PSALM reduces Napocor debts by $18B since 2001

MANILA, Philippines - The Power Sector Assets and Liabilities Management Corp. (PSALM) said it had significantly trimmed the financial obligations of state-run National Power Corp. (Napocor).

PSALM president and chief executive officer Emmanuel R. Ledesma Jr., in a comprehensive report on Napocor’s financial standing during a recent House committee on energy hearing, said for the period 2001 to 2010, the agency had paid $11 billion in Napocor debt, which included principal and interest, and $7 billion in independent power producers (IPP) obligations, or a total of $18 billion.

Ledesma said they expect the reduction on Napocor’s obligations until 2026, or over the 25-year lifespan of PSALM.

He said that by the end of PSALM’s corporate life in 2026, Napocor’s financial obligations that currently stand at $15.821 billion will substantially go down to an estimated $3.78 billion.

It must be noted that when the Electric Power Industry Reform Act (EPIRA) was enacted in 2001, the government’s accumulated financial obligations stood at $16.39 billion. 

The total winning bid prices of sold assets as of 2010 amounted to $10.65 billion, inclusive of the bid for the Angat hydroelectric power plant.

As of end-December 2010, an estimated $4.85 billion was collected out of the generated proceeds, of which $4.84 billion was used to pay down Napocor’s obligations. Collection of the remaining privatization proceeds amounting to $16.07 billion, including interest, will continue until 2029.

A total of 30 assets, which include 26 generating plants and four decommissioned facilities, have been successfully bid out by PSALM to private entities. Twenty of these assets represent 91.73 percent of PSALM-owned capacities in the Luzon and Visayas grids.

Moreover, PSALM has assigned the contracted capacities of five IPPs to IPP administrators (IPPAs). This covers 67.59 percent of PSALM’s contracted capacities in the Luzon and Visayas grids.

On a cash flow basis, Ledesma explained that the projected collections of receivables from the payments of IPPAs and the proceeds from the privatization of the National Transmission Corp. (TransCo) amount to $15.08 billion from 2011 to 2026.

The maturing financial obligations for the same period amount to $18.86 billion. Thus, the indicative shortfall is $3.78 billion.

Ledesma pointed out that this $3.78-billion shortfall could even be lower when PSALM completes the privatization of the remaining unsold plants and the contracted energy capacities that Napocor entered into with the IPPs to resolve the power crisis in the 1990s during the Ramos administration.