EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013
EGE Haina Reports Fourth Quarter 2013 Net Income of US$25.4 million; Revenues of US$193.4 million Special points of interest:
Santo Domingo, Dominican Republic, May 01, 2014 – EGE Haina announced today a Net Income of US$25.4 million for the fourth quarter of 2013,
As of March 31, 2014, the
compared to a Net Income of US$16.5 million in the fourth quarter of 2012,
Company repaid the Bridge Loan in the amount of US$100 million.
driven by a higher energy demand, higher spot sales and an increase in the average energy sales price for the period. Fourth quarter 2013 revenues
In March, 2014, the
Company signed a short term promissory note with Popular Bank for the amount of US$14 million. The maturity date is July 7, 2014.
amounted to US$193.4 million, showing a 6% increase when compared to the same period of the previous year.
Financial and Operational Summary
In February 2014, the
(US$ Thousands, except for Operational data)
Company paid dividends in the amount of US$7 million.
Description
In February 2014, the
Company obtained the definitive concession for the Quisqueya 2 power plant and the expansion of the Los Cocos wind farm.
On December 4, the
Company received the approval of the SIV for a Corporate Bonds issuance up to US$100MM with an average term of five years.
4Q'13
4Q'12
Var %
YTD'13
YTD'12
Var %
Revenues
193,350
182,536
6%
726,339
677,186
7%
Operating Costs
157,432
158,623
-1%
593,486
565,634
5%
Variable M argin
72,826
52,121
40%
256,206
220,401
16%
EBITDA¹
44,294
29,125
52%
159,268
132,430
20%
Operating Income
35,918
23,912
50%
132,853
111,552
19%
Net Income
25,427
16,508
54%
93,167
75,437
24%
(54,876)
(12,719)
331%
11,182
86,909
-87%
Availability, %
98
97
1%
92
98
-6%
Sales, GWh
859
706
22%
2,980
2,607
14%
Generation, GWh
767
481
59%
2,205
1,749
26%
Spot Purchases, GWh
6
99
-94%
74
434
-83%
PPA Purchases, GWh
85
125
-32%
702
424
65%
Operating cash, net
As of December 31, 2013,
EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio of 2.44:1.0 and Minimum Debt Service Coverage ratio of 5.14:1.0.
What’s inside Quarter highlights
2
External factors
2
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.
1
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 Quarter Highlights and Recent Developments
As of March 31, 2014, the Company repaid the Bridge Loan in the amount of US$100 million.
In March, 2014, the Company signed a short term promissory note with Popular Bank for the total amount of US$14 million. The maturity date is July 7, 2014.
In February 2014, the Company paid dividends in the amount of US$7 million.
In February 2014, the Company obtained the definitive concession for the Quisqueya 2 power plant and the expansion of the Los Cocos wind farm.
As of December 31, 2013, EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio of 2.44:1.0 and Minimum Debt Service Coverage ratio of 5.14:1.0.
On December 3, 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 with an average term of five years. As of April 30, 2014, eight tranches of $10 million each were placed, with annual interests rates of 6.25% and 6.00%. The cash proceeds were used to partially refinance the Bridge Loan.
During the 4Q’13, the Company signed short term promissory notes with different DR financial institutions for the total amount of US$95.5 million.
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 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.
External Factors Average price of fuel for 4Q’13 was US$91.2 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 December 31, 2013, closed at RD$42.77/USD. Accumulated inflation in DR, as of December 31, 2013 was 3.88%.2
2
http://www.bancentral.gov.do
2
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 Consolidated Financial Results3 Revenues (US$ Thousands) Description Contracted Energy Contracted Capacity Others Total Revenues
4Q'13
4Q'12
Var %
YTD'13
YTD'12
Var %
176,082
169,046
4%
658,938
621,379
6%
16,417
12,919
27%
64,818
53,534
21%
851
571
49%
2,583
2,273
14%
193,350
182,536
6%
726,339
677,186
7%
4Q’13 revenues increased 6% when compared with the same period of the previous year (US$193.4MM vs. US$182.5MM). This positive variance is essentially driven by: i) US$14.3MM or 120GWh spot energy sales during the 4Q’13 and ii) a higher demand under the PPAs with the Discos in 6% (4Q’13 622.1GWh vs 4Q’12 586.2GWh); partially offset by: a) lower sales under CEPM’s PPA mainly driven by the major maintenance of Sultana’s engine #4 performed in December’13 and b) a 4% decrease in the average energy sales price for the period (4Q’13 US$230.5/MWh vs 4Q’12 US$240.6/MWh).
