Lackadaisical condemnation in China’s NGCP participation

"(Let’s) examine why that portion of the National Power Corporation’s main function was sold."


(Part I)

The Senate has found a way to blast anew China’s creeping economic dominance in our country. It noted that according to its “ownership” of 40 percent of the country’s only transmission grid, the National Grid Corporation of the Philippines, China could pose a potential threat as it could “switch off the power grid and it will take between 24 and 48 hours to reboot the system after it has been ‘hacked.’”

Many of our senators, by their seemingly implanted view of China, expressed apprehension that we have to do something to allay this danger. Even retired Supreme Court Justice Antonio Carpio did not waste his time to pitch in, saying it is a “cause for concern.”

Unfortunately, this news that China might just shut off the country’s power grid was first reported by an American through that country’s notoriously subjective news media. Congressman Jericho Nograles charged that NGCP has been raking between P16 to P18 billion in dividends to its shareholders annually.

For a better understanding of this brouhaha, it is suggested that we examine why that portion of the National Power Corporation’s main function was sold.

One need not forget that Napocor guaranteed the financial cost of the country’s first nuclear power plant. Unexpectedly, the demagoguery that prevailed after the Marcos administration was ousted decided to mothball the almost finished power plant.

The Aquino government issued Executive Order No. 55 on Oct. 1, 1986 transferring to the national government the nuclear power plant, its equipment, materials, facilities, records and uranium fuel, and providing for the assumption of the remaining foreign loan contracted by Napocor and guaranteed by the government to finance the construction.

As if to firm up the decision to forgo the operations of the multibillion-dollar plant, the demagogue issued another Executive Order No. 98 on December 18, 1986, modifying EO No. 55, transferring to the National Government the nuclear plant, its equipment, materials, facilities, records and uranium fuel, and providing for the assumption of the remaining loan of Napocor by foreign lenders guaranteed by the government.

That decision instantly buried Napocor in such irredeemable debt of $2.3 billion, not to mention the usurious interest slapped by US creditors, which was bent on overthrowing the Marcos government. It could even be said that the Cory government was a party to that swindle because of the enormity of the amount about to be thrown into the septic tank.

Not a whimper was heard from Cory Aquino to demand a recession or rebate to the amount. We lost the case because the government failed to cite any defect to make the plant unserviceable and justify a demand for damages.

The country had to pay P250,000 a day for the loan until it was fully paid in 2014, even if the plant, in the words of Thelmo Cunanan, “did not produce a single watt of electricity.” As Americans creditors would say, they would not mind if the government would dump that into the garbage bin, provided they are paid to the last centavo.

The government later tried to deflect the adverse reaction from the public, particularly for the long hours of power outage. Production nosedived due to loss of man hours that to recover from the vandalizing effect of vengeance, the succeeding economic planners thought it wise to sell the only industry that produces energy for this country.

Napocor was placed in a very tight spot that it had to no choice but to sell or face the spectre of a possible economic collapse. The debt was swelling alongside the interest the country had to pay, not to mention the depreciating value of the peso and the incessant badmouthing by our politicians in blaming the corruption in Napocor.

On June 8, 2001, then-President Gloria Macapagal-Arroyo signed the Electric Power Industry Reform Act (EPIRA) or Republic Act 9136. Since the object was for the privatization of the only state-owned power industry, our economic managers opted first to deregulate the industry, referring to the rate of electricity that could be charged form the consumers.

Second was to chop the industry into several parts or divisions, particularly the creation of the transmission grid, an electricity market called Wholesale Electricity Spot Market (Wesm) and of separating them from the power producers. 

Before that, the government issued EO No. 215 on July 10, 1987, amending Presidential Decree No. 40, allowing distribution utilities to generate their electricity. This firmed up the cartel in the power industry, resulting in the uncontrollable increase in the price of electricity. Those in the power generation industry often connived to supply power to distribution utilities they own.

Most importantly, the government repealed PD No. 551 that lowered the cost of franchise tax payable by owners of distribution utilities, and instead passed them on to consumers at higher rate in the form of VAT.

On Dec. 12, 2007, a bid for a 25-year license to run the Philippine power grid or the privatization of Transco was held. The consortia, led by Monte Oro Grid Resources, then headed by Enrique Razon, the State Grid Corporation of China, and Calaca High Power Corp., won the bid, submitting the highest offer of $3.95 billion. On Jan. 15, 2009, NGCP officially started its operations of the transmission system with Walter A. Brown as president.

On June 10, 2010, Henry Sy Jr. was appointed as second president, but in May 2017, TransCo accused NGCP of violating the terms of the contract by supposedly making too much money from its operations and unduly profiting by allowing telecommunications firms to mount their fiber optic cables on the transmission towers. On March 7, Henry Sy Jr. resigned as president and CEO, and administrative officer Anthony Almeda was named new president.

Unlike the sale of other state-owned industries, the concession agreement allowed the government to keep the ownership of the transmission assets through TransCo. In accordance with Section 8 of the EPIRA Law, it states that no person, company or entity other than TransCo shall own any transmission facilities. The franchise only covers the operations, maintenance and expansion of the power grid, and the right of eminent domain necessary to construct, expand, and operate the transmission system.

For a cost of $3.95 billion, the State Grid Corporation of China has poured in P17 billion since 2009 for the improvement of the transmission lines. The privatization of the country’s transmission grid remains anomalous, because the law imposes a condition that the transmission grid remains government property.

While the owners of Monte Oro Grid Resources, led by Henry Sy Jr., and Calaca High Power Corp. led by Robert Coyiuto Jr., each represent 30-percent shares each, the State Grid Corp. of China, with 40 percent, is limited to giving just technical assistance.

According to Chinese Foreign Ministry Spokesperson Geng Shuang: “The project is now operated, managed and maintained by the Philippine side, with the Chinese partner offering only the necessary technical support upon request. The allegation of China’s control over the Philippine power grid or threat to the country’s national security is completely groundless.”

If the opposition now sees a problem in China’s participation in maintaining, expanding and improving the country’s power grid, the fact is it was done by the past administrations. First, the government should have analyzed that it was about to sell a vital and strategic industry. Second, the bidder includes a foreign and state-owned corporation engaged in a parallel industry. In other words, we were fully aware of these facts. 

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Topics: Rod Kapunan , National Grid Corporation of the Philippines , China , NGCP , National Power Corporation
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