Meralco profit surges 50% to P4.8 billion in first half

MANILA, Philippines – Power utility giant Manila Electric Co. (Meralco) yesterday said its net income surged 50 percent to P4.8 billion in the first half of 2010 from P3.2 billion in the same period last year on higher revenues from electricity sales.

In a statement, Meralco also said its core net income, which excludes one-time, exceptional charges, rose 82 percent to P5.8 billion during the same period compared with P3.18 billion a year earlier.

With the significant improvement in earnings, Meralco president and CEO Manuel V. Pangilinan said he is optimistic that the company would be able to meet its P11-billion core income target for 2010.

“The profit improvements reflect the significantly higher volume of energy sold with the surge in demand by all customer classes, led by the industrial sector. Contributing to the better performance were higher average distribution rates for the period,” he said.

Pangilinan said he expects the higher revenues in the first two quarters of the year to be sustained the rest of the year.

“The way we’re trending, we’re certainly up compared to last year. And most likely sales will be around P240-billion for the entire year – in the first half it was P127 billion. Most of that is passed-through as Meralco’s business is actually pure distribution. Of the P240-billion, anywhere between P40 and P45 billion is pure distribution, which is really our business,” he said.

Meralco’s consolidated revenues, of which electricity sales accounted for 98 percent, increased 35 percent to P127.5 billion in the first six months this year. Approximately 40 percent of the total increase in electricity revenue was accounted for by the 14-percent growth in kilowatt-hour sold while 46 percent was due to higher average purchased power and transmission pass-through costs. The first half also reflected improved average distribution rates.

Total costs and expenses for the period amounted to P120.3 billion, 34 percent higher than a year ago with cost of purchased power comprising 87 percent of total costs and expenses in 2010, compared with 85 percent in 2009.

In its meeting yesterday, Meralco’s board of directors likewise declared an interim cash dividend of P2.50 per common share to all shareholders of record as of Aug. 23, 2010, payable on Sept. 16, 2010, equivalent to approximately 50 percent of core earnings per share for the period.

At the same time, the board also approved the appointment of Oscar Reyes as chief operating officer (COO) to fill the Jose de Jesus resigned last July 1 to assume a Cabinet past under the new Aquino administration.

Total consolidated revenues from electricity sales amounted to P124.4 billion for the first half of 2010 or P32.3 billion more than the amount for the same period in 2009.

Average generation and transmission charges amounted to P6.25 per kwh or 17 percent higher than in the first half of 2009. Average distribution charge was at P1.40 per kwh, reflecting the partial effect of the PBR (performance-based regulation)-based rate adjustment, which sets the maximum average price (MAP) at P1.4917 per kwh for 2010. Collection of the adjustment resumed in April 2010 after the PBR-rate was voluntarily suspended by the company in late January.

Total energy sold amounted to 14,950 gigawatt-hours (gwh) or 14 percent higher than the volume generated in the first half of 2009. Billed customer account grew an additional 3.2 percent to 4.8 million.

Demand was led by the industrial sector which 24 percent, followed by the residential and commercial customers at 10 percent and 11 percent, respectively.

In terms of contribution to volume of energy sold, the commercial sector accounted for 39 percent, supported by a rise in commercial small and medium enterprises (SMEs) and increased occupancy rate for the real estate sector. The residential sector accounted for 32 percent of volume sold, buoyed by more housing units energized.

A total of 172 gwh were recovered from 57 self-generating capable customers, which showed increased dependence on Meralco as the more expensive cost of fuel made rates, notably the ecozone and National Power Corp. (Napocor) time-of-use (TOU) rates, more attractive.

Meralco’s overall average electricity rate in the second quarter of 2010 was higher than in the same period in 2009 due to the substantial increase in generation charges, driven mainly by the tight supply and correspondingly high wholesale electricity spot market (WESM) prices.

During the first half of 2010, average WESM spot prices ranged from P6.18 per kwh to P13.28 per kwh.

The significant improvement in the interruption frequency rate and cumulative interruption time is due mainly to the continuous upgrading of the company’s distribution system, which includes the expansion of five existing substations and commissioning of 14 new distribution feeders.

“Our ability to respond to challenges stems from the scale and strength of our company, supported by a committed and tested team, focused on serving customers and communities within our franchise area. We will build on our excellent financial discipline, capitalizing on our long-term capabilities and building from our strength by expanding into power generation and allied businesses. We are looking at a number of opportunities given our very healthy cash position and low gearing,” Pangilinan said. –Donnabelle L. Gatdula (The Philippine Star)