POSTSCRIPT / October 11, 2005 / Tuesday

By FEDERICO D. PASCUAL JR.

Philippine STAR Columnist

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GMA should say so, if she can't fix Napocor problem

DI NA KAYA?: It has been four years since Malacanang started whispering sweet nothings into the people’s ears about selling kuno to private investors the debt-ridden National Power Corp. so as to clear the slate and stabilize the retail cost of electricity.

At this late date, the promised privatization remains a mere mirage. The same people who had transformed the once proud and profitable corporation into a decrepit, debt-encrusted white elephant are still there bleeding it.

Napocor continues to lose millions by the day and dragging the country into a deep debt pit. It is the single biggest contributor to our P6-trillion consolidated public debt.

And the price of electricity continues to go up despite the election campaign promise of President Gloria Arroyo that soon-to-be-privatized Napocor and the rest of the energy system will be streamlined to force down power rates.

Pero kung talagang di na niya kaya, Ms Arroyo should just confess that the power monster is too big for her to handle. With that, we can start devising our own remedies and stop waiting for her administration to deliver on its promises.

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R.P. BYPASSED: With our exorbitant power rates being a major deterrent to investors looking for factory sites, we watch by the roadside as they pass on their way to neighboring countries whose electricity rates and other bonus factors are more attractive.

Energy officials and experts have agreed that privatizing Napocor generating assets to a level that could trigger healthy competition among private sector players would help soften prices in the long-term and level the playing field.

But despite nudging by the business community and consumer groups to take remedial measures to stabilize electricity rates, government planners seem to be not keen in adopting strategies to blunt an impending power crisis.

This despite an earlier statement of the Joint Foreign Chambers of Commerce urging government to work hard on policies sustaining hope that they would eventually be saved from the expensive electricity rates hounding their business.

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STANDSTILL: Businessmen have complained that the slow privatization of Napocor and the resulting high power rates have contributed to the soaring cost of doing business and the unfavorable investment climate in the country.

President Arroyo and her planners know this. They know that costly power, plus other negative factors, not only discourage the inflow of foreign investment but also prompt investors already here to pull out.

To prevent capital flight, the foreign chambers urged the government to accelerate Napocor’s privatization as provided in the Electric Power Industry Reform Act (EPIRA) that envisions competitive pricing to benefit consumers.

While the EPIRA requires the privatization of Napocor and at least 70 percent of power generating assets, the Power Sector Assets and Liabilities Management Corp. (PSALM) that is to take charge has so far sold only 11 percent of the power generators.

Foreign business groups called the attention of the administration. But nothing seems to move.

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LESSON UNLEARNED: Napocor has long been the biggest contributor to the budget deficit because of its mounting debts that government eventually absorbs.

Privatization is expected to ease the budget deficit since it will help the government wipe the slate clean, raise funds to pay Napocor’s debt, reduce government borrowings and cut the tax burden of Filipinos.

Maitet Diokno-Pascual, chair of the Institute for Popular Democracy, has reported that Napocor accounted from 1981 to 1986 for nearly half (46 percent) of the deficits of government-owned non-financial corporations.

At the end of 1982, she said, Napocor owed slightly over a fifth of our medium- and long-term external debt. Its losses climbed from P4 billion in 1998, to P13 billion in 2000, to P34 billion in 2002. By 2003, its losses had breached P100 billion.

By end-2003, according to the Freedom from Debt Coalition, Napocor’s liabilities stood at P1.4 trillion — and comprised over 40 percent of the national government debt of P3.3 trillion as of that year.

Pascual said: “When in the 1980s the Napocor incurred a $1.2-billion debt to pay for an overpriced power plant (the Bataan nuclear generator), we should already have learned our lessons.” But obviously we have not.

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POLITICAL SUBSIDY: The continued fiscal crisis of Napocor can be traced partly to politics.

With the public outcry over purchased power adjustment (PPA) charges in electricity bills, the President imposed in May 2002 a cap on what Napocor could recover from consumers for the contracts it had entered into with the independent power producers (IPPs).

Facing an election, the President reduced Napocor’s PPA charge from P1.25 per kilowatt-hour to 40 centavos per kwh. This slashed Napocor’s revenues by 85 centavos per kwh.

Pascual commented: “When one’s revenues fall by 85 centavos per kwh, he ought to find a way to reduce costs by at least as much to avert a disastrous bottom line. The opportunity to do so was via the renegotiation of Napocor’s contracts with the IPPs after the review of these contracts.”

“Unfortunately, all the Arroyo administration was able to renegotiate was a marginal savings of 9 centavos per kwh,” Pascual added. “Note that these 9 centavos are in terms of present value, so the improvement, small as it were, on Napocor’s profit picture would not even be immediately felt.”

She reported that the decisions made by the President’s men during the renegotiation of the IPP contracts was the second decision that led to the ballooning losses beginning in 2002. By the end of 2003, the Arroyo administration had announced through the PSALM that it renegotiated the terms all it could with the IPPs and that was that.

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MORE BORROWINGS: Napocor said recently it would soon borrow again another $150 million (or more than P840 million) on top of the recently borrowed $400 million from global creditors.

It said it would likely issue a bond to raise the money it needs to stay afloat long enough to complete its long-delayed privatization.

The state power firm recently obtained fresh funds worth $300 million via a six-year floating rate note followed by another $100 million just last month. Its debt is projected to hit P227.74 billion this year. This is tacked on to the government debt.

It may be time for Congress, whose joint congressional panel has oversight power over the debts, to look into this borrowing binge and identify the people driving Napocor deeper into penury.

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MILKING COW: Also contributing to the lukewarm reception of privatization are rampant corruption and the discovery of a P1.2-billion retirement fund scam last year, a fresh loan of $400 million-plus, and the reported worthless energy projects under past administrations.

A joint congressional panel found out in a hearing last year that thousands of employees, including executives of Napocor, had been paid around P1.2 billion in retirement package in preparation for the firm’s auction as a consequence of privatization.

Of the amount, P119.4 million was given to 25 executives and senior officers. In one Senate hearing, committee chairman Sen. Joker Arroyo got irritated with Napocor President Cyrill del Callar for refusing to identify the officials who got fat allowances and benefits.

What is outrageous is that these top managers were reportedly rehired through doubtful schemes after having enjoyed their retirement or separation bonanza. And this happened when the firm is expected to incur losses of P31 billion this year.

A deeper probe into the matter with an eye to prosecuting guilty parties is in order. There is an apparent reluctance among some key operators in Napocor who seem afraid to lose their milking cow through its privatization.

While it is true that Napocor is expected to break even this year, this is simply a result of government’s absorbing P200 billion of its loans pursuant to the EPIRA.

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(First published in the Philippine STAR of October 11, 2005)

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