COUNTDOWN Government Service Insurance System Chair Winston Garcia gestures during a talk with editors of the Philippine Daily Inquirer in Makati City in this file photo. JIM GUIAO PUNZALAN
By Gil C. Cabacungan Jr. Philippine Daily Inquirer First Posted 01:01:00 05/12/2008
MANILA, Philippines—Government Service Insurance System Chair Winston Garcia plans not only to buy out the Lopez family and other shareholders in Manila Electric Co. but to break up as well the firm’s concession to promote efficiency and transparency.
The GSIS president and general manager said in a phone interview Sunday that he would cut up the P75-billion power distribution company the same way the Manila Waterworks and Sewerage System (MWSS) franchise area was divided after it was privatized in 1997.
“We are very much interested, we think Meralco is a good investment,” Garcia said. “My plan is to take full control of Meralco and split it up into two or more sub-franchises. This worked very well in the MWSS privatization.”
Elpi Cuna, Meralco vice president for corporate communication, doubted the company’s 50-year franchise could be subdivided. “It’s a total package and the way it is worded, you have to go back to Congress to get permission,” said Cuna, speaking for Meralco, not for the Lopez family.
Garcia spoke to the Philippine Daily Inquirer on the eve of the first hearing called by the Joint Congressional Power Commission chaired by Sen. Miriam Defensor-Santiago and Pampanga Rep. Juan Miguel Arroyo, a son of President Gloria Macapagal-Arroyo.
Santiago said the panel would look into Meralco’s high electricity rates, but critics said the moves against the company were prompted by the critical stand against the Arroyo administration taken by the Lopez-owned radio-television network ABS-CBN Broadcasting Corp.
On Thursday, First Philippine Holdings Corp. (FPHC) chair Oscar Lopez, weary of Garcia’s tirades against his family’s management of Meralco, said he was “sick and tired of this business” and that the government could buy out his group.
Meralco, a power distributor, has said its high rates were dictated by state-owned National Power Corp. (Napocor), from which it gets most of the power it supplies to its consumers, and high royalties and fees collected by the government from independent power producers, including those owned by the Lopezes.
Premium over market price
Garcia said he had tapped his legal and financial advisers to make a tender offer for the Lopez family’s stake in Meralco. This would be done “definitely with a premium over the market price,” he said. He would extend this offer to other shareholders, he added.
The only way he could achieve what he called his “dream to cut up Meralco” was to get full control of it, Garcia said.
Meralco’s franchise area covers 9,337 square kilometers, including 25 cities and 86 municipalities where the country’s primary business districts and industrial estates are situated. The franchise serves roughly a quarter of the Philippine population, accounting for half of the country’s gross domestic product (GDP).
“That is too much economic wealth in the hands of one family. I believe two or more companies can operate viably within the Meralco franchise,” Garcia said.
Lopezes still to prove mettle
The Lopezes have yet to prove their mettle in a competitive field, Garcia said. “Just look at what happened to them in the water business, they lost money while the other concessioner (the Ayala-led Manila Water) on the other side is very profitable. I don’t agree that they are the best people to run Meralco.”
The Lopezes, through Maynilad Water Services Inc. (MWSI), won the right to operate the west zone of MWSS for 25 years in 1997 in what was billed as the richest water privatization in the world.
Due to heavy losses and mounting debts, the Lopezes were forced out of the concession 10 years ago, with D.M. Consunji Inc. and Metro Pacific Investments Corp. taking over following a debt-capital exchange with the government.
Competition to reduce rates
Garcia said having two or more operators in the Meralco franchise area, rather than just one, would ensure more transparency in the operation of a distribution firm.
“It would be hard to justify if one of the sub-franchisees would be charging a higher rate than its neighbors. Having competition would ensure that consumers would get a fair rate in their electricity bills,” he said.
Garcia has called for a management shakedown in Meralco to end what he described as “sweetheart deals” with Lopez-owned power firms and questionable charges being slapped on consumers. “Splitting it up will cure a lot of ills in the company,” he said.
Garcia said he was also surprised by Lopez’s declaration to get out of the business his family had controlled since its American owners pulled out in 1968. The family had offered to buy out the government last year, he said.
The Lopezes lost the company during the martial law years but regained it after the 1986 EDSA Revolution.
Garcia claimed that the Lopezes only held less than 20 percent of Meralco, noting that its supposed control on a total of 33 percent of the utility’s stock included the stakes of Union Fenoza (9 percent) and Meralco Pension Fund (9 percent).
In contrast, Garcia said the GSIS and other government financial institutions had a combined 35-percent share.
“I am just trying to correct what I believe is an unfair situation. How can a family with less than a quarter of the company’s stake have control of the company? I still cannot understand this,” he said. Garcia joined the Meralco board only last month.
Copyright 2008 Philippine Daily Inquirer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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