PCCI proposes equity participation by big industrial users in Meralco

The Philippine Chamber of Commerce and Industry (PCCI) is proposing equity participation by big industrial users in the Manila Electric Co. (Meralco).

In a press conference, officials of the PCCI led by its president Noemi Saludo, decided to offer their views on the current problems plaguing the utility sector.

The PCCI is proposing that the excess charge refund of Meralco to big industrial power users be converted into equity rather than paid out in cash.

According to Donald Dee, PCCI vice president for national issues, by allowing the conversion of the refund into equity in Meralco, the beleaguered power distributor would be able to keep the cash and use it instead for the upgrade and modernization of its facilities.

Dee assured that the PCCI proposal is not intended to create problems for Meralco.

The intent of the PCCI proposal, Dee explained, is to offer a more viable solution without any cash out for Meralco.

Dee admitted that the proposal still has to be carefully studied since it would result in a dilution of the shareholding of the existing stakeholders in the power firm.

Dee said that the equity could either be in the form of preferred or common shares.

Preferred shares represent partial ownership in a company.

However, preferred stock shareholders do not enjoy any voting rights of common stockholders.

A preferred share pays a fixed dividend that does not fluctuate, although the company does not have to pay this dividend if it lacks the financial ability to do so.

The main benefit of owning preferred shares is that the investor has a greater claim on the company’s assets than common stockholders.

Preferred shareholders already receive their dividends first and, in the event the company goes bankrupt, preferred shareholders are paid off before common stockholders.

Common stockholders enjoy dividends that depend on the financial performance of the company. However, common stocks are subordinate to capital stock in the event of a liquidation.

Meanwhile, Dee said that the PCCI is opposed to any move by Maynilad to increase its power rates especially since it admits that up to 70 percent of its water is lost and only 30 percent is billed.

As such, Dee said, the PCCI insists that Maynilad should first resolve its water system loss before it implements a rate hike.