First Gen profit drops on lower sales, forex losses

MANILA, Philippines - Lopez-led First Gen Corp. reported a 38-percent drop in its net income in 2013 to $118.1 million, from $190 million in 2012, due to lower sales volume and foreign exchange losses.

In a report submitted to the Philippine Stock Exchange, First Gen said the lower earnings was mainly due to the drop in profit of its subsidiary Energy Development Corp. (EDC) as a result of unrealized foreign exchange losses and loss on damaged assets resulting from Super Typhoon Yolanda.

The company also attributed the decline in income to the reduction of sales from the Wholesale Electricity Spot Market (WESM) and ancillary services of First Gen Hydro Power Corp. (FG Hydro).

First Gen said its income was also affected by the fire at the main transformer of San Lorenzo’s Unit 60 (which has a nameplate capacity of 250 megawatts).

On a recurring basis, the company’s net income stood at $154.6 million, lower by 11.1 percent than the same period in 2012 due to the lower recurring income contribution of FG Hydro and San Lorenzo.

This, however, was partially offset by the lower interest expense of the group mainly due to prepayment of loans.

First Gen’s consolidated revenues from the sale of electricity decreased by $155.3 million, or 7.5 percent to $1.9 billion in 2013 from $2.06 billion in 2012.

The Santa Rita and San Lorenzo natural gas-fired power plants accounted for $1.29 billion or 67.9 percent of total consolidated revenues.

EDC’s geothermal revenues accounted for $547.7 million or 28.8 percent, while FG Hydro accounted for $59.3 million or (3.1 percent).

The gas-fired plants’ combined revenues were seven percent lower from the previous year’s $1.39 billion due to lower dispatch, lower average gas prices, and lower average net dependable capacity (NDC) for San Lorenzo in 2013.

The decrease in dispatch was brought about by a scheduled major maintenance outage at Santa Rita, as well as the May 2013 fire at San Lorenzo’s Unit 60 transformer. This translated to lower combined earnings of the natural gas-fired plants.

EDC’s geothermal revenues were 1.6 percent lower than the previous period’s $556.5 million. Though there was a decrease in revenues from the effect of Yolanda on the Unified Leyte and Tongonan plants, this was almost entirely offset by higher sales volume from subsidiaries Green Core Geothermal Inc. and BacMan Geothermal Inc.

However, the company said unrealized foreign exchange losses from the restatement of its outstanding foreign loans arose because of the peso depreciation which, together with the loss on damaged assets resulting from the typhoon, negatively affected the bottom line.

First Gen directly owns 40 percent of FG Hydro while the remaining 60 percent is owned by EDC.

First Gen president Francis Giles B. Puno said they are optimistic that their income will improve this year despite the lower earnings posted in 2013.

“Despite the difficulties in 2013, First Gen is optimistic about its prospects for 2014. We are currently in the middle of construction for several projects, which include the 87-MW wind farm in Burgos, the 40-MW Nasulo geothermal project, and the 414-MW San Gabriel natural gas project. We also hope to include the 100-MW Avion natural gas project to that list soon,” he said.

“Moreover, San Lorenzo’s Unit 60 is back in commercial operation. EDC has restored Unified Leyte to its pre-Yolanda operating capacity, while BacMan Unit 1 (along with Unit 3) is already operating,” he added.