Manila Electric Co. · PSE:MER
Manila Electric — FY2010 Earnings Presentation
43 slides from Manila Electric's earnings presentation, Feb 28, 2011
Slide 1: Investors' Briefing & Teleconference: YE 2010 Operating & Financial Results
A | Ang liwanag ng bukas INVESTORS’ BRIEFING & TELECONFERENCE YE 2010 Operating & Financial Results February 28, 2011 Dee
Slide 2: Yearend 2010 Operating Highlights, Financial Results, Regulatory Updates, Outlook
Yearend 2010 Operating Highlights Oscar S. Reyes, Sr. Executive Vice President & COO Financial Results Betty C. Siy-Yap, Sr. Vice President & Chief Finance Officer Regulatory and Updates Ivanne G. Dela Peña, FVP & Head, Regulatory Management Office Outlook Manuel V. Pangilinan, President & Chief Exe
Slide 3: Operating Highlights
Operating Highlights 3
Slide 4: Record Energy Sales growth in 2010
Record Energy Sales growth in 2010 ¢ Consolidated sales growth is 9.9%, highest in 13 years * Consolidated sales of 30,247 GWh; MERALCO DU at 29,976 GWh ¢ Led by Industrial; also, healthy growth of Commercial and Residential ¢ Customer growth up 3.1% to 4.847M 2009 2010 2010 MERALCO NSI up 9.1% to 3
Slide 5: Robust Operational Performance vs. Regulatory Standards
Mh Robust Operational Performance vs. Regulatory Standards ¢ 7 out of 8 S- Factors Performance with REWARDS, estimated at P500M ¢ Exceptional 2010 System Loss Performance ; at 7.94%, well within cap of 8.5% and lowest in 35 years ¢ GSL Performance within limits for 1°* half of RY2011 Other Events of
Slide 6: Energy Sales — Consolidated 2010
Energy Sales — Consolidated 2010 * Consolidated Meralco & CEDC Energy Sales: 30,247 GWh ° Up 9.9% from 27,516 GWh in 2009 Energy Sales, GWh: 9.9% 30,247 GWh 2010 Share of sales: 0.5% { Industrial | Commercial Hl Residential rat Streetlights 2010 ; GROWTH Electrical DRIVERS Real Estate Machinery Food
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Slide 9: Power sources: NPC, WESM, IPPs
&) %% * % + 2010 2009 SOURCE GWh % Share GWh % Share NPC * 13,263 40.6% 12,187 40.7% WESM 4,616 14.1% 3,845 12.9% IPP-QPPL 3,388 10.4% 2,718 9.1% IPP-Sta. Rita 7,536 23.1% 7,491 25.0% IPP-San 3,824 11.7% 3,674 12.3% Lorenzo IPP-Others 17 0.05% 7 0.02% TOTAL NSI 32,643 100.0% 29,922 100.0% 2010 NSI i
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Slide 11: System loss performance well below cap
*+ % & + • )( - ; 4 5 4 , • - # - , 2 ! 5( , # ' , 2 , 2 ( : 0 *1 0 *1 Improvement Performance well below cap •Official ERC-filed Meralco System Loss: [excludes that of Clark Electric Distribution Corp. (CEDC) – 12MMA ending Dec 2010: 3.78%; Dec 2009: 3.86% •Starting 2008, System Loss was computed e
Slide 12: Savings to customers 2008-2010
) 0 + • 9- , 2 ! , - # 2 ,- 4 =( - # ' > # - Y2008: P361.6M Y2009: P1.370B P2.864B Total Cumulative Savings to Customers or 3.42¢/kWh (2008-2010) Y2010: P1.133B •? # 2 5 # ! 4 " %73; !( <%37 ); %8 3;0< " %73; " " " " " 7 # 2 5 ( - # , " " " " " " "
Slide 13: S-Factor rewards level
/ 1 , / & + • 7 5 ( 9@7 - , 2 ! 5( 2 =@ # ! B C ' !> • 32 5 ( 90 - , 2 ! 5( =@ # !> ! 5( = C ' !> > S-FACTOR REWARDS LEVEL IFR(FRC + PAI) : < 5.90 times CIT(FRC) : < 3.52 hours > A 90 = CIT(PAI) : < 1.94 hours 9@7 = -
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Slide 15: Other Events of Interest
Other Events of Interest 15
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Slide 20: Financial Results
Financial Results
Slide 21: Robust revenue growth, record income levels
ROBUST REVENUE GROWTH Consolidated Revenues at P245.5B *Electricity Sales up with 10% growth in sales volume and higher average distribution rate at P1.44/ kWh, up from P1.15/ kWh in 2009 RECORD INCOME LEVELS IN 2010 Core Income at P12.2B Reported Income at P9.7B in ¥2010 RETURN TO SHAREHOLDERS -Tot
