MTerra Solar Phase 1 begins commercial operations

From AB Capital's The Opening Bell: Three Moves

Event

MGen's MTerra Solar Phase 1 began commercial operations on Aug. 26, delivering 600MWac under its 850MW mid-merit power supply agreement (PSA) with Meralco. The remaining 250MW is expected online in the coming months. The broader project combines 3.5GWp of solar capacity and 4.5GWh of battery storage and is being developed with Actis as a 40% project partner.

View

This shifts MTerra Solar from a construction story to an earnings growth driver for Meralco (MER)'s generation arm. The mid-merit contract provides long-term contracted volumes and greater revenue visibility, although we expect the initial earnings contribution to be partly offset by higher depreciation and interest costs from the project's substantial build-out.

Catalyst

MER will likely continue to trade primarily on system loss concerns, but this provides a tangible fundamental catalyst as contracted capacity ramps up and starts contributing to earnings. We would also watch for greater traction around the potential backdoor listing via SPNEC as MGen's renewables platform, with MTerra its key operating asset.

Action

Positive for both MER and SPNEC. MTerra Solar adds a meaningful new source of contracted generation growth for MER's generation arm, while its ramp-up strengthens the investment case for SPNEC.

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