Quarterly Financial Report June, 2009
EGE Haina Reports Second Quarter 2009 Net Income of US$4.8 million; Revenues of US$68.6 million Santo Domingo, Dominican Republic, July 22th, 2009 – EGE Haina announced today second quarter 2009 Net Income of US$4.8 million, compared to net income of US$6.8 million in the second quarter 2008, driven by a decrease in energy sales price and lower demand. First quarter 2009 revenues were US$68.6 million, showing a 43% decrease when compared with revenues for the same period of the previous year.
Financial and Operational Summary (US$ Thousands, except for Operational data) Description
2Q'09
2Q'08
Var %
YTD'09
YTD'08
Var %
Revenues
68,621
121,353
-43%
123,978
221,838
-44%
Operating Costs
63,298
108,460
-42%
115,680
187,837
-38%
Variable M argin
23,991
32,422
-26%
42,880
72,507
-41%
EBITDA¹
9,183
17,019
-46%
16,025
42,520
-62%
Operating Income
5,323
12,893
-59%
8,298
34,000
-76%
Net Income
4,774
6,769
-29%
1,470
21,758
-93%
(10,790)
(25,705)
-58%
(8,188)
(8,972)
-9%
Availability, %
87
97
-10%
92
89
4%
Sales, GWh
478
558
-14%
936
1,062
-12%
Generation, GWh
330
361
-9%
675
738
-8%
Spot Purchase, GWh
150
197
-24%
260
323
-20%
Operating cash, net
Quarter Highlights and Recent Developments On May 5th, 2009, the first tranche for US$6 million of the 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. On May 15th, 2009, the Company and Centros del Caribe, S.A. entered into a termination agreement to the Power Sales Contract signed in April 2002. In May, 2009, the Company and Consorcio Energético Punta Cana-Macao (“CEPM”) entered into the first amendment to the Power Purchase Agreement signed in August 2008. The amendment eliminates the Euro indexation contained in the energy price and establishes a new minimum capacity of 48.1 MW. On June 4th, 2009, the Company entered into a $10 million loan with Banreservas at an annual interest rate of 9%, payable on a monthly basis. The loan is guaranteed by $12.2 million in Sovereign Bonds. The principal matures as follows: $7.5 million on June 30, 2010 and $2.5 million on June 30, 2011. On June 4th, 2009, the line of credit with Banreservas was paid-in full in an amount of $5.0 million. On June 16th EGE Haina offset accounts receivables from EDE Norte and EDE Sur with accounts payable to CDEEE, Hidro and ETED by US$22.7 million. Agreements’ execution is still pending. On June 17th, 2009, the second tranche for US$6 million of the local bond was placed, with a maturity of 24 months and an annual interest rate of 8.5% that will be paid monthly to investors. On June 19th, 2009, the Company entered into a $5 million loan with BHD at an annual interest rate of 9%, payable on a monthly basis. The loan is guaranteed by $7.2 million in Sovereign Bonds and has a two-year term. On June 19th, 2009, the line of credit with BHD Panamá was paid-in full in an amount of $4.5 million. 1
EBITDA is a non-GAAP financial measure, which is calculated by adding depreciation and amortization expenses to the Operating income.
1
Quarterly Financial Report June, 2009
Quarter Highlights and Recent Developments On June 30th, 2009, the Company sold part of its investment in Sovereign Bonds (Tranche 2) in the amount of $5,000,000 (face value) at a price of $88. On July 2nd, 2009 the Company made a partial repurchase of the 144A Senior Notes in the amount of $1,250,000 (face value) at a price of $68. On July 21st, 2009 the Company made a partial repurchase of the 144A Senior Notes in the amount of $818,000 (face value) at a price of $70.
External Factors Average price of fuel for the month of June was US$60.15 /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
Exchange rate as of June 30th, 2009, closed at RD$36.15/USD.
10 5 -
Accumulated inflation in DR, as of June 30th, 2009 was 3.19%.
Q1
Q2
Q3
Q4
2006
According to IMF DR GDP is estimated to grow 0.5% in 2009.
