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SEC warns public vs investing in BNP Client Project

THE Securities and Exchange Commission (SEC) warned the investing public against companies headed by Armando G. Gabriel and Jay C. Galang for their illegal solicitation of investments.

In an advisory posted on its website, the SEC called out Mr. Gabriel’s LDT Agro Industrial Hub Corp. (LDT) in partnership with Mr. Galang’s Nutriwealth Multipurpose Cooperative (NMPC)/VCM-NW Corp. (VCM-NW) for offering investments online through what they called “The BNP Client Project.”

The BNP Client Project’s advocacy is supposedly to provide high-quality rice to all.

The commission found LDT was inviting people to invest a certain amount through the BNP Client Project with a lock-in period of five years, in which time they will receive 10% returns on the first year up to 30% in the fifth year.

The money will allegedly be used to finance the farm cost of LDT’s farmer-client for the entire year. It then buys the farmer-client’s produce higher than its prevailing farmgate value, giving investors “high-quality rice at a very affordable price plus an option to earn 100% interest as reward.”

The interest may be paid out in cash, cavans of rice, or a combination of rice and cash. LDT also promises investors that their money will double in five years’ time.

The SEC noted that such investment scheme is considered an investment contract, which requires a secondary license from the commission. The securities to be sold must also be authorized by the SEC.

“LDT and VCM-NW are not authorized to solicit investments from the public as the above-mentioned corporations did not secure prior registration and/or license to solicit investment from the commission as prescribed under Section 8 of the Securities Regulation Code,” the corporate regulator said.

The commission warned that those who act as salesmen, brokers, dealers, or agents of the companies may be prosecuted and held criminally liable with a fine of up to P5 million or penalty of up to 21 years in prison. — Arra B. Francia

Eastern Communications to invest P850M to expand network coverage

TELECOMMUNICATIONS firm Eastern Communications said it is investing P850 million this year to expand its network coverage.

In a statement Monday, the company said it is increasing its spending to boost the company’s ongoing network modernization program, which already cost Eastern Communications P900 million in investments in 2018.

“This year, Eastern Communications will be allotting a capital expenditure of P850 million to continue its vision of providing the Philippine businesses and households with innovative services and a faster, more reliable internet connection,” it said.

“The capex will go towards the expansion of network coverage to new market and further improvement of the quality of Eastern Communications services,” it added.

Eastern Communications said it already invested a total P2 billion to P3 billion over the past two to three years for ramping up its network.

At the same time, the company said its net income grew 34% to P906 million last year, driven by the expansion of its network coverage, growth in small- and medium-sized enterprise customers and introduction of new products.

“[O]ur vision is to continue building on that strong connection we’ve forged with businesses and industries. Our goal this year is to deliver our signature high tech and high touch service to our more Filipino businesses and to more areas,” Eastern Communications Sales Head Michael S. Castañeda was quoted as saying.

The company said it wants to expand its coverage in Luzon, Visayas and Mindanao by building its network in more locations. — Denise A. Valdez

Robinsons Bank targets to double net earnings

ROBINSONS BANK Corp. eyes to double its net profit this year on the back of growth in its earnings from interest and fees.

In a text message, Robinsons Bank President and Chief Executive Officer Elfren Antonio S. Sarte said the Gokongwei-led bank is looking at a P756-million net income for the parent bank in 2019.

If realized, this will more than double the P317.11-million bottom line it recorded in 2018.

“Main driver will be growth in interest income,” Mr. Sarte said.

In a previous message, the bank chief said Robinsons Bank’s growth for this year is expected to be mainly supported by lending activities, with demand for both commercial and consumer loans expected to “remain strong” amid easing inflation.

Inflation continued to ease for the sixth straight month in April to settle at 3%, down from the 3.3% recorded the previous month, driven by slower increases in food and non-alcoholic beverage costs.

Apart from Robinson’s Bank’s interest income, Mr. Sarte added that its fee income is seen to improve on the back of its new businesses such as bancassurance as well as credit card issuing and acquiring.

