MANILA, Philippines — Lopez-led companies First Gen Corp. and Energy Development Corp. (EDC) posted net losses in the first half due mainly to a P5-billion “impairment charge” resulting from the decommissioning of a geothermal facility.
In separate disclosures to the Philippine Stock Exchange, First Gen said it posted a net loss of $13.3 million in the first six months of 2011, while its affiliate, EDC, reported a net loss of P2.3 billion from a year-ago net income of P5.63 billion.
Both companies explained that the P5-billion non-cash loss came from the decommissioning of the 49-megawatt (MW) Northern Negros Geothermal Power Plant. The facility shutdown was necessary to curb losses arising from its continued operations.
First Gen president Francis Giles Puno said that after conducting tests over the past three years, it was learned that the steam capacity of the Northern Negros site could only sustain a 5-MW to 10-MW geothermal plant.
Also contributing to First Gen’s net loss in the first six months of the year was the lower revenue contribution of First Gen Hydro Power Corp. (FG Hydro), owner of the 132-MW Pantabangan-Masiway hydroelectric power plants. This was due to the limited water availability coupled with a decline in the wholesale electricity spot market (WESM) prices.
Despite the reduced revenue contributions of EDC and FG Hydro, First Gen’s consolidated revenues still increased by 6.3 percent to $646.8 million in the first semester.
The increased revenues reflected the higher dispatch (output) and fuel prices of the 1,000-MW Sta. Rita and the 500-MW San Lorenzo natural gas power plants, which contributed stable earnings of $37.6 million.
“The stable earnings of the First Gas plants and the lower financing costs at the parent (level) helped cushion the effects of the write-down. We are quite confident that First Gen will be reporting positive earnings by the end of the year,” Puno said.
Meanwhile, EDC president and COO Richard B. Tantoco also assured stakeholders that the P5-billion impairment charge would not affect the company’s ability to declare dividends, considering that it has over P9 billion in unrestricted retained earnings.
Tantoco also stressed that measures have been undertaken to “right-size” the Northern Negros plant.
“We are headed towards the conversion of our NNGP plant into a cash accretive asset. With the right-sizing initiative, we are putting a stop to the P800 million yearly cash hemorrhage caused by the plant’s sub-optimal operations. Some value on the steamfield will likewise be restored once the right-sized replacement power plant is put in place,” Tantoco explained.
Tantoco further disclosed that the company’s P2.3-billion net loss could also be attributed to the P900-million reduction in steam revenues due to the Bacon-Manito facility rehabilitation.
EDC, the country’s largest geothermal producer, likewise posted higher operating expenses mainly attributable to higher operations and maintenance expenses for steam field and power plant facilities in all areas where it operates.