BWorld 782, Philippine nuclear energy, soon please

Philippine nuclear energy, soon please

March 11, 2025 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2025/03/11/658303/philippine-nuclear-energy-soon-please/

 

A year ago, in early March 2024, I joined the Philippine Nuclear Trade Mission to Canada that was organized by the Canadian Embassy in Manila. The delegation was headed by Department of Energy (DoE) Undersecretary Sharon Garin, plus Science and Technology Undersecretary Leah Buendia, Energy Regulatory Commission Chairperson Monalisa Dimalanta, and Philippine Nuclear Research Institute Deputy Director Vallerie Samson.

 

Private sector participants included Ronald “Suiee” Suarez, Vice-President for Corporate Communications of Aboitiz Power (AP) along with Lino Bernardo and Nicole Yazon, also of AP; Froilan Savet, Vice-President and Head of Networks of Meralco; and Sebastian Quinones, Jr. of Prime Energy. Guy Boileau, Senior Trade Commissioner of the Canadian Embassy in Manila plus Philippine consular officers in Toronto were with us all throughout.

 

I super-enjoyed that very educational trip. It was not the regular conference where we’d stay in one hotel all day long — instead we hopped from one meeting to another, had site visits to the McMaster University Nuclear Reactor, a big CANDU (Canada Deuterium-Uranium) mock-up reactor by Ontario Power Generation (OPG). In Toronto, we also met the officials of Bruce Power, the biggest nuclear power company in North America, among many others.

 

On Feb. 26 this year, the DoE released a statement, “DoE and OECD-NEA Strengthen Collaboration on Advancing the Philippine Nuclear Energy Program.” It is about the visit to the DoE of Director-General William D. Magwood IV of the Organization for Economic Cooperation and Development Nuclear Energy Agency (OECD- NEA) to discuss developments in the Philippine Nuclear Energy Program (NEP). The DoE projects the integration of 1,200 megawatts (MW) of nuclear power into Philippines’ energy mix by 2032.

 

Energy Secretary Raphael P.M. Lotilla was quoted as saying that, “Much of our work has focused on building a strong legal and regulatory framework for nuclear energy. We have made significant progress in submitting all necessary requirements for the ratification of existing nuclear energy-related agreements, paving the way for a safe, sustainable, and responsible nuclear energy program that will secure our nation’s energy future.”

 

I checked the status of nuclear energy development in the world. In the accompanying table, these nuclear reactors are defined as follows: “Operable” are already connected to the grid, “Under Construction” have their first concrete already poured and a keel layed for floating plants, “Planned” have approvals and funding or commitments in place and are mostly expected to be in operation within the next 15 years, and “Proposed” are specific programs or site proposals but the timing is uncertain.

 

The US remains the nuclear powerhouse with a capacity of 96,952 MW, followed by France. But China will lead the world in the future with 33,165 MW under construction and 38,710 MW from planned reactors. Europe’s largest economy, Germany, had hit peak nuclear generation of 171 terawatt-hours (TWh) in 2001 then started de-nuclearization as they pivoted hard towards more intermittent wind-solar energy sources with only 34.7 TWh of nuclear energy in 2022 and 6.7 TWh in 2023 (see Table).

 

Taiwan is phasing out its nuclear power and has only one remaining 932-MW operable plant. In contrast, Saudi Arabia and Iran have proposed nuclear plants with 2,900 MW and 5,200 MW respectively.

 

One company in the Philippines that is very enthusiastic about integrating nuclear power into the mix is Meralco, through its subsidiary Meralco Power Gen (MGEN). I asked Emmanuel V. Rubio, President and CEO of MGEN, about the preparations they are making for this task. He has an optimistic response.

 

“We believe that nuclear energy will play an important role in the energy mix of the Philippines as we shift towards a low carbon economy. We continue to endorse the efforts of the DoE in crafting the necessary policies to enable nuclear energy, and we likewise support the work in Congress in crafting legislation that will allow for the safe use of nuclear energy.

