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Meralco allots P12B for capital projects

THE Manila Electric Co. (Meralco), the country’s largest power distributor, has earmarked at least P12 billion for capital expenditures next year to further improve its power distribution system.

“We’re looking at a capital expenditure budget of around P12 billion to keep on improving our service delivery to customers and that requires improving the robustness of our distribution system to meet the expectation of more sensitive industries to the quality of service,” Oscar Reyes, Meralco senior vice president and chief operating officer, said. 

He said they are looking at annual investments between P11 billion and P12 billion. “In terms of capital expenditures, we’re trying to ensure that what we do creates as much value as we can,” he said. 

Betty Siy-Yap, Meralco chief finance officer, said the company has spent P5.1 billion in the first nine months of the year from P4.9 billion during the same period last year. 

“The increase is largely because of the parent company’s electric capital projects for customer requirements, which include subtransmission line and some distribution line projects,” Siy-Yap said. 

Meralco earlier said an 80-percent growth in its year-to-date core net income of P9.2 billion in the first nine months has pushed them to revise net income projections to P11.5 billion instead of P11 billion by year-end.

“The economy itself seems to be growing decently well. So on that basis and if the continued operating efficiencies and the control of our operational expenses, we are prepared to revise our core guidance net income to P11.5 billion from P11 billion,” Manuel V. Pangilinan, Meralco president and chief executive, said in a press conference on the firm’s 9-month financial performance.

The Meralco head hinted earnings may be even better depending on the energy sales in the last quarter and assuming there are no major disruptions in supply due to calamities or shutdowns of the power generation plants in Luzon. The company post P5.1 billion the same nine-month period last year.

Pangilinan said 2010 will be driven mainly by Meralco’s assessment of energy sales and the number of new customers.

Energy sales in the second half are seen to grow by just single-digit compared with that in the first half that grew by about 12.6 percent.

Meralco said its consolidated reported net income amounted to P8 billion in the first nine month from P5 billion in the same period last year.

It added that consolidated core net income—which excludes one-time, exceptional charges—for the first nine months amounted to P9.2 billion from P5.1 billion during same period last year.

Meralco said the results reflected higher volume of energy sold resulting from the surge in demand due to warmer temperature and higher demand from the commercial and industrial customers reflecting the improvement in the economic activity.

In addition, Meralco noted that the results were boosted by the increase in billed customers as well as the later-than-scheduled implementation of the distribution rate adjustments approved by the Energy Regulatory Commission (ERC).

Meralco also said consolidated revenues, 97 percent of which are electricity sales, increased by 32 percent to P188.9 billion in the nine months from P143.1 billion in the same period last year.

The increase in consolidated electricity revenues was on account of higher generation charges for eight out of the nine months of 2010.

The generation charge began to come down in September 2010 with a P0.68-per kilowatthour (kWh) reduction, following lower prices in the Wholesale Electricity Spot Market and higher dispatch of the independent power producers.

The said reduction was net of an unexpected P1.20/kWh increase in automatic cost adjustments billed by the National Power Corp. in August, which was subsequently lowered by ERC to P0.0538. For the nine months, approximately 35 percent of the total increased in consolidated electricity revenues is accounted for by 11-percent growth in volume of energy sold, while 50 percent is due to higher average pass-through costs.

In nine months, Meralco said the consolidated debt balance amounted to P20.6 billion due to debt payments, loan refinancing and net interest expense for the period declined to P1.1 billion from P1.6 billion for the same period last year.

Reyes said the biggest challenge remains to be sourcing and delivery of adequate affordable power, meeting and beating strict regulatory and customer standards of service quality as well as securing timely rate adjustments and reimbursements of pass-through expenses for purchased power.

“We continue to work constructively with power generators, the system and market operators, the Department of Energy and our regulators to ensure the entire electricity supply chain functions robustly to serve our more than 4.8 million residential, commercial and industrial customers,” Reyes said.

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