Operating Expenses (US$ Thousands) Description
4Q'13
4Q'12
Var %
YTD'13
YTD'12
Var %
Fuel Expense
91,114
67,023
36%
265,998
238,185
12%
Transmission Tolls
4,010
1,777
126%
17,226
9,437
83%
Purchased Power
21,335
59,459
-64%
176,824
200,600
-12%
Frequency Regulation
4,065
2,156
89%
10,085
8,563
18%
Operation & M aintenance
9,476
6,896
37%
33,135
31,717
4%
Administrative & General
19,057
16,100
18%
63,803
56,254
13%
Depreciation
8,375
5,213
61%
26,415
20,878
27%
157,432
158,623
-1%
593,486
565,634
5%
Total Operating Expenses
During 4Q’13 operating expenses were lower than 4Q’12 comparative figures in 1% or US$1.2 million. This decrease is mainly explained by the net effect of:
Purchased power: 64% or US$38.1MM lower than 4Q’12, driven by: a decrease in energy purchases (both spot and PPA’s) by 133.3 GWh or 59%, (4Q’13 91.6 GWh vs 4Q’12 224.9 GWh) driven by an increase in generation; partially offset by an increment in capacity purchases as a consequence of a lower assigned firm capacity by 88 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). Partially offset by:
Fuel expense: 36% or US$24.1 million higher than 4Q’12, essentially as a consequence of higher HFO and LFO consumption driven by an increase in thermal generation during the period (4Q’13 720 GWh vs 4Q’12 460 GWh).
Depreciation: 61% or US$3.2 million higher than 4Q’12, due to the expansion of the Los Cocos Wind Farm and Quisqueya 2 Power Plant, both inaugurated in 2013.
Administrative and general expenses: 18% or US$2.9MM increase when compared to 4Q’12 mainly due to: higher expenses related to promotional activities, sponsorship activities, the inauguration of the expansion of the Los Cocos wind farm, expenses related to the Transmission Line for the Los Cocos wind farm and higher professional services related to research and development costs (wind measurement study for the Larimar Project).
Operation and maintenance expenses: 37% or US$2.6MM increase when compared to 4Q’12 mainly due to: higher maintenance expenses and spare parts consumption of Sultana Engines, Los Cocos, Quisqueya 2 and Barahona plants.
Transmission tolls: 126% or US$2.2 million higher than 4Q’12, driven by a decrease in the assigned firm capacity, as explained above.
Frecuency Regulation: 89% or US$1.9 million higher than 4Q’12.
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.
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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013
Net Income Net income was US$25.4 million in 4Q’13, compared to a net income of US$16.5 million in the same period of the prior year. The positive variance of US$8.9 million is explained by:
US$12.0MM increase in operating income, as explained previously.
US$1.4 million lower tax expense, driven by a decrease of the taxable income in Dominican Pesos (RD$).
Partially offset by:
US$2.7MM higher interest expenses, net, mainly driven by a decrease in capitalized interests in the Quisqueya 2 and los Cocos expansion projects.
US$1.1 MM lower exchange gain, mainly due to a greater devaluation of the Dominican Peso (RD$) experienced in 4Q’12 in comparison with 4Q’13, affecting our net liability exposure in such currency.
US$0.7 million higher other expenses, related to a loss on asset disposal in 4Q’13.
Cash Flow Cash used in operating activities Net cash used in operating activities was US$54.9MM during 4Q’13, compared to US$12.7MM used during the same period of 2012. The US$42.2MM variance is explained by: US$108.7MM decrease in accounts payable; partially offset by: a) US$28.9MM lower accounts receivable, b) US$9.0MM lower other assets, c) US$8.9MM higher net income, d) US$6.8MM increase in other liabilities, e) US$6.5MM higher positive adjustments reconciling net income to the net cash used in operating activities, f) lower inventories in US$5.8MM and g) US$0.6MM decrease in prepaid expenses. Cash used in investing activities Net cash used in investing activities was US$14.3MM during 4Q’13, compared to US$150.8MM used in the same period of the prior year. The US$136.3MM variance is mainly due to lower additions to property, plant and equipment by $83.6MM during 4Q’13 and a decrease in restricted cash by US$52.7MM during 4Q’13 as a result of the payments made to Wärtsilä under the construction agreement for Quisqueya 2. Cash provided by financing activities The negative variance of US$23.8MM in financing activities during 4Q’13 when compared to the same period of the prior year, is due to: i) lower proceeds from long term debt by US$44MM and ii) 3.9MM higher repayments of long-term debt by US$3.9MM; partially offset by a) higher proceeds from short term debt by US$22.5MM and b) lower dividend payments by US$2MM.
