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, this teleconference call is recorded. Kindly follow the ground rules which were sent to you beforehand. We will be presenting the first half 2023 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 Chairman and CEO, Mr. Manuel V. Pangilinan, who I understand will be joining us a little later in the call. Other corporate officers who will be presenting are the following: Mr. Ronnie L. Aperocho, Executive Vice President and Chief Operating Officer; Ms. Betty C. Siy-Yap, Senior Vice President and Chief Finance Officer; Mr. Ferdinand O. Geluz, Senior Vice President and Chief Revenue Officer; Mr. Froilan J. Savet, First Vice President and Head of Networks; Atty. Jose Ronald V. Valles, First Vice President and Head of Regulatory Affairs and DU Regulatory Management; 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 DU business then highlights from Meralco PowerGen Corporation. Finally, we will conclude the presentation with a few words from our Chairman. After all the presentations are done, we will allot time for Q&A. 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. Thank you for joining us in this meeting. I will be presenting the results for the first 6 months of 2023. As summary, total energy volume handled by One Meralco is 31,571 gigawatt hours, 6% higher versus last year. When you speak of total energy handled, that will be the entire power supply chain of Meralco distribution, generation and retail electricity. As quick view of our CCNI, growth in CCNI was 47% for One Meralco. We saw higher DU CCNI contribution with 3% increase in energy sales volume driven by growth in residential and commercial volumes during summer. We also saw [ higher distribution rate ] with the completion of the [ ATU refund ]. Strong power generation contribution driven by the turnaround of GBP and also PacificLight and San Buenaventura. We saw positive contribution this time from our RES with the lower WESM and fuel price exposure. However, for our nonpower subsidiaries, impact on CCNI was lower contribution. The next slide shows our consolidated core net income. So unregulated business share in Meralco CCNI more than doubled versus last year driven by growth in power generation. In terms of the composition of our CCNI, distribution still continues to be the bigger chunk. Although comparing last year, it's 57% of our total PHP 19.2 billion against 79% of the PHP 13.5 billion last year. Power generation grew, taking a 34% share in CCNI versus 18% last year. RES and all other subsidiaries contributed the remaining 9%. I just want to highlight also that for the DU, although the share declined to 57%, in absolute values, we still saw growth of the DU business. The next slide shows our overall financial summary. Our consolidated core net income, reported net income and core EBITDA all grew in the first half of 2023 compared with last year. CCNI reached PHP 19.2 billion, reported net income was at PHP 17.9 billion and core EBITDA at PHP 13.2 billion. Again, I just want to emphasize that results from our power generation business continued to improve in the first half. It was a turnaround story for GBP with positive numbers this year compared with loss in the first half of 2022. PacificLight continued to bring in the numbers driven by the high retail margin or full margin in Singapore. The core DU business contribution also increased as DU volumes grew 3%. Our gross revenues consisting of DU, RES and consolidated power generation results amounted to PHP 224.8 billion or 13% higher. Total costs and expenses amounted to PHP 207 billion, much of which pertains to purchase power costs, which accounted for 81% of total costs and expenses. Our capital expenditure for the first half of 2023 amounted to PHP 14.1 billion. Cash and cash equivalents totaled PHP 51 billion, while our total borrowings was at PHP 101.5 billion. In terms of our detailed revenues, our gross revenues, as mentioned, is PHP 224.8 billion, 13% higher. If we look at the components, generation is at PHP 170.6 billion, 13% higher driven by the higher fuel prices, use of liquid fuel -- or liquid condensate by the first gas plants with a continuing restriction of the Malampaya gas field and further, the peso depreciation against the U.S. dollar and also increase in spot prices at the wholesale electricity spot market. Distribution revenue, as I mentioned, in absolute amount is still bigger at PHP 33.5 billion against PHP 30.7 billion, reflecting a 9% increase with the combined effect of 3% increase in DU sales volume as well as the higher average rate with the completion of the asset true-up [indiscernible]. In terms of energy fees, this is the revenue of GBP. Total revenue delivered is PHP 14.3 billion against PHP 12.6 billion or 13% increase due to higher fuel component built to customers of power generation and higher volume delivered. Note that last year, they were affected by Typhoon Odette. Nonelectric revenues is at PHP 6.5 billion against PHP 5.865 billion. The 11% increase in volume -- increase in revenues is coming from revenues of our tower business as well as increased number of customers of Radius and bill transaction from Bayad. Costs and expenses totaled PHP 206.9 billion or close to PHP 207 billion or an 11% increase over last year. As mentioned, the higher -- the bigger component is purchased power cost at PHP 167.4 billion compared with last year's PHP 148.4 billion. The 13% increase is largely due to higher WESM purchase price, increase in fuel. As mentioned earlier, the first gas plant had to use liquid condensate; and the peso depreciation, which was about 6% to an average of PHP 55.23 compared with PHP 52.16 same period last year. Our OpEx grew by 7% to PHP 18 billion -- PHP 18.2 billion mainly from the higher cost of labor, bills management expenses and also increase in cost of subsidiaries for work accomplishment. Included in these OpEx items would be material costs and labor costs of our construction unit. Coal and fuel power plant costs and O&M amounted to about close to PHP 10 billion, similar to what it was last year. And this is mainly due to the slightly lower coal prices during the period. Although -- and also higher repairs and maintenance costs last year because of -- because our plants in the south were affected by Typhoon Odette. Depreciation and amortization grew by 18% to PHP 8.2 billion with the increased depreciation for CapEx of the distribution utility plus depreciation of the towers that have been transferred by Globe to MIDC. Others represent largely provision for over-recoveries of the distribution unit. For capital expenditures, consolidated capital expenditure