The commercial bank signed a bancassurance partnership with Pru Life Insurance Corp. of UK in a bid to expand the lender’s product offerings.

It also ventured into the merchant acquiring business or processing credit and debit card transactions in behalf of retail partners through point-of-sale terminals.

Robinsons Bank’s 2018 income was 3.2% higher from P307.39 million posted in 2017. However, the bank was not able to hit its income goal of P500 million due to “lower interest margins due to higher of funds.”

The lender is mulling to go public within four years as part of its strategy to scale up operations to become a universal bank.

To be granted unibank status, Robinsons Bank has to beef up its capital to meet the P20-billion requirement set by the BSP, which can be achieved through an initial public offering, a stock rights offer from its investors, or a strategic partnership.

Making it to the top tier would allow the bank to offer more sophisticated products and services to clients. — Karl Angelo N. Vidal

Guns N’ Roses sues brewery over Guns ‘N’ Rosé ale

GUNS N’ ROSES is showing an appetite for litigation over a beer.

The rock band has sued the Colorado brewery Oskar Blues, accusing it of trademark infringement for selling an ale named Guns ‘N’ Rosé without permission.

In a complaint filed on Thursday in Los Angeles federal court, Guns N’ Roses accused Oskar Blues of intentionally trading off its goodwill, prestige, and fame by selling Guns ‘N’ Rosé since early 2018, and confusing beer drinkers into thinking the band was connected with the ale.

Guns N’ Roses, whose general partners include singer Axl Rose, guitarist Slash, and bassist Duff McKagan, also objected to sales of related goods including T-shirts, stickers, buttons, and bandannas, “an item uniquely associated” with the band and Rose. The band is seeking triple damages and a halt to sales of infringing products.

Oskar Blues is part of the Canarchy Craft Brewery Collective. The brewery, its outside law firm and Canarchy did not immediately respond on Friday to requests for comment.

According to court papers, Guns N’ Roses sued after Oskar Blues abandoned both its application to trademark “Guns N Rose” and any future use of that name or the band’s name, but said it would keep selling Guns ‘N’ Rosé beer through March 2020. — Reuters

OUTLIER: Investors load up on PLDT shares on expectations of sustained growth

INVESTORS bought PLDT, Inc. shares last week given the attractiveness of the company’s growth prospects.

Data from the Philippine Stock Exchange showed a total of P959.62 million worth of 762,895 PLDT shares exchanged hands on the trading floor from May 6 to May 10.

The stock price closed on Friday at P1,240 apiece, down 3.9% from the previous trading day. Prior to this, PLDT’s stock price has been on an uptrend most of the week — increasing to as high as P1,290 per share on Thursday.

PLDT’s share price last Friday was up 1.6% from its closing price of P1,220 per share on Friday the week before. Meanwhile, it is up 2.9% year to date.

“Anticipation over [first-quarter] results, on the back of a strong full-year 2018 earnings, pulled investors to the stock riding on hopes and expectations of a sustained trend,” said Philstocks Financial, Inc. Research Head Justino B. Calaycay, Jr. in an e-mail.

“Traditionally, telecoms were seen as among those benefitting from the first round effects of the election cycle…,” he added.

However, investors unloaded the stock after the release of PLDT’s first-quarter earnings report.

“PLDT was one of the actively traded stocks last week prior to the release of its [first-quarter] results. However, investors reacted negatively at the end of the week as most might have digested the report of PLDT,” Unicapital Securities, Inc. Research Head Wendy Estacio said.

PLDT reported telco core income reached P7.2 billion in the first quarter, up 6% from last year. This takes into account adjustments for the net effect of gains/loss on foreign exchange, derivative transactions, manpower rightsizing program, accelerated depreciation, and Voyager Innovations, Inc.

Consolidated service revenues went up seven percent to P38 billion, primarily due to the continued recovery of the individual wireless business which grew 18% to P16.9 billion. This came on the back of rising data usage and the addition of 3.4 million subscribers for the quarter, for a total of 63.4 million subscribers by end-March.

