Meralco gets upgrade from S&P

abs-cbnNEWS.com

MANILA - Global credit watcher Standard & Poor’s has raised the long-term foreign and local currency corporate credit rating of Manila Electric Co. (Meralco) to "B" from ’B-" with a positive outlook.

"The rating upgrade reflects Meralco’s improving financial risk profile as a result of higher tariffs, reduced reliance on short-term debt, and improving leverage position and financial flexibility," Standard & Poor’s said in a statement. "Meralco’s liquidity position is improving in our view," it added.

The debt watcher also said: "Meralco’s new owner — Philippine Long Distance and Telephone (PLDT) Co. and San Miguel Corp. ... are leading companies with dominant businesses, which, in our view, have supporting banking relationships."

San Miguel bought the 27% held by the Government Service Insurance System last year while the PLDT group acquired a 20% stake from the Lopezes in March. PLDT’s Beneficial Trust Fund, meanwhile, bought a 10% stake from the open market starting February, before it parent’s transaction with the Lopezes.

In April, Meralco secured approval from the Energy Regulatory Commission to implement performance-based regulation or PBR, in which an electric utilty may increase rates by meeting pre-set performance incentive schemes.

As a result, Meralco hiked average distribution rates by P0.257 per kilowatt-hour (kWh) to P1.227 per kWh, a first since 2003. The previous return on rate base, or cost-plus scheme, mainly pegged rates on historical costs plus a reasonable rate of return. Read More...