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SEC Form 17Q – 3Q 2012
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)
September 30, 2012 (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 9 3 0 A A C F S 0 5 0 9 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
700 P=30,105,082,674 P=19,577,815,395
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 – 3Q 2012 2
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-Q
QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER
1. For the quarterly period ended September 30, 2012 2. Commission identification number: 66381 3. BIR Tax Identification No. 000-169-125-000 4. Exact name of issuer as specified in its charter: ENERGY DEVELOPMENT CORPORATION 5. PHILIPPINES 6. (SEC Use Only)
Province, country or other jurisdiction of Industry Classification Code Incorporation or organization
7. One Corporate Centre Julia Vargas cor. Meralco Ave., Ortigas Center, Pasig City 1605 Address of issuer's principal office Postal Code 8. (632) 755-2332 Issuer's telephone number, including area code:
9. Merritt Road, Fort Bonifacio, Taguig City Former name, former address and former fiscal year, if changed since last report: 10. Securities registered pursuant to Sections 8 and 12 of the Code, or Sections 4 and 8 of the RSA
Title of each Class Number of shares outstanding as of September 30, 2012
Common Stock, P1.00 par value 18,750,000,000 Preferred Stock, P0.01 par value 9,375,000,000 11. Are any or all of the securities listed on a Stock Exchange? Yes [ √ ] No [ ]
If yes, state the name of such Stock Exchange and the class/es of securities listed therein: Philippine Stock Exchange Common Stock
12. Indicate by check mark whether the registrant:
(a) has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17 thereunder or Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the Corporation Code of the Philippines, during the preceding twelve (12) months (or for such shorter period the registrant was required to file such reports)
Yes [ √ ] No [ ] (b) has been subject to such filing requirements for the past ninety (90) days. Yes [ √ ] No [ ]
SEC Form 17Q – 3Q 2012
PART 1 FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Our unaudited consolidated financial statements for the quarter ended September 30, 2012 have been prepared in accordance with Philippine Financial Reporting Standards (PFRS) 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 quarter ended September 30, 2012. 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 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”, “Company” means the Energy Development Corporation and its subsidiaries. Additional information about the Company can be found on our corporate website www.energy.com.ph.
SEC Form 17Q – 3Q 2012 5
OVERVIEW OF OUR BUSINESS
Principal Products or Services As of September 30, 2012, the Company operates twelve geothermal power plants in the five geothermal service contract areas where it is principally involved in:
i. the production of geothermal steam for sale to National Power Corporation (NPC) pursuant to Steam Sales Agreements (SSAs) and
ii. the generation and sale of electricity through Company-owned geothermal power plants to NPC, privately-owned distribution utilities (DUs), large industrials, and electric cooperatives, pursuant to Power Purchase Agreements (PPAs) and Electricity Sales Agreements (ESAs), respectively.
Starting September 3, 2010, on account of the extended waiver, the Company ceased billing to NPC after Bacman Geothermal Inc’s (BGI) successful acquisition of the plants from NPC. 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 customers which include the Wholesale Electricity Spot Market (WESM), distribution utilities covered by bilateral contract quantities (BCQ) and the National Grid Corporation of the Philippines (NGCP) for ancillary services. For the Company’s third business segment, Energy Development Corporation (EDC) provides drilling services to the Lihir Gold Limited in Papua New Guinea. The Company has evolved into being the country’s premier pure renewable energy play, possessing interests in geothermal energy and hydro 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. 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.
Percentage of sales or revenues contributed by foreign sales The Company generated P506.9 million from the contract it entered into with Lihir Gold Limited (LGL) in Papua, New Guinea. This represents 2.3% of the Company’s P21,949.5 million gross revenues for the first three quarters of 2012. As of October 31, 2012, the contract with LGL was pre-terminated.
SEC Form 17Q – 3Q 2012 6
Distribution methods of products or services The Company’s 5,296.1 GWh total sales volume comprised of 4,941.2 GWh coming from electricity production in Leyte, Mindanao, Tongonan I, and Palinpinon geothermal power plants and 354.9 GWh from FG Hydro’s Pantabangan-Masiway hydro power plants. About 63.3% or 3,354.3 GWh generated by Leyte and Mindanao was sold to NPC. The 1,586.9 GWh generated by Tongonan I, Palinpinon I and II was sold to electric cooperatives and industrial customers in the Visayas region and the Wholesale Electricity Spot Market (WESM). Electricity production of about 354.9 GWh, by FG Hydro’s power plants, was sold to the distribution utility clients comprised of electric cooperatives in the province of Nueva Ecija, BGI and the WESM. The electricity generated by the Company’s geothermal power plants is transmitted to customers i.e., distribution utilities, electric cooperatives or bulk power customers by the NGCP through its high voltage backbone system. FG Hydro generated 354.9 GWh of electricity as of first three quarters of 2012, of which 76.1% or 270.1 GWh was delivered to its contracted customers and 23.9% or 84.8 GWh was sold to the WESM.
Competition The Company competes with other energy sources used for the production of power, particularly coal, gas and oil, substantially all of which are imported. Under the Company’s Geothermal Renewable Energy Service Contracts (GRESCs), it has long-term exclusive rights to explore, develop, and utilize geothermal steam resources in specific areas. Substantially all of the Company’s power capacity is sold through various offtake agreements, such as PPAs for the supply of electricity to NPC and ESAs with Dus, large industrials, and electric cooperatives. Since most of these agreements provide for take-or-pay quantities, the Company is not subject to direct competition. Furthermore, the supply of steam is location-specific, such that each power plant can only source its fuel from a dedicated nearby steam field. On May 5, 2010, BGI, the Company’s wholly-owned subsidiary through EDC Geothermal Corporation, submitted the winning bid of US$28.25 million for PSALM’s auction of the 150 MW Bac-Man Geothermal Power Plants located in the towns of Bacon, Sorsogon Province and Manito, Albay Province. The power plants were turned over to BGI in September 2010, and are currently under rehabilitation to restore capacity and reliability. The only other Philippine company engaged in the production of steam is Chevron Geothermal Philippines Holdings. Aboitiz Power Corporation, a power distribution and generation company, operate for the 747 MW Tiwi-Makban geothermal power plant. Multinationals that currently operate in the Philippines include Korea Electric Power Corporation, Marubeni, CalEnergy, Tokyo Electric Power Company, AES, and Sumitomo.
SEC Form 17Q – 3Q 2012 7
Dependence on one or a few major customers and identity of any such major customers Close to 45.2% of the Company’s total revenues are derived from existing long-term PPAs with NPC.
Concessions and government share payments The five geothermal service contract areas where the EDC’s geothermal production steam fields are located are: • 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) 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 25-year contract period expiring in 2037,
renewable for another 25 years) Palinpinon Geothermal Power Plant (with a 25-year contract period expiring in 2037,
renewable for another 25 years) Bacon-Manito Geothermal Power Plant (with a 25-year contract period expiring in 2037,
renewable for another 25 years) The Company also holds service contracts for the following prospect areas: Geothermal Resource
1. Mt Cabalian Geothermal Project (expiring by 2034) 2. Mt. Labo Geothermal Project (with a five-year pre-development period expiring in 2015,
25-year contract period expiring in 2035) 3. Mainit Geothermal Project (with a five-year pre-development period expiring in 2015,
25-year contract period expiring in 2035) 4. Ampiro Geothermal Project (with a five-year pre-development period expiring in 2017,
25-year contract period expiring in 2037) 5. Mandalagan Geothermal Project (with a five-year pre-development period expiring in
2017, 25-year contract period expiring in 2037) 6. Mt. Zion Geothermal Project (with a five-year pre-development period expiring in 2017,
25-year contract period expiring in 2037) 7. Lakewood Geothermal Project (with a five-year pre-development period expiring in
2017, 25-year contract period expiring in 2037) 8. Balingasag Geothermal Project (with a five-year pre-development period expiring in
2017, 25-year contract period expiring in 2037)
SEC Form 17Q – 3Q 2012 8
Wind Resource
1. Burgos Wind Project (WESC assigned by EDC to EDC Burgos Wind Power Corporation; pre-development stage expiring in 2012, 25-year contract period expiring in 2034)
2. Pagudpud Wind Project (pre-development stage expiring in 2013, 25-year contract period expiring in 2035)
3. Camiguin Wind Project (pre-development stage expiring in 2013, 25-year contract period expiring in 2035)
SEC Form 17Q – 3Q 2012 9
KEY PERFORMANCE INDICATORS The top eight (8) key performance indicators are set forth below:
Ratio
Sept – 12
Sept – 11
Current Ratio 2.11:1 2.65:1 Debt-to-Equity Ratio 1.45:1 1.81:1 Net Debt-to-Equity Ratio 1.12:1 1.37:1 Return on Assets (%) 10.59 (4.30) Return on Equity (%) 30.85 (11.49) Solvency Ratio 0.23 0.15 Interest Rate Coverage Ratio 3.87 2.27 Asset-to-Equity Ratio 2.76 3.09 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.
SEC Form 17Q – 3Q 2012 10
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 – 3Q 2012 11
OPERATING REVENUES AND EXPENSES
FINANCIAL HIGHLIGHTS During the first three quarters of 2012, the Company posted a net income of P8,566.1 million, a 1,856.4% or P9,053.8 million improvement from the net loss of P487.7 million in the nine-month period ending September 30, 2011. The following factors contributed to the increase: P4,998.6 million impairment loss on property, plant and equipment of Northern
Negros Geothermal Project that was recognized in June 2011; P1,811.8 million GCGI’s higher revenues from Tongonan I and Palinpinon power
plants as per agreed contracts that became effective in mid-2011 and the additional power supply agreements that were signed in December 2011; and
P1,481.5 million FG Hydro’s revenues from sale of electricity as ancillary services. These were partially offset by the P175.5 million increase in net loss by BGI.
Net income (loss) is equivalent to 39.0% of total revenues in 2012 as compared to the (2.7%) from the same period in 2011. Net income attributable to equity holders of the parent at P7,105.8 million for the first three quarters of 2012, was a turnaround from the P670.2 million net loss attributable to equity holders of the parent during the same period in 2011. The recurring net income generated in the first three quarters of 2012 increased by 95.9% or P3,804.4 million to P7,771.6 million from the P3,967.2 million posted during the same period in 2011. This was mainly attributable to the P3,366.2 million increase in sale of electricity by FG Hydro and GCGI, offset by the P315.0 million increase in cost of sales of electricity and steam. Recurring net income attributable to equity holders of the parent was posted at P6,311.2 million, up by 66.8%, as compared to the P3,784.2 million for the first three quarters of 2011.
Cash and cash equivalents decreased by 9.0%, or P1,122.1 million, to P11,371.3 million as of September 30, 2012 from the P12,493.4 million December 31, 2011 balance. The decrease was mainly due to the following:
P6,761.2 million increase in property, plant and equipment acquisition and other investments
P3,508.8 million debt servicing; and P3,225.0 million payment of cash dividend.
These were offset by the P12,385.6 million cash generated from operations.
SEC Form 17Q – 3Q 2012 12
RESULTS OF OPERATIONS The following table details the results of operations for EDC for the first three quarters of 2012 and 2011. STATEMENT OF INCOMEHorizontal Analysis of Material Changes
Favorable (Unfavorable) Variance(Amounts in PHP millions) September 2012 September 2011 Amount % 2012 2011REVENUES Sale of electricity 21,442.6 17,699.4 3,743.2 21.1% 97.7% 97.1%
Revenue from drilling services 506.9 522.3 (15.4) -2.9% 2.3% 2.9%21,949.5 18,221.7 3,727.8 20.5% 100.0% 100.0%
COST OF SALES AND SERVICES*Cost of sales of electricity and steam (7,502.5) (7,440.5) (62.0) -0.8% -34.2% -40.8%Cost of drilling services (299.2) (464.4) 165.2 35.6% -1.4% -2.5%
(7,801.7) (7,904.9) 103.2 1.3% -35.6% -43.3%GENERAL AND ADMINISTRATIVE EXPENSES* (3,128.5) (3,066.7) (61.8) -2.0% -14.3% -16.8%FINANCIAL INCOME (EXPENSE) Interest income 274.5 281.2 (6.7) -2.4% 1.3% 1.5% Interest expense (2,869.6) (3,260.2) 390.6 12.0% -13.1% -17.9%
(2,595.1) (2,979.0) 383.9 12.9% -11.8% -16.4%OTHER INCOME (CHARGES)
Loss on impairment of property, plant and equipment* - (4,998.6) 4,998.6 100.0% 0.0% -27.4% Foreign exchange gains, net 813.6 (48.7) 862.3 1770.6% 3.7% -0.3% Derivatives gains, net 1.9 107.5 (105.6) -98.2% 0.0% 0.6% Miscellaneous, net* (85.7) 18.8 (104.5) -555.9% -0.4% 0.1%
729.8 (4,921.0) 5,650.8 114.8% 3.3% -27.0%INCOME BEFORE INCOME TAX 9,154.0 (649.9) 9,803.9 1508.5% 41.7% -3.6%BENEFIT FROM (PROVISION FOR) INCOME TAX
Current (371.3) (402.8) 31.5 7.8% -1.7% -2.2%Deferred (216.6) 565.0 (781.6) -138.3% -1.0% 3.1%
(587.9) 162.2 (750.1) -462.5% -2.7% 0.9%NET INCOME (LOSS) 8,566.1 (487.7) 9,053.8 1856.4% 39.0% -2.7%Net income (loss) attributable to:
Equity holders of the Parent Company 7,105.8 (670.2) 7,776.0 1160.3% 32.4% -3.7%Non-controlling interest 1,460.3 182.5 1,277.8 700.2% 6.7% 1.0%
EBITDA 13,685.9 10,280.2 3,405.7 33.1% 62.4% 56.4%RECURRING NET INCOME 7,771.6 3,967.2 3,804.4 95.9% 35.4% 21.8%Recurring net income attributable to:
Equity holders of the Parent Company 6,311.2 3,784.2 2,527.0 66.8% 28.8% 20.8%Non-controlling interest 1,460.4 183.0 1,277.4 698.0% 6.7% 1.0%
HORIZONTAL ANALYSIS VERTICAL ANALYSIS
*New presentation based on SRC Rule 68 issued by Philippine SEC last October 20, 2011 – As amended effective for audited financial statements covering periods ending December 31, 2011 and onwards, and for interim financial statements starting the first quarter of 2012, and thereafter.
SEC Form 17Q – 3Q 2012 13
YTD September 30, 2012 vs. YTD September 30, 2011 Revenues
Total revenues for the nine-month period ended September 30, 2012 increased by 20.5% or P3,727.8 million to P21,949.5 million from P18,221.7 million in the first nine months of 2011.
Sale of electricity
Revenues from sale of electricity increased by 21.1% or P3,743.2 million to P21,442.6 million in the first three quarters of 2012 from P17,699.4 million during the same period in 2011. The increase in revenue was primarily due to the following:
P1,811.8 million GCGI’s higher revenues from Tongonan I and Palinpinon power plants as per agreed contracts that became effective in mid-2011 and the additional power supply agreements that were signed in December 2011; and
P1,481.5 million FG Hydro’s revenues from sale of electricity as ancillary services.
Cost of Sales and Services Cost of sales and services decreased by 1.3% or P103.2 million to P7,801.7 million in the first three quarters of 2012 from P7,904.9 million during the same period in 2011.
Cost of drilling services
Cost of drilling services decreased by 35.6% or P165.2 million to P299.2 million in the first three quarters of 2012 from P464.4 million during the same period in 2011 mainly due to the major repair of Rig 11 undertaken in 2011.
Financial Income (Expenses) Financial expenses-net decreased by 12.9% or P383.9 million to P2,595.1 million in the first three quarters of 2012 from P2,979.0 million during the same period in 2011 due to the lower interest charges on refinanced loans.
Interest expense Interest expense decreased by 12.0% or P390.6 million to P2,869.6 million in the first three quarters of 2012 from P3,260.2 million during the same period in 2011. The favorable variance is due to lower interest charges on refinanced loans.
Other Income (Charges) Other income for the first three quarters amounted to P729.8 million, or a 114.8% improvement from the other charges of P4,921.0 million in the same period in 2011, primarily due to the absence of any provision for impairment in 2012.
SEC Form 17Q – 3Q 2012 14
Loss on impairment of property, plant and equipment Impairment loss on property, plant and equipment of NNGP amounting to P4,998.6 million was recognized in June 2011 based on the result of the technical assessment of the Northern Negros steam resource.
Foreign exchange gains (losses) - net The P813.6 million foreign exchange gains as of the first three quarters ending September 30, 2012 is P862.3 million turnaround from the foreign exchange losses of P48.7 million in the same period in 2011. The favorable variance was brought about by appreciation of the peso against the US dollar.
The comparative foreign exchange rates against the USD were as follows:
PHP:US$ December 31, 2010 43.840 September 30, 2011 43.720 December 31, 2011 43.840 September 30, 2012 41.700
Derivatives gain - net Derivative gain - net decreased by 98.2%, or P105.6 million, to P1.9 million for the first nine months ending September 30, 2012 from P107.5 million during the same period in 2011 since there are cross-currency swaps that are designated as accounting hedges this year as compared to the foreign currency forwards last year that are not designated as accounting hedges.
Miscellaneous – net The Company recognized miscellaneous charges – net of P85.7 million for the first nine months ending September 30, 2012 compared to miscellaneous income – net of P18.8 million during the same period in 2011 mainly due to the P114.7 million loss on debt extinguishment from the fixed rate corporate notes 1, 2 and 3 in April 2012 and May 2012.
Provision for Income Tax The Company’s current tax expense decreased by 7.8% or P31.5 million to P371.3 million in the nine-month period ending September 30, 2012 from P402.8 million in the nine-month period ending September 30, 2011. The favorable variance was due to the Parent Company’s lower taxable income on steam and electricity operations mainly contributed by the drop in revenues caused by the decrease in average steam price of Palinpinon and Tongonan 1 and the absence of NNGP's revenues in 2012 (P181.5 million). These were offset by:
GCGI’s current tax expense due to its taxable income (P92.7 million);
SEC Form 17Q – 3Q 2012 15
BGI’s current income tax caused by the incidental income from testing of power plant (P26.4 million); and
Absence in 2012 of the additional deductible realized forex loss on full settlement of various JBIC (OECF) loans in April 2011 and June 2011 (P24.9 million).
Deferred tax expense of P216.6 million in September 2012, or a 138.3% turnaround from the P565.0 million deferred tax income in the nine-month period ending September 2011 was primarily contributed by the following:
Absence in 2012 of the deferred tax asset on provision for full impairment of NNGP's property, plant and equipment recognized in June 2011 (P499.9 million);
Parent Company’s deferred taxable income in the nine-month period ending September 2012 versus deferred taxable loss in the nine-month period ending September 2011 mainly attributed to higher unrealized foreign exchange gains on the realignment of foreign loans (P150.6 million); and
GCGI’s deferred tax liability on the application of Net Operating Loss Carryover (NOLCO) in the nine-month period ending September 2012 versus last period's deferred tax benefit (P178.4 million).
Net Income
As a result of the foregoing, the Company’s net income of P8,566.1 million for the first three quarters of 2012 was an improvement over the P487.7 million net loss for the first three quarters of 2011. Net income (loss) is equivalent to 39.0% of total revenues in 2012 as compared to the (2.7%) in 2011. Net income attributable to equity holders of the parent at P7,105.8 million for the first three quarters of 2012 was an improvement of the net loss attributable to equity holders of the parent at P670.2 million during the same period in 2011.
SEC Form 17Q – 3Q 2012 16
CAPITAL AND LIQUIDITY RESOURCES
As of the quarter ended (in millions of pesos)
Q3 2012
Q3 2011 YoY change
Balance Sheet Data Total Assets …………………………… 94,293.0 88,298.2 6.8% Total Liabilities………………………... 60,136.7 59,763.0 0.6% Total Stockholder’s Equity …………… 34,156.3 28,535.2 19.7%
The Company’s assets as of September 30, 2012 amounted to P94,293.0 million, 6.8% higher as compared to the P88,298.2 million level as of September 30, 2011.
SEC Form 17Q – 3Q 2012 17
FINANCIAL POSITION
Horizontal and Vertical Analysis of Material Changes as of September 30, 2012 and December 31, 2011. STATEMENT OF FINANCIAL POSITIONAnalysis of Material Changes as of September 30, 2012 and December 31, 2011
(Amounts in PHP millions) September 2012 December 2011 Amount % 2012 2011ASSETSCurrent Assets
Cash and cash equivalents 11,371.3 12,493.4 (1,122.1) -9.0% 12.1% 13.9%Trade and other receivables 5,047.8 3,411.3 1,636.5 48.0% 5.4% 3.8%Available-for-sale (AFS) investments 137.1 673.9 (536.8) -79.7% 0.1% 0.7%Parts and supplies inventories 3,346.4 3,355.8 (9.4) -0.3% 3.5% 3.7%Other current assets 937.3 741.9 195.4 26.3% 1.0% 0.8%
Total Current Assets 20,839.9 20,676.3 163.6 0.8% 22.1% 23.0%Noncurrent Assets
Property, p lant and equipment 59,894.4 57,676.9 2,217.5 3.8% 63.5% 64.1%Intangible assets 4,755.3 4,705.2 50.1 1.1% 5.0% 5.2%Deferred tax assets 1,204.1 1,420.7 (216.6) -15.2% 1.3% 1.6%Exploration and evaluation assets 1,477.6 1,087.1 390.5 35.9% 1.6% 1.2%Other noncurrent assets 6,121.7 4,451.6 1,670.1 37.5% 6.5% 4.9%
Total Noncurrent Assets 73,453.1 69,341.5 4,111.6 5.9% 77.9% 77.0%TOTAL ASSETS 94,293.0 90,017.8 4,275.2 4.7% 100.0% 100.0%LIABILITIES AND EQUITYLIABILITIESCurrent Liabilities
Trade and other payables 7,930.2 6,704.1 1,226.1 18.3% 8.4% 7.4%Income tax payable 163.7 18.7 145.0 775.4% 0.2% 0.0%Due to related parties 42.9 60.1 (17.2) -28.6% 0.0% 0.1%Derivative liabilities 65.7 - 65.7 100.0% 0.1% 0.0%Current portion of:
Long-term debts 1,610.7 2,249.5 (638.8) -28.4% 1.7% 2.5%Royalty fee payable 65.1 287.6 (222.5) -77.4% 0.1% 0.3%
Total Current Liabilities 9,878.3 9,320.0 558.3 6.0% 10.5% 10.4%Noncurrent Liabilities
Long-term debts - net of current portion 48,072.2 49,240.1 (1,167.9) -2.4% 51.0% 54.7%Net retirement and other post-employment benefits 1,324.8 1,054.2 270.6 25.7% 1.4% 1.2%Provisions and other long-term liabilities 798.0 756.8 41.2 5.4% 0.8% 0.9%Derivative liabilities 63.4 - 63.4 100.0% 0.1% 0.1%Total Noncurrent Liabilities 50,258.4 51,051.1 (792.7) -1.6% 53.3% 56.7%
EQUITYEquity 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% 19.9% 20.8%Common stock in employee trust account (372.3) (372.3) - 0.0% -0.3% -0.4%Additional paid-in capital 6,267.0 6,267.0 - 0.0% 6.6% 7.0%Equity reserve (3,706.4) (3,706.4) - 0.0% -3.8% -4.1%Net accumulated unrealized gain on AFS investments 102.4 91.8 10.6 11.5% 0.1% 0.1%Retained earnings 10,777.3 6,304.7 4,472.6 70.9% 11.4% 7.0%Cumulative translation adjustment (92.1) 0.6 (92.7) -15450.0% -0.1% 0.0%
31,819.7 27,429.2 4,390.5 16.0% 33.7% 30.5%Non-controlling interest 2,336.6 2,217.5 119.1 5.4% 2.5% 2.5%Total Equity 34,156.3 29,646.7 4,509.6 15.2% 36.2% 32.9%
TOTAL LIABILITIES AND EQUITY 94,293.0 90,017.8 4,275.2 4.7% 100.0% 100.0%
HORIZONTAL VERTICAL Increase (Decrease)
SEC Form 17Q – 3Q 2012 18
Assets
Cash and cash equivalents The 9.0% or P1,122.1 million decrease to P11,371.3 million as of September 30, 2012 from the P12,493.4 million December 31, 2011 balance was mainly due to the following:
P6,761.2 million increase in property, plant and equipment acquisition and other investments
P3,508.8 million debt servicing; P3,225.0 million payment of cash dividend; and
These were offset by the P12,385.6 million cash generated from operations. Trade and other receivables Trade and other receivables increased by 48.0% or P1,636.5 million to P5,047.8 million as of September 30, 2012 from the P3,411.3 million balance as of December 31, 2011 mainly due to the Parent Company’s P1,154.7 million slide in collection of August 2012 billings to NPC for Unified Leyte and Mindanao I & II projects. This was also caused by the increase in revenues of the subsidiaries.
