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.

Meralco recently reported that its customer base for the first half of the year saw a 2.6% increase to 4.63 million, with 107,508 new residential customers and 8,771 new commercial customers.

Meralco earned P2.893 billion in the first half of the year, up by 2.1% from the P2.833 billion earned in the same period last year.

Meralco shares closed at P173 on Friday, slightly higher than the previous day’s close of P172 apiece.

Mediaquest Holdings, Inc., a unit of the PLDT Beneficial Trust Fund, has a minority stake in BusinessWorld.

EDC optimistic

Meanwhile, listed geothermal giant Energy Development Corp. (EDC) of the Lopez group is hoping for a positive turnout for its upcoming bond issuance after it received the highest rating from a local credit watcher.

"The rating definitely provides the necessary push to make our bonds more attractive to investors and gives us enough reason to expect a successful issuance," Richard B. Tantoco, EDC president, said.

EDC applied with the Securities and Exchange Commission to sell bonds of up to P10 billion, but its "PRS Aaa" rating qualified the company to sell bonds of up to P12 billion.

Local rating firm PhilRatings cited EDC’s strong cash flow, ample liquidity, and financing sources in giving the power firm a positive rating.

EDC recently won the bidding for the Palinpinon-Tongonan geothermal complex, which have capacities of 92.5 megawatts (MW) and 112.5 MW. EDC is the country’s leading developer of geothermal energy, accounting for over 62% or 1,199 MW of the country’s total installed capacity prior to the Palinpinon-Tongonan purchase.

Before being publicly listed, EDC was a wholly owned subsidiary of state-owned Philippine National Oil Co. that has subsidiaries in the exploration, development and production of energy.

EDC became a unit of Lopez-owned Red Vulcan Holdings Corp. two years ago after parent First Gen Holdings Corp. bought a majority in the geothermal company for P58.5 billion.

EDC’s first half recurring net income fell by 27.6% to P2.6 billion from P3.6 billion in the same period a year ago due an increase in operating expenses and the maintenance of field facilities and geothermal wells.

EDC shares closed at P4.65 apiece on Friday, lower than the previous day’s close of P4.70.

abs-cbnnews.com is the online arm of ABS-CBN Broadcasting Corp. ABS-CBN, Meralco and EDC are part of the Lopez Group of Companies.