Investors cheer possible Meralco franchise renewal

MANILA, Philippines —  Strong investor confidence lifted the stocks of Manila Electric Co. (Meralco) after the House of Representatives passed on second reading the bill extending the company’s franchise for another 25 years, according to analysts.

Meralco’s share price maintained its momentum, rising by 1.34 percent to close at P455 apiece yesterday.

Analysts interviewed by The STAR attributed the positive investor sentiment to the latest development in Meralco’s legislative franchise renewal.

House Bill 10926, which seeks to extend Meralco’s operation, was approved by a voice vote last Tuesday.

Once enacted into law, the power distribution giant is expected to provide electric service to its franchise coverage until 2053.

“An approval will ensure the continuation and stability, which can lead to increased investor confidence,” AB Capital Securities Inc. vice president Jovis Vistan said.

Cristina Ulang, head of research at First Metro Investment Corp., said the possible franchise renewal is a “strong vote of confidence on the Meralco brand.”

The current franchise of Meralco is set to expire in 2028.

“This development lessens concerns regarding its franchise renewal, indicating that regulatory risks will be significantly reduced moving forward,” said Claire Alviar of Philstocks Financial Inc.

During his sponsorship of the bill, Albay Rep. Joey Salceda said that Meralco has complied with its “least cost, efficiency and reasonable price mandates,” as well as all the rules of the competitive selection process.

“Meralco’s mandates under its current franchise were clear. It has met its mandates, hence its franchise merits renewal. It is among the lowest system losses and is highly dependable,” Salceda said.

Meralco’s power rates, the congressman claimed, are on the lower end of rates among the distribution utilities in Southeast Asia.

Administration lawmakers approved on second reading late Tuesday the bill in the House of Representatives granting Meralco another franchise to operate for another 25 years.

The franchise of the country’s largest power distributor, whose area of coverage includes Metro Manila and nearby southern and northern provinces in Luzon, will expire on 2028, or four years from now, which means Meralco’s franchise will be valid until 2053 once the bill is signed into law.

“For the past few months we have held meetings to discuss the franchise application of Meralco. Since then, we have received various letters of support,” panel chairman Rep. Gus Tambunting said after his committee consolidated House Bills 9793, 9813, 10317 and its amended version.

The three measures were authored by Salceda (ways and means committee chairman), Rufus Rodriguez (committee on constitutional amendments chairman) and Lord Allan Jay Velasco (committee on energy chairman).

“The franchise is possibly the single most important private bill  for industrial policy in this country. Meralco services an area responsible for about half the country’s entire GDP (gross domestic product), and about 26 percent of the population,” Salceda, second district congressman from the province of Albay, said.

“Meralco is an exemplar of how service reliability can create economic growth and development. Meralco has also fully complied with the Energy Regulatory Commission’s rules and issuances. Some P48.3 billion in consumer refunds have also been delivered in full,” Salceda added. –  Delon Porcalla