Manila Electric Company (MER) Earnings Call Transcript & Summary

Good afternoon, investors and analysts, and welcome to today's briefing. I'm Dinbo Macaranas from the Meralco Investor Relations team, and I will be moderating today's conference call. Before we proceed any further, please be advised that this teleconference call is recorded. Kindly follow the ground rules, which were sent to you beforehand. We will be presenting the full year 2022 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 in this call, led by our President and CEO, Attorney Ray C. Espinosa. Other corporate officers who will be presenting are the following: Ms. Betty C. Siy-Yap, Senior Vice President and Chief Financial 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. We also have Mr. Raymond B. Ravelo, First Vice President and Chief Sustainability Officer; as well as Mr. Jaime T. Azurin, President and CEO of Meralco PowerGen Corporation. We will begin the presentation with the financial highlights, followed by the operating results of Meralco's new business, and then finally, we'll have Meralco PowerGen Corporation. After all the presentations are done, we will allow time for Q&A. At this point, I would now like introduce, our CFO, Ms. Betty C. Siy-Yap, who will present the financial results.

We will begin. I will be presenting the results for the full year ended December 31, 2022. Up on the screen, we're showing the 2022 financial highlights. Our consolidated core net income was at PHP 27.105 billion, 10% better than 2021. Reported net income with core EBITDA were also higher at PHP 28.4 billion and PHP 51.2 billion, respectively. Our reported net income grew 21%, while core EBITDA grew 7%. And these results were driven by our power generation investments in PacificLight Power in Singapore and San Buenaventura. PacificLight -- the net debt from the higher margin [indiscernible] margin, and while SBPL continued to deliver on its 20-year PSA with Meralco. Core DU accounted for 76% of CCNI and grew 6% in [ volume ]. With respect to gross revenues, our distribution revenue amounted to PHP [indiscernible] or representing 48% of total. This was the result of the -- with the effect of the asset true-up refund, which was implemented beginning May 2021. In November of 2022, we completed that asset true-up refund. Generation, transmission and other customer charges was at PHP 325.7 billion or 76% of the total. These pass-through charges grew 41% as a result of the increase in global price of cable, higher swap prices as well as the depreciation of the peso versus the U.S. dollar. Energy fees was at PHP 29.1 billion, representing fees collected largely by Global Business Power. Nonelectric revenues increased by 35% to PHP 12.6 billion, with a higher work accomplishments from MIESCOR, revenues recognized by MIDC for their tower contract and net increase in [indiscernible] that they use. And total costs and expenses amounted to PHP 406.3 billion or 79% -- and 79% was due to purchase power costs. With respect to our CapEx, our total spend in 2022 was PHP 42.6 billion, and this pertains largely to the requirements of the network, distribution networks, acquisition of the telecoms tower, development costs of power generation and the fiber network facilities build-out [indiscernible] including -- plus digitalization efforts with our other subsidiaries. Our cash and cash equivalent amounted to PHP 56.4 billion, while total debt was at PHP 103.8 billion. The next slide shows our consolidated revenues, which totaled PHP 426.5 billion, 34% higher than 2021. Generation, transmission and other pass-through charges were [ 76% ] in total. Distribution was [ 48% ] of the total top line. With respect to electric revenues, which is actually 97% the total, generation, transmission and other charges grew 21%. Generation and account [indiscernible] spike in prices. Distribution revenues amounted to PHP 59.1 billion, mainly driven by higher volumes. Energy fees was at PHP 29.1 billion. This grew 97% year-on-year. So that in 2022, we have full year GBPC number compared to 2021, which has only 9 months because we began consolidation in April of 2021. Nonelectric revenues was at -- grew 35%. For 2022, costs and expenses was PHP 406.3 billion. Purchase power was 79%. The growth in purchase power expansion is due to higher [ repayment ] costs. And WESM prices actually [ bought ] -- was higher mainly due to the tighter supply condition. The average WESM price went up to PHP 7.73 per kilowatt hour in 2022 from an average of PHP 4.99 per kilowatt hour in 2021. The Luzon grid was placed under yellow alert for 10 days and 2 days of red alert in 2022 compared with 4 days of yellow alert and 3 days of red alert in 2021. The secondary price cap was triggered 25.6% of the time versus 4.8% in the comparative period. The Luzon peak demand stood at 12,113 megawatts and it was in May of 2022 compared with 11,640 megawatts. The Malampaya natural gas averaged $10.18 per gigajoule in 2022 versus $7.50 per gigajoule in 2021. Newcastle index averaged $360.17 per metric ton in 2022 versus $137 per metric ton in 2021. The peso depreciated 11% to PHP 54.48 versus PHP 49.25 in 2021. The local currency recorded its all-time low closing of PHP 59 [ 4 times ] in October 2022. On OpEx, this grew 18%, with the combined effect of the following: higher contracted services in relation to bill statement activities, higher software maintenance expense related to systems application for [indiscernible] and RES customers, higher taxes and permits related to payment of RPP and business permits for new substations, lastly, ERC regulatory and supervision fees. Oil and fuel and power plant O&M combined total of PHP 24.5 billion [ ended ] 47% higher compared with 2021. Depreciation and amortization grew 