March 21, 2014

First GEN reports 2013 recurring net income of $154.6m

In a press statement, First Gen Corp said its recurring net income in 2013 fell 11% YoY to $154.6m. This is still not adjusted for preferred dividends which, by our estimates, could be worth around US$40m. Consolidated net income stood at $118.1m in 2013, down 37.8% YoY.

The 2013 net income was weighed down by lower earnings booked by EDC given unrealized forex losses, reduced revenues (by 47%) from FG Hydro, and the 5.5month-downtime of the San Lorenzo plant. FGEN's revenues decreased to $1.9b, down 7.5% YoY.In terms of contribution to net income, gas plants contributed $81.9m, down 23%; EDC accounted for $46.6m, down 43%; and FG Hydro contributed $27.9m, down 53%.

Our take: FGEN’s recurring income is 15.5% below our forecast. However, it is ahead of the US$121.7m consensus forecast but it is not clear if the latter is already adjusted for the preferred dividends. 2013 was a challenging year for FGEN which was beset by unfortunate events including the fire that hit its San Lorenzo plant, and the disruptions to EDC’s operations due to the super typhoon that hit the Visayas, The company has pending insurance claims for property and business losses pertaining to for San Lorenzo's downtime and EDC's business disruptions and plant damages.

With the full restoration of the San Lorenzo plant and quick restoration of EDC's plant capacity in Leyte, we expect earnings to rebound faster than originally expected. FGEN is also currently in the middle of construction for several projects which include the Burgos wind farm, a 414MW natural gas project, and EDC’s 40MW Nasulo geothermal project. – WealthSec