MERALCO (MERB – P20.50) monopoly over!
http://news.inq7.net/nation/index.php?index=1&story_id=71353
The Philippine Daily Inquirer (PDI) reported that MERALCO has agreed to let other power producers sell directly to its large industrial and commercial users that consumes at least 1 MW per month. Albay Rep. Joey Salceda is said to have brokered the deal between the Lopez family and the government.
Beyond the headlines, let us see how the move will likely impact the protagonists in the saga.
MERALCO – I expect investors to react negatively to the news. However, looking beyond the headlines, the move is actually good for the company. Here are my arguments:
First, Meralco gets to make peace with the government and keep its franchise.
Second, only 494 out of its 360,000 commercial and industrial customers will be affected. So roughly only 25% of its
revenue stream will be affected.
Third, investors can now rate Meralco based on the continuing value of its franchise. Share price of Meralco has been under pressure due to the threat that the government might take over its operations.
Lopez family – The move signals that the family is willing to make peace with the Arroyo administration. It is an open secret that the Lopez family is at odds with the current administration. The move might signal a start of a warming relationship with the current administration. Positive sentiment might spillover to other Lopez counters such as ABS, FPH and BPC.
Arroyo administration – I am no fan of GMA, but I have to give it to her for showing political will in “cracking” the power sector. Based on how things are brewing, the current administration is bent on pushing the Electric Power Reform Act (EPIRA). GMA can use this as the hallmark of her administration similar to the liberalization of telecom sector that was implemented during the Ramos era. The move will definitely send a strong message to the foreign fund manages. So lets see how the IPO of NAPOCOR and the privatization of Transco will prosper.