Slide 22: Based on Consolidated Audited Financial Statements
*Based on Consolidated Audited Financial Statements
Slide 23: Reported Net Income at P9.7B; Core Net Income at P12.2B
Reported Net Income at P9.7B • 34% electric revenue growth 5% 2% 2% • 10% unprecedented demand growth • P0.26 adjustment in distribution rate beginning April 2010. 169% 74% • 86% lower interest and other financial -26% charges 2006 2007 2008 2009 2010 Core Net Income at Core Net Income 4,696 3,532 2
Slide 24: Revenue up by 33%, EBITDA up by 38%
Revenue up by 33% Consolidated Revenues • 34% rise in Electricity Sales • Increased electric spending 190,787 200,693 191,755 33% • Increased economic activities • Warmer temperature 97% • Election spending • 3% customer growth • Higher generation and distribution charges 2006 2007 2008 2009 2010 •
Slide 25: Distribution revenue and pass-through charges
Distribution Revenue Distribution Revenues increase 43,391 29% • Higher Energy Sales volume by 2.7 mln 33,575 kWh 25,271 25,772 26,164 • Adjusted distribution rate at P1.4917 with the April 2010 implementation of the P0.269 distribution rate adjustment for the 3rd regulatory year of the 2nd Regulato
Slide 26: Total Costs and Expenses increased by 32%
Total Costs and Expenses Costs and Expenses increased by 32% 231,024 194,600 30,108 13% • Purchased Power Costs, which comprises 168,861 21,763 186,575 175,571 33% 87% of Total Costs and Expenses is up by 7,598 29,703 24,643 33% • 9.1% increase in volume purchased 161,263 172,837 156,872 200,916 87%
Slide 27: Strong Cash Position, Improved Credit Collection
Total Assets increased by 3.4% from P172.1bln in 2009 to P178.0bln in 2010 Strong Cash Position Assets 120,000 • Cash Balance increased by 43% to 100,000 P24.4bln as of end 2010. 80,000 60,000 Improved Credit 40,000 Collection 20,000 - 2006 2007 2008 2009 2010 • Accounts Receivables increased by Cas
Slide 28: Major Capital Projects 4Q 2010
Major Capital Projects 4Q 2010 (2) —————————————————— > MERALCO : =e, : 3 S —S ae } ng liwanag ng bukas EE NAIA {15KV Line (November 19, 2010)
Slide 29: Credit Rating Upgrade and Debt Refinancing
(! ) * + Total Liabilities increased by 3.5% from P111.0bln in 2009 to P114.8B in 2010 Total Equity increased to P63.2B as of December 2010 with equity attributable to parent at P59.0B Total Debt and Equity Credit Rating Upgrade • On November 17, 2010, S&P 2006 2007 2008 2009 2010 upgraded Meralco’s
Slide 30: Free Cash Flows and Dividends
, -. / Free Cash Flows: Free Cash Flows 15,933 • Free cash flow declined by 60% due to lower net cash from operations Dividends: 60% 6,443 • Total dividend payout of P6.45 on 2010 core earnings • Equivalent cash paid of 3% on closing market price of last trade date of 2010. 2009 2010 Core Div Date D
Slide 31: Regulatory Updates
Regulatory Updates
Slide 32: PBR Updates and NPC-Meralco Settlement Agreement
- ! 01 • Performance-Based Regulation (PBR) Updates – Implementation of the RY2011 Rates – Third Regulatory Period Reset Application • NPC-Meralco Settlement Agreement
Slide 33: RY2011 MAP Verification Petition chronology
! 2 %&'' " / 0 • Chronology: RY2011 MAP Verification Petition Date submitted April 5, 2010 End of hearings May 31, 2010 Release of decision January 4, 2011 Implementation January 2011 Billing • RY2011 MAP: applicable for July 2010-June 2011 – Under-/over-recoveries incurred as a result of the delaye
Slide 34: ! ! % ! +" %&&6 %&'' 1.6464 1.4917 !% !! 1.2227 ! ""
0 ! 3 ! 1 4 % 4 ! +" 5 %&&6 %&'' 1.6464 1.4917 !% !! 1.2227 ! "" 0.9657 # " $ !
