First Gen profit drops 50% on EDC losses

MANILA, Philippines – First Gen Corp., power generation arm of the Lopez Group, recorded a 50-percent drop in profits last year due to lower contributions from its affiliate.

In a disclosure, First Gen said net income attributable to equityholders of the parent firm slumped to $35 million last year from $70.2 million the previous year.

“The decline was mostly attributable to the lower income contribution from its affiliate, Energy Development Corp. (EDC), as it incurred a loss of $9.3 million in 2011 compared with an income contribution of $52.5 million in 2010,” it added.

The lower EDC earnings resulted from the non-cash impairment of $115.3 million (or P5 billion) on the Northern Negros geothermal project.

EDC also recorded foregone steam revenues worth P1.8 billion following its acquisition of the Bacon-Manito geothermal power plants in September 2010. The non-cash impairment charge was recorded in its books last June.

“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 Francis Giles B. Puno.

Puno added that projects of First Gen will benefit from low financing costs while hydropower and natural gas plants deliver good returns.

Consolidated revenues of First Gen rose nearly a tenth to $1.4 billion last year from $1.2 billion a year ago.

Higher revenues were due to higher dispatch and fuel prices of the 1,000-megawatt (MW) Santa Rita and the 500-MW San Lorenzo natural gas power plants, First Gen said.

The natural gas plants operated at a record dispatch rate of 89.2 percent compared with 82.7 percent in the previous year.

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