Manila Electric Company: Proposal to scrap system loss recovery creates an overhang

研报英文原文证据摘录

Manila Electric Company: Proposal to scrap system loss recovery creates an overhang

J P M O R G A N Asia Pacific Equity Research

28 July 2026

Manila Electric Company Overweight

MER.PS, MER PM

Proposal to scrap system loss recovery creates an Price (27 Jul 26):Php589.50

overhang Price Target (Jun-27):Php760.00

President Ferdinand Marcos, Jr. called for the removal of system loss charges to Power

ACconsumers in order to alleviate rising power costs in his State of the Nation Address Jelline Gaza, CFA

(SONA) yesterday (link) . The burden would shift to distribution utilities and (63-2) 8878-1131

electric cooperatives, though the ERC flagged concerns over operator readiness to jelline.gaza@jpmchase.com

absorb the full cost. For Meralco, we estimate a sizeable Php18.28bn post-tax net Jeanette Yutan

income hit (29% of 2027E), assuming a peer-low 5.85% system loss in 2025 and (63-2) 8878-1188

Php7.12/kWh average purchase power cost in 1Q26. Of this, 5.02% pertains to jeanette.g.yutan@jpmorgan.com

J.P. Morgan Securities Philippines, Inc.

unavoidable technical losses (wire heating, etc.) and only 0.83% to pilferage and

theft. If only non-technical system loss recovery is disallowed, we estimate a

Php2.59bn potential NIAT drag, or 4% of our 2027E NIAT. We highlight that Please see our takeaway note on potential

MER’s 5.85% system loss is below the 6.5% regulatory cap and compares EPIRA amendments here: Philippine

favorably against 10.7% industry-wide system loss. Fully scrapping the system

Power: Proposed power sector reforms

loss recovery would require an amendment to the Electric Power Industry Reform

bear watching; stricter cross-ownership,

Act (EPIRA) (our takeaways here). We note that there are a number of proposed

market share limits pose most risk (Jul-24)