04 Dec 2007
The Power Sector Assets and Liabilities Management Corporation (PSALM) is poised to chop off a sizeable chunk of the government’s debt burden by programming the pre-payment of up to US$1 billion of the National Power Corporation’s (NPC) loan obligations.
The amount is about 14% of NPC’s debt. "We have identified some loan agreements which allow for pre-payment, and we now have the resources for pre-payment because of the excellent proceeds generated by the privatization of NPC’s power plants,” PSALM Manager for Capital Markets and Risk Management Ferdinand George Florendo explained.
The Electric Power Industry Reform Act (EPIRA) provides that proceeds from the privatization of the government’s electricity assets, including the concession for the operation of the National Transmission Corporation (TransCo), which is set for bidding on December 12, will go to the liquidation of NPC's debts.
“We have evaluated NPC’s loans and we determined that pre-paying this portion of NPC’s debt, consisting of Yen-denominated loans, at this time will produce optimum benefits for the Filipino people," Mr. Florendo said. PSALM’s Capital Markets Department and NPC’s Finance Group are also considering other finance structures such as swaps and options available in the international financial markets to maximize the use of proceeds from the power privatization program.
Mr. Florendo clarified, however, that, “This does not necessarily mean that PSALM and NPC no longer need to borrow money for NPC. This is because the proceeds from privatization may not be enough to cover all of NPC’s US$7.2 billion debt, and because the timing of when we receive payments will have to be matched with the scheduled debt service payments.”
Mr. Florendo added, “We are eager to complete NPC’s privatization successfully and liquidate NPC’s debts as soon as possible because any unpaid portion of NPC’s debts becomes part of the consumers’ electric bill through the Universal Charge, in accordance with the EPIRA.”
“Ultimately, the continued success of the privatization of NPC’s power plants and the TransCo concession will result in cheaper electricity for the Filipino consumers,” Mr. Florendo remarked.
As regards the bidding for the TransCo concession, at the last round of bidding in February 2007, which ended with a failed bid, industry players pegged the expected concession fee at at least US$3 billion. “Of course we expect a bid higher than that now,” Mr. Florendo said.
Strategic Communications and Partnership Division |