The Philippines’ sovereign wealth fund, Maharlika Investment Corp., has acquired a 20% stake in Synergy Grid & Development Phils. Inc. for $337 million, granting the government greater oversight of the China-backed power transmission operator. This strategic investment marks Maharlika’s first venture since its establishment in 2023 and aims to address concerns regarding foreign influence over critical infrastructure and national energy security.
Table Content:
Maharlika’s Investment Strategy and Implications
Maharlika will purchase preferred shares from Synergy at a price of 15 pesos each, securing a guaranteed dividend yield of approximately 6% for the initial three years, increasing to 8% upon conversion to common shares. This investment signifies a pivotal move by the Philippine government to assert greater control over its energy infrastructure. The acquisition will provide Maharlika with two board seats in both Synergy and the National Grid Corporation of the Philippines (NGCP), the entity responsible for operating the nation’s power transmission system.
Synergy currently holds a 40.2% ownership stake in NGCP, with State Grid Corp. of China owning 40%. NGCP’s operations have been under scrutiny by the House of Representatives due to project delays and concerns surrounding Chinese ownership. The Philippine government’s investment in Synergy is intended to enhance transparency and oversight of NGCP’s activities.
Addressing Energy Security and Transparency Concerns
This investment aims to bolster the Philippines’ energy security while alleviating anxieties about foreign influence over vital infrastructure. Energy Secretary Raphael Lotilla emphasized the importance of transparency in NGCP’s operations, stating that the government’s involvement will provide a clearer understanding of the company’s activities and confirm the legitimacy of its presence.
President Ferdinand Marcos Jr. presided over the signing of the binding agreement, signifying the importance of this deal to the nation. This acquisition is expected to provide reassurance to stakeholders concerned about the reliability and security of the country’s power grid. While Maharlika has expressed interest in potentially acquiring shares held by State Grid Corp. of China in NGCP if they become available, no discussions have taken place with the Chinese firm at this time.
Funding and Future Outlook
The investment will be financed by capital contributions from state-owned banks, Development Bank of the Philippines and Land Bank of the Philippines. NGCP has been managing the Philippines’ power transmission system since 2009 under a 25-year concession, renewable for an additional 25 years. This strategic acquisition by Maharlika represents a significant step in solidifying the Philippines’ control over its energy future and fostering greater transparency in the operation of its critical infrastructure. It underscores the government’s commitment to long-term energy security and its proactive approach to addressing potential risks associated with foreign ownership in this crucial sector.
