Investors sell Meralco shares on news over power supply, nuclear

INVESTORS played with Manila Electric Co. (Meralco) shares last week over news that it has secured an exemption from the competitive selection process (CSP) for its emergency power supply.

Also influencing Meralco’s performance is news that the electricity distributor is looking into nuclear energy

Philippine Stock Exchange (PSE) data showed a total of 1.32 million Meralco shares worth P374.23 million were traded from Dec. 5-7 and 9, making it the 18th most active stock. Local financial markets were closed on Dec. 8 in observance of the Feast of the Immaculate Conception.

On a week-on-week basis, Meralco’s share price fell 1.8% to P280 apiece last Friday from its closing price of P285 on Dec. 2. For the year, the stock has gone down by 5.2%.

Timson Securities, Inc. Head of Online Trading Marc Kebinson L. Lood said in a Viber message that SMC Global Power Holdings Corp.’s decision to stop supplying Meralco effective Dec. 7 caused its stock price to drop.

The supplier’s move comes after the Energy Regulatory Commission (ERC) rejected a proposed rate hike for the 670 megawatts (MW) from the company’s Ilijan power plant. The ERC rejected a joint petition filed by Meralco and SMC Global Power for a rate increase, saying their plea was without basis as their power supply agreement is a fixed-rate contract.

Last week, Meralco secured an exemption from the Department of Energy from holding a CSP for its emergency power supply, which was prompted by a court-issued temporary restraining order (TRO) that put on hold its power supply deal with a unit of SMC Global Power.

Jose Ronald V. Valles, Meralco’s first vice-president and head of its regulatory management, said an offer was made by Aboitiz Power Corp. to supply Meralco the equivalent power capacity of 300 MW until Jan. 25, 2023.

“In the short term, this news is negative for the stock. Consumers will face higher power prices as SMC [Global Power] is forced to breach its fixed-rate agreement with Meralco. Meralco will look to buy electricity on the spot market at volatile prices,” Mr. Lood said.

In a separate development, the power distributor said it was applying for a grant from the United States Trade and Development Agency to perform a feasibility study for small modular reactors as the company is eyeing nuclear as an energy source.

Mr. Lood warns of higher energy prices that may be a “key risk” for the company in 2023. However, he said if oil prices decline then the power distributor’s margins will improve.

“When the economy begins to recover, energy consumption can increase with high demand, which will help bring in large volumes. Meralco is the one to keep an eye on; it’s a must-have and very stable,” he said.

Mr. Lood expects the power company to post a net income of P26.1 billion for the year, or about 11.1% higher than the previous year.

Meralco’s third-quarter revenues rose by 39.5% to P115.28 billion, bringing its nine-month revenues to P314.88 billion, up by around 35.9%. Its third-quarter attributable net income rose by 1% to P6.64 billion for a year-to-date increase of 19.6% to P19.76 billion.

Mr. Lood pegs Meralco’s resistance level at P310 and its support level at P260.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. – Ana Olivia A. Tirona