PSALM eyes sale of $5.87B receivables from NGCP to pare down debt

MANILA, Philippines—The state-run Power Sector Assets and Liabilities Management Corp. (PSALM) plans to sell as much as $5.87 billion worth of its receivables from the National Grid Corp. of the Philippines to help pare down debts.

According to PSALM spokesperson Julie Ann B. Domino, the corporation is now studying the outright sale of these receivables to financial institutions—which, if found viable, may likely be conducted in 2011.

The $5.87 billion represented the amount of receivables from the NGCP from the sale of the concession of the government-owned National Transmission Corp. (Transco), including interest. The principal amount (representing bid price) was $3.95 billion.

Since it took over in January 2009, NGCP has already remitted close to $1 billion, Domino said. The rest of the amount will be paid for within the next 18 years.

Domino added that there were a number of issues to be threshed out before the planned sale of the receivables, such as the amount of discount to be given to the bank or institution. The proposed sale would need the approval of the PSALM board. The NGCP would only be given notice at the least, Domino added.

The sale of receivables will also help PSALM manage its liabilities, which still stood at a staggering $15.8 billion as of the end of 2010, down slightly from the previous year’s $16.5 billion.

Last year, PSALM president and CEO Emmanuel R. Ledesma Jr. already disclosed that the agency was then mulling whether it would go for securitization or an outright sale of these receivables.

“We’re looking at maybe if we can securitize that or do an outright sale… We’re still in the stages of exploring although we have met with certain investment banks and government banks. It’s an idea that we feel is feasible, possible,” Ledesma had said.

“We’re looking more at an outright sale. It’s simpler and it’s more achievable for PSALM. But again we’re looking at the full amount; if we can do the full amount it would be good,” Ledesma further said.

With an outright sale, Ledesma said PSALM would be less reliant on borrowings to help trim Napocor debts. It will also “help our balance sheet and make my job a lot easier. And my job is to pare down debt.”

Meanwhile, as part of its liability management, PSALM is also looking to stretch maturities from the current average of nine years. Domino, however, noted that PSALM has been constrained by the fact that its corporate life would end in 2026. This means that the agency may only tap loans with maturities of less than 15 years.