12 Aug 2005
The National Power Corporation (NPC) has successfully reentered the international capital markets with the recent issuance of six-year Floating Rate Notes valued at $300 million. The issuance is expected to further boost NPC’s already improving financial condition.
Power Sector Assets and Liabilities Management Corporation (PSALM) president Nieves L. Osorio said the funds will be used to finance the maturing debt obligations, capital expenditures, and general funding requirements of NPC and PSALM for 2005.
To mature in 2011, the Notes carry an unconditional and irrevocable guarantee from the Philippine government and pay a quarterly coupon of three-month US dollar (USD) LIBOR (London Interbank Offered Rate) plus 425 basis points. LIBOR is the rate banks charge each other for short-term Eurodollar loans. It is frequently used as the base for resetting rates on floating-rate securities.
The transaction was offered in Asia at the initial price of $200 million. But based on strong investor response, the final issue was increased to $300 million. The issue attracted an order book of over $500 million from 85 different accounts across Asia, Europe and North America.
The Notes are expected to be rated BB-/BB by Moody’s and Fitch, consistent with the ratings of the Philippines’s long-term external debt.
Arranged by Bear, Stearns and Co. Inc. as sole lead manager, the transaction represents NPC’s second unsecured USD issuance in the international capital markets since 2002. For the two years prior to this issuance, the state-owned power firm had met most of its external funding requirements through borrowings from the national government, issuance of local bonds, and credit-enhanced transactions involving insurance providers such as the Overseas Private Investment Corporation and the Asian Development Bank.
Osorio said NPC’s successful reentry in the international capital markets is evidence of increasing confidence by foreign investors in the structural reforms that PSALM and NPC have been implementing since the Electric Power Industry Reform Act (EPIRA) of 2001 was enacted. EPIRA seeks to institute changes in the Philippine electricity industry. PSALM was created under this law to handle the privatization of NPC.
Osorio expects NPC to further improve its financial situation this year following the tariff increases that the firm successfully obtained from the Energy Regulatory Commission. She said that cash deficit reduction programs, the implementation of efficiency measures, and the absorption by the national government of P200 billion in debt obligations should translate to a sharper financial picture for NPC in the years to come.
NPC president Cyril C. del Callar expects the power firm to finally break even this year from a net loss of P29.9 billion in 2004 with the help of an electricity price increase and rising energy sales.
Strategic Communications and Partnership Division |