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Sale of Chevron’s geothermal assets in Philippines faces delay

Makban geothermal power plant, Philippines (source: ThinkGeoEnergy, creative commons)
Alexander Richter 3 Apr 2017

The closure on the acquisition of Chevron's geothermal assets in the Philippines by Ayala Corp. is being held up by a "right of first refusal" by SM Group, the co-owners of the Philippines Geothermal Production Company

As reported by the Manila Bulletin this morning, there is a hold up on the acquisition of Chevron’s geothermal assets in the Philippines by AC Energy Holdings, Inc. of the Ayala Group.

The sale of the assets of the Tiwi and Makiling-Banahaw (MakBan) steamfield assets is being hold up because of the “right of first refusal” warranted to its current partner All First Equity Holdings of SM Investment Corporation.

The right of first refusal gives the SM Group the option to match the offer of the assets’ winning bidder – a consortium that included the Ayala Group along with Star Energy Group Holdings Pte. Ltd. of Indonesia.

In an interview with reporters, AC Energy President and Chief Executive Officer Eric T. Francia forthrightly admitted that they are not certain yet as to the final outcome of the transaction because of the ongoing talks between Chevron and SMIC of the Sy Group.

“We don’t know yet, there is an ongoing discussion with the current partner of Chevron… it’s really a matter between Chevron and SM because they are still the ‘partners of record,’ so their discussions are ongoing – we’re just waiting,” he stressed.

The SM Group is Chevron’s current partner in Philippine Geothermal Production Company (PGPC), which has the contractual arrangement with the Philippine government to operate the Tiwi and MakBan steamfields in the Bicol region and Laguna-Batangas provinces, respectively.

The Sy group holds the majority equity of 60-percent in PGPC, as required by the Philippine Constitution on the exploration and development of State resources.

Francia noted that while they made an offer, “obviously, we just have to wait whether the sale will push through or not.”

There are two major conditions that they have been keeping watch on – one is that “the current discussion is now between the two partners” and two, “if there is a green light for us to get in, then we will need to get approvals.”

He further qualified that based on these two conditions, “if Chevron decides to sell to SM as opposed to us, that’s still a possibility, so it’s a judgment call for them.”

In case the deal does not fall through, Francia said Ayala Group should just have to move on.”

For the other deal on Chevron’s asset divestment in Indonesia, the Ayala Group executive indicated that “financial closing will happen in the next few weeks.”

The Indonesian assets have 637 MW of aggregate capacity for the geothermal facilities in Darajat and Salak in West Java.

Source: Manila Bulletin