Quarterly Quarterly Financial Report Financial Report June 30th, 2010
June 30th, 2010
EGE Haina Reports Second Quarter 2010 Net Income of US$6.9 million; Revenues of US$94.9 million Special points of interest:
Santo Domingo, Dominican Republic, August 17th, 2010 – EGE Haina announced
EGE Haina reported a
Consolidated Net Debt to Consolidated EBITDA Ratio and a Consolidated Interest Coverage Ratio of 1.1:1.0 and 5.6:1.0, respectively, as of June 30th, 2010.
In June 2010, the company collected US$12.2 MM corresponding to the principal and interests of the 2010 Sovereign bonds (first tranche). The company still holds US$10.5 million 2011 Sovereign Bond as an investment.
today a second quarter 2010 net income of US$6.9 million, compared to a net income of US$4.8 million in the second quarter 2009, driven by an increase in energy sales price and higher demand. Second quarter 2010 revenues were US$94.9 million, showing a 38% increase when compared to the same period of the previous year.
Financial and Operational Summary
In June 2010, the company made a US$10.0 MM dividend payment to its shareholders.
Inside this Issue: Quarter highlights
2
External factors
2
MD&A
3
Financial Debt
5
Collections
6
Financial results
7
1
(US$ Thousands, except for Operational data)
Description
2Q'10
2Q'09
Var %
YTD'10
YTD'09
Var %
Revenues
94,928
68,621
38%
189,029
123,978
52%
Operating Costs
81,121
63,298
28%
159,708
115,680
38%
Variable M argin
34,850
23,991
45%
70,616
42,880
65%
EBITDA¹
17,853
9,183
94%
37,344
16,025
133%
Operating Income (loss)
13,807
5,323
159%
29,321
8,298
253%
Net Income (loss)
6,953
4,774
46%
17,378
1,470
1083%
Operating cash, net
12,653
(6,845)
-285%
79,439
(8,188)
-1070%
Availability, %
88
85
3%
85
92
-8%
Sales, GWh
505
478
6%
988
936
6%
Generation, GWh
375
330
14%
804
675
19%
Spot Purchases, GWh
131
148
-12%
183
260
-29%
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 30th, 2010
Quarter Highlights and Recent Developments EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio and a Consolidated Interest Coverage Ratio of 1.1:1.0 and 5.6:1.0, respectively, as of June 30th, 2010. 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. In June 2010, the company replaced a US$5.0 MM loan maturing June 2011 at 7.50% –collateralized- with a US$5.0 MM loan agreement with no collateral and the same tenor. In June 2010, the company collected US$12.2 MM corresponding to the principal and interests of the 2010 Sovereign bonds. The company still holds US$10.5 MM 2011 Sovereign Bond as an investment. In June 2010, the company collected US$4.5 MM corresponding to the loan made to CEPM Energy (an affiliated company). In June 2010, the company made a US$10.0 MM dividend payment to its shareholders. In July, 2010 the Company repaid the loan outstanding with Banco de Reservas for US$2.5MM.
External Factors
Coal, Natural Gas and Fuel-Oil #6 Price Evolution (US$/MMBtu)
Exchange rate as of June 30th, 2010, closed at RD$36.92/USD. th
Accumulated inflation in DR, as of June 30 , 2010 was 2.87%.
10.9
10.08 8.23 6.37
6.20 6.23
5.89 6.41
5.30
4.91
4.48 3.81
Q4'08
Q1'09
5.04
4.07 3.44
According with the WOE of the FMI, the DR GDP will grow 5.5% in 2010.2
Q2'09 HFO
2
11.19
11.00
Average price of fuel for the month of June was US$66.04 /Bbl for Platt’s US Gulf Coast HFO #6, 3% Sulfur (fuel used to index the energy price under our PPAs).
Q3'09 COAL
4.34 3.73 3.78
3.58
Q4'09
Q1'10
Q2'10
NG
http://www.bancentral.gov.do/noticias/avisos/aviso2010-04-13.pdf
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Quarterly Financial Report June 30th, 2010
Consolidated Financial Results3 Revenues (US$ Thousands) Description
2Q'10
2Q'09
Var %
YTD'10
YTD'09
Var %
Contracted Energy
84,210
57,458
47%
167,141
101,596
65%
Contracted Capacity
10,631
10,312
3%
21,711
21,058
3%
87
850
-90%
176
1,324
-87%
94,928
68,621
38%
189,029
123,978
52%
Others Total Revenues
2Q’10 revenues increased by 38% when compared with the same period of previous year (US$ 94.9 MM Vs. US$ 68.6 MM). This positive variance is essentially driven by a 31.0% increment in the average energy sales price for the period (2Q’10 US$187.9/MWh vs 2Q’09 US$143.4/MWh) as a result of the increase in Fuel Oil prices, which is the main escalator of our PPAs’ pricing formula, and higher demand by 5.6% (2Q’10 505.3 GWh vs 2Q’09 478.4 GWh).
