‘Expiry of PSALM corporate life may increase government debt’

A lawmaker is pushing for the extension of the corporate life of Power Sector Assets and Liabilities Management (PSALM) Corp., saying its corporate life expiry could have “serious fiscal consequences.”

House Committee on Ways and Means Chairman Joey Sarte Salceda warned that the government may have to shoulder as much as P198 billion in debts from the liabilities of the PSALM if its corporate life is not renewed.

“If PSALM’s debt is not isolated from those of the national government, however, we would see an instant increase in the national government debt stock of at least P198 billion, given the delays in the privatization efforts,” Salceda warned.

The corporate life of the PSALM is expiring on June 26, 2026.

Salceda, meanwhile, asked the PSALM to present its plans for the extension.

“If we will extend your life by 50 years, better present what you want to do with it. I thus request, that the PSALM submit its 50-year and medium-term plan for financial management and privatization to my office,” Salceda said.

‘Potential financial risk’

Citing his assessment of PSALM’s debt management capabilities, Salceda said he expects some P198 billion of its debts will remain in 2026, following delays in the privatization of key assets due to the Covid-19 pandemic.

“I wouldn’t wait until the next administration to extend its corporate life,” Salceda said after a hearing last Wednesday on a proposal to extend the government corporation’s charter for another 50 years.”

“The fiscal consequences are serious, especially since that period will still involve fiscal recovery.”

Republic Act 9136 or the Electric Power Industry Reform Act (EPIRA), was enacted to ensure the solvency the National Power Corp. (NPC). The EPIRA created PSALM in 2001, a government-owned and -controlled corporation, with a corporate life of 25 years.

PSALM has the principal mandate of managing the orderly sale, disposition, and privatization of the NPC generation assets, real estate and other disposable assets, and Independent Power Producer (IPP) contracts to optimally liquidate all NPC financial obligations, including stranded debts and stranded contract costs, which were transferred to and assumed by PSALM pursuant to the EPIRA. At the end of PSALM’s life, all its assets and outstanding debts and IPP contract costs will revert to and be assumed by the national government.

“We were originally set to see the obligations begin to almost disappear by 2026, but due to the Covid-19 pandemic, certain privatization efforts were delayed,” Salceda said.

The lawmaker said that “unless PSALM’s privatization thrust is completed, this reversion is a potential fiscal risk that could affect our credit standing and the national government’s overall fiscal health—strained as it already is by the Covid-19 pandemic and implementation of the Mandanas-Garcia ruling increasing local government units’ share of national taxes.”

Salceda also said that certain privatization efforts are also in imminent need of a longer PSALM corporate life.

“The proposed development of the NPC property in Diliman, Quezon City, for example, into a mixed-use commercial complex will warrant the corporate life extension of the state-run corporation,” he said.

Salceda said the development blueprint initially cast for the 5.195-hectare NPC property aims to convert it into a mixed-use commercial strip patterned after the business district metamorphosis of Fort Bonifacio Global City. Because of the Covid-19 pandemic, re-adjustments have to be incorporated in the earlier crafted privatization design for the property.

“Given the experience of the Bases Conversion and Development Authority with developments such as Fort Bonifacio, whose planning began in 1995, but only started being developed into a full-scale master-planned community in 2003, the Diliman property could take at least a decade before it realizes its promise as a revenue-driver for the PSALM,” Salceda said.

Creation of TWG

Meanwhile, the House Committee on Energy chaired by Deputy Majority Leader Juan Miguel Macapagal Arroyo has created a technical working group (TWG) that would further discuss the proposals, extending the corporate life of and strengthening the PSALM.

Several resource persons expressed their agencies’ support for the bill extending PSALM’s corporate life. Among them was Department of Finance Undersecretary Bayani Agabin who said it would be beneficial for the country to have the life of PSALM extended considering its substantial debts.

He said if PSALM’s life would be allowed to expire, its debts would be absorbed in the balance sheet of the government and would increase the country’s deficit.

Philippine Independent Power Producers Association, Inc. President Anne Estorco-Montelibano said her group fully supports any measure that would allow PSALM to perform and complete its mandate under the EPIRA.