Shares of Manila Electric Co. (Meralco), the Philippines' largest electricity distributor serving Metro Manila and surrounding provinces, climbed last week, outpacing the broader Philippine market, as analysts said the utility could absorb a regulator-ordered customer refund without significantly affecting its earnings outlook or dividend policy.

Meralco ranked third in value turnover on the Philippine Stock Exchange (PSE), with P835.69 million worth of 1.37 million shares traded during the week of Aug. 3–7, according to PSE data. The stock closed at P494 on Friday, representing a 2.9% gain from P480 a week earlier. The advance outperformed both the 0.7% rise in the Philippine Stock Exchange index (PSEi) and the 1% increase in the industrial sector over the same period.

On a year-to-date basis, however, Meralco shares have declined 13.9%, trailing the PSEi's 3.9% gain and the industrial sector's 5.7% drop.

On July 31, the Energy Regulatory Commission (ERC), the body that sets electricity tariffs and oversees the country's power sector, ordered Meralco to refund P9.5 billion to customers over a six-month period. In a separate ruling, the regulator authorized the company to recover P8.7 billion in previously unrecovered pass-through costs — charges that utilities collect from customers and remit to third parties such as power generators and grid operators — over 36 months.

The regulatory decisions came shortly after Meralco released its first-half financial results. The company reported a 3.8% year-on-year increase in consolidated core net income to P26.5 billion, supported by stronger contributions from its power generation and retail electricity supply segments. Reported net income rose 12.6% to P27.54 billion, while consolidated revenue grew 15.7% to P283.71 billion.

Jasper Timoteo A. Ondap, an equity analyst at Regina Capital Development Corp., said in a Viber message that the P9.5-billion refund would affect Meralco's distribution utility revenue, though the impact on core earnings "may be milder than headlines suggest."

He noted that Meralco was already processing a similar refund under an ongoing P20-billion refund cycle, but that the scale and shorter implementation window of the new order "may dent it." He also cautioned that the P8.7-billion cost recovery should not be netted against the refund, as the two items fall into "entirely different brackets." The recovery, he explained, covers pass-through costs — including generation and system loss charges — that Meralco collects and remits to power generators, the National Grid Corp. of the Philippines, and government agencies.

"Meralco can definitely do so without materially affecting its earnings guidance or dividend payout," Mr. Ondap said, referring to the company's ability to absorb the refund obligation.

He added that uncertainty remained over which party would ultimately bear the cost of system loss charges — fees reflecting electricity lost during transmission and distribution that have long been a subject of consumer and regulatory scrutiny in the Philippines — noting the issue could weigh on the profitability of Meralco's distribution utility business and affect any future rerating of the stock.

Jash Matthew M. Baylon, an equity trader at The First Resources Management and Securities Corp., said the refund — as a pass-through tariff — was unlikely to affect Meralco's profits, though future earnings could face pressure if rates decline. He characterized both the refund and cost recovery as "regulated pass through and distribution tariffs" that are unlikely to impact the company's bottom line, and said Meralco's full-year guidance and dividend payout remained achievable.

Mr. Baylon added that despite last week's stock gain, investors remained cautious as they awaited clarity on the potential removal of system loss charges, which could have broader implications for the energy sector.

Juan Alfonso G. Teodoro, an equity analyst at Timson Securities, Inc., said the refund could weigh on short-term earnings but was unlikely to significantly affect Meralco's core business, as it represents "more of an adjustment to return excess charges to customers rather than a sign that Meralco's operations are weakening."

Mr. Teodoro said the 3.8% growth in core income gave the company sufficient cushion to absorb the refund without harming full-year results. "Our [earnings forecast in 2026 for] Meralco is approximately P52 billion," he said.

On technical levels, Mr. Ondap placed support at P450–P470 and resistance at P500. Mr. Baylon identified support at P470–P480 and resistance at P530. Mr. Teodoro set support at P450 and resistance at P520–P530.

Meralco's controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls.

— Pierce Oel A. Montalvo