Press Release
November 7, 2008

Senate urged to reject grant of franchise to Transco buyer

Senate Minority Leader Aquilino Q. Pimentel, Jr. (PDP-Laban) today urged the Senate to disapprove the administration bill granting a 25-year congressional franchise to a consortium financed by a Hongkong-based company which won the bidding to operate the country's power transmission system.

Pimentel said he is convinced that it is disadvantageous in terms of the government's economic and security interests to privatize the National Transmission Corporation (Transco) in favor of a newly-formed consortium, called National Grid Corporation of the Philippines (NGCP).

Forty percent of the NGCP is owned by the State Grid of Hong Kong Ltd. which is a wholly-owned subsidiary of the State Grid of China.

The majority ownership of 60 percent of the consortium is owned by two Filipino firms - the Monte Oro Grid Corp. which owns 30 per cent and Calaca High Power Corp, which owns the other 30 percent.

Pimentel questioned whether it is right for the government to give up the operations of the national network of power transmission lines.

"The Senate should scuttle the Transco bill. It is dangerous, to say the least, to allow a non-Filipino company, the so-called State Grid Hong Kong Ltd. a Hong Kong-based wholly-owned subsidiary of the Chinese government to run the national transmission facilities of power lines," the minority leader said.

"I find it most unusual for a government-owned power facility like Transco being in effect 'privatized' only to land into the hands of an entity that is owned by a foreign government."

Pimentel said that while the buyer of Transco won the bidding only for running the power transmission system it will also be authorized to use the fiber optics embedded in the transmission lines for national broadband operation,

"Moreover, the National Grid Corp., like a favored lotto ticket holder, gets to do two services for one franchise: it runs Transco, and its gets permission to do what ZTE Corp. got busted for - that is, do a kind of broadband services that are supposedly doable under the facilities it puts up," he said.

Pimentel said he found no rhyme nor reason for the government to give up Transco considering it has been operating profitably since it was separated from the National Power Corporation upon the enactment of the Electric Power Industry Reform Act in 200l.

He said the purpose of privatization is supposedly to pave the way for the infusion of new capital for upgrading and expanding power transmission services.

And yet, he said while the winning bidder would supposedly pay the government $3.95 billion for a 25-year concession to operate the power transmission network, it is required to pay only 25 percent or $l billion within 30 days after the approval of its congressional franchise. The $l billion downpayment will cover the first five years of concession. The balance of the payment or 75 percent will be paid over a 20-year period in two payments per year.

Only 50 per cent of the $l billion downpayment will come from the stockholders' own money while the other half will be raised through borrowings. Pimentel said Transco's buyers even plan to float bonds to raise money to comply with its financial obligation.

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