PLDT is optimistic that it can hit the P26-billion target for telco core income this year.

For his part, Philstocks’ Mr. Calaycay expects a “high single-digit growth” for PLDT this year “given the lingering challenges in the industry.”

“[Although] the third-telco player narrative has receded to the background, it remains a ‘threat’ to the current players going forward. As such, both will have to push its strategies a notch higher, e.g., the shift to 5G, which requires increased costs and outlay. There will still be pressures on the numbers,” Mr. Calaycay explained.

“By historical reference and from a price-point perspective, current trading levels are relative bargains — and already reflects currently available info. We will wait for fresh catalysts going forward,” he added.

For Unicapital’s Ms. Estacio: “I am cautious about PLDT’s free cash flows as capital expenditures level is expected to remain elevated in the next three years.”

“However, I still like the company due to its initiatives to improve its network coverage. For me, a higher capex (capital expenditures) budget is necessary to future-proof its business. It’s just a matter of how efficient PLDT is in using its allotted budget,” said Ms. Estacio, who expects PLDT to hit the top line and profit growth rates of 6.4% and 5.5%, respectively.

The company declared a record-high allocation of capex in 2019 at P78.4 billion, an increase of 34% or P20 billion from the P58 billion realized last year. The aggressive capital spending allows the telco giant to expand its network amid the impending entry of a new player.

Ms. Estacio pegged the stock’s support and resistance in the short term at P1,220 and P1,290 per share, respectively.

Meanwhile, Mr. Calaycay placed the stock’s support at between P1,150-P1,210 per share and resistance at P1,290 apiece.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Lourdes O. Pilar

Peso likely to strengthen

THE PESO may rise as the dollar weakens on US-China trade issues.

THE PESO is seen to strengthen against the dollar this week following the continuation of trade negotiations between the United States and China amid increased tariffs on Chinese goods.

The local unit ended last week at P52.12 versus the greenback, up 18 centavos from P52.30 finish the previous day, as markets cheered the 25-basis-point cut in the Bangko Sentral ng Pilipinas’ (BSP) benchmark rates.

However, the peso declined week-on-week from the P51.85-per-dollar finish last May 3.

Michael L. Ricafort, Rizal Commercial Banking Corp. economist, said the peso will likely strengthen versus the US unit this week on the downward correction of the dollar against major global currencies.

“US dollar corrected lower versus major global currencies as US-China trade talks continued and will resume in China even after the US raised tariffs on some Chinese imports…,” Mr. Ricafort said in a text message on Sunday.

The trade war between the world’s two largest economies simmered anew after the US last week raised levies on $200 billion worth of Chinese goods to 25% from the previous 10%. Beijing quickly vowed to take “necessary countermeasures” against Washington.

Despite these, Chinese Vice Premier Liu He assured the negotiations “have not broken down,” describing his meeting with senior US officials as “candid and constructive” even as their latest meeting in Washington ended without a deal.

A market analyst however said the dollar is expected to “move with an upward bias” in the first two days of the week following “US threats to further impose tariffs on remaining imports from China should trade disputes remain unresolved within the next three to four weeks.”

The market watcher added that expectations of a cut in BSP’s reserve requirement ratio (RRR) may boost the dollar by reducing the relative attractiveness of peso investments.

Although the central bank made no reduction in the reserve ratio during its latest Monetary Board meeting last Thursday, BSP Governor Benjamin E. Diokno said it will be “on the agenda” during this week’s meeting.

Mr. Diokno previously described big banks’ RRR — which was already reduced by a total of two percentage points last year to 18% — as “really high.” He also cited “room for…one percentage point (cut) every quarter for the next four quarters.”

“Any cut in RRR may still be a positive signal on the local economy and financial markets,” Mr. Ricafort said.

