U.S. Markets close in 4 hrs 2 mins

Edited Transcript of AP.PS earnings conference call or presentation 2-May-19 8:00am GMT

Q1 2019 Aboitiz Power Corp and Aboitiz Equity Ventures Inc Joint Analyst Briefing

Makati May 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Aboitiz Power Corp earnings conference call or presentation Thursday, May 2, 2019 at 8:00:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Cosette Canilao

Aboitiz InfraCapital, Inc., - COO & Senior VP

* David L. Rafael

AboitizLand Inc. - President & CEO

* Emmanuel V. Rubio

Aboitiz Power Corporation - COO

* Jose Emmanuel Uytiepo Hilado

Union Bank of the Philippines - CFO, Treasurer & Senior EVP

* Judd Salas

Aboitiz Power Corporation - Investors Relations Officer

* Krystel Gayle Guzman

Aboitiz Power Corporation - Assistant VP for Finance

* Liza Luv L. Tajanlangit-Montelibano

Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer

* Ma. Racquel J. Bustamante

Aboitiz Power Corporation - First VP & CFO for Generation Business Group

* Manuel R. Lozano

Aboitiz Equity Ventures, Inc. - CFO, Corporate Information Officer & Senior VP

* Nabil Francis

================================================================================

Conference Call Participants

================================================================================

* Cristina S. Ulang

First Metro Investment Corporation, Research Division - Department Head of Research

* Dominic Chuaunsu

* Elizabeth Santiago

* Jelline E. Gaza

JP Morgan Chase & Co, Research Division - Analyst

* Rafael Alfonso Javier

BofA Merrill Lynch, Research Division - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [1]

--------------------------------------------------------------------------------

Thank you, [Monique], for that briefing. It's very timely, in view of recent events. So today, we are going to report to you the first quarter results of Aboitiz Equity Ventures and its strategic business units. We are going to present to you power, banking, food, infrastructure and the land, and finally, a discussion on our financials. And then we are going to end as usual with our question-and-answer forum.

And then I'd like to introduce to you today the presenters for the following business units: reporting for power today, we have AboitizPower's Chief Operating Officer, Mr. Manny Rubio; reporting for banking, we have UnionBank's Chief Finance Officer, Mr. Toto Hilado; reporting for food, we have Pilmico's AVP for Finance, Ms. Gayle Guzman; reporting for infrastructure, we have Aboitiz InfraCapital's Chief Operating Officer, Ms. Cosette Canilao; we have land -- we have AboitizLand's Chief Executive Officer, Mr. David Rafael; we have, reporting for AEV, we have Aboitiz Equity Ventures' Chief Finance Officer, Mr. Dmi Lozano.

I'd also like to recognize in the audience today, AboitizPower's Chief Finance Officer, Ms. Liza Montelibano over here. We have AP Gen's Chief Finance Officer, Ms. Racquel Bustamante also over here. And finally, we have Republic Cement's Chief Executive Officer, Mr. Nabil Francis over here in the front.

And so without further ado, I'd like to introduce to you -- call on the presenter for AboitizPower, Mr. Manny Rubio.

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [2]

--------------------------------------------------------------------------------

Good afternoon, everyone. Nice to see familiar and new faces. As usual, we'll begin our report with EBITDA, which is one of our key financial indicators. Our beneficial EBITDA declined by 14% year-on-year and 13% of this decline was mainly due to higher power costs -- of higher cost of purchased power from WESM. WESM prices were exceptionally high during the first quarter. We are buying replacement power due to outages, and mainly, from over-contracting in preparation for incoming capacities.

1% was due to the absence of revenues from Therma Mobile, a contract that has expired and we have not renewed, but I have a separate story on that one. The outage was a derating of our Tiwi facilities due to lack of steam supply caused by Typhoon Usman last December. A portion of the steam pipeline owned by PGPC, the steam supplier, was damaged during the -- an erosion of one of the hills within the -- within Albay, and so far the line has been repaired and is now operating at actually more -- at a higher capacity than it was before the outage.

EBITDA margins declined from 31% to 27%, largely due to higher cost of purchase power, partially offset by fresh contributions from Hedcor Bukidnon, a plant that went online late last year.

Next slide, please. The group's core income decreased by 21% as a result of the 14% decline in EBITDA but partially offset by lower taxes. Depreciation and amortization increased due to tick-up of Pagbilao Energy Corp and Hedcor Bukidnon, new facilities that we added to our portfolio middle of last year.

Next slide. The group recognized and realized foreign exchange and derivative losses of PHP 440 million, mostly from dollar-denominated assets versus PHP 1.2 billion of same period last year, mostly again from the revaluation of U.S.-denominated debts.

AboitizPower's net income for the first quarter was PHP 3.6 billion, which was 9% lower year-on-year. Cash and cash equivalents were up by 8%, mainly from AP's short-term loan proceeds. Total liabilities increased by 4% or PHP 10.8 billion versus end of last year. This was due to dividends payable after the company approved the declaration of dividends last March and additional short-term borrowings of the parent company, which were partially offset by payments to suppliers and principal payments on existing long-term debts.

Capacity sales were lower by 7% compared to same period last year. This was due to lower bilateral contract quantities, mainly from Therma Mobile, which were partially offset by growth in ancillary services from our facilities in Mindanao. The expired TMO contract has since been renewed. We will discuss this further in succeeding slide.

With the new additions of PEC and HBI, we sold at our optimal capacity. Our total revenue decreased by 4%, mostly due to the expiration of capacity contracts. As previously mentioned, a large portion of these contracts has been renewed. Again, this is mainly due to TMO. Note that our contract mix is shifting to energy from capacity contracts as we continue to grow in the retail market.

Our gross margin declined by 21%, mainly due to the previously mentioned higher purchase cost of power. The decrease in energy generated was due to plant outages, both planned and forced. Generation levels are expected to normalize over the course of the year. We bought 661-gigawatt hours of purchase power at an average price of PHP 4.75 per kilowatt hour. Note that the time-weighted average price, or TWAP, was PHP 4.26 per kilowatt hour and the peak was around PHP 5.47 per kilowatt hour. Out of 661 gigawatt hours, 84 gigawatt hours was due to planned outages, the balance due to over-contracting in preparation for new facilities. And as we speak, we are already operating the 2 units in TVI, in Visayas, operating at capacity and injecting power into the grid.

Since then, PEC and APRI were both on outage, have already started to run. Additionally, the first unit, as I said, of TVI was declared on commercial operations and available at full capacity. The second unit is under testing and commissioning with NGCP and we expect to be running on -- and doing the reliability run all through May, right, and we're expecting to declare COD early June, latest.

Meanwhile, the earthquake last April 22 caused a line outage in Limay, affecting generation facilities in the area, including both units of GNPower Mariveles. Unit 1 of GMCP went back online April 25, while unit 2 we actually started this morning and we expect unit 2 to be synchronized by Saturday.

Next slide, please. A quick update on WESM and WESM prices. The first 3 months of 2019 had a higher LWAP compared to the same period last year. This was due to higher volume of capacity and outage either due to planned or forced outage of plants and higher demand. Actual average 2019 LWAP was 4.43 versus 3.62 in 2018.

I'd just like also to raise -- or for the audience to note, that there was also a mandate from DOE for plants to actually be available the whole month of May. So all planned maintenance in May were actually canceled, and plants that were scheduled to do maintenance in May had to do their maintenance in the first 4 months when this was announced. Four months, January, February, March, April, when hydros are not available because of low water levels. So you've heard about the issues on power crisis, right? So I guess that situation just aggravated and the forced outages that happened, which are unavoidable, aggravated the situation, and thus, resulted to some load dropping incidents about 2 weeks ago.

Next slide. On the water levels, Magat ended the first quarter of 2019 at an elevation of 163 meters above sea level compared to the rule curve of 180. The lower water level was due to the forecasted weak El Niño. That weak El Niño forecast still stands, but now they say that it's going to be an extended run. But we expect water levels to normalize by third quarter of this year, in line with the normal hydrology profile of Magat.

Next. Here are the operating highlights of the distribution group. Beneficial power sales were up by 3% to 1,343 gigawatt hours compared to same period last year, which also grew significantly. The strong growth was driven by increase in new customers across all segments, up 2% for residential, 1% for commercial, and more importantly, 5% for industrial.

The group's gross margins decreased from PHP 1.58 per kilowatt hour to PHP 1.53 per kilowatt hour year-on-year. The slight decrease was primarily due to the lost margin from Bajada Power Plant, which we have retired end of 2018. All our systems losses are below the regulatory cap of 6.25% except for Cotabato Light and Power, which ended slightly above the regulatory cap due to nontechnical losses with minimal impact to the bottom line.

We will continue to push our balance mix strategy because we believe that long-term energy security of the country can be solved by balancing sustainability, accessibility and reliability of power. That is why we continue to expand the company's generation portfolio. Our project pipeline is well on track to reach our target of 4,000 megawatts by 2020. And allow me to update you on the projects lined up for commercial operations.

I mentioned earlier, TDI, 2 units running at full capacity, injecting much-needed 300 megawatts at peak in the Visayas grid. We declared COD of first unit in April 16 and the second unit we expect to declare COD early June 2019.

