Manila Electric Company (MER) Earnings Call Transcript & Summary

Hi, everyone. Good afternoon. Good afternoon to our online attendees. Good afternoon, investors, analysts, fund managers and key stakeholders. Welcome to Meralco's First Quarter 2025 Results briefing. I am Paul Jayson Ramos, Chief Investor Relations Officer of Meralco, and I will serve as the moderator today here at Meralco López building. We also welcome our guest analysts and investors for joining us in person as well as those participating online from MS Teams conference facility. Before we proceed, please be advised that this session is being recorded. Kindly adhere to the ground rules, which we have sent to you prior to this meeting. Today, we will present the financial and operating results of Meralco for the first quarter of 2025, ended March 31, 2025. A copy of the presentation may be downloaded from our website at www.meralco.com.ph under the Investor Relations section. We are joined by members of Meralco's management team. Mr. Ronnie Aperocho, Executive Vice President and Chief Operating Officer; Ms. Betty Siy-Yap, SVP and Chief Finance Officer; Mr. Emmanuel Rubio, President and CEO of Meralco Power Gen; Mr. Ferdinand Geluz, Senior Vice President, Chief Revenue Officer and OIC subsidiary business; Attorney William Pamituan, SVP, Chief Legal Counsel and Head of Legal and Corporate Governance Officer; Ms. Charina Padua, First Vice President and Head of Customer Retail Services; Mr. Froilan Savet, First Vice President and Head of Networks; Attorney Jose Ronald Valles, SVP, Head of Regulatory Affairs and Head of DU Regulatory Management; Mr. Ramon Ravelo, SVP and Chief Sustainability Officer. Today's agenda will begin with the financial highlights, followed by the operating results of Meralco's Distribution Utility business, updates from MGen and updates on our sustainability initiatives. We will open the floor for a Q&A session before concluding the presentation with a remark from our Chairman. At this point, I would like to introduce our Chief Finance Officer, Ms. Betty Siy-Yap, who will present the financial results.

