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China has key to NGCP

The brownouts can be weaponized to bring our economy down on its knees. With full control of the grid’s systems operations, the NGCP can manipulate power interruptions

TDT

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Aside from the billions in lost revenues, China holds the key to the National Grid Corporation of the Philippines (NGCP), putting national security at risk, and the public and country’s business interests in the hands of an alien player.

Concerns were raised on Wednesday by several industry stakeholders, including government officials, as they disclosed the alleged Chinese intrusion into the national grid system.

They said that, if abused, the setup may lead to deliberate power interruptions that would adversely affect economic recovery, especially during these times of a pandemic.

[Related story: ‘Energy not profit security’ imperative]

A Daily Tribune source also warned that China does not need a remote switch to turn the power off in Manila.

“It’s like a thief who has a key to your house. The thief can decide when to enter,” the source added.

“We’ve practically given China the key to our national grid… For all intents and purposes, China has control of NGCP’s systems operations. It doesn’t even need to hack into our system because the Chinese are already inside the system,” the source said.

He also pointed out that the State Grid Corporation of China (SGCC) has four seats in the 10-man NGCP board, including one who sits as chair.

That position is very critical to the day-to-day operations of the NGCP. It (SGCC) practically holds the key to our grid.

Ironically, it is a high-ranking member of the Chinese politburo who holds a key position in Beijing’s energy department who advised visiting Filipino officials several years ago to not allow a foreign entity to take a foothold of our power grid.

He was aware of its potential to disrupt the economic and military capabilities of our nation, the source said.

“Whatever you do, do not let foreigners take control of your power grid,” the Chinese official reportedly told the Filipino delegates until he was made aware by one of his assistants that the SGCC holds 40-percent ownership of the Philippines’ grid.

According to a Daily Tribune source, even in times of peace, the threat to our economy exists with the Chinese presence in the NGCP hierarchy and it’s not just in the West Philippine Sea and the country’s other water territories.

“The brownouts can be weaponized to bring our economy down on its knees. With full control of the grid’s systems operations, the NGCP can manipulate power interruptions,” he said.

“Imagine the impact of such a scenario on our economy. It can stop economic activities while projecting a negative impact to investors that we have an unstable power source, not to mention expensive,” the source added.

Not only that, the Philippines might have been losing billions of economic revenues due to its allegedly “onerous contract with the electricity concessionaire.

An industry insider told Daily Tribune that the Concession Contract of the embattled NGCP has been disadvantageous to the government and that the government needs to act on it or only a few people will enjoy billions that should have been spent for economic gains.

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

 

Risa weighs in

Senator Risa Hontiveros also lambasted the NGCP over its supposed refusal to submit to a security audit — a year after Congress mandated it.

In an exclusive interview with Daily Tribune, Hontiveros said she suspects a “foreign state” might be behind the NGCP denial, which she said is a cause of “serious concern”.

“This is an ongoing concern because the NGCP refused to comply with the audit a year later,” Hontiveros said.

“A foreign state might have control and access to our grids where it can flick the switch on and off figuratively,” she added.

The lawmaker did not directly name the “foreign state” that has a possible hold over the country’s power sector but it is known that China has massive ownership of NGCP.

“It is extremely worrying that China has authority over crucial industries, such as our main power grid system,” she said.

“Keep in mind as well that Chinese firms have been banned by other countries, such as Japan and the US, for national security reasons. China has espionage laws that require its companies to cooperate in intelligence-gathering efforts,” she added.

Not only the power operations, but she also warned earlier that Philippine sovereignty can be compromised if the corporation will remain to possess authority over the country’s power grids.

“There certainly are national security implications of the NGCP being 40 percent owned by the government of China. We all know how China has been illegally taking over our seas and she may use her control over our power system as leverage against the Philippines vis-a-vis our disputed waters,” she told Daily Tribune.

“Now that tensions in the WPS are greater than ever, it will not be surprising if China uses every tool in her arsenal to weaken our claim in the WPS,” she added.

However, the lawmaker believes that company’s hold in the industry is over as she expressed support to the proposal of Energy Secretary Alfonso G. Cusi to revert the authority over the country’s power grids to the government.

 

A natural monopoly

Another Tribune source who is privy to the matter said that before the two years the NGCP took over the transmission business, the National Transmission Corporation’s (TransCo) net income earnings before tax were P23.43 billion in 2007 and P28.03 billion in 2008.

It also paid national and local taxes to the amount of P10.37 billion in 2007 and P8.62 billion in 2008.

“The transmission business of the government grew by 20 percent year on year before it was privatized.”

 

Sweetheart deal?

Section 21 of the EPIRA law mandates that the privatization of TransCo should be set in the standard that the “award shall result in the maximum present value of proceeds to the national government”.

It contemplated that the government will be paid the maximum value in the operations of its assets.

“The Concession Contract for the transfer of the transmission business to NGCP for P163 percent in 25 years is equivalent to a mere P6.75Billion a yearly average in revenues for the government vis-à-vis the P20.75 billion net revenue after taxes of TransCo in 2008,” the source explained While TransCo, a government-owned corporation, was not exempted from paying national taxes and local taxes, NGCP’s franchise law exempted it from all national and local taxes except for the 3 percent franchise tax on gross receipts.

Transco’s average tax payments for 2007 and 2008 is P9.5Billion annually while NGCP’s franchise tax payments for 2010 and 2011 averaged at P2.23 billion only.

Meanwhile, another source who also requested anonymity explained that the concession agreement contains a peculiar provision that gives NGCP the option to prepay any of the Deferred Agreements due under the agreement, so long as there is no amount due to PSALM or TransCo under the Concession Agreement.

This resulted in a loss of as much as P31.025 billion to the government in income from interest.

 

 

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