Good afternoon, investors, analysts, fund managers, and valued stakeholders. Welcome to Meralco's first quarter 2026 financial and operating results briefing. We are pleased to have you with us participating both in person and via MS Teams, and we thank you for taking the time to be with us today. Before we begin, please note that this session is being recorded. Kindly observe the ground rules that were circulated prior to this meeting. Today, we will walk you through Meralco's performance for the first quarter ended March 31, 2026. The presentation materials are available on our website under the investor relations section.
Joining us today are 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, Meralco PowerGen, Attorney Jose Ronald Valles, SVP, Head of Regulatory Affairs and Head of DU Regulatory Management. Our discussion today will begin with presentation of our financial performance, followed by updates on our distribution utility operations, power generation business, and key regulatory developments and outlook. We will open the floor for a Q&A session before concluding with the closing remarks from our COO. At this point, I would like to invite our Chief Finance Officer, Ms. Betty Siy-Yap, to walk us through the financial highlights for the quarter.
Good afternoon. CCNI for the quarter ended March 31 [audio distortion] combined contribution. Stable distribution utility and the growing power generation portfolio. The DU business continued to account for the largest share of our 11.4 [audio distortion].
Use the microphone.
Okay, sorry about that. Our CCNI for the quarter ended March 31, 2026, grew 2% from the combined contribution of a stable distribution utility and the growing power generation portfolio. The DU business continued to account for the largest share of our PHP 11.4 billion CCNI at PHP 5.3 billion, 46% of the total, although down from the 61% in 2025 with a higher share of power generation business. The DU sales volume was slightly lower at 12,273 GWh versus the almost 12,500 GWh in 2025. CCNI contribution of power generation grew by 51% to PHP 5.1 billion and now accounts for 45% of CCNI, up from 30% in 2025. The sales volume of power generation was at 6,626 GWh , 25% higher than the 5,294 GWh in 2025, mainly driven by the full quarter volume of LNGPH.
Thermal plants generated PHP 1.2 billion in revenues from the reserve market, versus PHP 1.7 billion last year. On January 26, 2026, the ERC granted PEDC's change in circumstance or CIC claim, representing unrecovered fuel costs from September 26 to December 4, 2022, allowing the recovery from Meralco customers of close to PHP 381 million. On MGreen, early this year, the ERC approved an advisory regarding feed-in tariff related to SP Calatagan. This allowed SP Calatagan to bill or to recover PHP 69 million in FIT adjustment. For Terra Solar, it achieved a key milestone in March, beginning with the delivery of an initial 85 MW of clean energy to the Luzon grid on March 14. This output was progressively ramped up to 250 MW by the end of the month, in line with the grid integration parameters of the NGCP.
Complementing this, the project successfully energized the first tranche of its battery energy storage system, enabling the delivery of 450 MWh , equivalent to 112.5 MW of stored energy to the grid during nighttime hours. Total energy sold for the month reached 10.6 GWh . Also in March, NGCP issued a PCAT-C for one of our other solar project, a 450 MW power plant in Bugallon, Pangasinan. IslaSol started delivering power to the grid at 50 MW, ramping up to 300 MW by March 31. This generated a total of 7.7 GWh . For retail supply business, sales volume was at 1,827 GWh , up 9% versus last year, mainly from new customers.
For our financial highlights, CCNI for the quarter increased by 2% to PHP 11.4 billion from PHP 11.2 billion in 2025. Consolidated reported net income increased by 4% to PHP 10.8 billion from PHP 10.4 billion the previous year. The gap between CCNI and consolidated reported net income represents acquisition of day one gain adjustment, as well as foreign exchange gains from Chromite and SP New Energy Corporation. Similar to our CCNI, our core EBITDA rose 2% to PHP 19.6 billion from PHP 19.2 billion in 2025. The total energy volume handled by One Meralco was 15,895 GWh , up versus last year's 15,621 GWh .
The Philippine volume was at 14,431 GWh , also higher versus the 14,218 GWh last year. DU volume, inclusive of sales of PELCO II , which we manage under an IMA or investment management contract, was at 12,468, 52% of about 23,900 GWh total volume distributed by all DUs and electric cooperatives in the Philippines. Our ES volume, as mentioned, was 1,827 GWh with 1,497 GWh sold within the franchise area and 330 GWh outside the franchise area.
This was 26% of about 6,900 GWh total volume supplied by all RESs. The MGen volume, at 6,626 GWh, had 5,223 GWh sold within the Philippines, 18% of approximately 28,100 GWh volume delivered by all GenCos in the Philippines. A total of 3,529 GWh was sold to the Meralco DU and its local and affiliate RESs. The contracted capacity of Meralco of 2,992.5 MW with MGen represents 38% of Meralco's franchise area peak demand or 25% of the Luzon peak demand during the quarter. This chart shows the segment information. On the right side are the contributions in terms of CCNI gross revenues and core EBITDA. The CCNI contribution of our regulated or distribution business represents the consolidated energy volume of Meralco, Clark Electric Distribution, and Shin Clark Power. The total of which was 12,273 GWh as mentioned, 2% lower versus last year.
For our unregulated businesses, the higher CCNI in terms of peso amount came from the growing power generation business, with its share now at 45% from 30% last year. This is equivalent to PHP 5.1 billion, driven by the strong performance and a full quarter results of LNGPH, where MGen holds 40.2% interest following its acquisition at the end of January of 2025. The retail electricity supply business and non-electric businesses, meanwhile, brought a combined PHP 1 billion or 9% driven by continuing customer acquisitions for our RES unit. The DU revenues accounted for 82% of the total. RES and non-power subsidiaries and affiliates accounted for 12% and power generation at 6%. Out of the consolidated core EBITDA of PHP 19.6 billion, DU contribution amounted to PHP 10.4 billion and accounted for 53% of the total.
