Weak peso could swell PSALM’s $5.3 B debts, to trigger rate hikes

State-run Power Sector Assets and Liabilities Management Corporation (PSALM) needs to face up to further financial hemorrhage with more than 50-percent of its $5.274-billion outstanding debts denominated in US dollars.

Consequently, according to energy official-sources, the weak value of the Philippine peso versus the greenback “has been causing worries” to the company because this could mean further swell on its liabilities; and at the same time, “it could trigger hikes in electricity rates.”

PSALM data would show that its US dollar debts amounted to $2.664 billion, or about 50.52-percent of outstanding financial obligations.

As of end-December, 2017, the state-run firm indicated that the exchange rate previously applied had been at R49.9230 vis-à-vis the US dollar.

Nevertheless, with the Philippine peso currently performing as the ‘weakest currency’ in the Asian region, it is seen that the forex rate reference could be driven up to the R51 to R52-to-the-US dollar range as already experienced in the first quarter this year.

At R52 to the US dollar then, the company’s debt portion could escalate to as high as R138.528 billion, roughly R5 billion up from last year’s R133.028 billion.

Of PSALM’s total debts, those in Philippine peso denomination had been placed at $2.063 billion; while Japanese yen-denominated amounted to $546.4 million.

Beyond direct borrowings, PSALM has also been paying various independent power producers (IPPs) on power supply agreements that had been pegged on US dollars.

Latest reckoning showed that IPP lease obligations amounted to $4.064 billion, with the bulk of $4.054 billion set in US dollars. The balance of $10.3 million had been Philippine peso-indexed.

For the IPP lease obligations, PSALM documents would show that this accounted for 99.75-percent of the aggregate amount.