$450-M loan for power sector OK’d

The Philippine Star 10/21/2006

The Bangko Sentral ng Pilipinas (BSP) has approved in principle the $450-million power sector program loan from the Asian Development Bank (ADB) that would bankroll the further deregulation and privatization of power generation in the country.

The BSP said yesterday that the Monetary Board (MB) has approved the loan, paving the way for the National Government (NG) to finalize negotiations with the ADB.

The MB also gave its final approval on two loans from the World Bank amounting to $310 million for the education and health sectors, the first program loans from the bank in almost seven years.

BSP Governor Amando M. Tetangco Jr. told reporters that the ADB loan was a loan of the republic with the Department of Finance (DOF) as the executing agency and the Department of Energy as the implementing agency.

"This is a policy-based loan for the Power Sector Development Program," Tetangco said. "The goal is to develop a financially sustainable, efficient and secure power supply to minimize the risk of power shortages."

Perhaps more than any other multilateral funding agencies, the ADB has expressed serious concern over the country’s looming power supply crisis that threatened to reverse economic growth in recent years.

Tetangco said the objective was to arrest the drain in government finances caused by power sector, thus freeing the funds for social services.

"The program is basically designed to strengthen the financial viability of the sector," Tetangco said.

Since it would be a program loan, Tetangco said the ADB facility would have attached policy conditions intended to strengthen the regulatory framework in the energy sector and further enhance market restructuring through competition.

"The intention is to encourage private participation in power generation," he said.

Initially, Tetangco said the terms of the loan would include a 15-year maturity inclusive of a three-year grace period. Interest rate on the loan was tentatively set at 6-month US LIBOR (London Interbank Overnight Rate) plus 60 basis points.

Read This

IFC to assist TransCo bid winner

The Philippine Star 10/15/2006

The winning bidder for the 25-year concession of the National Transmission Corp. (TransCo), the country’s sole power transmission provider, has been assured of financial assistance. This as the International Finance Corp. (IFC) said it was prepared to provide financing support to the winning concessionaire. The IFC is the private sector investment arm of the World Bank. "IFC would be pleased to consider working with the winning bidder on mutually acceptable terms, in an effort to determine the feasibility of the proposed financing and the potential for IFC support," Vipul Bhagat, IFC country manager for the Philippines and Thailand, said in a letter addressed to the Power Sector Assets and Liabilities Management Corp. (PSALM), the agency tasked by government to privatize the TransCo assets. Bhagat added that debt financing, quasi-equity or equity investment would be subject to IFC’s "comfort with the shareholding group, a satisfactory completion of legal, environmental, technical and financial due diligence, approval by IFC’s management and board of directors, and execution of mutually satisfactory documentation." IFC extends attractive interest rates from its financing programs aimed at development projects. Likewise, it infuses equity with an option to sell its stake to the lead entity of a development project. PSALM president and chief executive officer Nieves L. Osorio said the IFC offer affirms the multilateral lending agency’s faith in the country’s power sector. "It also encourages potential bidders to participate in the final bidding for the TransCo concession set in November," Osorio said. Three interested bidders for the concession had submitted their prequalification proposals to PSALM last month. Government is expected to announce the qualified bidders as soon as it completes the deliberation and validation of the financial and technical capabilities of the three investor groups. IFC, which provides financing for projects in less developed countries and promotes private enterprise in developing nations, has substantially invested in the Philippine power sector since the 1960s. Bhagat said the IFC is prepared to invest between $2 billion and $5 billion more in the Philippines in the next three to four years. Since 1962, IFC has invested $2 billion into various projects in the country. Among the key sectors for IFC’s direct investments or assistance in enticing foreign investors to invest, are in infrastructure, tourism, information technology (IT) especially the business processing outsourcing (BPO) sector, electronics, and energy. Next in the priority list are investments in water, medical tourism, financial sector, and the mining sector.

Read This