Gov’t to lose billions from NGCP prepayments

MANILA, Philippines -  The government stands to lose billions from advance payments of the National Grid Corp. of the Philippines’ concession fee, the National Transmission Corp. (TransCo) said.

In an interview, TransCo president Melvin Matibag said he is opposing prepayments of NGCP’s concession fee because it will adversely affect the state-run firm’s financial condition and the government will lose opportunity to earn interest income.

“I sent a letter to PSALM indicating that we are not in favor of the prepayment,” he said.

NGCP won a 25-year concession to run the country’s transmission assets after it took over the management of the country’s national transmission network in 2008 from the state-owned National Transmission Co. (TransCo).

Under the concession agreement, the grid operator has to pay the government, through PSALM, a total of $3.95 billion in concession fees on a staggered basis until 2029.

However, it has already prepaid part of its concession fee to the government amounting to $1.5 billion, or P57.88 billion, as of July 2013 and has a remaining balance of $1.2 billion.

In a letter dated Feb. 28, Matibag said the July 2013 prepayment has already resulted in revenue losses of P12.62 billion from 2013-2016, and will translate to further losses of P9.95 billion from 2017-2020 and P3.5 billion from 2021-2024 for a total of P26.07 billion.

If NGCP is allowed to make another prepayment of its concession fee, government losses could rise to as much as P59.59 billion from 2013 to 2029.

Moreover, NGCP is not allowed to make prepayments because it still has financial obligations amounting to nearly P4-billion due to TransCo.

“Under the concession agreement, they are allowed to do a prepayment. However, there is a provision also in the concession agreement that you can only do the prepayment if there no arrears,” Matibag said.

In its annual audit reports from 2013 to 2015, the Commission on Audit (COA) said prepayments were made even with NGCP’s unsettled obligations to TransCo, which run contrary to its concession agreement.