The market analyst added that the dollar’s rise might be tempered by a soft US inflation report as well as the comment of Atlanta Federal Reserve President Raphael Bostic that a cut in policy rates might be considered in the event that higher import taxes on Chinese goods would begin to have a negative impact on US economy.

For this week, Mr. Ricafort expects the peso to move between P51.90 and P52.30, while the market analyst gave a P52-P52.70 range.

Markets were closed yesterday for the midterm elections. — K.A.N. Vidal

Main index to move sideways on earnings, polls

By Arra B. Francia, Senior Reporter

THE MAIN INDEX may move sideways in the week ahead as investors digest the results of the midterm elections alongside more corporate earnings results for the first quarter.

The 30-member Philippine Stock Exchange index (PSEi) dropped 0.17% or 13.42 points to close at 7,742.20 on Friday. Meanwhile, on a weekly basis, the PSEi was down by 2.83% or 225 points.

“We may see investors start to come back into the market as the awaited election ends…, hopefully without any surprises,” Eagle Equities, Inc. Research Head Christopher John Mangun said in an e-mail.

The country selected a new set of senators, congressmen, and local government officials on Monday, the results of which will weigh on how the president’s policies and programs will move along in the next three years.

Financial markets were closed yesterday to make way for the midterm elections.

Mr. Mangun noted that first- quarter corporate earnings have also started to come in, showing better results compared to last year as inflation slowed in the January to March period.

Online brokerage 2TradeaAsia.com said companies accounting for 64.78% of the PSEi’s market cap show a simulated year-on-year growth of 12.4%. The simulated growth is at 6.59% for the all-shares counter, consisting of 52.79% of its total market cap.

Investors will also be looking at how the economy will perform in the second quarter following the disappointing 5.6% growth reported in the first three months.

2TradeAsia.com said it sees faster country’s gross domestic product (GDP) growth now that the 2019 budget has been approved and the government can accelerate fiscal spending.

“We expect improved results in the second quarter at 6.3% with the late passage of 2019’s fiscal budget, although possible adjustments might be considered depending on the details of the United States-China trade tariff issue,” the online brokerage said.

The US hiked tariffs on $200 billion worth of Chinese goods to 25% from 10% last Friday, citing sluggish negotiations with Beijing in the previous months. China’s Commerce Ministry said it “deeply regrets” Washington’s actions and plans to take countermeasures against the increase.

“While the picture remains grey on the US-China trade issue, both sides would need to work on a win-win solution to ensure growth momentum is maintained,” 2TradeAsia.com said.

In the meantime, Eagle Equities’ Mr. Mangun is keeping a wait-and-see stance on how the market will react.

“I am still inclined to believe that the market will go higher in the longer term,” Mr. Mangun said.

The analyst placed the market’s support level at 7,500 to 7,640, with resistance from 7,800 to 7,900.

Outstanding combination of style and substance

Ace Combat 7: Skies Unknown
Sony PlayStation 4

FLIGHT SIMULATORS don’t normally appeal to the masses, so it’s a testament to the quality of the Ace Combat series that it has managed to earn a multitude of fans all the same. It certainly had modest beginnings; Air Combat, its very first release, found shelf space in 1995 shortly after the Sony PlayStation was introduced and left much to be desired. Publisher Namco strove for realism, but wound up making compromises, particularly in graphics, to speed up play, resulting in what not a few quarters noted as an unpolished presentation. Still, there were more than enough positive elements for the pioneer to plant the seeds for long-lasting success.

These days, the Ace Combat name is synonymous to fast-paced entertainment featuring an eclectic mix of over-the-top premises, optical realism, and arcade handling. No doubt, much of its reliability stems from experience; over the last 25 years, Bandai Namco has deftly steered the franchise through title after title in a whopping 14 platforms, in the process managing to avoid overexposure by ensuring freshness and, at the same time, emphasizing core strengths. And, as long time followers know, at the heart of the effort is an unrelenting thrust to push hardware boundaries.

