The National Electrification Administration (NEA) gave the electric cooperatives (ECs) clearance to secure short-term loans from other financial institutions to mitigate the economic effects of the coronavirus disease 2019 (COVID-19) on their commercial operations.
NEA Administrator Edgardo Masongsong recently issued Memorandum No. 2020-015, allowing the 121 ECs to avail of short-term loans from banks and financial institutions other than the electrification agency while the country remains under state of calamity.
“No encumbrance of real properties, or a substantial portion of other properties or assets, will be made by the ECs.”
“We take cognizance of the ECs mandate to operate to ensure continued service delivery to the member-consumer-owners during the state of calamity. However, the financial condition of the ECs might be adversely affected due to the COVID-19 situation,” Masongsong said.
Under the NEA Loan Policy No. 14-A, ECs may secure short-term loans from sources other than NEA like banks, financing companies and other established financial intermediaries, as long as they are reasonable and appropriate.
Power coops may borrow money from financial institutions to augment monthly collection deficiencies that would cover their power bills; to facilitate working capital requirements; and for the purchase of maintenance vehicles.
Terms and conditions of the loans must also be “fair and equitable,” such that repayment period shall not exceed three years; interest rates are reasonable, and at the lowest, if possible; and the amount of loan shall not exceed three times the EC’s average power billings.
“No encumbrance of real properties, or a substantial portion of other properties or assets, will be made by the ECs,” Masongsong further stated, adding that proper documentations of the loan/s must be submitted to the NEA upon resumption of its normal business operations.
To recall, President Rodrigo Duterte placed the Philippines under a state of calamity through Proclamation No. 929 signed on March 16, 2020 to curb the spread of COVID-19 cases in the country.
The state of calamity is effective for a period of six months “unless earlier lifted or extended as circumstances may warrant.” The entire Luzon has since been placed under enhanced community quarantine with some provinces outside of Luzon also following.