 

“At One Meralco, we are proactively working towards this future by undertaking initiatives such as the NEST (Nuclear Energy Strategic Transition) program and the FISSION (Filipino Scholars and Interns on Nuclear Engineering) program. These initiatives are designed to build our institutional readiness and cultivate local talent, ensuring that we are well-positioned to be at the forefront of nuclear energy development in the Philippines.”

 

If the planned 1,200 MW of nuclear power comes online, can the transmission system handle it given the huge entry of intermittent renewables wind-solar in the grid? I asked Cynthia Alabanza, spokesperson and Head of Corporate Communications and Public Affairs of the National Grid Corporation of the Philippines (NGCP). She gave a practical response.

 

“NGCP has two major projects which will be completed by 2026 and 2027. Assuming no further major generation development will be built and commissioned in the Bataan area before 2032, and assuming further that the 1,200 MW nuclear target will be located in the Bataan area, then the existing facilities by 2027 will be adequate for that. Until the details of the project (location and capacity) are determined, and a System Impact Study (SIS) is issued for said project, everything remains speculative. NGCP cannot overemphasize the importance of collaborative and holistic planning when it comes to energy security.”

 

If oil-gas powerhouses Iran, Saudi, and the United Arab Emirates are setting up or planning more nuclear plants, the Philippines, which is an oil-gas-coal importer, should have big nuclear plants too. In 2023, the Philippines’ total power generation (from coal, gas, geothermal, hydro, etc.) was 119 TWh. That is equivalent to the nuclear generation of Japan in 1983, South Korea in 2002, and China in 2013.

 

The non-commissioning of the Westinghouse-built Bataan Nuclear Power Plant (BNPP) in 1986 was one of the single biggest mistakes of the Cory Aquino administration. If it had been allowed to operate, and with an average capacity factor of 85%, it could have generated an average of 4.6 TWh/year. This is larger than the combined generation of wind and solar of 3.8 TWh in 2023.

 

The BNPP was a “classmate” of nuclear plants built by Westinghouse in many countries, including Brazil’s Angra 1 plant (609 MW, commissioned in 1982); Slovenia’s Krisko plant (688 MW, commissioned in 1983); Spain’s Asco plant (995 MW, commissioned in 1984); and South Korea’s Hanbit 1 and Hanbit 2 (995 MW and 988 MW, respectively, both commissioned in 1986). They all were started to be built by Westinghouse in the 1970s, all experienced cost escalations when construction started, all were commissioned in the 1980s, and all are operating until now. And all are safe and have had no accidents. 

Macroecon 34, Philippines from 31st to 28th largest economy in the world by 2026

In 2024 the Philippines was the 31st largest economy in the world by GDP size at purchasing power parity (PPP) values. This year, we are projected to overtake Malaysia for the 30th spot and next year we are projected to overtake Argentina and Netherlands for the 28th spot. Data from the IMF World Econ. Outlook 2025 database.

Meanwhile the Philippines remains a consumption-based economy with household consumption comprising 73% of GDP, although this is a reduction already from 78% two decades ago or 2004. Government consumption, national and local, and investment or capital formation saw an increase in share from 2004 to 2024. Data from the PH Statistics Authority (PSA).

GDP by industrial origin, 2004 to 2024, the share of agriculture declined from 15% to 8% of GDP. Industry share is generally flat at 29-31% of GDP while the services sector share has significantly increased from 54% to 63%. Data also from PSA.

--------

See also:

Macroecon 31, Low oil prices, low inflation, September 05, 2024

Macroeconomic 32, GDP growth in Q1 2025, Germany degrowth, Japan inflation, June 01, 2025

Macroecon 33, Updated DBCC fiscal program, 2025-2028, June 29, 2025

BWorld 781, On Meralco rates and NGCP’s cost of capital

On Meralco rates and NGCP’s cost of capital

March 6, 2025 | 12:01 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2025/03/06/657373/on-meralco-rates-and-ngcps-cost-of-capital/

 

Former Energy Undersecretary and now “consumer advocate” recently attacked the Manila Electric Co. (Meralco) as being “unjust and unfair… charging households more than businesses,” referring to the lower rates for commercial and industrial customers compared to those of residential customers.

