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SAN MIGUEL CORPORATION
April 12, 2019
The Philippine Stock Exchange, Inc.
Disclosure Department
th
Floor, Philippine Stock Exchange Tower
th
Street, corner 5
th
Avenue
Bonifacio Global City, Taguig City
Attention: Janet A. Encarnacion
Head, Disclosure Department
Re: Annual Report
Gentlemen:
We are submitting herewith an electronic copy of the Annual Report (SEC Form 17-A) of San
Miguel Corporation, as filed with the Securities and Exchange Commission today, April 12, 2019.
Very truly yours,
C O V E R S H E E T
P W - 2 7 7
S. E. C. Registration Number
S A N
M I G U E L
C O R P O R A T I O N
(Company’s Full Name)
N O. 4 0 S A N M I G U E L A V E
M A N D A L U Y O N G C I T Y
M E T R O M A N I L A
P H I L I P P I N E S
(Business Address: No. Street City/Town/Province)
Atty. Mary Rose S. Tan (632) 632-
Contact Person Company Telephone Number
SEC FORM 2
nd
Tuesday of June
1 2 3 1 1 7 - A
Month Day FORM TYPE Month Day Annual Meeting
Secondary License Type, If Applicable
Dept. Requiring this Doc. Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders Domestic Foreign
To be accomplished by SEC Personnel concerned
____________________________
File Number LCU
____________________________
Document I. D. Cashier
S T A M P S
Remarks = pls. Use black ink for scanning purposes
- Check whether the issuer:
(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17
thereunder, and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports)
Yes [√ ] No [ ]
(b) has been subject to such filing requirements for the past ninety (90) days.
Yes [ √ ] No [ ]
- The aggregate market value of the 367,438,246 voting shares held by non-affiliates of the Company as of December 31, 2018 is Php54,013,422,162 (based on the closing price as of December 28, 2018 of Php147.00 per share. The aggregate market value of the 375,998,810 voting shares held by non-affiliates of the Company as of March 31, 2019 is Php65,423,792,940 (based on the closing price as of March 28, 2019 of Php134.00 per share).
DOCUMENTS INCORPORATED BY REFERENCE
- The following documents are attached and incorporated by reference:
None.
PART I – BUSINESS AND GENERAL INFORMATION
Item 1. Business
San Miguel Corporation (SMC, the Parent Company), together with its subsidiaries (collectively referred to as the Group), is one of the largest and most diversified conglomerates in the Philippines by revenues and total assets, with sales that accounts for about 5.9% of the Philippine gross domestic product in 2018.
Originally founded in 1890 as a single brewery in the Philippines, SMC has transformed itself from a market-leading beverage, food and packaging business with a globally recognized beer brand, into a diversified conglomerate with market-leading businesses in fuel and oil, energy, infrastructure, and investment in banking. SMC owns a portfolio of companies that is tightly interwoven into the economic fabric of its home market, benefiting from and contributing to, the development and economic progress of the Philippines. The common shares of SMC were listed on November 5, 1948 at the Manila Stock Exchange, now The Philippine Stock Exchange, Inc. (PSE).
In 2007, in light of the opportunities presented by the global financial crisis, the ongoing program of asset and industry privatization of the Philippine government, SMC’s strong cash position enhanced by recent divestments and cash flow generated by its established businesses, SMC began an aggressive business diversification program. SMC channeled its resources into what management believed were attractive growth sectors, aligned with the development and growth of the Philippine economy. More than ten years on, SMC’s diversification has resulted in a more valuable and profitable mix of sales and operating income. SMC is now better positioned to access capital, take advantage of different growth opportunities and can better mitigate the impact of downturns and business cycles.
Since January 2008, SMC has either directly or through its subsidiaries, made a series of acquisitions in the fuel and oil, energy, infrastructure and banking industries.
SMC, through its subsidiaries and affiliates, has become a Philippine market leader in its businesses with 28,598 regular employees and more than 100 production facilities in the Asia-Pacific region as of December 31, 2018. The extensive portfolio of SMC products includes beer, spirits, non-alcoholic beverages (NAB), poultry, animal feeds, flour, fresh and processed meats, dairy products, coffee, various packaging products and a full range of refined petroleum products, most of which are market leaders in their respective markets. In addition, the SMC Group contributes to the growth of downstream industries and sustains a network of hundreds of third party suppliers.
Through the partnerships it has forged with major international companies, the SMC Group has gained access to the latest technologies and expertise, thereby enhancing its status as a world-class organization.
SMC has strategic partnerships with international companies among them are Kirin Holdings Company, Limited (Kirin) for beer, Hormel Foods International Corporation (Hormel) for processed meats, Nihon Yamamura Glass Company, Ltd. (NYG), Fuso Machine & Mold Mfg. Co. Ltd. (Fuso) and Can-Pack S.A. (Can-Pack) for packaging products and Korea Water Resources Corporation (K-Water) for its power business.
Major developments in the Group are discussed in the Management’s Discussion and Analyses of Financial Position and Financial Performance, attached herein as Annex “A”, and in Notes 5, 7, 12 and 13 of the Audited Consolidated Financial Statements, attached herein as Annex “B”.
