Napocor breaks even in 2005

State-run National Power Corp. (Napocor) has wiped out its losses to break even in 2005, a ranking company official said.

Napocor president Cyril del Callar said the Napocor board has already submitted the company’s unaudited financial statements to the Commission on Audit (COA).

"We have been expecting that we will wipe out our losses last year. We have broken even," he said.

In 2004, Napocor recorded a net loss of P29.9 billion from P117.02 billion in 2003.

He said "cash or non-cash," their financial book is now back in the black.

This year, he said they remain "cautiously optimistic" that they would maintain their current financial position.

"It will actually depend on the schedule of loans (principal and interest) that we will pay this year," he said.

"With a liability and risk management program in place, Napocor will no longer be a drag on National Government’s finances in 2006 and beyond," he added.

He said Napocor’s sustained financial performance in 2006 and beyond would lead to a healthier public sector financial position.

Energy Secretary Raphael Lotilla said the privatization of the Napocor-Small Power Utilities Group (SPUG) areas will also contribute in sustaining the turnaround in Napocor’s finances due to the reduction in subsidy to these SPUG areas.

To date, seven SPUG areas have already been privatized, with a total capacity of 82 megawatts.

This SPUG privatization effort is expected to result in an estimated annual diesel/fuel savings of around P2 billion once the Energy Regulatory Commission (ERC) approves their application of supply contracts.

Napocor’s financial position started to deteriorate in 1998 as it entered into power purchase agreements (PPAs) with take-or-pay provisions allowing its independent power producers (IPPs) to collect from the power firm even if it does not use the electricity sourced from the IPPs.

The power generation firm’s interest expenses are also seen to go down to P22.64 billion in 2005 from P30.25 billion in 2004 as a result of the National Government’s decision last year to absorb some P200 billion of the firm’s outstanding liabilities, as mandated in the Electric Power industry Reform Act (EPIRA).

Del Callar said the improvement in the company’s financial performance could be attributed to its continuing effort to bring down the use of imported fossil fuel.

He said they have also engaged in various schemes to strengthen its financial management.

"We have reviewed our insurance contracts instead of paying long-term, we have shorten it or pay in cash so we will do away with expensive premiums," he said.

According to Del Callar, the strengthening of the peso against the US dollar and the Japanese yen also helped in trimming down the company’s losses last year.

He noted that most of the power firm’s debts are US and yen-denominated. Its book consists of 95 percent debt and five-percent equity.

Since 2001, Napocor has been borrowing about $1.5 billion annually to meet its budgetary shortfall.