Available-for-sale (AFS) investments
AFS investments decreased by 79.7% or P536.8 million to P137.1 million as of September 30, 2012 from the P673.9 million balance in December 2011 due to the reclassification to other non-current assets of ROP bonds maturing beyond 2013. Other current assets
This account increased by 26.3% or P195.4 million to P937.3 million as of September 30, 2012 from the P741.9 million balance in December 2011 primarily due to the Parent Company’s higher prepaid withhoding taxes of P320.6 million, GCGI’s higher withholding tax certificates of P102.5 million and prepaid insurance of P34.6 million. These were offset by the P202.0 million reclassification to non-current assets of the Parent Company’s TCC and the P60.4 million decrease in the Parent Company’s prepaid expenses.
Deferred tax assets This account decreased by 15.2% or P216.6 million to P1,204.1 million as of September 30, 2012 from the P1,420.7 million balance as of December 31, 2011 mainly due to the Parent Company’s P127.6 million lower recognition of deferred tax assets (DTA) on unrealized forex gains on translation of long-term foreign loans and GCGI’s P126.9 million application of DTA on NOLCO to its taxable income for the period. These were offset by BGI’s P52.0 million recognized deferred tax on incidental income from testing of power plant that is reflected in the property, plant and equipment account.
SEC Form 17Q – 3Q 2012 19
Exploration and evaluation assets This account increased by 35.9% or P390.5 million to P1,477.6 million as of September 30, 2012 from the balance of P1,087.1 million as of December 31, 2011 mainly due to the expenditures for the exploration activities in Rangas, Kayabon and Tanawon areas of Bacman. Other noncurrent assets This account increased by 37.5% or P1,670.1 million to P6,121.7 million as of September 30, 2012 from the P4,451.6 million balance as of December 31, 2011 mainly due to the following:
P870.1 million increase in Input VAT; P488.3 million reclassification from current AFS investment account of ROP bonds
maturing beyond 2013; P202.0 million reclassification from current portion of tax credit certificates; and P108.3 million investment in shares.
Liabilities
Trade and other payables
This account increased by 18.3% or P1,226.1 million to P7,930.2 million as of September 30, 2012 from the P6,704.1 million balance as of December 31, 2011 mainly due to the P750.0 million accrual of cash dividends to common stockholders and P533.8 million increase in BGI’s accounts payable arising from purchases of electricity for replacement power. Income tax payable
This account increased by 775.4% or P145.0 million, to P163.7 million as of September 30, 2012 from the P18.7 million balance as of December 31, 2011 arising from the Parent Company and GCGI’s taxable income for the period. Due to related parties
This account decreased by 28.6%, or P17.2 million, to P42.9 million as of September 30, 2012 from the P60.1 million balance as of December 31, 2011 mainly due to the Parent Company’s partial settlement of its liabilities.
Derivative liabilities – current
The account balance of P65.7 million as of September 30, 2012 is the fair value of the current portion of the cross-currency swaps designated as accounting hedges.
SEC Form 17Q – 3Q 2012 20
Long-term debts - current portion
Long-term debts - current portion decreased by 28.4% or P638.8 million, to P1,610.7 million as of September 30, 2012 from the P2,249.5 million balance at year-end 2011 primarily due to P1,534.9 million prepayment of the FCRN loans series 1, 2 & 3 and P20.3 million settlement of outstanding balance of OECF 8th yen loan. These were offset by the P707.3 million, P117.9 million and P64.9 million of this year’s current portion of U$175 syndicated loan, IFC B loan and FXCN loan tranche 1 & 2, respectively. Royalty fee payable - current portion
Royalty fee payable decreased by 77.4% or P222.5 million, to P65.1 million as of September 30, 2012 from the P287.6 million balance at year-end 2011 due to the payment for the period.
Net retirement and other post-employment benefits
This account increased by 25.7% or P270.6 million to P1,324.8 million as of September 30, 2012 from the P1,054.2 million balance as of December 31, 2011 due to the accrual of retirement benefits for the period. Provisions and other long-term liabilities This account increased by 5.4% or P41.2 million to P798.0 million as of September 30, 2011 from P756.8 million balance as of December 31, 2011 due to the P82.9 million additional asset retirement obligation offset by the Parent Company’s P40.4 million decrease in accrual of sick and vacation leave.
Derivative liabilities – non current
The account balance of P63.4 million as of September 30, 2012 is the fair value of the non-current portion of the cross-currency swaps designated as accounting hedges.
Net accumulated unrealized gain on AFS investments
This account increased by 11.5% or P10.6 million to P102.4 million as of September 30, 2012 from P91.8 million as of December 31, 2011 mainly due to the increase in fair value of the investments for the period.
Retained earnings Retained earnings increased by 70.9% or P4,472.6 million, to P10,777.3 million as of September 30, 2012 from P6,304.7 million as of December 31, 2011 mainly due to the P7,105.8 million net income for the first three quarters of 2012 offset by the P1,882.5 million regular cash dividend paid on April 23, 2012 and P750.00 million special cash dividend accrued and payable on October 16, 2012.
SEC Form 17Q – 3Q 2012 21
Non-controlling interest Non-controlling interest increased by 5.4% or P119.1 million to P2,336.6 million as of September 30, 2012 from P2,217.5 million balance as of December 31, 2011 mainly due to the P1,460.3 million net income for the first three quarters of 2012 offset by the P1,342.5 million payment of cash dividend.
SEC Form 17Q – 3Q 2012 22
Horizontal and Vertical Analysis of Material Changes as of September 30, 2012 and 2011. STATEMENT OF FINANCIAL POSITIONAnalysis of Material Changes as of September 30, 2012 and 2011
(Amounts in PHP millions) September 2012 S eptember 2011 Amount % 2012 2011ASSETSCurrent Assets
Cash and cash equivalents 11,371.3 12,699.2 (1,327.9) -10.5% 12.1% 14.4%Trade and other receivables 5,047.8 2,949.1 2,098.7 71.2% 5.4% 3.3%Available-for-sale (AFS) investments 137.1 675.3 (538.2) -79.7% 0.1% 0.8%Parts and supplies inventories 3,346.4 3,462.8 (116.4) -3.4% 3.5% 3.9%Due from related parties - 0.6 (0.6) -100.0% 0.0% 0.0%Derivative assets - 158.4 (158.4) -100.0% 0.0% 0.2%Other current assets 937.3 1,267.3 (330.0) -26.0% 1.0% 1.4%
Total Current Assets 20,839.9 21,212.7 (372.8) -1.8% 22.1% 24.0%Noncurrent Assets
Property , plant and equipment 59,894.4 55,968.8 3,925.6 7.0% 63.5% 63.4%Intangible assets 4,755.3 4,704.0 51.3 1.1% 5.0% 5.3%Deferred tax assets 1,204.1 1,440.5 (236.4) -16.4% 1.3% 1.6%Exploration and evaluation assets 1,477.6 1,070.0 407.6 38.1% 1.6% 1.2%Other noncurrent assets 6,121.7 3,902.2 2,219.5 56.9% 6.5% 4.4%
Total Noncurrent Assets 73,453.1 67,085.5 6,367.6 9.5% 77.9% 76.0%TOTAL ASSETS 94,293.0 88,298.2 5,994.8 6.8% 100.0% 100.0%LIABILITIES AND EQUITYLIABILITIESCurrent Liabilities
Trade and other payables 7,930.2 5,355.0 2,575.2 48.1% 8.4% 6.1%Income tax payable 163.7 155.8 7.9 5.1% 0.2% 0.2%Due to related parties 42.9 46.4 (3.5) -7.5% 0.0% 0.1%Derivative liabilities 65.7 74.5 (8.8) -11.8% 0.1% 0.1%Current portion of:
Long-term debts 1,610.7 2,055.2 (444.5) -21.6% 1.7% 2.3%Royalty fee payable 65.1 315.5 (250.4) -79.4% 0.1% 0.4%
Total Current Liabilities 9,878.3 8,002.4 1,875.9 23.4% 10.5% 9.1%Noncurrent Liabilities
Long-term debts - net of current portion 48,072.2 49,695.8 (1,623.6) -3.3% 51.0% 56.3%Royalty fee payable - net of current portion - 48.3 (48.3) -100.0% 0.0% 0.1%Net retirement and other post-employment benefits 1,324.8 1,440.8 (116.0) -8.1% 1.4% 1.6%Provisions and other long-term liabilities 798.0 575.7 222.3 38.6% 0.8% 0.8%Derivative liabilities 63.4 - 63.4 100.0% 0.1% 0.1%Total Noncurrent Liabilities 50,258.4 51,760.6 (1,502.2) -2.9% 53.3% 58.6%
EQUITYEquity 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% 19.9% 21.2%Common stock in employee trust account (372.3) (377.5) 5.2 -1.4% -0.3% -0.4%Additional paid-in capital 6,267.0 6,265.6 1.4 0.0% 6.6% 7.1%Equity reserve (3,706.4) (3,706.4) - 0.0% -3.8% -4.2%Net accumulated unrealized gain on AFS investments 102.4 90.9 11.5 12.7% 0.1% 0.1%Retained earnings 10,777.3 5,801.6 4,975.7 85.8% 11.4% 6.6%Cumulative translation adjustment (92.1) (0.8) (91.3) 11412.5% -0.1% 0.0%
31,819.7 26,917.2 4,902.5 18.2% 0.0% 30.5%Non-controlling Interest 2,336.6 1,618.0 718.6 44.4% 2.5% 1.8%Total Equity 34,156.3 28,535.2 5,621.1 19.7% 36.2% 32.3%
TOTAL LIABILITIES AND EQUITY 94,293.0 88,298.2 5,994.8 6.8% 100.0% 100.0%
HORIZONTAL VERTICAL Increase (Decrease)
SEC Form 17Q – 3Q 2012 23
Assets
Cash and cash equivalents The 10.5% or P1,327.9 million decrease to P11,371.3 million as of September 30, 2012 from the P12,699.2 million September 30, 2011 balance was mainly due to the following:
P9,924.3 million property, plant and equipment acquisition and other investments P5,098.0 million debt servicing; and P3,225.0 million payment of cash dividend.
These were offset by the P17,055.0 million cash generated from operations Trade and other receivables This account increased by 71.2% or P2,098.7 million to P5,047.8 million as of September 30, 2012 from the P2,949.1 million balance as of September 30, 2011. The increase was mainly due to the Parent Company’s P1,154.7 million slide in collection of August 2012 billings to NPC for Unified Leyte and Mindanao I & II projects. This was also caused by the increase in revenues of the subsidiaries. Available-for-sale (AFS) investments AFS Investments decreased by 79.7% or P538.2 million to P137.1 million as of September 30, 2012 from the P675.3 million balance as of September 30, 2011 due to the reclassification to other non-current assets of ROP bonds maturing beyond 2013. Derivative assets The derivative assets P158.4 million balance as of September 30, 2011 pertains to the fair value of the outstanding foreign currency forward and foreign exchange swap contracts. Other Current Assets
Other current assets decreased by 26.0% or P330.0 million to P937.3 million as of September 30, 2012 from the P1,267.3 million posted for the same period in 2011 mainly due to the P502.0 million reclassification to non-current assets of the Parent Company’s TCC. This was offset by the Parent Company’s higher prepaid withholding taxes of P131.7 million. Property, plant and equipment This account increased by 7.0% or P3,925.6 million to P59,894.4 million as of September 30, 2012 from the balance of P55,968.8 million as of September 30, 2011 primarily due to the P7,710.0 million net additions partially offset by the P3,325.9 million depreciation for the period.
SEC Form 17Q – 3Q 2012 24
Deferred tax assets This account decreased by 16.4% or P236.4 million to P1,204.1 million as of September 30, 2012 from the balance of P1,440.5 million as of September 30, 2011 mainly due to the Parent Company’s P148.0 million lower recognition of DTA on unrealized forex gains on translation of long-term foreign loans and GCGI’s P126.9 million application of DTA on NOLCO to its taxable income for the period. These were offset by BGI’s P52.0 million recognized deferred tax on incidental income from testing of power plant that is reflected in the property, plant and equipment account. Exploration and evaluation assets This account increased by 38.1% or P407.6 million to P1,477.6 million as of September 30, 2012 from the balance of P1,070.0 million as of September 30, 2011 primarily due to the expenditures for the exploration activities in Mindanao III, Rangas, Kayabon and Tanawon areas.
Other noncurrent assets This account increased by 56.9% or P2,219.5 million, to P6,121.7 million as of September 30, 2012 from the P3,902.2 million as of September 30, 2011 mainly due to the following:
P1,289.7 million increase in input VAT; P488.3 million reclassification from current available for sale investment account of
ROP bonds maturing beyond 2013; and P502.0 million increase in tax credit certificates.
Liabilities
Trade and other payables
This account increased by 48.1%, or P2,575.2 million, to P7,930.2 million as of September 30, 2012 from the balance of P5,355.0 million in the same period of 2011 mainly due to the P2,328.5 million increase in accounts payable to third parties.
Income tax payable
Income tax payable increased by 5.1% or P7.9 million to P163.7 million as of September 30, 2012 from the P155.8 million for the same period in 2011 arising from the GCGI’s taxable income for the period offset by the Parent Company’s lower taxable income.
Due to related parties
This account decreased by 7.5% or P3.5 million to P42.9 million as of September 30, 2012 from the balance of P46.4 million as of September 30, 2011 primarily due to the settlement of advances from First Gen.
SEC Form 17Q – 3Q 2012 25
Derivative liabilities - current The account balance of P65.7 million as of September 30, 2012 is the fair value of the current portion of the cross-currency swaps designated as accounting hedges in 2012. On the other hand, the account balance of P74.5 million as of September 30, 2011 is the fair value of the outstanding foreign currency forward in 2011. Long-term debts (current portion)
This account decreased by 21.6% or P444.5 million to P1,610.7 million as of September 30, 2012 from the balance of P2,055.2 million as of September 30, 2011 primarily due to the P1,554.2 million prepayment of the FCRN series 1, 2 & 3 and regular amortization of loans. This was offset by the P1,057.4 million reclassification from non-current of the US$175 million syndicated loan, IFC A & B loans and FXCN loan tranche 1 & 2.
Royalty fee payable (current portion )
This account decreased by 79.4 % or P250.4 million to P65.1 million as of September 30, 2012 from the balance of P315.5 million as of September 30, 2011 mainly due to the Parent Company’s P279.8 million payment to DOE and LGUs offset by P15.4 million accretion on Day 1 gain recognized from October 1, 2011 to September 30, 2012. Royalty fee payable (net of current portion )
This account decreased by 100.0% or P48.3 million as of September 30, 2012 primarily due to the reclassification to current portion of outstanding royalty fee payable in 2012.
Net retirement and other post-retirement benefits
This account decreased by 8.1% or P116.0 million to P1,324.8 million as of September 30, 2012 from P1,440.8 million balance as of September 30, 2011 mainly due to contribution to the fund in 2011 offset by the accrual of retirement benefits for the period.
Provisions and other long-term liabilities
This account increased by 38.6% or P222.3 million to P798.0 million as of September 30, 2012 from P575.7 million balance as of September 30, 2011 mainly due to the Parent Company’s P131.1 million additional asset retirement obligation and P88.6 million accrual of sick leave and vacation leave benefits.
Derivative liabilities – non current
The account balance of P63.4 million as of September 30, 2012 is the fair value of the non-current portion of the cross-currency swaps designated as accounting hedges.
SEC Form 17Q – 3Q 2012 26
Net accumulated unrealized gain on AFS investments This account increased by 12.7% or P11.5 million to P102.4 million as of September 30, 2012 from P90.9 million as of September 30, 2011 mainly due to the increase in fair value of the investments for the period.
Retained earnings Retained earnings increased by 85.8% or P4,975.7 million to P10,777.3 million as of September 30, 2012 from P5,801.6 million balance as of September 30, 2011 mainly due to the P7,105.8 million net income for the first three quarters of 2012 and the P503.0 million net income posted from October 1, 2011 to December 31, 2011. This was offset by the P1,882.5 million regular cash dividend paid on April 23, 2012 and P750.00 million special cash dividend payable on or before October 16, 2012. Non-controlling interest Non-controlling interest increased by 44.4% or P718.6 million to P2,336.6 million as of September 30, 2012 from P1,618.0 million balance as of September 30, 2011 mainly due to the P1,460.3 million net income for the first three quarters of 2012 and the P599.5 million net income posted from October 1, 2011 to December 31, 2011. This was offset by the P1,342.5 million payment of cash dividend.
SEC Form 17Q – 3Q 2012 27
CASH FLOW YTD September 30, 2012 vs. YTD September 30, 2011 Net cash flows from operating activities increased by 32.7% or P2,251.7 million to P9,127.5 million in the first three quarters of 2012 from P6,875.8 million during the same period in 2011 mainly due to the P2,697.4 million improved cash generation from operations due to increased revenues. This was offset by the P475.7 million increase in payment of income tax. Net cash flows used in investing activities decreased by 19.6% or P1,458.6 million to P5,990.0 million in the nine-month period ending September 2012 as compared to the P7,448.5 million during the same period in 2011. The decrease was primarily due to lower acquisition of property, plant and equipment by P1,745.5 million offset by the higher increase in exploration and evaluation assets by P378.3 million. The movement of P11,357.5 million, to P4,240.4 million on net cash flows used in financing activities in the nine-month period ending September 2012 from the P7,117.0 million net cash flows from financing activities during the same period in 2011 was mainly due to lower proceeds from the P7,000 million FXCN loan this year as compared to the P20,980.0 million proceeds from the US$300 million notes issuance and $175 million loan last year. This was offset by the lower payment of long-term debts by P5,624.9 million this year.
SEC Form 17Q – 3Q 2012 28
DISCUSSION ON THE SUBSIDIARIES
FG Hydro
(Amounts in PHP millions)
As of and for the periods ended Sept 30
2012 2011 Operating revenues 3,769.5 1,306.0 Operating expenses 681.8 537.0 Other expenses – net 313.2 318.3 Income before tax 2,774.5 450.7 Provision for (benefit from) income tax 0.4 0.7 Net income 2,774.1 450.0 Total current assets 2,780.3 1,698.8 Total noncurrent assets 7,004.1 7,322.4 Total current liabilities 794.2 565.7 Total noncurrent liabilities 4,028.6 4,410.4 Total equity 4,961.6 4,045.1
FG Hydro generated revenues of P3,769.5 million for the period ended September 30, 2012, 188.6% higher than the revenues of P1,306.0 million for the same period in 2011. The favorable variance was mainly on account of revenues earned from sale of electricity, as ancillary services to National Grid Corporation of the Philippines (“NGCP”), amounting to P1,862.1 million, the temporary assumption of BGI’s Power Supply Agreements (PSAs) with Batangas Electric Cooperative II (“BATELEC II”) 48MW and Linde Philippines 6MW amounting to P377.1 million, and higher sales to WESM coupled with higher spot prices. Ancillary service revenues in 2011 was only for a month’s billing period while the PSA with BGI only commenced in December 26, 2011. The unfavorable variance in operating expenses is mainly on account of higher depreciation, operations and maintenance expenses and taxes and licenses in 2012. The unfavorable variances, however, were partly offset by higher interest income from short-term deposits of P40.9 million in 2012 versus P28.1 million in 2011. Overall, FG Hydro posted a record net income of P2,774.1 million for the period ended September 30, 2012, P2,324.1 million higher than the P450.0 million reported income for the same period in 2011. Total assets as of September 30, 2012 stood at P9,784.4 million, P763.2 million or 8.5% higher than the 2011 level of P9,021.2 million. The favorable variance was mainly due to higher cash and accounts receivable trade balances in 2012. As of September 30, 2012, total liabilities stood at P4,822.8 million, P153.3 million or 3.1% lower than the 2011 level of P4,976.1 million. The decrease in liabilities was mainly due to the continuous pay-out of the scheduled semi-annual loan repayments. Total equity as of September 30, 2012 of P4,961.6 million is P916.5 million or 22.7% higher compared to the September 30, 2011 level of P4,045.1 million.
SEC Form 17Q – 3Q 2012 29
Green Core Geothermal Inc. September 2012 vs. September 2011 Results
(Amounts in PHP millions)
As of and for the periods ended September 30
2012 2011 Revenues 7,759.3 6,148.4 Operating expenses* (5,431.6) (6,214.5) Other income (charges) - net 59.6 (391.2) Income (loss) before income tax 2,387.3 (457.3) Benefit from (provision for) income tax (225.2) 45.8 Net income (loss) 2,162.1 (411.5) Total Current Assets 2,671.8 1,624.8 Total Non-Current Assets 9,762.3 9,784.0 Total Liabilities 1,460.0 8,108.3 Total Equity 10,974.1 3,300.5
*Includes Cost of Sale of Electricity and General and Administrative Expenses GCGI’s revenues increased by 26.2% or P1,610.9 million, to P7,759.3 million as of the nine-month period ending September 30, 2012 from P6,148.4 million for the same period in 2011 due to higher revenues from the sale of electricity as per agreed contracts that became effective in mid-2011 and the additional power supply agreements that were signed in December 2011. Operating expenses decreased by 12.6% or P782.9 million, to P5,431.6 million in 2012 from P6,214.5 million in 2011 due to lower cost of steam by an average cost of P0.58/kWh – net of the increase in volume by 144.3 GWh (P511.7 million). The decrease is also due to lower operations & maintenance of P178.5 million and purchased services & utilities of P169.2 million offset by higher general & administrative expenses of P76.5 million. This period’s other income of P59.6 million consisted mainly of foreign exchange gains and the absence in 2012 of interest expense.
