Gov’t waives right to buy

THE Philippine National Oil Co. yesterday decided to waive its right of first refusal to the 40 percent stake in Petron which Saudi Aramco is selling to the London-based Ashmore Group for $550 million.

“We based our decision on a number of factors, including the fact that the purchase of these shares by the government runs contrary to our policy of privatizing government stakes in corporations and letting the private sector run commercial enterprises,” Energy Secretary Angelo Reyes said after a meeting of the PNOC board.

PNOC, which holds a 40 stake in Petron after the latter’s privatization in 1994, also opted not to transfer the right to buy the Aramco block to a third party.

Reyes said last week that Morgan Stanley had approached PNOC with an offer to buy the stake.

Last week, JG Summit Petrochemical Corp., owned by the Gokongwei family, said it was offering about P24.5 billion ($575 million) for PNOC’s stake in Petron.

PNOC officials said no decision had yet been taken.

PNOC said the decision not to exercise its right followed a recommendation made by its financial advisors, Development Bank of the Philippines and ING.

“We were also aware that exercising the right of first offer and the subsequent tender offer could cost Philippine taxpayers some $825 million at a time when the government has many other priorities including the further development of our agriculture sector to support food security and investment in modern infrastructure to ensure the competitiveness of our economy,” he said.

Reynaldo David, DBP president, said Ashmore will be an acceptable partner as it has expressed intention to grow Petron’s business on all fronts, both strategic and financial.

David said Aramco has offered a supply agreement to Ashmore that guarantees a one-year oil supply for Petron.

Upon Aramco’s entry into Petron, it signed a 10-year supply contract covering 90 percent of the latter’s requirement.

The contract, which was scheduled to run until 2014, would be terminated upon the sale of Aramco’s stake to Ashmore.

David said DBP looked into the offer of Morgan Stanley as well as those of the Thai firm PTT Ltd. and the Gaisano family of Cebu.

Petron has assets amounting to P104.5 billion, with borrowings of P46.6 billion. It supplies 40 percent of country’s refined oil product requirement, with a refinery rated at a capacity of 180,000 barrel per day.

The Ashmore Group is listed on the London Stock Exchange. It has assets $36.5 billion.

Sen. Mar Roxas said PNOC should make public the deliberations which led to its decision.

Roxas, chairman of the Senate committee on trade and commerce, questioned why PNOC deliberated on the deal only on the last day of the two-month period within which to decide.

“The government knew that this sale was forthcoming yet there was no clear design on how to seize this as an opportunity to advance the national interest particularly at this time of sky-high oil prices,” he said.

Roxas raised the issue before the announcement to waive was made.

Roxas said the sale of the 40 percent stake of Aramco in Petron “is not just a simple commercial transaction” as it involves the public interest at a time when the price of crude oil is going off the roof.

“This pertains to a strategically crucial product, oil, and to a company that owns 40 percent market share in the domestic trade of oil products,” he said.

“They may have very good reasons not to exercise this option, but to date we don’t know what these are. And if these ‘good reasons’ don’t exist, we ought to instead exercise this right so we can place this key asset in friendly hands,” he said.


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