Transco’s suspicious interest in NGCP

On the surface, it looks like a “happy problem”. 

When you dig deeper into it, one finds out this is a potential disaster for the power sector and a major setback for the administration of President Duterte.

The “happy problem” is that there are two parties vying to build that long-delayed and much-needed interconnection of the Mindanao power grid to the power transmission systems of Visayas and Luzon.

One contender is the government’s private sector partner. The other, a government agency which the government practically dismantled years ago and whose mandate and responsibilities have been turned over to the private sector.

From out of the blue, the government agency wants to do that project it should have done decades ago but failed to do when it was still in-charge of the country’s nationwide power transmission.

This is the National Transmission Corp. or Transco. To do the project, its newly-appointed head, former airport officer-in-charge Atty. Melvin Matibag, wants to dip into the controversial Malampaya funds.

On the other hand, there is the government’s private sector partner – the National Grid Corporation of the Philippines (NGCP). This is the consortium to which the concession to operate and maintain the nationwide power transmission system was awarded in 2007 following a successful privatization program spearheaded by then Energy Secretary Vince Perez.

The NGCP is set to build the interconnection using its own funds.

The project calls for the installation of an additional 214 kilometers of the combination of high-tension wires strung on giant transmission towers and submarine cables and will require some P52 billion to complete.

The project is urgent. Two reasons. First, this is what will save Mindanao from the recurring problem of power shortage. This is a major disincentive to investors—the ones President Duterte wants so badly for Mindanao, particularly Davao.

Second, the President’s second State of the Nation Address (Sona) is forthcoming. He badly needs to make an announcement regarding his accomplishments in the power sector. So far, there has been no landmark achievements in this sector under the leadership of Matibag’s benefactor, Energy Secretary Alfonso Cusi.

The announcement at the Sona of a decisive move to interconnect all three transmission grids would have been a big applause point.

Unfortunately, that announcement may not be forthcoming – it appears the project may have become hostage to Transco’s bid to get it off the hands of the private sector partner and attempt at building it on its own.

Industry observers smell something suspicious here. Transco’s mysterious bid may have also unduly placed Matibag in an uncomfortable situation. Many are now asking if his entry into Transco was particularly meant to torpedo the interconnection plan that has already been put in place by NGCP.

Matibag’s recent statements can only fuel the negative speculations. So far, most if not all of the new Transco boss’ statements appear to be clear warnings to the NGCP.

Based on media reports, Matibag appears to be keen on conducting a “review” of the government’s concession agreement with NGCP.

Was the statement a signal to the NGCP that it must give in to the pressure to give up the project?

You see, in this country, sudden reviews of business covenants by government have always been viewed as a veiled warning. That Matibag’s statement is an exception to the rule is something the public still has to find out.

There’s another problem with that “review”. It will cause significant delay to the interconnection project.

There’s another problem: Transco’s plan to dip into the Malampaya funds to finance a government-led interconnection project. The move will definitely be questioned by solons and non-governmental organizations.

It will be very difficult to explain why the government would have to use the money from its share of royalties from the Malampaya natural gas project when private sector can do it using its own resources.

We do not wish to ascribe any ill motive to Transco’s bid to ease NGCP out of a project that is supposed to be part of its exclusive responsibility as spelled out in a covenant with government.

Cusi must, however, accept the fact that the sudden interest in the project of his Transco protege can only invite questions and suspicions.

It is also unfortunate that this exceptional interest would also put in question his longstanding relationship with Cusi, the man he succeeded as airport officer-in-charge, under the Arroyo Administration. Matibag also served as Cusi’s Executive Assistant in 2008.

Cusi has not made a secret out of his supposed “disappointment” with NGCP. It will be recalled that one of Cusi’s first significant action as head of the energy department was to order the audit of NGCP.

In the end, what the public hopes for is that government would opt for the quickest, cheapest way to provide them with reliable power supply.

Cusi and Matibag’s sudden entry into the power sector should not dash that hope.

More on this in our future columns.