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The Court of Appeals yesterday reversed the Energy Regulatory
Commission (ERC) ruling that allowed the Manila Electric Company (Meralco)
to raise its electricity price by 17 centavos per kilowatt-hour in June
last year. The court said ERC should have first required the audit of
Meralco's books and accounts before it was allowed to break down or
undbundle its charges and then to raise them. In a 33-page decision
penned by Associate Justice Martin Villarama, Jr., the appeals court
ordered the return of the case to ERC, as it also directed the
Commission on Audit (CoA) to check the books, records, and accounts of
Meralco. "In view of the foregoing, this court is of the opinion that a
CoA audit before approval by the ERC of both applications for rate
increase and rate unbundling filed by Meralco is necessary, being an
essential aspect of due process," the court said. Meralco's unbundled
rates took effect in June last year, after ERC approved its application
for unbundling as well as for a rate increase of 17 centavos per
kilowatt-hour. The increase covered 8.35 centavos per kilowatt-hour for
generation and transmission, and 8.65 centavos per kilowatt-hour for
distribution. Unbundling is the breaking down or detailing of power
companies' charges. Meralco's petition for unbundling was required by
the Electric Power Industry Reform Act (EPIRA).
Lopez-led Meralco, which is also partly owned by the government, was
the first private utility in the country to be allowed to unbundle its
rates. But in its decision, the appellate court said ERC "gravely erred"
when it ignored the issues raised by those opposed to the Meralco
unbundling. The ERC failed to properly consider evidence raised by
Meralco's detractors, and to order CoA to verify their claims, the court
said. It noted data presented by Meralco to ERC in support of its
unbundling and rate increase applications were strongly contested,
particularly the rate base that was allegedly "bloated and inflated,"
losses and expenditures that were overstated and unjustified, and their
inclusion in the computation of expenses that Meralco could pass on to
its customers. The court said these strong objections to the rate
increase sought by Meralco warranted the "prudent and sound exercise of
discretion" by ERC, which should have directed a CoA audit. "The ERC,
apparently forgetting that it was incumbent upon Meralco to prove such
necessity and reasonableness of the rate increase, clearly reneged on
its foremost duty to protect the interest of the consuming public," the
court said. Meralco officials, for their part, said they have not
received a copy of the appeals court ruling. "We have not gotten it yet.
What we are reacting to are reports from the media. But if it is true,
we have 15 days to study the decision and if we feel we have to file a
motion for reconsideration, we will do so," Meralco president Jesus P.
Francisco told reporters. He said it was a "disappointing" order by the
Court of Appeals. "We feel we are entitled to that increase," he said.
Mr. Francisco also said Meralco might need to raise the charges of some
1.2 million poor residential customers currently subsidized by
commercial and industrial users.
For its part, cause-oriented group Bagong Alyansang Makabayan (Bayan)
said the Court of Appeals decision was a major victory for consumers.
Bayan and other groups, including taxpayer Genaro Lualhati, asked the
appeals court last year to reverse the ERC approval of Meralco's rate
unbundling, which resulted in higher prices. "This is another major
victory for consumers who have long been assailed by high power rates.
We have labored for more than a year in opposing Meralco's unbundling of
rates and rate increases. It is a great relief for the oppositors and
the consuming public that the Court of Appeals annulled the ERC
decision," Bayan spokesman Renato M. Reyes, Jr. said in a statement. He
said Bayan was taking up the matter with ERC today, noting that the
decision should result in "significant reduction of power rates or a
return to the 2003 rates," before unbundling. Hearings on pending
applications for rate increase should also be suspended for the
meantime, Mr. Reyes said. "There should be an immediate review of the
collections made by Meralco after the implementation of the unbundled
rates. There should be no new increases in the meantime," he stressed.
Bayan had questioned Meralco's contracts with its Independent Power
Producers, which the group said resulted in high generation rates. Bayan
had also argued that the unbundling of rates would result in higher
rates. -- Bernardette S. Sto. Domingo
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Iligan City's refusal to condone National Steel Corporation's (NSC)
unpaid real estate tax of about
PhP700 million is going to keep the steel mill shut for at least 45
more days, or until mid-September. Creditor-banks had wanted to conclude
the steel firm's sale to a foreign buyer by today, so it could be
reopened immediately. But neither the banks, led by partly state-owned
Philippine National Bank (PNB), nor the buyer want to pay the back tax,
sources said. Consequently, the deadline for the signing of NSC's asset
purchase agreement has been extended by another 45 days, sources added.
It was the second time the sale was delayed. The original April 28
deadline had already been extended by 90 days after NSC's banks and its
buyer both chose to wait for the results of the May 10 elections.
