SMC, MPIC trade barbs on eve of TransCo bid

Two of the groups eyeing the concession contract for the country’s power transmission network are accusing each other of violating pre-qualification rules set by the Power Sector Assets and Liabilities Management Corp. (PSALM), the state agency tasked to oversee the privatization of power assets.

The bidding for the 25-year concession to run the power grid under the National Transmission Corp. (TransCo) is scheduled today.

In a letter to PSALM, a copy of which was furnished to the Securities and Exchange Commission, (SEC) San Miguel Energy vice-chairman and chief finance officer Ferdinand K. Constantino said the company is “deeply” concerned over the legal issues raised by the Perez Golangco Madrigal Andaya Law Offices regarding  the citizenship of the Metro Pacific-led Two Rivers Pacific Holdings Corp.

The San Miguel unit is leading a consortium bidding for TransCo. It has partnered with TPG Aurora BV, a subsidiary of the Texas Pacific Group which is a global private investment firm with more than $30 billion capital under management, and TNB Pari Sdn Bhd, a subsidiary of Tenaga Nasional Bhd, a major electric utility company in Malaysia.

Two Rivers, on the other hand, is teaming up with Italian firm Terna-Rete Electtrica Nazionale.

The other prequalified bidders are the  group of Monte Oro Grid Resources Corp. and State Grid Corp. of China and the consortium of Citadel Holdings Inc. and Power Grid Corp. of India Ltd.

“If the claims raised against Two Rivers have merit, the consortium will not be qualified to bid for the TransCo privatization,” Constantino said.

“As the government entity entrusted with implementing the TransCo privatization, it is PSALM (and not the SEC or any other agency) that is responsible for ensuring that each interested bidder meets the eligibility requirements and for undertaking all steps necessary to safeguard the transparency and integrity of the bidding process,” Constantino emphasized.

He also pointed out that even if the Two Rivers-Terna Rete group obtains an SEC opinion confirming that such bidder complies with the nationality requirement, ” the SEC does not conduct its own investigation into factual matters and its opinions are based solely on the facts disclosed by the party requesting for the opinion.“

But in its counter-statement, Two Rivers reiterated that it is qualified to bid for TransCo, saying the SEC itself has confirmed that the company is a Philippine national.

“We deplore the attempts of certain parties to gain an unfair advantage  or distract attention from their own weaknesses – by calling into question our qualifications to bid for TransCo,” Two Rivers president Jose Ma. K. Lim said.

Lim explained that while Metro Pacific Investments Corp. (MPIC) itself is qualified to participate in the bidding, it chose to withdraw due to the possibility that Ashmore Investment Management Ltd., which subscribed to convertible notes issued by MPIC, would convert such notes into equity of MPIC.

“Since Ashmore is engaged in power generation locally and globally, the acquisition by Ashmore of a substantial equity in MPIC would have placed an MPIC-led Two Rivers consortium in direct violation of the cross ownership restriction under Sec. 45 of the Electric Power Industry Reform Act (EPIRA).”

MPIC transferred its participation in Two Rivers to Pilipinas First Transmission Holdings Corp., 60 percent of which is owned by Philippine Long Distance Telephone Co. (PLDT) chairman Manuel V. Pangilinan and Philippine First Transmission Management Corp., a company also with 100 percent of its capital owned by Filipino nationals.

Lim alleged that it is , in fact, the San Miguel consortium which is in direct violation of the cross-ownership restriction under Sec. 45 of the EPIRA since three of its entities  are either  generation or distribution companies which are currently TransCo’s customers. 

San Miguel has subsidiaries San Miguel Mills Inc. in Batangas, San Miguel Corp. Bacolod and SMC Packaging Inc. which are all involved in power distribution.

However, PSALM said all the bidders that would be joining the auction for  the 25-year concession contract of TransCo have passed the nationality requirements.

 PSALM noted that the SEC’s Office of the General Counsel  confirmed that each of the groups’ proposed structure and equity  investments meet the ownership requirement for grantees of a public utility  franchise.

“We are hopeful that the confirmation from the SEC as to the  nationality of the bidders will put to rest all doubts about their qualification.  This is just more reason for us to push through with the bidding,” PSALM president Jose Ibazeta said.

 He said that while the  winning bidder will have the exclusive right to operate TransCo’s business,   the government will retain ownership of the strategic transmission assets and, pending the award by Congress of a franchise to the concessionaire, will control these assets.

The concessionaire will also be responsible for rehabilitating and expanding TransCo in accordance with the Transmission Development Plan and other guidelines set by the Energy Regulatory Commission.

This is the second time that the government is privatizing Transco’s facilities and assets worth about P138 billion by way of concession through open competitive bidding.

Last February, PSALM declared a failed bidding after only one of three prospective bidders submitted an offer.

The government hopes to raise about $3 billion from TransCo’s privatization.