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Edited Transcript of MER.PS earnings conference call or presentation 29-Apr-19 7:00am GMT

Q1 2019 Manila Electric Co Earnings Call

Pasig May 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Manila Electric Co earnings conference call or presentation Monday, April 29, 2019 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alfredo S. Panlilio

Manila Electric Company - Head of Customer Retail Services & Corporate Communications and Senior VP

* Betty Cheng Siy-Yap

Manila Electric Company - CFO, Chief Risk Officer & Senior VP

* Manuel Velez Pangilinan

Manila Electric Company - Chairman of the Board

* Oscar S. Reyes

Manila Electric Company - CEO, President & Executive Director

* Rogelio L. Singson

Manila Electric Company - SVP

* Ronnie Leguro Aperocho

Manila Electric Company - Head of Networks & Senior VP

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Conference Call Participants

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* Chesca Bugia-Tenorio

Crédit Suisse AG, Research Division - Research Analyst

* Jelline E. Gaza

JP Morgan Chase & Co, Research Division - Analyst

* Kayzer Llanda

Maybank Kim Eng Holdings Limited, Research Division - Analyst

* Rafael Alfonso Javier

BofA Merrill Lynch, Research Division - Analyst

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen. Welcome to the presentation of this afternoon -- this afternoon's presentation of the first quarter results for 2019. The order of presentation is as follows: financial results will be by our CFO, Ms. Betty Siy-Yap; our (inaudible) operation -- operating performance by President and CEO, Mr. Oscar S. Reyes; Senior VP for Networks, Mr. Ronnie Aperocho; Senior VP for Customer Retail Services and Corporate Communications, Alfredo Panlilio; and the report on MERALCO PowerGen by the President and CEO, Mr. Rogelio L. Singson.

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Oscar S. Reyes, Manila Electric Company - CEO, President & Executive Director [2]

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First of all, let me -- before I turn over to Ms. Betty Siy-Yap for the financial highlights that we just thank all of you for your attendance this afternoon. And then just very, very brief overview, we'll be reporting the first quarter of 2019. The first quarter saw a relatively mild increase in sales as a result of the fairly high base effect of the first quarter 2018, but notwithstanding the mild growth in the first quarter of 2019 in terms of sales. Our operations excellence continued to -- I think the features of the quarter and we turned up -- turned out favorable financial results resulting in enabling us to maintain a strong financial position liquidity and a strong balance sheet. And we will be also discussing a number of developments that provide further opportunities for growth of Meralco.

So let me now turn it over to Ms. Betty Siy-Yap for the financial highlights of Q1 2019.

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Betty Cheng Siy-Yap, Manila Electric Company - CFO, Chief Risk Officer & Senior VP [3]

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Good afternoon, ladies and gentlemen. I will be reporting -- good afternoon, ladies and gentlemen, I'll be reporting the results of Manila Electric Company. For the first quarter ended March 31, 2019, Our gross revenues grew by PHP 75.4 billion, 6% more than the PHP 70.8 billion in 2018. Our consolidated electric revenues representing 98% of total revenues grew 7%, and major driver for the increase in electricity revenue is the higher pass-through charges, which grew by 8% to PHP 59.4 billion resulting from the combined effects of the higher cost of gas and coal, the weakening of the Philippine peso versus the U.S. dollar and higher prices in the wholesale electricity spot market, in turn, which drove -- which was driven by the higher -- driven by the power supply shortage. Distribution revenues also registered a 1% growth due to the increased volume of energy sold even though the consolidated average distribution base per kilowatt hour was PHP 0.02 per kilowatt hour lower.

The volume of energy distributed by Clark Electric Distribution Corporation, CEDC, our 65% owned subsidiary, grew 10% to 132 gigawatt hours.

Our nonelectric revenues were at PHP 1.7 billion, 3% lower compared with 2018. Total operating expenses grew 3% year-on-year to PHP 6.3 billion with labor, contracted services and information technology, licensing and maintenance continuing to be the major expense items. Depreciation and amortization grew by 7% on account of the implementation of emergency capital expenditure. This was necessary to comply with customer and [load] growth requirements to improve service, efficiency and customer experience; ensure network resiliency and hardening; and to meet the IT security and safety requirements.

Our consolidated CapEx in 2019 for the first 3 months of 2019 amounted to PHP 4.3 billion, 43% higher compared with 2018. Pending approval of CapEx by the Energy Regulatory Commission, not covered by the partial approval for the first and second regulatory years of the fourth regulatory period. And Meralco manifested substantially, all of its CapEx applications, excluding those related to Automated Metering Infrastructure, or AMI, as necessary -- as emergency CapEx given the urgent needs and the limitation and extended sweating of the existing facilities. Soon after the said manifestation, Meralco began the implementation of such CapEx, prioritizing those related to new load requirements, upgrades and/or replacement of critically loaded facilities, asset renewal and safety, among others.

Our CCNI for the first 3 months of 2019 was at PHP 5.6 billion, and it was largely coming from the higher distribution revenue underpinned by the 2% growth in energy sales volume, the positive contribution from Clark Electric Distribution Corporation following the settlement in 2018 of an unexpected claim by the Clark Development Corporation over the distribution earnings of CEDC from 2014 to 2018 and the turnaround operating result of the company's retail electricity sales units.

The improved yields on placement and the reversal of excess provisions related to the settlement of legacy fiscal issues in the first 3 months of 2019 also provided some uplift to the consolidated core net income.

Contribution to CCNI of nonelectric subsidiaries in the first 3 months of 2019 was PHP 220.5 million driven by the continued growth in payments fulfillment and telecoms-related service revenues of CIS Bayad Center, Inc. and Radius Telecoms, Inc, excluding development and pre-development expense, the operating expenses of MERALCO PowerGen Corporation, MGen continues to incur selective project development expenditures, even as it awaits regulatory action on the Power Supply Agreements, filed on April 29, 2016, in order to limit the adverse impact of delays in building much-needed new power generating capacity and safeguarding the country's energy security, especially given the recent Yellow and Red Alerts by the National Grid Corporation facility.

Our consolidated EBITDA was at PHP 8.8 billion in the first quarter of 2019 with EBITDA margin on consolidated revenue flat at 12%.

Core earnings per share was at PHP 4.97 per share for the first 3 months ended March 31, 2019, while reported earnings per share was at PHP 5.032 per share.

Our interest-bearing loans and borrowings were at PHP 31.4 billion. Total principal debt repayment inclusive of financial and related charges amounted to PHP 9.4 billion.

In February 2019, holders of PHP 8.7 billion of Meralco's 7-year fixed rate loans exercised a put option, which accounted for the substantial portion the company's debt repayment during the first quarter of 2019. Availment of short-term loans by certain subsidiaries amounted to PHP 200 million.

