ERC okays Meralco $50-M debt issue

The Energy Regulatory Commission (ERC) has approved Manila Electric Co.’s request to issue more debt papers to support its capital expenditure program under the performance-based rate (PBR) mechanism.

With the approval, Meralco said it could now tap a long-term facility from Calyon Corporate and Investment Bank worth $50 million to partly cover for its capital expenses.

Meralco president Jesus Francisco said the Calyon facility will specifically be allocated to purchase equipment imported from Europe like power transformers.”

But Francisco said they are withholding any drawdown from the Calyon facility as they are still awaiting the ERC decision on its PBR application.

“We have no plans yet when to draw. Our PBR rates are not yet approved by the ERC,” Meralco finance executive Daniel Tagaza said.

Calyon, a member of the Credit Agricole Group, is one of the financing options Meralco is eyeing for funds for its capital expenses.

“It (Calyon loan) is a standby facility for the procurement of capital goods,” Tagaza said.

Meralco said in its application with the ERC said that its borrowings will not exceed P23.7 billion until 2011.

“The application filed by Meralco for authority to issue bonds or evidence of indebtedness in the maximum amount not to exceed a 50 percent debt to equity is hereby approved, subject to the condition that the loan shall be used to finance capital expenditure projects approved by the commission,” the ERC said.

Meralco said in order to provide utmost flexibility to its finances in a cost-effective manner, it intends to “incur long-term debt at the aforementioned options, maintaining its total debt, which is the sum of its outstanding debt and new debt, only up to a maximum equivalent to a debt equity ratio not exceeding 50 percent.”

Based on Meralco’s PBR application, the company is mandated to complete its proposed capital expenditures totaling P28.681 billion until 2011 to meet the electricity projected demand, comply with performance standards and maintain reliability of its distribution system.

“Given the peso amounts required to complete the capital expenditures approved for the second regulatory period, it is not possible or practical to finance all of these solely through (Meralco’s) internally-generated funds or collections. In this regard, applicant intends to finance a portion of the cost through long term debt,” Meralco said.

Meralco earlier said its equity stood at P47.394 billion, thus bringing its debt level to a maximum equivalent of P23.7 billion.

The utility firm said any funding option that it may undertake will not impact on the rate it charges its customers.