PNOC-EDC sizzles in stock market debut

PNOC-Energy Development Corp., a unit of state-owned Philippine National Oil Co., sizzled in its stock market debut yesterday as investors gobbled up the shares, pushing the geothermal power producer’s stock price 42 percent higher to P4.55 against its initial public offering (IPO) price of P3.20.

PNOC-EDC took center stage as it opened at P4.50 and closed at its peak of P4.55 on hefty volume of 1.32 billion shares, making it the biggest and hottest IPO so far this year. The only other large listing in 2006 was the $162-million IPO of Lopez-controlled power producer First Gen Corp. in January.

Paul Aquino, president and chief executive officer of PNOC-EDC, said the company raised about P16 billion from the maiden offering of up to 5.2 billion shares to the public. This figure could even go up to as much as P19.2 billion should its lead selling agent, CLSA Exchange Capital, decide to exercise the green shoe option.

The green shoe option, which is also often referred to as an over-allotment provision, allows the underwriting syndicate to buy up to an additional 15 percent of the shares at the offering price if public demand for the shares exceeds expectations. This option is exercisable 30 days from the listing date.

"We have high expectations it might be exercised but we’ll know in 30 days," said Richard Taylor, head of CLSA in Hong Kong.

"Investors have never been this bullish on a government corporation since our sister company, Petron Corp, went public in 1994. The high confidence of the business community on PNOC-EDC is just so overwhelming," Aquino said.

He said 74 percent of the IPO shares, which accounted for 36 percent the company’s capital, had been sold to foreign institutional investors while 26 percent was allocated to the domestic market.

Aquino said over 160 foreign institutional investors subscribed to the international portion of the offer, with World Bank Unit International Finance Corp acquiring five percent of the company.

He said parent firm PNOC continues to hold 64.3 percent of PNOC-EDC’s total outstanding capital stock.

No less than President Arroyo attended PNOC-EDC’s stock market launch amid hardline efforts by the government to cut its debt and achieve a balanced budget by 2008.

Energy Secretary Rafael Lotilla said the listing of PNOC-EDC shares bodes well for the government, pointing out that with fresh funds, the company is in a better position to pursue expansion, which is deemed critical to attaining President Arroyo’s energy self-sufficiency program.

PSE chairman and former Supreme Court Justice Jose C. Vitug, for his part, said the PNOC-EDC listing is a "milestone that breaks the drought in public stock offerings by government-owned or controlled corporations since Petron’s public offering in 1994 which raised about P9 billion."

Aquino said half of the proceeds from the offering will be used to improve, expand and acquire new equipment, fund short-term capital needs and exploration projects, and pay off debt. Around $150 million to $200 million will go to the upgrade of the company’s 20-year-old drilling equipment while $70 million to $90 million will go to the settlement of debt.

PNOC-EDC accounts for about 60 percent of total installed geothermal energy capacity in the Philippines, supplying fuel to 12 power plants. Its four geothermal fields are located in Leyte, Negros Oriental, Bicol and Cotabato.

Majority or 75 percent of PNOC-EDC’s revenues comes from the sale of electricity while 23 percent is being derived from the sale of steam to power plants operated by the National Power Corp.