Manila, May 1, 2003 -- Manila Electric Co. can book losses of as much as P3 billion this year from last year's P2.01 billion loss as the Supreme Court decided it will no longer entertain pleas to review its decision asking Meralco to refund customers P28 billion worth of overcharges.

In 2001, Meralco posted profits of P1.48 billion.

CLSA Philippines Inc. research head Alex Pomento, said the P3 billion loss for this year is most likely.

Meralco has said it does not have the resources to make a refund of that magnitude and has warned it risks defaulting on around P10 billion worth of debt due this year if it is forced to pay.

It has long- and short-term debt of about P38 billion.

"The issue now is survivability," said Doris Pardo, a utilities analyst at ING Barings Securities in Hong Kong. "Where on earth would Meralco get P28 billion?"

The government, which has the largest stake in Meralco at around 25 percent and guarantees about a third of its long-term debt, is looking at several repayment options to soften the impact of the refund on the utility.

Meralco serves around 3.8 million customers in and around metropolitan Manila. A 60:40 joint venture of First Philippine Holdings and Spanish power firm Union Fenosa SA holds the second-largest stake at 22.86 percent.

Industry commentators have warned that the government needs to keep Meralco - which supplies power to an area producing around 50 percent of the country's gross domestic product - financially viable with payments spread out over several years.

The government wants to divest its stake in Meralco as well as other power assets to help reduce the mountainous national debt and lower power costs.

Electricity in the Philippines is among the priciest in Asia, largely due to fast-track contracts struck with independent power producers in the 1990s during a period of frequent blackouts.

Meralco said in a statement the 2002 earnings slide stemmed from "the absence of a rate increase, system losses, provisions for losses (from deferred charges), low sales and other financial matters".

The Energy Regulatory Commission granted the utility only a small rate hike in March, well below what it had been seeking since April 2000. The watchdog also refused to allow Meralco to fully recover deferred power charges from its customers.

As a result, the company wrote off disallowed receivables of P878 million and made a provision for further probable losses of P810 million.

System losses - due to theft and leakage - rose to 10.85 percent last year from 10.39 percent in 2001, resulting in non-recoverable costs of P1.35 billion, the company said.

Meralco is allowed to recover such losses from customers of up to 9.5 percent of its total electricity output.

Capital expenditure for the year totalled P6.5 billion. Electricity sales revenues fell six percent year-on-year in 2002 to P121.6 billion. (Malaya)

Reported by: Sol Jose Vanzi

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