How the Indonesian magnate Salim came to control Meralco
Second of a series on the Salim Empire in the Philippines
WE’RE suffering not only from the rottenness of our political architecture, worsened by the unprecedented corruption in the current administration and Congress. Hardly figuring in the public discourse though is that fact that we are also being impoverished because of anomalies in the Philippines’ economic order.
One such aberration is the fact that an Indonesian magnate, Anthoni Salim, through his Hong Kong-based First Pacific Co., is the biggest shareholder, with 48 percent shares, of Meralco, the country’s largest power distribution firm with 8.2 million customers.
The national tragedy is that most Filipinos don’t even know that part of their monthly electricity bills have increased and will increase the wealth of Salim, Indonesia’s fifth-richest tycoon with a $14 billion fortune. Congress investigates so many “bs” issues that result in feeble or useless laws but dares not find out why an Indonesian tycoon is allowed to earn billions of dollars from a power-distribution monopoly in our country.
Partly due to the fact that electricity prices in the Philippines are the among highest in Asia — P12/kWh compared to Thailand and Vietnam’s P5/kWh — and Meralco’s policy of giving dividends to its shareholders every year equivalent to half its core net income, data from First Pacific’s annual reports indicate that it sucked out of the country a total of $1.5 billion (P93 billion) in profits from 2013 to 2025. Yet its CEO, Manuel V. Pangilinan, claims the firm cannot bear the cost of its system losses which accounts for about 6 percent of a customer’s electricity bill.
Meralco even made a foreign investment in 2013 when it invested $220 million — about P9 billion at the exchange rate then — to acquire 70 percent of PacificLight Power in Singapore. Unlike Meralco’s monopoly in the Philippines though, PacificLight was in a highly competitive market. In 2020, Meralco lost P2.3 billion to cover for the full impairment of the carrying value of its investment in PacificLight.
P102 billion
First Pacific’s P93 billion Meralco-generated profits plus the P9 billion it invested in Singapore total P102 billion — an amount I’m sure would have gone a long way in reducing the system losses that are part of consumers’ bill.
This is again a demonstration of the truth that the ruling class — with foreign membership — controls the prevailing view of the society it rules over. I first wrote about this an anomaly in several columns in 2014, wrote a dozen more articles on this subject, and published in 2016 book, Colossal Deception: How Foreigners Control Our Telecoms Sector (available at amazon.com, with revised edition due in January 2027). Ten years later, even as absolutely nothing in my assertions and facts were questioned by Meralco nor First Pacific, this anomaly — a mockery of the constitutional restrictions on foreign control over public utilities — that has burdened Filipinos has not made ripple in our political and media elite’s views.
This inarguably partly due to the power of Salim’s media empire I wrote about last Aug. 10 which was built almost simultaneously as he captured two monopolies, Meralco and Philippine Long Distance Telephone Co. (PLDT). No politician nor even other media dare lock horns with this conglomerate as his media weapons will be unleashed.
As in the creation of First Pacific’s media empire, Salim’s move — through his CEO Pangilinan — into Meralco began with the PLDT Beneficial Trust Fund (BTF), the retirement fund for PLDT’s 9,200 employees. First Pacific had acquired control of PLDT in November 1998, through the controversial help of President Joseph Estrada and his bagman Mark Jimenez. CEO Pangilinan at PLDT then directed the BTF it controlled to move its funds out of its longtime safe investments in blue-chip companies and government debt instruments to fund First Pacific’s media conglomerate and its capture of Meralco.
Trust fund
In January and February 2009, the BTF quietly accumulated 10.2 percent of Meralco in the stock market. First Pacific subsidiary Crogan Ltd. acquired another 3.1 percent, while Metro Pacific Investments Corp. (MPIC), First Pacific’s Philippine investment vehicle set up in 2006 to take over the poorly performing Metro Pacific Corp., acquired another 1.7 percent.
The decisive move came in March 2009, when PLDT subsidiary Piltel — later renamed PLDT Communications and Energy Ventures (PCEV) — acquired 20 percent of Meralco from the Lopez family. That move is emblematic of the country’s old elite’s willingness to so easily give up its corporate gems to foreigners. Together, these purchases quickly made the First Pacific-controlled group Meralco’s largest organized shareholder bloc, with 35 percent holdings.