Power generation core EBITDA contribution was at PHP 7.7 billion and contributed 39% of the total, while RES and other non-power subsidiaries and affiliates accounted for the remaining 8% or PHP 1.5 billion. The consolidated revenues increased by 5% to PHP 120.8 billion from PHP 114.5 billion in 2025, driven by higher pass-through generation and transmission charges of the DU and higher power generation revenues. Electric revenues of PHP 118.1 billion accounted for 98% of the consolidated revenues. Generation, transmission, and other pass-through charges were 17% higher at PHP 94.7 billion versus PHP 88.6 billion in 2025. Generation charge for the period includes a PHP 0.30/kWh combined contract price adjustment relating to additional fuel cost recoveries, which the ERC approved for four generation companies. These are ACEN, SPPC, Sual, and Panay Energy.
Also contributing to the higher generation charge were the higher fixed costs of the First Gas plant following the ERC approved interim extension of the power purchase agreement with Meralco and also the peso depreciation as the local currency weakened to an average of PHP 59.102 to the dollar versus PHP 57.96 against the U.S. dollar during the first quarter. Transmission charge also increased due to higher ancillary service charges from the reserve market and NGCP's higher maximum average revenue, which is equivalent to PHP 0.10/kWh as approved by the ERC, and collection of all its underrecoveries from the period 2016 to 2022, resulting to a PHP 0.04/kWh additional billing. Distribution revenue decreased by 2% due to the lower volume sold and the PHP 0.0023/kWh downward rate adjustment for the reset expert costs refund starting February of 2025.
Energy fee, which totaled PHP 6.8 billion, increased by 9%, from PHP 6.3 billion to PHP 6.8 billion from GBP's higher WESM revenues, Solar Philippines Calatagan Corporation's FIT rate adjustment, and the higher irradiation of solar power plants and PEDC's fuel CIC. The PHP 2.7 billion non-electric revenues were largely from Radius for its enterprise and SME accounts and billable projects to PLDT from MIESCOR's EPC projects and MServ's high voltage solutions and integrated facilities management project.
Costs and expenses totaled PHP 110.5 billion, purchased power costs accounted for 84%. OpEx represented 9%, depreciation at 4%, and the combined coal and fuel and power plant O&M at 3%. Purchased power costs increased by 7% to PHP 92.7 billion from PHP 86.4 billion, reflecting higher generation and transmission costs billed by the generation companies as well as NGCP, the details of which have been previously explained as part of the revenue charges.
Operating expenses amounted to PHP 10.4 billion, 1% higher year-on-year, primarily due to sustained cost efficiency measures and tighter management of controllable expenses, including optimization of operations and deferral of non-essential activities undertaken to protect customers from the cost pressures arising from the Middle East conflict. These initiatives reinforce Meralco's commitment to reliable service delivery while prudently managing costs in a volatile global environment. Depreciation and amortization was higher by 10% with the completion of CapEx projects during the period.
Combined coal and fuel and power plant O&M amounted to PHP 2.8 billion, higher due to PEDC 3 and Cebu Energy's plants 2 and 3's maintenance in 2026, whereas in 2025, it was only unit 3 of Cebu Energy. Fuel costs increased with GBP's higher WESM sales. Other expenses pertains to provision reversals after settling of various tax arrearage and assessments, net of provisions for overrecoveries.
The power generation business ended the first quarter with a 51% growth in CCNI versus the same period last year, mainly driven by full capacity operations and full three-month contribution of LNGPH starting its acquisition end of January. The LNG business contributed close to PHP 4 billion to the CCNI as LNGPH and PacificLight Power delivered a total of 2,712 GWh and 1,464 GWh , respectively. The thermal business contributed PHP 1.6 billion, higher by 6% from last year's PHP 1.5 billion due to the higher earnings from the WESM, partially offset by the weaker reserve market pricing. On capital expenditures, consolidated CapEx stood at PHP 19.5 billion in the first quarter.
Of this amount, 71% was spent for MGen's 3,500 MW DC MTerra Solar power plant, with the 4,500 MWh battery storage, as well as 49 MW battery energy storage in Toledo, Cebu, and the 31.8 MW expansion of Solar Philippines Tarlac Corporation. The total DU CapEx of PHP 5.7 billion were spent largely on new connections, asset renewal, load growth projects, pole relocation to support government infrastructure projects, and non-electric projects. Cash and cash equivalents amounted to PHP 112.9 billion, while our short-term and long-term investments totaled PHP 172 million and PHP 4.2 billion respectively. Major cash transactions during the period include the Meralco AWAT refunded to customers amounting to PHP 1.4 billion in the first quarter of this year. A total of PHP 6.3 billion has been refunded since April of 2025 as part of the PHP 19.96 billion AWAT refund over 36 months.
Note though, that the refund period has been shortened to 12 months for the remaining amount following ERC's decision last April 2022. Loan drawdowns of Meralco totaled PHP 6.5 billion, mainly used to pay the working capital adjustment as well as the reversible cost to San Miguel Global Power in relation to the Chromite acquisition. Terra Solar's drawdown of PHP 7.5 billion from its project financing which now totals PHP 76.1 billion. Infusion by Actis of PHP 3 billion and dividends received from unconsolidated investees of PHP 2.7 billion, largely from PacificLight and San Buenaventura. Our consolidated interest-bearing debts stood at PHP 238.1 billion, including the PHP 125.1 billion debt of our subsidiaries. As of end March, our net debt stood at PHP 125.1 billion with net debt to EBITDA, a ratio of 1.7x.
Debt maturities are spread through 2040, most of which are in Philippine peso, except with respect to the PacificLight debt. Our core EPS is at PHP 10.137 per share, up 2% year-on-year, while our reported EPS is at 4% higher at PHP 9.611 per share. That ends my report. Thank you.
