Post on 19-Apr-2018
transcript
Energy Development Corporation
38th Floor, One Corporate Centre Building, Julia Vargas corner Meralco Avenue
Ortigas Center, Pasig 1605, Philippines
Trunklines: +63 (2) 667-7332 (PLDT) / +63 (2) 755-2332 (Globe)
May 13, 2016 VINA VANESSA S. SALONGA
Head – Issuer Compliance and Disclosure Department (ICDD) Philippine Dealing & Exchange Corp. 37/F, Tower 1, The Enterprise Center 6766 Ayala Ave. cor. Paseo de Roxas Makati City Dear Ms. Salonga: In compliance with PDEx disclosure requirements, we submit the attached Energy Development Corporation (Consolidated) Quarterly Report for the period ended March 31, 2016 (SEC Form 17-Q).
SEC Number 66381 File Number _____
ENERGY DEVELOPMENT CORPORATION (Company’s full Name)
One Corporate Centre Julia Vargas cor. Meralco Ave., Ortigas Center, Pasig City (Company’s Address)
(632) 755-2332 (Telephone Number)
March 31, 2016 (Quarter Ending)
SEC FORM 17-Q (Form Type)
6 6 3 8 1
SEC Registration Number
E N E R G Y D E V E L O P M E N T C O R P O R A T I O N
( A S u b s i d i a r y o f R e d V u l c a n H o l d i n g s C o r p o r a t i o n ) A N D S U B S I D I A R I E S
(Company’s Full Name)
J u l i a V a r g a s C o r n e r M e r a l c o A v e n u
e , O r t i g a s C e n t e r , P a s i g C i t y
(Business Address: No. Street City/Town/Province)
Maribel A. Manlapaz 755-2332 (Contact Person) (Company Telephone Number)
0 3 3 1 S E C 1 7 0 5 0 5 Month Day (Form Type) Month Day
(Fiscal Year) (Annual Meeting)
(Secondary License Type, If Applicable)
Article I Dept. Requiring this Doc. Amended Articles Number/Section
Total Amount of Borrowings
675 P=5,399,622,093 P=8,139,958,894
Total No. of Stockholders Domestic Foreign
To be accomplished by SEC Personnel concerned
File Number LCU
Document ID Cashier
S T A M P S Remarks: Please use BLACK ink for scanning purposes.
COVER SHEET
SEC Form 17Q – 1Q 2016
PART 1: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Our unaudited consolidated financial statements for the three-month period ended March 31, 2016 have been prepared in accordance with Philippine Accounting Standards (PAS) 34, Interim Financial Reporting, and are filed as Annex I of this report. ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD & A”) The following is a discussion and analysis of the Company’s consolidated financial performance for the three-month period ended March 31, 2016. The prime objective of this MD&A is to help the readers understand the dynamics of our Company’s business and the key factors underlying our financial results. Hence, our MD&A is comprised of a discussion of our core business and an analysis of the results of operations. This section also focuses on key statistics from the unaudited financial statements and pertains to risks and uncertainties relating to the geothermal and other renewable power industry in the Philippines where we operate up to the stated reporting period. However, our MD&A should not be considered all inclusive, as it excludes unknown risks, uncertainties and changes that may occur in the general economic, political and environment condition after the stated reporting date. Our MD&A should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes. All financial information is reported in Philippine Pesos (PhP) unless otherwise stated. Any references in this MD&A to “we”, “us”, “our”, or “Company” pertains to the Energy Development Corporation and its subsidiaries. "EDC" pertains to the Parent Company Energy Development Corporation. Additional information about the Company can be found on our corporate website www.energy.com.ph.
SEC Form 17Q – 1Q 2016
The following is a summary of the key sections of this MD&A: OVERVIEW OF OUR BUSINESS ..............................................................................................4
Principal Products or Services .................................................................................................... 4 Distribution methods of products or services ............................................................................. 4 Competition................................................................................................................................. 5 Dependence on one or a few major customers and identity of any such major customers ........ 5 New Products or Services ........................................................................................................... 7
FINANCIAL HIGHLIGHTS ........................................................................................................7 RESULTS OF OPERATIONS .....................................................................................................8 FINANCIAL CONDITION ........................................................................................................12 CAPITAL AND LIQUIDITY RESOURCES ............................................................................16 CASH FLOW ...............................................................................................................................16 DISCUSSION ON THE SUBSIDIARIES .................................................................................17
Green Core Geothermal Inc. (GCGI) ........................................................................................ 17 Bac-Man Geothermal Inc. (BGI) .............................................................................................. 19 EDC Burgos Wind Power Corporation (EBWPC) ................................................................... 21 Unified Leyte Geothermal Energy Inc. (ULGEI) ..................................................................... 22 FG Hydro Power Corporation (FG Hydro) ............................................................................... 23
KEY PERFORMANCE INDICATORS ....................................................................................24 Commitments that will have an impact on the issuer’s liquidity ............................................25 Foreign Exchange Rate Volatility...............................................................................................25 Any events that will trigger direct or contingent financial obligation that is material to the company, including any default or acceleration of an obligation ............................................25 CASH DIVIDENDS .....................................................................................................................25 MAJOR STOCKHOLDERS ......................................................................................................26 BOARD OF DIRECTORS ..........................................................................................................27
OFFICERS ...................................................................................................................................27
SEC Form 17Q – 1Q 2016 4
OVERVIEW OF OUR BUSINESS
Principal Products or Services The Company operates in the four geothermal service contract areas where it is principally involved in the generation and sale of electricity through Company-owned geothermal power plants to NPC, electric cooperatives, privately-owned distribution utilities (DUs), large industrial clients, and National Grid Corporation of the Philippines (NGCP), pursuant to Power Purchase Agreements (PPAs), Wholesale Electricity Spot Market (WESM), Ancilliary Services Provider (ASP), and Feed-in Tariff (FIT), respectively. EDC’s subsidiaries, Green Core Geothermal, Inc. (GCGI) and Bac-Man Geothermal, Inc. (BGI), also hold offtake agreements in the form of Transition Supply Contracts (TSCs), Power Supply Contracts (PSCs) and Power Supply Agreements (PSAs) with various customers, particularly electric cooperatives. Through its 60% equity interest in First Gen Hydro Power Corporation (FG Hydro), the Company indirectly operates the 120 MW Pantabangan and 12 MW Masiway Hydroelectric Power Plants, located in Pantabangan, Nueva Ecija Province, Central Luzon. The power plants supply electricity into the Luzon grid to service the consumption of its distribution utilities clients covered by bilateral contract quantities. The Company has evolved into being the country’s premier pure renewable energy player, possessing interests in geothermal, hydro, wind and solar power. For geothermal energy, its expertise spans the entire geothermal value chain, i.e., from geothermal energy exploration and development, reservoir engineering and management, engineering design and construction, environmental management and energy research and development. Its wind energy expertise covers project research & development and wind data assessment. With FG Hydro, the Company has not only acquired expertise in hydropower operation and maintenance, but also the capability to sell power on a merchant basis. The Company also operates the Burgos Solar Project (Phases 1 and 2), which is inside the same concession area as EDC Burgos Wind Power Corporation (EBWPC) wind farm.
Distribution methods of products or services About 41.8% or 969.2 GWh of the 2,318.3 GWh sales volume from its electricity business was sold to NPC by Unified Leyte and Mindanao 1 and 2 Power Plants. About 26.8% or 620.4 GWh sales volume was sold to electric cooperatives, industrial customers and WESM in the Visayas region by the Palinpinon, Tongonan and Nasulo geothermal plants. About 11.8% or 273.5 GWh sales volume was sold to electric cooperatives, industrial customers and WESM in the Luzon region by the Bac-Man geothermal power plants. FG Hydro's electricity generation of 157.4 GWh was sold to WESM in the Luzon region and distribution utility clients in Nueva Ecija. Ancillary services of 98.3 GWh was sold to NGCP. Burgos wind and solar power plants generated 103.1 GWh and 2.4 GWh of electricity, respectively, which were sold under the Feed-In-Tariff (FIT) regime. ULGEI’s 94.0 GWh strips of energy were sold mainly to WESM.
SEC Form 17Q – 1Q 2016 5
Competition The Government, in implementing the thrust of the EPIRA, has paved the way for a more independent and market-driven Philippine power industry. As such, selling power and consequently the dispatch of power plants depend on the ability to offer competitively priced power supply to the market. The Company has multiple power projects in Luzon, Visayas, and Mindanao. The successful privatization of NPC assets and NPC-IPP contracts in Luzon and Visayas, coupled with the integration of the two Grids under the WESM, introduced new players and opened competition in the power industry. Multinationals that currently operate in the Philippines and could potentially compete against the Company include KEPCO Power Corporation, CalEnergy International Services, Inc., Marubeni Energy Corporation, and AES Corporation. Aboitiz group and San Miguel group are the Company‘s two closest competitors. For wind power, its closest competitor is North Luzon Renewable Energy Corporation, which operates the Caparispisan Wind Farm in Pagudpud, Ilocos Norte in addition to the following: Altenergy Philippines Holdings Corporation, Petrowind Energy, Inc., Trans-Asia Renewable Energy Corp., and Northwind Power Development Corporation. The Company will face competition in both the development of new power generation facilities and the acquisition of existing power plants, as well as in the financing for these activities. The performance of the Philippine economy and the historical high returns of power projects in the country have attracted many potential competitors, including multinational development groups and equipment suppliers, to explore opportunities in the development of electric power generation projects in the Philippines. Accordingly, competition for and from new power projects may increase in line with the long-term economic growth in the Philippines. The Company believes that it will be able to compete because of its competitively-priced power, the reliability of its power plants, its use of clean and renewable fuels, and its expertise and experience in power supply contracting and trading.
Dependence on one or a few major customers and identity of any such major customers Close to 34.8% of the Company’s electricity revenue are derived from existing long-term Power Purchase Agreements (PPAs) with NPC. Concessions As of March 31, 2016, the Company holds the following service contracts. Geothermal Resource The Company holds five (5) Geothermal Renewable Energy Service Contracts (GRESC) with the DOE for the following geothermal projects:
• Tongonan Geothermal Project (expiring in 2031) • Southern Negros Geothermal Project (expiring in 2031) • Bacon-Manito Geothermal Project (expiring in 2031) • Mt. Apo Geothermal Project (expiring in 2042) • Northern Negros Geothermal Project (expiring in 2044)
SEC Form 17Q – 1Q 2016 6
The Company, through its subsidiaries Green Core Geothermal Inc. and Bac-Man Geothermal Inc. secured three (3) Geothermal Operating Contracts covering power plant operations:
• Tongonan Geothermal Power Plant (with a twenty-five (25) year contract period expiring in 2037, renewable for another twenty-five (25) years)
• Palinpinon Geothermal Power Plants (with a twenty-five (25) year contract period expiring in 2037, renewable for another twenty-five (25) years)
• Bacon-Manito Geothermal Power Plants (with a twenty-five (25) year contract period expiring in 2037, renewable for another twenty-five (25) years)
The Company also holds Geothermal Renewable Energy Service Contracts (GRESC) for the following prospect areas:
• Ampiro Geothermal Project (with a five-year pre-development period expiring in 2017, 25-year contract period expiring in 2037, renewable for another twenty-five (25) years)
• Mandalagan Geothermal Project (with a five-year pre-development period expiring in 2017, 25-year contract period expiring in 2037, renewable for another twenty-five (25) years)
• Mt. Zion Geothermal Project (with a five-year pre-development period expiring in 2017, 25-year contract period expiring in 2037, renewable for another twenty-five (25) years)
• Lakewood Geothermal Project (with a five-year pre-development period expiring in 2017, 25-year contract period expiring in 2037, renewable for another twenty-five (25) years)
• Balingasag Geothermal Project (with a five-year pre-development period expiring in 2017, 25-year contract period expiring in 2037, renewable for another twenty-five (25) years)
• Mt. Zion 2 Geothermal Project (with a five-year pre-development period expiring in 2020, 25-year contract period expiring in 2040, renewable for another twenty-five (25) years)
Wind Resource The Company holds eleven (11) Wind Energy Service Contracts (WESC) with the DOE. The WESCs cover the following:
• 150 MW Wind Project in Burgos, Ilocos Norte; under DOE Certificate of Registration No. WESC 2009-09-004 (25-year contract period expiring in 2034; renewable for another twenty-five (25) years)
• 84 MW Wind Project in Pagudpud, Ilocos Norte; under DOE Certificate of Registration No. WESC 2010-02-040 (25-year contract period expiring in 2035; renewable for another twenty-five (25) years)
• Burgos 1 Wind Project in Burgos, Ilocos Norte; under DOE Certificate of Registration No. WESC 2013-12-063 (25-year contract period expiring in 2038; renewable for another twenty-five (25) years)
• Burgos 2 Wind Project in Burgos, Ilocos Norte; under DOE Certificate of Registration No. WESC 2013-12-063 (25-year contract period expiring in 2038; renewable for another twenty-five (25) years)
• Matnog 1 Wind Project in Matnog & Magdalena, Sorsogon; under DOE Certificate of Registration No. WESC 2014-07-075 (25-year contract period expiring in 2039; renewable for another twenty-five (25) years)
• Matnog 2 Wind project in Matnog, Sorsogon; under DOE Certificate of Registration No. WESC 2014-07-076 (25-year contract period expiring in 2039; renewable for another twenty-five (25) years)
• Matnog 3 Wind Project in Matnog, Sorsogon; under DOE Certificate of Registration No. WESC 2014-07-077 (25-year contract period expiring in 2039; renewable for another twenty-five (25) years)
SEC Form 17Q – 1Q 2016 7
• Iloilo 1 Wind Project in Batad & San Dionisio, Iloilo; under DOE Certificate of Registration No. WESC 2014-07-078 (25-year contract period expiring in 2039; renewable for another twenty-five (25) years)
• Negros Wind Project in Manapla & Cadiz City, Negros Occidental; under DOE Certificate of Registration No. WESC 2014-07-080 (25-year contract period expiring in 2039; renewable for another twenty-five (25) years)
• Burgos 3 Wind Project in Burgos and Pasuquin, Ilocos Norte; under DOE Certificate of Registration No. WESC 2015-09-085 (25-year contract period expiring in 2040; renewable for another twenty-five (25) years)
• Burgos 4 Wind Project in Burgos, Ilocos Norte; under DOE Certificate of Registration No. WESC 2015-09-086 (25-year contract period expiring in 2040; renewable for another twenty-five (25) years)
Solar Resource The Company holds five (3) Solar Energy Service Contracts (SESC) with the DOE. The SESCs cover areas in the following:
• 4.16 MW Phase 1 & 2.66 MW Phase 2 Burgos Solar Project, Ilocos Norte; under DOE Certificate of Registration No. SESC 2014-07-088 (25-year contract period expiring in 2039; renewable for another twenty-five (25) years)
• Murcia Solar Project in Murcia, Negros Occidental; under SESC No. 2015-03-113 (25-year contract period expiring in 2040; renewable for another twenty-five (25) years)
• Bogo Solar Project in Bogo, Cebu; under SESC No. 2015-06-234 (25-year contract period expiring in 2040; renewable for another twenty-five (25) years)
• President Roxas Solar Project in President Roxas, North Cotabato; under SESC No. 2015-03-114 (25-year contract period expiring in 2040; renewable for another twenty-five (25) years)*
• Kilada-Matalam Solar Project in Matalam, North Cotabato; under SESC No. 2015-03-119 (25-year contract period expiring in 2040; renewable for another twenty-five (25) years)*
*Cancellation letter has been submitted with Department of Energy (DOE) dated March 2016, awaiting confirmation reply
New Products or Services On January 17, 2016, the Company has successfully commissioned its 2.66 MW Burgos Solar Project Phase 2, which is inside the same concession area as EBWPC’s wind farm. The project is geographically situated in Barangay Saoit, Burgos Ilocos Norte. On March 1, 2016, the Energy Regulatory Commission (ERC) issued to EDC the Certificate of Compliance (COC) for the Burgos Solar Power Plant Phase 2. The COC specifies that the project, having a total capacity of 2.66 MW is entitled to the Feed-In Tariff (FIT) rate of P8.69, subject to adjustments as may be approved by the ERC, from January 19, 2016 to January 18, 2036.
FINANCIAL HIGHLIGHTS March 2016 vs. March 2015 Results During the first quarter of 2016, the recurring net income generated increased by 6.2% or P166.4 million to P2,871.5 million from the P2,705.1 million posted during the same period in 2015. The increase is mainly attributable to the P598.6 million increase in revenues primarily due to Palinpinon and Burgos
SEC Form 17Q – 1Q 2016 8
Wind's operations offset by the P401.1 million combined increase in cost of sales of electricity, general & administrative expenses, financial expenses, and provision for income tax. Recurring net income attributable to equity holders of the Parent Company was posted at P2,631.2 million, up by 6.8% as compared to the P2,464.3 million for the same period in 2015. The Company posted a net income of P3,494.5 million in the first quarter of 2016, an 27.8% or P760.6 million increase from the P2,733.8 million in the three-month period ended March 31, 2015. The movement was driven by the P598.6 million increase in revenues primarily due to Palinpinon and Burgos Wind's operations offset by the P401.1 million combined increase in cost of sales of electricity, general & administrative expenses, financial expenses, and provision for income tax. Net income is equivalent to 38.4% of total revenues for the quarter ended March 31, 2016 as compared to the 32.2% for the same period in 2015. Net income attributable to equity holders of the Parent Company at P3,254.0 million for the first quarter of 2016 is a P761.1 million increase from P2,492.9 million during the same period in 2015.
