By US News Agency / Asian

Visayan Electric Co. (VECO), the country’s second-largest electric distribution utility, has signed a P1.7-billion notes facility with local banks for its capital expenditure program.

VECO, in a statement, said the agreement with the banks was signed last Sept. 30. It tapped Metrobank, China Savings Bank and BPI Asset Management as the lenders in the issue, which was arranged by First Metro Investment Corp. as issue manager and Metrobank as notes facility agent.

“We are very pleased at this issuance which provides working capital at reasonable conditions for Veco’s recurrent capital expenditure. As the economy of Cebu, and the rest of the franchise area grows, so do the capital expenditures of VECO,” said Veco president Dennis Garcia in a statement.

VECO’s capital expenditures historically range at around P500 to P700 million per year. The firm expects to spend capex of about P1.38 billion next year, P815 million in 2012, P575 million in 2013 and P521 million in 2014.

The company said its capex increased from current levels due to its planned purchase of sub-transmission assets and construction of new substations and other improvements required to meet customer growth and ensure continued reliable service.

“VECO’s P1.7 billion multi-tranche notes issuance marks the company’s capital market debut, a significant milestone indeed. First Metro feels privileged to have arranged this transaction,” First Metro vice president of the Investment Banking Group Arsenio Ona said.

The VECO franchise area covers 672 square kilometers and serves the cities of Cebu, Mandaue, Talisay and Naga and four municipalities of the greater part of Metro Cebu – Liloan, Consolacion, Minglanillla and San Fernando.

As of September 2010 it has over 310,000 customers and a peak demand of 371 megawatts. It is jointly owned and managed by Aboitiz Power Corp. and Vivant Corp., both listed on the Philippine Stock Exchange.

The Energy Regulatory Commission last year allowed VECO to raise its rates by an average of P0.2267 per kilowatthour after disallowing some costs. VECO originally applied for an adjustment of P0.3514 per kWh to cover payroll; operating & maintenance expenses, taxes other than income tax, depreciation and amortization based on audited financial statements for 2008 using the rate of return base methodology under the uniform filing requirements.

The company’s last rate adjustment was granted in August 30, 2004 under ERC Case Nos. 2001-891 & 2002-06 and its approved rates then were based on calendar test year 2000.