is primarily driven by the DU CapEx, which is focused on new connections, asset renewals, load growth. While our subsidiary CapEx is from MIDC, or the towers business, wherein Globe has transferred a total of 1,060 towers on an SLB arrangement, or sale and leaseback arrangement. Plus, we do have additional build-to-suit towers. And then for power generation, the capital expenditure, which accounted for 3%, pertains to the completion of Phase 1 of the Baras solar plant. The next slide shows the quarter-on-quarter comparison of our CCNI. So as mentioned, CCNI grew 47% to PHP 19.2 billion, while reported net income reached PHP 17.9 billion. In Q1, our CCNI grew 40% to PHP 9 billion. Power generation CCNI was the main driver with the results of PacificLight delivering PHP 3.1 billion compared with PHP 1.8 billion same period last year. San Buenaventura, on the other hand, delivered PHP 464 million against PHP 194 million same period last year, and a turnaround of GBP with a positive PHP 295 million versus negative PHP 518 million. The DU CCNI contribution was slightly lower year-on-year because sales increased -- sales volume increased [ load ] to 2%, and this was tempered by the lower average tariff as a result of the lower -- effective lower interim average rate at 1.3522 compared with original 1.3810. And also, there were more expenses incurred in Q1 as economic activities increased and there were more costs related to customer payment management activities and IT services. RES contributed minimally only in the first quarter and CCNI contribution of subsidiaries were lower because most of the projects were at the early stages of work. In the second quarter, we saw a [ 50% ] increase in CCNI. Again, power generation was the main driver which increased 2.6x to PHP 2.9 billion with the continuing contribution of PacificLight Power at PHP 2.1 billion versus PHP 1.5 billion same quarter last year. GBP, again, showed a positive PHP 548 million against a loss of PHP 638 million last year. The DU CCNI was up 17% to PHP 6.5 billion with a 5% increase in volume in the second quarter of 2023 and higher distribution rate as we completed the asset true-up refund in May of 2023. RES contribution also improved due to lower WESM and fuel price exposures. Meanwhile, our core and reported EBITDA for the half year ended June 30 was at PHP 33.2 billion against PHP 31.4 billion, which are 36% and 32% -- which are up 36% and 32%, respectively. The next slide shows the different power generation units within Meralco. So wholly owned subsidiary Meralco PowerGen contributed a total of PHP 6.6 billion to Meralco CCNI in the first 6 months, significantly higher than the PHP 2.3 billion in 2022 on account of strong performance of PacificLight and positive contribution of the other operating units. Singapore-based PacificLight recorded a CCNI of SGD 221 million, an equivalent PHP 9 billion, as of June 30, 2023, from SGD 147.7 million or PHP 5.6 billion. This was primarily driven by the higher blended nonfuel margin averaging SGD 100 per megawatt hour from SGD 70.40 same period last year. PacificLight's 771-megawatt liquefied natural gas facility in Jurong Island delivered a total of 2,893 gigawatt hours of power. And MGen has a combined direct and indirect interest of 58%. San Buenaventura Power, or SBPL, a 455-megawatt supercritical coal-fired plant in joint venture with EGCO of Thailand, delivered a total of 1,244 gigawatt hours of energy with plant availability of 93% during the period. SBPL's CCNI was at PHP 1.7 billion, up 17% a year ago. We hold a 51% interest in this joint venture. Global Business Power booked CCNI of PHP 843.1 billion (sic) [ PHP 843 million ] and delivered 3,095 gigawatt hours of energy from its portfolio of coal and oil plants with a net capacity of 823.6 megawatts, of which 717 megawatts are contracted under PSA, the balance of which carried ancillary service agreements which contributed also to the CCNI. MGen Renewable, or MGreen as we refer to it, registered CCNI of PHP 78 million and delivered a total of 166 gigawatt hours of energy from its solar plants, namely: BulacanSol in San Miguel, Bulacan; Nuevo Solar in Currimao, Ilocos Sur (sic) [ Ilocos Norte ]; and PH Renewables, or the Baras plant in Baras, Rizal. BulacanSol is a 55-megawatt AC solar plant in partnership with PowerSource Energy Corporation and had plant availability of 97%, delivered 60 gigawatt hours to Meralco under a 20-year ERC-approved PSA. Nuevo Solar's 68-megawatt AC solar plant in partnership with Vena Energy started delivering its entire capacity to MPower on March 26, 2023, and generated a total of 75 gigawatt hours of energy as of the end of June. PHRI's 75-megawatt solar plant in Baras, Rizal, a partnership with Mit-Renewables Philippines, a subsidiary of Mitsui & Co., has completed commissioning tests of its first phase delivery involving 67.5 megawatts AC. Commercial operations is expected by mid-August 2023. Phase 2, meanwhile, is expected to be operational by mid of 2024. The Baras plant delivered 31 megawatts to MPower as of the end of June. Our consolidated interest-bearing debt totaled PHP 101.5 billion. Debt of subsidiaries accounted for 51% or PHP 51.7 billion, PHP 44.6 billion of which are debt of our power generation unit and PHP 7.1 billion for all other subsidiaries. Of the total amount, PHP 33.8 billion are maturing within 1 year. Our debt does not include the debt of PacificLight and San Buenaventura, which we don't consolidate. Cash and cash equivalents amounted to PHP 51 billion. Short-term investments totaled PHP 11.4 billion. Net debt as of the end of the first half of 2023 was PHP 39.1 billion with net debt to EBITDA at 0.67x. Our long-term investments and restricted cash totaled PHP 23.4 billion. Our funds included restricted cash of PHP 18.9 billion and 4.5 -- sorry, the PHP 23.4 billion included PHP 18.9 billion of long-term investments and PHP 4.5 billion of restricted cash. Meralco's debt is comfortably spread through 2037. The PHP 11 billion debt due in 2025 includes the PHP 7 billion 12-year fixed rate notes which Meralco issued in 2013 with a coupon of 4.875%. The other significant maturity will be in 2032 when the PHP 10 billion loan drawn by the parent company in December 2022 becomes due. Average cost of debt is 5.4%. All of our debt are fixed rate and all in Philippine peso, except with respect to a debt of Radius, which is $1.4 million. Today, the Board of Directors approved the declaration of the interim cash dividend of PHP 8.52 per share to all shareholders of record as of August 30, 2023, payable on September 14, 2023. This represents 50% of Meralco's core EPS. That ends my report, sir.

