The government is losing billions in pesos and stands to lose more under the agreement between the NGCP and Transco and PSALM.

This could be the case of the allegedly onerous 25-year concession agreement and franchise contract awarded to the National Grid Corporation of the Philippines (NGCP) in 2008.

Based on documents obtained by Daily Tribune, the government is losing billions in pesos and stands to lose more under the agreement between the NGCP and the National Transmission Corporation (TransCo) and the Power Sector Assets and Liabilities Management Corporation (PSALM).

“The concession contract and franchise of the NGCP were sweetheart deals,” the documents from reliable sources in the power industry revealed.

“The concession fee of $3.95 billion for 25 years is disadvantageous to the government,” it also stated.

At least P31.825 billion has already been lost by the government since the NGCP deal was sealed.

The concession agreement was signed on 8 February 2008 by TransCo president and chief executive officer (CEO) Arthur Aguilar; NGCP directors Walter Brown, Elmer Pedregosa and Du Zhigang, and Jose Ibazeta, president and CEO of PSALM.

It was noted that there were huge slides in government earnings, in terms of revenues and taxes, since the privatization of the national grid came.

Questions were also raised on the timing of the privatization agreement in February 2008 as the transmission business of the government was on the rise by 20 percent annual average.

“It did not make any business sense for the government to privatize the electricity transmission business,” the documents stressed.

In fact, it was pointed out that “the transmission business of the government grew by 20 percent year on year before it was privatized.”

Prior to the takeover of NGCP, TransCo’s income for 2007 was P23.43 billion and even rose to P28.03 billion the following year.

There were also huge declines in the annual average net government revenues from operations of the national grid from P20.75 billion to a mere P6.75 billion.

On the average annual tax revenues, TransCo remitted P9.5 billion for the fiscal years 2007 and 2008, while NGCP only paid P2.23 billion in 2010 and 2011.

This was because “the franchise law exempted the NGCP from all national and local taxes except for the three percent franchise tax on gross receipts.”

“The concession agreement, itself, is replete with provisions that are ambiguous and disadvantageous resulting to damage against the government,” the documents also stated.

Daily Tribune tried to reach NGCP for its side of the issue but it has yet to respond as of press time Wednesday.

Only recently, the NGCP was criticized for its failure to hold an initial public offering mandated by the law 10 years after it started operation.

The IPO should have been held last January.

Under the NGCP charter, it has 10 years from 15 January 2009 to comply with its statutory requirement to offer at least 20 percent of its outstanding capital stock to the public.

Based on its audited financial statements, the NGCP declared a total cash dividend of P169.893 billion in the past nine years. Had there been an IPO since 2009, the public would have received P33.98 billion in dividends.

However, the NGCP filed a petition before the Energy Regulatory Commission on 13 November 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 TransCo and PSALM for the delay of its IPO.

Meanwhile, both the Senate and the House of Representatives have expressed intention to conduct inquiries into the NGCP’s failure to go public as mandated.

The NGCP float is seen to 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.