The government may have to shoulder as much as P198 billion in debt from the liabilities of the Power Sector Assets and Liabilities Management (PSALM) Corporation unless its corporate life is renewed.
“Based on my assessment of PSALM’s debt management capabilities, I expect some P198 billion of its debts will remain in 2026, following delays in the privatization of key assets due to the COVID-19 pandemic,” House Ways and Means chairman and Albay Rep. Joey Salceda said on Wednesday.
PSALM’s corporate life is due to expire on June 26, 2026. A bill has been filed to extend the “life” of the government corporation.
“I wouldn’t wait until the next administration to extend its corporate life,” Salceda said after a hearing today on a proposal to extend the government corporation’s charter for another 50 years,” added Salceda, author of House Bill 10346 that extends PSALM’s corporate life.
“The fiscal consequences are serious, especially since that period will still involve fiscal recovery,” Salceda added.
Republic Act 9136, otherwise known as the Electric Power Industry Reform Act (EPIRA), was enacted to ensure the solvency of the National Power Corporation.
The EPIRA created the Power Sector Assets and Liabilities Management (PSALM) Corporation in 2001, a government-owned and -controlled corporation, with a corporate life of 25 years which is due to expire in 2026.
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 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.
“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.
Salceda added 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 National Power Corporation (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.”
“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 that real estate asset,” Salceda said.
Salceda, however, said he wants the PSALM to present its plans for the extension.