14 June 2004
The Freedom from Debt Coalition (FDC) calls upon the National Government (NG) to desist from assuming P500-billion debts of the National Power Corporation (NPC).
It is highly alarming that while the NG is suffering a P3.355-trillion debt, it is willing to bear NPC’s P500-billion debt that will add to its worsening fiscal conditions. The P500-billion NPC debt is 150% higher than the P200-billion that Sec.32 of the Electric Power Industry Restructuring Act (EPIRA) mandates the NG to assume.
P500 billion represents almost half of the NPC’s total liabilities of P1.3 trillion, mostly due to obligations to independent power producers (IPPs). This amount of debt is aggravated by NPC reportedly incurring P100 billion in foreign currency exchange losses last year due to the peso depreciation.
At the other side of the equation are the IPP contracts requiring dollar-denominated payments for operations and the fuel and purchased power costs. These contracts compel NPC to guarantee fuel requirements of IPPs. Further, NPC is required under these contracts to pay the IPPs whether or not the power is produced or consumed. These onerous provisions of IPP contracts cause NPC’s ballooning debt.
In privatizing the power industry, the government posits that the transfer of NPC’s assets to the private sector will unburden the government. Further, the government is optimistic that assuming NPC’s debt will make the corporation attractive to the private sector. Otherwise, no foreign investor in his/her right mind will buy debt-laden NPC.
The reality, however, looks grim: the government will continue to bear the huge debts of NPC aggravating the country’s worsening fiscal situation while the private sector is secure in earning zero-risk and debt-free profits.
In the end, the government will have to cut spending for education, health, social security, agriculture, housing, and other social services because it has to pay for the ballooning NG debt.
FDC reiterates its call to the government to refrain from assuming NPC’s debts to its IPPs. Instead, FDC calls upon the government to immediately cancel the onerous IPP contracts to lessen NPC’s debts and lower electricity rates.