PSALM secures P75-B loan

MANILA, Philippines—The state-run Power Sector Assets and Liabilities Management Corp. has obtained a P75-billion syndicated term loan to augment its working capital requirements and to refinance part of its existing financial obligations.

In a statement, PSALM president and CEO Emmanuel R. Ledesma Jr. said the loan will be used to help cover the corporation’s financial obligations this year amounting to $2.66 billion (over P100 billion), an amount that would include independent power producer debts and other contractual obligations arising from the operations of the remaining unsold assets.

These obligations also include a P25-billion short-term loan from the Land Bank of the Philippines that fell due last May and an P18-billion bond secured in 2004, which will fall due in August 2011.

Acting as the joint lead arrangers and bookrunners for the syndicated loan facility were Development Bank of the Philippines and LandBank. Co-lead arrangers were BDO Capital, PNB Capital and First Metro Investment, while arrangers included ANZ Bank and Standard Chartered Bank, Ledesma disclosed.

The P75-billion loan facility was approved by the PSALM board as early as February this year to help address the projected shortfall in funding requirements and meet the 2011 maturing obligations. The fund-raising plan was subsequently endorsed by the Department of Finance to enable PSALM to adequately address its financial requirements.

Ledesma said the state-run company was compelled to secure additional funding to fulfill its mandate to operate and maintain the plants still in its portfolio, including the cost of fuel, on top of its mandate to clear the books of the cash-strapped National Power Corp. As of end-2010, Napocor’s total liabilities stood at $15.8 billion, down slightly from the previous year’s $16.5 billion.

Also, the deferment of the asset privatization program—which would have been a source of funds for PSALM—and the inclusion of the National Transmission Corp.’s operating expenses in its financial requirements called for the need to raise funds, he added.

Ledesma admitted that PSALM has yet to hurdle the funding shortfall in succeeding years, including the company’s working capital requirements.

To address this, PSALM continues to explore a number of options to shore up funds, which included the imposition of the universal charge for stranded debts and stranded contract costs as soon as its applications have been approved by the Energy Regulatory Commission.

PSALM also wanted to accelerate the collection of receivables from the various winning bidders through prepayment and/or other financial structures within the confines of the contract; support the government’s thrust of consolidating the government-owned and -controlled corporation’s debts with the national government to minimize costs through an on-lending program; and tap the capital markets for other fund-raising purposes.