PNOC-EDC agent to exercise 15% overallotment option on IPO shares

The investment bank that managed the successful initial public offering (IPO) of PNOC Energy Development Corp. has decided to exercise a 15-percent overallotment option, boosting the size of the total IPO to as much as P19.2 billion on the back of huge demand mostly from foreign investors.

PNOC-EDC’s lead selling agent CLSA Exchange Capital exercised last Monday the overallotment option granted to it by the company. The option covers 782.61 million shares or approximately 15 percent of total shares. Of the total, 391.3 million comprised of primary shares which will be listed on the exchange today, bringing the number of listed PNOC-EDC shares to 15 billion common shares.

The company’s stock rose P1.35 or 42.2 percent to close at its day-best of P4.55 with a huge 1.23 billion shares exchanged on its first day of trading.

The overallotment or greenshoe option gives the underwriter the right to sell investors more shares than originally planned by the issuer if demand for a security proves higher than expected. The option typically allows underwriters to sell up to 15 percent more shares than the original number of shares sold.

CLSA also disclosed it did not engage in any stabilization activities from the date of initial listing of the EDC shares up to the exercise of the overallotment option.

PNOC-EDC, a unit of state-owned Philippine National Oil Co (PNOC), raised P16.7 billion from selling 5.2 billion shares, representing 36 percent its outstanding stock, at P3.20 a piece.

The listing of PNOC-EDC is the biggest IPO that has been undertaken by a government owned and controlled corporation since oil refiner Petron Corp., its sister company, went public in 1994.

PNOC-EDC’s offering generated a lot of interest with about 85 percent of more than 16 foreign institutional investors subscribing to the international portion of the offer.

International Finance Corp, the investment arm of the World Bank, has acquired shares equivalent to five percent of PNOC-EDC.

About 74 percent of the total offering was allocated to foreign institutional and corporate investors, while 26 percent was allotted to the domestic market.

Of the P16.7 billion in proceeds raised so far, five percent or about P8 billion will go to PNOC-EDC, while its parent firm, PNOC and the Department of Finance, will each get P4 billion.

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.