Good afternoon, ladies and gentlemen. I'll be presenting the results for the first quarter ended March 31, 2025. So on your screen is a summary highlights of the first quarter. So our first quarter results reflect strong start in 2025 across the business portfolio. In the first 3 months of 2025, the DU business accounted for the largest share of CCNI at 60% or an equivalent PHP 6.7 billion, up from 58% same period last year. While the power generation share grew to 31% with PHP 3.4 billion contribution, also higher versus the 27% share last year. The RES and the nonelectricity businesses brought a combined 9% or PHP 1.1 billion. MGen new milestones for MTerra Solar Philippines as it secured PHP 150 billion project financing and a PHP 10 billion equity infusion from Actis Rubyred (Singapore) Pte. Ltd. or Actis as part of the $600 million investment deal for Actis' acquisition of 40% in MTerra Solar. Through Chromite Gas Holdings, MGen completed the acquisition of a 40.2% effective interest in 2 gas-fired power plants, the 1,200-megawatt facility of South Premiere Power or 1,275 megawatt facility of Excellent Energy Resources, or EERI, along with an LNG import regasification terminal. And as a result, beginning February this year, we recognized in our books, our share in CCNI. The additional contribution from chromite gas was PHP 663 million. Dividends from unconsolidated investees totaled PHP 2.1 billion with Pacific Light contributing PHP 1.2 billion and San Buenaventura about PHP 850 million. The highest Meralco share closing price was at PHP 550 a share on March 31, 2025, with it at PHP 574.5 on April 22, 2025. This slide shows the financial summary. CCNI for the first quarter increased by 11% to PHP 11.2 billion from PHP 10.2 billion in 2024. The CCNI contribution of our regulated or distribution business grew 2% in terms of consolidated energy sales volume, which is volumes from Meralco Clark Electric and Shin Clark Power Corporation for a total 12,493 gigawatt hours compared to 12,307 same period last year. For our unregulated business, the higher CCNI came from strong performance of MGen's power generation units, which ended the quarter with a 25% increase in CCNI from a year ago, owing largely to the stable plant availability across all the portfolio, sustained revenue generation from reserve market and contribution of chromite gas beginning February this year. Combined volumes of our power generation units, including those whose results we consolidate in our books as well as those that we account for at equity increased by 64% to 5,294 gigawatt hours. The combined RES volume increased or grew by 7% to 1,671 gigawatt hours. Our consolidated reported net income increased by 9% to PHP 10.4 billion from PHP 9.6 billion last year. The gap between CCNI and reported net income largely represents the accretion of day 1 gain that we recognized last year and foreign exchange gain. Similar to our net income, the core EBITDA rose 8% to PHP 19.2 billion from PHP 17.8 billion. Consolidated revenues rose by 10% to PHP 114.5 billion from PHP 104.5 billion in 2024, mainly as a result of higher volume increase in pass-through charges, both for generation and transmission as well as higher revenues from the reserve market. Costs and expenses increased by 10% to PHP 103.1 billion, the bulk of which is still purchase power costs, which accounted for 84% of total costs and expenses. Capital expenditures totaled PHP 25.4 billion with the development of solar power plant and distribution network projects. Cash and cash equivalents amounted to PHP 103.1 billion, while consolidated debt was at PHP 188.1 billion. With respect to our revenues, electric revenues was at PHP 111.8 billion, which represents 98% of consolidated revenues of PHP 114.5 billion. Generation, transmission and other pass-through charges were 11% higher at PHP 88.6 billion versus PHP 79.6 billion in 2024 as a result of higher cost of natural gas with the increase in Malampaya gas price from SGD 9.94 per gigajoule, it rose to SGD 11.61 per gigajoule and higher LNG terminal fees of the Santa Rita and San Lorenzo plants. The peso also depreciated or weakened to an average of PHP 57.96 to the dollar in the first quarter of 2025 compared with PHP 55.96 in the same period last year. Transmission charge also went up with the higher ancillary service charges with additional capacity sourced by the National Grid Corporation of in the Philippines and new ASPA and the reserve market charges. Distribution revenue increased by 1%, slightly lower than the sales volume growth due to the 0.0023 per kilowatt hour reduction pertaining to the regulatory reset expert costs, which ERC ordered Meralco not to collect as part of its distribution willing charge starting February. The regulatory reset refund actually applies to all distribution utilities. Energy fee, which totaled PHP 6.3 billion, increased by 21% from PHP 5.2 billion to PHP 6.3 billion as GBP's volume grew by 5% to 1,237 gigawatt hours with a higher plant availability of Cebu Energy and Panay. In 2024, Unit 3 of Cebu Energy, Unit 3 of PEDC, and units 1 and 2 of PEDC had outages of 48 days, 25 days and 20 days, respectively, versus only 32 days of CEDC or Cebu Energy in 2025. The revenue was helped a lot by the higher revenues from the reserve market which generated a total of PHP 1.7 billion in 2025 compared with only about PHP 150 million in 2024. These were partially offset by lower WESM sales as average WESM price in Panay decreased to PHP 4.10 compared with PHP 7.10 same period last year. Nonelectric revenues was lower due to the deconsolidation of our tower subsidiary or MIDC at the end of September 2024. With respect to costs and expenses, this totaled PHP 103.1 billion. Purchased power costs accounted for 84%. OpEx represented 10% and depreciation 4%. Combined coal and fuel power plant O&M accounted for 2% of the total. Purchased power costs increased by 13% to PHP 86.4 billion from PHP 76.5 billion, consistent with the movement in pass-through revenues, which increased due to higher generation and transmission charges. The DU sourced more than half of its requirement or 51% of its power supply requirements from natural gas plants with 25% coming from WESM, 23% from coal and the remaining portion from solar and hydroelectric power sources. OpEx increased by 5% to PHP 10.3 billion, primarily accounted for from manpower, contracted services and related expenses. Additionally, there was an increased spend for IS IT-related costs and critical IT infrastructure. These operational investments are essential for maintaining an efficient, reliable and resilient electricity distribution system. Depreciation and amortization was lower by 12% with the deconsolidation of MIDC at the end of September 2024. Combined coal and fuel and power plant O&M amounted to PHP 2.6 billion, 22% lower with the decrease in maintenance cost and fuel as well as coal prices. With respect to our capital expenditure, consolidated CapEx was at PHP 25.4 billion, bulk of which or PHP 18.3 billion was utilized for the development of the MTerra Solar project in Nueva Ecija. The balance was used for Meralco's distribution network projects that included new connections accounting for about PHP 2 billion, asset renewal of about PHP 1.4 billion and load growth projects close to PHP 2 billion. We now go to power generation results of operations. Continuing to deliver strong performance while reaching significant milestones, MGen's power generation units ended the quarter with a 25% growth in CCNI from a year ago, mainly because of the stable plant availability across its portfolio, sustained strong revenues, again, from the reserve market and the contribution of Chromite Holdings. With a net sellable capacity of 4,953.1-megawatt across its portfolio in the Philippines and Singapore, as of the end of March, MGen delivered a total of 5,294 gigawatt hours of energy, which was 64% higher than same period last year. Global Business Power delivered 1,237 gigawatt hours of energy. And so its core net income grew to PHP 1.1 billion from only PHP 273 million last year. Meanwhile, San Buenaventura delivered 844 gigawatt hours, 50% higher than last year and booked a core net income of PHP 1.2 billion, driven again by higher capacity fees with 100% availability. Just to recall, they went on major maintenance at the end of 2023 until January of 2024. MGen Renewable or MGreen, total CCNI was at PHP 203 million during the first quarter of the year as it delivered 174 gigawatt hours of clean energy on the back of steady plant availability across all its solar plants, which averaged more than 93% during the year. The renewable energy unit continued its expansion track in the first quarter with the completion of 52.8 megawatt AC Cordon plant in Isabela. The project along with 2 other solar plants, the 19.8 megawatt AC Bongabon plant in Nueva Ecija and 80.1 megawatt AC Baras plant in Rizal were all inaugurated in the first quarter of this year, although they started to deliver towards the end of last year. Starting February this year, we've begun to recognize our share -- our 40.2% share in income from the 2 gas plants now, which are Ilijan and Excellent. In addition -- well, additionally, additional CCNI contribution was at PHP 660 million. Units 1 and 2 of EERI have successfully completed their testing and commissioning and have been issued FCATC, or the Final Certificate of Approval to Connect. With the combined generating capacity of 850 megawatts, these units are already fully operational and ready to deliver power to the grid. Overseas, Singapore-based PacificLight reported core net income of SGD 70.8 million or an equivalent PHP 3.1 billion, up 31% due to higher plant availability, resulting in higher blended nonfuel margin at SGD 82.4 per megawatt hour compared with only SGD 75.8 per megawatt or last year. Total energy delivered was at 1,403 gigawatt hours at the end of March, 6% higher than a year ago. Our consolidated interest-bearing debt at PHP 188.1 billion, which includes PHP 72.6 billion of debt from -- of our subsidiaries. In January this year, Meralco drew a PHP 75 billion debt from major banks to finance the investment in chromite. Separately, MTerra Solar in March secured a project financing equivalent to PHP 25.2 billion, with PHP 18 billion used to repay the bridge loan. Debt maturities are spread through 2039. As of the end of March, net debt stood at PHP 76 billion, with net debt to EBITDA of 1.06x. All of our debt -- all of our consolidated debt are in Philippines peso. Cash and cash equivalents amounted to PHP 103.1 billion with short-term investments at PHP 9 billion. Our core earnings per share is up PHP 9.912, up 11% versus 2024, while reported EPS is at PHP 9.270 a share. Thank you.

