COVER SHEET

for
SEC FORM 17-Q

SEC Registration Number

C S 2 0 0 6 0 4 4 9 4

COMPANY NAME
M E T R O P A C I F I C I N V E S T M E N T S C O R P

O R A T I O N A N D S U B S I D I A R I E S

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )

1 0 t h F l o o r , M G O B u i l d i n g , L e g a

s p i c o r n e r D e l a R o s a S t r e e t s ,

L e g a s p i V i l l a g e , M a k a t i C i t y

Secondary License Type, If

Form Type Department requiring the report Applicable

1 7 - Q

COMPANY INFORMATION
Company’s Email Address Company’s Telephone Number Mobile Number
info@mpic.com.ph +632-888-0888 –

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)
1,305 as of June 30, 2017 Last Friday of May December 31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation
Name of Contact Person Email Address Telephone Number/s Mobile Number
Mr. David J. Nicol djnicol@mpic.com.ph +632-888-0888 –

CONTACT PERSON’s ADDRESS

10/F MGO Building, Legaspi corner Dela Rosa Streets

Legaspi Village, Makati 0721 Philippines
NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the
Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person
designated.
2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records with
the Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from
liability for its deficiencies.
 SEC Number CS200604494
File Number_______

Metro Pacific Investments Corporation

(Company’s Full Name)

10/F MGO Bldg., Legaspi cor. Dela Rosa Sts.

Legaspi Village, 0721 Makati City
(Company’s Address)

(632) 888-0888
Telephone Number

______N/A_______
(Fiscal Year Ending)
(month & day)

Form 17-Q
Form Type

_________N/A__________
Designation (If applicable)

30 June 2017
Period Date Ended

____________N/A____________
(Secondary License Type and File Number)
12. Indicate by check mark whether the registrant:

(a) has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17 thereunder or
Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the
Corporation Code of the Philippines, during the preceding twelve (12) months (or for such shorter
period the registrant was required to file such reports)

Yes [ x ] No [ ]

(b) has been subject to such filing requirements for the past ninety (90) days.

Yes [ x ] No [ ]
 TABLE OF CONTENTS

Exhibit I Unaudited Interim Consolidated Financial Statements 1

Exhibit II Notes to Unaudited Interim Consolidated Financial Statements 9
Exhibit III Management's Discussion and Analysis of Financial Condition
and Results of Operations 66
Financial Highlights and Key Performance Indicators 67
Operational Review
MPIC Consolidated (June 2017 vs June 2016) 69
Operating Segments of the Group (June 2017 vs June 2016) 73
MPIC Consolidated (2Q 2017 vs 2Q 2016) 84
Discussion of Financial Position 87
Liquidity & Capital Resources 91
Financial Soundness Indicators 93
Risk Factors 94
Key Variable and Other Qualitative and Quantitative Factors 97
 Item 1

FINANCIAL
STATEMENTS
 Exhibit I

METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Amounts in Millions except Per Share Amounts)
Six Months ended June 30 Three Months ended June 30
2017 2016 2017 2016

OPERATING REVENUES
Water and sewerage services revenue P
=10,314 =10,120
P P
=5,490 =5,185
P
Toll fees 6,460 5,946 3,358 3,065
Hospital revenue 5,034 4,112 2,489 2,079
Rail revenue 1,528 1,478 729 732
Logistics and other revenue 760 85 536 85
24,096 21,741 12,602 11,146
COST OF SALES AND SERVICES (Note 20) (9,942) (8,754) (5,156) (4,497)
GROSS PROFIT 14,154 12,987 7,446 6,649
General and administrative expenses (Note 21) (5,001) (4,233) (2,254) (2,035)
Interest expense (Note 22) (2,732) (2,726) (1,383) (1,382)
Share in net earnings of equity method investees (Note 9) 3,424 3,522 1,680 2,102
Interest income (Note 22) 174 213 90 116
Construction revenue and other income (Note 23) 13,251 8,203 8,912 4,216
Construction costs and other expenses (Note 23) (10,496) (6,429) (6,849) (2,934)
INCOME BEFORE INCOME TAX 12,774 11,537 7,642 6,732
PROVISION FOR (BENEFIT FROM) INCOME
TAX
Current 2,172 2,075 1,177 1,168
Deferred (Note 11) 419 (461) 304 (575)
2,591 1,614 1,481 593
NET INCOME 10,183 9,923 6,161 6,139
OTHER COMPREHENSIVE INCOME (LOSS)
(Note 19)
Net OCI to be reclassified to profit or loss in subsequent
periods 212 606 42 791
Net OCI not being reclassified to profit or loss in
subsequent periods (88) − (92) −
124 606 (50) 791
TOTAL COMPREHENSIVE INCOME 10,307 10,529 6,111 6,930

Net Income Attributable to:

Owners of the Parent Company P
=7,821 =6,980
P P
=4,814 =4,352
P
Non-controlling interest 2,362 2,943 1,347 1,787
P
=10,183 =9,923
P P
=6,161 =6,139
P

Total Comprehensive Income Attributable to:

Owners of the Parent Company P
=7,945 =7,571
P P
=4,764 =5,143
P
Non-controlling interest 2,362 2,958 1,347 1,787
P
=10,307 =10,529
P P
=6,111 =6,930
P

EARNINGS PER SHARE (Note 24)

Basic Earnings Per Common Share, Attributable to
Owners of the Parent Company (In Centavos) P
=24.81 =24.42
P P
=15.27 =14.87
P
Diluted Earnings Per Common Share, Attributable to
Owners of the Parent Company (In Centavos) P
=24.78 =24.40
P P
=15.26 =14.86
P
See accompanying notes to the Unaudited Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis

2
 METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Millions)
Unaudited Audited
June 30, December 31,
2017 2016
ASSETS
Current Assets
Cash and cash equivalents and short-term deposits (Note 5) P
=39,772 =19,469
P
Restricted cash (Note 5) 2,848 2,432
Receivables (Note 6) 11,324 5,171
Other current assets (Note 7) 9,767 4,728
Total Current Assets 63,711 31,800

Noncurrent Assets
Restricted cash (Note 5) − 889
Available-for-sale financial assets (Note 8) 1,714 1,859
Investments and advances (Note 9) 128,416 126,556
Goodwill (Note 4) 35,401 21,004
Service concession assets (Note 10) 158,992 152,693
Property, plant and equipment 64,550 10,480
Deferred tax assets 848 467
Other noncurrent assets (Note 11) 19,035 5,854
Total Noncurrent Assets 408,956 319,802
P
=472,667 =351,602
P
See accompanying notes to the Unaudited Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis

(Forward)

3
 METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Millions)

Unaudited Audited
June 30, December 31,
2017 2016
LIABILITIES AND EQUITY

Current Liabilities
Accounts payable and other current liabilities (Note 12) P
=20,881 =14,965
P
Income tax payable 1,314 466
Due to related parties (Note 16) 3,779 1,713
Current portion of:
Provisions (Note 13) 5,557 5,229
Long-term debt (Note 14) 12,987 3,797
Service concession fees payable (Note 10) 747 874
Total Current Liabilities 45,265 27,044
Noncurrent Liabilities
Noncurrent portion of:
Provisions (Note 13) 5,111 239
Service concession fees payable (Note 10) 28,597 28,000
Long-term debt (Note 14) 153,277 93,219
Due to related parties (Note 16) 11,478 6,726
Deferred tax liabilities 7,761 3,925
Other long-term liabilities (Note 15) 5,732 4,368
Total Noncurrent Liabilities 211,956 136,477
Total Liabilities 257,221 163,521

Equity
Owners of the Parent Company:
Capital stock (Note 17) 31,624 31,619
Additional paid-in capital 68,457 68,438
Treasury shares (Note 17) (167) (167)
Equity reserves (Note 18) 6,322 6,282
Retained earnings 49,656 43,889
Other comprehensive income reserve (Note 18) 2,095 1,971
Total equity attributable to owners of the Parent Company 157,987 152,032
Non-controlling interest 57,459 36,049
Total Equity 215,446 188,081
P
=472,667 =351,602
P
See accompanying notes to the Unaudited Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis

4
METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in Millions)
Six Months Ended June 30
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax P
=12,774 =11,537
P
Adjustments for:
Interest expense (Note 22) 2,732 2,726
Amortization of service concession assets (Notes 10 and 20) 1,868 1,789
Depreciation and amortization (Notes 20 and 21) 733 602
Unrealized foreign exchange loss (gain) – net 109 25
Share in net earnings of equity method investees (Note 9) (3,424) (3,522)
Dividend income (Note 23) (2,541) (1,215)
Interest income (Note 22) (174) (213)
Others (251) (37)
Operating income before working capital changes 11,826 11,692
Decrease (increase) in:
Restricted cash (416) (57)
Receivables (680) (658)
Due from related parties and other current assets (458) (185)
Increase (decrease) in:
Accounts payable and other current liabilities 29 (732)
Accrued retirement cost and provisions 653 (386)
Net cash generated from operations 10,954 9,674
Income tax paid (2,028) (1,509)
Interest received 195 230
Net cash provided by operating activities 9,121 8,395
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in:
Short-term deposits (Note 5) 2,198 4,581
Other noncurrent assets 235 (413)
Dividends received from:
Equity method investees and AFS financial assets 2,224 2,785
Beacon Electric’s preferred shares 1,586 ─
Proceeds from:
Sale of investment in associate net of transaction cost (Note 9) 12,403 ─
Redemption of Beacon Electric’s preferred shares 3,500 ─
Acquisition of subsidiary, net of cash acquired (Note 4) (6,127) (3,154)
Acquisition of/Additions to:
Service concession assets (Note 10) (7,534) (6,907)
Available-for-sale financial assets (Note 8) (2,560) (1,192)
Property, plant and equipment (1,161) (1,415)
Investments in equity method investees (Note 9) (449) (20,719)
Net cash provided by (used in) investing activities 4,315 (26,434)
(forward)

5
METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in Millions)
Six Months Ended June 30
2017 2016
CASH FLOWS FROM FINANCING ACTIVITIES
Receipt or proceeds from:
Long-term debt (Note 14) 7,957 3,724
Issuance of shares (Note 17) 22 188
Deposit for future stock subscription (Note 17) ─ 21,960
Contributions from non-controlling stockholders 30 728
Payments of/for:
Interest and other financing charges (2,065) (2,202)
Long-term debt (Note 14) (4,000) (2,688)
Due to related party (2,001) ─
Service concession fees payable (701) (674)
Acquisition of treasury shares (168) (23)
Transaction costs on long-term debt (58) (459)
Dividends paid to owners of the Parent Company (2,147) (1,704)
Dividends paid to non-controlling stockholders (1,540) (1,000)
Net cash provided by (used in) financing activities (4,671) 17,850
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,765 (189)
CASH AND CASH EQUIVALENTS AT JANUARY 1 15,455 16,469
CASH AND CASH EQUIVALENTS AT JUNE 30 (Note 5) P
=24,220 =16,280
P
See accompanying notes to the Unaudited Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis

6
METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(Amounts in Millions)

Six Months Ended June 30, 2017

Attributable to Owners of the Parent Company
Other
Additional Equity Comprehensive Non-
Capital Paid-in Treasury Reserves Retained Income Reserve controlling Total
Stock Capital Shares (Note 18) Earnings (Note 18) Total Interest (NCI) Equity
At January 1, 2017 P
=31,619 P
=68,438 (P
=167) P
=6,282 P
=43,889 P
=1,971 P
=152,032 P
=36,049 P
=188,081
Total comprehensive income for the year:
Net income – – – – 7,821 – 7,821 2,362 10,183
Other comprehensive income – – – – – 124 124 – 124
Executive Stock Option Plan (ESOP) (Note 25) 5 19 – (2) – – 22 – 22
Restricted Stock Unit Plan (RSUP) (Note 25) – – – 33 – – 33 – 33
Cash dividends declared (Note 17) – – – – (2,147) – (2,147) – (2,147)
Other comprehensive income charged to retained earnings – – – – 93 – 93 – 93
Business combinations and others (Note 4) – – – 9 – – 9 20,589 20,598
Dividends declared to non-controlling stockholders – – – – – – – (1,541) (1,541)
At June 30, 2017 P
=31,624 P
=68,457 (P
=167) P
=6,322 P
=49,656 P
=2,095 P
=157,987 P
=57,459 P
=215,446

Six Months Ended June 30, 2016

Attributable to Owners of the Parent Company
Other
Additional Equity Comprehensive
Capital Paid-in Reserves Retained Income Reserve Non-controlling
Stock Capital (Note 18) Earnings (Note 18) Total Interest Total Equity
At January 1, 2016 =27,935
P =49,980
P =6,248
P =35,149
P =510
P =119,822
P =30,955
P =150,777
P
Total comprehensive income for the period:
Net income − − − 6,980 − 6,980 2,943 9,923
Other comprehensive income − − − − 591 591 15 606
Issuance of preferred shares (Note 17) 41 − − − − 41 − 41
Executive Stock Option Plan 32 136 (21) − − 147 − 147
Cash dividends declared (Note 17) − − − (1,704) − (1,704) − (1,704)
Dividends declared to non-controlling stockholders − − − − − − (980) (980)
NCI on Business Combination and others − − − − − − 1,338 1,338
At June 30, 2016 =28,008
P =50,116
P =6,227
P =40,425
P =1,101
P =125,877
P =34,271
P =160,148
P

See accompanying notes to the Unaudited Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis

7
Metro Pacific Investments Corporation
Aging of Receivables
(Amounts in Millions)

June 30, 2017

(Unaudited)
0 - 30 31 - 60 61 - 90 Over 90
Type Current days days days days Balance
Trade Receivable P
=7,662 P
=1,207 P
=487 P
=295 P
=1,106 P
=10,757
Notes Receivable − − − − 150 150
Other receivables 651 34 50 16 821 1,572
Due from related parties 23 − − − − 23
TOTAL 8,336 1,241 537 311 2,077 12,502
Allowance for impairment/loss
Trade Receivables (700)
Notes Receivable (150)
Other Receivables (38)
Due from related parties −
TOTAL (888)

NET RECEIVABLES P
= 11,614

December 31, 2016

(Audited)
0 - 30 31 - 60 61 - 90 Over 90
Type Current days days days days Balance
Trade Receivable =2,987
P =371
P =220
P =283
P =810
P =4,671
P
Notes Receivable − − − − 150 150
Other receivables 334 265 2 4 655 1,260
Due from related parties 92 − − − − 92
TOTAL 3,413 636 222 287 1,615 6,173
Allowance for impairment/loss
Trade Receivables (633)
Notes Receivable (150)
Other Receivables (71)
Due from related parties −
TOTAL (854)

NET RECEIVABLES =5,319

P

8
 Exhibit II

METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

1. Corporate Information

Metro Pacific Investments Corporation (the Parent Company or MPIC) was incorporated in the
Philippines and registered with the Philippines Securities and Exchange Commission (SEC) on
March 20, 2006 as an investment holding company. MPIC’s common shares of stock are listed in and
traded through the Philippine Stock Exchange (PSE). On August 6, 2012, MPIC launched Sponsored
Level 1 American Depositary Receipt (ADR) Program with Deutsche Bank as the appointed depositary
bank in line with the Parent Company’s thrust to widen the availability of its shares to investors in the
United States.

The principal activities of the Parent Company’s subsidiaries and equity method investees are described in
Notes 31 and 9, respectively.

Metro Pacific Holdings, Inc. (MPHI) owns 41.9% of the total issued common shares (or 42.0% of the
total outstanding common shares) as at June 30, 2017 and December 31, 2016. As sole holder of the
voting Class A Preferred Shares, MPHI’s combined voting interest as a result of all of its shareholdings is
estimated at 55.0% as at June 30, 2017 and December 31, 2016.

MPHI is a Philippine corporation whose stockholders are Enterprise Investment Holdings, Inc. (EIH;
60.0% interest), Intalink B.V. (26.7% interest) and First Pacific International Limited (FPIL; 13.3%
interest). First Pacific Company Limited (FPC), a company incorporated in Bermuda and listed in Hong
Kong, through its subsidiaries, Intalink B.V. and FPIL, holds 40.0% equity interest in EIH and investment
financing which under Hong Kong Generally Accepted Accounting Principles, require FPC to account for
the results and assets and liabilities of EIH and its subsidiaries as part of FPC group of companies in Hong
Kong.

The registered office address of the Parent Company is 10th Floor, MGO Building, Legaspi corner Dela
Rosa Streets, Legaspi Village, Makati City.

The accompanying unaudited interim condensed consolidated financial statements as at June 30, 2017 and
for the six months ended June 30, 2017 and 2016 were approved and authorized for issuance by the Board
of Directors (BOD) on August 4, 2017.

2. Summary of Significant Accounting Policies

Basis of Preparation
The interim condensed consolidated financial statements are prepared on a historical cost basis, except for
certain available-for-sale (AFS) financial assets that are measured at fair value, and are prepared in
accordance with Philippine Accounting Standard (PAS) 34, Interim Financial Reporting. The interim
condensed consolidated financial statements are presented in Philippine Peso, which is MPIC’s functional
and presentation currency, and all values are rounded to the nearest millions (000,000), except when
otherwise indicated.

9
The interim condensed consolidated financial statements do not include all the information and
disclosures required in the annual financial statements, and should be read in conjunction with the
Company’s annual consolidated financial statements as at and for the year ended December 31, 2016.

Changes in Accounting Policies and Disclosures

Our accounting policies are consistent with those followed in the preparation of the Company’s annual
consolidated financial statements for the year ended December 31, 2016, except for the following
adoption of new and amended Philippine Financial Reporting Standards (PFRS) effective
January 1, 2017.

The Company applied the following PFRS and amendments to existing standards effective
January 1, 2017. Except for additional disclosure requirements, adoption of the following standards did
not have any material impact on the Company’s financial position or performance:

▪ Amendments to PFRS 12, Clarification of the Scope of the Standard (Part of Annual Improvements to
PFRSs 2014 - 2016 Cycle) – The amendments clarify that the disclosure requirements in PFRS 12,
other than those relating to summarized financial information, apply to an entity’s interest in a
subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate)
that is classified (or included in a disposal group that is classified) as held for sale.

▪ Amendments to PAS 7, Statement of Cash Flows, Disclosure Initiative – The amendments to PAS 7
require an entity to provide disclosures that enable users of financial statements to evaluate changes in
liabilities arising from financing activities, including both changes arising from cash flows and non-
cash changes (such as foreign exchange gains or losses). See Note 29 for the required disclosures.

▪ Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for Unrealized Losses –
The amendments clarify that an entity needs to consider whether tax law restricts the sources of
taxable profits against which it may make deductions on the reversal of that deductible temporary
difference. Furthermore, the amendments provide guidance on how an entity should determine future
taxable profits and explain the circumstances in which taxable profit may include the recovery of
some assets for more than their carrying amount.

The Company has not early adopted any other standard, interpretation or amendment that has been issued
but is not yet effective. One of the standards that the Company did not early adopt is PFRS 9, Financial
Instruments.

In July 2014, the final version of PFRS 9 was issued. PFRS 9 reflects all phases of the financial
instruments project and replaces PAS 39, Financial Instruments: Recognition and Measurement, and all
previous versions of PFRS 9. The standard introduces new requirements for classification and
measurement, impairment, and hedge accounting. PFRS 9 is effective for annual periods beginning on or
after January 1, 2018, with early application permitted. Retrospective application is required, but
comparative information is not compulsory. Early application of previous versions of PFRS 9 is
permitted if the date of initial application is before February 1, 2015.

The adoption of PFRS 9 will have an effect on the classification and measurement of the Company’s
financial assets and impairment methodology for financial assets, but will have no impact on the
classification and measurement of the Company’s financial liabilities.

The Company is currently assessing the impact of adopting this standard.

Basis of Consolidation
The interim condensed consolidated financial statements include the accounts of the Parent Company and
its subsidiaries (see Note 31) as at June 30, 2017.

10
3. Operating Segment Information
The Company is organized into the following major business segments based on services and products
namely: water, toll operations, power, healthcare, rail, logistics and others.

The Company’s chief operating decision maker continues to be comprised of the BOD.
Seasonality. The Company’s toll road operations are a seasonal business. Based on historical traffic in
the North Luzon Expressway (NLEX), Subic-Clark-Tarlac Expressway (SCTEX) and Manila-Cavite Toll
Expressway (CAVITEX), the month of January is slightly below the normal average due to the end of the
Christmas holidays. From February to May, traffic is above the normal average due to the summer
holiday, which is traditionally a peak season for travel. The months of June and August remain to have
the lowest seasonal factors due to the rainy season. Traffic is expected to improve from September until
November, while the month of December has the highest seasonal factor due to the Christmas holidays.

The Company’s water utilities business is also seasonal, with comparatively lower revenues during the
rainy season in the Philippines.

For the power segment, electricity sales exhibit a degree of quarterly seasonality with the first quarter
having lower than the average electricity sales as this period is characterized by cooler temperature and
softer consumer demand following heightened consumer spending in the last quarter of the year. The
second quarter is marked by higher than average electricity sales. The fourth quarter performance is about
the average of the year.

The Company's rail business is seasonal, with lower ridership during the second quarter of the year due to
summer holiday in schools. In addition to this, Light Rail Transit Line 1 (LRT-1) is also closed from Holy
Thursday to Easter Sunday, and this typically occurs in April or March.

Operating Segment. For management purposes, the Company is organized into the following segments
based on services and products:

▪ Water, which relates to the provision of water and sewerage services by Maynilad Water Holding
Company, Inc. (MWHC) and its subsidiaries Maynilad Water Services, Inc. (Maynilad) and
Philippine Hydro, Inc. (PHI), and other water-related services by MetroPac Water Investments
Corporation (MPWIC).

▪ Toll operations, which primarily relate to operations and maintenance of toll facilities by Metro
Pacific Tollways Corporation (MPTC) and its subsidiaries NLEX Corporation (NLEX Corp; formerly
Manila North Tollways Corporation) and Cavitex Infrastructure Corporation (CIC), Tollways
Management Corporation (TMC), and equity investees, CII Bridges and Roads Investment Joint
Stock Company (CII B&R) and Don Muang Tollway Public Ltd (DMT). Certain toll projects are
either under pre-construction or on-going construction as at June 30, 2017.

▪ Power, which primarily relates to the operations of Manila Electric Company (MERALCO) in
relation to the distribution, supply and generation of electricity and Global Business Power
Corporation (GBPC) in relation to power generation. The investment in MERALCO is held both
directly and indirectly through Beacon Electric Asset Holdings, Inc. (Beacon Electric) while the
investment in GBPC held through Beacon Electric’s wholly-owned entity, Beacon PowerGen
Holdings Inc. (BPHI) (see Note 9).

▪ Healthcare, which primarily relates to operations and management of hospitals and nursing colleges
and such other enterprises that have similar undertakings by Metro Pacific Hospital Holdings, Inc.
(MPHHI).

11
▪ Rail, which primarily relates to Metro Pacific Light Rail Corporation (MPLRC) and its subsidiary,
Light Rail Manila Corporation (LRMC), the concessionaire for the operations and maintenance of the
LRT-1 and construction of the LRT-1 south extension.

▪ Logistics, which primarily relates to the Company’s logistics business through MetroPac Logistics
Company, Inc. (MPLC) and its subsidiary, MetroPac Movers, Inc. (MMI). However, given that the
logistics business does not yet meet the quantitative thresholds to qualify as an operating segment, the
results of the logistics operations are included in the ‘other businesses’ column.

▪ Others, which represent holding companies and operations of subsidiaries and other investees
involved in real estate and provision of services.

Segment Performance. Segment performance continues to be evaluated based on: consolidated net
income for the period; earnings before interest, taxes and depreciation and amortization, or Core
EBITDA; Core EBITDA margin; and core income. Net income for the period is measured consistent with
consolidated net income in the consolidated financial statements.

There are no revenue transactions with a single customer that accounted for 10% or more of the
Company’s consolidated revenues and no material inter-segment revenue transactions for the six-month
periods ended June 30, 2017 and 2016. Except for the equity in net earnings recognized from the
Company’s investments in DMT and CII B&R (see Note 9), all revenues of the Company were primarily
derived from within the Philippines.

The following table shows the reconciliations of the Company’s consolidated Core EBITDA to
consolidated net income for the six-month period ended June 30, 2017 and 2016.

Six Months Ended June 30

2017 2016
(Unaudited)
(In Millions)
Consolidated Core EBITDA P
=14,894 =13,089
P
Depreciation and amortization (2,622) (2,391)
Consolidated EBIT 12,272 10,698
Adjustments to reconcile with consolidated net income:
Interest income 173 212
Share in net earnings of equity method investees 3,164 3,520
Interest expense (2,731) (2,717)
Non-recurring income (expenses) - net (279) 799
Provision for income tax (2,416) (2,589)
Consolidated net income P
=10,183 =9,923
P

12
The following table presents revenue and profit information on operating segments for the six-month periods ended June 30, 2017 and 2016:
June 30, 2017 (Unaudited; in Millions)
Toll Other
Water Operations Power Healthcare Rail Businesses Consolidated
Total revenue from external sales P
=10,492 P
=6,460 =−
P P
=5,034 P
=1,528 P
=582 P
=24,096
Core EBITDA 7,186 4,158 2,541 1,235 347 (573) 14,894
Core EBITDA Margin 68% 64% − 25% 23% − 62%
Core income (loss) 1,842 2,038 5,291 308 123 (1,802) 7,800
Non-recurring income (expense) (313) 1,203 264 2 − (1,135) 21
Segment income (loss) P
=1,529 P
=3,241 P
=5,555 P
=310 P
=123 (P
=2,937) P
=7,821

June 30, 2016 (Unaudited; in Millions)

Toll Other
Water Operations Power Healthcare Rail Businesses Consolidated
Total revenue from external sales =10,120
P =5,946
P =−
P =4,112
P =1,478
P =85
P =21,741
P
Core EBITDA 7,508 3,503 1,215 1,007 357 (501) 13,089
Core EBITDA Margin 74% 59% − 24% 24% − 60%
Core income (loss) 1,799 1,792 4,193 249 159 (1,548) 6,644
Non-recurring income (expense) 465 (75) 148 (7) 2 (197) 336
Segment income (loss) =2,264
P =1,717
P =4,341
P =242
P =161
P (P
=1,745) =6,980
P

The following table presents segment assets and segment liabilities of the Company’s operating segments (amounts in millions):
Water Toll Other Adjustments/
Utilities Operations Power Healthcare Rail Businesses Eliminations Consolidated
Segment assets P
=102,528 P
=76,286 P
=92,845 P
=14,025 P
=10,725 P
=11,593 P
=36,249 P
=344,251
Investments and Advances 377 10,562 112,201 3,203 − 2,073 − 128,416
Consolidated Total Assets as at
June 30, 2017 (Unaudited) P
=102,905 P
=86,848 P
=205,046 P
=17,228 P
=10,725 P
=13,666 P
=36,249 P
=472,667
Segment assets =102,096
P =71,399
P =−
P =13,678
P =8,956
P =7,446
P =21,471
P =225,046
P
Investments and Advances 361 11,756 109,639 3,000 − 1,800 − 126,556
Consolidated Total Assets as at
December 31, 2016 (Audited) 102,457 =83,155
P =109,639
P =16,678
P =8,956
P =9,246
P =21,471
P =351,602
P
Segment liabilities:
As at June 30, 2017 (Unaudited) P
=48,040 P
=58,264 P
=91,595 P
=4,995 P
=5,723 P
=40,843 P
=7,761 P
=257,221
As at December 31, 2016 (Audited) =47,583
P =56,372
P =8,353
P =4,897
P =4,215
P =38,176
P =3,925
P =163,521
P

13
4. Business Combinations

As at June 30, 2017 and December 31, 2016, goodwill from business combinations comprised of:

June 30, December 31,

2017 2016
(Unaudited) (Audited)
(In Millions)
Power:
Beacon Electric* P
=10,548 =─
P
Water:
MWHC/Maynilad 6,803 =6,803
P
Eco-System Technologies
International, Inc. (ESTII) 1,132 894
PHI 288 288
Toll operations:
MPTC 5,749 5,749
CIC 4,966 4,966
TMC 3,110 ─
Healthcare:
Marikina Valley Medical Center, Inc. 662 662
Colinas Verdes Hospital Managers Corp.
(CVHMC) 234 234
Asian Hospital Inc. (AHI) 192 192
Riverside Medical Center, Inc. 69 69
De Los Santos Medical Center Inc. 7 7
Logistics:
MMI* 1,641 1,140
P
=35,401 =21,004
P
*Provisional goodwill as at June 30, 2017

Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances
indicate that the carrying amount may be impaired.

Acquisitions during the six-month period ended June 30, 2017

Acquisition of Delgado Clinic Inc. (DCI). On January 31, 2017, MPHHI completed agreement to infuse
approximately P=133.5 million of cash into DCI, owner and operator of the Dr. Jesus C. Delgado Memorial
Hospital (JDMH) via a subscription to preferred shares representing approximately 65% of the total
expanded capital stock of DCI. The cash infusion from MPHHI will enable JDMH to upgrade its
equipment and facilities, and expand its capacity.

