Napocor RORB drops to 2.27%

The National Power Corp. (Napocor) return-on-rate-base (RORB) dropped to 2.27 percent in the first seven months of 2002 from 3.94 percent in the same period last year.

Based on Napocor data, the aggregate rate base of the state-run power firm for the seven-month period amounted to P234.8 billion.

RORB is the measure of profitability of a company. It is being monitored closely by creditors as this indicates the ability of a corporation to pay off its debts. The lower the RORB the less the capability to service the loan obligations.

The drop in RORB was traced by the Napocor to the deterioration of its sales efficiency for the seven-month period.

According to the Napocor data, sales efficiency as measured in terms of the percentage of sales over generation deteriorated by 1.48 percentage points from 92.13 percent last year to 90.66 percent this year.

The net utility revenue (NUR) of the power firm decreased by 14 percent to P58.43 billion during the seven month period from P67.92 billion a year ago.

The decline in NUR was due to the combined effect of the 16.4 percent or 3,813 gigawatthour (gWh) decrease in sales volume and the P0.041 per kilowatthour (kWh) increase in average rates from P2.9136 per kWh to P2.9552 per kWh.

Napocor’s operation for the period January to July 2002 resulted in a net loss of P17.46 billion.

For the first time in over 20 years, Napocor’s operating revenue was insufficient to even cover its operating expenses, hence an operating rate (ratio of operating expenses to net utility revenue) of 105 percent.

The deterioration in performance of the company is due to a number of factors. Two of which are the drop in demand for electricity and the unrecovered cost of the newer independent power producers (IPPs) i.e., Casecnan, Bakun and Ilijan Natural Gas project which started commercial operation in April 2002, March 2001 and June 5, 2002, respectively.

To date, the Napocor has not received any approval from the Energy Regulatory Commission (ERC) for the inclusion of the three IPPs in the purchased power cost adjustment (PPCA) recovery mechanism. This means that Napocor will have to shoulder the expenses in the three IPPs operations and could not pass on cost to consumers.