 

Petronilo Ilagan alleged that residential customers are subsidizing businesses. He used old numbers to make his argument, saying that residential customers pay “P1.8082 per kilowatt-hour (kWh) for 1-200 kWh users, P2.1187 per kWh for 201-300 kWh, P2.4116 per kWh for 301-400 kWh, and P2.9220 per kWh for those consuming over 401 kWh.” These were June 2022 numbers.

 

The most recent numbers are: P1.29/kWh for those consuming 201-300 kWh per month, and P2.09/kWh for those consuming over 401 kWh. In contrast, General service B and General Power (GP) Secondary customers pay only P0.134/kWh. The GP 13.8 KV pay even lower at 5 centavos/kWh. The supply charge and metering charge are up to P12,461 per large customer per month (see table).

 

Meralco rates as of February 2025 for residential, commercial and industrial, P/kWh unless specified

 

Mr. Ilagan, who serves as president of the National Association of Electricity Consumers for Reforms, Inc. (Nasecore) is confused. Here are four reasons why.

 

1. The main concern of average residential or household customers like me is not “cheap at all costs” electricity but no blackouts. Electricity should be there when I need it, when I turn on the lights or the aircon. If electricity prices go up, then I can adjust by using an electric fan instead of an aircon, or turning off one or two of the many bulbs in the house. But when there is a blackout, my choices are horrible — either endure the darkness and inconvenience or light a candle. The latter is dangerous when a fire can accidentally happen, the price is damaged properties if not death to people.

 

2. The rates charged by private distribution utilities (DU) like Meralco are all regulated by the Energy Regulatory Commission (ERC) and not arbitrarily set by the DU. The current distribution charge rate has been there since 2003 and was not questioned for the last 22 years.

 

3. Setting up electric cables, meters, monitoring, and collection is more complicated and more costly with numerous small customers like households, compared with a single big hotel or mall or university.

 

4. The Electric Power Industry Reform Act of 2001 (EPIRA) Section 36 prohibits big customers from subsidizing residential customers, and businesses would be discouraged from coming into an area and creating more jobs if their cost of electricity gets even higher.

 

This attack on big DUs, the big generation companies, to force “cheap at all costs” electricity is only political noise and optics. The result would be “cheap but not available” electricity because the necessary cost and returns to entrepreneurship would not be met, so potential power businesses will not come into an area.

 

NGCP’S WACC

Recently the ERC set the weighted average cost of capital (WACC) for the National Grid Corp. of the Philippines (NGCP) for the 4th regulatory period (RP, 2016-2020) at 10.71%. This is lower than the 15.07% under the 3rd RP (2011-2015, under NGCP), and 15.88% under the 2nd RP (2006-2010, when the grid was under TransCo’s management).

 

This low level of WACC — meaning a low transmission charge to be allowed — can be problematic in terms of infusing more capital for more big transmission projects as more power generation capacities are added, espe-cially for geographically scattered, small renewable energy projects like solar.

 

The NGCP shoulders the Concession Fee Payment, then the 3% franchise tax, which are now considered as not being part of the revenue building blocks, or not an expenditure item for recovery. Then there are nearly a doz-en recoveries as adjustments to the annual revenue requirement (ARR) — some dating back to the 2nd RP — which are now facing uncertainty of recovery.

 

The regulated sub-sectors of power transmission and distribution are problematic because each costing is subject to approval or disapproval by the ERC. As an economics writer and researcher, my approach is always to have a high but realistic growth target — like 7-8% annual GDP growth — and seeing what the inputs are — like power generation-transmission-distribution levels — that can support such high growth targets. Working backwards to identify bottlenecks, regulation should adjust, not prevail. Growth targets should prevail over regulation and bureaucratic requirements. 

