ERC Rules on Public Offering of Generation Companies and Distribution Utilities

The Energy Regulatory Commission adopted on May 23, 2011 Resolution No. 9 entitled “A Resolution Adopting the Rules Requiring Generation Companies and Distribution Utilities Which Are Not Publicly Listed to Offer and Sell to the Public a Portion of Not Less Than Fifteen Percent (15%) of Their Common Shares of Stock Pursuant to Section 43(t) of Republic Act No. 9136 and Rule 3, Section 4 (m) of Its Implementing Rules and Regulations.”

Pursuant to the Resolution, generation companies and distribution utilities (DUs) which are not publicly listed are required to offer and sell to the public not less than 15% of their common shares of stock. The public offering shall be made within five years from the effectivity of the Resolution for existing companies and within five years from the issuance by the ERC of their respective Certificates of Compliance for new companies.

The public offering may be done through the following modes: (i) listing on the Philippine Stock Exchange; and (ii) listing of the shares in any accredited stock exchange, or direct offer of the shares of stock of registered enterprises to the public and/or their employees when deemed feasible and desirable by the Board of Investments. However, the offer of common shares through an employee stock option plan is not considered a public offering since the offer is limited only to the employees of the generation companies or the DUs and not to the general public. The offer to employees may be considered public offering only when the generation company or DU is a registered enterprise under the Omnibus Investment Code.

Under the Resolution, the public offering requirement does not apply to: (i) self-generation facilities, (ii) generation companies and DUs already listed on the PSE, (iii) generation companies and DUs whose holding companies are already listed on the PSE, (iv) generation companies and DUs which are organized as partnerships, and (v) electric cooperatives which have no common shares of stock. On the other hand, the requirement applies to electric cooperatives which have common shares of stock, privately-owned DUs and LGU-owned and operated DUs.