EGE Haina 1Q 2014

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT MARCH, 2014

EGE Haina Reports First Quarter 2014 Net Income of US$25.4 million; Revenues of US$193.4 million Special points of interest:

Santo Domingo, Dominican Republic, May 13, 2014 – EGE Haina announced today a Net Income of US$29.5 million for the first quarter of 2014, compared

 As of March 31, 2014, EGE

to a Net Income of US$26.6 million in the first quarter of 2013, driven by an

Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio of 1.82:1.0 and Minimum Debt Service Coverage ratio of 3.86:1.0.

increase in thermal and wind generation, higher energy demand and higher spot sales for the period. First quarter 2014 revenues amounted to US$193.4 million, showing a 3% decrease when compared to the same period of the

 As of March 31, 2014, the

previous year.

Company repaid the Bridge Loan in the amount of US$100 million.

Financial and Operational Summary

 In March, 2014, the

(US$ Thousands, except for Operational data)

Company signed a short term promissory note for the amount of US$14 million. The maturity date is July 7, 2014.

Description

 In March 2014, EGE Haina

entered into a PPA agreement with DOMICEM, S.A., under which EGE Haina will supply the capacity and associated energy demanded by DOMICEM. The PPA establishes an original term of 3 years, which matures in 2017.

1Q'14

1Q'13

Var %

Revenues

169,012

174,125

-3%

Operating Costs

127,044

142,147

-11%

Variable M argin

72,603

59,271

22%

EBITDA¹

51,145

37,180

38%

Operating Income

41,968

31,978

31%

Net Income

29,525

26,649

11%

Operating cash, net

82,614

(71,144)

-216%

Availability, %

99

98

1%

Sales, GWh

668

658

2%

Generation, GWh

765

498

54%

(100)

(68)

46%

4

229

-98%

Spot (Sales) Purchases, GWh PPA Purchases, GWh

What’s inside  Quarter highlights

2

 External factors

2

 MD&A

3

 Financial Debt

5

 Collections

6

 Financial Results

7

1 EBITDA is a non-GAAP financial measure, which is calculated by adding depreciation and amortization expenses to the operating income.

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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT MARCH, 2014 Quarter Highlights and Recent Developments 

As of March 31, 2014, EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio of 1.82:1.0 and Minimum Debt Service Coverage ratio of 3.86:1.0.



As of March 31, 2014, the Company repaid the Bridge Loan in the amount of US$100 million.



In March, 2014, the Company signed a short term promissory note for the total amount of US$14 million. The maturity date is July 7, 2014.



In March 2014, EGE Haina entered into a PPA agreement with DOMICEM, S.A., under which EGE Haina will supply the capacity and associated energy demanded by DOMICEM, at a base price for wind energy production established by the Law 57-07, annually adjusted by the U.S. CPI. The PPA establishes an original term of 3 years, which matures in 2017.



In February 2014, the Company obtained the definitive concession for the Quisqueya 2 power plant and the expansion of the Los Cocos wind farm.



In February 2014, the Company paid dividends in the amount of US$7 million.



On December 3, 2013, the Company received approval from the SIV for the issuance of Corporate Bonds in the DR debt capital market up to the amount of US$100 million with an average term of five years. As of April 30, 2014, eight tranches of $10 million each were placed, with annual interests rates of 6.25% and 6.00%. The cash proceeds were used to partially refinance the Bridge Loan.

External Factors Average price of fuel for 1’Q14 was US$91.2 Bbl for Platt’s US Gulf Coast HFO #6, 3% Sulfur (fuel used to index the energy price under our PPAs).

