Electricity price softness as supply outpaces demand
From AB Capital's The Opening Bell: Three Moves
Event
Average prices in the Wholesale Electricity Spot Market declined 1.8% MoM to P3.50/kWh in February. Supply rose 4.4% to 19,992MW, outpacing 3.1% demand growth to 12,874MW, resulting in wider reserve margins. Luzon prices fell sharply (-17.2% MoM to P2.69/kWh), while Visayas (+26.6%) and Mindanao (+23.2%) saw higher prices due to plant outages and constrained interconnection transfers.
View
The February data confirms a continuation of WESM price softness. For merchant-heavy gencos (ACEN, SCC), this implies continued margin pressure. In contrast, contracted gencos (AP/MER) remain relatively insulated given the dominance of long-term contracts in their portfolios.
Catalyst
Seasonal summer demand (Mar–May) typically tightens supply margins and drives higher spot prices, making this the next key watchpoint. Additional risk could come from fuel price volatility, particularly if geopolitical developments in the Middle East push coal and LNG costs higher, which historically feeds through to generation pricing.
Action
We remain cautious on merchant-heavy gencos (ACEN, SCC) in the near term given persistent WESM softness, though seasonal demand strength in the coming months could partially support margins. Contracted generators (AP, MER) with stable PSA coverage should continue to show more resilient earnings visibility.
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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