GMA seeks DOJ opinion on Napocor privatization

President Arroyo has asked the Department of Justice (DOJ) to render an opinion on whether a law is needed to facilitate the privatization of the transmission assets of the National Power Corp. (Napocor).

The President sought a legal opinion on the matter from the DOJ after several legislators opined that the existing Electric Power Industry Reform Act (EPIRA) already provides for the transfer of all of Napocor’s transmission assets to the National Transmission Corp. (Transco).

Senators Juan Ponce Enrile and Miriam Defensor-Santiago and Rep. Arnulfo Fuentebella said there is no need for a new law since the transfer of Napocor’s transmission assets is clearly defined under the EPIRA.

Enrile cited Section 8 of the EPIRA, which states that "within six months from (the law’s) effectivity... the transmission and subtransmission facilities franchise of the (Napocor) for the operation of the transmission system and the grid, shall be transferred to the Transco."

Nevertheless, the President asked for DOJ’s opinion to ensure that there will be no legal obstacles to the privatization efforts of the government.

"If Enrile’s stand is correct, this already serves as authority for Transco to offer its facilities to interested private concessionaires without further need to seek congressional approval," Presidential Spokesman Ignacio Bunye said in a statement yesterday.

The Power Sector Assets and Liabilities Management Corp. (Psalm), the body in charge of the Napocor assets up for privatization, is already reviewing the bids of five companies that are interested in purchasing the transmission assets.

According to Bunye, five world-class power companies signified their intention to join the bidding shortly after the May elections — a clear sign that the investor confidence in the political climate of the Philippines has improved.

Under the concession offered by the government, the winning bidder gets to operate the transmission grids for 25 years and may be subjected to an extension of another 25 years subject to performance conditions.

The privatization is expected to raise $2 billion to $5 billion for the government by the end of 2005.

As of the end of last year, Napocor’s debts were estimated at $23 billion, the interest payments of which are taking a heavy toll on the government’s fiscal position.

The President has said that the privatization of Transco’s assets would upgrade the transmission system and attract more investors while providing electricity to over 4,000 unelectrified barangays across the country.

An estimated P2.5 billion is needed over the next 10 years to strengthen the transmission grid and provide electricity for powerless barangays.

"Many semiconductor companies want to invest in the country but they are backing out due to our fluctuating electricity," the President said during a town hall meeting also attended by Energy Secretary Vicente Perez in Pandacan, Manila.

Mrs. Arroyo said that the privatization of Transco’s transmission assets would pave the way for setting up a P1 billion fund for a wholesale electricity spot market.

This spot market is expected to result in more competitive pricing among independent power producers and allow power distributors like the Manila Electric Co. and power cooperatives to select the IPPs that offer the lowest prices.