Manila Electric Company (MER) Earnings Call Transcript & Summary

[Audio Gap] A briefing on the 2019 full year financial and operating results. This will be the order of presentation: the financial results by our CFO, Ms. Betty Siy-Yap; Operations by President and CEO, Mr. Ray C. Espinosa; joined by our Head for Networks, Mr. Ron Aperocho; our Head for Customer Retail Services and Corporate Communications, Mr. Victor Genuino; and a report on our sustainability initiatives by Mr. Raymond Ravelo; and a report by Meralco PowerGen from SVP and President and CEO of MGen, Mr. Rogelio Singson. Please, Ms. Siy-Yap?

Good afternoon, ladies and gentlemen. I'll be presenting the financial highlights for the full year ended December 31, 2019. Our gross revenues grew to PHP 318.3 billion, 5% more than the PHP 304.5 billion in 2018, as a result of higher energy sales volume and higher pass-through generation charges brought about by the increased fuel prices, a weaker peso and higher spot prices at the Wholesale Electricity Spot Market from March to July of 2019. The year 2019 saw 51 Yellow Alerts and 15 Red Alerts in Luzon versus only 7 Yellow Alerts in 2018. Electricity revenues amounting to PHP 310.1 billion was stable at 97% of gross revenues compared with PHP 295.4 billion in 2018. Generation and other pass-through components as a percentage of total electricity revenues was at 79% in 2019. Meralco's distribution revenues remain unchanged -- distribution charge remained unchanged, while aggregate distribution revenues grew by 6% in 2019 to PHP 65.9 billion compared with 2018, reflecting the impact of higher volume distributed and sales mix. The nonelectric revenues was at PHP 8.2 billion, 9% lower compared with 2018. This represented over 2% of our total revenues. In terms of contribution or breakdown of distribution revenues, about 300 -- PHP 3.5 billion is due to higher sales volume and PHP 296 million is due to higher distribution rate. Our total costs and expenses for 2019 amounted to PHP 287.1 billion, 4% higher than in 2018. The cost of purchased power stood at 84% of total costs and expenses in 2019, consistent with the same period in 2018. Operating expenses, which account for 9% of total costs and expenses, amounted to PHP 27.2 billion. Labor and contracted services continue to be the major spread, mainly to serve the requirement for the maintenance of distribution facilities, including investigating outages, tree trimming and repair of minor streetlight and service drop troubles, meter reading, messengerial, disconnection, reconnection and relocation services and the maintenance of various information systems. Capital expenditures implemented for electric and nonelectric projects during the year amounted to PHP 20.2 billion, 48% higher than in 2018. This expresses our effort to address load growth, asset renewals, disaster hardening imperatives and regulatory compliance. It's all -- it also represents our abiding commitment to deliver better customer service, customer experience and achieve higher customer operational excellence. Major capital expenditures completed included 9 substation projects and 2 115-kV line projects and replacement of the Marikina Substation Bank 2, which include -- which increased Meralco's substation capacity by 598 MVA and circuit length by 108 kilometers. Our CCNI rose 6% to PHP 23.8 billion in 2019 compared PHP 22.4 billion in 2018, driven by the 6% increase in combined volume distributed by Meralco and its 65%-owned subsidiary, Clark Electric Distribution Corporation, as well as the improved performance of Retail Electricity Supply units, contribution of San Buenaventura Power Limited since it began operations in September of 2019, and the improved financing income from [ fines employed. ] Our consolidated reported net income for the year ended December 31, 2019, was at PHP 23.3 billion. Our core EBITDA stood at PHP 38 billion, 2% higher than 2018. Our total interest-bearing debt is slightly higher at PHP 41.3 billion, including debt of our subsidiary of PHP 1.6 billion at the end of 2019, of which PHP 28.5 billion are due to mature in 2020. Meralco maintains a strong balance sheet and liquidity position with net debt-to-EBITDA of 0.7x. Total principal debt repayments, customer refunds and financing charges paid amounted to PHP 11.9 billion in 2019. Our core earnings per share for 2019 was at PHP 21.145 per share, while our reported net earnings per share is at PHP 20.659. The Board of Directors of Meralco approved today a final cash dividend of PHP 10.395 per share to all shareholders of record as of March 20, 2020, payable on April 15, 2020. This consists of a final regular cash dividend of PHP 5.108 per share in a special cash dividend, equivalent to PHP 5.287 per share. The final cash dividend is in addition to the interim regular dividend of PHP 5.464, which was declared on July 29, 2019, paid on September 20, 2019. With this, it brings our total cash dividends out of the 2019 core net earnings to PHP 15.859 or a 75% payout. Mr. President, this ends my [ report. ]

