SEC Number 66381 - PDS Group · 2016-08-11 · SEC Form 17Q – 2Q 2016 SECURITIES AND EXCHANGE...

SEC Number 66381

File Number _____

ENERGY DEVELOPMENT CORPORATION

(Company’s full Name)

One Corporate Centre Julia Vargas cor. Meralco Ave., Ortigas Center, Pasig City

(Company’s Address)

(632) 755-2332

(Telephone Number)

June 30, 2016

(Quarter Ending)

SEC FORM 17-Q

(Form Type)

6 6 3 8 1

SEC Registration Number

E N E R G Y D E V E L O P M E N T C O R P O R A T I O N

( A S u b s i d i a r y o f R e d V u l c a n H o l d i

n g s C o r p o r a t i o n ) A N D S U B S I D I A R I E S

(Company’s Full Name)

J u l i a V a r g a s C o r n e r M e r a l c o A v e n u

e , O r t i g a s C e n t e r , P a s i g C i t y

(Business Address: No. Street City/Town/Province)

Maribel A. Manlapaz 755-2332 (Contact Person) (Company Telephone Number)

0 6 3 0 S E C 1 7 0 8 1 0

Month Day (Form Type) Month Day (Fiscal Year) (Annual Meeting)

(Secondary License Type, If Applicable)

Article I

Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

678 P=42,183,548,035 P=30,068,595,726

Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

S T A M P S

Remarks: Please use BLACK ink for scanning purposes.

COVER SHEET

SEC Form 17Q – 2Q 2016

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-Q

QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES

REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER

1. For the quarterly period ended June 30, 2016

2. Commission identification number: 66381

3. BIR Tax Identification No. 000-169-125-000

4. Exact name of issuer as specified in its charter: ENERGY DEVELOPMENT CORPORATION

5. PHILIPPINES 6. (SEC Use Only)

Province, country or other jurisdiction of Industry Classification Code

Incorporation or organization

7. One Corporate Centre Julia Vargas cor. Meralco Ave.,

Ortigas Center, Pasig City 1605

Address of issuer's principal office Postal Code

8. (632) 755-2332

Issuer's telephone number, including area code:

9. ___________________________________

Former name, former address and former fiscal year, if changed since last report:

10. Securities registered pursuant to Sections 8 and 12 of the Code, or Sections 4 and 8 of the RSA

Title of each Class Number of shares outstanding

as of June 30, 2016

Common Stock, P1.00 par value 18,737,010,000

Preferred Stock, P0.01 par value 9,375,000,000

11. Are any or all of the securities listed on a Stock Exchange?

Yes [ √ ] No [ ]

If yes, state the name of such Stock Exchange and the class/es of securities listed therein:

Philippine Stock Exchange Common Stock

12. Indicate by check mark whether the registrant:

(a) has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17 thereunder or

Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the Corporation

Code of the Philippines, during the preceding twelve (12) months (or for such shorter period the

registrant was required to file such reports)

Yes [ √ ] No [ ]

(b) has been subject to such filing requirements for the past ninety (90) days.

Yes [ √ ] No [ ]


PART 1: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Our unaudited consolidated financial statements for the six-month period ended

June 30, 2016 have been prepared in accordance with Philippine Accounting Standards

(PAS) 34, Interim Financial Reporting, and are filed as Annex I of this report.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (“MD & A”)

The following is a discussion and analysis of the Company’s consolidated financial

performance for the six-month period ended June 30, 2016. The prime objective of this MD&A is

to help the readers understand the dynamics of our Company’s business and the key

factors underlying our financial results. Hence, our MD&A is comprised of a discussion of

our core business and an analysis of the results of operations. This section also focuses on

key statistics from the unaudited financial statements and pertains to risks and uncertainties

relating to the geothermal and other renewable power industry in the Philippines where we

operate up to the stated reporting period. However, our MD&A should not be considered all

inclusive, as it excludes unknown risks, uncertainties and changes that may occur in the general

economic, political and environment condition after the stated reporting date.

Our MD&A should be read in conjunction with our unaudited consolidated financial

statements and the accompanying notes. All financial information is reported in Philippine

Pesos (PhP) unless otherwise stated.

Any references in this MD&A to “we”, “us”, “our”, or “Company” pertains to the Energy

Development Corporation and its subsidiaries. "EDC" pertains to the Parent Company Energy

Development Corporation.

Additional information about the Company can be found on our corporate website

www.energy.com.ph.


The following is a summary of the key sections of this MD&A:

OVERVIEW OF OUR BUSINESS ..............................................................................................4 Principal Products or Services .................................................................................................... 4

Distribution methods of products or services ............................................................................. 4 Competition................................................................................................................................. 5 Dependence on one or a few major customers and identity of any such major customers ........ 5 New Products or Services ........................................................................................................... 7

FINANCIAL HIGHLIGHTS ........................................................................................................7 RESULTS OF OPERATIONS .....................................................................................................8 FINANCIAL CONDITION ........................................................................................................12 CAPITAL AND LIQUIDITY RESOURCES ............................................................................16 CASH FLOW ...............................................................................................................................16

DISCUSSION ON THE SUBSIDIARIES .................................................................................17 Green Core Geothermal Inc. (GCGI) ........................................................................................ 17

Bac-Man Geothermal Inc. (BGI) .............................................................................................. 19 EDC Burgos Wind Power Corporation (EBWPC) ................................................................... 21

Unified Leyte Geothermal Energy Inc. (ULGEI) ..................................................................... 22 FG Hydro Power Corporation (FG Hydro) ............................................................................... 23

KEY PERFORMANCE INDICATORS ....................................................................................24 Commitments that will have an impact on the issuer’s liquidity ............................................25

Foreign Exchange Rate Volatility...............................................................................................25 Any event that will trigger direct or contingent financial obligation that is material to the

company, including any default or acceleration of an obligation ............................................25

CASH DIVIDENDS .....................................................................................................................25 MAJOR STOCKHOLDERS ......................................................................................................26

BOARD OF DIRECTORS ..........................................................................................................27

OFFICERS ...................................................................................................................................27

SEC Form 17Q – 2Q 2016 4

OVERVIEW OF OUR BUSINESS

Principal Products or Services

The Company operates in the four geothermal service contract areas where it is principally involved in the

generation and sale of electricity through Company-owned geothermal power plants to NPC, electric

cooperatives, privately-owned distribution utilities (DUs), large industrial clients, and National Grid

Corporation of the Philippines (NGCP), pursuant to Power Purchase Agreements (PPAs), Wholesale

Electricity Spot Market (WESM), Ancilliary Services Provider (ASP), and Feed-in Tariff (FIT),

respectively.

EDC’s subsidiaries, Green Core Geothermal, Inc. (GCGI) and Bac-Man Geothermal, Inc. (BGI), also

hold offtake agreements in the form of Transition Supply Contracts (TSCs), Power Supply Contracts

(PSCs) and Power Supply Agreements (PSAs) with various customers, particularly electric cooperatives.

Through its 60% equity interest in First Gen Hydro Power Corporation (FG Hydro), the Company

indirectly operates the 120 MW Pantabangan and 12 MW Masiway Hydroelectric Power Plants, located

in Pantabangan, Nueva Ecija Province, Central Luzon. The power plants supply electricity into the Luzon

grid to service the consumption of its distribution utilities clients covered by bilateral contract quantities.

The Company has evolved into being the country’s premier pure renewable energy player, possessing

interests in geothermal, hydro, wind and solar power. For geothermal energy, its expertise spans the

entire geothermal value chain, i.e., from geothermal energy exploration and development, reservoir

engineering and management, engineering design and construction, environmental management and

energy research and development. Its wind energy expertise covers project research & development and

wind data assessment. With FG Hydro, the Company has not only acquired expertise in hydropower

operation and maintenance, but also the capability to sell power on a merchant basis.

The Company also operates the Burgos Solar Project (Phases 1 and 2), which is inside the same

concession area as EDC Burgos Wind Power Corporation (EBWPC) wind farm.

Distribution methods of products or services

About 42.8% or 1,843.0 GWh of the 4,305.5 GWh sales volume from its electricity business was sold to

NPC by Unified Leyte and Mindanao 1 and 2 Power Plants. About 28.8% or 1,239.8 GWh sales volume

was sold to electric cooperatives, industrial customers and WESM in the Visayas region by the

Palinpinon, Tongonan and Nasulo geothermal plants. About 12.6% or 543.1 GWh sales volume was sold

to electric cooperatives, industrial customers and WESM in the Luzon region by the Bac-Man geothermal

power plants.

FG Hydro's electricity generation of 213.8 GWh was sold to WESM in the Luzon region and distribution

utility clients in Nueva Ecija. Ancillary services of 149.8 GWh was sold to NGCP.

Burgos wind and solar power plants generated 121.0 GWh and 5.3 GWh of electricity, respectively,

which were sold under the Feed-In-Tariff (FIT) regime.

ULGEI’s 189.7 GWh strips of energy were sold mainly to WESM.

SEC Form 17Q – 2Q 2016 5

Competition

The Government, in implementing the thrust of the EPIRA, has paved the way for a more independent

and market-driven Philippine power industry. As such, selling power and consequently the dispatch of

power plants depend on the ability to offer competitively priced power supply to the market. The

Company has multiple power projects in Luzon, Visayas, and Mindanao.

The successful privatization of NPC assets and NPC-IPP contracts in Luzon and Visayas, coupled with

the integration of the two Grids under the WESM, introduced new players and opened competition in the

power industry. Multinationals that currently operate in the Philippines and could potentially compete

against the Company include KEPCO Power Corporation, CalEnergy International Services, Inc.,

Marubeni Energy Corporation, and AES Corporation. Aboitiz group and San Miguel group are the

Company‘s two closest competitors. For wind power, its closest competitor is North Luzon Renewable

Energy Corporation, which operates the Caparispisan Wind Farm in Pagudpud, Ilocos Norte in addition

to the following: Alterenergy Philippines Holdings Corporation, Petrowind Energy, Inc., Trans-Asia

Renewable Energy Corp., and Northwind Power Development Corporation.

The Company will face competition in both the development of new power generation facilities and the

acquisition of existing power plants, as well as in the financing for these activities.

The performance of the Philippine economy and the historical high returns of power projects in the

country have attracted many potential competitors, including multinational development groups and

equipment suppliers, to explore opportunities in the development of electric power generation projects in

the Philippines. Accordingly, competition for and from new power projects may increase in line with the

long-term economic growth in the Philippines.

The Company believes that it will be able to compete because of its competitively-priced power, the

reliability of its power plants, its use of clean and renewable fuels, and its expertise and experience in

power supply contracting and trading.

Dependence on one or a few major customers and identity of any such major customers

Close to 35.3% of the Company’s electricity revenue are derived from existing long-term Power Purchase

Agreements (PPAs) with NPC.

Concessions

As of June 30, 2016, the Company holds the following service contracts.

Geothermal Resource

The Company holds five (5) Geothermal Renewable Energy Service Contracts (GRESC) with the DOE

for the following geothermal projects:

• Tongonan Geothermal Project (expiring in 2031)

• Southern Negros Geothermal Project (expiring in 2031)

• Bacon-Manito Geothermal Project (expiring in 2031)

• Mt. Apo Geothermal Project (expiring in 2042)

• Northern Negros Geothermal Project (expiring in 2044)

SEC Form 17Q – 2Q 2016 6

The Company, through its subsidiaries Green Core Geothermal Inc. and Bac-Man Geothermal Inc.

secured three (3) Geothermal Operating Contracts covering power plant operations:

• Tongonan Geothermal Power Plant (with a twenty-five (25) year contract period expiring in

2037, renewable for another twenty-five (25) years)

• Palinpinon Geothermal Power Plants (with a twenty-five (25) year contract period expiring in


• Bacon-Manito Geothermal Power Plants (with a twenty-five (25) year contract period expiring in


The Company also holds Geothermal Renewable Energy Service Contracts (GRESC) for the following

prospect areas:

• Ampiro Geothermal Project (with a five-year pre-development period expiring in 2017, 25-year

contract period expiring in 2037, renewable for another twenty-five (25) years)

• Mandalagan Geothermal Project (with a five-year pre-development period expiring in 2017, 25-

year contract period expiring in 2037, renewable for another twenty-five (25) years)

• Mt. Zion Geothermal Project (with a five-year pre-development period expiring in 2017, 25-year

contract period expiring in 2037, renewable for another twenty-five (25) years)

• Lakewood Geothermal Project (with a five-year pre-development period expiring in 2017, 25-


• Balingasag Geothermal Project (with a five-year pre-development period expiring in 2017, 25-


• Mt. Zion 2 Geothermal Project (with a five-year pre-development period expiring in 2020, 25-


Wind Resource

The Company holds eleven (11) Wind Energy Service Contracts (WESC) with the DOE. The WESCs

cover the following:

• 150 MW Wind Project in Burgos, Ilocos Norte; under DOE Certificate of Registration No.

WESC 2009-09-004 (25-year contract period expiring in 2034; renewable for another twenty-five

(25) years)

• 84 MW Wind Project in Pagudpud, Ilocos Norte; under DOE Certificate of Registration No.


(25) years)

• Burgos 1 Wind Project in Burgos, Ilocos Norte; under DOE Certificate of Registration No.


(25) years)



(25) years)

• Matnog 1 Wind Project in Matnog & Magdalena, Sorsogon; under DOE Certificate of

Registration No. WESC 2014-07-075 (25-year contract period expiring in 2039; renewable for

another twenty-five (25) years)

• Matnog 2 Wind project in Matnog, Sorsogon; under DOE Certificate of Registration No. WESC

2014-07-076 (25-year contract period expiring in 2039; renewable for another twenty-five (25)

years)

• Matnog 3 Wind Project in Matnog, Sorsogon; under DOE Certificate of Registration No. WESC

2014-07-077 (25-year contract period expiring in 2039; renewable for another twenty-five (25)

years)

SEC Form 17Q – 2Q 2016 7

• Iloilo 1 Wind Project in Batad & San Dionisio, Iloilo; under DOE Certificate of Registration No.


(25) years)

• Negros Wind Project in Manapla & Cadiz City, Negros Occidental; under DOE Certificate of



• Burgos 3 Wind Project in Burgos and Pasuquin, Ilocos Norte; under DOE Certificate of





(25) years)

Solar Resource

The Company holds five (3) Solar Energy Service Contracts (SESC) with the DOE. The SESCs cover

areas in the following:

• 4.16 MW Phase 1 & 2.66 MW Phase 2 Burgos Solar Project, Ilocos Norte; under DOE Certificate

of Registration No. SESC 2014-07-088 (25-year contract period expiring in 2039; renewable for


• Murcia Solar Project in Murcia, Negros Occidental; under SESC No. 2015-03-113

(25-year contract period expiring in 2040; renewable for another twenty-five (25) years)

• Bogo Solar Project in Bogo, Cebu; under SESC No. 2015-06-234 (25-year contract period

expiring in 2040; renewable for another twenty-five (25) years)

• President Roxas Solar Project in President Roxas, North Cotabato; under SESC No. 2015-03-114

(25-year contract period expiring in 2040; renewable for another twenty-five (25) years)*

• Kilada-Matalam Solar Project in Matalam, North Cotabato; under SESC No. 2015-03-119

(25-year contract period expiring in 2040; renewable for another twenty-five (25) years)*

*Cancellation letter has been submitted with Department of Energy (DOE) dated March 2016, awaiting

confirmation reply

New Products or Services

On January 17, 2016, the Company has successfully commissioned its 2.66 MW Burgos Solar Project

Phase 2, which is inside the same concession area as EBWPC’s wind farm. The project is geographically

situated in Barangay Saoit, Burgos Ilocos Norte.

On March 1, 2016, the Energy Regulatory Commission (ERC) issued to EDC the Certificate of

Compliance (COC) for the Burgos Solar Power Plant Phase 2. The COC specifies that the project, having

a total capacity of 2.66 MW is entitled to the Feed-In Tariff (FIT) rate of P8.69, subject to adjustments as

may be approved by the ERC, from January 19, 2016 to January 18, 2036.

FINANCIAL HIGHLIGHTS

June 2016 vs. June 2015 Results

During the first semester of 2016, the recurring net income generated increased by 2.7% or

P133.0 million to P4,980.8 million from the P4,847.8 million posted during the same period in 2015. The

increase is mainly attributable to the P230.1 million increase in revenue coupled with P240.4 million

SEC Form 17Q – 2Q 2016 8

decrease in recurring cost of sales of electricity and general & administrative expenses offset by

P292.6 million increase in provision for current tax.

Recurring net income attributable to equity holders of the Parent Company was posted at

P4,682.3 million, up by 0.6% as compared to the P4,655.9 million for the same period in 2015.

The Company posted a net income of P5,207.0 million in the first semester of 2016, a 8.5% or

P406.5 million increase from the P4,800.5 million in the six-month period ended June 30, 2015. The

movement was driven by the P230.1 million increase in revenue coupled with the decrease of

P443.4 million in combined cost of sales of electricity and general & administrative expenses offset by

the P271.9 million increase in provision for income tax.

Net income is equivalent to 30.6% of total revenues for the period ended June 30, 2016 as compared to

the 28.6% for the same period in 2015.

Net income attributable to equity holders of the Parent Company at P4,682.3 million for the first semester

of 2016 is a P26.4 million increase from P4,655.9 million during the same period in 2015.

RESULTS OF OPERATIONS

The following table details the results of operations of the Company for the first semester of 2016 and

2015.

STATEMENTS OF INCOME

Horizontal and Vertical Analysis of Material Changes as of June 30, 2016 and 2015

HORIZONTAL ANALYSIS VERTICAL ANALYSIS

Favorable (Unfavorable) Variance

(Amounts in PHP millions) June 2016 June 2015 Amount % 2016 2015

REVENUE

Sale of electricity 17,005.5 16,775.4 230.1 1.4% 99.9% 100.0%

COSTS OF SALE OF ELECTRICITY

Costs of sale of electricity (6,384.0) (6,428.3) 44.3 -0.7% -37.5% -38.3%

GENERAL AND ADMINISTRATIVE EXPENSES (2,747.6) (3,146.7) 399.1 -12.7% -16.2% -18.8%

FINANCIAL INCOME (EXPENSE)

Interest income 135.7 150.0 (14.3) -9.5% 0.8% 0.9%

Interest expense (2,296.0) (2,377.9) 81.9 -3.4% -13.5% -14.2%

(2,160.3) (2,227.9) 67.6 -3.0% -12.7% -13.3%

OTHER INCOME (CHARGES)

Foreign exchange losses – net (16.0) (234.0) 218.0 -93.2% -0.1% -1.4%

Proceeds from insurance claims 293.0 751.1 (458.1) -61.0% 1.7% 4.5%

Miscellaneous, net

55.6 (121.8) 177.4 -145.6% 0.3% -0.7%

332.5 395.3 (62.8) -15.9% 2.0% 2.4%

INCOME BEFORE INCOME TAX 6,046.1 5,367.8 678.3 12.6% 35.6% 32.0%

BENEFIT FROM (PROVISION FOR) INCOME TAX

Current

(807.2) (514.6) (292.6) 56.9% -4.7% -3.1%

Deferred

(31.9) (52.6) 20.7 -39.4% -0.2% -0.3%

(839.1) (567.2) (271.9) 47.9% -4.9% -3.4%

NET INCOME 5,207.0 4,800.5 406.4 8.5% 30.6% 28.6%

Net income attributable to:

Equity holders of the Parent Company 4,908.2 4,608.6 299.6 6.5% 28.9% 27.5%

Non-controlling interest 298.9 191.9 107.0 55.8% 1.8% 1.1%

EBITDA 10,627.0 9,688.2 938.8 9.7% 62.5% 57.8%

RECURRING NET INCOME 4,980.8 4,847.8 133.0 2.7% 29.3% 28.9%

Recurring net income attributable to:

Equity holders of the Parent Company 4,682.3 4,655.9 26.4 0.6% 27.5% 27.8%

Non-controlling interest 298.5 191.9 106.6 55.5% 1.8% 1.1%

SEC Form 17Q – 2Q 2016 9

YTD June 30, 2016 vs. YTD June 30, 2015

Revenue

Total revenue from sale of electricity for the period ended June 30, 2016 increased by 1.4% or

P230.1 million to P17,005.5 million from P16,775.4 million during the same period in 2015. The

improvement was principally driven by the P866.1 million increase in combined revenue contribution of

FG Hydro (P328.6 million), Tongonan (P259.4 million), Palinpinon (P160.6 million), and

Burgos Wind (P117.6 million) power generating units, offset by Bac-Man’s decrease in revenue

contribution amounting to P578.3 million.

