Tuesday, March 7, 2017

TransCo says gov’t to lose billions if NGCP allowed to prepay

Posted on March 06, 2017

THE GOVERNMENT stands to lose billions of pesos if the Power Sector Assets and Liabilities Management Corp. (PSALM) allows the prepayment by the grid operator of its concession fees, the top official of state-run National Transmission Corp. (TransCo) said.

“I sent a letter to PSALM,” said Melvin A. Matibag, TransCo president and chief executive officer. “We are positioning ourselves [that] we are not in favor of prepayment.”

Mr. Matibag was referring to a move in 2013 by privately owned National Grid Corporation of the Philippines (NGCP) to pay in advance the scheduled annual payment of its concession fee.

He said allowing NGCP to do so deprives the government of interest earnings for the fees, which are paid twice yearly for the duration of the concession agreement.

“We don’t even want to call it a prepayment because in our minds there are arrears [that are] unsettled,” he said. “If there are arrears you cannot do a prepayment.”

NGCP’s franchise came about after the country passed Republic Act 9136 in 2001 or the “Electric Power Industry Reform Act of 2001” (EPIRA), which paved the way for the sale of government energy assets.

The law separated the various components of the sector, including power transmission, which was spun off to state agency TransCo ahead of its turnover to the private sector through concession.

Unlike outright sale, the concession agreement allowed the government to keep ownership of the transmission assets through TransCo. Payment of the concession fee is through PSALM.

The operation, maintenance and expansion of the grid was handed over to NGCP, the consortium of Monte Oro Grid Resources Corp., Calaca High Power Corp. and the State Grid Corp. of China as technical partner, that won the 25-year concession in 2007 in a competitive bidding.

Mr. Matibag said the possible loss to the government if prepayment is allowed could reach “P9-10 billion thereabouts.”

“What we are saying is we even have collectibles of about P3.9 billion in arrears. If there are collectibles under the concession agreement, they are not allowed to do a prepayment,” he said.

NGCP started operating as electricity transmission service provider in 2009. Its expanded 50-year franchise gave the company the right to operate and maintain the transmission system and related facilities.

In his letter to Lourdes S. Alzona, PSALM officer-in-charge, Mr. Matibag said TransCo “still holds the same position that it strongly” disagrees with PSALM’s acceptance of P57.88 billion as prepayment from NGCP “as the same is not in accordance with the pertinent provisions” of the concession agreement.

Mr. Matibag said that aside from the prepayment being contrary to the concession agreement’s provisions, “it likewise badly affected and will still continue to adversely affect the financial condition of TransCo.”

He said the prepayment of P57.88 billion corresponding to 51.59% of the outstanding fee as of July 16, 2013 resulted in TransCo’s “actual loss” of revenue for P12.62 billion for years 2013-2016 and P9.95 billion for years 2017-2020 and an estimated loss of revenue for P3.5 billion for years 2021-2024.

These foregone revenues total P26.07 billion for years 2013 to 2024, he said “due to the reduction in the concession fee interest earnings.”

“Further, this is to caution PSALM of another prepayment of the deferred payment of the concession fee by NGCP as this will result in an additional loss of revenue,” Mr. Matibag said, citing the amount of P59.59 billion for years 2013 to 2029 “attributed by a reduction in the concession fee interest earnings.” -- Victor V. Saulon

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