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By Likha Cuevas-Miel, Reporter
The word war between the government and the
Lopez family for control of Manila Electric Co. (Meralco) is giving
foreign investors second thoughts about putting their money in the
country’s biggest power distributor.
On the sidelines of the stockholders’ meeting
of First Philippine Holdings Corp. on Monday, the president of the
holdings company, Elpidio Ibañez, said about five foreign strategic
and financial investors expressed their interest in forming a
consortium with the Lopez-led holdings firm since last year.
“Some of them said—but they did not say that
they would back out—that they’re a little disturbed at what’s
happening. That’s why I have to get back and talk to them and see
what they feel [now],” Ibañez said.
He added that these investors approached the
utility firm when the government, through the Department of Finance,
announced that it would be divesting its stake from Meralco as part
of its privatization program to raise more revenues.
But, according to Ibañez, the interest of these
prospective partners appeared to have waned when the spat between
the president of the Government Service Insurance System (GSIS),
Winston Garcia, and the Lopez group erupted.
GSIS owns 23 percent of Meralco, while the
government, including the state pension fund, has a 33-percent stake
in the power distributor.
“At this time, no [we cannot buy Meralco] by
ourselves. We don’t know what’s available. Now nobody seems to
be selling, so we don’t know what block is available,” Ibañez
said. Also at present, the Lopez holdings company owns 33.4 percent
of Meralco, a veto threshold that it apparently is comfortable with.
Since no shareholder seems to be interested in
selling, Meralco has an option to issue new shares that can be
bought by the likes of the holdings company.
“But, I think at this time, it doesn’t make
sense for Meralco do that. Our view is that Meralco is a relatively
unlevered company, so we would in fact want Meralco to lever more.
Because a utility company should have more leverage than equity so
it enhances returns to shareholders,” Ibañez said.
The company raised P4.3 billion by issuing 50
million Series “B” preferred shares to finance the acquisition
of additional Meralco shares and investments in several of its
subsidiaries that include First Philippine Infrastructure Inc.,
First Philippine Infrastructure Development Corp. and Manila North
Tollways Corp.
If a plan to increase its stake in Meralco does
not pan out this year, First Philippine Holdings Corp. may
reallocate more funds to retire debts. Of such debts, $100 million
will mature in the next two years.
Meralco to present plan
Manuel Lopez, Meralco chairman, told reporters
that Garcia’s claim that the family only wanted the GSIS chief’s
head was not true. “I’ve always treated him with dignity and
respect and [to] hit him below the belt is not my way,” he said.
On calls for him to resign as chairman of the
board, he said, “That’s for the board to decide, not Mr.
Garcia.”
Meralco will present today its proposal to the
Cabinet on lowering power rates. Oscar Lopez said the prevailing
high rates should not be blamed entirely on the power distributor.
Manuel Lopez was quiet on the key points of the
proposal, saying he did not want to preempt its presentation.
“Some solutions that will be proposed, I don’t know how they
will be adopted. Let’s see what happens.”
Stock conversion
In the Senate, Loren Legarda proposed also on
Monday that at least P34 billion in refunds to power customers be
converted into stocks of Meralco.
“This [conversion] will ease the pressure on
Meralco’s cash flow and at the same time formalize the stake of
the consumers in the distribution company where they can earn
dividends and be represented in the Meralco board,” the senator
said.
Among the refunds due are some P20 billion in
meter deposits that Meralco had collected through the years but was
disallowed by the Supreme Court in 2004. Meralco still has a balance
of P14.4 billion of the P30 billion that the High Tribunal had
ordered it to refund to its customers in another case. The Supreme
Court had ruled against Meralco’s inclusion of its income taxes in
the computation of electricity rates from 1994 to 2002.
Legarda charged that Meralco’s customers had
been financing its operations for years in the form of meter and
bill deposits and through repeated cases of overcharging.
“When caught and mandated to refund, Meralco
carries this out at a snail’s pace,” she said.
Legarda added that the conversion into stocks of
Meralco’s refunds to its customers is an alternative to outright
refunds deductible from their bills.
E-VAT issue
Meanwhile, Sen. Joker Arroyo said that although
he had voted against the expanded value-added tax (E-VAT) law and
the Electric Power Industry Reform Act, he would not support the
removal of the expanded tax from power and oil.
Speaker Prospero Nograles expressed his support
over the weekend to temporarily remove the expanded VAT on power and
oil to ease the burden of the people.
“This [removal] might solve one problem but
create another,” Sen. Arroyo argued.
He explained that the projected collections from
the ezpanded tax had already been factored in the 2008 national
budget.
“If we remove the E-VAT on power and oil,
where will we get the money to replace the lost revenues?” Senator
Arroyo asked.
He contended that it was not the expanded tax
but its misapplication that was causing much of the problems.
“For instance, why are they applying E-VAT on
system loss? The Department of Finance has been strangely quiet on
this issue. The [department] should now inquire into how much E-VAT
the utility companies had collected and how much they had
remitted,” Senator Arroyo said.
-- With Efren L. Danao
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