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State firms remit P31.3-B dividends, higher by 64%

By Elijah Joseph C. Tubayan, Reporter
FIFTY one of the 77 state-owned corporations paid out dividends amounting to P31.3 billion to the national government as of mid-July, the Department of Finance (DoF) said.
In a statement over the weekend, the Finance department said that the overall dividends remitted so far were 64% higher than the P19.1 billion recorded in the same period in 2017.
“The dividends recorded by the DoF’s Corporate Affairs Group (CAG) as of July 12 already exceed the full-year total of P27.735 billion contributed by GOCCs in 2016 and P30.45 billion in 2017, and is poised to easily surpass the record of P33.473 billion remitted in 2015,” the statement read.
Government owned and controlled corporations (GOCCs) are required to declare and remit at least half of their income as dividends to the national government, as stated in Republic Act No. 7656, or the GOCC Dividend Law.
The Civil Aviation Authority of the Philippines (CAAP) was the top contributor after remitting a total of P6.22 billion as of mid-July.
It was followed by the Philippine Ports Authority with P3.10 billion; Philippine Deposit Insurance Corp. with P2.844 billion; Philippine Amusement and Gaming Corp. with P2.59 billion; and the Philippine Charity Sweepstakes Office (PCSO) with P 2.54 billion.
The Bangko Sentral ng Pilipinas also sent P2.5 billion; P2.25 billion from the Manila International Airport Authority; P963.79 million from Food Terminal Inc. (FTI); P959.04 million from the Development Bank of the Philippine; and P905.74 million from the Bases Conversion and Development Authority.
“From January 1 to July 12 we collected more than what we collected the whole year of 2017,” Finance Secretary Carlos G. Dominguez III was quoted as saying, noting that the government will hold a turnover ceremony with President Rodrigo R. Duterte receiving the checks.
“We [also] have to thank [Transportation] Secretary [Arthur P.] Tugade. He really helped. The big collections are from the DoTr (Department of Transportation) agencies,” said Mr. Dominguez.
The DoF also noted that the PSCO remitted dividends for the first time, after the Commission on Audit (CoA) interpreted that dividend payments should be remitted first before earmarking its revenues to a special fund.
“The [PCSO] charter says that any excess they have . . . should be reverted to the charity fund. A matter of interpretation. But we told them even CoA says that it’s after dividend payments and whatever excess — that one will be remitted to charity fund,” Finance Assistant Secretary Soledad Emilia F. Cruz said.
“The problem with this is more efficient use of government funds. A lot of these guys just accumulate the money . . . lying idle not being spent, they don’t have a program,” Mr. Dominguez said for his part.
Mr. Dominguez even proposed a “one-fund concept” where all GOCCs have a unitary depository account
“Everybody has one fund. You need money? You have to ask, not to keep your own. That is efficient cash management. We are not yet there but we are working towards that,” he said,
“Why should we pay interest when in fact it’s just lying around there in the corporate accounts,” he added.

Brazil’s JBS suspends supplier after animal cruelty claims

SAO PAULO — Brazil’s JBS SA, the world’s largest meat producer, said on Tuesday it had stopped using one of its suppliers after an animal rights group released a video showing alleged mistreatment of pigs.
Animal rights group Mercy For Animals on Tuesday released video footage it said was shot in the United States showing workers beating piglets and ripping off their testicles without anesthesia, while female pigs were confined in very small metal cages. Reuters could not independently confirm the authenticity of the video.
JBS said in a statement that it suspended shipments from that supplier site and had started an investigation, without naming the company involved. JBS said it does not condone or participate in any type of abuse involving animals.
“The images presented in the video fall completely outside the company’s standards,” the JBS statement said.
Mercy For Animals, which describes itself as a nonprofit organization dedicated to preventing cruelty to farmed animals, said in an e-mail to Reuters that the video was shot at a facility owned by Tosh Farms LCC in Franklin, Kentucky, between December 2017 and March 2018.
Tosh Farms is among the 25 largest US pig producers and is a supplier to JBS, according to Mercy For Animals.
Tosh Farms did not immediately reply to a message and a call seeking comment.
Mercy for Animals described the images as “shocking” and called on the parties allegedly responsible for the well-being of the animals to change their practices. — Reuters

Peso seen sideways

THE PESO may move sideways after the central bank hinted on a fresh rate hike.