Thank you, Ms. Betty. Overall, the quarter reflects stable earnings growth and disciplined cost management, with core net income up 2% to PHP 11.4 billion, supported by both DU and power generation business. We will now move on to the operating performance. I would like to invite our COO, Mr. Ronnie Aperocho, to present the operating performance of the distribution utility.
Thank you, P.J. Good afternoon. Thank you for joining us in today's briefing. The first quarter of 2026 began on a challenging note. Cooler than usual temperatures, driven by weak La Niña conditions, softened electricity demand across our franchise. At the same time, heightened geopolitical tensions in the Middle East increased volatility in global energy markets, placing upward pressure on fuel costs and power rates. These developments encouraged greater energy conservation and accelerated interest in rooftop solar adoption. Despite these headwinds, Meralco delivered solid operational performance, achieved meaningful improvements in service reliability, and continued to expand its customer base.
Let me walk you through the key highlights of our first quarter performance. On energy sales, Q1 2026 energy sales reached 12,273 GWh , lower by 1.8% year-on-year, primarily due to the cooler weather conditions dampening demand. Recovery toward the summer months was tempered by intensified energy conservation measures following the escalation of the Middle East conflict. We estimate that 3%-5% of potential energy sales were forgone due to the adoption of four-day workweeks, work-from-home arrangements, shorter mall operating hours, and similar demand curtailment initiatives. These effects were partly offset by faster customer energization.
On net system input, the DU net system input declined to 12,640 GWh , reflecting a drop of 2.3% compared with the same period in 2025. Meralco's peak demand settled at 7.91 GW recorded last March 6, 2026, 5.1% lower compared with the same period in 2025, consistent with the milder temperature profile experienced in the quarter. Comparably, the Luzon peak registered 12.18 GW on March 5, which is a 2.3% decrease as well.
Our customer count continued to grow, reaching 8.26 million customers, a 2.2% increase year-on-year, highlighting sustained growth in electrification and service reach. On system loss, the 12-month moving average system loss improved to 5.72%, a notable 0.32 percentage point reduction year-on-year. This reflects our sustained investments in network upgrades, loss reduction programs, and stronger operational discipline. On SAIFI and SAIDI, reliability indicators also showed strong results as we attained double-digit improvements versus same period last year. Total SAIFI, fewer by 19% at 0.15x , and SAIDI was shorter by 10% to 97.5 minutes. Meanwhile, our average time to connect customers was faster by 6% at 2.22 days over 2.36 days last year, reinforcing our commitment to customer convenience and service excellence.
On electricity rates, our average electricity retail rate for the first quarter of 2026 was PHP 12.39/kWh , 12% higher versus the same reporting period last year, primarily due to the following. First, it was due to higher generation charges, 10.2% increase, mainly from the change in circumstances or CIC, recovery of some PSAs, recovery of Santa Rita's higher fixed charges, and lower WESM share. Second is due to the increased transmission charges, 38.3% increase from higher ancillary services cost, higher power delivery service charges, and collection of NGCP underrecoveries.
Third, it was due to higher FIT-All charges, 123% increase from higher FIT-All rates implemented in Q1 of 2026. The last was GEA-All was also implemented starting January 2026. Following the discussion on energy sales earlier, let us now look at the sector breakdown. The residential segment accounted for 33% of total sales or 4,111 GWh. Residential sales fell by 3.4% as cooler weather softened demand. The commercial segment, which makes up 38% of total sales, posted a slight decline of 0.8% as cooler temperature reduced HVAC usage and vacancies offset gains from restaurants. The industrial segment accounting for 38% of total sales likewise slipped by 1% year-on-year as operational disruptions and steel raw material constraints offset gains from semi con and cement segment or cement industry.
On updates from networks, especially for our major projects of networks, this slide highlights our key network investments completed in the first quarter of 2026, which directly support load growth and further strengthen system reliability across our franchise area. In the first quarter, we energized three major capital projects worth PHP 959 million, significantly strengthening grid reliability and capacity. This portfolio includes the development of new Bocaue GIS substation, replacement of 34.5 kV switchgear number one at Gateway substation, and expansion of Balagtas 115 kV, 34.5 kV substation, the second bank, 83 MVA, and collectively adding a total capacity of 166 MVA. Thank you, and turning you over to Attorney Ronald Valles for the regulatory report.
Good afternoon. For the regulatory update, first on your slide is the AWAT or the actual weighted average tariff, decision of the ERC. For ERC case number 2025-200025. Last March 14, if you recall, last year, Meralco received the PA, the provisional authority, where ERC directed us to refund PHP 19.96 billion at an average rate of PHP 0.1189/kWh for a period of 36 months starting April 2025. This was subsequently, on April 22, 2026, superseded by the ERC decision, final decision on the AWAT case. In this decision, the ERC ordered Meralco to refund the remaining unrefunded amount amounting to PHP 14.17 billion at an average refund rate of PHP 0.25/kWh , effective on May 2026 billing. The implementation period shall be within 12 months or until the remaining amount is fully refunded.
Apart from this, we have two other AWAT pending cases covering the period of January to June 2025, which is for PHP 4.69 billion and another one covering the period July to December 2025, which is PHP 4.32 billion. Next slide, please. On March 26, the ERC also promulgated the revised pass-through taxes resolution under ERC Resolution Number 9, series of 2026. This revised pass-through taxes resolution effectively superseded ERC Resolution Number 2, series of 2021, which was the basis for the pass-through nature of the paid real property tax, local franchise tax, and business taxes by the DUs. The rules were published on April 2 and became effective on April 17. Among the salient amendments from the previous rules are the following. First is the removal of the provision of limiting the scope of taxes paid for the year 2021 onwards.
