EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2012
EGE Haina Reports Fourth Quarter 2012 Net Income of US$16.5 million; Revenues of US$182.5 million Special points of interest:
Santo Domingo, Dominican Republic, May 1, 2013 – EGE Haina announced today a Net Income of US$16.5 million for the fourth quarter of 2012, compared to a
In January 2013, EGE Haina
inaugurated the expansion of the wind farm Los Cocos with an investment of US$103.4MM. The project consisted of the installation of 26 wind turbines with an installed capacity of 52MW.
Net Income of US$15.0 million in the fourth quarter of 2011, driven by a higher demand; partially offset by a decrease in the average energy sales price. Fourth quarter 2012 revenues amounted to US$182.5 million, showing a 13% increase when compared to the same period of the previous year.
In January 2013 and
November 2012, the Company paid dividends in the amounts of US$12MM and $2.2MM, respectively.
Financial and Operational Summary
As of December 31st, 2012,
EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio of 2.28:1.0, a Consolidated Interest Coverage Ratio of 9.31:1.0 and Minimum Debt Service Coverage ratio of 4.1:1.0.
During the fourth quarter of
2012, the Company received disbursements for a total of $74MM under the Senior Syndicated and Secured Loan Agreement with Citibank. Additionally, in January 2013, the Company received disbursements for a total of $19MM, completing the total amount of the loan agreement.
(US$ Thousands, except for Operational data) Description
4Q'12
4Q'11
Var %
FY'12
FY'11
Var %
Revenues
182,535
161,178
13%
677,186
617,540
10%
Operating Costs
158,623
139,035
14%
565,634
521,645
8%
Variable M argin
52,120
47,990
9%
220,401
186,789
18%
EBITDA¹
29,125
26,245
11%
132,430
112,242
18%
Operating Income
23,912
22,143
8%
111,552
95,895
16%
Net Income
16,507
15,054
10%
75,437
65,470
15%
(12,717)
89,649
-114%
86,909
41,072
112%
Availability, %
97
95
3%
92
98
-6%
Sales, GWh
706
635
11%
2,607
2,460
6%
Generation, GWh
481
420
15%
1,749
1,728
1%
Spot Purchases, GWh
99
213
-53%
434
723
-40%
Other Purchases, GWh
125
2
6337%
424
10
4318%
Operating cash, net
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, 2012 Quarter Highlights and Recent Developments
On April 30th, 2013, a dividend payment amounting to US$14MM was approved in the General Shareholders’ Meeting of the Company.
On April 17th, 2013, the Company signed a promissory note with The Bank of Nova Scotia in the amount of US$13MM, with an interest rate equivalent to one (1) month LIBOR plus 3% p.a., calculated over a 360 days base year. This promissory note matures in October 2013.
On March 5th, 2013, the Company signed a promissory note with The Bank of Nova Scotia, in the amount of US$12MM, with an interest rate equivalent to one (1) month LIBOR plus 3% p.a., calculated over a 360 days base year. This promissory note matures in August 2013.
In January 2013, EGE Haina inaugurated the expansion of the Los Cocos wind farm with an investment of US$103.4MM. The project consisted of the installation of 26 wind turbines with an installed capacity of 52MW.
In January 2013 and November 2012, the Company paid dividends in the amounts of US$12MM and $2.2MM, respectively.
As of December 31st, 2012, EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio of 2.28:1.0, a Consolidated Interest Coverage Ratio of 9.31:1.0 and Minimum Debt Service Coverage ratio of 4.1:1.0.
As of December 31st, 2012, Quisqueya II project had a construction progress of approximately 46%. Key milestones archived include: 100% of land preparation, 49% of construction the Substation, 62% of HFO Pipeline, 60% foundations and structure and 65% of well water network.
During the fourth quarter of 2012, the Company received disbursements for a total of $74MM under the Senior Secured Syndicated Loan Agreement with Citibank. Additionally, in January 2013, the Company received disbursements for a total of $19MM, completing the total amount of the loan agreement.
