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Project Name: PNOC-Energy Development Corporation |
| Country: Philippines |
Highlights :
- Equity investment of US$49 million in PNOC-EDC’s common shares, acquiring 5.05% ownership as a cornerstone investor in the Company’s Initial Public Offering (IPO) in December 2006
- Divestiture of 40% of the government’s shareholding: first step towards the Company’s privatization as part of the Philippine government’s reform plans for the power sector
- Successful IPO: largest IPO undertaken by a state-owned enterprise in the Philippines since 1994. The IPO was fully subscribed by cornerstone, institutional and private investors in the Philippines and overseas
- IFC’s role helped improve the Company’s corporate governance policies and practices and providing confidence to other investors
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About the Company:
PNOC Energy Development Corporation (PNOC-EDC or the Company), the second largest geothermal energy producer in the world, began commercial operations in 1983.
The Company operates six geothermal steam fields in four contract areas (Leyte, Southern Negros, Bacon-Manito, and Mindanao) where it has obtained exclusive rights to geothermal exploration, development and utilization through service contracts with the Department of Energy of the Philippines. The total installed capacity of the power plants as of year-end 2006 was 1,149.7 MW, accounting for approximately 60% of the Philippines’ installed geothermal capacity and contributing around 7.3% of the country’s power generation capacity in 2006. |
Financing objective:
The Company raised around PHP8.5 billion (around US$170 million equivalent) from the IPO of its newly issued shares. The proceeds of the IPO are used for purchase of new equipment, development of steam fields, and for working capital. |
The structure of the project :
IFC was invited by the Company to become one of the cornerstone investors in the PNOC-EDC's IPO. IFC’s participation was considered by the government and the Company’s management to be critical in ensuring the success of the IPO, and in keeping the momentum towards privatization after the IPO.
IFC invested US$49 million in newly issued common shares, acquiring 5.05% ownership in the IPO that took place on December 13, 2006.
The divestiture of 40% of the government’s shareholding was a first step in the Company’s privatization as part of the Philippine government’s electric power sector reform plans. The IPO was successful, and the stock price rose 42% on the first day of trading. |
The outcome :
IFC’s participation and advice in the area of corporate governance helped ensure the success of the IPO and sent a positive signal to investors on the prospects of the Government’s power sector reform program.
PNOC-EDC was subsequently privatized through a competitive sale of the government's shares to a strategic investor in November 2007.
The development of geothermal power, a clean and renewable energy source for which the Philippines is naturally endowed, would reduce pollution and carbon emissions from the use of fossil fuels, and diversify the country’s fuel sources.
The IPO contributed to the development of the country’s stock market, and the improved corporate governance polices will set a benchmark for future privatization of state-owned companies. With the success of the IPO and the access to international private capital markets it opened, PNOC-EDC can become a new global player in South-South development of geothermal resources.
| TERMS AND CONDITIONS |
| IFC investment amount |
PHP2.45 billion (5.05% of the common shares of the company) |
| Total IPO amount * |
PHP17 billion (40% of common shares of the company) |
| Currency |
Philippines Peso |
| Issue Date |
December 13, 2006 |
| Domestic and foreign issue % |
20% and 80% of the IPO, respectively. |
| Use of Proceeds |
Purchase of new equipment, development of steam fields, and for working capital | * Divided evenly between existing and newly issued shares
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