Provision for income tax - current and deferred of P225.2 million in 2012 was a reversal of P45.8 million benefit from income tax – deferred in 2011. Total current assets increased by 64.4% or P1,047.0 million, to P2,671.8 million in 2012 from P1,624.8 million in 2011 largely due to higher cash & cash equivalents of P578.3 million, trade & other receivables of P293.5 million and other current assets of P176.0 million. Total noncurrent assets decreased by 0.2% or P21.7 million, to P9,762.3 million in 2012 from P9,784.0 million in 2011 due to lower deferred tax asset of P138.8 million offset by higher other noncurrent assets of P111.4 million and property, plant & equipment of P5.7 million. Total liabilities decreased by 82.0% or P6,648.3 million, to P1,460.0 million in 2012 from P8,108.3 million in 2011 while total equity increased by 232.5% or P7,673.6 million, to P10,974.1 million in 2012 from P3,300.5 million in 2011 due to the conversion of the P5,452.5 million advances from EDC to equity coupled with the net income for the period October 1, 2011 to September 30, 2012 amounting to P2,221.1 million.
SEC Form 17Q – 3Q 2012 30
Bac-Man Geothermal Inc.
(Amounts in PHP millions) As of and for the periods ended
September 2012 September 2011 Expenses* (229.2) (23.1) Other income 3.9 0.8 Operating income (loss) (225.3) (22.3) Benefit from (provision for) income tax 29.8 2.2 Net loss (195.5) (20.1)
Total Current Assets 558.1 155.3 Total Non-Current Assets 3,874.2 2,824.6 Total Current Liabilities 1,501.5 3,032.1 Total Equity 2,930.8 (52.2)
As of September 30, 2012, BGI has yet to start commercial operations. The increase in expenses pertains primarily to net purchases of electricity amounting to P=103.3 million, composed of P=2,302.3 million revenues and P=2,405.6 million replacement power costs; rental and insurance costs of P=60.3 million; and depreciation expense of P=6.2 million. The increase in current assets by 259.4% or P=402.8 million is due mainly to the increase in trade and other receivables amounting to P=401.8 million resulting from the sale of electricity. Non-current assets increased by 37.2% or P=1,049.7 million resulting mainly from the capitalized costs for the rehabilitation of the power plants amounting to P=1,283.8 million. Income from testing of power plant for the period amounting to P=520.4 million was netted off this account as required by PAS 16. The increase in input VAT by P=231.2 million as a result of the increase in expenses also contributed to the overall increase in non-current assets. The decrease in liabilities and corresponding increase in equity results from the conversion of due to related parties into equity as capital infusion in December 2011.
SEC Form 17Q – 3Q 2012 31
Commitments that will have an impact on the issuer’s liquidity As of September 30, 2012, the Company has unserved purchase orders and awarded contracts for the purchase of various capital goods in the total amount of P67.9 million. Other than these, we are not aware of any other material commitments that should impact the Company’s liquidity. Legal proceedings There are no other material changes in the contingent liabilities since the last annual balance sheet date.
FOREIGN EXCHANGE AND INTEREST RATE EXPOSURE The Company has P=19,577.8 million in long-term US dollar denominated loans as of September 30, 2012 which is 43.2% of the total Company’s long-term loans.
OTHER MATTERS
CASH DIVIDEND
On March 13, 2012, the BOD of the Parent Company approved the following cash dividends in favor of all stockholders of record as of March 28, 2012 and payable on or before April 24, 2012:
cash dividend of P=0.0008 per share on the preferred shares; and regular cash dividend of P=0.10 per share on the common shares.
On September 5, 2012, the BOD of the Parent Company approved the payment of special cash dividends of P=0.04 per share on the common shares in favor of common stockholders of record as of September 20, 2012, payable on or before October 16, 2012. In March and May 2012, FG Hydro declared and paid cash dividends amounting to P=88.5 million and P=1,254.0 million, respectively.
SEC Form 17Q – 3Q 2012 32
MAJOR STOCKHOLDERS
As of September 30, 2012, the total number of stockholders was 700 and price was P6.08 per share. The public float level was at 50.60% (or 9,488,077,589 common shares).
List of Top 20 Stockholders as of September 30, 2012
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 - 6,740,652,872 6,740,652,872 23.97
3 PCD Nominee Corporation Filipino - 2,737,451,371 2,737,451,371 9.73
4 First Gen Corporation Filipino - 1,007,891,500 1,007,890,500 3.58
5 Northern Terracotta Power Corporation
Filipino - 726,450,200 726,450,200 2.58
6 Peter D. Garrucho, Jr. Filipino - 5,670,000 5,670,000 0.02
7 Benjamin K. Liboro Filipino - 3,525,500 3,525,500 0.01
8 Arthur A. De Guia Filipino - 2,200,000 2,200,000 0.01
9 CROSLO Holdings Corporation Filipino - 1,700,000 1,700,000 0.01
10 Hi-Light Corporation Filipino - 1,577,500 1,577,500 0.01
11 Mapazon Corporation Filipino - 1,470,000 1,470,000 0.01
12 ALG Holdings Corporation Filipino - 875,000 875,000 0.00
13 Raul I. Macatangay Filipino - 725,000 725,000 0.00
14 Rosalind Camara Filipino - 663,750 663,750 0.00
15 Rodolfo R. Waga, Jr. Filipino - 658,750 658,750 0.00
16 Emelita D. Sabella Filipino - 521,000 521,000 0.00
17 Rodolfo R. Waga, Jr. &/or Grace B. Waga
Filipino - 501,200 501,200 0.00
19 Hiro Budhrani &/or Astrid J. Budhrani
Filipino - 500,000 500,000 0.00
18 Ma. Consuelo R. Lopez Filipino - 500,000 500,000 0.00
20 Peter Mar & /or Annabelle C. Mar
Filipino - 500,000 500,000 0.00
SEC Form 17Q – 3Q 2012 33
BOARD OF DIRECTORS
As of September 30, 2012, the members of 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 Elpidio L. Ibañez 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 September 30, 2012, 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 Agnes C. de Jesus Senior Vice President for Environment and
External Relations, and Compliance Officer Nestor H. Vasay Senior Vice President, Chief Financial
Officer and Treasurer Marcelino M. Tongco Senior Vice President for Strategic
Contracting Manuel S. Ogena Senior Vice President for Technical Services Dominic M. Camu Senior Vice President for Power Generation Danilo C. Catigtig Senior Vice President for Strategic Initiatives
Office Vincent Martin C. Villegas Vice President for Business Development Erwin O. Avante Vice President for Corporate Finance Rico G. Bersamin Vice President for Steam Field Operations Ferdinand B. Poblete Vice President, Chief Information Officer Ariel Arman V. Lapus Vice President for Business Development
International Ernesto G. Espinosa Vice President Ellsworth R. Lucero Vice President – Power Dwight A. Maxino Vice President - So. Negros Geothermal
Project
SEC Form 17Q – 3Q 2012 34
Name Position Manuel C. Paete Vice President - Leyte Geothermal Project Liberato S. Virata Vice President - Bacon-Manito Geothermal
Project Wilfredo A. Malonzo Vice President for Supply Chain
Management Maribel A. Manlapaz Comptroller Teodorico Jose R. Delfin Corporate Secretary Ana Maria A. Katigbak Assistant Corporate Secretary Glenn L. Tee Senior Manager, Internal Audit Erudito S. Recio Senior Manager, Investor Relations
EDC Geothermal Corporation (EGC)
First Gen Hydro PowerCorporation (FGHPC)
EDC Wind EnergyHoldings Inc.
(EWEHI)
EDC Holdings International Limited
(EHIL)
EDC Drillco Corporation(EDC Drillco)
• 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)
Energy Development (EDC) Corporation Chile Limitada
EDC Pagudpod Wind PowerCorporation (EPWPC)
Energy Development Corporation Hong Kong
Limited(EDC HKL)
Prime TerracottaHoldings Corporation
Red Vulcan Holdings Corporation
D: 100%
D: 100% D: 100%D: 100%D: 100%D: 60%
ID: 100%D: 99.99%ID: 0.01%
Legend:D – Direct OwnershipID – Indirect OwnershipE – Economic InterestV – Voting Interest
E: 40%V: 60%
E: 100%V: 100%
PT EDC IndonesiaEDC Peru
Holdings S.A.C.EDC Chile
Holdings SPAPT EDC Panas Bumi
Indonesia
EDC Geotermica ChileEDC Geotermica
Peru S.A.C.
EDC Quellaapacheta
ID: 100% ID: 100%
ID: 70%
ID: 95% ID: 95% ID: 100%ID: 100%
EDC Burgos Wind PowerCorporation (EBWPC)
ID: 100%D: 33.33%ID: 66.67%
Energy Development Corporation
September 30,2012
Standards and interpretations under the PFRSPAS 1 Presentation of Financial Statements Adopted
PAS 10 Events After the Reporting Period Adopted
PAS 11 Construction Contracts Adopted
PAS 12 Income Taxes Adopted
PAS 16 Property, Plant and Equipment Adopted
PAS 17 Leases Adopted
PAS 18 Revenue Adopted
PAS 19 Employee Benefits Adopted
PAS 2 Inventories Adopted
PAS 20 Accounting for Government Grants and Disclosure of Government
Assistance Not Applicable
PAS 21 The Effects of Changes in Foreign Exchange Rates Adopted
PAS 23 Borrowing Costs Adopted
PAS 24 Related Party Disclosures Adopted
PAS 26 Accounting and Reporting by Retirement Benefit Plans Adopted
PAS 27 Consolidated and Separate Financial Statements Adopted
PAS 28 Investments in Associates Not Applicable
PAS 29 Financial Reporting in Hyperinflationary Economies Not Applicable
PAS 31 Interests In Joint Ventures Not Applicable
PAS 32 Financial Instruments: Presentation Adopted
PAS 33 Earnings Per Share Adopted
PAS 34 Interim Financial Reporting Adopted
PAS 36 Impairment of Assets Adopted
PAS 37 Provisions, Contingent Liabilities and Contingent Assets Adopted
PAS 38 Intangible Assets Adopted
PAS 39 Financial Instruments: Recognition and Measurement Adopted
PAS 40 Investment Property Not Applicable
PAS 41 Agriculture Not Applicable
PAS 7 Statement of Cash Flows Adopted
PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors Adopted
IFRS 1 First-time Adoption of International Financial Reporting Standards Not Applicable
IFRS 2 Share-based Payment Adopted
IFRS 3 Business Combinations Adopted
IFRS 4 Insurance Contracts Not Applicable
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations Not Applicable
IFRS 6 Exploration for and Evaluation of Mineral Assets Adopted
IFRS 7 Financial Instruments: Disclosures Adopted
IFRS 8 Operating Segments Adopted
IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities Adopted
IFRIC 10 Interim Financial Reporting and Impairment Adopted
IFRIC 12 Service Concession Arrangements Not Applicable
IFRIC 13 Customer Loyalty Programmes Not applicable
IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction Not applicable
IFRIC 15 Agreements for the Construction of Real Estate Not applicable
IFRIC 16 Hedges of a Net Investment in a Foreign Operation Not applicable
IFRIC 17 Distributions of Non-cash Assets to Owners Not applicable
IFRIC 18 Transfers of Assets from Customers Not applicable
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments Not applicable
IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments Not applicable
IFRIC 4 Determining Whether an Arrangement Contains a Lease Not applicable
IFRIC 5 Rights to Interests Arising from Decommissioning, Restoration and
Environmental Rehabilitation Funds Not applicable
IFRIC 6 Liabilities Arising from Participating in a Specific Market - Waste Electrical
and Electronic Equipment Not applicable
IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in
Hyperinflationary Economies Not applicable
IFRIC 9 Reassessment of Embedded Derivatives Adopted
SIC 10 Government Assistance Not applicable
SIC 12 Consolidation – Special Purpose Entities Not applicable
SIC 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers Not applicable
SIC 15 Operating Leases – Incentives Not applicable
SIC 21 Income Taxes – Recovery of Revalued Non-Depreciable Assets Not applicable
SIC 25 Income Taxes – Changes in the Tax Status of an Entity or its Shareholders Adopted
SIC 27 Evaluating the Substance of Transactions in the Legal Form of a Lease Not Applicable
SIC 29 Disclosure – Service Concession Arrangements Not Applicable
SIC 31 Revenue – Barter Transactions Involving Advertising Services Not applicable
SIC 32 Intangible Assets – Web Site Costs Not applicable
SIC 7 Introduction of the Euro Not applicable
Annex I
Energy Development Corporation (A Subsidiary of Red Vulcan Holdings Corporation) and Subsidiaries
Unaudited Interim Condensed Consolidated Financial Statements September 30, 2012 and 2011 (With Comparative Figures as of December 31, 2011 )
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)
AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
September 30,
2012
(Unaudited)
December 31,
2011
(Audited)
September 30,
2011
(Unaudited,
Restated,
Note 26)
ASSETS
Current Assets
Cash and cash equivalents (Notes 5 and 24) P=11,371,320,502 P=12,493,406,963 P=12,699,182,531
Trade and other receivables (Notes 6 and 24) 5,047,767,532 3,411,309,528 2,949,128,079
Available-for-sale (AFS) investments (Note 24) 137,109,600 673,853,680 675,255,400
Parts and supplies inventories (Note 7) 3,346,447,094 3,355,767,653 3,462,812,943
Derivative assets (Note 24) – – 158,419,378
Due from related parties (Notes 23 and 24) – 7,812 603,648
Other current assets 937,227,820 741,911,257 1,267,314,656
Total Current Assets 20,839,872,548 20,676,256,893 21,212,716,635
Noncurrent Assets
Property, plant and equipment (Note 8) 59,894,445,724 57,676,929,006 55,968,768,332
Intangible assets (Note 9) 4,755,318,325 4,705,245,708 4,704,038,221
Deferred tax assets - net 1,204,064,463 1,420,656,657 1,440,514,804
Exploration and evaluation assets 1,477,615,101 1,087,079,413 1,070,018,217
Other noncurrent assets (Note 10) 6,121,616,647 4,451,649,107 3,902,172,313
Total Noncurrent Assets 73,453,060,260 69,341,559,891 67,085,511,887
TOTAL ASSETS P=94,292,932,808 P=90,017,816,784 P=88,298,228,522
LIABILITIES AND EQUITY
Current Liabilities
Trade and other payables (Notes 11 and 24) P=7,930,235,369 P=6,704,075,261 5,355,024,648
Income tax payable 163,734,778 18,736,456 155,757,439
Due to related parties (Notes 23 and 24) 42,890,638 60,090,825 46,388,222
Current portion of:
Long-term debts (Notes 12 and 24) 1,610,673,813 2,249,517,382 2,055,224,478
Derivative liabilities (Note 24) 65,720,038 – 74,503,957
Royalty fee payable (Notes 13 and 24) 65,078,884 287,626,313 315,514,708
Total Current Liabilities 9,878,333,520 9,320,046,237 8,002,413,452
(Forward)
- 2 -
September 30,
2012
(Unaudited)
December 31,
2011
(Audited)
September 30,
2011
(Unaudited,
Restated,
Note 26)
Noncurrent Liabilities
Long-term debts - net of current portion
(Notes 12 and 24) P=48,072,224,256 P=49,240,054,073 P=49,695,800,701
Derivative liabilities - net of current portion
(Note 24) 63,371,038 – –
Royalty fee payable - net of current portion
(Notes 13 and 24) – – 48,318,448
Net retirement and other post-employment
benefits 1,324,796,774 1,054,237,256 1,440,777,462
Provisions and other long-term liabilities
(Note 8) 797,981,250 756,877,725 575,697,239
Total Noncurrent Liabilities 50,258,373,318 51,051,169,054 51,760,593,850
Total Liabilities 60,136,706,838 60,371,215,291 59,763,007,302
Equity
Attributable to equity holders of the Parent
Company:
Preferred stock (Note 14) 93,750,000 93,750,000 93,750,000
Common stock (Note 14) 18,750,000,000 18,750,000,000 18,750,000,000
Common shares in employee trust account (372,272,723) (372,272,723) (377,483,019)
Additional paid-in capital 6,266,966,828 6,266,966,828 6,265,571,968
Equity reserve (3,706,430,769) (3,706,430,769) (3,706,430,769)
Net accumulated unrealized gain on AFS
investments 102,352,984 91,758,915 90,902,139
Cumulative translation adjustments
(Note 24) (92,070,591) 592,534 (818,886)
Retained earnings 10,777,353,058 6,304,695,114 5,801,666,171
31,819,648,787 27,429,059,899 26,917,157,604
Non-controlling interest 2,336,577,183 2,217,541,594 1,618,063,616
Total Equity 34,156,225,970 29,646,601,493 28,535,221,220
TOTAL LIABILITIES AND EQUITY P=94,292,932,808 P=90,017,816,784 P=88,298,228,522
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 INCOME
Three-month Periods Ended
September 30
Nine-month Periods Ended
September 30
2012 2011 2012 2011
REVENUES (Note 4)
Sale of electricity P=6,419,210,425 P=6,290,586,632 P=21,442,620,932 P=17,699,362,656
Revenue from drilling services 161,670,238 195,609,796 506,891,671 522,321,325
6,580,880,663 6,486,196,428 21,949,512,603 18,221,683,981
COST OF SALES AND SERVICES
Cost of sales of electricity (Note 15) (1,775,772,761) (2,430,243,914) (7,502,538,423) (7,440,512,360)
Cost of drilling services (Note 16) (87,729,096) (185,465,297) (299,210,907) (464,389,788)
(1,863,501,857) (2,615,709,211) (7,801,749,330) (7,904,902,148)
GENERAL AND ADMINISTRATIVE
EXPENSES (Note 17)
(932,160,799)
(872,055,525)
(3,128,487,704)
(3,066,702,114)
FINANCIAL INCOME (EXPENSES)
Interest expense (Notes 4 and 18) (949,342,213) (945,312,694) (2,869,586,587) (3,260,238,922)
Interest income - net of final tax
(Notes 4 and 19)
93,771,405
63,343,894
274,546,848
281,217,028
(855,570,808) (881,968,800) (2,595,039,739) (2,979,021,894)
OTHER INCOME (CHARGES)
Foreign exchange gains (losses)
(Notes 4 and 20) 119,275,094 (285,517,229) 813,610,472 (48,683,289)
Derivative gains - net (Notes 4 and 24) 1,893,130 116,481,020 1,893,130 107,507,535
Impairment loss on property, plant and
equipment (Notes 4 and 8) –
– – (4,998,608,008)
Miscellaneous - net (Notes 4 and 21) (18,351,140) 6,343,758 (85,737,279) 18,802,772
102,817,084 (162,692,451) 729,766,323 (4,920,980,990)
INCOME (LOSS) BEFORE INCOME
TAX 3,032,464,283 1,953,770,441 9,154,002,153 (649,923,165)
BENEFIT FROM (PROVISION FOR)
INCOME TAX
Current (170,313,706) (155,757,439) (371,309,848) (402,833,122)
Deferred (26,980,218) 11,148,584 (216,592,195) 565,035,180
(197,293,924) (144,608,855) (587,902,043) 162,202,058
NET INCOME (LOSS) P=2,835,170,359 P=1,809,161,586 P=8,566,100,110 (P=487,721,107)
Net income (loss) attributable to:
Equity holders of the Parent Company P=2,487,462,502 P=1,660,871,742 P=7,105,782,444 (P=670,221,100)
Non-controlling interest 347,707,857 148,289,844 1,460,317,666 182,499,993
P=2,835,170,359 P=1,809,161,586 P=8,566,100,110 (P=487,721,107)
Basic/Diluted Earnings (Loss) Per Share
for Net Income (Loss) Attributable to
Equity Holders of the Parent
Company (Note 22) P=0.132 P=0.088 P=0.379 (P=0.036)
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
Three-month Periods Ended
September 30
Nine-month Periods Ended
September 30 2012 2011 2012 2011
Net income (loss) P=2,835,170,359 P=1,809,161,586 P=8,566,100,110 (P=487,721,107)
Other comprehensive income (loss)
Changes in fair value of AFS
investments recognized in
equity 12,755,659 (15,876,699) 10,594,069 (28,816,658)
Cumulative translation adjustments (64,421,018) (2,188,886) (92,663,125) (2,188,886)
Total comprehensive income (loss) P=2,783,505,000 P=1,791,096,001 P=8,484,031,054 (P=518,726,651)
Total comprehensive income (loss)
attributable to:
Equity holders of the Parent
Company P=2,435,797,143 P=1,642,806,157 P=7,023,713,388 (P=701,226,644)
Non-controlling interest 347,707,857 148,289,844 1,460,317,666 182,499,993
P=2,783,505,000 P=1,791,096,001 P=8,484,031,054 (P=518,726,651)
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 NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2012 AND 2011
Equity Attributable to Equity Holders of the Parent Company
Preferred
Stock
(Note 14)
Common
Stock
(Note 14)
Common
Shares in
Employee
Trust Account
Additional
Paid-in
Capital
Equity
Reserve
Net
Accumulated
Unrealized
Gain on AFS
Investments
Retained Earnings Subtotal
Non-controlling
Interest Total Equity
Cumulative
Translation
Adjustments
Balances, January 1, 2011, as previously
reported P=93,750,000 P=18,750,000,000 (P=379,219,785) P=6,266,099,283 (P=3,706,430,769) P=119,718,797
P=1,370,000 P=9,524,603,810 P=30,669,891,336 P=1,569,089,721 P=32,238,981,057
Effect of voluntary change in accounting
policy (Note 26) – – – – – – – 155,072,607 155,072,607 – 155,072,607
Balances, January 1, 2011, as restated
(Audited) 93,750,000 18,750,000,000 (379,219,785) 6,266,099,283 (3,706,430,769) 119,718,797 1,370,000 9,679,676,417 30,824,963,943 1,569,089,721 32,394,053,664
Total comprehensive income (loss):
Net income (loss) – – – – – – – (670,221,100) (670,221,100) 182,499,993 (487,721,107)
Changes in fair value of AFS
investments recognized in equity
–
–
–
–
– (28,816,658)
–
– (28,816,658)
– (28,816,658)
Cumulative translation adjustment – – – – – – (2,188,886) – (2,188,886) – (2,188,886)
– – – – – (28,816,658) (2,188,886) (670,221,100) (701,226,644) 182,499,993 (518,726,651)
Cash dividends (Note 14) – – – – – – – (3,007,500,000) (3,007,500,000) – (3,007,500,000)
Effect of subsidiary’s issuance of and declaration of dividends on preferred
shares to non-controlling interest (NCI)
(Note14) – – – – – – – (200,289,146) (200,289,146) 200,289,146 –
Cash dividend - FG Hydro’s preferred
shares – – – – – – – – – (333,815,244) (333,815,244)
Share-based payment – – 1,736,766 464,953 – – – – 2,201,719 – 2,201,719
Deferred income tax effect of share-based
payment – – – (992,268) – – – – (992,268) – (992,268)
Balances, September 30, 2011, as
restated (Unaudited, Note 26)
P=93,750,000
P=18,750,000,000
(P=377,483,019)
P=6,265,571,968
(P=3,706,430,769)
P=90,902,139
(P=818,886)
P=5,801,666,171
P=26,917,157,604
P=1,618,063,616
P=28,535,221,220
- 2 -
Equity Attributable to Equity Holders of the Parent Company
Preferred
Stock
(Note 14)
Common
Stock
(Note 14)
Common
Shares in
Employee
Trust Account
Additional
Paid-in
Capital
Equity
Reserve
Net
Accumulated
Unrealized
Gain on AFS
Investments
Cumulative
Translation
Adjustments Retained Earnings Subtotal
Non-controlling
Interest Total Equity
Balances, December 31, 2011 (Audited) P=93,750,000 P=18,750,000,000 (P=372,272,723) P=6,266,966,828 (P=3,706,430,769) P=91,758,915 P=592,534 P=6,304,695,114 P=27,429,059,899 P=2,217,541,594 P=29,646,601,493
Total comprehensive income (loss):
Net income – – – – – – – 7,105,782,444 7,105,782,444 1,460,317,666 8,566,100,110
Changes in fair value of AFS investments recognized in equity
– – – – – 10,594,069
– – 10,594,069
– 10,594,069
Cumulative translation adjustments – – – – – – (92,663,125) – (92,663,125) – (92,663,125)
– – – – – 10,594,069 (92,663,125) 7,105,782,444 7,023,713,388 1,460,317,666 8,484,031,054
Cash dividends (Note 14) – – – – – – – (2,632,500,000) (2,632,500,000) – (2,632,500,000) Cash dividends to NCI – – – – – – – – – (1,342,533,077) (1,342,533,077)
Documentary stamp tax on common
shares subscription
Non-controlling interest in PT EDC
Indonesia and PT EDC Panas Bumi
Indonesia
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(624,500)
–
(624,500)
–
–
1,251,000
(624,500)
1,251,000
Balances, September 30, 2012
(Unaudited)
P=93,750,000
P=18,750,000,000
(P=372,272,723)
P=6,266,966,828
(P=3,706,430,769)
P=102,352,984
(P=92,070,591)
P=10,777,353,058
P=31,819,648,787
P=2,336,577,183
P=34,156,225,970
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 NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2012 AND 2011
2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) before income tax P=9,154,002,153 (P=649,923,165)
Adjustments for:
Interest expense (Notes 4 and 18) 2,869,586,587 3,260,238,922
Depreciation and amortization (Notes 4, 8 and 9) 2,613,048,943 2,632,779,385
Unrealized foreign exchange gains - net (950,575,758) (177,643,991)
Interest income (Notes 4 and 19) (274,546,848) (281,217,028)
Provision for: – –
Retirement and post-employment benefits 270,967,853 212,830,273
Doubtful accounts - unrecoverable input VAT 148,912,692 –
Share-based benefits cost – 2,201,719
Loss on debt extinguishment (Notes 12 and 21) 114,683,892 –
Recovery of impairment loss on property, plant and
equipment (Notes 8 and 21) (63,614,885) –
Loss (gain) on retirement of property, plant
and equipment (752,932) 6,775,880
Impairment loss on property, plant and equipment of
Northern Negros Geothermal Project (NNGP)
(Notes 4 and 8) – 4,998,608,008
Derivative gains - net (Note 24) – (83,915,421)
“Day 1” loss on security deposits (Note 21) – 6,078,723
Operating income before working capital changes 13,881,711,697 9,926,813,305
Decrease (increase) in:
Trade and other receivables (1,625,391,361) 914,353,720
Due from related parties 7,812 (603,648)
Parts and supplies inventories 45,116,094 (702,171,632)
Other current assets 19,778,196 79,286,473
Increase (decrease) in:
Trade and other payables 390,361,459 (167,441,186)
Due to related parties (93,264,999) (145,695,637)
Royalty fee payable (232,737,504) (216,312,202)
Cash generated from operations 12,385,581,394 9,688,229,193
Interest and financing charges (2,781,246,427) (2,731,686,727)
Income taxes paid including creditable withholding taxes (476,475,056) (747,506)
Retirement and other post-employment benefits paid (408,336) (80,000,000)
Net cash from operating activities 9,127,451,575 6,875,794,960
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (Note 8) (4,949,643,012) (6,695,153,475)
Proceeds from incidental income from testing of property,
plant and equipment 520,417,469 –
Interest received 247,612,163 294,482,856
Increase in:
Exploration and evaluation assets (390,535,688) (12,225,900)
Intangible assets (Note 9) (122,215,985) –
Other noncurrent assets (1,298,815,757) (1,035,643,756)
Proceeds from sale of property, plant and equipment 3,223,548 –
Net cash used in investing activities (5,989,957,262) (7,448,540,275)
(Forward)
- 2 -
September 30, 2012
(Unaudited)
September 30, 2011
(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of:
Long-term debts (P=7,909,964,859) (P=13,534,852,507)
Cash dividends (Note 14) (3,225,033,077) (3,341,315,244)
Short-term loans – (175,000,000)
Documentary stamp (624,500) –
Proceeds from long-term debts (Note 12) 6,934,833,050 24,242,500,000
Decrease in provisions and other long-term liabilities (39,649,426) (74,283,283)
Net cash flows from (used in) financing activities (4,240,438,812) 7,117,048,966
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,102,944,499) 6,544,303,651
EFFECT OF FOREIGN EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS (19,141,962) (3,046,252)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 12,493,406,963 6,157,925,132
CASH AND CASH EQUIVALENTS AT END OF
PERIOD (Notes 5 and 24) P=11,371,320,502 P=12,699,182,531
See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements
.
