Meralco seeks ERC approval to include local franchise tax in Biñan customers’ bills

July 25, 2018 | 3:31 pm

Manila Electric Co. (Meralco) has asked the Energy Regulatory Commission (ERC) to implement the new local franchise tax rate imposed by Biñan City in Laguna province ahead of its inclusion in the customer’s retail rates.
Meralco said the city government had imposed a tax on business enjoying a franchise at a rate of 50% of 1% of the gross annual receipts, which include both cash sales and sales on account realized during the preceding calendar year within Binan.
The distribution utility is also asking that it be able to recover the differential local franchise tax for 2017 from customers in the said city.
Meralco has a legislative franchise to operate and maintain a distribution system in the cities and municipalities of Metro Manila, Bulacan, Cavite and Rizal, and certain cities, municipalities and barangays in Batangas, Quezon, Pampanga and Laguna.
As such it is authorized to charge all its customers for their electric consumption at the rates approved by the ERC. — Victor V. Saulon

NGCP seeks ERC approval to procure ancillary services from power firms

July 25, 2018 | 3:29 pm

Privately-owned National Grid Corporation of the Philippines (NGCP) has asked the Energy Regulatory Commission (ERC) for provisional authority to implement its ancillary services procurement agreement (ASPA) with a power plant in Luzon and another in the Visayas.
In a joint application filed with the ERC, the power grid operator and Therma Luzon, Inc. (TLI) have sought approval for the 60 megawatts (MW) that NGCP will buy from the power plant’s units 1 and 2 in Pagbilao, Quezon province on a firm basis, and another 60 MW on a non-firm, or as needed, basis.
Separately, NGCP and Palm Concepcion Power Corp. (PCPC) are asking approval for an ASPA for 15 MW on a firm basis, and 15 MW on a non-firm basis. Both applications sought provisional authority ahead of the ERC’s final approval.
NGCP forges agreements to procure “ancillary services” — in this case power supply — to ensure reliability in the operation of the transmission system and consequently, in the reliability of the electricity supply in the Luzon, Visayas and Mindanao grids.
Ancillary services are necessary to support the transmission of capacity and energy from energy resources to electricity load centers, while maintaining the reliable operation of the transmission system.
NGCP said the ancillary services to be sourced from TLI and PCPC will be used as contingency reserve, or power that will be allocated to immediately answer any reduction in supply when the largest power generating unit online fails to deliver. — Victor V. Saulon

Globe partners with DMCI Homes to offer broadband service to condo owners

July 25, 2018 | 3:17 pm

Globe Telecom, Inc. said it is partnering with DMCI Homes, Inc. to offer easy subscription to Globe At Home services exclusive to DMCI condominium owners.
In a statement on Wednesday, July 25, the telco giant said residents at The Birchwood and Ivory Wood in Taguig City, Asteria Residences in Parañaque City and Lumiere Residences and Sheridan Towers in Pasig City may now directly apply for subscription to Globe’s services through DMCI Homes.
“Globe At Home…has found a way to make things more convenient for their customers together with their new partner, DMCI Homes. Now, new condominium owners of DMCI Homes won’t have to brace traffic and long queues as they will have the option to apply for Globe At Home’s exclusive broadband plan during the turnover of their units,” it said. — Denise A. Valdez

RFM merges with three subsidiaries

July 25, 2018 | 3:10 pm

RFM Corp. is folding three subsidiaries into its portfolio in a bid to achieve efficiency in operations.
In a disclosure to the stock exchange on Wednesday, July 25, the listed ice cream and pasta manufacturer said it is merging with Cabuyao Logistics Industrial Corp., Interbake Commissary Corp., and Invest Asia Corp., with RFM as the surviving entity. — Arra B. Francia

City of Dreams operator’s revenue flat in Q2

July 25, 2018 | 3:08 pm

The operator of integrated resort and casino City of Dreams Manila reported flat revenue growth for the second quarter of 2018, weighed down by higher commissions.
In a disclosure to the stock exchange on Wednesday, July 25, Melco Resorts and Entertainment (Philippines) Corp said net revenues at City of Dreams Manila reached $173.9 million for the three months ending June, 1.3% lower than the $176.2 million it generated in the same period a year ago.
“The decrease was mainly due to higher commissions reported as a reduction in revenue upon the adoption of a new revenue recognition standard issued by the Financial Accounting Standards Board, partially offset by improved gross gaming revenues,” the company said. — Arra B. Francia