RESULTS OF OPERATIONS The following table details the results of operations of the Company for the first three quarters of 2016 and 2015. STATEMENTS OF INCOME Horizontal and Vertical Analysis of Material Changes as of March 31, 2016 and 2015
HORIZONTAL ANALYSIS VERTICAL ANALYSIS
Favorable (Unfavorable) Variance
(Amounts in PHP millions) March 2016
March 2015 Amount % 2016 2015
REVENUE Sale of electricity 9,096.3 8,497.7 598.6 7.0% 100.1% 100.0% COSTS OF SALE OF ELECTRICITY Costs of sale of electricity (3,216.0) (3,024.5) (191.5) -6.3% -35.4% -35.6% GENERAL AND ADMINISTRATIVE EXPENSES (1,365.0) (1,322.7) (42.3) -3.2% -15.0% -15.6% FINANCIAL INCOME (EXPENSE) Interest income 71.1 68.1 3.0 4.4% 0.8% 0.8% Interest expense (1,200.2) (1,131.7) (68.5) -6.1% -13.2% -13.3% (1,129.1) (1,063.6) (65.5) -6.2% -12.4% -12.5% OTHER INCOME (CHARGES) Foreign exchange losses – net 501.5 19.2 482.3 -2,512.0% 5.5% 0.2% Proceeds from insurance claims 45.9 77.1 (31.2) 40.5% 0.5% 0.9% Miscellaneous, net
63.7 (45.3) 109.0 -240.6% 0.7% -0.5%
611.1 51.0 560.1 1,098.2% 6.7% 0.6% INCOME BEFORE INCOME TAX 3,997.3 3,137.9 859.4 27.4% 43.9% 36.9% BENEFIT FROM (PROVISION FOR) INCOME TAX Current
(432.1) (400.3) (31.8) -7.9% -4.8% -4.7%
Deferred
(70.8) (3.8) (67.0) -1,763.2% -0.8% 0.0% (502.9) (404.1) (98.8) -24.4% -5.6% -4.8% NET INCOME 3,494.5 2,733.9 760.6 27.8% 38.4% 32.2% Net income attributable to: Equity holders of the Parent Company 3,254.0 2,492.9 761.1 30.5% 35.8% 29.3% Non-controlling interest 240.5 241.0 (0.5) -0.2% 2.6% 2.8% EBITDA 5,868.9 5,428.4 440.5 8.1% 64.5% 63.9% RECURRING NET INCOME 2,871.5 2,705.1 166.4 6.2% 31.6% 31.8% Recurring net income attributable to: Equity holders of the Parent Company 2,631.2 2,464.3 166.9 6.8% 28.9% 29.0% Non-controlling interest 240.3 240.8 (0.5) -0.2% 2.6% 2.8%
SEC Form 17Q – 1Q 2016 9
YTD March 31, 2015 vs. YTD March 31, 2014 Revenue Total revenue from sale of electricity for the quarter ended March 31, 2016 increased by 7.0% or P598.6 million to P9,096.3 million from P8,497.7 million during the same period in 2015. The improvement was principally driven by the P1,126.0 million increase in combined revenue contribution of Palinpinon (P153.4 million) and Burgos Wind (P667.6 million) power generating units, offset by Bac-Man’s decrease in revenue contribution amounting to P259.6 million. Costs of Sale of Electricity Costs of sale of electricity increased by 6.3% or P191.5 million to P3,216.0 million for the period ended March 31, 2016 from P3,024.5 million during the same period in 2015 mainly due to the following:
P130.9 million rental, insurance and taxes, due to reclassification of business tax from general and administrative expenses in 2015 and higher premium on insurance coverage of Company’s assets;
P109.4 million depreciation and amortization, primarily due to hook-up of new wells in LGBU, NIGBU, MAGBU, and BGBU;
P12.0 million in repairs and maintenance, i.e., higher maintenance costs for Leyte and Nasulo field facilities.
The aforementioned were mainly offset by P114.5 million decrease in purchased services and utilities.
General and Administrative Expenses General and administrative expenses increased by 3.2% or P42.3 million to P1,365.0 million in the first quarter of 2016 from P1,322.7 million during the same period in 2015 mainly due to the hike of the following:
P22.3 million for purchased services & utilities mainly on account of various administrative activities for Burgos Wind and Leyte, and exploration activities for international projects; and
P7.5 million provision for doubtful accounts.
Financial Income (Expense) Financial expenses - net increased by 6.2% or P65.5 million to P1,129.1 million for the period ended March 31, 2016 from P1,063.5 million during the same period in 2015.
Interest Income
Interest income increased by 4.4% or P3.0 million to P71.1 million for the quarter ended March 31, 2016 from P68.1 million during the same period in 2015 mainly due to higher investible partly offset by lower weighted average interest rates.
Interest Expense
Interest expense increased by 6.1% or P68.5 million to P1,200.2 million for the quarter ended March 31, 2016 from P1,131.7 million during the same period in 2015. The unfavorable variance is mainly due to the GCGI loan that was drawn last March 2015 partially offset by the applicable interest expense on the lower principal of outstanding loans following amortization payments made since second quarter of last year.
SEC Form 17Q – 1Q 2016 10
Other Income (Charges) Other income for the first quarter of 2016 amounted to P611.1 million, 1,098.2% or a P560.1 million increase from P51.0 million during the same period in 2015.
Foreign exchange gains (losses) - net
Foreign exchange gains - net for the three-month period ended March 31, 2016 amounted to P501.5 million, a P482.3 million increase from P19.2 million foreign exchange losses - net during the same period in 2015. The variance was mainly brought about by the appreciation of PHP against US$ for the quarter ended March 31, 2016 as compared to a PHP depreciation during the same period in 2015.
The comparative foreign exchange rates were as follows:
PHP:US$ December 31, 2014 44.720 March 31, 2015 44.700 December 31, 2015 47.060 March 31, 2016 46.070
Proceeds from insurance claims
Proceeds amounting to P45.9 million were received during the first quarter of 2016 due to machinery breakdown claims. Proceeds from insurance claims amounting to P77.1 million due to typhoons Glenda and Sendong were received during the first quarter in 2015.
Miscellaneous, net
Miscellaneous charges - net for the quarter ended March 31, 2016 amounted to P63.7 million, or a P109.0 million turnaround from the miscellaneous income - net of P45.3 million during the same period in 2015. The movement was mainly due to the higher dividend income received this period and lower disallowed input VAT claims from BIR.
Provision for Income Tax Current
The Company’s current tax expense increased by 7.9% or P31.8 million to P432.1 million for the quarter ended March 31, 2016 from P400.3 million during the same period in 2015 mainly on account of higher taxable income.
Deferred
Deferred tax expense for the first quarter of 2016 amounted to P70.8 million, a 1,763.2% or a P67.0 million increase from the P3.8 million during the same period in 2015, mainly due to the reversal of deferred tax liabilities on unrealized foreign exchange gains in 2015.
SEC Form 17Q – 1Q 2016 11
Net Income As a result of the foregoing, the Company’s net income increased by 27.8% or P760.6 million to P3,494.5 million for the first quarter of 2016 from P2,733.9 million net income during the same period in 2015. Net income is equivalent to 38.4% of total revenue for the period ended March 31, 2016 as compared to 32.2% for the same period in 2015.
SEC Form 17Q – 1Q 2016 12
FINANCIAL CONDITION The following table details the financial condition of the Company as of March 31, 2016 and December 31, 2015. STATEMENT OF FINANCIAL POSITION Horizontal and Vertical Analysis of Material Changes as of March 31, 2016 and December 31, 2015
HORIZONTAL ANALYSIS VERTICAL ANALYSIS
Favorable (Unfavorable) Variance
(Amounts in PHP millions) March 2016
December 2015 Amount % 2016 2015
ASSETS Current Assets
Cash and cash equivalents 17,836.5 17,613.9 222.6 1.3% 12.9% 12.9% Financial asset at fair value through profit or loss 1,036.1 1,014.3 21.8 2.1% 0.8% 0.7% Trade and other receivables 6,566.9 5,346.2 1,220.7 22.8% 4.8% 3.9% Parts and supplies inventories 3,382.1 3,251.9 130.2 4.0% 2.5% 2.4% Due from related parties 180.2 – 180.2 100.0% 0.1% 0.0% Current portion of:
Derivative assets 40.5 58.6 (18.1) -30.9% 0.0% 0.0% Available-for-sale (AFS) investments – 129.6 (129.6) -100.0% 0.0% 0.1%
Other current assets 2,371.6 2,263.5 108.1 4.8% 1.7% 1.7% Total Current Assets 31,413.9 29,678.0 1,735.9 5.8% 22.8% 21.8% Noncurrent Assets
Property, plant and equipment 88,448.0 88,567.7 (119.7) -0.1% 64.2% 65.1% Exploration and evaluation assets 3,085.6 3,073.6 12.0 0.4% 2.2% 2.3% Goodwill and intangible assets 4,247.0 4,289.3 (42.3) -1.0% 3.1% 3.2% Deferred tax assets – net 1,070.4 1,120.1 (49.7) -4.4% 0.8% 0.8% Available-for-sale (AFS) investments 434.0 435.1 (1.1) -0.3% 0.3% 0.3% Derivative assets 220.7 293.0 (72.3) -24.7% 0.2% 0.2% Other noncurrent assets 8,950.2 8,584.3 365.9 4.3% 6.5% 6.3%
Total Noncurrent Assets 106,455.9 106,363.1 92.8 0.1% 77.2% 78.2% TOTAL ASSETS 137,869.8 136,041.1 1,828.7 1.3% 100.0% 100.0% LIABILITIES AND EQUITY
LIABILITIES Current Liabilities Trade and other payables 11,810.1 9,989.9 1,820.2 18.2% 8.6% 7.3%
Due to related parties 112.8 101.8 11.0 10.8% 0.1% 0.1% Income tax payable 448.2 29.2 419.0 1,434.9% 0.3% 0.0% Current portion of:
Long-term debts 7,836.2 7,860.9 (24.7) -0.3% 5.7% 5.8% Derivative liabilities 12.4 4.9 7.5 153.1% 0.0% 0.0%
Total Current Liabilities 20,219.7 17,986.7 2,233.0 12.4% 14.7% 13.2% Noncurrent Liabilities
Long-term debts - net of current portion 65,548.4 66,650.7 (1,102.3) -1.7% 47.5% 49.0% Derivative liabilities - net of current portion 493.8 197.5 296.3 150.0% 0.4% 0.1% Net retirement and other post-employment benefits 1,992.9 1,914.9 78.0 4.1% 1.4% 1.4% Provisions and other long-term liabilities 1,973.8 2,061.5 (87.7) -4.3% 1.4% 1.5%
Total Noncurrent Liabilities 70,008.9 70,824.6 (815.7) -1.2% 50.8% 52.1% EQUITY Equity Attributable to Equity Holders of the Parent
Preferred stock 93.8 93.8 - 0.0% 0.1% 0.1% Common stock 18,750.0 18,750.0 - 0.0% 13.6% 13.8% Treasury Stock (54.3) (28.4) (25.9) 91.2% 0.0% 0.0% Common shares in employee trust account (350.2) (350.2) - 0.0% -0.3% -0.3% Additional paid-in capital 6,284.0 6,284.0 - 0.0% 4.6% 4.6% Equity reserve (3,706.4) (3,706.4) - 0.0% -2.7% -2.7% Net accumulated unrealized gain on AFS investments 102.9 104.0 (1.1) -1.1% 0.1% 0.1% Fair value adjustments on hedging transactions - (177.5) 177.5 -100.0% 0.0% -0.1% Cumulative translation adjustment arising from foreign subsidiaries (567.6) (97.3) (470.3) 483.4% -0.4% -0.1% Retained earnings 25,407.7 24,778.4 629.3 2.5% 18.4% 18.2% 45,959.9 45,650.4 309.4 0.7% 33.3% 33.6%
Non-controlling interests 1,681.3 1,579.4 101.9 6.5% 1.2% 1.2% Total Equity 47,641.2 47,229.8 411.4 0.9% 34.6% 34.7% TOTAL LIABILITIES AND EQUITY 137,869.8 136,041.1 1,828.6 1.3% 100.% 100.0%
SEC Form 17Q – 1Q 2016 13
Cash and cash equivalents Cash and cash equivalents increased by 1.3% or P222.6 million to P17,836.5 million as of March 31, 2016 from the P17,613.9 million in December 31, 2015. The increase was primarily attributable to the P3,315.5 million net cash generated from operating activities. The aforementioned were offset by the following:
P1,480.8 million acquisition of property, plant and equipment, mainly on account of drilling activities in Leyte and Palinpinon;
P902.5 million payments of interest and financing charges; P510.0 million principal re-payments of long-term debts; and P142.8 million regular cash dividend payments to non-controlling interest in FG Hydro.
Financial asset at fair value thru profit or loss This account increased by 2.1% or P21.8 million to P1,036.1 million as of March 31, 2016 from the P1,014.3 million in December 31, 2015 balance due to additional investments acquired in 2016. Trade and other receivables Trade and other receivables increased by 22.8% or P1,220.7 million to P6,566.9 million as of March 31, 2016 from P5,346.2 million balance as of December 31, 2015 mainly due to increase in NPC receivables.
Parts and supplies inventories This account increased by 4.0% or P130.2 million to P3,382.1 million as of March 31, 2016 from the P3,251.9 million as of December 31, 2015. The increase was due to purchase of various materials and supplies for plants maintenance and rehabilitation activities. Due from related parties This account increased by 100.0% or P180.2 million to P180.2 million as of March 31, 2016 mainly due to interest free advance for ULGEI P210.64 million. Other current assets This account increased by 4.8% or P108.2 million to P2,371.6 million as of March 31, 2016 from the P2,263.4 million balance in December 31, 2015 was primarily due to increase in withholding tax certificate. Property and equipment – net This account decreased by 0.1% or P119.7 million to P88,448.0 million as of March 31, 2016 from P88,567.7 million as of December 31, 2015. The decrease resulted primarily from receipt of proceeds from Weir Engineering Services for Bac-Man rehabilitation arising from settlement of the arbitration case.
SEC Form 17Q – 1Q 2016 14
Exploration and evaluation assets This account increased by 0.4% or P12.0 million to P3,085.6 million as of March 31, 2016 from the balance of P3,073.6 million as of December 31, 2015 mainly due to the expenditures for local explorations projects. Deferred tax assets – net This account decreased by 4.4% or P49.7 million to P1,070.4 million as of March 31, 2016 from the P1,120.1 million balance as of December 31, 2015 due to recognized deferred tax income. Available-for-sale (AFS) investments The decrease of 100.0% or P129.6 million to nil as of March 31, 2016 from the P129.6 million in December 31, 2015 in current available for sale investments is mainly due to the redemption of the matured placement last January 15, 2016 while, the decrease of 0.3% or P1.1 million to P434.0 million as of March 31, 2016 from P435.1 million in December 31, 2015 in non-current available for sale investment is due to realignment, amortization and MTM adjustment.. Derivative asset This account decreased by 30.9% or P18.1 million to P40.5 million as of March 31, 2016 from P58.6 million balance as of December 31, 2015 due to the outstanding hedging of foreign loans of the company. Other noncurrent assets This account increased by 4.3% or P366.0 million to P8,950.2 million as of March 31, 2016 from the P8,584.3 million balance as of December 31, 2015 primarily due to capital funding of international projects. Trade and other payables This account increased by 18.2% or P1,820.2 million to P11,810.1 million as of March 31, 2016 from the P9,989.9 million balance as of December 31, 2015 due to dividend payable accrued for common and preferred stockholders.
Due to related parties This account increased by 10.8% or P11.0 million to P112.8 million as of March 31, 2016 from P101.8 million as of December 31, 2015 was mainly due to outstanding consultancy fees with First Gen Corporation.
Income tax payable The increase in Income tax payable is due to the higher income tax expense for the period.
Derivative liability (current portion) The increase of 153.1% or P7.5 million to P12.4 million from P4.9 million as interest rate swap agreements resulted in loss.
SEC Form 17Q – 1Q 2016 15
Long-term debt – net of current portion The decrease in long-term debt of 1.7% or P1,102.3 million to P65,548.4 million from P66,650.7 million pertains mainly to the exchange rate realignment of loan balances. Net retirement and other post-retirement benefit The 4.1% increase or P78.0 million to P1,992.9 million as of March 31, 2016 from P1,914.9 million as of December 31, 2015 mainly due to retirement expense provision recognized during the period. Provisions and other long-term liabilities This account decreased by 51.7% or P1,065.0 million to P996.5 million as of March 31, 2016 from P2,061.5 million balance as of December 31, 2015 mainly due to provision for rehabilitation costs recognized under “Provisions and other long-term liabilities”. Cumulative translation adjustments arising from foreign subsidiaries
The increase of P470.3 million is mainly due to the outstanding hedging of foreign loans of the company.
Net accumulated unrealized gain on AFS investments
This account decreased by 1.1% or P1.1 million to P102.9 million as of March 31, 2016 and P104.0 million as of December 31, 2015. The decrease is mainly due to fair value of AFS investments for the period.
Retained earnings
The increase of 2.5% or P629.3 million to P25,407.7 million as of March 31, 2016 from P24,778.4 million as of December 31, 2015 was mainly due to the P3,254.0 million net income attributable to the equity holders of the Parent, partly reduced by P2,774.0 million cash dividend declared. Non-controlling interests Non-controlling interest increased by 6.5% or P101.9 million to P1,681.3 million as of March 31, 2016 from the P1,579.4 million balance as of December 31, 2015 due to the net income attributable to non-controlling interests of P240.5 million offset by theP142.8 million total cash dividend paid to non-controlling interests during the period.
SEC Form 17Q – 1Q 2016 16
CAPITAL AND LIQUIDITY RESOURCES
As of the nine-month period ended (in millions of pesos) YTD March 2016 YTD March 2015 YoY change
Statement of Financial Position Data Total Assets 137,869.8 137,191.1 678.7 Total Liabilities 90,228.6 93,005.7 (2,777.1) Total Stockholder’s Equity 47,641.2 44,185.4 3,455.8
The Company’s assets as of March 31, 2016 amounted to P137,869.7 million, 0.5% higher as compared to the P137,191.1 million level as of March 31, 2015.
CASH FLOW YTD March 31, 2016 vs. YTD March 31, 2015 Net cash flows from operating activities decreased by P2,468.2 million to P3,315.5 million for the period ended March 31, 2016 from P5,783.7 million during the same period in 2015 mainly due to lower operating revenue offset by higher operating expenses. Net cash flows used in investing activities decreased by 58.5% or P2,054.2 million to P1,460.5 million for the quarter ended March 31, 2016 as compared to the P3,515.4 million during the same quarter in 2015 primarily due to lower capital expenditures. Net cash flows from financing activities for the three-month period ended March 31, 2016 amounted to P1,581.2 million, an P9,288.3 million turnaround from the P7,707.1 million net cash flows used during the same period in 2015 primarily due to lower loan proceeds, partly offset by higher payments of long-term debts and dividends.
