Quarterly Financial Report March, 2009
EGE Haina Reports First Quarter 2009 Losses of US$3.3 million; Revenues of US$55.4 million Santo Domingo, Dominican Republic, May 7th, 2009 – EGE Haina announced today first quarter 2009 losses of US$3.3 million, compared to net income of US$15.0 million in the first quarter 2008, driven by a decrease in energy sales price and lower demand. First quarter 2009 revenues were US$55.4 million, showing a 45% decrease when compared with revenues for the same period of the previous year.
Financial and Operational Summary (US$ Thousands, except for Operational data) 1Q 2009
1Q 2008
Var %
Revenues
55,358
100,484
-45%
Operating Costs
52,382
79,377
-34%
Variable Margin
18,890
40,086
-53%
EBITDA¹
6,841
25,501
-73%
Operating Income
2,975
21,107
-86%
Net (loss) Income
(3,305)
14,989
-122%
2,602
16,733
-84%
Availability, %
95
97
-2%
Sales, GWh
457
505
-9%
Generation, GWh
346
377
-8%
Spot Purchase, GWh
110
126
-13%
Description
Operating cash, net
Quarter Highlights and Recent Developments In January, 2009, the Company performed the 48,000 hrs maintenance of Sultana del Este’s Engine #4. Such maintenance took 10 days to be completed. In February, 2009, the Company entered into a revolving credit facility with BHD Panama by US$4.5 million at 9.25%. On February 9th, 2009, the Company entered into an Agreement with CDEEE in which the latter offered to pay the outstanding accounts receivable generated during 2008 between the Company and Edenorte and Edesur in the concept of energy and capacity sales under the PPAs, for a total amount of US$77.0 million. The settlement of this debt was made in exchange for Sovereign bonds maturing in June 2010, 2011 and 2012; with interest accrual at 10.60% fixed rate and interest payable in semi-annual installments. The issuance of such bonds was approved by Law No. 490-08 of the National Congress of the Dominican Republic. On February 24th, 2009, the Board approved a dividend payment in the amount of US$40.0 million net of taxes that was paid 50% in cash and 50% with sovereign bonds under law 490-08 during March and April, 2009. In March, 2009, the Company issued short term debt with Banreservas by US$5.0 million at 11%. On March 3rd, 2009, the Company obtained the approval of the Dominican Security Exchange Superintendence for the issuance of a local bond amounting to US$30 million. This bond will be issued in five tranches of US$6 million each. The proceeds will be used to fund working capital needs. On March 16th, 2009, the Company and CDEEE agreed to offset US$17.6 million of the Company’s accounts payable to CDEEE against the same amount of accounts receivable from Edenorte and Edesur. On May 5th, 2009, the first tranche of US$6 million of local bond was placed, with a maturity of 18 months and an annual interest rate of 8% that will be paid monthly to investors. Fitch Dominicana has rated the issuance as BBB (dom) for long term instruments in foreign currency. 1
EBITDA is a non-GAAP financial measure, which is calculated by adding depreciation and amortization expenses to the Operating (loss) income.
1
Quarterly Financial Report March, 2009
External Factors Fuel average price for the month of March was US$37.61 /Bbl for Platt’s US Gulf Coast HFO #6, 3% Sulfur (fuel used to index the energy price under our PPAs).
30 25 20 15
st
Exchange rate as of March 31 , 2009, closed at RD$36.06/USD.
10 5 -
st
Accumulated inflation in DR, as of March 31 , 2009 was 0.74%.
Q1
According to IMF DR GDP is estimated to grow 0.5% in 2009.
2
Q2
Q3
Q4
Q1
Q2
2006
Q3
2007
Q4
Q1
Q2
Q3
2008
PLATTS US$/MMBTU
LFO US$/MMBTU
CARBON US$/MMBTU
NG US$/MMBTU
Q4
Q1 2009
Consolidated Financial Results3 Revenues (US$ Thousands)
1Q 2009
1Q 2008
Var %
Contracted Energy
44,138
92,008
-52%
Contracted Capacity
10,746
8,476
27%
Description
Others Total Revenues
474 55,358
100,484
100% -45%
1Q’09 revenues decreased by 45% when compared with the same period of previous year (US$ 55.4MM Vs. US$ 100.5MM). This negative variance is essentially driven by a 41.4% decrease in the average energy sales price for the period (1Q’09 US$102.6/MWh vs 1Q’08 US$175.0/MWh) as a result of the reduction in Fuel Oil prices, which is the main escalator of our PPAs’ formula, and lower demand (1Q’09 457.2 GWh vs 1Q’08 504.5 GWh) as a result of the suspension of the EDE Este PPA last November 2008.
2
Source: IMF World Economic Outlook, published in April, 2009.
3
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (USGAAP). These consolidated financial statements include the accounts of EGE Haina, and those of its wholly owned subsidiary EGE Haina Finance Company. Intercompany balances and transactions have been eliminated in consolidation.
