Maharlika should buy NGCP entirely

THE Maharlika Investment Fund has been emblematic of Ferdinand Marcos Jr.’s failure and extreme incompetence as president. He pushed for it early into his regime and tried to sell it to foreign investors in over a dozen visits abroad. Funded with a seed capital of P125 billion by the national government and two of its biggest banks, it has been an utter failure, attracting not a single dollar of overseas investments, a huge amount of money idle.

Marcos though has a golden opportunity to turn this failure into a huge success, for which Filipinos would be thankful: the nationalization of National Grid Corp. of the Philippines (NGCP) — the monopoly handling the national electric grid system, one of, if not the most crucial infrastructure in any country — by having the MIF buy off not just China State Grid Corp. that owns 40 percent of the firm, but also the two practically passive investors, Henry Sy Jr. and luxury-car distributor Robert Coyuito.

It’s understandable that the Chinese firm would be in NGCP: it is the world’s largest grid company and has expertise in that industry, which requires more and more advanced technology that it can parlay in other countries. NGCP was State Grid’s first investment abroad, and apparently encouraged by the huge profits it made there, it went on to invest in grid systems in six countries abroad — but never controlling these companies as it does over our grid system.

It’s a mystery how Coyiuto, whose mind has for decades been focused on luxury car distribution, popped up to bid for the power grid with Sy. At any rate, it’s been his biggest business success story.

Since becoming an investor in NGCP, his insurance firm, Prudential Guarantee and Assurance Corp., has cornered a big chunk of its insurance needs, with premiums from it (using 2019 data, as the firm has stopped making public its annual reports after that year) totaled P349 million, two-thirds of its total premium revenues.

According to a 2023 article by the Philippine Center for Investigative Journalism, which used data from the Energy Regulation Commission, “NGCP’s financial statements showed the company spent P2.8 billion in insurance payments from 2018 to 2021,” which include industrial all-risk insurance, a type of policy that allows the policyholder to protect assets from risks other than fire.

“Almost half of insurance policies during the period, or about P1.3 billion,” the PCIJ reported, “were procured from Prudential Guarantee and Assurance Inc., whose chairman and majority owner is Coyiuto.”

Imagine if our Government Service Insurance System — if government took over NGCP — instead handled all of the power grid’s insurance needs. GSIS’ revenues would boom so that it can increase the benefits for the country’s 1.6 million government employees.

NGCP is in a monopoly industry, as it is the sole firm running our grid system. As a monopoly, it is practically assured of profits — except if it is grossly mismanaged — as it does not need to compete with any other company. The benefits of a monopoly should be acquired solely by the people, through state corporations, not by private firms whose profits go to only a small group of individuals, much less to a foreign firm.

Moreover, the electric grid system is no longer just a static network of power lines and transformers; it is a dynamic, interconnected system that requires advanced technology to meet the demands of the 21st century. From smart grids and AI to renewable energy integration and cybersecurity, these technologies are essential for ensuring the grid’s reliability, efficiency and sustainability. As the energy landscape continues to evolve, the role of advanced technology in the grid will only become more critical, enabling a cleaner, more resilient, and more efficient energy future. I don’t think the SM group nor Coyiuto would have the expertise nor interest in transferring technology learned from the state grid to their companies.

We are the only country in Asia that has allowed a foreign firm and two tycoons to control such a crucial company that controls the grid system.

Our elites in the late 2000s, helped by the blah-blahs of neoclassical economists who worshiped private corporations as god’s gift to mankind, took advantage of the mismanagement by the strongman Marcos regime of the state firm National Power Corp. (Napocor) that handled the grid system. It convinced the body politic that all, if not most state corporations, are doomed to fail and that they should let private firms run such infrastructure.

The Electric Power Industry Reform Act (Epira) was passed in 2001 requiring the privatization of Napocor, with a National Transmission Corp. created to take over power transmission operations from the state firm. It was in 2008 that the Philippine government awarded a 25-year concession to the NGCP to operate the country’s power transmission system.

While the two tycoons and the Chinese firm will naturally put up a legal fight to block NGCP’s nationalization, a strong president has many political and regulatory levers to get them to divest. That we have the Maharlika Investment Fund is an advantage. Having a paid-in capital of approximately $2 billion, it can raise the additional $2 billion to buy off the existing stockholders that paid $4 billion, from other sources.

This, in fact, is what MIF was designed to do: Attract investors to join the investments it makes. These investors could even be foreign hedge funds as long as they acquire minority stakes.

NGCP would be very attractive to outside investors not just because it is a monopoly of the grid system of a large country but because of its track record of huge profits, as shown in the accompanying table.

You should care about this, dear reader. Check your Meralco bill. If it’s P2,000, P200 (10 percent) of that go to NGCP (“transmission charges”), and P100 of that to the NGCP owners, P40 of which goes to China.

We are an absurd country, nearly hilarious: Our leaders claim that some godforsaken shoal and reefs in the South China Sea are ours, which China asserts is part of its sovereign territory. An arbitration panel in 2016 convened at our request ruled that it is an issue that neither it nor the UN Convention of the Law of the Sea (Unclos) has authority to resolve. Our leaders refuse to admit that was the panel’s decision, even if it is at the very first page of the ruling.*

But we allow a Chinese state firm to siphon off to Beijing billions of dollars in profits for having a 40 percent ownership in our monopoly grid system, which even gives it the power to turn off all power in the country, if it chooses to because of some conflict that may arise between us and China.

*(Pages 12 and 2 of the award of the arbitral tribunal, July 12, 2016, verbatim quote: “The Convention (Unclos) however, does not address the sovereignty of States over land territory. Accordingly, this Tribunal has not been asked to, and does not purport to, make any ruling as to which State enjoys sovereignty over any land territory in the South China Sea, in particular with respect to the disputes concerning sovereignty over the Spratly Islands or Scarborough Shoal. None of the Tribunal’s decisions in this Award are dependent on a finding of sovereignty, nor should anything in this Award be understood to imply a view with respect to questions of land sovereignty.”)

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Maharlika should buy NGCP entirely
Source: Breaking News PH