Megaworld to launch Taguig residential tower this month

July 25, 2018 | 2:56 pm

Megaworld Corp. is unveiling a second residential tower worth P7 billion in sales within its Taguig township, after quickly selling out the first phase of the Park McKinley West project this month.
In a statement issued Wednesday, July 25, the listed property developer said Park McKinley West’s second tower will offer 478 rooms across 25 floors.
Units range in size from 48.5 square meters (sq.m.) for one-bedroom, up to 110 sq.m. for two-bedroom, up to 212 sq.m. for three-bedroom, up to 229 sq.m. for four-bedroom, and up to 336 sq.m. for five-bedroom penthouse units.
Amenities include a lap pool and kiddie pool with a pool deck and lounge, fitness center, function rooms, yoga room and outdoor yoga deck, outdoor sitting areas, water features, children’s playground, game room and sky garden.
The property unit of tycoon Andrew L. Tan expects to complete the project by 2023. — Arra B. Francia

2019 budget assumptions in focus

July 25, 2018 | 12:32 am

By Elijah Joseph C. Tubayan
Reporter
PRESIDENT Rodrigo R. Duterte submitted the proposed 2019 national budget to Congress after his State of the Nation Address (SONA) on Monday, setting into motion legislative hearings which, economists said, will do well to pay close attention to changing economic conditions.
Presidential Spokesperson Harry L. Roque, Jr. said in a press briefing on Tuesday that the Executive branch submitted the P3.757-trillion proposed 2019 budget, which was approved by the Cabinet on July 9, after the SONA and amid the tumultuous change in leadership at the House of Representatives that saw former president Pampanga Rep. Gloria M. Arroyo (second district), an economist, replacing Rep. Pantaleon D. Alvarez of Davao Del Norte’s first district as speaker.
“… [P]agkatapos po ng makulay na pangyayari sa Kamara, naisumite rin po ang 2019 budget kahapon (Regarding the 2019 budget, after the colorful events at the House, we were able to submit the 2019 budget yesterday). We commend the Department of Budget and Management for the early submission of the 2019 national budget… after the State of the Nation Address,” Mr. Roque said.
The proposed 2019 “cash-based” budget is slightly less than the P3.767-trillion obligation-based budget this year since the former provides for disbursements only within the fiscal year. Obligation-based budgets, in contrast, allow state offices to disburse funds for over two years.
According to the President’s budget message, “projects that will advance infrastructure development (under the Build Build Build Program) and human capital development (focused on education and health) are particularly highlighted and supported.”
Cash-based appropriations, the message added, will “promote better-designed, better-coordinated projects and programs from our agencies and speed up the delivery of goods and services to our people, obligations, or contracts for programs, activities and projects for implementation during the fiscal year…”
“Under the current obligation-based budget, agency performance is based on contracts awarded for the year, even if these contracts deliver their goods and services in the following years. Due to the pile-up of undelivered contracts, it is not unheard of that payments to performing contractors be inordinately delayed and that unscrupulous contractors are given advanced payments,” the budget message read.
“It is imperative that we modernize our budgeting system to meet international standards and adopt good practices.”
The disbursement program proposed for 2019 totals P3.832 trillion, 13.7% more than this year’s P3.37 trillion. Target revenues total P3.208 trillion, 12.7% more than the P2.846 trillion this year, leaving a fiscal deficit of P624.4 billion that is 19.23% bigger than the P523.68-billion deficit ceiling for this year.
Ahead of the start of public hearings on the proposed budget by the House committee on appropriations on July 31, economists interviewed yesterday cited the need to keep tabs on changing economic conditions, including on quickening inflation and the depreciating peso.
“Currently, the proposed budget is at its highest not only because of the anticipated inflationary trend that the economy is bound to face next year but also because of… the much-anticipated governments’ Build! Build! Build! infrastructure program,” Emmanuel J. Lopez, economist and the Dean of Colegio de San Juan de Letran’s Graduate School, said in an e-mail.
Mr. Duterte in his budget message said that Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion law, accounted for just 0.4 of a percentage point of the 4.3% first-half inflation pace and that external economic developments were at play in driving overall increases in prices of widely used goods.
He also assured that the 2019 budget provides for social mitigating measures against inflation, such as the increase of the monthly unconditional cash transfer to P300 from P200 currently, and of the Pantawid Pasada Program conditional cash transfer budget to P3.9 billion from P1 billion.
It also cited key programs to protect marginalized sectors such as the National Health Insurance program, free tertiary education, free education, basic education facilities program, as well as rice subsidy for military and other uniformed personnel.
“Basing from the past two fiscal years of the Duterte administration budget expenditures, appropriations seem to be in place and expended wisely,” said Mr. Lopez.
Emmanuel A. Leyco, a professor at the Asian Institute of Management, said in a mobile phone message that: “Cash-based budgeting is a good approach that will require strict discipline among agency administrators.”
“The major challenge for them are the assumptions they made in the budget preparation. If these assumptions do not materialize, they should be prepared to make prompt adjustments along the way,” he added.
The Development Budget Coordination Committee assumed a 4-4.5% inflation this year and 2-4% for 2019; as well as a P50- to P53-per-dollar exchange rate, among other assumptions for computing appropriations.
Mitzie Irene P. Conchada, vice-dean at the De La Salle University School of Economics, said separately: “It would be interesting to note how the administration will utilize the budget for its major projects such as the Build, Build, Build project on infrastructure.”
“One thing to be cautious about is its impact on the depreciation of the peso since infrastructure projects requires materials that are mostly imported,” she explained.
The budget message counted the Metro Manila Subway project and the Pasig River Ferry Convergence program among key infrastructure investments in 2019 for Metro Manila; the Philippine National Railways (PNR) Manila-Laguna South Commuter rail, Malolos-Tutuban PNR North 1 rail, and the Chico River Pump Irrigation for other areas in Luzon; the Panglao International Airport, New Cebu International Container Port for the Visayas; as well as the Mindanao Railway project and the Davao International Airport for Mindanao, among others.

