MA. CONCEPCION M. MAGDARAOG - pds.com.ph€¦ · One Corporate Centre Julia Vargas cor. Meralco Ave., Ortigas Center, Pasig City (Company’s Address) (632) 755-2332 (Telephone Number)

38th

Floor, One Corporate Centre Julia Vargas corner Meralco Avenue Ortigas Center, Pasig 1605 Tel: +63 (2) 667-7332 / +63(2) 755-2332 Fax: +63 (2) 982-2141

May 14, 2012

MA. CONCEPCION M. MAGDARAOG

Market Regulatory Services Group

Philippine Dealing & Exchange Corp.

37/F, Tower 1, The Enterprise Center

6766 Ayala Ave. cor. Paseo de Roxas

Makati City

Dear Ms. Magdaraog:

In compliance with the disclosure requirements of the PSE, we submit the attached

Energy Development Corporation (Consolidated) Quarterly Report for the period ended

March 31, 2012 (SEC Form 17-Q)

SEC Form 17Q – 1Q 2012

SEC Number 66381

File Number _____

ENERGY DEVELOPMENT CORPORATION

(Company’s full Name)

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

(Company’s Address)

(632) 755-2332

(Telephone Number)

March 31, 2012

(Quarter Ending)

SEC FORM 17-Q

(Form Type)

SEC Form 17Q – 1Q 2012

PART 1 FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Our unaudited consolidated financial statements for the quarter ended March 31, 2012

have been prepared in accordance with Philippine Financial Reporting Standards (PFRS)

and are filed as Annex I of this report.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD & A”) The following is a discussion and analysis of the Company’s consolidated financial

performance for the quarter ended March 31, 2012. The prime objective of this MD&A

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

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

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

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

relating to the geothermal power industry in the Philippines where we operate up to the

stated reporting period. However, our MD&A should not be considered all inclusive, as it

excludes unknown risks, uncertainties and changes that may occur in the general economic,

political and environment condition after the stated reporting date.

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

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

Pesos (PhP) unless otherwise stated.

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

Development Corporation and its subsidiaries.

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

www.energy.com.ph.

SEC Form 17Q – 1Q 2012 4

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

OVERVIEW OF OUR BUSINESS ..............................................................................................5 Principal Products or Services ........................................................................................................ 5

Percentage of sales or revenues contributed by foreign sales ......................................................... 5

Distribution methods of products or services ................................................................................. 6

Competition..................................................................................................................................... 6

Dependence on one or a few major customers and identity of any such major customers ............ 7

KEY PERFORMANCE INDICATORS ......................................................................................8

FINANCIAL HIGHLIGHTS .........................................................................................................9

RESULTS OF OPERATIONS ...................................................................................................10

Net Income ....................................................................................................................................13 CAPITAL AND LIQUIDITY RESOURCES ............................................................................14 FINANCIAL POSITION ............................................................................................................15

Horizontal and Vertical Analysis of Material Changes as of March 31, 2012 and December

31, 2011..................................................................................................................................... 15

Horizontal and Vertical Analysis of Material Changes as of March 31, 2012 and 2011. ........ 19

CASH FLOW ...............................................................................................................................24 DISCUSSION ON THE SUBSIDIARIES .................................................................................25

FG Hydro .................................................................................................................................. 25 Green Core Geothermal Inc. ..................................................................................................... 26

Bac-Man Geothermal Inc. ......................................................................................................... 27

FOREIGN EXCHANGE AND INTEREST RATE EXPOSURE ...........................................28 OTHER MATTERS ....................................................................................................................28

MAJOR STOCKHOLDERS ......................................................................................................29 BOARD OF DIRECTORS ..........................................................................................................30

OFFICERS ...................................................................................................................................30

SEC Form 17Q – 1Q 2012 5

OVERVIEW OF OUR BUSINESS

Principal Products or Services

As of March 31, 2012, the Company operates twelve geothermal steam fields in the five

geothermal service contract areas where it is principally involved in:

i. the production of geothermal steam for sale to National Power Corporation (NPC)

pursuant to Steam Sales Agreements (SSAs) and

ii. the generation and sale of electricity through Company-owned geothermal power plants

to NPC and privately-owned distribution utilities (DUs), pursuant to Power Purchase

Agreements (PPAs) and Electricity Sales Agreements (ESAs), respectively.

Starting September 3, 2010, on account of the extended waiver, the Company ceased billing to

NPC after Bacman Geothermal Inc’s (BGI) successful acquisition of the plants from NPC.

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

Company indirectly operates the 120 MW Pantabangan and 12 MW Masiway Hydroelectric

Power Plants, located in Pantabangan, Nueva Ecija Province, Central Luzon. The power plants

supply electricity into the Luzon grid to service the consumption of its customers which include

the Wholesale Electricity Spot Market (WESM), distribution utilities covered by bilateral

contract quantities (BCQ) and the National Grid Corporation of the Philippines (NGCP) for

ancillary services.

For the Company’s third business segment, Energy Development Corporation (EDC) provides

drilling services to the Lihir Gold Limited in Papua New Guinea.

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

possessing interests in geothermal energy and hydro power. For geothermal energy, its expertise

spans the entire geothermal value chain, i.e., from geothermal energy exploration and

development, reservoir engineering and management, engineering design and construction,

environmental management and energy research and development. With FG Hydro, the

Company has not only acquired expertise in hydropower operation and maintenance, but also the

capability to sell power on a merchant basis.

Percentage of sales or revenues contributed by foreign sales

The Company generated P167.6 million from the contract it entered into with Lihir Gold Limited

(LGL) in Papua, New Guinea. This represents 2.2% of the Company’s P7,704.3 million gross

revenues for the first quarter of 2012. For the fifth consecutive time, the Company’s contract

with LGL was once again renewed and extended up to December 31, 2012.

SEC Form 17Q – 1Q 2012 6

Distribution methods of products or services

The Company’s 1,866.4 GWh total sales volume comprised of 1,627.1 GWh coming from

electricity production in Leyte, Mindanao, Tongonan I and Palinpinon geothermal power plants;

148.9 GWh in Bac-Man geothermal power plants (BMGPP) and 90.4 GWh from FG Hydro’s

Pantabangan-Masiway hydro power plants. About 60.0% or 1,119.2 GWh generated by Leyte

and Mindanao was sold to NPC. The 1,627.1 GWh generated by Tongonan I, Palinpinon I and II

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

Wholesale Electricity Spot Market (WESM). BGI purchased 148.9 GWh to serve its contractual

obligations to BATELEC and Linde Philippines. Electricity production of about 90.4 GWh, by

FG Hydro’s power plants, was sold to the distribution utility clients comprised of electric

cooperatives in the province of Nueva Ecija, the WESM and NGCP for ancillary services.

The electricity generated by the Company’s geothermal power plants is transmitted to customers

i.e., distribution utilities, electric cooperatives or bulk power customers by the NGCP through its

high voltage backbone system.

FG Hydro generated 90.4 GWh of electricity as of first quarter of 2012, of which 68% or

61.1 GWh was delivered to its contracted customers and 32% or 14.8 GWh was sold to the

WESM.

Competition

The Company competes with other energy sources used for the production of power, particularly

coal, gas and oil, substantially all of which is imported.

Under the Company’s Geothermal Renewable Energy Service Contracts (GRESCs), it has long-

term exclusive rights to explore, develop, and utilize geothermal steam resources in specific

areas. Substantially all of the Company’s power capacity is sold through various offtake

agreements, such as PPAs for the supply of electricity to NPC and ESAs with DUs. Since most

these agreements provide for take-or-pay quantities, the Company is not subject to direct

competition. Furthermore, the supply of steam is location-specific, such that each power plant

can only source its fuel from a dedicated nearby steam field.

On May 5, 2010, BGI, the Company’s wholly-owned subsidiary through EDC Geothermal

Corporation, submitted the winning bid of US$28.25 million for PSALM’s auction of the 150

MW BMGPP located in the towns of Bacon, Sorsogon Province and Manito, Albay Province.

The power plants were turned over to BGI in September 2010, and are currently under

rehabilitation to restore capacity and reliability.

The only other Philippine company engaged in the production of steam is Chevron Geothermal

Philippines Holdings. Aboitiz Power Corporation, a power distribution and generation company,

successfully bid for the 747 MW Tiwi-Makban geothermal power plant. Multinationals that

currently operate in the Philippines include Korea Electric Power Corporation, Marubeni,

CalEnergy, Tokyo Electric Power Company, AES and Sumitomo.

SEC Form 17Q – 1Q 2012 7

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

Close to 43.0% of the Company’s total revenues are derived from existing long-term PPAs with

NPC.

Concessions and government share payments

The five geothermal service contract areas where the EDC’s geothermal production steam fields

are located are:

• Tongonan Geothermal Project (expiring in 2031)

• Southern Negros Geothermal Project (expiring in 2031)

• Bacon-Manito Geothermal Project (expiring in 2031)

• Mt. Apo Geothermal Project (expiring in 2042)

Northern Negros Geothermal Project (expiring in 2044)

The Company also holds service contracts for the following prospect areas:

Geothermal Resource

1. Mt Cabalian Geothermal Project (expiring by 2034)

2. Mt. Labo Geothermal Project (with a five-year pre-development period expiring in 2015,

25-year contract period expiring in 2035)

3. Mainit Geothermal Project (with a five-year pre-development period expiring in 2015,

25-year contract period expiring in 2035)

Wind Resource

1. Burgos Wind Project (WESC assigned by EDC to EDC Burgos Wind Power

Corporation)

Under DOE Certificate of Registration No. WESC 2009-09-004 (pre-development stage

expiring in 2012, 25-year contract period expiring in 2034)

2. Pagudpud Wind Project,



3. Camiguin Wind Project,



SEC Form 17Q – 1Q 2012 8

KEY PERFORMANCE INDICATORS

The top five (5) key performance indicators are set forth below:

Ratio

Mar – 12

Mar – 11

Current Ratio 1.89:1 2.44:1

Debt-to-Equity Ratio 1.63:1 1.75:1

Net Debt-to-Equity Ratio 1.21:1 1.10:1

Return on Assets (%) 2.45 2.28

Return on Equity (%) 7.48 6.67

Current Ratio – Total current assets divided by total current liabilities

This ratio is a rough indication of a company’s ability to pay its short-term obligations.

Generally, a current ratio above 1.00 is indicative of a company’s greater capability to settle

its current obligations.

Debt-to-Equity Ratio – Total interest-bearing debts divided by stockholders’ equity

This ratio expresses the relationship between capital contributed by the creditors and the

owners. The higher the ratio, the greater the risk being assumed by the creditors. A lower

ratio generally indicates greater long-term financial safety.

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

divided by stockholders’ equity

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

ratio means that the total of cash and cash equivalents exceeds interest-bearing

liabilities.

Return on Assets – Net income (annual basis) divided by total assets (average)

This ratio indicates how profitable a company is relative to its total assets. This also gives an

idea as to how efficient management is at using its assets to generate earnings.

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

This ratio reveals how much profit a company earned in comparison to the total amount of

shareholder equity found on the balance sheet. A business that has a high return on equity is

more likely to be one that is capable of internally generating cash. For the most part, the

company’s return on equity is compared with an industry average. The company is

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

SEC Form 17Q – 1Q 2012 9

OPERATING REVENUES AND EXPENSES

FINANCIAL HIGHLIGHTS

The recurring net income generated in the first quarter of 2012 increased by 126.1% or

P1,557.1 million to P2,792.2 million from the P1,235.1 million posted during the same

period in 2011. This was mainly due to P642.5 million Green Core Geothermal Inc’s

(GCGI) higher revenues from Tongonan I and Palinpinon power plants as per GCGI’s

agreed contracts that became effective in mid-2011; and FG Hydro’s P596.9 million

revenues from contingency and dispatchable reserves.

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

P2,344.5 million, up by 102.8%, as compared to the P1,155.9 billion for the first quarter

of 2011.

Net income is equivalent to 40.8% of total revenues in 2012 as compared to the 24.5%

from the same period in 2011. It increased by 115.4% or P1,686.1 million to

P3,146.9 million as of March 31, 2012 from P1,460.8 million during the same period in

2011.

Factors contributing to these were the following:

P1,738.6 million increase in sale of electricity due to fresh contribution of BGI’s

revenues, increase in GCGI’s sales and FG Hydro’s revenues from contingency and

dispatchable reserves; and

P149.4 million Foreign exchange gains due to appreciation of the peso against the US

dollar.

Net income attributable to equity holders of the parent at P2,699.3 million for the first

quarter of 2012, increased by 95.3% as compared to the P1,381.8 million during the same

period in 2011.

Cash and cash equivalents increased by 5.0% or P630.0 million to P13,123.4 million as

of March 31, 2012 from the P12,493.4 million December 31, 2011 balance. The increase

was mainly accounted for by the P798.9 million regular long-term debt servicing offset

by the P132.7 million dividend received from FG Hydro.

SEC Form 17Q – 1Q 2012 10

RESULTS OF OPERATIONS

The following table details the results of operations for EDC for the first quarter of

2012 and 2011.

INCOME STATEMENT

Horizontal Analysis of Material Changes as of March 31, 2012 and 2011

Favorable (Unfavorable) Variance

(Amounts in PHP millions) March 2012 March 2011 Amount % 2012 2011

REVENUES

Sale of electricity 7,536.8 5,798.2 1,738.6 30.0% 97.8% 97.4%

Revenue from drilling services 167.6 154.6 13.0 8.4% 2.2% 2.6%

7,704.4 5,952.8 1,751.6 29.4% 100.0% 100.0%

COST OF SALES AND SERVICES*

Cost of sales of electricity and steam (2,741.3) (2,762.7) 21.4 -0.8% -35.6% -46.4%

Cost of drilling services (95.4) (108.3) 12.9 -11.9% -1.2% -1.8%

(2,836.7) (2,871.0) 34.3 -1.2% -36.8% -48.2%

GENERAL AND ADMINISTRATIVE EXPENSES* (919.6) (888.9) (30.7) 3.5% -11.9% -14.9%

FINANCIAL INCOME (EXPENSE)

Interest income 93.9 123.9 (30.0) -24.2% 1.2% 2.1%

Interest expense (1,015.4) (1,038.9) 23.5 -2.3% -13.2% -17.5%

(921.5) (915.0) (6.5) 0.7% -12.0% -15.4%

OTHER INCOME (CHARGES)

Foreign exchange gains (losses), net 338.0 188.6 149.4 79.2% 4.4% 3.2%

Derivatives gains (losses), net - 37.6 (37.6) -100.0% 0.0% 0.6%

Miscellaneous, net* 59.3 30.7 28.6 93.2% 0.8% 0.5%

397.3 256.9 140.4 54.7% 5.2% 4.3%

INCOME BEFORE INCOME TAX 3,423.9 1,534.8 1,889.1 123.1% 44.4% 25.8%

BENEFIT FROM (PROVISION FOR) INCOME TAX

Current (187.9) (168.4) (19.5) 11.6% -2.4% -2.8%

Deferred (89.1) 94.4 (183.5) -194.4% -1.2% 1.6%

(277.0) (74.0) (203.0) 274.3% -3.6% -1.2%

NET INCOME 3,146.9 1,460.8 1,686.1 115.4% 40.8% 24.5%

Net income (loss) attributable to:

Equity holders of the Parent Company 2,699.3 1,381.8 1,317.5 95.3% 35.0% 23.2%

Non-controlling interest 447.6 79.0 368.6 466.6% 5.8% 1.3%

EBITDA 4,863.2 3,166.7 1,696.5 53.6% 63.1% 53.2%

RECURRING NET INCOME 2,792.2 1,235.1 1,557.1 126.1% 36.2% 20.7%

Recurring net income attributable to:

Equity holders of the Parent Company 2,344.5 1,155.9 1,188.6 102.8% 30.4% 19.4%

Non-controlling interest 447.7 79.2 368.5 465.3% 5.8% 1.3%

HORIZONTAL ANALYSIS VERTICAL ANALYSIS

*New presentation based on SRC Rule 68 issued by Philippine SEC last October 20, 2011 – As amended effective for audited financial statements covering periods ending December 31, 2011 and onwards, and for interim financial statements starting the first quarter of 2012, and

thereafter.

SEC Form 17Q – 1Q 2012 11

YTD March 31, 2012 vs. YTD March 31, 2011

Revenues

Total revenues for the period ended March 31, 2012 increased by 29.4% or P1,751.6 million to

P7,704.4 million from P5,952.8 million in 2011.

Sale of Electricity

Revenues from sale of electricity increased by 30.0% or P1,738.6 million to

P7,536.8 million in the first quarter of 2012 from P5,798.2 million during the same

period in 2011. The increase in revenue was primarily due to the following:

P738.9 million fresh contribution of BGI’s revenues coming from its PSAs with

BATELEC and Linde Philippines;

P642.5 million GCGI’s higher revenues from Tongonan I and Palinpinon power

plants as per agreed contracts that became effective in mid-2011; and

P596.9 million FG Hydro’s revenues from contingency and dispatchable reserves.

Revenue from Drilling Services

Revenue from drilling services increased by 8.4% or P13.0 million to P167.6 million in

the first quarter of 2012 from P154.6 million during the same period in 2011. The

favorable variance was attributed to higher dollar revenues in 2012 as there was 15 non-

revenue days reported in 2011 for the repair of Rig 11. Total dollar revenues as of

March 2012 was US$3.9 million against the US$3.5 million as of March 2011.

This was offset by lower average exchange rate by P0.952/US$1 (YTD March

2012=P42.832/US$1 vs. YTD March 2011=P43.784/US$1) due to the appreciation of the

peso against the US dollar.

Cost of Sales and Services

Cost of sales and services decreased by 1.2% or P34.3 million to P2,836.7 million in the first

quarter of 2012 from P2,871.0 million during the same period in 2011. Cost of drilling services

decreased by 11.9% or P12.9 million to P95.4 million in the first quarter of 2012 from

P108.3 million during the same period in 2011 mainly due to the repair of Rig 11 undertaken in

the first quarter of 2011. Total cost of sales of electricity and steam includes replacement power

cost amounting to P706.5 million.

Financial Income (Expenses)

Interest income decreased by 24.2% or P30.0 million to P93.9 million in the first quarter of 2012

from P123.9 million during the same period in 2011 due to lower monthly average investible

funds cushioned by higher weighted average interest rates on peso placements.

SEC Form 17Q – 1Q 2012 12

Other Income (Charges)

Other income–net increased by 54.7% or P140.4 million to P397.3 million in the first quarter of

2012 from P256.9 million during the same period in 2011.

Foreign Exchange Gains (Losses) - net

Net foreign exchange gains increased by P149.4 million, or 79.2%, to P338.0 million

from P188.6 million in 2011. The favorable variance was brought about by appreciation

of the peso against the US dollar.

The comparative foreign exchange rates against the USD were as follows:

JPY:US$ PHP:US$

December 31, 2010 81.659 43.840

March 31, 2011 82.871 43.390

December 31, 2011 77.912 43.840

March 31, 2012 82.420 42.920

Derivatives Gain (Loss) - Net

Derivative gain - net decreased by 100% from the P37.6 million balance in

March 31, 2011. The derivative gain pertained to various swap transactions for US dollar

and Japanese yen currencies entered into with various banks in February 2011, maturing

in March 2011 and April 2011.

Miscellaneous – Net

Miscellaneous income increased by 93.5% or P28.7 million to P59.4 million in the first

quarter of 2012 from P30.7 million during the same period in 2011. This was mainly

caused by P63.6 million reversal of NNGP power plant impairment.