Good afternoon to everyone. I will be here to deliver the operating results, assisted by Ron Aperocho and Viboy Genuino. Let me give you the highlights of the results for 2019. Energy sales was up 5.8% at 46,871 gigawatt hours. Customer count, up 4.1% at 6.88 million customers. Peak demand, up 4.6% at 7,740 megawatts. Net system input or NSI, up 5.4% at 49,251 gigawatt hours. The average retail rates were down at -- by 0.9% at PHP 8.87 per kilowatt hour, and we sustained our service improvement levels. So on the round, we had a very good year in 2019. So Viboy will take on the sales report, and the rest will be handled by Ronnie.

Thank you, sir. Good afternoon. Sales for 2019 grew 5.8% to 46,871 gigawatt hours. This is better than the 5.3% growth that we had in 2018 from 44,313. In terms of sales mix, our Commercial segment had the most share of energy sales at 39.4% to 18,483 gigawatt hours, followed by the Residential segment which had 31.1% share or 14,589 gigawatt hours. Industrial has a 29.3% share at 13,659 gigawatt hours. Commercial grew 5.8%, Industrial grew 3.8%, but our biggest growth driver in 2019 was the Residential segment at 7.6%. To give you more details on the different segments, the Residential segment finished strong at 7.6%. The POGO and BPO sector is creating a new breed of condominium dwellers, growing customer base outside Metro Manila is also contributing to the growth. Residential in 2019 added 1,031 gigawatt hours. If you look at the map, you will see Metro Manila had the highest growth in terms of absolute value at 568 gigawatt hours or a growth of 7.3%. The other areas like Cavite, Bulacan, Rizal, Laguna, all the way down to Pampanga, also showed substantial growth. The map on the middle shows where the sales in Metro Manila came from. So if you look at it, the Bay Area or the Pasay area grew the most by 15.8%. We had Manila grow at 7.4%; Makati, which grew 7.9%; BGC/Taguig grew 9.7%; and Paranaque also grew at 9.7%. We can attribute the growth of energy sales in the Residential segment by 2 main things. The temperature was warmer compared to 2018. The average temperature in 2019 was at 28.2 degrees Celsius compared to 27.9 degrees Celsius in 2018. Also, average inflation rate was more than half of what it was in 2018. Average inflation was at 2.5% versus the 5.1% in 2018. For the Commercial segment, it had a healthy growth of 5.6%, reaching 18,172 gigawatt hours. This was supported by positive business outlook and the POGO/BPO segment. The Commercial sector in 2019 added 961 gigawatt hours. The top 3 industries that we had in Commercial were real estate, which grew 8.5%; retail trade, which grew 4.8%; and hotels and restaurants grew 6%. The key insight that we got in 2019 was the 67% surge in POGO office space demand in 2019. It reached a leasable space of 738,000 square meters as opposed to only 443,000 square meters in 2018. Most of this growth or most of this free available space for POGO commercial spaces was in the Bay Area, which accounted for 42% of total space. We also saw sustained retail space absorption from food and beverage retailers, which account for 40%. For our Industrial segment, our top 3 segments are food and beverage, which grew 5.4%; nonmetallic, which is mostly cement and bottles, grew 8.5%; plastic and rubber grew 3.3%. This was fueled by our GDP growth of 5.9% in 2019; 4 additional BBB projects, which are expected to be opened in 2020. The dip that we saw in the Industrial segment was semicon, which for the first time showed a decline of 0.8%. Traditionally, the growth in the Industrial segment was driven largely by the growth of the semicon industry. For customer count, we grew 4.1% to 6.883 million customers. 92.1% of those are Residential, which grew 4.2%. This was followed by Commercial at 7.7% of total share of customers, which grew 2.8%. And 0.2% of our customers are Industrial, which grew 2.1% in 2019.

