Manila Electric Company (MER) Earnings Call Transcript & Summary

I am Randwil Macaranas from the Meralco Investor Relations team. 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 financial and operating results of Meralco for the first 9 months of 2023. A copy of the presentation may be downloaded from our website at www.meralco.com.ph under the Investor Relation [ section ]. We have members of Meralco's management team in this [ call ] and led by our COO, Mr. Ronnie Aperocho. Understand our Chairman and CEO, Mr. Manuel Pangilinan will be following later. Other corporate officers who will be presenting are the following: Betty Siy-Yap, Senior Vice President and Chief Financial Officer; Mr. Ferdinand O. Geluz, Senior Vice President and Chief Revenue Officer; Mr. Froilan J. Savet, First Vice President and Head of Networks; [ Jose Ronald Valles ], First Vice President and Head of Regulatory Affairs and New Regulatory Management; Mr. Raymond B. Ravelo, First Vice President and Chief Sustainability Officer. And finally, we also have Mr. Dominador Camu, Chief Operating Officer of Meralco PowerGen Corporation. We will begin with a presentation of the financial highlights followed by the operating results of Meralco's new business and then highlights from Meralco PowerGen Corporation. After all the presentations are done, we will allow time for Q&A. At this point, I would now like to introduce our CFO, Ms. Betty Siy-Yap, who will present the financial results.

