38 th Floor, One Corporate Centre Julia Vargas corner Meralco Avenue Ortigas Center, Pasig 1605 Tel: +63 (2) 667-7332 / +63(2) 755-2332 May 14, 2012 MA. CONCEPCION M. MAGDARAOG Market Regulatory Services Group Philippine Dealing & Exchange Corp. 37/F, Tower 1, The Enterprise Center 6766 Ayala Ave. cor. Paseo de Roxas Makati City Dear Ms. Magdaraog: In compliance with the disclosure requirements of the PSE, we submit the attached Energy Development Corporation (Consolidated) Quarterly Report for the period ended March 31, 2012 (SEC Form 17-Q)
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38th
Floor, One Corporate Centre Julia Vargas corner Meralco Avenue Ortigas Center, Pasig 1605 Tel: +63 (2) 667-7332 / +63(2) 755-2332 Fax: +63 (2) 982-2141
May 14, 2012
MA. CONCEPCION M. MAGDARAOG
Market Regulatory Services Group
Philippine Dealing & Exchange Corp.
37/F, Tower 1, The Enterprise Center
6766 Ayala Ave. cor. Paseo de Roxas
Makati City
Dear Ms. Magdaraog:
In compliance with the disclosure requirements of the PSE, we submit the attached
Energy Development Corporation (Consolidated) Quarterly Report for the period ended
March 31, 2012 (SEC Form 17-Q)
SEC Form 17Q – 1Q 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)
March 31, 2012
(Quarter Ending)
SEC FORM 17-Q
(Form Type)
SEC Form 17Q – 1Q 2012
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our unaudited consolidated financial statements for the quarter ended March 31, 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 March 31, 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 – 1Q 2012 4
The following is a summary of the key sections of this MD&A:
OVERVIEW OF OUR BUSINESS ..............................................................................................5 Principal Products or Services ........................................................................................................ 5
Percentage of sales or revenues contributed by foreign sales ......................................................... 5
Distribution methods of products or services ................................................................................. 6
RESULTS OF OPERATIONS ...................................................................................................10
Net Income ....................................................................................................................................13 CAPITAL AND LIQUIDITY RESOURCES ............................................................................14 FINANCIAL POSITION ............................................................................................................15
Horizontal and Vertical Analysis of Material Changes as of March 31, 2012 and December
Horizontal and Vertical Analysis of Material Changes as of March 31, 2012 and 2011. ........ 19
CASH FLOW ...............................................................................................................................24 DISCUSSION ON THE SUBSIDIARIES .................................................................................25
FG Hydro .................................................................................................................................. 25 Green Core Geothermal Inc. ..................................................................................................... 26
Bac-Man Geothermal Inc. ......................................................................................................... 27
FOREIGN EXCHANGE AND INTEREST RATE EXPOSURE ...........................................28 OTHER MATTERS ....................................................................................................................28
MAJOR STOCKHOLDERS ......................................................................................................29 BOARD OF DIRECTORS ..........................................................................................................30
*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 – 1Q 2012 11
YTD March 31, 2012 vs. YTD March 31, 2011
Revenues
Total revenues for the period ended March 31, 2012 increased by 29.4% or P1,751.6 million to
P7,704.4 million from P5,952.8 million in 2011.
Sale of Electricity
Revenues from sale of electricity increased by 30.0% or P1,738.6 million to
P7,536.8 million in the first quarter of 2012 from P5,798.2 million during the same
period in 2011. The increase in revenue was primarily due to the following:
P738.9 million fresh contribution of BGI’s revenues coming from its PSAs with
BATELEC and Linde Philippines;
P642.5 million GCGI’s higher revenues from Tongonan I and Palinpinon power
plants as per agreed contracts that became effective in mid-2011; and
P596.9 million FG Hydro’s revenues from contingency and dispatchable reserves.
Revenue from Drilling Services
Revenue from drilling services increased by 8.4% or P13.0 million to P167.6 million in
the first quarter of 2012 from P154.6 million during the same period in 2011. The
favorable variance was attributed to higher dollar revenues in 2012 as there was 15 non-
revenue days reported in 2011 for the repair of Rig 11. Total dollar revenues as of
March 2012 was US$3.9 million against the US$3.5 million as of March 2011.