Good afternoon. Meralco's peak demand in 2019 grew by 4.6% at 341 megawatts. This was registered last June 4. While for Luzon, the peak demand grew by 4.3% at 468 megawatts. This was registered also during the month of June, at June 21. For 2020, the projection of the Department of the Energy is for the Luzon peak demand to grow by 8.3% at around 950 megawatts. For net system input for 2019, okay, it grew by 5.4% at 2,517 gigawatt hours. Okay. And for energy sources, of course, the contracted supply contracts from our PSAs and IPPs delivered a total volume of 30,028 gigawatt hours or a combined share of 61% in 2019. Contestable volume grew to 29% from 28% in 2018. And the special contracts were almost at the same level at 667 gigawatt hours compared to 670 in 2018. Well, this year from WESM, dropped from 12% in 2018 at 5,771 gigawatt hours to 9% at 4,207 gigawatt hours in 2019. For the fuel mix in 2019, well, natural gas led the fuel source in 2019 at 40%, 19,601 gigawatt hours; followed by coal at 15,730 gigawatt hours, which is around 32%, with balance coming from multi-fuel sources. As you can see, solar power source gradually increased in 2019 at 50 gigawatt hours coming from only 3 gigawatt hours in 2018. For average retail rate in 2019, there was a drop of around 1% at PHP 8.87 per kilowatt hour. And in the next slide, you can see the breakdown of the components or the components of the average retail rate. Of course, generations charge is still the highest contributor to the average retail rate of the customer -- to customers at 59%. So it increased from PHP 5.12 in 2018 to PHP 5.22, but this was offset, in a way, by the reduction in the transmission charge from PHP 0.77 in 2018 to PHP 0.74 in 2019. There was also a decrease in the taxes and universal charge component from 1.08% (sic) [ PHP 1.08 ] in 2018 down to 0.91% (sic) [ PHP 0.91 ] in 2019. Of course, distribution charge, 16% of the total bill component of the customers at 16% to PHP 1.41, which is slightly higher compared to 2018 at PHP 1.4 per kilowatt hour. Okay? For -- next is system loss performance. We are happy to share that our system loss for 2019 was lowest ever at 5.54%. This translated to a total savings of PHP 5.2 billion or PHP 0.11 per kilowatt hour savings for our customers in 2019. Please note that our campaign to consistently bring down the systems losses for more than 10 years now has already resulted in a total of PHP 44.8 billion savings or PHP 0.11 per kilowatt hour total savings for our customers. For 2019, the system loss cap set by ERC was at 7.25%, and this has been reduced further to 7% starting January this year and further to 6.5% next year. Next slide, please. For S-Factor, they were all at the rewards level, and 7 out of 8 had marked improvements compared to 2018. For our prearranged SAIDI performance, there was a decline from 58.262 minutes to 63.193 minutes, but this was due to the numerous prearranged power interruptions as a result of the CapEx catch-up that we had undertaken last year and also due to the numerous relocation works that was undertaken by Meralco related to the priority PPP and BBB projects of the government. We're happy also to report that our total Customer Satisfaction Index score for 2019, which ended at 8.37, which was a recovery from a 2018 decline and is now at par with 2017's all-time high score. In terms of the different segments that we have, you will see that our CSI improved by 1.5% to 8.37. The CSI that we had for 2019 surpassed our stretch goal of 8.34 and is at par with 2017's score at 8.39. All the different segments drove the increase of CSI, mainly coming from the home and micro business segment and the Biz segment. The home and micro Biz segment was at 8.45 CSI score, the Biz segment at 8.43 and the corporate business group ended at 8.29 CSI.