THE PESO is seen to move sideways against the dollar this week due to a possible rate hike from the local central bank as well as geopolitical concerns abroad.
The peso strengthened slightly on Friday, closing the session at P53.51 against the greenback, two centavos higher than Thursday’s finish after the Bangko Sentral ng Pilipinas (BSP) hinted on a possible rate hike next month.
Week on week, the peso ended flat from its closing rate on July 13.
On Friday, a foreign exchange trader said the market will take its cue from hints that the BSP will raise benchmark rates anew during its next monetary policy meeting in August.
“We heard that the BSP might be aggressive in trying to quell inflation expectations. That might be a key moving forward,” the trader said in a phone interview on Friday.
On Friday, the chief of the monetary authority said it is considering a hike in benchmark rates to temper inflation expectations.
“Let me say that the BSP is considering strong follow-through monetary adjustment at the next meeting of the Monetary Board in August,” BSP Governor Nestor A. Espenilla said.
He added that sustained pressures on the local currency could adversely affect inflation expectations amid “strong and healthy” fundamentals.
The trader noted that the BSP might raise its interest rates by 25 basis points or even 50 basis points if it is more aggressive.
Meanwhile, Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines, said the peso might move sideways this week with a downward bias as “geopolitical noise concerning trade and interest rates might weigh down on the greenback.”
In tweets, US President Donald J. Trump accused European Union and China of illegally manipulating its currencies.
“China, the European Union and others have been manipulating their currencies and interest rates lower,” Mr. Trump said Friday night, adding that it is “taking away our big competitive edge” while the greenback strengthened.
“His comments also included some criticisms about the rate of US interest rate normalization, which [Mr.] Trump judged as being disadvantageous to the US economy,” Mr. Dumalagan added, referring to the US president’s interview with CNBC.
He added in the “Squawk Box” program that he was ready to slap tariffs on all $500 billion of imported goods from China, threatening to escalate the trade policy spat that has shook financial markets, Reuters reported.
From Tuesday to Thursday, the greenback might rebound slightly amid “likely firm US economic data” on housing, services and manufacturing, supporting the of at least two more rate hikes this year from the US Federal Reserve, the market economist added.
For this week, Mr. Dumalagan sees the peso moving between P53.15 and P53.65 versus the dollar, while the trader gave a slimmer forecast range of P53.30-P53.55. — Karl Angelo N. Vidal

