Meralco profit declines on lower distribution rates

Power distributor Manila Electric Co. (Meralco) on Monday said its income fell during the first half of 2016 due to a one-off cost recovery last year and lower distribution rates this year.

Despite the lower income, its officials said the company has maintained full-year income, expected to be the same as last year’s.

“For now we are looking at being able to achieve core net income for the year not far from what we registered in 2015. So we’re looking at the order of around P19 billion,” Meralco president and CEO Oscar Reyes said.

“Before we change our guidance, we would like to see what happens in the third quarter of 2016… We’ve seen our growth rate drop to single digit in June and July,” he added.

Consolidated revenues fell by four percent from P134 billion to P128.8 billion due to lower distribution rates, lower pass-through charges in the drop in crude oil and coal prices, and higher availability of its power plants.

“Our distribution rate, as you recall, Meralco took initiative of reducing its distribution tariff from P1.58 per kilowatt-hour to P1.38 per kWh in July 2015, following the completion of the third regulatory period. So second half 2015 to second half 2016, the tariff is at the same level already,” he said.

In a briefing, Meralco SVP and CFO Betty Siy-Yap said the first half net income was down by 11 percent at P10.4 billion, compared to the previous year’s P11.8 billion. Reported net income also fell eight percent from P11.7 billion to P10.8 billion.

“Last year, we had a regulatory approval of the GRAM, which provided an income. there was a one-off item in 2015 which wasn’t seen this year. we had the generation rate adjustment mechanism (GRAM),” she said.

The GRAM amounted to around P800 million, a recovery from 2003 to 2004 period which was only recovered in the first half of last year.

On the other hand, total energy sales for the first half of 2016 grew by 11 percent year-on-year with 19, 717 gigawatt-hours (GWh). June was the highest month with sales volume recorded, attributed to warmer temperature, an increase in the number of customers, low inflation, and low electricity prices.

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