Cash and cash equivalents, excluding long-term investments and placements of maturities beyond 90 days, were at PHP 36.1 billion as of the end of March. Short-term placements beyond 90 days, restricted cash, debt securities at amortized cost and financial assets at fair value through other comprehensive income, totaled PHP 63.5 billion as of the same date.

Our gross debt to EBITDA stood at 0.89x. Meralco maintains a strong balance sheet and liquidity position with net debt to EBITDA at negative 0.13x.

For the quarter ended March 31, 2019, total financing expenses amounted to PHP 442 million.

That ends my report.

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Oscar S. Reyes, Manila Electric Company - CEO, President & Executive Director [4]

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Thank you, Ms. Siy-Yap. Let me now give you the operating highlights. First of all, let me do a quick overview. First quarter 2019 saw energy sales increase by 2.3% to 10,381 gigawatt hours against a high base in first quarter of 2018.

Customer count. Our customer base continues to grow at a healthy rate of 4.5% to 6.680 million discrete customer accounts, then I will go to the previous [update] on this later.

Peak demand is up 1.2% to 6,950 megawatts and the company's net system input or electricity running through -- the volume of electricity running through Meralco's wires was up 2.1%, slightly lower than the energy sales of 2.3% in negative point system loss performance.

The average customer's bill or retail rate was PHP 9.13 per kilowatt hour, 7.9% higher than the average rate of the first quarter of 2018. I'm pleased to report that the company continued to outperform both the regulatory targets set by the Energy Regulatory Commission for the third regulatory year of -- third regulatory period and -- as well as our own performance in prior years, and we will give business updates -- second business updates later.

Now for the details. On energy sales, as I mentioned, for the first quarter of 2018 (sic) [2019], total energy sales reached 10,381 gigawatt hours, up [3%] over 2018 first quarter of 10,145. You may recall that our 2018 first quarter saw an 8.9% increase over 2017. So we have a very high base in 2018, and therefore, 2019 suffered from the high base effect. This increase was driven by an increase, first of all, in industrial class of market, our customer class, which grew by 4.4% in Q1 2018 compared to the 10% growth of Q1 2018 over 2017.

Commercial was up 2.2% over 2018, and 2018 was, in turn, 7.9% higher than 2017. Residential hardly grew -- residential kinds of customer class rose by only 0.4% in the first quarter of 2019 compared with the 9.2% growth of 2018 over 2017. So we see the (inaudible) cost on the back of the impact of the high base effect.

Mr. Panlilio will now give an explanation of the drivers behind this result.

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Alfredo S. Panlilio, Manila Electric Company - Head of Customer Retail Services & Corporate Communications and Senior VP [5]

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Thank you, sir. Hi, good afternoon to everybody. As indicated by Mr. Reyes, (inaudible) slow residential growth in the first quarter, 0.4% only or positive 12 gigawatt remain versus a very high base in last year. We grew 15% in 2018 compared to the previous year 2017. So how we monitor this is we have a consumer ramp-up, which contributed growth to us with 70 gig. We have energized customers from last year, and now they're ramping up. But this has been tempered obviously with the decline in our organic traffic or customers who have been with us in previous years.

So it's 4 gigawatt hours [per year] contributed by 65,000 new customers and expected to pick up as we go on through the year.

The growth is really coming from the South, remains to be leader in volume. We had 31 gigawatt ramp-up with Alabang, Taguig, Las Piñas, Parañaque and Rosario. And North comes second with 23 gigawatt ramp-up.

We're also -- there are a lot of projects that we have that we work with government, NHA, EMC areas, RAISE and LGU Housing. We also need more accounts to be put into the system.

For organic, again, a decline. Temperature has been relatively flat, although inflation is also flat and there was fear of spending our consumers and confidence -- our consumers' confidence is relatively flat. But having said that, [in income], we see a big turnaround in April especially for residential and especially the warm weather. It's really (inaudible) this month of April. We're looking at 6-plus percent growth in [component] in turn. So of course, contribution in second quarter are your peak months in terms of demand, and you will see that starting in April.

So for Commercial and Industrial, Commercial grew as a sector 1.9% or 4,057 gigawatts total driven by the top 3 accounts.

Our real estate grew by 4.8%. Real estate remains to be very strong and remains resilient in 2019, although despite the fact they didn't -- some delays in construction and accreditation. We can see a lot of new residential condominiums in the pipeline for upper-mid to luxury segments in Makati and BGC. And as you know, there's an influx of expatriate employees for BPOs and especially from the POGOs. So sales demand, we continue to see the top account, the Pearl Plaza, Meridian Park and Circuit Makati. Circuit Makati has been fully constructed and still ramping up in terms of its commercial and condominium towers.

Hotels and restaurants grew by 2.7%, continuous growth in the hotel industry, fairly increasing influx of foreign tourists. Last year, we had about 7.1 million tourists come in, forecasted this year is a ramp-up of about close to 8.2 million in 2019 as well as local tourism is also increasing.

Estimates for the next 3 years, hotel outlook remain to be bullish with more than -- about 9,000 hotel rooms in the pipeline within the franchise. A lot of it in Makati, 2,100; in Parañaque, 3,000; in Taguig, 1,600.

Storage. Normally, the storage segment is very strong in Commercial retail side, these are your commercial malls and mixed use locations. This first quarter, we see storage being #3 mainly driven by the F&B sector. F&B production increased certain demand for cold storage requirements of the distribution channels. Consumer habits also demanding fresh and frozen produce, so -- as well as growing online and grocery, e-commerce presence where cold storage facilities are -- have the support they needed.

So top 3 accounts -- sorry, going back to the hotel, Sheraton Hotel, Hilton Hotel, that's where the New World property is. So this (inaudible) covered incident 2 years ago. And then the Grand Hyatt, of course, continues to be on top. For storage, FRABELLE COLD STORAGE, Royal Cargo and SUPER FIVE COLD STORAGE.

Going to industrial, a growth of 5% of 3,068 gigawatt, an increase in production of cement from (inaudible) period (inaudible) retail supply -- expansion of all 4 plants of Eagle Cement totaling new requirement of 36 gigawatts and average demand of about 68 [megawatts]. And aside from cement, glass production in support again of the global U.S. [base] is also on the rise mainly from San Miguel Yamamura for glass bottle -- sorry, the beverage part of it, but they have doubled their production. So Eagle Cement 3A and B and San Miguel Yamamura [with that account].

Rubbers and plastics, mainly driven by the shift of JG Summit Petrochem to grid power, and 50% of their load now is in Meralco. And demand for increased packaging solutions, which drive also companies like Manly Plastics and FIBC Greenbag.

And lastly for Food and Beverage, slower growth in prices in heavily weighted food, nonalcoholic and alcoholic beverages compared to 2018, but continued -- there's (inaudible) perishable goods and trade production as witnessed, as I mentioned earlier, on cold storage growth and mirrored with some top accounts like San Miguel, Purefoods meat and products and having increase its demand, the San Miguel, Purefoods and Marulas and Zenith Foods.

