Napocor cuts 2004 losses by 74% to P29.9 billion

The state-run National Power Corp.’s (Napocor) net losses for 2004 was trimmed by a hefty 74.4 percent to P29.9 billion from P117 billion in 2003 and expects to further cut its losses for 2005.

"We are seeing an improvement in Napocor’s financial picture, primarily as its losses are projected to be less than P30 billion this year," said Energy Secretary Raphael M. Lotilla.

While declining to elaborate details about Napocor’s financial performance, Lotilla said the state-run power firm’s losses have been trimmed substantially due to several savings programs and other measures intended to improve its finances and make it more attractive to investors interested in acquiring its power generation assets.

At the same time, Napocor also reduced the utilization of its oil-fired power plants because of escalating fuel prices and relied more on its geothermal power plants.

Lotilla added that the increase in Napocor’s generation charges last year enabled the company to reduce its losses.

Last year, the Energy Regulatory Commission (ERC) granted Napocor a provisional authority to raise its rates by an average of 98 centavos per kilowatthour (kwh).

The rate hike enabled Napocor to meet the minimum eight percent return on rate base (RORB) set by its foreign creditors–the International Bank for Reconstruction and Development-World Bank and the Asian Development Bank.

However, Napocor’s interest expenses for 2004 reportedly reached about P35.5 billion from P25 billion in 2003.

Its long-term liabilities on the other hand, would total P1.013 trillion, with borrowings accounting for P374.8 billion. Napocor’s long-term obligations include contingent liabilities due to its contract with independent power producers.

Napocor’s foreign debts are one of the main causes of the government’s ballooning budget deficit.

The Power Sector Assets and Liabilities Management Corp. (PSALM) wants to peg power generation rates at market levels to stoke the interest of foreign investors in Napocor’s privatization which is mandated by the Electric Power Industry Reform Act.

Another proposed rate hike of P1.87 per kwh will serve to wipe out the operating losses of Napocor and make it attractive to investors.

The delay in the privatization of Napocor has been a major factor in the continued deterioration of the country’s fiscal position and the government’s inability to sustain a debt reduction program.

Napocor’s generation and transmission facilities are estimated to be worth between $5 billion and $7 billion. However, investors are afraid to shell out huge investments in assets of a company that is faced with regulatory and legal uncertainties.