Costs of Sale of Electricity

Costs of sale of electricity decreased by 0.7% or P44.3 million to P6,384.0 million for the period ended

June 30, 2016 from P6,428.3 million during the same period in 2015 mainly due to the decline of the

following:

P355.6 million purchased services and utilities attributable to the deferment of activities;

P128.5 million parts and supplies primarily due to lower consumption of fuel and mechanical

parts for maintenance activities; and

P32.6 million business and related expenses particularly travel and training expenses.

The aforementioned were offset by P477.2 million increase of the following:

P232.9 million depreciation and amortization due to additional property, plant and equipment;

P198.5 million rental, insurance and taxes mainly owing to increase in insurance premium; and

P45.8 million personnel costs.

General and Administrative Expenses

General and administrative expenses decreased by 12.7% or P399.1 million to P2,747.6 million in the

first semester of 2016 from P3,146.7 million during the same period in 2015 mainly on assessment of the

following:

P174.9 million rental, insurance and taxes mainly; and

P164.4 million business and related expense particularly travel and training expenses.

Financial Income (Expense)

Financial expenses - net decreased by 3.0% or P67.6 million to P2,160.3 million for the period ended

June 30, 2016 from P2,228.0 million during the same period in 2015.

Interest Income

Interest income decreased by 9.5% or P14.2 million to P135.7 million for the period ended

June 30, 2016 from P149.9 million during the same period in 2015 mainly due to lower investible

funds coupled with lower weighted average interest rates.

Interest Expense

Interest expense decreased by 3.4% or P81.9 million to P2,296.0 million for the period ended

June 30, 2016 from P2,377.9 million during the same period in 2015. The favorable variance was

on account of the amortization payment of loan principal.

SEC Form 17Q – 2Q 2016 10

Other Income (Charges)

Other income for the first semester of 2016 amounted to P332.6 million, 15.9% or a P62.7 million

decrease from P395.3 million during the same period in 2015.

Foreign exchange gains (losses) - net

Foreign exchange loss - net for the six-month period ended June 30, 2016 amounted to

P16.0 million, a P218.0 million decrease from P234.0 million foreign exchange losses - net

during the same period in 2015. The variance was mainly brought about by the depreciation of

PHP against US$ for the period ended June 30, 2015, none in 2016.

The comparative foreign exchange rates were as follows:

PHP:US$

December 31, 2014 44.720

June 30, 2015 45.090

December 31, 2015 47.060

June 30, 2016 47.060

Proceeds from insurance claims

Proceeds amounting to P293.0 million for the period ended June 30, 2016 pertains to claims on

business interruption due to lightning, machinery breakdown, and damages due to typhoons

Seniang. Proceeds amounting to P751.1 million were received for the insurance claims due to

typhoons Yolanda, Glenda and Sendong in 2015.

Miscellaneous, net

Miscellaneous income - net for the period ended June 30, 2016 amounted to P55.6 million, or a

P177.4 million turnaround from P121.8 million miscellaneous charges – net during the same

period in 2015. The movement was mainly due to derivative gains – net from the forward foreign

exchange contracts entered into with various banks considering the PhP and US$ exchange rates

as of the transactions/reporting dates.

Provision for Income Tax

Current

The Company’s current tax expense increased by 56.9% or P292.6 million to P807.2 million for

the period ended June 30, 2016 from P514.6 million during the same period in 2015 mainly on

account of higher taxable income.

Deferred

Deferred tax expense for the first semester of 2016 amounted to P31.9 million, a 39.4% or a

P20.7 million decrease from the P52.6 million during the same period in 2015, mainly due to the

recognition of deferred tax asset on NOLCO from head office expenses for exploration and other

non-renewable energy related activities while none for the same period in 2015.

SEC Form 17Q – 2Q 2016 11

Net Income

As a result of the foregoing, the Company’s net income increased by 8.5% or P406.6 million to

P5,207.1 million for the first semester of 2016 from P4,800.5 million net income during the same period

in 2015.

Net income is equivalent to 30.6% of total revenue for the period ended June 30, 2016 as compared to

28.6% for the same period in 2015.

SEC Form 17Q – 2Q 2016 12

FINANCIAL CONDITION

The following table details the financial condition of the Company as of June 30, 2016 and

December 31, 2015.

STATEMENT OF FINANCIAL POSITION

Horizontal and Vertical Analysis of Material Changes as of June 30, 2016 and December 31, 2015

HORIZONTAL ANALYSIS VERTICAL ANALYSIS

Favorable (Unfavorable) Variance

(Amounts in PHP millions) June 2016

December

2015 Amount % 2016 2015

ASSETS

Current Assets

Cash and cash equivalents 15,577.2 17,613.9 (2,036.7) -11.6% 11.5% 12.9%

Trade and other receivables 6,364.8 5,346.2 1,018.6 19.1% 4.7% 3.9%

Parts and supplies inventories 3,484.3 3,251.9 232.4 7.1% 2.6% 2.4%

Financial asset at fair value through profit or loss 1,057.5 1,014.3 43.2 4.3% 0.8% 0.7%

Due from related parties 179.9 – 179.9 100.0% 0.1% 0.0%

Current portion of:

Derivative assets 293.9 58.6 235.3 401.5% 0.2% 0.0%

Available-for-sale (AFS) investments – 129.6 (129.6) -100.0% 0.0% 0.1%

Other current assets 2,245.3 2,263.4 (18.2) -0.8% 1.7% 1.7%

Total Current Assets 29,202.9 29,677.9 (475.0) -1.6% 21.5% 21.8%

Noncurrent Assets

Property, plant and equipment 88,829.5 88,567.7 261.8 0.3% 65.4% 65.1%

Goodwill and intangible assets 4,204.0 4,289.3 (85.3) -2.0% 3.1% 3.2%

Exploration and evaluation assets 3,098.1 3,073.6 24.5 0.8% 2.3% 2.3%

Deferred tax assets – net 1,111.4 1,120.1 (8.7) -0.8% 0.8% 0.8%

Available-for-sale (AFS) investments 571.2 435.1 136.1 31.3% 0.4% 0.3%

Derivative assets 60.4 293.0 (232.6) -79.4% 0.0% 0.2%

Other noncurrent assets 8,689.7 8,584.2 105.5 1.2% 6.4% 6.3%

Total Noncurrent Assets 106,564.3 106,363.0 201.3 0.2% 78.5% 78.2%

TOTAL ASSETS 135,767.2 136,041.1 (273.9) -0.2% 100.0% 100.0%

LIABILITIES AND EQUITY

LIABILITIES

Current Liabilities

Trade and other payables 8,978.9 9,989.9 (1,011.0) -10.1% 6.6% 7.3%

Income tax payable 338.7 29.2 309.5 1059.9% 0.2% 0.0%

Due to related parties 32.9 101.8 (68.9) -67.7% 0.0% 0.1%

Current portion of:

Long-term debts 11,316.8 7,860.9 3,455.9 44.0% 8.3% 5.8%

Derivative liabilities 22.9 4.9 18.0 367.3% 0.0% 0.0%

Total Current Liabilities 20,690.2 17,986.7 2,703.5 15.0% 15.2% 13.2%

Noncurrent Liabilities

Long-term debts - net of current portion 60,935.3 66,650.7 (5,715.4) -8.6% 44.9% 49.0%

Net retirement and other post-employment benefits 2,081.0 1,914.9 166.1 8.7% 1.5% 1.4%

Derivative liabilities - net of current portion 561.4 197.5 363.9 184.3% 0.4% 0.1%

Provisions and other long-term liabilities 2,115.9 2,061.6 54.3 2.6% 1.6% 1.5%

Total Noncurrent Liabilities 65,693.6 70,824.7 (5,131.1) -7.2% 48.4% 52.1%

EQUITY

Equity Attributable to Equity Holders of the Parent

Preferred stock 93.8 93.8 - 0.0% 0.1% 0.1%

Common stock 18,750.0 18,750.0 - 0.0% 13.8% 13.8%

Treasury Stock (73.5) (28.4) (45.1) 158.8% -0.1% 0.0%

Common shares in employee trust account (350.2) (350.2) - 0.0% -0.3% -0.3%

Additional paid-in capital 6,284.0 6,284.0 - 0.0% 4.6% 4.6%

Equity reserve (3,706.4) (3,706.4) - 0.0% -2.7% -2.7%

Net accumulated unrealized gain on AFS investments 140.1 104.0 36.1 34.7% 0.1% 0.1%

Fair value adjustments on hedging transactions (561.7) (177.5) (384.2) 216.5% -0.4% -0.1%

Cumulative translation adjustment arising

from foreign subsidiaries 5.7 (97.3) 103.0 -105.9% 0.0% -0.1%

Retained earnings 27,061.8 24,778.4 2,283.4 9.2% 19.9% 18.2%

47,643.6 45,650.4 1,993.2 4.4% 35.1% 33.6%

Non-controlling interests 1,739.7 1,579.4 160.3 10.1% 1.3% 1.2%

Total Equity 49,383.3 47,229.7 2,153.6 4.6% 36.4% 34.7%

TOTAL LIABILITIES AND EQUITY 135,767.2 136,041.1 (273.9) -0.2% 100.% 100.0%

SEC Form 17Q – 2Q 2016 13

Cash and cash equivalents

Cash and cash equivalents decreased by 11.6% or P2,036.7 million to P15,577.2 million as of

June 30, 2016 from the P17,613.9 million in December 31, 2015. This was primarily attributable to the

P7,395.2 million and P2,826.7 million decrease in net cash generated from financing and investing

activities, respectively and offset by P8,168.1 million net cash generated from operating activities.

Trade and other receivables

Trade and other receivables increased by 19.1% or P1,018.6 million to P6,364.8 million as of

June 30, 2016 from P5,346.2 million balance as of December 31, 2015 mainly due to increase in NPC and

NTC receivables.

Parts and supplies inventories

This account increased by 7.1% or P232.4 million to P3,484.3 million as of June 30, 2016 from the

P3,251.9 million as of December 31, 2015. The increase was due to purchase of various materials and

supplies for plants maintenance and rehabilitation activities.

Due from related parties

This account increased by 100.0% or P179.9 million to P179.9 million as of June 30, 2016 mainly due to

interest free advance for ULGEI P265.8 million.

Available-for-sale (AFS) investments

The decrease of 100.0% or P129.6 million to nil as of June 30, 2016 from the P129.6 million in

December 31, 2015 in current available for sale investments is mainly due to the redemption of the

matured placement last January 15, 2016 while, the increase of 31.3% or P136.1 million to P571.2 million

as of June 30, 2016 from P435.1 million in December 31, 2015 in non-current available for sale

investment is due to realignment, amortization and MTM adjustment..

Derivative asset

This account increased by 401.5% or P235.3 million to P293.9 million as of June 30, 2016 from

P58.6 million balance as of December 31, 2015 in current portion while, the decreased of 79.4% or

P232.6 million to P60.4 million as of June 30, 2016 from P293.0 million balance as of

December 31, 2015 in non-current portion due to the outstanding hedging of foreign loans of the Parent

company.

Trade and other payables

This account decreased by 10.1% or P1,011.0 million to P8,978.9 million as of June 30, 2016 from the

P9,989.9 million balance as of December 31, 2015 due to payment to suppliers.

Income tax payable

The increase in Income tax payable is due to the higher income tax expense for the period.

SEC Form 17Q – 2Q 2016 14

Due to related parties

This account decreased by 67.7% or P68.9 million to P32.9 million as of June 30, 2016 from

P101.8 million as of December 31, 2015 mainly due to decrease in consultancy fees with First Gen

Corporation.

Derivative liability (current portion)

The increase of 367.3% or P18.0 million to P22.9 million from P4.9 million as interest rate swap

agreements resulted in loss.

Long-term debt – net of current portion

The decrease in long-term debt of 8.6% or P5,715.4 million to P60,935.3 million from P66,650.7 million

pertains mainly to the exchange rate realignment of loan balances.

Net retirement and other post-retirement benefit

The 8.7% increase or P166.1 million to P2,081.0 million as of June 30, 2016 from P1,914.9 million as of

December 31, 2015 mainly due to retirement expense provision recognized during the period.

SEC Form 17Q – 2Q 2016 15

Derivative liability (net current portion)

The increase of 184.3% or P363.9 million to P561.4 million from P197.5 million as interest rate swap

agreements resulted in loss.

Provisions and other long-term liabilities

This account increased by 2.6% or P54.3 million to P2,115.9 million as of June 30, 2016 from

P2,061.6 million balance as of December 31, 2015 mainly due to retirement expense provision recognized

during the period.

Cumulative translation adjustments arising from foreign subsidiaries

The increase of P458.6 million is mainly due to the outstanding hedging of foreign loans of the company.

Net accumulated unrealized gain on AFS investments

This account increased by 34.7% or P36.1 million to P140.1 million as of June 30, 2016 and

P104.0 million as of December 31, 2015. The increase is mainly due to fair value of AFS investments for

the period.

Retained earnings

The increase of 9.2% or P2,283.4 million to P27,061.8 million as of June 30, 2016 from

P24,778.4 million as of December 31, 2015 was mainly due to the P4,908.2 million net income

attributable to the equity holders of the Parent, partly reduced by P2,631.2 million cash dividend declared.

Non-controlling interests

Non-controlling interest increased by 10.1% or P160.3 million to P1,739.7 million as of June 30, 2016

from the P1,579.4 million balance as of December 31, 2015 due to the net income attributable to

non-controlling interests of P298.9 million offset by the P142.8 million total cash dividend paid to non-

controlling interests during the period.

SEC Form 17Q – 2Q 2016 16

CAPITAL AND LIQUIDITY RESOURCES

As of the six-month period ended

(in millions of pesos) YTD June 2016 YTD June 2015 YoY change

Statement of Financial Position Data

Total Assets 135,767.2 130,273.7 5,493.5

Total Liabilities 86,383.9 83,798.8 2,585.1

Total Stockholder’s Equity 49,383.3 46,474.9 2,908.4

The Company’s assets as of June 30, 2016 amounted to P135,767.2 million, 4.2% higher as compared to

the P130,273.7 million level as of June 30, 2015.

CASH FLOW

YTD June 30, 2016 vs. YTD June 30, 2015

Net cash flows from operating activities decreased by P3,247.4 million to P8,240.3 million for the period

ended June 30, 2016 from P11,487.8 million during the same period in 2015 mainly due to settlement of

trade payables.

Net cash flows used in investing activities decreased by 50.4% or P2,944.7 million to P2,899.0 million for

the quarter ended June 30, 2016 as compared to the P5,843.7 million during the same quarter in 2015

primarily due to lower capital expenditures.

Net cash flows used in financing activities for the six-month period ended June 30, 2016 amounted to

P7,395.2 million, a P3,174.9 million increase from the P4,220.3 million during the same period in 2015

due to higher payments of long-term debt.

SEC Form 17Q – 2Q 2016 17

DISCUSSION ON THE SUBSIDIARIES

Green Core Geothermal Inc. (GCGI)

(Amounts in PHP millions)

For the periods ended June 30

2016 2015

Revenue 5,445.7 5,025.3 Costs of sale of electricity (3,940.0) (4,330.5) General and administrative expenses (165.0) (276.7) Other income (charges) – net (203.8) (95.7) Income before income tax 1,136.9 322.4 Provision for income tax (201.4) (70.5) Net income 935.5 251.9

As of

June 30, 2016 December 31, 2015

Total current assets 4,403.6 3,776.7 Total noncurrent assets 9,729.9 9,675.2 Total current liabilities 3,255.4 3,017.2 Total noncurrent liabilities 6,481.9 6,976.0 Total equity 4,396.2 3,458.7

GCGI’s revenue increased by 8.4% or P420.4 million, to P5,445.7 million as of June 30, 2016 from

P5,025.3 million for the same period in 2015. The increase was due to higher sales volume by 69.2 GWh

and higher average tariff by P0.07/kWh.

Costs of sale of electricity decreased by 9.0% or P390.5 million, to P3,940.0 million in 2016 from

P4,330.5 million in 2015. The decrease was due to lower cost of steam (P456.0 million) offset by higher

rental, insurance and taxes (P39.8 million) and repairs and maintenance (P34.9 million).

General and administrative expenses decreased by 40.4% or P111.7 million, to P165.0 million in 2016

from P276.7 million in 2015. The decrease was due to lower purchased services & utilities

(P58.4 million), personnel costs (P42.3 million), and rental, insurance and taxes (P8.3 million).

Other charges – net increased by 113.0% or P108.1 million, to P203.8 million in 2016 from P95.7 million

in 2015. The unfavorable variance was mainly due to higher interest expense on long-term loan

(P78.8 million) and lower interest income (P35.1 million). The long-term loan was drawn last

March 8, 2015.

With the foregoing, net income increased by 271.4% or P683.6 million, to P935.5 million in 2016 from

P251.9 million in 2015.

Total current assets increased by 16.6% or P626.9 million, to P4,403.6 million as of June 30, 2016 from

P3,776.7 million balance as of December 31, 2015. The increase was due to higher cash & cash

equivalents (P511.7 million) and trade & other receivables (P85.0 million).

Total current liabilities increased by 7.9% or P238.2 million, to P3,255.4 million as of June 30, 2016 from

P3,017.2 million as of December 31, 2015. The increase was attributed to higher trade & other payables

(P211.8 million) and this period’s income tax payable, none in 2015, (P105.6 million) offset by lower

amount of due to related parties (P80.1 million).

SEC Form 17Q – 2Q 2016 18

Total noncurrent liabilities decreased by 7.1% or P494.1 million, to P6,481.9 million as of June 30, 2016

from P6,976.0 million as of December 31, 2015 due to this period’s repayment of the loan

(P510.0 million).

Total equity increased by 27.1% or P937.5 million, to P4,396.2 million as of June 30, 2016 from

P3,458.7 million as of December 31, 2015 due to this period’s net income (P935.5 million).

SEC Form 17Q – 2Q 2016 19

Bac-Man Geothermal Inc. (BGI)

(Amounts in PHP millions) For the periods ended

June 30, 2016 June 30, 2015 Revenues 1,679.9 2,228.0 Costs of sale of electricity (1,439.4) (1,164.7) General and administrative expenses (49.0) (102.9) Other expense (49.6) (1.3) Income before income tax 141.9 959.1 Provision for income tax 0.5 (0.6) Net income 142.4 958.5

As of

June 30, 2016 Audited

December 31, 2015 Total Current Assets 3,453.6 5,307.1 Total Non-Current Assets 5,511.6 5,724.3 Total Current Liabilities 1,487.5 1,756.6 Total Non-Current Liabilities 4,093.8 4,383.3 Total Equity 3,383.9 4,891.5

In spite of increase in sales volume, revenues decreased by 24.6% or P=548.1 million, to P=1,679.9 million

as of June 30, 2016 from P=2,228.0 million for the same period in 2015. The decrease was primarily due to

lower WESM prices.

