2007 ANNUAL REPORT Power Corporation - Aboitiz Equity Ventures

More documents

Recommendations

Info

F R O M Y O U R C H I E F F I N A N C I A L O F F I C E R Iker M. Aboitiz FIRST VICE PRESIDENT CHIEF FINANCIAL OFFICER CHIEF INFORMATION OFFICER Total 2007 Consolidated Net Income earned stood at 4.1 billion, an increase of 124% versus 2006. Net Foreign Exchange Gains of 785 million were incurred primarily on the revaluation of subsidiary and associate foreign exchangedenominated debt. Dear Shareholders, 2007 was both a challenging and rewarding year for Aboitiz Power Corporation (AP). Your company turned in record profits of 4.1 billion, successfully completed its Initial Public Offering (IPO) in July raising over 10 billion, and financed and completed over 20.3 billion in acquisitions and investments. 2007 Investment Acquisitions Breakdown STEAG 22% Enerzones 5% CPPC / EAUC 6% Sibulan Project 5% Magat 62% Total 2007 Consolidated Net Income earned stood at 4.1 billion, an increase of 124% versus 2006. Net Foreign Exchange Gains of 785 million were incurred primarily on the revaluation of subsidiary and associate foreign exchange-denominated debt. Recurring income contribution attributable to operations thus stood at 3.4 billion or a very healthy increase of 81% on the back of record contributions from both the distribution and generation businesses. Exceptional growth in 2007 Net Income resulted to an increase in both recurring and non-recurring earnings per share despite an increase of year-end shares outstanding by 47%. Recurring and non-recurring earnings per share for 2007 were at 0.53 and 0.66 respectively, both increasing by 44% and 78% from 2006 levels of 0.37 per share. Operating cash flow generated by AP’s business segments was equally strong. Your company’s consolidated EBITDA in 2007 was 5.5 billion, up by 92% from 2006 levels of 2.9 billion. Taking AP’s proportionate share of each of its subsidiaries and associate companies, pro-forma EBITDA increased to 6 billion, recording a 64% growth over the 3.7 billion registered in 2006. 2007 Pro-Forma EBITDA Breakdown Merchant generation assets 26% Hydro generation-based assets with contracts 21% Distribution and capacity fee- based generation assets 53% The strength of your company’s cash flows lies in its diversified risk mix. Like a well-balanced portfolio, AP’s mix of cash flows is designed to provide upside potential while prudently managing business risk: • Of the above-mentioned EBITDA of 6 billion, 53% was attributed to a combination of the very stable distribution business and the predictable capacity fee-based generation assets. To a certain extent, both are granted guaranteed returns. • The run-of-river hydro generation assets contributed 21%. Due to their Power Purchase Agreements, these assets take no market risk yet maintain moderate upside arising from increases in generation volume. These assets, however, do take hydrology risk, which your company feels is manageable given fairly steady Philippine rainfall patterns. • Magat, AP’s merchant hydro plant, generated most of the remaining 26% of the above-mentioned EBITDA of 6 billion. This asset’s significant upside is driven by its ability to store water equivalent to one month of generating capacity, allowing for the generation and sale of electricity to occur at the peak hours of the day, which command premium spot prices. Magat’s source of upside, water as a source of fuel and the ability to store it, is also its source of limited downside. This hydro asset has minimal marginal cash costs granting it competitive advantage in terms of economic dispatch order versus other fuel-fired power plants that have significant marginal cash costs. Lastly, given this asset’s unique ability to store water, generation in times of low spot prices can be deferred to times of more favorable spot prices. 22 • ABOITIZ POWER CORPORATION ANNUAL REPORT 2007
The strong and stable financial performance in 2007 resulted not only in healthy bottom line figures but in healthy returns as well. Return on Equity (ROE) for 2007 stood at 23%; if adjusted for non-recurring income, ROE would have been 18%. This respectable return was in spite of AP’s high year-end parent level cash balance of 10.6 billion mainly coming from the IPO proceeds. As your company’s acquisition and expansion strategy is further implemented, capital raised over last July’s IPO will be deployed into higher yielding investments, which are expected to further increase your equity returns. Your company’s balance sheet is sound and will be able to fund the acquisition and expansion plans