Manila Electric Co. · PSE:MER
Manila Electric — FY2009 Earnings Presentation
33 slides from Manila Electric's earnings presentation, Feb 24, 2010
Slide 1: Cover letter to the Philippine Stock Exchange
Mi, MERALCO ORTIGAS AVENUE, PASIG CITY 0300 PHILIPPINES 24 February 2010 MS. JANET A. ENCARNACION Head, Disclosure Department Philippine Stock Exchange, Inc. 4" Floor, Philippine Stock Exchange Center Exchange Road, Ortigas Center Pasig City, Metro Manila Dear Ms. Encarnacion, We are submitting to y
Slide 2: 2009 Year End Operating and Financial Results
Manila Electric Company & Subsidiaries 2009 Year End Operating and Financial Results Investors’ Briefing & Teleconference February 24, 2010 Mini Theatre – Basement, Lopez Building
Slide 3: Operating Highlights, Financial Results, Regulatory and Rate Updates
Yearend 2009 Operating Highlights Jose P. de Jesus, President & COO Financial Results Betty C. Siy-Yap, Chief Finance Officer Regulatory and Rate Updates Ivanna G. Dela Peña, FVP & Head, Regulatory Management Office
Slide 4: Operational Highlights
Operational Highlights
Slide 5: Total energy sales increased 1.7% to 27,516 GWh
Total energy sales in year 2009 increased 1.7% to 27,516 GWh over the same period in 2008 30,000 COMPARISON OF KILOWATT-HOUR SALES 25,000 Consolidated Report For the year ended Dec. 31, 2009 and 2008 20,000 ( In GWh ) 15,000 Segment Dec-09 Dec-08 % Growth Residential 8,904 8,620 3.3 10,000 Commercia
Slide 6: Number of customers increased 3.1% to 4.72 million
The number of customers increased by 3.1% from end of December 2008 to 4.72 million as of the end of December 2009. New Customers Number of Customers (YoY) Meralco and CEDC (Increase from beg of year) Consolidated Report (in thousands) 150,000 Segment Dec-09 Dec-08 % Growth 50,000 Residential 4,277
Slide 7: Additional GWh recovered from self-generating companies
• Additional 237.4 GWh were recovered from 57 self- generating companies • Increased Meralco dependence in year 2009 as expensive fuel made Meralco rates, notably the lower ecozone rates, more attractive. ! " # $% & ' (& ) * ' ' $ $(0(0 # # ' ' $ $ Note: )) ** & &' '* * 11 22 * with existing Meralco
Slide 8: System reliability (IFR) and availability (CIT)
> # ,886 - System Reliability (IFR) improved to 8.35 times - Availability (CIT) deteriorated to 9.46 hours IFR (times) /CIT (hours) : 1(% 2 ; # <8 6 = 4 .7 ! ' : 1 ( 2 !" # $
Slide 9: System loss 2009: 8.61%
$ SL 2009: 8.61% Beating the existing cap and lowest since 1981 12.0 11.51 Lower than the 9.5% cap 11.5 • Lower system loss charges to Meralco customers 11.0 10.58 10.46 10.5 9.99 10.0 System Loss Cap 9.5 9.28 9.0 8.61 8.5 2004 2005 2006 2007 2008 2009
Slide 10: Financial Results
Financial Results
Slide 11: Audited results for years ended December 31, 2009 and 2008
For the Years ended December 31, 2009 and 2008 Audited % (in million pesos except EPS) 2009 2008 YoY Revenues 184,872 191,775 -4% - Electricity 178,686 186,999 -4% - Non-electricity 6,186 4,776 30% Costs and Expenses 175,610 186,576 -6% Income Before Income Tax 9,262 5,199 78% Provision for Income T
Slide 12: Reported net income up 114%; core net income
& ( Reported net income registered a 114% or P3.2 billion increase over the same period last year + P11.0 billion decrease in costs and expenses due to + P5.9 billion or 4% lower purchased power cost. + P5.1 billion from ERC net under-recoveries and carrying charges + Increase from ERC approved unde
