Quarterly Quarterly Financial Report Financial Report JUNE 30TH, 2011
June 30th, 2011
EGE Haina Reports Second Quarter 2011 Net Income of US$16.3 million; Revenues of US$156.5 million Special points of interest:
Santo Domingo, Dominican Republic, August 4st, 2011 – EGE Haina announced
In April 2011, the
Superintendence of Securities of the Dominican Republic authorized a US$50.0MM bond issuance.
In May 2011, the Company paid a dividend of US$10.0MM, net of taxes.
today second quarter 2011 net income of US$16.3 million, compared to a net income of US$6.9 million in the second quarter 2010, driven by an increase in energy sales price and higher demand. Second quarter 2011 revenues were US$156.5 million, showing a 65% increase when compared to the same period of the previous year.
In May 2011, the Company
entered into two 5-year amortizing loan agreements with BHD International Bank (Panama), S.A. and Banco BHD by US$2.0MM and US$8.0MM, respectively.
Financial and Operational Summary
In May 2011, the Company
(US$ Thousands, except for Operational data)
repaid US$6.0MM of the tranche No.2 of the $30MM local bond.
In June 2011, the Company collected US$10.5MM corresponding to tranche No. 2 of the investment in sovereign bonds.
In July 2011, the Company
repaid US$6.0MM of the tranche No.3 of the $30MM local bond.
Description
2Q'11
2Q'10
Var %
YTD'11
YTD'10
Var %
Revenues
156,542
94,928
65%
281,090
189,029
49%
Operating Costs
131,640
81,121
62%
233,788
159,707
46%
Variable M argin
45,873
34,850
32%
88,281
70,616
25%
EBITDA¹
28,975
17,853
62%
55,449
37,344
48%
Operating Income
24,902
13,807
80%
47,302
29,321
61%
Net Income
16,342
6,953
135%
33,499
17,378
93%
(23,800)
12,653
-288%
(59,595)
79,439
-175%
Availability, %
97
88
11%
98
85
15%
Sales, GWh
613
505
21%
1,178
988
19%
434
375
16%
821
804
2%
179
131
37%
357
184
95%
Operating cash, net
What’s inside Quarter highlights
2
Generation, GWh
External factors
2
Spot Purchases, GWh
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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Quarterly Financial Report JUNE 30TH, 2011
Quarter Highlights and Recent Developments EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio and a Consolidated Interest Coverage Ratio of 1.62:1.0 and 10.6:1.0, respectively, as of June 30th, 2011. In April 2011, the Superintendence of Securities (Superintendencia de Valores), the Dominican securities authority, approved the issuance of local corporate bonds up to the amount of US$50MM. $30MM of those corporate bonds were placed from May through July of 2011. In May 2011, the Company paid a dividend in the amount of US$10.0MM, net of taxes. In May 2011, the Company entered into a variable rate 5-year amortizing loan agreement with Banco BHD of US$8.0MM. US$5.0MM out of the proceeds of this loan were used to refinance a short term line of credit with the same financial institution due in June 2011. In May 2011, the Company entered into a variable rate 5-year amortizing loan agreement with BHD International Bank of US$2.0MM. In May 2011, the Company repaid US$6.0MM of the tranche No.2 of the $30MM local bond. In June 2011, the Company collected $10.5MM corresponding to tranche No. 2 of the investment in sovereign bonds. In July 2011, the Company repaid US$6.0MM of the tranche No.3 of the $30 million local bond.
External Factors Average price of fuel for 2Q’11 was US$98.5 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 June 30th, 2011, closed at RD$38.15/USD. Accumulated inflation in DR, as of June 30th, 2011 was 5.85%.2 According to the IMF, the DR GDP is estimated to grow from 5% to 5.5% in 2011.3 In July 2011, the DR Government reopened its 7.5% amortizing notes due 2021. The notes price yielded 6.95%, marking the lowest yield for a DR international bond.
2 3
http://www.bancentral.gov.do http://www.bancentral.gov.do/noticias/avisos/aviso2011-06-07.pdf
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Quarterly Financial Report JUNE 30TH, 2011
Consolidated Financial Results4 Revenues (US$ Thousands) Description Contracted Energy Contracted Capacity Others Total Revenues
2Q'11
2Q'10
Var %
YTD'11
YTD'10
Var %
143,107
84,210
70%
254,779
167,141
52%
13,283
10,631
25%
25,344
21,711
17%
152
87
75%
968
176
449%
156,542
94,928
65%
281,090
189,029
49%
2Q’11 revenues increased by 65% when compared with the same period of previous year (US$ 156.5 MM Vs. US$ 94.9 MM). This positive variance is essentially driven by a 6.0% increment in the average energy sales price for the period (2Q’11 US$241.8/MWh vs 1Q’10 US$178.4/MWh) as a result of the increase in Fuel Oil #6 prices, which is the main escalator of our PPAs’ pricing formula, and higher demand by 17.2% (2Q’11 612.9 GWh vs 2Q’10 504.9 GWh), mainly driven by the reimplementation of the EDE Este PPA and the increase in the contracted capacity with CEPM to 64MW.
