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INDEPENDENT AUDITOR’S REPORT
The Board of Directors National Power Corporation Diliman, Quezon City Report on the Financial Statements We have audited the accompanying financial statements of the National Power Corporation, which comprise the statement of financial position as at December 31, 2013, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with state accounting principles generally accepted in the Philippines, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Basis for Qualified Opinion The existence and valuation of the year-end account balance of Utility Plants totaling P6.798 billion could not be ascertained due to non-appraisal of Utility Plants and failure to conduct physical inventory.
The existence, validity and accuracy of “OMA Trust” account with year-end balance of P7.291 billion were not ascertained due to: a) non-reconciliation with the “Assets Held in Trust with NPC” account of P4.170 billion, the reciprocal account maintained by PSALM for fund transfers for the operation and maintenance of the generation and other assets under the Operation and Management Agreement (OMA) between PSALM and NPC, registering a variance of P3.121 billion; b) non-conduct of physical inventory for supplies, materials and equipment located at
Republic of the Philippines COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City, Philippines
the Independent Power Producers (IPPs) and Power Barges 101, 102 and 103 with an aggregate amount of P2.909 billion; and c) for the items inventoried, existence of a variance of P1.344 billion between the balance per books and the balance per count.
Retained PSALM and Retained TransCo accounts set up by NPC for accounts retained by the latter during asset-debt accounts transfer from NPC and separation of TransCo books from NPC both in 2008, with aggregate year-end balances of P3.621 billion for asset accounts and P41.250 billion for liability accounts, remained outstanding/dormant since CY 2009; and documents to support the same were not available for verification, hence, the validity and accuracy of the accounts’ balances were not ascertained.
The existence, validity and correctness of Construction Work-in Progress account balance as at year-end amounting to P1.219 billion were not ascertained due to the inclusion of Work orders totaling to P716.313 million which remained dormant since CY 2010; and completed projects in the amount of P37.098 million. The accuracy, completeness and validity of Power Customers Receivables account balance of P6.733 billion as at year-end could not be ascertained as NPC’s Due from Other Agency account balance of P3.832 billion did not reconcile with the reciprocal account maintained by PSALM for Universal Charge for Missionary Electrification (UCME) collections, under Due to NPC account balance with a balance of P2.359 billion, registering a variance of P1.473 billion. The collectability of 29% of the account balance or P1.960 billion is doubtful as these remained outstanding for more than two to ten years. Qualified Opinion In our opinion, except for the effects and the possible effects of the matters discussed in the Basis for Qualified Opinion paragraphs, the financial statements present fairly, in all material respects, the financial position of the National Power Corporation as at December 31, 2013, and of its financial performance and cash flows for the year then ended in accordance with state accounting principles generally accepted in the Philippines. Emphasis of Matter We draw attention to Note 32 of the Notes to Financial Statements which describes the uncertainty pertaining to the NPC-Drivers and Mechanics Association (NPC-DAMA) case filed against the Corporation which may cost approximately P41 billion. Our opinion is not qualified in respect of this matter. Supplementary Information Required Under Revenue Regulation No. 15-2010 Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplementary information required by the Bureau of Internal Revenue on taxes, duties and license fees disclosed in Note 36 to the financial statements is presented for purposes of additional analysis and is not a required part of the financial statements prepared in accordance with state accounting principles generally accepted in the Philippines. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. COMMISSION ON AUDIT (Original Signed) MINERVA T. CABIGTING Supervising Auditor June 24, 2014
NATIONAL POWER CORPORATIONSTATEMENT OF FINANCIAL POSITIONDecember 31, 2013(With Comparative Figures as at December 31, 2012)(In Philippine Peso)
Notes 2013 2012ASSETSNon-Current AssetsUtility plant - net 4 6,798,300,860 7,307,468,169Construction work in progress 5 1,218,736,907 1,176,375,346Non-utility property - net 6 133,226,250 171,932,791Non - current power receivables 7 1,917,595,152 269,662,335Deferred charges 0 0Other Assets 8 5,411,983 5,126,128
Total Non-Current Assets 10,073,271,152 8,930,564,769
Current AssetsCash & cash equivalents 9 5,515,344,341 4,323,340,492Power receivables - net 10 6,733,149,696 8,235,478,037Other receivables - net 11 5,247,145,425 3,753,995,555Materials and supplies for operation 12 1,089,331,543 1,265,910,703Advances, prepayments and deposits 13 63,541,254 31,565,210
Total Current Assets 18,648,512,259 17,610,289,997Trust Assets (PSALM) 14 7,290,555,250 7,487,710,988Temporary Registry 15 3,621,194,498 5,250,448,114
TOTAL ASSETS 39,633,533,159 39,279,013,868
EQUITY AND LIABILITIESEquity 22,615,102,247 21,242,743,191
Non-Current LiabilitiesLong-term debts (net of current portion) 18 852,017,974 806,504,596Provision for vacation and sick leave benefits 21 571,030,542 625,061,839Deferred Credits 19 143,107,645 7,302,632
Total Non-Current Liabilities 1,566,156,161 1,438,869,067
Current LiabilitiesAccounts payable and accrued expense 19 4,372,958,839 3,724,016,543Current portion of long-term debts 18 47,458,721 42,553,272Retention on contract payments 20 88,200,820 68,716,095Deposits and trust funds 22 31,450,797 23,409,090Interest payable 18/28 455,826 547,507
Total Current Liabilities 4,540,525,003 3,859,242,508Trust Liabilities (PSALM) 14 7,290,555,250 7,487,710,988Temporary Registry 15 3,621,194,498 5,250,448,114
TOTAL EQUITY and LIABILITIES 39,633,533,159 39,279,013,868
See accompanying Notes to Financial Statements.
(With Comparative Figures for the Year Ended December 31, 2012)(In Philippine Peso)
Notes 2013 2012OPERATING REVENUEUtility income 2,175,735,664 2,319,922,691Transmission services income 12,380,079 18,720,224Universal charge 21 7,443,873,876 7,135,343,428Total operating revenue 9,631,989,619 9,473,986,343Prompt payment discount (25,144,661) (34,816,303)Other demand energy adjustment income (59,838,251) (63,381,267) Net Operating Revenue 9,547,006,707 9,375,788,773
OPERATING EXPENSESGeneration 5,706,713,190 6,364,801,605Administrative and general expenses 684,452,728 896,188,195Depreciation and depletion 326,243,550 403,916,555Bad debts 297,469,211 246,693,549Transmission and distribution 29,033,646 24,161,013Other operating expenses 83,940,508 115,287,939 Total Operating Expenses 7,127,852,833 8,051,048,856
OPERATING INCOME (LOSS) 2,419,153,874 1,324,739,917
OTHER INCOME(EXPENSES)Interest income 464,827,846 480,320,424Income from admininstrative fee 26 6,401,339 68,517,701Gain on forex fluctuation 0 36,927,507Gain on debt service - ICERA/forex recovery 0 1,712,069Gain on diesel/fuel transfer 41,229 443,631Gain Retirement of Assets 11,741,071 0Miscellaneous income 27 50,813,399 101,483,071Subsidy to NPP's of MEA 29 (2,200,745,985) (1,479,289,940)Depreciation - other plants/property (117,833,737) (77,739,051)Interest expense 28 (17,111,986) (32,121,826)Finance & other bank charges (74,537) (450,383)Loss CERA collection (forex) recovery 24 (2,606,190) 0Loss on forex fluctuation 25 (93,809,001) 0Miscellaneous expenses 30 (15,721,266) (26,963,562) Other Income (Expenses) (1,914,077,818) (927,160,359)NET INCOME (LOSS) Before NG Subsidy 505,076,056 397,579,558National Government Subsidy 31 987,761,000 0NET INCOME (LOSS) Before Income Tax 1,492,837,056 397,579,558Income Tax 0 0NET INCOME (LOSS) 1,492,837,056 397,579,558
See accompanying Notes to Financial Statements.
NATIONAL POWER CORPORATIONSTATEMENT OF COMPREHENSIVE INCOMEFor the Year Ended December 31, 2013
(In Philippine Peso)
Notes 2013 2012
CAPITAL STOCK P100 par value27,048,870,789 27,048,870,789
DONATED CAPITALBalance, Beginning 2,822,788 4,157,956 Donation during the year 16 650,710 0Amortization (421,632) (1,335,168) Balance, End 3,051,866 2,822,788
RETAINED EARNINGS 17Balance, Beginning (8,031,337,130) (15,628,654,879) Appropriated Retained Earnings - Sinking Fund 66,236,996 0Net income (loss) during the year 1,492,837,056 397,579,558 Correction of prior year's income (186,859,576) 7,199,738,191 Balance, End (6,659,122,654) (8,031,337,130)
APPRAISAL CAPITALBalance,Beginning 2,222,386,744 2,222,386,744 Adjustments (84,498) 0Balance, End 2,222,302,246 2,222,386,744 EQUITY 22,615,102,247 21,242,743,191
See accompanying Notes to Financial Statements.
