Quarterly Quarterly Financial Report Financial Report December 31st, 2010
December 31st, 2010
EGE Haina Reports Fourth Quarter 2010 Net Income of US$12.8 million; Revenues of US$114.5 million Special points of interest:
Santo Domingo, Dominican Republic, March 15th, 2011 – EGE Haina announced
• EGE Haina reported a
Consolidated Net Debt to Consolidated EBITDA Ratio and a Consolidated Interest Coverage Ratio of 0.97:1.0 and 7.6:1.0, respectively, as of December 31st, 2010.
• In October 2010, the
company repaid the first tranche of the Local Bond issued (US$ 6 MM), remaining US$ 24 MM outstanding.
today fourth quarter 2010 net income of US$12.8 million, compared to a net income of US$4.8 million in the fourth quarter 2009, driven by an increase in energy sales price and higher demand. Fourth quarter 2010 revenues were US$114.5 million, showing a 21% increase when compared to the same period of the previous year.
• During November and
December 2010, the Company entered into two agreements with Banco Popular Dominicano for US$8 MM and US$5 MM at variable interest rates. The loans mature in November and December 2015, respectively.
• On March 8, 2011 the
Company issued its audited financial statements for 2010.
Inside this Issue:
Financial and Operational Summary (US$ Thousands, except for Operational data)
Description
4Q'10
4Q'09
Var %
FY'10
FY'09
Var %
Revenues
114,546
94,799
21%
422,509
307,198
38%
Operating Costs
98,283
84,700
16%
359,921
278,183
29%
Variable M argin
38,290
31,193
23%
146,678
103,465
42%
EBITDA¹
20,324
14,057
45%
78,671
44,555
77%
Operating Income (loss)
16,263
10,099
61%
62,589
29,015
116%
Net Income (loss)
12,785
4,814
166%
41,973
14,402
191%
Operating cash, net
41,656
1,039
3908%
99,817
(17,302)
-677%
Availability, %
93
72
29%
90
81
11%
Sales, GWh
582
507
15%
2,178
1,956
11%
• Quarter highlights
2
Generation, GWh
363
406
-11%
1,625
1,465
11%
• External factors
2
Spot Purchases, GWh
219
101
117%
554
491
13%
• 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 December 31st, 2010
Quarter Highlights and Recent Developments EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio and a Consolidated Interest Coverage Ratio of 0.97:1.0 and 7.6:1.0, respectively, as of December 31st, 2010. On October 26, 2010 The Executive Board of the International Monetary Fund completed the second and third reviews of the Dominican Republic’s economic performance under a program supported by a 28-month Stand-By Arrangement (SBA). The completion of the reviews allowed the immediate disbursement of approximately US$249 MM, bringing total disbursements under the arrangement to an amount equivalent of US$687.6 MM. In October 2010, the company repaid the first tranche of the local corporate Bond (US$ 6 MM), remaining US$ 24 MM outstanding. In November 2010, the Company entered into a US$5.0 million unsecured loan with Banco Popular Dominicano at a variable interest rate, payable in 60 monthly installments of principal and interest totaling US$83,333 each. This loan matures in November 2015. In December 2010, the Company entered into a US$8.0 million unsecured loan with Banco Popular Dominicano at a variable interest rate, payable in 60 monthly installments of principal and interest totaling US$133,333 each. This loan matures in December 2015. In December 2010, the Company paid milestone number five to Cobra (the constructor of the Wind Project) in the amount of EUR 14.9MM. On March 8, 2011 the Company issued its audited financial statements for 2010.
External Factors
Coal, Natural Gas and Fuel-Oil #6 Price Evolution (US$/MMBtu)
Average price of fuel for the month of December was US$75.69 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 31st, 2010, closed at RD$37.63/USD. Accumulated inflation in DR, as of December 31st, 2010 was 6.24%.2 According to the statement by an IMF Mission, the DR GDP is estimated to have grown by 7.8% in 2010.3
3
11.19
4.91
5.04
10.9
11.64 10.61
8.23 6.37
6.20 6.23
5.89 6.41
Q4'08
4.48
Q1'09
5.30 4.07
3.81
Q2'09
3.44
Q3'09 HFO
2
11.00 10.08
4.23
4.34 3.78
3.58
Q4'09
Q1'10 COAL
3.97
3.73
Q2'10
4.50
Q3'10
Q4'10
NG
http://www.bancentral.gov.do http://www.imf.org/external/spanish/np/sec/pr/2011/pr1145s.htm
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Quarterly Financial Report December 31st, 2010
Consolidated Financial Results4 Revenues (US$ Thousands) Description Contracted Energy Contracted Capacity Others Total Revenues
4Q'10
4Q'09
Var %
FY'10
FY'09
Var %
101,390
83,984
21%
373,912
262,787
42%
12,695
10,653
19%
46,949
42,635
10%
461
162
185%
1,648
1,776
-7%
114,546
94,799
21%
422,509
307,198
38%
4Q’10 revenues increased by 21% when compared with the same period of previous year (US$ 114.5 MM Vs. US$ 94.8 MM). This positive variance is essentially driven by a 6.0% increment in the average energy sales price for the period (4Q’10 US$179.82/MWh vs 4Q’09 US$173.10/MWh) as a result of the increase in Fuel Oil prices, which is the main escalator of our PPAs’ pricing formula, and higher demand by 14.8% (4Q’10 581.7 GWh vs 4Q’09 506.6 GWh), mainly driven by the reinforcement of the EDE Este PPA.