Ace Combat 7: Skies Unknown, the series’ latest iteration, is no exception. It’s definitely a visual feast, offering up a level of detail that’s nothing short of fantastic. The planes are the star of the show, and, well, it shows; whether from afar or up close, they reveal a painstaking effort by developer Project Aces to maintain authenticity. And when they’re on air, they provide a rise to the senses by acting as conduits to exquisitely presented environs; from the clouds to the mountains to the ranges to the plains to the, yes, other marvels of machinery that share the skies, there is eye candy galore.

In this regard, Ace Combat 7: Skies Unknown not surprisingly excels on the PlayStation 4 Pro. Colors jump off stunningly sharp subjects, accompanying a symphony of sounds that heighten the sensory feedback. Meanwhile, the proceedings are unrelenting; the action occurs at a breakneck pace, aided in no small measure by steadily high frame rates and the ease of gameplay newcomers to the series will appreciate. Purists may protest Project Aces’ pronounced bias to partner the realism that marks its audiovisual presentation with uncomplicated handling, even in simulation mode, but the result cannot be denied. The adrenaline rush provided by the experience of flying in the midst of a bombing run or while aiming to shoot down other fighters jets trumps any pressing need to approximate true-to-life in-cockpit controls.

Not that Ace Combat 7: Skies Unknown fails to reward the most fastidious. For all its intent to flatten the learning curve, it likewise provides refinements that enhance its replay value; mastery of advanced turning, in particular, can claim satisfying returns. Post Stall Maneuvers, for instance, will allow gamers to become hunters instead of the hunted; introduced in place of the Close Range Assault countermeasures found in Ace Combat: Assault Horizon, they get the controlled aircraft behind enemies when properly executed.

In any case, advancement in Ace Combat 7: Skies Unknown requires upgrades in equipment and weaponry, tracked through the Aircraft Tree system and available for purchase via Military Result Points. The latter serves as in-game currency and is earned through the completion of missions and the extent in which achievements are forged. The vehicle, armament, and hangar unlocks help in campaign progression, but are retained for multiplayer mayhem. Needless to say, a fair amount of grinding and farming thus becomes a requisite.

Those steeped in Ace Combat lore will appreciate the continuity that Ace Combat 7: Skies Unknown provides. The setting is the same as that in the franchise’s other numbered titles, with the narrative picking up just as the Kingdom of Erusea launches an attack on the Osean Federation. Gamers assume the point of view of an Osean pilot with the callsign “Trigger,” wrongly haled to military court and sentenced to serve in an expendable military unit formed to fly dangerous missions. Soon enough, his success on air leads to a pardon and command of an Air Force squadron. More twists follow, and, with them, missions that serve to test reflexes, hand-eye coordination, and decision making under duress.

There’s a lot to be said about the manner in which Ace Combat 7: Skies Unknown tries to frame the action with an outlandish story told through pre-rendered cutscenes and radio chatter. Admittedly, the flow of information isn’t easy to follow. On the flipside, the intrinsic lure and allure of dogfighting renders the plot largely immaterial. Once objectives are clear, gamers will be happy to take off with the end-view of meeting them; there are, after all, installations to wipe out, planes to do battle against, assets to escort — with the whys and wherefores for the most part unnecessary to their fulfillment.

In sum, Ace Combat 7: Skies Unknown meets its goal of advancing the series as far as prevailing technology can take it. It’s an outstanding combination of style and substance, taking full advantage of the PS4 Pro’s processing power to engage viscerally, actively, and intellectually. Parenthetically, it has three PS VR-exclusive missions that further attest to its desire to stay on the industry’s cutting edge, and the wholly immersive take leaves gamers craving for more. Around 15 hours’ worth of play on first pass, it coaxes additional commitment with its continual delivery on lofty promises. At $60, it clearly earns its keep, and how.