NATIONAL POWER CORPORATION
For the Year Ended December 31, 2013STATEMENT OF CHANGES IN EQUITY
(With Comparative Figures for the Year Ended December 31, 2012)
Authorized 500,000,000 shares, issued
(With Comparative Figures for the Year Ended December 31, 2012)
Notes 2013 2012
CASH FLOWS FROM OPERATING ACTIVITIESCash collected from Universal Levy 7,018,907,839 6,993,905,083Collections of other receivables 308,822,083 3,923,327,775Collections from power customers 2,079,571,825 2,549,698,590Collections on deposits & advances 590,334 0Amount withheld from employees, suppliers & other creditors 766,959,471 998,278,083Interest and dividends received 337,743,750 289,729,754Deposits and trust funds received 17,955,494 17,835,564Net fund remittance 21,149,737 0 Purchase of fuel for generation (3,808,478,536) (5,862,781,283)Statutory remittances (1,738,407,890) (2,192,023,128)Other operating expenses (2,115,578,738) (1,554,699,967)Other expenses (1,171,535,714) (1,194,305,122)Personnel cost (449,496,306) (452,295,542)Refund of deposits and trust funds (9,191,156) (58,608,295)Net funds transferred/paid to/for PSALM/OMA* 0 (23,295,038)Realty tax paid (560,043) (476,274)Share of local government units in the national wealth 0 (318,293)Deposits and other advances 0 (7,531) Net Cash Provided by/(Used in) Operating Activities 1,258,452,150 3,433,964,376
CASH FLOWS FROM INVESTING ACTIVITIESInterest received from investments 44,013,676 69,417,238Proceeds from sale of assets 13,023,416 57,678Capital expenditures (60,219,091) (89,723,327) Net Cash Used in Investing Activities (3,181,999) (20,248,411)
CASH FLOWS FROM FINANCING ACTIVITIESTransfer from restricted cash account 0 65,000,000Transfer to restricted cash account (66,271) (197,046)Interest paid on loans (17,203,667) (38,637,036)Loss on forex (debt service) (2,606,190) 0Payment of loans (43,390,174) (2,341,851,211) Net Cash Used in Financing Activities (63,266,302) (2,315,685,293)EFFECT OF EXCHANGE RATE ON CASH & CASH EQUIVALENTS 0 (24,885)NET INCREASE IN CASH & CASH EQUIVALENTS 1,192,003,849 1,098,005,787CASH & CASH EQUIVALENTS, BEGINNING OF THE YEAR 4,323,340,492 3,225,334,705CASH & CASH EQUIVALENTS, END OF YEAR 5,515,344,341 4,323,340,492
See accompanying Notes to Financial Statements.
NATIONAL POWER CORPORATIONSTATEMENT OF CASH FLOWS For the Year Ended December 31, 2013
(In Philippine Peso)
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NATIONAL POWER CORPORATION NOTES TO FINANCIAL STATEMENTS (With Comparative Figures for CY 2012)
1. CORPORATE INFORMATION
National Power Corporation (NPC) was created Public Corporation under Commonwealth Act No. 120 on November 3, 1936. Its charter was then revised by virtue of Republic Act 6395, as amended. Primary Function - Section 1 of its Charter provides that the Corporation will undertake the following: (1) the comprehensive development, utilization and conservation of Philippine water resources for all beneficial uses, including power generation; and (2) total electrification of the Philippines through the development of power from all sources to meet the needs of industrial development and dispersal and the needs of rural electrification. NPC’s Charter provides that it shall be non-profit and shall devote all its returns from its capital investment, as well as excess revenues from its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and, in furtherance and effective implementation of the government’s policy of power generation, the Corporation, including its subsidiaries, is declared exempt from the payment of all forms of taxes, duties, fees, imposts as well as costs and service fees including filing fees, appeal bonds, supersede as bonds, in any court or administrative proceedings. With the enactment of RA#9337, otherwise known as the Reformed Value-Added Tax (RVAT) Law of 2005, which took effect on November 1, 2005, NPC’s purchases of fuel and purchased power as well as its sale of electricity are subjected to VAT, specifically stated under Sec. 24(A) of R.A. 9337 repealing Section 13 of R.A. No. 6395 on the Corporation’s exemption from VAT. However, its non-profit character and exemption from all other taxes, including income tax, has not been affected. Moreover, the Bureau of Internal Revenue (BIR) in its Ruling 018-2000 dated January 20, 2000 categorically stated that pursuant to Section 32(B) (7) (b) of the National Internal Revenue Code (NIRC) as amended by RA 8424, the income of NPC from its operation as public utility or from the exercise of any essential governmental functions shall be exempt from corporate income tax. The EPIRA Republic Act No. 9136, otherwise known as the “Electric Power Industry Reform Act of 2001”, the “EPIRA”, was enacted to institute reforms and provide framework for the restructuring of the electric power industry including, among others, the privatization of generation assets, real estate, other disposable assets, independent power plants and the liquidation of all liabilities and stranded contract cost of NPC. The EPIRA organized the industry into four (4) sectors: generation, transmission, distribution and supply. The structural reforms resulted, among others, in the creation of two (2) Government Owned and Controlled Corporations (GOCC’s), the National Transmission Corporation (TRANSCO) and the Power Sector Assets and Liabilities Management Corporation (PSALM). NPC was retained as a GOCC to perform the
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missionary electrification function, through the Small Power Utilities Group (SPUG), watershed management and the operation and maintenance of all undisposed generation assets. Separation of TRANSCO Books from NPC and the Transfer of Assets and Liabilities from NPC to PSALM As mandated under the EPIRA and pursuant to the instructions from the respective Boards and Managements of NPC, PSALM and TRANSCO, the actual separation of books of TRANSCO from NPC and the assets-debt accounts transfer from NPC to PSALM was implemented on October 1, 2008 based on the balances of interim financial report (except for SPUG) as of September 30, 2008. Full implementation was effected on December 31, 2008. This momentous event significantly affected the current financial structure of NPC, as only the accounts pertaining to SPUG, watershed and other assets/facilities that are used and useful in the performance of its missionary function, watershed management and the operation of plants, under the Operation and Maintenance Agreement with PSALM, are retained in the books of NPC. Similar in 2008, NPC reported only the result of operation for SPUG and the financial condition of the residual NPC, consisting of accounts pertaining to SPUG & watershed and the retained PSALM/TRANSCO accounts which are reported in the balance sheet under the Temporary Registry Accounts. (See Note 15) Operation and Maintenance Agreement (OMA) The Operation and Maintenance Agreement (OMA) is an agreement entered into by and between NPC and PSALM on February 17, 2009 wherein NPC will act as the Operator of the transferred generation and other assets/facilities owned by PSALM prior to privatization of such assets. This agreement shall be effective until the second anniversary unless otherwise extended or renewed by the parties. For 2013, PSALM and NPC agreed to continue to observe the terms of the current OMA until the new OMA is executed and made effective by both parties. The head office is located at the National Power Corporation, Building 1, BIR Road, corner Quezon Avenue, Diliman, Quezon City.
2. MAJOR ACCOMPLISHMENTS
Following are the highlights of accomplishments of SPUG and Watershed in 2013:
SPUG and WATERHED FINANCIAL HIGHLIGHTS
• Revenue
NPC raised a revenue of P9.547 billion for CY 2013 which is higher by 1.83 per cent or P 171 million over its actual revenue of P9.376 billion in CY 2012.
• Net Operating Income
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NPC posted a Net Operating Income P2.419 billion which is higher by 82.61 per cent from its Net Operating Income of P1.325 billion in CY 2012.
• Net Income
NPC reported a Net Income of P 1.493 billion from its Net Income of P 398 million in CY 2012. The significant increase is attributed primarily from NG subsidy amounting to a net of P988 million reported as Miscellaneous income and revenue derived from Universal Charge for Missionary Electrification of about P9.547 billion over the actual revenue level of P9.376 billion in CY 2012 or an increase of 1.83 per cent or P171 million.
OPERATIONAL HIGHLIGHTS In furtherance of its mandate to bring power as catalyst for development to the farthest, smallest and remotest areas and islands, the following are NPC’s programs and projects accomplishments in 2013:
Small Power Utilities Group (SPUG)
ACTYIVITIES ACCOMPLISHMENT
Supply, Delivery, Installation, Test and Commissioning 14 x 600 kW Generating Sets for Various SPUG Areas (Contract No. BCS-SU-2013-001)
Commissioned 10 x 600 kW Generating Sets
Supply of Materials, Labor, Delivery, Erection/Installation, test and Commissioning of Mini-Grid System for the Electrification of 2 Barangays at Cabul-an, Buenavista, Bohol under Off-Grid Electrification Project (Contract No. BCS-IN-2013-005)
Commissioned 1 x 6o kW Generating Sets
Contruction of Power Facilities Including Suppy, Erection/Installation and Test of Balance-of-Plant in Brgy. Toytoy, Palumbanes Island, Caramoran, Catanduanes under the Off-Grid Electrification Project (Contract No. BCS-IN-2013-003)
Commissioned 1 x 20 kW Generating Set
Supply of Materials, Labor, Delivery, Erection/Installation, Test and Commissioning of Mini-Grid System for the Electrification of Brgy. Atulayan Island, Sagnay, Camarines Sur under the Off-Grid Electrification Project. (Contract No. BCS-IN-2013-004)
Commissioned 1 x 15 kW Generating Set.