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)
AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. Corporate Information
Corporate Structure
Energy Development Corporation (the “Parent Company” or “EDC”) is a subsidiary of Red
Vulcan Holdings Corporation (Red Vulcan). The Parent Company and its subsidiaries
(collectively hereinafter referred to as the “Company”), were separately incorporated and
registered with the Philippine Securities and Exchange Commission (SEC) except for its foreign
subsidiaries. Below are the Parent Company’s ownership interests in its subsidiaries:
Percentage of Ownership
September 30, 2012 December 31, 2011
Direct Indirect Direct Indirect
EDC Drillco Corporation (EDC Drillco) 100.00% – 100.00% –
EDC Geothermal Corp. (EGC) 100.00% – 100.00% –
Green Core Geothermal Inc. (GCGI) – 100.00% – 100.00%
Bac-Man Geothermal Inc. (BGI) – 100.00% – 100.00%
Unified Leyte Geothermal Energy Inc.
(ULGEI) – 100.00% – 100.00%
Southern Negros Geothermal, Inc. (SNGI)**
– 100.00% – 100.00%
EDC Mindanao Geothermal Inc. (EMGI)**
– 100.00% – 100.00%
Bac-Man Energy Development Corporation
(BEDC)**
–
100.00%
–
100.00%
Kayabon Geothermal, Inc. (KGI)**
– 100.00% – 100.00%
Energy Development (EDC) Corporation Chile
Limitada [EDC Chile Limitada] 99.99%
0.01% 99.99%
0.01%
EDC Holdings International Limited (EHIL)**
100.00% – 100.00% –
Energy Development Corporation Hong Kong
Limited (EDC HKL)**
PT EDC Indonesia* –
100.00%
95.00%
–
–
100.00%
–
PT EDC Panas Bumi Indonesia* – 95.00% – –
EDC Chile Holdings SPA* – 100.00% – –
EDC Geotermica Chile* – 100.00% – –
EDC Peru Holdings S.A.C. * – 100.00% – –
EDC Geotermica Peru S.A.C. * – 100.00% – –
EDC Quellaapacheta* – 70.00% – –
EDC Wind Energy Holdings, Inc. (EWEHI) 100.00% – 100.00% –
EDC Burgos Wind Power Corporation (EBWPC) 33.33% 66.67% 33.33% 66.67%
EDC Pagudpud Wind Power Corporation
(EPWPC)* –
100.00% –
–
First Gen Hydro Power Corporation (FG Hydro) 60.00% – 60.00% – * Incorporated in 2012 and has not yet started commercial operations.
**Incorporated in 2011 and has not yet started commercial operations.
- 2 -
History of Ownership
Beginning December 13, 2006, the common shares of EDC were listed and traded on the
Philippine Stock Exchange (PSE). Up to November 2007, EDC was controlled by the Philippine
National Oil Company (PNOC), a government-owned and controlled corporation, and the
PNOC EDC Retirement Fund.
On November 29, 2007, PNOC and PNOC EDC Retirement Fund sold their combined interests
in EDC to Red Vulcan (a Philippine corporation). Red Vulcan was then a wholly owned
subsidiary of First Gen Corporation (First Gen, a publicly listed Philippine corporation) through
Prime Terracota Holdings Corporation (Prime Terracota). First Gen’s indirect interest in EDC
consists of 6.0 billion common shares and 7.5 billion preferred shares. Control was then
established through First Gen’s 60% indirect voting interest in EDC. Meanwhile, First Philippine
Holdings Corporation (First Holdings) directly owns 66.2% of the common shares of First Gen.
Accordingly, First Holdings became then the ultimate parent of the Company.
On May 12, 2009, First Gen’s indirect voting interest in Red Vulcan was reduced to 45% with the
balance taken up by Lopez Inc. Retirement Fund (40%) and Quialex Realty Corporation (15%)
through the issuance of preferred shares by Prime Terracota. As a result of this transaction, Prime
Terracota replaced First Holdings as the ultimate parent of EDC effective May 12, 2009.
Nature of Operations
The Parent Company operates 12 geothermal energy projects in five Geothermal Service Contract
(GSC) areas, namely:
1. Bacon-Manito Geothermal Project (BMGP);
2. Mt. Apo Geothermal Project (MGP);
3. Northern Negros Geothermal Project (NNGP);
4. Southern Negros Geothermal Project (SNGP); and,
5. Tongonan Geothermal Project (TGP).
These GSCs are entered into with the Department of Energy (DOE) pursuant to the provisions of
Presidential Decree 1442. These GSCs were replaced by Geothermal Renewable Energy Service
Contracts (GRESCs) on October 23, 2009.
Geothermal steam produced is delivered to the National Power Corporation (NPC) and fed to the
Parent Company and subsidiary’s power plants to produce electricity. EDC sells power to NPC
under the Steam Sales Agreements (SSAs) and Power Purchase Agreements (PPAs), respectively.
EDC also has drilling activities in Papua New Guinea. In August 2011, the Parent Company
assigned its electricity sales agreement with Iloilo I Electric Cooperative, Inc. (ILECO I) to GCGI.
On July 25, 2012, the ESA expired.
Subsidiaries
EDC Drillco
EDC Drillco is a company incorporated on September 28, 2009 to act as an independent service
contractor, consultant, specialized technical adviser for well construction and drilling, and other
allied activities. As of September 30, 2012, EDC Drillco remained non-operating.
EGC
EGC, originally named as First Luzon Geothermal Energy Corporation, is a special-purpose
company incorporated on April 9, 2008 to participate in the bid for another local power plant. The
bid was won by and awarded to another local entity. Thereafter, EGC became an investment
- 3 -
holding company of its wholly owned subsidiaries, namely GCGI, BGI, ULGEI, SNGI, EMGI,
BEDC and KGI. EGC also has a 0.01% stake in EDC Chile Limitada.
On March 8, 2011, the Philippine SEC approved the change of its corporate name to EGC.
Further details on EGC’s wholly-owned subsidiaries follow:
GCGI was incorporated on June 22, 2009 with primary activities on power generation,
transmission, distribution, and other energy related businesses. GCGI is currently operating
the 192.5 Megawatt (MW) Palinpinon and 112.5 MW Tongonan 1 geothermal power plants in
Negros Oriental and Leyte, respectively, following its successful acquisition from the Power
Sector Assets and Liabilities Management Corporation (PSALM) in 2009.
BGI was incorporated on April 7, 2010 primarily to carry on the general business of
generating, transmitting, and/or distributing energy. BGI has successfully acquired the
150 MW Bac-Man Geothermal Power Plants (BMGPP) from PSALM in 2010. BMGPP is
currently under rehabilitation to restore its capacity and reliability.
ULGEI is a company incorporated on June 23, 2010 to carry on the general business of
generating, transmitting, and/or distributing energy.
On February 4, 2011, the Philippine SEC approved the incorporation of SNGI and EMGI,
wholly owned subsidiaries of EGC, to carry on the general business of generating,
transmitting, and/or distributing energy derived from any and all forms, types and kinds of
energy sources for lighting and power purposes and whole-selling the electric power to power
corporations, public electric utilities and electric cooperatives.
On September 22 and 28, 2011, the Philippine SEC approved the incorporation of BEDC and
KGI, wholly owned subsidiaries of EGC, to carry on the general business of generating,
transmitting, and/or distributing energy derived from any and all forms, types and kinds of
energy sources for lighting and power purposes and whole-selling the electric power to power
corporations, public electric utilities and electric cooperatives.
As of September 30, 2012, ULGEI, SNGI, EMGI, BEDC and KGI remained non-operating.
EHIL and EDC HKL
EHIL was incorporated on August 17, 2011 in British Virgin Islands and will serve as an
investment holding company of EDC’s international subsidiaries. EHIL is the holding company
of EDC HKL which was incorporated on November 22, 2011 in Hong Kong. The following
entities are the subsidiaries under EHKL:
EDC Peru Holdings S.A.C., a foreign subsidiary incorporated on January 19, 2012 in Lima,
Peru is a 99.9% owned by EDC HKL. EDC Peru Holdings S.A.C. holds 99.9% stake in EDC
Geotermica Peru S.A.C., a foreign subsidiary incorporated on January 19, 2012 in Lima, Peru.
EHIL owns the remaining 0.1% stake in EDC Peru Holdings S.A.C. and EDC Geotermica
Peru S.A.C.
On July 17, 2012, EDC Quellaapacheta was incorporated in Lima,Peru as a 70% owned
subsidiary of EDC Geotermica Peru S.A.C.
On July 9, 2012, PT EDC Indonesia and PT EDC Panas Bumi Indonesia were incorporated in
Jakarta Pusat, Indonesia as 95% owned subsidiaries of EDC HKL.
- 4 -
EDC Chile Holdings SPA, which was incorporated on January 13, 2012 in Santiago,
Chile, is a wholly owned subsidiary of EDC HKL and is the holding company of EDC
Geotermica Chile, a foreign subsidiary that was also incorporated on January 13, 2012 in
Santiago, Chile.
EWEHI
EWEHI is a holding company incorporated on April 15, 2010. The following entities are the
subsidiaries under EWEHI:
EBWPC is a company incorporated on April 13, 2010 to carry on the general business of
generating, transmitting, and/or distributing energy. EBPWC is currently developing the
86 MW wind energy concession in Burgos, Ilocos Norte.
EPWPC is a company incorporated on February 29, 2012 to carry on the general business of
generating, transmitting, and/or distributing energy.
FG Hydro
On October 20 and November 17, 2008, in line with its objective of focusing on renewable
energy, the Parent Company acquired a total of 60% interest in FG Hydro from First Gen. FG
Hydro operates the 132 MW Pantabangan and Masiway Hydro-Electric Power Plants
(PAHEP/MAHEP) located in Nueva Ecija, Philippines. FG Hydro buys from and sells electricity
to the Wholesale Electricity Spot Market (WESM) and to various privately-owned distribution
utilities (DUs) under the Transition Power Supply Contracts (TPSCs).
EDC Chile Limitada
EDC Chile Limitada is a limited liability company incorporated on February 11, 2010 in Santiago,
Chile with the purpose of exploring, evaluating and extracting any mineral or substance to
generate geothermal energy. On January 10, 2012, the Chilean Ministry of Energy awarded to
EDC the geothermal exploration concession of Newen, while San Rafael and Batea geothermal
exploration concessions were awarded on January 19, 2012.
Corporate Address
In November 2011, the Parent Company changed its corporate address to One Corporate Centre,
Julia Vargas Avenue corner Meralco Avenue, Ortigas Center, Pasig City from Merritt Road, Fort
Bonifacio, Taguig City.
Authorization for Issuance of the Unaudited Interim Condensed Consolidated
Financial Statements
The consolidated financial statements were reviewed and approved by the Audit and Governance
Committee on November 5, 2012.
2. Basis of Preparation
The unaudited interim condensed consolidated financial statements have been prepared in
accordance with Philippine Accounting Standard (PAS) 34, Interim Financial Reporting.
Accordingly, the unaudited interim condensed consolidated financial statements do not include all
of the information and footnotes required in the annual consolidated financial statements, and
should be read in conjunction with the Company’s audited annual consolidated financial
statements as of and for the year ended December 31, 2011.
- 5 -
The unaudited interim condensed consolidated financial statements have been prepared on a
historical cost basis, except for derivative instruments and AFS investments measured at fair
value. The unaudited interim condensed consolidated financial statements are presented in
Philippine peso (Peso), the Parent Company’s functional currency. All values are rounded to the
nearest Peso, except when otherwise indicated.
As of September 30, 2012, the Company did not conduct an evaluation of the impact of the
Philippine Financial Reporting Standards (PFRS) 9, Financial Instruments: Classification and
Measurement, in its financial statements. The Company does not also intend to adopt PFRS 9 in
its December 31, 2012 annual consolidated financial statements. The Company will assess the
impact of PFRS 9 in its financial statements upon completion of all the phases of PFRS 9.
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, 2011, except for the following:
Cash flow hedges
Cash flow hedges are hedges of the exposure to variability in cash flows that are attributable to a
particular risk associated with a recognized asset, liability or highly probable forecast transaction
and could affect the consolidated statement of income. The effective portion of the gain or loss on
the hedging instrument is recognized as other comprehensive income (loss) in the “Cumulative
translation adjustments” account in the consolidated statement of financial position while the
ineffective portion is recognized as “Mark-to-market gain (loss) on derivatives” in the
consolidated statement of income.
Amounts taken to other comprehensive income (loss) are transferred to the consolidated statement
of income when the hedge transaction affects profit or loss, such as when hedged financial income
or expense is recognized or when a forecast sale or purchase occurs. Where the hedged item is the
cost of a non-financial asset or liability, the amounts taken to other comprehensive income (loss)
are transferred to the initial carrying amount of the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, amounts previously recognized in other
comprehensive income (loss) are transferred to the consolidated statement of income. If the
hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or
if its designation as hedge is revoked, amounts previously recognized in other comprehensive
income (loss) remain in equity until the forecast transaction occurs. If the related transaction is
not expected to occur, the amount is recognized in the consolidated statement of income.
The Company uses cross currency swaps to partially hedge its exposure to foreign currency and
interest rate risks on its floating rate Club Loan that is benchmarked against US LIBOR.
Amended accounting standards effective beginning January 1, 2012
PAS 12, Income Taxes - Recovery of Underlying Assets
The amendment clarified the determination of deferred tax on investment property measured
at fair value. The amendment introduces a rebuttable presumption that deferred tax on
investment property measured using the fair value model in PAS 40, Investment Property,
should be determined on the basis that its carrying amount will be recovered through sale.
- 6 -
Furthermore, it introduces the requirement that deferred tax on non-depreciable assets that are
measured using the revaluation model in PAS 16, Property, Plant and Equipment, always be
measured on a sale basis of the asset. The amendment becomes effective for annual periods
beginning on or after January 1, 2012. The amendment has no impact on the Company’s
financial position or performance.
PFRS 7, Financial Instruments: Disclosures - Enhanced Derecognition Disclosure
Requirements
The amendment requires additional disclosure about financial assets that have been transferred
but not derecognized to enable the user of the Company’s financial statements to understand
the relationship with those assets that have not been derecognized and their associated
liabilities. In addition, the amendment requires disclosures about continuing involvement in
derecognized assets to enable the user to evaluate the nature of, and risks associated with, the
entity’s continuing involvement in those derecognized assets. The amendment becomes
effective for annual periods beginning on or after July 1, 2011. The amendment affects
disclosures only and has no impact on the Company’s financial position or performance.
4. Operating Segment Information
The Company’s operating businesses are organized and managed separately according to the
nature of the products and services provided, with each segment representing a strategic business
unit that offers different products and serves different markets.
The Company’s identified operating segments below are consistent with the segments reported to
the Board of Directors (BOD), which is the Chief Operating Decision Maker (CODM) of the
Company.
a. Electricity segment - This segment pertains to: (1) EDC’s power plants covered mainly by
long-term PPAs with NPC; (2) FG Hydro’s spot sales to the WESM and with various DUs
covered by TPSCs; and (3) GCGI’s sales to WESM and to various NPC-assigned and new
customers covered by Power Supply Contracts and Power Supply Agreements, respectively.
b. Steam segment - This segment relates to EDC’s sale of steam to GCGI and NPC covered by
SSAs.
c. All other segments - This segment relate to segment performing drilling services for Lihir
Gold Ltd. in Papua New Guinea.
The Company has one geographical segment since it derives principally all its revenues from
domestic operations. Revenue from drilling services outside the Philippines is not material.
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.
All of the Company’s operations are in the Philippines and revenues generated are from domestic
operations except for revenue included in “All Others” category, which is from drilling services
rendered to Lihir Gold Ltd.
- 7 -
Segment performance is evaluated based on net income (loss) for the period and earnings before
interest, taxes, and depreciation and amortization (EBITDA). Net income (loss) for the period is
measured consistent with consolidated net income (loss) in the unaudited interim condensed
consolidated financial statements. EBITDA is calculated as total revenues minus total operating
expenses except non-cash items such as depreciation and amortization, impairment loss on
property, plant and equipment, and loss on disposal of property, plant and equipment among
others.
NPC is the main customer for the electricity segment which comprised 46% and 57% of the total
electricity revenue for the nine-month periods ended September 30, 2012 and 2011, respectively.
However, following the acquisition by BGI of the BMGPP in September 2010 and the subsequent
rehabilitation of these assets, the Parent Company ceased to bill NPC. In 2011, PSALM approved
the request of EDC to extend the waiver of billings and collections under Bac-Man steam
contracts until: (a) the execution of the deed of assignment from NPC/PSALM to BGI; or (b) such
time that the BMGPP resumes operations.
