Aboitiz Equity Ventures, Inc. (AEV) Earnings Call Transcript & Summary

Hello, everyone. Welcome to our analyst briefing. Today, we're going to report on the financial and operating performance of Aboitiz Equity Ventures and its strategic business units for the first 9 months of 2021. But first here are the house rules. [Operator Instructions] The briefing will be recorded for documentation purposes. By joining this session, you consent your name, voice, image and chat comments being recorded for use and dissemination. If you do not consent to the foregoing, please do not join the session. Our program will flow as follows: to provide an update on the Aboitiz Group, we will have Mr. Sabin Aboitiz, our Group CEO; to present for power, we will have Mr. Manny Rubio, President and CEO of AboitizPower; to present for banking, we will have Mr. Toto Hilado, CFO of UnionBank; to present for Food, we will have Mr. Tristan Aboitiz, President and CEO of Food Group Philippines; to present for Land, we will have Mr. Dave Rafael, President and CEO of AboitizLand; to present for infrastructure, we will have Ms. Cosette Canilao, President and CEO of Aboitiz InfraCapital; to present for Cement, we will have Mr. Vara Kalepalli, CFO of Republic Cement; to present AEV's consolidated financials, we will have Mr. Dmi Lozano, CFO of Aboitiz Equity Ventures. At the end of the presentation, we will conduct a Q&A session. And now to provide an update on the Aboitiz Group, I would like to turn you over to Mr. Sabin Aboitiz.

Thank you, Judd. Good afternoon. We recently made an announcement that marks a significant milestone in our company's history and heralds the becoming of a new phase in the continuous transformation and evolution of the Aboitiz Group. Today, almost 70% of our business comes from AboitizPower with an energy mix of roughly 70-30 thermal to renewable. The goal is to achieve a balanced business portfolio where half of our beneficial EBITDA comes from our non-power businesses and achieve a 50-50 thermal to renewable mix. That plan is on track. Last September 27, we disclosed that we had entered into a strategic partnership with JERA, Japan's largest generation company and one of the largest purchasers of LNG in the world and also a long-time partner through Tokyo Electric's ownership in Pagbilao 1 plant, which started in 2009. Just a little trivia, the Founder of the Tokyo Light Company, the owner of JERA, right, was General Douglas MacArthur. JERA is acquiring a 27% stake in AboitizPower. This transaction involves the sale of -- by AEV of its 25.01% stake in AboitizPower to JERA for approximately USD 1.5 billion. This money will go to AEV and not to AP. AEV will continue to own a controlling stake of approximately 52% in AboitizPower upon completion of the transaction. This means that we will retain control of our operations while having access to JERA's expertise. The remaining 1.99% stake will be acquired from our parent, Aboitiz & Company, bringing JERA's total post-transaction stake in AboitizPower to 27%. Assuming no change in AP's foreign ownership of 2.2% as of September 30, 2021, the additional foreign ownership of JERA will be comfortably below the mandated ceiling of 40%. This transaction is not covered by the mandatory tender offer threshold of 35%. The completion of the transaction is subject to the customary necessary conditions. And one of this is a special stockholders' meeting, we will have scheduled on December 10. Recently, the PCC advised that the proposed acquisition does not reach the prescribed compulsory notification thresholds. This satisfies one of those conditions precedent. So why is this good for AboitizPower? Well, it enables our plans to increase our portfolio generation to 9,200 megawatts by 2030. The plan is to achieve a 50-50 balance between our Cleanergy and thermal portfolios, as I said earlier, by adding 3,700 megawatts of additional renewable with no new coal coming in and 1,000 megawatts of LNG. This partnership leverages JERA's experience and expertise in us because they are the largest generator in Japan with operations over 10 countries with a total portfolio of approximately 80 gigawatt hours -- 80,000 gigawatt hours -- 80 gigawatt hours, sorry. They are, in large scale RE-centered -- on RE centered on offshore wind power generation and LNG value chains and is one of the largest energy purchasers in the world. Number three, they have expertise in the development of RE and zero emission thermal power generation using ammonia and hydrogen. Number four, they have expertise in the development of a Zero CO2 Emissions 2050 road map. So the partnership expands our network outside of the country and increases our optionalities. And as mentioned earlier, it optimizes our long-standing relationship since 2009. Upon completion of the transaction, we have agreed to explore collaboration in the following areas: one, development of power projects, including LNG to power projects; two, management and sourcing of LNG fuel supply; three, potential participation in aspects of plant O&M and [ three ], protect of plant O&M. So why is this good for AEV? Well, it has compelling strategic and financial merits for the group. The transaction will release significant cash proceeds to AEV of approximately $1.5 billion. This will provide us the financial flexibility to pursue growth initiatives all across the group. It will also allow us to bear down and refinance our existing debt. This transaction is fully aligned with our long-term strategy and previously announced 2030 growth targets, including, among others, expanding the nonpower share of our portfolio to 50% of our beneficial EBITDA. Also, it allows us to grow overseas to our target of about 10% of our total power requirements. Our partnership with JERA will play a pivotal role in our overall transformation as a group. We may have been around for 100 years. But the fact is we've only just begun. Thank you very much.

Thank you, sir. And now to present for Power, I'll now turn you over to Mr. Manny Rubio.

