Aboitiz Power profit drops 12% to P16.2B

MANILA, Philippines - Aboitiz Power Corp. (APC) reported yesterday a 12 percent drop in its consolidated income to P16.2 billion in the first three quarters of 2011, the company said in a disclosure report to the Philippine Stock Exchange (PSE).

APC said the revaluation of consolidated dollar-denominated loans and placements resulted to a non-recurring loss of P37 million.

APC also posted P721 million in one-off gains, net of tax, during the nine-month period, as a wholly-owned subsidiary booked revenue adjustments in the first quarter of 2011 resulting from a favorable ruling by the industry regulator regarding its tariff structure for its ancillary services contract, an associate company recovered costs relating to its fuel importation in the second quarter, and a subsidiary reversed a 2010 accrued expense relating to its independent power producer administration (IPPA) contract in the third quarter of 2011.

With these adjustments, the company’s core net income in the first nine months of 2011 amounted to P15.6 billion or a decline of 14 percent from the same period in 2010.

For the quarter ending September 2011, APC recorded a consolidated net income of P5.6 billion, recording a marginal decline of three percent year-on-year.

The movements in the peso-dollar exchange rate resulted to a P180 million non-recurring loss due to the revaluation of consolidated dollar-denominated loans and placements.

A one-off gain of P194 million was also incurred by a subsidiary as it reversed an accrued expense booked in 2010 relating to its IPPA contract. All these bring APC’s core net income for the third quarter of 2011 to P5.6 billion, which is 10 percent higher from a year ago.

“Our power generation and distribution businesses have continued to show strong recurring income for the quarter,” APC president and CEO Erramon Aboitiz said.

For the quarter ending Sept. 30, 2011, the power generation business recorded a six percent decline in earnings contribution, from P5.5 billion to P5.2 billion. When adjusted for one-off items, the group booked a nine percent expansion in income share, from P4.8 billion to P5.2 billion.

During the quarter in review, the generation group’s attributable power sales grew eight percent, from 2,356 gigawatt hours (gwh) to 2,535 gwh.

The increase was mainly due to improved plant availability. The quarter saw expansions in both spot market transactions and bilateral sales at 17 percent and five percent, respectively.

Average prices at the wholesale electricity spot market (WESM), however, were lower vis-à-vis 2010 levels, countering the positive bottom line effect of the group’s expanded sales, not to mention the higher average selling price of its contracted capacities.

On a year-to-date basis, the generation business accounted for 90 percent of earnings contributions from APC’s business segments, recording an income share of P15.3 billion for the first nine months of 2011, down 16 percent.

Netting out one-off items, APC’s generation business shored in P14.7 billion for the period, 17 percent lower than last year.

“Our strategy of contracting our base-load capacity is reducing the volatility of the earnings from our generation business,” Aboitiz said.

The decline in the group’s bottom line performance was due to the lower average selling price and net generation recorded for the period. As a group, APC’s generation business logged a 10 percent drop in average selling prices, given the softening of the spot market prices vis-à-vis 2010 levels. The average price of electricity in the WESM recorded a 48 percent drop for the period ending September 2011.