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Quarterly Financial Report March, 2009
Operating Expenses (US$ Thousands) Description
1Q 2009
1Q 2008
Var %
Fuel Expense
23,173
36,137
-36%
Transmission Tolls
2,789
3,003
-7%
Purchased Power
10,423
20,613
-49%
83
646
-87%
Operation & Maintenance
6,379
7,652
-17%
General & Administrative
5,670
6,932
-18%
Book Depreciation
3,866
4,394
-12%
Total Operating Expenses
52,382
79,377
-34%
Frequency Regulation
During 1Q’09 operating expenses were lower than 1Q’08 comparative figures by 34% (US$52.4 MM Vs. US$79.4 MM). The positive variance is the result of: Own generation: 36% or US$13.0 MM decrease in fuel costs as a result of a positive average price effect for the period (1Q’09 US$46.0 per BBLS vs 1Q’08 US$75.9 per BBLS) and lower fuel consumption (1Q’09 399.2 BBLS vs 1Q’08 441.4 BBLS). Purchased power: 49% or US$10.2 MM decrease is essentially the result of lower spot energy purchases by US$8.4 MM due to a positive average price effect for the period (1Q’09 US$91.0/MWh vs 1Q’08 US$145.3/MWh) and an 18% decrease in energy purchases (1Q’09 110.4 GWh vs 1Q’08 135.0 GWh) and US$1.8MM lower capacity purchases. Operating and maintenance expenses: 17% or US$1.3 lower than same period of prior year, as the result of i) The postponement of the mayor maintenance of the Barahona Plant which was rescheduled to April 2009 (US$0.9MM Positive impact); ii) lower labor cost by US$0.4 million due to the cost reduction program started in November 2008. General and administrative expenses: 18% or US$1.3 MM decrease mainly due to lower management fee expenses by US$0.8 MM as a consequence of a decrease in revenues and lower regulatory payment by US$0.4 MM. As a percentage of revenues, Operating expenses represented 95% and 80% in the 1Q’09 and 1Q’08, respectively.
Net (Loss) Income Net loss was US$3.3 million in the 1Q’09, from US$15.0 million net income in the same period of 2008. The negative variance of US$18.3 is explained by: Lower EBITDA by US$18.7 million as explained in the paragraphs above. Higher taxes by US$1.7 million due to the non recovery of the tax losses carry forward based on current 2009 estimated projections. Partially offset by higher exchange gain by US$0.4 million and other positive variances by US$1.7 million.
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Quarterly Financial Report March, 2009
Cash Flow Cash provided by operating activities Net cash provided by operating activities was US$2.6 million during the 1Q’09, compared to US$16.7 million in the same period of 2008. The most significant factors that decreased the cash provided by operating activities were: i) US$18.3 million decrease in net income; ii) US$12.2 million decrease in other liabilities; iii) US$4.2 million increase in prepaid expenses; and iv) US$3.5 million decrease in payables to related parties; partially offset by: a) US$11.4 million decrease in inventories; b) US$2.1 million increase in accounts payables; and c) US$10.2 million of higher positive adjustments reconciling net income to the net cash provided by operating activities. Cash provided by (used in) investing activities Net cash provided by investing activities was US$2.6 million in the 1Q’09 compared to US$1.1 million used in 1Q’08. The main factor that increased the cash provided by investing activities was the cancellation of a restricted short term investment by US$3.0 million in 1Q’09.
Financing activities Net cash used in financing activities was US$11.1 million in the 1Q’09, compared to US$1.7 million used in the same period of prior year. Such variance in mainly driven by the payment of a US$20.0 million dividend, partially offset with the issuance of short term debt by US$9.5 million during 1Q’09.
Financial Debt (US$ millions) Description
1Q 2009
1Q 2008
Var %
Short Term
10,792
1,703
534%
Long Term
175,000
175,000
0%
Total Financial Debt
185,792
176,703
5%
Local currency
0%
0%
Foreign currency
100%
100%
Fixed rate
94.2%
99.0%
Variable rate
5.8%
1.0%
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Quarterly Financial Report March, 2009
Collections Collection rate for 1Q’09 equaled 100% as compared to the 95% level of last year’s same quarter. The positive variance is manly due to the suspension of the EDE Este PPA, since the Company continues to receive the payments of pledged customers and credit card collections. Average Collection rate for Edenorte and Edesur was 65% for the 1Q’09.
