EDC profit drops 48% in 9 months

MANILA, Philippines - Energy Development Corp. (EDC), the country’s largest producer of geothermal energy, reported a 47.7-percent drop in net income in the nine months ending September this year, mainly due to the write-down of deferred tax assets, higher operating expenses and one-transaction cost in 2008.

In a financial report filed with securities regulators, EDC said its net earnings amounted to P1.39 billion as against P2.65 billion a year earlier. The decline in profit would have been higher were it not for the period’s foreign exchange gain and increased revenues.

“The unfavorable variance was primarily due to the P2.96 billion one-time write-down of net deferred tax assets in 2009 in view of the reduced corporate income tax rate under the Renewable Energy Act, one-time recognition in 2008 of P2.067 billion as other income pertaining to the arbitration award,” EDC said.

EDC booked P361 million in foreign exchange gains this year in contrast with the P173.3-million net loss a year ago.

Revenues rose six percent to P15.99 billion due to the rise in average price per kilowatt-hour for electricity sales. Revenue from sale of electricity went up 12 percent to P10.23 billion mainly on account of higher billed average price and higher sales volume.

Operating expenses grew 42.9 percent to P9.43 billion as a result of higher general and administrative expenses and operations and maintenance.

The Renewable Energy Act is expected to improve EDC’s projected bottom line, particularly with its provision of lower corporate income tax of 10 percent for power generated from renewable resources.

EDC has a 60-percent interest in a 112-megawatt hydroelectric power plant, bringing its total installed capacity to 1,266 megawatts or 8.1 percent of the country’s total installed capacity.

The company is tapping the debt market anew to raise up to P10 billion from the sale of fixed-rate bonds. Proceeds from the issue will be used to refinance maturing debt and for general corporate purposes. The bonds will have a term of 5-1/2 years and seven years.

BDO Capital & Investment Corp. will be the issue manager and sole bookrunner for the bond issuance which was assigned a rating of PRS Aaa by credit rating agency PhilRatings.

A rating of PRS Aaa – the highest credit rating on PhilRatings’ scale – means that the borrower’s capacity to meet its financial commitment on the obligation is extremely strong.

The company’s funding requirements are substantial due to sizeable debt maturity in 2010, as well as given the initial $96 million payment to Power Sector Assets and Liabilities Management Corp. (PSALM) for the Tongonan I, Palinpinon I and Palinpinon II power plants.

EDC has around $300 million in maturing obligations until next year, which includes a P1.5-billion Miyazawa loan due in June 2010.