LOPEZ-owned First Gen Corporation reported a decline of 85 percent in its income in the first nine months.

In a disclosure to the Philippine Stock Exchange (PSE), the company said its net income this year from January to September was pegged at US$7 million much lower than the US$45.8 million posted last year during the same period.

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First Gen said the decline in their net income “was principally attributable to a one-time, noncash write down of the deferred tax assets of First Gen’s geothermal associate, Energy Development Corp., due to the recent implementation of the Renewable Energy Act.”

The company added that it posted a US$2.9 million unrealized foreign exchange loss in 2009, from unrealized gains of US$22.2 million from foreign exchange movements in 2008.

But its main power generating assets continued to deliver steady operational results with First Gen, the 1,000-megawatt (MW) Santa Rita and 500-MW San Lorenzo natural gas fired plants consistently enjoyed average dispatch levels in excess of 80 percent.

At the same time “the company’s financial health continues to stabilize as it pursues a strong financing program aimed at moving a significant portion of the company’s loan obligations to operating subsidiaries and striking a reasonable balance between debt and equity.”

On the other hand, First Gen’s successful programs have brought down interest expense at the parent company level from a high of US$75.4 million in 2008 to only US$ 60.5 million as of this year.

“EDC wrote down P3 billion in deferred tax assets as a one-time effect of the implementation of the RE Act, with the reduction in corporate income tax rate to 10 percent from 30 percent, starting in February 2009,” First Gen added.

This resulted in their net income to decline by 47.7 percent to P1.3 billion in the first nine months of the year from last year.

Recurring net income however is 6.3 percent higher in the first nine months of 2009 at P1.5 billion.

“The write down in deferred tax assets is a one-time consequence of the RE Act, following which the company’s future operations will continuously enjoy substantial benefits. Going forward, our financing program, particularly the P15 billion rights issuance, is designed to further reduce our debt obligations with equity,” said First Gen CFO Giles Puno. (MSN/Sunnex)