Mobo-Aroroy “3”69 kV T/L Rehabilitaion Project Construction Status: 60.34% Completed
Genset Rental
Contracted Capacity: 1st Quarter - 50.90 MW 2nd Quarter - 47.90 MW 3rd Quarter - 51.90 MW 4th Quarter * 51.90 MW
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WATERSHED
Watershed Rehabilitation
• Established a total area of 200 hectares of open and denuded areas in various
watershed areas through reforestation, agroforestry and non-timber forest resources management As of December 2013, a total of 2,808 hectares were already established under Universal Charge – Environmental Charge (UC – EC) fund.
• Tree planting activities in partnership with various groups were also undertaken in 2013 such as with the NGCP, Philex Mining Corporation, San Roque Power Corporation, PNP/AFP/Npc Ladies Foundation, among others. A total of 297 hectares of open areas were rehabilitated in addition to the UC-EC funded projects.
• In support to the various rehabilitation projects and other environmental commitments of local groups to plant trees, the Department has embarked on the propagation of seedlings. More than 250,000 seedlings of various forestry species and fruit trees were produced/propagated for the rehabilitation projects, landholdings development and greening projects in partnership with other groups.
Watershed Protection
• Watershed protection and law enforcement through the “Bantay Gubat Patrol Program” has been launched in CY 2013 in the various watersheds under the NPC jurisdiction. Patrol operations including manning of checkpoints have been conducted jointly with other agencies like the DENR, PNP/military, LGUs and other groups together with the Bantay Watershed Task Force (BWTF) volunteers of NPC to ensure proper enforcement of forestry laws and regulation.
• A total of 10,746.64 board feet of lumber/timber, 195 sacks of wood charcoal, 6 conveyances have been confiscated by the joint operations of NPC, PNP/AFP, DENR, the LGUs and the BWTF volunteers (with 780 individuals from the 11 watersheds).
Corporate Social Responsibility Program
• Dispersal of around 150,000 seedlings (both forestry species and fruit trees) to
various stakeholders, LGUs, academes and institutions and private organizations for their re-greening programs.
• Dispersal of 527 gilts in the areas of Tiwi, Albay, Buhi (Camarines Sur) and Bokod, (Benguet) and 3 heads of goat in Buhi, Camarines Sur. Animal dispersal is one of
SPUG Plants Operating Hours
Increase in daily operating hours: 1. Casiguran DPP – 4 Hrs. (from 20 –
24 hrs.) 2. Concepcion DPP – 4 Hrs. (from 8 –
12 hrs.) 3. Corcuera DPP – 4 Hrs. (from 8 – 12
hrs.)
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the activities of the Department aimed at uplifting the livelihood of local residents inside the watersheds.
Information Dissemination Campaign (IEC)
• Continuous implementation of Information, Education and Communication (IEC) activities are being undertaken by the Department such as TV and radio plugging and production and distribution of print materials such as poster, leaflets, flyers, brochures, calendars and billboards Twenty (20) school lectures/film showing and 3,000 print materials conducted and produced.
• Last October 2013, the Batang Kalikasan – Young Environmental Champion (BK-
YEC) Program was launched. Thirty two (32) students from the elementary and high schools in Caliraya-Lumot Watershed Reservation (CLWR) participated in the said program aimed at fostering interest and awareness to students within the CLWR on environmental conservation and protection.
Community Development and Extension
• Conduct of various livelihood training to communities supporting and helping NPC in
its endeavor of forest protection A total of 11 livelihood trainings/seminars conducted:
• Provision of technical assistance in the implementation of livelihood projects :
o Ubi Production in Pantabangan-Carranglan Watershed
o Pangasius Catfish Production in Matampay, Lanao del Sur
o Abaca Fiber and Water Lily Handicraft Making in Lake Lanao - Agus
o Water Hyacinth Handicraft Production (with shredder) in Brgy. Tubigon, Maramag, Bukidnon
o Tilapia Culture in Pod in Lanao del Sur
• Implementation of Lakbay Aral and educational tour to promote awareness on the importance of watersheds and its relation to climate change.
Status of NPC Projects under Power Engineering Services (PES)
Project Title REMARKS
A. PROJECT IMPLEMENTATION GROUP - CLUSTER A
1. Re-reeling of 336.6 MCV ACSR Incl. Supply of 145 Steels Reels
• Re-reeling Completed: 14 July 2013. • Contractor’s Final Billing already paid.
2. Codon-Virac 69kV T/L Project
a. ROW - Controllable -There are 67 Controllable PAP’s/
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- On-going Payment of Lot Owners
- Uncontrollable - On-going documentation/processing of documents for filing of expropriation case for five (5) lot owners.
b. Supply, Delivery and Construction of T/L
• Bid Opening scheduled on 31 October 2013 was postponed. To resume upon approval of Virac (Marinawa) S/S Site.
3. Mobo-Aroroy 69KV T/L Rehabilitation Project
a. ROW
- Schedule I & II ROW activities completed. - Schedule III - On-going ROW activities
_ Remaining PAP’s are comsidered uncontrollable.
Construction
- Schedule I & II • Bid Opening conducted last 16 October 2013. • Bid Evaluation Report approved by BAC on 21 November 2013. • For finalization of the Post Qualification Report.
- Schedule III • On-going implementation. • Contractor's request for Time Extension on 07 November 2013 is under evaluation. Required documentary attachments not yet complied by the Contractor.
4. Mobo-Cataingan 69KV T/L Project (Schedule I & II)
a. ROW - On-going ROW activities
Supply and Delivery of T/L Matl's/Inst. • Bid Opening conducted last 29 October 2013. • For preparation of Post Qualification Report.
5. Remaining Works for Puerto Princesa – Roxas 138 KV T/L
• Whole length of the transmission line is almost complete but cannot be energized due to uncompleted portions in Schedule I & II due to issues on ROW. • Tender Documents for the remaining works of the Puerto Princesa-Roxas 138 kV T/L Project already finalized. • Remaining works of the Puerto Princesa-Roxas 138 kV T/L Project for bidding process upon concurrence of the Hagedorns to the proposed re-routing scheme.
B. PROJECT IMPLEMENTATION GROUP - CLUSTER B
6. Sta. Cruz-San Jose "4" 69 kV T/L Project, Schedule II
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Construction • Energized on 29 August 2011. Turned-over to End-user. • Final Billing on-hold pending settlement of Contractor's claim issue with its Sub-Contractor.
7. Supply/Delivery, Installation, Test and Commissioning of Gensets for Various SPUG Areas, 14X600 KW
• On-going implementation. • Contractor's request for Contract Time Extension on 18 November 2013 is under evaluation. Pending conformance to the required documentary attachments. • Remaining activities are Testing and Commissioning.
C. PROJECT IMPLEMENTATION GROUP - CLUSTER C
8. Construction of Agus 6/7 HEP Multi-Purpose Building
• Project Completed on 21 February 2013. • Certificate of Final Completion already approved.
9. Concreting of Access Road at Agus 4 HEP Right Wing Dam
• On-going implementation. • Project is substantially completed as of 30 December 2013. • Target completion - 07 January 2014.
10. Restoration/Reconstruction of Mindanao Generation Building
• On-going implementation. • Target completion - 11 July 2014.
3. SIGNIFICANT ACCOUNTING POLICIES Basis of Financial Statement Preparation
The accompanying financial statements of NPC are prepared and presented in accordance with the accounting principles and standards presently accepted in the Philippines under the historical cost basis, except for property, plant and equipment, which are carried in the balance sheet at revalued amounts. Pursuant to the provisions on the Scope and Authority, paragraph 7 of the Preface to Philippine Financial Reporting Standards, PFRS are designed to apply to the general purpose financial statements and other financial reporting of all profit-oriented entities. Hence, NPC, being a GOCC of non-profit character, may not be subject to the full compliance with the same, in its strict sense. Nevertheless, the following PFRS/Philippine Accounting Standards (PAS), as appropriate, were adopted and made
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the basis, in the preparation of the Financial Statements in order to achieve the primary objective of fairly presenting the Corporation’s financial condition, results of operation and cash flow, in so far as practicable and consistent with the standards and principles consistently applied pursuant to the former SFAS/IAS, which are now governed by PFRS/PAS.
Utility Plant and Depreciation Utility Plant is carried in the books at appraised values except for additions during the year which are recorded at cost. These assets are revalued in consonance with NPC’s loan covenants with creditor banks and in pursuance to Philippine Accounting Standards (PAS) No. 16, which permits revaluation of properties, plant and equipment. Land and landholdings, which include all the cost of land and land rights used in connection with power generation and transmission, are also included in the revaluation. Regular annual maintenance, repairs and minor replacements are charged to expense as they are incurred, whereas major maintenance, which is done on periodic three-to five-year intervals, is deferred, amortized and charged to operations over the number of years’ interval. Rehabilitation expenditure which would result in improvement of the plant’s efficiency beyond five years are capitalized and transferred to plant cost upon completion of work orders. Depreciation of fixed assets is charged from the date of acquisition of the fixed assets or after the completion of works. Depreciation based on depreciable values is computed using the straight line (SL) method pursuant to NPC Board Resolution No. 94-58 effective 1994, based on estimated economic lives as shown below:
Appraisal of Utility Plants Electric Plants in Service are recorded at appraised values in pursuance to PAS No.16 which permits the appraisal of property, plant and equipment. An independent appraiser conducts the review and appraisal of NPC’s assets once every four years. In the interim, NPC undertakes the internal revaluation which is adjusted when there are variances between the internally appraised figures and those arrived at by the independent appraisers. The last external revaluation of NPC assets was done by Resource Management International Inc. (RMII) in 1996. In 1997 and 1998, NPC applied 6 per cent and 8 per cent trending factors respectively for the internal revaluation.