28% to PHP 16 billion, with the completed CapEx of the distribution utility, including the towers asset and also GBP's depreciation, which was at PHP 3 billion for this year. Other expenses amounted to PHP 5.8 billion, mainly from provision for over recoveries. With respect to the CapEx, the DU CapEx share was 53% with the completion of major networks' project, which includes development of several substation and upgrading of certain facilities. Power generation CapEx accounted for 14%, largely relating to the Baras solar project and site development of Atimonan One Energy. Subsidiaries CapEx, which represents [ 30% ], largely pertains to MIDC's acquisition of the 860 towers from Globe and the completed 19 BTS or build-to-suit towers [ for Smart ]. Our consolidated core net income grew 10% to PHP 27.1 billion in 2022, while our reported net income was at PHP 28.4 billion, up 21%. The quarter-on-quarter [indiscernible] for the first quarter, which will highlight that first quarter's CCNI was PHP 5.6 billion, 10% better than the first quarter in 2021. This was driven largely by the distribution utility, with an increase in sales volume. Our generation also grew by PHP 1.1 billion, with contributions from PacificLight, San Buenaventura and BulacanSol. Reported net income was higher by 28% compared to 2021 as 2021 included the effect of the [indiscernible]. In Q2, our CCNI was at PHP 7.5 billion, higher by 19% versus Q4 2021. Despite the increase in volume, the new contribution was flat, and this was largely the effect of the asset true-up, which we've begun to implement. Power generation income continues to grow, and our [ increase ] in reported net income was at 35%, and this is mainly due to the ForEx adjustments that were reported. In 2021, we have ForEx loss. In 2022, we have ForEx gain. In the third quarter, CCNI was at PHP [ 6.5 billion ], lower by 2.2% versus Q3. Despite the 7% increase in volume, the DU contribution was lower. And similar to Q2, it was the effect of the refund. Power generation income was higher by PHP 1.3 billion. [indiscernible] same drivers. In Q4, distribution was at PHP 5.6 billion, higher by PHP 87 million or 2%, and this is driven by the 6% increase in volume. The increase was partly offset by the asset true-up refund [ implement ]. Our power generation income was higher by PHP 1.8 billion, and this remains to be the contribution of PLP. And overall, last year -- in 2021, the GBP plants were affected by Typhoon Odette. Overall, CCNI has 76% contribution from DU, 20% from power generation, 3% from subsidiaries and 1% from our RES. The next slide shows the contribution of the different power generation [ units ]. The first is PacificLight. Their total CCNI was SGD 305.4 million or PHP 12.1 billion, a significant increase from the SGD 59 million or PHP 2.2 billion achieved in 2021. This is primarily due to higher margins in the spot market, which averaged SGD 168.9 per megawatt hour as well as the 2% growth in demand. PacificLight's 800-megawatt LNG facility in Jurong Island, Singapore delivered a total of 5,619 gigawatt hours of energy in 2022. Our combined direct and indirect interest is 58%. San Buenaventura's 455-megawatt supercritical coal-fired plant in Mauban, Quezon underwent 29.55 days of scheduled and 15.28 days of unscheduled outage for the -- related to its maintenance shutdown. It delivered a total of 2,765 megawatt hours of energy with average plant availability at 87.9%. It's 100% CCNI or consolidated -- or net income is at PHP 3.5 billion. Global Business Power incurred losses as a result of impact of Typhoon Odette at the start of 2022, combined effect of higher fuel costs with the implementation of fixed rate contracts of its RES and the 70-megawatt PSA with Meralco and the expiration of its contract with [indiscernible]. GBP delivered a total of 4,927 gigawatt hours of energy in 2022. On MIDC. On August 11, MIDC signed an agreement with Globe to acquire 2,180 telecom towers and related passive infrastructure for a total consideration of PHP 26.2 billion, include -- plus the master list agreement, under which Globe will be the anchor tenant of the towers for an initial period of 15 years. In addition, Globe has commissioned MIDC to construct 900 additional BTS towers over the next 4 years, on which Globe shall also be the anchor tenant. On October 13, 2022, MIDC and Globe achieved first closing with a handover of 700-watt towers. On December 16, MIDC closed another 159 towers. Our consolidated interest-bearing debt stood at PHP 103.8 billion. The debt of our subsidiaries account for 52% of this total debt. Of this amount, PHP 35 billion will be maturing within 1 year. Cash and cash equivalent amounted to PHP 56.4 billion, [indiscernible] investments totaling PHP 18 billion. Net debt at the end of 2022 was PHP 29.4 billion, with net debt to EBITDA at 0.57x. The cash balance at the end of 2022 is net of refunds implemented. So we were refunding distribution rate true-ups 1 to 4. In 2022 alone, we refunded a total of PHP 32.5 billion out of a total PHP 38.8 billion, which has already been refunded. The total of [ ordered ] refund by ERC is PHP 48.3 billion. Our debts are spread through 2037, PHP 11 billion of which are due in 2025. This includes the PHP 7 billion 12-year fixed rate note that Meralco issued back in 2013. This chart shows our earnings per share and dividend. Today, the Board of Directors approved the declaration of cash dividends of PHP 11.028 per share to all shareholders of record as of March 29, 2023, payable on April 26, 2023. This brings total dividend declared out of the 2022 CCNI to PHP 16.834 per share or equivalent to 70% of the core EPS. Our dividend yield calculated using the December 31, 2022, closing price is at 6%. That concludes my report.

