Good afternoon, investors, analysts, fund managers, and key stakeholders. Welcome to Meralco's Full Year 2025 Results Briefing. I am Paul Jayson Ramos, Chief Investor Relations Officer of Meralco, and I will serve as the moderator today here at Makati Shangri-La. We also welcome our guest analysts and investors who are joining us in person, as well as those participating online through our MS Teams conference facility. Before we proceed, please be advised that this session will be recorded. Kindly adhere to the ground rules which were sent to you prior to this meeting. Today, we will present the financial operating results of Meralco for the full year 2025, ended December 31. A copy of the presentation may be downloaded from our website at www.meralco.com.ph under the investor relations section.
Today, we are joined by members of Meralco's management team, led by our Chief Operating Officer and EVP, Mr. Ronnie Aperocho, President and CEO of Meralco PowerGen, Mr. Emmanuel Rubio, SVP and Chief Finance Officer, Ms. Betty C. Siy-Yap, Head of Regulatory Management, Attorney Jose Ronald Valles. Today's agenda will begin with Meralco's full year financial highlights, followed by an update on operating results of our distribution utility business. We will then provide updates from Meralco PowerGen and share key regulatory and developments outlook. We will subsequently open the floor for Q&A before concluding the presentation with closing remarks. At this point, I would like to introduce our Chief Finance Officer, Ms. Betty C. Siy-Yap, who will present the financial results.
Thank you. Good afternoon, ladies and gentlemen. I will be presenting the results for the full year ended December 31, 2025. So on your screen is a summary of highlight of each of the business units. Our CCNI or consolidated core net income for the year 2025 grew 12%, driven by the steady performance of the core distribution business and solid growth of the power generation business. Following are the highlights. The DU business continued to account for the largest share of our PHP 50.6 billion consolidated core net income at PHP 29.6 billion, up 6%. DU CCNI contribution accounted for 58% of the total, down from 61% share in 2024, with the higher share of power generation business. Our sales volume for 2025 was flattish at 53,997 GWh .
Meralco refunded a total of PHP 938.5 million out of the PHP 987.2 million in ERC reset cost for the periods July 2015 to October 2024. PHP 4.9 billion was also refunded from April to December as part of the PHP 19.96 billion average weighted actual tariff refund over 36 months. Meralco's distribution rate was lower by PHP 0.0023 /kWh in February, so it is down to PHP 1.3499 per kilowatt hour due to ERC's exclusion of the regulatory reset cost embedded in the average interim tariff. On the other hand, on September 18, 2025, the ERC approved the average distribution supply and metering charge of Shin Clark Power Corporation of PHP 4.023/kWh . On the power generation side, CCNI contribution of power generation grew by 52% to PHP 16.8 billion and now accounts for 33% of the CCNI, up from 25% in 2024.
Their sales volume was at 27,289 GWh , 78% higher than the 15,296 GWh in 2024, driven primarily by the volume of LNGPH. The thermal plants generated PHP 3.6 billion of consolidated core net income from the reserve market. For MGreen, on March 16, Actis acquired a 40% share in Terra Solar through a PHP 30 billion subscription of common shares. In October of 2025, the ownership of SP New Energy Corporation increased to over 69% with the acquisition of the additional PHP 10.8 billion common shares from Solar Philippines Power Project Holdings, Inc. On MGen Gas Energy Holdings Inc, on January 27, 2025, a 40.2% effective interest in the gas companies was acquired with a total investment of close to PHP 70 billion.
All three units of Excellent Energy obtained a final certificate of approval to connect from the National Grid Corporation of the Philippines and provisional authority to operate from the Energy Regulatory Commission by April 30 of 2025 and July 1 of 2025, respectively. During the year, dividends received from unconsolidated investees totaled PHP 9.2 billion, largely from PacificLight, for a total of PHP 6.4 billion, and San Buenaventura Power Ltd Co at PHP 1.6 billion. With respect to RES and other businesses, the RES business and non-electric businesses provided a combined PHP 4.2 billion or 9% of CCNI. The RES business had a combined energy delivered of 7,510 GWh in 2025, up 11%, driven by continuing customer acquisitions. Meralco provides competitive price power to customer choice program customers through its local RES units, MPower and Clark Electric Distribution Corporation, as well as three other affiliate RES suppliers.
Dividends declared out of the 2025 CCNI was about 62.5% of core EPS, for a total of PHP 28 per share. Dividend yield was at close to 5% based on the 2025 year-end closing price of Meralco. On July 21, 2025, S&P Global affirmed Meralco's BBB credit rating and revised its outlook to positive, citing strong market position and improving business integration. Our stock price reached a high of PHP 618 on November 24, 2025, and it closed at PHP 574 at the end of 2025. We now go to the details. As mentioned, our CCNI increased by 12% to PHP 50.6 billion. Consolidated reported net income increased by 11% to PHP 51.1 billion. The gap between CCNI and consolidated reported net income represents accounting adjustments for day one gain from the present value adjustment of our over/under recoveries, foreign exchange losses, and impairment loss recognized by our subsidiary.
Our core EBITDA also rose. It grew by 15% to PHP 86.4 billion from PHP 74.9 billion. Our consolidated revenues increased by 6% to PHP 497.3 billion from PHP 470.4 billion in 2024, driven by the higher pass-through generation transmission charge of the distribution utility, increase in power generation revenues from the reserve market, and higher volumes of the retail electricity business. Costs and expenses increased by 6% to PHP 448.9 billion, the bulk of which represents purchased power cost. Capital expenditures totaled PHP 108.9 billion, largely related to the development of the solar power plant in Nueva Ecija and distribution network improvement projects. Our cash and cash equivalent amounted to PHP 109.3 billion with consolidated debt at PHP 230 billion. The next slide shows the segment information.
The CCNI contribution of our regulated or distribution business was from consolidated energy volumes of Meralco, Clark Electric and Shin Clark Power Corporation, which totaled 53,997 GWh. Note that the CCNI contribution of DU declined to 58% from 61%. However, in absolute terms, the numbers actually grew by 6%. For our unregulated business, the higher CCNI in terms of peso amount came from the growing power generation business, with its share now at 33%. This is equivalent to PHP 16.8 billion of the CCNI owing to the LNG investment, improved availability of the thermal plants in the Philippines and our gas plant in Singapore, as well as higher revenues from the participation in the reserve market. The retail electricity business and non-electric businesses, meanwhile, brought in a combined 9% share in our CCNI. The RES volume was at 7,510 GWh, up 11%, driven by continuing customer acquisitions.
The DU revenues accounted for 82% of the total. RES and non-power subsidiaries and affiliates accounted for the 12%, and power generation, 6% of revenues. DU contribution to the consolidated core EBITDA amounted to PHP 53.3 billion, up 19%. Power generation was at PHP 25.5 billion, up 30%, compared to 29% of the total, while RES and non-power subsidiaries accounted for the remaining 9%. The next slide shows the system-wide power sales volume. In this chart, we simply added the volume of the three segments. System-wide sales volume was at 67,630 GWh, slightly up from the 67,411 GWh in 2024. The DU volume includes the volume of Pampanga Electric Cooperative II, which we manage and operate under an investment management contract, was at 54,849 GWh, including 6,086 GWh sold by our RES units within the Meralco franchise area.
