financial report - isagen · financial report first quarter of 2014 isagen s.a. e.s.p. 1 ... ral...

1Financial Report First Quarter of 2014 ISAGEN S.A. E.S.P.

In the first quarter of 2014, ISAGEN’s revenue was $526,202 million, 6% more than revenue reported for the same period in the previous year. Net profit reported for the quarter was $147,073 million, 33% higher than net profits in the first quarter in 2013.

Below are the main occurrences in terms of regulation, the energy market and the Company’s financial results.

Industry Regulation

First Quarter of 2014

Financial Report

This resolution makes some modifications to the existing regulations of the Voluntary Disconnectable Demand (DDV in its Spanish acronym), which is a mechanism that allows reductions in the energy consumption of large clients to be utilized as alternatives for covering the generators’ Firm Energy Obligations (OEF).

Additionally, through this regulation, the CREG made modifications to the method for calculating the Daily Individual Real Compensation (RRID) of the plants, increasing the requirement to cover the OEF with Backup Contracts, Backup Statements or DDV in the case of power plant main-tenance, due to the modification of the Commercial Availability formula.

CREG Resolution 203

of 2013

Circular 05 of 2014

This contains the document created by the Regulatory Commission on measures to promote competition in the energy market. Since 2010, the CREG has reviewed the topic and has presented proposals on related regulations.

The aim of the analysis was to identify conditions in which an agent is pivo-tal; that is to say, that it has the ability to unilaterally change prices, as well as to identify schemes to avoid said conditions affecting the formation of market prices.

2 Financial Report First Quarter of 2014 ISAGEN S.A. E.S.P.

In the analysis, the results of the simulations are presented, and the effects of the contracts, the demand and an intraday market are evaluated. The results show, among other aspects, that the bilateral contracts of the gene-rating agents reduce the possibility that these will be pivotal in magnitude and frequency. Additionally, it is observed that in the market, the presence of pivotal agents may occur, but not frequently.

Finally, the following stand out from among the recommendations:

• The measures currently existing in the market must be maintained to preserve and promote competition in the WEM, such as the structu-ral measures of participation of the generating agents and the power band, and measures of conduct such as the confidentiality of offers.

• Since contracting is useful for mitigating the appearance of agents with pivotal conditions, it is considered that the implementation of schemes such as the Organized Regulated Market (ORM) is important in the promotion of competition in the WEM.

• Market intervention is not required and it is necessary to continue mo-nitoring the topic constantly, especially in companies that have a low level of contracting.

Through Resolution 052 of 2013, the CREG defined the methodology for establishing a regulated revenue (IR) for a period of 10 years to promote the use of imported natural gas - in this case, liquefied natural gas (LNG) - to cover backup energy according to the requirements of the electricity system on the Atlantic coast.

According to this methodology, the generators of this region of the country, that according to the UPME could support backup energy, formed what is known as the Thermal Group (GT). This group is responsible for carrying out a selection process that is public, efficient, transparent and duly audited, to select the agent that will construct the LNG regasification terminal.

With the information of the selected project, the CREG defined the regulated revenue and published it via Resolution 022 of 2014. The defined value is USD 40.75 million per year for 10 years. It is important to note that this reve-nue is transitory and only when the generators that form the GT make their definitive statements of the OEF guaranteed as LNG, will the CREG proceed to assign the regulated revenue of each of the members of the GT.

CREG Resolution 010

of 2014


Energy Market

Energy Demand

Accumulated Year Tracking

National EnergyDemand

4.5%

ISAGEN EnergyGeneration

14%

Average spotprice Q1 2014

Averange contractprice Q1 2014

166.6 $/kWh 127.6 $/kWh

By the end of the first quarter of the year, the national energy demand totaled 15,386 GWh, 4.5% greater than that presented in the first quarter of the previous year, which was 14,668 GWh. The variation of the regulated demand during the first quarter was 3.9%, while the variation of the non-regulated demand was 5.8%.

2013 2014

Demand GWh

Number of days

Average daily

demand

Demand GWh

Number of days

Average daily

demand

Growth 2013 / 2012

%Business days 10,026 59 169.9 10,815 61 177.3 4.3

Saturdays 2,078 13 159.8 2,188 13 168.3 5.3

Sundays/holidays

2,564 18 142.5 2,383 16 148.9 4.6

Total Month 14,668 90 163.0 15,386 90 171.0 4.5

The growth in domestic energy demand has been driven mainly by the following:

• The impact of the new Rubiales oil field, whose consumption represents 1% of the national demand of this period.

