EDC to sell bonds this year to expand capacity

Alexander Richter 20 Apr 2009

Philippine’s Energy Development Corp. will sell bonds and borrow from banks this year to expand its capacity by more than a third, president Paul Aquino said in an interview with Manila’s Standard Today.

“The company will hedge a ¥22- billion ($221 million) loan to avoid losses that may arise from movements in the Japanese currency, Aquino said at a media briefing yesterday, without elaborating. EDC, which accounts for more than 60 percent of the country’s installed geothermal capacity, plans to add 300 megawatts to its 1,905 MW of capacity “to capitalize” on supply shortages and potential demand growth. The company is also bidding for three geothermal plants with a total capacity of 455 MW at a government auction this year.

“We will need additional borrowings for our planned acquisitions,” Aquino said, adding that the company hasn’t set a numeric target for its fund raising yet. “We will first try to raise as much pesos as we can.”

Profit slumped 85 percent to P1.3 billion last year from 2007 because of losses from the revaluation of yen-denominated loans after the Japanese currency rose 23 percent against the dollar. This prompted EDC to start hedging its yen loans, beginning with a ¥12-billion borrowing maturing in June. The loan was fully hedged through a series of swap transactions.

The company is now soliciting proposals from banks for the hedging of a ¥22-billion loan maturing in June next year, said Felicito Gesite, EDC finance manager. Yen loans account for 77 percent of the company’s debt.

“Continuing efforts of the company to normalize financing, coupled with new acquisitions will give better earnings in the near future,” said Ron Rodrigo, research head at DBP-Daiwa Securities SMBC in Manila.

Aquino said EDC might borrow by the third quarter of the year. He said EDC could use proceeds of the borrowings to finance the construction of the 50-MW Tanawon geothermal project in Sorsogon, 20-MW Nasulo project in Negros Oriental and the Burgos, Ilocos Norte wind power project.

EDC may also consider tapping International Finance Corp., the private sector arm of the World Bank, for additional funding. “We are trying to tap all possible sources of funds,” Aquino said.”

Source: Manila Standard