TransCo sale put off again to next month

The government has pushed back the public auction for the 25-year concession contract of the National Transmission Corp. (TransCo) by another two weeks to Feb. 5, from the earlier scheduled Jan. 22 bidding date.

In a joint statement, Finance Secretary Margarito Teves and Energy Secretary Raphael Lotilla said the rescheduling of TransCo’s bidding would give the management of Power Sector Assets and Liabilities Management (PSALM), the entity in charge of selling the National Power Corp. ’s transmission and generation assets, ample time to thresh out "a few important legal and commercial issues."

Teves and Lotilla are the chairman and vice chairman, respectively, of PSALM.

They said the decision to reschedule anew the bidding for TransCo’s contract will not only provide more time but will also allow the prospective bidders and PSALM to ensure that the contract they would enter into would be a "sustainable" one – that which is fair to both the Philippine government and the bidders. The government hopes to raise about $3 billion in proceeds from the sale of TransCo.

Even before the announced bidding delay, PSALM president Nieves Osorio has already been hinting of a possible rescheduling in TransCo’s privatization.

Osorio had admitted that the Jan. 22 date is a bit "unrealistic" given the voluminous documents that they have to review and issues they have to discuss with the bidders.

Teves, however said the release of the final bid documents will still push through on Jan. 22 although "the public auction will be held two weeks later."

"All the three bidders have been informed and consulted and have agreed to the change in schedule," the officials said.

The three prequalified groups vying for the concessioin of the country's sole transmission arm include the consortium of Triratna Holdings Corp., Malaysia's Tenaga Nasional Bhd. and Newbridge Asia IV, L.P.; the consortium of Citadel Holdings Inc. and Italy's Terna SPA; and the consortium of Monte Oro Grid Resources Corp. and State Grid Corp. of China.

"They are expected to submit the copies of the direct agreement signed by the bidders and their proposed concession fee on the bidding date," Teves said.

The government has been trying to raise up to $5 billion since 2003 by selling TransCo and 31 state-run power plants.

Political uncertainty and doubts about the profitability of the creaking energy sector have deterred previous auctions and so far the government has sold just eight plants.

But hopes are high for 2007 as relative political calm, a new wholesale electricity spot market and improving state finances triggered the successful sale of two plants late last year.

Analysts said the second delay in two months for the sale of TransCo.

"Two weeks is not that long, but I would not want to see any further delay beyond that. That will indicate serious concern," said Peter Wallace, president of private think-thank Wallace Business Forum.

The government has been trying to sell TransCo since 2003. Analysts said the grid is an attractive asset because investors are assured of a steady revenue stream, unlike some of the Napocor plants that have no supply deals with distributors.

"I am more concerned about the Napocor plants," Wallace said. "The wholesale electricity spot market is held up at the moment because of the delay in the privatization of Napocor," he said.