definitive-information-statement-pse.pdf - energy

Energy Development Corporation 38

th Floor, One Corporate Centre Building, Julia Vargas corner Meralco Avenue

Ortigas Center, Pasig 1605, Philippines

Trunklines: +63 (2) 667-7332 (PLDT) / +63 (2) 755-2332 (Globe)

April 1, 2015

JANET A. ENCARNACION

HEAD, Disclosures Department

The Philippine Stock Exchange, Inc.

Philippine Stock Exchange Plaza

Ayala Triangle, Ayala Avenue, Makati City

Dear Ms. Encarnacion:

In compliance with the Philippine Stock Exchange disclosure requirement, we submit

the attached Notice of May 5, 2015 Annual Stockholders’ Meeting and SEC Form 20-IS

(Definitive Information Statement).

Energy Development Corporation

(A Subsidiary of Red Vulcan Holdings Corporation)and Subsidiaries

Consolidated Financial StatementsDecember 31, 2014 and 2013and Years Ended December 31, 2014, 2013 and 2012

and

Independent Auditors’ Report

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INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of DirectorsEnergy Development Corporation

We have audited the accompanying consolidated financial statements of Energy DevelopmentCorporation (a subsidiary of Red Vulcan Holdings Corporation) and its Subsidiaries, which comprisethe consolidated statements of financial position as at December 31, 2014 and 2013, and theconsolidated statements of income, statements of comprehensive income, statements of changes inequity and statements of cash flows for each of the three years in the period ended December 31, 2014,and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financialstatements in accordance with Philippine Financial Reporting Standards, and for such internal controlas management determines is necessary to enable the preparation of consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on ouraudits. We conducted our audits in accordance with Philippine Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the consolidated financial statements. The procedures selected depend on the auditor’s judgment,including the assessment of the risks of material misstatement of the consolidated financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the entity’s preparation and fair presentation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, December 28, 2012, valid until December 31, 2015SEC Accreditation No. 0012-FR-3 (Group A), November 15, 2012, valid until November 16, 2015

A member firm of Ernst & Young Global Limited

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Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of Energy Development Corporation and its Subsidiaries as at December 31, 2014and 2013, and their financial performance and their cash flows for each of the three years in the periodended December 31, 2014 in accordance with Philippine Financial Reporting Standards.

SYCIP GORRES VELAYO & CO.

Ladislao Z. Avila, Jr.PartnerCPA Certificate No. 69099SEC Accreditation No. 0111-AR-3 (Group A), January 18, 2013, valid until January 17, 2016Tax Identification No. 109-247-891BIR Accreditation No. 08-001998-43-2012, April 11, 2012, valid until April 10, 2015PTR No. 4751254, January 5, 2015, Makati City

March 6, 2015

A member firm of Ernst & Young Global Limited

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ENERGY DEVELOPMENT CORPORATION(A Subsidiary of Red Vulcan Holdings Corporation)AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 312014 2013

ASSETS

Current AssetsCash and cash equivalents (Notes 7 and 31) P=14,010,213,414 16,043,154,556Trade and other receivables (Notes 3, 8, 20 and 31) 6,887,533,961 3,611,367,033Financial assets at fair value through profit or loss (Notes 3, 9 and 31) 523,593,442 –Parts and supplies inventories (Notes 3 and 10) 2,902,452,788 3,094,303,449Derivative assets (Note 31) 22,024,164 14,244,905Available-for-sale investments (Notes 3, 9 and 31) – 341,841,500Other current assets (Note 11) 720,967,433 1,235,454,883

Total Current Assets 25,066,785,202 24,340,366,326

Noncurrent AssetsProperty, plant and equipment (Notes 3 and 12) 83,073,524,410 66,240,009,563Goodwill and intangible assets (Notes 3 and 13) 4,542,553,788 4,399,527,299Exploration and evaluation assets (Notes 3 and 14) 2,801,502,406 2,380,775,489Available-for-sale investments (Notes 3, 9 and 31) 567,976,890 407,242,129Deferred tax assets - net (Notes 2 and 28) 1,049,978,028 1,335,077,588Derivative assets (Note 31) 132,144,980 46,885,196Other noncurrent assets (Notes 3, 15 and 31) 7,264,999,222 5,855,620,746

Total Noncurrent Assets 99,432,679,724 80,665,138,010

TOTAL ASSETS P=124,499,464,926 P=105,005,504,336

LIABILITIES AND EQUITY

Current LiabilitiesTrade and other payables (Notes 3, 16 and 31) P=7,639,327,438 P=6,981,975,893Due to related parties (Notes 20 and 31) 49,625,468 53,347,005Income tax payable 58,743,150 –Current portion of:

Long-term debts (Notes 17 and 31) 10,499,672,112 1,872,075,873Derivative liabilities (Note 31) 3,394,698 524,790

Total Current Liabilities 18,250,762,866 8,907,923,561

Noncurrent LiabilitiesLong-term debts - net of current portion

(Notes 17 and 31) 58,962,569,562 56,676,684,462Derivative liabilities - net of current portion

(Note 31) 166,340,202 3,673,532Deferred tax liability 2,612,598 –Net retirement and other post-employment benefits

(Notes 3 and 27) 1,795,995,440 1,658,587,597Provisions and other long-term liabilities

(Notes 3 and 18) 1,701,097,781 1,513,676,279Total Noncurrent Liabilities 62,628,615,583 59,852,621,870

Total Liabilities 80,879,378,449 68,760,545,431

(Forward)

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December 312014 2013

EquityEquity attributable to equity holders of the Parent Company:

Preferred stock (Note 19) P=93,750,000 P=93,750,000Common stock (Note 19) 18,750,000,000 18,750,000,000Common shares in employee trust account (Notes 19 and 30) (346,730,774) (351,494,001)Additional paid-in capital (Note 30) 6,285,845,818 6,282,808,842Equity reserve (Note 19) (3,706,430,769) (3,706,430,769)Net accumulated unrealized gain on available-for-sale investments (Note 9) 143,192,675 29,611,321Cumulative translation adjustments on hedging transactions (Note 31) (178,182,172) (55,615,718)Cumulative translation adjustment arising from foreign subsidiaries (6,530,344) (8,698,511)Retained earnings (Notes 2 and 19) 21,095,090,585 13,204,236,334

42,130,005,019 34,238,167,498Non-controlling interests (Notes 2 and 19) 1,490,081,458 2,006,791,407Total Equity 43,620,086,477 36,244,958,905

TOTAL LIABILITIES AND EQUITY P=124,499,464,926 P=105,005,504,336

See accompanying Notes to Consolidated Financial Statements.

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ENERGY DEVELOPMENT CORPORATION(A Subsidiary of Red Vulcan Holdings Corporation)AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME

Years Ended December 312014 2013 2012

REVENUE FROM SALE OF ELECTRICITY (Notes 3, 12, 34, 35, 37 and 38) P=30,867,199,917 P=25,656,270,470 P=28,368,552,055

COSTS OF SALE OF ELECTRICITY(Notes 2, 10, 12, 20, 21, 23 and 27) (11,314,332,241) (9,435,354,924) (9,824,274,420)

GENERAL AND ADMINISTRATIVE EXPENSES(Notes 2, 8, 10, 12, 15, 22, 23 and 27) (5,744,349,133) (4,332,188,248) (4,702,875,529)

FINANCIAL INCOME (EXPENSE)Interest income (Notes 7, 24 and 31) 184,691,655 294,047,366 364,640,989Interest expense (Notes 17, 24 and 31) (3,754,010,722) (3,384,499,304) (3,703,648,469)

(3,569,319,067) (3,090,451,938) (3,339,007,480)

OTHER INCOME (CHARGES)Reversal of impairment of property, plant and equipment

(Notes 3 and 12) 2,051,903,642 – 63,614,885Proceeds from insurance claims (Note 12) 539,212,484 – –Foreign exchange gains (losses) - net (Notes 25 and 31) (102,531,122) (1,261,278,106) 1,053,466,774Reversal of (loss on) impairment of damaged assets due to Typhoon Yolanda (Notes 10 and 12) 53,443,007 (625,013,609) –Loss on impairment of exploration and evaluation assets

(Notes 3 and 14) – (574,820,864) –Miscellaneous - net (Note 26) 259,370,942 (223,109,595) (225,328,564)

2,801,398,953 (2,684,222,174) 891,753,095

INCOME BEFORE INCOME TAX FROMCONTINUING OPERATIONS 13,040,598,429 6,114,053,186 11,394,147,721

PROVISION FOR (BENEFIT FROM) INCOME TAX(Note 28)

Current 934,128,656 685,663,122 433,838,464Deferred 288,460,745 (199,679,773) 341,284,130

1,222,589,401 485,983,349 775,122,594

NET INCOME FROM CONTINUING OPERATIONS 11,818,009,028 5,628,069,837 10,619,025,127

NET INCOME FROM DISCONTINUEDOPERATIONS (Note 5) – – 97,495,445

NET INCOME P=11,818,009,028 P=5,628,069,837 P=10,716,520,572

Net income attributable to: Equity holders of the Parent Company P=11,681,155,539 P=4,739,577,464 P=9,002,361,919 Non-controlling interests 136,853,489 888,492,373 1,714,158,653

P=11,818,009,028 P=5,628,069,837 P=10,716,520,572

Basic/Diluted Earnings Per Share for:

Net Income from Continuing Operations Attributable toEquity Holders of the ParentCompany (Note 29) P=0.623 P=0.252 P=0.475

Net Income Attributable to Equity Holders ofthe Parent Company (Note 29) P=0.623 P=0.252 P=0.480


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ENERGY DEVELOPMENT CORPORATION(A Subsidiary of Red Vulcan Holdings Corporation)AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


NET INCOME P=11,818,009,028 P=5,628,069,837 P=10,716,520,572

OTHER COMPREHENSIVE INCOME (LOSS)Other comprehensive income (loss) to be reclassified to

profit or loss in subsequent periods: Cumulative translation adjustments on hedging

transactions, net of tax effect amounting to P=5,240,941 in 2014, P=9,867,862 in 2013 and P=16,047,386 in 2012 (Note 31) (122,566,454) 88,810,758 (144,426,476)

Cumulative translation adjustments on foreign subsidiaries 2,168,167 (14,534,996) 5,243,951

Changes in fair value of available-for-sale investments recognized in equity (Notes 9 and 31) 113,581,354 (81,911,404) 19,763,810

(6,816,933) (7,635,642) (119,418,715)Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods: Remeasurements of retirement and other post-

employment benefits, net of tax effect amounting to P=4,087,231 in 2014, nil in 2013 and P=45,188,919 in 2012 (30,145,429) (137,088,566) (406,700,259)

Total other comprehensive income -net of tax effect (36,962,362) (144,724,208) (526,118,974)

TOTAL COMPREHENSIVE INCOME P=11,781,046,666 P=5,483,345,629 P=10,190,401,598

Total comprehensive income attributable to: Equity holders of the Parent Company P=11,641,537,318 P=4,595,774,119 P=8,476,242,945 Non-controlling interests 139,509,348 887,571,510 1,714,158,653

P=11,781,046,666 P=5,483,345,629 P=10,190,401,598


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ENERGY DEVELOPMENT CORPORATION(A Subsidiary of Red Vulcan Holdings Corporation)AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFOR THE YEARS ENDED DECEMBER 31, 2014, 2013 and 2012

Equity Attributable to Equity Holders of the Parent Company

Preferred Stock(Note 19)

Common Stock(Note 19)

CommonShares in

EmployeeTrust Account

(Note 19)

AdditionalPaid-inCapital

Equity Reserve(Note 19)

Net AccumulatedUnrealized

Gain on AFSInvestments

CumulativeTranslation

Adjustments-Hedging

Transactions(Note 31)


Adjustments-Foreign

SubsidiariesRetained Earnings

(Note 19) Subtotal

Non-controllingInterests

(Notes 2 and 19) Total EquityBalances, January 1, 2014 P=93,750,000 P=18,750,000,000 (P=351,494,001) P=6,282,808,842 (P=3,706,430,769) P=29,611,321 (P=55,615,718) (P=8,698,511) P=13,204,236,334 P=34,238,167,498 P=2,006,791,407 P=36,244,958,905

Total comprehensive incomeNet income – – – – – – – – 11,681,155,539 11,681,155,539 136,853,489 11,818,009,028Changes in fair value of

available-for-sale investments recognized in equity (Notes 9 and 31) – – – – – 113,581,354 – – – 113,581,354 – 113,581,354

Cumulative translation adjustments on hedging transactions (Note 31) – – – – – – (122,566,454) – – (122,566,454) – (122,566,454)

Cumulative translation adjustments on foreign subsidiaries – – – – – – – 2,168,167 – 2,168,167 – 2,168,167

Remeasurements of retirement and other post-employment (Note 27) – – – – – – – – (32,801,288) (32,801,288) 2,655,859 (30,145,429)

Total other comprehensive income (loss) – – – – – 113,581,354 (122,566,454) 2,168,167 (32,801,288) (39,618,221) 2,655,859 (36,962,362)– – – – – 113,581,354 (122,566,454) 2,168,167 11,648,354,251 11,641,537,318 139,509,348 11,781,046,666

Cash dividends (Note 19) – – – – – – – – (3,757,500,000) (3,757,500,000) – (3,757,500,000)Cash dividends to non-controlling interests (Note 19) – – – – – – – – – – (658,255,057) (658,255,057)Share-based payment (Note 30) – – 4,763,227 3,036,976 – – – – – 7,800,203 – 7,800,203Investments from non-controlling shareholders (Note 30) – – – – – – – – – – 2,035,760 2,035,760

Balances, December 31, 2014 P=93,750,000 P=18,750,000,000 (P=346,730,774) P=6,285,845,818 (P=3,706,430,769) P=143,192,675 (P=178,182,172) (P=6,530,344) P=21,095,090,585 P=42,130,005,019 P=1,490,081,458 P=43,620,086,477

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CommonShares in


(Note 19)






Adjustments-Hedging



Adjustments-Foreign


(Note 19) Subtotal


(Notes 2 and 19) Total EquityBalances, January 1, 2013 P=93,750,000 P=18,750,000,000 (P=358,429,306) P=6,277,865,786 (P=3,706,430,769) P=111,522,725 (P=144,426,476) P=5,836,485 P=11,608,326,573 P=32,638,015,018 P=2,070,423,096 P=34,708,438,114

Total comprehensive incomeNet income – – – – – – – – 4,739,577,464 4,739,577,464 888,492,373 5,628,069,837Changes in fair value of

available-for-sale investments recognized in equity (Notes 9 and 31) – – – – – (81,911,404) – – – (81,911,404) – (81,911,404)

Cumulative translation adjustments on hedging transactions (Note 31) – – – – – – 88,810,758 – – 88,810,758 – 88,810,758

Cumulative translation adjustments on foreign subsidiaries – – – – – – – (14,534,996) – (14,534,996) – (14,534,996)

Remeasurements of retirement and other post-employment benefits (Note 27) – – – – – – – – (136,167,703) (136,167,703) (920,863) (137,088,566)

Total other comprehensive loss – – – – – (81,911,404) 88,810,758 (14,534,996) (136,167,703) (143,803,345) (920,863) (144,724,208)– – – – – (81,911,404) 88,810,758 (14,534,996) 4,603,409,761 4,595,774,119 887,571,510 5,483,345,629

Cash dividends (Note 19) – – – – – – – – (3,007,500,000) (3,007,500,000) – (3,007,500,000)Cash dividends to non-controlling interests (Note 19) – – – – – – – – – – (951,203,199) (951,203,199)Share-based payment (Note 30) – – 6,935,305 4,943,056 – – – – – 11,878,361 – 11,878,361

Balances, December 31, 2013 P=93,750,000 P=18,750,000,000 (P=351,494,001) P=6,282,808,842 (P=3,706,430,769) P=29,611,321 (P=55,615,718) (P=8,698,511) P=13,204,236,334 P=34,238,167,498 P=2,006,791,407 P=36,244,958,905

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CommonShares in


(Note 19)






Adjustments-Hedging



Adjustments-Foreign


(Note 19) Subtotal


(Notes 2 and 19) Total EquityBalances, January 1, 2012 P=93,750,000 P=18,750,000,000 (P=372,272,723) P=6,266,966,828 (P=3,706,430,769) P=91,758,915 – P=592,534 P=5,645,164,913 P=26,769,529,698 P=2,217,541,594 P=28,987,071,292Total comprehensive income (loss):

Net income – – – – – – – – 9,002,361,919 9,002,361,919 1,714,158,653 10,716,520,572Changes in fair value of

available-for-sale investments recognized in equity (Notes 9 and 31) – – – – – 19,763,810 – – – 19,763,810 – 19,763,810

Cumulative translation adjustments on hedging transactions (Note 31) – – – – – – (144,426,476) – – (144,426,476) – (144,426,476)

Cumulative translation adjustments on foreign subsidiaries – – – – – – – 5,243,951 – 5,243,951 – 5,243,951

Remeasurements of retirement and other post-employment benefits (Note 27) – – – – – – – – (406,700,259) (406,700,259) – (406,700,259)

Total other comprehensive loss – – – – – 19,763,810 (144,426,476) 5,243,951 (406,700,259) (526,118,974) – (526,118,974)– – – – – 19,763,810 (144,426,476) 5,243,951 8,595,661,660 8,476,242,945 1,714,158,653 10,190,401,598

Cash dividends (Note 19) – – – – – – – – (2,632,500,000) (2,632,500,000) – (2,632,500,000)Cash dividends to non-controlling interests (Note 19) – – – – – – – – – – (1,862,533,076) (1,862,533,076)Share-based payment (Notes 20 and 30) – – 13,843,417 10,898,958 – – – – – 24,742,375 – 24,742,375Investments from non-controlling shareholders in PT EDC Indonesia and PT EDC Panas Bumi Indonesia and EDC Quellaapacheta (Note 1) – – – – – – – – – – 1,255,925 1,255,925

Balances, December 31, 2012 P=93,750,000 P=18,750,000,000 (P=358,429,306) P=6,277,865,786 (P=3,706,430,769) P=111,522,725 (P=144,426,476) P=5,836,485 P=11,608,326,573 P=32,638,015,018 P=2,070,423,096 P=34,708,438,114


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ENERGY DEVELOPMENT CORPORATION(A Subsidiary of Red Vulcan Holdings Corporation)AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS


CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax from continuing operations P=13,040,598,429 P=6,114,053,186 P=11,394,147,721Income before income tax from discontinued operations

(Note 5) – – 139,279,207Adjustments for: Depreciation and amortization

(Notes 5, 12, 13, 21 and 22) 4,079,299,297 3,569,347,352 3,578,627,171 Interest expense (Notes 5 and 24) 3,754,010,722 3,384,499,304 3,703,648,469 Reversal of impairment of property, plant and

equipment (Notes 3 and 12 ) (2,051,903,642) – (63,614,885) Loss (gain) on disposal and retirement of property,

plant and equipment (Notes 12, 20 26) (362,228,309) (4,026,459) 455,016 Retirement and other post-employment benefit costs

(income) [Notes 23 and 27] 311,135,951 288,176,016 (427,492,784) Loss on direct write-off of input VAT claims

(Note 26) 234,188,828 220,039,070 – Interest income (Notes 7, 24 and 31) (184,691,655) (294,047,366) (364,640,989) Unrealized foreign exchange losses (gains) - net

(Notes 5 and 25) 99,350,940 1,274,306,832 (1,217,556,247) Provision for doubtful accounts - net

(Notes 15 and 22) 59,627,889 44,433,938 203,286,078 Mark-to-market gain on financial asset at fair value

through profit or loss (Note 9) (23,593,442) – – Share-based benefit cost (Notes 20 and 30) 7,800,204 11,878,361 24,742,375 Unrealized derivative losses (gains) - net (Note 31) 7,547,020 (7,298,261) (248,760) Loss (reversal) on damaged assets due to Typhoon

Yolanda (Notes 10 and 12) (53,443,007) 625,013,609 – Loss on impairment of exploration and evaluation

assets (Notes 3 and 14) – 574,820,864 – Loss on debt extinguishment (Notes 17 and 26) – – 188,145,763Operating income before working capital changes 18,917,699,225 15,801,196,446 17,158,778,135Decrease (increase) in: Trade and other receivables (3,320,155,188) 511,509,776 (721,533,010) Due from related parties – – 7,812 Parts and supplies inventories 312,883,782 138,987,378 52,737,319 Other current assets 276,429,851 (539,811,446) 164,131,088Increase (decrease) in: Trade and other payables 650,201,093 (844,676,501) 1,062,312,440 Increase in provisions and other long-term liabilities 99,799,975 210,650,846 310,984,350 Due to related parties (3,721,537) 266,585,224 (64,093,934)Cash generated from operations 16,933,137,201 15,544,441,723 17,963,324,200Retirement and other post-employment benefits

contributions (Note 27) (206,954,000) (202,342,501) (363,665,405)Income tax paid, including creditable withholding tax (637,327,909) (694,686,727) (563,089,655)Net cash flows from operating activities 16,088,855,292 14,647,412,495 17,036,569,140

(Forward)

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CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of property, plant and equipment (Note 12) (P=19,682,564,840) (P=10,366,499,024) (P=6,663,047,373)Purchase of Hot Rock entities (Notes 3 and 13) (133,185,000) – –Proceeds from revenue generated from testing of property,

plant and equipment (Note 12) – 1,401,482,922 520,417,469Interest received 240,298,311 284,694,418 365,288,722Acquisition of intangible assets (Note 13) (86,577,780) (145,058,843) –Purchase of available-for-sale investments (Note 20) (76,510,586) (87,335,659) (162,093,722)Purchase of financial assets at fair value through profit or

loss (Note 9) (500,000,000) – –Proceeds from redemption of available-for-sale investments

(Note 9) 346,448,103 130,428,284 –Proceeds from disposal and retirement of property, plant

and equipment (Notes 12, 20 and 26) 1,476,748,309 34,977,421 5,426,167Increase in: Exploration and evaluation assets (Notes 13 and 14) (411,034,200) (1,351,490,941) (517,025,999) Other noncurrent assets (1,585,139,956) (417,160,849) (1,698,256,608)Net cash flows used in investing activities (20,411,517,639) (10,515,962,271) (8,149,291,344)

CASH FLOWS FROM FINANCING ACTIVITIESPayments of:

Long-term debts (Note 17) (8,533,529,000) (2,439,902,500) (8,287,843,366) Dividends (Note 19) (4,415,755,057) (3,958,703,199) (4,495,033,076)Proceeds from long-term debts (Note 17) 19,157,557,718 10,348,278,531 6,934,833,050Investment from non-controlling shareholders 2,035,760 – –Interest and financing charges paid (3,921,038,030) (3,477,303,213) (4,108,361,868)Net cash flows from (used in) financing activities 2,289,271,391 472,369,619 (9,956,405,260)

NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS (2,033,390,956) 4,603,819,843 (1,069,127,464)

EFFECT OF FOREIGN EXCHANGE RATECHANGES ON CASH AND CASHEQUIVALENTS 449,814 19,190,510 (4,135,296)

CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 16,043,154,556 11,420,144,203 12,493,406,963

CASH AND CASH EQUIVALENTSAT END OF YEAR (Note 7) P=14,010,213,414 P=16,043,154,556 P=11,420,144,203


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ENERGY DEVELOPMENT CORPORATION(A Subsidiary of Red Vulcan Holdings Corporation)AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information and Authorization for Issuance of the Consolidated FinancialStatements

GeneralEnergy Development Corporation (the “Parent Company” or “EDC”) was incorporated in thePhilippines and registered with the Securities and Exchange Commission on March 5, 1976.Beginning December 13, 2006, the common shares of EDC were listed and traded in thePhilippine Stock Exchange.

The Parent Company and its subsidiaries (collectively referred to as the “Company”) are primarilyengaged in the business of exploring, developing, and operating geothermal energy and otherindigenous renewable energy projects in the Philippines.

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

Geothermal and Other Renewable Energy ProjectsEDC’s geothermal power projects engage in two principal activities: (i) the production ofgeothermal steam for use at EDC and its subsidiaries’ geothermal power plants, and (ii) thegeneration and sale of electricity through those geothermal power plants pursuant to take-or-paypower offtake arrangements. EDC’s steam and electricity sales are supported by medium- tolong-term offtake agreements in various forms. EDC’s steam sales are backed by long-termofftake agreements with its wholly-owned subsidiaries: (i) Geothermal Resource Sales Contracts(GRSCs) with Green Core Geothermal Inc. (GCGI); and (ii) a Steam Sales Agreement (SSA) withBac-Man Geothermal Inc. (BGI). EDC has three 25-year Power Purchase Agreements (PPAs)with National Power Corporation (NPC) covering EDC’s Unified Leyte and MindanaoGeothermal Power Projects (Mindanao I and Mindanao II). The PPAs for Unified Leyte andMindanao I are scheduled to expire in 2022 while the PPA for Mindanao II will expire in 2024(see Notes 3 and 34). GCGI and BGI also hold offtake agreements in the form of TransitionSupply Contracts (TSCs), Power Supply Contracts (PSCs) and Power Supply Agreements (PSAs)with various customers, particularly electric cooperatives. Also, EDC, GCGI and BGI sellelectricity to Wholesale Electricity Spot Market (WESM).

EDC holds service contracts with the Department of Energy (DOE) corresponding to 14geothermal contract areas, each granting EDC exclusive rights to explore, develop, and utilize thecorresponding resources in the relevant contract area. EDC conducts commercial operations in thefollowing four of its 14 geothermal contract areas:

§ Tongonan, Kananga, Leyte - EDC operates three geothermal steamfield projects in Leyte,which deliver steam to the Tongonan geothermal power plant, owned by EDC’s subsidiaryGCGI, and the four EDC-owned Unified Leyte geothermal power plants.

§ Southern Negros, Valencia, Negros Oriental - EDC operates two geothermal steamfieldprojects in Southern Negros, which deliver steam to the two GCGI-owned Palinpinongeothermal power plants and EDC-owned Nasulo geothermal power plant.

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§ Bacon-Manito, Albay and Sorsogon - EDC operates two geothermal steamfield projects,which deliver steam to two geothermal power plants in Albay and Sorsogon, owned by theParent Company’s subsidiary BGI.

§ Mt. Apo, Kidapawan, Cotabato - EDC operates one geothermal steamfield project, whichdelivers steam to two EDC-owned geothermal power plants on Mt. Apo.

The Company also operates hydroelectric power plant through First Gen HydroPower Corporation(FG Hydro), a 60%-owned subsidiary of EDC. FG Hydro generates revenue from the sale ofelectricity generated by its 132-Megawatt (MW) Pantabangan-Masiway hydroelectric plantslocated in Nueva Ecija. FG Hydro sells its generated electricity to various privately-owneddistribution utilities (DUs) under the PSAs and PSCs. Generated electricity in excess of thecontracted levels is sold to the WESM.

In November 2014, EDC Burgos Wind Power Corporation (EBWPC), a wholly-owned subsidiaryof EDC, has completed the construction of its 150-MW Burgos Wind Energy Project located inIlocos Norte. The Company intends to operate the Burgos Wind Project under the Feed-In Tariff(FIT) System. As of March 6, 2015, the Company’s application for the FIT Certificate ofCompliance (a requirement to avail of the incentives under the FIT System) is subject for theapproval of the Energy Regulatory Commission (ERC). In 2014, the Burgos Wind Project startedto generate electictricity which was sold to the WESM.

The construction of the Company’s 4-MW solar power plant located in Burgos, Ilocos Norte isongoing.

Also, until October 2012, the Parent Company had drilling operations in Papua New Guinea(see Note 5).

SubsidiariesThe Parent Company and its subsidiaries were separately incorporated and registered with thePhilippine Securities and Exchange Commission (SEC), except for its foreign subsidiaries. Beloware the Parent Company’s ownership interests in its subsidiaries:

Percentage of OwnershipDecember 31, 2014 December 31, 2013

Direct Indirect Direct IndirectEDC Drillco Corporation (EDC Drillco) 100.00 – 100.00 –EDC Geothermal Corp. (EGC) 100.00 – 100.00 –

Green Core Geothermal Inc. (GCGI) – 100.00 – 100.00Bac-Man Geothermal Inc. (BGI) – 100.00 – 100.00Unified Leyte Geothermal Energy Inc. (ULGEI) – 100.00 – 100.00Southern Negros Geothermal, Inc. (SNGI)*** – 100.00 – 100.00EDC Mindanao Geothermal Inc. (EMGI)*** – 100.00 – 100.00Bac-Man Energy Development Corporation (BEDC)*** – 100.00 – 100.00Kayabon Geothermal, Inc. (KGI)*** – 100.00 – 100.00Mount Apo Renewable Inc. (MAREI)* – 100.00 – –

Energy Development (EDC) Corporation Chile Limitada[EDC Chile Limitada] 99.99 0.01 99.99 0.01

(Forward)

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Percentage of OwnershipDecember 31, 2014 December 31, 2013

Direct Indirect Direct IndirectEDC Holdings International Limited (EHIL)**** 100.00 – 100.00 –

Energy Development Corporation Hong Kong Limited (EDC HKL)**** – 100.00 – 100.00

EDC Chile Holdings SpA*** – 100.00 – 100.00EDC Geotermica Chile SpA*** – 100.00 – 100.00

EDC Peru Holdings S.A.C.*** – 100.00 – 100.00EDC Geotermica Peru S.A.C.*** – 100.00 – 100.00

EDC Quellaapacheta** – 100.00 – 70.00EDC Geotérmica Del Sur S.A.C. ** – 100.00 – 100.00EDC Energía Azul S.A.C.** – 100.00 – 100.00

Geotermica Crucero Peru S.A.C.** – 70.00 – 70.00EDC Energía Perú S.A.C. ** – 100.00 – 100.00

Geotermica Tutupaca Norte Peru S.A.C.** – 70.00 – 70.00EDC Energía Geotérmica S.A.C.** – 100.00 – 100.00EDC Progreso Geotérmico Perú S.A.C.** – 100.00 – 100.00

Geotermica Loriscota Peru S.A.C.** – 70.00 – 70.00EDC Energía Renovable Perú S.A.C.** – 100.00 – 100.00PT EDC Indonesia*** – 95.00 – 95.00PT EDC Panas Bumi Indonesia*** – 95.00 – 95.00EDC Soluciones Sostenibles Ltd – 100.00 – –

EDC Energia Verde Chile SpA – 100.00 – –EDC Energia de la Tierra SpA – 100.00 – –

EDC Desarollo Sostenible Ltd – 100.00 – –EDC Energia Verde Peru SAC – 100.00 – –

EDC Wind Energy Holdings, Inc. (EWEHI) **** 100.00 – 100.00 –EDC Burgos Wind Power Corporation (EBWPC) – 100.00 – 100.00EDC Pagudpud Wind Power Corporation

(EPWPC)*** – 100.00 – 100.00EDC Bayog Burgos Power Corporation (EBBPC)* – 100.00 – –EDC Pagali Burgos Wind Power Corporation (EPBWPC)* – 100.00 – –

EDC Bright Solar Energy Holdings, Inc. (EBSEHI) */**** 100.00 – – –EDC Bago Solar Power Corporation (EBSPC)* – 100.00 – –EDC Burgos Solar Corporation (EBSC) * – 100.00 – –

First Gen Hydro Power Corporation (FG Hydro) 60.00 – 60.00 –*Incorporated in 2014 and has not yet started commercial operations.**Incorporated in 2013 and has not yet started commercial operations.***Incorporated in prior years and has not yet started commercial operations.****Serves as an investment holding company.

EDC DrillcoEDC Drillco is a company incorporated on September 28, 2009 to act as an independent servicecontractor, consultant, specialized technical adviser for well construction and drilling, and otherrelated activities. As of December 31, 2014, EDC Drillco remained non-operating.

EGCEGC, originally named as First Luzon Geothermal Energy Corporation, is a special-purposecompany incorporated on April 9, 2008 to participate in the bid for another local power plant. Thebid was won by and awarded to another local entity. Thereafter, EGC became an investmentholding company of its wholly owned subsidiaries, namely GCGI, BGI, ULGEI, SNGI, EMGI,MAREI, BEDC and KGI. EGC also has a 0.01% stake in EDC Chile Limitada.

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On March 8, 2011, the Philippine SEC approved the change of its corporate name to EDCGeothermal Corp.

Further details on EGC’s wholly owned subsidiaries follow:

§ GCGI was incorporated on June 22, 2009 with primary activities on power generation,transmission, distribution, and other energy related businesses. GCGI is currently operatingthe 192.5 MW Palinpinon and 112.5 MW Tongonan 1 geothermal power plants in NegrosOriental and Leyte, respectively, following its successful acquisition from the Power SectorAssets and Liabilities Management Corporation (PSALM) in 2009.

§ BGI was incorporated on April 7, 2010 primarily to carry on the general business ofgenerating, transmitting, and/or distributing energy. BGI has successfully acquired the150 MW Bac-Man Geothermal Power Plants (BMGPP) from PSALM in 2010. Prior to theacquisition of BGI of the BMGPP in May 2010, the Parent Company supplied and sold steamto NPC under the SSA. Details are as follows:

a. Bacon-Manito-IThe SSA for the Bac-Man 110 MW geothermal resources was entered in November 1988provides, among others, that NPC shall pay the Parent Company a base price per kilowatt-hour of gross generation, subject to inflation adjustments and based on a guaranteed take-or-pay rate at 75% plant factor. The SSA is for a period of 25 years, which commenced inMay 1993.

Bacon-Manito-IIBac-Man II’s SSA with NPC was signed in June 1996 for its two 20-MW capacitymodular plants - Cawayan and Botong. The terms and conditions under the contractcontain, among others, NPC’s commitment to pay the Parent Company a base price perkilowatt-hour of gross generation, subject to inflation adjustments and based on aguaranteed take-or-pay rate, commencing from the established commercial operationperiod, using the following plant factors: 50% for the first year, 65% for the second yearand 75% for the third and subsequent years. The SSA is for a period of 25 years, whichcommenced in March 1994 for Cawayan and December 1997 for Botong

BGI declared commercial operations of Bac-Man Unit 3, Bac-Man Unit 1 and Bac-ManUnit 2 on October 1, 2013, January 28, 2014 and June 3, 2014, respectively.

§ SNGI and EMGI are companies incorporated on February 4, 2011; and BEDC and KGI arecompanies incorporated on September 22 and 28, 2011, respectively. These are Philippinecompanies incorporated to carry on the general business of generating, transmitting, and/ordistributing energy derived from any and all forms, types and kinds of energy sources forlighting and power purposes and whole-selling the electric power to power corporations,public electric utilities and electric cooperatives. As of December 31, 2014 SNGI, MAREI,EMGI, BEDC and KGI remained non-operating.

§ ULGEI is a company incorporated on June 23, 2010; On November 8 and 11, 2013,respectively, ULGEI, a wholly owned subsidiary of the Energy Development Corporation, hadbeen declared as one of the seven Highest Ranking Bidders for the maximum allowable40MW per bidder in the Selection and Appointment of the Independent Power ProducerAdministrators (IPPA) for the Strips of Energy of the Unified Leyte Geothermal Power Plants(ULGPPs), and thereafter, as the Highest Ranking Bidder to administer the Bulk Energy of the

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ULGPPs, which is the capacity in excess of the 240MW allotted for the Strips of Energy. Thebidding was conducted by the PSALM on November 7, 2013, one day before Super TyphoonYolanda made landfall and severely affected the facilities of EDC, the National GridCorporation and various distribution utilities in Central Visayas. Consequently, ULGEI haswritten PSALM that it cannot accept the award of the winning bids as the physical andeconomic conditions underlying the bidding process and the IPPA Administration Agreementsrequired to be executed pursuant thereto have been dramatically altered by the severe andwidespread destruction caused by Super Typhoon Yolanda in the Eastern and Western Visayasregions.

In February 2014, PSALM has written ULGEI informing of the following:

1.) ULGEI has been selected as the Winning Bidder for Forty (40) MW Strips of Energy ofthe ULGPP at the bidded rate/price; and

2.) PSALM accepts ULGEI’s decision not to accept the award as Winning Bidder for theBulk Energy of the ULGPP, subject to subsequent determination/evaluation of theforfeiture of ULGEI’s Bid Security and ULGEI’s qualification to participate further in therebidding process for said Bulk Energy.

In December 2014, the IPPA Contract for the strips of energy was turned over to ULGEI.ULGEI recognized revenue amounting to P=8.3 million.

EHIL and EDC HKLEHIL was incorporated on August 17, 2011 in British Virgin Islands and serves as an investmentholding company of EDC’s international subsidiaries. EHIL owns 100% interest in EDC HKL, acompany incorporated on November 22, 2011 in Hong Kong. The following entities are thesubsidiaries under EDC HKL:

§ EDC Chile Holdings SpA, which was incorporated on January 13, 2012 in Santiago,Chile, is a wholly owned subsidiary of EDC HKL and is the holding company of EDCGeotermica Chile also incorporated on January 13, 2012 in Santiago, Chile. Its main purposeis to carry on the general business of generating, transmitting, and/or distributing energyderived from any and all forms, types and kinds of energy sources for lighting and powerpurposes and whole-selling the electric power to power corporations, public electric utilitiesand electric cooperatives.

§ EDC Peru Holdings S.A.C., incorporated on January 19, 2012 in Lima, Peru is a 99.9%-owned subsidiary of EDC HKL. EDC Peru Holdings S.A.C. holds 99.9% stake in EDCGeotermica Peru S.A.C., which was also incorporated on January 19, 2012 in Lima, Peru.EHIL owns the remaining 0.1% stake in EDC Peru Holdings S.A.C. and EDC GeotermicaPeru S.A.C. Its main purpose is to carry on the general business of generating, transmitting,and/or distributing energy derived from any and all forms, types and kinds of energy sourcesfor lighting and power purposes and whole-selling the electric power to power corporations,public electric utilities and electric cooperatives.

On July 17, 2012, EDC Quellaapacheta was incorporated in Lima, Peru as a 70%-ownedsubsidiary of EDC Geotermica Peru S.A.C. Its main purpose is to carry on the generalbusiness of generating, transmitting, and/or distributing energy derived from any and all forms,types and kinds of energy sources for lighting and power purposes and whole-selling theelectric power to power corporations, public electric utilities and electric cooperatives.

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On February 27, 2013, EDC Geotermica Del Sur S.A.C., EDC Energía Azul S.A.C., EDCEnergía Perú S.A.C., EDC Energía Geotérmica S.A.C., EDC Progreso Geotérmico PerúS.A.C., EDC Energía Renovable Perú S.A.C., were incorporated in Lima, Peru as 99.9%-owned by EDC HKL and 0.1%-owned by EDC Peru Holdings S.A.C. Its main purpose is tocarry on the general business of generating, transmitting, and/or distributing energy derivedfrom any and all forms, types and kinds of energy sources for lighting and power purposes andwhole-selling the electric power to power corporations, public electric utilities and electriccooperatives.

On July 5, 2013, three new entities were incorporated in Lima, Peru. These entities areGeotermica Tutupaca Norte Peru S.A.C. as 70% owned by EDC Energia Peru S.A.C;Geotermica Crucero Peru S.A.C., as 70% owned by EDC Energia Azul S.A.C; andGeotermica Loriscota Peru S.A.C., as 70% owned by EDC Progreso Geotermico S.A.C. Asof December 31, 2013, these new subsidiaries remained non-operating. There main purpose isto carry on the general business of generating, transmitting, and/or distributing energy derivedfrom any and all forms, types and kinds of energy sources for lighting and power purposes andwhole-selling the electric power to power corporations, public electric utilities and electriccooperatives.

§ On July 9, 2012, PT EDC Indonesia and PT EDC Panas Bumi Indonesia were incorporated inJakarta Pusat, Indonesia as 95%-owned subsidiaries of EDC HKL.

As of December 31, 2014, all subsidiaries of EDC HKL remained non-operating.

EWEHIEWEHI is a holding company incorporated on April 15, 2010. The following entities are thewholly owned subsidiaries of EWEHI.

§ EBWPC is a company incorporated on April 13, 2010 to carry on the general business ofgenerating, transmitting, and/or distributing energy. In September 2012, following EWEHI’sacquisition of 1,249,500 shares of EBWPC representing 33.33% ownership interest from EDCfor P=141.4 million, EBWPC became a wholly owned subsidiary of EWEHI. .

§ EPWPC is a company incorporated on February 29, 2012 to carry on the general business ofgenerating, transmitting, and/or distributing energy. As of December 31, 2014, EPWPCremained non-operating (see Note 36).

§ EBBPC is a company incorporated on May 22, 2014 to carry on the general business ofgenerating, transmitting, and/or distributing energy. As of December 31, 2014, EBBPCremained non-operating. (see note 36).

§ EPBWPC is a company incorporated on May 22, 2014 to carry on the general business ofgenerating, transmitting, and/or distributing energy. As of December 31, 2014, EPBWPCremained non-operating. (see note 36).

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EBSEHIEBSEHI is a holding company incorporated on May 23, 2014. The following entities are thewholly owned subsidiaries of EBSEHI

§ EBSPC is a company incorporated on May 22, 2014 to carry on the general business ofgenerating, transmitting, and/or distributing energy. As of December 31, 2014, EBSPCremained non-operating.

§ EBSC is a company incorporated on November 19, 2014 to carry on the general business ofgenerating, transmitting, and/or distributing energy. As of December 31, 2014, EBSCremained non-operating.

FG HydroOn October 20 and November 17, 2008, in line with its objective of focusing on renewable energy,the Parent Company acquired a total of 60% interest in FG Hydro from First Gen. FG Hydrooperates the 132 MW Pantabangan and Masiway Hydro-Electric Power Plants (PAHEP/MAHEP)located in Nueva Ecija, Philippines. FG Hydro buys from and sells electricity to the WESM andto various privately-owned distribution utilities (DUs) under the PSAs and PSCs.

EDC Chile LimitadaEDC Chile Limitada is a limited liability company incorporated on February 11, 2010 in Santiago,Chile with the purpose of exploring, evaluating and extracting any mineral or substance togenerate geothermal energy.

Corporate AddressThe address of the registered office of the Parent Company is One Corporate Centre, Julia VargasAvenue corner Meralco Avenue, Ortigas Centre, Pasig City.

Authorization for Issuance of the Consolidated Financial StatementsThe consolidated financial statements were reviewed and recommended for approval by the Auditand Governance Committee to the Board of Directors (BOD) on February 24, 2015. The sameconsolidated financial statements were approved and authorized for issuance by the BOD onMarch 6, 2015.

2. Basis of Preparation

The consolidated financial statements have been prepared on a historical cost basis, except forderivative instruments, financial asset at fair value through profit or loss and available-for-sale(AFS) investments that have been measured at fair value. The consolidated financial statementsare presented in Philippine peso (Peso), which is the Parent Company’s functional currency. Allvalues are rounded to the nearest Peso, except when otherwise indicated.

Statement of ComplianceThe consolidated financial statements of the Company have been prepared in accordance withPFRS issued by the Financial Reporting Standards Council.

Changes in Accounting Policies and Disclosures

The Company applied for the first time certain standards and amendments, which are effective forannual periods beginning on or after 1 January 2014. However, they do not impact the annualconsolidated financial statements of the Company.

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The nature and the impact of each new standard or amendment are described below:

· Investment Entities (Amendments to PFRS 10, Consolidated Financial Statements, PFRS 12,Disclosure of Interests in Other Entities, and PAS 27, Separate Financial Statements)

These amendments provide an exception to the consolidation requirement for entities thatmeet the definition of an investment entity under PFRS 10. The exception to consolidationrequires investment entities to account for subsidiaries at fair value through profit or loss. Theamendments must be applied retrospectively, subject to certain transition relief.

These amendments have no impact to the Company, since none of the entities within theCompany qualifies to be an investment entity under PFRS 10.

· PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities (Amendments)

These amendments clarify the meaning of ‘currently has a legally enforceable right to set-off’and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify foroffsetting and are applied retrospectively

These amendments have no impact on the Company, since none of the entities in theCompany has any offsetting arrangements.

· PAS 39, Financial Instruments: Recognition and Measurement - Novation of Derivatives andContinuation of Hedge Accounting (Amendments)

These amendments provide relief from discontinuing hedge accounting when novation of aderivative designated as a hedging instrument meets certain criteria and retrospectiveapplication is required. These amendments have no impact on the Company as the Companyhas not novated its derivatives during the current or prior periods.

· PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets (Amendments)

These amendments remove the unintended consequences of PFRS 13, Fair ValueMeasurement, on the disclosures required under PAS 36. In addition, these amendmentsrequire disclosure of the recoverable amounts for assets or cash-generating units (CGUs) forwhich impairment loss has been recognized or reversed during the period.

The application of these amendments has no impact on the disclosure in the Company’sconsolidated financial statements.

· Philippine Interpretation IFRIC 21, Levies (IFRIC 21)

IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggerspayment, as identified by the relevant legislation, occurs. For a levy that is triggered uponreaching a minimum threshold, the interpretation clarifies that no liability should beanticipated before the specified minimum threshold is reached. Retrospective application isrequired for IFRIC 21.

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This interpretation has no impact on the Company as it has applied the recognition principlesunder PAS 37, Provisions, Contingent Liabilities and Contingent Assets, consistent with therequirements of IFRIC 21 in prior years.

Annual Improvements to PFRSs (2010-2012 cycle)In the 2010 - 2012 annual improvements cycle, seven amendments to six standards were issued,which included an amendment to PFRS 13, Fair Value Measurement. The amendment to PFRS 13is effective immediately and it clarifies that short-term receivables and payables with no statedinterest rates can be measured at invoice amounts when the effect of discounting is immaterial.This amendment has no impact on the Company.

Annual Improvements to PFRSs (2011-2013 cycle)In the 2011 - 2013 annual improvements cycle, four amendments to four standards were issued,which included an amendment to PFRS 1, First-time Adoption of Philippine Financial ReportingStandards-First-time Adoption of PFRS. The amendment to PFRS 1 is effective immediately. Itclarifies that an entity may choose to apply either a current standard or a new standard that is notyet mandatory, but permits early application, provided either standard is applied consistentlythroughout the periods presented in the entity’s first PFRS financial statements. This amendmenthas no impact on the Company as it is not a first time PFRS adopter.

3. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements requires management to make judgments,estimates and assumptions that affect the reported amounts of revenues, expenses, assets andliabilities, and the disclosure of contingent liabilities, at the financial reporting date. Uncertaintyabout these assumptions and estimates could result in outcomes that require material adjustmentsto the carrying amounts of assets or liabilities in the future.

JudgmentsIn the process of applying the Company’s accounting policies, management has made thefollowing judgments, which have the most significant effect on the amounts recognized in theconsolidated financial statements:

Functional CurrencyThe Parent Company’s transactions are denominated or settled in various currencies such as thePeso, United States dollar (US$), and Japanese yen (JPY). The Parent Company has determinedthat its functional currency is the Peso, which is the currency that most faithfully represents theeconomic substance of its underlying transactions, events and conditions.

Discontinued OperationsIn October 2012, the Company has completed its contract with Lihir Gold Ltd. (Lihir) in PapuaNew Guinea for the provision of drilling services. In line with its current strategy, the Companywill no longer engage in drilling activities but will maintain its major business of selling electricity.Management considered that the drilling operations met the definition of discontinued operations,which is a component that has been terminated and is comprised of operations and cash flows thatcan be clearly distinguished operationally and for financial reporting purposes, from the rest of theCompany.

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Classification of Financial InstrumentsOn initial recognition, the financial instruments, or its component parts, are classified either as afinancial asset, a financial liability or an equity instrument in accordance with the substance of thecontractual arrangement and the definition of a financial asset, a financial liability or an equityinstrument. The substance of a financial instrument, rather than its legal form, governs itsclassification in the consolidated statement of financial position.

In addition, the Company classifies financial assets by evaluating, among others, whether the assetis quoted or not in an active market. Included in the evaluation on whether a financial asset isquoted in an active market is the determination on whether quoted prices are readily and regularlyavailable, and whether those prices represent actual and regularly occurring market transactions inan arm’s length basis.

The classifications of financial assets and financial liabilities of the Company are presented inNote 31.

Determination of Control over an Investee CompanyControl is presumed to exist when an investor is exposed, or has rights, to variable returns from itsinvolvement with the investee and has the ability to affect those returns through its power over theinvestee. The Company has established that it has the ability to control its subsidiaries by virtue ofeither 100% or majority interest in the investee companies.

Determination of whether NCI is Material for Purposes of PFRS 12 DisclosuresPFRS 12 requires an entity to disclose certain information, including summarized financialinformation, for each of its subsidiaries that have non-controlling interests that are material to thereporting entity. The Company has determined that the NCI in FG Hydro is material for purposesof providing the required disclosures under PFRS 12. FG Hydro is one of the reportable segmentsof the Company (under Pantabangan/Masiway business unit) with significant assets and liabilitiesrelative to the Company’s consolidated total assets and consolidated total liabilities. Also,dividends attributable to the NCI are considered significant relative to the total dividends declaredby the Group in current and prior periods.

Assessment of whether a Transaction Qualifies as Business Combination under PFRS 3The Company has made the following assessments in accounting for its investments in certainentities:

a) Acquisition of Shares of Hot Rock CompaniesOn December 19, 2013, Energy Development Corporation Hong Kong Limited (EDC HK; anindirect wholly-owned subsidiary of EDC), entered into a Share Sale Agreement (SSA), asamended, with Hot Rock Holding Ltd (BVI) (HR Holding BVI), an indirect wholly-ownedsubsidiary of Hot Rock Limited (HRL) incorporated in British Virgin Islands. HRL, a listedcompany in Australian Stock Exchange, is primarily engaged in geothermal explorationactivities in Australia, Chile and Peru. Under the SSA, all shares of Hot Rock Chile Ltd (BVI)[HRC BVI] and Hot Rock Peru Ltd (BVI) [HRP BVI] held by HR Holding BVI shall beacquired by EDC HK, subject to certain pre-completion conditions. HRC BVI and HRP BVIare also incorporated in the British Virgin Islands and direct wholly-owned subsidiaries of HRHolding BVI. The total purchase price for the acquisition of Hot Rock entities amounted toUS$3.0 million. The acquisition was completed on January 3, 2014 (the aquisiton date) asagreed by EDC HK and HR Holding BVI after all conditions precedent have either beenfulfilled or waived by both parties.

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Both HRC BVI and HRP BVI are engaged in exploration of prospective geothermal projectsin South America conducted through their respective subsidiaries, namely, Hot Rock ChileS.A. (HR Chile) and Hot Rock Peru S.A. (HR Peru). HR Peru owns 30% interest inGeotermica Quellaapacheta Peru S.A.C. while the Company owns 70%.

Prior to the acquisition by EDC HK, HR Chile and HR Peru had been granted withconcessions/authorizations by the governments of Chile and Peru, respectively, whereby thesecompanies obtained an exclusive right to carry out exploration activities to determine anypotential geothermal resource on certain areas covered by the concessions/authorizations. Theperiod to perform the necessary exploration work is typically for two to three years from thedate of grant, subject to further extension. As provided for in the SSA, included in the assetspurchased by EDC HK are selected existing and valid concessions/authorizations held by HRChile and HR Peru. In addition, the exclusive and preferential rights to apply for the renewalof expired geothermal concessions in Chile are also acquired by EDC HK. Hot Rock entitieshave previously performed field exploration on its geothermal tenements.

Management has determined that the acquired Hot Rock companies have met the definition ofa business that should be accounted for under PFRS 3 (see Note 13).

b) Joint Venture Agreement between the Company and Alterra Power Corporation on MariposaGeothermal ProjectOn May 20, 2013, EDC and Alterra Power Corporation (“Alterra”; a publicly-traded companyand listed at the Toronto Stock Exchange) executed a joint venture agreement (JVA) for theexploration and development of the Mariposa geothermal project in Chile (Mariposa Project).Following the execution of such JVA, EDC, Alterra and their relevant subsidiaries haveexecuted Shareholders’ Agreement and other related agreements (Project Agreements) all witheffect on June 17, 2013 for the implementation of the terms of the JVA. Under theShareholders’ Agreement, EDC (through EDC Geotermica SpA , its wholly owned subsidiaryin Chile) will acquire a 70% interest in Compañía De Energia (Enerco), an Alterra subsidiaryin Chile that owns the Mariposa Project. Alterra will continue to hold a 30% interest inEnerco through its wholly owned subsidiary Magma Energy Chile Limitada, subject to theterms of the Shareholders’ Agreement for the Mariposa Project.

The terms of the Project Agreements call for EDC to fund the next $58.3 million (estimated)in project expenditures in the Mariposa Project to top up Alterra’s past development costs.The relevant Project Agreements contemplate implementing an agreed work plan that willfurther develop the Mariposa Project by building infrastructures over the next 18 months.EDC Geotermica SPA will subscribe to Enerco’s increased shares to be able to have equity,operational and management control in Enerco. However, EDC’s continued participation inthe Mariposa Project is subject to positive results being obtained from resource assessmentstudies to be conducted by EDC for the Mariposa Project in accordance with the terms of theProject Agreements.

On June 17, 2013, EDC Geotermica SpA and Alterra entered into a Subscription Deed whichprovides that EDC Geotermica SpA subscribes to the shares of Enerco equivalent to 70% ofits total capital, subject to execution of capitalization documents to increase the capital stockof Enerco. In addition, the Subscription Deed provides that EDC Geotermica SpA maywithdraw from the Mariposa Project provided that the drilling of the first Mariposa well hasoccurred as part of technical studies to be conducted by the Company.

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In August 2013, EDC Geotermica SpA subscribed an amount of Chilean Peso29,099,669,042(US$51 million) or 33,283,391,332 shares at Chilean Peso0.8743 per share to be paid within10 years. This subscription has not yet been paid by the Company as of December 31, 2014.

Basic surface studies as well as civil works, road rehabilitation, base camp, and avalanchecontrols have already been completed. Additional roads, drilling pad construction, base campexpansion, and water supply system installation began in late 2014. Installation of the surfacecasing for exploratory wells is ongoing in preparation for drilling in late 2015. As ofDecember 31, 2014 and 2013, the capital expenditures funding made by the Company toEnerco amounting to P=1,145.1 million and P=905.3 million, respectively were recorded underthe “Non-trade accounts receivables” (see Note 8). Management intends to capitalize theseadvances against the shares subscription once the Company decides to continue the MariposaProject which is dependent on the results of technical studies on the project. In addition,management has determined that the Company’s involvement in the operations of Enerco didnot result into acquisition of Enerco as of December 31, 2014 and 2013 since the terms of theCompany’s investment in Enerco are still subject to significant and substantial conditions (e.g.,positive results of resource assessment in the area).

Deferred Revenue on Stored EnergyUnder its addendum agreements with NPC, the Parent Company has a commitment to NPC withrespect to certain volume of stored energy that NPC may lift for a specified period, provided thatthe Parent Company is able to generate such energy over and above the nominated energy for eachgiven year in accordance with the related PPAs. The Company has made a judgment based onhistorical information that the probability of future liftings by NPC from the stored energy isremote and accordingly has not deferred any portion of the collected revenues. The stored energycommitments are, however, disclosed in Note 32 to the consolidated financial statements.

Operating LeasesThe PPAs and SSAs of the Parent Company qualify as a lease on the basis that the Company sellsall its outputs to NPC/PSALM and, in the case of the SSAs, the agreement calls for a take-or-payarrangement where payment is made principally on the basis of the availability of the steam fieldfacilities and not on actual steam deliveries. This type of arrangement is determined to be anoperating lease where a significant portion of the risks and rewards of ownership of the assets areretained by the Company since it does not include transfer of the Company’s assets. Accordingly,the steam field facilities and power plant assets are recorded as part of the cost of property, plantand equipment and the capacity fees billed to NPC/PSALM are recorded as operating revenuebased on the terms of the PPAs and SSAs.

The Company has also entered into commercial property leases where it has determined that thelessor retains all the significant risks and rewards of ownership of these properties and hasclassified the leases as operating leases (see Note 32).

In connection with the installation of Burgos Wind Project’s wind turbines and relatedtransmission towers, the Company entered into uniform land lease agreements and contracts ofeasement of right of way, respectively, with various private landowners. The term of the land leaseagreement starts from the execution date of the contract and ends after 25 years from thecommercial operations of the Burgos Wind Project. The contract of easement of right of way onthe other hand, creates a perpetual easement over the subject property. Both the land leaseagreement and contract of easement of right of way were classified as operating leases. Allpayments made in connection with the agreements as part of “Prepaid expense”. Prepaid lease willbe amortized on a straight-line basis over the lease term whereas prepaid rights of way will beamortized on a straight-line basis over the term of the WESC, including the extension based on

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management’s judgment of probability of extension. Amortizations of both the prepaid lease andprepaid rights of way during the construction period shall be capitalized to “Construction inProgress” and expensed after the Construction in Progress becomes available for use.

Estimates and AssumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty atfinancial reporting date that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below:

Estimation of Fair Value of Identifiable Net Assets of an Acquiree in a Business CombinationIn accounting for business combinations, the purchase consideration is allocated to the identifiableassets, liabilities and contingent liabilities (identifiable net assets) on the basis of fair value at thedate of acquisition. The determination of fair values requires estimates of economic conditionsand other factors.

Fair Values of Financial InstrumentsThe fair values of financial instruments that are not quoted in active markets are determined usingvaluation techniques. Where valuation techniques are used to determine fair values, fair values arevalidated and periodically reviewed by qualified independent personnel. All models are reviewedbefore they are used, and models are calibrated to ensure that outputs reflect actual data andcomparative market prices. To the extent practicable, models use only observable data; however,areas such as credit risk (both own and counterparty), volatilities and correlations requiremanagement to make estimates. Changes in assumptions about these factors could affect reportedfair value of financial instruments (see Note 31).

Impairment of ReceivablesThe Company maintains an allowance for doubtful accounts at a level that management considersadequate to provide for potential uncollectibility of its trade and other receivables. The Companyevaluates specific balances where management has information that certain amounts may not becollectible. In these cases, the Company uses judgment, based on available facts andcircumstances, and based on a review of the factors that affect the collectibility of the accountsincluding, but not limited to, the age and status of the receivables, collection experience and pastloss experience. The review is made by management on a continuing basis to identify accounts tobe provided with allowance. The specific allowance is re-evaluated and adjusted as additionalinformation received affects the amount estimated.

In addition to specific allowance against individually significant receivables, the Company alsoprovides a collective impairment allowance against exposures, which, although not specificallyidentified as requiring a specific allowance, have a greater risk of default than when originallygranted. This collective allowance is based on historical default experience.

The aggregate carrying amounts of current and noncurrent trade and other receivables areP=6,920.2 million and P=3,625.4 million as of December 31, 2014 and 2013, respectively(Notes 8 and 15). The total amount of impairment losses recognized amounted to P=6.2 million,P=23.8 million and P=40.4 million in 2014, 2013 and 2012, respectively. (see Notes 8, 15 and 22).

Impairment of AFS InvestmentsThe Company classifies certain financial assets as AFS investments and recognizes movements intheir fair value in equity. When the fair value declines, management makes assumptions about thedecline in value to determine whether it is an impairment that should be recognized in theconsolidated statement of income.

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A significant or prolonged decline in the fair value of an investment in an equity instrument belowits cost is also being considered by the Company as an objective evidence of impairment. Thedetermination of what is “significant” and “prolonged” requires judgment. The Companyconsiders a significant and prolonged decline whenever it reaches 20% or more and lasts longerthan 12 months, respectively. The Company further evaluates other factors, such as volatility inshare price for quoted equities and the discounted cash flows for unquoted equities in determiningthe amount to be impaired.

No impairment loss on AFS investments were recognized in 2014, 2013 and 2012. The totalcarrying amount of current and noncurrent AFS investments amounted to P=568.0 million andP=749.1 million as of December 31, 2014 and 2013, respectively (see Notes 9 and 31).

Estimating Net Realizable Value of Parts and Supplies InventoriesThe Company measures inventories at net realizable value when such value is lower than cost dueto damage, physical deterioration, obsolescence, changes in price levels or other causes. Thecarrying amounts of parts and supplies inventories as of December 31, 2014 and 2013 amountedto P=2,902.5 million and P=3,094.3 million, respectively (see Note 10). Provision for (reversal of)allowance for inventory obsolescence amounted to (P=25.3 million), P=123.0 million and(P=83.5 million) in 2014, 2013 and 2012, respectively (see Notes 10 and 22).

Estimating Useful Lives of Property, Plant and Equipment and Water RightsThe Company estimates the useful lives of property, plant and equipment and water rights basedon the period over which each asset is expected to be available for use and on the collectiveassessment of industry practices, internal evaluation and experience with similar arrangements.The estimated useful life is revisited at the end of each financial reporting period and updated ifexpectations differ materially from previous estimates.

In February 2012, EDC transferred vacuum pumps previously used in NNGP to the PalinpinonPower Plant owned by GCGI. Since these transferred assets were utilized and included in theCGU of the Palinpinon Power Plant, the Company recognized a corresponding reversal ofimpairment loss amounting to P=63.6 million, representing the net book value of the assetstransferred had no impairment loss been previously recognized (see Note 26).

To utilize the remaining facilities and fixed assets of NNGP to the extent possible, the BOD ofEDC approved in September 2012 the transfer of the components of the power plant to NasuloPower Plant located in Southern Negros. This project is expected to generate an incrementalcapacity of 20-25MW. The target date for the start of commercial operations of the power plant inNasulo is in 2014. As of December 31, 2013, certain NNGP assets have already been transferredfrom Northern Negros to Nasulo. Management has assessed that the increase in the estimatedservice potential of these assets has not yet been established as necessary testing activities are yetto be conducted to determine whether the assets would function in the new location as intended bymanagement.

The carrying amount of the property, plant and equipment amounted to P=83,073.5 million andP=66,240.0 million as of December 31, 2014 and 2013, respectively (see Note 12). The carryingamount of water rights amounted to P=1,623.2 million and P=1,719.4 million as ofDecember 31, 2014 and 2013, respectively (see Note 13).

Impairment of Non-financial Assets other than GoodwillThe Company assesses whether there are any indicators of impairment for all non-financial assets,other than goodwill, at each financial reporting date.

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These non-financial assets (property, plant and equipment, intangible assets and input VAT) aretested for impairment when there are indicators that the carrying amounts may not be recoverable.

Where the collection of tax claims is uncertain based on the assessment of management andCompany’s legal counsel, the Company provides an allowance for impairment of input VAT.

The Company also recorded a provision for impairment of input VAT of P=53.4 million,P=36.2 million and P=196.1 million in 2014, 2013 and 2012, respectively (see Notes 15 and 22).

For property, plant and equipment and intangible assets, when value-in-use calculations areundertaken, management estimates the expected future cash flows from the asset or cash-generating unit (CGU) and discounts such cash flows using the sensitivity analysis of keyassumptions to calculate the present value as of the financial reporting date.

Management also makes an assessment whether previously recognized impairement loss should bereversed. Reversal of an impairment loss is recognized when there is an increase in the estimatedservice potential of an asset, either from use or from sale, since the date when the Company lastrecognized an impairment loss for that asset.

In 2011, EDC recognized full impairment on its Northern Negros Geothermal Power Plant(NNGP) assets amounting to P=8.7 billion due to steam supply limitations. Subsequently, selectedNNGP assets were transferred to and installed in Nasulo Power Plant located in Southern Negros.In light of the completion of the Nasulo Power Plant in July 2014, the Company has determinedthat the impairment loss previously recognized on assets transferred to and installed in Nasulo(from NNGP) must be reversed as the service potential of those assets has now been established(see Note 12). Accordingly, reversal of impairment loss amounting to P=2,051.9 million wasrecognized representing the net book value of assets installed in Nasulo Power Plant had therebeen no impairment loss previously recognized on these assets. The corresponding deferred taxasset amounting to P=205.2 million has likewise been reversed.

From originally being part of the NNGP cash-generating unit, the related assets have now becomepart of the cash-generating unit consisting of Nasulo/Nasuji steam field and power plants. Theamount of reversal of impairment was presented under NIGBU operating segment since the cash-generating unit is located in Negros Island (see Note 6). Based on a discounted cash flowprojection using 8.7% pre-tax discount rate, the recoverable amount of the relevant cash-generating unit is estimated to be at P=15,673.6 million. The period covered by the cash flowprojection is consistent with the estimated useful life of major component of the Nasulo PowerPlant.

The carrying amount of property, plant and equipment as of December 31, 2014 and 2013amounted to P=83,073.5 million and P=66,240.0 million, respectively (see Note 12). The carryingamount of water rights as of December 31, 2014 and 2013 amounted to P=1,623.2 million andP=1,719.4 million, respectively (see Note 13). The carrying amount of input VAT as ofDecember 31, 2014 and 2013 amounted to P=4,231.6 million and P=3,779.4 million, respectively(see Note 15).

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Impairment of GoodwillAs of December 31, 2014 and 2013, the Company’s goodwill is allocated to the following CGUs:

Entity Cash-Generating UnitCarrying Amount ofAllocated Goodwill

GCGI Palinpinon power plant complex P=2,107.6 millionGCGI Tongonan power plant complex 134.2 millionFG Hydro Pantabangan- Masiway hydroelectric plants 293.3 million

P=2,535.1 million

Goodwill is tested for impairment annually as at September 30 for GCGI and December 31 for FGHydro or more frequently, if events or changes in circumstances indicate that the carrying valuemay be impaired.

This requires an estimation of the value-in-use of the CGUs to which goodwill is allocated.Estimating value-in-use requires the Company to estimate the expected future cash flows from theCGUs and discounts such cash flows using weighted average cost of capital to calculate thepresent value of those future cash flows.

The recoverable amounts have been determined based on value-in-use calculation using cash flowprojections based on financial budgets approved by senior management of GCGI and FG Hydrocovering a five-year period. For GCGI, the pre-tax discount rate applied to cash flow projectionsin 2014 are 7.9% for Tongonan and 8.1% for Palinpinon; while in 2013, the pre-tax discount rateapplied is 6.1% for Tongonan and 7.8% for Palinpinon. The cash flows beyond the remainingterm of the existing agreements are extrapolated using growth rates of 4.0% for GCGI for theyears ended December 31, 2014 and 2013, respectively, and 4.0% and 4.4% for the years endedDecember 31, 2014 and 2013, respectively, for FG Hydro.

Following are the key assumptions used:

· Budgeted Gross Margin

Budgeted gross margin is the average gross margin achieved in the year immediately beforethe budgeted year, increased for expected efficiency improvements.

· Discount Rate

Discount rate reflects the current market assessment of the risk specific to each CGU. Thediscount rate is based on the average percentage of the Company’s weighted average cost ofcapital. This rate is further adjusted to reflect the market assessment of any risk specific to theCGU for which future estimates of cash flows have not been adjusted.

No impairment loss on goodwill was recognized in the consolidated financial statements in 2014,2013 and 2012. The carrying value of goodwill as of December 31, 2014 and 2013 amounted toP=2,651.5 million and P=2,535.1 million, respectively (see Note 13).

Impairment of Exploration and Evaluation AssetsExploration and evaluation costs are recognized as assets in accordance with PFRS 6, Explorationfor and Evaluation of Mineral Resources. Capitalization of these costs is based, to a certain extent,on management’s judgment of the degree to which the expenditure may be associated with findingspecific geothermal reserve. The Company determines impairment of projects based on thetechnical assessment of its resident scientists in various disciplines or based on management’s

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decision not to pursue any further commercial development of its exploration projects. In 2013,the Parent Company has assessed that its Cabalian geothermal project located in Southern Leyte isimpaired due to issues on productivity and sustainability of geothermal resources in the area.Accordingly, impairment loss amounting to P=574.8 million was recognized in 2013. Noimpairment loss was recognized in 2014 and 2012. As of December 31, 2014 and 2013, thecarrying amount of exploration and evaluation assets amounted to P=2,801.5 million andP=2,380.8 million, respectively (see Notes 14 and 33).

Retirement and Other Post-employment BenefitsThe cost of defined benefits retirement plan and other post-employment medical and life insurancebenefits are determined using the projected unit credit method of actuarial valuations. Theactuarial valuation involves making assumptions about discount rates, future salary increases,medical trend rate, mortality and disability rates and employee turnover rates. Due to thecomplexity of the valuation, the underlying assumptions and its long-term nature, defined benefitobligations are highly sensitive to changes in these assumptions. All assumptions are reviewed ateach reporting date. The net retirement and other post-employment benefits liability as ofDecember 31, 2014 and 2013 amounted to P=1,796.0 million and P=1,658.6 million, respectively.The detailed information with respect to the Company’s net retirement and other post-employmentbenefits is presented in Note 27 to the consolidated financial statements.

In determining the appropriate discount rate, management considers the interest rates ofgovernment bonds that are denominated in the currency in which the benefits will be paid, withextrapolated maturities corresponding to the expected duration of the defined benefit obligation.

The mortality rate is based on publicly available mortality tables for the specific country and ismodified accordingly with estimates of mortality improvements. Future salary increases andpension increases are based on expected future inflation rates for the specific country.

Provision for Rehabilitation and Restoration CostsIn 2009, with the conversion of its Geothermal Service Contracts (GSCs) to GeothermalRenewable Energy Service Contracts (GRESCs), the Company has made a judgment that theGRESCs are subject to the provision for restoration costs. Similary, under the Wind EnergyService Contract (WESC), EBWPC is responsible for the removal and the disposal of all materials,equipment and facilities installed in the contract area used for the wind energy project. Indetermining the amount of provisions for rehabilitation and restoration costs, assumptions andestimates are required in relation to the expected cost to rehabilitate and restore sites andinfrastructure when such obligation exists (see Note 33).

As of December 31, 2014 and 2013, the Company recognized provision for rehabilitation andrestoration costs amounting to P=748.5 million and P=654.5 million, respectively, presented under“Provisions and other long-term liabilities” account in the consolidated statement of financialposition (see Note 18).

Provision for Liabilities on Regulatory Assessments and Other ContingenciesThe Company has pending assessments from various regulatory agencies and outstanding legalcases. The Company’s estimate of the probable costs for the resolution of these assessments andlegal cases has been developed in consultation with in-house and outside legal counsels and isbased upon the analysis of the potential outcomes. Management and its legal counsels believe thatthe Company’s positions on these assessments are consistent with the relevant law and theseassessments would not have a material adverse effect on the Company’s consolidated financialposition and results of operations. It is possible, however, that future results of operations could bematerially affected by changes in the estimates or in the effectiveness of strategies relating to these

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proceedings. As of December 31, 2014, provisions for these liabilities amounting to P=66.2 millionand P=523.3 million are recorded under “Trade and other payables” (part of “Other payables”)account (see Note 16) and “Provisions and other long-term liabilities” (part of “Others”) account(see Note 18), respectively. Meanwhile, provisions for these liabilities as of December 31, 2013amounting to P=64.1 million and P=463.4 million are recorded under “Trade and other payables”(part of “Other payables”) account (see Note 16) and “Provisions and other long-term liabilities”(part of “Others”) account (see Note 18), respectively.

Interest on liability from litigation amounted to P=7.8 million, P=7.8 million and P=8.6 million for theyears ended December 31, 2014, 2013 and 2012, respectively (see Note 24).

Shortfall GenerationThe Parent Company’s Unified Leyte PPA with NPC requires the annual nomination of capacitythat EDC shall deliver to NPC. On a monthly basis, EDC bills a uniform capacity to NPC basedon the nominated energy. At the end of the contract year, EDC’s fulfillment of the nominatedcapacity and the parties’ responsibilities for any shortfall shall be determined. On the other hand,the PPAs for Mount Apo I and II provide a minimum offtake energy which the Parent Companyshall meet each contract year. The contract year for the Unified Leyte PPA is for fiscal periodending July 25 while the contract year for the Mindanao I and Mindanao II PPAs is for fiscalperiod ending December 25 (see Note 34). Assessment is made at every reporting date whetherthe nominated capacity or minimum offtake energy would be met based on management’sprojection of electricity generation covering the entire contract year. If the occurrence of shortfallgeneration is determined to be probable, the amount of estimated reimbursement to NPC isaccounted for as a reduction to revenue for the period and a corresponding liability to NPC isrecognized. As of December 31, 2014 and 2013, the Company’s estimated liability arising fromsuch shortfall generation amounted to P=321.1 million and P=263.2 million, respectively, shownunder the “Trade and other payables” account specifically under “Other payables” (see Note 16).

Moreover, the amount of estimations relating to the shortfall generation under the PPA’s coveringUnified Leyte may be subsequently adjusted or reported depending on the subsequentreconciliation by the Technical or Steering Committee established in accordance with the UnifiedLeyte PPA in view of the parties’ responsibilities in connection with the consequences oftyphoons and similar events.

Deferred Tax AssetsDeferred tax assets are recognized to the extent that it is probable that sufficient future taxableprofits will be available against which the assets can be utilized. Significant managementjudgment is required to determine the amount of deferred tax assets that can be recognized. Thisincludes the likely timing and level of future taxable profits together with future tax planningstrategies. The carrying value of recognized deferred tax assets amounted to P=2,054.7 million andP=2,376.7 million as of December 31, 2014 and 2013, respectively (see Note 28).

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4. Summary of Significant Accounting Policies

Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Parent Companyand its subsidiaries as at December 31, 2014. Control is achieved when the Company is exposed,or has rights, to variable returns from its involvement with the investee and has the ability to affectthose returns through its power over the investee. Specifically, the Company controls an investeeif and only if the Company has:· Power over the investee (i.e. existing rights that give it the current ability to direct the relevant

activities of the investee)· Exposure, or rights, to variable returns from its involvement with the investee, and· The ability to use its power over the investee to affect its returns

When the Company has less than a majority of the voting or similar rights of an investee, theCompany considers all relevant facts and circumstances in assessing whether it has power over aninvestee, including:· The contractual arrangement with the other vote holders of the investee· Rights arising from other contractual arrangements· The Company’s voting rights and potential voting rights

The Company re-assesses whether or not it controls an investee if facts and circumstances indicatethat there are changes to one or more of the three elements of control. Consolidation of asubsidiary begins when the Company obtains control over the subsidiary and ceases when theCompany loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiaryacquired or disposed of during the year are included in the statement of comprehensive incomefrom the date the Company gains control until the date the Company ceases to control thesubsidiary.

Profit or loss and each component of OCI are attributed to the equity holders of the parent of theCompany and to the NCI, even if this results in the NCI having a deficit balance. When necessary,adjustments are made to the financial statements of subsidiaries to bring their accounting policiesinto line with the Company’s accounting policies. All intra-group assets and liabilities, equity,income, expenses and cash flows relating to transactions between members of the Company areeliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as anequity transaction. If the Company loses control over a subsidiary, it:· Derecognizes the assets (including goodwill) and liabilities of the subsidiary· Derecognizes the carrying amount of any NCI· Derecognizes the cumulative translation differences recorded in equity· Recognizes the fair value of the consideration received· Recognizes the fair value of any investment retained· Recognizes any surplus or deficit in profit or loss· Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or

retained earnings, as appropriate, as would be required if the Company had directly disposedof the related assets or liabilities

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Business Combinations and GoodwillBusiness combinations are accounted for using the acquisition method. The cost of an acquisitionis measured as the aggregate of the consideration transferred, measured at acquisition date fairvalue and the amount of any NCI in the acquiree. For each business combination, the acquirermeasures the NCI of the acquiree either at fair value or at the proportionate share of the acquiree’sidentifiable net assets. Acquisition-related costs incurred are expensed and included in generaland administrative expenses.

When the Company acquires a business, it assesses the financial assets and financial liabilitiesassumed for appropriate classification and designation in accordance with the contractual terms,economic circumstances and pertinent conditions as at the acquisition date. This includes theseparation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’spreviously held equity interest in the acquiree is remeasured to fair value at the acquisition dateand any gain or loss on remeasurement is recognized in the consolidated statement of income.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value atthe acquisition date. Subsequent changes to the fair value of the contingent consideration which isdeemed to be an asset or liability, will be recognized in accordance with PAS 39, FinancialInstruments: Recognition and Measurement, either in the consolidated statement of income or as achange to OCI. If the contingent consideration is classified as equity, it should not be remeasureduntil it is finally settled within equity.

Goodwill is initially measured at cost being the excess of the aggregate of the considerationtransferred and the amount recognized for NCI over the net identifiable assets acquired andliabilities assumed. If this consideration is lower than the fair value of the net assets of thesubsidiary acquired, the difference is recognized in the consolidated statement of income.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses.For the purpose of impairment testing, goodwill acquired in a business combination is, from theacquisition date, allocated to each of the Company’s CGUs that are expected to benefit from thecombination, irrespective of whether other assets or liabilities of the acquiree are assigned to thoseunits.

Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, thegoodwill associated with the operation disposed of is included in the carrying amount of theoperation when determining the gain or loss on disposal of the operation. Goodwill disposed of inthis circumstance is measured based on the relative values of the operation disposed of and theportion of the CGU retained.

Foreign Currency Translation of Foreign OperationsThe consolidated financial statements are presented in Philippine Peso, which is the ParentCompany’s functional currency. Each entity or subsidiary in the Company determines its ownfunctional currency and measures items included in their financial statements using that functionalcurrency. Transactions in foreign currencies are initially recorded at the functional currencyexchange rate prevailing at the date of transaction. Monetary assets and monetary liabilitiesdenominated in foreign currencies are translated at the closing rate of exchange prevailing atfinancial reporting date. Non-monetary items that are measured in terms of historical cost in aforeign currency are translated using the exchange rates as at the dates of the initial transactions.

