Government to use Petron proceeds to boost infrastructure spending

The government plans to use the proceeds from the sale of its stake in Petron Corp. to boost infrastructure spending, Finance Undersecretary Gil Beltran said yesterday.

“We can accelerate some infrastructure projects if the proceeds come in this year,” he told reporters yesterday.

On Friday, the Ashmore Group, a London-listed fund manager agreed to acquire the 40 percent stake in Petron held by the Philippine National Oil Co. (PNOC) for P25.7 billion.

The move would give Ashmore a controlling stake in Petron as it would increase its ownership in the company to roughly 90 percent. The Ashmore Group, which is represented in the country by former Trade Minister Roberto “Bobby” Ongpin already owns 51 percent of the company after it acquired the 40 percent stake of Saudi Arabia-based Aramco Overseas Co. in Petron for $550 million and made a tender offer to other shareholders early this year.

San Miguel Corp., meanwhile, has entered into an agreement with Ashmore that gives the food and beverage conglomerate the option to buy up to 51 percent of Ashmore’s stake in Petron.

Government officials privy to the transaction expect the Ashmore Group to turn over the payment before yearend.

Proceeds from the Petron sale would give the government more room to post a smaller deficit this year compared to the programmed ceiling of P75-billion.

However, Beltran said that the government may opt to maintain the P75 billion program and instead use the proceeds from the Petron sale to accelerate infrastructure spending.

He said the government wants to bring infrastructure spending as a percentage of gross domestic product (GDP) to the ideal level of five percent.

As of end-September, the level was at four percent.

The government expects the economy to expand at a slower pace of 3.7 to 4.7 next year, revised downward from the official GDP target of 6.1 percent to 7.1 percent.

The government has decided to sell its stake in Petron, considered a crown jewel in the oil industry, to raise revenues for social services and infrastructure projects.

The government’s sale of its stake in Petron, meanwhile, will end an era of state control in the oil refining business which started in the early 70s.