Meralco sees 2.8% RORB for 2002

Lopez-controlled Manila Electric Co. (Meralco) is projecting a return-on-rate-base (RORB) of 2.8 percent for 2002, company president Jesus Francisco told reporters over the weekend.

Francisco said they could achieve the projected RORB of 2.8 percent if they would register zero to two percent sales growth this year. RORB is the measure of a company’s profitability. Creditors often monitor the RORB to determine the capability of the firm to pay its debts.

According to Francisco, to be able to achieve this RORB projection, they should be able to post a sales growth of four to five percent in the second half of the year.

"Our sales were down in the first half of the year. So to get the sales growth of two percent, we should be able to register growth in the second half of about four to five percent," he said.

In 2001, the company registered an RORB of 3.5 percent. Thus the projected 2.8 percent RORB for 2002 is a deterioration of the company’s capability to pay its obligations.

Francisco, however, is optimistic that the firm’s sales would pick up in the second semester of 2002 as indicated by a good sales performance in August compared to July. The official did not give the sales figure for July and August.

"We are expecting a pick-up in the industry’s activities toward the end of the year. We hope September sales growth will be even better than August," Francisco said.

Despite the lower RORB projection this year, he said the power distribution utility is expected to spend its capital expenditure target of P6 billion for the year.

He said they have spent about P3 billion is capex in the first six months of the year. "There are expenditure that we can’t change. So, we expect to use up the entire P6 billion projected capex by the end of the year," he said.

Meralco’s RORB started to deteriorate when then Energy Regulatory Board (ERB), now Energy Regulatory Commission (ERC), failed to approve the company’s application for a rate increase of 30 centavos per kilowatthour.

The company submitted its application for rate hike in April 2000. Since then, its capex has been trimmed down from P8 billion to P12 billion to only P6 billion.

So as not to be declared in technical default, the company has been applying for a waiver from its major creditors, Asian Development Bank and the World Bank for the past four years now. Under the loan agreement with these creditors, Meralco’s RORB should be at eight percent.