Manila Electric Company (MER) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome our investors and analysts on site here in the 14th floor of Lopez Building inside the Meralco Operating Center, as well as those attending online via MS Teams. I am P.J. Ramos from the Meralco Investor Relations Team and I will be moderating today's briefing. Before we proceed any further, please be advised that the conference call is recorded. Kindly follow the ground rules that were sent to you beforehand. We will present the financial and operating results of Meralco for the quarter ended September 30, 2024. You may download a copy of the presentation from our website, www.meralco.com.ph, under the Investor Relations section. We have members of Meralco's management team on hand for this briefing to be led by our EVP and Chief Operating Officer, Mr. Ronnie Aperocho; SVP and Chief Revenue Officer, Mr. Ferdinand Geluz; SVP and Chief Finance Officer, Ms. Betty Siy-Yap; FVP and Head of Networks, Mr. Froilan Savet; SVP and Head of Regulatory Affairs and DU Regulatory Management, Attorney Jose Ronald Valles; Senior Vice President, Assistant Corporate Secretary, Chief Legal Counsel, Compliance Officer and Head of Legal and Corporate Governance, Attorney William Pamintuan; FVP and Chief Sustainability Officer, Mr. Raymond Ravelo; and MGen President and CEO, Mr. Manny Rubio. I'd like also to acknowledge other Meralco executives present today. We will begin the presentation with the financial highlights, followed by the operating results of Meralco's DU business, then update from Meralco's PowerGen Corporation. Shortly after, we will have a brief report on our company's sustainability report. At this point, I would like to try to hand the floor to our Chief Finance Officer, Ms. Betty Siy-Yap.