US farmers, Chinese buyers chew on trade war

CHICAGO — Chinese importers of the livestock feed sorghum feasted on tabbouleh salad and chipotle tortillas made with the US grain at a Texas barbecue this week, as farmers try to woo buyers in the middle of an escalating US-China trade war.
Despite the overtures to the world’s top sorghum buyer, no deals were struck over the meal, held at the home of the head of the Texas Sorghum Producers. The normally brisk sorghum trade between the two countries has ground to a halt as tensions mount between Washington and Beijing.
Chinese buyers, who normally buy 90% of their sorghum imports from the United States, stopped purchasing due to concerns a tariff would be imposed and drive up the cost of shipments.
On July 6, that fear became reality when Beijing included sorghum in a list of US exports to face levies in retaliation for US tariffs on Chinese goods.
In rural Texas, the executive director of the producer group, Wayne Cleveland, hosted the Chinese delegation for a beef brisket barbecue at his home.
Also on the menu were tortillas made from sorghum — rather than wheat or corn — and duck, which is fed sorghum in China. In addition to its use as an animal feed, sorghum can form the base of gluten-free foods. In China it is used to make a fiery liquor called baijiu.
The atmosphere at the meal, part of a trip organized before Beijing implemented tariffs, was friendly as buyers enjoyed a view of the starry night, Cleveland said.
But there was little talk of the politics that has disrupted trade between the two sides, he said.
The loss of Chinese buying has pushed sorghum prices lower and hurt farmers in Texas. Sorghum is widely grown because it is a hardy crop that can withstand the hot climate.
“We need that market back,” Cleveland told Reuters.
Florentino Lopez, executive director of the United Sorghum Checkoff, an industry group, said Chinese buyers who attended the dinner were concerned about the longer-term impact of the trade war. They wanted to know if US farmers may cut back on sorghum plantings, which could tighten supplies available for sale next year even if Washington and Beijing resolve their differences.
“They are looking forward and being prepared for when they can actually make some purchases,” Lopez said.
Sorghum was one of the first casualties of the US-China trade war. China launched an anti-dumping probe into sorghum in February in response to US tariffs on solar panels and washing machines.
Chinese buyers have bought no significant volumes since then, according to US Department of Agriculture data. In 2017, they bought about $839 million of US sorghum, most of which was shipped in the months after the autumn harvest.
Both sides were frustrated by the impasse.
“I want to sell and they want to buy,” one trader said.
A Chinese sorghum buyer not participating in the trip told Reuters that buying would restart if US prices fall lower.
“We will definitely buy when prices are at a reasonable level, even with the 25% tariff,” the buyer said.
Colin Chopelas, who farms near the Texas port of Corpus Christi, finished harvesting his sorghum fields three weeks ago. His crop is in a grain elevator awaiting buyers.
Demand has taken a further hit because Mexico, another big market for US sorghum, has been canceling sales, USDA data showed on Thursday. An abundance of other available feeds, especially US corn, was also limiting interest in sorghum.
“Mexico is always an option, but they are not going to pay what we would typically get going to China,” Chopelas said. That has pushed down prices.
An elevator operated by global grains merchant Archer Daniels Midland at Corpus Christi was bidding roughly $3.68 per bushel to buy sorghum. Earlier this year, sorghum there fetched as much as $4.80 per bushel, according to Reuters data.
The Chinese delegation, which Sorghum Checkoff said represents importers that account for more than half of China’s total sorghum imports from the United States, will travel to Kansas next week. ADM and Gavilon, a unit of Marubeni Corp., said they are participating in the trade mission.
Cargill, Inc. will also attend, participants and other sorghum traders said. Cargill had no comment.
ADM said in May it would take a $30 million hit to its second-quarter trading profit related to disrupted sorghum shipments.
At a tour of an Attebury Grain facility in Saginaw, Texas, the Chinese importers said they still want to buy US sorghum but are worried about the tariff making deals too expensive, said George Gurganus, a grain buyer for Attebury Grain who met the group.
With China’s demand down, Gurganus is searching for alternative markets. “We’re looking at every other outlet we can find,” he said. — Reuters

Amazon glam for winter


ALL THIS rain is making me think about winter — winter wear that is. When else would you be able to wear your long coats and boots without attracting too much attention in the tropical heat?
With the rain, though, comes a battle, and every woman trudging along to get to work and her other preoccupations has to worry about, well, first off, getting there safely. A woman clad in Longchamp, may be saved from this worry, but then you’ll have to step out of the car looking good, right? Who else should the modern fighting woman turn to but the Amazons, the fierce female warriors of Greek legend? This was the one of the inspirations behind Longchamp’s Fall/Winter 2018 line, which BusinessWorld saw in a preview in Makati last week.
I must say that we’re particularly amused by the Amazons line, which features satchel-like bags with a combination chain-leather strap, chanelling a bit of the warrior look, especially in a sweet little python print executed in calfskin.
The petite Mademoiselle Longchamp gets an angrier update, in bolder, richer colors such as plum, with metallic detailing. A casual tote is also available, printed with large versions of the Longchamp racehorse logo.
As for the brand’s modern classic Le Pliage, it’s given new life with butterflies and bouquets — even tough girls have to have fun. — JLG

