c o v e r s h e e t · c o m p a n y i n f o r m a t i o n company’s email address company’s...

C O V E R S H E E T for

SEC FORM 17-Q

SEC Registration Number

C S 2 0 0 6 0 4 4 9 4

C O M P A N Y N A M E

M E T R O P A C I F I C I N V E S T M E N T 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

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )

1 0 t h F l o o r , M G O B u i l d i n g , L e g a

s p i c o r n e r D e l a R o s a S t r e e t s ,

L e g a s p i V i l l a g e , M a k a t i C i t y

Form Type Department requiring the report Secondary License Type, If Applicable

1 7 - Q

C O M P A N Y I N F O R M A T I O N

Company’s Email Address Company’s Telephone Number Mobile Number

[email protected] +632-888-0888 –

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

1,302 as of March 31, 2020 Last Friday of May December 31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation

Name of Contact Person Email Address Telephone Number/s Mobile Number

Mr. David J. Nicol [email protected] +632-888-0888 –

CONTACT PERSON’s ADDRESS

10/F MGO Building, Legaspi corner Dela Rosa Streets

Legaspi Village, Makati 0721 Philippines

NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated. 2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records with the Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from liability for its deficiencies.

mailto:[email protected]

SEC Number CS200604494

File Number_______

Metro Pacific Investments Corporation

(Company’s Full Name)

10/F MGO Bldg., Legaspi cor. Dela Rosa Sts.

Legaspi Village, 0721 Makati City

(Company’s Address)

(632) 888-0888

Telephone Number

______N/A_______

(Fiscal Year Ending)

(month & day)

Form 17-Q

Form Type

_________N/A__________

Designation (If applicable)

31 March 2020

Period Date Ended

____________N/A____________

(Secondary License Type and File Number)

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 March 31, 2020

2. SEC identification number CS200604494

3. BIR Tax Identification No. 244-520-457-000

4. Exact name of issuer as specified in its charter

METRO PACIFIC INVESTMENTS CORPORATION

5. Province, country or other jurisdiction of incorporation or organization

Makati City, Philippines

6. Industry Classification Code: (SEC Use Only)

7. Address of issuer's principal office Postal Code

10/F MGO Bldg., Legaspi cor. Dela Rosa Sts., Legaspi Village, 0721 Makati City

8. Issuer's telephone number, including area code

(632) 888 0888

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

N/A

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 of common stock outstanding

Common Shares 31,355,255,752

*Reported by the stock transfer agent as at April 30, 2020 and excluded the shares held by the Company

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

Yes [ X ] No [ ]

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

The common shares are listed on the Philippines Stock Exchange.

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 [ x ] No [ ]

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

Yes [ x ] No [ ]

TABLE OF CONTENTS

Exhibit I Unaudited Interim Consolidated Financial Statements 8

Exhibit II Notes to Unaudited Interim Condensed Consolidated

Financial Statements 15

Exhibit III Management's Discussion and Analysis of Financial Condition

and Results of Operations

Financial Highlights and Key Performance Indicators 74

Operational Review

MPIC Consolidated (March 2020 vs March 2019) 74

Operating Segments of the Group (March 2020 vs

March 2019) 77

Discussion of Financial Position 83

Liquidity & Capital Resources 87

Financial Soundness Indicators 89

Risk Factors 91

Key Variable and Other Qualitative and Quantitative Factors 97

SIGNATURES

Pursuant to the requirements of the Securities Regulation Code, the issuer has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Registrant : Metro Pacific Investments Corporation By

Signature : ____________________ Jose Ma. K. Lim

Title : President and Chief Executive Officer

Signature : ____________________________ David J. Nicol

Title : Executive Vice President and Chief Financial Officer

Date : 6 May 2020

_______________________

Item 1

FINANCIAL

STATEMENTS

8

Exhibit I

METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Amounts in Millions except Per Share Amounts)

Three Months ended March 31

2020

2019

*Re-presented

CONTINUING OPERATIONS

OPERATING REVENUES (Note 3) P=16,999 P=17,391

COST OF SALES AND SERVICES (Note 18) (7,953) (8,164)

GROSS PROFIT 9,046 9,227

General and administrative expenses (Note 19) (3,195) (3,065)

Interest expense (Note 20) (2,775) (3,136)

Share in net earnings of equity method investees (Note 8) 1,468 2,753

Interest income (Note 20) 512 821

Construction revenue 11,581 7,520

Construction costs (11,581) (7,520)

Others (Note 20) 225 95

INCOME BEFORE INCOME TAX FROM

CONTINUING OPERATIONS 5,281 6,695

PROVISION FOR INCOME TAX

Current 1,520 1,444

Deferred 71 94

1,591 1,538

NET INCOME FROM CONTINUING OPERATIONS 3,690 5,157

NET INCOME FROM DISCONTINUED OPERATIONS – 503

NET INCOME 3,690 5,660

OTHER COMPREHENSIVE INCOME (LOSS) – NET (Note 17)

From Continuing Operations:

To be reclassified to profit or loss in subsequent periods:

Exchange rate difference on translation of foreign operations (3,770) 528

Others (85) (124)

Not to be reclassified to profit or loss in subsequent periods 12 4

(3,843) 408

TOTAL COMPREHENSIVE INCOME (LOSS) (P=153) P=6,068

Net Income Attributable to:

Owners of the Parent Company P=1,890 P=3,542

Non-controlling interest 1,800 2,118

P=3,690 P=5,660

Total Comprehensive Income (Loss) Attributable to:

Owners of the Parent Company (P=1,933) P=3,961


(P=153) P=6,068

(Forward)

9

Three Months ended March 31

2020

2019

*Re-presented

Total comprehensive income (loss) attributable to

Parent Company:

From continuing operations (P=1,933) P=3,719

From discontinued operations – 242

(P=1,933) P=3,961

BASIC EARNINGS PER COMMON SHARE (Note 21)

From continuing operations (in centavos) P=5.99 P=10.46

From discontinued operations (in centavos) – 0.77

P=5.99 P=11.23

DILUTED EARNINGS PER COMMON SHARE (Note 21)

From continuing operations (in centavos) P=5.99 P=10.45

From discontinued operations (in centavos) – 0.77

P=5.99 P=11.22

*Comparative period re-presented as a result of the deconsolidation of a subsidiary in 2019 (see Note 24 for details).

See accompanying notes to the Unaudited Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis.

10


INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Amounts in Millions)

Unaudited Audited

March 31,

2020

December 31,

2019

ASSETS

Current Assets

Cash and cash equivalents and short-term deposits (Note 5) P=66,796 P=74,697

Restricted cash (Note 5) 4,381 5,011

Receivables (Note 6) 21,285 14,624

Other current assets (Note 7) 11,297 10,905

Total Current Assets 103,759 105,237

Noncurrent Assets

Investments and advances (Note 8) 163,633 169,092

Service concession assets (Note 9) 250,007 240,489

Property, plant and equipment 58,161 58,591

Goodwill (Note 10) 15,515 15,676

Intangible assets (Note 10) 3,211 3,279

Deferred tax assets 838 927

Other noncurrent assets (Note 7) 17,453 18,487

Total Noncurrent Assets 508,818 506,541

P=612,577 P=611,778

See accompanying notes to the Unaudited Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis

(Forward)

11


INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


Unaudited Audited

March 31,

2020

December 31,

2019

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable and other current liabilities (Note 11) P=35,505 P=36,363

Income tax payable 2,899 1,639

Due to related parties (Note 15) 5,696 5,638

Current portion of:

Provisions (Note 12) 6,929 6,742

Long-term debt (Note 13) 19,055 18,459

Service concession fees payable (Note 14) 5,918 6,277

Total Current Liabilities 76,002 75,118

Noncurrent Liabilities

Noncurrent portion of:

Provisions (Note 12) 5,040 4,997

Service concession fees payable (Note 14) 26,902 26,621


Due to related parties (Note 15) 2,280 2,240

Deferred tax liabilities 13,799 14,170

Other long-term liabilities (Note 11) 11,031 11,137

Total Noncurrent Liabilities

293,427 290,615

Total Liabilities 369,429 365,733

Equity

Owners of the Parent Company (Note 16):

Capital stock 31,661 31,661

Additional paid-in capital 68,638 68,638

Treasury shares (708) (4)

Equity reserves (532) (574)

Retained earnings 90,139 90,650

Other comprehensive income (loss) reserve (3,232) 591

Total equity attributable to owners of the Parent Company

185,966 190,962


Total Equity 243,148 246,045

P=612,577 P=611,778


12


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in Millions)

Three Months Ended March 31

2020

2019

*Re-presented

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax from continuing operations P=5,281 6,695

Income before income tax from discontinued operations – 710

Income before income tax P=5,281 P=7,405

Adjustments for:

Interest expense (Note 20) 2,775 3,136

Amortization of service concession assets (Notes 9 and 18) 1,240 1,228

Depreciation and amortization (Notes 18 and 19) 1,281 1,406

Unrealized foreign exchange loss (gain) – net 16 130

Share in net earnings of equity method investees (Note 8) (1,468) (2,826)

Interest income (Note 20) (512) (821)

Others 42 45

Operating income before working capital changes 8,655 9,703

Decrease (increase) in:

Restricted cash 630 691

Receivables (1,324) 334

Other current assets (470) 653

Increase (decrease) in accounts payable, provisions and other current liabilities (558) (518)

Net cash generated from operations 6,933 10,863

Income tax paid (260) (558)

Interest received 588 832

Net cash provided by operating activities 7,261 11,137

CASH FLOWS FROM INVESTING ACTIVITIES

Decrease (increase) in:

Short-term deposits (Note 5) 329 (136)

Other noncurrent assets 759 (908)

Dividends received from:

Equity method investees (Note 8) – 54

Acquisition of/Additions to:

Service concession assets (Notes 9 and 26) (12,876) (7,957)

Property, plant and equipment (Note 26) (518) (879)

Investments and advances (Note 8) (60) (328)

Net cash used in investing activities (12,366) (10,154)

(Forward)

13


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in Millions)


2020

2019

*Re-presented

CASH FLOWS FROM FINANCING ACTIVITIES

Receipt or proceeds from:


Issuance of shares (Note 16) – 22

Contributions from non-controlling stockholders 335 1,767

Payments of/for:

Interest and other financing charges (2,230) (2,924)

Long-term debt (Note 13) (15,757) (5,966)

Service concession fees payable (Note 14) (745) (574)

Acquisition of MPIC shares (Note 16) (704) (2)

Lease liability (171) (137)

Transaction costs on long-term debt (Note 13) (81) (21)

Dividends paid to owners of the Parent Company (2,401) –

Dividends paid to non-controlling stockholders (770) (2,161)

Net cash used in financing activities (2,309) (3,312)

NET DECREASE IN CASH AND CASH EQUIVALENTS (7,414) (2,329)

CASH AND CASH EQUIVALENTS AT JANUARY 1 73,211 46,607

CASH AND CASH EQUIVALENTS AT MARCH 31 (Note 5) P=65,797 P=44,278

*Comparative period re-presented as a result of the deconsolidation of a subsidiary in 2019 (see Note 24 for details).


14


INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019


Three Months Ended March 31, 2020

Attributable to Owners of the Parent Company

Capital

Stock

Additional

Paid-in

Capital

Treasury

Shares Equity

Reserves

Retained

Earnings

Other

Comprehensive

Income (Loss)

Reserve

(Note 17) Total

Non-

controlling

Interest (NCI) Total

Equity

At January 1, 2020 P=31,661 P=68,638 (P=4) (P=574) P=90,650 P=591 P=190,962 P=55,083 P=246,045

Total comprehensive income for the period:

Net income – – – – 1,890 – 1,890 1,800 3,690

Other comprehensive loss – – – – – (3,823) (3,823) (20) (3,843)

Restricted Stock Unit Plan (RSUP) (Note 22) – – – 42 – – 42 – 42

Treasury shares – – (704) – – – (704) – (704)

Cash dividends declared (Note 16) – – – – (2,401) – (2,401) – (2,401)

Contribution from non-controlling interest and others – – – – – – – 320 320

Dividends declared to non-controlling stockholders

(Note 11) – – – – – – – (1) (1)

At March 31, 2020 P=31,661 P=68,638 (P=708) (P=532) P=90,139 (P=3,232) P=185,966 P=57,182 P=243,148

Three Months Ended March 31, 2019

Attributable to Owners of the Parent Company

Capital Stock

Additional

Paid-in Capital

Treasury Shares

Equity Reserves

Retained Earnings

Other

Comprehensive

Income Reserve (Note 17) Total

Non-

controlling Interest (NCI)

Total Equity

At January 1, 2019 P=31,633 P=68,494 (P=178) P=6,968 P=64,533 P=1,861 P=173,311 P=65,692 P=239,003

Total comprehensive income for the period: Net income – – – – 3,542 – 3,542 2,118 5,660

Other comprehensive income (loss) – – – – – 419 419 (11) 408

Executive Stock Option Plan (ESOP) (Note 22) Exercise of stock option 5 18 – (1) – – 22 – 22

Treasury shares – – (2) – – – (2) – (2)

Cash dividends declared (Note 16) – – – – (2,400) – (2,400) – (2,400) Acquisition of non-controlling interest and others

(Notes 4 and 16) – – – (1,102) – – (1,102) 2,869 1,767

Dividends declared to non-controlling stockholders (Note 11) – – – – – – – (2,478) (2,478)

At March 31, 2019 P=31,638 P=68,512 (P=180) P=5,865 P=65,675 P=2,280 P=173,790 P=68,190 P=241,980


15

Exhibit II


NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

1. Corporate Information

Metro Pacific Investments Corporation (the Parent Company or MPIC) was incorporated in the

Philippines and registered with the Philippines Securities and Exchange Commission (SEC) on

March 20, 2006 as an investment holding company. MPIC’s common shares of stock are listed in and

traded through the Philippine Stock Exchange (PSE). On August 6, 2012, MPIC launched Sponsored

Level 1 American Depositary Receipt (ADR) Program with Deutsche Bank as the appointed depositary

bank in line with the Parent Company’s thrust to widen the availability of its shares to investors in the

United States.

The principal activities of the Parent Company’s subsidiaries and equity method investees are described in

Notes 28 and 8, respectively.

Metro Pacific Holdings, Inc. (MPHI) owns 42.2% of the total issued and outstanding common shares of

MPIC as at March 31, 2020 and 41.9% of the total issued and outstanding common shares as at

December 31, 2019. As sole holder of the voting Class A Preferred Shares, MPHI’s combined voting

interest as a result of all of its shareholdings is estimated at 55% as at March 31, 2020 and

December 31, 2019.

MPHI is a Philippine corporation whose stockholders are Enterprise Investment Holdings, Inc. (EIH;

60.0% interest), Intalink B.V. (26.7% interest) and First Pacific International Limited (FPIL; 13.3%

interest). First Pacific Company Limited (FPC), a company incorporated in Bermuda and listed in Hong

Kong, through its subsidiaries, Intalink B.V. and FPIL, holds 40.0% equity interest in EIH and investment

financing which under Hong Kong Generally Accepted Accounting Principles, require FPC to account for

the results and assets and liabilities of EIH and its subsidiaries as part of FPC group of companies in Hong

Kong.

The registered office address of the Parent Company is 10th Floor, MGO Building, Legaspi corner Dela

Rosa Streets, Legaspi Village, Makati City.

The accompanying unaudited interim condensed consolidated financial statements as at March 31, 2020

and for the three months ended March 31, 2020 and 2019 were approved and authorized for issuance by

the Board of Directors (BOD) on May 6, 2020.

2. Summary of Significant Accounting Policies

Basis of Preparation

The interim condensed consolidated financial statements have been prepared in accordance with

Philippine Accounting Standard (PAS) 34, Interim Financial Reporting. The interim condensed

consolidated financial statements are presented in Philippine Peso, which is MPIC’s functional and

presentation currency, and all values are rounded to the nearest million peso (P=000,000), except when

otherwise indicated.

16

The 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 consolidated financial statements as at and for the year ended December 31, 2019.

Changes in Accounting Policies and Disclosures

Our accounting policies are consistent with those followed in the preparation of the Company’s annual

consolidated financial statements for the year ended December 31, 2019, except for the following

adoption of new and amended Philippine Financial Reporting Standards (PFRS) effective

January 1, 2020. The Company has not early adopted any standard, interpretation or amendment

that has been issued but is not yet effective.

Several amendments and interpretations apply for the first time in 2020, but do not have an impact on the

interim condensed consolidated financial statements of the Company.

▪ Amendments to PAS 1, Presentation of Financial Statements and PAS 8, Accounting Policies,

Changes in Accounting Estimates and Errors, Definition of Material

The amendments provide a new definition of material that states “information is material if omitting,

misstating or obscuring it could reasonably be expected to influence decisions that the primary users

of general purpose financial statements make on the basis of those financial statements, which provide

financial information about a specific reporting entity.”

The amendments clarify that materiality will depend on the nature or magnitude of information, either

individually or in combination with other information, in the context of the financial statements. A

misstatement of information is material if it could reasonably be expected to influence decisions made

by the primary users. These amendments had no impact on the consolidated financial statements of,

nor is there expected to be any future impact to the Company.

▪ Amendments to PFRS 3, Business Combinations

The amendment clarifies that to be considered a business, an integrated set of activities and assets

must include, at a minimum, an input and a substantive process that together significantly contribute

to the ability to create output. Furthermore, it clarified that a business can exist without including all

of the inputs and processes needed to create outputs. These amendments had no impact on the

consolidated financial statements of the Company but may impact future periods should the Company

enter into any business combinations.

▪ Amendments to PFRS 7 Financial Instruments: Disclosures, PFRS 9 Financial Instruments and

PAS 39 Financial Instruments: Recognition and Measurement: Interest Rate Benchmark Reform

The amendments to PFRS 9 and PAS 39 provide a number of reliefs, which apply to all hedging

relationships that are directly affected by interest rate benchmark reform. A hedging relationship is

affected if the reform gives rise to uncertainties about the timing and or amount of benchmark-based

cash flows of the hedged item or the hedging instrument. These amendments had no impact on the

consolidated financial statements of the Company as it does not have any interest rate hedge

relationships.

▪ Revised Conceptual Framework for Financial Reporting

The Conceptual Framework is not a standard, and none of the concepts contained therein override the

concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist in

developing standards, to help preparers develop consistent accounting policies where there is no

applicable standard in place and to assist all parties to understand and interpret the standards.

17

The revised Conceptual Framework includes some new concepts, provides updated definitions and

recognition criteria for assets and liabilities and clarifies some important concepts.

These amendments had no impact on the consolidated financial statements of the Company.

The Company has not early adopted any other standard, interpretation or amendment that has been issued

but is not yet effective.

Basis of Consolidation

The interim condensed consolidated financial statements include the accounts of the Parent Company and

its subsidiaries as at March 31, 2020 (see Note 28).

3. Operating Segment Information Operating Segment

For management purposes, the Company is organized into the following segments based on services and

products:

Power, which primarily relates to the operations of Manila Electric Company (MERALCO) in relation to

the distribution, supply and generation of electricity and Global Business Power Corporation (GBPC) in

relation to power generation. The investment in MERALCO is held both directly and indirectly through

Beacon Electric Asset Holdings, Inc. (Beacon Electric) while the investment in GBPC is held through

Beacon Electric’s wholly-owned entity, Beacon PowerGen Holdings Inc. (BPHI).

Toll Operations, which primarily relate to operations and maintenance of toll facilities by Metro Pacific

Tollways Corporation (MPTC) and its subsidiaries NLEX Corporation (NLEX Corp), Cavitex

Infrastructure Corporation (CIC) and foreign investees, CII Bridges and Roads Investment Joint Stock

Company (CII B&R), Don Muang Tollway Public Ltd (DMT) and PT Nusantara Infrastructure Tbk (PT

Nusantara). Certain toll projects are either under pre-construction or on-going construction as at

March 31, 2020 (see Note 9).

Water, which relates to the provision of water and sewerage services by Maynilad Water Holding

Company, Inc. (MWHC) and its subsidiaries, Maynilad Water Services, Inc. (Maynilad) and Philippine

Hydro, Inc. (PHI), and other water-related services by MetroPac Water Investments Corporation (MPW)

and its subsidiaries.

Rail, which primarily relates to Metro Pacific Light Rail Corporation (MPLRC) and its subsidiary, Light

Rail Manila Corporation (LRMC), the concessionaire for the operations and maintenance of the Light Rail

Transit – Line 1 (LRT-1) and construction of the LRT-1 south extension.

Logistics, which primarily relates to the Company’s logistics business through MetroPac Logistics

Company, Inc. (MPLC) and its subsidiaries. However, given that the logistics business does not yet meet

the quantitative thresholds to qualify as an operating segment, the results of the logistics operations are

included in the ‘other businesses’ column.

Others, which represent holding companies and operations of subsidiaries and other investees involved in

real estate and provision of services.

After its deconsolidation starting December 2019, the Healthcare segment no longer qualified as an

operating segment starting January 2020 (see Note 24). After deconsolidation, Metro Pacific Hospital

Holdings, Inc. (MPHHI) has been accounted for as an investment in an associate (see Note 8) and equity

in net earnings in MPHHI is included in the ‘other businesses’ column.

18

The Company’s chief operating decision maker continues to be comprised of the BOD.

Seasonality

Power. For MERALCO, electricity sales exhibit a degree of quarterly seasonality with the first quarter

having lower than the average electricity sales as this period is characterized by cooler temperature and

softer consumer demand following heightened consumer spending in the last quarter of the year. The

second quarter is marked by higher than average electricity sales. The fourth quarter performance is about

the average of the year.

For GBPC, electricity sales exhibit a degree of quarterly seasonality with the first quarter having lower

than the average electricity sales. This period is characterized by cooler temperature, resulting to softer

consumer demand. Higher than average electricity consumption is marked during the second quarter as

temperature rises during the summer months. This increase in demand, however, is coupled with higher

generation from solar plants in Negros thereby tempering market prices. The fourth quarter sees an

increase in electric power consumption due to heightened consumer spending during the holiday season.

Toll Operations. The Company’s toll road operations are a seasonal business. Based on historical traffic

on the North Luzon Expressway (NLEX), Subic-Clark-Tarlac Expressway (SCTEX) and Manila - Cavite

Expressway (CAVITEX), the month of January is slightly below the normal average due to the end of the

Christmas holidays. From February to May, traffic is above the normal average due to the summer

holiday, which is traditionally a peak season for travel. The months of June to August remain to have the

lowest seasonal factors due to the rainy season. Traffic is expected to improve from September until

November, while the month of December has the highest seasonal factor due to the Christmas holidays.

For PT Nusantara, based on historical traffic for its toll roads, the months of January and February are

usually below the normal average traffic due to end of holidays and peak of rainy season. Traffic is then

expected to improve in the months of March to April due to the summer season. For the months May to

July, traffic is likely to decrease as a result of the long holidays (Ramadan and Lebaran holidays) but is

expected to stabilize in the months August to November. Traffic will improve again in December due to

the Christmas season.

Water. The Company’s water utilities business is also seasonal, with comparatively lower revenues

during the rainy season in the Philippines.

Rail. The Company’s rail business is seasonal, with lower ridership during the second quarter of the year

due to summer holiday in schools. In addition to this, LRT-1 is also closed from Holy Thursday to Easter

Sunday, and this typically occurs in April or March.

Impact of COVID-19 to MPIC’s businesses and operations

On March 16, 2020, the Philippine Government declared the entire Luzon area in the Philippines under an

“enhanced community quarantine” (ECQ). In other parts of the country, Iloilo province and Iloilo City

imposed an ECQ in their jurisdictions starting March 21, 2020. Cebu province was placed under an ECQ

on March 25 while Cebu City, imposed its own ECQ measure starting March 28. ECQ is effectively a

total lockdown, restricting the movement of the population in response to the growing pandemic of

coronavirus disease 2019 (COVID-19) in the country. Lockdown restrictions temporarily disrupted

capacity to read water and electric meters and limited ability to collect payments from customers.

For operations outside of the Philippines, governments of Indonesia, Vietnam and Thailand have declared

states of national emergency (SONE). Indonesian government declared SONE starting March 31, 2020

with toll roads, public transportation and airports remain open in Indonesia. Vietnam introduced

nationwide lockdown on April 1, 2020 with factories and establishments providing essential goods

19

remaining operational. Thailand was put into a state of emergency starting March 26,2020, with land

borders with adjacent countries ordered closed.

The impact of the ECQ (and various regional lockdowns) on our businesses is as follows:

▪ Power - MERALCO. In Luzon, reduction in the demand from the commercial and industrial sectors

partially offset by increased demand from residential customers as a direct consequence of the NCR

wide ECQ.

▪ Power - GBPC. In the Visayas, energy demand decreased by 20% to 30% after the start of the ECQ

imposed in Iloilo and Cebu. GBPC’s operating plants located in Cebu, Iloilo, Aklan and Mindoro

initiated a plant lockdown to ensure continued operations.

In its Advisory dated April 15, 2020, the Energy Regulatory Commission (ERC) stated that “Retail

Electricity Suppliers (RES) are directed to provide a grace period to all customers through the

deferment of their electricity bill falling due within the period of the ECQ or from March 16 to

April 30, 2020, without interest, penalties, fees and other charges. The cumulative amount of

electricity bills that was supposed to have fallen due within the ECQ shall be amortized in four (4)

equal monthly installments, payable in the four (4) succeeding billing months following the end of the

ECQ. This shall be reflected as a separate item in the electricity bill due on those succeeding months,

provided that the first billing due date following the ECQ shall be no earlier than May 15, 2020.” In

the same Advisory, the ERC stated that “Generators shall extend the same payment scheme as

provided in the preceding paragraph, to the RES, DU and other customers.”

▪ Toll Operations. NLEX, SCTEX, CAVITEX and the Cavite Laguna Expressway (CALAEX) have

remained partially open to facilitate unhampered movement of essential goods and transit of medical

workers amid the Luzon-wide ECQ. Domestic average daily vehicle entry (ADVE) for period post

implementation of ECQ to March 31, 2020, dropped by 89% versus ADVE covering pre-ECQ period

from January 1, 2020.

Traffic on foreign tollroads decreased with the declaration of SONE, with ADVE declining by 77% in

Thailand, 55% in Indonesia and 20% in Vietnam.

▪ Water - Maynilad. ECQ resulted in higher residential demand but at a lower average tariff rate

because of the closure of non-essential businesses which affected the non-domestic customer segment.