This was offset by lower average exchange rate by P0.952/US$1 (YTD March
2012=P42.832/US$1 vs. YTD March 2011=P43.784/US$1) due to the appreciation of the
peso against the US dollar.
Cost of Sales and Services
Cost of sales and services decreased by 1.2% or P34.3 million to P2,836.7 million in the first
quarter of 2012 from P2,871.0 million during the same period in 2011. Cost of drilling services
decreased by 11.9% or P12.9 million to P95.4 million in the first quarter of 2012 from
P108.3 million during the same period in 2011 mainly due to the repair of Rig 11 undertaken in
the first quarter of 2011. Total cost of sales of electricity and steam includes replacement power
cost amounting to P706.5 million.
Financial Income (Expenses)
Interest income decreased by 24.2% or P30.0 million to P93.9 million in the first quarter of 2012
from P123.9 million during the same period in 2011 due to lower monthly average investible
funds cushioned by higher weighted average interest rates on peso placements.
SEC Form 17Q – 1Q 2012 12
Other Income (Charges)
Other income–net increased by 54.7% or P140.4 million to P397.3 million in the first quarter of
2012 from P256.9 million during the same period in 2011.
Foreign Exchange Gains (Losses) - net
Net foreign exchange gains increased by P149.4 million, or 79.2%, to P338.0 million
from P188.6 million in 2011. The favorable variance was brought about by appreciation
of the peso against the US dollar.
The comparative foreign exchange rates against the USD were as follows:
JPY:US$ PHP:US$
December 31, 2010 81.659 43.840
March 31, 2011 82.871 43.390
December 31, 2011 77.912 43.840
March 31, 2012 82.420 42.920
Derivatives Gain (Loss) - Net
Derivative gain - net decreased by 100% from the P37.6 million balance in
March 31, 2011. The derivative gain pertained to various swap transactions for US dollar
and Japanese yen currencies entered into with various banks in February 2011, maturing
in March 2011 and April 2011.
Miscellaneous – Net
Miscellaneous income increased by 93.5% or P28.7 million to P59.4 million in the first
quarter of 2012 from P30.7 million during the same period in 2011. This was mainly
caused by P63.6 million reversal of NNGP power plant impairment.
Provision for Income Tax
Current tax expense increased by P19.5 million, or 11.6%, to P187.9 million from P168.4 million
during the same period in 2011. The unfavorable variance was on account of the following:
P31.0 million increase caused by taxable income in 2012 for the drilling operations in
Lihir, Papua, New Guinea versus taxable loss (NOLCO) in 2011; and
P43.7 million Fresh contribution of income taxes from BGI’s taxable income in 2012.
These were offset by P55.3 million lower taxable income on steam and electricity operations
mainly contributed by the absence of NNGP's revenues in 2012 coupled with higher finance cost
on new loans.
SEC Form 17Q – 1Q 2012 13
Net Income
As a result of the foregoing, the Company’s net income increased by 115.4% or P1,686.1 million
to P3,146.9 million in 2012 from P1,460.8 million in 2011.
Net income is equivalent to 40.8% of total revenues in 2012 as compared to the 24.5% in 2011.
Net income attributable to equity holders of the parent at P2,699.3 million for the first quarter of
2012, increased by 95.3% as compared to the P1,381.8 million during the same period in 2011.
SEC Form 17Q – 1Q 2012 14
CAPITAL AND LIQUIDITY RESOURCES
As of the quarter ended
(in millions of pesos)
Q1
2012
Q1
2011 YoY change
Balance Sheet Data
Total Assets …………………………… 92,151.1 95,326.7 3.3%
Total Liabilities………………………... 61,340.2 64,642.0 5.1%
Total Stockholder’s Equity …………… 30,810.9 30,684.7 0.4%
The Company’s assets as of March 31, 2012 amounted to P92,151.1 million, 3.3% higher as
compared to the P95,326.7 million level as of March 31, 2011.
SEC Form 17Q – 1Q 2012 15
FINANCIAL POSITION
Horizontal and Vertical Analysis of Material Changes as of March 31, 2012 and
December 31, 2011.
