EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2012
EGE Haina Reports Third Quarter 2012 Net Income of US$16.7 million; Revenues of US$171.8 million Special points of interest:
Santo Domingo, Dominican Republic, November 7, 2012 – EGE Haina announced
As of September 30th, 2012,
today a Net Income of US$16.7 million for the third quarter of 2012, compared
EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio of 1.06:1.0, a Consolidated Interest Coverage Ratio of 10.35:1.0 and Minimum Debt Service Coverage ratio of 3.6:1.0.
to a Net Income of US$16.9 million in the third quarter of 2011, driven by a decrease in the average energy sales price; partially offset by higher demand. Third quarter 2012 revenues amounted to US$171.8 million, showing a 2% decrease when compared to the same period of the previous year.
During the third quarter
2012, the Company received disbursements for a total of $86MM under the Senior Syndicated and Secured Loan. Additionally, in the fourth quarter, the Company has received disbursements for a total of $63MM.
In July 2012, Barahona power
plant had a forced outage for 72.06 hours. The plant is currently operating normally.
What’s inside Quarter highlights
2
External factors
2
MD&A
3
Financial Debt
5
Collections
6
Financial Results
7
Financial and Operational Summary (US$ Thousands, except for Operational data) Description
3Q'12
3Q'11
Var %
YTD'12
YTD'11
Var %
Revenues
171,762
175,271
-2%
494,651
456,362
8%
Operating Costs
145,863
148,822
-2%
407,011
382,610
6%
Variable M argin
55,241
50,516
9%
168,281
138,799
21%
EBITDA¹
31,270
30,547
2%
103,305
85,997
20%
Operating Income
25,899
26,449
-2%
87,640
73,752
19%
Net Income
16,681
16,916
-1%
58,930
50,417
17%
Operating cash, net
98,464
11,019
794%
99,626
(48,576)
-305%
Availability, %
96
96
0%
92
98
-6%
Sales, GWh
696
647
8%
1,900
1,825
4%
Generation, GWh
448
486
-8%
1,267
1,307
-3%
Spot Purchases, GWh
117
153
-24%
334
510
-34%
Other Purchases, GWh
131
8
1612%
299
8
3803%
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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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2012 Quarter Highlights and Recent Developments
As of September 30th, 2012, EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio of 1.06:1.0, a Consolidated Interest Coverage Ratio of 10.35:1.0 and Minimum Debt Service Coverage ratio of 3.6:1.0.
As of September 30th, 2012, Los Cocos II project had a construction progress of approximately 73%. Key milestones achieved include: 100% of land preparation and 100% of the components of the project on site; seven wind turbines were fully assembled already in the first alignment.
As of September 30th, 2012, Quisqueya II project had a construction progress of approximately 29%. Key milestones archived include: 100% of land preparation, 34% of construction the Substation, 43% of HFO Pipeline, 42% foundations and structure and 40% of well water network.
During the third quarter 2012, the Company received disbursements for a total of $86MM under the Senior Syndicated and Secured Loan Agreement with Citibank. Additionally, in the fourth quarter, the Company has received disbursements for a total of $63MM.
In July 2012, the Barahona power plant had a forced outage that lasted 72.06 hours, due to the spill of thousands of gallons of molasses by a third party mill that’s next to our facilities.
External Factors Average price of fuel for 3Q’12 was US$97.33 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 September 30th, 2012, closed at RD$39.34/USD. Accumulated inflation in DR, as of September 30th, 2012 was 2.37%.2
2
http://www.bancentral.gov.do
2
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2012 Consolidated Financial Results3 Revenues (US$ Thousands) Description Contracted Energy Contracted Capacity Others Total Revenues
3Q'12
3Q'11
Var %
YTD'12
YTD'11
Var %
157,059
161,939
-3%
452,333
416,718
9%
14,019
12,926
8%
40,616
38,270
6%
684
406
68%
1,702
1,374
24%
171,762
175,271
-2%
494,651
456,362
8%
3Q’12 revenues decreased 2% when compared with the same period of the previous year (US$171.8 MM vs. US$175.2MM). This negative variance is essentially driven by a 5.6% decrease in the average energy sales price for the period (3Q’12 US$231.4/MWh vs 3Q’11 US$245.1/MWh); partially offset by a higher demand in 7.6% (3Q’12 695.9 GWh vs 3Q’11 646.9 GWh), mainly driven by the reimplementation of the remaining 50MW under EDE ESTE’s PPA, as well as an increase in the contracted capacity under the CEPM PPA.
