ERC urged to deny NGCP’s petition to defer IPO
By Victor V. Saulon Sub-editor
STATE-LED National Transmission Corp. (TransCo) is asking the regulator to deny the petition of privately owned National Grid Corp. of the Philippines (NGCP) to defer its initial public offering (IPO), saying the grid operator should not be allowed to benefit from its decade-long inaction on the provisions of its franchise.
In its opposition and comment sent to the Energy Regulatory Commission (ERC), TransCo enumerated six reasons for opposing NGCP’s petition, including the latter’s filing for an extension only two months before the expiration of the 10-year period on Jan. 14, 2019.
“It provides no explanation or justification why it waited until almost the very end of the stipulated compliance period to formally request the ERC for an extension. By the beginning of 2018, NGCP possess all the financial indicators necessary to make an assessment on whether it can pursue its IPO within the last year,” TransCo said.
NGCP has filed a petition seeking to defer the public listing of its shares as mandated by Section 8 of its charter, Republic Act No. 9511, which was signed into law on Dec. 1, 2008. NGCP had 10 years from Jan. 15, 2009 to comply with the statutory requirement to make a public offering of at least 20% of its outstanding capital stock.
TransCo is the state company that owns the country’s transmission network, which is being used by NGCP for its function as grid operator.
TransCo’s filing is dated Dec. 20, 2018 and was sent to reporters over the weekend after Energy Secretary Alfonso G. Cusi said last week that he had asked Melvin A. Matibag, the company president and chief executive officer, for a copy of the opposition filed with the ERC.
Mr. Cusi said he wanted the government to buy a stake in NGCP.
TransCo also questioned NGCP’s contention that the pending arbitration case between the two would have an effect on the timing of the IPO.
“The pending arbitration case is not a valid ground to defer NGCP’s obligation to go public,” TransCo said, referring to the move by the private company to raise a separate dispute against the Power Sector Assets and Liabilities Management Corp. (PSALM) and TransCo before the Singapore International Arbitration Centre.
Aside from this claim being “unfounded and unsubstantiated,” NGCP also failed to present a valuation report from a “reputable independent valuation firm,” TransCo said.
In addition, TransCo opposed NGCP’s claim that the absence of the ERC’s approval for the period from 2016 to 2020 due to the deferred regulatory reset might affect the company’s valuation.
“The regulatory reset is not a condition sine qua non for NGCP to offer its shares to the public,” TransCo said.
The state company also said the period for compliance with Section 8 of RA 9511 is mandatory and self-executing.
TransCo said NGCP was taking a self-serving position that the decision to make a public offering of its shares and all the preparatory activities are subject to the discretion of the board of directors.
“Business judgment rule is subservient to the constitutional requirement of equity participation in public utilities by the general public,” TransCo said.