The RES volume was at 7,510, of which 6,086 was sold within the franchise area and 1,424 sold outside the franchise area. The Meralco PowerGen volume was at 27,289 GWh, with most of them or 21,600 sold within the Philippines, and of which a total of 15,931 were sold to Meralco Group DU and RES. With respect to our revenues, electric revenues was at PHP 485.5 billion, accounting for 98% of the consolidated revenue number of PHP 497.3 billion. Generation, transmission, and other pass-through charges were 8% higher at PHP 386.8 billion, due to higher fuel costs of power plants using liquefied natural gas and the Malampaya natural gas.
Transmission charge also went up due to the higher ancillary service charges from additional capacity sourced by the National Grid Corporation of the Philippines from the reserve market and implementation of a higher MAR, or maximum annual revenue, for the National Grid Corporation as approved by the ERC, which they began implementing in July of 2025. Distribution revenues decreased by 2%, or PHP 1.4 billion, due to the PHP 938.3 million reset cost adjustment book in June. The PHP 0.0023 /kWh downward rate adjustment for the VSET expert cost starting February of last year, and the flattish volume, which was at 53,997. These were mitigated by adjustments of Shin Clark's distribution revenue in July, and they're under recovery, which the ERC had approved to be collected over 11 months. The energy fee, which totaled PHP 26.8 billion, increased by 9% from PHP 24.6 billion, with higher revenues from the reserve market.
These were partially offset by lower fuel cost charged to customers with the decline in fuel price and a decrease in WESM sales as WESM prices in Panay decline. Non-power subsidiaries revenue was 12% lower due to the deconsolidation of our revenues from the tower business beginning September of 2024. With respect to costs and expenses, this totaled PHP 448.9 billion. Purchase power cost accounted for 84% of this total. OpEx accounted for 10%, depreciation at 4%, and the combined coal and fuel and O&M for power plants was at 2%. Purchase power costs increased by 9% to PHP 377.3 billion in 2025, reflecting the higher generation and transmission costs billed by the GenCos and NGCP during the year. OpEx amounted to PHP 43.5 billion, reflecting a 6% year-on-year increase.
The increase was primarily attributable to higher repairs and maintenance costs for the distribution asset, sustained investments in IT systems and software, ongoing cloud and online subscriptions. Salaries and salary-related expenses increased with MGen as MGen strengthened its manpower complement in support of the expanding base of operating power plant. Depreciation and amortization were higher by 4% with the completion of CapEx projects. Combined coal and fuel and power plant O&M amounted to PHP 11.3 billion, 19% lower with decrease in fuel and coal prices, partly offset by higher maintenance costs due to the scheduled outage of Toledo Power. Other expenses consist of present value adjustment pertaining to long-term liabilities and net provision reversals after settlement of real property taxes and reassessment of previously recognized provisions. Our CapEx stood at PHP 108.9 billion in 2025.
Of this amount, 70% or PHP 80 billion, represented our spend for the Meralco PowerGen 3,500 MW solar power plant, as well as two other smaller plants which came on stream during the year, which are in Bongabon, Nueva Ecija and Cordon, Isabela. The DU CapEx amounted to PHP 28.5 billion, which was spent on new connections, asset renewals, load growth, and pole relocation in support of the government infrastructure projects. For power generation, the power generation business sustained its strong growth momentum as it closed the year with 52% increase in CCNI contribution, driven by earnings of LNG investment through Chromite Gas Holdings. The LNG business contributed PHP 14.4 billion to MGen CCNI, while MGen's thermal business contributed PHP 6.5 billion, backed by higher revenues from the reserve market. Our consolidated interest-bearing debts stood at PHP 213 billion, including PHP 117.7 billion of debt of our subsidiaries.
As of the end of December, net debt stood at PHP 120.6 billion, with net debt to EBITDA ratio of 1.38 x. Debt maturities are well spread through 2040. All of Meralco's consolidated debt are peso-denominated. Cash and cash equivalent amounted to PHP 109.3 billion, while our short- and long-term cash investments totaled PHP 140 million and PHP 4.3 billion respectively. Our core earnings per share is at PHP 44.868 per share, up 12% versus the PHP 40.052 in 2024. The Meralco board today approved the declaration of final cash dividend amounting to PHP 16.672 a share to all shareholders of record as of March 26, 2026, payable on April 20, 2026. This brings the total dividends declared out of the 2025 CCNI to PHP 28 a share, close to 62.5% of core EPS. Using the December 31 closing price of Meralco of PHP 574, the yield is at 5%.
Looking back, dividends to shareholders in these last five years totaled PHP 117.1 billion on cumulative five-year CCNI of PHP 184.5 billion, representing 63% of such aggregate cumulative CCNI. In July of 2025, S&P Global Ratings affirmed Meralco's BBB credit rating and revised our outlook to positive from stable, citing our strong business position with improving scale and profitability in power generation and diversification of an integrated utility. S&P mentioned as well that the company will likely maintain strong operating cash flows from the core distribution business on the back of recent distribution franchise renewal. Our stock price is at PHP 488 at the end of 2024. By the end of 2025, it stood at PHP 574. So it is trending up. Today, it actually closed at more than PHP 600. As of this morning, I think it was PHP 634.5. I think it is PHP 632 when we close today. That ends my report.
Thank you.
Thank you, Ms. Betty. We will now move to the operational highlight and sustainability report to be led by our Chief Operating Officer, Mr. Ronnie Aperocho.
Thank you, PJ. Good afternoon and thank you for joining today's briefing. 2025 has been a banner year for Meralco, marked by strong operational performance despite a challenging business environment. Throughout the year, we remained focused on our core mandate as a distribution utility, delivering reliable, efficient, and affordable electricity to millions of Filipinos. Our operational indicators reached record best levels. System losses stayed below regulatory limits, service reliability improved significantly, and customer connections became faster and more efficient. These gains were achieved while managing external pressures such as volatile fuel prices, weather-related demand shifts, and broader economic uncertainties. I will now walk you through our full year 2025 performance highlights, showing how disciplined execution, sustained investments in our network, and a customer-first approach enabled Meralco to deliver a strong year operationally while positioning the company for long-term resilience and growth.
Starting with our business drivers, full year 2025 energy sales reached 53,997 GWh, broadly flat compared with the 2024 leap year. The slight decline of 0.6% versus an all-time high performance in 2024 was attributable to the cooler temperature with the transition from El Niño to La Niña, as well as the increased vacancies from POGO exit and higher unrealized sales from more frequent typhoons, which led to work and class suspensions. Nonetheless, our efforts to speed up customer energizations contributed an uplift, tempering the overall impact. Similarly, the DU net system input or NSI was 55,855 GWh, posting a marginal decline of 0.8% compared with the same period in 2024. At the closing of the year, Meralco's peak demand was 9.13 GW, recorded last April 23, 2025, 2% lower than in 2024.
The drop can be attributed to the unprecedented power demand surge in 2024, which normalized last year. Comparably, the Luzon peak registered at 13.84 GW on the same day, which is a 1% decrease as well. Our customer count continued to grow, reaching 8.22 million customers, a 2.2% increase year-on-year, highlighting sustained growth in electrification and service reach. Moving to the service performance of the DU, we closed 2025 with a 5.85% system loss performance, a 0.14 percentage points improvement than in 2024, making this the 18th consecutive year of achieving a system loss performance below the indicative regulatory cap of 6.5%. This translates to system loss charge savings for our customers amounting to an estimated PHP 6.5 billion or PHP 0.12/kWh in 2025, compared to the PHP 5 billion in 2024.
Reliability indicators also showed strong results as we attained another all-time best performance with double-digit improvements versus last year. Total SAIFI dropped by 12% at 0.911 x, and SAIDI was shorter by 10% to 97.5 minutes, surpassing the one in 100 gold standard, reflecting our sustained investments in distribution automation, preventive maintenance, and storm hardening, along with our efforts for faster response to outages. Meanwhile, our average time to connect customers was faster by 4.1% at 1.39 days over 1.45 days last year or in 2024, reinforcing our commitment to customer convenience and service excellence. On electricity rates, our average electricity retail rate for the year was PHP 11.81/kWh , 12.1% higher versus the same reporting period in 2024, primarily due to the following.
First, due to higher generation charge, 14.5% increase, mainly from higher Malampaya natural gas prices, recovery of previously deferred charges for First Gas plants, and inclusion of under-recovery adjustments under ERC rules. Second is the increased transmission charges, 30.5% increase from higher ancillary services cost, higher NGCP maximum allowable revenue or MAR, and collection of NGCP under-recoveries. Following the discussion on energy sales earlier, let's now look at the sector breakdown. The residential segment accounted for 36% of total sales or 19,060 GWh. Residential sales contracted 2% in 2025, heavily impacted by extreme weather patterns and cooler temperatures starting May last year. The commercial segment, which makes up 37% of total sales, posted a slight decline of 0.4% as office vacancies and sluggish foreign arrivals offset gains in retail and restaurants expansions.
The industrial segment delivered the strongest performance, growing by 1% year-on-year and accounting for 26% of total sales. This was driven by the resilient demand from semiconductor, steel, and construction-related industries. For the network project updates, this slide highlights our key network investments completed in the fourth quarter of 2025, which directly supported load growth and further strengthened system reliability across our franchise area. In the fourth quarter alone, we energized six major capital projects worth about PHP 1.5 billion, significantly strengthening grid reliability and capacity. This portfolio includes the replacement of three switchgears, construction of new sub-transmission line, development of a new GIS substation, and expansion of an existing substation, adding a total capacity of 166 MVA. This additional capacity and reliability improvement will accommodate load growth and improve service delivery across multiple areas in the franchise, especially in the provinces of Laguna and Cavite.
On sustainability, I will be covering updates on our latest ESG performance and ratings, as well as some news on our global sustainability recognitions. First, on ESG ratings. Strong and disciplined ESG performance continues to anchor our sustainability journey. Meralco stayed in line with global ESG rating averages as we maintained C ratings in the CDP or climate change and water security assessments for the fourth consecutive year, reflecting improvements in our climate risk disclosures, public policy engagements, and industry collaboration, as well as emission reduction initiatives, including our green mobility, resource conservation and efficiency, and SF6 management programs. Likewise, we sustained our above industry average rating in the S&P Global Corporate Sustainability Assessment, driven by strong performance in sustainability reporting, risk governance, and climate-related disclosures.
Moving on, our One Meralco 2024 integrated report, our very first IR, was recognized by Asia Sustainability Reporting Rating, or ASRRAT, for the sixth straight year, earning a silver rank for its strong alignment with the Global Reporting Initiative or GRI standards. This recognition comes on the heels of the top honors recently conferred by the Asia Integrated Reporting Awards, or AIRA, where our IR received the Platinum Award for Asia's Best Integrated Report for the first-time category. Finally, in line with the COP30, Meralco's Long-Term Sustainability Strategy was recognized by the International Chamber of Commerce or ICC through its global Opportunity of a Lifetime campaign. As the world's largest business organization representing companies in over 170 countries and serving as the voice of the global business community to intergovernmental bodies, the ICC spotlighted Meralco's strategy for charting a just and affordable path to a coal-free future by 2050.
Meralco was the only Philippine company featured, standing alongside global organizations such as the United Nations, Nestlé, and Bayer. This recognition underscores how our investments in renewables next generation technologies, as well as our 30 key sustainability initiatives through 2030, are not only curbing emissions and strengthening communities, but also demonstrating that sustainability and business growth must advance together. Thank you. I am now turning you over to Attorney Ronald Valles for the regulatory report.
Thank you, Ronnie. For the regulatory report, we'll discuss first the first topic, which is the WACC filing of Meralco for the 1RP. This is covering the period of July 1, 2026 to June 30, 2031. We filed recently the application last February 2. The application consists of the annual revenue requirements as follows. For the opening RAB as of June 30, 2026, the amount is PHP 359 billion. For the carryover CapEx, or the CapEx that have already been started from 2016 until the present, that amounts to PHP 31 billion. For the proposed four-year new CapEx, it's about PHP 442 billion. For the proposed four-year OpEx, it's about PHP 156 billion. And the four-year other taxes, that includes the real property tax for calendar years 2021 and for the prior years, about PHP 6 billion.
We use the rate of return equivalent to a WACC of 14.6% as determined by an independent expert. Thank you. By an independent expert, this WACC is considered an industry WACC and will be used similarly by all the other utilities applying for the 1RP. The volume that we use is 225 billion kWh sales. This is already net of the 8.4 billion kWh loss sales due to solarization. And the resulting rate is PHP 2.34 /kWh on average. As an overview of the Meralco CapEx, the CapEx program for the 1RP consists of the following. Electric capital projects, about PHP 154 billion. Non-networked assets, about PHP 26 billion. Information communication technology projects, about PHP 20 billion. Cybersecurity, about PHP 7 billion. AMI projects, about PHP 34 billion. And carryover projects, about PHP 31 billion.
In comparison with the other utilities that have filed under Group A, DECORP has filed an average of PHP 2.28 for the four-year period. PALECO, PHP 2.42 /kWh . And Cotabato Light, PHP 4.42 /kWh . Next topic is the competitive selection process. Last February 16 was the bid submission and bid opening for our 200 MW concluded CSP. Out of the 14 bidders that submitted expressions of interest, only 10 submitted the bids. And out of the 10 bidders that submitted the bids, only eight passed the prequalification evaluation. The reserve price was set at PHP 6.51 /kWh . Out of the eight that qualified in the prequalification evaluation, two of them submitted bids higher than the reserve price and therefore were disqualified.
