EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2011
EGE Haina Reports Fourth Quarter 2011 Net Income of US$15.1 million; Revenues of US$161.2 million Special points of interest: As of December 31st, 2011,
EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio and a Consolidated Interest Coverage Ratio of 0.79:1.0 and 20.56:1.0, respectively.
On October 11th, 2011, EGE
Haina inaugurated the first wind farm in the Dominican Republic with an investment of US$81.1MM.
Santo Domingo, Dominican Republic, February 23rd, 2012 – EGE Haina announced today Net Income of US$15.1 million for the fourth quarter of 2011, compared to a net income of US$12.8 million in the fourth quarter of 2010, driven by an increase in energy sales price and higher demand. Fourth quarter 2011 revenues amounted to US$161.2 million, showing a 41% increase when compared to the same period of the previous year.
Financial and Operational Summary
During the fourth quarter of 2011, the Company fully placed tranches No. 7 to 10 of the $50MM local bond.
On December 23rd, 2011, the
Company entered into an EPC contract of a 215 MW dual fuel, combined cycle power plant.
On December 30th, 2011, the
Company entered into a Turnkey Supply, Construction and Installation Agreement with UTE Los Cocos of a 50MW wind power project.
(US$ Thousands, except for Operational data)
Description
4Q'11
4Q'10
Var %
FY'11
FY'10
Var %
Revenues
161,177
114,545
41%
617,540
422,509
46%
Operating Costs
139,042
98,305
41%
521,645
359,943
45%
Variable M argin
47,990
38,288
25%
186,789
146,677
27%
EBITDA¹
26,238
20,300
29%
112,243
78,648
43%
Operating Income
22,135
16,240
36%
95,895
62,566
53%
Net Income
15,095
12,785
18%
65,515
41,973
56%
Operating cash, net
89,648
41,656
115%
41,072
99,816
-59%
Availability, %
95
93
1%
97
90
7%
Sales, GWh
635
582
9%
2,460
2,178
13%
Generation, GWh
439
363
21%
1,746
1,625
7%
Spot Purchases, GWh
196
219
-10%
714
554
29%
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.
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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2011 Quarter Highlights and Recent Developments
On October 11th, 2011, EGE Haina inaugurated the first wind farm in the Dominican Republic with an investment of US$81.1MM. The farm consists of 14 wind turbines with an installed capacity of 25MW.
On December 21st, 2011, the Company signed a promissory note with The Bank Of Nova Scotia, in the amount of US$30 million, with an interest rate equivalent to one (1) month LIBOR plus 3%, calculated over a 360 days base year. This promissory note matures in June 2012.
On December 23rd, 2011, the Company entered into a contract for the design, engineering, procurement of equipment for construction, start-up and testing of a dual fuel, combined cycle reciprocating engine power plant with a net installed capacity of 215.5MW, with Wärtsilä Finland OY and Wärtsilä Dominicana SRL. The total contract value amounts to US$198.7 million. The commercial operation date for the fuel plant is expected by the second half of 2013.
On December 30th, 2011, the Company entered into a Turnkey Supply, Construction and Installation Agreement with UTE Los Cocos for the design, construction and installation and commissioning of a 50MW wind power project which will interconnect with, and therefore expand the existing 25MW of Los Cocos. The total contract value amounts to US$91.0 million. The commercial operation date is expected by the first quarter of 2013.
As of December 31st, 2011, EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio and a Consolidated Interest Coverage Ratio of 0.79:1.0 and 20.56:1.0, respectively.
During the fourth quarter of 2011, the Company fully placed tranches No. 7 though 10 of the $50MM local bond, at annual interest rates that range from 6% to 7%, and terms ranging from three to five years.
External Factors Average price of fuel for 4Q’11 was US$98.3 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, 2011, closed at RD$38.87/USD. Accumulated inflation in DR, as of December 31st, 2011 was 7.76%.2
2
http://www.bancentral.gov.do
2
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2011 Consolidated Financial Results3 Revenues (US$ Thousands) Description Contracted Energy Contracted Capacity Others Total Revenues
4Q'11
4Q'10
Var %
FY'11
FY'10
Var %
147,506
101,389
45%
564,224
373,912
51%
13,278
12,694
5%
51,549
46,949
10%
393
462
-15%
1,767
1,648
7%
161,177
114,545
41%
617,540
422,509
46%
4Q’11 revenues increased by 41% when compared with the same period of the previous year (US$ 161.2 MM vs. US$ 114.5 MM). This positive variance is essentially driven by a 38.4% increment in the average energy sales price for the period (4Q’11 US$245.6/MWh vs 4Q’10 US$177.4/MWh) as a result of the increase in Fuel Oil #6 prices, which is the main escalator of our PPAs’ pricing formula, and higher demand by 9.2% (4Q’11 635 GWh vs 4Q’10 582 GWh), mainly driven by an increase in the contracted capacity under CEPM’S PPA and the demand from EDE Este.
