MANILA, Philippines—The Energy Regulatory Commission (ERC) has given power retailer Manila Electric Co. (Meralco) the go-ahead to issue more bonds or use other means of financing for capital expenditure projects.

In a recently issued decision, the ERC said Meralco could take more debt as long as it would not exceed 50 percent of its debt-equity ratio.

Meralco had sought the regulator’s approval to borrow not more than P23.7 billion up to 2011.

It said that under performance-based regulation—PBR, a scheme that replaced the decades-old return on rate base (RORB) as basis for setting utility rates—it was mandated to complete capital expenditure projects amounting to P28.68 billion.

It said these projects would allow it to meet the projected electricity demand up to 2011, comply with performance standards, and maintain the reliability of the distribution system.

“Given the peso amounts required to complete the capital expenditures approved for the second regulatory period, it is not possible or practical to finance all of these solely through (Meralco’s) internally generated funds or collections,” Meralco said in its petition. “In this regard, applicant intends to finance a portion of the cost through long-term debt.”

Meralco said it intended to take long-term debt through a number of financing options.

It said these were not expected to have any impact on its rates because under the PBR it would have to absorb all interest costs, fees and other costs related to long-term borrowing. It said these included foreign exchange losses on foreign debts.

Meralco mentioned in its application that it had a long-term standby facility with Calyon Corporate and Investment Bank worth up to $50 million, or its equivalent in any other currency. Edited by INQUIRER.net