Bidding for $6.5-B reinsurance of Napocor assets ‘fails’

The electronic bidding of the National Power Corp’s $6.5 billion reinsurance coverage did not push through yesterday, a top government official said.

Finance Undersecretary Antonio Bernardo, chairman of the joint bidding committee, said they decided to declare the exercise a "failed auction" after the pre-qualified bidders submitted "letters of regrets".

The finance official also clarified that the failed bidding had nothing to do with the Government Service Insurance System (GSIS)/Napocor rift over the issue on which agency would handle the bidding.

In fact, Bernardo said the GSIS appeared yesterday to signify its interest to participate in the bidding.

"GSIS has decided to retract the withdrawal and they have committed not to proceed with the parallel bidding," Bernardo said.

GSIS president and general manager Winston Garcia said the GSIS will exhaust all means to secure the assets and properties of Napocor with insurance coverage at the soonest possible time.

Garcia made the pledge following yesterday’s failed bidding for Napocor’s reinsurance requirements.

"We are looking for ways and means to solve the impasse. We will continue to help Napocor avert possible adverse effects of the failed bidding," Garcia said.

With the failed bidding, Bernardo said the joint committee decided to extend the insurance coverage of Napocor by another 60 to 90 days which will be covered by an "alternate" insurance broker, Chesterfield Insurance Brokerage Ltd. The insurance policy of Napocor expires on Sept. 30.

"We feel that it is appropriate to obtain a 60 to 90 day cover note from a broker in the meantime," Energy Secretary Vincent S. Perez, said.

The energy chief added that the two to three months extension of the reinsurance coverage of Napocor would be sufficient enough to allow the market to ease up. "We hope during this time, the reinsurance markets would have stabilized and would allow Napocor and Government Service Insurance System (GSIS) to obtain normal market premiums," he said.

According to Perez, they expect both the GSIS and the Napocor to accept the committee’s decision to get the services of Chesterfield for the three-nine month period. "We are confident that GSIS will cooperate with Napocor with the extension," he said.

Perez noted that they have been receiving comments from the market that the current situation in the US may likely affect the said exercise. "We have been getting indications that the three-day notice was too short for brokers to adequately prepare for their bids. The reinsurance market is still highly unsettled from the recent attacks in the United States," Perez said.

Citing initial indications from insurance brokers, Bernardo noted that if they held the bidding as scheduled, the government will shoulder higher premiums due to prevailing uncertaintly in the international financial market. "We will get locked in at very high terms," Bernardo said, in defense of their decision to temporary hold the bidding for the state-owned power firm’s insurance policy.

The Memorandum Order issued by President Arroyo last Sept. 10, directed the joint bidding committee to conduct the auction 15 days after the issuance of the order.

Bernardo said three firms – Agnew Higgins Pickering, Marsh & McLennan and Heath Lambert sent letters of regrets to the committee.

The firms, cited prevailing market conditions which prevented them from submitting their proposals.

Representatives from the other pre-qualified firms, namely: AON Energy, Alexander Forbes and Arthur J. Gallagher attended the 10 a.m. meeting for the submission of bids but also submitted letters of regrets.

As of presstime, the joint bidding committee was meeting to discuss future strategies for the reinsurance coverage.