Tax arrearages, excluding interest, penalties, and other charges imposed on and paid by DUs for the years prior to the effectivity of the rules shall now be allowed recovery. For PDUs, the proposed recovery shall be filed with the commission within 60 days from the effectivity of the rules on June 16, 2026. The initial RPT amount for filing and collection on the part of Meralco is around PHP 3.9 billion, representing the RPT paid in prior years up to calendar year 2020. The revised rules also included RPT paid on properties covered by use of profit agreements, in the scope of pass-through real property tax upon finalization of the regulatory reset process for the next regulatory period, and also the provision on ERC post-audit requirement that DU shall retain relevant documents for the last 10 years from the expiration of the DU franchise.
Last March 31, 2026, Meralco filed their application for the pass-through of our over-under recoveries for the calendar years 2023 to 2025. In that application, we paid for the net under-recovery of PHP 555.48 million, consisting of generation, transmission, and system loss charges, subsidies, RPT, and LFT. We are proposing a recovery period of 12 months for all charges, except for senior citizen subsidy, we propose one-month recovery period. Total indicative rate for the proposed recovery period is only PHP 0.0162/kWh on the average. As an update on our first regulatory period application under PBR, we filed our first RP application last February 2. Hearings were conducted between March 3 up to April 16, and then we submitted already our formal offer of evidence. We completed the presentation, or rather the presentation of witnesses or evidence by the intervenors, namely Commissioner Non.
Another intervenor was completed last April 30. We are expecting that the ERC will release the decision in June 2026 in time for the start of the first RP in July. For the CSP, Meralco's 2026 power supply procurement plan schedule of CSP activities had to be revisited and realigned due to significant delays in the conduct of CSP for the capacities covered by the previously approved 2025 PSPP. The summary of the updates reflected in the 2026 PSPP are as follows. For the 600 MW baseload, the implementation in the first year will now be for 300 MW, with the remaining 300 MW to be implemented starting the following year. For the 900 MW baseload, the implementation in the first year will now be only for 600 MW , and the remaining 300 MW to be implemented starting the following year.
The start date was also moved from 2030 to 2031, but the commencement of CSP remains scheduled for September 2026 to allow for timely completion. For the 450 MW mid-merit CSP, the capacity was reduced to 400 MW. The start date was also deferred to 2030. Although the ToR for the CSP was already submitted to the Department of Energy in May 2025, Meralco withdrew its request for certificate of conformity since the CSP is no longer scheduled to commence in 2026. For the 500 MW mid-merit CSP, the start date was moved from 2032 to 2034, and the CSP is no longer for the renewable energy requirement. Finally, the 400 MW virtual CSP is a new requirement that we have reflected in our 2026 PSPP. Thank you. I will turn you over to Mr. Manny Rubio for PowerGen now.
Thank you, Ronald. Good afternoon, everyone. I will begin with our number one priority across all sites, health and safety. For the first quarter of 2026, I am pleased to share that we maintain a safe working environment with over 91 million safe man-hours for both employees and contractors. As always, we emphasize we continue to strengthen and enhance our safeguards to ensure that every team member in MGen returns home safely every day. Moving on to our financial and operational results, during the first quarter of 2026, MGen delivered 6,626 GWh of energy, which is 25% more than the same period last year. The overall MGen Thermal group delivered 2,215 GWh of energy, marking a 6% increase driven by Global Business Power's higher dispatch, and San Buenaventura's higher plant availability.
MGen's liquefied natural gas investment in LNGPH through Chromite Gas Holdings delivered 2,712 GWh , 66% higher due to its first full quarter of operations in our portfolio compared to 2025. Meanwhile, Singapore-based PacificLight Power Pte. Ltd. delivered 1,464 GWh due to increased plant availability. Finally, MGen Renewables delivered 234 GWh, a 34% increase from last year, driven by the additional capacity from solar facilities commissioned after the first quarter of 2025 for Jayap, as well as new capacities from the energization of MTerra Solar this March and higher irradiance. Overall, MGen's energy delivery achieved a significant 25% increase versus last year due to the new capacities in our portfolio, higher dispatch via Global Business Power, and higher plant availability of San Buenaventura and PacificLight.
For Q1 2026, MGen's CCNI is now at PHP 5.1 billion, 51% growth compared to the same period last year. This is driven by stronger contribution from LNGPH, MGen Thermal's higher WESM sales and participation in the reserve market, and PacificLight's higher volumes and fast start contribution following its COD last May 2025. Our plant availability was at 92.3%, slightly lower from last year due to scheduled outages of several plants. But notably, we still generated 6,626 GWh of energy, which is 25% more from the same period last year. With all of this, MGen now contributes 45% to the One Meralco CCNI, its biggest share to date. Moving on to our key developments, the Toledo Battery Energy Storage System has successfully been energized as load last March 26, 2026. On April 10, it was energized as generator with the grid compliance test completed on April 23.
It is now undergoing ancillary service test until May 8. The first phase with 25 MW or 56.44 MW capacity will be completed by May. But since we are already compliant with the test as a generator, we are now offering this for arbitrage, charging during the day and offering during the evening, given that the WESM prices in Visayas have almost a 5x difference between day and night prices. This project is designed to enhance grid stability by providing fast response power support, regulating up and regulating down that helps balance supply and demand, improving system reliability and strengthening overall grid resilience and bring down ancillary service prices.
Following the completion of PacificLight's green transition financing for its plant 670 MW hydrogen-ready CCGT with 201 MWh battery energy storage system power plant last December, we have been continuing pre-execution work such as environmental impact assessment, which we actually got two weeks ago, quantitative risk assessment and pollution control study, part of the pre-execution works for the project. This power plant, scheduled to begin operations in 2029, is the first CCGT unit in Singapore integrated with large-scale battery energy storage system, enabling dynamic energy management to align electricity supply with grid demand. We remain on track in fulfilling our 600 MW commitment to Meralco with MTerra Solar's continued progress for phase one delivery in August. Just less than 15 months after its groundbreaking, we celebrated the first spark, marking its initial energization and synchronization last February, which was attended by Secretary Sharon Garin and other officials from the DOE.
