Investment, daw?

Whoever is the not-so-bright economic adviser who convinced BBM to launch Maharlika as a sovereign wealth or investment fund did him and the country a big disfavor. And the chu-chu-wa-wa chorus of private sector taipans advising BBM, who should have known better, also failed our country by not bringing up the pitfalls of such a Philippine government-managed fund.

Now after more than two years, the only thing certain with the Maharlika Fund is the demand of its CEO to be paid P2.5 million a month, published reports said. That’s not a big amount for a really good financial money manager in the private sector. But with the big salary comes the expectation of performance – or getting fired.

Enrico Villanueva, a senior lecturer of Economics at UP Los Baños whose field of expertise includes monetary and financial economics and does research on financial markets, posted this comment on X:

“Congratulations, Maharlika Investment Corp. (MIC). You finally have a website hosted in DOF domain. Plus, you earned P2.3 billion in interest income on P125 billion initial capital (P75 billion of which was forced out of profitable development lending of LBP and DBP and P50 billion through NG out of BSP & PAGCOR dividends).  That’s 1.84 percent return per annum. Pathetic for a sovereign wealth fund. Even @Merkadobarkada’s mom did better than that with her savings.

“Clarification/conundrum on MIC initial capitalization:  MIC website states P125 billion as initial capital (P75 billion from GFIs, P50 billion through NG coming from BSP, PAGCOR and PCSO dividends. The P125 billion was also reported as approved by news sites. DOF website mentions that the BSP already remitted dividends of P55 billion in mid-2023 and P9.2 billion in mid-2024. BSP earnings /dividends were mandated by its charter to be plowed back to BSP to build up its capital to P200 billion, but that capital build-up was postponed for two years in favor of Maharlika capitalization.

“PAGCOR and PCSO also remitted dividends. In this ANC interview, MIC president and CEO Rafael Consing said the MIF only has P75 billion. So where are the supposed BSP, PAGCOR and PCSO dividends now?”

Whatever…1.84 percent return per annum is pathetic even if Maharlika officials were busy organizing. They should have left the amount with DBP and LandBank since they didn’t need it yet, and the GFIs could have made a lot more than 1.84 percent and helped businesses that depended on them for financing. If the Maharlika geniuses parked the initial contributions in government treasury bills last year, they would have made a whole lot more.

Finance Secretary Ralph Recto has urged ordinary Filipinos to invest in the Bureau of the Treasury’s 30th tranche of Retail Treasury Bonds (RTB 30).  The RTB 30 is a five-year tenor investment with a gross interest rate of 6.250 percent per annum, payable every quarter until its maturity in 2029.

Now, we are being told Maharlika is expected to make its first investment this quarter, most likely in the energy sector, according to its top official.

Consing said in an interview with BusinessWorld on Jan. 2 that he believes investments in the energy sector, particularly transmission lines, would be “most impactful.”

It is also the preference of Secretary Recto for Maharlika to make its initial investment in NGCP. “There’s security issue with it. It will give us visibility,” Recto said. Concerns have been raised about a state-owned Chinese company having an interest in local infrastructure as crucial as power transmission.

Recto also cited NGCP being a profitable business that would be suitable for Maharlika. In 2023, Synergy Grid (SGP), the holding company of Henry Sy, Jr. and Robert Coyiuto Jr. controlling 60 percent of NGCP, booked P10.64 billion from the P23.4 billion in net income of NGCP.

Recto wants to buy a board seat which he estimates to cost about P12 billion to get a foothold in NGCP. But the buzz is, Maharlika wants more than a seat, probably as many as four board seats in NGCP itself and not in SGP. This will increase capitalization of NGCP but dilute the holdings of SGP and China Grid.

I realize that I once wrote in favor of Maharlika buying into NGCP precisely for the reasons Recto mentioned, to assure security of the grid in the face of Chinese presence and the profitability of NGCP would enable Maharlika to post profits right away.

The thrust to invest in energy is good, but the need is more in generation. I’m not sure Maharlika can wait five to six years for a greenfield power generation project to get commissioned. Solar may be quicker to commission but what we need most are baseload plants like coal and natural gas.

If immediate profit is a top priority of Maharlika, they are better off buying into Aboitiz Power which should report net profits that are twice as much as NGCP this year, or in the vicinity of P40 billion.

The problem with investing in Aboitiz Power is the EPIRA ban on government investments in generation companies. Since they are thinking of updating EPIRA anyway, maybe this ban can be modified to allow Maharlika to invest in the more profitable generating companies of Aboitiz and San Miguel.

Moving forward, the government needs the ability to invest in pioneering power generation companies including nuclear power. The government must be able to invest in generating capacity when required, especially when the private sector shows timidity as it had in recent years.

Maharlika’s presence in NGCP should help clear the backlog in ERC approvals that is hindering NGCP projects from taking off faster. Maharlika will also hopefully get other agencies of government to help NGCP with right-of-way problems that delay project completion.

The only question now is how much Maharlika will pay to get into NGCP. Negotiations are ongoing and hopefully the final decision is for the good of the public and our need for a reliable power grid.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco.