04 May 2004
The Freedom from Debt Coalition holds the past and present administrations accountable for the heavy financial losses of the National Power Corporation (NPC). Reportedly, NPC’s losses have already reached P100 billion in 2003.
According to newspaper reports, NPC said that it expected to incur losses due to the peso’s depreciation, high cost of foreign borrowings, and rises in global fuel prices. Also, the 40-centavo per kilowatt-hour cap on NPC’s purchased power cost adjustment since June 2002 was said to be blamed for the losses.
“Increase in the fluctuations in the cost of peso against the dollar and price of fuel also increase NPC’s obligations to the independent power producers as most, if not all, of the power contracts with the IPPs are dollar-denominated and NPC either provides for the fuel requirement or absorbs the effect of the peso-dollar fluctuation on the cost of the fuel. On top of this is the take-or-pay provision in the contracts that assures IPPs of payment for the contracted power even when it is not actually generated,” said FDC Secretary General Lidy Nacpil.
NPC started entering into power purchase agreements with IPPs under the Aquino Administration wherein 12 power contracts were forged. Under the Ramos Administration, 32 IPP contracts were signed; two were approved under the Estrada Administration. Under the incumbent President, the controversial Caliraya-Botocan-Kalayaan - IMPSA deal became effective despite questions in the legality of the power contract.
According to Nacpil, the onerous terms in the IPP contracts have resulted in NPC’s ballooning debts from only P122 billion in 1994 to almost P1.4 trillion in 2003. This accounts to almost 20% of the P5.4-trillion consolidated public sector debt. NPC’s total liabilities is equivalent to more than 40% of the P3.3-trillion National Government debt; NPC eats up to 70% of the P2.1-trillion total debt of government-owned and controlled corporations.
“It is ironic that despite the so-called savings from the renegotiation of IPP contracts that Pres. Arroyo brags about, NPC’s financial obligations continue to rise. Has the government really incurred savings from the renegotiation of contracts? We never know until the government shows to us the details of the renegotiation and the amendments in the contracts,” Nacpil further said.
“The level of NPC’s debt is alarming,” Nacpil exclaimed. “NPC debt largely contributes to the current debt crisis, as government borrows heavily from international and local markets to help finance NPC’s obligation,” she added. Recently, the government has raised $400-million sovereign-guaranteed bonds for NPC, which is part of its $1.5-billion borrowing requirement for 2004.
FDC believes that NPC’s huge financial obligations as well as the high cost of electricity will be reduced once the Executive takes a decisive action, such as the cancellation of onerous IPP contracts. Unless President Arroyo or the new administration decisively address the cause of NPC’s financial hemorrhage and high electricity rates, the government will sink deeper into the debt pit and the people will continue to pay for high cost of electricity.