Thank you, sir. Thank you.

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Oscar S. Reyes, Manila Electric Company - CEO, President & Executive Director [6]

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Thank you, Al. Now let me just go to Meralco's customer bill that I mentioned earlier. Pleased that the expansion or growth of Meralco's customer base continues to grow at a healthy pace. In the first quarter of 2018, these are up 4.5% to 6.682 million discrete customer accounts, slightly lower than the growth in 2018 over 2017 of 4.8%.

Now in terms of numbers of population, this still represents roughly about 1/4 of the total Philippine population of 4 to 5 persons per household.

Residential grew by 4.8%. So the growth of 4.5% was mainly driven by residential customer class, which now numbers as of end March 2019 at 6,150,000 customers that represents 92% of the total customer base of Meralco, so up 4.8%. Followed by Commercial with about 516,650 customers or 7.7% of our total customer base, and that is an increase of 2.8% over 2018. Industrial number, number is only about 10,600 customers, but they contribute over 30% of the total sales, and that's up by 2% over 2018.

Part of the reason why 2018 first quarter was relatively low is, aside from what Mr. Panlilio earlier cited, the effects of innovation in the fourth quarter, the impact of high inflation in the fourth quarter of 2018, which affected consumer confidence particularly households and individuals.

Temperature was another factor to the first quarter of 2018 -- '19. It was slightly cooler than first quarter of 2018. That's a 26.8 degree centigrade compared to 27.1 degree centigrade. There were also other economic factors such as higher -- slightly higher exchange rate, interest rates and commodity prices particularly fuel that affected sales in 2019 first quarter.

Meralco's 65% subsidiary in the Clark Freeport Zone -- Clark Electric Distribution Company, so it increased by over 9% -- 9.9% to 132.1 gigawatt hours and customer count was up to 2,357 discrete customer accounts over 2018.

Net system input was 135.5 gigawatt hours, and the growth there was slightly lower than the growth in energy sales indicative of improved system loss performance.

Meralco's net system input for volume electricity turning to our wires was up 2.1% to 10,993 gigawatt hours. This is lower than the increase in sales of 2.3% for the first quarter, again, indicative of the improved system loss performance.

Our first quarter 2019 peak demand in the Meralco franchise area was 6,950 megawatts, up 1.2% over the peak demand in 2018, the first quarter of 2018. Total full year 2018 peak demand was 7,388 -- 7,399 megawatts. And I'd like to just advise you that, as of April 22, our franchise area where we saw this exceeded 7,493 megawatts. So much higher peak demand in 2019.

Luzon peak demand was 11,004 megawatts, which was registered in April 24, 2019, up 1.2% over the total mid-peak of 10,876 megawatts. But on a quarter-to-quarter basis, peak demand for the Luzon grid was 2.5% higher.

In terms of energy sources or where electricity (inaudible) Meralco wires has been sourced, our Meralco's contracted Power Supply Agreements and Power Purchase Agreement for independent power producers, so contracted supply accounted for 59.6% of total net system input or electricity with the Meralco wires.

Retail electricity suppliers, including Meralco's own RES in power and Advantage accounted for close to 30% of total net system input while the balance of about 10.5% was sourced by Meralco from the wholesale of electricity spot market at 9.1% and special contracts of 1.4%.

In terms of the type of plants that provided this electricity, Meralco's contracted natural gas-fired power plants contributed 43.3% of total net system input. So natural gas accounts for roughly 43.3% of total net system input.

Contracted coal plants contributed 27.2% of net system input while other fuels including coal -- so coal, hydro, geothermal and biomass plants accounted for 29.5% of total net system input. This relates to power (inaudible) by -- retail electricity suppliers other than Meralco's as well as electricity being sold by Meralco from the wholesale electricity stock market, both of which have less visibility on as to this exact source.

Now on average customer bill. The average customer bill for the first quarter of 2019 was PHP 9.13 per kilowatt hour, up 7.9% or PHP 0.67 per kilowatt hour over the first quarter of 2018, which was PHP 8.46 per kilowatt hour.

The largest component continues to be the generation charge within the region, which is close to 60% of the total customer group, that's the largest component at PHP 5.47 per kilowatt hour, PHP 0.80 higher per -- kilowatt hour higher than in the first quarter of 2018.

Meralco's own distribution charge was slightly lower by PHP 0.01 per kilowatt hour, and that constitutes only 15.1% of the average customer bill. This used to be in the order of about 18%, now it's down to 15.1%.

Transmission charge of the natural grid was PHP 0.83 per kilowatt hour or PHP 0.02 lower than in first quarter of 2018 and accounts for about 9.1% of the average customer bill.

Taxes, universal charge and, I think, allowance was about PHP 1.09 per kilowatt hour or roughly 11.8% of the customer bill. And system loss was PHP 0.37 per kilowatt hour, PHP 0.02 higher than 2018, and it accounts for about 4% of the average customer bill.

In terms of -- [honorable] Mr. Chairman, thank you, thank you for joining us. In terms of system loss performance, Meralco's (inaudible) performance on a 12-month moving average (inaudible) by end March 2019 was 5.6%. Again, very close to the record -- the 116 new record of 5.48%. This 5.6% is 1.65% lower than the system was capped as loss reduced at 7.25%, effective January 2019. So we've seen Meralco continue to outperform the ERC system of (inaudible) of [18.5%] that continued up to June 2018 and 7.5% that was in effect from July 2018 to end December 2018. And mix effect translated in significant savings to Meralco customers, as well as system average interruption frequency and duration indices and customer average interruption duration indices. So that's voltage quality, average time to process applications and Energias customers, call center performance and system loss, all outperformed the regulatory targets that were set by our regulator -- Energy Regulatory Commission for the third regulatory period and the same with our guaranteed service levels at the customer level.

For other business updates, can I ask our Head of Networks, Mr. Ronnie Aperocho, to kindly cover this?

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Ronnie Leguro Aperocho, Manila Electric Company - Head of Networks & Senior VP [7]

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Thank you, sir, and good afternoon to everyone. We all know that a week ago, exactly last Monday, a very strong earthquake of magnitude 5.1 hit Zambales and Pampanga and we also felt the tremors here in Metro Manila. The good thing is that our entire franchise was not hit badly, except for the -- as a result of the multiple plants that tripped out during the earthquake on the other automatic load [trappings] affected 99 circuits, but the power was restored in less than 10 minutes.

But we also know that Porac in Pampanga was badly affected and Meralco somehow displayed its brand of (foreign language) and (foreign language) and that's why immediately after leaving the [cone] of the Department of Energy and the politicians in Pampanga, we immediately dispatched our crews, bringing with them gen sets, lighting equipment and heavy equipment. And, in fact, Meralco was the first responder, and we arrived there at exactly 10:00 p.m. of the same day.

And at the time, Ground Zero was without power. So the 21 gen sets and the 42 (inaudible) that we brought in really helped a lot in the search and retrieval process and in the rescue process, I would say, and immediately after, we sent also our cranes, 20-pounder and the 30-pound cranes that really helped a lot in supporting the structure from further collapsing during the search and rescue operations.

And also One Meralco Foundation Manila provided food packs and drinking water for rescue volunteers and we also provided charging stations for the volunteers for their communication equipments and mobile phones.

And by the way, I'd like to share also that today is another Red Alert day (inaudible) for the month of April that we are resorting to [manual graphics] because of insufficient capacity for that Luzon grid and the problem has been compounded further because as of now -- until now, there are still 3 plants in Bataan that are still isolated, the GNPower and the 2 new units at San Miguel power plant in Limay, Bataan.

Okay, next slide, please. And of course, CapEx. Meralco's CapEx -- we're ramping up our CapEx execution for this year to strengthen our network infra and fully ensure the requirements of our customers. And the bulk of our PHP 12 billion budget for this year has been allotted to new customer connections, which is around 43% of the total budget at around PHP 5.14 billion and PHP 3.51 billion is for asset renewals and maintenance. For load growth, we have a budget of around PHP 2.22 billion.

On top of this, we have also allotted a budget for the urgent relocation of [employees] that are affected by the government's BBB and [PP] Programs, which I will be discussing later on.

And for projects related to new customer connections, we have energized already for the first 3 quarters -- for the first quarter, close to 79,000 new customers and completed 1,570 big projects to serve the needs of new customers.

And to address capacity issues brought about by the ramp-up in consumption, especially during the (inaudible) demands of existing customers, we have also replaced 167 overloaded distribution transformers. And substantial part of our CapEx for this year has been utilized also to replace 18 poles, upgrade conductors, replace old meters and also station equipment. And shown on the screen are the major system requirement that we have lined out for the year to address the load growth of our -- within our franchise areas. And as you can see, the first one in April is the development of Southwoods Substation in Biñan and in Carmona. And towards the end of the year, we are scheduled to complete Bridgetowne Substation, Eton Centris Substation, Tagaytay West, San Mateo Substation, San Mateo-Diliman-Marikina 115 kV Line as well as the (inaudible) development of Calamba 230 kV, 115 kV Delivery Point Substation.

Okay, next slide, please. And for BBB Projects, there's already sort of a very strong pressure from the government especially from DPWH and the Department of Transportation. We're asked to clear the BBB project sites of poles and other obstructions. And shown on the screen are the major BBB projects that have been prioritized by the government and most of these -- most of the timelines related to the completion of these projects are somehow nonnegotiable on the part of government. And of course, this would require huge resources to be diverted to these projects and somehow affect also the execution of our several CapEx programs.

And somehow, we have managed to meet the timelines of the stakeholders and we have already allocated close to 2,300 homes out of the -- more than 3,000 homes affected.

So these are the 5 priority BBB projects being posed by the government. In fact, they engaged us on a monthly basis. They set up the meeting with Meralco just to really push the timeline for Meralco to complete the committed relocation timeline, as they have requested.

And the first one is the NLEX Harbor Link

Segment 10 that are completing the connection between R10 in the north area and the newly completed Segment 10 project and they wanted this link to be completed in December of this year, but for us to be able to meet the timeline, of course, the timeline set for us is made for the distribution lines and all cost for the transmission lines. And of course, for us to be able to renovate the affected facilities, it's very important for NLEX also to get the affected sites that would (inaudible) the areas where Meralco will be relocating its new poles. So we're working closely with NLEX on this.

And the next one is, of course, the PNR North 1 project, especially for package 2 that's the Bocaue to Malolos spreads. It's around 15 kilometers. It's been awarded already to a Japanese contractor and the contract was already signed last January 25 and the groundbreaking was held already last February 15.

And package 1 is coming between Tutuban to Bocaue and it's 23 kilometer spreads and it has been awarded already to the DMCI consortium and the fact that contract signing is next month. Okay?

Next slide. This is LRT Line 1 extension. As I have said, the OPR has scheduled the groundbreaking or there's extreme pressure from the Department of Transportation and we have already set the groundbreaking on May 6.

The pressure is coming from the fact that the loading [stacks] have arrived, but unfortunately, this project has been beset with serious bottlenecks and they have to revise the designs for -- we have to go through several revisions in the design because at the end, (inaudible) issues. Also limitations on the height because these are blind spots of the [NAIA] terminal as well as there are water inland channels to avoid our relocation airports.

And there's also this risk to global power interruption, but I think a big number of our customers during the relocation works.

And second to the last is the BGC-Ortigas Center Link Project, which will, somehow, improve the traffic flow from BGC all the way down to Ortigas but, of course, before we can relocate the affected poles, it's important for DPWH and the stakeholders also to demolish the effected site on a local avenue in Barangay, Cembo in Makati.

So next one. C5 Southlink Expressway Project especially the Phase I that would somehow finally interconnect C5 road to the Southlink area near Merville. So we have already completed the Phase 1 relocation and scope of works and now we're moving ahead to relocate more facilities down the line towards Parañaque.

So these are the key building projects and of course, we keep on engaging the stakeholders, especially the DOTr and DPWH on this. Thank you, sir.

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Oscar S. Reyes, Manila Electric Company - CEO, President & Executive Director [8]

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Thank you, Ronnie. And I now request Mr. Al Panlilio to give business updates on customer paying services and marketing.

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Alfredo S. Panlilio, Manila Electric Company - Head of Customer Retail Services & Corporate Communications and Senior VP [9]

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Okay, sir. Hello, again. As you know, we embarked on our [cost experience] transformation last year. We launched our Meralco Online platform. Just wanted to give you a quick update on the metrics (inaudible) that we're monitoring.

[Not even] -- we can go to the April -- as of April, we have already almost 225,000 accounts using Meralco Online; 270,000 have already downloaded. So our plan is to make them use it as we -- as they engage with Meralco.

We have 11,332 registered for paperless billing and we have also 170,000 online payment transactions that have gone through the platform since September, amounting to about -- almost PHP 500 million that have gone through the system. (inaudible) compared to our customer base and amount of collections that we do every month but (inaudible) for our customers to have another platform for them to engage with Meralco.

There's also during [free launch], we talked a lot of the Red Alert and Yellow Alerts. Part of now of Meralco Online is the feature to see the outages are on the bottom line. We have an outage map linked to Meralco Online. And during -- in fact during the Red Alerts last week, during that time, Emilio went to our call centers (inaudible) and he showed the screenshots that you see in front of you and there he tell them the [sit] level in terms of where the troubles are. Of course, (inaudible) network this is all linked with the area network and we're also aware of all these troubles and as troubles clear up, we're able to also update (inaudible) for the platform for customer (inaudible) and for our internal systems.

