DOE opposes proposed trust fund for Napocor

The proposed trust fund to pay off the huge liabilities of the debt-ridden National Power Corp. (Napocor) can only be viable if government has the money, according to energy officials.

The trust fund, as proposed by Sen. John Osmeña, seeks to assume all the liabilities, undisposed assets, and stranded costs when Napocor is privatized. It is embodied in Senate Committee Report no. 195 which seeks to form a power sector stranded assets and liabilities liquidation trust (PSSALLT).

Among the objectives of the PSSALLT is to retire the existing power purchase agreements (PPAs) with independent power producers (IPPs) which is one of the main reasons for Napocor's financial hemorrhaging.

The government-run corporation's liabilities are said to have reached P656 billion at the end of 1999.

Osmeña said government must pre-determine all the take-or-pay PPAs for the PSSALLT to be effective.

However, Napocor officials pointed out that it would cost government some $6 billion to $8 billion to pre-determine the PPAs thus stopping the bleeding so to speak.

"It is not viable, where will we get P240-billion ($6-billion)?" they said.

Other unnamed energy officials said the trust fund would only delay passing on the burden of paying for Napocor's liabilities to the consumers made up of the residential, commercial and industrial sectors.

The earlier proposal of the Department of Finance (DOF) is that Napocor's liabilities will be paid for by the public through a so-called universal levy or fee, which will appear in their monthly bills.

Under the PSSALLT, the government fund will assume the liabilities to be handled by the board of trustee of the fund. Payment of the liabilities will come from loans, bonds, grants, savings from other agencies, access fees, donations, among others.

The pre-termination of the PPAs is tied up with plans to borrow, sell bonds or seek grants to pay for Napocor's liabilities through the PSSALLT, the same sources said.

"The IPPs, who are the holders of the PPAs, were able to erect the power plants feeding Napocor with energy from loans and bond floats from local and international creditors. They are the same creditors that the national government will have to deal with in the future to raise funds to erase Napocor's liabilities through the fund," they said.