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GOVERNMENT-RUN National Power Corp. (Napocor) remains
optimistic it can sustain its positive financial
performance and post P90-billion net income by the end
of the year, Cyril C. del Callar, the company president,
told reporters on Tuesday.
“Our
income projections will depend on the foreign exchange
rate movement based on the assumptions of the
Development Budget and Coordination Committee (DBCC),”
del Callar said at the sidelines of the Manila Overseas
Press Club and Economic Journalists Association of the
Philippines economic briefing.
He
quickly added that should the peso strengthen, the
company’s income will improve as interest expense goes
down.
Based on
the DBCC’s assumption, the peso-dollar exchange rate
will average P48 to P50 to a dollar this year.
DBCC is
an interagency group composed of the Department of
Budget and Management (DBM), Department of Finance (DOF),
National Economic and Development Authority (NEDA) and
the Bangko Sentral ng Pilipinas (BSP).
In a
worst-case scenario, according to del Callar, the
company’s income could drop to P65 billion should the
peso weaken against the dollar. “Every P1 weakening or
strengthening of the peso is equivalent to a P15-billion
loss or gain,” he added.
Based on
its unaudited financial statement, Napocor is expected
to post a consolidated net income of P90 billion last
year from P86 billion in 2005.
Should
Napocor maintain its strong financial performance, it
would be the third year it will post earnings after
being in the red for almost 10 years.
Of the
P90-billion income last year, Napocor alone accounted
for P68.7 billion while power transmission agency,
National Transmission Corp. (Transco) accounted for the
P20.5 billion.
Transco
is a spinoff company of the Power Sector Assets and
Liabilities Management Corp. that assumed the operation
of the transmission business of Napocor when Republic
Act 9136, or Electric Power Industry Reform Act (Epira),
was enacted into law in 2001.
The
strengthening of the peso since 2005 has helped Napocor
cut its interest payments, thus allowing it to incur
foreign gains, as bulk of Napocor loans are
dollar-denominated.
Apart
from the strengthening peso,
del
Callar attributed the improved financial performance to
rigorous cost cutting that generated savings of almost
P25 billion.
Among
the measures were economic load dispatching of its power
plants; and improving the operational efficiency of
power plants.
Other
measures that boosted financial performance were: the
availment of discounts on some of the corporation’s fuel
deliveries; optimization of the use of local coal, which
is cheaper than imported coal; reduced operating
expenses; deferment of some capital expenditures; and
reduced contractual obligations from some independent
power producers
Apart
from the cost-cutting, the other factors that
contributed to the financial upturn in 2005 were the
Energy Regulatory Commission’s approval of adjustments
in Napocor’s Generation Rate Adjustment Mechanism and
Incremental Currency Exchange Rate Adjustment, as well
as the corporation’s application for a rate adjustment
under its Return-On-Rate-Base with Time-Of-Use Program;
the strong showing of the peso against major foreign
currencies, which significantly eased the corporation’s
burden of paying its long-term, yen- and
dollar-denominated debts; and the absorption by the
national government of P200 billion of Napocor’s
outstanding liabilities, as provided by the Epira.
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