National Grid takes over TransCo

National Grid Corporation of the Phils. (NGCP), the winning bidder for the operations and management of the National Transmission Corp. (TransCo), will officially take over the country’s power transmission highway today.

The turnover was made possible after NGCP, a consortium composed of Monte Oro Grid Resources Corp., Calaca High Power Corp. and State Grid Corp. of Hong Kong Ltd., paid the 40 percent upfront payment or $987.5 million to the National Government yesterday.

According to the Power Sector Assets and Liabilities Management Corp. (PSALM), the consortium was able to secure funding from Bank of China, PSBC and Banco de Oro.

NGCP has earlier secured the congressional franchise to operate and manage the national transmission system.

The NGCP consortium won the concession to operate and manage the system in a public bidding conducted by the government, specifically PSALM, in December 2007. The consortium offered $3.95 billion for the concession contract.

NGCP president and CEO Walter Brown readily accepted the company’s role as the new operator of TransCo’s nationwide system and facilities, reiterating an earlier promise to introduce efficiency into the grid’s operations and ensure adequate and reliable power supply.

“We are ready to start. We are fully committed to bringing reliable power to the Filipino people,” Brown said.

The winning consortium, as mandated by the Electric Power Industry Reform Act of 2001, is likewise directed to implement various improvement projects to further benefit power consumers.

Under the EPIRA, the winning consortium should assume the responsibility of upgrading and modernizing the facilities of TransCo. It was estimated that TransCo would need around $850 million as capital expenditure in the medium-term.

As provided under the concession agreement, NGCP will pay 25 percent of the total bid price to government at commencement date and pay the remaining 75 percent in the next 20 years.

The franchise law likewise contains safeguards to prevent power industry players from manipulating rates and passing their tax burden on consumers.

For the government’s part, Finance Secretary and PSALCM chairman Margarito Teves said proceeds from the privatization of TransCo will help trim down the country’s consolidated public sector deficit.

A major portion of the country’s CPSD is composed of National Power Corp. (Napocor) debts. TransCo assumed the transmission operations of Napocor after the passage of the EPIRA.

PSALM president Jose Ibazeta, on the other hand, said the entry of NGCP is a reflection of the investor’s continued confidence in the country’s privatization efforts.

“More significantly, this highlights the unwavering support and confidence of the investor community to the government’s capability to institute the necessary reforms in the Philippine power industry,” Ibazeta said.

“The successful privatization of the TransCo concession did not happen overnight. Considered as the single most important and biggest transaction in the government’s power reform program -the TransCo privatization process required utmost prudence in implementing strategic decisions,” Ibazeta said.

Ibazeta admitted that privatizing TransCo was not easy job. “These decisions subsequently resulted in the successful bidding of the TransCo concession in December 2007, after three failed attempts and despite the controversies that hounded the conduct of the privatization,” he said.

Monte Oro Grid Corp. is a wholly-owned subsidiary of Monte Oro Resources & Energy Inc. It was incorporated in the Philippines on Aug. 29, 2006 to invest and hold interest in shares of stocks of companies engaged or proposing to engage in infrastructure projects.

Calaca High Power, meanwhile, was incorporated in the Philippines on Dec. 15, 2006. It is in the business of operating, managing, maintaining and rehabilitating energy systems and services for gas, steam and electricity.

State Grid Corp. of Hong Kong Ltd. is a subsidiary of the State Grid Corp. of China, one of the world’s largest power utility companies.