EDC’s P10.5-B retail bonds still top rated by PhilRatings

January 12, 2016 8:34 pm  by VOLTAIRE PALAÑA

http://www.manilatimes.net/edcs-p10-5-b-retail-bonds-still-top-rated-by-philratings/239035

THE Energy Development Corp.’s (EDC) P10.5-billion outstanding retail bonds retained their highest credit rating of PRS Aaa issued by Philippine Rating Services Corp.
(PhilRatings), reflecting the Lopez-led company’s strong capacity to meet its financial obligation.

PRS Aaa is the highest credit rating assigned by PhilRatings and indicates that the obligation has minimal credit risk.

EDC’s P10.5 billion retail bonds consist of P3.5 billion due on December 4, 2016; P3.0 billion due on May 3, 2020; andP4.0 billion on May 3, 2023.

PhilRatings said the triple-A rating reflects several key considerations, including EDC’s ample cash flows, its position as the leading vertically-integrated geothermal power producer in the country, its growing portfolio of renewable energy projects, as well as its international expansion efforts that are expected to spark revenue growth.

Also considered were EDC’s strong revenue generation and sustained profitability; financial flexibility and manageable debt profile thereby mitigating various operational and financial risks; and its proactive stance in addressing emerging trends in the local power industry.

A rating outlook of stable was assigned to EDC’s credit rating.

“EDC’s solid operating and financial performance in 2014, its proven resilience in the face of calamities and disasters, as well as the upside provided by its on-going and planned projects, all contribute to the assignment of a stable outlook,” PhilRatings said.

EDC is the leading producer of geothermal power in the country. It has a total installed geothermal capacity of 1,169 megawatts (MW) or 60.9 percent of the country’s 1,918 MW installed geothermal capacity in 2014. It is also reportedly the largest vertically integrated geothermal company in the world.

To sustain and further enhance its growth prospects, EDC is venturing into other indigenous renewable energy projects involving hydropower, wind and solar energy.
In 2008, it ventured into hydroelectric power generation after acquiring a 60-percent equity in the 132-MW Pantabangan-Masiway Hydroelectric Power Plants (PMHEPP).

During the last quarter of 2014, EDC also commenced the commercial operation of the 150-MW Burgos Wind Energy Project (BWEP), the largest wind farm in the country.
Likewise, the 4.1-MW Burgos Solar Energy Project (BSEP) completed its first phase and commenced commercial operations in March 2015.

As a result, EDC’s total installed generating capacity — inclusive of PMHEPP, BWEP and BSEP — stood at 1,455 MW or 24.7 percent of the country’s 5,898 MW installed renewable energy capacity as of end-2014.

In line with the Department of Energy’s (DOE) target to more than triple the country’s installed capacity for renewable energy by 2030, EDC is also in various stages of developing additional growth areas for local renewable energy projects which are expected to add to the company’s portfolio in the coming years.

With the feed-in tariff scheme already in effect, the company expects to develop additional wind and solar projects in the next three to five years, subject to the projects’ feasibility based on the next rounds of FiT rates and installation targets.

In addition, EDC has expanded overseas by establishing offices in Chile, Peru and Indonesia. It signed a joint venture agreement with Alterra Power Corporation, a Toronto Stock Exchange (TSX)-listed renewable energy company, for the exploration and potential development of the Mariposa Project in Chile, and acquired the local subsidiaries of Australian geothermal firm Hot Rock Ltd in Chile and Peru.

EDC has built an early-stage portfolio consisting of stakes in five geothermal concessions and up to 19 applications rights in Latin America.

Consolidated revenues for the period ended December 31, 2014 increased by 20.3 percent from P25.7 billion to P30.9 billion. Net income in 2014 soared by 111 percent to P11.8 billion.

Net cash flows from operations were at P16.1 billion, up 9.8 percent from 2013. Debt to equity ratio improved from 1.62 times as of end-2013 to 1.59 times as of end-2014.

Given the robust cash generating ability, coupled with incremental borrowings, EDC appears to have adequate debt servicing capacity in relation to its maturing obligations in the coming years, PhilRatings said.

As of September 2015, consolidated revenues of P25.3 billion reflected an increase of P2.3 billion or 10.2 percent compared to the previous period.

Net income, however, decreased from P10.5 billion to P6.1 billion mainly due to the absence of recovery of impairment provisions and proceeds from insurance claims in 2014; foreign exchange loss of P1.2 billion in 2015; higher interest expense of P0.6 billion stemming from the BWEP’s project financing, and; higher operating expenses in 2015.

Removing the non- recurring items, recurring net income still decreased from P8.0 billion in September 2014 to P7.2 billion in September 2015.