Exchange rate as of March 31, 2014, closed at RD$42.77/USD. Accumulated inflation in DR, as of March 31, 2014 was 1.10%.2

2

http://www.bancentral.gov.do

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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT MARCH, 2014 Consolidated Financial Results3 Revenues (US$ Thousands)

Description

1Q'14

Contracted Energy Contracted Capacity

Var %

151,829

158,424

-4%

16,631

15,148

10%

552

553

0%

169,012

174,125

-3%

Others Total Revenues

1Q'13

1Q’14 revenues decreased 3% when compared with the same period of the previous year (US$169.0MM vs. US$174.1MM). This negatve variance is essentially driven by: i) a lower income from SIE compensation due to a decrease in the dispatch of Haina Turbo Gas and Haina 4 units and ii) a 6.3% or US$14.3/MWh decrease in the average energy sales price for the period due to a reduction in the price of fuel oil #6 by 9%; partially offset by US$10.3 million higher energy spot sales and higher energy demand by 10.2 GWh under the PPAs with the Discos and CEPM.

Operating Expenses (US$ Thousands)

Description

1Q'14

1Q'13

Var %

Fuel Expense

83,152

67,124

24%

Transmission Tolls

4,460

3,013

48%

Purchased Power

4,352

42,214

-90%

Frequency Regulation

4,445

2,503

78%

Operation & M aintenance

7,216

7,201

0%

General & Administrative

14,242

14,890

-4%

Depreciation

9,177

5,202

76%

127,044

142,147

-11%

Total Operating Expenses

During 1Q’14 operating expenses were lower than 1Q’13 comparative figures in 11% or US$15.1 million. This decrease is mainly explained by the net effect of:



Purchased power: 90% or US$37.9MM lower than 1Q’13, driven by: a decrease in energy purchases by 225.2 GWh (1Q’14 3.9 GWh vs 1Q’13 229.1 GWh) driven by an increase in generation and lower capacity purchases due to recognition by the OC of the firm capacity to Quisqueya 2, since March 2014.



Administrative and general expenses: 4% or US$0.6MM decrease when compared to 1Q’13 mainly due to: the inauguration of the Los Cocos II wind farm in February 2013, lower employee training, memberships, sponsorship and advertising expenses and lower services related to research and development costs; partially offset by a higher insurance expense.

Partially offset by:



Fuel expense: 24% or US$16.0 million higher than 1Q’13, essentially as a consequence of higher HFO and LFO consumption driven by an increase in thermal generation during the period by 258.5 GWh.



Depreciation: 76% or US$4.0 million higher than 1Q’13, due to the expansion of the Los Cocos Wind Farm and Quisqueya 2 Power Plant, both inaugurated in 2013.

 

Frecuency Regulation: 78% or US$1.9 million higher than 1Q’13.

Transmission tolls: 48% or US$1.5 million higher than 1Q’13.

3 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (USGAAP). These unaudited condensed consolidated financial statements include the accounts of EGE Haina, and those of its wholly-owned subsidiary EGE Haina Finance Company. Intercompany balances and transactions have been eliminated in consolidation.

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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT MARCH, 2014

Net Income Net income was US$29.5 million in 1Q’14, compared to a net income of US$26.6 million in the same period of the prior year. The positive variance of US$2.9 million is explained by:



US$10.0MM increase in operating income, as explained previously.

Partially offset by:



US$3.8 million higher financial expenses, net and amortization of debt issuance costs, due to: a) US$6.0 million lower capitalized interest expense. b) US$0.3 million higher amortization of debt issuance costs.

Partially offset by: c) US$1.8 million d) US$0.4 million e) US$0.2 million f) US$0.1 million

 

lower financial interest expense. higher commercial interest income, net. higher interest income on financial investments. positive change in the valuation of the interest rate Swap.

US$2.6 million higher tax expense, mainly driven by an increase of the taxable income in Dominican Pesos (RD$).

US$0.7 million lower exchange gain, mainly due to a greater devaluation experienced in 1Q’13 of the Dominican Peso (RD$) in comparison with 1Q’14, affecting our net liability exposure in such currency.

