BSP okays $300-M Napocor debt swap

The Bangko Sentral ng Pilipinas (BSP) has approved the proposed $300-million debt swap of the National Power Corp. (Napocor) that would fill up more than half of the company’s total borrowing requirement for the year.

The state-owned Napocor had laid out a $500-million borrowing requirement for the year including the debt swap which was originally proposed by the Power Sector Assets and Liabilities Management Corp (PSALM).

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the Monetary Board approved the swap at its meeting last week, allowing Napocor to exchange $300 million worth of maturing obligations.

Napocor said the swap would help tidy up the company’s debt portfolio which stood at $7.01 billion or P372 billion as of October last year.

This was a decline of about $6 billion since the government decided to absorb about P200 billion worth of expensive debt that Napocor had been having a difficult time servicing.

On behalf of Napocor, PSALM wanted to swap existing obligations to another currency, hedging on the cost advantages of the exchange.

Napocor, however, has since restructured the swap between short term loans and longer-term ones with tenors of up to 10 years. This way, the power company would be able to extend the maturity profile of its portfolio.

"Last year, we saw the impact of having longer-term loans, with Napocor being able to tap the local and foreign markets for a 10-year loan," Napocor president Cyril Del Callar earlier said. "With the strengthening of the peso against the dollar and with the improving economy, we can take advantage of this now."

Napocor has already announced that it is planning to borrow at least $500 million this year, significantly lower than its $700 million borrowing program in 2006.

Napocor said it needs to borrow to finance its cash flow since most of its earnings in 2006 are considered non-cash operating income. The company said it needs funding for its fuel purchases.

Over the past two months, the company had awarded coal procurement contracts, including a coal contract for five shipments at $84 per metric ton to Australian firm Hunter Valley Coal Corp. Pty Ltd.

Napocor had also earlier awarded three separate coal contracts for $65 to $68 per metric ton to PT Kaltim; PT Andalan and PT Baramulti. Both contracts would supply the requirements of the Pagbilao power plant.

Napocor said it needs 4.5 million metric tons of coal to fire up its coal power plants and next year, the requirement is expected to increase to five million to six million metric tons.