Philippines: 'Déjà vu' as NGCP locks horns with energy execs

Philippines: 'Déjà vu' as NGCP locks horns with energy execs

For National Grid Corporation of the Philippines (NGCP)—the giant firm in
charge of operating the country's electricity grid —it seems that history is
repeating itself.

In 2010, not long after former President Aquino assumed office, it found
itself on the receiving end of a tongue lashing from then Energy Secretary
Rene Almendras about the firm's supposed lack of transparency regarding the
"true state" of the country's power transmission system.

A few weeks later, the energy chief wrote NGCP president Henry Sy Jr. asking
him to explain several issues regarding the company's operations, especially
those on its 25-year concession agreement with the government that it won in
2008 with a $3.95-billion bid.

The dispute continued for several months, with the issue eventually dying
down after a long tit-for-tat conducted both overtly in the media and
covertly in meetings between policymakers, regulators and stakeholders.

Fast forward six years to today, a few months into the new administration of
President Duterte and NGCP finds itself once more at loggerheads with energy
officials, some of whom believe that the firm —controlled by an uneasy
alliance of two Filipino businessmen and one of China's biggest state-owned
enterprises—is enjoying more benefits from the government than it should.

This time, NGCP's nemesis is the newly appointed president of state-run
National Transmission Corp., Melvin Matibag. Transco is, strictly speaking,
still the owner of the power assets operated by NGCP although the government
agency is no longer involved in the grid's day-to-day activities.

Matibag is a longtime associate of Energy Secretary Alfonso Cusi.

"We don't understand why this is happening, but it has happened to us before
during the Aquino administration," NGCP's Sy told the Inquirer. "It went on
until we were able to explain the situation to them, then they understood."

The "situation" he spoke of is the perception that NGCP was making a killing
on charging consumers for every kilowatt of electricity that passes through
the grid from the power plant to the end user, when in fact, whatever the
company makes is offset by the billions of pesos it has to spend in order to
upgrade a nationwide transmission infrastructure that in some cases are five
or six decades old.

"We invest a lot to make sure that power is delivered to the consumer,
despite all the obstacles we face," Sy said.

Transco recently questioned NGCP why the latter supposedly allowed two
telecommunications firms to hook up facilities to the power grid without
having obtained the permission of the government agency— something NGCP
denied.

Nonetheless, NGCP said that the congressional franchise it operates under
authorizes it "to engage in ancillary businesses which maximizes utilization
of its assets such as, but not limited to, telecommunications system,
pursuant to Section 20 of Republic Act No. 9136," or the Electric Power
Industry Reform Act.

More importantly, the firm said that Transco could not interfere with its
operations, saying that, since it took responsibility for operating the
Philippine power grid almost a decade ago, the whole transmission system now
operates as a "going concern" where NGCP "assumes all responsibilities as if
it was the owner of the transmission assets."

And for NGCP, that right includes the right to carry on any related
businesses as long as it does not damage the assets.

It is a position that Transco's Matibag is bound to contest over the coming
days—a disagreement that will, if pushed to its logical end, may end up in
the Singapore International Arbitration Center where business disputes of
this nature are brought.

At stake is the nature of NGCP's franchise, billions of dollars in private
investment— including the single-biggest investment by a Chinese entity in
the Philippines—the efficiency of the national power grid and, ultimately,
millions of Filipino electricity consumers.

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Link to Original Article:
http://business.inquirer.net/228679/deja-vu-ngcp-locks-horns-energy-execs

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com