Good afternoon, investors, analysts, fund managers, and valued stakeholders. Welcome to Meralco's first-half 2026 financial and operating results briefing.

I am PJ Ramos, Chief Investor Relations Officer of Meralco, and I will be your moderator for today's session. We are pleased to have you as our participants joining both in person via MS Teams, and we thank you for taking the time to be with us today.

Before we begin, please take note this session is being recorded. Kindly observe the ground rules that were circulated prior to this meeting.

Today, we will walk you through Meralco's performance for the first half ended June 30, 2026. The presentation materials are available on our website under the Investor Relations section.

Joining us today are members of the Meralco management team: Mr. Ronnie Aperocho, Executive Vice President and Chief Operating Officer; Ms.

Betty Siy-Yap, SVP and Chief Finance Officer; Mr. Emmanuel Rubio, President and CEO, Meralco PowerGen; Atty.

Jose Ronald Valles, SVP, Head of Regulatory Affairs and Head of DU Regulatory Management; and maybe later our Chairman Manny Pangilinan will join us. Our discussion today will begin with a presentation of our financial performance, followed by updates on our distribution utility operations, power generation business, and key regulatory developments and outlook.

We'll open the floor for Q&A afterwards. At this point, I would like to invite our Chief Finance Officer, Ms.

Betty Siy-Yap, to walk us through the financial highlights for the quarter.

Thank you, PJ. Good afternoon, ladies and gentlemen.

I'll be presenting the results of the first half of 2026. On your screen is a summary of what transpired.

Meralco's CCNI for the six months ended June 30, 2026 grew 3.8%, demonstrating resilience amid the challenging energy environment backed by its diversified energy portfolio. The DU business continued to account for the largest share of our 27.4 billion CCNI at 12.7 billion, 48% of the total, although down from 54% in 2025, with the continued expansion of our power generation business and with more energy delivered by our RES business.

Consolidated DU energy sales in the first semester stood at 26,967 gigawatt-hours from 27,091 gigawatt-hours in the same period in 2025, reflecting a 0.5% decline year on year as warmer conditions in the second quarter helped cushion the weak first quarter performance. CCNI contribution of power generation grew by 11% to 10.5 billion pesos and accounted for 39% of CCNI, up from 37% in 2025.

Sales volume was at 14,178 gigawatt-hours, 12% higher than the 12,644 gigawatt-hours in 2025, mainly driven by the full six months contribution and operations in 2026 of LNGPH and commissioning energy from Terra Solar starting March, and three Baracuda energy, or our Laurel projects, 450 MW AC solar power plant in Bugallon, Pangasinan, which received its PCAC or provisional certificate of approval to connect from NGCP last March 2026. The thermal plant sold a total of 4,702 gigawatt-hours, up by 2%.

Last April, GBPC bought the minority share in the following investees: Panay Power Holdings Corporation and from Global Formosa Power Holdings, Inc., resulting in higher earnings contribution from MGen's increased ownership interest in Panay Energy Development Corporation and Cebu Energy Development Corporation. On January 25, 2026, Toledo Energy Development Corporation received its FCAC for its 25 megawatt 56.44 megawatt-hour and 56.44 megawatt-hour battery energy storage system located in Toledo, Cebu.

It has since sold a total of 3 gigawatt-hours and reported revenue of close to 58 million pesos. Okay.

On the renewable side for MGreen, MTerraSolar Phase 1 generated a total of 151.1 gigawatt-hours from its combined PV and BESS facilities. On the retail electricity supply side, sales volume was at 3,864 gigawatt-hours, up 9% versus last year driven by continuing customer acquisitions and synergies with power generation group.

For financial highlights, as previously mentioned, our CCNI for the first half of 2026 increased by 3.8% to 26.5 billion from 25.5 billion in 2025. Consolidated reported net income increased by 11% to 26.3 billion from 23.6 billion the previous year.

The gap between CCNI and consolidated reported net income represents day one gain adjustment and net foreign exchange losses. Q1 CCNI was driven mainly by the 51% increase in CCNI contribution of power generation, which grew to 5.1 billion pesos from 3.4 billion, driven by full capacity operation and full three months contribution of LNGPH.

The growth in Q2 CCNI, on the other hand, was from higher contribution of the RES business driven by trading gains and favorable line rental and settlement surplus, as well as slightly higher DU contribution as volume in the second quarter went up by 1%. Similar to our CCNI, core EBITDA rose by close to 4% to 44.8 billion pesos from 43.2 billion in 2025.

The next slide shows our total system-wide power sales volume. The total energy volume handled by One Meralco was 34,328 gigawatt-hours, up 2% versus the 33,778 gigawatt-hours in 2025.

The Philippine volume was at 31,445, also higher versus the 30,913 gigawatt-hours last year. DU volume, inclusive of sales of PELCO II, which we manage and operate under an investment management contract, was at 27,425 gigawatt-hours, 52% of about 53,200 gigawatt-hours total volume distributed by all DUs and electric cooperatives, including the 3,164 gigawatt-hours sold by our RES unit within our franchise area.

