Napocor needs $2-B for debt service, IPP payments

State-owned National Power Corp. (Napocor) will need at least $1 billion for debt service and another $1 billion as payments for the amortization of the capacity fees to its independent power producers (IPPs) next year.

Power Sector Assets and Liabilities Management Corp. (PSALM) president Edgardo del Fonso said Napocor normally sets aside $1 billion for debt servicing every year. Of this amount, $500 million will be for principal and another $500 million for interest.

For 2003, he said they have maturing obligations amounting to close to $500 million. Some of these maturing debts are bonds which were issued by the power firm during the past years.

As of end-June 2003, Napocor has approximately $7 billion worth of debts, $800 million more than $6.2 billion incurred in end-2001 but slightly lower than the $7.2 billion (P376.32 billion) recorded in end-2002.

But the $7 billion debts still excluded the $250 million loan which was partly-backed by the Overseas Private Investment Corp. (OPIC) of the US that was finalized a few weeks ago.

These Napocor loans will be transferred to PSALM once it gets approval from the company’s multilateral creditors –Asian Development Bank, Japan Bank for International Cooperation and World Bank.

But there have been a lot of issues that the three banks have been asking PSALM and Napocor to resolve before they approve the transfer.

Specifically, the banks want to know what the National Government will do to support PSALM if it will not meet the debt servicing or what will be the debt coverage ratio of the NG.

The creditors also want to clarify what will be done by NG to pay up the loans that will be absorbed by PSALM.

The huge debts of Napocor could only be reduced through privatization wherein the government will no longer be burdened with providing financing requirement for the power generation firm.

President Arroyo had said that privatizing Napocor will put an end to the financial problem of the National Government in subsidizing the debt-ridden power company. "We need to put a stop to all this. We need to put a stop to the continuous hemorrhage of government funds due to financial losses of Napocor," she said.

Mrs. Arroyo noted that for the past five years, Napocor has incurred losses of P73 billion. This year, the company is expected to incur losses of about P70 billion.

"The answer to sourcing the huge capital requirements of our power sector is privatization. Privatization enables the government to stretch its scarce finances to meet other basic needs that our people should have immediately," she said.

The sale of Napocor assets will generate some $5 billion in proceeds. The privatization of Napocor’s transmission assets is expected to fetch some $2 to $2.5 billion while it can raise another $2.5 billion from the sale of the generation assets.