Earlier, PNB president Lorenzo V. Tan said the real estate tax issue
could be the biggest stumbling block to NSC's sale because neither the
banks nor the steel mill's buyer, Global Infrastructure Holdings, Ltd.
of India, wanted to foot the bill. Last year, the Iligan City government
under Mayor Franklin M. Quijano said it was open to writing off the back
tax. But last May 10, Mr. Quijano lost to his former vice-mayor,
Lawrence Lluch Cruz, who was reportedly reconsidering his predecessor's
position. Mr. Tan had said new negotiations were needed. Also setting
back NSC's sale is the objection of the steel mill's Malaysian
stockholder, Pengurusan Danaharta Nasional Berhad, to the asset purchase
agreement for still unknown reasons. Danaharta, Malaysia's national
asset management company, took over NSC from Hottick Investments Co.,
Ltd., which failed to pay the steel mill's debts in 1999. Danaharta used
to control over 80% of NSC, but this dropped to 20% following a
restructuring scheme. Another major creditor, state-run Land Bank of the
Philippines, earlier said that under a November 2002 agreement,
Danaharta could not oppose the sale if NSC were to be sold for more than
80% of its appraised value. Global Infrastructure Holdings, which owns
one of India's largest private steel operations, won the bid for NSC at
PhP13.25 billion, payable in eight years.
-- Felipe F. Salvosa II
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The Department of Finance (DoF) backs the proposal of the House of
Representatives' think-tank to expand the list of nonessential goods
subject to excise taxes, saying the suggestion can be "explored" for
possible inclusion in the government's legislative agenda. "It is a good
idea...it could be explored," said Finance undersecretary Grace P. Tan.
Another Finance official, who requested anonymity, said the
recommendation of the Congressional Planning and Budget Department (CPBD)
"will make the indirect tax system more equitable." After all, people
who can afford luxury items are the ones who should be made to pay
higher taxes, the official added. And if congressmen would be unwilling
to file a bill on taxing nonessentials, the official said the Finance
department could take the initiative. The recommendation of the CPBD to
expand the list of nonessential goods subject to excise tax will require
the amendment of Section 150 of the National Internal Revenue Code (NIRC),
which limits excisable non-essential items to jewelry, perfume and
toilet water, and yachts.
CPBD wants to include in the list the following items:
- antiques, rare, handmade by artisans, made of expensive metals
or of exquisite design, custom-made or with exceptional features,
and created by well-known persons or companies; and
- services such as cosmetic surgery and "procedures undertaken for
aesthetic purposes" such as body sculpting and face-lifts.
"Expanding the list of nonessential goods enhances the progressivity
of the tax system because the tax burden is borne by those who are able
to pay for luxury goods and services," CPBD said.
QUESTIONS
Reacting to the CPBD proposal, noted fashion designer Patis Tesoro
said, "I work with piņa fabric. I'm into the revival of piņa and I know
that it generates a lot of work for people, for farmers who do the
planting and for their wives and families who process it into fabric. If
they tax these workers, it's going to be the end of what we are trying
to do, [which is] to revive piņa. I cannot understand why they want to
tax these artisans. I just want the President to make some sense. I need
her to make sense." Dita Sandico-Ong, a designer who also uses a lot of
locally hand-woven fabrics, added, "I don't know what the repercussions
will be, but it should not be done. The ones who will end up paying are
our customers." On the possibility of raising the excise tax on cosmetic
surgery, Dr. Regina Grace Buzon-Llorin of the Belo Medical Group, Inc.
said, "Why? Why do they want to tax cosmetic surgery when it is
something that one does for one's self? What they should tax are
necessities, not things that are optional and that people undergo to
pamper themselves."
At the Senate, the chairman of the ways and means committee said yhe
expansion of the list of nonessential goods that would be subject to
excise tax could get Congress approval. But the measure should be firmed
up to include further details, said Senator Ralph G. Recto. He noted
that the CPBD proposal seemed feasible and that it would yield
additional revenues for the government. "This move seems essential to
plug the budget deficit, but they should explain to the legislators
exactly how that would be implemented," Mr. Recto told BusinessWorld.
"I am supportive of that move, provided that the proposal, if enacted
into law, would be implemented properly."
At present, the National Internal Revenue Code lists the following
items as subject to excise taxes:
- real or imitation jewelry;
- precious and semi-precious stones;
- goods made of and ornamented, mounted or fitted with precious
metals;
- goods made of ivory but excluding medical and surgical
instruments;
- perfumes and toilet paper; and
- yachts and similar contraptions for sports or pleasure.
