Singapore Power in talks for possible partnership with local companies

Singapore Power Corp. (SPC), the sole bidder for the assets of National Transmission Corp. (Transco) is in talks with a potential local partner, a government source said.

An official from the Power Sector Assets and Liabilities Management Corp. (PSALM) said SPC has informed them of ongoing negotiations with a local partner.

"They said they are busy with some legal arrangements with a (local) partner," the PSALM official said, although he failed to divulge the identity of the potential partner.

Under the law, a foreign company can own only up to 40 percent of a local company. "They need to tap a local entity to own the remaining 60 percent," the official said.

The official said this only goes to show that SPC is very keen in leasing out the Transco assets.

"They remain committed to invest in Transco. They have not changed their plans to conduct the financial due diligence by the end of this month," the official added.

But the official admitted that SPC has also expressed concerns on some areas particularly on the political uncertainties in the country.

"We do not know if they are affected by the would-be results of the May elections, though they have indirectly said during previous discussions that they would include political climate in their investment review," the official said.

According to the official, another main concern raised by the potential investors is the tariff structure. "They want to determine the tariff and the long-term impact on revenues of this tariff rate," the official said.

Meanwhile, the PSALM official said the Finnish power firm that has signified its interest to bid for Transco’s assets is still on its due diligence. "It is still doing its own due diligence. But its interest is not as keen as that of SPC," the official added.

In the event of a possible backing out of these two potential investors, Transco president Alan T. Ortiz said they may opt to conduct another international roadshow.

"If that’s the case then we will have to market it some more, maybe another roadshow. If Singapore Power is worried of the upcoming national elections and opted to wait the results of the election as the barometer for their investment in the country then we just have to wait and see. Otherwise, our option maybe is to do another roadshow," Ortiz said.

Under the Electric Power Industry Reform Act of 2001, PSALM will handle the finances and the privatization of the transmission and generation assets of the government-controlled National Power Corp. (Napocor).

The government said Transco would be an attractive buy for investors as the firm owns the country’s transmission highway, has a whopping P16 billion in net income and is debt-free. Transco’s privatization is expected to raise some $2 billion in proceeds for the government.