PSALM secures P75-B loan for working capital

STATE-RUN Power Sector Assets and Liabilities Management Corp. has secured a P75-billion syndicated term loan facility to augment its present working capital requirements and to partially refinance its existing financial obligations.

In a statement, PSALM president and CEO Emmanuel R. Ledesma Jr. explained that the loan will be used to help cover the corporation’s financial obligations this year amounting to $2.66 billion (equivalent to over P100 billion at the prevailing exchange rate).

These obligations included the P25-billion short-term loan with the Land Bank of the Philippines that fell due last May; the P18-billion bond which will fall due in August 2011; independent power producer debts; and other contractual obligations arising from the operations of the remaining unsold assets.

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 fundraising plan was subsequently endorsed by the Department of Finance (DOF) to enable PSALM to adequately address its financial requirements.

Ledesma explained that the state-run firm was compelled to secure additional funding to fulfill its mandate to operate and maintain the plants still under its portfolio, which necessarily included the unavoidable costs of fuel that PSALM has to purchase for its fuel-based plants—on top of its mandate to clear the books of the cash-strapped National Power Corp. (Napocor). As of end-2010, Napocor’s total liabilities stood at a staggering $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.