• In the first quarter of 2014, there was a greater number of business days than in the first quarter of 2013 due to Easter falling in March the previous year.

• A notable increase in non-regulated demand. When breaking down growth by sectors, the growth recorded in the manufacturing sector stands out. This may be influenced by the greater number of business days pre-viously mentioned.

In the last twelve months (April 2013 - March 2014), Colombian electricity demand was 61,608 GWh, a 3.2% increase from that of the April 2012 - March 2013 period (59,565 GWh).

Source: XM


National Energy Demand (GWh)

Source: XM - Portal BI

NationalDemand 2013

NationalDemand 2014

January

5,025

5,167

4,610

4,902

5,033

5,316

February March

Source: XM

Hydroelectricity Contributions to the National Electrical Grid

Jan/

00

25

0

Jan/

01

Apr/

00

Jul/0

0

Oct/0

0

Apr/

01

Jul/0

1

Oct/0

1

Jan/

02

Apr/

02

Jul/0

2

Oct/0

2

Jan/

03

Apr/

03

Jul/0

3

Oct/0

3

Jan/

04

Apr/

04

Jul/0

4

Oct/0

4

Jan/

05

Apr/

05

Jul/0

5

Oct/0

5

Jan/

06

Apr/

06

Jul/0

6

Oct/0

6

Jan/

07

Apr/

07

Jul/0

7

Oct/0

7

Jan/

08

Apr/

08

Jul/0

8

Oct/0

8

Jan/

09

Apr/

09

Jul/0

9

Oct/0

9Ja

n/10

Apr/

10

Jul/1

0

Oct/1

0

Jan/

11

Apr/

11

Jul/1

1

Oct/1

1

Jan/

12

Apr/

12

Jul/1

2

Jan/

13

Apr/

13

Jul/1

3

Oct/1

3

Jan/

14

Oct/1

2

50

75

100

125

150

175

200

225

250(% media)

The following diagram shows the percentage of the water levels with respect to the historical average, month by month. As can be seen, the levels were slightly higher than the historical average during the first three months of the year.

Water Levels and Evolution of National Electrical Grid Reserves


Natural Water Flows, % of the Historical

Average

January February March

Antioquia 97.6 122.4 105.7

East 70.5 65.3 88.2

Center 103.3 83.2 164.3

Caribbean 75.3 50 73.4

Valle 113.7 125.2 143.6

National Electrical Grid 96.9 110.3 113.9

San Carlos (Punchiná) 145.9 202.53 198

Miel I (Amaní) 124.2 131.57 100

Jaguas (San Lorenzo) 108.2 201.97 124.5

In the first quarter of the year, contract prices were mostly above those recor-ded in the first quarter of 2013, which is in line with the PPI.

The average market price for the quarter was $ 166.4/kWh. This is lower to that presented in the same quarter of the previous year, which was $ 168.3/kWh. The behavior of the spot market price is due to the better water supply.

Spot Market Prices


Stock Exchange and Contract Price Trends Q1 2014 ($/kWh)

Stock Price 2013 Stock Price 2014

185.0 187.6 151.3

160.4 182.2 137.7


Contract Price 2013 Contract Price 2014

126.1 128.7 127.9

126.0 126.2 124.1



ISAGEN Generation (GWh)


Energy Generation

During the first quarter of the year, ISAGEN’s accumulated generation grew 14%, rising from 2,622 GWh in 2013 to 2,999 GWh in 2014. This greater generation is due to the hig-her water levels in the reservoirs of all the Company’s power plants, and mainly in the Miel Power Plant, including the aqueducts (Manso and Guarinó). As such, there was greater thermal plant generation during the quarter due to the mana-gement carried out in obtaining fuel, and the current market conditions

Generation at ISAGEN Power Plants (GWh)

Q1 2014 Q1 2013

Calderas

Miel I

Jaguas

San Carlos

Termocentro

Amoyá

0

19.27

14.84

639.52

528.08

184.48

156.38

1,524.48

1,455.49

467.35

565.29

65.98

-

872799

951

1,260

9231,003

Energy Generated 2013 Energy Generated 2014


During the first quarter of the year, the generation of all the production centers was higher than that recor-ded the previous year, which is due to the greater hydroelectricity contri-butions to the system and to market conditions that made thermal power generation viable.


