MANILA - The majority stockholder of the Philippines' power grid operator, which has courted controversy over issues including Chinese ownership, is set to kick off a crucial share sale on Tuesday to comply with regulations.
Synergy Grid Development Phils plans to sell up to 1.15 million shares, including overallotment option, at 12 pesos $0.24 apiece in a follow-on offering to increase its public ownership, a requirement to remain listed on the Philippine Stock Exchange.
The $274 million sale is also intended to save the National Grid Corporation of the Philippines, a key asset, from possible regulatory troubles. The NGCP, which has a monopoly on the electricity transmission network, has faced senate scrutiny and threats of franchise revocation over a string of issues, including its long-overdue public offering and allegations of Chinese control.
The NGCP is required to sell 20% of its shares to the public or list a shareholder owning at least 30% of the company on the PSE under its 2008 legislative franchise. The corporation has opted to comply through the listing of Synergy, which indirectly controls 60% of the company.
The share sale is expected to lift Synergy's public float to at least 20%, as required by the PSE. Failure to do so will result in delisting. Trading of Synergy shares has been suspended since May after a share-wrap transaction with the NGCP's Filipino shareholders shrank its public float to 0.25%.
The NGCP is a consortium of technical tycoons Henry Sy Jr. and Robert Cuyuito Jr. and their Filipino partner, the State Grid Corporation of China, which owns 40% of the company. In 2007, the group won the bid to run the country's power transmission and was granted a 25-year franchise. It started operations in 2009 and was required to conduct a share sale within 10 years. The NGCP has cited unfavorable market conditions for the delay.
Early this year, investors anticipated a record-breaking $1 billion to 2 billion IPO by the NGCP, one of the country's most profitable companies. An IPO will set the NGCP up for greater public scrutiny and shareholders will also face dilution.
The NGCP does not want its holdings to be diluted, according to a source close to the State Grid Corporation of China. This is also part of the reasons why the NGCP chose to comply with Synergy, the source said.
Taking that route will keep China's stake intact, while Filipino shareholders' ownership will be dispersed.
NGCP spokesperson Cynthia Alabanza said that if the IPO path had been chosen, a sizable portion of shares likely would have been offered to domestic investors to compensate for the limited liquidity of the foreign market. Foreign ownership in the NGCP has already hit the 40% limit for utilities set by the constitution, and selling more shares to foreigners would risk breaching that cap, she added.
Synergy's follow-on offering allows NGCP to address the franchise and comply with that challenge at the same time, Alabanza told Nikkei Asia last week.
The Energy Regulatory Commission, which warned the NGCP to comply with its franchise share sale requirement by Nov. 14 or face sanctions, has yet to rule on the corporation's mode of compliance.
We need to see first what will be the submission compliance filed before we can rule, ERC Commissioner Floresida Baldo-Digal told Nikkei.
The NGCP stressed that the Synergy shares listing, which is scheduled for Nov. 10, is a mode of compliance. We can file compliance only once the listing is done, Alabanza said.
Baldo-Digal would not say if the NGCP will be compelled to conduct an IPO in case of adverse ruling. We cannot comment yet as nothing has been officially filed, the commissioner said.
Successfully complying with its mandate will address a key issue hanging over the NGCP.
The Senate Energy Committee in 2019 and 2020 heard issues surrounding the NGCP, including its performance, long-delayed share sale and Chinese ownership. Senators asked whether the Chinese can remotely shut off the grid amid reports that Chinese held key positions in the company. NGCP chief executive Anthony Almeda dismissed the concern, saying the Chinese were only technical advisers while the four Chinese on the board did not hold executive or managerial positions.
Manila and Beijing are locked in a territorial dispute in the South China SeaChina Sea, although President Rodrigo Duterte, whose term ends next year, has forged closer ties with China. State enterprise Dito Telecommunity owns 40% of China Telecom, a mobile challenger launched in March to dismantle the industry's longstanding duopoly.
Meanwhile, the Energy Regulatory Commission led by Duterte appointees will have a say on the NGCP's fate.