Ege haina 3q 2013 by EGE Haina

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2013

EGE Haina Reports Third Quarter 2013 Net Income of US$16.0 million; Revenues of US$185.3 million Special points of interest:

Santo Domingo, Dominican Republic, January 27, 2014 – EGE Haina announced

 On September 16, 2013, the

today a Net Income of US$16.0 million for the third quarter of 2013, compared

Company signed a Bridge Loan Agreement with Citibank in the amount of US$100MM.

to a Net Income of US$16.7 million in the third quarter of 2012, driven by a higher energy purchase cost and an increase in capacity purchases due to a decrease in the assigned firm capacity by 99 MW. Third quarter 2013 revenues

 On September 20, the

Company prepaid the 144A Senior Notes for the amount of US$164.9MM plus a call premium of $5.8MM.

amounted to US$185.3 million, showing an 8% increase when compared to the same period of the previous year.

Financial and Operational Summary

 As of September 30, 2013,

EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio of 2.2:1.0 and Minimum Debt Service Coverage ratio of 5.6:1.0.

 In October, Quisqueya II

power plant was inaugurated with an investment of approximately US$264MM. The power plant consists of 12 engines with an installed capacity of 215MW.

 On December 4, the

Company received the approval from the SIV for a Corporate Bonds issuance up to US$100MM with an average term of five years.

(US$ Thousands, except for Operational data) Description

3Q'13

3Q'12

Var %

YTD'13

YTD'12

Var %

Revenues

185,268

171,761

532,989

494,650

Operating Costs

152,712

145,862

436,054

407,011

Variable M argin

63,084

55,239

14%

183,380

168,280

EBITDA¹

38,888

31,270

24%

114,974

103,305

11%

Operating Income

32,556

25,899

26%

96,935

87,640

11%

Net Income

15,963

16,680

-4%

67,740

58,929

15%

Operating cash, net

37,240

98,465

-62%

58,657

99,626

-41%

Availability, %

-2%

-6%

Sales, GWh

762

696

10%

2,122

1,204

76%

Generation, GWh

472

448

1,438

819

76%

Spot Purchases, GWh

125

117

218

-69%

PPA Purchases, GWh

165

131

26%

616

168

268%

What’s inside  Quarter highlights

 External factors

 MD&A

 Financial Debt

 Collections

 Financial Results

1 EBITDA is a non-GAAP financial measure, which is calculated by adding depreciation and amortization expenses to the operating income.

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2013 Quarter Highlights and Recent Developments 

On August 5, 2013, EGE Haina entered into a Turbocharging Operation Performance Package with ABB, by means of which the latter provides delivery and installation services of original ABB spare parts for the Sultana del Este Power Barge.



On September 16, 2013, the Company signed a Bridge Loan Agreement with Citibank in the amount of US$100 million to partially finance the repayment of the 144A Senior Notes, with a sixmonth maturity and bullet repayment; the outstanding balance will bear an interest rate equal to the 1-month Libor plus 600 bps.



On September 20, 2013, the Company prepaid the 144A Senior Notes for the amount of US$164.9 million plus call premium of $5.8 million.



As of September 30, 2013, EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio of 2.2:1.0 and Minimum Debt Service Coverage ratio of 5.6:1.0.



In October, 2013, the Company signed a power purchase agreement with CEPM. Under this contract the Company will purchase all the energy produced by CEPM’s wind farm, Quilvio Cabrera. The contract has a twenty-year term and is subject to one-year renewals thereafter upon the consent of both parties.



In October, 2013, the Quisqueya II power plant was inaugurated with an investment of approximately US$264 million. The power plant consists of 12 combined cycle reciprocation engines with an installed capacity of 215MW. The power plant can be operated using LNG, fuel or diesel.



In November, 2013, the Company signed short term promissory notes with different DR financial institutions for the total amount of US$52.5 million. These promissory notes mature in February, March and May 2014, respectively.



