Meralco to sustain strong financial performance amidst heavy investments

The company is projected to maintain a ratio of FFO to debt of up to 45% over the next two years.

Manila Electric Co. (Meralco) in the Philippines is forecasted to maintain strong financial ratios despite heavy investments in its power generation business, said S&P Global Ratings.

The company is projected to sustain a ratio of funds from operations (FFO) to debt of up to 45% over the next two years, exceeding the previous upside trigger of 30%.

“Support will come from improving profitability in power generation and steady cash flow from distribution,” the report said.

Moreover, Meralco’s reported EBITDA is expected to increase to up to $1.2b (PHP68b) in 2024-2025.

Its improvement in power generation earnings over the next two years is attributed to the favourable power purchase agreement (PPA) contract terms for Global Business Power Corp. (GBPC) and additional earnings from the local contingency reserve market.

“Reflecting this, we raised our long-term issuer credit rating on Meralco to 'BBB' from 'BBB-',” the report added.

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