To our valued shareholders,
This is to present to you your company's performance for 2015 as we continue operating as a company whose primary business is to provide energy and power to Mindaonao and its people.
The year that passed was a challenging year for ACR due to the strong performance of the US Dollar against the Philippine Peso. This affected the pricing index for our energy revenues as well as some direct costs in our operations. While there was some erosion in the gains your company acquired for the year, we remain confident that our long term prospects and commercial viability in our chosen market remains robust.
Your Company is a committed as ever to see through completion the remaining Key Projects we have set to accomplish in the medium term - the operation of Sarangani Energy Corporation (SEC) Section 1; and construction and operation of SEC Section 2, San Ramon Power Incorporated (SRPI) and Siguil Hydro Power. We are keenly aware that the future growth and profitability of your company would be greatly impacted by the successful implementation of these projects.
Taking this into account your company worked diligently to ensure the availability of human and financial resources needed to bring these Key Projects into completion. I am happy to report that your Energy and Power subsidiaries were able to accomplish important targets that been set for the year that passed.
SEC completed the construction and started commissioning activities for the first section of its total 210MW coal-fired plant in Maasim, Sarangani Province. The second section of SEC and the Siguil Hydro Power project both entered the pre-bidding phase of their respective projects with the drafting of the project specification and pre-selection of contractors to bid for their engineering, procurement, and construction(EPC) contracts.
It was an exacting time for your company as our ability to deliver results on time and on budget was tested by the seemingly endless crop of minor issues in both project implementation and ongoing operations. However, we remain optimistic that the final returns to our investment in these projects would in the long term, still meet our projections.
For your company's existing generating assets, operational efficiency has always been a key directive handed on the management team of each power plant. In 2015, the operations of Western Mindanao Power Corporation (WMPC), Southern Mapalad Power Corporation (MPC) performed very well under the circumstances, posting a considerable 30% increase in operating profit for this period.
This close attention to profitability will become even more significant in the coming years since the energy conversion agreement (ECA) with the national government has expired on December 2015 for WMPC and April 2016 for SPPC. In plants will continue to operate as independent power producers, responsible for marketing and selling their capacities without the benefit if a long-term secured government contract.
Revenue and Profitability
For 2015, consolidated revenues declined 3% from P5.180 billion in 2014 to P5.022 billion. This Slide occurred due to the lower energy fees collected, despite an increase of energy sales volume by the three generating plants of your company. A change in accounting for depreciation of WMPC and SPPC assets, extending depreciable life from original ECA period to another 10 years, improved cost of services by 13% to Php3.072 billion. This improved gross profit by 15% from Php1.632 billion in the previous year to Php1.950 billion by the end of this reporting period.
As mentioned, operating profit improved significantly from Php1.164 billion to Php1.516 billion in 2015 due to lower general and administrative expenses. However, earnings before interest, taxes, depreciation and amortization (EBITDA) was lower for the year at Php1.591 billion from Php2.088 billion, stemming from foreign exchange losses incurred when setting a US Dollar denominated liability at a higher peso translation.
This resulted in your company's net income for 2015 to drop 5% from Php727 million last year to Php691 million this year, and the earnings attributable to the equity holders of the parent reduced from Php359 million to Php188 million. As a result, basic earnings per share decreased from Php0.056 in 2014 to Php0.029 per share in 2015.
Taking out the effect of this foreign exchange loss would show an improved core income of 23% from Php741 million in 2014 to Php909 million in 2015. The net income attributable to the parent would be Php0.064, 16% higher than last year's Php0.056
Towards A Balanced Energy Mix
The start of commercial operations of SEC Section 1 represents a major milestone in your company's strategic map as we endeavor to broaden our energy generation mix to include base load capacity in addition to our existing diesel peaking plants. We believe that a well-balanced energy mix - comprised of varying fuel sources such as cola, diesel and renewable - is the best approach in order to provide the most reliable and affordable power to our customers. We plan to take full advantage of these different fuel source's strengths while properly managing its weaknesses.
So far, your company is well on the path to achieve this desired balanced combination of generating assets. Your existing diesel power plants continue to operate as efficiently as possible, providing electricity to the Mindanao grid while the new types of generating assets are being developed.
The construction of SEC Section 2 is set to begin by the 3rd quarter of 2016, doubling your company's base load capacity as well as increasing our total generating capacity by more than 80% from 258MW as of the end 2015 to 468MW by end of 2018. The Siguil Hydro Power Plant will be your company's first foray into renewable energy and it is set to commence construction by early 2017.
The challenge to complete these projects as with others also in the pipeline continues to persist for you company in the next few years. What is considerable different from this point onward is the wealth of experience we have accumulated in successfully completing the construction of SEC Section 1 and the resultant increase in revenues this brand new power plant will contribute to your company during its operations.
In challenging times like the year that was we let our core values be our motivation to perform at the best of our abilities and deliver what is asked of us. Plainly your company is in business to provide a very important service to our customers.
We have taken the task to generate safe reliable and affordable power for the people of Mindanao.We are confident in the technologies we utilize, we take utmost precautions in maintaining the physical soundness of our engines, and we are always on the lookout for the most efficient way to deliver this service. We believe in the integrity of our work and the quality by which we produce our service.
We engage our host communities in the most meaningful, way we know how - through education. We provide much needed support to various efforts hat work to improve the quality of education at all the communities that graciously host our projects.
We are truly committed to being responsible stewards of the environment. We invest the protection of environment just as we invest in the protection of our properties. We have institutionalized environmental protection programs with focus on marine resources conservation and reforestation &watershed restoration.
All This we do as the expression of our core value to bridge the development gap in Mindanao in the most responsible manner as possible.
As always, thank you for sharing your support for us as we continue on pursuing these projects which, we believe, are the key to both mindanao and your company's bright future.
TOMAS I. ALCANTARA
Chairman & President