VECO agreement seen as solution to Cebu power shortage

The Department of Energy has lauded the Visayan Electric Co. (VECO)’s board for settling a long-standing row between the company’s stakeholders.

DOE Secretary Vicente Perez said the settlement of the internal dispute will be good for Cebu City’s continuing efforts to attract new and expanded investments since this development is an assurance of continuing stable and efficient power supply for the city.

VECO supplies 100 percent of the premier Central Visayan city’s power supply requirements.

Perez also recognized the efforts made by the Aboitiz and Garcia groups – the major stakeholders in VECO. ‘We thank the Garcia and Aboitiz groups for heeding our call for an early resolution of their internal issues," the energy chief said.

Vivant Corp., majority-owned by the Garcia family and Aboitiz Equity Ventures Inc. (AEV) signed a memorandum of agreement (MOA) to amicably settle all existing litigation among the parties and to cooperate in the management and preservation of VECO’s assets, franchise and business for the benefit of all stakeholders.

The dispute arose when Hijos de F. Escaño (Hijos), a holding company owning 51 percent of the outstanding shares in VECO swapped 30 percent of its controlling block in exchange for shares in the Garcias’ publicly listed company, Vivant. VECO is the second largest private electric distribution utility in the country with a franchise in Cebu. Hijos is owned 47 percent by AEV and 51 percent by the Garcia family.

The MOA also aims to restore Hijos’ VECO shares transferred under the share swap transaction and redistribute pro rata the excess of Hijos’ 25-percent shareholdings in VECO to its shareholders to comply with the Electric Power Industry Reform Act of 2001. The agreed redistribution under the MOA will result in the Garcias’ control of 48 percent of VECO through its direct ownership of 23 percent and Hijos’ 25 percent. The Aboitizes’ direct ownership of VECO will increase to 43 percent.

Under the MOA, the Garcias and the Aboitizes will share in the management of VECO, although the Garcias will retain control of the VECO board. The chairmanship and the vice-chairmanship will be rotated every year. Initially, the Garcias will nominate the chairman, while the Aboitizes will nominate the vice-chairman. The Garcias will also nominate the president. On the other hand, the Aboitizes will nominate the executive vice-president/chief operating officer who will be responsible for the operations and performance of VECO. – Donnabelle Gatdula