(Amounts In PHP millions) March 2012 Dec. 2011 Amount % 2012 2011
ASSETS
Current Assets
Cash and cash equivalents 13,123.4 12,493.4 630.0 5.0% 14.2% 13.9%
Trade and other receivables 3,604.8 3,411.3 193.5 5.7% 3.9% 3.8%
Total Equity 30,810.9 30,684.7 126.2 0.4% 33.5% 32.1%
TOTAL LIABILITIES AND EQUITY 92,151.1 95,326.8 (3,175.7) -3.3% 100.0% 100.0%
HORIZONTAL
ANALYSIS
VERTICAL
ANALYSIS
Increase
SEC Form 17Q – 1Q 2012 20
Assets
Cash and Cash Equivalents
This account decreased by 33.8% or P6,691.2 million to P13,123.4 million as of
March 31, 2012 from the P19,814.6 million balance as of March 31, 2011 primarily due to
the following:
P5,215.2 million pre payment of OECF 9th, 18th, 19th and 21st Yen and regular debt
servicing in 2011;
P798.9 million settlement of regular long-term debt servicing in 2012;
P3,007.5 million cash dividends paid by the parent company in 2011; and
P175.0 million payment of short-term borrowings.
These were offset by the P3,262.5 million proceeds from IFC 2.
Trade and Other Receivables
This account increased by 23.4% or P682.5 million to P3,604.8 million as of March 31, 2012
from the P2,922.3 million balance as of March 31, 2011. The increase is mainly due to the
BGI revenues coming from BATELEC and Linde and GCGI’s higher revenues.
Available-For-Sale (AFS) Investments
AFS Investments decreased by 5.9% or P40.5 million to P649.8 million as of March 31, 2012
from the P690.3 million balance as of March 31, 2011 due to foreign exchange losses
sustained in translating the placements to the continued appreciation of the Peso versus the
US Dollar exchange rate.
Parts and Supplies Inventories
This account increased by 19.4% or P527.7 million to P3,244.9 million balance as of
March 31, 2012 from the P2,717.2 million balance for the same period in 2011 due to the
increase , net of withdrawals, on various materials and supplies for drilling, maintenance and
rehabilitation activities in 2011.
Derivative assets
The derivative assets P11.8 million balance as of March 31, 2011 pertains to the fair value of
the outstanding foreign currency forward and foreign exchange swap contracts.
Other Current Assets
Other current assets increased by 14.9% or P126.8 million to P980.4 million as of
March 31, 2012 from the P853.6 million posted for the same period in 2011 is attributable to
the P248.7 million increase in prepaid expenses offset by P115.6 million decrease in
withholding taxes.
SEC Form 17Q – 1Q 2012 21
Deferred Tax Assets
This account increased by 34.8% or P343.7 million to P1,331.6 million as of March 31, 2012
from the balance of P987.9 million as of March 31, 2011 mainly due to the recognition of
deferred tax assets on the provision for full impairment of NNGP’s assets amounting to
P4,998.6 million and unrealized forex loss on dollar denominated loans in 2011.
Exploration and Evaluation Assets
This account increased by 25.3% or P304.0 million to P1,505.5 million as of March 31, 2012
from the balance of P1,201.5 million as of March 31, 2011 primarily due to the expenses of
Mindanao, Bacman Rangas/Kayabon, and Tanawon areas.
Other Noncurrent Assets
This account increased by 34.5% or P1,216.4 million, to P4,740.2 million as of
March 31, 2012 from the P3,523.8 million as of March 31, 2011 mainly due to the
P934.4 million increase in input VAT and P579.8 million increase long term receivables.
These were offset by the increase in allowance for doubtful accounts of P298.3 million.
Liabilities
Loan payable
This account decreased by 100.0%, or P90.0 million as of March 31, 2012 due to the
settlement of the loan.
Trade and other payables
This account increased by 5.8%, or P477.6 million, to P8,710.1 million as of March 31, 2012
from the balance of P8,232.5 million in the same period of 2011 mainly due to the
P654.7 million increase in accounts payable and offset by the P232.2 million decrease in
accrued interest and guarantee fee and other payables.
Income tax payable
Income tax payable decreased by 13.8% or P33.0 million to P206.7 million as of
March 31, 2012 from P239.7 million for the same period in 2011 mainly due to the
application of withholding tax certificates in the payment of income tax due for the 4th qtr of
2010 and 1st qtr. to 3rd qtr of 2011.
