Napocor mulls more borrowing

The National Power Corp. (Napocor) is considering another borrowing before the end of the year after its successful reentry into the international debt market with the issuance of $300-million worth of floating rate notes.

"We are still reviewing the finances of Napocor and we are also anticipating its financial requirements for 2006 that will determine the amount that would be borrowed," said Power Sector Assets and Liabilities Management Corp. (PSALM) president Nieves L. Osorio.

She added that the next borrowing would likely be lower than the previous one.

PSALM recently tapped the debt market for Napocor, with the proceeds from the $300-million notes to go into the payment of maturing debt obligations, capital expenditures, and general funding requirements of both Napocor and PSALM for 2005.

The notes, which mature in 2011, is guaranteed by the Philippine government and carries a three-month US dollar and LIBOR (London Interbank Offered Rate) plus 425 basis points. LIBOR is the rate banks charge each other for short-term Eurodollar loans. It is frequently used as the base for resetting rates on floating-rate securities.

The notes were issued in Asia with a base price of $200 million. The notes were oversubscribed and was increased to $300 million. The issue attracted an order book of over $500 million from 85 different accounts across Asia, Europe and North America.

The notes are expected to be rated BB-/BB by Moody’s and Fitch, consistent with the ratings of the Philippines’ long-term external debt.

Arranged by Bear, Stearns and Co. Inc. as sole lead manager, the transaction represents Napocor’s second unsecured dollar issuance in the international capital markets since 2002.

For the two years prior to this issuance, the state-owned power firm had met most of its external funding requirements through borrowings from the National Government, issuance of local bonds, and credit-enhanced transactions involving insurance providers such as the Overseas Private Investment Corp. and the Asian Development Bank.

Osorio said Napocor’s reentry in the international capital markets represents foreign investors’ renewed confidence in the structural reforms that PSALM and Napocor have been implementing since the Electric Power Industry Reform Act (EPIRA) of 2001 was enacted. EPIRA seeks to institute changes in the Philippine electricity industry. PSALM was created under this law to handle the privatization of Napocor.

Osorio added that Napocor sees further improvement in its financial situation this year following the tariff increases that the firm successfully obtained from the Energy Regulatory Commission.

She said that cash deficit reduction programs, the implementation of efficiency measures, and the absorption by the National Government of P200 billion in debt obligations should translate to a sharper financial picture for Napocor in the years to come.

Earlier, Napocor president Cyril C. del Callar said that for the first time in six years, the power firm will finally break even this year from a net loss of P29.9 billion in 2004 with the help of an electricity price increase and improved energy sales.