MANILA - The Lopez group's power generation arm has posted a significant drop in net income for the first 9 months of the year due to an asset writedown and foreign exchange losses.

In a statement to the Philippine Stock Exchange, First Gen Corp. said its net income fell 85% to $7 million in January to September this year from $45.8 million in the same period last year.

The company attributed the decline to a one-time, non-cash writedown of the deferred tax assets of its geothermal affiliate, Energy Development Corp. (EDC), following the implementation of the Renewable Energy Act in January 2009.

EDC wrote down P3 billion in deferred tax assets, resulting in a 47.7% drop in its net income to P1.3 billion during the first 9 months. Excluding this extraordinary item, however, EDC's core net income was 6.3% higher at P5.1 billion.

"The writedown is a one-time consequence of the RE Act. The company's future operations will continuously enjoy substantial benefits," said First Gen chief finance officer Giles Puno.

Apart from losses arising from the writedown, First Gen said $2.9 million in unrealized foreign exchange losses "further exacerbated" its recent financial performance.

Nevertheless, the company said its business remains stable, with the steady operational results of its main power generating assets, and its continued financing program.

During the 9-month period of 2009, First Gen's 1,000-megawatt Santa Rita and 500-MW San Lorenzo natural gas-fired plants consistently enjoyed average dispatch levels in excess of 80%. First Gen also operates the 225-MW Bauang power plant, the 112-MW Pantabangan-Masiway hydroelectric power plants, and the 1.6-MW Agusan mini hydro power plant.

The company's financing program, meanwhile, brought down interest expense at parent company to $60.5 million from $75.4 million last year.

"Going forward, our financing program, particularly the P15-billion rights issuance, will further reduce our debt obligations with equity," Puno said.