RES volume was at 3,864 gigawatt-hours with 3,164 gigawatt-hours sold within and 700 gigawatt-hours outside the franchise area. This was 26% of about 14,700 gigawatt-hours total volume supplied by various RESs.

MGen volume was at 14,178 gigawatt-hours with 11,295 sold within the Philippines, 18% of the 62,100 gigawatt-hours total volume delivered by gencos. A total of 7,975 gigawatt-hours was sold to the Meralco DU and its local and affiliate RESs.

The contracted capacity of Meralco of 2,992.5 MW with MGen represents 32% of Meralco's franchise area peak demand or 21% of the Luzon peak during the first six months of 2026. For our segment information, we'd like to highlight the following.

The CCNI contribution of the regulated or distribution business was from consolidated energy volumes of Meralco, Clark Electric, and Shin Clark Power Corporation of 26,967 gigawatt-hours, which was flattish compared with last year. As a result, the DU CCNI contribution declined to 12.7 billion pesos, now accounting for 48% of CCNI, from 13.7 billion or 54% share in 2025.

For our unregulated businesses, both power gen and RES businesses generated higher CCNI contributions in terms of peso amount. The share of power generation business is now at 39%, higher from the 37% a year ago.

This is equivalent to 10.5 billion of the CCNI, mainly driven by the strong full-capacity operations and full six months contribution of LNGPH, as well as higher energy sold by thermal and renewable plants. The retail electricity supply business and non-electric businesses meanwhile brought in a combined 3.4 billion or 13% of the CCNI, up from 2.4 billion or 10% of the CCNI in 2025, driven by continuing customer acquisitions of RES units.

The DU revenues accounted for 83% of the total, RES and non-power subsidiaries and affiliates accounted for 10%, and power generation at 7%. Out of the consolidated core EBITDA of 44.8 billion, DU contribution amounted to 24 billion and accounted for 52% of the total.

Power generation core EBITDA contribution was at 16 billion and comprised 36% of the total, while RES and other non-power subsidiaries and affiliates accounted for the remaining 4.9 billion or 12% of the consolidated amount. We go to our revenues.

Consolidated revenues increased by 16% to 283.7 billion from 245.2 billion in 2025, driven by higher pass-through generation and transmission charges of the distribution utility and higher power generation and RES revenues. Electric revenues of 279 billion accounted for 98% of the consolidated revenues.

Generation, transmission, and other pass-through charges were 19% higher at 226 billion versus 190.7 billion in 2025. The increase in generation charge was due to higher fixed charges from the ERC-approved interim extension of the power purchase agreement, the ERC-approved fuel cost recovery adjustment equivalent to 29 centavos per kilowatt-hour for four generation companies, higher LNG fuel prices, peso depreciation, and higher WESM charges.

Transmission charge similarly increased, driven by higher reserve market ancillary service charges, implementation of higher ERC-approved maximum allowable revenue beginning July 2025 for NGCP, and the recovery of NGCP under-recoveries from 2016 to 2022, resulting in an average rate increase of 11 centavos and 4 centavos per kilowatt-hour respectively. Distribution revenue increased by 2% despite the flattish volume due to the one-time refund last year of the regulatory reset costs that Meralco had previously collected from customers through distribution rates, but ultimately did not incur because of the delay in the regulatory reset process.

Energy fee, which totaled 16.7 billion, increased by 30% from 12.9 billion to 16.7 billion from GBPC's higher sales volume, SP Calatagan's FIT rate adjustment, commissioning energy from the new solar power plants, and PEDC's fuel CIC adjustment. The impact on CCNI totaled 283 million pesos.

The 4.7 billion non-electric revenues were largely from Radius for its enterprise and SME accounts and billable projects to PLDT; also from Miescor's EPC projects and Mserv's high voltage solutions and integrated facilities management projects. With respect to our costs and expenses, this totaled 257.4 billion.

Purchased power costs accounted for 86%, opex represented 8%, depreciation at 3%, and the combined coal and fuel and O&M costs for 3%. Purchased power costs increased by 19% to 220.5 billion from 185.7 billion, reflecting higher generation and transmission costs billed by the generation companies and NGCP.

Operating expenses amounted to 21.6 billion, 1% lower year on year, driven by continued cost management and operational efficiency initiatives. Depreciation and amortization were higher by 2% with the completion of capex projects during the period, largely from the distribution utility side.

Combined coal and fuel and power plant O&M amounted to 6.6 billion, reflecting a 23% increase due to the following: higher energy generated, spike in fuel prices, and plant maintenance of PEDC Unit 3 and Cebu Energy's units 2 and 3. The amount under expense account Others pertains to provision reversals after settlement of various tax arrearages or assessments, net of provisions for over- and under-recoveries.