Financial information on the operating segments are summarized as follows:
Electricity Steam
All Others
Eliminations Total
For the Nine-Month Period
Ended September 30, 2012
Segment revenue from external
customers P=21,442,620,932 P=– P=506,891,671 P=– P=21,949,512,603
Intersegment revenue – 4,338,772,423 – (4,338,772,423) –
Total segment revenue 21,442,620,932 4,338,772,423 506,891,671 (4,338,772,423) 21,949,512,603
Segment expenses (11,943,513,224) (2,846,581,467) (318,524,982) 4,338,772,423 (10,769,847,250)
Segment results P=9,499,107,708 P=1,492,190,956 P=188,366,689 P=– P=11,179,665,353
Unallocated interest expense (2,869,586,587)
Unallocated other income - net 729,766,323
Unallocated income taxes (587,902,043)
Unallocated interest income 274,546,848
Unallocated segment expenses (160,389,784)
Net income P=8,566,100,110
Segment EBITDA P=11,845,717,216 P=1,799,444,650 P=202,542,496 P=– P=13,847,704,362
Unallocated expenses (160,146,867)
Total EBITDA P=13,687,557,495
Electricity Steam All Others Eliminations Total
For the Nine-Month Period
Ended September 30, 2011
Segment revenue from external
customers P=17,699,362,655 P=– P=522,321,326
P=– P=18,221,683,981 Intersegment revenue 200,907,409 4,850,479,463 – (5,051,386,872) –
Total segment revenue 17,900,270,064 4,850,479,463 522,321,326 (5,051,386,872) 18,221,683,981
Segment expenses (17,590,473,162) (2,905,708,162) (489,738,353) 5,051,386,872 (15,934,532,805)
Segment results P=309,796,902 P=1,944,771,301 P=32,582,973 P=– 2,287,151,176
Unallocated interest expense (3,260,238,922)
Unallocated interest income 281,217,028 Unallocated income taxes 162,202,058
Unallocated other income - net 77,627,018
Unallocated segment expenses (35,679,465)
Net loss (P=487,721,107)
Segment EBITDA P=7,770,902,370 P=2,498,249,327 P= 46,545,455 P=– P=10,315,697,152
Unallocated expenses (35,466,346)
Total EBITDA P=10,280,230,806
- 8 -
Electricity Steam All Others
Eliminations Total
As of and for the Nine-Month
Period Ended
September 30, 2012
Segment assets P=61,211,227,207 P=11,102,712,097 P=6,027,696,802 P=– P=78,341,636,106
Unallocated corporate assets 15,951,296,702
Total assets P=94,292,932,808
Segment liabilities P=36,486,322,256 P=19,659,139,521 P=1,882,125,186 P=– P=58,027,586,963
Unallocated corporate liabilities 2,109,119,875
Total liabilities P=60,136,706,838
Capital expenditure P=2,513,893,300 P=1,422,707,665 P=1,056,804,395 P=– P=4,993,405,360
Unallocated capital expenditure 189,704,505
Total capital expenditure P=5,183,109,865
Depreciation and amortization P=2,250,994,788 P=347,635,431 P=14,175,807 P=– P=2,612,806,026
Unallocated depreciation and
amortization
242,917
Total depreciation and
amortization
P=2,613,048,943
Other non-cash items P=94,005,040 (P=40,381,736) P=– P=– P=53,623,304
Unallocated non-cash items –
Total other non-cash items P=53,623,304
Electricity Steam All Others Eliminations Total
As of and for the Year Ended
December 31, 2011
Segment assets P=59,324,793,038 P=12,376,428,799 P=4,066,696,844 P=– P=75,767,918,681
Unallocated corporate assets 14,249,898,103
Total assets P=90,017,816,784
Segment liabilities P=36,727,310,548 P=20,589,217,647 P=1,774,574,665 P=– P=59,091,102,860
Unallocated corporate liabilities 1,280,112,431
Total liabilities P=60,371,215,291
Capital expenditure P=4,674,950,095 P=4,106,780,031 P=158,656,411 P=– P=8,940,386,537
Unallocated capital expenditure 596,087,898
Total capital expenditure P=9,536,474,434
Depreciation and amortization (P=3,035,691,787) (P=386,991,348) (P=18,973,159) P=– (P=3,441,656,294)
Unallocated depreciation and amortization
(218,203)
Total depreciation and amortization (P=3,441,874,497)
Impairment loss P=4,998,608,008 P=– P=– P=– P=4,998,608,008
Other non-cash items (P=305,215,436) (P=340,416,065) (P=198,180) P=– (P=645,829,681)
Unallocated non-cash items 23,722,640
Total other non-cash items (P=622,107,041)
- 9 -
Electricity Steam All Others Eliminations Total
As of and for the Nine-Month Period Ended
September 30, 2011
Segment assets P=58,231,542,841 P=11,011,815,787 P=3,041,279,046 P=– P=72,284,637,674
Unallocated corporate assets 16,013,590,848
Total assets P=88,298,228,522
Segment liabilities P=34,869,479,237 P=18,806,771,286 P=1,527,009,918 P=– P=55,203,260,441
Unallocated corporate liabilities 4,559,746,861
Total liabilities P=59,763,007,302
Capital expenditure P=3,538,611,487 P=2,634,960,944 P=75,204,389 P=– P=6,248,776,820
Unallocated capital expenditure 456,733,819
Total capital expenditure P=6,705,510,639
Depreciation and amortization (P=2,333,866,535) (P=284,737,249) (P=13,962,482) P=– (P=2,632,566,266)
Unallocated depreciation and amortization
(213,119)
Total depreciation and
amortization
(P=2,632,779,385)
Impairment loss (P=4,998,608,008) P=– P=– P=– (P=4,998,608,008)
Other non-cash items (P=276,935,798) (P=329,476,987) (P=198,180) P=– (P=606,610,965)
Unallocated non-cash items 176,717,559
Total other non-cash items (P=429,893,406)
The following table shows the Company’s reconciliation of EBITDA to the consolidated net
income (loss) for the nine-month periods ended September 30, 2012 and 2011.
2012 2011
EBITDA P=13,687,557,495 P=10,280,230,806
Add (Deduct):
Interest expense (Note 18) (2,869,586,587) (3,260,238,922)
Depreciation and amortization (Note 8) (2,613,048,943) (2,632,779,385)
Foreign exchange gains (losses) - net (Note 20) 813,610,472 (48,683,289)
Benefit from (provision for) income tax (587,902,043) 162,202,058
Interest income (Note 19) 274,546,848 281,217,028
Provision for unrecoverable input VAT (Note 17) (148,912,692) (118,281,178)
Reversal of (provision for) impairment of parts and supplies
inventories (Note 17) 93,033,671 (179,794,591)
Derivatives gains - net (Note 24) 1,893,130 107,507,535
Reversal of (provision for) doubtful accounts (Note 17) 646,038 (99,295,933)
Impairment loss on property, plant and equipment of
NNGP (Note 8) – (4,998,608,008)
Miscellaneous income (charges) - net (Note 21) (85,737,279) 18,802,772
Consolidated net income (loss) P=8,566,100,110 (P=487,721,107)
The Parent Company has intersegment revenue from/to GCGI for the sale of steam/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.
- 10 -
5. Cash and Cash Equivalents
September 30,
2012
(Unaudited)
December 31,
2011
(Audited)
September 30,
2011
(Unaudited)
Cash on hand and in banks P=869,621,824 P=692,764,092 P=867,235,811
Cash equivalents 10,501,698,678 11,800,642,871 11,831,946,720
P=11,371,320,502 P=12,493,406,963 P=12,699,182,531
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.
6. Trade and Other Receivables
September 30,
2012
(Unaudited)
December 31,
2011
(Audited)
September 30,
2011
(Unaudited)
Trade P=4,901,795,739 P=3,336,433,682 P=2,938,731,313
Others:
Loans and notes receivables 72,127,246 59,331,933 28,826,614
Advances to employees 67,875,434 37,934,595 40,864,256
Non-trade accounts receivable 42,219,155 99,398,810 59,552,998
Employee receivables 7,400,307 8,896,656 10,921,652
Claims receivable 177,171 153,322 133,971
Total other receivables 189,799,313 205,715,316 140,299,491
5,091,595,052 3,542,148,998 3,079,030,804
Less allowance for doubtful accounts 43,827,520 130,839,470 129,902,725
P=5,047,767,532 P=3,411,309,528 P=2,949,128,079
Trade receivables are noninterest-bearing and are generally collectible in 30 to 60 days. Majority
of the Company’s trade receivables came from revenues from sale of electricity to NPC.
Provision for doubtful accounts recognized for the nine-month periods ended September 30, 2012
and 2011 amounted to P=0.65 million and P=99.29 million, respectively (see Note 17). As of
September 30, 2012, the Company provided provision for doubtful accounts amounting to P=0.28
million and there was a recognized recovery amounting to P=0.93 million. The Company written
off receivables amounting to P=86.08 million.
- 11 -
7. Parts and Supplies Inventories
September 30,
2012
(Unaudited)
December 31,
2011
(Audited)
September 30,
2011
(Unaudited,
Restated)
On hand:
Drilling tubular products and
equipment spares P=1,730,735,946 P=1,648,876,310 P=1,780,409,804
Power plant spares 674,849,661 718,777,618 744,128,832
Pump, production/steam gathering
system, steam turbine, valves
and valve spares
401,946,971 305,461,738
303,343,921
Electrical, cable, wire product and
compressor spares
102,744,151 83,543,105
83,190,006
Heavy equipment spares 87,936,477 90,293,956 90,646,650
Chemical products, gases and catalyst 96,367,962 113,397,104 133,520,350
Automotive, mechanical, bearing,
seals, v-belt, gasket, tires and
batteries
55,436,648 39,385,963
40,336,562
Construction and hardware supplies,
stationeries and office supplies,
hoses, communication and other
spares and supplies
61,538,168 20,268,296
16,949,069
Measuring instruments, indicators and
tools, safety equipment and
supplies
39,121,898 28,640,098
34,271,503
3,250,677,882 3,048,644,188 3,226,796,697
In transit 95,769,212 307,123,465 236,016,246
P=3,346,447,094 P=3,355,767,653 3,462,812,943
Inventories in transit include items not yet received but ownership or title to the goods has already
been transferred to the Company.
- 12 -
8. Property, Plant and Equipment
September 30, 2012 (Unaudited)
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
Major Spares
and Others
Construction
in-Progress Total
Cost
Balances at January 1, 2012 P=379,809,254 P=37,204,980,737 P=20,651,972,508 P=2,246,291,592 P=4,074,330,782 P=85,355,600 P=659,065,713 P=580,618,276 P=57,649,072 P=9,517,751,749 P=75,457,825,283
Additions 46,219 79,346 59,476,906 149,854,391 955,405,228 24,407,298 160,014,154 31,851,998 75,366,756 3,726,607,569 5,183,109,865
Disposals/Retirements/Write-off – – – (97,659) (9,360,783) (280,022) (956,262) (218,577) (1,387,073) – (12,300,376)
Reclassifications – (2,251,993) 1,832,102,085 66,103,852 5,884,277 – 95,187 (13,202) (42,170,926) (2,294,809,061) (435,059,781)
Balances at September 30, 2012 379,855,473 37,202,808,090 22,543,551,499 2,462,152,176 5,026,259,504 109,482,876 818,218,792 612,238,495 89,457,829 10,949,550,257 80,193,574,991
Accumulated Depreciation and Impairment
Balances at January 1, 2012 17,255,629 7,867,549,819 6,368,571,711 429,037,601 1,949,150,666 34,764,668 347,350,270 172,673,077 3,678,839 590,863,997 17,780,896,277
Depreciation for the year – 1,576,721,824 578,402,432 68,616,691 128,534,111 9,599,192 135,975,566 42,986,988 – – 2,540,836,804
Reversal of impairment – NNGP (Note 8) – (63,614,885) – – – – – – – – (63,614,885)
Disposals/Retirements/Write-off – – – (97,657) (8,321,622) (256,667) (804,211) (218,560) – – (9,698,717)
Reclassifications – (589,306) – 85,764 69,685,852 (568,462) (17,953,006) 48,946 – – 50,709,788
Balances at September 30, 2012 17,255,629 9,380,067,452 6,946,974,143 497,642,399 2,139,049,007 43,538,731 464,568,619 215,490,451 3,678,839 590,863,997 20,299,129,267
Net Book Value P=362,599,844 P=27,822,740,638 P=15,596,577,356 P=1,964,509,777 P=2,887,210,497 P=65,944,145 P=353,650,173 P=396,748,044 P=85,778,990 P=10,358,686,260 P=59,894,445,724
December 31, 2011 (Audited)
Land Power Plants
FCRS and
Production Wells
Buildings,
Improvements
and Other
Structures
Exploration,
Machinery and
Equipment
Transportation
Equipment
Furniture,
Fixtures and
Equipment
Laboratory
Equipment
Major Spares
and Others
Construction
in-Progress Total
Cost
Balances at January 1, 2011 P=333,924,551 P=36,607,352,559 P=17,392,141,146 P=1,798,591,948 P=3,803,840,502 P=67,240,415 P=495,684,907 P=456,421,470 P=53,030,079 P=5,021,702,358 P=66,029,929,.935
Additions 45,884,703 – 344,150,911 419,864,968 278,703,487 36,618,569 210,525,800 132,783,958 44,533,825 8,023,408,213 9,536,474,434
Disposals/Retirements/Write-off – (35,988,750) – (1,094,655) (1,812,341) (1) (1,899,186) (344,455) (583,522) – (41,722,910)
Reclassifications – 633,616,928 2,915,680,451 28,929,331 (6,400,866) (18,503,383) (45,245,808) (8,242,697) (39,331,310) (3,527,358,822) (66,856,176)
Balances at December 31, 2011 379,809,254 37,204,980,737 20,651,972,508 2,246,291,592 4,074,330,782 85,355,600 659,065,713 580,618,276 57,649,072 9,517,751,749 75,457,825,283
Accumulated Depreciation and Impairment
Balances at January 1, 2011 – 4,054,656,189 3,256,620,699 287,626,674 1,462,628,729 42,658,867 233,098,901 89,502,206 – – 9,426,792,265
Depreciation for the year – 2,158,122,126 692,852,385 84,957,014 258,849,165 4,939,887 85,937,845 60,024,918 – – 3,345,683,340
Impairment - NNGP 17,255,629 1,662,635,857 2,419,098,627 56,658,530 141,579,492 8 74,681,583 32,155,446 3,678,839 590,863,997 4,998,608,008
Disposals/Retirements/Write-off – (7,864,353) – (248,578) (1,805,755) – (1,667,039) (344,417) – – (11,930,142)
Reclassifications – – – 43,961 87,899,035 (12,834,094) (44,701,021) (8,665,076) – – 21,742,805
Balances at December 31, 2011 17,255,629 7,867,549,819 6,368,571,711 429,037,601 1,949,150,666 34,764,668 347,350,269 172,673,077 3,678,839 590,863,997 17,780,896,276
Net Book Value P=362,553,625 P=29,337,430,918 P=14,283,400,797 P=1,817,253,991 P=2,125,180,116 P=50,590,932 P=311,715,444 P=407,945,199 P=53,970,233 P=8,926,887,752 P=57,676,929,006
- 13 -
September 30, 2011 (Unaudited)
Land Power Plants
FCRS and
Production Wells
Buildings,
Improvements
and Other
Structures
Exploration,
Machinery and
Equipment
Transportation
Equipment
Furniture,
Fixtures and
Equipment
Laboratory
Equipment
Major Spares
and Others
Construction
in-Progress Total
Cost
Balance at January 1, 2011 P=333,924,551 P=36,607,352,559 P=17,392,141,146 P=1,798,591,947 P=3,803,840,502 P=67,240,415 P=495,684,907 P=456,421,470 P=53,030,079 P=5,021,702,358 P=66,029,929,934
Additions 45,830,894 – 304,026,186 63,450,924 132,833,294 27,175,690 40,691,336 76,718,133 – 6,318,810,368 7,009,536,825
Retirements/Write-off – – – (1,715,314) (5,374,487) (12,290,078) (43,020,199) (7,356,762) 5,849,270 – (63,907,570)
Reclassifications – 464,280,905 2,259,773,591 (9,712,761) (2,797,306) – (2,246,613) – – (2,722,252,895) (12,955,079)
Balance at September 30, 2011 379,755,445 37,071,633,464 19,955,940,923 1,850,614,796 3,928,502,003 82,126,027 491,109,431 525,782,841 58,879,349 8,618,259,831 72,962,604,110
Accumulated Depreciation and Impairment
Balance at January 1, 2011 – 4,054,656,188 3,256,620,699 287,626,673 1,462,628,729 42,658,867 233,098,900 89,502,206 – – 9,426,792,262
Depreciation for the period – 1,629,459,886 549,267,144 74,084,146 201,702,714 8,241,072 59,023,982 38,857,074 – – 2,560,636,018
Impairment – NNGP 17,255,629 1,662,635,857 2,419,098,627 56,658,530 141,579,492 8 74,681,583 32,155,446 3,678,839 590,863,998 4,998,608,009
Retirements/Write-off – – – (935,986) (5,318,755) (12,290,059) (38,107,689) (6,641,034) (7,154) – (63,300,677)
Reclassifications – – – (846,041) 76,772,009 (8,766) (4,282,164) (534,872) – – 71,100,166
Balance at September 30, 2011 17,255,629 7,346,751,931 6,224,986,470 416,587,322 1,877,364,189 38,601,122 324,414,612 153,338,820 3,671,685 590,863,998 16,993,835,778
Net Book Value P=362,499,816 P=29,724,881,533 P=13,730,954,453 P=1,434,027,474 P=2,051,137,814 P=43,524,905 P=166,694,819 P=372,444,021 P=55,207,664 P=8,027,395,833 P=55,968,768,332
Impairment Assessment of Northern Negros Geothermal Plant (NNGP)
In 2011, after the five-month shutdown of the NNGP since November 22, 2010, the NNGP was operated during April to June to complete the geothermal
resource testing. Based on the subsequent technical assessment, EDC has come to a conclusion that the sustainable operation of NNGP is only at 5-10 MW.
The Company evaluates the assets on a CGU basis for any indication of impairment at each financial reporting date. The Company assessed that there
continues to be an indication of impairment for NNGP and based on its impairment testing, recognized an impairment loss of P=4,998.6 million in June 2011.
In February 2012, EDC transferred vacuum pumps from NNGP to the Palinpinon Power Plant owned by GCGI. Since these transferred assets can still be
utilized and were included in the CGU of the Palinpinon Power Plant, the Company recognized a corresponding reversal of impairment loss amounting to
P=63.6 million, representing the net book value of the assets transferred had no impairment loss been previously recognized (Note 21).
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 costs, net of accumulated amortization, amounted to P=356.81 million and P=311.98 million as of September 30, 2012 and
December 31, 2011, respectively. As of September 30, 2012, December 31, 2011, and September 30, 2011, the provision for rehabilitation costs presented
under “Provision and other long-term liabilities” amounted to P=489.69 million, P=406.78 million and P=358.60, respectively.
- 14 -
Details of depreciation and amortization charges recognized in the consolidated statements of income are shown below:
September 30,
2012
(Unaudited)
December 31,
2011
(Audited)
September 30,
2011
(Unaudited)
Property, plant and equipment P=2,540,836,804 P=3,345,683,340 P=2,560,636,018
Water rights and other amortization (Note 9) 72,212,139 96,191,157 72,143,367
P=2,613,048,943 P=3,441,874,497 P=2,632,779,385
Cost of sales of electricity (Note 15) P=2,350,787,368 P=3,173,306,732 P=2,443,518,576
Cost of drilling services (Note 16) 860,429 1,110,041 652,487
General and administrative expenses (Note 17) 261,401,146 267,457,724 188,608,322
P=2,613,048,943 P=3,441,874,497 P=2,632,779,385
- 15 -
9. Intangible Assets
September 30, 2012 (Unaudited)
Goodwill Water Rights
Other
Intangible Asset Total
Cost
Balances at January 1, 2012 P=2,535,051,530 P=2,404,778,918 P=258,394,939 P=5,198,225,387
Additions – – 122,215,985 122,215,985
Balances at September 30, 2012 2,535,051,530 2,404,778,918 380,610,924 5,320,441,372
Accumulated Amortization
Balances at January 1, 2012 – 492,979,679 – 492,979,679
Amortization (Note 8) – 72,143,368 – 72,143,368
Balances at September 30, 2012 – 565,123,047 – 565,123,047
Net Book Value P=2,535,051,530 P=1,839,655,871 P=380,610,924 P=4,755,318,325
December 31, 2011 (Audited)
Goodwill Water Rights
Other
Intangible Asset Total
Cost
Balances at January 1, 2011 P=2,535,051,530 P=2,404,778,918 P=– P=4,939,830,448
Additions – – 258,394,939 258,394,939
Balances at December 31, 2011 2,535,051,530 2,404,778,918 258,394,939 5,198,225,387
Accumulated Amortization
Balances at January 1, 2011 – 396,788,522 – 396,788,522
Amortization (Note 8) – 96,191,157 – 96,191,157
Balances at December 31, 2011 – 492,979,679 – 492,979,679
Net Book Value P=2,535,051,530 P=1,911,799,239 P=258,394,939 P=4,705,245,708
September 30, 2011 (Unaudited)
Goodwill Water Rights
Other
Intangible Asset Total
Cost
Balances at January 1, 2011 P=2,535,051,530 P=2,404,778,918 P=– P=4,939,830,448
Additions – – 233,152,862 233,152,862
Balances at September 30, 2011 P=2,535,051,530 P=2,404,778,918 233,152,862 5,172,983,310
Accumulated Amortization
Balances at January 1, 2011 – 396,788,522 – 396,788,522
Amortization (Note 8) – 72,143,367 – 72,143,367
Balances at September 30, 2011 – 468,931,889 – 468,931,889
Net Book Value P=2,535,051,530 P=1,935,847,029 P=233,152,862 P=4,704,051,421
Water rights are amortized using the straight-line method over 25 years, which is the term of the
Agreement between FG Hydro and National Irrigation Administration. The remaining
amortization period of water rights is 19.1 years as of September 30, 2012.
Other intangible asset pertains to the Company’s wind energy project development costs.
- 16 -
10. Other Noncurrent Assets
September 30,
2012
(Unaudited)
December 31,
2011
(Audited)
September 30,
2011
(Unaudited)
Input value-added tax (VAT) P=4,140,435,487 P=3,270,286,773 P=2,850,768,215
Tax credit certificates 1,540,884,449 1,338,884,447 1,038,884,446
AFS investments 616,724,456 20,443,924 20,816,362
Special deposits and funds 262,850,225 123,278,392 116,238,764
Long-term receivables 79,624,273 81,561,056 59,670,238
Prepaid expenses 12,141,171 12,246,824 15,295,942
Others 39,573,941 27,670,094 33,136,564
6,692,234,002 4,874,371,510 4,134,810,531
Less allowance for doubtful
accounts
570,617,355 422,722,403
232,638,218
P=6,121,616,647 P=4,451,649,107 P=3,902,172,313
Provision for unrecoverable input VAT and long-term receivables amounted to P=147.30 million
and P=118.28 million for the nine-month periods September 30, 2012 and 2011, respectively
(Note 17).
