Pasig–(PHStocks)–Geothermal leader Energy Development Corporation (PSE: EDC) posted a cumulative net income of PhP615 million for the year ending 31 December 31 2011, 86% lower than the PhP4.4 billion declared in 2010. The non-cash impairment of PhP5 billion taken during the year on the Northern Negros Geothermal Project (NNGP) was the major contributor to the substantial decline in the company’s net income. Also contributing to the decline was the PhP1.2 billion of forgone steam revenues resulting from EDC’s acquisition of the Bacman Power Plants to which the company supplies the steam. This has also impacted on the company’s recurring net income which decreased by 27.5% to PhP5.2 billion from PhP7.2 billion the year before.
“2011 was a difficult year because we had to absorb sizable hits, primarily the PhP5 billion write off of Northern Negros and the PhP1.8 billion of forgone steam sales of Bacman. We are working hard to attain our targeted third quarter 2012 recommissioning of the 130MW Bacman Plants,” EDC President and COO Richard Tantoco explained. The full impairment of NNGP, will be cash accretive as the project incurs an annual cash operating cost of PhP800 million from its sub optimal operations.
“The impairment decision taken on NNGP, albeit costly, was necessary to clear the issue with finality,” Tantoco added.
The decline in net income was partially offset by the PhP1.1 billion revenues from FG Hydro’s sale of ancillary services. FG Hydro, a subsidiary of EDC, is the operator of the Pantabangan-Masiway hydroelectric power plants.