Osmeña moves for 10-year extension of PSALM’s corporate life

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WEDNESDAY, 15 AUGUST 2012 21:13 BUTCH FERNANDEZ / REPORTER

Sen. Sergio Osmena III on Tuesday filed remedial legislation to extend by 10 more years the corporate life of the Power Sector Assets and Liabilities Management Corp. (PSALM).

In filing Senate Bill 3250, Osmeña explained that the proposed extension of PSALM up to 2036 would enable the corporation to “better manage its remaining liabilities and lIPP [independent power producers] contract obligations.”

He recalled that the Congress passed the Electric Power Industry Reform Act of 2001 (Epira) which created PSALM as a corporation “with the principal purpose of managing the sale, disposition and privatization of the National Power Corp. (NPC) assets and lPP contracts with the greater objective of managing the NPC financial obligations in an optimal manner.”

Osmeña observed that 10 years after it was created, PSALM Corp. was able to privatize over 70 percent of the NPC generation assets and lPP contracts, and has optimally liquidated $5.62 billion of the NPC financial obligations out of the sales proceeds of the privatized assets amounting to $5.51 billion as of the end of 2011.” The senator, however, added that outstanding financial obligations still stood at $17.14 billion as of June 2011, broken down into $8.49-billion debts and $8.65-billion lPP obligations.

He said the calculated Stranded Contract Costs for 2007 to 2010, and Stranded Debts for 2011 to 2026 are estimated to reach a total 140.29 billion after deducting the P200-billion NPC obligations assumed by the national government and expected privatization proceeds,” Osmeña further explained.

“Despite the fact that there was privatization and national government absorption, total financial obligations have not decreased significantly since the Epira was enacted due to the following factors: continuous operations of NPC generating assets at a loss, which consequently resulted in new debts; power rates/tariff not reflective of true cost of electricity; commissioning of new IPPs in 2001-2003 and in 2006; Delay in privatization (2004) due to conditions precedent required to complete the sale process (e.g., resolution of plant-specific issues); foreign exchange losses; and, mismatch between the maturity profile of the financial obligations and the schedule of collection of the privatization proceeds,” he said.    source