SEC Form 17Q – 1Q 2016 17
DISCUSSION ON THE SUBSIDIARIES
Green Core Geothermal Inc. (GCGI)
(Amounts in PHP millions)
For the periods ended March 31 2016 2015
Revenue 2,697.9 2,589.2 Cost of sale of electricity (2,016.2) (2,234.7) General and administrative expenses (103.0) (128.7) Other income (charges) - net (104.5) (2.8) Income before income tax 474.2 223.0 Provision for income tax (91.8) (52.7) Net income 382.4 170.3 As of March 31, 2016 December 31,
2015 Total current assets 3,595.2 3,776.7 Total noncurrent assets 9,644.1 9,675.2 Total current liabilities 2,922.7 3,017.2 Total noncurrent liabilities 6,473.7 6,976.0 Total equity 3,842.9 3,458.7
GCGI’s revenue increased by P108.7 million, to P2,697.9 million as of March 31, 2016 from P2,589.2 million for the same period in 2015. The increase was primarily due to higher sales volume by 17.4 GWh.
Cost of sale of electricity decreased by 9.8% or P218.5 million, to P2,016.2 million in 2016 from P2,234.7 million in 2015. The decrease was due to lower cost of steam (P274.8 million) offset by higher repairs and maintenance (P35.8 million) and rental, insurance and taxes (P12.8 million). Other charges – net increased by P101.7 million, to P104.5 million in 2016 from P2.8 million in 2015. The unfavorable variance was mainly due to higher interest expense on long-term loan (P94.3 million). The long-term loan was drawn last March 8, 2015. With the foregoing, net income increased by 124.5% or P212.1 million, to P382.4 million in 2016 from P170.3 million in 2015. Total current assets decreased by P181.5 million, to P3,595.2 million as of March 31, 2016 from P3,776.7 million balance as of December 31, 2015. The decrease was traced to lower other current assets (P314.3 million) and trade and other receivables (P59.0 million) offset by higher cash & cash equivalents (P179.1 million). Total current liabilities decreased by P94.5 million, to P2,922.7 million as of March 31, 2016 from P3,017.2 million as of December 31, 2015. The decrease was attributed to lower trade & other payables (P184.9 million) offset by this period’s income tax payable, none in 2015, (P87.0 million). Total noncurrent liabilities decreased by 7.2% or P502.3 million, to P6,473.7 million as of March 31, 2016 from P6,976.0 million as of December 31, 2015 due to this period’s repayment of loan (P510.0 million).
SEC Form 17Q – 1Q 2016 18
Total equity increased by 11.1% or P384.2 million, to P3,842.9 million as of March 31, 2016 from P3,458.7 million as of December 31, 2015 due to this period’s net income (P382.4 million).
SEC Form 17Q – 1Q 2016 19
Bac-Man Geothermal Inc. (BGI)
(Amounts in PHP millions) For the periods ended
March 31, 2016 March 31, 2015 Revenues 707.7 952.9 Cost of sales (703.8) (568.1) General and administrative expenses (13.2) (45.0) Other income 13.7 3.6 Income before income tax 4.4 343.4 Provision for income tax 0.2 - Net income 4.6 343.4
As of
March 31, 2016 Audited
December 31, 2015 Total Current Assets 3,618.0 5,307.1 Total Non-Current Assets 5,464.5 5,724.3 Total Current Liabilities 1,448.3 1,756.6 Total Non-Current Liabilities 4,388.1 4,383.3 Total Equity 3,246.1 4,891.5
Revenues decreased by 25.7% or P=245.2 million, to P=707.7 million as of March 31, 2016 from P=952.9 million for the same period in 2015. The decrease was primarily due to decrease in WESM prices and expiration of some bilateral contracts. Cost of sales increased by 23.9% or P=135.7 million, to P=703.8 million as of March 31, 2016 from P=568.1 million for the same period in 2015. The increase was primarily due to higher steam costs, depreciation and amortization, and rental, insurance and taxes. General and administrative expenses decreased by 70.7% or P=31.8 million, to P=13.2 million as of March 31, 2016 from P=45.0 million for the same period in 2015. The decrease was due to lower purchased services and utilities, rental, insurance and taxes, and personnel costs. This year’s other income was higher by 280.6% or P=10.1 million, to P=13.7 million as of March 31, 2016 from P=3.6 million for the same period in 2015. The increase was primarily due to the P=81.9 million insurance proceeds for machinery breakdown claims, partly offset by higher interest expense, foreign exchange losses and VAT refund disallowance amounting to P=61.5 million, P=5.0 million and P=4.0 million, respectively. This year’s provision for income tax of P=0.2 million is attributable to deferred tax impact of temporary differences on retirement and other post employments benefits. Total current assets decreased by 31.8% or P=1,689.1 million, to P=3,618.0 million as of March 31, 2016 from P=5,307.1 million as of December 31, 2015. The decrease was primarily due to the decrease of cash and cash equivalents by P=1,905.1 million and trade receivables and other receivables by P=45.4 million, partly offset by the decrease of other current assets by P=262.6 million. Total non-current assets decreased by 4.5% or P=259.8 million, to P=5,464.5 million as of March 31, 2016 from P=5,724.3 million as of December 31, 2015. The decrease was mainly due to decrease of property,
SEC Form 17Q – 1Q 2016 20
plant and equipment by P=271.4 primarily due to the collection from Weir Engineering Services arising from settlement of the arbitration case, partly offset by increase in other non-current assets by P=11.8 million. Total current liabilities decreased by 17.6% or P=308.3 million, to P=1,448.3 million as of March 31, 2016 from P=1,756.6 million as of December 31, 2015. The decrease was mainly due to decrease of trade and other payables by P=308.1 million. Total non-current liabilities increased by 0.1% or P=4.8 million, to P=4,388.1 million as of March 31, 2016 from P=4,383.3 million as of December 31, 2015. The increase was primarily due to increase in long-term debts from amortization of deferred financing costs and increase in net retirement and other post-employment liability. Total equity decreased by 33.6% or P=1,645.4 million, to P=3,246.1 million as of March 31, 2016 from P=4,891.5 million as of December 31, 2015. The decrease was primarily due to dividend declaration of P=1,650.0 million, partially offset by net income earned during the period of P=4.6 million.
SEC Form 17Q – 1Q 2016 21
EDC Burgos Wind Power Corporation (EBWPC)
(Amounts in PHP millions) For the years ended
March 31, 2016 March 31, 2015 Revenue 920.7 253.1 Costs of sale of electricity (316.0) (266.5) General and administrative expenses (34.4) (28.7) Other charges – net (41.0) (133.0) Loss before income tax 529.3 (175.1) Provision for income tax (35.2) - Net Income (Loss) 494.1 (175.1) As of March 31, 2016 December 31, 2015 Total current assets 2,912.7 2,551.2 Total noncurrent assets 18,028.6 18,198.2 Total current liabilities 1,640.5 1,786.4 Total noncurrent liabilities 13,489.4 13,365.1 Total equity 5,811.4 5,598.0 EBWPC reported P=920.7 million revenue from sale of electricity for the quarter ended March 31, 2016 from P=253.1 million for the same period in 2015. This is a P=667.6 million or 263.8% increase mainly due to higher actual generated sales volume and implementation of Feed-in-tariff. Costs of sale of electricity increased by 18.6% or P=49.5 million, to P=316.0 million as of March 31, 2016 from P=266.5 million for the same period in 2015. The unfavorable variance was mainly due to rental, insurance and taxes (P=35.5 million) and purchased services and utilities (P=28.1 million). These were partly offset by lower depreciation and amortization (P=20.6 million) General and administrative expenses increased by 19.9% or P=5.7 million, to P=34.4 million as of March 31, 2016 from P=28.7 million for the same period in 2015. This was mainly due to higher materials and supplies (P=7.3 million) and personnel costs (P=3.5 million). These were partly offset by lower rental, insurance and taxes (P=3.0 million) and provision for impairment of Input VAT (P=2.0 million).
Other charges - net decreased by 69.2% or P=92 million, to P=41.0 million as of March 31, 2016 from P=133.0 million for the same period in 2015. This was mainly due to favorable appreciation of the peso against the dollar (P=150.4 million), partly offset by the increase in interest expense incurred (P=150.4 million) on the US$315 million debt facility. Balance sheet accounts have minimal movements during the quarter.
SEC Form 17Q – 1Q 2016 22
Unified Leyte Geothermal Energy Inc. (ULGEI)
(Amounts in PHP millions)
For the period ended March 31, 2016 March 31, 2015
Revenue 340.3 359.0 Costs of sale of electricity (517.0) (450.0) General and administrative expenses (3.0) (0.7) Other income (charges) - net - - Loss before income tax (179.7) (91.7) Provision for income tax - - Net Loss (179.7) (91.7) As of March 31, 2016 December 31, 2015 Total current assets 240.4 194.3 Total noncurrent assets - - Total current liabilities 813.7 587.9 Total noncurrent liabilities - - Total equity (capital deficiency) (573.3) (393.6)
ULGEI’s revenue decreased by 5.2% or P=18.7 million, to P=340.3 million as of March 31, 2016 from P=359.0 million for the same period in 2015. The unfavorable variance was due to lower WESM prices. Cost of sale of electricity increased by 14.9% or P=67.0 million, to P=517.0 million as of March 31, 2016 from P=450.0 million for the same period in 2015. The unfavorable variance was due to higher purchased price of electricity. General and administrative expenses increased by 328.6% or P=2.3 million, to P=3.0 million mainly due to increase in purchased services and utilities (P=1.8 million) and business and related expenses (P=0.5 million). With the foregoing, net loss increased by 96.0% or P=88.0 million to P=179.7 million as of March 31, 2016 from P=91.7 million for the same period in 2015. Total currents assets increased by 23.7% or P=46.1 million, to P=240.4 million as of March 31, 2016 from P=194.3 million balance as of December 31, 2015. The increase was mainly due to the higher trade receivable (P=37.8 million ) and cash (P=5.0 million). Total current liabilities increased by 38.4% or P=225.8 million, to P=813.7 million as of March 31, 2016 from P=587.9 million balance as of December 31, 2015. The increase was caused by higher due to related parties (P=210.6 million) and trade payables (P=15.2 million). Total capital deficiency increased by 45.7% or P=179.7 million to P=573.3 million as of March 31, 2016 from P=393.6 million balance as of December 31, 2015. The increase was due to net loss on operation.
SEC Form 17Q – 1Q 2016 23
FG Hydro Power Corporation (FG Hydro)
(Amounts in PHP millions)
As of and for the periods ended March 31
2016 2015 Operating revenues 1,012.0 1,043.5 Cost of sales (162.1) (165.8) General and administrative expenses (81.4) (71.3) Operating profit 768.5 806.4 Other expenses – net (30.2) (46.0) Income before tax 738.3 760.4 Provision for income tax (153.1) (158.0) Net income 585.2 602.4 Mar. 31, 2016 Dec. 31, 2015 Total current assets 1,766.0 1,734.2 Total noncurrent assets 6,019.0 5,670.1 Total current liabilities 747.6 596.4 Total noncurrent liabilities 2,832.5 2,831.2 Total equity 4,204.9 3,976.7
FG Hydro generated revenues of P1,012.0 million for the period ended March 31, 2016, 3.0% or P31.5 million lower than the revenues of P1,043.5 million for the same period in 2015. The unfavorable variance was mainly on account of lower average WESM prices and lower electricity sales during the period partly offset by higher ancillary service revenues. Cost of sales for the period ended March 31, 2016 is slightly lower at P162.1 million as compared to the P165.8 million level for the same period in 2015. The favorable variance was mainly due to lower water service fees paid to NIA during the period. General and administrative expenses was higher at P81.4 million, P10.1 million or 14.2% higher compared to the P71.3 million expense for the same period in 2015. The unfavorable variance was mainly due to increased amount of IAR insurance premium. Interest expense for the period ended March 31, 2016 of P32.6 million, however, is P15.1 million or 31.7% lower as compared to P47.7 million for the same period in 2015 due to reduced long-term debt balance. Provision for current income tax for the period ended March 31, 2016 is slightly lower at P153.1 million as compared to P158.0 million for the same period in 2015. Overall, FG Hydro posted a net income of P585.2 million for the period ended March 31, 2016, P17.2 million or 2.9% lower than the P602.4 million reported income for the same period in 2015. Total assets as of March 31, 2016 stood at P7,785.00 million, P380.7 million or 5.1% higher than the December 31, 2015 level of P7,404.3 million. The favorable variance was mainly due to higher accounts receivable balance in 2016. As of March 31, 2016, total liabilities stood at P3,580.1 million, P152.5 million or 4.4% higher than the December 31, 2015 level of P3,427.6 million. The unfavorable variance is mainly on account of higher balance of income tax liability as of end of March 31, 2016.
Total equity as of March 31, 2016 of P4,204.9 million rose slightly by 5.7% or P228.2 million as compared to the December 31, 2015 level of P3,976.7 million.
SEC Form 17Q – 1Q 2016 24
KEY PERFORMANCE INDICATORS The top eight (8) key performance indicators are set forth below:
Ratio March 2016 March 2015 Current Ratio 1.55:1 1.60:1 Debt-to-Equity Ratio 1.54:1 1.76:1 Net Debt-to-Equity Ratio 1.17:1 1.22:1 Return on Assets (%) 6.27 9.85 Return on Equity (%) 18.77 29.75 Solvency Ratio 0.07 0.05 Interest Rate Coverage Ratio 3.80 3.70 Asset-to-Equity Ratio 2.89 3.10
Current Ratio – Total current assets divided by total current liabilities. This ratio is a rough indication of a company’s ability to pay its short-term obligations. Generally, a current ratio above 1.00 is indicative of a company’s greater capability to settle its current obligations. Debt-to-Equity Ratio – Total interest-bearing debts divided by stockholders’ equity. This ratio expresses the relationship between capital contributed by the creditors and the owners. The higher the ratio, the greater the risk being assumed by the creditors. A lower ratio generally indicates greater long-term financial safety. Net-Debt-to-Equity Ratio – Total interest-bearing debts less cash & cash equivalents divided by stockholders’ equity. This ratio measures the company’s financial leverage and stability. A negative net debt-to-equity ratio means that the total of cash and cash equivalents exceeds interest-bearing liabilities. Return on Assets – Net income (annual basis) divided by total assets (average). This ratio indicates how profitable a company is relative to its total assets. This also gives an idea as to how efficient management is at using its assets to generate earnings. Return on Equity – Net income (annual basis) divided by total stockholders’ equity (average). This ratio reveals how much profit a company earned in comparison to the total amount of shareholder equity found on the balance sheet. A business that has a high return on equity is more likely to be one that is capable of internally generating cash. For the most part, the company’s return on equity is compared with an industry average. The company is considered superior if its return on equity is greater than the industry average. Solvency Ratio – Net income excluding depreciation and non-cash provisions divided by total debt obligations. This ratio gauges a company’s ability to meet its long-term obligations. Interest Rate Coverage Ratio – Earnings before interest and taxes of one period divided by interest expense of the same period. This ratio determines how easily a company can pay interest on outstanding debt. Asset-to-Equity Ratio – Total assets divided by total stockholders’ equity. This ratio shows a company’s leverage, the amount of debt used to finance the firm.
SEC Form 17Q – 1Q 2016 25
Commitments that will have an impact on the issuer’s liquidity As of March 31, 2016, the Company has unserved purchase orders and awarded contracts for the purchase of various capital goods in the total amount of P927.9 million. Other than these, we are not aware of any other material commitments that should impact the Company’s liquidity.
Foreign Exchange Rate Volatility The Company has P=8,140.0 million in long-term US dollar denominated loans as of March 31, 2016 which is 60.1% of the total Company’s long-term loans.
Any events that will trigger direct or contingent financial obligation that is material to the company, including any default or acceleration of an obligation There are no material changes in the contingent financial obligations since the last annual balance sheet date.
CASH DIVIDENDS Parent Company On March 9, 2016, EDC declared cash dividend amounting to P=2,600.0 million to its common shareholders and P=7.5 million to its preferred shareholder of record as of March 23, 2016 payable on or before April 12, 2016. First Gen Hydro On January 20, 2016, FG Hydro paid cash dividend amounting to P=142.8 million to its non-controlling common stockholder.
