Napocor to raise P7 billion for off-grid projects

MANILA, Philippines - State-run National Power Corp. (Napocor) plans to raise P7 billion through a bond issuance this year, its top executive said yesterday.

Napocor president Froilan Tampinco said the company needs to raise funds for the operations of its small power utilities group (SPUG), which provide electricity to off-grid areas.

Proceeds from the bond float will specifically be used to finance the capital expenditure of SPUG for the remainder of the year until 2010.

Tampinco said they are now soliciting proposals from several financial institutions for the planned bond floatation.

“We are talking to three banks. One offered its services for a possible bond issuance which we are looking into very seriously,” he said.

The Napocor chief said they will issue the bonds, not the Power Sector Assets and Liabilities Management Corp. (PSALM), the agency created to oversee the privatization of Napocor assets and contracts.

“This is something we will have to fend for ourselves and is not part of the mandate of PSALM so we’re exploring financing already at this time,” Tampinco said.

He said they need to raise additional funding before the year ends so as not to affect the company’s financial position.

“It will certainly affect our own proposed budget for next year since the one we will submit to Congress will no longer include that portion that will cover our responsibility over the operation and maintenance agreement we have with PSALM,” the Napocor official said.

Tampinco explained that Napocor still has a mandate to raise money for SPUG operations and it “can borrow money without any cap with government guarantee.”

He, however, said they are still studying if they need to raise the entire P7-billion requirement since they have a pending petition to collect universal charge from its customers.

“The amount we’re applying for amounts to P17 billion for 2009 to 2018 or translating to 30 centavos per kilowatthour. But it’s still an application and is still waiting the ERC’s approval,” he said.

The power reform law mandates that funds for the operations of SPUG shall come from the revenues from sales in the missionary areas and from the universal charge for missionary electrification as determined by the Energy Regulatory Commission (ERC).

He said they are also exploring other options such as encouraging more private sector participation in SPUG.

“Depending on how much private sector investment will come in, we would expect that with private sector investment coming in, government subsidy will also be reduced,” he said.

Napocor’s SPUG takes a leading role in planning power development in missionary areas. It assesses requirements and prospects for missionary electrification including the program for private sector participation. It also acts as the petitioner and local administration of the universal charge for missionary electrification.

The SPUG operates 304 generating units with a total generated capacity of about 129 MW. Its operation includes a hydroelectric plant and a hybrid wind turbine farm. It also serves 78 island grid and eight isolated grids, providing electricity to 42 customers consisting of 39 electric cooperatives and three local government units.

The estimated capital expenditure covering the years 2009 to 2018 amount to about P16 billion, part of which (P5 billion) is for generation projects in existing areas and P38 million for newly-transferred areas, and P1.5 billion in new areas.

Missionary electrification is funded from revenues of the sales to customers in the SPUG areas and universal charge collected from all electricity end-users as determined by the ERC.

The universal charge is a non-bypassable charge imposed from all electricity end-users as stipulated in the power reform law – one of which is missionary electrification.