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Non-monetary items measured at fair value in a foreign currency are translated using the exchangerates at the date when the fair value was determined. Foreign exchange differences between therate at transaction date and the rate at settlement date or financial reporting date are recognized inthe consolidated statement of income.

The functional currency of the Company’s subsidiaries is Philippine Peso, except for the followingsubsidiaries:

Subsidiary Functional CurrencyEHIL Philippine PesoEDC HKL - do -EDC Chile Holdings SPA Chilean pesoEDC Geotermica Chile - do -EDC Chile Limitada - do -EDC Peru Holdings S.A.C. Peruvian nuevo solEDC Geotermica Peru S.A.C. - do -EDC Quellaapacheta - do -EDC Geotérmica Del Sur S.A.C. - do -EDC Energía Azul S.A.C. - do -Geotermica Crucero Peru S.A.C. - do -EDC Energía Perú S.A.C. - do -Geotermica Tutupaca Norte Peru S.A.C. - do -EDC Energía Geotérmica S.A.C. - do -EDC Progreso Geotérmico Perú S.A.C. - do -Geotermica Loriscota Peru S.A.C. - do -EDC Energía Renovable Perú S.A.C. - do -EDC Soluciones Sostenibles Ltd - do -EDC Desarollo Sostenible Ltd - do -EDC Energia Verde Chile SpA - do -EDC Energia de la Tierra SpA - do -EDC Energia Verde Peru SAC - do -PT EDC Indonesia Indonesian rupiahPT EDC Panas Bumi Indonesia - do -

For subsidiaries whose functional currency is different from the presentation currency, theCompany translates the results of their operations and financial position into the presentationcurrency. As at the financial reporting date, the assets and liabilities presented (includingcomparatives) are translated into the presentation currency at the closing rate of exchangeprevailing at the financial reporting date while the capital stock and other equity balances aretranslated at historical rates of exchange. The income and expenses for the consolidated statementof income presented (including comparatives) are translated at the exchange rates at the dates ofthe transactions, where determinable, or at the weighted average rate of exchange during the year.The exchange differences arising on the translation to the presentation currency are recognized asa separate component of equity under the “Cumulative translation adjustment arising from foreignsubsidiaries account in the consolidated statement of financial position.

Foreign Currency-Denominated TransactionsTransactions in foreign currencies are initially recorded at the functional currency rate at the dateof the transaction. Monetary assets and monetary liabilities denominated in foreign currencies aretranslated using the functional currency rate of exchange as at financial reporting date. Alldifferences are taken to the consolidated statement of income under “Foreign exchange gains(losses)” account. Nonmonetary items that are measured at historical cost in a foreign currencyare translated using the exchange rate as at the date of the transactions. Nonmonetary itemsmeasured at fair value in a foreign currency are translated using the exchange rates at the datewhen the fair value is determined.

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Cash and Cash EquivalentsCash and cash equivalents in the consolidated statement of financial position comprise cash inbanks and on hand and short-term deposits with original maturities of three months or less fromdates of acquisition and that are subject to insignificant risk of changes in value.

Parts and Supplies InventoriesInventories are valued at the lower of cost and net realizable value. Cost includes the invoiceamount, net of trade and cash discounts. Cost is calculated using the moving average method.Net realizable value represents the current replacement cost.

Prepaid ExpensesPrepayments are expenses paid in advance and recorded as asset before these are utilized. Thisaccount comprises prepaid expenses, creditable withholding tax, tax credit certificates andadvances to contractors. The prepaid expenses are apportioned over the period covered by thepayment and charged to the appropriate accounts in the consolidated statement of income whenincurred; creditable withholding tax are deducted from income tax payable on the same year therevenue was recognized; and the advances to contractors are reclassified to the proper asset orexpense account and deducted from the contractor’s billings as specified on the provision of thecontract. Prepayments that are expected to be realized for a period of no more than 12 monthsafter the financial reporting period are classified as current asset; otherwise, these are classified asother noncurrent asset.

Property, Plant and EquipmentProperty, plant and equipment, except land, is stated at cost less accumulated depreciation,amortization and impairment in value, if any. The initial cost of property, plant and equipment,consists of its purchase price and any directly attributable costs of bringing the asset to its workingcondition and location for its intended use and any estimated cost of dismantling and removing theproperty, plant and equipment item and restoring the site on which it is located to the extent thatthe Company had recognized the obligation to that cost. Such cost includes the cost of replacingpart of the property, plant and equipment if the recognition criteria are met. When significantparts of property, plant and equipment are required to be replaced in intervals, the Companyrecognizes such parts as individual assets with specific useful lives, depreciation and amortization.All other repairs and maintenance costs are recognized in the consolidated statement of income asincurred. Land is carried at cost less accumulated impairment losses, if any.

The income generated wholly and necessarily as a result of the process of bringing the asset intothe location and condition for its intended use (e.g., net proceeds from selling any items producedwhile testing whether the asset is functioning properly) is credited to the cost of asset up to theextent of cost of testing capitalized during the testing period. Any excess of net proceeds overcosts is recognized in profit or loss. When the incidental operations are not necessary to bring anitem to the location and condition necessary for it to be capable of operating in the mannerintended by management, the income and related expenses of incidental operations are not offsetagainst the cost of the asset but are recognized in profit or loss and included in their respectiveclassifications of income and expense.

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Depreciation and amortization are calculated on a straight-line basis over the economic lives of theassets as follows:

Number of yearsPower plants 15-30Production wells 10-40Fluid Collection and Recycling System (FCRS) 13-20Buildings, improvements and other structures 5-35Exploration, machinery and equipment 2-25Transportation equipment 5-10Furniture, fixtures and equipment 3-10Laboratory equipment 5-10

Depreciation and amortization of an item of property, plant and equipment begin when it becomesavailable for use, i.e., when it is in the location and condition necessary for it to be capable ofoperating in the manner intended by management. Depreciation and amortization cease at theearlier of the date that the item is classified as held for sale (or included in a disposal group that isclassified as held for sale) in accordance with PFRS 5, Non-current Assets Held for Sale andDiscontinued Operations, and the date the asset is derecognized. Leasehold improvements areamortized over the lease term or the economic life of the related asset, whichever is shorter.

An item of property, plant and equipment is derecognized upon disposal or when no futureeconomic benefits are expected from its use or disposal. Any gain or loss arising on derecognitionof the asset (calculated as the difference between the net disposal proceeds and the carryingamount of the asset) is included in the consolidated statement of income in the year the asset isderecognized. The residual values, useful lives and methods of depreciation and amortization arereviewed and adjusted, if appropriate, at each financial reporting date.

Property, plant and equipment are recognized based on their significant parts. Each part of an itemof property, plant and equipment with a cost that is significant in relation to the total cost of theitem is depreciated separately.

Property, plant and equipment also include the estimated rehabilitation and restoration costs of theCompany’s steam fields and power plants contract areas for which the Company is legally andconstructively liable. These costs are included under “FCRS and Production Wells” and “PowerPlants” accounts, respectively (see Note 12).

Construction in progress is stated at cost and not depreciated until such time that the assets are putinto operational use.

Intangible AssetsIntangible assets acquired separately are measured on initial recognition at cost. Following initialrecognition, intangible assets are carried at cost less accumulated amortization and accumulatedimpairment loss, if any. Internally-generated intangible assets, if any, excluding capitalizeddevelopment costs, are not capitalized and expenditure is reflected in the consolidated statement ofincome in which the expenditure is incurred.

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The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assetswith finite lives are amortized over the useful economic life and assessed for impairmentwhenever there is an indication that the intangible asset may be impaired. The amortization periodand amortization method for an intangible asset with a finite useful life is reviewed at least at eachfinancial year end. Changes in the expected useful life or the expected pattern of consumption offuture economic benefits embodied in the asset is accounted for by changing the amortizationperiod or method, as appropriate, and treated as changes in accounting estimates. Theamortization expense on intangible assets with finite lives is recognized in profit or loss in theexpense category consistent with the function of the intangible asset.

Gains or losses arising from derecognition of an intangible asset are measured as the differencebetween the net disposal proceeds, if any, and the carrying amount of the asset and are recognizedin the consolidated statement of income when the asset is derecognized.

Water RightsThe cost of water rights of FG Hydro is measured on initial recognition at cost.

Following initial recognition of the water rights, the cost model is applied requiring the asset to becarried at cost less any accumulated amortization and accumulated impairment losses, if any.Water rights are amortized using the straight-line method over 25 years, which is the term of theagreement with the National Irrigation Administration (NIA).

Wind Energy Project Development CostsProject development costs are expensed as incurred until management determines that the projectis technically, commercially and financially viable, at which time, project development costs arecapitalized. Project viability generally occurs in tandem with management’s determination that aproject should be classified as an advanced project, such as, when favorable results of a systemimpact study are received, interconnected agreements are obtained and project financing is inplace.

Following initial recognition of the project development cost as an asset, the cost model is appliedrequiring the asset to be carried at cost less any accumulated impairment losses. The wind farmassets will then be presented as property, plant and equipment upon declaration of commerciality.During the period in which the asset is not yet available for use, the project development costs aretested for impairment annually, irrespective of whether there is any indication of impairment.

Computer Software and LicensesThe costs of acquisition of computer software and licenses are capitalized as intangible asset ifsuch costs are not integral part of the related hardware.

These intangible assets are initially measured at cost. Subsequently, these are measured at costless accumulated amortization and allowance for impairment losses, if any. Amortization ofcomputer software is computed using the straight-line method of over 5 years.

Exploration and Evaluation AssetsThe Company follows the full cost method of accounting for its exploration costs determined onthe basis of each service contract area. Under this method, all exploration costs relating to eachservice contract are accumulated and deferred under the “Exploration and evaluation assets”account in the consolidated statement of financial position pending the determination of whetherthe wells has proved reserves. Capitalized expenditures include costs of license acquisition,technical services and studies, exploration drilling and testing, and appropriate technical andadministrative expenses. General overhead or costs incurred prior to having obtained the legal

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rights to explore an area are recognized as expense in the consolidated statement of income whenincurred.

If tests conducted on the drilled exploratory wells reveal that these wells cannot produce provedreserves, the capitalized costs are charged to expense except when management decides to use theunproductive wells, for recycling or waste disposal.

Once the technical feasibility and commercial viability of the project to produce proved reservesare established, the exploration and evaluation assets are reclassified to property, plant andequipment.

Impairment of Non-financial AssetsFor non-financial assets such as property, plant and equipment, exploration and evaluation assets,water rights and input VAT claims for refund/tax credits, the Company assesses at each financialreporting date whether there is an indication that a non-financial asset may be impaired. If anysuch indication exists, the Company estimates the asset’s recoverable amount.

The recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and itsvalue-in-use and is determined for an individual asset, unless the asset does not generate cashinflows that are largely independent of those from other assets or group of assets. When thecarrying amount of an asset exceeds its recoverable amount, the asset is considered impaired andis written down to its recoverable amount. In assessing value-in-use, the estimated future cashflows are discounted to their present value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset. In determining fairvalue less costs to sell, an appropriate valuation model is used. These calculations arecorroborated by valuation multiples or other available fair value indicators.

Impairment losses are recognized in the consolidated statement of income in those expensecategories consistent with the function of the impaired asset.

For non-financial assets excluding goodwill, an assessment is made at each financial reportingdate as to whether there is any indication that previously recognized impairment losses may nolonger exist or may have decreased. If such indication exists, the Company makes an estimate ofrecoverable amount. A previously recognized impairment loss is reversed only if there has been achange in the estimates used to determine the asset’s recoverable amount since the last impairmentloss was recognized. In such instance, the carrying amount of the asset is increased to itsrecoverable amount. However, that increased amount cannot exceed the carrying amount thatwould have been determined, net of depreciation, had no impairment loss been recognized for theasset in prior years. Such reversal is recognized in the consolidated statement of income.

Goodwill is reviewed for impairment, annually or more frequently, if events or changes incircumstances indicate that the carrying value may be impaired. Impairment is determined forgoodwill by assessing the recoverable amount of the CGU or group of CGUs to which thegoodwill relates. When the recoverable amount of the CGU or group of CGUs is less than thecarrying amount of the CGU or group of CGUs to which goodwill has been allocated, animpairment loss is recognized immediately in the consolidated statement of income. Impairmentloss relating to goodwill cannot be reversed for subsequent increases in its recoverable amount infuture periods.

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Financial InstrumentsFinancial instruments are recognized in the consolidated statement of financial position, when theCompany becomes a party to the contractual provisions of the instrument. All regular waypurchases and sales of financial assets are recognized on the trade date, which is the date when theCompany commits to purchase the asset. Regular way purchases or sales are purchases or sales offinancial assets that require delivery of assets within the period generally established by regulationor convention in the market place. Derivatives are also recognized on a trade date basis.

Financial instruments are recognized initially at fair value. Except for financial instruments at fairvalue through profit or loss (FVPL), the initial measurement of financial instruments includestransaction costs. The Company classifies its financial assets into the following categories:financial assets at FVPL, held-to-maturity (HTM) investments, AFS investments, and loans andreceivables. For financial liabilities, the Company classifies them into financial liabilities at FVPLand other financial liabilities. The classification depends on the purpose for which the investmentswere acquired and whether they are quoted in an active market. Management determines theclassification of its investments at initial recognition and, where allowed and appropriate,re-evaluates such designation at every financial reporting date.

Financial instruments are classified as liability or equity in accordance with the substance of thecontractual arrangement. Interest, dividends, gains and losses relating to a financial instrument ora component that is a financial liability, are reported as expense or income. Distributions toholders of financial instruments classified as equity are charged directly to equity, net of anyrelated income tax benefit.

Financial Assets and Financial Liabilities at FVPLFinancial assets and financial liabilities at FVPL include those held for trading and thosedesignated upon initial recognition as at FVPL.

Financial assets and financial liabilities are classified as held for trading if they are acquired forthe purpose of selling and repurchasing in the near term. Derivatives, including separatedembedded derivatives, are also classified as held for trading unless they are designated as effectivehedging instruments or a financial guarantee contract. Gains or losses on investments held fortrading are recognized in the consolidated statement of income under the “Other income (charges)”account.

Financial assets or financial liabilities may be designated at initial recognition as at FVPL if thefollowing criteria are met: (a) the designation eliminates or significantly reduces the inconsistenttreatment that would otherwise arise from measuring the assets or recognizing gains or losses onthem on a different basis; or (b) the assets and liabilities are part of a group of financial assets,financial liabilities, or both, which are managed and their performance evaluated on a fair valuebasis, in accordance with a documented risk management strategy; or (c) the financial instrumentcontains an embedded derivative that would need to be separately recorded.

Where a contract contains one or more embedded derivatives, the entire hybrid contract may bedesignated as at FVPL, except where the embedded derivative does not significantly modify thecash flow or it is clear that separation of the embedded derivative is prohibited.

Classified under financial instruments at FVPL are foreign currency forward contracts, foreigncurrency swap contracts and financial asset at fair value through profit or loss as ofDecember 31, 2014 and 2013 (see Note 31).

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HTM InvestmentsHTM investments are quoted non-derivative financial assets with fixed or determinable paymentsand fixed maturities for which the Company has the positive intention and ability to hold tomaturity. Where the Company sells other than an insignificant amount of HTM investments, theentire category would be tainted and would have to be reclassified as AFS investments.Furthermore, the Company would be prohibited to classify any financial assets as HTMinvestments for the following two years. After initial measurement, HTM investments aremeasured at amortized cost using the effective interest method. Amortized cost is calculated bytaking into account any discount or premium on acquisition and fees that are integral parts of theeffective interest rate. Gains and losses are recognized in the consolidated statement of incomewhen the HTM investments are derecognized or impaired, as well as through the amortizationprocess. The effect of restatement of foreign-currency denominated HTM investments are alsorecognized in the consolidated statement of income.

The Company has no HTM investments as of December 31, 2014 and 2013.

Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. After initial measurement, loans and receivables are carried atamortized cost using the effective interest method less any allowance for impairment. Gains andlosses are recognized in the consolidated statement of income when the loans and receivables arederecognized or impaired, as well as through the amortization process.

Loans and receivables are classified as current assets if maturity is within 12 months from thefinancial reporting date. Otherwise, these are classified as noncurrent assets.

Classified under loans and receivables are cash and cash equivalents, trade and other receivables,and long-term receivables (see Notes 7, 8, 15 and 31).

AFS InvestmentsAFS investments are those non-derivative financial assets that are designated as such or are notclassified as financial assets designated at FVPL, HTM investments or loans and receivables.They are purchased and held indefinitely, and may be sold in response to liquidity requirements orchanges in market conditions.

After initial measurement, AFS investments are subsequently measured at fair value withunrealized gains and losses being recognized as other comprehensive income in the “Netaccumulated unrealized gain (loss) on AFS investment” account until the investment is disposedof or is determined to be impaired, at which time the cumulative gain or loss previouslyrecognized in equity are recognized in the consolidated statement of income. The Company usesthe specific identification method in determining the cost of securities sold. Interest earned on theinvestments is reported as interest income using the effective interest rate method. Dividendsearned on investment are recognized in the consolidated statement of income when the right toreceive payment has been established.

AFS investments are classified as current if these are expected to be realized within 12 monthsfrom the financial reporting date. Otherwise, these are classified as noncurrent assets.

AFS investments include quoted investments in government securities, corporate bonds,proprietary and equity shares (see Notes 9 and 31).

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Other Financial LiabilitiesThis category pertains to financial liabilities that are not held for trading or not designated as atFVPL upon the inception of the liability. Other financial liabilities, which include trade and otherpayables, amounts due to related parties and long-term debts (see Notes 16, 17, 20 and 31) areinitially recognized at fair value of the consideration received less directly attributable transactioncosts. After initial recognition, other financial liabilities are subsequently measured at amortizedcost using the effective interest method.

Amortized cost is calculated by taking into account any related issue costs, discount or premium.Gains and losses are recognized in the consolidated statement of income when the liabilities arederecognized, as well as through the amortization process.

Fair Value of Financial InstrumentsThe Company measures financial instruments, such as derivatives, financial asset through profit orloss and AFS investments at fair value at each reporting date. Also, fair values of financialinstruments measured at amortized cost are disclosed in Note 31.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The fair valuemeasurement is based on the presumption that the transaction to sell the asset or transfer theliability takes place either:· In the principal market for the asset or liability, or· In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Company. The fairvalue of an asset or a liability is measured using the assumptions that market participants woulduse when pricing the asset or liability, assuming that market participants act in their economic bestinterest.

The Company uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the consolidated financialstatements are categorized within the fair value hierarchy, described as follows, based on thelowest level input that is significant to the fair value measurement as a whole:· Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities· Level 2 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is directly or indirectly observable· Level 3 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is unobservable

For assets and liabilities that are recognized in the consolidated financial statements on a recurringbasis, the Company determines whether transfers have occurred between Levels in the hierarchyby re-assessing categorization (based on the lowest level input that is significant to the fair valuemeasurement as a whole) at the end of each reporting period.

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“Day 1” DifferencesWhere the transaction price in a non-active market is different from the fair value of otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables include only data from observable market, the Company recognizes the differencebetween the transaction price and fair value (a “Day 1” difference) in the consolidated statementof income unless it qualifies for recognition as some other type of asset. In cases where use ismade of data which is not observable, the difference between the transaction price and modelvalue is only recognized in the consolidated statement of income when the inputs becomeobservable or when the instrument is derecognized. For each transaction, the Companydetermines the appropriate method of recognizing the “Day 1” difference amount.

Derivative Financial Instruments and Hedge AccountingThe Company uses cross-currency swaps, foreign currency swaps and forwards and interest rateswaps to manage its interest rate and foreign currency risk exposures in its US dollar-denominatedloans. Accrual of interest on the received and pay legs of the interest rate swaps are recorded asadjustments to the interest expense on the related foreign currency-denominated loans. Accrual ofinterest on the pay legs of the various currency swaps are recorded as other financing costs.

Derivative financial instruments are initially recognized at fair value on the date on which aderivative contract is entered into and are subsequently re-measured at fair value. Derivatives arecarried as assets when the fair value is positive and as liabilities when the fair value is negative.Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedgeaccounting are taken directly to the statement of income.

For the purpose of hedge accounting, derivatives can be designated as cash flow hedges or fairvalue hedges, depending on the type of risk exposure.

At the inception of a hedge relationship, the Company formally designates and documents thehedge relationship to which the Company wishes to apply hedge accounting and the riskmanagement objective and strategy for undertaking the hedge. The documentation includesidentification of the hedging instrument, the hedged item or transaction, the nature of the riskbeing hedged and how the entity will assess the hedging instrument’s effectiveness in offsettingthe exposure to changes in the hedged item’s fair value or cash flows attributable to the hedgedrisk. Such hedges are expected to be highly effective in achieving offsetting changes in fair valueor cash flows and are assessed on an ongoing basis to determine that they actually have beenhighly effective throughout the financial reporting periods for which they were designated.

In 2012, the Parent Company designated its cross currency swaps as cash flow hedges of itsexposure on foreign currency and interest rate risks on a portion of its floating rate Club Loan thatis benchmarked against US LIBOR (see Notes 17 and 31).

In 2014, EBWPC designated its interest rate swaps as cash flow hedges to partially hedge itsexposure on interest rate risks on its ECA and Commercial Debt Facility (see Notes 17 and 31).

Cash Flow HedgesCash flow hedges are hedges on the exposure to variability of cash flows that are attributable to aparticular risk associated with a recognized asset, liability or a highly probable forecast transactionand could affect profit or loss. The effective portion of the gain or loss on the hedging instrumentis recognized as other comprehensive income (loss) in the “Cumulative translation adjustments onhedging transactions” account in the consolidated statement of financial position while theineffective portion is recognized in the consolidated statement of income.

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Amounts taken to other comprehensive income (loss) are transferred to the consolidated statementof income when the hedge transaction affects profit or loss, such as when hedged financial incomeor expense is recognized or when a forecast sale or purchase occurs. Where the hedged item is thecost of a non-financial asset or liability, the amounts taken to other comprehensive income (loss)are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction is no longer expected to occur, amounts previously recognized in othercomprehensive income (loss) are transferred to the consolidated statement of income. If thehedging instrument expires or is sold, terminated or exercised without replacement or rollover, orif its designation as hedge is revoked, amounts previously recognized in other comprehensiveincome (loss) remain in equity until the forecast transaction occurs. If the related transaction isnot expected to occur, the amount is recognized in the consolidated statement of income.

Embedded DerivativesAn embedded derivative is a component of a hybrid (combined) instrument that also includes anon-derivative host contract with the effect that some of the cash flows of the combinedinstrument vary in a way similar to a stand-alone derivative. The Company assesses whetherembedded derivatives are required to be separated from the host contracts when the Company firstbecomes party to the contract. An embedded derivative is separated from the hybrid or combinedcontract if all the following conditions are met:

(a) the economic characteristics and risks of the embedded derivative are not clearly and closelyrelated to the economic characteristics and risks of the host contract;

(b) a separate instrument with the same terms as the embedded derivative would meet thedefinition of a derivative; and

(c) the hybrid instrument is not recognized at FVPL.

Subsequent reassessment is prohibited unless there is a change in the terms of the contract thatsignificantly modifies the cash flows that otherwise would be required under the contract, in whichcase reassessment is required. The Company determines whether a modification to cash flows issignificant by considering the extent to which the expected future cash flows associated with theembedded derivative, the host contract or both have changed and whether the change is significantrelative to the previously expected cash flows on the contract.

Impairment of Financial AssetsThe Company assesses at each financial reporting date whether a financial asset or group offinancial assets is impaired. A financial asset or a group of financial assets is deemed to beimpaired, if and only if, there is objective evidence of impairment as a result of one or more eventsthat occurred after the initial recognition of the asset (an incurred loss event) and that loss eventhas an impact on the estimated future cash flows of the financial asset or a group of financialassets that can be reliably estimated. Objective evidence of impairment may include indicationsthat the borrower or a group of borrowers is experiencing significant financial difficulty, default ordelinquency in interest or principal payments, the probability that they will enter bankruptcy orother financial reorganization and where observable data indicate that there is measurable decreasein the estimated future cash flows, such as changes in arrears or economic conditions that correlatewith defaults.

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Assets Carried at Amortized CostFor assets carried at amortized cost, the Company first assesses whether an objective evidence ofimpairment exists individually for financial assets that are individually significant, or collectivelyfor financial assets that are individually and not individually significant. If the Companydetermines that no objective evidence of impairment exists for individually assessed financialasset, whether significant or not, it includes the asset in a group of financial assets with similarcredit risk characteristics and collectively assesses for impairment. Those characteristics arerelevant to the estimation of future cash flows for groups of such assets by being indicative of thedebtors’ ability to pay all amounts due according to the contractual terms of the assets beingevaluated. Assets that are individually assessed for impairment and for which an impairment lossis, or continues to be, recognized are not included in a collective assessment for impairment.

If there is an objective evidence that an impairment loss has been incurred, the amount of loss ismeasured as the difference between the asset’s carrying value and the present value of theestimated future cash flows (excluding future credit losses that have not been incurred) discountedat the financial assets’ original effective interest rate which is the effective interest rate computedat initial recognition. The carrying value of the asset is reduced through the use of an allowanceaccount and the amount of loss is recognized in the consolidated statement of income. If in casethe receivable has proven to have no realistic prospect of future recovery, any allowance providedfor such receivable is written off against the carrying value of the impaired receivable. If, in asubsequent year, the amount of the estimated impairment loss decreases because of an eventoccurring after the impairment was recognized, the previously recognized impairment loss isreduced by adjusting the allowance account. Any subsequent reversal of an impairment loss isrecognized in the consolidated statement of income, to the extent that the carrying value of theasset does not exceed its amortized cost at reversal date.

AFS InvestmentsFor AFS investments, the Company assesses at each financial reporting date whether there isobjective evidence that a financial asset or group of financial assets is impaired.

In the case of equity investments classified as AFS, impairment indicators would include asignificant or prolonged decline in the fair value of the investments below its cost. Where there isevidence of impairment, the cumulative loss, measured as the difference between the acquisitioncost and the current fair value, less any impairment loss on that financial asset previouslyrecognized in the consolidated statement of comprehensive income, is removed from equity andrecognized in the consolidated statement of income. Impairment losses on equity investments arenot reversed through the consolidated statement of income. Increases in fair value afterimpairment are recognized directly in the consolidated statement of comprehensive income.

In the case of debt instruments classified as AFS investments, impairment is assessed based on thesame criteria as financial assets carried at amortized cost. Future interest income is based on thereduced carrying amount and is accrued based on the rate of interest used to discount future cashflows for the purpose of measuring impairment loss. Such accrual is recorded as part of “Interestincome” in the consolidated statement of income. If, in a subsequent year, the fair value of a debtinstrument increases and that increase can be objectively related to an event occurring after theimpairment loss was recognized in the consolidated statement of income, the impairment loss isreversed through the consolidated statement of income.

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Derecognition of Financial Assets and LiabilitiesFinancial AssetsA financial asset (or where applicable, a part of a financial asset or part of a group of similarfinancial assets) is derecognized when:

· the right to receive cash flows from the asset has expired;· the Company retains the right to receive cash flows from the asset, but has assumed as

obligation to them in full without material delay to a third party under a “pass through”arrangement; or

· the Company has transferred its right to receive cash flows from the asset and either(a) has transferred substantially all the risks and rewards of the asset, or (b) has neithertransferred nor retained substantially all the risks and rewards of the asset but has transferredthe control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has enteredinto a “pass-through” arrangement, and has neither transferred nor retained substantially all therisks and rewards of the asset nor transferred control of the asset, the asset is recognized to theextent of the Company’s continuing involvement in the asset. Continuing involvement that takesthe form of a guarantee over the transferred asset is measured at the lower of original carryingamount of the asset and the maximum amount of consideration that the Company could berequired to repay.

Financial LiabilitiesA financial liability is derecognized when the obligation under the liability is discharged,cancelled or expires. When an existing financial liability is replaced by another from the samelender on substantially different terms, or the terms of an existing liability are substantiallymodified, such exchange or modification is treated as a derecognition of the original liability andthe recognition of a new liability, and the difference in the respective carrying amounts isrecognized in the consolidated statement of income.

Offsetting Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount is reported in theconsolidated statement of financial position if, and only if, there is a currently enforceable legalright to offset the recognized amounts and there is an intention to settle on a net basis, or to realizethe asset and settle the liability simultaneously. This is not generally the case with master nettingagreements, and the related assets and liabilities are presented at gross in the consolidatedstatement of financial position.

Retirement and Other Post-employment BenefitsThe Company maintains a funded, non-contributory defined benefits retirement plan. TheCompany also provides post-employment medical and life insurance benefits which are unfunded.

The Company recognizes the net defined benefit liability or asset which is the aggregate of thepresent value of the defined benefit obligation at the end of the reporting period reduced by thefair value of plan assets (if any), adjusted for any effect of limiting a net defined benefit asset tothe asset ceiling. The asset ceiling is the present value of any economic benefits available in theform of refunds from the plan or reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using theprojected unit credit method.

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Defined benefit costs comprise the following:· Service cost· Net interest on the net defined benefit liability or asset· Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in profit or loss. Past service costs are recognizedwhen plan amendment or curtailment occurs. These amounts are calculated periodically byindependent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the netdefined benefit liability or asset that arises from the passage of time which is determined byapplying the discount rate based on government bonds to the net defined benefit liability or asset.Net interest on the net defined benefit liability or asset is recognized as expense or income inprofit or loss.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change inthe effect of the asset ceiling (excluding net interest on defined benefit liability) are recognizedimmediately in the statement of financial position with a corresponding debit or credit to retainedearnings through OCI in the period in which they occur. Remeasurements are not reclassified toprofit or loss in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Company, nor can they be paiddirectly to the Company. Fair value of plan assets is based on market price information. When nomarket price is available, the fair value of plan assets is estimated by discounting expected futurecash flows using a discount rate that reflects both the risk associated with the plan assets and thematurity or expected disposal date of those assets (or, if they have no maturity, the expected perioduntil the settlement of the related obligations). If the fair value of the plan assets is higher than thepresent value of the defined benefit obligation, the measurement of the resulting defined benefitasset is limited to the present value of economic benefits available in the form of refunds from theplan or reductions in future contributions to the plan.

The Company’s right to be reimbursed of some or all of the expenditure required to settle adefined benefit obligation is recognized as a separate asset at fair value when and only whenreimbursement is virtually certain.

Termination benefitTermination benefits are employee benefits provided in exchange for the termination of anemployee’s employment as a result of either an entity’s decision to terminate an employee’semployment before the normal retirement date or an employee’s decision to accept an offer ofbenefits in exchange for the termination of employment.

A liability and expense for a termination benefit is recognized at the earlier of when the entity canno longer withdraw the offer of those benefits and when the entity recognizes related restructuringcosts. Initial recognition and subsequent changes to termination benefits are measured inaccordance with the nature of the employee benefit, as either post-employment benefits, short-term employee benefits, or other long-term employee benefits.

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ProvisionsProvision for Rehabilitation and Restoration CostsThe Company records the present value of estimated costs of legal and constructive obligationrequired to restore the sites upon termination of the cooperation period in accordance with itsGRESCs. The nature of these activities includes plugging of drilled wells and restoration of padsand road networks. When the liability is initially recognized, the present value of the estimatedcosts is capitalized as part of the carrying amount of the related “FCRS and “power plants”accounts for EDC and EBWPC, respectively, under property, plant and equipment.

The amount of provision for rehabilitation and restoration costs in the consolidated statement offinancial position is increased by the accretion expense recognized in the consolidated statementof income using the effective interest method. The periodic unwinding of the discount isrecognized in the consolidated statement of income as “interest expense”. Additional costs orchanges in rehabilitation and restoration costs are recognized as additions or charges to thecorresponding assets and provision for rehabilitation and restoration costs when they occur.

For closed sites or areas, changes to estimated costs are recognized immediately in theconsolidated statement of income. Decrease in rehabilitation and restoration costs that exceeds thecarrying amount of the corresponding rehabilitation asset is recognized immediately in theconsolidated statement of income.

Other ProvisionsProvisions are recognized when the Company has a present obligation (legal or constructive) as aresult of a past event, it is probable that an outflow of resources embodying economic benefits willbe required to settle the obligation and a reliable estimate can be made of the amount of theobligation. Where the Company expects some or all of a provision to be reimbursed, for example,under an insurance contract, the reimbursement is recognized as a separate asset but only when thereimbursement is virtually certain. The expense relating to any provision is presented in theconsolidated statement of income, net of any reimbursement. If the effect of the time value ofmoney is material, provisions are discounted using a pre-tax rate that reflects, where appropriate,the risks specific to the liability. Where discounting is used, the increase in the provision due tothe passage of time is recognized as “Interest expense” in the consolidated statement of income.

ContingenciesContingent liabilities are not recognized in the consolidated financial statements. These aredisclosed unless the possibility of an outflow of resources embodying economic benefits is remote.Contingent assets are not recognized in the consolidated financial statements but disclosed whenan inflow of economic benefits is probable.

Capital StockCapital stock is measured at par value for all shares issued. When the Company issues more thanone class of stock, a separate account is maintained for each class of stock and the number ofshares issued. Capital stock includes common stock and preferred stock.

When the shares are sold at premium, the difference between the proceeds and the par value iscredited to the “Additional paid-in capital” account. When shares are issued for a considerationother than cash, the proceeds are measured by the fair value of the consideration received. In casethe shares are issued to extinguish or settled the liability of the Company, the shares shall bemeasured either at the fair value of the shares issued or fair value of the liability settled, whicheveris more reliably determinable.

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Direct costs incurred related to equity issuance, such as underwriting, accounting and legal fees,printing costs and taxes are debited to the “Additional paid-in capital” account. If additionalpaid-in capital is not sufficient, the excess is charged against an equity reserve account.

Common Shares in Employee Trust AccountCommon shares in the employee trust account, which consist of common shares irrevocablyassigned to the Banco de Oro Trust and Investment Group (BDO Trust) account, are recognized atthe amount at which such common shares were reacquired by the Company for the purpose of itsexecutive/employee stock grant or such similar plans, and proportionately reduced upon vesting ofthe benefit to the executive/employee grantee of the related number of common shares.

This account is shown as a separate line item in the equity section of the consolidated statement offinancial position.

Employee Stock Ownership PlanAwards granted under the employee stock ownership plan of the Company are accounted for asequity-settled transactions. The cost of equity-settled transaction is measured by reference to thefair value of the equity instruments at the date it is granted. Such cost, together with acorresponding increase in equity, is recognized over the period in which the performance and/orservice conditions are fulfilled ending on the date on which the grantee becomes fully entitled tothe award (“vesting date”). The cumulative expense recognized for equity-settled transactions ateach financial reporting date until the vesting date reflects the extent to which the vesting periodhas expired, as well as the Company’s best estimate of the number of equity instruments that willultimately vest. No expense is recognized for awards that do not ultimately vest, except forawards where vesting is conditional upon a market or non-vesting condition, in which, awards aretreated as vesting irrespective of whether or not the market or non-vesting condition is satisfied,provided that all other performance conditions are satisfied.

Where the terms of an equity-settled award are modified, the minimum expense recognized is theexpense had the terms not been modified, if the original terms of the award are met. An additionalexpense is recognized for any modification which increases the total fair value of the share-basedpayment transaction or which is otherwise beneficial to the employee as measured at the date ofmodification.

Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation,and any expense not yet recognized for the award is recognized immediately. This includes anyaward where non-vesting conditions within the control of either the Company or the employee arenot met. However, if a new award is substituted for the cancelled award and designated as areplacement award on the date that it is granted, the cancelled and new awards are treated as ifthey were a modification of the original award, as described in the previous paragraph.

Equity ReserveEquity reserve is the difference between the acquisition cost of an entity under common controland the Parent Company’s proportionate share in the net assets of the entity acquired as a result ofa business combination accounted for using the pooling-of-interests method. Equity reserve isderecognized when the subsidiary is deconsolidated, which is the date on which control ceases.

Retained EarningsRetained earnings represent the cumulative balance of periodic net income or loss, dividendcontributions, prior period adjustments, effect of changes in accounting policy and other capitaladjustments.

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Cash and property dividends are recognized as a liability and deducted from retained earningswhen approved by the BOD. Stock dividends are treated as transfers from retained earnings tocapital stock. Dividends for the year that are approved after the financial reporting date are dealtwith as an event after the financial reporting date.

Retained earnings include the earnings of subsidiaries which are not available for dividenddeclaration.

LeasesThe determination of whether an arrangement is, or contains a lease, is based on the substance ofthe arrangement at inception date of whether the fulfillment of the arrangement is dependent onthe use of a specific asset or assets or the arrangement conveys a right to use the asset.

Operating lease payments are recognized as expense in the consolidated statement of income on astraight-line basis over the lease term.

Revenue RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to theCompany and the revenue can be measured reliably. Revenue is measured at the fair value of theconsideration received or receivable, excluding discounts, rebates, and other sales taxes or duty.The Company assesses its revenue arrangements against specific criteria in order to determine if itis acting as principal or agent. The Company has concluded that it is acting as a principal in all itsrevenue arrangements. The following specific recognition criteria must also be met beforerevenue is recognized:

Sale of ElectricitySale of electricity is consummated whenever the electricity generated by the Company istransmitted through the transmission line designated by the buyer, for a consideration. Revenuefrom sale of electricity is based on sales price. Sale of electricity using hydroelectric, wind andgeothermal power is composed of generation fees from spot sales to the WESM and PSCs/PSAswith various electric companies and is recognized monthly based on the actual energy delivered.

Drilling ServicesRevenue is recognized as drilling services are rendered. The Company discontinued its drillingservices in 2012.

Interest IncomeRevenue is recognized as interest accrues, using the effective interest rate, which is the rate thatexactly discounts estimated future cash receipts through the expected life of the financialinstrument to the net carrying amount of the financial asset.

Insurance ProceedsProceeds from insurance claims are deducted to costs of sales to the extent only of active repairsand maintenance expense incurred, the excess is recognized in other income. Proceeds from theinsurance claims are subsequently recognized when receipt is virtually certain.

Costs of Sale of Electricity and Costs of Drilling ServicesThese include expenses incurred by the departments directly responsible for the generation ofrevenues from steam, electricity and performance of drilling services (i.e., Plant Operations,Production, Maintenance, Transmission and Dispatch, Wells Drilling and MaintenanceDepartment) at operating project locations. Costs of sales of electricity and steam and cost ofdrilling services are expensed when incurred.

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Costs of drilling services were included in the computation of net income from discontinuedoperations, in 2012.

General and Administrative ExpensesGeneral and administrative expenses constitute cost of administering the business and normallyinclude the expenses incurred by the departments in the Head Office (i.e., Management andServices, and Project Location’s Administrative Services Department). General andadministrative expenses are expensed when incurred.

Borrowing CostsBorrowing costs directly attributable to the acquisition, construction or production of qualifyingassets, are added to the cost of the assets, until such time that the assets are substantially ready fortheir intended use or sale, which necessarily take a substantial period of time. Income earned ontemporary investment of specific borrowings, pending the expenditure on qualifying assets, isdeducted from the borrowing costs eligible for capitalization. Borrowing costs include interestcharges and other costs incurred in connection with the borrowing of funds, as well as exchangedifferences arising from foreign currency borrowings used to finance the project to the extent thatthey are regarded as an adjustment to interest costs. All other borrowing costs are recognized inthe consolidated statement of income in the period in which they are incurred.

TaxesCurrent Income TaxCurrent income tax assets and liabilities for the current and prior periods are measured at theamount expected to be recovered from or paid to the taxation authority. The tax rates and tax lawsused to compute the amount are those that are enacted or substantively enacted as at the financialreporting date.

Deferred TaxDeferred tax is provided using the balance sheet liability method on temporary differences at thefinancial reporting date between the tax bases of assets and liabilities and their carrying amountsfor financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporarydifferences, except:

· where the deferred tax liability arises from the initial recognition of goodwill or of an asset orliability in a transaction that is not a business combination and, at the time of the transaction,affects neither the accounting profit nor taxable profit or loss; and

· in respect of taxable temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, where the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differences will not reversein the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carryforward benefitsof unused tax credits and unused tax losses [i.e., net operating loss carry-over (NOLCO)], to theextent that it is probable that sufficient taxable profits will be available against which thedeductible temporary differences, and the carryforward benefits of unused tax credits and unusedtax losses can be utilized except:

§ where the deferred tax asset relating to the deductible temporary difference arises from theinitial recognition of an asset or liability in a transaction that is not a business combination and,at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;and

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§ in respect of deductible temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, deferred tax assets are recognized only to the extentthat it is probable that the temporary differences will reverse in the foreseeable future andsufficient taxable profits will be available against which the temporary differences can beutilized.

The carrying amount of deferred tax assets is reviewed at each financial reporting date andreduced to the extent that it is no longer probable that sufficient future taxable profits will beavailable to allow all or part of the deferred income tax asset to be utilized. Unrecognizeddeferred tax assets are reassessed at each financial reporting date and are recognized to the extentthat it has become probable that sufficient future taxable profits will allow the deferred tax asset tobe recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to theyear when the asset is realized or the liability is settled, based on tax rates (and tax laws) that havebeen enacted or substantively enacted as at the financial reporting date.

Deferred tax relating to items recognized directly in OCI is recognized in consolidated statementof comprehensive income. Deferred tax assets and deferred tax liabilities are offset, if a legallyenforceable right exists to offset current tax assets against current tax liabilities and the deferredtaxes relate to the same taxable entity and the same taxation authority.

VATRevenues, expenses and assets are recognized, net of the amount of VAT except:

§ where the VAT incurred on a purchase of assets or services is not recoverable from the taxauthority, in which case the VAT is recognized as part of the cost of acquisition of the asset oras part of the expense item as applicable; and

§ where receivables and payables are stated with the amount of VAT included.

The net amount of VAT recoverable from the taxation authority is recorded as “Input VAT” underthe “Other noncurrent assets” account in the consolidated statement of financial position. Subjectto approval of the taxation authority, input VAT can be claimed for refund or as tax credit forpayment of certain types of taxes due to the Company. Input VAT claims granted by the taxationauthority are separately presented as “Tax Credit Certificates” under the “Other noncurrent assets”account.

Earnings Per Share (EPS)Basic earnings per share is computed by dividing net income for the year attributable to commonshareholders of the Parent Company with the weighted average number of common sharesoutstanding during the year, after giving retroactive effect to any stock dividends or stock splits, ifany, declared during the year.

Diluted earnings per share is computed in the same manner, with the net income for the yearattributable to common shareholders of the Parent Company and the weighted average number ofcommon shares outstanding during the year, adjusted for the effect of all dilutive potentialcommon shares.

As of December 31, 2014 and 2013, the Company does not have any dilutive potential commonshares. Hence, diluted EPS is the same as basic EPS.

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Operating SegmentThe Company’s operating businesses are organized and managed separately according to thegeographical segments (see Note 6).

Discontinued OperationsDiscontinued operations are excluded from the results of continuing operations and are presentedas a single amount as net income (loss) from discontinued operations in the consolidated statementof income (see Note 5).

Events After the Financial Reporting DateEvents after the financial reporting date that provide additional information about the Company’sfinancial position at the financial reporting date (adjusting events) are reflected in the consolidatedfinancial statements. Events after the financial reporting period that are not adjusting events aredisclosed in the notes to the consolidated financial statements.

Future Changes in Accounting PoliciesThe Company will adopt the following standards and interpretations and assess their impact whenthese become effective. Except as otherwise indicated, the Company does not expect the adoptionof these standards and interpretations to have significant impact on its consolidated financialstatements.

Standards issued but not yet effective

· PFRS 9, Financial Instruments - Classification and Measurement (2010 version)

PFRS 9 (2010 version) reflects the first phase on the replacement of PAS 39 and applies to theclassification and measurement of financial assets and liabilities as defined in PAS 39,Financial Instruments: Recognition and Measurement. PFRS 9 requires all financial assets tobe measured at fair value at initial recognition. A debt financial asset may, if the fair valueoption (FVO) is not invoked, be subsequently measured at amortized cost if it is held within abusiness model that has the objective to hold the assets to collect the contractual cash flowsand its contractual terms give rise, on specified dates, to cash flows that are solely payments ofprincipal and interest on the principal outstanding. All other debt instruments aresubsequently measured at fair value through profit or loss. All equity financial assets aremeasured at fair value either through other comprehensive income (OCI) or profit or loss.Equity financial assets held for trading must be measured at fair value through profit or loss.For FVO liabilities, the amount of change in the fair value of a liability that is attributable tochanges in credit risk must be presented in OCI. The remainder of the change in fair value ispresented in profit or loss, unless presentation of the fair value change in respect of theliability’s credit risk in OCI would create or enlarge an accounting mismatch in profit or loss.All other PAS 39 classification and measurement requirements for financial liabilities havebeen carried forward into PFRS 9, including the embedded derivative separation rules and thecriteria for using the FVO. The adoption of the first phase of PFRS 9 will have an effect onthe classification and measurement of the Company’s financial assets, but will potentiallyhave no impact on the classification and measurement of financial liabilities.

PFRS 9 (2010 version) is effective for annual periods beginning on or after January 1, 2015.This mandatory adoption date was moved to January 1, 2018 when the final version ofPFRS 9 was adopted by the Philippine Financial Reporting Standards Council (FRSC). Suchadoption, however, is still for approval by the Board of Accountancy (BOA).

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· Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate

This interpretation covers accounting for revenue and associated expenses by entities thatundertake the construction of real estate directly or through subcontractors. The SEC and theFRSC have deferred the effectivity of this interpretation until the final Revenue standard isissued by the IASB and an evaluation of the requirements of the final Revenue standardagainst the practices of the Philippine real estate industry is completed. Adoption of theinterpretation when it becomes effective will not have any impact on the financial statementsof the Company.

The following new standards and amendments issued by the IASB were already adopted by theFRSC but are still for approval by BOA.

Effective January 1, 2015

· PAS 19, Employee Benefits - Defined Benefit Plans: Employee Contributions (Amendments)

PAS 19 requires an entity to consider contributions from employees or third parties whenaccounting for defined benefit plans. Where the contributions are linked to service, theyshould be attributed to periods of service as a negative benefit. These amendments clarify that,if the amount of the contributions is independent of the number of years of service, an entity ispermitted to recognize such contributions as a reduction in the service cost in the period inwhich the service is rendered, instead of allocating the contributions to the periods of service.This amendment is effective for annual periods beginning on or after January 1, 2015. It is notexpected that this amendment would be relevant to the Company, since none of the entitieswithin the Company has defined benefit plans with contributions from employees or thirdparties.

Annual Improvements to PFRSs (2010-2012 cycle)The Annual Improvements to PFRSs (2010-2012 cycle) are effective for annual periods beginningon or after January 1, 2015 and are not expected to have a material impact on the Company.They include:

· PFRS 2, Share-based Payment - Definition of Vesting Condition

This improvement is applied prospectively and clarifies various issues relating to thedefinitions of performance and service conditions which are vesting conditions, including:

• A performance condition must contain a service condition• A performance target must be met while the counterparty is rendering service• A performance target may relate to the operations or activities of an entity, or to those of

another entity in the same group• A performance condition may be a market or non-market condition• If the counterparty, regardless of the reason, ceases to provide service during the vesting

period, the service condition is not satisfied.

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· PFRS 3, Business Combinations – Accounting for Contingent Consideration in a Business Combination

The amendment is applied prospectively for business combinations for which the acquisitiondate is on or after July 1, 2014. It clarifies that a contingent consideration that is not classifiedas equity is subsequently measured at fair value through profit or loss whether or not it fallswithin the scope of PAS 39, Financial Instruments: Recognition and Measurement (or PFRS 9,Financial Instruments, if early adopted). The Company shall consider this amendment forfuture business combinations.

· PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of the Total of the Reportable Segments’ Assets to the Entity’s Assets

The amendments are applied retrospectively and clarify that:

• An entity must disclose the judgments made by management in applying the aggregationcriteria in the standard, including a brief description of operating segments that have beenaggregated and the economic characteristics (e.g., sales and gross margins) used to assesswhether the segments are ‘similar’.

• The reconciliation of segment assets to total assets is only required to be disclosed if thereconciliation is reported to the chief operating decision maker, similar to the requireddisclosure for segment liabilities.

· PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Revaluation Method - Proportionate Restatement of Accumulated Depreciation and Amortization

The amendment is applied retrospectively and clarifies in PAS 16 and PAS 38 that the assetmay be revalued by reference to the observable data on either the gross or the net carryingamount. In addition, the accumulated depreciation or amortization is the difference betweenthe gross and carrying amounts of the asset.

· PAS 24, Related Party Disclosures – Key Management Personnel

The amendment is applied retrospectively and clarifies that a management entity, which is anentity that provides key management personnel services, is a related party subject to therelated party disclosures. In addition, an entity that uses a management entity is required todisclose the expenses incurred for management services.


· PFRS 3, Business Combinations – Scope Exceptions for Joint Arrangements

The amendment is applied prospectively and clarifies the following regarding the scopeexceptions within PFRS 3:• Joint arrangements, not just joint ventures, are outside the scope of PFRS 3.• This scope exception applies only to the accounting in the financial statements of the joint

arrangement itself.

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· PFRS 13, Fair Value Measurement – Portfolio Exception

The amendment is applied prospectively and clarifies that the portfolio exception in PFRS 13can be applied not only to financial assets and financial liabilities, but also to other contractswithin the scope of PAS 39.

· PAS 40, Investment Property

The amendment is applied prospectively and clarifies that PFRS 3, and not the description ofancillary services in PAS 40, is used to determine if the transaction is the purchase of an assetor business combination. The description of ancillary services in PAS 40 only differentiatesbetween investment property and owner-occupied property (i.e., property, plant andequipment).


· PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets – Clarification of Acceptable Methods of Depreciation and Amortization (Amendments)

The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern ofeconomic benefits that are generated from operating a business (of which the asset is part)rather than the economic benefits that are consumed through use of the asset. As a result, arevenue-based method cannot be used to depreciate property, plant and equipment and mayonly be used in very limited circumstances to amortize intangible assets. The amendments areeffective prospectively for annual periods beginning on or after January 1, 2016, with earlyadoption permitted. These amendments are not expected to have any impact to the Companygiven that the Company has not used a revenue-based method to depreciate its non-currentassets.

· PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture - Bearer Plants(Amendments)

The amendments change the accounting requirements for biological assets that meet thedefinition of bearer plants. Under the amendments, biological assets that meet the definition ofbearer plants will no longer be within the scope of PAS 41. Instead, PAS 16 will apply. Afterinitial recognition, bearer plants will be measured under PAS 16 at accumulated cost (beforematurity) and using either the cost model or revaluation model (after maturity). Theamendments also require that produce that grows on bearer plants will remain in the scope ofPAS 41 measured at fair value less costs to sell. For government grants related to bearer plants,PAS 20, Accounting for Government Grants and Disclosure of Government Assistance, willapply. The amendments are retrospectively effective for annual periods beginning on or afterJanuary 1, 2016, with early adoption permitted. These amendments are not expected to haveany impact to the Company as the Company does not have any bearer plants.

· PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements (Amendments)

The amendments will allow entities to use the equity method to account for investments insubsidiaries, joint ventures and associates in their separate financial statements. Entitiesalready applying PFRS and electing to change to the equity method in its separate financialstatements will have to apply that change retrospectively. For first-time adopters of PFRS

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electing to use the equity method in its separate financial statements, they will be required toapply this method from the date of transition to PFRS. The amendments are effective forannual periods beginning on or after January 1, 2016, with early adoption permitted. Theseamendments will not have any impact on the Company’s consolidated financial statements.

· PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and JointVentures - Sale or Contribution of Assets between an Investor and its Associate or JointVenture

These amendments address an acknowledged inconsistency between the requirements inPFRS 10 and those in PAS 28 (2011) in dealing with the sale or contribution of assets betweenan investor and its associate or joint venture. The amendments require that a full gain or loss isrecognized when a transaction involves a business (whether it is housed in a subsidiary or not).A partial gain or loss is recognized when a transaction involves assets that do not constitute abusiness, even if these assets are housed in a subsidiary. These amendments are effective fromannual periods beginning on or after 1 January 2016.

· PFRS 11, Joint Arrangements – Accounting for Acquisitions of Interests in Joint Operations (Amendments)

The amendments to PFRS 11 require that a joint operator accounting for the acquisition of aninterest in a joint operation, in which the activity of the joint operation constitutes a businessmust apply the relevant PFRS 3 principles for business combinations accounting. Theamendments also clarify that a previously held interest in a joint operation is not remeasuredon the acquisition of an additional interest in the same joint operation while joint control isretained. In addition, a scope exclusion has been added to PFRS 11 to specify that theamendments do not apply when the parties sharing joint control, including the reporting entity,are under common control of the same ultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a joint operation and theacquisition of any additional interests in the same joint operation and are prospectivelyeffective for annual periods beginning on or after January 1, 2016, with early adoptionpermitted. These amendments are not expected to have any impact to the Company.

· PFRS 14, Regulatory Deferral Accounts

PFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferralaccount balances upon its first-time adoption of PFRS. Entities that adopt PFRS 14 mustpresent the regulatory deferral accounts as separate line items on the statement of financialposition and present movements in these account balances as separate line items in thestatement of profit or loss and other comprehensive income. The standard requires disclosureson the nature of, and risks associated with, the entity’s rate-regulation and the effects of thatrate-regulation on its financial statements. PFRS 14 is effective for annual periods beginningon or after January 1, 2016. Since the Company is an existing PFRS preparer, this standardwould not apply.

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· PFRS 5, Non-current Assets Held for Sale and Discontinued Operations - Changes in Methods of Disposal

The amendment is applied prospectively and clarifies that changing from a disposal throughsale to a disposal through distribution to owners and vice-versa should not be considered to bea new plan of disposal, rather it is a continuation of the original plan. There is, therefore, nointerruption of the application of the requirements in PFRS 5. The amendment also clarifiesthat changing the disposal method does not change the date of classification.

· PFRS 7, Financial Instruments: Disclosures - Servicing Contracts

PFRS 7 requires an entity to provide disclosures for any continuing involvement in atransferred asset that is derecognized in its entirety. The amendment clarifies that a servicingcontract that includes a fee can constitute continuing involvement in a financial asset. Anentity must assess the nature of the fee and arrangement against the guidance in PFRS 7 inorder to assess whether the disclosures are required. The amendment is to be applied such thatthe assessment of which servicing contracts constitute continuing involvement will need to bedone retrospectively. However, comparative disclosures are not required to be provided forany period beginning before the annual period in which the entity first applies the amendments.

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

This amendment is applied retrospectively and clarifies that the disclosures on offsetting offinancial assets and financial liabilities are not required in the condensed interim financialreport unless they provide a significant update to the information reported in the most recentannual report.

· PAS 19, Employee Benefits - regional market issue regarding discount rate

This amendment is applied prospectively and clarifies that market depth of high qualitycorporate bonds is assessed based on the currency in which the obligation is denominated,rather than the country where the obligation is located. When there is no deep market for highquality corporate bonds in that currency, government bond rates must be used.

· PAS 34, Interim Financial Reporting - disclosure of information ‘elsewhere in the interim financial

The amendment is applied retrospectively and clarifies that the required interim disclosuresmust either be in the interim financial statements or incorporated by cross-reference betweenthe interim financial statements and wherever they are included within the greater interimfinancial report (e.g., in the management commentary or risk report).

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· PFRS 9, Financial Instruments – Hedge Accounting and amendments to PFRS 9, PFRS 7 and PAS 39 (2013 version)

PFRS 9 (2013 version) already includes the third phase of the project to replace PAS 39 whichpertains to hedge accounting. This version of PFRS 9 replaces the rules-based hedgeaccounting model of PAS 39 with a more principles-based approach. Changes includereplacing the rules-based hedge effectiveness test with an objectives-based test that focuses onthe economic relationship between the hedged item and the hedging instrument, and the effectof credit risk on that economic relationship; allowing risk components to be designated as thehedged item, not only for financial items but also for non-financial items, provided that therisk component is separately identifiable and reliably measurable; and allowing the time valueof an option, the forward element of a forward contract and any foreign currency basis spreadto be excluded from the designation of a derivative instrument as the hedging instrument andaccounted for as costs of hedging. PFRS 9 also requires more extensive disclosures for hedgeaccounting.

PFRS 9 (2013 version) has no mandatory effective date. The mandatory effective date ofJanuary 1, 2018 was eventually set when the final version of PFRS 9 was adopted by theFRSC. The adoption of the final version of PFRS 9, however, is still for approval by BOA.

The adoption of PFRS 9 will have an effect on the classification and measurement of theCompany’s financial assets but will have no impact on the classification and measurement ofthe Company’s financial liabilities. The adoption will also have an effect on the Company’sapplication of hedge accounting. The Company is currently assessing the impact of adoptingthis standard.

· PFRS 9, Financial Instruments (2014 or final version)

PFRS 9 (2013 version) already includes the third phase of the project to replace PAS 39 whichpertains to hedge accounting. This version of PFRS 9 replaces the rules-based hedgeaccounting model of PAS 39 with a more principles-based approach. Changes includereplacing the rules-based hedge effectiveness test with an objectives-based test that focuses onthe economic relationship between the hedged item and the hedging instrument, and the effectof credit risk on that economic relationship; allowing risk components to be designated as thehedged item, not only for financial items but also for non-financial items, provided that therisk component is separately identifiable and reliably measurable; and allowing the time valueof an option, the forward element of a forward contract and any foreign currency basis spreadto be excluded from the designation of a derivative instrument as the hedging instrument andaccounted for as costs of hedging. PFRS 9 also requires more extensive disclosures for hedgeaccounting.

New standard issued by the IASB has not yet been adopted by the FRSC

· IFRS 15 Revenue from Contracts with Customers

IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply torevenue arising from contracts with customers. Under IFRS 15 revenue is recognised at anamount that reflects the consideration to which an entity expects to be entitled in exchange fortransferring goods or services to a customer. The principles in IFRS 15 provide a more

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structured approach to measuring and recognizing revenue. The new revenue standard isapplicable to all entities and will supersede all current revenue recognition requirements underIFRS. Either a full or modified retrospective application is required for annual periodsbeginning on or after 1 January 2017 with early adoption permitted. The Company is currentlyassessing the impact of IFRS 15 and plans to adopt the new standard on the required effectivedate once adopted locally.

5. Discontinued Drilling Operations

In October 2012, the Company discontinued its drilling services to Lihir in Papua New Guinea.Following are the results of the operations of the drilling component for the year endedDecember 31, 2012:

Revenue P=660,681,295

Cost of drilling services:Purchased services and utilities (242,739,844)Rental, insurance and taxes (150,270,290)Repairs and maintenance (64,518,763)Parts and supplies issued (34,198,258)Business and related expenses (3,614,955)Depreciation (1,259,855)Personnel costs (310,177)

(496,912,142)

General and administrative expenses:Depreciation (17,838,394)Purchased services and utilities (2,675,127)Parts and supplies issued (1,749,986)Personnel cost (1,285,920)Rental, insurance and taxes (886,126)Business and related expenses (575,725)Repairs and maintenance (137,900)

(25,149,178)Other income (charges):

Foreign exchange gains 733,689Others (74,457)

659,232

Income before income tax 139,279,207

Provision for deferred income tax (Note 28) (41,783,762)

Net income from discontinued operations P=97,495,445

Net income from discontinued operations is entirely attributable to equity holders of the ParentCompany.

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6. Operating Segment Information

The Company’s operating segments are determined based on geographical segment, with eachsegment representing a strategic business location that has similar economic and politicalconditions, proximity of operations and specific risks associated with operations in a particulararea.

The Company’s identified reportable segments below are consistent with the segments reported tothe BOD, which is the Chief Operating Decision Maker (CODM) of the Company:

a. Leyte Geothermal Business Unit (LGBU) - This segment pertains to Leyte geothermalproduction field and power plants. This includes projects in Tongonan, Mahanagdong, UpperMahiao, Malitbog and other projects in Leyte Province.

b. Negros Island Geothermal Business Unit (NIGBU) - This segment refers to Southern Negrosgeothermal production field and power plants. Power plants included in NIGBU arePalinpinon I, Palinpinon II, NNGP and Nasulo.

c. Bacon-Manito Geothermal Business Unit (BGBU) - This segment relates to Bacon-Manitogeothermal production field and power plants.

d. Mt. Apo Geothermal Business Unit (MAGBU) - This segment refers to Mt. Apo geothermalproduction field and power plants.

e. Pantabangan/Masiway - This segment relates to Pantabangan-Masiway hydroelectric complexlocated in Nueva Ecija Province.

f. Wind-Ilocos Norte Business Unit (WINBU) - This segment pertains to wind projects inNorthern Luzon, including Burgos wind energy project.

g. All others - refers to other renewable energy projects, foreign investments and head office ofthe Company.

Management monitors the operating results of the business segments separately for the purpose ofmaking decisions about resources to be allocated and of assessing performance. Finance costs,finance income, income taxes and other charges and income are managed on a group basis.

Segment performance is evaluated based on net income for the year and earnings before interest,taxes, and depreciation and amortization (EBITDA). Net income for the year is measuredconsistent with consolidated net income reported in the consolidated financial statements.EBITDA is calculated as revenues minus costs of sales of electricity and general andadministrative expenses, excluding non-cash items such as depreciation and amortization,impairment losses on non-financial assets, and loss on disposal of property, plant and equipment,among others.

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Financial information on the operating segments are summarized as follows:

Pantabangan/LGBU NIGBU BGBU MAGBU Masiway WINBU Others Total

Yeard endedDecember 31, 2014

Segment revenue P=18,364,197,709 P=12,644,433,901 P=4,494,754,347 P=2,368,843,658 P=1,624,130,409 P=188,304,621 P=8,337,288 P=39,693,001,933Intersegment revenue (2,779,106,429) (4,588,402,375) (1,458,293,212) – – – – (8,825,802,016)Total segment revenue 15,585,091,280 8,056,031,526 3,036,461,135 2,368,843,658 1,624,130,409 188,304,621 8,337,288 30,867,199,917Segment expenses (7,979,398,782) (3,372,114,185) (2,341,764,411) (1,801,952,981) (918,884,082) (177,902,756) (16,592,017,197)Unallocated expenses (466,664,177) (466,664,177)Interest income 85,281,147 42,110,150 17,277,300 11,065,979 28,421,845 533,136 2,098 184,691,655Interest expense (1,724,439,558) (907,465,848) (458,834,430) (348,769,365) (172,264,865) (89,174,965) (53,061,691) (3,754,010,722)Other income

(expenses) - net 356,025,843 108,560,848 (39,774,107) 24,558,255 (3,256,276) (463,470) 303,844,218 749,495,311Income taxes (639,569,890) (602,584,327) 57,316,899 (11,388,706) (18,074,121) (2,646,292) (5,642,964) (1,222,589,401)Reversal of previously

impaired property,plant and equipment – 2,051,903,642 – – – – – 2,051,903,642

Segment result P=5,682,990,040 P=5,376,441,806 P=270,682,386 P=242,356,840 P=540,072,910 (P=81,349,726) (P=213,185,228) P=11,818,009,028

EBITDA P=9,604,617,446 P=5,399,587,225 P=1,119,322,968 P=941,278,769 P=1,126,806,226 P= 150,943,432 P= 8,337,288 P=18,350,893,354Unallocated Expenses – – – – – – – (428,788,398)

P=17,922,104,956


Year endedDecember 31, 2013

Segment revenue P=15,775,292,990 P=11,182,135,164 P=246,465,088 P=1,876,973,704 P=2,501,216,675 P=– P=– P=31,582,083,621Intersegment revenue (1,888,584,019) (3,980,653,002) (56,576,130) – – – – (5,925,813,151)Total segment revenue 13,886,708,971 7,201,482,162 189,888,958 1,876,973,704 2,501,216,675 – – 25,656,270,470Segment expenses (7,100,076,840) (2,775,764,935) (1,110,547,292) (1,449,321,408) (855,065,032) (28,496,170) – (13,319,271,677)Unallocated expenses – – – – – – (448,271,495) (448,271,495)Interest income 150,817,865 63,342,356 34,991,681 18,269,183 26,493,820 125,529 6,932 294,047,366Interest expense (1,663,184,605) (847,376,565) (342,418,566) (337,619,061) (187,577,900) – (6,322,607) (3,384,499,304)Other expenses - net (1,252,587,196) (587,531,051) (145,772,169) (90,238,985) (9,392,222) (14,796,010) (583,904,541) (2,684,222,174)Income taxes (400,449,803) (269,436,691) 183,217,106 12,600,066 (8,868,213) – (3,045,814) (485,983,349)Segment result P=3,621,228,392 P=2,784,715,276 (P=1,190,640,282) P=30,663,499 P=1,466,807,128 (P=43,166,651) (P=1,041,537,525) P=5,628,069,837

EBITDA P=8,870,163,861 P=5,008,022,338 (P=639,659,175) P=792,428,490 P=2,067,053,408 (P=27,414,558) P=– P=16,070,594,364Unallocated Expenses – – – – – – – (429,519,371)

P=15,641,074,993


Year endedDecember 31, 2012

Segment revenue P=16,190,546,266 P=11,088,763,078 P=– P=1,985,626,185 P=4,753,254,746 P=– P=– P=34,018,190,275Intersegment revenue (1,712,199,749) (3,937,438,471) – – – – – (5,649,638,220)Total segment revenue 14,478,346,517 7,151,324,607 – 1,985,626,185 4,753,254,746 – – 28,368,552,055Segment expenses (7,294,571,578) (2,838,804,166) (1,852,026,768) (1,384,452,380) (932,300,338) (1,720,304) – (14,303,875,534)Unallocated expenses – – – – – – (223,274,415) (223,274,415)Interest income 185,725,002 59,809,514 41,322,195 24,420,316 53,302,912 39,987 21,063 364,640,989Interest expense (1,709,768,641) (885,978,756) (344,252,976) (350,508,951) (413,139,145) – – (3,703,648,469)Other income

(expenses) - net 365,373,277 502,892,471 55,674,459 22,890,728 (74,734,305) 476,331 19,180,134 891,753,095Income taxes (570,412,575) (383,138,659) 164,610,199 (15,268,508) 12,207,962 – 16,878,987 (775,122,594)Segment result from

continuing operatins P=5,454,692,002 P=3,606,105,011 (P=1,934,672,891) P=282,707,390 P=3,398,591,832 (P=1,203,986) (P=187,194,231) P=10,619,025,127

EBITDA P=9,261,002,063 P=4,899,116,507 (P=1,588,897,178) P=935,603,693 P=4,241,171,029 (P=1,720,305) P=– P=17,746,275,809Unallocated Expenses – – – – – – – (194,433,529)

P=17,551,842,280

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Pantabangan /LGBU NIGBU BGBU MAGBU Masiway WINBU Elimination Total

As of and for the year ended December 31,2014Segment assets P=71,608,301,585 P=33,197,063,395 P=13,848,796,054 P=9,932,116,993 P=7,604,603,949 P=24,740,355,824 (P=68,445,028,981) P=92,486,208,819Unallocated corporate

assets 32,013,256,107Total assets P=124,499,464,926Segment liabilities P=32,311,663,166 P=30,804,576,157 P=17,471,359,008 P=5,044,341,948 P=3,876,731,551 P=15,590,036,477 (P=71,464,533,288) P=33,634,175,019Unallocated corporate

liabilities 47,245,203,430Total liabilities P=80,879,378,449Capital expenditure P=2,980,724,113 P=2,715,395,635 P=1,391,152,987 P=80,468,199 P=118,332,958 P=12,292,374,252 P=96,230,146 P=19,674,678,290Unallocated capital

expenditure 433,882,606Total capital expenditure P=20,108,560,896Depreciation and

amortization P=1,977,166,821 P=702,804,914 P=435,957,718 P=370,617,590 P=421,559,899 P=133,316,576 P=– P=4,041,423,518Unallocated depreciation

and amortization 37,875,779Total depreciation and

amortization P=4,079,299,297Other non-cash items P=21,758,128 P=12,864,970 (P=11,331,477) P=3,770,502 P=– P=7,224,993 P=– P=34,287,116Unallocated non-cash

items –Total other non-cash

items P=34,287,116

Pantabangan /LGBU NIGBU BGBU MAGBU Masiway WINBU Elimination Total

As of and for the yearendedDecember 31, 2013

Segment assets P=65,205,296,071 P=25,469,361,138 P=11,968,739,199 P=9,886,351,624 P=8,387,255,753 P=7,814,935,084 (P=58,670,116,023) P=70,061,822,846Unallocated corporate

assets 34,943,681,490Total assets P=105,005,504,336Segment liabilities P=28,473,511,585 P=25,297,887,519 P=16,129,261,708 P=5,289,122,797 P=4,127,840,853 P=5,463,699,797 (P=59,498,621,034) P=25,282,703,225Unallocated corporate

liabilities 43,477,842,206Total liabilities P=68,760,545,431Capital expenditure P=2,628,115,271 P=986,383,567 P=1,408,204,079 P=549,451,912 P=58,608,479 P=4,085,608,975 P=– P=9,716,372,283Unallocated capital

expenditure 1,531,302,376Total capital expenditure P=11,247,674,659Depreciation and

amortization P=2,004,853,928 P=561,616,822 P=210,437,608 P=350,803,482 P=420,901,765 P=132,408 P=– P=3,548,746,013Unallocated depreciation

and amortization 20,601,339Total depreciation and

amortization P=3,569,347,352Other non-cash items P=78,677,802 P=20,688,290 P=70,561,550 P=13,972,713 P=– P=949,204 P=– P=184,849,559Unallocated non-cash

items (1,849,215)Total other non-cash

items P=183,000,344

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The following table shows the Company’s reconciliation of EBITDA to the consolidated netincome for the years ended December 31, 2014, 2013 and 2012.

2014 2013 2012EBITDA P=17,922,104,956 P=15,641,074,993 P=17,551,842,280Add (deduct): Depreciation and amortization

(Notes 12, 13, 21 and 22) (4,079,299,297) (3,569,347,351) (3,559,528,922) Interest expense (Note 24) (3,754,010,722) (3,384,499,304) (3,703,648,469) Reversal of previously impaired property, plant and

equipment (Notes 3 and 12) 2,051,903,642 – – Provision for income tax (Note 28) (1,222,589,401) (485,983,349) (775,122,594) Proceeds from insurance claims (Note 12) 539,212,484 – – Interest income (Note 24) 184,691,655 294,047,366 364,640,989 Foreign exchange gains (losses) - net

(Notes 25 and 31) (102,531,122) (1,261,278,106) 1,053,466,774 Provision for doubtful accounts (Notes 8, 15 and 22) (59,627,889) (59,979,611) (234,415,270) Reversal of (provision for) impairment of parts

and supplies inventories (Notes 3, 10 and 22) 25,340,773 (123,020,733) 83,504,018 Reversal of (loss on) impairment of damaged assets

due to Typhoon Yolanda (Notes 10 and 12) 53,443,007 (625,013,609) – Impairment loss on exploration and evaluation

assets (Note 14) – (574,820,864) – Miscellaneous - net (Note 26) 259,370,942 (223,109,595) (161,713,679)Net income from continuing operations 11,818,009,028 5,628,069,837 10,619,025,127Net income from discontinued operation – – 97,495,445Consolidated net income P=11,818,009,028 P=5,628,069,837 P=10,716,520,572

There were intersegment revenue, Parent to GCGI/BGI, GCGI to BGI and BGI to FG Hydro forthe sale of steam and electricity. Intersegment revenues are all eliminated in consolidation.Segment information is measured in conformity with the accounting policies adopted forpreparing and presenting the consolidated financial statements. Intersegment revenues are made atnormal commercial terms and conditions.

Unallocated expenses pertain to expenses of the corporate, technical and administrative supportgroups while unallocated corporate assets and liabilities which include among others certain cashand cash equivalents, property, plant and equipment, parts and supplies inventories, trade andother payables and retirement and post-retirement benefits, pertain to the Head Office and aremanaged on a group basis.

As discussed in Notes 3 and 12, the Company recognized an impairment loss of P=4,998.6 millionin 2011 and reversal of impairment amounting to P=63.6 million in 2012. Such impairment lossand partial reversal thereof were recognized under the NIGBU segment.

In 2014, the Company reversed previously recognized impairment loss related to the NNGPProject amounting to P=2,051.9 million (Note 12).

Also, the impairment loss on exploration and evaluation assets related to Cabalian Projectrecognized in 2013 was recorded as part of expense of LGBU segment (see Notes 3 and 14).

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7. Cash and Cash Equivalents

2014 2013Cash on hand and in banks P=2,675,815,987 P=3,941,157,345Cash equivalents 11,334,397,427 12,101,997,211

P=14,010,213,414 P=16,043,154,556

Cash in banks earn interest at the respective bank deposit rates. Cash equivalents consist ofmoney market placements, which are made for varying periods of up to three months dependingon the immediate cash requirements of the Company. Total interest earned on cash and cashequivalents, net of final tax, amounted to P=159.0 million in 2014, P=283.9 million in 2013 andP=358.4 million in 2012 (see Notes 24 and 31).

8. Trade and Other Receivables

2014 2013Trade P=6,424,986,333 P=3,397,069,626Others:

Non-trade accounts receivable 395,195,472 94,851,647Loans and notes receivables 95,900,731 124,936,697Advances to employees 53,107,976 73,699,085Employee receivables 9,491,872 11,958,401

553,696,051 305,445,8306,978,682,384 3,702,515,456

Less allowance for doubtful accounts 91,148,423 91,148,423P=6,887,533,961 P=3,611,367,033

Trade receivables are non-interest-bearing and are generally collectible in 30 to 60 days. Majorityof the Company’s trade receivables come from revenues from sale of electricity to NPC. (seeNotes 24 and 31).

Non-trade receivables include accrued interest, receivable from suppliers and other receivablesarising from transactions not in the usual course of the Company’s business such as disposal ofproperty and equipment. The non-trade receivable includes receivable from EDC Geotermica Spaamounting to P=254.0 million; this pertains to amounts receivable from suppliers and contractors.

The table below shows the rollforward analysis of the allowance for doubtful accounts on tradereceivables:

2014 2013Balance at beginning of year P=91,148,423 P=75,602,750Provision for doubtful accounts (Note 22) – 15,545,673Balance at end of year P=91,148,423 P=91,148,423

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9. Available-for-sale Investments/ Financial Asset at FairValue Through Profit or Loss

Financial asset at fair value through profit or lossIn January 2014, the Company entered into an investment management agreement (IMA) wherebythe Company availed of the services of Security Bank relative to the management and investmentof funds amounting to P=500.0 million.

Among others, following are the significant provisions of the IMA:

The Investment Manager shall administer and manage the fund as allowed and subject to therequirements of the Central Bank of the Philippines and in accordance with the written investmentpolicy and guidelines mutually agreed upon and signed by Security Bank and the Company.

The agreement is considered as an agency and not a trust agreement. The Company, therefore,shall at all times retain legal title to the fund.

The IMA does not guaranty a yield, return, or income on the investments or reinvestments madeby the Investment Manager. Any loss or depreciation in the value of the assets of the fund shall befor the account of the Company.

The Company accounts for the entire investment as a financial asset to be carried at fair valuethrough profit or loss. Mark-to-market adjustment on the securities is taken up in the consolidatedincome statement amounted to P=23.6 million in 2014.

Available-for-sale Investments

2014 2013Current - Quoted government debt securities

(Note 31) P=– P=341,841,500Noncurrent

Quoted securities (Note 31)Equity 308,129,936 114,961,907Government bonds and note 226,879,065 226,221,345Corporate bond 32,967,889 66,058,877

567,976,890 407,242,129Total P=567,976,890 P=749,083,629

Quoted government debt securities consist of investments in Republic of the Philippines (ROP)bonds, RCBC GT Capital Fixed Rate Bonds, BDP Fixed Rate Treasury Note and RCBC RetailTreasury Bond with maturities of 2016, 2023, 2032 and 2037, respectively; and interest rates of8.0%, 5.1%, 5.8% and 5.1%, respectively.

Investments in equity securities consist mainly of shares traded in the Philippine Stock Exchange.

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The movements of the unrealized gain related to the foregoing investments are presented in theconsolidated statements of comprehensive income with details as follows:

2014 2013 2012Net accumulated unrealized gain

on AFS investments atbeginning of year P=29,611,321 P=111,522,725 P=91,758,915

Changes in fair value recognizedin equity (Note 31) 113,581,354 (81,911,404) 19,763,810

Net accumulated unrealized gainon AFS investments at endof year P=143,192,675 P=29,611,321 P=111,522,725

Changes in fair value recognized in the consolidated statements of comprehensive income refer tounrealized gains and losses during the period brought about by the temporary increase or decreasein the fair value of the debt and equity instruments.

10. Parts and Supplies Inventories

2014 2013On hand:

Drilling tubular products and equipment spares P=1,261,382,306 P=1,461,354,072Power plant spares 742,487,866 678,693,801Pump, production/steam gathering system,

steam turbine, valves and valve spares 554,540,047 477,428,028Electrical, cable, wire product and compressor

spares 94,043,026 121,659,974Construction and hardware supplies, stationeries

and office supplies, hoses, communicationand other spares and supplies 68,189,468 68,258,675

Heavy equipment spares 56,136,387 65,130,865Chemical, chemical products, gases and catalyst 53,564,508 136,692,032Automotive, mechanical, bearing, seals, v-belt,

gasket, tires and batteries 46,123,084 47,339,199Measuring instruments, indicators and tools,

safety equipment and supplies 25,986,096 33,832,9182,902,452,788 3,090,389,564

In transit – 3,913,885P=2,902,452,788 P=3,094,303,449

Inventories in transit include items not yet received but ownership or title to the goods has alreadypassed to the Company.