Last March 14, MTerra Solar was energized as a generator, delivering an initial 85 MW of clean energy to the Luzon grid, marking the start of its contribution to the country's growing demand for reliable and clean energy. This output was progressively ramped up to 250 MW by the end of the month, in line with grid integration parameters by NGCP. Complementing this, the project successfully energized the first tranche of its battery energy storage system, enabling the delivery of 450 MWh , equivalent to 112 MW of stored energy to the grid during nighttime hours. This tranche now represents the largest operational BESS available in the Philippines. To date, our peak power PV achieved 248 MW of dispatch last March 27, while the maximum BESS daily discharge was at 409 MWh.
With these milestones, phase one of the project has reached an overall completion of, as of end of April, 86.57%, following the award of its engineering, procurement, and construction EPC contract in October 2025. As of April 23, the project has a total installed PV capacity of 1,293 MW, demonstrating its full-scale potential fully commissioned. This May 2026, MTerra Solar is looking at commissioning an additional 500 MW AC of solar capacity and 225 MW of battery capacity. This will make MTerra Solar the largest integrated operational solar PV and BESS project in the Philippines, and we just completed the bus in last night of the N-1 needed for this 500 MW energization of Terra Solar.
Following these milestones, we are proving that a combination of a variable renewable energy integrated with a storage system like BESS can provide a competitive source of mid-merit energy for the Philippines, which replaces traditional sources of mid-merit such as diesel or even gas. With the ongoing crisis in the Middle East that resulted to price spike of our fuel sources, the entry of MTerra Solar to the grid is not just timely but critical as this project lessens our dependence on imported fossil fuels, which is subject to price volatility. Up to the time we declare COD, Meralco has an option to get all the output of Terra Solar, depending of course, on the demand and prices in the spot market. I am also proud to say that this project is proof that we Filipinos can build big and build fast if we get our acts together.
Nowhere in the world that a project of this magnitude and at this scale has been made operational in such a short period of time as in this case, 15 months from groundbreaking. MGen recently signed a $2.8 million grant from the U.S. Trade and Development Agency, supporting efforts to explore nuclear energy as part of the country's long-term energy strategy. The grant will fund a comprehensive small modular reactor study assessing the viability of deploying SMRs in the country. The study will evaluate available SMR technologies, identify a shortlist of suitable designs, and conduct preliminary site assessments for potential deployment. The initiative forms a key step under Meralco's Nuclear Energy Strategic Transition or NEST. As an update, around 15 vendors have submitted their proposal for this initiative, and a final vendor recommendation has already been made and it is for approval by the USTDA.
The target schedule to start work on the SMR evaluation is this May, and the study is expected to be completed by April 2027. We will make the appropriate announcements on the vendor as soon as it has been agreed with the USTDA. MGen Renewables has been awarded also the integrated management system certification by TÜV SÜD Philippines, covering ISO 9001 for quality, ISO 14001 for environmental management, and ISO 45001 for occupational safety and health. This recognition spans MGen's renewable head office and key solar facilities in Nueva Ecija, Rizal, Bulacan, Isabela, and Tarlac, demonstrating consistent implementation of best practices across its sites nationwide. The suspension of the wholesale electricity spot market, or WESM, by the Energy Regulatory Commission last March, and the implementation of an administrative pricing mechanism reflected a necessary regulatory response to the extraordinary market conditions brought about by the Middle East situation.
In periods of system stress, prioritizing firm and dispatchable capacity, especially baseload generation, remains critical to maintaining grid reliability and supporting overall energy security. In response, MGen remained focused on keeping its plants running reliably and efficiently under the updated rules. Our baseload thermal plants continue to operate at full available capacity, supporting system reliability while we carefully manage plant performance and costs in line with the administered pricing framework. Through this, we were able to sustain dependable power supply for the country throughout the market suspension. Last Friday, the ERC has already lifted this suspension. Power generation companies like MGen are now allowed to offer at WESM in accordance with existing market conditions and rules and settlement based on clearing prices. Despite the challenges posed by geopolitical tensions and continued volatility in global energy markets, MGen remains focused on maintaining reliability and stability across its operations.
We have been managing our exposure to global market volatility through our diversified portfolio and a disciplined sourcing approach, supported by a mix of firm contracts and flexible arrangements. This allows us to navigate market fluctuations while sustaining dependable operations. At the same time, we are strengthening our long-term position through ongoing capacity development and continuous optimization of our existing assets, including the advancement of MTerra Solar, the completion of the Toledo BESS Phase 1, and the expansion of our thermal facility in Toledo, Cebu, as well as other pipeline projects we have in our portfolio.
We are looking forward to participating in CSPs that will be offered by distribution utilities like Meralco, and in that case, looking forward to participate in the 900 MW baseload CSP in September using Atimonan. These efforts are aimed at ensuring that we remain resilient, responsive, and fit for the country's evolving energy needs. We remain focused on strengthening self-reliance in support of long-term energy security for the Philippines in pursuit of powering a better tomorrow. Good afternoon.
Thank you, Mr. Aperocho, Attorney Valles, Mr. Rubio. We will now open the floor for questions from our analysts and investors. You may raise your questions in two ways. Raise your virtual hand and wait to be recognized before speaking.
By the way, P.J., we still have the sustainability report. We can request Raymond. Well, on sustainability, before we go into the Q&A portion, I will just report briefly on sustainability. So this is just a brief highlight on the progress across two key programs in Meralco, resource conservation and efficiency, and #Mbrace diversity and inclusion, as well as the recent sustainability recognitions. First, amid the ongoing energy crisis, we have further intensified our resource conservation and energy efficiency program. This was launched in 2020, and this program aims to reduce electricity and water consumption across our facilities, helping lower scope 2 greenhouse gas emissions, optimize operational costs, and strengthen compliance with the Energy Efficiency and Conservation Act. In March, we rolled out an employee-wide energy and resource conservation campaign across our offices.