MPHHI acquired DCI as part of its strategy to grow its portfolio and increase the Company’s total bed
capacity and to be the largest private hospital group in the Philippines. The acquisition was accounted for
using the acquisition method.

14
The provisional fair values of the identifiable assets and liabilities as at the date of acquisition:

(In Millions)
Assets
Cash =144
P
Inventories and other current assets 30
Property and equipment 138
312
Liabilities
Accounts payable and other current liabilities 29
Loans payable 4
Deferred tax liability 39
Other noncurrent liabilities 35
107
Total identifiable net assets at fair value 205
Non-controlling interest (35% at MPHHI level) (72)
Goodwill arising on acquisition –
Consideration transferred =133
P

Net cash inflow on acquisition is as follows:

Cash acquired with the subsidiary(a) =144

P
Total cash paid on acquisition (133)
Net cash inflow =11
P
(a)Cash acquired with the subsidiary is included in cash flows from investing activities.

The fair value of the property and equipment is provisional pending receipt of the final valuations for
those assets. The fair value and gross amount of DCI’s trade receivables amounted to P =6 million and
=11 million, respectively. The difference between the fair value and the gross amount of the receivables
P
represents the portion expected to be uncollectible.
The non-controlling interests were recognized as a proportion of net assets acquired.
From the date of acquisition, DCI has contributed P =55.1 million to the consolidated revenue and
=0.6 million of net loss for the five-month period ended June 30, 2017. If the combination had taken
P
place at the beginning of the year, contributions to the consolidated revenue and consolidated net income
would have been P =66.9 million of revenue and P =1.4 million of net loss for the six-month period ended
June 30, 2017. Total transaction costs for this, amounting to P=0.8 million, have been expensed and are
included in the “General and administrative expenses” in the consolidated statement of comprehensive
income and are part of operating cash flows for the six-month period ended June 30, 2017.

Step acquisition of TMC. On March 27, 2017, Metro Pacific Tollways North Corporation (MPT North;
formerly Metro Pacific Tollways Development Corporation) entered into a Share Sale and Purchase
Agreement (SPA) with Egis Road Operation S.A. (EROSA) for the purchase by MPT North of 26,600
common shares of TMC representing 7% of total issued and outstanding stock of TMC for a total
purchase price of P
=442.4 million. The acquisition was completed on April 4, 2017, whereupon beneficial
ownership of the 7% TMC Shares was vested in MPT North.

The above transaction increased MPT North’s effective ownership in TMC from 60.0% to 67.0%
and was accounted for as a business combination with MPT North acquiring control over TMC. In 2016,
despite ownership interest of 60%, the investment in TMC was accounted for as an associate as another
significant shareholder held veto rights related to changes in operations and dividend policies that affects

15
investors’ returns. These veto rights fell away with the increased shareholding and TMC is now
consolidated.

The provisional fair values of the identifiable assets and liabilities as at the date of acquisition is shown
below:
Provisional
Values
Recognized on
Acquisition
(In Millions)
Assets
Cash and cash equivalents =154
P
Receivables 528
Inventories 11
Other current assets 56
Property and equipment 71
Deposits and other noncurrent assets 31
851
Liabilities
Accounts payable and other current liabilities 442
Income tax payable 75
Provisions 175
Retention payable 19
Accrued employee benefits 7
718
Total identifiable net assets at fair value 133
Noncontrolling interest (44)
Fair value of previously held interest (2,757)
Goodwill arising on acquisition 3,110
Consideration transferred =442
P

Net cash outflow on acquisition is as follows:

Cash acquired with the subsidiary(a) =154

P
Total cash paid on acquisition (442)
Net cash outflow (P
=288)
(a) Cash acquired with the subsidiary is included in cash flows from investing activities.

In relation to the step-acquisition mentioned above, the Company recognized a gain of

=1,391.4 million in its consolidated net income as a result of remeasuring its existing interest from its
P
equity-accounted carrying value of TMC of P =1,365.9 million at the date of obtaining control to its
acquisition date fair value of P
=2,757.3 million (see Notes 9 and 23).

The fair value and gross amount of the receivables amounted to P =527.8 million. None of the
receivables have been impaired and it is expected that the full contractual amounts can be
collected.

The non-controlling interests were recognized at fair value.

The goodwill of P
=3,109.7 million that arose on the acquisition can be attributed to the synergies and other
benefits from combining the assets and activities of TMC to the Company. None of the goodwill
recognized is expected to be deductible for income tax purposes.

16
From the date of acquisition to June 30, 2017, TMC contributed nil operating revenues, since TMC
revenues pertains mainly to its services to NLEX Corp. and therefore eliminated at consolidated level, and
=66.6 million to net income of the Company. The contribution to net income represents savings from
P
TMC Operator’s fees as a result of consolidation of TMC. If the combination had taken place at the
beginning of the year, the incremental contributions to the consolidated revenue and consolidated net
income would have been nil revenue and P =41.9 million of net profit for TMC for the period ended
June 30, 2017.

On April 27, 2017, EROSA and Egis Investment Partners Philippines, Inc. (EIPPI), entered into an SPA
for EIPPI’s acquisition of TMC shares, representing 13.0% of the issued and outstanding shares of TMC,
held by EROSA for a total consideration of P
=821.47 million. No consideration was provided by the
shareholders of EIPPI. The TMC shares purchase price will be paid by EIPPI to EROSA through the
receipt of dividends from TMC (pre-merger) and NLEX Corp. (from and after merger).

EIPPI is jointly controlled by Egis Projects S.A. and MPT North with effective ownership of 54% and
46%, respectively. The above transaction increased MPT North’s effective ownership in TMC from
67.0% to 72.98% (representing increase of 5.98%) and was accounted for as an equity transaction with the
net discount of P
=9.5 million recognized in equity.

The discount represents the difference between the carrying value of the additional interest acquired and
the total consideration paid.

Total cash consideration paid to EIPPI P–

=
Carrying value of the additional interest acquired in TMC 9
Difference recognized in “Other reserves” account (P
=9)

MMI’s acquisition of group of assets. On April 4, 2017, PremierLogistics, Inc. (Premier), a subsidiary of
MPIC, completed the purchase of the businesses and assets, including key customer contracts of Ace
Logistics Inc. (Ace). Ace is engaged in the business of logistics, including warehousing, parcel and
e-commerce delivery, trucking, freight forwarding, customs brokerage and domestic shipping and also has
strong presence in pre-delivery inspection in the automotive industry. The transaction involved the sale
by Ace of identified logistics assets, the novation of certain key contracts of Ace with its clients and
vendors, and the transfer of certain key officers and employees of Ace to Premier.

The aggregate purchase price of P

=280.0 million shall be settled as follows:
▪ An initial amount of P =190.0 million shall be settled on closing, of which P
=30.0 million shall be
withheld by Premier and applied towards the payment of the subscription price with respect to
Ace’s 10% interest in Premier after the closing of the transaction;
▪ The balance of P =90.0 million shall be paid by way of installments: (i) P
=10.0 million each on
December 31, 2017, 2018 and 2019; and (ii) P =60.0 million on December 31, 2020.

Premier intends to use the assets purchased to expand the list of logistics services it offers and to widen its
client base. After the closing of the transaction, the principal stockholder of Ace subscribed to shares of
stock of PremierLogistics constituting 10% of the outstanding capital stock of Premier.

17
The acquisition of the assets has been accounted for using the acquisition method. The provisional fair
values of the assets acquired as at the date of acquisition:
Provisional
Values
Recognized on
Acquisition
(In Millions)
Property and equipment 5
Total identifiable net assets at fair value 5
Provisional goodwill (at PremierLogistics level) 275
Total acquisition cost 280
Applicable Input VAT 34
Total purchase price consideration, inclusive of Input VAT 314

The purchase price allocation is still provisional and the company has yet to attribute value to the
customer contracts.

The goodwill comprises the value of expected synergies arising from the acquisition and a customer list,
which is not separately recognized. Based on assessment, the customer list is not separable and therefore,
it does not meet the criteria for recognition as an intangible asset under PAS 38. None of the goodwill
recognized is expected to be deductible for income tax purposes.

Providing pro-forma information on the revenue and net income (as if the acquisition date was as at
January 1, 2016) was deemed impracticable considering that the group of assets was purchased from
various sellers and is, in any event, immaterial.

Step acquisition of Beacon Electric. On June 27, 2017, MPIC entered into a Deed of Absolute Sale of
Shares with PLDT Communications and Energy Ventures (PCEV) to acquire the remaining 25% interest
in Beacon Electric from PCEV for an aggregate purchase price of P =21.8 billion. This purchase
consideration is to be settled as to P
=12.0 billion in cash and the balance of P
=9.8 billion over the next four
(4) years. In order to fund the investment, MPIC completed an overnight placing of 4.5% of its directly
held MERALCO shares for an aggregate consideration of P =12.7 billion (see Note 9). Upon completion,
MPIC owns a direct 10.5% interest in MERALCO and, through its 100% interest in Beacon, a further
35.0%, thereby increasing its effective ownership interest in MERALCO from 41.2% to 45.5% and in
GBPC to 56% directly and 6.4% indirectly (through MERALCO).

18
The provisional fair values of the identifiable assets and liabilities as at the date of acquisition:

(In Millions)
Assets
Cash =17,156
P
Receivables 4,160
Investment in MERALCO 85,344
Property and equipment 53,978
Intangible asset 12,396
Other current assets 4,865
177,899
Liabilities
Accounts payable and other current liabilities 5,674
Loans payable 65,037
Provisions 4,372
Deferred tax liability 3,326
Other noncurrent liabilities 1,346
79,755
Non-controlling interest (at Beacon level) =9,571
P

Total identifiable net assets at fair value =88,573

P
Fair value of previously held interest (67,280)
Fair value of non-controlling interest in GBPC (11,212)
Goodwill arising on acquisition 10,548
Present value of consideration =20,629
P

The present value of the consideration amounting to P =20.6 billion includes P

=12.0 billion which was paid
in cash on transaction date and P=8.6 billion which represents the present value of the four (4) equal annual
installment amounting to P =2.45 billion per year payable starting June 2018 (see Note 16). After the
settlement, the total cash investment of the Company for this transaction would amount to P =21.8 billion.

Net cash inflow on acquisition is as follows:

Cash acquired with the subsidiary(a) =17,156

P
Total cash paid on transaction date (12,000)
Net cash inflow on transaction date =5,156
P
(a)Cash acquired with the subsidiary is included in cash flows from investing activities.

In relation to the step-up acquisition mentioned above, MPIC recognized a loss of P =1,127 million (see
Note 23) in the consolidated net income as a result of remeasuring its existing interest from its equity-
accounted holding of Beacon Electric at the date of obtaining control to its acquisition date fair value.
The purchase price allocation and loss on remeasurement are provisional and to be finalized within a
period of one year from the date of the transaction.

If the combination had taken place at the beginning of the year, incremental contributions to the
consolidated revenue and consolidated net income would have been P =10,751.8 million of revenue and
=2,523.5 million of net income for the six-month period ended June 30, 2017.
P

Acquisitions during the six-month period ended June 30, 2016

Acquisition of common shares of Sacred Heart Hospital of Malolos Inc. (SHHM). On March 7, 2016,
MPHHI completed the acquisition of SHHM by investing P =150.0 million in SHHM, for a 51% ownership.

19
Proceeds of the investment was intended to fund expansion of SHHM’s infrastructure to increase patient
beds and to acquire various medical equipment.

MPHHI acquired SHHM as part of its strategy to grow its portfolio and increase the Company’s total bed
capacity and to be the largest private hospital group in the Philippines. The acquisition was accounted for
using the acquisition method.

The net assets recognized in the December 31, 2016 consolidated financial statements were based on a
provisional assessment of fair value while MPHHI sought an independent valuation for the assets of the
acquired business. The valuation had not been completed by the date the 2016 consolidated financial
statements were approved for issue by the BOD.

In March 2017, the valuation was completed and the following are the final fair values of the identifiable
assets and liabilities as at the date of acquisition:

(In Millions)
Assets
Cash and cash equivalents =165
P
Receivables 25
Other current assets 14
Property and equipment 132
Other noncurrent assets 2
=338
P
Liabilities
Accounts payable and accrued expenses =36
P
Other current liabilities 3
Other noncurrent liabilities 5
44
Total identifiable net assets at fair value 294
Non-controlling interest (49% at MPHHI level) (144)
Goodwill arising on acquisition –
Consideration transferred =150
P

Net cash inflow on acquisition is as follows:

(In Millions)
Cash acquired with the subsidiary(a) =165
P
Total cash paid on acquisition (150)
Net cash inflow =15
P
(a)Cash acquired with the subsidiary is included in cash flows from investing activities.

The fair value and gross amount of SHHM’s trade receivables amounted to P
=25.0 million.
The non-controlling interests were recognized as a proportion of net assets acquired.
From the date of acquisition, SHHM has contributed P =196.7 million to the consolidated revenue and
=11.4 million to the consolidated net income for the year ended December 31, 2016. If the combination
P
had taken place at the beginning of the year, contributions to the consolidated revenue and consolidated
net income would have been P =232.1 million of revenue and P =16.4 million of net profit for the year ended
December 31, 2016. Total transaction costs for this acquisition, amounting to P =1.6 million, have been
expensed and are included in the “General and administrative expenses” in the consolidated statement of
comprehensive income and are part of operating cash flows for the year ended December 31, 2016.

MMI’s acquisition of group of assets. On May 19, 2016, MMI completed the purchase of the businesses
and assets (including certain contracts) of Basic Logistics Inc., A1Move Logistics, Inc., Philflash

20
Logistics, Inc. and BasicLog Trade and Marketing Enterprises (Sellers), all of which are involved in the
logistics business.

The transaction involves the acquisition by MMI of the logistics businesses and assets (including certain
contracts) of the Sellers for a total purchase price consideration of P
=2,168.3 million, inclusive of
applicable value-added taxes. After the completion of the transaction, a separate company that will be
designated by the Sellers will acquire twenty four percent (24%) of the outstanding capital stock of MMI.

MMI will expand its logistics business utilizing the assets and businesses initially acquired from the
Sellers.

The transaction was carried out through an asset purchase agreement involving, among others: (a) the
sale by the Sellers of identified logistics assets, (b) the novation of certain key contracts of the Sellers with
their respective clients, (c) the execution of new contracts required to ensure continued operations of the
business under MMI, and (d) the transfer of certain key officers and employees of the Sellers to MMI.

The net assets recognized in the December 31, 2016 consolidated financial statements were based on a
provisional assessment of fair value while MMI sought an independent valuation for the assets of the
acquired business. The valuation had not been completed by the date the 2016 consolidated financial
statements were approved for issue by the BOD.

In May 2017, the valuation was completed and the following are the final fair values of the identifiable
assets and liabilities as at the date of acquisition:

Final Provisional
Values Values
(In Millions)
Property and equipment =154
P =705
P
Intangible assets 91 91
Total identifiable net assets at fair value 245 796
Goodwill (at MMI level) 1,691 1,140
Total acquisition cost 1,936 1,936
Applicable Input VAT 232 232
Total purchase price consideration, inclusive of Input VAT =2,168
P =2,168
P

The downward change in the values of the property and equipment after the final appraisal was viewed as
an impairment indicator. Thus, impairment test was done which resulted in a provision for impairment
amounting to P
=324.2 million relating mostly to goodwill (see Note 23).

The goodwill comprises the value of expected synergies arising from the acquisition and a customer list,
which is not separately recognized. Based on assessment, the customer list is not separable and therefore,
it does not meet the criteria for recognition as an intangible asset under PAS 38. None of the goodwill
recognized is expected to be deductible for income tax purposes.

Providing pro-forma information on the revenue and net income (as if the acquisition date was as at
January 1, 2016) was deemed impracticable considering that the group of assets was purchased from
various sellers.

Acquisition of common shares of Eco-System Technologies International, Inc. (ESTII). On June 16, 2016,
MPWIC completed the acquisition of 65% of the outstanding capital stock of Eco-System Technologies
International, Inc. (ESTII). ESTII is engaged in the business of designing, supplying, constructing,
installing, and operating and maintaining wastewater and sewage treatment plant facilities. The
transaction allows MPIC, through MPWIC, to diversify its water sector investment holdings and invest in
the high growth wastewater EPC and O&M markets.

21
ESTII has a leading market position in the Philippine wastewater industry and has a valuable client base
comprised of major mall, office, commercial and residential property developers, hotels and resorts,
hospitals and industrial facilities.

The acquisition comprises of the purchase of 12,000,000 Class A common shares from Eco-System
Technologies, Inc. (ESTI) representing 60% of total outstanding capital stock of ESTII, at a consideration
of P
=141.67 per Class A common share, and subscription to 1,000,000 Class C common shares
representing 5% of total outstanding capital stock of ESTII, at a consideration of P
=100.00 per Class C
common share.

The net assets recognized in the December 31, 2016 consolidated financial statements were based on a
provisional assessment of fair value while MPWIC sought an independent valuation for the assets of the
acquired business. The valuation had not been completed by the date the 2016 consolidated financial
statements were approved for issue by the BOD.

In June 2017, the valuation was completed and the following are the final fair values of the identifiable
assets and liabilities as at the date of acquisition:
Final Provisional
Values Values
(In Millions)
Assets
Cash =99
P =99
P
Inventories 33 36
Input VAT 139 139
Intangible assets 769 1,121
Property and equipment and other assets 6 ─
1,046 1,395
Liabilities
Accounts payable and other current liabilities 7 ─
Accrued employee benefits 11 ─
18 ─
Total identifiable net assets at fair value 1,028 1,395
Non-controlling interest (35% at MPWIC level) (360) (489)
Goodwill arising on acquisition 1,132 894
Consideration transferred =1,800
P =1,800
P

Net cash outflow on acquisition is as follows:

Amount
(In Millions)
Cash acquired with the subsidiary(a) =99
P
Total cash paid as of December 31, 2016 (1,800)
Net cash outflow (P
=1,701)
(a)Cash acquired with the subsidiary is included in cash flows from investing activities.

The intangible assets comprise of customer contracts and license to intellectual property rights over
patents and utility models. The valuation had not been completed by the date the interim consolidated
financial statements were approved for issue by the BOD.

The goodwill comprises the value of expected synergies arising from the acquisition. None of the
goodwill recognized is expected to be deductible for income tax purposes.

As ESTII was incorporated by ESTI only on May 12, 2016, the Company did not provide any pro-forma
information on the revenue and net income as though the acquisition date was as at January 1, 2016.

Total transaction costs, included as “General and administrative expenses” amounted to P

=6.6 million.

22
5. Cash and Cash Equivalents, Short-term Deposits and Restricted Cash

June 30, December 31,

2017 2016
(Unaudited) (Audited)
(In Millions)
Cash and cash equivalents P
=24,220 P
=15,455
Short-term deposits 15,552 4,014
P
=39,772 =19,469
P

For the purpose of the interim consolidated statements of cash flows for the six months ended
June 30, 2017 and 2016, details of cash and cash equivalents:

June 30, June 30,

2017 2016
(Unaudited)
(In Millions)
Cash on hand and in banks P
=7,035 =3,245
P
Short-term deposits that qualify as cash
equivalents 17,185 13,035
P
=24,220 =16,280
P

Restricted Cash. Restricted cash classified as part of current assets pertains to sinking fund or debt
service account (DSA) representing amounts set aside for semi-annual principal and interest payments of
certain long-term debt. This DSA is maintained and replenished in accordance with the provision of the
loan agreements.

In April 2014, NLEX Corp signed a target cost construction contract with Leighton Contractors (Asia)
Ltd. (LCAL) for the construction of NLEX Segment 10. Pursuant to the contract, NLEX Corp placed a
reserve amount of P =889 million in an escrow account on July 28, 2014 to cover payment default leading
to suspension of works. This reserve amount is included in the “Restricted cash - noncurrent” account in
the consolidated statements of financial position as at December 31, 2016. Pursuant to the Escrow
Agreement, NLEX Corp exercised its option to reduce the escrow account balance. As at June 30, 2016,
the new minimum balance amounted to P =321.0 million. The new minimum balance is the amount equal
to the forecast of LCAL’s maximum committed costs over any given seven (7) weeks from the relevant
Calculation Date until the forecast Completion Date plus a reasonable contingency allowance as agreed
upon by both parties.

As at June 30, 2017, construction of Segment 10 is expected to be completed by first half of 2018 and as
such, release of the reserve amount is expected within the same period. The restricted cash therefore has
been reclassified to current restricted cash as at June 30, 2017.

23
6. Receivables
June 30, December 31,
2017 2016
(Unaudited) (Audited)
(In Millions)
Trade receivables P
=10,757 =4,671
P
Advances to affiliates 180 106
Advances to Department of Public Works
and Highways (DPWH) 179 180

Advances to officers and employees 151 106

Notes receivable 150 150
Advances to customers 66 112
Accrued interest receivables 37 46
Dividend receivable − 79
Others 959 631
12,479 6,081
Less allowance for doubtful accounts 888 854
11,591 5,227
Less current portion 11,324 5,171
Noncurrent portion (see Note 11) P
=267 =56
P

Trade Receivables. Trade receivables, which are non-interest bearing, included receivables arising from
the following: (i) outstanding billings for energy fees and pass-through fuel costs (with 15 to 30-day
term); (ii) water and sewerage services (with 60-day term); (iii) bulk water services (with 45 to 60-day
term); (iv) health care services (with 30-day credit term to self-pay, HMO, international insurance,
PhilHealth and corporate accounts); (v) O&M and EPC construction services (with 60-day credit term);
and, (vi) logistics services (with settlement period of 30 to 90 days).

Trade receivables also included due from Easytrip Services Corporation (ESC), a joint venture of MPTC
(see Note 9) amounting to P=242 million for the NLEX and P=7 million for the CAVITEX. Pursuant to the
Service Agreements, amounts due from ESC arising from the use of Easytrip tags in the NLEX and radio
frequency identification (RFID) sticker tags in the CAVITEX, shall be remitted by ESC to the designated
bank accounts within seven (7) days immediately following the date when any vehicle using the tags pass
through the electronic payment lanes of the NLEX and CAVITEX.

7. Other Current Assets

June 30, December 31,

2017 2016
(Unaudited) (Audited)
(In Millions)
Inventories - at cost P
=2,779 P771
=
Input VAT 2,656 1,354
Advances to contractors and consultants 2,610 1,518
Creditable withholding taxes 727 605
Prepaid expenses 518 337
Available-for-sale (AFS) financial
assets (Note 8) 302 5

(Forward)

24
 June 30, December 31,
2017 2016
(Unaudited) (Audited)
Real estate for sale - at lower of cost and
net realizable value 100 119
Due from related parties (see Note 16) 23 92
Miscellaneous deposits and others 387 262
10,102 5,063
Less allowance for decline in value 335 335
P
=9,767 =4,728
P

Inventories. Inventories includes the following: (a) Spare parts and supplies for the power plant
maintenance; (b) coal from Coal Supply Agreements to ensure adequate supply of coals to operate the
power plants; (c) hospital supplies; and (d) Spare part and supplies for rail maintenance.

The “allowance for decline in value” substantially represents provision for impairment of portions of
creditable withholding taxes expected not to be utilized.

8. AFS Financial Assets

June 30, December 31,
2017 2016
(Unaudited) (Audited)
(In Millions)
Shares of stock:
Quoted P
=22 P
=19
Unlisted 491 491
Unit Investment Trust Fund (UITF) 3,390 972
Investment in bonds and notes 1,503 1,354
5,406 2,836
Less: UITFs presented as short term
deposits (see Note 5) 3,390 972
Current portion (see Note 7) 302 5
Noncurrent portion P
=1,714 P
=1,859

The movements in the AFS financial assets are as follows:

June 30, December 31,
2017 2016
(Unaudited) (Audited)
(In Millions)
Balance at beginning of year P
=2,836 P3,631
=
Additions 9,100 13,824
Disposal and maturity (6,540) (14,679)
Unrealized changes in fair value 10 4
Reversal of impairment ─ 56
Balance at end of the period P
=5,406 =2,836
P

25
9. Investments and Advances

The associates and joint ventures of the Company are as follows:

Material Associates and Joint Venture. The Company has investments in the following material
associates and joint venture:

Ownership Interest in %
Place of June 30, December 31,
Incorporation Principal Activities 2017 2016
Associates:
MERALCO – Direct Philippines Power 10.5 15.0
MERALCO – Indirect (a) Philippines Power 35.0 26.2
GBPC – Indirect (b) Philippines Power ─ 42.0
DMT Thailand Tollways 29.4 29.4
CII B&R Vietnam Tollways 44.9 44.9
TMC Philippines Tollways ─ 60.0
Joint Venture:
Beacon Electric Philippines Holding Company/Power ─ 75.0
(a)
Held through Beacon Electric
(b)
Held through BPHI.

Individually immaterial investees. The Company has interests in the following individually immaterial
investments in associates and joint ventures:

Ownership Interest in %
Place of June 30, December 31,
Incorporation Principal Activities 2017 2016
Associates:
Manila Water Consortium Inc. Philippines Investment holding/ Water 39.0 39.0
EquiPacific HoldCo Inc. Philippines Investment holding/ Water 30.0 30.0
Watergy Business Solutions, Inc. Philippines Investment holding/ Water 49.0 49.0
Karayan Diliman Management, Inc. Philippines Engineering consultancy 40.0 40.0
Davao Doctors Hospital, Inc. Philippines Hospital operation 35.2 35.2
Medical Doctors Inc. Philippines Hospital operation 32.9 33.0
Manila Medical Services, Inc. Philippines Hospital operation 20.0 20.0
The Megaclinic, Inc. (Megaclinic) Philippines Clinic Management 25.5 51.0
AF Payments Inc. Philippines Operator of contactless 20.0 20.0
payment system
Indra Philippines, Inc. Philippines Management and IT 25.0 25.0
consultancy
First Gen Northern Energy Corp. Philippines Corporate life ended 33.3 33.3
December 31, 2016
Costa De Madera Philippines Real estate 62.0 62.0
Metro Pacific Land Holdings, Inc. Philippines Real estate 49.0 49.0

Joint Ventures:
Easytrip Services Corporation Philippines ETC system provider 50.0 50.0
Landco Pacific Corporation (Landco) Philippines Real estate 38.1 38.1
Metro Sanitas Corporation Philippines Clinical management 50.0 50.0
Lipa Medix Cancer Center Corporation Philippines Oncology treatment center 50.0 50.0

26
The account “Investments and advances” consist of the following components:

June 30, December 31,

2017 2016
(Unaudited) (Audited)
(In Millions)
Equity method investees:
Associates
Material
MERALCO P
=112,202 =39,035
P
DMT 6,702 6,409
CII B&R 3,727 3,869
TMC ─ 1,353
Others 4,853 4,653
Joint ventures
Material – Beacon Electric ─ 49,370
Others 234 125
127,718 104,814
Investment in Beacon Electric’s preferred shares
classified as AFS investments ─ 20,622
Advances to equity method investees 698 1,120
P
=128,416 =126,556
P

For the purpose of the interim consolidated statements of comprehensive income and cash flows for the
six months ended June 30, 2017 and 2016, movements in the “Equity method investees”:

June 30, June 30,

2017 2016
(Unaudited)
Acquisition costs
Balance at beginning of year P
=100,852 =79,419
P
Additions during the period:
Equity infusion into existing investees 259 19,754
Step-up 36,055 −
Disposal (11,748) −
Balance at end of the period 125,418 99,173
Accumulated equity in net earnings
Balance at beginning of year 2,828 4,525
Share in net earnings for the period:
Beacon Electric 1,927 1,575
MERALCO (direct interest) 1,087 1,551
DMT 249 −
TMC 50 −
CII B&R 42 −
Others 69 396
Dividends:
MERALCO (direct interest) (1,572) (1,961)
TMC (40) −
DMT (331) −
CII B&R (183) −
Others (19) (553)
Step-up (3,745) −
Disposal 170 −
Balance at end of the period 532 5,533

Accumulated share in the investees’ OCI

Balance at beginning of year 2,018 439
Share in investees’ OCI during the year 352 590
Step-up 389 −

27
 Disposal (107) −
Total 2,652 1,029
Less allowance for impairment loss
Balance at beginning of year 884 510
Provision − −
Total 884 510
P
=127,718 =105,225
P

Beacon Electric
On June 27, 2017, MPIC entered into a Deed of Absolute Sale of Shares with PCEV to acquire the
remaining 25% interest in Beacon Electric from PCEV for an aggregate purchase price of P =21.8 billion.
This purchase consideration is to be settled as to P
=12.0 billion in cash and the balance of P
=9.8 billion over
the next four (4) years. Beacon Electric holds 34.96% interest in MERALCO and 100% interest in BPHI.
The transaction resulted to MPIC gaining control over Beacon Electric and, thus, consolidating Beacon
Electric starting June 30, 2017.

MERALCO
In June 2017, MPIC completed the sale of 50.7 million shares representing approximately 4.5% of
outstanding capital stock of MERALCO through an overnight private placement for P =250.0 per share or
total proceeds of P
=12.7 billion which resulted to a gain of P
=731.9 million, net of P
=272.6 million
transaction costs (see Note 23). The proceeds were used by the Company to partially fund its acquisition
of the remaining 25% interest of PCEV in Beacon Electric.

