By Aubrey Rose A. Inosante and Sheldeen Joy Talavera, Journalists
MAHARLIKA Investment Corp. (MIC) is keen on purchasing State Grid Corp. of China’s (SGCC) interest in the exclusive operator of the Philippines’ electricity grid.
MIC President and Chief Executive Officer Rafael D. Consing, Jr. stated during a Palace briefing that the sovereign wealth fund would consider SGCC’s holdings in the National Grid Corp. of the Philippines (NGCP) “if it becomes accessible.”
China’s State Grid holds a 40% interest in NGCP, while the remaining shares are largely managed by Synergy Grid & Development Phils., Inc. (SGP).
“We have not fundamentally communicated with the Chinese. We only recognized this opportunity at the SGP level. Currently, we’re not in any conversations with State Grid of China,” Mr. Consing remarked.
On Monday, MIC finalized an agreement to acquire a 20% interest in SGP for P19.7 billion or approximately P15 per preferred share, establishing a “foothold” in NGCP.
Mr. Consing indicated that MIC could convert the preferred stocks into common shares in the future at a conversion price of P22.50 each.
“The preferred shares will ensure us a 6.5% dividend yield during the initial three years… Within that timeframe, we have the option to convert to common shares… Should we choose not to, the dividend rate will increase to 8%,” he noted, estimating that this could yield about P1.7 billion to P1.8 billion annually for MIC.
MIC aims to complete the agreement within 90 days, with a possibility of extending for another 90 days, he added.
In the meantime, Mr. Consing mentioned that MIC anticipates revealing four additional investments this year.
“This (NGCP agreement) is set to be our initial announcement, and I would intuitively suggest that within the next 30 days, we could disclose another,” he stated. “For the year, we aim for three to four significant ones. By year-end, we should have numerous foreign investors.”
‘LEVEL OF INFLUENCE’
Mr. Consing, however, clarified that the aim of the NGCP investment was not to gain control but “rather to achieve some degree of influence through the secured board seats.”
The agreement provided MIC with two board positions on both SGP and NGCP boards.
Mr. Consing stated that MIC would not engage in the daily operations of the grid operator, being a financial backer.
However, he noted that MIC would have access to NGCP’s financial reports and oversight of how the grid operator operates.
NGCP is a private entity responsible for operating, maintaining, and developing the country’s electricity grid. It commenced its operations as a power transmission service provider in 2009.
Energy Secretary Raphael P.M. Lotilla expressed during the same briefing that MIC’s investment would assist in lowering electricity expenses nationwide by bolstering power supply security.
He emphasized that the government’s board positions in NGCP would also promote enhanced transparency.
“As NGCP asserts, there is no cause for concern regarding its presence; hence, we’ll be in a better position to verify or affirm that,” he remarked.
“Conversely, if there are other aspects that need fortification—such as the cybersecurity of national transmission lines and facilities—then the government would also be better positioned to contribute to address those matters,” he added.
Legislators have raised alarms over SGCC’s involvement, a state-owned company of the Chinese Communist Party, in the grid operator, citing national security issues.
NGCP previously reiterated that it is Filipino-controlled, easing worries about its Chinese stakeholder’s influence in operations.
“I was hoping that the 40% share held by State Grid Corporation of China would be reacquired by the government for national security objectives,” Senator Joseph Victor G. Ejercito communicated to reporters via a Viber message on Tuesday.
He also voiced his support for MIC in pursuing SGCC’s shares in NGCP, emphasizing that “especially with the ongoing conflict with China in the West Philippine Sea, it should be a priority.”
Meanwhile, Alfred Benjamin R. Garcia, head of research at AP Securities, Inc., remarked that MIC’s participation in SGP is likely “to provide the government with insight into the operations and corporate decisions of NGCP to tackle national security concerns.”
“Financially, NGCP (or SGP) does not significantly require capital injection as they are quite affluent. The potential benefit for the company could be fewer regulatory hurdles with the government as a stakeholder,” Mr. Garcia noted in a Viber message.
He added that MIC’s engagement could facilitate the approval of specific permits and resolve right-of-way challenges that have impeded NGCP project executions.
Shares of SGP increased by 4.74% or 52 centavos to close at P11.50 on Tuesday. During the opening of trading, SGP requested a one-hour trading pause due to signing a binding term sheet with MIC for the subscription of preferred shares.
Simultaneously, Noel M. Baga, co-founder of the think tank Center for Energy Research and Policy (CERP), indicated that MIC’s investment in NGCP represents “a step toward bolstering energy security for Filipinos.”
He stated that MIC’s representation on NGCP’s board of directors “can expedite critical transmission initiatives and enhance grid management—factors that directly influence power reliability and cost.”
“While this progress may improve oversight of transmission infrastructure, CERP believes that comprehensive reforms, particularly amendments to the National Grid Code and Philippine Distribution Code, are vital for ensuring secure and reliable power supply for all Filipinos,” Mr. Baga expressed in a Viber message.
Although the government’s increased stake in the energy sector, including transmission, may be considered “favorable,” the Maharlika investment fund that supports the deal has “yet to address crucial issues of transparency, accountability, and potential conflicts of interest,” noted Jose Enrique “Sonny” A. Africa, executive director at think tank IBON Foundation.
“If left unaddressed, the agreement could merely reinforce corporate and regulatory capture of the privately dominated power sector under the pretense of enhanced government oversight,” he mentioned in a Viber message. — with Kyle Aristophere T. Atienza
