Good afternoon, investors and analysts, and welcome to today's briefing. I'm Dinbo Macaranas from the Meralco investor relations team, and I will be moderating today's conference call. Before we proceed any further, please be advised this teleconference call is recorded. Kindly follow the ground rules which were sent to you beforehand. We will be presenting the first half 2023 financial and operating results of Meralco. A copy of the presentation may be downloaded from our website at www.meralco.com.ph under the investor relations section. We have members of Meralco's management team in this call, led by our Chairman and CEO, Mr. Manuel V. Pangilinan, who I understand will be joining us a little later in the call.
Other corporate officers who will be presenting are the following: Mr. Ronnie L. Aperocho, Executive Vice President and Chief Operating Officer, Ms. Betty C. Siy-Yap, Senior Vice President and Chief Finance Officer, Mr. Ferdinand O. Geluz, Senior Vice President and Chief Revenue Officer, Mr. Froilan J. Savet, First Vice President and Head of Networks, Attorney Jose Ronald V. Valles, First Vice President and Head of Regulatory Affairs and DU Regulatory Management, Mr. Raymond B. Ravelo, First Vice President and Chief Sustainability Officer, as well as Mr. Jaime T. Azurin, President and CEO of Meralco PowerGen Corporation.
We will begin the presentation with the financial highlights, followed by the operating results of Meralco's DU business, then highlights from Meralco PowerGen Corporation. F inally, we will conclude the presentation with a few words from our Chairman. After all the presentations are done, we will allot time for Q&A. At this point, I would now like to introduce our CFO, Ms. Betty C. Siy-Yap, who will present the financial results.
Good afternoon, ladies and gentlemen. Thank you for joining us in this briefing. I will be presenting the results for the first six months of 2023. A summary. Total energy volume handled by one Meralco is 31,571 GWh, 6% higher versus last year. When we speak of total energy handled, that would be the entire power supply chain of Meralco: distribution, generation, and retail electricity. A quick view of our CCNI. Growth in CCNI was 47% for one Meralco. We saw higher DU CCNI contribution with 3% increase in energy sales volume, driven by growth in residential and commercial volumes during summer. We also saw high-up distribution due to the completion of the accepted two R2 plans. Strong power generation contribution driven by the turnaround of GBP and also PacificLight and San Buenaventura.
We saw positive contribution this time from our RES, with the lower WESM and fuel price exposure. However, for our non-power subsidiaries, impact on CCNI was a lower contribution. The next slide shows our consolidated core net income. Unregulated business share in Meralco CCNI more than doubled versus last year, driven by growth in power generation. In terms of the composition of our CCNI, distribution still continues to be the bigger chunk, although comparing last year, it's 57% of our total PHP 19.2 billion against 79% of the PHP 13.5 billion last year. Power generation grew, taking a 34% share in CCNI versus 18% last year. RES and all other subsidiaries contributed the remaining 9%. I just want to highlight also that for the DU, although the share declined to 57%, in absolute values, we still saw growth of the DU business. The next slide shows our overall financial summary.
Our consolidated core net income, reported net income, and core EBITDA all grew in the first half of 2023 compared with last year. CCNI reached PHP 19.2 billion, reported net income was at PHP 17.9 billion, and core EBITDA at PHP 13.2 billion. Again, just want to emphasize that results from our power generation business continued to improve in the first half. It was a turnaround story for GBP, with positive numbers this year compared with loss in the first half of 2022. PacificLight continued to bring in the numbers driven by the high retail margin or pool margin in Singapore. The core DU business contribution also increased as DU volumes grew 3%. Our gross revenues consisting of DU, RES, and consolidated power generation results amounted to PHP 224.8 billion or 13% higher.
Total cost and expenses amounted to PHP 207 billion, much of which pertains to purchase power costs, which accounted for 81% of total costs and expenses. Our capital expenditure for the first half of 2023 amounted to PHP 14.1 billion. Cash and cash equivalents total PHP 51 billion, while our total borrowings was at PHP 101.5 billion. In terms of our detailed revenues, our gross revenues, as mentioned, is PHP 224.8 billion, 13% higher. If we look at the components, generation is at PHP 170.6 billion, 13% higher, driven by the higher fuel prices, use of liquid fuel or liquid condensate by the first gas plants, with the continuing restriction of the Malampaya gas field. Further, the peso depreciation against the US dollar, and also increase in spot prices at the Wholesale Electricity Spot Market.
Distribution revenue, as I mentioned, in absolute amount is still bigger at PHP 33.5 billion against PHP 30.7 billion, reflecting a 9% increase with a combined effect of 3% increase in view sales volume, as well as the higher average rate with the completion of the asset true-up. In terms of energy fees, this is the revenue of GBP. Total revenue delivered is PHP 14.3 billion against PHP 12.6 billion, or 13% increase due to higher fuel component billed to customers of our generation and higher volume delivered. Note that last year they were affected by Typhoon Odette. Non-electric revenues is at PHP 6.5 billion against PHP 5.865 billion. The 11% increase in revenues is coming from revenues of our tower business, as well as increased number of customers of Bayad and bill transaction from Bayad.
Cost and expenses total PHP 206.9 billion or close to PHP 207 billion or an 11% increase over last year. As mentioned, the bigger component is purchase power cost at PHP 167.4 billion, compared with last year's PHP 148.4 billion. The 13% increase is largely due to higher WESM purchase price, increase in fuel. As mentioned earlier, the first gas plant had to use liquid condensate. And the peso depreciation, which was about 6% to an average of PHP 55.23, compared with PHP 52.16 same period last year. Our OpEx grew by 7% to PHP 18.2 billion, mainly from the higher cost of labor, bills management expenses, and also increase in cost of subsidiaries for work accomplishment. Included in this OpEx items would be material cost and labor cost of our construction unit.