Good afternoon, ladies and gentlemen -- good afternoon, ladies and gentlemen. Representing the results for the 9 months ended September 30, 2024. On your screen is a summary financial highlights. For the third quarter of 2024, we saw the highest third quarter results with the continued momentum across all business segments. The third quarter CCNI was at PHP 11.9 billion and this was generated from 4% increase in sales volume, higher contribution from global business power plants from contracts and income from WESM and reserve market. We saw higher trading gains from the retail electricity supply segment across the group. We also saw higher yields from fixed income placements. In the third quarter also, we consolidated our tower business under Miescor Infrastructure Development Corporation or MIDC with Phil-Tower Consortium, Inc. creating one of the largest telco tower companies in the Philippines. For the 9 months ended September 30, 2024, we delivered record CCNI of PHP 35.1 billion, 17% higher year-on-year and this comes from the DU share at 59%, Power Generation accounted for 29% and the Collective RES and non-Power subsidiaries delivered 16%. Dividends received from our unconsolidated investees totaled PHP 8.6 billion, of which 87% was from PacificLight and San Buenaventura. In the third quarter also, S&P raised our long-term credit rating to BBB, a notch below the sovereign grade credit rating of BBB positive, and our outlook remained at stable. This Chart -- this chart shows our quarterly financial highlights. For the third quarter of 2024, as mentioned, CCNI is at PHP 11.9 billion, 10% higher than last year's PHP 10.8 billion. The DU CCNI contribution increased by 12% from PHP 6.4 billion to PHP 7.7 billion with the 4% increase in sales volume from 13,372 gigawatt hours to 13,918 gigawatt hours. This accounted for about PHP 500 million impact or addition to the CCNI. Our contribution of the -- contribution from the unregulated business was at PHP 4.2 billion almost flat versus last year. The higher power generation contribution came largely from GBP which was PHP 653 million compared with PHP 485 million last year. This comes from their contracts as well as WESM sales. This partially offset the lower contribution by PacificLight, although remains to be positive, which was at -- which was lower contribution by PHP 796 million at PHP 1.8 billion in 2024 versus from last year's PHP 2.6 billion. RES CCNI contribution increased by 49% from PHP 956 million to PHP 1.4 billion, due to higher trading gains and better margins for their negotiated contracts. Our consolidated CCNI for the 9 months was higher by 17% at PHP 35.1 billion compared with PHP 30 billion in the same period owing to the consistent increase in sales volume of the distribution utility and contribution from power generation and RES. Our consolidated reported net income rose by 19% to PHP 33.8 billion from PHP 28.4 billion, while our core EBITDA increased by 16% from PHP 50.8 billion to PHP 59 billion. The gap between CCNI and our reported net income is accounted for by the day 1 gain adjustment of PHP 1.7 billion, foreign exchange loss of PHP 32 million and SPNEC's loss on exercise of put option of PHP 48 million. Net gain on sale of assets by PEDC of about close to PHP 400 million. Our consolidated revenues grew by 6% to PHP 355.4 billion from PHP 335.2 billion in 2023, mainly from the 7% increase in volume. Costs and expenses increased by 4% to PHP 319 billion, the bulk of which still pertains to purchased power costs which accounted for 82% of the total costs and expenses. Our capital expenditures totaled PHP 26 billion, largely from the distribution network improvement projects, development of solar plants and purchase and construction of the telecommunications tower. Our cash and cash equivalents amounted to PHP 65.5 billion while our consolidated debt was at PHP 89.1 billion. Of the total CCNI, our regulated business or the distribution business accounted for 59% or PHP 20.5 billion as volume grew 7% with residential and commercial volumes increasing by 10% and 8%, respectively. For our unregulated business, this accounted for 41%. As expected, power generation contribution was at around PHP 8.9 billion or 25% of the total. The RES business accounted for the difference. As mentioned, this was largely from the trading gains and higher margins from the WESM. We go to the details of our revenues. Consolidated revenues grew by 6% to PHP 355.4 billion, mainly on account of the increase in volume and higher transmission charges. Generation, transmission and other pass-through charges increased by 7% reflecting the volume increase. With respect to transmission, this is accounted for by the higher ancillary charges billed by National Grid Corporation of the Philippines. Our generation charge meanwhile decreased on a per kilowatt hour basis due to lower WESM charges and decrease in international coal prices and implementation of the new PSAs from the recently concluded CSPs. These factors more than offset the impact of the peso depreciation, which weakened to an average of PHP 56.99 per U.S. dollar during the first 9 months versus PHP 55.49 in the same period last year. In addition, this also offset the higher cost of fuel from the First Gas plants where they use LNG. With the ERC approval of the interim average rate of PHP 1.35 per kilowatt hour, our distribution revenue increased reflecting the 7% volume increase. Energy fees which totaled PHP 18.5 decreased by 9% due to lower fuel and coal prices coupled with lower plant availability of Cebu Energy and Panay Energy, which was partially offset by revenues from the strategic participation of GBP's Visayas power plant in the co-optimized and reserve markets. With respect to MIDC, note that we have completed the merger with PhilTower now by creating a new holding company called Pylon Holdings. The effective interest of MIESCOR in MIDC and PhilTower is 26.6%. Costs and expenses totaled PHP 319 billion, of which purchased power costs accounted for 82%. OpEx represented 9%, while depreciation and combined coal and fuel and power plant O&M accounted for 4%. Purchased power increased by 5% to PHP 262 billion, consistent with the movement of pass-through charges. Our operating expenses increased by 8% due to intensified maintenance work on DU facilities including work done to address overloaded transformers during the high heat index period, as well as activities in preparation for the rainy and holiday seasons, higher cost of software maintenance and subscription as well as inclusion or consolidation of the SP New Energy or SPNEC expenses this year following MGen's acquisition of a majority stake at the end of 2023. Depreciation and amortization increased by 9% to PHP 13.3 billion, due to the completed capital expenditures of the distribution utilities, the acquired towers for SLB or sale leaseback as well as the completed build to suit towers of MIDC. The completion of the first phase of the Baras plant in March of 2023 and the completion of Phase 2 in August of this year. The combined coal and fuel and O&M expense of our power plants amounted to PHP 10.8 billion, 23% lower with a decrease in fuel and coal prices. With respect to our capital expenditures, this total PHP 26 billion, the DU CapEx amounted to 65% of the total, which comprised largely of distribution network project which includes new connections, asset renewals, load growth and maintenance CapEx. Power generation CapEx was 11% while other subsidiary CapEx which was largely MIDC is 24%. With respect to MIDC, we deconsolidated starting September of this year. The next slide shows our Power Generation results. MGen's contribution to Meralco's earnings for the 9 months was driven by operational stability and efficiency of its power generating plants as well as maximized opportunities in the co-optimized and reserve market. As of end of September, MGen had total power generation capacity of 2,417 megawatts in its diversified portfolio in the Philippines and Singapore. During the period, MGen delivered a total of 11,556 gigawatt hours of energy, 3% more compared with the same period last year. PacificLight, which owns a liquefied natural gas facility in Jurong Island, Singapore booked core net income of SGD 219.9 million or an equivalent PHP 9.5 billion. While the total delivered energy is 4,299 gigawatt hours, 1% lower than last year's 4,337 gigawatt hours. Global Business Power recorded CCNI of PHP 2.2 billion, 62% better than last year's results. The San Buenaventura plant delivered a total of 2,493 gigawatt hours, a 27% increase over from the 1,962 gigawatt hours in the same year last year. With respect to dividends received for PacificLight, we receive a total of PHP 5.5 billion in the 9 months of 2024 and PHP 2 billion from San Buenaventura. Our consolidated interest-bearing debt stood at PHP 89.1 billion, including the PHP 47.9 billion debt of our subsidiaries. Our debt maturities are spread through 2039 with net debt as of the end of September 2024 at PHP 14.5 billion. Net debt to EBITDA of 0.2x. All of our consolidated debt are denominated in Philippine peso. Cash and cash equivalent amounted to PHP 65.5 billion, and short-term investments totaled PHP 9.1 billion. Our core EPS is at PHP 31.137 per share, up 17% while our reported EPS amounted to PHP 29.948 per share, 19% better than last year. The S&P upgraded Meralco's credit rating to BBB. Meralco's solid financial performance earned the upgrade from S&P Global which is now a notch below the Philippines BBB positive sovereign grade credit rating. S&P Global cited the company's strong financial position, improving profitability of the power generation business and the steady cash flows from the regulated distribution business and affirm Meralco's stable outlook. That ends my report. Thank you.

