In its latest publication called Philippine Stock Market Review, ING Barings attributed the 34.3-percent decline in net earnings to delays in Meralco’s request for a 30-centavo per kilowatt hour rate hike.
"It is politically very difficult for the government to grant Meralco a rate hike so soon after the passage of the power bill. The government promised lower rates with power reform," the study said.
Meralco said every month of delay results in a four-percent downward adjustment in its forecast.
But, it said the earnings of the power utility firm will eventually improve substantially to P3.5 billion on 2002, more than double the projected earnings in 2001.
The improvement’s income tax target next year is anchored on the assumption that a partial rate increase will be approved in 2002.
"Our fiscal year 2002 earnings forecast assumes a 20-centavo per kwh increase in distribution in January 2002," it said.
Revenues of the company are also seen to improve to P129.7 billion in 2001, P128.4 billion in 2002 and P133 billion in 2003.
According to ING Barings, there is a revenue uncertainty in the short term since the power reform bill does not clearly define the return-on-rate-base (RORB) formula.
Meralco accounts for 60 percent of the country’s electricity sales. As of end-June 2001, the power distribution company supplied power to 3.7 million customers in its primary franchise areas in Metro Manila and Calabarzon. These regions account for about 45 percent of the country’s gross domestic product (GDP) and 23 percent of the total population. Meralco’s franchises in several areas, which account for nearly 60 percent of its sales, will be up for renewal in 2003.