Good afternoon, ladies and gentlemen. Thank you for joining us for the 9 months [ Results ] Release. I will be presenting the results for the 9 months ended September 30, 2023. So a summary of our performance. The total energy volume handled by One Meralco was at 48,308 gigawatt hours, 7% higher versus 2022. In terms of our operating results, or CCNI, we saw a 53% increase in September. As of September 2023, with higher contributions across all businesses, the distribution utility, power generation and RES. So on the distribution utility side, CCNI was higher with a 4% increase in sales volume year-to-date, mainly from higher volumes of residential and commercial customers. and the higher distribution rate with the completion of the Asset True-up Refund. On the power generation side, this continues to be driven by PacificLight Power in Singapore and San Buenaventura. Global Business Power also turned in positive numbers compared to the negative numbers last year. For RES, there's also positive contribution given our ESG units ability to manage the negative effects of FPRE through modified product offerings to our customers. S&P revised our outlook to positive on stable cash flows and strong financials, and we affirmed the BBB- rating that's just given to us. For the 9 months ended, our consolidated core net income was at PHP 30.023 billion. While majority still continues to be contributions of the distribution utility at 58%, power generation delivered 34% with the balance from RES and other subsidiaries. For this slide, we actually broke it between regulated and unregulated business. For then regulated business, we saw growth to 42% from 24% same period last year with improved operating results of power generation. For the regulated business, which accounted for 58%, which was at 58% -- the share was up 58% from 76% a year ago. However, contribution on Meralco CCNI increased in terms of absolute amount. So these are the summary numbers. Our consolidated core net income, reported net income for EBITDA all grew in the 9 months of 2023 compared with the same period last year. CCNI reached PHP 30 billion, reported net income was at PHP 28.4 billion and core EBITDA was at PHP 50.8 billion. Results from our power generation business continued to grow during the 9-month period. The core distribution business grew also on account of the core [indiscernible] volume and strong second and third quarter results. Our gross revenues consists of the and [ URES ] and consolidated power generation results amounted to PHP 335.2 billion or 6% higher. Total cost and expenses amounted to PHP 307.5 billion, the bulk of which or 81% was purchased power costs. CapEx spent in the 9 months was PHP 21.1 billion, and this consists of requirements of the distribution network, completion of telecoms and power facilities build out, including the towers turned over by Globe to MIDC and development expenses related to the solar power generation project. Cash and cash equivalents amounted to PHP 73 billion, while our total debt stood at PHP 102.1 billion. In terms of the details of our revenues, our revenues grew 6% as contribution from the DU increased mainly due to higher volume, higher pass-through charges and distribution rate with the completion of the ERC-ordered refunds. For generation, total amount was at PHP 253.8 billion, 5% higher with the higher cost of replacement power delivered by Ilijan and Sual plants which are the replacement powers for the terminated contracts, coupled by the peso depreciation versus the U.S. dollar. I wish to highlight that on the distribution side, this was higher by 16% to PHP 51.6 billion with the combined effect of the increase in volume and the effect of the completed refunds. On energy piece, 1% lower despite the higher generated energy due to lower fuel and coal component billed to customers, consistent with the decline in fuel and coal prices. For the nonelectric revenue, this used 7% with the recognition of tower lease contracts of MIDC, increasing the number of circuits and accounts and Radius and higher transactions volumes of Bayad. Total costs and expenses grew by 3% with a higher cost of power under the approved emergency PSAs and higher OpEx. On the power purchase side, 5% increase due to the replacement power costs, [Audio Gap] a year OpEx coming mainly from contracted services for maintenance, disconnection, reconnection, collection and relocation costs, higher salaries and wages and project-related material costs for the projects of our construction subsidiaries. 19% decrease in coal and fuel plus power plant O&M due to lower coal and fuel price in 2023. Depreciation grew by 6% on account of completed capital expenditure of the distribution utility. The depreciation related to 1,149 towers acquired by MIDC and 526 kilometers of fiber optic cables added to the Radius network. On our capital expenditure. Consolidated capital expenditure amounted to PHP 21.1 billion, 3% higher compared to last year. The DU capital expenditure accounted for 76% of the total with completion of major network projects for new connections, asset renewal and low growth. Major network projects concluded during the period included development of Arca South in Taguig and the energy station of 115 kV switching stating as well as patio as well as relocation of some poles to support the government infrastructure project. Power generation CapEx accounted for 3%, largely with the development of Phase 1 of PH Renewables on Baras Solar plant. Subsidiary CapEx represents 21%, majority of which would be PHP 3.7 billion as it relates to the additional 289 towers acquired from Globe and 37 build-to-suit towers for Globe and Smart. Our consolidated CCNI, our consolidated core net income grew 53% to PHP 30 billion in the 9 months. Note that our 9-month figure actually surpassed the full year PHP 27.1 billion of 2022. Our reported net income reached PHP 28.4 billion. almost -- well flat compared to the full year numbers of 2022. When we compare it with like periods, or CCNI grew 53% whereas our reported net income grew 44%. In Q1, CCNI grew 40% to PHP 9 billion. For this quarter, it was driven largely by power generation, led by PacificLight and San Buenaventura. Power generation more than offset the DU CCNI contribution, which was slightly lower year-on-year as growth in sales volume was softer in the first quarter. In the second quarter, again, it was the contribution of power generation, while the DU begun its recovery with a 5% volume growth and higher distribution rate because some of the refunds were completed. And actually, the asset true-up was also completed sometime in May of 2022. RES contribution also improved as we offered modified supply offerings to the customers to offset the negative effect of FCRA. In the third quarter of 2023, CCNI grew 66%. Again, power generation contributed 2.6x better than what it contributed last year. So it was PHP 3.5 billion compared with PHP 1.3 billion last year, bulk of which, again, came from PacificLight and also added to that will be the contribution of San Buenaventura. GBP provided PHP 484 million in CCNI compared with a loss of PHP 743 million same period last year. The DU contributed PHP 6.4 billion to Meralco's CCNI, up 41% compared with the same period last year with a 6% increase in sales volumes and the downward -- and also last year, there was the effect of the asset refund. RES contribution also improved as RES continues to recover from the negative effects of FCRA. For all other subsidiaries and [indiscernible] , contribution declined with MIDC's continued build-out of its portfolio for SLB or Sale-Leaseback and BTS or Build to Suit. Our reported and for EBITDA, our core and reported EBITDA for the 9 months ended were at PHP 50.8 billion and 48.2 billion, 36% and 32% up respectively. And those are actually -- the numbers actually surpassed the full year 2022 numbers. On power generation, MGen's contribution to Meralco CCNI grew to PHP 10.2 billion coming from different plants in Singapore and in the Philippines. Wholly owned power generation subsidiary MGen contributed PHP 10.2 billion to Meralco CCNI as of the end of September, higher by nearly 3x -- and this is [ basically ] coming from PacificLight and San Buenaventura. And also the contribution of renewable energy plants, including the 135.5 megawatts [indiscernible] which came on stream in 2023. MGen has combined power generation capacity of over 2,000 megawatts in the Philippines and Singapore. For Singapore's PacificLight, the 100% CCNI is at SGD 332 million or PHP 13.4 billion higher compared with the SGD 230 million here an equivalent PHP 9 billion. On account of higher blended margins, which averaged [ SGD 103.78 ] per megawatt hour compared with $74.24 same period last year. PacificLight's 771 megawatts LNG plant delivered a total of 4,337 gigawatt hours of energy in the 9 months. San Buenaventura, a 455-megawatt supercritical coal fire plant, drove CCNI of PHP 2.9 billion and delivered a total of 1,962 gigawatt hours of energy with plant availability at 95%. The capacity of SBPL is fully contracted by Meralco under an ERC-approved PSA through 2039. GBP posted CCNI of $1.3 billion, a complete reversal of last year's loss of PHP 1.9 billion, attributed to improved [indiscernible] availability and contracting. They have actually terminated all of its fixed rate contracts and we contracted the same capacities. GBP delivered a total of 4,618 gigawatt hours of energy from its portfolio of coal and oil plants with a net capacity of 823.6 megawatts, of which 676 were contracted under PSA's with captive and contestable customers. MGen renewable or MGreen is the renewable arm of the group. It closed the 9 months with a total of PHP 72 million in CCNI contribution and delivered energy of 254 gigawatt hours from its solar plants, which are BulacanSol, [indiscernible] and the Baras solar plant. BulacanSol is the 55-megawatt solar plant in partnership with PowerSource and it achieved availability of 95% and then there were 84 gigawatt power to Meralco under a 20-year ERC-approved PSA. Nuevo Solar, a 68-megawatt AC solar plant in partnership with Vena Energy started delivering its entire output in power in March of 2023. As of end September, Nuevo Solar delivered a total of 111 gigawatt hours of energy. The 75-megawatt AC Baras solar plant, in Baras Rizal is owned and operated by PH Renewable a partnership with Mitsui Renewable Philippines. Commissioning tests of Phase 1 for the 67.1 megawatt AC project has been completed and commercial operations is expected before year-end. Phase 2 is due for COD by mid of 2024. The Baras plant has delivered a total of 59 gigawatt hours of energy to Mpower as of September. Our consolidated interest-bearing debt stood at PHP 102.1 billion, including debt of subsidiaries, which totaled PHP 52.3 billion. Maturities within 1 year include the [indiscernible] option in the 12-year fixed rate code, which Meralco issued back in 2013, totaling PHP 7 billion. Debt of our subsidiaries accounted for 51% or PHP 52.3 billion, of which PHP 44.1 million belong to MGen GBP. Cash and cash equivalents amounted to PHP 73 billion while short-term investments totaled PHP 7.2 billion. Net debt at the end of the 9 months of 2023 was at PHP 21.8 billion, while net debt to EBITDA stood at 0.34x. Our long-term investments and restricted cash totaled PHP 22.4 billion. Our core and reported EPS were at PHP 26.638 and PHP 25.197 per share, up 53% and 44% respectively. On October 31, 2023, S&P Global Ratings updated its credit rating on Meralco with a revised outlook to positive on stable cash flows and stronger financials. The BBB- rating was reaffirmed. The S&P report stated that the credit profile of Meralco will likely improve with support from improving profitability of the unregulated power generation business and stable cash flows from the distribution utility business. Steady cash flow from the regulated power distribution business is anticipated despite the delay in [indiscernible]. This will support Meralco's financial strength. The positive outlook reflects S&P's expectation for Meralco's improving performance in clarity and regulatory tariffs to give the stronger financial metrics over the next 12 to 24 months. That ends my report.

