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Energy Development Corporation 38
th Floor, One Corporate Centre Building, Julia Vargas corner Meralco Avenue
Ortigas Center, Pasig 1605, Philippines
Trunklines: +63 (2) 667-7332 (PLDT) / +63 (2) 755-2332 (Globe)
May 15, 2014
JANET A. ENCARNACION
HEAD, Disclosures Department
The Philippine Stock Exchange, Inc.
Philippine Stock Exchange Plaza
Ayala Triangle, Ayala Avenue, Makati City
Dear Ms. Encarnacion:
In compliance with PSE disclosure requirements, we submit the attached Energy
Development Corporation (Consolidated) Quarterly Report for the period ended
March 31, 2014 (SEC Form 17-Q).
SEC Form 17Q – 1Q 2014
SEC Number 66381
File Number _____
ENERGY DEVELOPMENT CORPORATION
(Company’s full Name)
One Corporate Centre Julia Vargas cor. Meralco Ave., Ortigas Center, Pasig City
(Company’s Address)
(632) 755-2332
(Telephone Number)
March 31, 2014
(Quarter Ending)
SEC FORM 17-Q
(Form Type)
6 6 3 8 1
SEC Registration Number
E N E R G Y D E V E L O P M E N T C O R P O R A T I O N
( A S u b s i d i a r y o f R e d V u l c a n H o l d i
n g s C o r p o r a t i o n ) A N D S U B S I D I A R I E S
(Company’s Full Name)
J u l i a V a r g a s C o r n e r M e r a l c o A v e n u
e , O r t i g a s C e n t e r , P a s i g C i t y
(Business Address: No. Street City/Town/Province)
Maribel A. Manlapaz 755-2332 (Contact Person) (Company Telephone Number)
0 3 3 1 S E C 1 7 0 5 0 6
Month Day (Form Type) Month Day (Fiscal Year) (Annual Meeting)
(Secondary License Type, If Applicable)
Article I
Dept. Requiring this Doc. Amended Articles Number/Section
Total Amount of Borrowings
690 P=35,721,252,717 P=23,044,219,616
Total No. of Stockholders Domestic Foreign
To be accomplished by SEC Personnel concerned
File Number LCU
Document ID Cashier
S T A M P S
Remarks: Please use BLACK ink for scanning purposes.
COVER SHEET
SEC Form 17Q – 1Q 2014
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our unaudited consolidated financial statements for the quarter ended March 31, 2014
have been prepared in accordance with Philippine Financial Reporting Standards (PFRS)
and are filed as Annex I of this report.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD & A”) The following is a discussion and analysis of the Company’s consolidated financial
performance for the quarter ended March 31, 2014. The prime objective of this MD&A
is to help the readers understand the dynamics of our Company’s business and the key
factors underlying our financial results. Hence, our MD&A is comprised of a discussion of
our core business and an analysis of the results of operations. This section also focuses on
key statistics from the unaudited financial statements and pertains to risks and uncertainties
relating to the geothermal power industry in the Philippines where we operate up to the
stated reporting period. However, our MD&A should not be considered all inclusive, as it
excludes unknown risks, uncertainties and changes that may occur in the general economic,
political and environment condition after the stated reporting date.
Our MD&A should be read in conjunction with our unaudited consolidated financial
statements and the accompanying notes. All financial information is reported in Philippine
Pesos (PhP) unless otherwise stated.
Any references in this MD&A to “we”, “us”, “our”, “Company” means the Energy
Development Corporation and its subsidiaries.
Additional information about the Company can be found on our corporate website
www.energy.com.ph.
SEC Form 17Q – 1Q 2014 4
The following is a summary of the key sections of this MD&A:
OVERVIEW OF OUR BUSINESS.............................................................................................. 5 Principal Products or Services ......................................................................................................... 5
Competition ..................................................................................................................................... 5
Concessions and government share payments ............................................................................ 6 KEY PERFORMANCE INDICATORS ..................................................................................... 8 FINANCIAL HIGHLIGHTS ....................................................................................................... 10 RESULTS OF OPERATIONS ................................................................................................... 11
CAPITAL AND LIQUIDITY RESOURCES ........................................................................... 15 FINANCIAL POSITION ............................................................................................................ 16
Horizontal and Vertical Analysis of Material Changes as of March 31, 2014 and December 31,
2013. .............................................................................................................................................. 16
CASH FLOW ............................................................................................................................... 20 DISCUSSION ON THE SUBSIDIARIES ................................................................................. 21
FG Hydro ....................................................................................................................................... 21
Green Core Geothermal Inc. ......................................................................................................... 22 Bac-Man Geothermal Inc. ............................................................................................................. 23
FOREIGN EXCHANGE AND INTEREST RATE EXPOSURE .......................................... 24 OTHER MATTERS .................................................................................................................... 24
MAJOR STOCKHOLDERS ...................................................................................................... 25
SEC Form 17Q – 1Q 2014 5
OVERVIEW OF OUR BUSINESS
Principal Products or Services
As of March 31, 2014, the Company operates twelve geothermal steam fields in the five geothermal
service contract areas where it is principally involved in the generation and sale of electricity
through Company-owned geothermal power plants to NPC and privately-owned distribution
utilities (DUs), pursuant to Power Purchase Agreements (PPAs) and Electricity Sales Agreements
(ESAs), respectively.
Through its 60% equity interest in First Gen Hydro (FG Hydro), the Company indirectly operates
the 120 MW Pantabangan and 12 MW Masiway Hydroelectric Power Plants, located in
Pantabangan, Nueva Ecija Province, Central Luzon. The power plants supply electricity into the
Luzon grid to service the consumption of its distribution utilities clients covered by bilateral
contract quantities (BCQ).
The Company has evolved into being the country’s premier pure renewable energy play, possessing
interests in geothermal energy and hydro power. For geothermal energy, its expertise spans the
entire geothermal value chain, i.e., from geothermal energy exploration and development, reservoir
engineering and management, engineering design and construction, environmental management and
energy research and development. With FG Hydro, the Company has not only acquired expertise in
hydropower operation and maintenance, but also the capability to sell power on a merchant basis.
Distribution methods of products or services
About 57.2% of the 1,821.3 GWh sales volume from its electricity business was sold to NPC.
Electricity production of about 138.0 GWh, i.e., pertaining to electricity generated by the hydro
power plants of FG Hydro, was sold mainly to its distribution utility clients comprised of electric
cooperatives in the province of Nueva Ecija while 527.2 GWh, i.e., generated by the geothermal
power plants in Tongonan I and Palinpinon, was sold mainly to electric cooperatives and industrial
customers in the Visayas region. Also, Bacman Units 1 and 3 geothermal power plant generated
electricity of 113.7 GWh that was sold to electric cooperatives and industrial customers. The
Company’s total sales volume comprised of 1,683.3 GWh coming from electricity production in
Leyte, Mindanao, Tongonan I, Palinpinon and Bacman 2 Unit 3 geothermal power plants; and
138.0 GWh sold from hydro power plant operations in Pantabangan, Nueva Ecija.
The electricity generated by the Company’s geothermal power plants is transmitted to customers
i.e., distribution utilities, electric cooperatives or bulk power customers by the National Grid
Corporation of the Philippines (NGCP) through its high voltage backbone system.
Competition
The Government, in implementing the thrust of the EPIRA, has paved the way for a more
independent and market driven Philippine power industry. This has allowed for competition, not
limited by location, and driven by market forces. As such, selling power and, consequently, the
SEC Form 17Q – 1Q 2014 6
dispatch of power plants depend on the ability to offer competitively priced power supply to the
market. The Company has multiple power projects in Luzon, Visayas, and Mindanao.
The successful privatization of NPC assets and NPC-IPP contracts in Luzon and Visayas, coupled
with the integration of the two Grids under the WESM, introduced new players and opened
competition in the power industry. Multinationals that currently operate in the Philippines and that
could potentially compete against the Company include KEPCO Power Corporation, CalEnergy
International Services, Inc., Marubeni Energy Corporation, and AES Corporation. Moreover, the
local power companies of the Aboitiz group and San Miguel group are the Company‘s two largest
competitors. In terms of generation capacities, the Aboitiz group has a total of 2,353 MW[1] in its
portfolio. Aboitiz Power Corporation is the Company’s only competitor in the geothermal energy
space, after it successfully bid for the 747 MW Tiwi-makban geothermal power plant. Chevron
Geothermal Philippines Holdings operates the Tiwi-Makban geothermal steam field, that supplies
the Aboitiz geothermal plant. The San Miguel group reportedly has 2,545[2] MW in its portfolio
after selling its 650 MW Limay combined-cycle gas turbine. Several of these competitors may have
greater financial resources and have more extensive operational experience and other capabilities
than the Company, giving them the ability to respond to operational, technology-related, financial,
and other challenges more quickly than the Company. The Company will face competition in both
the development of new power generation facilities and the acquisition of existing power plants, as
well as in the financing for these activities.
The performance of the Philippine economy and the historical high returns of power projects in the
country have attracted many potential competitors, including multinational development groups and
equipment suppliers, to explore opportunities in the development of electric power generation
projects in the Philippines. Accordingly, competition for and from new power projects may increase
in line with the long-term economic growth in the Philippines.
The Company believes that it will be able to compete because of its competitively-priced power, the
reliability of its power plants, its use of clean and renewable fuels, and its expertise and experience
in power supply contracting and trading.
[1] Data from Aboitiz Power: www.aboitizpower.com
[2] Data from San Miguel Corporation: www.sanmiguel.com.ph/businesses/new/power-energy/
Dependence on one or a few major customers and identity of any such major customers
Close to 45.2% of the Company’s total revenues are derived from existing long-term PPAs with
NPC.
Concessions and government share payments
The five geothermal service contract areas where the EDC’s geothermal production steam fields are
located are:
• Tongonan Geothermal Project (expiring in 2031)
SEC Form 17Q – 1Q 2014 7
• Southern Negros Geothermal Project (expiring in 2031)
• Bacon-Manito Geothermal Project (expiring in 2031)
• Mt. Apo Geothermal Project (expiring in 2042)
Northern Negros Geothermal Project (expiring in 2044)
The Company, through its subsidiaries Green Core Geothermal Inc. and Bac-Man Geothermal Inc.
secured three (3) Geothermal Operating Contracts covering power plant operations:
Tongonan Geothermal Power Plant (with a 25-year contract period expiring in 2037, renewable
for another 25 years)
Palinpinon Geothermal Power Plant (with a 25-year contract period expiring in 2037, renewable
for another 25 years)
Bacon-Manito Geothermal Power Plant (with a 25-year contract period expiring in 2037,
renewable for another 25 years)
The Company also holds service contracts for the following prospect areas:
Geothermal Resource
1. Mt. Labo Geothermal Project (with a five-year pre-development period expiring in 2015,
25-year contract period expiring in 2035)
2. Ampiro Geothermal Project (with a five-year pre-development period expiring in 2017, 25-
year contract period expiring in 2037)
3. Mandalagan Geothermal Project (with a five-year pre-development period expiring in 2017,
25-year contract period expiring in 2037)
4. Mt. Zion Geothermal Project (with a five-year pre-development period expiring in 2017, 25-
year contract period expiring in 2037)
5. Lakewood Geothermal Project (with a five-year pre-development period expiring in 2017,
25-year contract period expiring in 2037)
6. Balingasag Geothermal Project (with a five-year pre-development period expiring in 2017,
25-year contract period expiring in 2037)
Wind Resource
1. Burgos Wind Project (WESC assigned by EDC to EDC Burgos Wind Power Corporation;
pre-development stage expiring in 2012, 25-year contract period expiring in 2034)
2. Pagudpud Wind Project (pre-development stage expiring in 2013, 25-year contract period
expiring in 2035)
3. Burgos 1 Wind Project (with a three-year pre-development period expiring in 2016, 25-year
contract period expiring in 2038)
4. Burgos 2 Wind Project (with a three-year pre-development period expiring in 2016, 25-year
contract period expiring in 2038)
SEC Form 17Q – 1Q 2014 8
KEY PERFORMANCE INDICATORS
The top eight (8) key performance indicators are set forth below:
Ratio
Mar – 14
Mar – 13
Current Ratio 2.41:1 2.07:1
Debt-to-Equity Ratio 1.60:1 1.35:1
Net Debt-to-Equity Ratio 1.21:1 1.00:1
Return on Assets (%) 5.10 11.23
Return on Equity (%) 14.18 31.47
Solvency Ratio 0.06 0.08
Interest Rate Coverage Ratio 3.67 4.69
Asset-to-Equity Ratio 2.92 2.64
Current Ratio – Total current assets divided by total current liabilities.
This ratio is a rough indication of a company’s ability to pay its short-term obligations.
Generally, a current ratio above 1.00 is indicative of a company’s greater capability to settle
its current obligations.
Debt-to-Equity Ratio – Total interest-bearing debts divided by stockholders’ equity.
This ratio expresses the relationship between capital contributed by the creditors and the
owners. The higher the ratio, the greater the risk being assumed by the creditors. A lower
ratio generally indicates greater long-term financial safety.
Net-Debt-to-Equity Ratio – Total interest-bearing debts less cash & cash equivalents
divided by stockholders’ equity.
This ratio measures the company’s financial leverage and stability. A negative net debt-to-equity
ratio means that the total of cash and cash equivalents exceeds interest-bearing
liabilities.
Return on Assets – Net income (annual basis) divided by total assets (average).
This ratio indicates how profitable a company is relative to its total assets. This also gives an
idea as to how efficient management is at using its assets to generate earnings.
Return on Equity – Net income (annual basis) divided by total stockholders’ equity (average).
This ratio reveals how much profit a company earned in comparison to the total amount of
shareholder equity found on the balance sheet. A business that has a high return on equity is
more likely to be one that is capable of internally generating cash. For the most part, the
company’s return on equity is compared with an industry average. The company is
considered superior if its return on equity is greater than the industry average.
Solvency Ratio – Net income excluding depreciation and non-cash provisions divided by total debt
obligations.
This ratio gauges a company’s ability to meet its long-term obligations.
SEC Form 17Q – 1Q 2014 9
Interest Rate Coverage Ratio – Earnings before interest and taxes of one period divided by
interest expense of the same period.
This ratio determines how easily a company can pay interest on outstanding debt.
Asset-to-Equity Ratio – Total assets divided by total stockholders’ equity.
This ratio shows a company’s leverage, the amount of debt used to finance the firm.
SEC Form 17Q – 1Q 2014 10
OPERATING REVENUES AND EXPENSES
FINANCIAL HIGHLIGHTS
During the first quarter of 2014, the Company posted a net income of P2,523.6 million, a
15.4% or P458.0 million decrease from the P2,981.6 million in the three-month period
ending March 31, 2013. The movement was driven by the P269.6 million turnaround from
foreign exchange gains of P98.5 million in March 2013 to foreign exchange losses of
P171.1 million in the first quarter of 2014. This was supplemented by the P144.0 million
increase in cost of sales of electricity mainly due to personnel costs.
Net income is equivalent to 35.4% of total revenues for the period ended March 31, 2014 as
compared to the 43.0% from the same period in 2013.
Net income attributable to equity holders of the parent company at P2,376.0 million for the
first quarter of 2014 decreased by P322.2 million from P2,698.2 million during the same
period in 2013.
The recurring net income generated in the first quarter of 2014 decreased by 17.3% or
P493.7 million to P2,368.0 million from the P2,861.7 million posted during the same period
in 2013. The decrease is mainly attributable to the P144.0 million increase in cost of sales of
electricity and steam and P422.7 million increase in general and administrative Expenses.
Recurring net income attributable to equity holders of the parent was posted at
P2,220.4 million, down by 13.9%, as compared to the P2,578.3 million for the first quarter
of 2013.
SEC Form 17Q – 1Q 2014 11
RESULTS OF OPERATIONS
The following table details the results of operations for EDC for the first quarter of 2014 and
2013.
STATEMENT OF INCOME
Horizontal Analysis of Material Changes as of March 31, 2014 and 2013
Favorable (Unfavorable) Variance
(Amounts in PHP millions) MAR 2014 MAR 2013 Amount % 2014 2013
REVENUES
Sale of electricity 7,137.9 6,939.9 198.0 2.9% 100.0% 100.0%
COST OF SALES AND SERVICES
Cost of sales of electricity and steam (2,338.7) (2,194.7) (144.0) 6.6% -32.8% -31.6%
GENERAL AND ADMINISTRATIVE EXPENSES (1,261.6) (838.9) (422.7) 50.4% -17.7% -12.1%
FINANCIAL INCOME (EXPENSE)
Interest income 52.5 74.0 (21.5) -29.1% 0.7% 1.1%
Interest expense (972.6) (839.9) (132.7) 15.8% -13.6% -12.1%
(920.1) (765.9) (154.2) 20.1% -12.9% -11.0%
OTHER INCOME (CHARGES)
Foreign exchange (losses) gains, net (171.1) 98.5 (269.6) -273.7% -2.4% 1.4%
Derivative (losses) gains, net 7.5 (5.4) 12.9 -238.9% 0.1% -0.1%
Miscellaneous, net 307.2 (5.5) 312.7 -5685.5% 4.3% -0.1%
143.6 87.6 56.0 63.9% 2.0% 1.2%
INCOME BEFORE INCOME TAX 2,761.1 3,228.0 (466.9) -14.5% 38.7% 46.5%
BENEFIT FROM (PROVISION FOR) INCOME TAX
Current (232.8) (239.8) 7.0 -2.9% -3.3% -3.5%
Deferred (4.7) (6.6) 1.9 -28.8% -0.1% -0.1%
(237.5) (246.4) 8.9 -3.6% -3.4% -3.6%
NET INCOME 2,523.6 2,981.6 (458.0) -15.4% 35.4% 43.0%
Net income attributable to:
Equity holders of the Parent Company 2,376.0 2,698.2 (322.2) -11.9% 33.3% 38.9%
Non-controlling interest 147.6 283.4 (135.8) -47.9% 2.1% 4.1%
EBITDA 4,477.1 4,802.7 (325.6) -6.8% 62.7% 69.2%
RECURRING NET INCOME 2,368.0 2,861.7 (493.7) -17.3% 33.2% 41.2%
Recurring net income attributable to:
Equity holders of the Parent Company 2,220.4 2,578.3 (357.9) -13.9% 31.1% 37.2%
Non-controlling interest 147.6 283.3 (135.7) -47.9% 2.1% 4.1%
HORIZONTAL ANALYSIS VERTICAL ANALYSIS
SEC Form 17Q – 1Q 2014 12
YTD March 31, 2014 vs. YTD March 31, 2013
Revenues
Total sale of electricity for the period ended March 31, 2014 increased by 2.9% or
P198.0 million to P7,137.9 million from P6,939.9 million during the same period in 2013. The
improvement was primarily due to the P370.9 million increase in BGI’s revenues from the
commercial operation of Bacman Units 1 and 3 and the P82.4 million increase in FG Hydro’s sale
of electricity. This was however offset by FG Hydro’s P249.6 million revenue adjustment due to
the recomputation of spot prices for Nov. and Dec. 2013 billings as ordered by the ERC
Cost of Sales of Electricity
Cost of sales of electricity increased by 6.6% or P144.0 million to P2,338.7 million in the first
quarter of 2014 from P2,194.7 million during the same period in 2013. The unfavorable variance
was driven mainly by the personnel costs.
