First Gen posted lower 2011 profit on EDC loss

The Lopez-led First Gen Corp. posted a 50-percent decline in attributable net income to parent to $35 million in 2011 from the year-before level of $70.2 million due largely to a huge drop in the contribution of affiliate Energy Development Corp.

In a statement, First Gen explained that EDC incurred a loss of $9.3 million in 2011 as against an income contribution of $52.5 million during the previous year. The lower earnings from EDC had mainly resulted from the noncash impairment of P5 billion due to the shutdown of the 49-MW Northern Negros geothermal project and from the foregone steam revenues of P1.8 billion from the Bacon-Manito geothermal power plants, which EDC acquired in 2010.

Since EDC is rehabilitating the facilities, the geothermal plants could not produce electricity that could be sold to electric cooperatives and distribution utilities.

“The poor financial performance of EDC was disappointing but expected—given the current operating activity focused on the rehabilitation of the Bacon-Manito, Palinpinon and Tongonan power plants combined with the full impairment of the Northern Negros plant in EDC’s books,” said First Gen president Giles Puno.

“Despite the decreased earnings contribution of EDC in 2011, we continue to be a full believer in the future value of the company and have, in fact, continued to increase our ownership in the company. We are also pleased with the stable performance of our hydro and natural gas plants as they continue to deliver good returns to First Gen. The lower financing costs of the group have also put First Gen on more solid financial footing,” Puno further explained.

First Gen’s consolidated revenues rose 9.6 percent to $1.4 billion in 2011 from $1.2 billion in 2010. The increased revenues reflected the higher dispatch and fuel prices of the 1,000-megawatt Santa Rita and the 500-MW San Lorenzo natural gas power plants in Batangas.  The gas plants operated at their highest dispatch (or production) to date of 89.2 percent compared with 82.7 percent in the previous year.

The gas plants, according to First Gen, delivered stable attributable earnings to the parent of $70.9 million in 2011.

First Gen Hydro Power Corp.’s 132-MW Pantabangan-Masiway hydroelectric power plant was able to partially offset the loss by contributing higher earnings from its ancillary services that it was providing to National Grid Corp. of the Philippines since August last year.

FG Hydro contributed earnings of $24.8 million to First Gen, up 151.6 percent compared with the $9.9-million contribution in 2010.

Meanwhile, the P10-billion perpetual preferred shares issued by First Gen in July 2011 enabled the company to prepay the P5.1 billion in outstanding debt of its subsidiary, Unified Holdings Corp., and buy back some of its convertible bonds.

As a result, the company’s consolidated interest expense dropped $19.2 million to $84.9 million in 2011 from $104.2 million in 2010.