For power generation, the business for the first half of the year reflected an 11% growth in CCNI owing to higher earnings across its generation portfolio. The LNG business contributed 7.4 billion pesos to the CCNI, up by 11%, mainly driven by the full six months contribution of LNGPH following its acquisition on January 27, 2025.

The thermal business contributed 3.9 billion pesos, higher by 7% from last year's 3.6 billion, due to increase in energy delivered and higher earnings contribution from MGen's increased ownership interest in Panay Energy Development Corporation and Cebu Energy Development Corporation. On capital expenditures, consolidated capex totaled 39 billion in the first quarter.

Of this amount, 67% or 26 billion were spent by MGen's 3,500 megawatt DC Terra Solar power plant with 4,500 megawatt-hours of BESS, as well as the 56 megawatt-hour BESS system in Toledo, Cebu, and the 31.8 megawatt expansion of SP Tarlac, and 82 megawatt TPC1B expansion. The total DU capex of 12.9 billion were spent largely on new connections, totaling 4.9 billion; asset renewals at 3.8 billion; load growth at close to 3 billion; pole relocation work to support the government's infrastructure projects; and non-electric projects.

Our cash and cash equivalents amounted to 118.4 billion, while our short- and long-term cash investments totaled 1.1 billion and 3.2 billion respectively. Notable cash transactions during the period include the following: the Meralco AWAT refunded to customers amounting to 4.5 billion in the first half of this year.

A total of 9.4 billion has been refunded since April 2025 as part of the 19.96 billion AWAT refund. GBPC's buyout of minority share in Panay Power Holdings Corporation and Global Formosa Power Holdings, Inc.

The following loan repayments and drawdowns happened during the six months: PSBI drew an additional 18 billion loan; T&I, 7 billion drawdown; Meralco, 6.5 billion on February and another 5 billion in March; and Solar Philippines Tarlac, a 3.8 billion project financing. They also paid their bridge loan totaling 3.5 billion.

Dividends received from unconsolidated investees of 5.8 billion, largely from PacificLight and San Buenaventura. Payment of the final 2025 dividend of 18.7 billion, or equivalent 16 pesos .672 centavos per share on August 20, representing 50% of the second half 2025 CCNI and look-back of 12.5%.

Consolidated interest-bearing debt stood at 247.3 billion pesos, including the 134.4 billion total debt of our subsidiaries. Meralco maintained a healthy balance sheet, ending the period with net debt to EBITDA ratio of 1.4 times, providing ample financial flexibility to support its growth pipeline.

Debt maturities are spread to 2041. All of Meralco's consolidated debt are peso-denominated.

Our core earnings per share amounted to 23.516 pesos per share, up 3.8% versus last year. Today, the Meralco Board of Directors approved the declaration of an interim dividend amounting to 11 pesos .758 per share to all shareholders of record as of August 28 payable on September 23, 2026.

This represents a dividend payout of 50% and brings the implied annual yield on dividends declared out of core earnings to approximately 4.1% using the June 30, 2026 closing Meralco price. That ends my report.

Thank you, Ms. Betty.

Our diversified energy portfolio continue to demonstrate resilience in the first half with the distribution utility remaining to be our largest earning contributor at 48% of CCNI, with the power generation continuing to strengthen its share of earnings at 39% of total. We'll now proceed with the discussion of operating performance to be presented by Mr.

Ronnie Aperocho.

Thank you, PJ. Good afternoon to our analyst partners who joined us to who joined us for today's briefing.

For the first half of 2026, Meralco's distribution utility business remained operationally resilient, supported by a growing customer base, record peak demand, and continued improvements in service reliability indicators. While energy sales were marginally lower year on year in the first half, electricity demand has begun to recover, and starting July, year-to-date energy sales are expected to return to positive growth territory.

Let me now walk you through the highlights of our first-half operational performance. As mentioned by Ma'am Betty earlier, our sales stood at 26,967 gigawatt-hours, slightly lower by 0.5% year on year, primarily due to the cooler weather conditions dampening demand.

Recovery during the summer months was tempered by intensified energy conservation measures following the escalation of the Middle East conflict. These effects were partly offset by our faster customer energization, which helped cushion the overall sales decline.

The DU net system input was also steady at 28,165 gigawatt-hours, almost flat compared with the same period in 2025. Meralco posted another all-time high peak demand of 9.39 GW on May 28, 2026, 5.9% higher than last year, as warmer temperatures in May to June ramp up cooling demand.

Our customer count continued to grow, reaching 8.306 million customers, a 2.2% increase year on year. On system loss, our 12-month moving average system loss has stood at 6.07%, largely driven by increasing share of highly loss-to-serve low voltage residential and small commercial customers.

Nonetheless, we emphasize that managing system loss remains a key operational priority for Meralco, having achieved 18 consecutive years of system loss performance below the regulatory cap. We continue to pursue a balanced and cost-efficient approach that addresses both technical and non-technical losses through targeted network investments, advanced monitoring and and analytics, smart metering technologies, and focused anti-pilferage initiatives.

