Manila Electric Company (MER) Earnings Call Transcript & Summary

Good afternoon, investors, analysts and managers and key stakeholders. Welcome to Meralco's first half investors briefing. We also -- we welcome warmly our guest analysts and investors for joining us in person as well as those participating online for MS Teams conference facility. Before we proceed, please be advised that this session is being recorded. Kindly adhere to the ground rules, which were sent to you prior to this briefing. Today, we will present financial and operating results of Meralco for the first half of 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. Presenting along -- presenting with the team is Mr. Ronnie L. Aperocho, Executive Vice President and Chief Operating Officer; Ms. Betty Siy-Yap, SVP and Chief Financial Officer; Mr. Emmanuel Rubio, President and CEO of Meralco PowerGen; Mr. Ferdinand Geluz, Senior Vice President and Chief Revenue Officer and OIC subsidiary of businesses; Mr. Froilan Savet, First Vice President and Head of Networks; Attorney Jose Ronald Valles, SVP, Head of Regulatory Affairs and Head of the Regulatory Management. Today's agenda will begin with the financial highlights, followed by the operating results of Meralco's distribution utility business, updates from MGen and regulatory. We will open the floor for a question-and-answer session. At this point, I would like to introduce our Chief Financial 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 half of 2025. Our strong first half results was fueled by the solid performance of our core distribution business and accelerating momentum of the generation business. We present here the highlights. In the first 6 months of 2025, the distribution utility business accounted for the largest share at 54% or PHP 13.7 billion out of the total CCNI or consolidated core net income of PHP 25.5 billion, while power generation's share grew to 37% with PHP 9.4 billion contribution, higher versus the 27% in 2024. The RES business and the nonpower business brought a combined PHP 2.4 billion or 10%. The Board of Meralco approved today an interim cash dividend of PHP 11.328 per share, representing 50% of core EPS for the period, payable on September 22, 2025. For power generation, MGen achieved milestones as follows. The thermal plants continue to play a critical role in ensuring grid reliability with 128.9 megawatt capacity allocated to regulating and contingency reserves, providing a total of PHP 3 billion in revenues. On the LNG investments, in January, PacificLight was awarded the 600-megawatt hydrogen-ready CCGT project in Jurong Island, bringing the total generation capacity in Singapore of PacificLight to 1,500 megawatts by the time this plant comes into operation in 2029. On March 31, the ERC approved the increase in SPPC supply from 910 megawatts to 1,200 megawatt, which -- the 290 megawatt of which began -- started delivering power to Meralco in April 1. Commercial operations of Excellent Energy Resources or EERI -- EERI's units 1, 2 and 3 by April 30 of this year after the ERC issued the provisional authority to operate. Linseed Field Corp. or the regasification terminal achieved 2,400 megawatt gas send-out capacity starting June 1, 2025. On May 14, PacificLight successfully completed and commissioned the 100-megawatt fast-start ancillary facility, specifically -- significantly enhancing the flexibility of Singapore's grid. For MGreen, it delivered a total of 387 gigawatt hours, 13% higher with contribution of its newly incorporated, newly operational solar power plants, more than -- and with 98% average plant availability. Dividends from unconsolidated investees totaled PHP 4.9 billion, mainly from PacificLight and San Buenaventura. On July 21, less than a year after the upgrade of Meralco's long-term rating in August 2024, S&P Global Ratings affirmed Meralco's BBB credit rating and revised its outlook to positive, citing the company's strong business position with the improving scale and profitability in power generation and diversification as an integrated utility. On your screen would be the comparative first half numbers. Our CCNI for the first half of the year increased by 10% to PHP 25.5 billion from PHP 23.2 billion. Our consolidated reported net income increased by 5% to PHP 23.6 billion from PHP 22.4 billion last year. Similar to our net income, core EBITDA rose 9% to PHP 43.2 billion from PHP 39.7 billion. Consolidated revenues increased by 3% to PHP 245.2 billion from PHP 237.5 billion in 2024, mainly due to the increase in pass-through generation and transmission charges, higher volumes of the DU and retail electricity business and higher revenues of MGen from the reserve market. Costs and expenses increased by 3% to PHP 219.7 billion, the bulk of which still purchased power costs, which accounted for 85% of the total. Capital expenditure totaled PHP 47.5 billion, mainly for the development of the solar power plant and about PHP 11 billion for the distribution network. Cash and cash equivalents amounted to PHP 91.6 billion, while consolidated debt was at PHP 204.8 billion. The next slide shows the comparative segment information. This chart on the right -- the chart on the right show the contribution of each of the segments to our CCNI, revenues and core EBITDA. The CCNI contribution of our regulated or distribution business was from less than 1% -- was from the less than 1% growth in consolidated energy sales volume of Meralco, Clark Electric and Shin Clark, which totaled 27,091 gigawatt hours from 26,954 gigawatt hours from the previous year. Note that while CCNI of the DU declined to 54% in terms of its share in CCNI, CCNI contribution in absolute terms was higher by 7% at PHP 13.7 billion. For our unregulated businesses, the higher CCNI contribution in terms of peso amount came from the growing power generation business with its share at 37%, equivalent to PHP 9.4 billion of CCNI. This was coming from the higher revenues with the participation in the reserve market, our share in Chromite Gas Holdings and the new 100-megawatt plant of PacificLight. The retail electricity supply business and nonpower business subsidiaries, meanwhile, brought in combined PHP 2.4 billion or 10% with combined energy delivered by the RES business of 3,543 gigawatt hours. The DU revenues accounted for 83% of the total. RES and nonpower subsidiaries and affiliate accounted for 11% and power generation at 6%. The DU contribution to consolidated core EBITDA amounted to PHP 24.8 billion, up 11% versus last year and accounted for 58% of the total. Power generation was at PHP 14.6 billion, up 33% and comprised 34% of the total, while RES and nonpower subsidiaries and affiliate accounted for the remaining PHP 3.7 billion. Next slide, please. With respect to our revenues, electric revenues was at PHP 239.1 billion or 98% of