SEC Form 17Q – 1Q 2012 22
Due to related parties
This account decreased by 82.7% or P207.9 million to P43.5 million as of March 31, 2012
from the balance of P251.4 million as of March 31, 2011 primarily due to the settlement of
advances from First Gen of P235.0 million offset by increase in consultancy fee of
P28.6 million.
Derivative liabilities
The P3.6 million balance as of March 31, 2011 pertains to the fair value of the outstanding
foreign currency forward and foreign exchange swap contracts with various counterparties.
Long-term debts (current portion)
This account increased by 13.2% or P259.2 million to P2,229.2 million as of March 31, 2012
from the balance of P1,970.0 million as of March 31, 2011 mainly due to the P687.5 million
reclassification of the current portion of maturing IFC, FRCN and PNB debt obligation in
2012. These were offset by the P402.6 million settlement maturing debt obligation and
prepayment of current portion of OECF 9th, 18th, 19th and 21st Yen loan in 2011.
Royalty fee payable (current portion )
This account decreased by 21.7 % or P60.2 million to P217.3 million as of March 31, 2012
from the balance of P277.5 million as of March 31, 2011 mainly due to P80.3 million
payment to DOE and LGU’s offset by P20.1 million accretion on Day 1 gain recognized
from April 1, 2011 to March 31, 2012.
Long-term debt (net of current portion)
Long-term debts, consisting of JPY, US$ and PHP loans, decreased by 6.6% or
P3,422.1 million to P48,065.1 million as of March 31, 2012 from P51,487.2 million as of
March 31, 2011 due to the following:
Settlement of P4,260.6 million OECF 21st Yen loan and P128.0 million OECF 8th, 9th,
18th and 19th Yen loan,
P1,532.2 million and P496.8 million reclassification to current portion of obligation
due in 2012 of FRCN and IFC Loan, respectively.
These were offset by P3,262.5 million proceeds from of IFC loan 2.
Royalty fee payable (net of current portion )
This account decreased by 100.0% or P217.8 million as of March 31, 2012 primarily due to
the reclassification to current portion of outstanding royalty fees payable to 2012.
SEC Form 17Q – 1Q 2012 23
Net retirement and other post-retirement benefits
This account decreased by 11.9% or P154.1 million to P1,144.5 million as of March 31, 2012
from P1,298.6 million balance as of March 31, 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 26.1% or P150.0 million to P723.8 million as of March 31, 2012
from P573.8 million balance as of March 31, 2011 mainly due to the P64.4 million asset
retirement obligation recognized in 2011, P28.7 million accretion for the period and
P54.1 million accrual of sick leave and vacation leave for the period net of payment of the
10 days monetized vacation leave.
Net accumulated unrealized gain on AFS investments
This account decreased by 27.4% or P30.2 million to P80.1 million as of March 31, 2012
from P110.3 million as of March 31, 2011 mainly due to the decrease in fair value of the
investments for the period.
Retained Earnings
Retained Earnings decreased by 9.8% or P777.3 million to P7,121.5 million as of
March 31, 2012 from P7,898.8 million balance as of March 31, 2011 mainly due to the net
loss of P1,548.9 million posted from March 31, 2011 to December 31, 2011 and
P1,882.5 million payment of cash dividend for the year offset by P2,699.3 million net income
for the first quarter of 2012.
Non-controlling Interest
Non-controlling Interest increased by 56.3% or P928.6 million to P2,576.6 million as of
March 31, 2012 from P1,648.0 million balance as of March 31, 2011 mainly due to the net
income of P703.1 million posted from March 31, 2011 to December 31, 2011 and
P447.6 million net income for the first quarter of 2012. This was offset by P88.5 million
payment of cash dividend this year.
SEC Form 17Q – 1Q 2012 24
CASH FLOW
March 31, 2012 vs. March 31, 2011
Net cash flows from operating activities increased by 1.0% or P35.8 million to P3,593.6 million
in the first quarter of 2012 from P3,557.9 million during the same period in 2011 mainly due to
the P704.4 million improved cash generation from operations due to increased revenues and
P80.0 million decrease in retirement and other post-retirement benefits paid. These were offset
by the P715.1 million increase in interest and financing charges paid and P33.5 million increase
in withholding tax certificates.