Collections Vs Billings 140%
120%
100%
80%
60%
40% 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 Collection 105% 74%
81%
70% 129% 83%
72%
92%
95% 108% 89%
52% 100%
Operational Statistics 1Q 2009
1Q 2008
Var.%
9,053
9,092
-0.4%
Availability, %
95
97
-2.3%
Forced Outage Rate, %
1.6
0.8
100.0%
Installed Capacity, MW
599
599
0.0%
Effective Capacity, MW
547
547
0.0%
Firm Capacity, MW
273
359
-23.8%
Description Heat Rate, Btu/KWh
Energy Balance
580
430
GWh
280
130
(20)
(170) GWh - Spot Purchase
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
16
(78)
(133)
(152)
(105)
(132)
(116)
(149)
(126)
(197)
(237)
(139)
(110)
GWh - Sales
471
547
551
531
490
539
596
544
505
558
588
496
457
GWh - Generation
486
469
420
386
389
409
480
395
377
361
350
357
346
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Quarterly Financial Report March, 2009
EMPRESA GE ERADORA DE ELECTRICIDAD HAI A, S.A. A D SUBSIDIARY U AUDITED CO DE SED CO SOLIDATED BALA CE SHEETS AS OF MARCH 31, 2009 A D DECEMBER 31, 2008 Amounts in thousands of US$
Mar-09 Assets: Current Assets: Cash and cash equivalents Restricted cash Accounts receivable Inventory Prepaid expenses and other Deferred income tax Total current assets Deposits in banks, restricted Long term receivables Long term investments Property, plant and equipment Intangible assets, net Other assets Total Assets Liabilities and shareholders' equity: Current liabilities: Short-term debt Accounts payable Accounts payable to related parties Dividends payable Other Liabilities Total current liabilities Long-term debt, Deferred income tax Other non-current liabilities Shareholders' equity: Common stock Legal reserve Retained earnings Accumulated other comprehensive loss Total shareholders' equity Total liabilities and shareholders' equity
Dec-08
16,441 113,832 24,709 14,479 1,516 170,977
22,340 3,014 200,544 25,105 9,603 4,901 265,507
8,313 29,331 74,300 259,201 10,449 6,833 559,403
8,313 32,473 262,637 10,654 6,450 586,034
10,792 46,505 1,341 19,997 18,208 96,843
1,703 59,441 2,186 17,205 80,537
175,000 12,026 351 284,220
175,000 11,660 351 267,547
289,000 10,627 6,588 (31,032) 275,182
289,000 10,627 49,892 (31,032) 318,487
559,403
586,034
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Quarterly Financial Report March, 2009
EMPRESA GE ERADORA DE ELECTRICIDAD HAI A, S.A. A D SUBSIDIARY U AUDITED CO DE SED CO SOLIDATED I COME STATEME TS FOR THE THREE MO TH PERIODS E DED MARCH 31, 2009 A D 2008 Amounts in thousands of US$ 2009 Revenues Energy Capacity Others
Operating costs Fuel Transmission Purchased power Compensation for frequency regulation Operating and maintenance Administrative and general expenses Depreciation and amortization Operating income Financial expenses, net Foreign exchange gain Other income (expenses), net Income before income tax Income tax Current Deferred Net (loss) income
44,138 10,746 474
2008
92,008 8,476 -
55,358
100,484
23,173 2,789 10,423 83 6,379 5,670 3,866 52,382
36,137 3,003 20,613 646 7,652 6,932 4,394 79,377
2,975 (2,752) 370 48 641
21,107 (2,666) 18 (1,244) 17,216
(3,945)
(1,380) (847)
(3,305)
14,989
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Quarterly Financial Report March, 2009
EMPRESA GE ERADORA DE ELECTRICIDAD HAI A, S.A. A D SUBSIDIARY U AUDITED CO DE SED CO SOLIDATED CASH FLOW STATEME TS FOR THE THREE MO TH PERIODS E DED MARCH 31, 2009 A D 2008 Amounts in thousands of US$
2009 Cash flows from operating activities: Net (loss) income Adjustments to reconcile net (loss) income to the net cash provided by operating activities: Gain on sale of fixed asset Deferred income tax Depreciation and amortization Financial expenses Change in assets and liabilities: Accounts receivable Inventories Prepaid expenses Other assets Accounts payable Payable to related parties Other liabilities
2008
(3,305)
14,989
(4) 3,945 3,866 7,496
847 3,990 300
(3,131) 384 (5,070) (382) 5,766 (845) (6,119) 2,602
(3,948) (10,999) (865) 101 3,624 2,637 6,057 16,733
3,014 4 (435) 2,583
(1,134) (1,134)
9,500 (412) (20,003) (170) -
6,746 (6,217) (2,223)
(11,084)
(1,694)
Net (decrease) increase in cash and cash equivalents
(5,899)
13,905
Cash and cash equivalents at the beginning of period
22,340
67,053
Cash and cash equivalents at the end of period
16,441
80,958
Net cash provided by operating activities Cash flows from investing activities: Net changes in restricted cash Sale of property, plant and equipment Additions to property, plant and equipment Net cash provided by (used in) investing activities Cash flows from financing activities: Proceeds from short-term debt Repayment of short-term debt Dividends Debt issuance costs paid Changes in long term receivables Net cash used in financing activities
8
Quarterly Financial Report March, 2009
The 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 is the largest generator of electricity in the Dominican Republic, currently operating 11 electric power generation units at six plants, consisting of San Pedro, Sultana del Este – barge, Haina and Barahona in the southern part of the country, Puerto Plata in the northern and Pedernales in the western part of Santo Domingo. EGE Haina has contracted approximately 96% of its power generation to the three Dominican Republic distributors. 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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