Alsons Consolidated Resources Stead Fast For Mindanao

Result of Operations

Revenue and Profitability

ACR and Subsidiaries posted a significant improvement in its consolidated revenues, closing 2016 with Php7.11 billion, a jump of 42% from the Php5.02 billion reported in the previous year. This increase was due mainly to the contribution of Sarangani Energy Corporation (SEC), which commenced commercial operations on 29 April 2016. This year also saw all of the diesel power plant subsidiaries operating as full merchant plants after the Energy Conversion Agreements (ECAs) of Western Mindanao Power Corporation (WMPC) and Southern Philippines Power Corporation (SPPC) with the national government expired on 12 December 2015 and 12 April 2016, respectively.

Cost of services posted a significant increase at Php4.68 billion, 52% higher than the Php3.07 billion in 2015. The increase in cost was also due to the start of commercial operations of SEC posting a direct cost of Php1.93 billion. The full operations of WMPC and SPPC as merchant plants in 2016 also contributed to an increase in cost of fuel as pass-through item.

Gross profit improved by 24% to Php2.42 billion from Php1.95 billion in 2015 also due mainly to the contribution of SEC.

General and administrative expenses increased 22% to Php531 million from Php434 million in 2015, but operating profit still continued to improve at 25% for the year, from Php1.52 billion in 2015 to Php1.89 billion in 2016.

Earnings before interest, taxes, depreciation and amortization (EBITDA) jumped 52% from Php1.78 billion to Php2.69 billion this year, again attributable to the start of SEC operations during the year.

Finance charges increased by 1.67x from Php324 million to Php865 million. Interest expense incurred on the project loan to complete the first phase of the SEC plant is now fully recognized as an expense, after the project was completed and commenced operations. Last year, the interest was capitalized as part of project cost.

On the other hand, the Company realized a net other charges of Php155 million from Php84 million in 2015 as the Company recognized an impairment loss of Php245 million on goodwill this year. This impairment negated income from insurance claim of SPPC during the year amounting to Php70 million. Last year's one-time realized foreign exchange loss of Php218 million was incurred when the Company settled its foreign currency denominated debt.

As a result of the foregoing, the consolidated net income declined 8% from last year's Php691 million to Php636 million. Income attributable to Parent, however, recorded an improvement of 69% at Php317 million from Php188 million in the previous year and the Company posted strong earning per share of Php0.05 from Php0.03 last year.

Financial Position

As of 31 December 2016, total resources of ACR and Subsidiaries remained strong at Php30.81 billion, increasing by 2% versus the Php30.17 billion level reported in 2015.

Current assets dropped 23%, from Php7.90 billion to Php6.08 billion. The decline came largely from the decrease in cash and cash equivalents of SEC which were used to complete the first phase of its plant as well as lower prepaid expenses, and deposit in interest reserve account on the Fixed Rate Corporate Note (FXCN) of the Parent Company. On the contrary, noncurrent assets rose by 11%, representing capital expenditures incurred for the completion of the first phase of SEC power plant and the additional investment made to Aviana Development Corporation during the year.

Current liabilities increased during the period by 44% from Php2.02 billion to Php2.91 billion, largely on account of higher current portion of long-term debt and accounts payable and accrued expenses. Noncurrent liabilities decrease 3% due to the recognition to current the maturing portion of the Company's long-term debt.

ACR's balance sheet remained strong with a current ratio at 2.09:1 in 2016 versus the 3.90:1 level in 2015, while its debt-to-equity ratio increase slightly at 2.25:1 from 2.08:1, due to the availment of additional debts.

Net cash inflows from operating activities significantly improved to Php2.38 billion, a 74% increase from last year's Php1.37 billion. The lower acquisition of spare parts and extended credit terms of trade payables resulted in the improvement of cash from operations this year. Net cash used for investing activities posted a 97% jump at Php2.81 billion from last year's Php1.90 billion due mainly to capital expenditures for the completion of the construction of SEC plant. Together with net cash inflows from financing activities amounting to Php2.83 billion, largely from loan availments, available funds totaled Php2.68 billion in 2016, were used for power plant project construction of SEC 1 amounting to Php3.28 during the year. The net cash balance after accounting for the above changes reached Php2.05 billion, 48% lower than Php3.94 billion in the previous year.