THE GOOD:

• A feast for the senses

• Ultra-smooth gameplay

• Uncomplicated controls

• Decent-length campaign mode

• Good replay value

THE BAD:

• Overarching storyline too complex to follow without notes

• Multiplayer modes effectively limit plane choice to air-to-air fighter

• VR missions capped at three and woefully short

• Grinding required

RATING: 8/10

New housing dep’t seen up and running this month

THE new Department of Human Settlements and Urban Development (DHSUD) is expected to start operations by the last week of May, according to House committee on housing and urban development Chairman Alfredo Abelardo B. Benitez, the Representative for Negros Occidental’s 3rd District.

In a phone message to BusinessWorld on Monday, Mr. Benitez said the implementing rules and regulations (IRR) of Republic Act (RA) 11201, creating the DHSUD, will be finalized on “May 22.”

“Yes, that is our plan,” he said, adding that the new department is expected to be operational by “last week of May.”

Mr. Benitez said his office and the office of Senator Joseph Victor G. Ejercito, who chairs the Senate committee on urban planning, are directly involved in the drafting of the IRR.

President Rodrigo R. Duterte signed the measure into law on Feb. 14. The new department merges the Housing and Urban Development Coordinating Council (HUDCC) and the Housing and Land Use Regulatory Board (HLURB).

The new department, according to the law, will act as the primary national government entity responsible for the management of housing, human settlements and urban development, which also means that it will formulate national housing and urban development policies, strategies and standards that are consistent with the Philippine Development Plan to promote social and economic welfare.

The department will be composed of the Office of the Secretary, and the various bureaus, services and regional offices.

The Office of the Secretary, the law also said, will house the Office of the Department Secretary, the Offices of the Undersecretaries, the Offices of the Assistant Secretaries, and their immediate support staff.

In a chance interview, Housing and Urban Development Coordinating Council (HUDCC) Chairman Eduardo D. del Rosario said in February that with the creation of the DHSUD, the next area of focus will be addressing the housing needs of poor Filipinos.

He said his agency is planning to come up with a proposed measure, which will be called “Republic Act on the Development and Production of Housing Units Nationwide.”

The proposed bill, he said, will target around two million informal settler families nationwide.

Also in a televised interview with One News in February, national president Noel Toti M. Cariño of the Chamber of Real Estate & Builders Association noted that one of the functions of the new department is to address the housing backlog.

“The figures will show that the production of housing has not been really encouraging. It has remained lethargic. We are producing no more than 200 thousand housing units in a sector that needs it very much. For a time before, there was a problem of financing take out (the process by which financial institutions take over developer-generated mortgages). So a lot of developers were discouraged to actually go into housing because the funds could have easily dried up,” he said.

He added that the government “should at least be producing 500 thousand units a year.” — Arjay L. Balinbin

ERC studying way forward with licenses expiring amid Supreme Court TRO

THE Energy Regulatory Commission (ERC) is set to deliberate on how to move forward in promoting greater competition in the retail electricity business as the licenses of those authorized to engage in it are about to expire by 2021 to 2022 while a court-issued temporary restraining order (TRO) remains unresolved.

“Really, we have to be very careful lest we may be, the action of the ERC, may be construed as something that would breach the line of the TRO. We’re very careful. But of course, we have studied this and it’s now ready for commission deliberations,” said Agnes VST Devanadera, ERC chairperson and chief executive officer.

The commission’s top official was reacting to questions on the agency’s next move amid the continuing impasse in the full implementation of rules governing retail competition and open access (RCOA), a scheme that aims to increase the number of electricity suppliers thus lowering the cost of power.

On Feb. 21, 2017, the Supreme Court issued a TRO against a circular issued by the Department of Energy (DoE) and four resolutions issued by the ERC, less than a week before Feb. 26, 2017 when power users consuming an average of at least 1 megawatt (MW) per month for the past year are required to source power from a licensed retail electricity supplier (RES) and away from distribution utilities.

In issuing the TRO, the high court noted that the petitioners — entities that include schools and business groups — had established “a clear, legal right” considering that Republic Act 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA) provides for the voluntary migration of end-users to the contestable market.

