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Volume 1,
Series 2
Policy on Conversion of Calamity Loan into Calamity Grant/Subsidy

Resolution No. 40, series of 2016.

National Electrification Administration (NEA) recently issued a memorandum No. 2016-006 addressed to all Electric Cooperatives issuing its Policy on Conversion of Calamity Loan into Calamity Grant/Subsidy. Under the policy, NEA shall convert calamity loans released to ECs into subsidy/grant upon receipt by NEA of calamity fund subsidy fund. This converted loan however will still be considered as advances as provided for under the Memorandum of Agreement (MOA) and shall be subject to liquidation within 3 to 5 months from project completion and acceptance following COA rules and regulations.

It can be recalled that NEA is releasing calamity loan to ECs funded by internally generated funds (IGF) for the rehabilitation of damaged distribution lines and immediate restoration of power in the coverage areas caused by typhoon, earthquake and other natural calamities in accordance with accordance with NEA Loan Policy No. 6E, as amended, which provides the guidelines in granting loan advances as emergency / calamity loan and concessional / emergency calamity loans to ECs.

On January 3, 2014, the calamity subsidy fund of P3.929B was received by NEA for rehabilitation and reconstruction of the damaged distribution facilities of 33 ECs due to typhoon Yolanda. On the beginning of 2014, NEA requested DBM for an additional calamity subsidy assistance and authority to realign the amount of 301.77M subsidy funds for sitio electrification projects to calamity grant for ECs affected by other typhoon or calamities. DBM in its letter dated February 26, 2014 interpose no objection to the said request. However, it emphasized that this is not a realignment but rather a change in priority projects funded from the said release.

Consequently, total of 890M calamity loan were converted to calamity subsidy or grant favoring total of 44 ECs. On November 12, 2015, the Office of the President in its memorandum to Secretary Voltaire Gazmin approved the release of calamity assistance in the total of 803M to NEA for immediate rehabilitation / replacement of the distribution systems / lines and facilities of 14ECs damaged by typhoon Glenda in July 2014. To date NEA is still not in receipt of the funds.

Once NEA received the calamity subsidy fund, NEA shall convert loan released to ECs into subsidy/grant provided that the following will be observed:

  1. The amount to be converted into subsidy shall be the principal amount of calamity loan released but not to exceed the amount appropriated by the National Government for the EC subject to final inspection/evaluation of the NEA Engineering Department.
  2. No conversion shall be made on the capitalized interest during the grace period and other finance charges incurred up to the date of receipt of calamity fund. Charges should be settled accordingly.
  3. In case of partial conversion, the remaining calamity loan shall be amortized over the remaining life with revised amortization schedules.
  4. The subsidy/grant is subject to the prevailing engineering and administrative overhead (EAO) cost at 2%.
  5. After conversion of loan, NEA shall refund to the EC all excess principal payments after deducting EAO and other finance charges through the following order of application:
    1. Loan arrearages
    2. As advance payment of other existing loan
  6. Id the EC has no more outstanding loan, NEA shall refund to the EC the excess principal payments upon EC request through submission of board resolution.
  7. The amount of calamity loan converted to subsidy/grant is still considered as advances as provided for under the Memorandum of Agreement (MOA) and shall be subject to liquidation within 3 to 5 months from project completion and acceptance following COA rules and regulations.
  8. In the event of any adjustments in the amount of conversion as a result of COA audit, the EC shall be bound to pay the corresponding differential.
  9. Conversion of calamity loan to subsidy/grant shall be subject to approval by the Administration and confirmation/ratification by the NEA Board of Administrators.

Conversion of calamity loan to subsidy/grant shall be subject to approval by the Administration and confirmation/ratification by the NEA Board of Administrators.

  1. Board resolution requesting for conversion of calamity loan into subsidy/grant
  2. Board resolution confirming the amount of conversion
  3. Damage report, photos and bill of materials
  4. Work program on the restoration/rehabilitation activity
  5. Accounting of funds and its supporting documents
  6. Certificate of completion

This policy has been approved by NEA Board of Administrators on April 14, 2016 per Board Resolution No. 40, series of 2016.

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