Operating Expenses (US$ Thousands) Description
4Q'10
4Q'09
Var %
FY'10
FY'09
Var %
Fuel Expense
37,130
41,208
-10%
166,850
124,368
34%
Transmission Tolls
3,094
2,461
26%
10,840
10,531
3%
Purchased Power
34,829
18,543
88%
92,775
66,035
40%
Frequency Regulation
1,203
1,395
-14%
5,367
2,799
92%
Operation & M aintenance
9,288
8,745
6%
34,603
31,181
11%
General & Administrative
8,678
8,391
3%
33,404
27,729
20%
Depreciation
4,061
3,957
3%
16,082
15,540
3%
Total Operating Expenses
98,283
84,700
16%
359,921
278,183
29%
During 4Q’10 operating expenses were higher than 4Q’09 comparative figures by 16% or 13.6 MM (US$98.3 MM Vs. US$84.7 MM). This increase is mainly explained by: Purchased power: 88% or US$16.3 MM increase is the result of higher spot energy purchases (4Q’10 220.7 GWh vs 4Q’09 102.9 GWh), partially offset by a decrease in the average purchase price effect for the period (4Q’10 US$138.82MWh vs 4Q’09 US$183.2/MWh). Transmission Tolls: 26% or US$0.6 million higher than 4Q’09. Operation & Maintenance: 6% or US$0.5 million higher than 4Q’09; due to the major maintenance of Barahona Plant and Sultana’s engine #4 and # 6 executed during October and November’10 as well as the repair of Mitsubishi’s fuel tank performed in October’10; partially offset by the major maintenance the Sultana’s engines #5 and #7 executed during October and November’09 and the rehabilitation of the Puerto Plata unit #2 during December’09. General and administrative expenses: 3% or US$0.3 MM increase when compared to 4Q’09; mainly due to i) US$0.7 MM higher technical advisory fee expense and corresponding withholding taxes due to higher sales during the 4Q’10; ii) US$0.4 MM higher office operation costs; partially offset by iii) US$0.3MM lower professional services, iv)US$0.2MM lower allowance for doubtful accounts; v) US$0.2MM lower minimum taxes during 4Q’2010 and vi) US$0.1 other minor positive variances. Partially offset by Fuel costs: 10% or US$4.1 MM decrease, as a consequence of lower fuel consumption (4Q’10 396.1 thousand of BBLS vs 4Q’09 480.2 thousand of BBLS) due to 42.9GWh lower energy generation; partially offset by a negative average price effect for the period (4Q’10 US$75.9 per BBLS vs 4Q’09 US$73.9 per BBLS). 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 of its wholly
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Quarterly Financial Report December 31st, 2010
owned subsidiary EGE Haina Finance Company. Intercompany balances and transactions have been eliminated in consolidation.
Net Income Net income was US$12.8 MM in 4Q’10, compared to a net income of US$4.8 MM in the same period of the prior year. The positive variance of US$8.0 MM is explained by: Higher EBITDA by US$6.3 MM as explained in the above paragraphs. US$3.2 MM lower income tax. US$0.1 MM lower interest expense, net. Partially offset by : US$0.6 MM higher other income. US$1.0 higher exchange loss as a result of exposure to Euro holdings.
Cash Flow Cash provided by (used in) operating activities Net cash provided by operating activities was US$41.7 MM during the 4Q’10, compared to US$1.0 MM in the same period of 2009. The US$40.6 MM positive variation is explained by: a) US$45.8 MM decrease in accounts receivable; b) US$8.0 MM higher net income; c) US$5.7 MM lower income tax payable; d) US$2.2 MM increase in other liabilities; partially offset by: i) US$7.2 MM higher inventories; ii) US$6.5 MM lower accounts payable; iii) US$3.7 MM higher prepaid expenses and other assets; iv) US$2.8 MM of higher negative adjustments reconciling net income to the net cash used in operating activities; and v) US$0.9 MM higher derivative financial liability. Cash (used in) provided by investing activities Net cash used in investing activities was US$6.3 MM during the 4Q’10, compared to US$18.5 MM provided by investing activities in the same period of the prior year. The US$24.8 MM change is mainly the result of: i) US$22.8 MM higher additions to property, plant and equipment during 4Q’10; ii)US$23.2 MM lower sales of long term investments during 4Q’10; iii) US$11.1 MM increment of short term investments in 4Q’10 due to new certificates of deposit; partially offset by: iv) US$19.0 MM lower short term investment restricted; v) US$13.3 MM higher collections of short term investment. Cash provided by (used in) financing activities The positive variance of US$7.1 MM in financing activities during 4Q’10 when compared to the same period of the prior year, is mainly driven by: a)US$15.6 MM lower repayment of long term debt during 4Q’10 and b) US$1.0MM higher proceeds from long term debt; partially offset by 9.5 MM higher repayment of short term debt.
