17 Jun 2005
The bidders for the 25-year concession of the Transmission Company (Transco) should be prepared to finance the rehabilitation and expansion of the country’s electricity transmission system, a program that would need at least $850 million in the next five years in addition to the required cash down payment equivalent to at least 25% and the annual amortizations of the remaining 75% of the winning bid price.
“On top of collecting the winning bid price, the Philippine government expects the Transco concessionaire to finance and implement the country’s transmission development program as well as shoulder Transco’s operating expenses,” said Raphael Perpetuo M. Lotilla, Secretary of the Department of Energy.
“This means that aspiring bidders should have the capability to raise a substantial amount of money especially during the first five years of operations so they can maximize the potential earnings they can derive from the 25-year concession,” Lotilla added. PSALM has scheduled to hold the bidding for Transco’s concession during the fourth quarter of this year.
Lotilla explained that “we should not lose sight of the fact that the main reason why the Philippine government decided to privatize the power generation and transmission business was to ensure adequate power supply needed to support the economic growth of the country. Given the fiscal condition of the country, the government is not in a position to finance additional power generating plants and transmission lines to meet future requirements.”
Transco, as it is being offered to investors through the forthcoming public bidding, is debt-free as the outstanding debts attributable to Transco business will be transferred and serviced by PSALM once the consent of all creditors will have been obtained. The proceeds from Transco’s privatization will then be used to pay off these debts in order to lighten the debt burden of Philippine Government.
As approved by the Joint Congressional Power Commission (JCPC), the Philippine government will continue to own Transco’s assets while the concessionaire will handle the operations and implement its rehabilitation and expansion program. The concession may be extended for another 25 years depending on the review of the concessionaire’s performance.
The JCPC resolution also called for a cash payment of at least 25% while the balance will be payable over a period of 15 to 25 years. “The deferred payments, which will carry a fixed interest rate, will maximize the cash flow for the Government and at the same time make the acquisition of the Transco concession more affordable to investors,” Lotilla said.
Secretary Lotilla also said a minimum bid price or Reserve Price will be set shortly before the bids will be opened. “This Reserve Price which will not be revealed to the Bidders, will assure the Government that the maximum price will be extracted from the Transco bidders,” Lotilla said.
Strategic Communications and Partnership Division |