Manila Electric Company (MER) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and we'd like to welcome you to today's briefing. First off, we'd like to apologize for the slight delay in the start of the briefing. I am Dinbo Macaranas from the Meralco Investor Relations team, and I will be your moderator for today's conference call. Before we proceed, please be advised that this MS Teams' call is recorded. I would like to remind everyone as well to please follow the ground rules, which were sent to you beforehand. We will be presenting the full year 2021 financial and operating results of Meralco. A copy of the presentation may be downloaded from our website at www.meralco.com.ph under the Investor Relations section. We have members of Meralco's management team at this call, led by our President and CEO, Attorney Ray C. Espinosa. Other corporate officers who will be presenting are Ms. Betty C. Siy-Yap, Senior Vice President and Chief Finance Officer; Mr. Ronnie L. Aperocho, Senior Vice President and Head of Networks; Mr. Ferdinand O. Geluz, First Vice President and Chief Commercial Officer; Attorney Jose Ronald V. Valles, First Vice President and Head of Regulatory Management; Mr. Raymond B. Ravelo, First Vice President and Chief Sustainability Officer; and finally, we also have Mr. Jaime T. Azurin, President and CEO of Meralco PowerGen Corporation. The order of presentation will be as follows: we will begin with the financial highlights, followed by the operating results of the distribution utility and then highlights for Meralco PowerGen Corporation. Finally, we will wrap up the presentation with a few words from our President and CEO. As in previous briefings, we will allot time for Q&A after the presentation. At this point, I would now like to introduce our CFO, Ms. Betty C. Siy-Yap, who will present the financial results.

