Manila Electric Loses $2 Billion Value as Reform Plan Weighs
(Bloomberg) -- Manila Electric Co. shares extended their decline to a fourth day, erasing about 127 billion pesos ($2 billion) in market capitalization amid growing concern that a proposal to eliminate a power charge for consumers could hurt the utility’s earnings.
The stock fell as much as 12% on Thursday, the largest intraday drop since March 2020. Philippine President Ferdinand Marcos Jr. on late Monday proposed to end an unpopular charge where power consumers pay for electricity lost during delivery.
Uncertainty over the proposed removal of the power charge is clouding the outlook for Manila Electric, Philippines’ largest power distributor, with questions remaining over whether utility firms will be allowed to recover the costs through another mechanism. Manuel Pangilinan, the company’s chairman and chief executive officer, on Wednesday said the move would cost the industry “tens of billions of pesos.”
“The sentiment now is really driven by the hot mess after the State of the Nation Address remarks on system loss charges,” said Jasper Timoteo Ondap, an equity analyst at Regina Capital Development in Manila. The planned reform has “sparked debates and projected negative financial implications” for electricity producers.
Manila Electric reported an 11% year-on-year increase in net income for the first half of the year, though Pangilinan said geopolitical developments in the Middle East presents a headwind for the local energy industry. The Philippines is a fuel import-dependent country.
JPMorgan Chase & Co. analyst Jelline Gaza cut recommendation on the company to neutral from overweight, citing earnings and sales that trailed estimates.
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