Thank you, Ma'am Betty. We will now move to the operating results presentation to be led by our COO, Mr. Ronnie Aperocho. He will be followed by the heads of the different business segments who will provide further details.

Good afternoon, everyone. We're happy to report that our major business drivers and service KPIs are better or have improved during the first 9 months of the year as compared to the same period last year. Energy sales grew by 4% at 38,164 gigawatt hours. Customer count also grew by 3%. So the total customer accounts at Meralco right now is 7.771 million. Net system input also grew by 4% at 39,958-gigawatt hours, while Meralco peak demand stays at 8.44 gigawatts, which was registered last May this year. For system loss, the 12-month moving outreach as of September was at 5.81%. This is 0.07 percentage point lower than the 5.88% in 2022, while total SAIFI or the system average interruption frequency index was lower by 5% at 1.0x, while the total system average interruption duration index also improved -- was lower by 3% at 99.583 minutes. So this means that our customers have experienced lesser and shorter power outages during the first 9 months of the year. Time to connect, this is the measure of how fast can we connect our [indiscernible] applied for electric service and time to connect has improved by 18%, and it's now at 1.36 days. Electricity rate, however, increased by 12%, that then PHP 10.51 per kilowatt hours versus the PHP 9.43 in the same period in 2022. I am now turning over to Ferdie for the customer [indiscernible] report.

Okay. Good afternoon, everyone. As alluded by Ronnie, our consolidated distribution in [indiscernible] volume grew by 4.4% during the first 9 months, mainly driven by the robust growth of residential and commercial segment sales. It reached 38,163 (sic) [38,164] gigawatt hours for the first 9 months, higher compared to the 36,553 gigawatt hours same period last year. Meralco volume rose 4.4%, while the Clark Electric Distribution Corporation sales [indiscernible] increased by 7%. The full transition to face-to-face process in both public and private schools, the nationwide lifting of COVID-19 state of public health emergency at the start of Q3, as well as the shift to warmer weather patterns from the La Nina through El Nino combined -- this combined resulted to [ a huge ] 6.3% sales growth for quarter 3 alone. And to recall, in quarter 1, we grew 2%. Quarter 2, we grew 4.7% and now quarter 3, we grew at 6.3%. In terms of sales mix, the mix continues to shift towards pre-pandemic levels with commercial segment leading now accounting for 37% of total sales compared to 35% last year. Residential sales is up 35%, down a percentage point from 36% last year while industrial segment contribution also decreased from 30% last year to 28% this year. Next slide, please. So for energy sales profile and drivers, residential since we reported recovered and raised the year-to-date sales by 3.4% to 13,300 gigawatt hours. The above-average [ meterage ] are by [indiscernible] in the third quarter due to shipping of El Nino households who used cooling appliances more often to maintain comfort. Of course, it was also noted that there's increased consumption and occupancy in condominiums and dormitories in the metro due to the return of college and university students for on-site classes as well as more physical nature of work regiments. Secondly, all areas registered improvement in sales for the residential segment from the provinces to the Metro Manila. Commercial sales volume grew close to 10% to 14,122 for the first 9 months compared to same period last year. The nation-wide lifting of COVID-19 State of Public Health Emergency last July, further pushed the impetus to transition to fully personal experience. So first, the largest increase was noted in education, which at least 65% in terms of sales and restaurant, hotels, real estate also experienced double-digit increase compared to the first 9 months last year. Industrial sector sis gradually showing signs of rebound as the gap in sales volume narrowed down to minus 1% or [indiscernible] compared to last year. So sales is up 10,570 gigawatt hours this year compared to 10,677 gigawatt hours last year. So manage, they manage -- industrial managed to have 1% increase as semiconductors continue to increase and electricity, gas and water maintain its growing performance. Semicon which is actually negative 4% year-to-date, actively showed signs of recovery the last 2 months. And in fact, for the month of September, which showed a 4% increase for the first time as key accounts, they diversified the automotive chips and resume 2 plant operations, respectively. Cement likewise increase or reduce [indiscernible] increasing, but still minus 6% year-to-date, but the last 2 months showed positive numbers. For the beverage sectors and generation [indiscernible] show growth. However, demand in plastics is still continues to be affected by high input growth and lower plant production. So next slide, please. So for the last slide. So we continue to grow our customer base as a result of continuous robust energization performance both for project covered application and [indiscernible] service application. Our customer count grew to almost 200,000 new customers and it's now at 7.77 million customers compared to 7.57 million last year. Our registration, both for project covered application and ordinary service application is maintained despite that we finished the catch-up of the pandemic backlogs in 2021 and 2022. So we still maintain the robust administration count with project covered application running at between 700 to 800 project covered applications per month, much better than the pre-pandemic average of 450 to 500. And for ordinary service applications, it runs in the 20,000 range, also much better than the 80,000 average during the pre-pandemic [indiscernible]. So that ends the [indiscernible] report. And I'll now turn you over to Froilan for the networks report .