Good afternoon, ladies and gentlemen. I will be presenting the results for the full year December 31, 2021. On the screen is our -- is a summary of our financial highlights. We ended 2021 with consolidated core net income of PHP 24.6 billion, 13% higher than the PHP 21.7 billion last year on account of consolidated volume of 46,073 gigawatt hours and contributions from the different business units and our subsidiaries. Reported net income amounted to PHP 24.6 billion or 44% better. As you may recall, in 2020 we recognized impairment on our investment in PacificLight Power. Our core EBITDA is at PHP 44.6 billion, largely due to the higher volume contribution mentioned in the foregoing and adjustment of the deferred tax in provision, the latter being in the first quarter of 2021. Reported EBITDA is at PHP 43.4 billion. Subsidiary contribution was at PHP 1.2 billion from Power Generation and another PHP 1 billion from all other subsidiaries. Our revenues were higher by 16%, and it grew to PHP 318.5 billion. We wish to highlight that the 2021 revenue numbers include consolidation of GBPC. Electric revenues amounted to PHP 309.2 billion, of which PHP 63.4 billion pertains to distribution revenue. Generation and other pass-through revenue amounted to PHP 231.1 billion. Energy fees, which pertain to power plant operations, contributed PHP 14.8 billion to the top line. Non-electric revenues amounted to PHP 9.3 billion. Total costs and expenses were at PHP 289.2 billion, of which purchase power cost was PHP 225 billion or 10% higher versus last year. Coal and fuel plus [indiscernible] operating expenses totaled PHP 10 billion. Our OpEx was 33% higher at PHP 31.7 billion. Depreciation grew 46% to PHP 12.5 billion, of which PHP 2.4 billion relates to depreciation of Power Generation assets. Total cash and cash equivalents amounted to PHP 54.9 billion, including our long-term placement cash balances at PHP 110 billion, 14% higher compared to last year. Our borrowing totaled PHP 90.7 billion, up versus last year mainly due to the new debt and consolidation of GBPC debt. Further details, our gross revenues were at PHP 318.5 billion. And this consists largely electric revenues built by the distribution utility and RES. This includes distribution revenues of Meralco and Clark Electric. Meralco's average retail rate slightly increased by 4% to PHP 8.24 per kilowatt hour from PHP 7.96 kilowatt hour due to the higher pass-through charges. Generation and transmission charge went up by 7%. FIT-All increased by 77% due to the implementation of a higher FIT-All rate of PHP 0.0983 per kilowatt hour beginning January 2021, from the previously-billed PHP 0.0495. Meanwhile, subsidies, taxes and other charges, which accounted for 14% of the total retail price, were stable over the last 12 months. In April 2021, Meralco began consolidation of GBPC results with the acquisition of 86% interest held by MPIC and JG Summit Holdings, so energy fees that were included amounted to PHP 14.8 billion. So this is for the 9 months of 2021. For costs and expenses, this totaled PHP 289.2 billion. Purchased power cost increased 10% to PHP 225 billion from PHP 204.4 billion due to the overall higher cost of power in the unprecedented spike in global fuel price. Prices from the wholesale electricity spot market also increased due to tight supply conditions as demand continues to improve while average capacity of 3,373 megawatts in Luzon went on outage versus 2,629 in 2020. Also contributing to the higher PPC was the Malampaya gas supply restriction that began in March 2021. In addition, the plant went on shutdown in October 2021. Average Malampaya natural gas price was at $7.50 per gigajoule versus $6.65 per gigajoule in 2020. 72% of the consolidated OpEx represent labor cost and construction services. There was a 23% increase with the consolidation of GBPC OpEx plus the impact of continuing easing of quarantine restrictions, which increased business activities across all dealings. Our capital expenditures implemented totaled PHP 27.5 billion, broken down as follows: the distribution utility spent PHP 18.8 billion, covering load growth, asset renewal, new connections and support for government's BBB project and electrification. The DU also embarked into a green program to reduce emissions as EVs were deployed for its repeating program across the business sectors and business centers. Power Generation CapEx amounted to PHP 6 billion, largely representing site development of [indiscernible] and for the project -- solar project in Baras, Rizal. Previous CapEx [indiscernible] to the GPON business, and it accounted for PHP 1.8 billion of the total PHP 2.6 billion, while Bayad accounted for PHP 57 million for its digital transformation. Quarter-on-quarter, Q1 CCNI was down 11% versus last year due to lower sales volume and adjustments related to the [ create ] deal. In Q2, our CCNI was up 29% versus the same period last year due to higher sales volume and increase in contribution from most of our subsidiaries. Q3 CCNI was up last year, with MGen's contribution increasing by more than 4x. And this are due to the following: SBPL, our San Buenaventura plant, performed significantly better than 2020 and had lesser number of outage days; PLP, PacificLight, contributed [ PHP 340 million ] in this quarter alone. So if you recall, beginning July 1, the effective interest of Meralco through Meralco PowerGen in PacificLight is 58% now, with acquisitions of an additional 30% then. In Q4, CCNI was up 9% versus last year. DU revenue volume was 6% higher due to increased mobility with the easing of quarantine restrictions; higher contributions from Bayad, with higher transaction volume; and also from MIESCOR, which is generated from the margins from their telecoms project. PLP continued to contribute positively to the CCNI, offsetting the impact of other plants which had to go and shutdown with the effect of trying to [indiscernible]. Core EBITDA was higher at PHP 45.6 billion, while reported EBITDA was PHP 43.4 billion. Following are the highlights of each of the power plant operations. On March 31, GBPC became a wholly subsidiary of MGen. GBP posted PHP 512 million as standalone [indiscernible]. GBP posted PHP 512 billion core income, net of PHP 505 million interest on GBP's loan. From December 17 to 25, Cebu plants and Toledo plants were on shutdown. In 2021, SBPL continued to contribute positively to the CCNI. As mentioned, there were lower outage days. The share of MGen from GBP was PHP 1 billion. BulacanSol, the single largest solar facility in the Philippines to date, began operations in May of 2021. Meralco, through MGen, owns 60% of BulacanSol. The 2021 full year CCNI of BulacanSol amounted to PHP 26 million, net of PHP 11 million amortization of acquisition costs. In 2021, MGen acquired a 30% interest in PacificLight, bringing the combined interest to 58%. PacificLight is a turnaround story, with 78% capacity factor in 2021. The increasing demand in Singapore coupled with the restriction in piped natural gas allowed PLP to deliver more power to the [indiscernible]. Its full year operating results was SGD 59.2 million or equivalent PHP 2.2 billion. Meralco, through MGen recognized its' equivalent share beginning July of 2021. Meralco's financial position remains strong as customers continue to pay their installment balances. Our gross debt amounted to PHP 90.7 billion, which includes GBP's PHP 44.7 billion loans. Maturities of our consolidated debt are spread throughout 2036. The bulk of the maturity in 2025 pertains to the 12-year fixed rate notes issued by Meralco in 2013 with a put in 2023. Net debt is at PHP 35.8 billion. Gross debt-to-EBITDA is at 2.09x, while our net debt to EBITDA is less than 1. Total interest expense is 1.3x higher than last year on account [indiscernible] consolidation of the debtor and additional borrowings that were contracted during the year. Interest income was lower due to lower yields and lower average [indiscernible] time. MGen's debt includes -- MGen's debt consists of GBP and the BulacanSol liabilities. Our core earnings per share grew 13% to PHP 21.833 per share as of December 31, 2021, while our reported earnings per share amounted to PHP 20.849, 44% better. The Board of Directors of approved today the declaration of final cash dividend of PHP 10.226 per share to all shareholders of record as of March 30, 2022, payable on April 26, 2022. This final cash dividend plus the interim cash dividend paid in September of 2021 brings the total cash dividend out of the 2021 core earnings to PHP 15.283 per share, or a 70% payout. Using the December closing price, the yield is at 5%. That ends my report, Mr. Chair -- [indiscernible] Espinosa.

Thank you very much, Ma'am Betty. We will now move to the operating results presentation to be led by our President and CEO, Attorney Ray C. Espinosa.

