Senators question NGCP's excessive dividends despite delayed projects

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Metro Manila (CNN Philippines, May 24) — Senators on Wednesday questioned the National Grid Corporation of the Philippines (NGCP) over its excessive dividends for shareholders, which they believe should have been used for power projects.

During Wednesday's Senate hearing, the NGCP drew the ire of the energy committee after it admitted that a huge chunk of its net income in recent years only went to paying dividends.

The power grid operator said that in 2019, it earned a net income of ₱20.3 billion, of which ₱15 billion went to dividends.

Two years prior, the NGCP had a net income of ₱20.6 billion, of which ₱19 billion went to dividends.

Committee chairman Sen. Raffy Tulfo was even more shocked to learn that in 2014, the firm paid out ₱24 billion in dividends — more than its ₱22 billion declared net income for the year.

"Ano to? Paano nangyari ito? Negative pa? [What's this? How did this happen? How come it's negative?]" Tulfo said.

"Ito yung sinasabi ko noon pa na mas malaki ang napupunta sa dibidendo kaysa sa napupunta sa development. Only in the Philippines na for profit ang transmission," said Senator Raffy Tulfo.

[Translation: This is what I'm talking about before that a huge amount goes to dividends instead of for development. It's only in the Philippines where the transmission is being profited.]

The NGCP is 40% owned by the Chinese state-owned State Grid Corporation, while 60% is held by investment group Synergy Grid and Development Philippines of Henry Sy Jr. and Roberto Coyiuto Jr.

But the power grid operator explained that the dividends are not just sourced from the net income of the current year, but also from the retained earnings.

"Our profits or dividends are taken from retained earnings, which have accumulated over the years. So, it's not one is to one. Kung ano ang dineclare for this year (So what's declared for the year), does not necessarily come solely from the profits earned for that particular year," said NGCP spokesperson Cynthia Alabanza.

Retained earnings are an accumulation of a company's net income and net losses over all the years the business has been operating. These make up part of the stockholder's equity on the balance sheet.

The NGCP added that its capital outlay, which was P39 billion in 2019, came from different sources such as loans.

However, Tulfo was not convinced with NGCP's response.

"Imbes na napunta sa mga shareholders, kahit sabihin natin na mataas yung capital outlay ninyo, sana binuhos niyo na lang sa development, pagbili ng kagamitan para sa connectivity," he said.

[Translation: Instead of giving it to shareholders, although you have a huge capital outlay, you should have used it for the development and purchasing of equipment for connectivity.]

Delayed projects

The Energy Regulation Commission (ERC) also noted that the NGCP has 72 delayed projects across the country, which includes six backbone projects.

But Senator Sherwin Gatchalian flagged that despite these projects being delayed, they are already part of the transmission charge being collected by the power grid operator pursuant to its approved interim maximum annual revenue in 2020.

"Right now, we are not seeing anything. But they are deducting from consumers like us," he said.

The Department of Energy (DOE) noted that such a scheme is allowed, but the NGCP never consulted them or the ERC whenever there is a delay.

"ERC will tell them na okay na itong project niyo and you can proceed already, that's when the charging will start.... Unfortunately, mino-move yung project," said Energy Undersecretary Sharon Garin.

[Translation: ERC will tell them that this project is already okay, and you can proceed already, that's when the charging will start... Unfortunately, the projects are being moved.]

"That's without the approval of ERC or DOE on the moving of the schedule of the project...So minsan, kapag nade-delay, we are just informed and not consulted," she added.

[Translation: There's no approval of ERC or DOE with regards to the moving of the schedule of the project...So sometimes, when there is a delay, we are just informed and not consulted.]

Garin also said the ERC can only impose a maximum of ₱50 million penalties on the NGCP per violation.

"And yet bilyon ang kinikita nila sa kanilang pagchacharge at pinaghati-hatian na ang dibidendo na wala pa yung proyekto at hindi pa napapakinabangan ng taong bayan, at ang multa lang diyan ay ₱50 milyon? Dapat kulong kung tutuusin," Tulfo exclaimed.

[Translation: And yet they are earning billions through charging and the dividends are being rolled out even though the projects are yet to materialize, and the fine is only ₱50 million? They should be jailed.]

On the other hand, the NGCP apologized for the delays in its projects.

"If delayed po 'yan, it's not because ayaw naming tapusin. Marami po talaga kaming hurdles na na-encounter," said Albanza.

[Translation: If there were any delays, it's not because we don't want to finish it. We just encountered many hurdles.]