$450-M loan for power sector OK’d

The Bangko Sentral ng Pilipinas (BSP) has approved in principle the $450-million power sector program loan from the Asian Development Bank (ADB) that would bankroll the further deregulation and privatization of power generation in the country.

The BSP said yesterday that the Monetary Board (MB) has approved the loan, paving the way for the National Government (NG) to finalize negotiations with the ADB.

The MB also gave its final approval on two loans from the World Bank amounting to $310 million for the education and health sectors, the first program loans from the bank in almost seven years.

BSP Governor Amando M. Tetangco Jr. told reporters that the ADB loan was a loan of the republic with the Department of Finance (DOF) as the executing agency and the Department of Energy as the implementing agency.

"This is a policy-based loan for the Power Sector Development Program," Tetangco said. "The goal is to develop a financially sustainable, efficient and secure power supply to minimize the risk of power shortages."

Perhaps more than any other multilateral funding agencies, the ADB has expressed serious concern over the country’s looming power supply crisis that threatened to reverse economic growth in recent years.

Tetangco said the objective was to arrest the drain in government finances caused by power sector, thus freeing the funds for social services.

"The program is basically designed to strengthen the financial viability of the sector," Tetangco said.

Since it would be a program loan, Tetangco said the ADB facility would have attached policy conditions intended to strengthen the regulatory framework in the energy sector and further enhance market restructuring through competition.

"The intention is to encourage private participation in power generation," he said.

Initially, Tetangco said the terms of the loan would include a 15-year maturity inclusive of a three-year grace period. Interest rate on the loan was tentatively set at 6-month US LIBOR (London Interbank Overnight Rate) plus 60 basis points.