Good afternoon. Our energy sales rose 6% versus last year at 46,073 gigawatt hours. Our customer count grew 4% versus last year at 7.410 million customers. Our net system input was up 5% versus last year, 48,325 gigawatt hours, and the peak demand was higher by 3% compared to last year at 7,808 megawatts. System loss was down at 5.85%. or representing 0.23% percentage points on a 12-month moving average compared to last year. SAIFI was down 6% compared to last year at 1.409x. SAIDI was significantly down by 15% compared to last year at 138,774 minutes and time to connect was down 5% versus last year at 1.74 days. The average retail rate was higher by 4% versus last year at PHP 8.24 per kilo watt hour. So for the sales [indiscernible], our consolidated sales for 2021 is [ up at ] 46,073-gigawatt hours, so this is 6% up versus 2020, and it's driven largely by Industrial -- the Industrial segment with double-digit increase, with sales already reaching prepandemic level or 2019 level. Residential continues to normalize, with modest growth of 2.6% as [indiscernible] enjoyed better mobility brought about by relatively more relaxed restrictions and a higher vaccination [ vigor ]. Commercial growth was a bit slow compared to expectations, but it still grew at 3.2% as Commercial ramp-up momentum was dampened by the acquisition of operating restrictions brought about by ECQ and MECQ, which were declared twice last year, each semester lasting 1 to 2 months each. While sales is 6% up versus 2020, we would like to highlight that 2021 sales is just around 1.7% less than the 2019 [indiscernible] level or the prepandemic level. Residential sales is actually 16% higher compared to 2019 and also [ observed ] to follow the seasonal trend or monthly trend of our 2019 already, so some sort of normalizing in terms of trend. Industrial is at a prepandemic level almost the same as 2019 level with a [ 3 ] gigawatt hours difference, while Commercial have yet to recover because it's still down 18% versus the prepandemic level. In terms of sales mix, the year-to-date sales mix for 2021 is still -- was still driven by Residential at 37%, followed by Commercial at 33%, then Industrial with 30% share of the sales. Next slide, please. In terms of our segment sales, Residential grew 3% in 2021, with continued work from home and remote learning setups, with consumptions stabilizing around 2019 seasonal monthly trend. The slowdown in Q4 [ somehow ] due to greater mobility, particularly for vaccinated individuals. For the Commercial segment, Commercial's ramp-up during the end of first half was dampened by monsoon rains and ECQ as well as MECQ restrictions in the latter part of quarter 2 and then again in quarter 3, but still managed to exceed the 2020 levels by 3%. Ramp-up in vaccination and ease in restrictions compared to 2020 drove demand and activities in retail, which grew 6%, restaurants grew 5%, and public transport grew 6%. While education segment continues to be a larger industry with more than 20% decline compared to last year. Face-to-face classes are still restricted to date. For Industrial, Industrial posted a 13% growth in 2021 compared to 2020, thus returning to the 2019 level. Semiconductor increased by 10%, delivering strong performance driven by high demand for microchips, electronic parts and devices. Construction industries had a steady growth with cement growing at 36% and steel industry growing at 16% in terms of energy sales as it saw boost from BBB and private construction projects. Essential -- goods such as food and beverage grew 3%, and plastic products also grew 15% as they operated a significantly higher capacity in 2021. Next slide, please. Well, we continue to increase our customer base at pre-pandemic rate driven by higher energization numbers, both for project-covered applications as well as ordinary service application or simple connection. The project-covered application and ordinary service application numbers are at all-time highs and grew by 59% and 39%, respectively, during the year, compared to 2020. And it's driven by the following: number one, the continued increase in energization projects from telco, retail, restaurant, real estate and construction industries showing signs of economic recovery; number two, there's less restriction in mobility comparatively now compared to 2020 and increased operations in government agencies, which allow for easier processing and issuance of energization permits; number three, a sustained increase in energized [ single ] residential horizontals or divisions as well as mix use applications. It is also worth noting that the 2021 energization numbers are even significantly better than the pre-pandemic level or 2019 level by more than 20%. Well, due to the good energization numbers, Meralco customer count grew 4% or close to almost 270,000 additional customers compared to the same period last year. And it now stands at 7.424 million customers, whereas Residential remains to have the highest share at 92% or close to 6.9 million customers. Well, that is the customer report, and I now turn you over to my colleague Ronnie for the Networks operations report.

