April 13, 2022

via electronic mail

SECURITIES AND EXCHANGE COMMISSION
Secretariat Building, PICC Complex,
Roxas Boulevard, Pasay City, 1307

ATTENTION : DIR. VICENTE GRACIANO P. FELIZMENIO, JR.

Markets and Securities Regulation Department

via PSE EDGE

PHILIPPINE STOCK EXCHANGE, INC.
PSE Tower, 28th Street cor. 5th Avenue,
Bonifacio Global City, Taguig City

ATTENTION : MS. JANET A. ENCARNACION

Head, Disclosure Department

via electronic mail

PHILIPPINE DEALING & EXCHANGE CORP.
Market Regulatory Services Group
29th Floor BDO Equitable Tower
8751 Paseo de Roxas, Makati City 1226

ATTENTION : ATTY. MARIE ROSE M. MAGALLEN-LIRIO

Head – Issuer Compliance and Disclosures Department

Gentlemen:

Attached is the SEC Form 17-A (2021 Annual Report) of Aboitiz Power Corporation for your files.

Kindly acknowledge receipt hereof.

Thank you.

Very truly yours,

ABOITIZ POWER CORPORATION

By:

MANUEL ALBERTO R. COLAYCO

Corporate Secretary
 COVER SHEET

C 1 9 9 8 0 0 1 3 4
S.E.C. Registration Number

A B O I T I Z P O W E R C O R P O R A T I O N

( Company's Full Name )

3 2 N D S T R E E T , B O N I F A C I O G L O B A L

C I T Y , T A G U I G C I T Y , M E T R O M A N I L A

P H I L I P P I N E S
(Business Address: No. Street City / Town / Province )

MANUEL ALBERTO R. COLAYCO 02- 8886-2338

Contact Person Company Telephone Number

4th Monday of
Annual Report April
1 2 3 1 1 7 - A 0 4 2 5
Month Day FORM TYPE Month Day
Fiscal Year Annual Meeting

N/A
Secondary License Type, if Applicable

SEC N/A
Dept. Requiring this Doc Amended Articles Number/Section

x
Total No. of Stockholders Domestic Foreign
----------------------------------------------------------------------

To be accomplished by SEC Personnel concerned

File Number LCU

Document I.D. Cashier

STAMPS

Remarks = Pls. use black ink for scanning purposes

 SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17

OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES

1. For the year ended 2021

2. SEC Identification Number C199800134 3. BIR TIN 200-652-460-000

4. Exact name of registrant as specified in its charter Aboitiz Power Corporation

5. Philippines 6.
Province, country or other jurisdiction Industry Classification Code
of incorporation

7. 32nd Street, Bonifacio Global City, Taguig City 1634

Address of principal office Postal Code

8. (02) 8886-2800
Issuer’s telephone number, including area code

9. N/A
Former name or former address, if changed since last report

10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Section 4 and 8 of the RSA.

Title of Each Class Number of Shares of Common Stock

Outstanding and Amount of Debt Outstanding

Common 7,358,604,307

Total Debt (as of December 31, 2021) ₱234,437,399,000.00

Fixed-Rate Peso Retail Bonds Issued by the Company:

Issue Date Series Amount of Issuance Maturity Date Tenor
July 2017 Series A ₱3 billion July 2027 10 years
October 2018 Series B ₱7.7 billion January 2024 5.25 years
October 2018 Series C ₱2.5 billion October 2028 10 years
October 2019 Series D ₱7.25 billion October 2026 7 years
July 2020 Series E ₱9 billion July 2022 2 years
July 2020 Series F ₱550 million July 2025 5 years
March 2021 Series A ₱8 billion March 2026 5 years
December 2021 Series B ₱4.8 billion December 2025 4 years
December 2021 Series C ₱7.2 billion December 2028 7 years
March 2022 Series D ₱3.0 billion March 2027 5 years
March 2022 Series E ₱7.0 billion March 2029 7 years

For a discussion on the Company’s bond issuances, please refer to Part I Item 1 (I)(b).

11. Are any or all of the securities listed on a Stock Exchange?

Yes ( ) No ( )

If yes, state the name of such stock exchange and the classes of securities listed therein:
 Philippine Stock Exchange Common

12. Check whether the registrant:

(a) has filed all reports required to be filed by Section 17 of the Securities Regulation Code (SRC) and SRC Rule
17.1 thereunder or Section 11 of the RSA and RSA Rule 11 (a)-1 thereunder, and Sections 25 and 177 of the
Revised Corporation Code of the Philippines, during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports);

Yes ( ) No ( )

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

Yes ( ) No ( )

13. State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate
market value shall be computed by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within sixty (60) days prior to the date of filing. If a
determination as to whether a particular person or entity is an affiliate cannot be made without involving
unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may
be calculated on the basis of assumptions reasonable under the circumstances, provided the assumptions are
set forth in this Form.

