DO you know that PNOC Energy Development Corp. (EDC) was no longer a government-owned and controlled corporation (GOCC) even before the Lopez-led consortium acquired through a public bidding the remaining stake of Philippine National Oil Co. in what used to be PNOC’s wholly owned subsidiary?

For over 30 years, PNOC EDC, formed in 1975, has been a GOCC. This ownership status remained even after PNOC sold 3 billion EDC shares through an initial public offering on December 13, 2006. But after an additional stock sale in July 2007 diluted PNOC’s ownership to 40 percent of common shares from 60 percent, EDC ceased to be a subsidiary of PNOC and, thus, lost its status as a state-controlled or -owned corporation. (A filing says “PNOC EDC has effectively shed its GOCC status now that the government shareholdings in the company has effectively been reduced to 47 percent [rounded from 46.666 percent], which is the dividend when 10.5 billion shares is divided by 22.5 billion outstanding shares”).  

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With the issuance of 7.5 billion preferred shares, EDC’s ownership structure stayed within the 60-40 constitutional ratio of ownership between Filipino and foreign stockholders. Of the preferred shares, 3 billion shares went to PNOC EDC’s Retirement Fund. By including all these preferred shares, which are classified as voting shares, the government has been wrongly credited—not necessarily by PNOC— with  60-percent ownership. The percentage, though, is misleading because the computation included the 3 billion preferred shares owned by the retirement fund and are now deemed privately held. 

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Not that there is something fishy or anomalous in the bidding that the public should be wary about. A more curious investor may want to know how much of the P58.5 billion winning bid for 60 percent of EDC’s outstanding shares will go to PNOC and how much to the retirement fund. If the statements attributed to the Lopezes that in arriving at their bid they priced—Or was “value” the word used?—the common shares at P9.75 each are true, then try multiplying the price per share by 6 billion EDC shares and you will have a product of exactly P58.5 billion. This means the 7.5 billion preferred shares came only as bonuses or sweeteners. 

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Here is another computation. PNOC and the retirement fund combine for a total of 13.5 billion shares consisting of 6 billion common and 7.5 billion preferred shares. Dividing P58.5 billion by 13.5 billion shares will result in a dividend of P4.333 per share, which is way below EDC’s market value. What a bargain! At P4.33 per share, the retirement fund will get P13 billion for its 3 billion preferred shares, which it bought at P0.01 per each. What a gain or return on investments in less than six months! The government, on the other hand, will get P45.5 billion. EDC closed on Friday at P7. It hit a 30-day high of P7.60 on October  9, 2007. (Don’t wait for the price to soar. No tender offer is forthcoming based on an opinion issued by the Securities and Exchange Commission.) 

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The privatization of EDC has long been on the drawing board. As a matter of fact, the plan was conceived way back during the administration of President Fidel V. Ramos. It underwent several stages of planning that the disposition of government holdings in EDC happened only last week.

As a result of the IPO in 2006, foreigners hold more EDC shares than Filipino investors. As of December 31, 2006, PCD Nominee Corp. held 4,669,478 EDC shares or 31.13 percent, for foreigners and 1,276,688,500 EDC shares for Filipino investors. Why the big discrepancy? Remember how PNOC conducted an international offering of EDC shares indicating the government’s preference for foreigners over Filipinos? The full privatization of PNOC-held EDC shares has tilted the balance in favor of Filipinos. But again, one has to look at the equity structure of Red Vulcan Holdings Corp. to determine who owns how much of the corporate vehicle the Lopez group used in successfully bidding for PNOC’s remaining stake in EDC. 

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To see what kind of company has been acquired by the Lopezes and their partners, one has to look at EDC’s financial performance in the first nine months of 2007. The report showed the company registered a net income of P5,413,842,476, up 17.291 percent from P4,615,711,951 in the same period last year. With its consistent profitability, EDC has piled up retained earnings of P10,365,082,170 as of September 30, 2007. This tells us that with this kind of performance, EDC will be able to give back to its stockholder some of its profits either as cash or stock dividend. Why not start with a P0.50 dividend for 15 billion common shares that will eat up only P7.5 billion of accumulated retained earnings?

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DO you know that PNOC Energy Development Corp. (EDC) was no longer a government-owned and controlled corporation (GOCC) even before the Lopez-led consortium acquired through a public bidding the remaining stake of Philippine National Oil Co. in what used to be PNOC’s wholly owned subsidiary?