Napocor anchors bond float on power reform bill

The National Power Corp. (Napocor) will push through with its planned $300-million bond flotation in June this year only if the Power Sector Reform Bill (PSRB) is passed by Congress, a company official said.

Napocor finance chief Antonio Ingco said another bond offering is necessary by the middle of this year because the company has to pay some obligations which will fall due in June.

Specifically, Ingco said part of the proceeds from the bond float will be used to pay the company’s maturing loan to ING Barings amounting to $140 million. The balance will be used to finance Napocor’s capital expenditure this year.

Napocor earlier shelved plans to tap the international bond market pending the enactment of the power bill. Most of the investors are looking forward to the passage of the bill which includes the privatization of the country’s largest power producer.

"If the power bill will be passed anytime before June, then we can push through with our flotation," Ingco said.

Ingco said some of the investors might consider the passage of the power bill as a positive sign to buy the company’s bonds.

A study said Napocor bonds are being bought in the international bond market because they carry sovereign guarantee.

HSBC’s Asian Credit Review said that prospects of another bond issuance for the state-owned generation giant remain dim due to huge losses incurred by the company during the past few years.

Last year, Napocor incurred a net loss of P11.9 billion, almost double the P6 billion loss in the same period in 1999.

"We are not recommending Napocor bonds at the current juncture," the HSBC in its Asian Credit Review said. "The incremental yield pick up is marginal given Napocor bonds are illiquid, while investing in the sovereign already offers adequate yield from a risk/reward perspective.

Over the near-term, HSBC said the credit rating of the company 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.