PhilStar 31, Low inflation, low borrowings via PhilHealth idle fund transfer

Low inflation, low borrowings via PhilHealth idle fund transfer

 

ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star 

March 6, 2025 | 12:00am

https://www.philstar.com/business/2025/03/06/2426152/low-inflation-low-borrowings-philhealth-idle-fund-transfer

 

Yesterday, the Philippine Statistics Authority released the inflation data for February 2025 at only 2.1 percent, nice. Inflation in recent years: 3.1 percent in February 2017, 3.7 percent in February 2018, 3.8 percent in February 2019, 2.5 percent in February 2020, 4.2 percent in February 2021, 3.0 percent in February 2022, 8.6 percent in February 2023, 3.4 percent in February 2024 and 2.1 percent in February 2025.

 

So this is the lowest inflation for February over the past eight years. Good, kudos to the government economic team and Philippine entrepreneurs.

 

Low food inflation this year, at only 2.6 percent in February versus 4.6 percent in February 2024 has greatly contributed to the low overall price movement because food and non-alcoholic beverages constitute the biggest weight in overall inflation.

 

Other contributors are: housing, water, electricity, gas and other fuels, only 2.1 percent; transport, -0.1 percent vs 2.1 percent in February 2024; and health, only 2.1 percent vs 3.2 percent in February 2024.

 

Low inflation means high consumer confidence, and high household and private spending means high overall GDP growth because household consumption constitutes 73 percent of GDP.

 

In the first quarter of 2024, average inflation was 3.3 percent and household spending growth was 4.6 percent. In the first two months of 2025, inflation averaged at 2.5 percent only and household spending growth in Q1 2025 could be around 5.5 percent or higher.

 

I checked the press statements of the economic team. Budget Secretary Amenah Pangandaman said that they “welcome the news of lower-than-expected inflation and it   reflects the intensity of gains from previous actions to achieve price stability.  DBM will continue supporting programs which ensure that benefits are felt among the marginalized and lower-income deciles of the population.”

 

Finance Secretary Ralph Recto said that “Our fiscal consolidation and economic measures have contributed to declining trend in overall inflation. Ongoing measures include fast-track importation permits especially of key food commodities, implementation of lower tariff of rice under EO 62, the National Food Authority to release at least 25,000 metric tons (MT) of rice monthly through Food Terminal Inc. while continuing to support local farmers through palay procurement. Lower inflation contributes to higher business and consumer confidence leading to more economic activities, more revenue collections to fund more infrastructure and development projects nationwide.”

 

NEDA Secretary Arsenio Balisacan said that “The government will sustain its efforts to keep inflation low and manageable to protect the purchasing power of Filipinos… our efforts to combat inflationary pressures are working.”

 

Last week, the Bureau of the Treasury released the full year 2024 cash operations report. The budget deficit was P1.51 trillion, similar to a deficit of P1.51 trillion in 2023 and lower than the deficit of P1.67 trillion in 2021 and P1.61 trillion in 2022.

 

Financing or net borrowing is declining: P2.25 trillion in 2021, P1.97 trillion in 2022, P2.07 trillion in 2023, and P1.31 trillion in 2024. Good. We must aim for borrowings below P1 trillion a year because high public debt stock means high annual interest payment for us.

 

And yesterday the third oral arguments at the Supreme Court about PhilHealth idle funds transfer to the National Treasury continued.

 

During the second oral arguments last Feb. 25, Solicitor General Menardo Guevarra argued that majority of PhilHealth’s P60 billion excess funds remittance to the National Treasury were used to finance critical health and social service programs, including settlement of long-overdue Public Health Emergency Benefits and Allowances for Health Care and Non-Healthcare Workers during the COVID crisis, and Medical Assistance to Indigent and Financially Incapacitated Patients.

 

Then some P13 billion of the P60 billion was used to fund government counterpart financing for foreign-assisted infrastructure like counterpart financing for the Panay-Guimaras-Negros Island Bridges; the Metro Manila Subway Project; the Philippine Multi-Sectoral Nutrition Project; the Mindanao Inclusive Agriculture Development Project; the Cebu-Mactan Bridge and Coastal Road Construction Project; the North-South Commuter Railway System.

