Napocor eyes local funds to cut foreign exchange costs

The state-run National Power Corp. (Napocor) will tap more local fund sources this year to trim its foreign exchange costs.

Napocor president Rogelio M. Murga said the power firm is bent on shaving its foreign exchange costs by a significant level and has been scrounging for funds from domestic sources.

In 2003, Napocor, incurred a net loss of P100 billion, exceeding its original estimate of P75 billion. Of the net loss, foreign exchange costs comprised P77 billion, largely due to the higher cost of borrowing as the peso faltered against the dollar.

The steady climb in crude prices in the world market also weighed heavily on Napocor’s foreign exchange costs as it had to ensure a steady fuel supply to run its power generation plants. This raised Napocor’s dollar-denominated debts to $7 billion.

This year, however, Napocor expects its foreign-debt component to be lower than the P77 billion level in 2003.

Tapping domestic fund sources is one of several strategies Napocor is considering to ease its financial woes.

Previously, Murga said Napocor is expected to continue incurring losses because of the weakening of the peso, the higher cost of foreign borrowings, the climb in global fuel prices, and payment of offtake agreements with independent power producers.

Napocor is pinning its hopes on the Bangko Sentral ng Pilipinas’ forecast that the local currency could go back to the pre-election level of P52-P54 to the dollar by mid-year, especially if election results favor the incumbent administration.

Recently, the government kicked off the $5-billion privatization program for Napocor assets through the sale of one of its 35 power plants.

The privatization would save the government P38 billion, the amount used to finance the company’s requirements in a year.

Napocor’s loan obligations represent 25 percent of the total national debt, which will balloon further by year-end if the Arroyo administration sticks to its plan of borrowing at least $1.1 billion more for the operational needs of the power firm.

Napocor also issued some P12.552 billion in zero coupon bonds. Of the amount raised, P3.752 billion in bonds are set to mature in 2009 while the remaining P8.8 billion would fall due in 2011.

Proceeds of the bond issuance would be used to service existing debt, import fuel, and pay contractors. Napocor has $2.4 billion in maturing obligations this year.