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By Likha C. Cuevas-Miel, Reporter
BASIC Energy Corp. announced on Monday that it
signed an agreement with Chevron Philippines Inc. for a joint study
on the feasibility of an ethanol supply contract.
In a disclosure to the Philippine Stock
Exchange, Basic said it signed a memorandum of understanding to
determine whether it is possible for the two firms to undertake an
off-take agreement for the supply of 25 to 50 million liters of
ethanol a year.
“The result of the study would then aid in the
determination of the terms and conditions for a definitive agreement
for the supply of ethanol,” Basic said.
Chevron markets the Caltex brand in the
Philippines. Basic also eyes an ethanol supply contract with
Pilipinas Shell Petroleum Corp. as the oil refiner prepares for its
compliance with the Biofuels Act. The two firms signed a memorandum
of agreement last year for the possible supply of 50 million liters
a year. By securing its supply of ethanol, Shell would comply with
the new law which mandates that all gasoline sold should contain 5
percent blend of ethanol by 2009 and 10 percent by 2011.
Basic had planned to sell additional shares to
the public this year for its ethanol venture but decided to defer it
to a later date while it waits for the volatile markets to settle
down.
It instead is looking at possible joint venture
partners or strategic investors by issuing P1.6 billion worth of
convertible bonds. The debt notes can be converted into equity
within three to five years.
Another option open to Basic is through direct
private placements in the company by strategic investors, which may
be financial institutions or firms with a stake in energy
production.
Last December, Basic applied for the increase in
shares to P5.5 billion to accommodate the planned follow-on offering
to be underwritten by BDO Capital and Investment Corp. It expects to
generate P3 billion from the fund-raising exercise.
The additional capital would go to the
construction of two or three ethanol plants for P800 million each.
One plant slated for construction soon would be within the sugarcane
plantation in Zamboanga del Norte with a capacity to produce 200,000
liters of ethanol a day by end-2009. The rest of the proceeds of the
planned follow-on offering would be allocated to the proposed
ethanol plant and renewable energy projects in the pipeline. About
60 percent of its capital expenditures would be financed through
borrowings.
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