Flat glass maker defers P5-B investment on import threat

By Janina C. Lim, Reporter
TQMP Glass Manufacturing Corp., the country’s lone flat glass maker, is deferring a P5-billion expansion plan due to the lack of standardization rules and monitoring of imported goods that are increasingly flooding and hurting the domestic market.
“Were planning to put up a new furnace [but] with dissipation nag-aalinlangan rin kami (we’re still hesitating),” Paul Vincent C. Go, president of the Valenzuela City-based TQMP, told reporters in a media briefing last Friday in Pasay City.
The planned investment is bigger than the P3.5-billion it spent in putting up its current facilities. The proposed facility will hire 1,000 direct employees and generate 1,000 to 2,000 indirect employment.
TQMP manufactures flat glass through its recently acquired subsidiary Pioneer Float Glass Manufacturing Inc., which is formerly AGC Asahi Glass and owned by Japan-based AGC Asahi Glass Ltd., a world leader in producing glass, chemicals and high-tech materials. The acquisition closed early this year.
Asked why the firm failed to factor in the problem during due diligence, Mr. Go said the external factor, stemming from the government’s side, was difficult to detect.
TQMP blamed the government’s move in 2015 to exempt flat glass, among other products, from securing certification from the Bureau of Product Standards (BPS). Flat glass is commonly used for windows and doors in houses, buildings and automotive.
Administrative Order No. 15-01 Series of 2015 of the Department of Trade and Industry, to which the BPS is attached, said the move was meant “to fast-track the processing” of applications for import commodity clearances, which saw “significant increases” during that time.
As of April 2018, the BPS deemed 85 products as life-threatening and, hence, are enlisted for mandatory certification.
Shipments of products covered in the list are inspected by the Bureau of Customs, which obtains samples from import shipments for testing and certification.
Those not in the list are allowed to self-declare their labeling, which may be subject to BPS validation.
Citing internal reports, Mr. Go said the 2015 rule allowed the misdeclaration of shipments and barred the local manufacturer from obtaining precise data on the movement of supply in the flat glass market.
“Some are declaring as table wares, some as furniture. Puro technical ginagawa nila kaya nahihirapan din tayo (They’re doing technical barriers and we are having difficulty),” Mr. Go said.
Nonito B. Galpa, executive vice-president of Pioneer Float Glass Manufacturing, Inc. said generic importers label the thickness of their flat glass products below the industry’s nominal thickness standard, making them susceptible to easy breakage and a threat to the safety of users.
“Hindi kami naniniwala na hindi ito life-threatening (We don’t believe that these are not life-threatening),” Mr. Galpa said.
“They’re declaring a thickness [that is] not within the Philippine standard,” he said, describing the practice as scary because it leaves consumers without protection of the strength of the glass.
Mr. Galpa, also the vice-president of the Flat Glass Alliance of the Philippines, Inc., said imports surged after the new rule.
TQMP said the market share of local produce declined to about 40-50% from the 80% it used to enjoy before the imposition of DAO 2015. The firm currently produces 15,000 tons of flat glass a month.
Mr. Go said expansion plans were meant to fill in the country’s increasing demand for flat glass, currently pegged at 26,000 tons a month. The addition of the planned facility is expected to nearly triple the plant’s capacity at 42,000 tons a month.
However, the company official said the group has also been exporting, seeing that cheap imports are increasingly dominating to satiate local demand. TMPQ faces standard-regulating barriers, making it a challenge to penetrate foreign markets.
Of its current output, about 30-40% are allocated for export destinations such as Korea, Nigeria and Malaysia.
The company has sought an audience with the Department of Trade and Industry, which has turned over the industry’s concern to the BPS to hold another review.
“We’re not against the importation,” Mr. Galpa said, adding that the imported goods should be at par with locally made flat glass.