MPIC subsequently acquired the BTF’s Meralco shares in October 2009, through the pension fund’s transfer of its 10.2 percent stake to it for P13.4 billion in exchange for MPIC shares it issued. The pension fund subsequently sold these MPIC shares in the market in April and October 2010 for P12.9 billion.
Thus, this important portion of First Pacific’s Meralco acquisition did not involve an equivalent inflow of fresh foreign capital. The initial Meralco purchases had been financed through the PLDT pension fund, after which the BTF’s position was converted into MPIC shares and ultimately sold to investors in the Philippine stock market.
In March 2010, the group consolidated its Meralco interests in Beacon Electric Asset Holdings. MPIC transferred its 15 percent Meralco stake to Beacon, while PCEV transferred 13.7 percent. In return, MPIC and PCEV together held 100 percent of Beacon.
Beacon
Beacon then bought another 6.6 percent of Meralco from the Lopez family for P22.4 billion and 4.5 percent from the market for P13 billion. In October 2011, Beacon acquired PCEV’s remaining 6.1 percent Meralco stake for P15.1 billion, paying this with the issuance of preferred shares. Significantly, those preferred-share payments were funded from the dividends Beacon itself received from Meralco.
Beacon financed much of its expansion not with money remitted by First Pacific from Hong Kong but through the Philippine debt market. It issued about P34 billion of five to 10-year corporate notes, with the Meralco shares themselves that Beacon had acquired as collateral.
Beacon starting in January 2012 increased its share in Meralco through additional purchases from the Lopez family that it increased its holdings of Meralco to 35 percent.
The group later rearranged these holdings in 2014 and 2015 so that MPIC directly owned 12.5 percent of Meralco, with Beacon holding 35 percent. Again, much of the financing for this came from Philippine sources. About P10.9 billion of Meralco dividends due to Beacon was applied to the transaction, while MPIC obtained a P25 billion, 10-year loan from three Philippine banks.
MPIC in May 2016 acquired PCEV’s 25-percent Beacon interest for P26.2 billion, increasing its ownership in the holding firm to 75 percent. In June 2017 it acquired PCEV’s remaining 25 percent for P21.8 billion, making Beacon a wholly owned MPIC subsidiary.
Structure
MPIC now owns 12.5 percent of Meralco directly and 100 percent of Beacon, which owns another 35 percent of the power firm. MPIC’s combined effective economic interest in Meralco is consequently 47.5 percent, its biggest single stockholder. MPIC is owned 56 percent by First Pacific, which is owned 45 percent by Salim. This corporate layers serve an important role: It evades the Constitution’s provisions restricting foreign capital in a public utility to not more than 40 percent. But in today’s modern world, even a 26 percent shareholder — in large firms, as in the case of First Pacific’s holdings in PLDT — if he is the biggest single owner, allows it to control that firm, get huge profits, and even exploit a huge corporation’s ancillary businesses.
Pangilinan after whom the “MVP Group” is named, has remarkably less than 1 percent shares in First Pacific and in its other major firms in the past 17 years. Pangilinan is not complaining though. According to First Pacific’s reports, his total compensation package in 2025 was $12 million per year, equivalent to P683 million per year, or P2 million per day — which doesn’t include his pay as CEO of PLDT, Meralco and other “MVP” firms.
The remarkable feature of First Pacific’s control of Meralco is how the acquisition was financed. Contrary to neo-liberal theory that foreign investments bring into a capital-starved country large injections of much-needed foreign capital, Salim repeatedly tapped Philippine resources: the PLDT pension fund, domestic stock and debt markets, major Philippine banks and, eventually, the cash dividends generated by Meralco and PLDT themselves. The Philippines isn’t capital-starved: Its political, business and legal systems allow a foreign magnate to utilize those capital.
First Pacific’s Meralco shares at present have a market value of P267 billion. I estimate, using Meralco and First Pacific annual reports, that it spent P100 billion in capital to acquire these shares, with the rest raised from BTF, local borrowings and the stock market. It has received from 2012 to 2025 earnings from Meralco of P99 billion, which means that it generated a humongous P266 billion from its control of this power monopoly.
Yet Meralco has obviously not invested enough to reduce its system losses, so it conveniently charges 8.2 million customers for this.
Next in this series: How First Pacific skirted the Constitutional limits on foreigners’ control of public utilities.
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How the Indonesian magnate Salim came to control Meralco
Source: Breaking News PH
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