Operating Expenses (US$ Thousands) Description
2Q'10
2Q'09
Var %
YTD'10
YTD'09
Var %
Fuel Expense
34,690
26,216
32%
80,116
49,389
62%
Transmission Tolls
2,360
2,586
-9%
4,489
5,375
-16%
Purchased Power
22,073
15,680
41%
31,637
26,103
21%
955
148
547%
2,171
230
843%
Operation & M aintenance
9,085
8,368
9%
17,262
14,746
17%
General & Administrative
7,912
6,440
23%
16,011
12,110
32%
Depreciation
4,046
3,861
5%
8,022
7,727
4%
Total Operating Expenses
81,121
63,298
28%
159,708
115,680
38%
Frequency Regulation
During 2Q’10 operating expenses were higher than 2Q’09 comparative figures by 28% (US$81.1 MM Vs. US$63.3 MM). This increase is mainly explained by: Purchased power: 41% or US$6.4 MM increase is the result of a negative average price effect for the period (2Q’10 US$167.2/MWh vs 2Q’09 US$101.7/MWh); partially offset by lower spot energy purchases (2Q’10 132.5 GWh vs 2Q’09 149.7 GWh). Fuel costs: 32% or US$8.5 MM increase, as a consequence of higher fuel consumption (2Q’10 396.3 thousand of BBLS vs 2Q’09 366.6 thousand of BBLS) due to higher energy generation and a negative average price effect for the period (2Q’10 US$75.2 per BBLS vs 2Q’09 US$52.2 per BBLS). General and administrative expenses: 23% or US$1.5 MM increase mainly due to i) US$0.9 MM higher technical advisory fee expense due to higher sales; ii) US$0.1 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.
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.
3
Quarterly Financial Report June 30th, 2010
Net Income Net income was US$7.0 MM in the 2Q’10, compared to a net income of US$4.8 MM in the same period of prior year. The positive variance of US$2.2 MM is explained by: Higher EBITDA by US$8.7 MM as explained in the above paragraphs. Partially offset by US$4.2 MM higher income tax. US$1.9 higher exchange loss as a result of our exposure to the Euro. US$0.3 MM higher interest expense due to: a) US$1.0 million lower interest income from distribution companies as a result of lower accounts receivable; b) US$1.5 million lower interest in sovereign bonds as a result of the sale of tranche #3; c) US$0.6 million higher interest expenses in the local bond (US$12 MM outstanding at 2Q’09 vs US$30 MM outstanding at 2Q’10); d)US$0.2 million other negative higher minor variances; partially offset by e) US$0.9 million lower commercial interest expenses; f) US$1.2 higher interest gain on the loan made to CEPM Energy and g) US$0.9 million higher interest capitalized during the period. US$0.1 million other higher minor negative variances.
Cash Flow Cash provided by (used in) operating activities Net cash provided by operating activities was US$12.7 MM during the 2Q’10, compared to US$6.8 MM used in the same period of 2009. The US$19.5 MM positive variation is explained by: a) US$22.9 MM decrease in accounts receivable; b) US$2.2 MM higher net income; c) US$7.0 MM decrease in prepaid expenses; d) US$9.0 MM higher inventories e) US$0.5 MM increase in payable to related parties; f) US$14.0 MM of higher positive adjustments reconciling net income to the net cash provided by (used in) operating activities; partially offset by i) US$19.8 MM lower accounts payable; ii) US$16.3 MM decrease in other liabilities. Cash provided by (used in) investing activities Net cash provided by investing activities was US$4.1 MM during the 2Q’10, compared to US$0.7 MM used in investing activities in the same period of the prior year. The US$4.9 MM increase is mainly the result of: US$11.8 MM proceeds from short term investments in 2Q’10; partially offset US$6.9 MM higher additions to, and advance payments of, property, plant and equipment. Cash (used in) provided by financing activities The negative variance of US$26.1 MM in financing activities during 2Q’10 when compared to the same period of the prior year, is the result of: a) US$10 MM dividend paid during 2Q’10; b) US$22.0 MM lower issuance of long-term and short term debt; partially offset by i) lower debt repayment in US$5.8 MM during 2Q’10 and ii) US$0.1 MM lower issuance cost during 2Q’10.
