Power supply tightness supports spot prices; nuclear adds long-term growth optionality

From AB Capital's The Opening Bell: Three Moves

Event

The DOE warned that the Visayas grid could see further red and yellow alerts if 253MW of BESS (end-2026) and 293MW of diesel barges (1Q27) are delayed, with risks extending to Luzon and Mindanao in early 2027 as El Niño peaks. Looking further out, President Marcos reaffirmed the push for nuclear power to meet rising AI and data center demand.

View

Near-term supply is tight, with BESS and diesel barges offering limited relief. This supports elevated, volatile WESM prices into 1H27, favoring gencos, while El Niño threatens output from hydro assets. Longer term, nuclear signals a structural capacity build-out to meet rising AI and data center demand, creating growth opportunities for gencos but with execution, financing and cost risks.

Catalyst

We would watch BESS and barge commissioning, El Niño developments and WESM prices into the 2027 dry season. On nuclear, watch for concrete project milestones and partnerships among power players, including MGen's reported exploration of SMRs and a Bataan feasibility study. New data center supply contracts and capacity auction awards could also signal where incremental demand will translate into capacity growth.

Action

AP is our preferred play for near-term spot-price upside and longer-term growth, with hydro output the key 1H27 risk. MER offers defensive earnings and long-dated nuclear optionality. ACEN and SCC benefit from higher spot but with lower visibility (i.e. buildout costs for ACEN, COC uncertainty for SCC).

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