"Letter of Mr. Alfredo Montelibano, Chairman of the Board
of Meralco Securities Corporation to Alejandro Melchor,
Chairman of the Power Development Council dated April 10, 1973"

Annex G

Hon. Alejandro Melchor
C h a i r m a n
Power Development Council
Manila

Dear Sir:

In the meeting of March 29, 1973 between representatives of the Government Panel created under Memorandum Order 348 and of Meralco Securities Corporation (MSC). Mr. Arthur Alvendia inquired about the plans for the disposition or divestment of Manila Electric Company (MECO) shares held by MSC. As previously communicated to the government, it has been MSC’s policy. Initially implemented about a year ago, to disperse direct ownership of MECO to the public in full accord with the government’s objective of diffusing the ownership of strategic industries.

This letter will serve to confirm our representations at the abovementioned meeting that MSC is prepared to reduce its ownership of MECO to 20% or even zero in favor of the public. With regard to the mode and period of divestment, which must primarily consider the overriding imperatives of the New Society, MSC would like to defer to the President’s preferences, confident that he is as much concerned that any prescribed plan should also respect the rights of MSC’s legitimate creditors and conform to equitable standard of valuation.

Nonetheless, the Panel asked if MSC had made any studies on the alternatives for effecting a divestment. MSC has, in fact, made some exploratory proposals and hoped to develop into greater detail whatever features in them were found most acceptable. For your information, the proposals that have at one time or another either been discussed within MSC itself or transmitted to the appropriate authorities are the following.

(1) a scheduled divestment over time through direct public and/or institutional offerings, both primary (by MECO’s own issuance of shares) and secondary (by MSC sales of its holdings of MECO shares) pursuant to a program already under implementation before the imposition of Martial Law (Annex “A”);

(2) a divestment to the public through the government by an immediate exchange by MSC of its MECO shares for acceptable government bonds which are encashable under certain circumstances (Annex “B”);

(3) an arrangement by which a “trust” is commissioned with limited powers to receive the dividends on MECO shares, pay off MSC creditors and sell the MECO shares overtime. MSC would, however, retain certain ownership prerogatives of control over MECO until full divestment has been accomplished (Annex “C”).

Salient details of the above alternatives, to the extent developed, are described in Annexes “A”, “B” and “C” attached hereto. These alternatives are, of course, not exclusive of others and may also be refined, modified or combined as deemed desirable.

We would be pleased to receive, at the earliest opportunity, your approval of MSC’s plan to reduce its ownership of MECO to 20% (or zero) in favor of the public and an indication of which plan or features thereof best meet the government’s policies as well as the period within which divestment should be completed. The implementation of your decisions on these matters will then be undertaken as soon as possible in consultation with the appropriate agencies and representatives of the government.