Thank you. Thank you, Judd. Good afternoon, everyone that's in the call. Welcome to AboitizPower's Third Quarter 2021 Analysts Briefing. In July this year, we shared the progress with our aspirational target in the next decade. As we have communicated in the past, we aim to increase our total generation portfolio to 9,200 megawatts, and we will do this by growth in Cleanergy, almost threefold to 4,600 megawatts, resulting in a 50-50 balance between a thermal and renewable energy portfolio by 2030 without adding new coal. That's not part of the plan. This shift is part of our deliberate efforts in creating a truly sustainable organization. And as we continue to push the sustainability and below further this year, we've put in place a strategy that seeks to balance economic, social and environmental impact through good corporate governance. Part of the initiative of increasing appreciation for sustainability throughout the organization is bringing the conversations to our team members. We believe one cannot stand behind the cost they do not fully understand. In line with this, we are ramping up our internal communication programs to help the AboitizPower workforce better grasp why we do what we do as far as sustainability is concerned. We will continue to build on our strength, such as our programs for biodiversity, climate change, health and safety, labor standards, anticorruption and risk management as well as improve on existing gaps. AboitizPower envisions not only to be the preferred energy company, but it also strives to be a partner for sustainable growth. We are optimistic these initiatives, together with our partners, will bring about positive change not only for the organization, but ultimately for the customers and communities we serve. Now allow me to share AboitizPower's third quarter results. Our beneficial EBITDA was 29% higher in the first 9 months of 2021 compared to the same period last year. This was due to commissioning revenue from our new facility, GNPower Dinginin, our GNPD Unit 1, higher water inflow, higher availability of our TLI, TSI and TVI facilities and higher WESM dispatch and compliance with the must-offer rule. This was partially offset by the lower margins from the GNPower Mariveles, or GMEC, because of the Unit 1 outage. GNPD continues to feed much needed energy to the grid as it continues to undergo commissioning, and it is expected to commercially operate once we receive the COC from ERC, which we expect around December. We have already received Pmax certification from NGCP, which will be the basis for the COC at 668 megawatts. As mentioned in previous briefings, we were able to claim liquidated damages for Unit 1 in the first quarter for the delay in the construction of GNPD and the final payments for business interruption claims resulting from GMEC and APRI outages in the previous years. Even if you exclude the liquidity damages and business interruption claims, EBITDA would have been higher by 20% year-on-year. We also drew liquidity damages for Unit 2 last week. We have now drawn maximum delay liquidity damages for both units. As a result of what I had just mentioned, our EBITDA margin improved from 34% to 36%. Our third quarter performance versus the previous quarter was higher by 21% primarily due to significantly higher water inflows and higher portfolio margins resulting from higher availability of our coal and [indiscernible] hydro facilities. Manolo Fortich has returned to service since the landslide incident from last year. And even if you exclude the business interruption claims from the APRI outage, EBITDA would have been higher by 19%. Meanwhile, it was higher by 11% versus the same quarter last year due to commissioning revenue from GNPD Unit 1 as well as higher WESM dispatch in compliance with the must-offer rule and higher water inflow, and we are expecting La Niña in the next few months until the 2 quarters of 2022. The increase in EBITDA drove core income, 143% higher year-on-year. The higher taxable income was offset by the decrease in tax rates due to the CREATE bill. And even if you take out the liquidity damages and business interruption claims, core net income for the year would have been 100% -- 114% higher. The group recognized nonrecurring losses of PHP 36 million from the revaluation of U.S.-denominated debts. As a result, AboitizPower's net income for the first 9 months was PHP 16 billion, 124% higher year-on-year. Even if you take out the liquidated damages and business interruption claims, net income for the year would have been 96% higher. Cash and cash equivalents decreased by 16%, primarily due to low prepayments and partially offset by the bond drawdown in March. Investments and advances increased by 5%, mainly due to the equity infusions to GNPower Dinginin. Total liabilities decreased by 5% due to previously mentioned loan prepayments. And with that, our net debt to equity decreased from 1.4x to 1.1x. Capacity sales grew by 8% year-on-year. This was primarily driven by higher WESM dispatch, resulting from higher availability of our TLI and TVI facilities, fresh contributions from the commissioning of GNPD Unit 1 and higher water inflows. The optimization of our trading strategy resulted in higher capacity sold faster. Our total revenue increased by 26%, primarily due to higher effective BCQ and spot rates as well as increased sales volumes, as mentioned in the previous slide. Our total energy sold increased by 11% due to higher dispatch resulting from the higher availability of TLI, TSI and TVI facilities and higher water inflows. Ancillary services now form 16% of our total energy sold compared to 10% last year. We expect to increase given that NGCP will require more ancillary capacity in the coming months. Spot sales have increased with the commissioning of GNPD Unit 1, but this will shift to bilateral contract quantities after its COD. Due to better availability of TLI, TSI and TVI facilities and the higher water inflows, our purchased power volume decreased by 12%, and this was offset by increased purchase power rates driven by higher WESM prices. As a result, our peso gross margin increased by 22% year-on-year. And as you can see from the quarterly performance charts on the right, our gross margin increased by 15% due to higher portfolio margins resulting from the higher availability of our coal and run-of-river hydro facilities and higher water inflows. In the past few weeks, the most frequently asked question was how the increase in coal prices affected our margins. To give you a short explanation contracts are either fuel pass through or fixed price. For pass-through contracts, the movement of the index is passed on to the customer. For fixed price contracts, fuel prices are hedged at the NEWC to protect AP's margins for the life of the contract. Spot selling prices increased by 103% to PHP 5.36 per kilowatt hour. This was driven by WESM prices due to the higher volume of capacities on outage in the market, recoveries in demand and higher indices. Our trading strategies also allowed us to take advantage of higher peak prices. BCQ selling prices increased by 14% to PHP 4.62 per kilowatt hour, mainly due to studies also allowed us to take advantage of higher peak prices. BCQ selling prices increased by 14% to PHP 4.62, mainly due to higher prices. Average NEWC for the first 9 months of this year was $122 per metric ton versus PHP 58 per metric -- $58 per metric ton in the same period last year. The recent movement in coal prices underscore the risk attached to fixed price contracts longer than 3 years. Good, next slide, please. Okay. All our BUs except for coal are above the NERC benchmark in terms of availability. The rest of our facilities were able to sustain high availability performance. Coal availability is at 74%, including GMEC availability of specifically TLI, TSI and TVI is at 85%, much higher than last year, which was at 75%. As you may already know, GMEC went on outage as damage was found in a portion of the boiler of GMEC's Unit 1. Actual repairs to said portion have been completed. Parallel to the said repair works, GMEC Unit 1 went on general maintenance outage, which has since been completed. However, following its synchronization, the unit was shut down due to indications of a boiler tube leak. And we tried to run also last 2 or 3 days ago, and we had some sensor issues, which we believe will be addressed in the next 3 to 4 days. We'll update you on the synchronization of Unit 1 as we progress. So please note that there will be property damage and business interruption insurance claims for the GMEC outage. And GMEC's insurance brokers and adjusters have been informed, and the parties are currently undergoing the process of filing the insurance claims. Coordination with regulators and other key stakeholders are also ongoing. A key driver of our improved plant availability and reliabilities are organizational response to continuously strengthen our technical bench with targeted hiring and placement of strong and seasoned team of experts in asset management, project development and execution, overhaul, repair services and project management, operational excellence, systems and strategies and reliability and performance management across all our business units. For our distribution business group, beneficial power sales increased by 5% to 4,197 gigawatt hours year-on-year. This was due to higher consumption as a result of the recoveries in demand. Energy sales from residential customers increased by 2%, while energy sales from commercial and industrial customers increased by 7%. This was due to a less stringent community quarantines and assumption of operations of commercial and industrial businesses. The average gross margin slightly declined from PHP 1.67 per kilowatt hour to PHP 1.62 per kilowatt hour. This was due to the timing difference of pass-through charges brought about by higher coal prices. Except for Cotabato Light and Power Company, all system losses are below the regulatory cap of 5.5%. Cotabato Light System's losses ended above the regulatory cap due to nontechnical losses, which have been mentioning every town hall, and we are continuously addressing. But it has minimal impact on the bottom line. CapEx investments intended to address these systems