Slide 13: Revenues decreased 4%; EBITDA increased 20%
?( #' Revenues decreased by 4% to P184.9 billion in 2009 – Lower generation and transmission charges – Adjustments to unbilled distribution charges – Lost sales due to typhoon Ondoy of P445 million + PBR rate adjustment of P4.9 billion + ERC approved under-recovery + Transmission EBITDA Margin + Lif
Slide 14: Income statement for the years ended December 31, 2009 and 2008
For the Years Ended December 31, 2009 and 2008 (Amounts in Million Pesos) AUDITED Increase (Decrease) (Amounts in Million Pesos) Dec-09 Dec-08 Amount % Volume Sold (in Mln kWh) 27,516 27,049 467 1.7 Volume Purchased (in Mln kWh) 30,173 29,886 288 1.0 REVENUES Electricity 178,686 186,999 (8,313) (4)
Slide 15: Balance sheet as of December 31, 2009 and 2008
As of December 31, 2009 and 2008 (Amounts in Million Pesos) AUDITED Dec-09 Dec-08 % Change ASSETS Utility plant and others - net 98,378 95,703 3 Construction in Progress 3,702 5,149 (28) Other noncurrent assets 32,991 28,873 14 Total noncurrent assets 135,071 129,725 4 Current assets 45,342 48,659 (
Slide 16: Cash flow statement for the years ended December 31, 2009 and 2008
For the Years Ended December 31, 2009 and 2008 (Amounts in Million Pesos) AUDITED Dec-09 Dec-08 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax 9,262 5,199 Non-cash Items 9,921 20,064 Net Changes in Working Capital 22,755 (6,671) Net cash generated from operations 41,938 18,592 Interes
Slide 17: Free cash flow and dividends
% % # • Free Cash Flow amounted to P18.8 billion in 2009 • The Company paid P3.2 billion dividends in 2009 – P1.00 /share declared in May 2009; total of P1,489 million – P1.50 /share declared in October 2009; total of P1,708 million • On 22 February 2010, the Board approved the company’s dividend po
Slide 18: CAPEX of P8.99 billion for 2009
@ • For 2009 CAPEX of P8.99 billion reflected a slight 2.9% decrease from last year’s P9.25 billion. • Parent Company CAPEX pertains to: – Electric Capital Projects (99%) – Other Capitalized Items & Non-electric Projects (1%) C APEX ( P h p in M il li o n s ) H is t o r ic a l C A P E X P a re n t S
Slide 19: Debt and leverage ratios
# : • Current and noncurrent interest-bearing and other borrowings totaled P 20.7 billion • Average effective interest rates: - Foreign long-term loans - 5.3% - Local long-term loans - 8.1% - Local short-term loans - 10.4% AUDITED Dec-09 Dec-08 2009 2008 (Php in Millions) Foreign Local Total Foreign
Slide 20: Regulatory & Rate Updates
Regulatory & Rate Updates
Slide 21: Regulatory update topics
• Performance-Based Regulation (PBR) updates • Collection of pass-through cost under-recoveries • Rate movements • COA report on the June 2003 rate unbundling • Reduction of the system loss cap in 2010
Slide 22: Rate adjustment after six years
• Last rate adjustment was six years before (June 2003) • With other rate developments, average rate actually declined ++0.2570 0.2570 InInMay May2009 2009 !"# $ %& $ # ' $ () !# *+ # ) , #%& $ +- # $ . ()/ / %! + -- # $ . ( 24
Slide 23: Court of Appeals dismisses consumer groups' petition
