Meralco shares to rise with approval of new rate formula

MANILA, Philippines - Share prices of Manila Electric Co. (Meralco) are expected to rise during the next trading days after the government approved a new formula allowing it to charge higher rates. The company’s new investors, such as conglomerate San Miguel Corp. and the group of Hong Kong conglomerate First Pacific Co. Ltd., would stand to gain in the implementation of the performance-based rating (PBR), analysts said. The new scheme initially allowed the Philippines’ largest electric company to charge 25 centavos more to its customers, which number 4.5 million, the company’s website said. The scheme also replaces the return on rate base (RORB) formula which puts a 12 percent cap on the amount charged to consumers for the use of its distribution assets such as poles and wires. “The PBR has been long-anticipated," Paul Balaoing, PCCI Securities analyst, said. “It will mean additional revenues for Meralco and its share price will go up." Nikka Maloles, analyst at online stock brokerage firm 2TradeAsia, agreed. She said anyone associated with Meralco such will also benefit from the approval of the scheme. “Meralco's upside is solely dependent on the PBR. Utilities are heavily-regulated, that's why some investors stay away from them," said Maloles. “Meralco's revenues depend on the adjustments. The revenues also fund the company's capital expenditure requirements. I think San Miguel and First Pacific had already factored in that Meralco's PBR would already be implemented," she said. On Thursday Meralco's shares rose 1.087 percent to P93 each. - Cheryl M. Arcibal, GMANews.TV