SEC Form 17Q – 1Q 2016 26
MAJOR STOCKHOLDERS As of March 31, 2016, the total number of stockholders was 680 and the stock price was P5.88. Public float level was at 49.25% (or 9,228,916,239 common shares). List of Top 20 Stockholders as of March 31, 2016
Rank Name Nationality
Number of Shares
% Preferred Common Total
1 Red Vulcan Holdings Corporation Filipino 9,375,000,000 7,500,000,000 16,875,000,000 60.00
2 PCD Nominee Corporation Foreign - 5,451,442,656 5,451,442,656 19.39
3 PCD Nominee Corporation Filipino - 3,772,468,195 3,772,468,195 13.42
4 First Gen Corporation Filipino - 991,782,700 991,782,700 3.53
5 Northern Terracotta Power Corporation Filipino - 986,337,000 986,337,000 3.51
6 Peter D. Garrucho, Jr. Filipino - 5,670,000 5,670,000 0.02
7 F. Yap Securities, Inc. Filipino - 4,000,000 4,000,000 0.01
8 Peace Equity Access for Community Empowerment Foundation, Inc. Filipino - 3,030,000 3,030,000 0.01
9 Benjamin K. Liboro &/or Luisa Liboro Filipino - 2,525,500 2,525,500 0.01
10 Croslo Holdings Corporation Filipino - 2,200,000 2,200,000 0.01
11 Manuel Moreno or Maria Terasa Lopez Filipino - 1,310,000 1,310,000 0.00
12 Anthony M. Mabasa Filipino - 1,000,000 1,000,000 0.00
13 Arthur A. de Guia Filipino - 950,000 950,000 0.00
14 ALG Holdings Corporation Filipino - 875,000 875,000 0.00
15 First Life Financial Co., Inc. Filipino - 800,000 800,000 0.00
16 Peter Mar &/or Annabelle C. Mar Filipino - 700,000 700,000 0.00
17 Rosalind Camara Filipino - 663,750 663,750 0.00
18 Ma. Consuelo R. Lopez Filipino - 500,000 500,000 0.00
19 Nicolas, Virginia Maria D. Filipino - 393,000 393,000 0.00
20 Puno,Francis Giles B. &/or Ma. Patricia Puno Filipino - 367,500 367,500 0.00
SEC Form 17Q – 1Q 2016 27
BOARD OF DIRECTORS As of March 31, 2016, the members of the Board of Directors of EDC are as follows: Oscar M. Lopez Chairman Emeritus Federico R. Lopez Chairman and Chief Executive Officer Peter D. Garrucho, Jr. Director Joaquin E. Quintos IV Director Ernesto B. Pantangco Director and Executive Vice President Francis Giles B. Puno Director Richard B. Tantoco Director, President and Chief Operating Officer Jonathan C. Russell Director Edgar O. Chua Independent Director Francis Ed. Lim Independent Director Arturo T. Valdez Independent Director
OFFICERS As of March 31, 2016, the Officers of EDC are as follows:
Name Position Federico R. Lopez Chief Executive Officer Richard B. Tantoco President and Chief Operating Officer Ernesto B. Pantangco Executive Vice President Nestor H. Vasay Senior Vice President for the Finance
Group/CFO/Treasurer/Head of Finance & Shared Services Group
Manuel S. Ogena Senior Vice President, Geosciences and Reservoir Engineering Group
Dominic M. Camu Senior Vice President, Operations and Engineering Group and Concurrent Head of Leyte Geothermal Business Unit (LGBU)
Ma. Elizabeth D. Nasol Vice President, Human Resource Management Group
Erwin O. Avante Vice President, Corporate Finance, Compliance Officer (SEC & PSE)
Ferdinand B. Poblete Vice President, Information Technology Group/Chief Information Officer
Ariel Arman V. Lapus Vice President, Business Development, and Managing Director for Latin America
Ellsworth R. Lucero Vice President, Head of LGBU Facilities Operations Management
Manuel C. Paete Vice President, Head of LGBU Projects & Resource Management
Liberato S. Virata Vice President, Head of BGBU Projects & Resource Exploration Management
Reman A. Chua Vice President, Head of Wind Ilocos Norte Business Unit
SEC Form 17Q – 1Q 2016 28
Name Position Raymundo N. Jarque Vice President for International and
Frontier/Business Development Group Rassen M. Lopez Vice President, Head of Legal and Regulatory
Group Bernardito M. Lapuz Chief Risk Officer / Vice President for Strategy and
Risk Management Group Ramon A. Carandang Vice President / Head of Corporate Affairs Group Maribel A. Manlapaz Assistant Vice President, Comptroller Teodorico Jose R. Delfin Corporate Secretary Ana Maria A. Katigbak Assistant Corporate Secretary Glenn L. Tee Chief Audit Executive Erudito S. Recio Investor Relations and Corporate Information
Officer
ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIES
FINANCIAL SOUNDNESS INDICATORS
Ratio March 2016 March 2015 Current Ratio 1.55:1 1.60:1 Debt-to-Equity Ratio 1.54:1 1.76:1 Net Debt-to-Equity Ratio 1.17:1 1.22:1 Return on Assets (%) 6.27 9.85 Return on Equity (%) 18.77 29.75 Solvency Ratio 0.07 0.05 Interest Rate Coverage Ratio 3.80 3.70 Asset-to-Equity Ratio 2.89 3.10
EDC Geothermal Corporation (EGC)
First Gen Hydro Power Corporation (FGHPC)
EDC Wind Energy Holdings Inc.
(EWEHI)
EDC Holdings International Limited
(EHIL)
• Green Core Geothermal Inc. (GCGI)
• Bac-Man Geothermal Inc. (BGI)
• Unified Leyte Geothermal Energy Inc. (ULGEI)
• Southern Negros Geothermal, Inc. (SNGI)
• EDC Mindanao Geothermal Inc. (EMGI)
• Bac-Man Energy Development Corporation
(BEDC) • Kayabon Geothermal, Inc.
(KGI) •Mount Apo Renewable Energy
Inc. (MAREI)
Energy Development (EDC) Corporation Chile Limitada
Energy Development Corporation Hong Kong
Limited (EDC HKL)
Prime Terracotta Holdings Corporation
Red Vulcan Holdings Corporation
ID: 100%
D: 100% D: 100% D: 100% D: 100% D: 60%
ID: 100% D: 99.99%
Legend: D – Direct Ownership ID – Indirect Ownership E – Economic Interest V – Voting Interest
E: 40% V: 60%
E: 100% V: 100%
PT EDC Indonesia EDC Peru Holdings S.A.C.
EDC Chile Holdings SPA
PT EDC Panas Bumi Indonesia
EDC Geotermica Chile SPA
EDC Geotermica Peru S.A.C.
Geotermica Quello Apacheta Peru S.A.C.
ID: 100%
ID: 70%
ID: 95% ID: 95% ID: 100%
ID: 100%
EDC Geotermica Del Sur S.A.C.
EDC Energia Azul S.A.C.
EDC Energia Peru S.A.C.
EDC Energia Geotermica S.A.C.
EDC Progreso Geotermico S.A.C.
EDC Energia Renovable S.A.C.
Geotermica Crucero Peru S.A.C.
Geotermica Loriscota Peru S.A.C.
Geotermica Tutupaca Norte Peru S.A.C.
ID: 70%
EDC Bright Solar Energy Holdings Inc.
(EBSEHI)
EDC Drillco Corporation (EDC
Drillco)
EDC Bago Solar Power Corporation
(EBSPC)
D: 100%
ID: 100% •EDC Pagali Burgos Wind Power Corporation (EPBWPC) •EDC Burgos Wind Power Corporation (EBWPC) •EDC Pagudpod Wind Power Corporation (EPWPC)
•EDC Bayog Burgos Wind Power Corporation (EBBWPC) •Matnog 1 Renewable Energy Corporation (M1REC) •Matnog 2 Renewable Energy Corporation (M2REC)
•Matnog 3 Renewable Energy Corporation (M3REC) •Iloilo 1 Renewable Energy Corporation (I1REC) •Negros 1 Renewable Energy Corporation (N1REC)
EDC Desarollo Sostenible Ltd
ID: 100%
EDC Energia Verde Peru S.A.C.
ID: 30%
EDC Soluciones Sostenibles Ltd
ID: 100%
EDC Energia Verde Chile SpA
EDC Energia de la Tierra SpA
ID: 100%
ID: 100%
EDC Burgos Solar
Corporation (EBSC)
ID: 100% ID: 0.01%
ID: 0.01%
ID: 99.99%
ID: 99.96%
ID: 99.99% ID: 0.01%
ID: 0.01% ID: 99.99% ID: 0.01%
ID: 70%
ID: 70%
FIRST PHILIPPINE HOLDINGS CORPORATION AND SUBSIDIARIES SCHEDULE K – CORPORATE STRUCTURE
MARCH 31, 2016
Companies within the Lopez Group
FIRST PHILIPPINE HOLDINGS CORPORATION AND SUBSIDIARIES SCHEDULE K – CORPORATE STRUCTURE
MARCH 31, 2016
FPH Group
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation) SUPPLEMENTARY SCHEDULE OF ALL EFFECTIVE STANDARDS AND INTERPRETATIONS MARCH 31, 2016 PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of March 31, 2016
Adopted Not Adopted
Not Applicable
Framework for the Preparation and Presentation of Financial Statements Conceptual Framework Phase A: Objectives and qualitative characteristics
PFRSs Practice Statement Management Commentary
Philippine Financial Reporting Standards
PFRS 1 (Revised)
First-time Adoption of Philippine Financial Reporting Standards
Amendments to PFRS 1 and PAS 27: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
Amendments to PFRS 1: Additional Exemptions for First-time Adopters
Amendment to PFRS 1: Limited Exemption from Comparative PFRS 7 Disclosures for First-time Adopters
Amendments to PFRS 1: Severe Hyperinflation and Removal of Fixed Date for First-time Adopters
Amendments to PFRS 1: Government Loans
PFRS 2 Share-based Payment
Amendments to PFRS 2: Vesting Conditions and Cancellations
Amendments to PFRS 2: Group Cash-settled Share-based Payment Transactions
PFRS 3 (Revised)
Business Combinations
PFRS 4 Insurance Contracts
Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts
PFRS 5 Non-current Assets Held for Sale and Discontinued Operations
PFRS 6 Exploration for and Evaluation of Mineral Resources
Exhibit 2.2
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of March 31, 2016
Adopted Not Adopted
Not Applicable
PFRS 7 Financial Instruments: Disclosures
Amendments to PFRS 7: Transition
Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets
Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets - Effective Date and Transition
Amendments to PFRS 7: Improving Disclosures about Financial Instruments
Amendments to PFRS 7: Disclosures - Transfers of Financial Assets
Amendments to PFRS 7: Disclosures - Offsetting Financial Assets and Financial Liabilities
Amendments to PFRS 7: Mandatory Effective Date of PFRS 9 and Transition Disclosures
PFRS 8 Operating Segments
PFRS 9 Financial Instruments (2010 version)*
Amendments to PFRS 9: Mandatory Effective Date of PFRS 9 and Transition Disclosures*
Financial Instruments (2013 version)*
Financial Instruments (2014 version)*
PFRS 10 Consolidated Financial Statements
Amendments to PFRS 10, PFRS 12 and PAS 27: Investment Entities
Amendments to PFRS 10 and PAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture*
PFRS 11 Joint Arrangements
PFRS 12 Disclosure of Interests in Other Entities
Amendments to PFRS 10, PFRS 12 and PAS 27: Investment Entities
PFRS 13 Fair Value Measurement
PFRS 14 Regulatory Deferral Accounts*
PFRS 15 Revenue from Contracts with Customers*
Philippine Accounting Standards
PAS 1 (Revised)
Presentation of Financial Statements
Amendment to PAS 1: Capital Disclosures
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of March 31, 2016
Adopted Not Adopted
Not Applicable
Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation
Amendments to PAS 1: Presentation of Items of Other Comprehensive Income
PAS 2 Inventories
PAS 7 Statement of Cash Flows
PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
PAS 10 Events after the Reporting Period
PAS 11 Construction Contracts
PAS 12 Income Taxes
Amendment to PAS 12 - Deferred Tax: Recovery of Underlying Assets
PAS 16 Property, Plant and Equipment
Amendments to PAS 16 and PAS 18: Clarification of Acceptable Methods of Depreciation and Amortization*
Amendments to PAS 16 and PAS 41: Bearer Plants*
PAS 17 Leases
PAS 18 Revenue
PAS 19 Employee Benefits
Amendments to PAS 19: Actuarial Gains and Losses, Group Plans and Disclosures
Amendments to PAS 19: Defined Benefit Plans: Employee Contributions*
PAS 19 (Amended)
Employee Benefits
PAS 20 Accounting for Government Grants and Disclosure of Government Assistance
PAS 21 The Effects of Changes in Foreign Exchange Rates
Amendment: Net Investment in a Foreign Operation
PAS 23 (Revised)
Borrowing Costs
PAS 24 (Revised)
Related Party Disclosures
PAS 26 Accounting and Reporting by Retirement Benefit Plans
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of March 31, 2016
Adopted Not Adopted
Not Applicable
PAS 27 (Amended)
Separate Financial Statements
Amendments to PFRS 10, PFRS 12 and PAS 27: Investment Entities
Amendment: Equity Method in Separate Financial Statements*
PAS 28 (Amended)
Investments in Associates and Joint Ventures
Amendment: Accounting for Acquisitions of Interests in Joint Operations*
PAS 29 Financial Reporting in Hyperinflationary Economies
PAS 31 Interests in Joint Ventures
PAS 32 Financial Instruments: Disclosure and Presentation
Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation
Amendment to PAS 32: Classification of Rights Issues
Amendments to PAS 32: Offsetting Financial Assets and Financial Liabilities
PAS 33 Earnings per Share
PAS 34 Interim Financial Reporting
PAS 36 Impairment of Assets
Amendment to PAS 36: Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets
PAS 37 Provisions, Contingent Liabilities and Contingent Assets
PAS 38 Intangible Assets
PAS 39 Financial Instruments: Recognition and Measurement
Amendments to PAS 39: Transition and Initial Recognition of Financial Assets and Financial Liabilities
Amendments to PAS 39: Cash Flow Hedge Accounting of Forecast Intragroup Transactions
Amendments to PAS 39: The Fair Value Option
Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts
Amendments to PAS 39 and PFRS 7:
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of March 31, 2016
Adopted Not Adopted
Not Applicable
Reclassification of Financial Assets
Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets - Effective Date and Transition
Amendments to Philippine Interpretation IFRIC 9 and PAS 39: Embedded Derivatives
Amendment to PAS 39: Eligible Hedged Items
Amendment to PAS 39: Novation of Derivatives and Continuation of Hedge Accounting
PAS 40 Investment Property
PAS 41 Agriculture
Philippine Interpretations
IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities
IFRIC 2 Members’ Share in Co-operative Entities and Similar Instruments
IFRIC 4 Determining Whether an Arrangement Contains a Lease
IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
IFRIC 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment
IFRIC 7 Applying the Restatement Approach under PAS 29 Financial Reporting in Hyperinflationary Economies
IFRIC 8 Scope of PFRS 2
IFRIC 9 Reassessment of Embedded Derivatives
Amendments to Philippine Interpretation IFRIC - 9 and PAS 39: Embedded Derivatives
IFRIC 10 Interim Financial Reporting and Impairment
IFRIC 11 PFRS 2 - Group and Treasury Share Transactions
IFRIC 12 Service Concession Arrangements
IFRIC 13 Customer Loyalty Programmes
IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
Amendments to Philippine Interpretations IFRIC 14, Prepayments of a Minimum Funding Requirement
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Effective as of March 31, 2016
Adopted Not Adopted
Not Applicable
IFRIC 15 Agreements for the Construction of Real Estate*
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
IFRIC 17 Distributions of Non-cash Assets to Owners
IFRIC 18 Transfers of Assets from Customers
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
IFRIC 21 Levies
SIC-7 Introduction of the Euro
SIC-10 Government Assistance - No Specific Relation to Operating Activities
SIC-12 Consolidation - Special Purpose Entities
Amendment to SIC - 12: Scope of SIC 12
SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers
SIC-15 Operating Leases - Incentives
SIC-21 Income Taxes - Recovery of Revalued Non-Depreciable Assets
SIC-25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders
SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease
SIC-29 Service Concession Arrangements: Disclosures.
SIC-31 Revenue - Barter Transactions Involving Advertising Services
SIC-32 Intangible Assets - Web Site Costs
*These standards, interpretations and amendments to existing standards became effective subsequent to March 31, 2016. The Company did not early adopt these standards, interpretations and amendments.