2
Q1
Q2
Q3
2007
Q4
Q1
Q2
Q3
Q4
2008
PLATTS US$/MMBTU
LFO US$/MMBTU
CARBON US$/MMBTU
NG US$/MMBTU
Q1
Q2
2009
Consolidated Financial Results3 Revenues (US$ Thousands) Description
2Q'09
2Q'08
Var %
YTD'09
YTD'08
Var %
Contrac ted Energy
57,458
112,772
-49%
101,596
204,780
-50%
Contrac ted Capacity
10,312
8,582
20%
21,058
17,058
23%
-
100%
1,324
-
100%
121,353
-43%
123,978
221,838
-44%
Others Total Revenues
850 68,621
2Q’09 revenues decreased by 43% when compared with the same period of previous year (US$ 68.6MM Vs. US$ 121.3MM). This negative variance is essentially driven by a 41.4% decrease in the average energy sales price for the period (2Q’09 US$113.2/MWh vs 2Q’08 US$202.1/MWh) as a result of the reduction in Fuel Oil prices, which is the main escalator of our PPAs’ formula, and lower demand (2Q’09 478.4 GWh vs 2Q’08 557.8 GWh) as a result of the suspension of the EDE Este PPA in November 2008.
2
Source: IMF World Economic Outlook, published in April, 2009.
3
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (USGAAP). These consolidated financial statements include the accounts of EGE Haina, and those of its wholly owned subsidiary EGE Haina Finance Company. Intercompany balances and transactions have been eliminated in consolidation.
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Quarterly Financial Report June, 2009
Operating Expenses (US$ Thousands) Description
2Q'09
2Q'08
Var %
YTD'09
YTD'08
Var %
Fuel Expense
26,216
39,679
-34%
49,389
75,815
-35%
Transmission Tolls
2,586
4,217
-39%
5,375
7,220
-26%
Purchased Power
15,680
44,150
-64%
26,103
64,763
-60%
148
886
-83%
230
1,532
-85%
Operation & M aintenance
8,368
8,201
2%
14,746
15,853
-7%
General & Administrative
6,440
7,202
-11%
12,110
14,134
-14%
Depreciation
3,861
4,126
-6%
7,727
8,520
-9%
Total Operating Expenses
63,298
108,460
-42%
115,680
187,837
-38%
Frequency Regulation
During 2Q’09 operating expenses were lower than 2Q’08 comparative figures by 42% (US$63.3 MM Vs. US$108.5 MM). The positive variance is the result of: Own generation: 34% or US$13.5 MM decrease in fuel costs, essentially as a result of a positive average price effect for the period (2Q’09 US$51.1 per BBLS vs 2Q’08 US$85.0 per BBLS) and lower fuel consumption (2Q’09 366.6 thousand of BBLS vs 2Q’08 386.8 thousand of BBLS). Transmission Tolls: 39% or US$1.6 MM decrease when compared to 2Q’08, as a result of lower energy demanded as explained above, mainly due to the suspension of the EDE Este PPA. Purchased power: 64% or US$28.5 MM decrease is mainly the result of lower spot energy purchases due to a positive average price effect for the period (2Q’09 US$101.7/MWh vs 2Q’08 US$180.3/MWh) and a decrease in energy purchases (2Q’09 149.7 GWh vs 2Q’08 161.4 GWh), driven by a lower demand for the period. General and administrative expenses: 11% or US$0.8 MM decrease mainly due to i) lower management fee expenses by US$1.0 MM as a consequence of a decrease in revenues; ii) lower regulatory payments by US$0.3 MM; iii) partially offset by US$0.4 MM higher minimum taxes provision (asset tax) and iv) US$0.1 MM other lower negative variations. As a percentage of revenues, Operating expenses represented 92% and 89% in the 2Q’09 and 2Q’08, respectively.
Net Income Net income was US$4.8 MM in the 2Q’09, compared to US$6.8 MM net income in the same period of the prior year. The negative variance of US$2.0 is explained by: Lower EBITDA by US$7.8 MM as explained in the paragraphs above. Partially offset by lower other expenses by US$2.8 MM. US$1.8 MM lower income tax. US$0.8 MM lower financial expenses net, mainly due to the accrual of interests over the sovereign bonds received in February 2009.
3
Quarterly Financial Report June, 2009
Cash Flow Cash used in operating activities Net cash used in operating activities was US$10.8 MM during the 2Q’09, compared to US$25.7 MM in the same period of 2008. The most significant factors that decreased the cash used in operating activities were: i) US$22.8 MM increase in accounts payable; ii) US$14.1 MM decrease in accounts receivable and iii) US$9.5 MM increase in other liabilities, partially offset by: a) US$2.0 MM decrease in net income; b) US$16.9 MM increase in inventories; c) US$11.9 MM of adjustments reconciling net income to the net cash used in operating activities; d)US$0.7 MM lower variances.
Cash used in investing activities Net cash used in investing activities had almost in the same level during 2Q’09 and 2Q’08. The US$0.1 MM increase is the net result of US$0.5 MM higher short term investments and US$0.4 MM lower addition to property, plant and equipment.