Among the provisions that were put on hold is the issuance of new RES licenses. The DoE has since issued a circular making the migration voluntary instead of mandatory, although the ERC opted to wait for the resolution of the case at the Supreme Court.

“We have seven expired licenses, and we have also received 12 applications to renew licenses,” said ERC Spokesperson Floresinda B. Digal. “But given the TRO, we are constrained to act on these licenses because one of the rules that are on TRO is on the licensing of the RES.”

She said the commission had issued 30 licenses, with the remaining licensed 23 retail electricity suppliers awaiting the expiry of their licenses by 2021, and only a few by 2022.

The Retail Electricity Suppliers Association previously raised the possibility that should the impasse extend indefinitely, the retail electricity business will run out of licensed suppliers, resulting in the contestable customers returning to the distribution utilities.

ERC Commissioner Catherine P. Maceda said the pending RES license applications remain “active” while the agency studies the way forward amid the TRO.

Based on existing rules, a RES with an expired license stands to lose its license should it continue to operate. It can also be penalized.

“But there’s already a study done and meron na pong recommendation din na pag-uusapan ng (there’s also a recommendation that will be discussed by the) commission,” she said. “I don’t know if they will present this for the next meeting also, but there’s already a recommendation as well.”

“This is still subject to the deliberation of the commission if that will hold water — the recommendation,” she said, adding that the recommendation covers “how to move forward” amid the TRO without disclosing what the move will be.

A report issued by the Philippine Electricity Market Corp. (PEMC) placed the number of registered contestable customers, or those whose consumption reached the threshold set by the ERC, reached 1,198 as of end-2018 from only 240 when the retail market was launched on June 26, 2013.

The market recorded a total of 30 registered retail electricity suppliers, 14 registered local retail electricity suppliers, and 24 registered suppliers of last resort. A local RES serves as the retail supplier within the captive market of a distribution utility.

Suppliers of last resort serve those who were not able to contract with a licensed RES.

Majority or 1,080 registered contestable customers were in Luzon and the remaining 118 customers were in the Visayas. Mindanao is not yet part of the market as it does not have a fully functioning electricity spot market.

Of the total registrants, 19% were in the 750-kilowatt (kW)-to-999 kW contestability threshold, while 81% were in the 1 MW-and-above threshold. The retail activities of contestable customers were almost equally divided between industrial and commercial by end-2018.

The total registrants were about 64% of the 1,876 electricity end-users that were already issued a certificate of contestability by the ERC. The remaining 36% electricity end-users already issued with the certificate have not yet registered in the market.

The total energy consumption of the registered contestable customers for 2018 stood at about 17,628 gigawatt-hours (GWh). The consumption level accounts for about 23% of the combined energy consumption of the registered contestable customers and the captive customers for the year 2018.

Majority of the registered contestable customers were located within the franchise area of Manila Electric Co. (Meralco), the country’s largest distribution utility. By end-2018, about 31% of all registrants were being supplied by the suppliers under the Meralco group. — Victor V. Saulon

DoE says rules in place for competitive selection after high court ruling

THE Department of Energy (DoE) is not keen on issuing directives to power generation companies (gencos) and distribution utilities (DUs) that were affected by the Supreme Court decision requiring all power supply contracts forged after June 30, 2015 to undergo a competitive selection process (CSP).

“It’s simple. We already have the competitive selection process policy. Section 2 provides for the exemptions, all the rest gives the rules, so they have to have the third-party bids and awards committee already. They should beef up their power supply procurement plan, and if there’s a need [for] emergencies, they have Section 2 for the exemptions [from] the CSP,” said DoE Undersecretary William Felix B. Fuentebella in an interview.

On May 6, 2019, the Supreme Court’s public information office said the tribunal ruled that power supply agreement (PSA) applications submitted by the DUs on or after June 30, 2015 were to comply with the CSP in accordance with DoE Circular No. DC2015-06-008.

The circular required all DUs to undergo CSP, a form of competitive public bidding for their purchase of electricity from gencos, in securing PSAs. It became effective on June 30, 2015 after its publication.