As a result, total electricity consumption in the first quarter of 2026 declined by 5.3% year- on- year. We also sustained sustainability advocacy through the Earth Hour 2026, with executives promoting conservation practices and continued advancing our One Meralco solarization program, encouraging employees and customers to adapt all new solar solutions, either through a solar savings plan or a solar subscription plan. Moving on to our #Mbrace Diversity and Inclusion program. #Mbrace continues to drive our broader diversity and inclusion objectives, with emphasis on increasing women representation and empowering women, LGBTQIA+ individuals, and persons with disabilities. In line with these objectives, last March, we celebrated Women's Month with a series of events centered on empowerment, inclusion, and well-being. Among the highlights was our forum entitled Beyond the Glass Ceiling: Women Breaking Barriers, featuring Olympic champion Nesthy Petecio and DOE Assistant Secretary Mandy Romero.
Finally, moving on to sustainability recognitions. We are pleased to report that One Meralco achieved another milestone at the 2026 Asia-Pacific Stevie Awards, earning a total of 12 distinctions bannered by our first ever Grand Stevie Award. Our top awardee was our microgrid project in Caballete Island, which earned a Grand Stevie Award, the highest honor in the APAC Stevies, along with two Gold Stevies, highlighting the huge p ositive impact of our electrification and sustainability efforts on underserved communities. We were also honored with a Gold Stevie for our inaugural 2024 One Meralco Integrated Report.
On the individual front, our Chief Audit Executive, Melanie Oteyza , was honored as the Thought Leader of the Year. Likewise, our Chief Sustainability Officer, Raymond Ravelo, was recognized for the third straight year for his leadership and contributions to climate and sustainability initiatives. We also won a Silver Stevie for Greening the Network program and received multiple awards recognizing initiatives across audit, community engagement, and purpose-driven marketing and communications. These recognitions affirm One Meralco's continued commitment to creating long-term value through sustainability, innovation, inclusion, and meaningful stakeholder impact. Thank you.
Thank you, Mr. Aperocho. We will now open the floor for questions. We have several questions on the line at this point. We will read out some of them. First, on the DU side, can you share why DU profits declined in first quarter versus first quarter 2025? Other than the volume decline, what other factors contributed to the decrease in DU profits? I believe this is also in line with Carissa's question. What led to the 21% year-on-year decline in the CCNI of the distribution business, considering volumes were just down by 2%?
Hi, Greg. Hi, Carissa. Thanks for your question. Other than the volume, the other factors that resulted in the decline were higher OpEx, slightly higher OpEx. As you know, it is manpower-intensive and contracted services. On top of that, our increasing IT expenditures with our online subscriptions, and then the continuing repairs and maintenance of the facilities. We have also completed significant capital expenditures, the depreciation of which for those that were completed last year would have a full quarter depreciation for 2026. If you also recall, we continued to refund on the AWAT. That brings down the balance of investable cash. While the AWAT refund does not affect P&L, as we have provided for this already, it impacts on the cash flow, so the investable funds are lower.
In fact, in the coming months, the refund will be higher because the ERC has shortened the refund period from 36 months to 12 months. The remaining period should actually be about 24 months. It is now down to 12 months.
Still on the DU from Peter of Unicapital. On Meralco's rate reset, can we get management's view on how likely it is to be approved given the potential inflationary impact of higher electricity rates?
On the Meralco reset, as I earlier mentioned, the expectation is that the ERC will resolve, one way or the other, the application of Meralco in time for the July 1, 2026, start of the one RP. It's, I think, very speculative if we say what rate will be approved or whether the ERC will grant the rate as applied for. What I can tell you is historically, the ERC has made disallowances from the rate that we have filed. That's historically. We're filing for the one RP is based on the regulations of the ERC. If we comply with all the requirements, we're hoping that the ERC will give us a reasonable rate. Thank you.
Thank you, Attorney Valles. We'll shift the discussion a little bit to MGen. What percentage of contracts entered into by MGen have pass-through mechanisms? How much of the fuel cost increase can you pass through under your PSAs?
For MGen, depending on the customers. All of our contracts with the ECs, including Meralco, have pass-through provisions for fuel. Even our risk contracts in MGen have fuel pass-throughs. That's a small volume only for MGen in the risk market. There is no limitation with regard to how much of the fuel cost we can pass through, as long as it's based on the agreed formula.
Following that, Manny, what was the impact of the 36-day WESM suspension to MGen's operations?
As it should be same for the first few administered prices, we know what the prices are, given that the administered prices are based on the average of the past four weeks for the same period. There was an issue with regard to land rental charges. Some have been experienced higher rental. High line rental charges. Some have gained from the line rental charges. There are discussions now with DOE and ERC. I just got information that MOP has suspended the settlement. Hopefully, in the original formula for administered pricing, line rental charges is neutral. The only reason why line rental charges came out as an issue is because coal prices have been fixed at a certain price, PHP 6. With that, the issue on line rental charges came out.
I think what ERC is looking at, and this has been the position of PIPA, is to go back to the original formula and spirit of administered prices where line rental charges should be neutral. So take it out. The gains should be taken out, the losses should be taken out. That's the result. In fact, for our coal plants, our open position has been busted because we're selling at PHP 6. The intention really of the market suspension is to bring out coal capacities. That's why DOE and ERC approved a PHP 6 settlement for coal plant that is outside of any bilateral contract arrangements, just to make sure that we limit the output of the more expensive fuels like diesels, and in this case, LNG.
Because of the demand, the demand is there, or the demand was there during the suspension. The nomination has been accepted for LNGPH, and we're operating with all the units in LNGPH at that time.
