San Miguel’s entry into Meralco as a major shareholder raises a lot of uncertainties not only for the country’s biggest power distributor, but for its investors and millions of customers as well.
Last month, the government’s pension fund announced its intention to sell its 27-percent stake in Meralco to San Miguel at a price of P90 per share, double the current market price, and for a total of P30 billion. The amount was to be paid in three years, but more specific details of the transaction - such as the down payment or the interest rate on the amortization - were not made available.
GSIS said it would book P12.7 billion in net profit from the transaction. It comes at a time when the pension fund is under suspicion for possible losses after investing overseas at a time of intense market volatility globally.
Few were surprised with the news as talks had been going around town that the state pension fund had for months been trying to wrestle control of Meralco from the Lopez family with the objective of handing it over to the Cojuangco-led conglomerate at a premium - a rumor consistently denied by the two protagonists.
For Meralco, this means having on board a conglomerate with lots to spend, specifically over P100 billion in cold cash from the recent sale of several assets, and a kitty of at least $750 million for new investments.
For San Miguel, the acquisition marks the realization of a two-year old quest to expand into heavy industries where much of its planned expansion is hinged on.
Apart from Meralco, it is eyeing to take control of oil refiner Petron and an Indonesian mining firm, highlighting San Miguel’s preference to always be at the helm - something that doesn’t bode well for the Lopez family, who’s now hanging on by a slim majority in Meralco.
Would Danding be able to wrestle control of Meralco from the Lopezes? This is a question on everyone’s mind. Or will they exist harmoniously for the singular goal of profit?
Twists and turns at Meralco
Meralco, over the years, has been a story of twists and turns – and one that has caught the fancy of many.
Early this year, what was supposed to have been a minor case about which between the SEC and the regular court should rule on the legality of Meralco’s annual stockholders meeting in May has turned into a public spectacle.
It was suddenly about power play, corruption, influence peddling and the vulnerability of justices to succumb to such temptations. The case highlighted the struggle between two power blocs - the Arroyo government and the Lopez family - and all the stops they’d pull to gain control of Meralco.
The Government Service Insurance System, on the other hand, despite all the controversies it had been into, did consumers a big favor when it served as a fiscalizer on Meralco’s board.
With GSIS on board, the consuming public was made aware of alleged abuses Meralco had committed and also brought to fore several contentious issues including the return of customers’ meter deposits.
Not to be ignored
Meralco is indeed too big an issue to be ignored. It is after all the country’s largest power distributor whose franchise accounts for about half of the country’s economic output.
Depending on their intention, any group who ends up controlling the company would have the opportunity to probably lower rates or book billions in profits, aid economic growth or hostage the economy, or perhaps win a presidency.
Meralco has such great implications on the economy that it shouldn’t have been left to one power bloc alone. Years ago, Congress had the opportunity to do the Filipino people good when dozens of Meralco’s franchises were up for renewal.
They could have ended Meralco’s monopoly by splitting up the franchise into several blocks - like Metro Manila’s water concessions - yet very generous lawmakers ended up giving Meralco a single mega-franchise encompassing the entire Manila capital as well as provinces nearby and over a 50-year period.
Power price spikes
In the meantime, let us turn our attention to an even larger concern, something whose impact on millions of customers is immediate - power rates.
In July, a transformer at a major power transmission station in Bulacan conked out, causing a sharp spike in prices at the wholesale electricity spot market. Computations showed spot prices in the middle of July shot up to about P18 per kilowatthour from less than P3 the previous month.
If there’s anything to be learned from the latest price spikes in the spot market is the realization that years of underinvestment in the power sector has started to catch up on us.
Expensive Malampaya
Meanwhile, Meralco last week announced that the generation rate component of its monthly bill will rise by P0.30 per kilowatthour in November as a result of expensive natural gas, which price is indexed on a basket of oil prices.
Given the six-month lag in computing gas prices from Malampaya, the record high prices in the second and third quarter have yet to be felt by consumers.
Fortunately, the government is in a position to help heavily-burdened consumers since the state is the owner of the resources. The royalty it receives from the Malampaya operations, for this year alone, is expected to reach P37 billion. This could go a long, long way to helping our industries improve their competitiveness, something that they find elusive given our extraordinarily high power rates. If only the revenue would be spent wisely.
FilOil Flying V strengthens collegiate basketball commitment
The commitment of the Villavicencio group of companies to the development and promotion of collegiate basketball has been broadened during the past years. Raffy Villavicencio, the sportsman son of chairman Chito Villavicencio, is the moving spirit behind FilOil Flying V Sports that popularized the pre-season competitions that helped prepare teams for the new season.
Now FilOil Flying V Sports is also the main sponsor of the “Sweet 16” Final Challenge, the last stage in the 2008 Philippine Collegiate Championship games. With this funding assistance, the search for the national collegiate champion for 2008 will be completed.
As sponsor of this segment, FilOil Flying V is awarding scholarship grants totaling P850,000.00 to the top four teams. A major portion of the FilOil sponsorship package for the last stage of the Collegiate Championship is the cost of game operations and use of venue, transportation and billeting expenses of visiting teams.
Although a modest admission fee to the games will be charged, Raffy made it a point to set aside the bleacher section as free admission where students and schools’ band and cheering squad will be located.
For more details about the biggest collegiate basketball event for the year presented by SMART, PLDT, FilOil Flying V and KFC visit the official website, www.CollegiateChampionsLeague.net and www.gameface.ph, internet media partner of PCCL.
Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.