ERC Nixes COC Application Due to Ownership Issues
The Energy Regulatory Commission (ERC) nixed the application of Majestics Energy Corporation (MEC) for the approval of the issuance of a Certificate of Compliance (COC) for its 41.30 MWp DC Solar Roof Project. The project is intended as a Feed-In Tariff (FIT) eligible power plant located in Cavite Economic Zone (CEZ) I & II, in Rosario and Gen. Trias, respectively.
“We reviewed the pertinent documents submitted in support of Majestics Energy Corporation’s application for a FIT-COC and we observed that some transactions entered by the company are questionable and necessitates further inquiry. Hence, we deemed it proper to revert the matter to the Department of Energy (DOE) without further action from the Commission,” ERC Chairperson and CEO Agnes VST Devanadera said.
ERC, in its evaluation of MEC’s application for a COC, found that HRD (S) PTE., LTD., a Singaporean firm, holds forty percent (40%) of the total number of subscribed and paid-up capital stock while Filipino shareholders hold sixty percent (60%) of the same. Thus, MEC initially appeared to be compliant with the Constitution and Laws on Filipino equity requirement.
The ERC, however, observed that MEC’s Articles of Incorporation (AOI) and By-Laws, have expressed reservations as to the effective control within MEC, particularly the affirmative vote of 75% of the outstanding and issued shares is generally required to approve corporate resolutions pertaining to fundamental and management issues. Effectively, control did not fall on Filipino shareholders inasmuch as any decision made by the Filipino majority can be overturned by the foreign minority at will. ERC called the attention of MEC in order to rectify the issues on the ownership requirement of the law.
MEC amended the pertinent provisions in its AOI and By-Laws, particularly on the voting rights and quorum requirement for shareholders’ meetings from 75% to “a majority” of the outstanding capital stock. Further, MEC redeemed from H.R.D. Singapore Pte. Ltd. some 64,000 Preferred Redeemable shares at their total par value of PhP800 Million. H.R.D. Singapore also conveyed, transferred, and assigned all its rights and interests to Majestics Holdings Corporation (MHC) 6,000 fully-paid Redeemable Preferred shares of stock in Majestics Energy Corporation (MEC) and 2,400 fully-paid Class A Common shares of stock in MEC.
The said redemption of the 64,000 Preferred Shares of H.R.D. Singapore Pte. Ltd. and the divestment of the 6,000 Preferred Shares of H.R.D. to MHC resulted in almost 96.923% ownership by MHC of the MEC.
However, the ERC upon examination of the MHC’s 2014-2015 Audited Financial Statements observed that the funding for the redemption of the 64,000 redeemable Preferred Shares and the conveyance of the 6,000 redeemable Preferred Shares and 2,400 Class A Common Shares of stock to MHC was sourced from H.R.D. Singapore Pte. Ltd. which casted doubts on the legitimacy of the transactions.
“We (the ERC) do not approve applications filed before us hook, line, and sinker. We dig deeper into the relevant documents despite the fact that some government agencies had already granted its imprimatur on an energy project. In this case, Majestics Energy Corporation failed to get the Commission’s consensus that the Filipino equity of a corporation is indeed observed,” ERC Chair Devanadera added.