Core Businesses
Food and Beverage
San Miguel Food and Beverage, Inc. (“SMFB”) is a leading food and beverage company in the Philippines. The brands under which SMFB produce, market and sell its products are among the most recognizable and top-of-mind brands in the industry and hold market-leading positions in their respective categories. Key brands in the SMFB portfolio include San Miguel Pale Pilsen, San Mig Light and Red Horse for beer, Ginebra San Miguel for gin, Magnolia for chicken, ice cream and dairy products, Monterey for fresh and marinated meats, Purefoods and Purefoods Tender Juicy, for refrigerated prepared and processed meats and canned meats, Star and Dari Crème for margarine and B-Meg for animal feeds.
SMFB has three primary operating segments - (i) beer and NAB, (ii) spirits, and (iii) food. The Beer and NAB Segment and the Spirits Segment comprise the beverage business (the “Beverage business”). SMFB operates its Beverage business through San Miguel Brewery
Inc. and its subsidiaries (“SMB” or the “Beer and NAB Segment”), and Ginebra San Miguel Inc. and its subsidiaries (“GSMI” or the “Spirits Segment”). The Food business (the “Food Segment”) is managed through a number of other subsidiaries, including San Miguel Foods, Inc. (SMFI), Magnolia, Inc., (Magnolia) and The Purefoods-Hormel Company, Inc.
(Purefoods-Hormel). SMFB serve the Philippine archipelago through an extensive distribution and dealer network and export its products to almost 60 markets worldwide.
Beer and NAB Segment
The Beer and NAB Segment is the largest producer of beer in terms of both sales and volume in the Philippines, offering a wide array of beer products across various segments and markets. Top beer brands in the Philippines include San Miguel Pale Pilsen, Red Horse, San Mig Light and Gold Eagle. Its flagship brand, San Miguel Pale Pilsen, has a history of over 128 years and was first produced by La Fabrica de Cerveza de San Miguel, which started as a single brewery producing a single product in 1890 and has evolved through the years to become the diversified conglomerate that is SMC. The Beer and NAB Segment also produces non-alcoholic beverages such as ready-to-drink tea, ready-to-drink juice and carbonates.
The Food Segment’s portfolio includes branded value-added refrigerated meats and canned meats, butter, margarine, cheese, milk, ice cream, jelly-based snacks and desserts, specialty oils, salad aids and biscuits, flour mixes and coffee and coffee-related
products (collectively “Prepared and Packaged Food”) to integrated feeds (“Animal Nutrition and Health”) to poultry and fresh meats (“Protein”) as well as flour milling, grain terminal handling, foodservice, franchising and international operations (“Others”).
The key operating subsidiaries, products, brands and services for each of the primary businesses of the Food Segment are as follows:
a) Prepared and Packaged Food - The major operating subsidiaries for the Prepared and Packaged Food business are Purefoods-Hormel, Magnolia and San Miguel Super Coffeemix Co., Inc. (“SMSCCI”). Purefoods-Hormel produces and markets value-added refrigerated processed meats and canned meat products and is a 60:40 joint venture with Hormel Netherlands, B.V. which was entered into in 1998. The joint venture agreement sets out the parties’ agreement as shareholders of Purefoods-Hormel, including, among others, provisions on technical assistance and sharing of know-how, the use of trademarks, fundamental matters requiring shareholder or Board approval, exclusivity covenants and restrictions on the transfer of Purefoods-Hormel shares.
Value-added refrigerated meats include hotdogs, nuggets, bacon, hams, and other ready-to-heat meal products, which are sold under the brand names Purefoods, Purefoods Tender Juicy, Star, Higante, Purefoods Beefies, Vida and Purefoods Nuggets. Canned meats, such as corned beef, luncheon meats, sausages, sauces, meat spreads and ready-to-eat viands, are sold under the Purefoods, Star and Ulam King brands.
The dairy, spreads and biscuits business, primarily operated through Magnolia, Inc., manufactures and markets a variety of bread spreads, milk, ice cream, jelly-based snacks, salad aids, biscuits, flour mixes and cooking oils. Bread spreads include butter, refrigerated and non-refrigerated margarine and cheese sold primarily under the Magnolia, Dari Crème, Star and Cheezee brands. Dairy products include ready-to-drink milk, ice cream and all-purpose cream under the Magnolia brand; jelly-based snacks are under the JellYace brand, biscuits under the La Pacita brand, while flour mixes, salad aids like mayonnaise and dressings, are under the Magnolia brand. Cooking oil products are sold under the Magnolia Nutri-Oil brand. The margarine brands, Star and Dari Crème, established in 1931 and 1959 respectively, were acquired in the 1990s.
The coffee business under SMSCCI is a 70:30 joint venture between SMFB and a Singaporean partner, Jacobs Douwe Egberts RTL SCC SG Pte. Ltd., formerly Super Coffee Corporation Pte. Ltd. SMSCCI imports, packages, markets and distributes coffee mixes and coffee-related products in the Philippines.
