Philippine Markets Newsletter

MONDAY MACRO: Uniform Accounting shows how this industry has been resilient to macro headwinds and is set to capture tailwinds

January 3, 2022

With temperatures rising and growing electricity demand, it seems that the supply of power will be an important issue of the Philippines in the coming years.

Based on the aggregate performance of publicly traded companies in the electricity industry, the group looks poised to capture its growth tailwinds, while remaining largely unaffected by macro headwinds.

Philippine Markets Newsletter: 
The Monday Macro Report
Powered by Valens Research

Electricity prices increased a hefty amount for the majority of December 2021. 

The Independent Electricity Market Operator of the Philippines (IEMOP) reported that spot prices for electricity have risen by 22% from PHP 5.17/kWh in November to PHP 6.32/kWh.

High electricity prices are generally bad for an economy. Aside from the direct financial hit to everyone, it also raises the cost of manufacturing products, thereby generating inflation.

More importantly, high electricity prices suggest problems in the market such as higher power consumption versus what electricity providers can supply.

Amid the pandemic, the IEMOP reports that peak demand for electricity in 2021 is higher compared to 2019. Specifically, peak consumption has increased by 2.2% from 13,450 MW in 2019 to 13,450 MW in 2021.

The IEMOP is expecting peak consumption to continue growing in 2022.

On the other side of the market, electricity supply in the Philippines has been slow to catch up. Even now, some parts of the country still face power outages as a result of insufficient supply.

One reason for the supply instability is the number of power plants across the country facing unplanned shutdowns due to age. The Energy Regulatory Commission (ERC) claims that as much as 17 power generation companies have exceeded their plant outage allowance in 2021.

In addition to their market impact, these plant shutdowns also create a situation where power reserves can’t be maintained. The National Grid Corporation of the Philippines (NGCP) is struggling to secure contracts for ancillary services due to the supply situation.

However, it is also because of these supply and demand concerns that the Philippine electricity market is poised to improve significantly.

The Department of Energy (DOE) has been encouraging investments into power generation, particularly for renewable energy.

With regulatory tailwinds backing the electricity market, there’s huge growth opportunities for many publicly trading companies in the industry.

Many investors have realized this for Ayala-owned AC Energy (ACEN:PHL), given its already high valuations.

Meanwhile, Solar Philippines Nueva Ecija’s (SPNEC:PHL) stock price is currently up 27% since its IPO on December 17, 2021, as the firm starts construction on the largest solar project in Southeast Asia.

When looking at the aggregate performance of PSE-listed stocks in the electricity industry, we also see how well the industry has performed as a whole.

Aggregate Uniform ROA recorded muted levels from 2001-2009, before jumping to 8%-9% peaks in 2010-2012, driven by Aboitiz Power’s (AP:PHL) acquisition of geothermal and coal power plants in 2009.

Then, aggregate Uniform ROA compressed to 6%-7% levels through 2020 as some of the members started construction of power plants to enter the market. Despite the decline, profitability has still been near or above the 6% average global returns.

The group is in an industry resilient to macroeconomic headwinds, which is why it has managed to outperform the entire PSE amidst the pandemic. 

As a result, while the aggregate Uniform ROA of the entire PSE dropped from 7% in 2019 to 4% in 2020, the group’s Uniform ROA only faded to 6%.

Given the aforementioned growth opportunities of the electricity industry, it seems unlikely that the group’s Uniform ROA will see a decline that is unrelated to new construction projects.

As more power plants come online and start generating revenue, profitability may creep up toward previous highs. Regardless, the industry’s still-strong profitability is likely to persist through the long term.

About the Philippine Markets Newsletter
“The Monday Macro Report”

When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available. 

Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data. 

Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms. 

Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are, will make investing a less monumental task than finding a needle in a haystack.

Hope you’ve found this week’s macro chart interesting and insightful. 

Stay tuned for next week’s Monday Macro report!


Angelica Lim 
Research Director
Philippine Markets Newsletter
Powered by Valens Research

View All

You don’t have access to the Valens Research Premium Application.

To get access to our best content including the highly regarded Conviction Long List and Market Phase Cycle macro newsletter, please contact our Client Relations Team at 630-841-0683 or email

Please fill out the fields below so that our client relations team can contact you

Or contact our Client Relationship Team at 630-841-0683