Good afternoon. I am pleased to share with you the sustainability strategy and program we have thus far outlined for One Meralco. With the establishment of our Sustainability Office, we affirmed our commitment to sustainability as front and center to our business and as core to our company's strategy and operations. Given this, we in the Sustainability Office have identified 4 areas we will focus on as we drive the sustainability agenda: First, Planet. This is where we will develop and execute our programs to help preserve and protect our planet. Second, People. This captures our effort to embed a sustainable mindset within our organization, ensuring our employees are not only versed and are not only able to understand ESG concepts, but are also able to put these principles into practice. Third, Power. This focus area makes our sustainability agenda distinct in Meralco. A big part of our sustainability effort is ensuring we electrify and energize all unserved and underserved areas within our franchise 24/7 by 365. Now finally, underpinning all our efforts in this space is the objective of helping create what we call Prosperity for All. And we will achieve this by ensuring that our decisions as a company, our initiatives and our investments are guided and balanced by sustainability principles. Going forward, our sustainability initiatives and efforts will all be driven under an overarching program called Powering the Good Life. And Powering the Good Life will have 5 priority areas consistent with the Planet, People and Power, as I mentioned earlier. The first 3 priorities are planet-related, in particular, direct emissions reduction; resource efficiency, beginning with ourselves as a company, but also influencing our stakeholders; and of course, waste management. The fourth area, community electrification, captures our power initiative. And finally, workplace excellence will house our people programs. I'm also happy to share with you that we have already identified and launched a number of important projects in each of these areas. To give you a few examples, under direct emissions reduction, we are looking at installing solar PV systems on our facilities here in Ortigas and in our sector and business center offices across the franchise. As well, we are scanning our entire vehicle fleet and are evaluating which units we can electrify, beginning with our electric motorcycles in the business centers and subsequently transitioning our service vehicles to electric units. All these will really form part of our effort to build what we will then call the Meralco Smart and Sustainable City. Now on the resource efficiency, we've also embarked on a program to greenify office building. In the first instance, by continuing to replace our lights with LEDs and also by converting our air conditioning units to inverter type ones. As mentioned earlier, we also would like to influence our stakeholders to be more sustainable. And one of our focus areas is looking at our supplier base, and we will begin to include sustainability criteria as we accredit our different suppliers going forward. Finally, under waste management, as many of you know, we implemented a company-wide ban on single-use plastics in 2019. While this ban was, by and large, accepted and welcomed by our employees, there was a request for us to provide them alternatives to the banned materials. So in response to that, this coming Saturday, February 29, we will be opening our own retail market called The Good Store. Here, our employees and the general public will buy not only SUP alternatives, but also organic and sustainably farmed produce. Thus far, we've enlisted a number of partners who will be showcasing their products this weekend, partners such as Human Nature, Gawad Kalinga's Enchanted Farm and MultiFresh. In addition, this Good Store will also be the venue for sustainability workshops and education sessions for children, for mothers on topics such as plant-based cooking and plant-based science. So I'd like to bring this opportunity to invite all of you to be with us at our launch this Saturday at 8:30 in the morning, and we'd be very happy to welcome you to The Good Store. Thank you very much.

