US-Canadian group starts due diligence on TransCo

A partnership between Hydro-Quebec and SNC Lavalin will start a due diligence any time this week to signal its bid for the 25-year concession for the National Transmission Corp. (TransCo) assets, well-placed sources said.

TransCo president Alan T. Ortiz confirmed that a group from Canada and the United States will conduct its due diligence process on TransCo soon.

"The TransCo and the Power Sector Assets and Liabilities Management Corp. are expected to meet the American and Canadian firms that would conduct their respective due diligence processes soon," Ortiz said.

Hydro-Québec is a leader in the energy production and one of the most important energy distributor in North America.

SNC-Lavalin, on the other hand, is an engineering-construction firm which provides services globally.

Last week, State Grid Corp. of China (SG) reportedly started its due diligence on TransCo’s assets.

SG, which was ranked 40th in the 2005 Fortune Global 500, was spun off from the State Power Corp. of China.

At present, SG is in charge of transmission and distribution of power in the north and northeast of China. It controls power transmission in 22 of China’s 27 provinces.

TransCo’s concession contract is scheduled to be auctioned off on Nov. 7.

It is expected that the winning bidder will be announced in December.

The government is expected to raise some $2.5 billion to $3 billion from the lease of TransCo’s assets.

Prospective bidders are required to have a member or affiliate with sufficient experience in operating and maintaining electricity transmission systems comparable to that of the Philippines, with at least 6,000 circuit kilometers and a minimum of 6,000 megawatts peak demand, and a voltage level of 115 kilovolts to 230 kV.

The foreign investor who will bid for TransCo must have a net asset value or market capitalization of $175 million. The Filipino partner, on the other hand, must have $300 million.

It would be recalled that local conglomerates controlled by the Cojuangcos (San Miguel Corp.), Ayalas (BPI Capital) and Gokongweis (JG Summit Holdings) are reportedly eyeing to participate in the TransCo privatization because of the 60-40 foreign ownership ceiling.

Since these big firms have the financial strength to invest in this capital-intensive exercise, they are likely to participate by forging partnership with foreign power firms.

In late 2002 when the supposed privatization of National Power Corp.’s transmission assets was announced, several foreign power firms have expressed interest to bid.

A group of big time local financial investors led by Concepcion Industries Inc. is also planning to form a consortium to bid for TransCo.

Singapore Power  was the lone bidder during the two previous biddings conducted by PSALM for TransCo. But due to some dilly-dallying on the part of the government, Singapore Power decided to take the sideline.

Electricity Generating Authority of Thailand (EGAT), Hydro Quebéc and the Delgados of Islacom, and Australia’s Trans-Grid have also joined the bandwagon.

Earlier, EGAT is reported to have been forming a joint venture with CITRA of the Salim Group to handle the technical aspect while Northeast Development and Acquisition Corp. will be in charge of the financial side.

Another group that has reportedly signified interest for TransCo is composed of Japan’s Tokyo Electric Corp. and US-based Trans-Electric (for technical); and SMC and Morgan Stanley (for financial).

The other group is reportedly composed of First Pacific Co. Ltd. (financial) and Trans-Grid of Australia (technical).