Provision for Income Tax

Current tax expense increased by P19.5 million, or 11.6%, to P187.9 million from P168.4 million

during the same period in 2011. The unfavorable variance was on account of the following:

P31.0 million increase caused by taxable income in 2012 for the drilling operations in

Lihir, Papua, New Guinea versus taxable loss (NOLCO) in 2011; and

P43.7 million Fresh contribution of income taxes from BGI’s taxable income in 2012.

These were offset by P55.3 million lower taxable income on steam and electricity operations

mainly contributed by the absence of NNGP's revenues in 2012 coupled with higher finance cost

on new loans.

SEC Form 17Q – 1Q 2012 13

Net Income

As a result of the foregoing, the Company’s net income increased by 115.4% or P1,686.1 million

to P3,146.9 million in 2012 from P1,460.8 million in 2011.

Net income is equivalent to 40.8% of total revenues in 2012 as compared to the 24.5% in 2011.

Net income attributable to equity holders of the parent at P2,699.3 million for the first quarter of

2012, increased by 95.3% as compared to the P1,381.8 million during the same period in 2011.

SEC Form 17Q – 1Q 2012 14

CAPITAL AND LIQUIDITY RESOURCES

As of the quarter ended

(in millions of pesos)

Q1

2012

Q1

2011 YoY change

Balance Sheet Data

Total Assets …………………………… 92,151.1 95,326.7 3.3%

Total Liabilities………………………... 61,340.2 64,642.0 5.1%

Total Stockholder’s Equity …………… 30,810.9 30,684.7 0.4%

The Company’s assets as of March 31, 2012 amounted to P92,151.1 million, 3.3% higher as

compared to the P95,326.7 million level as of March 31, 2011.

SEC Form 17Q – 1Q 2012 15

FINANCIAL POSITION

Horizontal and Vertical Analysis of Material Changes as of March 31, 2012 and

December 31, 2011.

(Amounts In PHP millions) March 2012 Dec. 2011 Amount % 2012 2011

ASSETS

Current Assets

Cash and cash equivalents 13,123.4 12,493.4 630.0 5.0% 14.2% 13.9%

Trade and other receivables 3,604.8 3,411.3 193.5 5.7% 3.9% 3.8%

Available-for-sale (AFS) investments 649.8 673.9 (24.1) -3.6% 0.7% 0.7%

Parts and supplies inventories 3,244.9 3,355.8 (110.9) -3.3% 3.5% 3.7%

Other current assets 980.4 741.9 238.5 32.1% 1.1% 0.8%

Total Current Assets 21,603.3 20,676.3 927.0 4.5% 23.4% 23.0%

Noncurrent Assets

Property, plant and equipment 58,256.5 57,676.9 579.6 1.0% 63.2% 64.1%

Intangible assets 4,714.0 4,705.2 8.8 0.2% 5.1% 5.2%

Deferred tax assets 1,331.6 1,420.7 (89.1) -6.3% 1.4% 1.6%

Exploration and evaluation assets 1,505.5 1,087.1 418.4 38.5% 1.6% 1.2%

Other noncurrent assets 4,740.2 4,451.6 288.6 6.5% 5.1% 4.9%

Total Noncurrent Assets 70,547.8 69,341.5 1,206.3 1.7% 76.4% 77.0%

TOTAL ASSETS 92,151.1 90,017.8 2,133.3 2.4% 99.8% 100.0%

LIABILITIES AND EQUITY

LIABILITIES

Current Liabilities

Trade and other payables 8,710.1 6,704.1 2,006.0 29.9% 9.5% 7.4%

Income tax payable 206.7 18.7 188.0 1005.3% 0.2% 0.0%

Due to related parties 43.5 60.1 (16.6) -27.6% 0.0% 0.1%

Current portion of:

Long-term debts 2,229.2 2,249.5 (20.3) -0.9% 2.4% 2.5%

Royalty fee payable 217.3 287.6 (70.3) -24.4% 0.2% 0.3%

Total Current Liabilities 11,406.8 9,320.0 2,086.8 22.4% 12.3% 10.4%

Noncurrent Liabilities

Long-term debts - net of current portion 48,065.1 49,240.1 (1,175.0) -2.4% 52.2% 54.7%

Net retirement and other post-employment

benefits 1,144.5 1,054.2 90.3 8.6% 1.2% 1.2%

Provisions and other long-term liabilities 723.8 756.8 (33.0) -4.4% 0.8% 0.9%

Total Noncurrent Liabilities 49,933.4 51,051.1 (1,117.7) -2.2% 54.2% 56.8%

EQUITY

Equity Attributable to Equity Holders of the Parent

Preferred stock 93.8 93.8 - 0.0% 0.1% 0.1%

Common stock 18,750.0 18,750.0 - 0.0% 20.3% 20.8%

Common stock in employee trust account (372.3) (372.3) - 0.0% -0.3% -0.4%

Additional paid-in capital 6,267.0 6,267.0 - 0.0% 6.8% 7.0%

Equity reserve (3,706.4) (3,706.4) - 0.0% -3.9% -4.1%

Net accumulated unrealized gain on AFS

investments 80.1 91.8 (11.7) -12.7% 0.1% 0.1%

Retained earnings 7,121.5 6,304.7 816.8 13.0% 7.7% 7.0%

Cumulative translation adjustment 0.6 0.6 - 0.0% 0.0% 0.0%

28,234.3 27,429.2 805.1 2.9% 30.7% 30.4%

Non-controlling interest 2,576.6 2,217.5 359.1 16.2% 2.8% 2.5%

Total Equity 30,810.9 29,646.7 1,164.2 3.9% 33.5% 32.8%

TOTAL LIABILITIES AND EQUITY 92,151.1 90,017.8 2,133.3 2.4% 100.0% 100.0%

HORIZONTAL

ANALYSIS

VERTICAL

ANALYSIS

Increase (Decrease)

SEC Form 17Q – 1Q 2012 16

Assets

Cash and Cash Equivalents

The 5.0% or P630.0 million increase to P13,123.4 million as of March 31, 2012 from the

P12,493.4 million December 31, 2011 balance was mainly due to P798.9 million regular

long-term debt servicing offset by the P132.7 million dividend received from FG Hydro.

Trade and Other Receivables

Trade and other receivables increased by 5.7% or P193.5 million to P3,604.8 million as of

March 31, 2012 from the P3,411.3 million balance as of December 31, 2011 mainly due to

BGI revenues coming from BATELEC and Linde.

Other Current Assets

This account increased by 32.1% or P238.5 million to P980.4 million as of March 31, 2012

from the P741.9 million balance in December 2011 primarily due to the P118.6 million

increase in withholding tax certificates and P97.3 million increase in prepaid expenses.

Property, plant and equipment

This account increased by 1.0% or P579.6 million to P58,256.5 million as of March 31, 2012

from the balance of P57,676.9 million as of December 31, 2011. Testing and commissioning

revenues generated by Bac-man Unit 2 for the period was netted off in this account as

required by PAS 16.

Deferred Tax Assets

This account decreased by 6.3% or P89.1 million to P1,331.6 million as of

March 31, 2012 from the P1,420.7 million balance as of December 31, 2011 mainly due to

the lower recognition of deferred tax assets on unrealized forex gains on translation of long-

term foreign loans and GCGI’s application of NOLCO to its taxable income for the period.

Exploration and Evaluation Assets


from the balance of P1,087.1 million as of December 31, 2011 mainly due to the

expenditures for the exploration activities in Bacman Rangas/Kayabon and Tanawon areas.

Other Noncurrent Assets


from the P4,451.6 million balance as of December 31. 2011 mainly due to the increase in

Input VAT.

SEC Form 17Q – 1Q 2012 17

Liabilities

Trade and other payables

This account increased by 29.9% or P2,006.0 million to P8,710.1 million as of

March 31, 2012 from the P6,704.1 million balance as of December 31. 2011 due to the

P1,882.5 million accrual of cash dividend declared on March 13, 2012.

Income Tax payable

This account increased by 1005.3% or P188.0 million, to P206.7 million as of

March 31, 2012 from the P18.7 million balance as of December 31, 2011 arising from the

Parent Company’s taxable income for the period and the testing and commissioning revenues

generated by Bac-man Unit 2 for the period.

Due to related parties

This account decreased by 27.6% or P16.6 million to P43.5 million as of March 31, 2012

from the P60.1 million balance as of December 31, 2011 mainly due to partial settlement of

liabilities by the Parent Company.

Royalty fee payable - current portion

Royalty fee payable decreased by 24.4% or P70.3 million, to P217.3 million as of

March 31, 2012 from the P287.6 million balance at year-end 2011 was due to the payment of

royalty fee for the period.

Net retirement and other post-employment benefits


from the P1,054.2 million balance as of December 31, 2011 due to the accrual of retirement

benefits for the period.

Net accumulated unrealized gain on AFS investments


from P91.8 million as of December 31, 2011 mainly due to the decrease in fair value of the

investments for the period.

Retained Earnings

Retained Earnings increased by 13.0% or P816.8 million, to P7,121.5 million as of

March 31, 2012 from P6,304.7 million as of December 31, 2011 mainly due to the

P2,699.3 million net income for the first quarter of 2012 offset by the P1,882.5 million

payment of cash dividend.

SEC Form 17Q – 1Q 2012 18

Non-controlling Interest

Non-controlling Interest increased by 16.2% or P359.1 million to P2,576.6 million as of

March 31, 2012 from P2,217.5 million balance as of December 31, 2011 mainly due to the

P447.6 million net income for the first quarter of 2012 offset by the P88.5 million payment of

cash dividend.

SEC Form 17Q – 1Q 2012 19

Horizontal and Vertical Analysis of Material Changes as of March 31, 2012 and 2011.

BALANCE SHEET

Analysis of Material Changes as of March 31, 2012 and 2011

(Amounts In PHP millions) March 2012 March 2011 Amount % 2012 2011

ASSETS

Current Assets

Cash and cash equivalents 13,123.4 19,814.6 (6,691.2) -33.8% 14.2% 20.8%

Trade and other receivables 3,604.8 2,922.3 682.5 23.4% 3.9% 3.1%

Available-for-sale (AFS) investments 649.8 690.3 (40.5) -5.9% 0.7% 0.7%

Parts and supplies inventories 3,244.9 2,717.2 527.7 19.4% 3.5% 2.9%

Derivative assets - 11.8 (11.8) -100.0% 0.0% 0.0%

Other current assets 980.4 853.6 126.8 14.9% 1.1% 0.9%

Total Current Assets 21,603.3 27,009.8 (5,406.5) -20.0% 23.4% 28.3%

Noncurrent Assets

Property, plant and equipment 58,256.5 58,084.8 171.7 0.3% 63.2% 60.9%

Intangible assets 4,714.0 4,519.0 195.0 4.3% 5.1% 4.7%

Deferred tax assets 1,331.6 987.9 343.7 34.8% 1.4% 1.0%

Exploration and evaluation assets 1,505.5 1,201.5 304.0 25.3% 1.6% 1.3%

Other noncurrent assets 4,740.2 3,523.8 1,216.4 34.5% 5.1% 3.7%

Total Noncurrent Assets 70,547.8 68,317.0 2,230.8 3.3% 76.4% 71.7%

TOTAL ASSETS 92,151.1 95,326.8 (3,175.7) -3.3% 99.8% 100.0%


LIABILITIES

Current Liabilities

Loan payable - 90.0 (90.0) -100.0% 0.0% 0.1%

Trade and other payables 8,710.1 8,232.5 477.6 5.8% 9.5% 8.6%

Income tax payable 206.7 239.7 (33.0) -13.8% 0.2% 0.3%

Due to related parties 43.5 251.4 (207.9) -82.7% 0.0% 0.3%

Derivative liabilities - 3.6 (3.6) -100.0% 0.0% 0.0%

Current portion of:

Long-term debts 2,229.2 1,970.0 259.2 13.2% 2.4% 2.1%

Royalty fee payable 217.3 277.5 (60.2) -21.7% 0.2% 0.3%

Total Current Liabilities 11,406.8 11,064.7 342.1 3.1% 12.3% 11.6%


Long-term debts - net of current portion 48,065.1 51,487.2 (3,422.1) -6.6% 52.2% 54.0%

Royalty fee payable - net of current portion - 217.8 (217.8) -100.0% 0.0% 0.2%

Net retirement and other post-employment benefits 1,144.5 1,298.6 (154.1) -11.9% 1.2% 1.4%

Provisions and other long-term liabilities 723.8 573.8 150.0 26.1% 0.8% 0.7%

Total Noncurrent Liabilities 49,933.4 53,577.4 (3,644.0) -6.8% 54.2% 56.3%

EQUITY

Equity Attributable to Equity Holders of the Parent

Preferred stock 93.8 93.8 - 0.0% 0.1% 0.1%

Common stock 18,750.0 18,750.0 - 0.0% 20.3% 19.7%

Common stock in employee trust account (372.3) (377.5) 5.2 -1.4% -0.3% -0.4%

Additional paid-in capital 6,267.0 6,266.3 0.7 0.0% 6.8% 6.6%

Equity reserve (3,706.4) (3,706.4) - 0.0% -3.9% -3.9%

Net accumulated unrealized gain on AFS investments 80.1 110.3 (30.2) -27.4% 0.1% 0.1%

Retained earnings 7,121.5 7,898.8 (777.3) -9.8% 7.7% 8.3%

Cumulative translation adjustment 0.6 1.4 (0.8) -57.1% 0.0% 0.0%

28,234.3 29,036.7 (802.4) -2.8% 30.7% 30.4%

Non-controlling Interest 2,576.6 1,648.0 928.6 56.3% 2.8% 1.7%

Total Equity 30,810.9 30,684.7 126.2 0.4% 33.5% 32.1%

TOTAL LIABILITIES AND EQUITY 92,151.1 95,326.8 (3,175.7) -3.3% 100.0% 100.0%

HORIZONTAL

ANALYSIS

VERTICAL

ANALYSIS

Increase

SEC Form 17Q – 1Q 2012 20

Assets


This account decreased by 33.8% or P6,691.2 million to P13,123.4 million as of

March 31, 2012 from the P19,814.6 million balance as of March 31, 2011 primarily due to

the following:

P5,215.2 million pre payment of OECF 9th, 18th, 19th and 21st Yen and regular debt

servicing in 2011;

P798.9 million settlement of regular long-term debt servicing in 2012;

P3,007.5 million cash dividends paid by the parent company in 2011; and

P175.0 million payment of short-term borrowings.

These were offset by the P3,262.5 million proceeds from IFC 2.

Trade and Other Receivables


from the P2,922.3 million balance as of March 31, 2011. The increase is mainly due to the

BGI revenues coming from BATELEC and Linde and GCGI’s higher revenues.

Available-For-Sale (AFS) Investments

AFS Investments decreased by 5.9% or P40.5 million to P649.8 million as of March 31, 2012

from the P690.3 million balance as of March 31, 2011 due to foreign exchange losses

sustained in translating the placements to the continued appreciation of the Peso versus the

US Dollar exchange rate.

Parts and Supplies Inventories

This account increased by 19.4% or P527.7 million to P3,244.9 million balance as of

March 31, 2012 from the P2,717.2 million balance for the same period in 2011 due to the

increase , net of withdrawals, on various materials and supplies for drilling, maintenance and

rehabilitation activities in 2011.

Derivative assets

The derivative assets P11.8 million balance as of March 31, 2011 pertains to the fair value of

the outstanding foreign currency forward and foreign exchange swap contracts.

Other Current Assets

Other current assets increased by 14.9% or P126.8 million to P980.4 million as of

March 31, 2012 from the P853.6 million posted for the same period in 2011 is attributable to

the P248.7 million increase in prepaid expenses offset by P115.6 million decrease in

withholding taxes.

SEC Form 17Q – 1Q 2012 21

Deferred Tax Assets


from the balance of P987.9 million as of March 31, 2011 mainly due to the recognition of

deferred tax assets on the provision for full impairment of NNGP’s assets amounting to

P4,998.6 million and unrealized forex loss on dollar denominated loans in 2011.

Exploration and Evaluation Assets


from the balance of P1,201.5 million as of March 31, 2011 primarily due to the expenses of

Mindanao, Bacman Rangas/Kayabon, and Tanawon areas.

Other Noncurrent Assets

This account increased by 34.5% or P1,216.4 million, to P4,740.2 million as of

March 31, 2012 from the P3,523.8 million as of March 31, 2011 mainly due to the

P934.4 million increase in input VAT and P579.8 million increase long term receivables.

These were offset by the increase in allowance for doubtful accounts of P298.3 million.

Liabilities

Loan payable

This account decreased by 100.0%, or P90.0 million as of March 31, 2012 due to the

settlement of the loan.

Trade and other payables

This account increased by 5.8%, or P477.6 million, to P8,710.1 million as of March 31, 2012

from the balance of P8,232.5 million in the same period of 2011 mainly due to the

P654.7 million increase in accounts payable and offset by the P232.2 million decrease in

accrued interest and guarantee fee and other payables.

Income tax payable

Income tax payable decreased by 13.8% or P33.0 million to P206.7 million as of

March 31, 2012 from P239.7 million for the same period in 2011 mainly due to the

application of withholding tax certificates in the payment of income tax due for the 4th qtr of

2010 and 1st qtr. to 3rd qtr of 2011.

SEC Form 17Q – 1Q 2012 22

Due to related parties


from the balance of P251.4 million as of March 31, 2011 primarily due to the settlement of

advances from First Gen of P235.0 million offset by increase in consultancy fee of

P28.6 million.

Derivative liabilities

The P3.6 million balance as of March 31, 2011 pertains to the fair value of the outstanding

foreign currency forward and foreign exchange swap contracts with various counterparties.

Long-term debts (current portion)


from the balance of P1,970.0 million as of March 31, 2011 mainly due to the P687.5 million

reclassification of the current portion of maturing IFC, FRCN and PNB debt obligation in

2012. These were offset by the P402.6 million settlement maturing debt obligation and

prepayment of current portion of OECF 9th, 18th, 19th and 21st Yen loan in 2011.

Royalty fee payable (current portion )

This account decreased by 21.7 % or P60.2 million to P217.3 million as of March 31, 2012

from the balance of P277.5 million as of March 31, 2011 mainly due to P80.3 million

payment to DOE and LGU’s offset by P20.1 million accretion on Day 1 gain recognized

from April 1, 2011 to March 31, 2012.

Long-term debt (net of current portion)

Long-term debts, consisting of JPY, US$ and PHP loans, decreased by 6.6% or

P3,422.1 million to P48,065.1 million as of March 31, 2012 from P51,487.2 million as of

March 31, 2011 due to the following:

Settlement of P4,260.6 million OECF 21st Yen loan and P128.0 million OECF 8th, 9th,

18th and 19th Yen loan,

P1,532.2 million and P496.8 million reclassification to current portion of obligation

due in 2012 of FRCN and IFC Loan, respectively.

These were offset by P3,262.5 million proceeds from of IFC loan 2.

Royalty fee payable (net of current portion )

This account decreased by 100.0% or P217.8 million as of March 31, 2012 primarily due to

the reclassification to current portion of outstanding royalty fees payable to 2012.

SEC Form 17Q – 1Q 2012 23

Net retirement and other post-retirement benefits

This account decreased by 11.9% or P154.1 million to P1,144.5 million as of March 31, 2012

from P1,298.6 million balance as of March 31, 2011 mainly due to contribution to the fund in

2011 offset by the accrual of retirement benefits for the period.