For 2021, aggregate voting stock of registrant held outside of its affiliates and/or officers and employees totaled
3,453,415,177 shares (for details please refer to the attached notes to financial statements and Schedule H of
this report) while its market price per share was ₱29.70, as of December 31, 2021.

Based on this data, total market value of registrant’s voting stock not held by its affiliates and/or officers and
employees was computed to be ₱102.57 billion (bn).

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN

INSOLVENCY/SUSPENSION OF PAYMENTS PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:

14. Check whether the registrant has filed all documents and reports required to be filed by Section 17 of the RSA
subsequent to the distribution of securities under a plan confirmed by a court or the SEC.

Yes ( ) No ()

DOCUMENTS INCORPORATED BY REFERENCE

15. If any of the following documents are incorporated by reference, briefly describe them and identify the part of
SEC Form 17-A into which the document is incorporated:

(a) Any annual report to security holders:

• 2021 Audited Financial Statements of Aboitiz Power Corporation (with BIR ITR Filing Reference)
• 2021 Consolidated Audited Financial Statements and Supplementary Schedules
• Integrated Annual Corporate Governance Report
• Sustainability Reporting Template and 2021 Annual and Sustainability Report

(b) Any information statement filed pursuant to SRC Rule 20:

• SEC Form 20-IS (Information Statement) for 2022 Annual Stockholders’ Meeting

(c) Any prospectus filed pursuant to SRC Rule 8.1:

• None.
 TABLE OF CONTENTS

PART I BUSINESS AND GENERAL INFORMATION

Item 1 Business 1
Item 2 Properties 68
Item 3 Legal Proceedings 70
Item 4 Submission of Matters to a Vote of Security Holders 77

PART II OPERATIONAL AND FINANCIAL INFORMATION

Item 5 Market for Issuer’s Common Equity and Related Stockholder Matters 78
Item 6 Management’s Discussion and Analysis or Plan of Operations 79
Item 7 Financial Statements and Supplementary Schedules 92
Item 8 Changes in and Disagreements with Accountants on Accounting and 92
Financial Disclosures

PART III CONTROL AND COMPENSATION INFORMATION

Item 9 Directors and Executive Officers of the Issuer 97
Item 10 Executive Compensation 114
Item 11 Security Ownership of Certain Beneficial Owners and Management 118
Item 12 Certain Relationships and Related Transactions 119

PART IV CORPORATE GOVERNANCE

Item 13 Corporate Governance 121

PART V EXHIBITS AND SCHEDULES

Item 14 Exhibits 132
Reports on SEC Form 17-C (Current Report) 132
Sustainability Report 132

SIGNATURES 133

ANNEX A CORPORATE STRUCTURE 135

ANNEX B CERTIFICATES OF COMPLIANCE 136

ANNEX C 2021 SUSTAINABILITY REPORTING TEMPLATE

ANNEX D PARENT FINANCIAL STATEMENTS

ANNEX E CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY

SCHEDULES
 PART 1 – BUSINESS AND GENERAL INFORMATION

Item 1. Business

(1) Business Development

Aboitiz Power Corporation (AboitizPower) is a publicly-listed company incorporated on, and has been in business
since, February 13, 1998. AboitizPower was incorporated as a holding company for the Aboitiz Group’s
investments in electricity generation and distribution. Ownership in AboitizPower was opened to the public
through an initial public offering of its common shares in the PSE on July 16, 2007. Through its Subsidiaries and
Affiliates, AboitizPower is a well-positioned leader in the Philippine power industry being one of the leading
companies in power generation, distribution, and retail electricity supply. As of March 23, 2022, AboitizPower
had a market capitalization of ₱260.50 bn, with a common share price of ₱35.40 per share.

Driven by the pursuit of creating a better future for its customers, its host communities, and the nation,
AboitizPower’s business operations have developed into four strategic business units: (a) Power Generation, (b)
Power Distribution, (c) Retail Electricity Services (RES), and (d) Distributed Energy. The Company will continue
to pursue its international aspirations with a continued focus on renewable energy projects in wind, hydro, and
solar in high-growth geographic markets with acceptable regulatory environments.

