ADB won’t release loans unless power bill is OK’d

The Asian Development Bank (ADB) will withhold all financial assistance including loans to power-related projects in the Philippines until the Power Reform bill is passed into law.

Immediately affected is the $500-million Leyte-Mindanao interconnection project of the National Power Corp. (Napocor) of which the ADB had earmarked a loan of $100 million.

In a press briefing ADB director Vladimir Bohun said they placed importance on the restructuring plan as embodied in the Power Reform bill.

"If the Napocor is not privatized and the power sector is not restructured, it will be a dark scenario," Bohun said.

The government-run firm is operating on five-percent earnings and 95-percent borrowings which are said to reach half of its total liabilities. The other half of its existing liabilities is the contractual obligations with independent power producers (IPPs).

"Government should help Napocor by assuming the debts and restructuring the power sector in the short term. In the medium and long-term, retiring the debts and obligations will come from privatization proceeds," the ADB director for infrastructure, energy & financial sectors said.

He also made it clear that they remain interested in extending financial and technical assistance to the country’s energy, sector especially in the area of transmission and rural electrification. But it would defer any commitments or discussions until the Power Reform Bill is passed into law.

A significant percentage of Napocor’s loans are sourced from the ADB, and several borrowings are in the pipeline for future expansion projects of the government firm.

One such project is the Leyte-Mindanao transmission project, which will link the Visayas and the Mindanao grids will maximize the power from the steam-rich Leyte fields to the hydro power-dependent Southern Philippines.

Napocor will be spending at least $650 million for its national interconnection program or to link the transmission lines of the Luzon, Visayas and Mindanao grids.