Quarterly Quarterly Financial Report Financial Report March 31st, 2010
March 31st, 2010
EGE Haina Reports First Quarter 2010 Net Income of US$10.4 million; Revenues of US$94.1 million
Special points of interest:
Santo Domingo, Dominican Republic, May 11th, 2010 – EGE Haina announced
• EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio and a Consolidated Interest Coverage Ratio of 1.3:1.0 and 5.0:1.0, respectively, as of March 31st, 2010. • On January 11, 2010, the Company fully collected the outstanding amount of the accounts receivable under the rescheduling agreement signed with Edeeste in August 2006. • In April, 2010, the Company entered into a “turn key agreement” with Cobra for the development of the Los Cocos Wind Farm project located in the municipality of Juancho, Pedernales Province, with an installed capacity of 25.20 MW.
Inside this Issue:
today a first quarter 2010 net income of US$10.4 million, compared to a net loss of US$3.3 million in the first quarter 2009, driven by an increase in energy sales price and higher demand. First quarter 2010 revenues were US$94.1 million, showing a 70.0% increase when compared to the same period of the previous year.
Financial and Operational Summary (US$ Thousands, except for Operational data)
Description
1Q'10
1Q'09
Var %
Revenues
94,101
55,358
70%
Operating Costs
78,587
52,382
50%
Variable M argin
35,766
18,890
89%
EBITDA¹
19,490
6,841
185%
Operating Income (loss)
15,514
2,975
421%
Net Income (loss)
10,425
(3,305)
-415%
Operating cash, net
66,786
(1,343)
-5072%
Availability, %
81
82
0%
• Quarter highlights
2
Sales, GWh
483
457
6%
• External factors
2
Generation, GWh
430
346
24%
• MD&A
3
Spot Purchases, GWh
53
111
-53%
• 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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Quarterly Financial Report March 31st, 2010
Quarter Highlights and Recent Developments EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio and a Consolidated Interest Coverage Ratio of 1.3:1.0 and 5.0:1.0, respectively, as of March 31st, 2010. On January 11, 2010, the Company fully collected the outstanding amount of the account receivable from the rescheduling agreement signed with Edeeste in August 2006. On February 16, 2010, a euro forward contract was settled. In accordance with this agreement, the Company received €10,000,000 at a rate of US$1.4764/EUR. As of March 31st, 2010, accounts receivable have decreased from US$163.5 million (as reported in the balance sheet as of December 31st, 2009) to US$ 96.2 million. During the first quarter, cash collections were in the amount of US$ 114.7 million. Additionally, the Company entered into offsetting agreements by US$ 18.3 during the same period. On March 17, 2010 the Company issued its audited financial statements for 2009. The Company has restated its annual financial statements from amounts previously reported for periods ended through December 31, 2008. During 2009, the Company identified certain inventory adjustments that resulted from the translation of spare parts inventory from Dominican Pesos into US Dollars. The adjustment had no impact on the Company’s cash flow. In April 2010, the Company entered into a “turn key agreement” with Cobra for the development of the Los Cocos Wind Farm project located in the municipality of Juancho, Pedernales Province, with an installed capacity of 25.20 MW.
External Factors
Coal, Natural Gas and Fuel-Oil #6 Price Evolution (US/MMBtu)
Average price of fuel for the month of March was US$69.90 /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 31st, 2010, closed at RD$36.53/USD. Accumulated inflation in DR, as of March 31st, 2010 was 2.33%.
11.19
4.91
5.04
3.78
3.58
Q4'09
Q1'10
8.23 6.37 5.89 6.41
According with the WOE of the FMI, the GDP will grow 2 6.0%.