Provisions and other long-term liabilities

This account increased by 26.1% or P150.0 million to P723.8 million as of March 31, 2012

from P573.8 million balance as of March 31, 2011 mainly due to the P64.4 million asset

retirement obligation recognized in 2011, P28.7 million accretion for the period and

P54.1 million accrual of sick leave and vacation leave for the period net of payment of the

10 days monetized vacation leave.

Net accumulated unrealized gain on AFS investments


from P110.3 million as of March 31, 2011 mainly due to the decrease in fair value of the

investments for the period.

Retained Earnings

Retained Earnings decreased by 9.8% or P777.3 million to P7,121.5 million as of

March 31, 2012 from P7,898.8 million balance as of March 31, 2011 mainly due to the net

loss of P1,548.9 million posted from March 31, 2011 to December 31, 2011 and

P1,882.5 million payment of cash dividend for the year offset by P2,699.3 million net income

for the first quarter of 2012.

Non-controlling Interest

Non-controlling Interest increased by 56.3% or P928.6 million to P2,576.6 million as of

March 31, 2012 from P1,648.0 million balance as of March 31, 2011 mainly due to the net

income of P703.1 million posted from March 31, 2011 to December 31, 2011 and

P447.6 million net income for the first quarter of 2012. This was offset by P88.5 million

payment of cash dividend this year.

SEC Form 17Q – 1Q 2012 24

CASH FLOW

March 31, 2012 vs. March 31, 2011

Net cash flows from operating activities increased by 1.0% or P35.8 million to P3,593.6 million

in the first quarter of 2012 from P3,557.9 million during the same period in 2011 mainly due to

the P704.4 million improved cash generation from operations due to increased revenues and

P80.0 million decrease in retirement and other post-retirement benefits paid. These were offset

by the P715.1 million increase in interest and financing charges paid and P33.5 million increase

in withholding tax certificates.

Net cash flows used in investing activities decreased by 10.4% or P236.9 million to

P2,042.0 million in March 2012 as compared to the P2,278.9 million during the same period in

2011 primarily due to the decrease in acquisition of property, plant and equipment by

P689.2 million. This was offset by the P416.5 million increase in exploration and evaluation

assets.

The movement of P13,536.1 million, to P927.9 million on net cash flows used in financing

activities in March 2012 from the P12,608.2 million net cash flows from financing activities

during the same period in 2011 was mainly due to the P13,350 million proceeds from the

US$300M notes in 2011.

SEC Form 17Q – 1Q 2012 25

DISCUSSION ON THE SUBSIDIARIES

FG Hydro

(Amounts in PHP millions)

As of and for the periods ended

March 31

2012 2011

Operating revenues 1,411.1 517.2

Operating expenses 198.5 225.4

Other expenses – net 93.6 100.7

Income before tax 1,119.0 191.1

Provision for (benefit from) income tax - -

Net income 1,119.0 191.1

Total current assets 3,414.0 1,822.2

Total noncurrent assets 7,156.1 7,364.3

Total current liabilities 650.4 491.9

Total noncurrent liabilities 4,219.2 4,574.6

Total equity 5,700.5 4,120.0

FG Hydro generated revenues of P1,411.1 million for the period ended March 31, 2012, almost thrice the

revenues of P517.2 million for the same period in 2011. The favorable variance was mainly on account of

revenues earned from sale of electricity, as ancillary services to National Grid Corporation of the

Philippines (“NGCP”), amounting to P596.9 million, and the temporary assumption of BGI’s Power

Supply Agreements (PSAs) with Batangas Electric Cooperative II (“BATELEC II”) 48MW and Linde

Philippines 6MW amounting to P288.7 million. There were no revenues from the said entities for the

same period in 2011.

The favorable variance in operating expenses is mainly on account of lower depreciation, operations and

maintenance expenses and taxes and licenses in 2012. Higher interest income from short-term deposits of

P16.8 million in 2012 versus P9.1 million in 2011 further contributed to the favorable variance. Overall,

FG Hydro posted a net income of P1,119.0 million for the period ended March 31, 2012, P927.9 million

or 485.6% higher than the P191.1 million reported income for the same period in 2011.

Total assets as of March 31, 2012 stood at P10,570.1 million, P1,383.6 million or 15.1% higher than the

2011 level of P9,186.5 million. The favorable variance was mainly due to higher cash and accounts

receivable trade balances in 2012. As compared with the same period in 2011, there were no electricity

sales for ancillary services yet.

As of March 31, 2012, total liabilities stood at P4,869.6 million, P196.9 million or 3.9% lower than the

2011 level of P5,066.5 million. The decrease in liabilities was mainly due to the continuous pay-out of the

scheduled semi-annual loan repayments.

Total equity as of March 31, 2012 of P5,700.5 million is P1,580.5 million or 38.4% higher compared to

the March 31, 2011 level of P4,120.0 million.

SEC Form 17Q – 1Q 2012 26

Green Core Geothermal Inc.



March 31 2012 2011

Revenues 2,365.4 1,814.7 Operating expenses* (1,901.8) (2,072.5) Other income (charges) - net 23.9 (107.9) Income (loss) before income tax 487.5 (365.7) Benefit from (provision for) income tax –

deferred (48.6) 36.6

Net income (loss) 438.9 (329.1)

Total Current Assets 1,729.2 1,249.4 Total Non-Current Assets 9,963.7 9,727.0 Total Liabilities 2,442.0 7,593.6 Total Equity 9,250.9 3,382.8

*Includes Cost of Sale of Electricity and General and Administrative Expenses

GCGI’s revenues increased by 30.3% or P550.7 million, to P2,365.4 million for the three-month period

ended March 31, 2012 from P1,814.7 million for the same period in 2011 due to higher revenues from the

sale of electricity as per agreed contracts that became effective in mid-2011.

Operating expenses decreased by 8.2% or P170.7 million, to P1,901.8 million in 2012 from

P2,072.5 million in 2011 due to lower cost of steam by an average of P0.19/kWh (P88.0 million). The

decrease is also due to lower operations & maintenance of P84.2 million and purchased services &

utilities of P28.8 million offset by higher general & administrative expenses of P29.8 million.

This period’s other income of P23.9 million consisted mainly of foreign exchange gains and the absence

in 2012 of interest expense.

Provision for income tax - deferred of P48.6 million in 2012 was a reversal of P36.6 million benefit from

income tax - deferred in 2011.

Total current assets increased by 38.4% or P479.8 million, to P1,729.2 million in 2012 from

P1,249.4 million in 2011 largely due to higher trade & other receivables of P301.1 million and other

current assets of P175.5 million.

Total noncurrent assets increased by 2.4% or P236.7 million, to P9,963.7 million in 2012 from

P9,727.0 million in 2011 due to higher property, plant and equipment of P190.8 million and other

noncurrent assets of P91.5 million reduced by lower deferred tax asset of P45.6 million.

Total liabilities decreased by 67.8% or P5,151.6 million, to P2,442.0 million in 2012 from

P7,593.6 million in 2011 while total equity increased by 173.5% or P5,868.1 million, to P9,250.9 million

in 2012 from P3,382.8 million in 2011 due mainly to the conversion of the P5,452.5 million advances

from EDC to equity coupled with the net income for the period April 1, 2011 to March 31, 2012

amoutning to P415.6 million.

SEC Form 17Q – 1Q 2012 27

Bac-Man Geothermal Inc.



March 2012

March 2011

(Restated)

Revenues 738,935.3 –

Expenses (716,913.3) (2,135.8)

Other income 834.5 691.8

Operating income (loss) 22,856.5 (1,444.0)

Benefit from (provision for) income tax (36,208.1) 145.7

Net loss (13,351.6) (1,298.3)

Total Current Assets 484.9 134.4

Total Non-Current Assets 3,449.5 1,733.2

Total Current Liabilities 821.5 1,901.1

Total Equity 3,112.9 (33.5) *BGI was incorporated in the Philippines on April 7, 2010.

As of March 31, 2012, BGI has yet to start commercial operations.

Revenues earned result from electricity sales for the period pursuant to the signed PSAs with BATELEC

and Linde Philippines effective December 26, 2011.

The increase in expenses pertains primarily due to the cost of replacement power amounting to

P706.5 million.

The increase in current assets by 260.7% or P=350.5 million is due mainly to the increase in trade and

other receivables amounting to P=360.7 million partially offset by issuances of parts and supplies

inventories amounting to P=17.9 million.

Non-current asset increased by 99.0% or P=1,716.2 million resulting mainly from capitalized costs for the

on-going rehabilitation of the power plants of P=1,529.0 million. Testing and commissioning revenues

generated by Bac-man Unit 2 for the period was netted off in this account as required by PAS 16.

The decrease in liabilities and corresponding increase in equity results from the conversion of payables to

related parties into equity as capital infusion in December 2011.

SEC Form 17Q – 1Q 2012 28

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

As of March 31, 2012, the company has unserved purchase orders and awarded contracts for the

purchase of various capital goods in the total amount of P155.7 million.

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

Company’s liquidity.

Legal proceedings

There are no other material changes in the contingent liabilities since the last annual balance

sheet date.

FOREIGN EXCHANGE AND INTEREST RATE EXPOSURE

The Company has P=20,126.42 million in long-term US dollar denominated loans as of

March 31, 2012 which is 44.01% of the total company’s long-term loans.

OTHER MATTERS

CASH DIVIDEND

On March 13 2012, the BOD of the Parent Company approved the following cash dividends

in favor of all stockholders of record as of March 28, 2012 and payable on or before

April 24, 2012:

cash dividend of P=0.0008 per share on the preferred shares

regular cash dividend of P=0.10 per share on the common shares.

SEC Form 17Q – 1Q 2012 29

MAJOR STOCKHOLDERS

As of March 31, 2012, the total number of stockholders was 702 and price was P6.00 per share.

The public float level was at 52.79% (or 9,897,713,964 common shares).

List of Top 20 Stockholders as of March 31, 2012

Rank Name Nationality

Number of Shares

% Preferred Common Total

1

Red Vulcan Holdings

Corporation Filipino 9,375,000,000 7,500,000,000 16,875,000,000 60.00

2 PCD Nominee Corporation Foreign - 6,736,468,952 6,736,468,952 23.95

3 PCD Nominee Corporation Filipino - 3,147,041,711 3,147,041,711 11.19

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

5

Northern Terracotta Power

Corporation Filipino - 324,522,900 324,522,900 1.15

6 Federico R. Lopez Filipino - 6,092,501 6,092,501 0.02

7 Ernesto B. Rufino, Jr. Filipino - 5,694,700 5,694,700 0.02

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

9 Benjamin K. Liboro Filipino - 3,525,500 3,525,500 0.01

10 Arthur A. De Guia Filipino - 2,200,000 2,200,000 0.01

11 CROSLO Holdings Corporation Filipino - 1,600,000 1,600,000 0.01

12 Hi-Light Corporation Filipino - 1,577,500 1,577,500 0.01

13 Mapazon Corporation Filipino - 1,470,000 1,470,000 0.01

14 Ronaldo C. Sabella Filipino - 1,100,000 1,100,000 0.00

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

16 Raul I. Macatangay Filipino - 725,000 725,000 0.00

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

18 Rodolfo R. Waga, Jr. Filipino - 658,750 658,750 0.00

19 Emelita D. Sabella Filipino - 521,000 521,000 0.00

20

Rodolfo R. Waga, Jr. &/or Grace

B. Waga Filipino - 501,200 501,200 0.00

SEC Form 17Q – 1Q 2012 30

BOARD OF DIRECTORS

As of March 31, 2012, the members of Board of Directors of EDC are as follows:

Oscar M. Lopez Chairman Emeritus

Federico R. Lopez Chairman and Chief Executive Officer

Peter D. Garrucho, Jr. Director

Elpidio L. Ibañez Director

Ernesto B. Pantangco Director and Executive Vice President

Francis Giles B. Puno Director

Richard B. Tantoco Director, President and Chief Operating Officer

Jonathan C. Russell Director

Edgar O. Chua Independent Director

Francis Ed. Lim Independent Director

Arturo T. Valdez Independent Director

OFFICERS

As of March 31, 2012, the officers of EDC are as follows:

Name Position

Federico R. Lopez Chief Executive Officer

Richard B. Tantoco President and Chief Operating Officer

Ernesto B. Pantangco Executive Vice President

Agnes C. de Jesus Senior Vice President for Environment and

External Relations, and Compliance Officer

Nestor H. Vasay Senior Vice President, Chief Financial

Officer and Treasurer

Marcelino M. Tongco Senior Vice President

Manuel S. Ogena Senior Vice President for Technical Services

Dominic M. Camu Senior Vice President for Power Generation

Danilo C. Catigtig Senior Vice President for Strategic Initiatives

Office

Ernesto G. Espinosa Vice President for Human Resource

Management

Vincent Martin C. Villegas Vice President for Business Development

Erwin O. Avante Vice President for Corporate Finance

Rico G. Bersamin Vice President for Steam Field Operations

Ferdinand B. Poblete Vice President, Chief Information Officer

Ariel Arman V. Lapus Vice President/Project Development Officer

of EDC International

Ellsworth R. Lucero Vice President - Power

Dwight A. Maxino Vice President - So. Negros Geothermal

SEC Form 17Q – 1Q 2012 31

Name Position

Project

Manuel C. Paete Vice President - Leyte Geothermal Project

Liberato S. Virata Vice President - Bacon-Manito Geothermal

Project

Wilfredo A. Malonzo Vice President for Supply Chain

Management

Maribel A. Manlapaz Comptroller

Teodorico Jose R. Delfin Corporate Secretary

Ana Maria A. Katigbak-Lim Assistant Corporate Secretary

Glenn L. Tee Senior Manager, Internal Audit

Erudito S. Recio Senior Manager, Investor Relations

Annex I

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

Unaudited Interim Condensed Consolidated Financial Statements March 31, 2012 and 2011 (With Comparative Figures as of December 31, 2011 )

ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED

STATEMENTS OF FINANCIAL POSITION

MARCH 31, 2012 AND 2011

(With Comparative Figures as of December 31, 2011)

March 31,

2012

(Unaudited)

December 31,

2011

(Audited)

March 31,

2011

(Unaudited)

ASSETS

Current Assets

Cash and cash equivalents (Notes 5 and 32) P=13,123,430,591 P=12,493,406,963 P=19,814,618,839

Trade and other receivables (Notes 6 and 32) 3,604,793,410 3,411,309,528 2,922,268,849

Available-for-sale (AFS) investments (Note 32) 649,830,260 673,853,680 690,344,012

Parts and supplies inventories (Note 7) 3,244,932,240 3,355,767,653 2,641,149,059

Derivative assets (Note 32) – – 11,789,416

Due from related parties (Notes 23 and 32) – 7,812 – Other current assets 980,383,906 741,911,257 853,618,425

Total Current Assets 21,603,370,407 20,676,256,893 26,933,788,600

Noncurrent Assets

Property, plant and equipment – net (Note 8) 58,256,469,805 57,676,929,006 58,160,864,628

Intangible assets (Note 9) 4,713,967,976 4,705,245,708 4,518,994,137

Deferred tax assets – net (Note 22) 1,331,550,748 1,420,656,657 987,867,438

Exploration and evaluation assets 1,505,532,721 1,087,079,413 1,201,456,358

Other noncurrent assets – net (Note 10) 4,740,200,276 4,451,649,107 3,523,767,037

Total Noncurrent Assets 70,547,721,526 69,341,559,891 68,392,949,598

TOTAL ASSETS P=92,151,091,933 P=90,017,816,784 P=95,326,738,198


Current Liabilities

Loan payable (Note 32) P=– P=– P=90,000,000

Trade and other payables (Notes 11 and 32) 8,710,058,490 6,704,075,261 8,232,463,833

Income tax payable 206,667,979 18,736,456 239,681,571

Due to related parties (Notes 23 and 32) 43,505,312 60,090,825 251,353,422

Derivative liabilities (Note 32) – – 3,641,161

Current portion of:

Long-term debts (Notes 13 and 32) 2,229,209,718 2,249,517,382 1,970,025,253

Royalty fee payable (Notes 12 and 32) 217,335,769 287,626,313 277,493,584

Total Current Liabilities 11,406,777,268 9,320,046,237 11,064,658,824

March 31,

2012

(Unaudited)

December 31,

2011

(Audited)

March 31,

2011

(Unaudited)


Long-term debts - net of current portion

(Notes 13 and 32) 48,065,147,168 49,240,054,073 51,487,181,072

Royalty fee payable - net of current

portion (Notes 12 and 32) – – 217,825,561

Net retirement and other post-

employment benefits 1,144,547,300 1,054,237,256 1,298,609,476

Provisions and other long-term

liabilities (Note 8) 723,793,331 756,877,725 573,836,850

Total Noncurrent Liabilities 49,933,487,799 51,051,169,054 53,577,452,959

Total Liabilities 61,340,265,067 60,371,215,291 64,642,111,783

Equity (Note 14)

Attributable to Equity Holders of the

Parent Company:

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

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

Common shares in employee trust

account (372,272,723) (372,272,723) (377,483,019)

Additional paid-in capital 6,266,966,828 6,266,966,828 6,266,341,978

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

Net accumulated unrealized gain on

AFS investments 80,075,239 91,758,915 110,290,794

Cumulative translation adjustment 633,539 592,534 1,370,000

Retained earnings 7,121,471,769 6,304,695,114 7,898,784,383

28,234,193,883 27,429,059,899 29,036,623,367

Non-controlling interest 2,576,632,983 2,217,541,594 1,648,003,048

Total Equity 30,810,826,866 29,646,601,493 30,684,626,415

TOTAL LIABILITIES AND

EQUITY P=92,151,091,933 P=90,017,816,784 P=95,326,738,198

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.


UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF INCOME

FOR THE PERIODS ENDED MARCH 31, 2012 AND 2011

2012 2011

REVENUES (Note 4)

Sale of electricity P=7,536,756,442 P=5,798,160,507

Revenue from drilling services 167,581,380 154,616,637

7,704,337,822 5,952,777,144

COSTS OF SALES AND SERVICES

Costs of sales of electricity and steam (Note 15) (2,741,304,687) (2,762,726,562)

Cost of drilling services (Note 16) (95,439,340) (108,323,427)

(2,836,744,027) (2,871,049,989)

GENERAL AND ADMINISTRATIVE

EXPENSES (Note 17)

(919,583,173)

(888,899,817)

FINANCIAL INCOME (EXPENSES)

Interest income (Notes 4 and 20) 93,870,182 123,917,688

Interest expense (Notes 4 and 19) (1,015,345,353) (1,038,921,265)

(921,475,171) (915,003,577)

OTHER INCOME (CHARGES) (Note 4)

Foreign exchange gains - net (Note 18) 337,953,506 188,561,127

Derivatives gain (loss) – net – 37,553,046

Miscellaneous – net 59,407,284 30,702,512

397,360,790 256,816,685

INCOME BEFORE INCOME TAX 3,423,896,241 1,534,640,446

PROVISION FOR INCOME TAX

Current (187,931,523) (168,434,061)

Deferred (89,105,910) 94,387,514

(277,037,433) (74,046,547)

NET INCOME P=3,146,858,808 P=1,460,593,899

Net income attributable to:

Equity Holders of the Parent Company P=2,699,276,655 P=1,381,680,572

Non-controlling interest 447,582,153 78,913,327

P=3,146,858,808 P=1,460,593,899

Basic/Diluted Earnings Per Share for Net

Income Attributable to Equity Holders of

the Parent Company (Note 21) P=0.144 P=0.073



UNAUDITED INTERIM CONSOLIDATED

STATEMENTS OF COMPREHENSIVE INCOME


2012 2011

Net Income P=3,146,858,808 P=1,460,593,899

Other comprehensive income

Unrealized gain (loss) on AFS investments (11,683,676) (9,428,003)

Total comprehensive income P=3,135,175,132 P=1,451,165,896

Total comprehensive income attributable to:

Equity Holders of the Parent Company P=2,687,592,979 P=1,372,252,569

Non-controlling interest 447,582,153 78,913,327

P=3,135,175,132 P=1,451,165,896



UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


Equity Attributable to Equity Holders of the Parent Company

Preferred

Stock

Common

Stock

Common

Shares in

Employee

Trust Account

Additional

Paid-in

Capital

Equity

Reserve

Net

Accumulated

Unrealized

Gain on AFS

Investments

Retained

Earnings Subtotal

Non-controlling

Interest Total Equity

Cumulative

Translation

Adjustment

Balances, December 31, 2010, as

previously reported P=93,750,000 P=18,750,000,000 (P=379,219,785) P=6,266,099,283 (P=3,706,430,769) P=119,718,797

P=1,370,000 P=9,524,603,810 P=30,669,891,336 P=1,569,089,721 P=32,238,981,057

Total comprehensive income:

Net income – – – – – – – 1,381,680,572 1,381,680,572 78,913,327 1,460,593,899

Changes in fair value of AFS investments recognized in equity

–

–

–

–

– (9,428,003)

–

– (9,428,003)

– (9,428,003)

– – – – – (9,428,003) – 1,381,680,572 1,372,252,569 78,913,327 1,451,165,896

Cash dividend (Note 28) – – – – – – – (3,007,500,000) (3,007,500,000) (3,007,500,000) Share-based payment – – 1,736,766 464,953 – – – – 2,201,719 – 2,201,719

Deferred tax effect of share-based payment – – – (222,257) – – – – (222,257) – (222,257)

Balances, March 31, 2011 P=93,750,000 P=18,750,000,000 (P=377,483,019) P=6,266,341,979 (P=3,706,430,769) P=110,290,794 P=1,370,000 P=7,898,784,382 P=29,036,623,367 P=1,648,003,048 P=30,684,626,415

Balances, December 31, 2011 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=6,304,695,114 P=27,429,059,899 P=2,217,541,594 P=29,646,601,493

Total comprehensive income:

Net income – – – – – – – 2,699,276,655 2,699,276,655 447,582,153 3,146,858,808

Changes in fair value of AFS

investments recognized in equity

–

–

–

–

– (11,683,676)

–

– (11,683,676)

– (11,683,676) Cumulative translation adjustment – – – – – – 41,005 – 41,005 – 41,005

– – – – – (11,683,676) 41,005 2,699,276,655 2,687,633,984 447,582,153 3,135,216,137

Cash dividend (Note 28) – – – – – – – (1,882,500,000) (1,882,500,000) (88,490,764) (1,970,990,764)

Balances, March 31, 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=80,075,239 P=633,539 P=7,121,471,769 P=28,234,193,883 P=2,576,632,983 P=30,810,826,866



UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS


2012 2011

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax P=3,423,896,241

P=1,534,640,446

Adjustments for:

Interest expense 1,015,345,353

1,038,921,265

Depreciation and amortization 897,498,991

906,034,567

Unrealized foreign exchange losses (gains) (439,037,300)

(179,415,157)

Interest income (93,870,182)

(123,917,688)

Provision for retirement and post-employment benefits 90,297,471

70,459,883

Recovery of impairment of property plant and

equipment (66,321,901)

–

Provision for share-based benefit cost –

2,201,719

Provision for doubtful accounts 1,003,830

Loss on retirement of property, plant and equipment (1,122,882)

207,660

Profit on storehouse items - inventory variations –

(3,926,511)

Operating income before working capital changes 4,827,689,621

3,245,206,184

Decrease (increase) in:

Trade and other receivables (144,522,954)

1,296,889,303

Parts and supplies inventories 110,835,413

(59,779,721)

Other current assets (204,971,055)

(1,669,438)

Due to related party 7,812

– Increase (decrease) in:

Trade and other payables 435,577,892

(204,340,380)

Due to related parties (57,150,511)

(19,044,294)

Royalty fee payable (74,987,732) (69,140,651)

Cash generated from operations 4,892,478,486

4,188,121,003

Interest and financing charges paid (1,265,347,644)

(550,254,169)

Income tax paid (33,501,594)

– Retirement and other post-retirement benefits paid 12,573

(80,000,000)

Net cash flows from operating activities 3,593,641,821 3,557,866,834

2012 2011

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property, plant and equipment (1,416,845,788)

(2,106,030,465)

Proceeds from sale of property and equipment 71,863,569

Interest received 45,189,497

129,296,048

Decrease (increase) in:

Exploration and evaluation assets (418,453,308)

(2,044,119)

Other noncurrent assets (323,791,575)

(300,127,644)

Net cash flows from (used in) investing activities (2,042,037,605) (2,278,906,180)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from:

Long-term debts –

13,350,000,000

Payments of:

Short-term loans –

(85,000,000)

Long-term debts (798,852,453)

(618,105,082)

Cash dividends (88,490,765)

–

Increase in other long-term liabilities (40,508,508)

(38,664,359)

Net cash flows (used in) financing activities (927,851,726) 12,608,230,559

NET INCREASE IN CASH AND CASH EQUIVALENTS 623,752,490

13,887,191,213

EFFECT OF FOREIGN EXCHANGE RATE CHANGES

ON CASH AND CASH EQUIVALENTS 6,271,137

(230,497,506)

CASH AND CASH EQUIVALENTS AT BEGINNING OF

PERIOD 12,493,406,964 6,157,925,132

CASH AND CASH EQUIVALENTS AT END OF

PERIOD P=13,123,430,591 P=19,814,618,839


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

SELECTED NOTES TO THE UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

Energy Development Corporation [formerly Energy Development (EDC) Corporation] (the

“Parent Company” or “EDC”) is a subsidiary of Red Vulcan Holdings Corporation (Red Vulcan).

The Parent Company and its subsidiaries (collectively hereinafter referred to as the “Company”),

were separately incorporated and registered with the Philippine Securities and Exchange

Commission (SEC) except for Energy Development (EDC) Corporation Chile Limitada

(EDC Chile Limitada) which was incorporated in Santiago, Chile. Below are the Parent

Company’s ownership interests in its subsidiaries:

Percentage of Ownership

2012 2011

Direct Indirect Direct Indirect

EDC Geothermal Corp. [Formerly First Luzon

Geothermal Energy Corporation] (EGC) 100.00%

– 100.00%

–

Green Core Geothermal Inc. (GCGI) – 100.00% – 100.00%

Bac-Man Geothermal Inc. (BGI)***

– 100.00% – 100.00%

Unified Leyte Geothermal Energy Inc.

(ULGEI)***

– 100.00% – 100.00%

Southern Negros Geothermal, Inc. (SNGI)**

– 100.00% – –

EDC Mindanao Geothermal Inc. (EMGI)**

– 100.00% – –

Bac-Man Energy Development Corporation

(BEDC)**

–

100.00% – –

Kayabon Geothermal, Inc. (KGI)**

– 100.00% – –

EDC Chile Limitada***

99.99% 0.01% 99.99% 0.01%

EDC Drillco Corporation (EDC Drillco)****

100.00% – 100.00% –

First Gen Hydro Power Corporation (FG Hydro) 60.00% – 60.00% –

EDC Wind Energy Holdings, Inc. (EWEHI)***

100.00% – 100.00% –

EDC Burgos Wind Power Corporation

(EBWPC)***

33.33%

66.67%

– 33.33%

66.67%

–

EDC Pagudpud Wind Power Corporation*

(EPWPC)* –

100.00% –

–

EHIL**

100.00% – – –

EDC HKL**

– 100.00% – –

EDC Chile Holdings SPA* 100.00% – – –

EDC Geotermica Chile* 100.00% – – –

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

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

* Incorporated in 2012 and has not yet started commercial operations.

**Incorporated in 2011 and has not yet started commercial operations.

***Incorporated in 2010 and has not yet started commercial operations.

****Incorporated in 2009 and has not yet started commercial operations.

- 2 -

History of Ownership

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

Philippine Stock Exchange (PSE). Up to November 2007, EDC was controlled by the Philippine

National Oil Company (PNOC), a government-owned and controlled corporation, and the

PNOC EDC Retirement Fund.

On November 29, 2007, PNOC and PNOC EDC Retirement Fund sold their combined interests in

EDC to Red Vulcan (a Philippine corporation). Red Vulcan was then a wholly owned subsidiary

of First Gen Corporation (First Gen, a publicly listed Philippine corporation) through Prime

Terracota Holdings Corporation (Prime Terracota). First Gen’s indirect interest in EDC consists

of 6.0 billion common shares and 7.5 billion preferred shares. Control was then established

through First Gen’s 60% indirect voting interest in EDC. Meanwhile, First Philippine Holdings

Corporation (First Holdings) directly owns 66.2% of the common shares of First Gen.

Accordingly, First Holdings became then the ultimate parent of the Company.

On May 12, 2009, First Gen’s indirect voting interest in Red Vulcan was reduced to 45% with the

balance taken up by Lopez Inc. Retirement Fund (40%) and Quialex Realty Corporation (15%)

through the issuance of preferred shares by Prime Terracota. As a result of this transaction, Prime

Terracota replaced First Holdings as the ultimate parent of EDC effective May 12, 2009.

Nature of Operations

The Parent Company operates 12 geothermal projects in five geothermal service contract areas,

namely Tongonan Geothermal Project (TGP), Southern Negros Geothermal Project (SNGP),

Bacon-Manito Geothermal Project (BMGP), Mt. Apo Geothermal Project (MGP) and Northern

Negros Geothermal Project (NNGP) under the Geothermal Service Contracts (GSCs) entered into

with the Department of Energy (DOE) pursuant to the provisions of Presidential Decree (P.D.)

1442. These GSCs were replaced by Geothermal Renewable Energy Service Contracts (GRESCs)

on October 23, 2009.

Geothermal steam produced is delivered to the company-owned power plants to produce

electricity. EDC sells power to National Power Corporation (NPC), privately-owned distribution

utilities (DUs) and large industrial customers, pursuant to Power Purchase Agreements (PPAs) and

Power Supply Agreements (PSAs). Separately, it also has drilling activities in Papua New

Guinea.

Change in Corporate Name

On the July 29, 2010 annual stockholders meeting, the stockholders approved the amendment of

the Parent Company’s name from Energy Development (EDC) Corporation to Energy

Development Corporation. The Philippine SEC approved the change of the Parent Company’s

name on November 5, 2010.

Subsidiaries

On 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

Hydro operates the 132 Megawatt (MW) Pantabangan and Masiway Hydro-Electric Power Plants

(PAHEP/MAHEP) located in Nueva Ecija, Philippines. FG Hydro buys from and sells electricity

to the Wholesale Electricity Spot Market (WESM) and to various DUs under the Transition Power

Supply Contracts (TPSCs).

EGC is a special-purpose company incorporated on April 9, 2008 to participate in the bid for

another local power plant. The bid was won by and awarded to another local entity. Thereafter,

there has been no business activity yet as far as EGC is concerned other than being the investment

- 3 -

holding company of its wholly owned subsidiaries, namely GCGI, BGI, ULGEI, SNGI, EMGI,

BEDC and KGI. EGC also has a 0.01% stake in EDC Chile Limitada.

On March 8, 2011, the Philippine SEC approved the change of First Luzon Geothermal Energy

Corporation’s corporate name to EGC.

GCGI was incorporated on June 22, 2009 with primary activities on power generation,

transmission, distribution, and other energy related businesses. GCGI is currently operating the

192.5 MW Palinpinon and 112.5 MW Tongonan 1 geothermal power plants in Negros Oriental

and Leyte, respectively, following its successful acquisition from the Power Sector Assets and

Liabilities Management Corporation (PSALM) in 2009.

EDC Drillco is a company incorporated on September 28, 2009 to act as an independent service

contractor, consultant, specialized technical adviser for well construction and drilling, and other

allied activities.

BGI was incorporated on April 7, 2010 primarily to carry on the general business of generating,

transmitting, and/or distributing energy. BGI has successfully acquired the 150 MW Bac-Man

Geothermal Power Plants (BMGPP) from PSALM in 2010. BMGPP is currently under

rehabilitation to restore its capacity and reliability.

EWEHI is a holding company incorporated on April 15, 2010.

EBWPC is a company incorporated on April 13, 2010 to carry on the general business of

generating, transmitting, and/or distributing energy.

ULGEI is a company incorporated on June 23, 2010 to carry on the general business of generating,

transmitting, and/or distributing energy.

EDC 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

to generate geothermal energy. On January 10, 2012, the Chilean Ministry of Energy awarded to

EDC the geothermal exploration concession of Newen, while San Rafael and Batea geothermal

exploration concessions were awarded on January 19, 2012 (see Note 44).

On February 4, 2011, the Philippine SEC approved the incorporation of SNGI and EMGI, wholly

owned subsidiaries of EGC, to carry on the general business 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 the electric power to power corporations, public electric

utilities and electric cooperatives.

EHIL is an investment holding company of international subsidiaries incorporated on

August 17, 2011 in British Virgin Islands. EDC HKL, a wholly owned subsidiary of EHIL, was

incorporated on November 22, 2011 in Hong Kong and will serve as a holding company.

EDC Chile Holdings SPA and EDC Peru Holdings S.A.C. are wholly owned subsidiaries of EDC

HKL and are the Holding companies of EDC Geotermica Chile and EDC Geotermica Peru S.A.C.,

respectively.

On September 22 and 28, 2011, the Philippine SEC approved the incorporation of BEDC and

KGI, wholly owned subsidiaries of EGC, to carry on the general business of generating,

transmitting, and/or distributing energy derived from any and all forms, types and kinds of energy

- 4 -

sources for lighting and power purposes and whole-selling the electric power to power

corporations, public electric utilities and electric cooperatives.

Corporate Address

In November 2011, the Parent Company changed its address to One Corporate Centre, Julia

Vargas Avenue corner Meralco Avenue, Ortigas Centre, Pasig City from Merritt Road, Fort

Bonifacio, Taguig City.

Authorization for Issuance of the Interim Consolidated Financial Statements

The consolidated financial statements were reviewed and approved by the Audit and Governance

Committee on May 9, 2012.

2. Basis of Preparation

The unaudited interim condensed consolidated financial statements have been prepared in

accordance with Philippine Financial Reporting Standards (PFRS) Philippine Accounting

Standard (PAS) 34, “Interim Financial Reporting.” Accordingly, the unaudited interim condensed

consolidated financial statements do not include all of the information and footnotes required in

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

Company’s annual consolidated financial statements as at December 31, 2011.

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

historical cost basis, except for parts and supplies inventories that have been measured at lower of

cost or net realizable value and derivative instruments and AFS investments that have been

measured at fair value. The unaudited interim condensed consolidated financial statements are

presented in Philippine peso (Peso), which is the Parent Company’s functional currency. All

values are rounded to the nearest peso, except when otherwise indicated.

Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous financial year except for

the following:

Voluntary Change in Accounting Policy

Prior to 2011, the Company accounted for rig consumables as direct expense upon purchase since

these are primarily intended for immediate use. Over the years, the Company has accumulated a

large stock of unused rig consumables. As a result, starting January 1, 2011, the Company

adopted the policy of recognizing rig consumables as inventories.

Philippine Accounting Standard (PAS) 8, Accounting Policies, Changes in Accounting Estimates

and Errors, requires retrospective application for a change in accounting policy, except when it is

impracticable to determine period-specific effects. If retrospective application is impracticable,

the entity shall apply the new accounting policy at the beginning of the earliest period for which

retrospective application is practicable. Because prior to January 1, 2011, the Company does not

monitor the unused portion of rig consumable, management determined that it is impracticable to

establish the balance of rig consumables in prior years. Accordingly, the effect of the voluntary

change in accounting policy was presented as an adjustment to the opening balance of 2011

retained earnings.

As at January 1, 2011, the voluntary change in accounting policy resulted to an increase in parts

and supplies inventories, retained earnings and deferred tax liability amounting to P=172.3 million,

- 5 -

P=155.1 million and P=17.2 million, respectively (see Notes 10 and 31). The current year effect of

the voluntary change in accounting policy resulted to an increase in parts and supplies inventories

and net income amounting to P=19.66 million and P=17.69 million, respectively, and decrease in loss

per share by P=0.001 per share for the year ended December 31, 2011.

3. Significant Accounting Policies

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

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

Company’s annual consolidated financial statements as of and for the year ended December 31,

2011, except for the adoption of the following new and amended accounting standards that

became effective beginning January 1, 2012.

PAS 12, Income Taxes – Recovery of Underlying Assets

The amendment clarified the determination of deferred tax on investment property measured

at fair value. The amendment introduces a rebuttable presumption that deferred tax on

investment property measured using the fair value model in PAS 40, Investment Property,

should be determined on the basis that its carrying amount will be recovered through sale.

Furthermore, it introduces the requirement that deferred tax on non-depreciable assets that are

measured using the revaluation model in PAS 16, Property, Plant and Equipment, always be

measured on a sale basis of the asset. The amendment becomes effective for annual periods

beginning on or after January 1, 2012.

PFRS 7, Financial Instruments: Disclosures – Enhanced Derecognition Disclosure

Requirements

The amendment requires additional disclosure about financial assets that have been transferred

but not derecognized to enable the user of the Company’s financial statements to understand

the relationship with those assets that have not been derecognized and their associated

liabilities. In addition, the amendment requires disclosures about continuing involvement in

derecognized assets to enable the user to evaluate the nature of, and risks associated with, the

entity’s continuing involvement in those derecognized assets. The amendment becomes

effective for annual periods beginning on or after July 1, 2011. The amendment affects

disclosures only and has no impact on the Company’s financial position or performance.

Improvements to PFRS (issued in May 2010)

The International Accounting Standards Board (IASB) issued omnibus amendments to the

following standards, primarily with a view of removing inconsistencies and clarify wording. The

adoption of the following amendments resulted in changes to accounting policies but did not have

significant impact on the financial position and performance of the Company.

PFRS 3, Business Combinations

PFRS 7, Financial Instruments: Disclosures

PAS 1, Presentation of Financial Statements

PAS 27, Consolidated and Separate Financial Statements

- 6 -

4. Segment Revenue and Segment Results for Operating Segments

The Company’s operating businesses are organized and managed separately according to the

nature of the products and services provided, with each segment representing a strategic business

unit that offers different products and serves different markets.

The Company’s identified operating segments below are consistent with the segments reported to

the BOD, which is the Chief Operating Decision Maker (CODM) of the Company.

a. Electricity segment - These are EDC’s power plants covered mainly by: (1) long-term PPAs

with NPC; (2) FG Hydro’s spot sales to and buying from the WESM and with various DUs

covered by TPSCs; and (3) GCGI’s sales to various NPC-assigned and new customers covered

by Power Supply Contracts and Power Supply Agreements, respectively.

b. Steam segment - These relate to sale of steam to NPC plants covered by SSAs.

c. All other segments - These relate to segment performing drilling services for Lihir Gold Ltd.

and construction services accounted for under IFRIC 12 up to October 22, 2009

The Company has one geographical segment since it derives principally all its revenues from

domestic operations. Revenue from drilling services outside the Philippines is not material.

Management monitors the operating results of the business segments separately for the purpose of

making decisions about resources to be allocated and of assessing performance. Finance costs,

finance income, income taxes and other charges and income are managed on a group basis.

All of the Company’s operations are in the Philippines and revenues generated are from domestic

operations except for revenue from drilling services, included in “All Other Segments” category,

which is from foreign services rendered to Lihir Gold Ltd.

