Announcement of IFC Investment in Manila Electric Company (MERALCO) Philippines on September 19, 1966

.,. l • .~NT E RN AT ION AL F I NANCE CORPORATION 1818 H STREE·T. N.W .. WASl".IINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 IFC Press Release No. 66/14 Subject: IFC Investment in Manila For Release 12 noon EDT Electric Company (MERALCO) Monday, September 19, 1966 Philippines 'lhe leading power company in the Philippines, the privately owned Manila Electric Company (MERALCO), is to recei,re financing of $12 million from the Inter- national Finance Corporation (IFC), an affiliate of the World Banlt. 'nle IFC in- vestment, consisting or ·an equity subscription of $4 million and an $8 million long-term loan, is the largest so far made by the Corporation., and compares with the previous largest,commitment of $6.l million made earlier this year in a Brazilian paper company. This is the first investment IFC has made in a utility~ • The commitment will complete financing of $94 million for the 1966-69 stage of MER.ALCO~ s long-range expansion prograln.. Purchase of the major generating equip- ment is expected to be financed by suppliers' credits. The rest of the present fi- nancing will be covered by cash generation, advances from the parent company and other loans. MERALOO has been generating and selling electricity in the Philippines since 1903. Its franchise covers an area of 915 .square miles on the island of Luzon and includes the capital, Manila, and the thickly industrialized area around it. Th.;_s is the heart of manufacturing and commercial activity in the Philippines, and some 65 per cent of the country's· total energy demands are met by MERALCO's fo".ll' generating stations, which have a combined capacity of 494,000 kilowatts. In addition, the company has an agreement to purchase up to 150,000 kilowatts • f:roin the other main energy supplier, the government-owned National Power Corpora- tion (NPC). Apart from one small hydroelectric unit, all MERALCO's existing and planned plants are steam generating and fuelled by oil.  - 2 - \ • The chairman or MERALCO is Mr. Emilio Abello, a former Ambassador or the Philippines to the United States. The company has about J,000 permanent employees. MERALCO has always been a private company and until 1962 was controlled by thl1 General Public Utilities Corporation of New York. In that year a group or Filipino citizens formed the Meralco Securities Corporation (MSC) to take- over all holdings in MERALCO. The shares of MSC are actively traded on the stock ex- change and are held bt about 6,000 stockholders. Mr. AJ.tredo Montelibano, a former chairman of the National Econom~c ,Pouncil of the Philippines, is the chair- man of MSC. Mr. Eugenio Lapez Sr a prominent businessman and inc:lustrialist ~ 1 ~, the Philippines, is the president of both MERALCO and ~C. Energy sales in the Philippines grew at an annual average rate of nearly J.6 per cent in the ten years to 1965, when they totaled 2.7 billion kilowatt hours. A detailed study by MERALCO, encompassing population growth, saturation, size of households, disposable income and value of manufacturing, indicates an annual ~ gro"(,iJth rate averaging 11.3 per cent for the next decade. To help meet this and provide a margin of reserve capacity, the company has drawn up a long-range ex- pansion program providing for the installation of about 1,150,000 kilowatts of new generating capacity, and the transmission and distribution works to go with it, at a cost of' about $243 million. The first part of this plan covers expenditures up to 1969 and invo1ve·s the addition of a 100,000 kilowatt unit., noi,1 nearing completion, at the existing Tegan Station a,nd the construction or a new generating station, inland from Manila on Laguna de Bay, the Gardner Station, which will eventually have four units. The first and second units of the Gardner Station., each nominally rated at 150,000 kilowatts, are part of the 1966-60 program. Building of the first uriit has al- • read:v started and it should be ready for operation in mid-1968,. ' - 3 - IFC •s equity subscription of $4 million will be tor the purchase or new· :PlO conunonshares at a price of P$0 each. This would.yi.eld about 312,000 shares which will make IFC's equity holding aQout S per cent ot the ordinary·capital ot ;.~ 0 0 the company. The $8 million loan will be represented by first mortgage bond~. Repayment is in 26 sem;L-annual·. installments . beginning in 1969. I\'.~ This investment is the second IFC has made in the Philippines; the Corpora- tion has a $205,217 equity shareholding in the Private Develq>ment Co11>oration of the Philippines out ot an original underwriting commitment of $4.4 million. It is also the fourth time the World Bank Group has assiste~ the country's power industry; three loans, amounting to $$8.7 million, have been made by the World Bank to NPC • • • l '