HONG KONG – Manila Electric Co. (Meralco) is ramping up capital spending by more than 40 percent next year mainly to strengthen its distribution system and for its expansion into power generation.
In a briefing, Meralco president Oscar Reyes said the power firm has set a record capital expenditure program of P15.6 billion in 2014 compared with only P10.8 billion this year to sustain its robust performance, expand its reach and meet future growth requirements of an expanding customer base.
The amount is higher than the original capex forecast of P13.5 billion for next year.
“We’re investing heavily in the core distribution business and securing income and cash flow opportunities in new markets. We’re keeping the lights on for continued reliability and quality power, “ Reyes said.
Reyes said the power firm’s number of customers has risen by an average 3.3 percent in the past five years, with residential accounts accounting for a sizable portion of the increase.
Residential customers represent 91 percent while commercial customers account for eight percent of total 5.3 million customer count as of end-September. The firm expects to have a total of 5.36 million customers by the end of the year.
The planned capex will be sourced from a combination of “reinvestment of earnings and loans.”
He said Meralco has also posted a significantly lower system loss rate of 6.86 percent as of October, outperforming the mandated cap of 8.5 percent set by the Energy Regulatory Commission.
System losses refer to the cost of electricity either lost in transmission through power lines or pilfered. These losses are passed on to customers up to a certain percentage.
A lower system cap translates to savings for its electricity consumers.
Aside from enhancing its distribution network, Meralco is also building up a power generation portfolio of 2,700 megawatts to help ensure adequate power supply in the Luzon grid. Its power generation arm Meralco PowerGen Corp. teamed up with New Growth B.V., a wholly-owned unit of Thailand’s Electricity Generating Public Co. Ltd. (EGCO) to develop a new 460 megawatt coal-fired power plant in Mauban, Quezon.
The power utility giant also acquired a 20 percent interest in
Global Business Power Corp., (GBPC), the main electricity provider in Central Philippines.
GBPC currently owns and operates nine power plants in Toledo City, Cebu and Iloilo City, Panay Island with a total installed capacity of 627 MW.
Among its other projects include the Redondo Peninsula Energy’s 2X300 MW circulating fluidized-bed coal-fired power plant in the Subic Freeport Zone as well as the 800 MW LNG-to-power on Jurong Island in Singapore.
Meralco earlier inked a partnership with Japanese firm Chubu Electric Power Corp. to jointly study the feasibility of a natural gas plant in Antimonan, Quezon.
Given strong consumption spending and steadily increasing electricity sales, Reyes is confident that Meralco will meet or even exceed its income target of P17 billion this year from P16.3 billion in 2012.
He said the country’s robust economic fundamentals, continuing rise in OFW remittances, BPO revenues will boost Meralco’s bottom-line.
Reyes said Meralco also sees the 12o-hectare Pagcor Entertainment City along Roxas Boulevard as a new growth area when all four casino operators have been built.
Solaire Resort and Casino, owned by port magnate Enrique Razon, is estimated to consume 4 gigawatt hours per month while the SM-Melco group is forecast to generate at least 2.5 GWh monthly.
Reyes said the company remains on the lookout for opportunities overseas in addition to its investment in Singapore and Nigeria.
“We’re open if there’s an opportunity that comes up, looking at markets where power requirements are undeserved,” Reyes said.