State firm eyeing up to $2B from bonds early next year

STATE-OWNED Power Sector Assets and Liabilities Management Corp. (PSALM) plans to raise $1 billion to $2 billion by selling local currency bonds starting the first quarter of 2011 to refinance maturing debt, its president said yesterday.

PSALM, tasked with privatising the assets and managing the debts of state-owned National Power Corp. (Napocor), is looking at issuing 10-year bonds in the local market.

The sale will possibly be tranches and may reach as much as $2 billion in total, Emmanuel R. Ledesma, PSALM chief executive and president, told reporters.

“The government will need to borrow next year to address maturing Napocor debt amounting to $1.2 billion,” he said.

The company has $400 million in debt falling due in March and $800 million of floating rate notes maturing in August.

Mr. Ledesma said a peso bond sale in the offshore market was also an option for PSALM. “We’re still open to that. Nothing is final,” he said.

PSALM was not planning a dollar-denominated debt issue or debt swaps to lengthen Napocor’s debt maturities, he said.

Napocor was once the biggest drag on the Philippine government’s finances, having incurred huge debts to build several generation facilities after a power crisis in the early 1990s.

PSALM was created to clean up the power firm’s books and allow it to be profitable again.

“We’re very near the ceiling for the dollar borrowings for the GOCCs (government-owned and -controlled corporations). Dollar currency is out of the question,” Mr. Ledesma said.

PSALM was also looking at securitizing “receivables” of about $3 billion of state-owned National Transmission Corp., proceeds of which would also be used to repay Napocor’s debts.

“It’s an idea that we feel is feasible. It will mean less reliance on borrowings. If we can take $3 billion off our books, then it can make our lives a lot easier,” Mr. Ledesma said.

PSALM has been in talks with investment banks for the securitization plan and was looking to do the transaction as soon as next year, he said.

“With most of the government’s power assets already privatised, PSALM’s direction is towards the accomplishment of the other half of its mandate -- liability management,” Mr. Ledesma said.

Meanwhile, PSALM might pull out a petition before the Energy Regulatory Commission (ERC) seeking to recover billions in “stranded” costs through universal charges in monthly power bills. Mr. Ledesma said PSALM’s transactions under the previous administration were being reviewed.

“It’s one of our options. We have to clarify first what are the repercussions of withdrawing, and we have to make sure that we’re going to be re-file. We’re scheduling a meeting with [ERC Chairwoman Zenaida G. Cruz-Ducut] to clarify all of this,” said Mr. Ledesma.

PSALM will study the issue closely “so that the public will be affected in the least possible way,” he added.

The state firm wants consumers to shoulder stranded debts amounting to P54.9 billion and stranded contract costs of P26.7 billion through universal charges. This amounts to an additional P1.06 per kilowatt-hour in the monthly power bill. -- Reuters and Emilia Narni J. David