Our objective is to achieve sustainable reductions in system loss while ensuring that every peso invested delivers the greatest value to our customers and stakeholders. Meanwhile, service reliability indicators delivered meaningful improvements.

Total SAIFI was fewer by 11% at .426 times and SAIDI was shorter by 8% to 46.575 minutes. This translates to less frequent and shorter duration of power interruptions.

Our average time to connect customers also improved, faster by 6% at 2.23 days, reflecting our continued focus on faster and more responsive customer service. On electricity rates, our average electricity retail rate for the first half was 13.09 pesos per kilowatt-hour, 15% higher versus the same reporting period last year, primarily due to the following.

First, due to higher generation charge, 14% increase, mainly from the recovery of Santa Rita's higher fixed charges, change in circumstances or CIC recovery of some PSAs, higher imported LNG fuel prices, peso depreciation, and higher WESM charges. Second is due to the increased transmission charges, 47% increase from higher ancillary services costs, higher power delivery service charges, and collection of NGCP under-recoveries.

Third is due to higher FIT-All charges, 86% from higher FIT-All rates implemented in first half of 2026. Fourth is the GEA-All was also implemented starting January 2026, although collection was suspended for May and June 2026 billing period following ERC order.

Following the discussion on energy sales earlier, let us now look at the sector breakdown. The residential segment accounted for 36% of total sales or 9,712 gigawatt-hours.

Residential sales narrowed the gap from last year, posting only a .7% decline, as steady energization efforts offset impact of cooler weather. The commercial segment, which makes up 37% of total sales, remained flattish as cooler weather, office vacancies, and energy efficiency initiatives offset gains in the in the restaurant segment.

The industrial segment, accounting for 26% of total sales, likewise slipped by .6% as steel account shutdowns and market challenges in plastics outweigh growth in cement and semicon semicon industries. Lastly, on our networks project updates, this slide highlights our key network investments completed in the first half of 2026, which directly supported load growth and further strengthened system reliability across our franchise.

From April to June this year, we energized five major capital projects worth a total of 1.32 billion pesos. This portfolio includes the development of Bustos and Osorio substations, construction of Parang-Marikina 115 kV line, uprating of 115 kV power circuit breakers at North Port substation, and construction of new controlhouse with switchgear room at Malabon substation, collectively adding a total capacity of 133 MVA.

Thank you, and I'm now turning you over to Atty. Valles for the regulatory report.

Good afternoon. I have only two topics for the regulatory update.

The first is the interim extension of power purchase agreement with First Gas Santa Rita. Last June 10 this year, the Department of Energy directed Meralco and First Gas to immediately execute the extension of the PPA for a period of up to December 25, 2026.

This is the third interim extension. On terms that are consistent with the existing PPA and its prior extensions, or on such other mutually agreed terms as are not less favorable to the public interest.

Recognizing that the Santa Rita plant is among the most critically needed generation assets in the Luzon grid and has consistently and reliably supported grid stability across successive PPA extensions. Pursuant to that directive, we negotiated with the First Gas Santa Rita for better terms than the previously approved second extension.

For the non-fuel charges, we got a 50 million peso monthly discount. For the line rental, the line rental exceeding 15 centavos per kilowatt-hour or up to 25 million pesos per billing period shall be absorbed by First Gas, and the line rental cost beyond 25 million, if any, will continue to be borne by Meralco customers.

Then for the currency, USD-denominated components of non-fuel charges, such as the CRF, fixed O&M, and the VOM, converted to peso at an exchange rate of not more than USD a dollar to 62 pesos. The full financial risk arising from any exchange rate for non-fuel charges beyond the exchange rate cap shall now be assumed by First Gas Power Corporation.

The ERC already approved the third extension last June 24, 2026. In sum, the estimated savings or reductions for the extension period from July to December amount to about 300 million pesos for non-fuel charges discount and 150 million pesos for line rental costs under care of First Gas under the PPA.

Over 3 billion 3.8 billion pesos due to the provision of Malampaya gas to Ilijan beginning September 1, 2026 under the SPPC PSA, equivalent to an average of 36 centavos per kilowatt-hour reduction or savings to customers. The second update is on Meralco's CSP for the 600 megawatt baseload supply.

Last June 18, the DOE finally sent Meralco an updated letter noting division of the 600 megawatt baseload CSP into two phases with a contract duration of 15 days from the operations effective date, while maintaining the total contract capacity at 600 megawatt. Affirming that Meralco may proceed with the CSP on the basis of the revised capacity breakdown.

This CSP will have a COD of February 26, 2028 for the first 300 megawatt, and then ramping up to 600 megawatt on February 26, 2029. The milestone, the Bids and Awards Committee held a pre-bid conference on July 28, 2026, and the deadline to increase the offered capacity and/or change indicated nominated plants is set on August 25, 2026.

