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Napocor,
a financial black hole The Macapagal-Arroyo administration’s generous pronouncement that it is now willing to absorb as much as P500 billion of the state-run National Power Corp.’s debts sounds to many more like a marketing ploy full of hot air intended to perk once again investor interest. Secretary Vince Perez and his boys at the energy department have been vainly trying to dispose of this debt-ridden entity, like a virtual black hole that saps government finances. In the first place, as stated in the Electric Power Industry Reform Act (EPIRA) of 2001, government can absorb only up to P200 billion of Napocor’s debts. Why would the government – already running in deep red financially – make such claim? There are those who believe, for instance, that the recent deterioration of the peso is not really a FPJ-induced phenomenon. There is underlying concern about the huge and seemingly uncontrolled government deficit spending. But perhaps, there are preparations already underway to reopen and amend certain restrictive provisions of the EPIRA law with the objective of making the privatization of Napocor more palatable to buyers. With Sonny Osmeña having lost in the last elections, such move may now be more easily introduced. But will come-backing Enrile also say this time, "utang mo, sagot namin"? High price of mistakes Right after last week’s announcement by the finance department, Malacañang Palace issued a rejoinder saying that Napocor’s debt problem and pending privatization is a matter that requires immediate attention. "We just have to bite the bullet. These debts have accumulated through several administrations, and we can neither wish our debts away nor turn our back (on) them without risking a collapse in our credibility," said Presidential Spokesman Ignacio Bunye. "The neglect of the past cannot be cured by breeding more crises, uncertainties and hardships." He couldn’t have said it any better than this. This government has been left with too little choice but to "bite the bullet," so to speak. Unfortunately, it is not because of its own doing. It is simply paying the price for the mistakes committed, particularly past governments‚ failures to pour funds in an industry as vital as the power sector. For one, while we persecute the now much ballyhooed independent power producers (IPPs), they were our only hope during those blackout years. Napocor, without massive fund infusion by government, could certainly not have been able to provide continuous electricity. Financial nightmare Napocor scores top as the country’s best financial nightmare. It is the best example of why government should remove itself from managing a business. The state-owned power company’s asset base stands at P980 billion, but its re-appraised equity stands at no more than 12 percent of that, with the rest funded by debt. Government has been very slow in putting funds to the financially strapped Napocor. Of the actual P23 billion infused equity in the power company, P14 billion was made only during the Ramos administration out of the Oil Price Stabilization Fund (OPSF) and the Philippine Gaming and Amusement Corp. (Pagcor). Maturing obligations have now run to hundred of billions especially after the peso’s sharp fall versus the dollar. Payables to IPPs have also started to mount, with or without the renegotiations or threats of possible international arbitrations at hand. Worse than that is the fact that the country would soon again run out of power. And this time, there seems to be no takers. The investors that used to come in droves are no longer interested in bringing in funds for fear of getting a rebuke from the courts. The possibility of being a whipping boy to gain political points is another abhorring thought for them. During the 1990 power crisis, they came in with $5 billion in their pockets and built in a year or so power generation facilities which on normal occasion would take three to five years to construct. I don’t think we can expect a repeat performance this time. The Transco riddle Credibility now seems to be the biggest problem of potential investors in the local power industry. In fact, attempts to get a concessionaire for the National Transmission Co.’s transmission assets have been a big flop despite the company showing a net profit of P13 billion in its first year. And to think that Transco was packaged in such a way that it is considered as becoming the most profitable power utility of the future. So far, what we hear from the energy department are simply talks of companies interested or looking into the deal. And this has been the same story since more than a year after government placed Transco on the auction block. Interest in the sale of Napocor’s generation assets is similarly disappointing. Let’s pray that things will really start moving. Until then, the reality that confronts us is another power crisis and the near bankruptcy of the government from the heavy burden of a badly-managed public corporation.
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