EDC's P12-billion bonds retain highest rating

MANILA, Philippines - Domestic credit rating firm Philippine Rating Services Inc. (PhilRatings) has retained the highest mark on geothermal power producer Energy Development Corp.on its P12-billion bonds.

The bonds were issued in two tranches, with P8.5 billion due in June 2015 and P3.5 billion due in December 2016. 

“Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong,” PhilRatings said.

In maintaining the rating, PhilRatings took into account EDC’s strong earnings and cash flow generation, its improved debt profile, enhanced standing as a vertically integrated power producer, and the increased competitiveness of the Tongonan and Palinpinon power facilities which the company took over in October 2009.

EDC posted a net income of over P5.7 billion in the first half of the year on higher contributions of the Palinpinon and Tongonan steamfield and power projects, as well as the strong performance of subsidiary First Gen Hydro Power Corp., operator of the 112-megawatt Pantabangan-Masiway hydroelectric plants.

“Going forward, EDC’s profitability is expected to remain strong given the tight power supply situation in the country. Although there is substantial power supply coming on stream in the Visayas grid, demand for power produced by the Tongonan and Palinpinon facilities is expected to continue to be robust,” PhilRatings noted.  

PhilRatings said EDC’s profitability, in the short-term, might be affected by the loss of steam revenues from the bacman power facilities following their acquisition by a unit of EDC and subsequent rehabilitation. 

“PhilRatings considers the acquisition of the BacMan power facilities as a positive development for EDC in the medium-term as it completes the integration of all power plants being supplied by EDC with steam. Benefits would likewise result from the harmonization of the decision-making process for the usage of steam field and power facilities,” the credit rating agency said.

PhilRatings said long-term power offtake contracts with National Power Corp. assure a market for the output of Unified Leyte, Mindanao I and II. Should EDC participate and win the auction for managing the Unified Leyte power contract, its impact on profitability has yet to be determined and will largely depend on the cost of acquiring the contract, PhilRatings said.