Meralco November 18, 2013

MERALCO SERVES A STRATEGIC MARKET

Powers more than five (5) million customers in 33 cities and 78 municipalities The countrys center of commerce & industry

About 50% of the countrys GDP An estimated 60% of manufacturing output More than 30 manufacturing economic zones

HUB OF GOVERNMENT SERVICES & INFRASTRUCTURE

Providers of outsourced business processes HQ of shared services of global companies

Deustche Bank, Chevron, etc.

Hotels & hospitals Telecoms & transportation

Providers of outsourced business processes HQ of shared services of global companies (e.g., Deustche Bank, Chevron, etc.)

All major media companies

Internet backbone, LRT & MRT, airport, etc.

Hotels & hospitals Telecoms & transportation: internet backbone, LRT & MRT, airport All major media companies
Malacaang, Senate & House of Representatives, Supreme Court Armed Forces, National Police & Office of Civil Defense PAG-ASA

Malacaang, Senate & House of Representatives, Supreme Court, Armed Forces, National Police & Office of Civil Defense PAG-ASA

MARKET HAS BEEN STEADILY GROWING

ENERGY SALES
Ave. Growth: 2003-09: 2.7% 2009-12: 5.0% 2003-12: 3.7%
24,660 24,806

7.1%
30,247 26,219 27,049

32,771 GWh

30,592

27,516

23,834

25,078

2003

2004

2005

2006

2007

2008

2009

2010

2011
5.03

2012

CUSTOMER COUNT
Ave. Growth: 2003-09: 2.6% 2009-11: 3.2% 2003-12: 2.8% 4.21 4.05 4.32 4.39 4.46 4.57 4.70 4.85

3.2% 5.19 mln

2003
CONSOLIDATED

2004

2005

2006

2007

2008

2009

2010

2011

2012

DRIVERS OF GROWTH (1ST HALF 2013)

Details:

13,118

14,950

14,781

16,215

4.0%
2.7%

16,863 Total, in GWh 5,067 6,557 5,174

2013
Industrial

Share of 2013 Sales:

4,933
6,261 4,956

30.0%
4.7%

Commercial 38.9%

30.7%
4.4%

Residential

2009

2010

2011

2012

Movers for 1H 2013

Food & Beverage Electrical Machinery (semicon) Miscellaneous Manufactures
Real Estate (condominiums, BPO office space) Private Services (hotels, malls, hospitals) Trade

Increased household consumption mainly due to warmer

temperature and benign inflation

ON POWER PRICES

SUPPLY CHAIN OF THE POWER SECTOR

GENERATION CHARGE: SINGLE LARGEST COMPONENT

1H 2013 Share per component

BILL COMPONENT
Generation Charge Generation Charge

1H 2013
Overall Ave, P/kWh 5.38 1.66 0.85 0.47

56.9%

Meralco

Distribution Charge (MERALCO) Transmission Charge (NGCP)

NGCP

17.6%

9.0%
System Loss Taxes, Univ Charge Charge

System Loss Charge

Taxes, Univ Charge*

1.09 9.45

11.5%

5.0%

Total

* Breakdown: Universal Charges 0.25 VAT 0.77 Others (Local Franchise Tax, etc.) 0.07

REGIONAL COMPARISON OF ELECTRICITY PRICES

FINDINGS OF THE INTERNATIONAL ENERGY CONSULTANTS

Philippine tariffs are fully cost-reflective, which is sound economic policy

Policy is similar to Singapore, Japan, and Australia

Rates in Thailand, Malaysia, South Korea, Taiwan, & Indonesia are low due to government subsidies

Tariffs remain well below the cost Poor economic policy unsustainable

John Christopher Morris, Ph.D. Managing Director

COMPARISON OF AVERAGE RETAIL ELECTRICITY TARIFFS

30.00

USc/kWh

15.00

Bundled excl taxes Unbundled Generation Unbundled Transmission Unbundled Distribution Other Taxes & Charges

Cost-reflective
0.00

Government subsidized

Source: International Energy Consultants

Notes: 1. Weighted average tariff (all customer categories), excluding VAT 2. Tariffs are for January 2012

GOVERNMENT SUBSIDIES IN OTHER COUNTRIES

Subsidy is up to 54% of the power cost Subsidies are through: subsidized fuel, cash grants, additional debt, deferred expenditures

Source: International Energy Consultants

OTHER FINDINGS OF THE INTERNATIONAL ENERGY CONSULTANTS Dependence on the price of imported fuel
Fuel

is the largest component of the tariff. Approx. 80% of generation on Luzon is fuelled with imported coal & oil (at full international market prices) & domestic gas (pegged to international prices) Several (but not all) other countries with lower tariffs provide fuel to their utilities at belowmarket rates, or Their government-owned power generation, transmission, and/or distribution companies are subsidized, absorb costs, and/or incur losses