The bid submission and opening of bids is set on September 1, 2026. Remaining 2025 CSP for the 900 megawatt baseload supply, in October 2025, the Meralco submitted to the DOE its proposed TOR for approval, and this 900 megawatt baseload CSP is for the 600 megawatt by February 26, 2031, and additional capacity of 300 megawatt by February 26, 2032, with a contract term of 15 years for each phase.

We have yet to receive the DOE's approval of the terms of reference. That's all for the regulatory update.

Thank you.

Thank you, Atty. Valles.

We now turn to our power generation business. Please welcome Mr.

Emmanuel Rubio.

Thank you, PJ. As always, we begin with our number one priority across all sites, which is health and safety.

For the first half of 2026, we are proud to report that we maintained a safe working environment with over 118.9 million safe man-hours for both employees and contractors. More importantly, we recorded zero lost-time accidents across our operations during the period, which also include MTerraSolar that has ramped up construction for Phase 1 and 2 Phases 1 and 2 during this period.

These milestones reflect the commitment of every employee and contractor in maintaining a strong safety culture as we continue to expand our operations. Now move to operational performance.

The past six months, MGen thermal group delivered 4,702 gigawatt-hours, marking a 2% increase compared to the same period last year. Our LNG portfolio in the Philippines and Singapore delivered 8,650 gigawatt-hours, up 13% from the same period last year.

Meanwhile, our renewable energy business doubled its delivered energy this first half with 825 gigawatt-hours due to the additional capacity from MTerraSolar, which is made available to Meralco for its commissioning energy. Let's welcome our Chairman, Sir MVP.

In line with these results, we achieved a plant availability rate of 92.9%, well within world-class standards. All in all, for the first half of 2026, MGen's energy delivered increased by 12% year on year with 14 with 14,178 gigawatt-hours of electricity across the Philippines and Singapore.

Now on to the key developments across our businesses during the second quarter of the year. We've already expanded our battery energy storage portfolio in Visayas with the energization of the first phase of the Toledo battery energy storage system in Cebu.

The project adds 56.44 megawatt-hours of battery storage capacity, marking the first two-hour battery energy storage system facility in Visayas, designed to deliver its rated output when the grid needs it, particularly in the evening, at optimal price points. We are also certified to provide both regulating down and regulating up, and last month, the board approved expansion of a similar capacity in the same location.

On the gas plant in Singapore, we will be doing our first piling on August 14, and we'll be ground-breaking on September 28 for the construction of the 670 megawatt H-class gas plant in PacificLight. During the same month, we also completed the renaming of Global Business Power Corporation to MGen Thermal Energy, Inc., aligning our thermal business under the unified One MGen brand architecture and reinforces its strategic role within our diversified generation portfolio, and this is headed by Arnel Santos.

Another key highlight during this period was the continued progress of MTerraSolar. Just this month, we have officially inaugurated the first phase of MTerraSolar with President Ferdinand Marcos, Jr., marking the facility's readiness to commercially deliver 600 megawatts under its mid-merit power supply agreement with Meralco from 8:00 in the morning to 9:00 in the evening.

Following its commissioning in March, the project has already sold 151 gigawatt-hours of energy combined solar PV and BESS outputs. Phase 1 has energized 1,370 73 megawatts of solar PV capacity together with 825 megawatts or 3,300 megawatt-hours of battery energy storage, making MTerraSolar the largest operational integrated solar and battery facility on a single site in the world.

Although export capacity to the Luzon grid is currently capped at six at 750 megawatts pending completion of transmission-related works, it is enough to meet Meralco's requirement for Phase 1 delivery of 600 megawatts from 8:00 a.m. to 9:00 p.m.

Beyond that, the battery is also supplying energy to WESM when the grid needs it at optimal price points. We also received an SIS allowing us to dispatch maximum of 950 megawatts without the need for static compensators.

These achievements were all made possible by our workers on site, all of them safely logging over 30 million work hours without a lost-time injury. Our teams have also consistently demonstrated exceptional operational resilience in responding to the effects of the Mindanao earthquake.

Several generating facilities were affected, including our Sarangani Energy Corporation facilities. SEC continued its restoration after the earthquake and successfully synchronized units 1 and 2 back to the grid less than a week after the earthquake.

Meanwhile, Panay Energy Development Corp Unit 3 was safely restored and returned to service ahead of schedule after an intensive engineering and restoration program that prioritized safety, technical rigor, and operational excellence. These efforts highlight MGen's ability to respond quickly to unforeseen events while continuing to support grid stability and energy security.

Beyond our existing projects, we continue to explore new opportunities that support long-term energy security. We recently entered into an agreement with Vena Energy Joint Stock Company to explore renewable energy solutions that could deliver up to 5 gigawatts of baseload equivalent capacity.

We now turn to some updates on the retail electricity supply or RES business. More energy consumers now have the power to choose with the lowering of retail competition and open access or RCOA lower threshold to 100 kilowatts with of course also with aggregation, enabling more end-users to select their energy supplier and benefit from competitive rates.