Last March, we actually also had our eighth Luminaries. As you know, this is our annual program where we highlight engagement and our relationship with our customers. This year, we had a team where -- so that they can have partnerships with the (inaudible).

Every year, we do recognize partners from an LGU. This year, City of Biñan and Makati won those awards and, for this, Joliant RNN Corp. and ChocoVron Global Corporation, won it, and [CBG] won best development corp (inaudible) Robinsons Land Corporation.

And since it's the eighth year, we also had a look back on the previous [partners] with us and how to continue to affect the community being charge -- and change people's lives and we recognize, again, City of Bacoor, mainly (inaudible) taking the efforts to (inaudible).

Another significant event that happened in this first quarter is -- we signed up the O&M for Isla Verde Solar PV in Batangas. As you know, it's an island off Batangas City, completely off grid and we were able to sign them, supplying them with solar gen set -- solar battery combination in (inaudible). We signed a contract on January 22. And last February 15 -- again, it is ongoing (inaudible) led by Secretary Babes Singson, (inaudible) in Batangas. The ceremonial program to launch its Electrification Program with Batangas.

Every month, we continue to communicate with you in terms of how (inaudible) movement all of our bill (inaudible) and I think that we also give thanks to our customers as part of the advisory for energy efficiency and also (inaudible).

We also have a lot of cost initiatives and programs. In terms of -- we have forums that we come up with (inaudible) this [microbiz] partners, (inaudible) cities, highlighting, again, transformation that we can share with others and in terms of savings, in terms of solutions, in terms of (inaudible) and whatever requirement that the customers need to better their business.

We also ramping government. One of the key components of the (inaudible) with World Bank in the ramping that the government has asked if getting electricity service and we will include that very much with the help of Secretary (inaudible) Lopez and (inaudible) initiatives to support those programs also.

Lastly, and this is going to be very important in May. We are -- it's for our preparations for the midterm elections on May 13. We are coordinating with DOE, (inaudible) and also involving (inaudible). Like in 2016, we are going around and telling them -- educating them that we should not put more appliances than it should so we don't have any problems. We are also preparing (inaudible) on the accrual of (inaudible) to make sure that all the voting staffers and (inaudible) and [Comelec] and all the (inaudible) and these are secured and [not] powered.

Like in 2016, we will also publish Meralco media center downstairs in the lobby for monitoring, so we will continue to do that.

And last page, really more our activities, initiatives and communicating through -- especially the [voting] centers what to do and what not to do to prevent any issues. Thank you.

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Oscar S. Reyes, Manila Electric Company - CEO, President & Executive Director [10]

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Thank you, Al. And I now request Secretary Singson to provide an update of the New Clark City as well as MERALCO PowerGen projects.

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Rogelio L. Singson, Manila Electric Company - SVP [11]

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Thank you, Mr. Reyes. Good afternoon to everyone. For your information, we will be signing tomorrow our joint venture agreement with BCDA. If you recall, Meralco together with our Japanese partners, led by Marubeni, Kansai Electric Power and CHUBU Electric Power, we won the bid for the planning, construction and the development of the electric power distribution in the New Clark City.

The New Clark City as a planned community has a total of 9,400 hectares, all government-owned. And once fully developed, we expect about 1.1 million people inside New Clark City.

What you see there are actual pictures of the construction being undertaken by the (inaudible) contractor, MTD. You have the swimming pool for the Southeast Asian Games, the Village for Athletes, government center and the [Oval]. So this should be completed by end -- by August or September for testing and for the hosting of the Southeast Asian Games, end of November until, I believe, about December 10.

The role of the joint venture with Marubeni is to provide -- (inaudible) to hookup the substation, which you see on the left and the power distribution lines by the June of this year.

So right now, we have been engaged by the [BCDA-contractor] MTD to do the detailed design as well as the final alignment of (inaudible) will be as well as the underground cables that will connect to these facilities.

So we're confident that we will be able to deliver our commitment now and we just expect the (inaudible) to come up with its own commitment to provide the franchise or the operations in the New Clark City.

So these are actual sites in the New Clark City development.

Now going to power generation, (inaudible) power, which is 455 megawatts net supercritical coal-fired power plants in Mauban, Quezon. We are right now at 99.66% in terms of accomplishment, project completion with our EPC contractor. We will be commissioning end of September of 2019. So right now, we're in the process of very critical synchronization with the [grid]. So we hope to be able to at least make available, hopefully, a big chunk or 60% to 80% of the power plant even before commissioning that's assuming we have (inaudible) capacity or there is a need for it -- and we think there will be a need for it.

So we're confident that we will be onstream and the full benefit of San Buenaventura will be in the fourth quarter but the full benefit will be in 2020.

Now the next major project of MGen is the Atimonan One Energy, which is the first in the country -- this is the first 2x600 ultra supercritical. So it's even more modern than the one in Mauban. And both -- under both, we claim to be operating under the new technology, which we refer to as high-efficiency low emission coal-plant powered plants.

Backed up a little bit, we were able to host the ERC commissioners to visit the San Buenaventura power last week and they were quite interested with what's happening there. And so we were hoping that after seeing the efficiency of supercritical, they should be happy to (inaudible) supercritical coal-fired plant in Atimonan.

So if you recall, we already have the Certified Energy Project of National Significance from DOE with the pioneer project status with DOI and recently, we already submitted the comprehensive (inaudible) plan for Atimonan, which was [retrieved] by the LGU and the various stakeholders in the community.

In terms of renewable energy opportunities, we continue to look at available existing or solar projects that are under development. We see the need for Meralco under this renewable portfolio standards for some space for renewable energy and we'd like to be in that space as soon as we're able to put in place some of these renewables. And we are confident that we will be sharing and by next year, a pretty substantial amount in the renewables. Unfortunately, we cannot disclose where these are, who are the parties we are talking to, but nonetheless, we can just say that we would like to deliver space especially in the Luzon area.

Mr. Chairman, that's all.

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Oscar S. Reyes, Manila Electric Company - CEO, President & Executive Director [12]

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Thank you, Mr. Babes Singson. I'm glad that we are done by our board's finance committee chair for the past 10 years and recently, our Deputy CEO. Can we -- with his permission requesting to provide his own take or perspectives and views on the disciplined challenges. I think, it's okay, with you? (inaudible)

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Manuel Velez Pangilinan, Manila Electric Company - Chairman of the Board [13]

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(inaudible) Thank you. Just a few notes, which I actually mentioned to the press earlier this afternoon.

One of the main challenges that we see, obviously, is the regulatory events in front of us. So mainly in relation to the forthcoming [fourth] regulatory period. The fourth regulatory period will end June of this year and the fifth begins in July 1. So that will temper, obviously, the rate setting process that we are preparing ourselves for and, at this stage, there are a lot of unknown (inaudible) in terms of what should and should not be considered in determining this new tariff considering also that the tariff has actually been set for the fourth regulatory period. So what we can assure the investors is that we are in Meralco studying this very closely and keenly and we have had frequent meetings about it.

