Government eyes $400-M from sale of 10% stake in Malampaya

The government expects to raise $400 million from the sale of its 10-percent stake in the $2-billion Malampaya gas project.

Cabinet sources told reporters yesterday that the administration is hoping to complete the sale within the year following the appointment of the European investment bank, Credit Lyonaise as financial adviser.

They said the proceeds of the sale will "be critical in financing" the government’s P800.7- billion budget for next year.

The government owns 10 percent of the Malampaya natural gas project, held by the Philippine National Oil Co.’s (PNOC) subsidiary, PNOC Exploration Corp.

The sources said part of the proceeds will be used to settle a $170-million loan acquired by PNOC-EC which was used to finance part of the company’s participation in the project.

The Malampaya natural gas reserve is located off the shores of Northern Palawan which has been estimated to yield three trillion cubic feet of natural gas, capable of providing 3,000 megawatts of electricity.

The Malampaya project is 45 percent owned by Chevron-Texaco and Shell Exploration BV which also owns 45 percent. The remaining 10 percent represents PNOC’ s holdings.

The government is also planning to securitize its future receivables from the royalties to be paid by the project for the extraction of the natural gas.

However, this proposal is being opposed by various sectors, especially the International Monetary Fund (IMF).

In a paper, Nigel Chalk of the IMF’s Fiscal Affairs Department, acknowledged that securitization is an increasingly important financing alternative for the public sector especially in developing countries where increased uncertainty and market volatility leads to credit rationing.

However, Chalk said policy-makers should be aware that secured financing did not provide a "free lunch."

"By its very nature, securitization subordinates existing and future creditors and, as a result, may raise the cost of future secured and unsecured borrowing," Chalk said.

The government has been discussing the possibility of issuing $500-million denominated debt backed by future royalty flows from the Malampaya gas project.