Operating Expenses (US$ Thousands) Description
4Q'11
4Q'10
Var %
FY'11
FY'10
Var %
Fuel Expense
63,553
37,130
71%
255,177
166,850
53%
Transmission Tolls
2,914
3,094
-6%
11,267
10,840
4%
Purchased Power
44,161
34,829
27%
154,680
92,775
67%
Frequency Regulation
2,559
1,204
113%
9,627
5,367
79%
Operation & M aintenance
9,055
9,288
-3%
29,797
34,603
-14%
General & Administrative
12,697
8,700
46%
44,749
33,426
34%
Depreciation
4,103
4,060
1%
16,348
16,082
2%
139,042
98,305
41%
521,645
359,943
45%
Total Operating Expenses
During 4Q’11 operating expenses were higher than 4Q’10 comparative figures by 41% or US$40.7MM (US$139.0MM Vs. US$98.3MM). This increase is mainly explained by:
Fuel costs: 71% or US$26.4 million increase in fuel cost, essentially as a consequence of: a) higher HFO consumption by 88.8 thousand of BBLS at a higher price (4Q’11 484.9 thousand of BBLS at US$105.48/BBLS vs 4Q’10 396.1 thousand of BBLS at US$76/BBLS); b) higher Coal price (4Q’11 US$147.7/MT vs 4Q’10 US$106.1/MT); and c) higher LFO consumption by 26.6 thousand of BBLS at a higher price (4Q’11 63.2 thousand of BBLS at US$130.2/BBLS vs 4Q’10 36.6 thousand of BBLS at US$96.9/BBLS).
General and administrative expenses: 46% or US$4MM increase when compared to 4Q’10 mainly due to: i) US$1.9MM higher technical advisory fee expense as a result of the increase in sales during 4Q’11; ii) US$0.7MM higher office operation costs mainly due to an increment in development expenses; iii) US$0.5MM higher professional services iv) US$0.3MM higher labor cost head office, v) US$0.3MM higher insurance expenses, vi) US$0.2MM higher regulatory payment; and vii) US$0.1 higher minimum income tax.
Purchased power: 27% or US$9.4 increase is the result of an increase in the average purchase price for the period (4Q’11 US$218.2/MWh vs 4Q’10 US$138.8/MWh)
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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 DECEMBER 31, 2011 Net Income Net income was US$15.1 MM in 4Q’11, compared to a net income of US$12.8 MM in the same period of the prior year. The positive variance of US$2.3 MM is explained by:
Higher EBITDA by US$5.9 MM as explained in the paragraphs above.
US$0.8 MM lower interest expense, net.
US$0.7 MM lower exchange loss as a result of exposure to the Euro in 2010.
Partially offset by :
US$5.1 MM higher income tax due to the increment in the statutory tax rate to 29% due to enactment of law No. 13911.
Cash Flow Cash provided by operating activities Net cash provided by operating activities was US$89.6 MM during the 4Q’11, compared to US$41.6 MM provided in the same period of 2010. The US$48 MM variance is explained by: a) US$48.1MM decrease in accounts receivable b) US$5.3MM lower inventories, c) US$4.9MM increase in other liabilities; and d) US$2.3MM higher net income. The aforementioned are partially offset by: i) US$9.4MM lower accounts payable ii) US$2.3MM of lower negative adjustments reconciling net income to the net cash used in operating activities; and iii) US$0.9MM higher prepaid expenses; Cash used in investing activities Net cash used in investing activities was US$17.6MM during 4Q’11, compared to US$6.3MM used in the same period of the prior year. The US$11.3MM variance is mainly due to lower sales of restricted investments; partially offset by lower additions to property, plant and equipment during 4Q’11. Cash provided by financing activities The positive variance of US$37.9 MM in financing activities during 4Q’11, when compared to the same period of the prior year, is due to the net result of higher proceeds from short term debt by US$30 MM and higher proceeds from long term debt by US$18.6MM in 4Q’11; partially offset by i) US$5MM higher repayment of line of credit ii) US$4.0MM higher dividends paid; and iii)US$1.7MM higher repayment of long term debt during 4Q’10.