General and Administrative Expenses
General and administrative expenses increased by 50.4% or P422.7 million to P1,261.6 million in
the first quarter of 2014 from P838.9 million during the same period in 2013 mainly due to the
increase in the following:
P136.4 million rental, insurance and taxes;
P89.9 milion in purchased services and utilities on account of various field administrative
activities in support to the full restoration of damaged power plant facilities in LGBU; and
P43.0 million in depreciation and amortization.
Financial Income (Expenses)
Financial expenses-net increased by 20.1% or P154.2 million to P920.1 million in the first quarter
of 2014 from P765.9 million during the same period in 2013 due to the interest charges on new
loans.
Interest income
Interest income decreased by 29.1% or P21.5 million to P52.5 million in the first quarter of
2014 from P74.0 million during the same period in 2013. The unfavorable variance is
mainly due to lower interest income on investments and short-term placement of funds with
the drop in weighted average interest rates.
Interest expense
Interest expense increased by 15.8% or P132.7 million to P972.6 million in the first quarter
of 2014 from P839.9 million during the same period in 2013. The unfavorable variance is
due to interest charges on P7 billion Bond and US$80 million term-loan acquired in May
2013 and December 2013, respectively, coupled with the depreciation of the PhP against
US$.
SEC Form 17Q – 1Q 2014 13
Other Income (Charges)
Other income increased by 63.9% or P56.0 million to P143.6 million in the first quarter of 2014
from P87.6 million during the same period in 2013, primarily due to the gain on sale of rig offset by
the foreign exchange losses recognized for the first quarter of 2014.
Foreign exchange (losses) gains, net
The Company recognized foreign exchange losses of P171.1 million for the first quarter of
2014 compared to the foreign exchange gains of P98.5 million during the same period in
2013. The variance was mainly brought about by the depreciation of the peso against the US
dollar in contrast to its appreciation during the same period in 2013
The comparative foreign exchange rates against the USD were as follows:
PHP:US$
December 31, 2012 41.050
March 31, 2013 40.800
December 31, 2013 44.395
March 31, 2014 44.815
Derivatives (losses) gains, net
Derivative gains of P7.5 million for the three months ended March 31, 2014 is a 238.9%
turnaround from the P5.4 million derivative losses during the same period in 2013. The
realized/unrealized derivative gain (loss) transactions came from the forward foreign
exchange contracts entered into with various banks considering the PhP and US$ exchange
rates as of the transactions/reporting dates.
Miscellaneous, net
Miscellaneous income - net for the first quarter of 2014 amounted to P307.2 million, or a
P312.7 million turnaround from the miscellaneous charges - net of P5.5 million during the
same period in 2013. The increase was mainly due to the P247.5 million gain on sale of Rig
16 in 2014.
Benefit from (Provision for) Income Tax
Deferred tax expense of P4.7 million in March 2014, is a 28.8% decrease from the
P6.6 million deferred tax expense in the three-month period ending March 2013. The decrease was
primarily contributed by the following:
Parent Company’s deferred tax income of P2.9 million was a reversal of P11.3 million
deferred tax expense in 2013; and
GCGI’s lower deferred tax expense by P7.7 million.
These were offset by the absence in 2014 of BGI’s deferred tax with the project’s income tax
holiday effective July 1, 2013. The deferred tax income recognized in 2013 is P20.6 million.
SEC Form 17Q – 1Q 2014 14
Net Income
As a result of the foregoing, the Company’s net income decreased by 15.4% or P458.0 million to
P2,523.6 million for the first quarter of 2014 from P2,981.6 million net income during the same
period in 2013.
Net income is equivalent to 35.4% of total revenues in 2014 as compared to the 43.0% in 2013.
Net income attributable to equity holders of the parent company at P2,376.0 million for the first
quarter of 2014 is a P322.2 million decrease from P2,698.2 million during the same period in 2013.
SEC Form 17Q – 1Q 2014 15
CAPITAL AND LIQUIDITY RESOURCES
As of the quarter ended
(in millions of pesos)
Q1
2014
Q1
2013 YoY change
Balance Sheet Data
Total Assets …………………………… 107,155.5 95,763.0 11.9%
Total Liabilities………………………... 70,472.6 59,525.5 18.4%
Total Stockholder’s Equity …………… 36,682.9 36,237.5 1.2%
The Company’s assets as of March 31, 2014 amounted to P107,155.5 million, 11.9% higher as
compared to the P95,763.0 million level as of March 31, 2013.
SEC Form 17Q – 1Q 2014 16
FINANCIAL POSITION
Horizontal and Vertical Analysis of Material Changes as of March 31, 2014 and
December 31, 2013.
(Amounts in PHP millions) March 2014 December 2013 Amount % 2014 2013
ASSETS
Current Assets
Cash and cash equivalents 14,247.8 16,043.2 (1,795.4) -11.2% 13.3% 15.3%
Trade and other receivables 4,987.6 3,611.4 1,376.2 38.1% 4.7% 3.4%
Available-for-sale (AFS) investments - 341.8 (341.8) -100.0% 0.0% 0.3%
Parts and supplies inventories 3,316.3 3,094.3 222.0 7.2% 3.1% 2.9%
Derivative assets 12.6 14.2 (1.6) -11.3% 0.0% 0.0%
Financial asset at FVPL 500.0 - 500.0 100.0% 0.5% 0.0%
Other current assets 1,560.3 1,235.5 324.8 26.3% 1.5% 1.2%
Total Current Assets 24,624.6 24,340.4 284.2 1.2% 23.0% 23.2%
Noncurrent Assets
Property, plant and equipment 67,705.1 66,240.0 1,465.1 2.2% 63.2% 63.1%
Goodwill and intangible assets 4,371.4 4,399.5 (28.1) -0.6% 4.1% 4.2%
Deferred tax assets 1,330.7 1,335.1 (4.4) -0.3% 1.2% 1.3%
Exploration and evaluation assets 2,462.0 2,380.8 81.2 3.4% 2.3% 2.3%
Available-for-sale (AFS) investments 447.3 407.2 40.1 9.8% 0.4% 0.4%
Derivative assets 88.1 46.9 41.2 87.8% 0.1% 0.0%
Other noncurrent assets 6,126.3 5,855.6 270.7 4.6% 5.7% 5.6%
Total Noncurrent Assets 82,530.9 80,665.1 1,865.8 2.3% 77.0% 76.8%
TOTAL ASSETS 107,155.5 105,005.5 2,150.0 2.0% 100.0% 100.0%
LIABILITIES AND EQUITY
LIABILITIES
Current Liabilities
Trade and other payables 8,081.9 6,982.0 1,099.9 15.8% 7.5% 6.6%
Income tax payable 359.0 - 359.0 100.0% 0.3% 0.0%
Due to related parties 48.1 53.3 (5.2) -9.8% 0.0% 0.1%
Current portion of:
Long-term debts 1,730.6 1,872.1 (141.5) -7.6% 1.6% 1.8%
Derivative liabilities - 0.5 (0.5) -100.0% 0.0% 0.0%
Total Current Liabilities 10,219.6 8,907.9 1,311.7 14.7% 9.5% 8.5%
Noncurrent Liabilities
Long-term debts - net of current portion 57,034.9 56,676.7 358.2 0.6% 53.2% 54.0%
Net retirement and other post-employment benefits 1,736.1 1,658.6 77.5 4.7% 1.6% 1.6%
Provisions and other long-term liabilities 1,482.0 1,513.6 (31.6) -2.1% 1.4% 1.5%
Derivative liabilities - 3.7 (3.7) -100.0% 0.0% 0.1%
Total Noncurrent Liabilities 60,253.0 59,852.6 400.4 0.7% 56.2% 57.0%
EQUITY
Equity Attributable to Equity Holders of the Parent
Preferred stock 93.8 93.8 - 0.0% 0.1% 0.1%
Common stock 18,750.0 18,750.0 - 0.0% 17.5% 17.9%
Common stock in employee trust account (350.3) (351.5) 1.2 -0.3% -0.2% -0.3%
Additional paid-in capital 6,283.6 6,282.8 0.8 0.0% 5.9% 6.0%
Equity reserve (3,706.4) (3,706.4) - 0.0% -3.4% -3.5%
Net accumulated unrealized gain on AFS investments 72.0 29.6 42.4 143.2% 0.1% 0.0%
Retained earnings 13,697.7 13,204.2 493.5 3.7% 12.8% 12.6%
Cumulative translation adjustment (31.9) (64.3) 32.4 -50.4% 0.0% -0.1%
34,808.5 34,238.2 570.3 1.7% 32.5% 32.6%
Non-controlling interest 1,874.4 2,006.8 (132.4) -6.6% 1.7% 1.9%
Total Equity 36,682.9 36,245.0 437.9 1.2% 34.2% 34.5%
TOTAL LIABILITIES AND EQUITY 107,155.5 105,005.5 2,150.0 2.0% 100.0% 100.0%
HORIZONTAL
ANALYSIS
VERTICAL
ANALYSIS
Increase (Decrease)
SEC Form 17Q – 1Q 2014 17
Assets
Cash and cash equivalents
The 11.2% or P1,795.4 million decrease to P14,247.8 million as of March 31, 2014 from the
P16,043.2 million December 31, 2013 balance was mainly due to the P2,875.6 million
acquisition of property, plant and equipment and P628.2 million interest and financing charges
paid. These were offset by the P1,878.5 million cash generated from operations.
Trade and other receivables
Trade and other receivables increased by 38.1% or P1,376.2 million to P4,987.6 million as of
March 31, 2014 from the P3,611.4 million balance as of December 31, 2013 primarily caused
by additional trade receivables from customers.
Available-for-sale (AFS) investments - current
The 100% decrease of AFS investments from the P341.8 million balance as of
December 31, 2013 is caused by the maturity of ROP bonds due on January 15, 2014.
Parts and supplies inventories
This account increased by 7.2% or P222.0 million to P3,316.3 million as of March 31, 2014
from the P3,094.3 million balance in December 2013 due to purchase of various materials and
supplies for plants maintenance and rehabilitation activities.
Derivative assets - current
This account decreased by P1.6 million to P12.6 million as of March 31, 2014 from the
P14.2 million in December 31, 2013. The decrease was mainly due to maturity of the hedging
contracts.
Financial asset at FVPL
The account balance of P500.0 million as of March 31, 2014 pertains to this period’s purchase
of financial assets at FVPL.
Other current assets
This account increased by 26.3% or P324.8 million to P1,560.3 million as of
March 31, 2014 from the P1,235.5 million balance in December 2013 primarily due to the
P220.2 million increase in tax credit certificates and the P98.9 million higher prepaid expenses.
SEC Form 17Q – 1Q 2014 18
Available-for-sale (AFS) investments – noncurrent
AFS investments increased by 9.8% or P40.1 million to P447.3 million as of
March 31, 2014 from the P407.2 million balance as of December 31, 2013 mainly due to the
newly acquired First Gen Corporation Shares, realignment and MTM adjustment.
Derivative assets - noncurrent
This account increased by 87.8% or P41.2 million to P88.1 million as of March 31, 2014 from
the P46.9 million in December 31, 2013. There was an increase since the outstanding hedging
of foreign loans of the company resulted in derivative gain.
Liabilities
Trade and other payables
This account increased by 15.8% or P1,099.9 million to P8,081.9 million as of March 31, 2014
from the P6,982.0 million balance as of December 31, 2013 mainly due to the P1,882.5 million
dividends declared last February 28, 2014, P401.4 million increase in accrued interest and
guarantee fees and the P295.5 million increase in other payables. These were offset by the
P1,498.3 million decrease in accounts payable.
Income tax payable
The P359.0 million account balance as of March 31, 2014 is primarily arising from the Parent’s,
GCGI’s and FG Hydro’s taxable income for the period.
Due to related parties
This account decreased by 9.8% or P5.2 million to P48.1 million as of March 31, 2014 from the
P53.3 million balance as of December 31, 2013 mainly due to the settlement of liabilities.
Long-term debts - current portion
Long-term debts - current portion decreased by 7.6% or P141.5 million, to P1,730.6 million as
of March 31, 2014 from the P1,872.1 million balance at year-end 2013 primarily due to the
regular amortization of the loans.
Derivative liabilities – non current
There was a 100% decrease from the P3.7 million balance in December 31, 2013 since all of the
hedging contract is calculated to have derivative asset.
SEC Form 17Q – 1Q 2014 19
Equity
Net accumulated unrealized gain on AFS investments
This account increased by 143.2% or P42.4 million to P72.0 million as of March 31, 2014 from
the P29.6 million in December 31, 2013. The increase is mainly due to higher fair value of AFS
investments for the period.
Retained earnings
Retained earnings increased by 3.7% or P493.5 million, to P13,697.7 million as of
March 31, 2014 from P13,204.2 million as of December 31, 2013 mainly due to the
P2,376.0 million net income for the first quarter of 2014 offset by the P1,882.5 million cash
dividends for the period.
Non-controlling interest
Non-controlling interest decreased by 6.6% or P132.4 million to P1,874.4 million as of
March 31, 2014 from P2,006.8 million balance as of December 31, 2013 mainly due to the
P280.0 million cash dividend on preferred shares offset by the P147.6 million net income for
the first quarter of 2014.
SEC Form 17Q – 1Q 2014 20
CASH FLOW
YTD March 31, 2014 vs. YTD March 31, 2013
Net cash flows from operating activities decreased by 43.1% or P1,329.3 million to
P1,755.8 million in the first quarter of 2014 from P3,085.1 million during the same period in 2013
primarily due to the P1,359.3 million lower cash generation from operations.
Net cash flows used in investing activities increased by 135.3% or P1,498.7 million to
P2,606 .3 million in the three-month period ending March 2014 as compared to the
P1,107.6 million during the same period in 2013. The decrease was due to the
P1,816.8 million higher acquisition of property, plant and equipment offset by the P321.9 million
proceeds from early redemption of available-for-sale investments in 2014.
Net cash flows used in financing activities increased by 67.2% or P380.3 million to
P946.7 million in the first quarter of 2014 from P566.4 million during the same period in 2013
mainly due to the P280.0 million cash dividends in 2014 while none in 2013 and the P86.2 million
increase in interest and financing charges.
SEC Form 17Q – 1Q 2014 21
DISCUSSION ON THE SUBSIDIARIES
FG Hydro
(Amounts in PHP millions)
As of and for the periods ended
March 31 2014 2013
Operating revenues 1,097.4 984.2 Operating expenses 225.1 225.1 Other expenses - net 44.3 50.5 Income before tax 828.0 708.6 Provision for (benefit from) income tax - 0.1 Net income 828.0 708.5
March 31, 2014 Dec. 31, 2013
Total current assets 2,005.7 1,733.8 Total noncurrent assets 6,276.7 6,403.6 Total current liabilities 562.4 547.2 Total noncurrent liabilities 3,604.6 3,602.8 Total equity 4,115.4 3,987.4
FG Hydro generated revenues of P1,097.4 million for the period ended March 31, 2014, P113.2 million or
11.5% higher than the revenues of P984.2 million for the same period in 2013. The favorable variance was
mainly on account of higher ancillary service revenues and higher spot prices in the WESM.
Operating expenses for the period ended March 31, 2014 remained at same level as the same period in 2013
at P225.1 million. Interest expense as of March 31, 2014 was P4.4 million or 9.0% lower at P44.4 million
compared to P48.8 million for the same period in 2013 due to lower long-term debt balance. Overall, FG
Hydro posted a net income of P828.0 million for the period ended March 31, 2014, P119.5 million or 16.8%
higher than the P708.5 million reported income for the same period in 2013.
Total assets as of March 31, 2014 stood at P8,282.4 million, P145.0 million or 1.7% higher than the
December 31, 2013 level of P8,137.4 million. The favorable variance was mainly due to higher cash
balance.
As of March 31, 2014, total liabilities stood at P4,167.0 million, slightly higher than the December 31, 2013
level of P4,150.0 million.
Total equity as of March 31, 2014 of P4,115.4 million is P128.0 million or 3.2% higher compared to the
December 31, 2013 level of P3,987.4 million.
SEC Form 17Q – 1Q 2014 22
Green Core Geothermal Inc.
(Amounts in PHP millions)
For the periods ended March 31
2014 2013
Revenues 2,610.6 2,692.9 Cost of sale of electricity (2,160.4) (1,687.8) General and administrative expenses (124.0) (77.5) Other income (charges) - net 13.2 23.0 Income before income tax 339.4 950.6 Provision for income tax (45.8) (98.5) Net income 293.6 852.1
As of
March 31, 2014 December 31, 2013
Total Current Assets 4,047.2 4,916.2 Total Non-Current Assets 9,824.9 9,827.1 Total Liabilities 2,291.1 2,453.6 Total Equity 11,581.0 12,289.7
GCGI’s revenues decreased by 3.1% or P82.3 million, to P2,610.6 million as of March 31, 2014 from
P2,692.9 million for the same period in 2013 owing largely to lower sales volume.
Cost of sale of electricity increased by 28.0% or P472.6 million, to P2,160.4 million in 2014 from
P1,687.8 million in 2013, primarily due to higher cost of steam (P482.3 million).
General and administrative expenses increased by 60.0% or P46.5 million, to P124.0 million in 2014 from
P77.5 million in 2013 due mainly to higher purchased services & utilities (P44.8 million).
Other income (charges) – net decreased by 42.6% or P9.8 million, to P13.2 million in 2014 from
P23.0 million in 2013 due largely to lower interest income (P4.8 million) and foreign exchange gains
(P3.3 million).
With the foregoing, provision for income tax decreased by 53.5% or P52.7 million, to P45.8 million in 2014
from P98.5 million in 2013.