In February 2015, the Food Segment entered the biscuits category through the acquisition of the La Pacita brand from Felicisimo Martinez & Co., Inc. La Pacita products include crackers and cookies in various formats, which are distributed in the Philippines and exported to other countries.
b) Animal Nutrition and Health - The Animal Nutrition and Health segment produces integrated feeds and veterinary medicines. The operating subsidiary for the Animal Nutrition and Health segment is SMFI. Commercial feed products include hog feeds, layer feeds, broiler feeds, gamefowl feeds, aquatic feeds, branded feed concentrates and specialty and customized feeds. These feeds are sold and marketed under various brands such as B-Meg, B-Meg Premium, Integra, Expert, Dynamix, Essential, Pureblend, Bonanza and Jumbo.
c) Protein - SMFI is also the operating subsidiary for the Protein segment, which sells poultry and fresh meats products. The poultry business operates a vertically-integrated production process that spans from breeding broilers to producing and marketing chicken products, primarily for retail. Its broad range of chicken products is sold under the Magnolia brand, which includes fresh- chilled or frozen whole and cut-up products. A wide variety of fresh and easy- to-cook products are sold through the Magnolia Chicken Stations. The poultry business also sells customized products to foodservice and export clients, supplies supermarket house brands, serves chicken products to wet markets through distributors and sells live chickens to dealers.
The fresh meats business breeds, grows and processes hogs and trades beef and pork products. Its operations include slaughtering live hogs and processing beef and pork carcasses into primal and sub-primal meat cuts. These specialty cuts and marinated products are sold in neighborhood meat shops under the well-recognized Monterey brand name.
d) Others - Flour milling, premixes and baking ingredients, foodservice and franchising together with international operations, are categorized under Others. The bulk of this segment is accounted for by the flour milling business and grain terminal operation.
The flour milling business operates under San Miguel Mills, Inc. (SMMI). SMMI owns Golden Bay Grain Terminal Corporation, which provides grain terminal, warehousing services and grain handling (e.g. unloading, storage, bagging, and outloading) services to clients, and Golden Avenue Corp., which holds investment in real property.
The flour milling business offers a variety of flour products that includes bread flour, noodle flour, biscuit and cracker flour, all-purpose flour, cake flour, whole wheat flour, customized flour and flour premixes, such as pancake mix, cake mix, brownie mix, pan de sal mix, and rice cake mix. The business pioneered the development of customized flours for specific applications, such as noodles and pan de sal, a soft bread commonly eaten in the Philippines for breakfast. Flour products are sold under 19 brand names which enjoy strong brand loyalty among its institutional clients and other intermediaries, such as bakeries and biscuit manufacturers.
The international operations of the Food Segment are located in Indonesia and Vietnam. PT San Miguel Pure Foods Indonesia (formerly PT Pure Foods Suba Indah) (PTSMPFI) is a 75:25 joint venture with PT Hero Intiputra of Indonesia. San Miguel Pure Foods Investment (BVI) Limited, which operates San Miguel Pure Foods (Vn) Co., Ltd. (SMPFVN) in Vietnam, is a wholly-owned subsidiary of San Miguel Pure Foods International, Limited. Both PTSMPFI and SMPFVN are in the business of production and marketing of processed meats which are sold under the Farmhouse and Vida brands in Indonesia and under the Le Gourmet brand in Vietnam.
The foodservice business of the Food Segment is handled by Great Food Solutions (GFS), a group under SMFI. GFS, which services institutional accounts such as hotels, restaurants, bakeshops, fast food and pizza chains, was established in 2002 and is one of the largest foodservice providers in the Philippines. It markets and distributes foodservice formats of the value-added meats, fresh meats, poultry, dairy, oil, flour and coffee businesses. In turn, GFS receives a development fee from these businesses for selling their products to foodservice institutional clients.
The Food Division ventured into the franchising business to serve as contact points with consumers, a trial venue for new product ideas and a channel to introduce product applications for its products. The franchising business, also a group under SMFI, follows a convenience store model under the San Mig Food
a) Glass - The glass business is the Packaging Group’s largest business segment. It has three glass manufacturing facilities, and one glass and PET mold plant in the Philippines serving the requirements of the beverage, food, pharmaceutical, chemical, personal care and health care industries. The bulk of the glass bottle requirements served by this segment are for the beverage, pharmaceuticals and food industries. SMYAC is the country’s most technologically advanced glass manufacturing facility and the largest glass manufacturing facility in the Philippines.
b) Metal - The metal business manufactures metal caps, crowns, resealable caps and two-piece aluminum beverage cans for a range of industries that include beer, spirits, soft drinks, condiments and food. The Packaging Group’s metal container plant is the only aluminum beverage can plant in the Philippines and pioneered in the production of two-piece cans and ends for the beverage market.
c) Plastics - The plastics business provides plastic crates and pallets, plastic poultry flooring, food trays, plastic tubes, plastic consumer and industrial containers, and plastic pails and tubs to domestic and international markets.
d) PET - The PET business produces PET preforms and bottles, plastic caps and handles and offers filling services for PET bottles and aluminum cans.
e) Paper – Through Mincorr, a wholly-owned subsidiary of SMC based in Davao, the Packaging group supplies the carton packaging needs of a broad range of manufacturing and agricultural industries.
f) Flexibles - Through the Rightpak plant and Malaysian plants, the Packaging Group manufactures flexible packaging for the food, beverage, personal care, chemical and healthcare industries. It also provides composite materials for a varied range of industries including construction, semiconductor and electronics.