The one that submitted the best bid is Sual Power, Inc for the entire 200 MW at a rate of PHP 4.29 /kWh inclusive of VAT and line rental. This rate offered by Sual Power is for 100% plant capacity factor and is good for four contract years from January 26, 2026 or until January 25, 2030. The term will start upon ERC approval of the power supply agreement. The rate is a fixed rate, and there will be no escalation or price adjustment. Next slide. Change in circumstances, claims by different generators contracted by Meralco. Last January 27, Meralco received various ERC orders, all dated January 26, granting price adjustments in Meralco's PSAs with the following suppliers, ACEN, PanAsia, SPPC, and SPI.
The ERC approved ACEN Mid Merit CIC claim of PHP 220 million, and for ACEN Baseload, it is about PHP 1.5 billion, at a total of PHP 1.7 billion for ACEN. The ERC also approved PanAsia Energy's additional claim of CIC of PHP 380 million. This is on top of the PHP 884 million that the ERC previously approved in the past. For South Premiere or the Ilijan, ERC approved PHP 15.8 billion. For Sual Power, it is about PHP 13.3 billion or a total of PHP 29 billion. All in all, what the ERC approved is a total amount of PHP 31.3 billion, and in terms of per kilowatt hour, this is about PHP 0.28 /kWh . The term of collection or recovery is staggered between 12 months up to 36 months.
With respect to the First Gas Santa Rita power purchase agreement extension, the ERC approved the second extension of the First Gas Santa Rita PPA until June 25, 2026. In its approval, the ERC noted the following: the ERC's overarching consideration of critical balance between energy security and consumer welfare. According to ERC, if this is not extended, shutdown of Santa Rita plant will force Malampaya and the LNG terminal to shut down as well, which presents a critical energy security risk in the Luzon grid. The Santa Rita plant has contributed to energy security through the frequent operation of its available units at full capacity, providing the needed increase in supply and stabilizing WESM prices. Reliable and flexible capacity offered by Santa Rita plant is much needed during the summer months.
Finally, according to ERC, it is imperative that power grids maintain sufficient capacity available to avert yellow and red alerts. That is it for the regulatory update. Turning over to Manny Rubio for the Meralco PowerG en highlights. Thank you.
Thank you, Ronald. Good afternoon, everyone. As always, we begin our report with our number one priority across all sites, health and safety. For the full year 2025, we are proud to share that we maintained a safe working environment with over 74 million safe man-hours, both for employees and contractors. While we recorded zero lost time accidents and zero fatalities, we had 39 first aid cases and 22 recordable incidents, all of which were immediately addressed on-site and minor. We will continue enhancing our safeguards to ensure that every team member and contractor returns home safely every day to their families. For the full year 2025, the overall MGen Thermal Group delivered 8,955 GWh of energy, slightly higher than the previous year, driven by higher plant availability and stable operations.
2025 marks Global Business Power's first full year in participating in the reserve market, driving significant growth for MGen. It continues to be a key contributor to grid stability in the Visayas area, providing significant capacities for regulating contingency and dispatchable reserves. MGen's liquefied natural gas investment through Chromite Gas Holdings delivered 11,912 GWh, while Singapore-based PacificLight Power Pte Ltd delivered 5,689 GWh. MGen Renewable Energy or what we now call MGen Renewables, delivered 733 GWh, 18% more from a year ago, driven by additional capacity from solar facilities commissioned in Q1 2025 in Nueva Ecija and Isabela. With a total generation of 27,289 GWh in 2025, MGen achieved a 78% increase from last year, driven by new capacities from Chromite Gas Holdings, new capacities from our green projects, efficient plant operations, and operational excellence of our teams.
MGen ended 2025 with a consolidated core net income now at PHP 16.8 billion, reflecting a significant 52% growth. In 2024, MGen only contributed 24% to the one Meralco CCNI, and with the strong results we are now contributing 33%. Notably, our plants remained available for an average of 95.2% throughout the year, which is 3% higher compared to the previous year, and I must say, world-class. All these growth figures are driven by our first full-year participation in the reserves market and the contribution of LNGPH and new capacities from our solar facilities, and higher plant availability. Building on these strong results, we now turn to the key developments that shaped 2025. The closing of the Chromite Gas Holdings deal drove significant growth to MGen's portfolio in the past year.
Actually happening today, we are marking the successful arrival and unloading of its 50th LNG cargo, a milestone already achieved just barely two years after the terminal's commissioning. Across the region, our Singapore-based subsidiary, PacificLight, is also expanding MGen's footprint with commercial operations of its 100 MW fast start ancillary services or what we call in the Philippines dispatchable power on Jurong Island. It is also moving forward with its upcoming 670 MW high efficiency combined cycle gas turbine facility in Singapore, the largest in Singapore and ready to burn alternative fuel like hydrogen when that fuel becomes viable. It has appointed a consortium of Mitsubishi Power, Ltd and Jurong Engineering Limited to develop this project, expected to commence operations in 2029, coupled with a 97 MWh battery energy storage. Our LNG investments are not opportunistic. They are strategically positioned to support both energy security and low carbon goals.
From 2025 to 2030, our LNG capacity will grow by 32% with 4,447 MW. This reflects a deliberate expansion strategy anchored on LNG as a key transition fuel as we build a more sustainable future. Moving on to our thermal portfolio. The Department of Energy has reaffirmed the status of Atimonan One Energy power plant project as a committed project following the agency's earlier confirmation that the project remains outside the coverage of the 2020 coal moratorium policy. The Atimonan One Energy power plant will be constructed using high efficiency, low emission technology that utilizes higher temperatures and higher pressures to maximize energy production while minimizing fuel consumption, thus lower carbon emissions. Once operational, the facility is expected to account for approximately 7% of Luzon's energy supply.
MGen is expanding its capacity in Cebu with an upcoming 49 MW battery energy storage in Toledo and a 74 MW thermal power project in Toledo as well. We are in fact signing early works contract with the EPC on Friday. These projects support the country's goal of expanding energy capacity and ensuring energy security and power availability. With these developments in place, we expect our thermal portfolio to almost double by 2030. These are critical in ensuring energy security through baseload power expansions. We remain committed to leveraging advanced thermal technologies to reduce carbon emissions while delivering reliable, sustainable energy to support the country's transition toward the low carbon future. On the renewables front, we successfully inaugurated three solar power plants in Q1 2025, totaling 152.7 MW AC. Notably, two of these, MGEN Renewables Bongabon and Cordón Solar, are GEA-2 projects completed ahead of schedule.
Altogether, these three plants supply clean energy to more than 154,000 households in Luzon. As of end January 2026, Terra Solar phase one has reached 75% overall construction progress, delivering as scheduled. We have already installed 1,288 MW DC of photovoltaic cells and 622 battery energy storage system units. MTerra Solar has accomplished a major milestone on December 21, 2025, with the energization and cut-in of its 500 kV substation connecting to the Nagsaag-San Jose 500 kV Line 2, the first in the Philippines. On February 12, 2026, MTerra Solar successfully connected to the Luzon grid through NGCP's 500 kV backbone and is now in the final stages of energization as load. We are soaking all the transformers that we have on-site. The project's expected to energize as generator by second week of March 2026 and progressively ramp up capacity starting with its first 250 MW AC block.
