LNG investment pulls down Meralco net income in Q1
By BusinessMirror -April 27, 2020
THE Manila Electric Company (Meralco) reported a 54-percent drop in reported net income to P2.61 billion in the first quarter of the year as it recognized an impairment of its liquefied natural gas (LNG) investment in Singapore.
Core profit was slightly up by 2 percent to P5.7 billion. Revenues were down by 7 percent to P70.02 billion at end-March this year as electricity revenues declined by 8 percent to P67.9 billion, mainly on account of lower pass-through charges.
The volume of energy sold for the first quarter stood at 10,879 gigawatt hours (GWh), up by 5 percent in the same period of last year, mainly due to warmer temperature.
Meralco’s residential and commercial customers registered an 11-percent and a 5-percent growth in sales volume, respectively, while industrial recorded a 2-percent decline.
Commercial sales volume, which accounted for 40 percent of total volume grew, by 5 percent to 4,343 GWh. Real estate, retail trade, and hotels and restaurants continue to support growth.
Industrial sales volume, meanwhile, declined by 2 percent to 3,135 GWh as most sectors registered negative growth, with only the food and beverage and medical products industries registering increases.
Overall customer count grew to 6.9 million at end-March.
Electricity demand for the first quarter peaked at 7,614 megawatts last March 10, six days before the enhanced community quarantine (ECQ) was enforced. However, this went on a downtrend beginning March 16, losing up to close to 40 percent in a single day during the ECQ.
Victor Genuino, Meralco first vice president and head of customer retail services and corporate communications, said the company is now seeing the full effect of ECQ in relation to energy sales recorded this month.
“We’re going to see a very sharp decline coming particularly from our commercial customers. Industrial has ramped up a bit. For commercial, we also see a bit of uptick coming from food, but when it comes to real estate, retail trade and hotel—which are key drivers for commercial sales—we don’t see much growth there. So, April sales are expected to be lower than what we’ve seen in March,” he said.
Meralco CFO Betty Sy-Yap even expects “more than [a] 10-percent decline in volume over the original budget for the year.” The target volume was not disclosed.
According to Meralco Chairman Manuel Pangilinan, “the full tragedy of Covid-19 (coronavirus disease 2019) has yet to unfold.” He expects though that the second quarter figures would be lower than what Meralco reported for the first three months.
“Too early to give earning outlook for the full year. So far, what we are experiencing in April is a decline in our build volume. That’s likely to hold true for the entire second quarter so with the lower volumes and lower revenues, it is likely that the second quarter results will come in below the first quarter results. Below the P5.8 billion we’ve seen for the first quarter,” he said.
However, the company remains optimistic that a recovery in the overall business environment will happen starting the second half of 2020. He noted that demand peaked at 5,491MW last April 22, the first time since the start of ECQ, which had always hovered at a range of 3,500MW to more than 4,300MW.
“We do hope that the second half will be better and we’re looking forward to that,” said Pangilinan.
Meralco President Ray Espinosa, meanwhile, said the Covid-19 outbreak has created an extremely challenging environment of “unprecedented scale.” As such, he assured Meralco’s continuity of its services.
“Our business continuity and resiliency plans and the dedication of our employees and personnel have allowed us to continue delivering reliable and affordable power and to swiftly respond to service outages and interruptions in this time of great public need,” said Espinosa.
Meralco claimed force majeure and this resulted in reduced fixed cost for certain baseload plants and suspension of mid-merit and peaking supply contracts. These claims cut the April generation charges by P129.4 million, which translates to P0.0506 per kilowatt hour. Had Meralco not taken this recourse, the April 2020 generation charge would have been P0.0259 per kWh higher than in March 2020.
“Yes, we invoked (force majeure). We sent notice to our suppliers. We arrived at an amicable settlement on how to address the Force Majeure,” said Espinosa.
