Power prices ease in January on muted demand
From AB Capital's The Opening Bell: Three Moves
Event
System-wide WESM prices declined 18.6% MoM to P3.56/kWh in January, driven by a sharper drop in demand (-7.1%) than supply (-5.3%). While Visayas and Mindanao saw steep price declines, Luzon WESM prices rose 9% MoM due to tighter margins from forced outages of coal and gas units. Lower January spot prices will feed through to generation charges in the near term.
View
The January pullback largely reflects temporary demand softness. In Luzon, where most capacity and demand are concentrated, margins remain highly sensitive to outages, as evidenced by the MoM price increase despite lower demand. While the Sta. Rita PPA extension should help stabilize conditions, the system is likely to enter the hotter months with limited buffers, keeping yellow/red alert risks elevated during peak demand.
Catalyst
Key drivers remain plant availability during summer and the trajectory of demand as temperatures rise. Forced outages or fuel constraints could reverse recent WESM declines, while sustained availability and incremental capacity would cap spot upside.
Action
We remain selective, preferring highly contracted portfolios and DUs (AP, MER) for earnings visibility in the low spot-price environment.
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.
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