PNOC-EDC to sell 10% of shares via IPO

The PNOC-Energy Development Corp. (EDC) will sell 10 percent of its shares through an initial public offering (IPO) within this year.

PNOC-EDC president Sergio Apostol said the company’s board, in a meeting last Monday gave the go signal for an IPO that is estimated to raise some P10-billion proceeds.

"Rough estimates show that our assets amount to P103 billion, 10 percent of this will be P10 billion," Apostol said, adding that by next week, the company will start selecting a financial advisor that will handle the IPO.

Under the law, he said EDC should offer about 10 percent of its stake to small investors through a public offering.

"We do not want to entertain strategic investors. We want small investors to own part of the company," he said.

Apostol noted, however, that an IPO takes time. "Take the case of Petron, it took them three years to complete the sale of its stake to the public," he said.

The EDC chief, however, expressed optimism that they will be able to complete the IPO within six months to one year.

EDC, one of the most profitable subsidiaries of state-owned Philippine National Oil Co. (PNOC), is mainly engaged in geothermal development and exploration. For 2002, the company expects to achieve its net income target of P1 billion, up from the P800 million registered in 2001.

Apostol attributed the increase to higher steam sales.

He said the income would have been higher were it not for the taxes and royalties that PNOC-EDC has to give the National Government. The company, he said, also pays huge amounts for its build-operate-transfer (BOT) contracts.

"We are paying an average of $20 million every month to all our BOT contracts; and we are paying withholding taxes, fees and royalties to the government about P500 million a year," he said.

The state-run geothermal development firm is paying contracts with the Marubeni for the Mt. Lobi project as well as with California International Energy Services Inc. (CalEnergy). It is also paying loans to the World Bank and the Miyazawa Fund of Japan. A portion of its income also goes to payments on its $150-million Eurobonds issued several years ago.

Apostol said they are also paying P100 million a month to mother firm, PNOC. He explained that EDC owes some P2.4 billion to PNOC. So far, it has paid only P1.2 billion. The other P1.2 billion was supposed to be converted to equity but the mother firm wants EDC to pay it in cash. "So, we have agreed to just pay them P100 million a month," he said.

For 2003, the company is allocating some P20 million for its operational budget and capital expenditure. Next year’s projected capex is the same as this year.

EDC was created in 1976 by virtue of Presidential Decree 334 to accelerate the exploration, delineation and development of indigenous energy resources. A drilling division is consequently formed to carry out EDC’s mission.