Thank you, ma'am Betty. We will now move to the operating results presentation to be led by our President and CEO, Attorney Ray C. Espinosa. He will be followed by the heads of the different business segments.

Thank you, and good afternoon to everyone. On our business drivers, energy sales stood at 48,916 gigawatt hours by end 2022, up 6% compared to 2021. At this level, we have surpassed the pre-pandemic growth levels of the past, driven largely by the delivery by the commercial sector of a 14% year-to-date growth and residential delivering [ a 2% ] year-to-date growth. For customer count, our customer count stood at 7.625 million customers, up 3% compared to last year, and this is largely due to the sustained higher energization performance in 2022 versus 2021. Net system input stood at 51,270 gigawatt hours, up by 6% compared to the same period last year, driven largely by sustained growth in the commercial sector. Meralco peak demand stood at 8.11 gigawatts, up 4% compared to last year of 7.81 gigawatts. On service performance, system loss was at 5.77%, slightly down by 0.08 percentage points on a 12-month moving average compared to 2021. System Average Interruption Frequency Index or SAIFI was down 8% or lower by 8% at 1.300x compared to [indiscernible] in 2021. And System Average Interruption Duration Index or SAIDI was also down 7% at 128.419 minutes. Time to connect was lower by 5% at 1.64 days. Electricity rate on an average basis stood at PHP 9.52, up by 16% compared to the previous year's PHP 8.24.

Thank you, sir, and good afternoon, everyone. For customer report, as mentioned, we are happy to report that sales for 2022 is up 6% or more than 2,800 gigawatt hours versus 2021. It was registered that 48,916 gigawatt hours for 2022. And this is mainly driven by a very strong rebound of commercial segment, with double-digit increase of 14%. And as mentioned also, the total gigawatt-hour sales already surpassed 2019 pre-pandemic level by more than 4%. And -- or it's up more than 2,000 gigawatt hours versus the pre-pandemic 2019, with breakdown as follows, per segment. So Residential sales [indiscernible] 18% higher compared to 2019. Industrial also surpassed pre-pandemic levels 2019 with 3% increase. Whereas different story for Commercial. It is [indiscernible] still 6% below the 2019 level. So there's still room for growth for Commercial. In terms of sales mix, sales mix continue to shift towards Commercial segment, which shared the total now of this product at 36% compared to [ 3% ] in 2021. Residential accounted for 35% in 2022, down 2% from 2021, which was 37%. And Industrial segment [indiscernible] is also same at 29%. So we see shifting sales mix towards the Commercial segment, which is actually -- sense of normalization. Remember that during the pre-pandemic, our normal sales mix is 30% Residential, 40% Commercial and 30% Industrial. Next slide, please? So the details per segment. So Residential grew by 1% in 2021 despite the customers spending less time at home due to face-to-face classes, on-site work and [indiscernible]. There were more opportunities to travel and conduct face-to-face interaction, which reduced the time spent at home by customers. But aggressive energization activities during the pandemic and returning demand for school dormitories, central business district apartments and condominiums managed to offset the decline in organic sales. Commercial. For Commercial sales, Commercial sales volume grew 14% in 2022 to 17,403 gigawatt hours from 15,234 gigawatt the previous years, with the dramatic increase in mobility and economic activities vis-à-vis Delta variant-stricken 2021. On safe work in the venture, we were working [indiscernible] to take infrastructure will which reduce the time spent platform by customers. But aggressive initiation activities during the pandemic and returning their [indiscernible] to offset the decline in [indiscernible]. For Commercial sales, Commercial sales volume grew 14% according to the [indiscernible] 17,403 gigawatt hour from 15,234 gigawatt hour from previous year, with the dramatic increase in mobility and economic activities vis-à-vis Delta variant-stricken 2021. Among the time, we [indiscernible] our education, which grew [ 61% ], restaurants grew [ 26% ], retail 13%, hotels, 17%, real estate grew by [ 40% ] of first stabilized declines [indiscernible] part sector growth grew 10% in terms of energy consumption. For industrial, inflation, global supply chain issues stand for industrial growth to decline 3% compared to almost [indiscernible]. Semiconductors and electronics actually declined by 1%, following the rapid production for consumer electronics-related product as well as global demand. Construction has a steady growth [indiscernible] is still at 4%, in cement at 3% that serve EBV and private construction projects. Essential goods such as food and beverage and plastic products also grew by [ 7% ] and operated at significantly higher capacity boosted by Commercial activities and demand for extensions. So we continue to sustain our strong amortization of project over application [indiscernible] service application. So [indiscernible] application numbers grew by 30% compared to 2022, more than 9,000 projects in [indiscernible] and ordinary service applications meanwhile grew 8% compared to 2021 in more then [ 30,000 ] [indiscernible] service application. And [indiscernible] from 2 units as well as [indiscernible] restaurant, retail, real estate and constriction industries, we show [indiscernible]. And for the best [indiscernible] mobility increased [indiscernible] in government agencies allow for this year across issuers protection permits. So results of [indiscernible] numbers, our customer count decreased by 3% or more than 215,000 new customers compared to same period -- compared to 2021. And it now stands at 7.625 million customers. Our residential customers accounts for 92% or 7.041 million customers. So that ends up customer report, and I now hand over to my colleague Ronnie for the [indiscernible] performance.

