Sale of PNOC’s Malampaya stake may push through in Q3

The Philippine National Oil Co. (PNOC) expects to conclude the negotiations with an Asian consortium for the sale of its unit-PNOC-Exploration Corp’s stake in the $4.5 billion Malampaya project within the third quarter, a ranking company official said.

"We are discussing with potential investors. This is a foreign group in Asian region. We are hoping we would finish the talks within the third quarter," PNOC-EC executive vice president and head of the privatization committee Alfredo Parungao said.

Parungao said the government has decided to enter into a negotiated deal with an unnamed consortium, after the first bidding, which happened around November last year, failed.

"We needed at least three bidders and we did not meet that. We decided to enter into a negotiated deal as this way, we could ask for a higher value, rather than be contented with the winning bid," the PNOC official said.

However, the approved negotiated deal would still be subject to an approval from the Department of Finance. After that, major shareholders of the Malampaya consortium, Shell Petroleum Exploration B.V. and Chevron Texaco could still infuse right of first refusal.

The state-owned firm earlier considered either undergoing an initial public offering or just look for a strategic investor to dispose of its shares in Malampaya.

However, Parungao said as advised by ING Barings, the financial advisor, the group opted to just sell part of its shares to interested investors due to a depressed market situation in the Philippines at present.

"We talked to 13 potential investors, then we narrowed it down to nine...we rejected some bids and now we are pushing for a negotiated deal," he said.

The PNOC executive declined to reveal the identity of the group. "We will announce it soon. We can not reveal it until the talks are finalized," he said.

PNOC earlier offered the EC stake to investors in Thailand, Indonesia, Japan and Korea through international roadshows.

It was earlier mentioned that Indonesian and Thailand state firms Pertamina and Thai National Oil were among those that have signified keen interest to participate in the privatization. Korea’s Co-Gas has also apparently sounded of its intention to vie for the EC shares.

Parungao said the talks are now focused on financial matters since they have already concluded the negotiations on technical aspect of the sale.

PNOC-EC is selling 49 percent of its 10 percent share in the Malampaya project. The Malampaya stake is valued at about $300 million.

In May this year, the PNOC board had given the go signal to negotiate with the lone bidder of EC‚s stake. EC will hold on to the remaining 51 percent.

Based on the initial privatization plan, EC will create a new subsidiary, PNOC Malampaya Production Corp. (PNOC-MPC), which will absorb its 10-percent share in the $4.5-billion Malampaya project and some $175 million worth of loans.

A small portion of EC’s shares is already listed in the stock market in the early 70s but is not actively traded.

PNOC has hired the Hong Kong-based CLSA, an arm of well-renowned investment bank Credit Lyonnais, for the first phase of the privatization process, which primarily involved assets valuation.

ING Barings, meanwhile, was appointed as EC’s global coordinator for the second phase of the company’s privatization process. ING Barings will recommend the privatization methods to be used and serve as the underwriter for the offering.

The $4.5 billion Malampaya project in Northern Palawan could yield three trillion cubic feet of gas that could be used to fuel up to 3,000 megawatts of electricity for 20 years.

This is equivalent to more than half of the electricity requirements of Luzon even during peak hours.

The government and the local unit in Palawan were projected to receive $30 billion in revenues out of royalties and fees from the Malampaya project.