Q4'08
6.20 6.23 4.48
Q1'09
5.30 4.07 3.81
Q2'09 HFO
2
11.00 10.08
3.44
Q3'09 COAL
NG
http://www.bancentral.gov.do/noticias/avisos/aviso2010-04-13.pdf
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Quarterly Financial Report March 31st, 2010
Consolidated Financial Results3 Revenues (US$ Thousands) Description
1Q'10
1Q'09
Var %
Contracted Energy
82,931
44,138
88%
Contracted Capacity
11,080
10,746
3%
90
474
-81%
94,101
55,358
70%
Others Total Revenues
1Q’10 revenues increased by 70% when compared with the same period of previous year (US$ 94.1 MM Vs. US$ 55.4 MM). This positive variance is essentially driven by a 78.0% increase in the average energy sales price for the period (1Q’10 US$196.5/MWh vs 1Q’09 US$127.4/MWh) as a result of the increase in Fuel Oil prices, which is the main escalator of our PPAs’ pricing formula, and higher demand (1Q’10 482.5 GWh vs 1Q’09 457.2 GWh).
Operating Expenses (US$ Thousands) Description
1Q'10
1Q'09
Var %
Fuel Expense
45,426
23,173
96%
Transmission Tolls
2,129
2,789
-24%
Purchased Power
9,563
10,423
-8%
Frequency Regulation
1,216
83
1370%
Operation & M aintenance
8,177
6,379
28%
General & Administrative
8,099
5,670
43%
Depreciation
3,976
3,866
3%
Total Operating Expenses
78,587
52,382
50%
During 1Q’10 operating expenses were higher than 1Q’09 comparative figures by 50% (US$78.6 MM Vs. US$52.4 MM). This increase is the result of: Fuel costs: 96% or US$22.3 MM increase, as a result of higher fuel consumption (1Q’10 545.0 thousand of BBLS vs 1Q’09 369.2 thousand of BBLS) due to higher energy generation and a negative average price effect for the period (1Q’10 US$75.6 per BBLS vs 1Q’09 US$43.6 per BBLS). General and administrative expenses: 43% or US$2.4 MM increase mainly due to i) US$1.3 MM higher technical advisory fee expense due to higher energy sales; ii) US$0.6 MM higher office operation costs mainly due to the support provided to Haiti by the Company; iii) US$0.2 MM higher allowance for doubtful accounts expense; iv) US$0.2 MM higher regulatory payment and v) US$0.1 MM higher other minor negative variances. Operation and maintenance expenses: 28% or US$1.8 MM increase when compared to 1Q’09 mainly as a consequence of the major maintenance performed to the Sultana’s engine #2 and #8 in 1Q’10. Partially offset by lower transmission tolls expense: 24% or 0.7 MM due to lower energy purchased. Purchased power: 8% or US$0.9 MM decrease is mainly the result of lower spot energy purchases (1Q’10 54.8 GWh vs 1Q’09 110.4 GWh) as a result of the increase in generation, partially offset by a negative average price effect for the period (1Q’10 US$196.8/MWh vs 1Q’09 US$91.0/MWh). 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 31st, 2010
Net Income Net income was US$10.4 MM in the 1Q’10, compared to a net loss of US$3.3 MM in the same period of prior year. The positive variance of US$13.7 MM is explained by: Higher EBITDA by US$12.6 MM as explained in the above paragraphs. US$3.2 MM lower income tax. Partially offset by US$0.8 million higher other expenses mainly due to the loss incurred in the Euro forward. US$0.8 MM lower interest income, mainly due to a decrease on interest income from commercial receivables as a consequence of an increase in collections from the distribution companies. US$0.4 lower exchange gain. US$0.1 higher depreciation expense.
