WB may add sweeteners to sale of TransCo assets

The World Bank said yesterday that it is willing to add more sweeteners to the privatization of the government’s power transmission assets, including the possibility of providing guarantees and financing.

WB country director Joachim von Amsberg said discussions between the bank and Philippine authorities are still ongoing, focusing on the possibility of a risk-mitigation instrument that would guarantee the government’s contract with the winning concessionaire for the National Transmission Co (TransCo).

Von Amsberg said the WB is likely to work with the Asian Development Bank (ADB) which had been equally eager to assist the country’s effort to beef up its energy supply, a process that would not kick off until the government succeeded in privatizing its power assets.

"We’re interested in using a guarantee from WB and ADB for the TransCo concessionaire," said Von Amsberg.  "With a risk-mitigation instrument, we, in essence, reinforce government’s commitment to the contract."

According to Von Amsberg, the WB guarantee instrument, possibly including the ADB, would backstop the government’s own undertaking in the concession contract.

"That means, if the contract, for example, provides for termination fee in case of certain events, WB would guarantee that the fee is actually paid and there will be counter-guarantee for the government," he said.

Von Amsberg said the instrument is already in use in the power and energy sector in other countries, used as an effective tool to "strengthen the government’s credibility and the country’s regulatory regime."

Aside from the WB’s proposed risk-mitigation instrument, Von Amsberg said the bank’s investment arm, International Finance Corp., is also looking at the possibility of providing long-term financing to whoever would win the TransCo auction.

"The IFC is interested in the infrastructure sector, particularly in power," Von Amsberg said. "There is no particular amount, however, in this because financing is done on case to case basis."

According to Finance Secretary Margarito B. Teves, however, it is possible for the government to hold off the next TransCo bidding until after Congress has reconstituted itself following the May elections.

"My initial feeling is to wait for the new Congress to grant the franchise," said Teves, who is also board chairman of the Power Sector Assets and Liabilities Management Corp. (PSALM).

But Teves said no decision has been made on the new schedule for TransCo until the new PSALM president takes over the position of outgoing president Nieves Osorio.