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Senate Energy Committee to probe NGCP IPO delay

QUEZON CITY, Philippines – The building of the National Grid Corporation of the Philippines, “a privately owned corporation in charge of operating, maintaining, and developing the country’s state-owned power grid, an interconnected system that transmits gigawatts of power at thousands of volts from where it is made to where it is needed,” as seen on 25 June 2018. Photo by Mark Cayabyab/OS WIN GATCHALIAN

The Senate Committee on Energy will take another look at the possible reason preventing the National Grid Corporation of the Philippines (NGCP) from going public.

Senator Win Gatchalian, chair of the Senate Committee on Energy, stressed that the initial public offering (IPO) of NGCP, which is mandated under the law, is now long overdue as the ten-year deadline has passed and, therefore, depriving Filipinos of their fair share in the public utility.

Moreover, Gatchalian pointed out that the the Philippine Stock Exchange (PSE) has yet to comply with the submissions required of them during the first Senate inquiry on the issue, while the Energy Regulatory Commission (ERC) has yet to update the Committee on its compliance with its submission.

It would be recalled that on April 3, 2019, the Senate Committee on Energy ordered the ERC to submit a firm time table for the resolution of the NGCP’s case, which will determine whether NGCP can extend its IPOThe ERC, in its submission, stated that the issuance of the Commission’s decision on the case will be on 29 October 2019.

The Senate committee also asked the PSE to provide a simulation/research as to why an NGCP IPO with unfavorable market conditions mostly related to the company’s relationship with regulators and government agencies is detrimental to consumers.

“We want to tackle the IPO issue of the National Grid because we think this is going to be beneficial to our consumers directly and indirectly. We will conduct this hearing to understand from both the ERC and DOE as to where we are in this initial public offering of the NGCP,” Gatchalian stressed.

“In the end, the Congress, being the representative of the people, we were the ones who approved this franchise with condition of the IPO. So we’re answerable to the people why the IPO hasn’t been executed after 10 years. From my standpoint right now, I don’t see that deep rationale why the IPO didn’t happen,” he added.

Under the NGCP’s charter, it has 10 years from January 15, 2009 to comply with its statutory requirement to offer at least 20% of its outstanding capital stock to the public. The 10-year period ended on January 15, 2019.

Based on its Audited Financial Statements, the NGCP declared a total cash dividend of ₱169.893 billion in the past nine years. Had there been an IPO in 2009, the public would have received ₱33.98 billion in dividends.

However, the NGCP filed a petition before the ERC on November 13, 2018 to extend the IPO by one year, which it said was allowed under the law. During the hearing of the Senate Committee on Energy conducted in April, the NGCP blamed pending disputes with the National Transmission Corp. (Transco) and the Power Sector Assets Liabilities and Management (PSALM) for the delay of its IPO.

Gatchalian believes that the NGCP float will benefit Filipino consumers since it will promote greater public participation in an important public utility. Such participation includes attending and casting votes during stockholders’ meetings to ensure stronger corporate governance.

There will also be greater transparency in the NGCP since publicly listed companies will require three independent directors, real-time disclosure of material information, public annual report, public declaration of dividends, brand and seal of good housekeeping, according to the senator.

“I think the consumers will stand to benefit either directly or indirectly in the participation on the governance of the utility. Because even with one share, your voice will be heard,” Gatchalian said. “And with that one share, the alignment that was mentioned before will happen, but without any public participation, there is no way for the public to align their direction with the utility.”