IFC sets involvement in RP’s rural electrification program

The International Finance Corp. (IFC) has been given the green light by the Philippine government to get involved in the country’s rural electrification program.

IFC, the private sector arm of the World Bank, has signed an advisory mandate from the Department of Energy (DOE) to promote private investment and competitive infrastructure in rural power supply. However, it will not be involved in power generation.

The IFC will be mandated by the agreement to address the sustainability of tariffs and the regulatory framework in addition to the financial viability of the transaction.

IFC Philippines country manager Vipul Bhagat said in a statement that the IFC will assist in attracting investment benefits in infrastructure projects and help to achieve the highest standards and benefits for local communities.

Presently, most rural areas are served by electricity cooperatives that lack access to the national electricity grid. The Small Power Utilities Group (SPUG) of the National Power Corp. (Napocor) supplies power to about 86 isolated grids in 31 provinces through small power stations. It requires approximately P4.5 billion ($80 million) in annual subsidy for operations and investments.

An additional P1 billion annually will be needed on current plans to serve new remote areas.

Bhagat said the IFC will work with the DOE, Napocor, and the Power Sector Assets and Liability Management Corp. (PSALM) to develop a financially viable plan to introduce private sector participation through the sale of existing rural power assets. IFC will attract private investors in order to increase efficiency, provide reliable supply and contribute capital for further investments.

The global investment group has been active in the Philippine market. It has direct investments or loans in several sectors including banking, power generation, water utilities, asset management, securities, petrochemicals, health, financial services, insurance, pre-need, infrastructure, trading, and information technology.

In its fiscal year that ended in June 2003, IFC in Manila committed five projects worth a total of $ 66 million. For the current fiscal year, IFC expects to undertake up to six projects for a total of $100 million, a large part of which is expected in the infrastructure sector.