Republic of the Philppines
HOUSE OF REPRESENTATIVES
Quezon City
SIXTEENTH CONGRESS
First Regular Session

2922

House Bill No.

Introduced by: Representatives Michael Angelo C. Rivera and Rodel M. Batocabe

EXPLANATORY NOTE
‘The bill secks to extend the life of the Power Sector and Liabilities Management Corporation (PSALM).

For the purpose of managing the sale, disposition and privatization of the assets and IPP
contracts of the National Power Corporation, the Power Sector Assets and Liabilities
Management Corporation (PSALM Corp) was created by the Electric Power Industry
Reform Act of 2001, otherwise known as the EPIRA. It was to exist for a period of twenty-
five (25) years or until 2026. The intent was that after some of the NPC. obligations were
assumed by the National Government upon effectivity of the Act , PSALM would
optimally apply on the remaining NPC obligations the cash flow from (a) the sale of NPC
assets and (b) the collected universal charges from the consumers, such that by the
expiration of PSALM the National Government would be left with minimal or nil liabilities
of NPC,

In its mid-life the total financial obligations of PSALM for NPC have not decreased
significantly despite seventy percent (70%) of NPC generation assets and IPP contracts have
been sold and privatized. After liquidating US$5.62 Billion of NPC financial obligations
with the sales proceeds of privatized assets amounting to US$5.51 Billion (excluding interest
of placements thereof) as of 2011, the total outstanding financial obligations still stands at
USS17.14 Billion broken down into US$8.49 billion debt and USS$8.65 billion IPP
obligations. These financial obligations have not decreased significantly due to the following

reasons:

1) Mismatch between the privatization cash flow and the maturity profile of financial
obligations brought about by:


a) Failure of the privatization to realize in the bidding process the target prices for
the assets;

b) Delays in privatization due to conditions that must be satisfied to complete the
sale process and/or deferment in the privatization of some assets particularly of
the Agus-Pulangui Complex in Mindanao which was expected to bring in a hefty
price;

2) Continuous operation at a loss of NPC’s un-privatized assets resulting to new debts.

This was brought about by power rates/tariff not commensurate with the true cost of

electricity;

3) Foreign exchange losses.

‘Ail outstanding NPC debts transferred to PSALM will mature by 2036. It is only fitting and
proper that for the better management of the remaining liabilities and IPP contract
obligations it assumed from NPC, the PSALM Corporation’s life should be extended by 10
more years beyond 2026 until 2036.

‘Approved.

a —

MICHAEL ANGELO C. RIVERA
Representative Representative
I-CARE PARTY LIST ‘AKO BICOL PARTY LIST



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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session

9
House Bill No. 2922

Introduced by Representatives Michael Angelo C. Rivera and Rodel Batocabe

AN ACT EXTENDING THE LIFE OF POWER SECTOR ASSETS AND
LIABILITIES CORPORATION (PSALM) AMENDING FOR THE PURPOSE
REPUBLIC ACT NO. 9136 AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress

assembled:

Section 1. Section 50, Chapter VI of Republic Act No. 9136, otherwise known as the “Electric
Power Industry Reform Act of 2001” or EPIRA, is hereby amended to read as follows:

“Section 50. Purpose and Objective, Domicile and Term of Existence ~ The principal
purpose of the PSALM Corp. is to manage the orderly sale, disposition, and privatization of
‘NPC generation assets, real estate, and other disposable assets and IPP contracts with the
objective of liquidating all NPC financial obligations and stranded contract costs in an optimal

manner.
The PSALM Corp. shall have its principal office and place of business within Metro Manila.

‘The PSALM Corp. shall exist for a period of [twenty five (25)] THIRTY FIVE (35) years
from the effectivitity of this Act, unless otherwise provided by law, and all assets held by it, all
moneys and properties belonging to it, and all its liabilities outstanding upon the expiration of its
term of existence shall revert to and be assumed by the National Government.”

Section 2. Separability Clause.- If any part or section of this Act is declared unconstitutional,
such declaration shall not affect in any manner other parts or sections of this Act.


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Section 3. Repealing Clause. - The provisions of Republic Act No. 9136, otherwise known as
the “Blectric Power Industry Reform Act of 2001” shall continue to have full force and effect except
in so far as they are inconsistent with this Act.

Section 4. Effectivity Clause. — ‘This Act shall take effect on the fifteenth day following its
publication in at least two (2) national papers of general circulation.

Approved.