Total current assets decreased by 17.7% or P869.0 million, to P4,047.2 million as of March 31, 2014 from
P4,916.2 million balance as of December 31, 2013. The decrease was due to lower cash & cash equivalents
(P1,237.1 million) offset by higher trade & other receivables (P218.5 million), parts & supplies inventories
(P100.0 million) and other current assets (P49.0 million).
Total liabilities decreased by 6.6% or P162.5 million, to P2,291.1 million as of March 31, 2014 from
P2,453.6 million as of December 31, 2013. The decrease was attributed to lower trade & other payables
(P295.2 million) offset by higher amounts due to related parties (P82.8 million).
Total equity decreased by 5.8% or P708.7 million, to P11,581.0 million as of March 31, 2014 from
P12,289.7 million as of December 31, 2013 due to this period’s cash dividend (P1,000.0 million) offset by
this period’s net income (P293.6 million).
SEC Form 17Q – 1Q 2014 23
Bac-Man Geothermal Inc.
(Amounts in PHP millions) For the periods ended
March 31, 2014 March 31, 2013 Revenues 453.4 82.5 Expenses (490.9) (47.2) Other income (0.3) 0.6 Operating income (37.8) 35.9 Provision for income tax – (5.8) Net income (loss) (37.8) 30.1
As of
March 31, 2014 Audited
December 31, 2013 Total Current Assets 684.4 703.7 Total Non-Current Assets 4,547.5 4,170.0 Total Current Liabilities 2,690.4 2,295.8 Total Non-Current Liabilities 12.7 11.3 Total Equity 2,528.8 2,566.6
BGI declared commercial operations of Bac-Man Unit 3 and Bac-Man Unit 1, beginning October 1, 2013
and January 28, 2014, respectively.
Revenues amounting to P=453.4 million from Bac-Man Units 3 and 1 are now reported in the income
statement.
The increase in expenses pertains primarily to the recognition of steam cost of P=302.4 million and net trading
losses in 2014 amounting to P=91.0 million. These were supplemented by the increase in depreciation
expenses of P=13.6 million and purchased services and utilities of P=12.7 million.
Net trading gains amounting to P=82.5 million was recognized in 2013
No provision for income tax in 2014 due to the income tax holiday.
Balance sheet accounts have minimal movement during the quarter.
SEC Form 17Q – 1Q 2014 24
Commitments that will have an impact on the issuer’s liquidity
As of March 31, 2014, the Company has unserved purchase orders and awarded contracts for the
purchase of various capital goods in the total amount of P592.7 million.
Other than these, we are not aware of any other material commitments that should impact the
Company’s liquidity.
Legal proceedings
There are no other material changes in the contingent liabilities since the last annual balance sheet
date.
FOREIGN EXCHANGE AND INTEREST RATE EXPOSURE
The Company has P=23,044.2 million in long-term US dollar denominated loans as of
March 31, 2014 which is 39.2% of the total Company’s long-term loans.
OTHER MATTERS
CASH DIVIDEND
On February 28, 2014, EDC declared cash dividends amounting to P=1.9 billion to its common
shareholders and P=7.5 million to its preferred shareholders of record as of March 17, 2014
payable on or before April 10, 2014.
On January 29, 2014, FG Hydro declared cash dividends to its non-controlling common
shareholder amounting to P=280.0 million paid on February 4, 2014.
SEC Form 17Q – 1Q 2014 25
MAJOR STOCKHOLDERS
As of March 31, 2014, the total number of stockholders was 690 and the stock price was P=5.66. Public float
level was at 49.83% (or 9,343,137,364 common shares).
List of Top 20 Stockholders as of March 31, 2014
Rank Name Nationality
Number of Shares
% Preferred Common Total
1 Red Vulcan Holdings Corporation Filipino 9,375,000,000 7,500,000,000 16,875,000,000 60.00
2 PCD Nominee Corporation Foreign - 6,421,996,061 6,421,996,061 22.83
3 PCD Nominee Corporation Filipino - 2,918,559,390 2,918,559,390 10.38
4 First Gen Corporation Filipino - 991,782,700 991,782,700 3.53
5 Northern Terracotta Power Corporation Filipino - 882,666,700 882,666,700 3.14
6 Peter D. Garrucho, Jr. Filipino - 5,670,000 5,670,000 0.02
7
Peace Equity Access for Community
Empowerment Foundation, Inc. Filipino - 3,030,000 3,030,000 0.01
8 Croslo Holdings Corporation Filipino - 2,200,000 2,200,000 0.01
9 Arthur A. de Guia Filipino - 2,200,000 2,200,000 0.01
10 William Go Kim Huy Filipino - 2,000,000 2,000,000 0.01
11 Anthony M. Mabasa Filipino - 1,000,000 1,000,000 0.00
12 ALG Holdings Corporation Filipino - 875,000 875,000 0.00
13 First Life Financial Co., Inc. Filipino - 800,000 800,000 0.00
14 Raul I. Macatangay Filipino - 725,000 725,000 0.00
15 Rosalind Camara Filipino - 663,750 663,750 0.00
16 Emelita D. Sabella Filipino - 521,000 521,000 0.00
17 Ma. Consuelo R. Lopez Filipino - 500,000 500,000 0.00
18 Peter Mar &/or Annabelle C. Mar Filipino - 500,000 500,000 0.00
19 Virginia Maria D. Nicolas Filipino - 393,000 393,000 0.00
20 Carlos Go &/or Lenny Go Filipino - 375,000 375,000 0.00
SEC Form 17Q – 1Q 2014 26
BOARD OF DIRECTORS
As of March 31, 2014, the members of Board of Directors of EDC are as follows:
Oscar M. Lopez Chairman Emeritus
Federico R. Lopez Chairman and Chief Executive Officer
Peter D. Garrucho, Jr. Director
Elpidio L. Ibañez Director
Ernesto B. Pantangco Director and Executive Vice President
Francis Giles B. Puno Director
Richard B. Tantoco Director, President and Chief Operating Officer
Jonathan C. Russell Director
Edgar O. Chua Independent Director
Francis Ed. Lim Independent Director
Arturo T. Valdez Independent Director
OFFICERS
As of March 31, 2014, the members of Officers of EDC are as follows:
Name Position
Federico R. Lopez Chief Executive Officer
Richard B. Tantoco President and Chief Operating Officer
Ernesto B. Pantangco Executive Vice President
Nestor H. Vasay Senior Vice President, Chief Financial Officer
and Treasurer
Marcelino M. Tongco Senior Vice President for Strategic Contracting
Manuel S. Ogena Senior Vice President for Technical Services
Dominic M. Camu Senior Vice President for Power Generation
Rico G. Bersamin Senior Vice President for Steam Field
Operations
Ma. Elizabeth D. Nasol Vice President for Human Resource
Management
Vincent Martin C. Villegas Vice President for Business Development
Erwin O. Avante Vice President for Corporate Finance and
Compliance Officer
Ferdinand B. Poblete Vice President, Chief Information Officer
Ariel Arman V. Lapus Vice President for Business Development -
International
Ellsworth R. Lucero Vice President for Power Generation
Dwight A. Maxino Vice President, Southern Negros and Northern
Negros Geothermal Field
Manuel C. Paete Vice President, Leyte Geothermal Production
Field
Liberato S. Virata Vice President, Bacon-Manito Geothermal
Project
SEC Form 17Q – 1Q 2014 27
Wilfredo A. Malonzo Vice President for Supply Chain Management
Maribel A. Manlapaz Assistant Vice President, Comptroller
Teodorico Jose R. Delfin Corporate Secretary
Ana Maria A. Katigbak Assistant Corporate Secretary
Glenn L. Tee Senior Manager, Internal Audit
Erudito S. Recio Senior Manager, Investor Relations
ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIES
FINANCIAL SOUNDNESS INDICATORS
Ratio March 31
2014 2013
Current 2.41:1.00 2.07:1.00
Debt-to-Equity 1.60:1.00 1.35:1.00
Net Debt-to-Equity 1.21:1.00 1.00:1.00
Return on Assets (%) 5.10 11.23
Return on Equity (%) 14.18 31.47
Solvency 0.06 0.08
Interest Rate Coverage 3.67:1.00 4.69:1.00
Asset-to-Equity 2.92:1.00 2.64:1.00
MAP OF RELATIONSHIPS OF THE COMPANIES WITHIN THE FPH / FIRST GEN GROUPS
*FPH’s Corporate Structure as of March 31, 2014
1
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)
SUPPLEMENTARY SCHEDULE OF ALL EFFECTIVE STANDARDS
AND INTERPRETATIONS MARCH 31, 2014
PHILIPPINE FINANCIAL REPORTING STANDARDS
AND INTERPRETATIONS Effective as of March 31, 2014
Adopted Not
Adopted Not
Applicable
Framework for the Preparation and Presentation of
Financial Statements Conceptual Framework Phase A: Objectives and qualitative
characteristics
PFRSs Practice Statement Management Commentary
Philippine Financial Reporting Standards
PFRS 1
(Revised) First-time Adoption of Philippine Financial
Reporting Standards
Amendments to PFRS 1 and PAS 27: Cost of an
Investment in a Subsidiary, Jointly Controlled
Entity or Associate
Amendments to PFRS 1: Additional Exemptions
for First-time Adopters
Amendment to PFRS 1: Limited Exemption from
Comparative PFRS 7 Disclosures for First-time
Adopters
Amendments to PFRS 1: Severe Hyperinflation
and Removal of Fixed Date for First-time Adopters
Amendments to PFRS 1: Government Loans
PFRS 2 Share-based Payment
Amendments to PFRS 2: Vesting Conditions and
Cancellations
Amendments to PFRS 2: Group Cash-settled
Share-based Payment Transactions
PFRS 3
(Revised) Business Combinations
PFRS 4 Insurance Contracts
Amendments to PAS 39 and PFRS 4: Financial
Guarantee Contracts
PFRS 5 Non-current Assets Held for Sale and
Discontinued Operations
2
PHILIPPINE FINANCIAL REPORTING STANDARDS
AND INTERPRETATIONS Effective as of March 31, 2014
Adopted Not
Adopted Not
Applicable
PFRS 6 Exploration for and Evaluation of Mineral
Resources
PFRS 7 Financial Instruments: Disclosures
Amendments to PFRS 7: Transition
PHILIPPINE FINANCIAL REPORTING STANDARDS
AND INTERPRETATIONS Effective as of March 31, 2014
Adopted Not
Adopted Not
Applicable
Amendments to PAS 39 and PFRS 7:
Reclassification of Financial Assets
Amendments to PAS 39 and PFRS 7:
Reclassification of Financial Assets - Effective
Date and Transition
Amendments to PFRS 7: Improving Disclosures
about Financial Instruments
Amendments to PFRS 7: Disclosures - Transfers of
Financial Assets
Amendments to PFRS 7: Disclosures - Offsetting
Financial Assets and Financial Liabilities*
Amendments to PFRS 7: Mandatory Effective
Date of PFRS 9 and Transition Disclosures*
PFRS 8 Operating Segments
PFRS 9 Financial Instruments*
Amendments to PFRS 9: Mandatory Effective
Date of PFRS 9 and Transition Disclosures*
PFRS 10 Consolidated Financial Statements*
PFRS 11 Joint Arrangements*
PFRS 12 Disclosure of Interests in Other Entities*
PFRS 13 Fair Value Measurement*
Philippine Accounting Standards
PAS 1
(Revised) Presentation of Financial Statements
Amendment to PAS 1: Capital Disclosures
Amendments to PAS 32 and PAS 1: Puttable
Financial Instruments and Obligations Arising on
Liquidation
Amendments to PAS 1: Presentation of Items of
3
PHILIPPINE FINANCIAL REPORTING STANDARDS
AND INTERPRETATIONS Effective as of March 31, 2014
Adopted Not
Adopted Not
Applicable
Other Comprehensive Income*
PAS 2 Inventories
PAS 7 Statement of Cash Flows
PAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors
PAS 10 Events after the Balance Sheet Date
PAS 11 Construction Contracts
PAS 12 Income Taxes
Amendment to PAS 12 - Deferred Tax: Recovery
of Underlying Assets
PAS 16 Property, Plant and Equipment
PAS 17 Leases
PAS 18 Revenue
PAS 19 Employee Benefits
Amendments to PAS 19: Actuarial Gains and
Losses, Group Plans and Disclosures
PAS 19
(Amended) Employee Benefits*
PAS 20 Accounting for Government Grants and Disclosure
of Government Assistance
PAS 21 The Effects of Changes in Foreign Exchange Rates
Amendment: Net Investment in a Foreign
Operation
PAS 23
(Revised) Borrowing Costs
PAS 24
(Revised) Related Party Disclosures
PAS 26 Accounting and Reporting by Retirement Benefit
Plans
PAS 27
(Amended) Separate Financial Statements*
PAS 28
(Amended) Investments in Associates and Joint Ventures*
PAS 29 Financial Reporting in Hyperinflationary
Economies
4
PHILIPPINE FINANCIAL REPORTING STANDARDS
AND INTERPRETATIONS Effective as of March 31, 2014
Adopted Not
Adopted Not
Applicable
PAS 31 Interests in Joint Ventures
PAS 32 Financial Instruments: Disclosure and Presentation
Amendments to PAS 32 and PAS 1: Puttable
Financial Instruments and Obligations Arising on
Liquidation
Amendment to PAS 32: Classification of Rights
Issues
Amendments to PAS 32: Offsetting Financial
Assets and Financial Liabilities*
PAS 33 Earnings per Share
PAS 34 Interim Financial Reporting
PAS 36 Impairment of Assets
PAS 37 Provisions, Contingent Liabilities and Contingent
Assets
PAS 38 Intangible Assets
PAS 39 Financial Instruments: Recognition and
Measurement
Amendments to PAS 39: Transition and Initial
Recognition of Financial Assets and Financial
Liabilities
Amendments to PAS 39: Cash Flow Hedge
Accounting of Forecast Intragroup Transactions
Amendments to PAS 39: The Fair Value Option
Amendments to PAS 39 and PFRS 4: Financial
Guarantee Contracts
Amendments to PAS 39 and PFRS 7:
Reclassification of Financial Assets
Amendments to PAS 39 and PFRS 7:
Reclassification of Financial Assets - Effective
Date and Transition
Amendments to Philippine Interpretation IFRIC-9
and PAS 39: Embedded Derivatives
Amendment to PAS 39: Eligible Hedged Items
PAS 40 Investment Property
PAS 41 Agriculture
5
PHILIPPINE FINANCIAL REPORTING STANDARDS
AND INTERPRETATIONS Effective as of March 31, 2014
Adopted Not
Adopted Not
Applicable
Philippine Interpretations
IFRIC 1 Changes in Existing Decommissioning,
Restoration and Similar Liabilities
IFRIC 2 Members’ Share in Co-operative Entities and
Similar Instruments
IFRIC 4 Determining Whether an Arrangement Contains a
Lease
IFRIC 5 Rights to Interests arising from Decommissioning,
Restoration and Environmental Rehabilitation
Funds
IFRIC 6 Liabilities arising from Participating in a Specific
Market - Waste Electrical and Electronic
Equipment
IFRIC 7 Applying the Restatement Approach under PAS 29
Financial Reporting in Hyperinflationary
Economies
IFRIC 8 Scope of PFRS 2
IFRIC 9 Reassessment of Embedded Derivatives
Amendments to Philippine Interpretation
IFRIC - 9 and PAS 39: Embedded Derivatives
IFRIC 10 Interim Financial Reporting and Impairment
IFRIC 11 PFRS 2- Group and Treasury Share Transactions
IFRIC 12 Service Concession Arrangements
IFRIC 13 Customer Loyalty Programmes
IFRIC 14 The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction
Amendments to Philippine Interpretations
IFRIC- 14, Prepayments of a Minimum Funding
Requirement
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
IFRIC 17 Distributions of Non-cash Assets to Owners
IFRIC 18 Transfers of Assets from Customers
IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments
IFRIC 20 Stripping Costs in the Production Phase of a
Surface Mine*
6
PHILIPPINE FINANCIAL REPORTING STANDARDS
AND INTERPRETATIONS Effective as of March 31, 2014
Adopted Not
Adopted Not
Applicable
SIC-7 Introduction of the Euro
SIC-10 Government Assistance - No Specific Relation to
Operating Activities
SIC-12 Consolidation - Special Purpose Entities
Amendment to SIC - 12: Scope of SIC 12
SIC-13 Jointly Controlled Entities - Non-Monetary
Contributions by Venturers
SIC-15 Operating Leases - Incentives
SIC-21 Income Taxes - Recovery of Revalued Non-
Depreciable Assets
SIC-25 Income Taxes - Changes in the Tax Status of an
Entity or its Shareholders
SIC-27 Evaluating the Substance of Transactions
Involving the Legal Form of a Lease
SIC-29 Service Concession Arrangements: Disclosures.
SIC-31 Revenue - Barter Transactions Involving
Advertising Services
SIC-32 Intangible Assets - Web Site Costs
*These standards, interpretations and amendments to existing standards became effective subsequent to March 31, 2014. The
Company did not early adopt these standards, interpretations and amendments.
