Long-term supply deals support AP’s earnings durability

Highlights

• 15-year baseload agreements provide long-duration offtake for AP’s participating generation businesses.
• Six generators share the procurement, so the headline capacity is not AP’s alone.
• Vini Research Desk rates AP a Hold, seeing about 13% upside to our ₱51.10 fair value.

The Setup

AP’s Therma Luzon and Therma Visayas joined 15-year power supply agreements with the Luzon and Visayas Electric Cooperatives Aggregation, covering 29 on-grid cooperatives. Maximum aggregated contract capacity across suppliers is 445 MW for Luzon and 120.5 MW for Visayas. Officials did not specify when delivery of the committed supply would begin. AP last traded at ₱45.05 on September 17, up 15.5% from its 52-week low of ₱39.00 on November 11, 2025. Our momentum read on AP is Bullish.

Source: news article

Our Read

For AP, the benefit is a steadier demand base for thermal generation, not an expansion of generating capacity. Contracted offtake can reduce exposure to spot-market sales, but a long commitment does not by itself establish higher margins or incremental earnings. The distinction matters: replacing expiring contracts protects the earnings base, while additional contracted sales could grow it. At a ₱325.7 billion market capitalization, we treat these agreements as support for earnings durability rather than sufficient grounds for a valuation rerating.

Vini Research Desk rates AP a Hold, seeing about 13% upside to our fair value of ₱51.10. More durable baseload cash flows can support future dividend growth, benefiting holders of the Passive Income Plan.

What We're Watching

• AP-specific capacity allocations and tariffs in the participating subsidiaries’ signed PSA schedules
• Incremental versus replacement volumes in AP’s operating updates as deliveries begin