Historical Fuel Costs vs. Tariffs

Over the past decade, some markets have passed rising fuel costs on to customers (eg. Singapore, Australia, Philippines) but others have not (eg. Indonesia, Korea)
30.00 25.00 150 125

20.00
c/kWh 15.00 10.00 5.00 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

100
75 50 25 0 $/tonne - $/bbl Page 13

Coal

Oil

Australia

Singapore

Indonesia

Korea

Meralco
Source: IEC

NB. Meralco, Indonesia & Korea are averages of all tariff classes; Singapore, Australia are residential tariffs only

June, 2012

THE POWER SECTOR IS HEAVILY TAXED

Phl Power Market is a fully-priced market. No Subsidies and heavily taxed

GENERATION

DELIVERY
Transmission Distribution

VAT Royalty/Tax on indigenous fuels or Duty/Tax on imported fuels Real Property Tax Other taxes & fees

3% franchise tax, in lieu of all other taxes

VAT Local Franchise Tax on pass through gen/ trans/ system loss charges * Local Franchise Tax on distribution charges Real Property Tax Energy Tax on residentials Universal Charges incl FIT Other taxes & fees
* not applicable to electric coops

GENERATION IS FUELED MAINLY BY COAL AND INDIGENOUS NATURAL GAS

POWER PLANT MIX (BY VOLUME)
1H 2013 Purchases

Multi-fuel 5.1%
Hydro, Coal, et al.)

Geothermal 2.0%

SOURCE
Natural Gas

1H 2013
GWh Share

Natural Gas

9,307.1 7,616.4
369.1 936.7 18,229.3

51.1% 41.8%
2.0% 5.1% 100.0%

51.1%

Coal

41.8%

Coal
Geothermal Multi-fuel* Total Purchased Power

*Biomasss, Nat Gas, Hydro, Coal, et al.; includes volume for Special Program (energy availments of Sunpower & CEZ) & CEDC

MERALCO RECENTLY SECURED TIGHTLY PRICED POWER FOR ITS CUSTOMERS

Completion in 2012 of negotiations for new Power Supply Agreements
MERALCO & South Premiere Power Corp. MERALCO & SEM-Calaca Power Corp. MERALCO & Therma Luzon Inc. MERALCO & Masinloc Power Partners. MERALCO & San Miguel Energy Corp.

POWER PLANT / LOCATION

GENERATING COMPANY
South Premiere Power Corp. SEM-Calaca Power Corp. Masinloc Power Partners Co. Ltd. Therma Luzon Inc.

FUEL Nat Gas / Diesel

ILIJAN, Batangas CALACA, Batangas MASINLOC, Zambales PAGBILAO, Quezon SUAL, Pangasinan

INITIAL CONTRACTED CAPACITY

1,180 MW
210-420 MW 330-430 MW 350 MW 200-500 MW

Coal Coal
Coal Coal

Combined capacity: > 2,270 2,880 MW

San Miguel Energy Corp.

LOWER GENERATION CHARGES IN 2013 VS. 2012

4.00

4.50

6.50

Generation Charges also went up during past major Malampaya maintenance works

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13

3.50
6.77

5.00

5.50

6.00

7.00 6.74

Malampaya maintenance (Feb 10-Mar 9) Malampaya maintenance (Jul 13-21)

IMPACT OF THE MALAMPAYA AND POWER PLANT MAINTENANCE

Malampaya maintenance Power plant maintenance

Use of alternate, but more expensive, liquid fuels Tighter generation supply situation Greater dependence on WESM

Generation Charge will rise Will affect December and January bills to customers After conclusion of maintenance works, Generation Charge will normalize in February

CUSTOMER OPTIONS TO LOWER THEIR GENERATION CHARGE

Meralco's Peak / Off-Peak (POP) rates program

Formerly "Time of Use" or "TOU" Alternative energy pricing scheme: based on the cost of supplying electricity during a period of time

Meralco customers can avail of lower generation costs in their total electricity rate during predefined off-peak hours

DAYS
Monday to Saturday

PEAK
8 am to 9 pm (13 hours)

OFF PEAK
9 pm to 8 am (11 hours)

Sunday

6 pm to 8 pm (2 hours)

8 pm to 6 pm (22 hours)

RENEWABLE ENERGY ACT OF 2008

Promotes the development and commercialization of renewable energy resources Provides incentives to investors in renewable energy

RE Act

Fiscal Incentives

Non-Fiscal Incentives

Renewable Portfolio Standards (RPS)

Feed-in-Tariff Scheme (FIT)

