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THE ENERGY Regulatory Commission (ERC) said Manila Electric Co. (Meralco) is willing to pay only 14 billion pesos of an estimated 20 billion pesos in obligations that the power distributor has purportedly agreed to settle with the state-owned National Power Corp. (Napocor).
The amount is much lower than the 42 billion pesos that Meralco allegedly owes Napocor, which the government may convert into additional shares in the power distributor.
"Meralco has submitted a manifestation last September that it will pay only 14 billion pesos instead of 20 billion pesos ... [agreed on under a previous] settlement agreement between the two firms," ERC chairman Rodolfo Albano said at a news briefing.
He said Napocor has yet to comment on Meralco's position.
Albano's remarks followed a statement earlier Monday from presidential spokesman Ignacio Bunye, who said the government was undertaking a review of Meralco's debt to the government arising from Meralco's contract to buy electricity from Napocor.
Bunye was reacting to a newspaper report that said a debt-to-equity conversion is one of the options being considered by the government.
Under a 10-year power supply contract that expired in 2004, Meralco committed itself to purchasing 3,600 megawatts of electricity daily from Napocor.
However, Meralco's purchases from Napocor have been lower than the contracted volume. It now buys more from its affiliates such as First Gas Holdings Corp., which will undertake an initial public offering early next year.
Albano said the ERC has nothing to do with the government's supposed plan to take over Meralco.
"If the government wants to exercise its right to manage Meralco, it is its option. The ERC cannot do anything about this," he said.
ATR-Kim Eng Securities Inc said it has downgraded Manila Electric Co (Meralco) to a "hold" from "long-term buy" following reports that the government is looking into the possibility of taking over the power distribution utility.
Based on newspaper reports, the government claims that Meralco owes it 42 billion pesos, which may be converted into additional shares in the company.
ATR-Kim Eng warned the matter may have to be settled in court, and the dispute may drag on for a long time.
"Meralco's option is to elevate the resolution of the dispute to arbitration. The news [report] has caused us to rethink our long-term position on Meralco considering its numerous problems," ATR-Kim Eng analyst Laura Dy-Liacco said in a research note.
She said she was previously hoping for a small sustainable uptick in the share price in anticipation of a favorable decision soon from the Energy Regulatory Commission on a rate hike petition by Meralco.
"However, this latest news means we might have to wait a while longer," she said.
On Monday, the Energy Regulatory Commission said Meralco was willing to pay only 14 billion pesos of an estimated 20 billion pesos in obligations that the power distributor had agreed to settle with the state-owned National Power Corp (Napocor).
In 2003, Meralco agreed to pay Napocor 20 billion pesos to settle their dispute over a 10-year power supply contract.
Under the contract that expired in 2004, Meralco committed itself to purchasing 3,600 megawatts of electricity daily from Napocor.
However, Meralco's purchases from Napocor have been lower than the contracted volume. It now buys more from its affiliates such as First Gas Holdings Corp.
"The issues are complex but should Napocor back out of the settlement agreement, it will send a negative signal to investors," Dy-Liacco warned.
By MYRNA M. VELASCO
The Manila Bulletin
The net settlement amount jointly applied for by state-owned National Power Corporation (NPC) and Manila Electric Company (Meralco) that is now pending for deliberations and public hearing is just set at P20.05 billion, according to the Energy Regulatory Commission.
This was clarified by ERC chairman Rodolfo B. Albano, as he debunked claims of any P42 billion supposedly lodged by state-owned NPC before the Commission on a settlement deal it forged with Meralco.
"I would like to stress that it is a joint application between NPC and Meralco and the amount of P20 billion (net) was already agreed upon by the parties before they filed it before the Commission," he stressed.
It would be noted that at the conclusion of their mediation in July, 2003, the parties announced that their "settlement agreement" provides that Meralco will compensate NPC some P27.515 billion for energy contracted but not consumed for the last three years of the contract, stretching from 2002 to 2004. The contract provides for at least 3,600 megawatts of supply power procurement by the utility firm from NPC.
The total cost of NPC displaced capacity that would require compensation from Meralco will be partly offset by the P7.465 billion claims also lodged by the utility firm in the settlement agreement.
However, it was pointed out that when the forecasted gross compensation of P27.515 billion for NPC was estimated; the NPC–Meralco supply contract has still one-and-ahalf year before its scheduled expiration.
So, when the utility firm run the numbers after their deal lapsed, it found out that its volume of supply procurement from NPC went up, hence, the lower amount of claims due to the state-owned power firm.
Meanwhile, NPC noted that it remains committed to the original filing on the settlement agreement and that it is just actually awaiting the ruling of the ERC on it so the issue could be finally put to rest.
