Napocor deficit seen to decline

State-run National Power Corp. (Napocor) expects to bring down its deficit from 1.5 percent of gross domestic product (GDP) in 2004 to 0.5 percent in 2005 and 2006, the country’s top energy official said.

"With a liability and risk management program in place, Napocor will no longer be a drag on the National Government’s finances in 2006 and beyond," Energy Secretary Raphael P.M. Lotilla said.

He said the turnaround in Napocor’s financial performance to be sustained in 2006 and beyond would lead to a healthier public sector financial position.

Lotilla said the privatization of the Napocor-Small Power Utilities Group (SPUG) areas will also contribute to sustaining the turnaround in the power firm’s finances due to a reduction in subsidy to these areas.

To date, seven SPUG areas have already been privatized, with a total capacity of 82 megawatts.

The SPUG privatization effort is expected to result in an estimated annual diesel/fuel savings of around P2 billion once the Energy Regulatory Commission (ERC) approves their application of supply contracts.

Napocor has been in the red since 1998. The state-owned power firm, however, is confident it would finally turn around for the first time in seven years and its P117-billion net loss wiped out in 2005.

Napocor’s interest expenses are projected to go down to P22.64 billion in 2005 from P30.25 billion in 2004 as a result of the National Government’s decision last year to absorb some P200 billion of the firm’s outstanding liabilities, as mandated in the Electric Power Industry Reform Act (EPIRA).

Napocor president Cyril del Callar said the improvement in the company’s financial performance could be attributed to its continuing effort to bring down the use of imported fossil fuel.

He said they have also engaged in various schemes to strengthen financial management. "We have reviewed our insurance contracts instead of paying long-term, we have shortened it or pay in cash so we will do away with expensive premiums," he said.

Del Callar said the strengthening of the peso against the US dollar and the Japanese yen also helped in trimming down the company’s losses last year.

He noted that most of the power firm’s debts are US and yen-denominated. Its book is 95-percent debt and five- percent equity.

In 2004, Napocor recorded a net loss of P29.9 billion from P117.02 billion in 2003.

Since 2001, Napocor has been borrowing about $1.5 billion annually to meet its budgetary shortfall.

Del Callar said Napocor was able to generate savings in terms of fuel costs due to implementation of economic dispatch of power plants, among other cost cutting measures.