Deficits will widen after state assets are completely sold

BY DENNIS GADIL

(Last of two parts)

Every start of the fiscal year which is January, the President and the inter-agency Development Budget Coordination Council search for possible funding sources and often consult the Privatization and Management Office on which state asset can quickly produce a large sum to narrow the gap between revenues and expenses.

The PMO now has a partial inventory of the assets for auction. Some of the assets are in the internal inventory of state agencies which either own or operate them.

In 2007, government again floated the sale of the New Bilibid Prison property to plug an expected deficit of P75 billion in 2008. The sale did not materialize.

Aside from the NBP, the government also identified the cash-strapped National Food Authority (NFA) as another candidate for privatization. To this day, the NFA continues to bleed government coffers dry. It survives on subsidies.

Under the Arroyo administration, sold or privatized were Manila Gas (to Robinsons Land for P574 million); International School campus (to Century Properties for P1.432 billion); previously Lopez-owned Maynilad Water (to DMIC Holdings-Metro Pacific for $57 million); Initial Public Offering (IPO) of PNOC-Energy Development, P19.12 billion; and the sale of Nampeidai property in Japan for an undisclosed amount.

The old site of the Iloilo airport, which is at least 54 hectares, was also sold for P1.2 billion to property developer Megaworld Corp., which in turn, committed to spend another P1.5 billion to develop the property.

The state-owned Development Bank of the Philippines (DBP) also sold in 2006 some P9.56 billion worth of non-performing assets to a unit of US investment bank Lehman Brothers under the Special Purpose Vehicle.

The sale brought down DBP’s non-performing loans to 1.92 percent of total assets from 8.45 percent.

Sold were P5.8 billion in non-performing loans and P3.7 billion in "real and other properties owned or acquired". They are actually foreclosed collaterals.

PROCEEDS IN 2006

The 2006 revenue from privatization according to the Bureau of Treasury (BTr) totaled P119.35 billion, including the treasury’s income.

The amount helped reduce the budget deficit for that year to P62.2 billion, compared with the target maximum of P125 billion.

The Arroyo government also sold its energy assets through the Power Sector Assets and Liabilities Management Corp. (PSALM), the agency mandated by the Electric Power Industry Reform Act (EPIRA) to privatize the National Power Corporation’s 31 generating assets, 13 independent power producers’ (IPP) contracts, and the Transco concession.

Transco was leased for 25 years at $3.93 billion.

ENERGY ASSETS

The sale of energy assets in 2007 generated $5.99 billion, involving four power plants, along with long-term concession to run the National Transmission Corp. or Transco.

Among those already sold are the: 600-megawatt (mw) Masinloc coal-fired power plant to US-based power giant AES Corp. for $930 million; 600-MW Calaca coal-fired power plant to Franco-Belgian firm Suez-Tractebel for $786.5 million; 60 percent stake of PNOC-EDC, the country’s biggest geothermal power producer, to Lopez-led First Gen. Corp. for P36 billion; and, 100-MW Binga and 75-MW Ambuklao hydroelectric plants to SN Aboitiz Power for $325 M; and, the Transco to Monte Oro Grid Resources for $1.804 billion.

The other power plants up for sale or undergoing bidding are the 192.5-MW Palinpinon geothermal and 110-MW Panay diesel; the decommissioned Manila Thermal plant; the geothermal complex of 275-MW Tiwi and 410-MW Makban; Tongonan geothermal, Bohol diesel, the 150-MW Bacman and 0.8-MW Amlan hydropower plants, the diesel-fired 114-MW Iligan I and II and 620-MW Limay, and the decommissioned Bataan, Aplaya and General Santos plants.

The sale for the Calaca power plant, however, hit a snag last year and would be rebidded. The winning bidder ran into financial trouble and even blamed government for reneging on its commitments under the terms of the sale.

This month, PSALM announced plans to privatize Agus and Pulangi hydro power plants.

The government expects to rake in at least $7 billion more from the sale of the remaining Napocor plants this year.

