Meralco H1 core, net profits grow; MVP upbeat on 2022

THE Manila Electric Company (Meralco) expects to sustain its improving financial performance for the rest of the year after posting growth in core and net profits from January to June 2022 versus the same period last year.

“We remain optimistic that Meralco will be able sustain its financial performance throughout 2022,” said Meralco chairman Manuel Pangilinan in a statement after the company released Monday its first-half financial results.

The utility firm’s Consolidated Core Net Income (CCNI) in the first six months of the year rose by 15 percent to P13.1 billion from P11.4 billion in the same period last year on the back of strong energy sales and earnings from the power generation business.

Consolidated reported net income, meanwhile, improved 32 percent to P13.1 billion from P9.9 billion with the adjustments made last year in relation to the passing into law of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, and recognition of foreign exchange gains this year versus foreign exchange losses in 2021.

Meralco chief finance officer Betty Siy-yap said, “things are looking good” for the utility firm when asked if it can surpass last year’s core profit and revenues.

“Things are looking good, but we wish to highlight also that what is adding to CCNI of Meralco would be the power gen performance of Pacific Light, San Buenaventura, and Bulacan Sol…yes, there’s good key volume and contribution from power generation,” said Yap during the company’s virtual news conference.

Consolidated revenues rose by 34 percent to P199.6 billion from P149.1 billion, mainly due to the higher pass-through generation and other charges on account of persisting increase in global fuel prices, as well as the revenue contribution of the power generation business which was at P13.6 billion.

Pangilinan did not provide guidance numbers for 2022 full-year profit. He said these numbers would be available possibly in the third quarter.

He pointed out that while uncertainties and risks remain, “we expect that our country will raise the pace of economic recovery under the new government of President Ferdinand Marcos, Jr.,” as Meralco will be ready to support the growing power requirements of its customers and the government’s ramped up infrastructure projects and initiatives.

At end-june this year, Meralco recorded a total of 7.5 million customers, up 3 percent from 7.3 million during the first half of 2021. This was driven by record-high energization of project-covered and ordinary service applications mostly from mixed-use buildings, subdivisions, and telecommunications customers.

Energy sales during the period surpassed prepandemic levels to 23,968 gigawatt hours (GWH), a 6-percent increase from 22,663 GWH in the same six months last year.

Meralco reported strong recovery in the commercial segment as retail, restaurants, and hotels showed massive improvement after the government allowed establishments to operate at practically full capacity, and social gatherings like rallies and concerts to resume.

In the first half of the year, residential and commercial segments both accounted for 35 percent of the sales mix, showed signs of a shift back to the prepandemic mix, while industrial contributed 30 percent.

“Despite the brief slowdown due to the Omicron surge early this year, the continued easing of restrictions that coincided with elections-related activities allowed us to surpass our pre-pandemic sales performance in the first half of this year,” said Meralco President and CEO Ray C. Espinosa.

Meralco’s average retail rate increased by 18 percent to P9.33 per kwh from P7.92 per kwh as generation charges—which accounted for about 62 percent of the total retail rate—went up 30 percent due to higher fuel costs, peso depreciation and higher spot market prices.

“We remain cautious about the effect of persisting increase in global fuel prices on our rates. To this end, Meralco relentlessly looks for ways to cushion the impact of external volatilities on our operations.

“We will move ahead with the execution of sourcing strategies that include our planned CSPS (Competitive Selection Process), consistent with our Power Supply Procurement Plan, in a timely manner to ensure availability of cost-competitive power for our customers in the long-term,” Espinosa added.

Transmission charges, comprising 9 percent of the retail rate, increased by 14 percent. Subsidies and taxes, 11 percent of the retail rate, similarly went up by 12 percent.

The increase in pass-through charges was mitigated by the P0.34 per kwh average refund of distribution over-recoveries, totaling P5.7 billion for the period, as ordered by the Energy Regulatory Commission (ERC).

Meralco spent P14.2 billion for capital expenditures (capex), of which P8.7 billion went to networks capex, which consisted of new connections, asset renewals, and load growth projects, among others.

Operating expenses, meanwhile, went up by to P16.9 billion due to higher customer-related expenses and increase in spending of subsidiaries.

Consolidated interest‐bearing debt stood at P89 billion, including a P48.7-billion debt of subsidiaries. Of the total amount, P34.3 billion are maturing within one year.

On July 25, the Meralco Board of Directors approved the declaration of interim cash dividends amounting to P5.806 per share to all shareholders of record as of August 23, 2022, payable on September 14, 2022. This represents 50 percent of Meralco’s core earnings per share.