Petron said its recent $100-million investment to comply with the Clean Air Act (CAA) requirement signifies not only its commitment to the environment but also the company’s confidence in the country’s long-term growth prospects.
Petron public affairs manager Virginia Ruivivar said the company started the construction of an additional Gasoil Hydrotreater (GOHT) and an LVN Isomerization Unit (Isom) in the last quarter of 2003.
She said these facilities will allow Petron to increase the production of CAA-compliant diesel and gasoline.
The $100-million investment for the two projects was the biggest approved for incentives by the Board of Investments in 2003.
"We believe that the business climate is ripe for us to invest in additional facilities given that demand for gasoline and diesel is expected to grow because of increasing economic activity," Ruivivar said.
"The strong support we received from the banking community to finance this project augurs well for Petron and is a vote of confidence for the national economy," she added.
The health of the oil sector is closely linked with that of the country’s economy since an increase in fuel consumption means an increase in economic activity.
Petron said that the CAA-compliant facilities will put the company in a unique position since it will be the only player capable of locally-producing CAA fuels to meet all of its requirements.
"Aside from increasing the country’s supply security, this project will significantly lessen, if not eliminate, our need to import fuels to meet CAA specifications. This will likewise mean less dollar outflows for the country," Ruivivar said.
Oil companies have resorted to importing fuels and/or blending components to meet the CAA’s stringent specifications. Even refiners like Petron are importing products due to process limitations.
The company recently closed a $100-million five-year term loan with Norddeutsche Landesbank Girozentrale and its three arrangers namely, Citibank/Citi-group Global Markets Asia, ING Bank N.V. and SAMBA Financial Group.
The loan has an interest margin of 120 basis points over the three- or six-month LIBOR. It has a 30-month grace period, with an average tenor of four years. The cost-efficient pricing establishes a new benchmark in the Philippine corporate market.