Lopez group hands over P58.5-B payment for 60% of PNOC-EDC

 Red Vulcan Holdings Corp., the Lopez-led consortium that won the bid for the 60-percent government stake in geothermal power producer PNOC-Energy Development Corp. (PNOC-EDC), handed yesterday in its full payment of P58.5 billion to the Philippine National Oil Co. (PNOC).

The payment will conclude the sale of PNOC’s geothermal subsidiary to the group.

Lopez-owned First Generation Corp., Spalmare Holdings B.V. and Prime Terracota Holdings Corp. are the members of the Red Vulcan Holdings consortium.

From the payment, P47 billion was remitted to the National Government through the Bureau of Treasury (BTr) while the remaining P11.5 billion went to PNOC.

The Department of Finance (DOF) earlier said it will use the proceeds from the sale of the PNOC-EDC stake to bridge the government’s budget deficit projected to hit P63 billion by the end of this year.

PNOC, on the other hand, said it will utilize bulk of the proceeds from the sale of PNOC-EDC to fund its renewable energy-related projects.

“We are very extremely confident that we are turning over the business to the most capable hands, who possess the right combination of financial wherewithal and high technical expertise since First Gen, the head of the consortium, is already engaged in the energy business. The government is getting a premium in the form of P58.5 billion in cash from the country’s biggest privatization deal of the year,” PNOC president Antonio M. Cailao said.

Red Vulcan won over FDC Geo-Energy Holdings Inc.’s offer of P48.525 billion, Panasia Energy Holdings Inc.’s P39 billion and AP Renewables’ P33.165 billion in a public bidding held last Nov. 21.

The bidding was touted as the most transparent and professionally-ran government auction.

Red Vulcan now gains the majority control of the operational and financial management of the company.

PNOC-EDC has been in operation for almost 32 years and has done drilling and exploration projects in other countries.

“We believe that the tradition of excellence and professionalism by which we run PNOC-EDC for more than three decades will continue under the new owners, and that the company will continue carving a name in the international energy industry,” Cailao said.

“We will focus our efforts in creating other crown jewels. There is no limit to what PNOC can do as ‘the energy company’ as we will also benefit partly from this cash infusion.  By the way, PNOC can still enter the geothermal business as we did not agree to a ‘no compete clause,’ in the purchase agreement, that will prohibit PNOC from competing with Red Vulcan,” Cailao said.

The Development Bank of the Philippines and ING, which served as the sale’s financial advisors, provided a staple financing facility of $650 million (P27.9 billion) to Red Vulcan Holdings.

Energy Secretary Angelo Reyes said this is the biggest privatization deal so far this year and will likely be unmatched going forward, especially that the National Transmission Corp. (TransCo) is a concession deal, not a sale.

“Amidst all the false accusations and the government’s detractors on graft and corruption and opaqueness on similar deals, this PNOC-EDC privatization negates all these and underscores the government’s commitment to fairness and transparency,” Reyes said.