PLDT Communications and Energy Ventures Inc (PCEV), a unit of Philippine telco giant PLDT, has divested its remaining 25 per cent equity interest in Beacon Electric Asset Holdings Inc (Beacon) to Metro Pacific Investments Corp (MPIC) for up to $581.8 million (P21.8 billion).
Beacon is a special purpose company jointly owned by PCEV and MPIC, which holds a 35 per cent interest in Meralco and a 56 per cent interest in Global Power.
MPIC is the Philippines’ largest infrastructure investment management and holding company. Meralco is the country’s biggest electricity distributor, while Global Power is the leading supplier in Visayas with its currrent 852 MW of coal and diesel powered generating capacity.
MPIC will pay PCEV P12 billion in cash on closing, which is expected to be completed this June. The balance of P19.8 billion will be paid over the following four years.
Upon completion, PCEV will no longer have any direct interest in Beacon and indirect interest in Meralco and Global Power.
MPIC will continue to own a direct 10.5 per cent interest in Meralco and, through its 100 per cent interest in Beacon, a further 35 per cent – thereby taking its effective ownership interest in Meralco from 41.2 per cent to 45.5 per cent and in Global Power to 56 per cent directly and 6.4 per cent indirectly.
PCEV had invested up to P124 billion in Meralco and Beacon since 2009, and through the years received P114.7 billion in cash dividends and has completed its divestment for a total of P51.6 billion. This shows PCEV would have received in cash over the period 2.75 times its invested capital.
PCEV chairman and PLDT CEO Manuel V. Pangilinan said the divestment of shares in Beacon will help the PLDT group focus on the key priorities in its core businesses.
“While the investment is now viewed as no longer strategic, it has nonetheless been a very financially satisfying one. Proceeds from the sale will be used principally to reduce debt and to fund the ongoing network upgrade and expansion,” Pangilinan said.
PCEV is a holding company owned 99.9 per cent by local mobile carrier Smart Communications Inc, which is a wholly-owned subsidiary of PLDT Inc.
MPIC CEO Jose Ma K Lim said the latest transactions are rationalization and simplification of the company’s power investments.
Lim noted that for the first time, MPIC has no minority partner in its power portfolio holding company.
“We are now free to accelerate our rate of participation in the Philippine power sector building on our nationwide presence as we embrace distribution, thermal generation, renewables and energy from waste,” Lim said. “The transactions announced today are also immediately accretive to earnings.”
As this is a related party transaction, the PLDT and PCEV directors who are also on MPIC’s board recused themselves on the decision process at a Special MPIC Board meeting held for this purpose. The transaction has also been reviewed by MPIC’s audit committee, in accordance with MPIC’s internal policies.