Gov’t to sell Meralco shares as a single block

Government shares in Manila Electric Co. (Meralco) would be sold as a single block possibly in the second half of the year, finance officials said yesterday.

After closing the sale of its shares in Philippine Long Distance and Telephone Co. (PLDT), Finance Secretary Margarito B. Teves told reporters that government would focus its efforts on selling its Meralco shares.

According to Teves, the government prefers to sell its shares as a single block and the Department of Finance (DOF) would set discussions towards this strategy with the three government financial institutions (GFIs) that also own part of Meralco.

The government owned 29 percent of Meralco with the National Government holding seven percent through the Privatization Management Office (PMO).

The rest is owned by the Social Security System, the Government Service Insurance System (GSIS) and the Land Bank of the Philippines (LandBank)—all state-owned corporations.

"We would have to find out and settle whether the GFIs also would like to sell their shares with us," Teves said. "Other things being equal, that would help improve the value of the government’s Meralco shares than if they were sold separately."

According to Teves, unloading the shares of government in Meralco would make the privatization even more attractive particularly to huge investors.

Teves said talks with the GFIs have not started but he intends to begin individual discussions to determine the possibility of selling the shares as a block instead of separately.

"I want to find out what their thoughts are about selling the shares as a block," Teves said. "It is possible that some of them might want to defer disposing of the shares instead of selling."

According to Teves, the DOF wants to complete the transaction within the year, possibly within the second half of 2007.

Teves said the ultimate objective of the government was to continue consolidating its fiscal position and gradually reducing its total debt burden.

"Along these lines, we are looking at our other assets, including the shares in San Miguel Corp. which is exclusively owned by the National Government," Teves said. "Anything that will help the consolidated public sector."

Teves said the government had no indication of how much its shares were worth but earlier this year, Meralco chairman Manuel Lopez had already expressed interest in acquiring a portion of the government’s shares to raise its stake in the country’s biggest power distributor.

Teves said, however, that the sale of the shares would go through the usual bidding process to maximize the value of the asset. "That’s why we would prefer to sell the entire thing as a single block," he said. "It would make better business sense that way."

At stake are over 212 million shares equivalent to a 12- percent stake in Meralco.

The government holds a 29- percent stake in Meralco while the Lopez group’s First Philippine Holdings Corp. owns 14 percent. Spanish power firm Union Fenosa has a nine- percent stake, while the remaining shares are held by the public and other investors.

Union Fenosa has also indicated that it was considering the possibility of increasing its stake in Meralco, reflecting the Spanish group’s increasing confidence in the country’s power sector.