Quick takes from around the market
1. San Miguel [SMC 103.00 unch; 43% avgVol] [link] gave notice that its follow-on offering (FOO) of preferred shares was approved by the PSE. SMC will sell 666,666,700 preferred shares, split into three classes (SMC2L, SMC2N, SMC2O), at a price of P75.00/share. The offer period will start today and run through to November 21, with a tentative listing date scheduled for December 1. This is the first tranche of the ?65 billion shelf registration that the SMC board authorized in September. SMC also announced the initial dividend yields for the subseries of this offering: SMC2L (7.9145%), SMC2N (8.3466%), SMC2O (8.5936%).
MB quick take: Market conditions or otherwise, the SMC debt machine must roll on. SMC applied for a shelf registration that is active for three years, then decided to consume 76% of the allocation in this first tranche. Maybe they’re just giving themselves some wiggle room in case rates don’t do as we anticipate, or in case the airport project needs additional funding.
2. National Grid Corp. of the Philippines (NGCP) [link] received an order from the Energy Regulatory Commission (ERC) setting its total allowable revenue for the period of 2016 through 2020 at P183.5 billion (~P36.7 billion annually). This is 52.7% lower than the P388 billion that NGCP claimed for that period. In support of its order, the ERC evaluated historical data on NGCP’s expenditures and performance to determine if the costs that were incurred during that period were prudent, reasonable, and economically efficient. The ERC found that the NGCP’s reported revenues for the period were higher than its “total allowable revenue”. NGCP, which is owned by Synergy Grid [SGP 7.19, down 1.8%; 131% avgVol], is expected to provide comment to the ERC later this month.
MB quick take: This level of regulatory intervention is part of the risk and challenge of investing in utility companies like NGCP, or any of its utility peers, like Manila Water [MWC 17.30, up 1.1%; 143% avgVol]. Coming into the start of the Marcos Jr. administration, there was a concerning amount of buzz from politicians aiming at NGCP and its franchise. The buzz never evolved into anything more aggressive, and instead
