Meralco reports lower '99 income

The Lopez-controlled power retailer Manila Electric Co. will cut down its capital expenses by about P2 billion this year as it grapples with the increasing cost of operations and a weakening bottom line, company officials said yesterday.

Meralco executive vice president and chief operating officer Jesus Francisco said they have programmed to spend about P8.6 billion this year, although this could be reduced and redirected only to high priority projects such as transmission and distribution facilities.

Last year, the country's largest power franchise invested around P6.5 billion in several electric power projects, mainly to upgrade its distribution system. A big chunk of these expenditures were spent commissioning and expanding substations for the specialized needs of its core customers in the manufacturing, semi-conductor and electronic industries.

The capital cut this year, however, will affect projects on the local level, like streetlighting in barangays and would not involve any retrenchment or streamlining of employees, Francisco said.

Despite higher electricity sales in the first three months, Meralco suffered a 34-percent drop in its earnings to P764 million as its expenditures expanded faster than its revenue growth. A pending petition with the Energy Regulatory Board for an average rate increase of 30 centavos per kwh is expected to give the power company the much-needed relief to improve its bottom line by an increase in its return on rate base (RORB) from just under six percent last year to about eight percent this year.

The RORB is the ratio of allowed operating income to the utility's rate base expressed as a percentage. Meralco is allowed a maximum RORB of 12 percent.

A hike in its RORB is a necessary step to satisfy Meralco's creditors and assure the company it will have continued access to external funding for its projects, Meralco senior vice president and comptroller Daniel Tagaza said.

Meralco's sales to its residential, commercial and industrial customers went up 9.3 percent to 5.54 billion kwh in the first quarter, compared to the same period last year, powered by the strong demand from households and commercial establishments.