11. Trade and Other Payables
September 30,
2012
(Unaudited)
December 31,
2011
(Audited)
September 30,
2011
(Unaudited)
Accounts payable:
Third parties P=5,752,346,012 P=4,653,828,081 P=3,740,421,507
Related parties (Note 23) 219,458,193 145,143,240 101,772,180
Accrued interest and guarantee fees 1,180,882,817 1,047,605,943 1,274,550,117
Withholding and other taxes payable 310,212,375 328,466,441 106,774,803
SSS and other contributions payable 2,739,510 1,893,569 2,393,612
Deferred credits 19,869,446 22,095,129 11,963,286
Other payables 444,727,016 505,042,858 117,149,143
P=7,930,235,369 P=6,704,075,261 P=5,355,024,648
Accounts payable are noninterest-bearing and are normally settled on a 30 to 60 days payment
term.
Accrued interest represents interest accrual on outstanding long-term debts.
- 17 -
12. Long-term Debts
September 30,
2012
(Unaudited)
December 31,
2011
(Audited)
September 30,
2011
(Unaudited)
US Dollar-denominated debts P=19,577,815,395 P=13,003,311,706 P=20,480,107,578
Peso-denominated debts 30,105,082,674 38,466,007,305 31,250,424,758
Japanese Yen-denominated debts – 20,252,444 20,492,843
49,682,898,069 51,489,571,455 51,751,025,179
Less current portion 1,610,673,813 2,249,517,382 2,055,224,478
Noncurrent portion P=48,072,224,256 P=49,240,054,073 P=49,695,800,701
Issuance of Fixed Rate Note (FXCN) and Prepayment of Fixed Rate Corporate Note (FRCN)
On April 4, 2012, EDC signed a 10-year FXCN facility agreement amounting to P=7,000.0 million.
EDC used the proceeds to pay in full its existing FRCN loan. On April 4, 2012, EDC prepaid
series one and three for P=1,774.3 million and P=1,007.1 million, respectively. Subsequently, on
May 3, 2012, the FRCN series two was also prepaid for P=4,211.1 million. The extinguished
FRCN series one and three loans were originally scheduled to mature in July 2014 while the
extinguished FRCN series two was originally scheduled to mature in July 2016.
EDC recognized loss amounting to P=114.68 million arising from early extinguishment of debt
(Note 21).
Debt issuance costs amounting to P=86.05 million was capitalized as part of the new FXCN.
Overseas Economic Cooperation Fund (OECF)
On April 8, 2011, the Parent Company prepaid the JP¥8.1 billion (P=4,260.6 million) 21st Yen loan
with Japan International Cooperation Agency (JICA), a successor institution of the OECF (Japan).
The 21st Yen loan was originally scheduled to mature in March 2027.
On June 10, 2011, the Parent Company prepaid the OECF 19th Yen loan balance of JP¥218.6
million (P=117.4 million) originally scheduled to mature in December 2024. On June 17, 2011, the
Company fully settled its OECF 9th Yen loan of JP¥207.7 million (P=111.5 million).
On July 20, 2011, the Parent Company prepaid the OECF 18th Yen loan balance of JP¥45.3
million (P=24.3 million) originally scheduled to mature in January 2023.
On January 31, 2012, EDC fully settled its matured JP¥1.5 billion OECF 8th Yen loan amounting
to P=20.25 million.
US$300.0 million Notes
On January 20, 2011, EDC issued a 10-year US$300.0 million Notes (P=13,350.0 million) at 6.50%
interest per annum which will mature in January 2021. The notes are intended to be used by the
Parent Company to support the business expansion plans, finance capital expenditures, service
debt obligations and for general corporate purposes.
International Finance Corporation (IFC)
On May 20, 2011, the Parent Company signed a 15-year US$75.0 million loan facility with the
IFC to fund its medium-term capital expenditures program. The loan was drawn in Peso on
September 30, 2011 amounting to P=3,262.5 million. The loan is payable in 24 equal semi-annual
installments after a three-year grace period at an interest rate of 6.657% per annum.
- 18 -
Syndicated Loan Facility
On June 17, 2011, the Parent Company entered into a credit agreement for US$175.00 million
(P=7,630.00 million) syndicated term loan facility (Club Loan) with Australia New Zealand
Banking Group Limited, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Chinatrust (Philippines)
Commercial Banking Corporation, ING Bank N.V., Manila Branch, Maybank Group, Mizuho
Corporate Bank, Ltd., and Standard Chartered Bank as Mandated Lead Arrangers and
Bookrunners, and Standard Chartered Bank as Facility Agent. The purpose of the Club Loan is to
refinance the old US$175.00 million syndicated term loan which was availed on June 30, 2010
scheduled to mature on June 30, 2013. The Club Loan, which was fully drawn as of agreement
date, bears interest based on the prevailing LIBOR plus spread of 175 basis points. The prevailing
LIBOR shall be based on term of 1-month, 3-month or 6-month depending on what interest reset
frequency EDC selects at the end of each term. The Club Loan will mature on June 17, 2017.
FG Hydro Loan
On May 7, 2010, FG Hydro signed a loan agreement for a 10-year P=5,000.0 million loan with
PNB and Allied Bank, maturing on May 7, 2020. The loan is secured by a Real Estate and Chattel
mortgages on all present and future mortgageable assets of FG Hydro. The loan carries an interest
rate of 9.025% subject to re-pricing after five years. Loan repayment is semi-annual based on
increasing percentages yearly as set forth in Schedule 3 of the loan agreement with the first
payment made on November 8, 2010. The loan proceeds was used to finance the full payment of
the Deferred Payment Facility and the PRUP, and fund general corporate and working capital
requirements of FG Hydro.
13. Royalty Fee Payable
September 30,
2012
(Unaudited)
December 31,
2011
(Audited)
September 30,
2011
(Unaudited)
Due to DOE and Local
Government Units (LGUs) P=65,078,884 P=287,626,313 P=363,833,156
Less current portion 65,078,884 287,626,313 315,514,708
Noncurrent portion P=– P=– P=48,318,448
As discussed in Note 1 under “Nature of Operations”, the Parent Company entered into five GSCs
with the DOE, which granted the Company the right to explore, develop, and utilize the country’s
certain geothermal resources subject to sharing of net proceeds with the Philippine Government.
The Parent Company pays royalty fees to the DOE and LGUs under these agreements.
On May 8, 2012, GCGI entered into two Geothermal Operating Contracts, wherein GCGI will
have the right to operate the geothermal power plants under the Republic Act No. 9136 through a
Renewable Energy Operating Contract.
14. Equity
As required under the Philippine Constitution, the Parent Company is subject to the nationality
requirement that at least sixty percent (60%) of its capital stock must be owned by Filipino citizens
since it is engaged in the exploration and exploitation of the country’s energy resources. The
Parent Company is compliant with the said nationality requirement.
- 19 -
Beginning December 13, 2006, the 15.0 billion common shares of EDC were listed and traded on
the PSE at an Initial Public Offering (IPO) price of P=3.20 per share. After the initial IPO, there are
no subsequent listings of shares by the Parent Company.
The combined interest of Red Vulcan entitles it to 60% voting interest and 40% economic interest
in EDC.
The ownership of the Parent Company’s preferred shares is limited to Filipino citizens. The
preferred shares have voting rights and subject to 8% cumulative interest. Red Vulcan holds the
entire 9.4 billion preferred shares equivalent to 20% voting interest in EDC. The common shares
are majority held by Filipinos, with Red Vulcan holding 7.5 billion shares or an equivalent of 40%
voting and economic interest.
Issued and outstanding preferred and common shares as of September 30, 2012 and 2011, and
December 31, 2011 are as follows:
Number of Shares
Preferred stock - P=0.01 par value per share
Authorized 15,000,000,000
Issued and outstanding 9,375,000,000
Common stock - P=1 par value per share
Authorized 30,000,000,000
Issued and outstanding 18,750,000,000
The number of stockholders of the Parent Company as of September 30, 2012 and 2011, and
December 31, 2011 are as follows:
September 30,
2012
December 31,
2011
September 30,
2011
Preferred shares 1 1 1
Common shares 700 702 704
Retained Earnings
On September 5, 2012, the BOD of the Parent Company declared a cash dividend of P=0.04 per
share in favor of all common stockholders of record as of September 20, 2012, payable on or
before September 30, 2012 amounting to P=750.0 million.
On March 13, 2012, the BOD of the Parent Company approved the following cash dividends in
favor of all stockholders of record as of March 28, 2012 and payable on or before April 24, 2012:
cash dividend of P=0.0008 per share on the preferred shares totaling P=7.5 million
cash dividend of P=0.10 per share on the common shares totaling P=1,875.0 million
On March 15, 2011, the BOD of the Parent Company approved the following cash dividends in
favor of all stockholders of record as of March 29, 2011 and payable on or before April 22, 2011:
cash dividend of P=0.0008 per share on the preferred shares totaling P=7.5 million
cash dividend of P=0.16 per share on the common shares totaling P=3,000.0 million
- 20 -
NCI
On May 9, 2011, the Philippine SEC approved the amendment of the articles of incorporation of
FG Hydro reclassifying the unissued redeemable preferred shares into redeemable preferred
A & B shares. Included in the features of the preferred shares Series B is that it shall earn
cumulative dividends for each year during the period commencing January 1, 2009 and ending on
December 31, 2013, as may be declared and paid from time to time in amounts and on such dates
as may be declared by FG Hydro’s BOD, subject to the availability of FG Hydro’s retained
earnings. As a result of the issuance of the preferred “A” & “B” shares, P=200.3 million was
reallocated from retained earnings to non-controlling interest pertaining to the net income
allocable to First Gen for the period prior to January 1, 2011.
In June 2011, FG Hydro declared and paid cash dividends to its preferred shares amounting to
P=333.8 million.
In March and May 2012, FG Hydro declared and paid cash dividends to its preferred and common
shares amounting to P=88.5 million and P=1,254.0 million, respectively.
15. Cost of Sales of Electricity
September 30,
2012
(Unaudited)
September 30,
2011
(Unaudited)
Depreciation and amortization (Notes 8 and 23) P=2,350,787,368 P=2,443,518,576
Personnel costs 1,341,373,227 1,109,950,555
Purchased services and utilities 1,297,632,077 1,331,083,734
Repairs and maintenance 928,068,323 1,021,112,424
Rental, insurance and taxes 762,544,021 684,920,386
Parts and supplies issued 696,039,813 649,517,729
Royalty fees 135,336,974 152,686,774
Business and related expenses 76,659,957 47,722,182
Proceeds from insurance claims (85,903,337) –
P=7,502,538,423 P=7,440,512,360
16. Cost of Drilling Services
September 30,
2012
(Unaudited)
September 30,
2011
(Unaudited)
Purchased services and utilities P=201,268,689 P=291,844,580
Rental, insurance and taxes 53,426,227 31,552,795
Parts and supplies issued 29,122,478 50,996,386
Repairs and maintenance 9,833,145 43,595,486
Business and related expenses 4,400,814 28,231,942
Depreciation (Note 8) 860,429 652,487
Personnel costs 299,125 17,516,112
P=299,210,907 P=464,389,788
- 21 -
p
17. General and Administrative Expenses
September 30,
2012
(Unaudited)
September 30,
2011
(Unaudited)
Personnel costs P=940,919,078 P=1,041,792,389
Purchased services and utilities 776,544,260 669,624,444
Rental, insurance and taxes 613,449,773 361,716,170
Business and related expenses 332,632,045 244,700,213
Depreciation and amortization (Note 8) 261,401,146 188,608,322
Provision for unrecoverable input VAT and long-
term receivables (Note 10) 148,912,691 118,281,178
Parts and supplies issued 115,213,414 123,173,516
Provision for (reversal of) impairment of parts and
supplies inventories (Note 7) (93,033,671) 179,794,591
Repairs and maintenance 33,095,006 39,715,358
Provision (reversal) for doubtful accounts (Notes 4
and 6) (646,038) 99,295,933
P=3,128,487,704 P=3,066,702,114
18. Interest Expense
September 30,
2012
(Unaudited)
September 30,
2011
(Unaudited)
Interest on long-term debts including amortization
of transaction costs P=2,831,465,221 P=3,173,685,505
Interest accretion on provision for rehabilitation
and restoration costs 21,276,043 54,192,779
Interest accretion of “Day 1” gain 10,190,075 25,361,786
Interest on liability from litigation 6,655,248 5,858,330
Interest on loans payable – 1,140,522
P=2,869,586,587 P=3,260,238,922
19. Interest Income
September 30,
2012
(Unaudited)
September 30,
2011
(Unaudited)
Interest on cash equivalents P=223,506,839 P=266,121,000
Interest on overdue accounts/others 42,828,178 11,144,541
Interest on savings/current accounts 3,016,569 3,951,487
Interest accretion of “Day 1” loss on security deposit 818,786 – Others 4,376,476 –
P=274,546,848 P=281,217,028
- 22 -
20. Foreign Exchange Gains (Losses) - net
September 30,
2012
(Unaudited)
September 30,
2011
(Unaudited)
Foreign exchange gains on long-term debts P=981,827,599 P=504,188,449
Foreign exchange losses on other accounts (168,217,127) (552,871,738)
P=813,610,472 (P=48,683,289)
This account pertains to foreign exchange adjustments realized on repayment of loans and
restatement of outstanding balances of foreign currency-denominated loans, short-term placements
and cash in banks. The following table shows the exchange rates used to restate outstanding
balances at financial reporting dates:
Equivalent to US$1.00
Currency September 30,
2012
December 31,
2011
September 30,
2011
Japanese Yen 77.61 77.912 76.787
Philippine Peso 41.70 43.840 43.720
21. Miscellaneous Income (Charges)
September 30,
2012
(Unaudited)
September 30,
2011
(Unaudited)
Loss on debt extinguishment (Note 12) (P=114,683,892) P=–
Recovery of impairment loss on property, plant and
equipment (Note 8) 63,614,885 – “Day 1” loss on security deposit – (6,078,723)
Others (34,668,272) 24,881,495
(P=85,737,279) P=18,802,772
22. Earnings (Loss) Per Share (EPS)
September 30,
2012
(Unaudited)
September 30,
2011
(Unaudited)
(a) Net income (loss) attributable to equity holders
of the Parent Company P=7,105,782,444 (P=670,221,100)
Less dividends on preferred shares 7,500,000 7,500,000
(b) Net income attributable to common shareholders
of the Parent Company P=7,098,282,444 (P=677,721,100)
(c) Weighted average number
of common shares outstanding 18,750,000,000 18,750,000,000
Basic/diluted earnings (loss) per share (b/c) P=0.379 (P=0.036)
- 23 -
The Parent Company does not have dilutive common stock equivalents as of September 30, 2012
and 2011, and December 31, 2011.
23. Related Party Transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the
other party or exercise significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related if they are subject to common control or
common significant influence.
The following are the transactions that the Company had with related parties for the nine-month
periods ended September 30, 2012 and 2011.
a. Thermaprime Well Services, Inc. (Thermaprime)
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.
b. First Balfour, Inc. (First Balfour)
First Balfour is a wholly owned subsidiary of First Holdings. In 2011, the Company awarded
to First Balfour procurement contracts for various works such as Palinpinon 1 zero condensate
disposal system, civil, structural and mechanical/ piping works in Leyte and Bac-Man, and
refurbishment of BGI’s geothermal power plants.
c. 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=8.70 million per month plus applicable
taxes. This was increased to P=11.80 million per month plus applicable taxes effective
September 2009 to cover the cost of additional officers and staff assigned to the Parent
Company. The consultancy agreement was subsequently extended for another 16 months
from September 1, 2011 to December 31, 2012. Total consultancy services amounted to
P=124.10 million and P=119.52 million for the nine-month periods ended September 30, 2012
and 2011, respectively and were included in the “Cost of sales of electricity” under
“Purchased services and utilities” (see Note 15).
In 2012, EDC purchased shares of common stock of First Gen classified under AFS
investments. As of September 30, 2012, such AFS investments amounted to P=108.3 million.
d. IFC
On May 20, 2011, the Parent Company signed a 15-year US$75.0 million loan facility with
IFC, a shareholder of the Parent Company. IFC has approximately 5% ownership interest in
the Parent Company. The loan was drawn in Peso on September 30, 2011, amounting to
P=3,262.5 million. As of September 30, 2012 and December 31, 2011, the outstanding balance
of the loan amounting to P=3,201.29 million and P=3,196.11 million, respectively, is included
- 24 -
under the “Long-term debts” account in the unaudited interim consolidated statements of
financial position (see Note 12).
On November 27, 2008, the Parent Company entered into a loan agreement with IFC for
US$100.0 million. On January 7, 2009, the Parent Company opted to draw the loan in Peso
and received the proceeds amounting to P=4,048.75 million, net of P=51.25 million front-end
fee. As of September 30, 2012 and December 30, 2011, the outstanding loan amounted to
P=3,706.44 million and P=3,871.27 million, respectively.
e. 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:
i. Bauang Private Power Corporation is a subsidiary of First Private Power Corporation,
an associate of First Gen. First Gas Holdings Corporation and First Gas Power
Corporation are subsidiaries of First Gen. First Holdings, parent company of First
Gen, is an associate of Lopez Holdings Corporation (formerly Benpres Holdings
Corporation).
ii. Bayan Telecommunications Inc. (Bayantel) is 97.3%-owned by Bayantel Holdings on
which Lopez Holdings Corporation has 47.3% ownership.
iii. Sky Cable Corporation (Sky Cable) is 80.72%-owned by ABS-CBN Corp. on which
Lopez Holdings Corporation has 57.3% interest. ABS-CBN Publishing, Inc. is a
wholly owned subsidiary of ABS-CBN Corp.
iv. Rockwell Land Corporation is 51% owned by Meralco, which is 6.6% owned by First
Holdings.
v. First Electro Dynamics Corporation (FEDCOR) is a wholly owned subsidiary of First
Holdings.
vi. Adtel Inc. is a wholly owned Lopez Incorporated entity.
vii. Lopez Group Foundation, Inc. is the coordinative hub for the corporate social
responsibility initiatives of Lopez Holdings Corporation.
viii. 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 Holdings.
ix. First Philippine Industrial Corp. is 60% owned by First Holdings.
- 25 -
Following are the amounts of related party transactions for the periods ended September 30, 2012
and 2011, and the outstanding balances as of September 30, 2012 and 2011, and
December 31, 2011:
Transactions for the nine-
month periods ended September 30
Net amounts due from/to related parties
Related Party Nature of Transaction 2012
(Unaudited)
2011 (Unaudited)
September 30,
2012
(Unaudited)
December 31,
2011 (Audited)
September 30,
2011 (Unaudited)
Due from related parties
First Balfour, Inc. Interest-free advances P=– P=595,836 P=– P=– P=595,836
First Gen Interest-free advances – 3,437 – 3,437 3,437 First Gen Northern Energy
Corp.
Interest-free advances – 2,511 – 2,511 2,511
First GES Interest-free advances – 1,864 – 1,864 1,864
P=– P=603,648 P=– P=7,812 P=603,648
Due to related parties
First Gen Consultancy fee P=124,102,856 P=119,527,059 P=40,719,463 P=53,863,530 P=38,731,765
Interest-free advances 13,108,329 52,575,456 2,162,575 6,061,620 7,295,007 Eugenio Lopez Foundation Interest-free advances 1,095,000 2,400,000 – – –
First Gas Power Corporation Interest-free advances 117,182 525,690 8,600 165,675 361,450 Bauang Private Power
Corporation
Interest-free advances 57,330 – – – –
Lopez Group Foundation, Inc.
Interest-free advances – 498,400 – – –
First Gas Holdings
Corporation
Interest-free advances – 767,900 – – –
P=138,480,697 P=176,294,505 P=42,890,638 P=60,090,825 P=46,388,222
Trade and other payables
Thermaprime Work fees 889,589,364 694,231,740 110,233,783 P=101,171,006 93,181,809 First Balfour, Inc. Refurbishment of BMGPP
and ancillary facilities 72,812,561 147,798,460 98,525,289 38,989,273 5,862,855
First Philec Manufacturing Technologies Corp.
Purchase of services and utilities 3,750,000 – 3,247,481 – –
Adtel Inc. Purchase of services and
utilities 3,272,208 – 1,452,277 – – First Electro Dynamics
Corporation
Purchase of services and
utilities 2,930,000 – – – –
ABS-CBN Publishing, Inc. Purchase of services and utilities 1,284,110 – – – –
FPRC Purchase of services and
utilities 1,143,464 1,848,760 292,800 458,150
Bayantel
Purchase of services and
utilities 644,547 6,658,196 5,667,193 4,524,811 2,727,516
Securities Transfer Services, Inc.
Purchase of services and utilities 107,520 – 39,370 – –
Rockwell Land Corporation Purchase of services and
utilities 70,000 – – – – ABS-CBN Corp. Purchase of services and
utilities 8,878 – – – –
First Philippine Industrial Corporation
Purchase of services and utilities 1,488 – – – –
Sky Cable Purchase of services and
utilities – 25,182 – – –
P=975,614,140 P=850,562,338 P=219,458,193 P=145,143,240 P=101,772,180
Long-term debt
IFC Interest-bearing loans P=392,033,941 P=– P=6,907,726,314 P=7,067,386,686 7,234,328,541
The purchases from related parties are made at normal commercial terms and conditions. The
amounts outstanding are unsecured and will be settled in cash. Except for the US$80.0 million
- 26 -
letters of credit issued by the Parent Company in favor of EDC Chile Limitada, there were no
guarantees that have been given to and/or received from any related party in 2012 and 2011.
The Company did not recognize any impairment loss on receivables from related parties for the
nine-month periods ended September 30, 2012 and 2011.
24. Financial Risk Management Objectives and Policies
The Company’s financial instruments consist mainly of cash and cash equivalents, AFS
investments and long-term debts. The main purpose of these financial instruments is to finance
the Company’s operations. The Company has other various financial assets and liabilities such as
trade receivables, trade payables and other liabilities, which arise directly from operations.
Overview of the Company’s Risk Management
The Company has an Enterprise Risk Management (ERM) System in place covering all areas of
its organization, and it is aligned with ISO 31000:2009 (Risk Management - Principles and
Guidelines).
The risk management process involves a systematic application of management policies,
procedures, and practices to the activities of communicating, consulting, establishing the context,
and identifying, analyzing, evaluating, treating, monitoring, and reviewing risk. It is aligned and
integrated in the Company’s business model through the annual Strategy Execution Process which
integrates strategic planning, balanced scorecard, risk management, budget and performance
management processes.
