Napocor debt hits P801 billion

The total debt of the beleaguered National Power Corp. (Napocor) now stands at P801 billion, and the energy sector, including the government, is gravely concerned that it could double in the next three years.

In a forum yesterday, government and representatives of the private sector expressed fears that the country could experience an energy crisis by 2005 if the power reform bill remains in limbo.

"We only have a few days (to pass the electricity or power reform bill) before it would take another three to four years," said Fernando Roxas, head of the Privatization and Restructuring External Office (PREO) of Napocor.

The bill is pending in the Senate which, along with the House of Representatives, will go on recess Dec. 15. The election period also starts next month even as the Senate is under tremendous pressure to decide on President Estrada’s impeachment case by yearend.

Traditionally, members of Congress are distracted by the election fever and exert little effort to pass bills.

Roxas said that further delays in the passage of the bill will result in huge Napocor debts, which are being passed on to the national government and the consuming public.

According to the Washington Sycip Policy Center (WSPC), Napocor debts actually account for 25 percent of the national debt. It is a corporation that is actually five percent equity and 95 percent debt.

Electricity users pay 23 centavos per kilowatt hour for debt servicing alone when they pay their electricity bill.

Roxas said that the passage of the bill would result in lower costs although debt servicing will still be part of the consumers’ monthly bill. But it would easily be reduced by more than half as most of Napocor’s debts and contractual obligations would be assumed by the national government based on the power reform bill.

"Without the bill, consumers will continue to pay Napocor’s debts which can only get bigger for every month of delay," he said.

Of the total P801-billion debts, approximately P438 billion are contractual obligations with independent power producers (IPPs) while the remaining P363 billion are debts and interest on debts.

Based on the bill, the government will assume nearly P150 billion while it will realize approximately P400 billion from proceeds of the Napocor’s privatization and its assets. The rest will be assumed by the public through the so-called universal levy.

Another area of concern is the existing $1.2-billion structural adjustment standby loans from the Asian Development Bank (ADB).

Vladimir Bohun, director for infrastructure, energy and financial sectors department (East) of the ADB, said in an earlier interview with The STAR that the international financial institution will not release the money until the power reform bill is passed into law.

Bohun also indicated that several other loans or grants directly benefiting the energy sector such as rural electrification would be released only if the bill is passed.

All the foreign loans made by Napocor through the national government are dollar denominated, making them volatile to the depreciation of the peso. A number of these loans were undertaken and utilized when the peso was valued at around 28 to 30 to the dollar.

However, repayment of the loan principals as well as interest is based on the price during the time of payment and not when it was contracted. The peso was valued just below 50 to the dollar in Tuesday’s trading.

Meanwhile, another power crisis could be experienced by the country in 2004 or 2005 if the power sector is not restructured and new investments and capacities are not plowed into the industry.

According to Department of Energy (DOE), the country needs an additional 9,875 megawatts (MW) by 2005 to meet the demand said to grow by an annual rate of nearly nine percent. But the country has only half of that capacity which has already been committed by the private sector.

The other half is uncommitted and a majority of those interested in making investments in the energy sector said the passage of the energy bill was a prerequisite. The energy sector must make investments amounting to approximately P600 billion in the next four to five years to meet the demand.

Dr. Federico Macaranas, WSPC executive director, said the country may suffer another electricity shortage similar to the early 1990s, one of the reasons why Napocor had to contract the services of IPPs resulting in its huge debts.

Macaranas implied that a power shortage may be averted if the bill is passed, or new IPP contracts may have to be entered into resulting in bigger national debt.