The La Trinidad project is located in Benguet, Luzon Island. It will replace Bineng 1, 2 and 2b that originally had a combined capacity of 6 megawatts. With the new facility and it's expected to produce 19 megawatts of FIT, eligible hydropower, of which 100% is attributable to AboitizPower. And the plant is on track to reach its commercial operations in July 2019.

The Dinginin Project is located in Bataan. It will produce a net capacity of 2/668 megawatts of supercritical coal-fired power plant, of which 40% is attributable to AP. Both units are under construction with expected commercial operations of the first unit by January 2020 and second unit by middle of 2020.

And just a quick note, on the Naga Power Plant Complex. We have just recently completed the rehabilitation of 2 units out of 6, and we're ready to inject power into the grid once we get approval from NGCP. The other 4 we expect to be online by July 2020.

Therma Power Visayas has done a baseline assessment on the environmental condition of the site and preparations are being made to start cleanup upon approval by PSALM. We bought the assets from PSALM and that's part of the asset purchase agreement. We're working on an ancillary service contract with NGCP to -- for Naga, to provide dispatchable reserves, and once in a while, regulating reserve.

As you may recall, our oil-fired barges in Navotas went into preservation mode last February, following the absence of an approved power supply agreement. Last April 22, however, we were able to sign a new power agreement with Meralco. This 1-year contract is a timely response of both AboitizPower and Meralco to the call of government for stable and reliable power going to the midterm elections and beyond.

The plant was registered again with the Independent Electricity Market Operator, or IEMOP, and is currently delivering power as we speak to Meralco. And hot off the press and good news, we'd like to announce the acquisition of the additional stake in GN Mariveles and Dinginin was completed today. This will add another 478 megawatts in net attributable capacity to our portfolio.

That's all for AboitizPower. Thank you very much.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [3]

--------------------------------------------------------------------------------

Thank you very much, sir. I'd also like to acknowledge the presence in our audience today of AEV's Chief Investments Officer, Mr. Robert McGregor. He's over there. If you have any questions, you can already position yourself conveniently beside him.

So without further ado, I'd like to introduce to you the presenter for UnionBank, Mr. Toto Hilado.

--------------------------------------------------------------------------------

Jose Emmanuel Uytiepo Hilado, Union Bank of the Philippines - CFO, Treasurer & Senior EVP [4]

--------------------------------------------------------------------------------

Good afternoon. I'll be presenting the first quarter results for UnionBank.

For the first quarter of this year, net income was down 26% at PHP 2.17 billion. So basically, the reasons for the lower income are as follows: one, we had lower income from our subsidiaries, City Savings Bank, which had some problems in the renewal of its agreement with the Department of Education. And then, of course, we had implemented the ECL methodology for provisioning for loans and because of the ECL methodology, we had to provide for higher provisions. Then, lastly, an increase in operating expense.

For the net interest income. Net interest income was slightly higher by 1%, but net interest margins are still down on a year-to-year, although it has improved slightly. So spreads are lower by about 43 basis points, primarily because of the increase in rates last year, where we saw policy rates increased by the BSP by 1.75%.

Next slide, please. In terms of our credit portfolio, we had very good growth on the portfolio, at 12%. So our corporate portfolio increased by 10% and our commercial portfolio, which is the middle market, increased by 19%. Our retail portfolio increased by 12%. Our CSB loans, the payroll loans for teachers, was essentially flat, but we had good increases in our credit card business, which is up 41%. Our mortgage business is up 38%. Our auto loan portfolio though was down 26%, although that was by design.

On the noninterest income, it's slightly higher by 2% at PHP 2.3 billion. So miscellaneous income was up 27%. Our trading gains were lower by 19% at PHP 1.2 billion and service fees and charges was up 69% at PHP 530 million.

For total deposits. Total deposits were down 2%, but we compensated for that in terms of other funding sources through notes and bills payable. Like, for example, we raised about PHP 11 billion last year, last December, peso corporate bonds, which is booked under notes payable. So we shifted some of our funding to lower cost sources where we have lower cost of intermediation. Our CASA was up 10%.

On operating expenses, higher year-on-year by about 24%, primarily because of additional personnel for the sales expansions, and then of course our IT expenses and increased access due to the higher DST rates for deposits.

For our capital ratio, so the first quarter ratio for the total CAR is at 14.28% and CET1 is at 12.1%. In terms of the profitability ratios, our ratios are still well within industry averages. Our ROE was at 9.6%. Our return on assets was at 1.3% and cost-to-income ratio of 62%.

Lastly, in terms of our updates and outlook. So we foresee that we'll continue to have double-digit loan growth for this year in the range of 13% to 15%. And then we expect that there will be a more benign interest rate environment for the following quarters, especially in the second half of this year, where we foresee the BSP cutting reserve requirements and the policy rate.

And in terms of new products, we recently launched our online app that would allow our clients to open an account online. So no more face-to-face opening of account, you don't have to go to the branches, you just download an app and you can do it online.

And we also launched our new product, which we call the portal, which is a more enhanced system for our corporate clients. That's all. Thank you.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [5]

--------------------------------------------------------------------------------

Thank you, sir. Presenting for the food group, may I please call on Gayle Guzman.

--------------------------------------------------------------------------------

Krystel Gayle Guzman, Aboitiz Power Corporation - Assistant VP for Finance [6]

--------------------------------------------------------------------------------

Hello, good afternoon. I'm Gayle presenting for the food group.

So for food group, which comprises Pilmico and Gold Coin, revenues soared 144% year-on-year. On last year's acquisition of Gold Coin and the positive contribution of flour and feeds divisions. EBITDA jumped 60% to PHP 962 million, on the fresh contribution of our Gold Coin acquisition, coupled by the better performance of our flour business. However, EBITDA margin slid 300 basis points as raw material costs grew faster than selling prices. This is also coupled by higher manufacturing and operating expenses.

Overall, food group NIAT fell 6% year-on-year to PHP 257 million on the challenged performance of feeds and farms. Without Gold Coin, our food group revenue would have still grown at 9% year-on-year, but EBITDA reduced 8% and NIAT lower by 32%.

Going into revenues for the first quarter, flour -- our flour business grew 14% year-on-year to PHP 2 billion. This is largely due to the improvement in our commodity buying, which helped arrest thinning margins. Add to that, the 12% improvement in volume as we maximized our VisMin network and our newly developed channels in Luzon.

For feeds -- Pilmico Feeds Philippines and Vietnam, our revenues improved 11% year-on-year to PHP 5 billion. This is a 9% and a 13% hike in selling prices for Feeds Philippines and Vietnam, respectively. So the increase in selling prices was offset by the 2% and the 4% decline in volume of both Feeds Philippines and Vietnam.

The declining volume of Feeds PH is really largely due to the elimination of small agri center customers with poor credit history, add to that, increased competition giving lower feeds prices of our competitors. Meanwhile, aqua feeds Vietnam volume was up 4% year-on-year due to the high demand for pangasius as a result of bullish farm gate prices.

For our farms business, it fell 6% year-on-year for revenues to PHP 742 million. So selling prices have weakened by 3% following 2 years of consecutive years of good pork prices. So we expect lower prices to continue in 2020 as we're now nearing the peak -- sorry, going off of the peak. Add to that, volume actually was 1% lower. This is largely due to the PEDBCs that we're experiencing now in our farms starting December 2008. For Gold Coin, it contributed fresh [PHP 9.6 billion] of -- [PHP 9 6 billion] in revenue. So this is now 55% of our food group revenue. Without Gold Coin, food group revenue would still have grown by 9%.

Now going to EBITDA. Flour and Gold Coin contributed 60% improvement in EBITDA. So flour, actually -- flour's EBITDA surged 4% year-on-year. This is driven by the increase in byproduct contribution, despite -- which arrested a slide in gross profit per bag. Add to that, Gold Coin contributed PHP 406 million in EBITDA or accounting for now 42% of total. Without Gold Coin, EBITDA would have fallen by 8% year-on-year.

Meanwhile, our farms and feeds businesses were continually burdened by the increasing cost of raw materials. Pilmico Feeds Philippines and Vietnam plunged 6% year-on-year on the challenged performance of feeds Philippines, despite the improvement in EBITDA of Feeds Vietnam.

Feeds Philippines fell 8% from last year despite the hike in margins on the back of the 13% increase in manufacturing and operating expenses. Furthermore, EBITDA from the commodity trading business plummeted 1.5x on the forgone margin of soya as a result of higher cost of stock coupled by lower selling prices in the market. Our farms business dove 52%, following the 55% drop in EBITDA. The spike in raw material costs actually pushed feeds costs higher, which dragged EBITDA lower.

Now going into NIAT. The first quarter NIAT of the food group fell 9% -- sorry, fell 6% to PHP 257 million, following the lower EBITDA of Feeds and Farms. The flour's EBITDA, which grew 4x year-on-year, was tempered by the more-than-doubling of interest expense.

