Meralco: Philippines Largest Power Distributor

Manila Electric Co., the country’s largest power distributor, expects the company to surpass its P11 billion core net income target this year due to higher sales volume growth year-on-year.

“Yes, we’re on track on P11 billion, that’s out core net income. We do expect that we will surpass it by a little bit,” Meralco chief finance officer Betty Siy-Yap told reporters on Tuesday.

Siy, in an interview with reporters after the Committee on Energy hearing at the House of Representatives on Tuesday, said that while Meralco’s core net income performance depended on a number of factors, the company saw a tremendous increase in sales volume growth as of August, driven by its industrial customers.

Meralco expects sales volume to grow by four percent this year but sales volume already rose 11 percent as of August.

“It’s now 11.7 percent compared to last year. That will be tempered as we go to the end of the year because of the lower number of days by December because of the holidays. The 11.7 percent, that’s as of August,” Siy-Yap said.

“We’re higher (sales volume) than projected and we’re higher than last year but you should also remember that last year, we were also coming from a low 2008 demand so it was really, really low,” she said.

Siy-Yap said the industrial sector drove the higher sales volume this year as the sector slowly recovered from the US economic slump, which started in late 2008.

“Again I go back to 2008 when the volume was very low. Even through 2009, it wasn’t really much but you’ll see in 2010, even at this point, you’ll see semiconductors coming in. In the services sector and also commercial and residential, contributed to the growth. Another reason that contributed to the our sales growth is the mix of our customers. So it’s sales mix and volume,” she said.

The official said Meralco’s sales volume usually went down towards the last quarter of the year due to cooler weather which has softened demand and the presence of the hydro power plants. The hydropower plants were not able to run during the summer months due to low water reservoir at the dams which pushed up power rates.

“Sales volumes are much higher on an accumulative basis. Today, it’s greater than last year in terms of energy sold. So that’s the main driver. And number two, we had a rate adjustment in April. It was supposed to be in January but it took effect April this year,” she said.

The Energy Regulatory Commission allowed Meralco to increase its rates by an average of P0.2690 per kilowatthour for the distribution, supply and metering charges in April as part of the performance based rate setting scheme.

Meralco president and CEO Manuel Pangilinan said in May that they expected Meralco’s core net income to hit P11 billion this year, up 57 percent from its core net income of P7 billion in 2009 due to the recovery of the industrial sector and the distribution rate increase approved in April.

Pangilinan also said they were targeting sales revenues to hit P240 billion at the end of the year.

“Given the fact that Meralco had a robust and strong first half performance, typically in an average year 60 percent of energy sales are derived in the first half and 40 percent are derived in the second half. We expect energy sales to slow down a bit in the second half of the year and therefore will drive the revenue and profit picture that way for the second half,” Pangilinan said.

Meralco reported core net income of P5.805 billion for the first half, up 82.3 percent from P3.185 billion for the same period last year.

Consolidated net income amounted to P4.8 billion for the period, up 51.1 percent from P3.211 billion last year.

Meralco supplies electricity to over 4.5 million customers in its franchise area. The company, whose shares are listed at the Philippine Stock Exchange, is jointly owned by First Philippine Holdings Corp. of the Lopez Group, telecom giant Philippine Long Distance Telephone Co. and food and beverage giant San Miguel Corp. (PNA)

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