Almendras: PSALM likely to borrow in pesos in 2011

Published October 13, 2010 3:40pm

Energy Secretary Jose Rene Almendras said the Power Sector Assets and Liabilities Management Corp. (PSALM) will likely borrow in pesos next year. Almendras, who is also the PSALM vice-chairman, noted that PSALM's plan to borrow funds next year would mean an additional burden to the public. However, as the state-run corporation faces the problem of bloating debts, Almendras said he sounded off to the Department of Finance (DOF) the possibility of borrowing in pesos instead of dollars. "With the successful launch of the peso bonds, I was asking PSALM to consider that you might want to raise next year fund raising in peso denomination hopefully they will consider that," he said. "We were talking about PSALM situation like we met earlier with [Finance] Secretary [Cesar] Purisma and [PSALM] president Emmanuel Ledesma exploring how to be more efficient in borrowing if its throughput borrowing, what denominations to borrow, do we continue to borrow in US dollars or do we borrow philippine peso," he said. Almendras said the state-run corporation is working closely with the DOF in managing the liabilities of PSALM. Earlier, the DOF said PSALM would likely not tap the debt market this year. PSALM, an entity created under Republic Act 9136 or the Electric Power Industry Reform Act now manages the finances and privatization of the state-owned National Power Corp. (Napocor). PSALM is currently seeking to recover P470.9 billion worth of stranded debts of Napocor. Stranded debts refer to the unpaid financial obligations of Napocor not covered by the proceeds from the sale of Napocorâ€™s power assets. The recovery of the stranded debts will translate to an additional charge on power consumers. Napocor's outstanding debt As of December 2009, Napocorâ€™s outstanding debt stood at $16.5 billion, of which 40 percent are set to mature this year until 2014. For 2010, Napocor has around $3 billion worth of maturing loans. According to PSALM, it needs to recover Napocor's P470.8-billion stranded debts and P22-billion stranded contract costs. PSALM submitted two options to recover the P471 billion stranded debts:

by charging electricity consumers 30 centavos per kWh for 17 years, or

22.5 centavos per kWh for 25 years. For the stranded contract cost, PSALM proposes three options:

50.24 centavos per kWh for one year recovery period;

16.04 centavos for three-year period, and

9.20 centavos per kWh for five-year period. Financial requirement for 2010 covered In an earlier interview, Finance Undersecretary Jeremias Paul said they believe that PSALM's financial requirement for 2010 has been fully covered. He said they do not expect any pre-payment this year unless opportunities come along the way. "I don't think there would be pre-payment, it may be more on liability management," he said. "But if there is an opportunity, why not?" PSALM's financial situation, particularly its borrowing scheme, is now under close scrutiny by the DOE. Paul said there is also no problem in accounting all the privatization proceeds of Napocor. "I don't think there would be a problem accounting for these proceeds," he said. While privatization proceeds keep coming in, PSALM has been on a borrowing spree. He said the government should keep track of the bloating debts of PSALM. Payments for these will eventually be passed on to electricity consumers in a form of a "universal charge (UC)," he said. He noted that PSALM's pending application with the ERC to recover Napocor's stranded debts and stranded contract costs will lead to additional charges to consumers. If approved by the ERC, consumers will be paying this UC for the next 20 to 25 years. Domestic bonds Earlier this year, PSALM was given an approval to raise P30 billion to P50 billion through domestic bonds. It also plans to raise another $1 billion for the refinancing of its debts in 2011. The Energy Regulatory Commission (ERC) earlier pointed out that PSALM should convince the commission that their rate petitions are substantiated. â€“VVP, GMANews.TV

Tags: joserenealmendras, psalm, departmentoffinance, departmentofenergy