Net cash flows used in investing activities decreased by 10.4% or P236.9 million to
P2,042.0 million in March 2012 as compared to the P2,278.9 million during the same period in
2011 primarily due to the decrease in acquisition of property, plant and equipment by
P689.2 million. This was offset by the P416.5 million increase in exploration and evaluation
assets.
The movement of P13,536.1 million, to P927.9 million on net cash flows used in financing
activities in March 2012 from the P12,608.2 million net cash flows from financing activities
during the same period in 2011 was mainly due to the P13,350 million proceeds from the
US$300M notes in 2011.
SEC Form 17Q – 1Q 2012 25
DISCUSSION ON THE SUBSIDIARIES
FG Hydro
(Amounts in PHP millions)
As of and for the periods ended
March 31
2012 2011
Operating revenues 1,411.1 517.2
Operating expenses 198.5 225.4
Other expenses – net 93.6 100.7
Income before tax 1,119.0 191.1
Provision for (benefit from) income tax - -
Net income 1,119.0 191.1
Total current assets 3,414.0 1,822.2
Total noncurrent assets 7,156.1 7,364.3
Total current liabilities 650.4 491.9
Total noncurrent liabilities 4,219.2 4,574.6
Total equity 5,700.5 4,120.0
FG Hydro generated revenues of P1,411.1 million for the period ended March 31, 2012, almost thrice the
revenues of P517.2 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 P596.9 million, and the temporary assumption of BGI’s Power
Supply Agreements (PSAs) with Batangas Electric Cooperative II (“BATELEC II”) 48MW and Linde
Philippines 6MW amounting to P288.7 million. There were no revenues from the said entities for the
same period in 2011.
The favorable variance in operating expenses is mainly on account of lower depreciation, operations and
maintenance expenses and taxes and licenses in 2012. Higher interest income from short-term deposits of
P16.8 million in 2012 versus P9.1 million in 2011 further contributed to the favorable variance. Overall,
FG Hydro posted a net income of P1,119.0 million for the period ended March 31, 2012, P927.9 million
or 485.6% higher than the P191.1 million reported income for the same period in 2011.
Total assets as of March 31, 2012 stood at P10,570.1 million, P1,383.6 million or 15.1% higher than the
2011 level of P9,186.5 million. The favorable variance was mainly due to higher cash and accounts
receivable trade balances in 2012. As compared with the same period in 2011, there were no electricity
sales for ancillary services yet.
As of March 31, 2012, total liabilities stood at P4,869.6 million, P196.9 million or 3.9% lower than the
2011 level of P5,066.5 million. The decrease in liabilities was mainly due to the continuous pay-out of the
scheduled semi-annual loan repayments.
Total equity as of March 31, 2012 of P5,700.5 million is P1,580.5 million or 38.4% higher compared to
the March 31, 2011 level of P4,120.0 million.
SEC Form 17Q – 1Q 2012 26
Green Core Geothermal Inc.
(Amounts in PHP millions)
As of and for the periods ended
March 31 2012 2011
Revenues 2,365.4 1,814.7 Operating expenses* (1,901.8) (2,072.5) Other income (charges) - net 23.9 (107.9) Income (loss) before income tax 487.5 (365.7) Benefit from (provision for) income tax –
deferred (48.6) 36.6
Net income (loss) 438.9 (329.1)
Total Current Assets 1,729.2 1,249.4 Total Non-Current Assets 9,963.7 9,727.0 Total Liabilities 2,442.0 7,593.6 Total Equity 9,250.9 3,382.8
*Includes Cost of Sale of Electricity and General and Administrative Expenses
GCGI’s revenues increased by 30.3% or P550.7 million, to P2,365.4 million for the three-month period
ended March 31, 2012 from P1,814.7 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.
Operating expenses decreased by 8.2% or P170.7 million, to P1,901.8 million in 2012 from
P2,072.5 million in 2011 due to lower cost of steam by an average of P0.19/kWh (P88.0 million). The
decrease is also due to lower operations & maintenance of P84.2 million and purchased services &
utilities of P28.8 million offset by higher general & administrative expenses of P29.8 million.
