03 Aug 2005
The best time to bid out the National Transmission Corporation (Transco) will be from end- 2005 to early 2006 when the Energy Regulatory Commission (ERC) will have determined the transmission revenue cap for the second regulatory period.
“Once the ERC has set Transco’s maximum allowable revenue (MAR) for the second regulatory period, bidders will be in a better position forecasting their prospective revenue streams. This will be valuable information for investors in preparing their bids as MAR will be the basis for computing the transmission rates that will be charged to electricity users,” said Nieves L. Osorio, president of the Power Sector Assets and Liabilities Management Corp. (PSALM).
PSALM is bidding out the power transmission business through a 25-year concession contract. Discussions with prospective investors for the assets began last year but PSALM later decided to privatize the assets through competitive bidding, citing public interest.
Last week, the Electricity Generating Technology of Thailand (EGAT) and its Filipino partners disclosed that they were considering participating in a second bid for the assets. PSALM is finalizing the terms of reference for the competitive bidding.
Transmission wheeling rates are the main revenue source for the private concessionaire of the electricity transmission operations. The transmission rates were first set by the ERC in 2003, the start of the first regulatory period. The second regulatory period was originally set on January 1, 2006, but was moved to April 2006. Thereafter, it will be reset every five years.
ERC announced that the revenue cap or MAR will be set in April 2006 after the holding of public consultations in the first quarter of next year.
Osorio pointed out that at the start of each five-year regulatory period, the ERC would determine the concessionaire’s annual revenue requirement based on its operating and maintenance expenses, estimated tax payments, depreciation charges on assets used, and investors’ return on capital. “These factors will be the basis for computing the concessionaire’s maximum allowable revenue for the regulatory period,” she said.
At the end of each year, the revenue cap will be compared against the actual revenue collection of the concessionaire, the difference of which will be the basis for adjusting the following year’s revenue cap.
Osorio said the revenue cap would assure electricity consumers that fair electricity rates would be charged even after the privatization of Transco.
“We would like to assure consumers that the capital and operating expenditures as well as taxes are pass-through costs that would not be a source of windfall profits for the concessionaire who would be assured of a reasonable return for their investments,” she added.
Osorio said PSALM is now finalizing the transaction and bidding documents for Transco. The corporation has also set up a virtual data room facility that will provide information to investors conducting due diligence work.
Strategic Communications and Partnership Division |