Thank you, Manny. We will check the floor for questions. We have a question from Jelline Gaza of JP Morgan.
Hello. Thank you for acknowledging. I have a follow-up on what was discussed, Sir Manny. In particular, how do you balance the interest of the distribution utility as well as LNGPH, as we see the mark-to-market commodity price get impacted via generation charges? I understand that there is a cap of PHP 1/kWh for the generation charge increase. I am not sure if that still holds. But if that is the case, how is Meralco as a distribution utility planning to work around that cap as well as your mandate of least cost, as well as being a proponent of LNGPH?
On the first question, for all the output of Terra Solar to be released and get Meralco to take it. Initially, we are looking at, hopefully Meralco will not accept or will not take the capacity, and we will sell it in WESM. But they did. Everything that is coming out of Terra Solar is being taken by Meralco unless the prices in WESM is lower than the commissioning price that is pre-agreed with Meralco. So, that is the way we are balancing that capacity, and we are really bringing out all the coal during the market suspension.
Of bringing out all the capacities that we can bring out from San Buenaventura, from PEDC, CEDC, wherever. Since initially we thought that the line rental charges would be neutral just to limit the output of LNGPH. Given that we bought LNG at the highest, we bought it at, I think $23 per MMBtu.
It has gone down now to around $16, $17, but pre-war it was $10 per MMBtu. I think the peak is, touch wood, has passed us. And hopefully, with the additional contracts that we have opened, with Gunvor, with Novatek, and with TotalEnergies and JERA. We will have access and we will have options for LNG from now on. Because we were just contracted and getting the supply from Vitol and Shell, and Vitol declared force majeure on us. So, we have to get it from other sources. We are even looking at Russian supply, and we will be booking Russian supply. Those that are not sanctioned. It is not sanctioned areas like Sakhalin and Yamal.
Nomination at LNGPH today is at what level?
Technical preview. We shut down one unit. They don't want us to shut down because just in case a coal plant shuts down, we're the fastest one to react.
Understood. The 50%+ effective utilization in 1Q, was it because of a scheduled outage at LNGPH? The implied utilization at LNGPH in the first quarter is about 50% or less.
A plant outage for forced outage for Excelerate Energy. It's back now.
Thank you for explaining it well. My second question is on the tariffs again, Attorney Valles. I just wanted to understand the nuances of the current discussions with the ERC, specifically the key inputs like WACC, RAB, or volumes. Are you maintaining the priorly disclosed assumptions of a certain threshold on the RAB, revaluation of RAB, as well as WACC and volumes of down 5% per annum. Is this something that the ERC is warning about, given that discussions are already ongoing? Anything that you can give us?
The application has been filed with the ERC and the breakdown of the rate that we have filed with the ERC are all in the application, so we cannot change that anymore. As I mentioned last time, for example, in the regulatory asset base, we added a 25% contingency which will likely be removed by the ERC because that is conditioned only upon showing that the regulatory asset base has not yet been determined and approved by Meralco board at the time of the filing. Since we have already confirmed that the regulatory asset base that we have submitted to the ERC is the final regulatory asset base, then the 25% contingency can be removed.
For the others, every single centavo that we have included in the rate that we have filed, I believe we have supported that, made sufficient justification to the ERC, including the computation of the weighted average cost of capital. Our witnesses have testified to the ERC, and they have been lengthily cross-examined, not only by the interveners but also by the ERC consultants themselves. So I believe there is sufficient basis for the rate that we are seeking, and we're hoping that the ERC will give us a reasonable rate, considering the lapse of so many years that we did not have any price adjustment.
How about the volume, sir, given that currently now the pace is slower?
Yeah. The volume that we have submitted with the ERC, again, cannot be changed anymore. The only factor that we have not included there at the time of filing is the impact of the Middle East crisis. Because at the time of filing, the war has not yet started. But we have mentioned that to the ERC formally during the course of the proceedings, and we're hoping that they can take that into consideration in finally approving the level of volume that will be determined by the ERC for purposes of calculating our maximum average price.
Thank you so much for the color. Lastly, on volumes, may we get an indication of how it was as of April? Or maybe additional color on March, where we have started seeing some of the energy-saving measures implemented on a broad level. Is there any guidance for the rest of the year? Thank you.
Our report only covered the first quarter. But for April, we're seeing, again, a lower volume. In fact, we're looking at 4% drop versus April of last year. Because April of last year, it was still a high-base month. In fact, our April 2025 sales grew by 2.8% because April last year was relatively a warmer month because it was the tail end of the El Niño phenomenon. But we're seeing signs of recovery already starting last week of April. In fact, we hit the highest daily NSI, 180 GWh , last April 28. And that momentum has been sustained as we speak because of this relatively warmer weather. For the month of May, we're seeing a recovery already.
Take note that PAGASA has already declared a 79% of El Niño phenomenon starting June this year that will persist up to the first quarter of next year. Because of that declaration, we have revisited our forecast, and we're looking at a 1%-2% increase in our sales by year-end compared to, of course, 2025. So we're seeing a growth at 2% as we speak, but hopefully it can grow more. But there was a question earlier, what are the interventions that the distribution utility is doing?
What we're doing right now is we are accelerating the energization of the service application pipeline, and we're seeing a healthy pipeline of service applications, especially for high-load applications, meaning 5 kW and above. In fact, for the month of April, we have energized more than 1,000 project covered applications. That will translate to more than 100 MW addition in terms of capacity. We're looking at for the remaining nine months of the year, we're looking at 900 MW to 1 GW capacity addition out of the pipeline that we're currently handling. Yes, we're looking at a positive growth this year, though in the vicinity of 2%-3% or things like that.
Thank you. To Mr. Rubio, we have additional question here regarding the market WESM suspension. Can you share the average price range for LNG, not gas, during the market suspension?