Thank you, Ma'am Betty. We will now move to the operating results presentation to be led by our EVP and COO, Mr. Ronnie L. Aperocho. He will be followed by the heads of the different business [ segments ].

Okay. Good afternoon, everyone. I am pleased to report to you the bigger operational highlights of our core distribution business for the first half of 2023. Starting with energy sales. Our energy sales grew by 3.4% at 24,792 gigawatt hours versus the 23,968 gigawatt hours in 2022 for the same period. Our customer count grew also by 2.6% at 7.716 million. Net system input also increased by 2.8% at 26,007 gigawatt hours. Our peak demand grew as well by 4.1%. This was registered last May 9. So the highest demand was at 8.44 gigawatts. Of course, the growth in these numbers, or energy sales, NSI and peak demand, were driven by the sustained economic activities and increases in Residential and Commercial volumes. For our service performance, starting with system loss, we're happy to report also that we continue to achieve system loss that is way below the prevailing system loss [ cap ] of 6.5%. Now we are at 5.78%, which is 0.08 percentage point versus 5.86% system loss in 2022. Total SAIFI, or system average interruption frequency index, also improved by 2.4% at 0.644 times. Total SAIDI at 63.429 minutes, however, slightly increased by 1.4%. But in terms of the time to connect our new customers, we have improved tremendously by close to 17% at 1.38 days. And lastly, for the electricity rate for the first half of the year, the average retail rate was at PHP 10.68. This was 14.4% higher compared to the average retail rate of PHP 9.33 in 2022. These numbers are basically driven by higher generation costs, fuel costs, peso depreciation and WESM prices for the first half of 2023. I'm now turning you over to Mr. Ferdinand Geluz for the report on the sales for the first half of the year. Thank you.