Thank you. Good afternoon to everyone. For the operational highlights of our main distribution utility business, we're happy to report that we have seen remarkable growth in our business drivers such as energy sales and peak demand, while service performance has notably improved, especially our network reliability with double-digit improvements over last year's performance. Energy sales grew by 7.1% at 40,872 gigawatt hours. The net system input also grew by 7.7% at 42,480 gigawatt hours. Meralco's peak demand stood at 9.32 gigawatts. This was registered last April 24, 2024. So basically, all these increases were driven by the sustained growth in commercial and residential segments as well as the recovery on the Industrial segment. For the customer count, we're now at -- as of end of September, 7.986 million customers, but we're looking at breaking or achieving a 8 million customer connection milestone by -- before the end of the month. So that's something that we are celebrating -- that we will be celebrating that of attaining the 8 million customer connections. In terms of service performance, system loss was at 6.04%, higher by 0.23 percentage point versus the same period last year. But this still stays below the 6.5% regulatory cap. So basically the increase was driven by the higher share of high loss to serve residential customers in the total sales mix. As for reference, before the pandemic, the share of residential customers was only at 31%. But in 2024, the share of residential customers is already at 36%. So that explains why our blended or total system loss was higher. But of course, the entire networks organization, the entire -- our frontline organizations are doing its best to somehow bring the system loss below 6% at the end of the year. Meanwhile, for our reliability indicators, our total SAIFI and total SAIDI improved by double digits. Total SAIFI improved by 16%. When you say improvement, this means that reduction in terms of interruption frequency as well as reduction also in terms of interruption duration. Total SAIDI improved by 87 -- 11.7% at 87.89 minutes. Time to connect still at below 2 days. So this is still within the rewards level of the performance based regulation of ERC. And lastly on electricity rate, our average electricity retail rate is PHP 10.44 per kilowatt hours, slightly lower by 0.6% over same period last year, mainly due to the decrease in generation charge from lower WESM prices, lower coal prices, implementation of new power supply agreements and implementation of generation over recovery adjustment for July to September 2024 billing months. Thank you. And I'm turning you over to Ferdy Geluz for the customer report.

