Wednesday, November 19, 2008 Meralco's income drops
LOWER generation charges resulted in the decline in the total revenues of distribution giant Manila Electric Company (Meralco) in the third quarter of this year.
Meralco reported a 1.6 percent to P47.72 billion drop in its revenues for the third quarter this year compared to 2007.
From January to September this year, total revenues decreased by 9.9 percent to P140.47 billion from P155.89 billion and this attributable to "lower generation charges."
Net income for the third quarter of 2008 was P334 million, a 27.4 drop from P460 million in the same period last year.
Consequently, the first three quarters' earnings at P2.81 billion were almost the same as last year's P2.80 billion. Had it not been for the P2.52 billion provision for probable losses and the net over-recovery in transmission charges for the first three quarters of P1.40 billion, net income would have been P3.54 billion for January-September 2008.
Meralco said the decline in their net income was a result of the net effect of the P2.52 billion provision for probable losses arising from the generation cost disallowance and the P1.2 billion net over-recovery in transmission charges.
"Without these two items, net income for the quarter should have been P1.22 billion," the company said in its report.
Last September 3, 2008, the Energy Regulatory Commission (ERC) released its decision on Meralco's 10 petitions for reimbursement of generation charge under-recoveries (generation costs already paid by Meralco but not yet billed to customers) incurred during the period (September 2006-June 2007) when the automatic adjustments were suspended.
As a result of this, Meralco made a provision for probable losses of P2.52 billion.
But the ERC's final decision allowed only P9.98 billion out of the P12.68 billion filed for generation cost reimbursement resulting in a disallowance of P2.7 billion, reflected in the books as an adjusted amount of P2.52 billion.
In April 2008, Transco reduced its ancillary services charges that caused transmission costs to go down. This resulted in the transmission charge over-recoveries of P1.40 billion for the first three quarters.
As of December 31, 2007, Meralco had cumulative transmission charge under-recoveries of P6.36 billion (classified as contingent asset), of which P5.55 billion (for the period June 2003 to July 2007) had been filed for recovery at the ERC.
There was no unrecoverable purchased power cost (or cost in excess of the 9.5 percent system loss cap) for the third quarter as the company's average system loss was only 9.17 percent.
For the first nine months, unrecoverable purchased power cost, at P889 million, was a reduction from P1.97 billion in 2007.
Distribution revenues in both the third quarter (P6.64 billion from P6.65 billion) and the first nine months (P19.49 billion from P19.39 billion) remained practically at par with their 2007 levels. For the nine-month period, distribution revenues grew slightly to 1.7 percent due to increase in total kilowatthour (kWh) sales.
Also the company said that purchased power cost weaken with 8.9 percent to P40.20 billion in the third quarter of 2008 and by 13.2 percent to P118.91 billion for the nine-month period.
Major components of expenses are purchased power (generation and transmission costs), operations and maintenance, and depreciation.
Total expenses for the third quarter went down by 1.5 percent to P47.10 billion, from P47.81 billion last year. Year-to-date (YTD) expenses also decreased by 10.1 percent to P136.32 billion from P151.64 billion.
Operations and maintenance expenses for the third quarter were up from P2.25 billion last year to P2.89 billion this year, of which P127 million was for ERC supervision and regulation fees. YTD figures also rose 7.6 percent from P8.81 billion in 2007 to P9.48 billion in 2008.
Capital expenditures (Capex) for the quarter went up 24.2 percent from P1.34 billion last year to P1.67 billion this year. The investments were used to address customer load growth, replace dilapidated and obsolete electrical facilities, and reduce system loss.
The increase in Capex level was partly brought about by the purchase of the first batch of TransCo's sub-transmission assets and by the purchase of major equipment for the completion of Meralco-Amadeo 230kV Delivery Point substation and for the expansion of Meralco-San Pedro substation.
Substantial Capex amounts were also spent for the various distribution automation projects contained in Meralco's Capex Program under Performance Based Regulation (PBR). (MSN/Sunnex)