As the market continues to expand, MGen RES and Vantage Energy are working closely to look into synergies and optimization of supply contracts that will enable us to broaden our reach and deliver more competitive energy solutions to a broader network of customers. Beyond operational excellence, we remain committed to creating meaningful impact to communities we serve.

Following the earthquake in Mindanao, we immediately mobilized relief efforts to support affected communities, mobilizing 800,000 pesos of relief assistance to more than 3,000 individuals in Sarangani. We also continued the annual Brigada Eskwela initiatives with an investment of 1.91 million pesos across 51 schools and beneficiary sites.

These initiatives reflect MGen's commitment to supporting our host communities not only during times of need, but also through programs that contribute to their long-term development. Together with our continued focus on safety, operational excellence, and sustainable growth, they embody our commitment to powering a better tomorrow.

Good afternoon, everyone.

Thank you, Emmanuel Rubio. We would like to acknowledge the presence of our Chairman, Mr.

Manny V. Pangilinan.

We will now open the floor for questions from our analysts and investors. You may raise your questions in two ways: raise your virtual hand and wait to be recognized before speaking; alternatively, you may type your questions in the chat box, and I will read them on your behalf.

In any case, kindly state your name and the company you represent before asking your question, and please mention the executive you would like to address your question to. We have a live question on the crowd.

Hello, good afternoon. I'm Jelline Gazza from J.P.

Morgan. My first set of questions will be relating to the much-awaited tariff reset.

I'd like to address these questions to Atty. Valles and Ms.

Betty. First of which is on your view on the timing of the tariff reset and any updated views on the inputs in your ongoing discussions with the ERC.

The timing is still the same as what the chairperson of the Energy Regulatory Commission has announced in his own press release. I think that was several weeks ago.

That there will be a delay in the release of the decision for our 1RP. We expect that to be sometime in September or latest maybe October.

Since 1RP covers a four-year regulatory period that starts on July 1, so that decision should retroact to July 1 of this year.

How about, sir, the major inputs that could possibly move the expected tariff? If I recall, you're expecting 2.34 per kilowatt-hour, but there's a removal of contingency.

Is the trending method or CPI adjustment still in the table? Or any potential changes that could shift our expectation on the kilowatt-hour?

In terms of the changes from what we have officially filed, then there will be nothing because the ERC will simply base the decision on whatever has been filed and published as part of the requirements. We have communicated to the ERC, as well as to their consultants, the supervening events that occurred after the filing of the case, such as the global increase in the prices of materials and equipment that are needed for our capex expenditures.

We have informed the ERC about it, hoping that there will be some adjustments, upward adjustments in the capex that will be approved or allowed by the ERC.

How about for the RAB, sir?

For the RAB, the regulatory asset base, as I speak today, the evaluation of that is undergoing inspection by the ERC. There are on-site inspections being conducted by the ERC.

Thank you. I think that the second question is more recent and topical, which is the pronouncement of the president about disallowing recovery of system losses.

I think the question of investors has been, will this potentially delay the tariff reset? What would be the potential scenarios to expect given that the potential magnitude of earnings hit could be material depending on the final form?

Any thoughts from management about how this could play out and how it relates to the tariff timing and magnitude?

In terms of its relation on the tariff timing, well, first of all, the system loss charge is not really a distribution charge. That is a pass-through charge more related to generation costs.

It should not affect the timing of the reset or the timing of the release of the ERC decision.

I think the question, sir, is becoming the validity of it being recoverable. Right?

Is there any view from management about this one?

Yes. In terms of the validity today, of course, it is, we all know it is recoverable and the system loss charge is computed based on the regulations of the ERC.

EPIRA and Republic Act 7832 both allow the utilities to recover system loss. In terms of the amendment, we don't know yet what will be the result of the amendment mentioned by the president because the removal of the system loss charge is supposed to come after the Congress has deliberated on the amendments.

Maybe, sorry for the many questions, a follow-up on the EPIRA amendments. Any updates on those many pending bills?

Yes. Before the SONA, there were already various bills, both in the House and in the Senate, that were filed in relation to the system loss.

Some are related to system loss removal itself, and the others are related on the removal of VAT on system loss charges. All of these are still undergoing study by both houses of Congress.

In fact, both houses are also conducting hearings to hear the sides of all the stakeholders on the impact of the system loss removal.

Thank you, sir.

Thank you, Jelline. In line with regulatory and financial, there's a question online: "If the no-disconnection period is extended, how will Meralco protect its working capital from unpaid pass-through charges, and how badly would this hurt your bad debt provisions?"

Okay. The no-disconnection policy for now is until October.

Note that with respect to our customers, most of them still pay, but of course there's a segment which is delayed on payment. Now, our experience usually is once the policy is lifted, okay, the customers will actually pay because otherwise we would enforce disconnection.

Their option is really no option, they have to pay or we disconnect them. Now, the other thing that could happen is they could come forth and ask for an installment payment, which we allow.

Again, if they do not pay, then we disconnect them. Obviously, there is a working capital component.

