According to Nieves Osorio, president of the Power Sector Assets and Liabilities Management Corp. (PSALM), the transaction will be unconditionally and irrevocably guaranteed by the National Government.
PSALM is the state-run corporation mandated to privatize the assets of Napocor to help stem the bleeding in the government’s financial position.
Government’s inability to dispose of Napocor’s assets has forced it to resort to borrowings in the form of debt papers.
Last August, the Bangko Sentral ng Pilipinas (BSP) gave its approval to the planned bond flotation.
National Treasurer Omar Cruz said Napocor had ample time to fine-tune its strategy and timing, especially since the conditions in the market are favorable, with very few issues in the pipeline and funds looking for investments.
"Right now, the market is very good, with the consumer price index going down and everyone assuming that there will be no rate hike in the US," he said.
Napocor has not been in the global bond market since August 2005 when it floated $400 million in five-year floating rate notes.
Before the National Government decided to absorb some P200 billion worth of Napocor’s debt, the power generation company was the biggest drain on the national budget, unable to go to the market on its own.
The National Government had been forced to borrow on behalf of Napocor and relend it to the company since it could not raise funds on its own until the government allowed power rates to go up.
The government has been struggling to sell Napocor’s power generation plants and cut the country’s total debt burden but it has so far succeeded at selling only six plants.
In the meantime, multilateral fund agencies have been raising the alarm that the country would be facing serious power supply shortages as early as 2008 if the deregulation and restructuring of the power sector is not completed on time. – With Des Ferriols