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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2011 Financial Debt as of December 31, 2011 FINANCIAL DEBT GENERAL CONDITIONS AND RELEVANT STATISTICS Instrument
Balance
144 A Bond Local Bond-T4 Local Bond-T5 Local Bond (2) - T1/2 Local Bond (2) - T3/4 Local Bond (2) - T5/6 Local Bond (2) - T7/8 Local Bond (2) - T9/10 The Bank of Nova Scotia Popular term loan program BHD DR term loan program BHD Panamรก term loan program
Interest type
Interest Rate
164.9 Fixed 6.0 Fixed 6.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 30.0 Variable (LIBOR 1M+3%) 11.4 Variable (DR US$) 11.4 Variable (DR US$) 1.8 Variable (DR US$)
Repayment schedule
9.50% 8.75% 7.75% 7.00% 7.00% 7.00% 6.00% 7.00% 3.29% 6.50% 6.50% 6.50%
Bullet payment April 2017 Bullet payment April 2012 Bullet payment Dec 2012 Bullet payment May 2016 Bullet payment June 2016 Bullet payment June 2016 Bullet payment Oct 2014 Bullet payment Oct 2016 Bullet payment June 2012 Monthly - ending Nov 2015 Monthly - ending March and May 2016 Monthly - ending May 2016
8.04% 4.14 281.4
Weighted av. Interest rate Weighted av. Life (Years) Total financial debt (Millions)
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 Efectivo
2014
2015
2016
2017
Deuda
Financial Expenses (US$ Thousands) FY December Description
4Q'11
4Q'10
2011
2010
Interest on Senior Notes
(4,307)
(4,307)
(17,228)
(17,185)
Interest on Long-Term Debt
(1,370)
(629)
(4,344)
(2,894)
Financial Expenses
Interest on Payables to Power Vendors
(525)
(22)
(512)
(544)
Amortization of Deferred Charges
(698)
(400)
(1,562)
(1,650)
998
654
4,916
2,127
Capitalized Interest Other Financial Expenses
(123)
(87)
(192)
(154)
(6,025)
(4,791)
(18,922)
(20,300)
3,894
3,289
10,720
7,754
594
318
1,811
711
255
909
1,402
59
36
Financial Income: Interest on Trade Accounts Receivable Interest on Short-Term Investments Interest on Long-Term Investments Other Financial Income
Total Financial Expenses, Net
(124)
(1,210)
4,364
2,652
(1,661)
(2,139)
13,499 (5,423)
9,903 (10,397)
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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2011 Collections Cash Collection rate from distributions companies for 4Q’11 was 154% as compared to the 126% level of last year’s same quarter, with a peak of 268% in December 2011. As a result, at December 31, 2011 the Company had only two invoices in arrears from the distributions companies, which is in compliance with the stand-by agreement with the IMF.
Discos Cash Collections Vs Billings 154%
152% 126% 82%
96% 64%
80%
67% 60%
39%
43%
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Operational Statistics Description
4Q'11
4Q'10
Var.%
FY'11
FY'10
Var.%
Heat Rate, Btu/KWh
9,313
9,125
2.1%
9,554
9,458
1.0%
Availability, %
94.5
93.2
1.4%
96.6
90.0
7.3%
Forced Outage Rate, %
0.6
0.7
-14.3%
0.7
1.6
-56.3%
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
290
272
6.6%
305
285
7.0%
Energy Balance
580
GWh
430 280 130 (20) (170)
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q'11 2Q'11 3Q'11 4Q'11
(112)
(149)
(130)
(101)
(53)
(131)
(151)
(219)
(178)
(179)
(161)
(196)
GWh - Sales
457
478
514
507
483
505
609
582
566
613
647
635
GWh - Generation
346
330
384
406
430
375
458
363
387
434
486
439
GWh - Spot Purchase
6
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2011 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2011 AND 2010 Amounts in thousands of US$ 2011
2010
183,879 483 162,543 36,104 15,844 523 9,795 409,171
110,924 11,479 110,230 31,642 18,651 540 283,466
Deposits in banks, restricted Long term receivable Property plant and equipment, net Intangible assets Deferred charges, net Other assets Total assets
7,831 1,306 295,298 91 6,463 21,799 741,959
7,831 276,660 7,512 7,916 583,385
Liabilities and Shareholders' Equity Current liabilities Line of credit Short-term debt Current portion of long-term debt Accounts payable Payable to related parties Income tax payable Other current liabilities Total current liabilities
30,000 17,656 35,042 1,776 26,868 8,022 119,364