Segment performance is evaluated based on net income (loss) for the period and earnings before

interest, taxes, and depreciation and amortization (EBITDA). Net income (loss) for the period is

measured consistent with consolidated net income (loss) in the unaudited interim condensed

consolidated financial statements. EBITDA is calculated as total revenues minus total operating

expenses except non-cash items such as depreciation and amortization, impairment loss on

property, plant and equipment, and loss on disposal of property, plant and equipment of a

subsidiary among others.

NPC is the main customer for the electricity segment which comprised 43.92% of the total

electricity revenue for the period ended March 21, 2012 and the only external customer for the

steam segment, particularly for the BMGPP in 2010. Following the acquisition by BGI of these

power plants in September 2010 and the subsequent major rehabilitation of these assets, the Parent

Company ceased to bill NPC.

Financial information on the operating segments are summarized as follows:

- 7 -

Electricity Steam All Other Segments Eliminations Total

Period Ended March 31, 2012 Segment revenue from external

customers P=7,536,756,442 P=– P=167,581,380

P=– P= 7,704,337,822

Intersegment revenue 288,710,110 1,572,812,063 – (1,861,522,173) –

Total segment revenue 7,825,466,552 1,572,812,063 167,581,380 (1,861,522,173) 7,704,337,822

Segment expenses (4,564,250,912) (924,479,585) (101,722,915) 1,861,522,173 (3,728,931,239)

Segment results P=3,261,215,640 P=648,332,478 P=65,858,465 P=– 3,975,406,583

Unallocated segment expenses (27,395,961)

Unallocated interest income 93,870,182

Unallocated interest expense (1,015,345,353)

Unallocated other income - net 397,360,790

Unallocated income taxes (277,037,433)

Net income P=3,146,858,808

EBITDA P= 4,052,442,062 P=767,473,079 P=70,598,554 P=– P= 4,890,513,695

Unallocated expenses

(27,345,633)

P=4,863,168,062

Electricity Steam All Other Segments Eliminations Total

Period Ended March 31, 2011 Segment revenue from external

customers P=5,798,160,507 P=– P=154,616,637

P=– P=5,952,777,144

Intersegment revenue 91,806,053 1,660,839,611 – (1,752,645,664) –

Total segment revenue 5,889,966,560 1,660,839,611 154,616,637 (1,752,645,664) 5,952,777,144 Segment expenses (4,213,935,041) (1,169,430,414) (116,574,555) 1,752,645,664 (3,747,294,346)

Segment results P=1,676,031,519 P=491,409,197 P=38,042,082 P=– 2,205,482,798

Unallocated segment expenses (12,655,460) Unallocated interest income 123,917,688

Unallocated interest expense (1,038,921,265)

Unallocated other income - net 256,816,685 Unallocated income taxes (80,277,300)

Net income P=1,454,363,146

EBITDA P=2,494,844,455 P=682,332,853 P=2,121,254 P=– P=3,179,298,562

Unallocated expenses

(12,647,397)

P=3,166,651,165

Electricity Steam All Others Eliminations Total

As of and for the period ended

March 31, 2012

Segment assets P=41,495,715,327 P=13,295,301,762 P=2,449,721,508 P=– P=57,240,738,597

Unallocated corporate assets 34,910,353,336

Total assets – P=92,151,091,933

Segment liabilities P=37,645,794,821 P=20,829,624,307 P=1,751,294,773 P=– P=60,226,713,901

Unallocated corporate liabilities 1,113,551,165

Total liabilities P= 61,340,265,066

Capital expenditure P=608,829,626 P=615,488,858 P=116,673,629 P=– P=1,340,992,113

Unallocated capital expenditure 75,853,674

Total capital expenditure P=1,416,845,787

Depreciation and amortization (P=786,504,936) (P=106,203,638) (P=4,740,088) P=– (P=897,448,662)

Unallocated depreciation and

amortization

(50,328)

Total depreciation and amortization (P=897,498,990)

Other non-cash items (P=57,092,381) (P=47,753,184) P=788 P=– (P=104,844,777)

Unallocated non-cash items 383,890,800

Total other non-cash items (P=279,046,023)

- 8 -


As of and for the year ended December 31, 2011



Total assets P=90,017,816,784



Total liabilities P=60,371,215,291

Capital expenditure P=4,711,615,736 P=3,832,071,716 P=158,656,411 P=– P=8,702,343,863



Depreciation and amortization (P=3,035,691,787) (P=386,991,348) (P=18,973,159) P=– (P=3,441,656,294)


amortization

(218,203)

Total depreciation and amortization (P=3,441,874,497)

Impairment loss P=4,998,608,008 P=– P=– P=– P=4,998,608,008

Other non-cash items (P=305,215,436) (P=340,416,065) (P=198,180) P=– (P=645,829,681)


Total other non-cash items (P=622,107,041)


As of and for the period ended March 31, 2011



Total assets P=95,326,738,198



Total liabilities P=64,642,111,783

Capital expenditure P=1,102,774,920 P=912,609,564 P=25,210,223 P=– P=2,040,594,707



Depreciation and amortization (P=808,953,941) (P=93,202,110) (P=3,870,453) P=– (P=906,026,504)


amortization

(8,063)

Total depreciation and amortization (P=906,034,567)

Impairment loss P=– P=– P=– P=– P=–

Other non-cash items (P=59,413,749) (P=78,269,018) (P=167,375) P=– (P=137,850,142)


Total other non-cash items P=41,565,015

The following table shows the Company’s reconciliation of EBITDA to the consolidated net income

for the periods ended March 31, 2012 and 2011.

2012 2011

EBITDA P=4,863,168,062 P=3,166,651,165

Add (Deduct):

Depreciation and amortization (897,498,991) (906,034,567)

Net reduction in allowance (provision) for doubtful accounts (1,252,950) (106,846,824)

Reduction in allowance for/write-off of (provision for)

impairment of parts and supplies inventories (16,405,499) 39,057,564

Interest income 93,870,182 123,917,688

Interest expense (1,015,345,353) (1,038,921,265)

- 9 -

2012 2011

Foreign exchange gains (losses) – net 337,953,506 188,561,127

Derivatives gain (loss) – net – 37,553,046

Provision for income tax (277,037,433) (80,277,300)

Miscellaneous – net 59,407,284 30,702,512

Consolidated net income P=3,146,858,808 P=1,454,363,146

The Parent Company has intersegment revenue from/to GCGI for the sale of steam/electricity.

Intersegment revenues are all eliminated in consolidation. Segment information is measured in

conformity with the accounting policies adopted for preparing and presenting the consolidated

financial statements. Intersegment revenue are made at normal commercial terms and conditions.

Unallocated expenses pertain to expenses of the corporate, technical and administrative support

groups while unallocated corporate assets and liabilities which include among others certain cash

and cash equivalents, property, plant and equipment, parts and supplies inventories, trade and other

payables and retirement and post-retirement benefits, pertain to the Head Office and are managed

on a group basis.

5. Cash and Cash Equivalents

This account consists of the following:

March 31,

2012

(Unaudited)

December 31,

2011

(Audited)

March 31,

2011

(Unaudited)

Cash on hand and in banks P=935,915,921 P=692,764,092 P=6,045,602,577

Cash equivalents 12,187,514,670 11,800,642,871 13,769,016,262

P=13,123,430,591 P=12,493,406,963 P=19,814,618,839

Cash in banks earns interest at the respective bank deposit rates. Cash equivalents consist of

money market placements, which are made for varying periods of up to three months depending

on the immediate cash requirements of the Company.

6. Trade and Other Receivables

This account consists of the following:

March 31,

2012

(Unaudited)

December 31,

2011

(Audited)

March 31,

2011

(Unaudited)

Trade P=3,580,890,393 P=3,336,433,682 P=2,887,790,210

Others:

Non-trade accounts receivable 43,962,775 99,398,810 49,750,536

Loans and notes receivables 62,531,897 59,331,933 61,134,558

Advances to employees 39,669,975 37,934,595 37,937,045

Employee receivables 8,411,600 8,896,656 11,871,083

Claims receivable 133,972 153,322 133,971

154,710,219 205,715,316 160,827,193

3,735,600,612 3,542,148,998 3,048,617,403

Less allowance for doubtful accounts 130,807,202 130,839,470 126,348,554

P=3,604,793,410 P=3,411,309,528 P=2,922,268,849

- 10 -

Trade receivables are noninterest-bearing and are generally collectible in 30 to 60 days.

Majority of the Company’s trade receivables are collectible from NPC. All revenues from sale of

steam and majority of the revenues from sale of electricity were derived from NPC.

March 31,

2012

(Unaudited)

December 31,

2011

(Audited)

March 31,

2011

(Unaudited)

Balance at beginning of year P=130,839,470 P=30,606,792 P=

Provision for doubtful accounts (Note 25) – 100,232,678 – Reversal of provision for doubtful account (32,268) – –

Balance at end of year P=130,807,202 P=130,839,470 P=126,348,554

7. Parts and Supplies Inventories

March 31,

2012

(Unaudited)

December 31,

2011

(Audited)

March 31,

2011

(Unaudited)

On hand:

Drilling tubular products and equipment spares

P=1,712,077,488 P=1,648,876,310

877,612,431

Power plant spares 699,558,748 718,777,618 686,567,074

Pump, production/steam gathering system, steam

turbine, valves and valve spares

328,760,120 305,461,738

289,300,841

Chemical, chemical products, gases and catalyst

96,620,860 113,397,104

299,237,727

Heavy equipment spares 90,157,585 90,293,956 51,862,247

Electrical, cable, wire product and compressor

spares

91,004,229 83,543,105

62,641,357

Measuring instruments, indicators and tools, safety

equipment and supplies

37,352,294 28,640,098

32,916,255

Automotive, mechanical, bearing, seals, v-belt,

gasket, tires and batteries

47,377,955 39,385,963

28,807,947

Construction and hardware supplies, stationeries

and office supplies, hoses, communication

and other spares and supplies

68,761,305 20,268,296

11,755,922

3,171,670,584 3,048,644,188 2,340,701,801

In transit 73,261,656 307,123,465 300,447,258

P=3,244,932,240 P=3,355,767,653 P=2,641,149,059

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

passed to the Company.

11

8. Property, Plant and Equipment

March 31, 2012 (Unaudited)

Land Power Plants

FCRS and

Production Wells

Buildings,

Improvements

and Other

Structures

Exploration,

Machinery and

Equipment

Transportation

Equipment

Furniture,

Fixtures and

Equipment

Laboratory

Equipment

Major Spares

and Others

Construction

in Progress Total

Cost

Balances at January 1 P=379,809,254 P=37,204,980,737 P=20,651,972,508 P=2,246,291,592 P=4,074,330,782 P=85,355,600 P=659,065,713 P=580,618,276 P=57,649,072 P= 9,517,751,749 P=75,457,825,283

Additions 46,069 63,715,376 – 14,563,496 103,891,821 6,358,593 61,906,969 9,963,981 – 1,156,399,482 1,416,845,787

Disposals/Retirements/Write-off – (82,216,907) – – (2,286,923) – (1,315,767) (13,202) 2,531,355 – (83,301,444)

Reclassifications – – 476,850,493 (3,188,890) 6,338,049 (478,132) (13,738,382) (281,284) 7,787,031 (417,441,409) 55,847,476.44

Balance at March 31, 2012 379,855,323 37,186,479,206 21,128,823,001 2,257,666,198 4,182,273,729 91,236,061 705,918,533 590,287,771 67,967,458 10,256,709,822 76,847,217,102

Accumulated Depreciation and Impairment

Balances at January 1 17,255,629 7,867,549,819 6,368,571,711 429,037,601 1,949,150,666 34,764,668 347,350,270 172,673,077 3,678,839 590,863,997 17,780,896,277

Depreciation for the year – 524,881,026 232,820,938 22,785,877 30,533,389 2,731,933 44,067,248 15,630,790 – – 873,451,201

Disposals/Retirements/Write-off – (589,306) – (635,514) (1,674,131) (478,131) (8,889,197) (294,477) – – (12,560,756)

Reclassifications – (79,964,914) – 149,331 35,573,511 (121,443) (6,263,373) (412,537) – – (51,039,425)

Balance at March 31, 2012 17,255,629 8,311,876,625 6,601,392,649 451,337,295 2,013,583,435 36,897,027 376,264,948 187,596,853 3,678,839 590,863,997 18,590,747,297

Net Book Value P=362,599,694 P=28,874,602,581 P=14,527,430,352 P=1,806,328,903 P= 2,168,690,294 P= 54,339,034 P=329,653,585 P=402,690,918 P=64,288,619 P=9,665,845,825 P=58,256,469,805

December 31, 2011 (Audited)

Land Power Plants

FCRS and

Production Wells

Buildings,

Improvements

and Other

Structures

Exploration,

Machinery and

Equipment

Transportation

Equipment

Furniture,

Fixtures and

Equipment

Laboratory

Equipment

Major Spares

and Others

Construction

in Progress Total

Cost

Balances at January 1 P=333,924,551 P=36,607,352,559 P=17,392,141,146 P=1,798,591,948 P=3,803,840,502 P=67,240,415 P=495,684,907 P=456,421,470 P=53,030,079 P=5,021,702,358 P=66,029,929,935

Additions 45,884,703 – 344,150,911 419,864,968 278,703,487 36,618,569 210,525,800 132,783,958 44,533,825 8,023,408,213 9,536,474,434

Disposals/Retirements/Write-off - (35,988,750) - (1,094,655) (1,812,341) (1) (1,899,186) (344,455) (583,522) - (41,722,910)

Reclassifications - 633,616,928 2,915,680,451 28,929,331 (6,400,866) (18,503,383) (45,245,808) (8,242,697) (39,331,310) (3,527,358,822) (66,856,176)

Balances at December 31 379,809,254 37,204,980,737 20,651,972,508 2,246,291,592 4,074,330,782 85,355,600 659,065,713 580,618,276 57,649,072 9,517,751,749 75,457,825,283


Balances at January 1 – 4,054,656,189 3,256,620,699 287,626,674 1,462,628,729 42,658,867 233,098,901 89,502,206 – – 9,426,792,265

Depreciation for the year – 2,158,122,126 692,852,385 84,957,014 258,849,165 4,939,887 85,937,845 60,024,918 – – 3,345,683,340

Impairment – NNGP 17,255,629 1,662,635,857 2,419,098,627 56,658,530 141,579,492 8 74,681,583 32,155,446 3,678,839 590,863,997 4,998,608,008

Disposals/Retirements/Write-off – (7,864,353) – (248,578) (1,805,755) – (1,667,039) (344,417) - – (11,930,142)

Reclassifications – – – 43,961 87,899,035 (12,834,094) (44,701,020) (8,665,076) – – 21,742,805

Balances at December 31 17,255,629 7,867,549,819 6,368,571,711 429,037,601 1,949,150,666 34,764,668 347,350,270 172,673,077 3,678,839 590,863,997 17,780,896,277

Net Book Value P=362,553,625 P=29,337,430,918 P=14,283,400,797 P=1,817,253,991 P=2,125,180,116 P=50,590,932 P=311,715,443 P=407,945,199 P=53,970,233 P=8,926,887,751 P=57,676,929,006

12


Land Power Plants

FCRS and

Production Wells

Buildings,

Improvements

and Other

Structures

Exploration,

Machinery and

Equipment

Transportation

Equipment

Furniture,

Fixtures and

Equipment

Laboratory

Equipment

Major Spares

and Others

Construction

in Progress Total

Cost

Balances at January 1 P=333,924,551 P=36,607,352,559 P=17,392,141,146 P=1,798,591,947 P=3,803,840,502 P=67,240,415 P=495,684,907 P=456,421,470 P=53,030,079 P=5,097,727,288 P=66,105,954,864

Additions 40,121,285 261,371 – 13,497,880 49,377,301 15,425,418 6,623,952 41,237,370 – 1,939,485,888 2,106,030,465

Disposals/Retirements/Write-off – – – (1,705,554) (3,120,271) (4,055,609) (10,499,892) (1,433,168) 3,009,451 – (17,805,043)

Reclassifications – 454,450,823 307,742,309 4,599,864 29,120 – 309,152 – – (482,497,695) 284,633,573

Balances at March 31, 2011 374,045,836 37,062,064,753 17,699,883,455 1,814,984,137 3,850,126,652 78,610,224 492,118,119 496,225,672 56,039,530 6,554,715,481 68,478,813,859


Balances at January 1 – 4,054,656,188 3,256,620,699 287,626,673 1,462,628,729 42,658,867 233,098,900 89,502,206 – – 9,426,792,262

Depreciation for the year – 553,216,554 192,673,616 25,302,147 74,766,797 2,587,646 19,760,051 13,679,967 – – 881,986,778

Disposals/Retirements/Write-off – – – (926,227) (3,111,807) (4,055,603) (8,599,554) (904,192) – – (17,597,383)

Reclassifications – – – (224,954) 30,077,561 (71,589) (2,913,898) (99,546) – – 26,767,574

Balances at March 31, 2011 – 4,607,872,742 3,449,294,315 311,777,639 1,564,361,280 41,119,321 241,345,499 102,178,435 – – 10,317,949,231

Net Book Value P=374,045,836 P=32,454,192,011 P=14,250,589,140 P=1,503,206,498 P=2,285,765,372 P=37,490,903 P=250,772,620 P=394,047,237 P=56,039,530 P=6,554,715,481 P=58,160,864,628

13

Details of depreciation and amortization charges recognized in the statements of income are shown

below:

March 31,

2012

(Unaudited)

December 31,

2011

(Audited)

March 31,

2011

(Unaudited)

Property, plant and equipment P=873,451,201 P=3,345,683,340 P=881,986,778

Water rights 24,047,789 96,191,157 24,047,789

P=897,498,990 P=3,441,874,497 P=906,034,567

March 31,

2012

(Unaudited)

December 31,

2011

(Audited)

March 31,

2011

(Unaudited)

Costs of sales of electricity and steam (Note 15) P=815,022,773 P=3,173,306,732 P=846,143,688

Cost of drilling services (Note 16) 289,417 1,110,041 289,417

General and administrative (Note 17) 82,186,800 267,457,724 59,601,462

P=897,498,990 P=3,441,874,497 P=906,034,567

The asset retirement obligation pertains to the net present value of the estimated dismantling and

restoration costs of steam field facilities of the Parent Company at the end of the contract period. As

of March 31, 2012, the net book value of the asset retirement under the property, plant and equipment

amounted to P=307.71 million and the asset retirement obligations under noncurrent liabilities

amounted to P=414.20 million.

