In a press conference, COPW chairman Raul T. Concepcion said it is high-time for the government to look into the long-delayed initial public offering (IPO) of Shell, which is supposed to be undertaken three years after the passage of the Oil Deregulation Law in 1998.
"I will pass a proposal to the independent review committee that would call for the improvement of transparency in a deregulated oil industry. I believe that the best way to determine an oil firm’s return on equity is through proper disclosure and this could only be done through listing in the Philippine Stock Exchange," he said. The return on equity (ROE) is a measure of a company’s profitability.
A five-man independent body was formed recently by the Arroyo administration to review the Oil Deregulation Law and submit a recommendation to the President not later than May 31.
But Energy Secretary Raphael P.M. Lotilla revealed that the committee has been given two more weeks, or up to June 15, to come up with the recommendations which may call for some revisions in the law.
Concepcion, however, pointed out that he is in favor of deregulation. "I am in favor of deregulation. It has enough safeguards against oligopoly. But we should see to it that its provisions are pro-active and safeguard the interest of the public through transparency."
He said though all oil firms are required to submit their financial statements to the Securities and Exchange Commission (SEC), there is no mandate for them to disclose it properly to the public. "So it would be better if they would disclose and file to the PSE so the public would know the truth," he stressed.
The COPW chief pointed out that the listing in the local stock market is mandated by law. "That is part of the Oil Deregulation Law. If you are a refiner, you should list your shares in the stock market," he said.
But market sources pointed out that the government is hesitant to force Shell to list its shares in the local bourse for fear the company will shut down its refinery and worse, pull out of the country and place its refinery elsewhere.
Shell officials have been saying that they are reviewing their refinery business in the country following the decision of Caltex Philippines Inc. to shut down its 49-year old refinery in Tabango, Batangas and put up instead a P750-million finished product import terminal.
For the past years, Shell has also been convincing the government that it is not yet conducive for the oil firm to undertake an IPO.
But market analysts believe otherwise. The Philippine stock market so far remains the best performing bourse in Asia as it still rose 5.4 percent in peso terms and 9.2 percent in dollar terms year-to-date even after the decline from its peak in early March. Based on stock prices as of May 11, the PSE composite index has maintained its lead among Asian stock exchanges since January.
Sources said the government may be weighing the impact of allowing the Shell to delay its IPO as against the impact of the refinery’s possible closure on local supply, prices, employment.
Like Caltex, Shell opted not to invest on refinery upgrade to comply with the stricter specifications of the Clean Air Act (CAA). Instead, the two oil majors decided to just import finished products from the region unlike Petron Corp., the country’s largest refiner and partly-owned by government and the public, which invested some $100 million for refineries to produce CAA-compliant fuels.
As a result of Caltex’s conversion, some 180 of the total 220 employees in the refinery were displaced. Caltex has over 800 regular employees nationwide.
It is not clear, though, whether Caltex will still be compelled to list its shares in the local bourse despite the refinery shutdown.
But it is believed that Caltex would still have to undergo an IPO through CalSERV, its marketing arm which is engaged in direct retailing market through eight retail stations and convenience stores under Caltex and Star Mart brands.
Shell, on the other hand, has been saying that it is preparing for the IPO. In fact, it had appointed a financial advisor, Salomon Smith Barney, who is advising it to wait for an opportune time to list in the market.