the consolidated revenues. Generation, transmission and other pass-through charges were 5% higher at PHP 190.7 billion due to the higher cost of LNG and natural gas. The increase in Malampaya natural gas prices was a total of $11.6 per gigajoules compared with $9.99 per gigajoule last year. The peso also depreciated at an average of PHP 57.141 per U.S. dollar in the first 6 months compared with an average of PHP 56.887 last year. Transmission charges went up with the higher service charge from the additional ASPA agreements of NGCP and also the additional capacities from the reserve market. Despite the less than 1% increase in sales volume, distribution revenues decreased by PHP 830 million due to the implementation of onetime refund of PHP 22.64 per kilowatt-hour last February relating to the regulatory reset fees. In addition, our distribution revenue was reduced by PHP 0.0023 per kilowatt-hour with the reduction representing the regulatory reset fees. Energy fees, which totaled PHP 12.9 billion, increased by 1% from PHP 12.8 billion to PHP 12.9 billion with higher revenues from the reserve market. Nonpower subsidiaries revenue was lower due to the deconsolidation of MIDC. The next slide is on cost and expenses. Our total cost and expenses is at PHP 219.7 billion. Purchased power cost accounts for 85%. OpEx represented 10% and depreciation at 4%, while the combined coal and fuel and power plant O&M accounted for the remaining 2%. Purchased power costs increased by 6% to PHP 185.7 billion from PHP 174.4 billion, consistent with the movement in pass-through charges -- pass-through revenue charge. OpEx went up by 11% to PHP 21.7 billion with the increased manpower and contracted services to meet the DU's workload demand, particularly for the repair and maintenance of distribution facilities to ensure system resilience and reliability, IS/IT-related expenses driven by measures to ensure system stability and integrity of the support operations as well as increase in labor costs of MGen to support the expanding portfolio of power generation projects. Higher project costs were also incurred by MIESCOR. Depreciation and amortization was lower by 12% due to the consolidation of MIDC. Combined coal and fuel, power plant O&M amounted to PHP 5.4 billion, 27% lower. Other expenses consisted of present value adjustment for long-term liabilities and net provision reversals with the settlement of our RPT or real property taxes. For capital expenditures, consolidated amount was at PHP 47.5 billion as of end of June. Of this amount, 71% or PHP 33.6 billion was utilized for the construction of the MTerra Solar project for Greenergy and Greentech Solar plants. The DU accounted for PHP 14 billion, of which PHP 11 billion was for electric capital project and the balance for nonelectric projects. For the first -- for our power generation results of operations -- so backed by the strong performance of its growing power generation portfolio, MGen ended the first semester with a 52% increase in CCNI contribution of PHP 9.4 billion with higher revenues from its participation in the reserve market, investment in Chromite Gas Holdings and commissioning of the new 100-megawatt plant in Singapore as well as higher plant availability across its portfolio. With the increase in the net salable capacity of 5,068 megawatt in the Philippines and Singapore from 2,404 megawatt last year, MGen delivered a total of 12,644 gigawatt hours in the first 6 months of the year. Core net income of MGen thermal plants grew to PHP 3.6 billion from PHP 1.9 billion only last year and delivered a total of 4,591 gigawatt hours, up 4%. Beyond this growth, its thermal fleet continues to play a critical role in ensuring grid reliability with a substantial portion of the capacity allocated for regulating and contingency reserve. MGen's LNG Investment through Chromite Gas Holdings and Singapore-based PacificLight Power delivered a total of 4,800 gigawatt hours and 2,865 gigawatt hours, respectively. Overseas, PacificLight commissioned the 100-megawatt fast track ancillary services project on May 14, 2025. Meanwhile, MGen renewable or MGreen delivered a total of 387 gigawatt hours, 13% more, driven by the newly operational solar plants. The next slide shows our credit and debt profile. Consolidated interest-bearing debt totaled PHP 204.8 billion, including PHP 89.4 billion of debt from our subsidiaries. Note that the PHP 115.4 billion DU debt includes PHP 75 billion debt drawn from Chromite transaction, and the PHP 88.3 billion debt of MGen does not include the plant availment of PHP 110 billion at the Chromite project level, of which MGen's PHP 40.2 billion share of the proceeds will be upstream to shareholders. As of end June, Chromite's debt consists of working capital load of SPPC of PHP 3 billion and Linseed loan of PHP 15 billion. As of end June, consolidated net debt stood at PHP 103.9 billion and net debt to earnings before interest, taxes, depreciation and amortization of 1.28x. Debt maturities are well spread to 2040. All of our debt are in Philippine peso except for the Singapore debt, which is in their currency. Cash and cash equivalent totaled PHP 91.6 billion, and short-term investment totaled PHP 9.3 billion. Our long-term cash investments totaled PHP 5.2 billion. Our next slide shows our segment information on 100% basis. The charts on this slide shows the performance of our segment on 100% basis or including all our consolidated and unconsolidated entities. The total core net income is at PHP 33.8 billion, up 29% versus last year, with DU accounting for PHP 13.9 billion or 41% and power generation for 52% and rest the balance of 7%. Revenues, including revenues of our investees that are accounted for an equity pickup basis, amounted to PHP 334 billion with the DU accounting for PHP 210.6 billion or 63% of the total, power generation at close to PHP 95 billion or 28% and RES and the nonpower subsidiaries at PHP 28.8 billion or 9%. Total core EBITDA amounted to PHP 52 billion with the DU accounting for PHP 25.1 billion or 48% of the total, power generation at PHP 23.3 billion or 45% of total and RES the remaining 7%. Our core earnings per share is at PHP 22.65 a share, up 10% versus last year. Today, the Board of Directors approved the declaration of an interim cash dividend amounting to PHP 11.328 per share payable on September 22, 2025. This represents a payout of 50% or an implied yield of approximately 8% -- 5%, sorry, using the June 30, 2025, MER closing price. The next slide shows our S&P rating. So as mentioned, less than a year since the upgrade last year, S&P Global Ratings has affirmed Meralco's BBB credit rating but revised its outlook to positive from the previous table, citing our strong business position with the improving scale and profitability as an integrated utility. That ends my report.

