Chevron chooses Philippine partner according to legal requirement
Darajat Unit I owned by Indonesia Power (a PLN subsidiary) with steam supplied by Chevron (source: wienblog-growingtree/ blogspot)
Alexander Richter
5 Dec 2012
To fulfill the legal requirements for a local partner engagement under the Philippine Geothermal Law, Chevron Geothermal Philippines has chosen a Philippine partner under a new entity called SM Investments Corp.
The Philippine Geothermal Law requires that foreign companies engage a Philippine company, so it is not surprising that Chevron has now picked a partner.
A newly-formed entity under SM Investments Corporation (SMIC) of tycoon Henry Sy will be the local partner of American firm Chevron Geothermal Philippines Inc. (CGPHI) to complete the latter’s “Filipinization process.”
Chevron can negotiate with the Philippine government, through the Department of Energy (DOE), for a geothermal operating contract or GOC.
The Sy company which firmed up the joint venture deal with Chevron Geothermal is All First Equity Holdings, highly-placed sources privy to the recently-concluded negotiations have disclosed.
“All First Equity Holdings will take in 60-percent interest in the Filipino company incorporated by Chevron Geothermal for its Filipinization… that is the Philippine Geothermal Production Company Inc. or PGPCI,” the source added.
It was further gathered that the US firm negotiated with three to four parties before it ended up with the Sy firm for its winding search of a local partner.
“Filipinization” for the American firm entails tapping a Filipino partner so it can comply with the Philippine Constitution’s prescription of 60-percent domestic equity ownership for entities engaged in the exploration and exploitation of indigenous and renewable energy resources such as geothermal steam.
In PGPCI, Chevron will hold the minority shareholdings of 40-percent, but its technical expertise in geothermal steam exploration and development will be the new corporate vehicle’s lifeblood.
Basically, this will be the Sy group’s first foray into geothermal exploration. While affiliate firm National Grid Corporation of the Philippines (NGCP) is into the power sector’s transmission segment, All First Equity Holdings’ involvement in steam production will not, in any way, violate the Electric Power Industry Reform Act’s (EPIRA) provision on cross-ownership ban between the generation and transmission sub-sectors.
The industry source added that PGPCI will be the Filipino company (Filco) which shall be negotiating with the DOE for a new GOC. This was a major component of Chevron’s commitment under the Compromise Agreement (CA) it sealed with the National Power Corporation on March 17, 2003. The GOC being eyed is for 25 years; and can be renewed for another 15 years.
Section 6.2 of PD 1442 lays down the need for a service or operating contracting for companies to engage in the exploitation and development of the country’s geothermal resources.
When the government power assets were privatized, the obligations under the CA were subsequently transferred to the Power Sector Assets and Liabilities Management Corporation (PSALM), being NPC’s successor-company.
On the part of Chevron, it already “assigned, transferred and conveyed to PGPCI all of its rights, interests and obligations under the Geothermal Resource Sales Contract” that it signed with PSALM on June 17, 2004.
At the signing of the deal, it was Chevron’s precursor firm Philippine Geothermal Inc. (PGI) which was the signatory in the deal.
It subsequently “appointed PGPCI as the Filco which shall execute the GOC and Abandonment Agreement” with the government, in accordance with the compromise deal inked with NPC-PSALM in 2003.”
Source: Manila Bulletin
