PSALM to raise $1 billion to settle Napocor's maturing debts

MANILA, Philippines - The Power Sector Assets and Liabilities Management Corp. (PSALM) is preparing to raise $1 billion to refinance the maturing obligations of the National Power Corp. (Napocor) next year.

PSALM is an entity created under the Electric Power Industry Reform Act (EPIRA) to handle the finances of the state-owned power generation company.

Newly-appointed Energy Secretary and former PSALM president Jose Ibazeta told reporters over the weekend that they are contemplating on several options on how to raise its refinancing needs.

“We’re looking at peso financing, looking at securitize, maybe another bond issuance, depending on the conditions ng market,” he said.

Asked which of these options they would likely consider, Ibazeta said “We can’t say yet what would be out priorities. We have to rely on the market.”

Ibazeta said they are also uncertain how much they would actually raise.

“I can tell you numbers but the final decision is made always when the market is ready for it. It could be $500 million, $1.5 billion, we have to wait for the market,” he added.

He said the size of the fund raising would not only depend on the market but also how much they would get from their application with the Energy Regulatory Commission (ERC) for universal charge (UC).

Last month, PSALM had secured an approval of the Bangko Sentral ng Pilipinas (BSP) to issue P30 billion to P50 billion worth of bonds in the domestic market.

Ibazeta said the planned $1 billion would come on top of the already approved borrowing scheme of the BSP.

“This ($1 billion) will be for the 2011 refinancing,” he said.

The BSP’s Monetary Board specifically allowed PSALM to purchase foreign exchange including dollars to pay off Napocor’s debt worth more than $400 million scheduled to mature in the next few months.

The PSALM earlier announced that it would borrow at least P20 billion in the first quarter of the year to take advantage of domestic liquidity and the low interest rate environment in reducing the financial obligations of Napocor.

It plans to issue 5.5-year and 7.5-year bonds in the domestic bond market within the first quarter of the year as part of its task to manage the privatization of the state’s power assets.

PSALM made its first foray in the international bond market in May last year through an issue of $1 billion global bonds due in 2019. In November, PSALM tapped the international market anew through a $1.2 billion bond exchange offer of Napocor bonds maturing in 2010 and in 2011.