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Quarterly Financial Report December 31st, 2010
Financial Debt FINANCIAL DEBT GENERAL CONDITIONS AND RELEVANT STATISTICS Balance Interest type Interest Rate Repayment schedule 164.9 fixed 9.50% Balloon payment April 2017 6.0 fixed 8.50% Balloon payment May 2011 6.0 fixed 8.50% Balloon payment July 2011 6.0 fixed 8.75% Ballonn payment April 2012 6.0 fixed 7.75% Ballonn payment Deember 2012 5.0 fixed 5.00% Balloon June 2011 7.9 Variable (DR US$) 5.75% Monthly - ending November 2015 4.8 Variable (DR US$) 5.75% Monthly - ending December 2015
Instrument 144 A Bond Local Bond-T2 Local Bond-T3 Local Bond-T4 Local Bond-T5 BHD Popular Popular
9.03% 5.34 206.6
Weighted av. Interest rate Weighted av. Life (years) Total financial debt
Total Debt vs Financial Assets 180.0 160.0 140.0
US MM
120.0 100.0 80.0 60.0 40.0 20.0 2010
2011
2012
cash on hand
2013 Debt
2014
2015
2016
2017
Sovereign bonds
Financial Expenses (US$ Thousands) Description
4Q'10
4Q'09
FY'10
FY'09
Financial Expenses Interest on Senior Notes
(4,307) (4,460)
(17,185)
(18,598)
Interest on Short-Term Debt
(88)
(231)
(455)
(924)
Interest on Long-Term Debt
(541)
(474)
(2,439)
(902)
(22)
(460)
(544)
(3,686)
(399)
(383)
(1,649)
(1,617)
Interest on Payables to Power Vendors Amortization of Deferred Charges Capitalized Interest
655
-
2,127
Other Financial Expenses
(88)
(10)
(154)
(106)
-
(4,790) (6,018)
(20,299)
(25,832) 10,986
Financial Income: 2,007
2,381
6,472
Interest on Short-Term Investments
Interest on Trade Accounts Receivable
318
10
710
36
Interest on Long-Term Investments
255
1,352
1,402
4,110
70
8
1,317
46
2,651
3,751
9,902
15,178
(10,397)
(10,654)
Other Financial Income
Total Financial Expenses, Net
(2,140) (2,267)
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Quarterly Financial Report December 31st, 2010
Collections Cash Collection rate for 4Q’10 was 126% as compared to the 60% level of last year’s same quarter. The positive variance is due to higher cash collections from Edenorte (4Q’10 133% vs 4Q’09 59%) and Edesur (4Q’10 136% vs 4Q’09 52%).