Coal and fuel power plant cost and O&M amounted to about close to PHP 10 billion, similar to what it was last year. This is mainly due to the slightly lower coal prices during the period, and also higher repairs and maintenance cost last year because our plants in the south were affected by Typhoon Odette. Depreciation and amortization grew by 18% to PHP 8.2 billion, with increased depreciation for CapEx of the distribution utility, plus depreciation of the towers that have been transferred by Globe to MIDC. Others represent largely provision for overrecoveries of the distribution unit.
For capital expenditures, consolidated capital expenditure is primarily driven by the DU CapEx, which is focused on new connections, asset renewals, load growth, while our subsidiary CapEx is from MIDC or the towers business, wherein Globe has transferred a total of 1,060 towers on an SLB arrangement or sale and leaseback arrangement. Plus, we do have additional build-to-suit towers. For power generation, the capital expenditure, which accounted for 3%, pertains the completion of phase I of the Baras Solar plant. The next slide shows the quarter-on-quarter comparison of our CC&I. As mentioned, CC&I grew 47% to PHP 19.2 billion, while reported net income reached PHP 17.9 billion. In Q1, our CC&I grew 40% to PHP 9 billion. Power generation CC&I was the main driver with the results of PacificLight delivering PHP 3.1 billion compared with PHP 1.8 billion same period last year.
San Buenaventura, on the other hand, delivered PHP 464 million against PHP 194 million same period last year, and a turnaround of GBP with a PHP +295 million versus PHP -518 million. The DU CC&I contribution was slightly lower year-on-year because sales volume increased low to 2%. This was tempered by the lower average tariff as a result of the effective lower interim average rate at 1.3522 compared with the original 1.3810. Also, there were more expenses incurred in Q1 as economic activities increased, and there were more costs related to customer payment management activities and IT services. RES contributed minimally only in the first quarter, and CC&I contribution of subsidiaries were lower because most of the projects were at the early stages of work. In the second quarter, we saw a 53% increase in CC&I.
Again, power generation was the main driver, which increased 2.6 x to PHP 2.9 billion, with the continuing contribution of PacificLight Power at PHP 2.1 billion versus PHP 1.5 billion same quarter last year. GBP again showed a PHP +548 million against a loss of PHP 638 million last year. The DU CC&I was up 17% to PHP 6.5 billion with a 5% increase in volume in the second quarter of 2023 and higher distribution rate as we completed the asset true-up refund in May of 2023. RES contribution also improved due to lower WESM and fuel price exposures. Meanwhile, our core and reported EBITDA for the half year ended June 30 was at PHP 33.2 billion against PHP 31.4 billion, which are up 36% and 32% respectively. The next slide shows the different power generation units within Meralco.
The wholly owned subsidiary, Meralco PowerGen, contributed a total of PHP 6.6 billion to Meralco's CC&I in the first six months, significantly higher than the PHP 2.3 billion in 2022 on account of strong performance of PacificLight and positive contribution of the other operating units. Singapore-based PacificLight recorded a CC&I of SGD 221 million, an equivalent PHP 9 billion as of June 30, 2023, from SGD 147.7 million or PHP 5.6 billion. This was primarily driven by the higher blended non-fuel margin, averaging SGD 100 per MWh from SGD 70.40 same period last year. PacificLight's 771 MW liquefied natural gas facility in Jurong Island delivered a total of 2,893 GWh of power. MGen has a combined direct and indirect interest of 58%.
San Buenaventura Power or SBPL, a 455 MW supercritical coal-fired plant in joint venture with EGCO of Thailand, delivered a total of 1,244 GWh of energy with plant availability of 93% during the period. SBPL's CC&I was at PHP 1.7 billion, up 17% a year ago. We hold a 51% interest in this joint venture. Global Business Power booked CC&I of PHP 843.1 billion and delivered 3,095 GWh of energy from its portfolio of coal and oil plants with a net capacity of 823.6 MW, of which 717 MW are contracted under PSA. The balance of which carried ancillary service agreements, which contributed also to the CC&I.
MGen Renewable or MGreen, as we refer to it, registered CC&I of PHP 78 million and delivered a total of 166 GWh of energy from its solar plants, namely BulacanSol in San Miguel, Bulacan, Nuevo Solar in Currimao, Ilocos Sur, and PH Renewables or the Baras plant in Baras, Rizal. BulacanSol is a 55 MW AC solar plant in partnership with PowerSource Energy Corporation and had plant availability of 97%, delivered 60 GWh to Meralco under a 20-year ERC-approved PSA. Nuevo Solar's 68 MW AC solar plant in partnership with Vena Energy started delivering its entire capacity to MPower on March 26, 2023, and generated a total of 75 GWh of energy as of the end of June.
PHRI 75 MW solar plant in Baras, Rizal, a partnership with Mit-Renewables Philippines , a subsidiary of Mitsui & Co. has completed commissioning tests of its first phase delivery involving 67.5 MW AC. Commercial operations is expected by mid-August 2023. Phase II, meanwhile, is expected to be operational by mid of 2024. The Baras plant delivered 31 MW to MPower as of the end of June. Our consolidated interest-bearing debt totaled PHP 101.5 billion. Debt of subsidiaries accounted for 51% or PHP 51.7 billion, 44.6 of which are debt of our power generation unit and PHP 7.1 billion for all other subsidiaries. Of the total amount, PHP 33.8 billion are maturing within one year. Our debt does not include the debt of PacificLight and San Buenaventura, which we don't consolidate. Cash and cash equivalents amounted to PHP 51 billion.