Cash Flow Cash used in operating activities Net cash provided by operating activities was US$82.6MM during 1Q’14, compared to US$71.4MM used during the same period of 2013. The US$153.8MM variance is explained by: a) US$162.9MM lower accounts receivable, b) US$2.8MM increase in other liabilities, c) US$2.9MM higher net income, d)US$1.7MM decrease in prepaid expenses, e) lower inventories in US$1.0MM; partially offset by: i)$15.0MM decrease in account payables and ii) US$2.5MM lower positive adjustments reconciling net income to the net cash used in operating activities.

Cash used in investing activities Net cash used in investing activities was US$2.5MM during 1Q’14, compared to US$34.4MM used in the same period of the prior year. The US$31.9MM variance is mainly due to lower additions to property, plant and equipment by $42.6MM during 1Q’14 and a decrease in restricted cash by US$10.7MM during 1Q’14 as a result of the payments made to Wärtsilä under the construction agreement for Quisqueya 2.

Cash provided by financing activities The negative variance of US$94.3MM in financing activities during 1Q’14 when compared to the same period of the prior year, is due to: higher repayments of short-term and long-term debt by US$141.5MM and US$10.1MM, respectively; partially offset by i) higher proceeds from long-term debt by US$51.0MM, ii) lower dividend payments by US$4.3MM and iii) higher proceeds from short-term debt by US$2.0MM.

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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT MARCH, 2014 Financial Debt as of March 31, 2014 FINANCIAL DEBT GENERAL CONDITIONS AND RELEVANT STATISTICS Instrument

Balance

Interest type

Interest Rate

Long Term Facilities

311.9

6.77%

Citi Project Facilities Local Bond (2) - T1/2 Local Bond (2) - T3/4 Local Bond (2) - T5/6 Local Bond (2) - T7/8 Local Bond (2) - T9/10 BHD DR term loan program BPD DR term loan program BHD Panamรก term loan program Local Bond ($100M)-T1 Local Bond ($100M)-T2 y T3 Local Bond ($100M)-T4 y T5 Local Bond ($100M)-T6 y T7

180.0 Variable (L3M + 5.75%, 6.25% floor) 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 5.8 Variable (DR US$) 5.2 Variable (DR US$) 0.9 Variable (DR US$) 10.0 Fixed 20.0 Fixed 20.0 Fixed 20.0 Fixed

7.12% 7.00% 7.00% 7.00% 6.00% 7.00% 5.75% 5.75% 5.50% 6.25% 6.00% 6.00% 6.00%

Short Term Facilities

95.0

Scotiabank Short Term Loan BPD DR Short Term Loan Santa Cruz Short Term Loan BPD DR Short Term Loan Totals and Averages

63.0 15.0 3.0 14.0 406.9

Repayment schedule

Avg Life 2.67

Quarterly - ending March 2017 Bullet payment May 2016 Bullet payment June 2016 Bullet payment June 2016 Bullet payment Oct 2014 Bullet payment Oct 2016 Monthly - ending March & May 2016 Monthly - ending May 2016 Monthly - ending May 2016 Monthly-ending Jan.2020 Monthly-ending Feb.2020 Monthly-ending Mar 2020 Monthly-ending Mar 2020

3.16%

Variable (LIBOR 1M + 3%) Fixed Variable (DR US$) Fixed

3.15% 3.75% 3.25% 2.50% 5.93%

2.09 2.17 2.25 2.25 0.59 2.59 1.09 1.13 1.10 4.84 4.92 5.00 5.00 0.26

Bullet payment Feb, Apr & Jun 2014 Bullet payment Aug 2014 Bullet payment November 2014 Bullet Payment July 2014

0.19 0.42 0.67 0.33 2.11

DR Intl Bond Yield (Ask) 9.00% 8.00%

8.03%

7.72%

7.00%

6.84%

6.13% 6.00%

5.93%

5.72% 5.06%

5.00% 4.00% 3.00% 2.00% 2014

2.85%

2016

2018 DR Sov Bond

2020 EGE Haina

2022

2024

AES Dominicana

2026

2028

Banreservas

Financial Expenses (US$ Thousands) Description

1Q'14

1Q'13

Financial Expenses Interest on Senior Notes

-

(4,335)

