Corporate Performance Metrics

The overall performance rating of the Corporation is determined to put a quantitative representation of the extent to which PSALM has achieved the targets it set and indicated in its Annual Corporate Action Plan.

The Corporate Performance Metrics of PSALM, which was approved by the PSALM Board through Board Resolution No. 2009-1016-001, utilized both quantitative and timeliness measures.  Quantitative measure refers to number or volume of work and constitutes 60% of the rating.  On the other hand, timeliness measure refers to the observance of target schedules/deadlines in the completion of work.  It constitutes 40% of the rating.

Each performance indicator (PI) in the Corporate Action Plan is rated as follows:

Timeliness score X (0.4) X (weight) = T Rating
Quantity score X (0.6) X (weight) = Q Rating

T Rating + Q Rating = PI Rating. The overall performance rating is the sum of the PI ratings where: 

OVERALL CORPORATE RATING MATRIX

At the start of the year, PSALM sets its annual corporate targets for its key results areas (KRA).  For every KRA, a set of goals and objectives are established and performance indicators are formulated to be able to measure actual performance/accomplishment of the corporation.  These targets are then approved by the PSALM Board.  The corporate actual accomplishments are then evaluated using the Board-approved Corporate Performance Metrics using quantitative and timeliness measures.

Corporate Strategic Plans 2011-2020

Since its creation in June 2001, PSALM dedicatedly strives to discharge its responsibilities according to its mandate. The Corporation has continuously focused its efforts, despite a few snags in past performances, on improving the delivery of its corporate services.

In December 2010, PSALM formulated its 2011-2020 Corporate Strategic Plan (CSP) under the theme “PSALM@10: Moving Towards Greater Heights”. 

The CSP identified the following as PSALM’s Corporate Priorities or Key Result Areas (KRAs):

• Financial Management
• Asset Management
• Management of Universal Charge

Under the Financial Management KRA, PSALM specifically aims to reduce the total financial obligations and cost of borrowings, as well as address liquidity and foreign exchange (forex) risk exposure. This KRA also aims to improve profitability of remaining power generating assets, attain high collection efficiency and keep the operating costs at minimum level.  The Corporation’s goal under the Asset Management KRA is to privatize/dispose its power and non-power assets and maintain condition of these assets to ensure power supply and optimize value until privatization/disposal. For Management of Universal Charge KRA, PSALM aims to ensure consistent application of Universal Charge (UC) guidelines.

Strategic Plans

• Financial Management

PSALM targets to bring down the USD15.8 billion in 2010 total financial obligations (USD7.02 B debt and USD8.79 B IPP Lease Obligations) to USD4.35 billion by end of 2020 (ten-year plan).  It is noted, however, that the target reduction in financial obligations is directly affected by the inflow of privatization proceeds, Universal Charge for stranded debt and contract costs (UC SD and SCC) and results of operations of remaining assets. If there will be a gap between the maturing obligations for the year and the available funding, PSALM may have to refinance and this would affect the targeted reduction levels.

Likewise, PSALM will consider prepayment of its financial obligations to fast track the reduction provided that there is available funding (or surplus).  This would be possible if PSALM will be able to collect the UC SD/SCC and/or the winning bidders will prepay.

In support of the liability mandate of PSALM, the Corporation aims to achieve/implement the following:

• Control its borrowing cost
• Effectively manage its exposure to foreign exchange by increasing to 50% the peso component of its debt mix
• Matched the weighted average maturity (WAM) of debts with PSALM’s remaining life and the inflow of privatization proceeds. 

To achieve the aforementioned corporate targets, PSALM will implement financing transactions designed to achieve the desired debt reduction level, cost of borrowings, maturity profile and debt currency mix.  However, the final implementation of these transactions is subject to approvals of oversight agencies which are beyond the control of PSALM. Hence, the Corporation will maintain its close coordination and partnership with oversight agencies especially the Department of Finance and the Bangko Sentral ng Pilipinas for the implementation of its Liability Management Program.