Thank you. Good afternoon, everyone. So we're happy to report, well, as [ reported ] by Ronnie, that we're up 3.4% at 24,792 gigawatt hours for the first half of the year with higher demand from Residential and Commercial segments pushing energy sales to actually an all-time high this half of June 2023. Growth coming from the Meralco DUs, around 3.4% [ and 70% ] for Clark Electric Distribution Corporation. We have a bit of a slow quarter 1 at 2% growth. But we somehow recovered in quarter 2 where we grew almost 5% with monthly volumes reaching 4,500 gigawatt hour level in May and also reaching an all-time high of 4,643 month sales -- [ 4,743 ] gigawatt hours in June in terms of month sales. So we would like to highlight that our first half year-to-date sales on benchmark to the 2019 pre-pandemic year is already 9% higher with Residential up 31% versus 2019, Commercial up 2% and Industrial [ tracking a 4% ] increase. In terms of sales mix, we continue to shift towards pre-pandemic levels with continued recovery from business operations and resumption of social activities. Share from Commercial is now 37% from 35% in 2022, while Residential is roughly the same at 35%. Industrial segment actually somehow declined from 30% to 28% this year. Next slide, please. So Residential volume recovered in the second quarter to close to first half at 3,692 gigawatt hours, 2% higher than almost -- 1.4% higher than [ 3,506 ] the previous year. The end of prevailing cold phase caused by La Niña at the first quarter started with warm and dry season in the mid-March, causing several [ areas within the franchise to experience ] dangerous heat indices towards quarter 2 with Metro Manila reaching as high as 42 degrees Celsius in May according to PAGASA. This phenomenon caused households' increased usage of cooling appliances to maintain the level of comfort and avoid heat cramps and exhaustion. Commercial, meanwhile, led all segments with 9,161-gigawatt hours sales volume, double-digit growth of 10% from 3,305 gigawatts around the same period a year ago. Year-to-date performance reflected a combination of strong business [ globally ] and boost in public confidence [indiscernible] pre-pandemic and midyear sales volume of [ 8,802 ] gigawatt hours in 2019, which was then [ shaved off ] by 17% during the height of pandemic. With the resumption of face-to-face social events, such as concerts, conventions, business gatherings, demand from leisure and entertainment, hotel, retail and restaurant sectors continue to improve. The shift in academic calendar also amplified the demand in educational institutions as schools consumed more electricity to battle summer heat. Industrial segment, on the other hand, is continuing to be battered by impact of economic headwinds as sales declined by 2% to 6,928 gigawatt hours from 7,085 gigawatt hours last year. Semiconductors, plastics, cement and steel posted lower production and demand due to plant shutdowns, excess supply and stiff competition from overseas. On the other hand, generation [ really from ] embedded generation has gone up by about 50% due to [indiscernible] mandates, oversupply, [ commodity ] supply required during summer season. Of course, that includes integration of new RE resources within the franchise. Next slide, please. So we have a healthy growth in customer base at 3% or around 200,000 new customers or additional customers through continuous energization of projects and services. We observed, though, that [ registration ] numbers are a bit tempered compared to the catch-up years of 2021 and 2022 but significantly higher than pre-pandemic average of 2019, and it was better by 60% in terms of project-covered application and 14% better in terms of ordinary service application or simple connections. Worth noting also is that we saw larger applied load for project-covered applications by as much as 25% as we energize projects with high commercial load requirements, indicative of healthy commercial recovery especially in the real estate business activity space. So as mentioned, as a result of healthy [ origination ] numbers, we are now at 7.716 million customers, where Residential remains to have the highest share at 92%, Commercial at 7%, while 1% was shared by Industrial [ street lights ] customers. So that ends my report. I now turn you over to Froilan for the [ networks report ].

