PSIREN

The Philippines is among the first country in the Asia-Pacific region to implement power sector restructuring, with loans and policy/ technical support and advice from international financial institutions (IFIs) like Asian Development Bank (ADB), World Bank-International Finance Corporation (WB-IFC) and Japan Bank for International Cooperation (JBIC). These reforms required the unbundling of state-owned National Power Corporation (NPC), an enabling legal and regulatory framework, and substantive privatization of NPC generation and transmission assets, with the aim to promote greater private sector participation and competition and ultimately bring down power rates. The IFIs also provided loans for the distribution and transmission sectors.

In the early 1990s, the International Monetary Fund (IMF) imposed conditionalities such as the privatization of state enterprises as part of its structural adjustment programs. The WB provided financial packages and political risk guarantees for private power investments; a 1990 WB Energy Sector Loan laid the foundation of power sector reforms. The IFC supported private investments and was a pioneer in financing private generation projects in the late 1980s and early 1990s, e.g. Hopewell Corp. ADB provided a major loan to restructure the power sector in 1998 and has since been the lead donor agency to drive the reforms in the Philippines; JBIC co-financed the loan.

As US and European IPP project developers scale back their overseas operations in recent years, Japanese firms are regarding this as a new business opportunity, a development which JBIC supports though its project finance loans for the construction, rehabilitation and/or acquisition of power plants by private sponsors or in support of a Japanese power utility who expands its operations in overseas power business – e.g., KEILCO for Ilijan, J-Power-Sumitomo for CBK, Team Energy for Mirant assets. In the case of KEILCO, JBIC provided strategic financing for a joint venture undertaken by Japanese and Korean power utilities in a third country, promoting a business alliance of Japan and Korea. Table 1 shows increasing IFIs’ support to the power sector restructuring and participation of private sector players in the Philippine power industry.

FROM:
IFIs Support to Power Players in the Philippines
By Violeta P. Corral, PSIRU-Asia www.psiru.org, July 2009