August 19, 2015

First Gen Corp (FGEN) posts 7.4% YoY drop in 1H15 recurring earnings

First Gen Corp (FGEN) posted a 7.4% YoY decline in 1H15 recurring earnings to US$83.85m. Inclusive of non-recurring items, reported earnings were down 7.1% to US$95.27m. The bulk of earnings came from FGEN’s natural gas-fired power plants, which contributed combined earnings of US$67.1m, 11.5% higher Yoy.

The increase due to to lower interest expense and higher insurance claims of US$7m compared with US$2.5m last year for business interruption and machinery breakdown incurred by the 500MW San Lorenzo gas-fired power plant in 2013. On the other hand, subsidiaries Energy Development Corp (EDC) and First Gen Hydro Power Corp (FG Hydro) both contributed lower earnings in 1H15, down 24% to USD47.4m (from US$62.4m) and 29% to US$7.6m (from US$10.7m), respectively.

The decline was mainly due to higher operating expenses and typhoon-proofing works from EDC and lower revenues (because of lower average spot market prices and electricity production) from FG Hydro.

Our take: The results came in lower-than-expected, with 1H15 earnings equivalent to 49% of the full-year consensus estimate of US$175m. Management had earlier guided for a relatively flat earnings this year. While there is scope to further grow revenues in 2H15 as FGEN’s 97MW Avion gas power plant gets commissioned in 2H15, we believe the impact to earnings will be minimal this year. Moreover, EDC’s operating costs are expected to remain elevated for the rest of the year,2H15. – WealthSec