AboitizPower’s Renewable Shift Meets Regulatory and Operational Friction
Strong H1 2026 results mask fresh risks—system loss recovery, line rental charges, and TVI outages—as the utility pivots to solar and gas.
ABZPF · Earnings Call · 2026-08-06
The Quarter in Numbers
AboitizPower opened 2026 with a bang. “Beneficial EBITDA for the first half of 2026 reached PHP 43.3 billion, a 27% increase from PHP 34.1 billion in the same period last year.” — Juan Alejandro Aboitiz, President and CEO or Senior Executive · 2026-08-06 The Power Generation segment contributed 90% of that, with generation EBITDA up 30% year-on-year, driven by higher contracted volumes, stronger market prices, and the full first-half contribution from Chromite Gas and newly commissioned solar assets. These offsets more than absorbed lower coal plant availability and rising purchase power costs. The distribution utility (DU) and retail electricity supply (RES) segments added PHP 4.3 billion and PHP 1 billion in EBITDA, respectively, with RES holding a 27% market share.
The balance sheet also improved: net debt-to-equity tightened to 1.17x from 1.24x at year-end, and total interest-bearing debt fell to PHP 325.6 billion. Management emphasized that 89% of debt is peso-denominated, insulating earnings from FX volatility. The company is clearly executing on its strategic pivot—coal now represents 50% of attributable capacity, down from 57% in December 2025, as new solar assets and battery storage come online.
The Regulatory Overhang
The most pressing issue on the call was the proposed removal of system loss recovery charges. The CEO, Sandro Aboitiz, acknowledged the intent but tempered expectations: “I think directionally, the objective here is to reduce the cost to consumer and ensure that the distribution network operates efficiently. So that is an objective, I think we support” — Juan Alejandro Aboitiz, President and CEO or Senior Executive · 2026-08-06. Yet when pressed for a financial impact estimate, he declined, “it's premature to communicate potential financial impact here” — Juan Alejandro Aboitiz, President and CEO or Senior Executive · 2026-08-06. This regulatory uncertainty hangs over the DU segment, which already saw a 3% EBITDA dip despite 6% volume growth due to one-off expenses.
Linked to this is the line rental issue stemming from the April market suspension. Aboitiz explained that above-cap line rental charges are absorbed because PSAs have caps: “So anything above the cap, we must absorb” — Juan Alejandro Aboitiz, President and CEO or Senior Executive · 2026-08-06. The company is challenging the computation through PIPPA, and any reversal would only land in second-half results. That adds a layer of unpredictability to near-term margins.
Operational Snags
Two operational items cloud the otherwise solid picture. First, the TVI coal units (1 and 2) are offline due to steam turbine vibration issues. “Both units experienced steam turbine vibration issues and have been on outage in the last couple of months” — Juan Alejandro Aboitiz, President and CEO or Senior Executive · 2026-08-06. The outage allowance is exhausted, forcing replacement power purchases. Second, El Niño is hitting hydro output hard—energy generated fell 20% year-on-year in H1 2026. The CEO noted “we're expecting that to continue” — Juan Alejandro Aboitiz, President and CEO or Senior Executive · 2026-08-06, but the company is sticking to its contracted baseload strategy, targeting 100% contracted baseload by next year.
These headwinds are partially offset by favorable spot prices, which averaged PHP 6.29 per kWh versus PHP 4.09 a year earlier. Management now expects spot prices to remain higher than initial forecasts through 2027, reinforcing the attractiveness of spot exposure even as they hedge via bilateral contracts.
What’s Next
The company’s growth engine is its renewable pipeline. Operational renewable capacity stands at 846 MW, with 190 MW under construction and 179.5 MW of contracted green energy auction capacity in development. Notably, the Ubay Solar project (180 MWp) received full notice to proceed in July. Capital expenditure guidance for 2026 is PHP 62 billion, of which 80–85% is growth CapEx, and management expects this elevated level to persist as long as opportunities and balance-sheet support allow. MOB CapEx is a steadier PHP 10 billion per year.
On CBK, the tariff application remains gated by regulatory prerequisites—payment mechanisms and WESM rule changes—but Aboitiz indicated “we are doing all of the prework that's required so that by the time these two things are put in place, we're fully ready to submit” — Juan Alejandro Aboitiz, President and CEO or Senior Executive · 2026-08-06. Meanwhile, the pending Van Phong acquisition in Vietnam still awaits government approvals.
In sum, AboitizPower delivered a strong half, but the real story is the balance it must strike: capitalizing on a favorable spot environment and ambitious renewables buildout while navigating regulatory changes and operational disruptions. The market will be watching whether the system loss and spot price dynamics derail what is otherwise a promising transition.