Thank you. Thank you, Ferdie. Good afternoon to everyone. Our consolidated net system input or NSI for the year was up by 5% because of the recovery of all segments, led by the Industrial group, which grew by 13%. In terms of sourcing, 52% of our input was supplied by IPPs and old PSAs, 23% by new PSAs, 16% by other RESs, 8% from WESM and 1% from our special contracts. [ Over to ] fuel mix, 35% from coal, 34% from natural gas, 27% from multi-fuel, 4% from liquid fuel and only 1% from solar. Next slide please. The peak demand for the year was 7,808 megawatts, which was registered last May 27. This was 2.5% higher than 2020's peak of 7,614 megawatts, which was registered March 10, 2021, prior to the ECQ. Peak demand for Luzon was 11,640 megawatts, which was registered last May 28. This was 4.8% higher than 2020's peak of 11,103 megawatts, which was recorded March 9 also prior to the ECQ. Peak demand for Meralco is expected to reach the 8,000 megawatt level by May this year, while Luzon's peak is expected to reach 12,300 megawatts point also in May this year. For system loss -- next slide, please. Our 12-month moving average system loss for 2021 at 5.85% was lower by 0.2 percentage points. This was driven by the improved sales mix towards Commercial and Industrial segments, numerous system loss management initiatives and by the company-wide push to bring down the volume of unbilled checks. Please note that it is already the 14th consecutive year where our system loss performance is lower than the regulatory cap. The 5.85% system loss in 2021 resulted in PHP 3.5 billion or PHP 8 per kilowatt hour in customer savings. Dating back from 2008 to 2021, accumulated customer savings already amounted to PHP 51.5 billion, which can be translated to PHP 10 per kilowatt hour in customer savings. Aside from this, customers also benefited from PHP 9.6 billion of generation charge discount from [indiscernible] recoveries. This is around PHP 2 per kilowatt hour total discount on customer bills from 2005 to 2021. For our S-Factor and GSL performance, all of our key networks and customer service indicators are well within the rewards levels from the 3RP baseline targets and are all better than last year's performance levels. Total SAIFI improved by 6%. Total SAIDI improved by 15%, and CAIDI also improved by 9%. These numbers reflected the focus and the commitment of our people to keep the lights on during the pandemic. Given our customer service metrics, we achieved significant improvements. Average time to process applications improved by 24%, average time to connect also grew by 5%, and call center performance also improved by 17%. For GSL monitoring, there were no violations for GSL 1 and GSL 2. While the 9 violations for GSL 3 and 19,513 days' delay for GSL4 are way below the limits. For CapEx, our -- next slide, please. Our utilization stood at 86% of our PHP 19 billion budget. Biggest share for -- biggest share are new connections at PHP 6.16 billion, driven by all-time high, [ 232,000 ] energization of ordinary service applications and 7,000 energization of project-covered applications. Next was load growth at PHP 4.83 billion. For asset renewals, we spent PHP 4 billion for storm hardening, meter and substation equipment replacement and pole relocation works. For our pole relocation work, DPWH road widening projects, we exceeded our 2,000 pole relocation target, and this was an all-time high for Meralco. Most of these are in Cavite, Laguna, Batangas, Rizal and Quezon and [indiscernible]. We also strongly supported the BBB program of the government as we were able to relocate 1,480 poles or 83% of 1,780 poles. During the last quarter of 2021, we completed 6 major projects that addressed capacity, flexibility and power reliability requirements with a total budget of PHP 1.5 billion. These projects are the uprating of Saog-Veinte Reales-Malinta 115 kV line, which was completed last October 24. This is part of RY 2021 with a CapEx budget of PHP 88.3 million. Next was the expansion of Amadeo 230-115 kV delivery point substation with installation of the second 300 MVA power transformer bank. This was commissioned last October 28. It is part of our RY 2020 CapEx with a budget of PHP 208 million. Next was the expansion of Cainta substation through the installation of the new -- of the third 83 MVA power transformer bank. This was completed last October 29, part of our RY 2021 CapEx with a budget of PHP 239 million. And we also improved reliability of our Kamuning substation 115 kV bus from single-bus to double-bus configuration. This was completed last December 17. It's part of our RY 2022 CapEx with a budget of PHP 85 million. Last December 22, we also commissioned another 83 MVA power transformer bank at Silang substation. This is part of our RY 2021 CapEx with a budget of PHP 250 million. And the development of our Binangonan 115 kV - 34.5 kV substation, which was commissioned last December 27, part of our RY 2021 CapEx with a budget of PHP 666 million. And finally, Meralco has remained true to its corporate values [indiscernible] by extending once again a helping hand in distributing utilities when electric operatives were badly affected by Super Typhoon Odette last December. Most of our crews had to spend Christmas and New Year away from their respective families during the restoration assistance. In Cebu, we deployed 86 personnel and 21 vehicles from December 21 to January 22 to help Visayan Electric Company or VECO and Mactan Electric Company or MECO serving Cebu City, Talisay, Lapu-Lapu and Cordova. We also deployed 58 personnel and 13 vehicles in Bohol from December 23 to January 22 to assist Bohol Light Company, Inc. or BLCI and Bohol II Electric Cooperative or BOHECO II. We also lent 30 gensets to the office of Governor Arthur Yap to power up water filling stations. Finally, we also sent 47 personnel and 11 vehicles as far as Surigao City and Siargao Island in Mindanao from January 23 up to February 11 to help SURNECO or Surigao del Norte Electric Cooperative and Siargao Electric Cooperative or SIARELCO. Meralco has received numerous citations and appreciations from our affected [indiscernible] in these areas for helping them in the recovery efforts. Thank you. And I'm now turning you over to Mr. Azurin for the power generator results.

Ronnie, Ronald.

Sorry. Mr. Ronald Valles for regulatory reports, sorry.

