Lockdowns, LNG investment cut Meralco 9-month income

By Lenie Lectura – October 26, 2020
from Business Mirror

Power lines run beside a sign for the Manila Electric Co. (Meralco) Makati branch in Manila, the Philippines, on Monday, March 23, 2009. Manila Electric Co. is the largest Philippine power retailer.

THE MANILA Electric Co. (Meralco) on Monday reported a 39-percent drop in its net income to P11.3 billion at end-September this year, mainly due to losses incurred from its Singapore investment.

Meralco Chief Finance Officer Betty Siy-Yap said during an online press conference that consolidated net income at the end of third quarter was down by 38.6 percent to P11.252 billion due to recognition of the company’s share in impairment of the investment in PacificLight Power Pte Ltd. of P2.7 billion in the first quarter.

Core profit during the period was down by 15 percent to P15.727 billion from P18.453 billion in the same period a year ago. Revenues, likewise, declined by 11 percent to P214.208 billion at end-September this year as energy sales volume stood lower by seven percent at 32,539gigawatt hours (GWh). The decline, Meralco said, reflects the net effect of the community quarantine. Still, Meralco expects to perform “better” in the current quarter and would likely end the year with over P21 billion in core income.

“We are confident that we will surpass the P21-billion consolidated core net income guidance for 2020 provided in the first half of this year and be able to meet our committed return to shareholders,” said Meralco Chairman Manuel V. Pangilinan in a statement.

During the briefing, Pangilinan said full-year core income would be “slightly above P21 billion” as Meralco expects the fourth quarter “to be better than the second and third quarters given the rising volume of power sold.”

Full-year core income last year was recorded at P23.8 billion, 6 percent higher than the P22.4 billion it posted in 2018.  Reported net income remained at P20 billion in 2019 while revenues increased to P318.31 billion last year.

When asked to elaborate on Meralco’s Singapore investment, which dragged the company’s January to September performance, Pangilinan said PacificLight and its shareholders are in discussions with the creditor banks for the refinancing of its total term loan and revolving credit of S$678 million.

Meralco PowerGen (MGen), the power generation arm of Meralco, owns an effective 28-percent equity in PacificLight, which owns and operates a 2x400megawatt (MW) natural gas-fired combined cycle turbine power plant in Jurong Island, Singapore.

“The plan to combine our assets was eventually not supported by the Singapore government,” said Pangilinan, referring to Petronas of Malaysia.  “So, we are now talking to another power generation company.”

Pangilinan said the company remains to be on the lookout for ways to limit the adverse impact of the pandemic. “This pandemic has brought about unexpected and radical change in everyday life, giving rise to complex challenges as well as new opportunities. Amidst all challenges, we can play a meaningful role in the lives of our customers and in helping the country get back on the road to recovery.”

Meralco, he added, remains optimistic for 2021. Without providing figures, Pangilinan said core income is expected to rise next year and Meralco subsidiaries to do better. “It’s too early to give an order of magnitude at this stage, but it should be better.”

On Monday, Meralco also reported that its customer accounts reached 7.2 million. Of which, 92 percent are residential customers.

Capital expenditures (capex) for the nine months ending September amounted to P10.9 billion. Pangilinan said the company may need to execute close to P50 billion of capex for its distribution business and generation investments.

“We look at this opportunity to create jobs, propel business activities and stimulate consumption,” he said.