Thank you, Ms. Betty. We'll now 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 of our different business segments.

Thank you. Good afternoon, everyone. I'm pleased to present Meralco's first half operations report, highlighting a period of generally remarkable performance across all key areas. Starting with our energy sales. For the first half of 2025, our energy sales stood at 27,091 gigawatt hours, which grew by 0.5% from the previous year despite the high base due to last year's El Niño and 1 day difference versus 2024 leap year. In addition, our energy sales volume growth was tempered by the elevated vacancies in office and condo spaces from POGO exit, along with a muted demand during the midterm elections. The net system input or NSI was 28,169 gigawatt hours, posting a marginal growth of 0.3% compared with the same period in 2024. Meralco's year-to-date peak demand reached 9.13 gigawatts recorded last April 23, 2025, 2% lower than last year's 9.32 gigawatts. The drop can be attributed to last year's unprecedented power demand surge, which normalized this year. Our customer count is growing by 2.5% to reach 8.129 million customers by end of June. On the service performance of the DU, the 12-month moving average system loss for June was 5.88%, a notable 0.19 percentage point improvement over the same period last year and 0.04 percentage point improvement than last month. The improvement was the result of our system loss reduction activities ahead of year-to-date targets and a more favorable sales mix. In terms of system reliability, we recorded double-digit improvements for our performance indicators, SAIFI and SAIDI. Our total SAIFI was better by 13% at 0.477x, while our SAIDI, likewise, improved by 13% at 50.57 minutes. The year-to-date average time to connect customers also improved by 6% at 1.41 days over 1.5 days last year, translating to better customer experience with faster energization of service applications. And then finally, our average electricity retail rate during the first half of 2025 was PHP 11.41 per kilowatt-hour, higher by 11.1% versus the same reporting period last year, primarily due to the following: first, due to higher generation charge, 13.9% increase, from higher Malampaya natural gas prices due to the implementation of new gas sale and purchase agreement or GSPA of first gas plants; recovery of previously deferred charges for first gas plants and depreciation of peso; and increased transmission charges, 25.3% increase, from higher ancillary services costs. Thank you, and may I turn you over to Ferdie Geluz for the report on our sales. Thank you.

Good afternoon. So for the details of the energy sales, as mentioned by Ronnie, it stood at 27,091 gigawatt hours, so it's 0.5% versus last year's high base because of El Niño and where we grew almost 9% last year. So we also observed that modest gains from Q1 was offset by colder in weather quarter 2. On top of this, there was a downgrade in GDP forecast last April and from [ 6 ] to [ 5.5 ] driven by uncertainties from the U.S. tariff policy as well as some Middle East tension. So on a per segment basis, residential grew a tempered 0.7% with contribution from new customers energized within the last 12 months boosting a flattish per capita organic sales. In fact, while there were gains in Q1 where residential grew by 3%, we saw negative 1% depression in Q2 due to the May and June months' almost 3% decline. Commercial posted a marginal year-to-date growth of 0.3% versus almost 10% last year as ramp-up and expansions in retail and restaurants countered the impact of office vacancies brought about by the POGO exit starting January this year. Retail trade and restaurants benefited from new malls, wholesale supermarkets, convenience stores and boosted by openings of additional quick service restaurant franchises and cafés. Real estate is down 2% year-to-date and is affected by persisting vacancies from the POGO exit. So quarter-on-quarter, commercial grew 1.3% in Q1 but declined by almost 0.6% in Q2 highlighted by the almost 3% decline in May. So industrial performance inched up by 0.5% as demand for semicon, cement, infrastructure materials as well as still offset operational shifts in food and beverage. So some of the manufacturing of food and beverage were decentralized outside of franchise, and it somehow affected our energy sales. So for Q1, industrial grew a slight 0.2%, and we observed a slight uptick in Q2 to 0.9% brought out by the increase of steel. Steel actually is negative on quarter 1, but because of favorable economic conditions to -- for smelting operations and lower cost of scrap, I think smelting operations for steel -- the steel industry resumed in quarter 2. Well, semicon sustained increase driven by strong demand in storage devices and microchips. So for sales mix, year-to-date, residential stood at 36%, commercial at 37% and industrial at 26%. Our consolidated customer count currently stands at 8.30 million. This is actually a 200,000 customer base increase versus same period last year, continued by strong energization of service applications. So I think at this point in time, that being said, we remain cautiously optimistic about accelerating growth in the second half. Given the current trends and momentum behind our initiatives, we project full year growth to land within the 1.2% range. This is actually a downgrade from the distribution utility 4.5% estimate that we gave during the first quarter. So -- and this assumes a 2% to 4% expansion in demand as we continue to see uptick in recovery in the Industrial segment. I think for the last 2 months, Industrial segment is growing at 2% to 3%, and we expect some sort of recovery in the industrial sector as well as upbeat in the construction activities as well as a rebound -- slight rebound in the office space demand in Q4 because the base for office space actually suddenly declined in September with the announcement of the July POGO exit starting January 2025. So I think we saw a sharp decline in September. So that being said -- so makes kind of normalization as some of the spaces are being rented out and recovering slowly. So despite a slow start, Meralco is charging ahead with solid fundamentals and strategic execution, and we are confident in delivering growth even in a challenging macroeconomic environment. So we are actively executing strategic measures, including faster energization of pipeline projects, streamlining of service applications and fast-tracking of high profile and big-ticket initiatives to drive volume uplift. That ends my report, and I now turn you over to the networks report.