This period’s other income of P23.9 million consisted mainly of foreign exchange gains and the absence
in 2012 of interest expense.
Provision for income tax - deferred of P48.6 million in 2012 was a reversal of P36.6 million benefit from
income tax - deferred in 2011.
Total current assets increased by 38.4% or P479.8 million, to P1,729.2 million in 2012 from
P1,249.4 million in 2011 largely due to higher trade & other receivables of P301.1 million and other
current assets of P175.5 million.
Total noncurrent assets increased by 2.4% or P236.7 million, to P9,963.7 million in 2012 from
P9,727.0 million in 2011 due to higher property, plant and equipment of P190.8 million and other
noncurrent assets of P91.5 million reduced by lower deferred tax asset of P45.6 million.
Total liabilities decreased by 67.8% or P5,151.6 million, to P2,442.0 million in 2012 from
P7,593.6 million in 2011 while total equity increased by 173.5% or P5,868.1 million, to P9,250.9 million
in 2012 from P3,382.8 million in 2011 due mainly to the conversion of the P5,452.5 million advances
from EDC to equity coupled with the net income for the period April 1, 2011 to March 31, 2012
amoutning to P415.6 million.
SEC Form 17Q – 1Q 2012 27
Bac-Man Geothermal Inc.
(Amounts in PHP millions)
As of and for the periods ended
March 2012
March 2011
(Restated)
Revenues 738,935.3 –
Expenses (716,913.3) (2,135.8)
Other income 834.5 691.8
Operating income (loss) 22,856.5 (1,444.0)
Benefit from (provision for) income tax (36,208.1) 145.7
Net loss (13,351.6) (1,298.3)
Total Current Assets 484.9 134.4
Total Non-Current Assets 3,449.5 1,733.2
Total Current Liabilities 821.5 1,901.1
Total Equity 3,112.9 (33.5) *BGI was incorporated in the Philippines on April 7, 2010.
As of March 31, 2012, BGI has yet to start commercial operations.
Revenues earned result from electricity sales for the period pursuant to the signed PSAs with BATELEC
and Linde Philippines effective December 26, 2011.
The increase in expenses pertains primarily due to the cost of replacement power amounting to
P706.5 million.
The increase in current assets by 260.7% or P=350.5 million is due mainly to the increase in trade and
other receivables amounting to P=360.7 million partially offset by issuances of parts and supplies
inventories amounting to P=17.9 million.
Non-current asset increased by 99.0% or P=1,716.2 million resulting mainly from capitalized costs for the
on-going rehabilitation of the power plants of P=1,529.0 million. Testing and commissioning revenues
generated by Bac-man Unit 2 for the period was netted off in this account as required by PAS 16.
The decrease in liabilities and corresponding increase in equity results from the conversion of payables to
related parties into equity as capital infusion in December 2011.
SEC Form 17Q – 1Q 2012 28
Commitments that will have an impact on the issuer’s liquidity
As of March 31, 2012, the company has unserved purchase orders and awarded contracts for the
purchase of various capital goods in the total amount of P155.7 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=20,126.42 million in long-term US dollar denominated loans as of
March 31, 2012 which is 44.01% 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
regular cash dividend of P=0.10 per share on the common shares.
SEC Form 17Q – 1Q 2012 29
MAJOR STOCKHOLDERS
As of March 31, 2012, the total number of stockholders was 702 and price was P6.00 per share.
The public float level was at 52.79% (or 9,897,713,964 common shares).