External Factors Average price of fuel for 4Q’12 was US$94.26 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, 2012, closed at RD$40.28/USD. Accumulated inflation in DR, as of December 31st, 2012 was 3.91%.2
2
http://www.bancentral.gov.do
2
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2012 Consolidated Financial Results3 Revenues (US$ Thousands) Description Contracted Energy Contracted Capacity Others Total Revenues
4Q'12
4Q'11
Var %
FY'12
FY'11
Var %
169,046
147,506
15%
621,379
564,224
10%
12,918
13,279
-3%
53,534
51,549
4%
571
393
45%
2,273
1,767
29%
182,535
161,178
13%
677,186
617,540
10%
4Q’12 revenues increased 13% when compared with the same period of the previous year (US$182.5 MM vs. US$161.2MM). This positive variance is essentially driven by a higher demand in 11.2% (4Q’12 706.3 GWh vs 4Q’11 635 GWh), mainly as a result of the reimplementation of the remaining 50MW under EDE ESTE’s PPA, as well as an increase in the contracted capacity under the CEPM PPA; partially offset by a 5.6% decrease in the average energy sales price for the period (4Q’12 US$240.6/MWh vs 4Q’11 US$245.6/MWh).
Operating Expenses (US$ Thousands) Description
4Q'12
4Q'11
Var %
FY'12
FY'11
Var %
Fuel Expense
67,023
63,553
5%
238,185
255,177
-7%
Transmission Tolls
1,777
2,914
-39%
9,437
11,267
-16%
Purchased Power
59,459
44,162
35%
200,600
154,680
30%
Frequency Regulation
2,156
2,559
-16%
8,563
9,627
-11%
Operation & M aintenance
6,896
9,054
-24%
31,717
29,797
6%
General & Administrative
16,099
12,690
27%
56,254
44,749
26%
Depreciation
5,213
4,103
27%
20,878
16,348
28%
158,623
139,035
14%
565,634
521,645
8%
Total Operating Expenses
During 4Q’12 operating expenses were higher than 4Q’11 comparative figures by 14% or US$19.6MM. This increase is mainly explained by:
Purchased Power: 35% or US$11.3MM higher than 4Q’11, driven by an increase in demand by 71.2 GWh, which was not fully satisfied with our own generation, as well as the Flow Gate affecting the value of Barahona’s and Los Cocos’ injections during 4Q’12.
Fuel Expense: 5% or US$3.5MM higher than 4Q’11, essentially as a consequence of higher fuel consumption driven by an increase in generation during the period (4Q’12 481 GWh vs 4Q’11 420 GWh); partially offset by lower HFO and coal prices. General and administrative expenses: 27% or US$3.4MM increase when compared to 4Q’11 mainly due to: i)US$1.6MM higher minimum tax expenses, ii) US$1.4MM higher technical advisory fee expense and iii) US$0.4MM higher professional services related to research and development and legal consultants. Operation & Maintenance: 24% or US$2.2 MM lower than 4Q’11, due to the maintenance performed to Barahona power plant during 4Q’11 and lower labor cost, due to the capitalization of labor costs directly attributable to Los Cocos II and Quisqueya II projects during 2012.
Depreciation: 27% or US$1.1MM higher than 4Q’11, due to the depreciation of Los Cocos I Wind Farm, inaugurated in December 2011.
3
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, 2012
Net Income Net income was US$16.5 MM in 4Q’12, compared to a net income of US$15.0MM in the same period of the prior year. The positive variance of US$1.5 MM is explained by:
Higher EBITDA by US$ 2.9 MM as explained in the paragraphs above.
US$1.0 MM higher exchange gain, mainly due to the devaluation of the Dominican Peso (RD$) affecting positively our net liability exposure in such currency.
US$0.2 MM lower income tax.
US$0.2 MM higher other income.
Partially offset by :
US$1.7 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$1.1 MM higher depreciation expense, due to the depreciation of Los Cocos I Wind Farm, inaugurated in December 2011.
