Friday, July 30, 2004
Appeals court rules vs Meralco rate hike
PhP700-M unpaid realty tax delays NSC sale
Finance dep't backs plan to tax nonessentials
Top economists urge end to rice import restrictions
Standard & Poors marks down RP currency rating
ADB sees East Asia growth at 7.3% this year
BIR backs transfer of Lucio Tan cases
Globe inks PhP5-B loan to fund network expansion
PNOC unit to rebid PhP2.58-B Leyte geothermal project
San Miguel expects solid gains from int'l beer sales
Energy dep't says 4 firms serious in Masinloc plant bid
PLDT satellite unit expands service to 10 countries
Phisix rises 1% on foreign buying

July  28 - 29
July  26 - 27
July  22 - 23
July  20 - 21
July 15 - 16
July 14
July 12 - 13
July 9 - 10
July 7 - 8
July 5 - 6
July 1 - 2





Appeals court rules vs Meralco rate hike

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



PhP700-M unpaid realty tax delays NSC sale

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



Finance dep't backs plan to tax nonessentials

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 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.


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.


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



Top economists urge end to rice import restrictions

...even as RP renegotiates extension at WTO


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.


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.



Standard & Poors marks down RP currency rating


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."



ADB sees East Asia growth at 7.3% this year

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



BIR backs transfer of Lucio Tan cases

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.



Globe inks PhP5-B loan to fund network expansion


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.



PNOC unit to rebid PhP2.58-B Leyte geothermal project


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.



San Miguel expects solid gains from int'l beer sales

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



Energy dep't says 4 firms serious in Masinloc plant bid

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



PLDT satellite unit expands service to 10 countries

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



Phisix rises 1% on foreign buying


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.


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.


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.


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.


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.