Balances at December 31 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
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=311,715,443 P=407,945,199 P=53,970,233 P=8,926,887,751 P=57,676,929,006
12
March 31, 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
Balances at January 1 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=5,097,727,288 P=66,105,954,864
Balances at March 31, 2011 – 4,607,872,742 3,449,294,315 311,777,639 1,564,361,280 41,119,321 241,345,499 102,178,435 – – 10,317,949,231
Net Book Value P=374,045,836 P=32,454,192,011 P=14,250,589,140 P=1,503,206,498 P=2,285,765,372 P=37,490,903 P=250,772,620 P=394,047,237 P=56,039,530 P=6,554,715,481 P=58,160,864,628
13
Details of depreciation and amortization charges recognized in the statements of income are shown
below:
March 31,
2012
(Unaudited)
December 31,
2011
(Audited)
March 31,
2011
(Unaudited)
Property, plant and equipment P=873,451,201 P=3,345,683,340 P=881,986,778
Water rights 24,047,789 96,191,157 24,047,789
P=897,498,990 P=3,441,874,497 P=906,034,567
March 31,
2012
(Unaudited)
December 31,
2011
(Audited)
March 31,
2011
(Unaudited)
Costs of sales of electricity and steam (Note 15) P=815,022,773 P=3,173,306,732 P=846,143,688
Cost of drilling services (Note 16) 289,417 1,110,041 289,417
General and administrative (Note 17) 82,186,800 267,457,724 59,601,462
P=897,498,990 P=3,441,874,497 P=906,034,567
The asset retirement obligation pertains to the net present value of the estimated dismantling and
restoration costs of steam field facilities of the Parent Company at the end of the contract period. As
of March 31, 2012, the net book value of the asset retirement under the property, plant and equipment
amounted to P=307.71 million and the asset retirement obligations under noncurrent liabilities
amounted to P=414.20 million.
9. Goodwill and Intangible Assets
March 31, 2012 (Audited)
Goodwill Water Rights
Other
Intangible Asset Total
Cost
Balances at January 1 P=2,535,051,530 P=2,404,778,918 P=258,394,938 P=5,198,225,386
Additions – – 32,770,058 32,770,058
Balances at December 31 2,535,051,530 2,404,778,918 291,164,996 5,230,995,444
Accumulated Amortization
Balances at January 1 – 492,979,679 – 492,979,679
Amortization (Notes 12,
23, 24 and 25)
–
24,047,789
– 24,047,789
Balances at December 31 – 517,027,468 – 517,027,468
Net Book Value P=2,535,051,530 P= 1,887,751,450 P=291,164,996 P=4,713,967,976
December 31, 2011 (Audited)
Goodwill Water Rights
Other
Intangible Asset Total
Cost
Balances at January 1 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 2,535,051,530 2,404,778,918 258,394,938 5,198,225,387
14
Goodwill Water Rights
Other
Intangible Asset Total
Accumulated Amortization
Balances at January 1 – 396,788,522 – 396,788,522
Amortization (Notes 12, 23,
24 and 25)
–
96,191,157
–
96,191,157
Balances at December 31 – 492,979,679 – 492,979,679
Net Book Value P=2,535,051,530 P=1,911,799,239 P=258,394,938 P=4,705,245,708
March 31, 2011 (Unaudited)
Goodwill Water Rights Total
Cost
Balances at January 1, 2011 and March 31, 2011 2,535,051,530 2,404,778,918 4,939,830,448
Accumulated Amortization
Balances at January 1, 2011 – 396,788,522 396,788,522
Amortization (Note 8) – 24,047,789 24,047,789
Balances at March 31, 2011 – 420,836,311 420,836,311
Net Book Value P=2,535,051,530 P=1,983,942,607 P=4,518,994,137
Accrued interest on long - term debts 51,773,878 5,338,360 − 256,083,573 403,868,726 5,387,969 − 445,244,442
Derivative Liability − − − − 83,917 3,641,159
Total current financial liabilities 73,696,312 58,080,022 31,126 2,532,952,035 1,224,504,638 24,999,395 1,589,150 1,738,942,721
Noncurrent Financial
Liabilities
Liabilities at amortized cost:
Long-term debts - net of
current portion − 468,928,688
− 20,126,419,289 7,873,171,062 466,922,524
− 24,382,059,357
Total financial liabilities 73,696,312 527,008,710 31,126 22,659,371,324 9,097,675,700 491,921,919 1,589,150 26,121,002,078 1USD1=JPY82.420 as of March 31, 2012, EURO1=P=57.1943 and USD1= P=42.920 as of March 31, 2012 1USD1=JPY82.871 as of March 31, 2011, USD1=SEK5.27 and USD1= P=43.390 as of March 31, 2011
27
December 31, 2011
(Audited)
Original Currency
Yen US Dollar
Sweden
Kroner (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 investments:
Government debt securities − 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
Current portion of long-term debts 35,992,417 − − 20,252,433
Accrued interest on long - term debts 52,256,670 10,214,835 − 477,222,468
Total current financial liabilities 141,810,607 79,282,105 10,776,022 3,624,090,169
Noncurrent Financial Liabilities Liabilities 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
The following table demonstrates the sensitivity to a reasonably possible change in the US dollar
and Japanese yen exchange rates, with all other variables held constant, of the Company’s profit
before tax as at March 31, 2012 and 2011 and December 31, 2011 (arising from revaluation of
monetary assets and liabilities and derivative instruments.)
