Maharlika eyes NGCP deal soon

If Maharlika Investment Corp. (MIC), the country’s first sovereign wealth fund, has its way, its investment in the National Grid Corp. of the Philippines could become a reality as early as January, the first month of the New Year.

This is according to informed sources, who said that while there’s no deal yet, Maharlika is already in advanced talks with NGCP shareholders. Ongoing discussions suggest it’s likely to happen sooner than later, sources said.

It’s no secret that Maharlika, and by default, the Marcos administration, wants to buy into NGCP, the private sector-led electricity superhighway operator.

Here’s what I heard so far:

The Chinese shareholder, State Grid Corp. of China, the state-owned power company of China, isn’t budging and doesn’t want to sell.

State Grid said the government has a contractual obligation to the NGCP consortium which in 2009 was awarded a 25-year contract to operate the country’s transmission assets, as part of the overall privatization of the power industry. Listed Synergy Grid owns 60 percent of NGCP and the rest is owned by its technical partner State Grid.

The option for Maharlika now is to get NGCP to issue new shares to pave the way for the wealth fund’s entry. This would dilute the rest of the existing shareholders – tycoons Henry Sy Jr. and Robert Coyiuto Jr.

A source said Maharlika is eyeing two board seats if possible, although Finance Secretary Ralph Recto, chairman of Maharlika, earlier said one seat would be enough, which he estimates to cost around P12 billion.

If the price is right

All’s fair in love and war but in business, it’s all about the right price.

Any businessman would be willing to give up even his most prized asset – but only if the price is right.

And here lies the problem.

Sources said this is where it gets tricky because both parties are of two minds and can’t agree on the price.

Maharlika, of course, is perhaps obliged to get the best price, especially for its first investment asset.

Christmas season investigation

Could the disagreement on the price be the reason why congressional investigations on NGCP have continued? Could it be an effort to pressure NGCP to sell its shares for less? In short, a case of brasuhan – in Pinoy gangster speak.

Interestingly, even on Dec. 23, a day before Christmas Eve, and even if Congress was no longer in session, NGCP had to face the House committee on legislative franchises.

At the same hearing, lawmakers vowed to review NGCP’s franchise.

Some pundits suspect that if Maharlika and NGCP fail to agree on the price, the issue that lawmakers will use against NGCP is the high cost of power.

NGCP, for its part, is racing against time to explain that in the electricity cost charged to households, its transmission charge is the lowest.

To illustrate, NGCP said that for every P100 in a household’s electricity bill, P3.02 goes to transmission charge while generation (P50.63) and distribution (P23.28) make up the biggest items.

Taxes, universal charge, etc. account for P17.88 while ancillary services amount to P5.19.

This is based on the average sample residential bill of distribution utilities in Luzon, Visayas and Mindanao in November 2024.

As for NGCP’s performance, NGCP has repeatedly told the Energy Regulatory Commission that it has significantly improved the grid performance compared to when it was run by the government.

Its numbers show an 83.78-percent reduction in transmission outages from 2009 to 2023.

But lawmakers will find other issues for sure, as the Marcos administration aims to buy in cheap and possibly, eventually wrest control of NGCP from Sy and Coyiuto.

NGCP, after all, is a profitable business and transmission is a prized asset in the power sector.

On the other hand, changing NGCP’s setup midway also sends a bad signal to foreign investors that this is how the government treats long-term contracts – anything goes. This view is why we have lost a lot of foreign investors to Thailand and Vietnam.

I’m not saying NGCP is special. It isn’t and should not be treated as such. It should be penalized if it fails to deliver on its obligations. It must be dealt with by the regulator. Its performance must also be reviewed regularly.

IMF warning

Maharlika, for its part, is perhaps pressured to act fast and come up with returns, given the cost of setting it up.

Just last week, the International Monetary Fund (IMF) sounded the alarm on the state of Landbank and DBP, the two state-owned banks that contributed to the startup capital of Maharlika.

The IMF said the two banks need capital restoration following their contribution to Maharlika’s start-up capital. They also need to exit regulatory relief as soon as possible, it said.

Furthermore, the IMF said Maharlika should not come at the cost of a resilient financial system.

In September 2023, the two banks contributed to the startup capital of Maharlika – P50 billion from Landbank and P25 billion from DBP.

For now, let’s wait and see what happens next in this ongoing tug-of-war between the government and NGCP.

Ordinary Filipinos may not care much about it, but we should as this will impact the cost of power in this country, whichever way this turns out.

Many Filipinos, however, are busy in their own tug-of-war against the rising cost of living in this country – power, transport, rice, etc. and yes, even the quintessential Noche Buena – a problem our lawmakers rarely experience themselves.

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Email: [email protected]. Follow her on Twitter @eyesgonzales. Column archives at EyesWideOpen on FB.