Energy Development Corporation (A Subsidiary of Red Vulcan Holdings Corporation) and Subsidiaries
Unaudited Interim Condensed Consolidated Financial Statements March 31, 2014 and 2013 (With Comparative Audited Figures as of December 31, 2013)
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)
AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION As of March 31, 2014
(With Comparative Audited Figures as of December 31, 2013)
March 31,
2014
(Unaudited)
December 31,
2013
(Audited)
ASSETS
Current Assets
Cash and cash equivalents (Notes 5 and 23) P=14,247,765,753 P=16,043,154,556
Financial asset at fair value through profit or loss (Note 23) 500,000,000 –
Trade and other receivables (Notes 6 and 23) 4,987,604,223 3,611,367,033
Available-for-sale (AFS) investments (Note 23) – 341,841,500
Parts and supplies inventories (Note 7) 3,316,277,000 3,094,303,449
Derivative assets (Note 23) 12,581,498 14,244,905
Other current assets (Note 8) 1,560,336,795 1,235,454,883
Total Current Assets 24,624,565,269 24,340,366,326
Noncurrent Assets
Property, plant and equipment (Note 9) 67,705,062,705 66,240,009,563
Goodwill and intangible assets (Note 10) 4,371,447,185 4,399,527,299
Exploration and evaluation assets 2,462,036,651 2,380,775,489
Available-for-sale investments 447,319,018 407,242,129
Deferred tax assets - net 1,330,654,542 1,335,077,588
Derivative assets (Note 23) 88,070,486 46,885,196
Other noncurrent assets (Note 11) 6,126,322,248 5,855,620,746
Total Noncurrent Assets 82,530,912,835 80,665,138,010
TOTAL ASSETS P=107,155,478,104 P=105,005,504,336
LIABILITIES AND EQUITY
Current Liabilities
Trade and other payables (Notes 12 and 22) P=8,081,895,360 P=6,981,975,893
Due to related parties (Notes 22 and 23) 48,149,789 53,347,005
Income tax payable 359,024,486 –
Current portion of:
Long-term debts (Notes 13 and 23) 1,730,583,872 1,872,075,873
Derivative liabilities (Note 23) – 524,790
Total Current Liabilities P=10,219,653,507 8,907,923,561
(Forward)
- 2 -
March 31,
2014
(Unaudited)
December 31,
2013
(Audited)
Noncurrent Liabilities
Long-term debts - net of current portion
(Notes 13 and 23) P=57,034,888,461 P=56,676,684,462
Net retirement and other post-employment benefits 1,736,087,353 1,658,587,597 Provisions and other long-term liabilities 1,482,033,415 1,513,676,279 Derivative liabilities - net of current portion (Note 23) – 3,673,532
Total Noncurrent Liabilities 60,253,009,229 59,852,621,870
Total Liabilities 70,472,662,736 68,760,545,431
Equity
Attributable to equity holders of the Parent Company:
Preferred stock 93,750,000 93,750,000 Common stock 18,750,000,000 18,750,000,000 Equity reserve (3,706,430,769) (3,706,430,769) Additional paid-in capital 6,283,568,086 6,282,808,842 Common shares in employee trust account (350,303,194) (351,494,001) Net accumulated unrealized gain on AFS investments 72,033,359 29,611,321 Cumulative translation adjustment on hedging transactions (26,707,533) (55,615,718) Cumulative translation adjustment arising from foreign
subsidiaries (5,178,069) (8,698,511) Retained earnings 13,697,711,769 13,204,236,334
34,808,443,649 34,238,167,498 Non-controlling interest 1,874,371,719 2,006,791,407
Total Equity 36,682,815,368 36,244,958,905
TOTAL LIABILITIES AND EQUITY P=107,155,478,104 P=105,005,504,336
See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)
AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF INCOME
For the Three-Month Periods Ended
March 31
2014 2013
SALE OF ELECTRICITY P=7,137,864,198 P=6,939,942,895
COST OF SALE OF ELECTRICITY (Note 15) (2,338,697,738) (2,194,713,400)
GENERAL AND ADMINISTRATIVE EXPENSES (Note 16) (1,261,605,081) (838,912,721)
FINANCIAL INCOME (EXPENSES)
Interest income (Notes 4 and 18) 52,510,265 74,034,291
Interest expense (Notes 4 and 17) (972,593,065) (839,944,221)
(920,082,800) (765,909,930)
OTHER INCOME (CHARGES)
Foreign exchange gains - net (Note 19) (171,098,245) 98,554,117
Derivatives gain (loss) - net 7,517,980 (5,448,092)
Miscellaneous - net (Note 20) 307,163,165 (5,524,499)
143,582,900 87,581,526
INCOME BEFORE INCOME TAX 2,761,061,479 3,227,988,370
PROVISION FOR INCOME TAX
Current (232,761,178) (239,835,347)
Deferred (4,744,554) (6,594,069)
(237,505,732) (246,429,416)
NET INCOME P=2,523,555,747 P=2,981,558,954
Net income attributable to:
Equity Holders of the Parent Company P=2,375,975,435 P=2,698,223,255
Non-controlling interest 147,580,312 283,335,699
P=2,523,555,747 P=2,981,558,954
Basic/Diluted Earnings Per Share for Net Income
Attributable to Equity Holders of the Parent Company
(Note 21) P=0.126 P=0.144
See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)
AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
For the Three-Month Periods Ended
March 31
2014 2013
NET INCOME P=2,523,555,747 P=2,981,558,954
OTHER COMPREHENSIVE INCOME
Other comprehensive income to be
reclassified to profit or loss in subsequent
periods:
Changes in fair value of available-for-sale
investments recognized in equity 42,422,038 2,295,283
Cumulative translation adjustments on foreign
subsidiaries 32,428,627 17,149,906
Total other comprehensive income - net of tax effect 74,850,665 19,445,189
TOTAL COMPREHENSIVE INCOME P=2,598,406,412 P=3,001,004,143
Total comprehensive income attributable to:
Equity Holders of the Parent Company P=2,450,826,100 P=2,717,668,444
Non-controlling interest 147,580,312 283,335,699
P=2,598,406,412 P=3,001,004,143
See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)
AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2014 AND 2013
Equity Attributable to Equity Holders of the Parent Company
Preferred
Stock
(Note 14)
Common
Stock
(Note 14)
Common
Shares in
Employee
Trust Account
Additional
Paid-in
Capital
Equity
Reserve
Net
Accumulated
Unrealized
Gain on AFS
Investments
Cumulative
Translation
Adjustments-
Hedging
Transactions
Cumulative
Translation
Adjustments-
Foreign
Subsidiaries
Remeasurements
of Retirement
and Other Post-
Employment
Benefits
Retained
Earnings Subtotal
Non-controlling
Interest Total Equity
Balances, January 1, 2014 P=93,750,000 P=18,750,000,000 (P=351,494,001) P=6,282,808,842 (P=3,706,430,769) P=29,611,321 (P=55,615,718) (P=8,698,511)
P=– P=13,204,236,334 P=34,238,167,498 P=2,006,791,407 P=36,244,958,905
Total comprehensive income: – – – –
Net income – – – – – – – – – 2,375,975,435 2,375,975,435 147,580,312 2,523,555,747
Changes in fair value of AFS
investments recognized
in equity – – – – – 42,422,038 – – – – 42,422,038 42,422,038
Cumulative translation
adjustments – – – – – 28,908,185 3,520,442 32,428,627 32,428,627
– – – – – 42,422,038 28,908,185 3,520,442 2,375,975,435 2,450,826,100 147,580,312 2,598,406,412
Cash dividend (Notes 12 and 14) – – – – – – – – – (1,882,500,000) (1,882,500,000) (280,000,000) (2,162,500,000)
Share based payment – – 1,190,807 759,244 – – – – – – 1,950,051 – 1,950,051
Balances, March 31, 2014
(Unaudited) P=93,750,000 P=18,750,000,000 (350,303,194) 6,283,568,086 (3,706,430,769) 72,033,359 (26,707,533) (5,178,069) 13,697,711,769 34,808,443,649 1,874,371,719 36,682,815,368
See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
- 2 –
Equity Attributable to Equity Holders of the Parent Company
Preferred
Stock
Common
Stock
Common
Shares in
Employee
Trust Account
Additional
Paid-in
Capital
Equity
Reserve
Net
Accumulated
Unrealized
Gain on AFS
Investments
Cumulative
Translation
Adjustment
Retained
Earnings Subtotal
Non-controlling
Interest Total Equity
Balances, January 1, 2013, as previously
reported P=93,750,000 P=18,750,000,000 (P=358,429,306) P=6,277,865,786 (P=3,706,430,769) P=111,522,725 (P=138,589,991) P=12,331,621,322 P=33,361,309,767 P=2,072,545,121 P=35,433,854,888
Total comprehensive income:
Net income – – – – – – – 2,698,223,255 2,698,223,255 283,335,699 2,981,558,954
Changes in fair value of AFS investments
recognized in equity – – – – – 2,295,283 – – 2,295,283 – 2,295,283
Cumulative translation adjustment – – – – – – 17,149,906 – 17,149,906 – 17,149,906
– – – – – 2,295,283 17,149,906 2,698,223,255 2,717,668,444 283,335,699 3,001,004,143
Prior period adjustment- impact of PAS 19 – – – – – – – (689,361,078) (689,361,078) – (689,361,078)
Documentary stamp tax on common shares
subscription – – – – – – – (624,500) (624,500) – (624,500)
Cash dividend – – – – – – – (1,507,500,000) (1,507,500,000) – (1,507,500,000)
Balances, March 31, 2013 P=93,750,000 P=18,750,000,000 (P=358,429,306) P=6,277,865,786 (P=3,706,430,769) P=113,818,008 (P=121,440,085) P=12,832,358,999 P=33,881,492,633 P=2,355,880,820 P=36,237,373,453
See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)
AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2014 AND 2013
For the Three-Month Periods Ended
March 31
2014 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax P=2,761,061,479 P=3,227,988,370
Adjustments for:
Interest expense (Note 17) 972,593,065 839,944,223
Depreciation and amortization (Notes 9 and 10) 935,536,150 889,248,222
Unrealized foreign exchange losses (gains) - net 204,551,170 (118,082,162)
Retirement and post-employment benefits costs 77,499,756 92,057,925
Provision for doubtful accounts 8,132,751 8,580,142
Derivative losses (gains) - net (Note 23) 7,547,020 (1,349,710)
Share-based payment expense 1,950,051 –
Gain on sale of property, plant and equipment (231,835,675) (364,344)
Interest income (Note 18) (52,510,265) (74,034,291)
Operating income before working capital changes 4,684,525,502 4,863,988,375
Decrease (increase) in:
Trade and other receivables (1,378,003,840) 579,945,109
Parts and supplies inventories (221,973,551) 71,819,758
Other current assets (75,879,901) (248,382,603)
Increase (decrease) in:
Trade and other payables (1,189,921,239) (2,015,672,567)
Due to related parties 59,800,683 (13,823,150)
Cash generated from operations 1,878,547,654 3,237,874,922
Income taxes paid including creditable withholding taxes (122,738,704) (151,811,971)
Retirement and other post-employment benefits paid – (974,367)
Net cash flows from operating activities 1,755,808,950 3,085,088,584
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (Note 9) (2,875,603,570) (1,058,833,296)
Proceeds from:
Sale of property, plant and equipment 753,638,487 15,279,493
Redemption of available-for-sale investments 321,940,895 –
Revenue generated from testing of property,
plant and equipment – 299,366,077
Interest received 53,890,239 91,134,598
Purchase of financial asset at FVPL (500,000,000) –
Increase in:
Exploration and evaluation assets (81,261,162) (333,292,643)
Intangible assets (448,195) –
Other noncurrent assets (278,523,301) (121,300,818)
Net cash used in investing activities (2,606,366,607) (1,107,646,589)
(Forward)
- 2 -
March 31,
2014
(Unaudited)
March 31,
2013
(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of:
Cash dividends (Note 14) (P=280,000,000) P=–
Interest and financing charges (628,151,034) (541,977,560)
Decrease in provisions and other long-term liabilities (38,554,666) (24,385,806)
Net cash flows used in financing activities (946,705,700) (566,363,366)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,797,263,357) 1,411,078,629
EFFECT OF FOREIGN EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS 1,874,554 2,579,720
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 16,043,154,556 11,420,144,205
CASH AND CASH EQUIVALENTS AT END OF PERIOD
(Notes 5 and 23) P=14,247,765,753 P=12,833,802,554
See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.
ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)
AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. Corporate Information
Corporate Structure
Energy Development Corporation (the “Parent Company” or “EDC”) is a subsidiary of Red
Vulcan Holdings Corporation (Red Vulcan). The Parent Company and its subsidiaries
(collectively hereinafter referred to as the “Company”), were separately incorporated and
registered with the Philippine Securities and Exchange Commission (SEC) except for its foreign
subsidiaries. Below are the Parent Company’s ownership interests in its subsidiaries:
Percentage of Ownership
March 31, 2014 December 31, 2013
Direct Indirect Direct Indirect
EDC Drillco Corporation (EDC Drillco) 100.00 – 100.00 – EDC Geothermal Corp. (EGC) 100.00 – 100.00 –
Green Core Geothermal Inc. (GCGI) – 100.00 – 100.00
Bac-Man Geothermal Inc. (BGI) – 100.00 – 100.00 Unified Leyte Geothermal Energy Inc. (ULGEI) – 100.00 – 100.00 Southern Negros Geothermal, Inc. (SNGI)
**** – 100.00 – 100.00 EDC Mindanao Geothermal Inc. (EMGI)
**** – 100.00 – 100.00 Bac-Man Energy Development Corporation
(BEDC)**** – 100.00 – 100.00
Kayabon Geothermal, Inc. (KGI)**** – 100.00 – 100.00
Energy Development (EDC) Corporation Chile Limitada
[EDC Chile Limitada] 99.99 0.01 99.99 0.01
EDC Holdings International Limited (EHIL)*** 100.00 – 100.00 –
Energy Development Corporation Hong Kong Limited
(EDC HKL) *** – 100.00 – 100.00
EDC Chile Holdings SPA** – 100.00 – 100.00
EDC Geotermica Chile** – 100.00 – 100.00
EDC Peru Holdings S.A.C. ** – 100.00 – 100.00
EDC Geotermica Peru S.A.C. **
– 100.00 – 100.00
EDC Quellaapacheta**
– 70.00 – 70.00
EDC Geotérmica Del Sur S.A.C.* – 100.00 – 100.00
EDC Energía Azul S.A.C. * – 100.00 – 100.00
Geotermica Crucero Peru S.A.C. * – 70.00 – 70.00
EDC Energía Perú S.A.C. * – 100.00 – 100.00
Geotermica Tutupaca Norte Peru S.A.C. * – 70.00 – 70.00
EDC Energía Geotérmica S.A.C. * – 100.00 – 100.00
EDC Progreso Geotérmico Perú S.A.C. * – 100.00 – 100.00
Geotermica Loriscota Peru S.A.C. * – 70.00 – 70.00
EDC Energía Renovable Perú S.A.C. * – 100.00 – 100.00
PT EDC Indonesia** – 95.00 – 95.00
PT EDC Panas Bumi Indonesia** – 95.00 – 95.00
EDC Wind Energy Holdings, Inc. (EWEHI) 100.00 – 100.00 – EDC Burgos Wind Power Corporation (EBWPC) – 100.00 – 100.00 EDC Pagudpud Wind Power Corporation
(EPWPC)** – 100.00 – 100.00
First Gen Hydro Power Corporation (FG Hydro) 60.00 – 60.00 – *Incorporated in 2013 and has not yet started commercial operations. **Incorporated in 2012 and has not yet started commercial operations. ***Serves as an investment holding company. ****Incorporated in 2011 and has not yet started commercial operations.
- 2 -
History of Ownership
Beginning December 13, 2006, the common shares of EDC were listed and traded in the
Philippine Stock Exchange (PSE). Up to November 2007, EDC was controlled by the Philippine
National Oil Company (PNOC), a government-owned and controlled corporation, and the
PNOC EDC Retirement Fund.
On November 29, 2007, PNOC and PNOC EDC Retirement Fund sold their combined interests in
EDC to Red Vulcan (a Philippine corporation). Red Vulcan was then a wholly owned subsidiary
of First Gen Corporation (First Gen, a publicly listed Philippine corporation) through Prime
Terracota Holdings Corporation (Prime Terracota, a Philippine corporation). First Gen’s indirect
interest in EDC consists of 6.0 billion common shares and 7.5 billion preferred shares. Control
was then established through First Gen’s 60% indirect voting interest in EDC. Meanwhile, First
Philippine Holdings Corporation (First Holdings, a publicly listed Philippine corporation) directly
owns 66.2% of the common shares of First Gen. Accordingly, First Holdings became then the
ultimate parent of the Company.
On May 12, 2009, First Gen’s indirect voting interest in Red Vulcan was reduced to 45% with the
balance taken up by Lopez Inc. Retirement Fund (40%) and Quialex Realty Corporation (15%)
through the issuance of preferred shares by Prime Terracota. As a result of this transaction, Prime
Terracota replaced First Holdings as the ultimate parent of EDC effective May 12, 2009.
Beginning January 1, 2013, Lopez, Inc. became the ultimate parent of EDC by virtue of the new
definition of control under Philippine Financial Reporting Standards (PFRS) 10, Consolidated
Financial Statements.
Nature of Operations
The Parent Company operates 12 geothermal energy projects in five Geothermal Service Contract
(GSC) areas, namely:
1. Bacon-Manito Geothermal Project (BMGP);
2. Mt. Apo Geothermal Project (MGP);
3. Northern Negros Geothermal Project (NNGP);
4. Southern Negros Geothermal Project (SNGP); and
5. Tongonan Geothermal Project (TGP).
These GSCs are entered into with the Department of Energy (DOE) pursuant to the provisions of
Presidential Decree 1442 (P.D. 1442). These GSCs were replaced by Geothermal Renewable
Energy Service Contracts (GRESCs) on October 23, 2009 in accordance with the provisions of
R.A. 9513 or the Renewable Energy Act of 2008 (RE Law).
Geothermal steam produced is delivered and fed to the Parent Company’s and subsidiary’s power
plants to produce electricity. EDC sells steam and electricity to NPC under the Steam Sales
Agreements (SSAs) and Power Purchase Agreements (PPAs), respectively. Meanwhile, GCGI
and BGI sells electricity to bilateral customers under various Power Supply Agreements (PSAs).
Corporate Address
The Parent Company’s principal place of business is at One Corporate Centre, Julia Vargas
Avenue corner Meralco Avenue, Ortigas Centre, Pasig City.
- 3 -
Authorization for Issuance of the Unaudited Interim Condensed Consolidated Financial
Statements
The interim condensed consolidated financial statements were reviewed, approved and authorized
for issuance by the Board of Directors (BOD) thru the Audit and Governance Committee on
May 14, 2014.
2. Basis of Preparation
The unaudited interim condensed consolidated financial statements have been prepared in
accordance with Philippine Accounting Standard (PAS) 34, Interim Financial Reporting.
Accordingly, the unaudited interim condensed consolidated financial statements do not include all
the information and disclosures required in the annual consolidated financial statements, and
should be read in conjunction with the Company’s annual consolidated financial statements as at
December 31, 2013.
The unaudited interim condensed consolidated financial statements have been prepared on a
historical cost basis, except for the financial asset at FVPL, derivative instruments and AFS
investments that have been measured at fair value. The unaudited interim condensed consolidated
financial statements are presented in Philippine peso (Peso), which is the Parent Company’s
functional currency. All values are rounded to the nearest peso, except when otherwise indicated.
3. Significant Accounting Policies
The accounting policies adopted in the preparation of the unaudited interim condensed
consolidated financial statements are consistent with those followed in the preparation of the
Company’s annual consolidated financial statements as of and for the year ended
December 31, 2013, except for the adoption of the following new and amended accounting
standards that became effective beginning January 1, 2014.
New and Amended Standards
Investment Entities (Amendments to PFRS 10, PFRS 12 and PAS 27)
These amendments are effective for annual periods beginning on or after January 1, 2014.