Cash Flow Cash provided by operating activities Net cash used in operating activities was US$12.7 MM during the 4Q’12, compared to US$89.7 MM provided in the same period of 2011. The US$102.4MM variance is explained by: a) US$143.3MM higher accounts receivable, b) US$6.1 MM higher inventories and c) US$5.3 MM lower other liabilities. The aforementioned is partially offset by i) US$34.4MM higher accounts payable, ii) US$15.4MM decrease in prepaid expenses, iii) US$1.4 MM higher net income and iv) US$1.1MM of higher positive adjustments reconciling net income to the net cash provided in operating activities. Cash used in investing activities Net cash used in investing activities was US$150.8 MM during 4Q’12, compared to US$17.6 MM used in the same period of the prior year. The US$133.2 MM variance is mainly due to higher additions to property, plant and equipment by $114.3 MM during 4Q’12 and an increase in restricted cash by US$20.4 MM during 4Q’12 in order to fund the escrow account under the construction agreement with Wärtsilä; partially offset by US$1.5 MM of disbursement of notes receivable during 4Q’11. Cash provided by financing activities The positive variance of US$20.0 MM in financing activities during 4Q’12, when compared to the same period of the prior year, is due to higher proceeds from long term debt by US$42.4 MM, US$5.6MM lower repayment of line of credit and long term debt and US$2.0 lower dividends payment during 4Q’12; partially offset by US$30.0 lower proceeds from short term debt. 4
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2012 Financial Debt as of December 31st, 2012 FINANCIAL DEBT GENERAL CONDITIONS AND RELEVANT STATISTICS Instrument
Balance
144 A Bond Local Bond (2) - T1/2 Local Bond (2) - T3/4 Local Bond (2) - T5/6 Local Bond (2) - T7/8 Local Bond (2) - T9/10 BPD Panama term loan program BHD DR term loan program BHD Panamรก term loan program Citi Project Facilities Scotiabank Short Term Loan
Interest type
Interest Rate
164.9 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 8.5 Variable (DR US$) 9.0 Variable (DR US$) 1.4 Variable (DR US$) 181.0 Variable (L3M + 5.75%, 6.25% floor) 30.0 Variable (LIBOR 1M + 3%)
9.50% 7.00% 7.00% 7.00% 6.00% 7.00% 5.91% 5.75% 5.50% 6.25% 3.21%
Repayment schedule Bullet payment April 2017 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 June 2012
Avg Life
4.33 3.42 3.50 3.50 1.83 3.84 1.09 1.35 1.36 3.11 0.50
7.29% 3.34 444.7
Weighted av. Interest rate Weighted av. Life (Years) Total financial debt (Millions)
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
4Q'12
4Q'11
2012
2011
Interest on Senior Notes
(4,332)
(4,307)
(17,253)
(17,228)
Interest on Long-Term Debt
(4,478)
(1,370)
(13,906)
(4,344)
Interest on Payables to Power Vendors
(1,558)
(525)
(6,275)
(512)
(146)
(698)
(1,939)
(1,562)
998
9,921
4,916
Financial Expenses
Amortization of Deferred Charges Capitalized Interest Other Financial Expenses
4,837 (421)
(123)
(879)
(192)
(6,098)
(6,025)
(30,331)
(18,922)
2,921
4,183
12,683
10,720
75
594
3,353
1,811
Financial Income: Interest on Trade Accounts Receivable Interest on Short-Term Investments Interest on Long-Term Investments Other Financial Income
Total Financial Expenses, Net
11
(127)
-
909
64
59 13,499
3,007
4,650
16,100
(3,091)
(1,375)
(14,231)
(5,423)
5
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2012
Collections Collection rate for 4Q’12 was 65% as compared to the 154% level of last year’s same quarter. A December 31, 2011 had only two invoices in arrears from the distributions companies, which was in compliance with the stand-by agreement with the IMF. A December 31, 2012 the Company had 3.5 invoices in arrears. Such deterioration is mainly driven by lower payments from DR Government to the Distros, as a result of the termination of the aforementioned stand-by agreement.