As at June 30, 2017, interests in MERALCO held directly by MPIC and indirectly through Beacon
Electric are at 10.5% and 34.96%, respectively (see Note 4). The Company will continue to equity
account its ownership interest in MERALCO.

The carrying values and fair values of the MERALCO shares held indirectly through Beacon Electric and
held directly by the MPIC are as follows:
Ownership Carrying Fair
Interest in % Value Value
(In Millions)
As at June 30, 2017 Indirect* 34.96 P
=85,344 P
=102,613
Direct 10.50 26,857 30,822
As at December 31, 2016 Indirect* 26.22 =64,128
P =78,319
P
Direct 15.00 39,035 44,802
* Represents MPIC’s proportionate share in Beacon Electric’s investment in MERALCO using equity method
(for the carrying value) and at fair value.

GBPC
In May 2016, Beacon Electric’s wholly-owned entity, BPHI, acquired 56.0% interest in GBPC. As at
June 30, 2017, after the MPIC and PCEV transaction (see Note 4), the Company’s effective ownership in
GBPC is at 62.4% held indirectly through BPHI at 56.0% and MERALCO (holds 14.0% interest in
GBPC) at 6.4%. The transaction resulted to MPIC gaining control over GBPC and, thus, started
consolidating GBPC starting June 30, 2017.

GBPC is a holding company which, through its subsidiaries, is one of the leading independent power
producers in the Visayas region and Mindoro island. For the six-month period ended June 30, 2017,
GBPC’s consolidated revenue and net income amounted to P =10,751.7 million and P =1,624.9 million.

Beacon Electric’s preferred shares (Class A and Class B) classified as AFS investments
On May 29, 2017, Beacon Electric redeemed the 277,337,560 Class B preferred shares held by the
Company amounting to P =3.5 billion. For 2017, Beacon declared and paid all the dividends attributable to
Class B preferred shares held by the Company amounting to P =168.5 million.

28
 The Company owns 100% and 75% of Beacon Electric’s issued Class A preferred shares as at June 30,
2017 and December 31, 2016, respectively. For the six-month periods ended June 30, 2017 and 2016, the
Parent Company’s total dividend income from Beacon Electric’s preferred shares (both Class A and Class
B) amounted to P
=2,540.9 million and P
=1,215.2 million, respectively (see Note 23).

TMC
TMC is primarily engaged in the operations and maintenance of tollways, tollways facilities, interchanges
and related works. TMC is the operator of NLEX and SCTEX under an O&M Agreement.

On December 28, 2016, MPT North acquired additional 53,200 TMC common shares from EROSA,
representing 14% of the total issued and outstanding capital stock of TMC, for a total purchase price of
=884.7 million. This transaction increased MPT North’s interest in TMC to 60%. Despite ownership
P
interest of 60%, investment in TMC remains to be accounted for as an associate as another significant
shareholder holds significant veto rights related to changes to operating and dividend policies that affects
investors’ returns.

On March 27, 2017, MPT North acquired additional 26,600 common shares of TMC representing 7% of
total issued and outstanding stock of TMC for a total purchase price of P
=442.4 million. The acquisition
was completed on April 4, 2017. The acquisition increased MPT North’s effective ownership in TMC
from 60.0% to 67.0% and was accounted for as a business combination with MPT North acquiring control
over TMC (see Note 4).

The MegaClinic, Inc.

On May 11, 2017, MPHHI sold the whole 51% stake at The MegaClinic, Inc. to Metro Sanitas
Corporation for a total consideration of P=32.1 million. The sale decreased MPHHI’s effective ownership
from 51% to 25.5% resulting to a loss of control. The MegaClinic was deconsolidated starting May 2017
and resulted to loss on sale of P
=1.5 million.

10. Service Concession Assets and Service Concession Fees Payable

Service Concession Assets
The account “Service concession assets” consists of the following:

June 30, December 31,

2017 2016
(Unaudited) (Audited)
(In Millions)
Water:
Maynilad P
=84,933 =81,546
P
PHI 568 579
Metro Iloilo Bulk Water Supply Corp. 721 703
86,222 82,828
Toll operations:
NLEX Corp (NLEX, SCTEX and
Connector) 33,412 31,791
CIC (CAVITEX) 9,057 9,155
MPCALA Holdings, Inc. (MPCALA)
(CALAX) 23,011 22,362
Cebu Cordova Link Expressway
Corporation (CCLEX) 262 132
65,742 63,440
Rail:
LRMC (LRT-1) 7,028 6,425
P
=158,992 =152,693
P

29
The movements in the service concession assets follow:

As at June 30, 2017

(Unaudited)
Toll
Water operations Rail Total
(In Millions)
Cost:
Balances at January 1, 2017 P
=102,345 P
=69,121 P
=6,425 P
=177,891
Additions 4,780 2,152 470 7,402
Capitalized borrowing cost ‒ 631 134 765
Balances at June 30, 2017 107,125 71,904 7,029 186,058
Accumulated amortization:
Balances at January 1, 2017 19,517 5,681 ‒ 25,198
Additions 1,388 480 ‒ 1,868
Balances at June 30, 2017 20,905 6,161 ‒ 27,066
P
=86,220 P
=65,743 P
=7,029 P
=158,992

Water. Additions during the six-month period ended June 30, 2017 substantially included Maynilad’s costs
of rehabilitation works and additional construction.

Toll. Additions to the service concession assets substantially pertain to the on-going construction of the
Segment 10 project and the pre-construction activities of Segment 8.2 and the C3-R10 of the Harbor Link
project, NLEX widening project covering Segments 2 & 3, the NLEX toll plaza expansions and the on-going
pavement rehabilitation of the SCTEX. Additions also included pre-construction costs on the C5 South Link
and R1 enhancement project by CIC.

Rail. Costs of rehabilitation works, acquisition of rails for the existing LRT-1 system and consultancy cost
for LRT-1 Extension project.

Service Concession Fees Payable

The movements in the service concession fees payable follow:

As at June 30, 2017

(Unaudited)
Toll
Water operations Rail Total
(In Millions)
Balances at January 1, 2017 P
=7,318 P
=18,551 P
=3,005 P
=28,874
Foreign exchange differential 252 − − 252
Interest accretion 286 540 93 919
Payment (701) − − (701)
7,155 19,091 3,098 29,344
Less current portion 747 − − 747
P
=6,408 P
=19,091 P
=3,098 P
=28,597

Water. Concession fees relating to Maynilad’s service concession agreement are denominated in various
currencies. These are payable monthly following an amortization table up to the end of the concession period
and are non-interest bearing.

Toll operations.
▪ CALAX. Concession fees relating to the CALAX concession agreement is payable beginning on the
5th year (2020) over a period of 9 years from the signing of the concession agreement.

30
 ▪ Connector Project. NLEX Corp shall pay periodic payments to DPWH representing the
consideration for granting the concession and basic right of way in the Connector Road Project. The
payment shall commence on the first anniversary of the construction completion deadline, as
extended, until the expiry of the concession period.

Interest accretion on concession fees in relation to the CALAX and Connector Project are capitalized as
part of the capitalized borrowing of the “Service concession assets” account.

Rail. The concession fee for the LRT-1 concession agreement is payable in equal quarterly instalments
over the concession period with the first payment on the fifth anniversary of the Effective Date (with
September 12, 2015 as the Effective Date of the concession agreement). Settlement of the concession fee
is through the quarterly balancing payment mechanism reflecting netting of payments due to Grantors
against receivable from Grantors. Interest accretion is capitalized as part of the capitalized borrowing of
the “Service concession assets” account.

11. Other Noncurrent Assets

June 30, December 31,

2017 2016
(Unaudited) (Audited)
(In Millions)
Intangible assets arising from business
combinations (a) P
=13,195 =1,171
P
Deferred FCDA charges (b) 899 764
Deferred project costs (c) 857 858
Long-term cash and miscellaneous deposits 813 377
Advances to contractors and consultants 552 300
Property use rights 533 554
Deferred financing costs 413 441
Advances to AB Holdings Corporation 360 360
Receivables (see Note 6) 267 56
Deposits for LTIP (d) (see Note 15) 174 46
Sinking fund 152 155
Deferred LRT-1 charges 143 93
Deferred input VAT 126 256
Basketball franchise 100 100
Pension asset 46 34
Others 405 289
P
=19,035 =5,854
P

a. Intangible assets arising from business combinations comprises of intangible assets through business
combinations: (i) MMI’s carrying value of customer contracts that were assigned/transferred through
asset acquisition amounting to P=69.8 million; (ii) ESTII’s carrying value of customer relationship and
contracts and license to use intellectual property rights over patents and utility models amounting to
=729.1 million; and (iii) GBPC’s provisional value of customer contracts amounting to
P
=12,395.6 million as the result of consolidation of Beacon Electric (see Note 4). ESTII was acquired
P
in June 2016 while MMI acquired the assets and businesses of a certain group of logistics companies
in May 2016.

b. Foreign currency differential adjustment (FCDA) is a tariff mechanism granted to Maynilad to allow
it to recover losses or give back gains arising from the fluctuating movements of the peso against
other currencies. In view of the automatic reimbursement mechanism, Maynilad recognizes deferred
FCDA with a corresponding credit (debit) to FCDA revenues for the unrealized foreign exchange
losses (foreign exchange gains) which have not been billed or which will be refunded to the

31
 customers. Deferred FCDA and deferred credits are calculated as the difference between the
drawdown or rebased rate versus the closing rate. As at June 30, 2017, the FCDA balance is an asset
recognized as deferred FCDA charges.

c. Deferred projects costs comprise of costs directly attributable to the acquisition of a service
concession prior to the commencement of the concession term. Costs are transferred to service
concession asset upon effective date of the concession agreement.

d. To fund the LTIP programs for each cycle, MPIC enters into an Investment Management Agreement
(IMA) with a Trustee Bank. The LTIP fund will continue to accumulate until the LTIP target payout.

12. Accounts Payable and Other Current Liabilities

June 30, December 31,

2017 2016
(Unaudited) (Audited)
(In Millions)
Trade and accounts payable (a) P
=6,737 =4,583
P
Accrued construction costs (b) 3,972 4,279
Dividends payable 105 11
Accrued personnel costs 1,600 1,234
Accrued outside services and professional fees 1,041 924
Accrued expenses 1,449 934
Interest and other financing charges 1,341 876
Retention payable 671 457
Output taxes payable (c) 2,152 476
Withholding taxes payable 306 348
LTIP payable (see Note 15) 388 −
Accrued PNCC and BCDA 374 140
Lease payable - current portion (see Note 15) 131 131
Unearned revenue and other deposits 186 116
Others 428 456
P
=20,881 =14,965
P

a. Trade and accounts payable are non-interest bearing and are normally settled on 30 to 360 day terms.
Trade payables also included payable to ESC arising from the reloading of the Easytrip tags in the
NLEX.

b. This represents unbilled construction costs from contractors and normally settled upon receipt of
billings.

c. Output VAT includes operating companies deferred output VAT on trade receivables. Deferred output
VAT pertains to output VAT on amount billed to bilateral customers and net settlement with the
PEMC.

32
13. Provisions

Movements in this account are as follow:

June 30, 2017

(Unaudited)
(In Millions)
Heavy Other
Maintenance Provisions Total
Balance at the beginning of year P
=433 P
=5,035 P
=5,468
Additions and accretion 81 841 922
Additions from step acquisition
(see Note 4) ─ 4,372 4,372
Payments (13) (81) (94)
501 10,167 10,668
Less current portion 229 5,328 5,557
P
=272 P
=4,839 P
=5,111

Other provisions consist of estimated liabilities for losses on claims by third parties. The information
usually required by PAS 37, Provisions, Contingent Liabilities and Contingent Assets, is not disclosed as
it may prejudice the Company’s negotiation with third parties.

14. Long-term Debt

This account consists of:

June 30, December 31,

2017 2016
(Unaudited) (Audited)
(In Millions)
Current portions P
=12,987 =3,797
P
Noncurrent portions 153,277 93,219
P
=166,264 =97,016
P

Details of the long-term debt per company/segment as follows:

June 30, December 31,

2017 2016
(Unaudited) (Audited)
Long-term
Loans Bonds Total Total
(In Millions)
Power P
=65,038 =─
P P=65,038 =─
P
MPIC 38,691 ─ 38,691 36,878
Water 26,534 ─ 26,534 26,792
Toll Operations 26,831 6,957 33,788 32,543
Rail 2,099 ─ 2,099 657
Healthcare 531 ─ 531 588
159,724 6,957 166,681 97,458
Less unamortized debt issue cost (369) (48) (417) (442)
P
=159,355 P
=6,909 P
=166,264 =97,016
P

33
Power
The following loans were consolidated upon gaining control over Beacon Electric:
Interest Rate June 30,
Description (per annum) Terms 2017

Beacon Electric
Term-loan 6.00% - 8.00% Payable in 10 years with semi-annual P
=16,216
interest and principal repayments

BPHI
Term-loan 5.55% Payable in 10 years with semi-annual P
=11,935
interest and principal repayments

GBPC
Term-loan 5.15% - 10.89% Payable in 5 - 12 years with various P
=36,887
types of interest and principal
repayment terms

Total P
=65,038

Beacon Electric’s loans are secured by a pledge on MERALCO shares owned by Beacon Electric while
BPHI’s loan is secured by a pledge on GBPC shares owned by BPHI. Beacon Electric and BPHI are also
required to comply with certain debt covenants as stated in their respective loan agreements.

GBPC’s various loan facilities include loan agreements entered into by CEDC, PEDC, and TPC with
various lenders. Under the loan agreements, CEDC, PEDC and TPC are required to maintain a debt-to-
equity ratio not exceeding 70:30 and shall ensure that the core equity must be at least 30% of the total
project cost at project completion date and shall at all times be equivalent to at least 30% of the sum of
total outstanding loan under the facility and the core equity. The loans are secured by (i) a real estate
mortgage on all present and future assets, (ii) chattel mortgage on all present and future movable
properties, (iii) pledge agreements on some shares owned by CEDC and PEDC and shareholder advances
and subordinated loans, if any, (iv) assignment agreement on CEDC and PEDC’s future revenues, (v)
grantee rights of TPC for a Special Use Agreement issued by Department of Environment and National
Resources.

Beacon Electric, BPHI, CEDC, PEDC, and TPC are in compliance with their respective loan covenants as
at June 30, 2017.

MPIC
On December 1, 2015, MPIC entered into separate agreements to secure loan facilities in the aggregate
amount of P=16.5 billion. MPIC drew P =6.0 billion from this facility in 2016 and an additional P =2.0 billion
in June 2017. The proceeds of which were used by MPIC to finance its investments in various projects
and general corporate purposes. As at June 30, 2017, the undrawn amount from this facility amounting to
=3.0 billion (from the P
P =10.0 billion facility) and P
=5.5 billion (from the P=6.5 billion facility) are available
until August 31, 2017 and September 30, 2017, respectively.

Water
In 2014, Maynilad entered into a loan agreement with the Development Bank of the Philippines (DBP)
originally amounting to P=6.0 billion to partially finance the construction of Paranaque–Las Piñas sewerage
system. The loan was subsequently reduced to P =5.2 billion. As at December 31, 2016, the undrawn
amount from the facility is at P
=2.2 billion. However, in January 2017, Maynilad proposed to amend the
schedule of borrowing under the agreement due to the delayed implementation of the project as a result of
delayed issuance of relevant permits. With the amendment, the undrawn amount was reduced to
=1.8 billion, with P
P =1.0 billion to be drawn in 2017 and the remaining balance in 2018. The amendments
were approved by DBP on March 14, 2017.

34
The World Bank, through the Metro Manila Wastewater Management Project (MWMP), provided a
US$275.0 million loan to the Land Bank of the Philippines (LBP) for relending to Maynilad and the
concessionaire for the east service area, Manila Water Company, Inc. (Manila Water). The loan was
divided equally between these two concessionaires. The MWMP is intended to finance investments in
wastewater collection and treatment, and septage management in Metro Manila. In the first half of 2017,
Maynilad made an additional drawdown of US$11.6 million from the facility. The undrawn amount from
this facility is available until June 30, 2019 as approved by The World Bank in its letter dated June 15, 2017.

On June 7, 2017, Maynilad signed credit agreement with the Japan International Cooperation Agency (JICA)
amounting to JPY13.0 billion and P
=1.4 billion to finance up to 70 percent of non-revenue water (NRW) capital
expenditure projects from 2017 to 2020.
The loan agreement between Maynilad and The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Bank, Ltd.,
and Sumitomo Mitsui Banking Corporation (“Japanese Commercial Banks”) was also executed on
June 7, 2017. The amount of loan is JPY7.9 billion and this will be used to fund capital expenditures for the
water expansion projects from 2017 to 2019.

Toll operations
=
P 1.4 Billion Term Loan Facility. On March 27, 2017, MPT North entered into Term Loan Facility
Agreement with BDO Unibank Inc. for up to P =1.4 billion loan due 2027. MPT North shall pay semi-
annually within 10 years based on the amortization schedule indicated in the Term Loan Facility
Agreement. On March 30, 2017, the facility was fully drawn subject to an interest rate of 5.3241% per
annum payable semi-annually. Under the Term Loan Facility Agreement, MPT North shall maintain debt
service payment and reserve accounts.
=
P 600.0 Million Bridge Loan Facility. On June 7, 2017, CIC entered into a Bridge Loan Facility
Agreement with BDO Unibank, Inc. and Rizal Commercial Banking Corporation for a 4.47% bridge loan
amounting P=600.0 million with quarterly interest payment and principal to be fully paid on
December 6, 2017. The proceeds were used to finance the payment of Series 2010-1 Notes.
CIC’s Prepayment of Series 2010-1 Notes. On June 15, 2017, the CIC prepaid its Series 2010-1 notes. Total
payments made amounted to $14.1 million (P =698.2 million) of which, $11.3 million (P =560.1 million) pertains
to the outstanding principal and accrued interest for the quarter, and $2.8 million (P
=138.1 million) refers to the
prepayment penalties and legal and professional fees charged to the Company. Unamortized debt issue cost as
at June 15, 2017 amounted to $0.4 million (P=22.3 million) was reversed (see Note 23).
AIF’s Baht 1.7 Billion Term Loan Facility. On March 30, 2017, AIF entered into a Term Loan Facility
Agreement with Mizuho Bank, Ltd. and Sumitomo Mitsui Banking Corporation for up to Baht 1.7 billion
(P
=2.5 billion) loan due 2022. Interest is to be paid quarterly while the principal is to be paid semi-annually in
10 instalments with the final instalment due April 2022. The loan is subject to a floating interest rate which is
the aggregate of the applicable BIBOR and margin of 1.65% and is secured by a pledge over all the AIF
shares owned by FPM Tollway (Thailand) Limited and substantially all the DMT shares owned by AIF. All
dividend proceeds in respect of the investment in DMT shall be applied to repay this loan. The loan
agreement also contains, among others, covenants regarding the maintenance of certain financial ratios such
as debt-to-equity ratio and debt service coverage ratio (DSCR), maintenance of ownership in DMT of at least
29.45%, and maintenance of debt-service reserve account. On May 2, 2017, AIF draw an amount of
Baht 1.6 Billion from the loan and applied the proceeds to prepay the Baht 2.1 billion Term Loan Facility
Agreement with Thanachart Bank Public Company Limited (including interest accrued thereon, outstanding
principal and other related costs). Unamortized debt issue cost related to the prepaid loan amounting to P =34.3
million was expensed and the company paid prepayment penalties and costs amounting to P =46.6 million (see
Note 23).

Rail
LRMC’s Omnibus Loan and Security Agreement. On February 11, 2016, LRMC entered into a P =24.0 billion
15-year OLSA with certain banks. Amount allocated for the Cavite Extension and rehabilitation of the
existing Light Rail Transit 1 (LRT 1) system amounted to P
=15.3 billion and P
=8.7 billion, respectively. For

35
 first half 2017, LRMC made series of drawdowns totalling to P
=1,441.7 million subject to interest rate of
7.1445% payable quarterly.

15. Other Long-term Liabilities

June 30, December 31,

2017 2016
(Unaudited) (Audited)
(In Millions)
Accrued retirement liability P
=1,330 =517
P
Customers’ guaranty deposits (a) 998 938
Lease payable (b) 997 1,025
LTIP payable (c) 658 703
Accrued interest payable to MWSS 607 607
Contingent liability (see Note 4) 578 ─
Interest payable 136 134
Others 428 444
P
=5,732 =4,368
P

a. Customers’ guaranty deposits serve to guarantee payment of bills by customers. These deposits are
non-interest bearing and normally refunded upon termination of water service connection and are
initially measured at fair value. After initial recognition, these deposits are subsequently measured at
amortized cost using the effective interest rate method. The discount is amortized over the remaining
concession period using the effective interest rate method.

b. Lease payable represents present value of future minimum lease payments relating to the lease
agreements entered into by East Manila Hospital Managers Corp. (EHHMC), CVHMC and Metro
Pacific Zamboanga Hospital Corp. (MPZHC), which lease agreements qualify as business
combinations. The lease payable was initially determined at acquisition date and subsequently
adjusted for payments and accretion. The current portion of the lease payable is included in the
“Accounts payable and other current liabilities” account (see Note 12).

c. Certain of the Company’s employees are eligible for long-term employee benefits under a long-term
incentive plan (LTIP). The liability recognized on the LTIP comprises the present value of the
defined benefit obligation and was determined using the projected unit credit method. Each LTIP
performance cycle generally covers 3 years with payment intended to be made at the end of the each
cycle (without interim payments) and is contingent upon the achievement of an approved target core
income of the Company by the end of the performance cycle. The current portion of the LTIP as at
June 30, 2017 relates to MPTC’s LTIP cycle ending 2017 and is included in the “Accounts payable
and other current liabilities” account (see Note 12).

16. Due to and from Related Parties

The Company, in the normal course of business, has transactions with related parties which consist mainly
of availment of noninterest-bearing cash advances which are due and demandable anytime.

36
 Composition of amounts due to/from related parties follows:

June 30, December 31,

2017 2016
(Unaudited) (Audited)
(In Millions)
Due from related parties:
Landco P
=44 =44
P
FPC 1 1
TMC ─ 38
AFPI ─ 29
Others 9 11
54 123
Less allowance for impairment 31 31
P
=23 =92
P

Due to related parties:

PCEV P
=15,170 =8,352
P
Smart 72 72
Others 15 15
15,257 8,439
Less current portion 3,779 1,713
Noncurrent portion P
=11,478 =6,726
P

Due to PCEV as at June 30, 2017 pertains to outstanding amount for the purchase price of Beacon
Electric shares acquired in May 2016 and June 2017.
• On May 30, 2016, MPIC acquired from PCEV of 645,756,250 common shares of Beacon
Electric at a price of P
=31.612 per share or P =20.4 billion at nominal value. On the same date,
MPIC also acquired from PCEV 458,370,086 preferred shares of Beacon Electric constituting
25% of the total economic rights on the outstanding preferred shares of Beacon Electric at a
price of P
=12.62 per share or P =5.8 billion at nominal value. Of the total consideration of
=26.2 billion, P
P =17.0 billion was settled immediately while the remaining payable to PCEV
shall be paid as follows: (a) P=2.0 billion in June 2017, (b) P=2.0 billion in June 2018,
(c) P
=2.0 billion in June 2019, and (d) P =3.2 billion in June 2020.
• On June 13, 2017, MPIC entered into a Share Purchase Agreement with PCEV for the
purchase of PCEV’s 25% remaining interest in Beacon Electric (both common and preferred
shares). Total purchase price is P=21.8 billion of which P =12.0 billion was paid in cash and the
remaining P =9.8 billion to be settled equally over the next four years beginning June 30, 2018
(see Note 4).

17. Equity

Details of authorized and issued capital stock follow:

June 30, 2017 December 31, 2016
(Unaudited) (Audited)
No. of Shares Amount No. of Shares Amount
(In Millions except for number of shares)

Authorized common shares - P =1.00 par value 38,500,000,000 P

=38,500 38,500,000,000 =38,500
P
Authorized preferred shares:
Class A - P
=0.01 par value 20,000,000,000 200 20,000,000,000 200
Class B - P
=1.00 par value 1,350,000,000 1,350 1,350,000,000 1,350
Balance at end of the period 59,850,000,000 P
=40,050 59,850,000,000 =40,050
P

37
 June 30, 2017 December 31, 2016
(Unaudited) (Audited)
No. of Shares Amount No. of Shares Amount
(In Millions except for number of shares)

Issued and Outstanding - common shares:

Balance at beginning of year 31,527,848,752 P
=31,528 27,885,373,752 =27,885
P
Issuance of shares − − 3,600,000,000 3,600
Exercise of stock option plan 4,730,000 5 42,475,000 43
Issued - common shares 31,532,578,752 31,533 31,527,848,752 31,528
Less: Treasury Shares (23,970,000) (24) (23,970,000) (24)
Balance at end of the period 31,508,608,752 P
=31,509 31,503,878,752 =31,504
P
Treasury shares - common shares:
Balance at beginning of year 23,970,000 P
=167 − =−
P
Share buy-back − − 23,970,000 167
Balance at end of the period 23,970,000 P
=167 23,970,000 =167
P
Issued - preferred shares - Class A:
Balance at beginning of year 9,128,105,319 P
=91 5,000,000,000 =50
P
Issuance of shares − − 4,128,105,319 41
Balance at end of the period 9,128,105,319 P
=91 9,128,105,319 =91
P

Total number of stockholders 1,305 − 1,313 −

Cash Dividends

Six Months Ended June 30

2017 2016
(Unaudited)
(In Millions)
Final dividend in respect of the previous financial year
declared during the following interim period:
Common shareholder (P =0.068 and P=0.061 per share
in 2017 and 2016, respectively) P
=2,142.3 =1,701.6
P
Class A preferred shareholders (a) 4.6 2.5
P
=2,146.9 =1,704.1
P
Proposed interim dividend:
Common shareholder (P =0.0345 and P=0.0320 per
share in 2017 and 2016, respectively) (b) 1,086.9 1,008.7
Class A preferred shareholders (a) 4.6 2.9
1,019.5 1,011.6
(a)
MPHI is the sole holder of Class A preferred shares
(b)
2016 interim dividend is based on estimated outstanding common shares by September 1, 2017 totaling
31,508,608,752 common shares.

On March 1, 2017, the BOD approved the declaration of the cash dividends of P =0.068 per common share
in favor of the Parent Company’s shareholders of record at March 30, 2017 with payment date of
April 26, 2017. On the same date, the BOD also approved the declaration of cash dividends amounting to
a total of P
=4.6 million in favor of MPHI as the sole holder of Class A Preferred shares.

On August 4, 2017, the BOD approved the declaration of the cash dividends of P =0.0345 per common
share in favor of the Parent Company’s shareholders of record as at September 1, 2017 with payment date
of September 26, 2017. On the same date, the BOD approved the declaration of cash dividends
amounting to P=4.6 million in favor of MPHI as the sole holder of Class A Preferred shares.

38
18. Equity Reserves and Other Comprehensive Income Reserve

Equity Reserves
Equity reserves consist of the following, net of applicable income taxes:

June 30, December 31,

2017 2016
(Unaudited) (Audited)
(In Millions)
Effect of MPIC acquisition of Neo Oracle Holdings, Inc
(NOHI) shares P
=690 =690
P
Equity transactions:
Disposal or dilution of equity interest in a subsidiary 7,809 7,809
Acquisition of NCI (2,341) (2,350)
Other reserve from ESOP and RSUP 164 133
Total P
=6,322 =6,282
P

Other comprehensive income reserve

Other comprehensive income reserve consists of the following, net of applicable income taxes:

June 30, December 31,

2017 2016
(Unaudited) (Audited)
(In Millions)
Share in the OCI of equity method investees (see Note 9) P
=2,265 =2,021
P
Fair value changes on AFS financial assets 3 (4)
Actuarial gains 16 1
Cumulative translation adjustment (189) (47)
Total P
=2,095 =1,971
P

19. Other Comprehensive Income (Loss)

Six Months Ended Three Months Ended

June 30 June 30
2017 2016 2017 2016
(Unaudited)
(In Millions)
Items to be reclassified to profit or loss in subsequent periods:
Share in OCI of equity method investees from (see Note 9):
Exchange differences on translation of foreign operation P
=242 =258
P (P
=40) =469
P
Fair value changes in cash flow hedges − − − −
Net gain (loss) on change in fair value of AFS financial assets 104 332 104 332
Fair value changes of cash flow hedges − − − −
Net gain (loss) on change in fair value of AFS financial assets 11 89 12 3
Exchange difference on translation of foreign operation (203) (99) (45) (51)
Income tax 58 26 11 38
P
=212 =606
P P
=42 =791
P

39
 Six Months Ended Three Months Ended
June 30 June 30
2017 2016 2017 2016
(Unaudited)
(In Millions)
Items not to be reclassified to profit or loss in subsequent periods:
Share in OCI of equity method investees from (See Note 9):
Actuarial reserve (P
=102) =−
P (P
=102) =−
P
Actuarial reserve 19 − 14 −
Income tax (5) − (4) −
(P
=88) =−
P (P
=92) =−
P
P
=124 =606
P (P
=50) =791
P

20. Costs of Sales and Services

Six Months Ended June 30

2017 2016
(Unaudited)
(In Millions)
Amortization of service concession assets (see Note 10) P=1,868 =1,789
P
Personnel cost (a) 1,886 1,350
Cost of inventories (b) 1,791 1,443
Utilities 839 691
PNCC and BCDA fees 751 663
Contracted services 550 300
Operator’s fee (see Note 27) 505 1,095
Repairs and maintenance 375 333
Warehousing costs 279 −
Depreciation and amortization 268 216
Professional fees 246 435
Others 584 439
P=9,942 =8,754
P

a. In line with its strategic goal to improve operational efficiency, Maynilad offered a Special
Opportunity Program (SOP), a redundancy and right-sizing program. This program offered a
separation package based on the number of years, or fractions thereof, on a pro-rated basis, of
service with Maynilad plus monetary equivalent of some benefits. Total estimated severance for
the separated employees amounted to P =553.5 million, of which, P=276.7 million is paid out of
company funds while remaining paid out of the retirement plan asset.

b. Cost of inventories includes cost of medical services, materials and supplies.