losses are now well underway. On WESM, average year-to-date load weighted average price was PHP 4.45 per kilowatt hour, 74% higher compared to the same period last year. This was due to recoveries and demand, higher volume of capacities on outage in the market and higher indices. Many have asked about the effect of coal prices on the WESM prices. While we believe that coal prices do affect the spot market, there are many variables that drive them, and it would be difficult to isolate the extent of price movements due to coal prices. In many instances calls, not clearing, especially during the -- when there are actually significant capacities on outage. So we expect higher WESM prices this year compared to last year due to high capacity and outage and recoveries in demand. We'll show you how demand was affected by the community guarantees in the succeeding chart. And based on public data, we see how energy demand in Luzon and Visayas were affected by the imposition of the enhanced community quarantine or ECQ or its equivalents, and in the succeeding variants that follow. For Luzon, the red and blue lines show the grid's average weekly peak demand for 2020 and 2021, respectively. We've placed a coronavirus icon there to mark out when the ECQ started. For Visayas, the green and yellow lines show the grid's average weekly peak demand for 2020 and 2021, respectively. As of the fourth week of September 2021, public data now shows that Luzon and Visayas grids have registered higher demand of 4% and 6%, respectively, versus the same period last year. It is too early to conclude that recovery has begun. To come to this conclusion, subsequent demand data should be consistently in line or higher than previous year's demand. What these lines show is that the recently imposed ECQ has not had the same constructing effects as the previous year's ECQ. Over the past few months, we have been seeing NGCP red alerts for the Luzon grid. As our economy recovers and reopens, once again, we expect that the tight situation will continue and become tighter still in 2023 and onwards. We anticipate that new capacity will come maybe late 2025 or early 2026. In this chart, please closely note the broken black line, which represents the intersection of annual peak demand and the grid's reserve supply requirements. Amidst this evolving supply and demand situation, which includes the impact of the DOE moratorium on the building of new coal plants, we expect our GNPD units to play a significant role in addressing supply gaps and meeting critical market needs. Unit 1 will help address 2022 peak demand while Unit 2 will have addressed 2023 peak demand onwards for both. We are currently working on 1,314 megawatts of attributable net sellable capacity to help us achieve our 2030 target of 9,200 megawatts. So allow me to update you in the next few slides. GNPower Dinginin projects in the final stages of construction, with Unit 1 achieving first synchronization last February 5, 2021. Commissioning and testing of Unit 1 is currently ongoing, being impacted by COVID outbreaks. Unit 1's target date for commercial operation's now projected to occur once we get the COC from ERC, which we now expect to be around early December. GNPD Unit 1 will start taking over its [ PSAs ] once it reaches commercial operations to date. So today, it's selling to WESM. Progress on the construction of Unit 2 has also seen challenges and with the achievement of the next critical milestone, continuing to be impacted by travel bans and slow processing of travel authorizations, foreign experts and personnel as well as COVID outbreaks. We are -- accordingly, the target date for Unit 2's initial segmentation is scheduled that are the first quarter of 2022, from which we can start earning revenues. Note that Unit 2 was originally justified to sell to the spot market. And with the synchronization of Unit 2 expected to be in late Q1 2022, it should already be meeting the planned revenues when it starts consistently performing. In partnership with Wartsila and Aboitiz Construction, we started the installation of our first battery energy storage system, or BESS project in our Therma Marine facility with a capacity of 49 megawatts in Maco, Davao de Oro. This will fortify TMI's capability to support the Mindanao grid, especially during the summer months when there is limited supply of energy generated by hydropower plants, providing needed contingency reserves. This -- the project is currently 61% complete with the ongoing fabrication of the barge and battery modules. And the site is now ready to receive the battery barge with the completion of the mooring and resting structures. We target operations by first half of 2022. Early work activities have been completed by a SNAP Magat BESS project. This includes site service and basic engineering design. The tendering process, it's in final stages. And necessary permits for construction have been secured from various agencies and local government units. The project is expected to commence commercial operations in the second half of 2024. NGCP has officially confirmed to SNAP that it will upgrade the Magat Santiago 230-kV transmission line. And this will allow SNAP to continue adding capacities within the Magat area for additional projects. This was originally the constraint for projects in SNAP as the line -- the transmission capacity connecting Magat to Santiago is not [ minus 1 ] compliant. And since there's a commitment to NGCP to upgrade this, right, then there won't be any more constraint in the development of projects, including the floating hydro and the -- as we proceed with continuing the development of Alimit. We are currently securing the pertinent contracts and agreements for the SNAP Magat 67-megawatt floating solar project. And SNAP's working on the renewable energy service contract for this project with the Department of DOE. Since the National Irrigation Administration or NIA is the government agency in charge of dams and reservoirs, SNAP secured an extension of the memorandum of understanding, allowing the use of the reservoir. The plan is to install up to 115 megawatts floating solar depending on the final technical solution in NIA. PV Sinag Power is 75 megawatts located in Barangay Cayanga, municipality of Bugallon Pangasinan. It is one of our priority projects to accelerate our renewable energy growth. The EPC bidding process has been concluded. The target notice to proceed is on November 24. The project is expected to commercially operate by fourth quarter of 2022. Here is an update on the APRI field operator initiative to drill 12 new production wells at a minimum of 50 megawatts aggregated individual well capacity by 2023. The scheduled 3 makeup wells from MakBan for 2029 had been completed and are currently contributing 14 megawatts. 8 more production wells are expected to be completed by 2022. The total incremental capacity to date from these new wells is now contributing 26 megawatts. In Tiwi, the initiative to convert waste heat from geothermal brand power -- to power a 15-megawatt binary power plant is reaching the final stages of tender. Negotiations with top-ranked bidders is ongoing, and we hope to award the project by year-end. With AboitizPower's positive financial performance in the first 9 months of 2021, we're bullish about our prospects and for the remainder of the period and beyond. As we continue to face challenges brought about by the pandemic, we intend to take this new normal and turn it into a better normal for our team members and external stakeholders. In line with this, we are ramping up our One AP vaccination program through which we target to inoculate 5,000 team members this year. As of September, around 70% of those who signed up have received at least 1 dose of COVID-19 vaccine. And we just had a town hall earlier, and this number is now around 89%. This is part of our commitment to helping the government reach its target -- of vaccinating the majority of the population and testament to the value that we place on our team members' health and safety. We're also fast-tracking our digital transformation to ensure that we stay competitive and relevant in the landscape that continues to be disrupted by emerging technologies, which are even more amplified by the pandemic. Through our digital lead strategy, we are integrating digital initiatives across our business units to make sure we sustain these projects and nurture a digital culture within the workforce. We believe digitalization should not be implemented for the sake of digitalizations alone, but we should -- it should be adopted where it is truly relevant. Thus, we are saying digital first, but digital where it matters. On the energy transition front, we believe that a developing country like ours still face significant challenges. Even developed countries have started to realize the consequences of an unmanaged energy transition as Europe concurrently faces an energy crisis in the midst of economic recovery. The transition happened too fast to the point where it became unmanageable. While on the mend from the pandemic, they are now experiencing difficulty as RE failed to deliver the energy they need. AboitizPower has been pragmatic in the approach towards energy transition, grounded on what is rather than what could be. At the -- we believe on a decarbonized Philippines and it is very possible, but it requires a well-managed shift. The reality is that the country will continue to rely on coal in the -- or fossil fuel in the near term, near to mid-term until a new technology proves to be environmentally sustainable but as reliable and as cost effective. We are on the right track in achieving countries energy aspirations, but we all have to constantly work together. We have a robust and dynamic energy road map as well as mechanisms that encourage transparency and competitiveness with the ultimate goal of further driving costs to be more competitive. Everything that we do ultimately contributes to making AboitizPower a truly sustainable organization where we rebalance all aspects of sustainability, economic, social and environmental. We are one with the country and the rest of the world in creating a more sustainable future for all of us and the generations to come. [Foreign Language]