NEW TAX AGENCY
Mr. Recto has also filed a bill that sought the creation of National
Revenue Authority (NaRA). Senate Bill No. 1327, once enacted into law,
would privatize the Bureau of Internal Revenue (BIR). This move is aimed
at improving the operations of the revenue collection agency. In the
bill's explanatory note, Mr. Recto said there was an urgent need to arm
the agency with administrative independence and fiscal autonomy.
"Efficiency has never been the hallmark of civil service. Neither is
integrity. And the BIR has always been known to be lacking in both
departments. This bill endeavors to bring back both efficiency and
integrity into the country's tax administration system by granting the
revenue agency corporate powers that will give its new management
flexibility to implement policies and measures as it sees fit in
accordance with its vision, mission and goals," Mr. Recto said. "The BIR
today is shackled by too much bureaucratic interference that its
Commissioner cannot pursue new ways of doing things without having to
seek approval by the Secretary of Finance or by Congress or even by the
president," he added.
The bill, once enacted into law, would form the NaRA, which would be
akin to the independent body Bangko Sentral ng Pilipinas (Central Bank
of the Philippines, or BSP). The agency would be led by a chief
executive officer and would be governed by a board composed of seven
members, three of whom are ex-officio: the Cabinet secretaries of
Finance, and of Budget and Management, as well as the Director-General
of the National Economic and Development Authority. The four other board
members would come from the private sector who whould work at NaRA
full-time. The NaRA would be free from political interference since it
would not need annual appropriations from Congress and it would have its
own system of hiring, promoting, transferring, and firing personnel. The
proposed legislation further provides incentives to the NaRA, should it
exceed its annual revenue target. The amount of the incentive would be
given to the employees would be equivalent to one percent of the
difference of the target revenues from the actual collection. Mr. Recto
further said the structure of the revenue collection agency was one of
the biggest factors for the success or failure of the tax collection
system. He noted that in Singapore and Spain, the quality of tax
administration has improved after these countries improved their
revenue-collection agencies. "The BIR is currently faced with a
tremendous task of producing the financial resources the country needs
without having to borrow more. It has to modernize if government wants
to respond to changes in market conditions. It has to provide a more
suitable environment for the development of an honest, efficient,
innovative, professional, and service-minded revenue personnel if the
government wants to optimize revenue collection. It has to operate
efficiently as the private sector if it wants to keep up with the rest
of the economy," Mr. Recto said.
The government also proposed to Congress:
- major changes in the law on the value-added tax -- either by
scrapping the tax or imposing a two-step increase;
- the shift to gross from net income taxation for corporations and
professionals;
- taxing the windfall profits of telecommunication companies;
- increasing taxes on "sin" products like cigarettes and liquor,
as well as on petroleum;
- rationalizing fiscal incentives;
- introducing targeted tax amnesty; and
- creating a performance-driven system for revenue agencies that
fail to collect enough taxes because of corruption within their
ranks and widespread evasion.
Analysts have warned that if the government does not raise revenues
through more efficient tax collection or through new taxes,
international credit rating agencies might downgrade the Philippines,
Asia's most active sovereign debt issuer. The government wants to limit
its budget deficit this year to
PhP197.8 billion or 4.2% of gross domestic product. Including this
year, it would have run deficits for 15 of the last 19 years.
-- Karen L. Lema and Karina I. Roncesvalles with
a report from Raoul Cheekee
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...even as RP
renegotiates extension at WTO
By JENNIFER A. NG and ROMMER M.
BALABA, Reporters
The country's top economic planner and an economist are in favor of
lifting quantitative restrictions (QR) on rice despite claims by
farmers' groups that the industry faces a deluge in imports.
Socioeconomic Planning secretary Romulo L. Neri yesterday said he is in
favor of imposing tariffs instead of QRs - which sets limits on how much
of a commodity can be shipped - as this could mean additional revenues
and is "less prone to corruption." "Tariffs are better than QRs because
QRs tend to be prone to corruption and arbitrariness. Also with QRs,
[the government] does not get any revenues. At least under the tariff,
the government will get some revenues " Mr. Neri said. Dr. Rolando T. Dy,
executive director of the Center for Food and Agri-Business at the
University of Asia and the Pacific (UAP), also said he is in favor of
removing the QR on rice as it would make the commodity cheaper. "I am
for the removal of the QR provided adequate [tariff] protection is given
to the farmers at a rate I think could be calculated to provide
importers access to [imported] rice [and] at the same time give
protection to farmers," Mr. Dy said. "This will allow more people to
import rice and make available cheaper rice in the market," he added.
Mr. Neri said that under the QR system, importers from the private
sector will have to get a license before they can bring in shipments.
