EDC Q1 earnings dropped 54% to P1.5B

By Lenie Lectura – May 8, 2018
from Business Mirror

THE Energy Development Corp. (EDC) vowed to increase the efficiency and reliability of its assets after the company reported a 54-percent drop in first-quarter earnings on Tuesday.

Net income for the first three months of 2018 was down 54 percent to P1.5 billion, from P3.26 billion in the same period last year. The movement was mainly driven by a 15-percent decrease in revenue, from P9.61 billion in the first quarter last year to P8.18 billion at end-March this year.

Recurring net income attributable to equity holders (RNIA) of the parent for the period stood at P1.81billion, down 44 percent from the P3.25 billion posted the previous year, still on account of lower revenues and higher cash-operational expenses.

“Our results for the first quarter was dominated by the impact of Typhoon Urduja that hit Leyte island, site of our biggest business unit, last December,” EDC CFO Nestor Vasay said.

“Generation volume was lower by about 40 percent in Leyte compared to the first quarter of 2017, and we continued to incur recovery expenses.

However, we are now at 90 percent of the return-to-service activities in Leyte, and is targeting to complete our program by the third quarter,” Vasay added.

Tropical Depression Urduja damaged EDC’s power-plant pipelines in Leyte in December 2017.  At that time, the Leyte plants produced only 246 megawatts (MW), compared to 462 MW before the incident. EDC President Richard Tantoco acknowledged the events that hit Leyte continued to affect the company’s first-quarter numbers. He vowed the company would continue to invest in the reliability and performance of EDC power plants.

He said that as of May 4, Leyte was back at 512 MW. He also expected EDC revenues and RNIA to pick up.

“Though our financial predictability initiatives took a step back due to the two natural calamities that hit us last year, our stable financial footing allowed us to continue making the necessary investments on plant resiliency, operational reliability and efficiency,” he said.

“We are confident that our activities fleet-wide to increase our operational efficiency and to mitigate our key risks—particularly in contracting our capacity—will help us offset some of the foregone revenues from the impact of last year’s earthquake and Typhoon Urduja,” Vasay added.

In Leyte the completion of the rehabilitation of EDC’s Tongonan power plant last October boosted the plant’s generation capacity by 10 percent, raising output from 112 to 123 MW. The full suite of plant-control systems at Tongonan was also updated to the latest modern and digital specifications.

In Mount Apo the generator stator of the Mindanao 1 power plant was replaced with a brand-new unit, and a new power transformer will be installed in Mindanao 2 power plant this September.

Tantoco said the company is aware of the risks its faces due to natural hazards, and have taken quick and deliberate steps to address these.

Prior to Typhoon Urduja, EDC’s Leyte geothermal business unit had mitigated 17 landslide areas in 2017 alone at a total spend of P144 million.

Prior to that, in the 12-year period from 2006 to end-2017, EDC mitigated 154 areas in Leyte at a total cost of P954 million.

At present, a geohazard map has been updated using the latest, finest LiDAR data (Light Detection and Ranging) to further identify areas that pose a threat to EDC assets and a risk to revenue generation. From this map, 26 potential risk areas have been selected and are now programmed for mitigation works in 2018 and 2019.

“In 2018 alone, we are investing close to P400 million for geohazard-risk mitigation in 17 areas,” Tantoco said, adding that these events led to over P1.4 billion in recovery expenses, and over P3 billion in foregone revenue in 2017.

Twelve units of seismic monitoring stations are also being deployed across EDC fleet this month.

“These initiatives, borne out of lessons learned from the earthquake, as well as Typhoon Urduja, will increase the resiliency of our geothermal assets,” he added.

EDC is earmarking P6.1 billion in capital expenditure this year.

EDC Vice President for Finance Erwin Avante said the company may likely post flat earnings this year.