Allowance for inventory obsolescence

2014 2013Beginning P=59,899,457 P=51,775,060Provision (reversal) of allowance on inventory

(Note 22) (4,323,830) 8,124,397P=55,575,627 P=59,899,457

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Parts and supplies inventories include items that are carried at net realizable value amounting toP=428.7 million and P=440.1 million as of December 31, 2014 and 2013, respectively, and have acost amounting to P=484.2 million and P=500.0million, respectively. The rest of the parts andsupplies inventories are carried at cost.

Allowance for disposable parts and supplies

2014 2013Beginning P=239,584,923 P=124,688,588Provision (reversal) of allowance on inventory

(Note 22) (21,016,943) 114,896,335P=218,567,980 P=239,584,923

The Company identifies inventories subject to disposal and provides provision for these parts andsupplies for disposal.

The amount of inventory charged to expense amounted to P=1,296.5 million in 2014, P=945.9million in 2013 and P=958.5 million in 2012 (see Notes 5, 21 and 22). Details of parts and suppliesinventories issued are as follows:

2014 2013 2012Cost of sales of electricity and

steam (Note 21) P=1,067,442,483 P=788,973,966 P=768,473,850General and administrative

expenses (Note 22) 229,103,395 156,968,210 154,094,455Discontinued drilling operations

(Note 5) – – 35,948,244P=1,296,545,878 P=945,942,176 P=958,516,549

In 2014, after technical assessment some parts and supplies impaired in 2013 due to TyphoonYolanda amounting to P=53.4 million were reassessed to be reusable.

11. Other Current Assets

2014 2013Prepaid expenses P=293,372,006 P=302,435,288Tax credit certificates (Note 15) 186,711,661 472,531,633Withholding tax certificates 176,198,301 393,078,659Advances to contractors 64,685,465 67,064,239Others – 345,064

P=720,967,433 P=1,235,454,883

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12. Property, Plant and Equipment

2014

Land Power Plants

FCRS andProduction

Wells

Buildings,Improvements

and OtherStructures

Exploration,Machinery and

EquipmentTransportation

Equipment

Furniture,Fixtures and

EquipmentLaboratoryEquipment

Constructionin Progress Total

CostBalances at January 1 P=515,353,046 P=38,731,016,968 P=25,467,012,393 P=2,128,442,644 P=5,441,021,744 P=193,057,863 P=1,101,387,317 P=662,738,194 P=16,291,440,381 P=90,531,470,550Additions 73,713,266 155,555,848 50,439,130 14,947,232 51,348,042 36,621,092 54,825,091 39,307,446 19,631,803,749 20,108,560,896Disposals/retirements (Notes 20 and 26) – (1,277,159) – (1,300,549) (1,374,632,581) (10,320,460) (34,722,391) (1,265,142) – (1,423,518,282)Reclassifications – 20,691,762,062 4,674,741,220 2,097,512,663 133,652,718 (67,823,358) 160,463,423 5,496,961 (27,884,625,684) (188,819,995)Balances at December 31 589,066,312 59,577,057,719 30,192,192,743 4,239,601,990 4,251,389,923 151,535,137 1,281,953,440 706,277,459 8,038,618,446 109,027,693,169Accumulated Depreciation, Amortization

and ImpairmentBalances at January 1 17,627,581 11,895,257,449 8,476,733,491 617,184,722 2,412,546,361 69,185,062 511,330,385 291,595,936 – 24,291,460,987Depreciation and amortization for the year – 2,586,834,136 980,605,092 164,044,180 69,312,578 19,796,161 124,141,646 73,723,742 245,034 4,018,702,569Disposals/retirements (Note 26) – (271,047) – (1,300,536) (284,796,403) (8,189,342) (13,215,762) (1,225,191) – (308,998,281)Reclassifications – (360,518,915) – 86,293,315 278,693,804 245,035 317,584 121,337 (245,034) 4,907,126Reversal of previously impaired property, plant

and equipment – (2,051,903,642) – – – – – – – (2,051,903,642)Balances at December 31 17,627,581 12,069,397,981 9,457,338,583 866,221,681 2,475,756,340 81,036,916 622,573,853 364,215,824 – 25,954,168,759Net Book Value P=571,438,731 P=47,507,659,738 P=20,734,854,160 P=3,373,380,309 P=1,775,633,583 P=70,498,221 P=659,379,587 P=342,061,635 P=8,038,618,446 P=83,073,524,410

2013

Land Power Plants

FCRS andProduction

Wells

Buildings,Improvements

and OtherStructures

Exploration,Machinery and

EquipmentTransportation

Equipment

Furniture,Fixtures and

EquipmentLaboratoryEquipment

Constructionin Progress Total

CostBalances at January 1 P=515,587,728 P=37,329,247,352 P=22,545,392,364 P=2,378,453,064 P=3,938,188,809 P=286,850,994 P=629,797,360 P=617,995,651 P=13,168,080,990 P=81,409,594,312Additions – 149,652,902 133,924,564 47,343,279 195,718,071 16,408,565 63,402,914 34,683,517 10,606,540,847 11,247,674,659Disposals/retirements (Note 26) – (672,748,540) – (13,625,188) (151,257,597) (26,134,412) (55,453,415) (15,308,799) – (934,527,951)Reclassifications (234,682) 1,924,865,254 2,787,695,465 (283,728,511) 1,458,372,461 (84,067,284) 463,640,458 25,367,825 (7,483,181,456) (1,191,270,470)Balances at December 31 515,353,046 38,731,016,968 25,467,012,393 2,128,442,644 5,441,021,744 193,057,863 1,101,387,317 662,738,194 16,291,440,381 90,531,470,550Accumulated Depreciation, Amortization

and ImpairmentBalances at January 1 17,255,629 9,864,027,894 7,123,326,992 516,196,390 1,876,398,510 96,393,978 426,269,376 218,642,240 590,863,997 20,729,375,006Depreciation and amortization for the year – 2,136,698,413 650,990,367 105,228,014 530,856,403 15,386,426 110,751,071 58,536,459 – 3,608,447,153Disposals/retirements (Note 26) – (167,347,957) – (5,141,356) (148,653,037) (5,478,882) (47,190,772) (10,286,418) – (384,098,422)Reclassifications 371,952 61,879,099 702,416,132 901,674 153,944,485 (37,116,460) 21,500,710 24,703,655 (590,863,997) 337,737,250Balances at December 31 17,627,581 11,895,257,449 8,476,733,491 617,184,722 2,412,546,361 69,185,062 511,330,385 291,595,936 – 24,291,460,987Net Book Value P=497,725,465 P=26,835,759,519 P=16,990,278,902 P=1,511,257,922 P=3,028,475,383 P=123,872,801 P=590,056,932 P=371,142,258 P=16,291,440,381 P=66,240,009,563

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Burgos Wind Energy ProjectIn 2013, the Company commenced the construction of its 87-MW Burgos Wind Project (Phase 1),located in the Municipality of Burgos, Ilocos Norte. The project comprises three components: (i)the establishment of a wind farm facility; (ii) a 115kV transmission line; and (iii) a substationadjacent to the wind farm. In March 2013, the Company entered into an agreement with VestasWind Systems of Denmark for the construction of the wind energy facilities. Under theEngineering, Procurement and Construction (EPC) contract, Vestas Wind Systems is responsiblefor the design, manufacture, delivery of the works from the place of manufacture to the project site,erection, testing and commissioning for a complete and operational wind farm. The agreementcovers the installation of 29 units of V90-3.0 MW turbine together with associated on-site civiland electrical works. The Company issued notice to proceed to Vestas Wind Systems inJune 2013 for the construction of wind energy assets.

On May 16, 2013, EBWPC was granted a Certificate of Confirmation of Commerciality by theDOE for its 87-MW Burgos Wind Project. The certificate effectively converts the project’sWESC from exploration/predevelopment stage to the development/commercial stage.Accordingly, the wind energy project development costs amounting to P=467.7 million werereclassified into property, plant and equipment under the “construction in progress” account(see Note 13).

On May 3, 2013, to partially finance the construction of Burgos wind energy project, the Companyissued fixed-rate peso bonds amounting to P=7.0 billion (see Note 17). As the proceeds of thebonds are used specifically for the construction of the Burgos wind project, the Companycapitalized in its consolidated financial statements the actual borrowing costs incurred on thebonds amounting to P=263.0 million and P=140.8 million for the year ended December 31, 2014 and2013, respectivey, net of investment income on temporary investment of the proceeds of the bonds.

On April 30, 2014, the Company and Vestas Wind Systems have entered into another contract forthe construction and installation of an additional 21 wind turbines (Phase 2). This has raised theestimated total project investment cost to US$450 million from US$300 million, and once fullycompleted, would increase the total generating capacity to 150 MW from 87 MW.

On June 16, 2014, EDC signed two-year loan facilities with an aggregate principal amount ofP=2.7 billion with Philippine National Bank (PNB) and Security Bank Corporation (SBC) to partlyfinance the construction of Phase 2 of Burgos Wind Project while the Company is arranging therelated permanent project financing.

On June 27, 2014, the Parent Company, has secured another bridge financing facility fromAustralia and New Zealand Banking Group Limited (ANZ) and Mizuho Bank, Ltd. amounting toUS$90 million (P=3.91 billion). The proceeds of the facility completed the bridge financing for the63-MW Phase 2 of the Burgos Wind Project. Capitalized borrowing costs related to bridge loansamounted to P=69.8 million in 2014.

On October 17, 2014, EBWPC secured US$315.0 million financing agreement with a group offoreign and local banks representing the project financing for the construction of the 150-MWBurgos Wind Project. The facility which consists of US dollar and Philippine peso tranches willmature in 15 years. Part of the proceeds of this project financing were used to prepay the twobridge loan facilities. In 2014, capitalized borrowing costs related to project financing amountedto P=21.2 million.

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On November 12, 2014, EBWPC received the DOE's Certificate of Endorsement (COE) for FITeligibility under docket number COE-FIT No.W-2014-11-002 endorsing the 150-MW BurgosWind Project for the purpose of qualifying under the Feed-In Tariff (FIT) System.

Total revenue recognized by the Burgos Wind Energy Project from November 11, 2014 toDecember 31, 2014 amounted to P=188.3 million.

Upon completion of the Burgos Wind Project, the Company transferred a total cost ofP=16,241.2 million from the “Construction in Progress” account to completed property, plant andequipment under the “Power Plants” account. For the period from November 11, 2014 toDecember 31, 2014, the depreciation expense recognized on the completed assets of Burgos WindProject amounted to P=133.1 million while the total revenue generated amounted to P=188.3 million.

Completion of the Northern Negros Geothermal Plant to Nasulo Geothermal Plant (N2N) ProjectIn April 2011, EDC suspended the operations of its 49-MW Northern Negros Geothermal Plants(NNGP) because the plant was not capable of operating on its designed capacity due to steamsupply limitations. In the last quarter of 2013, to utilize the facilities and fixed assets of NNGP,EDC transferred the components of the power plant of NNGP to Nasulo Power Plant which willbe constructed site in Southern Negros. The N2N Project was implemented in two phases.Phase 1 covered the site preparation and civil works, including the construction of the powerhousebuilding and other civil structures and foundations while Phase 2 covered the relocation of theexisting unit and electro-mechanical equipment from NNGP going to Nasulo.

On July 21, 2014, the Company declared that the Nasulo Power Plant achieving a capacity of49.4-MW was already complete and in the condition necessary for it to operate as intended bymanagement. Upon completion of the Nasulo Power Plant, the adjacent Nasuji Power Plant withcapacity of 20 MW has been placed on preservation mode.

During the relocation and construction of the Nasulo Power Plant, the Company incurred generalborrowings used to fund the project. In 2014, the borrowing costs capitalized in connection withthe project amounted to P=14.4 million using capitalization rate of 6.3% per annum.

The Company performed testing run from April 2014 to July 20, 2014. The total revenuegenerated from testing amounted to P=343.5 million. Out of this amount P=99.8 million was offsetagainst the costs of testing whether the assets are functioning properly.

The total costs capitalized for the construction of the Nasulo Power Plant amounted toP=4,107.7 million, including assets came from NNGP. From July 21, 2014 to December 31, 2014,the related depreciation expense recognized for the Nasulo Power Plant amounted to P=65.9 million.

Transfer of certain NNGP assets to Palinpinon Power PlantIn February 2012, EDC transferred certain vacuum pumps previously used and located in NNGPto Palinpinon Power Plant located in Southern Negros and owned by GCGI. Since thesetransferred assets (which had been previously impaired in NNGP) can now be utilized and wereincluded in the cash-generating unit of the Palinpinon Power Plant, the Company recognized acorresponding reversal of impairment loss amounting to P=63.6 million, representing the net bookvalue of the assets transferred had no impairment loss been previously recognized. The reversal ofimpairment was recognized under NIGBU operating segment.

Completion of the Rehabilitation of Bac-Man Geothermal Power Plants (BMGPP)On May 5, 2010, BGI acquired the 150 MW BMGPP in an auction conducted by PSALM whereBGI submitted the highest offer price of US$28.3 million.

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Located in Bacon, Sorsogon City and Manito, Albay in the Bicol region, the BMGPP packageconsists of two steam field complexes. Bac-Man I power plant has two 55-MW generating units(Unit 1 and Unit 2) while Bac-Man II power plant has one 20-MW generating units (Unit 3). EDCsupplies the steam that fuels these power plants.

Problems with the equipment at both Bac-Man I and Bac-Man II power plants required theCompany to conduct a series of rehabilitation works since the acquisition of the power plants in2010. Units 1, 2 and 3 became available for use on January 28, 2014, June 3, 2014 andOctober 1, 2013, respectively.

In 2014 and 2013, the Company capitalized borrowing costs amounting to P=9.5 million andP=144.0 million from general borrowings using a capitalization rate of 6.50% and 6.43%,respectively.

Since 2011, testing procedures had been performed in preparation for planned commercialoperations of the power plants. In 2013, 2014 and 2013, revenue from electricity generated duringthe testing period amounting to P=1,401.5 million was offset against the cost of property, plant andequipment. No borrowing costs were incurred in 2014.

Total revenue generated by Units 1, 2 and 3 in 2014during their commercial operations (i.e., beingavailable for use as intended by management) amounted to P=3,036.5 million while revenuegenerated by Unit 3 in 2013 during its commercial operations amounted to P=189.9 million.Revenues earned during commercial operations were presented as part of the “Revenue from saleof electricity” account in the 2013 consolidated statements of income.

On October 2014, turbine retrofitting were completed, increasing the capacity of Unit 2 to 60 MW.As of date, Unit 1 is undergoing turbine retrofitting to increase capacity to 60 MW, its estimatedcompletion is on February 2015.

Impact of TyphoonsIn November 2013, certain assets of the Company located in Leyte sustained damage due toTyphoon Yolanda. As a result, in 2013, the Company recognized loss amounting toP=625.0 million which comprised of the carrying amount of the damaged property, plant andequipment at P=519.5 million and the value of damaged inventories atP=105.5 million.

In 2014 and 2013, total rehabilitation costs capitalized as part of property, plant and equipmentamounted to P=815.1 million and P=303.9 million, respectively while the costs of repairs and minorconstruction activities charged to expense amounted to P=94.7 million and P=2.7 million in 2014 and2013, respectively.

The Company received insurance proceeds relating to property damaged caused by TyphoonYolanda amounting to P=386.2 million and P=77.3 million for the years ended December 31, 2014and 2013, respectively. Proceeds from insurance received in 2014 were presented under the“Other income (charges)” account in the consolidated statement of income whereas in 2013,proceeds from insurance were offset against the “Costs of sale of electricity” account also in theconsolidated statement of income (see Note 21).

In July 2014, Typhoon Glenda caused damaged to certain assets of the Company located in Albay,Sorsogon and Leyte. Insurance proceeds received by the Company for compensation on propertydamaged amounting to P=52.1 million was offset against the “Costs of sale of electricity” account(Note 21).

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In December 2011, certain assets of the Company located in Southern Negros were damaged dueto Typhoon Sendong. The Company received insurance proceeds amounting to P=153.0 million in2014 which were presented as part of the “Other income (charges)” account in the consolidatedstatement of income.

Estimated Rehabilitation and Restoration CostsFCRS and production wells include the estimated rehabilitation and restoration costs of theCompany’s steam fields and power plants’ contract areas at the end of the contract period. Thesewere based on technical estimates of probable costs, which may be incurred by the Company inthe rehabilitation and restoration of the said steam fields’ and power plants’ contract areas from2031 up to 2044, using a risk-free discount rate and adjusted the cash flows to settle the provision.

Similarly, EBWPC has recorded an estimated provision for asset retirement obligation relating tothe removal and disposal of all wind farm materials, equipment and facilities from the contractareas at the end of contract period. The amount of provision was recorded as part of the costs ofpower plants.

Details of the cost and related accumulated amortization of estimated rehabilitation and restorationcosts follow:

2014 2013CostBalances at January 1 P=527,620,983 P=399,029,959Additions 54,531,215 128,591,024Balances at December 31 582,152,198 527,620,983Accumulated AmortizationBalances at January 1 P=81,133,657 P=52,745,788Amortization 31,484,765 28,387,869Balances at December 31 112,618,422 81,133,657Net Book Value P=469,533,776 P=446,487,326

The corresponding provision for rehabilitation and restoration costs amounting to P=748.5 millionas of December 31, 2014 and P=654.4 million as of December 31, 2013 were recorded under“Provisions and other long-term liabilities” account in the consolidated statement of financialposition (see Note 18). Accretion expense amounted to P=33.1 million, P=24.0 million andP=27.6 million for the years ended December 31, 2014, 2013 and 2012, respectively (see Notes 18and 24).

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Depreciation and AmortizationDetails of depreciation and amortization charges recognized in the consolidated statements ofincome are shown below:

2014 2013 2012Property, plant and equipment P=4,018,702,569 P=3,608,447,153 P=3,569,215,577Intangible assets (Note 13) 114,113,239 122,908,336 96,191,157Capitalized Depreciation (53,516,511) (162,008,137) (86,779,563)

P=4,079,299,297 P=3,569,347,352 P=3,578,627,171Costs of sales of electricity and steam

(Note 21) P=3,664,022,741 P=3,201,232,020 P=3,195,213,914General and administrative expenses

(Note 22) 415,276,556 368,115,332 364,315,008Discontinued drilling operations

(Note 5) – – 19,098,249P=4,079,299,297 P=3,569,347,352 P=3,578,627,171

ReclassificationsThe reclassifications in the accumulated depreciation of property, plant and equipment include thecapitalized depreciation charges amounting to P=53.5 million in 2014 and P=162.0 million in 2013under construction in progress which primarily relates to ongoing drilling of production wells.Also reclassifications in the cost of property, plant and equipment in 2014 and 2013 were due toresults of reassessment made by the Company on the nature of the assets.

13. Goodwill and Intangible Assets

2014

Goodwill Water RightsOther Intangible

Assets TotalCostBalances at January 1 P=2,535,051,530 P=2,404,778,918 P=171,776,021 P=5,111,606,469Additions 116,395,860 – 54,166,087 170,561,947Reclassifications (Note 12) – – 86,577,781 86,577,781Balances at December 31 2,651,447,390 2,404,778,918 312,519,889 5,368,746,197Accumulated AmortizationBalances at January 1 – 685,361,992 26,717,178 712,079,170Amortization

(Notes 21and 22) – 96,191,157 17,922,082 114,113,239Balances at December 31 – 781,553,149 44,639,260 826,192,409Net Book Value P=2,651,447,390 P=1,623,225,769 P=267,880,629 P=4,542,553,788

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2013

Goodwill Water RightsOther Intangible

Assets TotalCostBalances at January 1 P=2,535,051,530 P=2,404,778,918 P=467,744,367 P=5,407,574,815Reclassifications (Note 12) – – (467,744,367) (467,744,367)Additions – – 171,776,021 171,776,021Balances at December 31 2,535,051,530 2,404,778,918 171,776,021 5,111,606,469Accumulated AmortizationBalances at January 1 – 589,170,835 – 589,170,835Amortization

(Notes 21and 22) – 96,191,157 26,717,178 122,908,335Balances at December 31 – 685,361,992 26,717,178 712,079,170Net Book Value P=2,535,051,530 P=1,719,416,926 P=145,058,843 P=4,399,527,299

Goodwill

EDC HKLAs discussed in Note 3, EDC Hong Kong Limited (EDC HKL), a wholly owned subsidiary ofEDC purchased 100% interest in Hot Rock companies, namely: Hot Rock Chile Ltd (BVI), HotRock Peru Ltd (BVI), Hot Rock Chile S.A., Hemisferio Sur SpA and Hot Rock Peru S.A. Also,upon acquisition, Quellaapacheta Peru S.A.C. became a wholly-owned subsidiary of the Companywhich was previously 30%-owned by Hot Rock Peru S.A. and 70%-owned by the Company. Thetotal consideration amounting to US$3.0 million (P=133.2 million) was paid in cash.

The Company started its expansion in South America in 2010 where it applied and submitted bidsfor several concession projects in Chile and Peru. The acquired Hot Rock companies are at theinitial phase of geothermal power business and have been granted with government concessionlicense for exploration of geothermal energy in Chile and Peru. Management has determined thatthe resulting goodwill of the acquisition amounting to P=116.4 million would complement theCompany’s projects in South America.

The fair values of the identifiable assets acquired follow:

Fair valuesCash P=333,225Non-trade receivable 20,253Input VAT 6,742,945Exploration assets 9,692,717Total assets 16,789,140Percentage of ownership acquired 100%Share in assets acquired 16,789,140Goodwill arising from acquisition 116,395,860Total acquisition cost P=133,185,000

For the period from January 3, 2014 to December 31, 2014, Hot Companies incurred net loss ofP=24.8 million. The impact on revenue and net income of the Company had the acquisitionhappened at beginning of 2014 would have not been significant.

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Subsequent to acquisition of Hot Rock companies, the Company has changed the names of theseentities as follows:

Previous Name New NameHot Rock Chile Ltd BVI EDC Soluciones Sostenibles LtdHot Rock Peru Ltd BVI EDC Desarollo Sostenible LtdHot Rock Chile EDC Energia Verde Chile SpAHemisferio Sur SpA EDC Energia de la Tierra SpAHot Rock Peru EDC Energia Verde Peru SAC

GCGIOn September 2, 2009, GCGI acquired the 192.5 MW Palinpinon (in Negros Oriental) and112.5 MW Tongonan 1 (in Leyte) geothermal power plants in an auction conducted by PSALMwhere GCGI submitted the highest complying financial bid of US$220.0 million. This financialbid was subsequently reduced by US$6.7 million as PSALM agreed that the Company willdirectly assume the obligations to procure the equipment/services indicated in the PurchaseRequisitions being processed by NPC under Schedule R-Purchase Orders in the Asset PurchaseAgreement (APA). The total acquisition cost incurred by the Company amounted toP=10.7 billion resulting to goodwill of P=2,241.7 million.

FG HydroOn September 8, 2006, FG Hydro participated and won the bid for the 112 MW PAHEP/MAHEPfacility conducted by PSALM in connection with the privatization of NPC assets. FG Hydro paida total consideration of US$129.0 million (P=6.5 billion) and recognized goodwill amounting toP=293.3 million.

Details of the impairment review for goodwill are shown in Note 3.

Water rights Water rights pertain to FG Hydro’s right to use water from the Pantabangan reservoir to generate

electricity. NPC through a certification issued to FG Hydro dated July 27, 2006, gave its consentto the transfer to FG Hydro, as the winning bidder of the PAHEP/MAHEP, of thewater permit forPantabangan river issued by the National Water Resources Council on March 15, 1997.

Water rights are amortized using the straight-line method over 25 years, which is the term of theAgreement with National Irrigation Administration (NIA). The remaining amortization period ofwater rights is 16.9 years as of December 31, 2014 .

Other intangible assetsOther intangible assets pertain to the Parent Company’s wind energy project development costsand computer software and licenses.

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14. Exploration and Evaluation Assets

2014 2013CostBalances at January 1 P=2,955,596,353 P=1,604,105,412Additions 420,726,917 1,351,490,941Write-off (574,820,864) –Balances at December 31 2,801,502,406 2,955,596,353Accumulated ImpairmentBalances at January 1 574,820,864 –Write-off (Note 3) (574,820,864) –Provision for impairment (Note 3) – 574,820,864Balances at December 31 – 574,820,864Net Book Value P=2,801,502,406 P=2,380,775,489

Details of exploration and evaluation assets per project are as follows:

2014 2013Rangas/Kayabon P=1,585,001,266 P=1,293,546,768Mindanao III 1,014,256,667 980,434,215Dauin/Bacong 71,633,928 60,360,367Others 130,610,545 46,434,139

P=2,801,502,406 P=2,380,775,489

15. Other Noncurrent Assets

2014 2013Input VAT P=4,556,990,530 P=4,177,522,698Tax credit certificates 2,426,395,074 1,560,618,288Prepaid expenses 374,215,948 155,364,932Long-term receivables (Note 31) 113,822,523 88,962,765Special deposits and funds 109,398,960 177,990,509Others 90,709,011 168,287,470

7,671,532,046 6,328,746,662Less allowance for doubtful accounts 406,532,824 473,125,916

P=7,264,999,222 P=5,855,620,746

Input VATInput VAT includes the outstanding input VAT claims of P=1,782.4 million and P=1,514.2 millionas of December 31, 2014 and 2013. Input VAT claims for 2012 (P=843.7million), 2011(P=460.6 million), 2010 (P=257.4 million), 2008 (P=131.6 million), and 2007 (P=89.1 million) are stillpending with the Bureau of Internal Revenue (BIR)/Court of Tax Appeals as ofDecember 31, 2014.

On April 17, 2013, the 2006 VAT claim was resolved by a Resolution issued by CTA denying themotion for reconsideration on the input VAT claim amounting to P=276.0 million and the CTApartly granted the Parent Company TCC amounting to P=17.0 million. The TCC is still pendingfrom the BIR as of December 31, 2014.

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Tax credit certificates (TCCs)In April and June 2010, P=1,638.9 million TCCs were issued by the BIR to the Parent Companywith respect to its input VAT claims on Build-Operate-Transfer (BOT) fees from 1998 and 1999amounting to P=1,894.7 million. Such TCCs shall be utilized over a period of five years starting in2011 to 2015 with a cap of P=300.0 million per year, except in 2015 where the remaining balancemay be fully applied. The remaining balance of input VAT claims of P=255.8 million, which wasdisallowed by the BIR, was written off in 2010.

On August 17, 2012, BIR issued TCC to the Parent Company amounting to P=26.5 million for theinput VAT claims covering the period from January 1 to March 31, 2010. In 2013, BIR issuedTCC to the Parent Company amounting to P=212.0 million, P=152.3 million and P=96.4 millionrepresenting input VAT claims for 2009, 2010 and first quarter of 2011, respectively. GCGIlikewise received TCC in 2013 amounting to P=27.6 million pertaining to its 2010 input VAT claim.In 2014, BIR also issued TCC to the Parent Company amounting to P=381.7 million andP= 183.0 million, representing input VAT claims covering the period April 1 to December 31, 2011and January 1 to June 30, 2012, respectively. GCGI similarly received in 2014 TCC amounting toP=31.0 million for the input VAT claims covering year 2011 and January 1 to June 30, 2012.

In 2014 and 2013, the Parent Company utilized its TCCs amounting to P=32.2 million andP=64.6 million, respectively, for payment of DST and various taxes. GCGI, on the other hand,utilized its TCCs amounting P=14.5 million and P=27.6 million for income tax payments for theyears ended 2014 and 2013, respectively.

The Parent Company classified a portion of its TCCs as current assets amounting to P=44.7million;and for GCGI amounting to P=16.5 million. These are expected to be utilized for payment ofvarious taxes within twelve months.

TCCs that remain unutilized after five years from the date of original issuance are still validprovided that these are duly revalidated by the BIR within the period allowed by law.

Prepaid Expenses

In connection with the installation of Burgos Wind Project’s wind turbines and relatedtransmission towers, the Company entered into uniform land lease agreements and contracts ofeasement of right of way, respectively, with various private landowners. The term of the land leaseagreement starts from the execution date of the contract and ends after 25 years from thecommercial operations of the Burgos Wind Project. The total prepaid lease amounts toP=143.9 million.

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Allowance for doubtful accountsThe rollforward analysis of the allowance for doubtful accounts pertaining to input VAT andlong-term receivables is presented below.

2014Input VAT NPC Others Total

Beginning of year P=398,170,451 P=1,490,483 P=73,464,982 P=473,125,916Provision for doubtful

accounts (Note 22) 53,418,474 – 6,209,415 59,627,889Reversal (Note 22) (27,042,537) – – (27,042,537)Write-off (99,178,444) – – (99,178,444)End of year P=325,367,944 P=1,490,483 P=79,674,397 P=406,532,824

Specific impairment P=186,334,169 P=1,490,483 P=79,674,397 P=267,499,049Collective impairment 139,033,775 – – 139,033,775Total P=325,367,944 P=1,490,483 P=79,674,397 P=406,532,824

2013Input VAT NPC Others Total

Beginning of year P=557,766,016 P=1,490,483 P=65,734,242 P=624,990,741Provision for doubtful

accounts (Note 22) 114,904,322 – 8,259,094 123,163,416Reversal (Note 22) (78,729,479) – – (78,729,479)Write-off (195,770,408) – (528,354) (196,298,762)End of year P=398,170,451 P=1,490,483 P=73,464,982 P=473,125,916

Specific impairment P=186,334,168 P=1,490,483 P=72,397,373 P=260,222,024Collective impairment 211,836,283 – 1,067,609 212,903,892Total P=398,170,451 P=1,490,483 P=73,464,982 P=473,125,916

16. Trade and Other Payables

2014 2013Accounts payable:

Third parties P=4,652,153,805 P=5,061,002,130Related parties (Note 20) 1,059,251,739 235,996,358

Accrued interest on long-term debts (Note 17) 800,318,523 792,685,801Withholding and other taxes payable 532,795,426 387,352,605Royalty fee payable 58,286,539 39,671,237Deferred credits 37,587,664 35,720,220SSS and other contributions payable 4,525,306 4,064,414Other payables (Note 3) 494,408,436 425,483,128

P=7,639,327,438 P=6,981,975,893

Accounts payable are non-interest-bearing and are normally settled on a 30 to 60 days paymentterm.

“Royalty fee payable” pertains to outstanding payable to the Government for its share on certainearnings of the Company generated from renewable energy. Under the Renewable Energy (RE)Law, the Parent Company shall pay royalty fee equivalent to 1.5% of its gross income. Suchfiscal incentive was applied by the Parent Company beginning February 1, 2009 (see Note 33).

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On May 8, 2012, upon execution of their respective Geothermal Operating Contracts with theDOE, GCGI and BGI also became subject to royalty fee of 1.5% of their gross income(see Note 33).

In 2014, upon receipt of COE for fit eligibility EBWPC became subject to royalty fee of 1% of itsgross income.

Royalty fees are allocated between the DOE and LGUs where the geothermal resources arelocated and payable within 60 days after the end of each quarter. Royalty fee expense amountedto P=269.1 million, P=230.8 million and P=169.8 million for the years ended December 31, 2014,2013 and 2012, respectively (see Note 21).

“Other payables” account includes mainly provision for shortfall generation and portion ofliabilities on regulatory assessments and other contingencies (see Note 3).

As of December 31, 2014 and 2013, the Company has P=19.0 billion and P=15.3 billion, respectively,of unused credit facilities from various local banks, which may be availed of for future operatingactivities.

17. Long-term Debts

The details of the Company’s long-term debts are as follows:

Creditor/Project Maturities Interest Rate 2014 2013US$300.0 Million Notes January 20, 2021 6.5% P=13,306,210,227 P=13,194,176,160Peso Public Bonds§ Series 1 - P=8.5 billion June 4, 2015 8.6418% 8,488,355,479 8,462,056,012§ Series 2 - P=3.5 billion December 4, 2016 9.3327% 3,482,744,901 3,474,793,440International Finance Corporation

(IFC) [Note 20]§ IFC 1 - P=4.1 billion

2012-2033

7.4% per annum for thefirst five years

subject torepricing for another

five to 10 years 2,870,394,380 3,203,178,672§ IFC 2 - P=3.3 billion 2013-2025 6.6570% 2,716,078,159 2,959,680,920Fixed Rate Note Facility (FXCN)§ P=4.0 billion 2012-2022 6.6108% 3,857,085,232 3,891,039,339§ P=3.0 billion 2012-2022 6.6173% 2,891,564,383 2,917,900,934Refinanced Syndicated Term Loan§ US$175.0 million June 27, 2017

LIBOR plus a marginof 175 basis points 5,433,656,909 6,146,814,636

Restructured Philippine National Bank(PNB) and Allied Bank Peso Loan

November 7, 2022

1.5% + PDST-F rateor 1.0% + BSPovernight rate 3,570,000,000 3,910,000,000

2013 Peso Fixed-Rate Bonds§ P=4.0 billion May 3, 2023 4.7312% 3,924,428,609 3,950,634,878§ P=3.0 billion May 3, 2020 4.1583% 2,969,167,021 2,964,131,356

US$80 Million Term Loan June 21, 20181.8% margin plus

LIBOR 3,370,629,611 3,474,353,988Commercial Debt Facility US$35.5M October 23, 2029 2% margin plus

LIBOR 1,539,787,705 –ECA Debt Facility US$139M October 23, 2029 2.35% margin plus

LIBOR 5,953,597,209 –Commercial Debt Facility P=5.17B October 23, 2029 2% + PDST-F rate 5,088,541,849 –Total 69,462,241,674 58,548,760,335Less current portion 10,499,672,112 1,872,075,873Noncurrent portion P=58,962,569,562 P=56,676,684,462

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The Company’s foreign-currency denominated long-term loans were translated into Philippinepeso based on the prevailing foreign exchange rates as at financial reporting date(US$1= P=44.72 on December 31, 2014) (US$1= P=44.395 on December 31, 2013).

The long-term debts are presented net of unamortized transaction costs. A rollforward analysis ofunamortized transactions costs follows:

2014 2013Balance at beginning of year P=598,077,165 P=530,620,320Additions 442,752,282 169,321,469Amortization (Notes 24 and 31) (172,950,121) (101,864,624)Balance at end of year P=867,879,326 P=598,077,165

Parent Company LoansThe Parent Company entered into unsecured long-term loan arrangements with domestic andinternational financial institutions for its various development projects and working capitalrequirements.

Bridge LoansOn June 16, 2014, the Parent Company signed two-year loan facilities with an aggregate principalamount of P=2.7 billion with Philippine National Bank (PNB) and Security Bank Corporation(SBC). Of the total amount, P=1.3 billion will be provided by PNB while P=1.4 billion will beprovided by SBC.

On June 27, 2014, the Parent Company has secured another bridge financing facility from ANZand Mizuho Bank, Ltd. amounting to US$90 million (P=3.91 billion).

In 2014, part of the proceeds from the $315.0 million financing agreement for the construction ofthe 150-MW Burgos Wind Project (BWP) in Ilocos Norte was used to prepay the two bridge loanfacility.

US$80 Million Term LoanOn March 21, 2013, the Parent Company entered into a credit agreement with certain banks toavail of a term loan facility of up to US$80 million with availability period of 12 months from thedate of the agreement.

On December 6, 2013, the Parent Company availed of the full amount of the term loan withmaturity date of June 21, 2018. The proceeds are intended to be used by the Company forbusiness expansion, capital expenditures, debt servicing and for general corporate purposes. Theterm loan carries an interest rate of 1.8% margin plus LIBOR. Debt issuance costs related to theterm loan amounted to US$1.9 million (P=78.2 million), including front-end fees and commitmentfee.

The repayment of the term loan shall be made based on the following schedule: 4% and 5% of theprincipal amount on the 15th and 39th month from the date of the credit agreement, respectively;and 91% of the principal amount on maturity date.

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2013 Peso Fixed-Rate BondsOn May 3, 2013, EDC issued fixed-rate peso bonds with an aggregate principal amount ofP=7.0 billion. The bonds, which have been listed on the Philippine Dealing & Exchange Corp.(PDEx), are comprised of P=3.0 billion seven-year bonds at 4.1583% and P=4.0 billion 10-yearbonds at 4.7312% due on May 3, 2020 and May 3, 2023, respectively. Interest is payable semi-annually starting November 3, 2013. Transaction costs incurred in connection with the issuanceof the seven-year bonds and 10-year bonds amounted to P=39.1 million and P=52.1 million,respectively.

The net proceeds are used by the Company to partially fund the 87 MW Burgos wind projectlocated in the municipality of Burgos, Ilocos Norte with estimated project cost of US$300.0million. Any difference between the total construction costs and the net proceeds of the bondswill be sourced from internally generated cash, existing credit lines, and other potentialborrowings.

Pending disbursement for the construction of Burgos Wind Project, the Company invests the netproceeds in short-term liquid investments including, but not limited to, short-term governmentsecurities, bank deposits and money market placements which are expected to earn prevailingmarket rates.

The Parent Company undertakes that it will not use the net proceeds from the bonds for any otherpurpose, other than as discussed above. In the event of any deviation or adjustment in the planneduse of proceeds, EDC shall inform the bondholders and the SEC within 30 days prior to itsimplementation.

The Company capitalized in its consolidated financial statements the actual borrowing costsincurred on the bonds amounting to P=263.0 million and P=140.8 million for the periods endingDecember 31, 2014 and 2013, respectively.

US$ 300.0 Million NotesOn January 20, 2011, the Parent Company issued a 10-year US$300.0 million notes(P=13,350.0 million) at 6.50% interest per annum which will mature in January 2021. The notesare intended to be used by the Company to support the business expansion plans, finance capitalexpenditures, service debt obligations and for general corporate purposes. Such notes were listedand quoted on the Singapore Exchange Securities Trading Limited (SGX-ST).

Peso Public BondsOn December 4, 2009, the Company received P=12.0 billion proceeds from the issuance of fixedrate Peso public bonds - split into two tranches - P=8.5 billion, due after five years and six monthsand P=3.5 billion, due after seven years, paying a coupon of 8.6418% and 9.3327%, respectively.The peso public bonds are also listed on PDEx.

Effective November 14, 2013, certain covenants of the peso public bonds have been aligned withthe 2013 Peso Fixed-Rate Bonds through consent solicitation exercise held by the ParentCompany. Upon securing the required consents, a Supplemental Indenture embodying the parties’agreement on the proposed amendments was signed on November 7, 2013 between EDC andRizal Commercial Banking Corporation - Trust and Investments Group in its capacity as trusteefor the bondholders.

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IFCThe Parent Company entered into a loan agreement with IFC, a shareholder of the ParentCompany, on November 27, 2008 for US$100.0 million or its Peso equivalent of P=4.1 billion.On January 7, 2009, the Parent Company opted to draw the loan in Peso and received the proceedsamounting to P=4,048.8 million, net of P=51.5 million front-end fee. The loan is payable in 24 equalsemi-annual installments after a three-year grace period at an interest rate of 7.4% per annum forthe first five years subject to repricing for another five to 10 years. Under the loan agreement, theParent Company is restricted from creating liens and is subject to certain financial covenants.

On May 20, 2011, the Parent Company signed a 15-year US$75.0 million loan facility with theIFC to fund its medium-term capital expenditures program. The loan was drawn in Peso onSeptember 30, 2011, amounting to P=3,262.5 million. The loan is payable in 24 equal semi-annualinstallments after a three-year grace period at an interest rate of 6.657% per annum. The loanincludes prepayment option which allows the Company to prepay all or part of the loan anytimestarting from the date of the loan agreement until maturity. The prepayment amount is equivalentto the sum of the principal amount of the loan to be prepaid, redeployment cost and prepaymentpremium.

Issuance of FXCN and Prepayment of FRCNOn July 3, 2009, EDC received P=7,500.0 million proceeds from the issuance of FRCN split intotwo tranches, Series one and Series two. Series one amounting to P=2,644.0 million will matureafter 5 years and Series two amounting to P=4,856.0 million will mature after 7 years with a couponrate of 8.3729% and 9.4042%, respectively. On September 3, 2009, EDC received P=1,500.0million proceeds from the additional issuance of FRCN, a 5-year series paying a coupon of8.4321% (Series three).

On April 4, 2012, EDC signed a 10-year FXCN facility agreement amounting to P=7,000.0 millionwhich is divided into two tranches. The proceeds from the first tranche amounting to P=3,000.0million were used by the Company to prepay in full its FRCN Series One and Series Three forP=1,774.3 million and P=1,007.1 million, respectively. Subsequently, on May 3, 2012, the FRCNSeries Two was also prepaid in full for P=4,211.1 million using the proceeds from the secondtranche of FXCN amounting to P=4,000.0 million. The FXCN tranches 1 and 2 bears a coupon rateof 6.6173% and 6.6108% per annum, respectively. FRCN Series One and Series Three wereoriginally scheduled to mature in July 2014 while FRCN Series Two was originally scheduled tomature in July 2016.

EDC recognized loss amounting to P=114.7 million arising from early extinguishment of FRCN in2012 (see Note 26).

Debt issuance costs amounting to P=100.2 million was capitalized as part of the new FXCN.

Refinanced Syndicated Term LoanOn June 17, 2011, the Parent Company had entered into a credit agreement for theUS$175.0 million (P=7,630.0 million) transferable syndicated term loan facility with ANZ, TheBank of Tokyo-Mitsubishi UFJ, Ltd., Chinatrust (Philippines) Commercial Banking Corporation,ING Bank N.V., Manila Branch, Maybank Group, Mizuho Corporate Bank, Ltd. and StandardChartered Bank as Mandated Lead Arrangers and Bookrunners. The purpose of the new loan is torefinance the old US$175.0 million syndicated term loan availed on June 30, 2010 with scheduledmaturity of June 30, 2013. The new loan carries an interest of LIBOR plus a margin of 175 basispoints and has installment repayment scheme to commence on June 27, 2013 until June 27, 2017.

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EBWPC Loan

On October 17, 2014, EDC has secured $315.0 million loan for Burgos Wind Project (CommercialDebt Facility P=5.17B, ECA Debt Facility US$139M, Commercial Debt Facility US$35.5M). Thisis a financing facility for the construction of the 150-MW Burgos Wind Project (BWP) in IlocosNorte. The facility which consists of US dollar and Philippine peso tranches will mature in 15years. Portion of the proceeds received from the financing facility was used to settle theoutstanding bridge loans in October 2014. Total borrowing costs recognized on this amounts toP=83.7 million.

Under the agreement of the EBWPC’s Project Financing, EBWPC’s debt service is guaranteed bythe EDC.

In the last quarter of 2014, EBWPC entered into four (4) interest rate swaps (IRS) with aggregatenotional amount of US$150 million. This is to partially hedge the interest rate risks on its ECAand Commercial Debt Facility (Hedged Loan) that is benchmarked against US LIBOR and withflexible interest reset feature that allows EBWPC to select what interest reset frequency to apply(i.e., monthly, quarterly or semi-annually). As it is EBWPC's intention to reprice the interest rateon the Hedged Loan semi-annually, EBWPC utilizes IRS with semi-annual interest payments andreceipts.

FG Hydro LoanOn May 7, 2010, FG Hydro signed a 10-year P=5,000.0 million loan agreement with PNB andAllied Bank, maturing on May 7, 2020. The loan is secured by a real estate and chattel mortgageson all present and future mortgageable assets of FG Hydro. The loan carries an interest rate of9.025% subject to repricing after five years. Loan repayment is semi-annual based on increasingpercentages yearly with the first payment made on November 8, 2010. The loan proceeds wereused to finance the full payment of the Deferred Payment Facility and the PRUP, and fund generalcorporate and working capital requirements of FG Hydro.

On November 7, 2012, FG Hydro’s outstanding loan amounting to P=4,300.0 million wasrestructured by way of an amendment to the loan agreement. The amended agreement providedfor a change in the determination of the applicable interest rates and extended the maturity date ofthe loan by two years with the last repayment to be made on November 7, 2022. FG Hydro hasthe option to select its new applicable interest rate between a fixed or a floating interest rate. FGHydro opted to avail of the loan at the floating rate which is the higher of the 6-month PDST-Frate plus a margin of 1.50% per annum or the BSP overnight rate plus a margin of 1% per annumas determined on the interest rate setting date. For the first interest period, the applicable rate wasdetermined as the BSP overnight rate of 3.5% plus 1% margin. The principal and interest on theloan are payable on a semi-annual basis. Interest rates are determined at the beginning of everyinterest period.FG Hydro has a one-time option to convert to a fixed interest rate any time after the amendmenteffectivity date.

FG Hydro has assessed that the loan restructuring resulted to substantial modification of the termsof the original loan, hence, the original loan was considered extinguished. Amortization of theremaining transaction cost of the old loan amounting to P=52.2 million was accelerated and thetransaction cost incurred for the restructured loan amounting to P=21.3 million was recognized aspart of the loss on extinguishment of debt (see Note 26).

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With the merger of PNB and Allied Bank in February 2013, the Company’s loan balance wasconsolidated under PNB. The new loan was recognized at fair value which is equivalent to its facevalue.

Other Long-term DebtsOn January 31, 2012, the Parent Company fully settled its matured JP¥1.5 billion OECF 8th Yenloan amounting to P=20.3 million.

Loan CovenantsThe loan covenants covering the Parent Company’s and FG Hydro’s outstanding debts include,among others, maintenance of certain level of current, debt-to-equity and debt-service ratios. Asof December 31, 2014 and 2013, the Parent Company and FG Hydro are in compliance with theloan covenants of all their respective outstanding debts.

18. Provisions and Other Long-term Liabilities

2014 2013Provision for rehabilitation and restoration

costs (Notes 3 and 12) P=748,459,461 P=654,451,377Accrued sick leave and vacation leave 411,834,604 387,903,681Others (Note 3) 540,803,716 471,321,221

P=1,701,097,781 P=1,513,676,279

Provision for rehabilitation and restoration costsProvision for rehabilitation and restoration costs pertains to the present value of estimated costs oflegal and constructive obligations required to restore all the existing sites upon termination of thecooperation period. The nature of these restoration activities includes dismantling and removingstructures, rehabilitating wells, dismantling operating facilities, closure of plant and waste sites,and restoration, reclamation and revegetation of affected areas. The obligation generally ariseswhen the asset is constructed or the ground or environment at the site is disturbed. When theliability is initially recognized, the present value of the estimated costs is capitalized as part of thecarrying amount of the related FCRS and production wells and power plants (see Note 12). In2014, EBWPC also recognized provision for restoration activities which was capitalized as part ofpower plants (see Note 12).

The rollforward analysis of the provision for rehabilitation and restoration costs is presentedbelow:

2014 2013Provision for rehabilitation and restoration costs

at beginning of year P=654,451,377 P=493,524,946Unwinding of discount (Note 24) 33,090,313 24,048,418

687,541,690 517,573,364Effect of revision of estimate 60,917,771 136,878,013Provision for rehabilitation and restoration costs

at end of year P=748,459,461 P=654,451,377

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Accrued sick leave and accrued vacation leaveSick and annual vacation leave with pay are given to active employees subject to certainrequirements set by the Company. These leaves are convertible into cash upon separation of theemployees. At the end of the year, any remaining unused sick and vacation leave are accrued upto maximum allowed number of leave credits which is based on the employees’ length of servicewith the Company. Vacation and sick leave credits exceeding the maximum allowed for accrualare forfeited.

19. Equity

Capital StockAs required under the Philippine Constitution, the Parent Company is subject to the nationalityrequirement that at least 60% of its capital stock must be owned by Filipino citizens since it isengaged in the exploration and exploitation of the country’s energy resources. The ParentCompany is compliant with the said nationality requirement.

Beginning December 13, 2006, the 6.0 billion common shares of EDC were listed and traded onthe PSE at an initial public offering price of P=3.2 per share.

On May 19, 2009, the BOD approved an increase in EDC’s authorized capital stock fromP=15.1 billion comprising of 15.0 billion common shares with a par value of P=1,00 per share oraggregate par value of P=15.0 billion, and 7.5 billion preferred shares with a par value of P=0.01 pershare or aggregate par value of P=75.0 million to P=30.1 billion divided into 30.0 billion commonshares with a par value of P=1.00 per share or aggregate par value of P=30.0 billion, and 15.0 billionpreferred shares with a par value of P=0.01 per share or aggregate par value of P=150.0 million. Theincrease in authorized capital stock of the common shares was effected by way of a 25% stockdividend, to be taken from EDC’s unrestricted retained earnings as of December 31, 2008.

As of December 31, 2014 and 2013, the common shares are majority held by Filipino citizens,with Red Vulcan holding 7.5 billion shares or an equivalent of 40% interest.

The ownership of the Parent Company’s preferred shares is limited to Filipino citizens. Thepreferred shares have voting rights and subject to 8% cumulative interest (Note 29). Red Vulcanholds the entire 9.4 billion outstanding preferred shares equivalent to 20% voting interest in EDC.The combined interest of Red Vulcan entitles it to 60% voting interest and 40% economic interestin EDC.

On February 28, 2014, the BOD approved the reclassification of EDC's 3.0 billion common shareswith a par value of P=1.00 per share or aggregate par value of P=3.0 billion out of the unissuedauthorized common stock to 300.0 million non-voting preferred shares with a par value of P=10.00per share or aggregate par value of P=3.0 billion thereby creating a new class of preferred shares.Among others, the new class of non-voting preferred shares has the following features:i. Non-voting except in the cases provided by law;ii. Entitled to receive out of the unrestricted retained earnings of EDC, when and as declared by

the BOD, cumulative dividends at the rate to be determined by the BOD at the time ofissuance, before any dividends shall be set apart and paid to holders of the common shares,and shall not be entitled to participate with holders of the common shares in any furtherdividends payable;

iii. Assignable;

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iv. The Parent Company may redeem the non-voting preferred shares at its option in accordancewith their terms, and once redeemed, shall revert to treasury and may be reissued or resold bythe Parent Company;

v. In the event of any dissolution or liquidation or winding up, whether voluntary or involuntary,of the Parent Company, except in connection with a merger or consolidation, shall be entitledto be paid up to their issue value plus any accrued and unpaid dividends thereon before anydistribution shall be made to holders of the common shares, and shall not be entitled to anyother distribution.

vi. Non-convertible into any shares of stock of EDC of any class now or hereafter authorized;vii. No pre-emptive right to purchase or subscribe to any shares of stock of the Parent Company of

any class now or hereafter authorized, or reissued from treasury.

On November 24, 2014, the SEC approved the above reclassification in the unissued authorizedcommon shares of the Parent Company.The number of stockholders of the Parent Company as of December 31, 2014, 2013 and 2012follows:

2014 2013 2012Voting preferred shares 1 1 1Common shares 681 691 700

Details of the number of non-voting preferred shares, voting preferred shares and common sharesas of December 31, 2014, 2013 and 2012 are as follows:

2014 2013 2012Non-voting preferred shares - P=10.00 per share par value

Authorized 300,000,000 – –Issued and outstanding – – –

Voting preferred shares - P=0.01 per share par value

Authorized 15,000,000,000 15,000,000,000 15,000,000,000Issued and outstanding 9,375,000,000 9,375,000,000 9,375,000,000

Common shares - P=1.00 per share par value

Authorized 27,000,000,000 30,000,000,000 30,000,000,000Issued and outstanding 18,750,000,000 18,750,000,000 18,750,000,000

Common Shares in Employee Trust AccountOn March 25, 2008, the BOD of the Parent Company approved a share buyback programinvolving up to P=4.0 billion worth of the Parent Company’s common shares, representingapproximately 4% of the Parent Company’s market capitalization as of the date of the approval.The buyback program was carried out within a two-year period which commenced onMarch 26, 2008 and ended on March 25, 2010. The Parent Company intends to implement anexecutive/employee stock option ownership plan through options, grants, purchases, or such otherequivalent methods. In 2008, the Parent Company acquired a total of 93,000,000 common sharesfor a total cost of P=404.2 million.

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In 2009, 93,000,000 common shares held in treasury that were acquired in 2008 at the cost ofP=404.2 million have been issued irrevocably by the Parent Company to BDO Trust for the benefitof the executive/employee grantees under the Parent Company’s Employee Stock Grant Plan(ESGP). The BDO Trust is an independent and separate legal entity. EDC has neither control nordiscretion over the administration and investment activity on the common shares inexecutive/employee benefit trust held by BDO Trust. These shares are part of the issued andoutstanding common shares and are entitled to vote and receive dividend. These shares will notrevert to EDC even if the planned stock grant plan or other such plan is terminated. Any fruits orinterests of these shares shall be for the sole and exclusive benefit of the officers and employees ofEDC who are identified grantees of such stock plans. Any capital appreciation or decline in value,dividends, or other benefits declared on these shares shall accrue to the trust account and EDCshall not have any claim thereon. The issuance of the common shares to BDO Trust wasrecognized under the “Common shares in employee trust account” account in the consolidatedstatement of financial position (see Note 30).

Equity ReserveOn October 16, 2008, EDC, First Gen and FG Hydro entered into a Share Purchase andInvestment Agreement (SPIA), whereby EDC shall own 60% of the outstanding equity of FGHydro, which was then a wholly owned subsidiary of First Gen prior to the SPIA. FG Hydro andEDC were subsidiaries of First Gen at that time and were, therefore, under common control ofFirst Gen. The acquisition was accounted for similar to a pooling-of-interests method since FirstGen controlled FG Hydro and EDC before and after the execution of the SPIA. EDC recognizedequity reserve amounting to P=3,706.4 million pertaining to the difference between the acquisitioncost and EDC’s proportionate share in the paid-in capital of FG Hydro.

Retained EarningsFollowing are the dividends paid by the Parent Company in 2014, 2013 and 2012:

Declaration date Record date Payment date Shareholders DescriptionDividendper share Total amount

2014:October 3, 2014 October 20, 2014 November 13, 2014 Common Special P=0.10 P=1,875,000,000February 28, 2014 March 17, 2014 April 10, 2014 Common Regular 0.10 1,875,000,000- do - - do - - do - Preferred Regular 0.0008 7,500,000

P=3,757,500,000


2013:September 10, 2013 September 25, 2013 October 21, 2013 Common Special P=0.08 P=1,500,000,000February 20, 2013 March 11, 2013 April 8, 2013 Preferred Regular 0.0008 7,500,000- do - - do - - do - Common Regular 0.08 1,500,000,000

P=3,007,500,000


2012:September 5, 2012 September 20, 2012 September 30, 2012 Common Special P=0.04 P=750,000,000March 13, 2012 March 28, 2012 April 24, 2012 Preferred Regular 0.0008 7,500,000- do - - do - - do - Common Regular 0.10 1,875,000,000

P=2,632,500,000

NCIThe non-controlling interests in the consolidated financial statement represent mainly theownership by First Gen of 100% of preferred shares and 40% of common shares of FG Hydro.

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On May 9, 2011, the Philippine SEC approved the amendment of the articles of incorporation ofFG Hydro reclassifying its unissued redeemable preferred shares into redeemable preferred “A”and “B” shares. Features of the preferred shares Series B include the right to earn cumulativedividends from January 1, 2009 up to December 31, 2013, as may be declared and paid from timeto time in amounts and on such dates as may be declared by FG Hydro’s BOD, subject to theavailability of FG Hydro’s retained earnings and cap at nil in 2009, US$8.0 million in 2010 andUS$14.0 million thereafter up to 2013. As a result of the issuance of FG Hydro’s preferred sharesSeries B, P=200.3 million was reallocated from retained earnings attributable to the equity holdersof the Parent Company to NCI which amount pertains to the portion of FG Hydro net incomeallocable to preferred shares Series B stockholders for the period January 1, 2010 toDecember 31, 2010.

In March and May 2012, FG Hydro declared and paid cash dividends to its preferred and non-controlling common shareholders amounting to P=494.1 million andP=848.5 million, respectively. In October 2012, FG Hydro declared and paid cash dividends to itsnon-controlling common shareholders amounting to P=520.0 million. In May 2013, FG Hydrodeclared and paid cash dividends to its preferred shares and non-controlling common shareholdersamounting to P=951.2 million.

On January 29, 2014, FG Hydro declared cash dividend to its non-controlling commonshareholder amounting to P=280.0 million paid on February 4, 2014.

On June 4, 2014, FG Hydro declared and paid cash dividend to its preferred shareholderamounting to P=378.3 million.

Following are the summarized financial information of FG Hydro:

Statements of financial position

2014 2013(In Thousand Pesos)

Current assets P=1,524,030 P=1,986,613Non-current assets 6,080,574 6,400,643Total Assets P=7,604,604 P=8,387,256

Current liabilities P=656,708 P=525,068Non-current liabilities 3,220,024 3,602,773Total Liabilities 3,876,732 4,127,841Total Equity 3,727,872 4,259,415Total Liabilities and Equity P=7,604,604 P=8,387,256

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Statements of comprehensive income

2014 2013 2012(In Thousand Pesos)

Revenue P=1,624,130 P=2,501,217 P=4,753,255Cost and operating expenses (918,884) (855,065) (932,300)Other charges (147,099) (170,476) (434,570)Income before income tax 558,147 1,475,676 3,386,385Benefit from (provision for) income

tax (18,074) (8,868) 12,207Net income 540,073 1,466,808 3,398,592Other comprehensive income – (2,302) –Total comprehensive income P=540,073 P=1,464,506 P=3,398,592

20. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control theother party or exercise significant influence over the other party in making financial and operatingdecisions. Parties are also considered to be related if they are subject to common control.

a. Following are the amounts of transactions and outstanding balances as of and for the yearsended December 31, 2014 and 2013:

Transactions for the yearsended December 31

Net amounts due from/to relatedparties as at December 31

Related Party Nature of Transaction Terms 2014 2013 2014 2013Due to related parties

First Gen Consultancy feeUnsecured and willbe settled in cash P=175,284,706 P=175,284,706 P=43,998,784 P=43,998,784

Interest-free advances - do - 28,769,152 36,490,221 5,317,281 4,219,175Lopez Holdings Corporation Donation to Lopez Museum - do - – 5,042,750 – 5,042,750First Gas Power Corporation Interest-free advances - do - 579,088 460,503 40,841 73,110FGP Corp Interest-free advances - do - 408,775 281,616 95,562 13,186First Gas Holdings Corp. Interest-free advances - do - 51,480 52,280 – –First Gen Puyo Interest-free advances - do - 173,000 – 173,000 –

P=205,266,201 P=217,612,076 P=49,625,468 P=53,347,005

Trade and otherreceivables (Note 9)

Thermaprime Sale of rigs and inventories - do - P=1,650,000,000 P=– P=– P=–First GES Sale of electricity - do - P=342,258,797 P=169,368,975 P=54,561,770 P=61,993,428

Trade and other payables(Note 16)

ThermaprimeDrilling and other related

services - do - P=1,441,980,032 P=990,000,000 P=367,606,957 P=78,485,096

First Balfour Inc.Steam augmentation and other

services - do - 2,368,911,626 542,818,315 681,603,330 152,027,391First Philec Manufacturing

Technologies Corp Purchase of services and utilities - do - 6,996,360 6,914,101 2,511,446 2,194,482Bayantel Purchase of services and utilities - do - 14,254,689 11,151,751 9,319,058 3,543,051Adtel Purchase of services and utilities - do - 1,857,576 4,159,919 (2,043,252) (2,460,292)FPRC Purchase of services and utilities - do - 2,390,863 1,553,151 – 898,609First Electro Dynamics

Corporation (FEDCOR) Purchase of services and utilities - do - – 947,421 250,600 589,421ABS-CBN Foundation Purchase of services and utilities - do - 965,000 340,000 – 715,000

ABS-CBN Publishing, Inc. Purchase of services and utilities - do - – 3,536 3,600 3,600ABS-CBN Corp. Purchase of services and utilities - do - 434,456 199,107 – –Rockwell Land Corporation Purchase of services and utilities - do - 125,104 16,800 – –

P=3,837,915,706P=

1,558,104,101 P=1,059,251,739 P=235,996,358

Miscelaneous IncomeFirst Gen Dividend - do - 3,866,206 – – –

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The purchases from and sales to related parties are made at normal commercial terms andconditions. The amounts outstanding are unsecured and will be settled in cash. The Companyhas not recognized any impairment losses on receivables from related parties as ofDecember 31, 2014 and 2013.

i. First Gen

First Gen provides financial consultancy, business development and other related servicesto the Parent Company under a consultancy agreement beginning September 1, 2008.Such agreement is for a period of three years up to August 31, 2011. Under the terms ofthe agreement, billings for consultancy services shall be P=8.7 million per month plusapplicable taxes. This was increased to P=11.8 million per month plus applicable taxeseffective September 2009 to cover the cost of additional officers and staff assigned to theParent Company.

The consultancy agreement was subsequently extended for another 16 months fromSeptember 1, 2011 to December 31, 2012. The consultancy agreement was extended foranother two years from January 1, 2013 to December 31, 2014. Total consultancyservices amounted to P=175.3 million, P=175.3 million and P=165.6 million in 2014, 2013and 2012, respectively, and were included in the “Costs of sale of electricity” under“Purchased services and utilities” account (see Note 21).

In 2013, the Company acquired 1.7 million shares at P=12.99 per share or for a totalpurchase cost of P=21.8 million (see Note 9). In 2014, another 3.9 million shares wereacquired with share price ranging from P=15.63 to P=22.10 per share or for total purchasecosts of P=76.3 million.

ii. First Balfour, Inc. (First Balfour)

Following the regular bidding process, the Company awarded to First Balfourprocurement contracts for various works such as civil, structural and mechanical/pipingworks in the Company’s geothermal and wind power plants.

As of December 31, 2014 and 2013, the outstanding balance amounted to P=681.6 millionand P=152.0 million, respectively, recorded under “Trade and other payables” account inthe consolidated financial statements (see Note 16).

First Balfour is a wholly owned subsidiary of First Holdings.

iii. Thermaprime

· Thermaprime Well Services, Inc. (Thermaprime) is a subsidiary of First Balfour, awholly owned subsidiary of First Holdings. Thermaprime provides drilling servicessuch as, but not limited to, rig operations, rig maintenance, well design andengineering.

· On January 29, 2014, EDC entered into a contract with Thermaprime for the sale ofRig 16 and its ancillary items for an amount of P=825.0 million, exclusive of applicableVAT. The gain on sale amounted to P=247.5 million.

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· On July 24, 2014, the EDC entered into an additional contract with Thermaprime forthe sale of Rig 15 and its ancillary items for an amount of P=825 million, exclusive ofapplicable VAT. The gain on sale amounted to P=164.6 million.

iv. Other Related Parties

· First Gas Holdings Corporation and First Gas Power Corporation are subsidiaries ofFirst Gen. First Philippine Holdings, parent company of First Gen, is a subsidiary ofLopez Holdings Corporation (formerly Benpres Holdings Corporation).

· Bayan Telecommunications Inc. (Bayantel) is 97.3%-owned by Bayantel Holdings onwhich Lopez Holdings Corporation has 47.3% ownership.

· Lopez Holdings Corporation has 57.3% interest on ABS-CBN Corp. ABS-CBNPublishing, Inc. is a wholly owned subsidiary of ABS-CBN Corp, ABS-CBNFoundation.

· Rockwell Land Corporation is 86.79% owned by First Philippine Holdings.

· FEDCOR is a wholly owned subsidiary of First Philippine Holdings.

· Adtel Inc. is a wholly owned subsidiary of Lopez, Inc.

· First Philec Manufacturing Technologies Corp., Securities Transfer Services, Inc. andFirst Philippine Realty Corp. (FPRC), formerly known as INAEC Development Corp,are wholly owned subsidiaries of First Philippine Holdings.

· First Gen Energy Solutions (First GES) is a wholly owned subsidiary of First Gen.

b. Intercompany Guarantees

EDC Chile Limitada, EDC’s subsidiary in Chile, is participating in the bids for geothermalconcession areas by the Chilean government. The bid rules call for the provision of proof ofEDC Chile Limitada’s financial capability to participate in said bids or evidence of financialsupport from its Parent Company. Letters of credit amounting to US$80.0 million were issuedby EDC in favor of EDC Chile Limitada as evidence of its financial support.

c. Remuneration of Key Management Personnel

The remuneration of the directors and other members of key management personnel by benefittype are as follows:

2014 2013 2012Short-term employee benefits P=163,521,032 P=103,950,586 P=118,627,463Post-employment benefits

(Note 27) 14,459,571 14,459,571 9,290,493Share-based payments (Note 30) 7,800,204 11,878,361 24,742,375

P=185,780,807 P=130,288,518 P=152,660,331

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21. Costs of Sale of Electricity

2014 2013 2012Depreciation and amortization

(Notes 12 and 13) P=3,664,022,741 P=3,201,232,020 P=3,195,213,914Purchased services and utilities

(Note 20) 2,339,128,843 1,858,590,801 1,729,664,759Personnel costs

(Notes 23, 27 and 30) 2,040,257,709 1,619,218,711 1,681,195,017Parts and supplies issued (Note 10) 1,067,442,483 788,973,966 768,473,850Rental, insurance and taxes

(Note 32) 1,066,267,700 965,567,644 1,005,291,154Repairs and maintenance 747,222,579 742,635,113 1,214,445,888Royalty fees (Notes 16 and 33) 269,077,902 230,815,175 169,752,256Business and related expenses 173,060,809 130,707,369 166,168,972Proceeds from insurance claims (52,148,525) (102,385,875) (105,931,390)

P=11,314,332,241 P=9,435,354,924 P=9,824,274,420

Purchased services and utilities includes professional and technical services, hauling and handlingcosts, rig mobilization charges, contractual personnel costs and other services and utilities expense.

Business and related expenses covers the expenses incurred by the Company for local and foreigntravel, company meeting expenses and advertising and among other business expenses.

Proceeds from insurance claims are shown as a separate line item under the costs of sale ofelectricity. The Parent Company charges to expense outright any costs incurred relating torestoring or rehabilitating facilities or land improvements damaged by typhoons or by other factorswhich do not meet the capitalization criteria. Proceeds from the insurance claims are subsequentlyrecognized when receipt is virtually certain.

22. General and Administrative Expenses

2014 2013 2012Personnel costs (Notes 23, 27

and 30) P=1,785,339,678 P=1,241,744,195 P=1,606,426,813Purchased services and utilities 1,929,125,394 1,431,263,858 1,108,600,474Rental, insurance and taxes

(Notes 32 and 37) 816,988,039 497,103,590 802,484,066Business and related expenses 462,791,410 430,027,408 469,171,599Depreciation and amortization

(Notes 12 and 13) 415,276,556 368,115,332 364,315,008Parts and supplies issued (Note 10) 229,103,395 156,968,210 154,094,455Repairs and maintenance 71,437,545 23,965,312 46,871,862Provision for doubtful accounts

(Notes 8 and 15) 59,627,889 138,709,089 236,470,299Provision for (reversal of)

impairment of parts and suppliesinventories (Notes 3 and 10) (25,340,773) 123,020,732 (83,504,018)

Reversal of provision for doubtfulaccounts (Notes 8 and 15) – (78,729,478) (2,337,010)

Loss on direct write-offof receivables – – 281,981

P=5,744,349,133 P=4,332,188,248 P=4,702,875,529

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23. Personnel Costs

2014 2013 2012Salaries and other benefits P=3,526,143,932 P=2,710,676,485 P=3,834,883,185Net retirement and other

post-employment benefit costs(income) (Note 27) 311,135,951 288,176,016 (427,492,784)

Social security costs 46,272,115 31,692,285 36,584,470P=3,883,551,998 P=3,030,544,786 P=3,443,974,871

2014 2013 2012Costs of sales of electricity and steam

(Note 21) P=2,040,257,709 P=1,619,218,711 P=1,681,195,017General and administrative expenses

(Note 22) 1,785,339,678 1,241,744,195 1,606,426,813Discontinued drilling operations

(Note 5) – – 1,596,097Capitalized personnel costs

(Notes 12 and 13) 57,954,611 169,581,880 154,756,944P=3,883,551,998 P=3,030,544,786 P=3,443,974,871

Personnel costs amounting to P=58.0 million, P=169.6 million and P=154.8 million were capitalizedunder property, plant and equipment in 2014, 2013 and 2012, respectively (see Notes 12 and 13).

24. Interest Income and Interest Expense

Interest income consists of the following:

2014 2013 2012Interest income on cash equivalents P=158,432,173 P=231,712,074 P=354,778,763Interest income on cash in banks 538,777 52,155,412 3,596,543Others 25,720,705 10,179,880 6,265,683

P=184,691,655 P=294,047,366 P=364,640,989

Interest expense consists of the following:

2014 2013 2012Interest on long-term debts

including amortization oftransaction costs(Notes 17 and 31) P=3,713,109,302 P=3,352,639,778 P=3,656,390,728

Interest accretion on provision forrehabilitation and restorationcosts (Notes 3, 12 and 18) 33,090,313 24,048,418 27,644,866

Interest on liability from litigation(Note 3) 7,811,107 7,811,108 8,608,023

Interest accretion of “Day 1” gain(Note 31) – – 10,945,030

Interest on loan payable and others(Note 31) – – 59,822

P=3,754,010,722 P=3,384,499,304 P=3,703,648,469

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Interest on liability from litigationInterest on liability from litigation is related to land expropriation cases (see Note 3).

Interest accretion of “Day 1” gainInterest accretion of “Day 1” gain arose from deferred royalty fee payable. Prior to theimplementation of the RE Law, the Parent Company’s service contracts with the DOE underP.D. 1442 granted the Parent Company the right to explore, development, and utilize the country’sgeothermal resources subject to sharing of net proceeds with the Government. The 60%government share is comprised of royalty fees and income taxes. The royalty fees are shared bythe Government through DOE (60%) and the LGUs (40%).

On July 8, 2009, the Parent Company negotiated with the DOE for the payment of deferredroyalty due to DOE amounting to P=1.4 billion covering the period from 1989 to 2008. As agreedwith the DOE, the Parent Company will settle the deferred royalty fee for four years with aquarterly amortization of P=87.5 million or an annual payment of P=350.0 million. In accordancewith PAS 39, “Day 1” gain amounting to P=168.3 million was recognized for the differencebetween the nominal/maturity value and present value of the royalty fee payable. Subsequent toinitial recognition, royalty fee payable is accreted to its maturity value based on the effectiveinterest rate determined on Day 1.

In 2012, the deferred royalty fee had been paid in full.

25. Foreign Exchange Gains (Losses)

2014 2013 2012Realized foreign exchange gains (losses) - net (P=5,348,348) P=34,652,820 (P=169,333,424)Unrealized foreign exchange gains (losses) - net (97,182,774) (1,295,930,926) 1,222,800,198

Net foreign exchange gains (losses) (P=102,531,122) (P=1,261,278,106) P=1,053,466,774

This account pertains mainly to foreign exchange adjustments realized on repayment of loans andunrealized on restatement of outstanding balances of foreign currency-denominated loans,trade receivables and payables, short-term placements and cash in banks.

Following are the closing foreign exchange rates used in the translation of monetary assets andliabilities of the Company as of December 31, 2014, 2013 and 2012:

Peso Equivalent of 1 Unit of Foreign CurrencyCurrency 2014 2013 2012US dollar P=44.720 P=44.395 P=41.050Japanese yen 0.371 0.424 0.4787Singaporean dollar 33.696 34.999 33.703Euro 54.339 60.816 54.530New Zealand dollar 34.614 36.212 33.659Sweden kroner 5.686 6.787 –United Kingdom pound 54.339 72.900 –

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26. Miscellaneous Income (Charges)

2014 2013 2012Gain on sale of property, plant and

equipment (Notes 12 and 20) P=362,228,309 P=4,026,459 (P=455,016)Gain on sale of parts and

inventories (Note 20) 108,679,584 – –Loss on direct write-off of input

VAT claims (234,188,828) (220,039,070) –Mark to market gain - financial

asset at fair value throughprofit or loss (Note 9) 23,593,442 – –

Derivative gains - net (Note 31) 7,517,980 14,243,178 36,160Loss on debt extinguishment

(Notes 17 and 31) – – (188,145,763)Others – net (8,459,545) (21,340,162) (36,763,945)

P=259,370,942 (P=223,109,595) (P=225,328,564)

In 2014, after technical assessment some parts and supplies impaired in 2013 due to TyphoonYoland were reassess to be reusable amounting to P=53.4 million.

27. Retirement and Other Post-employment Benefits

The Parent Company, GCGI, and BGI have a funded, non-contributory, defined benefit retirementplan. The Company also provides post-employment medical and life insurance benefits which areunfunded. The plan covers all permanent employees and is administered by trustee banks.

Generally, upon fulfillment of certain employment conditions, the retirement benefits are payablein lump sum upon retirement which is determined on the basis of the retiree’s final salary andcomputed at certain percentage of final monthly salary base pay for every year of service.

Under the existing regulatory framework, Republic Act 7641 requires a provision for retirementpay to qualified private sector employees in the absence of any retirement plan in the entity,provided however that the employee’s retirement benefits under any collective bargaining andother agreements shall not be less than those provided under the law. The law does not requireminimum funding of the plan.

The following tables summarize the components of net benefit expense (income) recognized in theconsolidated statement of income and the funded status and amounts recognized in theconsolidated statement of financial position:

2014 2013 2012Current service cost P=238,936,137 P=216,224,407 P=225,399,365Settlement gain – – (752,920,161)Net interest 72,199,814 71,951,609 100,028,012Retirement and other post-

employment benefit costs(income) [Note 23] P=311,135,951 P=288,176,016 (P=427,492,784)

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2014 2013Present value of defined benefits obligation P=4,218,408,384 P=3,817,394,402Fair value of plan assets (2,422,412,944) (2,158,806,805)Net retirement and other post-employment benefits

liability P=1,795,995,440 P=1,658,587,597

Changes in the present value of the defined benefit obligation are as follows:

2014 2013Defined benefits obligation at beginning of year P=3,817,394,402 P=3,281,316,791Current service cost 238,936,137 216,224,407Interest cost on benefits obligation 165,888,990 164,156,619Benefits paid (155,906,725) (19,848,396)Remeasurements arising from:

Changes in demographic assumptions – 6,783,750Changes in financial assumptions 14,042,361 (136,913,466)Deviations of experience from assumptions 138,053,219 305,674,697

Defined benefits obligation at end of year P=4,218,408,384 P=3,817,394,402

Changes in the fair value of plan assets are as follows:

2014 2013Fair value of plan assets at beginning of year P=2,158,806,805 P=1,844,120,175Interest income 93,689,176 92,205,010Contributions to the plan 206,954,000 202,342,501Benefits paid (154,899,955) (18,317,296)Return on plan assets, excluding interest income 117,862,918 38,456,415Fair value of plan assets at end of year P=2,422,412,944 P=2,158,806,805

Actual return on plan assets P=211,552,095 P=130,661,425

EDC’s retirement benefits fund is maintained by the Bank of the Philippine Islands AssetManagement and BDO Trust while GCGI’s and BGI’s retirement benefits funds are maintained byBDO Trust. These trustee banks are also responsible for investment of the plan assets.

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The fair value of plan assets by each class at end of the reporting period follows:

2014 2013Investments quoted in active market

Quoted equity investments (by industry)Industrial - electricity, energy, power and

water P=320,803,238 P=344,262,751Holding firms 173,366,100 211,131,750Financials - banks 139,333,719 89,303,374Property 73,789,171 89,160,229Industrial - food, beverage, and tobacco 71,227,647 50,792,123Services - telecommunications 20,531,800 37,897,190Services - casinos and gaming 17,932,620 3,433,520Transportation services 16,954,910 28,467,894Industrial - construction, infrastructure and

allied services 14,167,442 15,337,140Golf country club 3,176,667 –Retail 8,053,267 16,878,765Mining 1,420,000 –

860,756,581 886,664,736Investments in debt instruments

Government securities 581,773,734 611,213,174Corporate bonds 365,293,503 219,628,619

947,067,237 830,841,793Unquoted investments

Cash and cash equivalents 588,326,766 409,052,687Receivables and other assets 26,262,360 32,247,589

614,589,126 441,300,276Fair value of plan assets P=2,422,412,944 P=2,158,806,805

Cash and cash equivalents include savings and time deposits. Quoted equity investments pertainto listed shares in PSE. The classification by industry of quoted shares presented above is basedon sector classification published by the PSE. Government securities pertain to ROP bonds whilecorporate bonds are debt instruments issued by domestic companies rated Aaa based on the latestcredit rating published by Philippine Rating Services Corporation (PhilRatings) in 2014.Government securities and corporate bonds are both traded in PDEx.

The Company expects to contribute P=230.0 million to its defined benefit retirement plan in 2015.

The principal actuarial assumptions used in determining retirement and other post-employmentbenefits as of December 31 of each year are as follows:

2014 2013EDC GCGI FG Hydro BGI EDC GCGI FG Hydro BGI

Discount rate 4.30% 4.16% 5.65% 4.29% 4.34% 4.35% 5.01% 4.27%Future salary increase

rate 5.00% 5.00% 10.00% 5.00% 5.00% 5.00% 12.00% 5.00%Medical costs trend rate 7.00% 7.00% – 7.00% 7.00% 7.00% – 7.00%

The assumption on the discount rate is based on the long-term government bond ratesapproximating the expected average remaining working life of the employees.

