POSTSCRIPT / March 29, 2009 / Sunday


Philippine STAR Columnist

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Traffic mess on EDSA another GMA project?

BLACK EYE: Who in the Department of Public Works and Highways has been trying hard to give President Gloria Arroyo a black eye?

Work gangs have dug up scattered sections of EDSA with abandon, trapping thousands of motorists in horrendous traffic every day since last week.

To make sure irate commuters know whom to blame/praise, large signs were put up with the President’s picture and the message that the traffic situation was “another project” of Pangulong Gloria.

Whoever put up those signs either (1) wanted public ire to rain on the President or (2) thought that repaving EDSA in irregular sections is a worthy legacy project for the exiting Chief Executive.

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WHERE TAXES GO: If the ulterior motive is theory #1, they are succeeding in reaping negative reaction. If it is theory #2, the author of the signs is grossly mistaken that commuters will see the patching up of road ruts as a big deal.

Either way, putting up those signs was a silly public relations move — aside from making the President look like she was campaigning for term extension.

Why the sudden flurry of runaway repaving?

Remember that days ago the media asked what ever happened to the road users’ tax considering that roads were/are in disrepair. An overreacting DPWH went all out and dug up EDSA with a vengeance to show where taxes went.

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HARD DECISION: Giving up a controlling stake in the Manila Electric Co. (Meralco) must have been a bitter pill to swallow for the Lopez family especially now that they are under incessant fire from critics and government attack dogs.

Pressure has forced the Lopezes to sell a big chunk (20 percent) of their 33-percent equity. But having weathered bigger storms, they appear able to handle the latest challenge to their management of the country’s biggest power retailer.

“Given how Meralco’s history has been intertwined with our family, acceptance of this sale was not easy, most especially by my brother Manolo, who has invested more than 30 years of his life with the company,” Lopez patriarch Oscar said.

He added: “However, beyond merely just being a family matter, any decision to sell a substantial stake in Meralco ultimately necessitated a proper review and approval by First Philippine Holdings, which is majority controlled by the Lopezes.”

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STRATEGIC RETREAT: The Lopez family is indeed on a retreat — at least for now. The family said that the sale of a big chunk of its shares was a necessary business decision “no matter how painful and difficult it was.”

But given the history of the family’s resilience and its rising when crisis hits, most observers have not called it a knockout while waiting for the stockholders and board meetings in May when a management shuffle is expected.

The sale of most of its shares to a non-adversarial group is widely viewed as a classic one-step-backward-two-steps-forward strategy to set aside problems related to cash flow difficulties and regulatory concerns complicated by politics.

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GSIS MISUSED: Many observers wonder if the Arroyo administration has realized by now that its attempt to grab control of Meralco has only weakened its position on a more scary basic problem — the looming power crisis.

Aside from compromising a rationale approach to the imminent power crisis, the administration’s campaign to control Meralco also damaged government’s financial standing in a sensitive social sector.

The proceeds of the sale of the shares held by the Government Service Insurance System are to be paid over three years. The revenue is still not on hand even as GSIS scrounges around for cash to solve pressing payments problems.

When GSIS allowed itself to be used in the power grab, it placed on the line its brittle finances and the well-being of its captive members and stakeholders.

The clumsy move also highlighted the administration’s penchant for using its awesome powers to interfere in private business. Such meddling is a disincentive to investors looking for a level playing field.

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PLUS SIDE: Some local market analysts viewed the Lopez decision as capitulation, but many foreign financial analysts viewed it as an indication that the family has decided to focus on the generation side of energy.

Deutsche Bank, in its analysis, saw a substantial enhancement in the price of FPH and the easing of its cash flow issues. The bank’s chief financial analyst Gio de la Rosa even projected a higher price range of FPH to P30, or 33 percent higher than its closing price last week of P22.25.

The projected optimism on FPH is also due to the offloading of the company’s debt issues with the proceeds from the sale. The deal enhanced the prospects of FPH.

For the Lopez family, the sale of Meralco eased its burden on its holdings in Energy Development Corp., which it could be forced to sell at distressed levels.

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MOVING FORWARD: Also seen benefiting from the sale, as per the Deutsche Bank analysis, is First Gen Corp. Of late, FirstGen has been hampered by its debt levels with P14 billion maturing this year.

The decision to sell Meralco shares for P20 billion, or 50 percent higher than the prevailing price, meant the Lopez empire will have ample breathing space and extra P6 billion in cash to pursue its other interests. The family saved its EDC holdings from being offloaded.

The family’s debt problem owing mostly to a politicized regulatory burden has been a recurring issue. The conglomerate leaves Meralco for a while to come out on firmer ground where it can concentrate on business growth.

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(First published in the Philippine STAR of March 29, 2009)

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