POWER retailer Manila Electric Co. (Meralco) expects its net income to reach P14 billion by year-end from P12.2 billion last year.
“We expect our core net income to increase by 15 percent to P14 billion, as we expect electricity sales in the second half this year to be broadly similar to that realized in the first half and reflecting slightly lower distribution tariffs for this period as approved by the Energy Regulatory Commission [ERC] under our third regulatory period,” Manuel V. Pangilinan, Meralco president and chief executive, told reporters in a press conference on Monday.
Pangilinan said Meralco plans to increase electricity sales in the second half to continue to deliver superior results to stakeholders.
Meralco is tapping Meralco PowerGen Corp., its power generation arm, to eventually help boost its profits.
“The management is challenged in making the profit curve a bit sharper, considering that the approved distribution rates for the third regulatory period is expected to be flattish,” Pangilinan said.
Pangilinan said they have thought of adding new businesses, especially in the generation side, to help raise the profit curve.
For the third regulatory period from July 2011 to June 2015, Meralco has been allowed by the ERC to collect an average distribution charge of P1.5828 per kilowatt-hour (kWh) from an average distribution charge of P1.6363/kWh in June 2007 to July 2011.
On July 22 Meralco PowerGen entered into a shareholder agreement with Taiwan Cogeneration International Corp. and AboitizPower Corp. to form the Redondo Peninsula Energy Inc. and develop a 600-megawatt (MW) coal-fired power plant in the Subic Bay Freeport Zone in Zambales.
Oscar Reyes, Meralco senior vice president and chief operating officer, also made it clear that the 600-MW coal-fired power plant will be part of Meralco and Meralco PowerGen’s 1,500-MW power generation plan.
He added that they plan to build the 1,500 MW through partnerships with other established and reputable players in the industry.
Aaron Domingo, Meralco PowerGen general manager, added they are also working on the 900-MW balance of the 1,500-MW target portfolio.
“On top of the 600 MW to be under RP Energy, we’re looking at anywhere from 1,800 MW to 2,400 MW of potential generating capacity projects in Luzon,” said Domingo, adding that not of all these 2,400-MW potential capacity would be put up.
Considering the large potential in generating capacity, Domingo said the 900 MW of their 1,500-MW target could be built within the next five years.
Domingo said they are talking with most power industry players, which include also San Miguel Global Power Holdings Corp.
The Meralco board also reaffirmed its dividend policy and declared a regular dividend of P3.45 per share, or equivalent to 50 percent of net earnings. The Meralco board, according to Pangilinan, will also take a “look-back” approach at year-end to determine if a special dividend is needed.
Betty Siy-Yap, Meralco senior vice president and chief finance officer, said the company’s consolidated net income increased by 25.6 percent to P6.091 billion in the first half of the year from P4.851 billion during the same period last year.
Yap added Meralco’s net income also increased by 34.7 percent to P7.822 billion in the first half of the year from P5.805 billion in the same period last year.
Yap said the increase in income was driven by the adjusted distribution rate due to the implementation of the tariff adjustments for the fourth regulatory year of the second regulatory period; higher volume sold to commercial, and lower operating costs.
However, she said consolidated sales revenues dropped by 1.9 percent to P124.8 billion in the first half of the year, as electricity sales revenues decreased by 2.6 percent to P121.2 billion in the first half. In the first half of 2010, Meralco’s consolidated sales revenue was P127.2 billion that took into account P124.4 billion in electricity sales revenues.
Nonelectricity sales revenues, on the other hand, increased by 30.9 percent to P3.6 billion in the first half of the year from P2.8 billion in the same period last year.
In terms of gigawatt-hours (GWh), Yap said Meralco sold a total of 14,781 GWh of electricity in the first half of the year or 1.1 percent lower than the sales volume of 14.950 GWh in the same period of 2010.
“The much cooler temperature, the lagged effect of the disaster that hit Japan, and the significantly higher base coming from 2010 constrained volume of energy sold in the first half of 2011 from surpassing the record level in 2010. The growth in customer count, system reliability and availability, the modest increase in commercial sales and the improved average distribution rate sustained the operating results,” Reyes said.
Reyes added that Meralco is committed to maintain a highly reliable electric distribution system and aspire to serve customers 24/7.
Amid the consecutive weather disturbances in the last two months, Reyes said Meralco’s system reliability and availability based on the interruption frequency and duration indices are at unprecedented levels.
“We are quite confident that there will be substantial savings in system loss charge for the consumers in 2011 given the continuing improvement in our system loss performance,” Reyes said.