Short-term investments totaled PHP 11.4 billion. Net debt as of the end of the first half of 2023 was PHP 39.1 billion, with net debt to EBITDA at 0.67 x. Our long-term investments and restricted cash total PHP 23.4 billion. Our funds included restricted cash of PHP 18.9 billion and 4.5. The PHP 23.4 billion included PHP 18.9 billion of long-term investments and PHP 4.5 billion of restricted cash. Meralco's debt is comfortably spread through 2037. The PHP 11 billion debt due in 2025 includes the PHP 7 billion 12-year fixed rate note, which Meralco issued in 2013, with a coupon of 4.875%. The other significant maturity will be in 2032 when the PHP 10 billion loan drawn by the parent company in December 2022 becomes due. Average cost of debt is 5.4%.
All of our debt are fixed rate. All in Philippine peso, except with respect to a debt of reuse, which is $1.4 million. Today, the board of directors approved the declaration of interim cash dividend of PHP 8.52 per share to all shareholders of records as of August 30, 2023, payable on September 14, 2023. This represents 50% of Meralco's core EPS. That ends my report, sir.
Thank you, Ms. Betty C. Siy-Yap. We will now move to the operating results presentation to be led by our EVP and COO, Mr. Ronnie L. Aperocho. He will be followed by the heads of the different business segments.
Okay. Good afternoon, everyone. I am pleased to report to you the bigger operational highlights of our core distribution business for the first half of 2023. Starting with energy sales, our energy sales grew by 3.4% at 24,792 GWh, versus the 23,968 GWh in 2022 for the same period. Our customer count grew also by 2.6% at 7.716 million. Net system input also increased by 2.8% at 26,007 GWh. Our peak demand grew as well by 4.1%. This was registered last May 9, so the highest demand was at 8.44 GW. Of course, the growth in these numbers or energy sales, NSI, and peak demand were driven by the sustained economic activities and increases in residential and commercial volumes.
For our service performance, starting with system loss, we are happy to report also that we continue to achieve system loss that is way below the prevailing system loss cap of 6.5%. We are at 5.78%, which is 0.08 percentage point versus the 5.86% system loss in 2022. Total SAIFI, or System Average Interruption Frequency Index, also improved by 2.4% at 0.644 x. Total SAIDI at 63.429 minutes, however, slightly increased by 1.4%. But in terms of the time to connect our new customers, we have improved tremendously by close to 17% at 1.38 days.
Lastly, for the electricity rate for the first half of the year, the average retail rate was at PHP 10.68. This was 14.4% higher compared to the average retail rate of PHP 9.33 in 2022. These numbers are basically driven by higher generation costs, fuel cost, peso depreciation, and WESM prices for the first half of 2023. I am now turning you over to Mr. Ferdinand Geluz for the report on the sales for the first half of the year. Thank you.
Thank you. Good afternoon, everyone. We are happy to report, as alluded to by Ronnie, that we are up 3.4% at 24,793 GWh for the first half of the year, with higher demand from residential and commercial segments pushing energy sales to an all-time high this half of 2023. Growth coming from Meralco is around 3.4% and 7% for Clark Electric Distribution Corporation. We have a bit of a slow quarter one at 2% growth, but we somehow recovered in quarter two, where we grew almost 5%, with monthly volumes reaching 4,500 GWh level in May, and also reaching an all-time high of 4,643 month sales 4,743 GWh in June in terms of month sales.
We would like to highlight that our first half year-to-date sales when benchmarked with the 2019 pre-pandemic year is already 9% higher, with residential up 21% versus 2019, commercial up 2%, and industrial crashing 4% decrease. In terms of sales mix, we continue to shift towards pre-pandemic levels with continued recovery from business operations and resumption of social activities. Share from commercial is now 37% from 35% in 2022, while residential is roughly the same at 35%. Industrial segment actually somehow declined from 30% to 28% this year. Next slide please. Residential volume recovered in the second quarter to close the first half of 3,692 GWh, 1.4% higher than 506 the previous year.
The end of prevailing cold phase caused by La Niña at the first quarter started with warm El Niño season in mid-March, causing several areas within the franchise to experience dangerous heat indices towards quarter two, with Metro Manila reaching as high as 42 degrees Celsius in May, according to PAGASA. This phenomenon caused households increased usage of cooling appliances to maintain the level of comfort and avoid heat cramps and exhaustion. Commercial, meanwhile, led all segments with 9,161 GWh sales volume, double-digit growth of 10% from 3,305 GWh the same period a year ago. Year-to-date performance reflected combination of strong business recovery and boost in public confidence as it surpassed pre-pandemic and mid-year sales volume of 8,802 GWh in 2019, which was then shaved off by 17% during the height of the pandemic.
With the resumption of face-to-face social events such as concerts, conventions, business gatherings, demand from leisure and entertainment, hotel, retail, and restaurant sectors continue to improve. The shift in academic calendar also amplified the demand in educational institutions as schools consume more electricity to battle summer heat. Industrial segment, on the other hand, is continued to be battered by weak economic headwinds as sales declined by 2% to 6,928 GWh from 7,085 GWh last year. Semiconductors, plastics, cement, and steel posted lower production and demand due to plant shutdowns, excess supply, and stiff competition from overseas.
On the other hand, generation, really from embedded generation, has gone up by about 50% due to must-run mandates, covering the supply required during summer seasons. That includes integration of new RE resources within the franchise. Slide please. We had a healthy growth in customer base at 3% or around 200,000 new customers or additional customers with continuous energization of projects and services. We observed, though, that energization numbers are a bit tempered compared to the catch-up years of 2021 and 2022. But still significantly higher than pre-pandemic average in 2019. In fact, it was better by 60% in terms of project convert application, and 14% better in terms of ordinary service application or simple connections.
Worth noting also is that we saw larger applied load for project convert applications by as much as 25% as we energize projects with high commercial load requirements, indicative of healthy commercial recovery, especially in the real estate business activity space. As mentioned, as a result of healthy energization numbers, we are now at 7.716 million customers, where residential remains to have the highest share at 92%, commercial 7%, and 1% was shared by industrial streetlights customers. That ends my report, and now turn you over to [Froilan] for the network report.