In the absence of meter readings for the domestic customers, Maynilad estimated the billing affected

by the ECQ period using average historical consumption pursuant to the policy of the MWSS

Regulatory Office. For non-domestic customers, Maynilad used a combination of electromagnetic

flow meter readings, actual readings by the technical team, and customer photographs of meter

readings.

Maynilad also extended assistance to its customers in the form of payment due date extensions and a

moratorium on disconnections during the ECQ.

▪ Rail. With the ECQ implementation and operations suspended starting March 17, 2020, there were

fewer operating days for the three-month period ended March 31, 2020 at 76 days versus last year of

the same period at 90 days.

See also disclosures under section “Management Discussion and Analysis” included in this report.

20

The inherent uncertainty created about future economic outlook as a consequence of COVID-19 and

measures to contain it, for all businesses globally, means that the likely margin of error in estimates

inherent in preparing any Financial Statements will have increased. As more clarity emerges on future

economic prospects such estimates on matters including the carrying value of assets and collection of

trade receivables may need to be revised.

As of May 6, 2020, the full effect of COVID-19 on full year earnings remains uncertain.

Segment Performance

Segment performance continues to be evaluated based on: consolidated net income for the period;

earnings before interest, taxes and depreciation and amortization (EBITDA), or Core EBITDA; Core

EBITDA margin; and core income. Net income for the period is measured consistent with consolidated

net income in the consolidated financial statements.

There are no revenue transactions with a single customer that accounted for 10% or more of the

Company’s consolidated revenues and no material inter-segment revenue transactions for the three-month

periods ended March 31, 2020 and 2019. The Company’s revenue substantially comprises of services

which revenue recognition is over time.

The following table shows the reconciliations of the Company’s consolidated core income to consolidated

net income for the three-month periods ended March 31, 2020 and 2019.


2020 2019

(Unaudited)

(In Millions)

Consolidated core income attributable to

owners of Parent Company P=3,430 P=3,660

Non-recurring income (expenses) - net (1,540) (118)

Consolidated net income attributable to

owners of Parent Company 1,890 3,542

Consolidated net income attributable to


Consolidated net income P=3,690 P=5,660

21

By Principal Business Activity

The following table presents revenue and profit information of operating segments for the three-month periods ended March 31, 2020 and 2019:

March 31, 2020 (Unaudited; in Millions)

Power

Toll

Operations

Water Rail Others Consolidated

Total revenue from external sales P=5,613 P=4,222 P=6,140 P=708 P=316 P=16,999

Core EBITDA 2,294 2,596 3,892 182 (254) 8,710

Core EBITDA Margin 41% 61% 63% 26% − 51%

Core income (loss) attributable to MPIC 2,874 891 882 62 (1,279) 3,430

Non-recurring income (expense) (1,416) (65) (4) 3 (58) (1,540)

Reported net income (loss) attributable to MPIC P=1,458 P=826 P=878 P=65 (P=1,337) P=1,890

March 31, 2019 (Unaudited; in Millions)

Power

Toll

Operations

Water Rail Others

Continuing

Operations Healthcare Consolidated

Total revenue from external sales P=5,918 P=4,243 P=5,974 P=832 P=424 P=17,391 P=3,981 P=21,372

Core EBITDA 2,216 2,686 3,882 239 (280) 8,743 1,016 9,759

Core EBITDA Margin 37% 63% 65% 29% − 50% 26% 46%

Core income (loss) attributable to MPIC 2,712 1,076 918 123 (1,411) 3,418 242 3,660

Non-recurring income (expense) 33 (93) (10) (3) (45) (118) − (118)

Reported net income (loss) attributable to MPIC P=2,745 P=983 P=908 P=120 (P=1,456) P=3,300 P=242 P=3,542

The following table presents segment assets and segment liabilities of the Company’s operating segments (amounts in millions):

Power

Toll

Operations

Water Rail Others

Adjustments/

Eliminations Consolidated

Segment assets P=81,133 P=146,405 P=132,713 P=33,621 P=38,719 P=16,353 P=448,944

Investments and Advances 128,120 14,412 2,159 − 18,942 − 163,633

Consolidated Total Assets as at

March 31, 2020 (Unaudited) P=209,253 P=160,817 P=134,872 P=33,621 P=57,661 P=16,353 P=612,577

Segment assets P=78,137 P=136,080 P=130,466 P=30,870 P=50,530 P=16,603 P=442,686

Investments and Advances 132,156 16,031 2,131 – 18,774 – 169,092

Consolidated Total Assets as at

December 31, 2019 (Audited) P=210,293 P=152,111 P=132,597 P=30,870 P=69,304 P=16,603 P=611,778

Segment liabilities:

As at March 31, 2020 (Unaudited) P=54,052 P=110,712 P=73,895 P=19,067 P=97,904 P=13,799 P=369,429

As at December 31, 2019 (Audited) P=55,448 P=102,398 P=73,162 P=17,291 P=103,264 P=14,170 P=365,733

22

By Geographical Market

While the Company’s geographic focus is still predominantly the Philippines, MPIC also has started

increasing its presence in Southeast Asia with its investments in Indonesia (PT Nusantara), Thailand

(DMT) and Vietnam (CII B&R, Tuan Loc Water Resources Investment Joint Stock Company and BOO

Phu Ninh Water Treatment Plant Joint Stock Company) (see Notes 8 and 28).


2020 2019

(Unaudited)

(In Millions)

Revenue:


Philippines P=16,516 P=16,816

Indonesia 480 575

Vietnam 3 –

16,999 17,391

From Discontinued Operations - Philippines – 3,981

P=16,999 P=21,372

Share in net earnings of equity method investees (see

Note 8):



Indonesia 49 9

Thailand 92 133

Vietnam (32) (41)

1,468 2,753

From Discontinued Operations - Philippines – 73

P=1,468 P=2,826

March 31,

2020

(Unaudited)

December 31,

2019

(Audited)

(In Millions)

Non-current assets (other than financial instruments and

deferred tax assets):


Indonesia 23,307 25,728

Thailand 6,849 8,079

Vietnam 3,508 3,482

P=505,735 P=503,466

23

4. Business Combinations and Transactions with Non-controlling Stockholders

Transaction during the three-month period ended March 31, 2020

The Company had no business combinations for the three-month period ended March 31, 2020.

Transaction during the three-month period ended March 31, 2019

Acquisition of Southbend Express Services Inc. (SESI). On February 26, 2019, Metro Pacific Tollways

Management Services Inc. (MPTMSI), a wholly-owned subsidiary of MPTC, acquired 100% of SESI for

a purchase price of P=93 million. SESI is engaged in providing manpower services to public and private

offices, industrial, commercial and other establishments. The transaction was accounted for using the

acquisition method under PFRS 3.

The final fair values of the identifiable assets and liabilities as at the date of acquisition:

Fair Values

(in Millions)

Assets

Cash and cash equivalents P=3

Receivables 36

Other current assets 3

Property, plant and equipment 6

Other noncurrent assets 16

64

Liabilities

Accounts payable and other current liabilities P=21

Long-term debt (current and noncurrent portions) 3

Other long-term liabilities 21

45

Total identifiable net assets at fair value 19

Goodwill arising on acquisition 42

Consideration transferred 61

Intercompany account settled 32

Total consideration on acquisition P=93

The fair value and gross amount of the receivables amounted to P=36 million. None of the receivables

have been impaired and it is expected that the full contractual amounts can be collected.

The goodwill that arose on the acquisition is attributed to the expected synergies arising from the

acquisition. None of the goodwill recognized is expected to be deductible for income tax purposes.

From the date of acquisition, SESI contributed consolidated revenue of P=94 million after elimination.

SESI derives most of its revenues from its services to NLEX Corp., CIC and MPT MSI and therefore

eliminated at consolidated level. Meanwhile, the contribution to the consolidated net income amounted to

P=89 million net loss for the year ended December 31, 2019. If the combination had taken place at the

beginning of the year, contributions to the consolidated revenue and consolidated net income would have

been P=108 million of revenue and P=110 million of net loss for the year ended December 31, 2019. Total

transaction cost amounting to P=0.2 million, has been expensed and is included in the “General and

administrative expenses” in the consolidated statement of comprehensive income and is part of operating

cash flows for the year ended December 31, 2019.

24

5. Cash and Cash Equivalents, Short-term Deposits and Restricted Cash

March 31,

2020

December 31,

2019

(Unaudited) (Audited)

(In Millions)

Cash and cash equivalents P=65,797 P=73,211

Short-term deposits 999 1,486

P=66,796 P=74,697

For the purpose of the interim consolidated statements of cash flows for the three months ended

March 31, 2020 and 2019, details of cash and cash equivalents are as follows:

Restricted Cash. Restricted cash classified under current assets pertains to sinking fund or debt service

account (DSA) representing amounts set aside for principal and interest payments of certain long-term

debt. This DSA is maintained and replenished in accordance with the provision of the loan agreements.

6. Receivables

March 31,

2020

(Unaudited)

December 31,

2019

(Audited)

(In Millions)

Trade (see Note 3): Power P=5,251 P=4,786

Water 3,229 2,436

Others 1,414 1,582

Dividend receivable (Note 8) 5,343 −

Receivable from Buhay (see Note 24) 3,920 3,873

Contract assets/unbilled receivables 1,227 1,227

Concession financial receivable (a) 951 1,117

Notes (b) 150 150

Nontrade (c) 2,843 2,479

24,328 17,650

Less allowance for ECL (b) 1,902 1,752

22,426 15,898

Less current portion 21,285 14,624

Noncurrent portion P=1,141 P=1,274

a. On April 24, 2012, PT Dain Celicani Cemerlang (DCC), a subsidiary of PT Nusantara entered into a

Cooperation Agreement for the supply of treated water to PT Kawasan Industri Medan (Persero)

(KIM) for a period of 20 years (excluding construction phase). The concession financial receivable

March 31,

2020

March 31,

2019

(Unaudited)

(In Millions)

Cash on hand and in banks P=15,160 P=8,021

Short-term deposits that qualify as cash

equivalents 50,637 36,257

P=65,797 P=44,278

25

pertains to the guaranteed minimum payment that will be received by DCC from KIM under the water

supply agreement.

PT Rezeki Perkasa Sejahtera Lestari (RPSL) has an Electrical Power Purchase Agreement with PT

Perusahaan Listrik Negara (Persero) (PLN) for the construction and operation of a Biomass Power

Plant for a period of twenty (20) years from the start of operations. Under the agreement, RPSL will

supply a portion of the generated power from the power plant to PLN in accordance with the terms

and conditions of the agreement. The concession financial receivable pertains to the guaranteed

minimum payment that will be received by RPSL from PLN under the electrical power purchase

agreement.

Finance income amounting to P=38 million and P=14 million was recognized in the interim consolidated

statement of comprehensive income for the three-month period ended March 31, 2020 and 2019,

respectively (see Note 20).

b. Notes receivable aggregating P=150 million comprising of defaulted loans are fully provided with

allowance as at March 31, 2020 and December 31, 2019.

c. Included in the nontrade receivables are (i) advances to Department of Public Works and Highways

(DPWH) (ii) advances to customers, affiliates and officers and employees that are generally

collectible within a year and (iii) advances to former subsidiaries and related parties. Portion of

advances to former subsidiaries and affiliates of the Company are fully provided with allowance.

NLEX Corp., MPCALA, CIC have made advances to DPWH which are covered by Reimbursement

Agreements. The purpose of advances is to fast track the acquisition of right-of-way (ROW) for the

construction of expressway projects. Total advances to DPWH amounted to P=294 million and

P=285 million as of March 31, 2020 and December 31, 2019, respectively.

The noncurrent portion of the receivables are included under the “Other noncurrent assets” account in the

consolidated statements of financial position.

7. Other Current Assets

March 31,

2020

(Unaudited)

December 31,

2019

(Audited)

(In Millions)

Inventories - at cost

Power plant spare parts and

consumables P=1,733 P=1,735

Power plant coal and fuel 638 637

Rail engineering supplies 436 412

Others 306 282

Input value-added tax (VAT) (a) 4,609 4,210

Creditable withholding taxes (b) 1,074 995

Prepaid expenses 701 1,233

Advances to contractors and consultants(c) 518 454

Due from related parties (see Note 15) 189 273

Financial assets at Fair value through other

comprehensive income (FVOCI) 167 300

Miscellaneous deposits and others 1,257 705

11,628 11,236

Less allowance for decline in value 331 331

P=11,297 P=10,905

26

a. Input VAT pertains to VAT imposed on purchases of goods and services. These are expected to be

offset against output VAT (see Note 11) arising from the Company’s revenue/income subject to VAT

in the future. Noncurrent portion as at March 31, 2020 and December 31, 2019 amounted to

P=135 million and P=182 million, respectively, and is included under “Other noncurrent assets”. The

noncurrent portion pertains to input VAT that can be offset against output VAT beyond one year and

those that can be claimed as tax credits.

b. This represents amount withheld by counterparty for services rendered by the Company which can be

claimed as tax credits. Management provided allowance for decline in value representing creditable

withholding taxes recognized in prior years that the Company may no longer be able to utilize.

c. Noncurrent portion of the advances to contractors and consultants included under “Other noncurrent

assets” as at March 31, 2020 and December 31, 2019 amounted to P=9,165 million and

P=10,581 million, respectively.

8. Investments and Advances

Material Associates. The Company’s investments in material associates substantially comprise of

investments in:

Ownership Interest in %

Principal

Place of

Business Principal Activities

March 31,

2020

December 31,

2019

Associates:

MERALCO – Direct Philippines Power 10.5 10.5

MERALCO – Indirect* Philippines Power 35.0 35.0

Alsons Thermal Energy Corporation

(ATEC) Philippines Power 50.0 50.0

DMT Thailand Tollways 29.4 29.4

CII B&R Vietnam Tollways 44.9 44.9

PT Jakarta Lingkar Baratsatu (JLB) Indonesia Tollways 35.0 35.0

MPHHI (see Note 24) Philippines Healthcare 20.0 20.0 * Held through Beacon Electric

Individually immaterial investees. The Company has interests in the following individually immaterial

investments in associates and joint ventures: Place of Ownership Interest in %

Incorporation Principal Activities March 31,

2020

December

31, 2019

Associates:

Water

EquiPacific HoldCo Inc. (EHI) Philippines Investment holding/ Water 30.0 30.0 Tuan Loc Water Resources Investment Joint Stock

Company (TLW)

Vietnam Investment holding/ Water

49.0 49.0

Watergy Business Solutions, Inc. (WBSI) Philippines Investment holding/ Water 49.0 49.0 Karayan Diliman Management, Inc. (KDMI) Philippines Engineering consultancy 40.0 40.0

Manila Water Consortium Inc. (MWCI) Philippines Investment holding/ Water 39.0 39.0

PT Tirta Kencana Cahaya Mandiri (TKC) Indonesia Water installation 28.0 28.0

Others

AF Payments Inc. (AFPI) Philippines Operator of contactless payment

system 20.0 20.0 Indra Philippines, Inc. (Indra Phils.) Philippines Management and IT consultancy 25.0 25.0

Costa De Madera Philippines Real estate 62.0 62.0

PT Intisentosa Alam Bahtera (IAB) Indonesia Port services 39.0 39.0 First Gen Northern Energy Corp. (FGNEC) Philippines Under liquidation (corporate life

ended December 31, 2016) 33.3 33.3

Metro Pacific Land Holdings, Inc. Philippines Under liquidation (corporate life ended July 31, 2019) 49.0 49.0

Joint Ventures:

Land Pacific Corporation (Landco) Philippines Real estate 38.1 38.1

27

The account “Investments and advances” consists of the following components:

March 31,

2020

(Unaudited)

December 31,

2019

(Audited) (In Millions)

Equity method investees:

Associates Material

MERALCO P=123,275 P=127,509

MPHHI 16,749 16,695

DMT 6,877 7,266

JLB 4,506 5,255

CII B&R 3,030 3,364

ATEC 2,967 2,768

Others 3,306 3,312

160,710 166,169

Advances to equity method investees 2,923 2,923

P=163,633 P=169,092

For the purpose of the interim consolidated statements of comprehensive income and cash flows for the

three months ended March 31, 2020 and 2019, movements in the “Equity method investees” are as

follows:

March 31,

2020

March 31,

2019

(Unaudited)

Acquisition costs

Balance at beginning of year P=161,727 P=145,935

Equity infusion into existing investees 60 166

Balance at end of the period 161,787 146,101

Accumulated equity in net earnings

Balance at beginning of year 4,376 3,205

Share in net earnings for the period:

Continuing operations

MERALCO 1,093 2,523

DMT 92 133

ATEC 200 114

MPHHI 54 −

CII B&R (12) (12)

Others 41 (5)

Discontinued operations − 73

Dividends:

MERALCO (5,327) (5,429)

Balance at end of the period 517 602

Accumulated share in the investees’ OCI


Share in investees’ OCI during the period (1,660) 264

Total 40 2,914

Less allowance for impairment loss


Provision − −

Total 1,634 1,323

P=160,710 P=148,294

28

MERALCO

MERALCO is a Philippine corporation with its shares listed on the PSE. It is the largest distributor of

electricity in the Philippines with its franchise valid until June 2028. The fair value of the Company’s

effective 45.5% investment in MERALCO amounted to P=115 billion and P=162 billion as at

March 31, 2020 and December 31, 2019 based on the quoted price of MERALCO as at those dates.

While the carrying value of the investment in MERALCO exceeded the quoted share price value as at

March 31, 2020, the Company considers this decline as temporary and not requiring impairment testing in

the absence of other impairment indicators (such as significant financial difficulty, probable bankruptcy or

breach of significant contracts and covenants). Moreover, the share price of MERALCO subsequently

recovered with the fair value of the Company’s effective investment in MERALCO estimated at

P=130 billion based on quoted price as at May 6, 2020, exceeding the March 31, 2020 carrying value of

P=123 billion.

On February 24, 2020, the BOD of MERALCO approved the declaration of cash dividends of P=10.395 a

share to all shareholders of record as at March 20, 2020, payable on April 15, 2020. This consists of a

final regular cash dividend of P=5.108 per share and a special cash dividend of P=5.287 per share. The total

dividends attributable to the Company (MPIC and Beacon Electric) amounted to P=5,327 million and is

included in the dividend receivable account in the consolidated financial statement of position as at

March 31, 2020. Dividends were fully collected in April 2020.

ATEC

ATEC has ownership in the following companies: (i) 75% in Sarangani Energy Corporation which owns a

2x118.5 MW (gross capacity) baseload coal-fired (with the second 118.5 MW unit in Sarangani Province

declaring commercial operations on October 10, 2019) in Maasim, Sarangani Province; (ii) 100% in San

Ramon Power, Inc. (SRPI) which is developing a 120 MW gross capacity baseload coal-fired plant in

Zamboanga City; and (iii) 100% in ACES Technical Services Corporation.

Termination of SRPI Power Supply Agreement. In a letter dated March 26, 2019, Zamboanga City

Electric Cooperative (ZAMCELCO) sent a Notice of Termination for the Power Sales Agreement (PSA)

with SRPI.

ZAMCELCO’s basis for terminating the PSA was the failure of the parties to achieve the Effective Date

under the PSA. Under the PSA, specific conditions needed to be achieved in order to trigger the Effective

Date of the PSA. However, in an agreement dated October 25, 2018 – a full 5 months prior to the

issuance of the termination letter – ZAMCELCO and SRPI entered into an agreement whereby the parties

declared that the remaining conditions precedent for Effective Date shall be waived. Accordingly, in the

same agreement, the parties agreed that the Effective Date of the PSA shall be set on October 5, 2018.

Under the PSA, SRPI has 36 months from Effective Date, or until October 2021, to start delivering power

to ZAMCELCO. SRPI may supply the power from its plant, or it may source the power from third

parties.

In a letter dated May 14, 2019, SRPI responded to ZAMCELCO’s termination letter to repudiate the

termination. SRPI essentially argued that the Effective Date has been achieved and there is no basis to

terminate the PSA.

As at May 6, 2020, the parties are still in the process of discussing the issue.

DMT

DMT is a major toll road operator in Bangkok, Thailand. The concession for DMT runs until 2034 for the

operation of a 21.9-kilometer six-lane elevated toll road from central Bangkok to Don Muang

International Airport and further to the National Monument, north of Bangkok.

29

CII B&R

CII B&R and its subsidiaries are primarily engaged in the construction, development and operation in

urban infrastructure sector under the BOT contracts and Built-Transfer contracts. CII B&R is incorporated

in Vietnam and listed in Ho Chi Minh City Stock Exchange.

The fair value of CII B&R shares held by the Company (including the equivalent shares of the potential

voting rights) based on quoted market price amounted to VND3,848 billion (P=8.25 billion) and

VND3,423 billion (P=7.5 billion) as at March 31, 2020 and December 31, 2019, respectively.

JLB

JLB is a toll road company that operates a 9.7 km length toll road that connects Kebon Jeruk (West

Jakarta) with Penjaringan (Soekarno- Hatta International Airport area, Cengkareng).

9. Service Concession Assets

This account consists of the following:

March 31,

2020

(Unaudited)

December 31,

2019

(Audited)

(In Millions)

Water: Maynilad P=98,919 P=97,347

Metro Pacific Iloilo Water, Inc. (MPIWI) 1,710 1,656

Phu Ninh Water Treatment Plant Joint Stock

Company (PNW) 1,380 1,365

Metro Iloilo Bulk Water Supply Corporation

(MIBWSC) 1,047 1,042

PHI 482 475

PT Nusantara 395 469

Metro Pacific Dumaguete Water Service Inc.

(MPDW) 50 39

103,983 102,393

Toll Operations:

NLEX Corp 47,019 45,093

MPCALA Holdings, Inc. (MPCALA) 33,622 32,522

PT Nusantara 14,346 14,946

Cebu Cordova Link Expressway Corporation

(CCLEC) 12,842 9,706

CIC 11,028 10,898

118,857 113,165

Rail:

LRMC (LRT-1) 27,167 24,931

P=250,007 P=240,489

30

The movements in the service concession assets follow:

As at March 31, 2020

(Unaudited)

Water

Toll

operations

Rail Total

(In Millions)

Cost: Balances at January 1, 2020 P=143,302 P=122,803 P=24,931 P=291,036

Additions 2,382 7,350 1,848 11,580

Capitalized borrowing cost 151 1,168 388 1,707

Exchange differences (82) (2,565) ‒ (2,647)

Balances at March 31, 2020 145,753 128,756 27,167 301,676

Accumulated amortization:

Balances at January 1, 2020 29,492 9,638 – 39,130

Additions 874 366 ‒ 1,240

Exchange differences (13) (105) ‒ (118)

Balances at March 31, 2020 30,353 9,899 ‒ 40,252

Impairment:

Balance at January 1, 2020 11,417 ‒ ‒ 11,417

11,417 ‒ ‒ 11,417

P=103,983 P=118,857 P=27,167 P=250,007

Service concession assets still under on-going construction and rehabilitation amounting to P=86,859 million

and P=80,998 million as at March 31, 2020 and December 31, 2019, respectively, are considered as contract

asset under PFRS 15. These service concession assets that are not yet available for use are subjected to

impairment testing under PAS 36 (see Note 10).

Additions to the service concession assets during the first quarter of 2020 included the following:

Service Concession Assets – Water: For Maynilad’s service concession asset, additions included the

following: (i) the cost of rehabilitation works and additional construction; (ii) concession fee drawdown

for Angat Water Transmission Improvement Project (AWTIP), advance payment for Kaliwa Dam

construction and various local component costs amounting to P=189.0 million; and (iii) capitalized

borrowing cost amounting to P=150.9 million.

For MPW, increase in the service concession assets included: (i) additions from the implementation of the

water concession project of MPIWI with Metro Iloilo Water District (MIWD) and (ii) various

development cost for MPDW amounting to P=10.9 million.

Service Concession Assets – Toll Operations: (i) the ongoing construction of CALAEX (P=1,134 million

with accretion of concession fee of P=260 million); (ii) NLEX Corp’s Segment 10 R10 section project

(P=1,472 million), Subic Freeport Expressway expansion (P=297 million), and NLEX Connector Road

Project (P=276 million with accretion of concession fee of P=52 million); (iii) CIC’s CAVITEX R1

Enhancement (P=61 million), and C5 South Link (P=40 million); (iv) CCLEC’s ongoing construction of

Cebu Cordova Link Expressway (P=3,136 million); and (v) PT Nusantara’s ongoing construction in

Pettarani, Makassar (P=1,976 million); and (vi) remaining additions pertain to construction costs on other

various concession projects.

Service Concession Assets – Rail: On-going rehabilitation of the LRT-1 existing line and the pre-

construction activities for the Cavite Extension.

31

10. Goodwill and Intangible Assets


(Unaudited)

Intangible Assets

Goodwill

Customer

Contracts Others Total

(In Millions)

Cost:

Balance at January 1, 2020 P=25,868 P=3,850 P=859 P=4,709

Additions − − 8 8

Exchange difference (161) − − −

Balance at March 31, 2020 25,707 3,850 867 4,717

Accumulated amortization:

Balance at January 1, 2020 − 1,046 364 1,410

Additions (see Note 18) − 42 34 76

Balance at March 31, 2020 − 1,088 398 1,486

Impairment:

Balance at January 1, 2020 10,192 20 − 20

Additions − − − −

Balance at March 31, 2020 10,192 20 − 20

P=15,515 P=2,742 P=469 P=3,211

Goodwill. The carrying amount of goodwill allocated to each of the CGU (determined to be at the

subsidiary level):

March 31,

2020

December 31,

2019

(Unaudited) (Audited)

(In Millions)

Power:

RPSL P=138 P=164

Toll Operations:

MPTC/TMC 8,859 8,859

CIC 4,966 4,966

PT Nusantara 778 914

Easytrip Services Corporation (ESC) 388 388

SESI 42 42

Water:

PNW 288 287

Logistics:

Premier 56 56

P=15,515 P=15,676

Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances

indicate that the carrying amount may be impaired.

In light of the impact of COVID-19 and the ECQ restricting movements and construction activities (see

Note 3), management reassessed recoverable amounts for the Company’s material goodwill and significant

service concession assets not yet available for use (see Note 9). Forecasts and the underlying assumptions

from an earlier impairment testing date (those disclosed in the annual consolidated financial statements as at

December 31, 2019), have been revised to reflect the economic conditions at March 31, 2020 and updated to

reflect the potential impact of COVID-19. Based on management’s assessment, no impairment loss to be

recognized on goodwill and service concession assets not yet available for use as at March 31, 2020.