Costs of sale of electricity increased by 23.6% or P=274.7 million, to P=1,439.4 million as of June 30, 2016

from P=1,164.7 million for the same period in 2015. The increase was primarily due to higher steam costs

driven by higher volume (P=227.8 million), depreciation and amortization (P=72.4 million), rental,

insurance and taxes (P=24.5 million), and personnel costs (P=5.1 million).

General and administrative expenses decreased by 52.4% or P=53.9 million, to P=49.0 million as of

June 30, 2016 from P=102.9 million for the same period in 2015. The decrease was due to lower purchased

services and utilities (P=23.3 million), personnel costs (P=20.8 million), and rental, insurance and taxes

(P=7.5 million).

This year’s other expense was higher by 3,715.4% or P=48.3 million, to P=49.6 million as of June 30, 2016

from P=1.3 million for the same period in 2015. The increase was primarily due to higher interest expense

and foreign exchange losses amounting to P=124.4 million and P=5.1 million, respectively, partially offset

by the P=81.9 million insurance proceeds for machinery breakdown claims.

This year’s provision for income tax of P=0.5 million is attributable to deferred tax impact of temporary

differences on retirement and other post employments benefits while provision for income tax last year of

P=0.6 million pertains to current income tax attributable to non-registered activities.

Total current assets decreased by 34.9% or P=1,853.5 million, to P=3,453.6 million as of June 30, 2016 from

P=5,307.1 million as of December 31, 2015. The decrease was primarily due to the decrease of cash and

cash equivalents by P=2,027.1 million, partly offset by the decrease of trade receivables and other

receivables, other current assets, and parts and supplies inventories by P=115.5 million, P=50.2 million and

P=7.5 million, respectively.

SEC Form 17Q – 2Q 2016 20

Total non-current assets decreased by 3.7% or P=212.7 million, to P=5,511.6 million as of June 30, 2016

from P=5,724.3 million as of December 31, 2015. The decrease was mainly due to decrease of property,

plant and equipment by P=229.9 primarily due to the collection from Weir Engineering Services arising

from settlement of the arbitration case, partly offset by increase in other non-current assets by

P=17.6 million.

Total current liabilities decreased by 15.3% or P=269.1 million, to P=1,487.5 million as of June 30, 2016

from P=1,756.6 million as of December 31, 2015. The decrease was mainly due to decrease of trade and

other payables and due to related parties by P=258.6 million and P=10.4 million, respectively.

Total non-current liabilities decreased by 6.6% or P=289.5 million, to P=4,093.8 million as of June 30, 2016

from P=4,383.3 million as of December 31, 2015. The increase was primarily due to payment made on the

long-term debt of P=300.0 million

Total equity decreased by 30.8% or P=1,507.6 million, to P=3,383.9 million as of June 30, 2016 from

P=4,891.5 million as of December 31, 2015. The decrease was primarily due to dividend declaration of

P=1,650.0 million, partially offset by net income earned during the period of P=142.4 million.

SEC Form 17Q – 2Q 2016 21

EDC Burgos Wind Power Corporation (EBWPC)


For the years ended

June 30, 2016 June 30, 2015

Revenue 1,030.9 913.3 Costs of sale of electricity (596.7) (452.9) General and administrative expenses (55.8) (63.8) Other charges – net (402.6) (436.4) Income (Loss) before income tax (24.2) (39.8) Provision for income tax 1.4 4.8 Net Income (Loss) (22.8) (35.0)

As of

June 30, 2016 December 31, 2015

Total current assets 2,086.3 2,551.2 Total noncurrent assets 17,900.6 18,198.2 Total current liabilities 1,232.0 1,786.4 Total noncurrent liabilities 13,535.8 13,365.1 Total equity 5,219.1 5,598.0

Revenues increased by 12.9% or P=117.6 million, to P=1,030.9 million as of June 30, 2016 from

P=913.3 million for the same period in 2015. The increase was mainly due to higher actual generated sales

volume for the current period.

Costs of sale of electricity increased by 31.9% or P=143.8 million to P=596.7 million as of June 30, 2016

from P=452.9 million for the same period in 2015. The unfavorable variance was mainly due to increase in

rental, insurance and taxes (P=67.4 million), repair and maintenance (P=56.1 million) and depreciation and

amortization (P=38.0 million). These were partly offset by lower purchased services and utilities

(P=18.2 million).

General and administrative expenses decreased by 12.5% or P=8.0 million, to P=55.8 million as of

June 30, 2016 from P=63.8 million for the same period in 2015. This was mainly due to lower rental,

insurance and taxes (P=10.3 million) and purchased services and utilities (P=4.7 million). These were partly

offset by higher materials and supplies (P=6.5 million).

Other charges - net decreased by 7.8% or P=33.8 million, to P=402.6 million as of June 30, 2016 from

P=436.4 million for the same period in 2015. This was mainly due to lower foreign exchange loss

(P=46.8 million), partly offset by the increase in net interest expense incurred (P=16.7 million) on the

US$315 million debt facility.

Total current assets decreased by 18.2% or P=464.9 million primarily due to decreased in cash and cash

equivalents (P=392.6 million).

Total noncurrent assets decreased by P=297.6 million mainly due to decreased in property, plant and

equipment by P=334.6 million.

Total current liabilities decreased by 31.0% or P=554.4 million due to the decreased in trade and other

payables by P=514.2 million and long-term debt by P=109.2 million.

SEC Form 17Q – 2Q 2016 22

Unified Leyte Geothermal Energy Inc. (ULGEI)


For the period ended

June 30, 2016 June 30, 2015

Revenue 753.0 762.5

Costs of sale of electricity (1,031.2) (873.2)

General and administrative expenses (4.8) (3.2)

Other income (charges) – net - -

Loss before income tax (283.0) (113.9)

Provision for income tax - -

Net Loss (283.0) (113.9)

As of

June 30, 2016 December 31, 2015

Total current assets 255.6 194.3

Total noncurrent assets - -

Total current liabilities 932.2 587.9

Total noncurrent liabilities - -

Total equity (capital deficiency) (676.6) (393.6)

ULGEI’s revenue decreased by 1.2% or P=9.5 million, to P=753.0 million as of June 30, 2016 from P=762.5

million for the same period in 2015. The unfavorable variance was due to lower selling price of electricity in

WESM.

Costs of sale of electricity increased by 18.1% or P=158.0 million, to P=1,031.2 million as of June 30, 2016 from

P=873.2 million for the same period in 2015 mainly due to higher purchased price of electricity.

General and administrative expenses increased by 50.0% or P=1.6 million, to P=4.8 million as of June 30, 2016

from P=3.2 million for the same period in 2015. The unfavorable variance was mainly due to higher purchased

services and utilities (P=0.7 million) and business and related expenses (P=0.9 million).

With the foregoing, net loss increased by 148.5% or P=169.1 million to P=283.0 million as of June 30, 2016 from

P=113.9 million for the same period in 2015.

Total currents assets increased by 31.5% or P=61.3 million, to P=255.6 million as of June 30, 2016 from

P=194.3 million balance as of December 31, 2015. The increase was mainly due to the higher trade receivable

(P=81.0 million ) and offset by decrease in cash (P=25.7 million).

Total current liabilities increased by 58.6% or P=344.3 million, to P=932.2 million as of June 30, 2016 from

P=587.9 million balance as of December 31, 2015. The increase was caused by higher due to related parties

(P=325.7 million) and trade payables (P=18.6 million).

Total capital deficiency increased by 71.9% or P=283.0 million to P=676.6 million as of June 30, 2016 from

P=393.6 million balance as of December 31, 2015. The increase was due to net loss on operation.

SEC Form 17Q – 2Q 2016 23

FG Hydro Power Corporation (FG Hydro)


As of and for the periods ended

June 30 2016 2015

Operating revenues 1,537.2 1,208.7 Cost of sales 311.7 307.9 General and administrative expenses 162.9 175.7 Operating profit 1,062.6 725.1 Other expenses – net 59.2 83.1 Income before tax 1,003.4 642.0

Provision for (benefit from) income tax 271.4 162.2

Net income 732.0 479.8

June 30, 2016 Dec. 31, 2015

Total current assets 1,687.1 1,734.2

Total noncurrent assets 5,926.1 5,670.1 Total current liabilities 641.9 596.4 Total noncurrent liabilities 2,619.5 2,831.2 Total equity 4,351.8 3,976.7

FG Hydro generated revenues of P1,537.2 million for the period ended June 30, 2016, 27.2% or

P328.5 million higher than the revenues of P1,208.7 million for the same period in 2015. The favorable

variance was mainly on account of a 21% increase in ancillary service revenues and slightly higher

electricity generated in 2016 that consequently resulted to lower replacement power purchases.

Cost of sales for the period ended June 30, 2016 is slightly higher at P311.7 million as compared to the

P307.9 million level for the same period in 2015. The unfavorable variance was mainly due to higher

water service fees paid to NIA during the period. General and administrative expenses was lower at

P162.9 million, P12.8 million or 7.3% lower compared to the P175.7 million expense for the same period

in 2015. The favorable variance was mainly due to lower professional fees paid in 2016 partly offset by

increase in amount of plant insurance amortization. Interest expense for the period ended June 30, 2016 of

P64.0 million was 25.9% or P22.4 million lower as compared to P86.4 million for the same period in

2015 due to reduced long-term debt balance. Provision for current income tax for the period ended

June 30, 2016 of P271.4 million is 67.3% or P109.2 million higher as compared to P162.2 million for the

same period in 2015. Overall, FG Hydro posted a 52.6% or P252.2 million increase in net income of

P732.0 million for the period ended June 30, 2016 as compared to the P479.8 million reported income for

the same period in 2015.

Total assets as of June 30, 2016 stood at P7,613.2 million, P208.9 million or 2.8% higher than the

December 31, 2015 level of P7,404.3 million. The favorable variance was mainly due to higher accounts

receivable balance in 2016.

As of June 30, 2016, total liabilities stood at P3,261.4 million, P166.2 million or 4.8% lower than the

December 31, 2015 level of P3,427.6 million. The favorable variance is mainly on account of lower

lon-term debt balance as of end of June 30, 2016.

Total equity as of June 30, 2016 of P4,351.8 million rose by 9.4% or P375.1 million as compared to the

December 31, 2015 level of P3,976.7 million.

SEC Form 17Q – 2Q 2016 24

KEY PERFORMANCE INDICATORS

The top eight (8) key performance indicators are set forth below:

Ratio June 2016 June 2015

Current Ratio 1.41:1 2.60:1

Debt-to-Equity Ratio 1.46:1 1.50:1

Net Debt-to-Equity Ratio 1.15:1 1.17:1

Return on Assets (%) 6.21 9.94

Return on Equity (%) 17.25 27.25

Solvency Ratio 0.11 0.10

Interest Rate Coverage Ratio 3.46 3.05

Asset-to-Equity Ratio 2.75 2.80

Current Ratio – Total current assets divided by total current liabilities. This ratio is a rough indication of

a company’s ability to pay its short-term obligations. Generally, a current ratio above 1.00 is indicative of

a company’s greater capability to settle its current obligations.

Debt-to-Equity Ratio – Total interest-bearing debts divided by stockholders’ equity. This ratio expresses

the relationship between capital contributed by the creditors and the owners. The higher the ratio, the

greater the risk being assumed by the creditors. A lower ratio generally indicates greater long-term

financial safety.

Net-Debt-to-Equity Ratio – Total interest-bearing debts less cash & cash equivalents divided by

stockholders’ equity. This ratio measures the company’s financial leverage and stability. A negative net

debt-to-equity ratio means that the total of cash and cash equivalents exceeds interest-bearing liabilities.

Return on Assets – Net income (annual basis) divided by total assets (average). This ratio indicates how

profitable a company is relative to its total assets. This also gives an idea as to how efficient management

is at using its assets to generate earnings.

Return on Equity – Net income (annual basis) divided by total stockholders’ equity (average). This ratio

reveals how much profit a company earned in comparison to the total amount of shareholder equity found

on the balance sheet. A business that has a high return on equity is more likely to be one that is capable of

internally generating cash. For the most part, the company’s return on equity is compared with an industry

average. The company is considered superior if its return on equity is greater than the industry average.

Solvency Ratio – Net income excluding depreciation and non-cash provisions divided by total debt

obligations. This ratio gauges a company’s ability to meet its long-term obligations.

Interest Rate Coverage Ratio – Earnings before interest and taxes of one period divided by interest

expense of the same period. This ratio determines how easily a company can pay interest on outstanding

debt.

Asset-to-Equity Ratio – Total assets divided by total stockholders’ equity. This ratio shows a

company’s leverage, the amount of debt used to finance the firm.

SEC Form 17Q – 2Q 2016 25

Commitments that will have an impact on the issuer’s liquidity

As of June 30, 2016, the Company has unserved purchase orders and awarded contracts for the purchase

of various capital goods in the total amount of P715.8 million.

Other than these, we are not aware of any other material commitments that should impact the Company’s

liquidity.

Foreign Exchange Rate Volatility

The Company has P=30,068.6 million in long-term US dollar denominated loans as of June 30, 2016 which

is 41.62% of the total Company’s long-term loans.

Any event that will trigger direct or contingent financial obligation that is material to the company,

including any default or acceleration of an obligation

There are no material changes in the contingent financial obligations since the last annual balance sheet

date.

CASH DIVIDENDS

Parent Company

On March 9, 2016, EDC declared cash dividend amounting to P=2,600.0 million to its common

shareholders and P=7.5 million to its preferred shareholder of record as of March 23, 2016 payable on or

before April 12, 2016.

First Gen Hydro

On January 20, 2016, FG Hydro paid cash dividend amounting to P=142.8 million to its non-controlling

common stockholder.

SEC Form 17Q – 2Q 2016 26

MAJOR STOCKHOLDERS

As of June 30, 2016, the total number of stockholders was 678 and the stock price was P5.52. Public float

level was at 49.24% (or 9,225,526,239 common shares).

List of Top 20 Stockholders as of June 30, 2016

Rank Name Nationality

Number of Shares

% Preferred Common Total

1 Red Vulcan Holdings Corporation Filipino 9,375,000,000 7,500,000,000 16,875,000,000 60.03

2 PCD Nominee Corporation Foreign - 5,305,665,906 5,305,665,906 18.87

3 PCD Nominee Corporation Filipino - 3,917,231,645 3,917,231,645 13.93

4 First Gen Corporation Filipino - 991,782,700 991,782,700 3.53

5 Northern Terracotta Power Corporation Filipino - 986,337,000 986,337,000 3.51

6 F. Yap Securities, Inc. Filipino - 5,690,000 5,690,000 0.02

7 Peter D. Garrucho, Jr. Filipino - 5,670,000 5,670,000 0.02

8 Benjamin K. Liboro &/or Luisa Liboro Filipino - 2,525,500 2,525,500 0.01

9 Croslo Holdings Corporation Filipino - 2,220,000 2,220,000 0.01

10 Manuel Moreno or Maria Terasa Lopez Filipino - 1,310,000 1,310,000 0.00

11 Arthur A. de Guia Filipino - 950,000 950,000 0.00

12 ALG Holdings Corporation Filipino - 875,000 875,000 0.00

13 First Life Financial Co., Inc. Filipino - 800,000 800,000 0.00

14 Peter Mar &/or Annabelle C. Mar Filipino - 700,000 700,000 0.00

15 Rosalind Camara Filipino - 663,750 663,750 0.00

16 Ma. Consuelo R. Lopez Filipino - 500,000 500,000 0.00

17 Nicolas, Virginia Maria D. Filipino - 393,000 393,000 0.00

18

Puno,Francis Giles B. &/or Ma. Patricia

Puno Filipino - 367,500 367,500 0.00

19 Edwin U. Lim Filipino 350,000 350,000 0.00

20 Eric U. Lim Filipino 321,000 321,000 0.00

SEC Form 17Q – 2Q 2016 27

BOARD OF DIRECTORS

As of June 30, 2016, the members of the Board of Directors of EDC are as follows:

Oscar M. Lopez Chairman Emeritus

Federico R. Lopez Chairman and Chief Executive Officer

Peter D. Garrucho, Jr. Director

Joaquin E. Quintos IV Director

Ernesto B. Pantangco Director and Executive Vice President

Francis Giles B. Puno Director

Richard B. Tantoco Director, President and Chief Operating Officer

Jonathan C. Russell Director

Edgar O. Chua Independent Director

Francis Ed. Lim Independent Director

Arturo T. Valdez Independent Director

OFFICERS

As of June 30, 2016, the Officers of EDC are as follows:

Name Position

Federico R. Lopez Chief Executive Officer

Richard B. Tantoco President and Chief Operating Officer

Ernesto B. Pantangco Executive Vice President

Nestor H. Vasay Senior Vice President/Chief Financial

Officer/Treasurer/Head of Finance & Shared

Services Group

Manuel S. Ogena Senior Vice President, Head of Geosciences and

Reservoir Engineering Group (Retired effective

June 30, 2016 COB)

Dominador M. Camu Jr. Senior Vice President, Head of Operations and

Engineering Group

Ma. Elizabeth D. Nasol Vice President, Head of Human Resource

Management Group

Raymundo N. Jarque Vice President, Head of Business Development

Group

Rassen M. Lopez Vice President, Head of Legal and Regulatory

Group

Ramon A. Carandang Vice President, Head of Corporate Affairs Group

Bernardito M. Lapuz Vice President, Chief Risk Officer, Head of

Strategy and Risk Management Group

Reman A. Chua Vice President, Head of Wind Ilocos Norte

Business Unit

Ariel Arman V. Lapus Vice President, Business Development, and

Managing Director for Latin America

Ferdinand B. Poblete Vice President, Chief Information Officer, Head of

Information Technology Group

Erwin O. Avante Vice President, Head of Corporate Finance,

Compliance Officer (SEC & PSE)

SEC Form 17Q – 2Q 2016 28

Name Position

Manuel C. Paete Vice President, Head of LGBU Project & Resource

Management

Liberato S. Virata Vice President, Head of BGBU Project & Resource

Exploration Management

Ellsworth R. Lucero Vice President, Head of LGBU Operations and

Maintenance (Retired effective June 30, 2016 -

COB)

Maribel A. Manlapaz Assistant Vice President, Comptroller

Teodorico Jose R. Delfin Corporate Secretary

Ana Maria A. Katigbak Assistant Corporate Secretary

Glenn L. Tee Chief Audit Executive / Assistant Vice President,

Internal Audit

Erudito S. Recio Corporate Information Officer / Senior Manager,

Investor Relations

ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIES

FINANCIAL SOUNDNESS INDICATORS

Ratio June 2016 June 2015

Current Ratio 1.41:1 2.60:1

Debt-to-Equity Ratio 1.46:1 1.50:1

Net Debt-to-Equity Ratio 1.15:1 1.17:1

Return on Assets (%) 6.21 9.94

Return on Equity (%) 17.25 27.25

Solvency Ratio 0.11 0.10

Interest Rate Coverage Ratio 3.46 3.05

Asset-to-Equity Ratio 2.75 2.80

EDC Geothermal Corporation (EGC)

First Gen Hydro Power Corporation (FGHPC)

EDC Wind Energy Holdings Inc.