Good afternoon, everyone. For the details of the consolidated energy sales, our cost of sales for the first 9 months of the year already reached 40,000 gigawatt hours at 40,872 gigawatt hours, a 7.1% increase or is an increase of around 2,708 gigawatt hours compared to same period last year and is driven by continued growth in the commercial and residential segments as well as modest recovery of the industrial segment. So residential is still at double-digit growth at 10.4% for the first 9 months with new energizations, upswing in organic per capita consumption due to warmer temperatures brought about by the first half El Nino. So for residential, it registered an additional of close to 1,400 gigawatt hours versus the same period last year. A 1,000 gigawatt hours is basically from organic sales or same store sales. So our year-to-date per capita consumption is at -- for residential is at 226 kilowatt hours compared to 210 kilowatt hours per capita in 2023, while close to 380 gigawatt hours came from new energizations or newly energized customers. Commercial grew for the first 9 months at -- by 8.1% mainly driven by expansions and increased activities in hotels, restaurants and retail, with boosted surging office occupancy in the real estate space. So hotel industry is the highest growing at 14% growth year-to-date as they continue to benefit from robust tourist arrivals. Retail trade as well as restaurants grew 8% and 10%, respectively, with sustained growth with business expansions and openings as well as increase in activities. Industrial meanwhile improved by just 1.6% with positive contributions from plastic, food and beverage, semiconductor and non-metallic sectors such as cement. But I think still the steel industries continues to be challenged. So plastics and cement grew 7%, food and beverage 4% and semiconductors grew 2%. In terms of sales mix, as Ronnie alluded, commercial leads the segment at 37% -- the sales share at 37% closely followed by residential at 36% while industrial is down to 26% from 28% last year. So again, as Ronnie mentioned, we're happy to note that as of September we have grown by more than 220,000 customers versus same period last year and it's very -- we're very close at hitting 8 million at 7.986 million by end of September. As we speak we are only less than 700 customers short of 8 million and we project to hit 8 million any day this week. That ends the customer report and I now turn you over to Froi for the networks report.

Good afternoon, everyone. Meralco completed 3 major CapEx projects in the third quarter this year. First was on July 28, we have completed the project installation of third 300 MVA power transformer at Duhat Delivery Point Substation. This project will ensure continuous power supply to major industrial and commercial customers in the area. Second was on August 31, we commissioned the new San Joaquin 115 kV-34.5 kV GIS substation. This is the first Meralco fully indoor GI substation. Everything housed in a building and the very first also in the Philippines. The project will unload the existing Taguig substation provide additional capacity and ensure the reliability of service to customers in Taguig and Pasig cities. Third and last, on September 30, we commissioned the Milagrosa 115 kV Switching Station. This project will enable Tanawan solar power plant to deliver its 50 megawatt AC power to the 115 kV system of Meralco for added capacity. At the grid level, TSPP will support the government's increased RE share policy. Also a portion of TSPP's output 25 megawatts to [indiscernible] is under a 20-year power supply agreement with Meralco in support of its RPS compliance. Thank you. I'm now turning you over to Attorney Valles for the regulatory report.

Good afternoon. So we'll start with the regulatory with the case of petition filed by Prime Energy versus Meralco at RTC Taguig City. So you will recall, last July 30, Prime Energy Resources, Prime Oil & Gas and PNOC Exploration Corporation, et al, filed a complaint for temporary restraining order and writ of preliminary injunction. It sought to enjoin Meralco from continuing the CSPs for the 600 megawatt and 400 megawatt PSAs. So last July 31, 2024 -- 31, 2024 Meralco received the 72-hour TRO issued by the Executive Judge. And after hearing the Court issued an amended order to extend that the 20 days -- the TRO to 20 days so until August 20, 2024. So last August 14, we filed our motion to dismiss citing that RTC does not have jurisdiction. And instead, it is ERC that has jurisdiction over the case and that Prime has no legal right that must be protected through the issuance of a TRO or injunction. And finally last August 17, the RTC ordered or order was issued rendering the TRO without force in effect and dismissed the complaint filed by Prime Energy against Meralco which led us to continue the CSPs for both the 600 megawatt baseload PSA and 400 megawatt mid-merit PSA. So we continued the CSPs for these 2 requirements. Last August 30, we -- the Bids and Awards Committee determined the resource for the 600-megawatt CSP where Masinloc Power and GN Power Dinginin won the bidding. Masinloc offered for 500-megawatt and GN Power for 100-megawatt. The rates shown in the screen are much lower than the total headline rate and total LCOE reserve prices. The term is for 15 years and this is going to be effective upon approval by the ERC. The fuel costs for these PSAs are full pass-through based on the submitted formula subject to the [ heat ] rate cut. And then subsequently on October 11, Meralco BAC continued with the CSP, this time for the 400-megawatt mid-merit requirement. The BAC found the bid submitted by GN Power to be the best bid with a total headline rate of PHP 7.54 per kilowatt hour, again lower than the reserve price as for the total headline rate of PHP 7.95 and LCOE rate of PHP 8.05 or PHP 8.06 per kilowatt hour. The term is again for 15 years subject to ERC approval and the fuel cost is again full pass-through based on the submitted fuel formula and subject to heat rate cut. Next update is on the First Gas PPAs. So last August 13, the ERC resolved the issues raised by First Gas on non-recovery of incremental costs for its GSPA and LNG. The resolution states that Meralco or rather FGPC or Santa Rita and San Lorenzo are allowed to recover and Meralco is authorized to collect from its customers the previously withheld charges related to incremental costs of the old and new GSPAs and LNG incidental costs over a period of 12 months commencing from the October billing period and also authorized Meralco to reflect the adjustment in the GSPA of First Gas plants effective October 2024. So as a result Santa Rita and San Lorenzo generation costs will reflect the respective new GSPA on all LNG-related costs and the impact of that is PHP 0.16 per kilowatt hour beginning Meralco October 2024 billing to its customers. While for the deferred cost the recovery of around PHP 6.4 billion from January to August 2024 supply months will translate to around PHP 0.16 per kilowatt hour in generation charge for the next 12 months as directed by the ERC. Finally for the franchise renewal update, so last August -- last September 24, 2024, the House of Representatives finally approved on second reading, House Bill #10926 which seeks to renew the franchise granted to Meralco for another 25 years. Representative Joey Salceda, the main author of the bill, delivered a sponsorship speech stating that Meralco had clearly met its mandated requirements of least cost efficiency, reasonable pricing, open and non-discriminatory access and anti-market power abuse under its current franchise. The Committee on Legislative Franchises Chairperson Representative Gus Tambunting also highlighted Meralco's reputation as a customer-friendly firm. The Board sponsors responded to questions raised by various interpolators, including the suggestion of First District Summer Representative Raul Daza. The bill is expected to be approved on third reading and subsequent transmittal to the Senate of the Philippines upon resumption of Plenary Session during the week of November 4, 2024. At the Senate, on September 12, the Senate Bill #2824 was filed by Joel -- Senator Joel Jose Villanueva, and the same was referred to the Committee on Rules on September 16, 2024. The bill is expected to be referred and deliberated by the Senate Committee on Public Services, once the House version is transmitted to the Senate. That's it for the regulatory update. I will now turn you over to Mr. Manny Rubio.