The jump in borrowing costs were a result of higher interest rates. Meanwhile, Gold Coin contributed PHP 71 million or 28% to total food group NIAT. Excluding Gold Coin, food group NIAT would have fallen 32% from last year.

So we have exciting days ahead as we've created a comprehensive animal nutrition platform for Pilmico across the Asia Pacific region, including China. We have been consistent in executing our two-pronged strategy of growing and strengthening our core businesses while building new ones and expanding our customer base geographically.

For the Feeds business, we've aggressively extended our reach across 11 countries and create a total animal nutrition platform which supports growth for both livestock and aqua feeds businesses as well as our special nutrition category.

Our growth is evident in the capacity that we have obtained through the years from 500,000 metric tons in 2012 with just Pilmico. We were catapulted to 4.2 million metric tons in 2018 with the acquisition of Gold Coin, coupled by our domestic expansion. And we are very positive that we'll hit 5.7 million metric ton by 2023 with our pipeline of projects.

Our commitment to grow the business is reflected in our robust CapEx spending. Since 2012, we've plowed in PHP 200 million into the business. This amount translates to an annual CAGR of 37%, with USD 118 million or PHP 6 billion earmarked for 2019. These CapEx excludes our equity investments in the 3 M&A deals that we've completed since 2018, which has now totaled to PHP 367 million.

So for 2019, our growth focus countries are China, Vietnam and the Philippines. We will expand our feeds capacity in China, being the world's largest pork producer, and now taking into consideration also the rise in fish consumption. And this is to take advantage of the increasing demand in the region. In Vietnam, being the ninth largest fish producer in the world, we will establish a new fish line to support our regional fish feed demand and back our multi-species growth strategy.

Meanwhile, we will continue nourishing our farms and feeds business in the Philippines with our series of expansions. We continue to ramp up our production capacities, both in our swine and poultry businesses. For feeds, we remain aggressive in penetrating and expanding markets, particularly the VisMin region.

For the project pipeline, we have the following projects for 2019. Last January, we successfully integrated Pilmico Animal Nutrition Joint Stock Company, previously known as Eurofeed, into Gold Coin Vietnam. Gold Coin Singapore Services acquired 100% of [PAN GAC]. This mill will supplement the growing animal feeds requirement in South Vietnam.

In March, we have completed our automated finished goods packing line in China. Through this automation, we'll be able to pack additional 120 bags per hour -- per line, so that will increase our efficiencies.

In June, we have stored 2 developments in China. The first one is the Dongguan hog line expansion, which will be filling an additional capacity of 9 tons per hour. Same goes with our pelleting line in Zhengzhou that requires additional capacity of 9 tons per hour.

On the same month, the Philippines layers business will increase its capacity to 260,000 ready-to-lay hens upon completion of our rearing farms. This facility will house the pullets as they grow to become layers before they are transferred to layer houses. In August, the Dongguan mill will open its second expansion for the year. This will bring an additional 5 tons per hour capacity to our fish feed line in Southern China.

Meanwhile, in the Philippines, we will start operating our 2 biogas facilities that will provide us additional 148,000 renewable energy. So this is Pilmico's contributing -- contribution to environmental mindfulness.

In November, we will pave the way for our meat fabrication plant in Tarlac. This will be capable of processing 305 -- 345,000 heads per annum, equivalent to 1.3x our current hog production. On the same month, we will be operating with a new additional capacity of our 5 tons per hour of fish feed mill in North Vietnam. This will cater the strong demand for fish feed in the northern part of Vietnam.

Lastly, in December, before the year-end, we're expecting to launch our new feed mill in Iligan, Philippines, that will contribute an additional 20 tons per hour. This will support the strong demand for our Visayas and Mindanao business.

Thank you. That ends the food group report.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [7]

--------------------------------------------------------------------------------

Thank you, Gayle. Presenting for Aboitiz InfraCap, may I please call on Cosette Canilao.

--------------------------------------------------------------------------------

Cosette Canilao, Aboitiz InfraCapital, Inc., - COO & Senior VP [8]

--------------------------------------------------------------------------------

Good afternoon, everyone. For Aboitiz InfraCapital, we'll start with our water portfolio. Again, we aim to build a water portfolio totaling to about 350 MLD across the water value chain over the next 3 years.

And we start with our Apo Agua. For Apo Agua, it's a 330 MLD bulk water project in Davao and we are on track with the preconstruction activities. Our steel coils have been delivered early this year and the manufacturing of the pipes for the pipe laying sometime this June or July will then commence. We're busy with the excavation of our water treatment plant and we are preparing for the what -- the pipe laying in June and July and we've engaged our -- the public in Davao through tri-media and social media platforms to inform them about the activities for that one.

Sir, next slide, please. For LiMA Water, it's an 8 MLD water facility in Batangas which captures end-to-end process of the water value chain. We've initiated several tariff reforms to ensure sustainability of the operations and to support our CapEx investment. And we foresee growth to remain due to robust demand from both new and existing locators in LiMA Water.

Next slide. For our infrastructure portfolio, as you all know, we have 3 -- submitted 3 unsolicited proposals for airport projects for NAIA, for Bohol Panglao and for Laguindingan. For NAIA, I think it's in the newspapers, the Department of Transport has already endorsed our proposal to NEDA-ICC and we are awaiting government approval. And once we get NEDA Board approval for our NAIA proposal, we will then commence with the Swiss challenge. For Bohol Panglao Airport, the DOTr has also endorsed our proposal to the NEDA-ICC and Board for their evaluation and approval.

And we'll show you some pictures. Next slide, please. So this is the current facade and grounds of the Bohol International Airport, which was inaugurated last year. Next slide, please. And these are the passenger boarding areas. You can see it's a blank canvas for us to expand operations and there is enough space for more food stalls and dining facilities for passengers. That's the current passenger check-in and the thing that we intend to do together with our technical services provider is to develop international and more domestic routes.

Next, please. For Laguindingan Airport, we were given Original Proponent Status earlier this year and the CAAP has also endorsed our proposal to NEDA. NEDA came back with their evaluation and we're currently coordinating with both CAAP and DOTr to respond to those comments from NEDA.

Next, please. So this is the facade of the Laguindingan Airport. As you can see, there's enough space for us to expand the terminal airport. Next, please. And it's -- the passenger level right now of Laguindingan Airport is at 2.1 million, but the capacity of the terminal is at 1.6 million. And this is the -- what we intend to do.

Next slide. Next, please. Now, for our digital infrastructure, we're now -- we're currently talking to 2 mobile network operators ascertaining their requirements and preparing our teams to also service their requirements for the next 5 years -- or the next 10 years.

For RCBM, there is stable private sector demand. And with the government's push for infrastructure, we're -- it's a good start for 2019, but there are, of course, some concerns on the impact on the delay in budget approval. Production costs are under control and market prices are stable. And the Bulacan, the bottling -- de-bottlenecking project was completed safely within budget and now delivering results.

And that's it for Aboitiz InfraCapital. Thank you.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [9]

--------------------------------------------------------------------------------

Thank you, Cosette. May I now call on Mr. David Rafael to report for AboitizLand.

--------------------------------------------------------------------------------

David L. Rafael, AboitizLand Inc. - President & CEO [10]

--------------------------------------------------------------------------------

type="E" />

Good afternoon, everyone. For the first quarter of 2019, AboitizLand posted a net income of negative PHP 44 million, a substantial decrease versus the same period last year. This is mainly attributable to the deferred revenue recognition of industrial lot sales in our industrial business unit, combined with slightly higher direct project expenses. Taking out this timing issue with respect to the recognition of these industrial lot sales revenue, it would have actually been PHP 1.77 billion or 46% versus the previous -- same period last year. In terms of residential sales for the first quarter, this amounted to PHP 497 million, similar as the same period the previous year. Through further efforts in sales, activities and additional project launches, AboitizLand is optimistic that we can further augment our sales momentum as the year progresses.

Next slide. For revenues, AboitizLand contributed PHP 671 million for the period, 9% decrease from the previous year. As mentioned, this was due to the deferred revenue recognition of industrial lot sales which we expect to recognize by the second quarter of this year. Despite this, residential business unit continues to make strides with a 56% increase in revenue contribution, primarily driven by construction progress in key projects such as Seafront Residences in Batangas and Amoa in Cebu. The commercial business unit also continues its steady performance with year-on-year revenue increase of 39%. This is attributable to the steady occupancy in our commercial assets in Cebu and the sustained momentum in The Outlets at Lipa, which commenced operations during the last quarter of 2018.

Moving on with the dip in revenues, gross profit and net operating profit year-on-year declines. Gross profit for the quarter stood at PHP 262 million, a 14% decrease versus the first quarter of 2018. This decrease also reflects the recent adoption of new accounting standards related to the treatment of commission expense. Net operating profit, PHP 15 million for the period, also decreased versus the same period last year.

In furthering our efforts to go national, in 2019, AboitizLand plans to launch 2 key phases and 2 new projects in key areas, namely Cebu, Pampanga and Lipa. For Cebu, the new phases in our existing developments in Amoa and Priveya Hills are expected to be launched with 486 units for release worth about PHP 1.7 billion. We also look forward to the launch of 2 new residential developments, The Villages at Lipa and Ajoya Pampanga, with 990 units to be made available worth PHP 3.8 billion.