Cash provided by (used in) financing activities Net cash provided by financing activities was US$16.1 MM in the 2Q’09, compared to US$5.0 MM used in the same period of prior year. Such variance is mainly driven by the issuance of long-term and short term debt by US$17.2 MM, partially offset with debt repayment in US$5.8 MM during 2Q’09.
Financial Debt FINANCIAL DEBT GENERAL CONDITIONS AND RELEVANT STATISTICS
Instrument 144 A Bond Local Bond-1st tranche Local Bons-2nd tranche Reservas-sov bond collateral BHD-sov bond collateral Weighted av. Interest rate Weighted av. Life (years) Total financial debt in US$ MM
Outstanding balance in US$ million 175 6 6 10 5
Interest type Fixed Fixed Fixed Variable Variable
Current Rate 9.50% 8.00% 8.50% 9.00% 9.00%
Average Life (years) 7.77 1.25 1.85 1.19 1.94
Repayment schedule Balloon repayment April 2017 Balloon repayment October 2010 Balloon repayment May 2011 US$7.5 MM balloon June 2010 - 2.5 MM June 2011 Repayment June 2011
9.39% 6.93 202
Financial Expenses (US$ Thousands) Description
2Q'09
2Q'08
YTD'09
YTD'08
Financial Expenses* : (3,463)
(4,202)
(7,619)
(8,309)
Interest on Short-Term Debt
Interest on Senior Notes
(276)
(39)
(312)
(146)
Interest on Long-Term Debt
(124)
-
(124)
Interest on Payables to Power Vendors
(894)
(514)
(2,980)
(692)
Withholding Taxes on Interest
(453)
-
(924)
-
Amortization of Deferred Charges
(386)
-
(760)
-
Other Financial Expenses
(10)
(228)
(83)
(442)
(5,605)
(4,983)
(12,802)
(9,589)
2,294
2,322
6,695
3,799
623
18
1,057
Financial Income: Interest on Trade Accounts Receivable Interest on Short-Term Investments Interest on Long-Term Investments Other Financial Incom e
Total Financial Expenses, Net
(12) 2,144 10
92
2,144 24
122
4,436
3,037
8,881
4,978
(1,169)
(1,946)
(3,921)
(4,611)
* Net of capitalizaed interests
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Quarterly Financial Report June, 2009
Collections Collection rate for 2Q’09 was 64% as compared to the 108% level of last year’s same quarter. The negative variance is manly due lower cash recovery from Edenorte and Edesur, which was 31% for the 2Q’09 compared to 97% in the same period of previous year; partially offset by the effect of the suspension of the EDE Este PPA, since the Company continues to receive the payments of pledged customers and credit card collections.
Cash Collections Vs Billings 140%
120%
100%
80%
60%
40% 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Collection 105% 74%
81%
70% 129% 83%
72%
92%
95% 108% 89%
52% 100% 64%
Operational Statistics Description
2Q'09
2Q'08
Var.%
YTD'09
YTD'08
Var.%
Heat Rate, Btu/KWh
9,196
9,262
-0.7%
9,109
9,188
-0.9%
Availability, %
87.1
96.6
-9.8%
92.1
88.6
4.0%
Forced Outage Rate, %
5.1
2.2
131.8%
3.6
1.3
176.9%
Installed Capacity, M W
599
599
0.0%
599
599
0.0%
Effective Capacity, M W
547
547
0.0%
547
547
0.0%
Firm Capacity, M W
262
350
-25.1%
268
354
-24.4%
Energy Balance
580
430
GWh
280
130
(20)
(170) 1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
GWh - Spot Purchase
16
(78)
(133)
(152)
(105)
(132)
(116)
(149)
(126)
(197)
(237)
(139)
(110)
(150)
GWh - Sales
471
547
551
531
490
539
596
544
505
558
588
496
457
478
GWh - Generation
486
469
420
386
389
409
480
395
377
361
350
357
346
330
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Quarterly Financial Report June, 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 JU E 30, 2009 A D DECEMBER 31, 2008 Amounts in thousands of US$ Jun-09
Dec-08
Ass ets : Current Ass ets : Cash and cash equivalents Restricted cas h Short Term Investment Short Term Investment, res tricted Accounts receivable Inventory Prepaid expenses and other Deferred income tax Total current as sets
21,011 6,961 8,162 102,656 36,035 19,129 5,605 199,559
22,340 3,014 200,544 25,105 9,603 4,901 265,507
Depos its in banks, res tricted Long term receivables Long term inves tments Long Term Inves ment, res tricted Property, plant and equipment Intangible assets , net Other ass ets Total As sets
8,312 26,188 25,246 8,962 258,264 10,197 6,833 543,561
