To sustain the responses against the coronavirus disease 2019 (Covid-19), the National Transmission Corporation (TransCo) is planning to remit all of its 2020 net earnings to the Bureau of Treasury (BTr) as dividend contribution.
For 2020, TransCo’s dividend remittance at 50 percent of its net earnings was estimated to amount to P1.63 billion.
TransCo president-CEO Melvin Matibag wrote Finance Secretary Carlos Dominguez III saying the state-run owner of the transmission grid will secure the approval of its board to comply with Dominguez’s directive on increasing the dividend remittance of the firm for 2020 to 75 percent of its net earnings.
Matibag said TransCo is even open to contributing 100 percent of its net income for this period to the government’s Covid-19 response efforts.
“TransCo supports the DoF (Department of Finance) in its revenue generation efforts for the government’s programs to alleviate the impact of the Covid-19 pandemic, and in fact, it is exploring the possibility of remitting 100 percent from the 2020 net earnings,” Matibag said in his letter to the Finance Secretary.
Had TransCo been given the right to operate the electricity backbone that it owns, its contribution to the government would be far substantial. Concessionaire National Grid Corporation of the Philippines (NGCP) has accumulated a total of P187.839 billion in cash dividends from 2009 to 2018, or a staggering payout rate of 91.2 percent.
Aside from that, NGCP has appropriated for itself receivables belonging to the government of about P3.92 billion.
Thus, even the P1 billion donation that NGCP has provided hospitals and local government units pale in comparison to the dividends distributed to its shareholders.
Instead of gaining from the concession deal, the government is even losing heavily from the privilege granted its franchise for the company to pay only a three percent tax in lieu of all other taxes.
The state lost P731.7 million from 2009 to 2018 due to NGCP interest income taxes exempted under the franchise law, or a total loss of P1.8 billion under the 25-year contract.
TransCo, instead, pays for annual corporate income tax of P7.9 billion to P17.3 billion per annum or a loss in government taxes for the 25-year duration of the concession agreement of P92.5 billion.
The concession fee of $3.95 billion for 25 years did not justify the privatization of the power transmission business.
Since the transmission sector is a natural monopoly, income from the business is assured.
Two years before NGCP took over the transmission business, TransCo’s net income earnings before tax were P23.43 billion in 2007 and P28.03 billion in 2008. It paid national and local taxes amounting to 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.
Under Section 21 of the EPIRA (Electric Power Industry Reform Act) law, the privatization of TransCo’s assets should be set in the standard that the “award shall result in maximum present value of proceeds to the national government,” or that it will pay the maximum value in the operations of its assets.
The concession contract for the transfer of the transmission business to NGCP for P163 billion in 25 years is equivalent to a mere P6.75 billion yearly average in revenues for the government against the P20.75 billion net revenue after taxes of TransCo in 2008.
The unfair deal that the government entered into with NGCP should be adjusted similar to the water concession deals to reflect the supremacy of people and not the interest of powerful business conglomerates.