STATE-OWNED lenders Land Bank of the Philippines and Development Bank of the Philippines were tapped by Power Sector Assets and Liabilities Management Corp. from a P20-billion short-term funding facility.

The loan, which will carry a six-month tenor, is now awaiting the Monetary Board's approval, government sources said. The state-owned banks will effectively advance to PSALM before the end of the year P20 billion worth of privatization receivables that PSALM was expecting to collect in the coming months.

Government officials said proceeds of the loan would be used by PSALM to boost its working capital, but other sources said the amount might be remitted to the government by the power agency as its privatization revenue for the year. This will help shore up the government's privatization receipts for the year and help trim fiscal deficits to targeted levels, sources said.

A mission from the International Monetary Fund expects the budget deficit to reach 0.9 percent of gross domestic product this year.

Landbank and DBP are expected to split the allocation for the P20-billion funding needed by PSALM, the sources said.

They said PSALM was expecting to collect the privatization receipts in January.

PSALM is mandated by the Electric Power Industry Reform Act of 2001 to manage and privatize all of Napocor's assets, including 35 power plants and non-power and real estate assets.

The government has successfully bid out some major power plants in the past months, hitting the 70-percent asset sale target for the year. These transactions, however, have yet to be consummated.

The privatization of Napocor assets is meant to raise the capital needed to avert a power crisis. The new investors are required to undertake improvements in their assets to ensure that they will remain competitive and viable. The government, for its part, uses the proceeds to settle the debts of Napocor.

Seen as the key to dismantling the dominance of a few industry players that have dictated electricity prices for many years, the privatization of the generation assets is also programmed to promote competition among power producers.

Epira limits the ownership of generation assets by a single owner to only 30 percent of the generating capacity within a single grid.