32

11. Accounts Payable and Other Current Liabilities

March 31,

2020

(Unaudited)

December 31,

2019

(Audited)

(In Millions)

Accrued construction costs P=10,880 P=8,451

Trade and accounts payable 5,064 6,443

Retention payable 3,537 3,442

Interest and other financing charges 2,763 2,443

Output taxes payable 2,555 2,422

Dividends payable (a) 2,131 2,900

Accrued expenses 1,916 2,223

Accrued outside services 1,531 1,886

Accrued personnel costs 1,366 1,681

Withholding taxes payable 702 992

LTIP payable (b) 470 –

Lease liabilities (c) 329 348

Accrued PNCC and BCDA fees 306 893

Loan prepayment and refinancing costs payable 276 461

Deposit from NGCP 126 126

Option liability (see Note 24) 42 46

Unearned revenues 30 71

Contract liabilities/unearned connection and

installation fees (d) 30 27

Others 1,451 1,508

P=35,505 P=36,363

a. As at March 31, 2020 and December 31, 2019, dividends payable included dividends due to non-

controlling shareholders of GBPC amounting to P=2,095 million.

b. The current portion of the LTIP payable as at March 31, 2020 pertains to the LTIP cycle of MPTC

(2018 to 2020). The non-current portion of the LTIP payable amounting to P=745 million as at

March 31, 2020 pertains to MPIC and Maynilad LTIP cycle 2019 to 2021.

Each LTIP performance cycle generally covers three (3) years with payment intended to be made at

the end of each cycle (without interim payments) and is contingent upon the achievement of an

approved target core income of the Company by the end of the performance cycle.

c. The noncurrent portion of lease liabilities amounted to P=1,051 million and P=652 million and included

under “Other long-term liabilities” (see Note 2) as at March 31, 2020 and December 31, 2019,

respectively.

d. Unearned connection and installation fees are initially recognized from the collection of the fees and

is then recognized as revenue over the remaining concession period as the Company provides water

and sewerage services to customers. The noncurrent portion amounted to P=489 million and

P=442 million and is reported under “Other long-term liabilities” as at March 31, 2020 and December

31, 2019, respectively.

33

12. Provisions

Movements in this account are as follow:

March 31, 2020

(Unaudited)

Heavy

Maintenance

Decommissioning

Liability

Other

Provisions Total

(In Millions)

Balance at January 1, 2020 P=511 P=614 P=10,614 P=11,739

Additions and accretion 73 157 97 327

Payments (31) − (50) (81)

Exchange differences (5) − (11) (16)

548 771 10,650 11,969

Less current portion − − 6,929 6,929

P=548 P=771 P=3,721 P=5,040

Other provisions consist of estimated liabilities for losses on claims by third parties. The information

usually required by PAS 37, Provisions, Contingent Liabilities and Contingent Assets, is not disclosed as

it may prejudice the Company’s negotiation with third parties. Also included in the other provisions are

provisions recognized in relation to the deconsolidation of MPHHI (see Note 24).

13. Long-term Debt

This account consists of:

March 31,

2020

(Unaudited)

December 31,

2019

(Audited)

(In Millions)

Current portions P=19,055 P=18,459

Noncurrent portions 234,375 231,450

P=253,430 P=249,909

Details of the long-term debt per company/segment as follows:

March 31,

2020

(Unaudited)

December 31,

2019

(Audited)

Loans

Long-term

Bonds Total

Total

(In Millions)

MPIC P=81,018 P=− P=81,018 P=85,771

Power 40,196 − 40,196 41,544

Toll Operations 62,881 12,957 75,838 68,274

Water 42,908 − 42,908 42,891

Rail 14,220 − 14,220 11,983

Logistics 889 − 889 1,055

242,112 12,957 255,069 251,518

Less unamortized debt issue cost 1,556 83 1,639 1,609

P=240,556 P=12,874 P=253,430 P=249,909

34

An analysis of the carrying amounts of borrowings into fixed and variable interest rates per

company/segment as follows:

Fixed Variable Total

March 31,

2020

(Unaudited)

December 31,

2019

(Audited)

March 31,

2020

(Unaudited)

December 31,

2019

(Audited)

March 31,

2020

(Unaudited)

December 31,

2019

(Audited)

MPIC P=80,460 P=85,198 P=– P=– P=80,460 P=85,198

Power 40,179 41,525 – – 40,179 41,525

Toll Operations 63,120 56,677 12,235 11,134 75,355 67,811

Water 35,001 34,990 7,567 7,551 42,568 42,541

Rail 13,979 11,779 – – 13,979 11,779

Logistics 889 1,055 – – 889 1,055

P=233,628 P=231,224 P=19,802 P=18,685 P=253,430 P=249,909

The carrying amounts of the borrowings are denominated in the following currencies:

March 31, 2020 (Unaudited)

Philippine

Peso

Indonesian

Rupiah

U.S.

Dollars

Thai

Baht

Japanese

Yen

Vietnamese

Dong Euro Total

MPIC P=80,460 P=– P=– P=– P=– P=– P=– P=80,460

Power 40,179 – – – – – – 40,179

Toll Operations 67,908 4,446 1,519 1,373 – – 109 75,355

Water 29,887 – 6,780 – 5,115 786 – 42,568

Rail 13,979 – – – – – – 13,979

Logistics 889 – – – – – – 889

P=233,302 P=4,446 P=8,299 P=1,373 P=5,115 P=786 P=109 P=253,430

Other relevant information on the Company’s long-term borrowings are provided below:

▪ Loan Drawdowns from Existing Facilities. During the first quarter of 2020, LRMC made drawdowns

against its OLSA amounting to P=2,236.9 million to finance the rehabilitation of existing system

construction of Cavite Extension.

In January 2020, CCLEC made a drawdown amounting toP=1.65 billion from its P=19.0 billion Loan

Facility which is intended to partially finance the on-going construction of the CCLEX project.

In March 2020, CIC made drawdowns against existing facilities amounting to a total of P=1,500 million to

finance the construction of CAVITEX R1 Enhancements Phase 2 and C5 South Link Segments 2 and 3.

▪ New Loan Facilities/Borrowings. In March 2020, NLEX Corp. short term bridge loans from a local

bank totaling P=4.0 billion. Also in March 2020, NLEX Ventures Corporation availed of short-term

loans from local banks amounting to total of P=68.0 million to be used for working capital

requirements.

In March 2020, MPTC obtained a bridge loan from a local bank amounting to P=2.1 billion, to

pre-finance other funding requirements for the year 2020.

▪ Loan Prepayment. In December 2019, as part of the Company’s plans to reduce its existing debts,

MPIC sought consent from all of its lenders as it intended to prepay the outstanding portion of the

debt under the P=6.48 Billion, 10-Year Notes Facility Agreement dated June 19, 2013 with a local

bank. MPIC effected and implemented this debt reduction exercise on February 13, 2020.

▪ Others. Cagayan de Oro Bulk Water, Inc. (COBI) applied for a 30-day grace period as allowed by

Section 4 of Republic Act No. 11469 also known as Bayanihan to Heal as One Act on its Security

Bank term loan amortization due on May 4, 2020. With the applied grace period, the new maturity

date is on June 3, 2020.

35

▪ The credit agreements provide for certain restrictions with respect to, among others, availing other

loans or advances to any of the Company’s affiliates, subsidiaries, stockholders, directors and officers

except in compliance with formally established and existing fringe benefit program of the Company.

These restrictions were complied with by the Company.

▪ The loan agreements contain among others, covenants regarding the maintenance of certain financial

ratios such as debt-to-equity ratio, debt service coverage ratio and maintenance of debt service reserve

account. As at March 31, 2020, MPIC and its subsidiaries are in compliance with their respective

debt covenants.

14. Service Concession Fees Payable

The movements in the service concession fees payable follow:


(Unaudited)

Toll

Operations Water Rail Total

(In Millions)

Balance at beginning of year P=21,991 P=7,364 P=3,543 P=32,898

Interest accretion (see Note 20) – 146 – 146

Interest accretion – capitalized 311 – 55 366

Foreign exchange differential – 222 – 222

Payment – (745) (67) (812)

22,302 6,987 3,531 32,820

Less current portion 4,368 1,293 257 5,918

P=17,934 P=5,694 P=3,274 P=26,902

Toll Operations. Concession fees relate to the CALAEX and the Connector Project:

▪ CALAEX. In consideration for granting the concession, MPCALA shall pay DPWH a concession fee

amounting to P=27.3 billion, 20% or P=5.5 billion of which was settled upon signing of the concession

agreement (July 10, 2015). The balance of the concession fee (nominal amount of P=21.8 billion) is

payable in equal annual instalments beginning on the 5th year (2020) over a period of 9 years from the

signing of the concession agreement.

▪ Connector Project. Under the concession agreement, NLEX Corp shall pay periodic payments to DPWH

representing the consideration for granting the concession and basic right of way in the Connector Road

Project. Total payments to be made to DPWH amount to P=8.5 billion, payable at P=243.2 million per

annum. The payment shall commence on the first anniversary of the construction completion deadline, as

extended, until the expiry of the concession period and shall be subject to an agreed escalation every two

years based on the prevailing CPI for the two-year period immediately preceding the adjustment or

escalation.

Water.

▪ Maynilad. Concession fees relating to Maynilad’s service concession agreement are denominated in

various currencies and are non-interest bearing. These are payable monthly following an amortization

table up to the end of the concession period.

▪ MPIWI. Under the service contract agreement between MPIWI and MIWD, MPIWI shall pay annual

service fee to MIWD representing the sum of the contract monitoring fees and fixed lease fees.

36

The annual fixed lease payments represent rentals for MIWD’s making the existing facilities available for

the exclusive use and possession of MPIWI throughout the operational period of twenty-five (25) years.

Rail. Under LRMC’s concession agreement for the LRT-1 Project, LRMC is required to pay the bid

premium of P=9.35 billion (inclusive of VAT) as concession fee, 20% or P=1.87 billion of which was settled

as at Effective Date in accordance with the LRT-1 Concession Agreement. The balance of the concession

fee (nominal amount of P=7.5 billion, inclusive of VAT) is payable in equal quarterly installments over the

concession period with the first payment due beginning the fourth quarter of 2019. Settlement of the

concession fee is through the quarterly balancing payment mechanism reflecting netting of payments due

to Grantors against receivable from Grantors.

15. Due to and from Related Parties

The Company, in the normal course of business, has transactions with related parties which consist mainly

of availment of noninterest-bearing cash advances which are due and demandable anytime.

Composition of amounts due to/from related parties follows:

March 31,

2020

(Unaudited)

December 31,

2019

(Audited)

(In Millions)

Due from related parties:

PT Intisentosa Alam Bahtera (IAB) P=116 P=122

Landco 52 46

PT Tirta Kencana Cahaya Mandiri (TKC) 22 22

MERALCO 19 –

MPHHI 2 97

FPC 1 1

Others 8 16

220 304

Less allowance for impairment 31 31

P=189 P=273

Due to related parties:

PCEV P=7,887 P=7,791

Smart 72 72

MERALCO 2 –

Others 15 15

7,976 7,878

Less current portion 5,696 5,638

Noncurrent portion P=2,280 P=2,240

Due to PCEV represents the present value of the outstanding amount for the purchase price of Beacon

Electric shares acquired in May 2016 and June 2017:

▪ On May 30, 2016, MPIC acquired from PCEV 645,756,250 common shares and 458,370,086

preferred shares of Beacon Electric for the total consideration of P=26.2 billion. Of the total

consideration of P=26.2 billion, P=17.0 billion was settled immediately while the remaining payable to

PCEV shall be paid as follows: (a) P=2.0 billion in June 2017, (b) P=2.0 billion in June 2018,

(c) P=2.0 billion in June 2019, and (d) P=3.2 billion in June 2020. The outstanding balance as at

March 31, 2020 and December 31, 2019 amounted to P=3.2 billion (at nominal amount). PCEV shall

retain the voting rights over these shares until full payment of the total consideration.

37

▪ On June 13, 2017, MPIC entered into a Share Purchase Agreement with PCEV for the purchase of

PCEV’s 25% remaining interest in Beacon Electric for a total purchase price of P=21.8 billion,

P=12.0 billion was settled immediately while the remaining payable to PCEV shall be settled equally

over the next four years beginning June 30, 2018. The outstanding balance as at March 31, 2020 and

December 31, 2019 amounted to P=4.9 billion (at nominal amount). PCEV shall retain the voting

rights over these shares until full payment of the total consideration.

16. Equity

Details of authorized and issued capital stock follow:

March 31, 2020

(Unaudited)

December 31, 2019

(Audited)

No. of Shares Amount No. of Shares Amount

(In Millions except for number of shares)

Authorized common shares - P=1.00 par value 38,500,000,000 P=38,500 38,500,000,000 P=38,500

Authorized preferred shares:

Class A - P=0.01 par value 20,000,000,000 200 20,000,000,000 200

Class B - P=1.00 par value 1,350,000,000 1,350 1,350,000,000 1,350

Balance at end of the period 59,850,000,000 P=40,050 59,850,000,000 P=40,050

Issued and Outstanding - common shares:

Balance at beginning of year 31,569,338,752 P=31,570 31,541,548,752 P=31,542

Exercise of stock option plan − − 27,790,000 28

Issued - common shares 31,569,338,752 31,570 31,569,338,752 31,570

Less: Treasury Shares (214,083,000) (214) (600,000) (1)

Balance at end of the period 31,355,255,752 P=31,356 31,568,738,752 P=31,569

Treasury shares - common shares:

Balance at beginning of year 600,000 P=4 26,100,000 P=178

Share buy-back 213,483,000 704 600,000 3

Share grant issue − − (26,100,000) (177)

Balance at end of the period 214,083,000 P=708 600,000 P=4

Issued - preferred shares - Class A:

Balance at beginning of year 9,128,105,319 P=91 9,128,105,319 P=91

Issuance of shares − − − −

Balance at end of the period 9,128,105,319 P=91 9,128,105,319 P=91

Total number of stockholders 1,302 − 1,307 −

Cash Dividends


2020 2019

(Unaudited)

(In Millions)

Final dividend in respect of the previous financial year

declared during the following interim period:

Common shareholder (P=0.076 as final dividend for the

calendar years 2019 and 2018, respectively) P=2,396.3 P=2,395.1

Class A preferred shareholders* 4.6 4.6

P=2,400.9 P=2,399.7

*MPHI is the sole holder of Class A preferred shares

On February 26, 2020, the BOD approved the declaration of cash dividends of P=0.076 per common share

in favor of the Company’s shareholders of record as of the record date at March 12, 2020 with payment

38

date of March 20, 2020. On the same date, the BOD also approved the declaration of cash dividends

amounting to a total of P=4.6 million in favor of MPHI as the sole holder of Class A Preferred shares.

Non-controlling Interest (NCI)

Aside from the changes in NCI arising from transactions disclosed in Note 4 (transaction with NCI),

movements in the NCI for the three-month period ended March 31, 2020 included equity infusion of the

other shareholders of LRMH and LRMC into the LRT-1 Project amounting to P=335 million.

Other comprehensive income (loss) reserve

Other comprehensive income (loss) reserve consists of the following, net of applicable income taxes:

March 31,

2020

(Unaudited)

December 31,

2019

(Audited)

(In Millions)

Share in the OCI of equity method investees (see Note 8) P=42 P=1,703

Fair value changes on financial assets at FVOCI (see Note 25) 3 69

Actuarial losses (302) (315)

Cumulative translation adjustment (see Note 17) (2,975) (866)

Total (P=3,232) P=591

Refer to Note 17 for the movements and analysis of the other comprehensive income (loss).

Treasury Shares

On February 26, 2020, the MPIC BOD also approved the implementation of a Share Buyback Program.

Said program to run for a period of three (3) months from the date of the approval by the BOD or until

May 26, 2020, with the amount of up to P=5 billion being allocated to effect share buybacks under the

program. The purpose for the Share Buyback Program was to improve shareholder value.

A total of 213,483,000 shares were acquired for purposes of the Share Buyback Program for an

accumulated cost of P=704 million. However, in light of the potential impact of COVID-19 on the

Company’s cash flows, MPIC has suspended the share buyback program.

17. Other Comprehensive Income (Loss)

Three Months Ended

March 31

2020 2019

(Unaudited) (In Millions)

Items to be reclassified to profit or loss in subsequent periods:

Exchange difference on translation of foreign operation (P=2,108) P=264

Share in OCI of equity method investees from (see Note 8):

Exchange differences on translation of foreign operation (1,662) 264

Net gain (loss) on change in fair value of financial assets at FVOCI – (48)

Changes in fair value of financial assets at FVOCI (92) –

Income tax 7 (76)

(P=3,855) P=404

39

Items not to be reclassified to profit or loss in subsequent periods:

Actuarial reserve P=19 P=7

Net loss on change in fair value of financial assets at FVOCI (1) (1)

Income tax (6) (2)

P=12 P=4

(P=3,843) P=408

On consolidation, the assets and liabilities of foreign operations are translated into Philippine Peso at the

rate of exchange prevailing at the reporting date and their statements of comprehensive income are

translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on

translation for consolidation are recognized in OCI.

The exchange difference on translation of foreign operation is attributable to the translation of PT

Nusantara’s statement of financial position and statement of comprehensive income from Indonesian

Rupiah (IDR; PT Nusantara’s functional currency) to Philippine Peso (PHP). Exchange rate used for

translation as at March 31, 2020 is at IDR0.00311:PHP1.00 as compared with rate used at

December 31, 2019 of IDR0.00365:PHP1.00.

18. Costs of Sales and Services


2020

2019

*Re-presented

(Unaudited)

(In Millions)

Fuel costs P=1,762 P=2,301

Amortization of service concession assets (see Note 9) 1,240 1,228

Personnel costs and employee benefits 1,094 1,028

Depreciation and amortization 976 745

Repairs and maintenance 527 545

Purchased power and transmission charges 498 431

PNCC and BCDA fees 468 467

Utilities 356 384

Materials and supplies 299 223

Contracted services and professional fees 220 306

Insurance 103 83

Provision for heavy maintenance 73 113

Trucking costs 57 37

Operator’s fee 34 30

Rentals 26 27

Others 220 216

P=7,953 P=8,164 *Comparative period re-presented as a result of the deconsolidation of a subsidiary in 2019 (see Note 24 for details).

40

19. General and Administrative Expenses


2020

2019

*Re-presented

(Unaudited)

(In Millions)

Personnel costs P=907 P=934

Taxes and licenses 667 595

Depreciation and amortization 305 317

Outside services 294 294

Professional fees 121 112

Repairs and maintenance 104 72

Entertainment, amusement and representation 90 76

Public relation 86 47

Advertising and promotion 72 53

Utilities 39 38

Transportation and travel 48 60

Collection charges 41 39

Insurance 41 31

Administrative supplies 21 25

Rentals 20 6

Miscellaneous 339 366


20. Interest Income, Interest Expense and Others

The following are the sources of the Company’s interest income:


2020

2019

*Re-presented

(Unaudited)

(In Millions)

Cash and cash equivalents, short-term deposits and

restricted cash P=460 P=800

Finance income from concession financial receivable

(see Note 6) 38 14

Investment in bonds, treasury notes and others 14 7

P=512 P=821 *Comparative period re-presented as a result of the deconsolidation of a subsidiary in 2019 (see Note 24 for details).

41

The following are the sources of the Company’s interest expense:


2020

2019

*Re-presented

(Unaudited)

(In Millions)

Long-term debt P=2,453 P=2,789

Accretion on service concession fees payable

(see Note 14) 146 133

Accretion on financial liabilities 107 160

Amortization of debt issue costs 36 27

Accretion on lease liabilities 26 19

Others 7 8


“Others” recognized in the consolidated statements of comprehensive income consists of the following:


2020

2019

*Re-presented

(Unaudited)

(In Millions)

Advertising, marketing, and toll services P=71 P=105

Foreign exchange gains (loss) - net 35 (19)

Rental income 24 22

Dividend income 17 – Net gain (loss) on prepayment of loan (see Note 13):

Penalties and other prepayment charges – (32)

Derecognized unamortized debt issue cost – (7)

Others 78 26

P=225 P=95 *Comparative period re-presented as a result of the deconsolidation of a subsidiary in 2019 (see Note 24 for details).

21. Earnings per Share

The calculation of earnings per share follows:


2020 2019

(Unaudited)

(In Millions, except

for Per Share amounts)

Net income attributable to equity holders of the

Parent Company: Continuing operations P=1,890 P=3,300

Discontinued operations − 242

1,890 3,542

(Forward)

42


2020 2019

(Unaudited)

(In Millions, except

for Per Share amounts)

Dividends on preference equity holders of the

Parent Company (2) (2)

Net income attributable to ordinary equity

holders of the Parent Company (a) P=1,888 P=3,540

Outstanding common shares at January 1 31,569 31,515

Effect of share buyback (see Note 16) (47) −

Weighted average number of common shares

for basic earnings per share (b) 31,522 31,515

ESOP and effect of share award 1 30

Weighted average number of common shares

adjusted for the effects of potential dilution (c) 31,523 31,545

Basic earnings per share (in centavos) (a/b) P=5.99 P=11.23

Diluted earnings per share (in centavos) (a/c) P=5.99 P=11.22

To calculate the earnings per share for discontinued operations (see Note 24), the weighted average

number of ordinary shares for both the basic and diluted earnings per share is as per the table above.

22. Share-based Payments

Restricted Stock Unit Plan (RSUP)

On January 31, 2020, the Compensation Committee approved MPIC’s LTIP covering cycle 2019 to 2021.

MPIC’s LTIP comprises of cash incentives and share award. The Company shall secure exemption ruling

from the SEC on the share award, which is necessary for the Company to reacquire MPIC common shares

in the market.

Fair value of the Share Award was determined using the market closing price of P=3.21 per share on date

of grant. One third (or 33.33%) of the share award vests every 31st of December beginning 2019 until

fully vested by December 31, 2021.

Total Share Award expense under the RSUP for the three-month periods ended March 31, 2020 amounted

to P=8 million included in “Personnel costs” under “General and administrative expenses” account in the

consolidated statements of comprehensive income.

23. Contingencies

The information provided in this report must be read in conjunction with the 2019 audited consolidated

financial statements of the Company.

Updates to the contingencies disclosed in the annual consolidated financial statements as at

December 31, 2019 are provided below. The ultimate outcome of these matters cannot be presently

determined.

43

Water

Rate Rebasing: 2013-2017

▪ 2013-2017 Rate Rebasing - International Arbitration. On July 24, 2017, the Arbitral Tribunal

unanimously upheld the validity of Maynilad’s claim against the Undertaking Letter issued by the

ROP, through the DOF, to compensate Maynilad for the delayed implementation of its relevant tariffs

for the Fourth Rate Rebasing Period (“Second Award”). The Tribunal ordered the ROP to reimburse

Maynilad the amount of P=3.4 billion (this was subsequently corrected to P=3.18 billion) for losses from

March 11, 2015 to August 31, 2016, without prejudice to any rights that Maynilad may have to seek

recourse against MWSS for losses incurred from January 1, 2013 to March 10, 2015. Further, the

Tribunal ruled that Maynilad is entitled to recover from the Republic its losses from

September 1, 2016 onwards. In case a disagreement on the amount of such losses arises, Maynilad

may revert to the Tribunal for further determination.

On February 11, 2019, Maynilad wrote the Department of Finance (DOF) about the amount of its

updated claim for compensation by the ROP, which is P=6.7 billion, with a request that the DOF order

the MWSS and the RO to meet with Maynilad to agree and discuss a proposed settlement of the

updated claim. The DOF did not respond to Maynilad’s letter.

On December 10, 2019, during a joint hearing of the Congressional Committees on Public Accounts

and Good Government and Public Accountability, Maynilad made an oral waiver of its claims against

the ROP amounting to P=6.7 billion which represents Maynilad’s foregone revenues for the period

March 11, 2015 to December 31, 2017. No recognition of this claim has been made in the

consolidated financial statements as at December 31, 2019.

On January 2, 2020, Maynilad executed the Release From and Waiver of Claim on Arbitral Award

(“Waiver”) in favor of the ROP. The waiver was unanimously ratified on March 2, 2020 by the

Maynilad Board of Directors after consultation with the three major shareholders of Maynilad

namely, MPIC, DMCI Holdings, Inc. and Marubeni Corp.

▪ 2013-2017 Rate Rebasing - Domestic Court Actions. In a decision dated August 30, 2017, the

Regional Trial Court, Branch 93 of Quezon City (“RTC”) granted the Petition for Confirmation and

Enforcement of the First Award which petitioner, Maynilad, filed in July 2015 (the “RTC Decision”)

following the refusal of MWSS and the MWSS Regulatory Office to implement the First Award. The

First Award upheld the 13.41% Rebasing Adjustment that Maynilad proposed for the Fourth Rate

Rebasing Period.

The MWSS filed a Motion for Reconsideration of the RTC Decision which the RTC denied in an

Order dated November 23, 2017 (“RTC Order”). The MWSS filed a Petition for Review with the

Court of Appeals (“CA”) on December 27, 2017 asking for a reversal of the RTC Decision and Order.

In its Comment to the Petition for Review, Maynilad prayed for the Petition for Review’s dismissal

and for the immediate enforcement of the RTC Decision and the First Award.

As a consequence of the issuance of the RTC Decision, Maynilad filed, on October 18, 2017, a

Motion for Execution of the First Award (“MotEx”). However, the RTC, on February 6, 2018, denied

the MotEx.

In its decision dated May 30, 2018, the CA denied MWSS’s Petition for Review, and affirmed the

RTC Decision and Order confirming the Final Award (“CA Decision”).

On June 14, 2018, Maynilad filed with the CA a Motion for Clarification (on the CA Decision) for the

CA to confirm that the RTC and CA Decisions are immediately executory, and that MWSS should

therefore implement the Final Award without any further delay (“Motion for Clarification”).

44

In the meantime, on July 11, 2018, Maynilad received MWSS’s Petition for Review on Certiorari

with the SC (under Rule 19.37 of the Special Rules of Court on Alternative Dispute Resolution) with

Manifestation dated July 4, 2018 (the “Petition”). MWSS prayed that the SC (i) reverse and set aside

the CA Decision, and (ii) grant MWSS’s counter-petition and declare MWSS as legally released or

excused from implementing or enforcing the Final Award or, in the alternative, declare the Final

Award as unenforceable.