SMYPC formed CAI, a joint venture with Can-Pack S.A., for the modernization of the two- piece aluminum can manufacturing business. Utilizing the know-how and technologies of Can-Pack Group on can manufacturing, CAI is now capable to produce aluminum cans and ends in three categories - regular (standard), sleek, and slim cans. With its aim to introduce various aluminum can-packaging formats to the growing market in the Philippines and the Asia Pacific region, the business has expanded its product line to offer 180 ml aluminum cans in 2018. To-date, CAI is capable of producing six can sizes.
On February 27, 2015, SMYPIL through its Australian subsidiary, SMYV Pty Ltd, has completed the acquisition of the assets and business of Vinocor Worldwide Direct Pty. Ltd. (Vinocor). Vinocor is a market leader in the supply of corks and closures for wine bottles in Australia, with facilities and operations based in Adelaide, South Australia.
On September 1, 2016, SMYA through its new New Zealand subsidiary, SMYE Limited, acquired the assets and business of Endeavour Glass Packaging Limited (In Receivership), a trading company based in Auckland, New Zealand. Thereafter, in 2017, SMYE Limited was amalgamated (or merged) with Cospak Limited, the New Zealand subsidiary of SMYA, with the latter continuing as the amalgamated (or surviving) company.
In 2017, SMYA acquired all of the issued share capital of Portavin Holdings Pty Ltd., Barrosa Bottling Services Pty Ltd. and Best Bottlers Pty Ltd., through its subsidiaries SMYP Pty Ltd., SMYB Pty Ltd and SMYBB Pty Ltd. These acquisitions strengthened SMYA’s business in Australia and expanded its product base to include wine filling services, serving the growing wine markets in the Australasia region and in China.
To augment growth of the wine filling business of SMYA, the Packaging Group established Wine Brothers Australasia Pty Ltd in Australia and Wine Brothers Philippines Corp. in the Philippines in 2018. The business is involved in the sale and distribution of wine products in their respective countries.
Moreover, in 2018, SMYA through its subsidiary, SMYJ Pty Ltd. acquired the business assets of JMP Holdings Pty Ltd, a supplier of retail packaging products, transport packaging solutions and other products and services based in Victoria, Australia.
Below is a list of the major domestic and international packaging subsidiaries as of December 31, 2018:
San Miguel Yamamura Packaging Corporation and subsidiaries, SMC Yamamura Fuso Molds Corporation, Can Asia, Inc. and Wine Brothers Philippines Corp.
San Miguel Yamamura Packaging International Limited and subsidiaries [including San Miguel Yamamura Phu Tho Packaging Company Limited, Zhaoqing San Miguel Yamamura Glass Company Limited, Foshan San Miguel Yamamura Packaging Company Limited, San Miguel Yamamura Packaging and Printing Sdn. Bhd., San Miguel Yamamura Woven Products Sdn. Bhd., Packaging Research Centre Sdn. Bhd., San Miguel Yamamura Plastic Films Sdn. Bhd., San Miguel Yamamura Australasia Pty. Ltd. and subsidiaries {including SMYC Pty Ltd (formerly Cospak Pty Ltd) and subsidiary, Cospak Ltd (New Zealand), SMYV Pty Ltd, SMYB Pty Ltd, SMYP Pty Ltd, SMYBB Pty Ltd], SMYJ Pty Ltd, and Wine Brothers Australasia Pty Ltd} and San Miguel Yamamura Glass (Vietnam) Limited and subsidiary]
Mindanao Corrugated Fibreboard, Inc.
San Miguel Yamamura Asia Corporation
Real Estate
San Miguel Properties Inc. (SMPI) was created in 1990 initially as the corporate real estate arm of SMC. It is the primary property subsidiary of the SMC Group, currently 99.94% owned by SMC.
SMPI is presently engaged in commercial property development, sale and lease of real properties, management of strategic real estate ventures and corporate real estate services.
The first project of SMPI is the SMC Head Office Complex, now considered a landmark and a catalyst in transforming the Ortigas Business District.
SMPI has expanded its portfolio, serving the high-end market with its foray into townhouse developments, such as Dover Hill in San Juan, One Dover View and Two Dover View in Mandaluyong, and Emerald 88 in Pasig.
Other residential developments are located in General Trias, Cavite and Sta. Rosa, Laguna.
The Makati Diamond Residences, a luxury serviced apartment across Greenbelt 5 in Legaspi Village, Makati City, is already operational in 2015.
SMPI, through E-Fare Investment Holdings, Inc., is developing the Mariveles Industrial Estate and Economic Zone. It intends to provide an attractive location for private investments, stimulate regional economic activity, generate employment opportunities and establish forward and backward linkages among industries in and around the economic zone.
SMPI is currently the marketing arm of another industrial estate for medium to heavy industries in Malita, Davao which is being developed by Kyron Landholdings, Inc.
Below is the list of major properties subsidiaries as of December 31, 2018:
San Miguel Properties, Inc. and subsidiaries [including Excel Unified Land Resources Corporation, SMPI Makati Flagship Realty Corp., Bright Ventures Realty, Inc. and Carnell Realty, Inc.].
SMC Global began acting as an IPPA of the Sual power plant in November 2009, the San Roque power plant in January 2010 and the Ilijan power plant in June 2010. SMC Global sells power through off take agreements directly to customers, including Manila Electric Company and other distribution utilities, electric cooperatives and industrial customers, or through the WESM.