"Importers who get a license get all the profits, so [the] profits go to
the privileged, [those] privileged enough to get an import license," Mr.
Neri claimed.
TARIFFS
Meanwhile, Mr. Dy said the government may consider slapping a tariff
of between 50%-100% once the import restrictions are removed. However,
the tariffs should be tempered in a way that it would not motivate
traders to smuggle rice. "The government must study carefully the tariff
rate it would apply on imported rice since a very high tariff rate would
discourage legal importation," he said. "If you put [the] tariff at 500%
nobody will import rice anymore, and we cannot also allow such a high
tariff since this would stimulate smuggling. It must be a balancing of
interest between farmers and consumers so that food prices would not
rise or fall that much to the detriment of either of them," Mr. Dy said.
Aside from South Korea, the Philippines is the only remaining World
Trade Organization (WTO) member-country that implements a QR on rice --
a sensitive commodity. The QR is set to expire on December 31, 2004 and
the government is currently negotiating with other WTO member-countries
for an extension of the "safeguard" measure - so-called because it is
ostensibly aimed at protecting an industry from a surge in imports.
National Food Authority deputy administrator Gregorio Y. Tan Jr. earlier
said representatives from Australia, Thailand, the United States,
Pakistan, Argentina, China, Canada and India have presented their
demands in return for their approval of the QR extension. "Some
countries have asked for an increase in the minimum access volume
[should the Philippines continue with its move to extend the QR]," Mr.
Tan said.
Farmers-groups have called on the government to keep the import
restrictions, saying the full liberalization of the rice industry will
threaten the sector as the country may be deluged with cheaper rice from
Thailand, Vietnam and China. The country still has to import this year a
significant volume of rice -- around one million metric tons (MT) -- as
local consumption will continue to outpace the estimated 15.4 million MT
output for the period. Given government pronouncements that the country
is near to achieving rice self-sufficiency, Mr. Dy likewise said there
should be no need for imports. "If we achieve self-sufficiency at a
competitive price then why should we import? There is no sense to import
even at a certain tariff level since there is adequate supply in the
country," he said.
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By IRIS CECILIA C. GONZALES,
Reporter
International credit rating agency Standard & Poor's Ratings Services
(S&P) yesterday downgraded its credit rating on the Philippines'
long-term local currency to 'BBB-' from 'BBB', citing the government's
fiscal woes. S&P, however, maintained its long-term foreign currency
rating at 'BB', two notches below investment grade, given the
government's "satisfactory external liquidity position." A credit
downgrade makes it more expensive for the Philippines to borrow as it
reflects the country's ability to pay its debts. A BBB- rating is still
within investment grade but reflects some risks while a 'BB' rating is
two notches below investment grade. Both, however, still reflect a
stable outlook on the economy. The Philippines, Asia's most active
issuer of sovereign dollar bonds, had a total external debt of $56.5
billion as of end-March. Just this week, the Philippines raised 350
million euros for its refinancing needs.
In its currency downgrade, S&P took into account the government's
fiscal rigidity amid a possible increase in interest rates. However,
Finance Secretary Juanita D. Amatong said there is still a relatively
high level of liquidity in the domestic financial market, with interest
rates easing in the recent issuances of Treasury bills and bonds.
"Government is committed to maintaining a domestic interest rate
environment, which is necessary to spur economic growth," Ms. Amatong
added S&P also noted the country's "shallow" capital market and its
limited ability to absorb more debt, a concern raised by Bangko Sentral
ng Pilipinas Governor Rafael B. Buenaventura. "This also implies an
increased risk of crowding out private sector investment, which has been
struggling to regain momentum since the 1997 financial crisis, with the
consequent impairment of future growth prospects," S&P analyst Agost
Benard said. A trader said there is not enough private sector borrowing
at present.
On the move of S&P to retain its long-term foreign currency rating,
Ms. Amatong said this indicated S&P's confidence on the government's
ability to pay. "The stable outlook assigned reflects S&P's confidence
on this administration's ability to carry out much needed reforms,
particularly in the fiscal sector." Mr. Benard said the affirmation of
the long-term currency rating takes into account the country's stable
liquidity position, sustained by the steady flow of dollar remittances.
"Reserve coverage of short term debt of around 270%, and a gross
financing requirement to reserves ratio projected at 54% this year
indicate moderate short term liquidity risk."
