PSALM plans P20-billion bond float in Q1

The Power Sector Assets and Liabilities Management Corp. (PSALM) will borrow at least P20 billion locally this quarter, largely to trim the debts of the National Power Corp. (Napocor). In a release yesterday, PSALM said that it "plans to raise at least P20 billion from the local bond market to take advantage of domestic liquidity and the low interest rate environment." Jamel R. Cruz, PSALM finance specialist, said that the local bond issue -- the first for the agency since it was formed in 2001 -- will carry maturities of five-and-a-half and seven-and-a-half years. PSALM said that the proceeds will be used "to augment its working capital requirements and liability management program." Mr. Cruz said that bulk of the proceeds will be used to help pay off Napocor’s maturing debts for the year, which amount to P72.95 billion. Mr. Cruz added that PSALM will undertake subsequent borrowings for the year as proceeds from the privatization of Napocor plants are not enough to pay the latter’s due debts this year. "Yes [there will be succeeding borrowings; privatization proceeds] is not enough. But no definite plans yet," Mr. Cruz said. Mr. Cruz said that they are also presently in talks with banks to arrange the issue, but declined to identify them. "We can’t disclose at this point. We are still in the negotiation stage. At the end of January we may finish [talks]," Mr. Cruz added. But a Reuters report yesterday identified them as the Development Bank of the Philippines, First Metro Investment Corp., HSBC and Banco de Oro Unibank Inc. PSALM is the government body formed and mandated by Republic Act 9136, or the Electric Power Industry Reform Act (EPIRA) of 2001, to sell the state’s power assets as well as to handle the liabilities of Napocor. PSALM raised a total of $2.2 billion from the international bond market last year. It also swapped $600 million worth of 2019 and 2024 bonds for shorter-dated debt in order to extend the life of its debt profile. The privatization of at least 70% of the state’s generating assets and contracted capacities of private plants are among the preconditions for open access in the power sector to set in under EPIRA. PSALM had already breached the 70% threshold for privatization of the state’s generating assets in July last year, after the sale of the 600-MW Calaca coal fired plant to DMCI Holdings, Inc. PSALM has so far achieved 44% of the privatization target for the Independent Power Producer Administrator (IPPA) contracts after the sale of hydro IPPAs last December. PSALM has also privatized by way of concession the state’s transmission functions under the National Transmission Corp. (TransCo). The privatization of Transco was completed in January 2009 with the turnover of the 25-year concession to the National Grid Corporation of the Philippines (NGCP). Having remitted its upfront payment of $987.5 million, or 25% of the $3.95-billion purchase price, and having signed the deed of transfer, the NGCP was officially given authority to operate the country’s sole transmission system starting Jan. 15. -- J. B. F. Santos, BusinessWorld