Synergy Grid falls amid dividend, ERC developments

SHARES of Synergy Grid & Development Phils., Inc. declined last week as investors weighed the company’s unchanged quarterly dividend alongside new Energy Regulatory Commission (ERC) rules governing the construction of transmission facilities.

Synergy Grid was the fourth most actively traded stock on the Philippine Stock Exchange (PSE) during the week of June 22-26, with 86.32 million shares worth P1.24 billion changing hands, according to PSE data.

The stock closed at P29.90 on Friday, down 8% from a week earlier. The decline outpaced the Philippine Stock Exchange index’s (PSEi) 1% drop and the industrial sector’s 1.5% decline.

Year to date, Synergy Grid shares have gained 80.6%, outperforming the PSEi’s 0.3% increase despite the industrial sector’s 3.5% decline.

Regina Capital Development Corp. Equity Analyst Jasper Timoteo A. Ondap said in a Viber message that Synergy Grid shares experienced an “overdone” sell-off last Monday after the company declared a second-quarter cash dividend of P0.3474 per share, unchanged from the previous quarter.

The dividend announcement was followed by a 10.8% decline in the stock, which closed at P29 that day. Shares fell further to P28.60 last Thursday before recovering.

Mr. Ondap also said investor sentiment may have been influenced by the ERC’s new transmission rules, which were adopted on June 19. Synergy Grid shares closed 3.7% lower that day at P32.50.

Under ERC Resolution No. 18, Series of 2026, entities other than the National Grid Corp. of the Philippines (NGCP) may finance and construct new transmission lines, substations, switchyards, and other transmission-related facilities.

The implementing rules allow NGCP to assume operation of facilities built by other entities, with the corresponding costs incorporated into its regulatory asset base (RAB).

NGCP is the country’s sole transmission network provider. Synergy Grid indirectly owns 60% of NGCP’s outstanding common shares, its sole operating asset, translating to an effective economic interest of 40.2%.

“There’s always a sell-off when monopolies and their market share or operations get challenged especially with lowering and more so on opening the gates to other parties,” Mr. Ondap said.

However, he said near-term earnings and dividends remain supported because investments and capital expenditures for the ERC’s fifth regulatory period remain concentrated in NGCP.

“The resolution’s mechanics protect NGCP long term since it still takes over everything and the cost goes into its RAB, so the headline risk is mostly noise.”

Mr. Ondap said the construction timeline, the rate reset period, and the timing of RAB inclusion under the new rules could create a temporary gap in NGCP’s earnings. However, any under-recoveries could likely be recovered through true-up adjustments during the next regulatory period, he added.

In the first quarter, Synergy Grid’s consolidated revenue increased 281.7% to P51.04 billion. Of the total, P30.07 billion came from a regulatory true-up for under-recoveries, compared with none in the same period a year earlier.

Net income attributable to equity holders of the parent rose 823.2% to P18.38 billion.

Mr. Ondap placed support at P27.70 and resistance between P31 and P34. — Pierce Oel A. Montalvo