US, Australian companies eye Transco's assets

Two power giants from the United States and Australia have signified keen interest in the privatization of the country’s electricity transmission highway.

In a press briefing after the close of the five-day international energy ministers’ meetings in Manila, Energy Secretary Vincent S. Perez said US-based AES Corp. and TransGrid of Australia have sounded off plans to look at the assets of the National Transmission Corp. (Transco).

AES, founded in 1981, is one of the world’s leading power companies with businesses in 27 countries.

TransGrid, on the other hand, is Australia’s largest transmission company and the owner, operator and manager of the high-voltage electricity transmission system throughout New South Wales.

This developed as negotiations with Singapore Power Corp. (SPC), the lone bidder for Transco’s assets, have yet to start.

Perez said many investors have renewed their interest in the Philippine power sector after the conduct of the national elections.

"With the elections over, they have sensed that political uncertainties are removed. We are now hopeful that this would translate to more concrete projects. We are glad that their interest is coming back," Perez said.

Like SPC, Perez said, the two firms have started their respective due diligence and have sent letters of intent to PSALM, or the Power Sector Assets and Liabilities Management Corp.

Transco officials said two more parties, a Finnish firm and a multinational company, which they opted not to identify, are also interested in the assets.

PSALM has decided to proceed with the sale of the National Power Corp.’s generating assets while pursuing a negotiated deal with SPC. Originally, Transco’s assets should be privatized first before proceeding with the sale of the generating assets.

If possible, the government wants Transco’s lease agreement finalized this month. The privatization process, which involves the sale of the generation assets and lease of the transmission facilities, could raise about $4-billion to $5-billion proceeds which could help reduce the country’s budget deficit.

The privatization of cash-strapped Napocor, which owns most of the country’s power plants, would also save the government the P38 billion ($676 million) it says it spends financing for the company each year.

At the same time, Perez said an Australian firm also expressed interest in the Masinloc coal-fired power plant while Taiwan Power Corp. has been invited to bid for the generating assets of Napocor.

So far, PSALM has sold two generating assets, the 3.5-megawatt (MW) Talomo hydro power plant in Davao, and the 1.6-MW Agusan hydropower facility in Bukidnon.

At least seven more plants have been lined up for sale within the third quarter and 21 plants scheduled to be auction off between the fourth quarter of 2004 to end-2005.

Various investors, Perez said, are also eyeing to pour in capital in oil and gas exploration projects. The government has come up with sweeteners to lure investors to these privatization efforts.

He said Chinese Petroleum Corp. has signified interest to explore possible oil and gas development projects in the Philippines.

Two attempts last year to draw bids for Transco’s transmission assets failed due to uncertainties over the regulatory environment and security concerns after an unsuccessful mutiny by rebel soldiers in July.

PSALM earlier warned of heavy losses of about $1 billion for every year of delay in the privatization of Transco.