Geothermal leader Energy Development Corporation (EDC) moves closer to its goal of overhauling the currency mix of its loan portfolio as it settled on June 28 its JPY22B Miyazawa II debt. With the settlement, EDC’s JPY loans now account for only 13 percent of the company’s total loans from the 87 percent and 40 percent reported in 2008 and 2009, respectively.
“Our investors have singled out the predominance of JPY denominated debt as a major concern because of our vulnerability to forex translation losses. Since taking over in 2008, we have fully addressed this concern with the successful redenomination of our debt stock to one that is now predominantly peso, or 66 percent of total loans. From this point on, our income statement will be more predictable as it is no longer subjected to large swings in the amount of unrealized forex losses/(gains) now that EDC has become less reliant on Yen denominated debt,” EDC President and COO Richard Tantoco explained.
During the first half of 2010, EDC had successfully hedged the US$:JPY exposure of its entire JPY 22B maturity and this has benefited the company about Php 181.1 million.
The Miyazawa II loan was among the legacy loans which PNOC EDC carried over into the present day fully private EDC. It was used to fund the investment and working capital requirements of PNOC EDC’S operating projects shortly after the Asian Financial Crisis.
EDC posted a PhP3.80 billion net income for the first quarter of 2010, up 68 percent from the PhP2.27 billion posted for the same period last year. Revenues from its two subsidiary corporations, Green Core Geothermal, Inc. (GCGI), operator of the 192.5 MW Palinpinon and 112.5 MW Tongonan I geothermal power plants, and First Gen Hydro Power Corporation (FG Hydro), operator of the Pantabangan and Masiway hydroelectric plants, were largely responsible for the significant rise in net income for the quarter, contributing PhP1.22 billion.
For the third time in a row, Energy Development Corporation (EDC), the country’s largest producer of geothermal energy, made it to the elite list of corporations that ranked high in corporate governance. EDC is among the gold awardees scoring 95 percent and above in the 2009 corporate governance scorecard, topping its previous year’s silver award. The Institute of Corporate Directors (ICD) in partnership with the Securities and Exchange Commission, Philippine Stock Exchange, Institute of Internal Auditors of the Philippines, Ateneo Law School, and Center for International Private Enterprise conducted the evaluation in order to assess the compliance levels of Philippine corporations. Shown from L-R are ICD Chairman Dr. Jesus Estanislao, EDC Director Vince Perez, EDC Vice Chairman and CEO Paul Aquino, EDC Chairman Oscar Lopez, EDC President & COO Richard Tantoco, SEC Commissioner Manuel Gaite and Ateneo Law School Dean Cesar Villanueva.
Deal for clean power. L-R: FGES VP for Marketing Arman Lapus, AKELCO President Wayne Malilay, EDC President & COO Richard Tantoco; AKELCO General Manager Chito Peralta, ILECO 1 Board Member Francisco Toledo, Jr. , ILECO 1 President Atty. Lex Anthony Cris A. Colada, Richard Tantoco, and ILECO I General Manager Wilfred L. Billena
Green Core Geothermal, Inc. (GCGI), a subsidiary of geothermal leader Energy Development Corporation (EDC), signed 10-year power supply agreements with the Iloilo Electric Cooperative (ILECO 1) and Aklan Electric Cooperative (AKELCO). Based on the contracts, GCGI will supply AKELCO with 18 MW for Y2010 and 10 MW from Y2011 to Y2020. ILECO 1, on the other hand will be supplied with 3 MW from Y2010 to Y2012 and 18 MW from Y2012-Y2022. Power will come from the 112.5-MW Tongonan 1 in Leyte and 192.5-MW Palinpinon plants in Negros Oriental which GCGI won in a bidding by PSALM last year.
“We’re very glad to have ILECO 1 and AKELCO as partners in delivering clean energy to Iloilo and Aklan. EDC’s long-term contracts with these two cooperatives will support the growth needs of the two cooperatives with clean, reliable and affordable power. Since the industry is leaning more towards clean energy, EDC, with its 34-year head start in the geothermal business, is well positioned to address the supply shortage in the Visayas grid,” EDC President and COO Richard Tantoco said.
AKELCO General Manager Chito Peralta likewise expressed satisfaction with the agreement. “Getting power has always been a challenge for us because as you know, Aklan is located at the tip of the grid. Now Green Core will be able to augment the power supply of the province and encourage more tourists to visit Boracay.” AKELCO services 17 municipalities in Aklan and two municipalities in Antique.
Tantoco added that the pricing of indigenous renewable energy resource such as geothermal is independent of any indexation to movements in global energy indices. Hence, ILECO 1 General Manager Wilfred Billena is confident that the contracts “will also result in lower power rates for us in Iloilo.” ILECO 1’s franchise areas cover 15 municipalities.
Energy Development Corporation (EDC), the country’s leading producer of geothermal energy, reported a PhP3.80 billion net income for the first quarter of 2010, a 68 percent jump from the PhP2.27 billion posted for the same period last year. Earnings before income tax, depreciation and amortization (EBITDA) also improved by 82 percent to PhP4.94 billion. Revenues from its two subsidiary corporations, namely the Green Core Geothermal, Inc (GCGI), operator of the 192.5 MW Palinpinon and 112.5 MW Tongonan I geothermal power plants, and First Gen Hydro Power Corporation (FG Hydro), operator of the Pantabangan and Masiway hydroelectric plants, were largely responsible for the significant rise in net income and EBITDA for the quarter, contributing PhP1.22 billion.