Operating Expenses (US$ Thousands) Description
3Q'12
3Q'11
Var %
YTD'12
YTD'11
Var %
Fuel Expense
58,247
81,639
-29%
171,162
191,624
-11%
Transmission Tolls
2,105
2,646
-20%
7,660
8,353
-8%
Purchased Power
54,195
37,506
44%
141,141
110,518
28%
Frequency Regulation
1,974
2,964
-33%
6,407
7,068
-9%
Operation & M aintenance
8,898
7,543
18%
24,821
20,743
20%
General & Administrative
15,073
12,426
21%
40,155
32,059
25%
Depreciation
5,371
4,098
31%
15,665
12,245
28%
145,863
148,822
-2%
407,011
382,610
6%
Total Operating Expenses
During 3Q’12 operating expenses were lower than 3Q’11 comparative figures in 2% or US$2.9MM. This decrease is mainly explained by:
Fuel Expense: 29% or US$23.4MM lower than 3Q’11, essentially as a consequence of a decrease in generation during the period (3Q’12 444 GWh vs 3Q’11 486 GWh), driven by the major maintenance of Haina Turbo Gas as well as a lower dispatch of Haina 4 and lower coal prices.
Purchased Power: 44% or US$16.7MM higher than 3Q’11, essentially due to a lower generation by 42 GWh, or 9%. Generation during 3Q’12 was negatively impacted by the maintenance works detailed above.
Operation & Maintenance: 18% or US$1.4 MM higher than 3Q’11, due to the maintenance performed to Los Cocos wind farm during 2012 (in construction during 2011) and higher maintenance expenses in Pedernales, Haina Turbo Gas and San Pedro de Macorís Plants.
General and administrative expenses: 21% or US$2.7MM increase when compared to 3Q’11 mainly due to: i) US$0.9MM higher office operation costs, ii) US$0.5MM higher technical advisory fee expense; iii) US$0.4MM higher labor cost, iv) US$0.4MM higher insurance expenses, v) US$0.4MM higher minimum tax expenses and; vi) US$0.1MM higher regulatory payment.
Depreciation: 31% or US$1.3MM higher than 3Q’11, due to the depreciation of the Los Cocos I Wind Farm, inaugurated in December 2011.
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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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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2012
Net Income Net income was US$16.7 MM in 3Q’12, compared to a net income of US$16.9MM in the same period of the prior year. The negative variance of US$0.2 MM is explained by:
US$3.5 MM higher interest expense, net, mainly due to higher financial interests driven by an increase in debt and an increase in commercial interest expenses due to the increment in accounts payable to power vendors.
US$1.3 MM higher depreciation expense.
Partially offset by :
Higher EBITDA by US$ 0.7 MM as explained in the paragraphs above.
US$3.9 MM lower income tax. In June’11, the statutory rate was increased to 29%, from 25%, by law No. 139-11. As a result in 3Q’11, the Company made a true-up adjustment to the tax liability in order to reflect the increase in the tax rate.
Cash Flow Cash provided by operating activities Net cash provided by operating activities was US$98.4 MM during the 3Q’12, compared to US$11.0 MM provided in the same period of 2011. The US$87.4MM variance is explained by: a) US$83.3MM lower accounts receivable, b) US$6.0MM higher accounts payable, c) US$4.6 MM higher other liabilities and, d) US$1.3MM of higher positive adjustments reconciling net income to the net cash provided in operating activities. The aforementioned is partially offset by i) US$6.0MM increase in prepaid expenses, ii) US$1.6 MM higher inventories and iii) US$0.2 MM lower net income. Cash used in investing activities Net cash used in investing activities was US$67 MM during 3Q’12, compared to US$11.3 MM used in the same period of the prior year. The US$55.7 MM variance is mainly due to higher additions to property, plant and equipment by $35 MM during 3Q’12 and an increase in restricted cash by US$20.9 MM during 3Q’12 in order to fund the escrow account under the construction agreement with Wärtsilä. Cash provided by financing activities The positive variance of US$84.4MM in financing activities during 3Q’12, when compared to the same period of the prior year, is due to higher proceeds from long term debt by US$78.5 MM, US$5.8MM lower repayment of long term debt and $0.1 MM lower payment of debt issuance cost in 3Q’12.
