RP-CHINESE GROUP BAGS TRANSCO DEAL WITH $3.95-B BID
MANILA, DECEMBER 13, 2007 (STAR) By Donnabelle Gatdula - A consortium of Filipino and Chinese firms led by local infrastructure holding firm Monte Oro Grid Resources Corp. bagged yesterday the concession contract for power grid operator National Transmission Corp. (TransCo) with a bid of $3.95 billion.
Monte Oro had teamed up with Calaca High Power Corp. and State Grid of China for the bidding, the country’s biggest privatization effort.
Controversy has shrouded Monte Oro in the wake of allegations by Sen. Jamby Madrigal of the group’s discreet ties to President Arroyo’s brother, Diosdado “Buboy” Macapagal Jr. and the Aboitiz group.
She also said it is Enrique Razon Jr., chair of International Container Services Inc. (ICTSI) and treasurer of the administration Team Unity in the May senatorial elections, who leads the Monte Oro group.
The consortium narrowly beat the $3.905-billion bid of the group of San Miguel Energy Corp. and partners Dutch firm TPG Aurora BV and Malaysia’s TNB Prai Sdn Bhd.
The Monte Oro group must still get a franchise to operate the grid from Congress, where opponents of Mrs. Arroyo in the Senate are likely to give them a rough ride amid allegations the winning consortium has close links to her.
“They (Monte Oro) have enough political clout to get it through the lower house but will likely run into a long-running tele-novella in the Senate,” said Alex Magno, director of the Development Bank of the Philippines.
The consortium has a year to get the franchise or ownership will revert to the government, which will continue to run the grid for the time being.
But Monte Oro’s president expressed confidence, saying their offer would be funded through a combination of equity and borrowing.
“We have agreements with underwriters and we will begin to implement them,” Walter Brown, who is also chairman of mining group Philex, said.
The government will get 25 percent of the purchase price once the franchise is awarded, with the remaining funds to be paid over 20 years.
“This is a move in the right direction,” said Jose Ibazeta, head of the agency tasked with selling state-run energy assets.
The winning price tag is more than double the previous privatization record of $1.6 billion paid for Fort Bonifacio in 1995 and crowns a turnaround in what had previously been a notoriously stop-start energy privatization program.
The government has been trying since 2003 to privatize the management of TransCo to boost state finances and modernize its creaking power sector. Yesterday’s auction was the fifth attempt and the second this year.
Political uncertainty and doubts about the predictability of profits tripped up previous sale efforts but a new tariff system for TransCo, in operation since last year, is supposed to make the 25-year license more lucrative for investors.
The grid, which needs about $725 million until 2010 for upgrades and expansion, was valued at P138 billion in 2006.
State Grid Corp is China’s largest electricity provider and is ranked 29th in the Fortune Global 500 list of the world’s largest companies by revenue this year.
World Bank support
The private investment arm of the World Bank has said it will give financial help of up to $250 million to the winning bidder.
The government had given four groups a green light to participate in the auction and 21 investors originally expressed interest.
A third group, led by holding firm Metro Pacific Corp., did not bid after their technical partner and investor, Italy’s Terna-Rete Electrica Nazionale, withdrew from the consortium at the last minute.
Proceeds from the sale will be used to pare some of the $6-billion to $7-billion debt at the state-run National Power Corp (Napocor), once the single biggest drain on state finances.
Napocor has already benefited from a string of recent power plant sales and Ibazeta said with the auction for Transco, the crown jewel of Philippine energy assets, the government had sold $6.6-billion worth of power assets since 2004.
The winning bidder did not join the press briefing held after the auction.
The Power Sector Assets and Liabilities Management Corp. (PSALM) said it would officially declare Monte Oro group as the winner 30 days from now, after another round of review is made on the submitted documents.
Though it backed out of yesterday’s bidding process, Two Rivers yesterday asserted that it was qualified to participate in the bidding.
“We deplore the attempts of certain parties to gain an unfair advantage – or distract attention from their own weaknesses – by calling into question our qualifications to bid for TransCo,” said Two Rivers president Jose Ma. K. Lim.
But Ibazeta believed that they have been very transparent and open in the bidding of TransCo.
“We are very happy about the successful turnout of the bidding exercise for TransCo. PSALM handled the privatization of the government’s transmission business with utmost transparency and judiciousness,” Ibazeta said.
“We strictly implemented the bidding procedures and complied with the rules governing the selection of today’s winning bidder,” he added.
Ibazeta acknowledged the support and assistance of other government agencies in the privatization of TransCo.
“We would not have gotten this far if not for the support of almost the entire executive branch of government,” he said.
Monte Oro Grid 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.
State Grid, on the other hand, represented enterprises and institutions formerly owned by the State Power Corp. of China. It was established to engage in transmission, transformation, and distribution.
Incorporated on Dec. 15 last year, Calaca High Power is involved in operating, managing, maintaining, and rehabilitating energy systems and services for gas, steam and electricity. Its major stockholder is Robert Coyiuto.
“To ensure the expeditious and smooth commencement of the concession period, PSALM will assist the concessionaire in preparing and submitting an application for a congressional franchise for the operation of the public utility,” Ibazeta pointed out.
“Our mandate is not simply bidding out and privatizing the generation assets and transmission, but ensuring that the interest of the Philippine government and its people is protected and upheld. We thank the bidders and appreciate their sustained interest and participation in this bidding,” the PSALM chief said.
PSALM’s privatization proceeds now total $6.6 billion, including those from the sale of 11 generation assets and the transmission business.
Chief News Editor: Sol Jose Vanzi
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