March 14, 2014

AP reports 2013 core net income of P4.3b

In an analysts’ briefing yesterday, Aboitiz Power Corporation (AP) said its consolidated net income stood at P18.6b in 2013, down 24% YoY. Excluding non-recurring items, core net income last year declined 15% YoY to P20.1b.

This is 3.6% ahead of consensus full-year forecast of P19.4b. Key takeaways from the briefing are as follows:

The full-year results factored in a non-recurring loss of P1.55b (vs. a gain of P705m last year) that included the net effect of the revaluation of the company’s dollar loans and placements, a non-recurring expense due to debt prepayment, and the step acquisition of a subsidiary net of impairment losses.

The power generation net income dropped 33% YoY and accounted for 83% of AP’s earnings. Net of one-off items, the segment net income was at P17.2b, still 21% lower YoY. This can be traced to lower average price (-3% YoY) due to the 7% drop in average selling price under bilateral contracts that offset the 9% rise in average spot market prices. The net attributable power generation sales rose 3% YoY to 10,949 GWh, reflecting the 37% hike in spot sales to 1,914 GWh and the 2% decline in sales through bilateral contracts to 9,035 GWh.

The company also realized lower margins in its Pagbilao plant and incurred higher fuel cost due to the implementation of the Geothermal Resource supply contract for the Tiwi-Makban plants.

Revenues from ancillary services dropped 35% YoY due to lower acceptance rate by the National Grid Corp of the Phils.

The power distribution net income grew 15% YoY mainly due to the increase in volume sales across all customer classes, approved rate adjustments, and improvement in systems loss levels.

Last year’s income included P1.3b in provisions for possible losses as AP deferred collecting from the Manila Electric Co the increase in power rate hike last year pending a resolution of the Supreme Court temporary restraining order. The regulator’s recent decision to void the power rate hike and for power generation companies to recalculate the applicable power rates at the spot market in November and December might have rendered the case moot and academic. Depending on the final applicable rate, AP may review the provisions. Any overstatement may be written back in 2014.

Given that the company has shifted to capacity-based bilateral contracts, it will be less vulnerable to the volatility in the spot market. This should also render its earnings and cash flows more predictable.

Future growth will be underpinned by current expansion plans including the 300MW power plant in Cebu, another 150MW unit in Davao, and 69 MW Manolo Fortich. Plans are also afoot to build another 300MW power plant in Davao and 14MW Sabangan Hydro plant by 2015. - WealthSec