(EWEHI)

EDC Holdings International Limited

(EHIL)

• Green Core Geothermal Inc. (GCGI)

• Bac-Man Geothermal Inc. (BGI)

• Unified Leyte Geothermal Energy Inc. (ULGEI)

• Southern Negros Geothermal, Inc. (SNGI)

• EDC Mindanao Geothermal Inc. (EMGI)

• Bac-Man Energy Development Corporation

(BEDC) • Kayabon Geothermal, Inc.

(KGI) •Mount Apo Renewable Energy

Inc. (MAREI)

Energy Development (EDC) Corporation Chile Limitada

Energy Development Corporation Hong Kong

Limited (EDC HKL)

Prime Terracotta Holdings Corporation

Red Vulcan Holdings Corporation

ID: 100%

D: 100% D: 100% D: 100% D: 100% D: 60%

ID: 100% D: 99.99%

Legend: D – Direct Ownership ID – Indirect Ownership E – Economic Interest V – Voting Interest

E: 40% V: 60%

E: 100% V: 100%

PT EDC Indonesia EDC Peru Holdings S.A.C.

EDC Chile Holdings SPA

PT EDC Panas Bumi Indonesia

EDC Geotermica Chile SPA

EDC Geotermica Peru S.A.C.

Geotermica Quello Apacheta Peru S.A.C.

ID: 100%

ID: 70%

ID: 95% ID: 95% ID: 100%

ID: 100%

EDC Geotermica Del Sur S.A.C.

EDC Energia Azul S.A.C.

EDC Energia Peru S.A.C.

EDC Energia Geotermica S.A.C.

EDC Progreso Geotermico S.A.C.

EDC Energia Renovable S.A.C.

Geotermica Crucero Peru S.A.C.

Geotermica Loriscota Peru S.A.C.

Geotermica Tutupaca Norte Peru S.A.C.

ID: 70%

EDC Bright Solar Energy Holdings Inc.

(EBSEHI)

EDC Drillco Corporation (EDC

Drillco)

EDC Bago Solar Power Corporation

(EBSPC)

D: 100%

ID: 100% •EDC Pagali Burgos Wind Power Corporation (EPBWPC) •EDC Burgos Wind Power Corporation (EBWPC) •EDC Pagudpod Wind Power Corporation (EPWPC)

•EDC Bayog Burgos Wind Power Corporation (EBBWPC) •Matnog 1 Renewable Energy Corporation (M1REC) •Matnog 2 Renewable Energy Corporation (M2REC)

•Matnog 3 Renewable Energy Corporation (M3REC) •Iloilo 1 Renewable Energy Corporation (I1REC) •Negros 1 Renewable Energy Corporation (N1REC)

EDC Desarollo Sostenible Ltd

ID: 100%

EDC Energia Verde Peru S.A.C.

ID: 30%

EDC Soluciones Sostenibles Ltd

ID: 100%

EDC Energia Verde Chile SpA

EDC Energia de la Tierra SpA

ID: 100%

ID: 100%

EDC Burgos Solar

Corporation (EBSC)

ID: 100% ID: 0.01%

ID: 0.01%

ID: 99.99%

ID: 99.96%

ID: 99.99% ID: 0.01%

ID: 0.01% ID: 99.99% ID: 0.01%

ID: 70%

ID: 70%

FIRST PHILIPPINE HOLDINGS CORPORATION AND SUBSIDIARIES SCHEDULE K – CORPORATE STRUCTURE

MARCH 31, 2016

Companies within the Lopez Group

FIRST PHILIPPINE HOLDINGS CORPORATION AND SUBSIDIARIES SCHEDULE K – CORPORATE STRUCTURE

MARCH 31, 2016

FPH Group

ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)

SUPPLEMENTARY SCHEDULE OF ALL EFFECTIVE STANDARDS

AND INTERPRETATIONS June 30, 2016

PHILIPPINE FINANCIAL REPORTING STANDARDS AND

INTERPRETATIONS

Effective as of June 30, 2016

Adopted Not

Adopted

Not

Applicable

Framework for the Preparation and Presentation of Financial

Statements

Conceptual Framework Phase A: Objectives and qualitative

characteristics

PFRSs Practice Statement Management Commentary

Philippine Financial Reporting Standards

PFRS 1

(Revised)

First-time Adoption of Philippine Financial

Reporting Standards

Amendments to PFRS 1 and PAS 27: Cost of an

Investment in a Subsidiary, Jointly Controlled

Entity or Associate

Amendments to PFRS 1: Additional Exemptions for

First-time Adopters

Amendment to PFRS 1: Limited Exemption from

Comparative PFRS 7 Disclosures for First-time

Adopters

Amendments to PFRS 1: Severe Hyperinflation and

Removal of Fixed Date for First-time Adopters

Amendments to PFRS 1: Government Loans

PFRS 2 Share-based Payment

Amendments to PFRS 2: Vesting Conditions and

Cancellations

Amendments to PFRS 2: Group Cash-settled

Share-based Payment Transactions

PFRS 3

(Revised)

Business Combinations

PFRS 4 Insurance Contracts

Amendments to PAS 39 and PFRS 4: Financial

Guarantee Contracts

PFRS 5 Non-current Assets Held for Sale and Discontinued

Operations

PFRS 6 Exploration for and Evaluation of Mineral

Resources

Exhibit 2.2


INTERPRETATIONS


Adopted Not

Adopted

Not

Applicable

PFRS 7 Financial Instruments: Disclosures

Amendments to PFRS 7: Transition

Amendments to PAS 39 and PFRS 7:

Reclassification of Financial Assets


Reclassification of Financial Assets - Effective Date

and Transition

Amendments to PFRS 7: Improving Disclosures

about Financial Instruments

Amendments to PFRS 7: Disclosures - Transfers of

Financial Assets

Amendments to PFRS 7: Disclosures - Offsetting

Financial Assets and Financial Liabilities

Amendments to PFRS 7: Mandatory Effective Date

of PFRS 9 and Transition Disclosures

PFRS 8 Operating Segments

PFRS 9 Financial Instruments (2010 version)*

Amendments to PFRS 9: Mandatory Effective Date

of PFRS 9 and Transition Disclosures*

Financial Instruments (2013 version)*

Financial Instruments (2014 version)*

PFRS 10 Consolidated Financial Statements

Amendments to PFRS 10, PFRS 12 and PAS 27:

Investment Entities

Amendments to PFRS 10 and PAS 28: Sale or

Contribution of Assets between an Investor and its

Associate or Joint Venture*

PFRS 11 Joint Arrangements

PFRS 12 Disclosure of Interests in Other Entities


Investment Entities

PFRS 13 Fair Value Measurement

PFRS 14 Regulatory Deferral Accounts*

PFRS 15 Revenue from Contracts with Customers*

Philippine Accounting Standards

PAS 1

(Revised)

Presentation of Financial Statements

Amendment to PAS 1: Capital Disclosures


INTERPRETATIONS


Adopted Not

Adopted

Not

Applicable

Amendments to PAS 32 and PAS 1: Puttable

Financial Instruments and Obligations Arising on

Liquidation

Amendments to PAS 1: Presentation of Items of

Other Comprehensive Income

PAS 2 Inventories

PAS 7 Statement of Cash Flows

PAS 8 Accounting Policies, Changes in Accounting

Estimates and Errors

PAS 10 Events after the Reporting Period

PAS 11 Construction Contracts

PAS 12 Income Taxes

Amendment to PAS 12 - Deferred Tax: Recovery of

Underlying Assets

PAS 16 Property, Plant and Equipment

Amendments to PAS 16 and PAS 18: Clarification

of Acceptable Methods of Depreciation and

Amortization*

Amendments to PAS 16 and PAS 41: Bearer Plants*

PAS 17 Leases

PAS 18 Revenue

PAS 19 Employee Benefits

Amendments to PAS 19: Actuarial Gains and

Losses, Group Plans and Disclosures

Amendments to PAS 19: Defined Benefit Plans:

Employee Contributions*

PAS 19

(Amended)

Employee Benefits

PAS 20 Accounting for Government Grants and Disclosure

of Government Assistance

PAS 21 The Effects of Changes in Foreign Exchange Rates

Amendment: Net Investment in a Foreign Operation

PAS 23

(Revised)

Borrowing Costs

PAS 24

(Revised)

Related Party Disclosures

PAS 26 Accounting and Reporting by Retirement Benefit

Plans


INTERPRETATIONS


Adopted Not

Adopted

Not

Applicable

PAS 27

(Amended)

Separate Financial Statements


Investment Entities

Amendment: Equity Method in Separate Financial

Statements*

PAS 28

(Amended)

Investments in Associates and Joint Ventures

Amendment: Accounting for Acquisitions of

Interests in Joint Operations*

PAS 29 Financial Reporting in Hyperinflationary

Economies

PAS 31 Interests in Joint Ventures

PAS 32 Financial Instruments: Disclosure and Presentation

Amendments to PAS 32 and PAS 1: Puttable

Financial Instruments and Obligations Arising on

Liquidation

Amendment to PAS 32: Classification of Rights

Issues

Amendments to PAS 32: Offsetting Financial Assets

and Financial Liabilities

PAS 33 Earnings per Share

PAS 34 Interim Financial Reporting

PAS 36 Impairment of Assets

Amendment to PAS 36: Impairment of Assets -

Recoverable Amount Disclosures for Non-Financial

Assets

PAS 37 Provisions, Contingent Liabilities and Contingent

Assets

PAS 38 Intangible Assets

PAS 39 Financial Instruments: Recognition and

Measurement

Amendments to PAS 39: Transition and Initial

Recognition of Financial Assets and Financial

Liabilities

Amendments to PAS 39: Cash Flow Hedge

Accounting of Forecast Intragroup Transactions

Amendments to PAS 39: The Fair Value Option

Amendments to PAS 39 and PFRS 4: Financial

Guarantee Contracts



INTERPRETATIONS


Adopted Not

Adopted

Not

Applicable

Reclassification of Financial Assets


Reclassification of Financial Assets - Effective Date

and Transition

Amendments to Philippine Interpretation IFRIC 9

and PAS 39: Embedded Derivatives

Amendment to PAS 39: Eligible Hedged Items

Amendment to PAS 39: Novation of Derivatives

and Continuation of Hedge Accounting

PAS 40 Investment Property

PAS 41 Agriculture

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restoration

and Similar Liabilities

IFRIC 2 Members’ Share in Co-operative Entities and

Similar Instruments

IFRIC 4 Determining Whether an Arrangement Contains a

Lease

IFRIC 5 Rights to Interests arising from Decommissioning,

Restoration and Environmental Rehabilitation

Funds

IFRIC 6 Liabilities arising from Participating in a Specific

Market - Waste Electrical and Electronic Equipment

IFRIC 7 Applying the Restatement Approach under PAS 29

Financial Reporting in Hyperinflationary

Economies

IFRIC 8 Scope of PFRS 2

IFRIC 9 Reassessment of Embedded Derivatives

Amendments to Philippine Interpretation

IFRIC - 9 and PAS 39: Embedded Derivatives

IFRIC 10 Interim Financial Reporting and Impairment

IFRIC 11 PFRS 2 - Group and Treasury Share Transactions

IFRIC 12 Service Concession Arrangements

IFRIC 13 Customer Loyalty Programmes

IFRIC 14 The Limit on a Defined Benefit Asset, Minimum

Funding Requirements and their Interaction

Amendments to Philippine Interpretations

IFRIC 14, Prepayments of a Minimum Funding

Requirement


INTERPRETATIONS


Adopted Not

Adopted

Not

Applicable

IFRIC 15 Agreements for the Construction of Real Estate*

IFRIC 16 Hedges of a Net Investment in a Foreign Operation

IFRIC 17 Distributions of Non-cash Assets to Owners

IFRIC 18 Transfers of Assets from Customers

IFRIC 19 Extinguishing Financial Liabilities with Equity

Instruments

IFRIC 20 Stripping Costs in the Production Phase of a Surface

Mine

IFRIC 21 Levies

SIC-7 Introduction of the Euro

SIC-10 Government Assistance - No Specific Relation to

Operating Activities

SIC-12 Consolidation - Special Purpose Entities

Amendment to SIC - 12: Scope of SIC 12

SIC-13 Jointly Controlled Entities - Non-Monetary

Contributions by Venturers

SIC-15 Operating Leases - Incentives

SIC-21 Income Taxes - Recovery of Revalued

Non-Depreciable Assets

SIC-25 Income Taxes - Changes in the Tax Status of an

Entity or its Shareholders

SIC-27 Evaluating the Substance of Transactions Involving

the Legal Form of a Lease

SIC-29 Service Concession Arrangements: Disclosures.

SIC-31 Revenue - Barter Transactions Involving

Advertising Services

SIC-32 Intangible Assets - Web Site Costs

*These standards, interpretations and amendments to existing standards became effective subsequent to June 30, 2016. The

Company did not early adopt these standards, interpretations and amendments.

Energy Development Corporation (A Subsidiary of Red Vulcan Holdings Corporation) and Subsidiaries

Unaudited Interim Condensed Consolidated

Financial Statements

June 30, 2016 (With Comparative Audited Figures

as of December 31, 2015)

and For the Six-Month Periods Ended

June 30, 2016 and 2015


AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF

FINANCIAL POSITION AS OF JUNE 30, 2016

(With Comparative Audited Figures as of December 31, 2015)

June 30,

2016

(Unaudited)

December 31,

2015

(Audited)

ASSETS

Current Assets

Cash and cash equivalents (Notes 5 and 23) P=15,577,176,864 P=17,613,921,891

Financial assets at fair value through profit or loss (Note 23) 1,057,510,950 1,014,293,092

Trade and other receivables (Notes 6 and 23) 6,364,814,482 5,346,227,386

Parts and supplies inventories (Note 7) 3,484,301,821 3,251,943,359

Due from a related party (Notes 22 and 23) 179,855,238 –

Current portion of:

Derivative assets (Note 23) 293,937,315 58,602,033

Available-for-sale investments – 129,603,240

Other current assets (Note 8) 2,245,255,902 2,263,418,699

Total Current Assets 29,202,852,572 29,678,009,700

Noncurrent Assets

Property, plant and equipment (Note 9) 88,829,487,327 88,567,738,668

Exploration and evaluation assets 3,098,095,931 3,073,600,767

Goodwill and intangible assets (Note 10) 4,203,978,824 4,289,260,334

Deferred tax assets - net 1,111,390,145 1,120,091,912

Available-for-sale investments - net of current portion

(Note 23) 571,230,046 435,123,312

Derivative assets - net of current portion (Note 23) 60,419,569 293,010,166

Other noncurrent assets (Notes 11 and 23) 8,689,714,683 8,584,215,557

Total Noncurrent Assets 106,564,316,525 106,363,040,716

TOTAL ASSETS P=135,767,169,097 P=136,041,050,416

LIABILITIES AND EQUITY

Current Liabilities

Trade and other payables (Notes 12 and 23) P=8,978,915,498 P=9,989,938,751

Due to related parties (Notes 22 and 23) 32,911,455 101,769,634

Income tax payable 338,668,689 29,161,489

Current portion of:

Long-term debts (Notes 13 and 23) 11,316,843,873 7,860,904,237

Derivative liabilities (Note 23) 22,882,197 4,943,539

Total Current Liabilities 20,690,221,712 17,986,717,650

(Forward)

- 2 -

Equity

Equity attributable to equity holders of the Parent Company:

Preferred stock 93,750,000 93,750,000

Common stock 18,750,000,000 18,750,000,000

Treasury stock (73,511,508) (28,416,391)

Common shares in employee trust account (350,247,130) (350,247,130)

Additional paid-in capital 6,284,045,797 6,284,045,797

Equity reserve (3,706,430,769) (3,706,430,769)

Net accumulated unrealized gain on available-for-sale

investments 140,109,866 104,003,133

Fair value adjustments on hedging transactions (Note 23) (561,748,987) (177,500,756)

Cumulative translation adjustment on foreign subsidiaries 5,815,405 (97,279,985)

Retained earnings 27,061,829,028 24,778,400,459

47,643,611,702 45,650,324,358

Non-controlling interests 1,739,700,807 1,579,355,909

Total Equity 49,383,312,509 47,229,680,267

TOTAL LIABILITIES AND EQUITY P=135,767,169,097 P=136,041,050,416

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

June 30,

2016

(Unaudited)

December 31,

2015

(Audited)

Noncurrent Liabilities

Long-term debts - net of current portion

(Notes 13 and 23) 60,935,299,888 66,650,689,335

Derivative liabilities - net of current portion

(Note 23) 561,376,581 197,525,898

Net retirement and other post-employment benefits 2,081,028,207 1,914,904,494

Provisions and other long-term liabilities 2,115,930,200 2,061,532,772

Total Noncurrent Liabilities 65,693,634,876 70,824,652,499

Total Liabilities 86,383,856,588 88,811,370,149


AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF INCOME

Three-Month Periods Ended

June 30

Six-Month Periods Ended

June 30

2016 2015 2016 2015

REVENUE FROM SALE OF

ELECTRICITY P=7,909,190,070 P=8,277,716,847 P=17,005,456,130 P=16,775,396,315

COSTS OF SALE OF ELECTRICITY

(Note 15) (3,168,035,007) (3,403,885,526) (6,384,016,138) (6,428,347,213)

GENERAL AND ADMINISTRATIVE

EXPENSES (Note 16) (1,382,677,981) (1,823,974,531) (2,747,634,316) (3,146,680,557)

FINANCIAL INCOME (EXPENSES)

Interest income (Notes 4 and 18) 64,619,973 81,833,312 135,697,392 149,949,194

Interest expense (Notes 4 and 17) (1,095,822,906) (1,246,225,333) (2,295,986,479) (2,377,882,980)

(1,031,202,933) (1,164,392,021) (2,160,289,087) (2,227,933,786)

OTHER INCOME (CHARGES)

Foreign exchange losses - net (Note 19) (517,438,190) (253,199,934) (15,960,178) (233,996,017)

Proceeds from insurance claims 199,085,992 674,033,597 293,020,992 751,092,490

Miscellaneous - net (Note 20) 39,841,399 (76,501,923) 55,559,000 (121,784,146)

(278,510,799) 344,331,740 332,619,814 395,312,327

INCOME BEFORE INCOME TAX 2,048,763,350 2,229,796,509 6,046,136,403 5,367,747,086

PROVISION FOR INCOME TAX

Current (375,096,920) (114,334,682) (807,213,378) (514,633,339)

Deferred 38,892,255 (48,854,899) (31,896,444) (52,613,098)

(336,204,665) (163,189,581) (839,109,822) (567,246,437)

NET INCOME P=1,712,558,685 P=2,066,606,928 P=5,207,026,581 P=4,800,500,649

Net income attributable to:

Equity holders of the Parent Company P=1,654,153,329 P=2,115,634,693 P=4,908,162,838 P=4,608,556,482

Non-controlling interests 58,405,356 (49,027,765) 298,863,743 191,944,167

P=1,712,558,685 P=2,066,606,928 P=5,207,026,581 P=4,800,500,649

Basic/Diluted Earnings Per Share

(Note 21) P=0.091 P=0.112 P=0.262 P=0.245



AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

Three-Month Periods Ended

June 30

Six-Month Periods Ended

June 30

2016 2015 2016 2015

NET INCOME P=1,712,558,685 P=2,066,606,928 P=5,207,026,581 P=4,800,500,649

OTHER COMPREHENSIVE INCOME

(LOSS)

Other comprehensive income (loss) to be

reclassified to profit or loss in subsequent

periods:

