EDC PR 2016 (FS section)

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Financial Statement Geothermal Renewable Energy Service Contracts and Geothermal Operating Contracts R.A. 9513, otherwise known as the Renewable Energy Act of 2008 (RE Law) and which became effective in January 2009, mandates the conversion of existing GSCs under P.D. 1442 into Geothermal Renewable Energy Service Contracts (GRESCs) so companies may avail of the incentives under the RE Law. Aside from the tax incentives, the significant terms of the service concessions under the GRESCs are similar to the GSCs except that the Parent Company has control over any significant residual interest over the steam fields, power plants and related facilities throughout the concession period and even after the concession period. On September 10, 2009, the Parent Company was granted the Provisional Certificate of Registration as an RE Developer for the following existing projects: (1) GSC No. 01 - Tongonan, Leyte, (2) GSC No. 02 - Palinpinon, Negros Oriental, (3) GSC No. 03 - Bacon-Manito, Sorsogon/Albay, (4) GSC No. 04 - Mt. Apo, North Cotabato, and (5) GSC No. 06 - Northern Negros. With the receipt of the certificates of provisional registration as geothermal RE Developer, the fiscal incentives of the RE Law were availed of by the Parent Company retroactive from the effective date of such law on January 30, 2009. Fiscal incentives include, among others, change in the applicable corporate tax rate from 30% to 10% for RE-registered activities. The GSC were fully converted to GRESCs upon signing of the parties on October 23, 2009, thereby the Company is now the holder of five (5) GRESCs and the corresponding DOE Certificate Registration as an RE Developer for the following geothermal projects: 1) GRESC 2009-10-001 for Tongonan Geothermal Project 2) GRESC 2009-10-002 for Southern Negros Geothermal Project 3) GRESC 2009-10-003 for Bacon-Manito Geothermal Project 4) GRESC 2009-10-004 for Mt. Apo Geothermal Project 5) GRESC 2009-10-005 for Northern Negros Geothermal Project On February 19, 2010, the Parent Company’s GSC in Mt. Labo in Camarines Norte and Sur were converted to GRESC 2010-02-020. On March 24, 2010, the DOE issued to the Parent Company a new GRESC for Mainit Geothermal Project under DOE Certificate of Registration No. GRESC 2010-03-021. In 2015, the Parent Company recognized loss on direct write-off of exploration and evaluation assets related to the Mt. Labo and Mainit Geothermal Projects amounting to ₱7.0 million and ₱4.3 million, respectively, due to issues on productivity and sustainability of geothermal resources in the area (see Note 14). The remaining service contract of the Parent Company covered by P.D. 1442 as of December 31, 2013 is the Mt. Cabalian in Southern Leyte with a term of 25 years from the effective date of the contract on January 31, 1997 and for an additional period of 25 years if the Parent Company has not been in default in its obligations under the GSC. As discussed in Note 3 to the consolidated financial statements, evaluation and exploration assets related to Cabalian project were impaired in 2013. In 2014, after thorough assessment, the Parent Company surrendered to the Department of Energy the Geothermal Service Contract covering the Southern Leyte Geothermal Project located in Cabalian, Southern Leyte. The Parent Company has found the project not viable considering the size of the resource and the risk associated with the development and sustainability thereof. The Company wrote off the allowance recognized for Cabalian project amounting to ₱574.8 million. 285
EDC also holds geothermal resource service contracts, each with a five-year pre-development period expiring in 2017 and a 25-year contract period expiring between 2037 and 2040, for the following prospect areas: 1) Ampiro Geothermal Project 2) Mandalagan Geothermal Project 3) Mt. Zion Geothermal Project 4) Lakewood Geothermal Project 5) Balingasag Geothermal Project 6) Mt. Zion 2 Geothermal Project 7) Amacan Geothermal Project Under the GRESCs, the Parent Company pays the Government government share equivalent to 1% to 1.5% of the gross income from the sale of geothermal steam produced and such other income incidental to and arising from generation, transmission, and sale of electric power generated from geothermal energy within the contract areas (see Note 16). Under the GRESCs, gross income derived from business is an amount equal to gross sales less sales returns, discounts and allowances, and cost of goods sold. Cost of goods sold includes all business expenses directly incurred to produce the steam used to generate power under a GRESC. The RE Law also provides that the exclusive right to operate geothermal power plants shall be granted through a Renewable Energy Operating Contract with the Philippine Government through the DOE. On May 8, 2012, EDC, through its subsidiaries GCGI and BGI secured three (3) Geothermal Operating Contracts (GOCs), each with a 25-year contract period expiring in 2037 and renewable for another 25 years, covering the following power plant operations: 1) Tongonan Geothermal Power Plant under DOE Certificate of Registration No. GOC 2012-04-038 2) Palinpinon Geothermal Power Plant under DOE Certificate of Registration No. GOC 2012-04-037 3) Bacon-Manito Geothermal Power Plant under DOE Certificate of Registration No. GOC 2012-04-039 The Government share, presented as “Government share” under the “Costs of sale of electricity” account, for both the GRESCs and GOCs is allocated between the DOE (60%) and the LGUs (40%) within the applicable contract area. Total outstanding government share and the related expense are shown in Notes 16 and 21 to the consolidated financial statements, respectively. 