Thank you, sir. And now to present for financial services, I will turn you over to Mr. Toto Hilado.

Thank you, Judd. Good afternoon, everyone. Thank you for joining us this afternoon. I will give an update on the bank's performance for the first 9 months of the year, including an update on our digital initiatives. The bank's net income for the first 9 months came in at PHP 10.7 billion, or 26% higher year-on-year. This is reported to an ROE of 13.6%. Higher revenues were driven by a sustained margin growth from a robust growth in our CASA deposits and lower funding costs, higher fees and commissions higher foreign exchange income and trading gains during the first half of 2021. Loan loss provisions are lower versus last year as NPLs stabilized in 2021. The group's NPL ratio came in at 4.9% versus 5.1% in December 2020. On our net interest income. Net interest income was higher by 3%, and our net interest margin increased by 8 basis points despite the drop in our -- the yield in our earning assets, which dropped from 6.2% to 5.6%, but the drop was compensated by a higher reduction in our funding costs, which improved from 1.7% to 1%. Earning assets grew by about 1%. Total loans dipped by 2% year-on-year to PHP 32 billion as demand for corporate and commercial loans remained subdued. Corporate loans declined by 9% from client -- from pre-termination of loans in the fourth quarter of 2020 and muted demand for term loans. We continue to provide short-term working capital loans to companies. And as the economy continues to recover, we expect credit bookings of corporates to grow. Our commercial banking and SME loans were also down 7% on lower risk appetite. Credit card receivables were also lower year-on-year. On the consumer -- other consumer loans, especially mortgages, it continued to grow and our CSB loan bookings were higher driven by strong DepEd loans and motorcycle loan releases. Total deposits were flat at PHP 510 billion. CASA deposits, on the other hand, grew at a record high of 30% year-on-year, boosting our deposit mix with a CASA ratio of 53% versus 41% last year. Our robust CASA growth were driven by customers -- by all customer segments as we tap more corporate and commercial clients for our cash management services and onboarded more retail customers on to our digital channels. Noninterest income rose by 22% to PHP 12.6 billion, with all key segments contributing to the growth. Fee income increased by 43% to PHP 2.2 billion on higher customer transactions. This includes increased Visa interchange fees, bill payment fees, electronic fund transfer fees, and now that we've returned our Instapay charges starting August of this year. This also includes ATM charges as well as higher commissions from our bancassurance business. Miscellaneous income also went up by 60% to PHP 2.1 billion, driven by higher foreign exchange income and income from our trust operations. Trading gains were also up 11% to PHP 8.2 billion. On operating expenses, OpEx grew by 16% to PHP 17.9 billion. However, net of onetime expenses, core OpEx was up only by 9%. The gross NPL ratio of the bank improved by 5.1% in December 2020 to 4.9%. So we've seen substantial improvement in our consumer loan portfolio, although the drop in the NPL in our consumer portfolio was offset by increased NPLs on the SME and corporate side. But net-net, the ratio still improved from 5.1% to 4.9%. As for the NPL coverage ratio, this improved from 62% to 73%. The bank's capital ratios are higher year-on-year as the growth of capital outpaced the growth of risk assets. As of September 2021, our CET1 ratio stood at 16.1%, and total CAR at 18.3%. As for our 2021 and 2022 outlook on GDP growth, we revised our 2020 forecast to 4.4% from 4% in our last report on account of declining COVID-19 case infection, rising levels of vaccinated individuals and better-than-expected macroeconomic results despite the lockdowns in the third quarter of 2021. For 2022, we expect GDP to further improve to 5.8% from continuous reopening of the economy on the back of an accommodative monetary policy, higher fiscal stimulus in 2022, especially with the national elections and achievement of herd immunity, given higher number of inoculated individuals from the continuous vaccination programs. As for policy rates, we expect policy rates to remain the same for the rest of the year. And in 2022, depending on how the economy evolves. We expect a rate adjustment of anywhere from 25 to 50 basis points. On industry NPLs as of August 2021, NPLs were kept stable at 4.5%, similar to June 2021. Nonetheless, we know that per BSP Governor Diokno statement, some banks are still expecting NPL ratios to be between 5% to 6% by the end of 2021. As for our digital updates, recall that back in 2017, we started our first transform branch, which we call the ARK. Fast forward to today, we now have transformed and rebranded a total of 138 branches, which is already 70% of our total branch network of 197. So what makes our ARK branches different from our old branches? It's the space, the people and process improvements that we have done. This includes the installation of self-service digital transaction portals or DTPs, tablet-based and cash check deposit machines, the streamlining of back-end processes, removal of paper forms, training of our sellers to become brand ambassadors as well as the redesign of the overall space. The KPIs of our brands ambassadors have also improved from just servicing over-the-counter transactions to digitally converting customers, going to the branch to download and use the app for their basic transactions. With these initiatives, the bank was able to realize bank's benefits. Paperless transactions increased by 5x from 2019 as more customers adapt to using the digital transaction portals, and as we digitized more types of transactions on the DTP. The DTP also reduced the use of physical forms, thereby substantially lowering annual paper cost. As transactions inputted into the DTP goes straight to the back end, processing time of over-the-counter transactions were reduced by as much as 71% from an average of 10.5 minutes to 3 minutes. As processing time's made faster and recon processes have been streamlined, overtime costs of our people have also been reduced with 80% of our branches having 0 overtime. Despite the continued stream of branch transactions, we did not increase our branch manpower. In fact, we were able to reduce by over 100 of our branch manpower and redeploy them to other units to serve as process engineers, IT support and the like. More importantly, because of the overall improvement in customer experience in our branches, our customer satisfaction score significantly improved to 4.92 and a superior Net Promoter Score of 76%. We also continue to gain traction in our digital takeup. We posted another record high in terms of number of sign-ups across our UnionBank online and portal platforms at more than 666,000. This brings our total app users to 3.6 million as of end September 2021. Similarly, we posted the highest number of new accounts opened in a fully digital manner via the app in a single quarter with more than 278,000 accounts in the third quarter of 2021. This brings our total digital accounts opened to 1.1 million or 30% out of our total digital users. Moreover, digital transactions continued to grow by 1.8x to more than 7.3 million transactions in the month of September as we onboarded more users on to our digital channels and as they become more familiar to transacting digitally. Digital transactions also continued to significantly surpass branch and ATM transactions by as much as 3.5x. Lastly, the bank got 1 of the 6 digital bank licenses granted by the BSP. We are the only private universal bank that got the license. We are looking forward to launching this new bank in 2022. That ends my presentation. Thank you for listening and looking forward to answering your questions in the Q&A session. Thank you.

Thank you, sir. And now to present for Food, I will turn you over to Mr. Tristan Aboitiz.