9. Goodwill and Intangible Assets

March 31, 2012 (Audited)

Goodwill Water Rights

Other

Intangible Asset Total

Cost

Balances at January 1 P=2,535,051,530 P=2,404,778,918 P=258,394,938 P=5,198,225,386

Additions – – 32,770,058 32,770,058

Balances at December 31 2,535,051,530 2,404,778,918 291,164,996 5,230,995,444

Accumulated Amortization

Balances at January 1 – 492,979,679 – 492,979,679

Amortization (Notes 12,

23, 24 and 25)

–

24,047,789

– 24,047,789

Balances at December 31 – 517,027,468 – 517,027,468

Net Book Value P=2,535,051,530 P= 1,887,751,450 P=291,164,996 P=4,713,967,976



Other


Cost

Balances at January 1 P=2,535,051,530 P=2,404,778,918 P=– P=4,939,830,448

Additions – – 258,394,939 258,394,939

Balances at December 31 2,535,051,530 2,404,778,918 258,394,938 5,198,225,387

14


Other



Balances at January 1 – 396,788,522 – 396,788,522

Amortization (Notes 12, 23,

24 and 25)

–

96,191,157

–

96,191,157

Balances at December 31 – 492,979,679 – 492,979,679

Net Book Value P=2,535,051,530 P=1,911,799,239 P=258,394,938 P=4,705,245,708


Goodwill Water Rights Total

Cost

Balances at January 1, 2011 and March 31, 2011 2,535,051,530 2,404,778,918 4,939,830,448


Balances at January 1, 2011 – 396,788,522 396,788,522

Amortization (Note 8) – 24,047,789 24,047,789

Balances at March 31, 2011 – 420,836,311 420,836,311

Net Book Value P=2,535,051,530 P=1,983,942,607 P=4,518,994,137

10. Other Noncurrent Assets

March 31,

2012

(Unaudited)

December 31,

2011

(Audited)

March 31,

2011

(Unaudited)

Tax credit certificates P=1,338,884,446 P=1,338,884,447 P=1,338,884,446

Long-term receivables 627,406,762 81,561,056 47,592,135

Input VAT 3,005,218,719 3,270,286,773 2,070,849,704

Prepaid expenses 17,015,460 12,246,824 26,591,467

Special deposits and funds 127,196,462 123,278,392 99,205,177

AFS investment 20,603,788 20,443,924 20,059,151

Others 27,600,873 27,670,094 46,047,058

5,163,926,510 4,874,371,510 3,649,229,138

Less allowance for doubtful

accounts

423,726,234 422,722,403

125,462,101

P= 4,740,200,276 P=4,451,649,107 P=3,523,767,037

11. Trade and Other Payables

March 31,

2012

(Unaudited)

December 31,

2011

(Audited)

March 31,

2011

(Unaudited)

Accounts payable:

Third parties

P=7,105,889,950 P=5,101,846,237

P=6,547,333,299

Related parties 162,656,196 145,143,240 66,490,715

Accrued interest and guarantee fees 1,144,578,826 1,047,605,943 1,276,554,336

Withholding and other taxes payable 191,707,169 328,466,441 143,493,967

Deferred credits 23,253,658 22,095,129 16,081,114

SSS and other contributions payable 1,804,807 1,893,569 2,110,019

Other payables 80,167,884 57,024,702 180,400,383

P=8,710,058,490 P=6,704,075,261 P=8,232,463,833

15

Accounts payable - trade are noninterest-bearing and are normally settled on a 30 to 60 days

payment term.

The accrued interest represents interest accrual on outstanding loans reckoning from the last

payment date up to the financial reporting date. Guarantee fees are accruals of amounts due to the

Philippine Government reckoning from the last payment date up to the financial reporting date.

12. Royalty Fee Payable

March 31,

2012

(Unaudited)

December 31,

2011

(Audited)

March 31,

2011

(Unaudited)

Due to DOE and LGU P=217,335,769 P=287,626,313 P=495,319,145

Less current portion (217,335,769) 287,626,313 277,493,584

Noncurrent portion P=– P=– P=217,825,561

13. Long-term Debts

March 31,

2012

(Unaudited)

December 31,

2011

(Audited)

March 31,

2011

(Unaudited)

Total Dollar-denominated debt P=20,126,419,273 P=13,003,311,706 P=20,259,768,324

Total Japanese Yen-denominated

debt – 20,252,444 4,545,174,289

Total Peso-denominated debt 30,167,937,613 38,466,007,305 28,652,263,712

50,294,356,886 51,489,571,455 53,457,206,325

Less current portion (2,229,209,718) (2,249,517,382) (1,970,025,253)

Noncurrent portion 48,065,147,168 P=49,240,054,073 P=51,487,181,072

The Company’s foreign-currency denominated long-term debts were translated into Philippine

pesos based on the prevailing foreign exchange rates at the date of the unaudited interim

consolidated statement of financial position (USD1=JPY82.420: USD1=PHP42.920 on

March 31, 2012, US$1= JP¥77.912; US$1=P=43.840 as of December 31, 2011 and

USD1=JPY82.871: USD1=PHP43.390 on March 31, 2011).

14. Equity

As required under the Philippine Constitution, the Parent Company is subject to the nationality

requirement that at least 60% of its capital stock must be owned by Filipino citizens since the

Parent Company is engaged in the exploration and exploitation of the country’s energy resources.

The Parent Company is compliant with the said nationality requirement.

Beginning December 13, 2006, the 15.0 billion common shares of EDC were listed and traded on

the Philippine Stock Exchange (PSE) at an Initial Public Offering (IPO) price of P=3.20 per share.

After the initial IPO, there are no subsequent listings of shares by the Parent Company.

The common shares are majority held by Filipino citizens, with Red Vulcan holding six billion

shares or an equivalent of 40% interest.

The ownership of the Parent Company’s preferred shares is limited to Filipino citizens. The

preferred shares have voting rights and subject to 8% cumulative interest. Red Vulcan holds the

16

entire 9.4 billion preferred shares equivalent to 20% voting interest in EDC. The combined

interest of Red Vulcan entitles it to 60% voting interest and 40% economic interest in EDC.

Issued and outstanding preferred and common shares as of March 31, 2012 and 2011 and

December 31, 2011 are as follows:

Number of Shares

Preferred stock - P=0.01 par value per

share

Authorized 15,000,000,000

Issued and outstanding 9,375,000,000

Common stock - P=1 par value per share

Authorized 30,000,000,000

Issued and outstanding 18,750,000,000

The Parent Company had 702 common stockholders and one preferred stockholder as of March

31, 2012, 702 common stockholders and one preferred stockholder as of December 31, 2011 and

712 common stockholders and one preferred stockholder as of March 31, 2011.

15. Cost of sales of electricity and steam

March 31,

2012

(Unaudited)

March 31,

2011

(Unaudited)

Depreciation P=815,022,773 P=846,143,688

Purchased services and utilities 722,676,193 319,552,151

Personnel costs 364,878,025 478,270,582

Rental, insurance and taxes 278,403,885 378,763,659

Repairs and maintenance 289,303,310 370,441,766

Parts and supplies issued 222,659,592 326,914,364

Royalty Fees 48,360,909 52,434,057

Business and related expenses – 3,090,381

P=2,741,304,687 P=2,775,610,648

16. Cost of Drilling and Services

March 31,

2012

(Unaudited)

March 31,

2011

(Unaudited)

Purchased services and utilities P=71,803,100 P=38,324,136



Depreciation 289,417 203,949

Personnel costs 215,545 9,865,541

Business and related expenses 72,431 15,733,760

Parts and supplies issued – 8,613,104

P=95,439,340 P=108,323,427

17

17. General and Administrative Expenses

March 31,

2012

(Unaudited)

March 31,

2011

(Unaudited)

Personnel costs P=295,863,515 P=262,780,652


Purchased services and utilities 241,081,841 201,228,706

Business and related expenses 100,110,093 54,603,221

Depreciation 82,186,800 59,601,462

Parts and supplies issued 37,975,389 36,142,442


Impairment of parts and supplies 16,405,500 – Provision for doubtful accounts 1,285,218 106,846,824

Reduction in allowance for impairment of parts and

supplies – (39,057,564)

Others – 45,242

P=919,583,173 888,899,817

18. Foreign Exchange Gains (Losses)

March 31,

2012

(Unaudited)

March 31,

2011

(Unaudited)

Foreign exchange gains (losses) on long-term loans P=437,815,486 P=530,964,770

Foreign exchange losses on other accounts (99,861,980) (342,403,643)

P=337,953,506 P=188,561,127

This account pertains to foreign exchange gains adjustments realized on repayment of loans and

restatement of outstanding balances of foreign currency-denominated loans, short-term placements

and cash in banks. Following are the exchange rates used to restate outstanding balances at

reported dates:

Equivalent to US$1.00

Currency March 31, 2012

December 31,

2011 March 31, 2011

Japanese Yen 82.420 77.91 82.871

Philippine Peso 42.920 P=43.84 43.390

19. Interest Expense

March 31,

2012

(Unaudited)

March 31,

2011

(Unaudited)

Interest on long-term debt including amortization of

transaction costs P=970,474,870 P=986,627,533

Interest on loan payable 30,796,406 782,375

Interest accretion of asset retirement obligation 7,424,113 39,882,211

Interest accretion of “Day 1” gain 4,697,188 9,676,224

Interest on liability from litigation 1,952,777 1,952,922

P=1,015,345,354 P=1,038,921,265

18

20. Interest Income

March 31,

2012

(Unaudited)

March 31,

2011

(Unaudited)

Interest on placements P=74,015,100 P=104,916,197

Interest on savings/current accounts 236,813 4,020,311

Interest on overdue accounts/others 992,881 14,981,180

ROP Bonds - Discount Amortization 18,357,534 –

Amortization of day 1 loss 267,854 –

P=93,870,182 P=123,917,688

21. Earnings Per Share (EPS)

The EPS amounts were computed as follows:

March 31,

2012

(Unaudited)

March 31,

2011

(Unaudited)

(a) Net income attributable to equity shareholders

of the parent P=2,699,276,655 P=1,381,680,572

Less dividends on preferred shares 7,500,000 7,500,000

(b) Net income attributable to common

shareholders of the parent P=2,691,776,655 P=1,374,180,572

(c) Weighted average numbers

of shares for EPS 18,750,000,000 18,750,000,000

Basic/diluted EPS (b/c) P=0.144 P=0.073

The Company does not have dilutive common stock equivalents.

22. Income Tax

The deferred tax assets and liabilities are presented in the unaudited interim condensed

consolidated statement of financial position as follows:

March 31, 2012

(Unaudited)

December 31,

2011

(Audited)

March 31, 2011

(Unaudited)

Deferred tax assets-net P=1,331,550,748 P=1,420,656,657 P=987,867,438

Deferred tax liabilities-net – – –

P=1,331,550,748 P=1,420,656,657 P=987,867,438

19

23. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the

other party or exercise significant influence over the other party in making financial and operating

decisions. Parties are also considered to be related if they are subject to common control or

common significant influence.

The following are the transactions that the Company had with related parties for the periods ended

March 31, 2012 and 2011.

a. First Balfour, Inc. (First Balfour)

Following the usual bidding process in 2010, the Company awarded to First Balfour

procurement contracts amounting to P=217.67 million for various works such as Palinpinon 1

zero condensate disposal system, Civil, Structural and Mechanical/ Piping Works in Leyte and

Bac-Man and refurbishment of BGI’s geothermal power plants.

First Balfour is a wholly owned subsidiary of First Holdings.

b. First Gen

First Gen provides financial consultancy, business development and other related services to

the Parent Company under a consultancy agreement beginning September 1, 2008. Such

agreement is for a period of three years up to August 31, 2011. Under the terms of the

agreement, billings for consultancy services shall be P=8.7 million per month plus applicable

taxes. This was increased to P=11.8 million effective September 2009 to cover the cost of

additional officers and staff assigned to the Parent Company. The consultancy agreement was

subsequently extended for another 16 months, from September 1, 2011 to December 31, 2012.

Total consultancy services were included in the “Costs of sales of electricity and steam” under

“Purchased services and utilities” account.

c. IFC

On May 20, 2011, the Company signed a 15-year US$75.0 million loan facility with IFC, a

shareholder of the Company. IFC has approximately 5% ownership interest in the Company.

The loan was drawn in Peso on September 30, 2011, amounting to P=3,262.5 million. As of

March 31, 2012, the outstanding balance of the loan amounting to P=3,197.50 million is

included under the “Long-term debts” account in the parent company statements of financial

position.

On November 27, 2008, the Company entered into a loan agreement with IFC for

US$100.0 million or its Peso equivalent of P=4.10 billion. On January 7, 2009, the Company

opted to draw the loan in Peso and received the proceeds amounting to P=4,048.75 million, net

of P=51.25 million front-end fees. As of March 31, 2012, the outstanding loan amounted to P=

3,873.34 million net of unamortized transaction costs of P=55.69and included under the “Long-

term debts” account in the parent company statements of financial position.

The loan is payable in 24 equal semi-annual installments after a three-year grace period from

the date of the loan agreement at an interest rate of 7.4% per annum for the first five years

subject to repricing for another five to 10 years. Under the loan agreement, the Company is

restricted from creating liens and is subject to certain financial covenants.Other Related

Parties.

20

d. Other Related Parties

In the ordinary course of business, the Company avails of or grants advances from/to its

related parties for working capital requirements. Such advances are payable/collectible within

12 months and are non-interest bearing.

Bauang Private Power Corporation is a subsidiary of First Private Power Corporation, an

associate of First Gen. First Gas Holdings Corporation and First Gas Power Corporation are

subsidiaries of First Gen. First Holdings, parent company of First Gen, is an associate of

Lopez Holdings Corporation.

Bayan Telecommunications Inc. (Bayantel) is 97.3%-owned by Bayantel Holdings on which

Lopez Holdings Corporation has 47.3% ownership.

Sky Cable Corporation (Sky Cable) is 80.72%-owned by ABS-CBN Corp. on which Lopez

Holdings Corporation has 57.3% interest.

First Philippine Realty Corp. (FPRC), formerly known as INAEC Development Corp, is a

wholly owned subsidiary of First Holdings.

Thermaprime Well Services, Inc. (Thermaprime) is a subsidiary of First Balfour, a wholly

owned subsidiary of First Holdings. Thermaprime provides drilling services such as, but not

limited to, rig operations, rig maintenance, well design and engineering.

First Gen Energy Solutions (First GES) is a wholly owned subsidiary of First Gen.

e. Following are the amounts of transactions for the periods ended March 31, 2012 and 2011 and

outstanding balances as of March 31, 2012 and 2011 and December 31, 2010:

Transactions for the

period ended March 31

Net amount Due from (to)

Related Parties

Related Party Nature of Transaction 2012 2011 March 31, 2012

(Unaudited)

December 31, 2011

(Audited)

March 31, 2011

(Unaudited)

Due from related

parties

First Gen Interest-free advances P=– P=– P=– P=3,437 P=

First Gen Northern

Energy Corp.

Interest-free advances

– – – 2,511 –

First GES Interest-free advances – – – 1,864 –

P=– P=– P=– P=7,812 P=–

Due to related

parties

First Gen

Interest-bearing

advances (payment) P=–

Consultancy fee 40,397,647 38,731,765 40,397,647 53,863,530 11,800,000

Interest-free advances 3,817,931 3,543,566 3,095,058 6,061,620 238,065,454 First Gas Holdings

Corporation


– 231,300 1,431,150 First Gas Power

Corporation


– 11,433 12,607 165,675 56,818

Lopez Group Foundation, Inc.


– 75,000 –

P=44,215,578 P=42,593,064 P=43,505,312 P=60,090,825 P=251,353,422

21

Transactions for the period ended March 31

Net amount Due from (to) Related Parties

Related Party Nature of Transaction 2012 2011 March 31, 2012

(Unaudited)

December 31, 2011

(Audited)

March 31, 2011

(Unaudited)

Trade and other

payables

Thermaprime Work fees 299,979,684 – 101,023,501 101,171,006 –

First Balfour, Inc. Steam augmentation

contract in Leyte 42,363,462 22,364,154 58,004,741 38,989,273 63,233,022 FPRC Purchase of services and

utilities 571,808 1,306,265 – 458,150 –

Bayantel

Purchase of services and

utilities 294,182 2,968,487 3,627,954 4,524,811 3,257,693

Sky Cable Purchase of services and

utilities 6,482 – – –

343,209,136 26,645,388 162,656,196 145,143,240 66,490,715

Long-term debt

IFC Interest-bearing loans 8,393,823 1,897,474 7,070,840,366 7,067,386,686 4,036,164,381

f. Intercompany Guarantees

EDC’s subsidiary in Chile is participating in the bids for geothermal concession areas by the

Chilean government. The bid rules call for the provision of proof of EDC Chile Limitada’s

financial capability to participate in said bids or evidence of financial support from its Parent

Company. Letters of credit amounting to US$80.0 million were issued by EDC in favor of

EDC Chile Limitada as evidence of its financial support. There were no guarantees received

from any related party.

Except for the US$80.0 million letters of credit issued by the Parent Company in favor of

EDC Chile Limitada as mentioned above, there were no guarantees that have been given to or

and received from any related party in 2011 and 2010.

The Company has not recognized any impairment losses on receivables from related parties as of

March 31, 2012 and 2011 and December 31, 2011.

24. Explanatory Comments about the Seasonality or Cyclicality of Interim Operations

Except for the hydro operations of First Gen Hydro, seasonality or cyclicality of interim

operations is not applicable to the Parent Company’s type of business because of the nature of its

contracts with NPC, which includes guaranteed volume under the applicable take-or-pay,

minimum energy off-take or contracted energy provisions. GCGI’s sales to cooperatives and

industries are also not subject to seasonality or cyclicality.

25. The Nature and Amount of Items Affecting Assets, Liabilities, Equity, Net Income, or Cash

Flows that are Unusual Because of their Nature, Size or Incidence

There are no assets, liabilities, equity, net income or cash flows that are unusual because of their

nature, size or incidence during the current period.

22

26. The Nature and Amount of Changes in Estimates of Amounts Reported in Prior Interim

Periods of the Current Fiscal Year or Changes in Estimates of Amounts Reported in Prior

Financial Years, If Those Changes Have a Material Effect in the Current Interim Period

There are no significant changes in estimates of amounts during the current period as well as in the

comparative period in 2011 with the exception of the recognition of rig consumables as

inventories which was previously accounted for as direct expense (Note 2).

27. Issuances, Repurchases, and Repayments of Debt and Equity Securities

There are no issuances, repurchases and repayments of debt and equity securities during the

current period.

28. Dividend Declarations

Retained Earnings

On March 13, 2012, the BOD of the Parent Company approved the following cash dividends in

favor of all stockholders of record as of March 28, 2012 and payable on or before April 24, 2012:


cash dividend of P=0.10 per share on the common shares

On March 15, 2011, the BOD of the Parent Company approved the following cash dividends in

favor of all stockholders of record as of March 29, 2011 and payable on or before April 22, 2011:


cash dividend of P=0.16 per share on the common shares

NCI

In March 7, 2012 FG Hydro declared and paid cash dividends to the NCI for common shares

amounting to P=88.49 million.

29. The Effect of Changes in the Composition of the Issuer During the Interim Period, including

Business Combinations, Acquisition or Disposal of Subsidiaries and Long-term Investments,

Restructurings, and Discontinuing Operations

There are no material changes in the composition of the registrant during the period.

30. Changes in Contingent Liabilities or Contingent Assets Since the Last Annual Consolidated

Statement of Financial Position Date

There are no material changes in the contingent liabilities or contingent assets since the last annual

consolidated statement of financial position date.

23

31. Existence of Material Contingencies and Any Other Events or Transactions that are

Material to an Understanding of the Current Interim Period

There are no material contingencies and any other events or transactions during the period.

32. Financial Risk Management Objectives and Policies

The Company’s financial instruments consist mainly of cash equivalents, AFS investments, and

long-term debt. The main purpose of these financial instruments is to finance the Company’s

operations and accordingly manage its exposure to financial risks. The Company has various

financial assets and liabilities such as trade receivables, concession receivables, trade payables and

other liabilities, which arise directly from operations.

Overview of the Company’s Risk Management

The Company has an Enterprise Risk Management (ERM) System in place covering all areas of

its organization, and it is aligned with ISO 31000:2009 (Risk Management - Principles and

Guidelines).

