Owners of privatized power supply contracts, NGCP owe govt more than $12 billion
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MANILA, Philippines – Companies that earlier bought, and have been operating the assets of state-owned National Power Corp. (Napocor) owe the government more than $12 billion, an amount more than enough to wipe out the country’s budget deficit for this year.
At today’s exchange rate, this amount would translate to P512 billion, or nearly double this year’s P286 billion budget deficit ceiling, which the government aims to plug through borrowings.
Emmanuel R. Ledesma Jr., president of state-run Power Sector and Assets and Liabilities Management Corp. (Psalm), said the agency is running after companies that owe it a combined $9.99 billion from the sale of Napocor contracts with third-party power plant operators, or the so-called independent power producers (IPP).
“Psalm yet to collect $9.99 billion in additional proceeds from the transfer of IPP contracts to private administrators as of September 2011,” Ledesma said.
“Psalm is also in the process of expediting the collection of $2.81-billion remaining payment for the concession of the country’s sole transmission business,” he added.
Besides the new administrators of IPP contracts, the receivables also include concession fees that the operator of the country’s power transmission highway, National Grid Corp. of the Philippines (NGCP), owes Psalm.
NGCP is controlled by a consortium composed of Henry Sy Jr. of the SM group, State Grid Corp. of China, and a Coyiuto-owned firm. Among the companies that earlier won bids for IPP administrator contracts were San Miguel Corp. and the Aboitiz group.
Given the failure of these private firms to pay Psalm for assets they already operate and benefit from, the government is asking consumers to shoulder the cost of paying debts incurred when Napocor still held the supply contracts and operated the national power grid.
Based on its most recent universal charge UC petition, Psalm was seeking regulatory approval for a rate hike amounting to P139 billion. This includes an additional P0.03 per kilowatt-hour that consumers would have to pay to settle Napocor’s stranded debts, and another P0.36 to pay down the company’s stranded contract costs.
Stranded debts pertain to outstanding Napocor loans that were not covered by the proceeds from the sale of the company’s power plants.
Stranded contract costs meanwhile refer to gains IPPs enjoyed from the difference between the price at which Napocor agreed to buy power from them, and the actual cost of producing the electricity.
These surplus profits stemmed from so-called take-or-pay clauses in the IPP contracts that ensures the third-party power producers get paid for electricity they produced even if Napocor didn’t need the supply at the time.
Napocor's debts stand at $18 billion, or higher than the $10.21 billion that Psalm raised from the sale of the former’s power plants and IPP contracts.
Psalm has used $5.47 billion so far to settle Napocor’s maturing obligations and interest.
The Electric Power Industry Reform Act of 2001 created Psalm to manage Napocor’s liabilities and shepherd the transfer of control over the power generation and transmission businesses from the government to the private sector.
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