Maharlika open to buying Chinese stake in NGCP
The country’s sovereign wealth fund is investing in the National Grid Corp. of the Philippines (NGCP) to allow the government to monitor the possible emergence of external threats, the head of Maharlika Investment Corp. (MIC) said on Tuesday.
MIC president and chief executive officer Rafael Consing Jr. said they would also be interested in buying the 40-percent NGCP stake owned by a Chinese state-owned company once the opportunity arises.
While he clarified that no threat exists now within NGCP, “we just want to basically say that [with] our presence there, at least we would be able to monitor if such threats indeed arise.”
Consing made the statement after he was asked to expound on his statement on Monday that the investment of MIC, which manages the Maharlika Investment Fund (MIF), would “safeguard the nation’s power supply from external threats and disruptions.”
NGCP is facing scrutiny at a House investigation over concerns about the composition of its board, mainly the presence of representatives of State Grid Corp. of China (SGCC), which owns 40 percent of the private firm operating the country’s lone power transmission network. Tycoons Henry Sy Jr. and Robert Coyiuto Jr. hold the remaining 60-percent stake.
Article continues after this advertisement“But at the moment, no such threat exists and nothing has been proven and, in fact, there are no allegations of such a threat existing,” Consing added.
Article continues after this advertisementOn Monday, Consing signed an agreement that would give MIC a 20-percent stake in Synergy Grid and Development Philippines Inc. (SGP), which holds a 40-percent share in NGCP.
Asked about China’s 40-percent stake in NGCP, he said: “We only saw this opportunity at the SGP level—we’re not having any discussions with the State Grid of China at this point in time.”
Target Chinese stake
Senators on Tuesday lauded the move of MIC, but Sen. JV Ejercito said it would have been better if the wealth fund bought out instead the 40-percent stake of SGCC.
Legislators have in recent years warned about potential security risks from a Chinese state firm’s involvement in the power grid.
“I was hoping that the 40-percent share owned by [SGCC] will also be reacquired by the government for national security reasons,” Ejercito told the Inquirer.
“With the (country’s maritime) conflict with China in the West Philippine Sea, it should be prioritized,” he pointed out.
Sen. Joel Villanueva also welcomed the development, saying it was “a step toward the right direction” that would result in “greater government influence and participation, which could motivate NGCP to be more efficient.”
For Sen. Juan Miguel Zubiri, MIC’s purchase of SGP’s shares was a good investment, but more than just profitability, “the investment in NGCP is strategic in terms of defense and security.”
“The national government should be strategically involved in the control and management of such an important energy backbone of our country,” he noted.
Meanwhile, Senate President Francis Escudero, who had voted against the establishment of MIF, said MIC should be able to explain if its investment in NGCP would earn more than placing the funds in government securities, which would have yielded an annual income of 6 percent.
Access to information
“The supposed goal of this (investment) is for the government to have a bigger control in our transmission system. I don’t recall seeing that in the MIC law,” he said, asking: “According to the MIC law, MIC is not allowed to govern or run a business. So how will they be able to ensure profits if they are not allowed to run a business?”
Viewed by critics as the Philippine government’s attempt to wrest control over the country’s grid operator, Consing clarified that MIC’s entry into NGCP was not meant to take over the firm.
“The objective was not to take control, but rather just to be able to achieve some level of influence, and you achieve that by way of your board seats,” he explained.
The MIC official expressed optimism that buying into NGCP would allow the government to access information on the grid operator’s affairs and enable it to make “informed decisions.”
“We were looking over the shoulder of the shareholders but the reality is that we had absolutely no access to such information, and now we will have access to that information,” he noted.
According to Consing, MIC’s involvement in NCGP would not be about its operations but about governance.
“Hopefully we can be invited to some of the more important committees so that we can see aspects of the operations greater than just by [looking at] their financial statements—so, we look forward to that,” he said.
Consing said MIC’s 20-percent stake in NGCP guarantees a 6.5 percent dividend yield for the first three years of its venture into the energy industry, or about P1.28 billion.
He, however, declined to disclose the projected return on investments of MIC’s maiden business investment.
“We can’t talk about that in public because we’re dealing with a public company, so everything that we say, we will be [revealing] sensitive data and information,” he said.
Congressional oversight
In the House of Representatives, Assistant Minority Leader Arlene Brosas on Tuesday slammed the administration’s acquiring a stake in NGCP, claiming this was “crony capitalism in its worst form.”
The Gabriela women’s party representative called on her colleagues at the House to exercise oversight and scrutinize the deal.
The government “is gambling people’s money by investing in [SGP] while opening doors for other cronies to profit from NGCP,” Brosas claimed.
“Essentially, they’re raiding government-owned and -controlled corporations to fund the Maharlika Investment Fund, only to use it in questionable deals that benefit big business interests,” she alleged.
“This corporate maneuvering would not reduce power rates or stop brownouts. The ordinary Filipino will still suffer from high electricity costs while cronies feast on profits from the power sector,” the lawmaker lamented in Filipino.