Power producer First Gen Corp. reported a 64 percent drop in its net income to $35.6 million in the third quarter from $99.1 million in the same period last year, primarily driven by an increase in interest and financing costs resulting from debt incurred for the purchase of its controlling stake in Energy Development Corp. (EDC).
First Gen chief finance officer Giles Puno said the drop in earnings can also be attributed to income tax payments of its Sta. Rita power plant, whose income tax holiday ended in May 2007.
He added the lower income contribution of subsidiary First Gen Hydro Power Corp., the company that owns the 112 megawatt Pantabangan/Masiway hydroelectric plant complex, also led to the lower profit figure.
“Our lower net income was expected considering that the amount of debt we had to take on in acquiring a controling stake in EDC. The company is currently focused on a number of fund-raising exercises and is already on its way to normalizing its financials,” Puno said.
“With the closing and funding of the $544-million term loan of First Gas Power Corp. this week and the sale of the stake in Pantabangan/Masiway hydropower plant, we have addressed most of the bridge loans coming due in November. The First Gas term loan was completed amidst an extremely challenging financial environment. This confirms the belief of the international commercial banks in the fundamentals and creditworthiness of our projects,” he added.
Based on its most recent unaudited consolidated financial statements, First Gen’s consolidated revenues rose to $1.3 billion, 64.3 percent higher from last year’s same-period revenues of $0.8 billion.
Correspondingly, income from operations also increased to $373 million or 76.2 percent. The increase was due to the consolidation of EDC’s financials, following the November 2007 purchase of the geothermal company’s shares from the goverment.
The increase in income from operations fully offset the decrease in earnings of FGHPC as it delivered lower earnings for in the nine months ending September 2008 resulting from reduced irrigation requirements that led to lower generation output and the lower prices at the wholesale electricity spot market.
The increase in income from operations, was, however, diminished by higher consolidated interest expenses and financing charges of $141 million or an incremental difference of 150.2 percent as compared to last year’s $56.4 million, mainly resulting from the debt for the EDC purchase and the consolidation of interest expense from EDC’s existing loans. This was exacerbated by unrealized foreign exchange losses due to the depreciation of the peso and the Japanese yen’s appreciation.