Operating Expenses (US$ Thousands) Description
2Q'11
2Q'10
Var %
YTD'11
YTD'10
Var %
Fuel Expense
63,899
34,690
84%
109,985
80,116
37%
Transmission Tolls
3,339
2,360
41%
5,707
4,489
27%
Purchased Power
40,892
22,073
85%
73,012
31,637
131%
Frequency Regulation
2,539
955
166%
4,104
2,171
89%
Operation & M aintenance
6,086
9,085
-33%
13,200
17,262
-24%
General & Administrative
10,812
7,912
37%
19,632
16,011
23%
Depreciation
4,073
4,046
1%
8,147
8,022
2%
131,640
81,121
62%
233,788
159,707
46%
Total Operating Expenses
During 2Q’11 operating expenses were higher than 2Q’10 comparative figures by 62% or 50.5 MM (US$131.6 MM Vs. US$81.1 MM). This increase is mainly explained by: Purchased power: 85% or US$18.8 MM increase is the result of higher spot energy purchases (2Q’11 180.7 GWh vs 2Q’10 132.5 GWh), and an increase in the average purchase price for the period (2Q’11 US$221.3MWh vs 2Q’10 US$167.2/MWh). General and administrative expenses: 37% or US$2.9 MM increase when compared to 2Q’10 mainly due to: i) US$2.3 MM higher technical advisory fee expense as a result of the increase in sales during 2Q’11; ii) US$0.3 MM higher office operation costs; iii) US$0.2 MM higher regulatory payment; iv) US$0.2 MM higher professional services; partially offset by v) US$0.1 lower insurance expenses. Fuel costs: 84% or US$29.2 million increase in fuel cost, essentially as a consequence of: a) higher LFO consumption in 55.3 thousand of BBLS at a higher price (2Q’11 55.3 thousand of BBLS at US$124.8/BBLS vs 2Q’10 4.9 thousand of BBLS at US$89.6/BBLS); b) higher Coal price (2Q’11 US$150.6/MT vs 2Q’10 US$88.0/MT); and c) US$25.2/BBLS increase in HFO price (2Q’11 US$100.7/BBLS vs 2Q’10 US$75.5/BBLS). Transmission Tolls: 41% or US$0.9 million higher than 2Q’10. Operation & Maintenance: 33% or US$3.3 million lower than 2Q’10 due to: a) the major maintenance performed to the Sultana’s engines #2 and #8 and Haina’s engine #4 and Barahona Plant during 2010; b) the dredging carried out in the vessel reception area during 2010; partially offset by c) the major maintenance performed to the Sultana’s engine #1, #5 and #7 during 2011. 4
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 o f 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 30TH, 2011
Net Income Net income was US$16.3 MM in 2Q’11, compared to a net income of US$6.9 MM in the same period of the prior year. The positive variance of US$9.4 MM is explained by: Higher EBITDA by US$11.1 MM as explained in the above paragraphs. US$2.0 MM lower exchange loss as a result of the reduction in our exposure to the Euro in 2011. US$0.3 MM higher other income mainly due to US$0.7 million insurance reimbursement of 48 the MVA transformer received during 2011, and the Euro forward loss recorded in 2010. Partially offset by : US$3.1 MM higher income tax. US$0.2 MM higher interest expense, net.
Cash Flow Cash (used in) provided by operating activities Net cash used by operating activities was US$23.8 MM during the 2Q’11, compared to US$12.7 MM provided by operating activities in the same period of 2010. The US$36.5MM variance is explained by: a) US$34.6MM increase in accounts receivable; b) US$11.2MM of higher negative adjustments reconciling net income to the net cash used in operating activities c) US$10.6MM lower accounts payable; and d) US$1.2MM higher inventories. The aforementioned is partially offset by: i) US$9.4MM higher net income; ii) US$8.4MM increase in other liabilities and iii) US$3.3MM lower prepaid expenses and other assets. Cash provided in investing activities Net cash provided by investing activities was US$6.9MM during 2Q’11, compared to US$4.1 MM provided in the same period of the prior year. The US$2.8 variance is mainly due to lower additions to property, plant and equipment during 2Q’11, partially offset by lower proceeds from investments. Cash provided by (used in) financing activities The positive variance of US$21.4MM in financing activities during 2Q’11, when compared to the same period of the prior year, is due to higher proceeds from long term debt by US$33.8MM; partially offset by US$7.1 MM higher repayment of long term debt and lower proceeds from line of credit by $5MM during 2Q’11.