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The economic growth of East Asian countries will peak at 7.3% this
year despite the sharp rise in world oil prices, the Asian Development
Bank (ADB) yesterday said, The Asia Economic Monitor (AEM), produced by
the ADB's Regional Economic Monitoring Unit (REMU), cited healthier
industrialized economies (especially the United States and Japan),
buoyant intra-regional trade, and continued strength in domestic demand
around the region as reasons for the projected 2004 growth. The
projected 2004 growth is above the 6.6% level forecast in the December
2003 AEM. It is expected to taper off to 6.5% in 2005 as economic growth
in US, Japan and China slows to more sustainable levels. East Asia is
composed of the 10 member-countries of the Association of Southeast
Asian Nations along with the People's Republic of China and Republic of
Korea. "This synchronized upswing in growth, which began last year, will
reach its peak this year, close to its post-crisis high of 7.5% in 2000,
and moderate somewhat in 2005," REMU Director Pradumna B. Rana said.
The ADB said East Asia's strong economic expansion for the first half
of 2004 was due to a combination of a rapid increase in exports and
continued strength in domestic demand. However, this robust growth,
along with increases in world prices for oil and other commodities, have
led to a gradual rise in inflation in the region. Still, the ADB said
East Asia's indicators remain strong as most major countries ran current
account surpluses in the first half, foreign exchange reserves continued
to grow sizably, and external debt indicators improved. The ADB,
however, said three near-term risks could dim the currently bright
outlook for East Asia: continued high oil prices, larger-than-expected
increases in US interest rates, and a hard landing for Chinese economy.
-- Jennifer A. Ng
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By KAREN L. LEMA, Reporter
The Bureau of Internal Revenue (BIR) supports the move of government
lawyers to transfer the multi-billion tax evasion case against tycoon
Lucio Tan from the Marikina Metropolitan Trial Court (MeTC) to the Court
of Tax Appeals (CTA). BIR Deputy Commissioner Kim J. Henares said the
transfer would speed up the resolution of the 12-year-old criminal
suits. Because unlike the cases at the MetC where they have to go
through the Regional Trial Court and Court of Appeals before they could
be elevated to the High Tribunal, cases filed before the CTA were
directly appealable to the Supreme Court, she said. "It will shorten the
process," Mr. Henares said in a telephone interview. It would also be
advantageous for both parties because "those at the CTA would understand
the cases better." The BIR has vowed to pursue the
PhP27-billion tax case against Mr. Tan after the Supreme Court
revived the case this month. The Office of the Solicitor General (OSG)
however wants the CTA to hear the cases instead of the MeTC.
In a motion for partial modification, Solicitor-General Alfredo L.
Benipayo told the High Court the cases could still be transferred
because the Marikina court has not fully acquired jurisdiction over the
cases. Mr. Benipayo noted Mr. Tan had not yet been arrested nor has he
posted bail before the Marikina court for nine counts of tax evasion.
"The third element is indubitably absent. Thus, jurisdiction has not
fully attached jurisdiction over the person is acquired upon his arrest
or upon his voluntary appearance," the motion said. With the
implementation of Republic Act 9282 on March 30, 2004, the CTA has been
given "exclusive original jurisdiction" over violations of the National
International Revenue Code. RA 9282 states that the CTA has "exclusive
original jurisdiction over all criminal offenses arising from violations
of the National Internal Revenue Code or Tariff and Customs Code and
other laws administered by the Bureau of Internal Revenue." With RA
9282, Congress has recognized that it is the CTA which has the "proper
technical competence" to try the subject cases. Given that the Marikina
court has not yet acquired in full the jurisdiction over the cases,
there is no impediment to transfer the case to the CTA, the OSG argued.
The Supreme Court, in an en banc session last July 13, unanimously voted
for the reinstatement of the case against Mr. Tan and nine "dummy"
corporations, noting that the MeTC failed to make an independent finding
based on the merits of the case.
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By ANNA BARBARA L. LORENZO,
Reporter
Ayala-led Globe Telecom, Inc. has inked a
PhP5-billion term loan with local and international banks to
finance its network expansion. "The facility is being made available
under the Wholesale Lending Program of the Development Bank of the
Philippines (DBP), funded by the Japan Bank for International
Cooperation (JBIC)," Globe said in a disclosure to the Philippine Stock
Exchange yesterday. Globe Vice-President for treasury Ma. Cecilia T.
Cruzabra said the PhP5-billion loan, which matures in five years, would
come from the JBIC, and will be coursed through several banks where DBP
has credit lines. Aside from the DBP, banks which signed for the loan
are Banco de Oro, China Banking Corp., China Trust, Security Bank,
Equitable PCI Bank, and the Philippine National Bank. Foreign
counterparts are ANZ Banking Corp., ING Bank, Mizuho Corporate Bank, and
Bank of Tokyo Mitsubishi. Globe also signed the agreement with Citycorp
Capital Philippines, Inc., which acts as the lead arranger for the term
loan. Ms. Cruzalba said the transaction took only about a month since
negotiations started only in June. "The interest rate passed on by the
DBP is fixed. It's below the five-year mart so it is very attractive for
Globe," she said.