On December 4, 2013, the Company received approval from the SIV for the issuance of Corporate Bonds in the DR debt capital market up to the amount of US$100 million an average term of five years. The issuance cash proceeds of this will be used to refinance the Bridge Loan.

External Factors Average price of fuel for 3Q’13 was US$93.0 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 30, 2013, closed at RD$42.60/USD. Accumulated inflation in DR, as of September 30, 2013 was 3.57%.2

http://www.bancentral.gov.do

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2013 Consolidated Financial Results3 Revenues (US$ Thousands)

Description Contracted Energy Contracted Capacity Others Total Revenues

3Q'13

3Q'12

Var %

YTD'13

YTD'12

Var %

167,705

157,059

482,856

452,333

17,010

14,018

21%

48,401

40,615

19%

553

684

-19%

1,732

1,702

185,268

171,761

532,989

494,650

3Q’13 revenues increased 8% when compared with the same period of the previous year (US$185.2MM vs. US$171.8MM). This positive variance is essentially driven by: i) a higher demand under the PPAs with the Discos in 13% (3Q’13 639GWh vs 3Q’12 566GWh), mainly as a result of the full reimplementation of EDE ESTE’s PPA; partially offset by: a) lower sales under CEPM’s PPA due to a decrease in demand and b) a 1% decrease in the average energy sales price for the period (3Q’13 US$229.1/MWh vs 3Q’12 US$231.2/MWh).

Operating Expenses (US$ Thousands)

Description

3Q'13

3Q'12

Var %

YTD'13

YTD'12

Var %

Fuel Expense

54,949

58,247

-6%

174,884

171,162

Transmission Tolls

4,977

2,105

136%

13,216

7,660

73%

Purchased Power

60,625

54,196

12%

155,489

141,141

10%

Frequency Regulation

1,633

1,975

-17%

6,020

6,407

-6%

Operation & M aintenance

9,078

8,898

23,659

24,821

-5%

General & Administrative

15,118

15,072

44,746

40,154

11%

Depreciation

6,332

5,371

18%

18,040

15,665

15%

152,712

145,862

436,054

407,011

Total Operating Expenses

During 3Q’13 operating expenses were higher than 3Q’12 comparative figures in 5% or US$6.9 million. This increase is mainly explained by:



Purchased power: 12% or US$6.4 million higher than 3Q’12, driven by: a) an increase in capacity purchases as a consequence of a lower assigned firm capacity by 99 MW, as a result of new plants that were incorporated into the SENI (San Lorenzo, Jigüey 1&2, Aguacate 1&2 and Estrella del Mar 2), and b) an increase in energy purchases (both spot and PPA’s) by 42.4 GWh or 17%, (3Q’13 290 GWh vs 3Q’12 248 GWh) driven by the aforementioned increase in demand, that was not satisfied with our own generation.



Depreciation: 18% or US$1.0 million higher than 3Q’12, due to the expansion of the Los Cocos Wind Farm inaugurated in January, 2013.



Transmission tolls: 136% or US$2.9 million higher than 3Q’12, driven by a decrease in the assigned firm capacity, as explained above.



Fuel expense: 6% or US$3.3 million lower than 3Q’12, essentially as a consequence of lower HFO consumption driven by a decrease in thermal generation during the period (3Q’13 419 GWh vs 3Q’12 423 GWh).

3 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (USGAAP). These unaudited condensed 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.

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2013

Net Income Net income was US$16.0 million in 3Q’13, compared to a net income of US$16.7 million in the same period of the prior year. The negative variance of US$0.7 million is explained by:



US$7.9MM higher interest expenses, net, mainly financial interests driven by an increase in debt and the call premium expense related to the early redemption of the 144A Bond.



US$0.4 million higher tax expense, driven by an increase of the taxable income in Dominican Pesos (RD$).



US$0.2 million higher other expenses, related to a change in the valuation of the interest rate swap that negatively affected the ineffective portion of such instrument.

Partially offset by :



US$6.7MM increase in operating income, as explained previously.