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Quarterly Financial Report JUNE 30TH, 2011
Financial Debt as of June 30, 2011 FINANCIAL DEBT GENERAL CONDITIONS AND RELEVANT STATISTICS Instrument Balance Interest type Interest Rate Repayment schedule 144 A Bond 164.9 fixed 9.50% Balloon payment April 2017 Local Bond-T3 6.0 fixed 8.50% Balloon payment July 2011 Local Bond-T4 6.0 fixed 8.75% Balloon payment April 2012 Local Bond-T5 6.0 fixed 7.75% Balloon payment December 2012 Local Bond (2) - T1/2 10.0 fixed 7.00% Balloon payment May 2016 Local Bond (2) - T3/4 10.0 fixed 7.00% Balloon payment June 2016 Local Bond (2) - T5/6 3.9 fixed 7.00% Balloon payment June 2016 Popular 1 4.3 Variable 5.75% Monthly - ending December 2015 Popular 2 7.1 Variable 5.75% Monthly - ending November 2015 BHD1 4.8 Variable 5.50% Monthly - ending March 2016 BHD2 7.8 Variable 5.50% Monthly - ending March 2016 BHD Panama 1.9 Variable 5.50% Monthly - ending March 2016 Weighted av. Interest rate Weighted av. Life (years) Total financial debt
8.72% 4.97 232.6
Total Debt vs Financial Assets 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0
2011
2012
2013
2014
cash on hand
2015
2016
2017
Debt
Financial Expenses (US$ Thousands) Description
2Q'11
2Q'10
YTD'11
YTD'10
(4,307)
(4,307)
(8,614)
(8,571)
(941)
(821)
(1,680)
(1,558)
Financial Expenses Interest on Senior Notes Interest on Long-Term Debt Interest on Payables to Power Vendors Amortization of Deferred Charges Capitalized Interest Other Financial Expenses
(5) (391) 1,284
40
50
(453)
(414)
(769)
(833)
901
2,466
901
(64)
(12)
(134)
(27)
(4,424)
(4,612)
(8,681)
(10,540)
Financial Income: Interest on Trade Accounts Receivable
2,187
1,299
3,950
3,206
Interest on Short-Term Investments
289
124
451
139
Interest on Long-Term Investments
197
447
447
892
8
1,230
20
1,241
Other Financial Income
Total Financial Expenses, Net
2,681
3,100
4,868
5,478
(1,744)
(1,513)
(3,813)
(5,062)
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Quarterly Financial Report JUNE 30TH, 2011
Collections Cash Collection rate for 2Q’11 was 83% as compared to the 96% level of last year’s same quarter. The reduction in the collection rate is mainly driven by the increase in revenues during the 2Q’11 attributed to the increments in fuel price as well as energy demand.
