Meralco mulls new loans

MANILA, Philippines - With the approval of a new rate recovery mechanism, the Lopez-controlled Manila Electric Co. (Meralco) might consider tapping the debt market anew.

Meralco treasurer Rafael Andrada said the performance-based rate (PBR) mechanism will enable the company to improve its finances. “The PBR approval …it should have an impact on our credit standing,” he said.

However, he said he is not certain if raising funds for Meralco’s improvement and enhancement of services would be part of the first order of the day of the new investors in the power utility firm.

Philippine Long Distance Co. (PLDT) and San Miguel Corp. (SMC) are the two biggest investors in Meralco.

“We have to wait for the first board meeting on June 29. But it could be part of the discussions..the financial standing of the company and how to improve it,” he said.

“After the first and second meetings we would be able to know if borrowing would be included in the list of our agenda with our new investors in place,” he said.

Due to the delayed approval of the PBR, the creditors of Meralco have not been keen in allowing the power firm to borrow more since a steady cash flow had not yet been assured.

But with the PBR which granted an authority for Meralco to collect an additional 25 centavos per kilowatthour from its customers starting May this year, creditors will now be convinced that Meralco will have a better chance of paying its debt.

Meralco’s total debt dropped by 28 percent to P16.04 billion as of first quarter of 2009 from P22.37 billion in the same period in 2008. The company was able to retire P7.9 billion worth of short-term debt as of end-March 2009.