TransCo concession attracts 7 bidders

Seven groups have expressed interest to bid for the 25-year concession of the National Transmission Corp. (TransCo), the top official of the Power Sector Assets and Liabilities Management Corp. (PSALM) said yesterday.

Without giving the identities of the parties, PSALM president Nieves L. Osorio said these groups have already submitted their respective expressions of interest (EOI).

Of the seven groups that submitted their EOI, 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. (Napocor), including the transmission assets.

Osorio said their interest was stirred by the Energy Regulatory Commission’s (ERC) release last June 20 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.

According to Osorio, 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.

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 eagerness 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," she said.

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.

By September this year, TransCo’s operation and maintenance concession contract will be auctioned off to interested bidders. Interested parties will have up to July 18 to submit their letters of interest.

A number of local groups including San Miguel Corp., Metro Pacific Corp. and Concepcion Industries have signified interest to form a consortium to participate in the TransCo privatization.

Big names in international transmission business have also surfaced in the TransCo bidding. These include Konsortium Logistik Berhad,Tenaga Nasional Berhad, EGAT, Red Electrica of Spain, Intergen, Mid American Energy Holdings, Hydro Quebec, National Grid, Singapore Power Corp., Kansai Electric, Kyushu Electric Corp., Electric Power Development of Japan, and Tokyo Electric Corp.