Cash Flow Cash provided by operating activities Net cash provided by operating activities was US$66.8 MM during the 1Q’10, compared to US$1.3 MM used in the same period of 2009. The US$68.1 MM positive variation is explained by: a) US$52.0 MM decrease in accounts receivable; b) US$13.7 MM higher net income; c) US$11.3 MM increase in other liabilities; d) US$5.8 MM decrease in prepaid expenses; e) US$0.8 MM increase in payable to related parties; f) US$0.4 MM lower other assets; partially offset by i) US$10.2 MM lower accounts payable; ii) US$3.4 MM higher inventories; iii) US$2.3 MM of higher negative adjustments reconciling net income to the net cash provided in operating activities. Cash (used in) provided by investing activities Net cash used in investing activities was US$0.9 MM during the 1Q’10, compared to US$2.5 MM provided by investing activities in the same period of the prior year. The US$3.5 MM decrease is mainly the result of: a) US$3.0 MM recovery of restricted cash in 1Q’09 and b) US$0.5 MM higher additions to property, plant and equipment. Cash used in financing activities The variance of US$11.1 MM of lower cash used in financing activities in 1Q’10 when compared to the same period of the prior year, is essentially the result of US$20 MM dividend paid during 1Q’09; partially offset by US$9.1 MM of proceeds from short term debt also in the 1Q’09.
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Quarterly Financial Report March 31st, 2010
Financial Debt FINANCIAL DEBT GENERAL CONDITIONS AND RELEVANT STATISTICS
Instrument 144 A Bond Local Bond- T1 Local Bond-T2 Local Bond-T3 Local Bond-T4 Local Bond-T5 BHD-sov bond collateral Reservas-sov bond collateral
Outsanding balance in US$ million 164.9 6.0 6.0 6.0 6.0 6.0 5.0 2.5
Weighted av. Interest rate Weighted av. Life (years) Total financial debt
9.25% 5.87 202.4
Interest type fixed fixed fixed fixed fixed fixed variable variable
Current Rate 9.50% 8.00% 8.50% 8.50% 8.75% 7.75% 7.50% 7.50%
Average Life Repayment schedule 6.99 Balloon payment April 2017 0.47 Balloon payment October 2010 1.06 Balloon payment May 2011 1.22 Balloon payment July 2011 1.97 Ballonn payment April 2012 2.63 Ballonn payment December 2012 1.16 Balloon payment June 2011 1.16 Balloon payment June 2011
Debt Amortizations vs Financial Assets 180 160 140 US$ MM
120 100 80 60 40 20 0 2009
2010
2011
2012
cash on hand
2013 Debt
2014
2015
2016
2017
Sovereign bonds
Financial Expenses (US$ Thousands) Description
1Q'10
1Q'09
Financial Expenses Interest on Senior Notes Interest on Short-Term Debt
(4,264) -
(4,627) (36)
Interest on Long-Term Debt
(696)
-
Interest on Payables to Power Vendors
(493)
(2,085)
Amortization of Deferred Charges
(419)
(374)
(57)
(74)
(5,928)
(7,197)
Other Financial Expenses
Financial Income: 1,907
4,401
Interest on Short-Term Investments
Interest on Trade Accounts Receivable
16
30
Interest on Long-Term Investments
444
Other Financial Income
Total Financial Expenses, Net
-
11
13
2,378
4,445
(3,550)
(2,752)
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Quarterly Financial Report March 31st, 2010
Collections Cash Collection rate for 1Q’10 was 152% as compared to the 100% level of last year’s same quarter. The positive variance is mainly the effect of the payment received from the Distribution Companies during the month of March. Such payment supports the commitment made by the Government with the International Monetary Fund (IMF) of maintaining the arrears coated with the generator companies in a maximum of 45 days.