On July 30, 2018, the CA issued a Resolution noting, without action, the Motion for Clarification that

Maynilad filed “in view of the pending Petition for Review” which the MWSS filed with the SC.

On November 19, 2018, the SC’s Second Division ordered the consolidation of the Petition with the

(five) consolidated petitions pending before the SC En Banc (“Consolidated Cases”), which seek to,

among other things, have the Concession Agreement nullified. On January 11, 2019, Maynilad filed a

Motion to De-Consolidate the Petition from the Consolidated Cases.

On April 5, 2019, Maynilad filed a Reiterative Motion to De-Consolidate and a Reiterative Motion to

Set the Consolidated Cases for Oral Arguments.

On June 18, 2019, the Supreme Court issued a Notice which, among other things, denied, for lack of

merit (with no explanation whatsoever), Maynilad Motion to De-Consolidate. Maynilad, through

counsel, received the Notice on October 11, 2019. The Consolidated Petitions remain pending before

SC.

On January 7, 2020, the SC issued its Resolution, which required the parties “to move in the premises

within 10 days from notice in view of the dropping by the Concessionaires of their claims against the

government arising from arbitration decision” (“Move-In Resolution”).

The Secretary of Finance, through the OSG, filed a Very Urgent Motion (to Set the Consolidated

Cases for Oral Arguments with Leave of Court) dated January 30, 2020, which prayed that the

Consolidated Cases be set Preliminary Conference on February 18, 2020, or on such other date

convenient to the SC, and that the Consolidated Cases be set for oral arguments on the issue of public

utility.

On March 5, 2020, Maynilad submitted its Consolidated Compliance and Comments. Maynilad raised

that “any waiver of the P=6.7 billion (in favor of the ROP) is irrelevant to, and should not affect, the

resolution of the Consolidated Cases. Maynilad further stressed that “regardless of whatever waiver

may or may not be agreed as regards Maynilad’s P=6.7 billion claims against the ROP, such waiver is

without prejudice to any of its rights under the Concession Agreement or the Final Award, and it does

not waive such rights which continue to be protected by the Constitution and by applicable laws”.

Finally, Maynilad posited that the holding of oral arguments should be suspended to await the results

of the parties’ negotiations on the amendments of the Concession Agreement.

As of May 6, 2020, the SC has yet to decide on MWSS’s Petition for Review on Certiorari.

Rate Rebasing: 2018-2022. On March 31, 2017, Maynilad submitted a five-year business plan to the RO

for the new rate rebasing covering the years from 2018 to 2022 with its proposed rate adjustments.

On September 13, 2018, the MWSS issued Resolution No. 2018-136-RO adopting RO Resolution No.

2018-09-CA dated September 7, 2018 granting Maynilad a partial rate adjustment of P=5.73/cu.m. for the

Fifth Rate Rebasing Period (2018 to 2022), to be implemented on an uneven staggered basis of (i)

P=0.90/cu.m. effective October 1, 2018; (ii) P=1.95/cu.m. effective January 1, 2020, (iii) P=1.95/cu.m.

effective January 1, 2021, and (iv) P=0.93/cu.m. effective January 1, 2022. The approved rate adjustment

still does not include the corporate income tax (“CIT”) component to which Maynilad is entitled by virtue

of the First Award. In their Resolutions, the MWSS and RO stated that the inclusion of the CIT in

Maynilad’s tariff is subject to the SC’s resolution of MWSS’s Petition for Review.

45

To preserve its right to the CIT which has already been adjudged in its favor in the First Award, and

pursuant to Article 12 of the Concession Agreement, Maynilad, on October 12, 2018, filed a Dispute

Notice, signaling the start of another arbitration. However, on November 9, 2018, MWSS and Maynilad

filed a joint application with the Appeals Panel to suspend proceedings to give the parties time to try to

settle their differences amicably.

The rate adjustment for January 1, 2020 was not implemented.

Concession Agreement Review and Amendment. With the onset of El Niňo in June 2019, southern

portions of Maynilad’s concession area (West Service Area) began experiencing intermittent water

interruptions brought about by the diminishing raw water allocation from Angat Dam, aggravated by a

protracted algal bloom that affected Laguna Lake which has served as Maynilad’s raw water source to

augment its supply from Angat Dam.

As the water crisis and the concomitant water interruptions stretched throughout the summer months,

Congress initiated hearings in aid of legislation to determine and address the cause of the water crisis.

The water Concession Agreements were brought into sharp focus when news broke out on November

2019 of the Other Operator’s award in an arbitration against the ROP (ordering the Government to

compensate the Other Operator for unimplemented rates beginning 2015).

Subsequently, MWSS issued Resolution No. 2019-201-CO on December 11, 2019, revoking Resolution

No.2009-180 dated September 10, 2009 pertaining to the Extension of the Concession Agreement of

Maynilad from May 7, 2022 to May 6, 2037.

Matters quickly escalated when the Government identified supposedly “onerous provisions” in the

Concession Agreement and ordered its review and amendment. On December 9, 2019, Maynilad received

a letter from MWSS informing Maynilad that the MWSS was directed to perform a review of the

Concession Agreement. The amendments to the provisions of the Concession Agreement may affect,

among others, future tariff increases and service commitments, and the concession period. Any future

amendments to the provisions of the Concession Agreement will be reflected in the financial statements as

these are determined.

On December 20, 2019, MWSS released a press statement clarifying Resolution No. 2019-201-CO and

confirming that the action of the MWSS BOT did not result in the rescission or outright cancellation of

the Concession Agreement.

On December 23, 2019, Maynilad received a letter from MWSS RO confirming that the 25-year CA from

1997 to 2022 and the Memorandum of Agreement (MOA) between Maynilad and the MWSS providing

the 15-year extension from 2022 to 2037 have not yet been cancelled.

As of May 6, 2020, the review of the Concession Agreement is still ongoing and Maynilad has not been

advised of any amendments to the provisions of the Concession Agreement.

Disputes with MWSS. In prior years, Maynilad has been contesting certain charges billed by MWSS

relating to: (a) the basis of the computation of interest; (b) MWSS cost of borrowings; and (c) additional

penalties. Consequently, Maynilad has not provided for these additional charges. These disputed charges

were effectively reflected and recognized by Maynilad as Tranche B Concession Fees amounting to

US$30.1 million by virtue of the Debt and Capital Restructuring Agreement (DCRA) entered into in

2005. Maynilad also paid US$6.8 million in 2005 as an additional amount of Tranche B Concession Fees

determined by the Receiver.

Maynilad reconciled its liability to MWSS with the confirmation and billings of MWSS. The difference

between the amount confirmed by MWSS and the amount recognized by the Maynilad amounted to

P=5.3 billion and P=5.6 billion as at March 31, 2020 and December 31, 2019, respectively. The difference

46

mainly pertains to disputed claims of MWSS consisting of additional Tranche B Concession Fees,

borrowing cost and interest penalty under the Concession Agreement (prior to the DCRA). Maynilad’s

position on these charges is consistent with the Receiver’s recommendation which was upheld by the

Rehabilitation Court.

Following the issuance of the Rehabilitation Court’s Order on December 19, 2007 disallowing the

MWSS’ disputed claims and the termination of Maynilad’s rehabilitation proceedings, Maynilad and

MWSS sought to resolve the matter in accordance with the dispute resolution requirements of the

Transitional and Clarificatory Agreement (TCA).

Prior to the DCRA, Maynilad has accrued interest on its payable to MWSS based on the terms of the

Concession Agreement, which was disputed by MWSS before the Rehabilitation Court. These already

amounted to P=985 million as at December 31, 2011 and have been charged to interest expense in prior

years. Maynilad maintains that the accrued interest on its payable to MWSS has been adequately replaced

by the Tranche B Concession Fees discussed above. Maynilad’s position is consistent with the Receiver’s

recommendation which was upheld by the Rehabilitation Court. With the prescription of the TCA and in

light of Maynilad’s outstanding offer of US$14 million to fully settle the claim of MWSS, Maynilad

reversed the amount of accrued interest in excess of the US$14.0 million settlement offer amounting to

P=378 million in 2012. The remaining balance of P=607 million as at March 31, 2020 and

December 31, 2019, which pertains to the disputed interest penalty under the Concession Agreement prior

to DCRA, has remained in the books pending resolution of the remaining disputed claims of MWSS.

Real Property Taxes Assessment on Common Purpose Facilities. On October 13, 2005, Maynilad and

Manila Water (the Concessionaires) were jointly assessed by the Municipality of Norzagaray, Bulacan for

real property taxes on certain common purpose facilities purportedly due from 1998 to 2005 amounting to

P=357 million. It is the position of the Concessionaires that these properties are owned by the ROP and

therefore, exempt from taxation.

The supposed joint liability of the Concessionaires for real property tax, including interests, as at

March 31, 2020 and December 31, 2019 amounted to P=1.0 billion.

After the Local Board of Assessment Appeals (LBAA) ruled in favor of the Municipality of Norzagaray,

Bulacan, the Concessionaires elevated the ruling of the LBAA to the Central Board of Assessment

Appeals (CBAA) by filing separate appeals.

During the presentation of evidence before the CBAA, the LBAA moved for the presentation of additional

witnesses, which was denied by the CBAA on February 12, 2016.

The LBAA filed a Motion for Reconsideration, which was again denied by the CBAA on June 20, 2016.

As a result, the LBAA filed a Petition for Certiorari before the Court of Tax Appeals (“CTA”).

On September 21, 2016, pursuant to the order of the CTA, the CBAA transmitted the complete records of

the case to the CTA, and held in abeyance all proceedings of the case until the Petition for Certiorari is

resolved.

On May 23, 2018, Court of Tax Appeals’ (CTA) Notice of Decision dated May 11, 2018 was received,

denying Petitioner’s Petition for Certiorari (for an interlocutory order) (“CTA Decision”). Thus, the CTA

ordered that the case be remanded to CBAA and for the proceedings to continue.

On September 3, 2018, Maynilad received the CTA’s Resolution dated June 4, 2018 noting the

compliance of Maynilad and MWSS informing the CTA of their respective dates of receipt of the CTA

Decision.

47

On February 7, 2019, Maynilad received an Entry of Judgment certifying that the CTA Decision became

final and executory on June 20, 2018.

The Concessionaires’ respective appeals remain pending before the CBAA.

Supreme Court Decision on the Philippine Clean Water Act. On September 17, 2019, Maynilad, through

its external counsel, received a copy of the Supreme Court En Banc decision, dated August 6, 2019, in the

case of Maynilad vs The Secretary of the Department of Environment and Natural Resources, et al (the

“Decision”).

The Supreme Court affirmed, with modifications, the decisions of the Court of Appeals finding the

Concessionaires and MWSS guilty of violating Section 8.

For violating Section 8, the Supreme Court held each of the Concessionaires jointly and severally liable

with the MWSS for P=921.5 million for the period May 7, 2009 (the day following the lapse of the

five-year period provided in Section 8) to August 6, 2019, the date of the Decision’s promulgation. The

fine is to be paid within 15 days from the time the Decision becomes final. In addition, MWSS and the

Concessionaires will be liable for the initial amount of P=322,102.00 a day, subject to a further 10%

increase every two years, pursuant to Section 28 of the CWA, until full compliance with the mandate of

Section 8. A 6% interest will be imposed on the total amount of the fines should there be a delay in its

payment.

On October 2, 2019, Maynilad filed a Motion for Reconsideration of the Decision with the Supreme

Court. As at May 6, 2020, the Supreme Court has yet to decide on Maynilad’s Motion for

Reconsideration.

Others. Maynilad is a party to various civil and labor cases relating to breach of contracts with damages,

illegal dismissal of employees, and nonpayment of backwages, benefits and performance bonus, among

others. Other disclosures required by PAS 37 were not provided as it may prejudice Maynilad’s position

in on–going claims, litigations and assessments.

Toll Operations

Toll Rate Adjustments – NLEX Corp. NLEX Corp, as petitioner-applicant, filed the following Petitions for

Approval of Periodic Toll Rate Adjustment with the Toll Regulatory Board (TRB) praying for the adjustment

of the toll rates for the NLEX:

Petition Date Filed Effectivity

2012 Petition June 2012 January 1, 2013

2014 Petition September 2014 January 1, 2015



On October 27, 2015, NLEX Corp was granted the right and obligation to manage, operate, and maintain

the SCTEX under the terms of the Business Agreement between NLEX Corp and BCDA. Under the

agreements covering the SCTEX, toll rate adjustment petitions shall be filed with the TRB yearly. Prior

to October 27, 2015, the BCDA filed petitions for toll rate adjustment effective in 2012, 2013, 2014, and

2016. Thereafter, on September 29, 2016, NLEX Corp, as petitioner-applicant, filed a petition for toll rate

adjustment effective January 1, 2017.

On June 14, 2019, NLEX Corp implemented the Petition for Periodic Toll Rate Adjustment effective

2012 in the SCTEX. Apart from this Petition, all the remaining toll rate adjustments for SCTEX are still

pending with the TRB as of May 6, 2020.

2012 and 2014 Petitions. On February 15, 2019, NLEX Corp received a Consolidated Resolution dated

October 2018 issued by the TRB which approved and allowed NLEX Corp to implement the toll rate

48

adjustment indicated therein on a staggered basis in 2018, 2020, 2021, and 2023. Likewise, on February

15, 2019, the TRB issued a letter to NLEX Corp instructing the latter to publish the Toll Fee Matrix,

which is attached to the said letter in accordance with the 2013 Revised Rules of Procedure of the Toll

Regulatory Board (TRB Rules). In full compliance with the letter, NLEX Corp. caused the publication of

the Toll Fee Matrix in a newspaper of general circulation, once a week for three consecutive weeks in

March 2019. On March 20, 2019, the TRB issued a Notice to Start Collection effective March 21, 2019.

Segment 10 Add-on Toll Rate Petition. On January 22, 2019, NLEX Corp as petitioner-applicant, filed a

Petition for Implementation of Approved Adjustment to Authorized Toll Rates with Application for

Provisional Relief with the TRB praying for the adjustment of the toll rate for the NLEX Open System

effective February 15, 2019 upon completion of the NLEX Harbor Link Project (NLEX Segments 9 and

10) (Segment 10 Add-on Toll Rate Petition).

On February 15, 2019, the TRB issued an Order finding NLEX Corp’s subject Petition to be sufficient in

form and directed NLEX Corp to publish in full the contents of the Petition in a newspaper of general

circulation, in accordance with applicable rules and laws, with a notice that all interested tollway users

may file a petition for review of the proposed adjusted toll rates. In full compliance with the Order and

TRB Rules, NLEX Corp caused the publication of the Petition in a newspaper of general circulation, once

a week for three consecutive weeks in February and March 2019. On March 5, 2019, the TRB issued a

letter to NLEX Corp stating that the TRB (a) conditionally approved the subject Petition and granted

NLEX Corp. provisional authority to collect the add-on tolls for the Open System of the NLEX and

(b) allowing the implementation of the new authorized toll price for the NLEX (Integrated Toll Fee

Matrix) which is attached to the said letter. The Integrated Toll Fee Matrix includes both: (a) the first

tranche of the approved adjusted toll rates in the 2012 and 2014 Petitions stated in the TRB’s

Consolidated Resolution dated October 2018; and (b) the provisionally approved add-on toll rates in the

Segment 10 Add-on Toll Rate Petition. In the same letter, the TRB instructed NLEX Corp to: (a) cause

the publication of the Integrated Toll Fee Matrix in accordance with the provisions of the TRB Rules and

(b) post the required bond amounting to P=530.0 million or the equivalent of one (1) year collection of

add-on rate. In full and complete compliance with the instructions of the TRB, NLEX Corp (a) submitted

the original of the Surety Bond issued by the Prudential Guarantee and Insurance Inc. in favor of the

Republic of the Philippines, acting by and through the TRB, and (b) caused the publication of the

Integrated Toll Fee Matrix in a newspaper of general circulation once a week for three (3) consecutive

weeks in March 2019. On March 20, 2019, the TRB issued a Notice to Start Collection effective

March 21, 2019. In March 2020, NLEX Corp posted an extension of the Surety Bond for six (6) months.

NLEX Corp agreed to implement a P=1.00 reduction in the Open system approved toll fees across all

vehicle classes to cushion the impact of toll adjustments to motorists.

Arbitration. In August 2015, NLEX Corp wrote the ROP, acting by and through the TRB, a Final

Demand for Compensation based on overdue 2013 and 2015 Toll Rate Adjustments (Final Demand). In

the letter, NLEX Corp stated that the ROP’s/TRB’s inexcusable refusal to act on the 2012 Petition and

2014 Petition is in total disregard and a culpable violation of applicable laws and contractual provisions

on the matter, to the great prejudice of NLEX Corp., which has continuously relied in good faith on such

contractual provisions as well as on the timely and proper performance of the ROP’s/TRB’s legal and

contractual duties.

In view of the failure of the ROP/TRB to heed the Final Demand, NLEX Corp sent a Notice of Dispute

to the ROP/TRB dated September 11, 2015 invoking STOA Clause 19 (Settlement of Disputes). STOA

Clause 19.1 states that the parties shall endeavor to amicably settle the dispute within sixty (60) calendar

days. The TRB sent several letters to NLEX Corp requesting the extension of the amicable settlement

period. However, NLEX Corp has not received any feasible settlement offer from the ROP/TRB.

Accordingly, on April 4, 2016, NLEX Corp. was compelled to issue a Notice of Arbitration and

Statement of Claim (Notice of Arbitration) to the ROP, acting by and through the TRB, consistent with

49

STOA Clause 19 in order to preserve its rights under the STOA. In the Notice of Arbitration, NLEX

Corp appointed retired SC Justice Jose C. Vitug as its nominee to the arbitral tribunal.

In a letter dated May 3, 2016, the ROP, acting by and through the Office of the Solicitor General (OSG),

notified NLEX Corp of its appointment of retired SC Chief Justice Reynato S. Puno as its nominee to the

arbitral tribunal.

In a letter dated June 1, 2016, NLEX Corp. proposed that the arbitration be held in Singapore which is

the seat of arbitration that the ROP has chosen for its various PPP projects, and proposed the Singapore

International Arbitration Center as the Appointing Authority. The proposal was accepted by the ROP,

acting by and through the OSG in a letter dated July 13, 2016 but reiterated its previous proposal that a

Philippine-based institution/person be the Appointing Authority.

On June 27, 2017, the initial case management conference was held in Singapore.

On December 11, 2017, NLEX Corp. submitted its Updated Statement of Claim.

On December 27, 2017, Respondent ROP/TRB filed its request for bifurcation, which was accordingly

granted, i.e., the proceedings were divided into two parts: first, the issue on whether or not the tribunal has

jurisdiction over NLEX Corp.’s claim, and second, the main merits of the claim as set forth in the Updated

Statement of Claim.

In January 2018, the ROP/TRB and NLEX Corp submitted their respective statements on the matter of

jurisdiction. In July 2018, the Arbitral Tribunal issued Procedural Order No. 2 whereby the Arbitral Tribunal

declined to dismiss the claim on the basis of the ROP/TRB’s objections to jurisdiction and ordered the

ROP/TRB to submit its Statement of Defense. In September 2018, the ROP/TRB submitted its Statement of

Defense. In October to November 2018, NLEX Corp and the ROP/TRB submitted their respective Requests

for Production of Documents, Objections to the Request for Production of Documents, and Reply to the

Objections to the Request for Production of Documents. In December 2018 and January 2019, the Arbitral

Tribunal resolved NLEX Corp’s and the ROP/TRB’s Request for Production of Documents.

On June 24 to 27, 2019 the arbitration hearings were held in Singapore. In August 2019, NLEX Corp and the

ROP/TRB submitted their respective Post-Hearing Briefs. On December 13, 2019, NLEX Corp sought from

the Arbitral Tribunal a 60-day suspension of the proceedings for the parties to discuss the matter. On

December 19, 2019, the Arbitral Tribunal granted the requested 60-day suspension. In February 2020, the

parties requested the Arbitral Tribunal for a further suspension of the proceedings until April 17, 2020 and

thereafter a further extension such that the arbitration is still pending as at May 6, 2020.

Total amount of compensation for TRB’s inaction on lawful toll rate adjustments, covering the toll rate

petitions of the NLEX (2012, 2014, 2016 and 2018 petitions), and of the SCTEX is approximately at

P=13.7 billion and P=13.0 billion (net of VAT and net of Government’s share) as at March 31, 2020 and

December 31, 2019, respectively.

Toll Rate Adjustments - CIC. CIC has a pending claim for compensation against the ROP, acting by and

through the TRB, in the amount of P=2.8 billion and P=2.7 billion (VAT-exclusive, and net of PRA’s share) as

of March 31, 2020 and December 31, 2019, respectively. The Company’s claim is based on TRB’s inaction

on lawful toll rate adjustments which were due in January 1, 2012, 2014, 2015 and 2016. CIC sent a demand

letter in August 2015 to TRB seeking payment of the said amount. TRB disputed the demand letter and

claimed that no compensation is due to CIC as the toll rate adjustment petitions have not yet been resolved.

Subsequently, CIC sent a Notice of Dispute to the TRB in September 2015 pursuant to the dispute resolution

provisions of the TOA. CIC filed a Petition for Periodic Toll Rate Adjustment on September 20, 2016. TRB

replied, stating that they are studying the petition based on their Rule of Procedure.

On November 16, 2016, CIC filed a Motion for Provisional Approval of Toll Rates under petition filed in

2014. There has been no action on the 2014 petition on the Motion for Provisional Approval.

50

On February 7, 2017, the CIC received a notice from the Permanent Court of Arbitration that Chelva Retnam

Rajah has been designated the appointing authority who will appoint the chairperson of the Arbitration Panel.

On September 30, 2017, the CIC filed another Petition for the next cycle, covering both R-1 and R-1

expressway extension. The Petition has been published in a newspaper of general circulation and the

Company is awaiting TRB’s action thereon as of February 26, 2020.

In December 2017, Claimants CIC and PRA submitted their updated statement of claim with the Arbitration

Tribunal. On December 29, 2017, the Arbitration Tribunal issued a ruling bifurcating the proceedings, i.e.,

separating the issue on its jurisdiction from the merits of the main claim for arbitration.

On January 12, 2018, TRB has filed with the Arbitration Tribunal its jurisdictional objections, essentially

alleging arguments in support of its intention to immediately have the arbitration case dismissed for lack of

jurisdiction on the part of the Tribunal. The Respondent has filed its jurisdictional objections and CIC and

PRA filed their opposition to those objections on January 26, 2018.

The Procedural order no. 2 issued by TRB on July 9, 2018: (a) Denied the request for dismissal of the claims;

(b) reserved the decision on the objections to jurisdiction and admissibility to the merit phase of the

proceedings; (c) instructed the filing in the Statement of Defense from the respondent, to which the claimant

may file a reply brief ; and (d) instructed the parties to confer and agree on an updated timetable to file

pleadings, which must be reported to the Tribunal not later than August 6, 2018.

On August 28, 2018, CIC filed its Compliance Ad Cautelam to TRB's Order stating that: (a) Under the Toll

Operation Agreement, PRA and/or CIC each have distinct and separate right to a periodic adjustment of the

Agreed Toll Rate. Petitions for toll adjustments can be filed by either PRA or CIC, (b) CIC filed its petition

within the prescribed period and the subsequent filing of a similar petition by PRA is a mere superfluity. On

October 12, 2018, CIC filed its petition for approval of add-on agreed toll rate with application for provisional

relief for Phase 1 of Segment project, requesting the TRB to approve and allow the implementation of an add-

on toll of P=0.20 per km.

On January 12, 2019, Atty. Ernesto B. Francisco, Jr. filed his Petition for Review Ad Cautelam. On

March 2, 2019, CIC filed its Comment/Opposition to the Petition for Review Ad Cautelam. On

July 31, 2019, CIC filed its Urgent Motion to Resolve the 2017 Petition.

Within the period of March to May 2019, Claimants CIC and PRA and the ROP/TRB submitted their

respective witness statements, pleadings, factual exhibits, legal authorities, and other pre-hearing

documents.

On June 24 to 27, 2019 the arbitration hearings were held in Singapore. In August 2019, the Claimants

CIC and PRA and the ROP/TRB submitted their respective Post-Hearing Briefs. In December 2019,

Claimants CIC and PRA sought from the Arbitral Tribunal a 60-day suspension of the proceedings for the

parties to discuss the matter.

In February 2020, the parties requested the Arbitral Tribunal for a further suspension of the proceedings

for a period of 60 days or until April 17, 2020. The Arbitral Tribunal granted the request and a subsequent

extension request such that the arbitration is still pending as of May 6, 2020.

R1 Enhancement Phase 1. On July 15, 2019, TRB issued a Resolution (a copy of which was received by

CIC on October 14, 2019) allowing the implementation of the Add-On Toll Rate of P=1.00, P=2.00 and

P=3.00 (VAT-inclusive) for vehicle classes 1, 2 and 3, respectively, subject to the continuing review and

validation by TRB to determine the reasonableness of its imposition and the issuance by COA of its

recommendation once it has completed its audit, effective October 24, 2019.

C5 South Link Expressway Segment 3A-1. On July 4, 2019, CIC filed its Petition for Approval of Initial

Toll for C5 South Link Expressway and Provisional or Interim Initial Toll for Segment 3A-1 requesting

TRB to approve and allow the implementation of the initial toll fees.

51

On July 10, 2019, TRB issued an Order requiring CIC to publish in full the contents of the Petition in a

newspaper of general circulation with a notice that all interested tollway users may file a petition for

review. On July 13, 18, and 22, 2019, CIC completed the publication requirements of TRB.

On August 15, 2019, TRB issued a Resolution (a copy of which was received by CIC on

October 10, 2019) approving and allowing the implementation of the provisional initial toll rate of P=22.00,

P=44.00 and P=66.00 (VAT-inclusive) for vehicle classes 1, 2 and 3, respectively, subject to the review by

the Commission on Audit and to the continuing authority of the TRB to review its reasonableness,

effective October 24, 2019.

The authority to collect the above-mentioned provisional initial toll is valid only for a period of six (6)

months counted from the start of actual toll collection. Within that period, CIC must submit to TRB an

updated investment recovery scheme for the entire CAVITEX, including the C5 South Link Expressway.

Value-Added Tax (VAT) Assessments. On various dates, NLEX Corp received VAT assessments from the

BIR covering taxable years 2006 to 2009 totaling P=3,066 million including penalties. The assessments are

at various stages. On June 11, 2010, NLEX Corp filed its Position Paper with the BIR reiterating its claim

that it is not subject to VAT on toll fees.