Thank you. Good afternoon, everyone. We will continue with the report. The consolidated NSAI for the first half of 2023 is higher by 2.8% than in 2022. This is attributed to the growth in the commercial and residential sectors due to increased social engagement, including in-person attendance at offices, schools, and similar settings. The mix of energy sources for the first half was mainly driven by the IPP plants and new PSA or FSA to replace the energy supplied by the SPPC 670 MW capacity, which was suspended on December 7, 2022. Subsequently, the fuel mix for the first half was also mainly driven by the suspension of the SPPC. That is why we have 36% more for coal. Next slide, please. Due to their continued increase in economic activity, Meralco and Luzon peak demands increased by 4.1% and 2.6% respectively.
Both peak demands were recorded on May 9, 2023, with 8.44 GW for Meralco and 12.43 GW for Luzon. The next slide, our system loss 12-month moving average has improved to 5.78% in June 2023, which is a 0.08 percentage point improvement from last year's performance. This is still well below the indicative 6.5% regulatory cap. Generally, for Espanco and GSN, we are still delivering well within the performance period. SAIFI improved by 2.4% at 0.644x . However, SAIDI and MAIFI declined by 1.4% and 2.2% respectively, largely due to wire downs, equipment failures, heavy rain, strong winds, and lightning. Meanwhile, the average time to process applications and the average time to connect customers significantly improved at 21% and 16.5% respectively. This is attributed to the streamlining of processes to prevent piling up of pending applications.
For call center performance, there was a slight decline of 0.1%, but we are more or less being able to sustain the performance last year as we answered 90.7% of calls within 20 seconds. GSL performances are well below the annual average threshold and have significantly improved compared with the same period last year. CapEx, we now stand at 47% utilization or PHP 9.61 billion worth of CapEx implemented as of June, with the majority of power spent in new connections, asset renewals, and load growth projects. We are also continuously supporting government infra projects, both under the Build Better world and the road widening programs of DPWH and LP. Lastly, we are pleased to report that we have completed six major projects, three substation projects, and three system expansion and improvement projects. On April 30, we commissioned San Ildefonso substation with an initial capacity of 50 MVA.
This project will address the load growth in the municipalities of San Ildefonso and San Miguel in the province of Bulacan. On May 7, we commissioned Hermosa South substation with an initial capacity of 80 MVA. This will serve the rapidly growing demand of customers in Imus, Cavite, and some parts of Rosario. And on June 27, we commissioned Arca South GIS substation, with an initial capacity of 83 MVA. This project will serve the demands of customers in Taguig, Makati, and Parañaque. For system expansion and improvement projects, we energized on April 18, 2023, the Calumpit project to NGCP's installation of 48 300 MVA power transformer.
And on June 4, we replaced the 40-year-old 100 MVA power transformer at Taguig substation. And lastly, we installed two sets capacitor banks, one each Hermosa substation and Calumpit substation. This new capacitor banks will enhance the reactive power supply, provide additional green power capacity, improve efficiency, voltage regulation, and power factor. Turning over to Attorney Valles for the regulatory.
Good afternoon. For the regulatory update. For the average retail rate for the first half of 2023, that is 14% higher than that of 2022, mainly due to higher generation charges. The average gen charge for the first half of 2023 registered a 24.7% increase due to higher fuel costs, faster depreciation, and higher vessel prices and purchases following the suspension of the PSA with SPPC. The 10.4% decrease in average transmission cost was due to lower ancillary service charges, and the average system loss charges increased by 19.9% due to higher generation costs. The average distribution rate with the DRTU or distribution rate true-up for the first half of 2023 is PHP 1 and 7 centavos per kWh .
When normalized, taking out the effect of DRTU for the average rate decreased to PHP 1.4956 per kWh in the first half of 2023, from the first half of 2022's rate of PHP 1.5473 per kWh . Such decrease is due to lower effective rate for residential, commercial, and industrial customers. Subsidies, taxes, and universal charge increased by 14.6%, mainly due to higher effective taxes and higher universal charges as approved by the ERC. The FIT-All collection was suspended for the first half of 2023 following the ERC resolutions.
Going now to the update on the PSAs, with San Miguel Energy Corporation or SMEC, and South Premiere Power Corp. or SPPC for the 670 MW in light of the decision of the Court of Appeals. Just to provide you with a background there, last April 18, 2022, SMEC and SPPC sent notices of change in circumstances, claiming that Ukraine-Russia conflict and other economic factors, and NPC gas stations for SPPC caused adverse impact on their ability to supply under the PSA. They claimed losses from January 2022 to May 2022, for SMEC, that was PHP 3.7 billion, and for SPPC, around PHP 1 billion. SMEC and SPPC later filed joint motion for price adjustments with the ERC together with Meralco. Last August 5, SPPC and SMEC sent notices to terminate the PSAs effective October 4, 2022.
Last September 29, the ERC, voting two to three, issued orders denying the price adjustment motion. As a result, SPPC and SMEC elevated the matter before the Court of Appeals. Last December 2, 2022, Meralco received a TRO from the Court of Appeals for the SPPC case following SPPC's posting of the appropriate SPPC supply beginning December 7, 2022. Last December 27, the Court of Appeals 13th Division granted the consolidation of both the SPPC and SMEC petitions. On January 26, Meralco received a notice that the Court of Appeals granted preliminary injunction for SPPC PSA but denied the TRO for SMEC PSA. With the denial of the TRO for SMEC continued to supply to Meralco. Last July 14, Meralco received the joint decision of the Court of Appeals, dated June 27, 2020.
