Meralco profit up to P6.1B in H1

By Zinnia B. Dela Peña (The Philippine Star) Updated July 26, 2011 12:00 AM MANILA, Philippines - Power retailing giant Manila Electric Co. (Meralco) logged a 26 percent increase in its net income in the first half of the year to P6.1 billion, aided by a higher distribution charge as well as lower operating costs. In a briefing yesterday, Meralco chief operating officer Oscar Reyes said the company managed to post a net profit in the first six months of the year despite a one percent drop in sales volume resulting from a much cooler temperature, reduced manufacturing activity due to the earthquake that struck Japan, and the absence of election-related spending. However, the growth in customer count to 4.933 million, system reliability and availability and the modest increase in commercial sales sustained the company’s operating results, he said. Consolidated core net income climbed 35 percent to P7.8 billion while earnings per share rose 26 percent to P5.40. Given the utility firm’s robust operating results, Meralco president and chief executive officer Manuel V. Pangilinan said the company’s core net income is seen to hit P14 billion by the end of the year, up 15 percent from 2010. Pangilinan said the company’s strong performance also allowed it to declare a 50 percent dividend payout, equivalent to an interim cash dividend of P3.45 per share, the highest so far in the power firm’s 108-year history. During the period under review, the average distribution rate of Meralco was P1.63 per kilowatthour compared with P1.40 per kwh in 2010. Total energy sold reached 14,781 gigawatthours or only one percent lower. Customer count grew three percent to 4.9 million with the residential sector leading the growth with a three percent increase, followed by commercial customers at 0.5 percent. Consolidated revenues, of which electricity accounted for 97 percent, declined two percent to P124.8 billion, due to significantly lower generation and system loss charges and the slightly lower volume of energy sold. For the first half of 2011, generation and system loss charges as well as taxes and subsidies, which account for 69 percent of total pass-through charges were lower. Transmission and distribution charges, on the other hand, grew 45 percent and 17 percent, respectively. Total costs and expenses for the half amounted to P115.2 billion or four percent lower than 2010, with cost of purchased power accounting for 83 percent of total. As of end-June this year, Meralco’s consolidated free cash flow stood at P15.2 billion, largely driven by increased distribution revenues, improvement in collection performance and recovery.   Cash and cash equivalents as of the end of the first half of 2011 amounted to P42 billion or 174 percent higher. The company’s debt, on the other hand, stood at P28.4 billion. Meralco issued a total of P7.5 billion of corporate notes and availed of loan under a bilateral loan arrangement at fixed and floating rate notes. “Much has changed in the last couple of years and credit goes to the concerted efforts of the management of Meralco in attaining operational efficiencies and financial stability. Equally important is the much more defined processes of the regulators, which has allowed us to operate in a more stable regulatory environment. Needless to say, the lagged effect on the global economy of the recent earthquakes is highly visible and has, to a certain extent resulted in lower than expected growth for the company. However, the operating efficiencies have contributed to significant improvements in the overall performance of Meralco, making the company an investment class in its own right. We are committed to deliver on our dividend policy, barring any unforeseen events,” said Manuel M. Lopez, chairman of Meralco.