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Synergy Grid & Development re-IPO

Synergy Grid & Development Phils (SGP) aims to raise up to US$350m in its Philippines (Phil) IPO.

The company has been listed on the Phil Stock Exchange (PSE) for over a decade but has been more of an empty shell for most of its listed history. SGP’s two main shareholders, Henry Sy, Jr and Robert G. Coyiuto, recently entered into a share swap agreement leading to SGP indirectly controlling over 60% of National Grid Corporation of the Philippines (NGCP). SGP now aims to list at least 20% of its outstanding stock to meet PSE’s free-float requirement, as well as those set out at the time of grant of NGCP concession.

NGCP owns the concession rights for 50 years to operate the national power transmission network in the Phils and in that sense it enjoys a monopoly status. However, its returns are regulated and hence, it can’t really do much with its monopoly status.

Regulated returns will result in SGP having low earnings growth, therefore, a high dividend yield is probably its only saving grace. Although SGP doesn’t own 100% of NGCP and its capex outlay remains high, hence, it is uncertain how much dividend it can pay out.