This decision annulled and set aside the ERC orders, which earlier denied the price adjustment motions and directed Meralco to exhaust all options to preserve the PSAs. The same decision of the Court of Appeals granted SPPC's and SMEC's price adjustment motions for the period of January 2022 to May 2022, and this is without prejudice to any further request for price adjustments for June 2022 onwards. It also denied SMEC's motion for partial reconsideration of the Court of Appeals resolution denying SMEC's prayer for TRO and made permanent the preliminary injunction issued in favor of SPPC. Among the reasons cited by the Court of Appeals in the decision are as follows.
The validity of the notices of termination was not raised as an issue in the ERC, and therefore the ERC's order invalidating the notices of termination and directing Meralco to preserve the PSA effectively denied SPPC's and SMEC's right to due process. The determination of the validity of the notices of termination is not within the scope of jurisdiction of the ERC. The PSAs contain a CIC provision which allows price adjustments for specific periods, and with this CIC provision, the PSAs cannot be considered to have a fixed rate, hence it cannot be characterized as financial contracts. By executing the same, SPPC and SMEC did not assume all risk. The ERC's regulatory operation service, through the Chief of Tariff and Rates Division, confirmed that granting the price adjustment remains to be the least cost option for Meralco.
As a result of the decision of the Court of Appeals, SPPC and Sual Power, formerly SMEC, sent notices of termination of PSAs to Meralco. Meralco, in turn, replied to these letters of termination. We contested SPPC's position on SPI's intended course of action, and we asked both SPPC and Sual to reconsider their respective positions without prejudice to the final resolution of the case by the CA or the Supreme Court, such the case may be. We also reserve our right to pursue available legal remedies, pending and upon resolution of the case, as may be appropriate. For Sual, Meralco requested SPI to allow it a reasonable period, not earlier than August 25, 2023, to look for replacement capacity in order to protect its customers from exposure to volatile WESM prices.
In response, last July 18, 2023, Sual Power gave Meralco only until July 23, 2023, to look for replacement emergency power supply. Effective midnight of July 24, Sual Power, Inc. already ceased supply and acceptance of Meralco's nominations. Because of the termination of the 330 MW of Sual Power, last July 17, Meralco sent requests for proposal to different power suppliers for the replacement emergency for 330 MW covering the period from August 26, 2023, to March 25, 2024, subject to ERC provisional approval or interim review. The deadline for submission of offers was set on July 20 because of the urgency. Last July 20, only one offer was received.
That was from SPPC, to deliver 330 MW of power coming from the Ilijan plant until March 25, 2024. This will be in addition to the 480 MW SPPC FSA that we have recently signed with them and already being implemented. That's it for the regulatory update. Turning over now to Mr. Raymond B. Ravelo for sustainability report. Thank you.
Thank you, Attorney Valles. Good afternoon, everyone. I'll be providing a brief update on the sustainability front. We're very pleased to share with you that we have sustained our all-time best ratings in the most recent ESG scores released by two agencies, MSCI and FTSE Russell. For MSCI, which assesses companies across the globe on general and industry-specific ESG factors, we maintain our triple B rating, which we first achieved last year after a string of double Bs in 2020 and 2021. This is because of our strong performance on renewable energy opportunities and wastewater management practices. This rating of triple B actually places us among MSCI's top-rated Filipino companies. Moving on to FTSE Russell, which evaluates companies according to their exposure to and management of ESG concerns, we maintained our all-time best rating of 3.2 in 2023.
At a score of 3.2, Meralco is ranked higher than both the Philippine overall average of 2.6 and global energy sector mean score of 2.7. Next page, please. Recently, two rating agencies, particularly MSCI and Sustainalytics, published their climate scores indicating the alignment of companies with regard to the Paris Agreement's goal of limiting global temperature rise to no more than 2 degrees Celsius. For MSCI, we were rated a 1.7 degree Celsius for our implied temperature rise rating. This means that we are aligned with the Paris Agreement's 2 degree Celsius world.
On the other hand, Sustainalytics gave us a score of 1.9 degree Celsius, and this means we are moderately misaligned with a 1.5 degree Celsius world, which is the stretch target. But we are in line with a 2 degree Celsius world. That is all for the sustainability update. I will now pass you on to Mr. Jaime Azurin for the power generation. Thank you.
Yes. Good afternoon. For the power generation group, we were able to deliver 7,398 GWh during the first six months of 2023. This is up by 7% due to the increased plant availability, as well as the commissioning of our two solar power projects in Baras, Rizal, and in Currimao, Ilocos Norte. GBP's improved plant availability during the first half of the year has resulted to a 14% increase in energy delivered from last year's 2,716 GWh to 3,095 GWh. On the other hand, San Buenaventura Power Ltd. Co. energy delivered capped at 1,244 GWh, down by 9% compared to previous year. This is due to a forced outage that happened in June of 2023. Our Singapore-based subsidiary, PacificLight, expanded its energy delivered by 4%, 2,893 GWh.
Lastly, our renewable company, MGreen, has delivered a total of 166 GWh of energy, with additional capacities from the operations of Currimao and Baras solar projects. These projects were fully energized in February and March, respectively. As we continue in our low carbon energy transition journey, our 75 MW solar power project with Mitsui in Baras, Rizal, has completed commissioning tests of the project's phase I at 67.5. Phase I has been generating at full capacity since April of 2023. Moreover, two of our solar projects under development have successfully qualified and among the winning bidders in the Department of Energy's second round of Green Energy Auction Program.
These winning bids are for the establishment of a 49 MW solar plant in Cordon, Isabela, and an 18.75 MW solar plant in Bongabon, Nueva Ecija by 2025. Once operational, MGen's renewable energy capacity will reach at 266 MW. In the forthcoming years, we anticipate development of more renewable projects as we remain dedicated in fulfilling our commitment of providing cleaner and more sustainable energy to the market. Good afternoon. Thank you.