Cash Collections Vs Billings 152%
108% 100% 95% 89%
64%
60%
52% 43% 1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
Operational Statistics Description
1Q'10
1Q'09
Var.%
Heat Rate, Btu/KWh
9,797
9,557
2.5%
Availability, %
81.2
81.6
-0.5%
Forced Outage Rate, %
2.4
1.2
100.0%
Installed Capacity, M W
599
599
0.0%
Effective Capacity, M W
547
547
0.0%
Firm Capacity, M W
247
297
-16.6%
Energy Balance
580 430
GWh
280 130 (20) (170) 1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
(127)
(197)
(238)
(139)
(111)
(149)
(130)
(101)
(53)
GWh - Sales
505
558
588
496
457
478
514
507
483
GWh - Generation
377
361
350
357
346
330
384
406
430
GWh - Spot Purchase
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Quarterly Financial Report March 31st, 2010
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, 2010 A D DECEMBER 31, 2009 Amounts in thousands of US$ Mar-10 Assets: Current Assets: Cash and cash equivalents Short Term Investment Accounts receivable Inventory Prepaid expenses and other Deferred income tax Total current assets Deposits in banks, restricted Long term investments Long Term Invesment, restricted 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 Derivative financial liabilities 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: Currency translation adjustment Investments revaluation reserve Total shareholders' equity Total liabilities and shareholders' equity
Dec-09
105,353 12,400 96,188 32,858 18,607 2,251 267,656
39,548 12,328 163,498 30,451 19,432 3,033 268,289
7,831 2,462 8,197 249,514 8,865 6,890 551,416
7,831 10,480 251,703 9,130 6,874 554,308
6,000 10,031 1,020 19,563 36,614
6,000 32,069 1,009 359 10,563 50,001
196,367 15,960 13 248,953
196,367 16,123 13 262,504
289,000 11,365 32,809
289,000 11,365 22,384
(31,032) 321 302,463
(31,032) 87 291,804
551,416
554,308
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Quarterly Financial Report March 31st, 2010
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 MOTH PERIODS E DED MARCH 31, 2010 A D 2009. Amounts in thousands of US$ Three month period ended March 31, 2010 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 (loss) gain Other (expenses) income, net Income before income tax Income tax Net income (loss)
2009
82,931 11,080 90
44,138 10,746 474
94,101
55,358
45,426 2,129 9,563 1,216 8,177 8,099 3,976 78,587
23,173 2,789 10,423 83 6,379 5,670 3,866 52,382
15,514 (3,550) (40) (747) 11,178
2,975 (2,752) 370 48 641
(753)
(3,945)
10,425
(3,305)
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Quarterly Financial Report March 31st, 2010
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 MOTH PERIODS E DED MARCH 31, 2010 A D 2009. Amounts in thousands of US$ Three month period ended March 31, 2010 Cash flows from operating activities: Net income (loss) Adjustments to reconcile net income (loss) to the net cash provided by (used in) operating activities: Gain on sale of fixed asset Deferred income tax Depreciation and amortization Financial expenses Forward contracts Change in assets and liabilities: Accounts receivable Inventories Prepaid expenses Other assets Accounts payable Payable to related parties Other liabilities
2009
10,425
(3,305)
753 3,976 3,860 507
(4) 3,866 7,496 -
48,909 (3,028) 689 (16) (4,448) 11 5,148
(3,131) 384 (5,070) (382) 5,766 (845) (6,119)
66,786
(1,343)
(947) (4) (951)
3,014 4 (435) 2,583
(30) (30)
9,500 (412) (20,003) (170) (11,084)
Net increase (decrease) in cash and cash equivalents
65,805
(9,844)
Cash and cash equivalents at the beginning of period
39,548
22,340
105,353
12,495
18,648 245
18,761 2,095 58
Net cash provided by (used in) operating activities Cash flows from investing activities: Net changes in restricted cash Sale of property, plant and equipment Additions to property, plant and equipment Short-term investments Net cash (used in) provided by investing activities Cash flows from financing activities: Proceeds from short-term debt Repayment of short-term debt Dividends Debt issuance costs paid Net cash used in financing activities
Cash and cash equivalents at the end of period Supplemental cash flow information of non-cash activities Decrease in accounts receivable through offsets with accounts payable Reclassification of accounts receivable from non-current to current Unpaid additions of property, plant and equipment
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Quarterly Financial Report March 31st, 2010
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, based on installed capacity, 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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