As far as the power firm is concerned, it noted that it does not have knowledge of any existing document on the P42 billion claims from the settlement.
Albano also clarified that at the course of public hearings on the settlement deal, Meralco made supplemental filing on re-adjusted claims amounting to P14 billion because of higher procurement it made on the remaining duration of their 10-year contract for supply of electricity until it lapsed in December 2004.
Meralco vice president and utility economics head Ivanna G. dela Pena said the process of adjustment was provided for under the settlement agreement; so the submission of updated computation was warranted.
But she pointed out that the net settlement amount could not go further than the original estimate; and in fact, it should really go down because Meralco’s power purchase went up from baseline quantity in most months after the mediated deal was finally sealed.
Meralco said the final settlement deal, which is now pending for approval by the ERC, aims to address the concerns of the parties in regard to contract quantities, the provision of the transmission capacity and dispatch the utility firm’s contracted independent power producers; and the continued purchases from NPC of its directly-connected customers within its franchise area.
The utility firm likewise pointed out that the settlement deal it has entered into with NPC is not an abrogation of their power supply contract because both parties have adhered to the process.
The agreement further provides for the dispatch of its IPPs at contract levels (which are usually within the range of 83 to 86-percent of installed capacities of First Gas Power Corporation; and Quezon Power Phils. Ltd. Co; and this is seen to translate to reduction in electricity bills of Meralco customers; initially estimated at P0.03 per kilowatt hour (kWh), when computed in 2003.
NPC and Meralco made their respective filings at the ERC for their claims in the settlement deal which are to be recovered over a five-year period or as prescribed by the industry regulator.
MERALCO questions authenticity of NAPOCOR memo
Manila Electric Co., the country's largest power distributor, Wednesday disputed the authenticity of a memorandum outlining options by which the government can collect the alleged P42 billion debt MERALCO owed the National Power Corporation (NAPOCOR).
abs-cbnNEWS.com 12/21/2005 3:57:50 PM
http://www.abs-cbnnews.com/topofthehour ... ryId=25344
MERALCO chairman Manuel Lopez also urged energy officials to be "more forthright in their initiatives to address the multidimensional problems of the industry and not to confuse objectives and prescriptions or to mislead the public with false solutions."
"Proposals such as those contained in the memorandum or statements like those attributed in today's issue of the [Philippine Daily Inquirer] (PDI) to consultants and administration officials insisting on the P42 billion debt do nothing to clarify the real issues and to provide constructive solutions to the problem of the industry," Lopez said.
He added: "Moreover, we are most unfair to those who may wish to seek redress when those who may be accountable are nameless and faceless government officials."
Lopez reiterated that the company does not owe NAPOCOR P42 billion but P14.3 billion as stated in the settlement agreement it signed last July 2003.
no such thing daw!
Lopez: Union Fenosa wanted to quit Meralco
Union Fenosa of Spain, the foreign partner of the Lopez group in Manila Electric Co., is extremely disappointed with current issues hounding the country’s largest power distributor, a Meralco official said yesterday.
“They (Union Fenosa) are holding on (to their investments in Meralco) but they have lots of disappointments in making the $200 million investment six years ago,” Meralco chairman Manuel Lopez told reporters in a briefing.
Lopez said Union Fenosa officials in his last visit to Spain in October this year were “getting restless” in their investments in Meralco and wanted to “sell out.”
He said he was able to convince the Spanish firm to hold on to their investments after assuring that “things will get better.”
Meralco is 23 percent owned by a joint venture of Spain’s Union Fenosa and the Lopez family’s First Philippine Holdings Corp. Union Fenosa owns about 9 percent of Meralco.
Union Fenosa is a diversified business group engaged in the generation, distribution and commercialization of energy (electricity and gas) in Spain.
The Philippine government controls about 25 percent of Meralco while the rest is held by the public and other investors.
-Hey sino source nito? Please always cite the source, plus the link bank to the url of the source, and no copy pasting the whole article. copyrights issues! -dragon
Bottomline, may babayaran ang Meralco sa gov't. Be it 14B, 20B or 42B. Kahit 14B lang, it's a very huge obligation.
What puzzled me bakit may power crisis nung 1997. Why was there an immediate need for an emergency power given to FVR to push with the creations of IPP's. Was there a huge demand that NPC cannot meet? If it's the case, bakit ang sabi ng Meralco, yung demand nila ng mga taon na yun ay bumaba kaya sila pinagbabayad ng kaukulang power purchase from NPC. From my understanding, Meralco incurred huge losses because they cought so much supply from NPC pero yung demand nila bumaba. In short they over shoot their estimates. Why then the Filipino ws lead to believe that there was a power crisis despite the fact that Meralco can't even UTILIZED the supply it bought from NPC.