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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2012
Financial Debt as of September 30th, 2012 FINANCIAL DEBT GENERAL CONDITIONS AND RELEVANT STATISTICS Instrument
Balance
144 A Bond Local Bond-T5 Local Bond (2) - T1/2 Local Bond (2) - T3/4 Local Bond (2) - T5/6 Local Bond (2) - T7/8 Local Bond (2) - T9/10 Popular term loan program BHD DR term loan program BHD Panamรก term loan program Citi Project Facilities Scotiabank Short Term Loan Weighted av. Interest rate Weighted av. Life (Years) Total financial debt (Millions)
Interest type
Interest Rate
164.9 Fixed 6.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 9.2 Variable (DR US$) 9.6 Variable (DR US$) 1.5 Variable (DR US$) 107.0 Variable (L3M + 5.75%, 6.25% floor) 30.0 Variable (LIBOR 1M + 3%)
Repayment schedule
9.50% 7.75% 7.00% 7.00% 7.00% 6.00% 7.00% 5.91% 6.22% 5.50% 6.25% 3.24%
Bullet payment April 2017 Bullet payment Dec 2012 Bullet payment May 2016 Bullet payment June 2016 Bullet payment June 2016 Bullet payment Oct 2014 Bullet payment Oct 2016 Monthly - ending Nov 2015 Monthly - ending March & May 2016 Monthly - ending May 2016 Quarterly - ending March 2017 Bullet payment December 2012
7.51% 3.53 378.2
Total Debt vs Financial Assets 240.0 210.0 180.0 150.0 120.0 90.0 60.0 30.0 0.0 2012
2013
2014
2015
Cash on hand
2016
2017
Debt
Financial Expenses (US$ Thousands) Description
3Q'12
3Q'11
2012
2011
Interest on Senior Notes
(4,307)
(4,307)
(12,921)
(12,921)
Interest on Long-Term Debt
(3,691)
(1,294)
(9,428)
(2,974)
Interest on Payables to Power Vendors
(2,173)
(37)
(4,717)
(673)
(380)
(1,793)
(1,153)
5,084
3,918
Financial Expenses
Amortization of Deferred Charges Capitalized Interest Other Financial Expenses
2,357 (215)
1,452 64
13
(458)
(69)
(8,702)
(4,502)
(24,233)
(13,186)
Financial Income: Interest on Trade Accounts Receivable
3,959
2,875
9,762
6,826
Interest on Short-Term Investments
711
764
3,278
1,217
Interest on Long-Term Investments
-
462
-
Other Financial Income
14 4,684
Total Financial Expenses, Net
(4,018)
(30) 4,071 (431)
53
909 186
13,093
9,138
(11,140)
(4,048)
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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2012
Collections Cash Collection rate for 3Q’12 was 153% as compared to the 80% level of last year’s same quarter. The positive variance is due to higher cash collection from Distribution Companies during 3Q’12, particularly in September’12 which represented 412%, thus reducing the invoices in arrears to 2.5, from 3.5 in 3Q’11.
Discos Cash Collections Vs Billings 152%
153%
154% 126%
82%
96%
80% 74% 67% 54%
38%
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Operational Statistics Description
3Q'12
3Q'11
Var.%
YTD'12
YTD'11
Var.%
Heat Rate, Btu/KWh
9,427
9,886
-4.6%
9,240
9,486
-2.6%
Availability, %
96.3
95.9
0.4%
91.7
97.9
-6.3%
Forced Outage Rate, %
0.7
2.2
-68.2%
2.7
0.9
200.0%
Installed Capacity, M W
624
599
4.2%
624
599
4.2%
Effective Capacity, M W
547
547
0.0%
547
547
0.0%
Firm Capacity, M W
279
322
-13.3%
283
312
-9.2%
Energy Balance 580 430
GWh
280 130 (20) (170)
1Q10
2Q10
3Q10
4Q10
1Q'11
2Q'11
3Q'11
4Q'11
1Q'12
2Q'12
3Q'12
GWh - Spot Purchase
(53)
(131)
(151)
(219)
(178)
(179)
(161)
(196)
(84)
(149)
(121)
GWh - Sales
483
505
609
582
566
613
647
635
573
631
696
-
-
-
-
-
-
-
-
(63)
(79)
(131)
430
375
458
363
387
434
486
439
426
403
444
GWh - PPA Purchase GWh - Generation
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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2012 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011 Amounts in thousands of US$ 2012
2011
Assets: Current Assets: Cash and cash equivalents Restricted cash Short-term investment Accounts receivable Inventories Prepaid expenses Deferred income tax Other current assets Total current assets
240,576 29,555 212,083 33,624 15,317 198 2,023 533,376
183,879 483 161,428 36,105 15,844 201 10,737 408,677
Deposits in banks, restricted Long term receivable Property plant and equipment, net Intangible assets Deferred charges, net Other assets Total assets
2,311 441,551 91 10,058 12,536 999,923
7,831 1,306 295,298 91 6,463 21,799 741,465
Liabilities and Shareholders' Equity Current liabilities Short-term debt Current portion of long-term debt Accounts payable Payable to related parties Income tax payable Derivative financial liability Other liabilities Total current liabilities
