17 Mar 2011
The Power Sector Assets and Liabilities Management (PSALM) Corporation expects to significantly reduce its financial obligations to USD3.78 billion by 2026 when it factors in all payments from the privatization of the power plants and the proceeds from the National Power Corporation's (NPC) contracted capacities in the independent power producer (IPP) plants it had successfully bid out through transparent public auctions as of December 2010.
This was disclosed by PSALM President and Chief Executive Officer Emmanuel R. Ledesma Jr., who presented a comprehensive report on the Corporation's financial standing to Congress during the House Committee on Energy hearing conducted last 10 March. He said that by the end of PSALM's corporate life in 2026, its financial obligations that currently stand at USD15.821 billion will substantially go down to an estimated USD3.78 billion. It must be noted that when the Electric Power Industry Reform Act (EPIRA) was enacted in 2001, the government's accumulated financial obligations stood at USD16.39 billion.
The total winning bid prices of sold assets as of 2010 amounted to USD10.65 billion, inclusive of the bid for the Angat Hydroelectric Power Plant. As of 31 December 2010, an estimated USD4.85 billion was collected out of the generated proceeds, of which USD4.84 billion was used to pay down NPC's obligations. Collection of the remaining privatization proceeds amounting to USD16.07 billion, including interest, will continue until 2029.
A total of 30 assets, which include 26 generating plants and four decommissioned facilities, have been successfully bid out by PSALM to private entities. Twenty of these 30 assets represent 91.73% of PSALM-owned capacities in the Luzon and Visayas grids.
Moreover, PSALM has assigned the contracted capacities of five IPPs to IPP Administrators (IPPAs). This covers 67.59% of PSALM's contracted capacities in the Luzon and Visayas grids.
For the period 2001 to 2010, PSALM had paid USD11 billion in NPC debt, which included principal and interest, and USD7 billion in IPP obligations, or a total of USD18 billion.
On a cash flow basis, President Ledesma explained that the projected collections of receivables from the payments of IPPAs and the proceeds from the privatization of the National Transmission Corporation amount to USD15.08 billion from 2011 to 2026. The maturing financial obligations for the same period amount to USD18.86 billion. Thus, the indicative shortfall is USD3.78 billion.
He pointed out that this USD3.78-billion shortfall could even be lower when PSALM completes the privatization of the remaining unsold plants and the contracted energy capacities that NPC entered into with the IPPs to resolve the power crisis in the 1990s during the Ramos administration.
The remaining generation assets held by PSALM include the Power Barges 101-104, the Agus-Pulangi Hydroelectric Power Plant, and the Malaya Thermal Power Plant. The decommissioned plants on its auction list include the Sucat Thermal Power Plant and the Bataan Thermal Power Plant.
PSALM will also transfer to new IPPAs NPC's contracted capacities in the following IPPs: Naga, Leyte, Western Mindanao Power Corporation, Southern Philippine Power Corporation, Mindanao coal-fired power plant, and Mt. Apo geothermal power plants 1 & 2.
PSALM stressed that the completion of the privatization program is necessary to check the further accumulation of debts because, historically, the remaining generation assets and the IPP plants operate at a loss. Further delays in the privatization program, on the other hand, may increase the amount of the indicative shortfall.
President Ledesma emphasized that the shortfall is cumulative until 2026 and does not take into account the year-on-year disparity between annual maturing obligations and receivables. The annual shortfall is addressed by PSALM through additional borrowings. He also pointed out that the maturity profile of loans and the collection of proceeds from the sale of power assets do not match. Under the privatization contracts, the acquisition of the power plants will be fully paid in a number of years through a staggered payment scheme. But in any year when maturing debts exceed privatization collections, PSALM will have no other recourse but to raise funds through new loans to settle the maturing obligations.
After the asset and debt transfer between NPC and PSALM transpired in 2008, PSALM started its refinancing program to fund obligations that were due in 2009 and 2010 and to extend the maturities of remaining outstanding debts.
The mismatch between the profile of the maturing obligations and expected collections compels PSALM to refinance the gap. As part of its mandate to manage its liabilities, PSALM is also exploring various financial structures to narrow the gap between collections and payments to minimize borrowings.
Strategic Communications and Partnership Division |