EDC PR 2016 (FS section)

Legal Claims
The Company is contingently liable for lawsuits or claims filed by third parties, including labor
related cases, which are pending decision by the courts, the outcomes of which are not presently
determinable. In the opinion of management and its legal counsel, the eventual total liability from
these lawsuits or claims, if any, will not have a material effect on the consolidated financial
statements (see Notes 3 and 18).
33. Geothermal Service Concession Contracts
Geothermal Service Contracts
Under P.D. 1442, all geothermal resources in public and/or private lands in the Philippines,
whether found in, on or under the surface of dry lands, creeks, rivers, lakes, or other submerged
lands within the waters of the Philippines, belong to the State, inalienable and imprescriptible,
and their exploration, development and exploitation. Furthermore, the Government may enter into
service contracts for the exploration, development and exploitation of geothermal resources in the
Philippines.
Pursuant to P.D. 1442, the Parent Company had entered into the following Geothermal Service
Contracts (GSCs) with the Government of the Republic of the Philippines (represented by the
DOE) for the exploration, development and production of geothermal fluid for commercial
utilization:
a. Tongonan, Leyte, dated May 14, 1981
b. Southern Negros, dated October 16, 1981
c. Bac-Man, Sorsogon, dated October 16, 1981
d. Mt. Apo, Kidapawan, Cotabato, dated March 24, 1992
e. Mt. Labo, Camarines Norte and Sur, dated March 19, 1994
f. Northern Negros, dated March 24, 1994
g. Mt. Cabalian, Southern Leyte, dated January 13, 1997
The exploration period under the service contracts shall be five (5) years from the effective date,
renewable for another two years if the Parent Company has not been in default in its exploration,
financial and other work commitments and obligations and has provided a work program for the
extension period acceptable to the Government. Where geothermal resource in commercial
quantity is discovered during the exploration period, the service contracts shall remain in force for
the remainder of the exploration period or any extension thereof and for an additional period of
25 years thereafter, provided that, if the Parent Company has not been in default in its obligations
under the contracts, the Government may grant an additional extension of 15 to 20 years.
Under P.D. 1442, the right granted by the Government to the Parent Company to explore, develop,
and utilize the country’s geothermal resource is subject to sharing of net proceeds with the
Government. The net proceeds is what remains after deducting from the gross proceeds the
allowable recoverable costs, which include development, production and operating costs. The
allowable recoverable costs shall not exceed 90% of the gross proceeds. The Parent Company
pays 60% of the net proceeds as government share and retains the remaining 40%. The 60%
government share is comprised of government share and income taxes. The government share is
split between the DOE (60%) and the LGUs (40%) where the project is located.
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I Energy Development Corporation Performance Report 2016