Poor market conditions block NGCP bid to go public

National Grid Corporation of the Philippines (NGCP) yesterday reiterated that it was holding off its mandated public listing, citing unfavorable market conditions mostly related to the company’s relationship with regulators and government agencies.

At a hearing held by the Senate committee on energy yesterday, NGCP spokesperson Cynthia Perez-Alabanza said factors that discourage the company to push ahead with an initial public offering (IPO) included the lack of an Energy Regulatory Commission (ERC) decision that finalizes price control arrangements concerning the years 2016-2020.

Alabanza said there were also pending disputes among NGCP and state firms National Transmission Corp. (Transco) and Power Sector Assets and Liabilities Management Corp. (PSALM) that were now in arbitration.

She added that there were also threats against NGCP’s concession, which Transco president Melvin Matibag made publicly.

“[It] makes no sense and would be downright irresponsible for NGCP to proceed with the IPO and ask the public to invest in a business the basic concession of which has been publicly threatened by the government,” she said. “NGCP cannot perpetrate a fraud against the investors.”

Under NGCP’s franchise issued by Transco, the grid operator is required to do an IPO of at least 20 percent of its outstanding capital stock within 10 years or by Jan. 14, 2019.

Last January, NGCP filed a petition at the ERC asking to extend the requirement period by another year.

“NGCP would like to dispel any mistaken notion that it did not do anything to comply with the requirement under its franchise to publicly list its shares and waited just before the expiration of the 10-year period to seek an extension with the ERC,” Alabanza said.

The lawyer said NGCP’s franchise allowed the dispersal of ownership through backdoor listing.

“As early as 2010, or just a year after NGCP began its operations, NGCP took steps toward a backdoor listing involving at least 30 percent of its outstanding shares of stock,” she said. “This, however, did not push through due to an adverse ruling by the Bureau of Internal Revenue regarding the tax-free status of the transaction.”

Alabanza also said that aside from the backdoor listing attempt, NGCP had been receiving and evaluating unsolicited proposals beginning 2014 from various foreign and local banks on a possible IPO.

As for the lack of price control decision from the ERC, she said this gave NGCP uncertainty in expected future earnings as well as prevented the company from presenting an approved capital expenditure budget for 2016-2020.

“[Given these,] NGCP at present cannot meet the basic components for an IPO listing and provide the optimum price for its shares,” Alabanza said. “Investor confidence in NGCP’s maiden entry into the capital market has to be established by ensuring sound and reliable and definitive financial information to the investing public.”

According to NGCP, average transmission charges have gone down from a high of 80 centavos a kilowatt-hour in 2010 to 54 centavos currently. NGCP said transmission charges represent just about 5 percent of overall retail rates.