Osmeña files bill seeking to extend PSALM corporate life until 2036
Senator Sergio “Serge” Osmena III filed a bill on Wednesday seeking to extend the corporate life of Power Sector Assets and Liabilities Management Corporation (PSAML Corp.) to better manage its remaining liabilities and Independent Power Producer (IPP) contract obligation.
“Extending the corporate life of PSALM by ten (10) years, or until 2036, will allow the Corporation to better manage its remaining liabilities and lPP contract obligations,” Osmena explained in Senate Bill No. 3250.
The Electric Power Industry Reform Act of2001 or the EPIRA created the Power Sector Assets and Liabilities Management Corporation (PSALM Corp.) with the principal purpose of managing the sale, disposition and privatization of the National Power Corporation (NPC) assets and lPP contracts with the greater objective of managing the NPC financial obligations in an optimal manner.
Ten (10) years thereafter, Osmena said, PSALM Corp. has privatized more than seventy percent (70%) of the NPC generation assets and lPP contracts, and has optimally liquidated US$5.62 Billion of the NPC financial obligations out of the sales proceeds of the privatized assets amounting to US$5.51 Billion as of the end of 2011 (excluding interest income from its placements).
The outstanding financial obligations still stand at US$17.14 billion as of June 2011, broken down into US$8.49 billion debts and US$8.65 billion lPP obligations. The calculated Stranded Contract Costs for 2007 to 2010, and Stranded Debts for 2011 to 2026 are estimated to reach a total Php140.29 billion after deducting the Php200 billion NPC obligations assumed by the National Government and expected privatization proceeds,” Osmena further explained.
Osmena said, “Despite the fact that there was privatization and National Government absorption, total financial obligations have not decreased significantly since the EPIRA was enacted due to the following factors: Continuous operations of NPC generating assets at a loss, which consequently resulted in new debts; Power rates/tariff not reflective of true cost of electricity; Commissioning of new IPPs in 2001-2003 and in 2006; Delay in privatization (2004) due to conditions precedent required to complete the sale process (e.g., resolution of plant-specific issues); Foreign exchange losses; and, Mismatch between the maturity profile of the financial obligations and the schedule of collection of the privatization proceeds.
He further said that the EPIRA provides that PSALM Corp. shall exist for a period of twenty five (25) years from the effectivity of the Act which shall be up to the year 2026. “All outstanding NPC debts transferred to PSALM will mature by the year 2036 while the longest term for the NPC-IPP Contracts transferred to PSALM will end in 2031. After 2026, all outstanding debts and IPP contract costs will revert to and be assumed by the National Government, including the management of the remaining IPP contracts and/or their administration under the IPPA.”
In the performance of its functions and for the attainment of its objectives, additional powers for the PSALM Corp. are being proposed in the bill, to wit:
• The power to reorganize, as it may deem appropriate, to effect economy and promote efficiency by right sizing the PSALM organization in proportion to the scale, scope and nature of its corporate programs and priorities. It is submitted that the exercise of the power to reorganize must be expressly granted/authorized by law, based on several CSC Rulings on the implementation of Government Reorganization.
• The power to reassign officials and employees in accordance with the changes in its existing functions shall provide the Corporation with the basis to implement job rotation which is the sequential or reciprocal movement of an employee from one government office to another or from one division to another within the same agency as a means of developing and enhancing the potentials of personnel by exposing them to the other work functions of the Corporation.
“Consistent with the proposed power of the Corporation to reorganize, the President and CEO of PSALM Corp. shall also have the additional power to submit a reorganization plan to the Board for its approval, consistent with its mandate under the EPIRA, and to implement the said plan within six (6) months from approval of the Board thereof, subject to the guidelines and policies set by the Board.,” Osmena explained.
This is to expressly authorize the PSALM President and CEO to plan, secure the Board approval and implement the reorganization within a specified time period and in accordance with Board-approved policies and guidelines, he added.