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The Company recognized expense for termination benefits amounting to P=605.2million in 2012.No such expense was incurred in 2013 and 2014.

The sensitivity analysis below has been determined based on reasonably possible changes of eachsignificant assumption on the defined benefit obligation as of December 31, 2014 and 2013,assuming if all other assumptions were held constant:

2014Increase/Decrease in

Percentage PointEffect on Present Value of

Defined Benefit ObligationDiscount rate +1% (P=391,199,634)

-1% 453,337,628

Future salary increases +1% P=437,942,768-1% (388,112,431)

Medical costs trend +1% P=4,775,824-1% (4,160,167)

2013Increase/Decrease in

Percentage PointEffect on Present Value of

Defined Benefit ObligationDiscount rate +1% (P=454,165,935)

-1% 454,165,935

Future salary increases +1% P=441,700,936-1% (441,700,936)

Medical costs trend +1% P=6,321,694-1% (6,321,694)

The estimated weighted average duration of benefit payment is 17 to 14 years in 2014 and 16 to17 years in 2013.

Following are the information about the maturity profile of the defined benefit obligation as ofDecember 31, 2014 and 2013:

2014 2013Within the next 12 months 1% 2%Between 2 and 5 years 13% 11%Between 5 and 10 years 25% 22%Between 10 and 15 years 33% 33%Beyond 15 years 28% 32%

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28. Income Tax

a. The components of the Company’s deferred tax assets and liabilities follow:

2014Beginning of

YearCharged to

IncomeCharged to

Equity End of YearDeferred income tax assets on: Impairment loss on property, plant and

equipment P=867,128,611 (P=208,608,594) P=– P=658,520,017 Unrealized foreign exchange losses - BOT

power plants 808,145,766 (105,320,740) – 702,825,026 Differences in fair value versus cost of

Tongonan and Palinpinon property, plantand equipment 172,738,614 (18,299,886) – 154,438,728

Revenue generated during testing period of BGIpower plants 153,384,890 446,693 – 153,831,583

Accrued retirement benefits 73,425,734 6,435,843 4,087,229 83,948,806 Provision for rehabilitation and restoration costs 65,445,138 6,713,224 – 72,158,362 Provision for uncollectibility of the receivable

from NPC 63,428,692 45,769,306 – 109,197,998 Allowance for doubtful accounts 51,141,908 (6,271,826) – 44,870,082

Calamity loss 40,954,708 (39,424,730) – 1,529,978 Provision for impairment of parts and supplies

inventories 33,475,340 (7,294,484) – 26,180,856 Unrealized foreign exchange losses 917,907 – 917,907 Others 46,491,159 5,071,674 (5,240,938) 46,321,895

2,376,678,467 (320,783,520) (1,153,709) 2,054,741,238Deferred income tax liabilities on:

Differences in fair value versus cost ofproperty, plant and equipment (911,129,123) 36,053,677 – (875,075,446)

Capitalized rehabilitation and restoration costs (44,993,697) (807,862) – (45,801,559) Difference in fair value versus cost of

inventories (16,339,976) 783,138 – (15,556,838) Unrealized foreign exchange gains (1,445,462) (1,803,882) – (3,249,344) Others (67,692,621) – – (67,692,621)

(1,041,600,879) 34,225,071 – (1,007,375,808)P=1,335,077,588 (P=286,558,449) (P=1,153,709) P=1,047,365,430

In 2014, the Company took up amortization of deferred tax expense on capitalized bowing costsamounting to P=1.9 million.

2013Beginning of

YearCharged to

IncomeCharged to

Equity End of YearDeferred income tax assets on: Unrealized foreign exchange losses - BOT

power plants P=913,466,506 (P=105,320,740) P=– P=808,145,766 Impairment loss on property, plant and

equipment 867,128,611 – – 867,128,611 Differences in fair value versus cost of

Tongonan and Palinpinon property, plantand equipment 191,047,219 (18,308,605) – 172,738,614

Allowance for doubtful accounts 65,934,928 (14,793,020) – 51,141,908 Provision for rehabilitation and restoration costs 49,812,280 15,632,858 – 65,445,138

Revenue generated during testing period of BGIpower plants 40,204,712 113,180,178 – 153,384,890

Provision for impairment of parts and suppliesinventories 16,549,691 16,925,649 – 33,475,340

Unrealized foreign exchange losses 734,292 183,615 – 917,907Calamity loss – 40,954,708 – 40,954,708Accrued retirement benefits 62,526,494 10,899,240 – 73,425,734

(Forward)

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2013Beginning of

YearCharged to

IncomeCharged to

Equity End of Year Provision for uncollectibility of the receivable

from NPC P=– P=63,428,692 P=– P=63,428,692 Others 87,946,536 (32,912,219) (8,543,158) 46,491,159

2,295,351,269 89,870,356 (8,543,158) 2,376,678,467Deferred income tax liabilities on:

Differences in fair value versus cost ofproperty, plant and equipment (925,696,213) 14,567,090 – (911,129,123)

Capitalized rehabilitation and restoration costs (35,433,167) (9,560,530) – (44,993,697) Difference in fair value versus cost of

inventories (16,758,849) 418,873 – (16,339,976) Unrealized foreign exchange gains (152,161,732) 150,716,270 – (1,445,462) Others (21,360,335) (46,332,286) – (67,692,621)

(1,151,410,296) 109,809,417 – (1,041,600,879) P=1,143,940,973 P=199,679,773 (P=8,543,158) P=1,335,077,588

Portion of deferred income tax charged to income amounting to P=41.8 million in 2012 pertainsto discontinued operations.

b. As of December 31, 2014, the Company has NOLCO that can be claimed as deductionsagainst future taxable income as follows:

Inception Year NOLCO Application ExpiredAvailable

Balance Expiry Year2011 P=638,699,605 (P=574,110,432) P=65,013,121 P=– 20142012 260,547,099 (791,924) – 259,863,731 20152013 586,467,886 (4,001,124) – 584,306,446 20162014 613,178,578 (23,253,553) – 613,178,578 2017

P=2,098,893,168 (P=602,157,033) P=65,013,121 P=1,457,348,755

In 2014, no DTA was recognized for NOLCO of P=573.3 million pertaining to losses subject tothe 30% tax regime, as management does not expect any taxable income at the 30% taxregime where the applicable NOLCO can be claimed as a deduction.

c. A numerical reconciliation between provision for income tax and the product of accountingincome multiplied by the tax rates of 10% or 30% , as applicable, follows:

2014 2013 2012Income before income tax from:

Continuing operations P=13,040,598,429 P=6,114,053,186 P=11,394,147,721Discontinued operations – – 139,279,207

P=13,040,598,429 P=6,114,053,186 P=11,533,426,928

Income tax at statutory tax rates(10%/30%) P=2,415,436,620 P=1,573,542,122 P=2,152,664,323

Adjustments for:Income tax holiday incentives (381,507,362) (457,321,130) (1,040,160,497)Effect of RE Law and effect of change in tax rate – 21,548,418 (206,819,310)Dividend income (842,386,620) (934,250,959) (205,273,615)Unrecognized deferred tax asset

on NOLCO 153,830,468 180,710,970 72,990,015Interest income - net of final tax (11,039,108) (35,506,915) (43,544,951)

(Forward)

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2014 2013 2012Non-deductible provisions/ (non-taxable recovery) - net (P=26,984,160) (P=42,670,666) P=15,333,535Unrecognized deferred tax asset on

provision for impairment loss (172,446,259) 172,446,259 –Non-deductible interest expense 2,982,989 12,293,165 16,263,341Movement of temporary

differences reversing duringincome tax holiday (5,693,868) (42,946,777) 27,955,021

Non-taxable/non-deductible foreign exchange loss (gains)

on ROP bonds 38,317,625 (3,408,285) (533,579)Others 52,079,076 41,547,147 28,032,073

Provision for (benefit from) income tax P=1,222,589,401 P=485,983,349 P=816,906,356From continuing operations P=1,222,589,401 P=485,983,349 P=775,122,594From discontinued operations – – 41,783,762

P=1,222,589,401 P=485,983,349 P=816,906,356

The 10% statutory rate applies to the relevant renewable energy operations covered by the RELaw while the 30% applies, in general, to the other activities.

d. On February 14, 2013, BGI was granted with an income tax holiday (ITH) incentive by theBoard of Investments (BOI) covering its 130 MW BMGPP complex. Subject to certainconditions, BGI is entitled to income tax holiday for seven years from July 2013 or date ofcommissioning of the power plants, whichever is earlier. BGI does not recognize deferred taxassets and deferred tax liabilities on temporary differences that are expected to reverse duringITH period.

e. On February 12, 2014, the BOI approved the ITH registration of the Nasulo Power Plant underthe Renewable Energy Act of 2008 (RA 9513) effective for 7-year period beginning inJanuary 2016 or date of commissioning, whichever is earlier. While the Nasulo power planthas a capacity of 49.4 MW, the ITH shall be limited only to the revenues derived from the saleof 30 MW.

f. On June 29, 2011, the BOI approved the ITH registration of the 86 MW Burgos Wind Farmunder the Renewable Energy Act of 2008 (RA 9513). On June 03, 2014, the Companyreceived a legal service letter from BOI granting the upward amendment of registered capacityof the Burgos Wind Farm from 86 MW to 150 MW effective for 7-year period beginning inDecember 2015 or date of commissioning,whichever is earlier.

g. On December 18, 2008, the BIR issued Revenue Regulations (RR) No. 16-2008 whichimplemented the provisions of Section 34(L) of the Tax Code, as amended by Section 3 ofR.A. No. 9504, which allows individuals and corporations who are subject to the 30% RCITrate to adopt the OSD in computing their taxable income. Under RR No. 16-2008,corporations may claim OSD equivalent to 40% of gross income, excluding passive incomesubjected to final tax, in lieu of the itemized deductions. A corporate taxpayer who elected toavail of the OSD shall signify such in the income tax return (ITR). Otherwise, it shall beconsidered as having availed of the itemized deductions allowed under Section 34 of theNational Internal Revenue Code. Pursuant to Section 3 of RR No. 02-2010 dated February 18,2010, the election to claim the OSD or the itemized deduction for the taxable year must besignified by checking the appropriate box in the ITR filed for the first quarter of the taxableyear adopted by the taxpayer. Once the election is made, the same type of deduction must beconsistently applied for all succeeding quarter returns and in the final ITR for the taxable year.

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Any taxpayer who is required but fails to file the quarterly ITR for the first quarter shall beconsidered as having availed of the itemized deductions option for the taxable year.

For 2014, 2013 and 2012, the Company computed its income tax based on itemizeddeductions for its income subject to either 10% or 30% income tax rate.

h. FG Hydro, EBWPC and BGI does not recognize deferred tax assets and deferred tax liabilitieson temporary differences that are expected to reverse during ITH period.

29. Basic/Diluted Earnings Per Share

The basic/diluted earnings per share amounts were computed as follows:

2014 2013 2012Net income attributable to equity

holders of the Parent Company P=11,681,155,539 P=4,739,577,464 P=9,002,361,919Less dividends on preferred shares

(Note 19) 7,500,000 7,500,000 7,500,000(a) Net income attributable to common

shareholders of the Parent Company 11,673,655,539 4,732,077,464 8,994,861,919

(b) Less net income from discontinued operations attributable to equity holders of the Parent Company – – 97,495,445(c) Net income from continuing operations attributable to common shareholders of the Parent Company 11,673,655,539 4,732,077,464 8,897,366,474(d) Weighted average number

of common shares outstanding 18,750,000,000 18,750,000,000 18,750,000,000Basic/diluted earnings per share (a/d) P=0.623 P=0.252 P=0.480

From continuing operations (c/d) P=0.623 0.252 0.475From discontinued operations (b/d) – – 0.005

The Parent Company does not have dilutive common share equivalents.

30. Share-Based Payment

On January 23, 2009, the BOD of the Parent Company approved the ESGP. The ESGP is anintegral part of the Parent Company’s total rewards program for its officers and employees and isintended to provide an opportunity for participants to have real and personal direct interest in theParent Company.

On December 1, 2009, the Nomination and Compensation Committee (the Committee) granted7,000,000 shares representing the Parent Company common shares authorized under the ESGPwhich were transferred to the BDO Trust. These shares were part of the 93,000,000 commonshares issued to the BDO Trust and recorded under “Common shares in employee trust account”.BDO Trust will administer the issuance of the common shares to the employee grantees under theParent Company’s ESGP (see Note 19).

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The stock grants are given in lieu of cash incentives and bonuses. The grant of shares under theESGP does not require an exercise price to be paid by the awardees. The granted shares will vestover a three-year period as follows: 20% after the first anniversary of the grant date; 30% after thesecond anniversary of the grant date; and the remaining 50% after the third anniversary of thegrant date. Awardees that resign or are terminated will lose any right to unvested shares. Thereare no cash settlement alternatives.

The ESGP covers officers and employees of the Parent Company or other individuals whom theCommittee may decide to include. The Committee shall maintain the sole discretion over theselection of individuals to whom awards may be granted for any given calendar year.

Stock awards granted by the Committee to officers and employees of EDC are shown below:

Grant DateNumber of

Shares Granted

Fair Value PerShare

at Grant Date Vested UnvestedDecember 1, 2009 7,000,000 P=4.20 7,000,000 –June 1, 2010 2,625,000 4.70 2,625,000 –June 1, 2011 2,625,000 6.75 2,625,500 –June 1, 2012 2,625,000 5.84 525,000 1.312,500June 1, 2013 2,250,000 6.10 450,000 1,800,000

Total compensation expense recognized in 2014, 2013 and 2012 amounted to P=7.9 million,P=11.9 million and P=24.7 million, respectively. A corresponding increase in the “Common sharesin employee trust account” amounting to P=4.8 million, P=6.9 million and P=13.8 million and increasein the “Additional paid-in capital” account amounting to P=3.0 million, P=4.9 million andP=10.9 million were recorded for the years ended December 31, 2014, 2013 and 2012, respectively(see Note 19).

31. Financial Risk Management Objectives and Policies

The Company’s financial instruments consist mainly of cash and cash equivalents, AFSinvestments and long-term debts. The main purpose of these financial instruments is to financethe Company’s operations and accordingly manage its exposure to financial risks. The Companyhas various other financial assets and liabilities such as trade receivables, trade payables and otherliabilities, which arise directly from operations.

Financial Risk Management PolicyThe main financial risks arising from the Company’s financial instruments are credit risk, foreigncurrency risk, interest rate risk, equity price risk and liquidity risk. The Company’s policies formanaging the aforementioned risks are summarized hereinafter below.

Credit RiskThe Company’s geothermal and power generation business trades with only one major customer,NPC, a government-owned-and-controlled corporation. Any failure on the part of NPC to pay itsobligations to the Company would significantly affect the Company’s business operations. As apractice, the Company monitors closely its collection from NPC and charges interest on delayedpayments following the provision of its respective SSAs and PPAs. Receivable balances aremonitored on an ongoing basis to ensure that the Company’s exposure to bad debts is notsignificant. The maximum exposure of trade receivable is equal to its carrying amount.

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With respect to the credit risk arising from other financial assets of the Company, which compriseof cash and cash equivalents excluding cash on hand, financial asset at FVPL, other receivablesand AFS investments, the Company’s exposure to credit risk arises from default of thecounterparty, with a maximum exposure equal to the carrying amount of these instruments beforetaking into account any collateral and other credit enhancements.

The following tables below show the Company’s aging analysis of the Company’s financial assetsas of December 31, 2014 and 2013:

2014Past Due but Not Impaired

Neither PastDue nor

ImpairedLess than

30 Days31 Days

to 1 Year

Over 1 Yearup to

3 YearsOver

3 Years

PastDue and

Impaired Total(In Thousand Pesos)

Loans and receivables: Cash and cash

equivalents(excluding cash onhand) P=13,869,256 P=– P=– P=– P=– P=– P=13,869,256

Trade receivables 3,766,128 1,334,308 1,155,556 78,381 – 90,613 6,424,986 Loans and notes

receivables 95,901 – – – – – 95,901 Employee receivables 9,492 – – – – – 9,492 Non-trade receivables 345,810 33,058 14,873 1,455 – – 395,196 Long-term receivables 85,754 – – – – 78,488 164,242AFS investments: Debt investments 259,847 – – – – – 259,847 Equity investments 308,130 – – – – – 308,130Financial asset at FVPL 523,593 – – – – – 523,593Derivatives designated as

cash flow hedges: Derivative assets 154,169 – – – – – 154,169Total P=19,418,080 P=1,367,366 P=1,170,429 P=79,836 P=– P=169,101 P=22,204,812

2013Past Due but Not Impaired

Neither PastDue norImpaired

Less than30 Days

31 Daysto 1 Year

Over 1 Yearup to

3 YearsOver

3 Years

PastDue and

Impaired Total(In Thousand Pesos)

Loans and receivables: Cash and cash

equivalents(excluding cash onhand) P=16,013,213 P=– P=– P=– P=– P=– P=16,013,213

Trade receivables 3,213,038 17,048 75,835 – – 91,149 3,397,070 Non-trade receivables 84,773 – 10,060 19 – – 94,852 Loans and notes

receivables 124,936 – – – – – 124,936 Employee

receivables* 11,958 – – – – – 11,958 Long-term

receivables 16,685 – – – – 72,278 88,963AFS investments: Debt investments 341,842 – – – – – 341,842 Equity investments 407,242 – – – – – 407,242Financial assets at

FVPL: Derivative assets 7,547 – – – – – 7,547Derivative assets

designated as cashflow hedges 53,583 – – – – – 53,583

Total P=20,274,817 P=17,048 P=85,895 P=19 P=– P=163,427 P=20,541,206

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Credit Quality of Financial AssetsFinancial assets are classified as high grade if the counterparties are not expected to default insettling their obligations. Thus, the credit risk exposure is minimal. These counterpartiesnormally include customers, banks and related parties who pay on or before due date. Financialassets are classified as a standard grade if the counterparties settle their obligation with theCompany with tolerable delays. Low grade accounts are accounts, which have probability ofimpairment based on historical trend. These accounts show propensity of default in paymentdespite regular follow-up actions and extended payment terms.

As of December 31, 2014 and 2013, financial assets categorized as neither past due nor impairedare viewed by management as high grade, considering the collectibility of the receivables and thecredit history of the counterparties. Meanwhile, past due but not impaired financial assets areclassified as standard grade.

Foreign Currency RiskForeign currency risk is the risk that the fair value or future cash flows of a financial instrumentwill fluctuate because of changes in foreign exchange rates.

The Company’s exposure to foreign currency risk is mainly from the financial assets and liabilitiesthat are denominated in US dollar (US$). This primarily arises from future payments of foreigncurrency-denominated loans and other commercial transactions and the Company’s investment inROP Bonds.

The Company’s exposure to foreign currency risk to some degree is mitigated by some provisionsin the Company’s GRESCs, SSAs and PPAs. The service contracts allow full cost recovery whilethe sales contracts include billing adjustments covering the movements in Philippine peso and theUS$ rates, US Price and Consumer Indices, and other inflation factors.

To mitigate further the effects of foreign currency risk, the Company will prepay, refinance orhedge its foreign currency denominated loans, whenever deemed feasible. The Company alsoenters into derivative contracts to mitigate foreign currency risk.

The Company’s foreign currency-denominated financial assets and liabilities (translated intoPhilippine peso) as of December 31, 2014, and 2013, are as follows:

2014Original Currency

US$Japaneseyen (JP¥)

Swedenkroner(SEK)

ChileanPeso

(CHP=)

PeruvianSol

(PEN)Singapore

Dollar (SGD)New Zealanddollar (NZD)

PesoEquivalent1

Financial AssetsLoans and receivables: Cash equivalents 45,365,000 − − − − − − P=2,028,722,800 Cash on hand and in

banks 7,115,870 − − 151,118,435 34,157 − − 329,890,847AFS investments: Debt investments 2,909,250 − − − − − − 130,101,660Derivative assets

designated as cashflow hedges 3,447,432 − − − − − − 154,169,159

Total financial assets 58,837,552 − − 151,118,435 34,157 − − P=2,642,884,466

(Forward)

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Swedenkroner(SEK)

ChileanPeso

(CHP=)

PeruvianSol

(PEN)Singapore

Dollar (SGD)New Zealanddollar (NZD)

PesoEquivalent1

Financial LiabilitiesLiabilities at amortized

cost: Accounts payable 18,288,738 117,481,739 1,569,250 − − 94,100 259,616 P=882,590,091 Long-term debt 661,843,245 − − − − − − 29,597,629,916 Accrued interest on

long-term debts 9,021,799 − − − − − − 403,454,851 Derivative liability 3,795,503 − − − − − − 169,734,894Total financial liabilities 692,949,285 117,481,739 1,569,250 − − 94,100 259,616 P=31,053,409,7521 US$1= P=44.72, JP¥1=P=0.371444,SEK1=P=5.686, CHP1=P=0.073837, PEN1=P= 14.959, SGD1=P=33.6961 and NZD1=P=34.6136as of December 31, 2014 (see Note 25)



UnitedKingdom

pound (GBP)

Swedenkroner(SEK)

ChileanPeso

(CHP=) Euro (EUR)New Zealand dollar (NZD)

PesoEquivalent1

Financial AssetsLoans and receivables:

Cash equivalents 56,300,000 − − − − − − P=2,499,438,500 Cash on hand and in

banks 11,917,441 − − − 96,005,271 − − 537,186,567AFS investments:

Debt investments 7,696,268 − − − − − − 341,675,818Financial assets at FVPL:

Derivative assets 169,997 − − − − − − 7,547,020Derivative assets

designated as cash flowhedges 1,206,962 − − − − − − 53,583,080

Total financial assets 77,290,668 − − − 96,005,271 − − P=3,439,430,985Financial LiabilitiesLiabilities at amortized

cost: Accounts payable 26,621,867 13,822,941 138,000 1,254,342 − 139,000 621,331 P=1,231,408,505 Long-term debt 513,785,044 − − − − − − 22,809,487,028 Accrued interest on long-term debts 8,891,194 − − − − − − 394,724,558Derivative liabilities

designated as cash flowhedges 94,568 − − − − − − 4,198,322

Total financial liabilities 549,392,673 13,822,941 138,000 1,254,342 − 139,000 621,331 P=24,439,818,413 1 US$1= P=44.395, JP¥1=P=0.0095, GBP1=P=72.90, SEK1=P=6.79, CHP=1=P=0.08449, EUR1=P=60.82 and NZD1=P=36.212as of December 31, 2013 .(see Note 25)

The following tables demonstrate the sensitivity to a reasonably possible change in the foreigncurrency exchange rates applicable to the Company, with all other variables held constant, of theCompany’s income (loss) before income tax and equity for the years ended December 31, 2014and 2013. The impact on the Company’s income before income tax is due to revaluation ofmonetary assets and monetary liabilities while impact on equity arises from changes in the fairvalue of cross currency swaps designated as cash flow hedges as well as AFS debt investments.

2014Foreign Currency

Appreciates(Depreciates) By

Effect on IncomeBefore Income Tax Effect on Equity

USD 10% or P=4.472 (P=2,850,825,116) P=269,780,071(10% or P=4.472) 2,850,825,116 (383,226,594)

JPY 10% or P=0.03714 (4,363,792) −(10% or P=0.03714) 4,363,792 −

SEK 10% or P=0.56860 (892,276) −(10% or P=0.56860) 892,276 −

(Forward)

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CHP 10% or P=0.00738 1,115,818 −(10% or P=0.00738) (1,115,818) −

PEN 10% or P=1.4959 51,096 −(10% or P=1.4959) (51,096) −

SGD 10% or P=3.36961 (317,080) −(10% or P=3.36961) 317,080 −

NZD 10% or P=3.46136 (898,624) −(10% or P=3.46136) 898,624 −




USD 10% or P=4.440 (P=2,101,957,381) P=57,158,762(10% or P=4.440) 2,101,957,381 (56,878,221)

GBP 10% or P=7.28967 (1,005,974) −(10% or P=7.28967) 1,005,974 −

SEK 10% or P=0.67867 851,284 −(10% orP=0.67867) (851,284) −

EUR 10% or P=6.08161 (845,344) −(10% or P=6.08161) 845,344 −

NZD 10% or P=3.62120 (2,249,963) −(10% orP=3. 62120) 2,249,963 −

The effect of changes in foreign exchange rates in equity pertains to the fair valuation of AFSinvestments and derivatives designated as cash flow hedges, and is exclusive of the impact ofchanges affecting the Company’s consolidated statements of income.

Equity Price RiskEquity price risk is the risk that the fair value of traded equity instruments decreases as the resultof the changes in the levels of equity indices and the value of the individual stocks.

As of December 31, 2014 and 2013, the Company’s exposure to equity price risk is minimal.

Interest Rate RiskThe Company’s exposure to the risk of changes in market interest rates relates primarily to theCompany’s long-term debt obligations with floating interest rates, derivative assets, derivativeliabilities and AFS investments.

The interest rates of some of the Company’s long-term borrowings and AFS debt investments arefixed at the inception of the loan agreement.

The Company regularly evaluates its interest rate risk by taking into account the cost of qualifiedborrowings being charged by its creditors. Prepayment, refinancing or hedging the risks areundertaken when deemed feasible and advantageous to the Company.

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Interest Rate Risk TableThe following tables provide for the effective interest rates and interest payments by period ofmaturity of the Company’s long-term debts:

2014

InterestRates

Within1 Year

More than 1year but lessthan 4 years

More than 4Years but

less than 5Years

More than5 Years Total

(In Thousand Pesos)

Fixed RateUS$ 300.0 million Notes 6.50% P=872,040 P=2,616,120 P=872,040 P=1,308,060 P=5,668,260Peso Public Bonds Series 1 -P=8.5 billion 8.64% 367,277 – – – 367,277 Series 2 - P=3.5 billion 9.33% 326,645 327,552 – – 654,197IFC 1 - P=4.1 billion 7.40% 173,397 394,359 89,221 146,746 803,723IFC 2 - P=3.3 billion 6.66% 182,040 444,850 114,218 329,611 1,070,719FXCN P=3.0 billion 6.62% 193,060 567,268 185,119 454,112 1,399,559 P=4.0 billion 6.61% 257,160 755,614 246,583 604,888 1,864,2452013 Peso Fixed-Rate Bonds P=3.0 billion 4.16% 124,749 374,247 124,749 62,375 686,120 P=4.0 billion 4.73% 189,248 567,744 189,248 662,368 1,608,608Reconstructed PNB andAllied Bank Peso Loan 4.5% 295,005 575,707 78,800 15,969 965,481Floating RateUS$ 80.0 million 1.80% +

LIBOR 173,100 422,901 – – 596,001US$ 175.0 million Refinanced Syndicated Term Loan

1.75% +LIBOR 85,585 126,805 – – 212,390

P=5.17 billionCommercial DebtFacility

2.00% +PDST-F rate 318,901 885,542 283,519 2,411,365 3,899,327

US$ 139 million ECADebt Facility

2.35% +LIBOR 190,340 601,455 189,974 1,625,808 2,607,577

US$ 35.5 million DebtFacility

2.00% +LIBOR 42,978 137,558 43,448 371,824 595,808

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2013

InterestRates

Within1 Year

More than 1 Yearbut less than 4

years

More than 4Years but less

than 5 YearsMore than

5 Years Total(In Thousand Pesos)

Fixed RateUS$ 300.0 million Notes 6.50% P=865,703 P=2,597,108 P=865,703 P=2,164,256 P=6,492,770Peso Public Bonds Series 1 -P=8.5 billion 8.64% 734,553 367,277 – – 1,101,830 Series 2 - P=3.5 billion 9.33% 326,645 653,289 – – 979,934IFC 1 - P=4.1 billion 7.40% 237,045 557,732 134,425 287,669 1,216,871IFC 2 - P=3.3 billion 6.66% 198,995 495,716 131,173 443,829 1,269,713FXCN P=3.0 billion 6.62% 195,045 573,224 187,104 639,231 1,594,604 P=4.0 billion 6.61% 259,804 763,547 249,227 851,471 2,124,0492013Peso Fixed-Rate Bonds P=3.0 billion 4.16% 124,749 374,247 124,749 187,124 810,869 P=4.0 billion 4.73% 189,248 567,744 189,248 851,616 1,797,856Reconstructed PNB andAllied Bank Peso Loan 4.5% 339,622 733,570 137,142 94,769 1,305,103Floating RateUS$ 80.0 million 1.80% +

LIBOR 75,475 206,427 32,996 – 314,898US$ 175.0 million Refinanced Syndicated Term Loan

1.75% +LIBOR 121,870 235,811 – – 357,681

The following tables demonstrate the sensitivity to a reasonably possible change in interest rates,with all other variables held constant, of the Company’s income before income tax and equity asof December 31, 2014 and 2013. The impact on the Company’s equity is due to changes in the fairvalue of AFS investments, cross currency swaps and interest rate swaps designated as cash flowhedges.

2014Effect on Equity

Increase/Decreasein Basis Points

Effect on IncomeBefore Income Tax

Change in Fair Value ofAFS Investments

Cumulative TranslationAdjustment

+100 (P=218,863,360) (P=17,364,678) P=554,586,559-100 218,863,360 10,408,574 (567,167,964)

2013Effect on Equity

Increase/Decreasein Basis Points

Effect on IncomeBefore Income Tax

Change in Fair Value ofAFS Investments

Cumulative TranslationAdjustment

+100 (P=77,691,250) (P=2,594,736) 28,830,862-100 77,691,250 2,875,278 (53,977,832)

The effect of changes in interest rates in equity pertains to the fair valuation of AFS investmentsand derivatives designated as cash flow hedges, and is exclusive of the impact of the changesaffecting the Company’s consolidated statement of income.

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Liquidity RiskThe Company’s objective is to maintain a balance between continuity of funding and sourcingflexibility through the use of available financial instruments. The Company manages its liquidityprofile to meet its working and capital expenditure requirements and service debt obligations. Aspart of the liquidity risk management program, the Company regularly evaluates and considers thematurity of both its financial investments and financial assets (e.g. trade receivables, otherfinancial assets) and resorts to short-term borrowings whenever its available cash or maturedplacements is not enough to meet its daily working capital requirements. To ensure immediateavailability of short-term borrowings, the Company maintains credit lines with banks on acontinuing basis.

Liquidity risk arises primarily when the Company has difficulty collecting its receivables from itsmajor customer, NPC. Other instances that contribute to its exposure to liquidity risk are when theCompany finances long-term projects with internal cash generation and when there is creditcrunch especially at times when the company has temporary funding gaps.

The tables below show the maturity profile of the Company’s financial assets used for liquiditypurposes based on contractual undiscounted cash flows as of December 31, 2014 and 2013.

2014

On DemandLess than 3

Months3 to

6 Months>6 to

12 Months>1 to

5 YearsMore than


Loans and receivables - Cash equivalents P=– P=11,334,397 P=– P=– P=– P=– P=11,334,397Financial Asset at FVPL 523,593 – – – – – 523,593AFS investments - Debt investments 259,847 – – – – – 259,847

P=783,440 P=11,334,397 P=– P=– P=– P=– P=12,117,837

2013

On DemandLess than 3

Months3 to

6 Months>6 to

12 Months>1 to

5 YearsMore than


Loans and receivables - Cash equivalents P=– P=12,101,997 P=– P=– P=– P=– P=12,101,997AFS investments - Debt investments 377,617 – – – – – 377,617

P=377,617 P=12,101,997 P=– P=– P=– P=– P=12,479,614

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The tables below summarize the maturity analysis of the Company’s financial liabilities as ofDecember 31, 2014 and 2013 based on contractual undiscounted payments:

2014On

DemandLess than3 Months

3 to6 Months

>6 to12 Months

>1 to5 Years


(In Thousand Pesos)Liabilities at amortized

cost: Accounts payable* P=− P=5,681,577 P=− P=− P=− P=− P=5,681,577 Accrued interest on

long-term debts 67,918 433,955 298,446 − − − 800,319 Other payables** 67 24,641 − − − − 24,708 Due to related parties 49,625 − − − − − 49,625Long-term debts − 740,588 10,768,198 2,961,457 29,128,089 49,487,899 93,086,231Derivative liabilitiesdesignated as cash flow

hedges − − − − − 169,735 169,735Total P=117,610 P=6,880,761 P=11,066,644 P=2,961,457 P=29,128,089 P= 49,657,634 P=99,812,195

*excluding statutory liabilities to the Government **excluding non-financial liabilities.

2013On

DemandLess than3 Months

3 to6 Months

>6 to12 Months

>1 to5 Years


(In Thousand Pesos)Liabilities at amortized

cost: Accounts payable* P=− P=5,351,131 P=− P=− P=− P=− P=5,351,131 Accrued interest on

long-term debts 84,356 394,725 313,605 − − − 792,686 Other payables** − 56,563 − − − − 56,563 Due to related parties 53,347 − − − − − 53,347Royalty payable 39,671 − − − − − 39,671Long-term debts − 87,278 2,162,178 2,371,072 36,429,373 36,743,861 77,793,762Derivative liabilities

designated as cashflow hedges − 525 − − 3,673 − 4,198

Total P=177,374 P=5,890,222 P=2,475,783 P=2,371,072 P=36,433,046 P=36,743,861 P=84,091,358 *excluding statutory liabilities to the Government **excluding non-financial liabilities.

Financial Assets and Financial LiabilitiesSet out below is a comparison of carrying amounts and fair values of the Company’s financialinstruments as of December 31, 2014 and 2013.

2014 2013CarryingAmounts Fair Values

CarryingAmounts Fair Values

Financial AssetsLoans and receivables: Long-term receivables P=85,753,718 P=80,742,027 P=88,962,765 P=84,641,685AFS investments: Debt investments 259,846,955 259,846,955 341,841,500 341,841,500 Equity investments 308,129,936 308,129,936 407,242,129 407,242,129Financial assets at FVPL 523,593,442 523,593,442 − −Derivative assets 7,547,021 7,547,021 Derivative assets designated as cash flow hedge 154,169,144 154,169,144 53,583,080 53,583,080

P=1,331,493,195 P=1,326,481,504 P=899,176,495 P=894,855,415

(Forward)

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2014 2013CarryingAmounts Fair Values

CarryingAmounts Fair Values

Financial LiabilitiesFinancial liabilities at amortized cost:

Long-term debts P=69,462,241,673 P=86,080,409,672 P=58,548,760,334 P=62,920,736,836Derivative liabilities: Derivative liabilities designated

as cash flow hedges 169,734,900 169,734,900 4,198,322 4,198,322P=69,631,976,573 P=86,250,144,572 P=58,552,958,656 P=62,924,935,158

Due to relatively short maturity, ranging from one to three months, carrying amounts approximatefair values for cash and cash equivalents, trade and other receivables, amounts due to relatedparties and trade and other payables.

The methods and assumptions used by the Company in estimating the fair value of financialinstruments are:

Long-term ReceivablesThe fair value of long-term receivables was computed by discounting the expected cash flow usingthe applicable rate of 3.06% and 2.52% in December 31, 2014 and 2013, respectively.

AFS InvestmentFair values of quoted debt and equity securities are based on quoted market prices. For equityinvestments that are not quoted, the investments are carried at cost less allowance for impairmentlosses due to the unpredictable nature of future cash flows and the lack of suitable methods ofarriving at a reliable fair value.

Long-term DebtsThe fair values for the Company’s long-term debts are estimated using the discounted cash flowmethodology with the applicable rates ranging from 1.76% to 6.71% and 1.76% to 7.40% inDecember 31, 2014 and 2013, respectively.

The following tables show the fair value information of financial instruments classified underloans and receivables, financial asset at FVPL, AFS investments, and derivatives designated ascash flow hedges and analyzed by sources of inputs on fair valuation as follows:

· Quoted prices in active markets for identical assets or liabilities (Level 1);· Those involving inputs other than quoted prices included in Level 1 that are observable for the

asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and· Those with inputs for the asset or liability that are not based on observable market data

(unobservable inputs) (Level 3)

2014Total Level 1 Level 2 Level 3

Loans and receivables:Long-term receivables P=85,753,718 P=− P=− P=85,753,718

Financial asset at FVPL 523,593,442 − 523,593,442 −AFS investments:

Debt investments 259,846,955 259,846,955 − −Equity investments 308,129,936 308,129,936 − −

Derivative assets designated ascash flow hedges 154,169,144 − 154,169,144 −

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2013Total Level 1 Level 2 Level 3

Loans and receivables:Long-term receivables P=88,962,765 P=− P=− P=88,962,765

Financial asset at FVPL:Derivative assets 7,547,020 − 7,547,020 −

AFS investments:Debt investments 341,841,500 341,841,500 − −Equity investments 407,242,129 407,242,129 − −

Derivative assets designated ascash flow hedges 53,583,080 − 53,583,080 −

For the years ended December 31, 2014 and 2013, there were no transfers between Level 1 andLevel 2 fair value measurements and no transfers into and out of Level 3 fair value measurements.

The Company classifies its financial instruments in the following categories.

2014

Loans andReceivables

AFSInvestments

Liabilities atAmortized

Cost

FinancialAssets at

FVPL

DerivativesDesignated as

Cash FlowHedges Total

(In Thousand Pesos)Financial AssetsCash and cash equivalents P=14,010,213 P=− P=− P=− P=− P=14,010,213Trade receivables 6,334,373 − − − − 6,334,373Non-trade receivables 395,195 − − − − 395,195Loans and notes receivables 95,901 − − − − 95,901Employee receivables 9,492 − − − − 9,492Long-term receivables 85,754 − − − − 85,754AFS - debt investments − 259,847 − − − 259,847AFS - equity investments − 308,130 − − − 308,130Financial asset at FVPL − − − 523,593 − 523,593Derivative assets − − − − 154,169 154,169Total financial assets P=20,930,928 P=567,977 P=− P=523,593 P=154,169 P=22,176,667

(In Thousand Pesos)Financial LiabilitiesAccounts payable* P=− P=− P=5,681,577 P=− P=− P=5,681,577Accrued interest on long-

term debts − − 800,319 − − 800,319Other payables** − − 24,708 − − 24,708Due to related parties − − 49,625 − − 49,625Long-term debts − − 69,462,242 − − 69,462,242Derivative liabilities − − − − 169,735 169,735Total financial assets P=− P=− P=76,018,471 P=− P=169,735 P=76,188,206*excluding statutory liabilities to the Government**excluding non-financial liabilities.

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2013

Loans andReceivables

AFSInvestments

Liabilities atAmortized

Cost

FinancialAssets at

FVPL

DerivativesDesignated as

Cash FlowHedges Total

(In Thousand Pesos)Financial AssetsCash and cash equivalents P=16,043,155 P=− P=− P=− P=− P=16,043,155Trade receivables 3,305,921 − − − − 3,305,921Non-trade receivables 94,852 − − − − 94,852Loans and notes receivables 124,937 − − − − 124,937Employee receivables 11,958 − − − − 11,958Long-term receivables 16,685 − − − − 16,685AFS - debt investments − 341,842 − − − 341,842AFS - equity investments − 407,242 − − − 407,242Derivative assets − − − 7,547 53,583 61,130Total financial assets P=19,597,508 P=749,084 P=− P=7,547 P=53,583 P=20,407,722

(In Thousand Pesos)Financial LiabilitiesAccounts payable* P=− P=− P=5,351,131 P=− P=− P=5,351,131Accrued interest on long-

term debts − − 792,686 − − 792,686Other payables** − − 56,563 − − 56,563Due to related parties − − 53,347 − − 53,347Royalty payable − − 39,671 39,671Long-term debts − − 58,548,760 − − 58,548,760Derivative liabilities − − − − 4,198 4,198Total financial assets P=− P=− P=64,842,158 P=− P=4,198 P=64,846,356*excluding statutory liabilities to the Government**excluding non-financial liabilities.

The table below demonstrates the income, expense, gains or losses of the Company’s financialinstruments for the year ended December 31, 2014, 2013 and 2012.

2014 2013 2012Effect on Profit

or LossEffect

on EquityEffect on

Profit or LossEffect

on EquityEffect on


on EquityIncrease

(Decrease)Increase

(Decrease)Increase

(Decrease)Increase

(Decrease)Increase

(Decrease)Increase

(Decrease)Loans and receivablesInterest income on: Cash in banks (Note 7) 538,777 P=– P=52,155,412 P=– P=3,596,543 P=– Cash equivalents (Note 7) 158,432,173 – 230,926,922 – 312,797,929 – Trade receivables – – – – 693,922 – Employee and other receivables 25,622,077 – 8,992,474 – 3,338,547 –Provision for doubtful

accounts - trade receivables – – (15,545,673) – (31,775,230) –184,593,027 P=– P=276,529,135 P=– P=288,651,711 P=–

AFS investmentsEquity investments: Net gain (loss) recognized in equity P=– P=116,656,029 P=– (P=55,137,703) P=– (P=3,648,940)Debt investments: Net gain (loss) recognized

in equity – (3,074,675) – (26,773,701) – 23,412,750 Interest income on

government debt securities 98,628 – 785,152 – 43,111,994 –

Net unrealized gain removed from equity and recognized in profit or loss (Note 9) – – – – – –

Gain on early redemption of AFS investment (Note 9) – – – – – –

P=98,628 113,581,354 P=785,152 (P=81,911,404) P=43,111,994 P=19,763,810

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2014 2013 2012Effect on Profit

or LossEffect

on EquityEffect on


on EquityEffect on


on EquityIncrease

(Decrease)Increase

(Decrease)Increase

(Decrease)Increase

(Decrease)Increase

(Decrease)Increase

(Decrease)Financial assets at FVPLNet fair value changes of

forward contracts P=7,517,980 P=– P=14,243,178 P=– (P=4,131,240) P=–

Derivatives designated as cashflow hedges

Cumulative translationadjustment P=– (P=122,566,454) P=– P=88,810,758 P=– (P=144,426,476)

Financial liabilities atamortized cost

Interest expense on (Note 24): Long-term debts, including

amortization oftransaction costs (P=3,713,109,302) P=–(P=3,352,638,769) P=– (P=3,656,390,728) P=–

Royalty fee payable – – – – (10,945,030) – Loan payable and others – – – – (59,822) –Loss on extinguishment of debt

(Note 26) – – – – (188,145,763) –(P=3,713,109,302) P=–(P=3,352,638,769) P=– (P=3,855,541,343) P=–

Derivative Financial InstrumentsThe Company engages in derivative transactions, particularly foreign currency swaps, foreigncurrency forwards, currency swaps and interest rate swaps to manage its foreign currency riskand/or interest rate risk arising from its foreign-currency denominated loans. These derivatives areaccounted for either as derivatives designated as accounting hedges or derivatives not designatedas accounting hedges.

The table below shows the derivative financial instruments of the Company:

2014 2013Derivative

AssetsDerivativeLiabilities

DerivativeAssets

DerivativeLiabilities

Derivatives designated as accounting hedges

Cross-currency swaps P=154,169,144 P=– P=53,583,080 P=4,198,322Interest rate swaps – 169,734,900 – –

Derivatives not designated as accounting hedges

Foreign currency swap contracts – – 7,547,021 –Total derivatives P=154,169,144 P=169,734,900 P=61,130,101 P=4,198,322Presented as:

Current P=22,024,164 P=3,394,698 P=14,244,905 P=524,790Noncurrent 132,144,980 166,340,202 46,885,196 3,673,532

Total derivatives P=154,169,144 P=169,734,900 P=61,130,101 P=4,198,322Derivatives Not Designated as Accounting Hedges

A. Foreign Currency Swap ContractsA foreign currency swap is an agreement to exchange amounts in different currencies based on thespot rate at trade date and to re-exchange the same currencies at a future date based on an agreedrate.

In 2013, the Company entered into a total of 22 foreign currency swap contracts with aggregatenotional amount of US$105.6 million and an average forward rate of P=44.0.

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The Company settled these foreign currency swap contracts in 2014 resulting to a 15.1 milliongain that was recorded under “Derivative gains - net” in the consolidated statement of income.

For the years ended December 31, 2014 and 2013, the Company recognized P=7.5 million gain andP=12.9 million gain, respectively, from the fair value changes of the foreign currency swapcontracts. These are recorded under “Derivative gains (losses) - net” in the consolidated statementsof income.

The Company did not enter into any foreign currency swap transaction in 2014.

B. Foreign Currency Forward ContractsThese are contractual agreements to buy or sell a foreign currency at an agreed rate on a futuredate.

In 2013, the Company entered into a total of 45 currency forward contracts with variouscounterparty banks. These contracts include one deliverable and 44 non-deliverable forwardcontracts. The deliverable buy JP¥ - sell US$ forward contract has notional amount and forwardrate of US$3.0 million and JP¥91.0, respectively. As for the non-deliverable forward contracts,the Company entered into sell US$ - buy PHP= transactions with onshore banks and simultaneouslyentered into buy US$ - sell PHP= transactions with offshore banks as an offsetting position. Theaggregate notional amount of these sell PHP= - buy US$ forward contracts was US$130.0 millionwhile the average forward rate was P=43.61.

For the year ended December 31, 2013, the Company recognized P=1.6 million gain from fair valuechanges of these foreign currency forward contracts. Such amount is recorded under “Derivativegains - net” in the consolidated statement of income.

The Company did not enter into any foreign currency forward transaction in 2014.

Derivatives Designated as Accounting Hedges

A. Cross Currency Swap ContractsIn 2012, the Parent Company entered into six (6) non-deliverable cross-currency swap (NDCCS)agreements with an aggregate notional amount of US$65.00 million. These derivative contractsare designed to partially hedge the foreign currency and interest rate risks on the ParentCompany's Refinanced Syndicated Term Loan (Hedged Loan) that is benchmarked against USLIBOR and with flexible interest reset feature that allows the Parent Company to select whatinterest reset frequency to apply (i.e., monthly, quarterly or semi-annually) [see Note 17]. As it isthe Parent Company’s intention to reprice the interest rate on the Hedged Loan quarterly, theParent Company utilizes NDCCS with quarterly interest payments and receipts.

During 2014, the Parent Company entered into additional six (6) NDCCS with aggregate notionalamount of US$45.0 million to further hedge its foreign currency risks and interest rate risksarising from the Hedged Loan.

Effectively, the twelve (12) NDCCS converted 62.86% of Hedged Loan into a fixed rate peso loan.

Under the NDCCS agreements, the Parent Company receives floating interest based on 3-monthUS LIBOR plus 175 basis points and pays fixed peso interest. On specified dates, the ParentCompany also receives specified USD amounts in exchange for specified peso amounts based onthe agreed swap rates. These USD receipts correspond with the expected interest and fixedprincipal amounts due on the Hedged Loan.

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Pertinent details of the NDCCS are as follows:

Notionalamount

(in millions)TradeDate

EffectiveDate

MaturityDate

Swaprate

Fixedrate Variable rate

US$15.00 03/26/12 03/27/12 06/17/17 P43.05 4.87% 3-month LIBOR + 175 bps10.00 04/18/12 06/27/12 06/17/17 42.60 4.92 3-month LIBOR + 175 bps10.00 05/03/12 06/27/12 06/17/17 42.10 4.76 3-month LIBOR + 175 bps10.00 06/15/12 06/27/12 06/17/17 42.10 4.73 3-month LIBOR + 175 bps10.00 07/17/12 09/27/12 06/17/17 41.25 4.58 3-month LIBOR + 175 bps10.00 10/29/12 12/27/12 06/17/17 41.19 3.44 3-month LIBOR + 175 bps

7.50 05/14/14 06/27/14 06/17/17 43.60 3.80 3-month LIBOR + 175 bps7.50 05/14/14 06/27/14 06/17/17 43.57 3.80 3-month LIBOR + 175 bps7.50 06/09/14 06/27/14 06/17/17 43.55 3.60 3-month LIBOR + 175 bps7.50 06/09/14 06/27/14 06/17/17 43.55 3.60 3-month LIBOR + 175 bps7.50 07/10/14 9/27/14 06/17/17 43.29 3.50 3-month LIBOR + 175 bps7.50 07/09/14 9/27/14 06/17/17 43.37 3.68 3-month LIBOR + 175 bps

The maturity date of the 12 NDCCS coincides with the maturity date of the Hedged Loan.

As of December 31, 2014 and 2013, the outstanding aggregate notional amount of the ParentCompany’s NDCCS amounted to US$110 million and US$65.00 million, respectively. Theaggregate fair value changes on these NDCCS amounting to P=8.4 million loss and P=55.6 millionloss as of December 31, 2014 and 2013, respectively, were recognized by the Company under"Cumulative Translation Adjustments on Hedging Transactions” account.

Hedge Effectiveness ResultsAs of December 31, 2014 and 2013, the fair value of the outstanding NDCCS amounted to P=154.2million and P=56.9 million, respectively. Since the critical terms of the Hedged Loan and NDCCSmatch, the Parent Company recognized the aggregate fair value changes on these NDCCS under“Cumulative Translation Adjustment on Hedging Transaction” account in the consolidatedstatements of financial position.

B. Interest Rate Swap ContractsIn the last quarter of 2014, EBWPC entered into four (4) interest rate swaps (IRS) with aggregatenotional amount of US$150 million. This is to partially hedge the interest rate risks on its ECAand Commercial Debt Facility (Foreign Facility) that is benchmarked against US LIBOR and withflexible interest reset feature that allows EBWPC to select what interest reset frequency to apply(i.e., monthly, quarterly or semi-annually) [see Note 17]. As it is EBWPC's intention to reprice theinterest rate on the Foreign facility semi-annually, EBWPC utilizes IRS with semi-annual interestpayments and receipts.Under the IRS agreement, EBWPC will receive semi-annual interest of 6-month USD-LIBOR andwill pay fixed interest. EBWPC designated the IRS as hedging instruments in cash flow hedgeagainst the interest rate risks arising from the Foreign Facility.

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Pertinent details of the IRS are as follows:

Notionalamount

(in million)TradeDate

EffectiveDate

MaturityDate

Fixed rate Variable rate

US$62.00 10/20/14 12/15/14 10/23/29 2.635% 6-month LIBOR40.00 10/20/14 12/15/14 10/23/29 2.635 6-month LIBOR39.00 12/11/14 12/15/14 10/23/29 2.635 6-month LIBOR9.00 10/20/14 12/15/14 10/23/29 2.508 6-month LIBOR

The maturity date of the six IRS coincides with the maturity date of the Foreign Facility.

As of December 31, 2014, the outstanding aggregate notional amount of EBWPC's IRS amountedto US$150 million. The aggregate fair value changes on these IRS amounted to P=169.7 millionloss as of December 31, 2014.

Hedge Effectiveness ResultsAs of December 31, 2014, the fair value of the outstanding IRS amounted to (P=169.7 million).Since the critical terms of the Foreign Facility and IRS match, EBWPC recognized the aggregatefair value changes on these IRS under “Cumulative Translation Adjustment on HedgingTransaction” account in the consolidated statements of financial position.

The net movement of fair value changes made to “Cumulative Translation Adjustment on HedgingTransactions” account for the Company’s cash flow hedges is as follows:

2014 2013Balance at beginning of the year (P=55,615,718) (P=144,426,476)Changes in fair value of the cash flow hedges (132,172,633) 244,634,426

(187,788,351) 100,207,950Transferred to consolidated statement of incomeForeign exchange (gain) / loss (52,375,000) (189,630,000)Interest expense 67,222,119 43,674,194

14,847,119 (145,955,806)Balance before tax (172,941,234) (45,747,856)Tax (5,240,938) (9,867,862)Balance at end of the year (P=178,182,172) (P=55,615,718)

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Fair Value Changes of DerivativesThe table below summarize the net movement in fair values of the Parent Company’s derivativesas of December 31, 2014 and 2013.

2014 2013Balance at beginning of the year P=56,931,779 (P=238,675,102)Net changes in fair value of derivatives:

Designated as accounting hedges (132,172,633) 244,634,426Not designated as accounting hedges 7,517,980 14,243,178

(124,654,653) 258,877,604Fair value of settled instruments:

Designated as accounting hedges 67,222,118 43,674,194Not designated as accounting hedges (15,065,000) (6,944,917)

52,157,118 36,729,277Balance at end of the year (P=15,565,756) P=56,931,779Presented as:

Derivative assets P=154,169,144 P=61,130,101Derivative liabilities (169,734,900) (4,198,322)

(P=15,565,756) P=56,931,779

The effective portion of the changes in the fair value of the NDCCS designated as accountinghedges were deferred in equity under “Cumulative Translation Adjustment on HedgingTransactions” account.

Capital ManagementThe primary objective of the Company’s capital management is to ensure that it maintains ahealthy capital ratio in order to comply with its financial loan covenants and support its businessoperations.

The Company manages and makes adjustment to its capital structure as it deems necessary.To maintain or adjust its capital structure, the Company may increase the levels of capitalcontributions from its creditors and owners/shareholders through debt and new shares issuance,respectively. No significant changes have been made in the objectives, policies and processes ofthe Company from the previous years.

The Company monitors capital using the debt ratio, which is long-term liabilities divided by long-term liabilities plus equity. The Company’s policy is to keep the debt ratio at not more than 70:30.The Company’s long-term liabilities include both the current and long-term portions of long-termdebts. Equity includes all items presented in the equity section of the consolidated statement offinancial position.

The table below shows the total capital considered by the Company and its debt ratio as ofDecember 31, 2014 and 2013.

2014 2013Long-term liabilities P=69,462,241,673 P=58,548,760,335Equity 43,620,086,477 36,244,958,905Total P=113,082,328,150 P=94,793,719,240Debt ratio 61.4% 61.8%

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As of December 31, 2014 and 2013, the Company is able to meet its capital managementobjectives.

32. Commitments and Contingencies

Stored EnergyIn 1996 and 1997, the Parent Company entered into Addendum Agreements to the PPA related tothe Unified Leyte power plants where any excess generation above the nominated energy ortake-or-pay volume will be credited against payments made by NPC for the periods it was not ableto accept electricity delivered by EDC (see Note 34). As of December 31, 2014 and 2013, thecommitment for stored energy is equivalent to 4,326.6 GWH.

Lease CommitmentsFuture minimum lease payments under the operating leases as of December 31, 2014 and 2013 areas follows:

2014 2013Within one year P=93.1 million P=99.3 millionAfter one year but not more than five years 89.4 million 204.3 millionTotal P=182.5 million P=303.6 million

The Company’s lease commitments pertain to rentals on the drilling rigs, head office and variousoffice space and warehouse for steam/electricity projects in Leyte, Northern Negros, Albay,Sorsogon, Southern Negros and Mindanao. Rent expense amounted to P=610.9 million,P=498.2 million, and P=601.3 million in 2014, 2013 and 2012, respectively.

Purchase CommitmentsTotal purchase commitments for capital items as of December 31, 2014 and 2013 amounted toP=5,674.4 million and P=11,820.0 million, respectively, of which, contractual commitments for theacquisitions of property, plant and equipment amounted to P=3,213.9 million and P=11,820.0 millionas December 31, 2014 and 2013, respectively. These are expected to be settled in the nextfinancial year.

Legal ClaimsThe Company is contingently liable for lawsuits or claims filed by third parties, including laborrelated cases, which are pending decision by the courts, the outcomes of which are not presentlydeterminable. In the opinion of management and its legal counsel, the eventual total liability fromthese lawsuits or claims, if any, will not have a material effect on the consolidated financialstatements (see Notes 3 and 18).

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33. Geothermal Service Concession Contracts

Geothermal Service ContractsUnder P.D. 1442, all geothermal resources in public and/or private lands in the Philippines,whether found in, on or under the surface of dry lands, creeks, rivers, lakes, or other submergedlands within the waters of the Philippines, belong to the State, inalienable and imprescriptible, andtheir exploration, development and exploitation. Furthermore, the Government may enter intoservice contracts for the exploration, development and exploitation of geothermal resources in thePhilippines.

Pursuant to P.D. 1442, the Parent Company had entered into the following Geothermal ServiceContracts (GSCs) with the Government of the Republic of the Philippines (represented by theDOE) for the exploration, development and production of geothermal fluid for commercialutilization:a. Tongonan, Leyte, dated May 14, 1981b. Southern Negros, dated October 16, 1981c. Bac-Man, Sorsogon, dated October 16, 1981d. Mt. Apo, Kidapawan, Cotabato, dated March 24, 1992e. Mt. Labo, Camarines Norte and Sur, dated March 19, 1994f. Northern Negros, dated March 24, 1994

The exploration period under the service contracts shall be five years from the effective date,renewable for another two years if the Parent Company has not been in default in its exploration,financial and other work commitments and obligations and has provided a work program for theextension period acceptable to the Government. Where geothermal resource in commercialquantity is discovered during the exploration period, the service contracts shall remain in force forthe remainder of the exploration period or any extension thereof and for an additional period of25 years thereafter, provided that, if the Parent Company has not been in default in its obligationsunder the contracts, the Government may grant an additional extension of 15 to 20 years.

Under P.D. 1442, the right granted by the Government to the Company to explore, develop, andutilize the country’s geothermal resource is subject to sharing of net proceeds with theGovernment. The net proceeds is what remains after deducting from the gross proceeds theallowable recoverable costs, which include development, production and operating costs.

The allowable recoverable costs shall not exceed 90% of the gross proceeds. The Parent Companypays 60% of the net proceeds as Government share and retains the remaining 40%. The 60%government share is comprised of royalty fees and income taxes. The royalty fees are splitbetween the DOE (60%) and the LGU (40%) where the project is located.

Geothermal Renewable Energy Service Contracts and Geothermal Operating ContractsR.A. 9513, otherwise known as the Renewable Energy Act of 2008 (RE Law) and which becameeffective in January 2009, mandates the conversion of existing GSCs under P.D. 1442 intoGeothermal Renewable Energy Service Contracts (GRESCs) so companies may avail of theincentives under the RE Law. Aside from the tax incentives, the significant terms of the serviceconcessions under the GRESCs are similar to the GSCs except that the Parent Company hascontrol over any significant residual interest over the steam fields, power plants and relatedfacilities throughout the concession period and even after the concession period.

On September 10, 2009, the Parent Company was granted the Provisional Certificate ofRegistration as an RE Developer for the following existing projects: (1) GSC No. 01 - Tongonan,Leyte, (2) GSC No. 02 - Palinpinon, Negros Oriental, (3) GSC No. 03 - Bacon-Manito,

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Sorsogon/Albay, (4) GSC No. 04 - Mt. Apo, North Cotabato, and (5) GSC No. 06 - NorthernNegros. With the receipt of the certificates of provisional registration as geothermal REDeveloper, the fiscal incentives of the RE Law were availed of by the Parent Company retroactivefrom the effective date of such law on January 30, 2009. Fiscal incentives include, among others,change in the applicable corporate tax rate from 30% to 10% for RE-registered activities.

On October 23, 2009, the Parent Company received from DOE the Certificate of Registration asthe RE Developer for the following geothermal projects:

a. Tongonan Geothermal Project, Under DOE Certificate of Registration No.GRESC 2009-10-001

b. Southern Negros Geothermal Project, Under DOE Certificate of Registration No.GRESC 2009-10-002

c. Bacon-Manito Geothermal Project, Under DOE Certificate of Registration No.GRESC 2009-10-003

d. Mt. Apo Geothermal Project, Under DOE Certificate of Registration No.GRESC 2009-10-004

e. Northern Negros Geothermal Project, Under DOE Certificate of Registration No.GRESC 2009-10-005

On February 19, 2010, the Parent Company’s GSC in Mt. Labo in Camarines Norte and Sur wasconverted to GRESC 2010-02-020.

On March 24, 2010, the DOE issued to the Parent Company a new GRESC for Mainit GeothermalProject under DOE Certificate of Registration No. GRESC 2010-03-021.

The remaining service contract of the Parent Company covered by P.D. 1442 as ofDecember 31, 2013 is the Mt. Cabalian in Southern Leyte with a term of 25 years from theeffective date of the contract on January 31, 1997 and for an additional period of 25 years if theParent Company has not been in default in its obligations under the GSC. As discussed in Note 3,evaluation and exploration assets related to Cabalian project were impaired in 2013.

In 2014, after thorough assessment, EDC surrendered to the Department of Energy the GeothermalService Contract covering the Southern Leyte Geothermal Project located in Cabalian, SouthernLeyte. EDC has found the project not viable considering the size of the resource and the riskassociated with the development and sustainability thereof. The Company written off theallowance recognized for Cabalian project amounting to P=574.8 million.

The Company also holds geothermal resource service contracts for the following prospect areas:

(i) Ampiro Geothermal Project (with a five-year pre-development period expiring in 2017,25-year contract period expiring in 2037)

(ii) Mandalagan Geothermal Project (with a five-year pre-development period expiring in 2017,25-year contract period expiring in 2037)

(iii) Mt. Zion Geothermal Project (with a five-year pre-development period expiring in 2017,25-year contract period expiring in 2037)

(iv) Lakewood Geothermal Project (with a five-year pre-development period expiring in 2017,25-year contract period expiring in 2037)

(v) Balingasag Geothermal Project (with a five-year pre-development period expiring in 2017,25-year contract period expiring in 2037)

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Under the GRESCs, the Parent Company pays the Government royalty fee equivalent to 1.5% ofthe gross income from the sale of geothermal steam produced and such other income incidental toand arising from generation, transmission, and sale of electric power generated from geothermalenergy within the contract areas (see Note 16). Under the GRESCs, gross income derived frombusiness is an amount equal to gross sales less sales returns, discounts and allowances, and cost ofgoods sold. Cost of goods sold includes all business expenses directly incurred to produce thesteam used to generate power under a GRESC.

The RE Law also provides that the exclusive right to operate geothermal power plants shall begranted through a Renewable Energy Operating Contract with the Government through the DOE.Accordingly, on May 8, 2012, the EDC’s subsidiaries, Green Core Geothermal Inc. and Bac-ManGeothermal Inc. secured three Geothermal Operating Contracts (GOCs) covering the followingpower plant operations:

(i) Tongonan Geothermal Power Plant under DOE Certificate of Registration No. GOC 2012-04-038 (with a twenty-five (25) year contract period expiring in 2037, renewable for anothertwenty-five (25) years)

(ii) Palinpinon Geothermal Power Plant under DOE Certificate of Registration No. GOC 2012-04-037 (with a twenty-five (25) year contract period expiring in 2037, renewable for anothertwenty-five (25) years)

(iii) Bacon-Manito Geothermal Power Plant under DOE Certificate of Registration No. GOC No.2012-04-039 (with a twenty-five (25) year contract period expiring in 2037, renewable foranother twenty-five (25) years)

The Government share, presented as “Royalty fees” under the “Costs of sale of electricity”account, for both the GRESCs and GOCs is allocated between the DOE (60%) and the LGUs(40%) within the applicable contract area.

Total outstanding royalty fees and the related expense are shown in Notes 16 and 21, respectively.

34. Power Purchase Agreements

The Parent Company sells electricity to NPC pursuant to the following PPAs:

588.4 MW Unified LeyteThe PPA provides, among others, that NPC shall pay the Parent Company a base price perkilowatt-hour of electricity delivered subject to inflation adjustments. The PPA stipulates acontracted annual energy of 1,370 gigawatt-hours (GWH) for Leyte-Cebu and 3,000 GWH forLeyte-Luzon throughout the term of the PPA. It also stipulates that the Parent Company shallspecify the nominated energy for every contract year.

52.0 MW Mindanao IThe PPA provides, among others, that NPC shall pay the Parent Company a base price perkilowatt-hour of electricity delivered subject to inflation adjustments. The PPA stipulates aminimum offtake energy of 330 GWH for the first year and 390 GWH per year for the succeedingyears. The contract is for a period of 25 years, which commenced in March 1997.

54.0 MW Mindanao IIThe PPA provides, among others, that NPC shall pay the Parent Company a base price perkilowatt-hour of electricity delivered subject to inflation adjustments. The PPA stipulates a

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minimum energy offtake of 398 GWH per year. The contract is for a period of 25 years, whichcommenced in June 1999.

Revenue from sale of electricity covered by PPAs amounted to P=13,838.9 million,P=12,287.8 million and P=13,051.5 million for the years ended December 31, 2014, 2013 and 2012,respectively.

35. GCGI’s Power Supply Contracts/Power Supply Agreements

With the Company’s takeover of the Palinpinon and Tongonan power plants effectiveOctober 23, 2009, Schedule X of the Asset Purchase Agreement (APA) with PSALM provides forthe assignment to the Company of 12 NPC’s PSCs. As of December 31, 2014, the followingPSCs remained effective:

Customers Contract ExpirationDynasty Management & Development Corp. (DMDC) March 25, 2016Philippine Foremost Milling Corp. (PFMC) March 25, 2016

Since the Company’s takeover of the power plants, 25 new PSAs have been signed as follows:

Customers Contract Start Contract Expiration

Leyte Don Orestes Romualdez Electric Cooperative, Inc.(DORELCO)* December 26, 2010 December 25, 2020 Leyte II Electric Cooperative, Inc. (LEYECO II)* December 26, 2010 December 25, 2040 LEYECO II* December 26, 2011 December 25, 2040 Leyte III Electric Cooperative, Inc. (LEYECO III)* December 26, 2011 December 25, 2040 Leyte IV Electric Cooperative, Inc. (LEYECO IV)* December 26, 2012 December 25, 2017 Leyte V Electric Cooperative, Inc. (LEYECO V)* December 26, 2010 December 25, 2020 Philippine Phosphate Fertilizer Corporation (PHILPHOS) December 26, 2011 December 25, 2016

Cebu Visayan Electric Company, Inc. (VECO)* December 26, 2010 December 25, 2024 VECO* December 26, 2011 December 25, 2016 Balamban Enerzone Corporation (BEZ)* December 26, 2010 December 25, 2025 First Gen Energy Solutions (FGES) June 26, 2013 June 25, 2023

Bohol Bohol II Electric Cooperative, Inc. (BOHECO II)* January 26, 2013 January 25, 2040

Negros Central Negros Electric Cooperative, Inc. (CENECO)* December 26, 2011 December 25, 2040 Negros Occidental Electric Cooperative, Inc. (NOCECO)* December 26, 2010 December 25, 2020 Negros Oriental I Electric Cooperative, Inc. (NORECO I)* December 26, 2010 December 25, 2030 Negros Oriental II Electric Cooperative (NORECO II)* December 26, 2010 December 25, 2035 Northern Negros Electric Cooperative, Inc. (NONECO)*,** December 26, 2010 December 25, 2020 Dumaguete Coconut Mills, Inc. (DUCOM) October 26, 2010 October 25, 2020

Panay Aklan Electric Cooperative, Inc. (AKELCO)* March 26, 2010 December 25, 2040

Antique Electric Cooperative, Inc. (ANTECO) December 26, 2014 December 25, 2040 Capiz Electric Cooperative, Inc. (CAPELCO)* January 27, 2010 December 25, 2040 Iloilo I Electric Cooperative, Inc. (ILECO I)* March 26, 2010 December 25, 2040 Iloilo II Electric Cooperative, Inc. (ILECO II)* December 26, 2010 December 25, 2030 Iloilo III Electric Cooperative, Inc. (ILECO III)* December 26, 2012 December 25, 2030 Guimaras Electric Cooperative, Inc. (GUIMELCO)* December 26, 2012 December 25, 2040*With Provisional Authority from the Energy Regulatory Commission (ERC) as of December 31, 2014.** NONECO is formerly known as V.M.C. Rural Electric Service Cooperative, Inc. (VRESCO).

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*SGVFS011523*

Coordination with the ERC is ongoing to secure the Final Authority for the filed applications forthe approval of the PSAs with the distribution utility customers. The term was extended for PSAswith LEYECO II, LEYECO III, VECO, BEZ, BOHECO II, CENECO, NORECO I, NORECO II,AKELCO, CAPELCO, ILECO I, ILECO II, ILECO III and GUIMELCO.

Preparations are ongoing for the filing with the ERC of the applications for the approval of thePSAs with ANTECO.

Revenue from sale of electricity under the PSCs and PSAs amounting to P=10,486.7 million andP=10,045.9 million in 2014 and 2013, respectively.

36. BGI Power Supply Agreements

In 2011, the Company entered into two PSAs with Batangas II Electric Cooperative, Inc.(BATELEC II), both with contract period starting December 26, 2011 to December 25, 2012, andone with Linde Philippines, Inc., with a contract period starting December 26, 2011 toDecember 25, 2013. The two PSAs with BATELEC II were not subsequently renewed orextended.

On December 13, 2012, the PSA between GCGI and PASAR was assigned to the Companyeffective December 26, 2012.

Total revenue from the sale of electricity amounted to P=3,641.3 million in 2014 andP=758.32 million in 2013. The costs of purchases of electricity from WESM were set off againstrevenue from sale of electricity. Any excess revenue from or excess cost of sale of electricity ispresented as revenue from sale of electricity or cost of sale of electricity, respectively.

37. Wind Energy Service Contracts and Solar Energy Service Contract

Wind Energy Service Contracts

On September 14, 2009, the Parent Company entered into WESC 2009-09-004 with the DOEgranting the Parent Company the right to explore and develop the Burgos Wind Project for aperiod of 25 years from the effective date. The pre-development stage under the WESC shall betwo years extendible for another year if the Parent Company has not been in default in itsexploration or work commitments and has provided a work program for the extension period uponconfirmation by the DOE. Within the pre-development stage, the Parent Company shall undertakeexploration, assessment and other studies of wind resources in the contract area. Upon declarationof commerciality, as confirmed by the DOE, the WESC shall remain in force for the balance of the25-year period for the development/commercial stage.

The DOE shall approve the extension of the WESC for another 25 years under the same terms andconditions, provided the Company is not in default of any material obligations under the contractand has submitted a written notice to the DOE for the extension of the contract not later than oneyear prior to the expiration of the original 25-year period. Further, the WESC provides that allmaterials, equipment, plant and other installations erected or placed on the contract area by theParent Company shall remain the property of the Parent Company throughout the term of thecontract and after its termination.

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*SGVFS011523*

On May 26, 2010, the BOD of EDC approved the assignment and transfer to EBWPC of all thecontracts, assets, permits and licenses relating to the establishment and operation of the BurgosWind Power Project under DOE Certificate of Registration No. WESC 2009-09-004. OnMay 16, 2013, EBWPC was granted a Certificate of Confirmation of Commerciality by the DOE.

The Parent Company has submitted a letter of surrender for the Taytay, Dinagat and Siargaocontract areas on December 19, 2011 and the Camuguin contract area on January 11, 2013 andthus, will not pursue these project areas further. Per Section 4.2 of the WESC, the surrender willtake effect 30 days upon the RE Developer’s submission of a written notice to the DOE.

The Company holds ten (10) Wind Energy Service Contracts (WESC) with the DOE. The WESCscover the following:· 150 MW wind project in Burgos, Ilocos Norte; under DOE Certificate of Registration

No. WESC 2009-09-004 (25-year contract period expiring in 2034)· 84 MW wind project in Pagudpud, Ilocos Norte; under DOE Certificate of Registration

No. WESC 2010-02-040 (25-year contract period expiring in 2035)· Burgos 1 wind project in Burgos, Ilocos Norte; under DOE Certificate of Registration

No. WESC 2013-12-063 (25-year contract period expiring in 2038)· Burgos 2 wind project in Burgos, Ilocos Norte; under DOE Certificate of Registration

No. WESC 2013-12-063 (25-year contract period expiring in 2038)· Matnog 1 wind project in Matnog & Magdalena, Sorsogon; under DOE Certificate of

Registration No. WESC 2014-07-075 (25-year contract period expiring in 2039)· Matnog 2 wind project in Matnog, Sorsogon; under DOE Certificate of Registration

No. WESC 2014-07-076 (25-year contract period expiring in 2039)· Matnog 3 wind project in Matnog, Sorsogon; under DOE Certificate of Registration

No. WESC 2014-07-077 (25-year contract period expiring in 2039)· Iloilo 1 wind project in Batad & San Dionisio, Iloilo; under DOE Certificate of Registration

No. WESC 2014-07-078 (25-year contract period expiring in 2039)· Iloilo 2 wind project in Concepcion, Iloilo; under DOE Certificate of Registration

No. WESC 2014-07-079 (25-year contract period expiring in 2039)· Negros wind project in Manapla & Cadiz City, Negros Occidental; under DOE Certificate of

Registration No. WESC 2014-07-080 (25-year contract period expiring in 2039)

Solar Energy Service Contract

On August 6, 2014, the Parent Company entered into SESC No. 2014-07-088 with the DOEgranting the Parent Company the right to explore and develop the Solar Energy Project.

The Company holds two (2) Solar Energy Service Contracts (SESC) with the DOE. The SESCscover areas in the following:· 4 MW Burgos, Ilocos Norte; under DOE Certificate of Registration No. SESC 2014-07-088

(25-year contract period expiring in 2039)· Bago City, Negros Occidental; under DOE Certificate of Registration No. SESC 2014-04-066

(25-year contract period expiring in 2039)

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*SGVFS011523*

38. FG Hydro’s Contracts and Agreements

PSCsIn 2006, FG Hydro acquired existing contracts from NPC as part of FG Hydro’s acquisition of thePAHEP/MAHEP for the supply of electric energy with several customers within the vicinity ofNueva Ecija. All of these contracts had expired as of December 31, 2011. Upon renegotiationwith the customers and due process as stipulated by the ERC, the expired contracts were renewedexcept for the contract with Pantabangan Municipal Electric System (PAMES).

FG Hydro shall generate and deliver to these customers the contracted energy on a monthly basis.FG Hydro is bound to service these customers for the remainder of the stipulated terms, the rangeof which falls from December 2008 to December 2020.

Upon expiration, these contracts may be renewable upon renegotiation with the customers and bythe approval of ERC. As of December 31, 2013, there are four remaining PSCs being serviced byFG Hydro.

In addition to the above contracts, FG Hydro entered into a PSA with BGI, effective for a periodof two months, commencing on December 26, 2011, unless it is sooner terminated or thereafterrenewed or extended under such terms as may be agreed by both parties.

Details of the existing contracts of FG Hydro are as follows:

Related Contracts Expiry Date Other DevelopmentsPAMES December 25, 2008 FG Hydro had continued to supply

PAMES’ electricity requirements withPAMES’ compliance to the agreedrestructured payment terms. However,there was no new agreement signedbetween FG Hydro and PAMES

Nueva Ecija II ElectricCooperative, Inc., Area 2(NEECO II - Area 2)

December 25, 2016 The ERC granted a provisional approvalof the PSA between FG Hydro andNEECO II-Area 2 on August 2, 2010with a pending final resolution of theapplication for the approval thereof.

Edong Cold Storage and IcePlant (ECSIP)

December 25, 2020 A new agreement was signed by FGHydro and ECOSIP in November 2010for the supply of power in thesucceeding 10 years.

NIA-Upper Pampanga RiverIntegrated Irrigation System(UPRIIS)

October 25, 2020 FG Hydro and NIA-UPRIIS signed anew agreement in October 2010 for thesupply of power in the succeeding 10years.

In addition to the above contracts, FG Hydro entered into a PSA with Nueva Ecija II ElectricCooperative, Inc., Area 1 (NEECO II - Area 1). The contract term is for a minimum of five years,commencing on August 26, 2013, and may further continue and remain effective up to August 25,2023 subject to agreement by both parties on the provisions of re-pricing. The ERC granted aprovisional approval of the PSA between FG Hydro and NEECO II-Area 1 on January 14, 2014.

FG Hydro also entered into a PSA with FPIC. The contract was originally for a period of eightmonths, commencing on April 26, 2012, and was extended for a month or until January 25, 2013.

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*SGVFS011523*

Operation and Maintenance Agreement (O&M Agreement)In 2006, FG Hydro entered into an O&M Agreement with NIA, with the conformity of the NPC.Under the O&M Agreement, NIA will manage, operate, maintain and rehabilitate theNon-Power Components of the PAHEP/MAHEP in consideration for a service fee based on actualcubic meter of water used by FG Hydro for power generation.

In addition, FG Hydro will provide for a trust fund amounting to P=100.0 million within the firsttwo years of the O&M Agreement. The amortization for the Trust Fund is payable in 24 monthlypayments starting November 2006 and is billed by NIA in addition to the monthly service fee.The Trust Fund has been fully funded as of October 2008.

The O&M Agreement is effective for a period of 25 years commencing on November 18, 2006and renewable for another 25 years under the terms and conditions as may be mutually agreedupon by both parties.

Total service fees incurred amounted to P=117.7 million, P=138.9 million and P=88.2 million in 2013,2012 and 2011, respectively, and are included under the “Cost of sale of electricity” account in thestatements of comprehensive income.

Memorandum of Agreement (MOA)PSALM entered into a MOA with the Protected Area Management Board (PAMB). Under theMOA, PAMB granted FG Hydro the right to use the Masiway land, where the MAHEP powerplant is situated in consideration for an annual user’s fee. The MOA will be effective for 25 yearsand renewable for a similar period subject to terms and conditions as may be mutually agreedupon by both parties.

FG Hydro incurred annual user’s fee amounting to P=0.1 million in 2014, 2013 and 2012. Theuser’s fee is included under “General and administrative expenses” account in the consolidatedstatements of income, specifically “Rental, insurance and taxes” account (see Note 22).

Ancillary Services Procurement Agreement (ASPA)FG Hydro entered into an agreement with the NGCP on February 23, 2011 after being certifiedand accredited by NGCP as capable of providing Contingency Reserve Service, DispatchableReserve Service, Reactive Power Support Service and Black Start Service. Under the agreement,FG Hydro through the PAHEP facility shall provide any of the above-stated ancillary services toNGCP.

