Meralco wants more time to pay debts
Business Week, 19 January 2004
By JENNEE GRACE U. RUBRICO
Reporter Lopez-controlled Manila Electric Co. may have-difficulties in asking creditors for another extension of the deadline for the repayment of some S80 million in short-term debts because of a recent court decision against its price increase.
"It looks like refinancing now may' not be possible. We will see by the end of the week," Musical President Jesus P. Francisco said, as he attributed his firm's predicament to the Supreme Court ruling that stopped its rate increase o f 12 centavos per kilowatt-hour."
The S80-million loans, which are' maturing this week, is payable to Bank of the Philippine Islands, Citibank, Equitable PCI Bank, and Banco de 0ro Universal Bank.
Mr. Francisco said Meralco was optimistic of an extension on the payment deadline after the Energy Regulatory Commission last November allowed it to temporarily increase its power rate.
The increase was granted pending the resolution of Meralco', petition to hike its price by an average of 13.58 centavos per kilowatt-hour.
But with the court ruling last January 13, which effectively suspended' the rate increase, Meralco would have to go back to its creditors, Mr. Francisco said.
"We were already given a short extension, which was based on refinancing" that was possible through the rate hike, lx said.
Mr. Francisco earlier said Meralco needed the payment extension because its cash position would already be bur dened by refunds to customers this semester.
The refund is in line with another Supreme Court ruling that barred Meralco from including income tax in computing operational costs, and then passing on such costs to customers. The court thus ordered Meralco to re turn to its customers alleged overcharges from 1994 to 2003.
The first two phases of the refund cover residential customers that use up to 300 kilowatt-hours per month.
The third phase of the refund, which Meralco is currently servicing, covers residential customers that consume more than 300 kilowatt hours per month. It is expected to cost Meralco between P4.8 billion and P5 billion.
The fourth phase, which will cover industrial and commercial customers, is estimated to total P 18 billion.
The $80-million loans, whit h were originally equivalent to P5.5 billion, fell due last April but Meralco got a three-month extension.
Last July, Meralco again asked for a rollover and was given six months, or until this month.
Meanwhile, tile European Chamber of Commerce of the Philippines (ECCP) said the Supreme Court order barring Meralco from raising its electricity price was a bad signal to investors in the power sector.
In a statement, ECCP said it could discourage investors from pursing up additional power plants and other facilities needed to ensure stable power supply in the country.
"It is obvious that the country needs new base-load power plants, substations and a viable distribution network in Luzon and other parts of the country to ensure power supply during these c end half of this decade. However, investors - both local and foreign - will only be attracted if the independence of the ERC [Energy Regulatory Commission] is guaranteed; contracts governing fair rate returns are honored; [and) distribution and generation utilities are allowed to earn a reasonable investment return to improve credit standing," ECCP said.
The government expects a power shortage in the Visayas starting this year, and is currently implementing stop-gap measures - such as transferring power barges to tile area - to address the power shortage during the election period. The state-run National Power Crop. is also hoping to transfer a 110-megawatt coal-fired power plant in Pinamucan, Balangas, to Din gle, Iloilo befo re yearend.
The state-run National Transmission Corp., meanwhile, is also implementing transmission projects in the Visayas to help ensure long-term power supply in the area.
In Mindanao , a power shortage is expected by 2006 if no additional Installed capacity comes in, while Luzon expects a shortage by 2008.
ECCP said prospective additional investments may be "jeopardized" if the decisions of the Supreme Court and the ERIC were "politicized."
"In our view, the ERC's decision on Meralco's rate increase must be implemented without delay as it will benefit the economy and the users of power in the long run." ECCP said.
It issued the statement after Meralco said that it would abide by the Supreme Court's order to stop implementing the 12-centavo per kilowatt-hour average rate increase.
ERC earlier granted the increase pending oral arguments on a petition filed by th e Freedom from Debt Coalition and party list groups against the provisional increase.
Last December 22 FDC and party list groups Akbayau . Partido , Manggagawa and Sanlakas asked the Supreme Court to issue a temporary restraining order on the implementation of the provisional rate increase. They also asked the court to declaim ERC as having no legal basis to issue provisional authorities.
In an order dated January 13, the Supreme Court said that "without giving due course to the (FDC) petition." Meralco and ERIC should "observe status quo prevailing before the filing out the petition."
Meralco already imposed tile 12-centavo increase and it would be reflected on the January 2004 billing statements of customers.
Mr. Francisco said that the firm could not stop the collection of the bills already sent out. But he also said that the firm could refund those who have already paid the additional 12 centavos, depending on what would be decided during oral arguments on the FDC case and the ERC guidelines on the issue.
The 12-centavo provisional increase was based on a November 27 ERC decision that meant to allow the firm to undertake 42 expansion projects.
Several groups asked ERC to suspend or revoke the provisional authority, saying that it was granted without due process.
ERC did not act on their petition, prompting FDC and the party-list groups to seek relief before the Supreme Court.
Inoculated development, consumer group National Association of Electricity Consumer for Reform asked ERC to tab the Commission on Audit to audit Meralco expenses
In a comment filed at ERC, Nasecore said the audit would determine if the method used by Meralco in asking for a rate increase was correct.
"This audit will allow among others CoA to determine the methodology used by Meralco in the latest appraisal and evaluation of property that is used on the operation of its business.Verification of the valuation methodology used is important because the asset values used in the present case partly consist of values rolled forward from the Meralco refund and unbundling cases." Nasecore said.
Nasecore noted that in deciding the case that resulted in a refund by Meralco, the Supreme Court rejected the "average investment" method used by Meralco in favor of the net average investment method.
"Along this line, there is a need for a though audit of Meralco's expenses and the Honorable Commission is respectfully requested to seek the assistance of (CoA) to conduct an audit on behalf of the consumers since the Honorable Commission lacks the manpower to do the job," Nasecore told ERC.
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