MANILA, Philippines - Oil refiner Petron Corp. is expecting to save P1 billion per year on energy costs following the completion of its planned 70-megawatt (MW) sold fuel power plant.

Slated for completion in 2012, the plant will be able fully supply the 35 to 40-MW requirement of Petron’s main refining facility in Limay, Bataan, with the excess to be sold to the [grid], said Petron chief financial officer Emmanuel Eraña.

Speaking at the sidelines of Petron’s analyst briefing on Friday, Eraña added that the company has yet to apply for the necessary licenses to sell power.

“This will make our cost structure much more competitive and this will also [improve] our ability to deal with fluctuations in power supply,” noted company president Eric O. Recto. Petron will spend P10 billion to complete the plant, which is expected to begin construction this year.

A significant portion of the power generation facility’s price tag will be funded by Petron’s upcoming preferred share offering in which the refiner plans to raise as much as P10 billion.

The plan involves selling up to 100 million preferred shares at an indicative P100 apiece from February 15 to 26. The refiner may also use the proceeds to free up short-term credit lines for working capital requirements.

Preferred shares entitle holders to dividends before common shareholders and also have certain advantages if a company liquidates, but carry no voting rights.

Petron will probably set a dividend rate of between 9.3% and 9.55% for as many as 100 million preferred shares it intends to sell, said Eduardo Francisco, president of BDO Capital & Investment Corp., one of the issue arrangers.

The share offering, part of Petron’s multiyear capital-raising program, is also seen to support the company’s expansion activities.

Eraña said Petron plans to spend P1 billion per year to put up 1,000 additional service stations over the next five years. He said Petron will put up 300 stations this year—almost double 2009’s 171 new stations.

As such, the company is targeting to have 1,700 service stations by the end of 2010.

“As the world economy recovers, we expect the prices of petrochemicals to improve, not just in the coming months but on a more sustained basis over the long term [and] this will contribute substantially to our bottom line,” said Recto.

Eraña said net income last year will likely reach P4.2 billion representing a reversal from the P3.98-billion loss reported in 2008. Sales that year noticeably dropped due to the volatility in oil prices. “We kept a lower crude inventory last year,” Eraña said. “We rode the market and avoided any speculation.”

At present, the company’s refining facility in Limay, the country’s largest, has a capacity of 180,000 barrels per day.

Petron has an overall market share of 36.4% higher than its nearest competitors Pilipinas Shell Petroleum Co.’s 27.9% and Chevron Philippines Inc.’s 13.9%.

These three companies account for over 78% of the domestic oil market.

Diversifying conglomerate San Miguel Corp. had previously acquired a two-year option to purchase a 51% stake in Petron from a unit of UK-based investment firm Ashmore Group.

San Miguel has until December 24 this year to exercise this option.