Energy and Power

The Power Group gross revenues increased by 46% from Php5.0 billion in 2015 to Php7.20 billion in 2016. The net income dropped by 15% from Php1.31 billion in the previous year to Php1.11 billion in 2016.

Western Mindanao Power Corporation (WMPC)

Shareholders: Alsing Power Holdings, Inc. / Tomen Power Singapore Pte. Ltd. / Aboitiz Power Corporation

The total energy delivered to the Mindanao grid in 2016 reached 354,877MWh or 46% lower than 654,061MWh energy delivered in 2015, representing a decrease in plant average load of 41.9MW from 76.3MW in 2015. In the same way, plant capacity utilization dropped to 41.9% from previous year's utilization of 76.3%. WMPC gross revenues increased from Php1.43 billion in 2015 to Php1.64 billion in 2016, net income earned for 2016 reached Php86.2 million.

Southern Philippines Power Corporation (SPPC)

Shareholders: Alsing Power Holdings, Inc. / Tomen Power Singapore Pte. Ltd. / Aboitiz Power Corporation

The total energy generated for 2016 reached 154,996MWh, 52% lower than last year's generation of 322,872MWh. This resulted to a decrease in plant capacity utilization of 33% from 69.7% in 2015. SPPC posted gross revenues of Php611.8 million in 2015,14% lower from the Php708 million in 2015. Net income decreased to Php212.6 million, compared to Php365.4 million of the previous year.

Mapalad Power Corporation (MPC)

Shareholders: Conal Holdings Corporation

The total energy generated for 2016 reached 246,879MWh, 44% lower than the 442,678MWh of energy delivered in 2015. MPC generated revenues of Php1.77 billion in 2016, 38% lower from the Php2.86 billion of revenues generated in 2015. Net income for 2016 reached Php75.5 million.

Alto Power Management Corporation (APMC)

Shareholders: Conal Holdings Corporation / Tomen Power Singapore Pte. Ltd.

APMC will carry on in managing WMPC, SPPC and MPC locally. The O&M contracts with P.T. Makassar Power in Indonesia expired last 30 April 2016 and was no longer renewed. APMC's gross revenues in 2016 reached Php27.6 million, lower than the Php61.8 million registered in 2015. It posted a net income of Php0.22 million this year.

Sarangani Energy Corporation (SEC)

Shareholders: Alsons Thermal

The construction of SEC Phase 1 coal-fired power plant with a capacity of 105 megawatts commenced in January 2013 with Daelim Philippines Inc. and Daelim Industrial Company Ltd. as EPC contractors. Commercial operation of the circulating fluidized bed power plant was declared on 29 April 2016.

For 2016, SEC delivered a total of 415,664MWh of energy to its four customers. The company generated total revenues of Php3.5 billion with net income of Php893 million for the first eight months of operations.

Land and Property

Alsons Land Corporation (ALC)

Shareholder: Alsons Consolidated Resources Inc.

The gross revenue of Alsons Land Corporation increased to Php22 million in 2016 from Php19 million in 2015. Income from leasing activities improved by 13% while Campo Verde, a joint venture project with Sunfields Realty Development Inc.(SRDI) located in Malvar, Batangas contributed 67% improvement in revenues during the year. The Company's main focus is selling the remaining available inventories in 2017.

Kamanga Agro-Industrial Economic Development Corporation (KAIEDC)

Shareholder: Alsons Consolidated Resources Inc.

The development of Kamanga Agro-Industrial Economic Zone (Kamanga Ecozone) commenced in 2013 with Sarangani Energy Corporation as its anchor locator. Kamanga Ecozone is accredited with the Philippine Economic Zone Authority (PEZA) as an agricultural and light-industry zone. By locating inside this ecozone, the locators can enjoy the benefits of a reliable power source as well as the incentives prescribed by law through the PEZA.