 

At end-2024, PhilHealth has P498 billion in cash, more than enough to continue increasing its inpatient, outpatient and special benefit packages.

 

Lower inflation, lower deficit and borrowings by tapping idle funds of some big government corporations like PhilHealth. These will contribute in pushing for higher economic growth, higher job creation for our people without resorting to more taxation or more borrowings.

BWorld 780, To reduce poverty and create jobs, 7-8% economic growth is needed

To reduce poverty and create jobs, 7-8% economic growth is needed

March 4, 2025 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2025/03/04/656799/to-reduce-poverty-and-create-jobs-7-8-economic-growth-is-needed/

 

Last week Canada and India released their fourth quarter (Q4) 2024 GDP data. So, the top 15 largest economies in the world have now provided their full year 2024 data (except Brazil and Russia). Extending the list to encompass the top 60 medium and large economies in the world, one sees that the fastest growing economies last year were Vietnam, India, and the Philippines. Kudos to Philippine businesses and workers, and the government economic and infrastructure teams.

 

The European nations and Japan remain laggards economically. The largest economy of Europe, Germany, has been contracting for the last two years straight, a clear case of deindustrialization. As has Austria too, and Russia’s three neighbors — Finland, Latvia, and Estonia (see Table 1).

 

Growth of nearly 6% is good, but we need to grow 7-8% yearly if we are to significantly reduce poverty and create more jobs. From 1982 to 2011, China grew by an average of 10.3% per year. From 1992 to 2019, Vietnam grew by an average of 7.1% per year.

 

Aside from having had a low economic base up to the early 1980s, both China and Vietnam grew fast on the back of electricity generation which was heavily dependent on coal. India and Indonesia did so too. Their big manufacturing capacity, their huge hotels, resorts, and malls, their airports and seaports were all powered mostly from their coal plants which give cheap, reliable, and dependable electricity.

 

Meanwhile, the Philippines’ coal generation is the smallest among developed and emerging Asian countries except for those that rely more on natural gas like Thailand and Singapore. Even developed and “greenie” Korea and Japan have high coal generation (see Table 2).

 

I believe that the Philippines can grow by 7-8% per year for a decade — provided we discard growth-braking climate-related regulations and restrictions, plus if we have improvements in rule of law and a drastic reduction in the annual budget deficit and borrowings.

 

Last week, on Feb. 24, CNN’s Richard Quest interviewed Finance Secretary Ralph G. Recto about trade and investments, asking if the Philippines is in danger of US President Donald Trump’s “protectionist” policies. I liked the practical reply of Secretary Recto.

 

He said: “Our economy is 70% to 75% domestic driven. Unlike China and Vietnam, or even our neighbors in Southeast Asia, [which are] more export-oriented driven. We earn foreign exchange from OFW remittances. We have a trade deficit when it comes to goods. We have a robust BPO industry… FDIs, hopefully, maybe Apple… Western companies [that] invested in China will probably move also to the Philippines. And we have a new law CREATE MORE, for that purpose… [we are] now working on a free trade agreement with the European Union… [we are] open to a free trade agreement with the United States. And I will bat for a reduction in tariffs on US vehicles.”

 

Mr. Recto was referring to the Implementing Rules and Regulations (IRR) of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act or RA 12066 that he signed on Feb. 21 as the Chair of the Fiscal Incentives Review Board (FIRB), along with his FIRB Co-Chair, Trade Secretary Ma. Cristina Aldeguer-Roque.

 

Last Friday, Feb. 28, the Bureau of the Treasury released the December and hence full year 2024 cash operations report. The budget deficit was P1.51 trillion. But the revenues data is still incomplete, with no breakdown yet for income tax, excise tax, VAT, and other domestic taxes. I think when these are fully accounted, the deficit can go down to probably P1.3 trillion only.

 

The budget deficits in previous years were: P1.37 trillion in 2020, P1.67 trillion in 2021, P1.61 trillion in 2022, and P1.51 trillion in 2023.

 

Meanwhile, financing or net borrowing is declining: P2.50 trillion in 2020, P2.25 trillion in 2021, P1.97 trillion in 2022, P2.07 trillion in 2023, and P1.31 trillion in 2024.

