MANILA, Philippines— The Philippine Stock Exchange will spearhead the creation of an independent entity that will accredit the geological findings of oil exploration and renewable energy companies planning to go public.
The creation of such a privately run authentication entity is upon the suggestion of Energy Secretary Rene Almendras who cited this as part of global best practices in a press briefing with the PSE and the Securities and Exchange Commission on Thursday.
SEC Commissioner Juanita Cueto added the proposed accreditation process would be a “refinement” to the recently drawn listing and disclosure framework customized for petroleum and renewable energy companies that took effect on Thursday.
The supplemental rules, which were a result of a collaboration between the PSE, SEC and DOE, relaxed the one-year operating history requirement under the second board listing rules of the PSE.
Almendras said that by bringing more of these companies into the local bourse, it would be spreading the risk borne by investors but likewise spreading the potential rewards as well.
“But how do we give public a fair share of information? You will have as many opinions as you have the number of geologists looking at the same data,” Almendras said.
To help the public distinguish which exploration companies had solid potentials, the DOE would initially take the role of certifying those companies as a precondition to listing on the PSE.
“But we’re pushing for a truly independent group that will review this and authenticate the findings. Other markets have something like that…We can make these improvements happen,” the energy chief said.
Lack of information would naturally drive investors to take a more conservative stance, Almendras said. But if there’s such a centralized authentication process, stock valuations could be better, Almendras said.
“When you want to go public, you need to convince public that your estimates are accurate,” he said.
The energy chief said the entity could be run by a pool of experts, many of whom could be tapped from the academe.
“We want a marketplace where you have deeper investors but hopefully there will also be higher trading volume and clearly improved information (flow),” Almendras said.
PSE president Hans Sicat agreed that the creation of such an entity would boost transparency for the benefit of the investing public.
SEC Commissioner Cueto added that the collaboration with the DOE would be crucial because corporate regulators would need the government entity’s technical expertise in measuring risk in investing in these types of companies.
While the proposed accreditation entity would be generally useful for oil exploration companies, Almendras said it could also be helpful in evaluating renewable energy companies using geothermal technology.
The new supplemental listing rules are similar to the existing framework for second board listing but less stringent when it comes to the one-year operating history requirement. The rules thereby aim to open up capital market funding opportunities to the sector, especially those in the early stages of exploration and development.