EDC profit drops 60% to P2.249B

Energy Development Corp. (EDC), the geothermal energy development arm of the Lopezes, posted a 60-percent drop in its net income in the first three quarters of 2008 to P2.249 billion, from P5.6 billion in the same period last year, due to foreign exchange losses.

In a disclosure to the Philippine Stock Exchange, EDC said it incurred a P5.985-billion foreign exchange loss in 2008 due to the conversion to peso of the yen and dollar-denominated loans.

This was in contrast with the P2.43-billion foreign exchange gain for the same period in 2007.

For the third quarter of 2008, EDC incurred losses of P211.6 million from a net income of P1.599 billion in 2007 due to the forex losses.

The company incurred forex losses of P5.99 billion and P2.78 billion for the first nine months and third quarter, respectively.

“The decrease in net income for first nine months was partially offset by the P1.98-billion decrease in operating expenses and P1.91-billion increase in miscellaneous – net other income largely attributed to the March 25, 2008 favorable arbitral decision on long-standing contractual disputes with National Power Corp.,” EDC said.

The nine-month revenues dropped three percent to P13.653 billion from P14.081 billion in 2007 primarily due to the drop in average price per kilowatthour for electricity sales.

The firm’s third quarter revenues likewise went down to P4.66 billion from P4.85 billion a year ago.

Revenue from sale of electricity decreased 4.2 percent to P8.31 billion in the first nine months from P8.67 billion during the same period in 2007 on account of lower average price of electricity by 1.041centavos per kwh.

This is attributed to the reduced inflation factor with the significant peso appreciation against the dollar in the first half (P391.9 million) and the decrease in the electricity generation of Northern Negros by 40.7 gigawatthours to 15.8 gwh in 2008 from 56.5 gwh generation in 2007 with the temporary shutdown of the power plant starting May 2008 for remedial works being undertaken on the production wells.

Steam sales revenues, however, increased four percent to P3.23 billion in the first nine months from P3.11 billion during the same period in 2007 due to the 2.83-centavo per kwh hike in average price due to higher inflation factor (P65 million), higher sales volume by 26.7 gwh mainly on account of higher surplus revenues of Palinpinon 2 (22 gwh), among others.

EDC said revenue from drilling services rendered to Lihir Gold Ltd. increased 3.3 percent to P515.3 million in the first nine months from P498.7 million previously.

“The $11.7-million revenues in 2008 was higher than the $10.6 million billed in 2007. However, in peso terms, only a slight increase is being reported given that the average peso-dollar exchange rate in the first nine months of 2008 was P43.89:$1 as compared to P47.046:$1 during the same period in 2007,” EDC said.

The decline in earnings came despite efforts of the company to trim down expenses.

Its operating expenses went down 27 percent in the first nine months to P5.34 billion from P7.33 billion during the same period in 2007.

The company made lower purchased services and utilities and general and administrative expenses. It did not also incur construction costs for the period under review.

All the conditions precedent stipulated for final closing of the sale of 60 percent of First Gen Hydro Power Corp., owner of the 112-MW Pantabangan-Masiway hydro plants, to EDC have been achieved on November 17. EDC bought the stake for $105 million.

“Accordingly, all economic and voting rights pertaining to the sale of the foregoing 60 percent interest in FGHPC shall vest upon EDC effective November 17, 2008,” EDC added.

According to EDC, the acquisition is in line with the company’s thrust towards promoting renewable energy sources.

First Gen Corp., the power generation subsidiary of the Lopez group, owns a 60 percent stake in EDC.

Eventually, First Gen decided to sell its 40 percent stake in EDC to the consortium led by Marubeni Corp.