Thank you. Good afternoon, everyone. We will continue with the report. The consolidated NSI for the first half of 2023 was higher by 2.8% than in 2022. This is attributed to the growth in the commercial and residential sectors due to increased social engagement, [ meetings in in-person ] in offices, schools and [indiscernible]. The mix of energy sources for the first half was mainly driven by IPP, RES and new PSA or EPSA to replace the energy supplied by the SPPC of 670-megawatt capacity, which was suspended on December 7, 2022. Subsequently, the fuel mix for the first half was also mainly driven by the suspension of SPPC. That's why we have a [indiscernible]. Next slide, please. Due to the continued increase in economic activity, Meralco and Luzon peak demands increased by 4.1% and 2.6%, respectively. Both peak demands were recorded in May 9, 2023, with 8.44 gigawatts for Meralco and 12.43 gigawatt for Luzon. In the next slide, our system loss 12-month moving average has improved to 5.78% in June 2023, which is a 0.08 percentage improvement from last year's performance, still well below the [ indicative ] 6.5% regulatory cap. Generally, for S-Factor and GSL, those, we believe, are doing well within the performance [ period, tightly ] improved by 2.4% at 0.644 times. However, SAIDI and MAIFI declined by 1.4% and 2.2%, respectively, largely due to [indiscernible] failures, heavy rains, strong winds and [indiscernible]. Meanwhile, the average time to process applications and the average time to connect customers significantly improved, up 21% and 16.9%, respectively, which is attributed to the streamlining of processes to prevent piling up of pending applications. For call center performance, there was a slight decline of 0.1%, but we are more or less be able to sustain the performance last year as we answered 96.7% of calls within 20 seconds. GSL performances are well below the annual average thresholds and significantly improved compared to same period last year. For CapEx, we now stand at 47% utilization or PHP 9.61 billion worth of CapEx implemented as of June with the majority of our spend in new connections, asset renewals and load growth [ ramps ]. We are also continuously supporting government infra projects, both under the Build Better More and the road widening programs of DPWH [indiscernible]. Lastly, we are pleased to report that we have completed 6 major projects, 3 substation projects and 3 system expansion and improvement projects. On April 30, we commissioned San Ildefonso substation with an initial capacity of 50 MVA. This project will address the load growth in the municipalities of San Ildefonso and San Miguel in the province of Bulacan. On May 7, we commissioned Vermosa South substation with an initial capacity of 83 MVA. This will serve a rapidly growing demand of customers in Imus, Cavite and some parts of Bacoor. And on June 27, we commissioned Arca South GIS substation with an initial capacity of 83 MVA. This project will serve the demands of customers in Taguig, Makati and Parañaque. For system expansion and improvement projects, we energized on April 18, 2023, the conjunctive project to NGCP's installation of Zapote 300 MVA power transformer bank. And on June 4, we replaced the 40-year old, 100 MVA power transformer at Taguig substation [indiscernible]. And lastly, we installed 2 [ sets of ] capacitor banks, one each in Canlubang substation and Cainta substation. This new capacitor bank will enhance the reactive power supply, provide additional green power capacity to improve efficiency, voltage regulation and power factor. Now turning over to Atty. Valles for the regulatory [ update ].