The difference between the new over the old appraised values is recorded under the Appraisal Capital account. This account is treated as a permanent account and is not diminished by any depreciation charges.
Type of Plant Economic Life
1. Diesel Plants and Barges 20 years 2. Transmission Lines 30 years
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The last revaluation of generation asset was made in 1996 and has not been updated to date. Considering the exemptions allowed under IFRS 1, paragraph 16-19, the Corporation may establish such revalued amounts of the generation assets as “deemed cost” in line with the ongoing privatization of the NPC’s plants. Capitalization of Interest Interests incurred on external borrowings which relate to capital projects in progress and prior to the commencement of operation are capitalized. Allocation of Support Group Income and Expenses Income and expenses of the Support Services Group are allocated among operating plants and construction. The allocation rate is based on the extent of support services rendered to operations and capital projects. The present ratio of operating expenses to capital expenses of NPC is 94/6. Cost Center services that cannot be clearly classified, as well as expenses identified as having no direct effect to projects, are treated as one hundred percent operating expenses. Investments Local Investments are recorded at face value. Investments in foreign currency are recorded in compliance with PAS 21 using Bangko Sentral ng Pilipinas (BSP) guiding rate at the date of the transaction. Balances are reported using the closing rate at each Balance Sheet date. Interest earnings on placements follow the accrual method of accounting. Receivables and Allowance for Doubtful Accounts Power and other receivables are stated net of allowance for doubtful accounts. Allowances are determined through the specific identification of uncollectible accounts.
Materials and Supplies for Operation Materials and supplies (M & S) for operation are categorized as fuel (and its related products) and non-fuel. The Fuel M & S are composed of the fuel oil, diesel, coal & thermal chemical stocks used by NPC plants for power generation. These inventories are valued using the weighted average method. The change in accounting treatment for Fuel M & S that is from Last-in-First-out (LIFO) to weighted average method has been made effective on January 1, 2006 in compliance with PAS 2 for “Inventories”. The non-Fuel M & S, on the other hand, are valued using the moving average method and can be further broken down into the non-fuel M & S of NPC plants and areas and those non-Fuel M & S assigned to private Independent Power Producers (IPPs). The non-Fuel M & S of NPC plants and areas represent basically the materials, supplies and equipment received by NPC property custodian for use in operations; while non-Fuel M & S assigned to private IPPs, which are included in the Asset in Trust account, includes
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spares, materials and supplies transferred to private contractors as stipulated in the individual contracts. Taxes and Duties With the enactment of R.A. 9337, otherwise known as the Reformed Value-added Tax (RVAT) Law of 2005, which took effect on November 1, 2005, NPC’s purchases of fuel and purchased power as well as its sale of electricity are subjected to VAT specifically stated under Sec. 24(A) of R.A. 9337 repealing Section 13 of R.A. No. 6395 on the exemption from VAT of the National Power Corporation. Effective February 1, 2006, the VAT rate increased from 10 per cent to 12 per cent pursuant to Revenue Memorandum Circular No. 7-2006 dated January 1, 2006. Accounting for Foreign Exchange Transactions In compliance with PAS 21 which was made effective January 1, 2005, transactions denominated in foreign currencies are recorded at BSP Guiding Rate at the date of the transaction. Foreign exchange differentials resulting from these transactions are recorded as project cost for projects under construction while differentials pertaining to operating plants are recorded as Gain/Loss on Foreign Exchange Fluctuations. Outstanding payable accounts are reported using the closing rate at each Balance Sheet date. Accounting for Donated Assets NPC adopts the capital approach under Paragraph 14 of PAS 20 – Accounting for Government Grants and Disclosure of Government Assistance in recognizing donated power plants that expand the asset base regardless of whether from government or private entity. The fair values of the plants are recorded as Donated Capital under Equity, which will be reduced by annual depreciation. Income Determination The Corporation uses the accrual method of accounting for income and expenses and an all inclusive concept of income determination wherein all ordinary and extraordinary items pertaining to current period are considered in computing net income while items applicable to prior periods are recorded as adjustment of prior years’ income and are reflected in the Statement of Changes in Equity. Accounting for Taxes and Duties on Importation Taxes and duties on imported materials and equipment intended for projects are recorded as part of project costs, while taxes and duties on materials and equipment for operation are expensed as incurred.
Composition of Rate Base
Rate Base is the average value of the net fixed assets in operation at the beginning and at the end of each year. The value of net fixed assets in operation equals the gross value of the operating assets less the amount of accumulated depreciation.
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Plants undergoing major rehabilitation/repair and which are out of operation for less than one calendar year are included in the computation of Rate Base.
4. UTILITY PLANT This account consists of the following:
Hydradulic Production
Plant
Other Production
Plant Transmission
Plant Distribution
Plant Others Total
Cost
Beginning
72,012,263
10,555,182.236 5,110,679,551
489,836,089
1,950,844,443
18,178,554,582
Additions
99,300
11,780,739 0
0
9,721,893
21,601,932
Adjustments
(79,437,398)
1,744,757
(2,649,340)
6,709,395
(73,632,586)
Ending 72,111,563
10,487,525,077
5,112,424,308
487,186,749
1,967,275,731
18,126,523,928
Accumulated Depreciation/Depletion
Beginning
42,773,928
7,749,641,425 1,903,153,768
89,625,163
1,085,892,129
10,871,086,413
Additions 0
139,066,050
165,344,400
22,075,850
116,145,194
442,631,494
Adjustments
89,370
11,971,187
1,005,189
(779,083)
2,218,498
14,505,161
Ending
42,863,298
7,900,678,662
2,069,503,357
110,921,930
1,204,255,821
11,328,223,068
Carrying Value
December 31, 2013
29,248,265
2,586,851,366
3,042,920,951
376,264,819
763,015,459
6,798,300,860
Carrying Value
December 31, 2012
29,238,335
2,805,540,811
3,207,525,783
400,210,926
864,952,314
7,307,468,169
The decrease pertains to the Narra Diesel Power Plant generator set Unit 5 for its remaining parts as well as Brookes Point Diesel Plant for Units 1 & 2 including dilapidated power house were scrapped/sold under Release Order dated February 26, 2013 and Letter Award LAP20130212.1.
5. CONSTRUCTION WORK IN PROGRESS (CWIP)
This account consists of the following:
2013 2012 CWIP – Work Order 1,218,736,907 1,138,813,416 CWIP - Materials & Supplies 0 37,561,930 1,218,736,907 1,176,375,346
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CWIP – Work Order refers to the costs of projects under construction, while CWIP – Materials & Supplies represents stock inventory intended for projects which are still in the custody of project custodians or are in transit.
6. NON-UTILITY PROPERTY Non-utility property account consists of the following:
2013 2012 Cost of Non-Utility Property 1,282,659,471 1,334,227,846 Accumulated Depreciation (1,149,433,221) (1,162,295,055) Net Book Value 133,226,250 171,932,791
This amount pertains to other properties and equipments owned by the Corporation but are
not used in utility operations. The decrease pertains to the grid electrification project for the installation of solar photovoltaic at Samar treated as financial assistance to LGU.
7. NON-CURRENT RECEIVABLES
The account represents the long-term portion of the restructured accounts of power customers in accordance with memorandum of agreements executed by and between NPC and the power customers.
The Increase in this account is due to following reasons:
a. Reclassification of the Accrued Utility Revenue for 3rd GRAM and 3rd ICERA pertaining to CY 2005 amounting to P1.483 billion from current to non-current power receivables account as recommended in the 2012 COA audit observations.
b. Reclassification from current to non-current Power Receivables amounting to P192.113 million of the following:
• Masbate Electric Cooperative, Inc. (MASELCO) due to non moving accounts
from November 2010 to December 2013. The proposal for Account Restructuring awaits the NPC Management and Board approval; and
• Customers with approved Special Payment Scheme: - Municipality of Calayan FAO Cagayan Electric Cooperative (CAGELCO) - Palawan Electric Cooperative, INC. (PALECO) - LGU Paluan
8. OTHER NON-CURRENT ASSETS This account consists of the following:
2013 2012 Non-Current Power Receivables 1,917,595,152 269,662,335
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2013 2012
Restricted Cash 3,981,203 3,849,805 Stock for Disposal 1,430,780 1,276,323
5,411,983 5,126,128
The Restricted Cash account pertains to the funds intended for purposes other than current operations and therefore, not immediately available to management for any disbursement transactions other than its specified purpose. The increase in restricted cash balance pertains to the Right of Way Acquisition for the transmission line projects under the Power Engineering Services Group.