The risk management process involves a systematic application of management policies,

procedures, and practices to the activities of communicating, consulting, establishing the context,

and identifying, analyzing, evaluating, treating, monitoring, and reviewing risk. It is aligned and

integrated in the Company’s business model through the annual Strategy Execution Process which

integrates strategic planning, balanced scorecard, risk management, budget and performance

management processes.

The implementation of the Company’s ERM System provides the following benefits and

advantages:

a. Proactively identifies and manages the key exposures of the Company to protect corporate

assets and profits by identifying and preventing risks before they occur. Thus, it helps avoid

losses which can impair the operations or financial position of the Company in case of

fortuitous events;

b. Identifies and exploits areas of “risk-based advantage”;

c. Provides management at all levels with the required information to make informed decisions on

issues critical to the success of the business and its projects;

d. Establishes the accountability of risk owners in the management of risks;

e. Provides balance in the management of risks and an objective basis for allocating resources;

f. Ensures that efforts and initiatives are well-coordinated so that the Company does not manage

risks in silo;

g. Monitors the implementation and effectiveness of the risk treatment options;

h. Ensures compliance with the policies and processes that are established to manage risks; and

i. Reduces the reliance on increasingly expensive insurance protection. Insurance may provide

the financial relief in case of loss. However, certain risks are not insurable, while some though

insurable, may be too costly and uneconomical to insure.

Risk Assessment

One major activity in the Company’s ERM System is the risk assessment. It is the overall process

of risk identification, risk analysis, and risk evaluation (ISO 31000:2009). It is performed at the

project level by project teams, at the operational level by the line and middle management, at the

executive level by the Management Committee, and at the strategic level by the BOD through its

Risk Management Committee.

24

Risk Treatment

Risk management strategies and action plans are formulated once the risks have been evaluated

and the top risks have been identified. Risk treatment is a process to modify risk (ISO

Guide 73:2009) and is synonymous with risk mitigation, risk elimination, risk prevention, and risk

reduction. It can involve:

a. Avoiding the risk by deciding not to start or continue with the activity that gives rise to the

risk;

b. Taking or increasing risk in order to pursue an opportunity;

c. Removing the risk source;

d. Changing the likelihood;

e. Changing the consequences;

f. Sharing the risk with another party or parties (including contracts and risk financing); and

g. Retaining the risk by informed decision.

Financial Risk Management Policy

The main financial risks arising from the Company’s financial instruments are credit risk, foreign

currency risk, interest rate risk and liquidity risk. The Company’s policies for managing the

aforementioned risks are summarized hereinafter below.

Credit Risk

The Company’s geothermal and power generation business trades with only one major customer,

NPC, a government-owned-and-controlled corporation. Any failure on the part of NPC to pay its

obligations to the Company would significantly affect the Company’s business operations. As a

practice, the Company monitors closely its collection from NPC and charges interest on delayed

payments following the provision of its respective SSAs and PPAs. Receivable balances are

monitored on an ongoing basis to ensure that the Company’s exposure to bad debts is not

significant. The maximum exposure of trade receivable is equal to its carrying amount.

With respect to credit risk arising from other financial assets of the Company, which comprise

cash and cash equivalents excluding cash on hand, other receivables, AFS investments and

derivatives assets, the Company’s exposure to credit risk arises from default of the counterparty,

with a maximum exposure equal to the carrying amount of these instruments before taking into

account any collateral and other credit enhancements.

The following tables show the Company’s aging analysis of past due but not impaired financial

assets as of March 31, 2012 and 2011 and December 31, 2011:


Past Due but Not Impaired

Neither Past

Due nor

Impaired

Less than

30 Days

31 Days

to 1 Year

Over 1 Year

up to

3 Years

Over

3 Years

Past

Due and

Impaired Total

(In Thousand Pesos)

Loans and receivables:

Cash and cash

equivalents P=13,117,802 P=– P=– P=– P=– P=– P=13,117,802

Trade receivables 3,175,371 166,045 74,521 34,146 – 130,807 3,580,890

Non-trade receivables 2,623 25,270 15,809 260 – – 43,962

Loans and notes

receivables 50,266

4,297 3,596 4,374 –

– 62,533

Employee receivables 18,318 – – – 18,318

Advances to

employees 36,551

405 1,974 741 –

– 39,671

Long-term receivables 561,517 – – – – 62,066 623,583

Due from Related

Parties – – – – – – –

25



Neither Past

Due nor

Impaired

Less than

30 Days

31 Days

to 1 Year

Over 1 Year

up to

3 Years

Over

3 Years

Past

Due and

Impaired Total

(In Thousand Pesos)

AFS investments:

Debt investments 649,830 – – – – – 649,830

Equity investments 20,604 – – – – – 20,604

Derivative Assets – – – – – – –

Total P=17,632,882 P=196,017 P=95,900 P=39,521 P=– P=192,873 P=18,157,193



Neither Past Due nor

Impaired

Less than

30 Days

31 Days

to 1 Year

Over 1 Year up to

3 Years

Over

3 Years

Past Due and

Impaired Total

(In Thousand Pesos)


Cash and cash equivalents P=12,486,732 P=– P=– P=– P=– P=– P=12,486,732

Trade receivables 2,942,461 75,181 150,377 37,576 – 130,839 3,336,434

Non-trade receivables 54,130 6,792 38,477 – – – 99,399 Loans and notes

receivables 59,332

– –

– –

– 59,332

Employee receivables 19,949 – – – – – 19,949 Advances to

employees 26,025

1,416 7,727 2,767 –

– 37,935

Long-term receivables – – – – – 61,062 61,062 Due from related

parties 8 – – – – – 8

AFS investments: Debt investments 673,854 – – – – – 673,854


Total P=16,282,935 P=83,389 P=196,581 P=40,343 P=– P=191,901 P=16,795,149



Neither Past

Due nor

Impaired

Less than

30 Days

31 Days

to 1 Year

Over 1 Year

up to

3 Years

Over

3 Years

Past

Due and

Impaired Total

(In Thousand Pesos)

Loans and receivables: Cash and cash

equivalents P=19,809,227 P=– P=– P=– P=– P=– P=19,809,227

Trade receivables 2,489,998 29,266 228,578 – 13,600 126,349 2,887,791

Non-trade receivables 44,899 2 979 3,871 – – 49,751

Loans and notes receivables 1,912

– 4,377 54,224 621

– 61,134

Employee receivables 28,953 – – – – – 28,953

Advances to employees 2,873

– 7,559 27,131 374

– 37,937

Long-term receivables 919 – – – – 46,673 47,592

AFS investments: Debt investments 690,344 – – – – – 690,344


Derivative Assets 11,789 – – – – – 11,789

Total P=23,100,973 P=29,268 P=241,493 P=85,226 P=14,595 P=173,022 P=23,644,577

Credit Quality of Neither Past due nor Impaired Financial Assets

Financial assets are classified as high grade if the counterparties are not expected to default in

settling their obligations. Thus, the credit risk exposure is minimal. These counterparties

normally include customers, banks and related parties who pay on or before due date. Financial

26

assets are classified as a standard grade if the counterparties settle their obligation with the

Company with tolerable delays. Low grade accounts are accounts, which have probability of

impairment based on historical trend. These accounts show propensity of default in payment

despite regular follow-up actions and extended payment terms.

As of March 31, 2012 and 2011 and December 31, 2011, financial assets categorized as neither

past due nor impaired are viewed by management as high grade, considering the collectability of

the receivables and the credit history of the counterparties.

Foreign Currency Risk

The Company’s exposure to foreign currency risk is mainly from the financial assets and liabilities

that are denominated in US dollar and Japanese yen. This primarily arises from future payments

of foreign-currency denominated loans and other commercial transactions and the Company’s

investment in ROP Bonds.

The Company’s exposure to foreign currency risk to some degree is mitigated by some provisions

in the Company’s GRESCs (formerly GSC), SSAs and PPAs. The service contracts allow full

cost recovery while the sales contracts include billing adjustments covering the movements in

Philippine peso and the US dollar rates, US Price and Consumer Indices, and other inflation

factors.

To mitigate further the effects of foreign currency risk, the Company will prepay, refinance or

hedge its foreign currency denominated loans, whenever deemed feasible.

The Company’s foreign currency-denominated financial assets and liabilities (translated into

Philippine peso) as of March 31, 2012 and 2011 and December 31, 2011 are as follows:

March 31, 2012

(Unaudited)


Original Currency Original Currency

Yen US Dollar Euro

Peso

Equivalent1 Yen US Dollar

Sweden

Kroner (SEK)

Peso

Equivalent2

Financial Assets

Loans and receivables: Cash equivalents − 83,204,000 − 3,571,115,680 − 20,850,000 − 904,681,500

Cash on hand and in banks − 1,370,780 − 58,833,870 − 3,333,265 − 144,630,368

Trade and other receivables − 1,693,038 − 72,665,191 − 2,336,589 − 101,384,597

AFS investments:

Government debt securities − 15,140,500 − 649,830,260 − 15,910,210 − 690,344,012

Financial assets at FVPL:

Derivative assets − − − − − 271,708 − 11,789,416

Total financial assets − 101,408,318 − 4,352,445,001 − 42,701,772 − 1,852,829,893

Current Financial Liabilities

Liabilities at amortized cost:

Trade and other payables 21,922,434 52,741,662 31,126 2,276,868,462 12,970,435 19,527,509 1,589,150 867,173,871

Current portion of

long-term debts − − − − 807,665,477 − − 422,883,249

Due to related Parties − − − − − − − −

Accrued interest on long - term debts 51,773,878 5,338,360 − 256,083,573 403,868,726 5,387,969 − 445,244,442

Derivative Liability − − − − 83,917 3,641,159

Total current financial liabilities 73,696,312 58,080,022 31,126 2,532,952,035 1,224,504,638 24,999,395 1,589,150 1,738,942,721

Noncurrent Financial

Liabilities


Long-term debts - net of

current portion − 468,928,688

− 20,126,419,289 7,873,171,062 466,922,524

− 24,382,059,357

Total financial liabilities 73,696,312 527,008,710 31,126 22,659,371,324 9,097,675,700 491,921,919 1,589,150 26,121,002,078 1USD1=JPY82.420 as of March 31, 2012, EURO1=P=57.1943 and USD1= P=42.920 as of March 31, 2012 1USD1=JPY82.871 as of March 31, 2011, USD1=SEK5.27 and USD1= P=43.390 as of March 31, 2011

27

December 31, 2011

(Audited)

Original Currency

Yen US Dollar

Sweden

Kroner (SEK)

Peso

Equivalent1

Financial Assets


Cash equivalents − 99,562,576 − 4,364,823,332

Cash on hand and in banks 125,208 1,909,007 − 83,761,320

Trade and other receivables − 1,802,580 − 79,025,107 AFS investments:

Government debt securities − 15,370,750 − 673,853,680

Total financial assets 125,208 118,644,913 − 5,201,463,439

Current Financial Liabilities


Trade and other payables 53,561,520 69,067,270 10,776,022 3,126,615,268

Current portion of long-term debts 35,992,417 − − 20,252,433

Accrued interest on long - term debts 52,256,670 10,214,835 − 477,222,468

Total current financial liabilities 141,810,607 79,282,105 10,776,022 3,624,090,169

Noncurrent Financial Liabilities Liabilities at amortized cost:

Long-term debts - net of current portion − 468,600,735 − 20,543,456,222

Total financial liabilities 141,810,607 547,882,840 10,776,022 24,167,546,391 1US$1=JP¥77.912, US$1= P=43.840 and SEK1=P=6.363 as of December 31, 2011

The following table demonstrates the sensitivity to a reasonably possible change in the US dollar

and Japanese yen exchange rates, with all other variables held constant, of the Company’s profit

before tax as at March 31, 2012 and 2011 and December 31, 2011 (arising from revaluation of

monetary assets and liabilities and derivative instruments.)


Foreign Currency

Appreciates (Depreciates) By

Effect on Income

Before Income Tax

USD 10% or PHP4.292 (P=1,826,685,460)

(10% or PHP4.292) 1,826,685,460

JPY 10% or PHP0.05786 (4,264,000)

(10% or PHP0.04734) 3,488,728

eEURO (10% or PHP5.71943) 178,026

10% or PHP5.71943 (178,026)


Foreign Currency


Effect on Income

Before Income Tax

USD 10% or P=4.38 (P=1,880,062,120)

(10% or P=4.38) 1,880,062,120

JPY 10% or P=0.06252 (P=8,858,171)

(10% or P=0.05115) 7,247,208

SSEK 10% or P=0.6363 (6,856,783)

(10% or P=0.6363) 6,856,783


Foreign Currency


Effect on Income

Before Income Tax

USD 10% or PHP4.40 (P=2,560,304,316)

(10% or PHP4.40) 2,560,304,316

JPY 10% or PHP0.05818 (529,267,239)

28


Foreign Currency


Effect on Income

Before Income Tax

(10% or PHP0.04760) 433,036,832

SSEK 10% or PHP0.91482 (1,453,789)

(10% or PHP0.74849) 1,189,464

Equity Price Risk

Equity price risk is the risk that the fair values of traded equity instruments decrease as the result

of the changes in the levels of equity indices and the value of the individual stocks.

As of March 31, 2012 and 2011 and December 31, 2011, the Company’s exposure to equity price

risk is minimal.

Interest Rate Risk

The Company’s exposure to the risk of changes in market interest rates relates primarily to the

Company’s long-term debt obligations with floating interest rates, derivative assets and AFS debt

investments.

The interest rates of some of the Company’s long-term borrowings and AFS debt investments are

fixed at the inception of the loan agreement.

The Company regularly evaluates its interest rate risk by taking into account the cost of qualified

borrowings being charged by its creditors. Prepayment, refinancing or hedging the risks are

undertaken when deemed feasible and advantageous to the Company.

Interest Rate Risk Table

The following tables provide for the effective interest rates and interest payments by period of

maturity of the Company’s long-term debts:

Interest

Rates

Within 1 Year

More than 1

year but less

than 4 years

4–5 Years

More than

5 Years

Total

March 31, 2012

(Unaudited)

Fixed Rate

PNB and Allied Bank 9.03% 416,291 1,014,291 246,520 423,956 2,101,058

IFC 1 7.40% 289,163 711,135 186,262 582,174 1,768,734

IFC 2 6.66% 273,799 608,541 165,548 723,131 1,771,019

FRCN 8.37% 157,487 134,304 – – 291,791

Series 1

Series 2 9.40% 388,739 688,205 34,631 – 1,111,575

Series 3 8.43% 89,978 76,732 – – 166,710

Peso Public Bonds

Series 1 8.64% 734,553 1,836,383 – – 2,570,936

Series 2 9.33% 326,645 979,934 326,645 – 1,633,224

USD 300.0 Notes 6.50% 836,940 2,510,820 836,940 3,347,760 7,532,460

Floating Rate

USD 175.0

Refinanced

Syndicated Term

Loan

1.75% +

LIBOR

152,040

350,108

83,664

18,953

604,765

29

Interest

Rates

Within

1 Year

More than 1 year

but less than 4

years

45 Years

More than

5 Years

Total

December 31, 2011

(Audited)

Fixed Rate

OECF

PNB and Allied Bank

IFC 1

IFC 2

3.20%

9.03%

7.40%

6.66%

P=327

416,291

289,163

273,799

P=–

1,014,291

711,135

608,541

P=–

246,520

186,262

165,548

P=–

423,956

582,174

723,131

P=327

2,101,058

1,768,734

1,771,019

FRCN

Series 1

8.37%

180,117

207,851

–

–

387,968

Series 2 9.40% 423,750 816,579 92,983 – 1,333,312

Series 3

US$ 300M Notes

8.43%

6.50%

102,907

854,880

118,752

2,564,640

–

854,880

–

3,846,960

221,659

8,121,360

Peso Public Bonds:

Series 1 8.64% P=734,553 P=1,836,383 P=– P=– P=2,570,936

Series 2 9.33% 326,645 979,934 326,645 – 1,633,224

Floating Rate

US$ 175.0M

Refinanced

Syndicated Term

Loan

1.75% +

LIBOR

155,724

372,675

89,541

38,506

656,446

Interest

Rates

Within 1 Year

More than 1

year but less

than 4 years

4–5 Years

More than

5 Years

Total

March 31, 2011

(Unaudited)

Fixed Rate

OECF

JBIC(b) 21st yen

PNB and Allied Bank

IFC

3%–5.7%

2.3% & 2.7%

9.03%

7.40%

P=9,443,044

112,946,671

442,550,903

328,398,611

P=17,556,550

295,022,974

1,135,576,892

875,164,931

P=4,813,545

84,264,290

295,004,688

224,284,236

P=20,271,423

452,678,103

670,476,024

872,275,000

P=52,084,562

944,912,038

2,543,608,507

2,300,122,778

FRCN 8.37% 201,916,530 291,790,448 – – 493.706,978

Series 1

Series 2 9.40% 422,449,569 868,715,640 115,562,362 23,087,102 1,429,814,673

Series 3 8.43% 102,537,849 134,667,664 – – 237,205,513

Peso Public Bonds

Series 1 8.64% 734,553,000 2,203,659,000 367,276,500 – 3,305,488,500

Series 2 9.33% 326,644,500 979,933,500 326,644,500 326,644,500 1,959,867,000

USD 300.0 Notes 6.5% 846,105,000 2,538,315,000 846,105,000 4,230,525,000 8,461,050,000

Floating Rate

USD 175.0

Syndicated Term

Loan

3.25% + Libor

303,696,590

455,544,885 – –

759,241,475

The following tables demonstrate the sensitivity to a reasonably possible change in interest rates,

with all other variables held constant, of the Company’s profit before tax and equity for the three

month period ending March 31, 2012 and 2011 and for the year ending December 31, 2011. The

effect also includes impact of changes in interest rates on derivatives.


Increase/Decrease

in Basis Points

Effect on Income

Before Income Tax

Effect on Equity

Excluding Income

US$ +100 (P=75,110,000) P=1,664,399

-100 75,110,000 29,278,708

30


Increase/Decrease

in Basis Points

Effect on Income

Before Income Tax

Effect on Equity

Excluding Income

USD +100 (P=76,720,000) (P=8,929,578)

-100 76,720,000 19,217,468


Increase/Decrease

in Basis Points

Effect on Income

Before Income Tax

Effect on Equity

Excluding Income

PHP +100 (P=2,086,718) (P=8,929,578)

-100 2,085,799 19,217,468

USD +100 (P=73,846,701) (P=17,173,190)

-100 73,845,782 20,147,216

Liquidity Risk

The Company’s objective is to maintain a balance between continuity of funding and sourcing

flexibility through the use of available financial instruments. The Company manages its liquidity

profile to meet its working and capital expenditure requirements and service debt obligations. As

part of the liquidity risk management program, the Company regularly evaluates and considers the

maturity of both its financial investments and financial assets (e.g. trade receivables, other

financial assets) and resorts to short-term borrowings whenever its available cash or matured

placements is not enough to meet its daily working capital requirements. To ensure immediate

availability of short-term borrowings, the Company maintains credit lines with banks on a

continuing basis.

Liquidity risk arises primarily when the Company has difficulty collecting its receivables from its

major customer, NPC. Other instances that contribute to its exposure to liquidity risk are when the

company finances long-term projects with internal cash generation and when there is credit crunch

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 liquidity

purposes based on contractual undiscounted cash flows as of March 31, 2012 and 2011 and

December 31, 2011.