Thank you, Mr. Azurin. Thank you, sirs, for your respective presentations. Before we proceed any further, I would like to recognize the presence of our Chairman and CEO, Mr. Manuel V. Pangilinan, who just joined us in the call. Good afternoon, sir.
Thank you.
We will now open the floor for questions to our analysts and investors. For those of you who would like to ask a question, you have two options to do so. First, you may raise your virtual hand and please wait for me to recognize you before you speak. Secondly, you may also type your questions in the chat box, and I will be reading them for our executives. In either instance, kindly state your name and the company you represent before asking your question. Please also state the name of the executive you would like to address the question to.
The first question comes from Theo of Maybank. Thank you for the opportunity. His first question goes: What are year-on-year volume growth of the main power generation units, particularly for PLP, GBP, and San Buenaventura? The second question besides PLP, how are average selling price trends for local generation units? Are these sustainable? Finally, are there any updates on the rate rebasing? Theo, I think your first question has already been answered by the presentation. Let's move to your second question on average selling prices of the local generation units.
Thank you. Theo, the average selling price is dependent on when the contract was signed. Earlier contracts, the rate is around PHP 6 to PHP 7. But lately, you can see sub PHP 6 right now in the market for contracting. That depends on when it was really contracted. We see also, as mentioned even by Meralco, a softening of the WESM prices, thus affecting spot market prices for the generating plants. Thank you.
Thank you, sir. Theo's last question. Any update on the rate rebasing? Attorney Valles?
Our 5th RP rate application is still pending with the ERC. They are still evaluating, and we have not received any notice or order from the ERC on the resumption of the hearing process.
Thank you, sir. The next question comes from Eunice Dol atre of SB Equities. Would highly appreciate if you could shed light on the following. First, any upside risk expected to distribution volumes with the El Niño? What is your current sales volumes outlook for the rest of the year? Also, how do you see El Niño impacting your financial outlook, given that you now operate a distribution and generation business? The second question reads, any updates on the tariff resetting? I think this has been addressed already earlier. Finally, if you can share any guidance on the direction of the tariff versus the current tariff, what can drive this higher or lower tariff, even as we expect continued CapEx rollout on network-related projects?
Sir, in the volumes. I'll answer the volume question first. Of course. Excuse me. With El Niño, we see some sort of upside in terms of, if higher temperature will prevail, then, of course, our main driver, residential, will be impacted in terms of consumption, as well as commercial, due to the requirement for cooling equipment for both household level and, of course, for commercial spaces. In terms of outlook, while we grew 3.4% in the first half, there is some sort of forecast with a growth of close to 5% on the second half, and that will bring us to a year-end of around 4%.
Thank you very much, Sir FOG. For Eunice's second question, any guidance, sir, on the direction of the tariff reset, upwards or downwards?
For the 5th RP?
For the 5th RP.
We have filed our own rate application.
We have filed an application for the 5th RP, and the rate is PHP 1.57. We are hoping that PHP 1.57 will be applied.
What is the question of what will drive this higher or lower tariff?
The application has not been granted. Normally, what drives the tariff is sales.
Well, we all know it is a political decision, isn't it?
Yes.
At the end, where we are is we are provisionally granted the temporary rate, right? This was supposed to have been given starting July 2022. The start date. We are delayed by at least a year as we speak. We are charging at PHP 135.22, which was the last period.
Right
Final determination rate. Our rates are higher because of the mix.
Yeah.
The weighted average rate is much higher. The one which we're taking.
Yeah.
Yeah. So where we will land is really a question when the government, ERC, will eventually decide which rate it will be. Personally, I doubt whether it will get to PHP 1.57, because it's a little on the high side. So where we will land? We don't know. You know this, because we've seen this for the past seven years, from July 2015 until June of 2022, where our provisional rate was PHP 1.38.
1.380.
And we eventually were granted PHP 1.3522. But in those seven years, our collection rate was the provisional rate of PHP 1.38. Our booking rate was lower than that. So we're adopting the same practice where our provisional rate is PHP 1.3522, but internally, our booking rate is lower than PHP 1.3522. So for now, that's what it is. So you could see there will be a differential between the cash flow and the P&F booking because of the booking rate. So that's where we work. We don't like it, but that's the way it is. That's where the situation actually is. The sooner the government decides on the 5th RP rate, the better for everybody. Then we can be totally transparent in terms of where the state of the finances are.
Thank you very much.
Is that confusing enough? Who asked the question?
Eunice.
Eunice [inaudible]. Vista. Sorry, specifically SBS.
SB is?
Security.
Security. Thank you very much, sir.
But you guys are familiar with the approach, right? I don't think this is new to you. Are they not online?
They are online. But only i t was sent through the chat. They can hear.
Okay. But can they ask questions?
Yes, they can.
Directly?
Yes, they can. Eunice, third question. Do you see further upside risks on overall retail rates given the expected El Niño at the tail end of this year? How do you see spot prices trending? Are you seeing a growing concern on recontracting or CSP participation for your distribution business as spot prices remain elevated? Thank you very much.
First part.
Well, I'd like to think that the RES industry has changed as a consequence of this Ukraine war, right? This sudden uptick in fuel prices. What has changed is that the RES suppliers are now switching to either index pricing or WESM. Isn't it? Isn't that the case? The risk is not there in terms at least of being exposed to one side or the other, unlike before, right? But the dynamics of that particular sector of the energy industry has changed and given advantage to those RESs which have affiliated generation plants. Those with excess capacity that are able to sell to the RESs have the advantage now. Meralco doesn't have that kind of advantage. We do have some capacity, but not much. It's the others that have that advantage. Is that right?
Yes, one on the CSP.
It is not so much that risk of the pricing risk anymore. It is, can we keep some level of our market share of the RES without a significant source of capacity on the generation side? That is the risk for Meralco for its RES business.