In August 2011, as part of the reorganization of the power-related assets of SMC, SMC Global acquired from SMC its 100% equity interest in San Miguel Electric Corp. (SMELC), which is a grantee of a Retail Electricity Supplier (RES) license issued by the Energy Regulatory Commission of the Philippines (ERC).
In April 2013, SMC Global, through SMC Power Generation Corp., acquired 35% equity stake in Olongapo Electric Distribution Company, Inc. In October 2013, SMC Global was awarded the winning concessionaire for the rehabilitation, operations and maintenance of Albay Electric Cooperative, Inc. located in Albay province which became effective upon confirmation of the National Electrification Administration in November 2013. A wholly-owned subsidiary, Albay Power and Energy Corp. was organized and established for this purpose.
In July 2013, SMC Global through San Miguel Consolidated Power Corporation, a wholly- owned subsidiary, commenced construction works for its 2 x 150 MW coal-fired power plant in Malita, Davao Occidental (Davao Greenfield Power Plant).
In September 2013, SMC Global, through SMC Powergen Inc. (“SPI”), acquired the 4 x 35 MW Co-Generation Solid Fuel-Fired Power Plant located at the Petron Bataan Refinery, Barangay Alangan, Limay, Bataan, (“Limay Co-Gen Power Plant”) from Petron Corporation (“Petron”). On December 23, 2016, the Limay Co-Gen Power Plant was purchased back by Petron from SPI.
In October 2013, SMC Global through SMC Consolidated Power Corporation (SCPC), a wholly-owned subsidiary, commenced construction works for its 4 x 150 MW coal-fired power plant in Limay, Bataan (Limay Greenfield Power Plant). The second 2 x 150 MW of the Limay Greenfield Power Plant was formerly owned by another subsidiary, the Limay Premiere Power Corp., but this was later transferred to SCPC in June 2017. SCPC was granted a RES license by the ERC on August 24, 2016, which gave it the ability to directly contract with contestable customers.
Units 1 and 2, with a combined rated capacity of 300 MW, of the Davao Greenfield Power Plant attained commercial operations on July 26, 2017 and February 26, 2018, respectively. Units 1, 2 and 3 with a rated capacity of 450 MW of the Limay Greenfield Power Plant attained commercial operations on May 26, 2017, September 26, 2017, and March 26, 2018, respectively, while Unit 4 is expected to commence commercial operations in second quarter of 2019.
In November 2014, PowerOne Ventures Energy Inc., a subsidiary of SMC Global, and K- Water entered into a joint venture partnership for the acquisition, rehabilitation, operation and maintenance of the 218 MW Angat Hydroelectric Power Plant awarded by PSALM to K- Water.
On June 16, 2016, Meralco Powergen Corporation (“MGen”), a subsidiary of Manila Electric Company (“Meralco”), and Zygnet Prime Holdings, Inc. (“Zygnet”) subscribed to 2,500 and 102 common shares of Mariveles Power Generation Corporation (“MPGC”), then a wholly- owned subsidiary of SMC Global, respectively. As a result, the ownership of SMC Global was reduced to 49% of the outstanding capital stock of MPGC while MGen and Zygnet each owns 49% and 2% equity interest in MPGC, respectively. MPGC intends to develop, construct, finance, own, operate and maintain a 4 x 150 MW circulating fluidized bed coal-fired power plant and associated facilities in Mariveles, Bataan.
On January 25, 2019, the SMC Global subscribed to the remaining 18,314,898 unissued common shares of MPGC, thereby increasing its ownership interest in MPGC from 49.0% to 73.6%, as a result of the waiver by MGen and Zygnet of their right to contribute additional equity pursuant to the capital call issued by MPGC. On the same date, SMC Global
subscribed to an additional 28,929,347 common shares to be issued out of the proposed increase in the authorized capital stock of MPGC upon approval by the SEC.
On March 20, 2018, SMC Global acquired 51% and 49% equity interests in SMCGP Masin Pte. Ltd. (formerly, Masin-AES Pte. Ltd. and hereinafter referred to as “SMCGP Masin”) from AES Phil Investment Pte. Ltd. (AES Phil) and Gen Plus B.V., respectively. SMCGP Masin indirectly owns, through its subsidiaries, Masinloc Power Partners Co. Ltd. (MPPCL) and SMCGP Philippines Energy Storage Co. Ltd. (formerly, AES Philippines Energy Storage Co. Ltd. and hereinafter referred to as “SMCGP Philippines Energy”). MPPCL owns, operates and maintains the 1 x 330 MW and 1 x 344 MW coal-fired power plant (Units 1 and 2), the under- construction project expansion of the 335 MW unit (Unit 3) (Units 1, 2 and 3 are collectively referred to as the "Masinloc Power Plant"), and the 10 MW battery energy storage project (the "Masinloc BESS"), all located in Masinloc, Zambales, Philippines (collectively, the “MPPCL Assets”),while SMCGP Philippines Energy plans to construct the 2 x 20 MW battery energy storage facility in Kabankalan, Negros Occidental ("Kabankalan BESS"). The MPPCL Assets add 684 MW capacity to the existing portfolio of SMC Global. MPCCL also owns 40% of Alpha Water Realty & Services, Corp. (“Alpha Water”).
