$250-M PSALM bond issuance to cover Napocor’s funding needs for next year

The Power Sector Assets and Liabilities Management Corp. (PSALM) may use the proceeds from the $250-million planned bond issuance which will be partially-backed by the Asian Development Bank (ADB) to cover the financing requirement of the National Power Corp. (Napocor) for 2004.

PSALM president Edgardo del Fonso said up to now they are still waiting for the go signal of the ADB for the proposed bond float.

PSALM is mandated to manage the finances and the privatization of the state-owned Napocor.

Del Fonso said in case they are able to secure ADB’s approval by the last quarter of this year, they plan to use the proceeds of the bond issue to partly finance the capital expenditure of Napocor for next year.

"Even if it happens by late this year then that (proceeds) will be used for 2004 funding already. For now, no movement yet it is not actually under discussion.

According to del Fonso, the ADB is still reviewing and validating the data submitted by PSALM.

ADB has asked PSALM to comply with some requirements. Specifically, the multilateral creditor said it needs to see concrete progress in the privatization of the transmission assets of the Napocor before they approve the bond offer.

"We agreed with the government that there should be concrete progress on the privatization in the power sector before we move with the $250-million partial credit guarantee, " ADB country director for the Philippines Thomas Crouch said, in an earlier interview.

Crouch said the transfer is a crucial part of the privatization process of the state-run power firm. "Part of the privatization process is the transfer of the Napocor assets and liabilities to PSALM. That is part of the progress we need to see before we give the partial credit guarantee," he said.

But the PSALM chief said they are not rushing the issuance of the ADB-backed bonds. "We are now just waiting. So for us there is no pressure to chase after because we are covered for the year," he said.

Recently, the PSALM has successfully pulled off a $250-million bond offering which is backed by the Overseas Private Investment Corp. (OPIC) of the US.

The planned $250 million ADB-backed borrowing was supposed to be part of the overall $750-million partial credit guarantee to be provided by ADB to finance Napocor’s financing requirement while state-run power firm is being privatized.

PSALM had already offered some $500 million of the $750 million through a bond offering late last year.