Thank you, Ms. Betty. We'll no move on to the operating results presentation to be led by our Executive Vice President and Chief Operating Officer; Mr. Ronnie Aperocho, followed by the heads for different business segments.

Thank you, PJ. Good afternoon to everyone. We are pleased to present Meralco's first quarter operations report highlighting a period of generally remarkable performance across all key areas. Of course, starting with energy sales, our sales for the first quarter stood at 12,493 gigawatt hours, which grew by 1.5% from the previous year. This is despite the high base, it was a La Niña period last year. And of course -- and also this 1-day difference versus 2024, which was a leap year. But normalizing, the energy sales will result in a year-to-date growth of 4.75%. The DU net system input or NSI was 12,937 gigawatt hours, slightly higher by 1.7% compared with the same period in 2024, while Meralco's year-to-date peak demand reached 8.34 gigawatts. This was recorded last March 6, 2025, 8.2% higher than last year's 7.71 gigawatts. Our customer count is growing also by 2.6% to reach 8.083 million customers by end of March. On the service performance of the deal, the 12-month moving average system loss for March is 6.04%, a 0.14 percentage point increase over the same period last year, but 0.06 percentage point improvement from February. This is still way below the prevailing system loss cap of 6.5%. But nonetheless, we're intensifying our system loss reduction efforts. And we are still on track in meeting our year-end target of 5.95% or below 6%. On SAIFI, which is a System Average Interruption Frequency Index, our reliability performance continues to improve. Our total SAIFI dropped by 11.1% at 0.185x, reflecting fewer power interruptions. SAIDI, which is the System Average Interruption Duration Index, likewise improved by 6.2% at 20.943 minutes showing reduced power interruption duration. Our year-to-date average time to connect customers also improved by 14.7% at 1.39 days over 1.63 days last year, translating to better customer experience, especially for our new customers. On electricity rates, our average electricity retail rate for the first quarter of 2025 was PHP 11.06 per kilowatt hour, higher by 2.6% compared with the same period last year, primarily due to the following: first, due to higher generation charge from higher Malampaya natural gas prices with the implementation of new GSPAs of first gas plants, recovery of previously deferred charges for first gas plants and peso depreciation. Next was due to the increased transmission charges from higher ancillary services. And the third one was due to the resumption of FIT-All collection in February 2025. Turning you over to Mr. Froilan Savet for the report on the CapEx project that were completed by networks.

For networks project updates in the first quarter of the year, we energized 3 major CapEx projects, 2 substation expansion projects, specifically expansion of BGC-2 and the Malinta substation. The last one is the substation development project, which is the new 115 kV, 34.5 kV Mesaland substation. With these 3 projects, we are effectively providing additional capacity for load growth, further enhance our service reliability in the areas being served by the substations. Expansion of FBGC-2 substations in Bonifacio Global City and parts of Makati will benefit vital customers, including the DOE, St. Lukes Medical Center, Philippine National Oil Company. Malinta substation on the other hand caters to the cities of Valenzuela and Malabon. [indiscernible] its expansion also provides the same benefits, large customers such as Manhattan Rubber Plastic, Johnson Manufacturing and Atlas Metal Production. Finally, the new Mesaland substation delivers power to certain areas in the provinces of Laguna and Cavite, and is improving the service of commercial and residential customers Ayala Malls Nuvali, Hacienda Sta. Elena, Georgia Club Augusta, Mesa Homes Village, Adventist University of the Philippines, and The Medical City South Luzon, among others. Now turning over to Mr. Ferdie Geluz for the customer report.

Yes. So for the first quarter sales, I think Ronnie already mentioned the growth of -- modest growth of 1.5% to 12,493 gigawatt hours. So it's close to 200 gigawatt hours better than last year. Last year was a very high base because for last year first quarter, we grew around 9% on El Niño, an additional year on the leap day -- leap year day. So normalized on a per -- on a daily consumption basis, I think this will lead to 3% growth if we account for the additional day last year. But of course, residential led the segment in terms of percentage growth. It still grew close to 3% to 4,257 gigawatt hours in the first quarter, modest compared to last year's close to 12% growth, but still growth despite the very high base. And of course, this is driven by newly energized customers as we energized more than 200,000 new customers -- residential customers compared to last -- well, the incremental growth compared to last year. And we see uptick in the late Q1 as consumption of residential heat index started to increase with the onset of summer months. So the trend for residential was in January around flattish, February 3% growth, and in March, it grew 5% in the month. Commercial segment is still the highest sales contributor for quarter 1 with 4,744 gigawatt hours, albeit tempered growth of 1.3% or around close to 65 gigawatt hours in the quarter. As gains from business expansion in retail trade, restaurants as well as hotel were offset by the decline in real estate due to vacancies from the POGO exit. We expect to slowly normalize over the next month to next year with the repurposing of this space vacancies created by POGO exit as rental rates decline due to oversupply and of course, as government officers expand into this -- expansion slowly take up the space vacancies as well as the other businesses. We also expect data center ramp-up of the large data centers. We energized late last year as well as first quarter this year to slowly aid commercial sales and slowly in Q2, and of course, most of them are ramping up in the second half of the year. Industrial ended flat on the quarter at 3,455 gigawatt hours, only growing marginally at 0.2% as challenges in food and beverages still and electric gas and water offset modest growth in cement, plastics and semicon. Food and beverage registered a 2% decline due to the transfer of our Pepsi operations in Muntinlupa to outside franchise because of certain regulatory -- well, local government regulations are limiting the water consumption of the factory. Cement grew 4% and benefited from the strong performance of continuous infra build as government released PHP 1 trillion budget for infrastructure this year. So for April, we're seeing sales of around 2.7% to 3%. And we expect quarter 2 to be slightly better than quarter 1 in terms of percentage growth. So that ends the customer report, and I now turn you over to Ronald for the regulatory report.