Keen to maintain our foothold in Cebu, AboitizLand expects to launch the fourth phase of Amoa, one of our key developments in Compostela, by July 2019. This new phase will offer 157 house and lot units and 238 lots-only units with a total value of PHP 1.2 billion. We also look forward to the opening of the sixth phase of Priveya Hills, our high-end lot-only residential development located in Talamban, Cebu, by June of 2019. A total of 91 lots will be made available for sale with an average size of 220 to 230 square meters.

Following the introduction of our flagship mid-market brand, Ajoya, in Tarlac and Nueva Ecija in 2018, we're excited to introduce another Ajoya community, this time in Pampanga, by the second quarter of 2019. Ajoya Pampanga is a 21-hectare development, offering a healthy mix of house and lot products which will cater to the robust demand in the mid-market segment in the area.

In South Luzon, Seafront Residences, our second home community in San Juan, Batangas, continues to be one of AboitizLand's best-selling developments to-date with 4 launched phases and close to PHP 2.2 billion in sales.

To further solidify our presence in the Batangas corridor, we look forward to the grand launch of The Villages at Lipa by the second quarter, offering mid to upper-mid houses and lot products. This new development, composed of thoughtfully designed villages with exclusive amenities, will be a residential component in the Lima estate, our thriving township in Batangas.

As we continue to develop Lima into a thriving township, we look to continue developing our recurring business in the estate through The Outlets at Lipa, our first commercial project in Luzon, which commenced operation in the fourth quarter of 2018. The mall has demonstrated a strong potential for success as occupancy steadily ramps up, with more tenants looking to open in the next few months.

Focusing a bit more on our industrial park, the LIMA Technology Center, we seek to continuously maximize our value footprint through a careful and focused approach. One way is through the development of recurring business. Apart from the abovementioned outlets, we also look forward to the opening of Lima Exchange towards the end of the year, a terminal hub that will service the immediate needs of the growing community in the area.

As we look to continue sustaining the stellar performance of our industrial park, we wish to further capitalize on our industrial hubs, not only by expanding our industrial footprint but also through the development of recurring business and residential communities adjacent to these industrial areas. Through this approach, we look to transform these industrial spaces into holistic, thriving townships.

In closing, we want to highlight our various developments and communities across the country, centered on key geographic clusters. AboitizLand has steadily expanded its footprint from our initial beginnings in Cebu to where we are today with communities across multiple cities and regions. Now with key developments in major cities across Luzon, we look to further capitalize on our growing communities and continue to expand our presence through key initiatives across our 3 core business units: Industrial, commercial, residential. Thank you.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [11]

--------------------------------------------------------------------------------

Thank you, David. And now to report on AEV financials, may I please call on Mr. Dmi Lozano.

--------------------------------------------------------------------------------

Manuel R. Lozano, Aboitiz Equity Ventures, Inc. - CFO, Corporate Information Officer & Senior VP [12]

--------------------------------------------------------------------------------

Hi, good afternoon. Yes. So AEV recorded consolidated revenues of PHP 47 billion or a 26% increase for the first quarter of 2019, mainly coming from the fresh contribution of Gold Coin to Pilmico. However, EBITDA and net income are both down and I will explain these in the next few slides.

Our first quarter beneficial EBITDA was down 11% compared to the same period last year. This was mainly due to higher purchase power costs from the power business unit. As mentioned earlier, some of the drivers of this decline have been resolved. We have recovered the lost capacity of our Tiwi facilities that were affected by typhoons late last year, TVI is already online and we have signed a new PSA for Therma Mobile.

At the consolidated level, our EBITDA also declined by 11%. This led -- this decline in EBITDA drove our first quarter core net income down to PHP 3.9 billion, which is 27% below first quarter 2018. After accounting for nonrecurring losses, net income landed at just over PHP 3.5 billion, which translates to an EPS of 6 -- PHP 0.63 per share.

On a consolidated level, cash and cash equivalents ended up higher up by 8%, primarily due to internally generated cash. Total liabilities increased by 3.3% or PHP 8.8 billion versus same period last year and this was due to dividends payable which were announced in March as well as additional borrowing, mainly for power and food businesses.

On the HR front, and these are good news. As you probably know, during our stockholders' meeting, the Board announced the appointment of AP's COO, Emmanuel V. Rubio, as AP's next President and COO upon the retirement of AP's current COO, Erramon Aboitiz, at the end of 2019. Over last 23 years, Manny has held multiple leadership positions within AP and Aboitiz Group and we have full confidence that he will lead our organization to an even more successful future. The best of luck, Manny.

And just in case you've missed it, in December 2018, it was also announced that AEV's COO, Sabin Aboitiz, will be the next Group President and COO upon the retirement of AEV's current COO, Mr. Monchu Aboitiz, at the end of 2019. Sabin has been with the group for the last 32 years and has held multiple leadership positions across the group. We all look forward to a reenergized Aboitiz Group in 2020 under Sabin's leadership. Thank you.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [13]

--------------------------------------------------------------------------------

Thank you, Dmi. The floor is now open for your questions. (Operator Instructions) So questions from the audience? Yes?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Dominic Chuaunsu, [1]

--------------------------------------------------------------------------------

I'm Dominic Chuaunsu from BDO. So this one is for Mr. Rubio. First of all, congratulations. And my question is twofold. So the first one is what's your outlook on the power sector for the next 5 years? And what would be your outlook on like WESM prices for the rest of the year?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [2]

--------------------------------------------------------------------------------

What was your second question?

--------------------------------------------------------------------------------

Dominic Chuaunsu, [3]

--------------------------------------------------------------------------------

What would be your outlook on WESM prices for the rest of the year?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [4]

--------------------------------------------------------------------------------

Okay. Well, I'll answer the second question first. In our presentation, we believe that the WESM prices will be lower in the second half of 2019. There will be new capacities coming in. One plant that's been commissioned now is San Buenaventura. We believe Masinloc, the -- what used to be an AESI plant, will also be coming in towards the end of the year. We just injected 300 megawatts in Visayas beginning -- unit 1 will come in -- in fact, it could be generating and injecting energy to the grid for commissioning maybe around November, December and declared commercially available by January 2020. And second unit, ahead of schedule, by May 2020, no?

So I guess, this plant's -- let's stop at 2020 -- to 2023 first. I think we'll provide ample supply of power into the grid up to that time. And we expect new capacities to be coming in after these plants. There is always, of course -- if we look into the schedule being presented by DOE, the Atimonan of Meralco is scheduled to come in -- supposedly it's 2023.

Note also that we still have RP Energy. The facilities -- the site is being -- the issue on the slope is being resolved and we expect that we can make a decision on the -- on our options with regard to what facility will be built in RP Energy probably by middle to late next year. So these are the new capacities that will come in post the capacities that I just mentioned.

So just to add to that, no? I think this is private sector's response to the growing demand of the country as the Philippine economy grows, no? And all of these are actually possible because of EPIRA. You can just maybe look into the new capacities that came in upon the enactment of EPIRA. NPC plants that were upgraded -- NPC plants that were operating at suboptimal availability rates and low capacity factors. If we look at those data now, not just for AboitizPower, but even for those bought by our competitors, I think they are now operating all at world-class levels, no?

There are questions about how come there are forced outages and how come the forced outages are actually happening all at the same time. Well, that one I cannot provide an answer but forced outages are a technical reality of operating facilities. All equipment, whether it's a power plant, whether it's your car, whether it's any machinery, will suffer forced outages. In fact, in -- when you look at NERC GADS, which is the North American Electricity Reliability Center, the data that -- which we use as a benchmark in AboitizPower, the data on availability factors, it's actually much lower than the availability factors that we have in our facilities that are owned and operated by Aboitiz, no? Before, we used that as a benchmark, but because we're always outperforming NERC, we said that our benchmark would always now be the -- our performance the previous year. So I'd just like to highlight that as -- I guess because there's a Senate hearing today, that will be again the headlines for tomorrow.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [5]

--------------------------------------------------------------------------------

Dom, okay? All right? Yes? Do we have other questions from the audience? Yes, Cristina?

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [6]

--------------------------------------------------------------------------------

Good afternoon, and congratulations to incoming President, Mr. Manny Rubio, and the one who's absent. May I ask what's the -- are you able to quantify the power losses if they are associated with the replacement power for TVI and Pagbilao and TMO, Mariveles?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [7]

--------------------------------------------------------------------------------

Well, no. For TVI, yes, we have the data for that. We -- just to clarify, there's no requirement for replacement power for TMO. The TMO contract was -- well, we didn't get approval for that so we decided to just cancel the contract and preserve the facility, disconnect it from the grid since there's no contract. It's an embedded facility with Meralco. And at that time, we were left without an option but to actually disconnect.

And plan for relocation. That was the program that we have always been communicating with regard to TMO. We believe that there are actually locations within the Philippines where a unit or 2 of -- out of 4 of TMO barges will provide value for ancillary services. But again, as I reported, we have just signed a contract, a new contract with Meralco for 1 year under the original terms and conditions of the contract, not the extended one, no, but the original contract. And yes -- and then subject to the agreement of both parties, it can be extended for another year.

