Manila Electric Co. (Meralco) has secured a credit rating upgrade from S&P Global, with its long-term rating elevated to ‘BBB’ from ‘BBB-’, supported by the company’s solid financial performance and ongoing strategic investments.
The upgrade, which comes with a stable outlook, positions Meralco just one notch below the Philippines’ sovereign credit rating of ‘BBB+’, signaling a low risk of credit default.
S&P Global highlighted Meralco’s strong financial standing, driven by improving profitability in its power generation business and consistent cash flows from its regulated distribution operations.
The credit rating agency also pointed to the company’s prudent management of leverage and growth spending over the next 12 to 24 months as key factors in the rating boost.
Meralco is expected to maintain a robust funds-from-operations to debt ratio of 39% to 45% over the next two years, well above the previous trigger level of 30%.
The company’s EBITDA is projected to sustain double-digit growth, underpinned by ongoing strategic investments in its power generation business.
Among the key investments in Meralco’s pipeline are its planned entry into the local natural gas sector through an integrated liquefied natural gas (LNG) facility in Batangas and the development of a 3,500 MW solar energy plant with 4,500 MWh of battery storage in Nueva Ecija, Luzon.
These projects align with the company’s broader strategy to support the Philippines’ energy security and sustainable economic growth.
“This investment grade upgrade from S&P Global reflects our commitment to maintaining financial stability while achieving our long-term objectives,” said Manuel V. Pangilinan, Meralco’s Chairman and CEO. “It challenges us to continue pursuing strategic investments in power generation and innovative services to meet the evolving needs of our customers and the country’s energy sector.”
S&P Global noted that Meralco’s liquidity remains strong, bolstered by its robust cash flow generation and access to capital markets for its ongoing projects.
The stable outlook is expected to hold as long as Meralco continues to manage its financial policies conservatively and executes its growth strategies effectively.
Meralco first achieved an investment grade rating of ‘BBB-’ in 2017, with an outlook upgrade to positive in October 2023, driven by expectations of improving operational and financial performance as well as greater clarity on regulatory matters.
Business News Asia