Good afternoon, everyone. To continue on networks report, the consolidated NSI for the third quarter of 2023 is 39,958 gigawatt hour, which is 4% higher compared to the same period last year. This is attributed to the increased economic activity, especially with increased social engagements, including in-person attendance, offices, school and similar [indiscernible] . As of September year-to-date, the energy mix was characterized by a lower share of both new and old PSAs, now at 21% and 35%, respectively, which is mainly due to the termination of a [indiscernible], SPPC and SPI sales . This led also to higher WESM purchases resulting in the increase of WESM share to 13%. For the fuel mix, this was also affected by the termination of the SPPC and SPI sales , reducing the share of natural gas 26%, while coal share increased to 32% when emergency PSA with coal plants, GNPD, PIL Pagdilaw and so on were signed to provide the placement power previously provided by SPPC and SPI. Meralco peak demand for the year is still at 8.44 gigawatts reported on May 9 and is a 4% increase versus 2022. On the other hand, a new Luzon Peak demand was achieved on July 6, 2023, with 12.55 gigawatt demand, 5% increase against [indiscernible] 2022 . The 12-month moving average system loss is now at 5.81%, which is a 0.07 percentage point improvement from last year. This is still well below the indicative 6.5% regulatory count. Generally, for S-Factor and guaranteed service level, we are still delivering well within the performance ceiling -- SAIFI improved by 5% at 1.004x, while SAIDI improved by 3% at 99.583 millimeters. However, MAIFI declined 3% higher than last year, largely driven for transient ports and equipment in [indiscernible]. Meanwhile, the average time to cast its obligations and the average time to connect costumers continue to see significant improvements over last year and are now at 24%, an 18% improvement [indiscernible] . This is attributed to the streamlining of processes to be [indiscernible] pending applications. For cost center performance, there was a slight decline of 0.3% but we're more or less able to sustain the performance last year as we answered 96.75% of calls within [ 20 segments ]. GSL performances are well below the annual average thresholds. Next slide. For CapEx, we now stand at 70% utilization or PHP 14 billion worth of CapEx implemented as of September with the majority of our spend on new connections, asset renewals and load growth projects. We're also continuously supporting government projects, both under the build better more and the pole relocation programs, the DPWH and [indiscernible]. Last September 24, we successfully energized the Pulong Santa Cruz 115 kV switching station. This project will improve the reliability and flexibility of the existing Laguna Bel-Air, Santa Rosa 115 kV line as it caters to the high degree of service reliability and power quality required by ePLDT Vitro Hyperscale Data Center in Santa Rosa, Laguna. Thank you.

