All eyes are on the competing bids of power-distribution giant Meralco and port magnate Enrique Razon Jr.’s IGNITE Power and Energy Holdings for the South Cotabato II Electric Cooperative, Inc. (SOCOTECO II).

The cooperative board quickly dismissed Meralco’s bid while provisionally accepting IGNITE’s, all apparently without properly evaluating either bid in an open and fully competitive manner. The accelerated pace of the transition has sparked unease among civic, consumer, and academic stakeholders, particularly because of what critics describe as the aggressive approach of the Razon-led group. 

The inclusion of boxing icon and former senator Manny Pacquiao in the venture is widely seen as a political and public-relations sweetener layered onto an already highly sensitive power restructuring effort. (READ: When business and politics mix: Enrique Razon’s empire)

Notre Dame of Dadiangas University President Brother Manuel de Leon has raised his own concerns, telling a recent forum: “Parang minadali.” (It appeared rushed.)

Stakeholders find it difficult to accept the decision of the board, which granted a provisional go-ahead to one proposal while throwing aside another without an entirely transparent comparison process. Was the result cast long before the process began? 

Major utility player

Serving roughly 300,000 consumers in Soccsksargen (Region XII), SOCOTECO II is no trivial utility. It was once regarded as a model cooperative — fully barangay-electrified and certified Triple-A. Its decline into Category B status is certainly concerning, but not equivalent to institutional collapse. Rehabilitation remains possible, which makes the extraordinary remedies now being proposed all the more deserving of scrutiny.

Under the IGNITE structure that’s been made public, SOCOTECO II would enter into a joint venture and form a new corporation in which the cooperative would retain only a 30% stake. IGNITE has offered an initial P4-billion investment, alongside a commitment to pour in P10 billion over five years.

Critics said the board decision could pave the way for a gradual surrender of ownership.

The fear is not unfounded. Electricity distribution is among the most stable recurring-revenue businesses in the economy. Operational control over a captive franchise area becomes extraordinarily valuable over time.

Consumers cannot realistically “unsubscribe” from an electricity distribution network. That’s why governance structures, franchise rights, asset transfers, and control mechanisms matter far more than headline investment promises. 

And this is exactly where Meralco’s proposal deserves a far more rigorous second look.

Did Meralco submit a hostile takeover proposal, as some sectors alleged?

Meralco’s February 2 submission was explicitly labeled a non-binding term sheet intended “solely for discussion and structuring purposes.” It proposed a strategic partnership aimed at improving SOCOTECO II’s reliability, modernization, and long-term sustainability while expressly preserving the cooperative’s franchise. 

That preservation clause is critical because it stated that the transaction would neither require nor result in a separate or overlapping franchise, nor would it “diminish, transfer, or place at risk” SOCOTECO II’s franchise rights.

Franchise transfer and asset distribution

By contrast, IGNITE’s proposed structure involves transferring franchise and distribution assets into a newly formed corporation while leaving existing liabilities with SOCOTECO II. This resembles not merely corporatization, but a far more far-reaching exercise in financial engineering with substantial implications for risk allocation and long-term control.

Corporatization is the process of transforming an organization — typically a government entity, cooperative, or non-stock institution — into a corporation operating under a formal equity structure with shares, ownership interests, a board of directors, and profit-oriented financial management. In the case of electric cooperatives, corporatization effectively converts a member-owned utility into a stock corporation where ownership and control may eventually be shared with or transferred to private investors and strategic partners.

The irony is that the board partly justified rejecting Meralco’s proposal on corporatization concerns. Yet, Meralco’s rebuttal strikes directly at the logic of that position. 

It argues that corporatization is expressly permitted under both the Electric Power Industry Reform Act (EPIRA) of 2001 and the National Electrification Administration Reform Act of 2013. Meralco pointed out that the competing IGNITE proposal itself allegedly adopts an even more aggressive corporatization framework.

The board also argued that Meralco’s proposal lacked a firm capital commitment. But Meralco’s term sheet followed standard utility-industry practice by deferring final valuations and investment commitments until after due diligence. No sophisticated utility operator commits blind capital without first evaluating system losses, asset quality, regulatory exposure, capital expenditure obligations, and demand characteristics.

