PSALM Liabilities Climb To $16.7B

Manila Bulletin

By MYRNA M. VELASCO

June 3, 2012, 9:25pm

MANILA, Philippines --- With fresh borrowings of P75 billion last year, the liabilities of the Power Sector Assets and Liabilities Management Corporation (PSALM) inched up anew to $16.728 billion compared to $15.820 billion when it closed its books in 2010.

PSALM’s debt level, as reckoned in September 2011, was even higher than the $16.387 billion recorded in 2001, or the period prior to the privatization of the National Power Corporation’s (NPC) assets.

Based on documents from the company, PSALM’s debts have gone up to $8.227 billion last year from $7.022 billion in 2010. The obligations to independent power producers (IPP) were just slightly down to $8.502 billion from $8.798 billion the previous year, despite the fact that more than 70 percent of its supply contracts have already been privatized.

“PSALM continued to secure loans to augment its present working capital requirements and to partially refinance its existing financial obligations as part of its liability management program,” the company said.

Prior to its announcement of P75 billion loan procurement around June last year, the state-run firm has noted that it first drew on a P25-billion short term loan facility with the Land Bank of the Philippines (LBP) to service some P12.2 billion maturing debts in March and April 2011.

A closer examination of the document on PSALM’s debt profile would show that even the national government’s absorption of P200 billion worth of NPC obligations in 2004 had not done much to trim down the company’s liabilities.

From a debt level of $8.720 billion in 2003, this was just pared to $6.610 billion, inferring then that the application of the loan absorption may just have been half of the total amount.

PSALM noted that the exchange rate at the time of the debt absorption was at P51.40 to the US dollar, therefore, the calculated debt reduction impact would have been at $3.89 billion. If re-assessed, however, the actual loan reduction for the period was just $2.11 billion; hence, there had been a cost difference of $1.78 billion that PSALM must explain.

The company justified that for that year, NPC incurred borrowings to finance cash deficit from its capped rates. As can be gleaned from previous interviews with energy officials though, the borrowings announced at that time was just $500 million and was scheduled for 2005 drawdown.

It was clear in the Electric Power Industry Reform Act (EPIRA) which specific NPC debts shall benefit from the NG’s cost assumption. There is no provision that this shall be applied in other obligations, such as those with the IPPs or the company’s operating costs.   source