Thank you, Ronald. I'll begin the update for the Power Generation group with health and safety being the top priority at all MGen sites. With clear intent and focus on ensuring a secure and risk-free environment, we achieved a total of 38 million safe man hours across employees and contractors. For the month of September, we are happy to report that we have 0 lost time accident, 0 first aid case, 0 recordable case and, of course, 0 fatality. This results underscore our dedication towards maintaining a safe work environment while we ensure stable and reliable power supply. For the operational highlight at the Power Generation group, we're able to deliver 11,556 gigawatt hours of the energy for the first 9 months of the year, higher than 11,171 gigawatt hours posted in the same period a year ago. This uptick in performance due to high availability across all our assets. GBP's energy delivered decreased by 7% compared to last year, reaching 4281 gigawatt hours on account of planned outages for -- during the period. Meanwhile, our San Buenaventura plant registered 2,493 gigawatt hours, 27% higher than the 1,962 gigawatt hours posted a year ago. SBPL achieved an 89.9% average plant availability in the past 9 months after its first major scheduled maintenance in January this year since it started commercial operations in 2019. Our Singapore-based subsidiary PacificLight saw a slight decrease on its energy delivery to 4,299 gigawatt hours on account of its planned outage to upgrade the facility, making it one of the most efficient plants now in Singapore. And lastly, MGreen, the Renewable Energy unit of MGen Group, delivered a total of 483 gigawatt hours of energy supported by the operations of SPNEC subsidiaries SP Tarlac and SP Calatagan. For Terra Solar, we continue to make significant strides in our low-carbon energy transition journey, highlighted by the progress we made on this flagship project. Last July, the project was certified by DOE as an Energy Project of National Significance and further, Terra Solar Philippines secured the green lane certification from the Board of Investments on July 23, 2024. The green lane certification enables the project to benefit from streamlined and expedited permit approval and processing. Driven by its commitment to efficiency, TSPI partnered with MIESCOR to build infrastructure connecting -- the infrastructure connecting Terra Solar to the National Grid. This includes the main collector substation, 2 solar collector substations and the installation of the 230 kV connection asset. In terms of completion, Terra Solar project achieved on project development 73% overall project development numbers. Key progress areas include land control, PV land is now 62% complete and transmission line right-of-way is 62% complete. Permitting for pre-development is 61% complete, solar farm development under preparation for land is 96% complete, procurement is 95% complete, interconnection development is 92% complete and PV site clearing is 23% complete. Meralco and SP Energy or SPNEC formed a strategic partnership with Actis on September 6. Actis is known as a key global player in sustainable infrastructure. The partnership involves Actis investment in a 40% equity stake in Terra Solar Philippines, a project set to become the largest integrated renewables and energy storage power plant in the world and the largest FDI in infrastructure development in the Philippines today. Beyond Terra Solar, MGreen and Vena Energy signed an investment agreement for the development, construction and operations of the 450 megawatt solar project in Pangasinan through 3 Barracuda Energy Corporation. Chromite continues its path towards acquiring regulatory approval and we submitted all requirements to the Philippine Competition Commission. All the questions and all documents have been -- that were asked by Chromite -- by PCC have been submitted which right now and we are now waiting for their decision. The existing South Premier or the Ilijan plant continues to run at capacity equal to the PSA with Meralco and excellent energy, the new plant is on track to deliver energy to the grid with the first unit within the year and the 2 units first for January and February of 2025. MGen as part of its commitment to powering the good life, continues to push programs that help build a more sustainable future for everyone. MGen through MGreen continues to empower communities through renewable energy and in partnership with One Meralco Foundation or OMF, successfully distributed 150 solar kits to residents of Sitio Tamale in Bongabon, Nueva Ecija. Our renewable energy arm, MGreen, as reported earlier, generated 483 gigawatt hours of clean energy, the highest it has delivered ever, which was sourced from our solar power plants. And as part of OMF's One Trees program we have successfully planted 1.5 million trees to date. And lastly, we also partnered with Rex Education to conduct a 2-day book donation drive which supported 7,569 public high school students in Rizal and Bulacan. That's it for the generation group.