Thank you, Mr. Geluz. To continue for DU, CapEx projects, second quarter of the year, we energized 9 major CapEx projects for system adequacy and system reliability; commissioned 4 projects, contributing a total of 459 MVA additional capacity to our system. These are the expansion of Bridgetowne substation in Pasig City and Makati GIS substation in Makati City. Third would be the development of ASEANA, 115 kV, 34.5 kV GIS substation, this one in Pasig City. And the fourth one is the operating of 230 kV, 115 kV Tayabas, 100 MVA power transformer to 300 MVA in Tayabas, Quezon. These projects will support the load growth, improve service reliability in the cities of Pasig, Makati, Parañaque, Pasay, portions of Quezon City and municipalities in Quezon and Laguna provinces. On top of this capacity addition projects, we have 5 major CapEx projects or system security or reliability improvement projects. This is geared to improve our subtransmission system backbone with a total CapEx of PHP 957 million. We have completed the development of Regalado, 115 kV GIS switching station in Quezon City, the very first indoor switching station in Meralco and, of course, also in the Philippines. This also connected ST Telemedia Global Data Centre to our 115 kV system. Second would be the reliability improvement of Abubot substation in Dasmariñas, Cavite and the uprating of Malolos-Calumpit and Malolos-Tabang 69 kV lines in Bulacan. And the fifth one was the uprating of portion of Dila-Real 115 kV line. Collectively, these projects strengthened the subtransmission system in Bulacan and Laguna sectors, effectively enhancing the operational switching flexibility during contingencies for proportions of Quezon City, Caloocan and Cavite province. Thank you.

Thank you, Mr. Aperocho, Mr. Geluz and Mr. Savet. We now proceed to the highlights from MGen to be presented by Mr. Emmanuel Rubio, of MGen.