On April 3, 2014, the BIR accepted and approved NLEX Corp’s application for abatement and issued a

Certificate of Approval for the cancellation of the basic output tax, interest and compromise penalty

amounting to P=1,010.5 million and P=584.6 million for taxable years 2006 and 2007, respectively.

Notwithstanding the foregoing, management believes, in consultation with its legal counsel, that in any

event, the STOA amongst NLEX Corp, ROP, acting by and through the TRB, and PNCC, provides NLEX

Corp with legal recourse in order to protect its lawful interests in case there is a change in existing laws

which makes the performance by NLEX Corp of its obligations materially more expensive.

Real Property Tax (RPT) Assessments. NLEX Corp and MPT North are also parties to certain claims and

assessments relating to real property taxes (RPT) as follows:

▪ In 2004, MPT North received RPT assessments covering Segment 7 located in the province of Bataan

for the period from 1997 to June 2005 amounting to P=98.5 million for alleged delinquency property

tax. MPT North appealed before the Local Board of Assessment Appeals (LBAA) of Bataan and

prayed for the cancellation of the assessment. In the said appeal, MPT North invoked that the

property is owned by the ROP, hence, exempt from RPT. The case is still pending before the LBAA

of Bataan.

▪ In July 2008 and April 2013, NLEX Corp filed Petitions for Review under Section 226 of the Local

Government Code with the Local Board of Assessment Appeals (LBAA) of the Province of Bulacan

seeking to declare as null and void tax declarations issued by the Provincial Assessor of the Province

of Bulacan. The said tax declarations were issued in the name of NLEX Corp. as

owner/administrator/beneficial user of the NLEX and categorized the NLEX as a commercial

property subject to RPT. The LBAA has yet to conduct an ocular inspection to determine whether the

properties, subject of the tax declarations, form part of the NLEX, which NLEX Corp argues is

property of the public dominion and exempt from RPT. The matter is still pending as at

March 31, 2020.

▪ In September 2013, NLEX Corp received notices of realty tax delinquencies for the years 2006 to

2012 and 2013 issued by the Provincial Treasurer of Bulacan stating that if NLEX Corp fails to pay or

remit the alleged delinquent taxes, the remedies provided for under the law for the collection of

delinquent taxes shall be applied to enforce collection. In September 27, 2013, the Bureau of Local

Government Finance of the Department of Finance (DOF-BLGF) wrote a letter to the Province of

Bulacan advising it to hold in abeyance any further course of action pertaining to the alleged real

property tax delinquency. In October 2013, the Provincial Treasurer of Bulacan has respected the

52

directive from the DOF-BLGF to hold the enforcement of any collection remedies in abeyance. In

January 2017, the Provincial Treasurer of Bulacan issued a notice of realty tax delinquencies for the

years 2006 to 2017 stating that it could apply the remedies provided under the law for the collection

of delinquent taxes. The matter is still pending as at March 31, 2020.

The outcome of the claims on RPT cannot be presently determined. Management believes that these

claims will not have a significant impact on the Company’s consolidated financial statements.

Management and its legal counsel also believe that the STOA also provides NLEX Corp with legal

recourse in order to protect its lawful interests in case there is a change in existing laws which makes the

performance by NLEX Corp of its obligations materially more expensive.

Others. The companies in the toll operations segment are also parties to other cases and claims arising

from the ordinary course of business filed by third parties, which are either pending decisions by the

courts or are subject to settlement agreements. The outcome of these claims cannot be presently

determined. In the opinion of management and its legal counsel, the eventual liability from these lawsuits

or claims, if any, will not have a material adverse effect on the Company’s consolidated financial

statements.

Power

Competitive Selection Process (CSP) on all PSAs. On November 15, 2016, Alyansa Para sa Bagong

Pilipinas, Inc. (ABP) filed a Petition for Certiorari and Prohibition against the Energy Regulatory

Commission (ERC) entitled ABP vs. ERC, et al (GR No. 227670). The Petition asked the Supreme Court

to disapprove certain MERALCO power supply agreements (PSAs) for failure of MERALCO to conduct

a competitive selection process (CSP) in the procurement of its PSAs. This Petition stemmed from DOE

Department Circular No. DC 2015-06-008 which mandated all distribution utilities to undergo CSP in the

procurement of its PSAs. The requirement applied to all PSAs that have not been submitted to the ERC

for approval before June 30, 2015. The ERC subsequently extended the applicability date of the CSP

requirement to April 30, 2016.

Panay Energy Development Corporation (PEDC) and Global Luzon Energy Development Corporation

(GLEDC) were impleaded in this case because they had PSAs with MERALCO that were submitted to

ERC after June 30, 2015 but before the April 30, 2016 applicability date. Other generation companies

with similar PSAs with MERALCO were impleaded as well.

On May 17, 2019, the Supreme Court issued a decision (the “SC Decision”) in the above case requiring

all PSAs submitted to the ERC for approval on or after June 30, 2015 to undergo a CSP in accordance

with the DOE Department Circular DC 2018-02-0003 (the “2018 DOE CSP Rules”). This is a source of

confusion amongst industry participants because a number of affected PSAs actually underwent CSP in

accordance with laws and regulations then existing at the time. However, if the SC Decision were to be

strictly implemented, these CSP activities would not be fully compliant with the 2018 DOE CSP Rules

because, for obvious reasons, those rules were inexistent at that time.

ERC and PEDC filed their respective Motions for Reconsideration (MR) to the SC Decision. However, in

a Resolution dated July 23, 2019, the Supreme Court denied with finality both the ERC’s and PEDC’s

MRs and fully upheld the SC Decision.

The SC Decision affects PEDC’s PSAs with MERALCO and Panay-Guimaras Power Supply Consortium,

GLEDC’s PSA with MERALCO, and PPC’s PSA with NOCECO.

The ERC called an industry meeting on August 20, 2019 where it mentioned that the ERC plans to file a

Motion for Clarification with the Supreme Court. The ERC did not elaborate on what this Motion for

Clarification will contain. For the meantime, the ERC has instructed the affected industry participants to

observe the status quo.

53

In a Memorandum advisory dated August 16, 2019, the DOE advised distribution utilities affected by the

SC Decision that they may enter into a negotiated procurement for emergency power supply without

undergoing CSP pursuant to the 2018 DOE CSP Rules. The emergency power supply shall be for a

period not exceeding one (1) year and shall be for a rate not higher than the latest ERC-approved

generation tariff for the same or similar technology in the area. Submission of the request for Certificate

of Exemption shall be made not later than August 20, 2019.

In a letter to the DOE dated August 20, 2019, MERALCO filed an application to be granted a Certificate

of Exemption from the conduct of CSP to allow continued implementation of the PSA with PEDC. The

supporting documents to the request for a Certificate of Exemption were submitted by MERALCO to the

DOE on September 30, 2019. MERALCO’s application was granted in a letter from the DOE dated

January 15, 2020. A Certificate of Exemption dated January 15, 2020 was issued by the DOE for a period

of one (1) year from August 26, 2019 to August 25, 2020.

For its part, the Panay-Guimaras Power Supply Consortium (the “Consortium”) wrote the DOE that they

previously conducted a CSP when they procured their power supply agreements from PEDC and that it is

their position that such CSP substantially complies with the requirements of the 2018 DOE CSP Rules.

Accordingly, they sought confirmation from DOE that they no longer need to procure anew a power supply

agreement. In response, the DOE sent a response letter which directed the members of the Consortium to

clarify the matter with the ERC and stated that “the DOE deems that ERC has the jurisdiction to determine

the validity and compliance of the PSA with the SC decision”. In a separate matter, in an Order dated

September 11, 2019, the ERC directed MERALCO and each of the electric cooperatives comprising the

Panay-Guimaras Power Supply Consortium to submit, within 90 days, a DOE Certification attesting their

compliance with the 2018 DOE CSP Rules. The members of the Consortium each filed before the ERC a

Joint Compliance with PEDC, attaching an affidavit attesting to the Consortium’s compliance with the 2018

DOE CSP Rules, together with the response letter from the DOE. The parties are currently awaiting further

action from the ERC.

Claim for terminated Coal Supply Agreement. Due to non-conforming coal quality deliveries, PEDC

terminated its Coal Supply Agreement with Lucent Aminto, Inc. (“LAI”) in 2017. On October 16, 2018

LAI filed a Notice of Arbitration before the Singapore International Arbitration Centre (“SIAC”),

claiming a total amount of US$608 thousand which it later increased to a total amount of US$1.1 million

plus unquantified damages in its Statement of Claim. In its Statement of Defence and Counterclaim,

PEDC filed a total counterclaim of US$437 thousand against LAI. The arbitration proceedings are still

ongoing before the SIAC.

Others. GBPC and its subsidiaries are also parties to other cases and claims arising from the ordinary

course of business filed by third parties, which are either pending decisions by the courts or are subject to

settlement agreements. The outcome of these claims cannot be presently determined. In the opinion of

management and its legal counsel, the eventual liability from these lawsuits or claims, if any, will not

have a material adverse effect on the Company’s consolidated financial statements.

Rail

Claims with Grantors. On various dates in 2015 through 2019, LRMC submitted to the DOTr and LRTA

(collectively known as “Grantors”) letters representing its claim for costs incurred and estimated in

relation to Existing System Requirements (ESR) and Light Rail Vehicle (LRV) shortfall on the premise of

the Grantors’ obligation in relation to the condition of the Existing System as at the Effective Date

(September 12, 2015), Fare Deficit, Structural Defect Restoration (SDR) costs, and contractor and other

additional costs incurred less Key Performance Indicator (KPI) charges. As at May 6, 2020, LRMC has

submitted nineteen letters (first to nineteenth Balancing Payments) to the Grantors representing its claims.

Total claims up to the 19th Balancing Payment amounted to P=7,026.8 million with a revised total amount

P=5,502.7 million after Grantor’s comments. All claims are still undergoing discussion as at

May 6, 2020.

54

Others

Donor’s Tax. NOHI received on January 14, 2011 a Final Assessment Notice (FAN) demanding the

payment of approximately P=170.2 million as deficiency donor’s tax (comprising of the basic tax due and

25% surcharge) on the excess of the book value over the selling price of several shares of stock in

Bonifacio Land Corporation (BLC) which NOHI sold to a third party. The assessment was based on the

finding of the Bureau of Internal Revenue–Large Taxpayer Service (BIR–LTS) that the transaction is

subject to donor’s tax as a “deemed gift” transaction under Section 100 of the 1997 National Internal

Revenue Tax Code (the Tax Code). NOHI filed its formal protest to the FAN raising several factual and

legal arguments. The case became final as per Supreme Court's Resolution dated July 26, 2017 denying

NOHI’s Motion for Reconsideration. In 2018, NOHI partially settled amount due to BIR of P=397 million.

As at May 6, 2020, NOHI is awaiting BIR’s decision on NOHI’s request for abatement of delinquency

interest given that NOHI is no longer operating and already undergoing liquidation.

24. Contracts, Agreements and Commitments

The information provided in this report must be read in conjunction with the 2019 audited consolidated

financial statements of the Company.

Updates to certain contracts and commitments disclosed in the annual consolidated financial statements as

at December 31, 2019 and new contracts entered during the first quarter of 2020 are provided below:

MPIC

Buhay Ventures Holdings (PH) Inc.’s (Buhay) Investment in MPHHI. On December 9, 2019, MPIC,

together with MPHHI, completed a series of transactions for the investment and entry of global

investment firm KKR, alongside Arran Investment Private Limited (“Arran”), in and to, MPHHI.

Included in the series of transactions are the following:

▪ Buhay Ventures Holdings (PH) Inc. (Buhay), a subsidiary of KKR, subscribed to, a mandatorily

exchangeable bond, at the principal issue value of P=30.1 billion (the “Buhay Exchangeable Bond”).

The Buhay Exchangeable Bond can be exchanged to 239,932,962 common shares of MPHHI owned

and held by MPIC (“Buhay EB Underlying Shares”). The Buhay EB Underlying Shares represent

approximately 15.88% of the issued and outstanding capital stock of MPHHI, entitled to vote, on a

fully-diluted basis. The Buhay Exchangeable Bond’s subscription price shall be settled:

(i) P=26,091 million on completion date; (ii) P=1,602 million one hundred eighty (180) days after the

completion date; and (iii) P=2,404 million on the first anniversary of the completion date. As at

March 31, 2020 and December 31, 2019, receivable from Buhay for portion of the subscription price

amounted to P=3,920.1 million and P=3,872.5 million, respectively, and is included under the

“Receivables” account in the statement of financial position (see Note 6). The increase in receivables

pertains to interest accretion and is recognized as “other income” in the consolidated statement of

comprehensive income for the three-month period ended March 31, 2020 (see Note 20).

▪ Arran reinvested alongside Buhay. This transaction involved the acquisition by KKR of Arran’s

Exchangeable Bond and Arran’s directly owned shares in MPHHI. On July 2, 2014, Arran paid

P=6.5 billion as consideration for an Exchangeable Bond issued by MPIC which can be exchanged, in

the future, into 158,137,590 shares common shares of MPHHI (the “Arran Exchangeable Bonds”).

The terms of the Arran Exchangeable Bond have been amended to align with the terms of the Buhay

Exchangeable Bond.

Buhay as holder, shall be entitled, among others, to exchange the Exchangeable Bonds (Buhay

Exchangeable Bond and Arran Exchangeable Bonds) for all of the underlying shares on the earlier of

(i) thirty (30) days after the date the common shares of MPHHI, including the underlying shares, are

first listed on the PSE following its initial public offering of shares and (ii) the date that is 10 years

55

from the issue date of the Exchangeable Bonds (“Mandatory Exchange Date”). Interest applicable to

the Exchangeable Bonds shall be equivalent to the actual dividend yield of the underlying shares.

▪ As part of KKR’s investment in MPHHI, MPIC granted in favor of KKR the following options (“Call

Options”): (i) an irrevocable option, exercisable after the completion of this transaction, to require

MPIC to sell to the Investor (and/or one or more of its designees) all or a portion of MPIC’s shares in

MetroPac Apollo Holdings, Inc. (“Apollo”); and (ii) an irrevocable option, exercisable after Signing

date, to require MPIC to sell to one or more newly established Philippine domestic companies or

investment vehicles, each of which is wholly and beneficially owned by Filipino citizens who have

relevant expertise and experience beneficial to the business of MPHHI. Apollo, a Philippine

registered company (in which MPIC has 65% ownership as at March 31, 2020 and

December 31, 2019) owns and holds all the outstanding voting preferred shares issued by MPHHI.

The fair value of the call options was estimated at the Call Option Agreement date using a binomial

pricing model, taking into account the terms and conditions on which the options were granted. The

exercise price is calculated based on the formula set forth in the Call Option Agreement. The Call

Options can be exercised anytime up to ten years. As at March 31, 2020 and December 31, 2019, fair

value of the Call Options is estimated at P=41.6 million and P=46.0 million, respectively.

The abovementioned series of transactions provided Buhay an economic interest of approximately 80%,

on fully diluted basis post conversion of the Exchangeable Bonds. These transactions resulted to the

deconsolidation of MPHHI beginning December 9, 2019 with the recognition of gain on deconsolidation

amounting to P=25,908 million, net of provisions for estimated tax warranties and indemnities

P=2,568 million. The fair value of the provisions amounted to P=2,570 million as at March 31, 2020 (see

Note 12).

As a result of the deconsolidation, the Healthcare segment was classified as a discontinued operations and

comparative periods were re-presented. The financial information presented as ‘discontinued operations’

for three months ended March 31, 2019:

(in Millions)

Operating Revenues P=3,981

Cost of Sales and Services (2,208)

Gross profit 1,773

General and administrative expenses (1,186)

Interest expense (49)

Share in net earnings of equity method investees 73

Interest income 11

Others 88

Income before income tax 710

Provision for income tax 207

Net Income from Discontinued Operations 503 -

Other comprehensive income - net – -

Total comprehensive income from Discontinued

Operations P=503

Net Income from Discontinued Operations attributable to

MPIC P=242

Earnings per share attributable to MPIC: (In centavos)

Basic (in centavos) P=0.77

Diluted (in centavos) P=0.77

56

Power

Transfer of transmission facilities to the National Grid Corporation of the Philippines (NGCP). In 2016,

the ERC issued Resolution No. 23, Series of 2016 “A Resolution Adopting Amended Rules on the

Definition and Boundaries of Connection Assets for Customers of Transmission Providers”. Section 7

(Transitory Provision) of the ERC Resolution No. 23-2016 mandates the Generation Companies to start

the disposal or transfer of their assets with transmission functions in favor of NGCP, Transmission

Provider before the generation company’s Renewal of its Certificate of Compliance.

To comply with the ERC Resolution, GBPC’s generation subsidiaries, namely PEDC, TPC and CEDC

entered into an agreement with the NGCP for the transfer of the generation companies’ transmission

facilities. NGCP made a total deposit of P=159 million for the subject transmission assets. The transfer of

the transmission assets of CEDC was completed in December 2019 at a gain of P=148 million.

However, the transfer of the transmission assets of PEDC and TPC remains pending as at May 6, 2020.

PEDC, TPC and NGCP agreed to perform additional undertaking before the transmission assets can be

transferred. The transmission assets shall remain as property, plant and equipment until such time that the

schedule of the transfer and sale has been set. The deposit for the transmission properties amounting to

P=126 million is included as “Accounts payable and accrued expenses” as at March 31, 2020 and

December 31, 2019.

Negotiations for Power Supply Contract with More Electric and Power Corporation (MORE).

On January 19, 2019, the legislative franchise of Panay Electric Company, Inc. (PECO) to distribute

electricity in Iloilo City expired without having been renewed. A bill was filed for its renewal but was not

acted upon by Congress. News reports have indicated that PECO was pushing a bill for a new franchise

from Congress; however, this was denied at the committee level. PEDC and Panay Power Corporation

(PPC) have power supply agreements with PECO which will expire in 2036 and 2026, respectively.

In the meantime, in February 2019, RA No. 11212 was enacted into law. It granted a legislative franchise

to MORE Power and Electric Corporation (“MORE”) to own and operate an electric distribution utility in

Iloilo City. RA No. 11212 granted PECO an interim authority to operate the existing distribution system

in Iloilo City until MORE establishes or acquires its own distribution system and completes the transition

towards full operation. Such interim authority shall not exceed two (2) years from the grant of MORE’s

legislative franchise. RA No. 11212 also directed the ERC to grant PECO a Certificate of Public

Convenience and Necessity (CPCN) covering such interim period.

In an Order dated May 21, 2019, the ERC granted PECO a Provisional CPCN to replace its previous

CPCN which expired on May 25, 2019. The Provisional CPCN is valid only for the aforesaid 2-year

interim period and shall be automatically revoked once MORE is able to take over the distribution of

electricity in Iloilo City pursuant to RA No. 11212.

On July 1, 2019, in a Declaratory Relief case PECO filed to question the validity of RA No. 11212, the

Regional Trial Court (RTC) of Mandaluyong City issued a Judgment declaring unconstitutional the

provisions of RA No. 11212 that grants MORE the power to expropriate PECO’s distribution assets.

News reports indicate that MORE has appealed this judgment.

On August 14, 2019, in the expropriation case MORE filed to acquire PECO’s distribution assets, the

RTC of Iloilo City ordered the issuance of a Writ of Possession authorizing MORE to take over

possession of PECO’s distribution assets. The Writ of Possession was implemented on February 28 and

29, 2020 wherein specific distribution assets of PECO were placed in the possession of MORE.

On March 5, 2020, the ERC revoked PECO’s Provisional CPCN and issued a CPCN to MORE. The said

ERC order stated that while MORE is unable to secure a Certificate of Exemption from the Department of

Energy (DOE) necessary to enter into emergency power supply agreements, MORE shall source its power

57

requirements from the current power generation suppliers of PECO. On the basis of this ERC order,

PEDC and PPC continued supplying power to the consumers of Iloilo City.

In the meantime, under RA No. 11212, as well as under the DOE Department Circular DC 2018-02-0003,

MORE is authorized to procure emergency power on a negotiated basis provided such supply shall not

exceed one (1) year and the rates therefore shall not be higher than the latest ERC-approved rates in the

area. Pursuant to such authority, PEDC and PPC are negotiating with MORE for the possible supply of

1-year emergency power to Iloilo City. As at May 6, 2020, negotiations with MORE still on-going.

Toll Operations

Toll Collection Interoperability Agreement. On September 15, 2017, Toll concessionaires/operators,

Department of Transportation, DPWH, and Land Transportation Office, signed the MOA for Toll Collection

Interoperability with TRB; whereby the concessionaires or facility operators agreed to timely, smoothly, and

fairly implement the interoperability of the electronic toll collection systems and cash payment systems of the

covered expressways and of future toll expressways, consistent with and subject to the concessionaires and

operators’ respective concession agreements, toll operations agreements, and supplemental toll operations

agreement, as applicable.

The agreement will be implemented in two phases and to be operationalized within twelve (12) months from

signing of the MOA. The first phase covers electronic collection interoperability, while the second phase

covers cash collection interoperability. MPTC’s Toll Collection Lanes (NLEX, SCTEX, CAVITEX and

portion of the CALAEX) are currently accepting Autosweep tags enrolled to the Easytrip system. As at

May 6, 2020, the implementation is still in the works. TRB convenes coordination meetings with all

concerned parties.

Grant of Original Proponent Status to MPT South for Cavite Tagaytay Batangas Expressway (CTBEx)

Project. On July 26, 2018, Metro Pacific Tollways South Corp. (MPT South), an indirect subsidiary of

MPIC, was granted Original Proponent Status by the DPWH in relation to its unsolicited proposal for the

CTBEx Project.

The CTBEx Project, a 50.42 kilometer toll facility, is intended to connect seamlessly with CALAEX and

CAVITEX and is expected to provide congestion relief to Aguinaldo Highway and Tagaytay-Nasugbu road.

It is currently configured to have eight (8) main interchanges and two (2) spur roads, and is estimated to cost

approximately P=25 billion and if awarded, will be funded through a combination of internally-generated funds

and debt.

The final award of the CTBEx Project will be subject to a Swiss Challenge expected within second half of

2020.

Disposition of 10.32% shares in PT Margautama Nusantara by MPTC. On March 30, 2020, MPTC,

through its wholly owned subsidiary, CIIF Infrastructure Holdings Sdn. Bhd. (CIIF), entered into a Share

Purchase Agreement with West Nippon Expressway (NEXCO-West), Japan Expressway International

Co., Ltd., (JEXWAY), and Japan Overseas Infrastructure Investment Corporation for Transport & Urban

Development (JOIN), for the partial acquisition by NEXCO-West, JEXWAY and JOIN from CIIF of

10.32% PT Margautama Nusantara (MUN) shares (the “Transaction”). The value of the Transaction is

approximately USD35.2 million (equivalent to P=1.8 billion).

Following the Transaction, MPTC will continue to hold majority shares in MUN through PT Metro

Pacific Tollways Indonesia (PT MPTI; MPTC’s wholly owned Indonesian subsidiary), which holds an

equity interest of approximately 76% of PT Nusantara, which then holds 74.98% equity interest in MUN.

CIIF originally held 20% equity interest in MUN. Following the Transaction, CIIF will remain a holder

of 9.68% MUN shares. This transaction is subject to certain conditions precedent which as at

May 6, 2020 are yet to complete.

58

The decrease in effective ownership in MUN shall be accounted for as an equity transaction in the

consolidated financial statements with the difference between the carrying value of the interest disposed

and the total consideration received, recognized in equity.

Water

Dumaguete City Water District (DCWD) Water Concession Joint Venture Project. On May 16, 2018,

MPW officially received from DCWD the Notice of Award for the rehabilitation, operation, maintenance,

and expansion of DCWD’s existing water distribution system and development of wastewater facilities.

On September 3, 2019, MPW signed a joint venture agreement (JVA) with DCWD. Pursuant to the

provisions set in the JVA, Metro Pacific Dumaguete Water Service Inc. (MPDW) was incorporated on

October 22, 2019 which is 80%-owned by MPW and 20%-owned by DCWD. MPDW shall implement

the project and will have the right to bill and collect tariff for the water supply and wastewater services

provided to the customers in the service area of DCWD. The JVA shall be effective for a term

commencing on the commencement date (as defined in the JVA) and ending on the 25th anniversary

thereof and may be renewed for another 25 years at the option of MPDW for as long as MPDW is not

then in default under any of its material obligations under the JVA and provided, further, that the initial

and renewal terms of JVA shall in no event exceed an aggregate of 50 years from commencement date.

On October 30, 2019, MPDW signed a Service Contract Agreement with DCWD. This grants MPDW the

exclusive right and privilege to undertake the project.

As at May 6, 2020, the conditions precedent for the declaration of commencement date has not yet been

achieved.

Amayi Water Concession Agreement. On February 19, 2019, Amayi Water Solutions, Inc., a wholly

owned subsidiary of Maynilad, entered into a concession agreement with the Municipality of Boac,

Marinduque. The concession agreement shall be effective for a period of twenty-five (25) years

beginning on the commencement date with the option to renew for another maximum of 25 years at the

sole discretion of the concessionaire. On January 23, 2020, the Office of the Boac Waterworks Operation

of the Municipality of Boac, Marinduque notified Maynilad Boac of the order of their Local Chief

Executive calling for the review and further study of the Concession Agreement. As at May 6, 2020, the

Municipality of Boac, Marinduque has yet to fulfill their obligation under the Concession Agreement that

are part of the contract’s conditions precedent.

Logistics Land Lease. On February 5, 2020, MMI entered into a twenty-five (25) year lease covering

approximately 52,751 square meters located in Sta. Rosa, Laguna. MMI intends to build a dry goods and

refrigerated warehouse facility on the site which is targeted to be operational by 2021. The lease has a

commencement date of February 16, 2020 and expiring on February 15, 2045. The lease is subject to

escalation provisions and adjustment in accordance to market rent rate subject to rent review on the tenth

anniversary and ten years thereafter. MMI paid an upfront fee of ₱34.8 million and recognized ROU asset

of ₱489.0 million as at lease commencement date. MMI was granted a rent-free period from February

2020 and rental payment will start in August 2022. Current and non-current portions of the lease liability

as at March 31, 2020 amounted to nil million and ₱458 million, respectively.

As at May 6, 2020 design works and pre-construction work on the warehouse facility is ongoing.

