ADB, WB defer decision on Napocor’s request for waiver

The Asian Development Bank and the World Bank have deferred the granting of a waiver to the National Power Corp. (Napocor) pending the passage of the Power Sector Reform Bill (PSRB).

"They have decided to defer their decision on the waiver pending further developments in the power restructuring law," Napocor finance chief Antonio Ingco, told reporters over the weekend.

In a letter to Napocor, ADB, one of the major sources of concessional loans for the power firm, said they are willing to wait for further developments in the power bill.

Napocor had sought a waiver from ADB and WB due to its failure to meet with loan covenants such as the prescribed return-to-rate-base (RORB) and debt service coverage ratio (DSCR). The two multilateral creditors had granted Napocor a waiver in 1998 and 1999. But, in 2000, they appeared "hesitant" to give in to the request of Napocor for a waiver due to President Arroyo’s earlier pronouncement that she was not keen on enacting the Power Bill.

Ingco said aside from its response to Napocor’s request for waiver, the ADB also made a letter to other Cabinet members "urging them to consider the passage of the bill".

According to Ingco, ADB and WB are not actually hesitant to grant the waiver but just want to wait for the Congress’ move on the Power Act.

"ADB said it is willing to defer its decision on the waiver so the government will have more time to comply with the loan covenants, in case the bill will be passed," Ingco said.

Of the $6.5-billion total loans of Napocor, about $4 billion came from ADB, WB and Japan Bank for International Cooperation. If these banks will not give a waiver to Napocor, the company will be in technical default and will be asked to pay the debts.

Aside from this, the disbursement of about $1-billion worth of loans from these three multilateral lenders this year is expected to be put on hold.

Upon review of the proposed law, the Arroyo administration has committed to enact the bill in this Congress. If not passed within the 11th Congress, a special session will be called to pass the Power Bill before the May elections or not later than June this year.

The bill, sponsored by Speaker Arnulfo Fuentebella, seeks to deregulate the power industry and sell the assets of the Napocor to private companies. Critics had warned that the bill would bring about a monopoly in the power industry, resulting in higher electric rates for the public.