MGen explores next leg of capacity growth with VinEnergo

From AB Capital's The Opening Bell: Three Moves

Event

Meralco PowerGen Corp. (MGen) signed a memorandum of understanding (MoU) with VinEnergo, the renewable energy arm of Vingroup, to explore the development of up to 25GW of renewable energy and energy storage projects in the Philippines, including solutions capable of delivering up to 5GW of baseload-equivalent capacity.

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We think this highlights MGen's ambition to expand beyond its current pipeline and strengthen its position in the country's energy transition. Attributable generation capacity is set to double from 2.6GW in 2025 to 5.3GW by 2030 driven by existing projects, and this partnership suggests management is already identifying the next leg of growth. While VinEnergo is a relatively new platform, it is backed by Vingroup, giving MGen exposure to a partner with significant capital, development expertise and a growing international renewable energy (RE) pipeline.

Catalyst

Key catalysts include the announcement of specific projects, capacity allocations, timelines and investment commitments. We would also look for proof of execution from VinEnergo (i.e. rollout across international markets).

Action

We continue to like Meralco (MER), which combines stable regulated distribution utility (DU) earnings with the faster-growing generation business of MGen. While the MoU has no immediate earnings impact, successful project conversion could provide upside to our forecasts and extend its growth runway. We also see this as supportive for JG Summit Holdings (JGS), where MER accounts for nearly 40% of net asset value (NAV) and remains a key value driver, as highlighted in our note published today.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.