FMIC cites wisdom of borrowing offshore

July 25, 2018 | 12:31 am

By Melissa Luz T. Lopez
Senior Reporter
GOVERNMENT plans to borrow more funds abroad will help the state manage debts better, even amid rising interest rates and a weaker peso, a senior officer of one of the country’s biggest investment banks said.
“It’s really more of diversifying their funding source because they need a certain amount — P1 trillion is projected next year,” Christopher Ma. Carmelo Y. Salazar, senior vice-president at First Metro Investment Corp. (FMIC), said in a recent interview.
“Given that rates are going up, they want to explore other markets such that for the government, it would be the best for them,” Mr. Salazar, head of FMIC’s financial markets group, said in a recent interview.
The government plans to borrow up to P1.189 trillion in 2019, a third more than the P888.23 billion programmed this year.
A fourth or P297.2 billion will be sourced from external creditors, while P891.7 billion will be borrowed locally.
Earlier this month, National Treasurer Rosalia V. de Leon announced that the government has been looking to tap the euro as well as sukuk bond markets as new frontiers, on top of another sale of dollar-denominated debt besides yen- and renminbi-denominated papers.
“If they source everything here, since rates are going up, it might be expensive then. But by diversifying elsewhere, that allows them to at least manage their costs,” Mr. Salazar explained.
The Treasury raised $2 billion through a global bond sale in January, with half consisting of new money and the balance involving liability management.
The government also issued $230 million worth of renminbi-denominated “panda” bonds back in March.
Authorities are likewise looking at opportunities to tap the Japanese market via “samurai” bonds by October.
New foreign markets for government debt papers will help secure more funding for the aggressive public spending planned — programmed at more than P8 trillion — until 2022, when President Rodrigo R. Duterte ends his six-year term, Mr. Salazar said. In turn, this is expected to help fuel economic growth to a faster 7-8% annually up to that year in order to slash unemployment rate to 3-5% by 2022 from 5.5% in 2016 and poverty incidence to 13-15% also by 2022 from 21.6% in 2015.
Mr. Salazar said turning to new markets remains a sound plan despite the recent depreciation of the peso.
“That is something that they would have to (factor in),” one currency trader said.
“The peso is weakening right now but five years later, it might be a different story… It could be that the peso is stronger that time — that’s something that could be the situation.”
The peso has touched fresh 12-year lows since mid-June and is currently trading weaker than P53 per dollar.
Mr. Salazar noted that borrowed funds will augment the government’s cash for stepped-up infrastructure spending at a time that state revenues have lately logged double-digit rates of increase.
Treasury data show total revenue collections reached P1.411 trillion as of end-June, against disbursements worth P1.604 trillion.
As a developing economy, the Philippines borrows from local and foreign sources to fund increased spending and boost overall activity.

PHL local currency bond issuances down in Q1 — ADB

July 25, 2018 | 12:31 am

GOVERNMENT plans to borrow more funds abroad will help the state manage debts better, even amid rising interest rates and a weaker peso, a senior officer of one of the country’s biggest investment banks said. Read the full story.