Others

Integrated Solid Waste Management Facility Project (ISWM Project). In March 2017, the consortium

consisting of MPIC, Covanta Energy, LLC and Macquarie Group, Ltd. was granted Original Proponent

Status (OPS) by The Quezon City Government to design, construct, finance, and operate an ISWM

Project. The ISWM facility will be capable of processing and converting up to 3,000 metric tons per day

59

of Quezon City’s municipal solid waste into 42MWe of renewable energy, enough to power between

60,000 to 90,000 homes. The ISWM Project will be undertaken through a Joint Venture between QC

LGU and the consortium in accordance with QC LGU Ordinance: No. SP-2336, s. 2014 (QC PPP Code).

As the original proponent of the ISWM Project, the consortium will have the exclusive rights to enter into

detailed negotiations with the QC LGU. Upon successful completion of negotiations, the ISWM Project

will be subjected to a competitive challenge consistent with government regulations. If and when the

consortium is awarded the ISWM Project, development and construction would take approximately three

(3) to four (4) years. It is expected that this project will be funded through a combination of debt and

equity.

As at May 6, 2020, the Company is waiting for the issuance of the Notice of Award from the

Quezon City Government.

Investment Agreement with Dusit International of Thailand (“Dusit”). On February 19, 2020, MPIC

announced the signing of a ₱1.6 billion investment agreement with Dusit to develop and manage jointly

hospitality and residential properties in the Philippines. The investment agreement is subject to certain

specific performance conditions precedent, including the approval of the Philippine Competition

Commission. Given that the full impact of COVID-19 is still uncertain as at May 6, 2020, both parties are

evaluating COVID-19’s long-term implications on the contemplated projects and on the leisure and

hospitality sectors as a whole.

60

25. Financial Instruments

Categories of Financial Instruments

The categories of the Company’s financial assets and financial liabilities, other than cash and cash equivalents, short-term deposits and restricted cash are:

March 31, 2020

Financial Assets Financial Liabilities

Amortized Cost FVPL

Debt instruments

at FVOCI

Equity

Instruments

at FVOCI

Amortized Cost FVPL

Total

ASSETS

Investment in UITF (a) P=– P=654 P=– P=– P=– P=– P=654

Receivables - net 22,426 – – – – – 22,426

Other current assets:

Deposit for LTIP – – – – – – –

Due from related parties 189 – – – – – 189

Miscellaneous deposits and others 961 – – – – – 961

Other noncurrent assets:

Treasury bonds and notes – – 69 – – – 69

Corporate bonds – – – – – – –

LTNCD – – 94 – – – 94

Quoted equity shares – – – 93 – – 93

Unquoted equity shares – – – 924 – – 924

Quoted club shares – – – 32 – – 32

Other receivables 360 – – – – – 360

Long term cash and miscellaneous deposits 658 – – – – – 658

P=24,594 P=654 P=163 P=1,049 P=– P=– P=26,460

LIABILITIES

Accounts payable and other current liabilities (b) P=– P=– P=– P=– P=31,377 P=42 P=31,419

Provisions – – – – – 2,570 2,570

Due to related parties – – – – 7,976 – 7,976

Service concession fees payable – – – – 32,820 – 32,820

Long-term debt – – – – 253,430 – 253,430

Other long-term liabilities – – – – 1,204 – 1,204

P=– P=– P=– P=– P=326,807 P=2,612 P=329,419 (a)Included under ‘Cash and cash equivalents and short-term deposits’. (b)Excludes statutory payables

)

61

\Fair Values

The fair value of the assets and liabilities is determined as the price that would be received to sell an asset

or paid to transfer a liability in an orderly transaction between participants at the measurement date. The

following tables summarize the carrying amounts and fair values of the assets and liabilities, analyzed

among those whose fair value is based on:

• Level 1 – Quoted market prices in active markets for identical assets or liabilities

• Level 2 – 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); and

• Level 3 – Those with inputs for the asset or liability that are not based on observable market data

(unobservable input).

March 31, 2020

Carrying Value Level 1 Level 2 Level 3

Total Fair

Value

(In Millions)

Assets measured at fair value

Financial assets through profit or loss

UITF P=654 P=– P=654 P=– P=654

Financial assets through OCI

Treasury bonds and notes 69 20 49 – 69

Corporate bonds – – – – –

LTNCD 94 94 – – 94

Quoted equity shares 93 93 – – 93

Unquoted equity shares 924 – – 924 924

Quoted club shares 32 – 32 – 32

P=1,866 P=207 P=735 P=924 P=1,866

Liabilities measured at fair value

Financial Liabilities at FVPL

Option liability P=42 P=– P=– P=42 P=42

Provisions 2,570 – P=– 2,570 2,570

P=2,612 P=– P=– P=2,612 P=2,612

Assets for which fair values are disclosed

Amortized cost

Miscellaneous deposits P=1,619 P=– P=– P=1,573 P=1,573

P=1,619 P=– P=– P=1,573 P=1,573

Liabilities for which fair values are disclosed

Other financial liabilities

Service concession fees payable

(current and noncurrent)

P=32,820 P=– P=– P=30,599 P=30,599

Long-term debt (current and noncurrent) 253,430 13,497 – 247,175 260,672

Customer guaranty deposit 1,204 – – 1,310 1,310

Due to related parties 7,976 – – 7,984 7,984

P=295,430 P=13,497 P=– P=287,068 P=300,565

The following methods and assumptions were used to measure the fair value of each class of assets and

liabilities for which it is practicable to estimate such value:

Cash and Cash Equivalents. Due to the short-term nature of transactions, the fair value of cash and cash

equivalents approximate the carrying amounts at the end of the reporting period.

Restricted Cash, Cash Deposits, and Accounts Payable and Other Current Liabilities. Carrying values

approximate the fair values at the reporting date due to the short-term nature of the transactions.

Investments in UITF. UITFs are ready-made investments that allow the pooling of funds from different

investors with similar investment objectives. These UITFs are managed by professional fund managers

and may be invested in various financial instruments such as money market securities, bonds and equities,

62

which are normally available to large investors only. A UITF uses the mark-to-market method in valuing

the fund’s securities. A UITF uses the mark-to-market method in valuing the fund’s securities. It is a

valuation method which calculates the Net Asset Value (NAV) based on the estimated fair market value

of the assets of the fund based on prices supplied by independent sources.

Investments in Unquoted Equity Securities. Investment in unquoted equity securities included interests in

unlisted shares of stocks. To estimate the fair value of the unquoted equity securities, the Company uses

the guideline public company method. This valuation model is based on published data regarding

comparable companies’ quoted prices, earnings, revenues and EBITDA expressed as a multiple, adjusted

for the effect of the non-marketability of the equity securities. The estimate is adjusted for the net debt of

the investee, if applicable.

Due from Related Parties. Fair value of due from related parties approximates their carrying amounts as

these are expected to be settled within a year from the reporting date.

Miscellaneous Deposits. The fair value of the refundable occupancy deposits is determined by

discounting the deposit using the prevailing market rate of interest.

Due to Related Parties, Service Concession Fees Payable and Customers’ Guaranty Deposits. Estimated

fair value is based on the discounted value of future cash flows using the applicable rates for similar types

of financial instruments.

Notes Receivable and Miscellaneous Deposits. Estimated fair value is based on the present value of

future cash flows discounted using the prevailing rates that are specific to the tenor of the instruments’

cash flows at the end of each reporting period with credit spread adjustment.

Derivative Liability. The fair value of the call options was estimated using a binomial pricing model (see

Note 24).

Long-term Debt. For both fixed rate and floating rate (repriceable every six months) US dollar-

denominated debts and Philippine Peso-denominated fixed rate corporate notes, estimated fair value is

based on the discounted value of future cash flows using the prevailing credit adjusted risk-free rates that

are adjusted for credit spread.

Provisions. Estimated fair value is based on the discounted value of future cash flows using the

applicable rates for similar types of financial instruments (see Note 24).

26. Supplemental Cash Flow Information

Non-cash investing activities

During the current interim period, the Company had a non-cash investing activity which was not reflected

in the interim consolidated statement of cash flows. A total of P=366 million and P=343 million of interest

accretion arising from service concession fee payable has been capitalized to service concession assets for

the three-month periods ended March 31, 2020 and 2019, respectively (see Note 14).

Addition to ROU asset amounted to P=526 million, net of upfront payments.

Changes in liabilities arising from financing activities

The following table shows significant changes in liabilities arising from financing activities, including

changes arising from cash flows and non-cash changes:

63

Service concession

fee payable

(see Note 14)

Long-term debt

(see Note 13)

Due to related

parties

(see Note 15)

Lease Liability

(see Note 11)

Dividends Payable

(see Note 11)

Interest Payable

(see Note 11)

(In Millions)

Balance as at January 1, 2020 P=32,898 P=249,909 P=7,878 P=1,000 P=2,900 P=2,443

Cash flow (see statements of cash flows)

Proceeds − 20,215 − − − −

Payments (745) (15,757) − (171) (770) (2,230)

Transaction cost − (81) − − − −

(745) 4,377 − (171) (770) (2,230)

Non-cash:

Leases entered during the period − − − 526 − −

Dividends declared to NCI − − − − 1 −

Interest expense − − − − − 2,775

Additions − − − − −

Interest accretion 512 (93) 98 26 − −

Foreign exchange movements 222 (805) − (1) − −

Balancing payment mechanism (67) − − − −

Amortization of debt issue costs − 84 − − −

Others − (42) − − − (227)

667 (856) 98 551 1 2,548

Balance as at March 31, 2020 P=32,820 P=253,430 P=7,976 P=1,380 P=2,131 P=2,761

64

27. Events after the Reporting Period

Aside from those disclosed in Note 23 (status of certain contingencies) and Note 24 (status of contracts,

agreements and commitments), events occurring after the reporting period include:

Acquisition of NCI in PNW. On April 6, 2020, MPW increased its ownership interest in PNW from 52.549%

to 56.069% through subscription to additional 3.5 million shares for VND35 billion (P=75.3 million). MPW

paid VND5 billion (P=10.8 million) as partial payment for the subscription and the remaining VND30 billion

(P=64.5 million) to be paid upon receipt of the Resolution of the PNW Board of Management finalizing the

Subscription of the New Shares.

The increase in effective ownership in PNW shall be accounted for as an equity transaction in the consolidated

financial statements with the difference between the carrying value of the additional interest acquired and the

total consideration recognized in equity.

Loan drawdowns and New Facilities. The Company made the following drawdowns to its existing and/or new

facilities:

▪ Water. Metro Iloilo Water, Inc. (MIW) signed an Omnibus Credit Line Agreement amounting to

P=100 million with a local bank, dated April 6, 2020.

▪ Rail. In April 2020, LRMC made an additional loan drawdown amounting to P=473.5 million to finance

existing system works, rolling stock and construction of Cavite Extension. Also, in April 2020,

LRMC availed of short-term loans from a local bank amounting to P=1,000 million to be used as

working capital during the Luzon-wide ECQ.

▪ Tollroads. In April 2020, CCLEC made a drawdown amounting to P=1.32 billion from its P=19.0 billion

Loan Facility which is intended to partially finance the on-going construction of the CCLEX project.

In April 2020, PT MPTI applied for the drawdown of the Credit Facility from PT Bank Central Asia

amounting to IDR 69 billion (approximately P=230 million) and was credited on April 27, 2020. This

will be used for bridging financing to MUN.

65

28. Consolidated Subsidiaries

The consolidated subsidiaries of MPIC are as follows:

March 31, 2020 December 31, 2019

Name of Subsidiary Place of Incorporation

MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective

Interest

MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective

Interest Principal Activity

(In %) (In %)

MPIC Subsidiaries

Beacon Electric Asset Holdings, Inc.

(Beacon Electric)

Philippines 100.0 – 100.0 100.0 – 100.0 Investment holding; Under the terms of the

sale agreements in 2016 and 2017, PCEV shall

retain voting rights over the sold Beacon

Electric shares until full payment of

consideration (see Note 15).

Metro Pacific Tollways Corporation (MPTC) Philippines 99.9

–

99.9 99.9

–

99.9 Investment holding

Maynilad Water Holding Company, Inc.

(MWHC)

Philippines 51.3 – 51.3 51.3 – 51.3 Investment holding

MetroPac Water Investments Corporation

(MPW)


Metro Pacific Light Rail Corp. (MPLRC) Philippines 100.0 – 100.0 100.0 – 100.0 Investment holding

MetroPac Logistics Company, Inc. (MPLC)


Metro Pacific Resource Recovery

Corporation (MPRRC)

Philippines 100.0 – 100.0 100.0 – 100.0 Investment holding; formerly MetroPac Clean

Energy Holdings Corporation

MetPower Ventures Partners Holdings, Inc.

(MVPHI)


Fragrant Cedar Holdings, Inc. (FCHI) Philippines 100.0 – 100.0 100.0 – 100.0 Property Lessor

Porrovia Corporation Philippines 50.0 50.0 100.0 50.0 50.0 100.0 Investment holding; BOD of Porrovia

approved the shortening of the company’s

corporate life to until March 31, 2019.

Neo Oracle Holdings, Inc (NOHI) Philippines 96.6 – 96.6 96.6 – 96.6 Investment holding and Real estate; Formerly

Metro Pacific Corporation (MPC). NOHI’s

corporate life ended December 31, 2013 and is

currently under the process of liquidation.

MPIC-JGS Airport Holdings, Inc.

(MPIC-JGS)

Philippines 58.8 – 58.8 58.8 – 58.8 Investment holding; BOD of MPIC-JGS


corporate life to until February 15, 2016.

66



MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective

Interest

MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective


(In %) (In %)

Metro Global Green Waste, Inc. (MGGW) Philippines 70.0 – 70.0 70.0 – 70.0 Investment holding; BOD of MGGW


corporate life to until December 31, 2017.

MPIC Infrastructure Holdings Limited

(MIHL)

BVI 100.0 – 100.0 100.0 – 100.0 Investment holding

Metro Vantage Properties, Inc. (MVPI) Philippines 100.0 – 100.0 100.0 – 100.0 Real estate

Beacon Electric Subsidiary

Beacon PowerGen Holdings, Inc. (BPHI) Philippines – 100.0 100.0 – 100.0 100.0 Investment holding

BPHI Subsidiary

Global Business Power Corporation (GBPC) Philippines – 56.0 62.4 – 56.0 62.4 Investment Holding

GBPC Subsidiaries

ARB Power Ventures, Inc. (APVI) Philippines – 100.0 62.4 – 100.0 62.4 Investment holding

GBH Power Resources, Inc. (GPRI) Philippines – 100.0 62.4 – 100.0 62.4 Power Generation

Global Energy Supply Corporation (GESC) Philippines – 100.0 62.4 – 100.0 62.4 Power Distribution

Global Hydro Power Corporation (GHPC) Philippines – 100.0 62.4 – 100.0 62.4 Power Generation

Global Renewables Power Holdings

Corporation (GRPC)

Philippines – 100.0 62.4 – 100.0 62.4 Power Generation

Mindanao Energy Development Corporation

(MEDC)


Global Trade Energy Resources

Corp.

Philippines – 100.0 62.4 – 100.0 62.4 Trading business

Toledo Holdings Corp. (THC) Philippines – 100.0 62.4 – 100.0 62.4 Investment holding

Toledo Power Co. (TPC) Philippines – 100.0 62.4 – 100.0 62.4 Power Generation

Global Formosa Power Holdings, Inc.

(GFPHI)

Philippines – 93.2 58.2 – 93.2 58.2 Investment holding

Panay Power Holdings Corporation (PPHC) Philippines – 89.3 55.7 – 89.3 55.7 Investment holding

Lunar Power Core, Inc. (LPCI) Philippines – 57.5 35.9 – 57.5 35.9 Investment holding

GFPHI Subsidiary

Cebu Energy Development Corporation

(CEDC)


LPCI Subsidiary

Global Luzon Energy Development

Corporation (GLEDC)


PPHC Subsidiaries

Panay Power Corporation (PPC) Philippines – 100.0 55.7 – 100.0 55.7 Power Generation

Panay Energy Development Corporation

(PEDC)


67



MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective

Interest

MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective


(In %) (In %)

GRPC Subsidiary

CACI Power Corporation (CACI) Philippines – 100.0 62.4 – 100.0 62.4 Power Generation

MVPHI Subsidiary

Surallah Biogas Ventures Corp. Philippines – 80.0 80.0 – 100.0 100.0 Waste-to-Energy (see Note 24); On January

30, 2020, the SEC approved SBVC’s

application for increase in authorized capital

stock with equity infusion in 2019 of the other

noncontrolling shareholders issued their

corresponding capital stocks in SBVC.

MVPHI’s interest in SBVC decreased from

100% to 80%.

MPTC Subsidiaries

Metro Pacific Tollways North Corporation

(MPT North; formerly Metro Pacific

Tollways Development Corporation)


Cavitex Infrastructure Corp. (CIC) Philippines – 100.0 99.9 – 100.0 99.9 Tollway operations; Interest in CIC is held

through a Management Letter Agreement.

CIC holds the concession agreement for the

CAVITEX.

Metro Strategic Infrastructure

Holdings, Inc. (MSIHI)


MPT Asia, Corporation BVI – 100.0 99.9 – 100.0 99.9 Investment holding

Metro Pacific Tollways Management

Services, Inc. (MPTMSI)

Philippines – 100.0 99.9 – 100.0 99.9 Formerly M+ Corporation. Incorporated on

August 24, 2016 with the primary purpose to

carry on the toll collection function of

CAVITEX and CALAEX.

Metro Pacific Tollways South Corporation Philippines – 100.0 99.9 – 100.0 99.9 Investment holding

Metro Pacific Tollways

Vizmin Corporation (MPT Vizmin)


Easytrip Services Corporation (ESC) Philippines – 66.0 65.9 – 66.0 65.9 Electronic toll collection services

Metro Pacific Tollways Asia, Corporation

Pte. Ltd.

Singapore – 100.0 99.9 – 100.0 99.9 Investment holding

MPT North Subsidiaries

68



MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective

Interest

MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective


(In %) (In %)

NLEX Corporation Philippines – 75.1 75.0 – 75.1 75.0 Tollway operations (see Note 1); Change in

the corporate name from Manila North

Tollways Corporation was approved by the

SEC on February 13, 2017. 4.3% is owned

through 42.8% ownership in Egis Investment

Partners Philippines Inc.

Collared Wren Holdings, Inc. (CWHI) Philippines – 100.0 99.9 – 100.0 99.9 Investment holding

Larkwing Holdings, Inc. (LHI) Philippines – 100.0 99.9 – 100.0 99.9 Investment holding

MPCALA Holdings, Inc. (MPCALA) Philippines – 51.0 99.9 – 51.0 99.9 Tollway operations (see Note 1); MPCALA is

owned by MPT North at 51% and the

remaining 49% owned equally by CWHI and

LHI.; holds the concession agreement for the

CALAEX.

Luzon Tollways Corporation (LTC) Philippines – 100.0 99.9 – 100.0 99.9 Tollway operations; Dormant

NLEX Corp Subsidiary

NLEX Ventures Corporation Philippines – 100.0 75.0 – 100.0 75.0 Service facilities management

MPT Asia Subsidiaries

MPT Thailand, Corporation BVI – 100.0 99.9 – 100.0 99.9 Investment holding

MPT Vietnam, Corporation BVI – 100.0 99.9 – 100.0 99.9 Investment holding; Holds the investment in

CII B&R (see Note 8)

PT Metro Pacific Tollways Indonesia Indonesia – 100.0 99.9 – 100.0 99.9 Investment holding; Holds the investment in

PT Nusantara.

Metro Pacific Tollways South

Corporation

Metro Pacific Tollways South

Management Corporation

Philippines – 100.0 99.9 – 100.0 99.9 Tollway operations

MPT Vizmin Subsidiary

Cebu Cordova Link Expressway Corporation

(CCLEC)

Philippines – 100.0 99.9 – 100.0 99.9 Tollway operations; CCLEC holds the

concession agreement for the CCLEX

MPTMSI Subsidiary

Southbend Express Services. Inc. Philippines – 100.0 99.9 – 100.0 99.9 Manpower services (see Note 4)

MPT Thailand Corp Subsidiaries

FPM Tollway (Thailand) Limited

Hong Kong – 100.0 99.9 – 100.0 99.9 Investment holding

69



MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective

Interest

MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective


(In %) (In %)

AIF Toll Road Holdings (Thailand) Limited

(AIF)

Thailand – 100.0 99.9 – 100.0 99.9 Investment holding; Holds the investment on

DMT (see Note 8).

Metro Pacific Tollways Asia, Corporation

Pte. Ltd. Subsidiary

Metro Pacific Tollways Vietnam Company

Limited (Vietnam) Vietnam – 100.0 99.9 – 100.0 99.9 Investment holding

CAIF III Infrastructure Holdings Sdn Bhd

(Malaysia) (CAIF III) Malaysia – 100.0 99.9 – 100.0 99.9 Investment holding

CIIF Infrastructure Holdings Sdn Bhd

(Malaysia) (CIIF) Malaysia – 100.0 99.9 – 100.0 99.9 Investment holding

PT Metro Pacific Tollways Indonesia

Subsidiary

PT Nusantara Infrastructure Tbk (Indonesia) Indonesia – 76.3 76.2 – 76.3 76.2 Infrastructure company

PT Nusantara Subsidiaries

PT Margautama Nusantara (MUN)

Indonesia – 75.0 82.1 – 75.0 82.1 Construction, trading and services – Toll;

CAIF III and CIIF holds an aggregate 24.98%

in MUN

PT Potum Mundi Infranusantara (Potum) Indonesia – 99.9 76.1 – 99.9 76.1 Water and waste management services

PT Energi Infranusantara (EI) Indonesia – 99.9 76.1 – 99.9 76.1 Construction, trading and services - Power

PT Portco Infranusantara (Portco) Indonesia – 99.9 76.1 – 99.9 76.1 Port management

PT Telekom Infranusantara (Telekom) Indonesia – 100.0 76.2 – 100.0 76.2 Trading, supplies and other

telecommunications

PT Marga Metro Nusantara Indonesia – 70.0 53.4 – 70.0 53.4 Construction, trading and services

MUN Subsidiaries

PT Bintaro Serpong Damai Indonesia – 88.9 73.0 – 88.9 73.0 Toll road operator

PT Bosowa Marga Nusantara (BMN) Indonesia – 99.5 81.7 – 99.5 81.7 Toll road operator

BMN Subsidiary

PT Jalan Tol Seksi Empat (JTSE) Indonesia – 99.4 81.2 – 99.4 81.2 Toll road operator

JTSE Subsidiary

PT Metro Jakarta Ekspresway Indonesia – 85.0 69.0 − 85.0 69.0 Trade, development, and business

management consulting services

Potum Subsidiaries

PT Tirta Bangun Nusantara Indonesia – 100.0 76.1 – 100.0 76.1 Water and waste management services

PT Dain Celicani Cemerlang Indonesia – 74.5 56.7 – 74.5 56.7 Water and waste management services

PT Sarana Catur Tirta Kelola (SCTK) Indonesia – 65.0 49.5 – 65.0 49.5 Water management services

SCTK Subsidiaries

70



MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective

Interest

MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective


(In %) (In %)

PT Sarana Tirta Rezeki Indonesia – 90.0 47.2 – 90.0 47.2 Water management services; PT Sarana Tirta

Rezeki is owned by SCTK at 80% while 10%

is owned by Potum.

PT Jasa Sarana Nusa Makmur Indonesia – 100.0 49.5 – 100.0 49.5 Water management services

EI Subsidiaries

PT Inpola Meka Energi Indonesia – 56.2 42.8 – 56.2 42.8 Power supply services

PT Rezeki Perkasa Sejahtera Lestari Indonesia – 80.0 60.9 – 80.0 60.9 Power supply services

MWHC Subsidiary

Maynilad Water Services, Inc. (Maynilad)

Philippines 5.2 92.9 52.8 5.2 92.9 52.8 Water and sewerage services; Holds the

concession agreement for the water

distribution in the West Concession Area.

Maynilad Subsidiaries

Amayi Water Solutions, Inc. (AWSI) Philippines – 100.0 52.8 – 100.0 52.8 Water and sewerage services

Philippine Hydro, Inc. (PHI) Philippines – 100.0 52.8 – 100.0 52.8 Water and sewerage services

MPW Subsidiaries

MetroPac Cagayan De Oro, Inc. (MCDO) Philippines – 100.0 100.0 – 100.0 100.0 Water services

MetroPac Iloilo Holdings Corp. (MILO) Philippines – 100.0 100.0 – 100.0 100.0 Investment holding/ Water services

Metro Iloilo Bulk Water Supply Corp. Philippines – 80.0 80.0 – 80.0 80.0 Bulk water services; Holds the joint venture

agreement for the bulk water supply in MIWD.

Eco-System Technologies International, Inc.

(ESTII)

Philippines – 65.0 65.0 – 65.0 65.0 EPC and O&M contractor

MetroPac Cagayan de Oro Holdings, Inc. Philippines – 100.0 100.0 – 100.0 100.0 Investment holding

Cagayan De Oro Bulk Water, Inc. Philippines – 95.0 95.0 – 95.0 95.0 Bulk water services; Holds the joint venture

agreement for the bulk water supply in

COWD.

MetroPac Baguio Holdings Inc. Philippines – 100.0 100.0 – 100.0 100.0 Investment holding

Metro Iloilo Concession Holdings Corp. Philippines – 100.0 100.0 – 100.0 100.0 Investment holding

MetroPac Dumaguete Holdings Corp. Philippines – 100.0 100.0 – 100.0 100.0 Investment holding

Metro Pacific Dumaguete Water Services

Inc.

Philippines – 80.0 80.0 – 80.0 80.0 Water services; Incorporated on

October 22, 2019

Metro Pacific Iloilo Water Inc. Philippines – 80.0 80.0 – 80.0 80.0 Water services; Incorporated on

January 17, 2019

Metro Pacific Water International Limited

(MPWIL)

BVI – 100.0 100.0 – 100.0 100.0 Investment holding

Metro Pacific TL Water International

Limited

BVI – 100.0 100.0 – 100.0 100.0 Investment holding

MPWIL Subsidiary

71



MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective

Interest

MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective


(In %) (In %)

B.O.O. Phu Ninh Water Treatment Plant

Joint Stock Company Vietnam – 52.5 52.5 – 52.5 52.5 Water services

MPLRC Subsidiaries

Light Rail Manila Holdings Inc. (LRMH) Philippines – 50.0 50.0 – 50.0 50.0 Investment holding

Light Rail Manila Corporation (LRMC) Philippines – 55.0 55.0 – 55.0 55.0 Rail operations; Holds the concession

agreement for the LRT-1.