4
Quarterly Financial Report June 30th, 2010
Financial Debt V a lue s in m illions of US $ FINANCIAL DEBT GENERAL CONDITIONS AND RELEV ANT S TATIS TICS Instrum e nt Ba la nce Inte re st type Curre nt Ra te Ave ra ge Life Re pa ym e nt sche dule 144 A B ond 164.9 fixed 9.50% 6.81 B alloon paym ent A pril 2017 Local B ond-T1 6.0 fixed 8.00% 0.29 B alloon paym ent October 2010 Local B ond-T2 6.0 fixed 8.50% 0.88 B alloon paym ent M ay 2011 Local B ond-T3 6.0 fixed 8.50% 1.04 B alloon paym ent July 2011 Local B ond-T4 6.0 fixed 8.75% 1.79 B allonn paym ent A pril 2012 Local B ond-T5 6.0 fixed 7.75% 2.45 B allonn paym ent Decem ber 2012 B HD 5.0 variable 7.50% 0.98 B alloon June 2011 Reservas-sov bond collateral 2.5 variable 7.50% 0.98 B alloon June 2011 W e ighte d a v. Inte re st ra te W e ighte d a v. Life (ye a rs) Tota l fina ncia l de bt
9.25% 5.70 202.4
Total Debt vs Financial Assets 180.0 160.0 140.0
US$ MM
120.0 100.0 80.0 60.0
40.0 20.0 0.0 2010
2011
2012 cash on hand
2013
2014
Debt
2015
2016
2017
Sovereign bonds
Financial Expenses (US$ Thousands) Description
2Q'10
2Q'09
YTD'10
YTD'09
Financial Expenses Interest on Senior Notes
(3,973)
(3,916)
(8,571)
(8,543)
Interest on Short-Term Debt
(280)
(276)
(292)
(312)
Interest on Long-Term Debt
(522)
(124)
(1,266)
(124)
40
(894)
(453)
(2,980)
(414)
(386)
(833)
(760)
Interest on Payables to Power Vendors Amortization of Deferred Charges Capitalized Interest Other Financial Expenses
507
-
901
-
(10)
(27)
(83)
(4,612)
(5,605)
(10,540)
(12,802)
1,299
2,294
3,206
6,695
30
Financial Income: Interest on Trade Accounts Receivable Interest on Short-Term Investments
124
Interest on Long-Term Investments
447 1,230
Other Financial Income
Total Financial Expenses, Net
(12)
139
18
2,144
892
2,144
10
1,241
24
3,100
4,436
5,478
8,881
(1,513)
(1,169)
(5,062)
(3,921)
5
Quarterly Financial Report June 30th, 2010
Collections Cash Collection rate for 2Q’10 was 96% as compared to the 64% level of last year’s same quarter. The positive variance is mainly due to the higher cash collections from Edenorte and Edesur when compared with the same period of the previous year (Edenorte 97% vs 34% and Edesur 71% vs 29%, respectively); partially offset the lower collections from EDE Este (2Q’10 5% vs 2Q’09 614%) as a consequence of the effect of the suspension of this PPA. The rescheduled debt with EDE Este was fully collected in Dec’09.
