042607: Meralco swings to net profit of P532M in first quarter

By Donnabelle L. Gatdula
The Philippine Star 04/26/2007

Manila Electric Co. (Meralco), the country’s biggest power distributor, reported yesterday a net income of P532 million for the first quarter of 2007, a huge turnaround from net loss of P748 million in the same last year.

In a disclosure to the Philippine Stock Exchange (PSE), Meralco said the improved financial performance was largely attributed to the cancellation of the provisioning for probable losses starting January 2007 following the favorable Supreme Court decision on the company’s unbundling rate case on Dec. 8, 2006.

In fact, Meralco said its net income would have been higher last year if not for the loss provisioning.

"Had there been no provisions made for probable losses amounting to P1.43 billion in the first quarter of 2006, net income for that period would have been P179 million," it said. Compared to that level, net income this year would still be higher by 197 percent or by P353 million.

Other factors that contributed to the improvement in the company’s bottom line were: a 3.7-percent electricity sales growth to 6,039 gigawatt-hours (gwh) and a 49.1-percent decrease in unrecoverable purchased power to P494.46 million.

Meralco said its unappropriated retained earnings also continued to improve, recovering from a deficit of P2.12 billion in the first quarter of 2006 to a positive balance of P10.92 billion in the same period this year.

It added that with the robust electricity volume growth of 3.7 percent, revenues increased 15.8 percent from P41.61 billion last year to P48.20 billion this year.

Total expenses, however, increased 10.7 percent to P47.40 billion, owing to the rise in purchased power cost as well as operations and maintenance expenses of 16 percent and 20.7 percent, respectively.

These increases, though, were offset by declines in other expense items such as interest and other financial charges, by 30.1 percent; taxes other than income tax, by 56.4 percent; depreciation and amortization, by 2.4 percent; and provision for disallowed receivables, by 6.3 percent.

Purchased power cost increased to P42.72 billion, the components of which were recoverable purchased power cost (cost up to the 9.5-percent system loss cap) which increased 17.7 percent from P35.87 billion in 2006 to P42.23 billion in 2007, and unrecoverable purchased power cost (system loss in excess of the cap), which dropped 49.1 percent from P971.63 million to P494.46 million this year.

Operations and maintenance costs increased to P2.83 billion mainly due to additional employee pension provisions from P301.28 million in 2006 to P813.76 million in 2007.

In the first quarter of 2007, Meralco invested P1.29 billion in capital expenditures, 22.5 percent more than the P1.06 billion last year. These investments were primarily used to address customer growth, correct overloaded facilities, meet customer service requirements, and reduce system loss.

Energy sales for the first quarter of 2007 increased 3.7 percent to 6,039 gwh compared to the same period last year. Sales rose despite lower humidity (72.66 percent in 2007 vs. 77.43 percent in 2006) and shorter average billing days (89.50 days in 2007 vs. 89.98 days in 2006).

Significant increases in energy sales by the commercial segment of 6.1 percent to 2,294 gwh and industrial segment of 4.1 percent to 1,761 gwh were the main catalysts of this overall growth.

Energy consumption of the residential segment, likewise, modestly grew by 0.7 percent to 1,949 gwh, reversing declines in three consecutive quarters.

Commercial sales accounted for 38 percent of total energy sales in 2007, up from 37.1 percent in the previous year. The share of industrial sales also increased to 29.16 percent from 29.05 percent, while that of residential sales went down to 32.28 percent in 2007 from 33.23 percent in the previous year.

Sales growth in the commercial segment was driven by the real estate sub-segment which expanded by 12.1 percent. This was followed by private services at 6.7 percent and retail trade at 3.6 percent.

Real estate growth was largely attributed to the demand from new buildings operating since the last quarter of 2006. For the first quarter of this year, a total of 11 new real estate developments with loads of 500 kilowatts and above (including Cyberzone in Filinvest Corporate City, and Serendra and HSBC in Bonifacio Global City) were energized. The buildings, with an aggregate applied capacity of 9.5 megawatts (MW), are expected to contribute an estimated 5.5 gwh upon their full operation.

Business process outsourcing (BPO), which includes call centers, also continued to fuel the expansion in this sub-segment as five newly energized call centers in 2006 contributed 5.1 gwh in the first quarter of 2007. A total of 17 new BPO projects in Meralco’s franchise with an aggregate applied load of 24.5 MW are expected to further increase sales.

 

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