For your last question on the growing concern on recontracting or CSP participation. Well, actually, today, the spot prices are low because of the weather. The concern really is on the long-term whether that is sustainable. For now, what we do is we stick to the plan. Plan is based on the power procurement plan that we have submitted to the ERC, and that plan contains the schedule which we need to follow. So the schedule as to when we are going to schedule a CSP and when we are going to start operating a winning power supplier.
Thank you, sir. The next question comes from Greg [Dilag] of BDO Securities. What is driving the higher non-fuel margin in PacificLight? Secondly, can you share the PacificLight average selling prices in the first half of 2023 versus the first half of 2022? Finally, what is the EBITDA margin of GBP in the first half of 2023 compared with last year as well?
Thank you, Greg. For number one, what is driving the higher non-fuel margin in PacificLight? The one that is driving the non-fuel margin is the pool prices in Singapore has increased significantly due to the tight demand supply in Singapore. For your second question, can you share the PacificLight ASP?
Average selling price.
Average selling price in first half 2023 versus. I think our margins have increased. Last year it is about $70.
Selling price.
Yeah, selling price. Margin, $70 per MWh .
Margin. The selling price is about SGD 240.
Versus this year of?
No, sorry. This year is 240 versus last year's 190.
Yeah. So it is much higher.
The third one is the EBITDA margin of GBP in the first half 2023. Betty, do you have the figures?
Okay. EBITDA margin. The GBP EBITDA margin for 2023 is 28% against last year's 17%.
Thank you, sir. Thank you, ma'am. I think we have others who are raising their hands on the line. I would like to call on Somesh Agarwal from UBS. Somesh, please go ahead and ask your questions.
Hi, thank you for the opportunity. On the PSA terminations, I understand you have details in the PDF, but could you elaborate specifically and probably in an easier language, on the 670 MW terminated on 7 December, and the other one, which was terminated in this March, 1.8 GW. Any specific updates versus the last quarter? Thank you.
Yes. For the 670 MW, that was the Ilijan PSA, base load PSA. It was then terminated last December 7, 2022. Since the termination, that capacity was replaced by 300 MW coming from Ilijan, which is also base load, and another 370 MW coming from Therma Luzon, which is an avoidance power plant, which is also base load. The PSAs that cover both contracts or both capacities are compiled with ERC. Now, with respect to the 330 MW, that 330 MW was recently terminated last July 24. That is for the Sual base load plant, and that was terminated by San Miguel, as a result of the Court of Appeals decision, which according to them, allowed them to terminate that contract.
With the termination last July 24, midnight, Meralco sought replacement power from different generators and only one responded, and that was the South Premiere of San Miguel, which is operating the Ilijan power plant. So they offered the 330 MW to supply the 330 MW that Sual power plant was previously supplying. So we're trying to cover the 330 MW replacement capacity with a new EPSA to be added to the 480 MW that we initially signed with San Miguel. The rate will be the same as that of the 480 MW. That's it.
Thank you, sir. We also have another one who is raising his hand. I'd like to call on German De La Paz from Abacus. Herman, go ahead and ask your questions.
Hi there, Dinbo. Can you hear me?
Yes, go ahead.
All right. Thank you for the briefing. I have three questions for the generation business. First is on PacificLight. I noticed that Q2 core income declined by 35% quarter-on-quarter. May I ask the reason for this? Second, I read an article that says that the Singapore government is capping electricity prices in the country, and that they will index it to natural gas prices, which have declined by 54% on a year-to-date basis. Should we expect PLP's core net income in second half to decline because of this? Lastly, for SBPL, I understand that the decline in Q2 earnings was due to the forced outage. May I ask its status as of current?
Thank you, German. For PacificLight, the decline in second quarter was due to a scheduled preventive maintenance which started in April 29 up to about June 18. This is part of their uprating of the efficiency of the power plant. That is the reason for the significant drop in energy delivery. With regards to the secondary price cap that you have been mentioning that is being imposed in Singapore, it will have a lesser impact for PacificLight because we are already, for the year, 85% fully contracted until the early part of next year.
The effect on pricing in the pool market will have still an effect, but minimal as far as the revenue. For San Buenaventura, we had a 13-day outage starting from June 3 to June 18 due to some vibration in the turbine. This has been already resolved, and we are fully operational by June 19. That has been resolved. Thank you.
All right. That is all from me. Thank you.
Thank you, German. Thank you as well, Mr. Azurin. I would now like to call on Jelline Gaza from JP Morgan. Jelline, go ahead.
My first question is on the PacificLight asset. It was mentioned, the details on the contract, but may I please ask, would you be able to provide details on the fuel supply? Are you expecting to benefit from any changes in the LNG prices, or has this been hedged forward? My second question is on the franchise renegotiation. Have you started discussing this with the legislature? If so, what are the key dates that we should be looking at? My third, on the rate reset, I understand that it is still pending with the ERC, but are there any future dates or events that is expected in the calendar? If so, do you have any expected timing on any resolution in the next 12 months? My fourth, on the San Miguel contracts, what is the company's position on your ability to demand any liquidated damages from your counterparty? Thank you.
Okay. I will answer the first question, Jelline. The details of the fuel supply, it is prudent practice by PacificLight to hedge their retail contracts, which are normally sold at a fixed rate. The fuel is hedged versus each of the contracts that they enter into. Thank you.
Thank you, sir. The next question relates to the franchise, and has there been any progress on that, on the negotiation with the legislature?
Well, we have started as early as February this year to reach out to the leadership of the House and even the Senate regarding the prospects for renewal of the franchise, which is sometime in 2028 still. As you indicated, it is prudent to start the process this early. The actual process would start after the SONA of the president. We should see some movement in the next few weeks in terms of the process getting started at the lower house, as you know. We would like to aim for renewal, hopefully sometime next year, 2024, early enough so that people can rest easy about the franchise of Meralco.
