TransCo sale attracts 12 bidders

A dozen foreign and local investor groups have expressed interest to bid for the 25-year concession contract for the National Transmission Corp. (TransCo), the Power Sector Assets and Liabilities Management Corp. (PSALM) said.

PSALM vice-president Nonito R. Bernardo, Jr. said they have received 12 expressions of interest (EOI) to participate in the forthcoming public bidding for TransCo in September this year. PSALM gave interested parties until July 18 to send their respective EOI. 

The government expects to raise between $2.5 billion to $3 billion from the bidding of TransCo’s operations and management contract.

Based on the bidding procedures, interested bidders are required to sign a confidentiality agreement before they are given their copies of the transaction documents and access to the TransCo data room and facilities so they can start due diligence efforts. 

Bernardo declined to reveal the identities of the prospective bidders, saying most of them are represented by their lawyers and investment bankers. 

The interested bidders can now submit the documents required by PSALM for the pre-qualification stage. Bernardo said the schedule of the first pre-bid conference will be announced soon.

Prospective bidders are required to have a member or affiliate with sufficient experience in operating and maintaining electricity transmission systems comparable to that of the Philippines, with at least 6,000 circuit kilometers and a minimum of 6,000 megawatts peak demand, and a voltage level of 115 kilovolts to 230 kV. 

A foreign investor for TransCo must have a net asset value or market capitalization of $175 million. Its Filipino partner, on the other hand, must have $300 million.

A pre-bid conference is scheduled on Sept. 6, 2006 and the deadline for the receipts of bids is on Sept. 27 this year.

Following the notice of award, PSALM estimates a closing period of 12 months inclusive of the application for a congressional franchise. 

The bidding procedures will be done in a two-envelope final bid.  Under the technical proposal, the bidders should post a $30 million bid bond through an irrevocable standby letter of credit, issued by a qualified bank and set at a fixed amount.

The winning group, by the time of the award, must not have ownership of generating, distribution or supply assets in the Philippines. 

Big local conglomerates controlled by the Cojuangcos (San Miguel Corp.), Ayalas (BPI Capital) and Gokongweis (JG Summit Holdings) were reportedly eyeing to participate in the TransCo privatization because of the 60-40 foreign ownership ceiling.

Since these big firms have the financial strength to invest in this capital-intensive exercise, they are likely seen to participate by forging partnership with foreign power firms. 

 A group of local financial investors led by Concepcion Industries Inc. is reportedly also planning to form a consortium to bid for TransCo. 

In late 2002 when Transco’s supposed privatization was announced, several foreign power firms have expressed interest to bid.  These power companies are based in Hong Kong, Thailand, Singapore and New Zealand.

Singapore Power  was the lone bidder in the two previous biddings for TransCo, both of which were declared a failure.

Electricity Generating Authority of Thailand (EGAT), Hydro Quebéc and the Delgado group, and Australia’s Trans-Grid have also joined the bandwagon of firms eyeing TransCo.

Other groups that have reportedly signified interest for TransCo are Japan’s Tokyo Electric Corp. and US-based Trans-Electric, as well as First Pacific Co. Ltd. (financial) and Trans-Grid of Australia.