On Demand

Within 30

Days

31 to 60

Days

61 to 180

Days

181 to 360

Days

Over

360 Days Total

(In Thousand Pesos)

AFS investments -

Debt investments P=649,830 P=– P=– P=– P=– P=– P=649,830

Loans and receivables -

Cash equivalents – 11,082,324 1,105,190 – – – 12,187,514

P=649,830 P=11,082,324 P=1,105,190 P=– P=– P=– P=12,837,344

31


On Demand

Within 30

Days

31 to 60

Days

61 to 180

Days

181 to 360

Days

Over

360 Days Total

(In Thousand Pesos)

AFS investments -

Debt investments P=673,854 P=– P=– P=– P=– P=– P=673,854 Loans and receivables -

Cash equivalents – 9,574,010 2,226,633 – – – 11,800,643

P=673,854 P=9,574,010 P=2,226,633 P=– P=– P=– P=12,474,497


On Demand Within 30

Days 31 to 60

Days 61 to 180

Days 181 to 360

Days Over

360 Days Total

(In Thousand Pesos)

AFS investments -

Debt investments P=690,344 P=– P=– P=– P=– P=– P=690,344

Loans and receivables - Cash equivalents – 13,769,016 – – – – 13,769,016

Financial Assets at FVPL-

Derivative Assets 11,789 11,789

P=690,344 P=13,780,805 P=– P=– P=– P=– P=14,471,149

The table below summarizes the maturity analysis of the Company’s financial liabilities as of

March 31, 2012 and 2011 and December 31, 2011 based on contractual undiscounted payments:


On

Demand

Less than

3 Months

3 to

6 Months

>6 to

12 Months

>1 to

5 Years

More than

5 Years Total

(In Thousand Pesos)


Accounts payable P=− P=7,031,579 P=− P=− P=− P=− P=7,031,579

Accrued interest and

guarantee fees 87,304 741,703 315,572 − − − 1,144,579

Other current liabilities − 59,633 − − − − 59,633

Due to related parties 43,505 − − − − − 43,505

Royalty fee payable − 136,846 87,500 49,073 − − 273,419

Long-term debts − 641,203 1,215,407 2,988,399 36,098,859 28,454,454 69,398,322

Total P=130,809 P=8,610,964 P=1,618,479 P=3,037,472 P=36,098,859 P=28,454,454 P=77,951,037


On

Demand

Less than

3 Months

3 to

6 Months

>6 to

12 Months

>1 to

5 Years

More than

5 Years Total

(In Thousand Pesos)


Accounts payable P=− P=5,028,880 P=− P=− P=− P=− P=5,028,880 Accrued interest and

guarantee fees 90,769 713,620 243,217 − − − 1,047,606

Other current liabilities − 3,518 − − − − 3,518 Due to related parties 60,091 − − − − − 60,091

Royalty fee payable − 133,228 87,500 136,573 − − 357,301

Long-term debts − 924,581 1,140,510 3,030,619 37,322,968 29,329,707 71,748,385

Total P=150,860 P=6,803,827 P=1,471,227 P=3,167,192 P=37,322,968 P=29,329,707 P=78,245,781

32


On Demand

Less than 3 Months

3 to 6 Months

>6 to 12 Months

>1 to 5 Years

More than 5 Years Total

(In Thousand Pesos)


Accounts payable P=− P=5,798,084 P=− P=− P=− P=− P=5,798,084

Accrued interest and guarantee fees 266,759 491,152 347,495 − − − 1,105,406

Other current liabilities − 1,023 − − − − 1,023

Short-term loan payable − 90,000 − − − − 90,000 Due to related parties 251,353 − − − − − 251,353

Royalty fee payable − 42,426 175,000 86,421 224,073 − 527,920

Long-term debts − 4,785,014 23,003,431 12,453,462 31,908,529 3,495,476 75,645,912 Financial Liabilities at FVPL:

Derivative Liability − 3,641 − − − − 3,641

Total P=518,112 P=11,211,340 P=23,525,926 P=12,539,883 P=32,132,602 P=3,495,476 P=83,489,830

Financial Assets and Financial Liabilities

Set out below is a comparison of carrying amounts and fair values of the Company’s financial

instruments as of March 31, 2011 and 2010 and December 31, 2010.

March 31, 2012

(Unaudited)

March 31, 2011

(Unaudited)

Carrying

Amount Fair Value

Carrying

Amount Fair Value

Financial Assets


Cash and cash equivalents P=13,123,430,589 P=13,123,430,589 P=19,814,618,839 P=19,814,618,839

Trade receivables 3,450,083,190 3,450,083,190 2,761,441,656 2,761,441,656

Non-trade receivables 43,962,775 43,962,775 49,750,536 49,750,536

Loans and notes receivables 62,531,897 62,531,897 61,134,558 61,134,558

Employee receivables 18,317,607 18,317,607 28,952,730 28,952,730

Advances to employees 39,669,975 39,669,975 37,937,045 37,937,045

Long-term receivables 561,517,259 561,517,259 919,031 872,568

AFS investments: – –

Debt investments 649,830,260 649,830,260 690,344,012 690,344,012

Equity investments 20,603,788 20,603,788 20,059,151 20,059,151

Financial assets at FVPL:

Derivative assets 11,789,416 11,789,416 11,789,416 11,789,416

P=17,981,736,756 P=17,981,736,756 P=23,476,946,974 P=23,476,900,51

Financial Liabilities

Financial liabilities at amortized cost:

Accounts payable P=7,031,579,051 P=7,031,579,051 P=5,798,083,773 P=5,798,083,773

Accrued interest and guarantee fees 1,144,578,826 1,144,578,826 1,276,554,336 1,276,554,336

Other current liabilities 59,633,315 59,633,315 1,022,811 1,022,811

Short term loan payable – – 90,000,000 90,000,000

Due to related parties 43,505,311 43,505,311 251,353,422 251,353,422

Royalty fee payable 217,335,769 220,496,096 495,319,145 503,054,037

Long-term debts 50,294,356,886 57,698,353,640 53,457,206,325 57,387,808,114

Financial liabilities at FVPL -

Derivative liabilities – – 3,641,161 3,641,161

P=58,790,989,158 P=66,198,146,239 P=61,373,180,973 P=65,311,517,654

33

December 31, 2011

(Audited)

Carrying

Amount Fair Value

Financial Assets


Cash and cash equivalents P=12,493,406,963 P=12,493,406,963

Trade receivables 3,205,594,212 3,205,594,212

Non-trade receivables 99,398,810 99,398,810

Loans and notes receivables 59,331,933 59,331,933

Employee receivables 19,948,544 19,948,544

Advances to employees 37,934,595 37,934,595

Due from related parties 7,812 7,812

Long-term receivables − −

AFS investments:

Debt investments 673,853,680 673,853,680

Equity investments 20,443,924 20,443,924

P=16,609,920,473 P=16,609,920,473


Financial liabilities at amortized cost:

Accounts payable P=5,028,879,595 P=5,028,879,595

Accrued interest and guarantee fees 1,047,605,943 1,047,605,943

Other current liabilities 3,517,746 3,517,746

Short term loan payable − −

Due to related parties 60,090,825 60,090,825

Royalty fee payable 287,626,313 290,907,188

Long-term debts 51,489,571,455 59,055,715,275

P=57,917,291,877 P=65,486,716,572

The methods and assumptions used by the Company in estimating the fair value of financial

instruments are:


Carrying amounts approximate fair values due to its short-term nature. Trade and Other Receivables, Due to Related Parties, Trade and Other Payables and Short-term

Loan Payable

These are instruments with relatively short maturity ranging from 1 to 3 months. Carrying

amounts approximate fair values.

Long-term Receivables

The fair value of long-term receivables was computed by discounting the expected cash flow using

the applicable rates of 3.01% in March 31, 2011.

AFS Investments

Fair values of quoted debt and equity securities are based on quoted market prices. For equity

investments that are not quoted, the investments are carried at cost less allowance for impairment

losses due to the unpredictable nature of future cash flows and the lack of suitable methods of

arriving at a reliable fair value.

Derivative Assets

The fair value of currency forwards was determined by reference to market values provided by

counterparty banks. The currency options were valued using Garman- Kohlhagen option pricing

model that takes into account such factors as the risk-free US Dollar and Euro interest rates and

historical volatility.

34

Long-term Debts and Royalty Fee Payable

The fair values for the Company’s long-term debts are estimated using the discounted cash flow

methodology with the applicable rates ranging from 1.75% to 10.96%, 1.91% to 10.88%, 2.06% to

10.57% in March 31, 2012, December 31, 2011 and March 31, 2011, respectively. Fair values of

royalty fee payable are determined using discount rates ranging from 5.37% to 6.02%, 5.32% to

6.43%, 4.07% to 6.04% in March 31, 2012, December 31, 2011, March 31, 2011, respectively. The following tables show the fair value information of financial instruments classified under

FVPL and AFS investments analyzed by source 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).

March 31, 2012

(Unaudited) Level 1 Level 2 Level 3 At Cost

AFS investments:

Debt investments P=649,830,260 P=649,830,260 P= P= P=

Equity investments 20,603,788 20,529,238 74,550

December 31, 2011

(Audited) Level 1 Level 2 Level 3 At Cost

AFS investments:

Debt investments P=673,853,680 P=673,853,680 P=− P=− P=−

Equity investments 20,443,924 20,369,374 − − 74,550

March 31, 2011

(Unaudited) Level 1 Level 2 Level 3 At Cost

AFS investments:

Debt investments P=707,524,992 P=707,524,992 P=− P=− P=−

Equity investments 18,166,353 18,091,803 − − 74,550

During 2012 and 2011, there were no transfers between Level 1 and Level 2 fair value measurements and no transfers into and out of Level 3 fair value measurements.

The Company classifies its financial instruments in the following categories. March 31, 2012 (Unaudited)

Loans and

Receivables

AFS

Investments

Financial

Assets at

FVPL

Liabilities at

Amortized

Cost

Financial

Liabilities at

FVPL Total

(In Thousand Pesos)

Financial Assets

Cash and cash equivalents P=13,123,431 P=− P=− P=− P=− P=13,123,431

Trade receivables 3,450,083 − − − − 3,450,083

Non-trade receivables 43,963 − − − − 43,963

Loans and notes receivables 62,532 − − − − 62,532

Employee receivables 18,318 − − − − 18,318

Advances to employees 39,670 − − − − 39,670

Other long-term receivables 561,517 − − − − 561,517

AFS - debt investments − 649,830 − − − 649,830

AFS - equity investments − 20,604 − − − 20,604

35


Loans and

Receivables

AFS

Investments

Financial

Assets at

FVPL

Liabilities at

Amortized

Cost

Financial

Liabilities at

FVPL Total

(In Thousand Pesos)

Financial Liabilities Accounts payable − − − 7,031,579 − 7,031,579

Accrued interest and guarantee

fees − − − 1,144,579 − 1,144,579

Other current liabilities − − − 59,633 − 59,633

Due to related parties − − − 43,505 − 43,505

Royalty fee payable − − − 217,336 − 217,336

Long-term debts − − − 50,294,357 − 50,294,357

Total P=17,299,514 P=670,434 P=− P=58,790,989 P=− P=76,760,937


Loans and

Receivables

AFS

Investments

Financial

Assets at

FVPL

Liabilities at

Amortized

Cost

Financial

Liabilities at

FVPL Total

(In Thousand Pesos)

Financial Assets







Due from related parties 8 − − − − 8




Accounts payable − − − 5,028,880 − 5,028,880

Accrued interest and guarantee

fees − − − 1,047,606 − 1,047,606




Long-term debts − − − 51,489,571 − 51,489,571

Total P=15,915,624 P=694,298 P=− P=57,917,292 P=− P=74,527,214


Loans and

Receivables

AFS

Investments

Financial

Assets at

FVPL

Liabilities at

Amortized

Cost

Financial

Liabilities at

FVPL Total

(In Thousand Pesos)

Financial Assets







Other long-term receivables 919 − − − − 919



Derivative Assets − − 11,789 − − 11,789


Accounts payable − − − 5,798,084 − 5,798,084

Accrued interest and guarantee − − 1,276,554 1,276,554

36


Loans and

Receivables

AFS

Investments

Financial

Assets at

FVPL

Liabilities at

Amortized

Cost

Financial

Liabilities at

FVPL Total

(In Thousand Pesos)

fees − −


Short-term loan payable − − − 90,000 − 90,000



Long-term debts − − − 53,457,206 − 53,457,206

Derivative Liabilities − − − − 3,641 3,641

Total P=22,754,756 P=710,403 P=11,789 P=61,436,030 P=3,641 P=84,916,619

The following table demonstrates the income, expense, gains or losses of the Company’s financial

instruments for the years ended March 31, 2012 and 2011 and December 31, 2011:

March 31, 2012

(Unaudited)



Effect on

Profit or Loss

Effect

on Equity

Effect on

Profit or Loss

Effect

on Equity

Effect on

Profit or Loss

Effect

on Equity

Increase

(Decrease)

Increase

(Decrease)

Increase

(Decrease)

Increase

(Decrease)

Increase

(Decrease)

Increase

(Decrease)

Loans and receivables

Interest income on: Cash in banks P=236,811 P=– P=6,388,430 P=– P=4,020,311 –

Cash equivalents 72,619,964 – 369,729,747 – 104,916,319 –

Trade receivables 1,377,041 – 2,983,715 – – –

Employee receivables 1,010,976 – 8,909,082 – – –

Due from related parties – – – – – –

Other receivables – – – – 14,319,893 –

P=75,244,792 P= P=388,010,974 P= P=123,256,523 P=

AFS investments Equity investments:

Net gain (loss) recognized

in equity – (36,814) – 2,277,570 – 1,892,798 Debt investments:

Net gain (loss) recognized

in equity – (11,646,862) (30,001,763) – (11,320,801) Net unrealized gain removed

from equity and recognized

in profit or loss – – 235,689 – Interest income on

ROP Bonds 18,357,534 – 1,099,376 – 217,799 – Gain on early redemption of

AFS bond investment – – 271,292 –

P=18,357,534 (P=11,683,676) P=1,606,357 (P=27,724,193) P=217,799 (P=9,428,003)

Derivative Financial Instruments

at FVPL

Fair value changes and premium on forward contracts – – 108,319,377 – 37,533,046 –

P=– P=– P=108,319,377 P=– P=37,533,046 P=–

Financial liabilities at amortized

cost

Interest expense on long-term

debts (1,001,271,276) – (4,005,331,916) – (986,627,533) – Interest expense on royalty

payable (4,697,188) – (31,332,828) – – –

Interest expense on short-term loans (1,140,521) – (782,375) –

“Day 1” gain on royalty fee – – – (9,676,224) –

Loss on extinguishment of deb – – (197,898,124) – – –

(P=1,005,968,464) P=– (P=4,235,703,389 P=– (P=997,086,132) P=–

37

Capital Management

The primary objective of the Company’s capital management is to ensure that it maintains a

healthy capital ratio in order to comply with its financial loan covenants and support its business

operations.

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 capital

contributions from its creditors and owners/shareholders through debt and new shares issuance,

respectively.

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 not more than 70:30.

The Company’s long-term liabilities include both the current and long-term portions of long-term

debts. Equity includes capital stock attributable to common and preferred shares, unrealized gains

reserve and retained earnings.

Table below shows the Company’s debt ratio as of March 31, 2012 and 2011 and

December 31, 2011.

March 31, 2012

(Unaudited)

December 31, 2011

(Audited)

March 31, 2011

(Unaudited)

Long-term liabilities P=50,294,356,886 P=51,489,571,455 P=53,457,206,325

Equity 30,810,826,866 29,646,601,493 30,684,626,415

Total P=81,105,183,752 P=81,136,172,948 P=84,141,832,740

Debt ratio

62.0% 63.5%

63.5%

Derivative Financial Instruments

The Company’s derivative financial instruments are accounted for as financial instruments at

FVPL. The table below shows the fair value of derivative financial instruments reported as assets

or liabilities as of March 31, 2011 and nil in March 31, 2012 and December 31, 2011.

March 31, 2011

(Unaudited)

Derivative

Assets

Derivative

Liabilities

Embedded derivatives -

Currency options P=– P=–

Free standing derivatives

Currency forwards 11,789,416 3,641,161

Total derivatives P=11,789,416 P=3,641,161

Presented as:

Current P=11,789,416 P=3,641,161

Noncurrent – –

Total derivatives P=11,789,416 P=3,641,161

Freestanding Derivatives. The Company enters into derivative transactions to hedge the foreign

currency exposure arising from its foreign currency denominated loan contracts. In 2012 and

2011, the Company had positions in the following types of freestanding derivatives to protect

itself against foreign currency risk arising from the changes on the exchange rate of the Peso in

relation to the foreign currency.

38

Foreign Currency Forward Contracts. Foreign currency forward contracts are contractual

agreements to buy or sell a foreign currency at an agreed rate on a future date. These are contracts

that are customized and transacted with a bank or financial institution.

For the three-month period ending March 31, 2011, the Company entered a total of 6 buy JPY -

sell USD foreign currency forward contracts with various counter-party banks. These contracts

have notional amounts and average rates of JP¥2,441 million and JP¥83.00, respectively.

Foreign Exchange Swap Contracts. These are contractual agreements between parties to

exchange two currencies at a certain exchange rate at a certain time in the future.

For the three-month period ending March 31, 2011, the company has entered a total of 26 foreign

exchange swap contracts with various counter-party banks. These contracts which include five sell

JPY-buy PHP, two sell JPY-buy USD and nineteen sell USD-buy PHP on trade date have notional

amounts of JP¥12,450 million, JP¥2,075 million and $448 million, respectively.

Embedded Derivatives. The Company has financial and non-financial contracts with derivatives

embedded in them. These embedded derivatives have the effect that some of the cash flows of the

financial and non-financial contracts vary in a similar way to a freestanding derivative.

Fair Value Changes of Derivatives

The tables below summarize the net movement in fair values of the Company’s derivatives as of

March 31, 2012 and 2011 and December 31, 2011.

Freestanding Derivatives

March 31, 2012

(Unaudited)

December 31, 2011

(Audited)

March 31, 2011

(Unaudited)

Derivative

Asset

Derivative

Liability

Derivative Asset

Derivative Liability

Derivative Asset

Derivative Liability

Currency Forwards

Balance at beginning of year P=– P=– P=– P=– P=– P=–

Net changes in fair value – – 381,813,015 (273,493,638) 57,326,207 (P=19,773,161) Settlement – – (381,813,015) 273,493,638 (45,536,791) 16,132,000

Balance at end of year P=– P=– P=– P=– P=11,789,416 (P=3,641,161)

The net changes in fair value of the Company’s derivatives for the periods ended December 31,

2011 and March 31, 2011, amounting to P=108.32 million gain and P=37.5 million gain, respectively

were taken to the “Derivatives gain (loss)” account in the consolidated statements of income.

33. Event After the Financial Reporting Period

On April 4, 2012 the company entered into a 10-year 7,000.00 billion Fixed Rate Note Facility

Agreement(FXCN) to prepay existing FXCN series one (P=2,644.00 million), two (P=1,500.00

million) and three (P=4,856.00 million). The Company has prepaid series one and three for

P=1,774.32 million and P=1,007.07 million, respectively. Subsequently, on May 3, 2012 the FRCN

series 2 (P=4,856.00 million) was also prepaid for P=4,211.10 million.

The Company’s subsidiaries applications as Renewable Energy developer of Tongonan and

Palinpinon Power Plant for GCGI and BMGPP for BGI were approved on May 8, 2012.

Documents

MA. CONCEPCION M. MAGDARAOG - pds.com.ph€¦ · One Corporate Centre Julia Vargas cor. Meralco Ave., Ortigas Center, Pasig City (Company’s Address) (632) 755-2332 (Telephone Number)