Thank you very much, sir. Your third question is on the rate reset. Are there any particular dates or events to watch out for?
Well, the timeline of the ERC has not changed. But based on what's happening today at the ERC, I think the rate rebasing application of Meralco will be resolved early next year. I think their new target is first quarter of next year or before the 5th RP ends.
Thank you, sir. The last question relates to the SMC contract. What is the company's position as far as the liquidated damages? Is there any potential ability to still raise those?
Yes. So for us, that liquidated damages provision in the contract are concerned, I think that's very clear in the contract. We have always reserved our right to claim for liquidated damages against San Miguel for the termination, assuming that termination is adjudged to be unlawful by the court under a final judgment. We made that very clear to them, and that we will go after them for the liquidated damages.
Thank you, sir. The next question, allow me to read from the chat box again. Comes from Grace of MBTC Trust. Would you be able to share the pricing mechanism for the new PSAs with SPPC and Sual? Are pass-through clauses embedded in the contracts?
The new EPSA for SPPC and so on. The existing EPSA is the one with SPPC, and we will just add another 350 MW on top of the 480 MW that we have already signed. That contract allows for a complete pass-through of the fuel, actually indexed based on the JKM, since they are going to be using LNG. But for the initial part of the contract, I think the first two months of the 480 MW implementation, the SPPC used coal. So the coal was completely passed through, the fuel was completely passed through. The fixed price was at PHP 1.75 per kWh . So for the first two months, the price of SPPC to Meralco was much lower than what Therma Luzon, Inc. was selling to Meralco. It was, I think, more than PHP 1 difference.
Okay. Thank you very much, sir. The next question comes from Gio Dela Rosa of Regis. The press release and presentation cited the positive contribution from the RES business. Can you elaborate on this? Are RES volumes higher? Did you raise selling prices?
Hi, Gio. Thanks for the question. The volume of RES was actually lower because we lost some of the customers as a result of the FCRA. Our volume in RES was actually 18% lower. The positive contribution only meant that they are generating positive contributions this year compared with last year, which was negative because of the issues of the FCRA. So, are margins better? Well, we do not have fuel risk this time, and the customers who have stayed with us are either billed on a WESM base or indexed to the DU rate.
Thank you, ma'am. Gio's next question reads: Does Meralco intend to contest the Court of Appeals decision on the 1,000 MW PSAs with SPPC at the Supreme Court, or will it just acquiesce and pass on the much higher prices to end users?
To date, our lawyers are discussing our legal remedies from the Court of Appeals decision. But yes, most likely, we will go to the Supreme Court, assuming that the motion for reconsideration is not determined to be the best or the most suited remedy for this. We are planning to elevate the matter to the Supreme Court in the event that the Court of Appeals also denies the MR that was filed by the ERC and Office of the Solicitor General.
Thank you very much, sir. I would now like to call on Mayank Maheshwari from Morgan Stanley. Mayank, go ahead and ask your question.
Thank you for the call, sir. My questions was mostly in terms of the balance sheet and the growth CapEx going forward. If you look at, I think, the net debt to EBITDA is now at 0.62x. Is there a target that you are getting towards in terms of a limit where you will be happy with? The second question was a related question around what are the non-distribution CapEx guidance that you can give us for the tower portfolio and the generation portfolio and any more inorganic growth that is planned for this year? Thank you.
For the net debt to EBITDA, note that in terms of our debt balance, it actually includes our distribution over recoveries. Actually, the increase in debt is coming from the towers business. We have an additional, I think, PHP 700 million, and this increases as the towers are turned over to MIDC by Globe. On the DU side, there's not been significant increase in debt other than what we had added last year of PHP 10 billion.
So ma'am, on the tower side, what would be the year- end? What will be that level of debt, and can you just share some performance on the towers of how they have done in the first six months?
Well, on the towers, like any company which is starting, they're still in a loss position because it has taken a while for Globe to turn over. At our end, we are not ready to accept the tower unless the documentations are clear. One of the challenges in the turnover really relates to the lease contract between the original lessor. Well, the lessor of Globe and the tower space. It was noted that in several instances, because these are long-time leases, the original lessor could have passed away already, and there are [EJK, extrajudicial, EJS settlements, which are still being processed. That's why it's taking a while. But the total debt when all of these are completed should be about. Let me just check the number, Mayank. I'll get back to you on the total debt number.
Sure. No, that's fine. I think the last question was more related to refinancing, considering, I think you have pretty heavy refinancing in 2024 and 2025. Can you just, ma'am, talk about of how you're thinking about that? In terms of rates.
Sorry, can you repeat your question, Mayank?
Your debt repayment schedule, I think 2024 and 2025, you have a reasonable amount of debt coming up for, I suppose, refinancing or for payment. I am just thinking, how are you thinking about the rates that you can get to on refinancing this debt?
Okay. The major maturity actually that we have would be the put on a PHP 7 billion bond that we issued in 2013. Of course, that is a good rate at 4.875. We continue to discuss with banks for borrowings. Well, right now it ranges, depending on the tenor, and it is around 6%, 7% for our debt.
Got it. Thank you, ma'am.
Although we are looking at it very carefully before we finally contract. As I mentioned, the seven is actually due in 2025, but there is a put by the end of this year.
Got it. Thank you.
Thank you very much, Mayank. Thank you as well, ma'am Betty. At this point, I do not think there are any more further questions. I would like to request our chairman for some final words, sir.
It was well. Thank you for joining us this afternoon and for your questions. We look forward to seeing you for the third quarter results. Thank you.
Thank you very much again, everyone. I would just like to inform everyone that an audio recording of this call may be viewed from our website at www.meralco.com.ph under the investor relations section. Thank you very much again for joining us. We look forward to seeing you at our next call.