Clove sees 20x return on Philippines oil deal

Clove's leadership team - Bharat Parashar, Darren Tan and Chung Min Pang - brought the deal with them from EMP Daiwa in 2010.

The investment dates back to 2008, when VenturOil came up with the idea to redevelop SC6 Cadlao, an oilfield that had been plugged since 1992. Parashar and Tan then worked with VenturOil on a deal structure and EMP Daiwa subsequently committed up to $10 million in VenturOil Philippines through its wholly-owned special purpose vehicle Energy Best. VenturOil has a 20 % stake in SC6.

The exit to Peak Oil and Gas Singapore - a subsidiary of Australia-listed Raisama Energy and a consortium partner of VenturOil in the SC6 redevelopment - comes at an opportune time for Clove. The private equity firm is in the process of raising its maiden fund, which targets growth deals across natural resources, agriculture, logistics and infrastructure in Southeast Asia with a view to exiting to international investors.

The fund has a target of $250 million and is expected to reach a first close later this year or in early 2013.

"We needed to show an exit to our LPs," Tan, partner at Clove Capital, tells AVCJ. "A lot of potential investors want to see our ability to exit an investment in Southeast Asia, given the perception that these tend to be slightly more challenging markets to operate in."

Reaching the exit was not easy, though. During the four-year holding period, Tan and Parashar had to work their way through a heap of bureaucratic red tape in order to get the project off the ground. This included persuading the Philippines Department of Energy to grant various licenses and regulatory incentives, as well as helping VenturOil negotiate a consortium agreement with an oil services operator.

The shareholding structure represented another challenge. Given that only local companies qualify for breaks such as the Filipino Participation Incentive Allowance, which equates to 7.5% of a project's gross oil revenue, Clove had to create a framework through which VenturOil could be recognized as a Filipino company. The solution was to team up with a local partner that took 60% of the voting rights in VenturOil, while Clove retained a 95% economic interest.

"It took us nearly three years to develop SC6 into a tangible investment opportunity," Tan adds. "We prefer to create investment opportunities instead of looking at bid-out deals, as we feel that by creating, managing and operating our investments we have more control on our returns."

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• Topics
• Exits
• Southeast Asia
• Industrials
• Trade sale
• Exit
• energy
• Commodities
• Philippines
• Clove Capital Partners