Thanks, PJ. Good afternoon, everyone. I'll begin my report with our -- reporting on our top priority across all sites, health and safety. In the first half of 2025, we maintained a safe working environment with over 8.9 million safe man hours, both for employees and contractors. While we recorded 0 lost time accidents, 0 recordable cases and no fatalities, we had 2 first aid cases, both minor incidents and occurred in March and April, which were immediately addressed on site. This serve as important reminders that safety requires constant vigilance. We remain fully committed to strengthening our health and safety measures and building an even safer workplace for everyone, especially considering that we have over 10,500 contractors working today in MTerra Solar in the provinces of Bulacan and Nueva Ecija. As of end June, the overall M Thermal Group delivered 4,591 gigawatt hours of energy, marking a 4% increase, driven by stable operations across our portfolio. Energy delivered from San Buenaventura Power grew by 17% and 1,803 gigawatt hours, while Global Business Power recorded 2,788 gigawatt hours. GBP continues to play a critical role in ensuring grid reliability with a substantial portion of capacity allocated to regulating and contingency reserve support in Visayas. MGen's investment through Chromite Gas Holdings and Singapore-based Pacific Light Power delivered 4,800 gigawatt hours and 2,865 gigawatt hours, respectively. Lastly, MGen Renewable Energy, or MGreen, delivered 387 gigawatt hours, a 13% increase from a year ago, driven by newly operational solar plants and more than 98% of average plant availability across our green portfolio. Overall, MGen delivered a total of 12,644 gigawatt hours of energy in the first half of 2025, 66% increase compared to the same period last year. This significant growth was driven by improved dispatch across our plants, consistently high plant availability, increased capacity contributions, particularly with the successful integration of Chromite Gas Holdings and our team's continued commitment to operational excellence and reliability across the portfolio. Building on this momentum, we now turn to our growth projects. The development of MTerra Solar project as one of the world's largest integrated 3,500 megawatt solar plant and 4,500 megawatt hour of battery energy storage system is ongoing with Phase 1 overall project completion rate at 54% as of end June 2025. Land acquisition and conversion for Phase 1 is almost complete, while Phase 2 stands at 42%. On transmission, 88 of 89 500 kV tower sites have been secured with the remainder just waiting document completion from the seller. In just 8 months since the project groundbreaking in November 2024, MTerra Solar has achieved a major construction milestone with 778 megawatts of solar PV cells now installed on site. This significant achievement not only surpassed the project's target of 750 megawatts at this stage, but also positions MTerra Solar as the largest solar PV installation of its kind in the Philippines today, demonstrating the project's speed and strong momentum. MTerra Solar also mobilized more than 11,000 workers at its peak with over 7.5 million safe man hours recorded since the project commencement, highlighting the scale and complexity of the construction efforts. It plays a key role in supporting the country's goal of achieving a 35% renewable energy share in the power generation mix by 2030 and 50% by 2040. With Phase 1 on track for completion by early 2026 and Phase 2 targeted the following year, MGen is set to exceed its 1,500 megawatt attributable renewable energy capacity goal by 2027, 3 years ahead of the original 2030 time line. As we integrate more renewables into the grid, LNG emerges as an essential transitional fuel that can address our baseload requirements while reducing greenhouse gas emissions. One key investment Chromite Gas Holdings with integrated -- with its integrated LNG facility in Batangas City, which MGen owns 40.2% of provided strong performance as a result of the approval of SPPC's 290-megawatt PSA on April 1 and the commercial operations of all the -- Excellent Energy 3 by 425-megawatt units by April 30. In addition, the terminal LFC, completed its regasification terminal and achieved 2,400 megawatt gas send-out capacity starting June 1, allowing it to fully service the requirements of SPPC and Excellent Energy. While we aim to expand the LNG to power business in the Philippines, we have been steadily growing our LNG capacity overseas. Pacific Light commissioned a new 100-megawatt fast start ancillary services project on Jurong Island. Powered by Siemens Energy gas turbines, the plant will deliver critical support to the grid during unplanned outages or system disturbances, the equivalent of dispatchable reserves in our country. As part of growing our thermal -- of growing our thermal portfolio, MGen is pursuing the development of Atimonan One Energy Inc., a 1,200-megawatt ultra supercritical coal-fired power plant. It just secured the Department of Energy's reaffirmation of its status as a committed project, which followed the agency's confirmation that the project remains outside of the coverage of the coal moratorium policy. Our investment in Atimonan reflects our commitment to providing cost-effective and reliable power supply to meet the growing demands of Luzon. Atimonan Energy power plant will be constructed using high-efficiency, low-emission technology that utilizes high temperatures and pressures to maximize energy production while minimizing fuel consumption. This is one of the latest technologies in the world that is critical in achieving lower carbon emissions from thermal plants and the only one in the Philippines. We will employ advanced and efficient technologies to ensure our operations support economic societal development, all while adhering to the company's commitment to sustainability. Through MGen's thermal and renewable energy arms, we entered into 2 power supply agreements with EvoEnergi, Inc., a newly licensed retail electricity supplier. And under the agreements, M Thermal and MGreen will supply energy sufficient to serve 62,000 households from both renewable and thermal sources. This reflects a assured commitment to advancing energy reliability and sustainability through strategic partnerships with the competitive retail electricity market. As part of our broader commitment to strengthen grid reliability, MGen is set to develop a 49-megawatt battery edge storage system in Toledo, Cebu. This facility will play a key role in ensuring reliable and balanced power delivery across the Visayas grid, particularly in maintaining the quality and safety of electricity reaching end users. The Toledo West project is expected to complete its first phase with 25 megawatt, 40-megawatt hour capacity by 2026 and the balance to be completed in 2027, subject to regulatory clearances. So we remain committed to powering the good life by creating meaningful sustainability and community impact through our 4 pillars. First pillar is our people. MGen is now a member of the Philippine Financial and Inter Industry Pride or PFIP, strengthening the commitment to diversity, equity, inclusion and belonging in the workplace. This also coincided with the formal launch of MGen's DIP policy, providing a clear road map to fostering a culture where authenticity, inclusion and mutual respect are deeply embedded. Next, to Power. We delivered 387 gigawatt hours of clean energy in the first half of the year, which powered roughly 322,500 homes. Our unwavering commitment to implementing impactful programs was also recently recognized with MTerra Solar project garnering global acclaim at the Asia Pacific Stevie Awards, clinching 2 gold Stevies for innovation in energy and sustainability and sustainability and climate protection services. For planet, we continue to make an impactful -- an impact through our BrighTER initiative where we've installed more than 70 solar-powered street lights across 7 Barangay's, MTerra Solar's host communities in Nueva Ecija. And finally, prosperity. Through our back-to-school programs, MGen supported more than 47,000 beneficiaries across 72 schools in 11 provinces, donating over PHP 1.9 million worth of goods, including classroom and office supplies, audiovisual equipment, bin codes, storybooks and school essentials. We've also graduated 487 out of 630 scholars for Terra Transform, skills training program for residents geared towards the construction needs of the MTerra Solar project. And to date, 213 of them have already been hired by EPC contractors. All these initiatives and recognitions reflect our belief that the energy transition should uplift, empower and include the very communities where we operate. On a final note, MGen's solid performance in the first half of 2025 reflects the strength and agility of our growing generation portfolio. From the thermal and LNG to renewables and storage, we are scaling up our investments that push our growth and profitability forward and ultimately delivering value to all our stakeholders. MGen is well positioned to sustain momentum. We remain steadfast in our vision to lead the Philippines' transition to secure, affordable and sustainable energy future. It is our clear commitment that everything we do today contributes to powering a better tomorrow, not just for ourselves, but for the generation to come. Thank you.

Thank you Emmanuel Rubio. We now open the floor for questions. [Operator Instructions]

[indiscernible] average retail rate increased by 11% to PHP 10 per kilowatt in the first half of this year. What trends do you foresee for retail rate in the second half given the global fuel volatility? In relation to that, there was a question on with first half consolidated energy sales volume up 1%, the full year volume growth.

