Wednesday, 13 May 2009

Philippines' Petron to spend $1 billion for upgrade

Reuters with a report from J. B. F. Santos

THE PHILIPPINES’ top oil refiner, Petron Corp., plans to spend as much as $1 billion to upgrade its facilities, which it will partly fund through bonds and a preferred share issue.

Ramon S. Ang, company chairman and CEO, said after an annual meeting yesterday that bonds worth P10 billion would be issued in two tranches, with the first half likely in May or June.

"We were [also] thinking of issuing P15 billion worth of preferred shares," he told reporters.

Earlier, Petron said in a statement it would invest as much as $1 billion "for additional facilities to enable the full conversion of residual products to more valuable gasoline, diesel, LPG and propylene".

It said funds could come from an offering of fixed rate notes and retail bonds, but Mr. Ang said the only plans for now were the bonds and the preferred share sale.

Petron has a capacity of 180,000 barrels per day and sells nearly 40% of the Philippines fuel requirements. The company is undertaking the second phase of an expansion plan for its petrochemical venture.

Petron President Eric O. Recto said some P450 million had been allocated to finance an additional 200 stations nationwide.

"It’s a different model, typically our service stations cost quite a bit more than that ... these are the micro filling stations," Mr. Recto said.

"It’s a way to address competition. There’s no denying that [the smaller players] have made inroads," he added.

The firm currently has 1,300 gas stations and added just 35 last year.

Mr. Ang said the expansion was "in line with our strategic initiative to strengthen the company’s core business and ensure our market dominance."

Philippine food and beverage conglomerate San Miguel Corp. has an exclusive option to buy a 50.1% stake in Petron from UK investment firm Ashmore Group.

Ashmore’s holdings in Petron are held by its wholly owned subsidiary SEA Refinery. The group currently holds a total of 90.57% in Petron after it bought out the government in December in a $544-million deal.

San Miguel, which is diversifying into power and heavy industry, has until December 2010 to exercise the option to buy the Petron shares.

Mr. Ang, who is also the president of San Miguel, said in the statement there were significant opportunities for synergy between the two companies.

"Early indications from various institutions signify a high level of interest for our planned fund raising activities," he said. "This positive response means they recognise the company’s solid fundamentals, undisputed market leadership and potential synergies with San Miguel."

Petron said its January-March net income climbed by a third to P874 million. Analysts expect 2009 net profit to rise about 30% to P5.2 billion.

Petron shares yesterday rose to P5.70 from P5.60.

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