By May, PV capacity is targeted to reach up to 700 MW AC, complemented by around 825 MWh of battery storage. This would position the project among the largest integrated solar and battery installations globally. By August, we expect to fulfill our phase one supply commitments under our contract with the distribution utility. With MTerra Solar expected to be fully operational next year, including phase two and our upcoming Concepción Solar Project in Iloilo, our renewable energy portfolio is set to grow by 649% by 2030. We are also setting a new target for attributable renewable energy capacity by increasing it to 1,800 MW AC by 2030. MGen is also preparing for the future of nuclear energy in the Philippines through targeted capacity building and strategic studies. Through the vision program, five MGen employees are now learning world-class expertise in nuclear engineering.
On a more recent news, we have received a grant from the U.S. Trade and Development Agency, enabling a study on the viability of small modular reactors and the deployment of SMRs in identifying preferred technologies and sites. These initiatives support a safe, responsible, and well-planned approach, ensuring the Philippines is ready to explore nuclear as a long-term, secure energy option. MGen continues to power a better tomorrow through different initiatives that pave the way for a more sustainable future. As mentioned, our top priority remains the safety of our people, safeguarding their well-being, both physically and psychologically. Our power generation portfolio continues to expand across technologies to meet the region's growing energy demand. At MGEN, we also remain committed to reducing our carbon footprint through coal ash and solid waste diversion, wastewater recycling, and tree planting.
Lastly, through our ER 1-94, MGEN has supported host communities by contributing PHP 38 million. We have also created over 12,000 jobs for MTerra Solar Project and installed the first internationally compliant football lighting system in Western Visayas at the La Paz football field. On a final note, MGEN's overall performance in 2025 was marked by strong operational efficiency across our portfolio, delivering solid results in both power generation and financial growth, achievements made possible by our people. Amid a rapidly changing energy landscape, we successfully pursued inclusive and sustainable growth. These efforts have earned both local and international recognition, highlighting MGEN's leadership in innovation, operational excellence, and sustainable energy solutions. We look forward to a promising and impactful 2026 as we advance our ongoing and upcoming projects. [Non-English content] .
Thank you, Mr. Ronnie Aperocho, Attorney Valles, and Mr. Emmanuel Rubio. At this point, we would like to acknowledge our chairman, Mr. Manuel V. Pangilinan. 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. Alternatively, you may type your questions in the chat box, and I will read them on your behalf. In either case, kindly state your name and the company you represent before asking your question. Please mention the executive you would like to address your question to. We start here on the floor. We have a virtual hand raised. Can you open the mic for Jelline Gaza of JP Morgan?
Hello. Good afternoon. Thank you for the opportunity. Can you hear me?
Hi, Jelline. Yes, we can hear you.
Yeah. Thank you. My first question relates to the tariff reset for the DU business. I am just wondering how confident are you that it will be resolved or finalized within the year? That is my first question.
Hi. Actually, the ERC, prior to requiring the DUs to file the application, issued the rules. The rules contain the schedule for the filing and resolution of the application. In all public consultation, the ERC has emphasized that it will definitely resolve all applications before the start of the 1RP. That will be before July 1 this year. So our expectation is that the ERC will have a final resolution, at least for the Manila Electric application, either by May or June of this year.
Thank you, sir. Attorney Valles, can I have a follow-up also with your application? May I please understand the inputs that you have brought into this one? This map at around PHP 2.34 /kWh seems to be a big jump from the current one. In what particular input would you say you are confident with regard to getting it approved at that level? For example, RAB, I noticed that it includes a 25% contingency allowance. Number two, on the WACC, we saw NGCP propose a 15% as well, but only got an award of around 11%. The CapEx all in all would be almost double of what you have spent in the last four years as well. Can you comment on those major inputs? Another interesting point I noticed is on the volumes.
It practically implies a mid or low single-digit decline in annual volume growth from 2026. Is this how you are concerned about solarization in the medium term? Thank you.
Hi. Thank you for the question. First on the asset, yes, you are correct. The ERC has issued a guidance that we include, or the utilities include a 25% contingency on the RAB. In the case of Meralco, that 25% contingency amount to around PHP 66 billion of the PHP 359 billion regulatory asset base that we included in our filing. On top of that, the ERC also recently advised to include an inflation for the assets included in the RAB from the 2016 onwards. We included that, and that inflation amounts to about PHP 76 billion.
If you add that together and you deduct that from PHP 359 billion, the asset would have been PHP 187 billion only. That will be a big reduction. For the CapEx, that's PHP 242 billion that we propose. That includes major CapEx that we are proposing that have not been included in the previously approved rate of Meralco, or the previously approved rate of Meralco of PHP 1.35/kWh. For example, did not include AMI CapEx of PHP 34 billion. We also, for the first time, are including assets that have not been part of the regulatory asset base in the past. Or not part of the CapEx that we have filed in the past, such as the battery storage. That's, I think, around PHP 1 billion. And electric vehicle charging stations and other CapEx related to electric vehicles in compliance with the electric vehicle loan.
That's about PHP 700+ million. Of course, the bulk of the CapEx proposal is still the electric capital projects. About 64% of the total proposed CapEx pertain to electric capital projects. Of course, there's also an increased amount of CapEx pertaining to cybersecurity and on other non-network and ICT projects. With regard to the WACC, the WACC is 14.6%. Again, it is based on the formula of the ERC, which is 60% equity and 40% debt. The independent expert determined that the cost of debt is about 9%, 9% or 9.2%. The cost of equity is about 14%-22%. When you average it out and get the 75th percentile, that's about 14.6%. When you compare that with NGCP, understand the NGCP filed for a higher rate. But the scheme for NGCP is different.
For NGCP, for example, the WACC that was given to them for the fifth RP, the last, is 11.74%. But they're subject only to 3% franchise tax. If you net it out, that's only about 11.38%. If you gross it up, the 11.38%, the rate of the WACC for the DU should have been 15%+ . But our expert applied only a lower WACC, which is 14.6%, based on his own or their own independent review and analysis. So we expect that the ERC will grant us a WACC that is commensurate to the net rate of return that they have given to the NGCP. For the sales, the sales is actually based on the EIU December 2025 forecast. But we only deducted from that sales forecast our own internal forecast on the impact of solarization, which is about 8.5 billion kWh .
We need to do that because the lost sales translate to lost income to Meralco. To compensate for that, we need to increase the rate by reducing the sales. That's it. I hope I answered the question. Thank you.
Thank you very much for the comprehensive answer, Attorney Valles. If I may, my last question is on the generation business. Can you comment about the quarter-on-quarter decline in generation net income? Is this driven by an outage with one of your plants? A question on SBPL specifically, and then maybe a timing of overhead cost recognition. Is this a correct way of understanding the quarter-on-quarter movement of generation profits? Thank you so much. I'll go back in the queue. Thank you.