All right. Good afternoon, everyone. Thank you for taking the time out this afternoon to listen to the results the Food Group for the first 9 months of the year 2021. The Food Group's revenue for the period increased 17% year-on-year to PHP 63 billion or USD 1.3 billion, with growth being driven by all divisions, except our Flour division. Meanwhile, our EBITDA declined 1% to PHP 3.8 billion or USD 78 million due to a decline in the margins in our Feeds and our Flour division. Likewise, our EBITDA margin decreased by 112 basis points mainly driven by the weaker EBITDA margin of our Flour division, which saw a decline of 739 basis points, and our Feed division, which saw a decline of 227 basis points. However, overall food group NIAT improved 39% year-on-year to PHP 1.7 billion or USD 35 million due to the fact that our Farms division bounced back from a loss in the same period last year. We also saw positive impacts coming from the CREATE bill, which added PHP 23 million to the bottom line and the recognition of income tax holiday savings from some of our Farm assets, which added PHP 95 million to our bottom line. Focusing on revenue now. Results for the first 9 months of the year increased 17% year-on-year to PHP 64 billion or USD 1.3 billion. Again, on the back, consistent contributions from all our divisions, except the Flour division. Revenue from our Farms division improved 4% year-on-year to PHP 2.2 billion or USD 45 million year-on-year due to an 89% increase in the selling price of pork. This was brought about by the shortage of supply of pork in the Philippine market. This was despite the 44% shortfall in volume, which was due to the reduced output coming from our Breeder Farm 1 facility, which was impacted by ASF last year. Feeds revenue increased 21% year-on-year to PHP 55 billion or USD 1.1 billion on the back of an 11% rise in the selling prices of our feed which offset a decline in volume. Meanwhile, Flour revenue fell 4% year-on-year to PHP 6.1 billion or USD 125 million due to a 3% decline in the average selling prices following the aggressive pricing of competition, coupled with a 1% reduction in volume due to lower demand as a result of the regional lockdowns that were implemented because of COVID-19. Turning to EBITDA now. Our overall EBIT -- group EBITDA declined 1% year-on-year to PHP 3.8 billion or USD 78 million. EBITDA was dragged down by the lower contributions coming from our Feeds and Flour divisions. The Farms business EBITDA increased sharply by 292% as the gross profit per kilo of pork grew 5.8x following the increase in pork selling prices. The consolidated Feeds business EBITDA declined 19%, due principally to higher raw material costs for the period. Raw material prices are up 19% year-on-year, while our selling prices are up only 11% for the same period. This dynamic resulted in a 22% squeeze in our margins which is due to our inability to fully pass on the increase in raw material cost to our customers in a timely manner. Our Flour division's EBITDA shrank 47% year-on-year. due to higher operating and admin costs, coupled with lower byproduct contribution due to a decline in the selling prices of our [ Flour ] into the Feeds industry. Lastly and turning now to the group's NIAT. The food group's NIAT jumped 39% year-on-year due to the positive contributions again from the Farms division, following its 292% growth in EBITDA for the period and a PHP 141 million impact of ASF for the farm operation in the same period last year, which did not recur in 2021. Meanwhile, the Flour division's NIAT fell 50% year-on-year, following the 47% decline in EBITDA. However, the decline to the bottom line was softened by a 32% drop in financing costs, coupled with a reduction of 81% in ForEx losses on money market placements. The consolidated Feeds business NIAT fell 24% year-on-year, in line with the 19% drop in EBITDA, again due to the higher raw material costs in the period. Moving now to the Food Group's aspirations and strategy. Our vision to become an integrated regional agri business remains anchored on the 3 pillars of balance, optimize and develop. Balance means diversifying our product portfolios to increase resilience as well as to balance revenues and EBITDA contributions across countries, businesses and species. Optimize means focusing on operational excellence by identifying and removing inefficiencies across the different divisions and countries and leveraging technology to help achieve this. And develop means building new growth opportunities by investing in fast-growing and high-margin segments like aquaculture, specialty nutrition and pet food. For the next 10 years, we have identified 5 strategic moves anchored on these 3 pillars, and they are the following: one, improve overall operational efficiency across our operations; two, to diversify and grow our Feeds business across the different geographies; three, to selectively integrate downstream in farms and processing; four, to protect our market share and grow our margins in our Flour business here in the Philippines; and five, to develop new businesses in fast-growing -- in the fast-growing aqua and high-margin segments like specialty nutrition. These strategic moves will continue to guide the Food Group towards achieving its vision. Moving now to project updates from the previous briefing. Above, you will see the list of projects that we have completed since then and what we have in store for the rest of the year. We will elaborate on these projects in the succeeding slides. First, related to the growth of our meat business in the Philippines, we continue to grow our brand and channel of meat distribution, The Good Meat. As of the end of the third quarter, we have successfully added 1 physical storage in San Juan and 40 concessionaire stores across Metro Manila, Central Luzon and the Northern part of the Luzon region. We anticipate the addition of 2 new physical stores by the end of the fourth quarter with a capacity of 2 metric tons per day per store. Furthermore, we anticipate the addition of 30 more concessionaire stores within the same region by the end of the year. All of these concessionaire stores are in partnership with leading supermarkets in the area. These initiatives should do 2 things for us: further develop a B2C channel and provide an expansion to our supply chain which will ensure better distribution to all customers in the relevant areas. With this, we hope to capture a larger percentage of the margin that is available along the value chain. Turning now to our international operations. We have the ongoing construction of our warehouse expansion in Medan, North Indonesia. This project was originally expected to be completed in the fourth quarter of 2021. However, due to changes in design, completion has now been moved through the first quarter of 2022, and we currently sit at about a 46% completion rate. Once finished, this facility should be able to store up to 3,000 metric tons of product and is intended to improve efficiency, stability of production and reduce the need for external warehouses to store our product. And lastly, again, focusing on the Farms business in the Philippines, we are already at a 30% completion rate in terms of the construction of our third breeder farm facility, which will be located in Nueva Ecija. The farm will have a capacity of 2,500 sow level and is expected to be finished by June 2022. This additional capacity will help to ease the shortage of supply of pork in the Philippine market today. And with our improved biosecurity protocols and methodologies, we are confident but expanding this capacity amidst the spread of ASF in the country is definitely possible. So these are all the updates for the Food Group this afternoon. Looking forward to the questions in the Q&A portion. Thank you all very much for your time.

Thank you, sir. And now to present for land, I will turn you over to Mr. Dave Rafael.

Thank you, Judd. Thank you, everyone, for being here. And so that we could present to you AboitizLand's performance for Q3. So for the third quarter of 2021, AboitizLand contributed a net income of PHP 648 million, a significant increase versus the same period last year. In terms of residential sales, AboitizLand has generated PHP 3.7 billion, an 89% increase versus the previous year, resulting from improved sales operations across the different projects and continued efforts in building up sales momentum. Next slide, please. Zooming in on revenue, AboitizLand contributed PHP 2.9 billion, up by 34% from the same period in the previous year. The residential business made up 73% of the total revenue at PHP 2.1 billion. The residential business had a significant increase in its revenue contribution year-on-year at 197% and due to increased construction activity and stronger sales. The industrial business experienced a decline of 54% compared to the previous year. This is largely due to the timing difference in the revenue recognition of lots sold for the year. The commercial business also posted a 17% increase due to increased foot traffic as quarantine restrictions continue to be eased. Next slide, please. Focusing more on the performance of the residential business. AboitizLand generated PHP 2.1 billion in revenue as the third quarter of 2021 which is 197% higher compared to the previous year. This increase is attributable to enhance construction activity as well as our continued strong performance in sales. AboitizLand continues to capitalize on our momentum this year, pushing our sales to PHP 3.7 billion, which is more than double what was generated in the same period last year. We have already surpassed the PHP 2.9 billion residential sales target for the year. Next slide, please. Our new digital strategy and the campaign highlighting the value appreciation of our properties have proven to be effective as evidenced by our strong Q3 performance. As we continue to develop our online tools to make the customer journey more streamlined, we believe that sales will continue to be strong. We also continue to improve our operations as we are able to complete more homes, while also completing site development as scheduled. Finally, with our -- next slide, please. Finally, with our strong performance so far, the residential business is projected to meet key financial metrics by the end of 2021, and we are optimistic that we will sustain our growth trajectory in 2022. AboitizLand will continue to build on our digital initiatives and to further improve our infrastructure. Strategic partnerships will be maximized and pursued to strengthen planning, construction and collections. Our marketing initiatives shall capitalize on the shifting market needs towards better living spaces outside the metro and ensure that our marketing efforts more flexible as we face the pandemic. We also continue to create competitive payment terms that will adjust accordingly to the market. Lastly, to keep momentum, we shall be launching new phases of existing projects like Foressa, The Villages at Lipa and Amoa all next year. Thank you very much, and looking forward to any of your questions later in the Q&A. Thank you.

