Petron to issue peso bonds to fund expansion

MANILA, Philippines - Petron Corp., the country’s largest oil refiner, will issue peso-denominated bonds to raise funds for its expansion projects, the company disclosed to the Philippine Stock Exchange yesterday.

It said the local currency bonds would be settled in dollars although the timing and size of the issue have yet to be determined by the company.

Also yesterday, the company said it has declared a cash dividend of P2.382 per share for record date of Nov. 16, 2010 and payment date of Dec. 6, 2010.

Petron has been trying to raise funds to support its aggressive expansion program.

Earlier this year, Petron president Eric Recto said they are still finalizing the entry scheme for the new investors in the company’s refinery upgrade and expansion, including a petrochem project.

Recto said they have to firm up how the investors will infuse capital in the company as this will have to conform to the long-term refinery plan of Petron.

He said they are eyeing three options: for Petron itself to issue new equity; the formation of a joint venture with the new partner to pursue a particular project; and through a combination of selldown and issuance of new shares.

“P1 billion is a rough estimate of the capital that we will need to be able to build out what we call the Refinery Master Plan Phase 2. Usually there is a Phase 3 and Phase 4 but we’re talking about Phase 2 in general which is in simple terms the expansion of our petrochemical capabilities,” Recto said.

“It also makes sense for us to go out and look for someone who could provide value, not just capital. Capital is one thing and value another,” he added.

Phase 2 of Petron’s refinery upgrade is estimated to amount to about $1.1 billion, depending on which areas they would want to build on.

“For the expansion of Petron’s oil refinery, we are looking for foreign partners to join us in our expansion. Talks are ongoing and we still cannot tell when we will finalize things. I also cannot tell how many companies we are in talks with,” Petron chairman Ramon Ang, for his part, said.

“The 40 percent, in large, will be mostly new shares. We are looking at expanding the refinery to make it more efficient and process a much bigger percentage of crude,” he said.