Napocor expects to break even for 1st time since ’98

For the first time since 1998, the National Power Corp. (Napocor) is expected to turn around and break even this year from a net loss of P29.9 billion in 2004.

Napocor president Cyril del Callar said new estimates by the power firm’s Finance department show a projected net loss of P31.33 billion. But this will be wiped out by a combination of drop in interest expenses and revenues from a subsidiary.

Del Cellar said the reduction in interest expenses is due primarily to the National Government’s decision last year to absorb Napocor’s P200-billion outstanding liabilities as mandated in the Electric Power Industry Reform Act (EPIRA). From P30.25 billion in 2004, interest expenses are expected to drop to P18 billion this year.

"The transfer of Napocor’s debts last year will be felt this year in terms of trimming the company’s interest expenses. At the same time, we expect to reduce operating expenses by implementing cost-cutting measures," said Del Callar.

These include improving its power generation mix dispatch by increasing the use of cheaper fuel types like hydro, geothermal and natural gas, while reducing the use of more expensive oil-fired and coal power plants.

At the same time, the National Transmission Corp. (Transco) whose financial statements are still lumped with Napocor, is projecting revenues this year of P14.12 billion which should wipe out Napocor’s projected losses.

Napocor chief financial officer Lorna Dy said another positive factor for Napocor is its expected higher power sales which is projected to inch up slightly to 38,983 gigawatthours (gwh) from 36,596 gwh in 2004 despite an slowdown in economic activities as spiraling crude oil prices threaten to fuel inflation and hinder economic growth.

Del Callar said sustained energy sales will cut across all grids includingNapocor’s biggest customer, the Manila Electric Co. which continues to buy power from Napocor despite the expiration of a supply contract between the two parties last December.

For May and June this year, Meralco purchased 649 kilowatthours more than what it originally bought from Napocor.

Former Department of Finance (DOF) Undersecretary Nieves Osorio and now president of Power Sector Assets and Liabilities Management Corp. (PSALM) said the expected turnaround in Napocor’s finances will translate into an improved picture for the country’s consolidated public sector debt.

Napocor’s losses are the second-biggest drag on the country’s consolidated public sector deficit and delays in its privatization continue to bleed the government’s finances.

Earlier, Dy noted that Napocor’s net loss was trimmed by a hefty 74.4 percent to P29.9 billion from P117 billion in 2003.

Dy attributed the substantial cut in Napocor’s net loss last year primarily to the large decline of foreign exchange fluctuation losses which reached only P26.1 billion in 2004 compared to P78.2 billion.

She said last year, Napocor used a P56 to $1 benchmark for its debt servicing obligations among others, but the peso improved to an average of P54 to $1.

Dy added that there was also an accrual of revenue amounting to P28.67 billion from its cost recovery mechanisms for fuel and purchased power and forex differentials. Additional revenues were realized from the collection of universal charges for missionary electrification and rehabilitation and management of watershed areas amounting to P1.41 billion.