Cumulative translation adjustment

on hedging transactions (65,023,426) 277,359,822 (384,248,231) 101,425,351

Changes in fair value of available-for-sale

investments recognized in equity 9,711,310 (35,265,061) 36,106,733 20,054,607

Cumulative translation adjustments

on foreign subsidiaries 104,202,248 (19,168,359) 103,095,390 (57,063,484)

NET OTHER COMPREHENSIVE

INCOME (LOSS) TO BE

RECLASSIFIED TO PROFIT OR

LOSS IN SUBSEQUENT PERIODS 48,890,132 222,926,402 (245,046,108) 64,416,474

Other comprehensive income not to be

reclassified to profit or loss in

subsequent periods:

Remeasurements of retirement and other

post-employment benefits – – 10,702,886 –

TOTAL OTHER COMPREHENSIVE

INCOME (LOSS), NET OF TAX 48,890,132 222,926,402 (234,343,222) 64,416,474

TOTAL COMPREHENSIVE INCOME,

NET OF TAX P=1,761,448,817 P=2,289,533,330 P=4,972,683,359 P=4,864,917,123

Total comprehensive income attributable

to:

Equity Holders of the Parent Company P=1,703,043,461 P=2,338,561,095 P=4,669,538,461 P=4,672,972,956

Non-controlling interests 58,405,356 (49,027,765) 303,144,898 191,944,167

P=1,761,448,817 P=2,289,533,330 P=4,972,683,359 P=4,864,917,123



AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2016 AND 2015

Equity Attributable to Equity Holders of the Parent Company

Preferred

Stock

Common

Stock

Treasury Stock

Common

Shares in

Employee

Trust Account

Additional

Paid-in

Capital

Equity

Reserve

Net

Accumulated

Unrealized Gain

on Available-for-

sale investments

Fair

Value

Adjustments on

Hedging

Transactions

Cumulative

Translation

Adjustments on

Foreign

Subsidiaries

Retained

Earnings Subtotal

Non-controlling

Interests Total Equity

Balances, January 1, 2016 P=93,750,000 P=18,750,000,000 (P=28,416,391) (P=350,247,130) P=6,284,045,797 (P=3,706,430,769) P=104,003,133 (P=177,500,756) (P=97,279,985) P=24,778,400,459 P=45,650,324,358 P=1,579,355,909 P=47,229,680,267

Total comprehensive income:

Net income – – – – – – – – – 4,908,162,838 4,908,162,838 298,863,743 5,207,026,581

Changes in fair value of

available-for-sale

investments recognized

in equity

–

–

–

–

– 36,106,733

–

– – 36,106,733 – 36,106,733

Fair value adjustments on

hedging transactions

–

–

–

–

–

– (384,248,231)

–

– (384,248,231)

– (384,248,231)

Cumulative translation

adjustments on foreign

subsidiaries

–

–

–

–

–

– – 103,095,390 103,095,390 103,095,390

Remeasurements of

retirement and other

post-employment benefits

–

–

–

–

–

– – – 6,421,731 6,421,731 4,281,155 10,702,886

– – – – – 36,106,733 (384,248,231) 103,095,390 4,914,584,569 4,669,538,461 303,144,898 4,972,683,359

Cash dividends (Notes 12 and 14) – – – – – – – – (2,631,156,000) (2,631,156,000) – (2,631,156,000)

Cash dividends to non-controlling

interest,

– – – – – – – – – – (142,800,000) (142,800,000)

Acquisition of treasury stock – (45,095,117) – – – – – – – (45,095,117) – (45,095,117)

Balances, June 30, 2016 P=93,750,000 P=18,750,000,000

(P=73,511,508) (P=350,247,130) P=6,284,045,797 (P=3,706,430,769) P=140,109,866 (P=561,748,987) P=5,815,405 P=27,061,829,028 P=47,643,611,702 P=1,739,700,807 P=49,383,312,509


- 2 -

Equity Attributable to Equity Holders of the Parent Company

Preferred

Stock

Common

Stock

Common

Shares in

Employee

Trust Account

Additional

Paid-in

Capital

Equity

Reserve

Net

Accumulated

Unrealized Gain

on Available-for-

sale investments

Cumulative

Translation

Adjustments on

Hedging

Transactions

Cumulative

Translation

Adjustments on

Foreign

Subsidiaries

Retained

Earnings Subtotal

Non-controlling

Interests Total Equity

Balances, January 1, 2015 P=93,750,000 P=18,750,000,000 (P=346,730,774) P=6,285,845,818 (P=3,706,430,769) P=143,192,675 (P=178,182,172) (P=6,530,344) P=21,095,090,585 P=42,130,005,019 P=1,490,081,458 P=43,620,086,477

Total comprehensive income:

Net income – – – – – – – – 4,608,556,482 4,608,556,482 191,944,167 4,800,500,649

Changes in fair value of

available-for-sale

investments recognized

in equity – – – – – 20,054,607 – – – 20,054,607 – 20,054,607


adjustments on hedging

transactions – – – – – – 101,425,351 – – 101,425,351 – 101,425,351


adjustments on foreign

subsidiaries – – – – – – – (57,063,484) – (57,063,484) – (57,063,484)

– – – – – 20,054,607 101,425,351 (57,063,484) 4,608,556,482 4,672,972,956 191,944,167 4,864,917,123

Cash dividends (Note 14) – – – – – – – – (1,882,500,000) (1,882,500,000) – (1,882,500,000)

Cash dividends to non-controlling

interest, – – – – – – – – – – (128,000,000) (128,000,000)

Share-based payment – – 252,374 190,368 – – – – – 442,742 – 442,742

Balances, June 30, 2015 P=93,750,000 P=18,750,000,000 (P=346,478,400) P=6,286,036,186 (P=3,706,430,769) P=163,247,282 (P=76,756,821) (P=63,593,828) P=23,821,147,067 P=44,920,920,717 P=1,554,025,625 P=46,474,946,342



AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six-Month Periods

Ended June 30

2016 2015

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax P=6,046,136,403 P=5,367,747,086

Adjustments for:

Depreciation and amortization (Notes 9, 10, 15 and 16) 2,717,481,396 2,464,699,297

Interest expense (Note 17) 2,295,986,479 2,377,882,980

Interest income (Note 18) (135,697,392) (149,949,194)

Provision for doubtful accounts (Note 16) 44,891,208 31,569,575

Mark-to-market gain on financial assets at fair value

through profit or loss (Note 20) (43,217,858) (404,429)

Loss on direct write-off of input VAT claims (Note 20) 35,644,993 87,111,648

Provision for impairment of parts and supplies(Note 16) (9,180,977) (7,778,222)

Unrealized foreign exchange losses (gains) - net (Note 19) (2,408,869) 192,647,861

Gain on sale of property, plant and equipment

(Notes 9 and 20) (128,755) (371,246)

Share-based payment expense – 442,742

Operating income before working capital changes 10,949,506,628 10,363,598,098

Decrease (increase) in:

Trade and other receivables (1,026,565,039) 284,199,630

Parts and supplies inventories (223,177,485) (208,084,527)

Due from a related party (179,855,238) –

Other current assets 162,892,856 (850,277,118)

Increase (decrease) in:

Trade and other payables (1,048,620,753) 2,178,003,259

Due to related parties (68,858,179) 38,478,912

Provisions and other long-term liabilities 61,494,723 92,700,294

Retirement and other post-employment benefits 177,997,101 166,927,555

Cash generated from operations 8,804,814,614 12,065,546,103

Income taxes paid including creditable withholding taxes (564,485,053) (577,780,107)

Net cash flows from operating activities 8,240,329,561 11,487,765,996

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions of property, plant and equipment (Note 9) (3,029,446,939) (5,157,210,848)

Collection of liquidated damages from contractor (Note 9) 122,029,156 –

Purchase of available-for-sale investments (100,000,000) –

Purchase of financial assets at fair value through profit or loss – (500,000,000)

Interest received 143,671,264 155,696,383

Proceeds from:

Sale of property, plant and equipment 16,617,315 10,941,362

Redemption of available-for-sale investments 131,480,090 –

Increase in:

Debt service reserve account (72,380,075) –

Exploration and evaluation assets (25,108,007) (161,686,310)

Intangible assets (2,830,925) (58,671,561)

Other noncurrent assets (83,018,151) (132,763,055)

Net cash flows used in investing activities (2,898,986,272) (5,843,694,029)

(Forward)

- 2 -

For the Six-Month Periods

Ended June 30

2016 2015

CASH FLOWS FROM FINANCING ACTIVITIES

Acquisition of treasury stock (P=45,095,117) –

Proceeds from availment of long-term debts (Note 13) – P=9,442,483,901

Payments of:

Long term debt (2,345,639,407) (9,418,238,750)

Interest and other financing charges (2,230,493,722) (2,234,006,099)

Cash dividends (Note 14) (2,773,956,000) (2,010,500,000)

Net cash flows used in financing activities (7,395,184,246) (4,220,260,948)

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS (2,053,840,957) 1,423,811,019

EFFECT OF FOREIGN EXCHANGE RATE CHANGES

ON CASH AND CASH EQUIVALENTS 17,095,930 (1,819,966)

CASH AND CASH EQUIVALENTS AT BEGINNING OF

PERIOD 17,613,921,891 14,010,213,414

CASH AND CASH EQUIVALENTS AT END OF PERIOD

(Notes 5 and 23) P=15,577,176,864 P=15,432,204,467



AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

1. Corporate Information

General

Energy Development Corporation (the “Parent Company” or “EDC”) was incorporated in the

Philippines and registered with the Securities and Exchange Commission on March 5, 1976.

Beginning December 13, 2006, the common shares of EDC were listed and traded in the

Philippine Stock Exchange.

The Parent Company and its subsidiaries (collectively referred to as the “Company”) are primarily

engaged in the business of exploring, developing, and operating geothermal energy and other

indigenous renewable energy projects in the Philippines.

Red Vulcan is the parent company of EDC while Lopez, Inc. is the ultimate parent company.

Principal Office Address

The registered principal office address is at 38th Floor, One Corporate Centre, Julia Vargas

Avenue corner Meralco Avenue, Ortigas Center, Pasig City.

Authorization for Issuance of the Unaudited Interim Condensed Consolidated Financial

Statements

The interim condensed consolidated financial statements were reviewed, approved and authorized

for issuance by the Board of Directors (BOD) thru the Audit and Governance Committee on

August 10, 2016.

2. Basis of Preparation

The unaudited interim condensed consolidated financial statements of the Company as of

June 30, 2016 and for the six-month periods ended June 30, 2016 and 2015 have been prepared in

accordance with Philippine Accounting Standard (PAS) 34, Interim Financial Reporting. The

unaudited interim condensed consolidated financial statements do not include all the information

and disclosures required in the annual financial statements, and should be read in conjunction with

the Company’s annual financial statements as at December 31, 2015.

The unaudited interim condensed consolidated financial statements have been prepared on a

historical cost basis, except for the financial assets at fair value through profit or loss (FVPL),

derivative instruments and available-for-sale (AFS) investments that are measured at fair value.

The unaudited interim condensed consolidated financial statements are presented in Philippine

peso (Peso), which is the Parent Company’s functional currency. All values are rounded to the

nearest peso, except when otherwise indicated.

- 2 -

3. Significant Accounting Policies

The accounting policies adopted in the preparation of the unaudited interim condensed

consolidated financial statements are consistent with those followed in the preparation of the

Company’s annual consolidated financial statements as of and for the year ended

December 31, 2015, except for the adoption of the following amended accounting standards that

became effective beginning January 1, 2016.

Effective January 1, 2016

PFRS 10, Consolidated Financial Statements, and PAS 28, Investments in Associates and

Joint Ventures - Investment Entities: Applying the Consolidation Exception

(Amendments)

These amendments clarify that the exemption in PFRS 10 from presenting consolidated

financial statements applies to a parent entity that is a subsidiary of an investment entity that

measures all of its subsidiaries at fair value and that only a subsidiary of an investment entity

that is not an investment entity itself and that provides support services to the investment

entity parent is consolidated. The amendments also allow an investor (that is not an

investment entity and has an investment entity associate or joint venture), when applying the

equity method, to retain the fair value measurement applied by the investment entity associate

or joint venture to its interests in subsidiaries. These amendments are effective for annual

periods beginning on or after January 1, 2016. These amendments are not applicable to the

Company since none of the entities within the Company is an investment entity nor does the

Company have investment entity associates or joint venture.

PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements

(Amendments)

The amendments will allow entities to use the equity method to account for investments in

subsidiaries, joint ventures and associates in their separate financial statements. Entities

already applying PFRS and electing to change to the equity method in its separate financial

statements will have to apply that change retrospectively. For first-time adopters of PFRS

electing to use the equity method in its separate financial statements, they will be required to

apply this method from the date of transition to PFRS. The amendments are effective for

annual periods beginning on or after January 1, 2016, with early adoption permitted. These

amendments do not have any impact on the Company’s unaudited interim condensed

consolidated financial statements.

PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations

(Amendments)

The amendments to PFRS 11 require that a joint operator accounting for the acquisition of an

interest in a joint operation, in which the activity of the joint operation constitutes a business

must apply the relevant PFRS 3 principles for business combinations accounting. The

amendments also clarify that a previously held interest in a joint operation is not remeasured

on the acquisition of an additional interest in the same joint operation while joint control is

retained. In addition, a scope exclusion has been added to PFRS 11 to specify that the

amendments do not apply when the parties sharing joint control, including the reporting entity,

are under common control of the same ultimate controlling party.

- 3 -

The amendments apply to both the acquisition of the initial interest in a joint operation and the

acquisition of any additional interests in the same joint operation and are prospectively

effective for annual periods beginning on or after January 1, 2016, with early adoption

permitted. These amendments do not have any impact on the Company as there has been no

interest acquired in a joint operation during the period.

PAS 1, Presentation of Financial Statements - Disclosure Initiative (Amendments)

The amendments are intended to assist entities in applying judgment when meeting the

presentation and disclosure requirements in PFRS. They clarify the following:

That entities shall not reduce the understandability of their financial statements by either

obscuring material information with immaterial information; or aggregating material items

that have different natures or functions

That specific line items in the profit or loss and OCI and the statement of financial

position may be disaggregated

That entities have flexibility as to the order in which they present the notes to financial

statements

That the share of OCI of associates and joint ventures accounted for using the equity

method must be presented in aggregate as a single line item, and classified between those

items that will or will not be subsequently reclassified to profit or loss.

Early application is permitted and entities do not need to disclose that fact as the amendments

are considered to be clarifications that do not affect an entity’s accounting policies or

accounting estimates. These amendments do not have impact on the Company.

PFRS 14, Regulatory Deferral Accounts

PFRS 14 is an optional standard that allows an entity, whose activities are subject to

rate-regulation, to continue applying most of its existing accounting policies for regulatory

deferral account balances upon its first-time adoption of PFRS. Entities that adopt PFRS 14

must present the regulatory deferral accounts as separate line items on the statement of

financial position and present movements in these account balances as separate line items in

the statement of profit or loss and other comprehensive income. The standard requires

disclosures on the nature of, and risks associated with, the entity’s rate-regulation and the

effects of that rate-regulation on its financial statements. PFRS 14 is effective for annual

periods beginning on or after January 1, 2016. Since the Company is an existing PFRS

preparer and is not involved in any rate-regulated activities, this standard does not apply.

PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture - Bearer Plants

(Amendments)

The amendments change the accounting requirements for biological assets that meet the

definition of bearer plants. Under the amendments, biological assets that meet the definition

of bearer plants will no longer be within the scope of PAS 41. Instead, PAS 16 will apply.

After initial recognition, bearer plants will be measured under PAS 16 at accumulated cost

(before maturity) and using either the cost model or revaluation model (after maturity). The

amendments also require that produce that grows on bearer plants will remain in the scope of

PAS 41 measured at fair value less costs to sell. For government grants related to bearer

plants, PAS 20, Accounting for Government Grants and Disclosure of Government Assistance,

will apply. The amendments are retrospectively effective for annual periods beginning on or

- 4 -

after January 1, 2016, with early adoption permitted. These amendments do not have any

impact to the Company as the Company does not have any bearer plants.

PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Clarification of

Acceptable Methods of Depreciation and Amortization (Amendments)

The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern of

economic benefits that are generated from operating a business (of which the asset is part)

rather than the economic benefits that are consumed through use of the asset. As a result, a

revenue-based method cannot be used to depreciate property, plant and equipment and may

only be used in very limited circumstances to amortize intangible assets. The amendments are

effective prospectively for annual periods beginning on or after January 1, 2016, with early

adoption permitted. These amendments do not have any impact to the Company given that the

Company has not used a revenue-based method to depreciate its non-current assets.

Annual Improvements to PFRSs (2012-2014 cycle)

The Annual Improvements to PFRSs (2012-2014 cycle) are effective for annual periods beginning

on or after January 1, 2016 and do not have any impact on the Company. They include:

PFRS 5, Non-current Assets Held for Sale and Discontinued Operations - Changes in

Methods of Disposal

The amendment is applied prospectively and clarifies that changing from a disposal through

sale to a disposal through distribution to owners and vice-versa should not be considered to be

a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no

interruption of the application of the requirements in PFRS 5. The amendment also clarifies

that changing the disposal method does not change the date of classification.

PFRS 7, Financial Instruments: Disclosures - Servicing Contracts

PFRS 7 requires an entity to provide disclosures for any continuing involvement in a

transferred asset that is derecognized in its entirety. The amendment clarifies that a servicing

contract that includes a fee can constitute continuing involvement in a financial asset. An

entity must assess the nature of the fee and arrangement against the guidance in PFRS 7 in

order to assess whether the disclosures are required. The amendment is to be applied such that

the assessment of which servicing contracts constitute continuing involvement will need to be

done retrospectively. However, comparative disclosures are not required to be provided for

any period beginning before the annual period in which the entity first applies the

amendments.

PFRS 7 - Applicability of the Amendments to PFRS 7 to Condensed Interim Financial

Statements

This amendment is applied retrospectively and clarifies that the disclosures on offsetting of

financial assets and financial liabilities are not required in the condensed interim financial

report unless they provide a significant update to the information reported in the most recent

annual report.

- 5 -

PAS 19, Employee Benefits - Regional Market Issue Regarding Discount Rate

This amendment is applied prospectively and clarifies that market depth of high quality

corporate bonds is assessed based on the currency in which the obligation is denominated,

rather than the country where the obligation is located. When there is no deep market for high

quality corporate bonds in that currency, government bond rates must be used.

PAS 34, Interim Financial Reporting - Disclosure of Information ‘Elsewhere in the Interim

Financial Report’

The amendment is applied retrospectively and clarifies that the required interim disclosures

must either be in the interim financial statements or incorporated by cross-reference between

the interim financial statements and wherever they are included within the greater interim

financial report (i.e., in the management commentary or risk report).

4. Operating Segment Information

The Company’s operating segments are determined based on geographical segment, with each

segment representing a strategic business location that has similar economic and political

conditions, proximity of operations and specific risks associated with operations in a particular

area.