On the first question on the distribution tariff. Well, total retail rate rather. Well, first of all, on the distribution side, the rate remains to be at 135 at the moment, and we are expecting that the 135 will continue until the end of the year. So there will be no change in the distribution tariff. But with respect to the other pass-through charges, particularly the generation charges, there might be -- we might experience some changes, particularly increases in the generation costs due to the effects of the depreciation of the peso and the increases in the fuel prices globally.

Yes. I think some sort of alluded to the year-end volume projection. So as mentioned, we expect full year growth to land within the 1% to 2% range where in second half -- we see some sort of project a stronger second half of 2% to 2.4% expansion in demand as we see further upside in the potential macroeconomic turnaround and as well as on back of the upbeat construction activities and rebound in office space for Q4 by Q4.

Martin Marty from First Metro. I would like if you -- I'd just like to ask if you can expound on the positive news for the Atimonan plant as well as the possibility for a separate listing for MGreen.

I'll answer that. Well, Atimonan has been initially issued a clearance by DOE early this year, Atimonan being part of the permitted projects outside of the moratorium with certain conditions that by 2050, that it has to actually be able to fire a different fuel other than coal. And well, basically that. And then it was recalled for review without much detail when we got the letter. But when the letter was issued again, the DOE reaffirmed that the Atimonan Energy power plants not covered by the 2020 coal moratorium and allowing the project to move forward with permitting and development through the EBOS, because it's also considered -- it can be considered as energy project of national significance given the size. Again, there's no detailed issuance with regard to -- or there's no detailed explanation on the reissuance of the permit except that DOE is looking forward to really adding capacity to the grid that can meet emissions requirement and provide low-cost energy as we are committed to actually making sure that if we offer this plant that this is going to be one of the lowest cost baseload plant that will be out there. Second question?

On MGreen and the possibility for listing.

I think we issued -- the last time we issued the statement with regard to MGreen going public. March 2025. We have not changed our position so far. It's still under review. We actually don't need -- it's just one of the options for us to generate funds for project. Terra Solar 1 is fully funded. If ever, we are looking at probably considering listing of MGreen when we do Terra Solar 2. And we said that we will push with Terra Solar 2 development once we have delivered Terra Solar 1 Phase 1, which is expected to be around late February or early March of 2026. Meanwhile, we are actually developing and enhancing the pipeline projects of MGreen through land banking.

My first question relates to the tariff reset. Would you be able to give us an update where it is currently? And how is the conversations going so far with the new set of ERC commissioners?

For the tariff reset, as you are aware, the Energy Regulatory Commission suspended all the proceedings in our 5RP reset in light of the Supreme Court decision on the unbundling of Meralco. And the ERC also held a public consultation on the valuation methodology that would apply for the valuation of the regulatory asset base in connection with our 5RP reset. But the ERC has yet to conclude the public consultation and has yet to issue any order in relation to the 5RP of Meralco, whether it intends to continue or proceed with the rest of the proceedings or will suspend it indefinitely. My view personally is that I think the 5RP will continue at least until the end of the year. We haven't spoken to the regulators on this point. But considering that the 5RP that we started last July 1, it's too late already because there are many other things that need to be done for the 5RP processes to continue -- process to continue, then I don't think they will be able to make a decision before the end of the year. So I think the 5RP will just continue -- the PHP 1.35 that we are currently charging will continue until the end of the year.

My next question is for Ms. Betty. May I ask, please, how much is the contribution of the chromite asset to Meralco as of first half? And may I also clarify if this already includes the cost of debt for the acquisition and how it was a portion in the PHP 9.4 billion generation earnings contribution?

We have a question online from [indiscernible] can you enlighten us on how CCNI for distribution -- distribution utility business was up year-on-year while distribution revenue was virtually [indiscernible].

The distribution -- the CCNI grew because also of the -- our share in equity earnings of our investments that would include Pacific Light, San Buenaventura, ATEC and Chromite. That's a major contributor. So overall, CCNI, if you look at the segment information that we provided, the driver is power generation.

We have another question from Karisa Magpayo of Macquarie Securities. What was the blended margin of Pacific Light in first half '25? And how did this change year-on-year?

This year is about SGD 86 compared with last year's SGD 87.

Another question, how much provisions were booked in first half '25. And the third question is what were the nonrecurring items in first half '25 [indiscernible].

The difference between core and reported would be the day 1 gain when we account for the present value of our liabilities and foreign exchange. So those are the 2 major items. What was your question on...

[indiscernible] for bookings. We will come back to your question, Karisa. We have another question here the customer -- on customer count growth with the energization of new customers, do we expect this growth trend to be continued in the second half 2025? Which segments are showing the strongest momentum?

Well, we anticipate the growth trend to continue for the second half of 2025, while we some sort of ended 2024 at PHP 8.04 million. We're forecasting PHP 8.2 million to PHP 8.22 million. So there's a slight slowdown in terms of numbers for the second half, basically because of real estate, I think there's a slowdown of real estate construction. But what we're seeing is while there's a slowdown in some sort of real estate condo transactions, we are seeing larger application in terms of the commercial segment. But in terms of volume, I think the driver is really residential parent because it actually accounts for 92% of the total volume. So it's -- volume-wise, it's larger, but in terms of demand, the industrial commercial actually picks up the demand. So again, I think we'll end up around 180,000 customers better compared to 2024 numbers.