TELCO, INFRA, UTILITIES

The government likewise finally disposed of the Philippine Telecommunications Investment Corp. (PITC) in 2007 to First Pacific Co. for P25.2 billion.

The PTIC stake translates to a 6.4 percent indirect equity in telecommunications giant Philippine Long Distance Telephone Co. (PLDT).

State-run Philippine National Construction Corp. (PNCC) was finally transferred to British Virgin Island-based Radstock Securities for P6 billion under a compromise agreement when the privatization of the agency failed.

The sale was controversial since attached to it was the almost P18 billion obligations of the PNCC to Japan’s Marubeni Corp, which belatedly came up during the negotiations.

The amount would be shouldered by government and transferred to Radstock as part of the agreement.

Last year, the government identified for unloading its shares in San Miguel Corp. (SMC) by P50 billion; Manila Electric Co. (Meralco) by P6 billion and sold its Petron shares to British investment group Ashmore by $550 million.

Only the sale of shares of San Miguel did not push through.

The government also announced it was selling the remaining 4.6 percent stake in PNB worth P998 million.

P30 BILLION FOR 2009

Finance Secretary Margarito Teves has said government will likely sell more assets to earn more than the P30 billion it had programmed from privatization in 2009. The privatization target was up from the initial P15 billion to P30 billion after the deficit cap was increased.

Teves cited the government’s 99.78 percent stake in Philippine National Oil Co.-Exploration Corp. (PNOC-EC), which is the oil and gas exploration arm of PNOC.

The government hopes to sell the PNOC unit for at least P10 billion.

It has already sold PNOC’s shipping unit, the PNOC Shipping and Transport Corp (PSTC), for P2.3 billion.

Also included in this year’s auction list are the 120-hectare Food Terminals Inc., (FTI) property in Taguig for at least P10 billion to P15 billion and the government’s real estate property in Fujimi, Japan, where the Philippine embassy holds offices.

The Fujimi property will not be sold outright but would be offered through a long-term lease arrangement.

The state-owned Eastern Telecommunications Philippines Inc was once included in the list of items to be sold in 2008 and 2009 but was recently taken off the list.

Teves was also mum about plans to seriously put the NFA on the auction bloc.

He only said FTI and the PNOC-EC would be sold in the first semester of the year.

Also identified for "continued" privatization are television stations RPN-9 and IBC-13, Al-Amanah Islamic Bank, and Philippine Postal Corp, which could fetch government at least P30 billion.

The BCDA has also lined-up the privatization of what remains of Fort Bonifacio.

To be developed are nine pieces of adjoining properties – six of which are owned by BCDA in Bonifacio South — JUSMAG, SSU, ASCOM, Marines, BNS, and NOVAI — and portions of the Philippine Army (POL depot and dental dispensary), the National Mapping and Resource Information Authority (NAMRIA) and consular areas, also in Fort Bonifacio.

At raw, the properties are fetching P20,000 per square meter.

The BCDA would dispose of only the six properties it owns, covering 93 hectares, in a phased development that kicks off with the 35.5-hectare JUSMAG scheduled this year.

The JUSMAG property has so far generated the interest of property giants like Ayala Land Inc., Megaworld Corp., SM Group, Shimao Group of China, and Robinsons Land Corp.

MORE ASSETS

Government sources said there are still big-ticket items that could be readily sold.

It could put the NBP property back on the auction bloc, which could easily fetch at least P100 billion.

Only recently, government, through the Philippine Ports Authority (PPA), privatized the Manila North Harbor to a consortium of Harbour Centre and Metro Pacific through a lease agreement worth at least P10 billion.

With a P177.2 billion deficit in the horizon, government is expected to add more "crown jewels" to the "sell" list on top of those already identified for immediate disposal.

But the tragedy is that those already sold and those lined-up for sale are not recurring incomes and would not be around in next coming years to help bail out the next government from future financial strain which is sure to come anyway.

By that time, the joke about selling Rizal Park may no longer be a joke.