In the Matter of CE Luzon Geothermal Power Company, Inc.

January 12, 2016 SEC CASE NO. 01-14-417 IN THE MATTER OF CE LUZON GEOTHERMAL POWER COMPANY, INC. FOR : Voluntary Dissolution with Creditors Affected ORDER For consideration is the Petition dated 27 December 2013 filed on even date by CE Luzon Geothermal Power Company, Inc. ("Petitioner") for voluntary dissolution under Section 119 of the Corporation Code. 1 Petitioner was incorporated on 16 May 1994 under SEC Registration No. AS094-004356. Its primary purpose is "[t]o design, develop, construct, erect, assemble, commission and operate geothermal power plants and related facilities for the conversion into electricity of steam and brine provided by and under contract with the Philippine Government, or any subdivision, instrumentality or agency thereof, or any government-owned or controlled corporation, or other entity engaged in the development, supply or distribution of energy; . . . ." 2 Petitioner was incorporated to develop, construct, and operate the Mahanagdong Power Plant ("Plant") located in Tongonan, Ormoc City, Leyte. Pursuant to a Build-Operate-Transfer Agreement between Petitioner and the Philippine Government, through the Philippine National Oil Company-Energy Development Corporation ("PNOC-EDC"), Petitioner shall generate electricity using geothermal steam to be supplied by PNOC-EDC at no cost to Petitioner for a 10-year cooperation period. 3 On 25 July 2007, the cooperation period ended and consequently, the Plant was transferred by Petitioner to the Philippine Government at no cost on an "as is" basis pursuant to a Deed of transfer dated 25 July 2007. 4 Hence, Petitioner's directors and officers determined that it may be dissolved inasmuch as it has already accomplished the purpose for which Petitioner corporation was formed and it will no longer venture in other business ventures. 5 At a meeting of Petitioner corporation's stockholders duly called for the purpose of dissolving Petitioner corporation, 6 the stockholders of Petitioner corporation owning at least two-thirds (2/3) of the outstanding capital stock approved the dissolution of Petitioner corporation through the filing of a petition for voluntary dissolution with this Commission. 7 Thus, the Petition was filed, signed by a majority of the Board of Directors and verified by its President. By way of an Order dated 20 February 2014, the Commission gave due course to the Petition and directed, among others, the publication and posting thereof for such period of time and in places, as prescribed by Section 119 of the Corporation Code, so that any person may file, on or before 20 April 2014, his objections thereto, to be heard during the initial hearing set on 25 April 2014. Petitioner was also directed to give notice of the Petition to all of its stockholders and creditors, and to furnish the Commission proof of such notice(s). aScITE On 16 April 2014, Energy Development Corporation ("EDC"), a listed creditor of the Petitioner, filed its Opposition to the Petition , stating that it is in the process of computing the fees and assessments in relation to the transfer of the Plant, and that the dissolution will be prejudicial to the right of EDC to claim Petitioner's share in the transfer fees amounting to US$50,000.00. EDC likewise claims that Petitioner could have opted to sell its assets under Section 40 of the Corporation Code, or filed a petition for corporate rehabilitation. On the same date, the City Government of Ormoc ("Ormoc"), another listed creditor of the Petitioner, likewise filed through registered mail its Verified Opposition 8 to the Petition . In said Opposition, the sole ground presented by Ormoc is that Petitioner has yet to pay the transfer tax due to Ormoc when Petitioner transferred the industrial building, machineries, and equipment of the Plant to EDC. Ormoc further manifested that Petitioner did not provide the necessary deed or instrument evidencing the exact amount of consideration involved in the transfer. On 23 April 2015, Petitioner filed its Compliance 9 with the Order dated 20 February 2014, on the posting and notice to creditors of the Petition , with annexes attached thereto. During the initial hearing held on 25 April 2014, Petitioner, through counsel, and Ormoc, likewise through counsel, were present. In said hearing, the following documents were marked in evidence: 1. Exhibits "A" to "A-2" publication of the Order dated 20 February 2014 in the Leyte Samar Daily Express, issues dated 22 March 2014, 29 March 2014, and 5 April 2014; 2. Exhibit "A-3" affidavit of publication executed by Mr. Dalmacio Grafil; 3. Exhibits "B" to "B-15" copies of the notice furnished to the creditors of Petitioner; 4. Exhibits "C" to "C-2" affidavits of posting in the City Bulletin Board of Ormoc executed by Mr. Angelo Roman; 5. Exhibits "D" to "D-7" original and amended Articles of Incorporation of Petitioner; 6. Exhibit "E" Deed of Transfer dated 25 July 2007, in favor of EDC; 7. Exhibit "F" Secretary's Certificate dated 27 December 2013, attesting to the approval of Petitioner's board of directors and stockholders owning at least 2/3 of the outstanding capital stock of the dissolution; 8. Exhibit "G" Certificate of No Tax Liability issued by the Bureau of Internal Revenue; 9. Exhibit "H" Notice of Cancellation of Registration of Petitioner corporation issued by the Bureau of Internal Revenue; 10. Exhibit "I" Certification of the remaining assets of Petitioner corporation as of 27 December 2013; 11. Exhibit "J" Certification of the schedule of Petitioner's liabilities as of 30 November 2013; 12. Exhibit "J-1" schedule of Petitioner's liabilities as of 30 November 2013; 13. Exhibit "K" summary of the pending cases regarding tax assessments involving Petitioner; 14. Exhibit "L" Petitioner's Audited Financial Statements for the fiscal year ending 31 December 2012, filed with the Commission on 30 April 2013; and 15. Exhibit "M" Petitioner's General Information Statement for the year 2013, filed on 29 November 2013. On 12 May 2014, Petitioner filed its Consolidated Reply to the Opposition of EDC and Ormoc. HEITAD The Commission finds that Petitioner complied with all the procedural and substantive requirements of Section 119 of the Corporation Code. All the material allegations of the Petition are supported by documentary evidence. All the stockholders and creditors have been duly notified of the Petition by publication, posting, and/or mail. 10 As to the objections raised by Oppositors EDC and Ormoc, the same are in the nature of money claims which are properly addressed and settled during the liquidation of Petitioner's corporate assets. Liquidation of corporate assets is a matter of internal concern of a corporation and does not require the Commission's approval. It falls within the power of the directors and stockholders or the duly-appointed liquidation trustee. 11 In connection therewith, Oppositors may seek the aid of the courts in order to protect their interests during the liquidation proceedings. Further, Petitioner's corporate assets as of the end of 2013, as disclosed in its Certification of remaining assets 12 and reflected in its Audited Financial Statements, 13 with neither documents contested by both Oppositors, amount to a total of Two Million Seven Hundred Two Thousand United States Dollars (US$2,702,000.00), of which Nine Hundred Sixty Thousand United States Dollars (US$960,000.00) consist of current assets, i.e. , cash and cash equivalents, and prepaid expenses and other current assets. On the other hand, Petitioner corporation's acknowledged liabilities 14 consist of the following: Creditor Amount of Claim Energy Development Corporation/City Up to US$50,000.00 Government of Ormoc, Leyte Castillo Laman Tan Pantaleon & San Jose US$1,687.04 Law firm Salvador & Associates P1,823,941.63 In this light, Petitioner's current assets are more than sufficient to pay all its obligations to both Oppositors and other creditors acknowledged by Petitioner corporation. Lastly, with regard to the additional claim of EDC that Petitioner could have simply sold its corporate assets under Section 40 of the Corporation Code or filed a petition for corporate rehabilitation, we do not agree. The sole purpose for which Petitioner corporation was established is the development, construction, and operation of the Plant. With the Plant's transfer to EDC, Petitioner has nothing left to do. Thus, corporate rehabilitation is not an option since the purpose of corporate rehabilitation is to restore an ailing corporation to a condition of successful operation, and Petitioner is no longer in operation. Likewise, as impliedly admitted by EDC, the sale of Petitioner's corporate assets under Section 40 of the Corporation Code is simply an option for Petitioner. In this case, Petitioner opted to undergo dissolution and settle all its liabilities, including liabilities to EDC, during the liquidation of its corporate assets. Petitioner's choice deserves respect. WHEREFORE, premises considered, this Petition is hereby GRANTED. CE Luzon Geothermal Power Company, Inc. is hereby DISSOLVED. Let a copy of this Order be furnished to the Commission's Company Registration and Monitoring Department for its appropriate action. SO ORDERED. Mandaluyong City, Philippines, January 12, 2016. (On Official Business) TERESITA J. HERBOSA Chairperson (SGD.) MANUEL HUBERTO B. GAITE Commissioner (SGD.) ANTONIETA F. IBE Commissioner (SGD.) EPHYRO LUIS B. AMATONG Commissioner (SGD.) BLAS JAMES G. VITERBO Commissioner Footnotes 1. Batas Pambansa Blg. 68 (1980). 2. Annex "A" of the Petition. 3. Paragraph 2 of the Petition. 4. Paragraph 3 of the Petition. 5. Paragraph 4 of the Petition. 6. Held on 31 October 2013. 7. Annex "J" of the Petition. 8. Dated 15 April 2014. 9. Dated 15 April 2014. 10. Petitioner's Compliance dated 15 April 2014. 11. SEC Opinion dated 23 July 1993. 12. Exhibit "I" for Petitioner. 13. Exhibit "L" for Petitioner. 14. Exhibit "J-1" for Petitioner.