Good afternoon, everyone. For the regulatory updates for the first 9 months of 2023 the average retail rate was 12% higher than 2022, which is mainly due to the higher generation charge. [indiscernible] generation charge for the first 9 months is registered a 14.3% increase from the first 9 months of 2022 due to higher fuel costs, higher WESM prices and an offtake of peso depreciation. Following the increase in generation costs, average system loss charge also increased by 10.5%. The 18.6% decrease in average transmission cost was mainly due to lower ancillary service charges. The average distribution rate with the distribution rate for the first 9 months of 2023 is PHP 1.2231per square kilowatt hour. So when we normalize this by taking off EPC or [ BRD4 ], the average rate decreased by -- decreased to PHP 1.4964 per kilowatt hour in the first 9 months of 2023 from [indiscernible] per kilowatt hour for the same period last year. That decrease is due to a decrease in sales share, effective rate of residential customers and effective way to commercial customers. Subsidies, taxes and universal charge increased by 14.3%, mainly due to higher effective taxes and higher universal charges approved by the ERC. 100% decrease in FIT-ALL was due to suspended collection -- for the first 9 months of 2023, following the ERC directive. We have an update on the Terra Solar PSA. Last August 10, the ERC issued a notice of resolution dated August 8, 2023, approving with final authority the Meralco TSI PSA -- the TSPI PSA with the following modifications and conditions. No details are yet allowed on onetime price adjustment. However, the ERC disallowed the AS cost recovery payment and the purchase of excess capacity and the renewal and extension of term. The TSPI was also directed to submit several documents. The base rate is shown on the table in your screen. The annual capacity there is subject to a one time price adjustment. We have yet to receive the official copy of the actual ERC decision. Next slide. On the price adjustment or [indiscernible] . You will recall that March 18, 2022, [indiscernible] sent notice approval change in the content claiming that Ukraine, Russia conflict and other geopolitical economic [indiscernible] was adverse impact on its ability to supply under the PSA claim losses of PHP 1.2 billion ordering the period April 2022 until December 2022. So last April 13 [indiscernible] filed with the ERC a joint motion for fund price adjustment and that motion was joined by Meralco. [indiscernible] sent notice to terminate the PSA for breach of the threshold level to effective 6 months later and [indiscernible] supply in Meralco last December 5, 2022. On August 29, of 2023, Meralco reached its decision dated March 8, in the decision, the ERC among other things granted the price adjustment motion and allowed recovery [ operates its upward fewer ] losses due to a change in the contents from the -- for the period from April 2, 2022 to September 25, 2022 amounting to PHP 884 million, which is to be included in Meralco's true-up application. It also granted the termination of the PSA effective upon the date of the actual termination which is on December 5, 2022. Because [indiscernible] unrecovered amount for April 25 already reached 75 million, which is the above threshold able book provided in the PSA for the CIC claims. And it also adopted a [indiscernible] expeditionary approved last October '23. 2022 was the final way. So last October 3, 2023, Meralco filed a motion for need to file supplemental applications to include a [indiscernible] claim in its generation was over under recovery and it's true of application under ERC case #2023-046. Next slide is on the -- on the withdrawal of the 5RP application. [indiscernible] Last March 16 remember that we filed the 5RP application for approval of the annual revenue requirement and the performance ascended scheme for regulatory use 2023 to 2026. The total ARR for [ Primark ] is PHP 320.4 billion, and the average price is PHP 1.57 per kilowatt hour. So last September 16, the last -- of 2022, that was the last year in conducted in this case. While the pretrial conference has been completed, the ERC has not issued the pretrial order and the ERC has not also set the case for hearing for presentation of evidence since then. So after more than a year of inaction, Meralco filed an Omnibus motion to allow Meralco to refile the [ Primark ] application designed to go over a new period from RY 2025 to RY 2028. And consider the RY 2023 and RY 2024 as last period with a rate of 1.3522 per kilowatt hour as the final date during this period. And to refile the application no later than February 15, 2024, before the start of the RY 2025. The Omnibus motion of Meralco is premise on the following grounds. Resolving the application would violate the express provision of the RDWR which states that the ARR must be based on forward-looking analysis support as cash flow requirements and must represent the optimal forecast revenue requirement. Due to delays, resolution of the application is no longer based on forecast. The first RY of the 5RP ended already on June 30, 2023. While the second RY, we did the RY 2024, the 5RP's almost at its midway. With the additional activities to be completed, it is likely that the final resolution of the case would not be completed even before the end of RY 2024. There were also super meeting factors like the additional OpEx and CapEx due to new regulatory and legal impositions that need to be considered in the new 5RP application. And it is to the best interest of the consumers that RY 2023 and 2024, repeated similar to the last period with the final rate of 135.22 which is much lower than the average rate of 157 originally applied for in Meralco's application. The new 5RP forecasts are now being prepared in anticipation of ERC's approval of the proposed to global and be filing the application. So finally, as an update on the 1,800 megawatt CSP as well as the 1,200 megawatt brownfield CSP. Following the ERC approval of the termination of the Excellent Energy and NPPCLP PSAs last December 12, 2023, Meralco started the bidding process for the 1,800 megawatt net CSP. Last October 27, Meralco received the certificate of conformity for the procurement of 1,800 megawatt net base load power requirements from the Department of Energy. And on the same date, Meralco [indiscernible] a copy of the COC and informed the DOE of the commencement of the CSP, who was the first publication on November 1, 2023 compliance with the requirements of the ERC's CSP rules. So as mentioned last November, when we published the invitation to be 1,800 megawatts. On November 3, we posted the invitation to bid on the DOE's CSP E-Portal portal and Meralco CSP subsite. So on the table, you will see the milestone events. We are targeting December 26, 2023, as the resubmission deadline. On the other hand, for the 1,200 megawatt brownfield net CSP, Meralco requested already the DOE for the issuance of the certificate of conformity for the invitation to bid and the terms of reference for the 1,200-megawatt brownfield CSP. We are awaiting the action of the DOE on this request. That's it for the regulatory update. Thank you very much.

