HIGHER interests rates and financing costs, peso depreciation, and the Japanenese yen's appreciation have resulted in the significant drop in the net income of the Lopez-owned firm-First Gen Corp. (FGC)

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However, FGC chief finance officer Giles Puno said they are expecting the decline in the net income due to the debt taken on for the acquisition of the Energy Development Corp. (EDC), formerly owned by the Philippine National Oil Company (PNOC).

In a disclosure to the Philippine Stock Exchange (PSE), FGC said that it posted lower profits in the third quarter of 2008 with 64.1 percent to US$35.6 million as compared to the US$99.1 million recorded in 2007 during the same period.

"Our lower net income was expected considering the amount of debt we had to take on in acquiring a controlling stake in EDC," Puno said.

Aside from the EDC acquisition, Puno said payment of the income tax holiday for the 1,000 megawatts Sta. Rita Power Plant which ended last May 2007 and the lower net income of its subsidiary First Gen Hydro Power Corporation, the company that owns and operates the 112 MW Pantabangan-Masiway hydroelectric power plant contributed to the decrease in their profit.

He said they are now set to close a funding for the US$544 million term loan of First Gas Power Corp., this week as well as the sale of the 60 percent stake in the Pantabangan-Masiway power facility with projected proceeds of US$104.1 million. The company is also set to sign an agreement with a consortium headed by Marubeni Corporation for the sale of up to 40 percent stake in Red Vulcan Holdings Corp., where part of the proceeds will be used to settle fully the remaining debt of Red Vulcan.

"The First Gas term loan was completed amidst an extremely challenging financial environment. This confirms the belief of the international commercial banks in the fundamentals and creditworthiness of our projects," Puno added.

According to the FGC official, they have already addressed most of the bridge loans of the company that will mature this month.

"The company is focused on a number of funding exercises and is already on its way to normalizing its financials," Puno further said.

In its unedited consolidated financial statements, the company's consolidated revenue rose to US$1.3 billion, up by 64.3 percent as against last year's revenue of US$0.8 billion.

Also income from operations increased to US$373 million or 76.2 percent higher than 2007. But Puno said the increase in income from operations was reduced by higher consolidated interest expenses and financing charges of US$141 million from the US$56.4 million last year. (MSN/Sunnex)

For more Philippine news, visit Sun.Star Cebu.

(November 18, 2008 issue)
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