In terms of the overall business, I'm optimistic, as presented by Oscar earlier. I think we do see very good growth happening this year over the first quarter (inaudible) compared to the muted (inaudible) period we have seen, the uptick happening in the subsequent quarters.

The other point of emphasis of Meralco is after the support behind MGen in terms of its power generation initiatives, We are -- we remain committed to invest in significant capital in power generation and invest in new plants, and I would say these are the plant that we're looking at because we are actually focusing our attention in our supercritical plants more than any other coal technology at this stage.

And we are happy to hear that San Buenaventura will soon come online. I think that it's around September and we'll have our commercial operation date.

As we speak, the process of energy situation is ongoing and hopefully, that will be completed very soon and that will lead then to COD happening in some time September unless we could actually make that happen earlier.

There is also focus on our part in renewable energy. I think we all know that the world is (inaudible) to renewable and the Philippines is not going to be -- (inaudible) is going to be one of those who will have to look (inaudible) As a new source of utility scale power supply. (inaudible) and I mentioned to Oscar that we may have to look at offshore wind indiscernible] because it is apparently a very proven technology that it will -- it has been a way by which issues on land have been addressed for many of the swing projects especially in a country where the terrain is a challenge for wind projects. They say at least that the people that they have met with in the Philippines can be a good candidate for offshore wind because we are not a large country and the wind in the Philippines seems to be good.

Having said that, it requires serious wind resource study before we can let any progress on this onshore wind, but certainly, we should look at that in the same way that we are looking at onshore grid.

There are other initiatives that we are looking at outside of the regulated space. We are focusing, we will be focusing our attention also in supporting our Radius Telecoms. I think there's a good prospect for expanding this -- this does increase its revenue and I personally am also bullish about the Bayad Center. I think we will have more information about how we develop these strategies for Radius Telecoms and for Bayad Center in the near future. Thank you.

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Oscar S. Reyes, Manila Electric Company - CEO, President & Executive Director [14]

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Lastly, I'd like to just thank our Chairman, Mr. MVP, for joining us, taking the time to join us this afternoon. And sir, perhaps you might want to give your own take?

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Manuel Velez Pangilinan, Manila Electric Company - Chairman of the Board [15]

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Well, thank you, Oscar, and I know I haven't been with you for quite some time. So -- not that I have much to say today, but feeling -- hoping we could engage in some questions with you. We said in our press announcement that it's quite difficult for Meralco to give with some degree of certainty as to how we can --[think the] '19 numbers will work out in terms of the whole year. And it's mainly driven by the fact that we, at this stage, there is no visibility, one way or the other, as to what the tariff will be flagged for the -- starting in July for the fifth RP, no. Until there is some clarity about that and it's been difficult for us to see how '19 would look like.

Now having said that, there's a fair degree of certainty that the first half of the year, given we worked the numbers you've seen for the first quarter, and I think it's been said that [29%] growth in volume for April, again very, very warm months. We can see this on May, June. Quite likely, the second quarter numbers, we think volume of Meralco is going to be quite, quite, quite significant. So we expect the second quarter to be another good quarter for Meralco. So I believe the first half numbers should be better than the first half last year, no? So thank you.

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Oscar S. Reyes, Manila Electric Company - CEO, President & Executive Director [16]

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Thank you, Mr. Chairman. [Maita], over to you.

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Unidentified Company Representative, [17]

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(Operator Instructions)

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Philippine Equity Partners, Ping Javier.

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Rafael Alfonso Javier, BofA Merrill Lynch, Research Division - Analyst [2]

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I just have 4 questions here, 3 for Ms. Betty and one for the Chairman. For Ms. Betty, I just want to quantify how much was the Clark settlement? That's number one. Number two, I want to further understand how you were able to turnaround your retail business during the first quarter. I'm particularly looking at whether you had available contracts or available capacity during the quarters that you were able to contract. And the third, I somehow noticed your effective tax rate for the quarter fell from 28% to 24%. If you could have -- any explanations for that would be appreciated. Those are my 3 questions for Ms. Betty. And for the Chairman, I just want one -- I have one quick question here. I understand there is uncertainty on the tariff path over the medium term, and you mentioned 2019 would be difficult to have a guidance as of the moment, but my question is how realistic is a July -- is a new tariff by July? How realistic that we could have a conclusion over that in the third quarter or fourth quarter at the least?

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Manuel Velez Pangilinan, Manila Electric Company - Chairman of the Board [3]

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Well, let me start first, and then Betty can give you the details of the first 3 questions first. In terms of the tariff timetable, it is -- our sense is that it is unlikely that there would be any approvals that could be procured in the second half of 2019 and expect the fifth RP, no, because we have not actually started the formal process of discussion with the ERC in respect with the [tariff fee]. So quite likely, the only agreement with ERC on the feed parity tariff will probably be early part of 2019 or very likely perhaps middle of 2019. So I think that the -- so the question, the collateral question in your mind must be what do we do in the interim while the ERC was contemplating what the appropriate tariff or the feed tariff be. I think what's likely to happen is that we would probably proceed with charging the same tariff rate of PHP 1.38 for which we have had in provisional approval for the fourth RP. So that is likely. Unless, of course, you're told otherwise by the (inaudible). We're assuming that, that could continue for the balance of the year and heading for the early part of 2020, no? So on that basis, the billing rate for Meralco would be -- assuming at least for planning purposes, we'll continue till the end of the year at least -- the early part of the year (inaudible) In which case, the number should look -- could look (inaudible), but the numbers for the full year 2019 are, of course, protected, no, are protected. So on the whole, taken in the round, I think the 2019 numbers should be quite good, no?

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Betty Cheng Siy-Yap, Manila Electric Company - CFO, Chief Risk Officer & Senior VP [4]

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Okay. To your first question, how much was the Clark settlement? There's (inaudible) last year. It was over -- a little bit over [1 50]. That is with respect to the distribution revenues of Clark from 2014 until 2017, no, which CDC claims, no? So that was recorded in the financial statements of Clark last year.

The second question is how were you able to turnaround RES? Well, with respect to RES, no, last year, we had a negative number in the first quarter. For this year, it was positive. So the effect was effectively doubled, and that contributed to our bottom line. And this is largely due to significantly better terms or (inaudible) no contracts that they had contracted the power supply contracts of RES. So that effectively helped them manage what they're able to sell.

The third question is effective tax rate. In the past, we evaluate our tax position, and for 2019, our position is we will still be using the optimal standard deduction, no, which is if the -- optional standard deduction. So we take 40%, no? In terms of deduction, we take 40% of your gross income instead of opting for the itemized, and that effectively would bring down the effective tax rate. And we had already taken this in the first quarter of 2019, no? In the past, there were regular assessments throughout before we did -- before we do the adjustment in the later period.

