Metro Pacific to increase Meralco stake — Pangilinan

Businessman Manuel V. Pangilinan has rejected talk that the listed holding firm he heads is in short supply of funds to increase its ownership in Manila Electric Co. (Meralco), saying money is available for an additional 6.7 percent of the country's largest power distribution utility. Metro Pacific Investments Corp. will buy the stake, to be provided by Meralco shareholder First Philippine Holdings Corp. of the Lopez family under a deal late last year, Pangilinan said. Both camps have twice extended the signing of the so-called call option deal, which allows Metro Pacific and allied firms to hike their interest in Meralco to 41.4 percent. First Holdings and Metro Pacific were supposed to wrap up the deal last Jan. 15 but moved it to Jan. 29 and then to Feb. 28. No explanation was given for the extensions, fueling market talk that funding is an issue. "The situation is getting murky to the point where I think the reputation of Metro Pacific is being damaged, that it doesn't have the funding," Pangilinan told BusinessWorld on Friday. "We're getting ready with the funding. It's not a funding issue," he added. Metro Pacific is the Philippine unit of Hong Kong's First Pacific Co. Ltd., which partly owns Philippine Long Distance Telephone Co. (PLDT). Mediaquest Holdings, Inc., which is owned by the Beneficial Trust Fund of PLDT, has a minority stake in BusinessWorld. Pangilinan was a surprise guest at a Friday luncheon President Gloria Macapagal-Arroyo had hosted for BusinessWorld, baring before the President plans for Meralco to go into power generation to try to lower electricity rates. Mrs. Arroyo, who had complained of Meralco's high rates ahead of Pangilinan's entry to the power utility early last year, expressed approval of the move, claiming that "sweetheart deals" with power suppliers were a problem. The Lopezes, who used to have sole management control of the utility, also own the Sta. Rita and San Lorenzo natural gas plants that have long-term supply contracts with Meralco. Metro Pacific is independently entering power generation, submitting a letter of intent to the government to buy the Angat hydroelectric plant along with Ayala Corp. early this month. The Lopezes first sold a 20-percent stake in Meralco to the PLDT group in March 2009, raising P20 billion to retire mounting debt incurred in their foray into power generation, particularly geothermal energy. Firms allied with Metro Pacific later obtained an additional 14.7-percent stake from the open market, sending Meralco share prices skyrocketing. An alliance with the Lopezes fended off a takeover attempt last year by diversifying food and beverage conglomerate San Miguel Corp., which has a 27-percent stake but claims to be able to muster 43 percent. Last November, the power struggle took another twist when the son of mall tycoon Henry Sy, the country's richest man, offered to buy half of the Lopezes' remaining 13.4 percent Meralco stake for P300 apiece. Pangilinan's group, which had the right of first refusal, matched the offer under complicated terms — Metro Pacific first extended an P11.2-billion loan to the Lopezes in November, and then would be given a call option to expire on March 31, 2010 over the 6.7 percent stake for P22.4 billion. The latest deal will allow the Metro Pacific-PLDT bloc to hike its interest in Meralco to 41.4 percent from 34.7 percent. The Lopezes will reduce their stake to 6.7 percent from 13.4 percent. Pangilinan said "there are things that we are preparing for that is guiding the postponement" of the call option deal. He did not elaborate. First Holdings was also mum on the issue. "There are various aspects still being discussed. It would be premature to disclose them at this time," said company President Elpidio L. Ibañez through a text message sent by Benjamin R. Lopez, First Holdings vice-president and head of corporate communications. Pangilinan also said his group had yet to receive official notification that the Lopezes intended to sell another 1.7 percent stake in Meralco. "Not until we have received official notice," he said when asked whether Metro Pacific would shell out money for more Meralco shares. Shares of the utility went down by nearly 5 percent to P160 apiece on Friday, while First Holdings shed 1 percent to P48. Metro Pacific lost more than 4 percent to P2.22 on Friday. — Felipe F. Salvosa II with a report from Kristine Jane R. Liu