Back to square one for Transco

The government has decided to change anew the privatization scheme for the National Transmission Corp. (Transco) to a public bidding from a negotiated deal, the country’s top energy official announced yesterday.

"I wish to announce that the concession for the operation of Transco will be awarded through a public bidding. This follows the termination of the discussions conducted with several interested investors for a negotiated award," said Energy Secretary Vincent Perez, who is also vice chairman of the Power Sector Assets and Liabilities Management Corp. (PSALM).

PSALM, which is in-charge of the privatization of Transco and the generation assets of the National Power Corp. (Napocor), had earlier decided to conduct negotiated bids for the concession agreement for Transco after two failed public auctions in July and August this year.

"We decided to terminate the discussions with the investor groups because the terms and conditions, including the price, of their proposals submitted to the PSALM are highly unique and complex,"he said.

Perez explained that while they have "better than expected price offers", there were also some conditions tied to the price tags. Hence, it would be in the best interest of all concerned to award the concession through public bidding," he said.

He said they are optimistic that the four prospective bidders that submitted indicative price offers for Transco last Oct. 6 would join the public bidding.

"The Philippine government wishes to thank the investor groups which participated in the discussions for their serious interest in the privatization of Transco’s operations. While they will remain unnamed, they are most welcome to participate in the bidding that will be subsequently conducted," he added.

Aside from being more transparent, Perez said the public bidding would allow more investors, including those that submitted their letters of interest and indicative price offers, to participate in the privatization of Transco.

"They still have a chance to bid. All of them can bid unlike in negotiated bid when only one will be able to discuss with the government," he said.

The energy chief also noted that in a public bidding, they would be able to come up with common terms and conditions.

"Since we received complex offers from the four interested groups, we think it’s best that we adopt common terms and conditions which will be better for the government and bidders in the long-term," he added.

Transco earlier fetched indicative offers of between $1.9 billion to $3.4 billion from the four interested groups.

He said they do not foresee any legal impediments in pursuing a public bidding instead of negotiated bid. Under the law, the government has an option to go on negotiated deal after two failed biddings.

According to the energy secretary, they would try to finalize and hold the public bidding for Transco before the end of the year. "We expect to finalize everything by Dec. 2004," he said. "PSALM will start immediately with the bidding preparations. The privatization of the Transco concession will continue to be pursued as mandated by law," he said.

Sources said the likely bidders for Transco are food and beverage giant San Miguel Corp. (SMC) which reportedly joined forces with Tokyo Electric, Electricity Generating Authority of Thailand (EGAT) and an unidentified Filipino firm, Hydro Quebéc and the Delgados of the Transnational Diversified Group; and Metro Pacific Corp. and Australia’s Trans-Grid.