Transco may raise rates to cover capex shortfall

A sharp drop in its capital expenditures (capex) over the next six years – from $1.2 billion to $450 million – could force the National Transmission Corp. (Transco) to increase transmission rates to plug its budgetary shortfall.

Alan Ortiz, president of Transco, said the whittled down budget will translate into foregone revenues because the company will no longer have the flexibility to install new transmission lines and implement critical projects intended to generate additional revenues.

Transco has been asking the National Government to reconsider its decision to trim the agency’s capex .

"As a power utility, we have to operate on a 24-hour basis, especially because of maintenance functions. The government didn’t say no to our appeal but they pointed that we have to work within that budget. Only when the economy improves could government add to our budget," Ortiz said.

Ortiz said that aside from plugging its projected capex gap, Transco’s intention to file for a rate increase is seen to attract more investors.

He added that Transco while still pushing for privatization, could also tap the bond market through the Power Sector Assets and Liabilities and Management Corp. (PSALM) if efforts to find a suitable buyer prove to be futile.

PSALM is the entity designated by Republic Act 9136, otherwise known as the Electric Power Industry Reform Act, to carry out the privatization of Transco. It takes over the ownership of Napocor’s assets, liabilities and other real-estate properties including its orderly sale, disposition and privatization.

Early this year, Ortiz said a Finnish firm had expressed interest to purchase Transco, valued at around $2 billion.

Under a privatization plan approved by President Arroyo in October 2002, Transco’s facilities would be privatized by way of a concession.

"We will issue bonds if there is no concessionaire in two years," Ortiz said, adding that under current conditions, the company can still sustain its operations for the next two years.

At the same time, Transco is still in the process of identifying which projects will be shelved or deferred because of government’s decision to cut its fund sources.

"It’s hard because these projects are all priority," he said.