PSALM urged to resolve sovereign guaranty issue

The Japan Bank for International Cooperation (JBIC) is asking the Power Sector Assets and Liabilities Management Corp. (PSALM) to thresh out first the issue of sovereign guarantees before it gives its consent to the transfer of assets and liabilities from the National Power Corp. (Napocor) to PSALM.

Floro Adviento, JBIC manager, said they are just waiting for PSALM to address this issue. "The ball is now in PSALM. Until we get the response from them, we cannot issue the consent."

PSALM, on the other hand, said it is already seeking an opinion from the Office of General Corporate Counsel (OGCC) on this matter.

"PSALM is now seeking a legal opinion from the OGCC whether the National Government can still honor the sovereign guarantees extended to the ODA (official development assistance) approved by JBIC for Napocor," PSALM sources said.

According to the same sources, JBIC wants an assurance that the National Government will honor these guarantees.

"JBIC is demanding that these guarantees must be honored and maintained even after Napocor sells its power plants," the sources said.

The consent from multilateral creditors is crucial in the privatization process of Napocor assets.

Another creditor, Asian Development Bank (ADB), has already given its general consent.

Since JBIC and another creditor, World Bank, have yet to give their universal consent (lock,stock and barrel approval of the transfer of assets from Napocor to PSALM), they are just giving consent on a per asset basis.

It was learned that JBIC has extended ODA loans for the 600-megawatt (MW) Calaca thermal power plant and the Tongonan, Tiwi and Makban geothermal power facilities.

JBIC’s international finance account, meanwhile, include the 1,200-MW Ilijan natural gas-fired power plant and the San Roque multi-purpose plant.

As of end-December 2005, Napocor’s total outstanding debt reached $7.01 billion or about P372 billion. Of this loan amount, some 37 percent are yen-denominated.