9. CASH & CASH EQUIVALENTS
This account composed of the following:
2013 2012 Cash in Bank 623,566,999 257,999,922 Working Fund 8,480,006 1,340,570 Temporary Investments 4,883,297,336 4,064,000,000 5,515,344,341 4,323,340,492
The increase in Cash in Bank pertains to partial release of NG Subsidy under SARO No. 130017603 in the amount of P 250 million and allocation of UCME for CY 2013 from PSALM. The increase in Temporary Investments & Working Fund attributed to the funds intended for payment of fuel payables and other financial obligations which are under process as of the balance sheet date.
10. POWER RECEIVABLES Receivables from power customers consist of the following:
2013 2012 Power Receivables 3,874,065,108 3,618,252,142 Accrued Utility Revenue 482,025,666 2,387,321,066 Restructured Power Receivables 51,082,252 46,022,277 Due from Other Agency 3,831,829,882 3,406,863,847 8,239,002,908 9,458,459,332 Allowance for Bad Debts (1,505,853,212) (1,222,981,295) 6,733,149,696 8,235,478,037
The increase in Power Receivables is due to build up/increase of outstanding balance of
ARMM Customers by P450.14 Mn and partly offset by the reclassification of total amount of P192.113 from current to current to non-current power receivable. (refer to Note 7)
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The decrease in Accrued Utility Revenue is mainly the result of reclassification from current
to non-current power receivables account of 3rd GRAM and 3rd ICERA pertaining to CY 2005 amounting to P1.483 billion as recommended in the 2012 COA audit observations. (refer to Note 7)
The increase in Restructured Accounts pertains to set-up of CY 2014 current
restructured account and the current portion of the approved Special Payment Scheme of Municipality of Calayan for the Account of (FAO) Cagayan Electric Cooperative, Inc. (CAGELCO)
The increase in Due From Other Agency represents receivables from PSALM pertaining
to UCME which is due for remittance to NPC. Increase of Allowance for Bad Debts is due to the increased Provisions for Bad Debts in
ARMM Customers, from 10 per cent to 50 per cent as recommended by the Credit Management Division (CMD) of Treasury Department.
11. OTHER RECEIVABLES This account consists of the following:
2013 2012 Interest Receivable 505,391,681 331,361,240 Rent Receivable 473,214 416,667 Receivable from the National Gov’t. 18,486,282 69,818,333 Receivable from Officers & Employees 7,159,446 7,756,464 Accounts Receivable – Others 1,648,755,624 890,009,433 Output Tax Receivable 611,857,917 557,486,436 Input Tax Credit on Non-Depreciable Capital 2,451,857,806 1,893,402,102 Input Tax Credit on Depreciable Capital 5,520,819 6,102,244 5,249,502,789 3,756,352,919 Allowance for Bad Debts (2,357,364) (2,357,364) 5,247,145,425 3,753,995,555
The increase in Accounts Receivables – Others account is mainly attributed to the approved NG subsidy per SARO No. F130017603 and F130332 amounting to P1.071 billion with partial released of funds amounting to P250 million.
12. MATERIALS AND SUPPLIES FOR OPERATION Details of the account are as follows:
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2013 2012 Gasoine 192,633 691,019 Diesel 430,219,295 570,414,766 Stock Transfer–Clearing Accounts 17,828,204 26,742,269 Materials, Supplies and Equipment 397,034,633 405,198,559 Fuel Oil 24,797,606 50,211,390 Thermal Chemicals 633,790 632,808 MSE in Transit – Operating Plants 136,733,837 138,431,086 Matls. & Suppkies Temp. Adjustm. 56,633,776 56,477,489 Other Oil Products 25,257,769 17,111,317 1,089,331,543 1,265,910,703
13. ADVANCES AND PREPAYMENTS AND DEPOSITS This account consists of the following:
The increase in Advances to Contractors/Prepaid Charges is mainly due to the payment of mobilization expenses with Power Dimension Incorporated and Thermo Power Incorporated for Work Order Nos. E600A15, E600A17, 1315A17 and E800A01.
Advances for Medical & Medical Group Life Insurance refers to the advance payment to insurance companies of employees’ medical benefits which are subject to reimbursement through salary deductions.
Court and Other Deposits refers to the impending compliance of Occidental Mindoro Electric Cooperative’s (OMECO) to the Notice of Garnishment issued in the CC No. Q-1170129, Chona Dimayuga vs. NPC payment of power bills. The increase in Other Advances pertains to the payment of insurance premium for motor vehicle Insurance policy with GSIS.
2013 2012 Advances and Prepayments Advances to Gov’t. Bodies & Institutions 378,093 378,093 Advances to Contractors/Prepaid Charges
36,462,298 14,052,253
Marginal & Guaranty Deposits 521,651 521,651 37,362,042 14,951,997 Court and Other Deposits Advances for Medical Group Life Ins. 11,443,732 11,343,098 Court and Other Deposits 7,405,266 405,266 Other Advances 7,277,960 4,827,019 26,126,958 16,575,383 Cash Advances to Officers & Employees 52,254 37,830 63,541,254 31,565,210
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14. TRUST ACCOUNTS
Trust Assets (PSALM) pertains to balances of accounts set-up as working capital for the operation, maintenance and management of the facilities and generation plants of the main grid under the OMA, details as follows:
2013 2012 Total Investments & Other Assets 1,363,946,205 1,565,328,474 Cash and cash equivalents 604,187,954 491,993,065 Materials and Supplies for Operation 5,144,383 0 Prepayments 895,167 0 Court and Other Deposits 9,932,333 0 Cash Advances – Officers and Employees 20,044 0 Other Receivables 5,306,429,164 5,430,389,449 7,290,555,250 7,487,710,988
15. TEMPORARY REGISTRY ACCOUNTS
Temporary Registry Accounts consist of the following: 2013 2012 Retained PSALM Accounts 1,772,692,840 3,401,946,456 Retained TransCo Accounts 1,848,501,658 1,848,501,658 3,621,194,498 5,250,448,114
Details as follows:
ACCOUNTS RETAINED PSALM ACCOUNTS
RETAINED TRANSCO
ACCOUNTS
UTILITY PLANT at Appraised Values 6,302,350,700 2,544,297 Accumulated Depreciation & Depletion (4,690,960,240) (1,053,723) Net Utility Plant 1,611,390,460 1,490,574 Construction Work in Progress 3,500,079 1,023,183,912 TOTAL UTILITY PLANT 1,614,890,539 1,024,674,486 Investment in Government & Other Corporation 0 36,262 Non-Utility Property - NET 0 500,899,936 Accounts and Other Receivables - NET 0 404,192 Other Assets 0 1,000,331 TOTAL INVESTMENTS & OTHER ASSETS 0 502,340,721 Cash & Cash Equivalent 157,802,301 5,064,981 Other Receivables 0 8,064,153 Materials & Supplies for Operation 0 289,198,542 Advances 0 2,624,243 Prepayments 0 14,857 Court & Other Deposits 0 5,797,624
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Cash Advances - Officers & Employees 0 10,455 TOTAL CURRENT ASSETS 157,802,301 310,774,854 DEFERRED CHARGES 0 3,040,786 CONTINGENT ASSETS 0 7,670,811 TOTAL ASSETS 1,772,692,840 1,848,501,658 PROPRIETARY CAPITAL & LIABILITIES Retained Earnings (39,074,959,551) 1,583,316,610 Appraisal Capital (144,937,887) 0 Contingent Surplus 0 7,670,811 TOTAL PROPRIETARY CAPITAL (39,219,897,438) 1,590,987,420 LONG TERM DEBTS (Net of Current Portion) 40,992,590,278 0 Accounts Payable and Accrued Expense 0 72,344,024 Retention on Contract Payments 0 158,093,550 Deposits and Trust Funds 0 1,100,215 TOTAL CURENT LIABILITIES 0 231,537,790 DEFERRED CREDITS 0 25,976,448 TEMPORARY REGISTRY ACCOUNTS TOTAL PROPRIETARY CAPITAL & LIABILITIES 1,772,692,840 1,848,501,658
Retained PSALM and Transco Accounts consist of account balances retained at NPC by PSALM and TransCo as of the asset-debt transfer to PSALM and separation of TransCo books effective October 1, 2008, which are for further validation, reconciliation, adjustments and final transfer to PSALM, TransCo and/or NPC, as the case maybe.
16. DONATED CAPITAL
2013 2012 Donated Capital 3,051,866 2,822,788
The increase in Donated Capital pertains to the land donated for NPC’s Tandubas Diesel
Power Plant, Balut Diesel Plant, Balimbing Diesel Plant, Sibutu Diesel Plant and Manuk-Mangkaw Diesel Plant by the local government where the plants are located.
The Donated Capital account is amortized over the remaining life of the assets under the
Equity Method for grant.