40
21. General and Administrative Expenses

Six Months Ended June 30

2017 2016
(Unaudited)
(In Millions)
Personnel costs P
=2,070 =1,615
P
Depreciation and amortization 486 386
Outside services 435 351
Taxes and licenses 282 265
Professional fees 278 257
Repairs and maintenance 142 123
Rentals 138 88
Advertising and promotion 138 129
Utilities 133 109
Transportation and travel 91 66
Entertainment, amusement and representation 85 87
Administrative supplies 83 80
Collection charges 70 68
Insurance 63 50
Public relation 60 64
Miscellaneous 447 495
P
=5,001 =4,233
P

22. Interest Income and Expenses

The following are the sources of the Company’s interest income:

Six Months Ended June 30

2017 2016
(Unaudited)
(In Millions)
Cash and cash equivalents, short-term deposits and
restricted cash P
=150 =190
P
Investment in bonds, treasury notes and others 24 23
P
=174 =213
P

The following are the sources of the Company’s interest expense:

Six Months Ended June 30

2017 2016
(Unaudited)
(In Millions)
Long-term debt P
=2,131 =2,137
P
Accretion on service concession fees payable 286 295
Accretion on financial liabilities 263 258
Amortization of debt issue costs 33 23
Others 19 13
P
=2,732 =2,726
P

41
23. Construction Revenue and Other Income and Construction Costs and Other Expenses

Six Months Ended June 30

2017 2016
(Unaudited)
(In Millions)
Construction revenue and other income:
Construction revenue P
=7,996 =6,146
P
Dividend income (see Note 9) 2,541 1,215
Gain on remeasurement of previously held
interest (see Notes 4 and 9) 1,391 −
Gain on sale of investment (see Note 9) 732
FCDA and foreign exchange gains - net 184 261
Rental income 69 67
Income from toll service facilities 73 77
Management fees 13 46
Reduction in contingent liability ─ 153
Reversal of provisions and recovery of
accounts written-off ─ 109
Others 252 129
P
=13,251 =8,203
P

Six Months Ended June 30

2017 2016
(Unaudited)
(In Millions)
Construction costs and other expenses:
Construction costs P
=7,996 =6,146
P
Loss on remeasurement of previously held
interest (see Notes 4) 1,127 −
Provision for decline in value of investments 324 −
Provisions 439 −
FCDA 184 236
Penalty and costs on prepayment of loan 185 −
Adjustment to amortized cost due to change in
expected cash flow 57 −
Others 184 47
P
=10,496 =6,429
P

24. Earnings per Share

The calculation of earnings per share follows:

Six Months Ended June 30

2017 2016
(Unaudited)
(In Millions, except
for Per Share amounts)
Net income attributable to equity holders of the
Parent Company P
=7,821 =6,980
P

42
 Six Months Ended June 30
2017 2016
(Unaudited)
(In Millions, except
for Per Share amounts)
Dividends on preference equity holders of the
Parent Company (5) (3)
Net income attributable to ordinary equity
holders of the Parent Company (a) P
=7,816 =6,977
P

Outstanding common shares at January 1 31,504 27,885

Effect of issuance of common shares during
the period 1 685
Weighted average number of common shares
for basic earnings per share (b) 31,505 28,570
ESOP 32 23
Weighted average number of common shares
adjusted for the effects of potential dilution (c) 31,537 28,593

Basic earnings per share (in centavos) (a/b) P

=24.81 =24.42
P

Diluted earnings per share (in centavos) (a/c) P

=24.78 =24.40
P

25. Share-based Payments

As at June 30, 2017, there are no outstanding and exercisable share options for the First, Second and Third
Grants.

The following table illustrates the number of, exercise prices of, and movements in share options during
the period for the Fourth Grant:
Fourth Grant
Tranche A Tranche B
Number Exercise Number Exercise
of shares Price of shares Price
Outstanding at December 31, 2016 12,525,000 P
= 4.60 56,000,000 P
= 4.60
Exercised during the period (4,730,000) 4.60 – –
Expired during the period – – – –
Outstanding at June 30, 2017 7,795,000 P
= 4.60 56,000,000 P
= 4.60

Exercisable at:
December 31, 2016 12,525,000 =4.60
P 56,000,000 =4.60
P
June 30, 2017 7,795,000 P
= 4.60 56,000,000 P
= 4.60

Carrying value of MPIC’s ESOP included under “Equity reserves” in the equity section of the
consolidated statement of financial position amounted to P
=61.0 million as at June 30, 2017 (see Note 18).

Restricted Stock Unit Plan (RSUP)

On July 14, 2016, the Compensation Committee of MPIC approved the RSUP as part of MPIC’s LTIP.
The RSUP, which has a validity period of ten (10) years, replaced the Parent Company’s ESOP, which
will expire in 2018.

As at June 30, 2017 and December 31, 2016, a total of 23,970,000 MPIC common shares had been
acquired to partially cover up to approximately 27.4 million shares to be granted to the directors and key
officers of the Company under MPIC’s LTIP program, which included the RSUP. The shares acquired
are presented under the “Treasury shares” account in the consolidated statements of financial position.

43
 Total Share Award expense under the RSUP for the six-month period ended June 30, 2017 amounted to
=33.1 million included in “Personnel costs” under “General and administrative expenses” account in the
P
consolidated statements of comprehensive income.

26. Contingencies

The information provided in this report must be read in conjunction with the 2016 audited consolidated
financial statements of the Company.

Updates to the contingencies disclosed in the annual consolidated financial statements as at

December 31, 2016 are provided below. The ultimate outcome of these matters cannot be presently
determined.

Water

Rate Rebasing Adjustment. Metropolitan Waterworks and Sewerage (MWSS) released Board of Trustees
Resolution No. 2013-100-RO dated September 12, 2013 and Regulatory Office (RO) Resolution
No. 13-010-CA dated September 10, 2013 on the rate rebasing adjustment for the rate rebasing period
2013 to 2017 reducing Maynilad’s 2012 average all-in basic water charge by 4.82% or P =1.46 per cubic
meter (cu.m.) or P=0.29 per cu.m. over the next five years. Maynilad has formally notified its objection
and initiated arbitration proceedings. On October 4, 2013, Maynilad filed its Dispute Notice before the
Appeals Panel.

On December 17, 2013, the RO released Resolution No. 13-011-CA regarding the implementation of a
status quo for Maynilad’s Standard Rates and FCDA for any and all its scheduled adjustments until such
time that the Appeals Panel has issued the Final Award.

On January 5, 2015, Maynilad officially received the Appeals Panel’s award dated December 29, 2014
(the “Arbitral Award”) upholding Maynilad’s alternative Rebasing Adjustment for the Fourth Rate
Rebasing Period of 13.41% or its equivalent of P
=4.06 per cu.m. This increase has effectively been
reduced to P
=3.06 per cu.m., following the integration of the P
=1.00 Currency Exchange Rate Adjustment
(CERA) into the basic water charge. To mitigate the impact of the tariff increase on its customers,
Maynilad offered to stagger its implementation over a three-year period.

The Arbitral Award, being final and binding on the parties, Maynilad asked the MWSS to cause its
Board of Trustees to approve the 2015 Tariffs Table so that the same can be published and implemented
15 days after its publication.

However, the MWSS and the RO have chosen, over Maynilad’s repeated objections, to defer the
implementation of the Arbitral Award despite it being final and binding on the parties. In its letter dated
February 9, 2015, the MWSS and RO, who received their copy of the Arbitral Award on January 7, 2015,
informed Maynilad that they have decided to await the final outcome of their arbitration with the other
concessionaire, Manila Water, before making any official pronouncements on the applicable resulting
water rates for the two concessionaires.

On February 20, 2015, Maynilad wrote the Philippine Government, through the Department of Finance
(DOF), to call on the Undertaking which the Republic of the Philippines (ROP) issued in favor of
Maynilad on July 31, 1997 and March 17, 2010. On March 9, 2015, Maynilad again wrote the ROP,
through the DOF, to reiterate its demand against the Undertaking. The letters dated February 20 and
March 9, 2015 are collectively referred to as the “Demand Letters”. Maynilad demanded that it be paid,
immediately and without further delay, the
=3.4 billion in revenue losses that it had sustained as a direct result of the MWSS’ and the RO’s refusal to
P

44
implement its correct Rebasing Adjustment from January 1, 2013 (the commencement of the Fourth Rate
Rebasing Period) to February 28, 2015.

On March 27, 2015, Maynilad served a Notice of Arbitration and Statement of Claim upon the ROP,
through the DOF. Maynilad gave notice and demanded that the ROP’s failure or refusal to pay the
amounts required under the Demand Letters be, pursuant to the terms of the Undertaking, referred to
arbitration before a three-member panel appointed and conduct proceedings in Singapore in accordance
with the 1976 United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.

On April 21, 2015, the MWSS Board of Trustees in its Resolution No. 2015-004-CA dated
March 25, 2015 approved to partially implement the Arbitral Award of a tariff adjustment of
=0.64 per cu.m. which, net of the P
P =1.00 CERA, actually translates to a tariff adjustment of negative
=0.36 per cu.m. as opposed to the Arbitral Award of P
P =3.06 per cu.m. tariff adjustment, net of CERA. For
being contrary to the Final Award as well as the provisions of the concession agreement, Maynilad did not
implement this tariff adjustment.

On May 14, 2015, the MWSS Board of Trustees in its Resolution No. 2015-060-RO approved a 7.52%
increase in the prevailing average basic charge of P
=31.25 per cu.m. or an upward adjustment of P
=2.35 per
cu.m. as partial implementation of the Arbitral Award. With the discontinuance of CERA, the net
adjustment in average water charge is 4.32% or P =1.35 per cu.m.

In the fourth quarter of 2015, the Arbitration Tribunal was constituted. On February 17, 2016, Maynilad
again wrote the ROP, through the DOF, to reiterate its demand against the Undertaking and to update its
claim. Evidentiary hearings were completed in December 2016. As of that date, the result is still pending.
As at June 30, 2017, Maynilad’s revenue losses due to the delayed implementation of the Arbitral Award
is estimated at P
=9.8 billion.

On March 31, 2017, Maynilad submitted a five-year business plan to Metropolitan Waterworks and
Sewerage System – Regulatory Office (MWSS-RO) for the new rate rebasing covering the years 2018 to
2022.

Starting April 22, 2017, adjusted water rates are to be implemented which included increase in the FCDA,
as well as an adjustment to cover the 1.9% Consumer Price Index.

As of the June 30, 2017, the Petition for Confirmation and Execution of the Arbitral Award is pending
resolution before the Regional Trial Court of Quezon City.

On July 24, 2017, the Arbitral Tribunal unanimously upheld the validity of Maynilad’s claim against the
Undertaking Letter issued by the ROP, through the DOF, to compensate Maynilad for the delayed
implementation of its relevant tariffs for the rebasing period 2013 to 2017. The Tribunal ordered the ROP
to reimburse Maynilad the amount of ₱3.4 billion for losses from 11th March 2015 to 31st August 2016,
without prejudice to any rights that Maynilad may have to seek recourse against MWSS for losses
incurred from 1st January 2013 to 10th March 2015. Further, the Tribunal ruled that Maynilad is entitled to
recover from the Republic its losses from 1st September 2016 onwards. In case a disagreement on the
amount of such losses arises, Maynilad may revert to the Tribunal for further determination.

As at August 4, 2017, the management is in discussion with ROP on settling its claim. However, the issue
of the tariff going forward still needs to be resolved and this is essential to fund further infrastructure for
drinking water supply and enhance sewage coverage.

Real Property Taxes Assessment. On October 13, 2005, Maynilad and Manila Water (the
Concessionaires) were jointly assessed by the Municipality of Norzagaray, Bulacan for real property taxes
on certain common purpose facilities purportedly due from 1998 to 2005 amounting to P =357.1 million. It
is the position of the Concessionaires that these properties are owned by the ROP and therefore, exempt
from taxation.

45
The supposed joint liability of the Concessionaires for real property tax, including interests, as at
December 31, 2016 amounted to P =1.0 billion.

After the Local Board of Assessment Appeals (LBAA) ruled in favor of the Municipality of Norzagaray,
Bulacan, the Concessionaires elevated the ruling of the LBAA to the Central Board of Assessment
Appeals (CBAA) by filing separate appeals. As at August 4, 2017, the case is still pending.

Disputes with MWSS. In prior years, Maynilad has been contesting certain charges billed by MWSS
relating to: (a) the basis of the computation of interest; (b) MWSS cost of borrowings; and, (c) additional
penalties. Consequently, Maynilad has not provided for these additional charges. These disputed charges
have been reflected by virtue of the Debt and Capital Restructuring Agreement (DCRA) entered into in
2005. Accordingly, Maynilad has recognized these additional charges, referred to as Tranche B
Concession Fees in the DCRA, amounting to US$30.1 million. The Receiver determined an additional
amount of Tranche B Concession Fees of US$6.8 million. In 2005, Maynilad had recognized and fully
paid Tranche B Concession Fees of US$36.9 million and the related accrued interest thereon.

Maynilad reconciled its liability to MWSS with the confirmation and billings of MWSS. The difference
mainly pertains to disputed claims of MWSS consisting of additional Tranche B Concession Fees,
borrowing cost and interest penalty under the Concession Agreement (prior to the DCRA). Maynilad’s
position on these charges is consistent with the Receiver’s recommendation which was upheld by the
Rehabilitation Court.

Following the issuance of the Rehabilitation Court’s Order on December 19, 2007 disallowing the
MWSS’ disputed claims and the termination of Maynilad’s rehabilitation proceedings, Maynilad and
MWSS sought to resolve the matter in accordance with the dispute resolution requirements of the
Transitional and Clarificatory Agreement (TCA).

Prior to the DCRA, Maynilad has accrued interest on its payable to MWSS based on the terms of the
Concession Agreement, which was disputed by MWSS before the Rehabilitation Court. These already
amounted to P =985.3 million as at December 31, 2011 and have been charged to interest expense in prior
years. Maynilad maintains that the accrued interest on its payable to MWSS has been adequately replaced
by the Tranche B Concession Fees discussed above. Maynilad’s position is consistent with the Receiver’s
recommendation which was upheld by the Rehabilitation Court. With the prescription of the TCA and in
light of Maynilad’s outstanding offer of US$14.0 million to fully settle the claim of MWSS, Maynilad
reversed the amount of accrued interest in excess of the US$14.0 million settlement offer. The remaining
balance of P=607.2 million as at June 30, 2017 and December 31, 2016, which pertains to the disputed
interest penalty under the Concession Agreement prior to DCRA, has remained in the books pending
resolution of the remaining disputed claims of MWSS.

Others. Maynilad is a party to various civil and labor cases relating to breach of contracts with damages,
illegal dismissal of employees, and nonpayment of backwages, benefits and performance bonus, among
others.

Toll Operations

Toll Rate Adjustments - NLEX Corp. NLEX Corp, as petitioner-applicant, filed the following petitions for
the approval of Periodic Toll Rate Adjustment (PTRA) with the Toll Regulatory Board (TRB) praying for
the adjustments of the toll rates:
▪ In June 2012, for the NLEX PTRA effective January 1, 2013 (2012 Petition);
▪ In September 2014, for NLEX PTRA effective January 1, 2015 (2014 Petition); and
▪ In September 2016, for the PTRA for the NLEX and SCTEX effective January 1, 2017 (2016
Petition).

46
In August 2015, NLEX Corp wrote the ROP, acting by and through the TRB, a Final Demand for
Compensation based on overdue toll rate adjustments that should have been effective January 1, 2013 and
January 1, 2015 (Final Demand). However, the ROP/TRB failed to heed on the Final Demand and as
such, NLEX Corp sent a Notice of Dispute to the ROP/TRB dated September 11, 2015 invoking STOA
Clause 19 (Settlement of Disputes). STOA Clause 19.1 states that the parties shall endeavor to amicably
settle the dispute within sixty (60) calendar days. The TRB sent several letters to NLEX Corp requesting
the extension of the amicable settlement period. However, NLEX Corp has not received any feasible
settlement offer from the ROP/TRB.

Accordingly, on April 4, 2016, NLEX Corp was compelled to issue a Notice of Arbitration and Statement
of Claim (Notice of Arbitration) to the ROP, acting by and through the TRB, consistent with STOA
Clause 19 in order to preserve its rights under the STOA.

In May 2016, TRB through Office of the Solicitor General (OSG) nominated their arbitrator for NLEX
and their preferred venue for arbitration. In a letter dated June 1, 2016, NLEX Corp proposed that the
arbitration be held in Singapore which is the seat of arbitration that the ROP has chosen for its various
PPP projects, and proposed the Singapore International Arbitration Center as the Appointing Authority.
In a letter dated July 13, 2016, the ROP, acting by and through the OSG, stated that it accepts Singapore
as the venue of arbitration, but reiterated its previous proposal that a Philippine-based institution/person
be the Appointing Authority.

Under the SCTEX Toll Operations Agreement, toll rate adjustment petitions shall be filed with the TRB
yearly. Prior to NLEX Corp’s take-over of the SCTEX operations, the Bases Conversion and
Development Authority (BCDA) filed petitions for toll rate adjustment that should have been effective in
2012, 2013, 2014, and 2016. Thereafter, in September 2016, NLEX Corp, as petitioner-applicant, filed a
petition for toll rate adjustment effective January 1, 2017.

On June 27, 2017, the initial case management conference was held in Singapore. As of June 30, 2017,
total amount of compensation for TRB’s inaction on lawful toll rate adjustments for NLEX and SCTEX,
are approximately at P =0.7 billion (both VAT-exclusive and net of Government’s share),
=5.4 billion and P
respectively.

Toll Rate Adjustments - CIC. CIC filed the following petitions for the approval of the PTRA with the
TRB:
▪ On the R-1 Expressway:
o In September 2011, for the PTRA effective January 1, 2012 (2011 Petition);
o In September 2014, for the PTRA with an Application for Provisional Relief with toll
rates effective January 1, 2015 (2014 Petition); and
o In November 2016, for the PTRA effective January 1, 2017 (2016 Petition).
▪ On R-1 Extension:
o In September 2013, for the PTRA effective January 1, 2014 (2013 Petition);
o In September 2016, for the PTRA effective January 1, 2017 (2016 Petition).

In August 2015, for failure to implement toll rate adjustments, CIC filed notices with the TRB demanding
settlement of the past due tariff increases amounting to P
=719.0 million based on the overdue toll rate
adjustments as at July 31, 2015 for the CAVITEX.

In April 2016, CIC issued a Notice of Arbitration and Statement of Claim to the ROP, acting by and
through the TRB, consistent with the dispute resolution procedures under its Toll Operation Agreement
(TOA) to obtain compensation in the amount of P =877 Million (as of March 27, 2016) for TRB’s inaction
on lawful toll rate adjustments which were due January 1, 2012, January 1, 2014, and January 1, 2015.
Singapore shall be the venue of arbitration. In February 2017, CIC received notice from the Permanent
Court of Arbitration that the authority who will appoint the chairperson of the Arbitration Panel has been
designated.

47
As at August 4, 2017, CIC has yet to receive regulatory approval for all the petitions filed on the PTRA.
As of June 30, 2017, total amount of compensation for TRB’s inaction on lawful toll rate adjustments
which were due since January 1, 2012 for both R1 and R1-Extension is approximately at P =1.3 billion
(VAT-exclusive and net of PRA share).

Value-Added Tax (VAT). In view of RMC 39-2011, NLEX Corp started imposing VAT on toll fees from
motorists and correspondingly started recognizing VAT liability on October 1, 2011. Through all the
years that the issues of VAT are being discussed, NLEX Corp received the following VAT assessments:

▪ NLEX Corp received a Formal Letter of Demand from the BIR on March 16, 2009 requesting
NLEX Corp to pay deficiency VAT plus penalties amounting to P =1,010.5 million for taxable year
2006.
▪ NLEX Corp received a Final Assessment Notice from the BIR dated November 15, 2009,
assessing NLEX Corp for deficiency VAT plus penalties amounting to P =557.6 million for taxable
year 2007.
▪ NLEX Corp received a Notice of Informal Assessment from the BIR dated October 5, 2009,
assessing NLEX Corp for deficiency VAT plus penalties amounting to P =470.9 million for taxable
year 2008.
▪ On May 21, 2010, the BIR issued a Notice of Informal Conference assessing NLEX Corp for
deficiency VAT plus penalties amounting to P
=1.0 billion for taxable year 2009.
▪ On June 11, 2010, NLEX Corp filed its position paper with the BIR reiterating its claim that it is
not subject to VAT on toll fees.

On April 3, 2014, the BIR accepted and approved the NLEX Corp’s application for abatement and issued
a Certificate of Approval for the cancellation of the basic output tax, interest and compromise penalty
amounting to P =1,010.5 million and P
=584.6 million for taxable years 2006 and 2007, respectively.

Notwithstanding the foregoing, management believes, in consultation with its legal counsel, that in any
event, the STOA among NLEX Corp, ROP, acting by and through the Toll Regulatory Board (TRB), and
Philippine National Construction Corporation (PNCC), provides NLEX Corp with legal recourse in order
to protect its lawful interests in case there is a change in existing laws, which makes the performance by
NLEX Corp of its obligations materially more expensive.

Real Property Tax. NLEX Corp has filed several Petitions for Review under Section 226 of the Local
Government Code with the LBAA of the Province of Bulacan on July 15, 2008 and April 16, 2013,
seeking to declare as null and void certain tax assessments and tax declarations issued by the Provincial
Assessor of the Province of Bulacan. The said tax declarations were issued in the name of NLEX Corp as
owner of the NLEX and categorizing the NLEX as a commercial property, subject to real property tax.
As at September 18, 2013, the total amount of tax assessed by the Province of Bulacan against NLEX
Corp was P=304.9 million. The LBAA has yet to determine whether said properties in fact covers portions
of the NLEX, which NLEX Corp argues are part of the public domain and exempt from real property tax.

On September 27, 2013, the Bureau of Local Government Finance of the Department of Finance (DOF–
BLGF) wrote a letter to the Province of Bulacan advising it to hold in abeyance any further course of
action pertaining to the alleged real property tax delinquency. On October 4, 2013, the Provincial
Treasurer of Bulacan has respected the directive from the DOF–BLGF to hold the enforcement of any
collection remedies in abeyance.

The outcome of the claims on real property tax cannot be presently determined. The management of
NLEX Corp believes that these claims will not have a significant impact on the Company’s consolidated
financial statements and believes that the STOA also provides NLEX Corp with legal recourse in order to
protect its lawful interests in case there is a change in existing laws which makes the performance by
NLEX Corp of its obligations materially more expensive.

48
Others. The companies in the toll operations segment are also parties to other cases and claims arising
from the ordinary course of business filed by third parties, which are either pending decisions by the
courts or are subject to settlement agreements. The outcome of these claims cannot be presently
determined. In the opinion of management and its legal counsel, the eventual liability from these lawsuits
or claims, if any, will not have a material adverse effect on the Company’s consolidated financial
statements.

Power

4th Regulatory Period Reset Application. MERALCO was among the first entrants to the Performance-
Based Regulation (PBR). Rate setting under PBR is governed by the Rules for Setting Distribution
Wheeling Rates (RDWR). The PBR scheme sets tariffs based on the regulated asset base of the
Distribution Utility (DU), and the required operating and capital expenditures once every regulatory
period (RP), to meet operational performance and service level requirements responsive to the need for
adequate, reliable and quality power, efficient service, growth of all customer classes in the franchise area
as approved by the Energy Regulatory Commission (ERC). PBR also employs a mechanism that
penalizes or rewards a DU depending on its network and service performance. Rate filings and setting are
done every RP where one RP consists of four regulatory years. A regulatory year (RY) begins on July 1st
and ends on June 30th of the following year.

MERALCO’s 3rd RP ended on June 30, 2015. The 4th RP for Group “A” entrants commenced on July 1,
2015 and shall end on June 30, 2019. To initiate the reset process, the ERC posted in its website on April
12, 2016, the following draft issuance for comments, to wit:

▪ Draft “Rules for Setting Distribution Wheeling Rates for Privately Owned Distribution
Utilities Operating under Performance Based Regulation, First Entry Group: Fourth
Regulatory Period”;

▪ Draft “Position Paper: Regulatory Reset for the July 1, 2015 to June 30, 2019 Fourth
Regulatory Period for the First Entry Group of Privately Owned Distribution Utilities subject
to Performance Based Regulation”; and

▪ Draft “Commission Resolution on the Issues on the Implementation of PBR for Privately
Owned DUs under the RDWR”.

Under ERC Resolution No. 25, Series of 2016 dated July 12, 2016, the ERC promulgated a Resolution
modifying the Rules for Setting Distribution Rates (“RDWR”) for Privately-Owned Distribution Utilities
Entering Performance Based Regulation (“PBR”).

An initial hearing was originally set by the ERC for January 9, 2017 and all interested parties were to file
their comments on the Petition by December 26, 2016.

Subsequently, however, the ERC reset the hearing to January 23, 2017 and deadline for filing comments
was January 23, 2017. MERALCO filed its Comment to the Petition on January 9, 2017. Hearings were
scheduled on May 15 and June 21, 2017. The ERC will issue an Order on the date of the next public
consultation.

In a Notice dated November 16, 2016, the ERC approved the draft “Regulatory Asset Base (“RAB”) Roll
Forward Handbook for Privately Owned Electricity Distribution Utilities (DUs)” (RAB Handbook) for
posting in its website. All interested parties were given until December 19, 2016 to submit their
respective comments to the draft RAB Handbook. Thereafter, during the public consultation on
January 9, 2017, the parties were given until February 9, 2017 to file their comments to the draft RAB
Handbook. In an Omnibus Motion filed on February 9, 2017, MERALCO submitted its initial comments
to the draft RAB Handbook but moved for the deferment of the proceedings until the consumer group
Petition has been resolved.

49
MERALCO also files with the ERC its applications for over/under-recoveries of pass-through costs.
These consist mainly of differential generation, transmission and system loss charges technically referred
to as over/under-recoveries, which are refundable/recoverable from the customers, as allowed by law.

Interim Average Rate for RY 2016. On June 11, 2015, MERALCO filed its application for the approval of
a proposed Interim Average Rate of P =1.3939 per kWh and translation thereof into rate tariffs by customer
category. On July 10, 2015, the ERC provisionally approved an Interim Average Rate of P =1.3810 per
kWh and the rate translation per customer class, which was reflected in the customer bills starting
July 2015. MERALCO has completed the presentation of its evidence and is set to file its Formal Offer of
Evidence (FOE) after the ERC rules on pending motions. As at June 30, 2017, the ERC has yet to resolve
the pending motions.

Capital Expenditures (“CAPEX”) for RY 2016. Absent the release by the ERC of the final rules to govern
the filing of its 4th RP Reset, MERALCO filed on February 9, 2015 an application for approval of
authority to implement its CAPEX program for RY 2016 (July 1, 2015 to June 30, 2016) pursuant to
Section 20(b) of Commonwealth Act No. 146, as amended, otherwise known as the Public Service Act.
On June 15, 2016, MERALCO received a copy of the ERC Decision dated April 12, 2016 which partially
approved MERALCO’s CAPEX program for RY 2016 amounting to P =15.5 billion, subject to certain
conditions. An intervenor has filed a Motion for Reconsideration of the Decision which is pending before
the ERC. On July 25, 2016, MERALCO has filed its opposition to the Motion for Reconsideration. As at
June 30, 2017, the ERC has yet to rule on the Motion for Reconsideration.

CAPEX for RY 2017. On March 8, 2016, MERALCO filed an application for approval of authority to
implement its CAPEX program for RY 2017 (July 1, 2016 to June 30, 2017) pursuant to the Public
Service Act. Hearings have been completed and MERALCO is awaiting the final decision of the ERC.
On July 26, 2016, MERALCO received the Order dated May 5, 2016, granting MERALCO provisional
authority to implement the nine (9) major projects and 37 residual projects constituting a substantial part
of the CAPEX program, subject to certain conditions. On August 16, 2016, MERALCO filed a Motion for
Partial Reconsideration on the requirement to submit an accounting of the depreciation fund. Hearings on
the application have been completed. On September 14, 2016, MERALCO filed a Motion for Resolution.
MERALCO is awaiting the final decision of the ERC.