Light Rail Manila Holdings 2, Inc. Philippines – 50.0 50.0 – 50.0 50.0 Investment holding

Light Rail Manila Holdings 6, Inc. Philippines – 50.0 50.0 – 50.0 50.0 Investment holding

MPLC Subsidiaries

MetroPac Movers, Inc (MMI) Philippines – 99.1 99.1 – 99.1 99.1 Logistics

LogisticsPro, Inc. Philippines – 100.0 100.0 – 100.0 100.0 Logistics

MMI Subsidiaries

MetroPac Trucking Company, Inc. Philippines – 100.0 99.1 – 100.0 99.1 Logistics

TruckingPro, Inc Philippines – 100.0 99.1 – 100.0 99.1 Logistics

PremierLogistics, Inc. Philippines – 100.0 99.1 – 100.0 99.1 Logistics

PremierTrucking, Inc. Philippines – 100.0 99.1 – 100.0 99.1 Logistics

OneLogistics, Inc. Philippines – 100.0 99.1 – 100.0 99.1 Logistics

MVPI Subsidiary

MetroPac Property Holdings, Inc. Philippines – 100.0 100.0 – 100.0 100.0 Investment holding; Incorporated on

January 10, 2019

Millenial Resorts Corporation Philippines – 100.0 100.0 – 100.0 100.0 Rental or leasing services of residential

properties; Incorporated on October 7, 2019

SCENIQ Lifestyle Corporation Philippines – 100.0 100.0 – 100.0 100.0 Real estate activities; Incorporated on

October 14, 2019

MPRRC Subsidiary

QC Integrated Waste Management

Holdings, Inc.

Philippines – 100.0 100.0 – 100.0 100.0 Energy from waste; Incorporated on

May 30, 2019

NOHI Subsidiaries

First Pacific Bancshares Philippines, Inc. (FP

Bancshares)

Philippines – 100.0 96.6 – 100.0 96.6 Investment holding; BOD of FP Bancshares


corporate life to until October 31, 2019.

Metro Pacific Management Services, Inc. Philippines – 100.0 96.6 – 100.0 96.6 Management services

First Pacific Realty Partners Corporation

(FPRPC)

Philippines – 50.0 48.3 – 50.0 48.3 Investment holding; BOD of FPRPC approved

the shortening of the company’s corporate life

to until May 31, 2018.

Metro Tagaytay Land Co., Inc. Philippines – 100.0 96.6 – 100.0 96.6 Real estate; Pre-operating.

72



MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective

Interest

MPIC

Direct

Interest

Direct

Interest of

Subsidiary

MPIC

Effective


(In %) (In %)

Pacific Plaza Towers Management Services,

Inc.

Philippines – 100.0 96.6 – 100.0 96.6 Management services; Dormant.

Philippine International Paper Corporation Philippines – 100.0 96.6 – 100.0 96.6 Investment holding; Dormant.

Pollux Realty Development Corporation Philippines – 100.0 96.6 – 100.0 96.6 Investment holding; Dormant.

Metro Asia Link Holdings, Inc. Philippines – 60.0 58.0 – 60.0 58.0 Investment holding; Dormant.

73

Item 2

Management's Discussion and

Analysis of Financial

Condition and Results of

Operations

74

Exhibit III

Financial Highlights and Key Performance Indicators

The summary financial information presented below as at March 31, 2020 and for the three-month

periods ended March 31, 2020 and 2019 was derived from the Company’s unaudited interim consolidated

financial statements, prepared in accordance with Philippine Accounting Standard 34, Interim Financial

Reporting. The information below is not necessarily indicative of the results of future operations.

In this Report, Core EBITDA, Core EBITDA margin, and Core Income are not measures of performance

under Philippine Financial Reporting Standards (PFRS), and users of this Report should not consider

Core EBITDA, Core EBITDA margin and Core Income in isolation or as alternatives to net income as an

indicator of the Company’s operating performance or to cash flow from operating, investing and

financing activities as a measure of liquidity, or any other measures of performance under PFRS. There

are various Core EBITDA, Core EBITDA margin and Core income calculation methods, accordingly, the

Company’s presentation of these measures may not be comparable to similarly titled measures used by

other companies.

The following discussion and analysis of the Group’s financial condition and results of operations should

be read in conjunction with the accompanying unaudited interim condensed consolidated financial

statements and the related notes as at March 31, 2020 and for the three-month periods ended

March 31, 2020 and 2019 (“March 31, 2020 Interim Consolidated Financial Statements”) included in this

Report.

Operating Segments of the Group

Operational Review

I - MPIC CONSOLIDATED

As discussed in Note 3 - Operating Segment Information to the March 31, 2020 Interim Consolidated

Financial Statements, the Company is organized into the following segments based on services and

products: Power, Toll operations, Water, Rail, Logistics and Others.

Segment performance is evaluated based on: consolidated net income for the period; earnings before

interest, taxes and depreciation and amortization, or Core EBITDA; Core EBITDA margin; and core

income. Net income for the period is measured consistent with consolidated net income in the

consolidated financial statements.

Core EBITDA is measured as net income excluding depreciation and amortization of property and

equipment and intangible assets, asset impairment on noncurrent assets, financing costs, interest income,

equity in net earnings (losses) of associates and joint ventures, net foreign exchange gains (losses), net

gains (losses) on derivative financial instruments, provision for (benefit from) income tax and other non-

recurring income (expenses). Core EBITDA margin pertains to Core EBITDA divided by service

revenues.

Performance of the operating segments are also assessed based on a measure of recurring profit or core

income. Core income is measured as net income attributable to owners of the Parent Company excluding

the effects of foreign exchange and derivative gains or losses and non-recurring items (NRI), net of tax

effect of aforementioned. NRI represent gains or losses that, based on occurrence or size, are not

considered usual operating items.

75

1Q 2020 versus 1Q 2019

MPIC Consolidated Statements of Comprehensive Income

1Q 2020 1Q 2019

Increase

(Decrease)

Audited Amount %

(in Php Millions)

Operating Revenues 16,999 21,372 (4,373) (20)

Continuing operations 16,999 17,391 (392) (2)

MPHHI – 3,981 (3,981) (100)

Cost of Sales and Services 7,953 10,372 (2,419) (23)


MPHHI – 2,208 (2,208) (100)

General and administrative expenses 3,195 4,251 (1,056) (25)

Continuing operations 3,195 3,065 130 4

MPHHI – 1,186 (1,186) (100)

Interest expense 2,775 3,185 (410) (13)


MPHHI – 49 (49) (100)

Share in net earnings of associates and joint

ventures 1,468 2,826 (1,358) (48)

Continuing operations 1,468 2,753 (1,285) (47)

MPHHI – 73 (73) (100)

Interest income 512 832 (320) (38)

Continuing operations 512 821 (309) (38)

MPHHI – 11 (11) (100)

Construction revenue 11,581 7,520 4,061 54

Construction costs (11,581) (7,520) (4,061) 54

Other income (expense) - net 225 183 42 23

Continuing operations 225 95 130 >100

MPHHI – 88 (88) (100)

Provision for income tax 1,591 1,745 (154) (9)

Continuing operations 1,591 1,538 53 3

MPHHI – 207 (207) (100)

Net income attributable to owners of the Parent

Company 1,890 3,542 (1,652) (47)

Other comprehensive income (loss) (3,843) 408 (4,251) (>100)

Total comprehensive income attributable to

owners of the Parent Company (1,933) 3,961 (5,894) (>100)

Core income 3,430 3,660 (230) (6)

Non-recurring income (expense) (1,540) (118) (1,422) >100

76

Revenues

The Company’s revenues from continuing operations decreased by 2% to P=16,999 million reflecting an

initially strong growth subsequently offset by the effect of the ECQ on the following segments:

▪ Revenues from the Power segment for the first quarter of 2020 decreased by 5% due to lower

pass through fuel costs more than offsetting the 16% increase in volume of power sold.

▪ Toll revenues remained flat at P=4.2 billion due to ECQ. Average daily entries for the first quarter

of 2020 were down by 11% on the NLEX and 10% on the SCTEX. CAVITEX average daily.

entries for the first quarter of 2020 grew by 2% due to opening of the C5 Southlink 3A-1.

▪ Rail revenues declined by 15% due to suspension of operations from ECQ starting March 17.

▪ Logistics revenues during the first quarter of 2020 declined by 25% to P=316 million as the first

quarter 2019 revenues included election related revenue.

▪ Water utilities posted a 3% increase in revenues on the strength of (i) Maynilad’s 2% billed

volume growth; and (ii) MPW’s Bulk water and Sewage Treatment Plant services contribution.

See the relevant segment information under section II - OPERATING SEGMENTS OF THE GROUP.

Cost of Sales and Services

Cost of sales and services from continuing operations decreased by 3% to P=7,953 million driven mainly

by the decrease in coal prices and lower contracted services. The decrease was partially offset by an

increase in depreciation and amortization expense in line with the increased capital expenditure, and the

increase in personnel costs (see Note 18 - Costs of Sales and Services to the March 31, 2020 Interim

Consolidated Financial Statements).

General and administrative expenses

General and administrative expenses from continuing operations increased by 4% to P=3,195 million. The

Company’s general and administrative expenses are substantially fixed in nature. See details in Note 19 –

General and Administrative Expenses to the March 31, 2020 Interim Consolidated Financial Statements.

Share in net earnings of equity method investees

Share in net earnings of equity method investees from continuing operations decreased by 47% to

P=1,468 million mainly due to MERALCO’s full impairment of its investment in Pacific Light Power

(PLP), a gas-fired power plant in Singapore (see discussion under section II - OPERATING SEGMENTS

OF THE GROUP).

Consolidated net income attributable to equity holders of the Parent Company

The decrease in this account is mainly attributable to the full provisioning of MERALCO’s investment in

PLP and impact of ECQ.

Core Income attributable to equity holders of the Parent Company

MPIC’s consolidated core income of P=3,430 million for the first quarter of 2020 declined by 6% as

compared with the first quarter of 2019 reflecting the following:

▪ Power (distribution and generation) accounted for P=2.87 billion or 62% of the aggregate

contribution;

▪ Toll operations contributed P=0.92 billion or 20% of the total;

77

▪ Water (distribution, production and sewerage treatment) contributed P=0.86 billion or 18% of the

total; and

▪ the Hospital, Rail, Logistics and others contributed P=43 million.

The figures referred to above represent MPIC’s share in the stand-alone core income of the operating

companies, net of consolidation adjustments. See the relevant segment information under section II -

OPERATING SEGMENTS OF THE GROUP.

Non-recurring expenses - net

Non-recurring expense amounting to P=1,540 million for the first quarter of 2020 is mainly provisioning in

full of the carrying value of MERALCO’s investment in PLP. Last year’s non-recurring expense

comprised mainly of project costs and loan refinancing expenses.

II - OPERATING SEGMENTS OF THE GROUP

Power

MPIC’s power business contributed P=2.9 billion to Core Net Income in the first quarter of 2020, an

increase of 7% driven largely by GBPC and lower borrowing cost in Beacon Electric Holdings, Inc.

owing to loan prepayments in 2019.

MERALCO

1Q 2020 1Q 2019

Increase

(Decrease)

Manila Electric Company Unaudited Amount %

(in Php Millions)

Revenues 70,029 75,378 (5,349) (7)

Expenses 66,260 67,841 (1,581) (2)

Core income 5,724 5,598 126 2

Reported net income attributable to equity holders of

MERALCO 2,619 5,671 (3,052) (54)

Capital Expenditure 4,152 4,339 (187) (4)

Key Performance Indicators

Increase

(Decrease)

1Q 2020 1Q 2019 Amount %

Volume Sold (in mln kwh) 10,879 10,381 498 5

System Loss (12-month moving average) 5.42% 5.60% -0.18% (3)

MERALCO’s Core Net Income for the first quarter of 2020 rose 2% to P=5.7 billion, driven by a 9%

increase in distribution revenues and higher contribution from subsidiaries slightly offset by lower

passthrough fuel prices.

For safety, MERALCO suspended meter reading following the ECQ implementation. Approximately

33% of March 2020 billing was estimated based on the immediately preceding 3 months average

78

consumption, in accordance with the provisions of the Distribution Services and Open Access Rules of

the ERC.

Residential volumes grew 12% reflecting warmer weather, new customer connections and increased

working from home arrangements. Commercial sales volume grew 5% on continued expansion of

business-to-consumer services pre-ECQ. Industrial sales volume declined by 2% as most sectors

registered lower output. MERALCO’s peak demand for the first quarter of 2020 was 10% higher than a

year ago at 7,614 MW pre-ECQ. However, during the ECQ peak demand was down as much as 40% to a

low of 4,516 MW in March 2020 and further to 4,289 in April 2020. Average daily Net System Input was

102 GWh, 26% lower than the pre-ECQ average.

WESM prices decreased due to improved supply conditions in the Luzon grid, lower fuel prices, and

appreciation of the Peso. This helped reduce pass-through generation charges with the result that the 7.1%

decrease in total revenues to P=70.0 billion was outpaced by the 11.8% decrease in purchased power.

MERALCO’s Reported Net Income for the first quarter of 2020 declined by 54% to P=2.6 billion. First

quarter 2020 non-recurring expense included a P=2.7 billion reduction in the carrying value of the

investment in PLP in Singapore. Despite PLP’s excellent operational record, trading conditions in the

Singapore electricity market continue to be unfavorable.

MERALCO spent P=4.2 billion on capital expenditures in the first quarter of 2020 to address critical

loading of existing facilities and to support new demand and customer connections.

GBPC

1Q 2020 1Q 2019

Increase

(Decrease)

GBPC Unaudited Amount %

(in Php Millions)

Revenue 5,553 5,774 (221) (4)

Expenses 4,241 4,452 (211) (5)

Core EBITDA 2,061 2,043 18 1

Core Income 439 398 41 10

Reported Net Income attributable to

equity holders of GBPC 440 292 148 51

Capital Expenditure 47 71 (24) (33)


Increase

(Decrease)

1Q 2020 1Q 2019 Amount %

Electricity Sold (consolidated; GWh) 1,236 1,061 175 16

Bilateral – Generation 812 786 26 3

Bilateral – WESM 136 68 68 100

WESM – Spot Sales 78 105 (27) (26)

NGCP ASPA 210 102 108 >100

GBPC recorded a 10% rise in Core Net Income to P=439 million for the first quarter of 2020 from

P=398 million in the first quarter of 2019. This reflected volume recovery from maintenance shutdowns in

2019 and a higher contribution from ATEC due to opening of a 118.5 MW expansion plant of its

subsidiary, Sarangani Energy Corporation. ECQ declarations in Visayas commenced in late March and

79

had minimal effect on first quarter results. While electricity demand fell 20-30%, it is expected to pick up

once ECQ is lifted and will normalize during the second half.

GBPC is exploring investments in renewable energy projects to complement its current fossil fuel

capacity.

Toll Operations

1Q 2020 1Q 2019

Increase

(Decrease)

Metro Pacific Tollways Corporation Unaudited Amount %

(in Php Millions)

Consolidated Statements of Income

Net toll revenues 4,222 4,243 (21) (1)

Costs and expenses 2,232 2,264 (32) (1)

Core EBITDA 2,730 2,866 (136) (5)

Core Income 924 1,121 (197) (18)

Reported net income attributable to equity

holders of MPTC 854 1,028 (174) (17)

Capital Expenditure 8,812 4,176 4,636 >100


Increase

(Decrease)

1Q 2020 1Q 2019 Amount %

Average Daily Vehicle Entries:

NLEX 247,680 277,974 (30,294) (11)

SCTEX 61,802 68,805 (7,003) (10)

CAVITEX 163,798 161,272 2,526 2

CALAEX 6,580 - 6,580 >100

DMT 70,365 98,338 (27,973) (28)

CII B&R 43,527 41,028 2,499 6

PT Nusantara 251,095 266,815 (15,720) (6)

MPTC recorded Core Net Income of P=0.9 billion for the first quarter of 2020, down 18% from

P=1.1 billion a year earlier as a result of lower traffic on all roads due to the implementation of the ECQ as

well as higher interest costs on increased borrowings.

Overall, MPTC’s system-wide vehicle entries, including both our domestic and regional road networks,

averaged 844,847 a day for the first quarter of 2020 versus 914,232 thousand for the first quarter of 2019.

Tollroads in the Philippines:

Average daily vehicle entries on all four of our domestic tollways declined 6% to 479,860 in the first

quarter of 2020 compared with 508,051 a year earlier.

Domestic daily vehicle entries averaged 574,000 for the first two months of 2020, an increase of 14%

over the same period last year but declined to 57,000 a day after the ECQ increasing to 115,000 in late

80

April. Despite severe operational challenges, our domestic tollroads have remained partially open to

facilitate unhampered movement of essential goods and transit of frontline workers.

Significant progress was made during the first quarter of the year on the Company’s toll projects: (i) start

of full commercial operations on 11th February of the first sub-section of the CALAEX and (ii) opening of

the NLEX Harbor Link Malabon Exit on 21st February. This first section of the CALAEX provides

travelers with an alternative route between Sta. Rosa-Tagaytay Road and Mamplasan Road, helping to

decongest Aguinaldo highway and Sta. Rosa-Tagaytay road. Since its opening, the NLEX Harbor Link

Malabon Exit has provided traffic congestion relief for commuters in the CAMANAVA area.

On March 5, 2020, President Rodrigo R. Duterte conducted a progress inspection of the NLEX Harbor

Link C3-R10 Section, the new 2.6-km elevated expressway from Caloocan Interchange, C3 Road,

Caloocan City to Radial Road 10, Navotas City. Prior to the ECQ, the NLEX Harbor Link C3-R10

Section was at 93 percent completion and working towards full completion by March. However, target

completion has been moved to June 2020 assuming resumption of construction activities in May 2020.

With full completion of this project, travel time from the Port Area to NLEX will be reduced to 10

minutes, significantly benefitting the transport logistics industry as cargo trucks are spared from the truck

bans on congested local roads.

Construction on our other Luzon toll road projects has also been temporarily suspended due to the ECQ.

Meanwhile, activities continue (though at a slow pace) for our CCLEX project with authority from Cebu

City to undertake construction while ECQ is in effect.

MPTC is reviewing targeted completion of all toll road projects depending on the release and recovery

from ECQ.

MPTC expects to spend P=107 billion to complete current projects plus an additional P=25 billion if it

secures the Cavite-Tagaytay-Batangas Expressway (CTBEx), for which it was awarded Original

Proponent status and in respect of which a Swiss Challenge is expected during the second half of 2020.

Tollroads outside the Philippines:

Average daily vehicle entries for the toll investments outside the Philippines declined 10% to 364,987 in

the first quarter of 2020 compared with 406,181 a year earlier due to the ongoing construction and road

integration within their concession areas. The implementation of various measures (from curfews to

regional lockdowns) that limit movement of people and vehicles in response to the threat of COVID-19,

also reduced traffic.

Water

Unaudited

Increase

(Decrease)

Maynilad Water Services, Inc. 1Q 2020 1Q 2019 Amount %

(in Php Millions)

Consolidated Statements of Income

Revenues 5,712 5,686 26 0

Costs and Expenses 2,771 2,612 159 6

Core EBITDA 3,788 3,797 (9) (0)

Core Income 1,607 1,821 (214) (12)

Reported Net Income 1,617 1,819 (202) (11)

Capital Expenditure 2,408 2,401 7 0

81


Increase

(Decrease)

1Q 2020 1Q 2019 Amount %

Volume of water supplied (MCM) 175.4 178.5 (3.1) (2)

Volume of water billed (MCM) - Maynilad 131.3 128.5 2.8 2

Volume of water billed (MCM) - Consolidated 135.9 133.4 2.5 2

Non revenue water % DMA (average) 25.1% 28.0% -2.9% (10)

Non revenue water % DMA (period end) 24.8% 26.3% -1.5% (6)

Billed customers (period end) 1,462,312 1,420,580 41,732 3

Customer mix (% based on billed volume)

Domestic (residential and semi-business) 80.4% 80.0% 0.4% 0

Non-domestic (commercial and industrial) 19.6% 20.0% -0.4% (2)

MPIC’s water business comprises investments in Maynilad, the biggest water utility in the Philippines,

and MPW, focused on building new water businesses outside Metro Manila. The water segment’s

contribution to Core Net Income amounted to P=0.9 billion for the first quarter of 2020, most of it from

Maynilad.

Maynilad

Revenues remained flat at P=5.7 billion with increased billed volume being offset by lower average tariff.

Increase in residential demand at a lower average tariff offset declines in commercial and industrial

segments with the implementation of the Luzon-wide ECQ (in the absence of meter readings, residential

volumes are estimated to have increased 5% and commercial and industrial volumes to have declined

45% during the ECQ to date).

Maynilad’s Core Net Income for the first quarter of 2020 decreased by 12% to P=1.6 billion as a result of

higher amortization and depreciation expenses as a consequence of Maynilad’s heavy investments in

Non-Revenue Water reduction and continuing facilities upgrades.

Water coverage has grown by nearly one-third under MPIC’s management to 9.7 million people, while

3,151 kilometers of new pipes have been laid. NRW at the DMA level was at 24.8% at end of March

2020 down from 68% 13 years ago, saving 1 billion liters of water every day, or enough water to provide

the needs of a large city.

On March 12, 2020, the National Water Resources Board approved the increase in water allocation for

domestic use in Metro Manila and adjacent cities by 4 cubic meters per second. This increased water

allocation complemented by Maynilad’s optimization of water treatment facilities and continued

reduction of water losses, will enable Maynilad to increase distribution.

Review of the water concession contract is ongoing with the Asian Development Bank assisting the

Government on the economic and financial aspects of the agreement.

MPW

Outside the Maynilad concession which currently bills approximately 1,500 MLD, MPW currently bills

359 MLD, with planned expansion of up to 602 MLD capacity in the Philippines and 660 MLD in

Vietnam.

MPW’s entities continue to operate and deliver water during the ECQ through a skeletal work force in

Laguna, Iloilo, and Cagayan de Oro as well as its international operations in Vietnam.

82

MPW’s contribution to MPIC is currently immaterial but as these new projects are completed, it is

expected to become a major profit contributor.

Rail

1Q 2020 1Q 2019

Increase

(Decrease)

Rail Unaudited Amount %

(in Php Millions)

Farebox revenues 708 832 (124) (15)

Expenses 522 652 (130) (20)

Core EBITDA 249 239 10 4

Core Income 180 223 (43) (19)

Reported Net Income 185 218 (33) (15)


Increase

(Decrease)

1Q 2020 1Q 2019 Amount %

Average daily ridership 422,703 463,758 (41,055) (9)

Available LRV (period end) 116 112 4 4

LRMC’s Core Net Income fell by 19% to P=180 million in the first quarter following the suspension of

operations with the Luzon-wide ECQ. Average daily ridership of 422,703 for the first quarter of 2020 was

9% down compared with 463,758 in the same period last year. Operations were suspended starting

March 17, 2020. While LRMC contributed P=62 million to MPIC’s Core Income for the first quarter of

2020, erosion in contribution to core is expected as operations remain suspended.

Construction progress of the LRT-1 Cavite Extension had reached 38% completion prior to construction

suspension during the lockdown but design works is on-going.

LRMC acknowledges that public transportation is essential to economic recovery. LRMC is working

towards stringent health protocols such as social distancing, health screening protocols and deployment of

COVID-19 response protocols that would ensure passenger safety once ECQ is lifted and train operations

resume.

Logistics

MMI is focused on providing our clients with first-class warehousing and cold storage facilities.

MMI is set to start construction of a dry goods and refrigerated warehouses facility, on a 52,000-square

meter site located along the Sta. Rosa-Tagaytay Road, some two kilometers from the South Luzon

Expressway. Originally targeted to open in the second quarter of 2021, this project’s timetable is now

under review due to ECQ. MMI is not yet contributing positively to MPIC’s Core Net Income but

following an extensive restructuring in 2019, we expect better looking ahead. Moreover, the significant

disruption in supply chains during the COVID-19 crisis indicates potentially increased opportunity in

developing high quality large warehouses.

83

Discussion on Financial Position as at March 31, 2020 and December 31, 2019

Assets

The following table summarizes the individual increases (decreases) of consolidated asset accounts.

March 31,

2020

December 31,

2019

Increase

(Decrease)

Unaudited % Audited % Amount %

(in Php Millions)

ASSETS

Current assets

Cash and cash equivalents and

short-term deposits 66,796 64 74,697 71 (7,901) (11)

Restricted cash 4,381 4 5,011 5 (630) (13)

Receivables 21,285 21 14,624 14 6,661 46

Other current assets 11,297 11 10,905 10 392 4

103,759 100 105,237 100 (1,478) (1)

Noncurrent Assets

Investments and advances 163,633 32 169,092 33 (5,459) (3)

Service concession assets 250,007 50 240,489 47 9,518 4

Property, plant and equipment 58,161 11 58,591 12 (430) (1)

Goodwill 15,515 3 15,676 3 (161) (1)

Intangible assets 3,211 1 3,279 1 (68) (2)

Deferred tax assets 838 0 927 0 (89) (10)

Other noncurrent assets 17,453 3 18,487 4 (1,034) (6)

508,818 100 506,541 100 2,277 0

• Cash and cash equivalents and short-term deposits – (Decrease) Mainly due to MPIC’s loan

prepayment and the group’s scheduled payment of loans and interest, additional capital expenditures,

dividends paid and MPIC’s implementation of the share buyback program (see section Liquidity and

Capital Resources for the summary of the Group’s statement of cash flows for the three-month period

ended March 31, 2020).

• Restricted Cash – (Decrease) Restricted cash pertains to sinking fund or debt service account (DSA)

representing amounts set aside for principal and interest payments of certain long-term debt. This

DSA is maintained and replenished in accordance with the provision of the loan agreements.

Decrease in restricted cash is a consequence of the scheduled repayment of loans (see Note 5 - Cash

and Cash Equivalents, Short-term Deposits and Restricted Cash to the March 31, 2020 Interim


• Receivables – (Increase) Mainly driven by the dividend receivable from MERALCO and increase in

trade receivables impacted by the implementation of the ECQ (see Note 6 – Receivables and Note 3 -

84

Impact of COVID-19 to MPIC’s businesses and operations to the March 31, 2020 Interim


• Investments and advances – (Decrease) The net reduction in the investments account is attributable to

the Company’s share in the final dividend from MERALCO amounting to P=5.3 billion which is

greater than the Company’s share in the earnings at P=1.1 billion (see Note 8 - Investments and

Advances to the March 31, 2020 Interim Consolidated Financial Statements).

