Meralco bond issue maintains top rating

MANILA, Philippines - Philippine Rating Services Corp. maintained its sterling credit rating for Manila Electric Co.’s outstanding bonds.

The outstanding bonds amounting to P18.5 billion retained their PRS Aaa credit rating from PhilRatings given the power utility giant’s strong cash flows and sustained profitability.

Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The issuer’s  capacity to meet its financial commitments on the obligation is extremely strong. PRS Aaa is the highest rating assigned by PhilRatings.

The rating also took into account Meralco’s dominant franchise, experienced management team, and conservative capital structure.

The bonds were issued in December 2013, with P11.5 billion due in 2020 and P7 billion due in 2025.

The outlook for the rating is stable.

Meralco is the largest electric power distribution company in the Philippines that provides power to over 5.7 million customers in the entire Metro Manila, Bulacan, Cavite and Rizal and Batangas, Laguna, Pampanga and Quezon.

About half of the gross domestic product (GDP) is generated in Meralco’s franchise area. The company’s market share is estimated at 74 percent for Luzon and 55 percent for the entire nation.

PhilRatings said Meralco has likewise consistently outperformed operating metrics relative to regulatory standards.   The company’s 12-month moving average system loss as of the end of June was at 6.6 percent, lower than the Energy Regulatory Board (ERC)-mandated cap of 8.5 percent  for all private distribution utilities.

“Meralco has exhibited strong cash flow generating ability and profitability through the years and this is expected to continue for the projected period, driven by the foreseen growth in the Philippine economy and domestic consumption,” PhilRatings said.

It ended the first half with P53.6 billion in cash.

“The company’s debt to equity  ratio was at 0.4 times as of the end of June, well within the regulatory limit approved by the ERC for the third regulatory period,” PhilRatings said.