CAPEX for RY 2018. On April 3, 2017, MERALCO filed an application for approval of authority to
implement its CAPEX program for RY 2018 (July 1, 2017 to June 30, 2018) pursuant to the Public Service
Act. On May 26, 2017, MERALCO received the Order dated May 15, 2017, granting MERALCO
provisional authority to implement the 18 major projects and 36 residual projects constituting a substantial
part of the CAPEX program, subject to certain conditions. Hearings were conducted on June 22 and
August 1, 2017. The next scheduled hearing is on August 25, 2017.

Supreme Court (SC) Temporary Restraining Order (TRO) on December 2013 Increase in MERALCO
Billing Rate. On December 9, 2013, the ERC gave clearance to the request of MERALCO to implement a
staggered collection over three (3) months covering the December 2013 billing month for the increase in
generation charge and other bill components such as value added tax, local franchise tax, transmission
charge, and system loss charge. The generation costs for the November 2013 supply month increased
significantly because of the aberrant spike in the Wholesale Electricity Spot Market (WESM) charges on
account of the non-compliance with WESM Rules by certain plants resulting in significant power
generation capacities not being offered and dispatched, and the scheduled and extended shutdowns, and
the forced outages, of several base load power plants, and the use of the more expensive liquid fuel or
bio-diesel by the natural gas-fired power plants that were affected by the Malampaya Gas Field, shutdown
from November 11 to December 10, 2013.

On December 19, 2013, several party-list representatives of the House of Representatives filed a Petition
against MERALCO, ERC and the DOE before the SC, questioning the ERC clearance granted to
MERALCO to charge the resulting price increase, alleging the lack of hearing and due process. It also

50
sought for the declaration of the unconstitutionality of the Electric Power Industry Reform Act (EPIRA),
which essentially declared the generation and supply sectors competitive and open, and not considered
public utilities. A similar petition was filed by a consumer group and several private homeowners
associations challenging also the legality of the Automatic Generation Rate Adjustment (AGRA) that the
ERC had promulgated. Both petitions prayed for the issuance of TRO, and a Writ of Preliminary
Injunction.

On December 23, 2013, the SC consolidated the two (2) Petitions and granted the application for TRO
effective immediately and for a period of 60 days, which effectively enjoined the ERC and MERALCO
from implementing the price increase. The SC also ordered MERALCO, ERC and DOE to file their
respective comments to the Petitions. Oral Arguments were conducted on January 21, 2014,
February 4, 2014 and February 11, 2014. Thereafter, the SC ordered all the Parties to the consolidated
Petitions to file their respective Memorandum on or before February 26, 2014 after which the Petitions
will be deemed submitted for resolution of the SC. MERALCO complied with said directive and filed its
Memorandum on said date.

On February 18, 2014, acting on the motion filed by the Petitioners, the SC extended for another 60 days
or until April 22, 2014, the TRO that it originally issued against MERALCO and ERC last
December 23, 2013. The TRO was also similarly applied to certain generating companies, the NGCP, and
the Philippine Electricity Market Corporation (PEMC; the administrator of WESM and market operator)
who were all enjoined from collecting from MERALCO the deferred amounts representing the P =4.15 per
kWh price increase for the November 2013 supply month.

In the meantime, on January 30, 2014, MERALCO filed an Omnibus Motion with Manifestation with the
ERC for the latter to direct PEMC to conduct a re-run or re-calculation of the WESM prices for the supply
months of November to December 2013. Subsequently, on February 17, 2014, MERALCO filed with the
ERC an Application for the recovery of deferred generation costs for the December 2013 supply month
praying that it be allowed to recover the same over a six (6)-month period.

On March 3, 2014, the ERC issued an Order voiding the Luzon WESM prices during the November and
December 2013 supply months on the basis of the preliminary findings of its Investigating Unit that these
are not reasonable, rational and competitive, and imposing the use of regulated rates for the said period.
PEMC was given seven (7) days upon receipt of the Order to calculate these regulated prices and
implement the same in the revised WESM bills of the concerned DUs in Luzon. PEMC’s recalculated
power bills for the supply month of December 2013 resulted in a net reduction of the December 2013
supply month bill of the WESM by P =9.3 billion. Due to the pendency of the TRO, no adjustment was
made to the WESM bill of MERALCO for the November 2013 supply month. The timing of amounts to
be credited to MERALCO is dependent on the reimbursement of PEMC from associated generator
companies. However, several generating companies have filed motions for reconsideration questioning
the Order dated March 3, 2014. MERALCO has filed a consolidated comment to these motions for
reconsideration. In an Order dated October 15, 2014, the ERC denied the motions for reconsideration.
The generating companies have appealed the Orders with the CA where the petitions are pending.
MERALCO has filed a motion to intervene and a comment in intervention in the petition filed by a
generating company and shall file similar pleadings in the cases filed by the other generators.

In view of the pendency of the various submissions before the ERC and mindful of the complexities in the
implementation of ERC’s Order dated March 3, 2014, the ERC directed PEMC to provide the market
participants an additional period of 45 days to comply with the settlement of their respective adjusted
WESM bills. In an Order dated May 9, 2014, the parties were then given an additional non-extendible
period of 30 days from receipt of the Order within which to settle their WESM bills. However, in an
Order dated June 6, 2014 and acting on an intervention filed by Angeles Electric Corporation, the ERC
deemed it appropriate to hold in abeyance the settlement of PEMC’s adjusted WESM bills by the market
participants.

51
On April 22, 2014, the SC extended indefinitely the TRO issued on December 23, 2013 and
February 18, 2014 and directed generating companies, NGCP and PEMC not to collect from MERALCO.
As at August 4, 2017, the SC has yet to resolve the various petitions filed against MERALCO, ERC, and
DOE.

ERC and DOE Resolutions on Retail Competition and Open Access Prohibiting the Operations of the
Local Retail Electricity Supply business segment. On March 8, 2016, the ERC promulgated Resolution
No. 05 Series of 2016 entitled “A Resolution Adopting the 2016 Rules Governing the Issuance of
Licenses to Retail Electricity Suppliers (RES) and Prescribing the Requirements and Conditions
Therefor”. The Resolution removed the term Local RES as one of the entities that may engage in the
business of supplying electricity to the Contestable Market without need of obtaining a license therefor
from the ERC. Moreover, while an affiliate of a DU is allowed to become a RES, the allowance is
“subject to restrictions imposed by the ERC on market share limits and the conduct of business activities”.

On May 12, 2016, the ERC issued Resolutions No. 10 and 11, Series of 2016, which:

▪ Provided for Mandatory contestability. Failure of a Contestable Customer to switch to RES

upon date of mandatory contestability (December 26, 2016 for those with average demand of
at least one (1) MW and June 26, 2017 for at least 750 MW) shall result in the physical
disconnection from the DU system unless it is served by the Suppliers of Last Resort (SOLR,
or, if applicable, procures power from the WESM);

▪ Prohibits DUs from engaging in the Supply of electricity to the Contestable Market except in
its capacity as a SOLR;

▪ Mandates Local RESs to wind down their supply businesses within a period of three (3)
years;

▪ Imposes upon all RESs, including DU-affiliate RESs, a market-share cap of 30% of the total
average monthly peak demand of all contestable customers in the competitive retail electricity
market; and,

▪ Prohibits RESs from transacting more than 50% of the total energy transactions of its Supply
business, with its affiliate Contestable Customers.

On May 27, 2016, MERALCO filed a Petition before Pasig RTC, praying that : (a) a TRO and
subsequently a Writ of Preliminary Injunction (“WPI”) enjoining the DOE and ERC from implementing
the Assailed Rules be issued; and the Assailed Rules be declared null and void for being contrary to the
EPIRA and its IRR. In an Order dated July 13, 2016, RTC-Pasig granted a WPI, which became effective
on July 14, 2016, and shall be effective for the duration of the pendency of the Petition.

Meanwhile, ERC filed a Petition for Certiorari and Prohibition with prayer for TRO and/or WPI before
the SC (“SC Petition”), which asserted that RTC-Pasig has no jurisdiction to take cognizance of
MERALCO’s Petition, citing Sec. 78 of the EPIRA. A similar petition was subsequently filed by the
DOE before the SC.

On October 10, 2016, the SC, in relation to the Petition filed by DOE, issued a TRO that restrained,
MERALCO, the RTC Pasig, their representatives, agents or other persons acting on their behalf from
continuing the proceedings before the RTC Pasig, and from enforcing all orders, resolutions and decisions
rendered in Special Civil Action No. 4149 until the petition before the SC is finally resolved. In a
Resolution dated November 9, 2016, the SC denied MERALCO’s motion for reconsideration of the
October 10, 2016 Resolution.

On November 2, 2016, in relation to the Petition filed by the ERC, the SC issued a Resolution dated
September 26, 2016, which partially granted the ERC Petition. While the SC allowed the RTC to proceed

52
with the principal case of declaratory relief, it nonetheless issued a Preliminary Mandatory Injunction
(“PMI”) against RTC Pasig to vacate the preliminary injunction it previously issued, and Preliminary
Injunction (“PI”) ordering the RTC Pasig to refrain issuing further orders and resolutions tending to enjoin
the implementation of EPIRA. On November 14, 2016, MERALCO filed a Motion for Partial
Reconsideration with Very Urgent Motion to lift PMI/ PI.

On November 24, 2016, the ERC promulgated a resolution moving the contestability date of end users
with an average monthly peak demand of at least one (1) MW from December 31, 2016 to February 26,
2017.

On January 17, 2017, MERALCO, through counsel, received an SC Resolution dated December 5, 2016,
which consolidated the SC DOE Petition with the SC ERC Petition. The same resolution also denied the
Motion for Partial Reconsideration filed by MERALCO.

In relation to the ERC and DOE Petitions, a separate Petition for Certiorari, Prohibition and Injuction was
filed by Philippine Chamber of Commerce and Industry (“PCCI”), San Beda College Alabang, Inc.,
Ateneo de Manila University and Riverbanks Development Corporation. In said Petition PCCI et. al
sought to declare as null and void, as well as to enjoin the DOE and ERC from implementing DOE
Circular No. 2015-06- 0010, Series of 2015, ERC Resolution Nos. 5, 10, 11 and 28, Series of 2016.
Acting on the Petition, the Supreme Court en banc through a Resolution dated February 21, 2017, issued a
TRO enjoining the DOE and the ERC from implementing DOE Circular No. 2015-06- 0010 Series of
2015, ERC Resolution Nos. 5, 10, 11 and 28 Series of 2016. Pursuant to the foregoing, PEMC has taken
the position that the TRO enjoined the voluntary contestability of 750 kW to 999 kW customers and has
not allowed them to switch to the contestable market. The DOE, in a press release, has advised that it is in
the process, together with PEMC and ERC, of drafting a general advisory for the guidance of RCOA
stakeholders. The PCCI petition was consolidated with two other separate petitions filed by Siliman
University and several distribution utilities. The DOE and ERC have also filed a consolidated comment on
these petitions.

Rail
Claims with Grantors. In accordance with Schedule 5 of the LRT-1 Project Concession Agreement,
LRMC is entitled to be compensated for the unavoidable incremental cost that the LRMC will incur to
restore the Existing System to the level necessary to meet all of the baseline Existing System
Requirements taking into consideration any Emergency Upgrade Contract executed by the Grantors for
the same purpose, if the Existing System does not meet the Existing System Requirement (ESR) as
certified by the Independent Consultant (IC).

LRMC is also entitled to receive compensation from the Grantors if the Grantors do not make available a
minimum of one hundred (100) light rail vehicles (LRV) or the system is not able to operate to a cycle
time of no more than one hundred and six (106) minutes, or a combination of the two on the effective
date. The compensation is based on the formula and procedures provided for in the concession
agreement.

On October 30, 2015, LRMC submitted a letter to the Department of Transportation and Communication
(DOTC) representing its claim for ESR costs and LRV shortfall on the premise of the Grantors’ obligation
in relation to the condition of the Existing System prior or as of the effective date. Subsequently, on
November 16, 2015, the Grantors sent a letter of dispute in response to the claims of LRMC.

As at June 30, 2017, LRMC submitted seven letters (first to seventh Balancing Payments) to the DOTC
representing its claim for ESR costs and LRV shortfall on the premise of the Grantors obligation in
relation to the condition of the Existing System prior or as of the Effective Date, fare deficit, and
contractor and other additional costs incurred less Key Performance Indicator charges.

53
On July 28, 2017, the Company submitted invoice for the eighth Balancing Payment amounting to
=327.1 million which included claims for fare deficit and Grantor’s compensation payment.
P

All claims are still undergoing discussion as at August 4, 2017.

Others

Donor’s Tax. NOHI received on January 14, 2011 a Final Assessment Notice (FAN) demanding the
payment of approximately P =199.7 million as deficiency donor’s tax (including surcharge and interest as at
January 31, 2011) on the excess of the book value over the selling price of several shares of stock in
Bonifacio Land Corporation (BLC) which NOHI sold to a third party. The assessment was based on the
finding of the Bureau of Internal Revenue–Large Taxpayer Service (BIR–LTS) that the transaction is
subject to donor’s tax as a “deemed gift” transaction under Section 100 of the 1997 National Internal
Revenue Tax Code (the Tax Code).

On February 14, 2011, NOHI filed its formal protest to the FAN raising several factual and legal
arguments. However, this was denied by the BIR through the letter it has delivered to NOHI stating its
Final Decision on Disputed Assessment (FDDA). NOHI then filed a Petition for Review with the Second
Division of the Court of Tax Appeals (CTA) to challenge the FDDA. On June 11, 2014, the CTA
rendered its decision on the case which did not sustain NOHI’s position. NOHI filed a Motion for
Reconsideration on the CTA 2nd Division’s decision as NOHI firmly believes that it is not liable for the
deficiency donor’s taxes and that it has strong legal and factual basis to support its claim. On
September 16, 2014, the CTA 2nd Division issued an Order denying NOHI’s Motion for Reconsideration.
In October 2014, NOHI, through its counsel, filed a Petition for Review before the CTA en banc praying
for, among others, the reversal of the decision of the CTA 2nd Division. In January 2015, the CTA en
banc gave due course to the petition for Review and directed the parties to submit their memoranda. The
case on appeal is deemed submitted for the decision of the CTA en banc.

On May 4, 2016, the CTA En Banc promulgated its decision, which was received on May 13, 2016,
denying the company's Petition for Review dated October 21, 2014 and affirming the adverse decision of
the Second Division of the Court dated June 11, 2014 and Resolution of the Second Division dated
September 16, 2014 which denied NOHI's Motion for Reconsideration. Subsequently, on May 24, 2016,
a Motion for Reconsideration was filed on the aforesaid decision of the CTA En Banc. The Commissioner
of Internal Revenue submitted a Comment on the company’s Motion for Reconsideration on
July 27, 2016. The Motion for Reconsideration which was filed on May 24, 2016 is now deemed
submitted for decision. On October 28, 2016, NOHI received a copy of the Resolution of the CTA En
Banc dated October 18, 2016 denying NOHI’s Motion for Reconsideration.

On November 7, 2016, NOHI filed with the Supreme Court a motion for an extension of thirty (30) days
from November 12, 2016 to until December 12, 2016, within which to file a Petition for Review with the
said Court as appeal from the decision and resolution of the CTA en banc. On December 12, 2016, NOHI
filed with the SC the required Petition for Review dated December 9, 2016.

On March 14, 2017, NOHI received a copy of the Resolution dated January 23, 2017 of the Supreme
Court denying NOHI’s Petition for Review on the decision of the Court of Tax Appeals en banc which
affirmed the decision of the CTA Second Division ordering NOHI to pay donor’s tax in the amount of
=170.2 million including surcharge but exclusive of interest.
P

On March 28, 2017, NOHI filed a Motion for Reconsideration on the aforesaid Resolution of the Supreme
Court. As at August 4, 2017, NOHI has not received any Resolution from the Supreme Court with respect
to the filed Motion for Reconsideration.

54
27. Contracts, Agreements and Commitments

The information provided in this report must be read in conjunction with the 2016 audited consolidated
financial statements of the Company.

Updates to certain contracts and commitments disclosed in the annual consolidated financial statements as
at December 31, 2016 and new contracts entered into during the first half of 2017 are provided below:

MPIC

Issuance of Exchangeable Bond to GIC Private Limited (GIC). On July 2, 2014, GIC, through Arran
Investment Private Limited, invested P
=3.7 billion for a 14.4% stake in MPHHI and paid P
=6.5 billion as
consideration for an Exchangeable Bond which can be exchanged into a 25.5% stake in MPHHI in the
future. The Exchangeable Bond was accounted for as an equity instrument with the interest accruing on
the Exchangeable Bond recorded at its present value (see Notes 12 and 15).

Water

Cagayan de Oro 100 MLD Bulk Water Project (CDO Bulk Water Project). MPWIC received the Notice
of Award (NOA) for the CDO Bulk Water Project on March 23, 2017.

The CDO Bulk Water Project, which has a term of 30 years, renewable for another 20 years, involves the
supply of 100 MLD bulk water to Cagayan De Oro Water District (COWD) and the construction of new
water transmission lines and rehabilitation of the Camaman-an Reservoir. Currently, COWD has
approximately 90,000 service connections. The estimated project cost is approximately P
=2.8 billion. This
project will be implemented through a joint venture company to be owned by MPWIC (95%) and the
COWD (5%).

On April 17, 2017, MPWIC has complied with the obligation to deliver performance security amounting
to P
=2.7 million within thirty days from the receipt of the NOA. The definitive agreements implementing
the joint venture is expected to be signed upon completion of the other requirements in the NOA.

Toll Operations

Merger between NLEX Corp and TMC. On October 19, 2016, the BOD of NLEX Corp approved the
proposed merger between NLEX Corp and TMC, with NLEX Corp as the surviving corporation. On
November 17, 2016, majority of the stockholders of NLEX Corp confirmed and ratified the proposed
merger between NLEX Corp and TMC. On April 17, 2017, NLEX Corp and TMC, signed the plan of
merger and articles of merger, pursuant to which NLEX Corp and TMC will be merged, with NLEX Corp
as the surviving corporation.

As the surviving corporation, NLEX Corp’s corporate existence shall continue and shall: (a) acquire all
respective rights, businesses, assets and other properties of TMC; and, (b) assume all the debts and
liabilities of TMC.

The execution of the merger shall be subject to regulatory approvals, including the Philippine
Competition Commission, and shall take effect 15 days from and after the approval by the SEC of the Articles
of Merger and the issuance of Filing of the Articles of Merger. Upon the effective date of the merger, each
TMC shareholder participating in the merger shall receive common shares in NLEX using the exchange ratio
of 2.7 NLEX common shares for every 1 TMC common share (or such other exchange ratio prescribed by the
SEC). Alternatively, a TMC shareholder who has exercised its appraisal right under the law will instead sell
its TMC common shares to TMC for cash consideration, pursuant to the Corporation Code of the Philippine.
Upon the effectivity of the merger, NLEX shall be deemed as having acquired all the assets, and assumed all
the liabilities of TMC.

55
NLEX Corp will remain to be an indirect subsidiary of MPIC after the implementation of the merger, which
is expected to be completed by second half of 2017.

Construction of the CALAX’ Laguna Segment. On June 30, 2017, MPCALA and DMCI Incorporated
(DMCI) entered into the Construction Contract, pursuant to which DMCI has agreed to construct and
complete the Civil Works for the Laguna Segment of the CALAX in the Philippines in accordance with the
terms of the Construction Contract. The contract price for the Project is P
=7.2 billion (equivalent to
approximately US$142.9 million), inclusive of taxes, subject to adjustments as provided for in the
Construction Contract. DMCI shall commence the works on the seventh day from the date of DMCI’s receipt
of the notice to proceed from MPCALA (Commencement Date).

On July 03 2017, MPCALA issued the Notice to Proceed to DMCI signifying the official commencement of
construction works for the project. The project is expected to be completed in 2020 and be fully operational
by 2021.

Renegotiated Operations & Maintenance (O&M) Agreement with TMC. On March 6, 2017, TMC and
NLEX Corp entered into a side letter agreement formalizing the Base Fee of the Operations &
Maintenance Agreement (O&M Agreement). The amount of the Base Fee as of February 9, 2017 (Base
date) is P
=1,136.8 million for the NLEX, Segment 7, Dau Interchange, Segment 8.1, Balagtas Interchange
Northbound Exit and Segment 9.

Power

Transfer of transmission facilities to the National Grid Corporation of the Philippines (NGCP). In
February 2017, a Deed of Absolute Sale was executed between the generating subsidiaries of GBPC,
namely Panay Energy Development Corporation (PEDC), Toledo Power Company (TPC) and Cebu
Energy Development Corporation (CEDC), and the NGCP on the transfer of transmission facilities based
on the initial list of assets as appraised by a third party appraiser. The transfer is expected to be completed
in 2017.

Final Acceptance of the 1x150 MW (gross) CFB clean coal-fired expansion plant (PEDC 3). In 2014,
GBPC’s subsidiary, Panay Energy Development Corporation began the construction of PEDC 3 in its
existing Panay Coal Plant Facility in Barangay Ingore, La Paz, Iloilo City. PEDC 3 is registered with the
Board of Investments (BOI) under BOI Registration Number 2014-110 on July 22, 2014. PEDC declared
commercial operations of its 150 MW Expansion Plant on January 26, 2017 in accordance with the terms
and conditions of its Power Supply Agreements. The Project Completion Date of PEDC3 is expected to
be achieved by the end of 2017.

Integrated Solid Waste Management Facility Project (ISWM Project). In March 2017, the consortium
consisting of MPIC, Covanta Energy, LLC and Macquarie Group, Ltd. has been granted Original
Proponent Status (OPS) by The Quezon City Government to design, construct, finance, and operate an
ISWM Project. The ISWM facility will be capable of processing and converting up to 3,000 metric tons
per day of Quezon City’s municipal solid waste into 42MWe of renewable energy, enough to power
between 60,000 to 90,000 homes. The ISWM Project will be undertaken through a Joint Venture between
QC LGU and the consortium in accordance with QC LGU Ordinance: No. SP-2336, s. 2014 (QC PPP
Code).

As the original proponent of the ISWM Project, the consortium will have the exclusive rights to enter into
detailed negotiations with the QC LGU. Upon successful completion of negotiations, the ISWM Project
will be subjected to a competitive challenge consistent with government regulations. If and when the
consortium is awarded the ISWM Project, development and construction would take approximately three
(3) to four (4 years). It is expected that this project will be funded through a combination of debt and
equity.

56
 Rail

Rehabilitation of Existing System. LRMC entered into a two-year agreement with First Balfour, Inc. for
its Structural Restoration Project which includes the parapets, faulty concrete and repair of river bridges of
the LRT-1 line. The notice to proceed was signed and issued on March 17, 2017.

In line with this project, LRMC also signed an Independent Contractor Agreement with ESCA
Incorporated for the expertise and services necessary in managing the Structural Restoration Project with
First Balfour, Inc.

Construction of the Cavite Extension. On February 11, 2016, LRMC signed an EPC Agreement for the
construction of LRT-1 Cavite Extension with Bouygues Travaux Publics Philippines Inc., Alstom
Transport S.A. and Alstom Transport Construction Philippines Inc. which shall commence upon the
issuance by the Grantors of a notice to proceed. As at August 4, 2017, the Notice to proceed is still
pending.

28. Financial Instruments

Categories of Financial Instruments

There are no changes in the classification of financial assets resulting from changes in the use and purpose
of these assets. The categories of the Company’s financial assets and financial liabilities as at
June 30, 2017 are:
June 30, 2017
Financial
Financial Assets Liabilities
AFS Other
Loans and Financial Financial
FVPL Receivables Assets Liabilities Total
(In Millions)
ASSETS
Cash and cash equivalents =–
P P
= 24,154 =–
P =–
P P
= 24,154
Short-term deposits – 12,161 – – 12,161
Restricted cash – 2,848 – – 2,848
Receivables - net – 11,591 – – 11,591
Due from related parties – 23 – – 23
AFS financial assets:
Investment in bonds – – 1,503 – 1,503
Investment in UITF – – 3,390 – 3,390
Investment in equity – – 513 – 513
Deposit for LTIP – 174 – – 174
Other noncurrent assets – 1,517 – – 1,517
P
=- P
= 52,468 P
= 5,406 =–
P P
= 57,874

LIABILITIES
Accounts payable and other current liabilities (a) =–
P =–
P =–
P P
= 17,718 P
= 17,718
Due to related parties – – – 15,257 15,257
Service concession fees payable – – – 29,344 29,344
Long-term debt – – – 166,264 166,264
Deferred credits and other long-term liabilities – – – 1,172 1,172
=–
P =–
P =–
P P
= 229,755 P
= 229,755
(a)
Excludes statutory payables

Fair Values
The following table shows a comparison, by classes, between the carrying values and fair values of certain
of the Company’s financial instruments as at June 30, 2017. Financial instruments with carrying amounts
reasonably approximating their fair values are no longer included in the comparison.

June 30, 2017

Carrying Total Fair
Value Level 1 Level 2 Level 3 Value
(In Millions)
Assets measured at fair value
AFS Financial Assets

57
 June 30, 2017
Carrying Total Fair
Value Level 1 Level 2 Level 3 Value
(In Millions)
Shares of stock P
=513 P
=22 P
=491 =–
P P
=513
Unit Investment Trust Fund 3,390 – 3,390 – 3,390
Investment in bonds and treasury Notes 1,503 863 640 – 1,503
P
=5,406 P
=885 P
=4,521 =–
P P
=5,406
Assets for which fair values are disclosed
Loans and Receivables
Miscellaneous deposits P
=1,517 =–
P =–
P P
=1,467 P
=1,467
P
=1,517 =–
P =–
P P
=1,467 P
=1,467
Liabilities for which fair values are disclosed
Other financial liabilities
Service concession fees payable P
=29,344 =–
P =–
P P
=30,895 P
=30,895
(current and noncurrent)
Long-term debt (current and noncurrent) 166,264 – – 168,781 168,781
Customer guaranty deposit 998 – – 1,053 1,053
Due to related parties 15,257 – – 15,146 15,146
P
=211,863 =–
P =–
P P
=215,754 P
=215,754

During the six-month period ended June 30, 2017, there were no transfers between Level 1 and Level 2
fair value measurements, and no transfers into and out of Level 3 fair value measurement. There were no
change in the methods and assumptions used to measure the fair value of each class of assets and
liabilities for which it is practicable to estimate such value.

Levels 1 and 2 Fair Value Hierarchy

Cash and Cash Equivalents. Due to the short-term nature of transactions, the fair value of cash and cash
equivalents approximate the carrying amounts at the end of the reporting period.

Restricted Cash, Cash Deposits, and Accounts Payable and Other Current Liabilities. Carrying values
approximate the fair values at the reporting date due to the short-term nature of the transactions.

Investments in UITF. A UITF uses the mark-to-market method in valuing the fund’s securities. It is a
valuation method which calculates the Net Asset Value (NAV) based on the estimated fair market value
of the assets of the fund based on prices supplied by independent sources.

Due from Related Parties. Fair value of due from related parties approximates their carrying amounts as
these are already to be settled within a year from the consolidated statement of financial position date.

Service Concession Fees Payable and Customers’ Guaranty Deposits. Estimated fair value is based on
the discounted value of future cash flows using the applicable rates for similar types of financial
instruments.

Notes Receivable, Miscellaneous Deposits and Other Financial Assets. Estimated fair value is based on
the present value of future cash flows discounted using the prevailing rates that are specific to the tenor of
the instruments’ cash flows at the end of each reporting period with credit spread adjustment.

Long-term Debt. For both fixed rate and floating rate (repriceable every six months) US dollar
denominated debts and Philippine Peso-denominated fixed rate corporate notes, estimated fair value is
based on the discounted value of future cash flows using the prevailing credit adjusted US risk-free rates
and Philippine risk free rates that are adjusted for credit spread.

29. Supplemental Cash Flow Information

Non-cash investing activity

During the current interim period, the Company had a non-cash investing activity which was not reflected
in the interim consolidated statement of cash flows. For the six-month period ended June 30, 2017, a total

58
 of P
=560 million of interest accretion arising from service concession fee payable has been capitalized to
service concession assets (see Note 10).

Non-cash financing activities:

The following table shows significant changes in liabilities arising from financing activities, including
changes arising from cash flows and non-cash changes:

Service concession Due to Related

fee payable Long-term debt Parties
(see Note 10) (see Note 14) (see Note 16)
(Unaudited)
(In Millions)
Balance as at December 31, 2016 =28,874
P =97,016
P =8,439
P
Cash flow (see statements of cash flow)
Proceeds − 7,957 −
Payments (701) (4,000) (2,001)
Transaction cost − (58) −
(701) 3,899 (2,001)

Non-cash
Acquisition of subsidiary − 65,037 −
Deferred purchase − − 8,629
Foreign exchange movements 252 168 −
Interest accretion 919 (21) 190
Amortization of debt issue costs − 88 −
Others − 77 −
1,171 65,349 8,819
Balance as at June 30, 2017 =29,344
P =166,264
P =15,257
P

30. Subsequent Events

Aside from those disclosed in Note 17 (MPIC’s dividend declaration), Note 26 (Arbitral Tribunal ruling), and
Note 27 (CALAX’ Notice to Proceed), events occurring after June 30, 2017 include:

MERALCO’s Dividend Declaration. On August 3, 2017, the BOD of MERALCO approved the declaration of
cash dividends consisting of an interim regular cash dividend of P
=4.489 per share and a special dividend of
=4.436 per share to all common shareholders of record as at August 30, 2017, payable on
P
September 22, 2017. MPIC’s share of the dividends amounted to P =1.1 billion attributable to its 10.5% direct
interest in MERALCO.