Thank you, sir. And now to present for Infrastructure, I will turn you over to Ms. Cosette Canilao.

Thanks, Judd, and good afternoon to everyone. So let me start with our industrial economic centers. So LIMA Estate's Phase 1 expansion at Block 9 has progressed well and is substantially complete in terms of land development. Currently, 80% of its available inventory is already reserved with a healthy pipeline of prospective locators. In addition, LIMA's Block 9 Phase 2 expansion is set to add 49 hectares of inventory, which will further cater to the increasing demand for industrial lots in Batangas from both local and international locators. Construction is expected to begin in January of next year. The expansion in LIMA is expected to generate up to 28,000 new jobs in Batangas and in the neighboring areas once it's fully developed and occupied. Meanwhile, planning for the 40-hectare industrial expansion of West Cebu Industrial Park is now complete, and construction is set to begin by January 2022. With the limited industrial lots available in PEZA-proclaimed economic zones in Cebu, this project is expected to address the demand for both new and expanding exporters and domestic enterprises seeking to capitalize on CREATE incentives. The most recently PEZA -- recently approved PEZA proclamation for the expansion of 37 hectares of industrial lots will also allow us to recognize around PHP 2 billion worth of revenues in the fourth quarter of this year. Now moving on to the central business districts in LIMA. Since its launch in April, our commercial lots for sale have been well received with more than half of the total available lots already sold as of September. We expect the investors to start construction by second quarter of 2022. These commercial lots range from 1,800 up to 5,000 square meters, ideal for offices, condominiums, hospitals, hotels and other commercial uses. In addition, we are getting ready to build a 7-tower office complex in the heart of the commercial area in LIMA to capitalize on the anticipated boom of BPOs outside NCR. The first tower, LIMA Tower One, is set to break ground in the second quarter of next year. New developments in the commercial lots and the office complex will complement the existing commercial components in LIMA, such as The Outlets at Lipa, LIMA Exchange, LIMA Park Hotel and LIMA Transport Hub. LIMA Estate's 30-hectare commercial zone is the first master plan CBD to rise in the province of Batangas. This will open up a new wave of opportunities in the area and will bring in a higher standard of development and quality to provincial locators. In Davao, Apo Agua is back on -- is on track to begin operations in 2022, despite the challenges brought about by the pandemic. The team is now busy conducting tests and commissioning portions of the facility. In parallel, we are closely coordinating with the Davao City Water District to prepare for the facility's operations. Apo Agua and its contractor, JVAC, continue to maintain manpower numbers of around 5,000 workers while also pushing for extended work hours and simultaneous work on all fronts across the multiple disciplines. Apo Agua is mitigating the impact of the pandemic to their workforce by observing strict COVID protocols and routine testing. In addition, vaccination efforts for the workers are ongoing in partnership with the Davao LGU. Lima Water, on the other hand, continues to provide high-quality water supply and wastewater services to LIMA Estate. Its current build volume of around 7.4 million liters of water per day is 10% better versus prior year. Lima Water is optimistic that the increasing trend of consumption will continue with the easing of COVID restrictions and incoming additional production lines from existing and new locators. In parallel, Lima Water continues to build its automation and priority efficiency initiatives, like the Smart Water Network, to allow more efficient management of its water supply network and ensure the long-term sustainability of water supply. Our tower company with Partners Group, Unity Digital Infrastructure, is aggressively supporting the government's drive to roll out 50,000 towers by 2030. To date, Unity has completed 4 sites for mobile network operators well ahead of its schedule and is currently in the buyer stages of acquiring sites and building over 400 towers. By the end of 2022, we expect Unity to be operating about 1,000 towers, on its way to becoming a market leader in this space. Unity continues to engage with over 150 accredited vendors and contractors to support its tower construction activities, helping generate jobs and spur local economies. On the other hand, our poles or small cell sites business continues to help fast-track better connectivity in the country. We are looking to have over 350 sites by year-end, mostly in Cebu and Davao markets. We also expect to start deploying in Subic after receiving formal SBMA approval in October. In terms of our financials, we have doubled our CapEx to PHP 2.8 billion to ramp up our investments in digital infrastructure for -- and for the construction of Apo Agua. Meanwhile, the slight delay in the PEZA proclamation of industrial lots deferred our third quarter revenue recognition to the fourth quarter, resulting in lower EBITDA as of the third quarter. Overall, InfraCapital remains optimistic about delivering a solid performance for the rest of the year. Leveraging on the group's -- on Aboitiz Group's strengths, nationwide presence and legacy, we look forward to investing in projects with communities and spur growth through better and integrated infrastructure facilities and services. That concludes my presentation, and I look forward to answering your questions later. Thank you.

Thank you, ma'am. And now to present for cement, I will turn you over to Mr. Vara Kalepalli.

Good afternoon to you all. Welcome to this analyst briefing, and I will take you through the cement results. Could you please -- yes. As usual, we will not have the complete presentation of cement results as we are not a listed company, but we will take you through the -- what is the cement overall growth and what are the market trends and what pressures we are going through right now and how we are coping with that, and also the contribution to the AEV, as usual. Now the cement demand for the first 9 months is on a positive note, not only versus 2020 but also versus 2019. Actually, we no longer compare to 2020, but we compare with 2019. That is the pre-pandemic level. So happy to share that we -- as per our internal estimates, there is a good positive growth versus 2019, helping the Philippine economy in its recovery. The main drivers for the demand is basically coming from infrastructure and residential segments. These are the 2 segments which are driving the growth. While the nonresidential segment that is relating to commercial and hospitals and -- this sector is somewhat muted. We expect the infrastructure to pick up further in the coming months. A simple note on the -- what should I say, on the imports. We also note that there is a substantial reduction in the imports in the Q3 versus in the Q2 of the current year and also versus Q3 of the last year. So as you all know, the DTI is conducting an investigation into the antidumping practices from Vietnam. And if this comes out, there could be imposition of antidumping duties, which would further reduce the imports, we hope. Now coming to the cost control and activities, like anyone, we are also facing cement -- we're also facing the cost pressure from the global supply chain, such -- of input costs and especially the coal. This is also impacting the industry and -- but at the same time, it is impacting equally everyone in the industry. So we hope to pass on these increased costs to the market over a period of time. But I should say that the cost -- the operational improvements that we are taking in the last few years, the investments that we made in the debottlenecking projects is helping us improve all our KPIs, and that is also helping us in overcoming this current global supply chain commodity crisis. So overall, for the AEV contribution, we -- it is -- for the 9 months is at PHP 1.4 billion versus -- it is higher by PHP 1 billion versus previous year, and it is also much higher versus 2019. We are also positively impacted by the CREATE Bill, reducing the income tax rate to 25% on our deferred tax liability. So this is the overall result. A few words on the forecast for the full year. We are cautiously optimistic about the cement demand for the rest of the period, and we hope to do well in the coming months. Thank you. This is the presentation from the cement, and we look forward to any questions that you may have later on.

