TransCo privatization faces stumbling block

The privatization of the National Transmission Corp. (TransCo) may still face a stumbling block as the Power Sector Assets and Liabilities Management Corp. (PSALM) admitted that a case filed against it has yet to be resolved.

In a press statement, PSALM said it has mistakenly announced that the case was already junked by the Regional Trial Court of Makati.

“A press release posted on this website inaccurately stated that the complaint filed by La Costa Development Corp. was dismissed by the Regional Trial Court of Makati City. However, only the prayer by La Costa for the issuance of a writ of preliminary injunction was denied by the Makati RTC. The complaint remains pending with the court for resolution of the main case. PSALM apologizes for any inconvenience,” it said.

But a PSALM source said the asset management firm will push through with TransCo’s privatization as scheduled amid the pending resolution of legal issues.

“PSALM can proceed as provided in the rules, and what can stop PSALM to continue the process is any legal order,” the source said.

PSALM’s privatization, bidding and awards committee had earlier disqualified La Costa because it was not satisfied that La Costa, as the Philippine member of the concessionaire, had the ability to fund an equity investment of at least $300 million. La Costa partnered with Canada’s SNC Lavalin to bid for the 25-year concession contract of TransCo.

RTC Makati earlier rejected La Costa’s request for the court to issue a temporary restraining order to stop the TransCo bidding process.

PSALM has already declared, the Filipino-Chinese consortium led by Monte Oro Grid Resources Corp. (MOGRC) as the winning bidder, issued a selection notice to the consortium and signed the direct agreement which provides for a one-year period for MOGRC to apply for and obtain a franchise from Congress to operate TransCo.

The issuance of the notice of award to the consortium of Monte Oro and its partners Calaca High Power Corp. and State Grid of China paved the way for negotiations to start to secure a franchise from Congress.

The winning bidder has one year from its receipt of a notice of award to obtain the congressional franchise.

The Monte Oro consortium submitted the highest bid of $3.95 billion for the right to operate TransCo, besting the other group composed of San Miguel Energy Corp., Dutch firm TPG Aurora BV and Malaysia’s TNB Prai Sdn Bhd which offered a bid of $3.5 billion.

PSALM earlier said the Monte Oro group will not be able to run TransCo without a franchise from Congress. Thus, it is in its best interest to comply with all the requirements of Congress to be able to secure the franchise.

The Philippine Constitution requires the operator of a public utility, such as the nationwide transmission assets of TransCo, to first get a franchise from Congress before it can run the public utility. Under the TransCo bidding rules, the winning bidder must incorporate a concession corporation which will apply for a franchise from Congress to operate TransCo.

PSALM said the concession corporation must consist of the same members of the consortium that participated in the bid.

The winning bidder will be required to pay the 25-percent downpayment of its bid price, called the commencement fee, only after it acquires the congressional franchise. In the same vein, however, the winning bidder will not benefit from TransCo operations until it gets the franchise.