WB, ADB offer $500-M guarantee to winning TransCo bidder

The World Bank is also willing to extend guarantee of up to $500 million to the winning bidder of the National Transmission Corp. (TransCo) concession, it said in a statement.

Earlier, the Asian Development Bank (ADB) indicated it would extend guarantee and technical assistance grants to the winning bidder.

In a joint notice addressed to all bidders, the two global creditors said they were prepared to consider provisions of WB partial risk guarantee and an ADB guarantee.

"The World Bank and the Asian Development Bank have been actively supporting the power sector reform agenda of the government of the Philippines," the two lending institutions said in their joint notice.

Both the WB and ADB are currently considering respective guarantee support of up to $250 million each.

"As part of the sector reform, the WB and ADB is prepared to support the proposed TransCo concession to finance, operate, maintain, rehabilitate and expand the nationwide transmission network," the two parties said.

The guarantees are intended to protect the concession against certain payment defaults resulting from the failure of the government to meet its contractual obligations under the concession documents.

The winning bidder is expected to shell out a huge amount which requires major lending to foreign and domestic financial institutions.

However, WB and ADB will each require the Philippine government to provide a counter-indemnity for the guarantees for the concession.

The Power Sector Assets and Liabilities Management Corp. (PSALM) also received an offer of financial assistance from the International Finance Corp. (IFC) offering to provide financing support to the future TransCo concessionaire.

PSALM president Nieves L. Osorio said the support of the WB and the ADB "is vital in our pursuit of the government’s power reform agenda. "

"We would like to assure our lenders that we will continue to be guided by the principles of transparency and integrity."

Guarantees being offered by WB and ADB would boost potential bidders’ resolve to participate in the final bidding process of the TransCo concession set in November.