GSIS net profit from sale over P12 B - Winston

MANILA, Philippines – The Government Service Insurance System has realized a net profit of P12.5 billion from the sale of its 27 percent stake in the Manila Electric Co. to San Miguel Corp., GSIS president Winston Garcia said yesterday.

In a statement, Garcia lauded the deal, which, he said, “many thought would be impossible.”

“At the darkest hour of the stock market, the GSIS managed to do something many thought would be impossible – turn around a seemingly losing proposition into a P12.7-billion profit,” he said.

GSIS announced the sale late Monday and said a total of P30 billion including interest payment was involved.

Garcia said the pension fund manager was able to sell the shares for P90 per share or at an “unbelievable premium” of 102 percent over Meralco’s closing price of P44.50 last Monday.

“Nobody —most especially our detractors —ever thought the GSIS would be able to do this especially during this time when even century-old financial institutions were folding up,” Garcia said.

“If you would recall, from the very start, our entry into Meralco was an investment and we expected to make money from this investment,” he stressed.

“More importantly, we were able to pull this deal, selling Meralco at a premium price, during the worst time of the market, when everything was down and everything was trading at record lows,” Garcia said.

GSIS, Garcia said, plans to use the proceeds from the sale for other investment opportunities.

He did not elaborate but earlier Garcia said the state pension fund was interested in buying into Philam Life, the country’s largest insurer.

Early this year, GSIS spent P8.9 billion to acquire the government’s remaining 9.9 percent stake in Meralco, a move which raised the pension fund’s stake in Meralco to 27 percent.

Meanwhile, the Lopez group said it welcomes San Miguel’s purchase of GSIS stake in Meralco.

“We are hoping to have a more productive partnership with the entry of SMC,” Benjamin Lopez, vice president for corporate communications of First Philippine Holdings Corp. told reporters.

“When a company that is really run as a business buys into another company it is normally because they want their investment to earn and not to lower their shares. We welcome anybody who will be able to help the company,” Meralco vice president for corporate communications Elpi Cuna said.

Meralco frustrated

Meanwhile, Meralco president Jesus Francisco said the Energy Regulatory Commission’s order deferring the approved rate hike for next month would hurt the company’s services to its customers.

“We now have to assess how we can continue to implement our CAPEX (capital expenditure) and OPEX (operational expenditure) commitments under PBR (performance-based rate) and service the mandated refunds,” Francisco said.

Francisco also said that under the approved PBR, rates for residential customers would only be increased by less than five percent.

“We wish to correct the earlier reported 36 percent increase in the cost of electricity because of the PBR implementation. That is not true,” he said.

“Disappointed is an understatement. This is our first rate increase after more than five years, PBR rates should have been implemented in July 2007, and after a delay of 16 months, we are told that we have to wait some more,” Francisco said.

“We believe that over the more than two years since we filed our PBR application in September 2006, the issues were thoroughly discussed, and all parties were accorded due process in accordance with ERC rules,” he said.

In stopping the Meralco rate hike, ERC granted the motion of the National Association of Electricity Consumers for Reform or Nasecore.

Nasecore moved for a freeze in rate hike pending an ERC decision on its motion for reconsideration on its rate-related cases against Meralco.

ERC, meanwhile, said the deferment of the rate hike was a collegial decision.

ERC executive director Francis Saturnino Juan was defending former ERC chairman Rodolfo Albano Jr. who had been getting the blame for ERC’s decision on Meralco’s PBR.

“The Meralco decision was a decision of the entire ERC,” Juan said.

“As can be gathered or deduced from the ERC’s decision and the timing of its release, chairman Albano by himself cannot determine the outcome of Meralco’s application,” Juan said.

Nasecore president Pete Ilagan, for his part, also said it’s unfair to single out Albano for the Meralco rate hike decision.

“There are process and rules of practice to be adhered to, so there’s nothing wrong with the decision of the ERC to review it (ruling) before allowing it for implementation,” Ilagan said.

“It is not the first time that the ERC has deferred or devoted more time to review its decisions, especially since we were already raising some points against it even during the public hearings,” he said.

“We have raised concerns on the parameters of computing Meralco’s tariffs based on the PBR so this is now the subject of our motion for deferment,” Ilagan said.

Albano, on the other hand, said he is considering legal action against those who had accused him of benefiting from Meralco rate hike decision.

“I will be talking to my lawyers about this. I can’t let these people malign my name,” he said. - with Donnabelle Gatdula