29 Jun 2006
Investor interest in the National Transmission Corporation (TransCo) is growing as seven parties recently signified their intention to bid for TransCo's 25-year concession by submitting their expressions of interest to the Power Sector Assets and Liabilities Management Corporation (PSALM).
Their interest was stirred by the Energy Regulatory Commission's (ERC) release last 20 June of the Final Determination of TransCo's regulated asset base (RAB) amounting to P138 billion at the start of 2006. The RAB will be the basis for TransCo's annual maximum allowable revenue (MAR) which, in turn, will determine the transmission wheeling rates. The wheeling charges will be the main source of revenue for the TransCo concessionaire.
PSALM President Nieves L. Osorio said ERC's ruling on the Final Determination of TransCo's RAB would impact on prospective investors in two ways: They would be able to predict future cash flows in terms of expenditures and revenues, and it would be a signal to these investors on how the ERC would actually implement the transmission wheeling rate guidelines.
The transmission rates were first set by the ERC in 2003, the start of the first regulatory period, using the performance-based rate setting methodology. This system determines the concessionaire's annual revenue requirement based on its projected operating and maintenance expenses, estimated tax payments, regulatory depreciation charges on assets used, and investors' return on capital.
The second regulatory period started this year, after which a reset will be made every five years.
Of the seven groups that submitted their expressions of interest, five have secured their bid documents from PSALM, the government agency tasked to sell the assets and manage the liabilities of the National Power Corp., including the transmission assets. The bid documents for the forthcoming public bidding of TransCo's 25-year concession include bidding procedures, data room rules, index and compact discs that contain pertinent data about TransCo, and a summary of the information memorandum that carries primarily technical data on the TransCo assets.
Having acquired their bid documents, the five prospective investors can start conducting their due diligence on TransCo until the bidding for the transmission company is held in September 2006. The investors are also required to pay a participation fee to ensure their earnestness in joining the bidding process. They will likewise have to sign a confidentiality agreement preventing them from disclosing information they will get during the due diligence phase. The agreement also inhibits PSALM from prematurely revealing the identities of the interested bidders.
Other interested parties have until July 18 to submit their letter of interest and secure their bid documents after which a pre-bid conference will be held. Meanwhile, interested investors can still submit their expressions of interest to PSALM until mid-July 2006.
Strategic Communications and Partnership Division |