The ASPA is effective for a period of three (3) years, commencing on February 23, 2011 and shallbe automatically renewed for another three (3) years after the end of the original term subject tocertain conditions as provided in the ASPA.

Memorandum of Agreement with NGCP (MOA with NGCP)In 2011, FG Hydro entered into a MOA with NGCP for the performance of services on theoperation of the PAHEP 230 kV switchyard and its related appurtenances (Switchyard).

NGCP shall pay FG Hydro a monthly fixed operating cost of P=0.1 million and monthly variablecharges representing energy consumed at the Switchyard.

The MOA is effective for a period of five years and renewable for another three years under suchterms as may be agreed by both parties.

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*SGVFS011523*

WESM TransactionsFG Hydro, as a direct WESM member, sells/buys electricity in the WESM.

39. Vestas Operation and Maintenance Agreement (O&M Agreement)

In 2013, EBWPC entered in an agreement with Vestas Wind Systems (Vestas) for the constructionof Phase 1 (87 MW). The project comprises three components: (i) the establishment of a windfarm facility; (ii) a 115kV transmission line; and (iii) a substation adjacent to the wind farm.

In April 2014, EBWPC and Vestas agreed for the installation of additional 63 MW (Phase 2).

EBWPC will operate and maintain the wind farm under a ten-year operations and maintenanceagreement with Vestas. The Vestas O&M contract is a service and energy-based availabilityagreement based on Vestas’ AOM 5000 product. The agreement is a full-scope maintenancecontract covering both scheduled and unscheduled maintenance with an energy-based availabilityon the wind turbines. The agreement covers the wind turbines, wind farm electrical balance-of-plant systems, the wind turbine yaw back-up generators, and the Burgos Substation.

As opposed to a traditional O&M contract that provides a guarantee that the turbines in a windpower plant are operational for a defined period of time on an annual basis (referred to as time-based availability), the AOM 5000 model provides an energy-based guarantee, which encouragesthe Contractor to ensure that the turbines are fully-operational when the wind is blowing.

40. Events After the Financial Reporting Date

On March 6, 2015, EDC declared cash dividends amounting to P=1.9 billion to its commonshareholders and P=7.5 million to its preferred shareholder of record as of March 20, 2015 payableon or before April 16, 2015.

On January 8, 2015, FG Hydro declared cash dividends amounting to P=320 million to its commonstockholders of record as of January 15, 2015 payable on or before January 23, 2015.

On March 6, 2015, the Company was authorized to undertake a 2-year share buy-back program,authorizing Management tobuy at its discretion from the market the Corporation’s shares up to anaggregate value of Pesos Four Billion (P=4,000,000,000.00) worth of the company’s commonshares. This is part of the continuing commitment to utilize some of its cash, from time to time, forthe benefit of its shareholders/ employees. The program will be executed through the open marketby means of the trading facilities of the Philippine Stock Exchange and implemented by theVP/Treasurer/CFO.

At today’s price of P=8.86 per share, the P4.0 Billion is equivalent to approximately 2.4 % of thecompany’s total outstanding common shares. The period will commence on March 15, 2015 andconclude on March 14, 2017.

On March 6, 2015, GCGI completed the execution of separate loan agreements with Asia UnitedBank Corporation, Bank of Philippine Islands, BDO Unibank, Inc., Development Bank of thePhilippines, Land Bank of the Philippines, Rizal Commercial Banking Corporation, RobinsonsBank Corporation and Union Bank of the Philippines for the total amount of P=8.5 billion.

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*SGVFS011523*

41. Notes to Company Statements of Cash Flows

Non cash investing activity consists of recognition of provision for rehabilitation and restorationamounting to P=54.9 million and P=128.6 million and capitalized borrowing cost amounting toP=383.16 and P=284.8 million of property, plant and equipment as of December 31, 2014 and 2013,respectively (see Note 12).

Exhibit 2.1

*The Parent Company has 1% direct equity interest in BTI, a subsidiary of Bayantel. This excludes the economicinterest related to voting rights assigned to Lopez Inc.

56.50%V&E

79.32%V

56.51% E

45.9% V&E52.48% V&E

EDC GeothermalCorporation (EGC)

First Gen Hydro PowerCorporation (FGHPC)

EDC Wind EnergyHoldings Inc.

(EWEHI)

EDC HoldingsInternational Limited

(EHIL)

• Green Core Geothermal Inc.(GCGI)

• Bac-Man Geothermal Inc.(BGI)

• Unified Leyte GeothermalEnergy Inc. (ULGEI)

• Southern Negros Geothermal,Inc. (SNGI)

• EDC Mindanao GeothermalInc. (EMGI)

• Bac-Man EnergyDevelopment Corporation

(BEDC)• Kayabon Geothermal, Inc.

(KGI)•Mount Apo Renewable Energy

Inc. (MAREI)

Energy Development (EDC)Corporation Chile Limitada

EDC PagudpodWind PowerCorporation

(EPWPC)

Energy DevelopmentCorporation Hong Kong

Limited(EDC HKL)

Prime TerracottaHoldings Corporation

Red VulcanHoldings Corporation

ID: 100%

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

ID: 100%D: 99.99%

Legend:D – Direct OwnershipID – Indirect OwnershipE – Economic InterestV – Voting Interest

E: 40%V: 60%

E: 100%V: 100%

PT EDC Indonesia EDC PeruHoldings S.A.C.

EDC ChileHoldings SPA

PT EDC Panas BumiIndonesia

EDC Geotermica ChileSPA

EDC GeotermicaPeru S.A.C.

GeotermicaQuellaapacheta Peru

S.A.C.

ID: 100%

ID: 70%

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

EDC Burgos WindPower

Corporation(EBWPC)

ID: 100%ID: 100%

EDC Geotermica Del SurS.A.C.

EDC Energia Azul S.A.C.

EDC Energia Peru S.A.C.

EDC EnergiaGeotermica S.A.C.

EDC Progreso GeotermicoS.A.C.

EDC Energia RenovableS.A.C.

Geotermica CruceroPeru S.A.C.

Geotermica LoriscotaPeru S.A.C.

Geotermica TutupacaNorte Peru S.A.C.

ID: 70%

EDC Bayog BurgosWind PowerCorporation(EBBWPC)

ID: 100%

EDC Bright SolarEnergy Holdings Inc.

(EBSEHI)

EDC DrillcoCorporation (EDC

Drillco)

EDC BagoSolar PowerCorporation

(EBSPC)

D: 100%

ID: 100%

EDC Pagali BurgosWind PowerCorporation(EPBWPC)

ID: 100%

EDC DesarolloSostenible Ltd

ID: 100%

EDC Energia VerdePeru S.A.C.

ID: 30%

EDC SolucionesSostenibles Ltd

ID: 100%

EDC Energia Verde Chile SpA

EDC Energia de la Tierra SpA

ID: 100%

ID: 100%

EDC BurgosSolar

Corporation(EBSC)

ID: 100%ID: 0.01%

ID: 0.01%

ID: 99.99%

ID: 99.96%

ID: 99.99% ID: 0.01%

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

ID: 70%

ID: 70%

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

SUPPLEMENTARY SCHEDULE OF ALL EFFECTIVE STANDARDSAND INTERPRETATIONSDECEMBER 31, 2014

PHILIPPINE FINANCIAL REPORTING STANDARDS ANDINTERPRETATIONSEffective as of December 31, 2014

AdoptedNot

AdoptedNot

Applicable

Framework for the Preparation and Presentation of FinancialStatementsConceptual Framework Phase A: Objectives and qualitativecharacteristics

PFRSs Practice Statement Management Commentary

Philippine Financial Reporting Standards

PFRS 1(Revised)

First-time Adoption of Philippine FinancialReporting Standards

Amendments to PFRS 1 and PAS 27: Cost of anInvestment in a Subsidiary, Jointly ControlledEntity or Associate

Amendments to PFRS 1: Additional Exemptions forFirst-time Adopters

Amendment to PFRS 1: Limited Exemption fromComparative PFRS 7 Disclosures for First-timeAdopters

Amendments to PFRS 1: Severe Hyperinflation andRemoval of Fixed Date for First-time Adopters

Amendments to PFRS 1: Government Loans

PFRS 2 Share-based Payment

Amendments to PFRS 2: Vesting Conditions andCancellations

Amendments to PFRS 2: Group Cash-settled Share-based Payment Transactions

PFRS 3(Revised)

Business Combinations

PFRS 4 Insurance Contracts

Amendments to PAS 39 and PFRS 4: FinancialGuarantee Contracts

PFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations

PFRS 6 Exploration for and Evaluation of MineralResources

Exhibit 2.2


AdoptedNot

AdoptedNot

Applicable

PFRS 7 Financial Instruments: Disclosures

Amendments to PFRS 7: Transition

Amendments to PAS 39 and PFRS 7:Reclassification of Financial Assets

Amendments to PAS 39 and PFRS 7:Reclassification of Financial Assets - Effective Dateand Transition

Amendments to PFRS 7: Improving Disclosuresabout Financial Instruments

Amendments to PFRS 7: Disclosures - Transfers ofFinancial Assets

Amendments to PFRS 7: Disclosures - OffsettingFinancial Assets and Financial Liabilities

Amendments to PFRS 7: Mandatory Effective Dateof PFRS 9 and Transition Disclosures

PFRS 8 Operating Segments

PFRS 9 Financial Instruments (2010 version)*

Amendments to PFRS 9: Mandatory Effective Dateof PFRS 9 and Transition Disclosures*

Financial Instruments (2013 version)*

Financial Instruments (2014 version)*

PFRS 10 Consolidated Financial Statements

Amendments to PFRS 10, PFRS 12 and PAS 27:Investment Entities

Amendments to PFRS 10 and PAS 28: Sale orContribution of Assets between an Investor and itsAssociate or Joint Venture*

PFRS 11 Joint Arrangements

PFRS 12 Disclosure of Interests in Other Entities

Amendments to PFRS 10, PFRS 12 and PAS 27:Investment Entities

PFRS 13 Fair Value Measurement

PFRS 14 Regulatory Deferral Accounts*

PFRS 15 Revenue from Contracts with Customers*

Philippine Accounting Standards

PAS 1(Revised)

Presentation of Financial Statements

Amendment to PAS 1: Capital Disclosures

Amendments to PAS 32 and PAS 1: Puttable


AdoptedNot

AdoptedNot

Applicable

Financial Instruments and Obligations Arising onLiquidation

Amendments to PAS 1: Presentation of Items ofOther Comprehensive Income

PAS 2 Inventories

PAS 7 Statement of Cash Flows

PAS 8 Accounting Policies, Changes in AccountingEstimates and Errors

PAS 10 Events after the Balance Sheet Date

PAS 11 Construction Contracts

PAS 12 Income Taxes

Amendment to PAS 12 - Deferred Tax: Recovery ofUnderlying Assets

PAS 16 Property, Plant and Equipment

Amendments to PAS 16 and PAS 18: Clarificationof Acceptable Methods of Depreciation andAmortization*

Amendments to PAS 16 and PAS 41: Bearer Plants*

PAS 17 Leases

PAS 18 Revenue

PAS 19 Employee Benefits

Amendments to PAS 19: Actuarial Gains andLosses, Group Plans and Disclosures

Amendments to PAS 19: Defined Benefit Plans:Employee Contributions*

PAS 19(Amended)

Employee Benefits

PAS 20 Accounting for Government Grants and Disclosureof Government Assistance

PAS 21 The Effects of Changes in Foreign Exchange Rates

Amendment: Net Investment in a Foreign Operation

PAS 23(Revised)

Borrowing Costs

PAS 24(Revised)

Related Party Disclosures

PAS 26 Accounting and Reporting by Retirement BenefitPlans

PAS 27 Separate Financial Statements


AdoptedNot

AdoptedNot

Applicable

(Amended) Amendments to PFRS 10, PFRS 12 and PAS 27:Investment Entities

Amendment: Equity Method in Separate FinancialStatements*

PAS 28(Amended)

Investments in Associates and Joint Ventures

Amendment: Accounting for Acquisitions ofInterests in Joint Operations*

PAS 29 Financial Reporting in HyperinflationaryEconomies

PAS 31 Interests in Joint Ventures

PAS 32 Financial Instruments: Disclosure and Presentation

Amendments to PAS 32 and PAS 1: PuttableFinancial Instruments and Obligations Arising onLiquidation

Amendment to PAS 32: Classification of RightsIssues

Amendments to PAS 32: Offsetting Financial Assetsand Financial Liabilities

PAS 33 Earnings per Share

PAS 34 Interim Financial Reporting

PAS 36 Impairment of Assets

Amendment to PAS 36: Impairment of Assets –Recoverable Amount Disclosures for Non-FinancialAssets

PAS 37 Provisions, Contingent Liabilities and ContingentAssets

PAS 38 Intangible Assets

PAS 39 Financial Instruments: Recognition andMeasurement

Amendments to PAS 39: Transition and InitialRecognition of Financial Assets and FinancialLiabilities

Amendments to PAS 39: Cash Flow HedgeAccounting of Forecast Intragroup Transactions

Amendments to PAS 39: The Fair Value Option

Amendments to PAS 39 and PFRS 4: FinancialGuarantee Contracts

Amendments to PAS 39 and PFRS 7:Reclassification of Financial Assets

Amendments to PAS 39 and PFRS 7:


AdoptedNot

AdoptedNot

Applicable

Reclassification of Financial Assets - Effective Dateand Transition

Amendments to Philippine Interpretation IFRIC-9and PAS 39: Embedded Derivatives

Amendment to PAS 39: Eligible Hedged Items

Amendment to PAS 39: Novation of Derivativesand Continuation of Hedge Accounting

PAS 40 Investment Property

PAS 41 Agriculture

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restorationand Similar Liabilities

IFRIC 2 Members’ Share in Co-operative Entities andSimilar Instruments

IFRIC 4 Determining Whether an Arrangement Contains aLease

IFRIC 5 Rights to Interests arising from Decommissioning,Restoration and Environmental RehabilitationFunds

IFRIC 6 Liabilities arising from Participating in a SpecificMarket - Waste Electrical and Electronic Equipment

IFRIC 7 Applying the Restatement Approach under PAS 29Financial Reporting in HyperinflationaryEconomies

IFRIC 8 Scope of PFRS 2

IFRIC 9 Reassessment of Embedded Derivatives

Amendments to Philippine InterpretationIFRIC - 9 and PAS 39: Embedded Derivatives

IFRIC 10 Interim Financial Reporting and Impairment

IFRIC 11 PFRS 2- Group and Treasury Share Transactions

IFRIC 12 Service Concession Arrangements

IFRIC 13 Customer Loyalty Programmes

IFRIC 14 The Limit on a Defined Benefit Asset, MinimumFunding Requirements and their Interaction

Amendments to Philippine InterpretationsIFRIC- 14, Prepayments of a Minimum FundingRequirement

IFRIC 15 Agreements for the Construction of Real Estate*

IFRIC 16 Hedges of a Net Investment in a Foreign Operation


AdoptedNot

AdoptedNot

Applicable

IFRIC 17 Distributions of Non-cash Assets to Owners

IFRIC 18 Transfers of Assets from Customers

IFRIC 19 Extinguishing Financial Liabilities with EquityInstruments

IFRIC 20 Stripping Costs in the Production Phase of a SurfaceMine

IFRIC 21 Levies

SIC-7 Introduction of the Euro

SIC-10 Government Assistance - No Specific Relation toOperating Activities

SIC-12 Consolidation - Special Purpose Entities

Amendment to SIC - 12: Scope of SIC 12

SIC-13 Jointly Controlled Entities - Non-MonetaryContributions by Venturers

SIC-15 Operating Leases - Incentives

SIC-21 Income Taxes - Recovery of Revalued Non-Depreciable Assets

SIC-25 Income Taxes - Changes in the Tax Status of anEntity or its Shareholders

SIC-27 Evaluating the Substance of Transactions Involvingthe Legal Form of a Lease

SIC-29 Service Concession Arrangements: Disclosures.

SIC-31 Revenue - Barter Transactions InvolvingAdvertising Services

SIC-32 Intangible Assets - Web Site Costs *These standards, interpretations and amendments to existing standards became effective subsequent to December 31, 2013.The Company did not early adopt these standards, interpretations and amendments.

ENERGY DEVELOPMENT CORPORATION(A Subsidiary of Red Vulcan Holdings Corporation)SUPPLEMENTARY SCHEDULE OF RETAINED EARNINGSAVAILABLE FOR DIVIDEND DECLARATIONDECEMBER 31, 2014

Unappropriated retained earnings, January 1, 2014 P=10,432,266,598Add (Deduct):

Impairment loss on property, plant and equipment ofNorthern Negros Geothermal Project (after tax) 5,957,444,218

Unappropriated retained earnings, as adjusted to available fordividend declaration, December 31, 2014 16,389,710,816Add (Deduct):Net income in 2014 closed to Retained Earnings 10,958,701,734Add (Less): Non-actual/unrealized income / loss (net of tax)

Unrealized foreign exchange gain (54,438,252)Unrealized mark-to-market gain (21,234,098)Net income actually earned in 2014 10,883,029,384

Add (Less): Cash dividend declaration (3,757,500,000)TOTAL RETAINED EARNINGS AVAILABLE FORDIVIDEND DECLARATION, DECEMBER 31, 2014 P=23,515,240,200

Exhibit 2.3

Exhibit 3

ENERGY DEVELOPMENT CORPORATIONAND SUBSIDIARIES

INDEX TO SUPPLEMENTARY SCHEDULESForm 17-A, Item 7

Supplementary Schedules

A. Financial Assets

B. Amounts Receivable from Directors, Officers, Employees,and Principal Stockholders (Other than Related Parties)

C. Amounts Receivable from Related Parties which are Eliminatedduring the Consolidation of Financial Statements

D. Intangible Assets - Other Assets

E. Long-Term Debt

F. Indebtedness to Related Parties*

G. Guarantees of Securities of Other Issuers*

H. Capital Stock

* Not Applicable

ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIESSCHEDULE A - FINANCIAL ASSETSAs of December 31, 2014

FINANCIAL ASSETS Name of Issuing Entity & association of each useAmount shown in the

balance sheetIncome received and

accrued

Loans and receivables:Cash and cash equivalents N/A 14,010,213,414 158,970,950Trade receivables N/A 6,424,986,333Non-trade receivables N/A 395,195,472Loans and notes receivables N/A 95,365,755Employee receivables N/A 9,491,873 4,757,000Long-term receivables N/A 85,753,718

AFS investments:Equity Investments First Gen 281,678,100Debt investments ING Bank 130,101,660 98,628Debt investments RCBC Retail Treasury Bonds 69,602,880Debt investments RCBC GT Capital Fixed Rate Bonds 32,967,890Debt investments BDP Fixed Rate Treasury Note 27,174,525Equity Investments Wack Wack Golf & Country Club Share 15,000,000Equity Investments Alabang Country Club Share 4,600,000Equity Investments Sta. Elena Golf Club Share 2,700,000Equity Investments Baguio Country Club Share 1,850,000

Equity Investments Manila Southwoods Golf & Country Club Share 750,000Equity Investments Canlubang Golf & Country Club Share 650,000Equity Investments Metropolitan Club Share 275,000Equity Investments Orchard Golf & Country Club Share 200,000Equity Investments Petron Corp. 186,836Equity Investments Club Filipino Share 180,000Equity Investments Capitol Hills Golf & Country Club Share 60,000

Derivative Assets N/A 154,169,144

TOTAL 21,743,152,598 163,826,578

ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIESSCHEDULE B - AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS, EMPLOYEES AND PRINCIPAL STOCKHOLDERS (OTHER THAN RELATED PARTIES)As of December 31, 2014

Name andDesignation of

DebtorBalance at Beginning of

Period Additions AmountsCollected

AccountsWritten-off Current Not Current

Balance at Endof Period

Employees 136,895,098 89,237,539 (120,740,034) 105,392,603 - 105,392,603

Directors

TOTAL

Note: The Company keeps the information on the name & designation of employees and other details confidential. As per written agreement with the concerned employees, any outstanding balance at the time of retirement shall be deducted from the retirement benefit proceeds.

ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIESSCHEDULE C - Amounts Receivable from Related Parties which are Eliminated during the Consolidation of Financial StatementsAs of December 31, 2014

Name of Subsidiary Balance at January 1, 2014 Additions Amounts Collected Reclassification Amounts Written-off Current Non- Current Amount Eliminated

Energy Development CorporationEDC Drillco Corporation 188,939 14,134 203,073 203,073EDC Geothermal Corp. 4,878,078 4,209,031 9,087,109 9,087,109Green Core Geothermal Inc. 74,378,128 352,757,372 (359,735,370) 67,400,130 67,400,130Bac-Man Geothermal Inc. 1,806,081,714 367,197,944 (202,613) 2,173,077,045 2,173,077,045EDC Wind Energy Holdings Inc. 2,330,166,777 2,346,972,768 (2,351,706,130) 2,325,433,415 2,325,433,415EDC Burgos Wind Power Corporation 530,883,044 262,715,984 (793,599,028) - -EDC Pagudpud Wind Power Corporation 37,601 12,834 50,435 50,435First Gen Hyrdro Corporation 75,058 915,482 (75,058) 915,482 915,482Unified Leyte Geothermal Energy Inc. 193,279 - (56,197) 137,082 137,082Southern Negros Geothermal, Inc. 18,856 14,134 32,990 32,990EDC Mindanao Geothermal Inc. 7,528 14,134 21,662 21,662Bac-Man Energy Development Corporation 18,856 14,134 32,990 32,990Kayabon Geothermal, Inc. 18,856 14,134 32,990 32,990EDC Holdings International Limited 2,790,846 - (2,706,920) 83,926 83,926EDC Hong Kong Limited 42,870 - 42,870 42,870EDC Chile Limitada - 9,739,997 9,739,997 9,739,997EDC Geotermica Chile SPA 18,003,881 - 18,003,881 18,003,881EDC Geotermica Quellaapacheta 680,381 - 680,381 680,381PT EDC Indonesia 2,747,895 - 2,747,895 2,747,895

EDC Bright Solar Energy Holdings Inc. - 59,850 59,850 59,850 EDC Bago Solar Power Corporation - 10,268 10,268 10,268 Mount Apo Renewable, Inc. - 10,172 10,172 10,172 EDC Burgos Pagali WInd Power Corp - 9,850 9,850 9,850 EDC Bayog Burgos Wind Power Corp - 10,268 10,268 10,268

EDC Geothermal Corp.Unified Leyte Geothermal Energy Inc. 150,000 150,000 150,000EDC Mindanao Geothermal Inc. - 1,000 1,000 1,000Bac-Man Energy Development Corporation - 1,000 1,000 1,000Kayabon Geothermal, Inc. - 1,000 1,000 1,000Southern Negros Geothermal, Inc. - 1,000 1,000 1,000

Green Core Geothermal Inc. - -EDC Burgos Wind Power Corporation 390,000 1,140,000 (1,530,000) - -

Bac-Man Geothermal Inc.Green Core Geothermal Inc. 8,331,546 - (1,351,367) 6,980,179 6,980,179EDC Burgos Wind Power Corporation 38,972 - (38,972) - -

EDC Wind Energy Holdings Inc.EDC Burgos Wind Power Corporation 2,358,713,750 2,351,764,375 (4,710,478,125) - -

(Forward)

Name of Subsidiary Balance at January 1, 2014 Additions Amounts Collected Reclassification Amounts Written-off Current Non- Current Amount Eliminated

EDC Burgos Wind Power CorporationEnergy Development Corporation - 786,534,028 (786,534,028) - -Green Core Geothermal Inc. - 1,530,000 (1,530,000) - -Bac-Man Geothermal Inc. - 38,972 (38,972) - -EDC Wind Energy Holdings Inc. - 4,389,005 4,389,005 4,389,005

EDC Hong Kong LimitedEDC Chile Limitada 105,961,380 (190,169) 105,771,211 105,771,211EDC Geotermica SAC 6,470,418 (6,470,418) -EDC Peru Holdings SAC 154,640,640 (138,697,600) 15,943,040 15,943,040EDC Chile Holdings SPA 184,680 (184,680) - -EDC Geothermica SPA 26,864,500 (14,955,518) 11,908,982 11,908,982

EDC Geotermica Peru SACEDC Geotermica Quellaapacheta Peru SAC 29,520,400 (13,577,360) 15,943,040 15,943,040

EDC Peru Holdings SACEDC Geotermica Quellaapacheta Peru SAC 1,037,462 11,583,777 12,621,239 12,621,239EDC Geotermica Peru SAC 28,579,054 (12,636,014) 15,943,040 15,943,040Energy Development Corporation Hong Kong Limited 95 (5) 90 90EDC Holdings International Limited - 15 15 15EDC Geotérmica Del Sur S.A.C. - 41,127 41,127 41,127EDC Energía Azul S.A.C. - 49,953 49,953 49,953EDC Energía Perú S.A.C. - 51,823 51,823 51,823EDC Energía Geotérmica S.A.C. - 39,706 39,706 39,706EDC Progreso Geotérmico Perú S.A.C. - 50,177 50,177 50,177EDC Energía Renovable Perú S.A.C. - 41,276 41,276 41,276Geotermica Crucero Peru S.A.C. - 2,256,965 2,256,965 2,256,965Geotermica Tutupaca Norte Peru S.A.C. - 5,509,473 5,509,473 5,509,473Geotermica Loriscota Peru S.A.C. - 113,082 113,082 113,082EDC Energia Verde Peru SAC - 32,065,970 32,065,970 32,065,970

EDC Geotermica Quellapacheta Peru SACEDC Geotermica Peru SAC 960,141 (960,141) - -

EDC Chile LimitadaEnergy Development Corporation 50,710,704 (45,970,413) 4,740,291 4,740,291

EDC Chile Holdings SpAEDC Chile Limitada - 116,413,554 116,413,554 116,413,554EDC Geothermica SPA - 279,332,496 279,332,496 279,332,496

TOTAL 7,543,766,328 6,937,642,264 (9,243,225,097) - - 5,238,183,495 - 5,238,183,495

ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIESSCHEDULE D - INTANGIBLE ASSETS - OTHER ASSETSAs of December 31, 2014

Description Beginning Balance Additions at costCharged to costand expenses

Charged to otheraccounts

Other changes additions(deductions)

Ending Balance

Water Rights 1,719,416,926 - 96,191,157 - - 1,623,225,769

Goodwill 2,535,051,530 116,395,860 - - - 2,651,447,390

Other Intangible Assets 145,058,843 140,743,868 17,922,082 - - 267,880,629

TOTAL 4,399,527,299 257,139,728 114,113,239 - - 4,542,553,788

Note:Additions to Goodwill pertain to the goodwill arising from the acquisition of Hot Rock entities in Chile and Peru.

Additions to Other Intangible Assets pertain to computer software and licenses.The amounts charged to cost and expenses represent regular amortization and is credited through an accumulated

amortization account.

ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIESSCHEDULE E - LONG-TERM DEBT

As of December 31, 2014

(In PhP) (In PhP) (In PhP) (In PhP) (Approx in PhP) Periodic Payments

Foreign Loans:USD175 Million Club Loan Facility $ 175,000,000 7,630,000,000 43.60 $ 121,474,882 5,433,656,909 $ 17,039,545 762,592,493 $ 104,435,337 4,671,064,416 1.75% + LIBOR $ various 44.395 various 9 semi annual

payments June 27, 2017

USD300 Million Bonds $ 300,000,000 13,350,000,000 44.50 $ 297,520,346 13,306,210,227 $ - - $ 297,520,346 13,306,210,227 6.50% $ 300,000,000 44.395 13,318,500,000 bullet payment January 20, 2021USD80 Million Term Loan $ 80,000,000 3,517,600,000 43.97 $ 75,286,216 3,370,629,611 $ - - $ 75,286,216 3,370,629,611 1.80% + LIBOR $ various 44.395 various balloon payment June 21, 2018USD35.5 Million Commercial Debt Facility $ 35,500,000 1,590,665,000 44.81 $ 34,431,038 1,539,787,705 $ 652,250 29,170,830 $ 33,778,788 1,510,616,876 2% + LIBOR various 44.720 various 30 semi annual

paymentsOctober 23, 2029

USD139 Million ECA Debt Facility $ 139,000,000 6,228,245,000 44.81 $ 133,130,763 5,953,597,209 $ 2,241,624 100,244,515 $ 130,889,139 5,853,352,694 2.35% + LIBOR various 44.720 various 30 semi annualpayments

October 23, 2029

Domestc Loans:Restructured PNB & Allied Bank Peso LoanP 3,500,000,000.00 3,500,000,000.00 P 3,570,000,000.00 3,570,000,000.00 P 382,500,000.00 382,500,000 P 3,187,500,000.00 3,187,500,000.00 1.5% + PDST-F- rate or

1.0% + BSP overnightrate

P various various 20 semi-annualpayments

November 7, 2022

Fixed Rate Bond-7 Years P 3,000,000,000 3,000,000,000 P 2,969,167,021 2,969,167,020.86 P - - P 2,969,167,021 2,969,167,020.86 4.1583% 3,000,000,000 3,000,000,000 bullet payment May 4, 2020Fixed Rate Bond-10 Years P 4,000,000,000 4,000,000,000 P 3,924,428,611 3,924,428,611.11 P - - P 3,924,428,611 3,924,428,611.11 4.7312% 4,000,000,000 4,000,000,000 bullet payment May 3, 2023FXCN - Series 1 P 3,000,000,000 3,000,000,000 P 2,891,564,382 2,891,564,381.78 P 26,145,852 26,145,852 P 2,865,418,530 2,865,418,529.89 6.6173% (ave) P 150,000,000 15,000,000 20 semi-annual

paymentsApril 19, 2022

FXCN - Series 2 P 4,000,000,000 4,000,000,000 P 3,857,085,232 3,857,085,231.81 P 35,051,004 35,051,004 P 3,822,034,227 3,822,034,227.41 6.6108% (ave) P 200,000,000 20,000,000 20 semi-annualpayments

April 19, 2022

Peso Public Bond 5.5 Years P 8,500,000,000 8,500,000,000 P 8,488,355,479 8,488,355,479.22 P 8,488,355,479 8,488,355,479 P - - 8.6418% P 8,500,000,000 8,500,000,000 bullet payment June 4, 2015Peso Public Bond 7 Years P 3,500,000,000 3,500,000,000 P 3,482,744,901 3,482,744,900.62 P - - P 3,482,744,901 3,482,744,900.62 9.3327% P 3,500,000,000 3,500,000,000 bullet payment December 4, 2016IFC 1 P 4,100,000,000 4,100,000,000 P 2,870,394,380 2,870,394,379.57 P 335,302,705 335,302,705 P 2,535,091,675 2,535,091,674.80 7.40% (ave) P 170,833,333 170,970,000 24 semi-annual

paymentsApril 15, 2023

IFC 2 P 3,262,500,000 3,262,500,000 P 2,716,078,159 2,716,078,158.96 P 244,360,183 244,360,183 P 2,471,717,976 2,471,717,976.26 6.657% (ave) P 125,480,769 125,606,250 26 semi-annualpayments

October 15, 2025

PHP 5.17 Billion Commercial Debt Facility P 5,170,000,000 5,170,000,000 P 5,088,541,848 5,088,541,848.49 P 95,949,051 95,949,051 P 4,992,592,797 4,992,592,797.03 2% + PDST-F rate P various various 30 semi annualpayments

October 23, 2029

TOTAL 74,349,010,000 69,462,241,673 ############# 58,962,569,562

Amount and Number of Periodic Payments Maturity Date

(In original currency) (In original currency) Long-Term Debt (Net of Current Portion)

Interest RateTitle of Issue and Type of ObligationAmount Authorized by Indenture

(In original currency)Balance at December 31, 2014

(In original currency)Current Portion of Long-Term Debt

(In original currency)

ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIESSCHEDULE F - INDEBTEDNESS TO RELATED PARTIESAs of December 31, 2014

Name of Related Parties Balance at beginning of periodBalance at end of

period

NOT APPLICABLE

ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIESSCHEDULE G - GUARANTEES OF SECURITIES OF OTHER ISSUERSAs of December 31, 2014

Name of issuing entity of securitiesguaranteed by the company for

which this statement is filed

Title of issue of each classof securities guaranteed

Total amountguaranteed and

outstanding

Amount owned byperson for whichstatement is filed

Nature of guarantee

NOT APPLICABLE

ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIESSCHEDULE H - CAPITAL STOCKAs of December 31, 2014

Title of IssueNumber of shares

authorized

Number of sharesissued andoutstanding

Number ofshares reserved

for options,warrants,

conversion andother rights

Number ofshares held byrelated parties

Number ofshares held byDirectors andkey executive

officers

Common 27,000,000,000 18,750,000,000 - 7,500,000,000 35,038,936Stock (40%) (0.187%)

991,782,700(5.29%)

937,693,900(5.00%)

Preferred 15,000,000,000 9,375,000,000 - 9,375,000,000 -Stock (100%)(Voting)

Preferred 300,000,000 0Stock(Non-voting)

EXHIBIT 4

ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIESFINANCIAL SOUNDNESS INDICATORS

Ratio Dec 312014 2013

Current 1.37:1.00 2.73:1.00

Debt-to-Equity 1.59:1.00 1.62:1.00

Net Debt-to-Equity 1.27:1.00 1.17:1.00

Return on Assets (%) 10.30 5.6

Return on Equity (%) 29.59 15.9

Solvency 0.23 0.16

Interest Rate Coverage 3.71:1.00 3.54:1.00

Asset-to-Equity 2.85:1.00 2.90:1.00

Exhibit 6

Material Contracts And Agreements

GEOTHERMAL RENEWABLE ENERGY SERVICE CONTRACTS AND GEOTHERMALOPERATING CONTRACTS

The Company and its subsidiaries currently have 14 service contracts with the Government for theexploration and utilization of geothermal energy. Three geothermal operating contracts (GOC) covergeothermal power plant operations; and eleven of the geothermal contract areas are covered bygeothermal renewable energy service contracts (GRESC) under the RE Law. The Company’s existinggeothermal contracts cover the following:

GRESCo Tongonan, Kananga, Leyteo Southern Negros, Valencia, Negros Orientalo Bacon-Manito, Albay-Sorsogono Mt. Apo, Kidapawano Northern Negros, Negros Occidentalo Mt. Labo, Camarines Norteo Ampiro, Zamboanga del Norte-Zamboanga del Sur-Misamis Occidentalo Mandalagan, Negros Occidentalo Lakewood, Zamboanga del Norte and Zamboanga del Suro Balingasag, Misamis Oriental - Bukidnono Mt. Zion, North Cotabato – Davao del Sur

GOCo Palinpinon Geothermal Power Plants in Valencia, Negros Orientalo Tongonan Geothermal Power Plant in Kananga, Leyteo Bacon-Manito Geothermal Power Plant in Albay-Sorsogon

The service contracts for the (i) Tongonan; (ii) Southern Negros; (iii) Bacon-Manito; (iv) Mt. Apo;(v) Northern Negros; (vi) Mt. Labo; (vii) Ampiro; (viii) Mandalagan; (ix) Lakewood; (x) Balingasag and(xi) Mt.Zion contract areas are in the form of GRESCs. The contract for the (i) Palinpinon; (ii) Tongonanand (iii) Bacon-Manito geothermal power plants are in the form of GOCs. The GRESCs and the GOCswere entered into pursuant to the RE Law. Generally, under the service contracts, the Company isappointed as the exclusive party to conduct geothermal operations on behalf of the Government in therelevant contract area and agrees to provide the necessary services, technology and financing for thegeothermal operations contemplated therein, and assumes the financial risks for those operations.

Four of the Company’s eleven (11) GRESC contract areas, specifically Tongonan, Southern Negros,Bacon Manito and Mt. Apo, are in commercial operation and the GRESCs for these contract areas are toexpire between 2031 and 2042. The Company has an existing contract area in Northern Negros.However, the Company decided to temporarily shutdown the operations of Northern Negros in 2011while it studies the appropriate power plant capacity for the said area. It has not re-commissioned itsoperations in Northern Negros as of the date of this report.

The service contracts for Mt. Labo, Ampiro, Mandalagan, Lakewood, Balingasag and Mt.Zion, none ofwhich are currently in commercial operation, are effective for an initial two year pre-development periodfrom their respective effectivity dates, renewable for another two years and further on for one more yearprovided that the Company has not defaulted on its exploration, financial and other work commitmentsand obligations and has provided a work program for the extension period that is acceptable to theGovernment. Where geothermal resources in commercial quantity are discovered during the pre-development period, each service contract shall, with respect to any production area delineated therein,remain in force for the balance of a 25-year period, renewable for an additional period of 25 years if theCompany is not in default of its obligations under the service contract. If the Company does not default

on its obligations under the applicable contract, the Government may grant a further extension of 25 years(in the case of Mt. Apo, Northern Negros, Mt. Labo, Ampiro, Mandalagan, Lakewood, Balingasag andMt. Zion).

Under each of the service contracts, all materials, equipment, plants and other installations that are erectedor placed on the contract area shall remain the property of the Company throughout the term of the REContract and after termination thereof. The Company shall be given one year to remove these facilities,otherwise ownership shall be vested in the Government.

Under the service contracts, the Company must pay government share to the Government and localgovernment units, from the proceeds derived from the geothermal operations. Under the GRESCs andGOCs, the Company must pay a Government Share equal to 1.5% of the income derived from the sale ofgeothermal steam or electricity produced and other incidental income, in addition to income tax payableby the Company.

WIND ENERGY SERVICE CONTRACTS

The Company holds ten (10) WESCs with the DOE. The wind service contracts cover the following: 150 MW wind project in Burgos, Ilocos Norte 84 MW wind project in Pagudpud, Ilocos Norte Burgos 1 wind project in Burgos, Ilocos Norte Burgos 2 wind project in Burgos, Ilocos Norte Matnog 1 wind project in Matnog & Magdalena, Sorsogon Matnog 2 wind project in Matnog, Sorsogon Matnog 3 wind project in Matnog, Sorsogon Iloilo 1 wind project in Batad & San Dionisio, Iloilo Iloilo 2 wind project in Concepcion, Iloilo Negros wind project in Manapla & Cadiz City, Negros Occidental

EDC Burgos Wind Power Corporation (EBWPC), a subsidiary of the Company, developed an 87MWwind farm in Burgos and the WESC for the project was assigned to EBWPC in February 2011. EBWPCsubmitted a Declaration of Commerciality (DOC) for the project last August 2011 and the same has beenapproved by the DOE last April 2013. As it has been studied that there is potential for a bigger wind farmin EBWPC’s contract area, EBWPC submitted a DOC covering the Burgos Wind Expansion Project. Theexpansion project added an additional 63 MW of wind power. The DOE’s confirmation of the expansionproject’s commerciality was secured last December 2013. The project started commercial operations lastNovember 2014.

On the other hand, the WESC for the Pagudpud project was assigned by EDC to EDC Pagudpud WindPower Corporation (EPWPC) last June 2012. EPWPC submitted a Declaration of Commerciality for thePagudpud project last February 2013, and the same was confirmed by the DOE last June 2014.

The WESCs for Burgos 1 and Burgos 2 were signed by EDC last December 2013, while the WESCs forMatnog 1, Matnog 2, Matnog 3, Iloilo 1, Iloilo 2 and Negros were signed last August 2014.

Under the WESC, the Company is obligated to provide the services, technology, equipment and financingfor the wind energy operations contemplated by the WESC. The Company assumes the financial risks incase it is determined during the pre-development stage that wind resources in the contract area do notjustify commercial development.

Under the DOE’s new guidelines, the WESC is effective for a non-extendible period of three (3) yearsprovided that the failure of the Company to accomplish the first annual milestones set forth by the DOEand as indicated in the Work Program shall result in the expiration of the RE Contract. However, the

submission of a Declaration of Commerciality at any time during the pre-development stage and theconfirmation thereof by the DOE shall supersede the milestone requirement.

Within the pre-development stage of the wind energy operation, the Company is required to undertakeexploration, assessment, harnessing, piloting, and other studies of wind resources. Upon submission bythe Company and the confirmation by the DOE of a declaration of commerciality within the pre-development stage, the WESC remains in force for the balance of a period of 25 years from the effectivedate and can be renewed for another 25 years if the Company has not been in default of any of its materialobligations under the WESC.

SOLAR ENERGY SERVICE CONTRACTS

The Company holds two SESCs with the DOE. The solar service contracts cover areas in the following: Burgos, Ilocos Norte Bago City, Negros Occidental

EDC is developing a 4MW solar farm in Burgos, Ilocos Norte. EDC submitted a DOC for the project lastAugust 2014. The DOE’s confirmation of the project’s commerciality was released in January 2015.

The contract area of the solar project in Bago City, Negros Occidental was awarded to EDC in April2014. The feasibility of the commerciality of this project is still being evaluated by EDC.

Under the SESC, the Company is obligated to provide the services, technology, equipment and financingfor the solar energy operations contemplated by the SESC. The Company assumes the financial risks incase it is determined during the pre-development stage that solar resources in the contract area do notjustify commercial development.

Under the DOE’s new guidelines, the SESC is effective for a non-extendible period of two (2) yearsprovided that the failure of the Company to accomplish the first annual milestones set forth by the DOEand as indicated in the Work Program shall result in the expiration of the RE Contract. However, thesubmission of a Declaration of Commerciality at any time during the pre-development stage and theconfirmation thereof by the DOE shall supersede the milestone requirement.

Within the pre-development stage of the solar energy operation, the Company is required to undertakeexploration, assessment, harnessing, piloting, and other studies of solar resources. Upon submission bythe Company and the confirmation by the DOE of a declaration of commerciality within the pre-development stage, the SESC remains in force for the balance of a period of 25 years from the effectivedate and can be renewed for another 25 years if the Company has not been in default of any of its materialobligations under the SESC.

Risks relating to the Company and its businesses

A substantial portion of the Company’s revenues are attributed to payments from a single offtaker,NPC, who may be unable to meet its payment obligations to the Company.

A substantial portion of the Company’s revenues have historically been derived from sales of electricityand steam to one customer, NPC. Under long-term PPAs, NPC is committed to purchase electricity fromsix of the Company’s geothermal plants. The expiration dates of these PPAs range from 2022 to 2024.The Company expects that it will continue to rely heavily on NPC for a substantial portion of itselectricity sales revenue for the foreseeable future. If NPC is unable to meet its payment obligations underthe PPAs, the Company would be materially and adversely affected.

NPC’s power generation assets are subject to an ongoing privatization process conducted by PSALM. Inparticular, PSALM is transferring the control of the trading of the energy capacities covered by existingNPC-IPP contracts to qualified IPP Administrators. PSALM affirmed that NPC will remain the legalcounterparty to the PPAs subsequent to the appointment of the IPP Administrators and thus NPC willremain liable for payment of fees under the PPAs.

In the past, NPC has experienced financial difficulties due to the depreciation of the Peso against majorforeign currencies, lower-than-expected electricity demand, high debt levels, political pressure, andregulatory challenges, which limited NPC’s ability to pass on increased costs to its customers.

In addition, the Company incurs various costs and obligations under its contracts with third parties tomeet its obligations to supply electricity to NPC under the PPAs. These costs and obligations include debtservice payments, project development, steam and power production and operating costs. The Company isdirectly obligated to pay for these costs and obligations, regardless of whether NPC pays the Companyunder the PPAs. The Company depends on NPC’s payment, under the PPAs to fund its costs andobligations to third parties.

Any difficulty or inability on the part of NPC to meet its payment obligations under the PPAs, includingpayments intended to cover the Company’s costs and debt service obligations, would have a material andadverse effect on the Company’s business, cash flows, and results of operations if the company wereunable to source other purchasers of energy on substantially the same or better terms. Additionally, ifNPC fails to meet its obligations under the PPAs, the Company would have difficulty in meeting itsfinancial obligations to third parties, and therefore may have to obtain funds from other sources to meetthese obligations. There can be no assurance that such alternative funding would be available, or, if thefunding were available, that it would be on commercially reasonable terms.

The Company’s financial performance depends on the successful operation of its geothermalsteamfields and power plants, which are subject to various operational risks.

The Company’s financial performance depends on the successful operation of its geothermal steamfieldsand power plants. The cost of operation and maintenance and the operating performance of geothermalsteamfields and power plants may be adversely affected by a variety of factors, including the following:

• unscheduled shutdowns due to maintenance, replacement of major parts, unexpected breakdowns,failure of equipment or the equipment of the transmission serving utility beyond the contractualallowance;

• improper management of the geothermal resource;

• the presence of hazardous materials in the Company’s project sites; and

• catastrophic events such as fires, explosions, earthquakes, typhoons, floods, landslides, lightning,environmental pollution, releases of hazardous materials, severe storms or similar and unexpected

occurrences affecting the Company’s projects or any of the power purchasers or other thirdparties providing services to the Company’s projects.

Many of these events may cause personal injury and loss of life, severe damage to or destruction of theCompany’s properties and the properties of others, and may result in the suspension of the Company’soperations and the imposition of civil or criminal penalties.

The counterparties to the Company’s GRESCs, PPAs, PSAs, TSCs, ESAs and other related agreementsmay have the conditional right to terminate those agreements under circumstances specified thereinarising from failure to generate or deliver electricity or geothermal resources, as the case may be, whichcontinues beyond a specified period of time. As a consequence, there may be no revenues from theaffected asset other than the proceeds from business interruption insurance, if any, that applies to theevent after the relevant waiting period. There can also be no assurance that insurance proceeds receivedunder policies maintained by the Company would adequately cover all liabilities that may be incurred orany direct or indirect costs and losses suffered, including liabilities to and losses claimed by third parties.

In addition, some of the PPAs have provisions that permit the counterparty, under specific conditions, topurchase assets of the Company upon the occurrence of an event of default at a price which may notcompensate the Company for the value of such assets. In addition, if a GRESC, PPA, PSA, TSC, ESA orother related agreement is terminated by the counterparty thereto, the affected party may not be able toenter into a replacement agreement on terms as favorable as the terminated agreement or with acounterparty as creditworthy as the terminating counterparty. As a result of all or any of the foregoing, theCompany may not be able to make payments of principal, premium, if any, and interest on its debts whendue.

The Company’s exploration, development and production of geothermal energy resources are subjectto geological risks and uncertainties.

The Company’s business involves the exploration, development, and production of geothermal energyresources. These activities are subject to uncertainties, which may result in non-commercial wells, due to,among others, the following:

• insufficient steam in the drilled wells;

• the discovery of acidic, oversaturated, and hypersaline fluids which are unsuitable in the steamgeneration process using current technologies;

• the uncontrolled release of high pressure steam; and

• the sudden decline in pressure and temperature.

The occurrence of any of these or other uncertainties, which may occur naturally or as a result of humanerror, can increase the Company’s operating costs and capital expenditures, or reduce the efficiency of itssteamfields and power plants.

Given that geothermal resources are located in varied and complex geological environments, their sizesand volumes can only be estimated. The viability of geothermal projects depends on different factorsdirectly related to the geothermal resource, such as the heat content (i.e. the maximum temperature andpressure tapped by the wells) of the geothermal reservoir, chemistry of the reservoir fluids, useful life (i.e.commercially exploitable life) of the reservoir, and operational factors relating to the extraction ofgeothermal fluids. Production and injection wells can require frequent maintenance or replacement.Replacement or repair of certain equipment, vessels or pipelines, may be required, due to corrosion anderosion arising from acidic and high-gas geothermal fluids. New production and injection wells may berequired for the maintenance of current operating levels, thereby requiring substantial capitalexpenditures. The Company’s geothermal energy projects may suffer an unexpected decline in thecapacity of their respective geothermal wells, and are exposed to a risk of geothermal reservoirs not being

sufficient for sustained generation of the desired electrical power capacity over time. In addition, theCompany may fail to find commercially viable geothermal resources in the expected quantities andtemperatures, which would adversely affect its development of geothermal power projects.

Geothermal resources are generally located within tectonically active areas. These areas may havefrequent low-level seismic activity. Serious seismic accidents may occur that could result in damage tothe Company’s facilities or equipment to such an extent that the Company could not perform its normalobligations under SSAs, PSAs, ESAs or PPAs for the affected project. This, in turn, could reduce theCompany’s net income and materially and adversely affect its business, financial condition, results ofoperations and cash flow. If the Company’s operations are disrupted by a serious seismic disturbance, itsbusiness interruption and property damage insurance may not be adequate to cover all losses sustained asa result thereof. In addition, insurance coverage may not continue to be available in the future in amountsadequate to insure against such seismic disturbances.

Licenses, permits and operating agreements necessary for the Company’s business may not beobtained, sustained, extended or renewed.

The Company’s operations rely on permits, licenses and agreements and in some cases renewals of suchpermits, licenses and agreements. Management believes that the Company currently holds or has appliedfor all necessary licenses, permits and agreements to carry on the activities that it is currently conductingunder applicable laws and regulations, licenses, permits and agreements. However, the Company’s abilityto obtain, sustain or renew such licenses, permits and agreements on acceptable terms is subject to changein regulations and policies and to the discretion of applicable governmental authorities and counterparties.

Continued compliance with, and any changes in, safety, health and environmental laws andregulations may adversely affect the Company’s operating costs.

The Company is subject to a number of laws and regulations affecting many aspects of its present andfuture operations, including the disposal of various forms of materials resulting from geothermal reservoirproduction, the drilling and operation of new wells, and power plant operations. Such laws andregulations generally require the Company to obtain and comply with a wide variety of licenses, permits,and other approvals. In addition, regulatory compliance for the construction of new facilities is a costlyand time-consuming process; changing environmental regulations may require major expenditures inobtaining permits and may create the risk of expensive delays or material impairment in project value ifprojects cannot be operated as planned due to changing regulatory requirements or local opposition.

The Company’s projects are subject to numerous statutory and regulatory standards relating to the use,storage, and disposal of hazardous substances. The Company uses industrial lubricants and othersubstances in its projects, which are or could be classified as hazardous substances. If any of theCompany’s projects is found to have released any hazardous substances into the environment, theCompany could become liable to investigation and removal of those substances, regardless of their sourceand time of release. The cost of any remediation activities in connection with a spill or other release ofsuch substances could be significant.

Safety, health, and environmental laws and regulations in the Philippines have become more stringent,and it is expected that this trend will continue. The adoption of new laws and regulations on safety,health, and environment, new interpretations of existing laws, increased governmental enforcement ofenvironmental laws, or other developments in the future may require additional capital expenditures orthe need for additional operating expenses in order to comply with such laws and to maintain currentoperations.

The Company may be adversely affected by changes in the legal and regulatory environment affectingits projects.

The Company and its projects are subject to significant regulation, including the EPIRA, and therefore arealso subject to changes in regulations, or in their interpretations. Energy regulation is currently, and maycontinue to be, subject to challenges, modifications, the imposition of additional requirements, andrestructuring proposals. The Company may not be able to obtain or maintain all regulatory approvals thatmay be required in the future, or secure any necessary modifications to existing regulatory approvals. Inaddition, the cost of operation and maintenance and the operating performance of steamfields andgeothermal power plants may be adversely affected by changes in certain laws and regulations and themanner in which certain laws and regulations are implemented. Any such changes could change aspectsof the Company’s operations or increase the Company’s compliance expenses which could materially andadversely affect the Company’s business, financial condition and results of operations.

In recent years, the Government has sought to implement measures designed to establish a competitiveenergy market. These measures include the successful privatization of power generation facilities andgrant of a concession to manage, operate and maintain the transmission and subtransmission assets ofTransCo, as well as the establishment of a wholesale spot market for electricity. The move towards amore competitive electricity industry could result in the emergence of new and numerous competitors.These competitors may have greater financial resources, and have more extensive operational experienceand other capabilities than the Company, giving them the ability to respond to operational, technological,financial and other challenges more quickly than the Company.

Likewise, under the RE Law and its implementing rules, in relation to a reduced income tax rate from30% to 10% for Renewable Energy developers, there is a provision for a possible pass-on of savings inthe form of lower power rates under such mechanism as may be determined by the DOE in coordinationwith the Renewable Energy developers. Such determination may include the applicability of certainexceptions to the pass-on savings provision. The results of such pass-on savings mechanism, if ruledunfavorable against the Company, may have a material and adverse impact on the Company’s businessand financial condition.

The Company faces increased competition in the power industry, including competition resulting fromlegislative, regulatory and industry restructuring efforts. (please refer to discussions under Part I –Business “Competition”)

The Company has relied and will continue to rely significantly on, and faces substantial competitionfor, the services of its experienced, skilled and specially-trained technical personnel.

The Company has relied, and will continue to rely, on a large number of specially-trained technicalpersonnel with highly specialized skills and abilities for its geothermal steamfield and power generatingactivities. The Company has experienced significant problems with hiring and retaining skilled personnel,and will continue to face increased competition for its retained employees from other geothermal energyproducers and similar business sectors, especially where wages and benefits are much higher and betterthan those paid by the Company. Additionally, because the Company is one of the leading geothermalenergy producers worldwide, the Company’s technical employees form a pool of some of the most highlyexperienced and skilled professionals in the industry, which makes them very attractive to othercompanies. If the Company is unable to retain a sufficient number of its qualified personnel or if theCompany is unable to attract new employees with the skills required for its technical operations, theCompany’s business operations could be adversely affected. A general shortage of qualified personneland the higher compensation offered by international firms in the Company’s industry may also requirethe Company to raise employee salaries and benefits which could negatively impact the Company’sprofitability and operations.

The Company may experience fluctuations in the cost of materials that may materially and adverselyaffect its business, financial condition, future results and cash flow.

The Company’s operations are dependent on the supply of various materials, including pipes, and variousindustrial equipment components. The Company obtains such materials and equipment at prevailingmarket prices on an as-needed basis and does not have any long-term agreements with any of itssuppliers. Most of the Company’s supplies are imported and denominated in foreign currencies. Inaddition, there may be a limited number of suppliers for certain items that the Company requires and as aresult, availability can be limited. Future cost increases and unavailability of necessary materials andequipment could adversely affect the Company’s results of operations.

The Company’s ability to increase revenue from NPC and other power offtakers requires that existingtransmission infrastructure be free of bottlenecks and be of sufficient capacity to readily transmit thegenerating capacity of the Company’s existing and future geothermal power projects.

Currently, the electricity transmission infrastructure in the Philippines continues to experience constraintson the amount of electricity that can be wheeled from power plants to key load centers in specific areas inthe different island grids. The lack of improvements in transmission infrastructure has been caused bydelays in the implementation of projects to be undertaken by NGCP, the privatized transmission companyresponsible for maintaining and ensuring the sufficiency of the power transmission infrastructure in thePhilippines. If these transmission constraints remain unresolved, the ability of NPC or any other powerofftaker to request dispatch from any of the Company’s power generation facilities to the country’s loadcenters will be adversely affected. In turn, this could adversely affect the growth of the Company’srevenue from the sale of electricity.

In addition, the electricity generated by the Company’s plants on Leyte island is transmitted over asubmarine cable that does not have the capacity to dispatch all of the electricity that the plants are capableof producing. As a result, the Company does not operate these plants at their full load factor. The reducedload factor negatively affects the efficiency of the plants and results in excess condensation in the plants’turbines, reducing the useful life of the turbines. The Company cannot predict when the applicablesubmarine cable will be upgraded to the extent necessary to permit it to dispatch electricity from theseplants at the plants’ full capacity.

The Company may face labor disruptions that may interfere with its operations.

The Company is exposed to the risk of strikes and other industrial actions. As of December 31, 2011, theParent Company employed a total of 2,202 full-time employees. There are 13 labor unions within theParent Company, each representing a specific collective bargaining unit allowed for by law (pls. refer todiscussions under Part I – Business “Employees and Labor Relations”). There can be no assurance thatother employees will not unionize or that strikes, work stoppages or other industrial actions will not occurin the future. Any such event could disrupt operations, possibly for a significant period of time, result inincreased wages and other benefits and otherwise have a material adverse effect on the Company’sbusiness, financial condition or results of operation.

The Company is exposed to the risk of foreign currency fluctuations.

Almost all of the Company’s revenues are denominated in Pesos, although partially indexed to U.S.Dollars, while a portion of its long-term liabilities, including the Notes, and some of the Company’sexpenses are denominated in foreign currencies. This exposes the Company to foreign exchange risk,mainly from future payments of foreign loans and other commercial transactions. An adverse change inexchange rates can reduce the Company’s ability to service its debt and other obligations, and mayincrease the Company’s expenses, thereby adversely affecting the Company’s cash flows and net income.

The Company cannot predict the amounts it will have to pay for expropriated land.

The Company’s service agreements with the Government require the Government to make available toEDC lands necessary for its geothermal operations and, as a private entity, the Company has no power toexpropriate land. In instances where the Company seeks to acquire ownership over certain parcels of landfor use in its projects but is unable to reach an agreement with a private landowner, it depends on PNOCand the DOE (which are able to expropriate land) to expropriate land for the Company’s projects, usingfunds sourced from the Company. Thereafter, titles to these expropriated lands are generally transferred tothe Company.

Under Philippine law, any party who has land expropriated by the Government is entitled to be paid thefair market value for the land expropriated. Any land which is expropriated by PNOC or the DOE on theCompany’s behalf must be paid for by the Company at its fair market value, or for just compensation, asultimately determined by a court of law. Just compensation is affected by factors such as the amount ofconsequential damage to the remaining property if the whole property is not expropriated; consequentialbenefit of the expropriation to the private landowner; and interest in case of delay in payment of justcompensation.

The Company may be unable to refinance its outstanding debt and any future financing the Companyreceives may be less favorable than current financing arrangements.

The Company has issued corporate and retail notes and has multiple loan agreements with local andforeign banks. The Company’s continued access to debt financing is subject to a number of factors whichare outside of the Company’s control. For example, political instability, an economic downturn, socialunrest, changes in the Philippine regulatory environment or the bankruptcy of an unrelated powergeneration company could increase the Company’s cost of borrowing or restrict the Company’s ability toobtain debt financing. Market conditions and other factors (such as the absence of a Governmentguarantee) may not permit future projects with loan terms similar to those that the Company haspreviously received. If the Company is not able to refinance its outstanding debt at maturity, it may haveto undertake alternative financing plans, such as:

• selling power plants or other assets;• seeking to raise additional equity;• restructuring its debts; or• reducing or delaying capital investments.

The undertaking of any of these alternative financing plans could have a materially adverse effect on theCompany’s financial condition and results of operations. In addition, if the Company is unable to obtainfinancing for its future projects on a favorable basis, it may have a significant effect on its growth plans,financial condition and results of operations.

The Company may not be able to obtain or maintain adequate insurance.

Although the Company maintains insurance against many of its operating hazards, including businessinterruption, third-party liability, seismic disturbance and terrorism insurance, the Company cannot anddoes not insure against all of them with third-party insurers. In particular, the Company self-insures itsdrilling rigs and its motor vehicles. For those items for which the Company has third party insurance, theinsurance proceeds received under these policies may not adequately cover all liabilities that may beincurred or any direct or indirect costs and losses that may be suffered, including liabilities to and lossesclaimed by third parties. If any of the geothermal operations or power plants suffers a large uninsured lossor any insured loss significantly exceeds available insurance coverage, the Company’s business, financialcondition and results of operations may be adversely affected.

In addition, the insurance coverage for the geothermal facilities and power plants is subject to annualrenewal. Numerous factors outside the Company’s control can affect market conditions for insurance,which in turn can affect the availability of insurance coverage as well as premium levels for theCompany’s policies. The Company’s insurance coverage is also subject to certain exclusions, limitationsand deductibles. If the availability of insurance coverage is reduced significantly, the Company maybecome exposed to certain risks for which it is not and/or cannot be insured. Also, if premium levels forthe insurance coverage required for its facilities increase significantly, the Company could incursubstantially higher costs for such coverage or may decide to reduce the coverage amount, either of whichcould have an adverse effect on its financial condition and results of operations.

The Company may not successfully implement its growth strategy.

The Company’s growth strategy is to develop additional geothermal power projects and other renewableenergy projects, such as wind farms, in both the Philippines and in international markets. This strategymay require entering into strategic alliances and partnerships and substantial investments in newgeothermal steamfield and other renewable energy facilities. The Company’s success in implementingthis strategy will depend on, among other things, its ability to identify and assess potential partners,investments and acquisitions, successfully finance, close and integrate such investments and acquisitions,control costs and maintain sufficient operational and financial controls.

The Company’s geothermal steam and electricity production in the Philippines is the Company’s onlysignificant revenue generating business. The key challenges the Company faces to its growth strategyinclude:

• its ability to attract and retain third party customers for its services and products;

• its ability to develop a positive reputation for offering projects and services in new markets;

• a lack of expertise in renewable energy projects other than geothermal projects;

• its ability to attract and retain the personnel necessary to implement its growth strategy;

• competition from companies offering similar services in the markets that the Company plans toenter and for which entry is dependent, in part, on the number, size, operating history, geographicscope, expertise, reputation and financial resources of those competitors; and

• its ability to identify and assess potential partners, investments and joint ventures; successfullyreceive approval from relevant government authorities; finance, close and integrate suchinvestments; and maintain sufficient operational and financial controls.

This growth strategy could place significant demands on the Company’s management and otherresources. The Company’s future growth may be adversely affected if it is unable to make theseinvestments or form these partnerships, or if these investments and partnerships prove unsuccessful.

If general economic and regulatory conditions or market and competitive conditions change, or ifoperations do not generate sufficient funds or other unexpected events occur, the Company may decide todelay, modify or forego some aspects of its growth strategies, and its future growth prospects could beadversely affected.

The Company’s intellectual property rights may not be adequate to protect its business.In the past, the Company has not generally filed patent applications or attempted to protect its intellectualproperty. Additionally, the Company has not included non-disclosure provisions in agreements withemployees and others having access to confidential information. The lack of any measures to adequatelyprotect the Company from disclosure or misappropriation of its proprietary information could allowothers to gain access to valuable, proprietary information which could have a negative effect on theCompany’s business.

Also, the Company’s competitors or other parties may assert that certain aspects of the Company’sbusiness or technology may be covered by patents held by them. Infringement or other intellectualproperty claims, regardless of merit or ultimate outcome, can be expensive and time-consuming and candivert management’s attention from the Company’s core business.

Failure to obtain financing or the inability to obtain financing on reasonable terms could affect theexecution of the Company’s growth strategies.The Company’s growth and expansion plans depend on the Company making strategic investments innew projects and acquisitions that are expected to be funded through a combination of internallygenerated funds and external fund raising activities, including debt and equity financing. The Company’sability to raise additional equity financing from non-Philippine investors is subject to foreign ownershiprestrictions imposed by the Philippine Constitution and applicable laws.

The Company’s continued access to debt financing as a source of funding for new projects andacquisitions and for refinancing maturing debt is subject to many factors, many of which are outside ofthe Company’s control. For example, political instability, an economic downturn, social unrest, changesin the Philippine regulatory environment or the bankruptcy of an unrelated power generation companycould increase the Company’s cost of borrowing or restrict the Company’s ability to obtain debtfinancing. The Company cannot guarantee that it will be able to arrange financing on acceptable terms, ifat all. The inability of the Company to obtain debt financing from banks and other financial institutionswould adversely affect its ability to execute its growth strategies. In addition, any future debt incurred bythe Company may:

• increase the Company’s vulnerability to general adverse economic and industry conditions;

• restrict the Company’s ability to incur additional capital expenditures and other general corporateexpenses;

• require the Company to dedicate a substantial portion of its cash flow to service debt payments;

• limit the Company’s flexibility to react to changes in the power generation business and thepower industry;

• restrict the Company’s ability to declare dividends;

• place the Company at a competitive disadvantage in relation to competitors that have less debt;

• require the Company to agree to additional financial covenants; and

• limit, along with other restrictive covenants, the Company’s ability to borrow additional fundsand to operate its business.

The Company has and will likely continue to rely significantly on the services of members of its seniormanagement team, and the departure of any of these persons could adversely affect its business.Members of the Company’s senior management team who are also employees of other companies in theLopez Group may have a conflict of interest. The Company has and will likely continue to relysignificantly on the continued individual and collective contributions of its senior management team. Anumber of its top management personnel, including the President and Chief Operating Officer, ChiefFinancial Officer, and the head of Business Development, have been seconded from one of theCompany’s shareholders, First Gen, and may be asked to return to their original employer upon 30 days’written notice. The loss of the services of any member of the Company’s senior management or theinability to hire and retain experienced management personnel could have a material adverse effect on itsbusiness and results of operations. There can be no assurance that First Gen will not influence the actionsand decisions of these members of senior management in order to place the interests of First Gen abovethe interests of the Company and its other shareholders.

1

SECURITIES AND EXCHANGE COMMISSION

SEC FORM – ACGR

ANNUAL CORPORATE GOVERNANCE REPORT

GENERAL INSTRUCTIONS

(A) Use of Form ACGR

This SEC Form shall be used to meet the requirements of the Revised Code of CorporateGovernance.

(B) Preparation of Report

These general instructions are not to be filed with the report. The instructions to the variouscaptions of the form shall not be omitted from the report as filed. The report shall contain thenumbers and captions of all items. If any item is inapplicable or the answer thereto is in thenegative, an appropriate statement to that effect shall be made. Provide an explanation on whythe item does not apply to the company or on how the company’s practice differs from the Code.

(C) Signature and Filing of the Report

A. Three (3) complete set of the report shall be filed with the Main Office of the Commission.

B. At least one complete copy of the report filed with the Commission shall be manually signed.

C. All reports shall comply with the full disclosure requirements of the Securities RegulationCode.

D. This report is required to be filed annually together with the company’s annual report.

(D) Filing an Amendment

Any material change in the facts set forth in the report occurring within the year shall be reportedthrough SEC Form 17-C. The cover page for the SEC Form 17-C shall indicate “Amendment tothe ACGR”.

2

SECURITIES AND EXCHANGE COMMISSION

SEC FORM – ACGR

ANNUAL CORPORATE GOVERNANCE REPORT

1. Report is Filed for the Year 2014 with Updates for 2015

UPDATES LIST for 2015:

January 8, 2015 SEC Form 17-C Retirement of Officer (Rico G. Bersamin)

January 28, 2015 SEC Form 17-C Appointment of officer (Dominador M. Camu, Jr.)

January 29, 2015 SEC Form 17-C Consolidated ACGR for 2014

UPDATES LIST for 2014 (Consolidated):

January 30, 2014. January 30, 2014. Directors’ Attendance in Board Meetings for2013

March 28, 2014. (a) SEC Form 17- C ACGR Updates as of December 31, 2013required in Sec. 17 of the SRC; and (b) SEC Advisement Letter onACGR Updates as of December 31, 2013 not required to be reportedby Sec. 17 of the SRC

April 4, 2014. Definitive Information Statement

July 15, 2014. Amended Manual on Corporate Governance

July 23, 2014. Board Approved Consolidated 2013 ACGR

May 9, 2014August 26, 2014September 24,2014December 2, 2014December 29,2014.

SEC Advisement Letter on Attendance of Directors and Key Officersin the Annual Corporate Governance Training

December 29,2014.

Attendance of Directors in Board Meetings

2. Exact Name of Registrant as Specified in its Charter ENERGY DEVELOPMENTCORPORATION

3. One Corporate Center, Julia Vargas corner Meralco AvenueOrtigas Center, Pasig City 1605Address of Principal Office Postal Code

4. SEC Identification Number 66381 5. (SEC Use Only)

Industry Classification Code

3

6. BIR Tax Identification Number 00 0169125000

7. (02) 667-7332 / (02) 755-2332Issuer’s Telephone number, including area code

8. NAFormer name or former address, if changed from the last report

4

TABLE OF CONTENTS

A. BOARD MATTERS ……………………………………………………………..…….. 61) BOARD OF DIRECTORS

(a) Composition of the Board (Updated June 2014) ............……………….…. 6(b) CG Policy adopted by the Board ………………………...........…………….. 7(c) Board review of Corporate Vision and Mission ………..…………………... 10(d) Directorship in Other Companies (Updated March 2015) …………………. 10(e) Shareholding in the Company (Updated December 2014) .………………... 18

2) CHAIRMAN AND CEO…………..….…………...………………………………. 193) OTHER EXECUTIVE, NON-EXECUTIVE & INDEPENDENT DIRECTORS … 204) CHANGES IN THE BOARD OF DIRECTORS ..………………………………… 225) ORIENTATION AND EDUCATION PROGRAM ………………………………. 33

B. CODE OF BUSINESS CONDUCT & ETHICS……………………..........................… 461) POLICIES…….....…………………………………………………………………. 462) DISSEMINATION OF CODE……………............…………………………….…. 563) COMPLIANCE WITH CODE……………………………………………….......... 564) RELATED PARTY TRANSACTIONS…………………..……………………..… 57

(a) Policies and Procedures ....…………………........…………………………… 57(b) Conflict of Interest ...……………………………..........……………………… 57

5) FAMILY, COMMERCIAL AND CONTRACTUAL RELATIONS…………...….. 586) ALTERNATIVE DISPUTE RESOLUTION………………….…………………… 60

C. BOARD MEETINGS & ATTENDANCE….....…………………………………….....… 611) SCHEDULE OF MEETINGS………………………………...…………………..… 612) DETAILS OF ATTENDANCE OF DIRECTORS (Updated December 2014)....... 623) SEPARATE MEETING OF NON-EXECUTIVE DIRECTORS…………………... 624) QUORUM REQUIREMENT ………………………………...............….………… 625) ACCESS TO INFORMATION ....................................……………..….………… 626) EXTERNAL ADVICE…………….………………………….…………….……… 667) CHANGES IN EXISTING POLICIES (Updated December 2014) ……………… 69

D. REMUNERATION MATTERS………………………………………………………….. 691) REMUNERATION PROCESS……………………....…………………………….. 692) REMUNERATION POLICY AND STRUCTURE FOR DIRECTORS (Updated March

2015) …......................................................................................................................... 703) AGGREGATE REMUNERATION (Updated March 2015) …............................. 714) STOCK RIGHTS, OPTIONS AND WARRANTS………………………………… 725) REMUNERATION OF MANAGEMENT………………………...……………….. 73

E. BOARD COMMITTEES………………………………………….…………………......... 741) NUMBER OF MEMBERS, FUNCTIONS AND RESPONSIBILITIES …………… 742) COMMITTEE MEMBERS (Updated March 2015) ............………………………… 783) CHANGES IN COMMITTEE MEMBERS (Updated December 2014)…………….. 844) WORK DONE AND ISSUES ADDRESSED (Updated March 2015) ………............855) COMMITTEE PROGRAM (Updated March 2015).………………………………… 90

F. RISK MANAGEMENT SYSTEM ………..…………………………………...................... 911) STATEMENT ON EFFECTIVENESS OF RISK MANAGEMENT SYSTEM (Updated

March 2015)…...…………………………………...................................................… 912) RISK POLICY……...........................……………………………………………… 923) CONTROL SYSTEM……………………………….……………………………… 95

5

G. INTERNAL AUDIT AND CONTROL .............................................. .......................... 981) STATEMENT ON EFFECTIVENESS OF INTERNAL CONTROL

SYSTEM…………....……………........................................................................ 982) INTERNAL AUDIT

(a) Role, Scope and Internal Audit Function………………………………...……99(b) Appointment/Removal of Internal Auditor……………………………………… 100(c) Reporting Relationship with the Audit Committee…………………………… 100(d) Resignation, Re-assignment and Reasons (Updated December 2014)........... 100(e) Progress against Plans, Issues, Findings and Examination Trends (Updated

December 2014) …………………….................................................................. 101(f) Audit Control Policies and Procedures (Updated December 2014) ......……… 102(g) Mechanisms and Safeguards…………………...............…...……………...... 102

H. ROLE OF STAKEHOLDERS ……………………………………………………..…….. 1041) STAKEHOLDER POLICIES ………………………………………………………… 1042) CSR / SUSTAINABILITY REPORT ……………………………………………..... 1113) MECHANISMS FOR EMPLOYEE PARTICIPATION (Updated March

2015)......................................................................................................................111(a) Employee Safety, Health and Welfare……………….…………………………111(b) Data on Training And Development Programmes For Employees ................ 112(c) Reward/Compensation Policy ……...…………………………………………… 113

4) EMPLOYEE COMPLAINTS AND PROTECTION …..……………………........... 115

I. DISCLOSURE AND TRANSPARENCY ………………………………………………... 1151) OWNERSHIP STRUCTURE (Updated December 2014) …………………………… 1152) ANNUAL REPORT (Updated March 2015) ………………………………………… 1183) EXTERNAL AUDITOR’S FEE (Updated March 2015) …………………………. 1194) MEDIUM OF COMMUNICATION …………………………………………...….. 1195) RELEASE DATE OF THE AUDITED FINANCIAL REPORT (Updated March 2014)

.……………………………................................................................................... 1206) COMPANY WEBSITE ……………………………………………….................... 1207) DISCLOSURE OF RPT (Updated December 2014).………..…............…………… 120

J. RIGHTS OF STOCKHOLDERS…………………………………………………………....1221) RIGHT TO PARTICIPATE EFFECTIVELY IN STOCKHOLDERS’ MEETINGS

(Updated March 2015).......................................................................................... 1222) TREATMENT OF MINORITY STOCKHOLDERS (Updated March 2015)

..……………………………………………........................................................... 132

K. INVESTORS RELATIONS PROGRAM………………………………………………....... 133L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES (Updated December 2014)

.…………….………………………………........................................................................ 134M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL (Updated December 2014)

....………………………………......................................................................................... 138N. INTERNAL BREACHES AND SANCTIONS...……………………………………..….. 141

6

A. BOARD MATTERS

1) Board of Directors

Number of Directors per Articles ofIncorporation

ELEVEN (11)

Actual number of Directors for the year ELEVEN (11)

(a) Composition of the Board

Complete the table with information on the Board of Directors (Updated as of June 2014):

Director’s Name

Type[Executive(ED), Non-Executive(NED) or

Independent Director

(ID)]

Ifnominee,identify

theprincipal

Nominatorin the lastelection (if

ID, state therelationship

with thenominator)

Datefirst

elected

Date lastelected (ifID, state

thenumber of

yearsserved as

ID)1

Electedwhen

(Annual/Special

Meeting)

No. ofyearsserved

asdirector

OSCAR M.LOPEZ

ED N/A

Red VulcanHoldingsCorporation

Nov.2007

May 6,2014

Annual SEVEN(7)

FEDERICO R.LOPEZ

ED N/A Nov.2007

May 6,2014

Annual SEVEN(7)

RICHARD B.TANTOCO

ED N/A Nov.2007

May 6,2014

Annual SEVEN(7)

FRANCISGILES B. PUNO

NED N/A Nov.2007

May 6,2014

Annual SEVEN(7)

ERNESTO B.PANTANGCO

ED N/A Nov.2007

May 6,2014

Annual SEVEN(7)

JONATHAN C.RUSSELL

NED N/A Nov.2007

May 6,2014

Annual SEVEN(7)

PETER D.GARRUCHO

NED N/A Nov.2007

May 6,2014 Annual

SEVEN(7)

ELPIDIO L.IBAÑEZ

NED N/A June2009*

May 6,2014

Annual FOUR(4)

EDGAR O.CHUA

ID N/A RafaelIgnacio H.Montinola /NORELATION

July2010

May 6,2014 / 4years

Annual FOUR(4)

FRANCISCOED. LIM

ID N/A Edwin D.Martelino/NORELATION

July2010

May 6,2014 / 4years

Annual FOUR(4)

ARTURO T.VALDEZ

ID N/A FarleyCuizon/ NORELATION

July2011

May 6,2014 / 3years

Annual THREE(3)

* Director Elpidio L. Ibañez was first elected to the Board of Directors of the Energy DevelopmentCorporation at the Annual Stockholders’ Meeting held last June 30, 2009. He resigned on July 21, 2009.Thereafter, In the Annual Stockholders’ Meeting of July 29, 2010, Mr. Ibañez was elected again asDirector of EDC, where he remains as such up to the present

1 Reckoned from the election immediately following January 2, 2012.

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(b) Provide a brief summary of the corporate governance policy that the board of directorshas adopted. Place emphasis the policy/ies relative to the treatment of all shareholders,respect for the rights of minority shareholders and of other stakeholders, disclosureduties, and board responsibilities.

SUMMARY OF EDC’S CORPORATE GOVERNANCE POLICY. “The Board ofDirectors, Officers, Executives and Employees of the Energy Development Corporationhereby commits themselves to the principles of sound corporate governance andacknowledges that the same shall serve as a guide in the attainment of the Company’scorporate goals.”

POLICY/IES RELATIVE TO THE TREATMENT OF ALL SHAREHOLDERS, RESPECTFOR THE RIGHTS OF MINORITY SHAREHOLDERS AND OF OTHERSTAKEHOLDERS, DISCLOSURE DUTIES, AND BOARD RESPONSIBILITIES:

-----ON THE TREATMENT OF ALL SHAREHOLDERS AND RESPECT FOR THE RIGHTSOF MINORITY SHAREHOLDERS & OTHER STAKEHOLDERS

From EDC’s Amended By-Laws:Article II MEETING OF STOCKHOLDERS

6. Quorum. xxx In all cases where the law requires a two-thirds vote of theoutstanding capital stock, the majority vote of the minority shareholders present shalllikewise be required for validity of decisions in Stockholders’ Meetings.

Article IV BOARD OF DIRECTORS

3. Quorum. xxx However, once an Independent Director is elected to the Board, thequorum shall constitute a majority of the Board of Directors, with the presence of atleast one (1) Independent director, and every decision of a majority of the quorumshall require the concurrence of at least one (1) Independent Director for validity ofthe decisions of the Board.

