PSALM eyes real-estate property sale to pay off Napocor debts

by Lenie Lectura – November 22, 2015

from Business Mirror

THE Power Sector Assets and Liabilities Management Corp. (Psalm) is eyeing the sale of some real-estate property starting next year to be able to pay off the remaining debts incurred by the National Power Corp. (Napocor).

Psalm is the agency mandated by Republic Act 9136, or the Electric Power Industry Reform Act (Epira) of 2001, to handle the sale of the remaining state-power assets and financial obligations of the Napocor. The government transferred Napocor’s assets and debts to Psalm in 2008.

Psalm President Lourdes Alzona, in an interview, said proceeds from the privatization of the generation assets are not enough to pay off Napocor’s obligations. Thus, Psalm is evaluating other possible ways by which the government could reduce its obligations. One of which, she said, is the sale of real property.

“As to plans for 2016, further to our main mandate to reduce Psalm financial obligations out of disposal of power assets, Psalm may have to focus on strategic plan for real-estate management,” Alzona said when asked of the state company’s plans and priorities for 2016.

Alzona did not say what real estate-related assets are left to sell. She pointed out, though, that this, if successfully carried out, will improve Psalm’s financial position. “This is in a development phase that would include sale, transfer and management of lots, and other real properties. It will give substantial contribution in improving our capability to pay off Napocor debts,” Alzona said.

As of September 2015, Alzona said in the same interview that Psalm’s obligations stood at P565 billion.

Including interest that would still be due until the maturity of said obligations, PSALM’s total debt would amount to P674 billion, she added.

Over the years, Alzona said Psalm was able to reduce liabilities by continuously implementing a liability-management program. She said this would be continued until Psalm is able to pay off Napocor’s debts.

The agency has 25 years from the enactment of the Epira to fulfill its mandate unless, otherwise, extended by law. At the end of its corporate life, all of its assets and liabilities will revert to the national government.

Napocor President Gladys Cruz-Santa Maria said only 20 percent of government-owned power assets have yet to be privatized or roughly 1,600 megawatts (MW) of power- generation capacity.

These include the 32-MW Power Barge (PB) 104 in Davao City; the 727-MW Caliraya-Botocan-Kalayaan (CBK) hydropower facility; the Agus hydropower plant; the Independent Power Producer Administrator (Ippa) contract for the Unified Leyte geothermal power plant; the 210-MW Mindanao coal-fired power plant in Misamis Oriental; and the 140-MW Casecnan multipurpose hydroelectric power plant.

Psalm will also rebid the decommissioned 850-MW Sucat thermal power plant.

The Napocor, meanwhile, maintains these assets while awaiting privatization, the responsibility of operating and maintaining these undisposed assets is managed by two functional groups in Napocor-Mindanao Generations for Agus and Pulangi, while the PB is under the Resource Management Services, Santa Maria said.

As a rule of thumb, 1 MW is worth $2 million. This would mean that the government expects to raise about $3.2 billion from the sale of the remaining assets if at all the sale would push through.

The target privatization for CBK is in 2016, but the Psalm board has yet to include this on the agenda of its meetings.

Kalayaan of the CBK complex acts both as regulating and contingency reserves. This means that CBK is vital to the power sector. It can be recalled that it was because of CBK that Luzon was able to avert a power crisis in the summer of 2015. Hence, if privatized, the government no longer has control over the asset.

Likewise, Alzona said the auction for the 210 MW Mindanao coal-fired power plant has been deferred taking into consideration the power-supply outlook because of the El Niño and the target commissioning of new power capacities in 2016.

Given these scenarios, Psalm has yet to finalize its privatization plans for the remaining Napocor assets.

In 2014 privatization proceeds from the sale of state-owned power assets reached P20.8 billion.

Of the amount, P19.66 billion came from the sale of the 218-MW Angat Hydroelectric Power Plant in Bulacan and the remaining from the 153.1-MW Naga Power Plant in Cebu City.

Latest available data from Psalm showed that proceeds from the sale of state-owned power assets reached $19.878 billion as of March this year.

Of the amount, actual collection amounted to $9.577 billion during the period with the remaining balance of $10.30 billion to be collected.

In a report, Psalm said it has yet to collect bulk of the privatization proceeds from the Ippa amounting to $7.744 billion.

The remaining $2.557 billion has yet to be collected from the transmission business privatization.

Psalm said that, as of the period, the entire proceeds from the privatization of the power-generating assets amounting to $3.534 billion has been collected.

Similarly, proceeds from the sale of the decommissioned plant, amounting to $0.004 billion, has also been collected.

“Of the $8.797-billion privatization proceeds utilized, $8.689 billion, or 98.77 percent, was used for the liquidation of financial obligations. The difference between the total amount collected and total utilization in the amount of $0.78 billion is placed in temporary investments while awaiting utilization,” Psalm said.

Broken down, Psalm utilized $1.298 billion of the privatization proceeds for debt repayment, $4.979 billion for regular debt service, $2.412 billion for build-operate-transfer lease obligations; $0.107 billion for privatization related expenses; and $0.001 billion for operations expenses of the National Transmission Corp.