Meralco mulls P3-B fixed-rate corporate notes issue

MANILA, Philippines - Power retailing giant Manila Electric Co. (Meralco) is planning to issue P3 billion worth of fixed-rate corporate notes this month to fund general corporate purposes.

Sources said the company has allotted an overallotment option of P2 billion.

The notes, which have a maturity of seven years to 10 years, will be arranged by HSBC.

The issuance of notes is aimed at taking advantage of the low interest rate environment and the liquidity in the banking system.

Meralco is working on a lower capital expenditure budget of P37.2 billion over a four year period. The company was earlier looking at a capital budget of about P45 billion.

The capex was approved by the Energy Regulatory Commission under the performance-based regulation scheme.

Meralco is the country’s largest electric power distribution company, with franchise service area covering 9,337 square kilometers. It provides power to 4.9 million customers in 31 cities and 80 municipalities, which include Metro Manila, the provinces of Rizal, Cavite and Bulacan, and parts of provinces of Pampanga, Batangas, Laguna and Quezon.

Turnover of business establishments in the franchise area accounts for almost 46 percent of the country’s gross domestic product or GDP.

Through 65-percent owned unit Clark Electric Distribution Corp., Meralco holds the power distribution franchise for Clark Special Economic Zone in Clark, Pampanga. CEDC franchise area covers 32 square kilometers and 1,641 customers.

In 2010, consolidated energy sales of the company represented 73 percent of the sales of the Luzon grid and 55 percent of the Philippines’ total energy sales.

Meralco is organized into three major operating segments, namely, power, real estate and contracts, services and others.

Last year, Meralco PowerGen Corp., a wholly owned subsidiary, was reorganized as the company’s vehicle for potential entry into power generation. As of March 31, 2011, MPG has begun development of the proposed power generation plants.