From the EDC Corporate Governance Manual:COMMITMENT TO RESPECT STOCKHOLDERS’ RIGHTS

The Articles of Incorporation and all resolutions adopted by the Board establishingand designating series of serial preferred stock, fixing the number of shares to beincluded in each series and the rights, preferences and limitations of the shares ofeach series as filed with the Commission, which are deemed part of the Articles ofIncorporation, shall lay down the specific rights and powers of stockholders withrespect to the particular shares of stock they hold, all of which shall be protected bylaw so long as they shall not be in conflict with the Corporation Code.

The Board shall be committed to respect the voting right, pre-emptive right, right toinformation, right to dividends and appraisal rights of the stockholders.

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-----ON DISCLOSURE DUTIESFrom the EDC Corporate Governance Manual:DISCLOSURE DUTIES

REPORTORIAL OR DISCLOSURE SYSTEM OF COMPANY’S CORPORATEGOVERNANCE POLICIES

The reports or disclosures required under this Manual shall be prepared and submittedto the Commission by the responsible Board Committee or Officer through theCompany’s Compliance Officer.

-----ON BOARD RESPONSIBILITIES

From the EDC Corporate Governance Manual:BOARD RESPONSIBILITIES

---------------Section 3 BOARD GOVERNANCEBOARD RESPONSIBILITYThe Board of Directors is primarily responsible for the governance of the corporation.Corollary to setting the strategies and policies for the accomplishment of thecorporate objectives, it shall provide an independent check on Management. TheBoard shall likewise review and comment on the strategic directions identified byManagement.

BOARD ACCOUNTABILITYThe Board is primarily accountable to the stockholders. It should provide them with abalanced and comprehensible assessment of the corporation’s performance, positionand prospects on a quarterly basis, including interim and other reports that couldadversely affect its business, as well as reports to regulators that are required by law.

Thus, it is essential that Management provide all members of the Board with accurateand timely information that would enable the board to comply with its responsibilitiesto its stockholders.

------------------Subject 3General Responsibilities of the Board

Compliance with the principles of sound corporate governance instituted in thisManual shall be the paramount responsibility of and shall start with the Board.

The Board shall exercise the corporate powers and conduct and manage the businessand affairs of the Company in consonance with the principles of sound corporategovernance instituted in this Manual and shall be responsible for fostering the long-term success of the Company and securing its sustained competitiveness andprofitability in a manner consistent with its corporate objectives and the bestinterests of its stockholders and other stakeholders. (Amended pursuant to BoardResolution dated July 15, 2014, in compliance to SEC Memorandum Circular No.9, ss 2014).

Consistent with a director’s three-fold duty of obedience, diligence and loyalty to the

9

corporation he serves, the Directors shall:

1. Act within the scope of power and authority of the Company and the Board asprescribed in the Articles of Incorporation, By-laws of the company and inexisting laws, rules and regulations;

2. Exercise their best care, skill, judgment and observe utmost good faith in theconduct and management of the business and affairs of the Company; and

3. Act in the best interest of the Company and for the common benefit of theCompany’s stockholders and other stakeholders.

A director’s office is one of trust and confidence. As such, a Director shall act in amanner characterized by transparency, accountability and fairness.

Subject 4Specific Duties and Functions of the Board

To ensure a high standard of best practice on governance for the Company and topromote and protect the interest of the Company, its stockholders and otherstakeholders, the Board shall conduct itself with honesty and integrity in theperformance of, among others, the following duties and functions:

1. Install a process of selection to ensure a mix of competent Directors andOfficers each of whom can add value and contribute independent judgment tothe formulation of sound corporate strategies and policies, and adopt aneffective succession planning program for Management;

2. Elect the President and other Officers;3. Adopt a professional development program for Officers and succession

planning for the Company Executives;4. Determine or validate the Company’s purpose, its vision, mission and

strategies to carry out its objectives;5. Ensure that the Company complies with all relevant laws, rules and

regulations and codes of best business practices6. Identify the Company’s major and other stakeholders in the community in

which it operates or are directly affected by its operations, and formulatea clear policy of accurate, timely and effective communication with themthrough an effective investor relations program; (Amended pursuant toBoard Resolution dated July 15, 2014, in compliance to SEC MemorandumCircular No. 9, ss 2014);9, ss 2014);

7. Adopt a system of internal checks and balances and regularly evaluateapplicability thereof under changing conditions;

8. Identify key risk areas and key performance indicators and monitor thesefactors with due diligence

9. Ensure the continuing soundness, effectiveness and adequacy of theCompany’s internal control environment; and

10. Properly discharge Board functions by meeting regularly, and give dueconsideration to independent views during Board meetings, which meetingsshall be duly minuted;

11. Adopt procedures for the Directors, either individually or as a group, infurtherance of their duties, to take independent professional advice and tohave access to management;

12. Keep Board authority within the powers of the institution as prescribed in theArticles of Incorporation, By-Laws and in existing rules and regulations.

13. Approval of items reserved to the Board, such as, but not limited to:a. Annual Reports and Financial Statementsb. Dividends

10

c. Financial Policiesd. Budgete. Retirement Plan and selection/appointment of Trusteesf. Safety/asset integrity mattersg. Others

14. Provide sound strategic policies and guidelines to the corporation on majorcapital expenditures. Establish programs that can sustain its long-termviability and strength. Periodically evaluate and monitor the implementationof such policies and strategies, including business plans, operating budgetsand Management’s overall performance

15. Formulate and implement policies and procedures that would ensure theintegrity and transparency of related party transactions between and amongthe corporation and its parent company, joint ventures, subsidiaries,associates, affiliates, major stockholders, officers and directors, includingtheir spouses, children and dependent siblings and parents, and ofinterlocking director relationships by members of the Board.

16. Establish rules for an alternative dispute resolution system in the corporationthat can amicably settle conflicts or differences between the corporation andits stockholders, and the corporation and third parties, including theregulatory authorities.

17. Appoint a Compliance Officer who shall have the rank of at least vice-president. In the absence of such appointment, the Corporate Secretary,preferably a lawyer, shall act as Compliance Officer

18. Perform such other functions which may be required under existing laws,issuances and regulations.

(c) How often does the Board review and approve the vision and mission?

The Company’s Mission and Vision is under constant review by Management and the Board,to ensure that the Mission and Vision is descriptive and comprehensive to cover theoperations and purpose of the Company.

The current Mission and Vision was approved by the Board in 2010 after years of study sinceEDC’s full privatization in 2007. The objective of the revision of the Mission and Vision is toensure that EDC’s guiding principles, mission and vision, as well as the essential CompanyValues are geared towards private enterprise concerns and objectives.

This is the first and only time that the Company’s Mission and Vision has been amended.

(d) Directorship in Other Companies

i. Directorship in the Company’s Group2 (Updated as of December 2014)

Identify, as and if applicable, the members of the company’s Board of Directors whohold the office of director in other companies within its Group:

2 The Group is composed of the parent, subsidiaries, associates and joint ventures of the company.

11

Director’s Name Corporate Name of theGroup Company

Type of Directorship(Executive, Non-Executive,Independent). Indicate if

director is also the Chairman.OSCAR M. LOPEZ Lopez Holdings Corporation

(formerly Benpres HoldingsCorporation)First Philippine HoldingsCorporation (FPH)Energy Development Corporation.Bac-Man Geothermal Inc., EDCBurgos Wind Power Corporation,EDC Geothermal Corp., EDCWind Energy Holdings Inc., GreenCore Geothermal Inc.

Director and ChairmanEmeritus

FEDERICO R. LOPEZ Energy Development Corporation(EDC)EDC Geothermal CorporationGreen Core Geothermal Inc.Bac-Man Geothermal Inc.Bac-Man Energy DevelopmentCorporationSouthern Negros Geothermal, Inc.Kayabon Geothermal Inc.EDC Wind Energy Holdings Inc.EDC Burgos Wind PowerCorporationEDC Bayog Burgos Wind PowerCorporationEDC Pagali Burgos Wind PowerCorporationEDC Bright Solar EnergyHoldings, Inc.EDC Bago Solar PowerCorporationEDC Burgos Solar CorporationFirst Philippine HoldingsCorporation (FPHC)First Gas Power Corp.First Gen Corporation (First Gen).FG Hydro CorporationFirst Gas Power Corporation (FGPCorp.)First Gen Energy Solutions(FGES)First Gen Renewable Inc.FG Bukidnon Power Corp

Chairman and Chief ExecutiveOfficer

12



director is also the Chairman.

First Philippine Industrial Corp.First Philippine Electric Corp.First Philippine Realty Corp.First Balfour Inc.

Rockwell Land Corporation

ABS-CBN Corporation

Lopez Holdings, Inc.

Chairman

Vice Chairman

Director

Treasurer

RICHARD B. TANTOCO EDCEDC Geothermal CorporationGreen Core Geothermal Inc.Bac-Man Geothermal Inc.Bac-Man Energy DevelopmentCorporationSouthern Negros Geothermal, Inc.Kayabon Geothermal Inc.EDC Wind Energy Holdings Inc.,EDC Burgos Wind PowerCorporationEDC Bayog Burgos Wind PowerCorporationEDC Pagali Burgos Wind PowerCorporationEDC Bright Solar EnergyHoldings, Inc.EDC Bago Solar PowerCorporationEDC Burgos Solar Corporation

First Gen Corp.First Gen Luzon Power Corp.First Gen Hydro Power Corp.First Gen Geothermal PowerCorporationFirst Gen Visayas Hydro PowerCorporationFirst Gen Mindanao Hydro PowerCorporationFirst Gen Energy Solutions, Inc.First Gen Premier Energy Corp.Red Vulcan Holdings Corp.First Gen Visayas Energy Inc.First Gen Prime EnergyCorporationFirst Gen Renewables, Inc.Blue Vulcan Holdings Corp.

Director, President and ChiefOperating Officer (COO)

Director and Executive VicePresident

13



director is also the Chairman.Northern Terracotta Power Corp.Prime Meridian PowergenCorporationOneCore Holdings Inc.DualCore Holdings Inc.GoldSilk Holdings Corp.First Gas Holdings CorporationFirst Gas Power CorporationFGP Corp.First Gas Pipeline Corp.First NatGas Power Corp.AlliedGen Power CorporationFGLand Corp.

First Gen Bukidnon PowerCorporationUnified Holdings Corp.First Gen Northern Energy Corp.First Philippine Holdings.

Oscar M. Lopez Center forClimate Change Adaptation andDisaster Risk ManagementFoundation, Inc.

KEITECH EducationalFoundation, Inc.

Executive Vice President

Trustee and President

Trustee

FRANCIS GILES B. PUNO First Gen Corp.First Gen Renewables IncFG Bukidnon Power Corp.First Gen Energy Solutions, Inc.Red Vulcan Holdings Corp.First Gen Luzon Power Corp.First Gen Geothermal Power Corp.First Gen Northern Energy Corp.First Gen Visayas HydroPower CorpFirst Gen Mindanao Hydro PowerCorp.First Gas Holdings Corp.First Gas Power Corp.FGP Corp.Unified Holdings Corp.First Gas Pipeline Corp.First NatGas Power Corp.FGLand Corp.

First Philippine Holdings Corp.

Director, President and COO

Executive Vice President andChief Financial Officer (CFO)

14



director is also the Chairman.

First Gen Hydro PowerCorporationEDC Geothermal CorporationGreen Core Geothermal Inc.Bac-Man Geothermal Inc.Bac-Man Energy DevelopmentCorporationSouthern Negros Geothermal, Inc.Kayabon Geothermal Inc.EDC Wind Energy Holdings Inc.EDC Burgos Wind PowerCorporationEDC Bayog Burgos Wind PowerCorporationEDC Pagali Burgos Wind PowerCorporationEDC Bright Solar EnergyHoldings, Inc.EDC Bago Solar PowerCorporationEDC Burgos Solar Corporation.Mount Apo Renewable EnergyInc.

Director

ERNESTO B.PANTANGCO

EDCEDC Geothermal CorporationGreen Core Geothermal Inc.Bac-Man Geothermal Inc.Bac-Man Energy DevelopmentCorporationSouthern Negros Geothermal, Inc.Kayabon Geothermal Inc.EDC Wind Energy Holdings Inc.EDC Burgos Wind PowerCorporationEDC Bayog Burgos Wind PowerCorporationEDC Pagali Burgos Wind PowerCorporationEDC Bright Solar EnergyHoldings, Inc.EDC Bago Solar PowerCorporationEDC Burgos Solar Corporation

First Gen Corp.First Gen Geothermal Power Corp.First Gen Visayas Hydro PowerCorp.

Director and Executive VicePresident (EVP).

Executive Vice-President

15



director is also the Chairman.First Gen Mindanao Hydro PowerCorp.FGLuzonRed Vulcan

FPPCBPPC

FG LuzonGCGIEWEHIFG Bukidnon

FGHPCFirst Gen Northern Energy Corp.

Director, President and CEO

Director

President and Director

JONATHAN C. RUSSELL Energy Development Corporation

First Gen Corp.

Green Core Geothermal Inc.

Director

Executive Vice President

Director

PETER D. GARRUCHO,JR.

Energy Development CorporationEDC Geothermal CorporationFPHCFirst Gen Corp.First Gas HoldingsFirst Gas PowerFGPCorp,Unified HoldingsFirst Gas PipelineFirst Gen Hydro Power Corp.FG Bukidnon Power Corp.First Gen Energy Solutions, Inc.Red Vulcan Holdings Corp.Prime Terracota Holdings Corp.First Philippine Industrial CorpFirst Balfour Corp.

Director

ELPIDIO L. IBAÑEZ EDC

FPHC

First Gen Renewables Inc.FG Bukidnon Power Corp.Bauang Private Power Corp.First Private Power Corp.First Gas Holdings Corp.First Gas Power Corp.

Director

Director, President and ChiefOperating Officer

Director

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director is also the Chairman.FGP Corp.Unified Holdings Corp.First Gas Pipeline Corp.EDC Geothermal CorporationGreen Core Geothermal Inc.Bac-Man Geothermal Inc.Bac-Man Energy DevelopmentCorporationSouthern Negros Geothermal, Inc.Kayabon Geothermal Inc.EDC Wind Energy Holdings Inc.EDC Burgos Wind PowerCorporationEDC Bayog Burgos Wind PowerCorporationEDC Pagali Burgos Wind PowerCorporationEDC Bright Solar EnergyHoldings, Inc.EDC Bago Solar PowerCorporationEDC Burgos Solar Corporation

First Batangas Hotel Corp.

First Philippine Utilities Corp.

First Balfour Inc.First Philippine Electric Corp.First Philippine Industrial Corp.First Philippine Industrial ParkPhilippine Electric Corp.Securities Transfer Services, Inc.

Chairman of the board

Director and President

Director

EDGAR O. CHUA Energy Development Corporation Independent Director only inEDC

FRANCISCO ED. LIM Energy Development Corporation Independent Director only inEDC

ARTURO T. VALDEZ Energy Development Corporation Independent Director only inEDC

ii. Directorship in Other Listed Companies

Identify, as and if applicable, the members of the company’s Board of Directors whoare also directors of publicly-listed companies outside of its Group:

17

Director’s Name Name of Listed Company


director is also theChairman.

OSCAR M. LOPEZ NONE NOT APPLICABLEFEDERICO R. LOPEZ NONE NOT APPLICABLERICHARD B. TANTOCO NONE NOT APPLICABLEFRANCIS GILES B. PUNO NONE NOT APPLICABLEERNESTO B.PANTANGCO

NONE NOT APPLICABLE

JONATHAN C. RUSSELL NONE NOT APPLICABLEPETER D. GARRUCHO,JR.

NONE NOT APPLICABLE

ELPIDIO L. IBAÑEZ NONE NOT APPLICABLEEDGAR O. CHUA Integrated Microelectronics

Inc.Independent Director

FRANCISCO ED. LIM NONE NOT APPLICABLEARTURO T. VALDEZ NONE NOT APPLICABLE

iii. Relationship within the Company and its Group

Provide details, as and if applicable, of any relation among the members of theBoard of Directors, which links them to significant shareholders in the companyand/or in its group:

Director’s Name Name of theSignificant Shareholder

Description of therelationship

Oscar M. Lopez Federico R. Lopez SonOscar M. Lopez Ernesto B. Pantangco Cousin-In-LawFederico R. Lopez Francis Giles B. Puno Brother-In-Law

iv. Has the company set a limit on the number of board seats in other companies(publicly listed, ordinary and companies with secondary license) that an individualdirector or CEO may hold simultaneously? In particular, is the limit of five boardseats in other publicly listed companies imposed and observed? If yes, brieflydescribe other guidelines:

YES, BUT ONLY INSOFAR AS A GUIDING CONSIDERATION IN THEEVALUATION OF THEIR FITNESS FOR ELECTION PRIOR TO THE DIRECTORS’ELECTION IN THE ANNUAL STOCKHOLDERS’ MEETING.

GuidelinesMaximum Number ofDirectorships in other

companiesExecutive Director

THE CORPORATE GOVERNANCE MANUAL and theCHARTER OF THE NOMINATION ANDCOMPENSATION COMMITTEE provides:

Duties and Responsibilities

18

GuidelinesMaximum Number ofDirectorships in other

companiesNon-ExecutiveDirector

On Nomination:

“(3) to determine and submit an appropriate recommendationor finding on whether a candidate’s directorship in othercorporations would affect his capacity to serve and performhis duties as a director diligently, taking into considerationthe following factors: (a) The nature of the business of theCompany; (b) The number of directorships/activememberships and officerships of a Director in othercorporations or organizations; (c) Any possible conflict ofinterest; (d) The age of the Director; and (e) Such otherfactors which the Board may consider from time totime.“(4) To ensure that the Executive Directors, theIndependent Directors and Non-Executive Directors whoserve as full-time executives in other corporations shallsubmit themselves to a low-indicative limit on directorshipsin other corporations in order that the capacity of saiddirectors to serve the Company with utmost diligence shallnot be compromised.”

CEO

(e) Shareholding in the Company (As of 31 December 2014)

Complete the following table on the members of the company’s Board of Directors whodirectly and indirectly own shares in the company:

Name of Director Number of Directshares

Number ofIndirect shares /

Through (name ofrecord owner)

% ofCapitalStock

OSCAR M. LOPEZ 200,501 500,000.001%.003%

FEDERICO R.LOPEZ

1 0 .000%

RICHARD B.TANTOCO

8,104,501 5,125,000.043%.027%

FRANCIS GILES B.PUNO

2,102,501 0 .011%

ERNESTO B.PANTANGCO

2,112,501 0 .011%

JONATHAN C.RUSSELL

1,080,951 0 .006%.

PETER D.GARRUCHO JR.

5,670,000 1,000,000.030%.005%

ELPIDIO L. IBAÑEZ 500,001 0 .003%.EDGAR O. CHUA 1 0 .000%FRANCISCO ED.LIM

30,001 0 .000%

ARTURO T.VALDEZ

1 0 .000%

TOTAL 19,800,960 6,625,000 0.14%* Based on Public Ownership Report

19

2) Chairman and CEO

(a) Do different persons assume the role of Chairman of the Board of Directors and CEO?If no, describe the checks and balances laid down to ensure that the Board gets thebenefit of independent views.

Yes (i) No X

Identify the Chair and CEO:

Chairman of theBoard

FEDERICO R. LOPEZ

CEO/President

FEDERICO R. LOPEZ(CEO)RICHARD B. TANTOCO(PRESIDENT and COO)

(b) Roles, Accountabilities and Deliverables

Define and clarify the roles, accountabilities and deliverables of the Chairman and CEO.

Chairman Chief Executive Officer

Role

The Chairman of the Board shall be electedby and among the Directors. He shallpreside at all meetings of the Board andshall perform such other duties as he maybe called upon to perform by the Board.

He shall assist in ensuring that the Boardmeets regularly in accordance with thecorporate governance policies andpractices. He shall likewise ensure that theBoard meets regularly in accordance withan approved annual schedule and performsit duties responsibly. He shall determinethe agenda of each meeting in consultationwith the President.

The Chief ExecutiveOfficer shall have generalsupervision over thebusiness and affairs, andthe properties of theCorporation. He shall alsoperform such duties andresponsibilities that shallbe assigned to him by theBoard of Directors fromtime to time.

AccountabilitiesThe Chairman is accountable for theproper processes and direction of themeetings and activities of the Board.

He is accountable to theBoard and to theCompany’s shareholdersand stakeholders for theproper implementation ofprojects and otheroperational requirements

Deliverables

Ensures the optimization of the skills andcombined knowledge and experience of theBoard in order to achieve operationalexcellence.Lead proponent of the Company’scorporate governance policies.

Positive growth anddevelopment. Excellencein execution. Leadimplementor of thecompany’s corporategovernance programs

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Explain how the board of directors plans for the succession of the CEO/ManagingDirector/President and the top key management positions?

FROM THE CORPORATE GOVERNANCE MANUAL

The Board committed to review and redefine, when necessary, the roles, duties andresponsibilities of the President and key members of Management, if the Committeereasonably believes that such is necessary in order to integrate the dynamic requirements ofthe business as a going concern and the future plans of the Company, subject at all times tothe principles of sound corporate governance.

In practicing the foregoing commitment, whenever there is an election for a company officer,whether CEO or any other key management position, the Nomination and CompensationCommittee of the Board reviews the profile and documents of the new officer and deliberateson his fitness for appointment to the post. This review is usually included in the Agenda ofthe Committee’s Meeting,

3) Other Executive, Non-Executive and Independent Directors

Does the company have a policy of ensuring diversity of experience and background ofdirectors in the board? Please explain.

YES, EDC has such a policy.


“The Board has committed to install a process of selection to ensure a mix of competentDirectors and Officers each of whom can add value and contribute independent judgment tothe formulation of sound corporate strategies and policies.”

As such, in the deliberations of the Nomination and Compensation Committee, the curriculumvitae, the background, experience and relevant information on a nominee for election as aDirector, or a nominee for appointment as an Officer of the Company, are scrutinized anddiscussed to ensure a healthy balance of knowledge, reputation, experience and know-how inthe Board and in the roster of officers that will ultimately benefit the company.

Does it ensure that at least one non-executive director has an experience in the sector orindustry the company belongs to? Please explain.

YES, it ensures industry experience.

Under the Company’s Articles of Incorporation and By-Laws, and the Company’s CorporateGovernance Manual, the Qualifications for Directors do not distinguish between a Non-Executive and Executive Director, inasmuch as the qualifications include the practicalunderstanding of the business of the corporation and the membership in good standing inrelevant industry, business or professional organization.

This means that the need for experience with regard to the industry is highly important.

The present composition of the Board includes professionals with extensive experience inbusiness, power and energy, finance, and the environment. We also have directors withextensive government experience as top-level executives.

21

Define and clarify the roles, accountabilities and deliverables of the Executive, Non-Executive and Independent Directors:

Executive Non-Executive IndependentDirector

Role a director who is alsothe head of adepartment or unit ofthe corporation orperforms any workrelated to theCompany’s operationas a part of theCompany’s executivemanagement team;

a director who isneither the head of adepartment or unit ofthe corporation norperforms any workrelated to itsoperation. He isneither part of theCompany’s executivemanagement team

a person who, apartfrom his fees andshareholdings, isindependent ofmanagement and freefrom any business orother relationshipwhich could, or couldreasonably beperceived to,materially interferewith his exercise ofindependent judgmentin carrying out hisresponsibilities as adirector of theCompany

Accountabilities Promoting transparency and fairness to the stockholders and investors ofthe company to ensure long-term and sustainable corporate success.

Deliverables Growth and Process Improvements that willgenerate cost savings and revenueenhancements.

Providingindispensableindependent judgmentand objectivity on allissues presented to theBoard.

Provide the company’s definition of "independence" and describe the company’s compliance tothe definition.

“Independent Director” means a person who is independent of management and who, apartfrom his fees and shareholdings, is free from any business or other relationship with theCompany which could, or could reasonably be perceived to, materially interfere with hisexercise of independent judgment in carrying out his responsibilities as a director of theCompany

Does the company have a term limit of five consecutive years for independent directors? If aftertwo years, the company wishes to bring back an independent director who had served for fiveyears, does it limit the term for no more than four additional years? Please explain.

EDC has automatically adopted the SEC regulation on the term limits for independentdirectors embodied in SEC Memorandum Circular No. 9, series of 2011 dated December 5,2011 whereby Independent Directors may serve as such for five (5) consecutive yearscommencing on January 2, 2012, with a possibility for re-election for no more than anotherfive consecutive years thereafter, PROVIDED that the independent director has undergone a2-year “cooling off” period after the first five (5) years.

At present, the rules embodied in the provisions of SEC MC No. 9, ss 2011 on the term limitsfor Independent Directors has not yet found actual application in the company since thecurrent independent directors in EDC have two more years' eligibility (2015 and 2016), in

22

view of Section 6 of SEC MC No. 9, ss 2011 which states that the rule on term limits "shalltake effect on January 2, 2012. All previous terms served by existing IDs shall not be includedin the application of the terms limits subject of this circular". Should there come a time whenthe five-year limit is reached, the affected Independent Director/s shall be rendered ineligiblefor re-election by our Nomination and Compensation Committee pursuant to SEC MC No. 9,ss 2011.

SEC MC No. 9, ss 2011 will serve as additional guideline for the Company’s Nominationand Compensation Committee whenever they convene to screen and evaluate thequalifications and disqualifications of nominees for election to the EDC Board of Directors.

4) Changes in the Board of Directors (Executive, Non-Executive and Independent Directors)

(a) Resignation/Death/Removal

Indicate any changes in the composition of the Board of Directors that happened duringthe period:

Name Position Date of Cessation Reason

NONE N/A N/A N/A

(b) Selection/Appointment, Re-election, Disqualification, Removal, Reinstatement andSuspension

Describe the procedures for the selection/appointment, re-election, disqualification,removal, reinstatement and suspension of the members of the Board of Directors.Provide details of the processes adopted (including the frequency of election) and thecriteria employed in each procedure:

Procedure Process Adopted Criteria

a. Selection/Appointment

(i) Executive Directors In accordance with theprovisions of theCompany’s By-Laws, theCorporate GovernanceManual and the Charter ofthe Nomination andCompensationCommittee, the procedurefor the Selection orappointment of ExecutiveDirectors and Non-Executive Directors is asfollows: The Board of Directors

approves the setting ofthe date for the AnnualStockholders’ Meeting(ASM), where theelection of Directorsshall take place. Noticethereof shall be givento the PSE, and to the

Primary criteria forelection of Directors,whether Executive, Non-Executive orIndependent, are thestatutory requirementsunder the CorporationCode of the Philippines.

In addition, Pursuant tothe provisions of theCompany By-Laws, theCorporate GovernanceManual and the NCCCharter, the followingare additional criteria forthe selection orappointment of EDCdirectors:

A college graduate orwith sufficientexperience in managing

23


SEC via SEC Form 17-C.

All nominations for theelection of directors bythe stockholders shallbe submitted in writingto the Board and shallbe received at theCorporation’s Principalplace of business atleast forty (40) workingdays before the date ofthe meeting for theelection of directors.Within the same periodand pursuant to theNCC Charter, theCommittee shallengage a qualifiedindependent person toadvise them in theevaluation of anyperson nominated forDirector of theCorporation

business At least twenty-one years

old Proven to possess

integrity and probity Shall be prudent Practical understanding

of the business of thecorporation

Membership in goodstanding in relevantindustry, business orprofessional organization

Previous businessexperience

(ii) Non-ExecutiveDirectors

The above procedureapplies to all Directors,whether Executive, Non-Executive or independent

Same as Executive Directors

(iii) IndependentDirectors

The above procedureapplies to all Directors,whether Executive, Non-Executive or independent

IN ADDITION TO THEABOVE CRITERIA, THEFOLLOWING ARE ALSOREQUIRED FORNOMINEES FORINDEPENDENTDIRECTOR: For the non-executive

directors, they shouldalso possess suchqualifications and staturethat would enable themto effectively participatein the deliberations ofthe Board.

Not an existing director,officer, executive oremployee of thecompany

Does not own more than2% of the shares of thecovered company

Is not a relative of any

24


director, officer,executive or substantialshareholder of thecompany

Is not acting as anominee orrepresentative of anydirector, officer,executive or shareholderof the company

Has not been employedin any capacity by theCompany

Is not retained, or withinthe last two years, hasnot been retained as aprofessional adviser bythe company

Has not engaged anddoes not engage in anytransaction with thecompany

b. Re-appointment

(i) Executive Directors No special process for re-appointment; Instead, therules for selection /appointment stated aboveare applied.

No special Criteria for re-appointment; Instead, therules for selection /appointment stated above areapplied.


Same as above Same as above


Same as above Same as above, except in thecase of IndependentDirectors, the terms limits setby the SEC under SECMemorandum Circular No.9, series of 2011 are nowfactored in the criteria fortheir reappointment.

c. Permanent Disqualification

(i) Executive Directors Upon the voluntarydeclaration or a third-partyreport on the occurrence ofacts which may be deemed

Permanent Disqualification(i) No person shall qualify

or be eligible fornomination or election

25



as grounds for permanentdisqualification, the mattershall be taken up by theNomination andCompensation Committeefor determination. TheCommittee may likewisetake up the matter motuproprio upon knowledge ofthe grounds for temporarydisqualification of aDirector. Any decision itreaches concerning theissue shall be forwarded tothe Board for approval.

to the Board ofDirectors if he isengaged in anybusiness or activitywhich competes with oris antagonistic to that ofthe Corporation or anyof its subsidiaries andaffiliates, whichdisqualification may bewaived by a majorityvote of the Board ofDirectors, upon therecommendation of theNominationsCommittee. Withoutlimiting the generalityof the foregoing, aperson shall be deemedto be engaged in suchbusiness or activity:a. If he is an officer,

manager, director orcontrolling person of,or the owner (eitherof record orbeneficially) of fivepercent (5%) or moreof any outstandingclass of shares of anycorporation (otherthan one in which theCorporation owns atleast thirty percent(30%) of capitalstock), or entityengaged in a businessor activity which theBoard of Directors,by at least a majorityvote of the directorspresent constituting aquorum, determinesto be competitive orantagonistic to that ofthe Corporation or itssubsidiaries andaffiliates; or,

b.If he is an officer,manager, director orcontrolling person of,or the owner (eitherof record or

26


beneficially) of fivepercent (5%) or moreof any outstandingclass of shares of anyother corporation orentity engaged in anyline of business of theCorporation or that ofits subsidiaries andaffiliates, where theBoard of Directors,by at least a majorityvote of the directorspresent constituting aquorum, determinessuch corporation orentity as beinginvolved in actsviolative of the lawsagainst combinationsin restraint of trade;or where themembership in theBoard of Directors ofthe Corporation ofsuch officer,manager, controllingperson or owner ofsuch persons andentities, in thejudgment of theBoard of Directors,by at least majorityvote of the directorspresent constituting aquorum, may violatethe laws againstcombinations inrestraint of trade; or,

c. Being a nominee, asdetermined by theBoard of Directors byat least a majorityvote of directorspresent constituting aquorum, of anyperson set forth in thepreceding clause (a)or (b).

(ii) Any person convictedby final judgment of anoffense involving moralturpitude, fraud,

27


embezzlement, theft,estafa, counterfeiting,misappropriation,forgery, bribery, falseaffirmation, perjury, orsimilar fraudulent actsor transgressions;

(iii) Any person convictedby final judgment of anoffense punishable byimprisonment for aperiod exceeding six (6)years, or a violation ofthe Corporation Codecommitted within five(5) years prior to thedate of election as aDirector

(iv) Any person judiciallydeclared to beinsolvent;

(v) Any person convictedby final judgment by acompetent court of acrime, or found liable orresponsible by finaldecision or order by acompetentadministrative body forany violation that (a)involves the purchase orsale of securities, asdefined in the SecuritiesRegulation Code; (b)arises out of theperson’s conduct as anunderwriter, broker,dealer, investmentadviser, principaldistributor, mutual funddealer, futurescommission merchant,commodity tradingadvisor, or floor broker;or (c) arises out of hisfiduciary relationshipwith a bank, quasi-bank, trust company,investment house or asan affiliated person ofany of them;

(vi) Any person who, byreason of misconduct,

28


after hearing, ispermanently enjoinedby a final judgment ororder of theCommission or anycourt or administrativebody of competentjurisdiction from: (a)acting as underwriter,broker, dealer,investment adviser,principal distributor,mutual fund dealer,futures commissionmerchant, commoditytrading advisor, or floorbroker; (b) acting as adirector or officer of abank, quasi-bank, trustcompany, investmenthouse, or investmentcompany; (c) engagingin or continuing anyconduct or practice inany of the capacitiesmentioned in sub-paragraphs (a) and (b)above, or willfullyviolating the laws thatgovern securities andbanking activities.

(vii) The disqualificationshall also apply if suchperson is currently thesubject of an order ofthe Commission or anycourt or administrativebody denying, revokingor suspending anyregistration, license orpermit issued to himunder the CorporationCode, SecuritiesRegulation Code or anyother law administeredby the Commission orBangko Sentral ngPilipinas (BSP), orunder any rule orregulation issued by theCommission or BSP, orhas otherwise beenretrained to engage in

29


any activity involvingsecurities and banking;or such person iscurrently the subject ofan effective order of aself-regulatoryorganization suspendingor expelling him frommembership,participation orassociation with amember or participantof the organization.

(viii)Any person foundguilty by final judgmentby a foreign court orfinancial regulatoryauthority of acts,violations ormisconduct similar toany of the acts,violations ormisconduct listed in thepreceding clause;

(ix) Any person who haspreviously committedpatently unlawful act(s)and/or other act(s)deemed inimical to thereputation and/orinterest of theCorporation, itssubsidiaries oraffiliates;

(x) Any person who hascommitted acts causingundue injury to theCorporation, itssubsidiaries oraffiliates, or committedacts causing injury toanother corporationwhile acting as anofficer or directortherein

Any person who haspreviously committed grossnegligence or bad faith indirecting the affairs oranother corporation where heserved as an officer ordirector

(iii) Independent Same as above IN ADDITION TO THE

30


Directors ABOVE CRITERIA FORPERMANENTDISQUALIFICATION, THEFOLLOWING SHALLALSO BE CONSIDEREDIN THE CASE OFINDEPENDENTDIRECTORS: When he becomes an

officer, employee orconsultant of the samecorporation

The additional groundsfor disqualification shallbe those provided underRule 38 of the AmendedImplementing Rules andRegulations of theSecurities RegulationCode.

d. Temporary Disqualification

(i) Executive Directors Upon the voluntarydeclaration or a third-partyreport on the occurrence ofacts which may be deemedas grounds for temporarydisqualification, the mattershall be taken up by theNomination andCompensation Committeefor determination. TheCommittee may likewisetake up the matter motuproprio upon knowledge ofthe grounds for temporarydisqualification of aDirector. Any decision itreaches concerning theissue shall be forwarded tothe Board for approval.

Refusal to disclose theextent of businessinterest

Absence or non-participation in morethan 50% of meetings

Dismissal or terminationfrom directorship inanother corporation theshares of which arelisted on the Exchange

Under preventivesuspension by theCompany

Conviction that has notyet been final withregard to cases likemoral turpitude and othersimilar fraudulent acts oftransgressions




Same as above IN ADDITION TO THEPROVISIONS FORREGULAR DIRECTORS,THE FOLLOWING ALSOAPPLIES TOINDEPENDENTDIRECTORS

His beneficial equity

31


ownership in thecorporation or any of itssubsidiaries and affiliatesexceeds two percent(2%) of its subscribedcapital stock. Thedisqualification shall belifted if the limit is latercomplied with.

The additional groundsfor temporarydisqualification shall bethose provided underRule 38 of the AmendedImplementing Rules andRegulations of theSecurities RegulationCode.

e. Removal

(i) Executive Directors In case of removal ofDirectors, whetherExecutive, Non-Executiveor Independent, theprovisions of Section 28 ofthe Corporation Code shallbe followed.

The law does not specifycases for removal of adirector nor even require thatremoval should be forsufficient cause or reason.Under Section 28 of theCorporation Code, thestockholders may have adirector removed for anyground, provided theprocedure for such removalis complied with.





f. Re-instatement

(i) Executive Directors The By-Laws or theCorporate GovernanceManual do not allow forspecial rules forreinstatement of directors.Any such possiblereinstatement shall becovered by the processesfor appointments orelection of Directors

The By-Laws or theCorporate GovernanceManual do not allow forspecial criteria forreinstatement of directors.Any such possiblereinstatement shall becovered by the criteriaapplicable for appointmentsor election of Directors(Executive, Non-Executiveand Independent)





32


g. Suspension

(i) Executive Directors Pursuant to the authority ofthe Board, through theNomination andCompensation Committee(NCC) to screen thequalifications anddisqualifications of theBoard, the Committee mayrecommend the suspensionof a Director, subject to theapproval of the Board ofDirectors.

If the act to be penalized isfor the non-compliancewith the CG Manual, theCG Manual provides that“The Compliance Officershall be responsible fordetermining violation(s)after notice and hearing andshall recommend to theChairman the imposablepenalty for such violation,subject to further approvalby the Board.”

1. PROVIDED IN THE CGMANUAL

2.PENALTIES FOR NON-COMPLIANCE WITHTHE MANUALTo strictly encourageobservance andimplementation of theprovisions of this Manual,the following penalties shallbe imposed, after notice andhearing, on the Company’sDirectors, Officers,Executives and employees incase of violation of any ofthe provisions of thisManual:1. In case of first violation,

the subject person shallbe reprimanded.

2. In case of secondviolation, the subjectperson shall besuspended from holdingoffice; provided that, theduration of suchsuspension shall dependon the gravity of theviolation in each case.

3. In case of third violation,the maximum penalty ofremoval from office shallbe imposed.

The wilful commission of athird violation of anyprovision of this Manual byany Director, Officer,Executive or employee shallbe a sufficient cause forremoval from office of suchDirector, Officer, Executiveor employee.


Same as above Same as the above


Same as above Same as the above

33

Voting Result of the last Annual General Meeting (May 6, 2014 Annual Stockholders'Meeting)

Name of DirectorVotes Received In Favor of Election

2014OSCAR M. LOPEZ 22,404,416,771.36FEDERICO R. LOPEZ 23,629,289,766.99RICHARD B. TANTOCO 22,397,892,115.86FRANCIS GILES B. PUNO 21,728,533,201.20ERNESTO B. PANTANGCO 22,336,212,335.80JONATHAN C. RUSSELL 21,855,448,670.71PETER D. GARRUCHO 22,341,022,089.93ELPIDIO L. IBAÑEZ 22,348,484,627.43EDGAR O. CHUA 23,000,955,395.10FRANCISCO ED. LIM 24,902,063,329.37ARTURO T. VALDEZ 24,896,267,429.37

5) Orientation and Education Program

(a) Disclose details of the company’s orientation program for new directors, if any.

FROM THE CORPORATE GOVERNANCE MANUAL:

Training/Orientation Process

“The Board undertakes to require a newly elected member of the Board to attend,within a reasonable period after his election to the Board, a seminar on corporategovernance conducted by any duly recognized private or government institution.

”In addition, newly-elected members of the Board should familiarize themselves withthe Corporation’s operations, senior management and business environment. Theyshould be inducted in terms of their fiduciary duties and responsibilities as well as inrespect of the Board’s expectations.

”Appropriate training opportunities for both existing and potential directors may,from time to time, be identified and undertaken.”

Upon election to the EDC Board, a new Director receives an orientation about the Company,conducted by the Office of the President (OP) and the Corporate Planning Department(CorPlan). The orientation is a multi-session activity wherein the Director is briefed oninformation about EDC such as the nature of the business, the geothermal and renewableenergy operations, the organizational and functional structure of the company, among others.Thereafter, the Director will be scheduled to visit one or several of EDC’s geothermalprojects, for an on-site orientation of the business.

In addition to the in-house orientation given by the Company to the new Director, theCompliance Office likewise ensures that the new Director receives a proper corporategovernance orientation, if he has not attended one prior to his election in the EDC Board.

The latest Director to be added to the current set of Directors is Independent Director ArturoT. Valdez, who was elected in 2011. He underwent the abovestated in-house orientation aswell as the corporate governance orientation within the first few months after his election.

34

For 2014, all directors of the Company attended a corporate governance seminar conductedby duly-accredited training providers, in compliance with SEC Memorandum Circular No.20, ss. of 2013. The Compliance Office will continue to ensure that at least once a year, alldirectors and key officers of the Company will attend a corporate governance seminar toinculcate in them corporate governance principles and update them with the latest corporategovernance policies and practices.

(b) State any in-house training and external courses attended by Directors and SeniorManagement3 for the past three (3) years (Updated December 2014):

2012Name Seminar Title Start Date

Tee, Glenn L. Effective Presentation CascadeLeadership Empowerment Training for

Managerial ExcellenceExecutive Session of Ranjay GulatiCoaching Session (Batch 1)

March 7, 2012May 21-22, 2012

June 27-28, 2012November 7, 2012

Avante, Erwin O. Coaching Session (Batch 1)Business Leaders Luncheon with Gov. Jeb BushSecurity Bank Economic BriefingCorporate ImageStrategy SeminarGlobal Investment Portfolio StandardISDA DocumentationPhilippine Investment ConferenceMaybank Economic BriefingANZ Economic BriefingBloomberg TrainingDeutsche Bank Economic BriefingTax Avoidance 101Finance Lecture Series "Marriage Law"

November 7, 2012August 13, 2012

July 25, 2012July 24, 2012June 26, 2012

June 6, 2012April 12, 2012

March 27, 2012March 16, 2012

February 23, 2012January 18, 2012January 11, 2012

May 29, 2012February 28, 2012

Bersamin, Rico G. Tax Avoidance 101Effective Presentation Cascade - Batch 1Executive Session of Ranjay GulatiEffective Presentation Cascade Training

May 29, 2012March 7, 2012June 25, 2012

March 27, 2012Camu, Dominador, Jr.M.

Coaching Session (Batch 2)NFPA 70E: Standard for Electrical Safety in the

Workplace Training

November 8, 2012September 10, 2012

Catacutan, Alejandro V. Coaching Session (Batch 1)Effective Presentation CascadeExecutive Session of Ranjay Gulati


June 27, 2012Catigtig, Danilo C. Coaching Session (Batch 1)

Effective Presentation Cascade - Batch 2Executive Session of Ranjay Gulati2012 PGS Teambuilding

November 7, 2012March 21, 2012

June 25, 2012February 6, 2012

3 Senior Management refers to the CEO and other persons having authority and responsibility for planning,directing and controlling the activities of the company.

35


De Jesus, Agnes C. Part 2: EQ Strategies for Conflict ManagementCoaching & MentoringCoaching Session (Batch 1)Developing OthersExecutive Session of Ranjay GulatiEQ Strategies for Conflict Management for the

EERS Management TeamHoja de AsistenciaExecutive Session of Ranjay GulatiEffective Presentation Cascade Batch 4Spanish Language Course (multi-session)

December 4, 2012

November 28, 2012November 7, 2012November 7, 2012

June 25, 2012

August 28, 2012April 14, 2012March 1, 2012

June 25, April 17,February 22, 2012

Espinosa, Ernesto G. Coaching Session (Batch 1)HR Learning @ the Pit Stop: Project

Management and Time ManagementHR Pitstop: Advanced Labor Laws HRMS

Balance Scorecard


July 20, 2012

Lacambra, Martin Jude V. Coaching Session (Batch 1)Effective Presentation Cascade - Batch 2Executive Session of Ranjay GulatiLopez Credo Cascade Session Batch 6Effective Presentation Cascade Training - Batch

2

November 7, 2012March 21, 2012

June 27, 2012April 18, 2012

March 21, 2012

Lucero, Ellsworth R. Coaching Session (Batch 1)Executive Session of Ranjay Gulati

November 7, 2012June 25, 2012

Malonzo, Wifredo A. Effective Presentation Cascade - Batch 1Executive Session of Ranjay GulatiEffective Presentation Cascade TrainingOnboard: New Employee Orientation (Batch 13)

March 7, 2012June 25, 2012

March 27, 2012March 1, 2012

Maxino, Dwight A. Coaching Session (Batch 1)Executive Session of Ranjay Gulati


Ogena, Manuel S. Anti-Sexual Harassment OrientationExecutive Session of Ranjay Gulati

September 3, 2012June 25, 2012

Paete, Manuel C. Coaching Session (Batch 2)Executive Session of Ranjay Gulati


Poblete, Ferdinand B. Coaching Session (Batch 1)Anti-Sexual Harassment OrientationEffective Presentation Cascade - Batch 1Executive Session of Ranjay GulatiEffective Presentation Cascade TrainingOnboard: New Employee Orientation (Batch 13)

November 7, 2012September 3, 2012

March 7, 2012June 25, 2012

March 27, 2012March 1, 2012

Salonga, Noel D. Coaching Session (Batch 1)IT Project Management Awareness BriefingONBOARD! Month 6 Appreciation SessionEffective Presentation Cascade - Batch 2Executive Session of Ranjay GulatiLopez Credo Cascade Session Batch 11Effective Presentation Cascade Training - Batch

2CRP on Geochemical ModelingHSC Software Training

November 7, 2012January 18, 2012

July 27, 2012March 21, 2012

June 27, 2012April 20, 2012

March 21, 2012February 17, 2012February 15, 2012

36


Tongco, Marcelino M. Effective Presentation Cascade - Batch 1Executive Session of Ranjay Gulati2012 PGS Teambuilding

March 7, 2012June 25, 2012

February 6, 2012Vasay, Nestor H. Anti-Sexual Harassment Orientation

Tax Avoidance 101Finance Lecture Series "Marriage Law"

September 3, 2012May 29, 2012

February 28, 2012Villaroman, JamesArnold D.

Security Awareness Talk (batch 7) November 9, 2012

Virata, Liberato S. Coaching Session (Batch 2)Executive Session of Ranjay Gulati


Oscar M. Lopez(Chairman Emeritus)

Executive Learning Session by Ranjay Gulati2012 Board Strategy Retreat

June 25, 2012October 10, 2012

Federico R. Lopez(Chairman and CEO)

Executive Learning Session by Ranjay Gulati2012 Board Strategy Retreat

June 25, 2012October 10, 2012

Richard B. Tantoco(President and COO)

2012 Board Strategy Retreat October 10, 2012

Francis Giles B. Puno Executive Learning Session by Ranjay Gulati June 25, 2012Elpidio L. Ibanez Executive Learning Session by Ranjay Gulati

2012 Board Strategy RetreatJune 25, 2012

October 10, 2012Peter D. Garrucho, Jr. 2012 Board Strategy Retreat October 10, 2012Ernesto B. Pantangco 2012 Board Strategy Retreat October 10, 2012Jonathan C. Russell 2012 Board Strategy Retreat October 10, 2012Edgar O. Chua(Independent Director)


Francis Ed. Lim(Independent Director)

2012 Board Strategy RetreatSeminar on the Anti-Money laundering Act of

2001 as Amended, and BSP Circular No. 706

October 10, 2012March 20, 2012

Arturo T. Valdez(Independent Director)



Milo V. Alejo Team Coaching (TCCP) June 24, 2013Erwin O. Avante HPT Workshop February 21, 2013

Building a Culture of Integrity May 2, 2013Rico G. Bersamin Executive Learning Sessions with Prof. Deepak

MalhotraJune 17, 2013

Dominador Jr. M. Camu Information Security September 27, 2013Danilo M. Capapas Information Security June 20, 2013

Economic Briefing by ANZ October 24, 2013Alejandro V. Catacutan Executive Learning Sessions with Prof. Deepak


Reman A . Chua Information Security September 27, 2013Agnes C. De Jesus Social Return on Investment (SROI) Seminar February 19, 2013

37


Building a Culture of Integrity May 2, 2013Executive Learning Sessions with Prof. Deepak


Information Security September 27, 2013Martha J. De Lusong HPT Workshop February 21, 2013Richard Sr. E. Eugenio HPT Workshop February 21, 2013

Executive Learning Sessions with Prof. DeepakMalhotra

June 17, 2013

Information Security September 27, 2013Danilo D. Guevara Building a Culture of Integrity May 2, 2013


June 20, 2013

Martin Jude V. Lacambra Executive Learning Sessions with Prof. DeepakMalhotra

June 20, 2013

Information Security September 1, 2013Ariel Arman V. Lapus Information Security September 27, 2013Ellsworth R. Lucero Executive Learning Sessions with Prof. Deepak


Wilfredo A. Malonzo Executive Learning Sessions with Prof. DeepakMalhotra

June 17, 2013

Information Security June 20, 2013Maribel A. Manlapaz Executive Learning Sessions with Prof. Deepak


Mary Ann L. Matibag Information Security June 20, 2013Lecture Series: ING Economic Briefing and

UpdatesJuly 23, 2013

Dwight A. Maxino HPT Workshop February 21, 2013Executive Learning Sessions with Prof. Deepak


Ma. Elizabeth D. Nasol Executive Learning Sessions with Prof. DeepakMalhotra

June 17, 2013

Team Coaching (TCCP) June 24, 201350th PMAP Convention Summit September 25, 2013

Manuel S. Ogena Executive Learning Sessions with Prof. DeepakMalhotra

June 17, 2013

Information Security September 27, 2013Manuel C. Paete Executive Learning Sessions with Prof. Deepak


Abigaile T. Palas HPT Workshop February 21, 2013Executive Learning Sessions with Prof. Deepak


Ernesto B. Pantangco 2013 Board Strategy Retreat October 1, 2013Regina Victoria J.Pascual

2013 Information Security April 22, 2013

The 5 Choices to Extraordinary Productivity November 18, 2013Ferdinand B. Poblete Building a Culture of Integrity May 2, 2013

38



June 20, 2013

Information Security September 27, 2013Erudito S. Recio "Does sell-side research still matter?" & "Value

creation, capital structure, dividend and pay-outs"

April 23, 2013


June 20, 2013

Information Security September 27, 2013Economic Briefing by ANZ October 24, 2013

Jonathan C. Russell 2013 Board Strategy Retreat October 1, 2013Noel D. Salonga Training on Statistical Methods in Treatment of

Laboratory Results and ExperimentsMarch 6, 2013


June 17, 2013

Radiometric Dating Methods Training October 1, 2013Fundamentals of Finance for Technical

ExecutivesOctober 7, 2013

Francis Xavier M. Sta.Ana

Utilization of Finite Element and Mass (FEHM)Code and Its Application on GeomechanicalModelling

January 28, 2013

Lecture Seminar on Welbore Modelling UsingSimgwel

June 3, 2013


June 20, 2013

Richard B. Tantoco Building a Culture of Integrity May 2, 2013Executive Learning Sessions with Prof. Deepak


Information Security September 27, 2013Team Coaching (TCCP)Board Strategy Retreat

June 24, 2013October 1, 2013

Glenn L. Tee 2013 Information Security April 21, 2013Regulatory Seminar June 4-6, 2013Executive Learning Session on Negotiation with

Prof. Deepak MalhotraJune 20-22, 2013

Leadership Assembly July 29-30, 2013Executive Learning – Richard Greene August 12, 2013Contracts Seminar September 26, 2013Board Strategy Retreat October 1, 2013

Marcelino M. Tongco Information Security September 27, 2013Contracts Administration For Strategic

ContractingSeptember 25, 2013

Contracts Administration For StrategicContracting

November 5, 2013

Nestor H. Vasay Lecture Series: ING Economic Briefing andUpdates

July 23, 2013

James Arnold D.Villaroman

Building a Culture of Integrity May 2, 2013

39



June 17, 2013

Liberato S. Virata Executive Learning Sessions with Prof. DeepakMalhotra

June 17, 2013

Earl Jason R. Vistro Building a Culture of Integrity May 2, 2013Executive Learning Sessions with Prof. Deepak


Contracts Administration For StrategicContracting

September 25, 2013

Andrew John O.Whittome

Information Security September 27, 2013

2014(Updated with data as of December 31, 2014)

Name Seminar Title Start DateCesar G. Aguilar Safety Leadership and Creating a Positive Safety

Culture SeminarFebruary 17 - 19,

2014Media Relations and Crisis Communications

WorkshopMay 15 - 16, 2014

Executive Learning Session on AdaptiveLeadership with Dr. Ronald Heifetz

August 13 - 14, 2014

Lina Rose A. Alcances National Wellness Summit August 28, 2014Milo V. Alejo Power-Up Onboarding July 1-4, 2014

Power-Up August 8, 2014Executive Learning Session on Adaptive

Leadership with Dr. Ronald HeifetzAugust 13 - 14, 2014

Corporate Governance August 15, 2014Team Coaching October 9-10, 2014Emergency Disaster Configuration Seminar October 30, 2014

Rene G. Astorga 4 Disciplines of Execution February 12-13, 2014

John B. Arnaldo Media Relations and Crisis CommunicationsWorkshop

May 15-16, 2014

BCMP Conference and Planning June 16, 2014

Power-Up Onboarding July 1-4, 2014

Power-Up August 8, 2014


August 13 - 14, 2014

Team Coaching October 9-10, 2014Erwin O. Avante 4 Disciplines of Execution February 12-13, 2014

Distinguished Corporate Governance SpeakerSeries

April 29, 2014

40


Name Seminar Title Start DateEnvironmental Management Representative with

Neville ClarkeMay 14, 2014

EMS: Environmental ManagementRepresentative Training with ElizabethPulvinar

May 23, 2014


August 13 - 14, 2014

Emergency Disaster Configuration Seminar September 30, 2014Team Coaching October 9-10, 2014

Rico G. Bersamin Executive Safety Leadership February 20, 2014Power-Up August 8, 2014Executive Learning Session on Adaptive


Corporate Governance August 15, 2014Team Coaching October 9-10, 2014

Dominador M. Camu Jr. Power-Up August 8, 2014Corporate Governance September 15, 2014

Jonathan Z. Canto Executive Learning Session on AdaptiveLeadership with Dr. Ronald Heifetz

August 13 - 14, 2014

Danilo M. Capapas Executive Learning Session on AdaptiveLeadership with Dr. Ronald Heifetz

August 13 - 14, 2014

Alejandro V. Catacutan Executive Learning Session on AdaptiveLeadership with Dr. Ronald Heifetz

August 13 - 14, 2014

Safety Leadership and Creating a Positive SafetyCulture Seminar

September 1-3, 2014

Edgar O. Chua Corporate Governance December 18, 2014

Reman A. Chua 4 Disciplines of Execution February 12-13, 2014

Emmanuel A. Claveria Emergency Disaster Configuration Seminar October 30, 2014

Teodorico R. Delfin Corporate Governance Orientation Program September 15, 2014

Richard E. Eugenio Sr. EMS: Enviromental Management RepresentativeTraining

May 23, 2014


August 13 - 14, 2014

Peter D. Garrucho Jr. Corporate Governance September 15, 2014Ferdinand S. Golez 4 Disciplines of Execution February 12-13, 2014

Executive Safety Leadership February 20, 2014

Power-Up August 8, 2014

Emergency Disaster Configuration Seminar September 9, 2014Eduardo S. Gonzalez II Executive Learning Session on Adaptive


Danilo D. Guevara Executive Learning Session on AdaptiveLeadership with Dr. Ronald Heifetz

August 13 - 14, 2014

Emergency Disaster Configuration Seminar October 7, 2014Mark D. Habana Power-Up August 8, 2014

41


Name Seminar Title Start DateTeam Coaching October 9-10, 2014Corporate Governance December 18, 2014

Josemaria M. Hernandez Emergency Disaster Configuration Seminar October 30, 2014Elpidio L. Ibanez Corporate Governance September 15, 2014Raymundo N. Jarque 4 Disciplines of Execution February 12-13, 2014


August 13 - 14, 2014

Ana Ma.Maria MargaritaA. Katigbak

Corporate Governance February 18, 2014

Martin Jude V. Lacambra 1st HR Lopez Council GMM March 27, 2014Power-Up August 8, 2014Corporate Governance December 18, 2014

Ariel Arman V. Lapuz Power-Up August 8, 2014Executive Learning Session on Adaptive



Francis Ed. Lim Corporate Governance September 15, 2014Federico R. Lopez Corporate Governance November 24, 2014Oscar M. Lopez Corporate Governance September 15, 2014Rassen M. Lopez Mandatory Continuing Legal Education January 13, June 16,

August 24, 2014Executive Safety Leadership February 20, 2014Orientation Course on Corporate Governance March 6, 2014Power-Up August 8, 2014Executive Learning Session on Adaptive


Team Coaching October 9-10, 2014Ellsworth R. Lucero Executive Learning Session on Adaptive


Corporate Governance August 15, 2014Jose Noel V. Luna 4 Disciplines of Execution February 12-13, 2014

Media Relations and Crisis CommunicationsWorkshop

May 15 - 16, 2014

1Q HR Insights: Shared Services May 28, 2014

Power-Up Onboarding July 1-4, 2014


August 13 - 14, 2014

7 Habits of Highly Effective People August 18-19, 2014

EDC Library Learning Series August 28, 2014

Emergency Disaster Configuration Seminar September 2, 2014

Equipment Familiarization and Training forEvacuation, Fire Brigade and EmergencyResponse Terms

October 29, 2014

Wilfredo A. Malonzo 4 Disciplines of Execution February 12-13, 2014

42


Name Seminar Title Start DateExecutive Safety Leadership February 20, 2014Safety Leadership and Creating a Positive Safety

Culture SeminarFebruary 24, -26,

2014Distinguished Corporate Governance Speaker

SeriesApril 29, 2014




Maribel A. Manlapaz Executive Learning Session on AdaptiveLeadership with Dr. Ronald Heifetz

August 13 - 14, 2014

Emergency Disaster Configuration Seminar October 21, 2014Corporate Governance December 18, 2014

Mary Ann L. Matibag Executive Learning Session on AdaptiveLeadership with Dr. Ronald Heifetz

August 13 - 14, 2014

Emergency Disaster Configuration Seminar October 21, 2014Grace L. Marcelo Executive Learning Session on Adaptive


Emergency Disaster Configuration Seminar October 21, 2014Dwight A. Maxino 4 Disciplines of Execution February 12-13, 2014

Executive Safety Leadership February 20, 2014Environmental Management Representative with


EMS: Environmental ManagementRepresentative Training with ElizabethPulvinar

May 23, 2014

Corporate Governance August 15, 2014Ma. Elizabeth D. Nasol Executive Safety Leadership February 20, 2014

1st HR Lopez Council GMM March 27, 2014

2nd Quarter General Membership Meeting June 26, 2014Power-Up August 8, 2014Executive Learning Session on Adaptive


Corporate Governance August 15, 2014PMAP Annual Conference September 18-19,

2014Team Coaching October 9-10, 2014

Manuel S. Ogena 4 Disciplines of Execution February 12-13, 2014

43


Name Seminar Title Start DateExecutive Safety Leadership February 20, 2014Process Excellence Workshop for GREG April 1-3, 2014Power-Up August 8, 2014Executive Learning Session on Adaptive


Corporate Governance August 15, 2014Team Coaching October 9-10, 2014Emergency Disaster Configuration Seminar October 21, 2014

Manuel C. Paete Executive Learning Session on AdaptiveLeadership with Dr. Ronald Heifetz

August 13 - 14, 2014

Corporate Governance August 15, 2014Ernesto B. Pantangco Executive Learning Session on Adaptive


Corporate Governance November 21, 2014Regina Victoria J.Pascual

EDC Library Learning Series March 26, 20141st HR Lopez Council GMM March 27, 2014Media Relations and Crisis Communications

WorkshopMay 15 - 16, 2014


August 13 - 14, 2014

Emergency Disaster Configuration Seminar September 2, 2014Ferdinand B. Poblete 4 Disciplines of Execution February 12-13, 2014

Executive Safety Leadership February 20, 2014Distinguished Corporate Governance Speaker

SeriesApril 29, 2014

Townhall: Leaders' Assembly, Rebranding,Broadening Trip and Communicasia TripCascades

July 10, 2014




September 1-3, 2014

Emergency Disaster Configuration Seminar September 9, 2014Team Coaching October 9-10, 2014

Francis Giles B. Puno Corporate Governance November 21, 2014Jonathan C. Russell Corporate Governance September 15, 2014Ronaldo T. Sabella Executive Learning Session on Adaptive


Noel D. Salonga Process Excellence Workshop for GREG April 1-3, 2014Executive Learning Session on Adaptive


Emergency Disaster Configuration Seminar October 30, 2014

Norman D. Samonte Media Relations and Crisis CommunicationsWorkshop

May 15 - 16, 2014

Emergency Disaster Configuration Seminar October 7, 2014Carlo Santos Onboarding December 1, 2014

44


Name Seminar Title Start DateJay Joel L. Soriano Power-Up August 8, 2014


August 13 - 14, 2014

Corporate Governance August 15, 2014Team Coaching October 9-10, 2014Equipment Familiarization and Training for

Evacuation, Fire Brigade and EmergencyResponse Terms

October 29, 2014

Francis Xavier M. Sta.Ana

4 Disciplines of Execution February 12-13, 2014

Emergency Disaster Configuration Seminar October 21, 2014Richard B. Tantoco Power-Up August 8, 2014


August 13 - 14, 2014

Corporate Governance September 15, 2014Augusto Luis D. Tan Executive Safety Leadership February 20, 2014


August 13 - 14, 2014

Corporate Governance August 15, 2014Emergency Disaster Configuration Seminar October 21, 2014

Glenn L. Tee Executive Learning Session on AdaptiveLeadership with Dr. Ronald Heifetz

August 13 - 14, 2014

Corporate Governance August 15, 2014Arturo T. Valdez Corporate Governance September 15, 2014Nestor H. Vasay Power-Up August 8, 2014


August 13 - 14, 2014

Team Coaching October 9-10, 2014

Ryan Z. Velasco Executive Safety Leadership February 20, 2014


May 15 - 16, 2014

James Arnold D.Villaroman

Executive Safety Leadership February 20, 2014Environment Management Representative with



May 15 - 16, 2014




September 1-3, 2014

Team Coaching October 9-10, 2014Vincent Martin C.Villegas

4 Disciplines of Execution February 12-13, 2014

45


Name Seminar Title Start DatePower-Up August 8, 2014Executive Learning Session on Adaptive


Corporate Governance September 15, 2014Team Coaching October 9-10, 2014

Liberato S. Virata Power-Up July 15, 2014Executive Learning Session on Adaptive


Corporate Governance August 15, 2014Earl Jason R. Vistro 4 Disciplines of Execution February 12-13, 2014


February 24-26, 2014

Andrew John O.Whittome

4 Disciplines of Execution February 12-13, 2014Power-Up August 8, 2014Executive Learning Session on Adaptive


(c) Continuing education programs for directors: programs and seminars and roundtablesattended during the year. (Updated with data as of December 31, 2014)

Name ofDirector/Officer

Date of Training Program Name ofTraining

Institution

OSCAR M. LOPEZ SEPTEMBER 15, 2014 Corporate Governance SGV & Co.FEDERICO R. LOPEZ NOVEMBER 24, 2014 Corporate Governance SGV & Co.RICHARD B.TANTOCO

AUGUST 13-14, 2014 Executive Learning Sessionon Adaptive Leadership

Dr. RonaldHeifetz

NOVEMBER 21, 2014 Corporate Governance SGV & Co.FRANCIS GILES B.PUNO

NOVEMBER 21, 2014 Corporate Governance SGV & Co.

ERNESTO B.PANTANGCO

AUGUST 13-14, 2014 Executive Learning Sessionon Adaptive Leadership

Dr. RonaldHeifetz

NOVEMBER 21, 2014 Corporate Governance SGV & Co.JONATHAN C.RUSSELL

SEPTEMBER 15, 2014 Corporate Governance SGV & Co.

PETER D.GARRUCHO JR.

SEPTEMBER 15, 2014 Corporate Governance SGV & Co.

ELPIDIO L. IBAÑEZ SEPTEMBER 15, 2014 Corporate Governance SGV & Co.EDGAR O. CHUA DECEMBER 18, 2014 Corporate Governance SGV & Co.FRANCISCO ED. LIM SEPTEMBER 15, 2014 Corporate Governance SGV & Co.ARTURO T. VALDEZ SEPTEMBER 15, 2014 Corporate Governance SGV & Co.

In ensuring our Board's continuous education and awareness of global practices, all our directorsparticipated in at least one of the corporate governance seminars conducted for the year by a duly-accredited training provider, in compliance with SEC Memorandum Circular No. 20, ss. of 2013. Thecorporate governance seminars provided EDC Directors, Corporate Officers and Senior Managementan opportunity to learn and integrate corporate governance principles and be provided with usefulinsights on various and current governance issues. EDC’s Directors and Corporate Officers

46

finished the year with 100% participation and compliance. Further, as part of our governanceinitiatives and beyond-compliance requirements, other members of the Management Team, such asthe head of the various Business Units, also attended the Corporate Governance seminars for 2014.

Directors Richard B. Tantoco and Ernesto B. Pantangco also attended a seminar on adaptiveleadership last August 13 and 14, 2014.

B. CODE OF BUSINESS CONDUCT & ETHICS

1) Discuss briefly the company’s policies on the following business conduct or ethics affectingdirectors, senior management and employees:

The Company’s Code of Conduct and Business Ethics (CCBE) which was approved by the Boardand launched in 2004, touches on the topics identified below. These policies on business conductand ethics are also reflected in several policies incorporated in EDC's Personnel Manual andGuidelines on Giving and Receiving Corporate Gifts.

The CCBE is made applicable not only to employees, but also to members of Senior Managementand the Board of Directors.

Business Conduct &Ethics Directors Senior Management Employees

(a) Conflict ofInterest - TheCompany'sConflict ofInterest Policyand Guidelinesare clearly laiddown in itsPersonnelManual underWork Conditions- Conflict ofInterest.

Directors, Officers andemployees are requiredto strictly avoid anyconflict between theirpersonal interest andthe Company's interestin dealing with thirdparties doing or seekingto do business with theCompany. Whenever aconflict of interestarises, the Board isrequired to disclose thesame for properdisposition.

Same, however, thedisclosure shall bemade to theimmediate officer orthe President

Same, however, thedisclosure shall bemade to theimmediatesupervisor or officer

(b) Conduct ofBusiness andFair Dealings -The Companyhas its own Codeof Conduct andBusiness Ethicslaunched onSeptember 13,2004.

“Employees mustmaintain professionalrelationships withgovernment agencies,observe all legalrequirements andprotocols, and keep alltransactions aboveboard”

Employees shall consistently apply highstandards of business and personal ethics indischarging their duties and responsibilities.This means behaving honestly and withintegrity at all times, whether dealing withother employees, the general public, businesspartners (customers, suppliers, contractors,banks), government and regulatoryauthorities, the communities where weoperate, civic organizations, and otherstakeholders.

(c) Receipt of giftsfrom third parties- The Companyhas a detailedGuidelines on

APPLICABLE TO DIRECTORS, SENIOR MANAGEMENT ANDEMPLOYEES

The Company strictly prohibits solicitation of gifts, acceptance of bribesand special favors, and other actions that might be construed as giving

47


Giving andReceiving ofCorporate Gifts,which waslaunched onFebruary 2013.

undue advantage to contractors or suppliers.

The Company prohibits employees and management from acceptinganything, the value of which under the circumstances is manifestlyexcessive – from clients, customers, suppliers or business associates ofthe Company

(d) Compliance withLaws &Regulations


The company is “committed to be a good corporate citizen, TheCompany’s transactions and/or business decisions shall comply with allapplicable laws and regulations on taxes, environment, labor, safety andhealth, and procurement..”

(e) Respect forTradeSecrets/Use ofNon-publicInformation -The Companyhas policiesfound in its Codeof Conduct andBusiness Ethicsand in itsConflict ofInterest Policyreflecting theCompany'srespect for tradesecrets and use ofnon-publicinformation.


EXCERPT FROM THE CODE OF CONDUCT AND BUSINESSETHICS

Confidential Information The Company ensures that confidential information - such as,

but not limited to, processes, computer passwords and software,technical information, business forecasts, plans, strategies andinformation concerning our operations, customers and vendors,and employees - is not disclosed to anyone without properauthorization.

The Company recognizes the employee’s right to privacy, thus,all employee records, especially payroll, are kept strictlyconfidential, and shall be used only for their specified purposes.

The Company shall not allow employees to solicit, receive oruse any confidential or proprietary information or trade secretsbelonging or relating to any supplier, contractor, consultant,former employee or other person or entity, except as may belawfully received from the owner or an authorized third party.

Employees shall not divulge any confidential or proprietaryinformation or trade secrets belonging or relating to their workor other employees except as maybe authorized by theCompany.

Employees shall use the Internet primarily for businesspurposes. They shall be prohibited from disclosing confidentialinformation, acquiring unauthorized information or accessing ordistributing pornographic or offensive materials by Internet ore-mail.

EXCERPT FROM WORK CONDITIONS - CONFLICT OFINTEREST IN THE PERSONNEL MANUAL - It is considered aviolation of the Conflict of Interest Policy -

"For Directors, Officers, or Employees, without prior written authority,

48


to give or release to any person any data or information of a confidentialnature concerning the Company, such as those relating to decisions,plans, earnings, financial or business forecasts, or competitive bids, orto use such information to his personal advantage when the same isimproper, undesirable, or not in the best interest of the Company, as forexample, by acquiring, or inducing others to acquire, any interest insecurities of a Company involved in, or which may become involved inany transaction with the Company, which is not generally known to thepublic."

(f) Use of CompanyFunds, Assetsand Information -The Companyhas policiesincorporated inits Code ofConduct andBusiness Ethics,its Conflict ofInterest Policy inthe PersonnelManual and itsGuidelines inGiving andReceivingCorporate Giftsthat governs theuse of companyfunds, assets andinformation.


EXCERPTS FROM EDC’S CODE OF CONDUCT AND BUSINESSETHICS

Our Employees Employees shall judiciously use company resources (such as

office supplies, equipment, computers, vehicles, etc.) forofficial purposes only.

Confidential Information The Company ensures that confidential information - such as,

but not limited to, processes, computer passwords and software,technical information, business forecasts, plans, strategies andinformation concerning our operations, customers and vendors,and employees - is not disclosed to anyone without properauthorization.

The Company recognizes the employee’s right to privacy, thus,all employee records, especially payroll, are kept strictlyconfidential, and shall be used only for their specified purposes.

The Company shall not allow employees to solicit, receive oruse any confidential or proprietary information or trade secretsbelonging or relating to any supplier, contractor, consultant,former employee or other person or entity, except as may belawfully received from the owner or an authorized third party.

Employees shall not divulge any confidential or proprietaryinformation or trade secrets belonging or relating to their workor other employees except as maybe authorized by theCompany.

Employees shall use the Internet primarily for businesspurposes. They shall be prohibited from disclosing confidentialinformation, acquiring unauthorized information or accessing ordistributing pornographic or offensive materials by Internet ore-mail.

EXCERPT FROM THE GUIDELINES IN GIVING ANDRECEIVING CORPORATE GIFTS

"5.2.1. Employees shall not give or offer gifts of any value, directly orthrough others, under circumstances that are unlawful or mightotherwise appear to be an attempt to improperly influence a decision

49


which affects the Company.

5.2.2. If an employee is involved in decisions to give gifts or donateCompany assets, including money, goods-in-kind or services, he or shemust justify to his immediate superior the expected benefit to theCompany of any gift or donation that the Company makes.

5.2.3 Gift giving, to promote the Company’s interests, is acceptableprovided the gift satisfies the following conditions:

5.2.3.1 Of nominal or appropriate value, such as a standardcorporate advertising novelty;

5.2.3.2 It has the appropriate level of management approval;

5.2.3.3 Is not prohibited by law or the receiving organization;

5.2.3.4 Is culturally sensitive and satisfies generally accepted orknown business practice; and,

5.2.3.5 Is consistent with the image the Company is trying topromote."

EXCERPT FROM WORK CONDITIONS - CONFLICT OFINTEREST IN THE PERSONNEL MANUAL - It is considered aviolation of the Conflict of Interest Policy -

"For Directors, Officers, or Employees, without prior written authority,to give or release to any person any data or information of a confidentialnature concerning the Company, such as those relating to decisions,plans, earnings, financial or business forecasts, or competitive bids, orto use such information to his personal advantage when the same isimproper, undesirable, or not in the best interest of the Company, as forexample, by acquiring, or inducing others to acquire, any interest insecurities of a Company involved in, or which may become involved inany transaction with the Company, which is not generally known to thepublic."

(g) Employment &Labor Laws &Policies


EXCERPTS FROM THE CODE OF CONDUCT AND BUSINESSETHICS

Our Employees EDC provides fair and competitive salaries and benefits to all

employees and administers these promptly without regard toposition or title. The Company provides equal opportunities forits employees’ training and career development. Itacknowledges, promotes and rewards the most qualified basedon good performance.

EDC expects its employees to work harmoniously at all times,

(h) Disciplinaryaction

50


to respect each other’s rights and beliefs, and to give creditwhere it is due.

EDC prohibits employees from entering into any activity whichmay conflict with the Company’s interests or which mayprejudice their ability to carry out their duties andresponsibilities objectively.

EDC acknowledges and respects the right of employees tofreedom of association within the parameters of the law, and foras long as such activities will be beneficial to them and to theCompany.

EDC observes fair, non-discriminatory and transparentprocedures in hiring employees based on qualifications andexperience and in accordance with the organizationalrequirements of the company.

EDC implements a fair and objective employee performanceevaluation in order to promote productivity, career growth andgeneral work improvement.

Employees shall consistently apply high standards of businessand personal ethics in discharging their duties andresponsibilities. This means behaving honestly and withintegrity at all times whether dealing with other EDCemployees, the general public, business partners (customers,suppliers, contractors, banks), government and regulatoryauthorities, the communities where we operate, civicorganizations, and other stakeholders.

Employees shall observe proper working hours, makingthemselves available during all working hours. Time allotted forwork must be used efficiently and effectively, and for officialpurposes only.

Employees shall be accountable for the work they deliver,including omissions and oversights, such behavior contributingto the expeditious and win-win resolution of conflicts.

Employees shall at all times strictly follow accounting andinternal control procedures to safeguard company assets, andfacilitate the timely submission of accurate financial andoperational reports to top management.

Employees shall be protected from all types of social injustice -such as sexual harassment, unjust demotion and separation, etc.- in the workplace.

Employees must follow all Company rules and regulations at alltimes.

A Healthy and Safe Work Place The Company ensures a safe, healthy and secure working

environment for its employees. It promptly initiates safety andremediation measures to prevent and minimize any adverseenvironmental impacts that might arise from its operations.

The Company shall subject to appropriate disciplinary actionsemployees who are under the influence of illegal drugs oralcohol while at work.

The Company shall strictly enforce “No Smoking” rules in

51


designated areas. The Company prohibits the unauthorized carrying of deadly

weapons within its facilities.

EXCERPTS FROM THE PERSONNEL MANUAL

General Policy. - It is the policy of the Company that only mentally,physically and morally qualified candidates are recruited and hired foreach job opening. Present employees of the Company are given priorityfor suitable job opening or vacancies. In the absence of qualifiedemployees, the Company hired from outside sources, *giving priority toapplicants from the locality where vacancies exist.

Labor Relations. - The Company respects the rights of its employees toform organizations in accordance with law for Collective Bargaining.

Discipline. - It is the policy of the company to prescribe the reasonablenorms of conduct and standards of behavior to instill a strong sense ofdiscipline among its employees.

Any deviation from such prescribed norms and standards will be subjectto disciplinary action which may include suspension and dismissal inaccordance with company regulations and the provisions of existinglabor laws and their implementing rules and regulations.

(i) Whistle Blower(aka "ProtectedDisclosuresPolicy")


Initially approved by the Board under the title “Whistleblower Policy”,EDC has renamed it as the PROTECTED DISCLOSURES POLICY

Please see the full text below.

(j) ConflictResolution

There is no explicit and detailed provision on conflict resolution in ourCode of Conduct and Business Ethics. At most, a general statement thatall shall contribute to the expeditious and win-win resolution ofconflicts.

POLICY : No Director, officer, employee or anyone, who ingood faith, reports a violation of the Code shallsuffer harassment, retaliation or adverse employmentconsequence. An employee who retaliates against

52

someone who has reported a violation in good faithis subject to discipline up to and includingtermination of employment.

This Protected Disclosure Policy is intended toencourage and enable employees and others to raiseserious concerns within the Company prior toseeking resolution outside the Company.

COVERAGE : These Rules shall apply to all directors,officers, and employees of the Company as well asany person who makes a protected disclosure asdefined in this policy.

ADMINISTRATION :The Internal Audit Department is responsible forthe administration, revision, interpretation, andapplication of this policy. The policy will bereviewed annually and revised as needed.

POLICY GUIDELINES:

1. The EDC ( “Company”) Code of Conduct and Business Ethics(“Code”) requires directors, officers, and employees to observehigh standards of business and personal ethics in the conduct of theirduties and responsibilities. As employees and representatives of theOrganization, practice honesty and integrity in fulfilling theirresponsibilities and comply with all applicable laws and regulations.