Thank you, Ronnie. Now on to our regulatory update. The average retail rate for 2021 increased by 4% compared to 2020 due to higher generation, system loss, distribution and FIT-All charges. The average generation charge for 2021 registered a 10% increase due to higher fuel costs and higher WESM charges. Higher fuel costs was due to higher Malampaya and coal prices and use of liquid fuel by First Gas plants, continuing Malampaya gas restrictions since March 2021, and the facility shutdown in October 2021 [indiscernible] to ensure uninterrupted supply. Average retail rate for January to December 2021 billing, plus PHP 5.01 per kilowatt hour versus PHP 3.45 for 2020. Prices increased due to tight supply conditions, especially during summer months. Due to lower ancillary service charge, power delivery service charge and improved system loss, our average transmission charge registered a decrease of 10.3%. There was a 1.6% increase in average system loss charge due to higher generation cost. The distribution rate. The distribution rate move-up for 2021 is at [ 1.4% ]. Without the distribution rate move-up, the 2021 year-to-date average distribution rate as of December 2021 is PHP 1.5778 per kilowatt hour compared to the PHP 1.5562 per kilowatt hour in 2020. This is due to the shift in sales shares towards the residential sector, which had higher [indiscernible] rates among the customer classes. Distribution rate move-up plan was implemented only March 2021 onwards. Subsidies, taxes and universal charge decreased by 0.7% due to lower taxes, following the implementation of the distribution rate move-up, decreases in transmission and subsidies charge and non-recovery of local franchise tax for certain months. FIT-All increased significantly by 76.8% due to the implementation of higher FIT-All rate at PHP 0.0983 per kilowatt hour from PHP 0.0495 starting January 2021. Collection of FIT-All was continuous throughout the year 2021 as compared with 2-month suspension for last year, April and May 2020, in consideration of COVID-19 situation. For the CSP update. For the 170-megawatt covering contract period from February 26, 2022, to July 15, 2022. Last December 23, 2021, the invitation to bid with terms of reference was approved by the Department of Energy for CSP of 170 megawatt net peaking capacity, and it was published in The Philippine Star and posted in DOE's CSP E-Portal. Last January 5, 2022, which is the expression of interest deadline, expressions of interest were received from 3 bidders, South Premiere Power Corporation for 170 megawatt; Therma Luzon, Inc. for 50 megawatt; and Toledo Power Company or Panay Electric -- Panay Energy Development Corporation for 50 megawatt. The bid submission and opening and evaluation of documents, which was conducted via Zoom and attended by authorized representatives from SPPC, TLI manifested in a letter to TPBAC its withdrawal from bidding process. SPPC with its total delivered headline rate of PHP 6.8198 per kilowatt hour was declared the best bid. Excluding VAT, cap on line rental, and ancillary service cost recovery, SPPC's offer was at PHP 5.7498 per kilowatt hour, 45% plant capacity factor. The notice of award was issued to SPPC upon completion of the post qualification on February 3, 2022. And on February 10, the PSA was submitted to ERC for evaluation prior to filing of the relevant application. With regard to the 850-megawatt unsolicited proposal from Terra Solar Philippines, Inc., last January 21, 2022, the DOE approved the revised invitation to bid and bid requirements and posted in CSP E-Portal. The proposed rate of Terra Solar is PHP 5.70 per kilowatt hour at 50% plant capacity factor, excluding line rental and ancillary service cost recovery. The first newspaper publication was made on January 22, 2022, and the dateline for submission of expressions of interest was set on February 2, 2022. TPBAC received expressions of interest from SMC Global Light and Power Corp. and SunAsia Energy on February 2, 2022. Both challengers are building 2,500 megawatt solar and 4,000 megawatt battery energy storage. On February 10, upon a bidder's request during the pre-bid conference, deadline for submission of additional comments was extended to February 21. So the bid submission and opening of pre-qualification documents date also moved from March 7 to March 14, 2022. On the CSP for the 180 megawatt covering the contract period from February 26, 2022, to July 25, 2022. So we -- Meralco submitted to the DOE for its review and approval a proposed TOR for procurement through CSP of 180 megawatts baseload capacity covered by agreements affected by the continuing Malampaya gas supply restrictions. So last February 22, Meralco received DOE's reply on the proposed TOR and had stated that the DOE expects Meralco's compliance with these comments, after which Meralco is enjoined to proceed with the publication of the invitation [indiscernible]. So the TOR and the schedule of CSP activities are now being finalized by the Meralco [indiscernible]. So on other regulatory updates, particularly with respect to the amendments to the Public Service Act. So [indiscernible] Committee of the Congress has approved the amendments to the Public Service Act, and those relating to power are the [indiscernible] provisions on Section 16. On the removal of the requirement for depreciation fund for public utilities, which was proposed for Meralco and Pepoa. [indiscernible] approved this, but with modification and inserted the phrase, "as may be required by the proper administration agency," which grants ERC the flexibility to make depreciation fund optional. So at present, the ERC does not require DUs to put up depreciation fund under its existing regulation. Also [indiscernible] recommended the removal for the need for prior regulatory approval to secure long-term debt and issue shares of stock as well as the prior regulatory approval for encumbrance for assets not part of the RAB, Regulatory Asset Base. [indiscernible] approved all these recommendations. And then Meralco and Pepoa recommended also to ensure timely approval of CapEx projects and remove requirement to secure approval for transactions involving non-regulated assets. [indiscernible] has approved the following: Allowing service provider to file approval of emergency CapEx within 60 days from implementation of project, and the administrative agency may issue regulations prescribing shorter period for approval of emergency CapEx and the need to secure prior approval only applies to assets which form part of RAB. So for those that are not RAB, no need for regulatory approval. Finally, on Section 16 C and Section 21 of the Public Service Act are the recommendations of Meralco and Pepoa. Leave determination of appropriate rate-setting methodology to the regulatory agency and for the fines and penalties, charter of administrative agency should prevail. Both of these recommendations were adopted by the [indiscernible]. And then on the schedule for the filing of the 5RP application of Meralco and other deals belonging to Group A. Last December 2021, [indiscernible] released the PBR rules that shows the PBR filing schedules. The Group A DUs, namely [indiscernible], Meralco and [indiscernible] are directed to [indiscernible] reset applications by March 11. This is a result of a request for 30-day extension from the ERC. After revising, the ERC has set the public hearings from March to May, releasing its initial report by the end of May and a final determination of approved revenue requirement and prices will be by July. By August, separate rate translation process will start and [indiscernible]. However, the coverage of the 5RP will start by July 2022 despite inherent delays. In the case of Meralco, our recent application will include Meralco's forecast of customer growth, CapEx, OpEx and other taxes, inflation and ForEx. This also includes proposals for performance targets, 5RP opening up and rate of return. And based on these inputs, the annual revenue requirement and the maximum average price will be calculated. Meralco will be proposing the WACC that will be determined by international experts based on certain parameters that are internationally accepted and aligned with local jurisprudence and practices. A subsequent date translation filing in August 2022, we'll allocate them up distribution, supply and metering charges per customer class. That ends my report. We'll move over now to Mr. Jaime Azurin.