Thank you very much, Vara. And now to present AEV's financials, I will turn you over to Mr. Dmi Lozano.

Good afternoon, ladies and gentlemen. I'd just like to start off with this page, as usual, which is really to flash our financial highlights for the 9 months of this year. Maybe we can focus on the revenues. AEV recorded consolidated revenues of PHP 158 million (sic) [ PHP 158 billion ] for the first 9 months of 2021. This is 15% higher compared to the same period last year, mainly due to the commissioning revenues of GNPD Unit 1 as well as increases in sales volume and higher effective rates from our power business. We also saw increased selling prices for our farms and feed business along the way. Let me go to the next slides to go into more detail on the EBITDA and net income. Our first 9 months beneficial EBITDA was 29% higher compared to last year. This was mainly due to the following. 20% of that 29% increase is due to power's performance, including commissioning revenue from GNPD, higher water inflow for our hydro projects, higher availability of our thermal power plants, and higher WESM dispatch and prices. Some of this increase also came from financial services due to higher net income margins, higher fees and commissions, higher foreign exchange income, and the strong trading gains we saw early this year. We also had increases from the infrastructure group, which saw the cement business have higher market demand as well as -- and this is important because this is where we've been investing for a few years, improved operational efficiencies, which bode well for the future profitability of that group. Our third quarter performance, if you look at that specifically, versus the previous quarter was higher by 5%, primarily due to significantly higher water inflow in the third quarter, higher availability of our thermal and run-of-river hydro facilities. If we look at the -- on the next slide, the consolidated EBITDA. This is also up by 28% and for the same reasons as our beneficial EBITDA. Moving on to core income. The increase in EBITDA drove a much higher core income for us. And this also was helped by controlled interest expense despite more debt and lower -- or flattish depreciation. So this drove our net income -- our core net income up by 133%. On the tax side, you see a decrease, and this is really driven by the CREATE Bill, which saw a reduction in our overall tax rate, as well as some adjustments that were reflected in 2021. Net income with net recurring gains or nonrecurring gains, sorry, of PHP 83 billion, mainly due to the revaluation of our dollar-denominated assets. So as a result, our net income for the first 9 months was PHP 20 billion -- or roughly PHP 20 billion, which is 135% higher than last year. This translates to an earnings per share of PHP 3.47. Moving on to the balance sheet. On a consolidated level, cash and cash equivalents decreased by 11% primarily due to some debt servicing as well as CapEx and investment in associates, which contributed to this decline in our cash. On both the parent and consolidated levels, our net debt to equity ratios are well within our internal parameters. And we have -- we're showing very strong interest coverage ratios, which goes to show that our balance sheet has weathered the storm and actually been quite -- given us quite a bit of confidence in the 2020 and 2021 despite the challenges of the pandemic. In August, we issued the third tranche of our retail bonds, and we were able to raise PHP 10 billion. The proceeds were used to prepay our fixed-rate retail bonds maturing in 2022, a year ahead of its maturity schedule. We also infused cash to partially finance future funding requirements of Aboitiz InfraCapital in 2021 and '22 for its towers projects and Apo Agua. The prepayment of the bonds is part of our continuing efforts across the group to reduce our financing costs to take advantage of the current low interest rate environment and to stretch out our maturity and eventually provide improved returns for our stakeholders. Through our strategy of diligent and thoughtful cash management, AEV is projected to have more than sufficient liquidity to sustain any prolonged community quarantines while continuing to finance our growth projects. Next slide, please. So just a few things. We -- to summarize as quickly as possible, our key takeaways and things that make us -- that give us confidence in the future. First, our strategic partnership with JERA marks a very significant milestone for our company. It's good for AboitizPower. The partnership provides more muscle behind our clean energy thrust for the next 10 years. It's good for AEV, as Sabin Aboitiz, our CEO, mentioned, as it provides financial flexibility for us to pursue growth initiatives across all of our business units and accelerate the diversification of our portfolio. We are excited about this and look forward to the completion of the transaction hopefully within the end of this year. Second, we have been able to sustain our double-digit EBITDA growth for the first 9 months of the year. This is in spite of the challenging environment, especially with input costs rising in some of our key businesses, but also as the lockdowns have been recurring and causing disruptions in some of these industries. But we have been able to successfully mitigate through various contracting mechanisms and other cost control and productivity improvement measures. We hope to sustain this trajectory not just for the rest of the year but for the coming years. And finally, our balance sheet is battle-tested and proven to be strong. This -- it gave us the financial strength and confidence to protect our team members, now almost 90% vaccinated, and to protect our businesses and communities and other stakeholders in 2020 and 2021. And we continue to support our recovery and the recovery of our ecosystems. Upon the completion of the JERA deal, our balance sheet will be further fortified, giving us more financial muscle as we cross over into 2022 and pursue our 10-year growth ambitions, and we expect to see quite a few opportunities along the way. Thank you, and back to you, Judd.

Thank you very much, Dmi. Before we move on to our Q&A, we would like to request our audience to complete a short survey that will pop up on your screen. Your feedback is very useful to us and will help us [Audio Gap] additional feedback. Please let us know. We'd love to hear from you.

Thank you very much for answering our survey. And now onto our Q&A. We have received advanced questions and we are going to take them up now. If we have time, we will address questions raised live on the platform. And so we are going to begin with a question for AboitizLand, right? So this is directed to you, Dave. So I think the question is what is AboitizLand's value of unsold inventory as of end September 2021?

Okay. Can you hear me? Okay.

Yes.

Let me answer that question by -- okay. First of all, in terms of launched inventory, the value of our launched inventory is about PHP 19.7 billion. That's across our 3 areas in North Luzon, South Luzon and Cebu. The value of our unlaunched inventory is about PHP 28.5 billion. So that's sitting on about 286 hectares of land. And let me just add, in terms of our land bank, we have an existing land bank of about 525 hectares with a rough zonal valuation of about PHP 17.5 billion.

Thank you. Thanks for that, Dave. Our next question is for Republic Cement. So this is for you, Vara. What is the impact of the rising coal prices to your margins? And how is this being managed?