The Company’s identified reportable segments below are consistent with the segments reported to

the BOD, which is the Chief Operating Decision Maker (CODM) of the Company:

a. Leyte Geothermal Business Unit (LGBU) - This segment pertains to Leyte geothermal

production field and power plants. This includes projects in Tongonan, Mahanagdong, Upper

Mahiao, Malitbog, Unified Leyte Geothermal Energy, Inc. (ULGEI) and other projects in

Leyte Province.

b. Negros Island Geothermal Business Unit (NIGBU) - This segment refers to Southern Negros

geothermal production field and power plants. Power plants included in NIGBU are

Palinpinon I, Palinpinon II and Nasulo.

c. Bacon-Manito Geothermal Business Unit (BGBU) - This segment relates to Bacon-Manito

geothermal production field and power plants.

d. Mt. Apo Geothermal Business Unit (MAGBU) - This segment refers to Mt. Apo geothermal

production field and power plants.

e. Pantabangan/Masiway - This segment relates to Pantabangan-Masiway hydroelectric complex

located in Nueva Ecija Province.

f. Wind-Ilocos Norte Business Unit (WINBU) - This segment pertains to both wind and solar

projects commercially operating in Northern Luzon.

g. All others - refers to other renewable energy projects including foreign investments and Head

Office of the Company.

- 6 -

Management monitors the operating results of the business segments separately for the purpose of

making decisions about resources to be allocated and of assessing performance. Finance costs,

finance income, income taxes and other charges and income are managed on a group basis.

Segment performance is evaluated based on net income for the period and earnings before interest,

taxes, and depreciation and amortization (EBITDA). Net income for the period is measured

consistent with consolidated net income reported in the unaudited interim condensed consolidated

financial statements. EBITDA is calculated as revenues minus costs of sale of electricity and

general and administrative expenses, excluding non-cash items such as depreciation and

amortization, impairment losses on non-financial assets, and loss on disposal of property, plant

and equipment, among others.

- 7 -

Financial information on the operating

segments are summarized as follows: Pantabangan/

LGBU NIGBU BGBU MAGBU Masiway WINBU All others Total

For the Six-Month Period Ended

June 30, 2016

Segment revenue from external customers P=9,149,049,119 P=6,099,631,226 P=2,768,234,015 P=1,217,180,298 P=1,537,244,000 P=1,080,369,857 (P=466,500) P=21,851,242,015

Intersegment revenue (1,782,624,981) (1,974,801,390) (1,088,359,514) – – – – (4,845,785,885)

Segment revenue 7,366,424,138 4,124,829,836 1,679,874,501 1,217,180,298 1,537,244,000 1,080,369,857 (466,500) 17,005,456,130

Segment expenses (4,331,475,117) (1,646,064,045) (1,035,983,730) (858,301,994) (474,591,151) (669,613,145) – (9,016,029,182)

Unallocated expenses – – – – – – (115,621,272) (115,621,272)

Interest income 56,485,678 24,098,230 30,810,895 9,846,452 3,696,109 10,758,455 1,573 135,697,392

Interest expense (808,234,140) (420,695,911) (269,380,038) (164,496,594) (63,966,524) (407,260,191) (161,953,081) (2,295,986,479)

Other income (expense) - net 63,000,000 196,714,956 78,094,968 11,530,375 1,100,855 (15,107,489) (2,713,851) 332,619,814

Benefit from (provision for) income taxes (302,559,443) (286,616,923) (33,931,940) (14,908,902) (255,941,576) 1,389,089 53,459,873 (839,109,822)

Net income (loss) P=2,043,641,116 P=1,992,266,143 P=449,484,656 P=200,849,635 P=747,541,713 P=536,576 (P=227,293,258) P=5,207,026,581

EBITDA P=4,152,605,898 P=2,956,268,165 P=974,429,748 P=571,994,476 P=1,278,225,878 P=787,578,041 (P=466,500) P=10,720,635,705

Unallocated expenses (93,638,403)

P=10,626,997,303

Pantabangan/

LGBU NIGBU BGBU MAGBU Masiway WINBU All others Total

For the Six-Month Period Ended

June 30, 2015

Segment revenue from external customers P=8,154,998,921 P=6,427,116,388 P=3,088,506,354 P=1,165,933,091 P=1,208,676,865 P=921,159,368 P=762,548,161 P=21,728,939,148

Intersegment revenue (1,174,027,238) (2,369,056,096) (860,549,243) – – – (549,910,256) (4,953,542,833)

Segment revenue 6,980,971,683 4,058,060,292 2,227,957,111 1,165,933,091 1,208,676,865 921,159,368 212,637,905 16,775,396,315

Segment expenses (4,208,393,160) (1,878,346,391) (1,215,017,121) (806,276,322) (483,607,614) (520,324,719) – (9,111,965,327)

Unallocated expenses – – – – – – (463,062,443) (463,062,443)

Interest income 71,911,804 48,271,533 14,790,940 7,877,090 3,440,385 3,652,055 5,387 149,949,194

Interest expense (839,345,213) (519,605,499) (238,309,020) (157,325,956) (86,377,183) (374,384,101) (162,536,008) (2,377,882,980)

Other income (expense) - net 538,634,463 (64,381,323) 7,278,473 (63,537,194) (125,015) (65,501,687) 42,944,610 395,312,327

Benefit from (provision for) income taxes (265,375,636) (146,998,169) 15,692,932 (8,476,723) (162,249,985) 4,327,343 (4,166,199) (567,246,437)

Net income (loss) P=2,278,403,941 P=1,497,000,443 P=812,393,315 P=138,193,986 P=479,757,453 (P=31,071,741) (P=374,176,748) P=4,800,500,649

EBITDA P=3,768,623,129 P=2,628,818,160 P=1,264,677,655 P=579,838,965 P=940,610,130 P=734,184,110 P=212,637,906 P=10,129,390,055

Unallocated expenses (441,147,383)

P=9,688,242,672

- 8 -

LGBU NIGBU BGBU MAGBU WINBU

Pantabangan/ Masiway Elimination Total

As of and for the period ended

June 30, 2016

Segment assets P=79,578,152,617 P=22,411,586,659 P=13,173,816,379 P=9,891,360,175 P=20,642,473,849 P=7,613,142,336 (P=64,051,830,120) P=89,258,701,895 Unallocated corporate assets 46,508,467,202

Total assets P=135,767,169,097

Segment liabilities P=37,817,745,109 P=18,642,094,612 P=15,785,196,275 P=4,825,228,483 P=15,752,225,331 P=3,261,393,165 (P=64,502,399,812) P=31,581,483,163

Unallocated corporate liabilities 54,802,373,425

Total liabilities P=86,383,856,588

Capital expenditures P=2,346,452,556 P=145,911,572 P=96,107,143 P=89,318,756 P=28,223,147 P=17,143,120 P=– ₱2,723,156,294

Unallocated capital expenditures 342,660,481

Total capital expenditures P=3,065,816,775

Depreciation and amortization P=1,100,519,950 P=468,976,279 P=326,435,166 P=209,790,282 P=374,203,822 P=215,573,029 P=13,263,106 P=2,708,761,634

Unallocated depreciation and amortization 8,719,762

Total depreciation and amortization P=2,717,481,396

Other non-cash items P=17,136,927 P=8,526,095 P=4,103,812 P=3,325,890 P=2,617,507 P=– P=– P=35,710,231

Total other non-cash items P=35,710,231

Pantabangan / LGBU NIGBU BGBU MAGBU WINBU Masiway Elimination Total

As of and for the year ended December 31, 2015

Segment assets P=78,058,899,778 P=32,936,609,463 P=17,500,580,950 P=9,818,726,619 P=7,403,627,346 P=21,135,652,224 (P=74,253,610,830) P=92,600,485,550

Unallocated corporate assets 43,440,564,866

Total assets P=136,041,050,416

Segment liabilities P=36,810,240,513 P=30,236,009,726 P=19,286,579,171 P=4,802,875,925 P=3,453,122,772 P=15,519,077,210 (P=74,528,409,031) P=35,579,496,286

Unallocated corporate liabilities 53,231,873,863

Total liabilities P=88,811,370,149

Capital expenditure P=3,190,355,706 P=2,000,554,649 P=1,073,681,653 P=259,986,884 P=199,538,446 P=2,299,087,704 (P=225,590,000) P=8,797,615,042

Unallocated capital expenditure 1,660,293,121

Total capital expenditure P=10,457,908,163

Depreciation and amortization P=2,092,459,202 P=918,912,641 P=518,360,990 P=427,234,777 P=432,800,865 P=691,251,183 P=– P=5,081,019,658

Unallocated depreciation and amortization 74,817,039

Total depreciation and amortization P=5,154,836,697

Other non-cash items P=105,122,238 P=34,343,277 P=15,612,965 P=3,761,570 P=– P=8,834,795 P=– P=167,674,845

Unallocated non-cash items 23,465,622

Total other non-cash items P=191,140,467

- 9 -

The following table shows the Company’s reconciliation of EBITDA to the consolidated net

income for the six-month periods ended June 30, 2016 and 2015:

June 30,

2016

(Unaudited)

June 30,

2015

(Unaudited)

EBITDA P=10,626,997,303 P=9,688,242,672

Add (deduct):

Depreciation and amortization (Notes 9, 10,

15 and 16) (2,717,481,396) (2,464,699,297)

Interest expense (Note 17) (2,295,986,479) (2,377,882,980)

Provision for income tax (839,109,822) (567,246,437)

Proceeds from insurance claims 293,020,992 751,092,490

Interest income (Note 18) 135,697,392 149,949,194

Provision for doubtful accounts (Note 16) (44,891,208) (30,953,052)

Foreign exchange gains - net (Note 19) (15,960,178) (233,996,017)

Reversal of impairment of parts

and supplies inventories (Note 16) 9,180,977 7,778,222

Miscellaneous - net (Note 20) 55,559,000 (121,784,146)

Consolidated net income P=5,207,026,581 P=4,800,500,649

In the normal course of business, entities within the Company engage in intercompany sale and

purchase of steam and electricity. Intersegment revenues are all eliminated in consolidation.

Segment information is measured in conformity with the accounting policies adopted for

preparing and presenting the consolidated financial statements. Intersegment revenue are made at

normal commercial terms and conditions.

Unallocated expenses pertain to expenses of the corporate, technical and administrative support

groups while unallocated corporate assets and liabilities which include among others certain cash

and cash equivalents, property, plant and equipment, parts and supplies inventories, trade and

other payables and retirement and post-employment benefits, pertain to the Head Office and are

managed on a group basis.

5. Cash and Cash Equivalents

June 30,

2016

(Unaudited)

December 31,

2015

(Audited)

Cash on hand and in banks P=2,154,338,897 P=2,389,289,290

Cash equivalents 13,422,837,967 15,224,632,601

P=15,577,176,864 P=17,613,921,891

Cash in banks earn interest at the respective bank deposit rates. Cash equivalents consist of

money market placements, which are made for varying periods of up to three months depending

on the immediate cash requirements of the Company.

- 10 -

6. Trade and Other Receivables

June 30,

2016

(Unaudited)

December 31,

2015

(Audited)

Trade P=6,290,738,522 P=5,202,441,632

Others:

Loans and notes receivables 80,371,629 89,808,207

Non-trade accounts receivable 65,760,112 126,859,526

Advances to employees 31,807,291 30,135,380

Employee receivables 9,156,975 9,905,713

187,096,007 256,708,826

6,477,834,529 5,459,150,458

Less allowance for doubtful accounts 113,020,047 112,923,072

P=6,364,814,482 P=5,346,227,386

Trade receivables are noninterest-bearing and are generally collectible in 30 to 60 days. Majority

of the Company’s trade receivables arose from sale of electricity to National Power Corporation.

7. Parts and Supplies Inventories

June 30,

2016

(Unaudited)

December 31,

2015

(Audited)

Drilling tubular products and equipment spares P=1,506,599,482 P=1,465,329,233

Power plant spares 870,209,114 782,543,298

Pump, production/steam gathering system, steam

turbine, valves and valve spares 772,254,911 694,433,653

Electrical, cable, wire product and compressor

spares 103,600,021 90,825,523

Construction and hardware supplies, stationeries and

office supplies, hoses, communication and other

spares and supplies 73,033,479 65,697,140

Heavy equipment spares 55,740,809 59,415,737

Automotive, mechanical, bearing, seals, v-belt,

gasket, tires and batteries 49,382,584 35,132,285

Chemical, chemical products, gases and catalyst 31,798,112 36,621,297

Measuring instruments, indicators and tools, safety

equipment and supplies 21,683,309 21,945,193

P=3,484,301,821 P=3,251,943,359

- 11 -

8. Other current assets

June 30,

2016

(Unaudited)

December 31,

2015

(Audited)

Debt service reserve account (Note 13) P=1,396,629,283 P=1,324,249,208

Tax credit certificates 301,591,775 279,694,215

Withholding tax certificates 238,217,488 157,896,581

Prepaid expenses 262,717,993 450,489,959

Advances to contractors 46,099,363 49,716,522

Others – 1,372,214

P=2,245,255,902 P=2,263,418,699

- 12 -

9. Property, Plant and Equipment

June 30, 2016 (Six Months)

Land Power Plants

Fluid Collection

and Recycling

System (FCRS)

and Production

Wells

Buildings,

Improvements

and Other

Structures

Exploration,

Machinery and

Equipment

Transportation

Equipment

Furniture,

Fixtures and

Equipment

Laboratory

Equipment

Construction

in Progress Total

Cost

Balances at January 1 P=624,552,251 P=64,510,830,206 P=33,259,806,881 P=4,543,063,384 P=4,285,760,412 P=163,740,940 P=1,340,722,365 P=811,692,784 P=10,002,975,160 P=119,543,144,383

Additions 45,369,199 15,061,356 15,464,277 2,360,823 9,752,086 3,792,857 18,264,950 42,670,759 2,913,080,468 3,065,816,775

Disposals/retirements – – – – (149,240) (8,961,076) (29,029,393) (102,693) – (38,242,402)

Reclassifications (8,688,492) 292,413,267 1,776,488,655 282,368,171 869,287 2,310,291 31,235,321 4,953,414 (2,524,984,111) (143,034,197)

Balances at June 30 661,232,958 64,818,304,829 35,051,759,813 4,827,792,378 4,296,232,545 160,883,012 1,361,193,243 859,214,264 10,391,071,517 122,427,684,559

Accumulated Depreciation,

Amortization and Impairment

Balances at January 1 17,627,581 15,195,703,581 10,507,769,251 1,172,790,122 2,737,318,225 92,947,565 788,132,389 439,794,568 23,322,433 30,975,405,715

Depreciation and amortization for the

period

– 1,685,422,265 541,651,668 137,911,016 131,830,535 11,523,042 81,245,984 39,784,452

– 2,629,368,962 Disposals/Retirement – – – – (79,071) (6,868,228) (14,711,037) (95,507) – (21,753,843)

Reclassifications – (10,719,477) 298,610 7,508,687 16,820,636 546,910 296,977 424,055 – 15,176,398

Balances at June 30 17,627,581 16,870,406,369 11,049,719,529 1,318,209,825 2,885,890,325 98,149,289 854,964,313 479,907,568 23,322,433 33,598,197,232

Net Book Value P=643,605,377 P=47,947,898,460 P=24,002,040,284 P=3,509,582,553 P=1,410,342,220 P=62,733,723 P=506,228,930 P=379,306,696 P=10,367,749,084 P=88,829,487,327

- 13 -

December 31, 2015 (One Year)

Land Power Plants

FCRS and

Production Wells

Buildings,

Improvements

and Other

Structures

Exploration,

Machinery and

Equipment

Transportation

Equipment

Furniture,

Fixtures and

Equipment

Laboratory

Equipment

Construction

in Progress Total

Cost

Balances at January 1 P=589,066,312 P=59,577,057,719 P=30,192,192,743 P=4,239,601,990 P=4,251,389,923 P=151,535,137 P=1,281,953,440 P=706,277,459 P=8,038,618,446 P=109,027,693,169

Additions 35,485,939 1,602,819,287 191,722,229 13,313,740 70,476,664 26,915,182 50,514,107 95,540,309 8,371,120,706 10,457,908,163

Disposals/retirement – (98,704,767) – (331,313) (20,121,483) (18,576,376) (17,163,789) (1,391,692) – (156,289,420)

Reclassifications – 3,429,657,967 2,875,891,909 290,478,967 (15,984,692) 3,866,997 25,418,607 11,266,708 (6,406,763,992) 213,832,471

Balances at December 31 624,552,251 64,510,830,206 33,259,806,881 4,543,063,384 4,285,760,412 163,740,940 1,340,722,365 811,692,784 10,002,975,160 119,543,144,383

Accumulated Depreciation,

Amortization and Impairment

Balances at January 1 17,627,581 12,069,397,981 9,457,338,583 866,221,681 2,475,756,340 81,036,916 622,573,853 364,215,824 – 25,954,168,759 Depreciation and amortization for the year – 3,172,391,661 1,050,430,668 304,253,687 304,370,857 24,970,326 173,166,380 76,845,708 – 5,106,429,287

Disposals/retirements – (68,346,907) – (177,507) (16,533,475) (13,113,088) (9,248,861) (1,380,497) – (108,800,335)

Reclassifications – 22,260,846 – 2,492,261 (26,275,497) 53,411 1,641,017 113,533 – 285,571

Reversal of previously impaired property,

plant and equipment – – – – – – – – 23,322,433 23,322,433

Balances at December 31 17,627,581 15,195,703,581 10,507,769,251 1,172,790,122 2,737,318,225 92,947,565 788,132,389 439,794,568 23,322,433 30,975,405,715

Net Book Value P=606,924,670 P=49,315,126,625 P=22,752,037,630 P=3,370,273,262 P=1,548,442,187 P=70,793,375 P=552,589,976 P=371,898,216 P=9,979,652,727 P=88,567,738,668

- 14 -

Estimated Rehabilitation and Restoration Costs

FCRS and production wells include the estimated rehabilitation and restoration costs of the

Company’s steam fields and power plants’ contract areas at the end of the contract period. These

were based on technical estimates of probable costs, which may be incurred by the Company in

the rehabilitation and restoration of the said steam fields and power plants’ contract areas from

2031 up to 2044, discounted using the Company’s risk-adjusted rate.

Similarly, the Company estimated a provision related to the removal and disposal of all wind farm

materials, equipment and facilities from the contract areas at the end of contract period. The

amount of provision was recorded as part of the costs of power plants.

These costs, net of accumulated amortization, amounted to P=677.3 million and P=682.3 million as

of June 30, 2016 and December 31, 2015, respectively. As of June 30, 2016 and

December 31, 2015, the provision for rehabilitation costs recognized under “Provisions and other

long-term liabilities” amounted to P=1,090.9 million and P=1,058.0 million, respectively.

Collection of liquidated damages from Weir Engineering Services Limited (Weir)

On February 2, 2016, BGI received the International Court of Arbitration of the International

Chamber of Commerce (ICC) Tribunal’s Phase 1 Award dated February 1, 2016, wherein Weir

was ordered to pay BGI US$4.4 million pursuant to the favorable determination by the Engineer,

Parsons Brinckerhoff Philippines Inc. that sums are owed by Weir to BGI under the Contract for

Works - Completion of Works to Steam Turbine and Generator of Units 1, 2 and 3 dated March

29, 2012. Weir was also ordered to reimburse BGI for the legal costs incurred amounting to

US$0.9 million.

Weir has paid US$4.4 million (P=209.9 million) and US$0.9 million (P=42.3 million) on

February 9, 2016 and February 23, 2016, respectively.

On June 27, 2016, all claims arising under the contract between BGI and Weir have been settled

satisfactorily and that pursuant to this, BGI has agreed to return the US$1.9 million

(P=88.9 million) to Weir, and that BGI and Weir have agreed to jointly take steps to cause the

discontinuance of the arbitration.

The net amount received of US$2.5 million (P=122.0 million) for the liquidated damages was

accounted as reduction from property, plant, and equipment.