 

Budget Secretary Amenah F. Pangandaman, in a press release, hailed that the budget deficit for 2024 has “gone down to 5.7% of GDP, better than expected… the lowest rate recorded since the pandemic in 2020… a marked improvement compared to the 6.2% deficit in 2023… also well within the fiscal outlook of the Development Budget Coordination Committee (DBCC) at our last meeting.”

 

While I share Ms. Pangandaman’s exuberance, I still wish that spending, the deficit, and borrowing decline significantly. The interest payments for our public debt in 2024 was P763 billion, or an average of P2.1 billion per day. This is huge and wasteful.

 

Also last week, on Feb. 26, I attended the BusinessWorld Stock Market Outlook 2025, held at the Dusit Hotel in Makati. The finance speakers expressed an overall business optimism for the country this year, coming from 2024’s “high-interest rate environment,” the “tug of war between low-risk premiums and elevated bond yields,” “foreign fund outflows of $442 million or three times higher than 2023,” and saying that “PSEi still significantly undervalued.”

 

The CREATE MORE law and its IRR, especially the corporate income tax cut from 25% to 20% to start this year, should help attract those foreign equities and FDIs back to Philippine soil and companies. 

PhilStar 30, Meralco finance and GDP congruence, energy regulation incongruence

Meralco finance and GDP congruence, energy regulation incongruence

 

ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star 

February 27, 2025 | 12:00am

https://www.philstar.com/business/2025/02/27/2424408/meralco-finance-and-gdp-congruence-energy-regulation-incongruence

 

Last Monday, Feb. 24 , I attended the 2024 Meralco Financials Operating Results: Media Briefing held at Grand Hyatt in BGC, Taguig City. Top officers of the company were there led by chairman and CEO Manuel V. Pangilinan or MVP, EVP and COO Ronnie Aperocho, SVP and chief finance officer Betty Siy-Yap, SVP and chief revenue officer Ferdinand Geluz, SVP and head of Regulatory Management Office Jose Ronald Valles, FVP and head of Networks Froilan Savet, Meralco Power Gen (MGen) president and CEO Emmanuel Rubio, others. Moderator was the always-smiling communications expert Joe Zaldariaga, the company’s VP and head of Corporate Communications.

 

STAR energy reporter Brix Lelis was also there and his recent stories include “Meralco earnings at all-time high” (Feb. 25), “NGCP wins Singapore arbitration case vs PSALM, TransCo” (Feb. 25), “Meralco: Consumers save P3.88 billion from new power deal” (Feb. 26).

 

As an economics researcher and writer for decades, I always try to look for the macro perspective of some micro or corporate/industry trends. I saw three correlations and congruences between some national macroeconomic data with Meralco finance.

 

One, in 2024 our GDP growth was 5.6 percent, Meralco electricity sales (in gigawatt-hours, GWh) growth was 6 percent.

 

Two, in 2024 the Philippines’ S&P credit ratings was “BBB+ positive,” Meralco ratings was “BBB- positive.”

 

Three, also in 2024 GDP, household consumption of P16.1 trillion constituted 72.5 percent of GDP. The combined consumption of residential 19,455 GWh plus commercial 20,406 GWh was 73.4 percent of total electricity sales of 54,325 GWh.

 

I mentioned the first two during the open forum, good numbers. In a closing message, MVP mentioned that the Philippine economy is a private or household consumption-driven economy, hence a high share of household spending on food, restaurants, malls, etc. He is correct. The numbers are in point three above.

 

The report by MGen president Manny Rubio is cool when he said something like “MThermal and MGas are helping drive the country’s energy security through strategic baseload power expansion.”

 

Correct. I always believe that hydrocarbons and fossil fuels are useful, not harmful, if we prioritize to save our economy and jobs, save our households and food from the inconvenience of blackout. Save the planet, well planet Earth is 4.6 billion years old and it has seen natural climate change of warming-cooling endless cycle.