Slide 35: Group A Entrant DU MAP comparison
7 / 0 0 %&'' 8% 4 ! +" 9 ERC- ERC- MAP2011 Group A approved approved applied or Status Entrant DU MAP2010 MAP2011 (P/kWh) (P/kWh) (P/kWh) MAP2011 CEPALCO 1.4482 1.5745 implemented 1.5705 Sept 2010 1.9429 (w/ relaxed MAP2011 DECORP 1.5460 SC) implemented 1.7100 1.5499 Aug 2010 (SC imposed) MAP 2011 M
Slide 36: MAP (P/kWh) by regulatory year
% 4 ! +" ! : 3/ 0 4 " 8 "9 1.70 1.65 1.60 2RP Final Determination Actual/ERC-verified 1.50 1.49 1.47 1.40 1.36 MAP (P/kWh) 1.30 1.26 1.22 1.20 1.17 1.10 1.00 0.97 0.90 2008 2009 2010 2011 Regulatory Year
Slide 37: Performance-Based Regulation framework
" " 0 3 4 ! • Before each regulatory period (four regulatory years), the ERC evaluates and determines a utility’s: – Forecasted energy sales and demand – Proposed performance standards – Annual Revenue Requirement and Maximum Average Prices Market forecasts • Energy & demand • Exchange rates Project
Slide 38: Third regulatory period reset timeline
" (! 0 1 ; 4 ! + " 8; "9 "98< !+ %&'' %&''33< %&'=9 Date Event June 18, 2010 Filing of the 3RP Reset Application Jan. 11, 2011 Release of the Draft Determination Jan. 28, 2011 Deadline for comments on the Draft Determination Feb. 7, 2011 Public consultation on the Meralco Draft Determination Tentati
Slide 39: NPC-Meralco Settlement Agreement
- 1 " 3 ! ! 4 • Result of mediation to resolve differences between NPC & Meralco regarding their 10-year “Contract for the Supply of Electric Energy” • Key features of the Settlement Agreement, signed on July 15, 2003: – Baseline quantities to be purchased by Meralco from NPC were reduced to reflect
Slide 40: Settlement chronology at the ERC
>4 5 " 3 ! ! 4 8'?%9 Date Event At the ERC April 15, 2004 Filing of Joint Application by NPC & Meralco with ERC Jan. 20, 2006 NPC and Meralco jointly submitted to ERC a calculation that showed that the net settlement was reduced to P14.3 billion July 10, 2006 Hearings on the application were complet
Slide 41: Settlement chronology at the Pasig Regional Trial Court
>4 5 " 3 ! ! 4 8%?%9 Date Event At the Pasig Regional Trial Court (RTC) Nov 23, 2009 MERALCO filed the Petition for Declaratory Relief at the Pasig RTC to declare SA as valid and binding Aug 16, 2010 OSG reiterated its Opposition, asked that the “dispute should be referred to the Arbitration” & to s
Slide 42: Court of Appeals proceedings
! 1 0 ! 8 9 • November 19, 2010 – OSG filed a Petition for Certiorari, Prohibition, and Mandamus at the CA, with an Application for a Temporary Restraining Order (TRO) • December 1, 2010 – The CA issued a 60-day TRO. The RTC of Pasig, MERALCO, and NPC were restrained them from further proceedings on
Slide 43: Thank you
MERALCO Ang liwanag ng bukas Manila Electric Company Thank you
Manila Electric Company — FY2010 Earnings Presentation on 6ix