No official decision has been reached on which financial institution will handle the borrowing, but reports indicate that Barclays Capital Ltd. would be the underwriter.
Finance Secretary Juanita Amatong revealed yesterday that the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has already approved in principle the new Napocor borrowing.
Amatong said no specific decision has been made, but the borrowing could be in the form of a loan or private placement depending on the final decision of the Napocor board.
"Napocor’s borrowing is a key factor for us because the total borrowing of the National Government would depend on how much the power company would be able to raise on its own," Amatong said.
BSP Governor Rafael Buenaventura said the MB was still waiting for presentations to be made on the details of the undertaking that would allow Napocor to access the foreign credit market carrying the full faith and guarantee of the National Government.
"They still have to present the details of who the lender will be and the chosen terms, but since it has been approved in principle, it’s a go," Buenaventura said.
According to Amatong, the National Government itself needs to raise at least $800 million from foreign sources this year but she said the actual amount could change if Napocor does not succeed in raising its own fund.
"We would have to go to the market for Napocor if it can’t do it on its own," she said. "Our primary consideration is to pick whichever is the cheapest alternative for the NG."
Amatong said that if Napocor’s borrowing is too expensive, it might be more economical for the NG to borrow and then relend to the power company as it has done in the last two to three years.
Napocor has just secured the approval for a issuance of P5-billion worth of peso-denominated zero-coupon bonds rated by Moody’s Investor Service at Ba2 with a negative outlook.
The proposed peso bond is subject to the grant of Full Powers/Special Authority of the President of the ROP (Republic of the Philippines) authorizing the issuance of this bond and the guarantee.
Moody’s explained that despite the weak operating and financial profiles of Napocor, the Ba2 rating reflected the guarantee by the ROP for the bond offering.
"Moody’s expectation is that the Philippine government will honor its commitment to the outstanding guaranteed obligations of Napocor regardless of the progress of power sector restructuring and privatization," Moody’s said.
Moody’s said Napocor’s operating performance has deteriorated in the first six months of 2003, because of lower revenue resulting from the reduction of its rates.
According to Moody’s, Napocor’s performance was also affected by higher operating and interest expenses, and the 0.40 peso per kilowatt-hour cap on the power purchase cost adjustment (PPCA).
The PPCA is an automatic cost recovery mechanism that allowed Napocor to pass on increased costs associated with its US dollar-denominated obligations under independent power producer (IPP) contracts.
Under the power sector reform plan, Napocor was supposed to transfer its asset and liabilities to the Power Sector Assets and Liabilities Management Corp. (PSALM), a company wholly-owned by the government.