They provide an exception to the consolidation requirement for entities that meet the
definition of an investment entity under PFRS 10. The exception to consolidation requires
investment entities to account for subsidiaries at fair value through profit or loss. It is not
expected that this amendment would be relevant to the Company since none of the entities in
the Company would qualify to be an investment entity under PFRS 10.
Philippine Interpretation IFRIC 21, Levies (IFRIC 21)
IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers
payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon
reaching a minimum threshold, the interpretation clarifies that no liability should be
anticipated before the specified minimum threshold is reached. IFRIC 21 is effective for
annual periods beginning on or after January 1, 2014. The Company does not expect that
IFRIC 21 will have material financial impact in future financial statements.
- 4 -
PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial
Liabilities (Amendments)
The amendments clarify the meaning of “currently has a legally enforceable right to set-off”
and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as
central clearing house systems) which apply gross settlement mechanisms that are not
simultaneous. The amendments affect presentation only and have no impact on the
Company’s financial position or performance. The amendments to PAS 32 are to be
retrospectively applied for annual periods beginning on or after January 1, 2014.
PAS 39, Financial Instruments: Recognition and Measurement - Novation of Derivatives and
Continuation of Hedge Accounting (Amendments)
These amendments provide relief from discontinuing hedge accounting when novation of a
derivative designated as a hedging instrument meets certain criteria. These amendments are
effective for annual periods beginning on or after January 1, 2014. The Company has not
novated its derivatives during the current period. However, these amendments would be
considered for future novations.
PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets
(Amendments)
These amendments remove the unintended consequences of PFRS 13 on the disclosures
required under PAS 36. In addition, these amendments require disclosure of the recoverable
amounts for the assets or CGUs for which impairment loss has been recognized or reversed
during the period. These amendments are effective retrospectively for annual periods
beginning on or after January 1, 2014 with earlier application permitted, provided PFRS 13 is
also applied. The amendments affect disclosures only and have no impact on the Company’s
financial position or performance.
4. Operating Segment Information
In 2013, the reportable segments of the Company have been changed from business segment
(electricity, steam and drilling) to geographical segment, with each segment representing a
strategic business location that has similar economic and political conditions, proximity of
operations and special risks associated with operations in a particular area.
The Company’s identified reportable segments below are consistent with the segments reported to
the BOD, which is the Chief Operating Decision Maker (CODM) of the Company.
a. Leyte Geothermal Business Unit (LGBU) - refers to Leyte Geothermal Production Field and
Power Plant. This includes projects in Tongonan, Mahanagdong, Upper Mahiao, Malitbog and
other projects in Leyte.
b. Negros Island Geothermal Business Unit (NIGBU) - refers to Southern Negros Geothermal
Production Field and Power Plant.
c. Bacon-Manito Geothermal Business Unit (BGBU) - refers to Bacon-Manito Geothermal
Production Field and Power Plant.
- 5 -
d. Mt. Apo Geothermal Business Unit (MAGBU) - refers to Mt. Apo Geothermal Production
Field and Power Plant.
e. Pantabangan/Masiway - This segment relates to Pantabangan-Masiway hydroelectric complex
located in Nueva Ecija Province.
f. Wind-Ilocos Norte Business Unit (WINBU) - This segment pertains to wind projects in
Northern Luzon, including Burgos wind energy project.
g. All others - refers to other wind energy projects, foreign investments and head office of the
Company.
Segment information is measured in conformity with the accounting policies adopted for
preparing and presenting the consolidated financial statements. Intersegment revenue are made at
normal commercial terms and conditions.
- 6 -
Financial information on the operating segments are summarized as follows:
Pantabangan/
LGBU NIGBU BGBU MGBU Masiway WINBU All others Total
Period Ended March 31, 2014
Segment revenue from external customers P=4,235,973,428 P=2,840,357,107 P=755,874,577 P=588,902,992 P=847,856,667 P=– P=– P=9,268,964,771
(654,329,591) (1,174,337,877) (302,433,105) – – – – (2,131,100,573)
Total segment revenue P=3,581,643,837 P=1,666,019,230 P=453,441,472 P=588,902,992 P=847,856,667 P=– P=– P=7,137,864,198
Segment expenses (1,715,932,347) (694,942,834) (550,047,330) (308,611,197) (225,091,069) (4,936,078) – (3,499,560,855)
Unallocated expenses (P=100,741,964) (P=100,741,964)
Interest income P=28,595,830 P=13,279,621 P=5,424,878 P=3,853,165 P=1,339,163 16,390 1,218 52,510,265
Interest expense (479,344,257) (268,165,343) (94,683,882) (92,981,359) (44,440,671) 7,022,447 (972,593,065)
Other income – net (47,411,387) (50,844,109) (9,979,864) 6,640,953 (1,225,098) (1,274,070) 247,676,475 143,582,900
Income taxes (140,372,173) (70,138,867) 15,211,981 (16,801,680) (22,446,991) (2,958,002) (237,505,732)
Net income P=1,227,179,503 P=595,207,698 (P=180,632,745) P=181,002,874 P=555,992,001 (P=6,193,758) P=151,000,174 P=2,523,555,747
EBITDA P=2,351,522,497 P=1,123,514,967 (P=3,415,720) P=370,980,398 P=727,645,000 (P=4,872,690) P=– P=4,565,374,452
Unallocated expenses (88,257,584)
P=4,477,116,868
Pantabangan/
LGBU NIGBU BGBU MAGBU Masiway WINBU Others Total
Period Ended March 31, 2013
Segment revenue from external customers P=4,330,357,975 P=2,431,176,409 P=82,539,711 P=457,983,138 P=984,204,545 P=– P=– P=8,286,261,778
(546,123,697) (800,195,186) – – – – – (1,346,318,883)
Total segment revenue P=3,784,234,278 P=1,630,981,223 P=82,539,711 P=457,983,138 P=984,204,545 P=– P=– P=6,939,942,895
Segment expenses (1,579,610,013) (618,807,890) (298,986,914) (288,086,838) (225,297,476) (172,450) – (3,010,961,581)
Unallocated segment expenses (22,664,540) (22,664,540)
Interest income 36,699,640 18,079,694 7,541,874 4,269,536 7,434,814 5,145 3,588 74,034,291
Interest expense (419,081,126) (209,178,395) (77,904,084) (84,955,862) (48,824,754) – – (839,944,221)
Other income - net 45,952,519 38,234,883 6,532,822 6,355,668 (9,125,623) (3,730) (365,013) 87,581,526
Income taxes (184,062,569) (82,472,392) 26,158,750 (6,000,947) (52,258) – – (246,429,416)
Net income 1,684,132,729 776,837,123 (254,117,841) 89,564,695 708,339,248 (171,035) (23,025,965) P=2,981,558,954
EBITDA P=2,704,054,811 P=1,146,066,965 (P=145,307,166) P=249,167,532 P=864,156,462 P=– P=– P=4,818,138,604
Unallocated expenses (15,431,920)
P=4,802,706,684
Pantabangan /
LGBU NIGBU BGBU MAGBU WINBU Masiway Elimination Total
As of and for the period ended
March 31, 2014
Segment assets P=67,826,202,006 P=41,135,847,937 P=12,530,874,612 P=9,860,072,395 P=10,556,713,733 P=8,282,452,849 (P=47,894,206,503) P=102,297,957,029
Unallocated corporate assets 4,857,521,075
Total assets P=107,155,478,104
Segment liabilities P=30,503,053,142 P=22,915,772,859 P=16,874,055,502 P=5,034,306,234 P=8,211,672,204 P=4,167,045,949 (P=12,924,454,986) P= 74,781,450,904
Unallocated corporate liabilities (4,308,788,168)
Total liabilities P=70,472,662,736
Capital expenditure P=685,801,474 P=95,707,047 P=368,675,497 P=33,680,635 P=1,402,403,617 P=9,660,096 P=78,619,652 P=2,674,548,018
Unallocated capital expenditure 284,313,676
Total capital expenditure P=2,958,861,694
Depreciation and amortization (P=487,683,001) (P=148,073,457) (P=92,455,304) (P=89,897,217) (P=42,259) (P=104,879,402) (P=11,288,020) (P=934,318,660)
Unallocated depreciation and amortization (630,234)
Total depreciation and amortization (P=934,948,894)
Other non-cash items P=1,871,994 (P=4,365,114) (P=734,834) (P=791,386) P=– P=– P=– P=4,019,340
Unallocated non-cash items
–
Total other non-cash items P=4,019,340
Pantabangan /
LGBU NIGBU BGBU MAGBU WINBU Masiway Elimination Total
As of and for the period ended
December 31, 2013
Segment assets P=65,205,296,071 P=25,469,361,138 P=11,968,739,199 P=9,886,351,624 P=7,814,935,084 P=8,387,255,753 (P=93,724,126,317) P=35,007,812,552
Unallocated corporate assets 69,997,691,784
Total assets P=105,005,504,336
Segment liabilities P=28,473,511,585 P=25,297,887,519 P=16,129,261,708 P=5,289,122,797 P=5,463,699,797 P=4,127,840,853 (P=59,498,621,034) P=25,282,703,225
Unallocated corporate liabilities 43,477,842,206
Total liabilities P=68,760,545,431
Capital expenditure P=2,628,115,271 P=986,383,567 P=1,408,204,079 P=549,451,912 P=4,085,608,975 P=58,608,479 P=– P=9,716,372,283
Unallocated capital expenditure 1,531,302,376
Total capital expenditure P=11,247,674,659
Depreciation and amortization P=2,004,853,928 P=561,616,822 P=210,437,608 P=350,803,482 P=132,408 P=420,901,765 P=– P=3,548,746,013
Unallocated depreciation and amortization 20,601,339
Total depreciation and amortization P=3,569,347,352
Other non-cash items P=78,677,802 P=20,688,290 P=70,561,550 P=13,972,713 P=949,204 P=– P=– P=184,849,559
Unallocated non-cash items (1,849,215)
Total other non-cash items P=183,000,344
- 9 -
The following table shows the Company’s reconciliation of EBITDA to the consolidated net
income (loss) for the three-month periods ended March 31, 2014 and 2013.
2014 2013
EBITDA P=4,477,116,868 P=4,802,706,684
Add (Deduct):
Depreciation and amortization (Notes 9 and 10) (935,536,150) (889,248,222)
Interest expense (Note 17) (972,593,065) (839,944,221)
Provision for income tax (237,505,732) (246,429,416)
Foreign exchange gains (losses) - net (Note 19) (171,098,245) 98,554,117
Interest income (Note 18) 52,510,265 74,034,291
Provision for doubtful accounts (Note 167) (8,132,751) (8,537,248)
Derivatives loss - net (Note 234) 7,517,980 (5,448,092)
Reversal of impairment of parts and supplies
inventories 4,113,412 1,395,562
Miscellaneous - net (Note 20) 307,163,165 (5,524,501)
Consolidated net income P=2,523,555,747 P=2,981,558,954
The Parent Company has intersegment revenue from/to GCGI and BGI for the sale of
steam/electricity. Intersegment revenues are all eliminated in consolidation. Segment information
is measured in conformity with the accounting policies adopted for preparing and presenting the
consolidated financial statements. Intersegment revenue are made at normal commercial terms
and conditions.
Unallocated expenses pertain to expenses of the corporate, technical and administrative support
groups while unallocated corporate assets and liabilities which include among others certain cash
and cash equivalents, property, plant and equipment, parts and supplies inventories, trade and
other payables and retirement and post-employment benefits, pertain to the Head Office and are
managed on a group basis.
5. Cash and Cash Equivalents
March 31,
2014
(Unaudited)
December 31,
2013
(Audited)
Cash on hand and in banks P=2,810,445,708 P=3,941,157,345
Cash equivalents 11,437,320,045 12,101,997,211
P=14,247,765,753 P=16,043,154,556
Cash in banks earn interest at the respective bank deposit rates. Cash equivalents consist of
money market placements, which are made for varying periods of up to three months depending
on the immediate cash requirements of the Company.
6. Trade and Other Receivables
March 31,
2014
(Unaudited)
December 31,
2013
(Audited)
Trade P=4,681,963,672 P=3,397,069,626
Others:
Advances to employees 88,352,412 73,699,085
Non-trade accounts receivable 171,760,020 94,851,647
Loans and notes receivables 124,950,616 124,936,697
Employee receivables 11,725,926 11,958,401
Total other receivables 396,788,974 305,445,830
5,078,752,646 3,702,515,456
Less allowance for doubtful accounts 91,148,423 91,148,423
P=4,987,604,223 P=3,611,367,033
Trade receivables are noninterest-bearing and are generally collectible in 30 to 60 days. Majority
of the Company’s trade receivables arose from sale of electricity to NPC.
Provision for doubtful accounts amounted to nil for the periods ended March 31, 2014 and 2013.
7. Parts and Supplies Inventories
March 31,
2014
December 31,
2013
On hand:
Drilling tubular products and equipment spares P=1,552,032,335 P=1,461,354,072
Power plant spares 782,951,772 678,693,801
Pump, production/steam gathering system,
steam turbine, valves and valve spares 543,477,284 477,428,028
Electrical, cable, wire product and compressor
spares 115,927,257 121,659,974
Heavy equipment spares 91,983,612 65,130,865
Chemical, chemical products, gases and catalyst 83,757,794 136,692,032
Construction and hardware supplies, stationeries
and office supplies, hoses, communication
and other spares and supplies 63,874,186 68,258,675
Automotive, mechanical, bearing, seals, v-belt,
gasket, tires and batteries 45,485,471 47,339,199
Measuring instruments, indicators and tools,
safety equipment and supplies 33,849,596 33,832,918
3,313,339,307 3,090,389,564
In transit 2,937,693 3,913,885
P=3,316,277,000 P=3,094,303,449
Inventories in transit include items not yet received but ownership or title to the goods has already
been passed to the Company.
8. Other current assets
March 31,
2014
December 31,
2013
Withholding tax certificates P=613,313,016 P=393,078,659
Tax credit certificates 472,531,633 472,531,633
Prepaid expenses 401,322,789 302,435,288
Advances to contractors 72,154,710 67,064,239
Others 1,014,647 345,064
P=1,560,336,795 P=1,235,454,883
- 12 -
9. Property, Plant and Equipment
March 31, 2014
Land Power Plants
FCRS and
Production Wells
Buildings,
Improvements
and Other
Structures
Exploration,
Machinery and
Equipment
Transportation
Equipment
Furniture,
Fixtures and
Equipment
Laboratory
Equipment
Construction
in Progress Total
Cost
Balances at January 1 P=515,353,046 P=38,731,016,968 P=25,467,012,393 P=2,128,442,644 P=5,441,021,744 P=193,057,863 P=1,101,387,317 P=662,738,194 P=16,291,440,381 P=90,531,470,550
Additions – 9,738,777 (4,638,471) 95,786 24,460,578 7,116,796 5,817,484 12,496,234 2,903,774,510 2,958,861,694
Disposals/retirements – – – – (669,356,465) (2,403,008) (205,815) (1) – (671,965,289)
Reclassifications – 1,574,387,231 771,731 2,090,267 75,402 (68,206,172) 1,527,365 53,363 (1,568,781,532) (58,082,345)
Balances at March 31 515,353,046 40,315,142,976 25,463,145,653 2,130,628,697 4,796,201,259 129,565,479 1,108,526,351 675,287,790 17,626,433,359 92,760,284,610
Accumulated Depreciation,
Amortization and Impairment
Balances at January 1 17,627,581 11,895,257,449 8,476,733,491 617,184,722 2,412,546,361 69,185,062 511,330,385 291,595,936 – 24,291,460,987
Depreciation and amortization for the year – 540,151,038 196,149,738 26,070,270 80,456,753 4,669,918 36,996,023 18,244,508 4,269,592 907,007,840
Disposals/retirement – – – – (147,553,740) (2,402,997) (205,739) – – (150,162,476)
Reclassifications – 28,750 – 1,435,557 16,073,152 192,666 (6,558,651) 13,672 (4,269,592) 6,915,554
Balances at March 31 17,627,581 12,435,437,237 8,672,883,229 644,690,549 2,361,522,526 71,644,649 541,562,018 309,854,116 – 25,055,221,905
Net Book Value P=497,725,465 P=27,879,705,739 P=16,790,262,424 P=1,485,938,148 P=2,434,678,733 P=57,920,830 P=566,964,333 P=365,433,674 P=17,626,433,359 P=67,705,062,705
December 31, 2013
Land Power Plants FCRS and
Production Wells
Buildings,
Improvements
and Other Structures
Exploration,
Machinery and Equipment
Transportation Equipment
Furniture,
Fixtures and Equipment
Laboratory Equipment
Construction in Progress Total
Cost
Balances at January 1 P=515,587,728 P=37,329,247,352 P=22,545,392,364 P=2,378,453,064 P=3,938,188,809 P=286,850,994 P=629,797,360 P=617,995,651 P=13,168,080,990 P=81,409,594,312 Additions – 149,652,902 133,924,564 47,343,279 195,718,071 16,408,565 63,402,914 34,683,517 10,606,540,847 11,247,674,659
Disposals/retirements – (672,748,540) – (13,625,188) (151,257,597) (26,134,412) (55,453,415) (15,308,799) – (934,527,951)
Reclassifications (234,682) 1,924,865,254 2,787,695,465 (283,728,511) 1,458,372,461 (84,067,284) 463,640,458 25,367,825 (7,483,181,456) (1,191,270,470)
Balances at December 31 515,353,046 38,731,016,968 25,467,012,393 2,128,442,644 5,441,021,744 193,057,863 1,101,387,317 662,738,194 16,291,440,381 90,531,470,550
Accumulated Depreciation, Amortization
and Impairment
Balances at January 1 17,255,629 9,864,027,894 7,123,326,992 516,196,390 1,876,398,510 96,393,978 426,269,376 218,642,240 590,863,997 20,729,375,006
Depreciation and amortization for the year – 2,136,698,413 650,990,367 105,228,014 368,848,266 15,386,426 110,751,071 58,536,459 – 3,446,439,016 Disposals/retirements – (167,347,957) – (5,141,356) (148,653,037) (5,478,882) (47,190,772) (10,286,418) – (384,098,422)
Reclassifications 371,952 61,879,099 702,416,132 901,674 315,952,622 (37,116,460) 21,500,710 24,703,655 (590,863,997) 499,745,387
Balances at December 31 17,627,581 11,895,257,449 8,476,733,491 617,184,722 2,412,546,361 69,185,062 511,330,385 291,595,936 – 24,291,460,987
Net Book Value P=497,725,465 P=26,835,759,519 P=16,990,278,902 P=1,511,257,922 P=3,028,475,383 P=123,872,801 P=590,056,932 P=371,142,258 P=16,291,440,381 P=66,240,009,563
- 13 -
Estimated Rehabilitation and Restoration Costs
FCRS and production wells include the estimated rehabilitation and restoration costs of the
Company’s steam fields and power plants’ contract areas at the end of the contract period. These
were based on technical estimates of probable costs, which may be incurred by the Company in
the rehabilitation and restoration of the said steam fields and power plants’ contract areas from
2031 up to 2044, discounted using the Company’s risk-adjusted rate. These costs, net of
accumulated amortization, amounted to P=506.70 million and P=346.28 million as of March 31,
2014 and December 31, 2013, respectively. As of March 31, 2014 and December 31, 2013, the
provision for rehabilitation costs under “Provisions and other long-term liabilities” amounted to
P=696.72 million and P=493.52 million, respectively.
