Meralco Reports 3Q 2015 Net Income of PhP15.8B

Pasig—(PHStocks)—Manila Electric Co. (Meralco, PSE: MER) has announced that its unaudited consolidated core net income, which excludes one-time, exceptional charges, for the nine months ended September 30, 2015 amounted to PhP15.8 billion. Consolidated reported net income for the same period stood at PhP16.1 billion.

Total volume of electricity distributed grew by almost 5%. This was largely attributable to the strong demand from all customer classes on account of new customer connections, particularly residential and commercial, increased economic activities, and benign inflation. Excluding the effects of Typhoon Glenda (international codename Rammasun) in July 2014, and tropical storm Mario (international codename Fung Wong) in September 2014, which resulted in unserved energy of 281GWh, volume still grew by almost 4% in 2015 compared with 2014. Billed customers grew by 209,000 to 5.7 million, reflecting an increase of almost 4% year-on-year.

Core earnings per share for the nine months ended September 30, 2015 was PhP14.01; reported earnings per share was at PhP14.33. The lower interim average rate implemented at the start of the 4th  Regulatory Period (4RP) on July 1, 2015 resulted in a lower average distribution rate of PhP1.52 per kWh, compared with PhP1.63 per kWh in the same period last year. Consolidated revenues, of which electricity sales accounted for 97%, decreased by 3% to PhP197 billion due to the combined effects of (i) lower average distribution tariff; and, (ii) net lower pass-through generation and other charges, down PhP6.5 billion as a result of significantly lower fuel prices, the competitively negotiated power supply agreements (PSAs) and the loss of contestable supply revenues to other retail electricity suppliers. No major power interruption affected the franchise area during the nine month period, which experienced only one weather disturbance, Typhoon Ineng (international codename Goni) compared with two weather disturbances in 2014.

Non-electricity revenues, which accounted for 3% of consolidated revenues, increased by 44%. Higher revenues were generated by (i) Meralco Industrial and Engineering Services Corporation (Miescor) and its subsidiaries with the completion of construction and maintenance contracts; (ii) Meralco Energy Inc. (MServ) with increased strategic loadside outsourcing and energy efficiency services; (iii) CIS Bayad Center Inc. (Bayad Center) with higher volume of bills payment services, load top-up and remittances; and (iv) Radius Telecoms Inc. (Radius) with additional circuits served and increased monthly recurring fees billed for back-up telecommunication services.

Consolidated core EBITDA was higher at PhP27.1 billion, reflecting core EBITDA margin of 14% on consolidated revenues.

Consolidated capital expenditures amounted to PhP7.8 billion for the first nine months of 2015. Electric capital projects (ECP) accounted for substantially all of Meralco’s capital expenditures. In the first nine months of 2015, Meralco completed seven major projects, namely, (i) construction of the Mahabang Parang-Batangas City 69kV line; (ii) expansion of the Fort Bonifacio Global City (FBGC)-4 substation; (iii) construction of Dasmarinas-Imus 115kV line; (iv) expansion of Tutuban substation; (v) uprating of Meycauayan-Bagbaguin 115kV line; (vi) construction of Batangas City-Bolbok-Sirnlong 69kV line; and (vii) development of PAGCOR-1 Gas-insulated Switchgear (GIS) substation. There were also significant completion milestones for the timely relocation of Meralco facilities affected by the Ninoy Aquino International Airport (NAIA) Expressway Project and the Department of Public Works and Highways (DPWH) road and bridge widening projects. With the objective of improved visibility and management of assets, and efficient and enhanced work order management, Meralco went “live” with its implementation of the IBM Maximo Enterprise Asset Management (EAM) system, initially at its North Distribution Services and Corporate offices in September 2015. By the end of 201 5, it is expected that all of the Networks assets and work orders will be supported by the IBM Maximo EAM.

Total cash and cash equivalents stood at PhP44.9 billion as at September 30, 2015. Available-for-sale (“AFS“) and held-to-maturity (HTM) securities were at the level of PhP30.9 billion. Total dividends paid in the first nine months of 2015 amounted to PhP17.1 billion. Free cash flows, net of investments in AFS and HTM securities, was negative PhP7.3 billion, largely due to cash dividends paid and the capital expenditures for ECP.

Consolidated gross debt balance amounted to PhP29.9 billion as at September 30, 2015, including debt of PhP2.5 billion maturing within one year. Gross debt to EBITDA stood at 0.83x as at end September 2015; net debt to EBITDA was at negative 0.41. Total notes payable and long-term debt and financing costs paid during the nine months ended September 30, 2015 amounted to PhP1.6 billion. All of Meralco’s debts are denominated in Philippine pesos, with no significant maturities until 2020. Financing costs totaled PhP0.9 billion.

“The Philippine economy has stayed resilient this year, driven largely by domestic consumption which, in tum, has been supported by growing inward remittances from overseas Filipinos and Business Process Outsourcing (BPO) revenues, assisted by new domestic and foreign investments. Inflation is at a record low, mainly as a result of lower fuel prices. Peak demand for electricity surged in August to a record of 6.298GW, the first time peak demand in any year was registered outside of the summer months of March to June.

“This has heightened our focus on ensuring that we maintain a highly reliable and “new normal”-hardened network infrastructure to maintain our services at a 24/7 pace. Notable was the absence of any major power service interruption experienced in our franchise area, which is home to 50% of the Philippine Gross Domestic Product (GDP) and 25% of our population. The strong partnership and cooperation among industry players across the energy supply chain, government agencies, and consumers contributed to averting any power supply crisis during the summer months of 2015. However, we are not “out of the woods” yet in terms of power supply availability and reliability. This further strengthens our resolve to develop our power generation portfolio of up to 3GW in joint venture with strategic partners to safeguard the security of power supply for our franchise area and the Luzon Grid.

“We continue to engage our regulators and policy makers, industry players and consumers, and interest groups on policy and regulatory issues in the interest of ensuring that sourcing and delivery of power supply at least cost is delivered for our customers. We must allow markets to work and ensure freedom of choice of consumers is enhanced and not stifled,” said Manuel V. Pangilinan, Chairman.

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