2014 First Quarter Results

Revenue

EnergyGeneration

14%

OperatingRevenue

6%

OperatingCosts

OperatingProfit

EBITDA NetProfit

3% 24% 23% 33%

Main Figures Q1 2014 Q1 2013 % Variation

Energy Generated (GWh) 2,999 2,622 14%

Revenue (Millions of $) 526,202 494,864 6%

Operating Costs (Millions of $) 293,304 302,539 -3%

Operating Profit (Millions of $) 208,053 167,297 24%

Operating Margin 40% 34% -

EBITDA (Millions of $) 237,347 192,790 23%

EBITDA Margin 45% 39% -

Income Tax Allowance (Millions of $) (56,917) (44,029) 27%

Net Profit (Millions of $) 147,073 110,891 33%

Net margin 28% 22% -

Q1 2014 Q1 2013 % Variation

Domestic contracts 409,251 332,345 23%

International Contracts 1,993 58,295 -97%

Stock Market Transactions 96,337 68,624 40%

AGC 15,796 22,336 -29%

Deviations 130 265 -51%

Gas 295 11,504 -97%

Technical Services 2,400 1,495 61%

TOTAL 526,202 494,864 6% *Amounts in millions of pesos


In the first quarter of 2014, ISAGEN’s revenue was $ 526,202 million, up 6% on that obtained in the same period for the previous year. This increase in revenue was due to the following factors:

• Revenue from energy sales in domestic contracts accounted for 78% of the total revenue obtained during the quarter. This was due to the higher volume of energy sold to regulated and non-regulated clients and better sales prices.

• In the first quarter of the year, power sales to Venezuela showed a significant decrease. This is due to the start-up of two new generation resources in eastern Venezuela, the Don Luis Zambrano 450 MW thermal power plant and the Fabricio Ojeda 510 MW hydroelectric power plant.

Sales to Venezuela Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014

Millions $ 58,295 77,217 44,111 18,844 1,993

GWh 199.10 275.00 177.60 62.90 8.50

• Energy sales on the market accounted for 18% of the quarter’s total revenue. The increase in sales on the market is explained mainly by the greater generation that occurred during the period under analysis.

• Revenue from gas sales was less for the following reasons: i) the natural gas available at ISAGEN was used mainly to supply thermal plant generation, and there were no excesses for commercialization; ii) the clients that usually purchased on the secondary market of the interior of the country were supplied with firm gas in the commercialization process that occurred during November 2013; iii) the secondary market is adapting to the new rules and is awaiting the changes that will be implemented by the market manager.

• During the quarter, revenues were received from the provision of the Automatic Generation Control (AGC) Service, which represented 3% of the total revenue generated during the first three months of the year.


Operating Costs

Operating costs for the quarter totaled $ 293,304 million, 3% less than that recorded in the first quarter of the previous year. This decrease was due to the following:

*Amounts in millions of pesos


Energy purchases 85,089 104,176 -18%

Usage and connection to the National Transmission System charges

47,792 56,267 -15%

NDC, CRDs and Commercial Exchange System 1,960 2,003 -2%

Act 99/93 transfer 11,249 9,584 17%

FAZNI contribution 3,421 3,009 14%

Depreciation 27,990 23,847 17%

Fuels 69,211 63,317 9%

Other operating costs 46,592 40,336 16%

TOTAL 293,304 302,539 -3%

Source: ISAGEN

Revenue Q1 2013 Revenue Q1 2014

67%DomesticContracts

12%International

Contracts

14%Stock MarketTransactions

0.2%AGC

2%Natural

Gas0.4%Others

78%Domestic Constracts

0.4%International

Contracts

18%Stock MarketTransactions

3%AGC

0.1%Natural

Gas0.4%Others



• Energy purchases accounted for 29% of the total operating costs in the quarter, broken down as follows:

Source: ISAGEN

Operating Costs Q1 2013 Operating Costs Q1 2014


ENERGY PURCHASES 85,089 104,176 -18%

Energy purchases 34,591 55,447 -38%

Reliability premium refund 32,535 26,039 25%

Restrictions and others 17,963 22,689 -21%

34%Energy

purchases

19%Usage and connection

to the National Transmission System

Charges

8%Depreciation

21%Fuels

5%Tansfers requiredby Law

and others

13%Other operating

costs29%Energy

purchases

16%Usage and connection

to the National Transmission System

Charges

10%Depreciation

24%Fuels

16%Other operating

costs

6%Transfersrequired by Law

and others

Energy purchases were less than those recorded in the quarter of the previous year, due to greater energy generation and at a lower average price for the quater.