30,000 11,783 138,445 4,870 20,482 2,664 11,334 219,578
30,000 17,656 34,537 1,775 26,806 8,355 119,129
336,402 12,515 3 568,498
233,751 13,422 3 366,305
289,000 19,684 156,437 (33,696) 431,425
289,000 16,737 100,455 (31,032) 375,160
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
999,923
741,465
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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2012 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2012 AND 2011 Amounts in thousands of US$ Three month period ended September 30,
Nine month period ended September 30,
2012
2011
2012
2011
157,059
161,939
452,333
416,718
14,019
12,926
40,616
38,270
684
406
1,702
1,374
171,762
175,271
494,651
456,362
Fuel
58,247
81,639
171,162
191,624
Purchased power Transmission
54,195 2,105
37,506 2,646
141,141 7,660
110,518 8,353
1,974
2,964
6,407
7,068
8,898 15,073 5,371 145,863
7,543 12,426 4,098 148,822
24,821 40,155 15,665 407,011
20,743 32,059 12,245 382,610
25,899 (4,018) 313 (28) 22,166
26,449 (431) 123 194 26,335
87,640 (11,140) 1,159 (239) 77,420
73,752 (4,048) 175 691 70,570
(5,592) 107
(9,024) (395)
(19,241) 751
(19,931) (222)
58,930
50,417
Revenues Energy Capacity Others
Operating costs
Compensation for frequency regulation Operating and maintenance Administrative and general expenses Depreciation and amortization Operating income Financial expenses, net Foreign exchange gain, net Other income (expenses), net Income before income tax Income tax Current Deferred Net income
16,681
16,916
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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2012 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONSOLIDATED CASH FLOW STATEMENTS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2012 AND 2011 Amounts in thousands of US$ Three month period ended September 30, 2012 Net income Adjustments to reconcile net income to the net cash provided by (used in) operating activities: Gain on sale of property plant and equipment Loss on asset dispossal Gain on early liability extinguishment Deferred income tax Depreciation Provision for doubful accounts Financial expenes Change in assets and liabilities: Accounts receivable Inventories Prepaid expenses Other assets Accounts payable Income tax payable Payable to related parties Other liabilities
2011
Nine month period ended September 30, 2012
2011
16,681
16,916
58,930
50,417
(107) 5,371 41 4,764
396 4,097 4,280
(19) 204 (751) 15,665 107 5,863
(44) 41 222 12,245 122 2,590
47,090 1,206 (10,444) 21,338 6,178 1,035 5,308
(36,259) 2,845 (3,052) (1,440) 41,710 (19,245) 66 705
(72,909) 1,578 527 8,713 82,124 (6,324) 3,095 2,822
(141,004) (6,641) 5,181 (4,582) 47,430 (14,095) 605 (1,062)
98,464
11,019
99,626
(48,576)
Sale of property, plant and equipment Additions to property, plant and equipment Net changes in restricted cash Disbursement of notes receivable Collection of notes receivable Collection of restricted investments Short-term investments Net cash used in investing activities
(46,286) (20,947) 237 (66,995)
(11,301) (11,301)
(111,619) (29,555) (1,700) 237 8,314 (134,322)
58 (21,424) 10,535 (10,831)
Proceeds from long-term debt Repayment of long-term debt Dividends Debt issuance costs paid Net cash provided by financing activities
86,000 (1,570) 84,430
7,537 (7,381) (142) 14
107,000 (10,221) (5,386) 91,393
46,427 (20,191) (9,999) (522) 15,715
Net increase (decrease) in cash and cash equivalents
115,899
(268)
56,697
(43,692)
Cash and cash equivalents at the beginning of the period
124,677
67,500
183,879
110,924
240,576
67,232
240,576
67,232
Net cash provided by (used in) operating activities
Cash and cash equivalents at the end of the period
3
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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2012 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. Additionally, the Company constructed a 25MW wind farm consisting of 14 wind generators located in Los Cocos, municipality of Oviedo, in the southern part of the country. EGE Haina had contracted approximately 82% of its power generation with three State owned distributors, and approximately 18% 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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