TransCo bidders required to post $30-million bid bond

08 Jun 2006

Investors interested in bidding for the 25-year concession of the National Transmission Corporation (TransCo) must post a $30-million irrevocable unconditional standby letter for credit.

"The $30-million bid bond is a guarantee that the prequalified bidders will completely, faithfully and promptly comply with their obligations under the bidding procedures, the direct agreement and the final transaction documents," said Ms. Nieves L. Osorio, president of the Power Sector Assets and Liabilities Management Corporation (PSALM), which is set to bid out TransCo in September 2006.

The highest bidder will be required to adjust its bid bond to make it equivalent to 1% of the financial bid within three business days from its declaration as the highest bidder.

Once the transaction is completed, the winning bidder will be required to pay the "commencement fee" representing 25% of the bid price in US currency. The remaining 75% may be deferred, converted to its peso equivalent at a predefined rate, and spread over a predetermined amortization schedule of up to 15 years. The deferred portion will carry an interest at a rate predetermined by PSALM and in line with market rates.

"The deferred payments, representing up to 75% of the concession fee, will be denominated in peso, matching TransCo's primarily peso revenue streams," Ms. Osorio said. "Requiring both the upfront and deferred portions to be payable in US dollars, compared to TransCo's primarily peso revenue stream, will introduce a very large currency risk for investors."

The winning concessionaire will also be required to maintain throughout the 25-year concession period an irrevocable standby letter of credit to ensure the fulfillment of its obligations. The letter of credit must be reinstated to its full amount after any drawdown by TransCo.

PSALM earlier announced that prospective investors could now start submitting their expressions of interest. PSALM will receive these expressions of interest until 18 July 2006. Qualified bidders will then be given ample time to conduct their due diligence. The transaction documents for the forthcoming bidding are now available.

Strategic Communications and Partnership Division
Tel. No. (632) 9029067