NGCP willing to advance $5.87B payment to gov’t

National Grid Corporation of the Philippines, operator of the country’s power transmission network, is willing to advance the payment of its concession fees worth $5.87 billion to the government to help settle the debts of the state-owned Power Sector Assets and Liabilities Management Corp. (PSALM).

In a briefing last Friday, NGCP spokesperson Cynthia Alabanza said the company could do so directly, instead of PSALM tapping a third party (financial institutions) to which it could sell its receivables from NGCP.

Alabanza was reacting to the pronouncements of PSALM, which said that it wanted to sell $5.87 billion worth of its receivables and interest from the NGCP at a discounted rate to help bring down interest payments. Such move is expected to bring down the amount of universal charges—which currently stands at P139 billion—that will be passed on to all consumers.

The $5.87 billion represented the amount of receivables from NGCP arising from the sale of the concession of the government-owned National Transmission Corp. (Transco), including interest. The principal amount (representing the bid price) was $3.95 billion. Since it took over in January 2009, NGCP has remitted close to $1 billion. The rest of the amount will be paid over the next 18 years.

According to Alabanza, there were no provisions in the concession agreement about any prepayments and as such, any agreement to effect the plan would have to be under a new contract.

“If the government asks for prepayment, that will be by contract. And if NGCP will agree to a prepayment, I’m sure the finance people will have studied it well enough. Its financial implication will not be at the expense of the capital expenditure. Any arrangement for prepayment should not affect the [capital spending],” Alabanza explained.

“There are no official negotiations on any prepayment between NGCP and PSALM. It’s really a financing strategy,” Alabanza said.

As it is, NGCP has accelerated by five years the amortization of the concession fees as it agreed that the payments would be spread over 20 years, instead of 25 years, Alabanza noted.

PSALM spokesperson Julie Ann B. Domino earlier said the government agency planned to conduct the outright sale of the receivables to financial institutions in 2012.

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

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