EDC plans refinancing debt with bond issuance of up to US$ 216 million

Alexander Richter 15 Oct 2009

Reported locally, Philippines-based Energy Development Corp. (EDC) targets to pay off its debts due in mid-2010, and scheduled an issuance of up to P10 billion (US$ 216 million) in 5.5- and seven-year fixed-rate bonds.

In its investor briefing, EDC said it will issue P6 billion in 5.5-year and seven-year fixed-rate bonds, which has an oversubscription option of P4 billion.

EDC’s P10-billion bond issue will be arranged by BDO Capital and Investment Corp., RCBC Capital Corp. and SB Capital Corp.

EDC said proceeds of the bond issuance will be used to finance the payments of its debts due in the middle of 2010.

“Our Miyazawa 2 loan is maturing in June 2010 and amounts to ¥22 billion or a little over P11 billion, based on the current peso-yen exchange rate,” Ana Regina Go, EDC chief finance officer, said.

Go added that EDC is doing the fundraising and refinancing early since now is a good time to go to the market, particularly for the peso bond.

She also noted that EDC is looking at improving its debt profile.

“At the end of 2008, we did not have any peso-denominated debt. But with the issuance of the P9 billion in private placement notes in July and September this year and with the additional retail bond, our peso-denominated debt will increase to 53 percent,” Go said.

And in December 2010, she added that with the full settlement of the Miyazawa-2 loan, the peso-denominated loans will account for 79 percent of EDC’s debt.

“EDC debt currency mix has been more balanced and is intended to mirror our natural hedge as we get paid by the National Power Corp. for the steam in peso with a portion indexed or 52 percent in dollars,” said Go, adding that EDC refinancing efforts are geared toward getting peso loans instead of third-currency loans.

EDC earlier expressed optimism that investors will respond positively to its upcoming bond issuance after securing an “Aaa” rating from PhilRatings.

“Getting the highest possible corporate credit rating affirms EDC’s good credit standing and excellent fiscal management. The rating definitely provides the necessary push to make our bonds more attractive to investors and gives us enough reason to expect a successful issuance,” Richard Tantoco, EDC president and chief operating officer, said.

EDC said it applied for registration with the Securities and Exchange Commission (SEC) for bonds of up to P10 billion. However, its “Aaa” rating qualifies the country’s leading geothermal firm for bonds of up to P12 billion.

PhilRatings cited EDC’s strong cash flow generation, ample liquidity and financing sources to cover maturing debt and operating requirements, reduced exposure to foreign-currency risk, improving profitability, leadership in the geothermal industry, and experienced management team as the plus factors for its getting the highest possible corporate credit rating.

EDC earlier issued P9-billion fixed-rate corporate notes which elicited strong investor take-up.? In fact, EDC’s maiden debt issue in the domestic capital markets was 2.5 times oversubscribed and was upsized from its original issue size of P3 billion.

“We are confident our net income will stay robust given our acquisition of the Tongonan and Palinpinon geothermal plants, long-term contracts with National Power Corp., our local and overseas expansion, and the Renewable Energy Act benefits which we will take advantage of as we continue to invest in environment-friendly resources,” Tantoco said.

EDC remains the country’s leading producer of geothermal energy accounting for 62 percent or 1,199 megawatts (MW) of the 1,980-MW total installed capacity.

EDC is also positioning itself as the premier pure renewable-energy player in the Philippines with its acquisition of 60 percent equity in the Pantabangan-Masiway hydroelectric project and the development of an 86-MW wind farm in Burgos, Ilocos Norte.”

Source: Business Mirror