The country’s biggest producer of geothermal energy, Energy Development Corp. (EDC), saw its net income dive in 2011 on a major write-off and foregone sales of its Bacon-Manito (Bacman) power plants in the Bicol region.
EDC in 2011 posted a cumulative net income of P615 million—86 percent lower than the P4.4 billion declared in 2010.
The non-cash impairment of P5.1 billion taken on the Northern Negros Geothermal Project (NNGP) led to a substantial drop in the company’s net income.
Also contributing to the decline was the P1.21 billion in forgone revenues resulting from EDC’s acquisition of the Bacman power plants. Before the takeover, EDC had sold steam to Bacman.
This also affected the company’s recurring net income, which dipped by 27.5 percent to P5.2 billion from P7.2 billion the previous year.
EDC president and COO Richard Tantoco said 2011 was “a difficult year because we had to absorb sizable hits, primarily the P5.1 billion write-off of Northern Negros and the P1.21 billion of foregone steam sales of Bacman.”
He said that the company is now working hard “to attain our targeted third quarter 2012 re-commissioning of the 130-MW (megawatt) Bacman Plants.”
The full impairment of NNGP will be cash accretive as the project incurs an annual cash operating cost of P800 million from its sub-optimal operations.
“The impairment decision taken on NNGP, albeit costly, was necessary to clear the issue with finality,” Tantoco explained.
The decline in net income was partially offset by the P1.1 billion revenue from FG Hydro’s sale of ancillary services.
FG Hydro, a subsidiary of EDC, is the operator of the Pantabangan-Masiway hydroelectric power plants.