IF MY HUNCH IS CORRECT, GINAWA TAYONG :) NG GOBERYO NOON. THERE'S NO POWER CRISIS. WE ARE LEAD TO BELIEVE THERE WAS PARA E FAST TRACK YUNG IPP CONTRACTS WHICH IS MILKING THE COUNTRY AND THE FILIPINO FOR SO MANY YEARS.
There was indeed a major power crisis during the last years of Cory Aquino. I can still distinctly remember the 10-hour daily brownouts during that period. I'd go to work and have to take the stairs up to the 8th floor everyday, then when i'd go home, brownouts would start at 7 p.m. until 5 a.m. Many of the NPC plants were conking out and had to undergo long maintenance and rehab works. The economy stagnated.
All the additional IPPs were built on the assumption that the economyc would grow consistently at 5%, but then we were hit by the asian financial crisis in '97. Thus, the projections were all out of whack resulting in oversupply. That's all factual and can easily be verified through adequate research.
14B was already the assumed figure by most analysts and has been imputed in the stock price. if the liabilities increase then the price should react accordingly.
there was a power crisis and the only way to encourage the IPPs to come here was to guarantee the contracts (take or pay). how long would it have taken us to get out of the crisis if we prolonged negotiations.?
meralco has been losing money because it has not been allowed to increase rates. fph has been making money because meralco buys power at a higher cost than npc whether meralco uses it or not. ditto with first gen. wala pa atang 3 years bawi na capital. then they borrow money (shades of ABS!) and use it to make more money...
By Rey E. Requejo
The Manila Standard
THE Bureau of Internal Revenue (BIR) has been asked to collect alleged tax deficiencies of the Manila Electric Co. (Meralco) amounting to P85.3 billion covering the years 2002 and 2003.
In a two-page complaint filed with BIR, Danilo Lihaylihay said the government should collect from the Lopez-owned power distribution firm P85,369,699 in internal revenue taxes for its contracted purchases of energy from the National Power Corp. totaling 60.09 gigawatt-hours (GWh) at P2.46 per kilowatt-hour, in the aggregate amount of P147.83 billion for the period.
Meralco officials said they could not comment on the complaint because they have yet to receive a copy of the document.
“I have to get a copy first,” said Meralco president Jesus Francisco.
In Malacañang, presidential adviser on political affairs Gabriel Claudio said BIR has not been ordered to go after the Lopez family by the Arroyo administration.
“Politics has nothing to do with it. We are aware of the campaign being waged by BIR relative to our economic agenda. The Lopezes are not being targeted for political reasons,” Claudio explained.
Lihaylihay was the same BIR informant responsible for exposing the tax deficiencies of Forever Living, a multi-level marketing company, for failing to pay P1.2 billion in taxes due to the government. The firm, owned by the family of Parañaque Rep. Roilo Golez, settled the case with BIR by paying P179 million in February 2005.
Lihaylihay said he was also responsible for the filing of a tax evasion case against Honda Cars Philippines Inc.
The P85 billion was broken down by Lihaylihay into P14 billion representing taxes due to the government for the purchase of P147.8 billion worth of electricity from Napocor; P7.39 billion as fraud penalty; P3.69 billion as late payment penalty; and P51.73 billion representing the 20 percent interest per annum from 1995 to 2005.
Lihaylihay also asked BIR to collect from Meralco some P7.7 billion in uncollected documentary stamp taxes from 1995 to 2005.
In his complaint, Lihaylihay urged BIR Commissioner Jose Mario Bunag to issue the necessary writ of garnishment, distraint or levy on the bank deposits and assets of Meralco to satisfy the government’s tax claims.
Lihaylihay, however, clarified that he was not harassing Meralco when he executed his two-page affidavit.
As part of its intensified program to go after tax evaders under its RATE (Run After Tax Evaders) scheme, BIR has been encouraging the people to report tax cheats to the government. The BIR pays out rewards to every informant based on actual collected taxes and penalties from proven tax evaders.
In an interview, Lihaylihay, who claimed to be the president of a group he called Tax Informers Network, said BIR should act promptly on this new tax evasion case filed against Meralco to prove that the government is indeed sincere in its campaign against tax evaders.
“I hope that the BIR will act on it immediately to show to the people that they are sincere in their effort to go after tax evaders,” said Lihaylihay, a graduate of criminology and once worked as paralegal of National Federation of Labor Unions.
“Since the government badly needs funds to bankroll its various projects, the BIR should not dilly-dally in looking into the tax liabilities of Meralco,” the informant added.
Lihaylihay warned that he would take the necessary actions — both administrative and criminal — against BIR officials led by Bunag if they refuse to act on his case against Meralco. With Joyce Pangco Pañares and Alena Mae S. Flores
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