Liza, do you have the number for TVI replacement?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [8]

--------------------------------------------------------------------------------

One.

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [9]

--------------------------------------------------------------------------------

Only?

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [10]

--------------------------------------------------------------------------------

That's below, sorry.

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [11]

--------------------------------------------------------------------------------

But it's the replacement power -- it's the cost -- okay. The total cost to purchase power that we had to buy -- so it's for the -- so we bought one B worth of purchase power for the first quarter for TVI.

Now, that being said, we really did expect to buy for TVI this first quarter because we knew that the first unit was going to come online only in April, but we did not expect to buy at an average price of PHP 475. So we ended up buying probably like PHP 1 to PHP 1.2 per kilowatt hour higher than what we expected to do.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [12]

--------------------------------------------------------------------------------

I know, but what you're -- what was your expected?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [13]

--------------------------------------------------------------------------------

Three. Our budget was PHP 3 -- to buy for TVI at PHP 3.

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [14]

--------------------------------------------------------------------------------

Which was -- it is supposedly the normal WESM prices for first quarter of the year, no?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [15]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [16]

--------------------------------------------------------------------------------

And note, I think more important is that we bought this because we are over-contracted. Out of the 661 megawatt hours that we bought, only 89 was -- 89 or around that is due to...

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [17]

--------------------------------------------------------------------------------

84 was due to the outages.

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [18]

--------------------------------------------------------------------------------

84 was due to the outage. The rest we know that we have to buy because of -- because TVI is only going to come in, in April. But now that the plants are -- both TVI units are running, so we're sourcing the contracts that were supposedly meant to be supplied by TVI from TVI.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [19]

--------------------------------------------------------------------------------

Sir, may I also know what's the tariff range for TVI RES or the service -- the contractor TVI is serving vis-à-vis the replacement cost -- just the tariff?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [20]

--------------------------------------------------------------------------------

Contract -- average contract price for RES?

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [21]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [22]

--------------------------------------------------------------------------------

PHP 3.3 to PHP 3.5, around PHP 3.50.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [23]

--------------------------------------------------------------------------------

For the RES?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [24]

--------------------------------------------------------------------------------

For the RES.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [25]

--------------------------------------------------------------------------------

And for the Pagbilao downtime, there was also replacement power there?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [26]

--------------------------------------------------------------------------------

That's included in the 84 gig, yes.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [27]

--------------------------------------------------------------------------------

Also included in this one...

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [28]

--------------------------------------------------------------------------------

That's April. A small portion of the Pagbilao, no? Yes.

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [29]

--------------------------------------------------------------------------------

Yes, that's true. But that's April now because we were down April...

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [30]

--------------------------------------------------------------------------------

2 to 16.

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [31]

--------------------------------------------------------------------------------

2 to 16.

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [32]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [33]

--------------------------------------------------------------------------------

So no downtime for Pagbilao in the first quarter? Only TVI?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [34]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [35]

--------------------------------------------------------------------------------

I think there was a bit in Jan, but it's not -- the bigger one was the APRI one. That was the longer bit.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [36]

--------------------------------------------------------------------------------

For APRI, you bought also?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [37]

--------------------------------------------------------------------------------

Yes. So the outage in first quarter, the larger portion of the outage was APRI when we were down from the previous year because of the typhoon. And then there was a bit of Pag 3, but the long stretch of Pag 3 was April 2 to April 16.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [38]

--------------------------------------------------------------------------------

So no in 1 -- nothing in 1Q also for APRI?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [39]

--------------------------------------------------------------------------------

No. APRI was the one that we -- the outage that we had to buy for in the first quarter was really APRI.

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [40]

--------------------------------------------------------------------------------

In first quarter.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [41]

--------------------------------------------------------------------------------

Okay. How much was the replacement for APRI?

--------------------------------------------------------------------------------

Ma. Racquel J. Bustamante, Aboitiz Power Corporation - First VP & CFO for Generation Business Group [42]

--------------------------------------------------------------------------------

PHP 400 million, equivalent to the 84-gigawatt hour outage for APRI.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [43]

--------------------------------------------------------------------------------

That's the power loss?

--------------------------------------------------------------------------------

Ma. Racquel J. Bustamante, Aboitiz Power Corporation - First VP & CFO for Generation Business Group [44]

--------------------------------------------------------------------------------

It's a replacement power loss cost.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [45]

--------------------------------------------------------------------------------

Ah, cost. Was there any -- were there any losses like the cost is higher than the tariff?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [46]

--------------------------------------------------------------------------------

On average, we were -- at RES we're -- so we bought -- if we bought an average of 4.75 and our average RES contract is about at 3.5...

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [47]

--------------------------------------------------------------------------------

That's the diff?

--------------------------------------------------------------------------------

Ma. Racquel J. Bustamante, Aboitiz Power Corporation - First VP & CFO for Generation Business Group [48]

--------------------------------------------------------------------------------

The less -- more or less PHP 150 to PHP 180 million. That's more or less the differential.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [49]

--------------------------------------------------------------------------------

That's for the entire purchases?

--------------------------------------------------------------------------------

Ma. Racquel J. Bustamante, Aboitiz Power Corporation - First VP & CFO for Generation Business Group [50]

--------------------------------------------------------------------------------

Only for APRI, only for the outage for APRI.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [51]

--------------------------------------------------------------------------------

Okay. And for TVI?

--------------------------------------------------------------------------------

Ma. Racquel J. Bustamante, Aboitiz Power Corporation - First VP & CFO for Generation Business Group [52]

--------------------------------------------------------------------------------

We really assumed to buy for TVI. The only difference is that we bought it at a higher price versus what we expected.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [53]

--------------------------------------------------------------------------------

(inaudible)

--------------------------------------------------------------------------------

Ma. Racquel J. Bustamante, Aboitiz Power Corporation - First VP & CFO for Generation Business Group [54]

--------------------------------------------------------------------------------

Yes. Unlike for APRI, it's a real outage, so the differential is really the generation cost in the replacement one.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [55]

--------------------------------------------------------------------------------

You bought for the entire 280 megawatt? Was the buying for TVI -- was the buying for the entire -- just for the half?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [56]

--------------------------------------------------------------------------------

Because we were replacing only for the portion that was contracted to RES. So for TVI, we're half-contracted to VECO and we're not required to replace for that. So we were replacing only for the 150 that's contracted the RES.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [57]

--------------------------------------------------------------------------------

Yes. And RES would be like 350 in terms of tariff?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [58]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [59]

--------------------------------------------------------------------------------

May I also know how much is your -- how much is the size of RES already relative to total -- if you can share relative to revenue, or total relative to earnings?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [60]

--------------------------------------------------------------------------------

So well, this was kind of indicative because, in large part, the RES contracts are the one that pertain to energy, energy contracts. There's a bit actually of regulated energy but it's small. So you can more or less -- it's 1/3 is RES because there are -- yes.

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [61]

--------------------------------------------------------------------------------

But again, this chart will shift because we have to recognize now TMO was a capacity contract again for the next year. Also, I would like to highlight, Cristina, that the outage in APRI was caused by steam supply. The generating facility owned by Aboitiz Power was actually available, but we didn't have enough steam from PGPC because a pipeline supplying a portion of the steam that we need got damaged. And also during the -- well what people are considering a crisis during the load shedding last April, we -- Aboitiz Power owned and operated facilities, all of them are actually operating. It's our source, which is obviously being operated by TeaM Energy, which is Pagbilao Unit 3, which went down. So we were buying for that portion, that Pagbilao 3 that you mentioned that went down in April.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [62]

--------------------------------------------------------------------------------

Sir, just the -- many were expecting you to benefit from the higher spot prices. Did you benefit at all?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [63]

--------------------------------------------------------------------------------

No, we were net buyers.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [64]

--------------------------------------------------------------------------------

Net buyers. How much was your merchant capacity geared for WESM? Or was there any merchant capacity for the WESM?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [65]

--------------------------------------------------------------------------------

For that period, we didn't have any, that's why we were buying. We were buying, I think, anywhere from 100 to 120 megawatts. But today, since we're operating 2 units now of TVI, I think for certain periods of the day, we are actually net sellers.

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [66]

--------------------------------------------------------------------------------

Sorry. I just -- may I just add. Because when we do -- because substantially, we're really contracted more than 100%, right? The only time that we get to sell from WESM is when we have diversity, meaning our actual production load doesn't match the load of the customer. So you have like holes where we can sell but our customers are not consuming. That's the only thing that we sell. It's like the pebbles in between the big rocks, so to speak, right? So it's not much. We can't really gain from that during this period significantly.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [67]

--------------------------------------------------------------------------------

Sir, what again was the thinking behind over-contracting? Why is that a strategy? Is that something normal?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [68]

--------------------------------------------------------------------------------

So that when our new facilities start operating, we can transfer those contracts right away and enjoy stable revenues from this new facility like TVI.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [69]

--------------------------------------------------------------------------------

And could you have -- so it's inevitable? The replacement power loss were inevitable -- were an inevitable consequence of that?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [70]

--------------------------------------------------------------------------------

We were actually buying for those contracts and we were -- depending on our price forecast, we said that it's something that we can manage. And yes, for the last -- I think for the last 18 months until the first week of April, prices were quite low. And that has also been presented by PEMC during the Senate hearing last week.

