Meralco power project may cost P7B

Business mirror
MONDAY, 28 FEBRUARY 2011 20:37 PAUL ANTHONY A. ISLA / REPORTER

MANILA Electric Co. (Meralco), the country’s largest power retailer, is looking at spending between P6 billion and P7 billion for its foray into the power generation business.

“We’re in discussion with several banks right now, particularly for our first project or the 150-megawatt (MW) aero derivative power plant,” Betty Siy-Yap, Meralco chief finance officer, told reporters in a press conference, as she added that the total project cost is still being finalized.

“But off hand, it [could cost around] P6.5 billion. We’re looking at financing 70-percent of the project through debt and the rest through equity infusion from the parent company,” she added.

Siy-Yap also noted that they have the capability to finance the equity portion at the parent company level.
The 150-MW power plant forms part of Meralco’s five-year plan to put up 1,500 MW of additional generating capacity.

“The entire 1,500-MW power generation portfolio could entail an investment of $2.2 billion to $2.3 billion. But for the first 150-MW power plant, it will cost us P6.5 billion to build it, and we’re still completing cost estimates,” Siy-Yap said.

Meralco president and chief executive Manuel V. Pangilinan pointed out the need for the country to have new power plants in order for rates to go down.

 “It’s where Meralco should be moving into building power plants sooner rather than later. It has the ability to market the power and the financial strength to do it as well,” Pangilinan said.

Pangilinan earlier said Meralco expects to put the power plant on stream as early the first quarter of 2012. The planned power facility will be a combined-cycle gas turbine, which is similar to a jet engine and will run by liquefied natural gas, diesel or aviation fuel.

Pangilinan explained that they considered this technology so it could be designed and be brought down quickly, and that they plan to build the facility. Meanwhile, Pangilinan declined to give his company’s guidance numbers for this year.

“In terms of outlook, demand only grew by around 2 percent in January and February as compared to the 10 percent sales growth last year. Though our tariffs are slightly higher this year compared to the average last year, yet still we are not in the position of giving a guidance number for this year,” Pangilinan said.

He reasoned that they still have a pending the application for increased tariffs under the third regulatory period with the Energy Regulatory Commission (ERC).

Meralco also announced its audited consolidated core net income reached P12.2 billion for the year while consolidated reported net income amount to P9.7 billion. The power retailer said last year’s financial results reflect higher recurring net income compared with that of 2009 as a result of increased volume of energy sold.

Meralco added that unprecedented 10 percent growth in sales volume was the result of unusually high temperatures, higher consumption brought about by election spending in the first half of 2010 and of the upturn in business expansions within the franchise area throughout the year.

Its year–to–date system loss rate was at an all-time low of 7.94% percent, which more than half a percentage point lower than the 8.5%-cap set by the ERC.