So first, on the regulatory update is the ERC order on Meralco's AWAT applications. So you will recall us, January 28, Meralco's New AWAT application was filed for a true-up with a maximum average price of PHP 1.35 as per kilowatt hour versus AWAT covering the period declared as lapsed, which is July 1, 2022 to June 30, 2025. So the difference in AWAT versus MAP yields an over-recovery of PHP 19.9 billion, which was what we file. Meralco proposed recovery of PHP 862 million was -- that was over-refunded in the implementation of distribution rate true-up 1, 2, 3 and 4, resulting in a proposed net refund of PHP 19.1 billion. So after hearings, the ERC issued a PA order on March 5 with the following conditions: Meralco was direct to refund PHP 19.9 billion at an average rate of PHP 11.89 per kilowatt hour within 36 months or until fully refunded. And the ERC also did not allow the offsetting of the PHP 862 million DRTU over-refund as this amount is still subject to be -- to the review of the commission. Next is the ERC's notice of resolution for the approval of the additional 290-megawatt contract capacity with South Premiere Power Corporation, or SPPC. So last May 9, 2024, the ERC already gave us a provisional authority to implement the PSA with SPPC covering 910 megawatts only out of the 1,200 megawatts. And subsequently, Meralco and SPPC filed a joint motion for a consideration of that order requesting that the parties be allowed to fully implement the 1,200 megawatt contract capacity. And finally, last March 28, 2025, the ERC issued a notice of resolution approving the joint motion and resolved to add 290 megawatts of the originally approved capacity under the same terms and conditions and under the same rate as the original 910 megawatt earlier approved by the ERC. Next slide. So last April 16, Meralco posted its 2025 power supply procurement plan that was recently approved by the Department of Energy in its letter dated April 11, 2025. So as shown on your screen is a table, listing down all the capacities that are up for CSP. We have the 200-megawatt RE baseload and 600-megawatt baseload that are due for publication this coming May 2025. And then we also have 900-megawatt that is due on September 2025 for publication. And finally, 450-megawatt mid-merit also this May 2025. So we recently received an unsolicited proposal from First Quezon Biogas Corporation for 1.4 megawatt capacity. Under Section 2.3 of the Department of Energy Circular DC2023-06-0021, it allows exemption from CSP of any supply from any generating plant embedded in the DU's franchise area, utilizing RE resources within the contracted capacity of the generation plant does not exceed 10-megawatt per distribution utility. So we received the USP from First Quezon Biogas for its 1.426 megawatt biogas power plant located in Candelaria, Quezon with the following key advantages. The plant uses biogas as a renewable energy source generated from locally sourced agricultural waste and primarily chicken manure, rice straw, corn stover from nearby towns, which mitigates environmental concerns on waste disposal methods and provide sustainable manure management solution, reduces emission of greenhouse gases and provides reliable baseload power and contributes to local economic development through creation of jobs. The plant is expected to achieve commissioning for the 1.426 megawatt capacity within 1 year after ERC approval. So the rate for this is PHP 6.50 per kilowatt hour. Finally, or not yet. The update on the new 5RP application that we filed last February 7, 2025. Meralco already concluded all the hearings. There were 10 hearings scheduled by the ERC, and Meralco has already presented 12 witnesses to justify the application. So we are awaiting ERC's further action on this case. And finally, with respect to the franchise of Meralco. Last April 11, the President Ferdinand Marcos already signed Republic Act 12146, renewing the franchise granted to Meralco for another 25 years from the expiration of the current franchise granted under RA 9209. It was published in the Official Gazette and the Manilla Bulletin last April 16 and 17, respectively. So the law will take effect 15 days after publication in the official gazette or on May 1, 2025. That's it for the regulatory update. Turning you over now to Manny Rubio.