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [71]

--------------------------------------------------------------------------------

Sorry, if I can just add. The wisdom of over-contracting or otherwise, you have to look at it over the entire term of when you did it, right, because it was really a choice between you contract ahead so that by the time it runs, we're really contracted for what we're producing from that plant. But the catch is during the ahead, we're exposed to WESM, as opposed to you don't contract ahead and by the time we run we're selling to WESM and we're waiting to contract the output from the plant, right? So that's really the choice and we chose the former. And if you look at it from when the -- from the beginning of when we started to contract, we got hit by the prices actually only just now, and we were contracted since like, I don't know, middle of last year. We actually did it that early. We actually did the same for PEC before PEC went online. So that's the choice that we have made.

--------------------------------------------------------------------------------

Manuel R. Lozano, Aboitiz Equity Ventures, Inc. - CFO, Corporate Information Officer & Senior VP [72]

--------------------------------------------------------------------------------

Cristina, our goal really is whenever we build the project finance, our goal is to protect the long-term and the long-term means having contracts that will cover that capacity. So having short-term volatility actually is really a small part of it. So as Liza said, we have to look at the long term. And by the way, if you look at the first few months that we had overcapacity, we were probably making money because the WESM prices were low. So it's only for this last quarter or so that that's been an issue. But at the end of the day, we believe that that's really the key. I mean, if you look at building a plant, you need to have -- your question is always to ask before, how much is contracted? Why is not contracted? Now it's fully contracted, right? So that's the key. The key for us is long term we're fully contracted and we can protect -- we ensure the cash flow is there for our financing.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [73]

--------------------------------------------------------------------------------

Sir, lastly. What's the average life or the contract life for RES, your average contract life and for capacity?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [74]

--------------------------------------------------------------------------------

For RES, by regulations, maximum of 3.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [75]

--------------------------------------------------------------------------------

Three years. And for the capacity base?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [76]

--------------------------------------------------------------------------------

Long. We have capacity-based contracts that are as long as what 20..?

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [77]

--------------------------------------------------------------------------------

Ah, 20?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [78]

--------------------------------------------------------------------------------

Yes. Yes, that long.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [79]

--------------------------------------------------------------------------------

Thank you, Cristina. Yes, can we call on the others? Do you have any questions that you want to ask? Yes, Jelline?

--------------------------------------------------------------------------------

Jelline E. Gaza, JP Morgan Chase & Co, Research Division - Analyst [80]

--------------------------------------------------------------------------------

I'm Jelline Gaza from JPMorgan. In relation to the replacement power on a sequential basis, I'd like to understand how -- what can we expect by 2Q '19? I understand that you already saw the first unit of TVI started its commercial operations April, middle of April, in April. And then you have forced outages in Pagbilao 3 as well as GMCP. So how are those key events play out? Just to give a sense of what one-off we can expect in 2Q.

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [81]

--------------------------------------------------------------------------------

For Q2?

--------------------------------------------------------------------------------

Jelline E. Gaza, JP Morgan Chase & Co, Research Division - Analyst [82]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [83]

--------------------------------------------------------------------------------

Well, we certainly will have a -- the impact of the outage of PC will be reflected in April, no? But since we're operating TVI, already 2 units, I think that has been -- that's been managed, no? As far as GMCP is concerned, most of the contracts are capacity -- all of the contracts are capacity contracts. They have excused forced outage allowance. And as I said, the second unit most probably will come in early Saturday morning.

--------------------------------------------------------------------------------

Jelline E. Gaza, JP Morgan Chase & Co, Research Division - Analyst [84]

--------------------------------------------------------------------------------

So net-net, can I confirm that what we have seen in terms of the magnitude of replacement power in 1Q will not recur, right, or at least in a lesser magnitude when it come 2Q?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [85]

--------------------------------------------------------------------------------

Barring any other forced outages, yes.

--------------------------------------------------------------------------------

Jelline E. Gaza, JP Morgan Chase & Co, Research Division - Analyst [86]

--------------------------------------------------------------------------------

Barring other events aside from what we know?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [87]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Jelline E. Gaza, JP Morgan Chase & Co, Research Division - Analyst [88]

--------------------------------------------------------------------------------

Okay. And then a quick follow-up on what Cristina asked. I guess, for a more clearer picture on the RES competition -- competitive landscape, especially with AC Energy's recent purchase of Phinma as well as the recent movements in the spot. Like for the new contracts, what's the current trend in terms of tenor, the length of the contract as well as maybe the pricing and your ability to pass through fuel costs?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [89]

--------------------------------------------------------------------------------

Yes. I think for RES -- with the RES market and the way the market was going, right, contract rates, I believe, will still stay within anywhere from 1 to 3 years. And some of that basically were based on views of the generators. Like for us, I don't think we'll be able -- we'll be going long term on RES. For one, you're limited by the regulations. And as we actually see how the market is going, there will be events like this again, whether in a few months or next year. It always comes in cycles. And -- but with new capacities coming in, like San Buenaventura, Masinloc, maybe it's going to -- the market will still remain quite competitive. But what happens beyond that? So I think the contracting sweet spot would probably be around 2020, early 2021 when we see supply to be tightening up again as demand continues to grow.

--------------------------------------------------------------------------------

Jelline E. Gaza, JP Morgan Chase & Co, Research Division - Analyst [90]

--------------------------------------------------------------------------------

So basically that's still within the maximum of 3 years?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [91]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Jelline E. Gaza, JP Morgan Chase & Co, Research Division - Analyst [92]

--------------------------------------------------------------------------------

And then for Ms. Liza, I'd like to know the nature of the PHP 1.4 billion other operating income from your generation side this quarter and the driver for the lower taxes?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [93]

--------------------------------------------------------------------------------

So this is the other income. Okay. A large part of it is actually related to GRAM and ICERA, okay. You're familiar with it. This was an issue from like way back 20 long ago, right? So it's -- GRAM is rate adjustment; ICERA is ForEx adjustment. When it started out, GRAM and ICERA for the -- shortly after we took over the assets from the government, there was a portion of it that's supposed to be for the generator and a portion of it was for PSALM. But back then, the sharing was not clear. So there were amounts that we collected, but we never booked them as income because it wasn't clear how much of it was ours. Around late 2017, there was an order given explaining the formula for the sharing. So we had a very detailed position paper done to analyze the formula, to justify, to clarify how much of it is really ours. And now completing the position paper and the legal opinion that we got, we already booked as income the portion that we actually collected, which we think is rightfully ours.

--------------------------------------------------------------------------------

Jelline E. Gaza, JP Morgan Chase & Co, Research Division - Analyst [94]

--------------------------------------------------------------------------------

Are we expecting more going forward or is this the whole extent of it.

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [95]

--------------------------------------------------------------------------------

That's it.

--------------------------------------------------------------------------------

Jelline E. Gaza, JP Morgan Chase & Co, Research Division - Analyst [96]

--------------------------------------------------------------------------------

Okay. How about the lower taxes for the quarter?

--------------------------------------------------------------------------------

Ma. Racquel J. Bustamante, Aboitiz Power Corporation - First VP & CFO for Generation Business Group [97]

--------------------------------------------------------------------------------

Last year, we had LD for PEC, so that's the corresponding tax for the liquidated damages that we recognized last year.

--------------------------------------------------------------------------------

Jelline E. Gaza, JP Morgan Chase & Co, Research Division - Analyst [98]

--------------------------------------------------------------------------------

So it's a higher base in 1Q '18 (inaudible)?

--------------------------------------------------------------------------------

Ma. Racquel J. Bustamante, Aboitiz Power Corporation - First VP & CFO for Generation Business Group [99]

--------------------------------------------------------------------------------

Exactly. Last year was higher.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [100]

--------------------------------------------------------------------------------

Thank you, Jelline. Do we have other questions from the floor? Yes.

--------------------------------------------------------------------------------

Unidentified Analyst, [101]

--------------------------------------------------------------------------------

I have a question for -- I have several questions for Sir Manny. First, may I ask the total capacity of unplanned outage in Q1?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [102]

--------------------------------------------------------------------------------

I don't know the exact number, but from what I can remember from the presentation made in the Senate, on top of the planned outages, and there would always be planned outages every month, and the de-rating of the hydros if they are still operating because of the water levels, I saw a number like 1,000 to 1,200 megawatts of forced outages. At one time, I think it's higher than that because while it has been out, that 647 megawatts, and a number of baseload plants.

--------------------------------------------------------------------------------

Unidentified Analyst, [103]

--------------------------------------------------------------------------------

No, sorry sir, for AP alone?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [104]

--------------------------------------------------------------------------------

Ah, AP alone? Well, for first quarter, as I said, it's only the de-rating of TV, and that's from 90 megawatts to 50 megawatts. We were running but only de-rated because of lack of steam. And then a portion of that -- a small -- for a short period, we were buying also for the 200 megawatts that we were sourcing from Pagbilao when Pagbilao Unit 3 went on outage. That's for Q1.