As part of the sale, SMC Global also acquired SMCGP Transpower Pte. Ltd. (formerly, AES Transpower Private Ltd. and hereinafter referred to as “SMCGP Transpower”), and SMCGP Philippines Inc. (formerly, AES Philippines Inc. and hereinafter referred to as “SPHI”). SMCGP Transpower was a subsidiary of The AES Corporation which provides corporate support services to MPPCL through its Philippine Regional Operating Headquarters, while SPHI was a wholly-owned subsidiary of AES Phil and provides energy marketing services to MPPCL.
On July 13, 2018, Prime Electric Generation Corporation (“PEGC”), a wholly-owned subsidiary of SMC Global, acquired the entire equity interest of ALCO Steam Energy Corporation in Alpha Water, representing 60% of the outstanding capital stock of Alpha Water. As a result, SMC Global now effectively owns 100% of Alpha Water through its subsidiaries, PEGC and MPPCL. Alpha Water is the owner of the land on which the current site of the MPPCL Assets in Zambales Province is located.
On September 19, 2018, PEGC and Oceantech Power Generation Corporation (“OPGC”), another wholly-owned subsidiary of SMC Global, purchased the entire partnership interests in SMCGP Philippines Energy from subsidiaries of SMCGP Masin.
Based on the total installed generating capacities reported in the Energy Regulatory Commission of the Philippines (“ERC”) Resolution No. 04, Series of 2018 (the “ERC Resolution on Grid Market Share Limitation”), SMC Global believes that its combined installed capacity gives it a market share of approximately 19% of the National Grid, 25% of the Luzon Grid and 9% market share of the Mindanao Grid, in each case as of December 31, 2018.
Below is a list of the major energy subsidiaries as of December 31, 2018:
SMC Global Power Holdings Corp. and subsidiaries [including San Miguel Energy Corporation and subsidiaries, South Premiere Power Corp., Strategic Power Devt. Corp., San Miguel Electric Corp., SMC Consolidated Power Corporation, San Miguel Consolidated Power Corporation, SMC PowerGen Inc. and subsidiary, SMC Power Generation Corp., PowerOne Ventures Energy Inc., Albay Power and Energy Corp., Limay Premiere Power Corp.] and Prime Electric Generation Corporation, SMCGP Masin Pte. Ltd. (SMCGP Masin; formerly Masin-AES Pte. Ltd. and subsidiaries {including Masinloc Power Partners Co. Ltd. and subsidiary, Alpha Water and Realty Services Corp. }, SMCGP Transpower Pte. Ltd. (formerly AES Transpower Private Ltd. and subsidiary, and SMCGP Philippines Inc (formerly AES Philippines, Inc.)].
NAIA Terminals 1, 2 and 3. NAIAx connects to the Skyway system, the Manila-Cavite Toll Expressway (CAVITEX) and the Entertainment City of the Philippine Amusement and Gaming Corporation (PAGCOR). NAIAx became fully operational in December 2016.
Skyway Stage 3
On February 28, 2014, SMHC through AAIBV incorporated Stage 3 Connector Tollways Holdings Corp. (S3HC), which holds an 80% ownership interest in Citra Central Expressway Corp. (CCEC). CCEC holds a 30-year concession to construct, operate, and maintain the Skyway Stage 3, an elevated roadway with the entire length of approximately 14.82 km from Buendia Avenue in Makati to Balintawak, Quezon City and will connect to the existing Skyway Stage 1 and 2. This is envisioned to inter-connect the northern and southern areas of Metro Manila to help decongest traffic in Metro Manila and stimulate the growth of trade and industry in Luzon, outside of Metro Manila.
On March 15, 2016, AAIBV sold its 100% ownership interest in S3HC to AAIPC.
Skyway Stage 4
Skyway Stage 4 is a proposed 34.8 km roadway from South Metro Manila Skyway to Batasan Complex, Quezon City. Skyway Stage 4 will serve as another expressway system that aims to further decongest EDSA, C5 and other major arteries of the Metropolis. Further, it aims to provide faster alternate route and accessibility to the motorist when travelling from the province of Rizal and Calabarzon area to Metropolis. The project has a concession period of 30 years (from start of operations), with a target completion date by end of 2022. To date, construction has not yet started.
Boracay Airport
SMC, through the 99.92% interest of SMHC in Trans Aire Development Holdings Corp. (TADHC), is undertaking the expansion of Boracay Airport under a 25-year Contract-Add- Operate-and-Transfer concession granted by the Republic of the Philippines (ROP), through the Department of Transportation and Communications (now the Department of Transportation).
MRT-
In October 2010, SMC, through SMHC, acquired a 51.0% stake in Universal LRT Corporation (BVI) Limited (ULC BVI), which holds the 25-year Build-Gradual Transfer-Operate-Maintain concession for MRT-7. MRT-7 is a planned expansion of the metro rail system in Manila which mainly involves the construction of 22 km mass rail transit system with 14 stations that will start from San Jose del Monte City in Bulacan and end at the integrated LRT-1 / MRT-3 / MRT-7 station at North EDSA and a 22 km six lane asphalt highway that will connect the North Luzon Expressway to the intermodal transport terminal in San Jose del Monte City, Bulacan and a 22-km road component from San Jose del Monte City, Bulacan to the Bocaue exit of the NLEX.
