MANILA, Philippines - Manila Electric Co., the country’s largest power retailer, may venture into clean power generation to further boost its cash flow and provide a full spectrum of energy, according to a top company official.
Meralco director and Metro Pacific Investments Corp. (MPIC) chairman Manuel V. Pangilinan said he has encouraged the power utility giant to consider investing in power generation assets, particularly renewable energy sources.
Renewable energy is energy generated from natural sources such as sunlight, wind, rain, tides and geothermal heat.
MPIC and sister firm Pilipino Telephone Corp., through a newly-formed unit, own the single largest stake in Meralco, with a combined ownership of 28.2 percent in the power retailer.
“We prefer that our investment in power generation be made through Meralco,” Pangilinan said, though he declined to name the power generation assets that interest the group. “It could be a greenfield or an existing project, preferably in Luzon.”
MPIC and Piltel are transferring their combined 28.2 percent interest in Meralco into Beacon Electric Asset Holdings Inc., a new unit equally owned by the two companies.
Beacon Electric recently signed an agreement with Lopez-owned First Philippine Holdings Corp. giving it an option to acquire over 74.7 million common shares of Meralco (equivalent to 6.7-percent of the power utility firm) for P300 each share or a total cost of P22.4 billion.
The exercise period for the call option is from March 15 to May 15, 2010.
Beacon Electric has entered into an agreement with a syndicate of banks for a loan of up to P18 billion over a period of 10 years to fund the acquisition of more Meralco shares. The facility will be secured by Meralco shares.
If the call option is exercised, the amended shareholders agreement will allow the Lopez Group to nominate one Meralco director for their remaining 6.7-percent Meralco stake while Beacon Electric and Piltel will be allowed to nominate four.
Together, the Lopez Group and Beacon Electric will be able to nominate five out of the nine non-independent directors of the power retailer.
Hong Kong-based conglomerate First Pacific Co. Ltd. has agreed to subscribe to P6.6 billion worth of MPIC’s three-year convertible bonds to partially fund its subscription of Beacon Electric’s shares.
Pangilinan pointed out that the standstill arrangement preventing the sale of any of the remaining Meralco shares owned by the Lopez Group to third parties for a period of three years, “serves to stabilize the ownership”of the country’s largest power distributor.
The Lopez Group sold a 20 percent stake in Meralco to PLDT/Piltel in March 2009 for $414 million and votes its remaining holdings with the Pangilinan – led group.
Together they control 48 percent of the utility while about nine percent is held by the public.
San Miguel Corp., on the other hand, holds a 27 percent interest in Meralco while ally Global 5000 Investments, headed by by former Trade and Industry Minister Roberto V. Ongpin owns about 10 percent.
Meralco owns the country’s largest power franchise and has become an attractive target after regulators allowed it to raise power tariffs by up to 27 percent, its first hike since 2003.