Winning Transco bidder gets 25-year concession

ABS-CBN News

Posted at Jan 15 2009 12:53 PM | Updated as of Jan 15 2009 08:57 PM

The Philippines' power grid was formally privatized yesterday, with the government handing over a 25-year concession to a consortium which includes one of China’s biggest utilities.

Transaction documents were signed by the Power Sector Assets and Liabilities Corp., the state-owed firm mandated to privatize the government’s power assets, and National Grid Corp. of the Philippines (NGCP).

The consortium is made up of Monte Oro Grid Resources Corp., Calaca High Power Corp. and the State Grid Corp. of Hongkong Ltd. The Chinese firm is a subsidiary of State Grid Corp. of China, one of the world’s largest power utility companies.

The new operator of National Transmission Corp. (Transco) paid an initial $987.5 million last week as part of a $3.95-billion deal. It was named the winning bidder in December 2007 but a required franchise bill was signed into law just last month.

Under the concession, NGCP had to pay 25% of the total bid price to obtain the contract, with the remaining 75% to issued over a period of 20 years.

The approved franchise was for 50 years but the concession contract only covers half. NGCP has the option to renegotiate a new deal before its contract expires.

"We are ready to begin tomorrow (January 15) running. We will be operating fully from day one,’" NGCP President and Chief Executive Officer Walter A. Brown said.

The government has said that proceeds from the deal would be used to build public infrastructure as well as fund social service programs.

Republic Act 9136 or the Electric Power and Industry Reform Act of 2001 (EPIRA) mandates the privatization of the government’s generation and transmission facilities to promote competition and investments in the power industry.

"The government is now a step closer to subjecting and providing the Filipino consumer reliable, quality and affordable supply of electricity," PSALM President Jose C. Ibazeta said.

TransCo, which was formed via EPIRA, assumed the National Power Corporation’s (Napocor) electricity transmission functions and has been operating separately since March 1, 2003.

It links power plants owned by Napocor and independent power producers to the country’s 123 distribution utilities and electric cooperatives, which in turn deliver electricity to end-users.