Rehabilitation of BMGPP
Since 2010, BGI’s power plants are undergoing rehabilitation. In 2011, BGI performed testing
procedures in preparation for its planned commercial operations. As of March 31, 2014, Unit 2 is
still under rehabilitation while Unit 1 and Unit 3 commenced commercial operations on January
28, 2014 and October 1, 2013, respectively.
Meanwhile, revenue generated by Unit 1 from January 28, 2014 to March 31, 2014 and Unit 3
from January 1, 2014 to March 31, 2014 during their commercial operations amounting to P=308.5
million and P=145.0 million, respectively, were presented as part of the “Revenue from sale of
electricity” account in the consolidated statement of income.
Burgos Wind Energy Project
In March 2013, the Parent Company entered into an agreement with Vestas of Denmark for the
construction of the 87 MW wind farm in Burgos, Ilocos Norte. Under the Engineering,
Procurement and Construction (EPC), Vestas is responsible for the design, manufacture, delivery
of the works from the place of manufacture to the project site, erection, testing and commissioning
for a complete and operational wind farm. The agreement covers the installation of 29 units of
V90 3.0 MW turbine together with associated on-site civil and electrical works. The Company
issued Notice to Proceed to Vestas in June 2013.
On April 30, 2014, the Company has signed on for the installation of an additional twenty one
(21) wind turbines. This raises the total project investment cost to US$450 million from
US$300 million, and once fully completed, increases the total generating capacity to 150 MW
from 87 MW.
Depreciation and Amortization
Details of depreciation and amortization charges recognized in the unaudited interim consolidated
statements of income are shown below:
March 31,
2014
(Unaudited)
March 31,
2013
(Unaudited)
Property, plant and equipment P=907,007,840 P=865,200,434
Intangible assets (Note 10) 28,528,310 24,047,789
P=935,536,150 P=889,248,223
Cost of sales of electricity (Note 15) P=824,150,589 P=820,829,217
General and administrative (Note 16) 111,385,561 68,419,006
P=935,536,150 P=889,248,223
- 14 -
10. Goodwill and Intangible Assets
March 31, 2014
Goodwill Water Rights
Other Intangible
Assets Total
Cost
Balances at January 1 P=2,535,051,530 P=2,404,778,918 P=171,776,021 P=5,111,606,469
Additions – – 448,196 448,196
Balances at March 31 2,535,051,530 2,404,778,918 172,224,217 5,112,054,665
Accumulated Amortization
Balances at January 1 – 685,361,992 26,717,178 712,079,170
Amortization
(Notes 15and 16) – 24,047,789 4,480,521 28,528,310
Balances at March 31 – 709,409,781 31,197,699 740,607,480
Net Book Value P=2,535,051,530 P= 1,695,369,137 P=141,026,518 P=4,371,447,185
December 31, 2013
Goodwill Water Rights
Other Intangible
Assets Total
Cost
Balances at January 1 P=2,535,051,530 P=2,404,778,918 P=467,744,367 P=5,407,574,815
Reclassifications (Note 9) – – (467,744,367) (467,744,367)
Additions – – 171,776,021 171,776,021
Balances at December 31 2,535,051,530 2,404,778,918 171,776,021 5,111,606,469
Accumulated Amortization
Balances at January 1 – 589,170,835 – 589,170,835
Amortization
(Notes 15 and 16) – 96,191,157 26,717,178 122,908,335
Balances at December 31 – 685,361,992 26,717,178 712,079,170
Net Book Value P=2,535,051,530 P=1,719,416,926 P=145,058,843 P=4,399,527,299
Water rights are amortized using the straight-line method over 25 years, which is the term of the
Agreement with National Irrigation Administration. The remaining amortization period of water
rights is 17.7 years as of March 31, 2014.
Other intangible assets pertain to the Company’s wind energy project development costs and
software cost related to the acquisition of new accounting system in 2013.
Reclassification
In 2013, the Company reclassified the wind energy project development costs amounting to
P=467.74 million into property, plant and equipment. Management believes that the technical
feasibility and commercial viability of the project has already been established following the
issuance by the Company of notice to proceed to its wind farm contractor, Vestas (see Note 9).
- 15 -
11. Other Noncurrent Assets
March 31,
2014
(Unaudited)
December 31,
2013
(Audited)
Input value-added tax P=4,419,331,447 P=4,177,522,698
Tax credit certificates 1,482,893,864 1,560,618,288
Special deposits and funds 224,339,989 177,990,509
Prepaid expenses 205,312,056 155,364,932
Long-term receivables 96,447,621 88,962,765
Others 179,255,938 168,287,470
6,607,580,915 6,328,746,662
Less allowance for doubtful accounts 481,258,667 473,125,916
P=6,126,322,248 P=5,855,620,746
Provision for doubtful accounts pertaining to input VAT and long-term receivables amounted to
P=9.8 million and P=8.5 million for the three-month periods ended March 31, 2014 and 2013,
respectively (Note 16).
12. Trade and Other Payables
March 31,
2014
(Unaudited)
December 31,
2013
(Audited)
Accounts payable:
Third parties P=3,212,451,510 P=5,061,002,130
Related parties (Note 22) 586,220,789 235,996,358
Royalty fee payable 51,817,809 39,671,237
Dividends payable 1,882,500,000 –
Accrued interest and guarantee fees 1,194,109,430 792,685,801
Withholding and other taxes payable 392,570,936 387,352,605
Deferred credits 36,454,488 35,720,220
SSS and other contributions payable 4,763,030 4,064,414
Other payables 721,007,368 425,483,128
P=8,081,895,360 P=6,981,975,893
Accounts payable are noninterest-bearing and are normally settled on a 30 to 60 days term.
The accrued interest represents interest accrual on outstanding loans.
- 16 -
13. Long-term Debts
March 31,
2014
(Unaudited)
December 31,
2013
(Audited)
US Dollar-denominated debts P=23,044,219,616 P=22,815,344,784
Peso-denominated debts 35,721,252,717 35,733,415,550
58,765,472,333 58,548,760,334
Less current portion 1,730,583,872 1,872,075,873
Noncurrent portion P=57,034,888,461 P=56,676,684,461
The Company’s foreign-currency denominated long-term debts were translated into Philippine
pesos based on the prevailing foreign exchange rates at the date of the unaudited interim
consolidated statement of financial position (USD1= P=44.815 on March 31, 2014 and
USD1= P=44.395 on December 31, 2013).
14. Dividends
Parent Company
On February 28, 2014, EDC declared cash dividends amounting to P=1.9 billion to its common
shareholders and P=7.5 million to its preferred shareholders of record as of March 17, 2014 payable
on or before April 10, 2014.
FG Hydro
On January 29, 2014, FG Hydro declared cash dividends to its non-controlling common
shareholder amounting to P=280.0 million paid on February 4, 2014.
15. Cost of Sale of Electricity
March 31,
2014
(Unaudited)
March 31,
2013
(Unaudited)
Depreciation and amortization P=824,150,589 P=820,829,217
Personnel costs 531,474,558 385,725,206
Purchased services and utilities (Note 22) 360,238,049 291,487,988
Rental, insurance and taxes 285,005,469 341,325,748
Parts and supplies issued 197,132,764 100,268,013
Repairs and maintenance 74,777,943 205,650,497
Royalty fees 56,688,509 45,341,410
Business and related expenses 20,076,727 26,672,805
Proceeds from insurance claims (10,846,870) (22,587,484)
P=2,338,697,738 P=2,194,713,400
- 17 -
16. General and Administrative Expenses
March 31,
2014
(Unaudited)
March 31,
2013
(Unaudited)
Personnel costs P=377,801,540 P=261,371,101
Purchased services and utilities 353,931,674 264,072,847
Rental, insurance and taxes 273,141,555 136,773,154
Depreciation and amortization 111,385,561 68,419,005
Business and related expenses 75,910,574 69,013,273
Parts and supplies issued 50,471,211 24,749,005
Repairs and maintenance 14,943,627 7,372,650
Provision for doubtful accounts (Note 6 and 11) 9,794,134 8,537,248
Reversal of impairment of parts and supplies
inventories (Note 7) (5,774,795) (1,395,562)
P=1,261,605,081 P=838,912,721
17. Interest Expense
March 31,
2014
(Unaudited)
March 31,
2013
(Unaudited)
Interest on long-term debts including amortization
of transaction costs P=962,843,591 P=833,604,675
Interest accretion on provision for rehabilitation
and restoration costs 7,796,697 6,339,546
Interest on liability from litigation 1,952,777 –
P=972,593,065 P=839,944,221
18. Interest Income
March 31,
2014
(Unaudited)
March 31,
2013
(Unaudited)
Interest on placements P=39,766,220 P=64,985,166
Interest on savings/current accounts 12,042,025 1,026,221
Accretion of “Day 1 loss” on security deposit 310,951 288,600
Interest on overdue accounts/others – 1,413,560
Others 391,069 6,320,744
P=52,510,265 P=74,034,291
- 18 -
19. Foreign Exchange Gains (Losses) - net
March 31,
2014
(Unaudited)
March 31,
2013
(Unaudited)
Realized foreign exchange gains - net P=29,982,860 P=123,373,303
Unrealized foreign exchange losses - net (201,081,105) (24,819,186)
(P=171,098,245) P=98,554,117
This account pertains to foreign exchange adjustments on repayment of loans and restatement of
outstanding balances of foreign currency-denominated loans, short-term placements and cash in
banks.
20. Miscellaneous Income
March 31,
2014
(Unaudited)
March 31,
2013
(Unaudited)
Gain on sale of property, plant and equipment (P=247,502,828) P=–
Others (59,660,337) (5,524,499)
(P=307,163,165) (P=5,524,499)
21. Earnings Per Share
The Earnings Per Share amounts were computed as follows:
March 31,
2014
(Unaudited)
March 31,
2013
(Unaudited)
(a) Net income attributable to equity shareholders of
the Parent Company P=2,375,975,436 P=2,698,223,255
Less dividends on preferred shares 7,500,000 7,500,000
(b) Net income attributable to common shareholders
of the Parent Company P=2,368,475,436 P=2,690,723,255
(c) Weighted average number
of common shares outstanding 18,750,000,000 18,750,000,000
Basic/diluted earnings per share (b/c) P=0.126 P=0.144
The Parent Company does not have dilutive common stock equivalents as of March 31, 2014 and
2013.
- 19 -
22. Related Party Transactions
a. First Balfour, Inc. (First Balfour)
Following the regular bidding process, the Company awarded to First Balfour procurement
contracts of various structural and mechanical/piping works.
First Balfour is a wholly owned subsidiary of First Holdings.
b. First Gen
First Gen provides financial consultancy, business development and other related services to
the Parent Company under a consultancy agreement beginning September 1, 2008. Such
agreement is for a period of three years up to August 31, 2011. Under the terms of the
agreement, billings for consultancy services shall be P=8.7 million per month plus applicable
taxes. This was increased to P=11.8 million effective September 2009 to cover the cost of
additional officers and staff assigned to the Parent Company. The consultancy agreement was
subsequently extended for another 16 months, from September 1, 2011 to December 31, 2013.
The consultancy agreement was further extended for another two years from January 1, 2013
to December 31, 2014.
In 2012, the Parent Company purchased 5.4 million shares of First Gen with acquisition cost
of P=77.09 million recorded as AFS investments.
c. IFC
IFC is a shareholder of the Parent Company that has approximately 5% ownership interest in
the Parent Company. On May 20, 2011, the Parent Company signed a 15-year US$75.0
million loan facility with IFC. The loan was drawn in Peso on September 30, 2011,
amounting to P=3,262.5 million. As of March 31, 2014 and December 31, 2013, the
outstanding balance of the loan amounting to P=2,961.5 million and P=2,959.7 million,
respectively, is included under the “Long-term debts” account in the unaudited interim
consolidated statements of financial position (see Note 13).
On November 27, 2008, the Parent Company entered into a loan agreement with IFC for
US$100.0 million or its Peso equivalent of P=4.1 billion. On January 7, 2009, the Parent
Company opted to draw the loan in Peso and received the proceeds amounting to
P=4,048.8 million, net of P=51.3 million front-end fee. The loan is payable in 24 equal semi-
annual installments after a three-year grace period at an interest rate of 7.4% per annum for the
first five years subject to repricing for another five to 10 years. Under the loan agreement, the
Parent Company is restricted from creating liens and is subject to certain financial covenants.
As of March 31, 2014 and December 30, 2013, the outstanding loan amounted to
P=3,205.0 million and P=3,537.5 million, respectively.
d. Other Related Parties
In the ordinary course of business, the Company avails of or grants advances from/to its
related parties for working capital requirements. Such advances are payable/collectible within
12 months and are non-interest bearing.
Following are the other related parties identified by the Company:
Bauang Private Power Corporation is a subsidiary of First Private Power Corporation, an
associate of First Gen. First Gas Holdings Corporation and First Gas Power Corporation are
- 20 -
subsidiaries of First Gen. First Holdings, parent company of First Gen, is an associate of
Lopez Holdings Corporation (formerly Benpres Holdings Corporation).
Bayan Telecommunications Inc. (Bayantel) is 97.3%-owned by Bayantel Holdings on which
Lopez Holdings Corporation has 47.3% ownership.
Sky Cable Corporation (Sky Cable) is 80.7%-owned by ABS-CBN Corp. on which Lopez
Holdings Corporation has 57.3% interest. ABS-CBN Publishing, Inc. is a wholly owned
subsidiary of ABS-CBN Corp.
Rockwell Land Corporation is 86.79% owned by First Holdings.
First Electro Dynamics Corporation (FEDCOR) is a wholly owned subsidiary of First
Holdings.
Adtel Inc. is a wholly owned subsidiary of Lopez Incorporated.
Lopez Group Foundation, Inc. is the coordinative hub for the corporate social responsibility
initiatives of Lopez Holdings Corporation.
First Philec Manufacturing Technologies Corp., Securities Transfer Services, Inc. and First
Philippine Realty Corp. (FPRC), formerly known as INAEC Development Corp, are wholly
owned subsidiaries of First Holdings.
Thermaprime Well Services, Inc. (Thermaprime) is a subsidiary of First Balfour, a wholly
owned subsidiary of First Holdings. Thermaprime provides drilling services such as, but not
limited to, rig operations, rig maintenance, well design and engineering.
On January 29, 2014, EDC entered into a contract between Thermaprime Well Services, Inc.
for the sale of Rig 16 and its ancillary items for an amount of Php 825,000,000, exclusive of
applicable vat. The company gained Php247,502,828 from the sale.
First Gen Energy Solutions (First GES) and First Gen Northern Energy Corp. are wholly
owned subsidiaries of First Gen.
First Philippine Industrial Corp. is 60% owned by First Holdings.
- 21 -
Following are the amounts of transactions for the periods ended March 31, 2014 and 2013 and
outstanding balances as of March 31, 2014 and December 31, 2013:
Transactions for the periods ended March 31
Net amount due from/to related parties
Related Party Nature of Transaction 2014
(Unaudited)
2013
(Unaudited)
March 31,
2014
(Unaudited)
December 31,
2013
(Audited)
Trade and other receivables
First Gen Energy
Solutions
Revenue from sale of electricity P=80,539,272 P=– P=63,935,920 P=61,993,428
Due to related parties
First Gen Consultancy fee P=43,821,176 P=35,827,372 P=43,998,784 P=43,998,784
Interest-free advances 4,265,195 13,915,942 4,099,171 4,219,175
Lopez Group Foundation,
Inc.
Interest-free advances 5,042,750 First Gas Power 41,760 – 41,760 73,110
First Gas Power Corporation
Interest-free advances 10,074 138,517 10,074 13,186 First Gas Holdings
Corporation
Interest-free advances 52,280
P=48,138,205 P=49,934,111 P=48,149,789 P=53,347,005
Trade and other payables
Thermaprime Work fees P=195,000,000 P=255,740,955 P=227,498,650 P=78,485,096
First Balfour, Inc. Refurbishment of BMGPP and ancillary facilities 389,793,444 4,010,543 353,085,664 152,027,391
First Philec Manufacturing
Technologies Corp.
Purchase of services and utilities
– – 2,194,482 2,194,482
Bayantel Purchase of services and utilities 3,607,856 227,024 3,700,241 3,543,051
FPRC Purchase of services and utilities 985,106 98,109 211,102 898,609 ABS-CBN Publishing Purchase of services and utilities – – 3,600 3,600
ABS-CBN foundation Purchase of services and utilities 715,000 – – 715,000
Adtel Inc. Purchase of services and utilities 1,736,686 – (830,950) (2,460,292) First Electro Dynamics
Corporation
Purchase of services and utilities
– – 358,000 589,421
First Philippine Industrial Corporation
Purchase of services and utilities
– – – –
Rockwell Land Corporation Purchase of services and utilities 86,875 16,800 – –
Sky Cable Purchase of services and utilities – – –
ABS-CBN Corp. Purchase of services and utilities 29,464 – – –
P=591,954,431 P=260,093,431 P=586,220,789 P=235,996,358
Long-term debt
IFC Interest-bearing loans P=99,360,503 P=124,598,103 P=6,166,463,239 P=6,162,859,592
The purchases from related parties are made at normal commercial terms and conditions. The
amounts outstanding are unsecured and will be settled in cash. Except for the US$80.0 million
letters of credit issued by the Parent Company in favor of EDC Chile Limitada, there were no
guarantees that have been given to and/or received from any related party in 2014 and 2013.
The Company did not recognize any impairment losses on receivables from related parties for the
three-month periods epnded March 31, 2014 and 2013.
- 22 -
23. Financial Risk Management Objectives and Policies
The Company’s financial instruments consist mainly of cash and cash equivalents, AFS
investments and long-term debts. The main purpose of these financial instruments is to finance
the Company’s operations. The Company has other various financial assets and liabilities such as
trade receivables, trade payables and other liabilities, which arise directly from operations.