The quarter also saw the Company’s core net income improving by PhP3.2 billion, 103 percent higher than the PhP1.6 billion posted during the same period in 2009. The marked improvement was primarily driven by the increased electricity sales from GCGI geothermal and Pantabangan-Masiway hydroelectric plants.
“We’re off to a good start in 2010 given the performance of our subsidiary corporations. Knowing the pulse of our customers worked to our advantage. We are sensitive to their preference for clean, reliable, sustainable and affordable energy sources. The pricing of the indigenous renewable energy resource that we offer our customers is independent of any indexation to movements in global energy indices. This was validated by the long term contracts that we have already secured for the Palinpinon and Tongonan geothermal power plants,” EDC President and COO Richard Tantoco said.
Green Core successfully took over operations of the Palinpinon and Tongonan I geothermal power plants in October last year. This year, EDC is adding to its portfolio of power generation assets the 150-MW Bacman geothermal plant in Sorsogon after it submitted the highest bid in the recently concluded auction for the geothermal plants.
“We are programming the rehabilitation of the Bacman power plants and bring them back to their full capacity within 18 to 24 months. With our acquisition of the Bacman plants, our steamfield and power plant operations will be fully integrated in all our project sites. This will make our operations more efficient and our electricity production competitively-priced,’’ Tantoco explained.
EDC also owns and operates the Unified Leyte plants consisting of the 125-MW Upper Mahiao, 180-MW Mahanagdong, 232-MW Malitbog and 51-MW optimization plants, as well as the 52-MW Mindanao 1 and 54-MW Mindanao 2 power plants in North Cotabato. These plants were turned over to EDC by its BOT partners at the end of the cooperation period.
To date, EDC remains the largest producer of geothermal energy in the Philippines accounting for 62 percent of the total country installed geothermal capacity. Aside from geothermal, EDC also owns and operates the 122-MW Pantabangan-Masiway hydro electric plants and has investments in wind energy projects in Ilocos and other provinces.
The best of the best. L-R: EDC Investor Relations Officer Baby Clemente, CFA Philippines President April Lynn Tan, UP’s Choerleen Solema, Jose Mari Punzalan, Raymund Li, Pamela Li & Rachel Sison, UP faculty & team coach Gavin Lee, EDC Investor Relations Manager Erudito Recio, & CFA Philippines Denis Du & Ernie Francisco.
UP tops them all. We have reason to be proud again as the Philippine colors shone the brightest in the recently concluded Global Investment Research Challenge (IRC) held in HongKong. Five business administration and accounting students from the University of the Philippines prove that Filipinos can hold their own against the best of the world when they emerged top winners in the IRC. Raymund Li, Choerleen Solema, Jose Mari Punzalan, Pamela Li and Rachel Sison of the UP College of Business Administration overcame tough competition against Brigham Young University from the Americas region, Fordham University from New York region, and University of Cape Town from EMEA region before being declared the global winner. Prior to winning the global championship, UP had to hurdle competition from schools in the Philippines and then in Asia-Pacific. For the regional finals, UP bested 15 universities from China, HongKong, Taiwan, Indonesia, Korea, India, Japan, Malaysia, Australia, New Zealand, Pakistan, Singapore and Sri Lanka to earn the right to represent Asia-Pacific in the global finals. This year’s competition had over 425 universities all over the world participating.
The UP students’ presentation and recommendation on Energy Development Corporation (EDC) as a buy impressed and convinced the panel of judges composed of investment industry experts from all over the world. In their presentation, they recommended that investors buy shares of the Philippines largest geothermal company citing EDC’s stock price’s upside potential given its industry leadership, the country’s power supply problems, and the Renewable Energy law.
The IRC is a worldwide annual competition organized by the Chartered Financial Analyst Institute (CFAI) to provide university students with unparalleled real world experience in equity research and company analysis. Over 425 universities worldwide sent representatives to the regional competitions held in the Americas, Asia Pacific, EMEA, and New York to determine the four teams that competed in the global final, which was held in Hong Kong.
“Winning the Global IRC is very special for us and we are grateful for all the help and support we received throughout the process. We hope this will help raise recognition of the quality of the financial services talent in the Philippines,” said Raymund Siegfrid O. Li, team member, University of the Philippines. “Participating in the Global IRC was an incredible learning experience for us – especially since we are undergraduate students and the challenge requirements went beyond what is being taught in our current courses. We are grateful for the practical insight we gained through this once-in-a-lifetime experience and are confident it will create new opportunities for us.”
Commenting on the event, John Rogers, CFA, President and CEO of CFA Institute, said: “My congratulations go to the University of the Philippines for winning the fourth annual Global IRC. Since its inception in 2007, the competition has gone from strength to strength, thanks to the determination and commitment of universities, students, industry professionals, and societies from across the world. This year, more than 90 CFA Institute member societies hosted local competitions, with over 425 universities and 2,000 students from many of the world’s top finance schools participating. I was extremely impressed with the final four teams’ research and presentations and would like to applaud their skill and tenacity. We at CFA Institute hope that the experience has helped to instill ethics and best practices in what may be the next generation of investment professionals.”
For his part, EDC President & COO Richard Tantoco vows to support worthy projects that will help students gain knowledge and acquire hands-on experience in equity research. “This is a very good exercise in developing future investment and financial analysts. I am happy that EDC is able to participate in undertakings that would again put the Philippines in a very distinguished position and make every Filipino beam with pride.”
This is the first time for the Philippines to win this tough contest. The global winners from the past three years came from Nanyang Technological University in Singapore, Hong Kong Baptist University, and Babson College in Boston, USA.