Okay. Moving on, just a quick update on the impact of Typhoon Tisoy to Meralco's customers last December 3 to 5, where it affected the 119 circuits or 16% of Meralco's 722 operational circuits, and 1.62 million of our customers suffered short duration and even sustained interruptions. But there were around 563,000 customers affected between 1 p.m. and 2 p.m. of December 3, 2019. But we were able to reduce it to just 15% of that number the following day. And the second day, that's December 5, we were able to achieve 100% restoration to all affected customers. And after we had achieved 100% restoration in our franchise, we extended -- next slide, please, our helping hands to other electric co-ops that needed assistance. So we deployed a total of 45 personnel in Bicol to help Aleco in their power restoration efforts. And actually, we also extended assistance to the same co-op in their meter clustering projects to address the high system loss in that part of the franchise. And while Meralco's personnel have been trained and tested for those type of restoration, but not for volcanic eruption, that's why we were a bit sort of -- we were [ cold touch ], not unready, when the Taal Volcano erupted. But the Taal eruption somehow brought out the best in us, especially in our people. So with 45 circuits out, affecting a huge number of our customers, our people got ready, wore their masks, brought their safety harness and all the pressure washers and all the available cleaning materials, and we deployed them in Batangas and in Cavite to accelerate the cleanup process to get rid of the volcanic ashes that were trapped in our facilities so that we could bring the power back to our affected customers as soon as possible. So due to the hard work of our people, and we practically worked around the clock, and in 7 days, we were able to achieve 100% restoration to all the customers that were affected by Taal Volcanic eruption. So as part of the Meralco's rapid response, there was a top-level management meeting to assess the situation. We mobilized all the available equipment, especially the washer -- the insulator washers that we have. And in fact, we purchased 30 more washers that were retrofitted to our basket trucks. And we coordinated also with Bureau of Fire, MMDA and Maynilad for assistance. And we mobilized all available basket trucks and all available crews across our franchise. Next slide, please. Okay. 1,000 -- more than 1,000 crew were deployed in Cavite and Batangas, and around 300 vehicles were used for the speedy restoration and for the cleanup of our facilities that were affected. Okay. For CapEx, of course, this is the lifeblood of our system. For 2019, we spent PHP 14.7 billion. This is more than our approved budget for PHP 12 billion for 2019. So we got the instruction from our President to address the deficiencies in the system and to immediately address the pending request of our customers for new connections and even for the renewal of our aging facilities and, of course, above all is to address the load request requirements of our customers. And on top of that, we also allotted a significant budget to accelerate or to speed up the relocation of our facilities that are somehow hindering or affecting the priority Build, Build, Build or PPP projects of the government. Okay, next slide. And for CapEx, these are the major projects that we completed in 2019. For substation capacity, we have increased our capacity by 598 MVA and sort of extended or increased our circuit exposure by 108 kilometers. For substation projects, these are the development of Southwoods in Binan and Calamba in Laguna; expansion of Filinvest, Bridgetowne in Pasig; expansion of TMC in Cavite; development of Eton-Centris in Quezon City; of course, the development of Makati; expansion of Sta. Rosa 2 substation; and expansion of Tagaytay West in Cavite. We had completed also 2 major 115-kV subtransmission line projects: the San Jose 115-kV lines, the Novaliches Leg; as well as the Teresa-Tagbac 115-kV line. And we completed also a record 51 residual projects in 2019. And we have replaced also an overloaded Marikina Bank 2 substation last June of last year. And as I mentioned earlier, for PPP and BBB projects, we continue to work closely with the government and the different stakeholders to align with their execution time lines. In fact, we have a regular meeting with the Secretary of the DPWH to discuss their priority projects. For now, they are sort of requesting Meralco to prioritize the clearing of Binondo-Intramuros Bridge, Guadalupe Bridge, Lambingan and Estrella-Pantaleon Bridge to speed up the rehabilitation and the widening of these bridges. For the C3-R10 project of MNTC, we're able to relocate 64 posts in January, which enabled them to open the Dagat-Dagatan off-ramp last Feb 21. So this is a major milestone of the project as it eased the bottleneck or traffic congestion in Malabon and Caloocan areas. And in December last year, we expanded our Sta. Rosa substation by putting in additional 83 MVA power transformer bank. So this addressed the increasing power requirement in the cities of Sta. Rosa and Binan in Laguna. And this likewise provided switching flexibility during contingencies as well as reduced further the technical systems losses of Meralco in that part of the franchise. And also for Tagaytay area, we expanded last December 17 our existing Tagaytay West Substation by putting an additional 50 MVA power transformer capacity. So this will provide a very reliable power supply not only in Tagaytay, but also in adjacent municipalities of Mendez, Alfonso, Aguinaldo, Indang, Amadeo and Silang in Cavite. Okay. And of course, there's another project, the construction of New Teresa-Tagbac 115-kV line. That was completed last December 27. This addressed the additional power requirements of the biggest cement plant in the area, Solid Cement Corporation, in the sitio of Tagbac in Antipolo. And this has relieved also the forecasted overloading of New Teresa Bank No. 1, which already registered 107% overloading brought about by the additional load of Solid Cement Corporation. And finally, we have this aggressive program to attain 100% electrification in the entire franchise of Meralco. So this program is called