Good afternoon, everyone. On the sustainability, very pleased to report that last month, Meralco was recognized at the international [indiscernible] or the IGAs with a total of 8 Stevies. The Stevies are the world's -- are among the world's premier awards honoring achievements and positive resolutions of companies globally. Four of the 8 Stevies we won were in the [ IB's ] inaugural or first-ever sustainability awards category. In particular, Meralco was recognized with a gold Stevie and the sustainability leader of the year covering Asia, Australia and New Zealand. Meralco is actually the lone gold Stevie award in this category and the first-ever winner also in this category. Our solar company spectrum was likewise recognized in the video awards category sustainability environment for its video on the solar rooftop installation of Spectrum. This was a collaboration between our Meralco marketing team and Spectrum -- also a gold Stevie and the first ever winner in this category. And finally, on the sustainability front, our diversity and inclusion program #Mbrace was awarded a Bronze Stevie in the sustainability initiative with the air category also covering Asia, Australia and New Zealand. In addition, our One Meralco Foundation also reaped a number of Stevies across various categories. First of all, our One Meralco Foundation President, Jeff Tarayao was hailed as a thought leader of the year in government or a nonprofit and also was a gold Stevie winner in that category. Two of our CSR programs, our household electrification program and our one port piece program, we're also awarded Bronze Stevies in the CSR program of the year category in Asia, Australia and New Zealand. Finally, in the communications campaign front, our powering of communities during the pandemic [indiscernible] . Thank you very much.

On top of these awards, Meralco's Chief Sustainability Officer, Raymond Ravelo, has been recognized both locally and internationally for his leadership towards sustainability. This gives credit to his role in establishing the overarching sustainability agenda, which is powering the [indiscernible] the long-term sustainability strategy from 2021 to 2050 and planning various sustainability programs. In particular, in receivables, the sustainability year-over-year category of the 2023 IPAs, where he is the lone gold winner in the 2023 Asia Pacific Sustainability thought leader of the year award by environment [ peers ]. This recognition serve as testament to the commitment of the company and its leaders to building a sustainable [indiscernible] .

Thank you, sirs, for your respective presentations. Before we proceed, I'd like to recognize the presence of our Chairman. Chairman [indiscernible] thanks for joining us. . The next part of the presentation will be the Meralco PowerGen highlights to be presented by [ Mr. Dominador Lim ], MGen Chief Operating Officer.

Good afternoon, everyone. Allow us to walk you through PG on the 9 months operations of the power generation group of Meralco. As you begin to see in the [ Gold line ] generation in so September of this year is positive. It's actually 6% higher. On the TBD, our portfolio plans at about 9 CSP units, 775 megawatts of net capacity is actually generated higher than last year by about 10%. SBP, which is our pulverized coal for 155 megawatts, slightly down, partly because of 13 day outage and middle of this year, sometime in June. And also slightly lower this March compared to last year. On the PacificLight line, that is actually our portfolio, which a subsidiary [ interport ] that is a combined cycle gas turbine. Two units of 771 megawatts that net [indiscernible] by 4%. The MGreen, although the capacity is slightly only about 200-megawatt [ DC ] we aptly registered break jump primarily because we have 2 solar PV farms that actually came in to variation early this year. And that actually was the primary reason why we had a big challenge in energy delivery as of this report to [indiscernible] In the second slide, it actually is the segue to those 2 PV plants that we have. One is somewhere up north of the major island in -- it's actually in partnership with Vena Energy, Pasquin Energy Holdings we have actually reached full capacity at 68-megawatt ac sometime in February of this year. It has also availed the final authority to connect and is just waiting for the ERCs regional authority to operate in the COC. On the right-hand side, that's the MGreen 75 megawatts solar power project in Baras. We are also in partnership with Mitsui, the local unit is Mit-Renewables Philippine Corporation. The first phase, which is the big chunk of the 75-megawatt ac be now in the commissioning phase and in the operation. We're just waiting again for the ERC approval sometime at the end of this year. And then the second phase actually of the 67.5 will be operated by some time on the middle of next year. The last one is a big investment MGen renewable energy -- and in partnership with SP New Energy Corporation by about PHP 16 billion -- PHP 15.9 billion to be up through the subscription of 15.7 billion common shares and 19.4 billion redeemable voting shares with SPNEC. SPNEC is a publicly listed integrated developer, owner and operator of solar power projects. SPNEC is a majority owned by Solar Philippines Power, Philippines Holdings or SPH. At transaction close, MGreen's common and preferred voting shares will account for the controlling stake in SPNEC. MGreen with the agreement of SPH, we use SPNEC as the primary vehicle to develop the 3,500 megawatt PD solar panels and a 4,000-megawatt hour battery energy storage system in Luzon. Thank you.

Thank you, Sir. Before we proceed to the Q&A, I'd like to call on our Chairman and CEO, Mr. Manuel Pangilinan for a few words.

Thank you, and good afternoon to everybody. Contained in our press statement, it should be around noon time today. We're guiding to full year 2020 consolidated for an income of PHP 37 billion. So that's my statement, and I will now open to your questions.

Thank you very much, sir. We will now open the floor for questions for analysts and investors. [Operator Instructions] Please also speak the name of the executive you would like to ask the question to. I can see that Jelline Gaza has raised her hand. Go ahead.

Hello, can you hear me?

Yes, Jelline go ahead.

I have 4 questions, actually. The first set of questions is with regard to the generation segment of the company. I guess, for Mr. Kamo. Number one is on the PacificLight. What drove the higher [indiscernible] or margins as of 9 months despite the use of [indiscernible] in the Singapore spot market? And then can you please comment on the sustainability of earnings going forward into 2020 -- I mean 4Q in 2024? That's the first one.