Thanks, Ronald. I'll begin with a report on our top priority across all sites, safety. In Q1 2025, we maintained the safe and injury-free work environment with an achievement of over 46 million man safe hours, both for employees and contractors. Also happy to report that the first quarter ended with zero lost time accident, zero first aid case, zero fatality and zero recordable case. We're expecting this safe man hours to significantly increase once we are in full swing in the construction and installation of panels in Nueva Ecija for MTerra Solar project. Global Business Power, what we run now is MThermal, delivered 1,237 gigawatt hours of energy at end March 2025. I'm happy to note that GBP's CCNI contribution surged to PHP 1.1 billion from PHP 273 million last year, due to higher plant availability for both Cebu and Panay sites and as well as participation in the reserve market that continue to drive operational and financial performance. Just for context, in the last 3 months, we've been offering 52 megawatts of reserve capacity both for contingency and regulating reserves. But 2 weeks ago, we have got another certification for PEDC Unit 3 for another 30 megawatts of regulating reserves, and then the Unit 3 of CEDC is scheduled to get tested for 13 megawatts of contingency reserve in the coming days. Meanwhile, San Buenaventura Power, or SBPL, generated 844 gigawatt hours, 50% higher than previous year, driven by higher capacity factor and 100% availability versus 72% a year ago. We are now beginning to report on our investments in Chromite Gas Holdings, where we have a 40.2% stake in SPPC, EERI and the gas terminal and regas facility starting February this year. Excellent Energy and SPPC have delivered 1,636 gigawatt hours of energy for February and March this year, and we expect this to increase with the entry of the third unit of Excellent Energy by the end of May. Our Singapore-based subsidiary, PacificLight, recorded a 6% increase from a year ago and delivered energy with 1,400 gigawatt hours. This is driven by higher plant availability this quarter resulting to a higher blended nonfuel margin. And lastly, MGen's renewable energy or MGreen, the renewable energy unit of MGen delivered 174 gigawatt hours of clean energy on back of a steady plant availability across all its solar plants, which averaged at more than 93% during this period, but we expect this to even improve in the coming quarters. Overall, MGen delivered a total of 5,934 gigawatt hours of energy in Q1 2025, which is a 64% increase compared to the same period last year. However, this growth does not yet reflect the full potential of MGen as we have units in the pipeline to be operational, specifically in PLP, the 100-megawatt Fast Start plant and LNGPH, the third unit of Excellent Energy, and we will continue our active participation in the research market and rest through the rest of MGen's GESC. This quarter's performance reflects our strategic planning, operational stability, active participation in the optimized market and the commitment of our team to deliver our results this year. The development of MTerra Solar project as one of the world's largest integrated 3,500 megawatt peak solar plant with 4,500 megawatt hour of battery energy storage is ongoing with overall project completion rates stood at 35% as of March 2025. And this is continuously improving quite well with ongoing construction works on the substation, transmission towers and assembling structures of solar panels. For Phase 1, land acquisition is already complete with Phase 2 half way through. Additionally, 85% of the required tower sites of the transmission lines have already been secured. And actually, the agreement for -- the commercial agreement for these remaining tower sites have already been finalized as well. In February 2025, MGen affiliate, MTerra Solar Philippines signed PHP 150 billion Omnibus Loan and Security Agreement, or OLSA, from 6 of the large -- of the biggest local banks in the Philippines, namely BDO BPI, Metrobank, Security Bank, PNB and Chinabank to fund its ongoing development and construction of Terra Solar. This is the largest financial deal in the history of the Philippines to date which is a sign of confidence on the Terra Solar project on MGen, on Meralco and in the country. Further supporting this landmark project, Actis' finalized acquisition for a 40% stake in MTerra Solar under $600 million investment deal that was closed last March. This investment by Actis is the largest greenfield investment in infrastructure in the history of the Philippines and shows the growing interest of investors in the growth of renewable energy in the Philippines. The renewable energy unit continues its expansion track in the first quarter with the completion of the 52.8 megawatt peak Cordon plant in Isabella. This project, along with 2 solar projects, the 19.8-megawatt Bongabon plant in Nueva Ecija and the 80.1 megawatt peak Baras plant in Rizal were inaugurated in the first quarter. These plants collectively supply clean energy to over 154,000 households, reflecting MGen's commitment to lead the country's energy transition. And these 3 solar projects have increased our renewable energy capacity to almost 400 megawatts. With MTerra Solar in the horizon, we are expected to breach a commitment to build 1,500 megawatt renewable energy already by 2027, 3 years ahead of schedule. These 3 new plants will be supplying [ J-up ] starting July. As we integrate more renewables into the grid, LNG emerges as an essential transition fuel that can address our baseload requirements while reducing greenhouse gas emissions. This year, we expect LNG to overtake coal as our main source of baseload, boosting our baseload power with a lower carbon energy source. MGen together with its partners, completed the financial close of USD 3.3 million -- USD 3.3 billion deal for the country's first and most expansive integrated LNG facility in Batangas with MGen now holding 40.2% attributable interest in 2 -- in the 2 gas-fired power plants, the 1,200-megawatt SPPC or what we know as Ilian, and the 1,275 megawatt facility of Excellent Energy Resources, along, of course, with an LNG import and regasification terminal. As an update on EERI, Units 1 and 2 of EERI have successfully completed testing and commissioning and have been issued the Final Certificate of Approval To connect, or FCATC, with a combined generating capacity of 850 megawatts. These units are already fully operational and ready to deliver power to the grid. EERIs Unit 3 with a capacity of 425 megawatts has also underground testing and commissioning and is awaiting issuance of the Final Certificate of Approval to Connect from NGCP and, of course, the issuance of a provisional authority to operate from ERC. While we aim to expand the LNG to power business in the Philippines, we have been steadily growing our LNG capacity outside of the country. On the international front, our subsidiary PLP continued its expansion of the CCGT facility with a capacity of 600 megawatts on Jurong Island. The EPC contractor for this project has been -- well, the OEM has been awarded to Mitsubishi for a 670-megawatt H-class CCGT and JEL as the -- or Jurong Energy as the EPC contractor. Scheduled for commercial operations in January 2029, the new plant will include a large-scale energy storage system, the first ever of its kind in Singapore to balance, of course, the variability of what EMA of Singapore is planning by importing at least 4,000 megawatts of renewable energy from neighboring islands. PacificLight is also committed to expand its existing 830 megawatts CCGT facility with a 100-megawatt First Start capacity or what is actually a dispatchable reserve plant in the Philippines and this is in Singapore due to begin operations in the second quarter of 2025. So this is paid capacity fee with a fuel pass through once dispatched by EMA. All of this strengthened our LNG portfolio with LNG bridging our transition toward a low-carbon energy future. This landmark LNG projects exemplify MGen's steadfast commitment to innovation, sustainability and excellence, setting new standards for integrating efficiency and operational and environmental responsibility in power generation. So MGen continues to uphold our commitment to powering the good life by championing initiatives that pave the way for a more sustainable future. Together with our subsidiaries, we have also been pursuing community programs to drive inclusive and sustainable growth. For our host communities in Nueva Ecija, MTerra Solar, in the first quarter, installed solar-powered street lights across 7 barangays in Gaban, Peñaranda and Genral Tinio to enhance road safety and visibility. It also conducted job readiness trainings for 630 scholars in Gaban to give them opportunity to be hired for the project construction, and we have set up temporary community marketplaces to -- within the project site to provide market services for about at least 10,000 workers that will be employed ion instruction of Terra Solar. So this gives locals a space to market their products and services. For the scholars, we have already graduated 60 of them certified for electrical installations. On a final note, MGen's overall performance in the first quarter of the year has been marked by strong operational efficiency across our portfolio, enabling us to deliver solid results. MGen is well positioned to sustain momentum and continue delivering value across our portfolio. Backed by dedication of our people and strength of our partnerships, we remain confident in MGen's ability to navigate the changing landscape and pursue inclusive and sustainable growth. Good afternoon.