Energy Development Corporation (A Subsidiary of Red Vulcan Holdings Corporation) and Subsidiaries
Unaudited Interim Condensed Consolidated Financial Statements March 31, 2016 (With Comparative Audited Figures as of December 31, 2015) and For the Three-Month Periods Ended March 31, 2016 and 2015
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation) AND SUBSIDIARIES UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As of March 31, 2016 (With Comparative Audited Figures as of December 31, 2015)
March 31, 2016
(Unaudited)
December 31, 2015
(Audited)
ASSETS
Current Assets Cash and cash equivalents (Notes 5 and 23) P=17,836,486,431 P=17,613,921,891 Financial assets at fair value through profit or loss (Note 23) 1,036,149,471 1,014,293,092 Trade and other receivables (Notes 6 and 23) 6,566,855,948 5,346,227,386 Parts and supplies inventories (Note 7) 3,382,053,266 3,251,943,359 Due from a related party (Notes 22 and 23) 180,181,187 – Current portion of: Derivative assets (Note 23) 40,471,782 58,602,033 Available-for-sale investments – 129,603,240 Other current assets (Note 8) 2,371,634,228 2,263,418,699 Total Current Assets 31,413,832,313 29,678,009,700
Noncurrent Assets Property, plant and equipment (Note 9) 88,448,049,512 88,567,738,668 Exploration and evaluation assets 3,085,618,380 3,073,600,767 Goodwill and intangible assets (Note 10) 4,246,956,170 4,289,260,334 Deferred tax assets - net 1,070,366,432 1,120,091,912 Available-for-sale investments - net of current portion
(Note 23) 434,016,454 435,123,312 Derivative assets - net of current portion (Note 23) 220,685,900 293,010,166 Other noncurrent assets (Notes 11 and 23) 8,950,196,686 8,584,215,557 Total Noncurrent Assets 106,455,889,534 106,363,040,716
TOTAL ASSETS P=137,869,721,847 P=136,041,050,416
LIABILITIES AND EQUITY
Current Liabilities Trade and other payables (Notes 12 and 23) P=11,810,139,506 P=9,989,938,751 Due to related parties (Notes 22 and 23) 112,837,815 101,769,634 Income tax payable 448,234,489 29,161,489 Current portion of: Long-term debts (Notes 13 and 23) 7,836,200,254 7,860,904,237 Derivative liabilities (Note 23) 12,358,170 4,943,539 Total Current Liabilities 20,219,770,234 17,986,717,650 (Forward)
- 2 -
Equity Equity attributable to equity holders of the Parent Company: Preferred stock 93,750,000 93,750,000 Common stock 18,750,000,000 18,750,000,000 Treasury stock (54,342,153) (28,416,391) Common shares in employee trust account (350,247,130) (350,247,130) Additional paid-in capital 6,284,045,797 6,284,045,797 Equity reserve (3,706,430,769) (3,706,430,769) Net accumulated unrealized gain on available-for-sale
investments 102,896,275 104,003,133 Fair value adjustments on hedging transactions (Note 23) (496,725,561) (177,500,756) Cumulative translation adjustment on foreign subsidiaries (70,884,562) (97,279,985) Retained earnings 25,407,675,699 24,778,400,459 45,959,737,596 45,650,324,358 Non-controlling interests 1,681,295,451 1,579,355,909 Total Equity 47,641,033,047 47,229,680,267
TOTAL LIABILITIES AND EQUITY P=137,869,721,847 P=136,041,050,416 See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
March 31, 2016
(Unaudited)
December 31, 2015
(Audited)
Noncurrent Liabilities Long-term debts - net of current portion
(Notes 13 and 23) P=65,548,443,021 P=66,650,689,335 Derivative liabilities - net of current portion
(Note 23) 493,787,675 197,525,898 Net retirement and other post-employment benefits 1,992,878,807 1,914,904,494 Provisions and other long-term liabilities 1,973,809,063 2,061,532,772 Total Noncurrent Liabilities 70,008,918,566 70,824,652,499 Total Liabilities 90,228,688,800 88,811,370,149
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation) AND SUBSIDIARIES UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF INCOME
For the Three-Month Periods
Ended March 31 2016 2015
REVENUE FROM SALE OF ELECTRICITY P=9,096,266,059 P=8,497,679,469
COSTS OF SALE OF ELECTRICITY (Note 15) (3,215,981,131) (3,024,461,687)
GENERAL AND ADMINISTRATIVE EXPENSES (Note 16) (1,364,956,335) (1,322,706,026)
FINANCIAL INCOME (EXPENSES) Interest income (Notes 4 and 18) 71,077,419 68,115,882 Interest expense (Notes 4 and 17) (1,200,163,572) (1,131,657,647) (1,129,086,153) (1,063,541,765)
OTHER INCOME (CHARGES) Foreign exchange gains - net (Note 19) 501,478,012 19,203,917 Proceeds from insurance claims 93,935,000 77,058,893 Miscellaneous - net (Note 20) 15,717,601 (45,282,221) 611,130,613 50,980,589
INCOME BEFORE INCOME TAX 3,997,373,053 3,137,950,580
PROVISION FOR INCOME TAX Current 432,116,458 400,298,658 Deferred 70,788,698 3,758,199 502,905,156 404,056,857
NET INCOME P=3,494,467,897 P=2,733,893,723
Net income attributable to: Equity holders of the Parent Company P=3,254,009,509 P=2,492,921,791 Non-controlling interests 240,458,388 240,971,932 P=3,494,467,897 P=2,733,893,723
Basic/Diluted Earnings Per Share (Note 21) P=0.173 P=0.133 See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation) AND SUBSIDIARIES UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three-Month Periods
Ended March 31 2016 2015
NET INCOME P=3,494,467,897 P=2,733,893,723
OTHER COMPREHENSIVE INCOME Other comprehensive income (loss) to be
reclassified to profit or loss in subsequent periods: Fair value adjustments on hedging transactions, net of tax
effect amounting to P=27.3 million in 2016 and nil in 2015 (Note 23) (319,224,805) (175,934,471)
Cumulative translation adjustments on foreign subsidiaries 26,395,423 (37,895,125) Changes in fair value of available-for-sale investments
recognized in equity (1,106,858) 55,319,668
NET OTHER COMPREHENSIVE LOSS TO BE RECLASSIFIED TO PROFIT OR LOSS IN SUBSEQUENT PERIODS (293,936,240) (158,509,928) Other comprehensive income not to be reclassified to profit or loss in subsequent periods: Remeasurements of retirement and other
post-employment benefits 10,702,885 – TOTAL OTHER COMPREHENSIVE LOSS,
NET OF TAX (283,233,355) (158,509,928)
TOTAL COMPREHENSIVE INCOME, NET OF TAX P=3,211,234,542 P=2,575,383,795
Total comprehensive income attributable to: Equity Holders of the Parent Company P=2,966,495,000 P=2,334,411,863
Non-controlling interests 244,739,542 240,971,932
P=3,211,234,542 P=2,575,383,795
See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation) AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2016 AND 2015
Equity Attributable to Equity Holders of the Parent Company
Preferred
Stock Common
Stock
Treasury Stock
Common Shares in
Employee Trust Account
Additional Paid-in Capital
Equity Reserve
Net Accumulated
Unrealized Gain on Available-for-sale investments
Fair Value
Adjustments on Hedging
Transactions
Cumulative Translation
Adjustments on Foreign
Subsidiaries Retained Earnings Subtotal
Non-controlling Interests Total Equity
Balances, January 1, 2016 P=93,750,000 P=18,750,000,000 (P=28,416,391) (P=350,247,130) P=6,284,045,797 (P=3,706,430,769) P=104,003,133 (P=177,500,756) (P=97,279,985) P=24,778,400,459 P=45,650,324,358 P=1,579,355,909 P=47,229,680,267 Total comprehensive income: Net income – – – – – – – – – 3,254,009,509 3,254,009,509 240,458,388 3,494,467,897 Changes in fair value of
available-for-sale investments recognized in equity
–
–
–
–
–
– (1,106,858)
–
– – (1,106,858) – (1,106,858) Fair value adjustments on
hedging transactions
–
–
–
–
–
–
– (319,224,805) – – (319,224,805) – (319,224,805) Cumulative translation
adjustments on foreign subsidiaries – –
– – – – – – 26,395,423 – 26,395,423 – 26,395,423 Remeasurements of retirement
and other post-employment benefits – –
– – – – – – – 6,421,731 6,421,731 4,281,154 10,702,885 – – – – – – (1,106,858) (319,224,805) 26,395,423 3,260,431,240 2,966,495,000 244,739,542 3,211,234,542 Cash dividends (Notes 12 and 14) – – – – – – – – – (2,631,156,000) (2,631,156,000) (142,800,000) (2,773,956,000) Acquisition of treasury stock – – (25,925,762) – – – – – – – (25,925,762) – (25,925,762)
Balances, March 31, 2016 P=93,750,000 P=18,750,000,000
(P=54,342,153) (P=350,247,130) P=6,284,045,797 (P=3,706,430,769) P=102,896,275 (P=496,725,561) (P=70,884,562) P=25,407,675,699 P=45,959,737,596 P=1,681,295,451 P=47,641,033,047
See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
- 2 - Equity Attributable to Equity Holders of the Parent Company
Preferred
Stock Common
Stock
Common Shares in
Employee Trust Account
Additional Paid-in Capital
Equity Reserve
Net Accumulated
Unrealized Gain on Available-for-Sale Investments
Fair Value
Adjustments on Hedging
Transactions
Cumulative Translation
Adjustments on Foreign
Subsidiaries Retained Earnings Subtotal
Non-controlling Interests Total Equity
Balances, January 1, 2015 P=93,750,000 P=18,750,000,000 (P=346,730,774) P=6,285,845,818 (P=3,706,430,769) P=143,192,675 (P=178,182,172) (P=6,530,344) P=21,095,090,585 P=42,130,005,019 P=1,490,081,458 P=43,620,086,477 Total comprehensive income: Net income – – – – – – – – 2,492,921,791 2,492,921,791 240,971,932 2,733,893,723 Changes in fair value of
available-for-sale investments recognized in equity – – – – – 55,319,668 – – – 55,319,668 – 55,319,668
Fair value adjustments on hedging transactions – – – – – – (175,934,471) – – (175,934,471) – (175,934,471)
Cumulative translation adjustments on foreign subsidiaries – – – – – – – (37,895,125) – (37,895,125) – (37,895,125)
– – – – – 55,319,668 (175,934,471) (37,895,125) 2,492,921,791 2,334,411,863 240,971,932 2,575,383,795 Cash dividends – – – – – – – – (1,882,500,000) (1,882,500,000) (128,000,000) (2,010,500,000) Share-based payment – – 252,374 190,368 – – – – – 442,742 – 442,742
Balances, March 31, 2015 P=93,750,000 P=18,750,000,000 (P=346,478,400) P=6,286,036,186 (P=3,706,430,769) P=198,512,343 (P=354,116,643) (P=44,425,469) P=21,705,512,376 P=42,582,359,624 P=1,603,053,390 P=44,185,413,014
See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation) AND SUBSIDIARIES UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three-Month Periods
Ended March 31
2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=3,997,373,053 P=3,137,950,580
Adjustments for: Depreciation and amortization (Notes 9, 10, 15 and 16) 1,335,879,434 1,249,356,272
Interest expense (Note 17) 1,200,163,572 1,131,657,647 Unrealized foreign exchange gains - net (Note 19) (553,666,375) (68,780,565) Interest income (Note 18) (71,077,419) (68,115,882) Loss on direct write-off of input VAT claims (Note 20) 26,642,900 48,156,119 Mark-to-market gain on financial assets at fair value through profit or loss (Note 20) (21,856,379) (8,377,909) Provision for doubtful accounts (Note 16) 21,271,309 13,760,472 Provision for impairment of parts and supplies (3,574,527) – Gain on sale of property, plant and equipment
(Notes 9 and 20) (191,648) (371,246) Share-based payment expense – 442,742 Operating income before working capital changes 5,930,963,920 5,435,678,230 Decrease (increase) in:
Trade and other receivables (1,228,025,044) 35,793,494 Due from a related party (180,181,187) – Parts and supplies inventories (126,535,379) (28,101,915) Other current assets 53,631,838 (218,916,668) Increase (decrease) in:
Trade and other payables (1,071,255,724) 553,413,621 Due to related parties 11,068,181 (5,499,361) Provisions and other long-term liabilities 16,462,335 100,757,458 Retirement and other post-employment benefits contributions 89,847,701 83,576,177 Cash generated from operations 3,495,976,641 5,956,701,036 Income taxes paid including creditable withholding taxes (180,461,932) (173,019,160) Net cash flows from operating activities 3,315,514,709 5,783,681,876
CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of property, plant and equipment (Note 9) (1,480,817,591) (2,210,951,896)
Collection of liquidated damages from contractor 210,972,556 – Purchase of financial assets at fair value through profit or loss – (500,000,000) Interest received 78,469,831 71,304,882 Proceeds from: Redemption of available-for-sale investments 131,480,090 – Sale of property, plant and equipment 1,671,630 1,291,515 Increase in: Exploration and evaluation assets (12,017,612) (39,761,148) Intangible assets (2,857,925) (24,649,390)
Other noncurrent assets (387,399,810) (812,660,600) Net cash flows used in investing activities (1,460,498,831) (3,515,426,637)
(Forward)
- 2 -
For the Three-Month Periods
Ended March 31
2016 2015
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from availment of long-term debts (Note 13) P=– P=8,429,373,629
Acquisition of treasury stock (25,925,762) – Payments of:
Long term debt (510,000,000) – Interest and other financing charges (902,500,765) (594,256,625) Cash dividends (Note 14) (142,800,000) (128,000,000) Net cash flows from (used in) financing activities (1,581,226,527) 7,707,117,004
NET INCREASE IN CASH AND CASH EQUIVALENTS 273,789,351 9,975,372,243
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (51,224,811) (1,090,688)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 17,613,921,891 14,010,213,414
CASH AND CASH EQUIVALENTS AT END OF PERIOD (Notes 5 and 23) P=17,836,486,431 P=23,984,494,969
See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation) AND SUBSIDIARIES NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Corporate Information
General Energy Development Corporation (the “Parent Company” or “EDC”) was incorporated in the Philippines and registered with the Securities and Exchange Commission on March 5, 1976. Beginning December 13, 2006, the common shares of EDC were listed and traded in the Philippine Stock Exchange.
The Parent Company and its subsidiaries (collectively referred to as the “Company”) are primarily engaged in the business of exploring, developing, and operating geothermal energy and other indigenous renewable energy projects in the Philippines.
Red Vulcan is the parent company of EDC while Lopez, Inc. is the ultimate parent company.
Principal Office Address The registered principal office address is at 38th Floor, One Corporate Centre, Julia Vargas Avenue corner Meralco Avenue, Ortigas Center, Pasig City.
Authorization for Issuance of the Unaudited Interim Condensed Consolidated Financial Statements The interim condensed consolidated financial statements were reviewed, approved and authorized for issuance by the Board of Directors (BOD) thru the Audit and Governance Committee on May 12, 2016.
2. Basis of Preparation
The unaudited interim condensed consolidated financial statements of the Company as of March 31, 2016 and for the three-month periods ended March 31, 2016 and 2015 have been prepared in accordance with Philippine Accounting Standard (PAS) 34, Interim Financial Reporting. The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company’s annual financial statements as at December 31, 2015.
The unaudited interim condensed consolidated financial statements have been prepared on a historical cost basis, except for the financial assets at fair value through profit or loss (FVPL), derivative instruments and available-for-sale (AFS) investments that are measured at fair value. The unaudited interim condensed consolidated financial statements are presented in Philippine peso (Peso), which is the Parent Company’s functional currency. All values are rounded to the nearest peso, except when otherwise indicated.
- 2 -
3. Significant Accounting Policies
The accounting policies adopted in the preparation of the unaudited interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements as of and for the year ended December 31, 2015, except for the adoption of the following amended accounting standards that became effective beginning January 1, 2016.
Effective January 1, 2016
PFRS 10, Consolidated Financial Statements, and PAS 28, Investments in Associates and
Joint Ventures - Investment Entities: Applying the Consolidation Exception (Amendments)
These amendments clarify that the exemption in PFRS 10 from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity that measures all of its subsidiaries at fair value and that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity parent is consolidated. The amendments also allow an investor (that is not an investment entity and has an investment entity associate or joint venture), when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries. These amendments are effective for annual periods beginning on or after January 1, 2016. These amendments are not applicable to the Company since none of the entities within the Company is an investment entity nor does the Company have investment entity associates or joint venture.
PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements
(Amendments) The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. Entities already applying PFRS and electing to change to the equity method in its separate financial statements will have to apply that change retrospectively. For first-time adopters of PFRS electing to use the equity method in its separate financial statements, they will be required to apply this method from the date of transition to PFRS. The amendments are effective for annual periods beginning on or after January 1, 2016, with early adoption permitted. These amendments do not have any impact on the Company’s unaudited interim condensed consolidated financial statements.
PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations
(Amendments) The amendments to PFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the activity of the joint operation constitutes a business must apply the relevant PFRS 3 principles for business combinations accounting. The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, a scope exclusion has been added to PFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party.
- 3 -
The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation and are prospectively effective for annual periods beginning on or after January 1, 2016, with early adoption permitted. These amendments do not have any impact on the Company as there has been no interest acquired in a joint operation during the period.
PAS 1, Presentation of Financial Statements - Disclosure Initiative (Amendments)
The amendments are intended to assist entities in applying judgment when meeting the presentation and disclosure requirements in PFRS. They clarify the following: That entities shall not reduce the understandability of their financial statements by either
obscuring material information with immaterial information; or aggregating material items that have different natures or functions
That specific line items in the profit or loss and OCI and the statement of financial position may be disaggregated
That entities have flexibility as to the order in which they present the notes to financial statements
That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss.
Early application is permitted and entities do not need to disclose that fact as the amendments are considered to be clarifications that do not affect an entity’s accounting policies or accounting estimates. These amendments do not have impact on the Company.
PFRS 14, Regulatory Deferral Accounts
PFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first-time adoption of PFRS. Entities that adopt PFRS 14 must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements in these account balances as separate line items in the statement of profit or loss and other comprehensive income. The standard requires disclosures on the nature of, and risks associated with, the entity’s rate-regulation and the effects of that rate-regulation on its financial statements. PFRS 14 is effective for annual periods beginning on or after January 1, 2016. Since the Company is an existing PFRS preparer and is not involved in any rate-regulated activities, this standard does not apply.
PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture - Bearer Plants (Amendments) The amendments change the accounting requirements for biological assets that meet the definition of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants will no longer be within the scope of PAS 41. Instead, PAS 16 will apply. After initial recognition, bearer plants will be measured under PAS 16 at accumulated cost (before maturity) and using either the cost model or revaluation model (after maturity). The amendments also require that produce that grows on bearer plants will remain in the scope of PAS 41 measured at fair value less costs to sell. For government grants related to bearer plants, PAS 20, Accounting for Government Grants and Disclosure of Government Assistance, will apply. The amendments are retrospectively effective for annual periods beginning on or
- 4 -
after January 1, 2016, with early adoption permitted. These amendments do not have any impact to the Company as the Company does not have any bearer plants.
PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Clarification of
Acceptable Methods of Depreciation and Amortization (Amendments) The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortize intangible assets. The amendments are effective prospectively for annual periods beginning on or after January 1, 2016, with early adoption permitted. These amendments do not have any impact to the Company given that the Company has not used a revenue-based method to depreciate its non-current assets.
Annual Improvements to PFRSs (2012-2014 cycle) The Annual Improvements to PFRSs (2012-2014 cycle) are effective for annual periods beginning on or after January 1, 2016 and do not have any impact on the Company. They include: PFRS 5, Non-current Assets Held for Sale and Discontinued Operations - Changes in
Methods of Disposal The amendment is applied prospectively and clarifies that changing from a disposal through sale to a disposal through distribution to owners and vice-versa should not be considered to be a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the requirements in PFRS 5. The amendment also clarifies that changing the disposal method does not change the date of classification.
PFRS 7, Financial Instruments: Disclosures - Servicing Contracts
PFRS 7 requires an entity to provide disclosures for any continuing involvement in a transferred asset that is derecognized in its entirety. The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and arrangement against the guidance in PFRS 7 in order to assess whether the disclosures are required. The amendment is to be applied such that the assessment of which servicing contracts constitute continuing involvement will need to be done retrospectively. However, comparative disclosures are not required to be provided for any period beginning before the annual period in which the entity first applies the amendments.
PFRS 7 - Applicability of the Amendments to PFRS 7 to Condensed Interim Financial Statements This amendment is applied retrospectively and clarifies that the disclosures on offsetting of financial assets and financial liabilities are not required in the condensed interim financial report unless they provide a significant update to the information reported in the most recent annual report.
- 5 -
PAS 19, Employee Benefits - Regional Market Issue Regarding Discount Rate This amendment is applied prospectively and clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used.
PAS 34, Interim Financial Reporting - Disclosure of Information ‘Elsewhere in the Interim Financial Report’ The amendment is applied retrospectively and clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the greater interim financial report (i.e., in the management commentary or risk report).
4. Operating Segment Information
The Company’s operating segments are determined based on geographical segment, with each segment representing a strategic business location that has similar economic and political conditions, proximity of operations and specific risks associated with operations in a particular area. The Company’s identified reportable segments below are consistent with the segments reported to the BOD, which is the Chief Operating Decision Maker (CODM) of the Company:
a. Leyte Geothermal Business Unit (LGBU) - This segment pertains to Leyte geothermal
production field and power plants. This includes projects in Tongonan, Mahanagdong, Upper Mahiao, Malitbog, Unified Leyte Geothermal Energy, Inc. (ULGEI) and other projects in Leyte Province.
b. Negros Island Geothermal Business Unit (NIGBU) - This segment refers to Southern Negros geothermal production field and power plants. Power plants included in NIGBU are Palinpinon I, Palinpinon II and Nasulo.
c. Bacon-Manito Geothermal Business Unit (BGBU) - This segment relates to Bacon-Manito geothermal production field and power plants.
d. Mt. Apo Geothermal Business Unit (MAGBU) - This segment refers to Mt. Apo geothermal production field and power plants.
e. Pantabangan/Masiway - This segment relates to Pantabangan-Masiway hydroelectric complex located in Nueva Ecija Province.
f. Wind-Ilocos Norte Business Unit (WINBU) - This segment pertains to both wind and solar projects commercially operating in Northern Luzon.
g. All others - refers to other renewable energy projects including foreign investments and Head Office of the Company.