What can be more troubling is Meralco’s allegation that SOCOTECO II developed a “Partnership Framework for Capital Investment” and “Terms and Conditions” after it had already submitted its presentation, and then evaluated proposals using standards that were allegedly never disclosed to it despite repeated requests. That allegation alters the complexion of the bidding narrative.

Meralco further claimed that IGNITE was subsequently allowed to negotiate and align its proposal with SOCOTECO II’s preferred framework while Meralco was denied a similar opportunity.

This goes beyond ordinary commercial friction. It cuts to the core of fiduciary governance. Electric cooperatives may technically be private entities, but they function as monopoly utilities operating in the public interest. 

Because consumers cannot switch providers when governance fails, cooperative leadership carries obligations far heavier than those found in ordinary private corporations. Transparency, accountability, and procedural fairness are not optional ideals in such structures — they are foundational requirements.

A must: Competitive bidding

Meralco’s position hinges partly on NEA Resolution No. 88, Series of 2002, which outlines the requirement for competitive selection processes involving private-sector participation in electric cooperatives.

One need not automatically adopt Meralco’s legal interpretation to appreciate the broader governance principle at stake: when billions of pesos, long-term franchise rights, and operational control over a regional electricity monopoly are involved, opacity becomes dangerous. 

Those concerns are amplified by the political optics surrounding the transaction. Manny Pacquiao’s meetings with local leaders may be entirely innocent, but in high-stakes utility negotiations, timing, optics, and perceived influence matter enormously.

None of this automatically renders the IGNITE proposal defective. Nor does it mean Meralco should automatically prevail. But measured against balance-sheet depth, operating scale, systems capability, regulatory experience, and technical track record, it does have a point.

IGNITE and efficiency 

IGNITE says the proposed deal is being misunderstood. Company executives have publicly stated there is yet to have a final agreement, saying that the initiative remains a proposal as long as it hasn’t been greenlit by member-consumer-owners under the cooperative framework.

IGNITE refuses to call the arrangement a “takeover” but maintains that modernization has always been the goal: injecting capital, technical know-how, and systems capability into a cooperative facing operational and financial pressures. Ignite also explains that SOCOTECO II itself would continue to exist as a juridical entity, with the cooperative retaining equity participation in the new structure. 

It frames its proposal not as an asset grab, but an attempt to unlock private-sector efficiency in a utility sector where underinvestment, systems losses, and political interference have historically constrained long-term reliability.

That defense merits serious consideration. The truth is, private capital has frequently prevailed in many places where politicized utility governance has not. The deeper issue, however, is that utility transactions get shaped not by stated intents for all involved, but by how control, risk and economic rights are distributed in the end.

Legal continuity, in the case of infrastructure economics, does not preclude a deep transfer of operational supremacy in practice. A cooperative may barely survive on paper, but ultimately effective control over revenues, assets, expansion choices, and long-term strategy moves elsewhere. 

Thus, it’s not only a debate on whether IGNITE wants to modernize SOCOTECO II anymore. It is over whether the process surrounding one of Mindanao’s principal electricity franchises has been sufficiently transparent to warrant a transformation that could redefine in perpetuity who controls a captive regional power monopoly.

The larger problem is that the SOCOTECO II bidding process now appears too rapid, too opaque, and too unevenly administered to inspire public confidence.

The board still has time to correct that perception. It should publish the evaluation framework, disclose the comparative scoring, allow side-by-side final offers, and conduct a transparent competitive review. 

Member-consumer-owners deserve to see precisely what is being traded away, what risks are being assumed, and what economic rights are being preserved.

Once governance control over a regional electricity monopoly effectively shifts hands, reversing that decision becomes extraordinarily difficult. History is filled with utilities that discovered too late that the true cost of a rushed rescue was not financial. It was control. (To be continued in my next newsletter.) – Rappler.com

I welcome your views on these and other issues where decisions made in power shape the country’s economic future.

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