PSALM belittles criticisms of having mismanaged Napocor debts

State-run Power Sector Assets and Liabilities Management Corp. (PSALM) on Friday belittled claims of mismanagement of National Power Corp. (Napocor) debts, saying it has already paid creditors some $18 billion. When Napocor was restructured under the Electric Power Industry Reform Act (EPIRA) — enacted in 2001 — its financial obligations stood at $16.39 billion, according to PSALM. "Napocor's debts, in fact, have gone down from the pre-privatization figure in 2001," PSALM explained, adding that Napocor’s debt now amounts to only $15.8 billion. From 2001 to 2010, PSALM said it paid $11 billion in Napocor debts and $7 billion in obligations to independent power producers (IPP). Had the debts stayed in their 2001 level, PSALM would have wiped out all of Napocor's financial obligations, it pointed out. Growing liabilities But Napocor's liabilities ballooned over the years, growing significantly after the enactment of EPIRA due to various commitments and obligations needed to sustain its operations. The commissioning of new IPP plants, for instance, raised its total debt to $22.35 billion in 2003, before the full-scale implementation of the privatization program in 2004. Throughout the years, Napocor continued to operate at a loss due to a mismatch between regulated power rates and the true cost of producing power, bringing its operational losses in the nine-year period to $8.8 billion. The new IPP plants, on the other hand, cost the power firm $3.2 billion, raising the amount of new debts to $12 billion, on top of the losses from foreign exchange due to the depreciation of the peso when the EPIRA was first implemented. Napocor was left with no other choice but to resort to more borrowings to cover both the actual and projected shortfall from its operations. PSALM was also forced to incur new loans to check the accumulation of maturing debts, when the proceeds from the privatization program fell short of covering maturities and service payments. Sold power assets PSALM pointed out that proceeds from the privatized power assets reached $10.65 billion in 2010. Of the amount, about $4.85 billion went mostly to pay for Napocor's debts. PSALM said it expects to substantially reduce Napocor's liabilities to $3.78 billion by 2026, after factoring in payments from the privatization of plants, earnings from the transmission business, and proceeds from the contracted capacities in IPP plants. —JMT/VS, GMA News