DOF, ADB sign Omnibus Amendment Agreement

03 Mar 2006

The Department of Finance (DOF), National Power Corporation, Power Sector Assets and Liabilities Management Corporation (PSALM), National Transmission Corporation (TransCo) and the Asian Development Bank (ADB) today (Friday, March 3) formally signed the Omnibus Amendment Agreement (OAA) that expressly provides the consent of ADB to the transfer of the assets of National Power to PSALM and TransCo, and the assumption by PSALM of all loan obligations of National Power with the ADB. The OAA amends all loan agreements between ADB and National Power to reflect these consents.

The consent of National Power's creditors, including that of the ADB as contained in the OAA, is a major pre-condition for the successful implementation by PSALM of its mandate to privatize all the assets of National Power, which is a vital component in the restructuring of the country's electricity industry.

The OAA will also bring PSALM a step closer to its goal of getting the universal consent of the other multilateral creditors - the World Bank and the Japan Bank for International Cooperation - and some small commercial creditors in its efforts to fast-track the privatization of the generation assets of National Power.

"The OAA signing is a milestone event because ADB is the first big creditor to give its consent to the transfer of all assets and liabilities of National Power. We now expect the other big creditors to follow suit within the year, which is our target," said PSALM President Nieves l. Osorio. "The universal consent is important because it will enable us to accelerate the privatization process and manage the loan obligations of National Power more prudently."

PSALM's assumption of the generating assets of National Power through the OAA will mean that it will have more control in terms of how these power plants will be run, including managing costs.

The OAA also requires the buyers of ADB-funded generation and transmission assets to observe certain covenants, such as those pertaining to environmental protection in the operation of the ADB-funded assets originally required by ADB in the ADB loan agreements funding these assets. This means that PSALM will be required to ensure that the buyers honor these covenants.