Meralco core income down by 9% in 2020

Fourth-quarter profit slips as homes take biggest consumption share

MANILA Electric Co. (Meralco) posted a core net income of P5.98 billion in the fourth quarter of 2020, down 11.2% year on year to cap 2020 with residential users accounting for the biggest share of power consumption.

Excluding one-time items, the power distribution utility’s reported income slipped by around 2% to P5.064 billion, its finance chief said in a media briefing on Monday.

For full-year 2020, Meralco reported an 8.9% drop in core net income to P21.71 billion as it logged lower electricity sales due to reduced power purchases.

“We ended 2020 with consolidated core net income of P21.7 billion, about 9% lower than the P23.8 [billion] in 2019,” Meralco Senior Vice-President and Chief Finance Officer Betty C. Siy-Yap said to present the listed firm’s operating and financial results for 2020.

“Our gross revenues [were] at P275.3 billion, 14% lower than 2019 while volume also dropped. Our electricity revenues dropped 7%, reflecting the reduction in purchased power costs,” she added.

Meralco’s reported income last year decreased 30% to P16.32 billion. The figure was adjusted to exclude the effect of foreign exchange gains or losses, impairment charges, mark-to-market adjustments and other one-time, exceptional transactions.

Core earnings per share stood at P19.262.

Last year, sales volumes were “skewed” toward the residential segment as the lockdown restrictions brought about the rise of work-from-home arrangements, online distance learning and limited movement.

Meanwhile, the growth rate of commercial volumes dropped by 20% as hotels and retail trade were the hardest hit, with foot traffic in malls, hotels and other retail establishments experiencing a “drastic decline.”

The power firm added that industrial volumes “inched up gradually by the end of the year as manufacturers started to operate.”

“For the first time since March 2020, industrial volumes reflected positive 4% growth in December. The semiconductor and non-metallic industries provided the increase to the volumes and took the share in sales from the food and beverage, and packaging industries,” Meralco said in a statement.

Meralco said that residential, commercial and industrial volumes accounted for 38%, 34% and 28% of sales. Before the pandemic, commercial volume accounted for the biggest share at 40%.

Energy sales further declined due to three typhoons that affected Meralco’s franchise area. These typhoons are Typhoon Quinta, which resulted in unrealized sales of over 19 gigawatts hour (GWh); Super Typhoon Rolly, which left 21 GWh of unserved volume; and Typhoon Ulysses, which affected 92% of the Meralco’s customers.

Still, Meralco’s customer base grew 4% by the end of the year as it recorded a total of 7.1 million customer accounts, with a net of 249,000 new customers.

In a statement issued after the briefing, Meralco Chairman Manuel V. Pangilinan said: “We are committed to enabling the re-opening of the economy, which we hope happens this year. We are encouraged by Meralco’s January 2021 operating trends, including energy sold to commercial customers starting to regain traction.”

During the briefing, the firm also gave updates on its latest competitive selection process (CSP), which sought to look for eligible firms that could supply 1,800 megawatts (MW) of power to the company. 

Meralco said that the third-party bids and awards committee determined that the two firms with the “best bids” — Excellent Energy Resources, Inc. and Masinloc Power Partners Co. Ltd. — were issued notices of award. Both firms are subsidiaries of SMC Global Power Holdings Corp.

The company earlier said that Excellent Energy Resources offered a levelized cost of electricity (LCOE) of P4.1462 per kilowatt-hour (kWh) and Masinloc Power Partners Co. Ltd. offered P4.2605 per kWh. Both LCOEs were lower than the reserve price of P5.2559 per kWh.

The LCOE is used to compare power supply offers from various firms over a period of 20 years, Meralco Vice-President and Head of Utility Economics Department Lawrence S. Fernandez previously said.

Shares in Meralco at the local bourse improved 1.11% or P3 to end at P274 apiece on Monday.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls. — Angelica Y. Yang

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