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The government plans to assume P500 billion of the National Power Corporation’s (NPC) debts in an effort to win back investors’ confidence in the country’s power industry. The debts incurred by state-owned NPC, which carries with it a sovereign guarantee, amounts to P1.3 trillion, while the reported losses of the power utility in 2003 amounted to P100 billion. Government’s plan is to hasten the phase of privatizing the power assets of the cash-strapped NPC by assuming part of its debts.
Finance Secretary Juanita D. Amatong said the government assumption of NPC’s debts would have different dates of maturity so that the government will finish paying the creditors by 2020. She also said NPC might use the same scheme that the government used when it absorbed all the debts of the old Central Bank in 1993.
Presidential Spokesperson Ignacio Bunye said the government has little choice on the assumption of NPC’s debt, as it has to protect its credibility to investors. He further stressed that it is inevitable for the government to assume the liabilities of NPC in order to prevent massive power interruptions in the future.
Party list Representative Loreta Ann Rosales, meantime, said that the government’s plan needs an amendment on the Electric Power Industry Reform Act (EPIRA) before it could push through. EPIRA states that government will shoulder a portion of the financial obligations of NPC in the amount not to exceed P200 billion. The Department of Finance (DOF), however, says that the P200 billion set by EPIRA is not a limit and insists that the objective of EPIRA is to improve the attractiveness of the power sector to investors even if it means shouldering more than P200 billion of NPC debts.
Plans of government assumption of NPC’s debts likewise caused worries over the government’s fiscal deficit, which is expected to reach P197.8 billion this year.
While the debt assumption of the government can make the privatization of NPC’s power assets more viable to investors, the losses of NPC should nevertheless be accounted for. NPC blames their losses on peso depreciation and high fuel prices.
The government, however, should see to it that the money borrowed by NPC from their creditors and the losses that they incurred in their operations did not go to graft and corruption. And if a portion of it did, the government should have the political will to prosecute those who are at fault.
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