Reliability premium refunds increased due to the increase in generation during the first quarter of the year.

• Fuel expenditures accounted for 24% of the quarter’s total operating costs. This fuel was used mainly in the operation of the Termocentro thermal power plant.


EBITDA Operating Profit

Net Profit

The net profit of the quarter rose 33% compared to the same quarter of the previous year. This result is due to the better revenues explai-ned earlier, as well as a better non-operating result compared to the same quarter the previous year.

The better non-operating result is basically due to a positive effect in the exchange difference and to the effect of the record of ad-justments of previous periods carried out in the first quarter of 2013 (the Laudo Miel process was adjusted by a value of $ 4,300 mi-llion, and adjustments estimated at $ 3,500 million were made to income).

The income tax allowance for Q1 2014 was greater than that recor-ded in the same quarter of the previous year due to greater profits and a lesser deduction in investment of real productive fixed assets.

Operating Profit and EBITDA

Revenue in the first quarter of this year was reflected in the operating profit and the EBITDA, demonstrating positive behavior compared to the quarters of 2013. This improvement in results is explained by ISAGEN’s better generation, which has been the highest recorded in recent quarters. Additionally, the decrease in operating costs and expenses contributed to the operating profit and the EBITDA demonstrating increases of 24% and 23% respectively.

A significant increase in the operating and EBITDA margins has also been demonstrated, closing the quarter at 40% and 45%, respectively.

Q1 2013

39%

45%192,790

237,347

Q1 2014 Q1 2013 Q1 2014

34%

40%167,297

208,053

Q1 2013 Q1 2014

22%

28%

110,891

147,073

Source: ISAGEN

Source: ISAGEN




Assets As of March 2014

As of December 2013

Quarterly Variation %

Current Assets 784,965 652,631 20.3

Non-current Assets 6,272,836 6,109,626 2.7

Valuations 793,084 793,084 0.0

TOTAL ASSETS 7,850,885 7,555,341 3.9

Liabilities and Equity

As of March 2014

As of December 2013

Quarterly Variation %

Liabilities 3,891,629 3,525,891 10.4

Equity 3,959,156 4,029,450 -1.7

Balance Sheet

AssetsThe main asset variations during the first quarter of 2014 correspond to the capitalization of project costs to a value of $ 189.311 million.

Liabilities and Equity The following were the main variations in liabilities in the first quarter:

• The record of dividends to be paid of $ 217,268 million, in accordance with the distribution of profits approved by the General Shareholders’ Meeting that took place in March.

• Payments were received from Club Deal credit of $ 110,467 million, from Hermes of USD 3.6 million and from leasing of $ 718 million.

• Interests for Club Deal, local bonds and leasing were paid to a total amount of $59,854 million, and for Hermes of USD 468,000.

• The third installment of the accounts payable to the legal stability contract and its interest were paid at a value of $ 4,333 million.

The value of equity was reduced due to the record of distribution of profits approved by the General Shareholders’ Meeting. The decrease is reflected as follows:

