Meralco forms team to ensure viability

The Manila Electric Co. (Meralco) announced yesterday the creation of a "special committee" to help the country’s largest power distributor remain viable after the Supreme Court ordered it to refund billions of pesos to customers.

The committee is composed of well-known leaders in banking and finance, led by former prime minister Cesar Virata, currently the president of the Bankers Association of the Philippines, a Meralco statement said.

The Supreme Court ruled last month that Meralco overbilled its customers from 1994 to 1998, and the firm estimates the funds involved could be as much as P28 billion.

The firm earlier said it would have to ask its creditors for a restructuring of its debts on expectations of losses if the refunds were made, but at the same time appealed against the court’s decision.

However, the Supreme Court rarely reverses its decisions.

Meralco spokesman Elpi Cuna said they might file the appeal today. "We are preparing the documents and we will probably submit it tomorrow," he said.

The special committee is to "oversee the formulation and execution of a sustained viability plan and program for Meralco," Meralco’s statement said.

"With the commitment of these individuals to actively and directly participate in such a critical understanding... Meralco strongly demonstrates to the various stakeholders its intention to firmly resolve the concerns and issues facing the company," said Meralco chief executive Manuel Lopez.

"We believe the creditor communities, who in particular have been concerned about recent developments, will find this a reassuring move towards ensuring the financial stability of the company," Lopez said.

The other members of the committee are audit and corporate governance expert Washington Sycip, founder of Sycip, Gorres and Velayo accounting firm; former Commission on Elections chief Christian Monsod, an expert on legal and regulatory affairs; banker Octavio Victor Espiritu, an expert in credit and finance and a former president of Far East Bank and Trust Co.; Monico Jacob, former chairman of Petron Corp. and an expert in corporate restructuring; and foreign investment expert Emilio Vicens, country representative of Union Fenosa SA.

"Meralco’s reason for being, first and foremost, is to ensure continued, reliable and safe electricity distribution service to the public," Meralco said in its statement.

The government, which has a 25-percent stake in Meralco, has ruled out taking over the company’s operations but said it wants to appoint representatives to help it maintain financial stability.

On Saturday, President Arroyo vowed the government would implement the refund order if as expected the Supreme Court turned down the Meralco appeal.

On Nov. 15, the five justices of the Supreme Court’s third division voted unanimously for the refund based on a petition of the Energy Regulatory Board (ERB), the predecessor of the Energy Regulatory Commission (ERC).

After years of allowing utilities to treat income tax as an operating expense, the ERB in early 1998 reversed itself and declared that income tax should not be considered in computing a utility’s return-on-rate-base.

Meralco resisted the ERB order and elevated the case to the court, winning a decision in the Court of Appeals in 2000. This prompted the ERB to bring the case before the Supreme Court.

The order will worsen the woes of the power distributor which has already been unsuccessfully petitioning the ERC for a power rate increase.

Meralco said it will have even less money to avoid a debt repayment crunch, amounting to P31 billion, most of it long-term and covered by a government guarantee.

Credit ratings agency Standard and Poor’s said Meralco has P5 billion worth of debt maturing in 2003, P7.2 billion in 2004, and P6.4 billion due in 2005. – With AFP