Shares expected to climb as focus turns to SONA

By Arra B. Francia, Reporter
LOCAL SHARES may move up this week as investors anticipate the president’s state of the nation address (SONA) on Monday.
The benchmark Philippine Stock Exchange index (PSEi) went up 0.15% or 11.74 points to close at 7,399.61 on Friday, staying flat from a week ago with a 0.01% increase.
The property sector’s 1.2% gain and industrials’ 0.82% uptick failed to offset the decrease in holding firms, which gave up 1.83% for the week. Turnover remained thin, dropping by 37% to P3.4 billion on average.
“Gauges turned relatively unchanged during the week, with sessions limited within 7,334-7,459. Activity was light with MOC (market on close)-boost mostly prevalent, ahead of Pres. Duterte’s SONA [this] week,” online brokerage firm 2TradeAsia.com said in a weekly market note.
Analysts are banking on what President Rodrigo R. Duterte will be saying during his third SONA on Monday, where he is expected to deliver a report on his administration’s accomplishments and plans moving forward.
“The president will be giving his state of the nation address on Monday which may give investors the assurance that they have been longing for. This event may turn out to be the catalyst to get investors back into this market,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a market report.
2TradeAsia.com said stock investors will likely focus on the next phase of the tax reform program, especially to changes on corporate taxes, the retention or removal of fiscal incentives and provisions on renewable energy.
Extra attention will also be given to updates on the government’s flagship infrastructure program called “Build, Build, Build” as well as the Duterte administration’s stance on the country’s territorial dispute with China.
“Specifically, investors would like to see if the key direction hasn’t changed or may divert in light of the initial phase of the tax reform plan’s impact on inflation. This will be crucial to listed companies’ capex rollout, including timing of budget preparation for large-ticket infra undertakings. As such, any hint to affirm this year’s growth prospects could invigorate appetite for equities, especially if these would lead to increased direct investments & job creation,” the online brokerage said.
Should the president’s report fail to uplift market sentiment, Eagle Equities’ Mr. Mangun said the main index may continue moving sideways and retain its low trading volume instead.
At the same time, 2TradeAsia.com said investors are also looking forward to the release of second-quarter corporate earnings. It noted that with the recent outflow of foreign funds from the local market, foreigners may be positioning themselves and are “merely waiting for opportunities to move in.”
Eagle Equities’ Mr. Mangun said support is from 7,340 to 7,185, while the resistance to overcome is 7,450 to 7,500.

