Thai firm drops bid plan for Transco
Wednesday, July 12, 2006
By Niel V. Mugas, Reporter
A PROSPECTIVE bidder for the National Transmission Corp. (Transco) has pulled out of the race, after it registered objections to some conditions the government set for the auction, a source familiar with the matter said.
The Electricity Generating Authority of Thailand (EGAT) will no longer participate in the September auction of Transco, after it found some conditions in the bidding unfavorable to prospective investors. The Thailand-based power firm posted the highest bid for Transco during an auction held in 2004.
“They [EGAT] do not believe in this kind of exercise. Besides there are conditions which they perceive to become a problem in the future,” the source said.
EGAT has long been interested in operating the $2.8-billion Transco, which is set for privatization through a 25-year concession, renewable for another 25-years depending on the performance of the winning concessionaire.
One of EGAT’s primary concerns, the source said, is the absence of a congressional franchise at the time of the award, which will require the winning concessionaire to work hard on its own to secure the permit.
This, the source added, poses a problem considering that the 12-month closing target set by the Power Sector Assets and Liabilities Management Corp. (Psalm), the agency tasked with selling government’s power-sector assets, falls on an election year.
“It would be a problem. It would be very expensive especially if the application will come on an election year unless the winning bidder will have lots of money to spare,” the source said.
The 40-percent limit on foreign ownership of Transco also poses a serious concern, the source said.
Under PSALM’s rules, a Filipino partner must own the majority stake in the Transco concession thereby splitting its required market capitalization to about $375 million for the Filipino bidder and to $125 million for his foreign partner.
EGAT’s Filipino partner, however, is still weighing its options and will hold discussions this week to determine its options. It may opt to look for another partner, possibly a foreign fund manager.
“They would meet to see if they would still be bidding for Transco. They want to make sure that they would still have time to negotiate with new partners,” the source said.
“We cannot disclose yet but this would involve a foreign bank,” the source added.
Before it scrapped plans to bid for Transco’s concession, EGAT was reportedly in talks with CITRA of the Salim Group to handle the technical aspect while Northeast Development and Acquisition Corp. (Nedac) will be in charge of the financial side.
Last month Transco said even groups have signified interest in the state-owned transmission firm, five of which are proceeding with their respective due diligence on the company.
PSALM, however, has a nondisclosure agreement with these companies, so it cannot name them.
Transco is one of the most profitable power-sector companies in the Philippines, with assets of more than P184 billion last year.
posted by philpower @ 5:21 PM,