Hi, Jelline. For power generation, there are a couple of factors. For example, for GBP, there were plants which went on outage or maintenance. In the case of San Buenaventura, it is the end of their holiday, so they are now subject to income tax, and that started towards the end of the last quarter of 2025. Also, at the start of 2025, remember in 2024, they went on their first major maintenance. For the first month of 2025, San Buenaventura wasn't in full operations. That's for GBP and San Buenaventura. In the case of PacificLight, the margins, the net non-fuel margins actually came down compared with 2024. Although I think they average at around $80+/MWh . In the middle of the year, I think there was one of their units that went out. It's a combination of, yeah.
Thank you, Jelline Gaza, for the question. Hope we were able to answer it. Opening the floor here in attendance.
Hi, good afternoon. [Eunice Villator] from Security Bank. My first question would be on the core earnings mix. We've seen that in terms of the DU and generation, there's been slight shift towards the generation business. Do you think this is the sustainable trend for generation to eventually overtake the distribution? Or how do we intend to see it moving forward? Thank you. That's my first question.
I think for the short to medium term, it's possible that the profits from the generation units will catch up or will outpace the growth of the DU. Because you have Toledo plants coming in, the expansion in Singapore, which is the 100 MW that's finished. Then they're building a new plant of 600 MW gas plants in Singapore. Of course, the Terra Solar, which is the biggest solar facility in the Philippines and elsewhere in the world. I think we start energizing selling to the grid sometime in March on a phase basis. We're reaching about 1,500 MW sometime in August. That will continue through to the early part of 2027 when phase two should be finished. The entire 3,500 MW solar facility will be on stream. So that will impact the generation profitability, these plants, Toledo.
Then part of the transaction, the investment we made in Chromite Gas Holdings, it turned out that San Miguel bought a turbine of 450 MW- 435 MW, which was in surplus at that time last year. We were wondering whether we should put it in the Ilijan complex in Batangas or in the Visayas, because the Visayas is in supply deficit to the tune of about 400 MW. So the decision is to move the turbines, it's uninstalled yet, to the plant we have in Iloilo. So we will have a gas plant in Iloilo of 435 MW, a new one, located in the Panay Electric in Iloilo City. That will answer for the supply deficit in the Visayas because their index and power rates are very high because they default to diesel plants, right? So this is very important for Visayas.
It was fortuitous that San Miguel did buy this because gensets, generators, turbines are in very extremely short supply nowadays. So Visayas that will answer for the Visayas deficit. Mindanao is currently in a bit of a surplus, but, I think demand will eventually catch up, and Mindanao will need, quite soon, maybe as early as next year, some new generation plants. So we're looking at that as well. So yeah, I think for the short to medium term, growth of generation is likely to outpace the growth in the DU. The DU should not sit idly by while-- could have general competition as well, right? So, there are two thrusts that the DU starting to make and should be aggressive in pursuing these two thrusts. One is our ability to invest, acquire in DUs in the provinces, basically owned by electric cooperatives.
That's a tough nut to crack because it's sort of coated by politics, local politics. Our people have been active in talking to several jurisdictions in several parts of the country like Batangas, even Albay, and what you call that? GenSan. Iligan. Iligan will soon bid out the DUs, not very large. It's a medium-sized provincial DU. There are many things that are available, many of those ECs that are available. But it's not easy to implement, to execute on the investment. The other track that the DU should take is solarization. I think that was mentioned a bit earlier, if I recall. To solarize in the first instance, in the provinces outside the franchise area of Meralco, because that is additive to the volume and the revenues of Meralco. Their business model is to sell power, not to sell solar panels.
Because if we sell power, we do earn the power rates. We don't earn just the distribution rate. In the case of Meralco's franchise area, we earn only about PHP 1.35/kWh. Whereas if we charge the full electric rate, which we own, that would be anywhere between PHP 8/kWh- PHP 10/kWh . So those are really the two key components of the direction that DU should take to build its own business. Then as an adjunct to that is, of course, electric vehicles. Meralco's in the best position to roll out charging stations, in the first instance, in the franchise areas that we have. Hopefully we can do so on a nationwide basis in the urban areas, in the urban cities of the Philippines. That's the future for DU, apart from the existing legacy business of wires.
Thank you, sir. Since we're already on the DU, just a follow-up in terms of how do you see your volume growth moving forward? Because we've seen from prior years that, of course, there's higher correlation in terms of your volume growth and the GDP. Can you share the factors that could have led to the divergence from last year? Because we've seen flattish to negative sales growth for DUs and about 4% of GDP.
You're right. There's a strong correlation between GDP growth and the growth of the business of the DU, particularly in our franchise area, which accounts for about 60%, I believe, of the GDP of the country. So we're directly affected by GDP growth, and that's the principal reason why the second half demand has been quite soft. Occasioned by the president's SONA address on the flood control issues. That's one, and then there's the inroads slowly being made by solar panels, solar power, on rooftops, principally. Number three is the weather. It's been cool this last quarter, last year, and in the first two months this year. I'm glad that we're starting to warm up, the weather is starting to warm up. Hopefully, demand can resume.
Now, our outlook for economic growth, and I think everybody's outlook for economic growth for 2026 and maybe for the better part of 2027, is quite cautious. Sub 5% economic growth. It will affect the demand for power for Meralco particularly. How long will that last? I think it will last at least for two more years, 2026- 2027, 2028. Depends on who the frontrunner is. Because in fact, you drive economic sentiment, right? Yeah.
Thank you, sir. I guess this is going to be my last question for now. Just want to understand your rationale on your interest over the Semirara COC. What brought that idea to take on that COC, if ever? Thank you.
Yeah. By the time we build and commission Atimonan, we would probably have around 2,600 MW of capacity. It is just, I think, rational for us or logical for us to consider or be interested in Semirara as a physical hedge on coal price volatility and of course, fuel security. As we know in the past that Indonesian policies have shifted from time to time, and we want to make sure that if we have that kind of coal demand, we want to at least have some level of security. It is still very early days. We do not know yet how much coal capacity is there. Do not even know yet the whole specifications of the plant. Although we have ordered Semirara for some of our plants and we can burn them, and Atimonan is also designed to burn the calorific value that Semirara has.
Just on the calorific value, but not yet on the chemical composition.
By method, Sid Consunji is a partner in Maynilad and other things. I think Manny here has met Sid. He seems to be open to a situation to use Gen Z vocabulary with us. In a way, it's easy inside track because he's got the equipment, he's got knowledge of the operations and the extent of the reserves of coal available in that particular location. We are likely to partner with him, and he's got the equipment in place. We don't have to reinvent the wheel and all that. It's likely that he will insist on majority position by DMCI for that. We want to know your reaction if we were to consider a mine- mouth kind of situation where you integrate backward to coal. Some banks don't like coal. Most banks?
Thank you for the question, [Eunice]. We have some virtual hands raised on the line. Can we open the line of Mr. Raymond Franco? Raymond, you may ask your question.
Hello. Sorry, can you hear me?
Yes, we can.
Okay. Thank you for the opportunity. Just two questions from me. This is regarding sensitivity analysis due to the rate reset application. The first question would be for Attorney Valles. What would be the distribution rate if eventually the WACC that is used by the ERC or implemented by the ERC is 12%?