Okay. Like I already addressed this during my presentation. Now the main impact of our cost is coming from imported coal. And this is -- luckily, this is impacting everyone, not just only Republic Cement. So we hope to pass on this additional cost to the market. Probably, there could be some gap, but then definitely, this should be passed on. Now how are we managing this basically? There are basically 3 things. Like you all know, we have invested in the debottlenecking projects in the last years, which is helping us in improving all our technical KPIs, reducing our variable cost. Secondly, we also invested in -- what should I say, in the flexibility of our fuel mix. So you all must have seen our strategy related to plastic neutrality. So we have been able to increase our alternative fuels to double digits in the current year. So that is also helping us in managing this cost. And all our operational excellence initiatives will help us in managing this present, what should I say, energy crisis in terms of cost. Thank you.

Thank you. Thank you, Vara, for that answer. Our next question will be for AboitizPower. We will direct this to Mr. Manny Rubio. So this is like a set of questions that we put together. Was there any impact on AP's EBITDA in 9 months 2021 due to the rise in coal prices? Do you foresee any impact? What percentage of supply contracts are fuel pass-through provision? For the contracts that do not have fuel pass-through, is the coal supply needed fully hedged? And finally, does AP have hedging agreements -- do AP's hedging agreements cover extraordinary price adjustment? Sir?

Yes. As I mentioned in my presentation earlier, our contracts are either fuel pass-through or fixed price. The recent movement in coal prices underscores the risks attached to fixed-price contracts longer than 3 years since it's either fully hedged or indexed. And I think this has been what I've been communicating in past -- in the past briefings. We are really trying to avoid the risk of a long-term fixed-price contract. With this, there's no impact to our margins despite volatility in coal prices. So with regard to the last question on the hedging agreements, yes, we are getting settlements covering extraordinary price adjustments.

Yes. Thank you for that. Still for you, AboitizPower, sir. How much income was booked from claims for GNP Dinginin, final payment for BN -- BI claims for GN Mariveles and AP Renewables during the first 9 months of 2021? And how much of this was booked in third quarter 2021? And then excluding income from these items, what would have been AP's 9 months 2021 core income?

Okay.

And -- sorry. And the last one, are there any expected further damages to be received from BI claims moving forward? Is the timing of the receipt of the claims the same as the recording of the gain? Yes. That's it.

Okay. Thank you for the question, quite lengthy. I'll try to answer them in sequence. Well, for the third quarter 2021, we were able to recognize the APRI BI claims of PHP 115 million and PHP 35 million, respectively, for the Typhoon Usman and the Unit 5 rotor damage. As for -- as of the first 9 months in 2021, the income recognized includes GNPD, Unit 1 liquidity damages of PHP 3 billion, PHP 3.74 billion beneficial, GMCP BI claim of PHP 118 million beneficial for 2019 outage; and APRI total BI claims of PHP 150 million. Excluding other income, core income would have been PHP 12.4 billion as of the first 9 months. Now for the balance year, 2021, we have actually grown on GNPD Unit 2 liquidated damages last week of about $32 million, and net beneficial is actually PHP 1.1 billion. For 2022, we're targeting to receive the balance of the Manolo Fortich insurance claim of about 500 million and the GMEC insurance claim of $18 million for the 2021 outage that was supposed to be -- we're aiming to collect that in 2021. But I think it's going to move to 2022. For BI, we recognize the income when we have the prepayment -- sorry, the payment of account, or the POA. In collection, normally happens not more than 1 quarter. For liquidated damages, timing of receipt is the same as the recording of the gains.

Thank you for that, sir. Our next question still for you. Sorry. So this one is, how much did -- can I see the next slide, please, sorry. Our next question is how much did GNPD Unit 1 contribute to earnings in third quarter 2021 and 9 months 2021, sir?

Okay. For the third quarter of 2021, GNPD margins from commissioning is 523 million beneficial. As of September 2021, total margins from commissioning for the full year is 1.5 billion beneficial.

Thank you, sir. Next question also for you, still for you. What is GNPD's total project cost versus the budget of 1.7 billion? And when will you start recognizing 100% depreciation for GNPD and transition capitalized interest expense to the P&L?

On depreciation, GNPD Unit 1 will start depreciating upon turnover from the contractor, right, which may not be the same time as COD. COD is commercial as far as the contracts are concerned. This is currently projected either later this year or early next year. So corresponding interest expense will then transition to the profit and loss statement, of course. Likewise, for GNPD Unit 2, which will start depreciating upon turnover from the contractor, currently, are projected around mid to third quarter of next year. Corresponding interest expenses related to Unit 2 will then transition to profit and the loss statement. GNPD latest project cost is about $1.9 billion, $200 million increase versus budget attributable to finance costs resulting from the project delays.

Thank you, sir. Our next question, another question for you. How much did AP spend on capital expenditures for the first 9 months of 2021? And in addition, do you have a 2022 estimate or ballpark figure? How would this be funded?

The total beneficial CapEx spend for -- or spent for the last 9 months is at PHP 7.4 billion; the estimated CapEx for 2022, roughly around PHP 21 billion. This is just for base maintenance of business and expansion CapEx. And this will be funded by a mix of debt and, of course, cash equity.

Thanks for that, sir. A last question for you for this round. May we have guidance on AP's normalized tax rate moving forward? And would the effective 9 months 2021 rate be the applicable rate?

The effective tax rate as of September 2021 is 18%. And the rate varies per business unit, depending on its taxability. Tax rate actually evolved based on the mix of our portfolio. With GNPD now online, producing anywhere from 600 to 668 megawatts with an ITH, the average effective rate will be lower and will be lower still as GNPD starts to be a bigger portion of our net income.

Okay. Thank you very much. Thanks for that, sir. Now our next question is going to be for UnionBank. So Toto, this question is for you. So far for the fourth quarter of 2021, how has UnionBank's nonperforming NPL ratio been trending? Do you have guidance for next year?

Yes. So as presented earlier, the NPL ratio has been trending lower from 5.1% last year to about 4.9% as of September. For the rest of the fourth quarter, we think it will just be there at 4.9% to 5.1%, nothing -- no significant change. But for next year, we think it should be improving. It's -- we haven't completed our forecast, but at the rate things are going, the trend should be an improving NPL ratio for next year as we see more growth and the economy reopening.

Thank you, Toto. Our next question is still for you. In what markets do you expect loans to meaningfully pick up and NPL ratios to further deteriorate next year in light of forecasts that NPL peak rate could be as high as 8%? And in what specific industries?

If the momentum is maintained and assuming no more return to ECQ, we think that the growth would be across the board, consumer, corporates market. And if that's the case, we think that the NPL ratio should improve. Our experience has been that consumer loan NPLs really came in strong hard last year, December 2020, and substantially has recovered this year. And if we were able to recover on the consumer this year, then that kind of recovery should continue for next year. The NPL peak rate projected is 8%. I don't think the industry would hit 8%. So I think that's -- probably the industry would be only as high as about 6%. That's our estimate.

Thank you for your guidance, Toto. A last question for you, if you have any updates on your open banking activities.

The open banking initiative will be highly dependent on the release of the BSP circular. There is a draft that's been circulated, but it won't be implemented right away. There are certain tiers that have been identified -- identifying what kind of information will be made available. So it remains to be seen how fast this will materialize. But suffice it to say that the bank is ready to be active on the open banking initiative as we are currently already comfortable with having APIs. So as you probably know, communication between banks will be through APIs. And we are API-ready, and we use a lot of APIs. And we foresee to be a very active participant, but there's no specific guideline yet released by the BSP.