59
31. Consolidated Subsidiaries

The consolidated subsidiaries of MPIC are as follows:

June 30, 2017 December 31, 2016

MPIC Direct MPIC MPIC Direct MPIC
Place of Direct Interest of Effective Direct Interest of Effective
Name of Subsidiary Incorporation Interest Subsidiary Interest Interest Subsidiary Interest Principal Activity
(In %) (In %)
MPIC Subsidiaries
Beacon Electric Asset Holdings, Inc. Philippines 100.0 – 100.0 75.0 – 75.0 Investment holding; Acquired the
(Beacon Electric) remaining 25% in June 27, 2017
(See Note 4)
Metro Pacific Tollways Corporation (MPTC) Philippines 99.9 – 99.9 99.9 – 99.9 Investment holding
Maynilad Water Holding Company, Inc. Philippines 51.3 – 51.3 51.3 – 51.3 Investment holding
(MWHC)
MetroPac Water Investments Corporation Philippines 100.0 – 100.0 100.0 – 100.0 Investment holding
(MPWIC)
Metro Pacific Hospital Holdings, Inc. Philippines 85.6 – 85.6 85.6 – 85.6 Investment holding; With the Exchangeable
(MPHHI) Bond, the non-controlling shareholder is
entitled to 39.89% effective ownership
interest in MPHHI.
Metro Pacific Light Rail Corp. (MPLRC) Philippines 100.0 – 100.0 100.0 – 100.0 Investment holding
MetroPac Logistics Company, Inc. (MPLC) Philippines 100.0 – 100.0 100.0 – 100.0 Investment holding
MetroPac Clean Energy Holdings Philippines 100.0 – 100.0 100.0 – 100.0 Investment holding
Corporation (MCE)
Fragrant Cedar Holdings, Inc. (FCHI) Philippines 100.0 – 100.0 100.0 – 100.0 Real estate
Porrovia Corporation Philippines 50.0 50.0 100.0 50.0 50.0 100.0 Investment holding
Neo Oracle Holdings, Inc (NOHI) Philippines 96.6 – 96.6 96.6 – 96.6 Investment holding and Real estate;
Formerly Metro Pacific Corporation
(MPC). NOHI’s corporate life ended
December 31, 2013 and is currently under
the process of liquidation.
MPIC-JGS Airport Holdings, Inc. Philippines 58.8 – 58.8 58.8 – 58.8 Investment holding; BOD of MPIC-JGS
(MPIC-JGS) approved the shortening of the company’s
corporate life to until February 15, 2016.
Metro Global Green Waste, Inc. (MGGW) Philippines 70.0 – 70.0 70.0 – 70.0 Investment holding; BOD of MGGW
approved the shortening of the company’s
corporate life to until December 31, 2017.
MPIC Infrastructure Holdings Limited BVI 100.0 – 100.0 100.0 – 100.0 Investment holding
(MIHL)

Beacon Electric Subsidiary

Beacon PowerGen Holdings, Inc. (BPHI) Philippines – 100.0 100.0 – – – Investment holding

BPHI Subsidiary
60
 June 30, 2017 December 31, 2016
MPIC Direct MPIC MPIC Direct MPIC
Place of Direct Interest of Effective Direct Interest of Effective
Name of Subsidiary Incorporation Interest Subsidiary Interest Interest Subsidiary Interest Principal Activity
(In %) (In %)
Global Business Power Corporation (GBPC) Philippines – 56.0 62.4 – – – Investment Holding

GBPC Subsidiaries
ARB Power Ventures, Inc. (APVI) Philippines – 100.0 62.4 – – – Investment holding
GBH Power Resources, Inc. (GPRI) Philippines – 100.0 62.4 – – – Power Generation
Global Energy Supply Corporation (GESC) Philippines – 100.0 62.4 – – – Power Distribution
Global Hydro Power Corporation (GHPC) Philippines – 100.0 62.4 – – – Power Generation
Global Renewables Power Corporation Philippines – 100.0 62.4 – – – Power Generation
(GRPC)
Mindanao Energy Development Corporation Philippines – 100.0 62.4 – – – Power Generation
(MEDC)
Toledo Cebu International Trading Philippines – 100.0 62.4 – – – Trading business
Resources Corporation (TCITRC)
Toledo Holdings Corporation (THC) Philippines – 100.0 62.4 – – – Investment holding
Toledo Power Company (TPC) Philippines – 100.0 62.4 – – – Power Generation
Global Formosa Power Holdings, Inc. Philippines – 93.2 58.2 – – – Investment holding
(GFPHI)
Panay Power Holdings Corporation (PPHC) Philippines – 89.3 55.7 – – – Investment holding
Lunar Power Core, Inc. (LPCI) Philippines – 57.5 35.9 – – – Investment holding

GFPHI Subsidiary
Cebu Energy Development Corporation Philippines – 56.0 32.6 – – – Power Generation
(CEDC)

LPCI Subsidiary
Global Luzon Energy Development Philippines – 100.0 35.9 – – – Power Generation
Corporation (GLEDC)

PPHC Subsidiaries
Panay Power Company (PPC) Philippines – 100.0 55.7 – – – Power Generation
Panay Energy Development Corporation Philippines – 100.0 55.7 – – – Power Generation
(PEDC)

GRPC Subsidiary
CACI Power Corporation (CACI) Philippines – 100.0 62.4 – – – Power Generation

MPTC Subsidiaries
Metro Pacific Tollways North Corporation Philippines – 100.0 99.9 – 100.0 99.9 Investment holding
(MPT North; formerly Metro Pacific
Tollways Development Corporation)

61
 June 30, 2017 December 31, 2016
MPIC Direct MPIC MPIC Direct MPIC
Place of Direct Interest of Effective Direct Interest of Effective
Name of Subsidiary Incorporation Interest Subsidiary Interest Interest Subsidiary Interest Principal Activity
(In %) (In %)
Cavitex Infrastructure Corporation (CIC) and Philippines – 100.0 99.9 – 100.0 99.9 Tollway operations; Interest in CIC is held
subsidiaries through a Management Letter Agreement.
CIC holds the concession agreement for the
CAVITEX.
Metro Strategic Infrastructure Philippines – 97.0 96.9 – 97.0 96.9 Investment holding
Holdings, Inc. (MSIHI)
MPT Asia BVI – 100.0 99.9 – 100.0 99.9 Investment holding
Metro Pacific Tollways Management Philippines – 100.0 99.9 – 100.0 99.9 Tollway collection
Services, Inc. (MPTMSI) (a)
Metro Pacific Tollways South Corporation Philippines – 100.0 99.9 – 100.0 99.9 Holding company

MPTDC Subsidiaries
NLEX Corporation Philippines – 75.6 75.5 – 75.6 75.5 Tollway operations; Change in the
corporate name from Manila North
Tollways Corporation was approved by the
SEC on February 13, 2017.
Tollways Management Corporation (TMC) Philippines 73.0 72.9 – – – Tollway management
Collared Wren Holdings, Inc. (CWHI) Philippines – 100.0 99.9 – 100.0 99.9 Investment holding
Larkwing Holdings, Inc. (LHI) Philippines – 100.0 99.9 – 100.0 99.9 Investment holding
MPCALA Holdings, Inc. (MPCALA) Philippines – 51.0 99.9 – 51.0 99.9 Tollway operations; MPCALA is owned by
MPTDC at 51% and the remaining 49%
owned equally by CWHI and LHI.; holds
the concession agreement for the CALAX.
Cebu Cordova Link Expressway Corporation Philippines – 100.0 99.9 – 100.0 99.9 Tollway operations; CCLEC holds the
(CCLEC) concession agreement for the CCLEX

Metro Pacific Tollways Vizmin Philippines – 100.0 99.9 – 100.0 99.9 Investment holding
Luzon Tollways Corporation (LTC) Philippines – 100.0 99.9 – 100.0 99.9 Tollway operations; Dormant

NLEX Corp Subsidiary

NLEX Ventures Corporation Philippines – 100.0 75.5 – 100.0 75.5 Service facilities management

MPT Asia Subsidiaries

MPT Thailand Corporation BVI – 100.0 99.9 – 100.0 99.9 Investment holding
FPM Tollway (Thailand) Limited Hong Kong – 100.0 99.9 – 100.0 99.9 Investment holding
AIF Toll Road Holdings (Thailand) Co., Ltd Thailand – 100.0 99.9 – 100.0 99.9 Investment holding; holds the investment in
(AIF) DMT (see Note 9).
MPT Vietnam Corporation BVI – 100.0 99.9 – – – Investment holding

Metro Pacific Tollways South

Corporation
Metro Pacific Tollways South Philippines – 100.0 99.9 – – – Tollway operations
Management Corporation

62
 June 30, 2017 December 31, 2016
MPIC Direct MPIC MPIC Direct MPIC
Place of Direct Interest of Effective Direct Interest of Effective
Name of Subsidiary Incorporation Interest Subsidiary Interest Interest Subsidiary Interest Principal Activity
(In %) (In %)

MWHC Subsidiary
Maynilad Water Services, Inc. (Maynilad) Philippines 5.2 92.9 52.8 5.2 92.9 52.8 Water and sewerage services; Holds the
concession agreement for the water
distribution in the West Concession Area.

Maynilad Subsidiaries
Amayi Water Solutions, Inc. (AWSI) Philippines – 100.0 52.8 – 100.0 52.8 Water and sewerage services
Philippine Hydro, Inc. (PHI) Philippines – 100.0 52.8 – 100.0 52.8 Water and sewerage services

MPWIC Subsidiaries
MetroPac Cagayan De Oro, Inc. (MCDO) Philippines – 100.0 100.0 – 100.0 100.0 Water services
MetroPac Iloilo Holdings Corp.(MILO) Philippines – 100.0 100.0 – 100.0 100.0 Investment holding/ Water services
Metro Iloilo Bulk Water Supply Corp. Philippines – 80.0 80.0 – 80.0 80.0 Bulk water services; Holds the joint venture
agreement for the bulk water supply in
Metro Iloilo Water District.
Eco-System Technologies International, Inc. Philippines – 65.0 65.0 – 65.0 65.0 EPC and O&M contractor
(ESTII)

MPHHI Subsidiaries
Riverside Medical Center, Inc (RMCI) Philippines – 78.0 66.7 – 78.0 66.7 Hospital operation
East Manila Hospital Managers Corp. Philippines – 100.0 85.6 – 100.0 85.6 Hospital operation; Doing business under
(EMHMC) the name and style of Our Lady of Lourdes
Hospital
Asian Hospital Inc. (AHI) Philippines – 85.6 73.3 – 85.6 73.3 Hospital operation
Colinas Verdes Hospital Managers Corp. Philippines – 100.0 85.6 – 100.0 85.6 Hospital operation; Doing business under
(CVHMC) the name and style of Cardinal Santos
Medical Center.
AHI Hospital Holdings Corp. Philippines – 100.0 85.6 – 100.0 85.6 Investment holding, Formerly Bumrungrad
International Philippines Inc.
De Los Santos Medical Center Inc. Philippines – 51.0 43.7 – 51.0 43.7 Hospital operation
(DLSMC)
The Megaclinic, Inc. (Megaclinic) Philippines – – – – 51.0 43.7 Clinic management

Central Luzon Doctors’ Hospital, Inc. Philippines – 51.0 43.7 – 51.0 43.7 Hospital operation
(CLDH)
Metro Pacific Zamboanga Hospital Corp. Philippines – 100.0 85.6 – 100.0 85.6 Hospital operation; Doing business under
(MPZHC) the name and style of West Metro Medical
Center.
Medigo Corporation Philippines – 100.0 85.6 – 100.0 85.6 Telehealth operation; Formerly First Call
24/7 Corporation
Sacred Heart Hospital of Malolos Inc. Philippines – 51.0 43.7 – 51.0 43.7 Hospital operation; Acquired in 2016
(SHHM) (see Note 4).

63
 June 30, 2017 December 31, 2016
MPIC Direct MPIC MPIC Direct MPIC
Place of Direct Interest of Effective Direct Interest of Effective
Name of Subsidiary Incorporation Interest Subsidiary Interest Interest Subsidiary Interest Principal Activity
(In %) (In %)
Marikina Valley Medical Center, Inc. Philippines – 93.0 79.6 – 93.0 79.6 Hospital operation
(MVMC)
Delgado Clinic Inc. (DCI) Philippines – 65.0 55.6 – – – Hospital operation; Doing business under
the name and style of Dr. Jesus C. Delgado
Memorial Hospital; Acquired in 2017
(see Note 4).
Medi Linx Laboratory, Inc. Philippines – 100.0 85.6 – – – Clinical laboratory operator; Incorporated
in January 2017
Metro RMCI Cancer Center Corporation Philippines – 51.0 43.7 – – – Clinic management; Incorporated in
February 6, 2017

RMCI Subsidiary
Riverside College, Inc. (RCI) Philippines – 100.0 66.7 – 100.0 66.7 School operations

CVHMC Subsidiary
Colinas Healthcare, Inc. Philippines – 100.0 85.6 – 100.0 85.6 Clinic management

CLDH Subsidiary
Metro CLDH Cancer Center Corporation Philippines – 100.0 43.7 – 100.0 43.7 Clinic management

MPLRC Subsidiaries
Light Rail Manila Holdings Inc.(LRMH) Philippines – 50.0 50.0 – 50.0 50.0 Investment holding
Light Rail Manila Corporation (LRMC) Philippines – 55.0 55.0 – 55.0 55.0 Rail operations; Holds the concession
agreement for the LRT-1.
Light Rail Manila Holdings 2, Inc. Philippines – 50.0 50.0 – 50.0 50.0 Investment holding
Light Rail Manila Holdings 6, Inc. Philippines – 50.0 50.0 – 50.0 50.0 Investment holding

MPLC Subsidiaries
MetroPac Movers, Inc (MMI) Philippines – 76.0 76.0 – 76.0 76.0 Logistics
LogisticsPro, Inc. Philippines – 100.0 100.0 – 100.0 100.0 Logistics

MMI Subsidiaries
MetroPac Trucking Company, Inc. Philippines – 100.0 76.0 – 100.0 76.0 Logistics
TruckingPro, Inc Philippines – 100.0 76.0 – 100.0 76.0 Logistics
PremierLogistics, Inc. Philippines – 90.0 68.4 – 100.0 76.0 Logistics
PremierTrucking, Inc. Philippines – 100.0 76.0 – 100.0 76.0 Logistics
OneLogistics, Inc. Philippines – 100.0 76.0 – 100.0 76.0 Logistics

NOHI Subsidiaries
First Pacific Bancshares Philippines, Inc. Philippines – 100.0 96.6 – 100.0 96.6 Investment holding
Metro Pacific Management Services, Inc. Philippines – 100.0 96.6 – 100.0 96.6 Management services
First Pacific Realty Partners Corporation Philippines – 50.0 48.3 – 50.0 48.3 Investment holding
Metro Tagaytay Land Co., Inc. Philippines – 100.0 96.6 – 100.0 96.6 Real estate; Pre-operating.
64
 June 30, 2017 December 31, 2016
MPIC Direct MPIC MPIC Direct MPIC
Place of Direct Interest of Effective Direct Interest of Effective
Name of Subsidiary Incorporation Interest Subsidiary Interest Interest Subsidiary Interest Principal Activity
(In %) (In %)
Pacific Plaza Towers Management Services, Philippines – 100.0 96.6 – 100.0 96.6 Management services; Dormant.
Inc.
Philippine International Paper Corporation Philippines – 100.0 96.6 – 100.0 96.6 Investment holding; Dormant.
Pollux Realty Development Corporation Philippines – 100.0 96.6 – 100.0 96.6 Investment holding; Dormant.
Metro Asia Link Holdings, Inc. Philippines – 60.0 58.0 – 60.0 58.0 Investment holding; Dormant.

(a)
Formerly M+ Corporation. Incorporated on August 24, 2016 with the primary purpose to carry on the toll collection function of CAVITEX and CALAX. Amended articles of incorporation was signed on July 18, 2017.

65
 Item 2

Management's Discussion and

Analysis of Financial Condition
and Results of Operations

66
 Exhibit III

Financial Highlights and Key Performance Indicators

The summary financial information presented below as at June 30, 2017 and for the six-month periods ended
June 30, 2017 and 2016 was derived from the Company’s unaudited interim consolidated financial statements,
prepared in accordance with Philippine Accounting Standard 34, Interim Financial Reporting. The
information below is not necessarily indicative of the results of future operations.

In this Report, Core EBITDA, Core EBITDA Margin and Core Income are not measures of performance
under Philippine Financial Reporting Standards (PFRS), and users of this Report should not consider Core
EBITDA, Core EBITDA Margin and Core Income in isolation or as alternatives to net income as an indicator
of the Company’s operating performance or to cash flow from operating, investing and financing activities as
a measure of liquidity, or any other measures of performance under PFRS. There are various Core EBITDA,
Core EBITDA Margin and Core income calculation methods, accordingly, the Company’s presentation of
these measures may not be comparable to similarly titled measures used by other companies.

The following discussion and analysis of the Group’s financial condition and results of operations should be
read in conjunction with the accompanying unaudited interim condensed consolidated financial statements
and the related notes as at June 30, 2017 and for the six-month periods ended June 30, 2017 and 2016
(“June 30, 2017 Interim Consolidated Financial Statements”) included in this Report.

Increase
Unaudited (Decrease)
1H 2017 1H 2016 Amount %
(in Php Millions)
Operating Revenues 24,096 21,741 2,355 11
Income before income tax 12,774 11,537 1,237 11
Net income attributable to owners of the Parent Company 7,821 6,980 841 12
Core EBITDA 14,894 13,089 1,805 14
Core income 7,800 6,644 1,156 17
Non-recurring income (expense) 21 336 (315) (94)
Core EBITDA margin 62% 60% 2% 3

Overview

Highlights for the first six months of the year which had financial impact are as follows:

▪ Expanding the Hospital Business - Acquisition of Delgado Clinic Inc. (DCI). On January 31, 2017,
Metro Pacific Hospital Holdings, Inc. (MPHHI) completed agreement to infuse approximately P =133.5
million of cash into DCI, owner and operator of the Dr. Jesus C. Delgado Memorial Hospital (JDMH)
via a subscription to preferred shares representing approximately 65% of the total expanded capital
stock of DCI. The cash infusion from MPHHI will enable JDMH to upgrade its equipment and
facilities, and expand its capacity. MPHHI acquired DCI as part of its strategy to grow its portfolio
and increase the Company’s total bed capacity and to be the largest private hospital group in the
Philippines.

▪ Financing capital expenditure through loan facilities. On March 27, 2017, Metro Pacific Tollways
North Corporation (MPT North; formerly Metro Pacific Tollways Development Corporation) entered
into a =
P 1.4 Billion Term Loan Facility with BDO Unibank Inc. due in 2027. The facility was fully
drawn on March 30, 2017 (see Note 14 to the June 30, 2017 Interim Consolidated Financial
Statements).

67
 ▪ Deeper participation in Power sector. On June 13, 2017, MPIC signed a Share Purchase Agreement
with PLDT Communications and Energy Venture Inc. (PCEV) for the purchase of PCEV’s 25%
remaining interests in Beacon Electric Asset Holdings Inc. (Beacon Electric) (both common and
preferred shares) at a total purchase price of P
=21.8 billion. This purchase consideration was settled as
to P
=12.0 billion in cash with the balance of P
=9.8 billion over the next four (4) years. In order to fund
the investment, MPIC completed an overnight placing of 4.5% of its directly held Manilad Electric
Company (MERALCO) shares for an aggregate consideration of ₱12.7 billion. Following this and
related financing transactions MPIC’s economic interest in MERALCO is 45.5% and in Global
Business Power Corporation (GBPC) 62.4%.

▪ Acquisition of Tollways Management Corporation (TMC). On April 4, 2017, MPT North (formerly
Metro Pacific Tollways Development Corporation) completed the acquisition of additional 7%
ownership in TMC from EROSA which increased its effective ownership from 60.0% to 67.0%. This
acquisition was accounted for as a business combination with MPT North acquiring control over
TMC.

The following events and transactions did not have any significant financial impact as of June 30, 2017 but are
expected to affect financial results in the future:

▪ Expanding Water Business outside Metro Manila. MetroPac Water Investments Corporation
(MPWIC) received the Notice of Award (NOA) for the Cagayan de Oro 100 MLD Bulk Water
Project (CDO Bulk Water Project) on March 23, 2017. The CDO Bulk Water Project, which has a
term of 30 years, renewable for another 20 years, involves the acquisition and construction of a 100
MLD water treatment plant and the construction of new water transmission lines and rehabilitation of
the Camaman-an Reservoir, to supply the Cagayan de Oro Water District which currently has
approximately 90,000 service connections. The estimated project cost is approximately P =2.8 billion.
This project will be implemented through a joint venture company to be owned by MPWIC (95%)
and the Cagayan de Oro Water District (5%). The definitive agreements implementing the joint
venture is expected to be signed upon completion of the requirements in the NOA.

▪ Merger between NLEX Corp and TMC. On October 19, 2016, the BOD of NLEX Corporation
(NLEX Corp; formerly Manila North Tollways Corporation) approved the proposed merger between
NLEX Corp and TMC, with NLEX Corp as the surviving corporation. On November 17, 2016,
majority of the stockholders of NLEX Corp confirmed and ratified the proposed merger between
NLEX Corp and TMC. On April 17, 2017, NLEX Corp and TMC, signed the plan of merger and
articles of merger, pursuant to which NLEX Corp and TMC will be merged, with NLEX Corp as the
surviving corporation. As the surviving corporation, NLEX Corp’s corporate existence shall continue
and shall: (a) acquire all respective rights, businesses, assets and other properties of TMC; and, (b)
assume all the debts and liabilities of TMC. NLEX Corp will remain to be an indirect subsidiary of
MPIC after the implementation of the merger, which is expected to be completed around the 3rd
quarter of 2017.

▪ Expanding the Power Business.

o In March 2017, an MPIC led consortium including Covanta Energy, LLC and Macquarie Group,
Ltd. was granted Original Proponent Status by the Quezon City Government for a 42 MW energy
from waste project. The project will design, construct, finance and operate an Integrated Solid
Waste Management (ISWM) facility in Quezon City. The ISWM facility will be capable of
processing and converting up to 3,000 metric tons per day of Quezon City’s municipal solid waste
into 42MW of renewable energy, enough to power between 60,000 to 90,000 homes.

o In June 2017, GBPC and Alsons Consolidated Resources Inc. (ACR) have forged agreement
where the former will acquire a 50 percent interest in Alsons Thermal Power Corp. (ATEC).
Under the deal, ACR will sell 14,952,678 shares to GBPC with a base purchase price of P
=4.25
billion. As at June 30, 2017, this deal has not yet been closed.

68
Description of Operating Segments of the Group

An operating segment is a component of the Company that engages in business activities from which it may
earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the
Company’s other components. An operating segment’s operating results are reviewed regularly by the chief
operating decision maker to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is available.

The following are the Group’s reportable segments:

▪ Power, which primarily relates to the operations of Manila Electric Company (MERALCO) in
relation to the distribution, supply and generation of electricity and Global Business Power
Corporation (GBPC) in relation to power generation. The investment in MERALCO is held both
directly and indirectly through Beacon Electric Asset Holdings, Inc. (Beacon Electric) while the
investment in GBPC held through Beacon Electric’s wholly-owned entity, Beacon PowerGen
Holdings Inc. (BPHI).

▪ Toll operations, which primarily relate to operations and maintenance of toll facilities by Metro
Pacific Tollways Corporation (MPTC) and its subsidiaries NLEX Corp and Cavitex Infrastructure
Corporation (CIC), and associates, Tollways Management Corporation (TMC), CII Bridges and
Roads Investment Joint Stock Company (CII B&R) and Don Muang Tollway Public Ltd (DMT).
Certain toll projects are either under pre-construction or on-going construction as at June 30, 2017.

▪ Water, which relates to the provision of water and sewerage services by Maynilad Water Holding
Company, Inc. (MWHC) and its subsidiaries Maynilad Water Services, Inc. (Maynilad) and
Philippine Hydro, Inc. (PHI), and other water-related services by MetroPac Water Investments
Corporation (MPWIC).

▪ Healthcare, which primarily relates to operations and management of hospitals and nursing colleges
and such other enterprises that have similar undertakings by Metro Pacific Hospital Holdings, Inc.
(MPHHI).

▪ Rail, which primarily relates to Metro Pacific Light Rail Corporation (MPLRC) and its subsidiary,
Light Rail Manila Corporation (LRMC), the concessionaire for the operations and maintenance of the
Light Rail Transit Line 1 (LRT-1) and construction of the LRT-1 south extension.

▪ Logistics, which primarily relates to the Company’s logistics business through MetroPac Logistics
Company, Inc. (MPLC) and its subsidiaries, MetroPac Movers, Inc. (MMI) and PremierLogistics, Inc.

▪ Others, which represent holding companies and operations of subsidiaries and other investees
involved in real estate and provision of services.

Operational Review

I - MPIC CONSOLIDATED

The Company’s chief operating decision maker is the BOD. The BOD monitors the operating results of each
business unit separately for the purpose of making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on: consolidated net income for the period; earnings
before interest, taxes and depreciation and amortization, or Core EBITDA; Core EBITDA margin; and core
income. Net income for the period is measured consistent with consolidated net income in the consolidated

69
financial statements.

Core EBITDA is measured as net income excluding depreciation and amortization of property and equipment
and intangible assets, asset impairment on noncurrent assets, financing costs, interest income, equity in net
earnings (losses) of associates and joint ventures, net foreign exchange gains (losses), net gains (losses) on
derivative financial instruments, provision for (benefit from) income tax and other non-recurring income
(expenses). Core EBITDA margin pertains to Core EBITDA divided by service revenues.

Performance of the operating segments are also assessed based on a measure of recurring profit or core
income. Core income is measured as net income attributable to owners of the Parent Company excluding the
effects of foreign exchange and derivative gains or losses and non-recurring items (NRI), net of tax effect of
aforementioned. NRI represent gains or losses that, based on occurrence or size, are not considered usual
operating items.

The following section includes discussion of the Company’s results of its operations as presented in its
consolidated financial statements as well as management’s assessments of the performance of the Group
which is translated to core (or recurring) profit and non-core (or non-recurring) profit.

70
1H 2017 versus 1H 2016

MPIC Consolidated Statements of Comprehensive Income

Increase
Unaudited (Decrease)
1H 2017 1H 2016 Amount %
(in Php Millions)
Operating revenues 24,096 21,741 2,355 11
Cost of sales and services 9,942 8,754 1,188 14
General and administrative expenses 5,001 4,233 768 18
Interest expense 2,732 2,726 6 0
Share in net earnings of equity method investees 3,424 3,522 (98) (3)
Interest income 174 213 (39) (18)
Other income (expense) - net 2,755 1,774 981 55
Provision for income tax 2,591 1,614 977 61
Net income attributable to owners of the Parent Company 7,821 6,980 841 12
Other comprehensive income (loss) attributable to owners of
the Parent Company 124 606 (482) 80
Total comprehensive income attributable to owners of
the Parent Company 7,945 7,571 374 5
Core income 7,800 6,644 1,156 17
Non-recurring income (expense) 21 336 (315) (94)

Revenues

The Company’s revenues increased by 11% to P =24,096 million for the first half of 2017, reflecting improved
performances from all of the Company’s major operating segments.
▪ Toll revenues are higher by 9% with average daily entries for the first half of 2017 up by 7% on the
NLEX, 24% on the SCTEX and 8% on the CAVITEX compared with first half of 2016.
▪ Hospital revenues increased by 22% to P =5,034 million driven by (i) contributions from Marikina
Valley Medical Center (acquired on July 29, 2016) and JDMH (acquired on January 31, 2017) and
(iii) increased number of out-patients served across all hospitals.
▪ Water utilities posted a 2% increase in revenues on the strength of (i) Maynilad’s 2% billed volume
growth and a 1.9% inflationary increase in tariff increase effective end of April 2017; and (ii)
MPWIC’s Bulk water and Sewage Treatment Plant services contribution.
▪ Rail revenues grew 3% driven by the 6% growth in average daily ridership.
▪ Also, contributing to the increase in revenues is the Logistics business owing to the acquisition of
certain logistics assets and businesses in May 2016. Logistics revenues during the first half of 2017 at
=582 million compared to P
P =85 million during the same period last year.

Cost of Sales and Services

Cost of sales and services increased by 14% to P

=9,942 million for the first half months of 2017 due to:
▪ Maynilad’s one-time separation expenses for redundancies and redefined job functions brought about
by changes in work processes.
▪ Logistics business contributing P =379 million.
▪ Increased amortization expense of concession assets from completed capital expenditures at Maynilad
and MPTC.

