DOE may defer IPO deadline for oil refiners

The Department of Energy (DOE) may defer the deadline for the initial public offering (IPO) of oil refiners.

Energy Secretary Vincent S. Perez said he hasn’t discussed the IPO issue with the two oil refiners – Pilipinas Shell Petroleum Corp. and Caltex Philippines Inc. He said the DOE has no plans yet to get its own financial advisor that would evaluate the IPO plans of the oil firms.

"We are not going to appoint our own advisor. We are still waiting for them to submit to us (the regular progress report on their IPO plans)," he said.

Perez said he also has to schedule a meeting with the oil companies to determine if they are really committed to conduct their respective IPOs. "I haven’t had the chance to sit down with them," he said.

Last year, the DOE issued Department Circular No. 2002-10-006 (published on Oct. 30) which imposes a hefty P50,000 penalty for each day of delay from the date determined by the Secretary of Energy for the holding of IPO.

Petron Corp., the country’s largest oil refiner, has been listed in the local bourse even before Republic Act 8479 or Downstream Oil Industry Deregulation Act was passed in 1998. Petron, used to be wholly-owned by the National Government through the Philippine National Oil Co. (PNOC). PNOC sold 20 percent of its stake in Petron to the public in 1994 after selling 40 percent to Saudi Arabian Oil Co., a subsidiary of Aramco Overseas B.V., the world’s largest oil producer. The remaining 40 percent is retained by PNOC.

Caltex and Shell have been asking for an extension to comply with RA 8479 even on or before the lapse of the supposed three-year period for the oil refiners to submit themselves to an IPO, or by February last year.

Under the Oil Deregulation Law, "any person or entity engaged in oil refinery business shall make a public offering through the stock exchange of at least 10 percent of its common stock within a period of three years from the effectivity of the Act or the commencement of its refinery operations."

Taking into consideration a Department of Justice (DOJ)’s opinion on the IPO schedule, the DOE has repeatedly given in to the request of the oil firms.

The DOJ opinion said the law is not mandatory but rather directory in nature. "Based on the prevailing economic conditions, it is expected that an IPO at this time may well fall short of the norms of a successful offering both in terms of pricing and distribution if undertaken within the period,"it said.

The two oil firms said they have to wait for the market to show signs of improvement before undertaking the IPO.

Shell country chairman Eliseo Santiago said they will have to postpone the IPO to early 2004, considering the bearish mood in both the local foreign stock markets.

On the issue of financial capability, Perez said Shell and Caltex are more than ripe to undertake their IPOs as they have already shown signs of improvement as indicated in their huge earnings posted in 2001.

In 2001, Shell registered a net income of P2.7 billion as against P1.1-billion net loss in 2000 while Caltex earned P600 million to P800 million last year.