ADB airs concern over ability of PSALM to assume Napocor debts

The Asian Development Bank (ADB) has expressed concern over the ability of the Power Sector Assets Liabilities Management Corp. (PSALM) to assume the debt liabilities of the National Power Corp. (Napocor).

"The PSALM has a limited mandate," Richard S. Ondrik, ADB chief country officer for the Philippines country office (PhCO), said.

Ondrik said they are not against the plan of the PSALM to assume all the debts of Napocor including those made with the ADB and other official development assistance (ODA) loans.

The ADB official said it was inhibited from reorganizing a block transfer of all our loans from Napocor to PSALM since the different loan agreement were made with the power sector government agency. PSALM is a government asset management council (AMC) which is tasked to manage and liquidate all Napocor’s bad debts.

The power sector agency has an outstanding debt of over $6 billion from various sources including ODA agencies like the World Bank, the Japan Bank for International Cooperation (JBIC), and the ADB.

With the passage of the Power Reform Bill, the PSALM was formed to assume all Napocor liabilities in preparation for the privatization of the power sector.

Ondrik said the loans must be reviewed one by one to determine which can be assumed by PSALM and recognized by the ADB, and which ones have legal impediments.

"It will take a while but it should not inhibit the sale of the Napocor assets or its privatization," the ADB official said, hinting though that government must consider the outstanding loans covering certain assets for sale to the private sector.

Napocor reportedly has an outstanding debt of roughly P1 billion with the ADB covering 18 program and project loans including the $600-million Power Sector Program Loan (PSPL). – Ted Torres