Yes, this is [indiscernible] from MGen. On the PacificLight, okay, the main driver continued [indiscernible] high tariff or nonreal margin at the experienced by the company in the Singapore market continues to be high, okay, both from a [ subtracting ] and from a [ pulling ] margin. Actually, they're doing about [ SPD 105 ] per since this the same dollar, no? and this $5, $10 per megawatt hour, okay of nonfuel margin paid for material. [indiscernible] that's the second part of the question.

How sustainable is it?

How sustainable? Now moving forward, the way the people is in the far leading in is basically a high quite single market in return. They are expecting that the market good core deck starting next year and will further correct into 2025 and 2026 before it lapses further to about $45 per megawatt hour going forward. At least that's how we're seeing it at the moment.

Thank you, sir. Jelline go ahead with your other questions.

How about with the visibility on the CSP auctions for the base load, how will this impact your Atimonan growth aspiration?

The CSP. How will the CSP impact the plans as far as Atimonan? [indiscernible]

I think on the CSP, there is a power supply plan that's been published when this was properly published by Meralco and has already been exactly in the DOE website now. And looking at the trajectory of the base load, given that the [indiscernible] energy is a base load nonrenewal bond. The earliest I believe, that the project is subject to obviously a lot of different factors. But if we just base it on the power supplies plan, we are actually looking at the earliest sometime in 2028 I guess. That's probably the next opportunity for a size as big as Atimonan plant, which is about 1,200 megawatts.

And then lastly, for Miss Betty on the [ PTC ] termination. We understand that the ERC has allowed you around $884 million of recovery. Is this already final? And if -- and how will this impact your P&L? And when do you expect changes to be reflected?

Yes, the ERC did approve the recovery, although that amount covers only through September. PBC will be filing for the remainder of the period. So until we get the final approval, that spend, we will recognize the total amount. And the ERC would also indicate how the recovery will be in their final decision. So as of this moment, we don't have visibility yet on how the recovery will [Audio Gap].

Okay. Understand. And for my last question, on the [ fifth RP ] with [indiscernible] , when do you expect to submit the revised application and -- what are your expectation the changes on the input's the same?

Well first of all, we need to -- we need to have the approval press of the termination with one of the 5RP before we can refile the new 5RP application covering [indiscernible] As soon as we are able to get that approval, we are working on the filing of that new application by February 15 latest. So that will be in time for the -- for the start of the new reset sometime in July 2024. Of course, we expect some changes in the values like in the annual revenue requirements because this will not offer a new set of 4 regulatory years and considering the past so that we will be adding additional CapEx and OpEx as a result of new regulations and requirements and ForEx.

Any other questions from our other analysts? There is a question here from [ Herman for Abacus ]. Regarding the 3,500 megawatt project under SPNEC was this separate from Terra Solar, or will it be [indiscernible]? Will MGreen subscribe to additional SPNEC shares in the future.

[ Herman ], it's the same 3,500 of their assumed part. And then to your question on whether MGreen will be subscribing to additional SPNEC shares. Well there's a structure for the acquisition. It will involve both our primary and secondary shares. But the numbers are yet to be finalized.

I think it might be good to give you -- explain to the current structure of how is SPNEC and Terra Solar related to each other . The contemplation was for Terra Solar be the operating solar for the company. Because that has the BSA with Meralco. And for the moment, Terra Solar is owned 50-50. 50% each for by SPNEC and 50% by [indiscernible] infrastructure, which is the [indiscernible] group. Where Meralco's invested in the recent vesting is at the SPNEC level And [indiscernible] shoot out that happened between [indiscernible] and the [indiscernible] group and the prime infrastructure. For one, we take the other out of their respective investment of 50% in Terra Solar. So the deadline for the shootout will sometime in January 2024. So we will know on or before that time, who will be the remaining shareholder of Terra Solar.

Any other questions from our analysts. We have another question from [ Ferlin Tan ] of [indiscernible] Asset Management. May I ask what is driving the quarter-on-quarter growth in share of income from associates.

[ Ferlin ], Betty here. The one that's driving the share in income would be PacificLight -- as you will see and as we have discussed, the contribution of PacificLight has been increasing over the -- well, at least in the 9 months, and it started last year. For the 9-month period, our share in the PLP income is PHP 7.9 billion -- and then the other part of that would be our share in the income of San Buenaventura, which is PHP 1.5 billion.

Are there any other questions from analysts and investors? Quick follow-up from [ Ferlin ] again. I think I've missed what we shared earlier, but could you explain why it was the increase -- in third quarter [ 2020], the contribution from PacificLight when new SVP in 3Q '23 was lower than that for [indiscernible] .

That's right. Okay. Now in second quarter of 2023, you gave, I think it happened in April until June. One unit of PacificLight under when we have been taken incorporate the tension to improve the efficiency of the plan. That basically attributed to why second quarter was down compared to third Q wherein the 2 units are fully available.

Thank you, sir. There's another question from Jelline Gaza. She asks, can you please discuss the dividend policy at the PacificLight level and how fast the repatriation is to MGen's benefit.

