Full release of power sector loan seen this year

Finance Secretary Jose Isidro Camacho has expressed confidence that the last tranche ($200-million) in a $600-million loan for the country’s power sector would be released by the last quarter of the year.

In an interview, Camacho said the Philippines has complied with all the conditions set by the Asian Development Bank (ADB) prior to the release of the third and last tranche under the Power Sector Program Loan (PSPL), a joint undertaking of the Japan Bank for International Cooperation (JBIC) and the ADB.

"The President has only to sign all the implementing rules for the deregulation of the power sector to fulfill all the conditions set by the lending agencies," Camacho said.

Other conditions which have already been implemented are the passage of the Electricity and Power Industrial Reform Act (EPIRA), the initial privatization of the National Power Corp. (Napocor) and its transmission facilities, and the initial deregulation of the power sector.

The only concern of the ADB is the ability of the Power Sector Assets and Liabilities Management Corp. (PSALM) to assume the debt liabilities of Napocor. The PSALM is the government asset management entity tasked to manage and liquidate all bad assets including debts of Napocor.

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

Napocor has outstanding debts of over P6 billion from various International financial sources including the World Bank, JBIC, and the ADB.

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

Meanwhile, Camacho said the sale of the government’s shares in the Manila Electric Co. (Meralco) remains dependent of the outcome of the utilities’ rate hike petition with the Energy Regulatory Commission (ERC) and the result of the hearing on its franchise with Congress.

"We have already formed a team to monitor the price of Meralco in the stock market," the finance secretary said during a forum sponsored by the Bank Marketing Association of the Philippines (BMAP).

Government is desperate to raise funds to cover its huge budget deficit this year, and the sale of its assets such as Meralco shares is expected to help reduce the deficit.

Meralco has a P0.30 per kilowatthour rate hike petition with the ERC. Approval of the rate hike is expected to increase the market price of Meralco shares while continued delay will depress its price.

"Naturally, we can not dispose of the shares if it will result in illogical losses to the government," he added.