Karisa, the number is PHP 2.3 billion.

Well, this is part to that question earlier on collection efficiency and digital adoption, [indiscernible] alongside amount. Can you comment on the traction of digital payment channel that Meralco online [indiscernible].

Well, for Meralco online, I think we saw volumes because we recently launched the new version of Meralco app. And it is a -- it has a better feature. So I think we're now seeing more than PHP 3 billion, around PHP 3.5 billion payments via Meralco online with around 600,000 transactions every month. But overall, including all the channels of Meralco, actually, digital payments accounts for 55% of the total payment transactions. But in terms of amount, it's actually around 45%. So the larger amounts are being paid over the counter technically because of some issues on the -- especially on the large accounts because of the CWT. So it's a bit manual, but we're some sort of also incorporating it in our future bills for digital payments. And as far as digital engagement, as far as Meralco customer engagement is concerned, which includes all the others like complaints, billing inquiries. Actually, our digital transactions account for around 70% of the total customer engagement, including self-service because of our web and the new My Meralco app.

We have another question online from Peter [indiscernible] Capital. I believe the first 2 questions have been answered. The third question is when do you expect SPNEC to turn EBITDA positive.

We expect SPNEC to be EBITDA positive when we deliver Phase 1 of Terra Solar. And even before we do commercial operations, please know that we will be also generating capacity during commissioning to be supplied to the vessel. That will be -- that will in turn also generate cash.

In line with that, Mr. [indiscernible], another set of questions on power generation. We saw power generation contribution [indiscernible] jumped PHP 9.8 billion year-to-date. Can you talk more about how [indiscernible] and ramp-up are shaping [indiscernible].

Apart from the contribution of chromite, which Betty already mentioned, the terminal already able to supply 2,400 megawatts, equivalent of 2,400 megawatt equivalent of a gas sellout. The big -- the ones that really move the needle are the participation of the thermal plants, particularly PEDC and CEDC in the optimized market. 2 units of PEDC are actually supplying contingency reserve as well as the 3 units in CEDC. And the average price of contingency reserve in Cebu is hovering anywhere between PHP 6 to PHP 7 per kilowatt hour. While the regulating reserves, which PEDC Unit 3 is supplying for 30 megawatts almost on a consistent basis, price at around maximum PHP 24 to PHP 25. That's why we have -- we were able to justify and the Board approved our investment in a 40-megawatt hour battery enough -- we believe enough to beat the marginal plant to at least make the prices a bit rational to ensure the sustainability of the market of this one. Having said that, we're also testing -- we will be testing our San Buenaventura plant in Luzon to provide also regulating and contingency reserve given that reserve prices for contingency and regulating in Luzon are also high, not as high as Visayas, but attractive enough for us to participate in that -- and on availability, the average availability now that we have in our thermal plants are above 90%. The lowest ones, but are catching up because of the plant outage in January and in February, our plants in Mindanao in joint venture with the [indiscernible] plants. And all the solar plants are above 98%.

Just want to check once again if you have any questions. We have a few more unanswered questions online.

[ Liam ] from [indiscernible] Securities. Just one question. Can you provide context on how operational shifts in food and bev offset the industrial sales?

Well, I think for food and beverage, there's some sort of decentralization. There are some sort of scale down the operations in our franchise and put up a new -- some sort of manufacturing plants outside the franchise. So for distribution -- for ease of distribution. And one thing that we also noted is for most of this subsegment food and beverage in the industry, especially the breweries, they're putting up solar on our rooftops that's some sort of -- also impacted our sales in terms of gigawatt hour sales.

And we open the floor for Germaine Guinto of Maybank Research.

I just have 3 questions. Sorry if I missed this, but is there any updated guidance on Chromite earnings contribution for the full year? Should we expect higher than the initially guided PHP 5 billion to PHP 6 billion contribution guidance at the start of the year? Or should it be still the same?

I will answer that. I think we're tracking towards achieving that number. We're tracking achieving that number.

My second question is if possible, can you get some color on potential project cost and possible headline guidance [indiscernible] commercialize.

So what we're doing now is that we actually didn't stop the project development work on Atimonan. Well, we were expecting that we believe the country needs it and that the DOE will eventually allow the plant to be built. So what we're doing is we are actually making the plant ready for -- to participate in any auction coming probably by -- we're timing it probably by around September or early October with energy or even we're even looking at RES underwriting a certain portion. And we're also coordinating with DOE with regard to DOE's plan of implementing a baseload capacity auction. I don't think though that it will be this year, but maybe next year. So that's the time line that we're looking for Atimonan that I think we will be able to participate in an auction by around September to early October, given where we are with budget development. As far as cost is concerned, it's like -- well, it's any coal plant that -- but we're aiming to actually develop this at around $2 million to $2.2 million per megawatt, slightly higher because it's an ultra supercritical coal, but with a lower OpEx because of lower fuel consumption.

You mentioned that this plant should offer lower cost for consumers. So does that mean this is expected to have better margins than that of the traditional coal and gas plants? And if so, by how much?

Well, we believe that this will be the -- when it participates in the -- if it participates in an auction, well, that auction will happen around October, we believe that this is going to be the most competitive supply for base oil supply in the country.

I hope we answered your questions.

Are you able to provide any outlook on Pacific Light blended market for the full year? Should we expect it to be stable at that levels?

