Meralco to float $600-M bonds to finance maturing loans

The Manila Electric Co. (Meralco) said yesterday it would float some $600-million worth of bonds to finance its maturing obligations and operating expenses this year.

In a disclosure to the Philippine Stock Exchange (PSE), Meralco corporate secretary Gil San Diego said "the proceeds will be used to finance activities related to the company’s comprehensive liability management plan (CLMP).

Among these CLMP-related expenditures are: the provision of security to Meralco’s existing unsecured creditors over assets covered by mortgage trust indenture; and new financing to address funding needs for working capital, capital expenditures, debt financing and other requirements.

It has been a long time since Meralco floated bonds because of its difficulty to convince investors to invest in the company due to the absence of a rate increase for the past years.

Recently, the ERC granted Meralco a five-centavo overall tariff rate increase for the unbundling of rates plus 8.75 centavos for the deferred purchased power adjustment (PPA). The two rates will be implemented simultaneously by Meralco. The deferred PPA will be collected by Meralco from its customers for three years.

This year, Meralco will need some P10 billion to restructure maturing debts.

Daniel Tagaza, Meralco vice president for finance, said the restructuring of the loans is one of the options being eyed under the power firm’s comprehensive financial management program (CFMP).

The CFMP, Tagaza said, is being worked out by two of the firm’s largest creditor banks, Citibank N.A. and Bank of Philippine Islands (BPI), which are now acting as Meralco’s financial advisors for the CFMP.

Earlier, Tagaza said the two financial advisors have been looking at two options: To refinance the debts through new borrowing or declaring a moratorium of payments on its debts.

Tagaza said they expect to suffer a loss for 2002. "Based on our unaudited financial statement, we got a net loss. The losses were higher than the P700-million loss we incurred in the third quarter of 2002," he said.

Meralco treasurer Rafael Andrada, in a separate interview, said the power distribution firm will be spending P7 billion on capital expenditures this year.

The P7-billion capex will support the company’s projected sales volume growth for 2003 of about three to five percent, higher than the 0.5 to 0.6 percent registered in 2002. "We normally use the country’s projected gross domestic product (GNP) as our benchmark for sales growth," Tagaza said.

Andrada said the capex, which is at the same level as the 2002 budget, will be funded by the company’s internally-generated funds.