Interest on Short-Term Debt

(1,418)

-

Interest on Long-Term Debt

(5,457)

(4,700)

Interest on Payables to Power Vendors

(1,570)

(1,671)

Amortization of Deferred Charges

(1,006)

Capitalized Interest Other Financial Expenses

-

(694) 6,027

(456)

(253)

(9,907)

(5,626)

4,347

4,097

316

149

Financial Income: Interest on Trade Accounts Receivable Interest on Short-Term Investments Other Financial Income Total Financial Expenses, Net

28

13

4,691

4,259

(5,216)

(1,367)

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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT MARCH, 2014

Collections Collection rate for 1Q’14 was 161%, which was higher of that of last year’s same quarter which stood at 56%. As shown in the graphic below, the Distribution Companies, with the help of the DR Government’s subsidy, are making the effort to maintain less than three invoices in arrears.

Discos Cash Collections Vs Billings 154%

161%

153% 123%

90%

80%

74%

72%

65%

56%

54%

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

Operational Statistics Description

1Q'14

1Q'13

Var.%

Heat Rate, Btu/KWh

8,477

9,970

-15.0%

Availability, %

99.2

98.0

1.2%

Forced Outage Rate, %

0.1

0.3

-66.7%

Installed Capacity, M W

896

681

31.6%

Firm Capacity, M W

274

215

27.3%

Energy Balance 800 650 500

GWh

350 200 50 (100) (250)

2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14

GWh - Spot Sale (Purchase) (179) (153) (213)

(84)

GWh - Sales GWh - PPA Purchase GWh - Generation

(134) (117)

613

647

635

573

631

-

(8)

(2)

(71)

(97)

434

486

420

418

401

696

(99)

68

(10)

(125)

(6)

100

706

658

701

762

859

668

(131) (125) (229) (223) (165) 448

481

498

468

472

(85)

(4)

767

765

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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT MARCH, 2014 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2014 AND DECEMBER 31, 2013 Amounts in thousands of US$ 2014

2013

Assets Current Assets: Cash and cash equivalents Restricted cash Accounts and notes receivable Inventories Income tax credit Prepaid expenses Deferred tax asset Total current assets

91,428 3,739 260,820 48,329 2,121 1,162 566 408,165

86,559 3,739 358,333 47,135 3,685 3,787 607 503,845

7,049 633,882 108 5,297 463 1,054,963

7,747 639,149 108 6,220 18 474 1,157,561

95,000 55,555 80,501 2,412 5 1,262 50 3,743 238,527

192,500 55,510 135,252 2,489 6,304 1,437 50 6,637 400,179

Long-term debt Derivative financial instrument Deferred income tax Other non-current liabilities Total liabilities

256,330 15,927 3 510,787

227,736 80 15,063 3 643,061

Shareholders' equity: Common stock Legal reserve Retained earnings Accumulated other comprehensive loss Total shareholders' equity

289,000 26,644 260,593 (32,060) 544,176

289,000 25,167 232,544 (32,211) 514,500

Long term notes receivable Property plant and equipment, net Intangible assets Deferred charges, net Deferred tax asset Other assets Total assets Liabilities and Shareholders' Equity Current liabilities Short-term debt Current portion of long-term debt Accounts payable Payable to related parties Diviends payable Derivative financial instrument Deferred tax liability Other current liabilities Total current liabilities

Total liabilities and shareholders' equity

1,054,963

1,157,561

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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT MARCH, 2014 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 2014 AND 2013 Amounts in thousands of US$ Three months period ended March 31, 2014

