Gokongweis want Petron

MANILA, Philippines – The Gokongwei group and Morgan Stanley  have expressed interest in buying the 40 percent stake owned by the government and another 40 percent by Saudi Aramco, respectively, in Petron Corp., Energy Secretary Angelo Reyes said yesterday.

Aramco has received an offer of $550 million from London-based investment fund Ashmore Group for the stake, but the Philippine National Oil Co. (PNOC), which also owns a 40 percent stake in the country’s largest refiner, has the right of first refusal.

Officials said PNOC can also assign its option to a third party. Its board meets today to decide on a course of action.

PNOC has to make a decision by May 12, based on the 1994 agreement with Aramco giving the state power firm 60 days to decide whether to exercise the right of first refusal or assign its option to a third party.

“There are some that expressed interest – the Gokongwei group and some representatives from Morgan Stanley,” Reyes told reporters.

He said the offers had been referred to PNOC’s financial advisers, ING Bank and state-owned Development Bank of the Philippines (DBP).

“People have come forward to say that they are interested and we have actually referred them to the DBP. The Gokongwei group has expressed interest. Some representatives from Morgan Stanley have expressed interest. That’s as far as I know,” Reyes said.

The Gokongweis control conglomerate JG Summit Holdings Inc., which owns the country’s second-biggest airline, Cebu Pacific.

It also has interests in property development, food, telecommunications and banking, and has a share in JG Summit Petrochemical Corp., a joint venture with Marubeni Corp., which the company says is the first integrated polyethylene and polypropylene plant in the Philippines.

But JG Summit Petroleum Corp. president and chief operating officer Lance Gokongwei said in a letter to Reyes dated April 21, 2008 that his firm is interested in the government’s stake.

He said JG Summit Petroleum is “making offer to purchase the 40 percent shareholdings of PNOC in Petron consisting of 3.75 billion shares at P6.55 per share.”

Petron’s own petrochemical business is expected to take off this year.

It hopes to increase gasoline production and extraction of propylene, a petrochemical used for food packaging materials and impact-resistant plastics, with the opening of a new facility at its 180,000-barrel per day refinery in Bataan.

At current prices, the Ashmore deal values Petron at about P6.22 per share, against the P5.60 it was trading at yesterday.

Sources from the Petron board told The STAR that Ashmore was having second thoughts about buying the Aramco shares. But top executives of Petron and PNOC denied the rumor.

“That’s not true. They are not backing out,” Petron Corp. chairman Nicasio Alcantara said in a telephone interview.

PNOC president Antonio Cailao also denied talk of Ashmore backing out.

“There’s no such thing. As far as we are concerned, they (Ashmore) are still interested to buy the shares of Aramco in Petron,” Cailao said.

In 1994, the government sold 40 percent of its PNOC stake in Petron to strategic investor Saudi Aramco while 20 percent was offered to the public. PNOC maintains the remaining 40 percent.

“It was stipulated that should government or Aramco wish to sell to the public they must follow certain processes – which include the offering to the other party the right of first refusal and they must be selling to an eligible third party,” Reyes said.

Finance Secretary Margarito Teves earlier said they would be studying the possibility of selling the remaining 40 percent stake of PNOC in Petron by the middle of this year.

Petron posted a net income of P658 million in the first three months of this year. But the company’s net income for the first quarter 2008 was 31 percent lower than the P953 million reported for the same period last year. The company attributed the drop in net income to lower refining margins.

Total sales volumes increased by 10 percent to 12.92 million barrels in the first quarter of 2008 compared to 11.75 million barrels last year. Meanwhile, sales revenues increased by 37.5 percent to P59.60 billion this year from P43.35 billion in 2007.

“In spite of the drop in our income, we are confident that we will be able to meet our financial and operating targets for the year as we begin to see the positive impact of our new petrochemical feedstock units,” Public Affairs Manager Virginia Ruivivar said.

On April 9, Petron inaugurated the country’s first petrochemical feedstock units at its Bataan Refinery, namely the Petro Fluidized Catalytic Cracking Unit (PetroFCC) and the Propylene Recovery Unit (PRU). 

The company also said it is set to commission its fuel additives blending plant in Subic.

Petron will be the exclusive toll blender for Innospec – a leading fuel additives supplier – for its market in the Asia-Pacific region. Under the partnership, Petron will be able to tap Innospec’s regional customer network for its own lubricants and specialty chemicals. Petron will also provide technical support services to Innospec in the region, as well as directly participate in marketing petroleum additives to select markets in Southeast Asia, Northeast Asia, China, and India. Innospec’s additives are used in Petron’s world-class fuels, namely Blaze, XCS Plus, Xtra Unleaded and DieselMax.