Maharlika sees 6.5% annual yield on  P19.7B NGCP investment in first 3 yrs 

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2nd MIC investment set within next 30 days

State fund Maharlika Investment Corporation (MIC) said it expects to earn at least P1.28 billion annually from its investment in the National Grid Corporation of the Philippines (NGCP), even as it seeks to stabilize supply and prices of electricity for consumers.

The MIC on Monday signed a P19.7 billion binding share purchase agreement with Synergy Grid and Development Philippines Inc. (SGP), giving the government a 20 percent equity stake in Synergy Grid and two seats on the NGCP board.

“The total proceeds will be about 19.7 billion pesos, representing 20% of SGP with an effective issue price of 15 pesos per preferred share,” MIC President and Chief Executive Officer Rafael Consing Jr., said in a briefing in Malacanang on Tuesday  

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Done in 90 days

The acquisition deal is likely to be consummated within 90 days, with a possible extension of another 90 days, he said.  

“The 20 percent stake in National Grid through SGP guarantees the government a 6.5 percent annual dividend yield over the next three years, estimated at P1.28 billion a year,” Consing said. 

This could even go up to 8 percent or P1.576 billion, if the preferred shares are converted into common shares.

“We’ve got … to convert to common shares. Following which, the dividend rate would then rise to 8 percent,” the MIC head said.

Consing said he is not yet aware who will represent the government during company board meetings.

Influence, not control 

Amid reports that the government wants to have majority control of the NGCP board by raising the number of seats to four – out 15 board members – Consing clarified that “the objective … was not to take control but rather just to be able to achieve some level of influence, and you achieve that by way of board seats.”

The ownership structure of NGCP has also been a subject of security concern because it is 40 percent owned by the State Grid Corporation of China. Lawmakers have expressed fears that Beijing could use the NGCP for sabotage in case of a conflict over the disputed waters of the West Philippine Sea,” according to a report by the Philippine Institute for Development Studies (PIDS) in February 2024.

“NGCP said this is not a concern because ‘only Filipinos are manning the (NGCP) substations.’ The remaining 60 percent stake is split between businessmen Henry Sy Jr. and Robert Coyiuto Jr.,” PIDS added. 

Since January 2009, NGCP has exercised full authority over the management and operations of the nationwide transmission system, a critical public utility, under a franchise granted by the Philippine Congress. 

With the MIC represented on the NGCP board, the Philippine government will have access to vital information in order to make more informed decisions about power supply and system in the country, the MIC official said.

Greater transparency

More In the same briefing on Tuesday, Energy Secretary Raphael Lotilla said that as part of the NGCP board, there will be more transparency and the government will see how the NGCP operates, what needs to be strengthened and addressed at the power grid company.

“There will be greater transparency, at least from the standpoint of the government and it will have a view of the operations of NGCP,” the Energy chief said.

Other things that need to be strengthened, for example cyber security related to the grid and transmission facilities, the government would also be able to do so and contribute to addressing those issues, Lotilla added.

Asked how the MIC investment could directly benefit the public and lower the cost of electricity in the country, Consing said the investment would help NGCP roll out its transmission infrastructure to accommodate more power through the grid and reach more consumers throughout the country.

MIC sets next investment 

Consing said the MIC is looking at other areas where MIC could place the country‘s sovereign wealth fund such as the distribution, transmission and secondary transmission grids for the island provinces such as Mindoro and Palawan.

He said MIC is still talking with the National Electrification Administration (NEA) about investment in transmission infrastructure for the two provinces

“So, there has been negligible investment in these areas over the past years, and we feel that investing in these island grids would in fact also spur development. But this time, driven by the countryside, the MIC official said.

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 So, whether we’re talking about the national grid or island grids, you see that it’s basically the most important part of that entire electricity ecosystem,” Consing added.

Another area of investment the MIC wants to explore is agriculture.

Consing said MIC is making another investment within 30 days but declined to identify which sector other than saying the sovereign wealth fund will make three to four investments this year.

Lotilla also suggested investments in the study and development of the nuclear power systems in the country.

Consing said they are open to the idea but must first determine if it falls within the “cost ownership prescriptions between generation and transmission,” and if it is allowable under the law that created the sovereign wealth fund.

Asked about possible investments in the State Grid Corporation of China (SGCC), which has a 40 percent equity in NGCP, Consing said there is no talk about it at the moment, but “if it becomes available” MIC is interested.

China’s 40 percent stake in the power transmission company is of no concern as things now stand.

“In the sense that there will be government representation, you know. In fact, I don’t really see any problem with them being there at the moment because I guess that’s beyond basically what we look at from a financial investor perspective,” Consing said.

Foreign money 

Meanwhile, Consing said potential foreign investors have expressed interest in the sovereign wealth fund which could be accommodated by the end of the year.

He said there are presently no foreign investors involved as the MIC wants to establish first its credibility and track record.

Consing was appointed to lead the sovereign wealth fund in November 2023, and the MIC was authorized to hire additional personnel seven months later in July 2024.

The MIC was established in 2023 under the Maharlika Investment Fund Act which created the MIC and pooled its funds from the state-owned Land Bank of the Philippines (P50 billion) and Development bank of the Philippines (P25 billion). It was mandated to invest in high-impact projects, especially infrastructure.

MIC has P75 billion in capital with another P50 billion coming in from the dividends of the Bangko Sentral ng Pilipinas and Philippine Amusement and Gaming Corporation. The money is currently held by the Bureau of Treasury.

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