One of the conditions of the $138 million loan extended in 1992 was that Meralco should post a minimum return of eight percent on its asset base each year.
The utility used the money to expand its power distribution network in Luzon, but has failed to meet the profitability clause for four years in a row.
In principle, failure to meet the covenant puts Meralco in danger of default. But the ADB and the World Bank, which extended another loan with the same condition, have issued waivers to the company each time it missed the required rate of return.
Meralco indicated last month it would fall short again this year because it has not yet been granted approval to raise prices.
"We need to assess the continuing relevance of that covenant," Tom Crouch, ADB country director for the Philippines, said at a briefing for the foreign media.
"Given the way in which the whole power sector is being restructured, a legitimate question needs to be asked – does it make sense for a covenant to be set in a market that is a competitive market?"
Under the power sector reform act passed last year, the government is seeking to privatize and introduce competition into generation, transmission, distribution and supply.
Crouch said the ADB had been discussing the relevance of the profitability covenant with Meralco but he added he could not say when a decision would be made on whether to scrap it.
He also said the government should make urgent progress in disposing of its generation and transmission assets to the private sector.
Such a move would help avoid the kind of power shortages and blackouts that plagued the Philippines in the early 1990s, he said.
"By the middle of next year we need to see some move on asset privatization," Crouch said.
The government had planned to sell the concession rights for its transmission assets in the fourth quarter of this year.
But that has been put off until April, pending congressional approval of an amendment that would allow the transfer of franchise rights to holders of transmission concessions.
The sale of the country’s generating assets is expected to follow three to four months later.