Thank you [indiscernible]. Good afternoon to everyone. Our full-year consolidated net system input or NSI, grew by 6% on the back of sustained growth in segment. This is higher than the credit. Power sourcing 41% was our IT seasonal PSAs, 31% plus. Retail suppliers, 91% for the [indiscernible] PSAs, 6% on the [indiscernible] special [ cost backs ]. For the QL6 Natural gas at 36%, all at 30% and full [ 28% ] and liquid fuel at 1%. For the fixed demand for 2022, the highest demand within the [indiscernible] franchise was at [indiscernible] reorder 13. This was 4% higher than the 7.81 gigawatts. This demand in the was reported at 12.11 gigawatt is 4% for year [indiscernible] 11.46 gigawatts. The Department of Energy for the 5 months of this year, we will see the 13 gigawatts later, and this will happen in May this year. And this would be around 8% now years and last year's big demand . For system loss, our 12 month moving averages from investment from [indiscernible]. December '22 5.7 [indiscernible]. This is lower by 0.08 percentage points compared to '21, and this is way lower than the spend, which was up 6.5%. Lower system loss has been driven by our continuous efforts to [indiscernible] reduce standard sales, completion of CapEx projects that reduce technical losses and the improved sales mix in favor of Commercial and [indiscernible] segments and also help lowering about our substantial losses. We're happy to report that this is now our 15th consecutive year of lower than the [indiscernible] system. And our 2022 performance resulted in around PHP 4.7 billion from per kilowatt hour savings in cost of [indiscernible]. For our [indiscernible] factor and GSL performance, we performed very well, even with the tighter performance base lines. Our total SAIFI of 1.3x improved by 8%. This is within [indiscernible] peso. Our total SAIDI of PHP 128.4 million grew by 7% is also within that special, might be or more [indiscernible] average. [indiscernible] a new big indicator it grew by 6% at 9.2x. The improvements in SAIFI, SAIDI and MAIFI programs, timely completion of maintenance projects as well as our intensify all line inspection, bearing and rectification programs. Customer indicators, and we posted another major improvement of 26% for average [indiscernible] 2.2 days. Average time to connect also improved by 5% and [ 1.24 ] days. We have achieved significant [indiscernible] improving the end-to-end service application process. For call center performance, our December performance stood at [ 97.33% ], a 14% improvement compared to the same period last year. All of our customer indicators are within the rewards thresholds that we [indiscernible]. For GSL, GSL 1, we had 3,239 residents of customers experiencing a [indiscernible] duration of production that exceeded [ PHP 15,000 ]. For the same period in 2022, the [indiscernible] were at [ 7,300 ], but this is way below the turbine or [ 170 ], 872 under our [indiscernible] business. For GSL 2, we had 3 [ accidents ]. For GSL 3, we had 10 [ accidents ], but these incidents are way below the deadline that our PPIs. For GSL 4, we had 15,317 days of [indiscernible]. This is 80% 30,000, keeping [indiscernible]. For CapEx, our utilization stood at PHP 19 billion or [ 87% ] of our PHP 21.91 billion [indiscernible]. The previous half ending was [ PHP 6.66 ] billion for new connections and order [indiscernible]. For the full year, as we reported earlier, we energized [ 9,013 ] [indiscernible] projects at 251,200 ordinary service implications. CapEx spending for asset renewals was [ PHP 0.09 billion ] and other PHP 5 billion for load growth. Asset renewals include [indiscernible] on the [indiscernible] determine replacements in relation growth. For the relocation of close to 5,000 posted BBB and PPP or intra and DPW [indiscernible] transaction, we already relocated [ 8,600 ] [indiscernible], most of the remaining poles have third-party [indiscernible], which are still resolving in the project performance. This remains on back of our priority this year. For load growth, we expect , reconductoring and operating FCIE after [indiscernible] patent load 497 square millimeter [indiscernible] and thermal nonatopic tables, which allows us to double the line ampacity and [ NDA ] capacity from 171 [ NDA ] have an every [indiscernible]. This project strengthens our [indiscernible] system, which provides additional capacity for . At the Commonwealth on to 1 on [indiscernible] that we energized during the first 3 quarters of [indiscernible], we also commissioned new 83 [ NDA ] power in our net Northeastern part of our [indiscernible] CapEx filing with [indiscernible]. And one major low growth project that we completed last December was the La Mesa [indiscernible] station, which enabled that to serve [ STMicroelectronics ] in [indiscernible] to accommodate the increasing demand from the [indiscernible] 7 megawatts to 1,325 megawatts in 2023 and 20 megawatts in 2027. This project has allowed us to recover around 7 megawatts of [indiscernible] been connected for [indiscernible]. Thank you for visiting for report, and I'm turning it over to [indiscernible].

