"Foreign bidders are likely to be deterred by this requirement,"the American Chamber of Commerce of the Philippines Inc. (AmCham) said in a statement.
AmCham, which counts 800 members, said many investors are wary about the proposed set-up on the privatization of Transco. Based on the plan, the winning concessionaire will just have to apply for a franchise after it has assumed management of the Transco assets.
The transferability of the franchise from the National Power Corp. to the new Transco concessionaire was inadvertently omitted when the Electric Power Industry Reform Act (EPIRA) was passed in 2000.
At present, the government is readying a negotiated deal with Singapore Power Corp., the sole bidder for Transco’s concession contract.
The absence of the Transco bill left only one bidder for the Transco assets. It is also not certain if Singapore Power and the government will be able to seal a deal. The government expects to raise some $2.5 billion for the lease of the Transco assets. Any amount lower than this, Transco officials say, will likely not be accepted by the government.
At the same time, AmCham is likewise urging government to look for ways to bring down electricity costs and ensure dependable source of energy to encourage more foreign businesses in the country.
The group pointed out that high electricity cost is one of the major factors why some American businessmen are having second thoughts on relocating or expanding their existing operations in the country.
"Our membership includes American energy and power generation companies with large investments in the Philippines. Improving the price and reliability of electricity is an issue for all of our members," AmCham said.
US-based Mirant Corp., with total installed generating capacity of 2, 011 megawatts, is the largest power producer in the country.
Power rates in the Philippines are one of the most expensive compared to other neighboring countries like China, Malaysia and Thailand.
"High electric power costs are a frequent complaint of foreign investors who point to lower costs in competing regional economies with better infrastructure," the group said.
According to the AmCham, there is a possibility of demand exceeding supply in 2006-2007 in the Luzon grid if no additional capacity is built. The Department of Energy forecast demand to grow 9.7 percent during the period, requiring 10,000 MW of generating capacity.
"Given the four-to-five year gestation period for building new power plants, we appear to be entering a critical period in which further drift in implementing power sector reforms will increasingly doom the economy to repeat the 1991-1994 blackouts," the group noted.
AmCham also criticized how Congress spends more time "fulminating" against foreign IPP (independent power producer) firms rather than improving power rates.
They urged that government quickly resolve the ongoing review on multinational IPPs to allow the private sector privatization reforms to move forward.