17. RETAINED EARNINGS The improvement of Retained Earnings is mainly the result of improved financial
performance attributed to the recognition of NG subsidy in the net amount of P988 million under SARO-BMB-F-13-0017603 and F-13-01332. The total approved SARO (Special Allotment Release Order) is P1.071 billion of which 83 million was offset against the claims for reimbursement by NPC for the advances made in the preservation and maintenance of Bataan Nuclear Power Plant for the CY 2011 and CY 2012.
18. LONG-TERM DEBTS / CURRENT PORTION
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This account consists of the outstanding foreign borrowings as follows:
CREDITOR/PROJECT 2013 2012 Natixis / Credit National Project-PRES Proj. of SPUG 638,453,744 572,461,612 Banque Paribas Project-PRES Proj. of SPUG 213,564,230 234,042,984 852,017,974 806,504,596
Year-end BSP guiding rates:
December 31, 2013 December 31, 2012 Dollar USD 1 44.4140 41.1920 Euro EUR 1 60.8161 54.5300
CURRENT PORTION:
Creditor/Project Maturities Interest Rate 2013 2012 Natixis / Credit National Project-PRES Proj. of SPUG 2016 to 2031 Fixed at 0.40% 0 0 Banque Paribas Project-PRES Proj. of SPUG 2009 to 2019 Fixed at 5.09% 47,458,721 42,553,272 47,458,721 42,553,272
Repayment of principal for Natixis will start on September 30, 2017. Increase of principal repayment is due to depreciation of Philippine peso against EURO.
19. ACCOUNTS PAYABLES AND ACCRUED EXPENSES
This account consists of the following:
2013 2012 Financial Assistance/Benefits Payable 41,121,510 37,204,845 Gasoline and Other Oil Products Payable 22,175,266 9,404,665 Fuel Payable 1,144,357,315 685,459,314 M & S Equipment Payables 107,324,060 191,653,111 Accounts Payable- Others 292,961,792 307,319,792 Check Vouchers Payable 726,872,350 720,857,714 CO- Suppliers and Contractors 917,888,192 595,688,635 CO – NPC Employees 239,768,670 298,321,048 Accrued Salaries and Wages 97,916,171 153,554,618 GSIS Premiums and Loan Payable 19,343,480 13,200,082 GSIS Medicare Premiums Payable 1,397,540 1,125,327 HDMF Contributions & Loans Payable 1,821,809 1,297,965 Medical Insurance Premiums Payable 24,790 25,807 Cash Vouchers Payable 17,438,008 15,670,481 Due to Other Agency 8,671,976 8,378,437 Output Tax Payable 733,675,910 684,854,702
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4,372,958,839 3,724,016,543 The increase in fuel payable attributed to the build up payables with Petron Corporation in the amount of P 622.440 Million for CY 2013.
20. RETENTION ON CONTRACT OF PAYMENTS
2013 2012 Retention on Contract of Payments 88,200,820 68,716,095
The increase in retention on contract of payments pertains to 10 per cent retention for various work orders/purchase orders/contracts with Boston Home Inc (P 3.800 million), Engine Link International Co. (P 2.280 million), Fabmik Const. & Equipment Co. Inc. (P 5.945 million) and Power Dimension, Incorporated (P 8.334 million).
21. DEFERRED CREDITS
2013 2012 Deferred Credits – Accrued Leave 571,030,542 625,061,839 Unearned Interest Income – (Non-Current) 135,805,013 0 Other Deferred Credits 7,302,632 7,302,632 714,138,187 632,364,471
Deferred Credits – Accrued Leaves pertains mainly to accrued leave benefits of employees in compliance with PAS no.19 which requires that short term employee benefits, including paid annual vacation leave and sick leave, be recognized as either a liability or expensed on the period they were incurred.
Unearned Interest Income – (Non-Current) pertains to the new set-up of interest charges due on the restructured accounts.
22. DEPOSITS AND TRUST FUNDS
2013 2012 Deposits and Trust Funds 31,450,797 22,409,090
The account mainly includes amounts received and segregated for the execution of specific projects or contracts. It also includes the amounts deposited/advanced by suppliers, contractors and power customers to the Corporation.
23. UNIVERSAL CHARGE
2013 2012 Universal Charge 7,443,873,876 7,135,343,428
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Section 34 of the EPIRA provides that a Universal Charge (UC) to be determined, fixed and approved by the Energy Regulatory Commission (ERC) shall be imposed on all end – users for the (a) payment of stranded debts and contract costs; (b) missionary electrification; (c) equalization of taxes and royalties; (d) environmental charge; and (e) cross subsidies.
The UC shall be a non – by passable charge which shall be passed on and collected from
end – users on a monthly basis by the distribution utilities to be remitted to PSALM, the administrator of the Fund.
The UC for missionary electrification shall provide funds for the operation of the NPC –
SPUG, together with the sales from the missionary areas. On the other hand, the UC for environmental charge, which is equivalent to one – fourth of one centavo per kilowatt – hour (P0.0025/kwh), shall accrue to an environmental fund to be used solely for watershed rehabilitation and management and shall be managed by NPC under existing agreements.
In CY 2012, in addition to the UC of P2.763 billion, ERC granted NPC provisional authority
to recover from the UC the shortfalls in Missionary Electrification Subsidy from CY 2003 to CY 2009 amounting to P 3.825 billion under ERC Order on Case No. 2011-074RC dated July 30, 2012. ERC also granted NPC provisional authority for the availment of the Environmental Charge/Share from the Universal Charge for the rehabilitation and management of Watershed Areas dated July 16, 2012 amounting to P58.829 million for Watershed’s Plan 4 under ERC Order Case No. 2007-098RC and P100.554 million for Watershed’s Plan 5 under ERC Order Case No. 2008-10RC.
In CY 2013, NPC applied the ERC’s approvals, the total Universal Charges comprises
the P 2.763 billion UC, True-Up of P 4.465 billion and Environmental Charge amounting to P 215 million. The total Environmental Charges were fully collected from PSALM.
24. LOSS / GAIN ON DEBT SERVICE
2013 2012 Loss/Gain on Debt Service-Prin/ICERA (2,606,190) 1,712,069
This account consists of the additional costs incurred as a result of the appreciation or devaluation of the peso currency which affects the costs of servicing foreign currency debts (excluding interest). These costs are recoverable / refundable from/to power consumers under the ICERA (Incremental Currency Exchange Rate Adjustment) upon approval by the ERC.
25. LOSS/GAIN ON FOREX FLUCTUATION This account consists of:
2013 2012 Gain/Loss on Revaluation: Loan Payable (93,809,001) 36,927,507
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The account pertains to the gain / loss in the restatement of the outstanding balance of foreign currency denominated loans as of reporting date using the BSP guiding rates.
26. INCOME FROM ADM./BACKUP/OTHER SERVICE FEE
2013 2012 Income from Adm/Backup/Other Service Fee 6,401,339 68,517,701
The account consists on income derived from fees collected from new
owners/administrators of NPC/IPP plants for the administration of the Transition Supply Contract between NPC and MERALCO under their respective Implementation Agreement with NPC. The decrease on 2013 level was due to reduction of SGCs (Successor Generating Companies).
27. MISCELLANEOUS INCOME This account consists of the following:
2013 2012
Income from Liquidated Damages 6,966,710 8,345,745 Supplier’s Discount 17,904 167,352 Rental Income 334,108 1,661,288 Bid Related Income 8,782,330 2,760,108 Revenue from Lease of Electric Plant 2,808,214 1,980,833 Income from Donation 1,569,784 2,323,946 Others 30,334,349 84,243,799 50,813,399 101,483,071
Other Miscellaneous Income consists mainly of income from sale of scrap materials and donated capital for items.
28. INTEREST EXPENSE
2013 2012 Interest expense 17,111,986 32,121,826
This account pertains to interest expense on foreign & domestic loans. The interest expense for CY 2013 pertains to the outstanding foreign loans with BNP Paribas and Natixis. Repayment of principal with BNP Paribas commenced on December 2009 and Natixis will start on September 2017. The short term loan with Land Bank of the Philippines was fully settled on February 2012.
29. SUBSIDY TO NPP’S OF MEA AND TO SIG CUSTOMERS
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2013 2012 Subsidy to NPP’s of MEA and to SIG
Customers 2,200,745,985 1,479,289,940
This account pertains to subsidy to New Power Providers (NPP) of Missionary Electrification Areas (MEA) as approved by the Energy Regulatory Commission (ERC). The increase in this account is attributed to new NPPs namely: Eco Market Solutions, Palawan Power Generation, D. M. Consunji Holdings (DMCI), Mindoro Grid Corporation and Calamian Island Power Corporation.
30. MISCELLANEOUS EXPENSES This account consists of:
2013 2012 Other Taxes 11,104,104 17,518,219 Others 4,617,162 9,445,243 15,721,266 26,963,562
31. SUBSIDY FROM National Government (Special Allotment Release Order) refers to NG Subsidy per approved SARO-
BMB-F-13-0017603 and F-13-01332, amounting to a net total of P988 million. The total approved SARO is P1.071 billion of which P83 million was offset against the claims for reimbursement of NPC advances for the preservation and maintenance of Bataan Nuclear Power Plant covering the period FY 2011 and FY 2012.