4
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 Financial Debt as of December 31, 2013 FINANCIAL DEBT GENERAL CONDITIONS AND RELEVANT STATISTICS Instrument
Balance
Interest type
Interest Rate
Repayment schedule
Avg Life
Long Term Facilities
Citi Project Facilities Local Bond (2) - T1/2 Local Bond (2) - T3/4 Local Bond (2) - T5/6 Local Bond (2) - T7/8 Local Bond (2) - T9/10 BHD DR term loan program BPD DR term loan program BHD Panamรก term loan program
190.0 Variable (L3M + 5.75%, 6.25% floor) 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 6.5 Variable (DR US$) 5.8 Variable (DR US$) 1.0 Variable (DR US$)
7.12% 7.00% 7.00% 7.00% 6.00% 7.00% 5.75% 5.75% 5.50%
Quarterly - ending March 2017
100.0 75.0 15.0 15.0 14.5 3.0 475.7
6.17% 3.17% 3.75% 5.95% 3.48% 3.25% 5.95%
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
2.22 2.42 2.50 2.50 0.83 2.84 1.22 1.25 1.23
Short Term Facilities
Citi Bridge Loan Scotiabank Short Term Loan BPD DR Short Term Loan Banreservas Short Term Loan Citi Short Term Loan Santa Cruz Short Term Loan Totals and Averages
Variable (L1M + 6%) Variable (LIBOR 1M + 3%) Fixed Variable (DR US$) Variable (LIBOR 1M + 3.2%) Variable (DR US$)
Bullet payment Feb, Apr & Jun 2014 Bullet payment Aug 2014 Bullet payment Feb 2014 Bullet payment March 2014 Bullet payment March 2014
0.25 0.39 0.67 0.16 0.25 1.00 1.31
Financial Expenses (US$ Thousands) Description
4Q'13
4Q'12
2013
2012
Financial Expenses Interest on Senior Notes
(4,332)
(18,706)
Interest on Short-Term Debt
(1,932)
-
(2,103)
-
Interest on Long-Term Debt
(5,289)
(4,478)
(20,087)
(13,906)
Interest on Payables to Power Vendors
(2,915)
(1,558)
(8,545)
(6,275)
Amortization of Deferred Charges
(1,251)
(146)
(4,818)
(1,939)
Capitalized Interest Other Financial Expenses
154
871
4,838
15,751
(17,253)
9,922
(189)
(422)
(1,036)
(880)
(10,551)
(6,098)
(39,544)
(30,331)
4,547
2,921
15,559
12,683
239
75
1,113
3,353
10
11
68
64
Financial Income: Interest on Trade Accounts Receivable Interest on Short-Term Investments Other Financial Income
Total Financial Expenses, Net
4,796
3,007
16,740
16,100
(5,755)
(3,091)
(22,804)
(14,231)
5
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013
Collections Collection rate for 4Q’13 was 72%, which was higher of that of last year’s same quarter which stood at 65%. 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%
90%
82% 80%
74%
2Q11
3Q11
4Q11
72%
65%
54%
56%
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
Operational Statistics Operational Statistics Description
4Q'13
4Q'12
Var.%
YTD'13
YTD'12
Var.%
Heat Rate, Btu/KWh
8,602
9,540
-9.8%
9,240
9,486
-2.6%
Availability, %
97.6
97.1
0.5%
91.7
97.9
-6.3%
Forced Outage Rate, %
0.3
1.2
-75.0%
2.7
0.9
200.0%
Installed Capacity, M W
896
624
43.5%
896
624
43.5%
Firm Capacity, M W
202
221
-8.8%
211
258
-18.3%
Energy Balance 650 500
GWh
350 200 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 4Q'13
GWh - Spot Sale (Purchase) (178) (179) (153) (213)
(84)
GWh - Sales
635
573
631
GWh - PPA Purchase GWh - Generation
566
613
647
(134) (117)
-
-
(8)
(2)
(71)
(97)
387
434
486
420
418
401
696
(99)
68
(10)
(125)
(6)
706
658
701
762
859
(131) (125) (229) (223) (165) 448
481
498
468
472
(85) 767
6
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2013 AND 2012 Amounts in thousands of US$ 2013
2012
Assets Current Assets: Cash and cash equivalents Restricted cash Accounts and notes receivable Inventories Income tax credit Prepaid expenses Deferred tax asset Total current assets
86,559 3,739 358,333 47,135 3,685 3,787 607 503,845
141,661 38,161 279,085 38,793 2,802 461 500,963
7,747 639,149 108 6,220 18 474 1,157,561
11,811 13,382 604,184 91 9,910 381 504 1,138,784
192,500 55,510 135,252 2,489 6,304 1,437 50 6,637 400,179
30,000 15,849 213,217 4,321 10,679 9,398 930 52 8,834 290,839
Long-term debt Derivative financial instrument Deferred income tax Other non-current liabilities Total liabilities
227,736 80 15,063 3 643,061
398,899 1,717 12,596 3 704,055
Shareholders' equity: Common stock Legal reserve Retained earnings Accumulated other comprehensive loss Total shareholders' equity
289,000 25,167 232,544 (32,211) 514,500
289,000 20,509 158,036 (32,815) 434,729