As of July 1, 2016, SMC, through SMHC already holds 100% ownership in ULC BVI.
On December 12, 2016, the ROP through the Department of Transportation, gave its consent to the assignment of all the rights and obligations of ULC BVI under the Concession Agreement to SMC Mass Rail Transit 7, Inc. (SMC MRT 7). SMC through SMHC owns 100% of SMC MRT 7.
MNHPI
MNHPI is the terminal operator of Manila North Harbor, a 52-hectare port facility situated at Tondo, City of Manila. The port has a total quay length of 5,200 meters and 41 berths which can accommodate all types of vessels such as containerized and non-container type vessels. Under the Contract for the Development, Operation and Maintenance of the Manila North Harbor entered with the Philippine Ports Authority on November 19, 2009, the Philippine Ports
Authority awarded MNHPI the sole and exclusive right to manage, operate, develop and maintain the Manila North Harbor for 25 years, renewable for another 25 years. MNHPI commenced operations on April 12, 2010. SMC through SMHC owns 43.33% of MNHPI.
Bulacan Bulk Water Supply Project
The Bulacan Bulk Water Supply Project aims to provide clean and potable water to the province of Bulacan that is environmentally sustainable and with a price that is equitable. The project also aims to help various water districts in Bulacan to meet the increasing water demand of consumers, expand its current service area coverage and increase the number of households served by providing a reliable source of treated bulk water. SMC through SMHC owns 90% of LCWDC, which will serve as the concessionaire for a period of 30 years (inclusive of the two-year construction period). Phase 1 of this project was completed end of 2018 and started supplying potable water to six (6) Bulacan municipalities as of the first quarter of 2019.
Below is a list of the major infrastructure subsidiaries as of December 31, 2018:
San Miguel Holdings Corp. doing business under the name and style of SMC Infrastructure and subsidiaries [including Rapid Thoroughfares Inc. and subsidiary, Private Infra Dev Corporation, Trans Aire Development Holdings Corp., Optimal Infrastructure Development, Inc., Vertex Tollways Devt. Inc., Universal LRT Corporation (BVI) Limited, SMC Mass Rail Transit 7 Inc., ULCOM Company, Inc., Terramino Holdings, Inc. and subsidiary, Manila North Harbour Port, Inc., Luzon Clean Water Development Corporation and Sleep International (Netherlands) Cooperatief U.A. and Wiselink Investment Holdings, Inc. {which collectively own Cypress Tree Capital Investments, Inc. and subsidiaries including Star Infrastructure Development Corporation and Star Tollway Corporation (collectively the Cypress Group)}, Atlantic Aurum Investments B.V. and subsidiaries {including Atlantic Aurum Investments Philippines Corporation and its subsidiaries [including Stage 3 Connector Tollways Holding Corporation and subsidiary, Citra Central Expressway Corp., Citra Metro Manila Tollways Corporation and subsidiary, Skyway O&M Corp., MTD Manila Expressways Inc. and subsidiaries, Alloy Manila Toll Expressways Inc., Manila Toll Expressway Systems Inc. and South Luzon Tollway Corporation}].
Banking
SMC through SMPI has a current ownership of 39.9% of Bank of Commerce (BOC). BOC is a commercial bank licensed to engage in banking operations in the Philippines.
On December 17, 2018, SMC through SMC Equivest Corporation acquired 5,258, common shares of BOC representing 4.69% ownership interest.
Others
Other major subsidiaries include the following as of December 31, 2018:
San Miguel International Limited and Subsidiaries including San Miguel Holdings Limited and subsidiaries SMC Shipping and Lighterage Corporation and subsidiaries [including SL Harbour Bulk Terminal Corporation, Molave Tanker Corporation, Balyena Tanker Corporation and Narra Tanker Corporation San Miguel Equity Investments Inc. and subsidiaries including San Miguel Northern Cement, Inc. SMC Stock Transfer Service Corporation ArchEn Technologies Inc. SMITS, Inc. and subsidiaries SMC Equivest Corporation Anchor Insurance Brokerage Corporation SMC Asia Car Distributors Corp.
SMB also competes with producers of other alcoholic beverages, primarily gin, rum, brandy and recently, alcopops which are close substitutes to beer. In the beer industry - and more generally the alcoholic beverage industry - competitive factors generally include price, product quality, brand awareness and loyalty, distribution coverage, and the ability to respond effectively to shifting consumer tastes and preferences.
In the NAB market, SMB faces competition from established players and brands in ready- to-drink juice and ready-to-drink tea. For example, Zest-O, Tropicana Twister and C compete with Magnolia Fruit Drink, while Lipton and Nature’s Spring Iced Tea compete with Magnolia Healthtea.
In its main international markets, the SMBIL Group competes with both foreign and local beer brands, such as Blue Girl (Hong Kong), Carlsberg (Hong Kong, Thailand and Vietnam), Heineken (Hong Kong, South China, Thailand, Vietnam and Indonesia), Tsingtao (Hong Kong, China), Yanjing (China), Tiger (Thailand, Vietnam and Indonesia), Guinness (Hong Kong and Indonesia), Bintang (Indonesia), Budweiser (Hong Kong and China) and Snow (China), Singha and Asahi (Thailand), and Saigon Beer (Vietnam).
b) Spirits
The local hard liquor industry is segmented by category and geographically among the major players. The gin market is dominated by GSMI catering mostly the northern and southern provinces of Luzon. The Greater Manila Area and key urban centers across the country patronize Emperador Light Brandy locally produced by Emperador Distillers, Inc. Although recently, value-priced imported Alfonso Light Brandy distributed by Montosco, Inc. has likewise been gaining popularity.
