Lone TransCo bidder ready to raise offer to $4B

The consortium of local investment firm Citadel Holdings Inc. and Italian power grid operator Terna SPA said yesterday it is willing to pour in more than $4 billion in National Transmission Corp. (TransCo) should the government decide to enter into exclusive negotiations bid with the group.

Citadel Holdings spokesman and senior vice president for project development Rogelio Singson told a press conference that they have formally informed the government of their plans in case both parties enter into a negotiated deal for TransCo, the country’s sole power transmission company.

"On the issue of price offer, we have indicated with the government that we are ready to meet the target price set by PSALM (Power Sector Assets and Liabilities Management) which is anywhere from $3 billion up to the number they expect as concession fee," Singson said.

He said the committed price bid is "over and above the investment that would be poured in for the modernization and upgrade of the system of TransCo in the next five years."

Based on the Transmission Development Plan (TDP) of TransCo, it would need $850 million to maintain the reliable services of the country’s transmission highway.

"That would be on top of, or over and above what is needed to upgrade the system to maintain it over 25 years. Some $850 million was what was approved by the ERC (Energy Regulatory Commission) for the second regulatory period which starts 2006 to 2010. We are committed to undertake that," Singson said.

However, he clarified that this investment is anchored on the belief that the group would be able to enter into a negotiated bid with PSALM.

Meanwhile, Terna chief financial officer Fabio Todeschini said they are still contemplating if they would be joining the rebidding for TransCo if that would be the route that government will choose.

"We need to discuss that ( internally but it is obvious that the first impression of Terna is to walk away," Todeschini said.

Under the bid documents, the winning concessionaire would have to pay 25-percent upfront payment after the conditions precedent are met such as creditors’ consent and a Congressional franchise. Payment of the remaining 75 percent would be paid within the 25-year concession period.

If Terna will not be able to get a franchise within a 15-month period, the sales agreement states that the government will have to reimburse the $5-million bid document cost spent by the winning concessionaire.

A PSALM insider, meanwhile, said "there is no question on the capability of Terna SPA as they have already been pre-qualified."

"The PSALM board just wants to ensure that everything is in order. They cannot just decide that day on whether to rebid or enter into negotiated deal. There is a process that the board has to go through first," a PSALM source said.

Terna has been listed on the Italian Stock Exchange since 2004. It is presently the biggest transmission company in Italy and second largest in Europe.

If government would strike a deal with the Terna group, it would be the firm’s first venture and investment in Asia. In 2003, it spent an initial investment of $1.3 billion in Brazil, one of its ventures outside Italy.

As of 2005, the net asset value of Citadel/Terna group is placed at $2.36 billion.

"We believe that the bid deadline of Feb. 5 gave sufficient time to all the bidders to complete their transaction analysis. It would be extremely costly and inefficient to start the transaction process over again, after several attempts in the last six years. We were the only ones that committed to abide by the terms and conditions of the transaction documents within the established deadline," Singson said.

The PSALM board will decide within this week if it will enter into negotiations with Terna or re-bid the TransCo concession.