Yields on gov’t debt end flat

By Mark T. Amoguis, Researcher
BOND YIELDS moved sideways last week amid auction results, the affirmation of the country’s credit rating and hawkish statements from the Bangko Sentral ng Pilipinas (BSP).
On average, government securities’ (GS) yields — which move opposite to prices — went down by 1.19 basis points (bp), data from the Philippine Dealing & Exchange Corp. as of July 20 showed.
“GS rates dipped ever so slightly as traders scrambled to place funds in the secondary market after the rejection of the seven-year [bond] auction and the partial T-bill (Treasury bill) award,” a bond trader interviewed last Friday said.
“Client-driven deals were the focus with institutional players mindful of the BSP’s hawkish commentary as Governor Nestor A. Espenilla, Jr. pledged a decisive strike come August,” the trader added.
The government decided to borrow just P12.101 billion out of the planned P15-billion at the T-bills auction last Monday.
Broken down, the Bureau of the Treasury (BTr) raised P4 billion worth of 91-day papers as planned, P3.424 billion worth of 182-day debt (falling short of a P5-billion program), and P4.677 billion worth of 364-day notes (out of P6 billion).
Meanwhile, the BTr rejected all bids for its offer of P15-billion reissued seven-year Treasury bonds (T-bonds) with a remaining life of six years and eight months last Tuesday as investors demanded higher rates ahead of the August policy meeting of the central bank.
The BSP chief signalled last Friday that the central bank is considering a “strong” monetary policy action at its meeting next month to temper rising inflation.
Inflation hit a fresh five-year high of 5.2% in June. This brought the year-to-date average to 4.3%, already beyond the 2-4% central bank target.
The central bank’s policy-setting Monetary Board tightened rates through two 25-bp increases in its May and June meeting, bringing benchmark rates to a 3-4% range.
Michael L. Ricafort, economist at the Rizal Commercial Banking Corp. (RCBC), said yields on government bonds “corrected lower [last] week after global crude oil prices eased to new three-week lows, amid expectations that the risk of trade war involving the US, China, EU, Canada, and other developed countries could lead to slower global economic growth and slower inflation…”
This, in turn, “could lead to less Fed rate hike/s going forward, despite the fact that US Federal Reserve Chairman Jerome Powell reiterated gradual Fed rate hikes for now,” he explained.
“Local yields also eased after Fitch Ratings reiterated the country’s credit ratings and after some members of the country’s economic team reiterated commitment to further pursue additional tax reform measures,” Mr. Ricafort added.
Last week, Fitch Ratings affirmed the country’s “BBB” rating — a notch above minimum investment grade — with a “stable” outlook amid “favorable” growth outlook despite “overheating risks,” such as rising inflation, rapid credit growth, and widening trade deficit.
Moody’s Investors Service likewise affirmed its “Baa2” rating on the country — also one notch above minimum investment grade — and “stable” outlook, citing the economy’s overall strength, even as it flagged risks from rising inflation and the planned shift in government form.
At the secondary market last Friday, the short end of the curve ended mixed after the yield on the 91-day T-bill dropped 2.25 bps to 3.2552%, while the six-month and one-year T-bills gained 34.98 bps and 6.61 bps, respectively, to yield 4.3583% and 4.6988%.
In the belly, yields on the two-, five- and seven-year T-bonds shed 23.89 bps, 31.71 bps, and 4.96 bps, respectively, fetching 4.8772%, 5.6936%, and 6.2994%. Rates of the three- and four-year notes, meanwhile, climbed 5.49 bps (5.0197%) and 4.11 bps (5.6786%).
At the long end, 10-year debt’s yield went down by 5.11 bps to 6.3950%, while 20-year bond saw its yield inch up by 4.82 bps to 7.4071%.
The trader said for this week, “market players await the BSP’s inflation forecast with investors bracing for yet another above 5% inflation print.”
RCBC’s Mr. Ricafort said GS yields could continue to move “sideways to slightly lower” this week due to a downward correction in global crude oil prices “that could somewhat ease inflationary pressures and provided that the US dollar peso exchange rate remained relatively steady/confined in a narrow trading range as seen over the past month.”
The economist added: “[F]urther hike/s in local policy rates cannot be ruled on the next BSP monetary policy-setting meeting on Aug. 9, 2018 amid relatively higher inflation among five-year highs and weaker peso exchange rate vs. the US dollar among 12-year highs recently.”

How PSEi member stocks performed — July 20, 2018

Here’s a quick glance at how PSEi stocks fared on Friday, July 20, 2018.