34. Power Purchase Agreements and Power Supply Agreement a. Power Purchase Agreement 588.4 MW Unified Leyte The PPA provides, among others, that NPC shall pay the Parent Company a base price per kilowatt-hour of electricity delivered subject to inflation adjustments. The PPA stipulates a contracted annual energy of 1,370 GWH for Leyte-Cebu and 3,000 GWH for Leyte-Luzon throughout the term of the PPA. It also stipulates that the Parent Company shall specify the nominated energy for every contract year. The contract is for a period of 25 years, which commenced in November 1997. 286 I Energy Development Corporation Performance Report 2016
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2016 Audited Consolidated Financial
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Compliance • We have monitored th
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156 I Energy Development Corporatio
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We have fulfilled the responsibilit
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Those charged with governance are r
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ENERGY DEVELOPMENT CORPORATION (A S
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Preferred Stock (Note 19) Common St
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Years Ended December 31 2016 2015 2
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Southern Negros, Valencia, Negros O
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EDC Drillco EDC Drillco is a compan
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Geotermica Chile SPA also incorpora
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Authorization for Issuance of the C
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These amendments are applied prospe
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Applicability of IFRIC 12, Service
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In August 2013, EDC Geotermica SpA
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Fair Value Measurement of Financial
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In 2011, EDC recognized full impair
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The factors that the Company consid
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Recognition of Deferred Income Tax
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Current versus Non-current Classifi
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In 2015, the functional currency of
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Construction in progress represents
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would have been determined, net of
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Classified under loans and receivab
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Derivative financial instruments ar
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the allowance account. Any subseque
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maturity or expected disposal date
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has expired, as well as the Parent
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Proceeds from Insurance Claims Proc
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Future Changes in Accounting Polici
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The Company is currently assessing
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oader review of the research projec
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LGBU NIGBU BGBU MAGBU Pantabangan/
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7. Trade and Other Receivables 2016
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The movements of the net accumulate
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12. Property, Plant and Equipment L
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Total borrowing costs capitalized t
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Bac-Man 3 Engineering Procurement a
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13. Goodwill and Intangible Assets
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Page 91 and 92: ₱8.5 billion GCGI Term Loan On Ma
Page 93 and 94: 19. Equity Capital Stock As require
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Page 129 and 130: Pertinent details of the IRS are as
Page 131 and 132: The Company monitors capital using
Page 133: Legal Claims The Company is conting
Page 137 and 138: As of December 31, 2016, the Compan
Page 139 and 140: As of December 31, 2016, the Compan
Page 141 and 142: Ancillary Services Procurement Agre
Page 143 and 144: 41. ULGEI Power Supply Agreements A
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