ADB okays $500-M guarantee for RP

The Asian Development Bank (ADB) said yesterday it had approved a partial credit guarantee for up to half a billion dollars’ worth of commercial loans to support restructuring of the Philippines’ electricity sector.

The bank also indicated readiness to raise its guarantee to $750 million by providing $250 million in further support early next year, the Manila-based lender said in a statement.

The guarantee would back yen-denominated bonds to be issued by the Power Sector Assets ADB okays and Liabilities Management Corp. (PSALM) to cover cash flow needs during the early stages of the privatization of the state-run utility National Power Corp.

"We expect that our support of the bond issue will help the Philippines maintain the momentum of essential reforms in the power sector," ADB president Tadao Chino said in the statement.

"These will provide clear benefits to the poor through lower electricity prices, better service and stronger growth, as well as send an important positive message to private investors."

The bank said power shortages in the Philippines were among the highest in Southeast Asia’s highest and constrained investment, growth and development.

Privatization would start next year, and the bond issue is expected later this month.

Together with a counter-guarantee from the Manila government, the support would ensure PSALM’s access to competitive and long-term funds of up to 20 years, enabling it to pass savings on to consumers at an earlier stage, the bank said.

Meanwhile, ADB vice president Joseph Eichenberger stressed the "importance of swift legislative approval of the transfer of the public utility franchise of the National Transmission Corp. to a private concessionaire."

He said this would "boost investor confidence regarding the sale of generation assets" of the state utility that would follow. – AFP