For the regulatory update, the average retail rate for 2022 is 15% higher than that 2021 mainly due to higher generation charge. The average generation charge were [ 9.8% ], leased due to higher fee cost, vessel depreciation and higher vessel prices. The 19.1% increase interest charge was due to higher ancillary service and power delivery charges in the absence of the transmission operating in 2022. The following the increases to generate transmission costs, average [indiscernible] 41.5%. The average distribution rate, the distribution rate grew up 1, 3 and 4 is 84.35 square per gigawatt for the 12 months of 2020. Without the newer EU, the average rate decrease to [ 1.17 ] compared to the 2021 uptake of 1.5778 in [indiscernible] of the sales mix towards Commercial cost margin and decrease effective Commercial revenue base. So [indiscernible] taxes and universal shares increased by 11.1% mainly due to higher as a quality increase in the generation system loss strategy. Moving now to the distribution rate to our brand. As of December 2022, [indiscernible] a sort of a 51% with a [indiscernible] one reported. Here one [indiscernible] has already completed last December 2022 meeting. And residential customer has effectively increased the deals of [indiscernible] 2023. [indiscernible] is expected to be completed within the demand and in the [indiscernible] third party . For the emergency PSA update in the EV of the 300-megawatt emerging PSA or [indiscernible] that we signed between last December as acquired and the [indiscernible] was the last stage of the under . The [indiscernible] to sell over we see there at [indiscernible] December 2022 [indiscernible] except only for the period over which is [indiscernible]. And this time, the [ fees ] will pass. We implemented a rate and the rate is 8.52 [indiscernible] subject to change due to the ForEx and actual [indiscernible] cost. The [ GMP ] extensions forward certification extension from [indiscernible] issued the Department of Energy. For the CSP updates, [indiscernible] also is going to simultaneously for 189 [indiscernible] for the 300 megawatts of 200-megawatt base book. The 118 megawatt expected increasingly margin is on what we find in . And the registration of natural gas-fired power plants under the existing PSAs affected the . The 300-megawatt being an [indiscernible] for sure to repeat our of this number. So the deal has already approved the TORs or the terms of reference, according to CSP [indiscernible]. And the TORs were also be published last December 23 and December [indiscernible]. For the 180 megawatts base load, the status update, there was a failure [indiscernible] there because only 1 was received as 2020. The CSP who provided were is now being only one of [indiscernible]. That's a part the team [ CBOs ] approval of a final between the second round. And so the [indiscernible] was made that and the resubmission deadline's now on March 16, 2023. For the 300 megawatt fee gain, there was like [indiscernible] declared by the ]. This was received plus January 2023. So remember now this was issued in the CSP after receipt of the [indiscernible] office last ], explaining that the declaration of should be made on after the submission. So the resubmission that banks on March 2020. As an update on the ongoing basis filed by [indiscernible], again the ERC [indiscernible]. At September 29, the ERG hold 29, 2022 orders in . For price adjustment filed by the South [indiscernible] Power Corporation and [indiscernible] Retail Corporation to [indiscernible] for circularity portals, which we received on November 16 and the Holding division granted [indiscernible]. The lead of [indiscernible] the SPPC start accepting the [indiscernible] on [indiscernible]. So the resolution granting the [indiscernible] 60-day polity of the [indiscernible] hence, the counting of the 2022, the [indiscernible] probably only have [indiscernible]. The first 13, 2023, the [indiscernible], but granted the motion for [indiscernible], cited by the for a positing a small player and stable right to be protected that we are doing in . Normative [indiscernible] process are the ERC orders newly reminded at [indiscernible] of the PSA. This max financial losses that we measured reasonable curiously improve a fully compensated [indiscernible]. And whilst next [indiscernible] improves high prices of coal and [indiscernible], the resolution in the [indiscernible] ultimately boils down to the integration of the [indiscernible] PSA, which actually [indiscernible]. The consolidation strategy to avoid the possibility of [ 15 ] interpretations of the power supply agreements. For the SPVC, starting in '23, there division granted SPVC player for [indiscernible] upon the posting of the PHP 100 million bond. And recent remaining very the [indiscernible] primarily subsided by the CA division [indiscernible]. The ERC order and it's effectively joining at the [indiscernible] implementation of the PSA and its convenient power supply [indiscernible] has caused SPVC to suffer millions every day, thus violating SPVC [indiscernible] have been saving the property without just compensation. And the ERC order imposed on an [indiscernible] the PSA and the day all [indiscernible] available. And there is an urgent environment [indiscernible] is worth to continue to supply and the [indiscernible] at without being able to put the cost of such energy. And CA also clarified the [indiscernible] preliminary in [indiscernible] to spend on the implementation of the [ ESA ], but that's not coming in that PSA and that we sellout the parties then put into negotiations [indiscernible]. So that ends my report. We [indiscernible] with [indiscernible].

