Early last week, Meralco or Manila Electric Company (MER), which is the Philippines’ largest distributor of electricity, announced that it is considering to spend a total of PHP 45 billion from 2011 to 2015 to upgrade its electricity distribution network. About 85% of this projected capital expenditure will be used for the development of its delivery system and for the acquisition of additional transformers and meters. Meanwhile, the company, with the approval of the country’s Energy Regulatory Commission (ERC), will implement this January 2011 a new distribution rate. Upon implementation, the average distribution rate will increase to PHP 1.6464 per kilowatt-hour (kWh) from PHP 1.4917. Note that in June 2010, the company also petitioned the ERC for a hike in its rates to an average of PHP 1.7056/kWh in 2012, PHP 1.7686/kWh in 2013, PHP 1.8349/kWh in 2014, and PHP 1.9036/kWh in 2015. An upgrade and modernization of the company’s electric network will optimize its system, thus, decreasing its operating costs. This plus the implementation of a rate hike this year and a likely rate increases in the following years would indeed shore up MER’s coffers.
From a technical point of view, sentiment on MER had been bullish given its sharp rise from PHP 200.00/share to PHP 258.00 from December 28, 2010 to January 3, 2011. After reaching the said high, MER’s upward momentum has tapered, leading it to form what appears to be a pennant pattern. Now, if buying interest resumes and MER breaks above PHP 250.00, it could once again aim for its historical high at around PHP 300.00 in the near term.