2 more financial advisors tapped for PNOC-EC sale

MANILA, Philippines - The government has appointed two more financial advisors for the privatization this year of PNOC-Exploration Corp., the oil and gas development subsidiary of state-run Philippine National Oil Co. (PNOC).

Finance Secretary Margarito Teves told reporters at the sidelines of the Tiwi-Makban turnover ceremony at the Power Sector Assets and Management Corp. (PSALM) head office that aside from Development Bank of the Philippines (DBP), they have commissioned Citibank and ATR Kim Eng Capital Partners Inc. for the sale preparation.

Teves said he would be meeting with Energy Secretary Angelo Reyes, PNOC president Antonio Cailao and PNOC-EC president Rafael del Pilar to thresh out remaining issues and discuss strategies for the sale of a 40-percent stake in PNOC-EC.

Teves said they are eyeing to proceed with the sale on or before September 30 this year.

He said the financial advisors have recommended for a phased sale, which would allow government to sell the 40 percent stake in tranches or stages.

“They want to stage it initially at 40 percent and this is also the advise of our financial advisors,” Teves said.

The government hopes to generate revenues of about P11 billion from the sale of the PNOC-EC shares.

Several investor groups, including conglomerate San Miguel Corp., have signified their intention to participate in the bidding.

PNOC-EC is currently finalizing the terms of reference (TOR) for the sale.

The government has been postponing the sale of PNOC-EC shares due to the volatility of oil prices which could affect the bidding price.

PNOC-EC’s net income in the first quarter of 2009 dropped 18 percent to P506.66 million from P621.42 million in the same period last year.

The company said the decline was brought about by the drop in gas and condensate sales, coal trading and sale of fuel and lubes.

Publicly-listed PNOC-EC is an interesting buy since it owns a 10-percent stake in the $4.5-billion Malampaya deep water gas to power project or Service Contract (SC) 38 in Northwest Palawan.

“However the full payment of the SC 38 Malampaya related loan at the end of 2008, which resulted to a zero financing cost in 2009 and a reversal of foreign exchange loss in the previous year partly cushioned the decrease in net income for the first quarter as compared to the same quarter last year,” it said.

The company’s total revenues declined to P1.6 billion, down 18.81 percent from P1.972 billion year-on-year due to the decline in revenues of its three major business units, namely, Malampaya gas project, coal trading and Energy Supply Base.

Revenues from the Malampaya project fell to P1.13 billion, a drop of 11.72 percent from P1.28 billion due to lower gas prices during the period. — Donnabelle Gatdula