DURHAM, NORTH CAROLINA: It’s only fitting that our first column for this year tackles one of our favorite topics – Pilipinas Shell’s long overdue initial public offering (IPO). That’s because 2016 marks the eighteenth (18th) year that Shell has evaded its legal obligation as an oil refiner under the 1998 Oil Deregulation Law, to sell at least 10 percent of its common stock via public listing.
San Miguel-owned Petron Corporation, the only other oil refiner in the Philippines, had publicly listed its shares more than ten years ago in 2004.
It is frustrating that not one administration since 1998 – the Ramos, Estrada, Arroyo and the current PNoy administrations – has been able to implement or enforce this IPO requirement against Shell.
The only development on the oil giant’s public listing has been in the newspapers that some observers have jokingly referred to it as Shell’s “IPO by press release.”
Last October, Shell told reporters that it was looking to launch a long-delayed initial public offering sometime this year. “We’re getting ready for it,” Shell Country Chairman Edgar Chua said during a Shell event. “We’ve discussed it with the (Department of Energy). It’s just a question of timing.”
And two months ago, Chua announced to media: “We’re preparing a lot of things including the regulatory requirements of the PSE (Philippine Stock Exchange) and the SEC (Securities and Exchange Commission) as well as the road show requirements.”
“We already have a financial advisor. So we’re now preparing. By next year (2016) hopefully, (we will proceed) either before or after the (May presidential and national) elections,” Chua added.
Reading between the lines, it is clear that Shell does not want to commit to a definite time, date or period for its IPO. Chua’s generic statement that they are “getting ready for it” or that they will “hopefully” push through with their IPO, or that the public listing will happen “either before or after the elections” means that it is still deciding whether or not to comply with the oil deregulation law.
What Shell has been doing for almost two decades to delay compliance with the mandated IPO requirement is akin to a striptease – a prolonged enticement without actually doing the deed.
Industry insiders say Shell has already cleared all the roadblocks for its public listing. Yet, the oil company has found a catalog of excuses not to proceed with its public listing, citing unfavorable market conditions or the never-ending upgrade its Tabangao, Batangas refinery.
We predicted correctly that Shell wasn’t going public last year. We don’t see it doing an IPO by the time PNoy steps down from office in July 2016 – or even until the end of this year. It had successfully delayed its IPO for the past 18 years. Why stop now?
We stand by our fearless forecast a few months ago that Shell will never do an IPO unless it is forced by the High Court, or by the Office of the Ombudsman (if it ever gets around to investigating this highly anomalous situation), or by the country’s next president.
Shell has brazenly defied all attempts to compel it to proceed with its IPO because it has co-opted the government regulator tasked with overseeing and regulating the petroleum industry – the DOE. Economists call this scenario “regulatory capture.”
Regulatory capture is a form of political corruption that happens when a regulatory agency like the DOE, which was created to act in the interest of the public interest, instead acts in ways that benefit the industry it is supposed to be regulating, rather than the public.
Perhaps the best illustration of this anomaly are the public statements of DOE’s top official.
As the then director of the DOE’s Oil Industry Management Bureau, current Energy secretary Zenaida Monsada took Shell to task for its much-delayed IPO, which she described as “long overdue.”
“While the opinion of the Department of Justice is that the three-year period under the oil deregulation law is not mandatory but prescriptive and will not prohibit an IPO to be conducted after the lapse of the said period, nearly 15-year period since the passage of the law is long overdue for Shell to implement the public offering of 10 percent of its common stocks,” Monsada said in a letter to Shell two years ago.
After being appointed as the DOE officer-in-charge last July, Monsada began singing a different tune, much like her predecessor (and another Liberal Party stalwart) Jericho Petilla.
Monsada now justifies the delay in Shell’s public listing, saying that “an IPO is not just about what the company wants. They must comply with the requirements of the Philippine Stock Exchange (PSE). The requirements protect those who will buy (stocks).”
Monsada also says Shell must ensure continued earnings and this, she points out, is dependent on its refinery upgrade. Huh?! Since when did the law say that an oil refiner needs to be profitable before undertaking an IPO? Besides, if she already found Shell delinquent two years ago, why has their dilly-dallying suddenly become acceptable now?
Anyare, Secretary Monsada?!
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