US$1.1 MM higher exchange gain, mainly due to the devaluation of the Dominican Peso (RD$) affecting positively our net liability exposure in such currency.

Cash Flow Cash provided by operating activities Net cash provided by operating activities was US$37.2MM during 3Q’13, compared to US$98.5MM provided during the same period of 2012. The US$61.3MM variance is explained by: a) US$72.4MM higher accounts receivable, b) higher inventories in US$8.4MM, c) US$4.4MM decrease in other liabilities and d) US$0.7MM lower net income. The aforementioned effects are partially offset by: i) US$12.0MM decrease in prepaid expenses, ii) US$10.6MM higher accounts payable and iii) US$2.0MM higher positive adjustments reconciling net income to the net cash provided by operating activities. Cash used in investing activities Net cash used in investing activities was US$3.4MM during 3Q’13, compared to US$67.0MM used in the same period of the prior year. The US$63.6MM variance is mainly due to lower additions to property, plant and equipment by $42.7MM during 3Q’13 and a decrease in restricted cash by US$20.9MM during 3Q’13 as a result of the payments made to Wärtsilä under the construction agreement during 3Q’12. Cash (used in) provided by financing activities The negative variance of US$141.6MM in financing activities during 3Q’13 when compared to the same period of the prior year, is due to: i) higher repayments of long-term debt by US$169.9MM, due to the repayment of the 144A Senior Notes, ii) lower proceeds from long term debt by US$86MM, and iii) a US$0.7MM increase in payments of debt issuance costs; partially offset by higher proceeds from short term debt by US$115MM, mainly driven by the issuance of bridge loan agreement.

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2013 Financial Debt as of September 30, 2013 FINANCIAL DEBT GENERAL CONDITIONS AND RELEVANT STATISTICS Instrument

Balance

Interest type

Interest Rate

Repayment schedule

Avg Life

Long Term Facilities

Citi Project Facilities 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 BHD DR term loan program BPD DR term loan program BHD Panamรก term loan program

200.0 Variable (L3M + 5.75%, 6.25% floor) 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 7.1 Variable (DR US$) 6.4 Variable (DR US$) 1.1 Variable (DR US$)

7.09% 7.00% 7.00% 7.00% 6.00% 7.00% 5.75% 5.75% 5.50%

Quarterly - ending March 2017

100.0 55.0 15.0 434.6

6.15% 3.18% 3.75% 6.19%

Bullet payment Mar 2014

Bullet payment May 2016 Bullet payment June 2016 Bullet payment June 2016 Bullet payment Oct 2014 Bullet payment Oct 2016 Monthly - ending March & May 2016 Monthly - ending May 2016 Monthly - ending May 2016

2.36 2.67 2.75 2.75 1.08 3.09 0.83 1.29 0.84

Short Term Facilities

Citi Bridge Loan Scotiabank Short Term Loan BPD DR Short Term Loan Totals and Averages

Variable (L1M + 6%) Variable (LIBOR 1M + 3%) Fixed

Bullet payment Dec 2013, Feb & Aug 2014 Bullet payment Aug 2014

0.50 0.18 0.92 1.60

DR Intl Bond Yield (Ask) 9.00%

8.43% 8.00% 7.22%

7.00%

7.02%

5.91%

6.00%

6.44%

5.00% 4.00%

3.96%

3.00% 2.00% 2010

2012

2014

2016

2018

DR Sov Bond

2020 AES

2022

2024

2026

2028

Banreservas

Financial Expenses (US$ Thousands) Description

3Q'13

3Q'12

2013

2012

(4,307)

(18,861)

(12,921)

Financial Expenses Interest on Senior Notes

(10,119)

Interest on Short-Term Debt

(171)

Interest on Long-Term Debt

(5,062)

(3,691)

(14,798)

(9,428)

Interest on Payables to Power Vendors

(2,670)

(2,173)

(5,654)

(4,717)

Amortization of Deferred Charges

(2,163)