--------------------------------------------------------------------------------

Unidentified Analyst, [105]

--------------------------------------------------------------------------------

Okay. And Pagbilao is already back online?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [106]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Unidentified Analyst, [107]

--------------------------------------------------------------------------------

Okay. Okay. And then are we seeing that there are no significant impact from the lower hydrology in Q1 from El Niño?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [108]

--------------------------------------------------------------------------------

Well, there is an impact, of course, to the bottom end, but those are planned -- those are actually budgeted. We already took into consideration the hydrology in Magat, Ambuklao and being that's the typical cycle that we have in those impounding hydros.

--------------------------------------------------------------------------------

Unidentified Analyst, [109]

--------------------------------------------------------------------------------

Okay. Okay. For the AA Thermal, I understand that PCC already approved the acquisition.

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [110]

--------------------------------------------------------------------------------

We actually closed -- we closed the deal.

--------------------------------------------------------------------------------

Unidentified Analyst, [111]

--------------------------------------------------------------------------------

Okay. May I ask when will the higher stake be recognized in the books? Starting today?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [112]

--------------------------------------------------------------------------------

Today.

--------------------------------------------------------------------------------

Unidentified Analyst, [113]

--------------------------------------------------------------------------------

Okay. And then may I ask on the full quarter basis, how much is the expected attributable net income for the incremental capacity?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [114]

--------------------------------------------------------------------------------

It's actually only GMCP for which we'll see another 12%.

--------------------------------------------------------------------------------

Unidentified Analyst, [115]

--------------------------------------------------------------------------------

On a full quarter basis?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [116]

--------------------------------------------------------------------------------

Is it 12%? Okay, hang on. But it's -- but in the initial, at least for like the next 3 quarters, it's only the 12% of GMCP that you'll see. And then the significant one is when GNPD comes online because that's 30% additional that we get to see. We will get back to you on the exact value of the 12% figure.

--------------------------------------------------------------------------------

Unidentified Analyst, [117]

--------------------------------------------------------------------------------

Okay. I understand that you incurred $572 million in debt to acquire the...

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [118]

--------------------------------------------------------------------------------

Okay. $573 million was the total value of what we paid for the acquisition. Of that amount, the debt we incurred was only $400 million. The balance was internal cash. And out of that $400 million, only $300 million was borrowed in dollars and $100 million in pesos.

--------------------------------------------------------------------------------

Unidentified Analyst, [119]

--------------------------------------------------------------------------------

Okay. Okay. May I ask how much is your estimated interest expense from that on a full quarterly basis?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [120]

--------------------------------------------------------------------------------

Because of the $300 million, the rate is like sub-4 and then the additional $100 million in peso -- we did a peso short term, so a little bit over 5, so you can just compute.

--------------------------------------------------------------------------------

Unidentified Analyst, [121]

--------------------------------------------------------------------------------

Sub-4 and then 5. Okay. So last 2 questions. Since Dinginin will only be operational by next year, will you be able to capitalize some of the interest expense this year or no?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [122]

--------------------------------------------------------------------------------

During construction, interest expense is really capitalized.

--------------------------------------------------------------------------------

Unidentified Analyst, [123]

--------------------------------------------------------------------------------

For Dinginin?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [124]

--------------------------------------------------------------------------------

For any plant actually that you get project financing up until the date that you COD. The interest expense is part of interest during construction and it's capitalized.

--------------------------------------------------------------------------------

Unidentified Analyst, [125]

--------------------------------------------------------------------------------

Okay. Also the interest that you incurred for the acquisition of the...

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [126]

--------------------------------------------------------------------------------

No, that's different. So it's only project finance. The one to acquire, that we start to book already since April 30 when we borrowed the money, yes.

--------------------------------------------------------------------------------

Unidentified Analyst, [127]

--------------------------------------------------------------------------------

And then my last question. I can remember that last briefing, the target COD for Dinginin 1 was...

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [128]

--------------------------------------------------------------------------------

You remember?

--------------------------------------------------------------------------------

Unidentified Analyst, [129]

--------------------------------------------------------------------------------

Yes, sir. May I ask the reason for the delay?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [130]

--------------------------------------------------------------------------------

Well, the project management team had some issues with the supply of some of the major equipment. We need to make sure -- it's a supercritical facility, we need to make sure that we really control quality, and we have a number of inspectors actually in factories all over China supplying the major equipment. So yes, we just had some delays in major equipment supply.

--------------------------------------------------------------------------------

Unidentified Analyst, [131]

--------------------------------------------------------------------------------

Okay. Sorry, just a few questions for cement. May I ask the price and volume performance in Q1?

--------------------------------------------------------------------------------

Nabil Francis, [132]

--------------------------------------------------------------------------------

I think in Q1, we have we had a solid market. And when it comes to the market growth, we are anticipating 8%, slightly lower than the previous year, mainly due to the delays in terms of budget. And this, we have suffered a lot especially with all the small DPWH programs that had to stop. And now we are also in the election ban. We need to be -- regarding volumes in cement for Q1, one of the key issues also was Easter. Last year, Easter was in March; this year it was in April. So there is not a like-for-like if you should do a comparison. So I would say market volume is 8%. Regarding Republic Cement, we have had a stronger Q1. We have over-performed the market growth. And we are anticipating this growth to be -- to range between 8% to 9% for the year.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [133]

--------------------------------------------------------------------------------

Do we have other non-power-related questions from the audience today? Yes, please.

--------------------------------------------------------------------------------

Elizabeth Santiago, [134]

--------------------------------------------------------------------------------

Elizabeth from Abacus Securities. I'd just like to ask UnionBank regarding the performance of the CSB teacher loans? What was the reason for the flat growth? Is it a decline in demand or regulatory disadvantages? And also your outlook for OpEx growth. Is the above 20% level -- will this continue for the rest of the year?

--------------------------------------------------------------------------------

Jose Emmanuel Uytiepo Hilado, Union Bank of the Philippines - CFO, Treasurer & Senior EVP [135]

--------------------------------------------------------------------------------

The reason for the flat growth was the problems we encountered with the Department of Education. So for some time, I think it was about 6 to 8 months we couldn't fill these new loans. So of course, what happens is that you get paid off. And then after it was signed, the Department of Education put in more restrictions, so it means that it would be more difficult to -- or it takes longer to lend to a teacher because it has to go through a supervisor in a specific area. So in some areas, actually, they were not even able to provide for an approving authority. So it was the adjustment phase that affected the volume and then the delay in the renewal of the agreement. On the OpEx, that is a growth on a quarter-to-quarter basis, but our projection is that our OpEx should be flat year-to-year. So this is just a quarter-to-quarter thing.

--------------------------------------------------------------------------------

Elizabeth Santiago, [136]

--------------------------------------------------------------------------------

Just a follow-up the CSB teacher loans, I guess it's a procedural delay. Do you expect this to improve this year or maybe this will be a long term?

--------------------------------------------------------------------------------

Jose Emmanuel Uytiepo Hilado, Union Bank of the Philippines - CFO, Treasurer & Senior EVP [137]

--------------------------------------------------------------------------------

It should pick up this year. It should pick up this year.

--------------------------------------------------------------------------------

Elizabeth Santiago, [138]

--------------------------------------------------------------------------------

And the 13% to 15% loan growth expected for this year, this will be mostly coming from...

--------------------------------------------------------------------------------

Jose Emmanuel Uytiepo Hilado, Union Bank of the Philippines - CFO, Treasurer & Senior EVP [139]

--------------------------------------------------------------------------------

From our consumer side and our middle market side -- credit cards, mortgages -- middle market.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [140]

--------------------------------------------------------------------------------

Thank you, Elizabeth. Do you have any other questions for our non-power business units? Yes.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [141]

--------------------------------------------------------------------------------

For UnionBank, may I know what's the share or the contribution of City Savings to the overall UnionBank income in the first quarter?

--------------------------------------------------------------------------------

Jose Emmanuel Uytiepo Hilado, Union Bank of the Philippines - CFO, Treasurer & Senior EVP [142]

--------------------------------------------------------------------------------

They actually had about...

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [143]

--------------------------------------------------------------------------------

We'll get that for you. Do you have other questions for UnionBank? Yes?

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [144]

--------------------------------------------------------------------------------

And what's the spread on the teacher’s loan portfolio?

--------------------------------------------------------------------------------

Jose Emmanuel Uytiepo Hilado, Union Bank of the Philippines - CFO, Treasurer & Senior EVP [145]

--------------------------------------------------------------------------------

The income of CSB out of the 2.17 is about 250.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [146]

--------------------------------------------------------------------------------

Sir, are you able to give us a comparative if it used to like contribute a bigger amount in the first quarter of last year?