Thanks. By the way, we would like to report that Philippines led by Meralco and GCP, Department of Energy and NTC and TransCo successfully hosted last November the CEPSI 2021: The Energy Digicon of Asia Pacific. CEPSI or the Conference of the Electricity Power Supply Industry is the largest biennial conference of government and business leaders, experts and professionals in power and energy industry in East Asia and the Pacific. It was staged on fully virtual platform. This is the first for CEPSI, and the conference focused on 5S agenda, which are sustainability, social inclusiveness, smart, synergies and scalability. It was participated in by 2,970 total delegates and 258 companies from 25 countries, and there were 319 speakers and presenters and 327 plenary and concurrent sessions. At the end of the conference, our President, Ray Espinosa, and Depart of Energy [indiscernible] the People's Republic of China for 2023. Thank you. And I'm now turning you over to Raymond Ravelo, for the report on sustainability. Thank you.

Thank you, Ronnie. Good afternoon, ladies and gentlemen. Good afternoon, President RCE and colleagues in Meralco. Today, I will be presenting some updates [indiscernible] sustainability front. First, in November of 2021, our most recent sustainability report, our 2020 SR entitled Live Life was internationally recognized with a Gold Rank by the Asia Sustainability Reporting Rating or ASRRAT in their 2021 edition. This is actually the second international award won by our 2020 SR following the Silver we won of the 2021 International Business Awards in the United Kingdom. In this edition of ASRRAT, we were the highest ranked Filipino SR. And this is actually the second straight ASRRAT Gold Rank by Meralco. ASRRAT is a rating system initiated by the National Center for Sustainability Reporting based out of Jakarta, Indonesia. It is focused on assessing sustainability defaults across Asia. And they judge these SRs based on alignment with and support of the United Nations' Sustainable Development Goals, transparency of greenhouse gas disclosures and compliance with Global Reporting Initiative, or GRI, standards. Next, in support of our efforts to reduce our company emissions, we launched in 2021, the Green Mobility Program, through which we drove in the second half of 2021 an expanded deployment of electric vehicles in our sector offices and in our business centers. In particular, we rolled out or we began to roll out 69 electric vehicles in our 10 sector offices and in our 24 business centers, comprised of e-pickups, e-vans, e-cars and e-motorcycles. This brings our total, once completed and deployed, to 128 total EVs, including 59 eMotorcycles deployed in the first quarter also of 2021. To support the charging requirements of these EVs, we are in the process of installing 5 station chargers or class chargers in strategically located facilities in our sector offices. This actually brings our electrification of our Metro Manila business center vehicle fleet to 100% and overall, to a 6% electrification of our distribution utility fleet on route to achieving 25% electrification of our DU fleet by 2030. In the fourth quarter of last year, Meralco also became part of the FTSE4Good or Financial Times Stock Exchange For Good Emerging Markets and ASEAN 5 indices. The FTSE4Good Index series was launched in 2001 by FTSE Russell and is a market-leading ESG index, which ESG -- which investors use to invest in companies demonstrating outstanding sustainability practices. The index also supports investors in aligning their portfolios with their ESG values and advocacies. Meralco becomes only the second Philippine power company to be included in the FTSE4Good index series. And the key criteria for inclusion is overall ESG rating of 2.9 or higher. At the bottom of the screen, you see the rating of Meralco from an overall standpoint and broken down by ES&G and we see that it's ahead of Philippine and global energy sector averages as of the end of the first half of 2021. Finally, in the second half of last year, we also saw improvements in Meralco's ESG ratings across 3 bodies, FTSE, Sustainalytics and MSCI. FTSE Russell rates over 7,200 companies according to the company's exposure to and management of ESG issues. So in the second half of 2021, we upped that rating from 3 in the first half to 3.2 in the second half. This rating ranks Meralco higher than Philippine and energy sector averages with strong performance noted in the areas of risk management, labor standards and corporate governance. Sustainalytics, which rates over 12,000 companies on financially material ESG issues affecting long-term business performance, we received an improvement in the second half of 31.4 following a significant improvement in the first half of 31.5, bringing us to the lower runs of high risk. Meralco, as a result of this rating, is now included in the top 38% of the global energy sector with strong performance in human capital, biodiversity and land views and customer service. Finally, MSCI, which rates over 8,500 companies in general and industry-specific ESG issues affecting its core business, while we maintain our BB rating, our weighted average ESG rating significantly improved in 2021 from 4.6 in both 2019 and 2020 to 5.2 last year. This puts us in line with the global energy sector average with strong performance in emissions and waste as well as in community relations. That ends the sustainability report. I now turn over the virtual floor to Mr. Jimmy Azurin for the power generation update. Thank you.

