20 Feb 2007
The Power Sector Assets and Liabilities Management Corporation (PSALM) is set to sign amendment agreements with the World Bank signifying the creditor's universal consent to the transfer of the debts and assets of the National Power Corporation and National Transmission Corporation (TransCo) to PSALM.
On 29 January 2007, PSALM received the clearance from the Inter-agency Committee for the Review of Foreign Loan documents (IAC-RFLD) on three agreements which amended the original loan agreements of National Power with the WB-International Bank for Reconstruction and Development (WB-IBRD). The amendment agreements are expected to be formalized in March.
"Debt and asset transfer has always been on top of PSALM's list of major action items. This development will bring government's privatization efforts further forward as universal consent will impact on the attractiveness of the assets and facilitate the transfer of power assets successfully bid out to the new private owners," said PSALM President and Chief Executive Officer Nieves L. Osorio.
Creditor consent is a standard requirement of banks and other financial institutions before their borrowers can transfer ownership of assets that were acquired using loans they extended. The consent of creditors such as the World Bank is a major precondition for the successful privatization of National Power assets.
The amended loan agreements provide the terms and conditions for WB-IBRD's consent to the transfer of National Power debts and assets to PSALM as provided by the Electric Power Industry Reform Act. The Project Agreement requires TransCo to commit to the objectives of the projects funded by the loan agreements. The Agreement Amending the Guarantee Agreement ensures that the government guarantee on the original loan agreements will remain effective after the transfer of National Power's debts to PSALM.
Without the universal or omnibus consent, PSALM sought specific creditor consent for each plant it successfully bid out. It most recently secured specific consent for the 112-megawatt Pantabangan-Masiway hydro plant which was turned over to First Generation Hydropower Corp. in November 2006. PSALM is now working on the specific consent for the 360-MW Magat hydro plant which was successfully bid out in December 2006 and awarded to SN Aboitiz Power in January 2007.
The World Bank is the second major creditor after the Asian Development Bank (ADB) to give its universal consent to the transfer of power debts and assets to PSALM. On 03 March 2006, the Omnibus Amendment Agreement (OAA) was signed between ADB and the Department of Finance, National Power, PSALM and TransCo expressly providing 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 amended all loan agreements between ADB and National Power to reflect these consents.
Strategic Communications and Partnership Division |