In our last Vantage Point newsletter, we asked whether the board of South Cotabato II Electric Cooperative, Inc. (SOCOTECO II) rushed too soon toward the Enrique Razon-Manny Pacquiao opportunity.

It would be interesting to know which bidder actually has the financial depth and operational capability to rehabilitate a regional electricity monopoly without inevitably passing the hidden risks back to consumers.

Electricity distribution is one of the most durable recurring-cash-flow businesses in the country, largely because customers can’t just leave the grid when they decide to pull the plug.

When operational control over a franchise area is transferred, reversing that decision is nearly impossible. That is why the analysis of the balance-sheet comparison between the Razon-linked IGNITE Power proposal and the Manila Electric Company (Meralco) deserves a more in-depth investigation.

The IGNITE proposal was seen to provide an initial P4 billion, as well as P10 billion in investments over five years. On paper, those numbers are impressive. Infrastructure finance, however, is chock full of projects at launch that seemed plausible until refinancing pressure, challenges with execution, and debates over governance occurred years later.

In the reshuffling of utility companies, headline promises of investment are just the starting point. The real issue lies in determining who assumes the risk when projections don’t come to fruition.

Meralco’s size

Meralco is the country’s largest listed electricity distribution utility. Its bottom line reflects roughly P120.8 billion in revenues, P11.4 billion in core net income, and P19.6 billion in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Its net debt-to-EBITDA ratio was approximately 1.7 times.

Those numbers are important because rebuilding infrastructure needs more than a one-time capital injection for utility rehabilitation. It needs the capacity to fund upgrades, absorb regulatory shocks, sustain collections, pay debt, and stabilize tariffs.

Meralco’s risks are visible. The company has substantial debt liabilities. But those risks are reflected in audited filings and public disclosures. 

The harder question to answer is: What exactly are the comparable audited numbers behind the IGNITE proposal? Prime Infra boasts robust group-level financials, with roughly P55.9 billion in revenues and P37.6 billion in EBITDA for 2024. But that is at the Prime Infra group level, and not the balance sheet of IGNITE Power itself.

A group that has a wealthy parent doesn’t imply the bidding entity has the same balance-sheet capacity. Unless there are binding guarantees and enforceable funding obligations, the headline commitments remain projections rather than fully bankable obligations.

There is a significant difference between rehabilitating an existing utility and carving out its productive assets into a new operating entity while legacy obligations remain elsewhere. Rehabilitation means one structure preserves institutional continuity. Establishing a new entity potentially ring-fences future earnings while isolating older liabilities.

Critics describe the arrangement less as a partnership than as “a surrender of ownership.” The underlying concern is economic: Who ultimately controls the future cash flows generated by the franchise?

IGNITE massages public perception

The Razon-backed group seems to be deliberately shifting the balance-sheet size debate in its favor. Its subtext, however, is that utility rehabilitation is not simply a matter of identifying which bidder is bigger, richer, and more institutionally based.

IGNITE and SOCOTECO II officials have reiterated that the cooperative is not legally regarded as an “ailing” entity. The group’s defense hinges on the theory that member-consumer-owners actually — not just balance-sheet comparisons — should decide the fate of the cooperative at the end of the day through a referendum.

The challenge faced by SOCOTECO II, however, is not only whether the IGNITE proposal can work in theory. It’s whether the public has witnessed enough audited, entity-level financial transparency on which to base its decision to divest operational control of one of Mindanao’s most critical electricity franchises to have confidence.

In utility restructuring, confidence isn’t established through investment headlines, but through fact-checkable balance sheets, enforceable pledges of funding, and transparent governance structures.

IGNITE’s argument works politically more than financially. 

In stressing that SOCOTECO II is legally not an “ailing cooperative” the Razon group paints its bid as less a corporate takeover and more a participatory partnership.

Its messaging is easier for people to buy, especially in Mindanao where fears that local control will be lost to big Manila-based conglomerates remain sensitive. IGNITE, in effect, is weaponizing this fear in its favor.

But from a forensic-finance perspective, this argument is incomplete. Democratic approval does not automatically answer broader questions of balance-sheet strength, operational control, future tariff pressures, governance rights, and long-term risk allocation.

Meralco’s advantage is bigger than size, but also transparency: its audited disclosures, operating history and regulatory track record are publicly available, while IGNITE’s submission is still dominated by commitments made and the general standing of the Razon group more than entity-level financial capacity.

I welcome your views on these and other issues where decisions made in power shape the country’s economic future. – Rappler.com

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