, June 18 , 2004
By Donnabelle L. Gatdula  – The National Government will be able to save P8 billion in interest payment if it pushes through with its plan to absorb P500-billion worth of losses of the National Power Corp. (Napocor), Energy Secretary Vincent Perez said yesterday.

Perez, however, admitted that power rates are likely to increase in the next few months as measures to resolve the issue of rising Napocor losses like the removal of the company’s cost subsidies and privatization of its assets will be undertaken.

"Until Napocor is privatized, the country could experience competitive or higher rates. That’s we are rushing the privatization of Napocor in 18 months –which is just the time frame the President wants us to privatize the assets," he said.

Perez said having competitive rates through the removal of cost subsidies that might eventually lead to higher electricity prices will have to be done along with the privatization of the Napocor assets.

The energy official pointed out that one of the problems being encountered in the power sector is the lack of investments due to the artificial power rate of Napocor.

"In order to get new capacity, we need to have attractive rates for private capital to come in. Meaning, we’ll have to talk about removing subsidized rates of power in the country," he said.

A Napocor source told The STAR that another cause of Napocor’s ballooning losses is President Arroyo’s order to peg the purchased power and currency adjustment of the power firm to 40 centavos per kilowatt-hour (kwh) a few months after the Electric Power Industry Reform Act of 2001 was enacted. This move, the source said, is critical specially in times of volatility in world crude prices and wild gyrations in the foreign exchange rate.

"We cannot sustain the losses anymore of Napocor, losses at P100 billion a year. It is a drag on the government deficit, increasing our losses. So we really need to take pretty decisive action and we need to look at how we could make the cost of electricity sustainable," Perez said.

He said aside from fixing Napocor’s debt, other measures that need to be undertaken include: conversion of build-operate-transfer (BOT) contracts to build-operate-own (BOO) schemes, holding of competitive fuel procurement, and the privatization of Napocor assets.

"In order to seriously proceed with the privatization of Napocor’s assets, which will be the long-term solution to solve the debt and losses of Napocor, the only way we could proceed with the privatization is by transferring the debts of Napocor to the National Government," he said.

Perez added that "we really have to privatize Napocor in the next 18 months to have a competitive generation market- that is really the ultimate solution. The competitive generation market will also be needed in preparation for the WESM (wholesale electricity spot market)."

WESM is a venue where electricity services will be traded similar to the stock market. This will allow electricity customers to choose where to buy their electricity requirements.

The National Government said it needs to assume the P500 billion losses of Napocor, higher than the P200 billion stipulated in the EPIRA to pave the way for the power firm’s smooth privatization process.

So far, Napocor has sold only two small hydro- generating power plants in Mindanao. It is still awaiting investors to express keen interest in entering negotiated deal for the $2-billion transmission assets.

The privatization of Napocor’s assets could raise about $4 to $5 billion in proceeds which will be used to pay up portion of the $7.2 billion debts of the company accumulated over the years.

Reported by: Sol Jose Vanzi

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