THE Energy Regulatory Commission (ERC) has rejected the application of Majestic Energy Corp. for a certificate of compliance (CoC) for its 41.30 megawatt-peak (MWp) solar rooftop project in Cavite, after the regulator flagged concerns over foreign minority shareholders’ control of the company.
In a statement, ERC Chairman and Chief Executive Officer Agnes T. Devanadera said the agency has reviewed the pertinent documents submitted in support of Majestic Energy’s application for a feed-in tariff (FiT) certificate of compliance.
“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 without further action from the Commission,” she said.
The certificate is proof that a power plant complies with the applicable regulations, making it safe to switch on and operate.
Majestic Energy’s project is intended as a FiT-eligible power plant, giving it a guaranteed fixed rate for the electricity it produces for the next 20 years. It is located in Cavite Economic Zone (CEZ) I and II, in Rosario and Gen. Trias, respectively.
In its evaluation of Majestic Energy’s application for a CoC, the ERC found that HRD Singapore Pte. Ltd. holds 40% of the total number of subscribed and paid-up capital stock, while Filipino shareholders hold 60%. It noted the company initially appeared to be compliant with the Constitution and laws on Filipino equity requirement.
After its review of Majestic Energy’s articles of incorporation and by-laws, the ERC expressed reservations about the effective control within the company, particularly the required affirmative vote of 75% of the outstanding and issued shares in approving 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 [Majestic Energy] in order to rectify the issues on the ownership requirement of the law,” it said.
The ERC said Majestic Energy had amended the pertinent provisions of its incorporation papers, particularly on the voting rights and quorum requirement for shareholders’ meetings from 75% to “a majority” of the outstanding capital stock.
The company also redeemed from the Singaporean firm about 64,000 preferred redeemable shares at their total par value of P800 million. HRD Singapore also conveyed, transferred, and assigned all its rights and interests to Majestic Holdings Corp. over 6,000 fully paid redeemable preferred shares of stock in Majestic Energy and 2,400 fully paid Class A common shares of stock in the latter.
The ERC said the redemption of the preferred shares and the divestment of the preferred shares by HRD Singapore to Majestic Holdings resulted in almost 96.923% ownership by the holding firm of Majestic Energy.
However, the ERC upon examination of Majestic Holding’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 the holding firm was sourced from HRD Singapore, casting 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, [Majestic Energy] failed to get the Commission’s consensus that the Filipino equity of a corporation is indeed observed,” Ms. Devanadera said. — Victor V. Saulon