Yes. Thank you, Raymond. The year 2021 marked Meralco PowerGen's full acquisition of GBP in March to promote scale and bring greater synergies and operational efficiencies in serving the growing need for sustainable energy solutions. In May, MGen's first renewable energy plant, BulacanSol declared commercial operations, not long after the construction of the group's second solar plant started. This is in line with the company's goal to build 1,500 megawatts in renewable energy capacity in 7 years under One Meralco Group's sustainability agenda. MGen also increased its ownership in PacificLight, a Singapore-based energy power plant, to 58% effective July 1. In September, we have streamlined our operations and integrated Meralco PowerGen and GBP under one functional organization. Our of our employees will report starting this week to our unified headquarters in Ortigas while formal integration is underway as we complete regulatory requirements. We doubled our gross capacity after consolidating the power generation assets into a unified platform with MGen's 1,355 megawatt capacity and Global Power's 1,091 megawatt facilities, we have effectively ramped up our gross capacity 2,446 megawatts with 1,532-megawatt is attributable to MGen. In 2021, we were able to deliver 13,691 gigawatt hours, a 6% increase from last year's energy sales. This was driven by the improved average plant availability of San Buenaventura or SBPL to 89.48% in 2021 from 82.39% in 2020. PacificLight also improved its capacity factor to 78% in 2021 from 67% during the previous year. For BulacanSol, it has delivered 67 gigawatt hours of solar energy since May with 89% average plant availability. We look forward to increasing our renewable energy generation in the coming years using solar, energy storage and wind, among others. Next to BulacanSol, we are constructing a 75-megawatt AC plant in Baras, Rizal, which is expected to commence operation by quarter 3 of this year. Another solar plant in Ilocos Norte with a 68-megawatt AC capacity is expected to commence operation by quarter 1 2023. For the solar project in Isabela, EPC negotiations are in progress. You can expect 2 global energy projects in the coming years as we endeavor to provide leaner and sustainable energy supply to the market. Thank you.

Thank you, sirs, for the presentation. We will now open the floor for questions. For analysts and investors, for those of you who would like to ask a question, we have 2 options to do so. First, you may raise your virtual hand and please wait for me to recognize you before you speak. Secondly, you may also type your questions in the chat box, and I will be reading them for our executives. In both instances, kindly state your name and the company you represent before asking your question. Please also state the name of the executive, you would like to address the question to. I believe Jelline Gaza from JPMorgan has already sent her first question to the chat box. She asks -- she says, thank you for the briefing. Would appreciate additional color on the following. Number one, PowerGen, could you please provide the CCNI breakdown for the following assets, PacificLight, SBPL and GBPC? What drove the apparent net loss in GBPC in the fourth quarter of 2021? Number two, for PacificLight, what led to the strong turnaround of PacificLight? Is this sustainable going into 2022? Were there one-offs baked into the PHP 2.2 billion stand-alone net income?

Jelline, to your question, on the numbers that I had reported earlier are on a full year basis. So as mentioned, with respect to PLP, our acquisition was effective July 1. So the number that I have is full year, so we only have half year of that and 58%. So in terms of the contribution, PLP into the MGen royalty books is about PHP 1.4 billion. And then San Buenaventura provided another PHP 1 billion or so. BulacanSol is less than PHP 30 million. GBP on the operations side was actually positive PHP 146 million but then it had other costs that were charged. So for example, with respect to the acquisition, there's a purchase price allocation, so on the consolidated level, at the MGen level, there's an amortization of purchase price adjustment to the extent that it's attributable to fixed assets that it forms part of depreciation. And then any difference would be the amount that is attributable to the intangible. So there's also an amortization to that one. At the MGen level, there are overhead expenses that were incurred, and there's also interest on the bridge loan that was incurred. Separately, with the additional equity that we put into each of the project entities, we paid accumulated PSP of more than PHP 200 million during the year. And then your second question, what drove the apparent net loss in GBP, well, first, we were affected by Typhoon Odette. So because the transmission lines were down, they couldn't yield the power. And then separately, SBPL was actually on outage, maintenance outage. And this is actually planned, scheduled outage. For PacificLight, although I must say that the contribution of PLP did cover a portion of the losses. What led to the strong turnaround of PacificLight? It's, as mentioned earlier, the turnaround, the economy in Singapore has opened up earlier, and the demand has increased. And the restrictions in pipe natural gas allowed PLP to run more though. So -- and there was a better price at their spot market also. Is it sustainable? At least well, the projection is this should be good up to 2022, except that they had downtime in January mainly for inspection for the gas plant.

The next question comes from Karisa Magpayo of Macquarie. How did volumes trend in January and February 2022? Are you seeing an acceleration in volume growth? And if so, for which customer segments?

Okay. I'll first of all answer that one. So we have the actual numbers for January. And for January, we saw volume increasing by 2% after the end of January of 3,506 gigawatt hours, so 2% better than last year. And it's actually driven by -- well, commercial grew 2% as well as industrial, which grew 5%. But our residential, some sort of declined 1% and largely due to pressure and some sort of normalization. So for February, we don't have the per segment breakdown yet, but the indications are we'll be ending up February with a growth of -- with a sales of more than 3,700 gigawatt hours or growth of more than 6%. So if you combine January and February, to date, we'll be growing a little more than 4%.

The third question comes from Gio dela Rosa of Regis. Can you provide us an update on the regulatory process for Meralco's lapsed period?

Gio, this is Atty. Valles. For the lapse period, there is no specific process laid down in the 5RP reset rules that was formulated recently by ERC. But we have advocated very strongly with the ERC updates aiming that to upgrade maintaining so that includes the process of setting rates in the 5RP. So if the ERC will sustain our position together with the other industry players, then we expect ERC to just come up with a ruling or resolution resolving the issue on the lapsed period before the filing of the 5RP reset.

Another question just came in from Bob Santiago of UBS. Thanks for the presentation and have 3 questions. Number one, what is the volume growth expectation for 2022? Number two, I saw that tax is very low in the fourth quarter of 2021. Can you explain why? Number three, will there be any impact of high coal and natural gas price for MGen in 2022? Volume growth expectation for 2022?

