PSALM prepays Y27.2 billion of National Power debt

02 Jun 2008

The Power Sector Assets and Liabilities Management Corporation (PSALM) today (02 June) prepaid Y27.2 billion, or around USD263 million, of National Power Corporation's debt. The amount represents Tranche B of the Miyazawa yen-denominated loans extended in 1999 by the Japanese government to National Power to finance a number of transmission projects.

"The prepayment will reduce National Power's debt obligation from USD7.01 billion as of end 2007 to USD6.62 billion and will improve National Power's debt to total GOCC (government-owned and -controlled corporation) debt ratio from 58.4 percent to 57.1 percent in 2007," said Ms. Lourdes S. Alzona, PSALM's acting vice president for finance.

Ferdinand A. Florendo, manager of PSALM's Capital Markets and Risk Management Department, explained that aside from savings on interest payments and guarantee fees, "the Miyazawa prepayment reduces National Power's foreign exchange debt by four percent and increases the peso component of the debt currency mix to 13 percent from 11 percent. This improves National Power's liability profile by reducing the exposure of the company to foreign currency fluctuations."

Last 19 March, PSALM liquidated Y17.4 billion Direct Japan Bank of International Cooperation-Overseas Economic Cooperation Fund (JBIC-OECF) loans consisting of Y16.9 billion prepayment and Y0.5 billion principal due. Added to the prepayment of the Miyazawa loans, National Power's total debt has now been reduced by 5.6 percent. PSALM targets to reduce National Power's debt by at least 28 percent in the next two years.

The prepayment of the yen-denominated loans was made possible by the successful bidding of National Power's generation plants. Pursuant to the 2001 Electric Power Industry Reform Act, proceeds from the privatization of the government's electricity assets are used by PSALM to liquidate the financial obligations of National Power.

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