32. PROVISION FOR PRESENT OBLIGATIONS PURSUANT TO COURT RULINGS/ DECISIONS
The finality of the decision of the Supreme Court on December 2, 2009 in G.R. No. 156208, Entitled “NPC DRIVERS AND MECHANICS ASSOCIATION (NPC DAMA) ET. AL., (Petitioners), -versus- THE NATIONAL POWER CORPORATION (NPC) ET. AL., (Respondents)” to cause the immediate payment due to the petitioners and all other illegally dismissed NPC personnel/employees as well as the amount of charging lien of the attorneys and the finality of the decision of the Regional Trial Court Branch 84 of Quezon City on March 23, 2009 in CIVIL CASE NO. Q-07-61728 FOR: MANDAMUS Entitled “ABNER P. ELERIA and MELITO B. LUPANGCO, (Petitioners), -versus- MR. CYRIL C. DEL CALLAR, in his capacity as PRESIDENT of the NATIONAL POWER CORPORATION (NPC) ET. AL., (Respondents), NECU AND NEWU ET.AL (Petitioners-Intervenors)” to cause payment of the COLA and AAs to NPC employees have presented obligation for NPC. The ultimate results of these lawsuits are expected to result in an outflow of resources or payment. However, the DAMA case is now pending before the Honorable Supreme Court due to status quo order issued by the Supreme Court while the MANDAMUS case is held pending due to the Petition for
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Certiorari and Prohibition filed by the Department of Budget Management and Office of the Solicitor General.
In accordance with PAS 37 (IAS 37), a provision shall be recognized when (i) an entity has a present obligation (legal or constructive) as result of a past event; (ii) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and; (iii) a reliable estimate can be made of the amount of the obligation. In view thereof, included in the Temporary Registry Account are provisions for NPC’s present obligations to be assumed by PSALM Corporation, since pursuant to the EPIRA, PSALM shall take ownership not only of all generating assets, real estate, IPP contracts and other disposable assets but also of all liabilities of NPC.
The following are the status of the above cited cases:
I. G.R. No. 156208, Entitled “NPC DRIVERS AND MECHANICS ASSOCIATION (NPC DAMA) ET. AL., (Petitioners), -versus- THE NATIONAL POWER CORPORATION (NPC) ET. AL., (Respondents)”. Status of the Case: a. September 26, 2006 – The Honorable Supreme Court Third Division
promulgated a Decision on the above case, the dispositive portion of which reads: “WHEREFORE, premises considered, National Power Board Resolutions No. 2002-124 and 2002-125 are hereby declared VOID and WITHOUT LEGAL EFFECT. The Petition for Injunction is hereby GRANTED and respondents are hereby ENJOINED from implementing said NPB Resolutions No. 2002-124 and 2002-125.”
b. September 17, 2008 – The Supreme Court promulgated a Resolution on the Petitioners Motion for Clarification and/or Amplification which Resolved and issued the following ORDERS:
1) PARTIALLY GRANT the Petitioners Motion by affirming that, as a
logical and necessary consequence of the 26 September 2006 Decision, the petitioners have the right to reinstatement, or separation pay in lieu of reinstatement, pursuant to validly approved Separation Program; plus backwages, wage adjustments, and other benefits accruing from 31 January 2003 to the date of their reinstatement or payment of separation pay; less the amount of separation benefits which were previously received under the null NPB Resolutions;
2) PARTIALLY GRANT the Motion for Approval of Charging (Attorney’s)
Lien of Atty. Aldon and Atty. Orocio and ORDER the entry in the records of this case of their ten percent (10%) charging lien on the amounts recoverable by petitioners from respondent NPC by virtue of our Decision dated 26 September 2006; and
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3) ORDER that Entry of Judgment be finally made in due course in the case at bar.
c. October 10, 2008 – The said “Decision and Resolution become final and executory and are thereby recorded in the Book of Entries of Judgments.”
d. December 10, 2008 – The Supreme Court issued a Resolution granting the
petitioner’s Urgent Motion for Execution and accordingly issued the following ORDERS to the Chairman and Members of the National Power Board and the President of NPC to:
1) cause the preparation of a list, under oath, of (a) the names of all NPC
personnel/ employees terminated/separated pursuant to NPB Resolutions No. 2002-124 and 2002-125, and (b) the amount due to each of them by way of separation pay, backwages, wage adjustments and other benefits in accordance with applicable jurisprudence on illegal dismissal, as well as interests due from the time the decision became final and executory and to compute the 10% charging lien of Atty. Orocio and Atty. Aldon pursuant to the 17 September 2008 Resolution of the Court;
2) pay or cause to be paid immediately the amounts due to the petitioners
and all other illegally dismissed NPC personnel/employees as well as the amount of charging lien of Atty. Aldon and Atty. Orocio;
3) submit proof of their compliance to the orders of this Court as stated in
paragraph 1 and 2 hereof within thirty (30) days from receipt of this Resolution.
e. February 9, 2009 – The Petitioners filed a Manifestation with Urgent Omnibus
Motions with the Supreme Court with following PRAYERS:
1) The Chairman and Members of NP Board and NPC President be held in contempt of court and meted the penalties as may be warranted under the circumstances for failure and/or refusal to comply with the orders (Resolution) of the Honorable Court;
2) The Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of
Quezon City together with his/her deputies, be appointed designated with full powers and authority to enforce by execution the 10 December 2008 resolution of this Honorable Court by garnishment/levy upon of the assets of NPC, including but not limited to the assets of PSALM, based on the list and computations submitted and attested to by the responsible NPC officials hereafter to be summoned;
3) To immediately summon the concerned and responsible NPC Officials
to attest jointly and severally under oath as to the existence and correctness of said documents (Annex “C”) and submit under oath jointly and severally the certified true copies to this Honorable Court.
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f. December 2, 2009 – The Supreme Court granted the petitioners’ Manifestation with Urgent Omnibus Motions dated February 9, 2009 by:
1) Ordering the Chairperson and the Members of the National Power
Board and the President of NPC and their respective counsels, to SHOW CUASE why they should not be held in contempt of court for their willful failure to comply with 1 and 2 of the Resolution dated 10 December 2008 claiming that the Court’s decision nullifying NP Board Resolution No. 2002-124 and No. 2002-125 covered only 16 employees when it is clear that the Court’s decision covered all personnel/employees affected by the restructuring of the NPC;
2) Ordering the Clerk of Court of the Third Division of the Supreme Court
to implead or join PSALM as a party-respondent in this case;
3) Ordering the Chairperson and the Members of the National Power Board and the President of the National Power Corporation to comply with Court’s Resolution dated 10 December 2008;
4) Directing the Clerk of Court of the Regional Trial Court and Ex-Officio
Sheriff of Quezon City to cause the immediate execution of the Court’s Decision.
g. January 7, 2010 – The Supreme Court issued a Status Quo order such that
no NPC assets/deposits shall be garnished until further order by the Court. The case is set for an Oral Argument on13 January 2010.
h. March 17, 2010 – The Supreme Court issued a resolution noting PSALM’s
reply, OSG’s manifestation and motion to strike off certain annexes from petitioner’s manifestation.
i. July 2, 2012 – A Resolution issued noting the letters of Atty. Cornelio Aldon
and 5 others and noting/granting the letter of Atty. Cecilio Gellaga and OSG’s Motion to Leave to File and Admit the Motion to Expunge from the record. Awaiting Supreme Court’s resolution of the Motion to Resolve filed by petitioner DAMA. There was a proposal made by the unions/associations for the payment of the claim at a reduced amount of P 38.9 billion. However, the OSG opined that it is proper and prudent to await the resolution of the case before any action is undertaken in relation thereto. Hence, the NP Board opted to wait for the Supreme Court’s final resolution of the case.
II. CIVIL CASE NO. Q-07-61728 FOR: MANDAMUS Entitled “ABNER P.
ELERIA and MELITO B. LUPANGCO, (Petitioners), -versus- MR. CYRIL C. DEL CALLAR, in his capacity as PRESIDENT of the NATIONAL POWER CORPORATION (NPC) ET. AL., (Respondents), NECU AND NEWU ET.AL (Petitioners-Intervenors)”.
a. November 28, 2008 – The Regional Trial Court Branch 84 of Quezon City promulgated a DECISION in favor of the Petitioners and intervenors NECU & NEWU against the respondents National Power Corporation, its President and Board of Directors and ORDERED as follows:
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1. To RELEASE and to PAY the amount of Php6,496,055,339.98
representing the COLAs and AAs, and to PAY the amount of PhP704,777,508.60 representing interest computed from December 28, 2007, within 30 days from the finality of this Decision to petitioners, intervenors and other non-union employees similarly situated. The said monetary judgment shall earn another interest of 12% per annum from the date of finality of the decision until its full satisfaction;
2. To PAY Attorney’s fees in the amount of Php100,000.00 in favor
of the Petitioners and PhP200,000.00 in favor of the Intervenors NECU & NEWU;
2. To DEDUCT the amount of Php145,464,872.55
representing the deficiency payment of docket and other legal fees to be taken from the said lists of Napocor officials, workers, etc., xxx and to REMIT AND PAY the same to the Office of the Clerk of Court of the Regional Trial Court of Quezon City, within 15 days from finality of the Decision and finally, to FURNISH this court proof of compliance hereof. The said amount shall be without prejudice and subject to the final computation and assessment of the Office of the Clerk of Court. The said docket and legal fees shall be a lien on this judgment and shall be first satisfied pursuant to the provisions of Rule 141 and Rule 39 of the Rules of Court;
4. DECLARING the Consultancy Agreement to be valid and binding between the counsels and the Petitioners and the Intervenors NECU & NEWU, and its members, and 4.1 To DEDUCT the FIVE percent (5%) of the amount payable to each of the NAPOCOR employees, etc., xxx AND to PAY the amount deducted to Atty. Napoleon Uy Galit and Atty. Jonathan S. Presquito, after deducting the appropriate taxes.
