State-backed Maharlika Investment Corporation (MIC) will provide strong support, including a prospective recommendation to President Marcos, for a 25-year extension of the concession agreement for system operator National Grid Corporation of the Philippines (NGCP), allowing it to continue managing and operating the country’s power transmission network.

In an exclusive interview, MIC President and CEO Rafael Jose D. Consing Jr. firmly stated that NGCP’s concession deal with the government “must be extended, otherwise, the unpaid and uncollected value of their investments are going to be charged to us at the end of the concession period; and that is going to be a very significant cost; and that’s when you see the amount of transmission charges significantly increase.”

When asked if MIC is willing to endorse a 25-year extension of the NGCP concession agreement to President Marcos, Consing stressed, “Definitely, the answer is a clear yes!”

At this stage, he disclosed that NGCP is sitting on unrecovered capital investments of ₱400 to ₱500 billion (based on preliminary estimates). If cost recovery gets crammed into the final nine years of its concession, then consumers will be confronted with a brutal surge in electricity rates.

Consing expounded that if NGCP’s operation and management tenure for the country’s transmission facilities will be stretched, “then we have significantly more time to be able to amortize that significant cost,” as it was reckoned that when the bill drops, transmission charges will skyrocket and punch consumers right in their pockets.

NGCP’s concession deal kicked off in 2009 and ends in 2034. Still, with major transmission projects taking up to a decade to build, the clock is already breathing down policymakers’ neck - hence, without a renewal decision at this point, the government kills NGCP’s shot at injecting fresh capital and expanding the grid when the electricity system needs it most.

Consing similarly hinted that the financial closing for MIC’s P19.7 billion investment on the 20% preferred shares acquisition from NGCP’s holding company Synergy Grid & Development Phils. Inc. (SGP) is already nearing the finish line, teasing further that it is set to land “in the coming weeks”, although he concealed the exact dates for now.

NGCP’s cost recovery crisis

The MIC chief executive also sounded off that the biggest roadblock choking new transmission investments is NGCP’s cash being tied up and frozen due to painfully slow regulatory approvals.

“In order for NGCP to roll out projects properly, they need to be paid on time – if you make them build transmission capacity without paying them, it’s unfair to NGCP,” he noted.

Consing emphasized that NGCP has already been bleeding with the ‘cost of money’ it is being forced to absorb, “that’s why their level of debt has risen because they are not being paid – and that started during the last regime and that has compounding impact on their ability to deliver.”

He likewise opined that “the role (of NGCP) is not to reduce the price of electricity – in fact the truth is: the objective of the electricity sector is to be able to create a policy to achieve ubiquitous and low-priced energy across the nation. Now, as a result of being able to expand transmission infrastructure, you would now have the ability for generation facilities to be built on that line; that’s what is going to reduce electricity.”

The Maharlika CEO highlighted that “the role of NGCP is to roll out the infrastructure in order for power facilities to be built which can then bring down the cost of electricity eventually, so there’s a need to build out efficiently first.”

Ending the ‘whipping boy’ saga for NGP

Consing asserted that on MIC’s investment entry at NGCP, they opted not to scatter their bets across the value chain, “rather we haul in on that part of the value chain that requires most part of investments and the most impactful – therefore, we decided to invest in lines, especially transmission infrastructure.”

He said “we’re not there to police them. We are there to try and help enhance shareholder value – and NGCP got two stakeholders: first would be the existing shareholders; and second is the community that they serve—and what we aim to do is to be able to add value to both.”

When asked on things that MIC had discovered as a newly minted shareholder, he shared that 

 “they are severely misunderstood,” adding that “I believe that we have spent enough time with them for us to be able to say: we understand them much better than when I first looked at them.”

Particularly, Consing qualified that the claim of merely 28% capacity expansion that NGCP had done “is actually inaccurate because the 28% that they’ve added were all 500kV (kilovolt) lines,” explaining that these ultra-high voltage lines are a colossal leap and packing five times the capacity of the 138kV and 230kV lines churned out under the old National Power Corporation era, or under its successor-company National Transmission Corporation.

“That’s like putting in a 10-lane highway - it’s actually five times more than what had been there before, so it’s not enough to say that they added 28%; but they in fact enhanced that by providing a 10-lane highway if you were to compare that to physical highways; and also the other enhancements that they put or they deployed; and therefore, the 28% is nominal, but it is an incomplete and inaccurate narrative – it is too simplified, they’ve put in much more than that. And in fact today, they have excess transmission capacity,” he pointed out.

Consing added “obviously, I think there’s a disconnect between the public knew of them; what they actually did and what’s being said about them… so MIC will help try to bridge that understanding gap.”

When quizzed further on where the disconnect has been coming from, he underscored “it arose out of two things: number one: I think they’re a favorite whipping boy of politicians, of government because it’s so easy to speak about them adversely because they are a natural monopoly; and it’s really unfortunate.  And on the other hand, because it is such a technical industry, perhaps, they had not been able to express or articulate themselves well enough for the masses to be able to understand, so in my opinion, that is where the disconnect was.”

Onward, he reckoned that part of the discipline in the sector that must be steered by the Department of Energy (DOE) is proper coordination on power plant developments that would go along with the buildout of transmission facilities; specifying that power generators shall not just be allowed chase cheap land for their project sites, especially if these are miles away from transmission lines because that has been triggering fractured mess in the development of the country’s power system.