At the Threshold of Fresh Synergies: Meralco in 2010
Roberto M. Paterno
MERALCO is an investor-owned electric utility serving roughly a quarter of the estimated 94 million population of the Republic of the Philippines.
It was organized as the Manila Electric Railroad and Light Company 107 years ago in 1903 to provide electric light and power and an electric street railway system to Manila and its suburbs. The facilities that Meralco built to provide these two services represented for many years the largest single investment of American private capital and know-how in the whole of East Asia.
For a little more than four decades, Meralco provided Manilans their first modern mass public transportation system with electric streetcars which in the twenties were supplemented by busses. World War II destroyed the railway system beyond rehabilitation and Meralco gave up its transportation business in 1948, concentrating thenceforth on providing electricity. The electric service it provided powered much of the postwar rehabilitation and early industrialization of the young republic that became independent in 1946.
In 1961, in a move considered daring at that time, a group of Filipino investors led by the entrepreneur Eugenio Lopez Sr. bought Meralco from its American owners, the first major American enterprise to be so 'Filipinized.' During the decade that followed, the new Filipino management built electric generating and distributing facilities at an unprecedented pace to meet the burgeoning needs of its franchise area; this was made possible by earning the confidence of international credit institutions like the Ex-Im Bank of the United States, the Ex-Im Bank of Japan, the International Finance Corporation (IFC), Kreditanstalt fur Wiederaufbau (KFW), and other banks, insurance companies, and major American, German and Japanese suppliers.
Meralco was the first Philippine company to issue mortgage trust indenture bonds successfully in the US financial market on Wall Street. Meanwhile, an enlightened human resource management regime ensured industrial peace and employee loyalty at home. In 1969, Meralco became the very first billion-peso company in the Philippines. This was all the more remarkable because much of it had been achieved without recourse to government guarantees.
In the 1970's, the Philippine Government made it a state policy for the government to own all major generating facilities. Meralco sold its generating plants to the National Power Corporation, and electric distribution became its core business. Indeed, in the first half of the 1980's, Meralco's franchise area tripled in area from 2,678 square kilometers to 9,337 square kilometers, mainly because provincial consumers preferred the rates and service of Meralco to those of the utilities that had previously served them.
During the 1980's, Meralco, upon the request of the government, organized, started up and operated the country's first elevated light rail transit (LRT) system in Manila between Baclaran and Caloocan. It was reminiscent of the prewar role of Meralco in the city's streetcar system. At the end of the decade, Meralco turned over the efficiently functioning system to the government.
Since the late 1980's, state policy on electric generation changed and once again called for private investment in this area.
Reflecting a trend worldwide, the Philippines, since the 1990's, has also been in the throes of a major restructuring of the entire electric utility industry. In general this has included efforts to move towards privatization and at the same time limit monopolies and encourage open competition in large portions of the industry.
More than in the past, much of Meralco's management since the mid-1990's has been directed towards enabling the organization to react nimbly to the changing structures and environments in which it operates, despite its continuing status as one of the oldest and biggest Philippine companies. Drives have gone under different names and slogans, e.g, TQM, re-engineering, Meralco Transformation Program, etc., but they share certain common emphases: customer satisfaction, world-class efficiency and productivity, performance-driven rewards, good corporate citizenship, transparent good governance, and process, organizational and human resource development towards these values.
Occasionally these efforts and their results have received recognition from others. More than a quarter of a century ago in 1980, the Personnel Management Association of the Philippines named Meralco as the Employer of the Year. More recently, the Employers Confederation of the Philippines (ECOP) echoed this in choosing Meralco for its 'Grand Kapatiran sa Industriya' award as the overall winner in 2005 in four identified areas: industrial peace and harmony, productivity, social accountability, and strategic visioning and partnering for business and job survival. Regional Asian publications like Finance Asia, Far Eastern Economic Review, Asiaweek, Asiamoney, Euromoney, have often cited Meralco as among the 'best managed' companies not only in the Philippines, but in Asia. In 2008, the Institute of Corporate Directors, in cooperation with the Securities and Exchange Commission, the Philippine Stock Exchange and the Ateneo de Manila Law School, cited Meralco for being among the leaders in promoting good corporate governance.
Despite all this, Meralco is mindful of the fact that the most important judgment is that of the consumer or customer. The direction is to give the consumer a real choice on where to buy his electricity and Meralco's declared vision is to make itself the energy service provider of choice.
Meanwhile, major stock transactions in 2009, have placed Meralco on the threshold of exciting initiatives in synergistic partnership with two other giant Philippine conglomerates, the PLDT and the San Miguel groups. This should augur well not only for Meralco, but for the Philippines as well.
The synergistic partnerships can lead not only to increased business opportunities and cost reductions, but also to new, expanded and more affordable service to the public.