NGCP may defer IPO

MANILA, Philippines — The National Grid Corp. of the Philippines (NGCP) is seeking to defer its initial public offering (IPO) beyond the mandated period under a concession agreement with the government.

NGCP filed a petition with the Energy Regulatory Commission (ERC) to defer the public offering of its shares mandated under its charter for at least a year.

Republic Act No. 9511, its charter, was signed into law on Dec. 1, 2008. Under its charter, NGCP had a period of 10 years from Jan. 15, 2009 to comply with its statutory requirement to offer at least 20 percent of its outstanding capital stock to the public.

Under the law, the ERC is allowed to give NGCP a reasonable extension to list its shares of stock, subject to certain conditions.

In the event NGCP conducts its IPO, the government has an option to buy shares of NGCP, Energy Secretary Alfonso Cusi said.

“That is an option for government so we can sit in their board. But they are currently seeking an extension and we don’t know how long they are asking,” he said.

However, the application to defer NGCP’s IPO is being opposed by the National Transmission Corp. (TransCo) through an opposition letter filed with the ERC.

Among the reasons cited by NGCP for deferring its IPO include the arbitration case against TransCo and the Power Sector Assets and Liabilities Management Corp. (PSALM), which “is a valid ground to defer its public offering.” 

The grid operator said listing on the stock exchange would require it to disclose any material information, including arbitration proceedings which are confidential in nature. This, in turn, could spur speculation on its prices and an unfavorable arbitral award would pull down its market value and lead to lawsuits by disgruntled investors.

NGCP also cited the absence of the regulatory revenue for the fourth regulatory period from 2016 to 2020 since it would affect the valuation of its shares “since potential investors do not have visibility” on its future earnings.

However, in it is opposition letter, TransCo said NGCP sought the deferment only on the ninth year of its operations, where it had the previous years to launch an IPO.

For the arbitration proceedings, TransCo said all parties in the case “could waive the confidentiality obligation to the extent necessary” which would allow NGCP to make proper and appropriate disclosures.

 “In any case, the required disclosure need not be a full-blown discussion on the claims and defenses, but general statements on the causes of action and the amounts involved in the arbitration. Disclosure of the latter does not violate the confidentiality requirements under RA 9285 and the UNCITRAL Arbitration Rules which govern the current arbitration,” it said.

On the delayed regulatory reset, TransCo said it is not a valid ground to delay the public offering since NGCP would be required to provide historical records on its profitability and dividends three years before the proposed public offer.

“Any valuation of its shares will be premised principally on past financial performance rather than earnings projections,” the state-run firm said.

Since the IPO is a mandate by the franchise agreement, TransCo said NGCP should not be given an extension for its IPO. 

Previously, NGCP was supposed to do a backdoor listing through publicly listed Synergy Grid and Development Philippines Inc. Under the share swap deal, shares of Henry Sy Jr.’s One Taipan Holdings and Robert Coyiuto Jr.’s Pacifica21 Holdings Inc. – the two companies that control NGCP – would be swapped with new shares of Synergy Grid.

However, the transaction was cancelled since they were unable to obtain a tax-free ruling. NGCP will instead conduct an IPO.