--------------------------------------------------------------------------------

Jose Emmanuel Uytiepo Hilado, Union Bank of the Philippines - CFO, Treasurer & Senior EVP [147]

--------------------------------------------------------------------------------

That's -- it's like down by about 50%. And then in terms of the NIM, the NIM is about 6.2%.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [148]

--------------------------------------------------------------------------------

Just for the cement. So cement industry. Sir, are you able to share with us the stand-alone income of Republic? I understand the contribution is 32M loss. The total...

--------------------------------------------------------------------------------

Nabil Francis, [149]

--------------------------------------------------------------------------------

Yes. Well, the contribution to Aboitiz is not that big because today we are going through a very specific year. It's a year where basically we are revamping our capacity. And by the end of this year, we'll have increased our production capacity by 25%. So we'll move from our current 7.5 million to almost 9.5 million ton of cement.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [150]

--------------------------------------------------------------------------------

7.5 million to?

--------------------------------------------------------------------------------

Nabil Francis, [151]

--------------------------------------------------------------------------------

7.5 million ton to 9.5 million ton. And as a matter of fact, we need -- when you build new capacity in a brownfield situation, some of the assets are becoming, let's say, redundant or you need to write them off. That's why we have some additional depreciation that is somehow affecting the contribution. That's the bad news, but the good news, this is a nonrecurring item, and starting from 2020 onwards, this will not appear anymore in the accounts.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [152]

--------------------------------------------------------------------------------

Sir, what's the rated capacity inclusive of all the downtime, the parts of the plant that are not running, what's the...

--------------------------------------------------------------------------------

Nabil Francis, [153]

--------------------------------------------------------------------------------

For Republic Cement or for the market? For Republic Cement?

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [154]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Nabil Francis, [155]

--------------------------------------------------------------------------------

For Republic Cement, as of today, we are hovering around 7.5 million ton.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [156]

--------------------------------------------------------------------------------

Sir, that's the rated capacity. What's the utilization rate?

--------------------------------------------------------------------------------

Nabil Francis, [157]

--------------------------------------------------------------------------------

Well, this is the rated capacity, so when you take a mill -- a cement mill, we assume that a well-maintained mill would be running for 7,600 hours a year, which is around 88% to 89%.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [158]

--------------------------------------------------------------------------------

Sir, no mention of the loss. Sir, can you mention the amount of loss if stand-alone for the entire cement?

--------------------------------------------------------------------------------

Nabil Francis, [159]

--------------------------------------------------------------------------------

Well, in terms of operation, we don't have any losses. It's a strong recovery. We are printing a strong recovery in terms of operational EBITDA due to the positive volume trend. In terms of prices, we haven't -- cement prices on the market were stable. However, we have managed to record some profitability by improving the route to market and by some internal efficiencies. So in terms of operations, it's no losses. It's just a strong recovery there.

--------------------------------------------------------------------------------

Cristina S. Ulang, First Metro Investment Corporation, Research Division - Department Head of Research [160]

--------------------------------------------------------------------------------

Sir, how much operating income?

--------------------------------------------------------------------------------

Nabil Francis, [161]

--------------------------------------------------------------------------------

This is not a listed company so we don't communicate this.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [162]

--------------------------------------------------------------------------------

Thank you, Cristina. I think we have time for 1 or 2 more questions. Yes, Ping? I was about to say a non-power question, but Ping has already -- he stood up already. So the question after you should be a non-power question.

--------------------------------------------------------------------------------

Rafael Alfonso Javier, BofA Merrill Lynch, Research Division - Analyst [163]

--------------------------------------------------------------------------------

Manny, congrats. My question is obviously power. Quickly, I have 2 ones. The timeline for the liquidating damages at TVI, when do we expect it to be booked?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [164]

--------------------------------------------------------------------------------

Yes. If we could bring it in within the year, we'd be glad to. That's the goal. Because it really depends on whether -- what position we're going to take and what's the position of the EPC, right? But yes, we expect to -- our expectation is actually to resolve this -- the LD value by -- before the end of 2019.

--------------------------------------------------------------------------------

Rafael Alfonso Javier, BofA Merrill Lynch, Research Division - Analyst [165]

--------------------------------------------------------------------------------

Okay. Second is a -- sorry, I must have missed this. The APRI -- the issue with the steam, has it been resolved?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [166]

--------------------------------------------------------------------------------

Yes. From -- it was operating at 90 megawatts before Typhoon Usman late December, early January. Because a line -- a steam line of PGPC, the one supplying steam to APRI, got damaged in one of the landslides, the steam delivery was limited and only able to produce 50 megawatts in one of the -- in the facility. Progressively, the delivery was improved, and first week of April, we're actually at 95 megawatts.

--------------------------------------------------------------------------------

Rafael Alfonso Javier, BofA Merrill Lynch, Research Division - Analyst [167]

--------------------------------------------------------------------------------

Okay. So in the context of the replacement power, we can somehow take a view that the amount may not be replicated in 2Q given that TVI is already okay, Pag 3 (foreign language) but TV probably (foreign language)?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [168]

--------------------------------------------------------------------------------

No, the -- actually, it's not really much of the volume, but really the price. The thing is we still don’t have the final settlement with PEMC with regard to purchase power. But prices in April actually were higher to the point that the secondary price cap was triggered, which is good because whatever the offer was, the price is 625. And the price -- the secondary price cap, I think, ran for most of the second half of April.

--------------------------------------------------------------------------------

Rafael Alfonso Javier, BofA Merrill Lynch, Research Division - Analyst [169]

--------------------------------------------------------------------------------

Okay. Just last one question. Just with this chart, even if we took out the purchase power, the gross margin actually still have declined. Was it this?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [170]

--------------------------------------------------------------------------------

TMO.

--------------------------------------------------------------------------------

Rafael Alfonso Javier, BofA Merrill Lynch, Research Division - Analyst [171]

--------------------------------------------------------------------------------

TMO?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [172]

--------------------------------------------------------------------------------

When those capacity -- TMO? Yes.

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [173]

--------------------------------------------------------------------------------

Yes, because first quarter of last year...

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [174]

--------------------------------------------------------------------------------

It's 200 megawatts.

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [175]

--------------------------------------------------------------------------------

Yes. Capacity contract with Meralco, which we totally did not have first quarter of this year.

--------------------------------------------------------------------------------

Rafael Alfonso Javier, BofA Merrill Lynch, Research Division - Analyst [176]

--------------------------------------------------------------------------------

Margin, percentage.

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [177]

--------------------------------------------------------------------------------

Well, it's capacity fee, so most of that would be margin.

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [178]

--------------------------------------------------------------------------------

That's an average, that would have pulled us up on a per kilowatt hour, the TMO from last year.

--------------------------------------------------------------------------------

Rafael Alfonso Javier, BofA Merrill Lynch, Research Division - Analyst [179]

--------------------------------------------------------------------------------

It's that big that it could pull down everything?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [180]

--------------------------------------------------------------------------------

It can pull down the average.

--------------------------------------------------------------------------------

Rafael Alfonso Javier, BofA Merrill Lynch, Research Division - Analyst [181]

--------------------------------------------------------------------------------

From my calculation, it's 200 basis points excluding purchase power. 200 basis points.

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [182]

--------------------------------------------------------------------------------

It's 200 megawatts.

--------------------------------------------------------------------------------

Rafael Alfonso Javier, BofA Merrill Lynch, Research Division - Analyst [183]

--------------------------------------------------------------------------------

But in the RES, in the RES world?

--------------------------------------------------------------------------------

Liza Luv L. Tajanlangit-Montelibano, Aboitiz Power Corporation - Senior VP, CFO & Corporate Information Officer [184]

--------------------------------------------------------------------------------

Wait, sorry. And then (foreign language). We also had commissioning revenues from PEC last year during the first quarter, which is a pure sales to WESM.

--------------------------------------------------------------------------------

Rafael Alfonso Javier, BofA Merrill Lynch, Research Division - Analyst [185]

--------------------------------------------------------------------------------

Last year? Okay. But how about in the RES world, when we add more RES revenues into the mix, shouldn't it be the blend that average now has to report in more RES where the pricing could be lower? Should it effectively reduce the overall margin?

--------------------------------------------------------------------------------

Emmanuel V. Rubio, Aboitiz Power Corporation - COO [186]

--------------------------------------------------------------------------------

Yes. Typically, the value -- the contract value of our capacity contracts are actually higher than RES contracts. For one, because your capacity payment is guaranteed. So we intend to actually make up for the lower prices in RES by volume, and we have the capacity to actually contract more through new output of TVI. And well, of course, half of the capacity of TVI is also contracted with [DU] under a capacity contract plus the new contract that we have with TMO, which we did not budget for 2019. That's an upside.

--------------------------------------------------------------------------------

Judd Salas, Aboitiz Power Corporation - Investors Relations Officer [187]

--------------------------------------------------------------------------------

Thank you very much, Ping. With that, I'll have to close the question-and-answer forum. We're going to be able to continue this right after we close the forum formally. I'd like to remind everyone to please complete their survey forms. It's very important to us to keep a very good analyst briefing going. I'd also like to thank our presenters for today. Thank you. Thank you for your time today. And thank you, everyone, for joining us today. So please help us enjoy the refreshments outside, and please feel free to approach any of our executives who will still be with us today. Thank you, and goodbye.