Good afternoon. For the regulatory update, for the average retail rate for the first half of 2023, that is 14% higher than that of 2022 mainly due to higher generation charge. The average gen charge for the first half of 2023 registered a 24.7% increase due to higher fuel costs, peso depreciation and higher WESM prices and purchases following the suspension of the PSA with SPPC-Ilijan. The 10.4% decrease in average transmission costs was due to lower ancillary service charges. And the average system loss charges increased by 19.9% due to higher generation costs. The average distribution rate with DRTU, or distribution rate true-up, for the first half of 2023 is PHP 1.07 per kilowatt hour. And when normalized for taking up the effect of DRTU [ 4 ], the average rate decreased to 1.4956 per kilowatt hour in the first half of 2023 from the first half of 2022's rate of [ 1.547 ] per kilowatt hour. Such decrease is due to lower effective rate for Residential, Commercial and Industrial consumers. Subsidies, taxes and universal charge increased by 14.6% mainly due to higher effective taxes and higher universal charges as approved by the ERC . The FIT-All collection was suspended for the first half of 2023 following the ERC resolutions. Going now to the update on the PSAs with San Miguel Energy Corporation, or SMEC; and South Premiere Power Corporation, or SPPC, for the 670 megawatts in light of the decision of the Court of Appeals. So just to provide you with a backgrounder, as April 18, 2022, SMEC and SPPC sent notices of change in circumstances claiming that the Ukraine-Russia conflict and other economic factors and NPC gas restrictions for SPPC caused adverse impact on their ability to supply under PSA. They claimed losses from January 2022 to May 2022. For SMEC, that was PHP 3.7 billion and for SPPC, around PHP 1 billion. SMEC and SPPC later filed joint motions for price adjustment with ERC together with Meralco. So last August 5, SPPC and SMEC sent notices to terminate the PSAs effective October 4, 2022. Last September 29, the ERC, voting 3-2, issued orders denying the price adjustment motion. And as a result, SPPC and SMEC elevated the matter before the Court of Appeals. And last December 2, 2022, Meralco received a TRO from the Court of Appeals for the SPPC case following SPPC's posting of the appropriate bond. SPPC ceased supply beginning December 7, 2022. And at December 27, the Court of Appeals' 13th Division granted the consolidation of both the SPPC and SMEC petitions. And on January 26, Meralco received a notice that the Court of Appeals granted preliminary injunction for SPPC PSA but denied the TRO for SMEC PSA. So with the denial of the TRO for SMEC, SMEC continued to supply to Meralco. So last July 14, Meralco received the joint decision of the Court of Appeals dated June 27, 2023. This decision annulled and set aside the ERC orders, which earlier denied the price adjustment motions and directed Meralco to exhaust all options to preserve the PSAs. The same decision of the Court of Appeals granted SPPC's and SMEC's price adjustment motions for the period of January 2022 to May 2022, and this is without prejudice to any further requests for price adjustments for June 2022 onwards. It also denied SMEC's motion for partial reconsideration of the Court of Appeals' resolution denying SMEC's prayer for TRO and made permanent the preliminary injunction issue in favor of SPPC. Among the reasons cited by the Court of Appeals in the decision are as follows. The validity of the notices of termination was not raised as an issue in the ERC, and therefore, the ERC's order invalidating the notices of termination directing Meralco to preserve the PSA effectively denied SPPC's and SMEC's right to due process. And the determination of the validity of the notices of termination is not within the scope of jurisdiction of the ERC. The PSAs contain a CIC provision which allows price adjustments for specific periods. And with this CIC provision, the PSAs cannot be considered to have a fixed rate. Hence, it cannot be characterized as financial contracts. By executing the same, SPPC and SMEC did not assume all risks. The ERC's Regulatory Operations Service, through the Chief of Tariffs and Rates Division, confirmed that granting the price adjustment remains to be the least cost option for Meralco. So as a result of the decision of the Court of Appeals, SPPC and Sual Power, formerly SMEC, sent notices of termination of PSAs to Meralco. And then Meralco, in turn, replied to these letters of termination. We contested SPPC's position and SPI's intended course of action. And we asked both SPPC and Sual to reconsider their respective positions without prejudice to the final resolution of the case by the CA or the Supreme Court, as the case may be. We also reserved our right to pursue available legal remedies, pending and upon resolution of the case, as may be appropriate. And for Sual, Meralco requested SPI to allow it a reasonable period, not earlier than August 25, 2023, to look for replacement capacity in order to protect its customer from exposure to volatile WESM prices. So in response, July 18 -- last July 18, 2023, Sual Power gave Meralco only until July 23, 2023, to look for replacement emergency power supply. So effective midnight of July 24, SPI already ceased supply and acceptance of Meralco's nominations. So because of the termination of the 330 megawatts of Sual Power, last July 17, Meralco sent request for proposal to different power suppliers for the replacement emergency for 330 megawatts covering the period from August 26, 2023, to March 25, subject to ERC provisional approval or interim relief. So the deadline for submission of offers was set on July 20 because of the urgency. So last July 20, only one offer was received, that was from SPPC, to deliver 330 megawatts of power coming from the Ilijan plant until March 25, 2024. So this will be in addition to the 480-megawatt SPPC EPSA that we have recently signed with them and already being implemented. That's it for the regulatory update. Turning over now to Mr. Raymond Ravelo for sustainability [ for the group ]. Thank you.

