Sta. Rita gets 6-month extension, Malampaya gas to support Ilijan

From AB Capital's The Opening Bell: Three Moves

Event

The Energy Regulatory Commission (ERC) approved a six-month extension of Meralco's (MER) power purchase agreement (PPA) with First Gen Corp. (FGEN) for the 1,200MW Sta. Rita plant to Dec. 25, 2026, with negotiated terms expected to save consumers P4.2 billion, or P0.36/kWh, from September to December. As part of the extension, FGEN will also share its Malampaya gas allocation with the 1,200MW Ilijan plant (owned by a consortium of MGen, Aboitiz Power (AP) and San Miguel Corp. (SMC)) starting September.

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The Sta. Rita extension improves FGEN's earnings visibility but keeps MER's generation costs relatively high, with the P0.36/kWh savings providing only partial relief for consumers. While generation costs are passed through and do not directly affect MER's margins, elevated electricity rates remain a political overhang. Meanwhile, the Malampaya gas allocation to Ilijan is operationally positive, improving fuel security and reducing exposure to imported fuel volatility, but is not an earnings catalyst given fuel-cost pass-through.

Catalyst

Watch how the savings flow through to MER's generation charges starting September, alongside any political moves on high electricity rates, progress on Prime Infra's new gas discoveries and further gas supply deals.

Action

We see the announcement as more of a visibility and fuel-security positive than an earnings catalyst for the sector. Consumer rate relief is welcome, but unlikely to change the political narrative around high electricity costs. We would stay cautious on regulated utilities and favor names with greater exposure to unregulated generation.

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