PNOC-EDC expects 21% hike in profit

PNOC-Energy Development Corp. (PNOC-EDC), the geothermal and renewable energy arm of the state-run Philippine National Oil Co., is expecting a 21-percent increase in its net operating income this year with the first turnover of a build-operate-transfer (BOT) project next month, a top company official said.

PNOC president Eduardo Mañalac said PNOC-EDC’s net earnings from operations this year could reach P10.5 billion, from the 2005 level of P8.6 billion.

The ownership of the 125-megawatt (MW) Upper Mahiao geothermal power plant in Leyte, currently being managed and run by a consortium led by California Energy Inc., is expected to be transferred to PNOC-EDC this month.

Pursuant to Republic Act 7718, otherwise known as the Amended BOT Law of 1994, PNOC-EDC entered into 10-year energy conversion agreements, starting in 1996, to convert geothermal steam to electricity with CalEn,  Ormat Inc., Oxbow Power Corp. and Marubeni Corp. for the construction and operation of six major power plants in Leyte and Mindanao, with a combined capacity of 685 MW.

The geothermal firm started selling electricity in July 1997 when its first power plant, built under the BOT scheme, started commercial operations.

The bulk of PNOC-EDC revenues are allotted for payments of BOT projects. Up to 2009, EDC would need to pay more than P2 billion worth of BOT contracts.

Mañalac noted that PNOC-EDC’s net operating income is almost flat compared to the first quarter of last year at P2.45 billion, which was attributed to the lower foreign gains for BOT obligations.

"We’re expecting hopefully that the revenues would also increase significantly by the second half of the year, as Upper Mahiao would be turned over some time this month. This turnover would result to lesser payments, and expectedly higher revenues as the electricity sales would go straight to our books," he said.

By the third quarter of 2006, Mañalac said PNOC-EDC will have a balloon payment for BOT contracts of about $40 to $50 million.

In the first quarter of the year, he said PNOC’s net operating income went down to P121 million from P129 million at the end of the first quarter in 2005.

The PNOC chief attributed the decline in the mother company’s operating income to the increase in expenses due to higher real estate taxes.

Another subsidiary of PNOC, PNOC-Exploration Corp.’s net income from operations for the first three months of 2006 increased substantially by 94 percent to P1.21 billion from P626 million in the same period last year.

Mañalac said the rise in PNOC-EC’s operating income was brought about by better revenues during the period.

For the first quarter of 2006, PNOC-EC’s revenues grew to P1.85 billion from P1.11 billion during the first quarter of last year.

The better revenue performance, he said, was due to the increase in dispatch of gas-fired plants of the National Power Corp. (Napocor).

PNOC-EC owns 10 percent of the $4.5-billion Malampaya deep water gas to power project which supplies the natural gas requirement of three gas-fired power plants the 1,500-megawatt (MW) Ilijan, 500-MW Sta. Rita and 1,000-MW San Lorenzo.

Mañalac noted that Napocor implemented a merit dispatch of its power plants which put natural gas-run power facilities on a priority list.