- 15 -

Depreciation and Amortization

Details of depreciation and amortization charges recognized in the unaudited interim consolidated

statements of income are shown below:

June 30,

2016

(Unaudited)

June 30,

2015

(Unaudited)

Property, plant and equipment P=2,629,368,962 P=2,400,131,359

Intangible assets (Note 10) 88,112,434 64,567,938

P=2,717,481,396 P=2,464,699,297

Costs of sales of electricity (Note 15) P=2,568,757,580 P=2,335,845,028

General and administrative (Note 16) 148,723,816 128,854,269

P=2,717,481,396 P=2,464,699,297

10. Goodwill and Intangible Assets

June 30, 2016 (Six Months)

Goodwill Water Rights

Other Intangible

Assets Total

Cost

Balances at January 1 P=2,651,268,704 P=2,404,778,918 P=203,718,042 P=5,259,765,664

Additions – – 2,830,925 2,830,925

Balances at June 30 P=2,651,268,704 P=2,404,778,918 P=206,548,967 P=5,262,596,589

Accumulated Amortization

Balances at January 1 – 877,744,306 92,761,024 970,505,330

Amortization (Notes 15 and 16) – 48,095,578 40,016,856 88,112,434

Balances at June 30 – 925,839,884 132,777,880 105,861,7765

Net Book Value P=2,651,268,704 P=1,478,939,034 P=73,771,086 P=4,203,978,824

2015

Goodwill Water Rights

Other

Intangible

Assets Total

Cost

Balances at January 1 P=2,651,447,390 P=2,404,778,918 P=312,519,889 P=5,368,746,197

Additions – – 14,118,479 14,118,479

Reclassifications (Note 9) – – (122,920,326) (122,920,326)

Foreign exchange translation

adjustment (178,686) – – (178,686)

Balances at December 31 2,651,268,704 2,404,778,918 203,718,042 5,259,765,664

Accumulated Amortization

Balances at January 1 – 781,553,149 44,639,260 826,192,409

Amortization (Notes 15 and 16) – 96,191,157 48,121,764 144,312,921

Balances at December 31 – 877,744,306 92,761,024 970,505,330

Net Book Value P=2,651,268,704 P=1,527,034,612 P=110,957,018 P=4,289,260,334

Water rights are amortized using the straight-line method over 25 years, which is the term of the

agreement with National Irrigation Administration. The remaining amortization period of water

rights is 15.4 years as of June 30, 2016.

Other intangible assets pertain to the Company’s accounting software.

- 16 -

11. Other Noncurrent Assets

June 30,

2016

(Unaudited)

December 31,

2015

(Audited)

Input value added tax (VAT) P=4,173,688,227 P=4,471,008,284

Tax credit certificates 2,634,775,274 2,655,267,017

Long-term receivables 141,789,764 127,074,578

Prepaid expenses 634,583,942 534,594,491

Special deposits and funds 130,071,375 117,103,382

Others 1,421,673,760 1,112,461,952

9,136,582,342 9,017,509,704

Less allowance for doubtful accounts 446,867,659 433,294,147

P=8,689,714,683 P=8,584,215,557

Provision for doubtful accounts pertaining to input VAT and long-term receivables amounted to

P=44.89 million and P=31.6 million for the six-month periods ended June 30, 2016 and 2015,

respectively

(Note 16).

Others

Others include capital expenditures funding made by the Company to Enerco amounting to

P=1,229.4 million and P=947.1 million as of June 30, 2016 and December 31, 2015, respectively.

The Company intends to capitalize these capital expenditures funding against the shares

subscription once the Company decides to continue the Mariposa Project which is dependent on

the results of geological and other technical studies on the project.

12. Trade and Other Payables

June 30,

2016

(Unaudited)

December 31,

2015

(Audited)

Accounts payable:

Third parties P=-4,719,120,373 P=6,106,304,175

Related parties (Note 22) 1,146,989,138 1,972,851,687

Accrued interest on long-term debts 895,656,474 899,937,453

Withholding and other taxes payable 256,337,314 385,542,255

Government share payable 62,567,328 58,778,040

Deferred credits 25,004,390 48,755,834

SSS and other contributions payable 4,501,037 4,193,828

Other payables 1,868,739,444 513,575,479

P=8,978,915,498 P=9,989,938,751

Accounts payable are noninterest-bearing and are normally settled on a 30 to 60 days term.

The accrued interest represents interest accrual on outstanding loans.

“Other payables” account include mainly provision for shortfall generation.

- 17 -

13. Long-term Debts

Creditor/Project Maturities Interest Rate

June 30, 2016

(Unaudited)

December 31, 2015 (Audited)

US$300.0 Million Notes January 20, 2021 6.5% P=14,031,504,179 P=14,023,483,523

Peso Public Bonds

Series 2 - P=3.5 billion December 4, 2016 9.3327% 3,495,902,327 3,491,326,269

International Finance Corporation

(IFC)

IFC 1 - P=4.1 billion 2012-2033 7.4% per annum for the

first five years subject to

repricing for another

five to 10 years

2,367,203,004 2,535,091,675

IFC 2 - P=3.3 billion 2013-2025 6.6570% 2,349,360,773 2,471,717,976

Fixed Rate Note Facility (FXCN)

P=4.0 billion 2012-2022 6.6108% per annum

from April 4, 2012 to April 30, 2015 and

5.25% from April 30,

2015 until maturity

3,670,634,269 3,737,122,040

P=3.0 billion 2012-2022 6.6173% per annum

from April 4, 2012 to

April 30, 2015 and 5.25% from April 30,

2015 until maturity

2,751,969,014 2,801,750,828

Refinanced Syndicated Term Loan

US$175.0 million 2013 - 2017 LIBOR plus a margin

of 175 basis points 4,513,996,049 4,916,764,416

2013 Peso Fixed-Rate Bonds P=4.0 billion May 3, 2023 4.7312% 3,961,766,613 3,959,423,253

P=3.0 billion May 3, 2020 4.1583% 2,946,635,328 2,943,911,465

US$80 Million Term Loan June 21, 2018 1.8% margin plus LIBOR

3,389,423,339 3,568,385,220

Commercial Debt Facility US$37.5 Million October 23, 2029 2% margin plus

LIBOR 1,638,312,883 1,675,035,601

ECA Debt Facility US$150 Million October 23, 2029 2.35% margin plus LIBOR

P=6,495,359,278 P=6,638,811,162

Commercial Debt Facility P=5.6 Billion October 23, 2029 2% + PDST-F rate 5,277,214,194 5,398,440,226

P=291.2 Million Term Loan December 17, 2030 5.75% 289,058,798 288,932,892

Restructured Philippine National Bank

(PNB) and Allied Bank Peso Loan

November 7, 2022 1.5% + PDST-F rate

or 1.0% + BSP overnight rate

2,996,250,000 3,187,500,000

P=8.5 Billion Term Loan March 6, 2022 5.25% 7,421,065,630 7,922,729,666

P=5.0 Billion Term Loan September 9, 2025 5.25% 4,656,488,083 4,951,167,360

Total 72,252,143,761 74,511,593,572

Less current portion 11,316,843,873 7,860,904,237

Noncurrent portion P=60,935,299,888 P=66,650,689,335

The Company’s foreign-currency denominated long-term debts were translated into Philippine

pesos based on the prevailing foreign exchange rates at the date of the unaudited interim

consolidated statement of financial position (USD1= P=47.06 on June 30, 2016 and

USD1= P=47.06 on December 31, 2015).

EDC Parent Loan

In June 2016, the Parent Company executed a loan agreement with Union Bank of the Philippines

for the total amount of P=5.0 billion.

- 18 -

14. Dividends

Parent Company

On March 9, 2016, EDC declared cash dividend amounting to P=2.6 billion to its common

shareholders and P=7.5 million to its preferred shareholder of record as of March 23, 2016 payable

on or before April 12, 2016.

First Gen Hydro

On January 20, 2016, FG Hydro paid cash dividend amounting to P=142.8 million to its

non-controlling common stockholder.

15. Costs of Sale of Electricity

June 30,

2016

(Unaudited)

June 30,

2015

(Unaudited)

Depreciation and amortization P=2,568,757,580 P=2,335,845,028

Personnel costs 1,162,007,127 1,116,240,407

Rental, insurance and taxes 807,378,619 608,887,437

Purchased services and utilities (Note 22) 891,554,222 1,247,138,541

Repairs and maintenance 538,898,872 542,665,191

Parts and supplies issued 242,704,699 371,185,951

Government share 132,077,490 133,104,635

Business and related expenses 40,637,529 73,280,023

P=6,384,016,138 P=6,428,347,213

16. General and Administrative Expenses

June 30,

2016

(Unaudited)

June 30,

2015

(Unaudited)

Personnel costs P=1,093,476,030 P=1,030,915,152

Purchased services and utilities 964,300,844 1,090,287,949

Rental, insurance and taxes 250,348,268 425,221,692

Depreciation and amortization 148,723,816 128,854,269

Business and related expenses 146,367,751 310,738,976

Repairs and maintenance 57,952,357 62,270,776

Parts and supplies issued 50,755,019 75,216,913

Provision for doubtful accounts (Note 11) 44,891,208 30,953,052

Reversal of impairment of parts and supplies

inventories (9,180,977) (7,778,222)

P=2,747,634,316 P=3,146,680,557

- 19 -

17. Interest Expense

June 30,

2016

(Unaudited)

June 30,

2015

(Unaudited)

Interest on long-term debts including amortization

of transaction costs (Note 13) P=2,268,964,874 P=2,356,649,157

Interest accretion on provision for rehabilitation

and restoration costs 23,116,051 17,328,270

Interest on liability from litigation 3,905,554 3,905,553

P=2,295,986,479 P=2,377,882,980

18. Interest Income

June 30,

2016

(Unaudited)

June 30,

2015

(Unaudited)

Interest on placements (Note 5) P=127,463,429 P=141,920,323

Interest on overdue accounts/others 6,905,433 2,831,019

Interest on savings/current accounts 595,695 4,472,047

Others 732,835 725,805

P=135,697,392 P=149,949,194

19. Foreign Exchange Gains (Losses) - net

June 30,

2016

(Unaudited)

June 30,

2015

(Unaudited)

Realized foreign exchange losses - net (P=18,369,047) (P=16,116,289)

Unrealized foreign exchange gains - net 2,408,869 250,112,306

(P=15,960,178) P=233,996,017

This account pertains mainly to foreign exchange adjustments on repayment of loans and

restatement of outstanding balances of foreign currency-denominated loans, short-term placements

and cash in banks.

- 20 -

20. Miscellaneous Income

June 30,

2016

(Unaudited)

June 30,

2015

(Unaudited)

Derivative gains - net P=51,900,600 P=–

Mark to market gain - financial asset at fair value

through profit or loss 43,217,858 404,429

Input VAT claims written-off (35,644,993) (87,111,648)

Gain on sale of property, plant and equipment

(Note 9) 128,755 371,246

Others (4,043,220) (35,448,173)

P=55,559,000 (P=121,784,146)

21. Earnings Per Share

The earnings per share amounts were computed as follows:

June 30,

2016

(Unaudited)

June 30,

2015

(Unaudited)

(a) Net income attributable to equity shareholders of

the Parent Company P=4,908,162,838 P=4,608,556,482

Less dividends on preferred shares 7,500,000 7,500,000

(b) Net income attributable to common shareholders

of the Parent Company P=4,900,662,838 P=4,601,056,482

(c) Weighted average number

of common shares outstanding 18,735,122,527 18,750,000,000

Basic/diluted earnings per share (b/c) P=0.262 P=0.245

The Parent Company does not have dilutive common stock equivalents as of June 30, 2016 and

2015.

22. Related Party Transactions

a. First Balfour, Inc. (First Balfour)

Following the regular bidding process, the Company awarded to First Balfour procurement

contracts of various structural and mechanical/piping works.

First Balfour is a wholly-owned subsidiary of First Holdings.

b. First Gen

First Gen provides financial consultancy, business development and other related services to

the Parent Company under a consultancy agreement beginning September 1, 2008. Such

agreement is for a period of three years up to August 31, 2011. Under the terms of the

- 21 -

agreement, billings for consultancy services shall be P=8.7 million per month plus applicable

taxes. This was increased to P=11.8 million effective September 2009 to cover the cost of

additional officers and staff assigned to the Parent Company. The consultancy agreement was

subsequently extended until December 31, 2016.

c. Other Related Parties

In the ordinary course of business, the Company avails of or grants advances from/to its

related parties for working capital requirements. Such advances are payable/collectible within

12 months and are non-interest bearing.

Following are the other related parties identified by the Company:

First Gas Holdings Corporation and First Gas Power Corporation are subsidiaries of First

Gen.

First Philippine Holdings, parent company of First Gen, is a subsidiary of Lopez Holdings

Corporation (formerly Benpres Holdings Corporation).

Bayan Telecommunications Inc. (Bayantel) is 97.3%-owned by Bayantel Holdings on

which Lopez Holdings Corporation has 47.3% ownership.

Lopez Holdings Corporation has 56.5% interest on ABS-CBN Corp. ABS-CBN

Publishing, Inc. is a wholly owned subsidiary of ABS-CBN Corp, ABS-CBN Foundation.

Rockwell Land Corporation is 86.58%-owned by First Philippine Holdings.

FEDCOR is a wholly-owned subsidiary of First Philippine Holdings.

Adtel Inc. is a wholly-owned subsidiary of Lopez, Inc.

First Philec Manufacturing Technologies Corp., Securities Transfer Services, Inc. and First

Philippine Realty Corp. (FPRC), formerly known as INAEC Development Corp, are

wholly-owned subsidiaries of First Philippine Holdings.

First Gen Energy Solutions (First GES) is a wholly-owned subsidiary of First Gen.

Thermaprime Well Services, Inc. (Thermaprime) is a subsidiary of First Balfour, a

wholly owned subsidiary of First Holdings. Thermaprime provides drilling services such

as, but not limited to, rig operations, rig maintenance, well design and engineering.

- 22 -

Following are the amounts of transactions for the six-month periods ended June 30, 2016 and

2015 and outstanding balances as of June 30, 2016 and December 31, 2015 with entities under

common control:

Balances

Transactions for the six-month period

ended June 30

(Unaudited)Transactions for the three-

month period ended March 31

(Unaudited)

June 30

UnauditedMarch

31,

2016

Unaudited

December 31

AuditedDecembe

r 31, 2015

Audited

Related Party Nature of Transaction Terms 2016 2015 2016 2015

Entities under common

control

Due from related parties

First Gen Interest-free advances Unsecured and will be

settled in cash

P=265,800,000 P=– P=179,855,238 P=–

Balances

Transactions for the six-month period

ended June 30

(Unaudited)Transactions for the three-

month period ended March 31

(Unaudited)

June 30

UnauditedMarch

31,

2016

Unaudited

December 31

AuditedDecembe

r 31, 2015

Audited

Related Party Nature of Transaction Terms 2016 2015 2016 2015

Trade and other

receivables (Note 6)

First GES Sale of electricity

Unsecured and will be

settled in cash P=135,668,506 P=174,852,505 P=29,845,902 P=40,330,538

Due to related parties

First Gen Consultancy fee Unsecured and will be


Dividend - do - 138,849,578 – – –

Interest-free advances - do - 13,803,400 11,928,033 687,411 4,490,831

FGP Corp - do - - do - 227,805 43,300 – 2,133

First Gas Power Corporation - do - - do - – 60,880 – 48,435

P=347,151,887 P=194,460,448 P=32,911,455 P=101,769,634

Trade and other payables

(Note 12)

Thermaprime Drilling and other related

services

Unsecured and will be


First Balfour Inc. Steam augmentation and other

services

- do -

725,513,144 1,362,391,648 943,522,669 1,356,167,441

Rockwell Land Corporation -do - - do - 26,264,981 80,810 26,264,981 –

First Gen Energy Solutions,

Inc.

- do - - do - 22,647,656 10,914,281 – –

Bayantel - do - - do - 8,155,500 9,757,876 5,605,372 1,687,740

Adtel - do - - do - 3,821,098 232,943 (2,145,118) 1,900,142

ABS-CBN Publishing, Inc. - do - - do - 823,036 3,600 841,600

FPRC - do - - do - 509,224 1,338,633 27,693

Skycable do - do - 361,607 – 1,217,411 186,830

First Philec Manufacturing

Technologies Corp Purchase of services and utilities

- do -

44,196 351,830 9,117,293 9,117,293

FEDCOR - do - - do - – – 358,000 358,000

First Philippine Industrial

Corp - do -

- do -

– 3,654 3,654 3,654

ABS-CBN Foundation - do - - do - – – 63,000 63,000

ABS-CBN Corp. - do - - do - – – 26,518

P=1,612,109,907 P=2,220,995,696 P=1,146,989,138 P=1,972,851,687

Entities under common control are indirect subsidiaries of Lopez, Inc., the Company’s ultimate

parent company. The sales to and purchases from related parties are made at normal commercial

terms and conditions.

The Parent Company issued letters of credit amounting to US$80.0 million in favor of its

subsidiary, EDC Chile Limitada, as evidence of the Parent Company’s financial support for EDC

Chile Limitada’s participation in the bids for geothermal concession areas by the Chilean

Government.

The Company also issued letters of credit in favor of its subsidiaries in Peru, namely, EDC

Quellaapacheta and EDC Energia Verde Peru SAC at US$0.3 million each as evidence of the

- 23 -

Parent Company’s financial support for the geothermal authorizations related to the exploration

drilling activities of the said entities. Except for the letters of credit issued by the Company in

favor of EDC Chile Limitada, EDC Quellaapacheta and EDC Energia Verde Peru SAC as

mentioned above, there were no guarantees that have been given to or/and received from any other

related party in 2016 and 2015.

The Company has not recognized any impairment loss on trade and other receivables relating to

intercompany transactions as of June 30, 2016 and December 31, 2015.

23. Financial Risk Management Objectives and Policies

The Company’s financial instruments consist mainly of cash and cash equivalents, AFS

investments, trade receivables, trade payables and long-term debts. The main purpose of these

financial instruments is to finance the Company’s operations and accordingly manage its exposure

to financial risks. The Company has various other financial assets and liabilities such as trade

receivables, trade payables and other liabilities, which arise directly from operations.