Note that with respect to the arrangement also, the generation companies, we also pay them based on what we collect, which is an arrangement with the ERC. Otherwise, although from the working capital management side, we also ensure that we have the required working capital requirement.

As I mentioned, this is not a very big segment compared with the total 8.3 million customer accounts. With respect to bad debts, we actually do a regular review.

For example, for the first six months, we did a review again of what our bad debts are, and we provide if there are any accounts which we believe will not be recoverable, and usually these are the terminated accounts.

"What is your outlook on distribution volumes for full year 2026? How are the volumes trending so far in July?"

I believe this was touched earlier by your COO, Mr. Aperocho, but maybe you can elaborate.

We have seen growth already starting from the May to June volumes, and I think for the month of July, we're seeing a growth of 6.4% to 7%, and that's a good sign already. This will be sustained towards the second half of the year.

Right now, we're looking at a growth of 2% to 2.5% at the end of the year. It's mainly because El Niño will be somehow driving our sales in the second half of the year.

Thank you for that. Do we have a question on the floor?

We have a question from Carissa Magpayo regarding MGen financials: "What was the reason for the 11% year-on-year decline in the earnings contribution from power generation in the second quarter of 2026?"

It's the outage of PEDC 3, and then the Sarangani plant was also out mainly because of the earthquake, and there was the line rental hit of LNGPH from the one-month administered pricing.

Question on MGen from Derek of CLSA: "Are non-capitalized interest expenses from Terra Solar already reflected in first half 2026 numbers?"

Yes, but much of them because Terra Solar is under construction, they're largely capitalized. They're really related to the project.

Thank you, Ms. Betty.

We have a question regarding Pax Silica: "What will the possible capex estimation of Meralco in the Pax Silica initiative, and will it be able to sustain a profitable margin due to the capex because of the Pax Silica energy requirements and EPIRA system loss amendments?"

At this point, it's very hard to quantify because what we're getting is just the demand requirement will be ranging from 3 GW to 10 GW. We don't know yet.

We need to understand, of course, the ramp-up, the timing, and of course the requirements and all that. At this stage, to be honest, we don't know yet the capex requirements.

Of course, as we're working with BCDA and our Japanese partners, and we have started the discussion already. Of course, we're looking forward also for grid connection.

Grid connection is primordial that of having a direct connection from NGCP. I think that's very, very important.

Thank you, Mr. Aperocho.

We have a question from Katrice Dela Rea of Security Bank regarding our potential partnership with Albay Electric Cooperative: "Is Meralco considering these types of partnerships as a next driver of growth for the DU segment? What would be Meralco's participation in this venture?"

Right now, it's still in the exploratory stage. Our group has had a meeting with the local politicians already.

At this stage, no commitments yet because what's very important to consider on the side of Meralco is the debt of

Bottlenecks that could derail your investments towards nuclear energy?

Yeah. We're always keen to explore new technology in our portfolio, technology that will enhance our portfolio to participate and supply the grid.

In fact, we're leading in terms of learning and discussing with potential suppliers, understanding what they have. We've sent employees or I think we have like 16 or 18 people outside studying and learning about nuclear technology.

We are actually participating in dialogues with DOE for policy discussions. At the end of the day, I think the PhilAtom needs to be formed.

The bill has passed. We have not seen yet any movement with regard to the formation of the regulatory body, and there's still two pending bills in Congress, which are the nuclear liability and nuclear incentives, which we are watching closely.

Outside of that, we're just discussing and evaluating potential partners that we can actually work with in the future.

Thank you, Manny Rubio. We have a question from Jermaine Guinto of Maybank regarding the outlook on the generation segment for second half: "Do we expect sustained growth and similar earnings contribution as seen in the first half, or do we expect acceleration for newly energized plants and BESS?"

Apart from the full-year operations of LNGPH compared to last year, we will be declaring COD for Terra Solar late this year, around maybe hopefully before the end of September, early October, so that's 600 megawatts of mid-merit supply to Meralco. We've recently also energized and received FCAC, the final certificate to connect, for 54 megawatt-hour battery, today just participating in arbitrage, charging in the day and supplying in the evening in Cebu.

Once we have the provisional authority to operate, which we expect to come within the next two weeks, then we can actually offer also regulating down or regulating up capacity for this plant and participate in the optimized market. I guess that's for the balance of the year.

Of course, the full operations of all our facilities in Cebu, both CEDC and PEDC, while there are plant outages in Visayas, there's high prices in the spot market.

While on generation, we have a question from Jose Angeles: "How will MGen or Meralco be affected by the ERC's new rule regarding allowing of the construction of transmission lines connecting to generation plants? Will the cost be billed to NGCP?"

Actually, we're already doing that. Most of the plants that we're building, including Terra Solar, we're the ones building the transmission capacity, advancing the capex for NGCP with the agreement that, as both will file jointly with ERC, that the generator, in this case Terra Solar, or your third party in the future just in case, to be reimbursed the full capacity.