- 6 -
Management monitors the operating results of the business segments separately for the purpose of making decisions about resources to be allocated and of assessing performance. Finance costs, finance income, income taxes and other charges and income are managed on a group basis.
Segment performance is evaluated based on net income for the period and earnings before interest, taxes, and depreciation and amortization (EBITDA). Net income for the period is measured consistent with consolidated net income reported in the unaudited interim condensed consolidated financial statements. EBITDA is calculated as revenues minus costs of sale of electricity and general and administrative expenses, excluding non-cash items such as depreciation and amortization, impairment losses on non-financial assets, and loss on disposal of property, plant and equipment, among others.
- 7 -
Financial information on the operating segments are summarized as follows:
Pantabangan/ LGBU NIGBU BGBU MAGBU Masiway WINBU All others Total For the Three-Month Period Ended March 31, 2016 Segment revenue from external customers P=4,653,909,817 P=3,065,959,614 P=1,244,958,716 P=610,447,725 P=1,012,006,516 P=943,575,146 P=– P=11,530,857,534 Intersegment revenue (879,458,919) (1,017,409,386) (537,256,576) – – – (466,594) (2,434,591,475) Segment revenue 3,774,450,898 2,048,550,228 707,702,140 610,447,725 1,012,006,516 943,575,146 (466,594) 9,096,266,059 Segment expenses (2,210,216,706) (849,399,718) (489,530,506) (431,653,790) (242,863,275) (358,978,172) – (4,582,642,167) Unallocated expenses – – – – – – 1,704,701 1,704,701 Interest income 30,699,813 12,490,613 18,317,299 5,411,755 1,860,133 2,296,451 1,355 71,077,419 Interest expense (421,783,105) (235,938,986) (129,769,166) (94,481,899) (32,634,397) (204,050,786) (81,505,233) (1,200,163,572) Other income (expense) - net 237,219,657 77,252,225 103,196,390 39,382,826 609,857 156,243,152 (2,773,494) 611,130,613 Benefit from (provision for) income taxes (159,781,362) (137,108,242) (20,545,328) (9,697,736) (137,565,698) (35,236,216) (2,970,574) (502,905,156) Net income (loss) P=1,250,589,195 P=915,846,120 P=189,370,829 P=119,408,881 P=601,413,136 P=503,849,575 (P=86,009,839) P=3,494,467,897 EBITDA P=2,119,436,055 P=1,436,871,077 P=365,231,659 P=284,947,494 P=872,832,002 P=773,268,741 (P=466,594) P=5,852,120,434 Unallocated expenses 16,784,375 P=5,868,904,809 Pantabangan/ LGBU NIGBU BGBU MAGBU Masiway WINBU All others Total For the Three-Month Period Ended March 31, 2015 Segment revenue from external customers P=4,271,456,829 P=3,157,986,892 P=1,379,717,160 P=580,642,398 P=1,043,512,555 P=253,952,753 P=359,007,496 P=11,046,276,083 Intersegment revenue (678,626,895) (1,161,009,555) (426,832,656) – – – (282,127,508) (2,548,596,614) Segment revenue 3,592,829,934 1,996,977,337 952,884,504 580,642,398 1,043,512,555 253,952,753 76,879,988 8,497,679,469 Segment expenses (1,846,267,280) (933,363,046) (504,082,479) (306,298,822) (237,107,234) (296,117,948) – (4,123,236,809) Unallocated expenses – – – – – – (223,930,904) (223,930,904) Interest income 34,637,701 18,476,611 7,844,939 4,294,197 1,513,475 1,348,220 739 68,115,882 Interest expense (420,896,216) (234,469,295) (122,788,504) (84,315,482) (47,736,758) (139,925,113) (81,526,279) (1,131,657,647) Other income (expense) - net (14,285,085) 23,583,143 43,575,945 (2,789,621) 185,222 5,718,744 (5,007,759) 50,980,589 Benefit from (provision for) income taxes (151,770,237) (75,243,794) (3,396,775) (15,695,577) (158,024,015) 34,574 38,967 (404,056,857) Net income (loss) P=1,194,248,817 P=795,960,956 P=374,037,630 P=175,837,093 P=602,343,245 (P=174,988,770) (P=233,545,248) P=2,733,893,723 EBITDA P=2,258,288,171 P=1,291,392,849 P=573,755,867 P=363,082,618 P=914,176,874 P=163,494,510 P=76,879,989 P=5,641,070,878 Unallocated expenses (212,659,761) P=5,428,411,117
- 8 -
Pantabangan / LGBU NIGBU BGBU MAGBU WINBU Masiway Elimination Total As of and for the period ended March 31, 2016 Segment assets P=79,414,696,966 P=22,260,196,783 P=12,938,212,175 P=9,841,006,389 P=21,575,387,352 P=7,785,030,266 (P=52,694,089,331) P=101,120,440,600 Unallocated corporate assets 36,749,281,247 Total assets P=137,869,721,847 Segment liabilities P=38,417,568,595 P=19,558,037,032 P=15,855,253,367 P=4,852,442,151 P=15,752,225,331 P=3,579,409,672 (P=55,110,227,164) P=42,904,708,984 Unallocated corporate liabilities 47,323,979,816 Total liabilities P=90,228,688,800 Capital expenditures P=994,164,104 P=61,304,932 P= 18,409,998 P=14,193,320 P=15,696,839 P=8,084,629 P=– P=1,111,853,822 Unallocated capital expenditures 276,671,599 Total capital expenditures P=1,388,525,421 Depreciation and amortization P=547,507,629 P=232,887,643 P=145,186,378 P=104,335,486 P=103,688,761 P=187,193,863 P=6,631,553 P=1,327,431,313 Unallocated depreciation and amortization 8,448,121 Total depreciation and amortization P=1,335,879,434 Other non-cash items P=7,694,235 P=4,832,923 P=1,873,647 P=1,818,074 P=1,477,904 – – P=17,696,783 Total other non-cash items P=1,353,576,217
Pantabangan / LGBU NIGBU BGBU MAGBU WINBU Masiway Elimination Total As of and for the year ended December 31, 2015 Segment assets P=78,058,899,778 P=32,936,609,463 P=17,500,580,950 P=9,818,726,619 P=7,403,627,346 P=21,135,652,224 (P=74,253,610,830) P=92,600,485,550 Unallocated corporate assets 43,440,564,866 Total assets P=136,041,050,416 Segment liabilities P=36,810,240,513 P=30,236,009,726 P=19,286,579,171 P=4,802,875,925 P=3,453,122,772 P=15,519,077,210 (P=74,528,409,031) P=35,579,496,286 Unallocated corporate liabilities 53,231,873,863 Total liabilities P=88,811,370,149 Capital expenditure P=3,190,355,706 P=2,000,554,649 P=1,073,681,653 P=259,986,884 P=199,538,446 P=2,299,087,704 (P=225,590,000) P=8,797,615,042 Unallocated capital expenditure 1,660,293,121 Total capital expenditure P=10,457,908,163 Depreciation and amortization P=2,092,459,202 P=918,912,641 P=518,360,990 P=427,234,777 P=432,800,865 P=691,251,183 P=– P=5,080,019,658 Unallocated depreciation and amortization 74,817,039 Total depreciation and amortization P=5,154,836,697 Other non-cash items P=105,122,238 P=34,343,277 P=15,612,965 P=3,761,570 P=– P=8,834,795 P=– P=167,674,845
Unallocated non-cash items
23,465,622 Total other non-cash items P=191,140,467
- 9 -
The following table shows the Company’s reconciliation of EBITDA to the consolidated net income for the three-month periods ended March 31, 2016 and 2015:
March 31, 2016
(Unaudited)
March 31, 2015
(Unaudited) EBITDA P=5,868,904,809 P=5,428,411,117 Add (deduct):
Depreciation and amortization (Notes 9, 10, 15 and 16) (1,335,879,434) (1,249,356,272) Interest expense (Note 17) (1,200,163,572) (1,131,657,647) Provision for income tax (502,905,156) (404,056,857) Foreign exchange gains - net (Note 19) 501,478,012 19,203,917 Proceeds from insurance claims 93,935,000 77,058,893 Interest income (Note 18) 71,077,419 68,115,882 Provision for doubtful accounts (Note 16) (21,271,309) (13,760,472) Provision for (reversal of) of impairment of parts
and supplies inventories (Note 16) 3,574,527 (14,782,617) Miscellaneous - net (Note 20) 15,717,601 (45,282,221) Consolidated net income P=3,494,467,897 P=2,733,893,723
In the normal course of business, entities within the Company engage in intercompany sale and purchase of steam and electricity. Intersegment revenues are all eliminated in consolidation. Segment information is measured in conformity with the accounting policies adopted for preparing and presenting the consolidated financial statements. Intersegment revenue are made at normal commercial terms and conditions.
Unallocated expenses pertain to expenses of the corporate, technical and administrative support groups while unallocated corporate assets and liabilities which include among others certain cash and cash equivalents, property, plant and equipment, parts and supplies inventories, trade and other payables and retirement and post-employment benefits, pertain to the Head Office and are managed on a group basis.
5. Cash and Cash Equivalents
March 31, 2016
(Unaudited)
December 31, 2015
(Audited) Cash on hand and in banks P=3,107,243,471 P=2,389,289,290 Cash equivalents 14,729,242,960 15,224,632,601 P=17,836,486,431 P=17,613,921,891
Cash in banks earn interest at the respective bank deposit rates. Cash equivalents consist of money market placements, which are made for varying periods of up to three months depending on the immediate cash requirements of the Company.
- 10 -
6. Trade and Other Receivables
March 31, 2016
(Unaudited)
December 31, 2015
(Audited) Trade P=6,478,210,409 P=5,202,441,632 Others: Loans and notes receivables 86,545,270 89,808,207 Non-trade accounts receivable 62,769,380 126,859,526 Advances to employees 42,375,671 30,135,380 Employee receivables 9,975,165 9,905,713 201,665,486 256,708,826 6,679,875,895 5,459,150,458 Less allowance for doubtful accounts 113,019,947 112,923,072 P=6,566,855,948 P=5,346,227,386
Trade receivables are noninterest-bearing and are generally collectible in 30 to 60 days. Majority of the Company’s trade receivables arose from sale of electricity to National Power Corporation.
7. Parts and Supplies Inventories
March 31, 2016
(Unaudited)
December 31, 2015
(Audited) Drilling tubular products and equipment spares P=1,525,877,152 P=1,465,329,233 Power plant spares 837,423,183 782,543,298 Pump, production/steam gathering system, steam
turbine, valves and valve spares 694,018,344 694,433,653 Electrical, cable, wire product and compressor
spares 98,620,143 90,825,523 Construction and hardware supplies, stationeries and
office supplies, hoses, communication and other spares and supplies 71,831,529 65,697,140
Heavy equipment spares 55,720,086 59,415,737 Automotive, mechanical, bearing, seals, v-belt,
gasket, tires and batteries 44,706,570 35,132,285 Chemical, chemical products, gases and catalyst 32,537,019 36,621,297 Measuring instruments, indicators and tools, safety
equipment and supplies 21,319,240 21,945,193 P=3,382,053,266 P=3,251,943,359
- 11 -
8. Other current assets
March 31, 2016
(Unaudited)
December 31, 2015
(Audited) Debt service reserve account (Note 13) P=1,224,505,910 P=1,324,249,208 Prepaid expenses 457,452,071 450,489,959 Tax credit certificates 332,367,290 279,694,215 Withholding tax certificates 311,773,024 157,896,581 Advances to contractors 45,535,933 49,716,522 Others – 1,372,214
P=2,371,634,228 P=2,263,418,699
- 12 -
9. Property, Plant and Equipment
March 31, 2016 (Three Months)
Land Power Plants
Fluid Collection and Recycling
System (FCRS) and Production Wells
Buildings, Improvements
and Other Structures
Exploration, Machinery and
Equipment Transportation
Equipment
Furniture, Fixtures and
Equipment Laboratory Equipment
Construction in Progress Total
Cost Balances at January 1 P=624,552,251 P=64,510,830,206 P=33,259,806,881 P=4,543,063,384 P=4,285,760,412 P=163,740,940 P=1,340,722,365 P=811,692,784 P=10,002,975,160 P=119,543,144,383 Additions – 1,834,084 – 1,520,414 321,970 2,421,893 4,351,867 21,008,979 1,449,358,384 1,480,817,591 Disposals/retirements – – – – (128,130) (5,366,357) (250,545) (86,174) – (5,831,206) Reclassifications (17,267,183) (13,471,966) 801,008,531 128,376,834 209,605 1,955,402 33,144,477 4,953,415 (1,239,887,646) (300,978,531) Balances at March 31 607,285,068 64,499,192,324 34,060,815,412 4,672,960,632 4,286,163,857 162,751,878 1,377,968,164 837,569,004 10,212,445,898 120,717,152,237 Accumulated Depreciation,
Amortization and Impairment Balances at January 1 17,627,581 15,195,703,581 10,507,769,251 1,172,790,122 2,737,318,225 92,947,565 788,132,389 439,794,568 23,322,433 30,975,405,715 Depreciation and amortization for the
period
– 826,044,965 266,884,810 67,201,598 64,658,788 5,748,257 39,462,201 20,716,726
– 1,290,717,345 Retirement – – – – (57,963) (3,971,822) (242,446) (78,992) – (4,351,223) Reclassifications – (10,719,477) 298,610 6,889,683 9,733,983 485,052 219,332 423,705 – 7,330,888 Balances at March 31 17,627,581 16,011,029,069 10,774,952,671 1,246,881,403 2,811,653,033 95,209,052 827,571,476 460,856,007 23,322,433 32,269,102,725 Net Book Value P=589,657,487 P=48,488,163,255 P=23,285,862,741 P=3,426,079,229 P=1,474,510,824 P=67,542,826 P=550,396,688 P=376,712,997 P=10,189,123,465 P=88,448,049,512
- 13 -
December 31, 2015 (One Year)
Land Power Plants FCRS and
Production Wells
Buildings, Improvements
and Other Structures
Exploration, Machinery and
Equipment Transportation
Equipment
Furniture, Fixtures and
Equipment Laboratory Equipment
Construction in Progress Total
Cost Balances at January 1 P=589,066,312 P=59,577,057,719 P=30,192,192,743 P=4,239,601,990 P=4,251,389,923 P=151,535,137 P=1,281,953,440 P=706,277,459 P=8,038,618,446 P=109,027,693,169 Additions 35,485,939 1,602,819,287 191,722,229 13,313,740 70,476,664 26,915,182 50,514,107 95,540,309 8,371,120,706 10,457,908,163 Disposals/retirement – (98,704,767) – (331,313) (20,121,483) (18,576,376) (17,163,789) (1,391,692) – (156,289,420) Reclassifications – 3,429,657,967 2,875,891,909 290,478,967 (15,984,692) 3,866,997 25,418,607 11,266,708 (6,406,763,992) 213,832,471 Balances at December 31 624,552,251 64,510,830,206 33,259,806,881 4,543,063,384 4,285,760,412 163,740,940 1,340,722,365 811,692,784 10,002,975,160 119,543,144,383 Accumulated Depreciation,
Amortization and Impairment Balances at January 1 17,627,581 12,069,397,981 9,457,338,583 866,221,681 2,475,756,340 81,036,916 622,573,853 364,215,824 – 25,954,168,759 Depreciation and amortization for the year – 3,172,391,661 1,050,430,668 304,253,687 304,370,857 24,970,326 173,166,380 76,845,708 – 5,106,429,287 Disposals/retirements – (68,346,907) – (177,507) (16,533,475) (13,113,088) (9,248,861) (1,380,497) – (108,800,335) Reclassifications – 22,260,846 – 2,492,261 (26,275,497) 53,411 1,641,017 113,533 – 285,571 Reversal of previously impaired property,
plant and equipment – – – – – – – – 23,322,433 23,322,433 Balances at December 31 17,627,581 15,195,703,581 10,507,769,251 1,172,790,122 2,737,318,225 92,947,565 788,132,389 439,794,568 23,322,433 30,975,405,715 Net Book Value P=606,924,670 P=49,315,126,625 P=22,752,037,630 P=3,370,273,262 P=1,548,442,187 P=70,793,375 P=552,589,976 P=371,898,216 P=9,979,652,727 P=88,567,738,668
- 14 -
Estimated Rehabilitation and Restoration Costs FCRS and production wells include the estimated rehabilitation and restoration costs of the Company’s steam fields and power plants’ contract areas at the end of the contract period. These were based on technical estimates of probable costs, which may be incurred by the Company in the rehabilitation and restoration of the said steam fields and power plants’ contract areas from 2031 up to 2044, discounted using the Company’s risk-adjusted rate. Similarly, the Company estimated a provision related to the removal and disposal of all wind farm materials, equipment and facilities from the contract areas at the end of contract period. The amount of provision was recorded as part of the costs of power plants. These costs, net of accumulated amortization, amounted to P=581.6 million and P=682.3 million as of March 31, 2016 and December 31, 2015, respectively. As of March 31, 2016 and December 31, 2015, the provision for rehabilitation costs recognized under “Provisions and other long-term liabilities” amounted to P=977.3 million and P=1,058.0 million, respectively. Depreciation and Amortization Details of depreciation and amortization charges recognized in the unaudited interim consolidated statements of income are shown below:
March 31, 2016
(Unaudited)
March 31, 2015
(Unaudited) Property, plant and equipment P=1,290,717,345 P=1,220,827,962 Intangible assets (Note 10) 45,162,089 28,528,310 P=1,335,879,434 P=1,249,356,272
Costs of sales of electricity (Note 15) P=1,262,270,785 P=1,152,918,602 General and administrative (Note 16) 73,608,649 96,437,670 P=1,335,879,434 P=1,249,356,272
10. Goodwill and Intangible Assets
March 31, 2016 (Three Months)
Goodwill Water Rights Other Intangible
Assets Total Cost Balances at January 1 P=2,651,268,704 P=2,404,778,918 P=203,718,042 P=5,259,765,664 Additions – – 2,857,925 2,857,925 Balances at March 31 2,651,268,704 2,404,778,918 206,575,967 5,262,623,589 Accumulated Amortization Balances at January 1 – 877,744,306 92,761,024 970,505,330 Amortization – 24,047,789 21,114,300 45,162,089 Balances at March 31 – 901,792,095 113,875,324 1,015,667,419 Net Book Value P=2,651,268,704 P=1,502,986,823 P=92,700,643 P=4,246,956,170
- 15 -
2015
Goodwill Water Rights
Other Intangible
Assets Total Cost Balances at January 1 P=2,651,447,390 P=2,404,778,918 P=312,519,889 P=5,368,746,197 Additions – – 14,118,479 14,118,479 Reclassifications (Note 9) – – (122,920,326) (122,920,326) Foreign exchange translation
adjustment (178,686) – – (178,686) Balances at December 31 2,651,268,704 2,404,778,918 203,718,042 5,259,765,664 Accumulated Amortization Balances at January 1 – 781,553,149 44,639,260 826,192,409 Amortization (Notes 21 and 22) – 96,191,157 48,121,764 144,312,921 Balances at December 31 – 877,744,306 92,761,024 970,505,330 Net Book Value P=2,651,268,704 P=1,527,034,612 P=110,957,018 P=4,289,260,334
Water rights are amortized using the straight-line method over 25 years, which is the term of the agreement with National Irrigation Administration. The remaining amortization period of water rights is 15.6 years as of March 31, 2016.