Cash Collections Vs Billings 152%
108% 100%
95%
96%
89%
64%
60%
52% 43% 1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
Operational Statistics Description
2Q'10
2Q'09
Var.%
YTD'10
YTD'09
Var.%
Heat Rate, Btu/KWh
9,064
9,642
-6.0%
9,456
9,552
-1.0%
Availability, %
87.7
84.9
3.3%
84.9
92.1
-7.8%
Forced Outage Rate, %
0.5
5.3
-90.6%
4.4
3.4
29.4%
Installed Capacity, MW
599
599
0.0%
599
599
0.0%
Effective Capacity, MW
547
547
0.0%
547
547
0.0%
Firm Capacity, MW
247
297
-16.6%
261
345
-24.4%
Energy Balance 580 430
GWh
280 130 (20) (170)
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
(127)
(197)
(238)
(139)
(111)
(148)
(130)
(101)
(53)
(131)
GWh - Sales
505
558
588
496
457
478
514
507
483
505
GWh - Generation
377
361
350
357
346
330
384
406
430
375
GWh - Spot Purchase
6
Quarterly Financial Report June 30th, 2010
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2010 AND DECEMBER 31, 2009 Amounts in thousands of US$ Jun-10
Dec-09
Assets: Current Assets: Cash and cash equivalents Short Term Investment Short Term Investment, restricted Accounts receivable Inventory Prepaid expenses and other Deferred income tax Total current assets
110,833 9,220 2,556 93,612 34,991 16,357 1,484 269,053
39,548 12,328 163,498 30,451 19,432 3,033 268,289
Deposits in banks, restricted Long Term Invesment, restricted Property, plant and equipment Intangible assets, net Other assets Total Assets
7,831 249,991 10,827 10,183 547,884
7,831 10,480 251,703 9,130 6,874 554,308
19,500 13,738 943 15,588 49,770
6,000 32,069 1,009 359 10,563 50,001
182,867 15,783 19 248,439
196,367 16,123 13 262,504
289,000 11,365 29,762
289,000 11,365 22,384
(31,032) 351 299,445
(31,032) 87 291,804
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
547,884
554,308 7
Quarterly Financial Report June 30th, 2010
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS FOR THE SIX AND THREE MOTH PERIODS ENDED JUNE 30, 2010 AND 2009 Amounts in thousands of US$ Three month period ended June 30, 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
2009
Six month period ended June 30, 2010
2009
84,210 10,631 87
57,458 10,312 850
167,141 21,711 176
101,596 21,058 1,324
94,928
68,621
189,029
123,978
34,690 2,360 22,073 955 9,085 7,912 4,046 81,121
26,216 2,586 15,680 148 8,368 6,440 3,861 63,298
80,116 4,489 31,637 2,171 17,262 16,011 8,022 159,708
49,389 5,375 26,103 230 14,746 12,110 7,727 115,680
13,807 (1,513) (1,948) 194 10,540
5,323 (1,169) 31 4,184
29,321 (5,062) (1,988) (553) 21,718
8,298 (3,921) 370 79 4,825
(3,587)
590
(4,340)
(3,356)
6,953
4,774
17,378
1,470
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Quarterly Financial Report June 30th, 2010
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENTS FOR THE SIX AND THREE MOTH PERIODS ENDED JUNE 30, 2010 AND 2009 Amounts in thousands of US$ Three month period ended June 30, 2010 Cash flows from operating activities: Net income Adjustments to reconcile net income to the net cash provided by (used in) operating activities: Gain on sale of fixed asset Net foreign exchange loss Deferred income tax Depreciation and amortization Investments revaluation reserve Financial expenses Forward contracts Change in assets and liabilities: Accounts receivable Inventories Prepaid expenses Other assets Accounts payable Payable to related parties Other liabilities Other non-current liabilities Net cash provided by (used in) operating activities
2009
Six month period ended June 30, 2010
2009
6,953
4,774
17,378
1,470
1,304 743 4,046 4,382 -
3,356 3,861 (6,273) (4,461) -
1,304 1,496 8,022 8,242 507
(4) 3,356 7,727 (6,273) 3,035 -
3,040 (2,871) 2,318 (10) 3,544 (76) (10,726) 6
(19,837) (11,898) (4,676) 23,330 (564) 5,536 8
51,949 (5,899) 3,007 (26) (904) (65) (5,578) 6
(22,968) (11,514) (9,746) (382) 29,096 (1,409) (583) 8
12,653
(6,845)
79,439
(8,188)
Cash flows from investing activities: Net changes in restricted cash Sale of property, plant and equipment Advance payments of property, plant and equipment Additions to property, plant and equipment Short-term investments Net cash provided by (used in) investing activities
(3,427) (3,766) 11,324 4,131
(256) (508) (764)
(3,427) (4,713) 11,320 3,181
3,014 4 (690) (508) 1,819
Cash flows from financing activities: Proceeds from long-term debt Proceeds from short-term debt Repayment of long-term debt Repayment of short-term debt Dividends Debt issuance costs paid Net cash (used in) provided by financing activities
5,000 (5,000) (10,000) (10,000)
10,000 17,000 (11,154) 412 (134) 16,124
5,000 (5,000) (10,000) (30) (10,030)
19,500 17,000 (11,154) (20,003) (304) 5,039
Net increase (decrease) in cash and cash equivalents
6,784
8,515
72,589
(1,329)
Cash and cash equivalents at the beginning of period
105,353
12,495
39,548
22,340
-
(1,304)
-
Effects of exchange rate change on the balance of cash 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 Dividends paid in nature with financial assets by US$20.00 million with, a fair market value of US$19.4 million
(1,304) 110,833
26 (191) -
21,011
110,833
21,011
38,856 2,095 2,255
18,675 53
57,616 4,190 2,314
19,364
-
19,364
9
Quarterly Financial Report June 30th, 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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