Financial Risk Management Policy
The main financial risks arising from the Company’s financial instruments are credit risk, foreign
currency risk, interest rate risk, equity price risk and liquidity risk. The Company’s policies for
managing the aforementioned risks are summarized hereinafter below.
Credit Risk
The Company’s geothermal and power generation business trades with only one major customer,
NPC, a government-owned-and-controlled corporation. Any failure on the part of NPC to pay its
obligations to the Company would significantly affect the Company’s business operations. As a
practice, the Company monitors closely its collection from NPC and charges interest on delayed
payments following the provision of its respective SSAs and PPAs. Receivable balances are
monitored on an ongoing basis to ensure that the Company’s exposure to bad debts is not
significant. The Company does not hold any collateral from its trade receivables hence, its
maximum exposure to credit risk equals on these trade receivables equals its carrying amount.
With respect to the credit risk arising from other financial assets of the Company, which comprise
of cash and cash equivalents excluding cash on hand, financial asset at FVPL, other receivables,
amounts due from related parties and AFS investments, the Company’s exposure to credit risk
arises from default of the counterparty, with a maximum exposure equal to the carrying amount of
these instruments before
taking into account any collateral and other credit enhancements.
The following tables below show the Company’s aging analysis of the Company’s financial assets
as of March 31, 2014 and December 31, 2013:
March 31, 2014 (Unaudited)
Past Due but Not Impaired
Neither Past
Due nor
Impaired
Less than
30 Days
31 Days
to 1 Year
Over 1 Year
up to
3 Years
Over
3 Years
Past
Due and
Impaired Total
(In Thousand Pesos) Loans and receivables:
Cash and cash
equivalents (excluding cash on
hand) P=14,227,422 P=– P=– P=– P=– P=– P=14,227,422
Trade receivables 3,372,389 240,361 978,065 – – 91,149 4,681,964
Loans and notes
receivables 124,951 – – – – – 124,951
Employee receivables 11,726 – – – – – 11,726
Non-trade receivables 127,955 5,112 38,692 – – – 171,759
Long-term receivables 96,448 – – – – 72,278 168,726
AFS investments:
Debt investments 260,732 – – – – – 260,732
Equity investments 186,587 – – – – – 186,587
Financial asset at FVPL: Designated as at FVPL 500,000 – – – – – 500,000
Derivative Asset 100,652 – – – – – 100,652
Total P=19,008,862 P=245,473 P=1,016,757 P=– P=– P=163,427 P=20,434,519
- 23 -
December 31, 2013
Past Due but Not Impaired
Neither Past
Due nor
Impaired
Less than
30 Days
31 Days
to 1 Year
Over 1 Year
up to
3 Years
Over
3 Years
Past
Due and
Impaired Total
(In Thousand Pesos)
Loans and receivables:
Cash and cash
equivalents
(excluding cash on
hand) P=16,013,213 P=– P=– P=– P=– P=– P=16,013,213
Trade receivables 3,213,038 17,048 75,835 – – 91,149 3,397,070
Non-trade receivables 84,773 – 10,060 19 – – 94,852
Loans and notes
receivables 124,936 – – – – – 124,936
Employee
receivables* 11,958 – – – – – 11,958
Long-term
receivables 16,685 – – – – 72,278 88,963
AFS investments:
Debt investments 341,842 – – – – – 341,842
Equity investments 407,242 – – – – – 407,242
Financial assets at
FVPL:
Derivative assets 7,547 – – – – – 7,547
Derivative assets
designated as cash
flow hedges 53,583 – – – – – 53,583
Total P=20,274,817 P=17,048 P=85,895 P=19 P=– P=163,427 P=20,541,206
Credit Quality of Financial Assets
Financial assets are classified as high grade if the counterparties are not expected to default in
settling their obligations. Thus, the credit risk exposure is minimal. These counterparties
normally include customers, banks and related parties who pay on or before due date. Financial
assets are classified as a standard grade if the counterparties settle their obligation with the
Company with tolerable delays. Low grade accounts are accounts, which have probability of
impairment based on historical trend. These accounts show propensity of default in payment
despite regular follow-up actions and extended payment terms.
As of March 31, 2014 and December 31, 2013, all financial assets categorized as neither past due
nor impaired are viewed by management as high grade, considering the collectibility of the
receivables and the credit history of the counterparties.
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in foreign exchange rates.
The Company’s exposure to foreign currency risk resulted primarily from the financial assets and
liabilities that are denominated in US dollar. These financial assets and liabilities consist of
foreign currency denominated loans, cash equivalents, trade and other payables and the
Company’s investment in marketable securities and ROP Bonds.
The Company’s exposure to foreign currency risk to some degree is mitigated by some provisions
in the Company’s GRESCs, SSAs and PPAs. The service contracts allow full cost recovery while
the sales contracts include billing adjustments covering the movements in Philippine peso and the
US dollar rates, US Price and Consumer Indices, and other inflation factors.
- 24 -
To mitigate further the effects of foreign currency risk, the Company will prepay, refinance or
hedge its foreign currency denominated loans, whenever deemed feasible. The Company also
enters into derivative contracts to mitigate foreign currency risk. Accordingly, in the first half of
2012, the Company entered into non-deliverable cross currency swaps to hedge its foreign
currency risk exposure on its US dollar-denominated Club Loan.
The Company’s foreign currency-denominated financial assets and liabilities (translated into
Philippine peso) as of March 31, 2014, and December 31, 2013, are as follows:
March 31, 2014
Original Currency
US$ Japanese yen (JP¥)
Chilean Peso
(CHP=) Euro (EUR)
New Zealand
dollar (NZD)
Peso
Equivalent1
Financial Assets
Loans and receivables:
Cash equivalents 38,900,000 − − − − 1,743,303,500
Cash on hand and in banks 4,508,404 − 115,195,991 − − 202,044,125
Derivative assets designated as
cash flow hedges 2,245,944 − − − − 100,651,980
Total financial assets 45,654,348 − 115,195,991 − − 2,045,999,605
Financial Liabilities
Liabilities at amortized cost:
Accounts payable 12,259,210 13,822,941 − 207,100 556,919 589,948,393
Long-term debt 514,026,898 − − − − 23,036,115,434
Accrued interest on long-
term debts 6,112,143 − − − − 273,915,689
Total financial liabilities 532,398,251 13,822,941 − 207,100 556,919 23,899,979,516 1 US$1= P=44.8150, JP¥1=P=0.4358, CHP1=P=0.0817, EUR1=P=61.8965 and NZD1=P=38.9812 as of March 31, 2014
December 31, 2013
Original Currency
US$
Japanese
yen (JP¥)
United
Kingdom
pound (GBP)
Sweden
kroner
(SEK)
Chilean
Peso
(CHP=) Euro (EUR)
New Zealand
dollar (NZD)
Peso
Equivalent1
Financial Assets
Loans and receivables:
Cash equivalents 56,300,000 − − − − − − P=2,499,438,500
Cash on hand and in
banks 11,917,441 − − − 96,005,271 − − 537,186,567
AFS investments:
Debt investments 7,696,268 − − − − − − 341,675,818
Financial assets at FVPL:
Derivative assets 169,997 − − − − − − 7,547,020
Derivative assets
designated as cash flow
hedges 1,206,962 − − − − − − 53,583,080
Total financial assets 77,290,668 − − − 96,005,271 − − P=3,439,430,985
Financial Liabilities
Liabilities at amortized
cost:
Accounts payable 26,621,867 13,822,941 138,000 1,254,342 − 139,000 621,331 P=1,231,408,505
Long-term debt 513,785,044 − − − − − − 22,809,487,028
Accrued interest on
long-term debts 8,891,194 − − − − − − 394,724,558
Derivative liabilities
designated as cash flow
hedges 94,568 − − − − − − 4,198,322
Total financial liabilities 549,392,673 13,822,941 138,000 1,254,342 − 139,000 621,331 P=24,439,818,413 1 US$1= P=44.395, J P¥1=P=0.0095, GBP1=P=72.90, SEK1=P=6.79, CHP=1=P=0.08449, EUR1=P=60.82 and NZD1=P=36.212 as of December 31, 2013.
- 25 -
The following tables demonstrate the sensitivity to a reasonably possible change in the foreign
currency exchange rates applicable to the Company, with all other variables held constant, of the
Company’s income (loss) before income tax and equity for the periods ended March 31, 2014 and
year ended December 31, 2013 (arising from revaluation of financial assets and liabilities and
derivative instruments).
March 31, 2014 (Unaudited)
Foreign Currency
Appreciates (Depreciates) By
Effect on Income
Before Income Tax
USD 10% or PHP4.482 (P=2,191,407,999)
(10% or PHP4.482) 2,191,407,999
JPY (10% or PHP0.04358) 602,378
10% or PHP0.04358 (602,378)
eEURO 10% or PHP6.18965 (1,281,877)
(10% or PHP6.18965) 1,281,877
NZD 10% or PHP3.89812 (2,170,936)
(10% or PHP3.89812) 2,170,936
December 31, 2013 (Audited)
Foreign Currency
Appreciates
(Depreciates) By
Effect on Income
Before Income Tax Effect on Equity
USD 10% or P=4.440 (P=2,101,957,381) P=57,158,762
(10% or P=4.440) 2,101,957,381 (56,878,221)
GBP 10% or P=7.28967 (1,005,974)
(10% or P=7.28967) (1,005,974)
SEK 10% or P=0.67867 851,284
(10% orP=0.67867) (851,284)
EUR 10% or P=6.08161 (845,344)
(10% or P=6.08161) (845,344)
NZD 10% or P=3.62120 (2,249,963)
(10% orP=3. 62120) 2,249,963
The effect of changes in foreign exchange rates in equity pertains to the fair valuation of AFS
investments and derivatives designated as cash flow hedges, and is exclusive of the impact of
changes affecting the Company’s condensed consolidated statements of income.
Equity Price Risk
Equity price risk is the risk that the fair value of traded equity instruments decreases as the result
of the changes in the levels of equity indices and the value of the individual stocks.
As of March 31, 2014 and December 31, 2013, the Company’s exposure to equity price risk is
minimal.
Interest Rate Risk
The Company’s exposure to the risk of changes in market interest rates relates primarily to the
Company’s long-term debt obligations with floating interest rates, derivative assets, derivative
liabilities and AFS investments.
The interest rates of some of the Company’s long-term borrowings and AFS debt investments are
fixed at the inception of the loan agreement.
The Company regularly evaluates its interest rate risk by taking into account the cost of qualified
borrowings being charged by its creditors. Prepayment, refinancing or hedging the risks are
undertaken when deemed feasible and advantageous to the Company.
- 26 -
Interest Rate Risk Table
The following tables provide for the effective interest rates and interest payments by period of
maturity of the Company’s long-term debts.
March 31, 2014 (Unaudited)
Interest
Rates
Within
1 Year
More than 1
year but less
than 4 years
More than 4
Years but
less than 5
Years
More than
5 Years Total
Fixed Rate
US$ 300.0 million
Notes 6.50% P=873,893 P=2,621,678 P=873,893 P=1,747,785 P=6,117,249
Peso Public Bonds
Series 1 8.64% 734,553 367,277 – – 1,101,830
Series 2 9.33% 326,645 653,289 – – 979,934
IFC 1 7.40% 215,594 457,491 110,265 235,966 1,019,316
IFC 2 6.66% 198,438 495,716 131,173 443,829 1,269,156
FXCN
P=3.0 billion 6.62% 195,045 573,224 187,104 639,231 1,594,604
P=4.0 billion 6.61% 259,804 763,547 249,227 851,471 2,124,049
2013Peso Fixed-Rate
Bonds
P=3.0 billion 4.16% 124,749 374,247 124,749 187,124 810,869
P=4.0 billion 4.73% 189,248 567,744 189,248 851,616 1,797,856
PNB and Allied
Bank 4.5% 339,622 733,570 137,142 94,769 1,305,103
Floating Rate
US$ 80.0 million
1.80% +
LIBOR 151,315 512,322 42,247 – 705,884
US$ 175.0 million
Refinanced
Syndicated Term
Loan
1.75% +
LIBOR 118,383 207,414 – – 325,797
December 31, 2013
Interest
Rates
Within
1 Year
More than 1 Year
but less than 4
years
More than 4
Years but less
than 5 Years
More than
5 Years Total
(In Thousand Pesos)
Fixed Rate
US$ 300.0 million
Notes 6.50% P=865,703 P=2,597,108 P=865,703 P=2,164,256 P=6,492,770
Peso Public Bonds
Series 1 8.64% 734,553 367,277 – – 1,101,830
Series 2 9.33% 326,645 653,289 – – 979,934
IFC 1 7.40% 237,045 557,732 134,425 287,669 1,216,871
IFC 2 6.66% 198,995 495,716 131,173 443,829 1,269,713
FXCN
P=3.0 billion 6.62% 195,045 573,224 187,104 639,231 1,594,604
P=4.0 billion 6.61% 259,804 763,547 249,227 851,471 2,124,049
2013Peso Fixed-Rate
Bonds
P=3.0 billion 4.16% 124,749 374,247 124,749 187,124 810,869
P=4.0 billion 4.73% 189,248 567,744 189,248 851,616 1,797,856
PNB and Allied Bank 4.5% 339,622 733,570 137,142 94,769 1,305,103
Floating Rate
US$ 80.0 million 1.80% +
LIBOR 75,475 206,427 32,996 – 314,898
US$ 175.0 million
Refinanced
Syndicated Term
Loan
1.75% +
LIBOR 121,870 235,811 – – 357,681
- 27 -
The following tables demonstrate the sensitivity to a reasonably possible change in interest rates,
with all other variables held constant, of the Company’s income before income tax and equity as
of March 31, 2014 and December 31, 2013. The effect on equity includes impact of change in
interest rates on derivatives designated as cash flow hedges as well as AFS debt investments.
March 31, 2014 (Unaudited)
Increase/Decrease
in Basis Points
Effect on Loss
Before Income Tax Effect on Equity
+100 (P=78,426,250) (P=104,592,924)
-100 78,426,250 (102,779,386)
December 31, 2013
Effect on Equity
Increase/Decrease
in Basis Points
Effect on Income
Before Income Tax
Change in Fair Value of
AFS Investments
Cumulative Translation
Adjustment
+100 (P=77,691,250) (P=2,594,736) 28,830,862
-100 77,691,250 2,875,278 (53,977,832)
The effect of changes in interest rates in equity pertains to the fair valuation of AFS investments
and derivatives designated as cash flow hedges, and is exclusive of the impact of the changes
affecting the Company’s condensed consolidated statement of income.
Liquidity Risk
The Company’s objective is to maintain a balance between continuity of funding and sourcing
flexibility through the use of available financial instruments. The Company manages its liquidity
profile to meet its working and capital expenditure requirements and service debt obligations. As
part of the liquidity risk management program, the Company regularly evaluates and considers the
maturity of both its financial investments and financial assets (e.g. trade receivables, other
financial assets) and resorts to short-term borrowings whenever its available cash or matured
placements is not enough to meet its daily working capital requirements. To ensure immediate
availability of short-term borrowings, the Company maintains credit lines with banks on a
continuing basis.
Liquidity risk arises primarily when the Company has difficulty collecting its receivables from its
major customer, NPC. Other instances that contribute to its exposure to liquidity risk are when the
Company finances long-term projects with internal cash generation and when there is credit
crunch especially at times when the company has temporary funding gaps.
- 28 -
The tables below show the maturity profile of the Company’s financial assets used for liquidity
purposes based on contractual undiscounted cash flows as of March 31, 2014 and
December 31, 2013.
March 31, 2014
On Demand
Less than 3
Months
3 to
6 Months
>6 to
12 Months
>1 to
5 Years
More than
5 Years Total
(In Thousand Pesos)
Loans and receivables -
Cash equivalents P=– P=11,437,320 P=– P=– P=– P=– P=11,437,320
Financial Asset at FVPL 500,000 – – – – – 500,000
AFS investments -
Debt investments 260,732 – – – – – 260,732
P=760,732 P=11,437,320 P=– P=– P=– P=– P=12,198,052
December 31, 2013
On Demand
Less than 3
Months
3 to
6 Months
>6 to
12 Months
>1 to
5 Years
More than
5 Years Total
(In Thousand Pesos)
Loans and receivables -
Cash equivalents P=– P=12,101,997 P=– P=– P=– P=– P=12,101,997
AFS investments - Debt investments 377,617 – – – – – 377,617
P=377,617 P=12,101,997 P=– P=– P=– P=– P=12,479,614
The tables below summarize the maturity analysis of the Company’s financial liabilities as of
March 31, 2014 and December 31, 2013 based on contractual undiscounted payments:
March 31, 2014
On
Demand
Less than
3 Months
3 to
6 Months
>6 to
12 Months
>1 to
5 Years
More than
5 Years Total
(In Thousand Pesos) Liabilities at amortized
cost:
Accounts payable* P=− P=4,197,237 P=− P=− P=− P=− P=4,197,237
Accrued interest on
long-term debts 85,570 933,431 174,108 − − − 1,193,109
Other payables − 1,964,673 − − − − 1,964,673
Due to related parties 48,150 − − − − − 48,150
Long-term debts − 2,388,219 480,494 2,855,906 36,281,805 36,356,966 78,363,390
Total P=133,720 P=9,483,560 P=654,602 P=2,855,906 P=36,281,805 P=36,356,966 P=85,766,559
*excluding other liabilities which pertain to statutory liabilities to the Government
December 31, 2013
On
Demand
Less than
3 Months
3 to
6 Months
>6 to
12 Months
>1 to
5 Years
More than
5 Years Total
(In Thousand Pesos) Liabilities at amortized
cost:
Accounts payable* P=− P=5,351,131 P=− P=− P=− P=− P=5,351,131 Accrued interest on
long-term debts 84,356 394,725 313,605 − − − 792,686
Other payables − 56,563 − − − − 56,563 Due to related parties 53,347 − − − − − 53,347
Royalty payable 39,671 − − − − − 39,671
Long-term debts − 87,278 2,162,178 2,371,072 36,429,373 36,743,861 77,793,762 Derivative liabilities
designated as cash
flow hedges − 525 − − 3,673 − 4,198
Total P=177,374 P=5,890,222 P=2,475,783 P=2,371,072 P=36,433,046 P=36,743,861 P=84,091,358
*excluding other liabilities which pertain to statutory liabilities to the Government
- 29 -
Financial Assets and Financial Liabilities
Set out below is a comparison of carrying amounts and fair values of the Company’s financial
instruments as of March 31, 2014 and December 31, 2013.