Discos Cash Collections Vs Billings 154%
152%
153%
126%
82% 96%
80% 74%
67%
65%
54% 38%
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
Operational Statistics Description
4Q'12
4Q'11
Var.%
FY'12
FY'11
Var.%
Heat Rate, Btu/KWh
9,540
9,313
2.4%
9,240
9,486
-2.6%
Availability, %
97.1
94.5
2.8%
91.7
97.9
-6.3%
Forced Outage Rate, %
1.2
0.6
100.0%
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 4Q'12
GWh - Spot Purchase
(53)
(131)
(151)
(219)
(178)
(179)
(153)
(213)
(84)
(134)
(117)
GWh - Sales
483
505
609
582
566
613
647
635
573
631
696
706
-
-
-
-
-
-
(8)
(2)
(71)
(97)
(131)
(125)
430
375
458
363
387
434
486
420
418
401
448
481
GWh - PPA Purchase GWh - Generation
(99)
6
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2012 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2012 AND 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 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
141,661 38,161 276,643 38,793 2,802 461 498,521
183,879 483 161,430 36,105 2,334 201 10,737 395,168
11,811 13,382 604,184 91 9,910 381 504 1,138,784
7,831 1,306 295,298 91 6,463 21,799 727,955
30,000 15,849 210,060 5,036 10,679 9,398 930 52 8,834 290,839
30,000 17,656 34,537 1,772 3 14,363 7,289 105,620
398,899 12,596 1,717 3 704,055
233,751 13,422 3 352,796
289,000 20,509 158,036 (32,815) 434,729
289,000 16,737 100,455 (31,032) 375,160
1,138,784
727,955
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EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2012
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTH PERIODS AND YEAR ENDED DECEMBER 31, 2012 AND 2011 Amounts in thousands of US$ Three month period ended December 31, 2012
2011
Year ended December 31, 2012
2011
Revenues Energy
169,046
147,506
621,379
564,224
12,918
13,279
53,534
51,549
571
393
2,273
1,767
182,535
161,178
677,186
617,540
Fuel
67,023
63,553
238,185
255,177
Purchased power Transmission
59,459 1,777
44,162 2,914
200,600 9,437
154,680 11,267
2,156
2,559
8,563
9,627
6,896 16,099 5,213 158,623
9,054 12,690 4,103 139,035
31,717 56,254 20,878 565,634
29,797 44,749 16,348 521,645
23,912 (3,091) 1,165 161 22,147
22,143 (1,375) 136 (31) 20,873
111,552 (14,231) 2,324 (78) 99,567
95,895 (5,423) 311 660 91,443
(5,354) (286)
(7,318) 1,499
(24,595) 465
(27,250) 1,277
Net income
16,507
15,054
75,437
65,470
Other comprehensive loss, net of tax: Cash flow hedge Unrealized loss on available-for-sale investments
(1,783) -
-
(1,783) -
(491)
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
Compehensive income
14,724
15,054
73,654
65,470
8
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2012 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS AND YEAR ENDED DECEMBER 31, 2012 AND 2011 Amounts in thousands of US$ Three month period ended December 31, 2012 Cash flows from operating activities: Net income Adjustments to reconcile net income to the net cash (used in) provided by operating activities: Gain on sale of property plant and equipment Loss on asset dispossal Unrealized gain on available-for-sale investments Deferred income tax Depreciation Infeffectivenness on cash flow hedge 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
2011
Year ended December 31, 2012
2011
16,507
15,054
75,437
65,470
(18) 286 5,212 355 (906) 69 186
(1) (41) (1,499) 4,103 1,369 114 -
(37) 204 (465) 20,878 355 4,957 176 186
(45) (1,277) 16,348 3,959 235 -
(50,149) (6,425) (995) (9,015) 36,791 1,359 169 (6,143)
93,197 (324) (5,941) (19,479) (34,812) 38,695 17 (803)
(123,058) (4,847) (468) (301) 118,915 (4,965) 3,264 (3,322)
(47,807) (6,965) (760) (24,061) 12,618 24,600 622 (1,864)
(12,717)
89,649
86,909
41,072
37 (130,498) (20,417) 119 (150,760)
(16,115) (1,500) (17,615)
37 (242,117) (49,972) (1,700) 356 8,314 (285,083)
60 (37,539) (1,500) 10,535 (28,444)
74,000 (7,437) (2,000) (0) 64,562
(5,000) 30,000 31,618 (8,014) (4,000) 8 44,612
181,000 (17,658) (2,000) (5,386) 155,955
(5,000) 30,000 78,045 (28,205) (13,999) (514) 60,327
Net (decrease) increase in cash and cash equivalents
(98,915)
116,647
(42,218)
72,955
Cash and cash equivalents at the beginning of the period
240,576
67,232
183,879
110,924
141,661
183,879
141,661
183,879
Net cash (used in) provided by operating activities Cash flows from investing activities: 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 Sale of investment securities Net cash used in investing activities
Cash flows from financing activities: Repayment of line of credit Proceeds from short-term debt Proceeds from long-term debt Repayment of long-term debt Dividends Debt issuance costs paid Net cash provided by financing activities
Cash and cash equivalents at the end of the period
9
EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 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, 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.
10