02 Mar 2012
The Power Sector Assets and Liabilities Management (PSALM) Corporation seeks to clarify the allegations made by Mr. Herman Tiu Laurel in his DieHard III column titled "IPPs owe public USD9.99B" that was published in the Daily Tribune on 27 February 2012.
Mr. Laurel claimed that PSALM failed to retire its financial obligations that currently stand at USD18 billion despite the fact that it has sold around 90% of the state's power assets. He implied that the money generated from the privatization is nowhere to be found. "It is as if the money from the sales vanished into thin air," he said in his column.
PSALM has unceasingly explained that the management of these debts is a gargantuan task and an intricate process linked to various factors. For the period 2001, the enactment of Republic Act No. 9136, the Electric Power Industry Reform Act (EPIRA), to 2011, PSALM had paid USD13 billion in debts of the National Power Corporation (NPC) - broken down into the principal amount of USD8.1 billion and the accrued interest of USD4.8 billion - and USD9 billion in independent power producer (IPP) obligations, or a total of USD22 billion. This amount would have wiped out the USD16.39-billion liabilities posted by NPC before the implementation of the EPIRA.
PSALM records, however, also show that from 2001 to 2011, NPC had incurred cumulative deficits, including operational losses and financial obligations, amounting to USD9.3 billion, because of subsidies, regulated rates, and commitments and obligations to adequately sustain the utility firm's operations. Even after the implementation of the EPIRA, NPC continued to operate at a loss as it failed to recover its true cost of power production. Thus, NPC resorted to more borrowings to cover both the actual and the projected shortfall from its operations.
NPC's operational accountabilities included the commissioning of new IPP plants from 2002 to 2004 that amounted to USD3.2 billion. In fact, NPC's total financial obligations, including its new debts, reached USD22.35 billion in 2003. This financial condition was exacerbated by the foreign exchange losses that NPC incurred from its foreign loans because of the peso depreciation in the initial years of the EPIRA implementation.
In 2004, NPC's aggregate debts eased slightly to USD19.50 billion after the government absorbed PhP200 billion of these obligations as stipulated in the EPIRA.
Mr. Laurel also implied that the Independent Power Producer (IPP) Administrators who acquired the contracts that NPC entered into with the IPPs did not pay their remaining dues to PSALM amounting to USD9.99 billion.
PSALM has clearly pointed out that this amount is to be collected according to the IPPA structure that mandates PSALM to reconcile its cash flow with the maturity profile of IPP obligations. The payment was structured in such a way that the privatization proceeds from the IPP Administrators would match the period when PSALM has to pay its obligations to the IPPs.
Based on its 2011 records, PSALM, so far, has generated around USD10.210-billion proceeds from the successful sale of the power and transmission assets and the transfer of IPP contracts to IPPAs. Of this amount, PSALM has collected USD5.472 billion of which USD5.477 billion (including income interest) was used to settle its maturing obligations.
Part of the receivables that PSALM is expediting to collect is the USD2.81-billion remaining payment for the concession of the country's sole transmission business. Under the concession agreement, the National Grid Corporation of the Philippines (NGCP) has the option to prepay the remaining balance of its bid offer of USD3.95 billion. The government, through its securitization scheme, may use the receivables from the concession contract of the NGCP to preclude PSALM from incurring more borrowings because cash will be available to pay for previous loans as they fall due.
Finally, Mr. Laurel misinterpreted the government's reluctance to transfer the Power Barges to Mindanao to provide emergency power because, he says, the move will violate EPIRA's ban on government to participate in power generation. What was banned is the creation of new obligations by the NPC to purchase power. In fact, PSALM is expediting the privatization of the Power Barges, stringently emphasizing the condition that the buyer will transfer the facilities to Mindanao to help resolve the power crisis in the region.
Strategic Communications and Partnership Division |