Good afternoon, Chairman, MVP. Good afternoon, everyone. I'll be providing some brief updates on the sustainability front, particularly on Meralco's latest ESG assessments or ESG ratings as well as on recognitions we received during the first quarter of 2025. I'll begin with our MSCI ESG rating. I'm happy to report that we have maintained our BBB rating, which places us in a strong position among over 8,500 companies assessed by MSCI globally. This rating highlights our transparency in disclosing our greenhouse gas emissions as well as the strength of our governance policies, especially around business ethics and tax transparency. Next, the Carbon Disclosure Project, or CDP, I'm pleased to share that we have sustained our scores for both the climate change assessment and the water security assessment. For climate change, we continue to perform in line within the global average score of C with strong performance noted by CDP on our climate-related risk disclosures, governance structures and risk and opportunity management. For water security, we likewise received positive feedback for our comprehensive disclosures on water-related risks. Next, our efforts were also recently recognized at the Asia Sustainability Reporting Awards where our 2023 combined annual and sustainability report entitled Pangako, received the Silver Award or second place in Asia's Best Sustainability Report category. ASRA, which assesses entries from leading companies across 13 countries, commended our commitment to transparent stakeholder communications as well as our alignment with global reporting standards. Finally, we also received a recognition at the International Tax & Investment Conference 2025, where we were honored for excellence in sustainable cities. In particular, this recognition spotlighted our initiatives through MGreen, our long-term sustainability strategy and other related investments, which collectively underscore the positive impact of our ESG commitments. Thank you very much.

Thank you for that. At this point, we'd like to acknowledge presence of our Chairman, Mr. Manuel V. Pangilinan.

We will now open the floor for questions from our analysts and investors. [Operator Instructions]

Jelline Gaza from JPMorgan. My first question is for Attorney Valles. Can you please give us more idea on the timing for the fifth regulatory? We said the next RP should start by July this year. There has been then 10 public hearings. Do you think that it would be completed in a timely manner before it's supposed to start?

Well, the schedule for the start of the 5RP is supposed to be July 1 this year. So far as Meralco is concerned, we have filed based on the time line given to us by the ERC. We completed all the processes and the hearings. Unfortunately, I think there is a pending incident at the ERC that they're trying to resolve. I saw in publication or posting, one of the post of the ERC that they have not awarded a consultant, the contract the consultant is supposed to handle the 5RP of Meralco. So that might result in further delay in the 5RP proceedings. So honestly, I'm not so sure ERC can still meet the target of July 1 based on the original schedule that they have provided in the rules of the 5RP. So far as a reasonable time line may be thereafter, maybe about 2, 3 months after July 1.

Still within the year. And on the components of the fifth RP, can you guide us through how you'll be able to increase the CapEx spending from the usual PHP 15 billion to PHP 20 billion for the DU business only to the proposal of around PHP 40 billion to PHP 50 billion a year?

Based on the application of Meralco, actually, the biggest component and so far as the CapEx is concerned is the AMI. So if the ERC will approve the CapEx, the AMI implementation that will increase the CapEx spending on Meralco beginning in the first year.

And also, my second question is still relating to the regulatory changes that we've seen in last week. How will the Atimonan One decision change by the DOE impact the viability of the project itself? I noticed that the procurement plan will already include the baseload capacities for auction by May.

Yes. Just for the record, the letter stated recall for further review. I've yet to discuss with the OE to understand what aspects of the projects -- of the project need to be reviewed. Atimonan is actually not really designed to participate for any of the PSPs of Meralco, but we're aiming to participate in the baseload action. The DOE is actually looking at implementing by the end of the year as announced by USAEC in Cagayan de Oro, okay? Then if we can actually -- because if you look at the Meralco schedule, it's only for 900 megawatts. We're 1,300. So maybe first come, first serve, whatever is left, we can participate. We're even looking at a RES or RESs to underwrite remaining capacities for whatever would be contracted in any of these auctions, whether it's for baseload auction to the CSP. I'm still hoping that -- we're still hoping that we can clarify and resolve all of these concerns. I think we all agree that the grid needs capacity and we have mentioned to -- well, we've declared public that we're confident that Atimonan would be one of the lowest cost baseload plant options that still can be constructed.

And lastly, on the chromite profit contribution, it's about PHP 663 million on the share of Meralco. Can I confirm that this is before the interest costs for the acquisition? And how should we think about the PHP 5 billion to PHP 6 billion expected contribution for the full year is on track, all considering it?

Okay. The answer is yes, the PHP 663 million is just operations. And that is -- that's only a month now, practically a little bit over a month, okay? Now with respect to interest, until we complete the PF or at the level -- at the operating company level, then that's just pure operations. But we really intend to push down a portion of the debt to the operating company level. So -- but net-net, if I look at overall Meralco, it should not be different from what we had projected on a consolidated basis because it just moves the debt to the operating company level, and that push down would actually be for all of our partners, so ratable share.

Thanks for that, Jelline. In line with that question, Ms. Betty, there's another related question here. Could you give guidance on the full year revenue and income contribution from chromite gas?

If my recollection is right, the full year chromite is about PHP 5 billion or PHP 6 billion.

We have several questions here related to regulatory. May I know what is your take on the seemingly heightened scrutiny of regulators in Meralco in the past weeks? How should we interpret these developments?

Can you repeat it?

May I know what is your take on the seemingly heightened scrutiny of regulators on Meralco in the past weeks? How should we interpret these developments?

Difficult to comment, right? Well, they've issued their press release, as you know, as at April something, 14 or something. And the DOE also had the press conference, after which they issued a press statement. So Meralco, in turn, has issued its own official statement in response to their own press release. And I think we'd like to leave it at that. We have reached out to the DOE to find other concerns, specifically with respect to Meralco. And that's in process. I think beyond that, it's -- it will be, I think, probably not appropriate to comment further.

