PSALM prepares for negotiations with prospective Transco investors

The Power Sector Assets and Liabilities Management Corp. (PSALM) will start next month negotiations with prospective investors for the privatization of the National Transmission Corp. (Transco), a ranking company official said.

"We welcome genuine offers and hope to begin non-exclusive bilateral negotiations in August," PSALM president Raphael Lotilla said. "But while we are open to suggestions, we will negotiate for terms that will bring maximum net proceeds to the government," he added.

The PSALM head said the move to open up talks with potential investors is in line with President Arroyo’s instructions to take advantage of increased interest in the country’s transmission assets.

Lotilla said PSALM is opening negotiations with qualified and interested parties on the concession agreement for the operation of Transco.

PSALM is the government agency tasked to privatize state-owned power generation, transmission and related assets under the Electricity Power Industry Reform Act (EPIRA).

The concession will be for a 25-year period renewable for another 25 years subject to performance conditions. Lotilla said government will require at least 25 percent of the enterprise value of the business payable upon closing of the transaction. But as an incentive, investors have the option to pay the balance in installment over a period of up to 25 years.

In case of a joint venture or consortium with foreign investors, a foreign participant must have the 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.

PSALM first bid out the National Power Corp.’s transmission facilities in July last year but the auction failed as only one party, Singapore Power, submitted a pre-qualification proposal. A second bidding in August 2003 also failed as only the same party submitted an offer sheet. Government rules on the disposition of its assets allow negotiations after two failed biddings.

So far, only three small hydroelectric plants have been successfully bid out since PSALM began public bidding for generation assets in March this year. PSALM will pursue an aggressive privatization schedule as it plans to privatize Transco and bid out the 600-megawatt coal-fired Masinloc plant in Zambales before year end. It also plans to sell off 70 percent of Napocor’s total generation capacity by the end of 2005.