POSTSCRIPT / October 27, 2009 / Tuesday


Philippine STAR Columnist

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Transco privatization demands transparency

WEDDING BELLS: We join friends in wishing only the best for Sen. Manuel “Mar” Roxas II and TV journalist Korina Sanchez, who will exchange marriage vows at 3 p.m. today at the Sto. Domingo Church in Quezon City.

The grand reception planned afterwards at the Araneta Coliseum in Cubao has been cancelled in view of the devastation wrought by typhoons in Metro Manila and parts of Luzon. The money for the feast will be donated to relief operations. Instead, light refreshments will be served the 2,000 guests at the churchyard after the rites.

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TRANSCO OWNERS: Transparency dictates that the public be told the identify of the influential persons involved in the conglomerate that is taking over the state-owned National Transmission Corp. or Transco.

We raise the point because talk is rife that some persons boasting of right connections have acquired “important shares” in the National Grid Corp. of the Philippines (the new business reincarnation of Transco) after it was privatized.

Interlocking ownership of firms involved in power generation, transmission and distribution will make a mockery of law and policy against such a strategic sector as power being captured by a virtual monopoly that can manipulate pricing.

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CROSS-OWNERSHIP: We are not imputing any illegal act, but we would like to see the Energy Regulatory Commission and the Securities and Exchange Commission determine if at least the spirit of the Electric Power Industry Reform Act (EPIRA) of 2001, particularly on cross-ownership, has been violated.

With politics in the background, reports reverberate that one group identified with the Transco acquisition now owns a number of power plants up for sale recently and a sizeable stake in various distribution utilities.

Some lawyers we have consulted said cross-ownership is prohibited under EPIRA. The idea is to level the playing field and prevent players from manipulating the cost of electricity.

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TRANSCO JOB: In December 2008, President Arroyo signed RA 9511 or the “Act Granting the National Grid Corp. of the Philippines (NGCP) a Franchise to Engage in the Business of Conveying or Transmitting Electricity through High Voltage Back-Bone System of Interconnected Transmission Lines, Substations and Related Facilities.”

The papers we have seen show that NGCP (formerly Transco) is composed of the Philippine’s Monte Oro Grid Resources Corp. of the Razon Group and Calaca High Power Corp. in partnership with China’s State Grid Corp.

Transco has the unique and crucial role of linking power plants owned by the National Power Corp. (Napocor) and independent power producers (IPPs) to the country’s 123 distribution utilities and electric cooperatives, which retail electricity to end-users.

Transco also assumes the transmission functions of Napocor, including the planning, construction and centralized operation and maintenance of high-voltage transmission facilities, grid interconnections and ancillary services.

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INVESTORS’ DREAM: The buyer of Transco had to secure congressional approval to be granted the exclusive concession to operate the transmission business. It was granted a 50-year contract.

The game looks mostly like a matter of being able to make an acceptable offer or bid and gaining favorable action of those who make the decisions for privatization.

Still, some foreign and local business groups have expressed concern that the energy sector, an investor’s dream, is being taken over by people with strong political connections.

Commercial activities that encompass power distribution in addition to transmission are a natural monopoly, giving investors in these capital-intensive activities assured good returns.

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CORPORATE VEIL: Transco’s bidding rules prohibit cross-ownership, saying:

“Power-generation companies and distribution utilities, including their subsidiaries, affiliates, stockholders and officials of generation companies or distribution utilities, or other entities engaged in generating and supplying electricity specified by the ERC within the fourth civil degree of consanguinity or affinity, are not allowed to hold any direct or indirect interest in Transco or its concessionaire.”

Transco concessionaires’ stockholders and officials, and their relatives within the fourth civil degree of consanguinity or affinity, are also prohibited from having any direct or indirect interest in any generation company or distribution utility.

Let us see if the ERC and the SEC, as well as other groups that are likely to jump into the case, will be able to pierce the corporate veil, if any, of some of the investors.

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$3.95-B OFFER: $3.95-B OFFER: After a long battle to acquire Transco, the Filipino-Chinese consortium NGCP is set to put in its $1-billion down payment to the government.

The $1 billion represents a 25-percent upfront payment for its $3.95-billion offer, the highest bid in the auction in December 2007. The balance will be paid semi-annually over 20 years.

Also under the terms of the sale, NGCP will assume the $800-million capital expenditure of Transco for the near-term.

Incorporated on Feb. 22, 2008, NGCP has a capital stock of P2 billion, of which P500 million has been subscribed and paid-up.

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THE OWNERS: Papers show that Monte Oro is controlled by the Walter Brown Group (although talk persists that there are other major owners). It is engaged in mining, energy exploration and infrastructure projects.

It is also involved in government privatization or similar projects, whether as proponent, equity investor or financial/technical advisor.

Calaca High Power, on the other hand, is run by the Coyuitos. It is in the business of operating, managing, maintaining and rehabilitating energy systems and services for gas, steam and electricity.

State Grid owns and manages China’s transmission highway. It is the second largest state-owned enterprise in China with more than 145 million customers and annual revenue of more than $107 billion.

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(First published in the Philippine STAR of October 27, 2009)

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