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Manila Bulletin devider Business devider Trade & Industry devider S&P Global: Meralco's generation push fuels 'positive outlook'

S&P Global: Meralco's generation push fuels 'positive outlook'

Published Jul 22, 2025 01:37 pm
Debt-watcher S&P Global Ratings said the expansion of Manila Electric Co.’s (Meralco) scale and market position in power generation will enhance its business as an integrated power utility.
In a statement, S&P Global Ratings said it affirmed Meralco’s ‘BBB’ rating and revised its outlook to positive, citing stable cash flow and increasing diversification from power generation investments.
“The positive outlook reflects our expectation that business integration, scale, and diversity could improve with project execution in power generation, without material delays or cost overruns,” S&P Global stated.
The ratings agency noted that Meralco’s gross operating generation capacity is projected to grow to 8.8 gigawatts (GW) by 2027 from 2.6 GW, a growth dependent on recent liquefied natural gas (LNG) acquisitions.
Alongside ongoing developments in the Terra solar project, both it and CGHI are expected to contribute 24 percent and 7 percent, respectively, to the company’s earnings before interest, depreciation, and amortization (EBITDA) within the next two years.
“We assume predictable cash flow from the projects, given their long-term power supply agreements with favorable tariffs. These upstream investments will also help Meralco better secure power supply and evolve as an integrated power utility from a stand-alone distribution company,” S&P Global elaborated.
The credit rater remained positive about Meralco’s progress on the Terra solar project, stating, “This is given the less complex nature of solar projects, their low gestation period, and Meralco's experience in developing such projects.”
S&P Global expects Meralco’s profitability to improve as the company adds more renewable energy (RE) to its portfolio, anticipating an increase in the EBITDA margin from 16 percent in 2024 to 21-22 percent by 2027 due to its solar projects.
Furthermore, Meralco could also see improved dividends from CGHI, PacificLight Energy Pte. Ltd., and San Buenaventura Power Ltd. Co.
However, with ongoing construction for the Terra solar project, the CGHI acquisition, the potential investment in the Atimonan One Energy plant, and annual distribution upgrades, Meralco is expected to ramp up its capital spending for power generation.
“We currently see limited risks from these investments for Meralco's financial profile, with little likelihood of the need for extra support from Meralco. This is because of the strong strategic partners and operational nature of these projects, which reduces the risk of high support requirements,” S&P said.
Meanwhile, S&P expects regulatory backing for Meralco as it recovers all pass-through charges, including returns on capital expenditures (capex) and costs for generation, transmission, and system loss.
“The positive outlook on Meralco reflects our expectation that the company’s business integration, scale, and diversity could improve with project execution in power generation. We expect the company to manage execution risks without material delays or cost overruns,” S&P Global reiterated.
Meralco’s current S&P rating could be further improved through timely recovery of regulated returns, successful project execution, and prudent financing structures for its investments, among other factors.

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Manila Electric Co. (Meralco)
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