There is no reason for NGCP’s equity holders to welcome the interest of Maharlika Fund to buy into the company.
They don’t need the additional equity or even if it can help, they are perfectly capable to raise the money themselves. Getting more government presence in the already contentious government concession merely creates additional headaches.
But the idea of getting the Maharlika Fund in the board room of NGCP has a lot of supporters. For one thing, diluting the shares of the current shareholders, including that of the State Grid of China (SGC), seems like a good idea for some. People are antsy about China having a strong presence in a vital infrastructure that our national grid is, given the state of current animosity in our relations with Beijing.
For another, there is a view that the 60 percent share of Synergy Grid Philippines (SGP), the Filipino controlling interest in NGCP may not be enough to protect the national interest. Henry “Big Boy” Sy, Jr. who runs SGP is seen as subject to negative pressure from China if push comes to shove. Big Boy is part of the SM Group with extensive business interest in China, including eight megamalls in the cities of Xiamen, Jinjiang, Chengdu, Zibo, Chongqing, Tianjin, Suzhou and Yangzhou. Maharlika’s presence at NGCP will help protect the national interest.
This is not to say that the Sy family are not patriotic Filipinos. Given how they rose from poverty to become the country’s top taipan family should more than indicate that their business interests are heavily Philippine-based.
As of May 2024, SM Investments was the most profitable company in the Philippines, with a profit of about $1.4 billion. BDO Unibank was the second most profitable company, with a profit of about $1.35 billion. SM is also on the way to having about a hundred malls and that’s a lot more than what they have in China.
In a disclosure to the Philippine Stock Exchange, SM Prime, another SM company, posted a P40 billion consolidated net income in 2023, 33 percent higher than the P30.1 billion recorded in 2022. The company’s 2023 consolidated revenues were P128 billion, 21 percent higher than the previous year’s P105.8 billion.
This is probably why according to the grapevine, Big Boy is resisting the interest of the Maharlika Fund to get into NGCP by way of diluting the shares of the current shareholders. He doesn’t need Maharlika’s money. Last I heard, Maharlika wants to buy four board seats but their offering price is way lower than what Big Boy would consider a serious offer.
Actually, Maharlika’s interest in NGCP may go against the original objectives for the fund. According to its website, “the MIC is mandated to act as the sole vehicle for the purpose of mobilizing and utilizing the MIF for investments in transactions in order to generate optimal returns on investments, while contributing to the overall goal of reinvigorating job creation and accelerating poverty reduction by sustaining the economy’s high growth trajectory, while ensuring sustainable development.”
Those are a lot of motherhood goals that DBP and Landbank are already addressing. Maharlika’s available funds are also rather limited. During the signing of the law creating Maharlika, BBM said “the fund will fail if we do not make money on the fund. It’s that simple. But there are so many opportunities that we cannot allow to slip by and that is why we have put up the Maharlika Fund so as to be able to give us the capacity and the ability to join in those investments.”
BBM gave specifics. “We are talking about investments in agriculture. We’re talking about investments in infrastructure. We are talking about investments in digitalization. We are talking about the investments in the strengthening of our supply chains. We are talking about all of those elements that the post-pandemic economy has shown us are necessary for us to be able to transform the Philippines into a country that not only is investment-friendly but also is competitive in the rest of the world. That is the point of this fund. That is the reason we have created this fund.”
So, how will Maharlika prioritize its limited investment funds? Will they go for pioneering ventures or companies with proven profitability? Or will Maharlika initiate investments in sectors of the economy that are critical but unable to attract investors? Agriculture, for example. Will Maharlika focus on essential missionary projects where it takes time to earn decent profits? Modernizing PNR and extending its reach comes to mind.
But it seems, in eyeing NGCP, Maharlika wants to show instant profitability even if its investment there is not necessary at this point. Maharlika owes the public a clear explanation of what exactly they want to do and why, given that NGCP isn’t half as profitable as other power companies.
Then again, if Maharlika is determined to barge into the NGCP boardroom, resistance by SGP and SGC is useless. That will be like resisting City Hall and that never works. As it is now, the allies of the administration in Congress are raising all sorts of issues against NGCP’s performance. Congress can also revoke NGCP’s franchise but this will create ripples in the investment community, a case of changing rules in mid-stream like what Duterte did with Manila Water and Maynilad. Of course they can cite the national security angle, given the continued bullying by China in the West Philippine Sea.
Maharlika Fund was born without much thought as to its investment strategy and overall investment philosophy. BBM is also half done with his term and who knows if the next president shares his enthusiasm on Maharlika’s potential.
With so many highly competent Filipino economists and investment managers, Maharlika should have been better thought out. But that’s too late now. Hopefully, they don’t fumble too much.
Boo Chanco’s email address is bchanco@gmail.com. Follow him on X @boochanco