• Service concession assets – (Increase) Mainly due to additional capital expenditures, net of

amortization. See Note 9 - Service Concession Assets to the March 31, 2020 Interim Consolidated

Financial Statements for the nature of the additions to the service concession assets.

• Other noncurrent assets – (Decrease) Mainly driven by the application of the advances to contractors

to service concession assets.

85

Liabilities and Equity

The following table summarizes the individual increases (decreases) of consolidated liabilities and equity

accounts.

March 31,

2020

December 31,

2019

Increase

(Decrease)

Unaudited % Audited % Amount %

(in Php millions)

Current Liabilities

Accounts payable and other current

liabilities 35,505 47 36,363 48 (858) (2)

Income tax payable 2,899 4 1,639 2 1,260 77

Due to related parties 5,696 7 5,638 8 58 1

Current portion of:

Provisions 6,929 9 6,742 9 187 3

Service concession fees payable 5,918 8 6,277 8 (359) (6)

Long-term debt 19,055 25 18,459 25 596 3

76,002 100 75,118 100 884 1

Noncurrent Liabilities

Noncurrent portion of:

Provisions 5,040 2 4,997 2 43 1

Service concession fees payable 26,902 9 26,621 9 281 1

Long-term debts 234,375 79 231,450 79 2,925 1

Due to related parties 2,280 1 2,240 1 40 2

Deferred tax liabilities 13,799 5 14,170 5 (371) (3)

Other long-term liabilities 11,031 4 11,137 4 (106) (1)

293,427 100 290,615 100 2,812 1

Equity

Capital stock 31,661 17 31,661 17 0 0

Additional paid-in capital 68,638 37 68,638 36 0 0

Treasury shares (708) 0 (4) 0 (704) >100

Equity reserves (532) 0 (574) 0 42 (7)

Retained earnings 90,139 48 90,650 47 (511) (1)

Other comprehensive income reserve (3,232) (2) 591 0 (3,823) >100

Total equity attributable to owners of

the Parent Company 185,966 100 190,962 100 (4,996) (3)

Non-controlling interest 57,182 55,083 2,099 4

86

• Income tax payable – (Increase) Tax payment deadlines were extended due to the ECQ.

• Service concession fees payable – current and noncurrent portions – (Decrease) Decrease represents

payment of concession fees net of movement in foreign exchange and interest accretion. For the

movement in the service concession fees payable, see Note 14 – Service Concession Fees Payable

and Note 26 - Supplemental Cash Flow Information to the March 31, 2020 Interim Consolidated

Financial Statements.

• Long-term debt – current and noncurrent portions – (Increase) See Note 13 - Long-term Debt to the

March 31, 2020 Interim Consolidated Financial Statements for details of the Company’s new loan

facilities and borrowings.

• Treasury shares – (Increase) A total of 213,483,000 shares were acquired under the Share Buyback

Program for an accumulated cost of P=704 million (see Note 16 - Equity to the March 31, 2020 Interim


• Other Comprehensive Loss-net – (Decrease) Mainly due to the translation adjustment of Indonesian

investment PT Nusantara and its associates driven by a significant decrease in the value of the

Indonesian Rupiah against the Philippine Peso (see Note 17 - Other Comprehensive Income (Loss) to

the March 31, 2020 Interim Consolidated Financial Statements).

• Non-controlling interest – (Increase) Aside from the NCI’s share in Net Income, additions to NCI

included infusion of the other shareholders of LRMH and LRMC into the LRT-1 project (see Note 16

- Equity to the March 31, 2020 Interim Consolidated Financial Statements). Refer to the Statements of

Changes in Equity for the other movements in the NCI account.

87

Liquidity and Capital Resources

The following table shows a summary of the Group’s unaudited statements of cash flows for the first

three months of 2020 and 2019 as well as the Company’s consolidated capitalization as of

March 31, 2020, and December 31, 2019:

Unaudited

Increase

(Decrease)

1Q 2020 1Q 2019 Amount %

(in Php Millions)

Cash Flows

Net cash provided by operating activities 7,261 11,137 (3,876) (35)

Net cash used in investing activities (12,366) (10,154) 2,212 22

Net cash used in financing activities (2,309) (3,312) (1,003) (30)

Net decrease in cash and cash equivalents (7,414) (2,329) 5,085 >100

Capital expenditures 13,394 8,836 4,558 52

Unaudited

March 31,

Audited

December 31,

Increase

(Decrease)

2020 2019 Amount %

(in Php Millions)

Capitalization

Long-term debt net of current portion 234,375 231,450 2,925 1

Current portion of long-term debt 19,055 18,459 596 3

Total short and long-term debt 253,430 249,909 3,521 1

Non-controlling interest 57,182 55,083 2,099 4

Total equity attributable to owners of the

Parent Company 185,966 190,962 (4,996) (3)

Cash and cash equivalents 65,797 73,211 (7,414) (10)

Short-term deposits 999 1,486 (487) (33)

As at March 31, 2020, MPIC’s consolidated cash and cash equivalents and short-term deposits totaled

P=66,796 million, a decrease of P=7,901 million from P=74,697 million as at December 31, 2019. This

decrease mainly resulted from increased CAPEX spending, prepayment and scheduled payment of loans

and interest, dividends paid, and acquisition of MPIC shares. Refer to the Exhibit I - Unaudited Interim

Consolidated Financial Statements for the Company’s Consolidated Statements of Cash Flows for the

details of the cash inflows and outflows during the current period.

Preserving cash is the Company’s immediate priority during this period of crisis brought about by

COVID-19. MPIC itself is well funded due to the sell down of interest in the Hospitals Business at the

end of 2019 with cash and cash equivalents and short-term deposits of P=24,947 million in its balance

sheet.

88

Operating Activities

MPIC’s consolidated net operating cash flow in the first quarter of 2020 posted a 35% decrease from

P=11,137 million to P=7,261 largely attributable to the decline in operating results and the lower collection

rate due to the ECQ. Lockdown restrictions temporarily disrupted capacity to read water meters and

limited ability to collect payments from customers (see Note 3 - Impact of COVID-19 to MPIC’s

businesses and operations to the March 31, 2020 Interim Consolidated Financial Statements).

Investing activities

Net cash used in investing activities amounted to P=12,366 million during the first quarter of 2020. Cash

outflows included CAPEX spending comprising mainly of additions to service concession assets. See

Note 9 - Service Concession Assets to the March 31, 2020 Interim Consolidated Financial Statements for

the nature of the additions to the service concession assets.

Financing Activities

The Company’s consolidated net cash used in financing activities amounted to P=2,309 million in the first

quarter of 2020. Significant outflows included: (i) prepayment of MPIC’s P=6.48 Billion, 10-Year Notes

Facility Agreement; (ii) debt servicing and scheduled payment of service concession fees; (iii) dividends

paid to owners of the Parent company; and (iv) acquisition of MPIC shares under the share buyback

program.

89

FINANCIAL SOUNDNESS INDICATORS

Financial Ratios Formula March 31,

2020

December

31, 2019

a) Current Ratio Total Current Assets 1.37 1.40

Total Current Liabilities

b) Solvency Ratio * NPAT + Depreciation and amortization 0.07 0.11

Total Liabilities

c) Debt-to-Equity Ratio Total Debt 1.04 1.02

Total Stockholders' Equity

d) Asset to Equity Ratio Total Assets 2.52 2.49

Total Stockholders' Equity


2020

March 31,

2019

e) Interest Rate Coverage Ratio EBIT 3.33 3.89 Net Interest Expense

f) Net Profit margin Net Profit after tax 21.7% 29.7%

Net Revenues


2020

December

31, 2019

g) Return on assets* NPAT + Interest Expense (net of tax) 3.9% 6.4%

Average Total Assets

h) Return on Equity* Net Profit after tax 6.0% 11.5%

Average Total Stockholders' Equity

*Annualized

90


AGING OF ACCOUNTS RECEIVABLES

As at March 31, 2020 (Unaudited)


Trade receivables P=9,894

Dividend receivable 5,343

Receivable from Buhay 3,920

Contract assets/unbilled receivables 1,227

Concession financial receivable 951

Notes receivable 150

Due from related parties 220

24,548

Less allowance for doubtful accounts (1,933)

22,615

Less current portion (21,474)

Noncurrent portion P=1,141

The aging analysis of receivables follows:

Neither past due nor impaired P=16,925

Past due but not impaired:

0–30 days 2,602

31–60 days 912

61–90 days 308

Over 90 days 1,868

Impaired 1,933

P=24,548

91

RISK FACTORS

As an investment and management company, MPIC undertakes risk management at a number of distinct

levels:

1. On entering new investments

Prior to making a new investment, any business to be acquired is subject to an extensive due

diligence including financial, operational, regulatory, environmental, social, governance risk

assessments. Risks to investment returns are then calibrated and specific measures to manage these

risks are determined. The Company is highly selective in the investment opportunities it examines.

Due diligence is conducted on a phased basis to minimize costs of evaluating opportunities that may

ultimately not be pursued.

MPIC’s investments involve to varying degrees, a partnership approach with MPIC co-investing

with partners that provide operational and technological input, thereby mitigating risks associated

with new business areas.

Financing for new investments is through a combination of debt and/or equity by reference to the

underlying strength of the cash flow of the target business and the overall financing position of

MPIC itself.

MPIC’s geographic focus is predominantly the Philippines but with some additional assets in

Indonesia, Thailand, and Vietnam. MPIC is mitigating its foreign investment risk through

partnerships with reputable and influential local firms in these countries and engaging strong and

reputable advisers.

2. On ongoing Management of the Financial Stability of the Holding Company

MPIC does not guarantee the borrowings of its investee companies and there are no cross-default

provisions from one investee operating company to another. Financial stability of the holding

company, including its dividend commitment to shareholders, is managed by reference to the ability

of the investee companies to remit dividends to MPIC to cover operating costs and service

borrowings. MPIC avoids currency and investment cycle mismatches by borrowing mostly in Pesos

using primarily long-term instruments with fixed rates.

MPIC sets the level of debt on the Parent Company’s balance sheet so as to withstand variability of

dividend receipts from its operating companies associated with regulatory and other risks described

below.

3. Risk Management within the Operating Companies

Each of the operating companies has a management team which is responsible for having their own

plan to manage risk. These are reviewed semi-annually by their respective Risk Management

Committees and periodically by MPIC.

o Political and Regulatory risks. The majority of MPIC’s invested capital is deployed into

businesses which are directly regulated by arms of the state: electricity distribution; water supply

and distribution along with sewage treatment; tollroads; and light rail. Each of these businesses

has concession or franchise agreements which involve a degree of operating performance

obligation in order to retain our rights and earn our expected returns. In some cases, these

92

agreements provide for retrospective assessment of the extent of our overall operational and

financial performance sometimes over a period of years.

Risks arising from these types of businesses include the potential for differences with regulators

involving interpretation of the relevant agreements – either during the period in question or in

retrospect. To manage these risks, the operating companies have dedicated regulatory

management groups with experienced personnel. Their duty is to manage the relationship with

regulators, keep management up-to-date on the status of the relationship and ensure companies

are well prepared for any forthcoming regulatory changes or challenges.

The Group has a sizeable amount of pending past due revenue claims accumulated for its water,

toll and rail businesses (see Note 30 – Contingencies to the December 31, 2019 Audited

Consolidated Financial Statements and Note 23 – Contingencies to the March 31, 2020 Interim

Consolidated Financial Statements). The risk of being unable to collect these claims is being

mitigated by continuing to deliver its obligations under its concession and franchise agreements

and maintaining open communication lines with the various responsible government agencies. In

December 2019 and following a water shortage in the first half of 2019, there have been

significant regulatory challenges faced by the Group especially by Maynilad with respect to its

15-year extension of Concession Agreement from 2022 to 2037 awarded and operationalized

under President Gloria Macapagal Arroyo.

According to a letter sent by MWSS to Maynilad dated December 11, 2019, in response to the

President’s directive on the “Revision of Concession Agreements”, MWSS, through its Board

Resolution No. 2019-201-CO revoked its own earlier resolutions (Resolution No. 2009-72 and

Resolution No. 2010-172).

In response, Maynilad, through a letter to the MWSS Board dated December 12, 2019, sought

urgent and unequivocal confirmation from the MWSS that the 2019 Resolution shortened the

term of Maynilad’s Amended Concession Agreement.

In a letter to Maynilad dated December 23, 2019, the MWSS Regulatory Office (RO) confirmed

that “as of to date, the 25-year Concession Agreement (CA) that covers the years 1997 to 2022

and the Memorandum of Agreement (MOA) that provides for the 15-year extension of the

concession period from year 2022 to 2037 have not yet been cancelled.”

These matters are dealt with in detail elsewhere in this report and in the 2019 MPIC Audited

Consolidated Financial Statements.

As of March 31, 2020, there are no significant updates on the Group’s regulatory and political

risks.

Competition and Market.

There is strong competition in bidding for Public-Private Partnership (PPP) projects offered by

the Philippine Government, and this may reduce forecast equity returns for winning bids. MPIC’s

preferred approach is to provide unsolicited proposals to government in order to receive Original

Proponent Status on its ideas. In this way it seeks to increase the prospect of winning projects and

avoid plain vanilla ‘lowest return on capital’ bidding.

MPIC’s investments in coal generation through GBPC and MGEN is also becoming increasingly

competitive due to Retail Electricity Supply (RES), migration of contestable customers from the

captive market, increasing number of competitors and the amended Competitive Selection

93

Process (CSP) rules. This is being addressed through the use of efficient process and technology

and using low calorie coal in order to remain competitive.

Other competition risks in MPIC’s relevant operating companies are discussed in each operating

company’s writeup on this report (see also Item 1 - Description of Business to the 2019 SEC

Form 17-A).

o Supply risk.

MPIC’s water company, Maynilad, has fundamental supply side risk in that: (i) it secures almost

all of its supply from a single source – the Angat dam (about 91% of Maynilad’s water supply

source); and (ii) this water source is shared by another water concessionaire, a hydro electric

plant, and the needs of farmers for irrigation. The Angat Dam water level reached 196 Meters by

the end of March 2020 (compared with the 193 Meters reported during the same period last year

and the normal year-end water level of 212 Meters). A water usage protocol is in place to ensure

all users receive water as expected within the constraints of available supply. Following

significant water supply disruptions in the past, the business has experienced periods of lower

water supply than allowed for in its concession. We have worked to moderate our reliance on

Angat by tapping raw water from Laguna Lake. Currently, we have operationalized Putatan

Water Treatment Plants to 300 MLD to augment water supply in preparation for the 2020

summer. Other projects in the pipeline include Laguna Lake Water Treatment Plant (150 MLD)

in Poblacion, Muntinlupa and Teresa Water Treatment Plant (300MLD) in congruence with the

planned Kaliwa Dam project. The Laguna Lake Water Treatment Plant and the Teresa Water

Treatment Plant projects are expected to be delayed due to the Enhanced Community Quarantine

(ECQ) and Maynilad’s cash disbursement re-prioritization program. The Government-initiated

188 MLD Sumag Diversion Project to be undertaken by Maynilad and Manila Water has,

however, been suspended by the Local Government, pending issuance of permits. The Company

has also other plans in place to mitigate the projected water shortage in 2020 including activating

deep wells in the affected areas.

During the ECQ, the NWRB agreed to allocate an additional 4 cubic meters per second (cms) of

water for Metro Manila which will help maintain service levels and support hygiene in the

population. The allocation approved by NWRB is being reviewed on a monthly basis.

Maynilad has sufficient other critical supply inventories (such as chlorine, potassium

permanganate, pipes and fittings) through September. Delivery orders to primary and secondary

suppliers were already issued for the balance of the year.

The power generation companies in the MPIC portfolio depend on varying grades of coal for

their fuel. Primary supply sources are backed up by alternative supply sources and carrying

appropriate inventories.

During the ECQ, GBPC does not foresee disruption in the supply of coal as cargos of power

generation companies are not part of the lock down, as prescribed by the Philippine Government.

Currently, all GBPC’s deliveries of raw materials, spares and consumables are being received as

scheduled. Additional days on the lead time are considered for potential delays that may be

experienced due to the ongoing pandemic. On services, critical contractors are provided

accommodation inside the plant facility during the lock down as part of operations strategy.

o Safety and Security risk.

COVID-19 Infection risk among employees, contractors and other service providers.

94

Across the operations of MPIC group, various skeletal, rotating weekly shifts, and remote

working protocols are being introduced to limit the potential for COVID-19 infections amongst

personnel, all of whom are retained on full pay. All have been briefed on hygiene, social

distancing and procedure to follow in the event of infection concerns including self-isolation.

Details of the measures implemented by the Group are disclosed in a separate report using SEC

Form 17C (COVID-19 Impact and risk mitigation strategies) which the Company submitted to

and uploaded on the PSE/SEC website last March 16, 2020.

The Group has also institutionalized monitoring of COVID-19 infection cases among its

employees, consultants, contractors and other service providers who are part of the workforce of

the Group. This is in response to the Group’s priorities which are to protect its employees and to

ensure the uninterrupted delivery of basic services the Group provides to its customers. The

Human Resources personnel of the Group are also regularly conducting health checks among

employees including those who are working remotely.

Other operational health and safety risk.

The operation of LRMC has significant operational safety and security risks. These risks have

been exacerbated by the poor condition and inadequate maintenance of the system prior to the

September 12, 2015 takeover by LRMC. LRMC is mitigating these risks by establishing a

Safety Management System driven from the top, appointing a strong senior management team

with extensive light rail operating experience and using a combination of engineering and

administrative controls in the operations and maintenance of LRT-1. The risk of terrorism in the

trains and stations, which is assessed as a key risk of LRMC, is also mitigated through strict

inspection of incoming passengers, x-ray screening in high density stations, banning of wrapped

packages as well as potentially harmful tools and chemicals and use of dogs trained in bomb

detection in each station.

For GBPC, possible hazards facing its employees include fires, electrical shocks and burns,

boiler fires and pressure vessel explosions, contact with hazardous chemicals, moving objects

and heavy equipment, fall, confined space works, and marine operations such as off-loading of

coal which are common risks in power plant facilities. GBPC is implementing safety programs

and policies aimed at reducing and/or eliminating accidents. In addition, GBPC is investing in

manpower safety training, machine safety design, fire protection systems, emergency response

equipment and regular fire-drills, provision of personal protective equipment, site inspections,

regular equipment maintenance and 3rd party certifications, and monitoring systems for

emergency and security purposes. All GBPC power plants are ISO-certified.

For Maynilad, possible common safety-related incidents include potential slips, trips and falls

into a confined space such as in waste water treatment plants. These incidents become more

acute with the presence of dangerous gases in the air throughout the facility. Specifically, the

main gases of concern in wastewater treatment plants are methane, hydrogen sulfide and too

much or the lack of oxygen. Beyond these gas hazards are the dangers that can be brought by

chlorine, a purifying chemical that is used by Maynilad in the decontamination of the waste and

effluent water. Maynilad is mitigating these risks through closely monitoring employees who are

at higher risk for hazard exposure and providing preventive measures to ensure safety.

Any incident of poor water quality distributed by Maynilad can severely impact on the health

and safety of its customers. Maynilad mitigates this risk by performing both quality assurance

and quality control checks to ensure that the water distributed to the customers is compliant with

the Philippine National Standard for Drinking Water 2017. At the plant level, the process control

laboratories of its La Mesa and Putatan plants conduct quality assurance at every stage of the

95

treatment process. Likewise, at the water distribution level, Maynilad’s Central Laboratory

performs quality control activities through daily testing of the water quality of water samples

collected from the tap of the customers at a ratio of 1 sample per 10,000 population.

For MERALCO, their safety risks are those attendant to operating an above ground power

distribution system serving approximately 28 million people. The primary risks are death or

injury through fall, burn or electrocution. Extensive training is made on using safety equipment

and operating protocols to minimize safety incidents.

MPTC’s operational safety risks concern accidents through possible driver error or a

combination of poor road design and/or signage. These risks are mitigated by road user safety

campaigns, careful traffic management and optimized design and construction.

MPTC is also exposed to all safety risks inherent in construction as well as natural disasters.

The Group has institutionalized monitoring and reporting of work-related fatalities and serious

injuries including significant environmental non-compliances and major governance and

corruption issues, if any, for review by the MPIC Risk Management Committee.

o Climate change risk and related issues.

• Extreme or unusual weather patterns associated with climate change is one of the Group’s

key risks. MPIC’s principal operating companies’ risk mitigation measures include: weather

hardening for above ground power distribution; increasing water processing capacity for

highly turbid water; and improved drainage and flood protection for toll roads. The principal

operating companies have also formalized and are continuously improving their Business

Continuity Plans including coordination with government and private organizations such as

the Philippine Institute of Volcanology and Seismology (PHIVOLCS), National Disaster Risk

Reduction and Management Council (NDRRMC) and Philippine Disaster Resilience

Foundation (PDRF) together with the operating companies’ respective regulators.

• Climate change is resulting in variable rainfall patterns leading to a combination of reduced

water supply (see supply risk) and increased turbidity of water sources including an increase

in algae bloom making it harder for Maynilad to sustain service levels. This risk is mitigated

through increased investment in water treatment capabilities and working with the

Government to explore new water sources.

• The Group is also trying to mitigate this risk through carbon offsetting initiatives such as tree

planting and other greening initiatives, use of clean and efficient technology in our coal

operations and exploring renewable energy sources (e.g. biogas and energy from waste) to

complement our existing coal investments.

o Cybersecurity risk including increasing data privacy protection needs.

Any disruption due to cyber attacks may result in service interruption, especially damaging

for our utilities, lost revenue, increased costs for protection, remediation costs, reputational

damage and regulatory fines. The Group is continuously enhancing its cybersecurity skills

and processes and is reviewing and purchasing appropriate insurance coverage. The Boards

and managements of some of our operating companies have also increased oversight

responsibility for Cybersecurity processes.

96

o Other operational risks

In LRMC, there are risks to projected financial returns through late delivery of Government

procured items such as Rights of Way, additional Light Rail Vehicles (LRVs), and the

Common Station. Plans to mitigate these risks include consistently engaging the regulators on

the status of the projects’ milestones and joint regular performance reviews by both parties –

the Concessionaire (LRMC) and the Grantors (the DOTC and the Light Rail Transit

Authority or LRTA).

Other risk associated with the Group’s operations, specifically on its Environmental, Social

and Governance aspects are discussed in the Company’s Sustainability Reports (SR) which

can be downloaded on MPIC website.

4. Financial Risk Management

The financial risks of MPIC’s operating companies are primarily: interest rate risk, foreign currency

risk, liquidity risk, credit risk and equity price risk (see Note 33 - Financial Risk Management

Objectives and Policies to the 2019 Audited Consolidated Financial Statements for more details on

these risks).

Liquidity risk. MPIC has ample liquidity to support its essential investment projects, meet debt

obligations and for maintaining the current level of dividend payments to shareholders. It is

reasonable for MPIC to anticipate a possibly reduced dividend income from its tollways business if

the traffic reduction relating to COVID-19 and Metro Manila community quarantine is substantial and

long lasting. MPIC is alert to the rapid decline in financial liquidity around the world and will be

continually assessing its investment program in light of this.

Since the announcement of the Government’s review of the Maynilad concession agreement toward

the end of 2019, Maynilad has been unable to access additional credit. The ECQ has led to a

suspension of meter reading (with bills estimated based on previous average volumes) and cash

collections have fallen below monthly cash operating expenses and other non-discretionary payments

such that Maynilad is depleting its cash. Depending on the length of the ECQ and subsequent

recovery, Maynilad might require additional short-term debt funding or shareholder support.

Except for Maynilad, other significant MPIC investees have not reported liquidity issues during the

ECQ. However, they are continuously monitoring cash flow projections and periodically checking

with their respective banks on available credit lines and ongoing interest rates.

Equity Price Risk. MPIC’s operating companies are generally not faced with equity price risk beyond

that normal for any listed company, where relevant.

The regulatory returns for MERALCO and Maynilad are benchmarked in part to the changing cost of

equity (and debt) in the Philippines with a positive correlation between rising equity risk premiums

and nominal returns. For more details on MERALCO’s risk factors, please see MERALCO’s March

31, 2020 17-Q as also uploaded on the edge website of the PSE.

Refer to the Risk Management section of MPIC’s Annual Report for the Company’s risk governance

structure and overview of risk management process.

97

Key Variable and Other Qualitative and Quantitative Factors

i. Events that will trigger direct or contingent financial obligation that is material to the company,

including any default or acceleration of an obligation

There are various outstanding contingent liabilities which are not reflected in the accompanying

consolidated financial statements. Refer to Note 23 – Contingencies and Note 24 – Contracts,

Agreements and Commitments to the March 31, 2020 Interim Consolidated Financial Statements for

the updates on the Company’s financial obligations.

ii. All material off-balance sheet transactions, arrangements, obligations (including contingent

obligations), and other relationships of the company with unconsolidated entities or other persons

created during the reporting periods

There are various outstanding contingent liabilities which are not reflected in the accompanying

consolidated financial statements. Refer to Note 23 – Contingencies and Note 24 – Contracts,

Agreements and Commitments to the March 31, 2020 Interim Consolidated Financial Statements for

the updates on the Company’s financial obligations.

iii. Description of any material commitments for capital expenditures, general purpose of such

commitments, expected sources of funds for such expenditures

Refer to Note 9 - Service Concession Assets and Note 24 – Contracts, Agreements and

Commitments to the March 31, 2020 Interim Consolidated Financial Statements for the updates on

the Company’s commitments.

iv. Any known trends, events or uncertainties that have had or that are reasonably expected to have a

material favorable or unfavorable impact on net sales or revenues or income from continuing

operations

The Company’s results of operations are highly dependent on its ability to set and collect adequate

tariffs under its concession agreements with the Philippine Government. Please refer to Note 23 –

Contingencies to the March 31, 2020 Interim Consolidated Financial Statements.

Impact of COVID-19 is disclosed in Note 3 - Impact of COVID-19 to MPIC’s businesses and

operations to the March 31, 2020 Interim Consolidated Financial Statements.

v. Any seasonal aspects that had a material effect on the financial condition or results of operations

Please refer to Note 3 – Operating Segment Information to the March 31, 2020 Interim

Consolidated Financial Statements.