Meralco's profit flat due to impact of temperature, currency, inflation
MANILA, Philippines – Manila Electric Company (Meralco) posted flat quarterly earnings on Monday, April 24, as inflation, currency effects, and cooler temperature continued to impact the Philippines' largest distributor of electrical power.
The operating and business conditions for the first quarter of 2017 proved to be more challenging for Meralco compared with 2016.
In terms of constraints on sales volume growth, Meralco said the first quarter of 2017 saw cooler temperature by almost 1 degree Celsius. The company also cited the absence of the February 2016 leap year effect, which is equivalent to approximately 100 gigawatt-hour (gwh) lower energy sales; higher inflation that was at 3.4% in March 2017; higher interest rates; a weaker peso; and higher fuel prices.
These challenges kept Meralco's first-quarter core net income broadly flat at P4.598 billion in the first quarter of 2017, from the P4.590 billion recorded in the same period in 2016.
Notwithstanding these less favorable factors, Meralco told the Philippine Stock Exchange that its growth in energy sales volume continued, albeit at a slower 3% level, due to the expansion in its customer base and strong consumer spending spurred by inward remittances from overseas Filipinos and the growth of business process outsourcing (BPO) industry.
"Worth noting is the shift in sales volume growth to commercial and industrial customers, which grew by 3% each, while residential customer volume grew by a mere 1%," Meralco President and Chief Executive Officer Oscar Reyes said in the disclosure.
For the past quarter, Meralco's commercial volume accounted for 40% of its total base, with industrial volume at 30%, and residential volume at 30%.
"Commercial sales volume was driven by the real estate, retail trade, and entertainment industries. The growth in the real estate industry continues to be supported by the strong demand for commercial spaces for BPOs," Reyes added.
Meralco said the tepid growth of a mere 1% in residential sales volume "may be attributed to the nearly 1 degree Celsius cooler temperature during the period, the higher average retail rate of P7.84 per kWh, and the leap year impact of one day less in February 2017."
Aside from these factors, Meralco during the past quarter continued to settle local taxes on certain real properties previously deemed not subject thereto, following a final judicial ruling. (READ: What Meralco's rate hike tells us about the power sector)
Its total revenues were up by 10.6% to P66.576 billion, while costs and expenses also went up by 12.2% to P60.512 billion in the first quarter of the year.
Meralco sought the Energy Regulatory Commission's approval for a rate hike of P0.92/kWh, for 3 months starting March 2017.
"We were simply just trying to alleviate the pain on the wallet of consumers. [The] suggestion of Meralco is to defer or put it on an installment basis," Meralco Chairman Manuel V. Pangilinan had said.
Meralco is planning staggered implementation, starting with P0.30/kWh last March, followed by another P0.30/kWh this month, and the remaining P0.32/kWh in May.