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By Likha C. Cuevas-Miel And Euan Paulo C. Ańonuevo,
Reporters
THE Gokongwei group wants to acquire a
substantial interest in the Philippines’ largest oil refiner,
government and company source said on Wednesday.
The separate announcements by the Department of
Energy and JG Summit Holdings Inc. came on the day Petron Corp.
disclosed that its first-quarter profit fell by a third to P658
million from the same period last year due to lower refining
margins.
The first quarter results were released just as
the international price of crude hit a fresh record of $122 a barrel
in Asia.
Petron said its net income fell even as revenues
jumped 37.5 percent to P59.60 billion, and its sales volumes
increased by 10 percent to 12.92 million barrels.
In a briefing, Energy Secretary Angelo Reyes
said the Gokongwei group, which has interests in the petrochemical,
property, food, retail, airline and telecom industries, and US-based
investment bank Morgan Stanley are looking to corner Saudi
Aramco’s 40-percent stake in Petron.
“There are several parties who have expressed
their interest to be considered as a third party eligible to
purchase the Aramco shares being offered and these include Morgan
Stanley based in Hong Kong and the Gokongwei group,” Reyes said.
The Saudi oil firm earlier agreed to sell its
entire stake in Petron after the London-based Ashmore Group, through
its unit SEA Refinery Holdings, offered $550 million for the said
shareholdings.
The government, through Philippine National Oil
Co. (PNOC), also has a 40-percent stake in Petron, giving it the
option to match this offer or assign the same to a third party, as
per an agreement with Aramco when the Saudi firm participated in
Petron’s privatization over a decade ago.
“We are now in the process of considering
that—whether we would want to exercise that right or to extend
that right to a third party,” Reyes said.
The energy secretary said the government sent
the two groups’ proposals to state-owned Development Bank of the
Philippines, which serves as PNOC’s financial adviser on the
exercise of the government’s pre-emptive right. A decision would
be made by May 12, he said, referring to the last day before the
60-day deadline for the exercise of the government’s right of
first refusal lapses.
Govt, not Aramco, shares in conglomerate’s
sights
But in a letter made available to reporters,
Lance Gokongwei, JG Summit president and chief executive, said the
company wants to buy the government’s stake in Petron if PNOC
decides to divest from the oil refiner.
“We have learned from newspaper articles that
[PNOC] is planning to sell its entire 40-percent shareholdings in
Petron consisting of 3.75 billion shares. We are interested in
making an offer to purchase the above-mentioned shares of Petron at
P6.55 per share. We are prepared to discuss this offer with you as
soon as the other terms and conditions to be agreed upon for the
said purchase,” the letter dated April 21, 2008, read.
Reyes said the government is considering the
sale of its Petron stake to boost state coffers, but added that the
energy department has yet to receive any offer.
The government plans to balance its budget this
year, and raise spending to cushion any adverse impact from a
slowing US economy, the Philippines’ biggest export market.
Airline, petrochem businesses to benefit
A source familiar with the matter told The
Manila Times that the government may consider the sale of its stake
if the Aramco shares fetch a “good price.”
“If it gets a higher price from what is now on
the table, the government may follow suit,” the source said.
Department of Finance sources said the
government doesn’t have the money to top the Ashmore group’s
offer. A share buyback would require budgetary allocation, which
they said is unlikely to pass in Congress.
For its part, JG Summit stands to gain from
securing a majority interest in Petron, ownership of which could
help mitigate the fuel supply concerns of the conglomerate’s
airline unit amid record crude prices. In addition, Petron’s
petrochemical venture can boost JG Summit’s resins business.
JG Summit owns Cebu Pacific and JG Summit
Petrochemical Corp. Last year, the Philippine conglomerate acquired
the remaining 17.72-percent shares in the petrochemical unit held by
Marubeni Corp.
With its 180,000 barrel-per-day refinery
capacity, Petron supplies nearly 40 percent of the country’s fuel
requirements. The company diversified into petrochemicals, with its
recent investments in a Petro Fluidized Catalytic Cracking Unit (PetroFCC)
and a Propylene Recovery Unit (PRU).
The PetroFCC, the first “cracking” unit of
its kind in the world, converts black products into higher value
LPG, gasoline, and diesel, as well as propylene. Propylene is the
raw material for petrochemicals used in the manufacture of everyday
products such as PET bottles and other food packaging, electrical
appliance, suitcases, furniture and automobile parts.
The PetroFCC has a conversion capacity of 19,000
barrels while the PRU produces 140,000 metric tons of propylene a
year.
Despite its profit drop in the first quarter,
Petron said it would meet its financial and operating targets this
year due to the contribution of its new petrochemical feedstock
units.
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