Prospects dim for another Napocor bond float, says study

Prospects for another bond issuance by the National Power Corp. remain dim due to huge losses incurred by the company during the past few year, according to a recent study.

"We are not recommending Napocor bonds at the current juncture," said an HSBC study called Asian Credit Review.

HSBC said the credit rating of Napocor will remain dependent on the National Government. "We expect Napocor’s credit rating to move in line with the Republic of the Philippines on the back of the explicit guarantee," it said.

According to HSBC, Napocor’s fate in the international bond market lies in the hands of the National Government, which itself is considered debt-ridden.

The power company is thus advised not to become too dependent on the government’s backing. "The Philippines’ ballooning fiscal deficit problem also weakens its ability to support Napocor," HSBC said.

It noted, however, that this sovereign guarantee will not be affected by the upcoming privatization plans of the power firm.

Napocor, wholly-owned by the government, is the dominant power generator and occupies a de facto monopoly in power transmission.

The study said one of the risk factors of the company is its weakening financial condition. Last year, Napocor lost P11.9 billion following a loss of P6 billion in 1999.

The power firm’s ability to meet its debt obligations, the HSBC study said, remains a major factor in the expected lackluster performance of the Napocor bonds. "The company’s debt service ratio is poor and rests on sovereign backing to access the debt capital market for refinancing and fund its capital expenditure requirement,’ it said.

The HSBC study also noted with apprehension the long delay in the privatization of the company. "Napocor’s outlook continues to be clouded by politicking on the details of its privatization plan."

Napocor’s privatization plan is one of the components of the proposed Omnibus Power Reforms Bill, which is still pending in Congress. But, the present administration of President Macapagal-Arroyo has indicated plans to scrap the Power Bill.

However, Napocor could still push for its privatization even without the Power Bill by amending its charter and selling its assets through the Committee on Privatization (COP).