 

Rubio was referring to their existing 1,293 MW coal plants, then an expansion of their coal plant in Toledo, Cebu at additional 78 MW. Then MGas’ LNG plant in Singapore, Pacific Light Plant (PLP) with 1,570 MW by 2030. And LNG plants in Batangas operational 2,475 MW from two huge gas plants in partnership with Aboitiz Power through Chromite Gas, and SMC Global Power. Plus an expansion of Excellent Energy Resources Inc. (EERI) Unit 4 with additional 432 MW by 2029. Coal and gas power, we need more of them, not less.

 

ERC delayed ruling on ASPA

 

Last week Feb. 18, the Energy Regulatory Commission (ERC) said it is delaying and postponing until March its decisions on several ancillary service procurement agreements (ASPA) submitted by the National Grid Corp. of the Philippines (NGCP) and its potential suppliers.

 

These ASPAs went through a competitive selection process (CSP) in 2023, winners announced that year. It is now 2025 or two years since the CSP and the ASPAs – standby power by generation companies (gencos) for NGCP to stabilize the grid when power reserves are low or insufficient -- are still not approved by the ERC.

 

There is big danger to power investment in this kind of regulation. When gencos bid in the CSP, the parameters and terms set by the ERC itself, they bid at the lowest price possible for them and still make a profit. If the winning price is not quickly honored by the ERC, delays approval of the ASPA because it wants to revise some parameters, have another price control to further bring down the price, winning gencos may be put on the verge of losing money. And potential investors will not come in because rules are changed midway, there is high business uncertainty.

 

The primary interest of consumers is no blackout. Not cheap at all cost. Power should be available 24/7 to avoid using candles (which can cause fires) or gensets (costly buying the unit and operating on diesel). If the price is high, consumers can adjust their consumption like turning only one aircon instead of two. If the price is forcibly low but there is blackout, the usual “cheap but not available” electricity, consumers cannot adjust but endure the darkness, inconvenience, damaged appliances or food in the refrigerator.

 

Ronald Valles discussed in his presentation some of Meralco’s PSA that successfully underwent CSP but still awaiting final verification by ERC. Which to me is another delayed approval and implementation and it is not good.

 

ERC should learn to deregulate. Once they have set the rules and terms at the CSP, there should be quick if not automatic approval of the power supply agreement, ASPA and related schemes for the regulated distribution and transmission sub-sectors.

 

The transmission sub-sector and NGCP also experience some price control by ERC. Huge and multi-year capital expenditures costing hundreds of billions pesos will require appropriate price adjustments in transmission charge. Adding more ancillary services towards more redundancy in reserves and ensure more stable grid will also require price adjustments in ancillary service charge.

 

See also this column’s recent papers, “From energy regulation to deregulation, Part 1” (Jan. 30), “Part 2” (Feb. 6).

BWorld 779, Exiting the FATF grey list and getting credit ratings to ‘A’

Exiting the FATF grey list and getting credit ratings to ‘A’

February 25, 2025 | 12:02 am

My Cup Of Liberty

By Bienvenido S. Oplas, Jr.

https://www.bworldonline.com/opinion/2025/02/25/655183/exiting-the-fatf-grey-list-and-getting-credit-ratings-to-a/

 

Last week, on Feb. 21, the Philippines was taken off the Financial Action Task Force’s (FATF) grey list. That is good. The FATF is the global anti-money laundering watchdog, and the Philippines has been on the FATF grey list since June 2021.

 

Department of Finance (DoF) Secretary Ralph G. Recto is correct in his exuberance saying that “This is a landmark achievement of the Marcos Jr. administration. It’s a seal of good housekeeping that strengthens public confidence in our financial system. This will directly benefit our remitting overseas Filipino workers, businesses, and the Filipino people… we will attract more foreign direct investments and expand more trade partnerships that will help accelerate economic growth. With this momentum, our next goal is clear — a credit rating upgrade within the Marcos Jr. Administration.”