Serving the Unserved. So as part of our first priority projects, we have 94 sites that were supposed to be energized by December last year, but due to right-of-way issues, we were able to energize 90 out of 94. But we are still working on the remaining sites, addressing the right-of-way issues and concerns so that we can obtain 100% electrification in all these identified sites as part of our Priority 1. We're happy also to share that our One Meralco Foundation assisted Taal Volcano victims. We covered 44 evacuation centers during the calamity, which was able to provide assistance to 3,000 families or 14,600 individuals. We were able to deploy solar-powered charging stations, relief goods, sleeping mats. We had a feeding program, distributed medicines and also packed food. For our customer engagements, products & services and initiatives in 2019, we are committed to provide Energy For All. So in 2019, we continued our initiatives to deliver the same quality of service to far-flung areas and urban growth centers. On the photos are examples of these initiatives that we've done in partnership with our customers. The first is the Isla Verde inauguration last Feb 15, 2019; the Cagbalete Microgrid Phase 1 inauguration last July 23; the Battery Energy Storage System inauguration and pilot in Bulacan, September 6; our Meralco-Lancaster Substation inauguration last May 18; and the Meralco-Bridgetowne Substation inauguration last November 21, to name a few. For our corporate customers, we continue to fulfill our promise to be our end -- to be their end-to-end energy solutions partner. We offer Power Ideas like energy consultation and diagnostics for customized energy solutions for loadside services, which we then endorse to our subsidiaries like MServ for Spectrum, Radius and eSakay. We also engage our customers with relevant solutions via our Power Up forums. We had 7 forums in 2019, which were represented by 767 companies, representatives coming from 518 companies and customers. We also add credibility to what we offer by featuring successful partnerships with customers where we're able to leverage on these Power Ideas that we were able to share with them. All of these were communicated through various channels we have like websites, social media, forums and our sales kits of our relationship managers. The examples in the photos are the EV fast-charging station, which we deployed in the Horizon Homes in Shangri-La; the Ateneo electric vehicle, which we still have currently there; the energy solutions that we're able to provide for Batangas Medical Center; and the launch of the net metering home of Imperial Homes in Via Verde, Sto. Tomas, Batangas. We also continue to highlight partnership stories, which we then communicate across several touch points, with special focus on our Luminaries event which happened in March 2019. In this, we were be able to utilize broadsheets, e-DMs, websites, the Meralco LinkedIn and Power Club Online to showcase the partnerships that we've had with different customers and highlighting the partnerships that were formed and how Meralco was able to help these customers to become more energy-efficient and productive. We continue to engage our corporate customers via our B2B partnerships off of work via the Meralco Golf Cup. This happened in November 19 in -- at Sta. Elena, which was participated by close to 200 customers. And the donations for the mulligan staff that were raised were given to the One Meralco Foundation. For our Biz customers, we continue to leverage on the successful partnerships with customers by promoting their stories in forums, customer engagement, digital articles and ads and in our TVC and RC. And here, we position our Meralco Biz Partners as an end-to-end energy solutions partner that can help customers achieve business sustainability and grow their business. Next, the Power Up Forum also that we had for our Biz customers remained to be the primary channel that we have to allow Biz Partner Managers to offer services to customers which we haven't engaged previously. It also provided a chance for customers to meet and seal business deals with other customers in attendance. This has been a very good campaign that we've had for our Biz segment to grow their business and partnerships with Meralco. For our LGU partners and property developers, we staged 12 Power Up Forums, which were attended by close to 1,500 attendees. This was able to generate close to 1,000 leads for Meralco and its subsidiaries to offer our complete energy solutions package. In 2019, we also had 12 barangay fora, which were hosted by the 3 areas of the home and micro business segment, North, Central and South, for barangay officials, city and municipal councilors. We were able to conduct 595 info campaigns. An example of which is what we did with the Quezon City LGU together with Mayor Joy Belmonte, wherein our key collaboration focused on providing an electronic transmission of the certificate of final electrical inspection in support of the government's thrust to improve the ease-of-doing-business ratings. To ensure speed and ease in energizing homes, we also encouraged our Residential customers to work with electrical contractors, which we've called Certified by Meralco. A GMM happened last May 27 to cascade important changes such as the PCAB license requirements, borderless certifications, schedule of trainings and recognition for exemplary performance. We are currently revamping this program to make it easier for customers to engage our CBM partners. Lastly, I'd like to share that since the launch of Meralco Online in 2018, CXE or our customer experience engine has become the primary platform for our customers to be able to interact with Meralco. We now have processed close to 600,000 service applications in our platform. We now have 354 -- close to 355,000 Meralco Online account holders. We now have 19,039 paperless billing applicants. We've been able to process over PHP 1.78 billion worth of online payments from 545,000 transactions. And we resolved outages and concerns amounting to 2.05 million in 2019. We'd also like to note that we've launched a chatbot pilot in our CXE platform, and we've received a customer rating of 4.21. That's all for the operations report.