The Visayas and Mindanao regions prefer Tanduay Rhum Dark 5 Years, a product of Tanduay Distiller’s Inc. Moreover, there is a market for Chinese wine in various islands in the region with GSMI’s Vino Kulafu emerging as the top choice in this category.
These major players compete in their development of brand equity, as the industry’s consumers generally develop affinities and loyalty to the brands that they patronize.
Liquor manufacturers also compete in terms of production efficiencies, as the price- sensitive nature of the industry’s consumers makes them more reliant on cost improvements than on price increases to brace against profit squeezes from an inflationary operating environment.
Manufacturers compete in the breadth of their distribution network.
Food
In recent years, the Prepared and Packaged Food segment has faced increased competition mainly from other local players who employ aggressive pricing and promotion schemes. Competitors and competing brands in the branded processed meats category include Foodsphere, Inc. (CDO), Virginia Foods, Inc. (Winner and Champion), and Century Pacific Food Inc. (Swift, Argentina and 555 ), Mekeni Food Corporation (Mekeni), Frabelle Food Corp. (Bossing), Sunpride (Sunpride, Holiday and Good Morning) and Maling.
For butter and spreadable fats, competitors include Fonterra Brands Philippines, Inc., New Zealand Creamery, Inc. and RFM Foods Corporation (for butter) and San Pablo Manufacturing Corporation, Malabon Philippines and AD Gothong Manufacturing Corporation (for margarine). In the cheese category, the main competitor of the Magnolia brand is Mondelez International, Inc. (Eden, Cheez Whiz, and Kraft). In the ice cream market, Unilever-RFM Ice Cream Inc. (Selecta) is the dominant player. Competitors in the coffee-mix business include Nestle SA (Nescafe), PT Mayora Indah (Kopiko), and Universal Robina Corporation (Great Taste).
The Food Segment is the largest producer of commercial feeds in the Philippines. Competitors under the Animal Nutrition and Health segment include major domestic producers such as Univet Nutrition and Animal Healthcare Co., Pilmico Foods Corporation (Pilmico), Universal Robina Corporation (URC) and Philippine Foremost Milling Corporation (Foremost), as well as numerous regional and local feedmills. There are also foreign feeds manufacturers which have established operations in the Philippines.
Major competitors under the Protein business include Bounty Fresh Foods Inc., Bounty Agro Ventures, Inc., Gama Foods Corp. and Cobb-Vantress Philippines, Inc. There are also occasional imports from the U.S., Canada and Brazil.
The Philippine fresh meats industry remains highly fragmented consisting mostly of backyard hog raisers. Its main competitors are Robina Farms (URC) and Foremost Farms. It also competes with several commercial-scale and numerous small-scale hog and cattle farms that supply live hogs and cattle to live buyers, who in turn supply hog and cattle carcasses to wet markets and supermarkets.
Major competitors of the flour milling business include Philippine Foremost Milling Corporation, Pilmico and URC.
Local players face competition from imported flour that primarily originates from Turkey, Malaysia and Indonesia. Imported flour has increased its presence through low-cost flour offerings.
Petron Corporation
Petron operates in a deregulated oil industry along with more than 100 other industry players (importers and distributors). With several players sharing in the market, competition is intense. Retail and depot network expansion, pricing, various marketing programs are being employed to gain a bigger share of the domestic market. Further adding pressure to competition are illegal trading practices (e.g., “bote-bote” retailing, illegal refilling and under declaration of value or quantity of imports) that have resulted in lost tax revenues for the government.
San Miguel Properties, Inc.
Among SMPI's major competitors in the South are the Ayala West Grove Heights and Nuvali by Ayala Land/Ayala Land Premier, South Forbes by Cathay Land, Solen Residences by Greenfield Properties, Eton City by Eton Properties, Amaia Scapes by Amaia Land, Solviento by GeoEstate, Natania Homes and Sabella by My Citi Homes, Meridian Place by Filinvest and Cedarwood Residences by Asia Landbest.
SMPI's competitors in Metro Manila are Rockwell Land’s 205 Santolan and Alvendia, Filinvest’s Fortune Hill, KMC Mag Group’s 81 Xavier and Baron Residences, Federal Land’s One Wilson Square and Ortigas & Company’s Viridian, Clairemont Hills by Anchorland and Horizon Estates by Transphil Land.
For the properties of SMPI generating lease income located in the Ortigas area, its competitors include the One Corporate Center, Philippine Stock Exchange Tower, Taipan Place, Wynsum Corporate Plaza, Orient Square, Robinsons Equitable Tower and Cyberspace Gamma, and Rockwell Business Center.
SMC Global Power Holdings Corp.
SMC Global’s main competitors are the Lopez Group and the Aboitiz Group. The Lopez Group holds significant interests in First Gen Corporation and Energy Development Corporation, while the Aboitiz Group holds interests in Aboitiz Power Corporation and Hedcor, Inc, among others.