8,313 32,473 262,637 10,654 6,450 586,034
7,549 30,968 777 19,591 58,885
1,703 59,441 2,186 17,205 80,537
194,500 15,503 356 269,244
175,000 11,660 351 267,547
289,000 10,627 11,995
289,000 10,627 49,892
(31,032) (6,273) 274,317
(31,032) 318,487
Liabilities and shareholders' equity: Current liabilities: Short-term debt Accounts payable Accounts payable to related parties Other Liabilities Total current liabilities Long-term debt, Deferred income tax Other non-current liabilities Shareholders ' equity: Common s tock Legal reserve Retained earnings Accumulated other comprehensive loss : Currency translation adjustment Inves tments revaluation reserve Total shareholders ' equity Total liabilities and shareholders ' equity
543,561
586,034 6
Quarterly Financial Report June, 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 A D SIX MO TH PERIODS E DED JU E 30, 2009 A D 2008 Amounts in thousands of US$
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 (loss) Other income (expenses), net Income before income tax Income tax: Current Deferred Net income
Three month period ended June 30,
Six month period ended June 30,
2009
2008
2009
2008
57,458 10,312 850
112,772 8,582 -
101,596 21,058 1,324
204,780 17,058 -
68,621
121,353
123,978
221,838
26,216 2,586 15,680 148 8,368 6,440 3,861 63,298
39,679 4,217 44,150 886 8,201 7,202 4,126 108,460
49,389 5,375 26,103 230 14,746 12,110 7,727 115,680
75,815 7,220 64,763 1,532 15,853 14,134 8,520 187,837
5,323 (1,169) 31 4,184
12,893 (1,946) (137) (2,814) 7,996
8,298 (3,921) 370 79 4,825
34,000 (4,611) (119) (4,058) 25,212
590
(386) (840)
(3,356)
(1,766) (1,688)
4,774
6,769
1,470
21,758 7
Quarterly Financial Report June, 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 A D SIX MO TH PERIODS E DED JU E 30, 2009 A D 2008 Amounts in thousands of US$ Three month period ended June 30, 2009 Cash flows from operating activities: Net income Adjustments to reconcile net income to the net cash used in operating activities: Gain on sale of fixed asset Deferred income tax Depreciation and amortization Investments revaluation reserve Financial expenses Change in assets and liabilities: Accounts receivable Inventories Prepaid expenses Other assets Accounts payable Payable to related parties Other liabilities Other non-currente liabilities
2008
Six month period ended June 30, 2009
2008
4,774
4,028
1,470
19,016
(590) 3,861 (6,273) (4,461)
(879) 3,970 (300)
(4) 3,356 7,727 (6,273) 3,035
(32) 7,960 -
(19,837) (11,898) (4,676) 23,330 (564) 5,536 8
(34,022) 5,013 (739) 450 552 (2,491) (4,013) (1,735)
(22,968) (11,514) (9,746) (382) 29,096 (1,409) (583) 8
(37,970) (5,986) (1,604) 551 4,176 146 2,044 (1,735)
(10,790)
(30,166)
(8,188)
(13,433)
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 provided by (used in) investing activities
(256) (508) (764)
(657) (657)
3,014 4 (690) (508) 1,819
(1,791) (1,791)
Cash flows from financing activities: Proceeds from long-term debt Proceeds from short-term debt Repayment of short-term debt Dividends Debt issuance costs paid Changes in long term receivables Net cash provided by (used in) financing activities
19,500 7,500 (10,743) (134) 16,124
9,822 (16,545) 1,722 (5,001)
19,500 17,000 (11,154) (20,003) (304) 5,039
16,568 (22,762) (501) (6,695)
Net increase (decrease) in cash and cash equivalents
4,570
(35,824)
(1,329)
(21,919)
Cash and cash equivalents at the beginning of period
16,441
80,958
22,340
67,053
21,011
45,134
21,011
45,134
38,856 2,095 2,255
4,102 -
57,616 4,190 2,314
6,320 -
19,364
-
19,364
-
Net cash used in operating activities
Cash and cash equivalents at the end of period Supplemental cash flow information of non-cash activities Decrease in accounts receivable through offsets wiht accounts payable Reclassification of accounts receivable from non-current to current Unpaid additions of property, plant and equipment $19.9 million dividend paid to Minority Interest with sovereign bonds with a fair market value of $19.3 million
8
Quarterly Financial Report June, 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.
9