Meralco shares take pounding over board struggle

Shares of Manila Electric Co. (Meralco) dropped nearly five percent yesterday as investors feared a protracted struggle for control of the Philippines’ largest power utility would distract management.

Meralco shares have slid around 26 percent since the end of April when state pension fund GSIS started its moves against management in a fight over the rates it charges for electricity.

“We all know that the battle will continue,” said Astro del Castillo, managing director of First Grade Holdings.

“Meralco will face questions on the management proxies, it will continue to face regulatory pressure on pricing, plus negative sentiment in the global markets remains,” he said.

GSIS, which owns around 25 percent of Meralco, tried to wrestle control of the group from the Lopez family by preventing the re-election of officers loyal to the clan at the company’s annual meeting in Manila on Tuesday.

The Lopezes retained majority control of the 11-person board but GSIS head Winston Garcia filed a petition with the Securities and Exchange Commission yesterday questioning the results of the vote.

The SEC has given Meralco until noon tomorrow ( Friday ) to air its side.

GSIS argued that Tuesday’s vote was tainted by illegitimate proxies and said the final vote would have given GSIS majority control if the illegal proxies were excluded.

Meralco shares closed down 4.8 percent yesterday, underperforming the main index which was 0.8 percent weaker.

GSIS wants to shake up Meralco’s management because it believed the Lopez’s have not done enough to bring down electricity prices.

Analysts agree power rates need to come down but they have said GSIS’s moves will spook foreign investors fearful of government meddling.

Power rates in the Philippines are among the highest in the region due to expensive contracts with private power producers, the country’s reliance on costly imported oil to generate electricity and widespread illegal tapping of power lines.

Critics say Meralco buys power at high rates from Lopez-owned generating firms and does not do enough to prevent illegal tapping of electricity, the cost of which is passed on to consumers.

The Lopezes  are one of the Philippines’ most powerful dynasties with two power generation plants and geothermal firm PNOC EDC, as well as the country’s biggest media firm, ABS-CBN Broadcasting Corp among their assets.