"Good faith demands that we comply with our own laws on foreign investment."
Part II
What puzzles everybody is that we made a howl on the sale of the Manila Hotel on grounds that it is part of our national patrimony. Ironically, we never made a whimper of protest in the disposition of our supposedly vital and strategic industry involving the country’s transmission grid.
Now Congress wants to scrutinize China’s investment without taking into account the circumstances why the government had to dispose our transmission grid. Maybe it’s our desperate economic managers, in their eagerness to recoup the lost amount wasted by that decision to pay the loan of 2$.3 billion to construct the BNPP that came after Napocor financially wobbled. Chopping Napocor to separate entities would lessen the cost to investors willing to take the gamble.
Surprisingly, among the investors was the State Grid Corporation of China, Monte Oro Grid Resources Corp., and Calaca High Power Corp which paid $3.95 billion for which SGCC has already poured in P17 billion in 2009 for the improvements, maintenance and expansion of its operation.
Technically, NGCP remains owned by the state thought the National Transmission Corp. as provided in R.A. 9511or giving NGCP a franchise. Section 8 of R.A. No. 9511 mandates the corporation “to make public offering of the shares representing at least 20 per centum of its outstanding capital stock or higher that may hereafter be provided by law within 10 years from the commencement of its operations.” That period began in 2009 and is supposed to end by 2019.
What is unusual about the privatization of our power industry, particularly the transmission grid aspect, is that the facilities remain owned by the government through the National Transmission Corp. The Department of Energy admits that NTC still controls about 6 percent of the whole transmission grid.
This aspect is confusing considering that NGCP has its own charter where the majority of the board has the power to decided and implement its program, with 40 percent presenting that of SGCC but limited to merely supervising the function or acting upon request to do some “trouble shooting activities” by the 60 percent controlling board. The two private partners already constitute a majority as required in Section 8, to quote: “The PSE of any company which directly or indirectly owns or controls at least 30 per centum of the outstanding shares of stock of the grantee (franchises) shall be considered full compliance of this requirement.”
The decision by the ERC to junk the petition filed by NTC and the Power Sector and Assets and Liabilities Management is misplaced much that Section 8 already gave NGCP a period of 10 years to “make public offering x xx Provided, the listing in the PSE of any company which directly or indirectly owns or controls represent at least 30 per centum of the outstanding shares of stock of the grantee (franchisee) shall be considered full compliance of the listing requirement.”
For the ERC now to give the two private partners an extension to comply with the “dispersal of ownership” is to unduly stretch what R.A. No. 9511 already provides. The grant for an extension beyond the 10-year period amounts to amending the law by mere motion which everybody knows cannot be done.
The NGCP, by the approval of RA 9511, was granted a congressional franchise of 25 years renewable for another 25 years. Likewise, China’s share in with NGCP cannot not be affected. SGCC is a state-owned corporation and is not listed in the PSE nor is open to public investment and is considered to have complied with the listing requirement.
Whatever conditions are imposed in the franchise like compliance to the dispersal of ownership strictly speaking affects only publicly listed domestic corporations. China did not violate the Constitution or any the provisions for our foreign investment laws. It is Monte Oro Grid Resources Corp. and Calaca High Power Corp. that controls the majority of the stocks that refuses to comply.
The president of the TransCo cannot force NGCP to allow the corporation to have a seat in the board for the logical reason that NGCP is a private corporation. Granting TransCo a seat in the board should be specific indicating that TransCo represents the remaining 6 percent of the country transmission grid it still controls and operate. In the case of China, the government badly needs the money to rescue our power industry caused by the lackadaisical decision to flush into the septic tank an amount of $2.3 billion by an obfuscated government with much hatred of the Marcos administration.
Before some members of Congress start rattling China to divert 20 percent of its 40-percent holdings for IPO, they better recall that a similar law was passed requiring public utilities to divest up to 75 percent of their holdings enacted on June 8, 2001, it specifically requires in Section 28 of R.A. No. 9136 to quote: “In compliance with the constitutional mandate for dispersal of ownership and de-monopolization of public utilities, the holdings of persons, natural or juridical, including directors, officers, stockholders and related interests, in a distribution utility and their respective holding companies shall not exceed 25 percent of the voting shares of stock unless the utility or the company holding the shares or its controlling stockholders are already listed in the PSE: Provided, that controlling stockholders of small distribution utilities are hereby required to list within five (5) years from the enactment of this Act x x x. This Section shall not apply to electric cooperatives.”
It seems that the ERC is the one stalling the implementation of the IPO. Our lawmakers now invoke the issue of national security, but naively ignoring that it was the decision by the Arroyo administration to dispose the country’s power industry to stave off the foreclosure by Napocor’s creditors. It was China that offered the highest bid.
The privatization of Napocor now appears as a privatization of our corporation to a foreign-owned state corporation. The approval of RA 9511 granted NGCP a congressional franchise of 25 years renewable for another 25 years. We sold by blaming corruption in government with our people wondering why it ended up in the hands of a foreign-owned state corporation.
Good faith demands that we comply with our own laws on foreign investment. In fact, among the three investors of NGCP, it is China’s SGCC that made the highest plow back of its earnings to help the country hurdle from the crises to bring down the cost of electricity. Sure, China can offer 20 percent from its 40-percent holdings for IPO, if being in fulfillment of its social responsibility if only we refrain from making nasty comments about its motivations.
Our senators are acting rudely by exhibiting more of their fear of the “co-location agreements” NGCP granted to other telecommunications company such as Globe Telecoms Inc. Smart Communications, Inc. and Digitel Mobile, Philippines Inc. There is anxiety that China Telecommunications which entered into a $5.4-billion investment agreement with Udenna Corp. owned by Dennis Uy would enter into similar “co-location agreement.”
Practically our senators now appear as spokespersons of the oligarchs who also acquired the franchise to distribute water and got the ire of President Rodrigo Duterte for suing the country to collect alleged P7.4-billion unpaid water bills. Ayala and Pangilinan are known to be the owners of Globe and Smart Telecommunications. Even if they already have existing facilities with NGCP, they fear NGCP would favor China for the fact that China Telecommunication are having the same corporate nationality with that of SGCC. In a deeper perspective, they fear just like their brokers Wall Street that the entry of China Telecommunication would pave the way for the full entry of China’s 5G system which the US has banned the use of Huawei’s communications system.
China’s 40-percent share entitles it to a three seats in the board 10 directors. But behind the alarmist talks if the fear of the oligarchs being overtaken in the lucrative business as service provider. Whether or not NGCP earns from these agreements is beside the point. The entry of China Telecommunications is a game changer for it will cost more for the existing telecommunications companies to install, replace and upgrade facilities just to compete with the new comer that will be using far newer and far more efficient models from China.
rpkapunan@gmail.com