Thank you, Atty. Valles. Good afternoon, everyone. I will be providing a brief update on the sustainability front. We're very pleased to share with you that we have sustained our all-time best ratings in the most recent ESG scores released by 2 agencies, MSCI and Financial Times Stock Exchange Russell. For MSCI, who assess companies across the globe on general and industry-specific ESG factors, we maintained our BBB rating, which we first achieved last year after a stream of BBs in 2020 and 2021. This is because of our strong performance in renewable energy opportunities and water management practices. This rating of BBB actually places us among MSCI's top-rated Filipino companies. Moving on to FTSE Russell, which evaluates companies according to their exposure to and management of ESG concerns, we maintained our all-time best rating of 3.2 in 2023. At a score of 3.2, Meralco is ranked higher than both the Philippine overall average of 2.6% and the global energy sector mean score of 2.7%. Next page, please. Recently, 2 rating agencies, particularly MSCI and Sustainalytics, published their climate scores, indicating the alignment of companies with regard to the Paris Agreement's goal of limiting global temperature rise to no more than 2 degrees Celsius. For MSCI, we were rated a 1.7 degree Celsius for our implied temperature rise rating. This means that we are aligned with the Paris Agreement's 2 degrees Celsius world. On the other hand, Sustainalytics gave us a score of 1.9 degree Celsius, and this means we are moderately misaligned with a 1.5 degree Celsius world, which is the stretch target, but we are in line with a 2 degree Celsius world. That is all for the sustainability update. I will now pass you on to Mr. Jaime Azurin for the power generation [ update ]. Thank you.

Yes. Good afternoon. For the power generation group, we were able to deliver 7,398 gigawatt hours during the first 6 months of 2023. This is up by 7% due to the increased plant availability as well as the commissioning of our 2 solar power projects in Baras, Rizal and in Currimao, Ilocos Norte. GBP's improved plant availability during the first half of the year has resulted to a 14% increase in LNG delivered from last year's 2,716 gigawatt hours to 3,095 gigawatt hours. On the other hand, San Buenaventura Power energy delivered capped at 1,244 gigawatt hours, down by 9% compared to previous year. This is due to a forced outage that happened in June of 2023. Our Singapore-based subsidiary, PacificLight, expanded its energy delivered by 4%, 2,893 gigawatt hours. Lastly, our renewable company, MGreen, it has delivered a total of 166 gigawatts hours of energy with additional capacities from the operations of Currimao and Baras solar projects. These projects were fully energized in February and March, respectively. As we continue in our low carbon energy transition journey, our 75-megawatt solar power project with Mitsui in Baras, Rizal has completed commissioning tests of the project's Phase 1 at 67.5. Phase 1 has been generating at full capacity since April of 2023. Moreover, 2 of our solar projects under development have successfully qualified and among the winning bidders in the Department of Energy's second round of Green Energy Auction Program. These winning bids are for the establishment of a 49-megawatt solar plant in Cordon, Isabela and an 18.75 megawatt solar plant in Bongabon, Nueva Ecija by 2025. Once operational, MGen's renewable energy capacity will reach 266 megawatts. In the forthcoming years, we anticipate development of more renewable projects as we remain dedicated in fulfilling our commitment of providing bigger and more sustainable energy to the market. Good afternoon. Thank you.

Thank you, Mr. Azurin. Thank you, sirs, for your respective presentations. Before we proceed any further, I'd like to recognize the presence of our Chairman and CEO, Mr. Manuel V. Pangilinan, who just joined us in the call. Good afternoon, sir.

Thank you.

We will now open the floor for questions to our analysts and investors. [Operator Instructions] The first question comes from Fio of Maybank. His first question goes, "What are year-on-year volume growth of the main power generation units, particularly for PLP, GBP and San Buenaventura?" His second question, "Besides PLP, how are average selling price trends for local generation units? Are these sustainable?" And finally, "Are there any updates on the rate rebasing?" Fio, I think your first question has already been answered by the presentation. So let's move to your second question on PLP and -- sorry, on average selling prices of the local generation units.

[ PLP ] average selling price is dependent on where the contract was signed. Earlier contracts and the rate is around PHP 6 to PHP 7. But lately, you can see some PHP 6 right now in the market for contracting. So that depends on when it was really contracted. And we see also, as mentioned by even by Meralco, a softening of the WESM price thus appending spot market prices for the generating plants. Thank you.

Thank you, sir. Fio's last question. Any update on the [indiscernible] Sun Valley.

Our [indiscernible] applications is pending with the ERC. They are still evaluating and we have not received any notice over there from the years on the resumption of these process.

The next question comes from is Eunice Dolatre of SE Equities. We highly appreciate if you can shed light on the following. First, any upside risk expected to distribution volumes with the El Nino? What is your current sales volume's outlook for the rest of the year? Also, how do you see El Nino impacting your financial outlook given that you now operate a distribution and generation business. The second question reads, any updates on the tariff resetting? I think this has been addressed already earlier. And then finally, if you can share any guidance on the direction of the tariff versus the current tariff. What can drive this higher or lower tariff even as we expect continued CapEx rollout for network-related projects.