From the [indiscernible] good discussion, we will now proceed with the sustainability report by Mr. Raymond Ravelo.

Yes. Thank you, P.J. Good afternoon, everyone. I'll be presenting some updates on the sustainability front. First, we're very pleased to report that this year Meralco maintained its inclusion in the FTSE4Good Index driven by our strong performance across FTSE's ESG standards. The FTSE4Good indices are a set of sustainability metrics that assess companies performance in areas such as climate change, labor standards and good governance practices. This marks the fourth consecutive year we have been included in the index and it validates the alignment of Meralco strategies and operations and practices with global sustainability standards. Next, we have likewise improved our standing in the latest ESG risk ratings of Sustainalytics. Sustainalytics is a global risk rating institution which evaluates companies exposure to and management of industry specific ESG risks. For the year 2024, our risk score decreased or improved to 31 versus 31.7 last year and against 31.4 in 2022. Sustainalytics cited our strong risk management practices in areas such as carbon emissions, community relations and ethics and governance. This actually places Meralco in the top 39% of electric utilities across the globe. Next, last September 16, we launched our latest sustainability initiative called Greening the Meralco Operating Center or Greening the MOC which is an effort that seeks to, as our Chairman himself puts it, position our nearly 22-hectare headquarters as the lungs of Ortigas. This project sits under the banner of 2 of our greenification efforts. One Meralco Foundation's reforestation program, One for Trees and our urban farm initiative called Meralco Power plants. Greening the MOC aims to plant more than 1,000 additional trees here in our compound before the end of this year, bringing our total count to over 2,800 trees. We will be planting a total of 16 types of trees, including hardwoods, softwoods, ornamentals and even medicinal trees, transforming our Meralco Operating Center into a vital carbon sink for the city.

Well, for the last part of our presentation, we're happy to report that Meralco continues to gain global acclaim, winning 8 Stevies at the 2024 International Business Awards, 1 gold, 3 silvers and 4 bronzes. These awards reflect Meralco's excellence in sustainability, corporate social responsibility and human resource management. We secured the prestigious Gold Stevie with our Chief Sustainability Officer, Raymond Ravelo, recognized as the Sustainability Hero of the Year. This marked the second consecutive year that Raymond has been the lone winner of this award. We earned 3 Silver Stevie's with our outstanding sustainability and corporate social responsibility and initiatives. Meralco Sustainability Agenda called Powering the Good Life was awarded for sustainability leadership, also for the second consecutive year. Our One Meralco Foundation President Jeffrey Tarayao was honored as the Thought Leader of the Year in the Non-Profit category for the second consecutive year as well. Additionally, OMF's initiative supporting energy access for underserved communities was recognized for advancing inclusive development. We also garnered 4 Bronze Stevies with our achievements in human resources and digital innovation. Meralco's embrace, diversity and inclusion program fostering gender balance and women empowerment; our employee engagement and retention efforts reflecting Meralco's commitment to building a positive workplace culture; Meralco's innovative customer experience dashboard showcasing our use of competitive intelligence to address evolving customer needs; and finally, our ninth edition of the Meralco Luminaries honoring external stakeholders who align with Meralco's vision for a more progressive Philippines. These accolades reinforce Meralco's standing as a global leader in sustainability, social responsibility and organizational excellence and ultimately inspires us to further elevate our initiatives and impact our customers, communities, constituents and the country. Thank you.