March 31, 2014 December 31, 2013
Carrying
Amounts Fair Values
Carrying
Amounts Fair Values
Financial Assets
Loans and receivables:
Long-term receivables P=96,447,622 P= 91,342,860 P=88,962,765 P=84,641,685
AFS investments:
Debt investments 260,731,975 260,731,975 341,841,500 341,841,500
Equity investments 186,587,044 186,587,044 407,242,129 407,242,129
Financial assets at FVPL: 500,000,000 500,000,000 − −
Derivative assets − − 7,547,021 7,547,021
Derivative assets designated as cash
flow hedge 100,651,984 100,651,984 53,583,080 53,583,080
P=1,144,418,625 P=1,139,313,863 P=899,176,495 P=894,855,415
Financial Liabilities
Financial liabilities at amortized cost:
Long-term debts P=58,793,733,965 P=70,766,076,655 P=58,548,760,334 P=62,920,736,836
Derivative liabilities designated as cash
flow hedges − − 4,198,322 4,198,322
P=58,793,733,965 P=70,766,076,655 P=58,552,958,656 P=62,924,935,158
The methods and assumptions used by the Company in estimating the fair value of financial
instruments are:
Cash and Cash Equivalents. Carrying amounts approximate fair values due to its short-term
nature.
Trade and Other Receivables, Royalty Fee Chargeable to NPC, Due to Related Parties, Trade and
Other Payables and Loan Payable. These are instruments with relatively short maturity ranging
one to three months, and thus, the carrying amounts approximate fair values.
Long-term Receivables. The fair value of long-term receivables was computed by discounting the
expected cash flow using the applicable rate of 2.76% and 2.52% in March 31, 2014 and
December 31, 2013, respectively
AFS Investments. Fair values of quoted debt and equity securities are based on quoted market
prices. For equity investments that are not quoted, the investments are carried at cost less
allowance for impairment losses due to the unpredictable nature of future cash flows and the lack
of suitable methods of arriving at a reliable fair value.
Long-term Debts and Royalty Fee Payable. The fair values for the Company’s long-term debts are
estimated using the discounted cash flow methodology with the applicable rates ranging from
1.76% to 6.32% and 1.75% to 7.40% in March 31, 2014 and December 31, 2013, respectively.
- 30 -
The following tables show the fair value information of financial instruments classified under
FVPL , derivatives designated as cash flow hedges and AFS investments analyzed by sources of
inputs on fair valuation as follows:
Quoted prices in active markets for identical assets or liabilities (Level 1);
Those involving inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and
Those with inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (Level 3).
March 31, 2014
Total Level 1 Level 2 Level 3
Loans and receivables:
Long-term receivables P=96,447,622 P=− P=− P=96,447,622
Financial asset at FVPL 500,000,000 500,000,000 − −
AFS investments:
Debt investments 260,731,975 260,731,975 − −
Equity investments 186,587,044 186,587,044 − −
Derivative assets designated as
cash flow hedges 100,651,984 − 100,651,984 −
December 31, 2013
Total Level 1 Level 2 Level 3
Loans and receivables:
Long-term receivables P=88,962,765 P=− P=− P=88,962,765
Financial asset at FVPL:
Derivative assets 7,547,020 − 7,547,020 −
AFS investments:
Debt investments 341,841,500 341,841,500 − −
Equity investments 407,242,129 407,242,129 − −
Derivative assets designated as
cash flow hedges 53,583,080 − 53,583,080 −
For the three-month periods ended month March 31, 2014, and for the year ended
December 31, 2013 there were no transfers between level 1 and level 2 fair value measurements
and no transfers into and out of Level 3 fair value measurements.
The Company classifies its financial instruments in the following categories.
March 31, 2014
Loans and
Receivables AFS
Investments
Liabilities at
Amortized
Cost
Financial
Assets at
FVPL
Derivatives
Designated as
Cash Flow
Hedges Total
(In Thousand Pesos)
Financial Assets
Cash and cash equivalents P=14,247,766 P=− P=− P=− P=− P=14,247,766
Trade receivables 4,590,815 − − − − 4,590,815
Non-trade receivables 171,760 − − − − 171,760
Loans and notes
receivables 124,951 − − − − 124,951
Employee receivables 11,726 − − − − 11,726
Long-term receivables 96,448 − − − − 96,448
AFS - debt investments − 260,732 − − − 260,732
AFS - equity investments − 186,587 − − − 186,587
Financial asset at FVPL − − − 500,000 − 500,000
Derivative assets − − − 100,652 100,652
Total financial assets P=19,243,466 P= 447,319 P=− P=500,000 P=100,652 P= 20,291,437
- 31 -
March 31, 2014
Loans and
Receivables
AFS
Investments
Liabilities at
Amortized
Cost
Financial
Assets at
FVPL
Derivatives
Designated
as Cash Flow
Hedges Total
(In Thousand Pesos)
Financial Liabilities
Accounts payable P=− P=− P=4,197,237 P=− P=− P=4,197,237
Accrued interest on long-
term debts − − 1,194,109 − − 1,194,109
Other payables − − 1,964,673 − − 1,964,673
Due to related parties − − 48,150 − − 48,150
Long-term debts − − 58,765,472 − − 58,765,472
Total financial liabilities P=− P=− P=66,169,641 P=− P=− P=66,169,641
December 31, 2013
Loans and
Receivables
AFS
Investments
Liabilities at
Amortized
Cost
Financial
Assets at
FVPL
Derivatives
Designated
as Cash Flow
Hedges Total
(In Thousand Pesos)
Financial Assets
Cash and cash equivalents P=16,043,155 P=− P=− P=− P=− P=16,043,155
Trade receivables 3,305,921 − − − − 3,305,921
Non-trade receivables 94,852 − − − − 94,852
Loans and notes
receivables 124,937 − − − − 124,937
Employee receivables 11,958 − − − − 11,958
Long-term receivables 16,685 − − − − 16,685
AFS - debt investments − 341,842 − − − 341,842
AFS - equity investments − 407,242 − − − 407,242
Derivative assets − − − 7,547 53,583 61,130
Total financial assets P=19,597,508 P=749,084 P=− P=7,547 P=53,583 P=20,407,722
Financial Liabilities
Accounts payable P=− P=− P=5,351,131 P=− P=− P=5,351,131
Accrued interest on long-
term debts − − 792,686 − − 792,686
Other payables − − 56,563 − − 56,563
Due to related parties − − 53,347 − − 53,347
Royalty payable − − 39,671 − − 39,671
Long-term debts − − 58,548,760 − − 58,548,760
Derivative liabilities − − − − 4,198 4,198
Total financial liabilities P=− P=− P=64,842,158 P=− P=4,198 P=64,846,356
- 32 -
The table below demonstrates the income, expense, gains or losses of the Company’s financial
instruments for the three-month periods ended March 31, 2014 and 2013.
March 31, 2014 (Unaudited) March 31, 2013 (Unaudited)
Increase
(Decrease)
Increase
(Decrease)
Increase
(Decrease)
Increase
(Decrease)
Effect on
Profit or Loss
Effect
on Equity
Effect on
Profit or Loss
Effect
on Equity
Loans and receivables:
Interest income on cash equivalents P=39,766,220 P=– P=64,888,347 P=– Interest income on cash in bank 12,057,324 – 1,026,222 –
Interest on employees receivable 315,342 – 1,237,558 –
Interest income on trade receivables – – 59,355 – AFS - equity investments -
Net gain (loss) recognized in
equity – 42,422,037 – (8,696,830)
AFS - debt investments:
Net gain (loss) recognized in
equity – – – 10,992,113
Interest Income on ROP Bonds 75,725 – 6,534,212 – Financial liabilities at amortized cost:
Interest expense on long-term loans (962,843,591) – (833,604,675) –
(P=910,628,980) P=42,422,037 (P=759,858,981) (P=2,295,283)
Capital Management
The primary objective of the Company’s capital management is to ensure that it maintains a
healthy capital ratio in order to comply with its financial loan covenants and support its business
operations.
The Company manages and makes adjustment to its capital structure as it deems necessary. To
maintain or adjust its capital structure, the Company may increase the levels of capital
contributions from its creditors and owners/shareholders through debt and new shares issuance,
respectively.
The Company monitors capital using the debt ratio, which is long-term liabilities divided by long-
term liabilities plus equity. The Company’s policy is to keep the debt ratio not more than 70:30.
The Company’s long-term liabilities include both the current and long-term portions of long-term
debts. Equity includes capital stock attributable to common and preferred shares, unrealized gains
reserve and retained earnings.
The table below shows the Company’s debt ratio as at March 30, 2013 and December 31, 2013.
March 30, 2014 December 31, 2013
Long-term liabilities P=58,765,472,333 P=58,548,760,335
Equity 36,682,815,368 36,244,958,905
Debt ratio 61.6% 61.8%
Derivative Financial Instruments
The Company engages in derivative transactions, particularly foreign currency forwards, foreign
currency swaps and cross-currency swaps, to manage its foreign currency risk and/or interest rate
risk arising from its foreign-currency denominated loans. These derivatives are accounted for
either as derivatives designated as accounting hedges or derivatives not designated as accounting
hedges.
- 33 -
The table below shows the derivative financial instruments of the Company:
March 14, 2014
(Unaudited)
December 31, 2013
(Audited)
Derivative
Assets
Derivative
Liabilities Derivative Assets
Derivative
Liabilities
Derivatives designated as
accounting hedges
Cross-currency swaps P=– P=– P=53,583,080 P=4,198,322
Derivatives not designated as
accounting hedges
Foreign currency forwards 100,651,984 – 7,547,021 –
Total derivatives P=100,651,984 P=– P=61,130,101 P=4,198,322
Presented as:
Current P=12,581,498 P=– P=14,244,905 P=524,790
Noncurrent 88,070,486 – 46,885,196 3,673,532
Total derivatives P=100,651,984 – P=61,130,101 P=4,198,322
Derivatives Not Designated as Accounting Hedges
Foreign Currency Swap Contracts
A foreign currency swap is an agreement to exchange amounts in different currencies based on the
spot rate at trade date and to re-exchange the same currencies at a future date based on an agreed
rate.
In December 31, 2013, the Company entered into a total of 22 foreign currency swap contracts,
respectively, with terms as follows:
December 31, 2013
Position
Aggregate
notional amount
(in million)
Average
forward rate
Sell US$ - buy PHP= US$105.60 P=44.00
For the period ended December 31, 2013, the Company recognized P= 12.9 million gain,
respectively, from the fair value changes of the currency swap contracts. These are recorded under
“Derivative gains (losses) - net” in the consolidated statement of income.
The Company did not enter into any foreign currency swap transaction in 2014.
Foreign Currency Forward Contracts
These are contractual agreements to buy or sell a foreign currency at an agreed rate on a future
date.
In 2013, the Company entered into a total of 45 currency forward contracts with various
counterparty banks. These contracts include one deliverable and 44 non-deliverable forward
contracts. The deliverable buy JP¥ - sell US$ forward contract has notional amount and forward
rate of US$3.0 million and JP¥91.0, respectively. As for the non-deliverable forward contracts,
the Company entered into sell US$ - buy PHP= transactions with onshore banks and simultaneously
entered into buy US$ - sell PHP= transactions with offshore banks as an offsetting position. The
aggregate notional amount of these sell PHP= - buy US$ forward contracts was US$130.0 million
while the average forward rate was P=43.61.
- 34 -
For the period ended March 31, 2014 and December 31, 2013, the Company recognized
P=7.5 million loss and P=1.6 million gain from fair value changes of these foreign currency forwards
contracts. Such amount is recorded under “Derivative gains - net” in the consolidated statement of
income.
The Company settled its foreign currency forward transaction in 2014 resulting to a 15.1 million
gain that was recorded under “Derivative gains - net” in the consolidated statement of income..
Derivatives Designated as Accounting Hedges
In 2012, the Company entered into 6 non-deliverable cross-currency swap (NDCCS) agreements
with an aggregate notional amount of US$65.00 million to partially hedge the foreign currency
and interest rate risks on its Refinanced Syndicated Term Loan that is benchmarked against US
LIBOR and with flexible interest reset feature that allows the Company to select what interest
reset frequency to apply (i.e., monthly, quarterly or semi-annually). As it is the Company’s
intention to reprice the interest rate on the hedged loan quarterly, the Company utilizes NDCCS
with quarterly interest payments and receipts.
Under the NDCCS agreements, the Company receives floating interest based on 3-month US
LIBOR plus 175 basis points and pays fixed peso interest. On specified dates, the Company also
receives specified USD amounts in exchange for specified peso amounts based on the agreed swap
rates. These USD receipts correspond with the expected interest and fixed principal amounts due
on the hedged loan. Effectively, the 6 NDCCS converted 37.14% of hedged USD loan into a
fixed rate peso loan.
Pertinent details of the NDCCS are as follows:
Notional
amount (in
million)
Trade
Date
Effective
Date
Maturity
Date
Swap
rate
Fixed
rate
Variable rate
US$15.00 03/26/12 03/27/12 06/17/17 P43.05 4.87% 3-month LIBOR + 175 bps
US$10.00 04/18/12 06/27/12 06/17/17 42.60 4.92% 3-month LIBOR + 175 bps
US$10.00 05/03/12 06/27/12 06/17/17 42.10 4.76% 3-month LIBOR + 175 bps
US$10.00 06/15/12 06/27/12 06/17/17 42.10 4.73% 3-month LIBOR + 175 bps
US$10.00 07/17/12 09/27/12 06/17/17 41.25 4.58% 3-month LIBOR + 175 bps
US$10.00 10/29/12 12/27/12 06/17/17 41.19 3.44% 3-month LIBOR + 175 bps
The maturity date of the six NDCCS coincides with the maturity date of the hedged loan.
As of March 31, 2014 and December 31, 2013, the outstanding aggregate notional amount of the
Company’s NDCCS amounted to US$65.00 million. The aggregate fair value changes on these
NDCCS amounting to P=26.7 million and P=55.6 million gain, as of March 31, 2014 and December
31, 2013, respectively, were recognized by the Company under “Cumulative Translation
Adjustment on Hedging Transactions” account.
Hedge Effectiveness Results
Since the critical terms of the hedged loan and the NDCCS match, except for one to two days
timing difference on the interest reset dates, the hedges were assessed to be highly effective. As
such, the aggregate fair value changes on these NDCCS amounting to P=955.4 million and P=244.6
million gain, in March 31, 2014 and December 31, 2013, respectively, recognized by the
Company under “Cumulative Translation Adjustment on Hedging Transactions” account in the
consolidated statements of financial position. No ineffectiveness was recognized in the
- 35 -
consolidated statement of income for the period ended March 31, 2014 and year ended December
31, 2013.
The net movement of changes made to “Cumulative Translation Adjustment on Hedging
Transactions” account for the Company’s cash flow hedges is as follows:
March 31,
2014
December 31,
2013
Balance at beginning of year (P=55,615,718) (P=144,426,476)
Changes in fair value of the cash flow hedges (955,372,520) 244,634,426
(1,010,988,238) 100,207,950
Transferred to consolidated statement of income
Foreign exchange (gain) / loss (22,359,042) (189,630,000)
Interest expense 1,006,639,747 43,674,194
984,280,705 (145,955,806)
Balance before tax (26,707,533) (45,747,856)
Tax – (9,867,862)
Balance at end of year (P=26,707,533) (P=55,615,718)
Fair Value Changes of Derivatives
The tables below summarize the net movement in fair values of the Company’s derivatives as of
March 31, 2014 and December 31, 2013.
March 31,
2014
December 31,
2013
Balance at beginning of year P=56,931,779 (P=238,675,102)
Net changes in fair value of derivatives:
Designated as accounting hedges (955,372,520) 244,634,426
Not designated as accounting hedges 7,517,978 14,243,178
(947,854,540) 258,877,604
Fair value of settled instruments:
Designated as accounting hedges 1,006,639,747 43,674,194
Not designated as accounting hedges (15,065,000) (6,944,917)
991,574,747 36,729,277
Balance at end of year P=100,651,984 P=56,931,779
Presented as:
Derivative assets P=100,651,984 P=61,130,101
Derivative liabilities – (4,198,322)
P=100,651,984 P=56,931,779
The effective portion of the changes in the fair value of the NDCCS designated as accounting
hedges were deferred in equity under “Cumulative Translation Adjustment on Hedging
Transactions” account.
- 36 -
24. Event After the Financial Reporting Period
On April 2, 2014 Department of Energy certified the Company’s Wind Energy Service Contracts
(WESC) as a registered RE developer.
The Board is proposing two (2) amendments to the Seventh Article of the Company’s Articles of
Incorporation. The first amendment consists of the reclassification of Three Billion
(3,000,000,000) authorized and unissued Common Shares, with a par value of One Peso (Php
1.00) per share from the existing authorized capital stock, into Three Hundred Million
(300,000,000) Non-Voting Preferred Shares with a par value of Ten Pesos (Php 10.00) per share
to be known as “Non-Voting Preferred Shares. These new Non-Voting Preferred Shares are
intended to be issued in series and the issue value of such shares will be determined at the time of
each issuance
The second amendment will be a modification of the limited denial of preemptive right already
existing in the Articles. The proposed amendment seeks to deny the preemptive right.
25. Other Matters
Seasonality or Cyclicality of Interim Operations
Except for FG Hydro’s sale of electricity coming from hydroelectric power/operations, seasonality
or cyclicality of interim operations is not applicable to the Parent Company’s type of business
because of the nature of its contracts with NPC, which includes guaranteed volume under the
applicable take-or-pay, minimum energy off-take or contracted energy provisions. GCGI’s sales
to cooperatives and industries are also not subject to seasonality or cyclicality.
Issuances, Repurchases, and Repayments of Debt and Equity Securities
There are no issuances, repurchases and repayments of debt and equity securities during the
current period
Changes in Estimates of Amounts Reported in Prior Financial Years
The key assumptions concerning the future and other key sources of estimation uncertainty used in
preparation of the unaudited interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Company’s annual consolidated financial statements
as of and for the year ended December 31, 2013.
Changes in the Composition of the Company During the Interim Period
There are no material changes in the composition of the registrant during the period.
Changes in Contingent Liabilities or Contingent Assets Since the Last Annual Reporting Date
There are no material changes in the contingent liabilities or contingent assets since the last annual
reporting date.
Existence of Material Contingencies and Any Other Events or Transactions that are Material to
an Understanding of the Current Interim Period
There are no material contingencies and any other events or transactions during the period.