disclosed in its IPO. • Total Consolidated Year-End Assets of 36.2 billion registered a 193% increase buoyed by cash raised in the IPO and the successful acquisitions and investments concluded throughout 2007. • Despite this expansion of Consolidated Assets, Total 2007 Consolidated Liabilities stood at only 8.5 billion. • Cash and Cash Equivalents at the Consolidated Level stood at 13.3 billion at year-end, while cash at the Parent Level stood at 10.6 billion. • Total Year-End Equity Attributable to Equity Holders of the Parent stood at 27 billion. This 212% rise was mainly brought about by additional capital raised over the IPO and additional infusions from our parent company, Aboitiz Equity Ventures. These capital-raising activities resulted in total year-end shares outstanding to increase by 47% to 7.4 billion shares. • Net Debt to Equity Ratio stood at -0.29 and -0.27 at the Consolidated and Parent Level, respectively. AP’s high net cash position coupled with the strong and stable cash flows from the distribution and generation businesses arm your company with the financial strength and ability to prudently carry out its acquisition and expansion strategy. The market acknowledged this prudent acquisition and expansion strategy through the successful close of the SN Aboitiz Power project finance deal in October 2007. It has been hailed as the region’s first-ever project finance debt granted to a merchant power plant and the winner of Project International’s Power Deal of the Year, Asset’s Best Project Finance and Best Privatization Awards. This uniquely successful debtraising activity is a testament to AP’s financial discipline and rewarding expansion strategy. The refinancing will have immediate bottom line effects with a reduction of interest rates from 12% to approximately 8.5% at the SN Aboitiz Power associate level, or approximately 450 million in annual interest savings. The debt markets of 2007 proved to be extremely favorable for capital-raising activities. High liquidity levels of both foreign and local banks resulted in ample capital being made available for infrastructurerelated projects. Coupled with low-interest rates and the lengthening of the lending yield curve, the environment for quality project finance borrowing extended throughout 2007 and is expected to continue in 2008. Your company looks forward to 2008 with great confidence and excitement. AP will carry on with its prudent acquisition and expansion strategy by: • Capitalizing on its portfolio of strong cash flows and under-levered balance sheet; • Further exploiting the favorable borrowing environment; • Applying financial discipline, and • Focusing on the opportunities in the dynamic and growing Philippine power industry. Iker M. Aboitiz First Vice President / Chief Financial Officer / Chief Information Officer The SN Aboitiz Power project finance deal in October 2007 has been hailed as the region’s first-ever project finance debt granted to a merchant power plant and is the winner of Project International’s Power Deal of the Year, Asset’s Best Project Finance and Best Privatization Awards. ABOITIZ POWER CORPORATION ANNUAL REPORT 2007 • 23
Page 1 and 2: Power Corporation Powering New Fron
Page 3 and 4: P o w e r i n g New Frontiers ABOIT
Page 5 and 6: FINANCIAL SUMMARY For the Year (In
Page 7 and 8: R E P O R T T O O U R S T O C K H O
Page 9 and 10: h Powering New Frontiers With deman
Page 11 and 12: Results of Operations POWER D I S T
Page 13 and 14: R E S U L T S O F O P E R A T I O N
Page 15 and 16: A SFELAPCO crew does live line work
Page 17 and 18: Results of Operations POWER G E N E
Page 19 and 20: POWER G E N E R A T I O N Hedcor si
Page 21 and 22: STEAG State Power Inc. (SPI) contri
Page 23: We expect our distribution companie
Page 27 and 28: DIRECTORS SPECIAL AND REGULAR BOARD
Page 29 and 30: Director and Senior Executive Compe
Page 31 and 32: The Office of the Chief Compliance
Page 33 and 34: Employee Relations In AP, people ar
Page 35 and 36: P o w e r i n g New Frontiers F E A
Page 37 and 38: The rest of its capacity is traded
Page 39 and 40: The annual energy requirement will
Page 41 and 42: Gone are the long queues at VECO’
Page 43 and 44: The three utilities aim to provide
Page 45 and 46: CPPC, meanwhile, is situated on a 1
Page 47 and 48: and reliable supply of electricity.
Page 49 and 50: The fulfillment of sharing the frui
Page 51 and 52: Board of Directors Jon Ramon M. Abo
Page 53: Corporate Officers Benjamin A. Cari

2007 ANNUAL REPORT Power Corporation - Aboitiz Equity Ventures

Create successful ePaper yourself

Delete template?

Save as template?