Discos Cash Collections Vs Billings 152% 126% 96% 82%
64%
67%
60%
43%
2Q09
3Q09
39%
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
Operational Statistics Description
2Q'11
2Q'10
Var.%
YTD'11
YTD'10
Var.%
Heat Rate, Btu/KWh
9,694
9,064
7.0%
9,486
9,456
0.3%
Availability, %
97.2
87.7
10.8%
97.9
84.9
15.3%
Forced Outage Rate, %
1.3
0.5
160.0%
0.9
4.4
-79.5%
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
322
290
11.2%
312
292
7.1%
Energy Balance
580 430
GWh
280 130 (20) (170)
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q'11
2Q'11
(112)
(149)
(130)
(101)
(53)
(131)
(151)
(219)
(178)
(179)
GWh - Sales
457
478
514
507
483
505
609
582
566
613
GWh - Generation
346
330
384
406
430
375
458
363
387
434
GWh - Spot Purchase
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Quarterly Financial Report JUNE 30TH, 2011
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2011 AND DECEMBER 31, 2010 Amounts in thousands of US$ Jun-11 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 Property, plant and equipment Intangible assets, net Other assets Total Assets Liabilities and shareholders' equity: Current liabilities: Line of credit Current portion of long-term debt Accounts payable Accounts payable to related parties Income tax 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: Currency translation adjustment Investments revaluation reserve Total shareholders' equity Total liabilities and shareholders' equity
Dec-10
67,500 483 212,729 39,928 12,849 532 334,021
110,924 11,479 110,230 31,643 18,651 540 283,467
7,831 282,187 7,130 11,060 642,229
7,831 276,659 7,512 7,916 583,385
17,600 26,856 1,690 10,850 7,857 64,853
5,000 14,600 23,351 1,150 5,701 6,912 56,714
215,047 15,121 19 295,040
186,967 15,504 19 259,204
289,000 15,139 74,082
289,000 13,464 52,258
(31,032) 347,189
(31,032) 491 324,181
642,229
583,385 7
Quarterly Financial Report JUNE 30TH, 2011
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2011 AND 2010 Amounts in thousands of US$ Three month periods ended June 30, 2011 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 (expenses) income, net Income before income tax Income tax Current Deferred Net income
2010
Six month periods ended June 30, 2011
2010
143,107 13,283
84,210 10,631
254,779 25,344
167,141 21,711
152
87
968
176
156,542
94,928
281,090
189,029
63,899 3,339 40,892 2,539 6,086 10,812 4,073 131,640
34,690 2,360 22,073 955 9,085 7,912 4,046 81,121
109,985 5,707 73,012 4,104 13,200 19,632 8,147 233,788
80,116 4,489 31,637 2,171 17,262 16,011 8,022 159,707
24,902 (1,744) 27 (71) 23,114
13,807 (1,513) (1,948) 194 10,540
47,302 (3,813) 52 691 44,232
29,321 (5,062) (1,989) (553) 21,718
(6,875) 103
(2,844) (743)
(10,906) 173
(2,844) (1,496)
16,342
6,953
33,499
17,378
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Quarterly Financial Report JUNE 30TH, 2011
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONSOLIDATED CASH FLOW STATEMENTS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2011 AND 2010 Amounts in thousands of US$ Three month periods ended June 30, 2011 Net income Adjustments to reconcile net income to the net cash (used in) provided by operating activities: Gain on sale of fixed asset Net foreign exchange loss Deferred income tax Depreciation and amortization Transfer from OCI to P&L Financial expenses Change in assets and liabilities: Accounts receivable Inventories Prepaid expenses Other assets Accounts payable Payable to related parties Other liabilities Other non-current liabilities
2010
Six month periods ended June 30, 2011
2010
16,343
6,953
33,499
17,378
(9) (103) 4,073 41 (4,711)
1,304 743 4,046 4,382
(44)
1,304 1,496 8,022 8,242
(31,607) (4,042) 7,600 (1,943) (7,450) 282 (2,273) -
3,040 (2,871) 2,318 (10) 3,544 (76) (10,726) 6
(104,624) (9,487) (3,142) 10,868 539 (1,764) -
51,949 (5,899) 3,007 (26) (904) (65) (5,578) 6
(23,800)
12,653
(59,595)
79,439
Sale of property, plant and equipment Advance payments of property, plant and equipment Additions to property, plant and equipment Proceeds from available-for-sale securities Net cash provided in investing activities
12 (3,632) 10,535 6,915
(3,427) (3,766) 11,324 4,131
58 (10,124) 10,535 470
(3,427) (4,713) 11,320 3,181
Proceeds from long-term debt Proceeds from line of credit Repayment of long-term debt Dividends Debt issuance costs paid Net cash provided by (used in) financing activities
33,890 (12,160) (9,999) (355) 11,376
5,000 (5,000) (10,000) (10,000)
38,890 (12,810) (9,999) (380) 15,701
5,000 (5,000) (10,000) (30) (10,030)
Net (decrease) increase in cash and cash equivalents
(5,509)
6,784
(43,424)
72,589
Cash and cash equivalents at the beginning of the period
73,009
105,353
110,924
39,548
Net cash (used in) provided by operating activities
Effects of exchange rate change on the balance of cash Cash and cash equivalents at the end of the period
Decrease in accounts receivable through offsets with accounts payable Unpaid additions of property, plant and equipment
67,500
892 306
(1,304) 110,833
26 (191)
0
(173) 8,147 41 (1,689)
8,233
-
(1,304)
67,500
110,833
2,514 398
18,675 53
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Quarterly Financial Report JUNE 30TH, 2011
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 had contracted approximately 86% of its power generation with three State owned distributors, and approximately 14% 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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