Meralco rates seen to drop by 30¢/Kwh

The rates of Manila Electric Co. (Meralco) may go down by as much as 30 centavos per kilowatt hour once the 1,000-megawatt (MW) Sta. Rita gas-fired power plant goes into commission.

In an investors' report on the Lopez-run First Philippine Holdings Inc., Cazenove & Co. said the entry of the Sta Rita's first block (500-MW) alone "'is expected to pare down Meralco's rate by P0.15 per Kwh and approximately P0.30 per Kwh if the whole capacity would be dispatched."

The Sta. Rita power plant is being operated by First Gas Power Corp. (FGPC), a subsidiary of FPHI like Meralco. The plant will generate power exclusively for the use of Meralco to feed electricity to the whole of Metro Manila and a large portion of Luzon.

The first block of the power plant, which is located in Batangas, is expected to be operational by April. The second block is scheduled to be on stream three to four months later.

"Given the commencement of tests, there is an increasing likelihood that the First Gas will really be able to dispatch power this time around with no delay. Recall that initial plans for the power plant's commissioning as early as November 1999," it said.

The original schedule was delayed due to some complications in its construction, which is being undertaken by Siemens Inc.

The pared down level of the Meralco rate is significant as it will be inputted in the scheduled rate hike petition this year. FPHI officials had earlier said that they would file for a rate increase with the Energy Regulatory Board (ERB).

However, they qualified that the rate increase would only be filed as soon as the Sta. Rita power plant would be commissioned. The pared down rate level would be inputted in such a way that it would not result in an actual increase in the customer's monthly bill.

Meanwhile, FPHI will postpone the sale of 40 percent of First Generation Holdings Corp. (FGHC) until the Sta. Rita and the 500-MW San Lorenzo gas-fired power plants are commercially operational.

Cazenove & Co. said the move would be financially-sound as FGHC could be sold at a more attractive price without the construction risks (referring to the delay in the construction by Siemens Inc.)

"The restructuring within the Lopez group is still ongoing and Benpres Inc. will likely acquire FPHI's non-core assets such as the Manila North Tollway and Rockwell," it said.

It added: "Given the shortage of financing for Benpres, there is a good chance that it will trade its FPHI stake for the assets, which is equivalent to a share buyback."