The Best Stock for Long-Term Investment in the Philippines


It seems to me that the best company for long term investment through the stock market in the Philippines is the Energy Development Corporation (EDC). EDC is the largest producer of geothermal energy in the Philippines, which is now also venturing in the hydro-electric and wind power generation.

Except from loan servicing, the company is almost financially risk-free even during this time of global financial crisis. This is because, the demand for its product – geothermal steam and electricity, is already guaranteed through the following contracts;
Steam Sales Contracts. The purchase of the geothermal steam produced by EDC is guaranteed (more than 70% of the plants’ rated capacity) through the take-or-pay provision in the contracts between EDC and all of National Power Corporation (NPC) Plants that are utilizing EDC’s steam supply - 150 MW Bacman, 192.5 MW Palinpinon, and 112.5 MW Tongonan Plants.
Power Supply Contracts. The purchase of the electricity generated by all power plants owned by EDC is guaranteed by the government-owned, PSALM, through the take-or-pay provision in their contracts. These plants are the 640 MW Leyte Geothermal Plants (contract until 2021/2022) and 106 MW Mt Apo Geothermal Plants (contract until 2022). The 49 MW Northern Negros Geothermal Plant has also a take-or-pay contracts with some electric utilities in the neighboring areas.

This guaranteed revenue, and most probably, profit, is the reason why EDC offers a regular cash dividend of Php0.125 per share for its stock holders, making it the best stock to buy for long-term investment (or maybe, even for short-term), specially during this time when the stock price of EDC is already plunging to record low of Php1.82 per share. At this price level, the guaranteed profit from EDC’s stock, through dividend alone, is around 6.87% -much higher than bank, or even T-bill rates.

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