Napocor needs P7 billion to finance small power utilities group

MANILA, Philippines - State-run National Power Corp. (Napocor) plans to raise P7 billion to finance the operations of its Small Power Utilities Group (SPUG).

“We may need to borrow to support the operation of SPUG,” Napocor president Froilan Tampinco told reporters over the weekend.

He said they may raise capital either through a syndicated loan or a bond float.

But Tampinco said they will have to secure the approval of the Department of Finance (DOF) on the planned borrowing as this may entail sovereign guarantee from the National Government.

“We will have to get clearance from the DOF on how much we can borrow as this will need guarantee from the government,” he said.

He said they are also hiring the financial advisors for the fund-raising exercise.

The Napocor chief said they may tap the Development Bank of the Philippines as one of the underwriters for the planned borrowing scheme.

According to Tampinco, there is also a possibility that they may raise these capital requirement by tranches. “It is a possibility that we may do it in phases,” he said.

If it pushes through, proceeds from the borrowings will cover for the SPUG’s capital requirements for the remainder of the year and early part of next year.

Once all the power plants of Napocor are privatized, the power generation firm will be focusing its operations on running the SPUG, the power generating units that supply power to off-grid customers.

SPUG is Napocor’s missionary electrification arm, servicing 78 small islands and eight off-grid areas. It operates 304 generating units with a total rated capacity of 129 megawatts. It has 42 customers or off-taker distribution utilities, consisting of 39 electric cooperatives and three local government units.

For 2008, SPUG’s average power rates went down by about P0.53 per kilowatt-hour to P7.29 per kilowatt-hour.

SPUG rates are higher than main grid rates because they are still heavily subsidized. The cost of producing power in the off-grid areas are estimated at P10-P11 per kilowatt-hour.

Revenues from the universal charge-missionary electrification, which are charged to consumers covered by the country’s main grid system, are used to help subsidize SPUG areas. For 2008, collections from the missionary subsidies amounted to P1.12 billion.

To augment the various islands transmission capacity, SPUG laid down more than 100 circuit-kilometers of 69-kilovolt transmission lines in 2008. It also energized 107 barangays in Masbate and Ticao under the Philippine Rural Electrification Service project.

The government is currently privatizing areas covered by SPUG by batches as part of the country’s power sector reform and restructuring program.