Although that third party that is not a generator, I think we have yet to see that as a model. Today generators are advancing transmission investments when there is none in order to connect to the grid.

Thank you, Manny Rubio. We have a live question from Jelline Gazza.

Hello. Hi, good afternoon.

I'd like to have some clarifications on the generation performance. I noticed that there's some positives like Terra Solar commissioning, PEDC CIC finally recognized.

I just wanted to know what's the common run rate of generation profits for the quarter excluding these unusual items, to speak? How much is Terra Solar commissioning income in 2Q, PEDC CIC, how much was line rental charges, and was it fully loaded in the quarter already?

Details, Betty?

We can do

We can just edit these, Jelline. Yeah.

Thank you. Then my second question is on the PPA extension yet again for Santa Rita.

I just wanted to understand what's the logic behind the ERC allowing a more expensive PPA extension as compared to the lower PSA with San Miguel at just 4 peso per kilowatt-hour handle? Is this what's needed for them to allow you to get piped gas from Malampaya, and what's the risk of further extension because, as it stands now, Meralco is already over-contracted?

You're absolutely correct. There's no logic to it.

If you were directed to do it, that's one reason why recently power rates have gone up.

Do you have an estimate, sir, how much? At least

a peso. Upward

of a peso? Yeah.

One over the 13 to 14 is because of this PPA.

I don't know what the base would be, but certainly that's the impact.

To your question on the run rate for generation, well, just to give you an idea, for the first half, power generation is about 9.6 billion, close to 10. Thereabouts for the second half, as long as all of this would have cleared the outage, then about that number.

For SEC, I think they're covered by insurance, yeah. That one, until we have an idea of what the final approved number is, then there's nothing that we would be booking in the financial statements.

So 9.6 is what's

9.6 is the first half.

Okay. Thank you.

I think to your question about the Terra Solar, the commissioning dates, Phase 1 and Phase 2, we should tell you right the commissioning, but it will come soon. Phase 1 with the bigger phase, no?

All the commissioning capacity all during the PSA hours, which is 8:00 to 9:00 p.m., is in the contract. Meralco has first dibs.

They have the option to accept or to allow us to sell, but they need it, right? At 31 centavos, you can see that in your bill.

They're taking all of it. It's also giving us because we can also charge the battery and optimize.

We're now releasing energy from beyond the contract hours, 9:00 p.m. up to about even 2:00 to 3:00 a.m.

and selling them during the duck curve, right? We're getting a significant take on that, although still not equivalent to the COD rates, right?

That's really helping. Once we are ready to do the grid compliance test, we're scheduling it with NGCP, I think we're looking at around first week of August that will run probably for five to six days, and then once we pass, and we're confident that we will pass, we will have to wait for NGCP to issue the FCAC, the final connection to connect certificate, and then that's the time we can declare COD.

Thank you for that. Just going back to Maybank's question earlier regarding regulatory, please could you educate us on how abrupt change to the regulated business like removal of system loss pass-through would come into effect?

What steps need to be taken? Does EPIRA have to be amended or does the ERC have jurisdiction to enact it on its own, or does it have to pass through Congress first?

I think the message of the president is clear that he wanted to remove system loss cap, so that will require amendment of the law of EPIRA, because the EPIRA does not provide for zero system loss cap. It provides for criteria on what cap will be set by the Energy Regulatory Commission, but it did not mention that it should be zero.

For it to completely remove system loss cap, there has to be an amendment of that law.

Thank you, Atty. Valles.

We'd just like to scan again questions on-site and online. At this point, returning online, there is a question: "Will the management negotiate for a 50% reduction for system loss charges and the removal of VAT on electricity charges?"

System loss is inherent in the business, right? Especially for electricity.

It is, in a way, for water, you will always have non-revenue water either technical or non-technical. Technical because of leakages, or non-technical because of theft or whatever, defective meters.

It's all part of the cost of doing business. I guess you can make a case for certain DUs that are inefficient, maybe their system loss is too high.

We're aware of some of them, and that's because they're out there in the provinces and it's run by the LGUs. What should be removed is the VAT.

Not only on the non-technical side, but also on the technical side, because there will be losses, right, system losses within the entire end-to-end system, no? The argument of the president that they're being charged for something they did not receive.

The VAT on the system loss is something that should be removed because they did not receive any service or a product, right? Yet, we're paying VAT on that particular thing on both the technical and non-technical reasons, no?

Thank you, Boss MVP. With no more questions on site and online, we'd like to call again our Chairman, Manny Pangilinan, for his closing remarks.

I don't know what to say. I guess once again, we are faced with uncertainties ahead of us, and it's bad enough, hard enough trying to raise profits year on year, right?

Then this thing just comes out of the blue. We got to deal with it, wish us luck.

Thank you.

Before we officially close, please be informed that an audio recording of today's briefing will be available on our website under the Investor Relations section. Thank you, and once again for attending today's briefing.

Stay safe, and we look forward to seeing you in our third-quarter October briefing.