Thank you. Good afternoon. We will have the first slide. We'd like to just give an update of the San Buenaventura. This is the first supercritical in the country. This 455 megawatt, which we commissioned on schedule last September 26. This has a total project cost of PHP 54.3 billion. We were able to complete this below budget and on time. We are happy to note that we have been able to contribute 852 gigawatt hours of energy to Meralco with a plant availability of 87% as of December, which means we were able to at least address some of the power outages that happened the last quarter of 2019. This is in partnership with a company from Thailand, EGCO. By the way, I would like to also convey our condolences to the family of EGCO President, [ Pibulpairoj ] Jakgrich, who passed away over the weekend in an accident that happened in Thailand. So as I mentioned, we are hopeful that this will continue to operate and contribute as a 455-megawatt, and this is a new power plant. As far as Atimonan is concerned, we continue its site development. We have been given the authority to proceed with site preparation and will be authorized with a budget of PHP 9-plus billion to complete the site for the power plant to be ready as soon as we are able to secure a PSA. So we are just waiting for the final terms of reference for the CSP for greenfield. So we are, as mentioned in the past, we are ready. We continue to do the site development. We continue to engage with the community and the social development in Atimonan. Next slide. As far as renewable, through our subsidiary, MGreen, as we had committed 1,000 megawatt of renewables, and this should be in the form of solar, wind and possibly pump storage and biomass. But right now, we're focused on wind and solar. Unfortunately, the 2 projects that we started working on tail end of last year has encountered some logistics delivery delays because the PV panels are coming from China, okay? So the virus, this accounted -- the impact of the virus -- coronavirus has affected the delivery of this project. Of the 2 projects, one has about 20% or 30% of its panels have been delivered. Unfortunately, the remaining 70% was caught up in a plant that was affected and that was -- that stopped operations. And -- but I understand some of the factories in that area started to reopen. The panels have been completed. It's a matter of delivery. The panels from the factory to the shipyard, shipyard shipped to the Philippines. The other project is in Bulacan. We continue to do the site development. Again, because our EPC contractor there is from China, the engineers that arrived during the quarantine period had to be quarantined for 14 days. But luckily, they're out of the quarantine period and they tested negative, so they're back in the field. But the panels that are going to come from China are still to be delivered, but we still have until the middle of this year for the delivery schedule for us to be able to catch up in terms of commissioning a total of 55 megawatts AC by end of this year. So all told, these 2 projects that we have been involved in, 135 megawatt DC or 95 megawatt AC. So we are also looking at floating solar. We're just waiting for LLDA to come up with its implementing rules on the multi-use of Laguna Lake. There's only one authority that has full control over Laguna Lake, and that's Laguna Lake Development Authority. So we're looking at floating solar in Laguna Lake. And we're also looking at other land-based solar in the rest of Luzon. We're also putting together a project for wind, which will be in Rizal. So having said that, we are hopeful that we can still achieve our commitment to the shareholders of doing 1,000 to 1,200 megawatts of renewables in 5 years. That's it. I mentioned this already, the first project that we signed up, our Bulacan -- the First Bulacan project. This is a -- we have an EPC from China, SUMEC, and they're on the ground. We're supposed to schedule a commissioning our COD by December. And hopefully, it will not be pushed back too far because of the supply delivery schedule coming from China. That's all from MGen. Thank you.

