Meralco to issue P4.8-billion fixed-rate notes

Manila Electric Co., the country's largest power distributor, has signed a P4.8-billion fixed-rate note facility to finance its plans to venture into power generation and to pay off its debts. In a disclosure to the Philippine Stock Exchange, Meralco said Tuesday that that the facility was arranged by BPI Capital Corp. as issue manager and bookrunner. “The 7-and-10 year notes, which were priced at 5.8327 percent and 6.4538 percent, respectively, will be issued on December 2 (Thursday)," Meralco said. Meralco chief finance officer Betty Sy-Yap told reporters in October that the power utility firm may take advantage of borrowing opportunities in the domestic and international markets brought by low interest rates. “Interest rates are very low, there’s so much liquidity in the banking system today. I think the confidence of investors in the Philippine business environment allows that," the Meralco official said. Last December, Meralco signed a P5.5-billion fixed- and floating-rate notes facility agreement with 13 institutional lenders to refinance its debts. It was lead-arranged by First Metro Investment Corp. with SB Capital Investment Corp as co-lead arranger and Insular Investment and Trust Corp. as co-arranger. The fixed-rate notes Meralco issued last year, which will mature in 2014, fetched P1.6 billion and another P3.9 billion from the sale of floating-rate notes due in 2015. The company spent over P7 billion for its capital expenditures this year to ensure the reliability of its system. Meralco has over 4.7 million customers in its franchise area. It is now controlled by PLDT, San Miguel Corp., First Philippine Holdings, and other minority shareholders. Power generation plans Late in October, Meralco announced plans to invest in generation facilities that will deliver at least 1,500 megawatts (MW) of power over the next five to six years, following the approval of its projects by the company’s board. The plans were in line with its distribution goals and were meant to manage overall electricity rates, especially generation costs, Meralco president and CEO Manuel V. Pangilinan said. The costs of power generation currently account for 60 percent of each consumer’s power bill. Meralco said it will set up a subsidiary — Meralco Power Generation Co. — to handle its planned power-generation facilities, most of which will use coal resources in a bid to lower electricity rates. The generation cost of its planned coal-fired plants, for instance, will be lower than the current level of P5 per kilowatt-hour. Pangilinan said the planned 1,500-MW portfolio was just a “conservative estimate" and that the figure could be higher. Under the law, power distributors are allowed to sell 50 percent of their own generating capacities. At present, only about 25 percent — or 1,200 megawatts — of Meralco’s supply comes from affiliate power-generation companies owned by the Lopez family. This means that, theoretically, Meralco can build up to 2,650 MW, the company said. The decision to increase the planned generation capacity from 1,500 MW will depend on the yearly growth in demand, the state of existing power plants in the country, and the entry of other new facilities into the national grid system. Oscar Reyes, chief energy adviser and chief operating officer of Meralco, announced in October that Meralco was planning to put up the first of several “peaking plants" within Luzon, whose generating capacities may add up to 200 MW. Peaking plants are power facilities that usually run in times when demand peaks. According to Reyes, Meralco expects these power plants to cost about $850,000 per MW. Based on the 200-MW target, this means Meralco may have to spend about $170 million, or more than P7 billion. — DM/VS/OMG, GMANews.TV