Globe is the second-largest wireless phone firm in the country, with
more than 10 million subscribers as of end-June. Globe President Gerardo
Ablaza earlier said the firm exceeded the 3,000-cell site mark in the
second quarter and will soon start the latest phase of its network
expansion. "We aim to complete roughly another 1,000 cell sites this
year. There are no specific targets yet, but the expansion would
continue until next year," Mr. Ablaza earlier said. He added that about
350 out of the 1,000 target number of cell sites have been completed so
far. Just last month, Globe announced another
PhP2-billion term loan facility with Metropolitan Bank and Trust
Co. to finance its capital expenditures. International ratings agency
Standard & Poor's recently upgraded Globe's long-term currency rating to
BB+ from BB, saying the mobile firm's projection on future capital
outlay, dividend payments and share buyback will not significantly
affect its debt reduction.
"The rating action recognizes Globe's improving financial profile and
its favorable market position in the Philippine wireless market,"
Standard & Poor's credit analyst Yasmin Wirjawan was earlier quoted. Mr.
Ablaza said Globe had a "healthy" second quarter, which is better than
its performance in the same period last year, and in January to March
this year. However, he refused to divulge absolute figures as the firm
is scheduled to release second-quarter report on Aug. 4. Globe is listed
at the Philippine Stock Exchange. Expectations of favorable performance
in the second quarter boosted Globe stock price by
PhP5to
PhP850 yesterday. It was the third most active stock with trades
amounting to
PhP91.755 million for the day.
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By JENNEE GRACE U. RUBRICO, Senior
Reporter
A unit of the Philippine National Oil Co. (PNOC) has decided to rebid
the PhP2.58-billion geothermal project in Palinpinon, Leyte after almost
six months of review. PNOC President Thelmo Y. Cunanan yesterday told
BusinessWorld the board of PNOC-Energy Development Corp., PNOC's
geothermal unit, has decided to rebid the Palinpinon project due to
findings the project was awarded to Japanese firm Kanematsu without
proper clearance. The Palinpinon project is one of two projects awarded
by the PNOC-EDC management during the time of former PNOC-EDC President
Sergio AF Apostol. It was later found the project, along with the
PhP7.414-billion Northern Negros Power Project, were awarded without the
required board approval. The PNOC-EDC board reviewed the projects after
Mr. Apostol's left his office to run for Congress. "There's been a
decision to rebid Palinpinon. The board decided there has to be a
rebidding because there was no board decision in the beginning, when it
was awarded to the contractor," Mr. Cunanan said. But he declined to
comment on whether the Northern Negros project would likewise undergo a
new bidding. The PhP2.58-billion Palinpinon II Optimization Project in
Southern Negros will involve the development of the geothermal steam
field of the Palinpinon geothermal field, the building of a
26.4-megawatt plant, and installation of transmission lines.
Currently, the Palinpinon geothermal field houses the 192.5-megawatt
power complex of the National Power Corp., which was commissioned in
1983. Mr. Cunanan said a rebidding would delay the project's
implementation, which was supposed to have started construction in June,
and was supposed to have been completed by December 2005. But he said
the delay is not likely to jeopardize the funding. PNOC-EDC earlier
announced the Development Bank of the Philippines had approved a
PhP1.4-billion term loan for the project. However, the loan, PNOC-EDC
said, would be sourced from Phase II of the environmental infrastructure
support credit program, a two-step lending facility financed by the JBIC.
JBIC has a condition that loans sourced from the multilateral
institution must meet completion dates. "If the JBIC loan expires before
the project is completed, PNOC-EDC will just have to renegotiate with
JBIC. This is just procedural, it's not likely to be difficult," Mr.
Cunanan said.
Earlier, PNOC-EDC President Paul A. Aquino said the firm did not want
to rebid the contracts for the Palinpinon and Northern Negros projects,
fearing the move would result in one-year delay. He said if PNOC decides
to rebid the project, there is a possibility that Kanematsu may go to
the courts for a temporary restraining order. This will delay further
the implementation of the project. "There are too many ramifications,"
he had said. The two power projects are among the initiatives of the
government to address the power needs of the country. The government
foresees that by 2008, power shortage will hit Luzon and the Visayas if
no new capacity is added. In Mindanao, a shortage is seen in 2009.
However, the reserves of the island are expected to hit critical levels
by 2006.
