ADB likely to grant Meralco waiver request

The Asian Development Bank (ADB) is likely to grant the waiver being sought by the Manila Electric Co. (Meralco) on certain conditions attached to a $100-million loan which includes a $100-million counterpart funding from the World Bank.

"The decision on the waiver will most likely be released after Easter," said Richard S. Ondrik, ADB chief country officer of the Philippines country office.

Ondrik said the bank will continue to monitor developments involving the country’s biggest utility company, especially its P0.30 per kilowatthour (kWh) rate petition which remains pending with the Energy Regulatory Commission (ERC).

In a letter to the ADB, Meralco sought a waiver for its obligation to maintain a return-on-rate-base (RORB) ratio of eight percent. Failure to meet the RORB would result in the ADB declaring a technical default on Meralco since the utility firm has been unable to pay its $200-million loan.

Last year, it recorded a 4.1-percent RORB and five percent in 2000.

A declaration of technical default would impact seriously on future loans as well as its ability to pay existing loans from private creditors.

Meralco officials said their ability to pay loans is directly hinged on its rate hike petition with the ERC. The petition was filed as far back as 1998.

Meralco has already been declared in technical default by some of its private creditors resulting in its inability to tap new funds to pay for earlier ones, including the ADB and WB loans.

The loan was issued to Meralco in 1992 to improve its delivery of electricity in Luzon, its main client base. The ADB actually extended a $138-million loan to finance the entire foreign currency cost of the project while the local currency cost of $92 million would come from other Meralco sources. – Ted Torres