(673)

(3,567)

(1,793)

Capitalized Interest Other Financial Expenses

4,890

2,357

14,880

5,085

(503)

(215)

(821)

(459)

(15,627)

(8,702)

(28,992)

(24,233)

3,382

3,959

11,013

9,763

277

711

874

3,278

Financial Income: Interest on Trade Accounts Receivable Interest on Short-Term Investments Other Financial Income

Total Financial Expenses, Net

3,678

4,684

11,943

13,093

(11,949)

(4,018)

(17,049)

(11,140)

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2013

Collections Collection rate for 3Q’13 was 90%, which was significantly lower of that of last year’s same quarter which stood at 153%. As shown in the graphic below, the Distribution Companies, with the help of the DR Government’s subsidy, are making the effort to maintain less than three invoices in arrears.

Discos Cash Collections Vs Billings 154%

153% 123%

80%

90% 82% 74%

38%

65%

54%

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

56%

1Q13

2Q13

3Q13

Operational Statistics Description

3Q'13

3Q'12

Var.%

YTD'13

YTD'12

Var.%

Heat Rate, Btu/KWh

9,183

9,427

-2.6%

9,240

9,486

-2.6%

Availability, %

94.7

96.3

-1.7%

91.7

97.9

-6.3%

Forced Outage Rate, %

0.5

0.7

-28.6%

2.7

0.9

200.0%

Installed Capacity, M W

681

624

9.1%

681

624

9.1%

Effective Capacity, M W

547

0.0%

547

0.0%

Firm Capacity, M W

214

279

-23.6%

214

283

-24.4%

Energy Balance 650 500 350

GWh

200 50 (100)

(250)

1Q'11

2Q'11

3Q'11

4Q'11

1Q'12

2Q'12

3Q'12

4Q'12

1Q'13

2Q'13

3Q'13

GWh - Spot Sale (Purchase) (178)

(179)

(153)

(213)

(84)

(134)

(117)

(99)

(10)

(125)

566

613

647

635

573

631

696

706

658

701

762

(8)

(2)

(71)

(97)

(131)

(125)

(229)

(223)

(165)

387

434

486

420

418

401

448

481

498

468

472

GWh - Sales GWh - PPA Purchase GWh - Generation

Dec-12

Assets: Current Assets: Cash and cash equivalents Restricted cash Accounts receivable Inventories Prepaid expenses Deferred income tax Total current assets Restricted cash, long term Long term receivable Property plant and equipment, net Intangible assets Deferred charges, net Deferred tax asset Other assets Total assets Liabilities and Shareholders' Equity Current liabilities Short-term debt Current portion of long-term debt Accounts payable Payable to related parties Diviends payable Income tax payable Derivative financial liability Deferred tax liability Other liabilities Total current liabilities Long term debt Deferred income tax Derivative financial liability Other non-current liabilities Shareholders' equity: Common stock Legal reserve Retained earnings Accumulated other comprehensive loss Total shareholders' equity Total liabilities and shareholders' equity

115,095 36,032 331,211 47,392 3,471 645 533,846

141,661 38,161 276,643 38,793 2,802 461 498,521

11,364 636,711 108 7,088 70 500 1,189,688

11,811 13,382 604,184 91 9,910 381 504 1,138,784

170,000 45,466 232,118 6,538 6,304 1,501 49 6,565 468,542

30,000 15,849 210,060 5,036 10,679 9,398 930 52 8,834 290,839

219,130 12,719 283.69 3 700,678

398,899 12,596 1,717 3 704,055

289,000 23,896 208,388 (32,275) 489,010

289,000 20,509 158,036 (32,815) 434,729

1,189,688

1,138,784

2012

Nine month period ended September 30, 2013

2012

Revenues Energy

167,705

157,059

482,856

452,333

17,010

14,018

48,401

40,615

553

684

1,732

1,702

185,268

171,761

532,989

494,650

Fuel

54,949

58,247

174,884

171,162

Purchased power Transmission

60,625 4,977

54,196 2,105

155,489 13,216

141,141 7,660

1,633

1,975

6,020

6,407

9,078 15,118 6,332 152,712

8,898 15,072 5,371 145,862

23,659 44,746 18,040 436,054

24,821 40,154 15,665 407,011

32,556 (11,949) 1,441 (259) 21,790

25,899 (4,018) 314 (29) 22,165

96,935 (17,049) 3,880 (209) 83,557

87,640 (11,140) 1,160 (239) 77,420

(5,574) (252)