Well, actually, the number that we have achieved so far is slightly lower than last year. However, even if the margins are actually declining, given the entry of Meranti, a 600-megawatt plant, it's being offset by a new capacity, the 100-megawatt standby plant, fast start plant that's being paid at full capacity fee by the EMA. Having said that, we're also seeing also increase in demand. And in fact, in the recent 3 or 4 weeks, we're seeing prices to actually go up a little bit. Just not sure if it's actually going to be sustainable for the rest of the year, but it's a positive side.

For the questions. The topic of Pacific Light, we have a question from Karisa Magpayo of Macquarie.

Of the PHP 6.8 billion for net income of Pacific Light in the first half, how much was from operation of the 100-megawatt fast start?

The 100-megawatt fast start was SGD 500 million.

Thank you for that. We have a question from Jessica [indiscernible] What is the update of the remaining balance of the distribution rate through refunds and the expected time line for full disbursement?

It's over 36 months for the PHP 19.9 billion from -- that covers the difference between [indiscernible] and the approved rate from July 1, 2022, up to December 2024. So that's over 36 months. We have refunded 3 months already of about PHP 1.7 billion.

Thank you, Ms. Betty. In regulatory still, what is the status of PSAs, especially those pending ERC approval?

There are, I think, at least 3 that we are still waiting for approval from the ERC. And up to now, there's no movement yet on these cases. So these are the, I think, the machine lock PSA. And then there's another one with I'm not sure if GNPD has gotten the approval already, but there are other 2 cases I can't remember. I will give you the complete list of those pending with the ERC.

From Greg [indiscernible] BPI Securities. Can we get more details on the profit contribution of chromite in second quarter '25 alone? Is it higher or lower than first quarter '25?

We expect the earnings of chromite to be higher than the first quarter given that the only time we were able to do a full gas send out was June 1, and the delivery of the plants were staggered on excellent energy. So now that we are on full capacity, we have to -- but we also have to schedule an outage of SPPC, but that's not going to affect the number significantly that second half will remain to be higher than first half.

Another question from Greg. What are the profit drivers that Meralco is looking at in the second half to hit the profit.

The bulk of the contribution will be coming from power generation, given that we will have the full 6 months for Chromite. I note that in the first quarter -- sorry, in the first half, it has staggered COD dates for Units 1, 2 and 3. So bulk of it -- and then we'll also have the full 6 months for the fast start from Singapore. And then we -- I think last...

The [indiscernible] plant, 70 megawatts delivered July.

Yes. So these are Bongabon and Cordon.

Cordon. And the commissioning energy coming from Terra Solar around December.

Jessica, going back to your question on the pending PSAs with ERC, these are the pending PSAs. We have the MPC or the [indiscernible] PSA for 500 megawatts that's baseload. Another one 100 megawatt with GNPD of Aboitiz that's baseload and another 400 megawatt with GNPD that's mid-merit. And then we have the San Roke Hydro for 340-megawatt mid-merit that has been decided, but is the subject of a motion for the consideration filed by the generator, which is still pending at the ERC. Finally is the 21 megawatt filed by SESI, which is also mid-merit. That's it. Thank you.

We have MGen related question from [indiscernible]. How many more power gen projects are still pending to expect online this year?

Well, the commissioning of Terra Solar 1, and then early next year will be the JV with Vena, 400 megawatts solar supplying Empower. So that's -- and then, of course, but that's 2026. But for this year, I think we've delivered already what we can deliver. But we'll get the full year, as Betty mentioned, the full 6 months of [indiscernible], the full 6 months of Cordon and Bongabon and the commissioning of Terra Solar.

I forgot to ask me the question on -- sorry, it's PHP 0.5 million, sorry.

We'll tie up the question from [indiscernible] Securities. Can you share with us MGen's spot exposure for first half 2025 for Philippines only and across the entire portfolio, including Pacific Light?

The uncontracted capacity of MGen's for PEDC and CEDC, we were deliberate about holding them out because it's participating in the optimized market in the Visayas. When we see prices to be go down with the entry of new plants, particularly our battery in Cebu that we expect to commission by around August of 2026, then that's the time we will be looking at shifting our capacity. Our RES, the engine RES is also looking at offering products like WESM plus premium, putting a tab and putting a floor given that the WESM is forecasted to be -- to stay at the current levels, especially when we inject Terra Solar capacity.

Thank you, Maggie. We have a question from [ Paolo De Castro ] of BPI Asset Management. Will we know what drove the increase in energy sales were flat year-on-year?

It's additional capacity because last year, a couple of our plants were down, San Buenaventura, PEDC and Pacific Light, yes.

And of course, the new capacity.

We have one more question online. But before we read that, do we have any questions on site? Going back to [indiscernible]. On your balance sheet, can you share your comfortable optimal debt metrics given strong uptick in debt levels?

Well, first, if you look at the parent company numbers, the debt looks high. But there's a second step that we're doing with respect to Chromite. We're pushing down the debt to the operating company level. Now we should be able to complete that transaction within the year. Well, the target is within the year. So we'll be pushing down about -- at least our share would be about PHP 40 billion, PHP 44 billion of what we had contracted. So yes, that's it. Well, in terms of -- well, I think if we look at debt to EBITDA, we should be comfortable at 2.5. So we -- that's -- and we're looking at -- that would be a consolidated number.

Thank you Betty. Those are our questions for now. So thank you, everyone, for your questions. Before we officially close please be informed that an audio recording of today's briefing will be available on our website under the Investor Relations section. Thank you once again for attending today's briefing. Stay safe, and we look forward to seeing you again in our third quarter 9 months briefing. Thank you.