LNGPH is not affected because it's contracted with Meralco. Only open positions are subjected to settlement using administered prices. No, LNGPH is not affected.
Thank you, EVR. Additional question from Lana of ATRAM. With the recent WESM price caps, have these had any impact on Meralco's PSAs supply costs or contracts with GenCos?
Can you repeat that again?
With the recent WESM price caps, have these had any impact on Meralco's PSAs supply costs or contracts with GenCos?
Contracted, bilateral contract. The governing price would be the agreement between the supplier and the customer. I'll add to LNGPH. We're also, of course, participating with about 60 MW of regulating up and regulating down in LNGPH. So that one is operating in the spot market. When it was suspended, in fact, with the market suspension, we have an idea of the pricing. We have an idea of how settlement will be, because it's based on the average of the past four weeks for that period. So we know when we're going to make an offer, where we can actually be accepted by NGCP. So that's in fact a positive for LNGPH as well.
I don't know the numbers exactly. But per our PSA, if there's a cap on the WESM and we are required to source from the WESM either because of outages, force outage or scheduled outage, and assuming the power supplier has already exceeded the allowance, then we pay only the lower of the PSA price and the WESM price. So if the WESM price is lower because of the cap, then that is the effect on Meralco PSA. I'm not sure whether there is recovery by the generators, because the capping is based on an intervention by the ERC.
Thank you, Attorney Valles. Look, finally, you made mention about this line rental issue. I think somehow our customers are protected with that because most, if not all of our PSAs have this cap in terms of line rental. So it's not a full pass-through, things like that.
Thank you for that. We'll go back on site. Are there any questions? We go back online. There's a question from Julian Rojas of PEP. What is the CapEx guidance for PowerGen in 2026?
We will complete, I think we've scheduled already the CapEx amount for Terra Solar up to Phase 2 that we need to still buy land and pay for the additional batteries. I'll get the numbers in a minute. Hang on. I'll say it later on.
Thank you, EVR. We have a question on MTerra Solar and renewables execution. How does BESS improve returns and dispatchability of solar assets?
The BESS will improve the returns depending on the price that you are selling it at, right? I think, well, given where we are today with NGCP already complaining, with regard to the variability of solar-only installations, DOE has mandated that any future solar projects will always have at least 20% energy storage capacity behind it to at least smoothen the variability of the solar project. In our case, if we get out and make a case for a bid merit supply, I do not think we can already look at the base load using variable and energy storage. For win-merit, we are looking for another project, but much, much smaller than Terra Solar, which is a Terra Solar Phase 2. We are looking at land of around 800 hectares. We can probably close out the option to acquire this land by end of the year.
Sorry, the CapEx that we actually offer this year is PHP 109 billion.
Thank you, EVR . We have a question regarding RES. So, in RES competition in pricing changes, can we talk more about it given the recent sector developments.
Okay. Well, depending on the generation that is backing up that RES, I do not think there is any RES now that is just really using balance sheet. I think it is too risky. For one, Meralco, we are working together with MPower, providing also the generation assets that we have to support their contracts, especially for Vantage. When they enter into a contract in Cebu, for example, we will be looking at providing them capacity using CEDC or PEDC. I think what is good for contestable customers is that we are seeing really competitive rates, good for the customers. Meralco is neutral about it because it is the same kilowatt hours passing through the Meralco lines. Customers will pay the same base of a kilowatt hour. What is at risk, of course, is the generation side.
There's enough capacity that has been lost, say, by the distribution utility, and if it is Meralco to retail, then there will come a time probably that they will be looking at carving out contracts. I've seen that when I was with the other company in Cebu, where our generation was carved out by the customer DU when there was a deep penetration of retail customers moving to retail suppliers. But for now, I think this is good for the contestable market and really getting its objective of providing competitive energy for contestables.
Thank you, EVR. I don't see any more questions online. We'll check on-site. We have another question from Jelline Gaza.
Sir Manny, just as a quick clarification, how much of your coal capacity domestically was exposed to the spot during the time of WESM suspension?
Given our price forecast with the [audio distortion]
Contracting, yeah.
It's PEDC, DC, and Toledo. Our price forecast for Cebu was high WESM prices that we decided to leave around 30% of our capacities to the spot market. Having said that, out of that 30%, we're also covering it to what is certified by NGCP to regulating up, regulating down, and contingency reserves. We believe that that's the optimum capacity. Now, just to avoid the volatility, we're also providing some energy to Vantage in serving their customers, about 45 MW, going up to about 82 MW.
Sir, and just to round up the CapEx discussion earlier, do we have an updated budget for the distribution business for the full year, Ms. Betty?
Jelline, we'll probably have that by the first half given all the changes.
Ms. Betty, how much was it before, PHP 20 billion or PHP 30 billion?
For?
The old budget for distribution.
Just distribution?
Yes.
Our full year last year was, let me try to check. Last year was PHP 11.5 billion.
Last year was at PHP 28.5 billion, Ms. Betty. Yeah, for the DU. I'll just wait.
It's going to be slightly higher. The original is a little bit over PHP 30 billion.
Thank you, Ms. Betty. Lastly, Sir Manny, can you talk about LNG supply and your procurement? How far along are we secured in terms of deliveries?
I believe we are secured. This is our average, probably, we get anywhere between, because also it is telling us that so much is getting dispatched during the day, although in the evening, it goes up anywhere between PHP 9 to about maybe PHP 15, PHP 16 . To me, that is not telling us that there is diesel that is coming in. I think it is exposed coal plants that are trying to make up for not getting dispatched during the day and recovering during the evening. We are really seeing the duck curve manifesting already, and we are expecting this given that the target of the government is to really push more renewable energy into the grid. Mind you, we are just dispatching 250 MW of Terra Solar. Once we are in by mid-May, when we have 750 MW, that is going to reflect in the spot market.