The competitive public bidding requirement is aimed at ensuring a fair, reasonable, and cost effective generation charge for consumers, under a transparent power sale mechanism between the generation companies and the DUs.

The court further ordered that the power purchase cost after compliance with the CSP is to retroact to the date of the PSA’s effectivity, but in no case earlier than June 30, 2015, for purposes of passing the purchase cost to consumers.

Its ruling set aside Resolution 13 of the Energy Regulatory Commission (ERC) that set the cut-off date for the compliance of the CSP requirement to Nov. 7, 2015. The agency’s resolution postponed the implementation of the provisions of the DoE circular by 130 days.

“The policies are already in place. They just have to follow the policy,” Mr. Fuentebella said.

“We have to look at the original decision. ’Yun na lang ang hinihintay ko (that’s all I’m waiting for), but most of the decisions are prospective.”

On May 10, the ERC said it had summoned the concerned electric power industry stakeholders and required them to submit information that will enable the agency to assess the possible impact of the SC decision.

It required the submission of documents by May 15, 2019, including the details of the procurement process of the affected contracts along with supporting papers, and a list of existing major or critical loads to be affected.

It also asked for other local or locational circumstances to be considered in relation to supply stability, actual monthly amount paid for the contracts involved, and actual historical customer profile from June 2015 to December 2018.

The ERC also asked stakeholders to submit their projected power supply-demand scenario from 2019 to 2026.

The agency said it had held initial discussions with the DoE earlier last week to collaborate on the possible measures that can be undertaken in order to manage the impact of the Supreme Court ruling to the consuming public.

“We assure the public that we will do everything within the Commission’s mandate to protect the welfare of the consumers relative to the impact of the recent Supreme Court decision. We are considering and exploring various scenarios to address the impact of the Supreme Court ruling,” ERC Chairperson and Chief Executive Officer Agnes VST Devanadera said. — Victor V. Saulon

German chamber sees TRABAHO dampening investment

GERMAN investment is expected to decline this year in line with those of other foreign businesses as they await clarity on the fiscal incentives reforms currently pending in Congress.

In its Annual Review 2018-2019 report, the German-Philippine Chamber of Commerce and Industry (GPCCI), said its parent organization AHK’s World Business Outlook is signaling a decrease in expected investment from the German business community in the Philippines.

“The ongoing discussion about TRAIN (Tax Reform for Acceleration and Inclusion) II, also known as the TRABAHO (Tax Reform for Attracting Better and High-Quality Opportunities) Bill, is likely to be one of the factors contributing to the investment slow-down,” according to the report, which was provided to reporters last week.

“With the midterm election… the tax reform packages’s finalization and its implementation was postponed until after (May 13), leaving the issue unclear for investors in the upcoming months,” it added.

The House measure, which was approved on third and final reading, intends to cut the corporate income tax (CIT) to 20% from 30% by 2029, on a staggered basis.

The Senate version proposes slashing the CIT to 25% on the first year of implementation.

Both intend to remove certain fiscal incentives that the Department of Finance blames for lowering its tax collections, particularly the 5% gross income earned incentive.

The adjustments to the tax perks under the TRABAHO Bill are expected to mostly impact export-oriented companies.

The report added that the proposed reduction of incentives has been “met with skepticism as the current incentive package is considered globally competitive.”

The report said investors are eagerly awaiting reforms meant to streamline permit and regulatory dealings with government.

“In this regard, GPCCI anticipated the implementation of the newly signed law on ease of doing business. The intention of this law is to cut red tape and simplify business processes.”

Risk factors cited in the report were securing skilled labor and infrastructure challenges.

The group added that the government’s “Build, Build, Build” program offers German firms a huge potential market for construction-related products and services.

“GPCCI is looking forward to a positive 2019, expecting a strong growth rate of over 6% again, despite challenging global trends, volatility due to trade disputes, growing protectionism and in Europe in particular, Brexit,” it added. — Janina C. Lim

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