Net Metering

Green Energy Option

NET METERING: CUSTOMER AS SUPPLIER

Import Meter

Energy Imported

kWh Imported

Export Meter

Customer Imports Energy from the Distribution Network

E.g., Night time with no Energy generated by the Solar PV Household Energy demand is supplied by the Distribution Network

less
Import Meter

Energy Exported

kWh Exported

Export Meter

Customer Exports Energy to the Distribution Network

Daytime with Energy generated by the Solar PV Household uses up a portion of the Energy generated by Solar PV for basic load Energy generated in excess of the Household load is exported to the Distribution Network

Net Billed Amount

SUPPORT TO MARGINALIZED SECTORS

KWh Consumption 1-20
21-50 51-70

Lifeline Discount (% of Charges*) 100%

50% 35%

Customer Count

39.36% 60.64%

71-100

20%
Lifeline Non-lifeline

* Applied to sum of Generation, Transmission, Distribution, Supply, Metering, and System Loss charges

Energy Consumption 10.24%

April 2013 Lifeline Data

Customer Count (in millions) Energy Consumption (gWh) 89.76%

Lifeline Non-Lifeline TOTAL

1.88 2.90 4.79

96.6 846.6 943.2

Lifeline

Non-lifeline

POWER SECURITY AND ROBUST DISTRIBUTION INFRASTRUCTURE

STRATEGIC IMPERATIVES

Given the strategic nature of Meralcos market, power security and competitiveness are very critical concerns

Adequate, reliable and reasonably priced power supply Customer-centric processes and systems Highly robust and customer responsive network and service infrastructure

INVESTING TO SUPPORT DEVELOPMENT

10,321 8748

9175

8890

9053

6668 5430 5339

6099

6869

Carmelray 83-MVA Bank No. 2, Carmelray Industrial Park, Calamba, Laguna

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Laguna Bel-Air Substation, Sta. Rosa, Laguna

CPIP 115 kV Line, Calamba Premiere Industrial Park (CPIP), Calamba, Laguna

REDUCING THE SYSTEM LOSS CHARGE

10.85
9.5%

11.10 10.21 10.10

9.65

System Loss Cap

9.28 8.61

8.5%
1.46%

7.94

7.35

7.04

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

IMPROVING SYSTEM AVAILABILITY AND RELIABILITY

Total IFR (Reliability) improved by 23%, at 2.84 times Forced CIT (Availability) improved by 29%, at 1.75 hours Pre-Arranged CIT (Availability) improved by 20%, at 1.11 hours

IFR: Interruption Frequency Rate CIT: Cumulative Interruption Time

IFR (times) /CIT (hours)

IMPROVING CUSTOMER SERVICE

Ave. Time to Process Application (Days)
8.18 5.94

11.42

Ave. Time to Connect Application (Days)

4.25
3.42 3.38 3.06

5.34

4.6

2.12

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

Ave. Time to Process Application

improved by 14%, at 4.6 days

Ave. Time to Connect Application

improved by 31%, at 2.12 days

IMPROVING ACCESS TO SERVICE

Meralco and the Philippines
Household Barangay
MERALCO (2012) 96.56% 100% Philippines (2012) 77.60% 99.98%

Source: DOE Accomplishment Report, 2012

Major Island Groups

Survey Population, in thousands % Families with Country Access to Electricity

Families with Access

Total Number of Families

Luzon
Visayas Mindanao

91.52 %
81.55 % 75.04 %

9,639
3,010 3,172

10,532
3,691 4,227

Source: NSO - Number of Families by Presence of Electricity, Main Source of Water Supply, and Toilet Facilities and by Region: 2009

ENHANCING DISASTER PREPAREDNESS

Fast response and isolation of hazardous and life threatening incidents Timely and accurate information on restoration efforts and power situation
Ready 24 x 7 to respond to our customers concerns

Habagat in August, 2012

Habagat in August, 2013

MAKING A DIFFERENCE BEYOND OUR FRANCHISE

ASSISTANCE TO CABANATUAN ELECTRIC CORPORATION (CELCOR) ON THE REPAIR OF DAMAGED ELECTRIC FACILITIES DUE TO TYPHOON SANTI (OCT 18-22, 2013)

Meralco contingent in Aklan, Capiz and Iloilo

Assessment

Meralco assessment team with CAPELCO Gen. Manager Edgar Diaz

Meralco Sector heads Gary Festin and Bernard Castro at assessment sites

Arrival

Meralco Sector heads give an overall briefing to the Panay contingent

Meralco Panay contingent line up along Aklan West Road on their way to their respective assignments in Kalibo in Aklan, Roxas City in Capiz, and Sara in Iloilo.

Meralco crews arrived at the Caticlan Port in Aklan after almost 24 hours of travel.

Efforts

Meralco crews at work in different areas in Panay Island

MERALCO SMART GRID VISION 2021