Energy firms poised for growth, but IPO market adverse

Energy companies are poised for growth this year because of increasing power demand, but the environment may not be conducive enough for initial public offerings (IPOs) due to uncertainty amid developments in the US, according to analysts.

“The outlook for sustained energy demand growth should help keep the appetite for capacity build-out among power generation companies healthy,” Rastine Mackie D. Mercado, research director at China Bank Securities Corp., told BusinessWorld via e-mail.

He added that power generation firms could continue to tap equity markets for potential fundraising opportunities.

“However, we think that continuing uncertainties around possible changes in US government policies, alongside potential upside US inflation risks and consequential changes to the Fed’s policy outlook could weigh on investor sentiment in the near term, and may present a challenge for companies looking to conduct an IPO,” he said.

An improvement in market conditions should help support appetite for potential listings this year, he also said.

Last year, there were only three IPOs, namely gold and copper mining company OceanaGold (Philippines), Inc., and energy companies Citicore Renewable Energy Corp. and NexGen Energy Corp.

This was below the six-IPO target of the Philippine Stock Exchange (PSE).

The PSE was supposed to have its fourth IPO in 2024 with the public listing of Cebu-based fuel retailer Topline Business Development Corp., but it decided to move its offer period to the second quarter of 2025 to accommodate institutional investors.

For 2025, the PSE is aiming to raise PHP 120 billion in capital.

“Current market conditions are not conducive for IPOs in general,” Juan Paolo E. Colet, managing director at China Bank Capital Corp., said in a Viber message.

“While some exceptional companies can probably command good valuations notwithstanding the weak market, we think most potential IPO candidates will be extra patient until investor sentiment and fund flows improve significantly, there is more clarity on Trump 2.0, and the midterm elections are done,” he added.

On Monday, US President-elect Donald J. Trump was inaugurated, marking the start of his second term.

Energy firms considering going public will have more reason to wait, said Mr. Colet, amid generally low trading of the more established listed energy players.

“At this point, our best case is that only one or two energy companies can do an IPO this year,” he said.

Some analysts, however, expressed optimism about the potential listings from the energy sector.

“The Philippine energy sector remains poised for continued growth this year, underpinned by rising demand for reliable power, supportive government policies on renewables, and growing investor appetite for sustainable projects,” said Jayniel Carl S. Manuel, equity trader at Seedbox Securities, Inc.

Mr. Manuel said that the government’s support and the growing need for reliable energy have helped foster “a good climate for these listings.”

Following the “positive showings” of recent energy IPOs such as Citicore, NextGen, and Alternergy Holdings Corp., he said that this reflects a clear demand for power companies in the country, especially those focused on clean and renewable energy.

“We expect several energy firms to consider going public this year, but their success will depend on careful preparation and broader market conditions,” he said. “In the end, having a strong, transparent plan for growth and showing that the business can be both profitable and responsible will be key to maintaining the positive track record we’ve seen so far.”

Conducting IPOs is among the ways to raise capital for large-scale projects, Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., noted.

“The energy sector, especially renewables, offers high growth potential as it aligns with long-term global trends. IPOs are an effective way to capitalize on investor interest and raise funds for scaling operations,” Mr. Arce said. – Sheldeen Joy Talavera, Reporter