Meralco expects core profit to improve despite costly oil

BY LENIE LECTURA – OCTOBER 25, 2021
from Business Mirror

The Manila Electric Co.’s (Meralco) improved financial performance in the January-to-September period will allow the utility firm to surpass its core profit last year.

Meralco Chairman Manuel V. Pangilinan said Monday there is indication that the utility firm will exceed the consolidated core net income (CCNI) achieved last year, despite spiraling fuel prices in the past nine weeks.

The sudden but significant rise in the prices of gas, coal and oil which can affect Meralco’s generation margins, and the lingering effect of the pandemic remain key risks to the company’s outlook for the fourth quarter. Still, Pangilinan is confident that full-year core profit will improve compared to last year.

“We envisage 2021 full-year results to be ahead of the 2020 (figure), but we are not expected to be quite definitive on the numbers yet for the full year because of the recent spikes in fuel prices, which could affect our generation margins starting the fourth quarter this year. So, the expectations for full year 2021, recurring core income will be ahead of 2020 nonetheless,” said Pangilinan.

Meralco reported Monday its CCNI at end-September this year grew by 15 percent to P18.1 billion from last year’s P15.7 billion driven by the combined effect of the 6-percent increase in energy distributed with the easing of quarantine restrictions, and increased contribution from its different business units and subsidiaries.

Reported net income improved by 47 percent year-on-year to P16.5 billion from P11.3 billion due to lower exceptional charges arising from the impairment recognized from the company’s investment in PacificLight Power Ltd. in 2020.

Consolidated total revenues were higher by 11 percent to P231.7 billion from P208.8 billion, mainly boosted by electricity revenues, which grew by 11 percent to P225.4 billion from P203 billion.

Meralco spent P18.5 billion on capital expenditures (capex) at end-September. Of which, almost 60 percent went to networks capex. About 90 percent of the networks capex was spent on new connections, asset renewals and load growth projects; while the balance was used to support other projects including the government’s Build, Build, Build program and the Meralco Electrification Program.

Operating expenses amounted to P22.7 billion, higher by 12 percent from the same period last year.

At end-September, Meralco’s customer base stood at 7.4 million.

Consolidated energy sales volumes rose 6 percent to 34,398 gigawatt hours (GWh) from 32,539 GWh in 2020 as commercial and industrial sectors recovered in the nine-month period following more flexible community quarantine restrictions, and sustained growth in the residential sector.

Meanwhile, Meralco President Ray Espinosa said the company’s long-term sustainability strategy will cost about P180 billion.

“We have a strategy for the orderly transition to cleaner energy and that will take three horizon, three decades all the way to 2050. We are also looking at new technologies that will allow for the use of use of renewable energy to deliver baseload requirement, and mix of renewables that we can put together alongside the battery storage system.

There’s a huge capex that will be involved if we are to implement that plan all the way to 2050. Roughly, not approved by board, if we were to implement this plan together, about P180 billion. That’s the cost of moving to cleaner energy and somebody has to pay that price,” he said.