Other intangible assets pertain to the Company’s accounting software. 11. Other Noncurrent Assets
March 31, 2016
(Unaudited)
December 31, 2015
(Audited) Input value added tax (VAT) P=4,280,533,302 P=4,471,008,284 Tax credit certificates 2,974,698,550 2,655,267,017 Long-term receivables 135,118,273 127,074,578 Prepaid expenses 635,697,733 534,594,491 Special deposits and funds 121,225,180 117,103,382 Others 1,240,138,275 1,112,461,952 9,387,411,313 9,017,509,704 Less allowance for doubtful accounts 437,214,627 433,294,147 P=8,950,196,686 P=8,584,215,557
Provision for doubtful accounts pertaining to input VAT and long-term receivables amounted to P=21.3 million and P=13.8 million for the three-month periods ended March 31, 2016 and 2015, respectively (Note 16). Others Others include capital expenditures funding made by the Company to Enerco amounting to P=1,074.0 million and P=947.1 million as of December 31, 2016 and 2015, respectively. The Company intends to capitalize these capital expenditures funding against the shares subscription once the Company decides to continue the Mariposa Project which is dependent on the results of geological and other technical studies on the project.
- 16 -
12. Trade and Other Payables
March 31, 2016
(Unaudited)
December 31, 2015
(Audited) Accounts payable: Third parties P=5,168,802,309 P=6,106,304,175 Related parties (Note 22) 1,291,316,763 1,972,851,687 Dividends payable (Note 14) 2,631,156,001 – Accrued interest on long-term debts 1,167,039,301 899,937,453 Withholding and other taxes payable 266,142,023 385,542,255 Government share payable 68,297,513 58,778,040 Deferred credits 25,422,575 48,755,834 SSS and other contributions payable 4,237,220 4,193,828 Other payables 1,187,725,801 513,575,479 P=11,810,139,506 P=9,989,938,751
Accounts payable are noninterest-bearing and are normally settled on a 30 to 60 days term.
The accrued interest represents interest accrual on outstanding loans.
13. Long-term Debts
Creditor/Project Maturities Interest Rate March 31, 2016
(Unaudited) December 31, 2015
(Audited) US$300.0 Million Notes January 20, 2021 6.5% P=13,730,480,146 P=14,023,483,523
Peso Public Bonds Series 2 - P=3.5 billion December 4, 2016 9.3327% 3,493,611,118 3,491,326,269 International Finance Corporation
(IFC)
IFC 1 - P=4.1 billion 2012-2033 7.4% per annum for the first five years
subject to repricing for another
five to 10 years
2,536,612,624 2,535,091,675
IFC 2 - P=3.3 billion 2013-2025 6.6570% 2,473,311,705 2,471,717,976 Fixed Rate Note Facility (FXCN) P=4.0 billion 2012-2022 6.6108% per annum
from April 4, 2012 to April 30, 2015 and
5.25% from April 30, 2015 until maturity
3,739,891,037 3,737,122,040
P=3.0 billion 2012-2022 6.6173% per annum from April 4, 2012 to
April 30, 2015 and 5.25% from April 30,
2015 until maturity
2,803,869,754 2,801,750,828
Refinanced Syndicated Term Loan US$175.0 million
2013 - 2017 LIBOR plus a margin of 175 basis points
4,817,309,443 4,916,764,416
2013 Peso Fixed-Rate Bonds P=4.0 billion May 3, 2023 4.7312% 3,960,579,388 3,959,423,253 P=3.0 billion May 3, 2020 4.1583% 2,945,256,441 2,943,911,465 US$80 Million Term Loan June 21, 2018 1.8% margin plus
LIBOR 3,496,986,987 3,568,385,220
Commercial Debt Facility US$37.5 Million October 23, 2029 2% margin plus LIBOR
1,639,932,051 1,675,035,601
ECA Debt Facility US$150 Million October 23, 2029 2.35% margin plus LIBOR
6,500,026,843 6,638,811,162
(Forward)
- 17 -
Creditor/Project Maturities Interest Rate March 31, 2016
(Unaudited) December 31, 2015
(Audited) Commercial Debt Facility P=5.6 Billion October 23, 2029 2% + PDST-F rate P=5,399,622,093 P=5,398,440,226 P=291.2 Million Term Loan December 17, 2030 5.75% 288,986,740 288,932,892 Restructured Philippine National Bank (PNB) and Allied Bank Peso Loan
November 7, 2022 1.5% + PDST-F rate or 1.0% + BSP overnight rate
3,187,500,000 3,187,500,000
P=8.5 Billion Term Loan March 6, 2022 5.25% 7,417,014,727 7,922,729,666 P=5.0 Billion Term Loan September 9, 2025 5.25% 4,953,652,178 4,951,167,360 Total 73,384,643,275 74,511,593,572 Less current portion 7,836,200,254 7,860,904,237 Noncurrent portion P=65,548,443,021 P=66,650,689,335
The Company’s foreign-currency denominated long-term debts were translated into Philippine pesos based on the prevailing foreign exchange rates at the date of the unaudited interim consolidated statement of financial position (USD1= P=46.07 on March 31, 2016 and USD1= P=47.06 on December 31, 2015).
14. Dividends
Parent Company On March 9, 2016, EDC declared cash dividend amounting to P=2.6 billion to its common shareholders and P=7.5 million to its preferred shareholder of record as of March 23, 2016 payable on or before April 12, 2016.
First Gen Hydro On January 20, 2016, FG Hydro paid cash dividend amounting to P=142.8 million to its non-controlling common stockholder.
15. Costs of Sale of Electricity
March 31, 2016
(Unaudited)
March 31, 2015
(Unaudited) Depreciation and amortization P=1,262,270,785 P=1,152,918,602 Personnel costs 600,276,559 488,553,257 Rental, insurance and taxes 496,296,563 365,381,984 Purchased services and utilities (Note 22) 445,752,823 515,661,351 Repairs and maintenance 217,655,651 205,704,259 Parts and supplies issued 99,940,879 195,744,262 Government share 68,943,196 71,460,833 Business and related expenses 24,844,675 29,037,139 P=3,215,981,131 P=3,024,461,687
- 18 -
16. General and Administrative Expenses
March 31, 2016
(Unaudited)
March 31, 2015
(Unaudited) Personnel costs P=603,908,377 P=475,723,550 Purchased services and utilities 423,357,893 401,017,452 Rental, insurance and taxes 129,577,906 158,583,866 Depreciation and amortization 73,608,649 96,437,670 Business and related expenses 63,100,422 90,298,412 Repairs and maintenance 28,013,201 28,446,227 Parts and supplies issued 25,693,105 43,655,760 Provision for doubtful accounts (Note 11) 21,271,309 13,760,472 Provision for (reversal of) of impairment of parts
and supplies inventories (3,574,527) 14,782,617 P=1,364,956,335 P=1,322,706,026
17. Interest Expense
March 31, 2016
(Unaudited)
March 31, 2015
(Unaudited) Interest on long-term debts including amortization
of transaction costs (Note 13) P=1,186,316,922 P=1,121,092,466 Interest accretion on provision for rehabilitation
and restoration costs 11,893,873 8,612,404 Interest on liability from litigation 1,952,777 1,952,777 P=1,200,163,572 P=1,131,657,647
18. Interest Income
March 31, 2016
(Unaudited)
March 31, 2015
(Unaudited) Interest on placements (Note 5) P=70,656,582 P=61,295,853 Interest on overdue accounts/others 239,907 1,844,082 Interest on savings/current accounts – 4,616,062 Others 180,930 359,885 P=71,077,419 P=68,115,882
- 19 -
19. Foreign Exchange Gains (Losses) - net
March 31, 2016
(Unaudited)
March 31, 2015
(Unaudited) Unrealized foreign exchange gains - net P=553,666,375 P=30,885,439 Realized foreign exchange losses - net (52,188,363) (11,681,522) P=501,478,012 P=19,203,917
This account pertains mainly to foreign exchange adjustments on repayment of loans and restatement of outstanding balances of foreign currency-denominated loans, short-term placements and cash in banks.
20. Miscellaneous Income
March 31, 2016
(Unaudited)
March 31, 2015
(Unaudited) Mark to market gain - financial asset at fair value
through profit or loss P=21,856,379 P=8,377,909 Derivative gains - net 26,657,438 – Loss on direct write-off of input VAT claims (26,642,900) (48,156,119) Gain on sale of property, plant and equipment
(Note 9) 191,648 371,246 Others (6,344,964) (5,875,257) P=15,717,601 (P=45,282,221)
21. Earnings Per Share
The earnings per share amounts were computed as follows:
March 31, 2016
(Unaudited)
March 31, 2015
(Unaudited) (a) Net income attributable to equity shareholders of
the Parent Company P=3,254,009,509 P=2,492,921,791 Less dividends on preferred shares 7,500,000 7,500,000 (b) Net income attributable to common shareholders
of the Parent Company 3,246,509,509 P=2,485,421,791 (c) Weighted average number
of common shares outstanding 18,740,834,066 18,750,000,000 Basic/diluted earnings per share (b/c) P=0.173 P=0.133
The Parent Company does not have dilutive common stock equivalents as of March 31, 2016 and 2015.
- 20 -
22. Related Party Transactions
a. First Balfour, Inc. (First Balfour) Following the regular bidding process, the Company awarded to First Balfour procurement contracts of various structural and mechanical/piping works.
First Balfour is a wholly-owned subsidiary of First Holdings.
b. First Gen First Gen provides financial consultancy, business development and other related services to the Parent Company under a consultancy agreement beginning September 1, 2008. Such agreement is for a period of three years up to August 31, 2011. Under the terms of the agreement, billings for consultancy services shall be P=8.7 million per month plus applicable taxes. This was increased to P=11.8 million effective September 2009 to cover the cost of additional officers and staff assigned to the Parent Company. The consultancy agreement was subsequently extended until December 31, 2016.
c. Other Related Parties In the ordinary course of business, the Company avails of or grants advances from/to its related parties for working capital requirements. Such advances are payable/collectible within 12 months and are non-interest bearing.
Following are the other related parties identified by the Company:
First Gas Holdings Corporation and First Gas Power Corporation are subsidiaries of First Gen. First Philippine Holdings, parent company of First Gen, is a subsidiary of Lopez Holdings Corporation (formerly Benpres Holdings Corporation).
Bayan Telecommunications Inc. (Bayantel) is 97.3%-owned by Bayantel Holdings on which Lopez Holdings Corporation has 47.3% ownership.
Lopez Holdings Corporation has 56.5% interest on ABS-CBN Corp. ABS-CBN Publishing, Inc. is a wholly owned subsidiary of ABS-CBN Corp, ABS-CBN Foundation.
Rockwell Land Corporation is 86.58%-owned by First Philippine Holdings.
FEDCOR is a wholly-owned subsidiary of First Philippine Holdings.
Adtel Inc. is a wholly-owned subsidiary of Lopez, Inc.
First Philec Manufacturing Technologies Corp., Securities Transfer Services, Inc. and First Philippine Realty Corp. (FPRC), formerly known as INAEC Development Corp, are wholly-owned subsidiaries of First Philippine Holdings.
First Gen Energy Solutions (First GES) is a wholly owned subsidiary of First Gen.
Thermaprime Well Services, Inc. (Thermaprime) is a subsidiary of First Balfour, a wholly owned subsidiary of First Holdings. Thermaprime provides drilling services such as, but not limited to, rig operations, rig maintenance, well design and engineering.
- 21 -
Following are the amounts of transactions for the three-month periods ended March 31, 2016 and 2015 and outstanding balances as of March 31, 2016 and December 31, 2015:
Balances
Transactions for the three-month period ended March 31
(Unaudited)
March 31, 2016
Unaudited
December 31, 2015
Audited Related Party Nature of Transaction Terms 2016 2015 2016 2015 Entities under common
control Due to related parties First Gen Consultancy fee Unsecured and will
be settled in cash P=11,903,699 P=38,400,000 P=107,978,292 P=97,228,235
Interest-free advances - do - 225,618 5,224,973 4,763,489 4,490,831 FGP Corp - do - - do - 58,315 9,400 58,315 2,133 First Gas Power
Corporation - do - - do - 37,719 – 37,719 48,435
P=12,225,351 P=43,634,373 P=112,837,815 P=101,769,634
Balances
Transactions for the three-month period ended March 31
(Unaudited)
March 31, 2016
Unaudited
December 31, 2015
Audited Related Party Nature of Transaction Terms 2016 2015 2016 2015 Entities under common
control Due from related parties First Gen Interest-free advances Unsecured and will
be settled in cash P=265,800,000 P=– P=180,181,187 P=–
Entities under common
control Trade and other
receivables (Note 6) First GES Sale of electricity Unsecured and will
be settled in cash P=58,123,933 P=90,132,421 P=21,485,777 P=40,330,538
Entities under common
control Trade and other
payables (Note 12) Thermaprime Drilling and other related
services Unsecured and will be settled in cash
P=554,388,665 P=509,397,755 P=274,530,105 P=602,471,776
First Balfour Inc. Steam augmentation and other services
- do - 351,939,224 389,150,378 1,000,527,108 1,356,167,441
First Philec Manufacturing Technologies Corp
Purchase of services and utilities - do - – 351,830 9,162,293 9,117,293
Bayantel - do - - do - 4,070,550 6,105,526 4,491,742 1,687,740 FEDCOR - do - - do - – – 358,000 358,000 Adtel - do - - do - 3,821,098 112,053 1,990,431 1,900,142 ABS-CBN Publishing,
Inc. - do - - do - 823,036 – 3,600 841,600
FPRC - do - - do - 124,803 – – 27,693 First Philippine Industrial
Corp - do - - do - – 926,979 3,654 3,654
ABS-CBN Foundation - do - - do - – – 63,000 63,000 ABS-CBN Corp. - do - - do - – – – 26,518 Rockwell Land
Corporation -do - - do - – 79,710 – –
Skycable do - do - – – 186,830 186,830 P=915,167,376 P=906,124,231 P=1,291,316,763 P=1,972,851,687
Entities under common control are indirect subsidiaries of Lopez, Inc., the Company’s ultimate parent company. The sales to and purchases from related parties are made at normal commercial terms and conditions. The Parent Company issued letters of credit amounting to US$80.00 million in favor of its subsidiary, EDC Chile Limitada, as evidence of the Parent Company’s financial support for EDC Chile Limitada’s participation in the bids for geothermal concession areas by the Chilean Government.
- 22 -
The Company also issued letters of credit in favor of its subsidiaries in Peru, namely, EDC Quellaapacheta and EDC Energia Verde Peru SAC at US$0.27 million each as evidence of the Parent Company’s financial support for the geothermal authorizations related to the exploration drilling activities of the said entities. Except for the letters of credit issued by the Company in favor of EDC Chile Limitada, EDC Quellaapacheta and EDC Energia Verde Peru SAC as mentioned above, there were no guarantees that have been given to or/and received from any other related party in 2016 and 2015. The Company has not recognized any impairment loss on trade and other receivables relating to intercompany transactions as of March 31, 2016 and December 31, 2015.
23. Financial Risk Management Objectives and Policies
The Company’s financial instruments consist mainly of cash and cash equivalents, AFS investments, trade receivables, trade payables and long-term debts. The main purpose of these financial instruments is to finance the Company’s operations and accordingly manage its exposure to financial risks. The Company has various other financial assets and liabilities such as trade receivables, trade payables and other liabilities, which arise directly from operations.
The Company classifies its financial instruments in the following categories:
March 31, 2016 (Unaudited)
Loans and
Receivables AFS
Investments
Liabilities at Amortized
Cost
Financial Assets at
Fair Value through
Profit or Loss
Derivatives Designated as
Cash Flow Hedges Total
(In Thousand Pesos) Financial Assets Cash and cash equivalents P=17,836,486 P=− P=− P=− P=− P=17,836,486 Trade receivables 6,365,190 − − − − 6,365,190 Non-trade receivables 62,766 − − − − 62,766 Loans and notes receivables 86,545 − − − − 86,545 Employee receivables 9,975 − − − − 9,975 Due from a related party 180,181 − − − − 180,181 Long-term receivables 39,657 − − − − 39,657 Debt service reserve account 1,224,506 − − − − 1,224,506 AFS - debt investments − 131,484 − − − 131,484 AFS - equity investments − 302,532 − − − 302,532 Financial assets at FVPL − − − 1,036,149 − 1,036,149 Derivative assets − − − − 261,158 261,158 Total financial assets P=25,805,306 P=434,016 P=− P=1,036,149 P=261,158 P=27,536,629 (In Thousand Pesos) Financial Liabilities Accounts payable* P=− P=− P=6,394,582 P=− P=− P=6,394,582 Accrued interest on long-term debts − − 1,167,039 − − 1,167,039 Other payables** − − 14,035 − − 14,035 Due to related parties − − 112,838 − − 112,838 (Forward)
- 23 -
March 31, 2016 (Unaudited)
Loans and
Receivables AFS
Investments
Liabilities at Amortized
Cost
Financial Assets at
Fair Value through
Profit or Loss
Derivatives Designated as
Cash Flow Hedges Total
(In Thousand Pesos) Long-term debts P=− P=− P=73,384,643 P=− P=− P=73,384,643 Derivative liabilities − − − − 506,146 506,146 Total financial assets P=− P=− P=81,073,137 P=− P=506,146 P=81,579,283 *excluding statutory liabilities **excluding non-financial liabilities.