Actually, there are many factors that will determine the rate, not just the WACC. Are you asking or are you telling us that everything else is constant in the application except that the WACC will be reduced from 14.6% that we applied for, down to 12%?
Yes. Everything else held constant, just the WACC will be changed.
I'll get back to you.
Okay. Thank you for that. If I can ask the second part of the question on sensitivity. I guess this is for Ms. Yap. What would the impact on earnings be for every PHP 0.10 increase in the distribution rate?
Gross of tax, assuming we have the same volume at 50,000, that's PHP 5.3 billion. Net of tax, that's about PHP 3.94 billion.
Okay. That's just the tax component. There's no other-
That could go either way, right?
Yeah. Yes. Up or down. Yeah.
Up or down. I think, frankly, as Ronald indicated, it's not just the WACC. It will obviously impact on the rates or other considerations like the OpEx, CapEx, principally, and your forecast of demand, right, Ronald? At the end, it will be a number that will be determined, I think, unscientifically, right? Let me say that. Because at the end, right now we're about PHP 1.35/kWh or something like that. What the final number would be. Because this rate hasn't been adjusted since July of 2015, am I right? Until June 30 of 2026. There's been a final determination up to June of 2022. Ronald, am I correct? July of 2022 up to June 30, 2026, they're a bit tentative, right? It's not final yet. But when they start the 1 RP on July the 1st.
The ERC already ruled with finality on the rate that will apply for the last period. The last period today is from 2016 up to June 30, 2026. That rate is equivalent to the last approved rate, which in the case of Meralco, is at PHP 1.35 /kWh .
For the last, since July 2015, we've invested, right, in the DU.
We've invested and spent OpEx, I think over PHP 350 billion already, both CapEx and OpEx. This has not been considered in the rate that we are charging the consumers today. Because the last rate that was approved to us considered only those CapEx and OpEx, and the RAM that were filed in 2010. Plus the four-year forecast of CapEx and OpEx from 2011 to 2015.
On its commercial merits, Meralco deserves some increase from the current base of PHP 1.3499 . But of course, it's not entirely objective in this country, is it? So we should behave as a utility. Aren't we well-behaved?
Hey, Raymond. Thank you for the question.
Raymond
To answer your question earlier on the 12% WACC. So the rate that we applied is at PHP 2.34/kWh. If that WACC will be 12% instead of 14.6%, the rate will be reduced by around PHP 0.03/kWh . Again, that is on the WACC alone.
Okay. Thank you very much. That is all the questions I have. Thank you.
Thank you, Raymond. We have one more virtual hand raised online. Can we call on Mr. Roberto de la Paz? Hi, Roberto. You may speak now. Hello, Roberto? Okay. Hi, Robert.
Hello?
Yes, hi. We can hear you now.
Hello. Can you hear me?
Yes, we can.
Sorry. Hello, can you hear me?
Yes, we can. Please go ahead with the question.
Hello, sir. Can you hear me?
Hi, Roberto. We can hear you. Please go ahead with the question.
Sorry. Hello, sir. Can you hear me? Hello?
Yes, Robert. Hi, we can hear you. Hello?
Hello. Can you hear me, sir?
Maybe perhaps you can type it, Robert. We have
Hello?
another question virtually here from Jelline, from a client. What is driving this bottleneck of securing land for Terra Solar phase one?
What is remaining for the land that we need to acquire? I think just to put some context, when we started the project, when we issued the EPC in November 2024, we only have around 45% of the required land. Through the last 15 months, I think what is remaining out of the 3,900 that we need to acquire, we have around just 200 hectares that are pending. We have offers for those almost 200 hectares, but we are actually holding off on acquiring because these are the last mile, and they are offering a higher rate than what we have acquired the balance for. We still have to acquire some land for phase two. We do not want the last mile to dictate the price of the remaining land.
However, I think closer to the time we need to deliver around maybe June, we will make the decision and acquire them. These are not PV lands, these are connecting lands because the sites are not contiguous. We have to connect the clusters. What we will do with these lands are just to lay down cables to connect the clusters in order to connect them to the main control. That is mainly the issue with the remaining land.
Thank you, EVR. Do we have any question on the floor? Yes.
Hi. Klyne from Regis Partners. Two questions for me. First, could you provide the balance of provisions in your balance sheet as of end 2025? In the event that you do get the tariff you want, should we expect this amount to be reversed immediately? That is my first question.
Well, there is still a fairly substantial amount of provisions on the books of Meralco. There have been, I think around 10 years where the tariffs were provisional, right, Ronald? That put us in a quandary where there is a difference between the billing rate to the customers and what our booking rate should be, because everything was tentative about the rate. We wanted to be conservative in terms of the booking rate as compared to billing rate. That is why some of you may have noticed that there is some difference between the accounting profits we disclosed versus the cash balances of Meralco's balance sheet. I think if we do get our desired tariff starting with the new RP, with the new 1RP
Arguably there is less pressure to bring the provisions onto the P&L. As opposed to if we do not get what we think we deserve, or if it is less than the PHP 1.35/kWh, then we really have to bring that back in. In any event, regardless of the outcome of this tariff setting mechanism for the new 1RP, we should start, I think we have since last year, bringing those provisions onto the P&L because we cannot allow it to stand there as a significant feature of the balance sheet. We have to bring those provisions back in, starting there. I think we will probably bring some of those provisions as well this year.
From a P&L perspective, it is good for Meralco, I would like to think, because we were able to smooth out or raise the level of the profits of the company in the next few years. Do you want to add anything? It is difficult for us, obviously, to disclose with precision what those provisions are. All I can say is don't worry. Be happy. Because your dividends will also function. As we bring those in, we declare X percent. Right now, we raise dividend payout ratio to 62.5%. So I think we should be music to your ears. We should be able to justify a higher dividend rate as we bring those provisions back to the mainstream P&L.
Last question for the Meralco PowerGen Corporation business. What is the latest update on Atimonan One Energy?
Atimonan One Energy is ready to participate in an auction or whether it is capacity auction or CSP from a sizable demand. The sizable demand that we are expecting is, of course, a CSP by Meralco for a 900 MW base load. Although there are also discussions with DOE on a possible capacity auction where we can probably also participate. But we are ready to actually participate. We have identified and shortlisted two EPCs. We have in fact informed one as the preferred EPC and have held their position as far as the offer on the cost is concerned up to September of 2026.
Thank you, Klyne, for the question. We will just go back to Mr. Roberto earlier. EVR, this question is for you. What is the growth plan for SP New Energy Corporation under the umbrella of MGEN Renewables, and when will it be fully integrated with MGEN if it has not already happened?
Yeah. At the moment, we are doing valuation for both MGen and SP New Energy Corporation assets. We are expecting that once the valuation is completed, which we expect before middle of this year, then we will integrate both the assets of both entities. Then by the time we deliver the second phase of Terra Solar, fully delivering our commitment to the PSA, then that is when we are going to look at the listing.
Thank you for-
It is probably as first quarter of 2027.