In addressing PSALM’s liquidity risk exposure, PSALM also targets the following:

• Attain high collection efficiency for power receivables (75-100%) and privatization proceeds (100%).
• Keep its operating cost, including that of its operator, within the Board-approved budget
• Minimize the Corporation’s net loss and negative cash flow from operations

PSALM aims to ensure that the Corporation will be able to improve the profitability of remaining power assets.  However, it is also recognized that there are power assets which are and will continue to be on a negative financial position due to the high cost of fuel used to run the plants and low power rate.  In order to minimize the impact of negative operations in its financial position, PSALM will optimize revenue from electricity trading by targeting 100% recovery of fuel costs of IPP plants; while to address the issue of tariff not being reflective of the true cost of electricity which contributes to negative operations, PSALM targets to regularly update its tariff and secure approval from the ERC.

• Asset Management

To fulfill its privatization mandate and to address the liability management requirements of the Corporation, PSALM targets to complete privatization of its contracted energy output by 2014, owned generating plants by 2016 and decommissioned plants  by 2017; as well as the complete disposal  of real estate properties by 2016 and excluded assets of sold plants and artworks  by 2013.

Following are the list of assets which are covered by PSALM’s Privatization and Disposal Program:

• Owned Plants:
• 218 MW Angat Hydroelectric Power Plant
• 650 MW Malaya Thermal Power Plant
• 128 MW Power Barges 101-104
• 982.1 MW Agus-Pulangui Hydroelectric Power Plants
• Navotas Gas Turbine Power Plant
• Sucat Thermal Power Plant (decommissioned)
• Bataan Thermal Power Plant (decommissioned)

• Contracted Energy Output
• 30.75 Benguet Mini Hydros
• 140 MW Casecnan
• 559 MW Unified Leyte
• 131.8 MW Naga Power Complex

(95.8 MW Cebu Thermal & 36 MW Cebu Diesel)

• 44.52 MW Mt. Apo 1
• 100 MW WMPC
• 50 MW SPPC
• 48 MW Mt. Apo 2
• 200 MW Coal-Fired
• Real Estate

1,271 parcels of land with area of around 11 million square meters and two (2) townhouses

• Artworks
• Excluded Assets of Sold Plants and Other Disposable Assets

Pending the privatization/disposal of power assets, PSALM will maintain and preserve these assets to ensure power supply and optimize their values until privatization.  In line with this, PSALM targets to maintain the remaining unprivatized plants' availability factor (AF) within or higher than the average AF in the last three years (2007-2010), the plants' forced outage rate (FOR) within or lower than the average FOR in the last 3 years (2007-2010) and the net heat rate that stay within 6.97% deviation from the design net heat rate.

• Management of Universal Charge

UC SD/SCC

The privatization proceeds are not enough to liquidate PSALM’s financial obligations.  The Universal Charge for Stranded Debts and Stranded Contract Costs (UC-SD and SCC) are measures allowed under the EPIRA that are expected to fill in the gap between privatization proceeds and the financial obligations.

PSALM’s targets to secure approval of the Energy Regulatory Commission on PSALM’s petitions for the recovery of stranded debt and/or stranded contract cost to facilitate the liquidation of its financial obligations.

Management of UC for Missionary electrification and Environmental Charge

PSALM, as the Administrator of the Universal Charge, is committed to the consistent application of ERC-approved guidelines and in ensuring efficiency in UC fund administration.   Thus, PSALM targets annually a 100% collection efficiency of Universal Charge from collecting entities and 100% disbursement of ERC-approved amount to UC beneficiaries, subject to funds availability/actual collection.

For 2011 to 2013, PSALM will disburse PHP2.763 billion per annum for Missionary Electrification to the National Power Corporation, in accordance with ERC decision for Case No. 2009-028.  As of to date, there is no ERC-approved amount for disbursement of UC for watershed/environmental management.