71
General and administrative expenses

General and administrative expenses increased by 18% to P =5,001 million for the first six months of 2017 due
to increases in personnel costs and professional fees driven by the acquisition of various logistics businesses.
Annual salary increases and expanded headcount caused further increase in personnel costs. Depreciation
expense grew in line with CAPEX spending.

Interest expense
Interest expense is at par with last year’s. Interest expense during the first six months of the current year
amounted to P =2,732 million versus P =2,726 million during the same period last year despite increase of the
level of debt from P=97,016 million as at June 30, 2016 to P=166,264 million as at June 30, 2017. This is due to
(a) acquired debt from consolidating Beacon Electric including BPHI and GBPC at the end of June 2017 and
(b) capitalization of interest costs for long-term debt used to fund construction of qualifying assets (see Note
10 to the June 30, 2017 Interim Consolidated Financial Statements).

Share in net earnings of equity method investees

Slight decrease in MPIC’s share in the net earnings of associates and joint ventures for the first six months of
2017 is mainly due to the step-up acquisition in TMC resulting in it being consolidated beginning April 2017
(See Note 4 to the June 30, 2017 Interim Consolidated Financial Statements).

Other income (expense) – net

Other income (net) is composed of Dividend income from Beacon Preferred shares, gain on remeasurement of
previously held interest in TMC and gain on sale of MERALCO offset by the loss on remeasurement of
previously held interest in Beacon Electric (See Note 4 to the June 30, 2017 Interim Consolidated Financial
Statements).

Consolidated net income attributable to equity holders of the Parent Company

The 12% increase in the consolidated net income attributable to equity holders of the Parent Company from
=6,980 million for the first half of 2016 to P
P =7,821 million of the current period is attributable mainly to
(i) robust traffic growth on each of the roads held by MPTC; (ii) an expanded power portfolio through
increased investment in Beacon Electric and Beacon Electric’s acquisition of GBPC; and (iii) continuing
growth in the Hospital Group.

Other comprehensive income (loss) attributable to equity holders of the Parent Company

The Company recorded other comprehensive income of P =124 million during the first six months of 2017
compared with P =606 million in 2016 as it recognized a lower share in MERALCO’s change in fair value of
available-for-sale financial assets and recognition of Actuarial loss as compared with nil in the first six months
of 2016.

Core Income attributable to equity holders of the Parent Company

MPIC’s share in the consolidated core income increased by 17% from P =6,644 million for the first six months
of 2016 to P
=7,800 million in 2017 primarily reflecting the following:

▪ Power (distribution and generation) accounted for P =5.3 billion or 55% of the aggregate contribution;
▪ Toll operations contributed P=2.0 billion or 21% of the total;
▪ Water (distribution, production and sewerage treatment) contributed P =1.8 billion or 19% of the total;
▪ the Healthcare contributed P=308 million or 3% of the total; and,
▪ the Rail, Logistics and Systems Group contributed P =104 million or 2% of the total.

72
The figures referred to above represent MPIC’s share in the stand-alone core income of the operating
companies, net of consolidation adjustments.

Non-recurring income (expenses)

Non-recurring income amounted to P=21 million for the first six months of 2017 substantially comprising of
accounting gain from remeasurement of TMC and gain on sale of MERALCO offset by the accounting loss on
remeasurement of Beacon Electric, refinancing costs, project expenses and one-time separation expense as a
result of Maynilad’s redundancy and right-sizing program. Last year’s non-recurring income amounted to
=336 million and mainly included Maynilad’s remeasurement of future deferred taxes.
P

II - OPERATING SEGMENTS OF THE GROUP

Power - MERALCO

Increase
1H 2017 1H 2016 (Decrease)
Manila Electric Company Unaudited Amount %
(in Php Millions)
Revenues 141,032 128,804 12,228 9
Expenses 127,543 114,839 12,704 11
Core income 10,118 10,388 (270) (3)
Reported net income attributable to equity holders of
MERALCO 10,501 10,768 (267) (2)
Capital Expenditure 5,280 4,095 1,185 29

Increase
Key Performance Indicators (Decrease)
1H 2017 1H 2016 Amount %
Volume Sold (in mln kwh) 20,338 19,717 621 3
System Loss (12-month moving average) 6.11% 6.46% -0.35% (5)

Operational highlights

MERALCO’s Core Net Income for the first six months of 2017 fell by 3% to P =10.1 billion. Distribution
revenues rose by 3% in line with volume growth on flat tariffs but were more than offset by higher operating
expenses from increased customer load growth, increased provisions and a decline in profit contribution
from subsidiaries.

The 3% growth in energy sales was led by the commercial sector which grew 4% on continued expansion of
the Business Process Outsourcing industry and a 4.5% increase in MERALCO’s customer base to
6.2 million.

Total revenues rose by 9% to P =141 billion due to higher pass-through generation charges owing to
significantly higher fuel prices driven by the scheduled maintenance shutdown of the Malampaya gas
facilities and higher prices in the Wholesale Electricity Spot Market (WESM).

MERALCO spent P =5.3 billion on capital expenditures in the first half of 2017 to address critical loading of
existing facilities and to accommodate growth in demand and customer connections. MERALCO surpassed
the previous year’s operating performance for system loss, achieving a record best of 6.1% at the end of

73
June 2017, 2.4 percentage points lower than the regulatory cap set by the Energy Regulatory Commission
(ERC) of 8.5%.

MERALCO continues to increase the scope of its power projects through MERALCO PowerGen
Corporation (MGen):

▪ San Buenaventura Power Limited (SBPL), a joint venture between MGen and Thailand’s New
Growth B.V., a subsidiary of EGCO, is developing a 455 MW (net) supercritical coal-fired power
plant in Mauban, Quezon. Construction progress is at 49% at the end of June 2017 and proceeding as
scheduled, with commercial operation due in June 2019. The plant capacity is contracted under an
ERC approved Power Supply Agreement (PSA) with MERALCO.

▪ Redondo Peninsula Energy, Inc. (RP Energy), a joint venture of MGen, Therma Luzon, Inc., and
Taiwan Cogeneration International Corporation, is awaiting ERC approval of the PSA with
MERALCO covering a substantial portion of its first 300 MW capacity coal-fired power plant. The
power plant site is ready for construction activities and expected completion is by 2020.

▪ Atimonan One Energy Corporation is awaiting review and approval of its PSA from the ERC for it
to issue a Notice to Proceed for the Engineering, Procurement and Construction (EPC) for its 2x600
MW coal-fired plant in Atimonan, Quezon. The PSA for the entire capacity is contracted by
MERALCO.

▪ MGen also has other joint venture power generation agreements for an additional 1,828 MW, the
PSAs of which are awaiting approval of the ERC.

Revenues

Consolidated revenues in the first half of 2017 was P=141.0 billion, 9% higher compared with P=128.8 billion in
the same period in 2016. The higher revenues are the result of the combined effect of (i) a 3% increase in
volume of energy sold; (ii) the increased generation charge related to the 20-day maintenance shutdown of the
Malampaya gas facilities and the extended maintenance outages of certain coalfired power plants; and (iii) the
depreciation of the peso versus the U.S. dollar to P
=50.47:US$1 as at June 30, 2017 from P =47.06:US$1 as at
June 30, 2016.

Expenses

Purchased power cost, the biggest component of MERALCO’s expenses, is the cost of electricity supply.
MERALCO does not operate its own generation capacity in the Philippines at present and purchases all of the
power that it distributes from the National Power Corporation (NPC) and its Successor Generating
Companies, the WESM and Independent Power Producers.

Net income

MERALCO’s net income decreased by 2% to P =10,501 million for the first six months of 2017 from
=10,768 million in 2016. This is mainly driven by higher contracted services and reduced contributions from
P
subsidiaries.

74
Power - GBPC

Increase
1H 2017 1H 2016 (Decrease)
GBPC Unaudited Amount %
(in Php Millions)
Revenue 10,752 8,518 2,234 26
EBITDA Core 4,245 4,120 125 3
Core Income 922 1,311 (389) (30)
Reported Net Income attributable to
equity holders of GBPC 901 1,250 (349) (28)

Increase
Key Performance Indicators (Decrease)
1H 2017 1H 2016 Amount %
Electricity Sold (consolidated; GWh) 2,027 1,787 240 13
Bilateral – Generation 1,702 1,604 98 6
Bilateral – WESM 211 119 92 77
WESM – Spot Sales 114 64 50 78

*Beacon Electric acquired 56% ownership interest in GBPC on May 27, 2016.

GBPC sold 2,027 GWH in the first six (6) months of 2017, an increase of 13% from a year earlier. Core Net
Income for the first half of 2017 was ₱0.9 billion.

GBPC’s subsidiary, Panay Energy Development Corporation (PEDC), began operations of its 150 MW
expansion plant during the first quarter of 2017. However, final plant acceptance is not due until December
this year as work continues on reducing unacceptable downtime levels.

GBPC is looking at several projects to expand its energy portfolio:

▪ In Luzon, GBPC’s main development project is a 670 MW super critical coal fired plant in Luna, La
Union. Local Government endorsements and Land Conversion Certificates have been received.
Transmission route surveys and EPC selection are continuing. This project is supported by a 600
MW Power Supply Agreement with MERALCO, and is awaiting ERC approval.

▪ GBPC’s renewable energy arm, Global Renewable Power Corporation, is also exploring several
renewable energy projects such as bagasse, pumped storage and hydro, as part of the company’s
commitment to offer flexible energy solutions to its customers.

Revenues

Revenue growth of 26% is mainly driven by higher pass-through cost driven by higher coal and fuel prices.
Excluding the pass-through revenues, capital recovery and other revenues grew by 6% which is mainly driven
by the 13% increase in electricity sold partly offset by some price (and margin) reduction.

Net Income

GBPC’s Reported Net Income declined by 28% mainly due to higher income tax expense driven by the
expiration of Income Tax Holiday in Cebu Energy Development Corporation (CEDC) in November 2016 and
PEDC (1 & 2) in March 2017.

75
Toll Operations

Increase
1H 2017 1H 2016 (Decrease)
Metro Pacific Tollways Corporation Unaudited Amount %
(in Php Millions)
Consolidated Statements of Income
Net toll revenues 6,460 5,946 514 9
Cost of Services 2,331 2,481 (150) (6)
Operating expenses 640 544 96 18
Interest income - net (618) (536) 82 15
Share in earnings of an associate 353 216 137 63
Other income (expense) - net 154 115 39 34
Provision for income tax 725 618 107 17
Core Income 2,058 1,625 433 27
Non-recurring income (expense) - net 1,573 (75) 1,648 >100
Reported net income 4,223 2,022 2,201 >100
Reported net income attributable to equity
holders of MPTC 3,631 1,550 2,081 >100
Core EBITDA 4,218 3,578 640 18
Core EBITDA margin 65% 64% 1% 2
Capital Expenditure 2,237 2,399 (162) (7)

Increase
Key Performance Indicators (Decrease)
1H 2017 1H 2016 Amount %
Average Daily Vehicle Entries - NLEX 233,652 219,132 14,520 7
Average Daily Vehicle Entries - SCTEX 54,991 44,282 10,709 24
Average Daily Vehicle Entries - CAVITEX 137,070 127,326 9,744 8
Average Daily Vehicle Entries - DMT 97,249 94,199 3,050 3
Average Daily Vehicle Entries - CII B&R 52,279 48,950 3,329 7

Operational highlights

MPTC recorded Core Net Income of P =2.1 billion in the first six months of 2017, 27% higher than the
=1.6 billion recorded a year earlier on the strength of an 8% increase in system-wide average daily vehicle
P
entries to 590,432 and tight cost control.

Tollroads in the Philippines:

Average daily vehicle entries for all three of our domestic tollways system (NLEX, CAVITEX and SCTEX)
totaled 440,904 up 9% compared with the same period in 2016.

Traffic on the NLEX grew by 7% and 24% for the SCTEX reflecting integration of the two roads in 2016.
Traffic on the CAVITEX grew by 8% driven by growth in residential communities in Cavite and tourism in
Batangas.

76
For all our built roads, we are focused on investment to service rising traffic demand:

• During the first half of 2017 toll plaza expansions were undertaken at major points such as
Balintawak, Meycauayan and Mindanao Ave. New exits to increase accessibility to industrial hubs
and subdivisions were also added.

• Segments 2 and 3 of the NLEX Road-Widening Project are complete and approval of add-on toll
rate is pending with the Toll Regulatory Board.

• Construction of the second stage of the P

=10.5 billion NLEX Harbour Link running from Valenzuela
City to C3 in Caloocan City is expected to be substantially completed by the end of 2017.

• On the CAVITEX, construction commenced in June 2017 of the P =11.7 billion C5 Link Expressway
joining C-5 Road in Taguig to R-1 (Coastal) Expressway. This 7.7km road is targeted to complete in
2020.

Progress on new roads is as follows:

• Construction of the P=21.8 billion 8-km elevated NLEX-SLEX Connector Road Project is due to
begin at the end of this year. Running from the NLEX in Caloocan City and connecting to the South
Luzon Expressway (SLEX) in the City of Manila the road is targeted for completion in 2021.

• Ground breaking for the P=19.0 billion 44.6-km Cavite Laguna Expressway (CALAx), connecting the
CAVITEX to Binan, Laguna, was held on 19th June 2017. An initial seven kilometers of the project
has cleared right-of-way hurdles and Government is committed to delivering the remaining 40km so
that planned completion by 2020 can be achieved.

• Ground breaking for the P

=27.9 billion 8.25-km Cebu-Cordova Link Expressway (CCLEx), a road
and bridge connecting Cebu City to Mactan Island via Cordova, was held on March 27, 2017.
Construction is expected to commence during the second half of 2017 and expected to complete by
2020.

MPTC will spend P =130.5 billion in the next five (5) years in building highways and tollroads around the
Philippines. In order to fund this, it is imperative that overdue tariff increases, now ranging between 20% and
48% on different parts of the network, be implemented. We are in constructive dialogue with the new
Administration on how to achieve this.

The merger of NLEX Corp and TMC, the Operations and Maintenance provider to the NLEX, is now
awaiting approval by the Securities and Exchange Commission. The merger, with NLEX Corp as the
surviving entity, is expected to lower costs and enable improved access to capital.

Tollroads outside the Philippines:

Don Muang Tollway Public Company Ltd. (DMT) in Bangkok reported an 3% growth in daily traffic to
97,249; and CII B&R in Vietnam a 7% increase to 52,279 in the first half.

MPTC are continuing to look for other investment opportunities in the region.

Net Toll Revenues

Net toll revenues for the first six months of 2017 amounted to P
=6,460 million, 9% higher than the revenue
recognized during the same period last year, mainly due to strong traffic growth on the NLEX (7%), SCTEX
(24%) and CAVITEX (8%).

77
Cost of Services and Operating expenses

Despite the 8% increase in toll revenues, costs and expenses decreased by 2% to P =2,971 million during the
first half of 2017. This is largely due to the savings brought about by the renegotiated operator’s fee.
Operator’s fee at NLEX Corp decreased from P =1,095 million for the first half of 2016 to P
=505 million in 2017
(see Note 27 to the June 30, 2017 Interim Consolidated Financial Statements) and the consolidation of TMC
from April 2017.

Core income

Core income increased by 27% to P

=2,058 million due to combination of traffic growth on NLEX, SCTEX and
CAVITEX and transfer of the investment in DMT from MPIC to MPTC. Note, however, that such transfer of
the DMT investment would not have any material impact on the consolidated results of MPIC.

Non-recurring income

Non-recurring income primarily relates to the accounting gain on remeasurement of previously held interest in
TMC amounting to P=1.8 billion at MPTC level offset by the refinancing cost and project expenses.

Reported Net income attributable to equity holders of MPTC

Reported Net Income grew significantly than growth in Core Income with MPTC recognizing a
remeasurement gain on previously held interest in TMC as discussed above.

78
Water

Increase
Unaudited (Decrease)
Maynilad Water Services, Inc. 1H 2017 1H 2016 Amount %
(in Php Millions)
Consolidated Statements of Income
Revenues 10,242 10,120 122 1
Costs and Expenses 4,218 3,918 300 8
Interest income (expense) - net (865) (985) (120) (12)
Other income (expense) - net 189 (138) 327 >100
Benefit from income tax (1,294) (1,752) 458 (26)
Core Income 3,676 3,603 73 2
Non-recurring expense (479) (593) (114) (19)
Reported Net Income 3,197 3,010 187 6
Core EBITDA 7,138 7,546 (408) (5)
Core EBITDA margin 70% 75% -5% (7)
Capital Expenditure 4,883 3,625 1,258 35

Increase
Key Performance Indicators (Decrease)
1H 2017 1H 2016 Amount %
Volume of water supplied (MCM) 372.3 350.1 22.1 6
Volume of water billed (MCM) 252.5 247.6 4.9 2
Volume of water billed (MCM) - Consolidated 260.1 253.9 6.2 2
Non-revenue water % (average) 32.2% 29.3% 2.9% 10
Non-revenue water % (period end) 31.2% 27.8% 3.4% 12
Billed customers (period end) 1,336,566 1,289,223 47,343 4
Customer mix (% based on billed volume)
Domestic (residential and semi-business) 81.0% 81.2% -0.2% (0)
Non-domestic (commercial and industrial) 19.0% 18.8% 0.2% 1

Operational highlights

MPIC’s water business comprises its investments in Maynilad, the biggest water utility in the Philippines,
and MPWIC, the Company’s unit focused on business development outside Metro Manila. Our water
segment’s contribution to Core Net Income amounted to P
=1.8 billion in the first half of 2017 attributable
substantially to Maynilad.

Maynilad
The matter of the Maynilad tariff implementation remains unresolved although the arbitration panel in
Singapore recently ruled in favor of Maynilad in its related claim on the Republic of the Philippines:

▪ In 2014, Maynilad received a favorable award in the arbitration of its 2013-2017 water tariff which
centered on Corporate Income Taxes being a recoverable expense. The MWSS has still not implemented
the awarded tariff increase while indicating they will await clarification from the Supreme Court of the
Philippines before proceeding.

▪ Acting in formal accordance with the provisions of its concession, Maynilad notified the Republic of the
Philippines (“Republic”) that it was calling on the Republic’s written undertaking to compensate

79
 Maynilad for losses arising from delayed implementation of the new tariff. On March 27, 2015,
Maynilad served a Notice of Arbitration against the Republic.

▪ On July 24, 2017, the Arbitral Tribunal unanimously upheld Maynilad’s claim for compensation for the
delayed implementation of its tariff increases for the rebasing period 2013 to 2017. The Tribunal ordered
the Republic to reimburse Maynilad the amount of P =3.4 billion for losses from March 11, 2015 to
August 31, 2016, without prejudice to any rights that Maynilad may have to seek recourse against
MWSS for losses incurred from January 1, 2013 to March 10, 2015. Further, the Tribunal ruled that
Maynilad is entitled to recover from the Republic its losses from September 1, 2016 onwards. In case a
disagreement on the amount of such losses arises, Maynilad may revert to the Tribunal for further
determination.

Maynilad is now in discussion with Government on settling its claim. However, the issue of the tariff going
forward still needs to be resolved and this is essential to fund further infrastructure for drinking water supply
and enhance sewage coverage.

The prospects for the second half of 2017 look more encouraging, due to a combination of cost out programs
and an inflationary increase in water rates of 1.9% effective April 22, 2017.

Non-Revenue Water (NRW) increased to 31.2% as at the end of June 2017 from 27.8% in 2016 due to the
abnormality in water production in connection with last year’s El Niño phenomenon. Just ten years ago,
when MPIC first invested in Maynilad, NRW was at a staggering 68% and millions of customers had
inadequate access to water. Maynilad repaired 12,692 pipe leaks across its concession area in the first six
months of the year.

Maynilad installed 15 kilometers of water pipes in the period, expanding its distribution line to 7,652
kilometers. Drinking water supply and sewerage coverage were 93% and 15% of its population, respectively,
while maintaining 24-hour service and average water pressure of over 7 psi at 100%.

For 2017, Maynilad allotted P=11.7 billion for its water and wastewater infrastructure projects; P
=3.4 billion
for sewerage and sanitation programs and P =8.3 billion for water sources and water loss recovery.

Capital expenditure as at June 2017 stood at P=4.9 billion, of which a significant portion is for the upgrade
and construction of reservoirs and pumping stations, laying of primary pipelines and construction of
wastewater facilities to improve public health. Maynilad is currently constructing six (6) new sewage
treatment plants (STPs) in various parts of the West concession area to expedite the provision of sewerage
and sanitation services for its customers. Once completed, these new wastewater facilities will be able to
serve approximately 1,340,000 Maynilad customers, collecting and treating wastewater to render it safe for
discharge.

MetroPac Water Investments Corporation

The Group’s success in clean water production and distribution is being replicated outside Manila with the
water infrastructure projects won through MPWIC:

▪ Metro Iloilo Bulk Water Supply Corp. (MIB), a joint venture with the Metro Iloilo Water District
(“MIWD”), began operation on 5th July 2016. MIB holds the joint venture project for the supply of up to
170 MLD of bulk treated water to MIWD. Since commencement of operations, MIB successfully
increased production volume to 46 MLD as of end-June 2017 from pre-take over production of 40 MLD
and improved the efficiency of plant operations. The rehabilitation of the water facility of MIWD is on-
going and is expected to be completed by June 2018. Once completed, water production is expected to
increase to a maximum of 61 MLD.

▪ Laguna Water District Aquatech Resources Corporation (LARC), in which MWIC owns an effective
stake of 27%, commenced operation and management of the distribution network of the Laguna Water
District on 1st January 2016. As at end of June 2017, LARC has expanded its coverage to two additional

80
 barangays in Nagcarlan, and successfully increased water pressure in several locations. LARC has also
realized marked enhancements in billing accuracy and collection efficiency from below 70% pre-
takeover to stabilize at above 90% through system developments and partnerships with collecting agents.
In addition, LARC has instituted roving technical specialists throughout barangays to quickly and
effectively address customer concerns.

▪ The company was recently awarded the Cagayan de Oro 100 MLD Bulk Water Project. This project,
which has a term of 30 years renewable for another 20 years, involves the supply of 100 MLD of treated
bulk water to the Cagayan De Oro Water District and the construction of new water transmission lines
and rehabilitation of the Camaman-an Reservoir. Cagayan de Oro Water District currently has
approximately 90,000 service connections. The estimated project cost is approximately ₱2.8 billion. The
project will be implemented through a joint venture company to be owned by MPW (95%) and the
Cagayan de Oro Water District (5%).

To date, MWIC’s operating water projects collectively provide 152 MLD of water and this will increase to
390 MLD when fully developed – equivalent to 28% of the current billed volume of Maynilad of 1,370
MLD. MWIC continues to look at further water opportunities outside Metro Manila.

Currently these projects are small relative to Maynilad but if most or all of the opportunities being explored
reach their full potential, MPWIC is capable of eventually growing to a size approaching that of Maynilad.

Maynilad’s Revenues

Increase
1H 2017 1H 2016 (Decrease)
Unaudited Amount %
(in Php Millions)
Water Services 8,277 8,160 117 1
Sewer Services 1,778 1,760 18 1
Other Contract & Services 187 200 (13) (7)
Total Revenues 10,242 10,120 122 1

Revenues slightly increased by 1% to ₱10.2 billion from ₱10.1 billion in the same period in 2016. Volume
sold during this period grew 2% to 252.5 million cubic meters as compared with last year while the number of
water connections (or billed customers) rose 4% to 1,336,566 at the end of June 2017. Percentage increases in
the components of Maynilad’s revenues are set out above.

Costs and Expenses

Costs and expenses increased by 8% to P =4.2 billion compared with P=3.9 billion last year primarily driven by
increases in amortization of intangible assets which grew in line with Maynilad’s continuing capital
expenditure program. In addition, light and power increased due primarily to higher average power rates,
coupled with higher electrical usage as a result of increased operating hours of pumping stations and in-line
boosters to improve service levels in the South, increased water treatment activities in Putatan treatment plant
to address water quality issues, and more sewage treatment plants in operation.

Core income

Core net income for the first half of 2017 increased by 2% to P

=3.7 billion from P
=3.6 billion mainly due to the
1% increase in revenue and higher cost and expenses as discussed above.

81
Non-recurring expenses

Non-recurring expense for the first six months of 2017 substantially comprise of the Special Opportunity
Program (SOP) costing P
=275 million which was recorded in March 2017 but reduction in headcount will only
happen beginning April 2017.

Reported Net Income

The increase in Reported Net Income by 6% is higher than the increase in Core Income of 2% owing to the
recognition of the SOP expense as mentioned above.

Healthcare

Increase
1H 2017 1H 2016 (Decrease)
Healthcare Group* Unaudited Amount %
(in Php Millions)
Gross Revenues 10,611 9,264 1,347 15
Expenses 8,431 7,368 1,063 14
Core EBITDA 2,287 1,966 321 16
Core Income 927 766 161 21
Reported Net Income 933 767 166 22

Increase
Key Performance Indicators (Decrease)
1H 2017 1H 2016 Amount %
Occupancy rate (%) - Standard Beds 64% 67% -3% (4)
Total beds available 2,873 2,602 271 10
No. of Patients – In patient 79,484 73,416 6,068 8
No. of Patients – Out patient 1,470,046 1,291,085 178,961 14
No. of Accredited Doctors 7,710 7,126 584 8
No. of Enrollees (schools) - average YTD 5,390 4,912 478 10
*Combined financial results of entities under the healthcare group (e.g. subsidiaries and associates).

Metro Pacific Hospital Holdings, Inc. (“MPHHI”) saw aggregate Core Net Income surge by 21% to P =927
million in the first six months of 2017 compared with the same period last year. Of the increase in Core Net
Income, 6% is attributable to the contribution from new hospital acquisitions during the latter part of 2016
while 15% is through organic growth driven by lower interest expense, cost savings from purchasing
synergies and increasing patient revenues across the company’s existing hospitals.

On January 31, 2017, MPHHI signed an agreement to infuse approximately P =133.5 million of cash into DCI,
owner and operator of JDMH via a subscription to preferred shares representing approximately 65% of the
total expanded capital stock of DCI. The cash infusion from MPHHI will enable the 68-year-old JDMH to
upgrade its equipment and facilities and expand its capacity to serve its surrounding communities.

The Hospital group’s contribution to MPIC’s Core Net Income grew 24% to P
=308 million in the first six
months of 2017 from P=249 million in the first six months of 2016.

MPHHI has grown to 13 hospitals as at end June 2017, with approximately 2,900 beds throughout the country
– eight in Metro Manila and five around the country (Davao, Bacolod, Tarlac, Zamboanga, and Bulacan). In

82
addition, MPHHI has also invested in a mall-based diagnostic and surgical center MegaClinic in SM
Megamall, and has indirect ownership in two healthcare colleges in Davao and Bacolod.

Rail

Increase
1H 2017 1H 2016 (Decrease)
Rail Unaudited Amount %
(in Php Millions)
Farebox revenues 799 746 53 7
Advertising and rental revenues 624 552 72 13
Expenses 192 211 (18) (9)
Core Income 124 144 (20) (14)
Reported Net Income 124 147 (23) (16)

Increase
Key Performance Indicators (Decrease)
1H 2017 1H 2016 Amount %
Average daily ridership 429,915 405,568 24,347 6
Average Light Rail Vehicle (period end) 104 91 9 10

LRMC has operated the LRT Line 1 (LRT-1), since September 12, 2015. Since the handover of LRT-1,
LRMC has successfully restored 27 Light Rail Vehicles (LRVs) bringing the total available to 104 by end of
June 2017.

LRMC served an average daily ridership of 429,915 in the first half of 2017, an improvement of 6% from the
average daily ridership of 405,568 recorded in the same period last year. During the first half of 2017, the
highest recorded daily ridership reached a record high of 536,000 from 2016 highest of 527,000.

LRMC is on schedule with its rail replacement project. It has finished 87% of the work to replace 32-year
old tracks as at July 2017. The rail replacement project covers a total of 26 kilometers of rail tracks, that
when completed, will enable the reinstatement of a train running speed of 60 kph to shorten journey times
and thereby increase capacity.

In March 2017, the LRT-1 Structural Restoration Project was given the Notice to Proceed with target
completion in two years. This project, which is a major component towards enhanced passenger safety
includes the restoration of 36-year-old parapets, faulty concrete, and repair of river bridges of the railway.
The Structural Restoration Project also complements the ongoing P =500-million Station Improvement Project.
LRMC inaugurated the Doroteo Jose Station in February 2017 and is currently refurbishing all the remaining
stations which is expected to be completed by first half of 2018.

LRMC contributed P =123 million to MPIC’s Core Income for the period with increased ridership as a result
of the rehabilitation of LRVs together with operating cost savings and deferred capex spending, some of
which are due to Government’s delay in the acquisition of rights of way. Moving forward, the combination
of pending tariff adjustments partly offset by an increasing cost base as operations expand to Cavite, will see
profits normalize.

