EDC PR 2016 (FS section)

Bac-Man 3 Engineering Procurement and Construction (EPC) Contract
On September 5, 2015, EDC entered into a design and equipment supply contract with Hyundai
Engineering Co., Ltd. and a construction services contract with Galing Power & Energy
Construction Co. Inc. for the engineering, procurement and construction of the 31-MW
Bac-Man 3 geothermal power plant in Barangays Capuy, Bucalbucan, Rizal and Bulabog,
Sorsogon City, Sorsogon Province.
Collection of Liquidated Damages from Weir Engineering Services Limited (Weir)
In June 2016, BGI and Weir Engineering Services Limited (Weir) have agreed to (i) settle all
claims arising from the contract for Works - Completion of Works to Steam Turbine and
Generator of Units 1, 2, and 3 dated March 29, 2012; and (ii) jointly take steps to cause the
discontinuance of the arbitration case pending with the International Chamber of Commerce. As a
result, BGI and Weir have entered into a settlement whereby BGI would receive a net
reimbursement for the liquidated damages amounting to US$2.5 million (₱122.0 million). The net
reimbursement amounting to US$2.5 million (₱122.0 million) was accounted for as a reduction
from the property, plant and equipment under the “Power Plants” category.
Construction in Progress
The Company’s construction in progress account includes steam assets and other on-going
construction projects. Steam assets are mainly composed of in-progress production wells and
FCRS, while other construction projects include on-going rehabilitation activities in the plants,
retrofitting projects and other constructions.
The construction in progress account included cost capitalized to the Bago Solar Project
amounting to ₱23.3 million. The Bago Solar Project was granted a Certificate of Confirmation of
Commerciality by the DOE on March 5, 2015. However, the Company decided to put the
development of the project on hold as the project economics are being evaluated on a post-FIT
scenario. Accordingly, a provision for impairment loss equivalent to the carrying amount of the
Bago Solar Project amounting to ₱23.3 million was recognized in 2015 (see Note 22). No similar
provision was recognized in 2016 and 2014.
Estimated Rehabilitation and Restoration Costs
FCRS and production wells include the estimated rehabilitation and restoration costs of the
Company’s steam fields and power plants’ contract areas at the end of the contract period. These
were based on technical estimates of probable costs, which may be incurred by the Company in
the rehabilitation and restoration of the said steam fields’ and power plants’ contract areas from
2031 up to 2044, using a risk-free discount rate and adjusted the cash flows to settle the provision.
Similarly, EBWPC has recorded an estimated provision for asset retirement obligation relating to
the removal and disposal of all wind farm materials, equipment and facilities from the contract
areas at the end of contract period. The amount of provision was recorded as part of the costs of
power plants.
230
I Energy Development Corporation Performance Report 2016