The implementation of the Company’s ERM System provides the following benefits and
advantages:
a. Proactively identifies and manages the key exposures of the Company to protect corporate
assets and profits by identifying and preventing risks before they occur. Thus, it helps avoid
losses which can impair the operations or financial position of the Company in case of
fortuitous events;
b. Identifies and exploits areas of “risk-based advantage”;
c. Provides management at all levels with the required information to make informed decisions on
issues critical to the success of the business and its projects;
d. Establishes the accountability of risk owners in the management of risks;
e. Provides balance in the management of risks and an objective basis for allocating resources;
f. Ensures that efforts and initiatives are well-coordinated so that the Company does not manage
risks in silo;
g. Monitors the implementation and effectiveness of the risk treatment options;
h. Ensures compliance with the policies and processes that are established to manage risks; and
i. Reduces the reliance on increasingly expensive insurance protection. Insurance may provide
the financial relief in case of loss. However, certain risks are not insurable, while some though
insurable, may be too costly and uneconomical to insure.
Risk Assessment
One major activity in the Company’s ERM System is the risk assessment. It is the overall process
of risk identification, risk analysis, and risk evaluation (ISO 31000:2009). It is performed at the
project level by project teams, at the operational level by the line and middle management, at the
executive level by the Management Committee, and at the strategic level by the BOD through its
Risk Management Committee.
- 27 -
Risk Treatment
Risk management strategies and action plans are formulated once the risks have been evaluated
and the top risks have been identified. Risk treatment is a process to modify risk (ISO
Guide 73:2009) and is synonymous with risk mitigation, risk elimination, risk prevention, and risk
reduction. It can involve:
a. Avoiding the risk by deciding not to start or continue with the activity that gives rise to the
risk;
b. Taking or increasing risk in order to pursue an opportunity;
c. Removing the risk source;
d. Changing the likelihood;
e. Changing the consequences;
f. Sharing the risk with another party or parties (including contracts and risk financing); and
g. Retaining the risk by informed decision.
Financial Risk Management Policy
The main financial risks arising from the Company’s financial instruments are credit risk, foreign
currency risk, interest rate risk, equity price risk and liquidity risk. The Company’s policies for
managing the aforementioned risks are summarized hereinafter below.
Credit Risk
Credit risk is the risk that the Company will incur a loss arising from customers, clients or
counterparties that fail to discharge their contracted obligations.
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 Company does not hold any collateral from its trade receivables hence, its
maximum exposure to credit risk on these trade receivables equals 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, other receivables, amounts due from related
parties and AFS investments in debt securities, 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.
The Company trades only with recognized, creditworthy third parties and/or transacts only with
institutions and/or banks which have demonstrated financial soundness and which have passed the
financial evaluation and accreditation of the Company.
- 28 -
The following tables below show the Company’s aging analysis of past due but not impaired
financial assets as of September 30, 2012 and 2011, and December 31, 2011:
September 30, 2012 (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=11,365,569 P=– P=– P=– P=– P=– P=11,365,569
Trade receivables 4,105,201 221,398 481,369 50,000 43,828 4,901,796
Long-term receivables 16,964 – – – – 62,660 79,624
Loans and notes
receivables 52,208 8,044 7,148 4,727 – – 72,127
Advances to employees 58,120 5,430 2,183 2,142 – – 67,875
Non-trade receivables 11,679 19,093 11,447 – – 42,219
Employee receivables* 15,640 – – – – – 15,640
AFS investments:
Debt investments 622,107 – – – – – 622,107
Total P=16,247,488 P=253,965 P=502,147 P=56,869 P=– P=106,488 P=17,166,957
*Includes noncurrent portion of employee receivables under other noncurrent assets.
December 31, 2011 (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=12,486,732 P=– P=– P=– P=– P=– P=12,486,732 Trade receivables 2,942,461 75,181 150,377 37,576 – 130,839 3,336,434
Non-trade receivables 54,130 6,792 38,477 – – – 99,399
Long-term receivables – – – – – 61,062 61,062 Loans and notes
receivables 59,332
– –
– –
– 59,332
Advances to employees 26,025
1,416 7,727 2,767 –
– 37,935
Employee receivables* 19,949 – – – – – 19,949
Due from related parties 8 – – – – – 8
AFS investments:
Debt investments 673,854 – – – – – 673,854
Total P=16,262,491 P=83,389 P=196,581 P=40,343 P=– P=191,901 P=16,774,705
*Includes noncurrent portion of employee receivables under other noncurrent assets.
- 29 -
September 30, 2011 (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=12,691,784 P=– P=– P=– P=– P=– P=12,691,784
Trade receivables 2,501,827 80,343 217,169 2,397 7,092 129,903 2,938,731 Loans and notes
receivables 52,585 316 2,467 4,185 – – 59,553
Employee receivables* 23,622 – – – – – 23,622
Non-trade receivables 15,669 – 10,904 2,254 – – 28,827
Advances to employees 22,148 5,525 10,067 3,124 – – 40,864
Long-term receivables 1,000 – – – – 58,670 59,670 Due from related parties 604 – – – – – 604
AFS debt investments: 675,255 – – – – – 675,255
Financial assets at FVPL: Derivative assets 158,419 – – – – – 158,419
Total P=16,142,913 P=86,184 P=240,607 P=11,960 P=7,092 P=188,573 P=16,677,329
*Includes noncurrent portion of employee receivables under other noncurrent assets.
Credit Quality of Neither Past due nor Impaired Financial Assets
Financial assets are classified as high grade if the counterparties are not expected to default in
settling their obligations. These counterparties normally include customers, banks and related
parties who pay on or before due date. Thus, the credit risk exposure is minimal. Financial assets
are classified as a standard grade if the counterparties settle their obligation with the Company
within 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 September 30, 2012 and 2011 and December 31, 2011, all financial assets categorized as
neither past due nor impaired are viewed by management as high grade, considering the
collectibility of the receivables and the credit history of the counterparties.
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in foreign exchange rates.
The Company’s exposure to foreign currency risk resulted primarily from the financial assets and
liabilities that are denominated in US dollar, Japanese yen and Sweden kroner. These financial
assets and liabilities consist of the Company’s investments in marketable securities and
government debt securities and foreign currency denominated loans.
The Company’s exposure to foreign currency risk to some degree is mitigated by some provisions
in the Company’s GRESCs, SSAs and PPAs. The service contracts allow full cost recovery while
the sales contracts include billing adjustments covering the movements in the Peso and US dollar
exchange rates, US Price and Consumer Indices, and other inflation factors.
To mitigate further the effects of foreign currency risk, the Company will prepay, refinance or
hedge its foreign currency denominated loans, whenever deemed feasible. The Company also
enters into derivative contracts to mitigate foreign currency risk. In 2012, the Company entered
into non-deliverable cross currency swaps to hedge its foreign currency risk exposure on its US
dollar-denominated Club Loan.
- 30 -
The Company’s foreign currency-denominated financial assets and liabilities (translated into
Philippine peso) as of September 30, 2012 and 2011, and December 31, 2011, are as follows:
September 30, 2012 (Unaudited) September 30, 2011 (Unaudited)
Original Currency
Peso
Equivalent1
Original Currency
Japanese Yen US Dollar
Sweden
Kroner
(SEK) Japanese Yen US Dollar
Sweden Kroner
(SEK)
Peso
Equivalent2
Financial Assets
Loans and receivables:
Cash equivalents − 48,514,639 − 2,023,060,446 − 91,466,061 − 3,998,896,187
Cash on hand and in banks − 2,571,472 − 107,230,374 − 3,769,079 − 164,784,134
Trade and other receivables − 2,730,154 − 113,847,422 − 834,170 − 36,469,912
AFS debt investments:
Government debt securities − 14,918,625 − 622,106,663 − 15,445,000 − 675,255,400
Financial assets at FVPL:
Derivative assets − − − − − 260,415 − 11,385,344
Total financial assets − 68,734,890 − 2,866,244,905 − 111,774,725 − 4,886,790,977
Current Financial Liabilities
Liabilities at amortized cost:
Trade and other payables 24,506,663 12,813,481 397,967 550,043,096 26,205,892 28,981,340 3,858,102 1,307,715,486
Accrued interest and guarantee fees 51,773,878 5,339,004 − 250,454,804 391,254,035 5,336,721 − 456,088,015
Current portion of long-term debts − 16,962,422 − 707,332,997 35,992,417 − − 20,492,843
Financial assets at FVPL:
Derivative liabilities − 3,095,709 − 129,091,065 − 36,428 − 1,592,632
Total current financial liabilities 76,280,541 38,210,616 397,967 1,636,921,962 453,452,344 34,354,489 3,858,102 1,785,888,976
Noncurrent Financial Liability
Liability at amortized cost:
Long-term debts - net of current portion − 452,529,554 − 18,870,482,402 − 468,437,959 − 20,480,107,567
Total financial liabilities 76,280,541 490,740,170 397,967 20,507,404,364 453,452,344 502,792,448 3,858,102 22,265,996,543 1USD1=JPY77.610, USD1= P=41.70 and SEK1=P=6.4161 as of September 30, 2012
2USD1=JPY76.787, USD1= P=43.72 and US$1=SEK6.8067 as of September 30, 2011
December 31, 2011 (Audited)
Original Currency
Yen US Dollar SEK Peso
Equivalent1
Financial Assets
Loans and receivables:
Cash equivalents − 99,562,576 − 4,364,823,332 Cash on hand and in banks 125,208 1,909,007 − 83,761,320 Trade and other receivables − 1,802,580 − 79,025,107 AFS debt investments − 15,370,750 − 673,853,680
Total financial assets 125,208 118,644,913 − 5,201,463,439
Current Financial Liabilities
Liabilities at amortized cost: Trade and other payables 53,561,520 69,067,270 10,776,022 3,126,615,268 Accrued interest and
guarantee fees 52,256,670 10,214,835 − 477,222,468 Current portion of
long-term debts 35,992,417 − − 20,252,433
Total current financial liabilities 141,810,607 79,282,105 10,776,022 3,624,090,169
Noncurrent Financial Liability Liability at amortized cost:
Long-term debts - net of
current portion − 468,600,735 − 20,543,456,222
Total financial liabilities 141,810,607 547,882,840 10,776,022 24,167,546,391 1US$1=JP¥77.912, US$1= P=43.840 and SEK1=P=6.363 as of December 31, 2011
- 31 -
The following tables demonstrate the sensitivity to a reasonably possible change in the US dollar
and Japanese yen and Sweden kroner exchange rates, with all other variables held constant, of the
Company’s income (loss) before income tax and equity for the periods ended September 30, 2012
and 2011 and year ended December 31, 2011 (arising from revaluation of financial assets and
liabilities and derivative instruments).
September 30, 2012 (Unaudited)
Foreign Currency
Appreciates (Depreciates) By
Effect on Income
before Income Tax
USD 10% or P=4.170 (P=1,746,942,040)
(10% or P=4.170) 1,746,942,040
JPY 10% or P=0.05373 4,098,588
(10% or P=0.05373) (4,098,588)
SEK 10% or P=0.64161 255,340
(10% or P=0.64161) (255,340)
December 31, 2011 (Audited)
Foreign Currency
Appreciates (Depreciates) By
Effect on Income
Before Income Tax
USD 10% or P=4.38 (P=1,880,062,120)
(10% or P=4.38) 1,880,062,120
JPY 10% or P=0.06252 (8,858,171)
(10% or P=0.05115) 7,247,208
SSEK 10% or P=0.6363 (6,856,783)
(10% or P=0.6363) 6,856,783
September 30, 2011 (Unaudited)
Foreign Currency
Appreciates (Depreciates) By
Effect on Loss
Before Income Tax
US$ 10% or PHP4.372 (P=1,446,932,085)
(10% or PHP4.372) 1,446,932,085
JPY 10% or PHP0.06326 (28,686,766)
(10% or PHP0.05176) 23,470,991
The effect of changes in foreign exchange rates in equity pertains to the fair valuation of AFS
investments and derivatives designated as cash flow hedges, and is exclusive of the impact of
changes affecting the Company’s interim condensed consolidated statements of income.
Equity Price Risk
Equity price risk is the risk that the fair value of traded equity instruments decreases as the result
of the changes in the levels of equity indices and the value of the individual stocks.
As of September 30, 2012 and 2011 and December 31, 2011, the Company’s exposure to equity
price risk is minimal.
- 32 -
Interest Rate Risk
The Company’s exposure to the risk of changes in market interest rates relates primarily to the
Company’s long-term debt obligations with floating interest rates, derivative assets, derivative
liabilities and AFS investments.
The interest rates of some of the Company’s long-term borrowings and AFS debt investments are
fixed at the inception of the loan agreement.
The Company regularly evaluates its interest rate risk by taking into account the cost of qualified
borrowings being charged by its creditors. Prepayment, refinancing or hedging the risks are
undertaken when deemed feasible and advantageous to the Company.
The following tables provide for the effective interest rates and interest payments by period of
maturity of the Company’s long-term debts.
Interest
Rates
Within 1
Year
More than 1
Year but less
than 4 Years
More than 4
Years but
less than 5
Years
More than
5 Years Total
September 30, 2012
(Unaudited)
Fixed Rate
In Thousand Pesos
IFC 1 7.40% P=275,563 P=673,285 P=172,943 P=499,147 P=1,620,938
IFC 2 6.66% 285,958 572,086 156,630 647,150 1,661,824
PNB & Allied 9.03% 398,115 950,339 219,721 321,860 1,890,035
FXCN-Tr1 6.62% 198,023 582,157 190,082 920,632 1,890,894
FXCN-Tr2 6.61% 263,771 775,447 253,194 1,226,303 2,518,715
Public Bonds Series 1 8.64% 734,553 1,469,106 – – 2,203,659
Public Bonds Series 2 9.33% 326,645 979,934 163,322 – 1,469,901
USD300M Notes 6.50% 813,150 2,439,450 813,150 2,846,025 6,911,775
Floating Rate
US$ 175M
Syndicated Club
Loan
1.75%+
Libor
143,995
312,232
56,882
–
513,109
Interest
Rates
Within
1 Year
More than 1
Year but less
than 4 Years
More than 4
Years but
less than 5
Years
More than
5 Years
Total
December 31, 2011
(Audited)
In Thousand Pesos
Fixed Rate
OECF
PNB and Allied Bank
IFC 1
IFC 2
3.20%
9.03%
7.40%
6.66%
P=327
416,291
289,163
273,799
P=–
1,014,291
711,135
608,541
P=–
246,520
186,262
165,548
P=–
423,956
582,174
723,131
P=327
2,101,058
1,768,734
1,771,019
FRCN Series 1 8.37% 180,117 207,851 – – 387,968
FRCN Series 2 9.40% 423,750 816,579 92,983 – 1,333,312
FRCN Series 3
US$ 300M Notes
8.43%
6.50%
102,907
854,880
118,752
2,564,640
–
854,880
–
3,846,960
221,659
8,121,360
Public Bonds Series 1 8.64% 734,553 1,836,383 – – 2,570,936
Public Bonds Series 2 9.33% 326,645 979,934 326,645 – 1,633,224
Floating Rate
US$ 175.0M
Refinanced
Syndicated Club
Loan
1.75% +
LIBOR
155,724
372,675
89,541
38,506
656,446
- 33 -
Interest
Rates
Within 1
Year
More than 1
Year but less
than 4 Years
More than 4
Years but less
than 5 Years
More than
5 Years Total
September 30, 2011
(Unaudited)
Fixed Rate
In Thousand Pesos
OECF 3.20% P=331 P=– P=– P=– P=331
IFC 1 7.40% 303,711 749,723 199,124 672,089 1,924,647
IFC 2 6.66% 119,452 683,995 174,049 803,780 1,781,276
PNB & Allied 9.03% 431,232 1,076,563 271,891 541,581 2,321,267
FRCN Series 1 8.37% 180,117 207,851 – – 387,968
FRCN Series 2 9.40% 400,536 747,128 69,769 – 1,217,433
FRCN Series 3 8.43% 90,048 93,104 – – 183,152
Public Bonds Series 1 8.64% 734,553 2,203,659 – – 2,938,212
Public Bonds Series 2 9.33% 326,645 979,934 326,645 163,322 1,796,546
US$ 300M Notes 6.50% 852,540 2,557,620 852,540 3,836,430 8,099,130
Floating Rate
US$ 175M
Refinanced
Syndicated Club
Loan
1.75% +
Libor
155,722
385,169
93,158
59,637
693,686
The following tables demonstrate the sensitivity to a reasonably possible change in interest rates,
with all other variables held constant, of the Company’s income (loss) before income tax and
equity as of September 30, 2012 and 2011 and December 31, 2011. The effect on equity includes
impact of change in interest rates on derivatives designated as cash flow hedges as well as AFS
debt investments.
September 30, 2012 (Unaudited)
Increase/Decrease
in Basis Points
Effect on Income
Before Income Tax Effect on Equity
USD +100 (P=72,975,000) (P=12,795,026)
-100 72,975,000 4,552,221
December 31, 2011 (Audited)
Increase/Decrease
in Basis Points
Effect on Income
Before Tax Effect on Equity
USD +100 (P=76,720,000) (P=8,929,578)
-100 76,720,000 19,217,468
September 30, 2011 (Unaudited)
Increase/Decrease
in Basis Points
Effect on Loss
Before Income Tax
Effect on
Equity
USD +100 (P=75,033,796) (P=8,902,435)
-100 75,034,792 22,333,879
The effect of changes in interest rates in equity pertains to the fair valuation of AFS investments
and derivatives designated as cash flow hedges, and is exclusive of the impact of the changes
affecting the Company’s interim condensed consolidated statement of income.
Liquidity Risk
The Company’s objective is to maintain a balance between continuity of funding and sourcing
flexibility through the use of available financial instruments. The Company manages its liquidity
profile to meet its working and capital expenditure requirements and service debt obligations. As
- 34 -
part of the liquidity risk management program, the Company regularly evaluates and considers the
maturity of both its financial investments and financial assets (e.g. trade receivables, other
financial assets) and resorts to short-term borrowings whenever its available cash or matured
placements is not enough to meet its daily working capital requirements. To ensure immediate
availability of short-term borrowings, the Company maintains credit lines with banks on a
continuing basis.
Liquidity risk arises primarily when the Company has difficulty collecting its receivables from its
major customer, NPC. Other instances that contribute to its exposure to liquidity risk are when the
Company finances long-term projects with internal cash generation and when there is credit
crunch especially at times when the company has temporary funding gaps.
The tables below show the maturity profile of the Company’s financial assets used for liquidity
purposes based on contractual undiscounted cash flows as of September 30, 2012 and 2011 and
December 31, 2011.
September 30, 2012 (Unaudited)
On Demand
Within 30
Days
31 to 60
Days
61 to 180
Days
181 to 360
Days
Over
360 Days Total
(In Thousand Pesos)
AFS debt investments P=137,110 P=– P=– P=– P=– P=– P=137,110
Loans and receivables
Cash equivalents – 10,045,103 431,595 – – 25,000 10,501,698
Total P=137,110 P=10,045,103 P=431,595 P=– P=– P=25,000 P=10,638,808
December 31, 2011 (Audited)
On
Demand
Within 30
Days
31 to 60
Days
61 to 180
Days
181 to 360
Days
Over
360 Days Total
(In Thousand Pesos)
AFS debt investments P=673,854 P=– P=– P=– P=– P=– P=673,854
Loans and receivables
Cash equivalents – 9,574,010 2,226,633 – – – 11,800,643
Total P=673,854 P=9,574,010 P=2,226,633 P=– P=– P=– P=12,474,497
September 30, 2011 (Unaudited)
On Demand Within 30
Days 31 to 60
Days 61 to 180
Days 181 to 360
Days Over
360 Days Total
(In Thousand Pesos)
AFS debt investments P=675,255 P=− P=− P=− P=− P=− P=675,255
Loans and receivables Cash equivalents – 8,917,793 2,914,154 – – – 11,831,947
Total P=675,255 P=8,917,793 P=2,914,154 P=– P=− P=− P=12,507,202
The tables below summarize the maturity analysis of the Company’s financial liabilities as of
September 30, 2012 and 2011 and December 31, 2011 based on contractual undiscounted
payments:
September 30, 2012 (Unaudited)
On
Demand
Less than
3 Months
3 to
6 Months
>6 to
12 Months
>1 to
5 Years
More than
5 Years Total
(In Thousand Pesos)
Liabilities at amortized cost:
Accounts payable P=− P=6,076,125 P=− P=− P=− P=− P=6,076,125
Accrued interest and guarantee fees 86,446 931,806 162,631 − − − 1,180,883
Other payables − 7,257 − − − − 7,257
Due to related parties 42,891 − − − − − 42,891
Royalty fee payable − 20,583 − 49,073 − − 69,656
Long-term debts − 781,990 280,369 2,912,146 34,115,818 31,815,929 69,906,252
- 35 -
September 30, 2012 (Unaudited)
On
Demand
Less than
3 Months
3 to
6 Months
>6 to
12 Months
>1 to
5 Years
More than
5 Years Total
Financial Liabilities at FVPL:
Derivative liabilities
Current − 65,720 − − − − 65,720
Noncurrent − 63,371 − − − − 63,371
Total P=129,337 P=7,946,852 P=443,000 P=2,961,219 P=34,115,818 P=31,815,929 P=77,412,155
December 31, 2011 (Audited)
On
Demand
Less than
3 Months
3 to
6 Months
>6 to
12 Months
>1 to
5 Years
More than
5 Years Total
(In Thousand Pesos)
Liabilities at amortized cost:
Accounts payable P=− P=4,731,730 P=− P=− P=− P=− P=4,731,730 Accrued interest and
guarantee fees 90,769 713,620 243,217 − − − 1,047,606
Other payables − 3,518 − 81,092 − − 84,610 Due to related parties 60,091 − − − − − 60,091
Royalty fee payable − 133,228 87,500 136,573 − − 357,301
Long-term debts − 924,581 1,140,510 3,030,619 37,322,968 29,329,707 71,748,385
Total P=150,860 P=6,506,677 P=1,471,227 P=3,248,284 P=37,322,968 P=29,329,707 P=78,029,723
September 30, 2011 (Unaudited)
On
Demand Less than 3 Months
3 to 6 Months
>6 to 12 Months
>1 to 5 Years
More than 5 Years Total
(In Thousand Pesos)
Liabilities at amortized cost:
Accounts payable P=− P=3,223,751 P=− P=− P=− P=− P=3,223,751
Accrued interest and
guarantee fees 284,125 654,688 335,736 − − − 1,274,549
Other payables − 2,197 − − − − 2,197 Due to related parties 148,160 − − − − − 148,160
Royalty fee payable − 135,763 87,500 175,000 49,073 − 447,336
Long-term debts − 647,297 1,283,298 2,943,498 33,683,074 34,224,446 72,781,613 Financial Liabilities at FVPL:
Derivative liabilities − 74,504 − − − − 74,504
Total P=432,285 P=4,738,200 P=1,706,534 P=3,118,498 P=33,732,147 P=34,224,446 P=77,952,110
Financial Assets and Financial Liabilities
Set out below is a comparison of carrying amounts and fair values of the Company’s financial
instruments as of September 30, 2012 and 2011 and December 31, 2011.
