PSALM urged to borrow $1 billion even without government guarantee

MANILA, Philippines - The government is urging the Power Sector Assets and Liabilities Management Corp. (PSALM) to proceed with its plan to borrow $1 billion from banks even without guarantee from the government.

“They eat up the guarantee headroom so we are urging them to proceed even without the guarantee,” National Treasurer Roberto Tan said.

Tan said that according to the RA 460 or the Foreign Borrowings Act, the government could only provide guarantee to the borrowings of state-owned agencies of up to $8 billion. Tan said the guarantee should not exceed $8 billion at any given time.

PSALM, the agency tasked to privatize the government’s power assets, plans to borrow $1 billion from banks.

Energy Secretary Jose Ibazeta has said that PSALM may borrow or pursue its liability management program even beyond June 30 or when the administration of Benigno Aquino III comes in.

He said PSALM would tap the market once conditions are ripe.

The agency would have to settle $3 billion worth of obligations this year, including $1.4 billion maturing debts of the National Power Corp. (Napocor).

It also needs about the same amount for its own contracts with independent power producers.

According to Luz Caminero, PSALM acting president, the agency has already raised almost $1 billion, or about a third of its borrowing requirements for the year.

In April, PSALM raised P20 billion via a peso retail bond issue for its working capital. The agency used part of the proceeds from the debt sale for its liability management program.