PSALM wants to prepay $180M worth of Napocor loans

The Power Sector Assets and Liabilities Management Corp. (PSALM) is seeking the approval of the Department of Finance (DOF) and the Bangko Sentral ng Pilipinas (BSP) to prepay some $180 million worth of yen-denominated loans of the National Power Corp. (Napocor).

In a press conference, PSALM president Jose Ibazeta said the loan is part of the $2.46-billion debts of the state-owned power generation company which the PSALM board approved to be prepaid in the early part of next year.

Ibazeta said the $180-million component that would be subjected to prepayment involves loan from the Overseas Economic Cooperation Fund/Japan Bank for International Cooperation (JBIC).

The PSALM chief said on top of seeking authority from DOF and BSP, they have also sent notice to JBIC last to undertake the prepayment plan.

The mode, Ibazeta said, would allow PSALM to take advantage of prevailing low interest rates and the peso appreciation.

Also, PSALM’s move to reduce Napocor’s debts through prepayment schemes and sell more Napocor assets would benefit electricity consumers.

Under the Electric Power Industry Reform Act (EPIRA), PSALM should file for petitions regarding stranded contract cost and stranded debts recovery through the universal charge (UC) which will be passed on to consumers.

The stranded debts of Napocor are the unpaid financial obligations of the power firm which have not been liquidated by the proceeds from the sales and privatization of its assets.

If PSALM will be able to sell more assets and pay more loans, it would mean lower UC to electricity end-users.

Ibazeta said that if the privatization level reaches 50 percent this year, they expect to raise at least $800 million proceeds.

“We are looking closely at the profile of Napocor’s liabilities. As much as possible we want to explore all options to trim it down, if not zero out the loans, especially during these times when there are opportunities like lower interest rates and the peso is appreciating,” he said.

According to the PSALM executive, if the plan materializes, the government may save up to P10 billion on foreign exchange losses alone.

Ibazeta likewise took note of improved interest rate from 18 percent in 2001 to five percent in 2006. If Napocor got some of these loans, the foreign exchange rate at that time was P55 to a dollar compared to current level of P45 to a dollar.

Ibazeta said they would no longer borrow for Napocor’s operating expenses this year.

Earlier, Napocor president Cyril del Callar announced that their borrowing requirement for the year may have been covered by good operational cash flow.