b. March 20, 2009 – The Court issued a Joint Order, the pertinent portion of
which is hereunder quoted, viz:
1. GRANTS the Motion for Execution filed by the NPC workers, petitioners and intervenors NECU & NEWU. Accordingly, the Branch Clerk of Court is directed to forthwith issue the Certificate of Finality of Judgment and the Writ of Execution to enforce the Court’s Decision dated November 28, 2008;
2. GRANTS the motion of petitioners and intervenors to Deposit the
Amount Equivalent to Judgment Award and Interest. The said amount shall be under
Custodia Legis of the Court pending its distribution to the listed and qualified
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beneficiaries or pending appeal with the Higher Court;
3. DENIES and Dismisses the Notice of Appeal filed by the Office of the Solicitor General for utter lack of merit;
4. DENIES the Motion for Reconsideration filed by the Public
Respondent Hon. Rolando G. Andaya, Jr. with finality.
c. March 23, 2009 – The Branch Clerk of Court issued the CERTIFICATE OF FINALITY OF JUDGMENT. The pertinent portion of which is quoted “That in view thereof, the Decision of the Court dated November 28, 2008 has become FINAL and EXECUTORY on December 18, 2008 for petitioners and intervenors, for NPC President and Board of Directors and Public Respondent Rolando G. Andaya, Jr. and the Department of Budget and Management; and December 19, 2008 for the Office of the Solicitor General”.
d. March 23, 2009 – The Branch Clerk of Court the WRIT OF EXECUTION
addressed to the Deputy Sheriff, RTC, Branch 84, Q. C., the pertinent portion of which is quoted
e. “NOW THEREFORE, you are hereby commanded to cause the execution of
the aforesaid judgment together with the aforementioned implementing orders including the payment in full of your lawful fees for the service of this writ”. “You are hereby directed to submit your report on the action taken within 10 days from receipt hereof and attach copy of your report to the record of this case, pursuant to Adm. Cir. 12-89, and thereafter, until the writ is fully executed and furnishing the Parties and their counsels copy thereof”.
f. March 24, 2009 – The Sheriff IV Franklin E. Dazo issued the NOTICE TO COMPLY upon NPC which was received March 25, 2009.
g. April 15, 2009 – The Supreme Court issued TRO, on the Order, Writ of
Execution and Notice Garnishment issued by RTC Branch 84.
h. May 26, 2009 – Department of Budget and Management filed a Petition for Certiorari and Prohibition. Awaiting for the Supreme Court’s Resolution of NPC’s and DBM’s petitions.
33. TARIFF DEVELOPMENT IN THE YEAR 2013 The following are the developments in Tariff for the Year 2013: RATE APPLICATIONS: An application was filed for the Recovery of the incremental/decrement costs/savings on
fuel and purchased on fuel and purchased power and foreign currency exchange rate fluctuations covering July to December 2011 under the 9th GRAM and 9th ICERA last May 20, 2013 with the proposed rates in kwh of P1.9796 for Luzon, P1.7156 for
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Visayas and P1.9888 for Mindanao. If approved as filed, this may result to an additional revenue of P2.287 billion.
Another rate application for the Recovery of the incremental/decrement costs/savings on
fuel and purchased power and foreign currency exchange rate fluctuations covering January to December 2012 under the 10th GRAM and 10TH ICERA was filed in September 10, 2013 with proposed rates in kwh of P1.5011 for Luzon, P1.4937 for Visayas and P1.8214 for Mindanao. If approved as filed, this application may result to an additional of P4.221 billion.
A True-Up application to recover the Shortfall in the Universal Charge for Missionary
Electrification (UCME) for the year 2012 was filed in September 20, 2013 amounting to P5.370 billion or a proposed rate of P0.0782/kwh to be charged to nationwide electricity customers. This application was approved as filed already includes the amount in applied in the 10th GRAM & ICERA applications mentioned above.
RATE APPROVALS. The Energy Regulatory Commission (ERC) issued the Decision for True-Up
Adjustment of UCME Subsidy for CY 2011 in August 12, 2013. The total approved amount is P4.65 billion or P0.0709/kwh effective December 26, 2013. The ERC also approved the same decision, which is the basic UCME of P2.7 billion for CY 2014. Last October 19, 2013, ERC issued the Decision for True-Up Adjustment of UCME Subsidy for CY 2010 amounting to P2.57 billion or P0.0381/kwh effective December 26, 2013.
34. UPDATE ON PRIVATE SECTOR PARTICIPATION PROGRAM IN THE POWER
GENERATION IN SPUG-SERVICED AREAS
In line with the government thrust to privatize the power industry including the operation of NPC – SPUG plants and minimize the subsidy on these areas, the following are the developments on the participation of the private sector in the power generation in the SPUG serviced areas:
NEW POWER PROVIDER
LOCATION
STATUS
1. Bantayan Island Power Corporation-(BIPCOR) Bantayan Island Operational and UCME recipient
since May 2006
2. Palawan Power Generation Inc. Mainland Palawan Operational and UCME recipient since May 2008
3. Delta P Mainland Palawan Operational and UCME recipient since April 2009
4. Powersource Phils. (QTP) Bataraza, Palawan Operational and UCME recipient since July 2010
5. D. M. Consunji Holdings –(DMCI) Masbate Mini Grid Operational and UCME recipient since August 2010
6. Catanduanes Power Generation Inc. Catanduanes Operational and UCME recipient since July 2011.
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7. Ormin Power Inc. Oriental Mindoro Operational and UCME recipient since November 2011.
8. Power One Corporation/ Mid Island Power Corporation Oriental Mindoro Operational and UCME recipient
since May 2012.
9. SUNWEST Water & Electric Company Catanduanes Operational as of December 3, 2012
10. Calamanian Islands Pow Corporation Busuanga PSA with ERC
11. Linao Mini Hydro (Lower Cascade) Oriental Mindoro Operational As of December 3, 2012
12. Gigawatt-Vivant Busuanga On-going construction of power pla facilities
13. Siquijor Island Power Corporation Siquijor
PROSIELCO Board approved the Sw Challenge and awarded it to Siqu Island Power Corporation (SIPCO They sought the opinion of Solici General for its legality. The SolG declared it as illegal considering that t NPP is a beneficiary of the UCME.
14. Mindoro Grid Corporation Oriental Mindoro Operational as of December 3, 2012
15. 3iPowergen Tablas, Marinduque, Romblo No power plant yet
16. Coastal Power Developme Corporation Basilan No power plant yet
17. Philippine Hybrid Energy System Inc. (PHESI)
Oriental Mindoro No power plant yet
35. SUPPLEMENTARY INFORMATION REQUIRED UNDER RR No. 15-2010 In compliance with the requirements set forth by Revenue Regulation No. 15-2010 hereunder are information on taxes, duties and license fees paid or accrued during the taxable year. The Corporation is a VAT- registered company with VAT output tax declaration of P24.288 million during the year based on the amount reflected in the Sales Account of P2.061 billion. The Corporation has zero-rated/exempt sales amounting to P6.895 billion pursuant to the provisions of Sections 106 (A)(2) and 108 (B) of the National Internal /revenue Code. The amount of VAT Input taxes claimed are broken down as follows:
Beginning Balance, Jan 2013 2,496,000,919 Current year's purchases:
1. Non-Capital Goods (fuel, mat. & equipt. & spares) 459,634,355 2. Capital goods 13,160,059 3. Services 343,685,675
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816,480,089 3,312,481,008 Claims for tax credit/refund and other adjustment 0 Ending Balance, Dec 2013 3,312,481,008
Other taxes and licenses pertain to:
Nature Amount Realty Tax 555,942 Documentary stamps on bank transactions 9,680 565,622
The amount of withholding taxes paid/occurred for the year amounted to:
Nature Amount Tax on compensation and benefits 71,289,831 Creditable withholding taxes 104,806,124 Final Vat / Final withholding taxes 331,834,036 507,929,991
36. INCOME TAX
Pursuant to BIR Ruling 020-2002 – Tax consequences of Electric Power Industry Reform Act of 2001 (B)(4) (Annex C) states that “While under the EPIRA, power generation shall no longer be considered a public utility operation, it may still be considered as essential governmental function insofar as the operation by NPC of the assets of SPUG is concerned. Hence, income derived therefrom shall be excluded from gross income pursuant to Section 32 (b)(7) of the 1997 Tax Code (Annex D).
