Meralco

1905 Words Oct 12th, 2011 8 Pages
Chapter 1
A. Rationale of the Study
The Manila Electric Company (Meralco) operates the electricity distribution franchise in Metro Manila and the entire provinces of Bulacan, Rizal, and Cavite; and portions of Laguna, Quezon, Batangas and Pampanga. With over 4.8 million customers and 30,247 GWh of energy sales in 2010, it is one of Southeast Asia’s largest distribution utility.
The franchise area of Meralco is home to 25.5 million people, roughly a quarter of the entire Philippine population of 94 million, and it is within Meralco's service area where almost half of the country's Gross Domestic Product (GDP) is produced, one-third from Metro Manila alone. Consequently, 54% of the total electricity usage in the Philippines, or almost
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The latter operates in the Luzon grid where Meralco is located.

Recently, Meralco Chairman Manuel Pangilinan in a media disclosure said that the company is moving into power generation. They are planning to undertake a 150MW power plant at an indicative cost range of US$120m to US$150m to run on mixed fuel. The targeted commencement of operation would be 1H12, and the company has identified Calamba, Laguna (south of Metro Manila) as the power plant site. The said power plant is part of Meralco's long-term plan to put up 1,500 MW in terms of greenfield power plants.

They are planning to undertake a 150MW power plant at an indicative cost range of US$120m to US$150m to run on mixed fuel. The targeted commencement of operation would be 1H12, and the company has identified Calamba, Laguna (south of Metro Manila) as the power plant site.
Existing ownership profile make power generation move difficult, in our view
Despite the announcement, we believe that the existing ownership structure of Meralco raises questions on whether the plan to move into power generation would materialise according to plan. The reason is the fact that the owners of Meralco include parties which have a large amount of power generation capacity, which could lead to a violation of limits on cross ownership between power generation and distribution companies. This raises the possibility that the
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