83
Logistics:

Following the acquisition of a majority of Basic Logistics in 2016, Metropac Movers Inc. (MMI) signed an
agreement in January 2017 to acquire certain assets and business of Ace Logistics, Inc. (Ace) for an
aggregate purchase price of P
=280 million. The acquisition was conditionally completed in April 2017. Ace
is engaged in the business of logistics, including warehousing, courier express and parcel delivery, e-
commerce delivery, trucking, freight forwarding, customs brokerage and domestic shipping. Ace also has a
strong presence in pre-delivery inspection in the automotive industry, which MPIC intends to expand.
MMI is in active discussions for further investments in logistics the second half of 2017.

2Q 2017 versus 2Q 2016

MPIC Consolidated Statements of Comprehensive Income

Increase
2Q 2017 2Q 2016 (Decrease)
Unaudited Amount %
(in Php Millions)
Operating Revenues 12,602 11,146 1,456 13
Cost of Sales and Services 5,156 4,497 659 15
General and administrative expenses 2,254 2,035 219 11
Interest expense 1,383 1,382 1 0
Share in net earnings of equity method investees 1,680 2,102 (422) (20)
Interest income 90 116 (26) (22)
Other income - net 2,063 1,282 781 61
Provision for income tax 1,481 593 888 >100
Net income attributable to owners of the Parent Company 4,814 4,352 462 11
Other comprehensive income (loss) attributable to owners of
the Parent Company (50) 791 (841) >100
Total comprehensive income attributable to owners of
the Parent Company 4,764 5,143 (379) (7)
Core income 4,667 3,905 762 20
Non-recurring income (expense) 147 447 300 67

Revenues

The Company’s revenues increased by 13% to P =12,602 million for the second quarter of 2017, reflecting
improved performance of the Company’s major operating segments.
• Water utilities posted a 6% increase in revenues brought about by 4% billed volume growth and the
impact of the 1.9% inflationary tariff increase effective end of April 2017.
• MPTC likewise posted 10% higher revenues mainly due to higher traffic on the NLEX and
CAVITEX and new contributions from SCTEX.
• Healthcare revenues also increased by 20% driven by the increasing number of outpatients served and
increase in number and complexity of medical procedures and new contributions from DCI and
MVMC.
• Contribution from Logistics business acquired on May 19, 2016.

84
Cost of Sales and Services

Cost of sales and services increased by 15% to P

=5,156 million for the second quarter of 2017 due to increased
personnel cost and contracted services driven by LRMC’s increased headcount and operations combined with
Logistics contribution beginning May 19, 2016.

General and administrative expenses

General and administrative expenses increased by 9% to P =2,035 million for the second quarter of 2017 due to
increases in personnel costs and professional fees driven by logistics contribution beginning May 19, 2016.
Annual salary increases and expanded headcount caused further increase in personnel costs.

Share in net earnings of equity method investees

Decrease in MPIC’s share in the net earnings of equity method investees for the second quarter of 2017 is
primarily attributable to the decrease in share from TMC due to gaining control in April 2017.

Other income - net

Other income (net of other expenses) at P

=2,063 million in 2Q2017 increased from P
=1,282 million mainly due
to dividend income from Beacon Electric’s preferred dividends, gain on remeasurement of previously held
interest in TMC and gain on sale of MERALCO shares offset by the loss on remeasurement of previously held
interest in Beacon Electric.

Provision for income tax

Provision for income tax increased to P

=1,481 billion in 2Q 2017 from P
=593 billion. Increase in provision for
income tax is mainly driven by Maynilad’s deferred tax adjustment from electing optional standard deduction
resulting to tax benefit in 2016.

Consolidated net income attributable to equity holders of the Parent Company

Consolidated net income increased from P=4,352 million to P=4,814 million for the second quarter. The increase
was mainly driven by the strong growth in profit contribution of the major businesses, increased effective
ownership in MERALCO and a full three month contribution from GBPC.

Core Income attributable to equity holders of the Parent Company

MPIC’s share in the consolidated core income increased by 20% from P

=3,905 million for the second quarter
of 2016 to P
=4,667 million in 2017 mainly reflecting the following:

• 24% increase in contribution from Power from P

=2,572 million in 2Q2016 to P
=3,183 million in
2Q2017 due to increased shareholding in MERALCO from 41.2% to 45.5%, full three-month
contribution from GBPC and higher Beacon Electric preferred dividends.

• 14% increase in contribution from Toll Roads from P

=958 million in 2Q2016 to P
=1,092 million in
2Q2017 mainly due to strong volume growth across all roads.

• 18% increase in contribution from Water Utilities from P

=956 million in 2Q2016 to P
=1,126 million
2Q2017 mainly due to 4% increased volume sold in Maynilad and contributions from MPWIC.

• 10% increase in contribution from Healthcare group from P

=115 million in 2Q2016 to P
=126 million in
2Q2017 mainly due to increased patient served and contributions from DCI and MVMC.

85
 • Rail, Logistics and others contributed P
=50 million in the second quarter of 2017.

The above represent MPIC’s share in the stand-alone core income of the operating companies, net of
consolidation adjustments.

Power, Tollroads, Water Utilities, Healthcare and Rail accounted for 57%, 20%, 20%, 2% and 1%
respectively, of MPIC’s share in operating income.

Non-recurring income

Non-recurring income amounted to P =151 million for the second quarter 2017 from P
=374 million last year.
Non-recurring income for 2Q2017 substantially comprises of gain on remeasurement of previously held
interest in TMC, gain on sale of MERALCO less loss on remeasurement of previously held interest in Beacon
Electric, refinancing and project expenses. 2Q2016 non-recurring income mainly comprise of remeasurement
of deferred taxes with Maynilad’s election of OSD.

86
Discussion on Financial Position as at December 31, 2016 and June 30, 2017

Assets

The following table summarizes the individual increases (decreases) of consolidated asset accounts.

June 30, December 31, Increase

2017 2016 (Decrease)
Unaudited % Audited % Amount %
(in Php Millions)
ASSETS
Current assets
Cash and cash equivalents and short-
term deposits 39,772 63 19,469 61 20,303 >100
Restricted cash 2,848 4 2,432 8 416 17
Receivables 11,324 18 5,171 16 6,153 >100
Other current assets 9,767 15 4,728 15 5,039 >100
63,711 100 31,800 100 31,911 100

Noncurrent Assets
Restricted cash ─ ─ 889 ─ (889) (100)
Available for sale financial assets 1,714 ─ 1,859 1 (145) (8)
Investments and advances 128,416 31 126,556 40 1,860 1
Goodwill 35,401 9 21,004 7 14,397 69
Service concession assets 158,992 39 152,693 47 6,299 4
Property, plant and equipment 64,550 16 10,480 3 54,070 >100
Deferred tax assets 848 ─ 467 ─ 381 82
Other noncurrent assets 19,035 5 5,854 2 13,181 >100
408,956 100 319,802 100 89,154 28

The significant increase in most balance sheet captions from December 31, 2016 to June 30, 2017 is due to
the consolidation of Beacon Electric and GBPC for the first time in 2017.

• Cash and cash equivalents and short-term deposits – (Increase) Mainly due to cash and cash equivalent
acquired from consolidating Beacon Electric including GBPC combined with the drawdown of additional
loans at MPTC, MPIC and LRMC less capital expenditure payments net of (see “Liquidity and Capital
Resources” for the summary of the Group’s statement of cash flow for the six-month ended June 30,
2017).

• Restricted Cash – current and non-current portions – (Decrease) Mainly attributable to the partial release
of MPTC’s restricted cash related to the construction of Segment 10 partially offset by the increase in
restricted cash allotted for the scheduled payment of loans (see Note 5 to the June 30, 2017 Interim
Consolidated Financial Statements).

• Receivables – (Increase) Mainly driven by the trade and other receivables acquired from consolidating
GBPC (see Notes 4 and 6 to the June 30, 2017 Interim Consolidated Financial Statements). In addition,
trade receivables also increased consistent with improvement in revenues.

87
• Other current assets – (Increase) Mainly driven by the Input VAT, inventories and other current assets
acquired from consolidating GBPC (see Notes 4 and 7 to the June 30, 2017 Interim Consolidated
Financial Statements).

• Investments and advances – (Increase) Increase is mainly attributable to the increased in effective
ownership in MERALCO from acquiring the remaining 25% of Beacon Electric in June 2017 net of the
4.5% sale of MERALCO on the same period. In addition, the increase is driven by the share in earnings
from associates and joint ventures net of dividends received. Refer to Note 9 to the June 30, 2017 Interim
Consolidated Financial Statements for the movements in this account.

• Goodwill – (Increase) Due to the goodwill arising from business combination of Beacon Electric and
TMC. In addition, the finalization of PPA of MMI and ESTII contributed to the increase. (See Note 4 to
the June 30, 2017 Interim Consolidated Financial Statements)

• Service concession assets – (Increase) Mainly due to the additional capital expenditures for the year, net
of amortization. See Note 10 to the June 30, 2017 Interim Consolidated Financial Statements for the
nature of the additions to the service concession assets.

• Property, plant and equipment – (Increase) Mainly driven by the Power plants, land and equipments
acquired from consolidating GBPC. (see Note 4 to the June 30, 2017 Interim Consolidated Financial
Statements). In addition, acquisitions from Hospitals net of depreciation also contributed to the increase.

• Other noncurrent assets – (Increase) Mainly driven by the intangible asset arising from business
combination from consolidating GBPC (see Notes 4 and 11 to the June 30, 2017 Interim Consolidated
Financial Statements).

88
Liabilities and Equity

The following table summarizes the individual increases (decreases) of consolidated liability and equity
accounts.

June 30, December 31, Increase

2017 2016 (Decrease)
Unaudited % Audited % Amount %
(in Php millions)
Current Liabilities
Accounts payable and other current
liabilities 20,881 46 14,965 56 5,916 40
Income tax payable 1,314 3 466 2 848 >100
Due to related parties 3,779 8 1,713 6 2,066 >100
Current portion of:
Provisions 5,557 12 5,229 19 328 6
Service concession fees payable 747 2 874 3 (127) (15)
Long-term debt 12,987 29 3,797 14 9,190 >100
45,265 100 27,044 100 18,221 67

Noncurrent Liabilities
Noncurrent portion of:
Provisions 5,111 2 239 ─ 4,872 >100
Service concession fees payable 28,597 13 28,000 21 597 2
Long-term debts 153,277 73 93,219 68 60,058 64
Due to related parties 11,478 5 6,726 5 4,752 71
Deferred tax liabilities 7,761 4 3,925 3 3,836 98
Other long-term liabilities 5,732 3 4,368 3 1,364 31
211,956 100 136,477 100 75,479 55

Equity
Capital stock 31,624 20 31,619 21 5 ─
Additional paid-in capital 68,457 44 68,438 45 19 ─
Treasury shares (167) ─ (167) ─ ─ ─
Equity reserves 6,322 4 6,282 4 40 1
Retained earnings 49,656 31 43,889 29 5,767 13
Other comprehensive income reserve 2,095 1 1,971 1 124 6
Total equity attributable to owners of
the Parent Company 157,987 100 152,032 100 5,955 4

Non-controlling interest 57,459 36,049 21,410 59

89
• Accounts payable and other current liabilities – (Increase) Mainly due to the trade and other payables
acquired from consolidating GBPC. (see Notes 4 and 12 to the June 30, 2017 Interim Consolidated
Financial Statements).

• Income tax payable – (Increase) included current provision for taxes.

• Provisions – current and noncurrent portions – (Increase) Acquired provisions from consolidating GBPC
and MPTC’s periodic provision for heavy maintenance and certain accruals for the period (See Notes 4
and 13 to the June 30, 2017 Interim Consolidated Financial Statements).

• Service concession fees payable – current and noncurrent portions – (Increase) Represents movement in
foreign exchange and accretion net of actual payment of concession fees (see Note 10 to the
June 30, 2017 Interim Consolidated Financial Statements).

• Due to related parties – (Increase) The increase is mainly driven by the deferred purchase portion of
MPIC’s acquisition of the remaining 25% of Beacon Electric from PCEV in June 2017 net of payments
made during the first half of 2017. (see Note 16 to the June 30, 2017 Interim Consolidated Financial
Statements).

• Long-term debt – current and noncurrent portions – (Increase) Mainly due to loans acquired from
consolidating Beacon Electric including BPHI and GBPC. In addition, drawdowns during the first half of
2017 amounting to P =2.0 billion, P
=1.4 billion and P
=1.4 billion for MPIC, MPTDC and LRMC,
respectively. (see Note 14 to the June 30, 2017 Interim Consolidated Financial Statements)

• Retained earnings – (Increase) Attributable to the net income earned for the period, net of dividends
declared in March 2017.

• Non-controlling interest – (Increase) Non-controlling interest’s share in dividends paid net of share in net
earnings in majority owned subsidiaries.

90
Liquidity and Capital Resources

The following table shows a summary of the Group’s unaudited statements of cash flows for the first six
months of 2017 and 2016 as well as our consolidated capitalization as of June 30, 2017, and
December 31, 2016:

Increase
Unaudited (Decrease)
1H 2017 1H 2016 Amount %
(in Php Millions)
Cash Flows
Net cash provided by operating activities 9,121 8,395 726 9
Net cash provided by (used in) investing activities 4,315 (26,434) (30,749) >100
Net cash provided by (used in) financing activities (4,671) 17,850 (22,521) >100
Net increase in cash and cash equivalents 8,765 (189) 8,954 >100
Capital expenditures 8,695 8,322 373 4

Unaudited Audited Increase

June 30, December 31, (Decrease)
2017 2016 Amount %
(in Php Millions)

Capitalization
Long-term debt net of current portion 153,277 93,219 60,058 64
Current portion of long-term debt 12,987 3,797 9,190 >100
Total short and long-term debt 166,264 97,016 69,248 71
Non-controlling interest 57,459 36,049 21,410 59
Total equity attributable to owners of the Parent
Company 157,987 152,032 5,955 4

Cash and cash equivalents 24,220 15,455 8,765 57

Short-term deposits 15,552 4,014 11,538 >100

As at June 30, 2017, MPIC’s consolidated cash and cash equivalents and short-term deposits totaled
=39,772 million, an increase of P
P =20,303 million from P
=19,469 million as at December 31, 2016. This is
mainly driven by the cash and cash equivalents and short-term deposits acquired from consolidating Beacon
Electric including BPHI and GBPC.

Operating Activities

MPIC’s consolidated net operating cash flow in the first six months of 2017 posted a 9% increase from
=9,121 largely attributable to the improvement in the operations of the Company’s major
=8,395 million to P
P
segments. Total revenues for the six-month period ended June 30, 2017 increased by P =2,355 million to
=24,096 million.
P

91
Investing activities

Net cash provided by investing activities amounted to P =4,315 million during the first half of 2017. Below are
the significant transactions during the first six months of 2016:

▪ Sale of 4.5% share in MERALCO. In June 2017, MPIC sold 50.7 million MERALCO shares or 4.5%
out of its 15% direct interest in MERALCO to various institutional investors through overnight
placement. Selling price is P=12.7 billion less transaction cost related to the sale of P
=272 million. The
proceeds were used to acquire the remaining 25% interest in Beacon Electric from PCEV.
▪ Redemption of Beacon Electric Class B Preferred Shares. In May 2017, Beacon Electric redeemed all
Class B Preferred shares held by MPIC amounting to P =3.5 billion.
▪ Acquisition of the remaining 25% interest in Beacon Electric. In June 2017, MPIC acquired the
remaining 25% ownership in Beacon Electric at an aggregate purchase price of P =21.8 billion of which
=12.0 billion was paid in cash and the remaining P
P =9.8 billion on a deferred purchase. Net cash
outflow is net of cash and cash equivalent acquired from Beacon Electric including BPHI and GBPC.
▪ Capital expenditures. Capital expenditures for the six-month period ended June 30, 2017 comprised
additions to service concession assets of Maynilad and MPTC and continuous improvements for the
Hospitals. Refer to Notes 10 to the June 30, 2017 Interim Consolidated Financial Statements for the
nature of the additions to the service concession assets.

Financing Activities

The Company’s consolidated net cash outflow from financing activities amounted to P =4,671 million in the
first half of 2017. Drawdowns amounted to P =2.0 billion, P
=1.4 billion and P
=1.4 billion from MPIC, MPTC an
LRMC. Aside from scheduled payment of debt (including interest) and service concession fees of Maynilad,
cash outflow included dividends paid to non-controlling shareholders amounting to P =1,414 million, a
significant portion of which was attributable to the share in the dividends of the non-controlling shareholders
of NLEX Corp and MWHC.

92
FINANCIAL SOUNDNESS INDICATORS

June 30, December

Financial Ratios Formula
2017 31, 2016

a) Current Ratio Total Current Assets

1.41 1.18
Total Current Liabilities

b) Solvency Ratioa NPAT + Depreciation and amortization

0.10 0.13
Total Liabilities

c) Debt-to-Equity Ratio Total Debt

0.77 0.52
Total Stockholders' Equity

d) Asset to Equity Ratio Total Assets

2.19 1.87
Total Stockholders' Equity

June 30, June 30,

Financial Ratios Formula
2017 2016

e) Interest Rate Coverage Ratio EBIT

5.99 5.59
Net Interest Expense

f) Net Profit margin Net Profit after tax

42.3% 45.6%
Net Revenues

g) Return on assetsb NPAT + Interest Expense (net of tax)

3.0% 3.8%
Average Total Assets

h) Return on Equityb Net Profit after tax

5.0% 6.0%
Average Total Stockholders' Equity

June 30, December

Financial Ratios Formula
2017 31, 2016

i) Return on assetsa NPAT + Interest Expense (net of tax)

6.1% 6.5%
Average Total Assets

j) Return on Equitya Net Profit after tax

10.1% 9.9%
Average Total Stockholders' Equity

a
Annualized
b
for the six-month period ended June 30, 2017 and 2016

93
RISK FACTORS

As an investment and management company, MPIC undertakes risk management at a number of distinct
levels:

1. On entering new investments

MPIC has taken steps to increase its presence in Southeast Asia through its equity investments in
Thailand's DMT and Vietnam's CII B&R, while remaining committed to its core business in the
Philippines. MPIC’s geographic focus remains to be predominantly the Philippines within which its
management team has extensive experience.

Prior to making a new investment, any business to be acquired is subject to an extensive due diligence
including financial, operational, regulatory and risk management. Risks to investment returns are then
calibrated and specific measures to manage these risks are determined. The Group is highly selective in
the investment opportunities it examines. Due diligence is conducted on a phased basis to minimize costs
of evaluating opportunities that may ultimately not be pursued.

MPIC’s investments involve - to varying degrees - a partnership approach with MPIC taking a
controlling position and key operating partners providing operational and technological input and thereby
mitigating risks associated with investing in new business areas. These partners are equity partners - and
having co-invested with the Group in a particular opportunity, they will participate in the risks and
rewards of the business alongside MPIC.

Financing for new investments is through a combination of debt and/or equity by reference to the
underlying strength of the cash flow of the target business and the overall financing position of MPIC
itself.

2. On ongoing Management of the Financial Stability of the Holding Company

MPIC does not guarantee the borrowings of its investee companies and there are no cross default
provisions from one investee company to another. Financial stability of the holding company, including
its dividend commitment to shareholders, is managed by reference to the ability of the investee
companies to remit dividends to MPIC to cover operating costs and service borrowings. MPIC avoids
currency and investment cycle mismatches by borrowing mostly in Philippine Pesos using primarily long
term instruments with fixed rates.

MPIC sets the level of debt on its Parent Company so as to withstand variability of dividend receipts
from its operating companies associated with regulatory and other risks described below.

3. Risk Management within the Operating Companies

o Operational risks. Each of the operating companies has a full management team which is responsible
for having their own plan to manage risk which is reviewed annually by their respective Risk
Management Committees and periodically by MPIC.

o Political and Regulatory risks. The majority of our invested capital is deployed into businesses which
are directly regulated by arms of the state: electricity distribution; water supply and distribution along
with sewage treatment; tollroads; and light rail. Each of these businesses has concession or franchise
agreements which involve a degree of operating performance obligation in order to retain our rights
and earn our expected returns. In some cases, these agreements provide for retrospective assessment
of the extent of our overall operational and financial performance sometimes over a period of years.

o Risks arising from these types of businesses include the potential for differences with regulators
involving interpretation of the relevant agreements – either during the period in question or in

94
 retrospect. To manage these risks, the investee companies have established dedicated regulatory
management groups with experienced personnel. Their duty is to manage the relationship with
regulators, keep management up-to-date on the status of the relationship and ensure companies are
well prepared for any forthcoming regulatory changes or challenges.

o Competition and Market.

Power
▪ MERALCO carries a degree of market risk and its returns in the short term may be influenced
by consumers who elect to self-generate and disconnect from the distribution grid. We are
mitigating that risk by improving efficiencies to the point that makes it largely uneconomic to
self-generate. With the move to Open Access from June 2013, MERALCO takes risks
associated with buying and selling some power on its own account instead of on a pass
through basis. MERALCO has an experienced management team in place to lead this
business. MERALCO is now also invested in power generation with attendant demand
volume and price risks and fuel source price and supply risks. The primary mitigants are
contracting to match demand and supply side volumes where possible and employing highly
experienced power market professionals to manage any open positions by trading in the
market.

▪ GBPC’s increased competition in the power industry, including competition resulting from
legislative, regulatory and industry restructuring efforts, could have a significant adverse
impact on GBPC’s future operations and financial performance. In recent years, the
Government has sought to implement measures designed to establish a competitive energy
market. These measures include the privatization of substantially all NPC-owned power
generation facilities and all Government-owned and operated transmission facilities. In
addition, renewable energy is provided priority dispatch as well as Government incentives,
making such forms of energy a competitor against non-renewable forms of energy such as
coal and fuel oil. The move towards a more competitive environment could result in the
emergence of new competitors. Some of these competitors may have greater financial
resources and have more extensive operational experience than GBPC, giving them the ability
to respond to operational, technological, financial and other challenges more quickly than
GBPC. These competitors may therefore be more successful than GBPC in acquiring existing
power generation facilities or in obtaining financing for and in the construction of new power
generation facilities. The varying types of fuel used by GBPC’s competitors could allow them
to sell electricity at a lower price or, as compared to certain of GBPC’s existing or future
power generation facilities, produce electricity at a lower cost. The ongoing restructuring of
the Philippine power industry may affect GBPC’s financial position, results of operations and
cash flows. GBPC may not be able to compete effectively against its competitors or maintain
its market share and profit margins.

Toll Operations
▪ At MPTC, we set tariffs on new road projects based on traffic projections agreed with the
regulator. Rising fuel prices, alternative means of transport and existing or prospective
alternative routes are all factors that can affect the number of vehicles that use our roads.

We alleviate this risk by choosing our projects carefully. Existing high traffic density,
difficulty in securing competing routes, a high potential for growth given demographic
changes and conservative growth estimates, even with the prior factors included in the
assessment, are the important variables we consider when committing to traffic projections
with the regulator.

95
 Healthcare
▪ For the Hospitals group, investment is taking place to enable more qualified personnel to
better serve patients more efficiently and effectively in upgraded facilities and with better
equipment.

The primary risk is that investment runs ahead of demand and patient ability or willingness to
pay. We mitigate this risk by ensuring we know our target market and scale our
improvements to their ability to pay. The pace of medical innovation is accelerating requiring
increased management of the risks that costly equipment may become out of date before its
cost is fully recovered and traditional healthcare delivery models may be disrupted.

Rail
▪ For Rail, LRMC was granted sole right to operate and maintain LRT Line 1. Customers have
non-rail alternatives such as buses and jeepneys.

Logistics
▪ MPIC’s newest business is Logistics which offers warehouse management, hauling, trucking
and related services to various companies in the Philippines. There are numerous large
competing logistics companies which means revenues and margins may be eroded through
their various initiatives to gain market share.

MPIC’s logistics business is managing competitive risk through appointing a strong

management team with experience in the logistics business.

o Safety and Security risk. These risks are most pronounced in our light rail operations through LRMC.

▪ The operation of LRMC has significant operational safety and security risks. These risk have been
exacerbated by the poor condition and inadequate maintenance of the system prior to the
September 12, 2015 takeover by LRMC. LRMC is mitigating these risks by appointing a strong
senior management team with extensive light rail operating experience and a relentless pursuit of
passenger and employee safety. In addition, there are risks to projected financial returns through
late delivery of Government procured items such as Rights of Way, additional Light Rail Vehicles
(LRVs), and the Common Station. Plans to mitigate these risks include consistently engaging the
regulators on the status of the projects’ milestones and joint regular performance reviews by both
parties – the Concessionaire (LRMC) and the Grantors (the DOTC and the Light Rail Transit
Authority or LRTA).

o Supply side risk. These risks are most pronounced in our water business through Maynilad and power
generation operations through GBPC.

▪ The water company has some supply side risk in that: (i) it secures almost all of its supply from a
single source – the Angat dam; and (ii) this water source is shared by another water
concessionaire, a hydroelectric plant, and the needs of farmers for irrigation. A water usage
protocol is in place to ensure all users receive water as expected within the constraints of available
supply. Following significant water supply disruptions in the past, the business has experienced
periods of lower water supply than allowed for in its concession. We have worked to moderate
our reliance on Angat by developing the Putatan Water Treatment Plant. In addition, the Sumag
Diversion Project, which was initiated by the Government, aims to provide additional 188 MLD
of water, was jointly implemented by Maynilad and Manila Water.

▪ GBPC is exposed to supply side regarding sourcing of sufficient appropriate coal for its boilers
which are designed to operate with coal that has a relatively high ash content. GBPC mitigates
this risk by utilizing coal from a variety of sources and mixing alternatively inert material with
coal as needed.

96
 4. Financial Risk Management

MPIC’s investee companies’ financial risks are primarily: interest rate risk, foreign currency risk, liquidity
risk, credit risk and equity price risk (see Note 35 - Financial Risk Management Objectives and Policies to
the 2016 Audited Consolidated Financial Statements). The Board of Directors of each investee company
reviews and approves policies for managing each of these risks as follows:

▪ Interest Rate Risk. Interest rate exposure is managed by using a mix of fixed and variable rate debt.
Open interest rate risk exposure lies in the delay between project award and debt drawdown. This is
managed through conservative bidding.

▪ Foreign Currency Risk. In general the investee companies will place some degree of reliance on their
regulated return mechanisms to pass through foreign currency risk. The current liquidity and depth of
the Philippine credit market is such that there should be little need for raising new borrowings in
foreign currency. Similar to the interest rate risk discussed above, the delay between project award
and debt drawdown exposes the Company to foreign exchange currency fluctuations. This is
managed through early identification of requirements for foreign currencies and formulation of US
and third currency buying plans, including hedging. Additionally, the Group closely monitors
economic outlook provided by several financial institutions.

Maynilad has some foreign currency borrowing but there is a mechanism in place wherein it can
recover currency fluctuations as approved by MWSS.

▪ Liquidity Risk. Each business monitors its cash position using a cash forecasting system wherein all
expected collections, disbursements and other payments are determined in detail.

▪ Credit Risk. Credit risk is managed by setting limits on the amount of risk a business is willing to
accept for individual counterparties and by monitoring exposures in relation to such limits.

▪ Equity Price Risk. The Company’s investee companies are generally not faced with equity price risk
beyond that normal for any listed company, where relevant. MPIC’s investment in MERALCO,
through Beacon Electric, is partly financed by borrowings which require a certain security cover
based on the price of MERALCO’s shares on the Philippine Stock Exchange (PSE) on a volume
weighted 30 trading day average calculation. MERALCO’s share price would have to decline by
82.75% from its price as at June 30, 2017 before Beacon Electric would be required to top-up
collateral with cash or pay-down debt.

Key Variable and Other Qualitative and Quantitative Factors

i. Events that will trigger direct or contingent financial obligation that is material to the company,
including any default or acceleration of an obligation

Refer to Note 26 – Contingencies and Note 27 – Significant Contracts, Agreements and Commitments to
the June 30, 2017 Interim Consolidated Financial Statements for the updates on the Company’s
financial obligations.

ii. All material off-balance sheet transactions, arrangements, obligations (including contingent
obligations), and other relationships of the company with unconsolidated entities or other persons
created during the reporting periods

Refer to Note 27 – Significant Contracts, Agreements and Commitments and Note 16 – Related Party
Transactions to the June 30, 2017 Interim Consolidated Financial Statements for the updates on the
Company’s financial obligations.

97
 Refer to Note 9 – Investments and Advances to the June 30, 2017 Interim Consolidated Financial
Statements for the updates on Beacon Electric’s debt.

iii. Description of any material commitments for capital expenditures, general purpose of such
commitments, expected sources of funds for such expenditures

Refer to Note 27 – Significant Contracts, Agreements and Commitments to the June 30, 2017 Interim
Consolidated Financial Statements for the updates on the Company’s commitments.

iv. Any known trends, events or uncertainties that have had or that are reasonably expected to have a
material favorable or unfavorable impact on net sales or revenues or income from continuing
operations

The Company’s results of operations are highly dependent on its ability to set and collect adequate
tariffs under its concession agreements with the Philippine Government. Please refer to Note 26 –
Contingencies to the June 30, 2017 Interim Consolidated Financial Statements.

v. Any seasonal aspects that had a material effect on the financial condition or results of operations

Please refer to Note 3 – Operating Segment Information to the June 30, 2017 Interim Consolidated
Financial Statements.

98