PETRON Corp. accused the Philippine National Oil Co. (PNOC) of breaching three lease contracts when the latter asked the oil firm to nullify binding-renewal clauses ahead of expiration.
According to Petron, this move could jeopardize operations and, more important, the interest of its small shareholders and partner stakeholders. Petron has existing lease agreements with the PNOC for the sites of its $3-billion refinery in Bataan, 24 bulk plants and 67 gasoline stations.
The BusinessMirror failed in its attempt to acquire the PNOC’s comments.
Petron said Joel Angelo Cruz, the firm’s general counsel, wrote to PNOC President Reuben Lista and told the latter that the lease agreements for the three properties and the renewal clauses are valid and binding.
“They are not in violation of any law nor manifestly and grossly disadvantageous to the government. Accordingly, your letters—because they deny without legal causes Petron’s contractual right to renew—constitute fundamental breach of the three lease agreements,” Cruz said. Petron was responding to Lista’s letter wherein the PNOC CEO nudged the oil company to waive certain provisions of the lease agreements “because they are inequitable”. Lista was also said to have asked Petron to submit remediation plans “so that the abandonment and cleanup of the sites may already be discussed and completed” before the expiration of the lease agreements next year.
“As you very well know, the long-term lease by Petron of the subject properties and the properties denominated as ‘Refinery Properties’, which are the subject of a third lease agreement between Petron and PNOC, was the primary consideration for Petron’s conveyance of said properties at book value to PNOC,” Cruz told Lista in the same letter. “Hence, the consideration for Petron’s leasehold rights is not only the rental payments provided for in the Lease Agreements but the conveyance of the properties to PNOC.”
The PNOC earlier cited Section 2 of the lease agreements. That section provides that, “in case the parties fail to come to an agreement, the same terms and conditions shall apply except the initial rental rate for the renewal period shall be the rental rate at the time of expiration plus 2 percent thereof, and subsequent rental rate shall be escalating by 2 percent per annum.”
Moreover, Section 3 provides that “should the lessee decide to reduce the area of the leased premises due to business or operational reasons, the rentals shall be reduced correspondingly on a per square meter per location basis.
“The reduction of rental for each affected property shall be effective on the succeeding month following the receipt by lessor of a written notice regarding the reduction of the leased properties”.
Petron President Ramon Ang earlier said Petron has every right not to nullify the said provisions because the contract calls for an automatic renewal under the same terms and conditions. “They want us to waive our rights, but we refused. We are willing to discuss a fair and reasonable valuation, but we cannot waive our rights, as these are stipulated in the contracts,” Ang said. “They should honor the contracts. Waiving it is a risk to our billions of dollars of investment.”