DoF: Cost of tax perks outweighs benefits to economy

July 25, 2018 | 12:30 am

THE COST of granting tax incentives to companies registered with investment promotion agencies (IPAs) outweighs their overall benefits to the economy, the Department of Finance (DoF) said on Tuesday.
The department presented a cost-benefit analysis of fiscal incentives given to firms during the third public hearing for the second tax reform package on corporate income tax and perks conducted by the House of Representatives Ways and Means Committee.
Finance Undersecretary Karl Kendrick T. Chua said that the economy on average gets only 60 centavos for every one peso of tax incentives granted based on 2015 data.
“So in average, there are many redundant and unnecessary incentives,” said Mr. Chua.
According to the DoF’s studies, the government had to spend over P257,000 to generate just one job in a registered investor.
Mr. Chua also said the government collects 32 centavos of additional taxes for every one peso worth of incentive granted.
Mr. Chua added that there was no significant difference in productivity between IPA-registered firms and companies that do not enjoy fiscal incentives.
“In general, registered firms — when compared to non-registered firms — have the same employment relative to size, same average wages, but pay top management higher, spend more on fixed assets, but do not spend higher on R&D (research and development), have the same level of exports relative to sales and no difference in productivity,” the DoF official said.
In the DoF’s analysis, non-manufacturing sectors like quarrying, housing and energy, as well as services have unnecessary incentives, as opposed to the agriculture and manufacturing sectors where benefits outweigh the costs.
Mr. Chua argued that incentives should also depend on applicants’ primary motivation for investing in the country.
“If the investor comes because there is a sure market, then we do not find the incentive necessary because the firm will make a profit anyway. If the investor comes with resource, land, or labor, or talent, then we do not think the incentive is necessary,” Mr. Chua said.
He also proposed that companies that are expanding should no longer be granted tax perks, citing DoF data showing that overall dividends paid to shareholders by IPA-registered firms exceeded the amount of the tax incentives given. “This suggests that many firms and industries are very profitable, but they enjoy incentives forever which we find unnecessary because they are profitable inherently,” he said.
However, the Board of Investments (BoI) and the Philippine Economic Zone Authority (PEZA) offered a different view.
Data provided by BoI bared a net tax revenue gain amounting to P2.02 per peso of incentive granted in 2015.
PEZA cited its own research showing that for every P1 incentive, companies registered with it generated P11.6 in export sales that same year.
Separate National Economic and Development Authority data meanwhile show that the government granted P91.3 billion worth of tax incentives to IPA-registered firms, which generated $18.4 billion in export earnings.
Mr. Chua said it would better to support industries through targeted, non-fiscal measures, than with blanket tax incentives. “We will support industries in a different manner. We’re more inclined to targeted subsidies for specific training programs rather than giving incentives forever without accountability,” he said.
Streamlined fiscal incentives are just one side of the coin for the second package of tax reforms, the other being a proposed cut in corporate income tax rates gradually to as low as 20% from the current 30%, which is the highest in Asia.
The measure, filed as House Bill No. 7458, will also replace the existing five percent gross income earned tax incentive with a 15% tax on net income, while capping this perk at five years.
The panel’s chair, Quirino Rep. Dakila Carlo E. Cua, said that he will heed the call of President Rodrigo R. Duterte to speed up approval of the bill as he wants the measure signed into law before the year ends.
Mr. Cua added that the committee should be “business as usual” despite a leadership change at the House and even possibly in his committee.
“Business as usual for the committee after the President charges this committee to prioritize and fast-track and support this bill. It is necessary to hold this hearing despite any considerations happening all around us,” said Mr. Cua.
Asked for a reaction on a possible change in chairmanship in the House ways and means committee, Mr. Cua replied: “I’m not concerned, but I recognized the possibility that there might be. We welcome whatever happens and we continue to support the President.”
He added that former president and now House Speaker Gloria M. Macapagal-Arroyo would be supportive of the measure, similar to her support in the Tax Reform for Acceleration and Inclusion law. “She understands the issues. Siguro na a-appreciate niya ‘yung value nitong economic reforms,” said Mr. Cua. — Elijah Joseph C. Tubayan