December 31, 2015 (Audited)
Loans and
Receivables AFS
Investments
Liabilities at Amortized
Cost
Financial assets at
FVPL
Derivatives Designated as
Cash Flow Hedges Total
(In Thousand Pesos) Financial Assets Cash and cash equivalents P=17,613,922 P=− P=− P=− P=− P=17,613,922 Trade receivables 5,089,519 − − − − 5,089,519 Non-trade receivables 126,860 − − − − 126,860 Loans and notes receivables 89,808 − − − − 89,808 Employee receivables 9,906 − − − − 9,906 Long-term receivables 32,685 − − − − 32,685 Debt service reserve account 1,324,249 − − − − 1,324,249 AFS - debt investments − 258,699 − − − 258,699 AFS - equity investments − 306,027 − − − 306,027 Financial assets at FVPL − − − 1,014,293 − 1,014,293 Derivative assets − − − − 351,612 351,612 Total financial assets P=24,286,949 P=564,726 P=− P=1,014,293 P=351,612 P=26,217,580 (In Thousand Pesos) Financial Liabilities Accounts payable* P=− P=− P=8,034,016 P=− P=− P=8,034,016 Accrued interest on long-term debts − − 899,937 − − 899,937 Other payables** − − 17,874 − − 17,874 Due to related parties − − 101,770 − − 101,770 Long-term debts − − 74,511,594 − − 74,511,594 Derivative liabilities − − − − 202,469 202,469 Total financial assets P=− P=− P=83,565,191 P=− P=202,469 P=83,767,660 *excluding statutory liabilities to the Government **excluding non-financial liabilities.
The following tables show the fair value information of financial instruments classified under loans and receivables, financial assets at FVPL, AFS investments, and derivatives designated as cash flow hedges and analyzed by sources of inputs on fair valuation as follows:
Quoted prices in active markets for identical assets or liabilities (Level 1); Those involving inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and Those with inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (Level 3)
- 24 -
March 31, 2016 (Unaudited)
Carrying Amounts
Fair Values Total Level 1 Level 2 Level 3 Financial Assets Loans and receivables: Long-term receivables P=39,657,458 P=36,863,069 P=− P=− P=36,863,069 Financial assets at FVPL 1,036,149,471 1,036,149,471 − 1,036,149,471 − AFS investments: Debt investments 131,484,076 131,484,076 131,484,076 − − Equity investments 302,532,378 302,532,378 302,532,378 − − Derivative assets designated as cash flow hedges 261,157,682 261,157,682 − 261,157,682 − Financial Liabilities Financial liabilities at amortized cost:
Long-term debts 73,384,643,275 86,762,093,136 − − 86,762,093,136 Derivative Liability: Derivative liabilities designated as cash flow hedges 506,145,845 506,145,845 − 506,145,845 −
December 31, 2015 (Audited) Carrying
Amounts Fair Values
Total Level 1 Level 2 Level 3 Financial Assets Loans and receivables: Long-term receivables P=32,685,410 P=30,285,275 P=− P=− P=30,285,275 Financial assets at FVPL 1,014,293,092 1,014,293,092 − 1,014,293,092 − AFS investments: Debt investments 258,699,227 258,699,227 258,699,227 − − Equity investments 306,027,326 306,027,326 306,027,326 − − Derivative assets designated as cash flow hedges 351,612,199 351,612,199 − 351,612,199 − Financial Liabilities
Financial liabilities at amortized cost:
Long-term debts 74,511,593,572 84,805,828,947 − − 84,805,828,947 Derivative Liablitiy: Derivative liabilities designated as cash flow hedges 202,469,437 202,469,437 − − 202,469,437
Due to relatively short maturity, ranging from one to three months, carrying amounts approximate fair values for cash in banks, trade and other receivables, loans and notes receivables, due to related parties and trade and other payables.
The methods and assumptions used by the Company in estimating the fair value of financial instruments are:
Long-term Receivables The fair value of long-term receivables was computed by discounting the expected cash flow using the applicable rate of 3.72% and 3.89% as at March 31, 2016 and December 31, 2015.
AFS Investment Fair values of quoted debt and equity securities are based on quoted market prices. For equity investments that are not quoted, the investments are carried at cost less allowance for impairment
- 25 -
losses due to the unpredictable nature of future cash flows and the lack of suitable methods of arriving at a reliable fair value.
Financial assets at FVPL The fair values of financial assets at FVPL are measured using inputs that are observable at the reporting date such as government and corporate securities listed in the Philippine Dealing and Exchange Corporation provided by the counterparty bank.
Derivative assets and liabilities designated as cash flow hedges The fair values of derivative assets and liabilities designated as cash flow hedges are based on quotations provided by the counterparty banks. Long-term Debts The fair values for the Company’s long-term debts are estimated using the discounted cash flow methodology with the applicable rates ranging from 1.75% to 3.40% and 1.75% to 11.27% as at March 31, 2016 and December 31, 2015, respectively.
For the three-month period ended March 31, 2016, and for the year ended December 31, 2015 there were no transfers between Level 1 and Level 2 fair value measurements and no transfers into and out of Level 3 fair value measurements.
Credit Risk The Company’s geothermal and power generation business trades with only one major customer, NPC, a government-owned-and-controlled corporation. Any failure on the part of NPC to pay its obligations to the Company would significantly affect the Company’s business operations. As a practice, the Company monitors closely its collection from NPC and charges interest on delayed payments following the provision of its respective SSAs and PPAs. Receivable balances are monitored on an ongoing basis to ensure that the Company’s exposure to bad debts is not significant. The maximum exposure of trade receivable is equal to its carrying amount.
With respect to the credit risk arising from other financial assets of the Company, which comprise of cash and cash equivalents excluding cash on hand, financial assets at FVPL, other receivables and AFS investments, the Company’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments before taking into account any collateral and other credit enhancements.
The following tables below show the aging analysis of the Company’s financial assets as of March 31, 2016 and December 31, 2015:
March 31, 2016 (Unaudited) Past Due but Not Impaired
Neither Past Due nor
Impaired Less than
30 Days 31 Days
to 1 Year
Over 1 Year up to
3 Years Over
3 Years
Past Due and
Impaired Total (In Thousand Pesos) Loans and receivables: Cash and cash
equivalents (excluding cash on hand) P=17,802,229 P=– P=– P=– P=– P=– P=17,802,229
Trade receivables 4,400,554 335,551 389,984 1,239,101 – 113,020 6,478,210 (Forward)
- 26 -
Loans and notes receivables P=86,545 P=– P=– P=– P=– P=– P=86,545
Employee receivables 9,975 – – – – – 9,975 Non-trade receivables 28,290 25,610 8,866 – – – 62,766 Long-term receivables 39,657 – – – – 95,461 135,118 Debt service reserve
account 1,224,506 – – – – – 1,224,506 AFS investments: – – – – – Debt investments 131,484 – – – – – 131,484 Equity investments 302,532 – – – – – 302,532 Financial assets at FVPL 1,036,149 – – – – – 1,036,149 Derivatives designated as
cash flow hedges: 261,158 – – – – – 261,158 Total P=25,323,079 P=361,161 P=398,850 P= 1,239,101 P=– P=208,481 P=27,530,672
December 31, 2015 (Audited) Past Due but Not Impaired
Neither Past Due nor
Impaired Less than
30 Days 31 Days
to 1 Year
Over 1 Year up to
3 Years Over
3 Years
Past Due and
Impaired Total (In Thousand Pesos) Loans and receivables: Cash and cash
equivalents (excluding cash on hand) P=17,495,408 P=– P=– P=– P=– P=– P=17,495,408
Trade receivables 3,460,994 476,414 62,165 1,089,945 – 112,923 5,202,441 Loans and notes
receivables 89,808 – – – – – 89,808 Employee receivables 9,906 – – – – – 9,906 Non-trade receivables 118,665 – – 6,255 – 1,939 126,859 Long-term receivables 30,200 – – 1,870 615 94,389 127,074 Debt service reserve
account 1,324,249 – – – – – 1,324,249 AFS investments: Debt investments 258,699 – – – – – 258,699 Equity investments 306,027 – – – – – 306,027 Financial assets at FVPL 1,014,293 – – – – – 1,014,293 Derivatives designated as
cash flow hedges: Derivative assets 351,612 – – – – – 351,612 Total P=24,459,861 P=476,414 P=62,165 P=1,098,070 P=615 P=209,251 P=26,306,376
Credit Quality of Financial Assets
Financial assets are classified as high grade if the counterparties are not expected to default in settling their obligations. Thus, the credit risk exposure is minimal. These counterparties normally include customers, banks and related parties who pay on or before due date. Financial assets are classified as a standard grade if the counterparties settle their obligation with the Company with tolerable delays. Low grade accounts are accounts, which have probability of impairment based on historical trend. These accounts show propensity of default in payment despite regular follow-up actions and extended payment terms.
As of March 31, 2016 and December 31, 2015, financial assets categorized as neither past due nor impaired are viewed by management as high grade, considering the collectability of the receivables and the credit history of the counterparties. Meanwhile, past due but not impaired financial assets are classified as standard grade.
- 27 -
Derivative Designated as Accounting Hedges The Company engages in derivative transactions, particularly cross currency swaps and interest rate swaps to manage its foreign currency risk and/or interest rate risk arising from its floating-rate foreign-currency denominated loans.
The table below shows the Company’s derivative financial instruments designated as accounting hedges:
March 31, 2016 (Unaudited) December 31, 2015 (Audited)
Derivative
Assets Derivative Liabilities
Derivative Assets
Derivative Liabilities
Cross-currency swaps P=234,500,244 P=– P=351,612,199 P=– Interest rate swaps – 506,145,845 – 202,469,437 Call spread swaps 26,657,438 – – –
P=261,157,682 P=506,145,845 P=351,612,199 P=202,469,437
Presented as: Current P=40,471,782 P=12,358,170 P=58,602,033 P=4,943,539 Noncurrent 220,685,900 493,787,675 293,010,166 197,525,898
P=261,157,682 P=506,145,845 P=351,612,199 P=202,469,437
Call Spread Swap Contracts In March 2016, the Parent Company entered into three call spread swaps with an aggregate notional amount of US$28.8 million. These derivative contracts are designed to hedge the possible foreign exchange loss of its US$80.0 million club loan. The aggregate fair value changes on these call spread contracts amounted to P=26.7 million as of March 31, 2016. Cross Currency Swap Contracts In 2012, the Parent Company entered into six non-deliverable cross-currency swap (NDCCS) agreements with an aggregate notional amount of US$65.0 million. These derivative contracts are designed to partially hedge the foreign currency and interest rate risks on the Parent Company’s Refinanced Syndicated Term Loan (Hedged Loan) that is benchmarked against US LIBOR and with flexible interest reset feature that allows the Parent Company to select what interest reset frequency to apply (i.e., monthly, quarterly or semi-annually) [see Note 13]. As it is the Parent Company’s intention to reprice the interest rate on the Hedged Loan quarterly, the Parent Company utilizes NDCCS with quarterly interest payments and receipts.
In 2014, the Parent Company entered into additional six NDCCS with aggregate notional amount of US$45.0 million to further hedge its foreign currency risks and interest rate risks arising from the Hedged Loan. Effectively, the 12 NDCCS converted 62.86% of Hedged Loan into a fixed rate peso loan. Under the NDCCS agreements, the Parent Company receives floating interest based on 3-month US LIBOR plus 175 basis points and pays fixed peso interest. On specified dates, the Parent Company also receives specified USD amounts in exchange for specified peso amounts based on the agreed swap rates. These USD receipts correspond with the expected interest and fixed principal amounts due on the Hedged Loan.
- 28 -
Pertinent details of the NDCCS are as follows:
Notional amount
(in millions)
Trade Date
Effective
Date
Maturity
Date
Swap
rate
Fixed
rate
Variable rate US$15.00 03/26/12 03/27/12 06/17/17 P43.05 4.87% 3-month LIBOR + 175 bps
10.00 04/18/12 06/27/12 06/17/17 42.60 4.92 -do- 10.00 05/03/12 06/27/12 06/17/17 42.10 4.76 -do- 10.00 06/15/12 06/27/12 06/17/17 42.10 4.73 -do- 10.00 07/17/12 09/27/12 06/17/17 41.25 4.58 -do- 10.00 10/29/12 12/27/12 06/17/17 41.19 3.44 -do- 7.50 05/14/14 06/27/14 06/17/17 43.60 3.80 -do- 7.50 05/14/14 06/27/14 06/17/17 43.57 3.80 -do- 7.50 06/09/14 06/27/14 06/17/17 43.55 3.60 -do- 7.50 06/09/14 06/27/14 06/17/17 43.55 3.60 -do- 7.50 07/10/14 9/27/14 06/17/17 43.29 3.50 -do- 7.50 07/09/14 9/27/14 06/17/17 43.37 3.68 -do-
The maturity date of the 12 NDCCS coincides with the maturity date of the Hedged Loan.
As of March 31, 2016 and December 31, 2015, the outstanding aggregate notional amount of the Parent Company’s NDCCS amounted to US$75 million. The aggregate fair value changes on these NDCCS amounted to P=234.5 million gain and P=351.6 million loss as of March 31, 2016 and December 31, 2015, respectively.
Interest Rate Swap Contracts In the last quarter of 2014, EBWPC entered into four interest rate swaps (IRS) with aggregate notional amount of US$150 million. This is to partially hedge the interest rate risks on its ECA and Commercial Debt Facility (Foreign Facility) that is benchmarked against US LIBOR and with flexible interest reset feature that allows EBWPC to select what interest reset frequency to apply (i.e., monthly, quarterly or semi-annually) [see Note 13]. As it is EBWPC's intention to reprice the interest rate on the Foreign facility semi-annually, EBWPC utilizes IRS with semi-annual interest payments and receipts. Under the IRS agreement, EBWPC will receive semi-annual interest of 6-month LIBOR and will pay fixed interest. EBWPC designated the IRS as hedging instruments in cash flow hedge against the interest rate risks arising from the Foreign Facility. Pertinent details of the IRS are as follows:
Notional
amount (in million)
Trade Date
Effective
Date
Maturity
Date
Fixed
rate
Variable rate US$62.00 10/20/14 12/15/14 10/23/29 2.635% 6-month LIBOR
40.00 10/20/14 12/15/14 10/23/29 2.635 -do- 39.00 12/11/14 12/15/14 10/23/29 2.635 -do- 9.00 10/20/14 12/15/14 10/23/29 2.508 -do-
The maturity date of the four IRS coincides with the maturity date of the Foreign Facility.
As of March 31, 2016 and December 31, 2015, the outstanding aggregate notional amount of EBWPC’s IRS amounted to US$147 million. The aggregate fair value changes on these IRS amounted to P=506.1 million and P=202.5 million loss as of March 31, 2016 and December 31, 2015, respectively.
- 29 -
Fair value Adjustments The net movement of changes made to “Fair value Adjustments on Hedging Transactions” account for the Company’s cash flow hedges is as follows:
March 31, 2016 (Three months)
(Unaudited)
December 31, 2015 (One year) (Audited)
Balance at beginning of the period (P=177,500,756) (P=178,182,172) Changes in fair value of the cash flow hedges (407,908,775) 259,449,991 (585,409,531) 81,267,819 Transferred to consolidated statement of income: Foreign exchange loss (gain) 74,250,000 (175,500,000) Interest expense (12,879,587) (94,741,473) 61,370,413 (270,241,473) Balance before tax (524,039,118) (188,973,654) Tax 27,313,557 11,472,898 Balance at end of the period (P=496,725,561) (P=177,500,756)
Fair Value Changes of Derivatives The table below summarizes the net movement in fair values of the Company’s derivatives as of March 31, 2016 and December 31, 2015.
March 31, 2016 (Three Months)
(Unaudited)
December 31, 2015 (One year) (Audited)
Balance at beginning of the period P=149,142,762 (P=15,565,756) Net changes in fair value of derivatives: Designated as accounting hedges (381,251,338) 259,449,991 Not designated as accounting hedges – – (381,251,338) 259,449,991 Fair value of settled instruments: Designated as accounting hedges (12,879,587) (94,741,473) Not designated as accounting hedges – – (12,879,587) (94,741,473) Balance at end of the period (P=244,988,163) P=149,142,762 Presented as: Derivative assets P=261,157,682 P=351,612,199 Derivative liabilities (506,145,845) (202,469,437) (P=244,988,163) P=149,142,762
The effective portion of the changes in the fair value of the derivatives designated as accounting hedges were deferred in equity under “Fair Value Adjustment on Hedging Transactions” account.
Capital Management The primary objective of the Company’s capital management is to ensure that it maintains a healthy capital ratio in order to comply with its financial loan covenants and support its business operations.
- 30 -
24. Event After the Financial Reporting Period
On May 3, 2016, the Company purchased 1,000,000 of its own shares from the market at an average price of P=5.635 per share pursuant to its BOD approved share buy-back program.
25. Other Matters
Seasonality or Cyclicality of Interim Operations For Wind Ilocos Norte Business Unit, higher revenue and operating profits are expected in the last quarter of the year this is based on the generation profile of Burgos. Solar power plant is expected to generate its highest revenue during summer months. For the rest of the entities, except for FG Hydro’s sale of electricity coming from hydroelectric power/operations, seasonality or cyclicality of interim operations is not applicable to the Parent Company’s type of business because of the nature of its contracts with NPC, which includes guaranteed volume under the applicable take-or-pay, minimum energy off-take or contracted energy provisions. GCGI’s sales to cooperatives and industries are also not subject to seasonality or cyclicality.
Issuances, Repurchases, and Repayments of Debt and Equity Securities There are no issuances, repurchases and repayments of debt and equity securities during the current period
Changes in Estimates of Amounts Reported in Prior Financial Years The key assumptions concerning the future and other key sources of estimation uncertainty used in preparation of the unaudited interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements as of and for the year ended December 31, 2015.
Changes in the Composition of the Company During the Interim Period There are no material changes in the composition of the registrant during the period.
Changes in Contingent Liabilities or Contingent Assets Since the Last Annual Reporting Date There are no material changes in the contingent liabilities or contingent assets since the last annual reporting date.
Existence of Material Contingencies and Any Other Events or Transactions that are Material to an Understanding of the Current Interim Period There are no material contingencies and any other events or transactions during the period.