Restricted cash, long term Long term notes 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 instrument Deferred tax liability Other current liabilities Total current liabilities
Total liabilities and shareholders' equity
1,157,561
1,138,784
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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTH PERIODS AND YEAR ENDED DECEMBER 31, 2013 AND 2012 Amounts in thousands of US$ Three month period ended December 31, 2013
2012
Year ended December 31, 2013
2012
Revenues Energy
176,082
169,046
658,938
621,379
16,417
12,919
64,818
53,534
851
571
2,583
2,273
193,350
182,536
726,339
677,186
Fuel
91,114
67,023
265,998
238,185
Purchased energy and capacity Transmission
21,335 4,010
59,459 1,777
176,824 17,226
200,600 9,437
4,065
2,156
10,085
8,563
9,476 19,057 8,375 157,432
6,896 16,100 5,213 158,623
33,135 63,803 26,415 593,486
31,717 56,254 20,878 565,634
35,918 (5,755) 50 (506) 29,707
23,912 (3,091) 1,164 161 22,147
132,853 (22,804) 3,930 (715) 113,264
111,552 (14,231) 2,324 (78) 99,567
(1,868) (2,413)
(5,354) (286)
(16,862) (3,235)
(24,595) 465
25,427
16,508
93,167
75,437
63
(1,783)
604
(1,783)
Capacity Others
Operating costs
Compensation for frequency regulation Operating and maintenance expenses Administrative and general expenses Depreciation Operating income Financial expenses, net Foreign exchange gain, net Other (expenses) income, net Income before income tax Income tax Current Deferred Net income Other comprehensive income (loss), net of tax: Cash flow hedge Compehensive income
25,491
14,725
93,771
73,654
8
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS AND YEAR ENDED DECEMBER 31, 2013 AND 2012 Amounts in thousands of US$ Three month period ended December 31, 2013 Cash flows from operating activities: Net income Adjustments to reconcile net income to the net cash (used in) provided by operating activities: Gain from the sale of property, plant and equipment Loss on asset dispossal Deferred income tax Depreciation Cash flow hedge infeffectivenness Financial expenes 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
2012
Year ended December 31, 2013
2012
25,427
16,508
93,167
75,437
262 2,412 8,375 (125) 661 65 -
(18) 286 5,212 355 (906) 69 186
(23) 618 3,235 26,415 (348) 10,332 231 19
(37) 204 (465) 20,878 355 4,957 176 186
(21,294) (577) (316) 27 (63,380) (3,685) (3,334) 606 -
(50,149) (6,425) (995) (9,014) 36,789 1,359 169 (6,145) -
(80,129) (11,662) (985) 30 (10,182) (13,083) (1,832) (4,621)
(123,058) (4,847) (468) (301) 118,915 (4,965) 3,264 (3,322)
Net cash (used in) provided by operating activities
(54,876)
(12,719)
11,182
86,909
Cash flows from investing activities: Proceeds from the sale of property, plant and equipment Purchases of 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
(46,901) 32,293 178 (14,430)
37 (130,498) (20,417) 119 (150,759)
23 (121,075) (17) 46,233 711 (74,125)
37 (242,117) (49,972) (1,700) 356 8,314 (285,083)
Cash flows from financing activities: Repayment of short-term debt Proceeds from short-term debt Repayment of long-term debt Proceeds from long-term debt Dividends paid Debt issuance costs paid Net cash provided by financing activities
22,500 (11,348) 30,000 (382) 40,770
(7,437) 74,000 (2,000) 64,563
(30,000) 192,500 (185,557) 49,000 (16,975) (1,127) 7,841
(17,658) 181,000 (2,000) (5,386) 155,955
Net decrease in cash and cash equivalents
(28,536)
(98,915)
(55,102)
(42,218)
Cash and cash equivalents at the beginning of the period
115,095
240,576
141,661
183,879
Cash and cash equivalents at the end of the period
86,559
141,661
86,559
141,661
9
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 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). The consolidated financial statements are audited and were prepared in conformity with Generally Accepted Accounting Principles in the United States (USGAAP). The consolidated financial statements can be obtained from Web site at www.egehaina.com. EGE Haina, the largest generator of electricity in the country, when measured by installed capacity, currently owns and operates eight (8) power plants throughout the country with an installed capacity of 895.8 MW – Quisqueya 2, 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.
10