[Operator Instructions] We actually have a series of questions already online. We'll start with Gregg Ilag of BDO Securities. Please share actual number for the distribution's CCNI and generation's CCNI for 9 months '24. First question of 4 questions. Share of actual number for the distribution's CCNI and generation's CCNI for 9 months '24 and [indiscernible]?

It's 59%, right, of CCNI. So if you calculate that, that comes out to be about PHP 21 billion for the DU and power generation PHP 8.4 billion.

Second question is what is the latest update with regard to rate increase [indiscernible]?

Yes, for the 5RP the motion to withdraw that we filed last September 2023 has been decided by the Supreme -- by the ERC. According to the Chair, when she was interviewed, I think it was in TV Patrol and Pandesal Forum. She disclosed that there was already a decision on our 5RP and the Commission supposedly ruled that the 5RP of Meralco will be considered slaps because of the delay and that Meralco will instead continue to charge the reduced rate of PHP 1.3522 per kilowatt hour until July -- until June 30, 2026. And that Meralco is instead directed to file a 6RP instead of the 5RP. So we are awaiting for the official copy of that decision and the ERC has not released the official copy as of this time.

Another question is what is the outlook for PacificLight blended margin trends in full year '25? Are we seeing this going down or lower?

Because we see fuel rates going down, the prices of course in the merchant market in Singapore would follow the trend of fuel -- fuel rates, right. Having said that, we also -- but we intend to balance the whatever decline there would be in the trend that we're seeing from PacificLight with capacities that we have here in the Philippines. As you know, we have been participating quite actively in the co-optimized market and we intend to increase our capacities that are being offered to the co-optimized market, particularly in the Visayas region. Those that are following the numbers, the clearing prices in the co-optimized market will see that Visayas prices are much higher than Luzon and we intend to, well, take the opportunity by introducing more capacity from PEDC and CEDC in 2025.

Last question from Greg, what are the prospects of the telco tower business?

Well, with the integration with PhilTower, the outlook is also a lot better because then the coverage should be now more nationwide. For MIDC, we're more focused on with Luzon and PH Tower or PhilTower has more of the Visayas/Mindanao Towers. The other thing also is recently we had received orders from about 300 from Smart. If we look at that in terms of co-location or tenancy, the ratios actually got up and should be better in the coming years. Although from the P&L standpoint we think that it will take us about 4 years from today to deliver positive numbers. But the tenancy ratio should increase already and that should improve the numbers.

We have a live question online from Mayank Maheshwari.

Can you hear me? Yes. So I had 3 questions. One was on the point of Singapore Power. Can you hear me?

Yes. While we wait for Mayank, we'll go on, on the next questions on screen. What is the energy sales guidance for fourth quarter '24 and the full year of this year?

Yes. I think for fourth quarter of 2024, we're some sort of projecting a modest 3% growth, and that will bring us to around 6% growth on the year, ending at around 53,350-plus gigawatt hours. So this is more 3,000 gigawatt hours better than the 2023 numbers.

Another 2 sets of questions for Peter. When do you see core net income growth to recover in PacificLight and SBPL? I guess related to that is any update on the 21 SPNEC service contracts that are currently in the process of termination?

I think the performance of PacificLight is relative to an event when fuel prices were really high during the height of the Ukraine-Russia conflict. And we're seeing -- just we're seeing the numbers normalizing and we're still seeing quite a profitable margin in Singapore to the point that we're even going to participate in the submission of a 600-megawatt technical offer due on November 1. On SBPL, it's a fully contracted facility contracted to Meralco with capacity. So I don't -- we don't expect really any fluctuation in terms of income as far as San Buenaventura is concerned.

I guess, these 2 other questions are for the generation. For the Terra Solar project, is the time line for Phase 1 still intact? Has the group encountered any issue with connecting to the transmission lines and right-of-way?

