May 19, 2015

First Gen Corp (FGEN) core earnings up 9.3% in 1Q15

First Gen Corp (FGEN) yesterday disclosed it posted a 17.7% YoY increase in 1Q15 reported net income to US$50.5m. Excluding non-recurring items, core income grew 9.3% to US$45.3m due to higher recurring income contribution of its geothermal and natural gas businesses.

On a stand-alone basis, FGEN’s 50.5%-owned subsidiary Energy Development Corp (EDC) posted a 4.9% rise in net income to P2.49b, up 4.9%. Excluding one-offs, EDC’s recurring net income grew 11% to P2.46b. EDC’s geothermal power plants posted higher recurring profits in 1Q15 (up P0.46m), which more than made up for losses (P0.18b) from its wind project.

FG Hydro, on the other hand, posted slightly higher earnings, up P0.05b. In terms of profit contribution, EDC and FG Hydro accounted for 37% (US$22.9m) and 15% (US$9.5m), respectively, of FGEN’s estimated equity earnings of US$62m in 1Q15.

FGEN’s natural gas-fired power plants contributed net profits of US$29.6m, equivalent to 48% of FGEN’s equity earnings. The gas plants’ income contribution rose 7% YoY from US$27.6% in 1Q14 due to higher capacity fees from Santa Rita (following the successful re-commissioning of one 250 MW unit in July 2014 after being down for most of 1H14) and San Lorenzo (due to an increase in the plant’s net dependable capacity by 3.1 MW to 549.9 MW). Profits were also buoyed by additional revenues from insurance claims and lower depreciation expenses for the San Lorenzo power plant.

Our take: FGEN’s 1Q15 results account for 23% of the full year consensus estimate of US$215.7m. Management has guided to relatively flat earnings this year, following a strong 64% growth in reported earnings to US$193m in 2014. There is scope to further grow revenues in 2H15 as FGEN’s new greenfield power project gets commissioned this year. Construction of the 97-MW Avion gas power plant is ongoing and is targeted to be commissioned by June of this year. – WealthSec