By Aubrey Rose A. Inosante and Sheldeen Joy Talavera, Reporters
MAHARLIKA Investment Corp. (MIC) is interested in acquiring State Grid Corp. of China’s (SGCC) stake in the sole operator of the Philippines’ power grid.
MIC President and Chief Executive Officer Rafael D. Consing, Jr. told a Palace briefing that the sovereign wealth fund would be interested in SGCC’s shares in the National Grid Corp. of the Philippines (NGCP) “if it becomes available.”
China’s State Grid has a 40% stake in NGCP, while the rest is effectively controlled by Synergy Grid & Development Phils., Inc. (SGP).
“We have not spoken basically to the Chinese. We only saw this opportunity at the SGP level. We’re not having any discussions with the State Grid of China at this point in time,” Mr. Consing said.
On Monday, MIC signed a deal to acquire a 20% stake in SGP for P19.7 billion or about P15 per preferred share, giving it a “foothold” in NGCP.
Mr. Consing said MIC could convert the preferred stocks into common shares later on at a conversion price of P22.50 each.
“The preferred shares will guarantee us a 6.5% dividend yield over the first three years… Within those three years, we’ve got the option to convert to common shares… Failing that, the dividend rate would then rise to 8%,” he said, estimating this would generate about P1.7 billion to P1.8 billion annually for MIC.
MIC aims to finalize the deal within 90 days, with an option to extend it for another 90 days, he added.
Meanwhile, Mr. Consing said MIC expects to announce four more investments this year.
“This (NGCP deal) is going to be our first announcement and intuitively I would say in the next 30 days we could have another one,” he said. “For the year, we will aim for three to four material ones. By the end of this year, we should already have quite a number of foreign investors.”
‘LEVEL OF INFLUENCE’However, Mr. Consing clarified that the objective of the NGCP investment was not to take control but “rather just to be able to achieve some level of influence through the acquired board seats.”
The deal gave MIC two board seats each on the boards of SGP and NGCP.
Mr. Consing said MIC would not be involved in the day-to-day operations of the grid operator as it is a financial investor.
But MIC will have access to NGCP’s financial statements and a view of how the grid operator is run, he noted.
NGCP is a private corporation that operates, maintains, and develops the country’s power grid. It started operations as a power transmission service provider in 2009.
Energy Secretary Raphael P.M. Lotilla said at the same briefing that MIC’s investment would help lower electricity costs across the country by providing security in power supply.
He noted that the government’s seats in the NGCP board would also enable greater transparency.
“As NGCP is stating, there is nothing to fear from the presence, then we’ll be in a better position to confirm or affirm that,” he said.
“On the other hand, if there are other things that need to be strengthened — for example the cybersecurity of the transmission lines of the country and the transmission facilities — then the government would also be better able to contribute to addressing those issues,” he added.
Lawmakers have expressed concern over the involvement of SGCC, a government-owned enterprise of the Chinese Communist Party, in the grid operator, citing national security.
NGCP earlier reiterated that it is Filipino-controlled, allaying concerns over its Chinese shareholder’s role in operations.
“I was hoping that the 40% share owned by State Grid Corporation of China be the one that will also be reacquired by the government for national security reasons,” Senator Joseph Victor G. Ejercito told reporters in a Viber message on Tuesday.
He also expressed support for MIC in pursuing SGCC’s shares in NGCP. “Especially with the conflict with China in the West Philippine Sea, it should be prioritized.”
Meanwhile, Alfred Benjamin R. Garcia, research head at AP Securities, Inc., said MIC’s entry in SGP is likely “to give the government visibility into the operations and corporate actions of NGCP in order to address national security concerns.”
“Cash-wise, NGCP (or SGP) doesn’t really need the capital infusion since they are very cash-rich. What the company can benefit from is that there would be fewer regulatory barriers with the government as a shareholder,” Mr. Garcia said in a Viber message.
He said MIC’s involvement could ease the approvals of certain permits and address right-of-way issues that have hindered NGCP projects.
Shares in SGP rose by 4.74% or 52 centavos to close at P11.50 on Tuesday. At the opening of trading, SGP requested a one-hour trading halt in view of the signing of a binding term sheet with MIC for the subscription of preferred shares.
At the same time, Noel M. Baga, co-convenor of think tank Center for Energy Research and Policy (CERP), said MIC’s investment in NGCP serves as “a step toward strengthening energy security for Filipinos.”
He said representation of MIC in NGCP’s board of directors “can help accelerate critical transmission projects and improve grid management — priorities that directly impact power reliability and affordability.”
“While this development may enhance oversight of transmission infrastructure, CERP maintains that comprehensive reforms, particularly amendments to the National Grid Code and Philippine Distribution Code, remain essential for ensuring secure and reliable power delivery to all Filipinos,” Mr. Baga said in a Viber message.
While the government’s greater stake in the power sector including transmission can in principle “be desirable,” the Maharlika investment fund which underpins the deal, however, has “still not resolved vital issues of transparency, accountability and potential conflict of interest,” said Jose Enrique “Sonny” A. Africa, executive director at think tank IBON Foundation.
“Left unresolved, the deal may just reinforce corporate and regulatory capture of the private sector-dominated power sector under the guise of greater government control,” he said in a Viber message. — withKyle Aristophere T. Atienza