Energy firms to post mixed results for second half — analysts

By Sheldeen Joy Talavera, Reporter

PHILIPPINE energy companies are expected to report mixed financial results for the second half of the year due to lower demand during the rainy season and the introduction of new capacity from energy projects, according to analysts.

“For the second half of the year, Philippine energy firms are likely to experience a mix of opportunities and challenges,” Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said in a Viber message. 

He said the demand for energy continues to grow, “driven by economic recovery and increased industrial activities,” providing a favorable environment for the sector.

Andrei G. Soriano, a research associate at China Bank Securities Corp., said that volumes of power generation and distribution firms, except for those with upcoming energy capacity, will likely be lower compared to the first half “due to seasonally lower demand” amid the rainy season.

“Those power gen firms with exposure to the spot market may also see some dip in revenues relative to 1H24 as spot prices are expected to trend lower,” he said in an e-mail.

Mr. Soriano said, however, that power generation companies with new operating capacities should see a year-on-year boost in profitability.

“Power distribution companies should also see some year-on-year volume growth as economic activities continue to pick up (i.e., commercial, industrial customers),” he said.

Some energy companies “may find lower borrowing costs advantageous in terms of financing new projects, expanding capacity, or improving operational efficiencies,” following the recent rate cut delivered by the Bangko Sentral ng Pilipinas (BSP), according to Jayniel Carl S. Manuel, an equity trader at Seedbox Securities, Inc.

To recall, the BSP cut policy rates for the first time since November 2020, driven by the improving inflation outlook. The Monetary Board implemented a 25-basis-point rate cut, lowering the benchmark rate to 6.25% from the over 17-year high of 6.5%.

Mr. Manuel said that lower interest rates may contribute to increased economic activity, “potentially leading to higher energy demand.”

“The energy sector is currently experiencing a number of positive developments, and these factors could play a role in shaping the sector’s outlook as the year progresses,” he said.

Ayala-led ACEN Corp. saw its attributable net income rise by 61.5% to P3.57 billion driven by the operationalization of new solar and wind farms, as well as significant reduction in costs.

Manila Electric Co. reported an increase of 31.3% in its attributable net income to P12.84 billion for the second quarter, driven by higher sales volume in the distribution business and increased plant availability in power generation.

Meanwhile, Aboitiz Power Corp.’s second-quarter attributable net income fell by 10% to P9.26 billion from P10.29 billion a year ago.

Semirara Mining and Power Corp. posted a 40.6% decline in its attributable net income for the period to P6.05 billion due to weaker coal and electricity prices.

Lopez-led First Gen Corp. reported a 2.5% decrease in its attributable net income to $75.26 million, amid higher expenses and lower contributions from some of its business units.

Mr. Arce said that despite the positive outlook, energy firms should navigate “potential regulatory changes and policy uncertainties.”

He added that shifts in government policies, particularly those involving energy tariffs and environmental regulations, could pose risks to profitability.

“Challenges for power firms include lower spot selling prices and tepid demand amid the rainy season, as well potential execution risks in their capacity roll-out (i.e., delays in project construction),” Mr. Soriano said.