September 30, 2012 (Unaudited) September 30, 2011 (Unaudited)
Carrying
Amount Fair Value
Carrying
Amount Fair Value
Financial Assets
Loans and receivables:
Cash and cash equivalents P=11,371,320,502 P=11,371,320,502 P=12,699,182,531 P=12,699,182,531
Trade receivables 4,857,968,219 4,857,968,219 2,808,828,588 2,808,828,588
Loans and notes receivables 72,127,246 72,127,246 28,826,614 28,826,614
Non-trade receivables 42,219,155 42,219,155 59,552,998 59,552,998
Advances to employees 67,875,434 67,875,434 40,864,256 40,864,256
Employee receivables 15,640,344 15,640,344 23,622,385 23,622,385
Long-term receivables 16,964,228 16,964,228 1,000,000 974,104
Due from related parties − − 603,648 603,648
AFS investments:
Debt investments 622,106,663 622,106,663 675,255,400 675,255,400
Equity investments 131,727,394 131,727,394 20,816,362 20,816,362
Financial assets at FVPL:
Derivative assets − − 158,419,378 158,419,378
P=17,197,949,185 P=17,197,949,185 P=16,516,972,160 P=16,516,946,264
- 36 -
September 30, 2012 (Unaudited) September 30, 2011 (Unaudited)
Carrying
Amount Fair Value
Carrying
Amount Fair Value
Financial Liabilities
Financial liabilities at amortized cost:
Accounts payable P=6,076,124,985 P=6,076,124,985 P=3,223,751,223 P=3,223,751,223
Accrued interest and guarantee fees 1,180,882,817 1,180,882,817 1,274,550,117 1,274,550,117
Other payables 7,256,926 7,256,926 2,196,586 2,196,586
Due to related parties 42,890,638 42,890,638 46,388,222 46,388,222
Royalty fee payable 65,078,884 65,078,884 363,833,156 369,225,129
Long-term debts 49,682,898,069 56,096,314,045 51,751,025,179 53,684,576,142
Financial Liabilities at FVPL:
Derivative Liabilities 129,091,076 129,091,076 74,503,957 74,503,957
P=57,184,223,395 P=63,597,639,371 P=56,736,248,440 P=58,675,191,376
December 31, 2011 (Audited)
Carrying
Amounts Fair Values
Financial Assets
Loans and receivables:
Cash and cash equivalents P=12,493,406,963 P=12,493,406,963
Trade receivables 3,205,594,212 3,205,594,212
Non-trade receivables 99,398,810 99,398,810
Loans and notes receivables 59,331,933 59,331,933
Advances to employees 37,934,595 37,934,595
Employee receivables 19,948,544 19,948,544
Due from related parties 7,812 7,812
Long-term receivables − −
AFS investments:
Debt investments 673,853,680 673,853,680
Equity investments 20,443,924 20,443,924
P=16,609,920,473 P=16,609,920,473
Financial Liabilities
Financial liabilities at amortized cost:
Accounts payable P=4,731,729,893 P=4,731,729,893
Accrued interest and guarantee fees 1,047,605,943 1,047,605,943
Other payables 84,610,045 84,610,045
Due to related parties 60,090,825 60,090,825
Royalty fee payable 287,626,313 290,907,188
Long-term debts 51,489,571,455 59,055,715,275
P=57,701,234,474 P=65,270,659,169
The methods and assumptions used by the Company in estimating the fair value of financial
instruments are as follows:
Cash and Cash Equivalents. Carrying amounts approximate fair values due to its short-term
nature.
Trade and Other Receivables, Due to Related Parties, and Trade and Other Payables. These are
instruments with relatively short maturity ranging from one to three months, and thus, the carrying
amounts approximate fair values.
Long-term Receivables. The fair value of long-term receivables was computed by discounting the
expected cash flow.
AFS Investments. 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
- 37 -
allowance for impairment losses due to the unpredictable nature of future cash flows and the lack
of suitable methods of arriving at a reliable fair value.
Derivative Assets and Derivative Liabilities. The fair values of the non-deliverable cross currency
swaps as of September 30, 2012 are based on quote provided by the counterparty bank while the
fair values of non-deliverable forwards outstanding as of September 30, 2011 are calculated by
reference to the prevailing forward rates.
Long-term Debts and Royalty Fee Payable. The fair values for EDC’s long-term debts are
estimated using the discounted cash flow methodology with the applicable rates ranging from
1.75% to 9.33%, 1.91% to 10.88%, and 2.11% to 11.72% on September 30, 2012, December 31,
2011 and September 30, 2011, respectively.
Fair values of royalty fee payable are determined using discount rates ranging from 5.32% to
6.43% and from 5.02% to 5.68%, as of December 31, 2011 and September 30, 2011, respectively.
The following tables show the fair value information of financial assets at FVPL and AFS
investments 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).
September 30,
2012
(Unaudited) Level 1 Level 2 Level 3
AFS investments:
Debt investments P=622,106,663 P=622,106,663 P=− P=−
Equity investments 131,652,844 131,652,844
December 31, 2011
(Audited) Level 1 Level 2 Level 3
AFS investments:
Debt investments P=673,853,680 P=673,853,680 P=− P=− Equity investments 20,369,374 20,369,374 − −
September 30,
2011
(Unaudited) Level 1 Level 2 Level 3
Financial assets at FVPL-
Derivative assets P=158,419,378 P=− P=158,419,378 P=−
AFS investments:
Debt investments 675,255,400 675,255,400 − − Equity investments 20,741,812 20,741,812 − −
For the nine-month periods ended September 30, 2012 and 2011, and for the year ended
December 31, 2011, 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.
The Company classifies its financial instruments in the following categories.
- 38 -
September 30, 2012 (Unaudited)
Loans and
Receivables
AFS
Investments
Liabilities at
Amortized
Cost
Derivatives
designated as
cash flow
hedges Total
(In Thousand Pesos)
Financial Assets
Cash and cash equivalents P=11,371,321 P=− P=− P=− P=11,371,321
Trade receivables 4,857,968 − − − 4,857,968
Loans and notes receivables 72,127 − − − 72,127
Non-trade receivables 42,219 − − − 42,219
Advances to employees 67,875 − − − 67,875
Employee receivables 15,640 − − − 15,640
Other Long-term Receivables - net 16,960 − − − 16,960
AFS - debt investments − 616,724 − − 616,724
AFS - equity investments − 137,110 − − 137,110
Financial Liabilities
Accounts payable − − 6,076,125 − 6,076,125
Accrued interest and guarantee fees − − 1,180,883 − 1,180,883
Other payables − − 7,257 − 7,257
Due to related parties − − 42,891 − 42,891
Royalty fee payable − − 65,079 − 65,079
Long-term debt − − 49,682,898 − 49,682,898
Derivative liabilities − − − 129,091 129,091
Total P=16,444,110 P=753,834 P=57,055,133 P=129,091 P=74,382,168
December 31, 2011 (Audited)
Loans and
Receivables
AFS
Investments
Liabilities at
Amortized
Cost Total
(In Thousand Pesos)
Financial Assets
Cash and cash equivalents P=12,493,407 P=− P=− P=12,493,407
Trade receivables 3,205,594 − − 3,205,594
Non-trade receivables 99,399 − − 99,399
Loans and notes receivables 59,332 − − 59,332
Advances to employees 37,935 − − 37,935
Employee receivables 19,949 − − 19,949
Due from related parties 8 − − 8
AFS - debt investments − 673,854 − 673,854
AFS - equity investments − 20,444 − 20,444
Financial Liabilities
Accounts payable − − 4,731,730 4,731,730
Accrued interest and guarantee fees − − 1,047,606 1,047,606
Other payables − − 84,610 84,610
Due to related parties − − 60,091 60,091
Royalty fee payable − − 287,626 287,626
Long-term debts − − 51,489,571 51,489,571
Total P=15,915,624 P=694,298 P=57,701,234 P=74,311,156
- 39 -
September 30, 2011 (Unaudited)
Loans and
Receivables
AFS
Investments
Financial
Assets at
FVPL
Liabilities at
Amortized
Cost
Financial
Liabilities at
FVPL Total
(In Thousand Pesos)
Financial Assets
Cash and cash equivalents P=12,699,183 P=– P=– P=– P=– P=12,699,183
Trade receivables 2,808,829 − − − − 2,808,829
Loans and notes receivables 59,553 − − − − 59,553
Non-trade receivables 28,827 − − − − 28,827
Advances to employees 40,864 − − − − 40,864
Employee receivables 23,622 − − − − 23,622
Other long-term receivables 1,000 − − − − 1,000
Due from related parties 604 − − − − 604
AFS - debt investments − 675,255 − − − 675,255
AFS - equity investments − 20,816 − − − 20,816
Derivative assets − − 158,419 − − 158,419
Financial Liabilities
Accounts payable − − − 3,223,751 − 3,223,751
Accrued interest and
guarantee fees − − − 1,274,550 − 1,274,550
Other payables − − − 2,197 − 2,197
Due to related parties − − − 46,388 − 46,388
Royalty fee payable − − − 363,833 − 363,833
Long-term debts − − − 51,751,025 − 51,751,025
Derivative liabilities − − − − 74,504 74,504
Total P=15,662,482 P=696,071 P=158,419 P=56,661,744 P=74,504 P=73,253,220
The table below demonstrates the income, expense, gains or losses of the Company’s financial
instruments for the nine-month periods ended September 30, 2012 and 2011.
September 30, 2012 (Unaudited) September 30, 2011 (Unaudited)
` Increase
(Decrease)
Increase
(Decrease)
Increase
(Decrease)
Increase
(Decrease)
Effect on
Profit or Loss
Effect
on Equity
Effect on
Profit or Loss
Effect
on Equity
Loans and receivables:
Interest income on cash equivalents P=223,506,839 P=– P=266,121,000 P=–
Interest on employees receivable 2,570,625 – 9,530,360 – Interest income on cash in bank 3,016,569 – 3,951,487 – Interest income on trade receivables 1,805,851 – – – Equity investments -
Net gain (loss) recognized in
equity – 7,958,969 – 2,650,008
Debt investments: – – Net gain (loss) recognized in
equity – 2,635,099 – (31,466,667)
Interest income on ROP Bonds 42,828,178 – 822,746 – Financial assets at FVPL:
Fair value changes on derivative
forward contract 1,893,130 – 107,507,535 – Financial liabilities at amortized cost:
Interest expense on long-term loans (2,831,465,221) – (3,173,685,505) – Interest expense on loan payable – – (1,140,522) – Interest expense on royalty payable (10,190,075) – (25,361,786) –
(P=2,566,034,104) P=10,594,068 (P=2,812,254,685) (P=28,816,659)
- 40 -
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.
The Company manages and makes adjustment to its capital structure as it deems necessary. To
maintain or adjust its capital structure, the Company may increase the levels of capital
contributions from its creditors and owners/shareholders through debt and new shares issuance,
respectively.
The Company monitors capital using the debt ratio, which is long-term liabilities divided by the
sum of long-term liabilities and equity. The Company’s policy is to keep the debt ratio not more
than 70:30. The Company’s long-term liabilities include both the current and long-term portions
of long-term debts. Equity includes all items presented in the equity section of the consolidated
statement of financial position.
The table below shows the Company’s debt ratio as at September 30, 2012 and 2011 and
December 31, 2011.
September 30, 2012
(Unaudited)
December 31, 2011
(Audited)
September 30, 2011
(Unaudited)
Long-term liabilities P=49,682,898,069 P=51,489,571,455 P=51,751,025,179
Equity 34,156,225,970 29,646,601,493 28,535,221,220
Debt ratio 59.3% 63.5% 64.5%
Derivative Financial Instruments
The Company engages in derivative transactions, particularly foreign currency forwards, foreign
currency swaps and cross-currency swaps, to manage its foreign currency risk and/or interest rate
risk arising from its foreign-currency denominated loans and to take advantage of market
opportunities. These derivatives are accounted for either as derivatives designated as accounting
hedges or derivatives not designated as accounting hedges.
The table below shows the derivative financial instruments of the Company for the nine-month
periods ended September 30, 2012 and 2011.
September 30, 2012
(Unaudited)
September 30, 2011
(Unaudited)
Derivative
Assets
Derivative
Liabilities
Derivative
Assets
Derivative
Liabilities
Derivatives designated as
accounting hedges
Cross-currency swaps P=– P=129,091,076 P=– P=–
Derivatives not designated as
accounting hedges
Foreign currency forwards – – 158,419,378 74,503,957
Total derivatives P=– P=129,091,076 P=158,419,378 P=74,503,957
Presented as:
Current P=– P=65,720,038 P=158,419,378 P=74,503,957
Noncurrent – 63,371,038 – –
Total derivatives P=– P=129,091,076 P=158,419,378 P=74,503,957
Derivatives Not Designated as Accounting Hedges
- 41 -
Foreign Currency Forward Contracts. These are contractual agreements to buy or sell a foreign
currency at an agreed rate on a future date. These are customized contracts transacted with a bank
or financial institution.
As of December 31, 2011 and September 30, 2011, the Company has entered into a total of 38
foreign currency forward contracts. These include 6 deliverable buy JP¥ - sell US$, 16 non-
deliverable buy US$ - sell PHP= and 16 non-deliverable sell US$ - buy PHP= forward contracts.
The aggregate notional amounts and weighted average forward rates of these foreign currency
forward contracts are as follows:
December 31, 2011 September 30, 2011
Position
Aggregate
notional amount
Average
forward rate
Aggregate
notional amount
Average
forward rate
Buy JP¥ - sell US$ JP¥2,441.00 million JP¥83.00 JP¥2,441.00 million JP¥83.00
Buy US$ - sell PHP= US$255.00 million P=43.12 US$255.00 million P=43.12
Sell US$ - buy PHP= US$255.00 million P=43.34 US$255.00 million P=43.34
In relation to the non-deliverable forward contracts, the Company entered into sell US$ - buy PHP=
transactions with onshore banks and simultaneously entered into buy US$ - sell PHP= transactions
with offshore banks as offsetting positions to lock-in gains at inception.
For the year ended December 31, 2011 and for the nine-month period ended September 30, 2011,
the Company recognized P=68.25 million gain and P=107.2 million gain, respectively, from fair
value changes of these currency forwards contracts. Such amounts are recorded under “Derivative
gains - net” in the interim consolidated statements of income.
Foreign Currency Swap Contracts. These are contractual agreements between two parties that
involve selling of one currency to another currency at trade date with a simultaneous agreement to
repurchase the sold currency at a future date against the payment of the currency bought at trade
date.
As of December 31, 2011 and September 30, 2011, the Company has entered into a total of 36
foreign currency swap contracts. The position of these foreign currency swap contracts at trade
date include sell JP¥ - buy PHP=, sell JP¥ - buy US$ and sell US$ - buy PHP=.
The aggregate notional amount and weighted average forward rate of foreign currency swap
contracts are as follows:
December 31, 2011 September 30, 2011
Position
Aggregate
notional amount
Average
forward rate
Aggregate notional
amount
Average
forward rate
Sell JP¥ - buy PHP= JP¥12,450.00 million P=0.53 JP¥12,450.00 million P=0.53
Sell JP¥ - buy US$ JP¥2,075.00 million JP¥81.00 JP¥2,075.0 million JP¥81.00
Sell US$ - buy PHP= US$701.00 million P=43.32 US$701.00 million P=43.32
For the year ended December 31, 2011 and for the nine-month period ended September 30, 2011,
the Company recognized P=40.07 million gain and P=44.3 million gain from the fair value changes
of these currency swap contracts. Such amount is recorded under “Derivative gains (losses) - net”
in the consolidated statements of income.
- 42 -
Derivatives Designated as Accounting Hedges
In 2012, the Company entered into five non-deliverable cross-currency swap (NDCCS)
agreements with an aggregate notional amount of US$55.00 million to partially hedge the foreign
currency and interest rate risks on its floating rate Club Loan that is benchmarked against US
LIBOR and with flexible interest reset feature that allows the Company to select what interest
reset frequency to apply (i.e. monthly, quarterly, or semi-annually). As it is the Company’s
intention to reprice the interest rate on the hedged loan quarterly, the Company utilizes NDCCS
with quarterly interest payments and receipts. Under the four NDCCS, the Company receives
floating US$ interest based on 3-month US LIBOR plus 175 basis points and pays fixed peso
interest. On specified dates, the Company also receives specified US$ amounts in exchange for
specified peso amounts based on the agreed swap rates. These US$ receipts correspond with the
expected interest and fixed principal amounts due on the hedged loan. Effectively, the NDCCS
converted 25.71% of hedged loan into a fixed rate peso Loan. Other details of the NDCCS are as
follows:
Notional amount
(in million)
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 US$10.00 04/18/12 06/27/12 06/17/17 P42.60 4.92% 3-month LIBOR + 175 bps US$10.00 05/03/12 06/27/12 06/17/17 P42.10 4.76% 3-month LIBOR + 175 bps US$10.00 06/15/12 06/27/12 06/17/17 P42.10 4.73% 3-month LIBOR + 175 bps US$10.00 07/17/12 09/27/12 06/17/17 P41.25 4.58% 3-month LIBOR + 175 bps
The maturity date of the five NDCCS coincides with the maturity date of the hedged loan.
As of September 30, 2012, the outstanding aggregate notional amount of the Company’s NDCCS
amounted to US$55.00 million. The aggregate fair value changes on these NDCCS amounting to
P=129.09 million loss was recognized by the Company under “Cumulative Translation
Adjustment” account.
Hedge Effectiveness Results
Since the critical terms of the hedged loan and the NDCCS match, except for one to two days
timing difference on the interest reset date, the hedges were assessed to be highly effective. As
such, there was no ineffectiveness recognized immediately in the interim consolidated statement
of income for the nine-month period September 30, 2012.
The rollforward analysis of the “cumulative translation adjustment” account of the Company
pertaining to the cash flow hedges is as follows:
September 30, 2012
(Unaudited)
Beginning balance P=–
Changes in fair value of the cash flow hedges 146,935,178
Transferred to consolidated statement of income (40,450,000)
Settlement (17,884,101)
Ending balance P=88,641,076
Of the amounts transferred to the interim consolidated statement of comprehensive income,
P=40.45 million is included in “Forex exchange gains (losses) - net”.
- 43 -
Fair Value Changes of Derivatives
The tables below summarize the net movement in fair values of the Company’s derivatives as of
December 31, 2011 and September 30, 2011.
Derivatives not designated as accounting hedges
December 31, 2011 September 30, 2011
Derivative
Assets
Derivative
Liabilities Derivative
Assets
Derivative
Liabilities
Balance at beginning of year P=– P=– P=– P=–
Net changes in fair value 381,813,015 (273,493,638) 395,098,781 (287,591,246)
Settlement (381,813,015) 273,493,638 (236,679,403) 213,087,289
Balance at end of period P=– P=– P=158,419,378 (P=74,503,957)
There are no derivatives not designated as accounting hedges as of September 30, 2012. The net
changes in fair value of the Company’s derivatives not designated as accounting hedges for the
year ended December 31, 2011 and for the nine-month period ended September 30, 2011,
amounting to P=108.32 million gain and P=107.5 million gain, respectively, were taken to the
“Derivatives gain (loss)” account in the interim consolidated statements of income.
Derivatives designated as accounting hedges
Derivative Liabilities
September 30,
2012
Balance at beginning of year P=–
Net changes in fair value 146,935,178
Settlement (17,844,101)
Balance at end of year P=129,091,076
The effective portion of the changes in the fair value of the NDCCS designated as accounting
hedges were deferred in equity under “Cumulative Translation Adjustment” account.
25. Event After the Financial Reporting Period
On October 15, 2012, EDC signed an agreement with Canada-based Alterra Power Corp. (Alterra)
for EDC to conduct exploration field works and due diligence at Alterra’s geothermal concession
in Chile as well as at five of Alterra’s geothermal authorizations in Peru.
26. Restatements
Voluntary Change in Accounting Policy
Prior to 2011, the Company accounted for rig consumables as direct expense upon purchase since
these are primarily intended for immediate use. Over the years, the Company has accumulated a
large stock of unused rig consumables. As a result, starting January 1, 2011, the Company
adopted the policy of recognizing rig consumables as inventories.
PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, requires retrospective
application for a change in accounting policy, except when it is impracticable to determine period-
specific effects. If retrospective application is impracticable, the entity shall apply the new
accounting policy at the beginning of the earliest period for which retrospective application is
- 44 -
practicable. Because prior to January 1, 2011, the Company does not monitor the unused portion
of rig consumable, management determined that it is impracticable to establish the balance of rig
consumables in prior years. Accordingly, the effect of the voluntary change in accounting policy
was presented as an adjustment to the opening balance of 2011 retained earnings.
As at January 1, 2011, the voluntary change in accounting policy resulted to an increase in parts
and supplies inventories, retained earnings and deferred tax liability amounting to P=172.3 million,
P=155.1 million and P=17.2 million, respectively.
27. Other Matters
Seasonality or Cyclicality of Interim Operations
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.
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, 2011, except for the following estimates that follows:
Impairment of Intangible Asset not yet available for Use
On July 27, 2012, the Energy Regulatory Commission approved the initial Feed-in Tariff (FIT)
rates that shall apply to generation of electricity from renewable energy sources. Particularly, for
wind energy, the approved FIT rate amounted Php8.53 per kwh. Accordingly, the Company used
the new FIT rate in the impairment assessment of the Company’s wind energy project
development costs. Based on the Company’s impairment assessment, the Company’s wind energy
project development remained to be recoverable. As of September 30, 2012, no impairment loss
has been recognized for this asset.
Provision for rehabilitation and restoration costs
Provision for rehabilitation and restoration costs is based on technical estimates of probable costs,
which may be incurred by the Company in the rehabilitation and restoration of the Company’s
steam fields and power plants’ contract areas from 2031 up to 2044. As of December 31, 2011, the
estimated rehabilitation and restoration costs are discounted using the Company’s risk-adjusted
rate. For the nine-month period ending September 30, 2012, the Company computed for the
provision for rehabilitation and restoration costs using the risk-adjusted cash flows and discount
rates equal to the risk-free rate. As of September 30, 2012 and December 31, 2011, the provision
for rehabilitation and restoration costs amounted to P=489.69 million and P=406.78 million,
respectively.
Changes in the Composition of the Company During the Interim Period
On February 2, 2012, EDC entered into JVA with HRL to co-develop four geothermal exploration
projects: the Calerias and Longavi projects in Chile, and the Quellaapacheta and Chocopata
projects in Peru. EDC and HRL successfully concluded negotiations after discussions began with
the signing of the Heads of Terms Agreement last November 28, 2011.
- 45 -
On May 2, 2012, EDC executed SHA with HRL to establish project companies for each of the Calerias and Longavi geothermal concessions in Chile, as well as the Chocopata and
Quellaapacheta geothermal authorizations in Peru, allowing the joint venture to commence
exploration activities at each of the foregoing sites. Pursuant to the terms of the SHA, EDC will
hold 70% of the outstanding capital stock of each of the project companies, with HRL taking the
remaining 30%.
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.
Unusual items
There are no assets, liabilities, equity, net income or cash flows that are unusual because of their
nature, size or incidence during the current period.
Recommended