"I was informed that the ADB Board gave its full consent to the Napocor asset/debt transfer with no objection received from the board of directors. We expect this to be formalized shortly and the consent of the other major creditors are expected to follow. This is expected to accelerate the privatization of Napocor’s generating capacities," said Energy Secretary Raphael M. Lotilla in yesterday’s press briefing by the National Government’s economic team.
Napocor’s creditors, such as the World Bank (WB) and the Japan Bank for International Cooperation (JBIC), have made debt absorption in accordance with Republic Act 9136 or the Electric Power Industry Reform Act (EPIRA) a precondition for giving their consent to the sale and transfer of Napocor assets. PSALM earlier proposed that the National Government absorb Napocor’s debts and repay this following the original payment schedule.
Napocor creditors had required PSALM to then transfer some of its P200-billion debts to the National Government before giving their consent on the transfer of the power firm’s assets to PSALM.
Lotilla added that the ADB could also extend a partial credit guarantee for Napocor’s future borrowings that would be used to restructure or retire some of Napocor’s maturing obligations.
"There is a facility the ADB is making available called a partial credit guarantee, which is intended to soften the interest that Napocor and PSALM will have to pay for new loans, which in turn, will be used to service the existing debts of Napocor," said Lotilla.
The amount of the credit guarantee has yet to be finalized but Lotilla said that ADB expressed its willingness to guarantee a maximum amount.
"The actual amount will depend on the mission and then agreement afterwards. That’s why these are important because the value added tax reform also paves the way for the consent of the creditors for the Transco (National Transmission Corp.) sale and that should also trigger the WB and JBIC," said Lotilla.
The ADB partial credit guarantee will take the form of a credit enhancement that would enable the Philippine government to secure new loans for Napocor at competitive cost.
Moreover, Napocor’s continuing debt payments will speed up the privatization of its generation assets.
JBIC and the WB previously gave their consent on the transfer of the assets of Napocor.
The WB’s and JBIC’s consent to the award and sale to winning bidders by PSALM covers the following generation assets: the 3.5-(MW) Talomo hydroelectric plant (HEP) in Talomo, Davao City; the 1.6 MW Agusan HEP in Manolo Fortich, Bukidnon; the 1.8 MW Barit HEP in Buhi, Camarines Sur; the 0.4 MW Cawayan HEP in Sorsogon City, Sorsogon; and the 1.2 MW Loboc HEP in Bohol.
Under the bidding rules, PSALM has to secure the approval of Napocor creditors 270 days after the signing of the sale agreement.