P15-B TransCo debt bared last minute
Wednesday, February 07, 2007
By MYRNA M. VELASCO
The last-minute disclosure of some P15-billion worth of outstanding liabilities and obligations that would have material impact on valuation as these will be passed on to the concessionaire of the National Transmission Corporation (TransCo) was pointed to as the major setback why the two other expected bidders were not able to submit their respective offers.
The total worth of obligations was in the form of under-recoveries in the approved maximum allowable revenue (MAR) of TransCo. It was culled that TransCo applied for P48 billion MAR but it was only allowed P33 billion for year 2007 by the Energy Regulatory Commission.
Among all other commercial issues raised, representatives of the consortia of Triratna Holdings Corporation with foreign partners Newbridge Asia IV L.P. and Tenaga Nasional Berhad; and that of the Monte Oro Grid Resources Corporation and State Grid of China divulged that the main trigger for their decision to back out from posting their bids was that the magnitude of liabilities not being factored in their valuation because of the delayed action of the Power Sector Assets and Liabilities Management Corporation (PSALM) on this despite constant prodding from the bidders.
It was known that these so-called list of TransCo liabilities and obligations were only released to the bidders at nick of time last February 2, leaving them no time to consult with their prospective lenders on how these shall be treated and factored in to their valuation.
"The time constraint prevented us from consulting our lenders. Their opinion will have significant bearing because we will be borrowing part of our payments to PSALM," a source from one of the prospective bidders has stressed.
The Triratna group also raised concerns on the provision for solidary liability which binds the consortium members to be jointly and severally accountable for any obligations that may arise out of the 25year concession deal.
It was known that one of their partners has constitutive prohibition in its company charter to enter into such type of arrangement.
The other major setback specified was PSALM’s failure to secure a legal opinion from the Department of Justice (DoJ) that will provide comfort to the bidders that they can recover and get reasonable return for every peso or dollar invested for the upgrading and expansion of the country’s transmission network .
At bidding date, only the consortium of Citadel Holdings with Italian partner Terna SpA was able to submit its tender, and this prompted PSALM to declare a failure of bidding.
While it was disappointed at the turn of the proceedings, the group noted it is willing to wait for the government’s final decision on its bid for a negotiated transaction. PSALM board has given word that it will have this entire week to decide on what steps shall be taken next.
Since this is already the third time that TransCo’s 25-year concession contract will be offered on a public bidding, CitadelTerna representative Rogelio Singson opined that the government, through PSALM, should exercise political will in undertaking options as may be allowed by law, primarily a negotiated deal.
"Government bidding rules allow for negotiation should only one pre-qualified bidder submit a bid after one failed bidding period. The Secretary of Justice has issued an opinion in the past allowing for such negotiations. This is already the third time the bidding for Transco has failed," Singson stressed.
Citadel-Terna group noted that it showed up and submitted its bid in good faith, complying with all the terms and requirements set by PSALM, further noting that it has both the technical competence and resources to assume as TransCo’s concessionaire for the next 25 years.
Should the bidding ended a success, the government was direly hoping to raise .0 billion from what was deemed as the country’s largest privatization exercise this year.
The bidding rules prescribe a payment structure that would require the concessionaire an upfront payment which is equivalent to 25-percent of the concession fee in US dollars.
The remaining 75-percent will be paid via a fixed-year annuity profile denominated in Philippine pesos. Under the proffered payment scheme, the government will require an interest rate that is aligned with market rates to ensure that PSALM gets full economic compensation for later payments. (MMV)
posted by philpower @ 9:10 AM,
