PSALM’s debt-servicing obligation pegged at P1.47 trillion from 2001 to 2017

By Lenie Lectura - January 31, 2018

https://businessmirror.com.ph/psalms-debt-servicing-obligation-pegged-at-p1-47-trillion-from-2001-to-2017/

The Power Sector Assets and Liabilities Management (PSALM) Corp.’s debt servicing for the period covering 2001 to 2017 has reached P1.47 trillion.

Of the amount, the principal debt payments hit P567.7 billion during the period. Maturing Independent Power Producer (IPP) obligations reached P555.7 billion. Interest payments and other charges stood at P346 billion.

Debt service is the amount PSALM had agreed to pay for a number of periods during the lifetime of its loan.  Under the Electric Power Industry Reform Act, PSALM is the government agency tasked to repay the debts of the National Power Corp. (Napocor).

In 2017 alone, PSALM settled a total of P73.3 billion in financial obligations, broken down into P55.9- billion debts and IPP obligations, and P17.4-billion interest. Aside from the P73.3-billion debt servicing in 2017, PSALM has paid P10 billion to the Bureau of the Treasury for its advances to PSALM in 2016 that was utilized to bridge the financing gap.

As of 2017, PSALM’s financial obligations went down to P466.2 billion, which registered a decrease of 7.9 percent from 2016’s level of P506.3 billion and a decrease of 62.4 percent vis-à-vis the 2003 level of P1.24 trillion.

Funds in settling PSALM’s assumed financial obligations are sourced from collections from its power generation, privatization proceeds and universal charge. To date, the privatization proceeds that PSALM realized stood at P528 billion, while the collection from the stranded contract cost portion of the universal charge reached P56.9 billion.

The bulk of PSALM’s financial obligations are foreign denominated, with a huge portion based in US dollars. Any devaluation of the peso against the US dollar from time to time contributes to the surge in financial obligations.

The commissioning of new power plants at that time also led to the spike in the debts’ interests.

The corporation’s financial-management strategy is instrumental in the sustained decline of its financial obligations,  PSALM said.

PSALM’s financial obligations peaked to P1.24 trillion in 2003, from P831 billion in 2000.

“The servicing of PSALM financial obligations in the total amount of P1.47 trillion could have entirely wiped out the 2000 figure it assumed from Napocor, had there been no complex and inevitable factors resulting in its increase through the years,” the state firm said.

These factors, PSALM is referring to, include the commissioning of new power plants between 2001 and 2006 to prevent the power shortage that paralyzed the country in the 1990s until early-2000, refinancing or new loans to fill the gap when maturing obligations fall due, and the vulnerability of PSALM’s assumed loans to foreign-exchange fluctuations.

“Despite these factors affecting the corporation’s financial obligations, the level was significantly trimmed down to its level today. It is projected that with PSALM’s continuous privatization efforts, including the sale of real-estate assets, collection of universal charge and power-generation proceeds, its financial obligations will further decrease substantially when the corporate life of PSALM ends in 2026,” it added.