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Food and beverage giant San Miguel Corp. said international beer
operations are "back on solid ground" with expectations this would
result in "solid" gains in the first half of the year. In a statement,
San Miguel said it expects revenues to increase by more than 20% and
that operating income for the first half would be positive. It did not
give actual figures. "Encouraged by the very positive outcome in the
first semester, San Miguel anticipates the momentum to continue in the
second half of the year," the firm said. San Miguel said that on
average, international operations will report growth in the "high-teens"
market, or those that fall under the 16- to 19-year old age bracket. It
said it expects sales to increase in the summer months, particularly in
China, which accounts for more than two-thirds of international sales
volume. "We anticipate China to register volume growth in excess of 20%
for the first six months of 2004," San Miguel said. It expects profits
for the period to show "significant improvement" from last year, as
operations recover from the threat of severe acute respiratory syndrome,
which was prevalent in 2003.
San Miguel said that outside China, its Australia and Indonesia
operations also "performed extremely well" during the period, as volumes
increased significantly and contributed to positive results. The firm
also quoted analysts as saying that penetration of regional growth
economies was "strategically the best way to diversify its earnings from
being a largely Philippine-centric company." In the past three months,
San Miguel expanded its operations in Thailand, Indonesia, and Vietnam.
The firm added that in the future, San Miguel's international business
would increase its contribution in the revenue mix to 30%-40% from less
than 15% at present. "The company will utilize its strengths in the
domestic business and international orientation as it aggressively
builds up its businesses in the region," it said. The country's largest
publicly listed food, beverage and packaging firm, San Miguel's net
profit jumped by 32% in January-May to
PhP3.29 billion from a year earlier. The firm attributed the
growth on higher beer sales and lower costs at its soft drinks unit.
Volume of domestic beer sales grew by 20% in January to May compared
with the same period last year, while international beer sales rose by
19% in the same period. Consolidated operating income rose 39% in the
first five months of the year at
PhP6.65 billion. -- Jennee Grace U. Rubrico
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The Department of Energy yesterday said it considers four out of 17
foreign investors as "serious bidders" for the 600-megawatt Masinloc
coal-fired power plant. Energy Secretary Vincent S. Perez, Jr. said
companies from India, Japan, Korea, the US and Southeast Asia have
submitted letters of intent to participate in the plant's sale. Masinloc
will be sold as a merchant plant without any power sale contract, Mr.
Perez said. He said four investors were initially considered by the
Power Sector Assets and Liabilities Management Corp. (PSALM) as serious
bidders while another four were deemed equally serious but had concerns
which were subsequently addressed by the PSALM board. Mr. Perez said the
board had approved the bid procedures for the plant. PSALM commenced the
asset sale process and distributed the bid procedures to interested
bidders yesterday. PSALM has set an Aug. 18 deadline for the submission
of letters of intent. A prebidding conference is scheduled on Sept. 1,
while the actual bidding is on Oct. 27.
The government aims to raise up to $5 billion by the end of 2005 by
selling power plants and grids owned by the National Power Corp. Six of
the companies interested in Masinloc were Japanese, three were from
Southeast Asia, and there was one each from India, Australia and South
Korea, according to a Reuters report. The other five companies were
based in the Philippines and included power producers. The Masinloc
plant, located in Zambales, north of Manila, would be sold free of debt.
But as an incentive, investors would have to pay only 40% of the price
at the time of any deal, deferring the remaining 60% over a period of
about seven years. The Philippines is moving towards the deregulation of
the power industry and will need foreign capital to build power plants
and upgrade grids to avoid nationwide blackouts that could strike in the
next four years. Reports said the country also needs to cut a mountain
of state debt worth some $61 billion. -- Bennet S.
Sto. Domingo
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Asia Cellular Satellite (ACeS) International, a unit of Philippine
Long Distance Telephone Co. (PLDT), has expanded its services to 10
countries in the Asia Pacific. The firm, which is 20% owned by PLDT,
tied up with national carriers and international distributors to open
the satellite service in Sri Lanka, Palau, Malaysia, Hong Kong,
Singapore, Taiwan, Japan, China, Nepal and Papua New Guinea. ACeS
started operations in 2001 with facilities in the Philippines, Indonesia
and Thailand. "We have established a niche market in the Philippine
maritime industry. We are now forging partnerships with
telecommunications companies and international distributors within the
footprint of ACeS satellite," said Tina Z. Mariano, public access
department head of Smart Communications, Inc., which manages ACeS
Philippines Cellular Satellite Corp.