Thank you, Gerri. Good afternoon, our CE members of Meralco management and analysts and investors. I am very pleased to share with you that 2022 was a better year for Meralco from an ESG rating or ESG assessment stamping. In particular, we achieved record-high scores or all-time best scores in a number of our ESG assessments. Foremost, this is our 2022 S&P Global Corporate Sustainability Assessment for CSA. The company's CSA rating of 45 represents a 9-point increase to our 2021 score of 36. And this record high-score is marked by across-the-board increases across all ESG parameters. This rating is likewise significantly above the global [ electricity ] industry average of 33, driven by improvements in areas such as stakeholder relations, human rights in corporate section to [indiscernible]. We, likewise on the next page, secured scores from CBP. CBP assesses over 18,700 companies across the globe on environmental disclosures and performance. In particular, our climate change assessment score was upgraded to a C in 2022, following a string of these last 2 years. And this is on the back of improvements in the company's energy transition targets, value chain engagement and lower scope to emissions. We also improved our CBP water security assessment rating a year as we were able to advance it to a C from F in the previous year, owing to significant improvements in our water disclosures. Finally, 2022 also marked another milestone when Meralco became a member of the Bloomberg Gender Quality Index. The Bloomberg Gender Quality Index is the only ESG assessment in the world focused on gender equality in the workplace, recording an overall score of 66.1, Meralco for its improved performance across multiple categories, including antisexual harassment policies, gender pay parity and fostering an inclusive culture. You can recall that earlier this year, we also secured our all-time best ESG rating of BBB from MCI, which again assesses the sustainability performance of over 8,500 companies worldwide. This BBB rating improvement over the BB ratings we received in 2020 and 2022. As a final update, again, our 2021 sustainability report was once again internationally recognized this time by the Asia Sustainability Reporting Rating with [indiscernible]. This is the second international our SR. And at ASRRAT, we were 1 of only 2 Philippine companies [indiscernible] recognized. ASRRAT is a rating system initiated and established by the National Center for Sustainability Reporting in Indonesia, and it is focused on assessing SRs published across the region. Main criteria include alignment with and support of the United Nations Sustainable Development rules, transparency of greenhouse gas disclosures or GH disclosures and compliance with GRI or Global Reported Initiatives. At this point, I'd like to pass the floor on to [indiscernible] for the power generation.

Thank you, Evan. For the power generation group, Meralco PowerGen and Global Business were able to deliver a total of 13,424 gigawatt hours of energy in 2022, which is 2% less versus the previous year in 2021 at 13,690 gigawatt hours. Global Business Power capped the year with 4,928 gigawatt hours of energy delivered as our plants gradually recovered from the aftermath of Typhoon Odette. For San Buenaventura, both scheduled and first outage temper delivered energy to 2,765 gigawatt hours at an average plant availability of 88%. PacificLight's performance, on the other hand, reflected a 3% increase in delivered energy at 5,619 gigawatt hours. Lastly, BulacanSol plant with an improved average plant availability of 97.8%, delivering 112 gigawatt hours for -- of energy on its first full year of operations. As we begin our low-carbon energy transition and increase our renewable energy portfolio following our BulacanSol, we signed a joint venture Vena Energy early in 2022 for the development of a 68-megawatt solar project in [indiscernible] Ilocos Norte. In addition, during the second half of the year, we secured a PHP 2.65 billion of project financing facility from RCBC to fund the construction of another solar plant in [indiscernible] Rizal, which is in partnership with Mitsui. Both projects are expected to commence commercial operations in March of 2023, bringing engines renewable energy capacity close to 200 mega watts. More renewable energy projects can be expected in the coming years using different technologies such as wind, hydro, solar and with battery as we endeavor to provide cleaner and sustainable energy supply to the market. Thank you, and have a great afternoon.

