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The Philippine government is investigating China’s part ownership of the national grid amid claims Beijing can plunge the country into darkness. Photo: AFP

Philippine national power grid IPO can guard against China threat: senator

  • The Philippine government is investigating China’s part ownership of the national grid amid claims Beijing can plunge country into darkness
  • Energy committee chairman Sherwin Gatchalian says public has already lost out on billions of pesos due to grid’s failure to list on stock exchange
The China-backed National Grid Corporation of the Philippines should list its shares publicly to help guard against fears that Beijing could cause a nationwide blackout at the flick of a switch.

That’s the view of Sherwin Gatchalian, chairperson of the Philippine Senate’s energy committee, who used a televised interview on Wednesday to remind the NGCP that under the franchise granted to the private firm by Congress in January 2009, it was required to sell 20 per cent of its equity in an initial public offering (IPO) within 10 years of operation. “This is really one of the most important features of the franchise,” Gatchalian said.

Senators have been investigating the security implications of China’s part ownership of the national energy grid for weeks after officials revealed that engineers in Beijing had the power to plunge the entire country into darkness. On Wednesday, Defence Secretary Delfin Lorenzana said the defence and energy departments would also seek to “prove or disprove the allegations of others that China can shut down our grid anytime they want”.

China can turn off the Philippine national power grid, officials say

The State Grid Corporation of China holds a 40 per cent stake in the NGCP. The Philippines” National Transmission Corporation previously ran the system and now has oversight over the NGCP, but its president Melvin Matibag has conceded that in reality its access is “limited”.

Gatchalian said that giving the public an opportunity to take a 20 per cent stake in the company would “improve the governance structure of this operator … the public could participate in its governance as well as look at the books and the operations closely”.

“And I would like to strongly suggest also that government takes a share, a stake in this IPO so that it will be well represented [on the board],” he added.

Gatchalian, a finance and operations management graduate of Boston University in the United States, said the public had already lost out due to the delayed listing.

A Filipino family uses candles for light during a power cut in Legazpi City, Albay province, southeast of Manila. Photo: AFP

He said based on the NGCP’s audited financial statements, it had declared 170 billion pesos (US$3.3 billion) worth of cash dividends in the past nine years. The money went to the three corporate stockholders: the Calaca High Power Corporation that belongs to ethnic Chinese businessman Robert Coyiuto, which owns a 30 per cent stake; the Monte Oro Grid Resources Corporation that belongs to the ethnic Chinese businessman Henry Sy, Jnr, which also has 30 per cent; and the State Grid of China which owns the rest of the firm.

“Had there been an IPO since 2009, the public would have received 33.98 billion pesos in dividends,” Gatchalian said.

Given the questions over the security of the grid, the NGCP spokeswoman Cynthia Alabanza said on Tuesday that it was not a “good time” for an IPO. “If we go on with this IPO, we will just be defrauding the investors because you put in your money, but what if the franchise is scrapped,” she said.

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But Matibag, of the National Transmission Corporation or TransCo, agreed with Gatchalian that an IPO was in the public’s interest. He pointed out that in 2016 when the NGCP distributed 20 billion pesos worth of dividends, the public could have received as much as four billion pesos.

Matibag said his corporation was “passionate” about stopping the NGCP from further delaying its IPO.

During the energy committee’s hearings last month, Matibag told senators that TransCo had long been barred from auditing NGCP operations. It was also Matibag who first confirmed that China could take down the entire grid. “Given the technological advancement right now in telecommunications, as well as in software, that is possible,” he had told the committee.

China could use Trojan horse tactic against Philippines, senator says

China’s foreign ministry spokesman Geng Shuang branded those claims as “completely groundless”. He said the Philippines was “China’s close and friendly neighbour as well as an important partner”, adding that the NGCP was operated, managed and maintained by the Philippine side. The State Grid Corporation of China only provided technical support upon request, he said.

“We hope certain individuals in the Philippines will look at cooperation with China in an open, objective and impartial manner. There is no need to worry about the sky falling or imagine trouble where there is none,” Geng said.

An electricity post in Quiapo city, metro Manila, Philippines. Photo: Reuters

For Gatchalian, however, Geng’s reassurance was not enough. He said he planned to involve the presidential national security adviser Hermogenes Esperon in his inquiry. He said he had already spoken to Esperon and was told “they are now getting data, studying the situation because you know, the National Security Council is really up-to-date when it comes to modern technology.”

He said the inquiry would have two objectives: first, a national security aspect and second, whether the NGCP had complied with its concession agreement and franchise, which includes an IPO.

“Incidentally,” he added, “I attended a conference of electrical engineers and one of them told me on the sidelines that a shutdown [by China] could really happen. In fact that same technology [being used by the NGCP] is being used in different parts of the country, so that technology is readily available now.”

“When it comes to national security, we should be paranoid … because anything can happen in the future … next year, 10 years from now, or twenty years from now,” Gatchalian said.

For President Rodrigo Duterte, the nation’s commander-in-chief, the issue of a possible shutdown by China is no cause for worry. On November 29 he said: “There are security issues that can be handled by the military. [This should not] be a problem. The [electric] tower? I will just blow that up. I will cut the cable, it’s over.”
This article appeared in the South China Morning Post print edition as: ‘Power grid IPO guards against China threat’
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