Arroyo Sucker Punches Everyone with Assault on Meralco

Did you see that coming ? I didn’t, although now it makes a hell of a lot of sense. Just when everyone thought GMA was keeping her head low ducking the rice and oil crises and the corruption charges against her graft-ridden administration, she takes a shot at the Manila Electric Company (Meralco), the Philippine’s largest power distributor, and rattles a lot of people’s cages.

To be sure, Meralco is big, unpopular and an easy target, having increased power charges yet again, making our power rates the highest in Asia per capita, running close to Japan. Meralco is perceived, not without cause, as greedy and insensitive to the people’s needs in these difficult times. It reported a 23 percent increase in quarterly earnings for 2008 as energy sales grew . It posted a net profit of P655 million ($15.4 million) for the first quarter, compared to P532 million in the same period last year. This even as most Filipinos, specially in Metro Manila which relies entirely on Meralco for its power needs, are struggling just to survive.

This made it easy for GMA to take on Meralco. Her ostensible reason being to bring down power rates, Arroyo asked business leaders, and the general public , to join her in “a tough legal fight” against Meralco before the Energy Regulatory Commission to force Meralco to reduce its electricity charges.

In a speech before the Federation of Philippine Industries and the Filipino-Chinese Chamber of Commerce, Arroyo said:

Please be there with all your legal luminaries because you will be beneficiaries, your workers will be the beneficiaries, your consumers will be the beneficiaries, the Filipino people will be beneficiaries. You are the ones with the means and articulateness to be able to make a good case before the Energy Regulatory Board.

Many read this as a declaration of open war against one of the Philippines’ wealthiest and most influential families, the Lopezes of Iloilo province, sugar barons who built a public utilities and media empire across the archipelago, including ABS-CBN, which has been unstinting in its criticism of the Arroyo presidency.

At the same time, the Government Service Insurance System (GSIS), headed by Arroyo loyalist Winston Garcia, started a proxy fight in an apparent attempt to wrest control of the utility. The GSIS, which owns 23 percent of Meralco and holds four seats in the 11-member board (Meralco has five seats while independent directors hold the remaining two), claims the present Lopez-controlled board has been less than transparent in its business dealings, to the detriment of the consuming public. According to Newsbreak magazine, the GSIS holdings combined with the remaining 10 percent shares distributed among PhilHealth, LandBank, Social Security System and Pag-Ibig Fund, effectively gives the government 33 percent of Meralco shares. A few more proxies might just tip the balance in favor of the Arroyo camp.

The company’s annual stockholders meeting is set for May 27.

Garcia even threatened to sue:

if only to shed light on and correct several questionable practices and deals by Meralco. This includes systems loss charges which is unfair to Meralco customers, as well as electricity lost due to the incompetence and inefficiency of Meralco in distributing power.

Arroyo is obviously going the populist route. As pointed out by columnist Amado Doronila:

The government is playing the populist card, also used by (Diosdado) Macapagal and Marcos, to appear that it is acting to bring down the cost of electricity when the administration is under siege from the rice price crisis. The crisis has stoked demands of the poor for cheap rice subsidized by the government, whose massive rice imports have prompted producers to cut down on exports and raise the price of the staple.

Squeezed between the pressures of food price inflation, the rising tensions in the rice queues, the breakdown of public order, and public demand for cheap electricity, the government is playing with fire by shuffling the populist card.

It is looking for new enemies to be used as a lightning rod to deflect public unrest over the potentially explosive issues of food price inflation and electricity bills.

But why not ? Arroyo has nothing to lose and everything to gain by attacking Meralco. As pointed out by Doronila, there’s no love lost between the Lopezes and Arroyo’s family. ABS-CBN has been vociferous in its attacks against her.

GMA intends to turn the tables on her critics, specially in the Senate, who are now distracted by this new maneuver. Unfriendly corporate entities have also been put on notice on what the government can do to court popular opinion. And this gut-issue is sure to resonate and gain adherents among the urban populace, the traditional core of the anti-government forces, and further deflate the opposition’s already faltering campaign against her.

She’s trying to pull a “Hugo Chavez”, only more subtle and elaborate. But will the public bite ? If she succeeds in a Meralco takedown, she just might be able to pull up her below basement-level approval ratings. For Arroyo, it’s certainly worth a try.

Malacañang continues to talk tough, and says it can take over Meralco, but insisted that it has no intention of doing so.

Oscar M. Lopez, chairman of the First Philippine Holdings Corp., in a moment of pique, said that the government can buy out the Lopez family from Meralco if it wants to. The Lopez group, through First Philippine Holdings, is the largest shareholder in Meralco, owning 33.4 of the country’s largest power distributor. Its holdings are only slightly higher than the government’s aggregate share of 33 percent.

Randy David looks at the demagogic positioning and blatant political opportunism in the government’s moves against Meralco. He notes:

While the high cost of electricity has been a recurring concern of consumer advocates, it is significant that this issue should surface at this time and is now absorbing all the public attention. Suddenly shunted aside are the issues that have haunted the government in the last few months: the rising price of rice and, even more so, the ZTE national broadband network scandal. This state of affairs is certainly working for Ms Arroyo, who has shown a capacity to override demands for public accountability by simply calling attention to her accusers’ liabilities.

GMA is set to meet with Meralco chair and CEO Manuel Lopez on Tuesday to discuss the thorny issues being raised against the electric utility. My guess is nothing will come out of this dialog and the real fireworks will be on May 27, the annual shareholders’ meeting.

The Chavez approach to national crises, which Arroyo is apparently taking a cue from: faced with shortages of foods, building materials and other staples, President Hugo Chávez is intensifying state control of the Venezuelan economy through a new wave of takeovers of private companies.

Raul Pangalangan examines the corporate bullying of Meralco and its political and economic implications.

Fireworks are expected at the annual shareholders’ meeting on Tuesday, May 27, with ugly accusations being thrown by both the anti and pro-Meralco groups and a proxy fight in the offing.

Raul Palabrica explains how to manage and orchestrate a possibly acrimonious stockholders meeting.

GSIS president and general manager Winston Garcia expressed pessimism there would be a management change in the Manila Electric Company during Meralco’s stockholders’ meeting tommorow.

The Securities and Exchange Commission (SEC) issues a cease and desist order (CDO) against Meralco, which enjoins the counting of certain votes favoring the present Meralco-controlled board, but the company will proceed anyway with with the election of a new 11-member board and the counting of the contested proxy votes. I doubt if the SEC can enforce its supposed prerogatives, with all the legal roadblocks Meralco will throw in its way. So much for Winston Garcia’s chest-thumping.

After the marathon annual meeting of stockholders yesterday that lasted for nearly 14 hours, making it–according to veteran observers–the longest in Philippine corporate history, the Lopezes retain control of Meralco.

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