Napocor bullish on privatization

State-run National Power Corp. expressed optimism that its privatization plan will take place within the next 18 months.

This optimism was expressed by Napocor is seeking another reprieve from its multilateral creditors after failing to comply with loan agreements.

Under its loan agreements with the Asian Development Bank and World Bank, Napocor should at least get a return-on-rate-base (RORB) of eight percent and debt service coverage ratio of 1.3 percent for 2000. But due to its continuing financial problems, Napocor will be unable to comply with these loan agreements.

Another part of the loan agreement which Napocor asked for a waiver was the asset valuation by an external appraiser. According to Napocor, based on previous, experience, the process of independent appraisal from start of engagement up to take up in the books usually takes a minimum of two years.

"This may be too late considering that we foresee privatization to take place within the next 18 months," the company said.

Napocor, in addition to the RORB and DSCR requirements, is required every four years to avail itself of the services of an independent appraiser to value its assets.

The last appraisal was undertaken in 1996 with result taken up in Napocor’s books only in 1998. The next external valuation is due by the end of this year.

Another reason cited by Napocor in requesting for a waiver on getting an external appraiser for asset valuations is that there are many methodologies to gauge a corporation’s performance under a deregulated power industry.

"The RORB methodology may or may not be applicable under the circumstance. Until such time that a proper measure can be determined and established, we request that an independent appraisal of Napocor asset be held in abeyance," it said.

It also said depending on the need, the independent appraisal may already be undertaken by the prospective buyers of the successor companies in the course of their due diligence on Napocor.

"It may be prudent at this point to allow the prospective owners to determine the most appropriate valuation methodology to use," it said.