There's another regulatory concern here. Are there any significant changes to Meralco's DU concession following the franchise renewal?

I'm not aware of any significant concession following the franchise renewal.

We should go back to the floor. We've questions on-site.

Meralco does not operate under a concession agreement. We operate under franchise which, as you know, has been extended from -- by another 25 years from 2028, right? So that is enshrined in law. So unless there is legislative action to amend, the franchise that is either current or the new one, then it stays where it is.

And then in terms of operations, does Meralco maintain its guidance of 4.5% DU volume growth for full year '25, even with this sluggish, but I assume in line with seasonality growth in first quarter?

Yes, we still maintain the 4.5% growth or around in volume, 56,800. So yes, we see sluggish first quarter, but picking up starting quarter 2 and most of the catch-up might happen on the second half as we forecast. Of course, barring any unforeseen macroeconomic things. Of course, there are macroeconomic factors affecting our growth like the forecast downgrade in terms of -- but, yes, of course, challenges last year is really a very high first half, we grew 9%. So it's hard to top 9%. But the second half, we grew around 4%. So we're pegging on seasonality as well as the constant amortization that we're doing and also expectation of the ramp-up of the large data centers that we some sort of energized late last year as well as first quarter. Well, up to April this year now where we energize the largest one Globe STT. Of course, last year, the largest was VITRO. So these are fairly large data centers compared to the normal data centers that we had before.

Thanks, Ferdi. On financials, what drove the higher blended margins for PacificLight during the first quarter? What drove the blended -- higher blended margins for PacificLight?

Well, the main drivers for PacificLight's income for the first quarter are fuel and high availability and the contracts they've signed in the merchant market.

We go back on the on-site. We have questions on it.

I'm [ Jarred ] from AB Capital. I have a question on the planned CSPs. I don't see any news thermal baseload CSPs for PSA starting in 2026 or 2027. Is this because we see the new renewable energy capacity as being enough to satisfy the growing demand?

So we have 600-megawatt baseload that's upcoming May 2025. And we also have a 900-megawatt baseload coming September 2025.

I believe these are PSA starting 2028 onwards.

Yes. And 2030.

Yes. So there's no new baseload for 2026 and 2027 other than the renewable energy baseload.

The PSA will start -- the COD of this is expected to be February 2028 for the 600. And then for the 900, that's February 2030. If you're asking for 2026 start -- are you asking for 2026 starts?

Yes, now new.

So we have the 200-megawatt baseload which is -- which includes the RE. It's baseload conventional in RE because the requirement is for us to get the renewable portfolio -- comply with the renewable portfolio standards. And then I think, yes, that's it. I said 450 mid-merit is for February 2029.

Yes. I'd also add that by February 2026, there's a mid-merit supply for 600 megawatts that was -- is now going to be serviced by Terra Solar. So we've been saying that the Terra Solar projects, it's now proven that a combination of renewable energy, coupled with the best can be as competitive as an option. For -- your typical supply of mid-merit used to be fossil fuel, right? So this one is actually going to replace that.

And then just a follow-up question for Sir Manny. Just on EERI. When do we expect to start recognizing depreciation on the plant after it's completed its commissioning?

We've started on the ones that have started delivering Unit 1, and I think we've also factored in some on Unit 2 depending on the recognition of the commercial operations. For Unit 1 and Unit 2 we've started.

Online, we have a question on CapEx guidance for full year 2025 and earnings guidance for this year. So CapEx guidance and earnings guidance for 2025.

For CapEx, well, for the BU side, we're looking at over PHP 25 billion and then another CapEx component would be coming from power generation. Let me just get the number in a second. Wait. I'll revert on the power generation. But the power generation number is largely TSPI for CapEx. I'll get it, wait a second. The total -- the bulk of which is really The DU is about PHP 29 billion and then the total consolidated is PHP 120 billion. That is largely TSPI or the difference. Because I remember, by February of 2026, Phase 1 should be operational already. So that's 2,500 megawatts, that would include -- the CapEx there would include the balance of plant and also the land acquisition.

Thank you for that. How -- for MGen, how many projects are still awaiting to be operational for this year?

This year -- for this year, of course, the balance of EERI, Unit 3. After that, none. But we will be starting SP Tarlac for another 35, that's an expansion. And the next one would be ready in February of 2026, which is the Phase 1 delivery of Terra Solar.

Thank you. Then we have two related questions on chromite. Does the depreciation and amortization for chromite gas plants already starting to be recognized this year?

I've answered that already.

And can you clarify if the PHP 5 billion to PHP 6 billion target for -- income target for chromite, is that under the operating company or already the income share of Meralco from the investment?

That's -- okay. So the whole amount -- that's our share already. And the total is PHP 6 billion from operations. So if there are opportunities to sell in the reserve market, it's not included.

Thank you, Ms. Betty. If we go on-site for any questions on hand.

This is Derrick from CLSA. Well, do we stick with the PHP 50 billion earnings guidance for this year?

Well, we are -- I guess it's -- in terms of income growth, we are looking at being able to maintain -- you've seen the growth in the first quarter. So 10.8%. We're looking to maintain double-digit growth in profit terms, core profit for Meralco for 2025. So it's probably within the range of probably land during the year at low double-digit growth, so between 10% to 12% for the year. So yes, it will be around PHP 50 billion or maybe hopefully more, right?

Jelline, yes. Here in the middle.

Sir, since you're here, I just wanted to get your thoughts on the balance sheet of Meralco and the dividend in capacity or requirement? It's -- we haven't seen the balance sheet transition to a net debt for many years. SO wonder it's been already on a net debt.

Well, net debt is about 1.06.

So that is still just okay. But I just wanted to get the sense how you're thinking about payout dividend policy, capital structure mix.

