DOF lines up PNOC’s geothermal unit as next big-ticket item for sale

The Department of Finance (DOF) is preparing the state-owned PNOC-Energy Development Corp. as the next big ticket item to be sold within the year after the Philippine National Bank (PNB).

Finance Undersecretary Jay Singson said they are currently threshing out some issues regarding the compliance of PNOC-EDC to the provisions of the Electric Power Industry Reform Act (EPIRA) of 2001.

"We need to address some issues first. Once we obtained the necessary clearance, we could push through with PNOC-EDC’s privatization in the latter part of the year," Singson said.

Singson said there are a number of prospective local and foreign investors who have already expressed interest to bid for the geothermal arm of PNOC-EDC.

PNOC-EDC, one of the profitable subsidiaries of state-owned Philippine National Oil Co. (PNOC), posted an unaudited net income of P2.9 billion in 2004, 19 times increase from last year’s P148 million.

The company’s privatization program has been in full swing in pursuant to Proclamation 50 signed by then President Corazon Aquino. Proclamation 50 launched the expeditious disposition and privatization of certain government owned and control corporations.

PNOC-EDC’s privatization forms part of the government’s thrust to restructure the power sector, promote industry efficiency and reduce government obligations. The company recently named French firm CLSA Exchange Capital as its financial advisor for privatization.

PNOC-EDC’s privatization program will be  similar to Petron wherein the government retains 40 percent of the company and the other 60 percent will be sold through a combined strategic stake sale and initial public offering (IPO), consisting of six billion and three billion shares, respectively.

At present, the state-owned firm has 15 billion shares after recently issuing another five billion shares out of an increase in the company’s authorized capital stock from 10 billion to 15 billion shares. The 10 billion shares are held by PNOC, its parent company.

PNOC-EDC maintains its number one position in the Philippine geothermal scene with 1,149.4 megawatts (MW) installed capacity spread over geothermal steamfields in Leyte, Negros Oriental, Bicol and North Cotabato. 

It accounts for 60 percent of the country’s total installed geothermal capacity of 1,905 MW.

Singson said they would also be studying the privatization of some of government’s shares (San Miguel Corp., Manila Electric Co.) and assets (IS property).

"We might consider to sell the IS property this year," he said. "We are still looking at the market if it would be appropriate for us to sell SMC and Meralco shares.  Besides, there are some legal issues we have to iron out on SMC shares."

The government has successfully bid out its 186 million shares in PNB. Union Bank consortium submitted the highest bid at P43.77 per share, enabling the government to raise P8.14 billion from the privatization process.