Okay. As far as, obviously, this is very typical, okay, [indiscernible] earnings okay, maybe simply live without -- and depending on the liquidity, meaning you can take into account [indiscernible] capital and other expenditures that we allowed for okay. They basically gave it out to all the shareholders [indiscernible] of the company. Then how fast okay. I mean, again, this depends on the available to get basically at that point in time. But they do actually remain the pay within the 2, 3 months' time.

[indiscernible]

That's right. Obviously, okay. There's also the condition with regards to the loan retainment, okay? One they do have a ratio to [indiscernible] And second, okay, under the agreement with the bank, they have to -- again, prior to the refinancing of their loan is that they had to basically say okay portions and the voluntary pay portion of the loan and then advocate portion of the amount has to be given back to shareholders at a point.

The next question comes from [ Angelin of Metromar Trust ]. She has a couple of questions. What initiatives will the company undertake to continuously achieve growth in 2024? And her second question is what is the CapEx guidance for 2024?

[indiscernible] is the answer the CapEx [indiscernible] 2024? Was that the question?

The second question was CapEx guidance for 2024.

Well, I think -- we're doing the budget for 2024. It is probably a bit early to be quite firm about our CapEx numbers for next year. But this year, our CapEx.

For the year alone PHP 25 billion.

That's for 2024. This year is [indiscernible] PHP 21 billion.

Okay. So the indicative number for '24 is PHP 25 billion for DU, no? this share will be spending 21 -- to date, we've spent about.

PHP 21.1 billion. For total. The UN and the towers.

For the whole year? How much have we spent to date?

PHP 21.1.

That's the whole year?

To date, sir? 9 months.

So we'll be spending more than PHP 21 billion this year?

Yes. That's the budget for next CapEx for the DU..

Anyway, so that's the this year. that's for DU alone. For -- there'll be further investments we're making what we manifested for SPNEC for the solar and a few other removals projects that come [indiscernible] for solar wind. I guess we can give you firmer numbers when we announce our full year results sometime earlier next year.

Thank you very much, sir. The next question comes from [indiscernible] . Any guidance on volumes for the rest of the year and next year also aside from SPNEC are you looking into other growth opportunities to further expand your generation business.

I think I take on the volume. But -- just to recall, in Q1, we grew 2%. Q2, around 4.7%. Q3, we grew in terms of DU sales force by around 6.3% and for quarter 4, we're done with October. October is more than 5%. So we're forecasting around in the vicinity of 5% for the whole of Q4 and that will bring us to around 4.7% year-end. So that's 50,000 for the DU Meralco plus CDC that would be around about 51,000 gigawatt hours. And for next year, I think our forecast will obviously be reported between [ 4% to 4.5% ] increase over this year.

Thank you, sir. The second part of your question relates to other growth opportunities apart from SP Bank when the generation settled.

Actually it started from SDN and as mentioned by our Chairman, there's a slew of projects in the pipeline that in both solar, wind and other technologies as we [indiscernible] . But as of now, we cannot just say look at this point because all of these are still under evaluation and for approval.

The next question comes from Peter [indiscernible] -- with MGreen's acquisition of SPNEC are there any plan discussion to lift SPNEC's suspension before December, 2023? SPNEC remains noncompliant with a minimum public ownership. Can you share a timeline?

As of now Meralco is not close on the SPNEC investment agreement. So in many ways, we have no -- we had no personality to influence the lifting of the suspension of SPNEC's shares. But once we do those, and we hope we could do that before sometime in December before year-end, then we would certainly petition PSC for the lifting of the suspension.

German de la Paz of Abacus has another question. In case that Prime intra would end up to be the sole owner of Terra Solar by January '24, what would be the next step?

So that will involve a discussion between ourselves and the prime infrastructure regarding our investment in Terra Solar itself.

I can see that Jelline Gaza has raised her hand. Go ahead Jelline.

I just have a question on the dividend expectations. I know that you have a PHP 37 billion income guidance for 2023. And historically, you have been paying out around 70% in the last 2 years. How should we think about this going forward given that you have a lineup of acquisitions as well as CapEx expectations for the telco business.

Well, the indicative numbers for the full year is that Meralco will realize a positive free cash flow for the full year 2023. So the question really is -- so the free cash flows indicated is able to sustain these investments, particularly the investments required for DDU and whatever other modest investment might be required. The bigger tickets will come in, in the form of investments in power plants. In SPNEC which will have an investment horizon starting 2024, all the way up to the early part of 2026 when the first class is supposed to be energized under the PSA. So I think we're scoping out the numbers in terms of the requirements for both SPNEC within that same timeframe and other renewable projects that are on the table, right? There's some wind projects, some solar or solar projects that are being considered either by self or in partnership with other solar vessel. So I think we'll be a bit firmer on the numbers in terms of both the CapEx requirements and the investment requirements that will be asked of Meralco next 3 to 4 years. Mindful of the fact that we do have -- we do pay a significant amount of our income in dividend terms. So we would hope -- our aim is to maintain that dividend payment in the coming years.

Any other questions from our analysts? If there will be no further questions, I would like to thank everyone for participating in today's call. Thank you very much again. As we end, I would like to inform everyone that you may listen to an audio recording of today's briefing from our website under the Investor Relations portion. Thank you very much again for attending, and have a good day. We wish to see you again when we release our full year 2023 results sometime early next year. Thank you very much. Merry Christmas as well.