Gov’t needs $1B to pay Napocor debts due 2010

06/15/2010

State holding firm Power Sector Assets and Liabilities Management Corp. (Psalm) plans to tap foreign banks to raise up to $1 billion to fund maturing obligations of debt-strapped state firm National Power Corp. (Napocor).

“I think at the moment, they’re still continuing their liability management. I’m sure even after June 30 they will pursue it. What I know is that it will be bank financing but I don’t know when,” Energy Secretary Jose Ibazeta said.

He, however, said he is not sure when Psalm go into borrowings as this would also depend on market conditions. Still, he said the agency is “prepared anytime and any day.”

The Electric Power Industry Reform Act (Epira) of 2001 mandates Psalm to privatize the assets of Napocor and proceeds generated will be used to settle the company’s obligations. Napocor’s debt as of December 2009 was placed at more than $16 billion.

Ibazeta added he has no idea how much of Napocor’s loan would be maturing this year.

Ma. Luz Caminero, acting president and chief executive officer of Psalm, however, said Napocor has about $1.4 billion maturing debts this year while the Independent Power Producers (IPPs) have the same level.

Last year, Psalm issued $1 billion in global bonds and another $1.2 billion in bonds was issued in the foreign market as part of its capital raising scheme.

Psalm was also able to secure the approval of Bangko Sentral ng Pilipinas (BSP) to raise P20 billion to as high as P30 billion to finance Napocor’s capital expenditures (capex) as well as its maturing debts.

Psalm earlier had indicated it is targeting to settle at least $3-billion maturing debts of Napocor as well as those of its IPPs this year.

Caminero said recent bond issuances of Psalm, which targeted raising P30 billion, would partially pay Napocor’s debts amounting to $16.5 billion as of end December 2009.

She said Psalm had reached about one-third of its target, so far.

She also said the Psalm board had approved P50 billion for the bond issuance.

“The maximum approval of the board is P50 billion. But right now, our target is P30 billion for this bond issuance,” Caminero told reporters.

Caminero said Psalm also needs to raise $1 billion in addition to the P30 billion target for the bond issuance. She did not give further details but hinted that Psalm was looking at currency cap, bond exchange as possible means to raise the needed $1 billion.

Psalm, according to Caminero, would pay this through refinancing and universal charge.

Asked if raising the universal charge is expected to have an impact on the rates, Caminero said: “It depends on how successful we are in mitigating the liabilities under the Liability Management Program. For instance, if the peso is appreciating and the peso bond is successful — then in a way the stranded debt becomes mitigated. We’re balancing everything. But we hope to be also successful in the privatization, that’s the important most of all — the privatization and the universal charge filing.”

Psalm hopes to complete the privatization of the remaining assets of Napocor as well as the contracted capacities of the IPPs.

“We’re hoping the bid offers will be attractive. And there’s also a big bulk of obligations coming from the IPPs, now that’s what we’re privatizing right now — the focus is on the privatization of the IPPs.

Last week, Psalm announced its planned retail bond issuance where it eyes to raise P20 billion.

Psalm said the retail bonds would consist of five-year and seven-year maturities for offering to both retail and institutional investors.

The retail bonds are expected to be priced with interest to be set via an auction facilitated by the Bureau of the Treasury. Interest on the bond will be paid quarterly.

The retail bonds will be Psalm’s debut issuance in the domestic market. It will carry the full, irrevocable, and unconditional guarantee of the Republic of the Philippines.

Psalm said the proceeds from the bond issuance will be used to augment its working capital and supports its liability management program. PNA

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