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Unidentified Company Representative, [5]

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Okay. Thank you, Mr. MVP and Ms. Siy-Yap. Back to our live audience. So was there any question? None so far. Back to you, ma'am. I'm sorry. Yes?

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Jelline E. Gaza, JP Morgan Chase & Co, Research Division - Analyst [6]

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I'm Jelline Gaza from JPMorgan. I have some questions. One is for Ms. Betty (inaudible). I'd like to ask about how much your (inaudible) of provisions for 1Q '19? And then secondly, for Mr. Babes Singson. Sir, do you have any updates with regard to the expected approval of the (inaudible) Power Supply Agreement especially with your -- our ERP commissioners (inaudible) last week?

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Rogelio L. Singson, Manila Electric Company - SVP [7]

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Okay. We were able to show the efficiency of scale, no, as far as their visit to Philippines. If you recall, somebody needs to (inaudible) power. They usually have today a lot of common facilities. So they were quite impressed with efficiency of scale. And we have -- that's exactly why we are pushing for 2x600 in Atimonan. If you're seeing the -- if we're [seeing to] of adding scale in Mauban, then we would see a little more hopefully in Atimonan. Now as far as the -- they have always -- ERC has always said that they want to hear the legal impediment, even they want the Supreme Court to make its determination before they make a decision, no? So we're still hoping that the Supreme Court will have a decision soon. So that, in time, [Hitachi] will make their own determination. I think...

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Unidentified Company Representative, [8]

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(inaudible)

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Betty Cheng Siy-Yap, Manila Electric Company - CFO, Chief Risk Officer & Senior VP [9]

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Okay. To your first question, Jelline, actually if we look at the total, no, we're still positive, which means net provision from the overlay coverage, no? But if your question is exactly how much it'd be reimbursed with respect to settlements that we have done in excess, it was about PHP 1 billion.

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Unidentified Company Representative, [10]

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Okay. Thank you, Ms. Siy-Yap and Mr. Singson. Back to our telephone participants if someone...

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Operator [11]

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We have a polling question come from Ping.

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Rafael Alfonso Javier, BofA Merrill Lynch, Research Division - Analyst [12]

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Yes. I just want to thank Ms. Betty for answering the questions. I do just have one quick follow-up for the Chairman. I understand. I guess the message is the -- a conclusive result by the second half of this year of the next tariff is quite unlikely. And potentially, it could happen sometime next year, but the -- my confusion arises on if that is the case, then where is the source of the uncertainty in the guidance? Yes.

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Manuel Velez Pangilinan, Manila Electric Company - Chairman of the Board [13]

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Well, it's -- in some respects, it is formula driven, right? The guidance that we can give, I think the items available that have to be considered by both Meralco and [ICI], the CapEx, the WACC, the forecast of expenses, forecast of the revenues, the volumes expected for the next 4 years under the regulatory period. And I think we have engaged in -- they're on track with a consultant quite recently and so forth and so on. So it's the whole ball of wax and they -- typically even if everything goes through, I think there's also a public hearing, Oscar -- public hearing -- and of course, the overall context or the overall political and often there's context that you have to consider because they're now technical guys, and probably have engaged or will engage -- we know that they have engaged, I think, in consultant. They're going to engage more consultants. So how long does it take? Frankly, it's beyond our control. Now I guess from one perspective, it is to Meralco's advantage, if it's -- if it will continuously want a delay, right? We think though, our sense is that we have seen once they have a settlement, with some clarity on what the [feed parity] tariff should be. So it's good for us to predict, but I think the sense on our side is that quite likely, we actually would come to a view as to what the tariff should be for the feed parity perhaps by the middle of next year. So we likely -- I think there's some sort of a tariff agreement with them by the middle of next year, no?

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Unidentified Company Representative, [14]

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Thank you, Mr. Chairman. Back to our live audience. Yes, Chesca?

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Chesca Bugia-Tenorio, Crédit Suisse AG, Research Division - Research Analyst [15]

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Yes. Chesca from Crédit Suisse. A question to anyone in the panel. I just want to get your views on -- or actually just get some color on the power shortage scenario that we're getting, similarly with the water shortage that clearly there are from numbers thrown there. So we clearly have water shortages and what water is being advanced on the water moving forward. I think if we can get particular numbers on the power shortage that we're experiencing. And when new capacity will come in and address that shortage. And if also I can get your views on the bigger picture, which is [testing] the solar power sector until 2024 which, I guess, is only at the moment being expected to come in. Right now, if we're getting power shortage already meeting our peak demand with slight outages, which is a normal recurrence, what then is our power sector going to be in the next 2 years? Which outages will be a normal recurrence and some new capacity will probably just address a bit of that. And then moving forward to 2024 with demand very resilient at this rate, and I think even possibly, if we get approvals for 2024, will there still be a gap? And then speaking on your 25% serve requirement, and with that said, with the bigger picture of the power sector, how can EPIRA actually -- how can the sector be conducive for an EPIRA law, where power rates are supposed to come down? It's right now at PHP 5 already.

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Manuel Velez Pangilinan, Manila Electric Company - Chairman of the Board [16]

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Chesca, do you want me to start with water or with power? In either case, it's pretty big. Let me start with water first because as we speak from a very primordial perspective, if you look at -- our single largest source of water for Metro Manila, as you know, is Angat Dam. So far, we supply [the zone] 200 meters, no, the elevation. And in terms of prolonged meters, no, in Angat. If there's a prolonged drought or no rain, say beyond June, it could -- the possibility of dropping below 180 meters could begin, in which case, there will be a shortage of power supply -- water supply, out of Angat. At the moment, it is able to supply 4,000 MLD to both concessionaires. As you know, the split is 40% for Manila Water, 60% for Maynilad. Now what is the billed volume for each of the concessionaires? For last year, if you go by the numbers, Manila Water is just [1,000] MLD. So they draw 40% of 4,000. So they have 1,600. And we draw 3,400 MLD, so we sell about 1,600. So both accounts just on the (inaudible), there should be no water shortage. Now there are -- what are additional sources of water for each of them? In that case, it is 2. We have 2 Putatan water treatment plants in Muntinlupa that produce about 300 MLD. And we have the anti-government, especially they're called to the principal's office in Malacañang to say, "What are you guys doing?" I said, "We need your permission to bring 2 more Putatan water treatment plant, so that we can have 600 MLD. So that if -- in case something happens to Angat, we can produce 600 MLD." Because also from a different perspective, we are able to -- we don't have to bump all the way from Angat down to (inaudible) Alabang and so forth, so that you can supply the water out of Putatan, no? Now the source of -- the other sources for Manila Water are La Mesa Dam, which is, I think, up to 150 MLD. And I think the (inaudible) water plant, water treatment plant Cardona about 50 MLD, right? So those are the 2 additional resources. I don't think they finished Cardona when water crisis hit them, and indeed, because of the drought, the supply really has dropped to around -- maybe around 50, 60 MLD. (inaudible) But technically, there is enough water, no? (inaudible) power, the analog to water is the power. Clearly, Kaliwa and Wawa Dams are important for a build-out by the country because of security reasons. We don't have to rely also on Angat. If there's an earthquake in Angat, (foreign language). So you have to build Kaliwa and so forth. (foreign language) How long will it take? It will take us at least 10 years to finish one or both dams. In the meantime, (foreign language). So we have to build -- you have to look at building water treatment plants not as big a capacity as Wawa or Kaliwa as well in the region. For example, grid building in Marigondon. Maybe that's about 50 to 100 MLD that you can build, and we'll be adding sources. We're building Apalit to supply Pampanga and sources of water that Bulacan needs. That's about 100 MLD. (inaudible). But we can address the increasing demand, but also more importantly, if an earthquake were to hit Metro Manila (foreign language) Angat, Wawa, Kaliwa, we don't know (foreign language). We have been advocating to the government to have a dispersed supply of water even if they're not as big as the big dams, no? So I think that's the solution. So we did have or we'll have -- we continue to have water issues depending, of course, on the weather. Is that clear enough, Chesca? (foreign language). We keep pushing the third and the fourth plants for Putatan and are pushing to finish Marigondon, Apalit and other sources in this house, so that we can complement the supply (inaudible) and in anticipation of -- if there's a big one that happens, we, at least, have a dispersed supply of water around Metro Manila. I don't think we can depend, of course, the extent of the damage caused by the earthquake. We can fully replace what we draw from Angat, but at least (foreign language).

