15 Oct 2010
The proceeds from the privatization of the power assets of the National Power Corporation have been used and continue to be used to settle the financial obligations of the government's generating firm as clearly stipulated in the provisions of the Electric Power Industry Reform Act (EPIRA).
This was again emphasized by the Power Sector Assets and Liabilities Management (PSALM) Corporation as it refuted the claims of Samar Representative Ben Evardone regarding PSALM's utilization of the privatization proceeds.
PSALM made it clear that the proceeds from the sale of the power assets were never spent for unscrupulous purposes as Rep. Evardone implied in his recent privilege speech and in his press statements. The power privatization agency branded the Samar representative's claims as inaccurate, unfair and untrue because they lacked the benefit of thorough verification and prudent study.
In his privilege speech, Rep. Evardone stated that PSALM has generated USD10.6 billion from privatization and USD2.8 billion in new loans for a total of USD13.4 billion. But it has paid only USD1.3 billion of National Power's debt. He asked where the USD12.1 billion went.
In presentations made to the House Committees on Energy and on Appropriations, PSALM explained that while it has generated USD10.6 billion from the privatization of government's power facilities, only USD4.67 billion has been collected as of 30 September 2010 because the remaining balance will be obtained through a deferred payment scheme. Of the USD4.67 billion collected so far, USD4.657 billion was used to service the debts of National Power, prepay maturing obligations, pay off independent power producer (IPP) obligations, and settle other privatization-related liabilities.
PSALM explained that the new loan amounting to USD2.8-billion referred to by Rep. Evardone was used to finance the operations of IPP plants still under contract with the government. PSALM also used the loan to procure fuel for the IPP plants and to settle other peso-denominated loans.
Because of the mismatch between the maturity profile of the obligations and the schedule of the privatization proceeds, PSALM needed to undertake refinancing to pay outstanding obligations. The obligations paid cover the principal payments and the interest where the bulk of the payment goes.
Rep. Evardone also questioned PSALM's Universal Charge (UC) application with the Energy Regulatory Commission (ERC) to recover PhP470 billion in stranded debts, saying it would be an additional burden to consumers in the form of higher electricity rates. He insinuated that the shortfall resulted from PSALM's incapability to prudently utilize the privatization proceeds.
PSALM has time and again made it clear that the PhP470 billion would be recovered in a span of 17 years through a levelized scheme to cushion the impact of any rate increase on consumers when the UC is finally collected. PSALM will also file petitions, as necessary, to adjust the UC depending on actual collection of privatization proceeds. PSALM pointed out that the UC for Stranded Debt is expressly provided under the EPIRA as Congress had anticipated that the power privatization proceeds would not be enough to fully cover the huge debts of National Power.
Dismissing the allegation that it has not been forthright about its finances, PSALM said it has presented the debt profile of National Power to the Department of Energy, the House Committees on Energy and Appropriations, and the ERC. PSALM is also providing additional information on National Power's debts to the House Committee on Energy. Notwithstanding these submissions to various agencies, PSALM said it can provide additional explanations to Rep. Evardone if the latter so requires.
PSALM stressed that it has always been transparent in discharging its liability management responsibilities and has, in fact, conducted expository presentations to the ERC to detail the collection and utilization of the privatization proceeds as part of its deliverables for its UC applications.
Corporate Communications Division