Thank you for that. We have one more question from Jelline Gaza. Jelline?
Thank you for acknowledging the raise hand, PJ. I have a question to Sir Manny about the generation business. First is on the reserve market. It has grown so much to contribute around 7% of bottom line. What is your view about this particular side of the business as we see more solar assets coming in and more and more power generation co-players are putting up their own energy storage? That is my first question. Second is on the distribution business. How much is the impact of solarization today, and what is your expectation in terms of quantum going into 2026 and 2027? Thirdly, on the procurement side of things, the Santa Rita legacy PPA has been extended for two times already. What is your view on the likelihood of it getting extended for a longer period of time?
What will it mean for Meralco's future generation assets, likelihood of winning new PSAs from the DU business? Thank you.
To answer the first question. On the reserves market, Jelline, I always look forward to your questions on the reserve market. It has really contributed quite significantly to the bottom line of Meralco PowerGen because of the high prices. Of course, the high prices in 2025 reflect the availability of supply. With more injected variable renewable energy into the grid, Department of Energy is in fact looking at changing the regime and revising the grid code as far as requirement for regulating up and regulating down is concerned. The current market is geared towards supplying 4% regulating reserves
based on peak demand. Because of injection of variable renewable energy, there is a proposal to actually increase the regulating up and regulating down to 20% of the total variable renewable energy capacity scheduled for dispatch, which is a significant increase in the current demand. So we see the market to remain tight and although we are seeing now a reduction in prices because of some batteries coming into the grid, but it is not as low as what we are expecting at 2026 to be. Currently, the prices remain, at least in Visayas, around PHP 14/kWh- PHP 18 /kWh , which needs to go down because that is not really sustainable. Luzon, from time to time, would also go up to that level. Just to let you know, two units of Excellent Energy were granted certificates to provide regulating reserves of 30 MW each.
In preparation, of course, to when the 20% of total variable renewable capacity has been approved by ERC which we probably expect to happen late this year.
If I may answer on the DU side, as mentioned by our chairman, don't worry, be happy. Actually, we at the DU side of the business, we remain very positive about a rebound this year in terms of the volume. We are looking at a 3.2% increase in our volume. Of course, solarization, as mentioned, impacted our volume. To share some numbers, for every 5 kWh that we are losing from solarization, we are gaining 1 kWh or 20% of that from the EV adoption. The target really is to close that gap. How to close that gap is for us to really put up more charging stations. That is the strategy. On top of that, we are looking at higher temperature come March, and I think that will somehow provide us some uplift in terms of the volume.
That will be sustained until the end of the year. Another reason why we remain ecstatic is because we have a very healthy pipeline. When I say healthy pipeline, we have significant volume of new service applications, especially project covered applications. As we speak, there are 9,000 project covered applications that are now being processed by our customer retail services and our networks group. The sooner that we energize all of these pending applications, the better for us in terms of volume addition, because right away, that will add up to our volume. Of course, we are pinning our hopes also to the hyperscalers. There are also hyperscalers in our pipeline. When they are up and running, this will definitely add volume for us this year. On solarization, it is something that we really cannot avoid.
That is why we have the strategy also to be a part of solarization. That is why through our subsidiaries, we are into rooftop solar installations also. One thing that separates or a differentiator for our offering is that we are offering this, rather than a direct sale of equipment, what we are offering, as envisioned by our chairman, is for us to provide a PPA model, especially for residential. Meaning no cost out from the customers. It will be Meralco through our subsidiaries who will finance the full cost of the solar installation and then provide several models for the recovery of that investment. We have already conducted a pilot of this model, and we already have 15 live customers, residential customers, who are into this PPA model. We are looking for a ramp-up in terms of adoption of this new model.
Because, of course, you really cannot compete head-on with hundreds of solar installers nationwide. What we are offering is a different kind of offering that will somehow entice customers. Our strategy here is not only limit within our franchise, but basically we can offer this type of a model to all of the customers in the country. We have very clear strategy to somehow regain our volume. Hopefully this year we can really achieve our 3.2% growth or maybe higher than that, given all these clear strategies. Thank you.
Thank you, Mr. Ronnie Aperocho. Thank you everyone for your questions. For a copy of today's briefing presentations, you may scan the QR code on screen or in your table cards. At this point, I would like now to call honored Chairman and CEO, Mr. Manuel V. Pangilinan for his closing remarks.
I think there's a third question that remains unanswered from that lady. This was Santa Rita, right?
Was there a question about Santa Rita?
Yes, sir. There is a question on Santa Rita.
As you know, they have been extended up to June 25, this year. That was the second extension to Santa Rita. The demand-supply situation for power in this country has turned to excess supply. I think that is the first time I am seeing it since we invested in Meralco in 2009. It is likely, unless the situation changes on the demand side of the equation, that we will not renew. Because for us to renew, it is about 500 MW- 1,000 MW. We will be over-contracted, and we cannot do that, because they are new, principally renewable capacities that are coming on stream. So we cannot over-contract. So it is unlikely that we will renew the contract to Santa Rita after June. Final remarks.
Well, thank you for joining us this afternoon. Maybe to echo the optimism of Ronnie here, we do look forward to a bright future for Meralco because this is not. I think when the president actually visited us in Meralco on Valentine's Day, and actually the BS of the Department of Energy. We presented to him what we are doing in terms of, number one, is expanding the lifeline subsidies to those who consume 50 kWh , to the poorest people in the Philippines. 50 kWh or below, they will be given the full subsidy. That is one. So he was quite pleased with that. Number two is the progress on Terra Solar. I reminded him that when he visited and broke ground in Terra Solar in Nueva Ecija, that was in November of 2024.
By March, we will be selling power to the grid, not the full amount of the capacity, but 250 MW?
250 MW energized. I mean, the plants already energized, ready for sale. So we will be seeing the first revenues and profits coming in by July from Terra Solar. I told him that it took us only 15 months to, not just fully complete, but at least to start energizing and selling to our people, renewables. Number three, to Ronnie's point, it will help the demand side if the government were to issue either a, the DICT were to issue a circular or the president issue an EO requiring all government agencies, departments to host or to locate their data locally for a number of reasons. Why are we paying the offshore data centers and spending valuable foreign exchange? The best is for them to locate here. It is also better from a cybersecurity standpoint that the data originate in the Philippines, stay in the Philippines.
Other countries, many other countries in Asia have enacted laws or regulations that require local companies to get their data hosted in this country. That will add, at least in the beginning, 270 MW requirement, right? It is something that could fill up the surplus capacity that we are seeing. Of course, hopefully economic growth returns sooner rather than later. I hope it turns, it could surprise us that the economy is turning on a dime. A great deal of it will depend on, I think, on the political outlook of this country. On that basis, we hope to see you when we announce the first quarter results and when it is clear as to how Terra Solar is performing. That would be in May this year. Terra Solar is performing, et cetera, and other good news that we can deliver to you.
Let me tell you what the president said. I thought Meralco was a very old, stagnant, and staid, and conservative institution. But Mr. President, it is old, but it is young, right? So thank you.