 

The DoF is a member of the National Anti-Money Laundering (AML) Coordinating Committee (NACC), Counter-Terrorism Financing (CTF), Counter-Proliferation Financing (CPF) — the inter-agency body responsible for overseeing the National AML/CTF/CPF Strategy (NACS) and guiding its implementation across relevant agencies.

 

On this development, see these related reports in BusinessWorld: “Investor sentiment likely to improve as Philippines is removed from ‘gray list,’” by Luisa Maria Jacinta C. Jocson (Feb. 24), and “Philippines exits global watchdog’s dirty money ‘gray list’” (Feb. 23).

 

The prevalence of Philippine Offshore Gaming Operators (POGO) in recent years was the main factor for the Philippines’ inclusion in the grey list. The POGOs were involved in lots of money laundering activities, so when President Ferdinand “Bongbong” Marcos, Jr. banned them last year, it was a good move.

 

 

The next entry point of big money laundering in the country would be illicit trade in tobacco, oil, jewelry, and other consumer goods — with hundreds of billions of pesos yearly lost in foregone taxes. The government should crack down on these to avoid landing on the grey list again someday.

 

Recently, both the Bureau of Customs (BoC) and Bureau of Internal Revenue (BIR) issued separate but related statements on illicit trade. “BoC Chief Rubio vows heads will roll after discovery of attempted resale of seized cigarettes” (Feb. 22), and “Commissioner Lumagui orders nationwide destruction of P2.1B worth of illicit cigarettes” (Feb. 24). These statements were about the attempted resale of P270 million worth of BoC-seized contraband cigarettes from Capas, Tarlac, and P2.1 billion of BIR-seized illicit tobacco. These two incidents alone would need large-scale money laundering schemes before the funds could be happily enjoyed by the smugglers and criminal groups. The BoC and BIR are both under the DoF, so they must have seen the Finance department’s clear signal to avoid getting on the FATF grey list again.

 

GETTING AN ‘A’

The economic team has targeted making the Philippines get an “A” rating from any of the three big ratings agencies — Fitch, Moody’s, and S&P.

 

I reviewed the latest credit ratings of major East Asian economies. The Philippines is “BBB+ positive” according to S&P or just one step from “A,” is “Baa2 stable” with Moody’s or two steps away from “A3,” and “BBB stable” as per Fitch or two steps from “A-.”

 

And the Philippines has higher ratings than Thailand and even Italy under S&P. Surprisingly, Vietnam and India, which were the two fastest growing major economies in the world in 2023 and 2024, have lower credit ratings (see the table).

 

Budget Secretary Amenah F. Pangandaman said in a Viber message that “a Philippines ratings upgrade to ‘A’ from any of those three agencies would mean lower cost of borrowings for us to help finance the budget deficit and finance important social and infrastructure projects.”

 

This is a reiteration of her previous position as reported here, “Public-finance roadmap to help elevate PHL to ‘A’ credit rating — Budget dep’t” (BusinessWorld, Sept. 17, 2024).

 

Of course, I would prefer that we significantly cut expenditures, cut the yearly deficit, and hence cut the need for more borrowing whether at low or high interest rates. But in the absence of this scenario, low-cost borrowings via a ratings upgrade to “A” is preferable. 

Deindustrialization 29, Germany and UK degrowth policy

Getting worse in Germany. GDP growth for the past 8 quarters (Q2 2023 to Q1 2025) is between -0.3% to 0. Clear degrowth. Data on corporate bankruptcies shows rising trend. Germany government is focused on save the planet, save Ukraine, save DEI, save illegal immigrants, but not save their economy.

Another example of degrowth, deindustrialization economics is UK. As they add more wind-solar in their grid, their overall electricity production declines as the more dependable and cheaper coal and nuclear plants are shutting down. The reason why they do not have blackout yet is electricity import from mainland Europe like France, a nuclear energy powerhouse. Expensive electricity contributes to more corporate bankruptcies.

-----------

See also:

Deindustrialization 26, Update on Europe degrowth, September 03, 2024

Deindustrialization 27, Europe declining market capitalization and GDP growth, September 08, 2024

Deindustrialization 28, Germany's large job cuts, September 29, 2024