Makati mass transport bid to face Swiss challenge

July 25, 2018 | 12:07 am

By Arra B. Francia, Reporter
IRC Properties, Inc. said its proposed $3.7-billion Makati Mass Transport system will now undergo Swiss challenge after securing approval from the Makati city government.
In a disclosure to the stock exchange on Tuesday, the listed firm said it has received the go signal from the local government for the competitive bid process. The company was awarded the original proponent status (OPS) for the project last month.
“IRC wishes to inform the investing public that pursuant to Makati City Ordinance No. 2014-051… a joint certification was today executed between the Makati City Government and IRC, certifying, among others, that IRC, as the proponent, is eligible to participate as the original proponent in the unsolicited proposal and competitive/Swiss Challenge process,” the company said in a statement.
Under a Swiss challenge, other parties are invited to match the bid of the original proponent. The party with the OPS will then have the advantage to outmatch the lowest proposal in order to secure the project.
IRC has partnered with several foreign firms, namely Greenland Holdings Group, Jiangsu Provincial Construction Group Co. Ltd., Kwan On Holdings Ltd., and China Harbour Engineering Co. Ltd. for its proposal to construct an 11-kilometer intra-city mass transport system with up to 10 stations.
The project is expected to connect key points in Makati and will be built at no cost to the government.
The company’s proposal comes alongside the government’s accelerated spending for infrastructure spending under President Rodrigo R. Duterte’s administration. IRC said the Makati mass transport system is expected to complement other mass transport projects such as the Metro Rail Transit, the proposed Metro Manila Mega Subway and the Pasig River Ferry.
To support its foray into infrastructure, the company is changing its corporate name to Philippine Infradev Holdings, Inc., alongside a change in its primary purpose to that of a holding firm with main interests in infrastructure and real estate development.
The company on Monday also increased its authorized capital stock to P19.5 billion, consisting of 9.5 billion common shares with a par value of P1 per share, and one billion preferred shares with a par value of P10 per share. The shares may be issued through private placement, preemptive rights offering, or other arrangements.
A fourth of the IRC’s increase in capital stock will be issued through private placement at a price of P1.10 to P1.40 per share, depending on the terms and conditions to be set by the company’s executive committee.
Incorporated in 1975, IRC’s core investments was initially in the acquisition, reclamation, development, and exploration of land, forests, minerals, oil, gas, and other resources. The company halted all exploration activities following the global recession in the 1970s, and bounced back as a property developer in 2013.
IRC’s attributable profit jumped 407% to P25.4 million during the first quarter of 2018, driven by a 47% increase in revenues to P75.17 million.
Shares in IRC went down seven centavos or 4.58% to close at P1.46 each yesterday.

CEDC seeks nod for P258-M capex

July 25, 2018 | 12:06 am

CLARK ELECTRIC Distribution Corp. is seeking regulatory approval for its spending plan. — *HTTP://WWW.CLARKELECTRIC.PH/*

CLARK ELECTRIC Distribution Corp. (CEDC) is seeking approval from the Energy Regulatory Commission (ERC) for its capital expenditure program for 2018 amounting to around P258 million.
CEDC, a unit of the country’s biggest power distribution utility Manila Electric Co., placed the bulk of the outlay at P125 million, for the implementation of its enterprise asset management system.
In its application, the company listed a number of “residual” projects, the biggest of which is allocated for the growth of its consumer metering network. The cost of putting up meters, instruments and metering transformers was placed at P29.98 million.
The spending program is meant “to ensure reliable operation of its distribution network and continuous distribution service and connection to meet the growing and future needs of its more than 2,000 industrial, commercial and residential customers inside the CSEZ,” the company said.
CEDC, which has a franchise to distribute electricity within the Clark Special Economic Zone, is under the performance-based regulation rate-setting methodology of the ERC. Its third regulatory period was supposed to have started on Oct. 1, 2015 and end on Sept. 30, 2019, but it is still waiting for the go-ahead from the commission to file its “reset” application.
The company said in the meantime, it was filing the application to seek prior approval from the ERC before it can construct, operate and maintain new distribution facilities, noting that as it has no authority to undertake and implement capital expenditure projects after Sept. 30, 2015, it is seeking the commission’s approval for its capex program for regulatory year, which spans Oct. 1, 2017 to Sept. 30, 2018.
In its application, the company said the lack of an approved capex projects from the start of the third regulatory period on Oct. 1, 2015 would “severely hamper” its operations and affect its ability to deliver electricity service to its customers.
It said it is “imperative” on the company to undertake the expansion and rehabilitation of its network facilities through acquisition of new assets to ensure continuous compliance with safety, performance and other statutory or regulatory requirements.
Ahead of the approval of its proposed capex, CEDC is asking the ERC to grant provisional authority to implement its projects for 2018. — Victor V. Saulon