Philippine Development Plan 2017-2022

Philippine Development Plan 2017-2022

PEZA told not to blame TRAIN 2 for weak investment

THE Department of Trade and Industry (DTI) said the Philippine Economic Zone Authority (PEZA) needs to stop blaming the second phase of the Tax Reform for Acceleration and Inclusion law (TRAIN 2) for the decline in its investment pledges.
Trade Secretary Ramon M. Lopez said other investment promotion agencies (IPAs) are posting annual increases in their project registrations, adding he does not know why PEZA’s totals have registered a downward trend.
“The question is, why are PEZA’s totals lower while those of BoI [Board of Investment] are higher. And other IPAs, even CEZA [Cagayan Economic Zone Authority] are showing increases,” he told reporters last week in Pasay City.
Ahead of the official data release, Mr. Lopez said the BoI’s six months to June investment pledges rose nearly 28% year-on-year.
PEZA’s new projects over the same period dropped 55.86% year-on-year to P53.067 billion. The number of projects also fell to 258 from 300 a year earlier with all industry-sector segments posting declines.
PEZA has blamed the drop on foreign investor apprehension over TRAIN 2, which hopes to rationalize investment incentives, including the replacement of the 5% gross income earned (GIE) tax incentive, in lieu of all local taxes, with a phased reduction of the corporate income tax rate.
“These foreign investors go to countries where incentives are time-bound,” Mr. Lopez said, adding that the only uncertainty he sees in TRAIN 2 is the transition period for current investors to adapt to the new regime.
“That’s the only uncertainty for PEZA locators. That alone. There should be no problem. So it is wrong to blame TRAIN 2 for the uncertainty. There must be something else that wasn’t there before,” Mr. Lopez added, citing trade tensions because PEZA locators are export-oriented.
As such, Mr. Lopez said he will take the lead in presenting the country’s investment climate to foreign businessmen.
“More clarity is needed for investors. I also don’t know what’s being presented. We have to see what the presentations are saying. That’s why I’d like to get more involved in the way things are being presented,” Mr. Lopez said.
“I’ll be talking also to potential PEZA investors. Whatever Plaza is saying about uncertainty, that’s her statement. We’d like to validate that,” he added, referring to PEZA Director-General Charito B. Plaza.
Regarding PEZA’s plan to become a government-owned and controlled corporation (GOCC) and leave the DTI for the Office of the President, Mr. Lopez said: “Nope. That cannot happen. They’re an investment promotion agency and part of their mission is industrial development.”
PEZA said it is seeking GOCC status as part of a proposal to amend the 23-year-old Republic Act 7916 or the Special Economic Zone Act of 1995.
PEZA said that as a GOCC, it will be “fully independent,” amid plans under TRAIN 2 to centralize investment promotion functions under a Fiscal Incentives Review Board (FIRB). — Janina C. Lim

Senate panel considering microgrids for rural power

THE SENATE energy committee is studying a plan to use the annual budget for rural electrification of nearly P5 billion to build microgrids to speed up the delivery of electricity in remote areas, its chairman said.
“By our computation, every year we allocate about close to P4 [billion], almost P5 billion in sitio and rural electrification. We plan to re-channel that to a microgrid project instead, because rural electrification is never completed,” Senator Sherwin T. Gatchalian told reporters after a recent energy forum.
He said one of the policies that he was looking at to promote microgrids — and their smaller version, minigrids — is to provide them with subsidies through the re-channeled funds from missionary electrification, which is collected from all on-grid electricity users.
He said the policy concept would be the subject of a resolution that he is planning to file before the government’s budget season.
A number of companies have previously expressed interest in putting up microgrids, which is a complete system with its own power resources, generation and load centers within a defined boundary.
However, electric cooperatives have criticized these plans, calling them an encroachment on their franchise areas by using total electrification as a guise to expand the private companies’ areas of operation.
Mr. Gatchalian said the National Electrification Administration (NEA), which oversees the electric cooperatives as well as rural electrification, had identified areas that are not provided with 24/7 electricity.
“We will prioritize those areas,” he said.
“Government can step in if the electric coop is not providing 24/7 electricity. And government can step in in two ways,” he said.
“Government can build the microgrid. I think they [government] can empower the local government units to do it, or ask the private sector to come in and build. I prefer the second one.”
He said he prefers the second option, which would not require a capital outlay from the government.
“But they have to open it up to the private sector to build the microgrid,” he said.
He said his committee has yet to study how many microgrids could be built using the electrification funds.
Asked about possible resistance from electric cooperatives, he said these entities should now be putting up microgrids if they intend to energize the unserved or underserved areas.
“But if [they’re] not providing 24/7 [electricity], that’s a failure on their part,” he said, adding that the electric cooperatives’ franchise is a privilege that the government can take back.
“The franchise is a privilege that the government gave you, but if you’re not using that privilege, we will take it back at least in that specific area. And government can step in to build or to ask somebody to build it,” he said.
Data from NEA show that as of May 2018, all cities and municipalities in the country have been energized, but there were barangays and sitios that remained without electricity. The agency placed the number of unserved barangays at 10, and the sitios at 24,496. — Victor V. Saulon

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