UCPB lends Daneco P326M

Business Mirror
THURSDAY, 29 SEPTEMBER 2011 20:09 JUN VALLECERA / REPORTER


THE United Coconut Planters Bank has extended a P326-million loan to the Davao del Norte Electric Cooperative or Daneco whose franchise area on Mindanao island is host to a number of fast-growing, mainly tourism-related enterprises with a strong appetite for power.


The loan represents the bank’s third such facility for the power sector and the largest thus far, the two earlier loans having the combined value of only P110 million or about a third the size of the Daneco transaction.


The 10-year loan will finance the upgrade of the power distributor’s facilities and double the capacity of two of its 10 substations from 10 mega volts (MVA) to 20 MVA and at the same time, rehabilitate its power lines, transformers and other distribution facilities and equipment.


Also, the upgrade will benefit the 125,900 households, commercial and industrial establishments, government offices and public utilities in Southern Mindanao that get their electricity from Daneco.


All this was made possible because the loan carries a guarantee from the Local Government Unit Guarantee Corp. or LGUGC, a privately-owned corporation established by the Bankers Association of the Philippines, the Development Bank of the Philippines and the Asian Development Bank which extends guarantee cover on loans for local development.


With the LGUGC cover in place, UCPB is reasonably given assurance the 10-year loan will be paid on the remote likelihood that Daneco is unable to service its outstanding obligations.


The UCPB loan formed part of LGUGC’s regular guarantee program.


The LGUGC also administers the Electric Cooperative-Partial Credit Guarantee (EC-PCG) program which is a special program put up by the World Bank meant to encourage the large commercial banks to support rural electrification by financing the expansion and rehabilitation of the distribution facilities of electric cooperatives.


The World Bank extended the government of the Philippines a grant worth $10 million for this purpose.


Daneco is one of the biggest electric cooperatives in the country; it distributes electricity to 374 barangays in Davao del Norte, Tagum City, the Island Garden City of Samal and Compostella Valley.


Power usage in these areas has been growing at an average of eight percent a year on account of the rise in business activities and the increase in the number of households there.


In particular, the Island Garden City of Samal, with its many fine white-sand beaches, Dugong sanctuary and numerous other natural attractions, has been experiencing a surge in investments in tourism-related infrastructures and in residential property developments.


Davao del Norte and Compostella Valley are the Philippines’ leading producers of banana, a major export crop that generated $250 million in foreign-exchange earnings for the country last year. The former is also one of Mindanao’s main rice granaries.