Govt approached several local conglomerates to invest in TRANSCO
Wednesday, September 29, 2004
By LENIE LECTURATODAY Reporter
The government on Monday said a number of private companies, including food and beverage giant San Miguel Corp. and Metro Pacific Corp., were approached a few months back and were asked if they would be interested to invest in the country’s high voltage lines that are currently being sold through a concession agreement.
“CSFB [Credit Suisse First Boston], our privatization advisor, continues to market the assets of the National Power Corp. (NAPOCOR). It started many months back and it is a continuing effort to reach the investors,” Power Sector Assets and Liabilities Management Corp. (PSALM) president Raphael Lotilla said.
The PSALM president, however, refused to confirm if San Miguel was among the five companies that were asked to resubmit last Friday an updated term sheet for the privatization of the National Transmission Corp. (TRANSCO).
On Monday, San Miguel said it is studying the possibility of bidding for the assets of TRANSCO. In a letter to the stock exchange, San Miguel president and chief operating officer Ramon S. Ang said the company has been approached by foreign investors to participate in a consortium that may make a bid for the TRANSCO assets.
“We confirm San Miguel was approached by foreign private sector parties to look at a possible acquisition of the assets of the TRANSCO. The company is currently studying the feasibility of such an acquisition in support of the government’s privatization program,” Ang said.
The government wants to lease out the $2-billion transmission assets of the state-owned napocor for 50 years. The Department of Energy and PSALM have extended the deadline of the TRANSCO privatization, which is expected to be completed by end of the year.
“Should the study show the acquisition of TRANSCO would be advantageous and value-creating for San Miguel, the study would then be submitted to the company’s board and stockholders for approval…Our objective in considering the proposal is to enhance the long-term shareholder value and ensure that the government assets such as TRANSCO be privatized at full value,” Ang said.
San Miguel currently has interests in beverage, food and agriculture, packaging and real estate. Since it already dominates the local market, San Miguel is expanding its operations in the Asia-Pacific region with the setting up of food and beverage manufacturing complexes in China, Thailand, Malaysia and Vietnam.
Reports indicated that San Miguel and Hong Kong-based investment holding firm First Pacific Corp. have expressed interest in bidding for the TRANSCO assets. Both companies are reportedly willing to invest up to $500 million in the transmission firm.
Former PSALM president Edgardo del Fonso, now PSALM advisor, said big local conglomerates, including the those owned by the Ayalas and the Gokongweis, were sent feelers to participate in the government’s privatization plan.
“These were just words. But we never saw them [Ayala and Gokongwei groups] surface. They did not come forward,” del Fonso said, adding that only the major companies would have capability to invest in TRANSCO.
An industry source privy to the ongoing privatization said of the five companies asked to resubmit an updated term sheet, two are local and three are foreign.
In its disclosure, San Miguel did not say if it participated in last Friday’s submission of term sheets, but a highly placed source did not eliminate the food and beverage giant when asked if it was included on the list of five interested firms.
“First Pacific or Metro Pacific is not among them,” a Today source said. Metro Pacific vice-president David Nugent said its parent firm, the Hong Kong conglomerate First Pacific, is considering various investment opportunities, including the power sector. “First Pacific through Metro Pacific is looking at a number of opportunities for new investments, including power but no substantive agreements or discussions have taken place yet,” Nugent said.
In the Philippines, First Pacific has interests in Philippine Long Distance Telephone Co. and wireless subsidiary Smart Communications, as well as a minority stake in Citra Metro Manila Tollways Corp., the consortium operating the Skyway.
Nugent also confirmed that the government has sent feelers to a number of large companies a few months back and presented a rundown of a number of government projects that may attract the private sector.
“A couple of months back, we sat down with them. First Pacific, through Metro Pacific, was approached. It was an attempt to get the understanding of the private sector and figure out which among the government projects we could take a look at... We continue to look at the opportunities but we were not among those that participated [in last Friday’s submission of an updated term sheet],” he said.
Lotilla, for his part, kept mum on the identities of the five firms. “We are bound by a confidentiality agreement. We will study thoroughly all of the term sheets that were resubmitted. We will get guidance from our board,” he said.
The Today source said two of the three foreign firms are from Japan and Australia.
Singapore Power Ltd. and American firm AES Corp., which were previously reported to have expressed keen interest in the transmission assets were not included on the list.
Five Japanese firms were earlier reported to have indicated plans to participate in the bidding: Kansai Electric Corp., Kyushu Electric Corp., Electric Power Development of Japan and Tokyo Electric.
Australia’s Trans-Grid and First Pac are also reportedly keen on participating in the privatization of TRANSCO, reportedly valued at $2 billion.
PSALM, the government entity tasked to privatize state-owned generation, transmission and related assets under the Electricity Power Industry Reform Act, first bid out the transmission facilities in July 2003. The bidding failed as only one party, Singapore Power, submitted a pre-qualification proposal. The second bidding held a month after also failed as only the same party submitted an expression of interest. Government rules on the disposition of its assets allow negotiations after failed bidding.
TRANSCO would be privatized through a concession agreement, which will be for a 25-year period renewable for another 25 years subject to performance conditions.
Lotilla said the government will require at least 25 percent of the enterprise value of the business payable upon closing of the transaction. As an incentive, investors have the option to pay the balance in installments over a period of up to 25 years.
In case of a joint venture or a consortium with foreign investors, the foreign participant must have financial and technical capability with proven domestic or international experience as operator of a transmission system with capacity and coverage comparable with that of the Philippines.
The government has earlier warned of heavy losses of about $1 billion for every year of delay in the privatization of TRANSCO. If talks on the negotiated sale bog down, it will be TRANSCO that will continue to operate the country’s transmission system. With C. Garcia
posted by philpower @ 1:26 PM,
