A mouse or power play?

The Mountain labored and brought forth a – mouse. It is an old Greek proverb. It is one of Aesop’s fables.

Here is Aesop:

“One day people noticed a Mountain in labor; smoke coming out of its summit, the earth quaking at their feet, trees crashing and huge rocks tumbling. They felt sure something horrible was going to happen. They all gathered together to see what terrible thing this could be. They waited and they waited, but nothing came. Suddenly there was a still more violent earthquake, and a huge gap appeared in the side of the Mountain. The people all fell down upon their knees and waited. At last, a teeny mouse poked its little head and bristles out of the gap and came running down towards them.”

Explains Wikipedia: the fable “refers to great promises and great labors that produce little result; in Latin versions, to produce ridiculous results.”

Eighteen months ago this week, the Maharlika Investment Fund became a law. MIF is the Philippines’ first sovereign fund. Said the Finance Department in July 2023, it is “a timely and necessary measure to unlock the country’s growth potential in a period when rising interest rates weigh down global economic prospects, and pandemic-induced widening debt levels limit the capacity of governments to conduct fiscal stimulus.” In other words, the money of the people, whose will is sovereign, is to be invested wisely to extract the best yield from a portfolio of options.

One of those options is energy. Specifically, the transmission of electricity, the National Grid Corporation of the Philippines. NGCP today is a privately owned corporation in charge of operating, maintaining and developing the country’s state-owned power grid, an interconnected system that transmits gigawatts of power at thousands of volts from where it is made to where it is needed. Its vision is “to build the strongest power grid and maintain the best power utility practice in Southeast Asia, with the collective efforts of a world-class professional work force.”

The government has been negotiating with NGCP’s owners to enable the state, through the Maharlika Investment Fund, to buy a significant chunk of NGCP. Significant means not a mouse, but a board seat or multiple board seats in NGCP.

Now, will government entry into NGCP “unlock the country’s growth potential?” Well, no. Government buying a portion of NGCP will not contribute much to growth potential:

One, the present owners of NGCP – China Grid (the world’s largest), Henry “Big Boy” Sy Jr. and Robert Coyiuto Jr. – are managing NGCP quite well.

Two, pouring taxpayers’ money into part ownership of NGCP will not create new jobs, except for the director or directors representing government equity in NGCP. That money is not a pittance. Easily P20 billion. That money if invested in another or new industry or business other than NGCP could create 10,000 jobs.

Three, if the idea is huge profits, well, there are better companies or conglomerates.

The Sy-owned BDO hauls profits at the rate of P6.7 billion a month or P80 billion a year. Ayala’s Bank of PI rakes in P5.3 billion a month or P64 billion a year. The Aboitiz group makes P2.09 billion a month or P24 billion a year. Ramon Ang’s San Miguel Corp. makes P4.1 billion a month or P50 billion a year. All are energy-strong listed growth companies.

Analyst Eric Jurado lists the fastest future earnings growers, per year: 1) Philex Mining, +73.9 percent; 2) Citicore Renewable Energy, +69.9 percent; 3) MREIT, +52.9 percent; 4) Monde Nissin, +51.1 percent and 5) Petron, +40.4 percent per year. These are all excellent companies. They are doing better than NGCP, which is tightly regulated.

NGCP has become a favorite punching bag of politicians and economic players. Why? Is it the China factor? To understand the current power play inside NGCP, it is useful to study its genesis.

In 2001, after the state-owned National Power Corporation (NPC) incurred a debt of $16.5 billion, the government enacted Republic Act No. 9136, the “Electric Power Industry Reform Act of 2001.” In 2007, the government, through the Power Sector Assets and Liabilities Management Corporation (PSALM), conducted several public biddings for the operation of the state’s transmission grid.

The first three biddings failed. The fourth was successful. The consortium of Monte Oro Grid Resources Corporation, Calaca High Power Corporation and State Grid Corporation of China could operate the government’s transmission grid for $3.95 billion (P158 billion in 2009 or P233 billion in today’s peso-dollar rate).

That consortium is NGCP. For the government to pay its debts due in 2009, NGCP had to remit $1 billion (25 percent) to PSALM upfront payment. The remaining 75 percent would be paid over 20 years.

In 2008, Congress granted NGCP a 50-year franchise to operate the country’s grid. The law offered many incentives, such as three percent franchise tax, in lieu of the income tax and any and all taxes, duties, fees and charges, rights, privileges, receipts, revenues and profits and on properties used in connection with its franchise.

The idea then, said House ways and means committee chair Joey Salceda, was to make the franchise more attractive.

Those who approved RA 9511 included Rep. Dan Fernandez, now House Speaker Martin Romualdez, now Sen. Risa Hontiveros, the late Congressman Danilo Suarez, now DepEd Secretary Sonny Angara, now Sen. Joel Villanueva, now Sen. Cynthia Villar, now DSWD Sec. Rex Gatchalian, now DOJ Secretary Crispin Remulla, now Makati Mayor Abi Binay, Speaker Sonny Belmonte and now DOJ Secretary Boying Remulla.

The senators who approved the NGCP franchise: TG Guingona, Chiz Escudero, Juan Ponce Enrile, Jinggoy Estrada, Pia Cayetano, Loren Legarda, Bong Revilla, Migz Zubiri, Dick Gordon, Kiko Pangilinan, Mar Roxas, Ed Angara, Joker Arroyo and Pong Biazon.

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