Napocor eyes add’l $700M for ’06

National Power Corp. (Napocor) would likely need another $700 million for its financing requirements in 2006, a ranking company official said.

"We will probably need more or less the same financing requirement next year," Napocor vice president for finance Lorna Dy said.

In 2005, the state-owned power firm raised $700 million to finance its operations.

The Napocor official said they would likely borrow less if the company’s financial position will further improve this year.

This year, the country’s largest power producer has set aside P18 billion for its debt service requirement alone.

Last October, Napocor successfully re-entered the international capital markets with the issuance of a $300-million six-year floating rate notes. Last month it also issued peso-denominated loans. The issuance is expected to further boost Napocor’s already improving financial condition.

Power Sector Assets and Liabilities Management Corp. (PSALM) president Nieves L. Osorio said the funds will be used to finance the maturing debt obligations, capital expenditures, and general funding requirements of Napocor and PSALM for 2005.

To mature in 2011, the notes carry an unconditional and irrevocable guarantee from the Philippine government and pay a quarterly coupon of three-month US dollar LIBOR (London Interbank Offered Rate) plus 425 basis points. LIBOR is the rate banks charge each other for short-term eurodollar loans. It is frequently used as the base for resetting rates on floating-rate securities.

Arranged by Bear, Stearns and Co. Inc. as sole lead manager, the transaction represents Napocor’s second unsecured dollar issuance in the international capital markets since 2002.

For the two years prior to the issuance, Napocor had met most of its external funding requirements through borrowings from the National Government, issuance of local bonds, and credit-enhanced transactions involving insurance providers such as the Overseas Private Investment Corp. and the Asian Development Bank.

Osorio said Napocor’s successful reentry in the international capital markets is evidence of increasing confidence by foreign investors in the structural reforms that PSALM and Napocor have been implementing since the Electric Power Industry Reform Act (EPIRA) of 2001 was enacted.

EPIRA seeks to institute changes in the Philippine electricity industry. PSALM was created under this law to handle the privatization of Napocor.

Osorio expects Napocor to further improve its financial situation this year following the tariff increases that the firm successfully obtained from the Energy Regulatory Commission.

She said cash deficit reduction programs, the implementation of efficiency measures, and the absorption by the national government of P200 billion in debt obligations should translate to a sharper financial picture for Napocor in the years to come.

Napocor president Cyril C. del Callar expects the power firm to finally break even this year from a net loss of P29.9 billion in 2004 with the help of an electricity price increase and rising energy sales.