Yes, we expect the time line to -- we're still sticking to the time line of delivery of the first phase of 2,200 megawatts completion -- 2,300 megawatt completion by February of 2026. So far we have really not seen any significant position in terms of securing the land. In fact the Phase 1 for the PV site is almost completely acquired. We're working on -- I think what's remaining of the 89 tower sites would be around close to 30 if I'm not mistaken. And we have already issued notice to proceed to the transmission EPC to start work on the installation of the transmission connection.

We have a live question online from Jelline Gaza of J.P. Morgan.

We couldn't hear them. Jelline, why don't you type your question.

[indiscernible]

P.J. can I just [Audio Gap] question earlier with regard to SPNEC service contracts which I will clarify. We saw in the news recently that DOE canceled a number of service contracts for JF1, JF2 and it actually mentioned SPNEC. We have not received any notice of disqualification. We have filed for a declaration of force majeure on one of our sites, which is SP Santa Rosa, even if we see just for one, because we cannot actually evacuate the energy since the transmission line that needed to evacuate -- this capacity will only be available one line is 2031 and the other by 2040 according to the SIS. The ones that have been terminated by DOE, the ones that SPNEC have to be transferred back to [ Terra Solar Philippines ], because we have a put option, and we've declared -- we have actually put these projects and I think both of those projects [indiscernible] the ones terminated, including some other service contracts that participated in JF1 and JF2.

More power generation questions. Does Meralco intend to extend the closing deadline provided that the conditions precedent or not met by year-end? And I guess related to that, can you share more the time line for LNG deal? Do we expect this to be finalized by year-end after obtaining the PCC approval, what are the remaining items before you can finalize?

Well, I think the significant CPs, the significant condition precedents for this would be, of course PCC approval and ERC approval for Excellent Energy. Well, we have submitted all the documents and answered all the questions that were sent to us by PCC. And as I said, we're just waiting for the final ruling. For Excellent, we're waiting for ERC approval. At least now there is an OIC chair, and we expect that ERC would again start hearing and making rulings on PSA. So the closing will really be dependent on these condition precedents.

Question with you, Manny? On plan for Mgen IPO, what are the key milestones you're looking for? Is there a possibility to spin this off to through SPNEC instead?

We'll be looking at a number of options for funding. Of course, one of them would be an Mgen IPO. Again, when -- the right time -- well, the right time is until we have probably a lot more projects on the pipeline, not with the current assets that we have. As SPNEC already listed, that's I think how we manage between SPNEC and Mgen, is MGreen actually, the one that we're considering is one of the things that we need to consider on when do we actually go for a listing for funding if needed.

Thanks, Manny. Still more on the power generation questions, from Germaine Guinto of Maybank Securities. Aside from normalizing prices, can you give us your view, outlook on the growth trajectory of PacificLight in light of Singapore's plans to import more energy from neighboring countries?

As I said, we are submitting an offer, a technical offer for Singapore's plan to put another 600 megawatt gas operational by 2029. And other than that, I think we've also mentioned that we have been given, for our consideration, a conditional license to export from Bulan 600 megawatt mid-merit supply from pure renewable energy. So it's going to be solar and battery, which PacificLight owns 37% of. These are the 2 projects that are in the pipeline.

There's one more question. Can you elaborate more on the recent participation of the VisMin plants in the co-optimized market? How does this reduce cost, and how much has it contributed to earnings?

Well, actually, the participation of the plants does not reduce cost. It provides us more opportunity to optimize between whether we will contract or we sell to WESM or we sell to the co-optimized market for ancillary services. I'm only talking about VisMin plants, PDC, CDC carbon diesel and Nabas. The diesel units are operating for dispatchable reserves and the PDC and CDC currently certified with 4 units are participating offering services for contingency reserves.

We have a question here regarding our income statement. Can you further expand the other expenses line item? What was the main reason behind this 50% decline?

The other expense line is -- are largely our interest income, interest expense and all others. For 2024, we -- on top of the -- and net of the interest expense would be the higher yield from our placements, which we did highlight in the summary page. And in addition, there were gains on sale of assets by the power generation unit.

Thank you Ms. Siy-Yap. I have a question here from CLSA. Have you secured the necessary debt portion for Terra Solar? And if so, which banks? If not, when?

Yes, we are in discussions with the banks right now for Terra Solar. There are likely 6 participating banks. So until we have signed or finally close, we will not be disclosing it. But it's the usual suspects, yes. But 6 of them on the Terra Solar operating unit and 3 for the land company.