!’ ’ " # • May 28, 2009: A number of consumer groups filed a Petition before the Court of Appeals to question ERC’s approval of Meralco’s MAP for RY2009 • January 29, 2010: The Court of Appeals dismissed the consumer groups’ Petition. According to the Court of Appeals: – The Petition was questioning
Slide 24: ERC approves MAP and rate translation for RY 2010
! ’ " # $ • In December 2009, ERC approved Meralco’s MAP and rate translation for RY 2010, which was implemented in January 2010 Comparison of approved MAP of PBR First Entrant DUs Approved Unconstrained Approved Constrained (in P/kWh) MAP RY2009 MAP RY2010 MAP RY2010 Dagupan Electric 1.309 2.1589 1
Slide 25: ERC actions on suspended rate adjustment
% # $ " • Feb. 1, 2010: ERC granted the manifestation – The suspension will be until such time that the the pending MR is resolved and all other issues that the other intervenors may raise has been addressed • Feb. 5, 2010: A hearing was held on the MR, although no intervenors appeared – ERC granted
Slide 26: Price-linked incentive scheme and S-Factor
& ' ( % ) %&* + For Meralco’s Second Regulatory Period PRICE-LINKED INCENTIVE SCHEME Units Wt. Target (Dead-band) Interruption Frequency Rate (IFR): Forced & Pre-arranged # 0.20 15.40 ≥ IFR ≥ 5.90 Cumulative Interruption Time (CIT): Forced only Hrs 0.20 9.56 ≥ CIT ≥ 3.52 Cumulative Interruption Time
Slide 27: GSL pay-outs under performance-based regulation
, % ) ,% + & • Implementation of the pay-outs under the GSL mechanism of PBR began on September 2009 and is ongoing RY 2008 RY 2009 GSL Measure Customers Pay-out Customers Pay-out Affected (in P million) Affected (in P million) GSL 1 426,270 51.2 321,046 38.5 GSL 2 21,994 2.6 15,984 1.9 GSL 3 284,53
Slide 28: Pass-through cost under-recoveries
! &- & - Cost Component Pending Resolved Remarks (in P billions) Generation 10% WESM purchase req' t 2.70 - MR is pending at ERC Collected through Jan 09 Congestion-related cost 2.11 2.11 Generation Charge Exclusive of P1.5B carrying Transmission 5.55 5.42 cost, collection began Nov 09 For confirmat
Slide 29: Rate movements in pesos per kWh
. 1& Pesos per kWh 3.50 4.00 4.50 5.00 5.50 6.00 Jul-07 , Aug / / Sept Oct Nov / Dec Jan-08 Feb Mar Apr May ! June July August Sept Oct Nov Dec Jan-09 Feb Mar Apr 0 May June July August Sept Oct Nov Dec Jan-10 31
Slide 30: Overall average rate by component
2 / / 3 4 Lower generation & transmission charges mitigated impact of higher distribution charges & collection of under-recoveries Overall average rate (in P/kWh) 2007 2008 2009 '09 vs '07 '09 vs '08 Generation 4.77 4.43 4.36 (0.41) (0.07) Transmission 0.93 0.98 0.88 (0.05) (0.10) System Loss 0.64 0
Slide 31: Timeline of 2003 rate unbundling case
!2" ’ 5 6 - Date Event May 30, 2003 ERC approves unbundled tariffs for Meralco June 2003 Meralco implements rate unbundling August 2003 “Petition for Review” filed before the Court of Appeals (CA) July 2004 CA sets aside unbundling decision: ERC should have asked COA to audit Meralco’s books. Meralc
Slide 32: System loss cap reduction
2 317 $ Date Development Dec 2008 ERC promulgation of system loss cap reduction resolution (Res. No. 17, series of 2008) Aug 2009 Submission by Meralco of letter-request to ERC to defer the imposition of the 8.5% cap starting 2010 Nov 2009 ERC denied Meralco’s request • In December 2009, Meralco fil
Slide 33: For the Year Ended December 31, 2009
For the Year Ended December 31, 2009 35
Manila Electric Company — FY2009 Earnings Presentation on 6ix