Napocor to pre-pay some loans upon passage of power bill

The National Power Corp. (Napocor) will pre-pay its expensive loans as soon as the power bill is passed, Energy Secretary and Napocor chairman Jose Isidro Camacho said.

"We will be able to save a lot if we can identify and pre-pay those expensive loans of Napocor, Camacho said, adding that an internal committee from Napocor is now in the process of identifying debts to be pre-paid.

The pre-payment of expensive loans, he said, would enable the National Government to absorb less stranded costs of the state-owned power firm.

However, Camacho did not say how much of the total $6.1 billion total obligations of Napocor would be retired. For interest payments alone, the Napocor intends to pay about P19 billion this year.

The new power bill calls for the privatization of the assets of the state-run power company. Studies show that with the privatization, cumulative borrowing over the five-year period 2001 to 2005 would be P16.5 billion compared with P157 billion if the bill is not passed or the privatization of Napocor does not push through.

It was emphasized, however, that the P16.5 billion does not assume pre-payment of obligations out of the proceeds. This assumes that privatization proceeds will be utilized for the required annual debt servicing.

Based on the study, assuming prepayment of obligations out of annual privatization proceeds, debt-servicing corresponding to obligations not pre-paid must be refinanced.

This portion of the debt servicing for the first five years is around P120 million. This is not reflected in the P16.5 billion required borrowings.

For 2006 to 2036, it was assumed that Napocor borrowing with privatization will amount to P258.4 billion as against P529 billion without the privatization of the power firm.

Without privatization, Napocor’s contribution to total public sector borrowing requirements of the National Government is P66.2 billion from 2001 to 2005.

With privatization, there would be a reduction in the public sector borrowing requirement of about P136.6 billion due to the improvement of Napocor’s financing deficit from P66.2 billion without privatization to a surplus of P70.4 billion with privatization for the same period.