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Public offerings by generation companies and distribution

The Energy Regulatory Commission (ERC) recently re-issued rules implementing the mandate on public offering under the Electric Power Industry Reform Act of 2001 (EPIRA). The ERC initially issued rules implementing this requirement in 2005; however, the rules were suspended in 2006 pending the conduct of public hearings.

The rules require generation companies and distribution utilities (DUs) to publicly offer and sell not less than 15% of their common stock. If necessary, the generation company or DU must increase its authorised capital stock or sell its subscribed stock to enable compliance.

The requirement does not apply to generation companies, DUs or their holding companies already listed in the Philippine Stock Exchange, self-generation facilities not selling excess power, partnerships engaged in electric generation and distribution which do not list partnership interests and electric cooperatives that have no common stock. The rules, however, still apply to the new owners of power projects privatized under the EPIRA.

Existing companies are required to implement the public offering and sell its shares within five years from June 30 2011, while new companies are required to do so within five years from the issuance of their certificate of compliance. A company may prove that it has taken steps to ensure the sale of the shares offered and the ERC may consider this compliance with the rules.

A public offering may be made through (i) listing with the Philippine Stock Exchange, or (ii) listing of the shares in any accredited stock exchange or direct offer by a Board of Investments-registered enterprise to its employees or the public, when deemed feasible and desirable by the Board of Investments.

An offer made through an employee stock option plan shall not be deemed as a public offer unless the generation company or DU is registered with the Board of Investments.

Generation companies and DUs are required to report compliance with these rules within 30 days. Any violation of the rules shall be subject to penalties that may be imposed by the ERC. Where good cause appears, the ERC may allow exceptions if such are in the interest of the public and not contrary to law or other related regulations.

The requirements under the rules are intended to enhance the inflow of private capital and broaden the ownership base of the power sector and protect public interest affected by the rates and services of DUs and other electric power providers.

By Jan Celine C Abaño-Ranada

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