THE national government is still liable for the loan obligations of the National Transmission Corp. (Transco) for existing loans secured prior to Transco’s privatization.

Loans secured for the use of Transco are assumed by the National Power Corp. (Napocor). As a separate agency, however, Transco has zero debt.

In a letter written by Power Sector Assets and Liabilities Management Corp. Asset  Management and Electricity Trading Group vice president Froilan Tampinco, the concessionaire, the consortium of the Monte Oro Grid Resources Corp., Calaca High Power Corp. and State Grid Corp. of China, will only be responsible for the management of the existing construction projects of Transco.

“While the concessionaire is now responsible for the management of the construction and completion of all projects under construction, Transco shall be liable for obligations in relation to loans existing prior to commencement date contracted relating to the transmissions assets, except those assumed by the concessionaire under the Loan Convenants Agreement,” Tampinco said in the letter.

Under the Construction Management Agreement (CMA), Transco is required to ensure that the concessionaire is able to draw down from the external funding that Transco certified to be available to the concessionaire on the commencement date.

Transco will also be responsible for replacing such funding if it ceases to be available to the concessionaire while any project under construction remains uncompleted, unless the concessionaire is found to be in default under any of the transaction documents.

However, if Transco fails to disburse the required funding, Tampinco said the concessionaire will be entitled to treat the undisbursed funding as an overdue amount under the concession agreement from the date that the funding will be disbursed under the funding agreement.

Meanwhile, Tampinco said that to determine the status of the projects under construction, as well as the estimated cost to complete projects and determine cost overruns/savings, Transco will deliver a certificate to the concessionaire within 45 days.

After the certificate is delivered, both the concessionaire and Transco will conduct an audit to determine the status of the projects under construction and estimated cost to complete each project to determine cost overruns or savings.

“The concession fee shall be subject to adjustment in accordance with [the concession agreement provision on adjustments to concession fee] in light of the results of the audit conducted. Subject to the findings in the audit referred to of the concession agreement, any cost overrun incurred or accruing prior to commencement date shall be dealt with in accordance with the provisions of the concession agreement,” Tampinco said.

“For avoidance of doubt, Transco shall not be liable to pay any cost overrun incurred for the implementation and/or completion of any project under construction from the commencement date,” Tampinco added.

Tampinco said that if the audit results show that the total cost of a project under construction at the commencement date is lower than that contained under the projects under construction of the concession agreement, the concessionaire will be required to pay Transco the difference.

Last December the consortium emerged as the highest bidder for the 25-year concession of Transco, the country’s sole transmission business.

Monte Oro Grid offered $3.950 billion for the concession contract, while the consortium of San Miguel Energy Corp., Dutch firm TPG Aurora BV and Malaysia’s TNB Prai Sdn Bhd bid $3.905 billion.

THE government has secured a $300-million Asian Development Bank loan that will help local government units (LGUs) pursue financing and budget reforms, President Arroyo announced Wednesday.

CEBU CITY—Cebu furniture exporters are pinning their hopes on new markets, particularly in the Middle East and in Russia, to cushion the effects of a reported US recession and the strengthening peso.

FEED millers are asking the Department of Agriculture (DA) to consider the suspension of tariffs levied on alternative raw materials used for making animal feeds to help them cope with the increasing cost of corn both in the local and international market.

ZAMBOANGA CITY—Agriculture Secretary Arthur Yap led the inauguration of a P33-million Zamboanga del Norte corn postharvest processing and trading center, which is expected to raise production of the grain in the province by as much as 10 percent and farmers’ incomes by as high as 50 percent.

INDEPENDENT think tank Ibon Foundation said there is a possibility that the government will resort to more taxes this year to address the fiscal crisis and ensure that it can continue its debt-servicing efforts.

THE national government is still liable for the loan obligations of the National Transmission Corp. (Transco) for existing loans secured prior to Transco’s privatization.

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