Cash Collections Vs Billings 152% 126% 100%
96% 64%
4Q08
67%
60%
52%
43%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
Operational Statistics Description
4Q'10
4Q'09
Var.%
FY'10
FY'09
Var.%
Heat Rate, Btu/KWh
9,125
9,520
-4.1%
9,458
9,426
0.3%
Availability, %
93.2
72.3
28.9%
90
81.3
10.7%
Forced Outage Rate, %
0.7
12.8
-94.5%
1.6
8.8
-81.8%
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
247
247
0.0%
261
345
-24.4%
Energy Balance 580 430
GWh
280 130 (20) (170) GWh - Spot Purchase
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
(139)
(112)
(149)
(130)
(100.89)
(53)
(131)
(151)
(218.93)
GWh - Sales
496
457
478
514
506.64
483
505
609
581.71
GWh - Generation
357
346
330
384
406
430
375
458
363
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Quarterly Financial Report December 31st, 2010
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009 Amounts in thousands of US$ Dec-10 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 Long term invesment, restricted Property, plant and equipment Intangible assets, net Other assets Total Assets Liabilities and shareholders' equity: Current liabilities: Short-term debt Current portion of long-term debt Accounts payable Accounts payable to related parties Derivative financial liabilities 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-09
110,924 11,479 110,230 31,643 18,651 540 283,467
39,548 12,328 163,498 30,450 19,432 3,033 268,289
7,831 276,659 7,512 7,916 583,385
7,831 10,480 251,703 9,131 6,874 554,308
5,000 14,600 23,351 1,150 5,701 6,912 56,714
6,000 32,070 1,009 359 10,563 50,001
186,967 15,504 19 259,204.1
196,367.00 16,123.29 13.00 262,504.23
289,000 13,464 52,258
289,000 11,365 22,384
(31,032) 491 324,181
(31,032) 87 291,804
583,385
554,308 7
Quarterly Financial Report December 31st, 2010
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 AND THREE MOTH PERIODS THEN ENDED Amounts in thousands of US$ Three month periods ended December 31, 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 Other (expenses) income, net Income before income tax Income tax Net income
2009
Years ended December 31, 2010
2009
101,390 12,695
83,984 10,653
373,912 46,949
262,787 42,635
461
162
1,647
1,776
114,546
94,799
422,509
307,198
37,130 3,094 34,829 1,203 9,289 8,678 4,060 98,283
41,208 2,461 18,543 1,395 8,745 8,391 3,957 84,700
166,850 10,840 92,775 5,367 34,603 33,404 16,082 359,921
124,368 10,531 66,035 2,799 31,181 27,729 15,540 278,183
16,262 (2,140) (1,268) (56) 12,798
10,099 (2,267) (322) 526 8,036
62,588 (10,397) (1,407) (1,236) 49,548
29,015 (10,654) (197) 2,571 20,735
(14)
(3,223)
(7,575)
(6,333)
12,784
4,814
41,973
14,402
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Quarterly Financial Report December 31st, 2010
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED CASH FLOW STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 AND THREE MOTH PERIODS THEN ENDED Three month periods ended December 31, 2010 Net income Adjustments to reconcile net income to the net cash provided by (used in) operating activities: Gain on sale of fixed asset Loss on asset dispossal Gain on early liability extinguishment Net foreign exchange loss Deferred income tax Depreciation and amortization Provision for doubtful accounts Gain on liability extinguishment Loss on sale of available-for-sale financial assets Investments revaluation reserve Financial expenses Forward contracts Put option Others Change in assets and liabilities: Accounts receivable Inventories Prepaid expenses Other assets Accounts payable Income tax Payable to related parties Derivative financial liability Other liabilities Other non-current liabilities
2009
12,785
4,814
Years ended December 31, 2010
2009
41,973
32 1,879 (790) 4,060 509 674 (622) -
1 17 (537) 3,223 3,957 290 (300) 63 5,723 (4,058) 359 (97)
26,350 (5,603) (1,462) (1,015) 5,198 5,701 31 (866) (5,206) -
(19,517) 1,643 993 221 11,660 63 (7,440) (38)
(1,042) 9,687 5,701 141 (866) (4,822) 6
(80,235) (7,273) (9,830) (423) 52,362 (1,177) (9,533) (38)
41,656
1,039
99,817
(17,302)
Additions to property, plant and equipment Long-term investments Short-term investments restricted Purchases of short-term investments Payments received on long-term investments Sales of short-term investments Purchases of restricted investments Sales of restricted investments Net cash (used in) provided by investing activities
3,482 3,294 (30,822) 19,043 (11,324) (3,294) 13,360 (19,043) 19,043 (6,261)
269 11 (4,687) 23,195 (277) 18,512
3,294 (37,099) (2,165) 13,360 (19,043) 19,043 (22,611)
3,495 2,893 (5,881) 27,595 (1,005) 27,097
Proceeds from long-term debt Proceeds from line of credit Repayment of long-term debt Repayment of short-term debt Dividends Debt issuance costs paid Net cash provided by (used in) financing activities
13,000 (6,300) 6,700
12,000 (15,569) 3,169 16 (384)
13,000 5,000 (13,800) (10,000) (30) (5,830)
37,500 17,015 (18,723) (8,054) (20,003) (322) 7,413
Net cash provided by (used in) operating activities Net changes in restricted cash Sale of property, plant and equipment Advance payments of property, plant and equipment Collection of other related p arty receivables
Decrease in accounts receivable through offsets with accounts payable Reclassification of accounts receivable from non-current to current Transfer from inventories to property, plant and equipment 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 Decrease in accounts payable settled by exchanging financial securities Dividends paid with investment securities
32 -
14,402
538
1,874 16,082 509 3,850
507 29,278
(4,413) 781
(665) 167 (1,851) 6,333 15,540 290 (300) 63 4,506 359 -
42,095
19,167
71,376
17,208
68,829
20,381
39,548
22,340
110,924
39,548
110,924
39,548
794 3,221 (2,117)
9,445 19,976 226,378
20,414 3,221 751
73,732 32,473 230,235
-
54,936 6,233 19,370
-
74,300 6,233 19,370
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Quarterly Financial Report December 31st, 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.
10