NGCP delays planned IPO

By Lenie Lectura – April 4, 2019
from Business Mirror

THE National Grid Corp. of the Philippines (NGCP) on Wednesday laid down valid grounds to delay its planned initial public offering (IPO), citing, among other reasons, public threats made against its concession by state firm National Transmission Corp. (Transco).

“The entire business of NGCP is founded on the concession agreement, which has been publicly threatened by Transco’s president, Melvin Matibag. NGCP obviously took this public declaration seriously because it came from Attorney Matibag, the president of Transco himself, and that to this very date, to NGCP’s knowledge, neither (PSALM) Power Sector Assets and Liabilities Management Corp. nor Transco has disowned or contradicted this public declaration.

“It thus makes no sense and would be downright irresponsible for NGCP to proceed with the IPO and ask the public to invest in a business the basic concession of which has been publicly threatened by the government. NGCP cannot perpetrate a fraud against the investors,” the grid operator said in a statement released during a public hearing presided by Sen. Sherwin Gatchalian, Senate Committee on Energy chairman.

NGCP won the concession to operate and manage the grid system in December 2007 for $3.95 billion. Transco still owns the assets. It is only the NGCP that operates the country’s power-transmission network for 25 years.

Under the law, NGCP should make a public offering of the shares representing at least 20 percent of its outstanding capital stock within 10 years from the commencement of its operation, which was on January 15, 2009.

NGCP filed a petition for extension for the listing of the shares; the petition is pending before the Energy Regulatory Commission (ERC).

During the hearing on Wednesday, the grid operator said the current market condition is not suitable for the listing and public offering of its shares because of the absence of the final determination of price-control arrangements from the ERC for the forth regulatory period (2016-2020); the pending disputes among NGCP, Transco and the PSALM which are now in arbitration; and the public threats made against NGCP’s concession, whether these are raised in arbitration.

On February 14, 2018, NGCP filed with the Singapore International Arbitration Centre a notice of arbitration against PSALM and Transco. The case is still pending.

“As to the subject matter of this Committee’s inquiry in aid of legislation, we wish to emphasize that NGCP is not asking for an exemption to comply with the requirement to list its shares of stock. NGCP intends to comply with the requirement of listing of shares. NGCP simply asks for a reasonable extension of the period within which to do so, as expressly allowed under Section 8 of its franchise (Republic Act 9511), based on the ground that the market condition is not suitable for such listing,” NGCP said

It explained the absence of the final determination of price-control arrangements for the fourth Regulatory Period prevents NGCP from having definitive base case financial projections for an IPO, which are commonly required from NGCP in the proposals submitted by various banks.

The final determination sets the amount of revenues that NGCP will be allowed to recover from its consumers, the amount of capital expenditures it can spend for its projects, and how much operation expenses it can incur for the relevant regulatory period.