Thank you to our executives for the presentation. We will now open the floor for questions to our analysts and investors, for those you who would like to ask a question, you have 2 options to do so. First, you may raise your virtual had, please wait for me to recognize you before you speak. Alternatively, you may also type your questions in the chat box, and I will be reading them for our executives. In both instances, kindly state you 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. The first set of questions comes from Karisa Magpayo of Macquarie. On the rate of leasing, can you provide an update on the rate of leasing to exercise? When do you expect this to be completed and implemented. On PacificLight, what is the company's outlook on the growth and profitability of this plan, we expect similar earnings profitability for 2023. And lastly, on SBPL, [ that get's ] power supply agreement allow for [ 12 ] pass-through or fewer course.

Karisa, [indiscernible] your first question, an update on our [indiscernible] is still undergoing. We are seeing those regimes at the moment, and we are now at the stage of reception of evidence. I'm not sure whether it's probably completed in the next few months. But I think that we are still targeting up until the end of June to complete everything. But based on the time line and based on the progress of the hearings, we can affect that the process will likely be completed after [indiscernible] this year.

Second question on PacificLight, Karisa. As you are well aware, Singapore is a purely customer-based contracts. So we have 1- to 2-year contracts in Singapore. And as of today, we hope that we can match the 2023 profitability with continuous contracting of our retail supply. On SBPL, is the power supply agreement allow full pass-through of fuel costs? Yes, but under certain parameters as to hit rate as required and approved by ERC. If you meet your hit rate that is the efficiency of the plant, then you are able to pass through. Failing of which you will have to absorb any additional cost for failure to do so. Thank you.

Thank you, sir. Thank you, Karisa, for your questions. The next line comes from Jelline Gaza, JPMorgan, on generation, when do you expect GBPC to recover from net losses? Are there any updates on Atimonan One?

Okay. For GBPC, our last fixed rate contract expired or was already terminated in December of 2022. So we expect a turnaround from this fixed rate -- low fixed price contracts, which attributed to the low sales. Are there any updates on Atimonan One? Atimonan One now, we're working of converting the coal-fired power plant to a gas LNG plant.

Thank you, Jelline Gaza for the question. The next one comes from Gio dela Rosa of Regis. Are there provisions relating to tax period carriers that are still on the books of Meralco [indiscernible] 2022? Is their intention to reverse loss through the P&L?

Betty here. The answer is yes, there is still an amount there for -- while the decision of the ERC for the last period is [indiscernible], there's an ongoing reset for NGCP. And there are -- we're waiting for the NGCP. We said there are discussions there or about looking at the last period also of NGCP. So we'll deal with that if we see the final range. Although the decision that they provided is that the last period rate is [indiscernible].

Thank you, Betty. The next one comes from Gregg Ilag of BDO. Can you share with us the sales volume year-on-year trends for January and February 2023?

Yes. For January, I think January this year around 5% growth compared to [indiscernible]. February is still, I don't know that would be. So a good trend of positive number that [indiscernible] think is global.

Thank you, sir. The next one comes from Fio de Jesus of Maybank. Any indications on January, I think that has been addressed. The second question, besides the ongoing 480-megawatt CSPs, how much more will Meralco look to procure over the next 2 years? And will this feature cost pass through? How much is Meralco currently procuring from the WESM?

The second question CSPs.

Yes, Fio, this is [indiscernible]. For the earlier question, for the next 2 years, yes, are based on the power supply procurement plan that we have submitted to the Department of energy. We still have at least 2,200 of our baseload capacity that we intend to -- CSP -- either this year earnings. For the 600 megawatt, that will be CSP this year. And then there is these 800 [indiscernible] capacity that we [indiscernible] this year or next year. So that's where first question. And the second question, how much -- today in the current prices of WESM, based on the average WESM prices, is about PHP 5 per kilowatt hour [indiscernible] total rate for WESM.

Fio ask a third question, now will Meralco continue to provide for any potential further recoveries?

The answer is, yes, because we are applying something that I think [indiscernible]. So pending final [indiscernible], which we do not know what it will be. We're -- we did an estimate. So we are making provision, although -- of course, the gap between the actual resulting weighted average rate and what [indiscernible] is provided.

Thank you, ma'am. The next question comes from Jelline Gaza. How much is total investments as of the end of 2022, for both current and noncurrent?

Jelline, what investment cash, do you mean cash investment or which investments?

Total investments. Both under short term as well as long-term assets, Miss Betty.

Okay. So the cash placements, you mean me. That's about PHP 46 million.

The next question comes from Gio dela Rosa of Regis. What are your expectations regarding the profit outlook for the telco tower business since MDC seems to have acquired them with a high price.

Okay. The first few years would definitely be negative to the bottom line because they'll have to do some maintenance refurbishing for us to be able to get the second locator. And the business model we ingest on the [ colocation ]. So right now, the focus for the towers that we have already that have entered over to asset 860 of that. That's currently undergoing testing because while we are already able to build upper tenant for that one. They're looking at strengthening the power so that we can get a second telco locator. Discussions are ongoing with the other telcos and the people [indiscernible]. So I would say bottom line, maybe 4 or 5 years before they generate positive numbers. And this colocation is faster than it would be [indiscernible]. Although on EBITDA, I should say, in 2 years, it should be [indiscernible].

