PSALM to borrow P50-B to refinance debts

By Iris C. Gonzales, The Philippine Star

Posted at Jan 27 2011 03:33 AM | Updated as of Jan 27 2011 11:33 AM

MANILA, Philippines - The Power Sector Assets and Liabilities Management Corp. (PSALM), the agency tasked to manage and privatize the power assets of National Power Corp. (Napocor), is eyeing to borrow anew some P50 billion in the first quarter of the year to refinance its debts.

The fund-raising activity will likely be completed within the first quarter of the year, a government source privy to the matter told The STAR yesterday.

The source said PSALM would likely issue domestic bonds, which are automatically guaranteed by the National Government. The source said PSALM wants to take advantage of the cash-rich domestic market.

“It will likely be in the first quarter of the year,” the source said.

The source added that proceeds of the fund-raising activity would be used to refinance the agency’s debts.

The Department of Finance (DOF) and PSALM are now studying the exact timing of the issuance, depending largely on market conditions.

Under the Aquino administration, the DOF would be spearheading all borrowings by government-owned and controlled corporations and government agencies including PSALM.

The move is to ensure that there is no bunching up of maturities.

Last year, PSALM was given the authority to raise P30 to P50 billion through the sale of domestic bonds.

As of end-December 2009, Napocor’s outstanding debt stood at $16.5 billion, 40% of which is set to mature starting until 2014, data from the agency showed.

Based on the application of PSALM, it would need to recover P470.8 billion worth of stranded debts and P22 billion-stranded contract costs of the Napocor.

Napocor had been a thorn on the government’s side because of its debts incurred mostly from onerous contracts with independent power producers (IPPs).

The contracts with IPPs have these so-called take-or-pay provisions which require the government to pay a fixed amount even if the power plants do not actually deliver electricity as agreed upon in their respective contracts.