(5,592) 107

(14,994) (822)

(19,241) 751

15,963

16,680

67,740

58,929

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 expenses, net Income before income tax Income tax Current Deferred Net income Other comprehensive (loss) income, net of tax: Cash flow hedge Compehensive income

(308) 15,655

16,680

541 68,280

58,929

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2013 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012 Amounts in thousands of US$ Three month period ended September 30, 2013 Cash flows from operating activities: Net income Adjustments to reconcile net income to the net cash provided by operating activities: Gain on sale of property plant and equipment Loss on asset dispossal Deferred income tax Depreciation Infeffectivenness on cash flow hedge Financial expenes Call premium on bond redemption Provision for doubful accounts Non-cash expenses Change in assets and liabilities: Accounts receivable Inventories Prepaid expenses Other assets Accounts payable Income tax payable Payable to related parties Other liabilities Net cash provided by operating activities Cash flows from investing activities: Sale of property, plant and equipment Additions to property, plant and equipment Purchases of intangible asset Net changes in restricted cash Disbursement of notes receivable Collection of notes receivable Collection of restricted investments Net cash used in investing activities

Cash flows from financing activities: Proceeds from short-term debt Repayment of short-term debt Proceeds from long-term debt Repayment of long-term debt Dividends Debt issuance costs paid Net cash (used in) provided by financing activities

15,963

2012

Nine month period ended September 30, 2013

2012

16,680

67,740

58,929

232 252 6,332 7 (586) 5,801 47 (4)

3 (107) 5,371 4,764 41 -

(23) 356 822 18,040 (223) 3,870 5,801 166 19

(19) 204 (751) 15,665 5,863 107 -

(25,296) (7,172) 1,582 39,149 (121) 110 944 -

47,090 1,206 (10,444) 21,338 6,178 1,035 5,309 -

(58,835) (11,086) (669) 3 45,798 (9,398) 1,502 (5,226)

(72,909) 1,578 527 8,713 82,124 (6,324) 3,095 2,823

37,240

98,465

58,657

99,626

(3,665) 103 178 (3,384)

(46,286) (20,947) 237 (66,995)

23 (66,775) (17) 13,940 533 (52,295)

(111,619) (29,555) (1,700) 237 8,314 (134,322)

115,000 (171,468) (745) (57,213)

86,000 (1,570) 84,430

170,000 (30,000) 19,000 (174,209) (16,975) (745) (32,929)

107,000 (10,221) (5,386) 91,393

Net (decrease) increase in cash and cash equivalents

(23,357)

115,900

(26,566)

56,697

Cash and cash equivalents at the beginning of the period

138,452

124,676

141,661

183,879

115,095

240,576

115,095

240,576

Cash and cash equivalents at the end of the period

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT SEPTEMBER 30, 2013

The condensed 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, the largest generator of electricity in the country, when measured by installed capacity, currently owns and operates seven (7) power plants throughout the country with an installed capacity of 528 MW - San Pedro de Macorís and Sultana del Este in the eastern part of the country, Haina and Barahona in the southern part of the country, Puerto Plata on the northern coast, and Los Cocos and Pedernales in the west. The power plant fleet consists of a number of oil and coal-fired boiler steam-turbine generators, diesel generators, a simple cycle gas turbine, and a 77 MW wind farm. EGE Haina had contracted approximately 84% of its power generation with three State owned distributors, and approximately 16% 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.