By Rjay Zuriaga Castor
The Iloilo Electric Cooperatives (ILECO) I, II, and III asserted that they are “financially stable” despite accruing millions of pesos in debts from the National Electrification Administration (NEA).
“ILECOs are financially stable. Allegations of excessive debts must be viewed within the context of ILECOs’ commitment to providing reliable and sustainable electricity services to their (member-consumer-owners),” they said in a statement on May 1.
The ILECOs statement is in response to the April 30 Daily Guardian report which detailed the significant debts each cooperative holds despite achieving the ‘Triple A’ (AAA) standard in their operations — the highest NEA performance designation.
The electric cooperatives emphasized that while they have outstanding debts, it represents a strategic investment measure to enhance their service quality and infrastructure development.
“It isn’t bad to incur loans to fund big projects. Loans are not a manifestation of business instability/reverses,” they added.
NEA Administrator Antonio Mariano Almeda previously disclosed to Daily Guardian that the cooperatives have substantial outstanding loans dedicated to capital expenditures, with ILECO I owing P12.4 million, ILECO II P36.2 million, and ILECO III P52 million.
Almeda explained that the loans obtained are intended to bolster capital to meet consumer electricity needs, particularly focusing on substation operations for consistent supply.
“The ILECO cooperatives are supposedly implementing capital expenditures (CAPEX) as we call it to be at par with the demands of electric consumption of their member-consumer-owners. They need substation operations [and] assistance to have a steady supply and eliminate fluctuations. That is where it usually goes,” he said.
The ILECOs noted that, just like any other businesses, electric cooperatives are no exception as they avail themselves of loans to fund their CAPEX projects that could ultimately improve their distribution system and facilities.
“In finance, there is a fundamental concept related to financing called the Maturity Matching Principle which means that long-term assets should be funded from long-term sources of financing,” they added.
According to documents from the Energy Regulatory Commission, the approved capital expenditure (CAPEX) projects for ILECO II and III from 2021 to 2023 amount to P476 million and P428 million, respectively.
Meanwhile, ILECO I’s CAPEX projects for 2021 to 2022 total P498 million.
The CAPEX projects include network projects for system loss, safety capacity, and non-network projects primarily aimed for service efficiency.
They were mostly financed by the cooperatives’ Reinvestment Fund for Sustainable Capital Expenditures (REFC) and partly by other funds such as loans and government subsidies.
“These CAPEX projects are capital-intensive which cost millions of pesos to fully implement. To ensure that the coop’s cash position and working capital will not be burdened by the significant outflow of cash, ILECOs opt to avail of long-term loans from NEA, REFC, and banks,” the cooperatives said.
“With this, the financial impact of the project will be spread over the period for which the asset will be utilized,” they added.
