"We believe the market needs more time after the May elections before investor interest returns to the Philippine power sector," the study said.
The investment firm’s study noted that issues confronting the power sector are normally put on the sidelines amidst the political uncertainties. "Tariff increases have been put on hold due to political issues taking a higher priority on many official’s agenda," the study said.
The country’s largest power distributor, Manila Electric Co. (Meralco), is among those that have been hit hard by the investors’ lack of enthusiasm in the power sector.
"Kilowatthour sales growth has also suffered as a result of the poor economic situation and the depreciating currency does not encourage investors to buy Meralco shares," the study said.
Adding to the burden of the sector, Lehman said, is the current weakness of the currency especially for those countries experiencing capital flight in response to domestic political problems.
"While baht may experience some temporary difficulty in conjunction with the January elections, politics are apt to be an ongoing problem for the Philippine peso," it said.
It further noted that it is not only the power sector alone that is suffering investors’ confidence problems but the whole country. "The Philippines faces greater challenges," it said.
According to the study, which was completed before President Gloria Macapagal-Arroyo, replaced former President Joseph Estrada, the Philippine economy is struggling because of a lack of policy direction, high interest rates and fiscal difficulties.
Despite these views, the local oil players and some old time investors of the country remain optimistic.
Industry leader Petron Corp. said it is looking forward to a better but difficult year for the company. "We are ready to face this year’s challenges," Petron chairman Jose Syjuco said.
The country’s second largest oil company, Pilipinas Shell Petroleum Corp., said the "situation is very fluid this year." Shell country chairman Oscar Reyes said the company’s approach would be to just maintain focus on operating as efficiently as they can.
"We need to be optimistic. We have to practice cost efficiency. We will go on with structural investment and maintain our market share," Reyes said.
French power giant Alstom country president Gilles David, who has been here for the past five years, said "there is no room for us to be pessimistic."