Mandated by the Electric Power Industry Reform Act of 2001 (EPIRA), private power generation companies (GenCos) and distribution utilities (DUs) are obliged to offer at least 15% of their common shares of stocks to the public.
In line with this, Energy Regulatory Commission (ERC) Resolution No. 04, series of 2019, amending ERC Resolution No. 09, series of 2011, outlines various methods for public offering:
- Listing on the Philippine Stock Exchange (PSE) for GenCos and DUs.
- Solicitation or presentation of securities for sale through modes stipulated in the Implementing Rules and Regulations (IRR) of the Securities Regulation Code (SRC).
- Listing of shares on accredited stock exchanges or direct offer to the public and/or employees by the Board of Investments.
The modes stipulated under the SRC IRR include, (i) publication in any newspaper, magazine or printed reading material which is distributed within the Philippines; (ii) presentation in any public or commercial place; (iii) advertisement or announcement on radio, television, telephone, electronic communications, information communication technology or any forms of communications; and (iv) distribution and/or making available flyers, brochures or any offering material in a public or commercial place or to prospective purchasers through the portal system, information communication technology and other means of information distribution.
However, offerings through employee stock option plans are not considered public offerings unless the GenCo or DU is a registered enterprise under the Omnibus Investment Code. Additionally, GenCos under the Build Operate and Transfer scheme are not considered compliant with the public offering requirement due to EPIRA’s privatization provisions. Exceptions are granted to GenCos, DUs, or their holding companies already listed in the PSE.
To provide guidance and simplify compliance with EPIRA’s public offering requirement, the Securities and Exchange Commission (SEC) issued Memorandum Circular No. 4, series of 2024, entitled Securing & Expanding Capital for PowerGen Operators & Wholesale Electricity & Retail Services (SEC POWERS).
Registrants must obtain clearances from relevant SEC departments before filing a registration statement (RS) with the SEC, along with financial disclosures per the Revised SRC Rule 68 and Philippine Financial Reporting Standards. These clearances shall be from the SEC (i) Company Registration and Monitoring Department, (ii) Corporate Governance and Finance Department, (iii) Office of the General Counsel, (iv) Enforcement and Investors Protection Department, and (v) Office of the General Accountant (OGA).
After pre-evaluation by the OGA, the RS filing proceeds upon sending the proof of payment of SEC registration fees. Payment is made either electronically or through a bank. The OGA evaluates financial statements and issues a Comment and Response Sheet (CRS) for registrants feedback.
Thereafter, registrants submit applications electronically to the SEC. Upon acceptance, hard copies are submitted. The application shall consist of (i) OGA Pre-Evaluation Clearance Form, (ii) SEC POWERS Submission Checklist, (iii) Form SEC POWERS and Prospectus, and (iv) all required exhibits.
Registrants must publish a Notice of Filing of the RS in two newspapers of general circulation for two consecutive weeks, and upload the Prospectus on their website. Shelf Registration requires an undertaking to pay remaining fees not later than thirty business days prior to the expiry of the three year reckoned from the date of the effectivity of the RS.
Subsequent offerings within three years require updated Prospectus and Certification of no material change. The SEC may allow registration with a 15% public ownership, an exception to its usual 20% minimum public ownership requirement for initial public offering.
Registrants must engage underwriters unless justified in a letter providing the details on how the shares will be sold or offered without an underwriter. The SEC shall review the RS within forty-five days from the date of its receipt of the proof of payment of the SEC registration fees. The SEC through the Markets and Securities Regulation Department (MSRD) will issue a comment letter within fifteen days from the start of the review period. The registrant shall respond to this comment letter within twenty days from its receipt. A meeting can be requested by the registrant at least two days before the proposed date but within its twenty day period to respond.
The SEC En Banc decides on approval of the RS, and upon approval, conditions are stated in a pre-effective letter. After fulfilling these conditions, an Order of Registration is issued. Public offering must commence within ten days of RS effectivity. Failure to do so leads to RS cancellation and fee forfeiture. Completion or termination of offering must be notified to the SEC. Incomplete or inaccurate RS may be rejected, leading to fee forfeiture.
SEC POWERS seeks to enhance compliance with EPIRA by granting expedited processes and simplified requirements for the securities registration of GenCos and DUs. This initiative supports the development of capital markets and promotes the democratization of wealth.
Please refer to the author’s related article for further information:
NAVIGATING COMPLIANCE WITH EPIRA’S PUBLIC OFFERING REQUIREMENTS IN THE PHILIPPINES