Article 130 of the Tax Code Reserve: $ 74,130 million

Reserve for investments: $ 165,003 million

Reserve release: $ 22,434 million


ASSETS March 2014

December 2013

Variation %

CURRENT ASSETS

Cash 364,572 228,943 59.2

Democratic shareholding collection

213 212 0.5

Investment portfolio 3,310 20,335 -83.7

Accounts receivable 302,393 282,205 7.2

Expenses paid in advance 14,307 21,113 -32.2

Inventories 90,175 89,434 0.8

Trust Rights 0 347 0.0

Other Assets 9,995 10,042 -0.5

TOTAL CURRENT ASSETS 784,965 652,631 20.3

NON-CURRENT ASSETS

Accounts Receivable

Difficult collections 1,435 1435 0.0%

Other 27,003 23,205 16.4%

Project advances 52,951 53,805 -1.6%

Debtors allowance (1,435) (1,435) 0.0%

79,954 77,010 3.8%

Investments 517 513 0.8

Property, plant and equipment, net

6,001,105 5,838,541 2.8%

6,001,622 5,839,054 2.8%

Deferred and other assets

Deferred charges 32,445 33,978 -4.5

Other Assets 81,994 83,481 -1.8

Acq. Property Leasing 76,821 76,103 0.9

191,260 193,562 -1.2

TOTAL NON-CURRENT ASSETS

6,272,836 6,109,626 2.7

Revaluations 793,084 793,084 23.97

TOTAL ASSETS 7,850,885 7,555,341 3.9

LIABILITIES AND EQUITY March 2014

December 2013

Variation %

CURRENT LIABILITIES

Financial obligations 42,566 35,176 21.0

Bond issuance premium 6,232 6,232 0.0

Accounts payable 372,606 182,918 103.7

Taxes and contributions 51,630 51,555 0.1

Labor obligations 9,098 12,208 -25.5

Estimated liabilities 114,181 67,053 70.3

Other liabilities 41,472 43,520 -4.7

TOTAL CURRENT LIABILITIES 637,785 398,662 60.0

NON-CURRENT LIABILITIES

Exterior borrowings 596,803 593,004 0.6

Bond obligations 850,000 850,000 0.0

Bond premiums 33,135 34,713 -4.5

Club deal credit obligations 1,194,718 1,084,250 10.2

Leasing lp 76,821 76,103 0.9

Labor obligations 62,051 62,051 0.0

Contractual taxes 60,827 56,252 8.1

Claims and litigations 3,175 2,929 8.4

Solidaridad fund deposit 1,083 1,070 1.2

Deferred income tax 375,231 366,857 2.3

TOTAL NON-CURRENT LIABILITIES

3,253,844 3,127,229 4.0

TOTAL LIABILITIES 3,891,629 3,525,891 10.4

SOCIAL CAPITAL

Authorized: 2,726,072,000 common shares with a unit value of $25

Subscribed and Paid 68,152 68,152 0.0

130 E.T Art Reserve 806,884 755,188 6.8

Legal Reserve 51,134 51,134 0.0

Surplus Capital 49,344 49,344 0.0

Equity Revaluation 1,113,794 1,113,794 0.0

Occasional Reserve Investments 949,190 784,187 21.0

FISCAL YEAR PROFIT 147,073 433,966 -66.1

Pgcp-Amort Accum Exchange Effect

-19,399 -19,399 0.0

Appreciation Surplus 793,084 793,084 0.0

TOTAL EQUITY 3,959,256 4,029,450 -1.7

TOTAL LIABILITY AND EQUITY 7,850,885 7,555,341 3.9

Balance SheetAs of March 31, 2014 and December 2013 (Millions of pesos)


Q1 2014 Q1 2013 Variation %REVENUE 526,202 494,864 6

Energy 523,506 481,866 9

Gas 295 11,504 -97

Technical Services 2,401 1,494 61

SALES COSTS 293,304 302,539 -3Energy purchases 85,089 104,176 -18Usage and connection charges to the NTS 47,792 56,267 -15NDC, CRDs and Commercial Exchange System 1,960 2,003 -2Act 99/93 transfer 11,249 9,584 17FAZNI contribution 3,421 3,009 14Depreciation 27,990 23,847 17Fuels 69,211 63,317 9Other operating costs 46,592 40,336 16

GROSS PROFIT 232,898 192,325 21

ADMINISTRATIVE EXPENSES 24,845 25,028 -1

OPERATING PROFIT 208,053 167,297 24

OPERATING MARGIN 40% 34%

NON-OPERATING INCOME

Interest 3,391 5,836 -42Portfolio 153 31 394Exchange rate difference 112 - 0Other revenues 5,577 5,207 7

9,233 11,074 -17

NON-OPERATING EXPENSES

Interest 7,979 8,591 -7Portfolio - - 0Exchange rate difference 402 3,515 -89Other income 4,915 11,345 -57

13,296 23,451 -43

PROFIT BEFORE TAXES 203,990 154,920 32

INCOME TAX ALLOWANCE (56,917) (44,029) 27

NET PROFIT 147,073 110,891 -6

NET MARGIN 28% 22%

Profit and Loss StatementAs of March 31, 2013 and 2014 (Millions of pesos)

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financial report - isagen · financial report first quarter of 2014 isagen s.a. e.s.p. 1 ... ral...

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