Thank you, Ma'am Betty. The next question comes from Jelline. What contributed to the PHP 7 billion of other income. Net in fourth quarter 2022, how do we reach this with a PHP 1 billion implied noncore net income item in the fourth quarter of 2022.

The other income includes a couple of items now. First, we have the day 1 gain offer the accretion because any liability, for example, recoveries, which are more than 1 year, under accounting, there's a requirement to record this at present value. And then after that, when you are [indiscernible], there's an [ FX low ], which is the day 1 gain. And then we also reversed impairment that was recognized on PacificLight given that it has resulted in Pacific bottom line. So there was a reversal of PacificLight. And then -- what else, will expect those 2 items for the other income stated.

And Ms. Betty, just as a follow-up, how much of these items to be considered in your disclosure of CCNI versus -- yes, for the year or the quarter?

The gap between CCNI and reported net income would be ForEx gain that we recognized for this year compared with last year. I have to get the ForEx numbers. And then -- so that's noncore income for us and then the reversal of impairment is also a noncore item for us.

Thank you, Ma'am Betty and Jelline. The next question comes from [indiscernible] of SB Equities. What are your plans in terms of maturing debt for 2024 and 2025, any chance for early [ retirement ]?

The 2025 fixed rate though has a put in 2023. So -- well, it depends on how many of the holders will put this instrumental -- investment that they're holding. But back then when we issued [indiscernible] was issued together with a 7-year note though. And that was in 2020, 2020 was the maturity. So -- 2 years before that, there was also a put a year before that I think there was a put. And -- it's a mix. Some of the holders decide to hold on to it. Some of them, had to -- well, they decided to put. So depending on that, the coupon for the 12-year note is 4.875, so it depends on where interest lands. Well, I think that with the basis for the holder to put or not. I guess with respect to financing, we continue to look at options for our financing. So, depends on where interest would land that's where we will decided who will receive another instrument issue, another instrument.

Thank you, ma'am. The next question comes from Mayank Maheshwari of Morgan Stanley. Can Meralco talk about the outlook on tariffs and tenancy for the telecom towers portfolio, also what will be the CapEx for the same?

On the tariffs, particularly for the [indiscernible] outlast site for at least [ 157 ] and we're working to achieve that rate. But of course, depending on other factors. We don't know we [indiscernible] how much the years will drag us. So we are working very hard [indiscernible] the requirements of the ERC is asking to support the [indiscernible].

The tenancy with telecom tower.

There's an assumed tenancy ratio, which increases over the period now. But well, I think if I'm not mistaken, it should be -- or 1.5 of the tenancy ratio. On that basis, the assumed [indiscernible] to us some of the -- those [indiscernible] to refurbish or to groom the current powers. The budget per [indiscernible] is about PHP 22 billion.

Thank you, ma'am. The next question comes from [indiscernible] Trust Banking Group. First question is noted that the gross debt has increased by 15% in 2022 to PHP 103 billion. How was this allocated? And the second question, what is the company's 2023 CapEx budget and how will this be funded?

The gross debt increase on first, it was the towers. When we the towers for MIDC. We do a debt for that one. The consortium of 2 [indiscernible], okay? We have drawn a total of over PHP 4 billion related to that one. And then the other one would be towards the end of the year, the DU PHP 10 billion of loan note bilateral. And then separate ER subsidiaries also incurred debt, [ reduce ] has about PHP 700 million. On the CapEx, it will be a mix of operations and debt loan, cash generated from operations. Note that in the -- now as we had a [indiscernible], the case action of [indiscernible] in there, except that there's going to be a finding difference between when you get the cash because remember the tariff hasn't assumed the effect over 4 years. So there will be a gap. There's a time difference between when you are able good collect from the bill and collect from the consumer, and when you actually get these assets to generate the revenue through the volume. But overall, the target should cover that one, plus a portion will be funded by them.

Thank you, ma'am. Are there any other questions? Okay. Your next question comes from Denise of SB Equities. What are your dividend outlook for this year? Would you be able to sustain 70% payout?

For our budget now over the years now, we've always assumed 60% in our internal budget, but we always aim to achieve better. So for 2022 budget, for example, when we were doing it in 2021, we also assumed 60%. But given our results, our profitability, we're able to pay out.

Next question comes from [indiscernible]. Any profitability targets for the year [indiscernible].

It can happen. Yes.

I guess it's a little [indiscernible] any guidance for profitability for the [indiscernible]. I believe that's the last question. We actually thank everyone for joining. And what we like to let you know that audio recording is available at our website, www.meralco.com.ph under the Investor Relations section. Thank you once again, and we'll see you at the call after first quarter 2023 results. Thank you, investors and analysts.