NGCP equity takers cautioned over cross-ownership ban

• 14 years ago (2010-01-24)
• David Flin

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With reports circulating that a deal is already in place for the equity divestment of shareholders in National Grid Corporation of the Philippines (NGCP), the prospective parties in the acquisition plan are being cautioned on the cross ownership ban under the power industry reform law. The Electric Power Industry Reform Act (EPIRA) explicitly provided that cross ownership between generation and transmission, or distribution and transmission, will not be allowed.

Sources close to the ongoing talks noted that the group of Henry Sy Jr. is being drawn into the deal, but it would be its partners which may eventually fall foul of the cross ownership prohibition. Sy last move into the power industry was in tandem with San Miguel Corporation (SMC) in a planned acquisition of Manila Electric Company (Meralco) using Triratna Holdings as a corporate vehicle. As a shareholder in both Meralco and the generation assets of the National Power Corporation, SMC is involved in both distribution and generation, and thus is likely to breach the cross ownership laws.

Section 45 of the EPIRA expressly prescribes that: “No generation company or distribution utility, or its respective subsidy or affiliate or stockholder or official of a generation company or distribution utility, or other entity engaged in generating and supplying electricity supplied by ERC (Energy Regulatory Commission) shall be allowed to hold any interest, direct or indirect, in TRANSCO or its concessionaire.” NGCP is the appointed concessionaire of the National Transmission Corporation (TRANSCO) for the Philippine’s transmission assets.

Experts suggest that the deal may be sealed with the equity takers by the end of February, and this may trigger movements in the management and board of NGCP. The purported entry of Sy’s group is seen to be via shareholdings acquisition from Monte Oro Grid Resources Corporation, one of the shareholders in NGCP. The alignment is reportedly with another local partner, Calaca High Power of the Coyiuto Group. The foreign partner is State Grid of China.