Thank you to our presenters. By the way, there are 30 people online. We are now ready for your questions. So we'd give the first opportunity to our live participants. And after, you will lead our telecom participants.

Is someone ready here?

[Operator Instructions]

Is there someone on the telephone?

[Operator Instructions]

None at the moment. So we will return to our live audience. Is anyone here for any other question? Yes, please. State your name and the company you represent.

[ Amy Filager ] from SB Equities. My first question would be on the fourth quarter performance. Based on the fourth quarter numbers, core income dipped around -- by 6%. What is the main reason for the decline in core net income?

For the fourth quarter, okay? For the reported -- I'll do the reported first. For reported, this is largely due to an impairment that was recognized with respect to our investments in Pacific Life and RP Energy. For reported, I think reported is just largely because the December -- the last month was lower, lower number of days, cooler temperature. And I think it's largely just that one, lower results in December.

Were there any impairment losses or any ForEx losses recorded in the fourth quarter? Because if I'm not mistaken, by the numbers, core net income in the fourth quarter declined by around 6% compared to the reported income which had around 2% to 3% growth.

Yes. The difference in our core and reported is largely the impairment and foreign exchange losses because there was an appreciation of the peso compared with the previous year.

Okay. And then my next question, on the sales volume or your demand outlook for this year. Are you seeing any dip in demand because of the recent news on the POGO crackdown? Because I understand that commercial sales -- I mean the main driver for Commercial is on the POGO.

So far, we've seen that the takeup for our POGO leads or for POGO office spaces has still been very robust and still growing. If you look at 2019, I think the total number of available space grew substantially to over 67% of takeup. So even though BPO is still the biggest commercial lessor in the country today, POGO is slowly picking up and catching up also. So we haven't seen any dent or any slowdown. If you talk to the property developers, they're actually very bullish with regards to POGO takeup for commercial space.

All right. Sorry, and my last question would be on the schedules or any updates on the rate resetting and the timeline for this year of the 1,200-megawatt CSP project.

On the rate resetting, we're still just waiting word from the ERC on when the formal process will start. There's a lot of facts-gathering on the part of ERC. So we still don't know when they will start the formal proceedings. With respect to the 1,200-megawatt CSP, that has been a bit delayed. We'll see that maybe in the next few weeks, we can publish already and call for bids. We -- just to raise one issue with the DOE, it was just raised to us by several prospective bidders, and this has to do with the -- a replacement power in relation to the outage allowances. As some of you may know or perhaps you're not aware, the DOE has suggested to us and we have accepted a suggestion that the outage allowances will actually essentially be removed such that replacement power will become the obligation of the power supplier. The power suppliers have come back to us and said, well, nothing departs from what has been the industry practice and norm and that, that would be too much for the power suppliers to bear. And the effect of that, really, would be just to increase the prices. So they're saying, it's already signaling to us that the bid projects might increase because they are not given any respite from scheduled outages and forced outages. So we have written formally to the DOE and let them know about this concern, and we have asked direction from them on how to deal with this matter. So we're assuming that the DOE can respond quickly to that question. And once we receive the reply, we will incorporate any changes to our TOR and then publish right away.

Thank you, Mr. Espinosa. So let's look if there's someone on the line at the moment.

We do have questions from the audio side, and that question is from Jelline with JPMorgan.

I have a follow-up question on the CSP bidding. Other than the removal of the replacement power allowance, are there any material changes in the terms of preference versus the previous invitation? And then my second question relates to the financial security investments. What was the balance as of end 2019?

Mr...

Mr. Valles, please.

Atty. Valles.

Well, basically, the only major change from the last terms of reference versus the one that was approved by the DOE is on the forecast on the fuel. From the -- in the previous TOR that was approved by the DOE, we were directed to use the forecast of 2020 -- 3 years after 2024, that's 2027. So right now, they are saying that we can use the forecast of fuel prices for 2020, and that will be adjusted in accordance with their formula every year until 20 -- until the turnover to PSA. So for the LC -- for the evaluation purposes, that will be a subject of an escalation at 2% annually. So that's the only major change from the last approved terms of reference by the DOE, aside from what Mr. Espinosa has earlier mentioned.

Thank you, Atty. Valles.

Just a follow-up on that, if I may. Hello?

Atty. Valles, there's a follow-up, yes.