20 Jun 2006
The winning bidder for the 25-year concession of the National Transmission Corporation (TransCo) will be required to obtain a congressional franchise to operate the transmission company which is considered a public utility. This will be one of the conditions precedent to complete the transaction, said Ms. Nieves L. Osorio, president of the Power Sector Assets and Liabilities Management Corporation (PSALM). PSALM is set to bid out the TransCo concession in September this year.
Under the concession agreement between TransCo and the concessionaire, the transmission company will retain the legal title to all the transmission assets, sell sub-transmission assets to distribution utilities, and take over the business if the concessionaire defaults. After obtaining the congressional franchise, the concessionaire will be responsible for operating, repairing and maintaining the assets. It will also take care of financing and constructing new assets.
Ms. Osorio disclosed that prospective investors would bid on a single financial parameter, the concession fee, which represents the enterprise value of the business, or the net present value of all future cash flows under the concession agreement with the concessionaire.
"This structure mirrors an asset sale, thereby maximizing upfront proceeds from the privatization," she said, stressing that the concession fee will be predetermined to ensure an objective bid process based on one single financial parameter.
Investors interested in bidding for the TransCo concession can now start submitting their expressions of interest. PSALM will receive these expressions of interest until mid-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.
To be qualified, prospective bidders must have a member or affiliate with sufficient experience in operating and maintaining electricity transmission systems comparable to that of the Philippines, with at least 6,000 circuit kilometers and a minimum 6,000 megawatts peak demand and a voltage level of 115 kilovolts (kV) to 230 kV.
In compliance with the 60%-40% equity rule on ownership of local entities as stipulated in the Philippine Constitution, foreign investors who will bid for TransCo must have a net asset value or market capitalization of at least $175 million. Their Filipino partners, on the other hand, must have $300 million.
Strategic Communications and Partnership Division |