Well, this -- the consolidated debt has grown because of the contracted debt to finance the investment chromite. But the plan, and I think it's been agreed with the 2 other shareholders is to push the relevant acquisition that we have contracted except for, of course, for San Miguel down to the operating company level. So we will deleverage the balance sheet as of March 31 by -- anywhere between PHP 70 billion to PHP 75 billion. So it will -- we saw that net debt-to-equity or gross debt to equity -- sorry, net debt to EBITDA and gross debt to EBITDA should drop hopefully, by the middle of the year, in the third quarter. So on that basis, we would anticipate to be able to maintain at least 50% dividend payout of core and I look back to be able to pay an additional 10% on core. So core will be -- core is about 50%. So you're looking at PHP 25 billion to PHP 30 billion of cash dividends. Is that okay? What, you want more, right?

Thanks for that, Jelline. We don't have any more questions on hand. But checking again on-site if you have any more questions.

[ Alvin ] from MEG Capital. I just wanted to ask, Meralco has been in the news trying to start or do the nuclear power plants. What's the vision for nuclear?

Yes. Meralco is really positioning itself as a major player in the nuclear energy space. But of course, this will basically be triggered by the bill, which is pending now in the Senate, the PhilATOM bill. But while waiting for the passage of that law, we're doing already, I would say, preparatory work, especially on the talent development. Maybe you have heard already that Meralco has already sent 5 scholars abroad. And we will be sending 7 more scholars. The first 5 scholars, 2 of them are in the U.S. and 3 of them are in China, and we'll be sending 7 scholars to be sent in France, in Canada, in Korea and Tsinghua University in China. And of course, we have signed also an MoU with EDF branch. We know that France is the leader in terms of nuclear energy adoption, around 75% of their energy requirement is supplied by nuclear power. So we're partnering with them in terms of doing the feasibility study, especially on the site selection. So yes, we're just waiting for the passage of that law. But of course, we are keen into the adoption of small modular reactor or SMR. And the first-of-a-kind SMR is now being constructed in Romania, and hopefully it will be up and running in 2030. So we're looking into the outcome of that first-of-a-kind small modular reactor.

Can you share the economics of nuclear like what you're seeing?

Well, that's part of the MOU we signed with EDF to understand the economics. Too early to say the price of the LCOE of nuclear. But of course, it's going to be expensive, especially for the first unit to be built in the Philippines. But of course, we're looking at economies of scale.

It's an enigma for us because the indications we're getting is that we don't know about smaller modular -- smaller micro modular reactors. But it's looking like if we are to build nuclear plants, you probably have to turn to conventional nuclear plants. And the feedback we're getting from both EDF or France and from Korea and the U.S. is that the cost of building conventional plant is $8 million per megawatt, right? So if you build, the minimum size is at least 600 megawatts. So you're looking at $5 billion. Of course, the cost of fuel will be rather low. So it's like buying an electric vehicle at this stage. The capital cost is higher than fossil fuel. But your OpEx is much lower. So how it balances out in terms of actual power rates, we still don't know. So we have to learn. We've signed an MOU with EDF to learn more about how the nuclear industry works in France. And we were told as well that smart meters in France are about 40 million meters, right? So how many Frenchmen are there, French people are there. So they're not -- I think we have -- we're more numerous in the French, right? So that's quite a lot. So we have a lot to learn from the French in terms of the nuclear industry and how they adopted the smart meters in a very, very big way. So when we invested in chromite, that's about 2,500 megawatts for about USD 3.5 billion. This is 600 megawatts of atomic energy or USD 5 billion. So that fuel must be damn cheap to justify an investment of USD 8 billion. So it's not a slam dunk proposition. But -- so you have to ask yourself, what is the price of energy independence for this country. So -- and I'd like to think that Meralco is the thought leader in nuclear energy as it is in many other areas in distribution and generation and probably is in the best position to pivot to nuclear, right? And in many ways, because of that, we're getting a lot of comments from all quarters. And let's stop it there, right?

Thank you for that, sir. Well, we don't have any more online questions. So we'll just do one more round on-site. Well, with that, I would like to turn the floor to our Chairman, MVP, for his final remarks.

Well, thank you for joining us for this first quarter results, and we'd probably give you a better idea of outlook for the full year 2025 when we announce our first half results. But it's probably going to land somewhere in the number that I mentioned earlier. Now I think just to be totally transparent on chromite. It is likely the profit at their level would be around PHP 25 billion this year. So we won't get all of that because we started accounting for the profitability sometime in February and 1 unit only. So the full impact of chromite, you haven't seen for the first quarter. But I think starting in the second quarter, you'll see more and more the benefits of the chromite investment. And I think the bottom line will also get affected when we push down the debts at their level. But it's a more tax-efficient situation because that's where both the profits and the cash are derived. So it's -- I think our optimism for Meralco's prospects remain tempered for the year. We've seen -- our sense is that it's a slow start for the economy for the first quarter. And we do hope that in the course of the last 3 quarters of this year that the economy will improve, especially with the pickup in election spending. We haven't seen that really in a very tangible way. So as you know, the certain of the super national institutions like ADB and the World Bank have reduced GDP forecast to sub 6%, right? So we -- so that's why our optimism is tempered. And -- but if you could achieve double-digit growth for this year, I think it would be a good achievement for the company. And chromite has expansion plans, right? We have bought the turbines, right, that 435 megawatts, and we will expand the capacity because we already bought it from San Miguel, which they bought before. So it's relatively inexpensive, and there are further plans to expand the solar investments after we complete the Phase I, and energy is already being produced by Phase I. I think we're optimistic that we can expand Terra Solar to a higher capacity level in the course of next year. Okay. Thank you. See you in September as the song says.

Thank you, Sir, MVP. Before we officially close, please be informed that an audio recording of today's briefing will be available on our website under the Investors section. Thank you once again for attending today's briefing. We look forward to seeing you in the second quarter briefing. Thank you.