PSALM, Napocor rating up for possible upgrade

MANILA, Philippines - Moody’s Investors Service has placed the credit ratings of the Power Sector Assets and Liabilities Management Corp. (PSALM) and the National Power Corp. (Napocor) on review for possible upgrade.

In an announcement yesterday, Moody’s said it placed PSALM’s Ba1 corporate family and unsecured bond ratings on review.

Moody’s noted PSALM’s role in reforming the Philippine power sector.

“PSALM’s ratings are underpinned by its distinct policy role and its close integration with the government,” said Mic Kang, a Moody’s vice president and senior analyst.

The company’s policy role is to restructure and reform the Philippine power sector. In addition, the government is obligated to assume any remaining assets and liabilities at the end of PSALM’s corporate life,’ Moody’s said.

“The government has provided unconditional and irrevocable guarantees for debt issued by PSALM and transferred from National Power Corp.,” Kang said.

Moody’s said the rating action follows Moody’s decision to place the Philippine government’s Ba1 long-term foreign currency and local currency ratings on review for upgrade on July 25.

PSALM is the agency tasked to handle and manage the assets and debts of Napocor.

Moody’s also placed the Ba1 senior unsecured rating of Napocor on review.

“The senior unsecured bond rating reflects the Philippine government’s unconditional and irrevocable guarantee for Napocor’s rated long-term bonds,” Kang added.

Moody’s noted that Napocor has transferred 99.9 percent of its rated US dollar bonds, including $300 million due in 2028 and $160 million due in 2016 to PSALM.

Napocor is fully owned by the government. It primarily operates and manages the power facilities that have been transferred to PSALM.

The actions on PSALM and Napocor’s credit ratings followed the rating agency’s move to place the Philippines’ sovereign rating review for upgrade, a development, which government officials hope would translate to an investment grade rating soon.