(foreign language) the power, the analog to water is our power, no? (foreign language) Red and Yellow Alert, no, NGCP, so Meralco, I asked for a demand-supply picture here in Luzon. And (inaudible) has given the situation. We have a complicated chart, Chesca. So I think if you want a separate briefing, maybe we ought to have a separate briefing, but the picture doesn't look good. It really doesn't look good.

The nameplate capacity of Luzon at the moment is 13,152 megawatts. That's what we have. If you look at the new capacity that's scheduled to be built without Atimonan, (foreign language) San Buenaventura (foreign language). Anyway, capacity, if you think of the capacity now, those -- the available capacity, it is about 14,000-something megawatts, no?

(foreign language) Luzon demand consists as much as 13,000 to 14,000. So there can be reserve. (foreign language). We should have at least 25% of the peak demand as total available reserves for us. We are nowhere near that. We are nowhere near that. So,

(foreign language) Atimonan (foreign language), San Buenaventura, I think they will go (inaudible) or something (inaudible) to help, but you clearly -- more capacity. (foreign language) solar (inaudible) unless you build a huge solar plant. We do need to build 600 to 1,200 utility grid plant, be it coal, be it solar -- sorry, be it coal, be it gas, to move the needle, to add sufficient capacity on stream (inaudible) adequate reserves. And then you complement that with solar, et cetera, et cetera, but you might want to build, no? (inaudible) you might want to gain. (inaudible) 24/7 capacity utilization is also low. (inaudible) until the battery issue is solved in the case of solar, maybe wind, (foreign language) we need the conventional solutions to the capacity situation. (foreign language).

I don't know. Maybe it's the population issue. Private sector mining, (foreign language). It means it does require guarantees from the government to build its plants. Now, it's our money and the commercial banks, I think, have been (inaudible) Meralco a lot to raise the money as in the case of Atimonan. (inaudible) Meralco (inaudible). That's why you should not invite me to this briefing.

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Unidentified Company Representative, [17]

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Okay. Thank you, Mr. Chairman. Okay. Back to our telephone participants. Is someone ready with a question?

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Operator [18]

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(Operator Instructions) Our next question comes from Kayzer from Maybank.

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Kayzer Llanda, Maybank Kim Eng Holdings Limited, Research Division - Analyst [19]

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My first question is addressed to Chairman, and second question is for Mr. Singson. So for the first question, this is regarding to the fourth regulatory period dates. With the fourth RP coming into close by June of this year, can you share your position or proposal with respect to determining what the true rates are for -- I mean, for the fourth RP covering 2015 to 2019? And the second question is regarding the news that Senator Gatchalian is putting forward a PHP 6 price cap with respect to power rates. Can you share your take or comment on that particular policy? Is that in effect already? Or what's the likelihood of that being implemented?

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Manuel Velez Pangilinan, Manila Electric Company - Chairman of the Board [20]

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Let me begin. (foreign language) I don't believe in this legislated power. (foreign language). What has to do -- for example, if you have shortage of power, you're going to put a power cap on some prices. (foreign language) consumers (foreign language). Why don't you -- when encouraged to invest in Meralco 2009, and we received explanation internally how to use this spot market, the works, and when we look at the supply situation, it's very [tight]. So how can a spot market work as appropriate in the supply and demand? It just doesn't work. And in fact, frankly, it leads to collusion amongst the generational plants. (foreign language) genuine competition amongst the generation plants. (foreign language) legislate (foreign language) power plant. You're going to (inaudible) my ability because I have the balls to build a merchant plant and put my output on (inaudible). I should be given the right to charge as much as I can depending or as long as I can on the (inaudible). If you're going to legislate, (foreign language) logic, no? (foreign language). The government should allow the private sector should unleash the (inaudible) go ahead and build more plants. (foreign language) Singapore, in excess of capacity to (foreign language) 100% (foreign language).

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Unidentified Company Representative, [21]

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Thank you, sir. Okay. If you have -- I'm sorry?

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Kayzer Llanda, Maybank Kim Eng Holdings Limited, Research Division - Analyst [22]

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Yes. Just probably on the first question with respect to the fourth RP rates, just want to get your thoughts or what your position is with respect to the determination of the...

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Manuel Velez Pangilinan, Manila Electric Company - Chairman of the Board [23]

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Let me answer that, okay? I might as well get on with this thing. (foreign language). Okay? Because it's a very sensitive issue politically. It's a very sensitive issue for Meralco economically. (foreign language) At the moment, our billing rate is PHP 1.38. So we don't know how eventually the ERC would view the fourth RP. We are on a PA earlier, a provision approval for [PHP 1.38]. (foreign language) later on (foreign language).

At the moment, we're taking a low profile with respect to the fourth RP (foreign language) the fifth RP, and I don't how we're going to resolve the fourth RP. We want to really come out in the open. So you can see this is the real picture. (foreign language) come out in the open. This is who we are. And we will see that the operations of Meralco are very good. This is an excellent company, and we have full confidence in the decision investment that Meralco (inaudible).

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Unidentified Company Representative, [24]

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And that helps. Thank you, sir. Thank you. Thank you for the questions. If you have other questions, please drop your questions to the email address through the conference call invite. Okay. This conference call is also available for an instant replay number, and the number is (852) 2112-1000. It's available until tomorrow, April 30. Thank you for joining us today.