2 weeks ago
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Maharlika Investment Corp. (MIC), the country’s sovereign wealth fund, is eyeing more investments in power distribution in Mindoro and Palawan as part of its portfolio, in line with its objective of being a development fund, according to MIC president and CEO Rafael Consing Jr.
Consing, who was a recent guest at the Monday Circle which meets every other week at the Westin Manila in Ortigas Center, explained that because the MIC was primarily seeded with government funds that would otherwise have been used to pay down the country’s debts, it has chosen to invest in entities and projects in the country that will help the country’s economic development rather than invest in foreign projects or outside of the country.
According to Consing, “The reality is that the P125 billion (capital of MIC) could have been conveyed to reduce our national debt, but instead it was used to seed us. So thus, from our perspective when we first met as a board, that was one of the things that I had emphasized that we have been funded by debt, and we owe it, therefore, to the country to ensure that we are investing this productively onshore and that’s exactly why we’ve decided that during its nascent stage that we were going to be steering MIC as a national development fund.”
He further explained that when looking at what other sovereign wealth funds are doing, “they’re investing in tech, they’re investing in AI because these are game changers in their nations. In our case, our game changer is, in fact, so basic. And we felt that we had to invest in basic investments in order for the private sector to build the fund, and hopefully take the country forward.”
He elaborated that “If you look at our population today, roughly about 51.92 percent of the population live in the rural areas, right? So I think that’s one important data point. The other important data point is that roughly about 73 percent of our economy is coming from consumption. You have about 20 to 24 percent coming from government spending, and maybe about 20 percent coming from investments. And the rest is our trade deficit...and if you have about 51.92 percent of your population living in rural areas...and if your primary driver of your economy is in fact consumption, then what you can do is if you want to have an immediate impact on your GDP, then you basically increase the purchasing power of your rural areas.
“So, how do you intend to do that? Such an ambitious statement to make, no? But we feel that there is a solution in fact today. In fact, the government has classified these rural areas in two.. from the perspective of electricity, from the perspective of broadband and health care, they put classifications in energy, all of these areas are placed under SPUGs or small power utilities groups. There are about 34 out of 187 cooperatives that are not connected to the grid, for example. So that about 80 to 90 percent of their cost is, in fact, of power... driven by diesel and bunker, and they’re paying about P25 per kilowatt hour. Resorts, for example, in Palawan, in Mindoro... are paying P25 per kWh because they’re buying the diesel directly, while we are paying P11.48 because we’re enjoying the mix of energy that we’re taking from the grid, right? And it’s exactly why when you identify these sectors, we ask ourselves, ‘where is the biggest investment that is required that can enable capital formation wholesale?’”
With that in mind, Consing explained the thought process in its initial investment in the National Grid Corp. of the Philippines (NGCP) as the platform and using that to invest in the same industry... “where we’re not the only ones investing, but the others are investing as well. So we said, we will invest in energy infrastructure. That’s why we’re not in the generation side. Neither are we on the distribution side. We’re on the transmission side. This, once you build that infrastructure of wires, then you can have entrepreneurs investing, small companies investing and large companies investing in these areas as well.
“So hence, we decided that NGCP was going to be an important investment in so far as the nation is concerned... and then we did not want to leave out islands, right? So hence, we’ve decided that in addition to investing in NGCP, we’re also investing in island transmission.”
The SPUGs, Consing revealed, are subsidizing power to the tune of about P170 billion per annum, 70 percent of which goes only to two areas, that’s Mindoro and Palawan. So we felt that if you are subsidizing Mindoro and Palawan by 70 percent of P170 billion “which is about P94 billion, then you know that there is a demand that can be met, right? There is obviously a population that’s being supported.”
Furthermore, he observed, “you have about 2.5 million tourists passing through Palawan and yet they rely on generators. We’ve got about 240,000 tourists in Mindoro and it’s just... the potential is not being maximized, right? So hence, one of our first MOUs that we’ve signed is, in fact, to roll out transmission lines in Mindoro first and then Palawan second.”
The MIC top executive also cited the fact that the World bank, about three years ago, had funded a study where they identified the five wind super highways in the Philippines, and two were found in Mindoro. Wind power, he believes, is a more efficient option for renewable power generation than solar power, which would entail use of more land area.
Noting that, Consing argued, “if we are aiming for a 35 percent contribution of renewable power into our generation sector by 2035 and 50 percent by 2050, can you imagine doing that in solar? We will lose all our land, all our agricultural land, right? So that’s why we felt we needed to support wind because in wind, we can deliver in gigawatts. Solar power, you can deliver in gigawatts nominally, but we will use significant amounts of land. So hence, if we can prepare Mindoro for that and eventually interconnect that to the grid, then they can begin building wind farms that can then supply power to the grid, and therefore reduce that cost over time. Because again you’re adding to the mix. So that’s what we intend to do.”
