Power firms seek additional 6-mo to buy transmission assets of government

MANILA, Philippines - Power distribution utilities have urged the Energy Regulatory Commission (ERC) to extend the deadline for the acquisition of sub-transmission assets (STAs) of the National Transmission Corp. (TransCo) by another six months from Dec. 31, 2010 to June 30, 2011.

Manila Electric Co., the country’s largest power distributor, along with Batangas Electric Cooperative and First Bay Power Corp., have jointly asked the ERC to give them an ample time to look into the STAs for sale.

“We believe that the ERC is aware that there are still RSTAs (residual sub-transmission assets) which have not been disposed to qualified DUs (distribution utilities — as of this time despite negotiations and diligent efforts of the different DUs to acquire the same,” the three firms said.

In the letter, the three DUs said they have “clear intentions” to acquire several STAs from TransCo, the state-run entity which previously operated the country’s power transmission network before it was privatized.

According to the power utilities, there are several issues that still need to be threshed out with regard to the acquisition of the STAs.

One major concern, they said, is the requirement that the consortium which would acquire the assets should be a juridical entity.

“We believe that such an extension of the deadline is in the spirit of the EPIRA’s (Electric Power Industry Reform Act of 2001) mandate to sell and transfer the STAs to qualified distribution utilities,” the group said.

Meralco first vice president Ivanna Dela Peña said Meralco is eyeing several STAs located in the Batangas area, which is part of their franchise area.

“We are in discussions with them to purchase the STAs, for a joint ownership of the assets,” she said.

Under Republic Act 9136 or the EPIRA, TransCo is mandated to sell its STAs or those assets with capacity of 69 kilovolts and below, to qualified DUS and electric cooperatives. Only DUs where the STAs are located could buy these but since most of the electric cooperatives could not afford to buy them, they need financially strong DUs like Meralco to help them.

TransCo has even offered the STAs to ECs through a the lease purchase financing program which allows Ecs a down-payment equivalent to just 20 percent of the selling price of these sub-transmission assets, with the balance to be spread out via installment in a period not exceeding 75 percent of the remaining life of the assets.

TransCo’s residual function is to oversee the operations of National Grid Corp. of the Philippines (NGCP), the new operator of the country’s transmission highway, and ensure the continued sale of the remaining STAs. TransCo expects to sell over P1 billion more of these assets.

As of April 30, 2010, TransCo has been able to divest P3.42 billion (67 sale packages) worth of STAs, including 325-MVA transformers to 56 DUs. Included in the sale packages are 40 lease purchase agreements with 32 ECs under concessional terms amounting to about P2.46 billion.

The balance of over P960 million represents sales to private DUs. Some 31 sale contracts have been approved by the ERC amounting to P1.49 billion as of end- April this year.

The sale of TransCo’s STAs involves some 131 sale packages covering some 107 interested DUs, mostly electric cooperatives (ECs). In cases where more than one DU is connected to a transmission line, there is a need for the connected and qualified DUs to form a consortium to buy and thereafter operate the asset.

The STAs involved a total of about 6,200 circuit-kilometers comprising mostly of 69-kV transmission lines and 1,600 MVA of substation capacity.

Estimated cost of these assets is placed at about P7.6 billion based on Dec. 31, 2007 net book values.

Privatizing the sub-transmission assets will, in the long run, be beneficial to power customers. By purchasing these assets, distributors will be able to improve their operations and expand their franchise area, thereby serving more customers.