Release Date: July 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Manila Electric Co (PHS:MER, Financial) reported a 21% increase in consolidated core net income for the first half of 2024, reaching PHP23.2 billion.
- Consolidated revenues grew by 6% to PHP237.5 billion, driven by higher sales volumes in the distribution utility segment.
- The company achieved a 9% increase in distribution revenues, attributed to higher sales volumes and an approved interim average rate.
- Manila Electric Co's power generation unit delivered a total of 7,633 gigawatt hours of energy, with a high plant availability rate of 99%.
- The company has made significant progress in renewable energy projects, including the development of solar plants and securing project financing for future expansions.
Negative Points
- Operating expenses increased by 8% due to maintenance of distribution utility facilities and higher software maintenance costs.
- The blended margin of Pacific Light was lower, despite generating higher volumes, due to market stabilization in Singapore.
- Purchase power costs rose by 4%, consistent with the movement in pass-through revenues, impacting overall expenses.
- The company's debt balance stood at PHP99.6 billion, with a net debt to EBITDA ratio of 0.1 times.
- Regulatory challenges persist, including unresolved issues with the Energy Regulatory Commission regarding rate applications and power supply agreements.
Q & A Highlights
Q: Can you comment on the sustainability of the strong earnings from the generation segment and the contribution from the reserve market?
A: Manny Rubio, President & CEO, Meralco PowerGen Corporation, stated that the profit is sustainable due to resolved fixed price contracts, which previously affected performance. The income from the optimized market was around PHP450 million, and while future prices are uncertain, the company expects continued contributions from the reserve market.
Q: Are there any expected changes in the regulatory framework, particularly regarding APR and pending bills in the Lower House?
A: Manny Rubio explained that there are pending bills focused on restructuring the Energy Regulatory Commission, which Meralco supports to address delays in case resolutions. They are also advocating for lifting grid limits to encourage more investors in power generation and distribution.
Q: What is Meralco's stake in the LNG terminal in Batangas, and what was the impact of the recent typhoon on operations?
A: Meralco owns approximately 40.2% of the LNG terminal through a joint venture. Regarding the typhoon, all affected customers have been restored, with 662,000 accounts impacted, primarily due to flooding and other causes like fallen trees and poles.
Q: What drove the increase in full-year guidance from PHP40 billion to PHP43 billion, and what was the contribution of generation to core income in Q2?
A: Betty Siy-Yap, CFO, noted that stable distribution sales and sustained results from power generation, particularly from Pacific Light and Buenaventura, contributed to the increase. The generation segment contributed PHP3.5 billion in Q2 2024.
Q: Can you provide an update on the search for a partner for the solar project and the expected CapEx for the project?
A: Manuel Pangilinan, Chairman & CEO, mentioned that bids for the solar project partnership are due by August 15, with several attractive offers expected. The total CapEx is projected at PHP195 billion, with 30% equity and 70% debt funding.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
