The National Power Corporation ( NAPOCOR ) Financial Status

As of the end of year 2004, the estimated total liabilities of the National Power Corporation (NPC) already reach P1,412,990,338.00 or 1.4 Trillion Pesos. This includes the debts from borrowings, P498.96 Billion, Deferred Credits of P17 Billion, and P771,171,651 liabilities to Independent Power Producers. This debt is shared by the NPC, the National Transmission Corporation (TRANSCO) and Power Sector Assets and Liabilities Management Corporations (PSALM).

The Accumulation of NPC debts
The debt of NPC started to build up in 1980s. On 1979, the total debt of NPC was already US$1.27 Billion. However, it was only 1998 when NPC started to loss from its operation. The net operating deficit of NPC begins in 2002 due to the following reasons:
1. Non-recovery of operating and fuel expenses of IPPS
2. Under recovery due to Pres. Gloria Macapagal Arroyo’ s order to cap the Purchased Power Costs to P0.40/kWh in May 8, 2002. The P0.85 difference from the actual cost was absorbed by NPC as a loss which accumulated to P16 Billion loss for 2 years alone.
3. Mandatory Rate Reduction by P0.30/kWh for households per R.A. 9136.
4. The reduction of Energy Sales.

In addition to this, NPC also spent not less that P8.7 Billion for separation benefits of the terminated NPC employees, although not yet affected by the privatization (RA 9136, Sec. 63), but later rehired.

What are the concerned agencies plan to pay all of these debts?
One of the purpose of the passage of the Electric Power Industry Reform Act (EPIRA) or R.A. 9136 is the privatization of all NPC generation assets excluding some of the generation plants in Mindanao and in small island grid. But the objective of the privatization is not mainly to encourage competition among generation plants but to pay NPC’s outstanding debt of P1.4 Trillion from the proceeds of the privatization. In addition to the proceeds from privatization, the National Government will directly assume the financial obligation of NPC not to exceed P200 Billion (RA 9134, Sec. 32).

However, according to the Commission on Audit (COA) Report, the estimated assets of NPC, including the Transmission assets of TransCo, worth only P980 Billion. It means that even if the assets of NPC and TransCo was sold, the proceeds from the privatization plus the P200 Billion from the National Government is not enough to pay its debt.

The rate increase of the cost of power is also one of the measure that NPC is using to reduce its debt.

Although, TransCo’s operating income reduces the NPC losses, it is also not exempted in the privatization.

References:

- 2004 COA audit report
- RA 9136
- Senate Committee Hearings Sep. 2004 - Feb. 2005.

Filed in Engineering and Technology, Society and Culture
Local date: March, 2010