BIZ BUZZ: Trouble for a Davao power utility

An electric cooperative in the Davao region is facing criticism from business groups and politicians over the allegedly poor quality of services it’s providing to its customers, Biz Buzz heard recently.

Some influential voices in these sectors have even called for the termination of the franchise of Northern Davao Electric Cooperative Inc. (Nordeco) due to its alleged history of inefficient supply of electricity.

Businesses, in particular, have been on the receiving end of the firm’s shortcomings. On Samal Island, for example, beach resort operators have to buy individual generation sets so that frequent power outages in the area won’t end up disrupting their operations.

Nordeco customers in Davao also say the utility has been unresponsive to complaints, with many a phone call going unanswered.

At the same time, Nordeco has an ongoing dispute with the Energy Regulatory Commission (ERC) about its plans to upgrade an existing 1-kilometer submarine cable in Davao City.

Industry experts say there are two options on how to address this issue. They could upgrade the existing submarine cable, which will cost P75 million, or they could ride on the 4-kilometer Davao-Samal Bridge that is currently under development, which will cost P200 million.

However, Nordeco supposedly chose to spend P1 billion on a 25-kilometer submarine cable from Davao de Oro. It has even taken out loans and awarded the contract to start the project.

The dispute with the ERC comes from its decision to approve P100 million in capital expenditures to upgrade the existing submarine cable. Nordeco is resisting this decision, saying it would prefer to spend it on other concerns. Critics say these expenditures, said to include the acquisition of new vehicles, is unnecessary at this point.

It’s easy to see why business groups and politicians have grown frustrated with Nordeco. They’ve even signed a resolution a couple of months ago calling for the termination of the utility’s franchise.

These groups include the Samal Island Chamber of Commerce & Industry Inc., Hugpong Manggama sa Isla, Samal City Resort Owners Association, Samal Island Tourism Council, United Association of Tricycle Operators and Drivers of Samal and the Tagum City Chamber of Commerce and Industry Inc.

Meanwhile, Rep. Pantaleon Alvarez, the former House speaker, also joined the bandwagon calling for the termination of Nordeco’s franchise, saying he no longer has confidence in its operations. The power utility was standing in the way of Davao del Norte’s development, he said.

This was echoed by other local government units (LGUs) in the area, with no less than six LGUs (Tagum City, Samal, Kapalong, New Corella, San Isidro, Talaingod) issuing separate petitions.

So with various stakeholders openly calling for the end of Nordeco, the electric cooperative is likely to face an uphill battle for its survival. But will lawmakers, who are now focused on their 2022 reelection campaigns, act to help the franchise’s long suffering customers? Abangan!

—Daxim L. Lucas

Warburg in no rush

Ahead of the recent conclusion of the 365-day lockup period on global private equity firm Warburg Pincus’ 15.8-percent stake in fiber internet company Converge ICT, the private equity firm had been swamped with proposals from investment bankers eager to package deals to sell the block.

Rumors of Warburg’s potential sellout dragged down shares of Converge, whose lofty valuation had allowed Dennis Anthony Uy of Pampanga to break into Forbes magazine’s 2021 list of richest in the Philippines with a No. 6 ranking, by 29 percent from its all-time high price of P45.50 per share.

But Warburg was not in a hurry to sell, Uy said in a chat with Biz Buzz yesterday. While it was inits nature as a private equity firm to eventually cash in, Uy said that based on his latest conversations with Warburg, it would unwind its shares in a slow, gradual and orderly pace and deal only with large institutions with long-term investment horizon, like sovereign wealth and retirement funds.

“Mas magaling pa si Warburg sa mga nag-pipitch (Warburg is better than those who are pitching),” Uy said.

A one-time-big-time unloading of shares by Warburg was “impossible,” Uy said, adding that would only hurt Warburg by weighing down its exit price.

On the creation of Converge American depository receipts (ADRs) by Citibank, which some investors speculated to be a preparation for Warburg’s future profit-taking, Uy said he was told that these were for retail and not institutional investors.

Warburg’s stake in Converge is worth around P38.2 billion as of yesterday’s close.

Nonetheless, Uy said Converge would have to increase its public float from the current 20 percent to 25 percent by November and further to 30 percent by next year.

The November schedule is to qualify it for inclusion in the MSCI indices and boost its visibility to more global investors.

On his debut on the list of the country’s richest, Uy said: “Hindi ko na-feel. Kumakain pa rin ako ng kambing, may utang pa din ako sa bangko.” (I did not feel it. I still eat goat and I still have bank debts.)

Despite the surge in the share price of Converge, he said he and his wife, Grace (president and chief risk officer) had not unloaded any centavo of their shares. At age 55, he said he only wanted to grow the business amid the blue ocean of opportunities while leaving a lasting legacy to the people of Pampanga.

—Doris Dumlao-Abadilla