Smart is a wholly owned subsidiary of PLDT. ACeS satellite's
footprint covers 11 million square miles in the Asia-Pacific region. It
can reach as far as Pakistan in the west, China, Japan and Korea up
north, and Indonesia and Papua New Guinea in the south. Ms. Mariano said
there are about 35,000 Smart Link satellite phone units in the
Philippines, most of which are used by shipping vessels. ACeS operates
abroad with a reseller's agreement by selling satellite communications'
airtime to national carriers. Existing agreements have been inked with
Mobitel of Sri Lanka, Palau Smart Call Telecom in Palau Islands, and
Celcom of Malaysia. -- A. B. L. Lorenzo
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By ROULEE JANE F. CALAYAG
Reaching its highest level in three months, the main stock index
yesterday sustained its momentum to end just a shade below 1,600,
following strong foreign buying. The Philippine Stock Exchange composite
index advanced 15.65 points or 0.99% at 1,599.06. Analysts polled by
BusinessWorld said expectations of strong second-quarter earnings by
major telecommunication firms as well as the continuing recovery of
overseas markets also paved the way for a broad-based rally. Rommel
Macapagal, analyst at Westlink Securities, Inc., said trading yesterday
benefited from gains in the past sessions. "There was observed foreign
buying that was spurred by a strong momentum which was carried over from
the past days," said Mr. Macapagal.
UPTREND
Managing to almost breach the 1,600 level was a feat for the stock
market which was gradually recovering after trading sideways for about
three weeks due to lack of fresh developments in the corporate and
economic fronts. "The market was able to overcome the challenges," added
Mr. Macapagal, noting that the main index easily broke the 1,580 level
on Wednesday. Hence, its move toward the 1,600 yesterday was a
confirmation of the market's projected upward trend. "It is now at the
1,600 level. Hopefully, the market would continue to move up. Either it
breaks this level or consolidates [today]," he said.
INDICES
All the counters crossed over to positive territory. The all shares
index recovered its losses the other day as it made a comeback with 2.55
points at 989.73. Mining remained the counter that made the biggest gain
of 39.91 at 1,690.97. Although slower than the previous day's gains, it
still indicated that investors were focused at snapping up mining
stocks, probably spurred by the shift in the government's thrust toward
the sector. The banks and financial services counter continued its
gains, advancing 7.72 to 471.82. Commercial-index was also strong at
2,519.22, up 21.06. Oil moved by 0.05 at 1.65. Property rose 5.07 at
541.67. Trades improved at 3,296 with almost three billion shares valued
at
PhP99.3 million. Gainers outranked losers at 58 to 20 while 44
issues remain unchanged.
TELECOMS
Jojo Gonzales, research chief at Philippine Equity Partners, Inc.,
said although the Phisix was below 1,600, its almost 1% gain was
satisfying because of the strong volume which hovered close to PhP1
billion. He said telecoms, led by Philippine Long Distance Telephone Co.
(PLDT), and the stocks of Bank of the Philippine Islands (BPI) and Ayala
Land, Inc. lent strength to the market. "Part of the strength is due to
expectations of good second-quarter results of telco firms and a
recovery in the stocks at the overseas markets," said Mr. Gonzales. The
gains of the American Depositary Receipts (ADRs) of PLDT in New York
were reflected locally as the telecom giant remained strong, leading the
group of most actively traded stocks. "PLDT broke the psychological
barrier at PhP1,300 in early trade before it retraced back [to] its
previous level," noted Westlink's Mr. Macapagal.
OPTIMISTIC
Mr. Macapagal expects the uptrend in the market to continue through
next week. "We are seeing a continuity of this trend until next week
with intermittent base-building and corrections," he said. He and other
analysts plot the resistance level at around 1,620. In line with this
projection, prospective buyers may choose to stay on the sidelines
temporarily in case there are further selling pressures that may occur
at this range. The more optimistic investors, however, may likely
overcome speculations of a bearish session, by barging into the market
and pushing it higher to 1,700. With most negative developments already
discounted, the market should be enjoying good times ahead although some
investors may be focusing only on some sectors, such as telcos and
power-related stocks, as they aim for higher average real returns.
TOP 10
Majority of the 10 top traded stocks were up, except for Manila
Electric Co. "B", ABS-CBN Holdings Corp., Philippine Depositary Receipts
(ABSP) and Pilipino Telephone Corp. (Piltel). The other stocks that saw
major trading deals were PLDT, Globe Telecom, Ayala Corp., SM Prime
Holdings, Inc., BPI, ALI and Equitable PCI Bank. PLDT added PhP45 to
PhP1,275 while Globe was up PhP20 to PhP845 on expectations of strong
earnings in the first semesters. Investors are banking on these stocks,
especially as they reported increased wireless subscribers for PLDT at
16 million and Globe at over 10 million. Their combined value turnover
was at PhP194.14 million.
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