Meralco seeks new waiver from ADB, WB

Publicly-listed Manila Electric Co. (Meralco) will seek another waiver from the Asian Development Bank (ADB) and the World Bank early next year for its return-on-rate-base (RORB) level prescribed under its loan contracts with the two multilateral financial institutions, Meralco assistant vice president and treasurer Rafael Andrada said.

"As soon as the year 2001 financial report is audited, we will file early next year a request for a waiver to the ADB and World Bank," Andrada said.

The company is anticipating that they would not be able to comply with the RORB requirement as the Energy Regulatory Commission (ERC) suspended for three months hearing of Meralco’s petition for a 30-centavo per kilowatt hour rate increase.

ERC chairman Fe B. Barin said the three-month suspension would allow the new board to study and review the application of Meralco.

According to Andrada, they do not want to be held in technical default for its remaining $160-million loan with ADB and World Bank.

Before the loans were granted to Meralco, the company signed a financial covenant with ADB and WB requiring the power company to earn an annual RORB of not less than eight percent. RORB is the ratio of operating income to the appraised asset value or investments in facilities and equipment used in the provision of electricity.

Meralco’s RORB for this year is expected to fall beyond four percent or about five percent in 2000, 5.5 percent in 1999 and 7.1 percent in 1998.

If granted, this will be the third time in a row that Meralco will be seeking a request for a waiver with the said multilateral creditors. The Meralco official said since 1999, they have been requesting for a waiver as their RORB started to deteriorate during this period.

The power distribution giant, Andrada said, has filed a rate increase in April 2000 to help improve its RORB. Proceeds from the increase would be used by the firm to finance its upgrading and expansion project that would eventually help it improve its returns.