Manila Electric Company (“Meralco” or “Company”) has secured an upgrade from S&P Global for its long-term credit rating to ‘BBB’ from ‘BBB-’ with stable outlook, on the back of solid financial performance and ongoing strategic investments.
Just one notch below the Philippines’ ‘BBB+’ sovereign credit rating, Meralco’s investment grade rating is deemed low risk of credit default.
In granting the upgrade and providing a stable outlook, S&P Global cited the Company’s strong financial position, with improving profitability of the power generation business and steady cash flows from the regulated distribution business. Meralco is also expected to manage its leverage and growth spending prudently in the next 12 to 24 months.
S&P Global said it expects Meralco to maintain a strong ratio of funds from operations to debt of 39% to 45% in the next two (2) years, which is above its previous upside trigger of 30%. Meralco’s EBITDA is forecasted to maintain double digit growth.
With several strategic investments in the pipeline, Meralco is set to continue allocating significant capital to support its investments in the unregulated power generation business. These investments include the Company’s planned entry into the local natural gas industry through its investment in an integrated liquefied natural gas (LNG) facility in Batangas, and the ongoing development of a 3,500 MW solar energy plant with 4,500 MWh of battery storage in Nueva Ecija, Luzon.
“This investment grade credit rating upgrade from S&P Global is not just an achievement for Meralco but also a reflection of our continued commitment to maintain financial stability and achieve our long-term business objectives. Similarly, this challenges us even further to pursue strategic investments in power generation and innovative products and services that will support the evolving requirements of our customers, as well as the Philippines’ thrust towards energy security and sustainable economic growth,” said Manuel V. Pangilinan, Chairman and Chief Executive Officer.
S&P Global said that Meralco’s liquidity remains adequate, supported by its strong cash flow generation and access to capital market for its ongoing capital projects. The Company’s stable rating outlook will likewise be maintained as long as Meralco manages its financial policies conservatively and, executes its growth strategies and expectations.
Meralco achieved the investment grade ‘BBB-’ rating in 2017. In October 2023, the global credit rating agency upgraded Meralco’s ‘BBB-’ rating outlook to positive from stable following expectations on improving operating and financial performance, and clarity on regulatory issues.