Meralco sees profits hitting P15 billion with rate hike

MANILA, Philippines - Listed Manila Electric Co. (Meralco) is looking at earnings growing more than four times this year as the power utility firm can ask higher distribution charges if it provides a high level of service. Alan T. Ortiz, who is San Miguel Corp.'s nominee to the Meralco board, said net income would likely jump 383.87 percent to P15 billion this year from P3.1 billion. “Obviously, the rate increase has pending for three years. The income that will be reported by year-end will be an accretion or accumulation of the last three years. It may look very large but really it should be divided by three years," he said. "But it will still be a quantum leap from 2008. From where we sit, it was reported last year that Meralco’s net income was P3.14 billion. But this year, it will be somewhere between P13 and P15 billion," he told reporters. Early this year, Government Service Insurance System (GSIS) sold its 27-percent stake in Meralco to conglomerate San Miguel. In May, the Energy Regulatory Commission (ERC) approved Meralco's application for performance-based rate (PBR) mechanism that would replace return-on-rate-base, which required the power distributor to charge 12 percent of the total value of its distribution assets. Meralco was allowed to hike electricity rates by 25 centavos to P1.22 per kiloWatt-hour (kWh). “The deviation from the rate base system to PBR is a significant improvement in the way power rates are going to be determined in the years to come. And Meralco will be a direct beneficiary of that," he said. “It would put Meralco on an even financial theme and will allow us to address our capital expenditure requirements, which was immediately improved from P700 million to P850 million and more to come. It will be a quantum leap in earnings, which we will translate in more efficient services and down the road lower rates. It will also wipe out our provisions for debts," he added. Ortiz said San Miguel president Ramon Ang envisions Meralco to be the "crown jewel" for the energy industry. "Remember, it used to be a blue chip firm listed in the New York Stock Exchange and traded internationally," he said. -GMANews.TV