Biz Buzz: Power sector politics

It took a while — several months of planning, maneuvering and, finally, execution, to be exact — but Energy Secretary Alfonso Cusi finally has the “clean slate” he’s always wanted at Philippine Electricity Market Corp. (PEMC).

PEMC, of course, is a key organization in the country’s energy sector, being responsible for running the Wholesale Electricity Spot Market that, in turn, is in charge of creating an efficient platform for the trading of power supply deals between producers and users. The whole idea is to provide consumers with the cheapest electricity rates possible. In theory, at least.

Just recently, PEMC announced the resignation of its longtime president Melinda Ocampo, surprising many players in the energy sector who thought she would stay on for the duration of the Duterte administration.

That’s because Cusi, who chairs PEMC, “strategically” did not act on the courtesy resignations he requested from the organization’s board of directors as early as December of last year. With no word or even rumors of any firing or replacement on the grapevine, the PEMC top brass could be forgiven for thinking that they would be spared the ax.

As it turned out, Cusi was just biding his time, waiting to chop off some key branches, as it were, at the opportune time.

And here’s where the story gets interesting. By its charter and mandate, PEMC was meant to transform itself into a completely private organization a few years after it was created by the Electric Power Industry Reform Act.

With key board members originally named by the energy secretary, these directors were supposed to give way eventually to private sector representatives and with the organization moving toward its ultimate goal of becoming an IMO (independent market organization) much like the Philippine Stock Exchange (only, it would trade electricity supply contracts instead of stocks).

But previous secretaries of energy had always resisted the idea of letting PEMC go and allowing it to become a completely private sector entity. Why? Well, why would anyone want to let go of an organization that makes millions or even billions in fees from market participants who participate in the WESM scheme?

And contrary to popular perception, the Department of Energy and the various agencies under it are actually some of the less affluent organizations of government, the cash-rich nature of their business notwithstanding.

That’s where PEMC comes in, with previous energy chiefs relying—we’re told—on the generosity and largesse of the organization to compensate for their budget limitations.

“Basically, PEMC functioned as a piggy bank for the government officials in the energy sector,” said one industry insider. “If there was an initiative that needed funding, the energy secretary would approach PEMC for it. If there was a seminar overseas that staffers needed to attend, you could rely on PEMC to provide the budget you didn’t have.”

No wonder the organization was virtually untouchable to previous energy chiefs. Cusi has a different idea, however.

Biz Buzz learned that, after evaluating the situation carefully—and keeping the status quo at PEMC in the meantime, including keeping the government’s representatives on the board—the energy chief has now decided to go full speed ahead into making the entity an IMO. The goal is nothing less than making PEMC and WESM more efficient organizations that will, hopefully, result in cheaper power rates for consumers.

So after sitting on the courtesy resignation letters of the PEMC brass for six months, Cusi finally struck one clean blow and replaced all directors in a deft boardroom coup. The affected officials were caught off guard, as were the energy sector players—everyone except Cusi, apparently, who had been planning the move for some time now.

So who is running PEMC now? Well, there’s a new board of directors and a new caretaker committee. But Biz Buzz hears that the man to watch—someone who may end up heading the powerful and cash-rich organization if he acquits himself well over the coming months—is a junior (meaning relatively young) member of this caretaker transition team.

This person is a former energy undersecretary who is competent about energy issues, but ended up supporting another presidential candidate in 2016. Will he get the top job? He could if he plays his cards right. Abangan. —DAXIM L. LUCAS

DD’s re-IPO

Property developer DoubleDragon Properties (DD), which plans to raise up to P7.5 billion in fresh capital, expects to launch this follow-on offering in the last quarter of this year.

“We expect a good take up from the institutional investors who wanted to take a substantial long-term position in DD during its high growth years. We also see this as a good window of opportunity to allow a good base of institutional investors to come in since there is no plan for another equity offering for at least a few years after this round,” DD chair Edgar “Injap” Sia II told Biz Buzz.

The follow-on offering is also expected to enhance the stock trading liquidity of DD. Apart from aspiring to be one of the country’s biggest property developers, DD aspires to be part of the cream of the crop of the stock market. It aims to join the local stock barometer Philippine Stock Exchange index sooner than later.

Currently valued by the stock market at P102 billion, DD is now comparable to Robinsons Land, which has a market capitalization of P99 billion.

DD has also upgraded its 2020 net profit goal to P5.5 billion from P4.8 billion as it expects its leasable portfolio to become bigger than originally projected by that time. It now expects its 2020 leasable portfolio to reach 1.2 million square meters compared to the old target of one million square meters.  —DORIS DUMLAO-ABADILLA

PCC void

The search is on for a new top-level technocrat at the Philippine Competition Commission (PCC).

One of the PCC’s Commissioners, lawyer El Cid Butuyan, had to fly back to the US—where he was based for many years before joining the fledgling PCC—to attend to pressing family matters.

Butuyan, who served the PCC from February 2016 to July 2017, served as head of investigations and litigation for the World Bank East Asia-Pacific team in a unit that probes fraud and corruption in World Bank-financed projects. He is also a faculty member at Harvard Law School where he finished his Masters of Laws. After the PCC stint, Butuyan is expected to return to his old unit in the World Bank.

PCC is the country’s antitrust body mandated under the Philippine Competition Act to review mergers and acquisitions to ensure that these deals will not prejudice the interest of consumers. It is tasked to review corporate deals valued at P1 billion or higher. —DORIS DUMLAO-ABADILLA