Well, for 2022, we were actually targeting net growth of 5% to 6%. Well, that's based on certain assumptions that. Well, there will be a continuous -- this GCQ to MGCQ. So again, there are some factors that may affect the sales, volume assumptions, which is really how the COVID will pan out. But if things continues to be on, for example, like alert levels 1 or 2, we're pretty much hoping that we'll hit the numbers that we're projecting.

For the second question regarding tax. I saw the tax is very low in the fourth quarter of '21. Can you explain why?

Okay. So for income tax, number one, the overall rate has actually come down for the year compared with last year. So we used to be 30%. Now it's 25%. And then we've adopted optional standard deductions, which means we'll take 40% deduction out of our -- the gap between income and direct costs. Usually, we do a true up our final calculation in the fourth quarter. So -- and we usually review our deferred tax asset components at year-end to finalize, so the adjustments came in. But overall, you should see that the effective tax rate is simply because of the effect of the income tax rate coming down from 30% to 25%.

So the third question, will there be any impact of high coal and natural gas price for MGen in 2022?

Well, now for MGen, most -- well, almost 90% of our contracts are pass-through fuel costs. So it's not us bearing the cost, but it will be passed on to the consumers. About 10% that this is covered by either contestable customers or WESM. WESM, as you know, also adjust based on the prices of fuel. For the natural gas in Singapore, our retail contracts are hedged, okay, against fluctuations in the gas prices in foreign exchange. And the spot market, for the balance of our contracts in spot market, this is adjusted on a day-to-day basis depending on flat gas prices in the market.

The next question comes from Eunice Dolatre of SB Equities. Any indications for sales, volumes, especially for residential and commercial, with residential, despite the 4% growth in customer count, only grew approximately 3% in volumes. Are you already seeing commercial volumes back to 2019 level this year? If you can share how volumes fare also in the first 2 months?

Well, we sure hope that commercial volumes will bounce back to 2019 level because as of 2021, our commercial volume for the 2020 full year is actually still 18% lower than 2019. But it is a good observation that residential per capita sales is actually going down with greater mobility because there are certain interdependency between commercial and residential sales though. As commercial operations opens up, we -- fewer people stay at home and actually some sort of depressed residential sales along -- at least per capita sales for household sales among all other factors. Well, we see industrial is actually -- actually industrial is actually growing steadily, at least consistently growing in the past 2 years. And I think up to January, we see industrial still growing 5%. So the next question is how did volume fare in the first 2 months. So again, January actually some sort of -- we saw January at 3,506 gigawatt hours, 2% better compared to January 2021. On a per segment, January is -- residential is actually contracted by 1%. Commercial grew 2%, while industrial grew 5%. On account of commercial growth this slower than expected on account of the Omicron variant. For February, we actually have an estimate -- because we're still on the last day of February, the estimate of our sales is at north of 3,700 level gigawatt hours. So it's actually more than 6% increase. And January, February combined, we sort of estimate of more than 4% increase in terms of sales compared to 2021.

Eunice's second question is, I believe this relates to the PHP 13.9 billion refund. How much was the readily funded as of end of 2021? And how much are we still expecting for the refund to be reflected this year?

Okay. For the PHP 13.9 billion, wait, I'm trying to get the number. But we -- I think we have already refunded close to PHP 6 billion, and we expect to refund the balance through December. And then to the additional portion that is expected, we think it's about PHP 5 billion. We estimate it to be about PHP 5 billion.

The next question comes from Gio dela Rosa. Can you give us an update on Atimonan?

Gio, Atimonan site development work is still continuing. We are just waiting for the next round of CSP of Meralco for its 2026 requirement, of which Atimonan will be joining the CSP process.

The next question comes from Jelline Gaza. What drove the 30% quarter-on-quarter growth in fourth quarter 2021 OpEx?

Jelline, can I get back to you on that one? Wait, let me just check.

Sure, Ms. Betty.

Okay. So this is comparing last year and this year, right? It's the consolidation of GBP?

Actually, Ms. Betty, quarter-on-quarter for the OpEx.

Were you asking third quarter versus fourth quarter?

Third and fourth.

Yes, please.

Jelline, I'll get back. Give me a second.

In the meantime, let's move to the next question from Gio dela Rosa. What was the level of Meralco's long-term financial investments as of the end of 2021?

The total cash and cash investments is PHP 110 billion against our cash balance of PHP 54 billion, PHP 55 billion. So the difference would be the long-term placement, yes. So about PHP 45 billion.

From Bob Santiago of UBS, can you let us know the CSP plan in 2022 and 2023? Would it change with the proposal from solar tariff?

This is Atty. Valles again. With the ASPP, as published in the portal of the Department of Energy, after the Terra solar, we have upcoming 500-megawatt in merit for RE as -- in the next round of our CSP together with the 1,000-megawatt for baseload that will be COD in 2026. And then there's also this 300-megawatt up for CSP baseload with renewable energy, which is scheduled for COD in 2024.

Any more questions from the analysts and investors? If there are none, RCE, may I request that you give Attorney Espinosa. Okay. Thank you very much, everyone, for joining the call. And I'd like to inform you that an audio recording of this teleconference call is available at our website under the Investor Relations portion in www.meralco.com.ph. Thank you very much again for attending, and we look forward to seeing you at the first quarter 2022 results meeting. Thank you, everyone.