ERC clarifies allowed modes of public offering

By Lenie Lectura – July 10, 2019
from Business Mirror

THE Energy Regulatory Commission (ERC) has moved to address concerns raised by a group of power generation companies (gencos) on the allowed modes of public offering.

Under the Electric Power Industry Reform Act (Epira) of 2001, all private gencos and distribution utilities (DUs) not publicly listed shall offer and sell to the public a portion of not less than 15 percent of their common shares of stocks.

However, the ERC suspended the directive in 2016 following the petitions made by the Private Electric Power Operators Association (Pepoa). One of the clarifications it raised included “whether registration of common shares at the Securities and Exchange Commission [SEC] was inadvertently omitted as a mode of public offering.”

The SEC, when asked for its opinion, told ERC that public offering under the Securities Regulation Code (SRC) does not necessarily require listing and selling in the Philippine Stock Exchange (PSE) or any stock exchange for that matter, since listing is just one form of public offering.

Further, the SEC reiterated that in case a special law such as Epira requires a corporation to offer and sell to the public a particular portion of its common shareholdings, compliance with its requirements will primarily depend on what particular law or its implementing rules will prescribe.

“The general definition of public offering under the 2015 IRR of the SRC will only apply suppletorily, if such special law does not provide for its own definition or modes of public offering,” it said. Thereafter, the ERC conducted another round of public consultation in December last year.

The result of the consultation led the ERC to adopt a resolution amending Resolution 9 which requires gencos and DUs which are not publicly listed to offer and sell to the public a portion of not less than 15 percent of their common shares of stock.

Resolution 4, which amended Resolution 9, cites the following modes for public offering:

• Listing of the generation companies and distribution utilities in the PSE.
• Listing of the shares of stock in any accredited stock exchange, or direct offer of a portion of registered enterprises’ capital stock to the public and/or their employees, when deemed feasible and desirable by the Board of Investments.
• Public offering under the Securities Regulation Code and its implementing rules and regulations.

However, gencos and DUs whose respective holding companies are already listed in the PSE are already complaint. Also, the offer of the common share of stock through a employee stock option plan (Esop) or any other similar plan shall not be deemed as public offering since the offer is limited only to the employees of the gencos and DUs, as against the general public to whom the offer is to be made.

“Said offer and sale of shares of stock, through Esop, is considered as public offering only when the genco or DU is a registered enterprise under the Omnibus Investment Code,” the ERC said. The ERC added gencos under the build-operate-transfer scheme shall not be deemed in compliance with the public-offering requirement given that the privatization provisions of the Epira has the effect of transferring the ownership of the privatized BOT projects to the new owners.

“Thus, the new owners shall comply with the public offering requirement,” the ERC said.

Resolution 4 was signed by the ERC commissioners last June 4 but was approved for posting last July 4.