The Energy Regulatory Commission (ERC) is seeking guidance from the Securities and Exchange Commission (SEC) on the appropriate modality in the mandated initial public offering (IPO) of power generation companies (GenCos).
“We are in consultation with SEC for us to be able to come up with a more definite and easier to implement policy or rules on this (IPO), so we are hoping that we will be able to address this on a more permanent basis,” ERC Chairperson Agnes T. Devanadera said.
At current stage of discussion, she noted that what appears as an acceptable mechanism for stock offering of the GenCos will be via their holding firms – instead of requiring the individual power companies to do their listing with the Philippine Stock Exchange.
The ERC chief emphasized that whatever advice or guidance extended to them by the SEC will eventually be considered in the rule-making process by the regulatory body, so the GenCos can be properly apprised and directed on their targeted public listing.
“It (IPO) is still within the holding company, and we have to have the amendments of the rules. So what have we been looking at is something that’s easier to comply with,” Devanadera stressed.
For that rule-making process on the IPO of GenCos to advance, the ERC chairperson disclosed that an application on the crafting of the rules had already been filed with the Commission on October 12 this year.
Apart from IPO, the ERC previously stated that there are other parameters in which the GenCos can broaden their ownership base, so they can comply with the stock offering prescription of the Electric Power Industry Reform Act (EPIRA), the law that has been serving as the ‘bible’ of the deregulation of the country’s power sector.
Under Section 43 (t) of the EPIRA and Rule 3 Section 4 (m) of its implementing rules and regulations, GenCos as well as distribution utilities are mandated “to offer or sell to the public a portion of not less than 15-percent of their common shares of stock.”
The timeframe for the decreed stock offering should have been five (5) years from the effectivitiy of the law – or as early as 2006, but that turned out to be a moving target given the heaps of legal clarifications sought on rules and policies; coupled with “unfavorable developments” in market conditions.
By far, the SEC issued an earlier legal opinion stipulating that a ‘public offering’ under the Securities Regulation Code (SRC) “does not necessarily require listing and selling in the PSE or any exchange for that matter, since listing is just one form of public offering.”
The SEC has cited provisions of the 2015 implementing rules and regulations of the SRC, which defines public offering as “any offering of securities to the public or to anyone, whether solicited or unsolicited.”
Nevertheless, in the view of Senate Committee on Energy Chairman Sherwin T. Gatchalian, he wants the IPO requirement for GenCos lifted, because he perceived that as impediment to capital flows in the power sector – primarily for smaller-scale renewable energy ventures.
He pointed out there is a need to relax some policies in the power industry, and he wants the IPO requirement scrapping to be one of those, because he sees that to be “burdensome to generation companies.”