The Company classifies its financial instruments in the following categories:

June 30, 2016 (Unaudited)

Loans and

Receivables

AFS

Investments

Liabilities at

Amortized

Cost

Financial

Assets at

Fair Value

through

Profit or

Loss

Derivatives

Designated as

Cash Flow

Hedges Total

(In Thousand Pesos)

Financial Assets

Cash and cash equivalents P=15,577,177 P=− P=− P=− P=− P=15,577,177

Trade receivables 6,177,718 − − − − 6,177,718

Non-trade receivables 65,757 − − − − 65,757

Loans and notes

receivables 80,372 − − − − 80,372

Employee receivables 9,157 − − − − 9,157

Due from a related party 179,855 − − − − 179,855

Long-term receivables 40,524 − − − − 40,524

Debt service reserve

account 1,396,629 − − − − 1,396,629

AFS - debt investments − 133,944 − − − 133,944

AFS - equity investments − 437,286 − − − 437,286

Financial assets at FVPL − − − 1,057,511 − 1,057,511

Derivative assets − − − − 354,357 354,357

Total financial assets P=23,527,189 P=571,230 P=− P=1,057,511 P=354,357 P=25,510,287

(In Thousand Pesos)

Financial Liabilities

Accounts payable* P=5,805,054 P=− P=− P=− P=− P=5,805,054

Accrued interest on

long-term debts − − 895,656 − − 895,656

Other payables** − − 7,383 − − 7,383

Due to related parties − − 32,911 − − 32,911

Long-term debts − − 72,252,144 − − 72,252,144

Derivative liabilities − − − − 584,259 584,259

Total financial assets P=5,805,054 P=− P=73,188,094 P=− P=584,259 P=79,577,407

*excluding statutory liabilities

**excluding non-financial liabilities.

- 24 -


Loans and

Receivables

AFS

Investments

Liabilities at

Amortized

Cost

Financial

assets at

FVPL

Derivatives

Designated as

Cash Flow

Hedges Total

(In Thousand Pesos)

Financial Assets

Cash and cash equivalents P=17,613,922 P=− P=− P=− P=− P=17,613,922

Trade receivables 5,089,519 − − − − 5,089,519

Non-trade receivables 126,860 − − − − 126,860

Loans and notes

receivables 89,808 − − − − 89,808

Employee receivables 9,906 − − − − 9,906

Long-term receivables 32,685 − − − − 32,685

Debt service reserve account 1,324,249 − − − − 1,324,249

AFS - debt investments − 258,699 − − − 258,699

AFS - equity investments − 306,027 − − − 306,027

Financial assets at FVPL − − − 1,014,293 − 1,014,293

Derivative assets − − − − 351,612 351,612

Total financial assets P=24,286,949 P=564,726 P=− P=1,014,293 P=351,612 P=26,217,580

(In Thousand Pesos)


Accounts payable* P=− P=− P=8,034,016 P=− P=− P=8,034,016

Accrued interest on

long-term debts − − 899,937 − − 899,937

Other payables** − − 17,874 − − 17,874

Due to related parties − − 101,770 − − 101,770

Long-term debts − − 74,511,594 − − 74,511,594

Derivative liabilities − − − − 202,469 202,469

Total financial assets P=− P=− P=83,565,191 P=− P=202,469 P=83,767,660

*excluding statutory liabilities to the Government **excluding non-financial liabilities.

The following tables show the fair value information of financial instruments classified under

loans and receivables, financial assets at FVPL, AFS investments, and derivatives designated as

cash flow hedges and analyzed by sources of inputs on fair valuation as follows:

Quoted prices in active markets for identical assets or liabilities (Level 1);

Those involving inputs other than quoted prices included in Level 1 that are observable for the

asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and

Those with inputs for the asset or liability that are not based on observable market data

(unobservable inputs) (Level 3)


Carrying

Amounts

Fair Values

Total Level 1 Level 2 Level 3

Financial Assets

Loans and receivables:

Long-term receivables P=40,524,245 P=38,396,797 P=− P=− P=38,396,797

Financial assets at FVPL 1,057,510,950 1,057,510,950 − 1,057,510,950 −

AFS investments:

Debt investments 133,943,580 133,943,580 133,943,580 − −

Equity investments 437,286,466 437,286,466 437,286,466 − −

(Forward)

- 25 -


Carrying

Amounts

Fair Values


Derivative assets designated as

cash flow hedges:

Derivative assets 354,356,884 354,356,884 − 354,356,884 −


Financial liabilities at amortized

cost:

Long-term debts P=72,252,143,761 P=84,341,414,489 P=− P=− P=84,341,414,489

Derivative Liability:

Derivative liabilities

designated as cash

flow hedges 584,258,778 584,258,778 − 584,258,778 −


Carrying

Amounts

Fair Values


Financial Assets


Long-term receivables P=32,685,410 P=30,285,275 P=− P=− P=30,285,275

Financial assets at FVPL 1,014,293,092 1,014,293,092 − 1,014,293,092 −

AFS investments:

Debt investments 258,699,227 258,699,227 258,699,227 − −

Equity investments 306,027,326 306,027,326 306,027,326 − −

Derivative assets designated as

cash flow hedges:

Derivative assets 351,612,199 351,612,199 − 351,612,199 −


Financial liabilities at amortized

cost:

Long-term debts 74,511,593,572 84,805,828,947 − − 84,805,828,947

Derivative Liablitiy:

Derivative liabilities

designated as cash flow

hedges 202,469,437 202,469,437 − 202,469,437 −

Due to relatively short maturity, ranging from one to three months, carrying amounts approximate

fair values for cash in banks, trade and other receivables, loans and notes receivables, due to

related parties and trade and other payables.

The methods and assumptions used by the Company in estimating the fair value of financial

instruments are:

Long-term Receivables

The fair value of long-term receivables was computed by discounting the expected cash flow using

the applicable rates of 2.73% and 3.89% as at June 30, 2016 and December 31, 2015.

AFS Investment

Fair values of quoted debt and equity securities are based on quoted market prices. For equity

investments that are not quoted, the investments are carried at cost less allowance for impairment

losses due to the unpredictable nature of future cash flows and the lack of suitable methods of

arriving at a reliable fair value.

- 26 -

Financial assets at FVPL

The fair values of financial assets at FVPL are measured using inputs that are observable at the

reporting date such as government and corporate securities listed in the Philippine Dealing and

Exchange Corporation provided by the counterparty bank.

Derivative assets and liabilities designated as cash flow hedges

The fair values of derivative assets and liabilities designated as cash flow hedges are based on

quotations provided by the counterparty banks.

Long-term Debts

The fair values for the Company’s long-term debts are estimated using the discounted cash flow

methodology with the applicable rates ranging from 1.75% to 21.58% and 1.75% to 11.27% as at

June 30, 2016 and December 31, 2015, respectively.

For the six-month period ended June 30, 2016, and for the year ended December 31, 2015 there

were no transfers between Level 1 and Level 2 fair value measurements and no transfers into and

out of Level 3 fair value measurements.

Credit Risk

The Company’s geothermal and power generation business trades with only one major customer,

NPC, a government-owned-and-controlled corporation. Any failure on the part of NPC to pay its

obligations to the Company would significantly affect the Company’s business operations. As a

practice, the Company monitors closely its collection from NPC and charges interest on delayed

payments following the provision of its respective SSAs and PPAs. Receivable balances are

monitored on an ongoing basis to ensure that the Company’s exposure to bad debts is not

significant. The maximum exposure of trade receivable is equal to its carrying amount.

With respect to the credit risk arising from other financial assets of the Company, which comprise

of cash and cash equivalents excluding cash on hand, financial assets at FVPL, other receivables

and AFS investments, the Company’s exposure to credit risk arises from default of the

counterparty, with a maximum exposure equal to the carrying amount of these instruments before

taking into account any collateral and other credit enhancements.

The following tables below show the aging analysis of the Company’s financial assets as of

June 30, 2016 and December 31, 2015:


Past Due but Not Impaired

Neither Past

Due nor

Impaired

Less than

30 Days

31 Days

to 1 Year

Over 1 Year

up to

3 Years

Over

3 Years

Past

Due and

Impaired Total

(In Thousand Pesos)


Cash and cash

equivalents

(excluding cash on

hand) P=15,433,802 P=− P=− P=− P=− P=− P=15,433,802

Trade receivables 3,803,382 441,574 864,809 1,067,952 − 113,020 6,290,737

Due from a related

party 179,855 − − − − − 179,855

Loans and notes

receivables 80,372 − − − − − 80,372

Employee receivables 9,157 − − − − − 9,157

Non-trade receivables 24,626 10,061 3,101 27,969 − − 65,757

(Forward)

- 27 -



Neither Past

Due nor

Impaired

Less than

30 Days

31 Days

to 1 Year

Over 1 Year

up to

3 Years

Over

3 Years

Past

Due and

Impaired Total

(In Thousand Pesos)

Long-term receivables 40,524 − − − − 101,266 141,790


account 1,396,629 − − − − − 1,396,629

AFS investments:

Debt investments 133,944 − − − − − 133,944

Equity investments 437,286 − − − − − 437,286

Financial assets at FVPL 1,057,511 − − − − − 1,057,511

Derivative assets

designated as cash

flow hedges:

Derivative assets 354,357 − − − − − 354,357

Total P=22,951,445 P=451,635 P=867,910 P=1,095,921 P=− P=214,286 P=25,581,197



Neither Past

Due nor

Impaired

Less than

30 Days

31 Days

to 1 Year

Over 1 Year

up to

3 Years

Over

3 Years

Past

Due and

Impaired Total

(In Thousand Pesos)


Cash and cash

equivalents

(excluding cash on

hand) P=17,495,408 P=– P=– P=– P=– P=– P=17,495,408

Trade receivables 3,460,994 476,414 62,165 1,089,945 – 112,923 5,202,441

Loans and notes

receivables 89,808 – – – – – 89,808

Employee receivables 9,906 – – – – – 9,906

Non-trade receivables 118,665 – – 6,255 – 1,939 126,859

Long-term receivables 30,200 – – 1,870 615 94,389 127,074


account 1,324,249 – – – – – 1,324,249

AFS investments:

Debt investments 258,699 – – – – – 258,699

Equity investments 306,027 – – – – – 306,027

Financial assets at FVPL 1,014,293 – – – – – 1,014,293

Derivatives designated as

cash flow hedges:

Derivative assets 351,612 – – – – – 351,612

Total P=24,459,861 P=476,414 P=62,165 P=1,098,070 P=615 P=209,251 P=26,306,376

Credit Quality of Financial Assets

Financial assets are classified as high grade if the counterparties are not expected to default in

settling their obligations. Thus, the credit risk exposure is minimal. These counterparties

normally include customers, banks and related parties who pay on or before due date. Financial

assets are classified as a standard grade if the counterparties settle their obligation with the

Company with tolerable delays. Low grade accounts are accounts, which have probability of

impairment based on historical trend. These accounts show propensity of default in payment

despite regular follow-up actions and extended payment terms.

As of June 30, 2016 and December 31, 2015, financial assets categorized as neither past due nor

impaired are viewed by management as high grade, considering the collectability of the

- 28 -

receivables and the credit history of the counterparties. Meanwhile, past due but not impaired

financial assets are classified as standard grade.

Derivative Designated as Accounting Hedges

The Company engages in derivative transactions, particularly cross currency swaps and interest

rate swaps to manage its foreign currency risk and/or interest rate risk arising from its floating-rate

foreign-currency denominated loans.

The table below shows the Company’s derivative financial instruments designated as accounting

hedges:

June 30, 2016 (Unaudited) December 31, 2015 (Audited)

Derivative

Assets

Derivative

Liabilities

Derivative

Assets

Derivative

Liabilities

Cross-currency swaps P=293,937,315 P=– P=351,612,199 P=–

Interest rate swaps – 584,258,778 – 202,469,437

Call spread swaps 60,419,569 – – –

P=354,356,884 P=584,258,778 P=351,612,199 P=202,469,437

Presented as:

Current P=293,937,315 P=22,882,197 P=58,602,033 P=4,943,539

Noncurrent 60,419,569 561,376,581 293,010,166 197,525,898

P=354,356,884 P=584,258,778 P=351,612,199 P=202,469,437

Call Spread Swap Contracts

In March 2016, the Parent Company entered into three call spread swaps with an aggregate

notional amount of US$9.6 million. In June 2016, the Parent Company also entered into

additional two call spread contract with notional amount of US$9.6 million each. These derivative

contracts are designed to hedge the possible foreign exchange loss of its US$80.0 million club

loan.

The aggregate fair value changes on these call spread contracts amounted to P=60.4 million as of

June 30, 2016.

Cross Currency Swap Contracts

In 2012, the Parent Company entered into six non-deliverable cross-currency swap (NDCCS)

agreements with an aggregate notional amount of US$65.0 million. These derivative contracts are

designed to partially hedge the foreign currency and interest rate risks on the Parent Company’s

Refinanced Syndicated Term Loan (Hedged Loan) that is benchmarked against US LIBOR and

with flexible interest reset feature that allows the Parent Company to select what interest reset

frequency to apply (i.e., monthly, quarterly or semi-annually) [see Note 13]. As it is the Parent

Company’s intention to reprice the interest rate on the Hedged Loan quarterly, the Parent

Company utilizes NDCCS with quarterly interest payments and receipts.

In 2014, the Parent Company entered into additional six NDCCS with aggregate notional amount

of US$45.0 million to further hedge its foreign currency risks and interest rate risks arising from

the Hedged Loan.

Effectively, the 12 NDCCS converted 62.86% of the Hedged Loan into a fixed rate peso loan.

Under the NDCCS agreements, the Parent Company receives floating interest based on 3-month

US LIBOR plus 175 basis points and pays fixed peso interest. On specified dates, the Parent

- 29 -

Company also receives specified USD amounts in exchange for specified peso amounts based on

the agreed swap rates. These USD receipts correspond with the expected interest and fixed

principal amounts due on the Hedged Loan.

Pertinent details of the NDCCS are as follows:

Notional

amount

(in millions)

Trade

Date

Effective

Date

Maturity

Date

Swap

rate

Fixed

rate

Variable rate

US$15.00 03/26/12 03/27/12 06/17/17 P=43.05 4.87% 3-month LIBOR + 175 bps

10.00 04/18/12 06/27/12 06/17/17 42.60 4.92 -do-

10.00 05/03/12 06/27/12 06/17/17 42.10 4.76 -do-

10.00 06/15/12 06/27/12 06/17/17 42.10 4.73 -do-

10.00 07/17/12 09/27/12 06/17/17 41.25 4.58 -do-

10.00 10/29/12 12/27/12 06/17/17 41.19 3.44 -do-

7.50 05/14/14 06/27/14 06/17/17 43.60 3.80 -do-

7.50 05/14/14 06/27/14 06/17/17 43.57 3.80 -do-

7.50 06/09/14 06/27/14 06/17/17 43.55 3.60 -do-

7.50 06/09/14 06/27/14 06/17/17 43.55 3.60 -do-

7.50 07/10/14 9/27/14 06/17/17 43.29 3.50 -do-

7.50 07/09/14 9/27/14 06/17/17 43.37 3.68 -do-

The maturity date of the 12 NDCCS coincides with the maturity date of the Hedged Loan.

As of June 30, 2016 and December 31, 2015, the outstanding aggregate notional amount of the

Parent Company’s NDCCS amounted to US$75 million. The aggregate fair value changes on

these NDCCS amounted to P=16.9 million gain and P=12.1 million loss as of June 30, 2016 and

December 31, 2015, respectively.

Interest Rate Swap Contracts

In the last quarter of 2014, EBWPC entered into four interest rate swaps (IRS) with aggregate

notional amount of US$150 million. This is to partially hedge the interest rate risks on its ECA

and Commercial Debt Facility (Foreign Facility) that is benchmarked against US LIBOR and with

flexible interest reset feature that allows EBWPC to select what interest reset frequency to apply

(i.e., monthly, quarterly or semi-annually) [see Note 13]. As it is EBWPC’s intention to reprice

the interest rate on the Foreign facility semi-annually, EBWPC utilizes IRS with semi-annual

interest payments and receipts.

Under the IRS agreement, EBWPC will receive semi-annual interest of 6-month LIBOR and will

pay fixed interest. EBWPC designated the IRS as hedging instruments in cash flow hedge against

the interest rate risks arising from the Foreign Facility.

Pertinent details of the IRS are as follows:

Notional

amount

(in million)

Trade

Date

Effective

Date

Maturity

Date

Fixed

rate

Variable rate

US$62.00 10/20/14 12/15/14 10/23/29 2.635% 6-month LIBOR

40.00 10/20/14 12/15/14 10/23/29 2.635 -do- 39.00 12/11/14 12/15/14 10/23/29 2.635 -do-

9.00 10/20/14 12/15/14 10/23/29 2.508 -do-

The maturity date of the four IRS coincides with the maturity date of the Foreign Facility.

- 30 -

As of June 30, 2016 and December 31, 2015, the outstanding aggregate notional amount of

EBWPC's IRS amounted to US$147 million. The aggregate fair value changes on these IRS

amounted to P=584.3 million loss and P=202.5 million loss as of June 30, 2016 and

December 31, 2015, respectively.

Fair value Adjustments

The net movement of changes made to “Fair value Adjustments on Hedging Transactions”

account for the Company’s cash flow hedges is as follows:

June 30, 2016 (Six months)

(Unaudited)

December 31,

2015 (One year)

(Audited)

Balance at beginning of the period (P=177,500,756) (P=178,182,172)

Changes in fair value of the cash flow hedges (517,094,220) 259,449,991

(694,594,976) 81,267,819

Transferred to consolidated statement of income:

Foreign exchange loss (gain) 26,307,500 (175,500,000)

Interest expense 77,629,996 (94,741,473)

103,937,496 (270,241,473)

Balance before tax (590,657,480) (188,973,654)

Tax 28,908,493 11,472,898

Balance at end of the period (P=561,748,987) (P=177,500,756)

Fair Value Changes of Derivatives

The table below summarizes the net movement in fair values of the Company’s derivatives as of

June 30, 2016 and December 31, 2015.

June 30, 2016 (Six months)

(Unaudited)

December 31,

2015 (One year)

(Audited)

Balance at beginning of the period P=149,142,762 (P=15,565,756)

Net changes in fair value of derivatives:

Designated as accounting hedges (456,674,652) 259,449,991

Not designated as accounting hedges – –

(456,674,652) 259,449,991

Fair value of settled instruments:

Designated as accounting hedges 77,629,996 (94,741,473)

Not designated as accounting hedges – –

77,629,996 (94,741,473)

Balance at end of the period (P=229,901,894) P=149,142,762

Presented as:

Derivative assets P=354,356,884 P=351,612,199

Derivative liabilities (584,258,778) (202,469,437)

(P=229,901,894) P=149,142,762

The effective portion of the changes in the fair value of the derivatives designated as accounting

hedges were deferred in equity under “Fair Value Adjustment on Hedging Transactions” account.

- 31 -

Capital Management

The primary objective of the Company’s capital management is to ensure that it maintains a

healthy capital ratio in order to comply with its financial loan covenants and support its business

operations.

24. Other Matters

Seasonality or Cyclicality of Interim Operations

For Wind Ilocos Norte Business Unit, higher revenue and operating profits are expected in the last

quarter of the year this is based on the generation profile of Burgos. Solar power plant is expected

to generate its highest revenue during summer months. For the rest of the entities, except for FG

Hydro’s sale of electricity coming from hydroelectric power/operations, seasonality or cyclicality

of interim operations is not applicable to the Parent Company’s type of business because of the

nature of its contracts with NPC, which includes guaranteed volume under the applicable take-or-

pay, minimum energy off-take or contracted energy provisions. GCGI’s sales to cooperatives and

industries are also not subject to seasonality or cyclicality.

Issuances, Repurchases, and Repayments of Debt and Equity Securities

There are no issuances, repurchases and repayments of debt and equity securities during the

current period

Changes in Estimates of Amounts Reported in Prior Financial Years

The key assumptions concerning the future and other key sources of estimation uncertainty used in

preparation of the unaudited interim condensed consolidated financial statements are consistent

with those followed in the preparation of the Company’s annual consolidated financial statements

as of and for the year ended December 31, 2015.

Changes in the Composition of the Company During the Interim Period

There are no material changes in the composition of the registrant during the period.

Changes in Contingent Liabilities or Contingent Assets Since the Last Annual Reporting Date

There are no material changes in the contingent liabilities or contingent assets since the last annual

reporting date.

Existence of Material Contingencies and Any Other Events or Transactions that are Material to

an Understanding of the Current Interim Period

There are no material contingencies and any other events or transactions during the period.

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SEC Number 66381 - PDS Group · 2016-08-11 · SEC Form 17Q – 2Q 2016 SECURITIES AND EXCHANGE...

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