2013

Revenues Energy

151,829

158,424

16,631

15,148

552

553

169,012

174,125

83,152

67,124

Purchased energy and capacity Transmission

4,352 4,460

42,214 3,013

Compensation for frequency regulation

4,445

2,503

7,216 14,242 9,177 127,044

7,201 14,890 5,202 142,147

41,968 (5,216) 625 (21) 37,356

31,978 (1,367) 1,367 (165) 31,813

(6,797) (1,034)

(4,979) (185)

29,525

26,649

151

49

29,676

26,698

Capacity Others

Operating costs Fuel

Operating and maintenance expenses Administrative and general expenses Depreciation Operating income Financial expenses, net Foreign exchange gain, net Other expenses, net Income before income tax Income tax Current Deferred Net income Other comprehensive income, net of tax: Cash flow hedge Compehensive income

8

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT MARCH, 2014 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 2014 AND 2013 Amounts in thousands of US$ Three months period ended March 31, 2014 Cash flows from operating activities: Net income Adjustments to reconcile net income to the net cash provided by (used in) operating activities: Gain from the sale of property, plant and equipment Loss on asset dispossal Deferred income tax Depreciation Cash flow hedge infeffectivenness Financial expenes Provision for doubful accounts Change in assets and liabilities: Accounts receivable Inventories Prepaid expenses Other assets Accounts payable Income tax payable Payable to related parties Other liabilities

2013

29,525

26,649

(13) 1,034 9,177 (62) 1,334 61

125 185 5,202 (4) 8,472 79

91,135 (1,855) 2,625 10 (48,469) 1,564 (77) (3,376) -

(71,814) (2,827) 890 4 (31,867) (1,020) 930 (6,148) -

Net cash provided by (used in) operating activities

82,614

(71,144)

Cash flows from investing activities: Proceeds from the sale of property, plant and equipment Purchases of property, plant and equipment Purchases of intangible asset Net changes in restricted cash Collection of notes receivable Net cash used in investing activities

13 (2,692) 178 (2,501)

(45,265) (17) 10,689 237 (34,355)

(141,500) 14,000 (11,361) 70,000 (6,300) (83) (75,243)

12,000 (1,286) 19,000 (10,675) 19,039

4,869

(86,460)

86,559

141,661

91,428

55,201

Cash flows from financing activities: Repayment of short-term debt Proceeds from short-term debt Repayment of long-term debt Proceeds from long-term debt Dividends paid Debt issuance costs paid Net cash (used in) provided by financing activities Net increse (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period

9

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT MARCH, 2014

The condensed consolidated financial statements presented herein have not been audited and were prepared in conformity with Generally Accepted Accounting Principles in the United States (USGAAP).

EGE Haina, the largest generator of electricity in the country, when measured by installed capacity, currently owns and operates eight (8) power plants throughout the country with an installed capacity of 895.8 MW – Quisqueya 2, San Pedro de Macorís and Sultana del Este in the eastern part of the country, Haina and Barahona in the southern part of the country, Puerto Plata on the northern coast, and Los Cocos and Pedernales in the west. The power plant fleet consists of a number of oil and coal-fired boiler steam-turbine generators, diesel generators, a simple cycle gas turbine, and a 77 MW wind farm. EGE Haina had contracted approximately 84% of its power generation with three State owned distributors, and approximately 16% with a related operating company. For more information, visit the Company's Web site at www.egehaina.com.

Caution Concerning Forward-Looking Statements: This report may contain “forward-looking statements”- that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” believe,” “seek,” or “will”. Forward-looking statements involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of the Company may differ materially from those expressed or implied by such forward-looking statements and assumptions. For us, particular uncertainties that could adversely or positively affect our future results include, but are not limited to: changes in general economic, political, governmental and business conditions; the behavior of financial markets; changes in commercial market regulations. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. EGE Haina assumes no obligation and does not undertake to update forward-looking statements.

Investor Contact: Please address any questions or comments related to this report to our investor’s e-mail: hainainvestors@egehaina.com.

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