Meralco mulls capex reduction

Manila Times.net

BY JAMES KONSTANTIN GALVEZ REPORTER

MANILA Electric Co. (Meralco) said it would reconsider its capital expenditure budget in line with the decision of the Energy Regulatory Commission to lower the utility’s maximum allowable revenue for the next three years.

Oscar Reyes, Meralco chief operating officer, said the company may likely defer some of its projects to realign its capex after the ERC reduced its applicable rates for the period 2012 to 2015.

“The rates approved are rates that are flat and slightly sloping. The ERC has come out with very challenging levels of capex and operational expenditures that we will have to live with over the next four years,” Reyes said.

“The challenge for us now is how to be able live within that capex and open levels that will require reviewing everything, seeing how we can phase or defer some of these capital projects,” he said.

Based on the ERC approved distribution, metering, and supply rates, Meralco would have to spend 20 percent lower than what it initially intended. It set a P45-billion capex over the four-year period.

“The capex that was eventually incorporated as part of the annual revenue requirement was close to 20 percent lower than what we have asked,” Reyes said.

But Meralco will not cancel any projects, he said. “We are currently reviewing the projects, but I don’t thing we will do away with any. It is just a question of phasing,” he said.

The executive said the new revenue cap would not limit the company’s capability to service its customers.

“But the important thing for us is to continue to deliver quality, reliable, adequate power to our customers. And to continue to expand our reach even to still unserved communities such as certain far-flung relocation sites,” he said.

The official said they are reviewing whether to borrow funds, adding they would have to live within their means at the moment. He said that they would also want to keep their good financial position despite a lower distribution collection for regulatory period 2012-2015.

“We want to see how we can operate with the opex levels, and continue to grow our profitability notwithstanding the challenging efficiency parameters the ERC set for us,” Reyes said.

On June 6, the ERC ordered Meralco to collect P0.636 centavos per kilowatt-hour for the regulatory period 2012 to 2015, lower than the prevailing Maximum Average Price for Regulatory Year 2011 of P1.6464 per kWh under the Performance Based Regulation scheme.