DOF THUMBED DOWN ARROYO ADMIN MOVES TO RAISE STAKE IN SMC, PETRON
MANILA, March 8, 2005 (STAR) By Des Ferriols - The Department of Finance (DOF) thumbed down yesterday all moves by the Arroyo administration to raise its financial stake in either San Miguel Corp. (SMC) or Petron Corp.
Because of the country’s precarious fiscal standing, the DOF said the government has neither the money nor the inclination to make major stock acquisitions at a time when it is trying to avoid incurring new debt.
Finance Secretary Cesar Purisima told reporters that the national budget would not be able to support the acquisition of new shares in SMC or even the award of a sovereign guarantee for such acquisitions planned by any government agency.
If government financial institutions have the funds to buy shares in SMC, they may do so, Purisima said. "But it will have to be without any government guarantee and they have to evaluate that based on their own business strategies."
Purisima’s statement effectively ends all speculation that the government will increase its stake in SMC this month in order to avoid being diluted by the company’s stock rights offer.
SMC is offering one new share for every 10 held by stockholders. If the government does not subscribe to the new offering, its equity will shrink by 10 percent.
Fully subscribing to the offering would cost the government somewhere between P5 billion to P8 billion — money which Purisima says the government cannot spare due to its tight fiscal situation.
The Arroyo administration is struggling with a budget deficit that analysts warn could explode into a full-blown fiscal crisis that would derail Mrs. Arroyo’s anti-poverty agenda.
In the case of Petron, Purisima said the Department of Energy considers the government’s present 40-percent equity in one of the country’s major petroleum companies as "appropriate."
Having giant Saudi crude oil producer Arabian American Oil Company (Aramco) as a major partner in Petron should promise the country relative stability of its crude oil supply in the face of upheavals in the Middle East, Purisima added.
"On the part of the DOF, we would like to push forward, not backward, on the privatization program," he said. "Plus we don’t have room for this in the budget."
President Arroyo wants the government to subscribe to SMC’s stock rights offering to prevent its 41-percent equity from being diluted.
In addition, she had hoped the government could sell its San Miguel holdings at a better price in the future.
But the Presidential Commission on Good Government, which oversees the government’s SMC equity, said last week that it may not subscribe to the stock offer because of the chronic budget deficit.
The government is locked in a drawn-out court battle with SMC chairman Eduardo "Danding" Cojuangco, who is accused of acquiring his stake in the food and beverage giant with state funds acquired during the Marcos dictatorship, of which he was closely allied.
For his part, Senate President Franklin Drilon suggested that the government reacquire a majority stake in Petron in an effort to minimize oil price increases.
Aramco acquired 40 percent of Petron in 1993. Another 20 percent was later sold to the public in an initial public offering.
Drilon accuses Petron and two other major local oil companies, Pilipinas Shell Petroleum Corporation and Caltex Philippines, of operating as a cartel instead of engaging in fair competition as intended by the landmark 1998 oil deregulation law.
He also accuses the so-called "Big Three" of overcharging the public.
If the government has a majority stake in Petron, it could dictate the company’s pump prices and eventually initiate competition, Drilon said.
Drilon said he was not advocating a return of a regulated oil industry — in which oil companies had to seek prior government approval before raising their prices — and a return of government subsidies that kept pump prices steady.
Although the government no longer has direct control over the oil industry, fuel prices remain politically sensitive. In the past, the government has relied on appealing to oil companies to hold down their prices.
Rising crude oil prices on the world market earlier prompted warnings from some local oil companies that they might possibly have to raise their pump prices weekly. — With Mike Frialde, Mayen Jaymalin, Paolo Romero
Reported by: Sol Jose Vanzi
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