March 31, 2012 (Unaudited)
Foreign Currency
Appreciates (Depreciates) By
Effect on Income
Before Income Tax
USD 10% or PHP4.292 (P=1,826,685,460)
(10% or PHP4.292) 1,826,685,460
JPY 10% or PHP0.05786 (4,264,000)
(10% or PHP0.04734) 3,488,728
eEURO (10% or PHP5.71943) 178,026
10% or PHP5.71943 (178,026)
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 (P=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
March 31, 2011 (Unaudited)
Foreign Currency
Appreciates (Depreciates) By
Effect on Income
Before Income Tax
USD 10% or PHP4.40 (P=2,560,304,316)
(10% or PHP4.40) 2,560,304,316
JPY 10% or PHP0.05818 (529,267,239)
28
March 31, 2011 (Unaudited)
Foreign Currency
Appreciates (Depreciates) By
Effect on Income
Before Income Tax
(10% or PHP0.04760) 433,036,832
SSEK 10% or PHP0.91482 (1,453,789)
(10% or PHP0.74849) 1,189,464
Equity Price Risk
Equity price risk is the risk that the fair values of traded equity instruments decrease as the result
of the changes in the levels of equity indices and the value of the individual stocks.
As of March 31, 2012 and 2011 and December 31, 2011, the Company’s exposure to equity price
risk is minimal.
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 and AFS debt
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.
Interest Rate Risk Table
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
4–5 Years
More than
5 Years
Total
March 31, 2012
(Unaudited)
Fixed Rate
PNB and Allied Bank 9.03% 416,291 1,014,291 246,520 423,956 2,101,058
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
Employee receivables 19,948,544 19,948,544
Advances to employees 37,934,595 37,934,595
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=5,028,879,595 P=5,028,879,595
Accrued interest and guarantee fees 1,047,605,943 1,047,605,943
Other current liabilities 3,517,746 3,517,746
Short term loan payable − −
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=57,917,291,877 P=65,486,716,572
The methods and assumptions used by the Company in estimating the fair value of financial
instruments are:
Cash and Cash Equivalents
Carrying amounts approximate fair values due to its short-term nature. Trade and Other Receivables, Due to Related Parties, Trade and Other Payables and Short-term
Loan Payable
These are instruments with relatively short maturity ranging from 1 to 3 months. Carrying
amounts approximate fair values.
Long-term Receivables
The fair value of long-term receivables was computed by discounting the expected cash flow using
the applicable rates of 3.01% in March 31, 2011.
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 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
The fair value of currency forwards was determined by reference to market values provided by
counterparty banks. The currency options were valued using Garman- Kohlhagen option pricing
model that takes into account such factors as the risk-free US Dollar and Euro interest rates and
historical volatility.
34
Long-term Debts and Royalty Fee Payable
The fair values for the Company’s long-term debts are estimated using the discounted cash flow
methodology with the applicable rates ranging from 1.75% to 10.96%, 1.91% to 10.88%, 2.06% to
10.57% in March 31, 2012, December 31, 2011 and March 31, 2011, respectively. Fair values of
royalty fee payable are determined using discount rates ranging from 5.37% to 6.02%, 5.32% to
6.43%, 4.07% to 6.04% in March 31, 2012, December 31, 2011, March 31, 2011, respectively. The following tables show the fair value information of financial instruments classified under
FVPL and AFS investments analyzed by source 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
During 2012 and 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. March 31, 2012 (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=13,123,431 P=− P=− P=− P=− P=13,123,431
Trade receivables 3,450,083 − − − − 3,450,083
Non-trade receivables 43,963 − − − − 43,963
Loans and notes receivables 62,532 − − − − 62,532
Employee receivables 18,318 − − − − 18,318
Advances to employees 39,670 − − − − 39,670
Other long-term receivables 561,517 − − − − 561,517