5,000 14,600 23,351 1,150 5,701 6,911 56,713
233,751 13,636 3 366,754
186,967 15,505 19 259,204
289,000 14,941 102,296 (31,032) 375,205
289,000 13,464 52,258 (30,541) 324,181
Assets: Current Assets: Cash and cash equivalents Short-term investment Accounts receivable Inventories Prepaid expenses Deferred income tax Other current assets Total current assets
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
741,959
583,385 7
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2011 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIODS AND THE YEARS ENDED DECEMBER 31, 2011 AND 2010 Amounts in thousands of US$ Three month periods ended December 31, 2011
2010
Years ended December 31, 2011
2010
Revenues Energy
145,052
101,389
561,770
373,912
Capacity
13,278
12,694
51,549
46,949
Others
2,846
462
4,220
1,648
161,176
114,545
617,539
422,509
Fuel
63,553
37,130
255,177
166,850
Purchased power Transmission
44,161 2,914
34,829 3,094
154,680 11,267
92,775 10,840
2,559
1,204
9,627
5,367
9,055 12,697 4,103 139,042
9,288 8,700 4,060 98,305
29,797 44,749 16,348 521,645
34,603 33,426 16,082 359,943
22,134 (1,376) 136 (31) 20,863
16,240 (2,139) (598) (56) 13,447
95,894 (5,423) 311 660 91,442
62,566 (10,397) (737) (1,236) 50,196
(7,381) 1,606
(880) 218
(27,312) 1,384
(5,777) (2,446)
15,088
12,785
65,514
41,973
Operating costs
Compensation for frequency regulation Operating and maintenance Administrative and general expenses Depreciation and amortization Operating income Financial expenses, net Foreign exchange loss, net Other income (expenses), net Income before income tax Income tax Current Deferred Net income
8
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2011 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONSOLIDATED CASH FLOW STATEMENTS FOR THE THREE MONTH PERIODS AND THE YEARS ENDED DECEMBER 31, 2011 AND 2010 Amounts in thousands of US$ Three month periods ended December 31, 2011 Net income Adjustments to reconcile net income to the net cash provided by operating activities: Gain on sale of fixed asset Deferred income tax Depreciation Provision for doubful accounts Net foreing exchange fain Loss on forward contract Financial expenes Put option 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-currente liabilities Net cash provided by operating activities Sale of property, plant and equipment Additions to property, plant and equipment Collection of other related party receivable Purshase of restricted investments Sales of restricted investments Purshase of investment securities Sales of investment securities Disbursement of notes receivable Net cash used in investing activities Proceeds from line of credit Repayment of line of credit Proceeds from short-term debt Repayment of long-term debt Proceeds from long-term debt Dividends Debt issuance costs paid Net cash provided by (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period 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
2010
Years ended December 31, 2011
2010
15,095
12,785
65,515
41,973
(1) (1,606) 4,103 235 1,328 -
32 (218) 4,060 509 1,879 674 (622)
(45) (1,384) 16,348 235 3,959 -
32 2,446 16,082 509 538 507 3,850 -
92,519 (324) (2,374) (19,096) (21,145) 21,168 17 (714) (16)
26,352 (5,603) (1,463) (1,015) 4,626 5,701 31 (866) (5,212) 6
(48,363) (6,965) 2,807 (23,678) 12,190 21,168 622 (1,787) (16)
29,278 (4,413) 781 (1,042) 9,112 5,701 141 (866) (4,822) 6
89,189
41,656
40,606
99,813
2 (16,115) (1,500) (17,613)
(27,340) 19,043 (2,165) 4,201 (6,261)
60 (37,539) 10,535 (1,500) (28,444)
(37,099) 3,294 (19,043) 19,043 (2,165) 13,360 (22,610)
(5,000) 30,000 (8,014) 31,618 (4,000) 44,604
(6,300) 13,000 6,700
(5,000) 30,000 (28,205) 78,045 (13,999) (514) 60,327
5,000 (13,800) 13,000 (9,997) (30) (5,827)
116,180
42,095
72,489
71,376
67,232
68,829
110,924
39,548
183,412
110,924
183,412
110,924
4,070 2,897
20,414 751
828 2,025
794 (2,117)
9
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 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. 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.
10