2. For purpose of the Protected Disclosure Policy, the following definitionsshall control and apply:

a. “Protected Disclosure” refers to the deliberate and voluntarydisclosure by an official or employee, or anyone who has relevantinformation of an actual, suspected or anticipated wrongdoing by anyofficial or employee or anyone so long as it affects the company.

b. “Whistleblower” refers to an official, employee, or any person whomakes a protected disclosure to his immediate supervisor, othersuperior officers, or the Internal Audit Department.

c. “Retaliatory Action” pertains to negative or obstructive responses orreactions to a disclosure of misconduct or wrongdoing taken againstthe whistleblower and/or those officials and employees supportinghim, or any of the whistleblower’s relatives within the fourth civildegree either by consanguinity or affinity. It includes, but notlimited to, civil, administrative or criminal proceedings commencedor pursued against the whistleblower and/or those officials andemployees supporting him, or any of the whistleblower’s relativeswithin the fourth civil degree either by consanguinity or affinity byreason of the disclosure made under these rules. It also includesreprisals against the whistleblower and/or those officials andemployees supporting him, or any of his relatives within the fourthcivil degree either by consanguinity or affinity, such as forcing orattempting to force any of them to resign, to retire and/or transfer,negative performance appraisals; fault-finding, undue criticism;

53

alienation; blacklisting; and such other similar acts.

3. A whistleblower may complain on or report acts or omissions that are:

a) Contrary to laws, rules, regulations or policies;b) Unreasonable, unjust, unfair, oppressive or discriminatory;

orc) Undue or improper exercise of powers and prerogatives.

4. A whistleblower shall have the following rights:

i. Protection Against Retaliatory Actions - No criminal,administrative or civil action shall be entertained against awhistleblower involving a protected disclosure.

ii. Defense of Privileged Communication – A whistleblower hasthe defense of absolute privileged communication in anyaction against him arising from a protected disclosure he hasmade.

iii. No Breach of Duty of Confidentiality – A whistleblowerwho has an obligation by way of oath, rule or practice tomaintain confidentiality of information shall not be deemedto have committed a breach of such duty if he makes aprotected disclosure of such information.

5. At all times during and after the protected disclosure, and throughout andafter any proceeding taken thereon, the whistleblower is entitled toconfidentiality as to: his identity, the subject matter of his disclosure, andthe person to whom such disclosure was made.

6. Any official or employee to whom a protected disclosure has been madeor referred shall not disclose any information that may identify or tend toidentify the whistleblower or reveal the subject matter of such disclosure,except only in the following instances:

a) The whistleblower consents in writing prior to the disclosureof the information;

b) The disclosure of the information is indispensable andessential, having regard to the necessary proceedings to betaken after the disclosure; or

c) The disclosure or referral of the information is madepursuant to an obligation under these Rules.

The above prohibition on disclosure shall apply to any official oremployee who has become privy to any confidential information,whether officially or by other means.

7. Notwithstanding the provisions in the immediately preceding section, thewhistleblower is encouraged to participate in proceedings commenced inconnection with the subject matter of the disclosure and to testify if histestimony is necessary or indispensable to the successful prosecution ofany charge arising from the protected disclosure. The whistleblower isexpected not to unreasonably withhold his or her cooperation.

8. A whistleblower who has made or is believed or suspected to have madea protected disclosure under these Rules shall not be liable to disciplinary

54

action for making such disclosure. No retaliatory action shall be takenagainst a whistleblower such as, but not limited to, discriminatory action,including those made under the guise of policy and proceduraldeterminations designed to avoid claims of victimization; reprimand;punitive transfer; referral to a psychiatrist or counselor; undue poorperformance reviews; obstruction of the investigation; withdrawal ofessential resources; adverse reports; attachment of adverse notes in thepersonnel file; ostracism; questions and attacks on motives; accusationsof disloyalty and dysfunction; public humiliation; and the denial of worknecessary for promotion.

Any official or employee who refuses to follow orders to perform an actthat would constitute a violation of this provision shall likewise beprotected from retaliatory actions.

9. Whistleblowers shall be entitled to the benefits under these Rules,provided that all the following requisites concur:

a) The disclosure is made voluntarily, in writing, and ifpossible under oath;

b) The information given by the whistleblower must containsufficient particulars and, as much as possible, supported byother material evidence;

c) The disclosure pertains to a matter not yet the subject of acomplaint already filed with, or investigated by the IAD orby any other concerned office; unless, the disclosures arenecessary for the effective and successful prosecutions, oressential for the acquisitions of material evidence not yet inits possession;

d) The whistleblower signifies in writing that he/she has fullyunderstood the provisions of these Rules.

10. Disclosures may be made anonymously, provided that the informationcontain sufficient particulars and details of the actual, suspected oranticipated wrongdoing and, as much as possible, supported by othermaterial evidence.

11. The following shall not be deemed protected disclosure under this policy:

a) Disclosure made by an official or employee in connectionwith a matter subject of his official investigation;

b) Disclosures which later appear to be absolutely groundlessor without basis. An investigation may be declined ordiscontinued if it is shown that the disclosure was madewithout reasonable grounds;

c) Disclosures concerning merits of Company policy;d) Absolutely false and misleading disclosures; ande) Disclosures that were later retracted by the whistleblower for

any reason. Such person shall lose the right to claim benefitor protection under this policy for the same disclosure andhis retraction shall be considered in determining whether ornot he will be admitted as a whistleblower with respect tofuture disclosures.

A person who makes a disclosure deemed unprotected shall not

55

enjoy any immunity, or any other right or privilege accorded underthis policy.

12. A disclosure made by a person who is himself a party to the disclosedmisconduct or wrongdoing, whether as principal, accomplice oraccessory, is deemed a protected disclosure under these Rules and suchperson may be entitled to the benefits of a whistleblower, provided that:

a) The whistleblower complies with the conditions under No. 8hereof;

b) The whistleblower should not appear to be the most guilty;c) The whistleblower has not been previously convicted by

final judgment of a crime involving moral turpitude; andd) The whistleblower testifies in accordance with his

disclosures.

13. Any EDC official to whom a disclosure is made shall have the followingobligations:

a) Maintain the confidentiality of the identity of thewhistleblower and the subject matter of the disclosure;

b) Undertake measures to ensure the well-being of thewhistleblower; and

c) Report the disclosure in full detail to the Internal AuditDepartment, within a period of five (5) days from date ofdisclosure.

14. Immediately upon receipt of the disclosure, the Internal AuditDepartment shall:

a) Evaluate the disclosure if the same qualifies as protecteddisclosure under No. 2 of these Rules;

b) Should the disclosure qualify as such, to determine whetherthe requisites for protected disclosure as set out in No. 8 ofthese Rules; and

c) Proceed to investigate the disclosure pursuant to their rules.

15. Any official or employee who has personal knowledge of any matterpertaining to a protected disclosure shall, if called upon, have theobligation to testify in any proceedings arising from such protecteddisclosure.

16. Any official or employee who testifies in any proceedings arising from aprotected disclosure shall be accorded the same protection againstretaliatory actions as provided in No. 7 hereof.

17. A whistleblower shall be entitled to a commendation, and/or any otherform of incentive as may be deemed appropriate.

18. Any official or employee who violates the protection of confidentiality ofa protected disclosure and of the confidentiality of proceedings shall beliable for disciplinary sanctions.

19. Any official or employee who does, causes or encourages retaliatoryactions, as defined in these Rules, against a whistleblower, or persons

56

believed or suspected to be one, and/or those officials and employeessupporting him, or any of his relatives within the fourth civil degree byconsanguinity or affinity, shall be immediately subjected toadministrative and/or criminal proceedings, and in appropriate cases,immediately placed under preventive suspension.

20. Any official or employee under obligation to report a disclosure underthese Rules, or who fails to act thereon or cause an investigation thereof,shall be liable for disciplinary action.

21. Any official or employee, who fails or refuses to testify, or to continue totestify, or who adversely varies his testimony, without just cause, in anyproceeding arising from a protected disclosure, shall be liable fordisciplinary action.

22. False and misleading disclosures or statements shall be sufficient groundfor the termination of benefits of whistleblowers under these Rules,including his immunity from administrative, criminal and/or civil suits.

---------- End of Text of Protected Disclosures Policy (a.k.a. Whistleblower Policy) ----------

2) Has the code of ethics or conduct been disseminated to all directors, senior management andemployees?

The CODE OF CONDUCT AND BUSINESS ETHICS has been communicated anddisseminated to all directors, senior management and employees. When it was launched in2004, there was a company-wide launch conducted after the flag ceremony, with the head ofthe Audit Committee presenting the Code of Conduct and Business Ethics to all employees atthe head Office, and simultaneously to the employees at site, via video conferencing. Inaddition to the launch, the dissemination and sign-off on the Code of Conduct and BusinessEthics was led by the Human Resources Management Sector (HRMS) with the individualsigned commitment of all employees.

Also, complementary to the Code of Conduct and Business Ethics is EDC’s employee CODEOF CONDUCT AND DISCIPLINE which became effective September 16, 2011. The Codeof Conduct and Discipline prescribes the norms of conduct and standards of behavior to instilla strong sense of discipline among its employees. These standards of behavior serve asguideposts in ensuring that our employees embrace and live the Company’s core values. Inlaunching the Code of Conduct and Discipline, acknowledgment forms expressing their jointcommitment to strictly conform to the Code of Conduct and Discipline were also signed byall employees.

3) Discuss how the company implements and monitors compliance with the code of ethics orconduct.

The company implements and monitors compliance as follows:

Formal launch and announcement of the Code of Conduct and Business Ethics, aswell as the Code of Conduct and Discipline

Providing a hotline for disclosures / complaints pursuant to the provisions of theProtected Disclosures Policy (a.k.a Whistleblower Policy) of EDC. The dedicatedtelephone line goes straight to the Internal Audit Department for proper disposition.

Implementation of the “EDC Spark” Program where employees cite the good deedsand good company values in actual situations. This is submitted to the Head office

57

HR for evaluation and selection of the EDC Spark of the Month. The conduct of a quarterly Expanded Employee Council and Labor-Management

Council whereby employees have the chance to discuss their company concerns andvalues issues with management.

4) Related Party Transactions

(a) Policies and Procedures

Describe the company’s policies and procedures for the review, approval or ratification,monitoring and recording of related party transactions between and among thecompany and its parent, joint ventures, subsidiaries, associates, affiliates, substantialstockholders, officers and directors, including their spouses, children and dependentsiblings and parents and of interlocking director relationships of members of the Board.

Related Party Transactions Policies and Procedures

(1) Parent Company Parties are considered to be related if one partyhas the ability, directly or indirectly, to controlthe other party or exercise significant influenceover the other party in making financial andoperating decisions. Parties are also considered tobe related if they are subject to common control.

Transactions with a related party are made undercomparable and normal commercial terms,conditions and circumstances as a transactionwith an independent third party. Our Boardreviews all transactions not in the usual course ofbusiness, including related party transactions, toensure that such are conducted at arm's length orupon such terms not less favorable to EDC thanthose offered to others. Amounts outstanding ofrelated party transactions are unsecured and willbe settled in cash. Outstanding balances ofrelated parties are reconciled monthly. Fulldisclosure is made on the related party transactionand its details in our financial statements.

(2) Joint Ventures(3) Subsidiaries(4) Entities Under Common Control(5) Substantial Stockholders(6) Officers includingspouse/children/siblings/parents(7) Directors includingspouse/children/siblings/parents(8) Interlocking director relationshipof Board of Directors

(b) Conflict of Interest

(i) Directors/Officers and 5% or more Shareholders

Identify any actual or probable conflict of interest to which directors/officers/5% ormore shareholders may be involved.

Details of Conflictof Interest (Actual or Probable)

Name of Director/s N/AName of Officer/s N/AName of Significant Shareholders N/A

(ii) Mechanism

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Describe the mechanism laid down to detect, determine and resolve any possibleconflict of interest between the company and/or its group and their directors,officers and significant shareholders.

Directors/Officers/Significant Shareholders

Company

Under company policies, affected directors, officers oremployees must disclose to their superiors, or in the case of aDirector, disclose to the Board, any real, apparent or imminentconflict of interest, clarifying the extent of the conflict. Themethod is purely voluntary.

In such cases of conflict, the affected officer/employee shallmake a full disclosure and an undertaking to take a hands-offposition on such transaction. In the case of directors, wherethere is conflict of interest, he shall excuse himself from thediscussions to avoid actual or appearance of, a bias.

Group

In case of a conflict of interest within the group, if such fallsunder related party transactions, then the same shall beconducted objectively and under competitive commercialterms, subject to disclosure in the company’s financialstatements.

5) Family, Commercial and Contractual Relations

(a) Indicate, if applicable, any relation of a family4, commercial, contractual or businessnature that exists between the holders of significant equity (5% or more), to the extentthat they are known to the company:

Names of RelatedSignificant Shareholders Type of Relationship Brief Description of the

RelationshipOscar M. Lopez andFederico R. Lopez

Family Father and Son

Ernesto B. Pantangco andOscar M. Lopez

Family Cousin-in-Law

Federico R. Lopez andFrancis Giles B. Puno

Family Their wives are sisters

(b) Indicate, if applicable, any relation of a commercial, contractual or businessnature that exists between the holders of significant equity (5% or more) and thecompany:

Names of RelatedSignificant

Shareholders

Type ofRelationship Brief Description

First GenCorporation

Parent of the parentcompany Red VulcanHoldings Corporation

First Gen provides financialconsultancy, business development andother related services to EDC under aconsultancy agreement beginning

4 Family relationship up to the fourth civil degree either by consanguinity or affinity.

59

September 1, 2008. Such agreement isfor a period of three years up to August31, 2011. Under the terms of theagreement, billings for consultancyservices shall be P8.7 million per monthplus applicable taxes. This wasincreased to P11.8 million per monthplus applicable taxes effectiveSeptember 2009 to cover the cost ofadditional officers and staff assignedfrom the Parent Company.

The consultancy agreement wassubsequently extended for another 16months fromSeptember 1, 2011 to December 31,2012. The consultancy agreement wasextended for another two years fromJanuary 1, 2013 to December 31, 2014.Total consultancy services amounted toP165.6 million, P161.6 million andP=170.8 million in 2012, 2011 and2010, respectively, and were included inthe ―Costs of sales of electricity andsteam‖ under-Purchased services andutilities account. In addition, First Gencharged P=236.4 million in 2010 for thereimbursement of the employee costs ofits seconded personnel to the Companyand was included in the general andadministrative expenses under -Businessand related expenses‖ account. Therewere no similar charges in 2012 and2011.In 2012, EDC purchased 5.4 millionshares of First Gen with acquisition costof P77.1 million recorded as AFSinvestments. In 2013, EDC acquiredadditional 1.7 millionshares at P12.99 per share or for a totalpurchase cost of P21.8 million. In2014, EDC acquired additional 4.0million shares with acquisition cost ofP76.5 million.

(c) Indicate any shareholder agreements that may impact on the control, ownership andstrategic direction of the company:

Name of Shareholders% of Capital Stock

affected(Parties)

Brief Description of theTransaction

NONE NONE NONENONE NONE NONE

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6) Alternative Dispute Resolution

Describe the alternative dispute resolution system adopted by the company for the last three(3) years in amicably settling conflicts or differences between the corporation and itsstockholders, and the corporation and third parties, including regulatory authorities.

Under the Company’s Corporate Governance Manual, the Board shall “establish rules for analternative dispute resolution system in the corporation that can amicably settle conflicts ordifferences between the corporation and its stockholders, and the corporation and third parties,including the regulatory authorities.”

Alternative Dispute Resolution System

Corporation & Stockholders

Under the Company’s Corporate GovernanceManual, the Board of Directors undertakes topromote stockholders’ rights and allow possibilitiesof seeking redress for violation of such rights. Inaddition, the Board of Directors encourages theexercise of stockholders’ voting rights and thecollective action towards solution of problemsthrough appropriate mechanisms.

Corporation & Third Parties

Contractual Dispute

In case of disputes related to contracts (includingconfidentiality agreements) between the Companyand Contractors /Suppliers, the Company’s standardcontracts provide that the parties shall attempt, tosettle the dispute through mutual discussions. If thedispute is not settled through mutual discussions, itshall be settled by an arbitral tribunal governed andconducted in accordance with the Rules ofConciliation and Arbitration of the InternationalChamber of Commerce (ICC) in force at the time ofthe commencement of arbitration.

For construction contracts, the Company adopts thedispute resolution process in the FIDIC (InternationalFederation of Consulting Engineers) contracts. Underthe FIDIC contracts, disputes and technical issues areresolved through negotiation between the parties.Disputes and technical issues not resolved bynegotiation shall be referred to an expert fordetermination or to arbitration (for matters excludedfrom the expert’s jurisdiction). In case of failure toresolve the dispute or issue, either Party may submitsuch dispute or technical issue to arbitration, underthe ICC Rules of Arbitration.

Labor Dispute

The Company adheres to the Department of Laborand Employment’s (DOLE) Department Order No.107-10, Series of 2010 which prescribes that all

61

issues arising from labor and employment shall besubject to the 30-day mandatory conciliation-mediation. The Company likewise takes part in themandatory mediation conference conducted by theLabor Arbiter.

Disputes in court

In cases of disputes pending in court, the Companyparticipates in court-annexed mediation and JudicialDispute Resolution for cases that are covered bymediation.

Corporation & RegulatoryAuthorities

The Company refers to the applicable conflictresolution measures provided in governing laws andregulations in cases of disputes with regulatoryauthorities.

C. BOARD MEETINGS & ATTENDANCE

1) Are Board of Directors’ meetings scheduled before or at the beginning of the year?

The schedule of the Board of Directors’ Meeting is scheduled at the beginning of the year. TheCorporate Secretary prepares the schedule of the meeting, in accordance with the provisions in theBy-laws and disseminates it to the members of the Board and Key executives, through the Officeof the President or the Director Relations Office.

FOR 2014, THE ADVISE ON THE SCHEDULE OF BOARD MEETINGS FOR THE YEARWAS DISSEMINATED BY THE OFFICE OF THE PRESIDENT VIA AN EMAIL TO THEBOARD AND KEY EXECUTIVES DATED JANUARY 7, 2014 WITH THE SUBJECT “2014EDC BOARD MEETINGS“.

The schedule of the 2015 EDC Regular Board Meetings was disseminated in the same mannerand is as follows:

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Disputes in court









61


Disputes in court









62

2) Attendance of Directors

2014 DIRECTORS’ ATTENDANCE IN BOARD MEETINGS

Board Name Date ofElection

No. ofMeetings

Heldduring the

year*

No. ofMeetingsAttended

%

ChairmanEmeritus

OSCAR M. LOPEZ May 6,2014

7 6 85.71%

Chairmanand CEO

FEDERICO R.LOPEZ

May 6,2014

7 7 100%

Member RICHARD B.TANTOCO

May 6,2014

7 5 71.42%

Member FRANCIS GILES B.PUNO

May 6,2014

7 7 100%

Member ERNESTO B.PANTANGCO

May 6,2014

7 7 100%

Member JONATHAN C.RUSSELL

May 6,2014

7 5 71.42%

Member PETER D.GARRUCHO, JR.

May 6,2014

7 7 100%

Member ELPIDIO L.IBAÑEZ

May 6,2014

7 7 100%

Independent

EDGAR O. CHUA May 6,2014

7 6 85.71%

Independent

FRANCISCO ED.LIM

May 6,2014

7 6 85.71%

Independent

ARTURO T.VALDEZ

May 6,2014

7 7 100%

3) Do non-executive directors have a separate meeting during the year without the presence ofany executive? If yes, how many times?

The Non-Executive Directors had a separate meeting without the presence of any executive lastDecember 5, 2014. The agenda for said non-executive directors' meeting was focused on processimprovements on the conduct of Board meetings and suggestions to improve Board participation.

4) Is the minimum quorum requirement for Board decisions set at two-thirds of boardmembers? Please explain.

PARAGRAPH 3, ARTICLE IV, OF THE EDC BY-LAWS, AS AMENDED, PROVIDES:

The minimum quorum requirement for board decisions under company By-Laws is a majorityof the members of the Board, WITH THE PRESENCE OF AT LEAST ONEINDEPENDENT DIRECTOR and EVERY DECISION OF A MAJORITY OF THEQUORUM SHALL REQUIRE THE CONCURRENCE OF AT LEAST ONEINDEPENDENT DIRECTOR FOR THE VALIDITY OF THE DECISIONS OF THEBOARD. (emphasis ours)

5) Access to Information

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(a) How many days in advance are board papers5 for board of directors meetings providedto the board?

Board papers for Board of Directors’ Meetings are provided at least one (1) week before thedate of the Board Meeting. A sample of the memo on the distribution date for Board materialsare embodied in the attached copy of the memo dated January 7, 2014 inviting Board Agendaitems:

(b) Do board members have independent access to Management and the CorporateSecretary?

YES. They have independent access to Management and the Corporate Secretary. Directorshave free access to Company premises and company officers any time. They are alsoprovided direct contact and means of communication with company officers.

(c) State the policy of the role of the company secretary. Does such role include assisting theChairman in preparing the board agenda, facilitating training of directors, keeping

5 Board papers consist of complete and adequate information about the matters to be taken in theboard meeting. Information includes the background or explanation on matters brought before theBoard, disclosures, budgets, forecasts and internal financial documents.

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directors updated regarding any relevant statutory and regulatory changes, etc?

FROM THE CORPORATE GOVERNANCE MANUAL:

The Corporate Secretary and Assistant Corporate Secretary who shall be citizens andresidents of the Philippines shall be the ex-officio Secretaries of the Board ofDirectors; they shall attend all sessions of the Board and shall record all votes and theminutes of all proceedings in a book to be kept for that purpose, and shall performlike duties for any committee of the Board when required. They shall give or cause tobe given notice of all meetings of the stockholders and of the Board of Directors asmay be required and shall perform such other duties as may be prescribed by theBoard of Directors or by the President under whose supervision they shall be.

In addition to the general powers hereinabove conferred and the specific powersgranted by the Company’s By-Laws, the Corporate Secretary and Assistant CorporateSecretary shall have the following duties:

1. They shall at all times strive to achieve perfection in the performance of theirfunctions and undertake that no surprises are likely to come fromthem. Likewise, loyalty to the mission, vision and specific business objectives ofthe Company shall form an important part of their duties.

2. Work fairly and objectively with the Board, Management, stockholders(Amended pursuant to Board Resolution No. 13, series of 2011 dated March 15,2011) and other stakeholders; (Amended pursuant to Board Resolution datedJuly 15, 2014, in compliance to SEC Memorandum Circular No. 9, ss 2014);

3. Have appropriate administrative and interpersonal skills;

4. If he is not at the same time the corporation’s legal counsel, be aware of the laws,rules and regulations necessary in the performance of his duties andresponsibilities;

5. Have a knowledge of the operations of the corporation;

6. Inform the members of the Board, in accordance with the by-laws, of the agendaof their meetings and ensure that the members have before them accurateinformation that will enable them to arrive at intelligent decisions on matters thatrequire their approval;

7. Ensure that all Board procedures, rules and regulations are strictly followed bythe members;

8. If he is also the Compliance Officer, perform all the duties and responsibilities ofthe said officer provided for in this Code.

9. Implement the corporate governance improvements adopted by the Board, ashereinafter adopted from time to time, including but not limited to:

The organization of an annual one-day off-site strategy retreat formembers of the Board for purpose of discussing and agreeing on strategicissues related to the Company and its business.

The organization of training on corporate governance for the Board,which shall be conducted by a recognized director training organization.

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(d) Is the company secretary trained in legal, accountancy or company secretarialpractices? Please explain should the answer be in the negative.

YES our Company Secretaries are trained in legal, accountancy and company secretarialpractices.

EDC’s Company Secretaries are: Atty. Teodorico R. Delfin and Atty. Ana Maria MargaritaA. Katigbak-Lim.

Atty. Delfin is EDC’s Corporate Secretary since his appointment in July 2010. His extensiveexperience on corporate housekeeping includes that of First Gen Hydro Power Corp., GreenCore Geothermal Inc., Bac-Man Geothermal Inc., EDC Geothermal Corp., EDC Wind EnergyHoldings, Inc., and several other Company subsidiaries. He also served as AssistantCorporate Secretary of First Gen Corp., FG Bukidnon Power Corp., First Gen Renewables,Inc., Red Vulcan Holdings Corp., First Gen Northern Energy Corp., and other First Gensubsidiaries. Prior to joining the Lopez Group, he was part of the Feria Law Offices and theEast Asia Power Resources Group, and has served in various capacities at the state-ownedPhilippine Amusement and Gaming Corporation.

Atty. Katigbak-Lim is EDC’s Assistant Corporate Secretary since her first appointment inJanuary 2007. She is a senior partner at the Castillo Laman Tan Pantaleon & San Jose LawFirm. Her practice areas are corporate law, securities and litigation.

(e) Committee Procedures

Disclose whether there is a procedure that Directors can avail of to enable them to getinformation necessary to be able to prepare in advance for the meetings of differentcommittees:

Yes X No


On Board Accountability:“Thus, it is essential that Management provide all members of the Board withaccurate and timely information that would enable the board to comply with itsresponsibilities to its stockholders.”

Adequate and Timely Information:“To enable the members of the Board to properly fulfill their duties and

responsibilities, Management should provide them with complete, adequate andtimely information about the matters to be taken in their meetings.

“Reliance on information volunteered by Management would not be sufficient in allcircumstances and further inquiries may have to be made by a member of the Boardto enable him to properly perform his duties and responsibilities. Hence, membersshould be given independent access to Management and the Corporate Secretary.

“The Members, either individually or as a Board, and in furtherance of their dutiesand responsibilities, should have access to independent professional advice at thecorporation’s expense.”

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Committee Details of the proceduresAudit and Governance COMMON TO ALL COMMITTEES:

Pursuant to a resolution of the Board, Directors mayattend the meetings of other committees and participate inthe discussions thereat, except vote on Committee matters.As such, Directors other than the Committee Members areautomatically included among the invitees in anyCommittee meeting and receive the advanced meetingnotifications as a matter of process.

For the attainment of this end, the Energy DevelopmentCorporation also created and staffed a Director RelationsOffice which handles the scheduling and centralizedcoordination of the Director’s meetings in the Company,and to which the members of the Board can immediatelyaccess information on schedules and meetings in thecorporation.

Though there are no written procedures, it has been theestablished practice to prepare and distribute themeetingagenda and materials to members and directors whoconfirmed their attendance about two to three days inadvance. Other directors who wish to join the committeemeeting are given copies of the meeting agenda andmaterials immediately before the start of the meeting.

Nomination and Compensation

Risk Management

Corporate Social Responsibility

Operations

6) External Advice

Indicate whether or not a procedure exists whereby directors can receive externaladvice and, if so, provide details:

Procedures Details

UNDER THE CORPORATEGOVERNANCE MANUALSpecific Duties and Functions of the Board“Adopt procedures for the Directors, eitherindividually or as a group, in furtherance oftheir duties, to take independent professionaladvice and to have access to management”

Under current practice, whenever a specialactivity comes up during board meetingswhich require the expertise of professionals,the Board gives its approval in securingexperts or consultants before arriving at adecision on a major issue.

In addition to securing the services ofexperts or consultants, an officer or a highlevel department is also assigned as thepoint person or project lead in theconsultancy with external parties.

UNDER THE CORPORATEGOVERNANCE MANUALAdequate and Timely Information

“To enable the members of the Board toproperly fulfill their duties andresponsibilities, Management should providethem with complete, adequate and timely

67

Procedures Details

information about the matters to be taken intheir meetings.RELIANCE ON INFORMATIONVOLUNTEERED BY MANAGEMENTWOULD NOT BE SUFFICIENT IN ALLCIRCUMSTANCES AND FURTHERINQUIRIES MAY HAVE TO BE MADEBY A MEMBER OF THE BOARD TOENABLE HIM TO PROPERLY PERFORMHIS DUTIES AND RESPONSIBILITIES.Hence, members should be givenindependent access to Management and theCorporate Secretary.

THE MEMBERS, EITHERINDIVIDUALLY OR AS A BOARD,AND IN FURTHERANCE OF THEIRDUTIES AND RESPONSIBILITIES,SHOULD HAVE ACCESS TOINDEPENDENT PROFESSIONALADVICE AT THE CORPORATION’SEXPENSE.

UNDER THE CORPORATEGOVERNANCE MANUAL

Duties and Functions of the Nominationand Compensation Committee

“(14) To review and recommend to the Boardthe Company’s compensation system,policies and guidelines and oversee thedevelopment and implementation ofcompensation and incentives program andguidelines affecting members of the Board,President , Vice Presidents and SeniorManagers. The levels of honoraria,remuneration or compensation of thecorporation should be sufficient to be able toattract and retain the services of qualified andcompetent directors and officers. A portionof the honoraria, remuneration orcompensation of executive directors may alsobe structured or be based on corporate andindividual performance.

“(15) To review annually the existing salarystructure of the President, Vice Presidentsand Senior Managers against actual paylineand existing trendline of the industrycompensation and benefits and brief theBoard on the situation of the company andhow it compares with the industries and

The Nomination and CompensationCommittee of the Board, when it decides oncompensation issues and policies, consultswith HR consultants on such matters, withthe help of EDC’s Human ResourcesManagement Sector and its Vice-President.

Once the findings of such study comes out,the same is elevated to the President, andthen to the Board, through the Committee,for information, or for necessary action.

68

Procedures Details

leading companies.”

Duties and Functions of the Audit andGovernance (AGC) Committee

The AGC selects, consults and works withexternal auditors on both audit and non-auditwork

UNDER THE CHARTER OF THE AUDITAND GOVERNANCE COMMITTEE:

Under AUTHORITY, the AGC is authorizedto: (a) retain independent counsel,accountants or others to advise or assist theCommittee in the conduct of investigation;and (b) meet with company officers, externalauditors or outside counsel, as necessary.UNDER THE CHARTER OF THENOMINATION AND COMPENSATION(NCC) COMMITTEE:

The Committee shall have the followingpowers and authorities:1. To access, gather or require the submissionof any and all information, document or dataon the Company’s compensation and benefitspackages or privileges for all of its officersand employees, including directors, executiveand management officers.2. TO SOLICIT PROFESSIONAL ADVICEAND/OR ASSISTANCE FROM OFFICERSAND EMPLOYEES WITHIN THECOMPANY OR FROM APPROPRIATEEXTERNAL ADVISERS /CONSULTANTS WHO SHALL BESUBJECTED TO THE FULL BUSINESSINTEREST DISCLOSURE.3. To approve any fee and other engagementterms of external advisers/consultants hiredin the execution of its duties andresponsibilities subject to the limits equal tothat of the CEO consistent with theCompany’s Approvals Manual.FOR THE OTHER BOARDCOMMITTEES, IN ACTUAL PRACTICE:

Whenever there is a project assigned by theEDC Board, or an activity undertaken motuproprio, the rest of the Board Committees(Risk Management Committee, CSRCommittee, Operations Committee) canengage consultants or external parties and

69

Procedures Details

receive expert advice or study on mattersunder their Committees’ jurisdiction or suchother assignment given by the Board.

7) Change/s in existing policies (Updated as of December 2014)

Indicate, if applicable, any change/s introduced by the Board of Directors (during itsmost recent term) on existing policies that may have an effect on the business of thecompany and the reason/s for the change:

Existing Policies Changes Reason

Corporate Health and SafetyPolicy (Approved onFebruary 5, 2014)

New To align with best practicesin Corporate Health andSafety Policies

Health and SafetyManagement System(Approved on February 10,2014)

New To align with best practicesin Corporate Health andSafety Management

The Manual on CorporateGovernance (Approved onJuly 15, 2014)

The definition of terms andthe scope of responsibilitywas extended beyondshareholders to all otherstakeholders

Compliance with SECdirective under SECMemorandum Circular No.9, series of 2014 whichincorporates the StakeholderPrinciple in corporategovernance.

Security Protocol on theProtection of EDCPersonnel, Contractors andVisitors in All Field SiteWork Areas (Approved onOctober 14, 2014)

Provided specificguidelines on varyingsituations / conditions.

To update the generalguidelines and align withbest practices in securityprotocol

Approvals Manual(Approved on November 4,2014)

Approving authority overPayment Orders andCertificates of WorkCompletion are extendedto project managers orcontract administrators

To institutionalize andstrengthen project charteringby empowering projectmanagers or contractadministrators.

Enterprise Risk ManagementManual (Effective onDecember 1, 2014)

New To provide the frameworkand the steps on how toconduct the risk managementprocess in EDC

D. REMUNERATION MATTERS

1) Remuneration Process

Disclose the process used for determining the remuneration of the CEO and the four (4)most highly compensated management officers:

70

Process CEO Top 4 Highest PaidManagement Officers

(1) Fixed remuneration

The process of determining the remuneration of the CEO andthe 4 most highly compensated management officer beginswith either: (a) a proposal directly from the Board, then adirective given to the Nomination and CompensationCommittee (NCC), pursuant to the NCC duties and functions;or (b) a proposal raised motu proprio by the NCC itself.

Under the Charter provisions on Duties and Functions onCompensation of the Committee, it states that the Committeehas the authority:

To review and recommend to the Board theCompany’s compensation system, policies andguidelines and oversee the development andimplementation of compensation and incentivesprogram and guidelines affecting members of theBoard, President/CEO, Vice Presidents and SeniorManagers.

After Board approval, the same shall be presented to theCompany’s Stockholders for their approval. Until such timethat the stockholders approve the resolution fixing the Board’sremuneration and financial package, the same shall be withoutforce and effect.

In EDC, the current Board compensation package was the onewhich was approved by the Board, and the Stockholders in2007. This 2007 resolution on Board Remuneration remainsthe same up to the present.

(2) Variableremuneration

(3) Per diem allowance

(4) Bonus

(5) Stock Options andother financialinstruments

(6) Others (specify)

2) Remuneration Policy and Structure for Executive and Non-Executive Directors

Disclose the company’s policy on remuneration and the structure of its compensationpackage. Explain how the compensation of Executive and Non-Executive Directors iscalculated.

RemunerationPolicy

Structure ofCompensation

Packages

HowCompensation is

Calculated

Executive DirectorsPls see the data

belowPls see the data


below

Non-Executive DirectorsPls see the data



below

THE BOARD’S COMPENSATION PACKAGE BELOW HAS BEEN APPROVED IN 2007AND REMAINS EFFECTIVE UNTIL TODAY (DISCLOSED EVERY YEAR IN SECFORM 20-IS)

In compliance with EDC Board Resolution No. 54, S’ 2007, the members of the Board areremunerated with a compensation package as follows:

Monthly director’s fee: P50,000.00 Attendance fee for Board meetings: P10,000.00 per meeting

71

Bonus to Directors as a group: ½ of 1% of declared cash dividend Group Life Insurance Coverage: P4 million, at a premium per month of P1,292.10

wherein P443.50 is being shouldered by the Company while the balance of P848.60 isbeing shouldered by the director. (Updated as of March 2015)

Group Hospitalization Insurance Coverage: P2,632.38 per month

Do stockholders have the opportunity to approve the decision on total remuneration (fees,allowances, benefits-in-kind and other emoluments) of board of directors? Provide detailsfor the last three (3) years.

YES, the Stockholders had the opportunity to approve the decision on total remuneration of theBoard of Directors.

Remuneration Scheme Date ofStockholders’ Approval

Current Scheme: Monthly director’s fee: P50,000.00 Attendance fee for Board meetings:

P10,000.00 per meeting Bonus to Directors as a group: ½ of

1% of declared cash dividend (Updated as of March 2015) Group

Life Insurance Coverage: P 4million (at a premium per month ofP1,292.10 wherein P443.50 is beingshouldered by the Company whilethe balance of P848.60 is beingshouldered by the director).

Group Hospitalization InsuranceCoverage (P2,632.38 per month)

2007(EDC Board Resolution No. 54, series of

2007)

This item was presented to, and receivedapproval of, the Company’s stockholders at

the 2007 Annual Stockholders’ Meeting.

NO CHANGE IN THE BOARD’SREMUNERATION SCHEME HASBEEN EFFECTED SINCE THEN.

3) Aggregate Remuneration

Complete the following table on the aggregate remuneration accrued during the most recentyear:

Remuneration Item ExecutiveDirectors

Non-ExecutiveDirectors (other than

independentdirectors)

IndependentDirectors

(a) Fixed Remuneration

Pls seeSUMMARY COMPENSATION TABLE

(b) Variable Remuneration

(c) Per diem Allowance

(d) Bonuses

(e) Stock Options and/or otherfinancial instruments

(f) Others (Specify)

Total

72

Other Benefits ExecutiveDirectors

Non-ExecutiveDirector (other than

independentdirectors)

IndependentDirectors

1) Advances

Pls seeSUMMARY COMPENSATION TABLE

2) Credit granted3) Pension Plan/s

Contributions(d) Pension Plans, Obligations

incurred(e) Life Insurance Premium(f) Hospitalization Plan(g) Car Plan(h) Others (Specify)

Total

FROM THE COMPANY’S SEC FORM 17-A (2014)

SUMMARY COMPENSATION TABLE(Updated as of March 2015)

Name Year Salary

Bonus/Other

Annual

Compensation

Federico R. Lopez, Chairman & CEORichard B. Tantoco, President & COOErnesto B. Pantangco, Executive VicePresidentNestor H. Vasay, Sr. Vice President, ChiefFinancial Officer and TreasurerDominador M. Camu, Jr., Senior VicePresident

CEO and the four most highly compensatedofficers named above

2013 P50,117,678 P43,331,884

2014 P91,608,849 P46,351,035

2015 (estimate) P95,441,575 P50,935,232

Aggregate compensation paid to all officersand directors as a group unnamed

2013 P114,124,875 P108,587,668

2014 P160,567,549 P140,913,366

2015 (estimate) P159,044,649 P116,871,209

*Note: Certain officers of the Corporation, including the top four members of senior managementlisted in the table above, are seconded and receive their salaries from First Gen Corp.**Ms. de Jesus was an Officer of the Company until her retirement by the end of February 2014

4) Stock Rights, Options and Warrants

(a) Board of Directors

Complete the following table, on the members of the company’s Board of Directors whoown or are entitled to stock rights, options or warrants over the company’s shares:

Director’sName

Number ofDirect

Number ofIndirect

Number ofEquivalent

Total % fromCapital Stock

73

Option/Rights/Warrants

Option/Rights/Warran

ts

Shares

As of the date hereof, there are no outstanding warrants held by the Company’s president,named executive officers, and all directors and officers, as a group.

(b) Amendments of Incentive Programs

Indicate any amendments and discontinuation of any incentive programs introduced,including the criteria used in the creation of the program. Disclose whether these aresubject to approval during the Annual Stockholders’ Meeting:

Incentive Program AmendmentsDate of

Stockholders’Approval

Stock Ownership Plan Stock Grant Plan Stock Option Plan Stock Financing Plan

The finalization and approval of each of the plansconstitutingthe Stock Ownership Plans, including the rulesthereof, have been delegated to the Company‘sboard of directors.

To date, only the rules of the Stock Grant Planhave been approved by the Company‘s board ofdirectors.

NONE June 10, 2008

5) Remuneration of Management (Updated March 2014)

Identify the five (5) members of management6 who are not at the same time executivedirectors and indicate the total remuneration received during the financial year (endingDecember 31, 2014):

Name of Officer/Position Total Remuneration

Rico G. Bersamin / Senior Vice-President

P 66.739 Milion

Manuel S. Ogena / Senior Vice-President

Ma. Elizabeth D. Nasol / Vice-President

Ellsworth R. Lucero/ Vice -President

Manuel C. Paete / Vice-President

6 The figure excludes the top executives seconded from First Gen Corporation

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E. BOARD COMMITTEES

1) Number of Members, Functions and Responsibilities

Provide details on the number of members of each committee, its functions, key responsibilities and the power/authority delegated to it by theBoard:

COMMITTEE

NO. OF MEMBERS

COMMITTEECHARTER

FUNCTIONS KEY RESPONSIBILITIES POWER

Exe

cuti

veD

irec

tor

(ED

)

Non

-Exe

cuti

veD

irec

tor

(NE

D)

Inde

pend

ent

Dir

ecto

r (I

D)

Audit AndGovernance

1 1 3 Yes. There isa CommitteeCharter

Assist the Board in itsoversightresponsibility asregards theCompany’s integrityof financial reportingprocess, effectivenessand soundness ofinternal controlenvironment,adequacy of auditfunctions for bothinternal and externalaudits, andcompliance withrules, policies, laws,regulations, contractsand the code ofconduct.

Review of quarterly andannual financial statementsincluding issues noted byexternal auditors;

Monitor and evaluate theeffectiveness of internalcontrol system throughinternal and external audits;

Monitor and review theeffectiveness of internalaudit function, itsaccomplishment andperformance;

Review the work,independence andperformance of externalauditors and exercise finalapproval on the appointmentor discharge of auditors;

Monitor and review thecompany’s compliance to

Authorize the investigationof any matter within itsscope of responsibility,retain independent counsel,accountants or others toadvise or assist theCommittee in the conduct ofinvestigation;

oversee the resolution ofdisagreements betweenmanagement and auditors;

seek required informationfrom employees who aredirected to cooperate withthe committee’s requests;

meet with company officers,external auditors, or outsidecounsel, as necessary;

coordinate with other boardcommittees as needed; and,

appoint, compensate and

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COMMITTEE

NO. OF MEMBERS

COMMITTEECHARTER


Exe

cuti

veD

irec

tor

(ED

)

Non

-Exe

cuti

veD

irec

tor

(NE

D)

Inde

pend

ent

Dir

ecto

r (I

D)

all rules, laws, regulations,and company policiesthrough the complianceofficer; and

Regularly report to theBoard significant issuesraised to the committee withrespect to the integrity offinancial reporting,effectiveness of internalcontrol and compliance withlegal and/or regulatoryrequirements..

oversee the work of anyregistered public accountingfirm employed by theCompany.

Nomination andCompensation

1 3 1 YES. There isa CommitteeCharter

This committee isresponsible forevaluating thequalifications of allpersons nominated tothe Board and those toother positionsrequiring appointmentby the Board. Theyalso establish a formaland transparentprocedure fordeveloping a policyon executivecompensation andfixing the

Pre-screening and shortlisting of candidatesnominated to become amember of the Board;

Identifying andrecommending thecandidates among theincumbent directors to fillvacancies in any of theBoard committees;

Ensuring that Directorssubmit themselves to a low-indicative limit ondirectorships in othercorporations;

To access, gather, or requirethe submission of any andall information regardingthe company’scompensation and benefitspackage

To approve any fee andother engagement terms ofexternal advisers

To approve, on behalf of theBoard, the payment ofcompensation benefits orbonuses to the Company’sofficers and employees

76

COMMITTEE

NO. OF MEMBERS

COMMITTEECHARTER


Exe

cuti

veD

irec

tor

(ED

)

Non

-Exe

cuti

veD

irec

tor

(NE

D)

Inde

pend

ent

Dir

ecto

r (I

D)

compensationpackages of corporateofficers and directors.

Establishing a formal andtransparent procedure fordeveloping a policy onexecutive remuneration andfor fixing the remunerationpackages of corporateofficers and directors

RiskManagement


The RiskManagementCommittee (RMC) isresponsible forassisting the Board inits oversightresponsibility overManagement’sactivities in managingphysical, financial,operational and otherrisks of thecorporation.

Conduct a yearly evaluationof the Company’s riskassessment and riskmanagement program

Recommend to the Boardthe Company’s strategicrisks

To require periodic reportsfrom Management toconfirm that the riskmanagement system of theCorporation is operatingcorrectly and consistentlywith its objectives

Corporate SocialResponsibility


The Corporate SocialResponsibilityCommittee (CSRC) isresponsible for theoversight andmonitoring the CSRPrograms of EDC.

Overseeing, coordinatingand integrate themanagement of theCompany’s CSR programsfor employees,environment, communitiesand interest groups,government

To redefine, in consultationwith the Board, the roles,duties and responsibilitiesof the Committee in order tointegrate the dynamicrequirements of businessand the future plans of theCompany, subject at all

77

COMMITTEE

NO. OF MEMBERS

COMMITTEECHARTER


Exe

cuti

veD

irec

tor

(ED

)

Non

-Exe

cuti

veD

irec

tor

(NE

D)

Inde

pend

ent

Dir

ecto

r (I

D)

instrumentalities andbusiness partners

times to the principles ofsound corporategovernance.

Operations 4 3 0 Yes. There isa CommitteeCharter

(Updated as of March2014)This committee isresponsible formonitoringCompany’s interestconcerning thepolicies, andoperations such as,but not limited tomatters requiring theapproval of the EDCBoard, approval of allexpenditures in theamount of P50– P250million, and otherassignments that maybe delegated by theBoard to theCommittee.

Deliberating, reviewing andrecommending all mattersthat require the approval ofthe Board, approval of theexpenditures andassignments that may bedelegated by the Board tothe Committee

The operations Committeehas decision-makingauthority for Policy,Personnel, Finance,Expenditures, Budget, FixedAssets, Procurement,Credits, Sales, Inventories,Legal, Insurance, GeneralEnergy Operations andother matters that may arisefrom time to time.

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2) Committee Members

(a) Executive Committee

The functions of an Executive Committee are currently being performed by theOperations Committee (OpsCom). Pls see information on the Opscom.

Office Name Date ofAppointment

No. ofMeetings

Held


%

Length ofService in

theCommittee

ChairmanNOTAPPLICABLE(NA)

NA NA NA NA NA

Member(ED)

NANA NA NA NA NA

Member(NED)

NA NA NA NA NA NA

Member (ID) NA NA NA NA NA NAMember NA NA NA NA NA NA

(b) Audit and Governance Committee (Updated with data as of December 31, 2014)

Office NameDate of

Appointment

No. ofMeetings Held

No. ofMeeting

sAttende

d

%

Lengthof

Servicein the

Committee

Chairman Edgar O. Chua (ID) May 6, 2014 4 4 100%

4 years

Member (ED) Ernesto B. Pantangco May 6, 2014 4 2 50% 7 yearsMember(NED)

Francis Giles B. Puno May 6, 2014 4 2 50% 7 years

Member (ID) Francisco Ed. Lim May 6, 2014 4 4 100%

4 years

Member (ID) Arturo T. Valdez May 6, 2014 4 4 100%

2 years

*Other non-member directors attended at least one committee meeting, namely, Federico R.Lopez, Richard B. Tantoco and Jonathan C. Russell.

Disclose the profile or qualifications of the Audit Committee members

FROM THE CORPORATE GOVERNANCE MANUAL ANDTHE AUDIT AND GOVERNANCE COMMITTEE CHARTER:

The committee shall be composed of at least three Board members and at least amajority of the Independent Directors and shall be chaired by an independentdirector. Each member shall have an adequate understanding and recent relevant

79

financial experience or competence of the company’s financial management systemsand environment. The members shall preferably have accounting and financebackgrounds or with audit experience. The Committee must also have one (1) VicePresident of the Company appointed by the President as a Committee resourceperson. It must also be comprised of the Audit and Governance CommitteeExecutive Officer, who shall be the Chief Audit Executive of Internal AuditDepartment and the Committee Secretary, who shall be from the members of InternalAudit Department.

For 2014, the Audit and Governance Committee is composed of the following Directors:

Edgar O. Chua (Chairman, Independent Director)

Chairman of its Audit and Governance Committee and a member of the CorporateSocial Responsibility He is also the Country Chairman of the Shell Companies in thePhilippines. He has corporate responsibility for the various Shell companies in theexploration, manufacturing and marketing sector of the petroleum business. Likewise, heoversees the Chemicals businesses and Shared Services. He is currently in the advisory boardof Globe Telecoms and Coca Cola FEMSA Philippines, the Chairman of the PhilippineBusiness for the Environment, President of Pilipinas Shell Foundation, Inc, trustee of variouscivic and business organizations including the National Competitiveness Council and theTrilateral Commission.

He has more than 30 years of experience in the business fields of chemicals, auditing,supply planning and trading, marketing and sales, lubricants, corporate affairs and generalmanagement. He held senior positions outside the Philippines as Transport analyst in GroupPlanning in the UK and as General Manager of the Shell Company of Cambodia. FromJuly1999 to August 2003, he held various regional positions in Shell Oil Products Eastincluding GM for Consumer Lubricants covering all countries East of Suez Canal includingSaudi Arabia, China, India, Korea, ASEAN, Australia, New Zealand and the Pacific Islands.

Mr. Chua earned his Bachelor of Science degree in Chemical Engineering from DeLa Salle University (1978) and attended various international seminars and courses includingthe senior management course in INSEAD in Fontainebleau, France. In 2013, Mr. Chua wasawarded the Management Association of the Philippines, Management Man of the Year.

Francis Ed. Lim (Independent Director)

Mr. Lim, Filipino, is an Independent Director of EDC since July 2010 and is amember of the Company's Audit and Governance Committee He is the Co-Managing Partnerand Senior Partner of Angara Abello Concepcion Regala & Cruz Law Offices(ACCRALAW) and is the Head of its Corporate and Special Projects Department. He is amember of the Financial Executives of the Philippines (FINEX). He is a law professor at theCollege of Law of the Ateneo de Manila University and the Graduate School of Law of SanBeda College, and the Vice-Chair, Commercial Law Department of the Philippine JudicialAcademy. He is a member of both the Philippine Bar and New York State Bar.

He is a trustee of The Insular Life Assurance Company, Ltd and an independentdirector of the Producers Savings Bank Corporation. He is also a trustee and president of the

Shareholders’ Association of the Philippines (SHAREPHIL) and the Vice-Chair of theCorporate Governance Committee of the Management Association of the Philippines (MAP)and Chairman of the Justice System Working Group of the National CompetitivenessCouncil.

80

He served as past President and CEO and Director of Philippine Stock Exchange, Inc.(PSE), President & CEO of Securities Clearing Corporation of the Philippines (SCCP),Chairman of the Philippine Stock Exchange Foundation, Inc., (PSEFI) and Capital MarketDevelopment Center, Inc. (CMDCI), Director of the Philippine Dealing & ExchangeCorporation (PDEx), Trustee of the Securities Investors Protection Fund (SIPF), and memberof Capital Market Development Council (CMDC) from September 15, 2004 to February 15,2010. He successfully worked for the passage by Congress of several capital marketdevelopment related laws, namely, Personal Equity Retirement Account Act (PERAA), CreditInvestment System Act (CISA), Real Estate Investment Trust Act (REITA), DocumentaryStamp Duty Exemption for secondary trading of listed stocks, and Financial Rehabilitationand Insolvency Act (FRIA). He was Chairman of the Technical Work Group on theCollective Investment Schemes Law (CISL) and Chairman of the Technical Work Group onReal Estate Investments Trusts (REITS) in the Fourteenth Congress of the Senate of theRepublic of the Philippines.

Mr. Lim graduated magna cum laude in Bachelor of Philosophy and cum laude inBachelor of Arts from the University of Santo Tomas. He completed with honors hisBachelor of Laws degree (Second Honors) from the Ateneo de Manila University and hisMaster of Laws degree from the University of Pennsylvania, USA.

Arturo T. Valdez (Independent Director)

Mr. Valdez, Filipino, is an Independent Director of EDC since July 2011, and is amember of its Audit and Governance Committee and the CSR Committee. He served asUndersecretary at the Department of Transportation and Communication (DOTC) from 1996to 2004 and was appointed Special Envoy to the Middle East from October 2007 to March2008. During his stint in government, he was instrumental in reforming the maritime industryand rationalizing the land transport sector.

He was past president (1974 to 1986) of the National Mountaineering Federation ofthe Philippines, Inc., the largest organization of mountaineering clubs in the country. Heconceived, organized and led the First Philippine Mt. Everest Expedition which successfullyaccomplished the “reconnaissance” climb of May 2006 when the Philippine flag was firstplanted at the peak of Mt. Everest, and the “first and only women traverse” of Mt. Everest bythree Pinays in May 2007, a feat unsurpassed in the history of Himalayan mountaineeringuntil today. Coming from the mountain after finishing the highest marathon on earth - the2008 Mt Everest Marathon - he went directly to the sea and built the “Balangay,” an exactreplica of a boat similar to the ancient sea craft dug up in Butuan City carbon dated 320 A.D.,and sailed it together with an intrepid crew of Filipinos around the Philippines and SoutheastAsia for 15 months solely powered by the wind and steered by the stars to highlight thesuperb seamanship and daringness of our ancestors as they sailed and habited the vast Pacificand Indian Oceans. Mr. Valdez believed that the Mt. Everest and Balangay expeditions maybe daunting but their success was symbolic of what Filipinos can achieve if they are unitedand set their mind on anything.

Mr. Valdez was an American Field Service scholar and graduated with an AB inEconomics from the University of Santo Tomas (1970). He completed special studies onSocial Market Economy (1971), and Party Building and Parliamentary Government (1994) atConrad Adenauer Foundation Institute in Germany. Aside from always having beenconnected with the Ramos for Peace and Development Foundation and concurrently asconsultant/adviser at the Office of the Executive Secretary, Office of the President, his mainpreoccupation today is getting involved with groups exploring alternative sources of cleanand renewable fuel for the transport sector to mitigate climate change. In like manner,alarmed by the series of devastations caused by man-made and natural disasters that wrought

81

untold misery in the country recently, he is working develop solutions for operationalchallenges or problems by conducting concept based experimentation to introduce indigenousinnovations and integrate technologies from other countries in Saving Lives.

Peter D. Garrucho, Jr.

Mr. Garrucho, Filipino, has been a Director of EDC since November 2007. Until hisretirement in January 2008, he served as Managing Director for Energy of FPHC and as ViceChairman and CEO of First Gen Corp. where he continues to be a Director. He also sits insubsidiaries of these corporations including the First Gas Holdings Group of companies (FirstGas Power, FGPCorp, Unified Holdings, First Gen Hydro Corp., FG Bukidnon Power Corp.,First Gen Energy Solutions, Inc., Red Vulcan Holdings Corp., Prime Terracota HoldingsCorp., First Philippine Industrial Corp. and First Balfour Corp. He also sits as a Director inEDC Geothermal Corporation. At present, he is also Vice Chairman of Franklin Baker Corp.where he has a significant shareholding and Chairman of Strategic Equities Corp., as amajority stockholder.

He served in the government as Secretary of the Department of Tourism and theDepartment of Trade and Industry during the administration of President Corazon C. Aquino.He was also Executive Secretary and Presidential Adviser on Energy Affairs under PresidentFidel V. Ramos. In 2000, he was given the award of an Honorary Officer of the Order of theBritish Empire by Her Majesty, Queen Elizabeth II.

Mr. Garrucho earned his Master in Business Administration degree from StanfordUniversity (1971) and his AB-BSBA degree from the De La Salle University (1966).

Ernesto B. Pantangco

Mr. Pantangco, Filipino, has been a Director of EDC since November 2007 and isalso the Company’s Executive Vice President (EVP). He is also an EVP of First Gen Corp.and several EDC subsidiaries: EDC Geothermal Corporation, Green Core Geothermal Inc.,Bac-Man Geothermal Inc., Bac-Man Energy Development Corporation, Southern NegrosGeothermal, Inc., Kayabon Geothermal Inc., EDC Wind Energy Holdings Inc., EDC BurgosWind Power Corporation, EDC Bayog Burgos Wind Power Corporation, EDC Pagali BurgosWind Power Corporation, EDC Bright Solar Energy Holdings, Inc., EDC Bago Solar PowerCorporation, EDC Burgos Solar Corporation, and President and CEO of FPPC and BPPC. Healso sits in the boards of FG Luzon, GCGI, EWEHI, FG Bukidnon, FGHPC, First GenGeothermal Power Corp., First Gen Visayas Hydro Power Corp., and First Gen MindanaoHydro Power Corp. He is President of FGHPC and First Gen Northern Energy Corp., andExecutive Vice President of First Gen Geothermal Power Corp., First Gen Visayas HydroPower Corp., First Gen Mindanao Hydro Power Corp., FGLuzon, and Red Vulcan. He wasthe President of the Philippine Independent Power Producers Association (PIPPA) for the lasteleven (11) years and currently re-elected as a Director. He is also Vice-Chairman of theNational Renewable Energy Board (NREB) and was recently asked to be Chairman of MAPCommittee on Energy.

Mr. Pantangco has a Bachelor of Science in Mechanical Engineering degree from theDe La Salle University (1973) and Master of Business Administration degree from the AsianInstitute of Management, dean’s list (1976). He is a registered mechanical engineer andplaced 6th in the 1973 board exams.

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Describe the Audit Committee’s responsibility relative to the external auditor.

FROM THE CORPORATE GOVERNANCE MANUAL ANDTHE AUDIT AND GOVERNANCE COMMITTEE CHARTER:

Recommend to the Board an external auditor (subject to shareholder ratification), andreview and approval the audit fee and engagement letter.

Review the external auditors’ proposed audit scope and approach, includingcoordination of audit effort with internal audit.

Review with management the external audit reports and findings as well as thecompany’s reply to audit findings.

Review the performance of the external auditors and exercise final approval on theappointment or discharge of the auditors.

Evaluate, determine and approve the non-audit work, if any, of the external auditor,and review periodically the non-audit fees paid to the external auditor in relation totheir significance to the total annual income of the external auditor and thecorporation’s overall consultancy expenses. The Committee shall disallow any non-audit work that will conflict with his duties as an external auditor or may pose a threatto his independence. The non-audit work, if allowed, should be disclosed in thecorporation’s annual report.

Review the required rotation of the external auditor partners or firms. Review and confirm the independence of the external auditors by obtaining

statements from the auditors on relationships between the auditors and the company,including non-audit services and discussing the relationships with the auditors.

Review the required rotation of external auditor partners. Meet separately, as necessary, with the external auditors to deliberate on any matter

that the committee or auditors believe should be discussed.

(c) Nomination and Compensation Committee (Updated with data as of December 31,2014)

Office NameDate of

Appointment

No. ofMeetings

Held

No. ofMeetin

gsAttend

ed

%

Lengthof

Servicein the

Committee

Chairman Federico R. Lopez May 6, 2014 3 3 100%

7 years

Member(NED)

Elpidio L. Ibanez May 6, 2014 3 3 100%

4 years

Member(NED)

Francis Giles B. Puno May 6, 2014 3 3 100%

7 years

Member (ID) Arturo T. Valdez May 6, 2014 3 3 100%

3 years

Member(NED)

Peter D. Garrucho, Jr. May 6, 2014 3 3 100%

7 years

(d) Remuneration Committee (Updated with data as of December 31, 2014)

NOTE: IN EDC, THE REMUNERATION FUNCTIONS ARE MERGED WITHNOMINATION FUNCTIONS IN THE NOMINATION AND COMPENSATIONCOMMITTEE

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No. ofMeetings

Held

No. ofMeetingsAttende

d

%

Lengthof

Servicein the

Committee

Chairman Federico R. LopezMay 6, 2014

3 3 100%

7 years

Member(NED)

Elpidio L. IbanezMay 6, 2014

3 3 100%

4 years

Member(NED)

Francis Giles B. PunoMay 6, 2014

3 3 100%

7 years

Member(ID)

Arturo T. ValdezMay 6, 2014

3 3 100%

3 years

Member(NED)

Peter D. Garrucho, Jr.May 6, 2014

3 3 100%

7 years

(e) Others (Specify)-

RISK MANAGEMENT COMMITTEECORPORATE SOCIAL RESPONSIBILITY (CSR) COMMITTEEOPERATIONS COMMITTEE

Provide the same information on all other committees constituted by the Board ofDirectors:

RISK MANAGEMENT COMMITTEE (RMC) (Updated with data as of December31, 2014)


No. ofMeetings

Held


%

Lengthof

Servicein the

Committee

Chairman Francis Giles B.Puno

May 6, 2014 2 2 100%

7 years

Member(ED)

NA NA NA NA NA NA

Member(NED)

Peter D. Garrucho,Jr.

May 6, 2014 2 1 50% 7 years

Member(NED)

Jonathan C. Russell May 6, 2014 2 2 100%

7 years

*Other non-member directors attended at least one committee meeting, namely, Federico R.Lopez, Ernesto B. Pantangco, Francis Ed. Lim (ID) and Arturo T. Valdez (ID).

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CORPORATE SOCIAL RESPONSIBILITY COMMITTEE (CSRC)(Updated with data as of December 31, 2014)

Office NameDate of

Appointment

No. ofMeetings

Held


%

Length ofService in

theCommittee

Chairman Federico R. Lopez May 6, 2014 1 1 100%

7 years

Member (ED) Ernesto B. Pantangco May 6, 2014 1 1 100%

7 years

Member(NED)

NA NA NA NA NA NA

Member (ID) Edgar O. Chua May 6, 2014 1 0 0% 4 yearsMember (ID) Arturo T. Valdez May 6, 2014 1 1 100

%3 years

*Non-member director Richard B. Tantoco also attended the committee meeting.

OPERATIONS COMMITTEE [Created on January 22, 2008 under BoardResolution No. 2, ss 2008] (Updated with data as of December 31, 2014)

Office NameDate of

Appointment

No. ofMeetings Held

No. ofMeeting

sAttende

d

%

Lengthof

Servicein the

Committee

Chairman (ED) THE COMMITTEE HAS NO CHAIRMAN. IT IS A COLLEGIAL BODY.Member (ED) Federico R. Lopez May 6, 2014 35 13 37.14

%6 years

Member (ED) Richard B. Tantoco May 6, 2014 35 22 62.86%

6 years

Member(NED)

Francis Giles B. Puno May 6, 2014 35 15 42.86%

6 years

Member (ID) NA NA NA NA NA NAMember (ED) Ernesto B. Pantangco May 6, 2014 35 26 74.29

%6 years

Member(NED)

Jonathan C. Russell May 6, 2014 35 21 60.00%

6 years

Member(NED)

Peter D. Garrucho, Jr. May 6,2014

35 18 51.43%

6 years

Member(NED)

Elpidio L. Ibanez May 6, 2014 35 30 85.71%

5 years

3) Changes in Committee Members

Indicate any changes in committee membership that occurred during the year and thereason for the changes:

Name ofCommittee Name Reason

Executive (NA) NONE NONE

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Audit andGovernance

NONE NONE


NONE NONE

Remuneration (NA) NONE NONE

Others (specify)RiskManagementCSROperations

NONE NONE

4) Work Done and Issues Addressed

Describe the work done by each committee and the significant issues addressed during theyear.

Updated for activities for the year ending December 31, 2014

Name of Committee Work Done Issues Addressed

Audit andGovernance

Financial Reporting andDisclosures. The AGC reviewedwith management and theexternal auditor (SGV & Co.) theannual audited financialstatements and the quarterlyinterim financial reports andendorsed these to the Board forapproval and release to regulatoryagencies, stockholders andlenders. The AGC reviewincluded discussions on theappropriateness of accountingpolicies adopted by management,the reasonableness of estimates,assumptions and judgments usedin the preparation of financialstatements, the impact of newaccounting standards andinterpretations, and other keyaccounting issues and auditresults as highlighted by theexternal auditor.

Internal Control. TheAGC monitored the effectivenessof the internal controlenvironment through variousmeasures such as: the review ofthe results of the external auditregarding internal control issues;exercising functionalresponsibility over Internal Audit

Integrity of financialreporting process;Effectiveness and soundnessof internal controlenvironment;

Adequacy of audit functions,both external and internalaudits; and

Compliance with rules,policies, laws, regulations,contracts and the code ofconduct

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and Compliance Office andreceiving reports on work done inassessing key governance, riskmanagement and controlcomponents; discussion withmanagement on major controlissues and recommendations toimprove policies and processes;and promoting a culture ofintegrity and ethical values in thecompany.

External and InternalAudit. The AGC reviewed theoverall scope and audit plan ofthe external auditor. It alsoreviewed and affirmed themanagement evaluation on theperformance of the externalauditor (for the 2013 financialstatements audit) and approvedthe re-engagement of SGV & Co.for another year (2014 audit). TheAGC approved the non-auditservices rendered by externalauditors. It also approved theInternal Audit annual plan andensured that independence ismaintained, the scope of work issufficient and resources areadequate.

Corporate Governanceand Compliance. The AGCmonitored the Company’scompliance to laws, regulationsand policies. It approved theannual plans and programs of theCompliance Office. Likewise, theAGC have supported theinitiatives of the ComplianceOffice in strengthening thecompany's corporate governanceframework: maintaining fullcompliance with new issuancesby regulations such as submissionof the Annual CorporateGovernance Report (ACGR),benchmarking on CG practiceswith comparable ASEANcompanies, improving CGevaluation system, ensuring thatall directors and senior executives

87


comply with the corporategovernance training requirements.

Assessment ofPerformance. The AGC assessedits performance for the year 2014based on the guidelines andparameters set in SECMemorandum Circular No. 4series of 2012 which specified therequired provisions or contents ofan audit committee charter andthe assessment of the auditcommittee’s compliancetherewith. Based on the requiredprovisions of the SEC, the Auditand Governance Committee’s selfassessment scores add up to97.06% which is equivalent to“Outstanding”.


For 2014, the NCCreviewed the qualifications,credentials and disqualificationsof nominees for Regular andIndependent Directors in the 2014Annual Stockholders Meeting, aswell as the qualifications anddisqualifications of the newCompliance Officer and the newEDC Vice President for StrategicContracting.

The NCC also reviewedthe pay structure of AssistantManagers and higher positions,the long-term retention programfor Executives, Managers andother individuals selected by theBoard and the grant of the 2014Variable Incentive and GratuityPay.

The SEC and the CorporateGovernance Manual’squalifications, credentials,and disqualifications fordirectors

88


Risk Management Business ContinuityManagement. BusinessContinuity Management (BCM)was launched in our LeyteGeothermal Business Unit(LGBU) and Bac-ManGeothermal Business Unit(BGBU). Plans for emergencyresponse, crisis management, andbusiness recovery have beendeveloped in LGBU while theseare ongoing for BGBU.

To further strengthen the BCMcapabilities of the organization,desktop simulations coveringvarious emergency and crisismanagement scenarios were alsoconducted.

Strategic Business UnitRisk Reviews. Risk reviews wereconducted as part of their annualplanning and strategy executionprocess by the following businessunits: (a) BGBU; (b) Mt. ApoGeothermal Business Unit(MAGBU); (c) LGBU and (d)Northern Island GeothermalBusiness Unit.

The objective of the risk reviewsis to identify the top risks of eachstrategic business unit (SBU).Correspondingly, the initiativesthat would address the SBUs’ toprisks are part of their 2014 budgetand work programs.

Vendor Financial andCredit Evaluation. 231 financialand credit evaluation of suppliersand contractors were conducted toreview their financialperformance and credit history.The purpose of the evaluation isto provide EDC with anunderstanding of its suppliers’and contractors’ financialcondition and related risks.

Risk ManagementSurvey and Enterprise Risk

Disaster Avoidance and RiskMitigation and Recovery

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Management (ERM) Workshops.A risk management survey wasconducted with all employees inall locations in July 2014 todetermine the organization’s riskmanagement practices, which itconsiders to be an integral part ofits ERM system implementation.Furthermore, areas forimprovement were identifiedthrough the survey.

Corporate SocialResponsibility

KEITECH Replication.The CSRC approved the KEFIorganizational changes andamendment of the articles ofincorporation and by-laws toinclude the KEITECH replicationprojects. It also approved theredesigning of courses percampus to address sitespecialization and long-termmarket demand at MAGBU,BGBU and Pantabangan Hydro-Electric Power (PHEP).

The CSRC also reviewedthe following initiatives: LeyteRebuilding Program,KEITECH-Leyte Regular andExtension Programs, BINHIProgram, Emergency andDisaster Configuration Program.

Policies and strategies onsocioeconomic developmentof the company’s hostcommunities and thestewardship of theenvironment where EDCoperates.

Operations The OperationsCommittee deliberated a total ofsixty-five (65) items, which wasapproved or elevated to the Boardfor final approval with acumulative worth of aboutPhP68.3 billion. It likewiseprovided guidance to the variousbusiness units and operatinggroups on issues pertaining to theCompany’s geothermal drillingoperations program, domestic andinternational expansion activities,project financing, reforestationprogram, and occupational safetyand health.

Items pertaining to drillingoperations and high-valueprocurements

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5) Committee Program

Provide a list of programs that each committee plans to undertake to address relevant issuesin the improvement or enforcement of effective governance for the coming year.

Name of Committee Planned Programs Issues to be AddressedExecutive (NA) NOT APPLICABLE NOT APPLICABLEAudit and Governance To improve current processes

and programs aligned withregulatory requirements, forincreased operational efficiency

NONE IDENTIFIEDNomination andCompensationRemuneration (NA) MERGED WITH NOMINATIONOthers (specify)

CSROperations

Review the following programsand provide direction for variousCSR initiatives in 2015:1. KEITECH technical-vocational projects in variouscampuses2. CSR - Education and HealthPrograms3. Financial performance of theEDC-assisted cooperatives4. BINHI Projects5. Monitoring and Evaluation:Social Acceptability MonitoringStudy and CSR SustainabilityAssessment

NONE IDENTIFIED

Risk Management (Updated with data as ofDecember 31, 2014) Business Continuity

Management-For 2015, theexisting BCM Plans for theother operating locations willbe reviewed and updated asnecessary. Other BCMinitiatives will also beevaluated for improvement.BCM awareness sessions willalso be conducted withemployees in all locations toinform them of EDC's BCMprogram and to make themaware of important aspects ofBCM.

Strategy Execution Process.- As part of the annualplanning and budget process,risk reviews will continue tobe conducted by the SBUs aswell as the Head Officegroups.

Electric Cooperative CreditRisk Portfolio-Analysis ofcustomers’ credit default risk

NONE IDENTIFIED

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Name of Committee Planned Programs Issues to be Addressedexposure and customers’financial strength andcreditworthiness

Vendor Financial andCredit Evaluation. Thisactivity will continue toensure that the company willonly transact with vendorswith financial capabilities.

Risk ManagementAwareness Session. ERMAwareness sessions will beconducted with staff in alllocations.

F. RISK MANAGEMENT SYSTEM

1) Disclose the following:

(a) Overall risk management philosophy of the company:

Our risk management system is embedded in our strategic planning and budgeting processes,as part of its strategy execution process. Risk management activities are being done annuallyat the operational and strategic levels of the organization. The whole year’s activities, as wellas the following year’s activities, are covered by the risk management review. With this, riskassessments are conducted to identify the top priority risks at the different levels of theorganization (i.e. operational and strategic levels). Correspondingly, mitigating measures areformulated and implemented to manage the top risks.

(b) A statement that the directors have reviewed the effectiveness of the risk managementsystem and commenting on the adequacy thereof:

EDC has a Risk Management Committee that assists our Board in its oversight responsibilityover Management’s activities in managing risks involving physical, financial, operational,labor, legal, security, environmental and other risks faced by EDC.

As provided stated in the Risk Management Committee charter:

1. “Conduct a yearly evaluation of the Company’s risk assessment and risk managementprogram and ensure that appropriate controls are in place.”

2. “Recommend to the Board the Company’s strategic risks, including the risk mitigationand control measures that require immediate or urgent implementation.”

3. “Meet periodically with the Audit and Governance Committee, key management, andinternal and external auditors to understand and discuss the control environment.”

4. “Review the Company’s risk tolerance, financial exposures, and investment guidelines,including the mitigating strategies, insurance, and other risk financing schemes beingundertaken.”

92

5. “Review periodically the security, safety, physical loss control measures, and thespecific Emergency Response Plan adopted by the Company to ensure that all risks areadequately covered.”

(c) Period covered by the review:

The whole year’s activities, as well as the following year’s activities, are covered by the riskmanagement review. With this, risk assessments are conducted to identify the top priorityrisks at the different levels of the organization (i.e. operational and strategic levels).Correspondingly, mitigating measures are formulated and implemented to manage the toprisks.

Also, the Board approved our Enterprise Risk Management (ERM) Manual, which aims toestablish a common risk language that will enable a dynamic and consistent application ofrisk management initiatives, aligned with ISO 31000:2009 (Risk Management – Principlesand Guidelines), on 1 December 2014.

Based on our ERM Manual, the RMC approves our risk appetite to guide the establishment ofthe risk tolerances based on physical injuries, environmental damage, reputation and financialimpact. Once risks are identified, risk management strategies and plans are formulated,implemented, monitored and reviewed. This is consistent with what the company has beencurrently been doing.

(d) How often the risk management system is reviewed and the directors’ criteria forassessing its effectiveness; and

The review is conducted annually.

(e) Where no review was conducted during the year, an explanation why not.

N/A

2) Risk Policy

(a) Company

Give a general description of the company’s risk management policy, setting out andassessing the risk/s covered by the system (ranked according to priority), along with theobjective behind the policy for each kind of risk:

Note: For this section, we are referring to the EDC corporate level risks.

EDC's strategic risk management is integrated into the overall business strategy and planningprocesses, so that the risk management programs support the development and execution ofthe business strategy.

On the company level, EDC looks at strategic risks, which is defined in EDC's EnterpriseRisk Management (ERM) Manual as those risks, whether internal or external, thatsignificantly affect the accomplishment of the corporate short-term and long-term objectives.These are possible sources of loss due to adverse business decisions, improperimplementation of plans, or lack of responsiveness to industry changes. It is a CEO andBoard-level priority, wherein the objectives are to distill insights and provide clarity on thetop 5 to 10 most important risks shaping EDC's performance; to support risk-informed

93

decisions at the RMC-level; to ensure a risk dialogue among the Management Committee, sothat strategic risks can be prioritized according to their impact and likelihood of occurrence;and to enable proper risk oversight by the Board.

Risk Exposure Risk Management Policy Objective1. Competition Risk EDC continues to expand its

operations and strives toimprove its systems andprocesses to be able to offercompetitively priced powersupply to the market.

To be the global leader ingeothermal energy.

2. Regulatory Risk EDC proactively manages itsexposures from changing lawsand regulations to ensurecontinuous operations andtimely projectimplementations.

To comply with the applicablelaws and regulations.

3. Credit Risk EDC manages its exposuresfrom NPC, a single off takerfrom which a substantialportion of the company’srevenues are attributed.

To ensure timely collectionfrom NPC.

4. Legal Risk EDC operates its business insuch a way that it complieswith all applicable legalrequirements.

To comply with all applicablelaws and regulations.

5. Foreign CurrencyRisk

EDC espouses the judiciousmanagement of its financialresources.

To minimize exposure toforeign exchange ratevolatility.

6. Interest Rate Risk EDC espouses the judiciousmanagement of its financialresources.

To minimize interest expense.

7. ElectricCooperative CreditRisk

EDC manages its exposures toits customers, the electriccooperatives, with regard tocredit default risk.

The objective is to be able topartner with electriccooperatives with healthyfinancial condition andcreditworthiness.

8. Liquidity Risk EDC espouses the judiciousmanagement of its financialresources.

To maintain a balance betweencontinuity of funding andsourcing flexibility through theuse of available financialinstruments.

9. Equity Price Risk EDC espouses the judiciousmanagement of its financialresources.

To minimize exposure toequity price risk

(b) Group

Give a general description of the Group’s risk management policy, setting out andassessing the risk/s covered by the system (ranked according to priority), along with theobjective behind the policy for each kind of risk:

94

Note: For this section, we are referring to the Strategic Business Unit (SBU) level risks.

On a Group level, EDC looks at operational risks and project risks.

Operational risks, as defined in our ERM Manual, are those risks due to changes andcircumstances in the internal and external environments that may affect EDC's way of doingbusiness. These are the possible sources of loss due to inadequate or failed internal processes,people or system, or from external events such as natural calamities. To prevent the risk ofbusiness interruption, our asset management are continuously being implemented, evaluatedand strengthened. Business Continuity and Crisis Management Plans are also being developedto improve resilience. Lastly, business interruption insurance can be obtained to cover thepotential revenue loss during an operational risk event. By doing these, the top management,through the Management Committee, are connected with the rest of the organization onoperational risk matters to ensure that critical risk information will surface in a timelymanner.

Project risks, on the other hand, are defined as an uncertain event that, if it occurs, has apositive or negative effect on the project's progress, result or outcome. Project riskmanagement is a continuous part of EDC's governance, and are embedded throughout the lifecycle of every project as it is in the daily operation of the business. Generally, project risksare managed by building risk management into the project life cycle, ensuring that a processis in place to identify, prepare for and mitigate risks; developing project contingency plans;actively promoting risk-based mindset within the Project Team; anticipating and mitigatingpost-project risks which may impact business as usual.

Risk Exposure Risk Management Policy Objective1. Exploration Risk Exploration risk is an inherent

risk in EDC’s operations as thecompany continues to explore,develop, and producegeothermal energy.

To minimize exploration-related costs while sustainablyoperating the geothermalresources.

2. Disaster Avoidance& Recovery Risk

EDC proactively manages itsexposures to man-made &natural hazards to ensurebusiness continuity and thesafety of its employees,contractors, and otherstakeholders.

The objective is to ensure thatthe company has a resilientprocess for business continuityand recovery in the event of adisaster.

3. BusinessInterruption Risk

EDC proactively manages thereliability and availability of itssteam fields and power plantsto ensure continuousoperations.

To increase the effectivenessand efficiency of the differentprocesses for operationalexcellence.

4. Safety Risk It is the policy of EDC toprovide safe and healthfulworking environment for all itsemployees, contractors, andvarious stakeholders whileprotecting and preserving itsassets.

To prevent occupationalaccidents and injuries at alltimes.

5. Environmental Risk EDC places a strongcommitment to be a goodsteward of the environment.

Comply with all applicablelegal requirements & otherrequirements related to our

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environmental aspects Exert best effort to prevent

the emission, or discharge ofany type of pollutant to theenvironment & protect thelocal ecosystem

Use natural resources asefficiently as possible, &conserve water, energy &other material resources

Pursue reduction of wastesby employing sourcereduction, reuse & recyclingmethods

Establish a framework forsetting environmentalobjectives & targets, &achieve continualimprovement through ourenvironmental performanceevaluation

Provide a healthful & safeworkplace for our people &promote their physical well-being

(c) Minority Shareholders

Indicate the principal risk of the exercise of controlling shareholders’ voting power.

Risk to Minority Shareholders

Generally, the principal risk is the minimal control over corporate direction. However, inthe case of EDC, such risk is mitigated with the provision in our By-Laws.

From the Company’s Amended By-Laws:Article II MEETING OF STOCKHOLDERS

6. Quorum. xxx IN ALL CASES WHERE THE LAW REQUIRES A TWO-THIRDS VOTE OF THE OUTSTANDING CAPITAL STOCK, THEMAJORITY VOTE OF THE MINORITY SHAREHOLDERS PRESENTSHALL LIKEWISE BE REQUIRED FOR VALIDITY OF DECISIONSIN STOCKHOLDERS’ MEETINGS.

3) Control System Set Up

(a) Company

Briefly describe the control systems set up to assess, manage and control the main issue/sfaced by the company:

Note: For this section, we are referring to the EDC corporate level risks.

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Risk ExposureRisk Assessment(Monitoring and

Measurement Process)

Risk Management and Control(Structures, Procedures,

Actions Taken)Competition Risk Annual risk identification,

evaluation, and monitoring Competitively-priced power Reliability of power plants Use of clean and renewable

fuels Expertise & experience in

power supply contracting andtrading

Regulatory Risk Annual risk identification,evaluation, and monitoring

Close monitoring of relevantproposed legislation

Key personnel are kept updatedwith the latest laws &regulations

Close coordination withrelevant regulatory agencies

Credit Risk Annual risk identification,evaluation, and monitoring

Close monitoring of collectionsfrom NPC

Receivable balances aremonitored on an ongoing basisto ensure that EDC’s exposureto bad debts is not significant

Legal Risk Annual risk identification,evaluation, and monitoring

Continuous action on existinglegal cases

Collaboration and coordinationwith parent company’s lawyers

Foreign CurrencyRisk

Annual risk identification,evaluation, and monitoring

Mitigated through existingprovisions in the company’sGRESCs, SSAs, and PPAs.

Prepayment, refinancing, orhedging of foreign currency-denominated loans, wheneverdeemed feasible

Interest Rate Risk Annual risk identification,evaluation, and monitoring

Interest rates of some of thecompany’s long-termborrowings are fixed at theinception of the loan agreement

Prepayment, refinancing, orhedging when deemed feasibleand advantageous

ElectricCooperative CreditRisk

Annual risk identification,evaluation, and monitoring Annual credit risk portfolio

analysisLiquidity Risk Annual risk identification,

evaluation, and monitoring Regular evaluation and

consideration of the maturity ofthe company’s financialinvestments & financial assets

Maintenance of credit lineswith banks on a continuingbasis

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(b) Group

Briefly describe the control systems set up to assess, manage and control the main issue/sfaced by the company:

Note: For this section, we are referring to the Strategic Business Unit (SBU) level risks.

Risk ExposureRisk Assessment(Monitoring and

Measurement Process)

Risk Management and Control(Structures, Procedures,

Actions Taken)Exploration Risk Annual risk identification,

evaluation, and monitoring Conduct of various studies Implementation of various

innovation programsDisaster Avoidance& Recovery Risk


Business ContinuityManagement Program

BusinessInterruption Risk


Power plant rehabilitations Process improvements Business Continuity

Management ProgramSafety Risk Annual risk identification,

evaluation, and monitoring Contractor Safety Management

Program Road Transport Safety Program NFPA 70E Training NFPA 72, 20 & 25 Training Safety Indoctrination Training Confined Space & Rope

Rescue Training Fire & Electrical Safety Audit

EnvironmentalRisk


Programmed launch of theEnvironmental ManagementSystem in the SBUs

Continuous monitoring ofenvironmental parameters in allSBUs

(c) Committee

Identify the committee or any other body of corporate governance in charge of layingdown and supervising these control mechanisms, and give details of its functions:

Committee/Unit Control Mechanism Details of its Functions

RISK OWNERS The responsibility ofmanaging the differentrisks as well as mitigatingthem

The risk identification andevaluation are done as partof their planning activitiesand the risk mitigatingmeasures are formed as partof their work programs andbudgets

RISK MANAGEMENTDEPARTMENT

provides the framework and process, and helps infacilitating the conduct of the annual risk assessment.

Prepares and presents a quarterly risk management report to

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the Risk Management Committee of the Board.

RISK MANAGEMENTCOMMITTEE OF THEBOARD

has oversight responsibility over management’s activitiesin managing risks

G. INTERNAL AUDIT AND CONTROL

1) Internal Control System

Disclose the following information pertaining to the internal control system of the company:

(a) Explain how the internal control system is defined for the company;

Internal control system is defined by the Company as a process that encompasses all actionstaken by management, the board and other concerned parties to provide reasonable assuranceregarding the achievement of objectives in the following categories:

Reliability and integrity of financial and operational information; Effectiveness and efficiency of operation; Safeguarding of assets; Compliance with policies, plans, procedures, laws, regulations and contracts; and

Management is primarily responsible for the establishment and implementation of a system ofInternal Control. As such, every Officer/Manager/other employees ensure that controlsystems as designed and implemented by management are complied with to effectively andefficiently achieve corporate goals and objectives and minimize or mitigate risks and otherlosses. Control systems, which include policies, systems and procedures, are regularlyevaluated and enhanced to keep it relevant and effective to the current operatingenvironment.

The components of the control system include the ff:

Control environment – sets the tone of an organization and is the foundation for allother components of internal control providing discipline and structure. Controlenvironment factors include management’s philosophy and operating style, employees’integrity and ethical values, commitment to competence, assignment of authority andresponsibility, and the attention and direction provided by directors. The Audit andGovernance Committee is tasked to oversee internal control environment including theadequacy of audit functions. The values that EDC espoused such as pursuit ofexcellence, bias for action, stewardship, integrity, fairness, results-driven teamwork,and entrepreneurial spirit instill among its employees’ a strong integrity base and highperformance expectation.

Policies and procedures – control activities that include management and operationalprocesses, human resource management, risk management and compliance processes,approvals, authorizations, verifications, reconciliations, review of operatingperformance, asset security and segregation of duties that will ensure accountability andwill serve as guide to employees in the conduct of business.

Information systems - pertains to procedures, hardware and software in placesupporting the company’s business and communication processes. The system

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provides automated controls, audit trails, information security, and reliable informationfor reporting and decision making.

Review and monitoring - the assessment done by management, internal and externalaudit groups on the internal control performance and achievement of companyobjectives.

Physical controls - consists of facilities, systems and personnel that prevent or protectinformation and resources from theft, damage, losses and misappropriation of assets,ensure the safety and security of employees, and ensures continuity of operations in anyevent of emergency.

(b) A statement that the directors have reviewed the effectiveness of the internal controlsystem and whether they consider them effective and adequate;

The Audit and Governance Committee is a creation of the EDC board and for 2014, iscomposed of five (5) directors. The AGC annually submits a report to the board of directors,containing its review of EDC's financial reporting, disclosure and internal controlenvironment based on the results of the work of external audits, internal audits andcompliance office.

(c) Period covered by the review;

The latest annual report of the Audit and Governance Committee to EDC board pertains tocalendar year 2014. This report is submitted annually.

(d) How often internal controls are reviewed and the directors’ criteria for assessing theeffectiveness of the internal control system;

The Audit and Governance Committee’s review of internal controls is performed quarterlythrough various measures such as: the review of the results of the external audit regardinginternal control issues and financial reporting; exercising functional responsibility overInternal Audit and Compliance Office and receiving reports on work done in assessing keygovernance, risk management and control components; discussion with management on majorcontrol issues and recommendations to improve policies and processes; and promoting aculture of integrity and ethical values in the company.

(e) Where no review was conducted during the year, an explanation why not.

NOT APPLICABLE

2) Internal Audit

(a) Role, Scope and Internal Audit Function

Give a general description of the role, scope of internal audit work and other details ofthe internal audit function.

Role Scope

Indicatewhether In-

house orOutsource

Internal AuditFunction

Name ofChief

InternalAuditor/Auditing Firm

Reportingprocess

Assurance Encompasses the Internal Audit Glenn L. Tee Reports

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provider evaluation andimprovement of theadequacy andeffectiveness of riskmanagement andcontrol.

Function ismaintained in-house. Co-sourcing andoutsourcing on aper project basisis resorted whennecessary

functionally tothe AGC andadministratively to thePresident.

Consultancy services

The nature and scopeof advisory and relatedservice activities areagreed with the clientand are intended toadd value and improvean organization’s riskmanagement, control,and governanceprocesses without theinternal auditorassuming managementresponsibility.

Internal AuditFunction ismaintained in-house. Co-sourcing andoutsourcing on aper project basisis resorted whennecessary

Glenn L. Tee Reportsfunctionally tothe AGC andadministratively to thePresident.

AGCSecretariat

Assist the AGCmembers in thedischarge of theirduties andresponsibilities asmandated by the AGCcharter.

Internal AuditFunction ismaintained in-house.

Glenn L. Tee Reportsfunctionally tothe AGC andadministratively to thePresident.

(b) Do the appointment and/or removal of the Internal Auditor or the accounting /auditingfirm or corporation to which the internal audit function is outsourced require theapproval of the audit committee? (Updated March 2015)

The AGC reviews and concurs with the appointment, replacement, or dismissal of the ChiefAudit Executive (CAE) and the external auditor.

(c) Discuss the internal auditor’s reporting relationship with the audit committee. Does theinternal auditor have direct and unfettered access to the board of directors and theaudit committee and to all records, properties and personnel?

As working arm of the Audit and Governance Committee, the Internal Audit Departmentreports functionally to the AGC but reports administratively to the President of the Company.As such, internal Audit plans, activities, organizational structure, staffing and charter arereviewed and approved by the Audit and Governance Committee. Likewise, Internal Audithas direct access to the AGC and to all records, personnel and properties as mandated by theInternal Audit Charter. The results of the work of internal audit are reported to the AGC on aquarterly basis and any such period as may be deemed necessary.

(d) Resignation, Re-assignment and ReasonsDisclose any resignation/s or re-assignment of the internal audit staff (including thoseemployed by the third-party auditing firm) and the reason/s for them.

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Name of Audit Staff Reason

Mr. Phillipp D. Pis-an Health ProblemMr. Moderrae Nikki S.

AlcaideBetter career and financial opportunities

(e) Progress against Plans, Issues, Findings and Examination Trends

State the internal audit’s progress against plans, significant issues, significant findingsand examination trends.

Progress Against Plans Accomplished 94% of the 2014 Audit PlanIssues7 Strengthen preventive controls over cash

management and procurement process bysegregating noted incompatible functions;

Strengthen access controls over inventorypostings in the SAP system and fullutilization of SAP to monitor and accountinventory movements;

Strengthen controls over contractingprocess of foreign projects/subsidiaries toensure adequate safeguarding of Companyinterests;

Need to evaluate measures to mitigate theimpact of high NCG in the Company’spower plants given the increasing NCGbreaches beyond the tolerable limit;

Enhance, implement and cascadeinformation security policy to ensure propersafeguarding of confidential information;

Strengthen application controls overelectronic transfers of information; and

Strengthen controls over fixed assetsmanagement to ensure proper and adequatesafeguarding.

Findings8 Non-compliance with policies, procedures,and SOPs in selected areas of reservoirmanagement, safe work permitadministration, inventory and warehouseadministration, procurement, and assetmanagement.

Examination Trends Pervasive issues and findings revolve aroundcontrol inadequacy, process or operationalinefficiencies, updating of establishedguidelines and procedures, non-compliancewith policies, standard operating proceduresand code of discipline.

7 “Issues” are compliance matters that arise from adopting different interpretations.8 “Findings” are those with concrete basis under the company’s policies and rules.

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[The relationship among progress, plans, issues and findings should be viewed as an internalcontrol review cycle which involves the following step-by-step activities:

1) Preparation of an audit plan inclusive of a timeline and milestones;2) Conduct of examination based on the plan;3) Evaluation of the progress in the implementation of the plan;4) Documentation of issues and findings as a result of the examination;5) Determination of the pervasive issues and findings (“examination trends”) based

on single year result and/or year-to-year results;6) Conduct of the foregoing procedures on a regular basis.]

(f) Audit Control Policies and Procedures

Disclose all internal audit controls, policies and procedures that have been establishedby the company and the result of an assessment as to whether the established controls,policies and procedures have been implemented under the column “Implementation.”

Policies & Procedures Implementation

Audit and Governance Committee Charter ImplementedInternal Audit Charter ImplementedInternal Audit Policies and ProceduresManual

Implemented

Audit Project Management System ImplementedProtected Disclosure Policy ImplementedAudit and Governance Committee Charter Implemented

(g) Mechanism and Safeguards

State the mechanism established by the company to safeguard the independence of theauditors, financial analysts, investment banks and rating agencies (example, restrictionson trading in the company’s shares and imposition of internal approval procedures forthese transactions, limitation on the non-audit services that an external auditor mayprovide to the company):

Auditors

(Internal andExternal)

Financial Analysts Investment Banks Rating Agencies

The AGC reviewsand confirms theindependence of theexternal auditors byobtaining statementsfrom the auditors onrelationshipsbetween the auditorsand the company,including non-auditservices anddiscussing therelationships withthe auditors. A 3

Restrictions andcovenants such asblackout period,prohibition of set-offin loan agreement,are incorporated inthe contract.Contractors aresubject toaccreditation and theengagementundergoes bidsolicitation,evaluation, and

Restrictions andcovenants such asblackout period,prohibition of set-offin loan agreementare incorporated inthe contract.Contractors aresubject toaccreditation and theengagementundergoes bidsolicitation,evaluation, and

Restrictions andcovenants such asblackout period,prohibition of set-offin loan agreement,are incorporated inthe contract.Contractors aresubject toaccreditation and theengagementundergoes bidsolicitation,evaluation, and

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year rotation ofaudit partner isprescribed in theCompany’scorporategovernance manual.For internalauditors,independence isassured by requiringinternal audit toreport directly andfunctionally to theAGC. The ChiefAudit Executive isrequired to providethe AuditCommittee with anassurance on anannual basis of theInternal Audit’sorganizationalindependence.

awardrecommendation forapproval of theappropriateapproving authority.



The AGC evaluates,determines andapprove the non-audit work, if any, ofthe external auditor,and reviewsperiodically the non-audit fees paid to theexternal auditor inrelation to theirsignificance to thetotal annual incomeof the externalauditor and to thecorporation’s overallconsultancyexpenses. TheCommittee willdisallow any non-audit work that is inconflict with theauditor’s duties as anexternal auditor ormay pose a threat tohis independence.The non-audit work,if allowed, will bedisclosed in thecorporation’s annualreport

Contractors arerequired to sign theconflict of interestpolicy.



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(h) State the officers (preferably the Chairman and the CEO) who will have to attest to thecompany’s full compliance with the SEC Code of Corporate Governance. Suchconfirmation must state that all directors, officers and employees of the company havebeen given proper instruction on their respective duties as mandated by the Code andthat internal mechanisms are in place to ensure that compliance.

In 2014, the Company’s Compliance Officer and Vice-President Erwin O. Avante and thePresident and COO Richard B. Tantoco will attest to the company’s full compliance with theprovisions of the SEC Code of Corporate Governance and the Company’s own Manual onCorporate Governance.

H. ROLE OF STAKEHOLDERS

1) Disclose the company’s policy and activities relative to the following:

Policy(from the Code of Conduct and

Business Ethics)Activities

Customers' welfare Our Business Partners The Company strictly prohibits

solicitation of gifts, acceptance ofbribes and special favors, andother actions that might beconstrued as giving undueadvantage to contractors orsuppliers.

The Company prohibitsemployees and management fromaccepting anything, the value ofwhich under the circumstances ismanifestly excessive - fromclients, customers, suppliers orbusiness associates of theCompany - that may impair or bepresumed to impair professionaljudgment.

The Company shall honor inaccordance with existingregulations, laws and policies, itscontractual obligations whethermade directly or through anauthorized representative.

Employees shall exercise fairnessand transparency in theirprocurement activities and otherbusiness transactions, andmaintain professional rather thanpersonal relationships withpotential and current suppliers,contractors and clients. Businessdecisions must be legal and moral.

Employees shall strictly observe

EDC, in partnership with FirstGen Corporation, has taken theinitiative of having a customer’sappreciation event every yearwherein they express appreciationto customers for keeping a goodbusiness relation with theCompany.

Our customer's appreciationevent, was held on December 3,2014 at the Marriott Hotel,Manila. Customers from variousparts of the Philippines attendedthe said event. Feedback formswere distributed to the customersduring the seminar conductedprior to said event. EDC also citedand formally recognized itscustomers for exemplary businessrelations and customerperformance: Most Responsiveand Cooperative Customer, thePrompt Payer and the Customerof the Year. We also gave loyaltyawards to customers who signedup PSA amendments ahead oftime.

Three (3) Customer Assemblieswere held for 2014 in Panay,Cebu and Dumaguete. TheAssembly provided EDC theopportunity to touch base with itscustomers through teambuilding

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company policies and laws onconflict of interest.

Employees shall maintain thehighest standards of service,professionalism, fairness andhonesty in dealing with clients,bankers and financial advisors.

Employees shall treat businesspartners and their personnel withprofessionalism and courtesy andwithout compromising theCompany’s integrity.

activities, seminars on businesscontinuity and discussions onvalue-added services that areoffered by EDC and the LopezGroup.

Supplier/contractorselection practice

In EDC, our Supply ChainManagement Group hasinstitutionalized a supplier /contractor evaluation andaccreditation process whichensures that only those companieswhich are duly registered withappropriate regulatory bodies,operating for at least three yearsand compliant with governmentrules and regulations, as well asfinancially and technically capableof completing the projects, areawarded the contracts.

In selecting our suppliers, weconduct a financial risk evaluationto determine a supplier's capacityto meet financial commitments andto deliver goods/services based oncredible financial statementscovering a reasonable period foranalysis.

We also conduct a legal evaluationto ascertain a supplier's statutorycompliance and legitimacy as anentity fit for engagement afterperusal of required documents. Wealso undertake further calibrationthrough technical evaluation,business case detailing costsavings potential and other value

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drivers for EDC, as may berequired by the nature oftransaction.

As part of the accreditationprocess, we require our suppliersto execute a written statement onthe absence of family or personalinterests in EDC, its subsidiaries,affiliates, their officers,stockholders, representatives,agents or employees to ensuretheir compliance with our Conflictof Interest Policy.

We also adopt relevant contractterms that guarantee the supplier'sagreement to abide by laws, rules,regulations and EDC establishedstandards pertaining to theenvironment, health and safety,and other applicable laws.

We also implement a competitiveand transparent bidding process inselecting our suppliers.

We further ensure that ourdatabase of accredited suppliersand contractors remain currentwith regular updating.

Environmentallyfriendly value-chain

Our Environment

The Company makes environmentas its priority concern and shalltherefore protect, conserve,develop and enhance all naturalresources in and around everyplace we operate, particularlygeothermal reservations enablingus to sustain operations andmaintain ecological balance.

The Company takes theresponsibility of educatingrelevant stakeholders onenvironmental and socialresponsibilities; and ensuring thatthey have understood,acknowledged and accepted theseresponsibilities.

Our operations are subject toextensive and stringent safety,health and environmental lawsand regulations. Multisectoralmonitoring teams (MMT)composed of representatives fromthe Department of Environmentand Natural Resources (DENR),local government units, hostcommunities and nongovernmentorganizations (NGOs) monitor theair and water quality within ourprojects sites. We havemaintained air and water qualityat normal levels and we are fullycompliant with the PhilippineClean Air Act and Clean WaterAct in our areas of operation tosafeguard the health and safety of

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The Company promotesenvironmental consciousness andprotection, in partnership withlocal and private sectors .

our personnel and hostcommunities.

The use of the vertical dischargediffuser (VDD) enables us tomitigate temporary defoliation ofadjacent forest stands during welltesting. By using the VDD, brinesprays are diverted to the silencerto prevent affecting nearbyvegetation

EDC’s major watershedmanagement strategy isreforestation to enhance therecharge of the reservoir. Thus,grassland areas, open and denudedareas in the geothermalreservations are planted withforest trees. We are among thefew in the country to useindigenous forest tree species inreforestation projects

Daily water quality monitoring isconducted to ensure that theambient water quality guidelinevalues which are protective of thebeneficial water uses downstreamof our projects are maintained atall times. We continue to fullyimplement the Zero DischargeSystem (ZDS) policy byseparating the fluids from thesteam that we extract to generatepower and by injecting them backinto the geothermal reservoir

For air quality monitoring, thelevels of the noise and thegeothermal gas naturally found inproject sites, hydrogen sulfide(H2S) are regularly measured atdesignated impact stations

EDC also assists in addressing thehazards that can be brought aboutby climate change. EDCundertakes holistic managementof the forests around its projectsto ensure the protection of thewater-based hydro and geothermalreservoirs through forest patrols,reforestation, biodiversitymonitoring, informationeducation, and alternative

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livelihoods for forest dwellers toavoid encroachment. EDC hasorganized 125 forest communitiesin its project sites and providedthem with livelihoodopportunities since 1990. Theseinterventions have drasticallyreduced destructive activities likeillegal logging and slash-and-burnfarming. When the Lopez Groupacquired EDC, its reforestationcommitment was furtherstrengthened. EDC launched the“BINHI” (vernacular for“germling”) Program, which aimsto increase its reforestation effortfrom 300 hectares to 1,000hectares per year, spanning 2009to 2019. The program also focuseson the use of indigenous and raretree species for biodiversityconservation, and water andcarbon storage as a climatechange adaptation measure toprotect the Company’s assets, itspersonnel and its hostcommunities.

Community interaction Communities Around Us

The Company recognizes andrespects the customs, traditionsand beliefs of all indigenouspeoples where it operates. Theircooperation and participation shallbe sought in a courteous andfacilitative manner, to encouragethem to wholeheartedly takeactive roles in the communitydevelopment programs sponsoredby the Company.

The Company undertakesinformation, education andcommunication campaigns as partof its social responsibility since itbelieves that it is vital for peopleto understand the Company’soperations.

The Company implementslivelihood programs for residentsof host communities to empower

EDC listens to its hostcommunities. In the 2012 SocialAcceptability Survey, EDC scoredan average of 95% for“appreciation” and 94% for“willingness of the community tosupport the company” vs. the 80%standard for high acceptance (inthe Guttman scale). Across allSBUs, the scores exceeded theglobal standard for highacceptance

EDC also supports economicactivity through localprocurement. We directly awardthe procurement of goods andservices to qualified locally basedsuppliers through our procurementpolicy. This allows us to workwith capable communityorganizations and cooperativesand help in building theirentrepreneurial capabilities

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them toward self-reliance, self-respect and unity.

The Company supports localemployment, and provides equalopportunity to all qualifiedindividuals in recruitment andother employment practices -regardless of ethnic, religious orother types of affiliation.

The Company acknowledges theimportance of the youth in nation-building. The Company, therefore,promotes youth development,through appropriate activities andprograms such as practicum,training and apprenticeshipprogram for students and out-of -school youths regardless of theirsocial affiliation.

The Company provides disasterrelief operations in time ofcalamity.

EDC likewise facilitatessustainable development andcreate meaningful change amongour host communities. TheCompany is doing this through itscorporate social responsibilityprogram called HELEn, whichfocuses on health, education,livelihood, and environment

In 2012, EDC helped hostcommunities in facilitatingproposals for communitydevelopment projects amountingto PhP35.7 million.

In EDC’s Mindanao operations,the Company set up the MountApo Foundation Inc. (MAFI) in1994 to manage another onecentavo per kilowatthour, whichbecame known as theEnvironmental and Tribal WelfareTrust Fund (ETWTF). In 2012,the ETWTF amounted to a total ofPhP6.9 million. The fund ischiefly used to support ascholarship program for thechildren of indigenous peoples(IP) and upland dwellers in ourarea of operation in Mindanao.

EDC supervises livelihoodmodules that are implemented by111 farmers and communityassociations across the fivegeothermal project sites, withplans of expansion in the future toour other renewable energyproject areas.

In 2014, EDC facilitated technicaland skills training and valuesformation for 1,598 individuals(members of Farmer’sAssociations/FAs) from LGBUand NIGBU-SN. Trainings onvarious teaching skillsenhancement were also conductedwith 485 teacher participants,where financial incentives andworking paraphernalia wereturned over to 336 teachers.

EDC also continues to implementthe College Admission Review

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and Readiness (CAREERS)Project to provide equal access toquality education and gainfulemployment.

To further ensure the health of thecommunities surrounding ourplants and improve theirsanitation practices, EDC hasrepaired 6 Barangay HealthCenters (BHCs), providedfunctional equipment to 29 BHCs,rehabilitated 10 Barangay watersystems, and distributedmedicines and medical supplies to45 BHCs.

To complement the improvedfacilities and supplies, we alsoenhanced the skills of more than281 community health workersthrough refresher trainings onprimary health care, basic lifesupport, diseases prevention,responsible parenthood andemergency preparedness andresponse. Support in healthservices, such as medical, dental,optical, blood-letting, outreachactivities, health awareness andresponsible parenthood, were alsoextended to 7,333 individuals ofhost communities across the fiveproject sites.

EDC also conducted a nutritionfeeding program implemented inour assisted partner schools.

Anti-corruptionprogrammes andprocedures

See OUR BUSINESS PARTNERSabove

In furtherance of the Company’sstand against corruption, itprovides policies and guidelinesagainst corruption in the code ofconduct and discipline, code ofconduct and business ethics, andthe Corporate GovernanceManual. Recently, the companyissued the gift giving andreceiving guidelines as anotherstep towards strengthening itsanti-corruption stand.

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Safeguarding creditors'rights

See OUR BUSINESS PARTNERSabove

EDC regularly gets in touch withits creditors and continuouslyupdate them with the status of ourprojects and activities, and engagethem in discussions to addresstheir concerns regarding our plansand existing activities.

2) Does the company have a separate corporate responsibility (CR) report/section orsustainability report/section?

YES. EDC has a sustainability report based on the G3.1 Disclosure standards with a SectorSupplement for the Electric Utility Sector.

3) Performance-enhancing mechanisms for employee participation.

(a) What are the company’s policy for its employees’ safety, health, and welfare?Show data relating to health, safety and welfare of its employees. (Updated March 2015).

EDC ensures a safe, healthy and secure working environment for its employees. It advocates for agood work-life balance to keep our employees healthy, engaged, enabled, energized and vigorous.

EDC's 2014 health initiatives have been anchored on the Occupational Health ManagementStandards (OHMS) put in place in 2012. Accomplishments were measured using the HealthManagement System Score with 2 as the target for 2014. 3 out of 4 sites of the Company wereable to achieve this target score. This means that the system is documented, approved, resourcedand implemented with priority objectives satisfied and the majority of others being addressed.

Critical programs put in place in 2013 have been continued. All SBUs have completed theirHealth Risk Assessment in 2014. This provides assurance that all health risks in the Company'soperations and workplaces are identified and being mitigated. Implementation of controls &monitoring are ongoing. The Medical Emergency Response program has also been continued.With its full implementation, the program now covers medical air evacuations to providespecialist care and intervention to workers in severe work-related incidents.

Another initiative that was carried over to 2014 was the Health and Wellness program focusing onweight control and physical activity. Multiple health fairs, a high-profile weight loss contest andaggressive information campaign have made employees more aware of healthier lifestyle optionsand are now maximizing health-related company benefits such as the gym.

The Travel Health Program was reviewed and improved in 2014. The program ensures thatemployees who will be traveling abroad on official business first undergo medical evaluation,First Aid and Basic Life Support training and vaccination prior to their departure. This is to assesstheir fitness to travel and perform their tasks in their specific destinations. Also, travelers areprovided basic medical supplies for their trip. All these requirements are provided and facilitatedby the medical team.

A new program that began implementation in 2014 is the Fitness for Duty Standard. It aims to

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provide assurance that workers in select positions undergo appropriate and relevant medicalscreening as part of risk mitigation related to the performance of their jobs.

Also new for 2014 are awareness intensive programs on Office Ergonomics and Ebola. Criticalgroups within the company received awareness sessions and information materials on thesetopics.

To continuously update and refresh the skills of the health staff, trainings on First Aid, Basic LifeSupport and Advance Cardiac Life Support were provided as necessary. There were alsoOccupational Health Trainings such as the Basic Occupational Safety and Health course and theCSR training for community partners and health staff. This CSR training focused mainly onhealth-related needs for the community.

Safety

In 2014, the Company continued the implementation of the following safety programs that wererolled-out in 2011-2013, such as contractor safety passport system, training for drivers andinspectors/mechanics, NFPA 70E Training, NFPA 72, 20 & 25 Training, Fire and ElectricalSafety Audit in NIGBU, Safety Indoctrination, NFPA 70 (NEC) Training, Fire and ElectricalSafety Audit in MAGBU, Implementation of Permit to Work Standard, Safety Leadership andCreating a Positive Safety Culture, Incident Investigation and Prevention.

To better improve its safety performance, the company also embarked on the following programsacross all operating units: Basic Occupational Safety and Health (BOSH) Training, FireEmergency Assessment, Permit to Work Audit across all SBUs, and Live Fire Fighting andRescue Training.

Moreover, the company consistently complied with the requirements of the DOLE’s RenewableEnergy Safety, Health and Environment Rules and Regulations (RESHERR), specifically onhaving DOLE-accredited Safety Officers in all facilities.

(b) State the company’s training and development programmes for its employees. Show thedata.

Various employee training and development opportunities were offered throughout the year toenable our employees perform their functions more effectively, develop higher-level skills andattain personal career satisfaction. These include programs on personal effectiveness, businessprocess improvement, leadership empowerment and managerial excellence, and corporategovernance, among others.

To facilitate the sharing of knowledge and experience among our seasoned technicalprofessionals, several of these training programs are conducted through mentoring, peer-to-peercoaching and through the Energy Academy. The Energy Academy offers a three-tiered trainingprogram that builds on levels from "basic" to "generalist" to "advanced." Our in-house mentorsand trainors are proven experts with actual field experience backed by relevant skills obtainedfrom studies in geothermal institutes in Iceland, New Zealand and USA.

Also, library learning sessions and lecture series were conducted in 2014, covering topics on riskmanagement, physical fitness and proper nutrition and leadership.

Our new employees also undergo an onboarding program to give them a more in-depthunderstanding and appreciation about EDC's business and culture.

In June 2014, our Leadership Team, comprised of our Board, our Management, our executive

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officers, managers and supervisors, participated in our 2014 Leaders' Assembly as part of oursuccession program for the company. Themed "Future Forward," the Assembly provided ouremployees a learning environment enabling them to develop and strengthen their strategic andtransformational leadership skills to help them transform to become our future leaders. TheAssembly also provided our Management an opportunity to engage our employees to participatetowards EDC's bright future, by providing them a venue to speak up and voice out their concerns.

In August 2014, we also launched our Power-up Sessions as a part of the culture change programwherein employees are immersed and reintroduced to EDC's core values and principles. In the 3-day Power-up sessions, Management cascades EDC’s future plans and interfaces with employees,answering their concerns and queries. This program provides a venue for our Management andemployees to align and revitalize their personal values and plans with the initiatives and activitiesof the company. This program is being implemented in all business units with the purpose thateveryone in EDC, including the Board and the Management, should be powered-up.

We also administered our 2014 Employee Engagement Survey conducted by Towers Watson inNovember 2014. Through the survey, we will be able to identify our strengths and areas forimprovement to ensure that our employees are fully committed into achieving the company'sgoals. The survey results will also give the Management a benchmark of our employees'engagement and performance against similar organizations locally and globally.

TRAINING DATA FOR 2014SOURCE: Internal HR Training Data(Updated as of December 2014)

RANK EXECUTIVES MANAGERS SUPERVISORS PROFESSIONAL/ TECHNICAL

RANKANDFILE

Nature ofTraining

ExecutiveLearningSessions

LeadershipEmpowerme

nt &ManagerialExcellence

AdvancedSupervisory

Training

Business ProcessImprovement

PersonalEffective

nessTraining

Head Count 36 126 368 946 751AverageTraining hours

53 23 22 17 5

TOTALNUMBER OFEMPLOYEES

2227

OVERALLAVERAGETRAININGHOURS

15

(c) State the company’s reward/compensation policy that accounts for the performance ofthe company beyond short-term financial measures

FROM THE EDC 2012 AND 2013 ANNUAL REPORTS AND INTRANET SYSTEM

EDC’s compensation philosophy is to recognize company & individual performance as reflected

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in the value of each officer or employee’s position compared against the marketplace and withinthe company. Executive officers are compensated in a manner that is consistent with theseprinciples, aligns the interests of management and shareholders and drives sustained and superiorperformance.

Annual Salary Increase

Deserving employees who work hard and perform well are bestowed with appropriate rewardsand recognition. To foster a positive and productive working environment and to motivate ouremployees to always aim for excellence, annual salary increases are based on the PerformanceManagement System, the EDC Performance P.A.C.E.

The EDC Performance P.A.C.E. is a development tool used to evaluate company and individualperformance linked to EDC's business objectives vis-a-vis individual rewards and incentives.This is a reformulated evaluation system that would address the current strategic businessconcerns of EDC in relation to our employees' performance.

During the 2014 Unified RF CBA Negotiations, all the seven (7) rank and file unions agreed that,for their annual salary increase under their respective CBAs, they will be covered by EDC'sperformance management system.

Employee Stock Grant Plan

Also, on January 23, 2009, the Board of Directors of EDC approved the Employee Stock GrantPlan (ESGP). The ESGP is an integral part of EDC’s total rewards program for its officers andemployees and is intended to provide an opportunity for participants to have real and personaldirect interest in EDC. It covers officers and employees of EDC and other individuals whom theNomination and Compensation Committee (NCC) may decide to include.

On December 1, 2009, the NCC granted 7,000,000 shares representing the Parent Companycommon shares authorized under the ESGP which were transferred to the BDO Trust. Theseshares were part of the 93,000,000 common shares issued to the BDO Trust and recorded under“Common shares in employee trust account”. BDO Trust will administer the issuance of thecommon shares to the employee grantees under the Parent Company’s ESGP.

The stock grants are given in lieu of cash incentives and bonuses. The grant of shares under theESGP does not require an exercise price to be paid by the awardees. The granted shares will vestover a three-year period as follows: 20% after the first anniversary of the grant date; 30% after thesecond anniversary of the grant date; and the remaining 50% after the third anniversary of thegrant date. Awardees that resign or are terminated will lose any right to unvested shares. There areno cash settlement alternatives.

EDC Performance P.A.C.E.

To foster a positive and productive working environment and to motivate our employees toalways aim for excellence, we have recently launched the Performance Management System, theEDC Performance P.A.C.E. It is a development tool used to evaluate company and individualperformance linked to EDC's business objectives vis-a-vis individual rewards and incentives.This is a reformulated evaluation system that would address the current strategic businessconcerns of EDC in relation to our employees' performance.

Service Recognition Programs

Also, to give credit to the hard work, professionalism and loyalty of our employees, we startedholding service recognition programs to formally recognize employees who have loyally and

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expertly served us for at least ten (10) years. In 2014, a total of 290 employees from the HeadOffice and the project sites were given a rousing celebration and recognition for the long andquality service they have rendered to EDC.

4) What are the company’s procedures for handling complaints by employees concerningillegal (including corruption) and unethical behaviour? Explain how employees areprotected from retaliation.

EDC has a FRAUD POLICY which was established in 2006 upon Board approval, to facilitatethe development of controls which will aid in the detection and prevention of fraud against theCompany and promotion of consistent organizational behaviour by providing guidelines andassigning responsibility for the development of controls. The policy defines fraud and enumeratesthe instances wherein fraud is committed, and designates the office primarily responsible forinvestigating corporate fraud cases. It emphasizes that in the process of investigating corporatefraud cases, the Company shall, at all times, accord all individuals concerned with all the rightsand privileges emanating from due process.

Also, EDC’s WHISTLEBLOWER POLICY (Officially called PROTECTEDDISCLOSURES POLICY), likewise passed by Board approval in 2006 is intended toencourage and enable employees and others to raise serious concerns within the company prior toseeking resolution outside the company. The EDC whistleblower policy is a guarantee that noperson who reports a violation of company policies shall suffer harassment, retaliation, or adverseemployment consequence. The EDC Whistleblower Policy identifies who could bewhistleblowers, laying down the matters which are reportable thereunder, the procedures forwhistleblowing, as well as their rights and responsibilities under the said policy.

I. DISCLOSURE AND TRANSPARENCY

1) Ownership Structure

(a) Holding 5% shareholding or more

Type ofClass

Name, address ofRecord Owner andRelationship with

Issuer

Name of BeneficialOwner & Relationship

with Record OwnerCitizenship No. of Shares

HeldPercentof Class

CommonPreferred

Red Vulcan HoldingsCorporation3rd Floor BenpresBldg.,Exchange Road cor.Meralco Ave.,Pasig City

(Red VulcanHoldings Corp. is amajor stockholder ofEDC)

Beneficial Owner -First Gen Corporation

(First Gen Corp. is amajor stockholder ofRed Vulcan HoldingsCorp.)

Proxy - Federico R.Lopez, Chairman ofFirst Gen Corporation

Filipino 7,500,000,0009,375,000,000

40.00%100.00%

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Common PCD NomineeCorporation(Foreign) *

There are no beneficialowners of more than5% of the outstandingshares.

Foreign 6,133,848,142 32.71%

Common PCD NomineeCorporation(Filipino) *

(PCD Nominee Corp.is a stockholder ofEDC)

There are no beneficialowners of more than5% of the outstandingshares.

Filipino 3,145,146,909 16.77%

Common First GenCorporation3rd Floor BenpresBldg.,Exchange Road cor.Meralco Ave.,Pasig City

(First Gen Corp. is astockholder of EDC)

Beneficial Owner ofmore than 5% -

Proxy - Federico R.Lopez, Chairman ofFirst Gen

Filipino 991,782,700 5.29%

Common Northern Terracotta3rd Floor BenpresBldg.,Exchange Road cor.Meralco Ave.,Pasig City

(Northern Terracottais a stockholder ofEDC)

Beneficial Owner -First Gen Corporation(Northern Terracotta isa stockholder of EDCand a wholly-ownedsubsidiary of First GenCorp.)

Proxy - Federico R.Lopez, Chairman ofFirst Gen Corporation

Filipino 937,693,900 5.00%

* PCD Nominee Corporation, a wholly owned subsidiary of Philippine Central Depository, Inc.(PCD), is the registered owner of the shares in the books of the Company’s transfer agent in thePhilippines. The beneficial owners of such shares are PCD’s participants, who hold the shares ontheir behalf or in behalf of their clients. PCD is a private company organized by the major institutionsactively participating in the Philippines capital market to implement an automated book-entry systemof handling securities transactions in the Philippines.

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DATA FROM PUBLIC OWNERSHIP REPORT

Name of Stockholder

Number of EDC SharesDirect Shareholdings Indirect Shareholdings

PreferredShares

CommonShares

PreferredShares

CommonShares

Red Vulcan HoldingsCorporation 9,375,000,000 7,500,000,000 - -PCD Nominee Corporation(Foreign) - 6,133,848,142 - -PCD Nominee Corporation(Filipino) - 3,145,146,909 - -

First Gen Corporation - 991,782,700 - -Northern Terracotta PowerCorporation - 937,693,900 - -

F. YAP SECURITIES, INC. 6,000,000 - -

Peter D. Garrucho, Jr. - 5,670,000 - -Peace Equity Access ForCommunity EmpowermentFoundation, Inc. -

3,030,000

- -

Croslo Holdings Corporation - 2,200,000 - -

William Go Kim Huy - 2,000,000 - -

Arthur De Guia - 1,250,000 - -

Anthony Mabasa 1,000,000 - -

ALG Holdings Corporation - 875,000 - -

First Life Financial Co., Inc. - 800,000 - -

Raul I. Macatangay - 725,000 - -

Rosalind Camara - 663,750 - -Peter Mar &/or Annabelle C.Mar 600,000 - -

Emelita D. Sabella - 521,000 - -

Ma. Consuelo R. Lopez - 500,000 - -

Virginia Maria D. Nicolas - 393,000 - -

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Direct and indirect shareholdings of our Directors and Officers for 2014 are as follows:

Position Name

Number of EDC SharesDirect Shareholdings Indirect Shareholdings

BeginningBalance(01 Jan.

2014)

EndingBalance(31 Dec.

2014)

BeginningBalance(01 Jan.

2014)

EndingBalance(31 Dec.

2014)

BOD

Oscar M. Lopez 200,501 200,501 500,000 500,000

Federico R. Lopez 1 1 - -

Peter D. Garrucho, Jr. 5,670,000 5,670,000 1,000,000 1,000,000

Richard B. Tantoco 8,104,501 8,104,501 3,125,000 5,125,000

Ernesto B. Pantangco 37,501 2,112,501 - -

Elpidio L. Ibanez 500,001 500,001 - -

Francis Giles Puno 2,102,501 2,102,501 - -

Jonathan C. Russell 892,751 1,080,951 - -

Edgar O. Chua 1 1 - -

Francisco Ed. Lim 30,001 30,001-

-

Arturo T. Valdez 1 1 - -

KeyExecutiveOfficers

Nestor H. Vasay 650,000 650,000 - -

Manuel S. Ogena 2,323,751 2,323,751 - -

Dominador M. Camu, Jr. - - - -

Elizabeth D. Nasol 10,000 50,000 - -

Vincent Martin C. Villegas 500 500 - -

Erwin O. Avante 100,000 100,000 - -

Rico G. Bersamin - - - -

Ferdinand B. Poblete 10,000 10,000 - -

Ariel Arman V. Lapus 148,000 148,000 - -

Ellsworth R. Lucero 1,228,125 1,228,125 - -

Dwight A. Maxino 1,228,125 1,228,125 - -

Manuel C. Paete 1,228,125 1,228,125 - -

Liberato S. Virata 1,252,250 1,252,250 - -

Wilfredo A. Malonzo - - - -

Teodorico Jose R. Delfin - - - -

Ana Maria A. Katigbak - - 272,000 272,000

Glenn L. Tee - - - -

Maribel A. Manlapaz 70,000 70,000 - -

Erudito S. Recio 66,500 27,000 25,100 25,100

2) Does the Annual Report disclose the following: (Based on 2014 Annual Report)

Key risks YES

Corporate objectives YES

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Financial performance indicators YES

Non-financial performance indicators YES

Dividend policy YES

Details of whistle-blowing policy YESBiographical details (at least age, qualifications, date of firstappointment, relevant experience, and any other directorships of listedcompanies) of directors/commissioners

YES

Training and/or continuing education programme attended by eachdirector/commissioner

YES

Number of board of directors/commissioners meetings held during theyear

YES

Attendance details of each director/commissioner in respect of meetingsheld

YES

Details of remuneration of the CEO and each member of the board ofdirectors/commissioners

YES.AGGREGATE

DETAILS

Should the Annual Report not disclose any of the above, please indicate the reason forthe non-disclosure.

The Training and or continuing education programme attended by each director for the year isnot included in the Annual Report since these are disclosed in the Corporate Governancepages of the EDC website: http://www.energy.com.ph/corporate-governance/compliance/sec-reports-on-corporate-governance/

3) External Auditor’s fee

NAME OF AUDITOR: SGV & CO.

Year Audit and Audit-relatedFees

Non-audit Fee

2014 ₱ 11,560,499.00 ₱ 10,782,862.00

2013 ₱ 13,393,280.00 ₱ 9,480,815.00

2012 ₱9,561,475.00 ₱ 676,661.00

4) Medium of Communication

List down the mode/s of communication that the company is using for disseminatinginformation.

Company Website (www.energy.com.ph) Company Intranet (www.intranet.energy.com.ph) Media briefings News releases Investor’s Briefings Roadshows Disclosures via the PSE Website (via ODiSy-now PSE EDGE) Compliance submissions to the SEC of structured reports Timely filing with the SEC of unstructured reports Flyers Paid Advertisements

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E-mails

5) Date of release of audited financial report: In 2012, we released the 2011 AFS on March 2, 2012. In 2013, we released the 2012 AFS on March 4, 2013. In 2014, we released the 2013 AFS on March 12, 2014.

6) Company Website

Does the company have a website disclosing up-to-date information about the following?

Business operations YES

Financial statements/reports (current and prior years) YES

Materials provided in briefings to analysts and media YES

Shareholding structure YES

Group corporate structure YES

Downloadable annual report YES

Notice of AGM and/or EGM YES

Company's constitution (company's by-laws, memorandum and articles ofassociation) YES

Should any of the foregoing information be not disclosed, please indicate the reason thereto.

Not applicable.

7) Disclosure of RPT

RPT Relationship Nature

Transactions forthe year endedDecember 31,

2014

Net Amounts duefrom/to related

parties as ofDecember 31

TRADE AND OTHER RECEIVABLESFirst Gen EnergySolutions

Affiliate Sale of electricity P=342,258,797 P=54,561,770

Thermaprime Affiliate Sale of rigs andinventories

1,650,000,000 –

DUE TO RELATED PARTIESFirst Gen Parent of

the parentCompany

Consultancy fee P=175,284,706 43,998,784

Interest-freeadvances

28,769,152 5,317,281

First Gas PowerCorporation

Affiliate Interest-freeadvances

579,088 40,841

FGP Corp. Affiliate Interest-freeadvances

408,775 95,562

First Gas Holdings Affiliate Interest-freeadvances

51,480-

First Gen Puyo Affiliate 173,000 173,000

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TRADE AND OTHER PAYABLESFirst Balfour Inc. Affiliate Steam

Augmentation andother services

P=2,368,911,626 681,603,330

Thermaprime Affiliate Drilling and otherrelated services

1,441,980,032 367,606,957

Bayantel Affiliate Purchase ofservices andutilities

14,254,689 9,319,058

First PhilecManufacturingTechnologies Corp.

Affiliate Purchase ofservices andutilities

6,996,360 2,511,446

FPRC Affiliate Purchase ofservices andutilities

2,390,863 -

ABS-CBNPublishing


- 3,600

ABS-CBNFoundation


965,000 -

Adtel Inc. Affiliate Purchase ofservices andutilities

1,857,576 (2,043,252)

First ElectroDynamicsCorporation


- 250,600

Rockwell LandCorporation


125,104 -

ABS-CBN Corp. Affiliate Purchase ofservices andutilities

434,456 -

MISCELLANEOUS INCOMEFirst Gen Affiliate Dividend P=3,866,206 -

When RPTs are involved, what processes are in place to address them in the manner thatwill safeguard the interest of the company and in particular of its minority shareholders andother stakeholders?

The purchases from related parties are made at normal commercial terms and conditions.The amounts outstanding are unsecured and will be settled in cash. The Company has notrecognized any impairment losses on receivables from related parties as of December 31,2014 and 2013.

J. RIGHTS OF STOCKHOLDERS

1) Right to participate effectively in and vote in Annual/Special Stockholders’ Meetings

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(a) Quorum

Give details on the quorum required to convene the Annual/Special Stockholders’Meeting as set forth in its By-laws.

Quorum Required

A majority of the outstandingstock either in person or byproxy shall, except asotherwise expressly providedby law, constitute a quorumfor the transaction of business.

(b) System Used to Approve Corporate Acts

Explain the system used to approve corporate acts.

System Used By Poll.

Description

Stockholders are informed of the Agenda items for the AnnualStockholders’ meeting, through the release and disclosure of theCompany’s Definitive Information Statement (SEC Form 20-IS).The proxy form is attached to the Notice and the 20-IS.

For those who will be represented by proxy, their votes should besubmitted and received by the Company no later than April 26, 2014.

For Stockholders attending in person, their votes shall be made andcast on the day of the meeting.

No new item shall be included in the agenda on the day of themeeting.

Approval is made on a one subject, one item basis, using a one share,one vote policy, regardless of the class of shares

*Updated based on SEC Form 20-IS (2014)

(c) Stockholders’ Rights

List any Stockholders’ Rights concerning Annual/Special Stockholders’ Meeting thatdiffer from those laid down in the Corporation Code.

Stockholders’ Rights underThe Corporation Code

Stockholders’ Rights not inThe Corporation Code

1. Direct or indirect participation inmanagement

The rights given by EDC to itsshareholders, both common and preferred,

follow the shareholder’s legal rights as suchunder the Corporation Code.

The innovation on shareholder rightsprovided by EDC to its shareholders is thepower of minority shareholders to controlthe validity of corporate acts which, underthe Corporation Code, requires at least 2/3

2. Voting rights

3. Right to remove directors;

4. Proprietary rights;a. Right to dividends;b. Appraisal right;c. Right to issuance of stock

certificate for fully paid shares;d. Proportionate participation in the

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distribution of assets inliquidation;

e. Right to transfer of stocks incorporate books;

f. Pre-emptive right.

vote of shareholders. In such case, EDC’sBy-Laws provide that there should also bethe vote of the majority of the minority

shareholders present

5. Right to inspect books and records;

6. Right to be furnished with the most recentfinancial statement/financial report;7. Right to recover stocks unlawfully sold fordelinquent payment of subscription;8. Right to file individual suit, representativesuit and derivative suits.

Dividends (as of 31 December 2014)

ENERGY DEVELOPMENT CORPORATIONDIVIDEND DECLARATIONS AND PAY-OUTS 2012-2014

Type Value RecordDate

DatePayable Reference

Special Cash dividendon Common shares,

P0.10/sh

1,875,000,000 20-Oct-14 13-Nov-14

PSE Disclosure datedOctober 3, 2014

Cash dividend onCommon shares,

P0.10/sh

1,875,000,000 17-Mar-14 10-Apr-14 PSE Disclosure datedFebruary 28, 2014

Cash dividend onPreferred shares,

P0.0008/sh

7,500,000 17-Mar-14 10-Apr-14 PSE Disclosure datedFebruary 28, 2014


P0.08/sh

1,500,000,000 25-Sep-13 21-Oct-13 PSE Disclosure datedSeptember 10, 2013


P0.08/sh

1,500,000,000 11-Mar-13 8-Apr-13 PSE Disclosure datedFebruary 20, 2013


P0.0008/sh

7,500,000 11-Mar-13 8-Apr-13 PSE Disclosure datedFebruary 20, 2013


P0.04/sh

750,000,000 20-Sep-12 16-Oct-12 PSE Disclosure datedSeptember 5, 2012


P0.10/sh

1,875,000,000 28-Mar-12 24-Apr-12 PSE Disclosure datedMarch 13, 2012


P0.0008/sh

7,500,000 28-Mar-12 24-Apr-12 PSE Disclosure datedMarch 13, 2012

(d) Stockholders’ Participation

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1. State, if any, the measures adopted to promote stockholder participation in theAnnual/Special Stockholders’ Meeting, including the procedure on how stockholdersand other parties interested may communicate directly with the Chairman of theBoard, individual directors or board committees. Include in the discussion the stepsthe Board has taken to solicit and understand the views of the stockholders as wellas procedures for putting forward proposals at stockholders’ meetings.

Measures Adopted Communication ProcedureEarly Issuance ofMeeting Notification,including enumeratingagenda items andproviding relevantinformation needed toarrive at an informeddecision

Issuance of the electronic copy via company websiteand the PSE portal

Press/Media releases

Distribution of proxyforms, with instructionsto appoint a proxy

A proxy form, together with instructions on how toappoint a proxy to shareholders' meeting, wereenclosed in the Notice and the SEC Form 20-IS toassist the shareholders who cannot personally attendthe meeting. Shareholders can download proxyforms from EDC website.

Shareholders who cannot personally attend themeeting may designate their authorizedrepresentatives by submitting a duly-executed proxyinstrument to the Office of the Corporate Secretary,not later than 6:00 p.m. of April 26, 2014. Beneficialowners whose shares are lodged with PDTC orregistered under the name of a broker, bank or otherfiduciary allowed by law, must, in addition to therequired I.D., present a notarized certification fromthe owner of record that he is the beneficial owner,indicating thereon the number of shares. Corporateshareholders are required to present a notarizedsecretary's certificate attesting to the authority of itsrepresentatives to attend and vote at the stockholders'meeting.

Question and Answerwith the Stockholdersduring the AnnualStockholders' Meeting

The Chairman encourages the shareholders to posetheir queries or to express their opinions orrecommendations during the ASM. The Directorsand the Management are present to address andanswer all the queries of the shareholders.

2. State the company policy of asking shareholders to actively participate in corporatedecisions regarding:a. Amendments to the company's constitutionb. Authorization of additional sharesc. Transfer of all or substantially all assets, which in effect results in the sale of the

company

125

From the Company’s Amended By-Laws:Article II, Item 6. In all cases where the law requires a two-thirds vote of the outstandingcapital stock, the majority vote of the minority shareholders present shall likewise berequired for validity of decisions in Stockholders’ Meetings.

As such, since item 2(a) and 2(c) are instances under the Corporation Code which requirethe vote of at least 2/3 votes of the stockholders, company policy mandates that a majorityvote of minority shareholders present be made. For item 2(b) on the additional shares,regular quorum and voting requirement is followed.

3. Does the company observe a minimum of 21 business days for giving out of noticesto the AGM where items to be resolved by shareholders are taken up?

YES

a. Date of sending out notices:

For the 2014 Annual Stockholders’ meeting, the Notice was first disclosed via thePSE’s Electronic Disclosure Generation Technology (PSE Edge) on February 14,2014 or eighty-one days before the date of the scheduled meeting on May 6, 2014.

The Notice was again issued, as part of the Definitive information Statement (SECForm 20-IS), which was published by the Company on April 04, 2014.

4. Date of the Annual/Special Stockholders’ Meeting:

May 6, 2014

5. State, if any, questions and answers during the Annual/Special Stockholders’Meeting.

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6. Result of Annual/Special Stockholders’ Meeting’s Resolutions

Results of the 2014 Annual Stockholders’ Meeting

Resolution Approving Dissenting AbstainingApproval of the Minutes of the PreviousStockholders’ meeting

TOTAL VOTES:23,904,490,552

22,578,379,978(80.28%)

0 1,326,110,574

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Approval of the Management Report andAudited Financial Statements for the yearended December 31, 2013

TOTAL VOTES:23,904,490,552

22,894,602,203(81.40%)

0 1,009,888,349

Confirmation and Ratification of all acts andresolutions of Management and the Board ofDirectors from the date of the laststockholders' meeting as reflected in thebooks and records of the company

TOTAL VOTES:23,904,490,552

22,568,102,478(80.24%)

10,277,500 1,326,110,574

Approval of amendment of the Articles ofIncorporation to reclassify the Three Billion(3,000,000,000) authorized and unissuedcommon shares with a par value of One Peso(Php1.00) per share, into Three HundredMillion (300,000,000) Non-Voting PreferredShares with a par value of Ten Pesos(Php10.00) per share

TOTAL VOTES:23,904,490,552

23,204,530,289(82.50%)

699,269,263 691,000

Approval of amendment of the Articles ofIncorporation to limit the preemptive right forcertain share issuances/ reissuances

TOTAL VOTES:23,904,490,552

21,438,895,716(76.23%)

2,464,903,836 691,000

Approval of the Appointment of SGV & Co.as the Company’s external auditor

TOTAL VOTES:23,904,490,552

22,894,602,203(81.40%)

0 1,009,888,349

7. Date of publishing of the result of the votes taken during the most recent AGM forall resolutions:

For the 2012 AGM, results were issued the afternoon after the meeting on May 9, 2012.For the 2013 AGM, the results were issued the afternoon after the meeting on May 7,2013.For the 2014 AGM, the results were issued the afternoon after the meeting on May 6,2014.

(e) Modifications

State, if any, the modifications made in the Annual/Special Stockholders’ Meetingregulations during the most recent year and the reason for such modification:

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Modifications Reason for Modification

NO MODIFICATION NO MODIFICATION



(f) Stockholders’ Attendance

(i) Details of Attendance in the Annual/Special Stockholders’ Meeting Held

Type ofMeeting

Names ofBoard

members /Officerspresent

Date ofMeeting

VotingProcedure

(by poll, showof hands, etc.)

% of SHAttendin

gin Person

% ofSH inProxy

Total % ofSH

attendance

Annual 11DIRECTORS

Oscar M.LopezFederico R.LopezRichard B.TantocoFrancis GilesB. PunoErnesto B.PantangcoPeter D.Garrucho, Jr.Jonathan C.RussellElpidio L.IbanezEdgar O. ChuaFrancisco Ed.LimArturo T.Valdez

May 6,2014

By Poll 0.02% 84.99% 85.01%

SpecialTHE COMPANY DID NOT HOLD ANY SPECIAL STOCKHOLDERS’

MEETING FOR 2014.

(ii) Does the company appoint an independent party (inspectors) to count and/orvalidate the votes at the ASM/SSMs?

THE COMPANY ENGAGED THE SECURITIES TRANSFER SERVICES, INC.(STSI) TO VALIDATE THE VOTES AT THE 2014 ANNUAL STOCKHOLDERS’MEETING

(iii) Do the company’s common shares carry one vote for one share? If not, disclose andgive reasons for any divergence to this standard. Where the company has more thanone class of shares, describe the voting rights attached to each class of shares.

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YES. EDC ADHERES TO THE ONE SHARE, ONE VOTE RULE.

(g) Proxy Voting Policies

State the policies followed by the company regarding proxy voting in the Annual/SpecialStockholders’ Meeting.

Company’s Policies

Execution and acceptance ofproxies

Advise on the execution of the Proxy and the detailsrelating to the acceptance and the identification neededare indicated in the Notice of Meeting issued by theCompany, together with the Definitive InformationStatement (SEC Form 20-IS)

Notary Notarization of the Proxy is not needed.

Submission of Proxy

Must be submitted duly signed and accomplished, tothe Office of the Corporate Secretary at the Head officeof the Energy Development Corporation, 38th Floor,One Corporate Centre Building, Julia Vargas corMeralco Ave., Ortigas Center, Pasig City, 1605

Several ProxiesNo distinction or limitation for several proxies underthe Notice and the 20-IS. As such, the rules for singularproxies apply to several proxies.

Validity of Proxy

For validity of the proxy in the 2014 ASM, the samemust be duly signed and accomplished, and submittedto the pre-assigned recipient (the Office of theCorporate Secretary, with address indicated) on orbefore April 26, 2014.

For beneficial owners whose shares are lodged must, inaddition to the required ID, provide a notarizedcertification from the owner of record that he is thebeneficial owner, indicating thereon the number ofshares.

Proxies executed abroad

For proxies executed abroad, the same is not specifiedin the Notice. However, by analogy, under Philippinelaw, documents to be executed outside the Philippinesmust be authenticated/acknowledged before the properPhilippine Consulate

Invalidated ProxyInvalidated proxies shall not be considered forpurposes of the voting requirements in the AnnualStockholders’ meeting.

Validation of Proxy

For the validation of proxies, the Company willexamine the completeness and authenticity of the formand the signature/s thereon not later than five (5) daysprior to the scheduled Annual Stockholders’ Meeting.

Violation of Proxy

In cases where the proxy requirements are notcomplied with, the company considers theminvalidated, and will not be counted nor considered forvoting purposes.

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(h) Sending of Notices

State the company’s policies and procedure on the sending of notices of Annual/SpecialStockholders’ Meeting.

Policies Procedure

As a listed company, EDC must comply withthe regulatory and legal requirement ofsending out Meeting Notices.

As a listed Company, EDC follows theperiod for the issuance of the Notice ofAnnual /Special Stockholders’ meetingimposed under the law.

For 2014, the Notice for the AnnualStockholders’ Meeting was first disclosedvia the PSE’s Electronic DisclosureGeneration Technology (PSE Edge) eighty-one days before the date of the scheduledmeeting.

The Notice was again issued, as part of theDefinitive information Statement, whichwas published by the Company on April 4,2014.

(i) Definitive Information Statements and Management Report

Number of Stockholders entitled toreceive Definitive Information Statementsand Management Report and OtherMaterials

For the 2014 ASM – 690

Date of Actual Distribution of DefinitiveInformation Statement and ManagementReport and Other Materials held bymarket participants/certain beneficialowners

For the 2014 ASM: April 10, 2014

Date of Actual Distribution of DefinitiveInformation Statement and ManagementReport and Other Materials held bystockholders

For the 2014 ASM: April 10, 2014

State whether CD format or hard copieswere distributed

BOTH CD FORMATS AND HARDCOPIES OF THE ANNUAL REPORTWERE DISTRIBUTED

If yes, indicate whether requestingstockholders were provided hard copies

YES

(j) Does the Notice of Annual/Special Stockholders’ Meeting include the following:

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Each resolution to be taken up deals with only one item. YES

Profiles of directors (at least age, qualification, date of firstappointment, experience, and directorships in other listedcompanies) nominated for election/re-election.

YES

The auditors to be appointed or re-appointed. YES

An explanation of the dividend policy, if any dividend is to bedeclared.

YES

The amount payable for final dividends. YES

Documents required for proxy vote. YES

Should any of the foregoing information be not disclosed, please indicate the reasonthereto.

2) Treatment of Minority Stockholders

(a) State the company’s policies with respect to the treatment of minority stockholders.

Policies Implementation

FROM THE CORPORATE GOVERNANCEMANUALSection 9, Subject 5 Right to Information

“.. They shall be granted the right to proposethe holding of a meeting and to propose theagenda of such meeting, provided that suchitems are for legitimate business purposes.”

FROM THE CORPORATE GOVERNANCEMANUALSection 9, Subject 2 Voting Right

”… At every meeting of the stockholders forthe election of directors, owners of shares ofcommon stock of the Company are entitledto one vote for each share of common stockowned by him. He may vote such number ofshares for as many persons as there aredirectors to be elected or to cumulate saidshares and give one candidate as many votesas the number of directors to be electedmultiplied by the number of his shares shallequal, or he may distribute them on the sameprinciple among as many candidates as heshall think fit.

“A Director shall not be removed withoutcause if such removal will deny the minoritystockholder’s right to be represented.

FROM THE CORPORATE GOVERNANCEMANUALSection 3 Board Governance

Board AccountabilityThe Board is primarily accountable to thestockholders. It should provide them with abalanced and comprehensible assessment ofthe corporation’s performance, position andprospects on a quarterly basis, includinginterim and other reports that could adverselyaffect its business, as well as reports to

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regulators that are required by law.

Thus, it is essential that Management provideall members of the Board with accurate andtimely information that would enable theboard to comply with its responsibilities toits stockholders

(b) Do minority stockholders have a right to nominate candidates for board of directors?

YES.

K. INVESTORS RELATIONS PROGRAM

1) Discuss the company’s external and internal communications policies and how frequentlythey are reviewed. Disclose who reviews and approves major company announcements.Identify the committee with this responsibility, if it has been assigned to a committee.

The purpose of EDC’s communications is to promote its business by providing investors andother stakeholders with timely, complete and accurate information on its goals and operations.The President and members of Management, each in his respective sector, review and approvemajor company announcements. IR is responsible for disclosing to the Philippine StockExchange (PSE) and ensuring that disclosures are made to the PSE prior to their release to thenews media.

2) Describe the company’s investor relations program including its communications strategy topromote effective communication with its stockholders, other stakeholders and the public ingeneral. Disclose the contact details (e.g. telephone, fax and email) of the officer responsiblefor investor relations.

Details

(1) Objectives The objective of IR is to generate investors and otherstakeholders’ interest in, and build up investors’ loyaltyto the company.

(2) Principles IR ensures that the investment community is providedwith timely, complete and accurate information used todetermine EDC’s share value. The operations arebased on openness, accuracy, consistency and equalaccess to information.

(3) Modes of Communications Information about EDC, its operating and financialperformance are provided to investors, stockholders,and other stakeholders through the following tools: 1-on-1 meetings and/or conference calls with

Management Quarterly investors’/analysts’ briefing with the

President and CFO Non-deal road shows and/or investors’ conferences

with the President and/or CFO IR section of EDC website (presentations and

SEC/PSE regulatory filings) Printed annual report

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At other times, the inquiries of investors and analystsare answered by phone or email.

(4) Investors Relations Officer Erudito S. RecioPhone #: +63 (2) 982-2142Fax #: =63 (2) 982-2141E-mail: [email protected]

3) What are the company’s rules and procedures governing the acquisition of corporatecontrol in the capital markets, and extraordinary transactions such as mergers, and sales ofsubstantial portions of corporate assets?

The company rule is to conduct above-adequate due diligence and review of such extraordinarytransactions, and the parties potentially involved in it, undertaken by expert third party firms andconsultants, not only to evaluate the fairness of the transaction price and its terms and conditions,but also to ensure the viability of such transaction to EDC in the long-term. Where the matterinvolves a related party, the Company exercises greater care and transparency in ensuring thefairness of the transaction price and its terms and conditions. When EDC acquired 60% of FirstGen Hydro Power Corporation (FGHPC) in 2008, the Company created a committee composedexclusively of its Independent Directors to oversee the transaction on behalf of EDC'smanagement, supported by an independent financial adviser to render the fairness opinion, and asole financial advisor. Disclosures to the Exchange and the investing public are made available bythe Company frequently to ensure that the full transparency is afforded the public.

Name of the independent party the board of directors of the company appointed to evaluatethe fairness of the transaction price.

For 2014, there were no activities relating to the acquisition and control in the capital markets,neither were there any extraordinary transactions which would require the utilization of anindependent party for the evaluation of the fairness of the transaction price.

However, should there be any cause to do so, the Company is ready to secure the services ofexperts and consultants in order to arrive at a fair price.

L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES (Updated December 2014)

Discuss any initiative undertaken or proposed to be undertaken by the company.

EDC maintains to develop strong partnerships with community stakeholders through its CorporateSocial Responsibility Program called ― Community Partnershipsǁ. The Program‘s approachprovides integrated support projects in four major areas – health promotion, educational support,livelihood/entrepreneurial development and environmental protection / enhancement – toencourage development through self-reliance in its 47 host communities.

In 2014, about 63,487 individuals and 151 groups have benefitted from EDC‘s communitydevelopment activities across the five project sites.

Initiative Beneficiary

Health Promotion EDC repaired 3 BHCs, provided

functional equipment to 25 BHCs, anddistributed medicines and medical suppliesto 33 BHCs.

Barangay health workers from 26 hostbarangays were supported with health care

The Barangay Health Centers, the healthworkers, the local leaders, families of the 47host communities across the five project sitesof EDC (Sorsogon, Leyte, Kidapawan,Bacolod, Dumaguete)

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paraphernalia to further capacitate them inproviding quality health service to thecommunity.

To complement the improved facilities andsupplies, EDC also enhanced the skills ofmore than 140 community health workersthrough refresher trainings on primaryhealth care, basic life support, diseasesprevention, responsible parenthood andemergency preparedness and response.

Support in health services, such asmedical, dental, optical, blood-letting,outreach activities, health awareness andresponsible parenthood was also extendedto 8,151 individuals of host communitiesacross the five sites.

Likewise, 3,375 school children in 9schools were beneficiaries of the nutritionfeeding program implemented in EDC‘sassisted partner schools.

To further ensure the health of thecommunity and improve sanitationpractices, EDC has also rehabilitated 7barangay water systems.

Educational Support Repaired 36 schools Trainings on various teaching skills

enhancement were conducted with 300teacher participants, financial incentivesto 52 teachers and working paraphernaliawere turned over to 330 teachers.

EDC subsidized the miscellaneous feesand school supplies of 20,807 elementaryschool students, and awarded scholarshipsto 1,160 top-performing and indigent highschool students and 30 college students,giving them an opportunity to stay inschool for another year.

A special education program, the twoLeyte Schools for Excellence (SFE), fullysubsidized the elementary education of825 elementary students.

Through EDC‘s investment in the SFE‘shardware and software components, theschools have continued to maintain anincrease in enrolment, attendance,retention, participation and achievementrates. There were also improvements in theNational Achievement Test results and inthe awards received by both schools.

Providing equal access to quality

Beneficiaries of EDC’s Educational Supportactivities are the families and students of the47 host communities across the five projectsites of EDC (Sorsogon, Leyte, Kidapawan,Bacolod, Dumaguete)

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education and gainful employment, EDCcontinues to implement the CollegeAdmission Review and Readiness(CAREERS) Project. In 2013, 21CAREERS summer class reviewees havequalified in the University of thePhilippines College Entrance Test(UPCAT). There are currently 62 studentsin the different UP campuses who benefitfrom the Project‘s monthly monitoring,mentoring and financial assistance. Also in2014, a second batch of 179 studentsunderwent a 20-day review class toprepare for entrance tests of premiumuniversities, such as UP. The CAREERSProject also facilitated their UPCATapplications last year.

Creating gainful employmentopportunities for trade school students isalso a part of the CSR education program.In its fifth year, the Kananga-EDCInstitute of Technology (KEITECH) hasproduced 529 trainees who have allsuccessfully passed the qualificationassessment for National Certifications.Aside from technical skills, the trainingcenter takes pride in its values formationprogram. Tech-voc experts and thetrainees‘ parents have observed significantpositive behavioral changes in the trainees.

After typhoon Yolanda struck Leyte,EDC, through KEITECH, committed to

the Office of the Presidential Assistant forRehabilitation and Recovery (OPARR) itsassistance in the Leyte rebuilding effortsby offering extension service training (oncarpentry, plumbing and electrical courses)for 1,080 residents of 16 towns includingKananga, Ormoc City and Leyte DistrictII from April 2014 to June 2016. As ofDecember 31, 2014, 285 residents havejust completed their KEITECH training,and 186 are already employed in variousconstruction industries working on therebuilding efforts.

EDC supports the youth in thecommunities also through career guidanceorientations that were conducted last yearwith 980 graduating high school studentsacross EDC partner schools.

The Special Program for the Employmentof Students (SPES), Kasanayan saHanapbuhay (KASH) and on-the-job

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training programs also accommodated 135students.

Livelihood and Enterprise Development EDC aims to instill the spirit of enterprise

within its 43 upland communities. Tocultivate entrepreneurial skills throughincome-generating projects of hostcommunities, EDC supervised livelihoodmodules that are implemented by 9 FarmerCooperatives and 89 Farmers/CommunityAssociations.

As a model of a sustainable enterprise,demo farms (sweet corn and banana) wereestablished wherein members of EDC-assisted cooperatives and associations aretrained, not only, on production, marketingand financial management, but also, on thevalue of accountability and responsibilitythrough on-the-job trainings in thedifferent aspects of the work.

EDC awarded P3.7 million worth of majorlivelihood projects that generatedemployment among community membersand provided income to the associations.

Apart from establishing systems forlivelihood development, EDC has directlyawarded P370.1 Million worth ofsmall/large -scale contracts to localfarmers federations.

Good fiscal management is observed inour Bac-Man cooperative, calledFEDBAHC, having availed a creditfacility from Land Bank of the Philippinesamounting to P38.1 million which waspaid on time.

On the aspect of capacity-building andvalues formation, EDC facilitated skillstraining for 1,979 individuals for variousincome-generating projects. In our LeyteGeothermal Project, we restored theoperations of two major livelihoodprojects, namely, poultry contract growingand vegetable project, that were destroyedby Typhoon Yolanda, through a donationreceived from Australian AID amountingto P1.5 million.

Beneficiaries across EDC’s five sites are 111farmers’ and community associations withinits 43 upland communities

Environmental Conservation, Protection,Enhancement and Advocacy From simply planting trees, EDC's

environmental stewardship has expanded

Beneficiaries of these CSR activities OnEnvironmental Conservation, Protection andEnhancement are the 47 host communities andschools and campuses across the five projectsites of EDC.

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to focus on 4 modules under the BINHIProgram. The Binhi- Tree for Life aims torehabilitate forest fragments by plantingindigenous trees that will expand thehabitats of wildlife and further protectbiodiversity. The Binhi-Tree for Foodfocuses on providing alternative livelihoodoptions for forest dwellers who depend onthe forest for a living, while the Binhi-Treefor Leisure develops ecotourism areaswithin EDC geothermal areas forenvironmental appreciation of the public.EDC’s BINHI Tree for the Future projectaims to preserve the gene pool of ourcountry’s top premium endangered trees,and has rescued and secured a total of 88endangered tree species.

In 2014 alone, EDC planted total of 3,509endangered trees in 15 different areasincluding 2 new regions (CAR and RegionIV-B), and achieved an average of 90%survival rate in almost all planting sitesdue to the good maintenance of our partnerschools and organizations. It is noteworthyto cite that some of these planted mothertrees in schools have started early to bearfruit and produce seeds that will furtherproliferate the rare species. There were4,957 trees of 69 species planted in thehedge garden used as a source forvegetative materials reproduction (VMR)of the rare tree species. So far, 22,270cuttings of 45 species were propagated inthis VMR facility which utilizes anautomated-mist irrigation system.

Also in 2014, the UP Biology-EDCThreatened Species Arboretum wasinaugurated to host the collection of EDC'srarest trees. The arboretum is a partnershipbetween the University of the PhilippinesDiliman Institute of Biology and EDC inincreasing awareness and fostering thepreservation of the gene pool ofendangered premium Philippine trees.

M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL (Updated December 2014)

Disclose the process followed and criteria used in assessing the annual performance of the boardand its committees, individual director, and the CEO/President.

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Process Criteria

Board of Directors Self-Assessment Evaluation.-In 2014, we simplified andmodified the questions toalign it with the OECDcorporate governanceprinciples.

In addition to questionnairesto be answered with ratingsbetween 1-5 points, there is asection where we solicitedinputs on “Recommendationson How to Enhance BoardPerformance” where aqualitative assessment ismade, together withsuggestions from theMembers of the Board. Thissection has been part of theassessment since 2011.

Criteria for the self-assessment are the following: Corporate governance

principles of fairness,accountability andtransparency

Leadership and businessexpertise, focus andstrategy

Recognition of theshareholders' rights

Board Committees Members of the committeesassessed the Committee’seffectiveness in carrying outits assigned role according toits charter.

2013 is the year the BoardCommittee Evaluation wasincorporated in the CGAssessment. In 2014, wesimplified and modified thequestions to align it with theOECD corporate governanceprinciples. There is also asection where we solicited"Recommendations on howto improve BoardCommittee's Performance" toreflect the qualitativeevaluation of the BoardCommittee.

Evaluation is based on thecommittees’ effectiveness incarrying out its mandate,their adherence to protocols,their focus to achievecompany goals and theexercise of their collectivejudgment about importantmatters.

For the Audit andGovernance Committee, thesame undergoes a round ofself-assessment

Evaluation/Assessment isBased on the SECMemorandum Circular No. 4,series of 2012 on the conductof a performance assessmentof Audit Committees

Individual Directors Self-Assessment Evaluation

Each director will evaluatehis own individual

Criteria for the self-assessment are the following: Corporate governance

principles of fairness,

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Process Criteria

performance for the year andhow he has contributed to theeffectiveness of the Board.

2014 is the year theIndividual DirectorEvaluation was incorporatedin the CG Assessment. Thequestions were crafted toreflect observance of OECDcorporate governanceprinciples.

accountability andtransparency

Recognition of equitabletreatment of shareholdersand the roles and rightsof stakeholders

Leadership and businessknowledge and expertise,focus and strategy

Working relationshipwith the Management

Chairman The Chairman's Evaluation isdesigned to identify theChairman's strengths,including areas that should befurther developed based onopinions by the Boardparticipants.

Criteria for the self-assessment are as follows: Ability to carry out his

mandate andresponsibilities

Ability to promoteeffective participationamong the Boardmembers,

Leadership andcommunication skills interms of fosteringcollegiality of Boardmembers,

Working relationshipwith the President.

CEO/President Board Evaluation on thePresident

The directors were asked toevaluate and rate thepresident passed ongovernance-relatedquestionnaires focused onleadership, managementstyle, business acumen, etc.We also include a qualitativesection in the assessment,whereby directors were askedto give their views on thePresident on the following:1. President/COO’s major

accomplishments overthe past year, andidentify the traits/skillsthe President / COOexhibited in makingthem happen

2. the President/COO’s keygoals for the past yearand the status of

Criteria for the self-assessment are the following: Leadership Management Working relationship

with the Board Financial Management

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Process Criteria

achievement of each3. the areas where the

President/COO couldimprove personalperformance and howthose areas could bedeveloped; and

4. the President/COO’s keygoals for theorganization in theupcoming year and anoutline of how each goalwill be accomplished

President’s Self-Assessment

The same questionnaire, withminor modifications, wereused for the president’s Self-Assessment which wouldthen, be evaluated, side byside against the Board’sevaluation of hisperformance, to show howunified or disparate the viewswere, in order to makeimprovements for the future.

N. INTERNAL BREACHES AND SANCTIONS

Discuss the internal policies on sanctions imposed for any violation or breach of thecorporate governance manual involving directors, officers, management and employees

Violations Sanctions

1st Violation Subject person will be reprimanded.2nd Violation Subject person shall be suspended from

holding office; provided that the duration ofsuch suspension shall depend on the gravity ofthe violation in each case.

3rd Violation The maximum penalty of removal from officeshall be imposed.

Willful commission of a third violation Shall be a sufficient cause for Removal fromoffice

In compliance with the Securities and Exchange Commission (SEC) Memorandum No. 12, Series of2014, which requires all publicly listed companies to consolidate all the Annual CorporateGovernance Report (ACGR) updates and changes for the year, the Board reviewed this ConsolidatedChanges in the ACGR for the year 2014 and approved the same for disclosure and publication in thecompany website.