EDC PR 2016 (FS section)

In August 2013, EDC Geotermica SpA subscribed an amount of Chilean Peso 29,099,669,042
(US$51 million) or 33,283,391,332 shares at Chilean Peso 0.8743 per share to be paid within
ten (10) years. No payment has been made by the Company as of December 31, 2016 and
2015.
Basic surface studies as well as civil works, road rehabilitation, base camp, and avalanche
controls have already been completed. Additional roads, drilling pad construction, base camp
expansion and water supply system have been installed and completed in 2015. Exploration
drilling program is intended to resume in 2016 or as soon as all the relevant permits have been
obtained. As of December 31, 2016 and 2015, the capital expenditures funding made by the
Company to Enerco amounting to ₱1,501.6 million and ₱947.1 million were recorded as part
of “Others” under “Other noncurrent assets” account (see Note 15).
Management has determined that the Company’s involvement in the operations of Enerco did
not result into acquisition of Enerco as of December 31, 2016 and 2015 since the terms of the
Company’s investment in Enerco are still subject to significant and substantial conditions
(i.e., positive results of resource assessment in the area).
Deferred Revenue on Stored Energy
Under its addendum agreements with NPC, the Parent Company has a commitment to NPC with
respect to certain volume of stored energy that NPC may lift for a specified period, provided that
the Parent Company is able to generate such energy over and above the nominated energy for each
given year in accordance with the related PPAs. The Company has made a judgment based on
historical information that future liftings by NPC from the stored energy is not probable and
accordingly, has not deferred any portion of the collected revenues. The stored energy
commitments are, however, disclosed in Note 32 to the consolidated financial statements.
Impairment of AFS Investments
The Company classifies certain financial assets as AFS investments and recognizes movements in
their fair value in equity. When the fair value declines, management makes assumptions about the
decline in value to determine whether it is an impairment that should be recognized in the profit or
loss.
A significant or prolonged decline in the fair value of an investment in an equity instrument below
its cost is also being considered by the Company as an objective evidence of impairment.
The determination of what is “significant” and “prolonged” requires judgment. The Company
generally considers “significant” as decline of 20% or more below the original cost of the
investment, and “prolonged” as greater than twelve (12) months assessed against the period in
which the fair value has been below its original cost. The Company further evaluates other
factors, such as volatility in share price for quoted equities and the discounted cash flows for
unquoted equities in determining the amount to be impaired.
In the case of debt instruments classified as AFS, the Company first assesses whether impairment
exists individually for financial assets that are individually significant, or collectively for financial
assets that are not individually significant. If the Company determines that no objective evidence
of impairment exists for an individually assessed financial assets, whether significant or not, it
includes the asset in a group of financial assets with similar credit risk characteristics and
collectively assesses them for impairment. Assets that are individually assessed for impairment
and for which an impairment loss is, or continue to be, recognized are not included in a collective
assessment of impairment.
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I Energy Development Corporation Performance Report 2016