MANILA, Phils. -- AboitizPower (PSE ticker symbol: AP) closed 2011 with a consolidated net income of P21.6 billion (bn), down by 14% year-on-year (YoY). This translated to an earnings per share of P2.94.
The revaluation of consolidated dollar-denominated loans and placements resulted to a non-recurring loss of P160 million (mn). In addition, AboitizPower booked a P663-mn one-off gain during the year because of the following: 1) a wholly owned subsidiary booked revenue adjustments in the first quarter of 2011 resulting from a favorable ruling by the industry regulator regarding its tariff structure for its ancillary services contract; 2) an associate company recovered costs relating to its fuel importation in the second and fourth quarters; 3) a subsidiary reversed a 2010 accrued expense relating to its Independent Power Producer Administrator (IPPA) contract in the third quarter of 2011; and 4), the company incurred fees relating to the prepayment of an outstanding loan in the fourth quarter. Adjusting for these one-offs, AboitizPower’s core net income for 2011 amounted to P21.1 bn, down by 14% YoY.
AboitizPower recorded a consolidated net income of P5.4 bn for the quarter ending December 31, 2011, down by 17% versus the same period in 2010. Movements in the peso-dollar exchange rate resulted to a P124-mn non-recurring loss due to the revaluation of consolidated dollar-denominated loans and placements. A P93-mn one-off loss was also incurred when AboitizPower prepaid one of its outstanding fixed rate notes in December 2011. This was partially offset by a non-recurring gain of P35 mn booked by an associate company, as it received cost reimbursements from the National Power Corporation (NPC) relating to its fuel importation. All these brought AboitizPower’s core net income for the fourth quarter of 2011 to P5.6 bn, lower by 14% YoY.
On a full-year basis, the generation business accounted for 89% of earnings contributions from AboitizPower’s business segments, recording an income share of P20.4 bn for the year, down by 16% YoY. Netting out one-off items, the company’s generation business shored in P19.8 bn, 16% lower than the previous year due to the lower average selling price and lower recorded net generation.
"Aside from organic growth coming from increased contracts, we will continue to expand our generating capacity through brownfield and greenfield projects. We expect to add approximately 700 MW of additional attributable capacity between 2012 – 2015,” said AboitizPower President & CEO Erramon Aboitiz.
AbotizPower’s generation business logged a 7% YoY decline in average selling prices, given the softening of spot market prices vis-à-vis 2010 levels. Both demand and supply conditions that prevailed during the year were responsible for the recorded 41% YoY drop in the average price of electricity in the Wholesale Electricity Spot Market (WESM) in Luzon. Demand for electricity remained relatively flat compared to 2010.
Meanwhile, the supply condition in 2011 improved given the marked reduction in average outage levels for the Luzon-based power plants. The adverse impact on earnings, however, was tempered by AboitizPower’s strategic move to lower its exposure to the spot market, as it continued to sign additional bilateral contracts. The company’s net generation for 2011 registered a 3% YoY decline from 9,762 gigawatt-hours (GWh) to 9,422 GWh. The drop in the company’s energy sales was mainly caused by reduced spot market transactions brought on by low prices that prevailed in the WESM.
In 2011, the ancillary services provided by AboitizPower’s merchant hydro assets grew significantly over the previous year. With water levels elevated, the capability of both Magat and Binga to offer ancillary services was substantially enhanced. The period saw a higher level of accepted capacities by the National Grid Corporation of the Philippines. The combined income contribution of these assets in 2011 recorded an 81% YoY expansion.
As of yearend 2011, AboitizPower’s attributable capacity was at 2,350 megawatts (MW), up by 15% YoY. The expansion was due to the following: 1) the assumption of full ownership of and control over the 70-MW Bakun hydro run-of-river plant in May; 2) the acquisition of the 242-MW Navotas power barges in May; 3) the full completion of the rehabilitation of the Ambuklao hydro facility in September; 4) the completion of the 4-MW Irisan hydro greenfield project also in September; and 5) the partial completion of the rehabilitation works at the Binga hydro facility.
For the three-month period in review, the AboitizPower’s generation business recorded a 17% YoY decline in its earnings contribution from P6.1 bn to P5.1 bn. When adjusted for one-off items, the group’s core net income amounted to P5.2 bn, 14% lower than in the same period in 2010. Attributable power sales was lower by 7% YoY, from 2,422 GWh to 2,247 GWh, mainly due to the YoY reduction in spot market transactions brought on by lower average prices at the WESM.
For the full year of 2011, AboitizPower’s distribution business registered a 25% YoY earnings expansion, from P1.9 bn to P2.4 bn. This was on the back of increased electricity sales and improved average gross margin. For the year ending December 31, 2011, total attributable electricity sales increased by 3% YoY, from 3,606 GWh to 3,727 GWh. The industrial segment again led the pack, recording a 6% YoY growth, while residential and commercial accounts posted marginal declines during the year.
The group’s average gross margin for 2011 improved by 15% YoY to P1.44/kWh, as a result of the implementation of the approved distribution tariffs (under the Performance Based Regulation) of some of AboitizPower’s distribution utilities and the reduction in operating expenses of Davao Light and Power Company. The Davao utility recorded a significant decline in operating expenses in 2011 as the operation of its back-up power plant was not required during the year.
“In spite of slower kwhr sales growth, our Distribution Group experienced favorable profit growth coming from improved margin and controlled operating costs. We are confident that electricity consumption will kick up in 2012 with the expected growth in the economy,” Aboitiz said.
For the quarter ending December 31, 2011, AboitizPower’s attributable electricity sales was at 964 GWh, a 4% increase from the previous year’s 929 GWh. The growth was primarily driven by higher electricity sales for the industrial segment, which recorded a 5% YoY expansion. Gross margin on a group-wide basis, however, declined by 3% YoY to P1.52/kWh. This can be mainly attributed to a timing difference that arose from refunds received by two of AboitizPower’s distribution utilities in the last quarter of 2010. Said refund was related to an over-recovery by NPC of incremental costs on foreign currency exchange rate fluctuations under the Incremental Currency Exchange Rate Adjustment. This resulted to the distribution group recording a decline of 5% YoY for the fourth quarter of 2011, from P692 mn to P654 mn.
As of December 31, 2011, AboitizPower’s total consolidated assets amounted to P154.2 bn, 15% higher than the yearend 2010 level of P134.6 bn. The company’s consolidated Cash and Cash Equivalents was at P23.4 bn, while total consolidated interest-bearing loans was at P73.2 bn. Equity Attributable to Equity Holders of the Parent increased by 20% to P68.9bn from yearend 2010. Current ratio as of end-December 2011 was at 3.4x (versus yearend 2010’s 2.6x), while net debt-to-equity ratio was at 0.7x (versus year-end 2010’s 0.8x).
“The strength of our power business lies in our diversified, complementary and competitive portfolio of generating assets. We have also been able to mitigate earnings volatility through our contracting strategy. We are confident that this, couple with our experienced management team, provides us with the ingredients necessary to thrive in a more challenging environment with the onset of more competition, open access, and the full implementation of WESM nationwide,” said Aboitiz.
AboitizPower is the holding company for the Aboitiz Group’s investments in power generation, distribution, retail and power services. It is a major producer of Cleanergy, its brand for clean and renewable energy in the Philippines with several hydroelectric and geothermal assets in its generation portfolio and also has non-renewable power plants located across the country. The company owns distribution utilities that operate in high-growth areas in Luzon, Visayas and Mindanao. (For more details, please visit: www.aboitizpower.com