2.5 Private Sector Assets and Liabilities Management Corporation (PSALM)

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Mandate

Tasked to help transform the power industry into a competitive, market-driven sector is the Power Sector Assets and Liabilities Management Corporation (PSALM).

PSALM began operations on July 11, 2001 to take ownership, manage, privatize and dispose of all existing generation assets, liabilities, real estate and other disposable resources of National Power. These include contracts with independent power producers that the state-owned power firm tapped in the 1990s  the height of the crippling power crisis  to put up the additional generating capacity that the country needed to ensure an adequate supply of electricity.

PSALM assumes all outstanding obligations of National Power. PSALM also owns the transmission assets and facilities and sub-transmission functions and resources of the TransCo. It has a corporate life of 25 years, after which all its properties will be turned over to the Philippine government.

Major Functions

Privatization of National Power ‚ Generation and TransCo ‚ Transmission Assets

PSALM undertakes a range of activities preparatory to the bid proper, including drafting information memoranda and transaction documents to be distributed to prospective bidders. PSALM also conducts due diligence on its assets to determine their readiness for privatization.

The publication of the Invitation to Bid officially begins the bidding process. The notice also indicates schedules of the pre-bid conference, the start of the conduct of due diligence by the bidders, the distribution of the final transaction documents, and the date for opening of bids.

PSALM will also appoint, again through public bidding, IPP (independent power producer) administrators who will manage the energy output of different portfolios of power plants run by IPPs. These IPPs were contracted in the 1990s by National Power to meet the country ‚ growing electricity requirements.

Liabilities management

PSALM manages all existing debt of National Power, capital lease payments to IPPs, and the outstanding obligations of electric coops to the National Electrification Administration and other government agencies. This function includes the management of other liabilities assumed by PSALM as well as its future borrowings. This is to ensure that PSALM will be able to pay all principal and interest payments as they fall due. Refinancing, whenever necessary, will be obtained at minimum cost. PSALM ‚ liability management function also requires the mitigation of foreign exchange risks through hedging or other means since some of the debt is denominated in foreign currency.

Administration of Universal Charge

PSALM, with the supervision and approval of the ERC, administers the collection of the Universal Charge (UC), which is collected every month by the distribution utilities from all electric consumers. The UC fund is used to finance, as specified by law, missionary electrification, environmental protection projects, and payment of National Power ‚ stranded debts.

-- from the Power Sector Assets and Liabilities Management Corporation (PSALM) Website