Bilyonaryo - Business

Marcos can bring down electricity bills by funneling Maharlika fund into stocks, bonds of SMC, Meralco, Synergy, Aboitiz, FGEN

December 18, 2022

Bilyonaryo.com

President Bongbong Marcos can fulfill his campaign promise to bring down power rates by putting part of the Maharlika Investment Fund (MIF) into stocks and bonds of the country’s biggest power firms.

Albay Rep. Joey Salceda said the energy sector not only offered the highest possible yield for the sovereign wealth fund but also the most potent tool in influencing power companies to slash their prices.

“A scan of energy sector benchmarks and sample investments shows that by focusing on the energy sector (a structural weakness of the Philippines in need of investments), the MIF can maximize its returns while also addressing a central development challenge for the Philippines,” said Salceda, the technical working group head of the MIF bill passed by Congress last Thursday.

For example, Salceda said the MIF could pick up the SMC Global Power bonds (which yield 5.95 percent to seven percent) that have recently dropped to $66 and $79.40.
Investors dumed the bonds after the Energy Regulatory Commission rejected SMC’s petition to raise tariffs on its fixed-price contact with Meralco which could lead to P15 billion loss for the company.

“SMC and MIF could do a joint repurchase agreement, on the condition that the bonds are rolled over into a convertible, increasing the government’s bargaining power over the dominant power generation sector player,” said Salceda, the former research chief of Baring Securities.

Another option, Salceda said is for the MIF to “be a passive dividend investor in power stocks that
would still allow the government bargaining power over power costs.”

He cited Meralco of the MVP and Gokongwei groups, Synergy Grid of the Big Boy Sy and Robert Coyiuto, Salcon Power of Kepco Philippines, Aboitiz Power (partner of Norwegian power firm Scatec which runs five local dams I which generate 54.7 percent margin), First Gen led by Piki Lopez, and Vivant Power of the Garcia family.

The energy sector will provide yields that are multiple times more than the nine percent annualized return targeted by the MIF.

“The MIF can attain alpha (the return on an investment much higher than a benchmark index), especially if it focuses on the energy sector – dams for generation, grid for transmission, minority positions in distribution companies – while also being exposed to higher-yield securities from foreign markets,” said Salceda.

Related News Tags: Bongbong Marcos, Maharlika Fund, Meralco, SMC, Synergy

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