29 Oct 2006
Three investor groups have passed the prequalification criteria set for the 25-year concession of the National Transmission Corporation (TransCo) that is scheduled to be bid out on 20 December. The three prospective bidders submitted last 28 September their respective prequalification proposals to the Power Sector Assets and Liabilities Management Corporation (PSALM), the agency handling the auction of the country's sole transmission arm.
The prequalification process is the second stage of the entire bidding procedure for the TransCo concession. In this phase, the prospective bidders submit their proposals to PSALM for review and validation.
PSALM President Nieves L. Osorio pointed out that the TransCo Privatization Technical Working Group, composed of technical teams from PSALM and TransCo, exerted utmost efforts in counterchecking and verifying the prequalification documents submitted by the three investor groups. Site visits were also conducted in the Metro Manila offices of the prospective bidders.
PSALM, however, declined to divulge the identities of the three groups at this stage of the bidding process.
The evaluation process involved stringent procedures that included obtaining the necessary verification and confirmation of appropriate government agencies. The members of the Technical Working Group liaised with the Securities and Exchange Commission, Department of Trade and Industry, Department of Foreign Affairs, Bangko Sentral ng Pilipinas and the Bureau of Internal Revenue.
Simultaneously, over the past two weeks, members of the PSALM and TransCo management conducted one-on-one meetings with each prospective bidder. In these lengthy meetings, issues and concerns related to the 25-year TransCo concession were thoroughly discussed.
The process was conducted to ensure that only serious bidders with proven domestic or international experience and expertise as a leading transmission system operator would be qualified to participate in the formal bidding.
As the operation of a transmission system is a public utility, the proposed members in the prequalified bidder consortium should comply with the 60% Filipino-40% foreign ownership structure. Thus, Filipinos will have at least a 60% ownership stake in the concession, while the technical partner may opt to take the required 5% share per the bidding procedures or the whole 40% share at the most. If the pre-technical partner opts to take 5%, the 35% may be assumed by other foreign investors.
The technical partner of each investor group must also be able to prove that it has sufficient experience in operating and maintaining a transmission system comparable to that of the Philippines, i.e, a transmission system with at least 6,000 circuit kilometers, with a system voltage of at least 230 kiloVolts, and a peak demand of at least 6,000 megawatts.
"Based on the proposals we received, the technical partners of the three groups are currently operating transmission systems that are at least three times bigger than the Philippines, and with peak demands that are at least two times higher than ours," said Ms. Osorio.
The technical partners are also required to have a net asset value (NAV) or market capitalization of at least USD500 million. Based on the 2005 audited financial statements they submitted, the technical partners of the three groups have NAVs that are at least five times over the minimum requirement.
"Passing the prequalification process will make the prospective bidders eligible to participate in the final bidding for the TransCo concession which is set for 20 December," said Ms. Osorio.
PSALM originally scheduled the bidding on 07 November. But in response to requests by prospective bidders for more time to conduct due diligence procedures and prepare their respective documents, the prequalification deadline had to be extended. The prequalification process was finally held on 28 September.
"Based on what we have observed so far, we are happy with the quality of investors who responded to our invitation to invest in our country's transmission system," Ms. Osorio said. "It is our hope that 2006 will end as a good year for the country's privatization program."
Strategic Communications and Partnership Division |