With El Nino, the resumption of upside in terms of higher temperature will prevail, then of course, our main driver well, residential will be impacted in terms of consumption, as well as commercial due to [indiscernible] for cooling equipment or bought the household level and then, of course, for commercial spaces. And in terms of outlook, while we grew 3.4% in the first half or some sort of forecast a growth of close to 5% on the second half, and that will bring us to a year-end of around 4%.

Thank you very much, [indiscernible]. For Eunice's second question, any guidance on the direction of the tariff reset upwards or downwards?

So we have filed our own rate application. We have filed an application for the [ 5 part B ] and the rate is 157. And we're hoping that 157 but what is the question of what can drive some higher or lower tariff -- the application has not been granted. Normally, what drives the tariff driving sales.

You all know it's a political decision at the end. Where we are is we are provisionally granted the temporary rate, right? This is supposed to have been given starting July 2022. So we are delayed by at least a year as we speak. So we're changing at 135 22, which was the lapsed period final determination rate. So but our rates are higher because of the mix. The effective rate is -- the weighted average rate is much higher. So where we will land is -- it's been a question of when the government ERC will eventually decide which rate it will be. Personally, I doubt whether the 157 as you said it's on the high side. So where we land, we will know. So it's the typical -- this is -- you know this, that we -- because we've seen this for the past several years from July 2015 until June of 2022, where our provisional rate was PHP 1.38, we eventually were granted 135 22. But in those 7 years, our collection rate was the provisional rate of 138. Our booking rate was lower than that. And so we're adopting the same practice where our provision rate is 135 22, but internally, our booking rate is lower than 135 22. So for now, that's what it is. So you could see there will be a differential between the cash flow and the P&L booking because of the booking rate. So that's where we don't like it, but that's the way it is. That's where the situation actually is. So the sooner the government decides on the [indiscernible] rate, the better for everybody. Then we can be totally transparent in terms of where the state of the finances are. Is that confusing enough? Who asked the question?

It's Eunice, sir.

But you guys are familiar with the codes, right? I don't think this is new to you. Are they not online?

They sent through the chat.

Okay. But can they ask questions directly?

Yes, sir. Eunice's third question, do you see further upside risks on overall weaker rates given the expected El Nino at the tail end of this year? How do you see spot prices trending? And are you seeing a growing concern on recontracting or CSP participation for your distribution business as spot prices remain elevated?

Well, I don't think there's -- I think everybody -- I'd like to think that the rest industry has changed as a consequence of this Ukraine war, right, and the sudden uptick in fuel prices. So what has changed is that the rest suppliers are now switching to either index pricing or WESM. So that it is -- so the risk is not there in terms of this being exposed 1 side or the other unlike before. But the dynamics of that particular sector of the energy industry has changed and given advantage to those [indiscernible] which have affiliated generation plants. Those with excess capacity that are able to sell to the RES has the advantage now. Meralco doesn't have that kind of advantage. We do have some capacity, but not much as the others that have that advantage. Is that fine?

On the CSP.

Sorry, it is not so much the risk of the pricing risk anymore. It is this -- can we keep some level of our market share of the RES because without a significant source of capacity on the generation side. That's the risk for Meralco for RES business.

For your last question on the growing concern on recontracting or CSP participation, actually today, the spot prices are low, so on the long term, whether that's sustainable. So for now, what we do is we stick to the plan. Plan is based on the power procurement plan that we have submitted to the ERC and that plan contains the schedule, which need to follow. So the schedule which as to when we are going to schedule a CSP and when we're going to start operating in green power supplier.

The next question comes from Gregg Ilag of BDO Securities. What is driving the higher nonfuel margin in PacificLight? Secondly, can you share the PacificLight average selling prices in the first half of 2023 versus the first half of 2022? And finally, what is the EBITDA margin of GBP in the first half of 2023 compared with last year as well.

Thank you, Gregg. For number one, what is driving the higher nonfuel margin in PacificLight, it's basically the one that is driving the nonfuel margin is the full prices in Singapore has increased significantly due to the tight demand supply in Singapore. For your second question, can you share the PacificLight, what is the average sale price in first half of '23. I think our margins have increased. Last year, it's about $70...

Selling price.

Yes, selling price $70 per megawatt.

The selling price is about SGD 240.

Versus this year of...

No, sorry. This year is 240 versus last year's 190.