Based on Energy Regulatory Commission (ERC) Resolution No. 05-2021, dated March 12, 2021, the power
generation business of AboitizPower is among the leaders in the Philippines in terms of installed capacity.
Moreover, AboitizPower has the second largest distribution utility, in terms of captive customer connections and
energy sales 1. As of the latest ERC report, the Company’s RES business combined is the second largest both in
number of customers and total retail market share. 2 AboitizPower is a pioneer in building and the operation of
run-of-river hydropower plants in the country. Today, through its renewable energy Subsidiaries, AboitizPower
has the largest installed capacity of renewable energy under its market control. 3

AboitizPower through its Subsidiaries, Joint Ventures, and Associates, is one of the leading players in the
Philippine power industry with interests in privately-owned power generation companies, RES services, and
distribution utilities throughout the Philippines, from Benguet in the north to Davao in the south.

AboitizPower’s portfolio of power generating plants consist of a mix of renewable and non-renewable sources
and of baseload and peaking power plants. This allows the Company to address the 24-hour demand of the
country with its coal and geothermal plants handling baseload demand, while the hydropower, solar, and oil-
based plants handle intermediate to peaking demand. Most of these plants are also capable of providing
ancillary services, which are also critical in ensuring a reliable grid operation. Its Generation Companies have an
installed capacity which is equivalent to a 16.58% market share of the national grid’s installed generating
capacity. 4 As of February 28, 2022, AboitizPower had a total of 5,332 MW net sellable capacity, of which 3,962
MW is the portion attributable to the Company. The Company targets to double its capacity to 9,200 MW by
2030. This is expected to come from a portfolio of renewables and selective baseload builds, with the optionality
for either coal or gas facilities. AboitizPower’s renewable investments are held primarily through its wholly-
owned Subsidiary, Aboitiz Renewables, Inc. (ARI), along with ARI’s Subsidiaries and Joint Ventures. AboitizPower
is a pioneer in the building and operation of run-of-river mini hydropower plants in the country.

AboitizPower also owns interests in nine Distribution Utilities in Luzon, Visayas, and Mindanao, including Visayan
Electric and Davao Light, the second and third largest distribution utilities in the Philippines, respectively in terms
of customer size and annual sales. AboitizPower’s Subsidiaries engaged in the distribution of electricity sold a
total of 7,396,423 MWh during 2021.

AboitizPower’s power generation business supplies power to various customers under power supply contracts,
ancillary service procurement agreements (ASPA), and for trading in the Wholesale Electricity Spot Market
(WESM). The power distribution business is engaged in the distribution and sale of electricity to end-users, and

1 Based on DOE’s Distribution Development Plan 2019-2028

2 ERC Competitive Retail Electricity Market Monthly Statistical Data as of January 2022
3 Based on ERC Resolution No. 02, Series of 2020 dated 12 March 2020
4 Based on Energy Regulatory Commission (ERC) Grid Limit Resolution

1 ∙ SEC FORM 17-A (ANNUAL REPORT)

 the RES and Others segment includes retail electricity sales to various off-takers that are considered eligible
contestable customers (“Contestable Customers”) and provision of electricity-related services, such as
installation of electrical equipment. AboitizPower’s Subsidiaries engaged in the supply of retail electricity sold a
total of 3.80 Terawatt hours (TWh) during 2021.

On December 16, 2021, JERA Asia acquired a 27% stake in AboitizPower, which consisted of a 25.01% stake from
Aboitiz Equity Ventures Inc. (AEV) and a 1.99% stake from ACO.

As of March 23, 2022, AEV owns 51.99% of the outstanding capital stock of AboitizPower, 27.00% is owned by
JERA Asia, 0.97% is owned by directors, officers, and other related parties, while the remainder is owned by the
public.

Neither AboitizPower nor any of its Subsidiaries has ever been the subject of any bankruptcy, receivership or
similar proceedings.

History and Milestones

The Aboitiz Group’s involvement in the power industry began when members of the Aboitiz family acquired a
20% ownership interest in Visayan Electric in the early 1900s. The Aboitiz Group’s direct and active involvement
in the power distribution industry can be traced to the 1930s, when ACO acquired Ormoc Electric Light Company
and its accompanying ice plant, Jolo Power Company, and Cotabato Light. In July 1946, the Aboitiz Group further
strengthened its position in power distribution in the Southern Philippines when it acquired Davao Light, which
is now the third largest privately-owned distribution utility in the Philippines in terms of customers and annual
gigawatt hour (GWh) sales.

In December 1978, ACO divested its ownership interests in Ormoc Electric Light Company and Jolo Power
Company and focused on the more lucrative franchises held by Cotabato Light, Davao Light, and Visayan Electric.

In response to the Philippines’ pressing need for adequate power supply, the Aboitiz Group ventured into power
generation, becoming a pioneer and industry leader in hydroelectric energy. In 1978, the Aboitiz Group
incorporated Hydro Electric Development Corporation (HEDC). HEDC carried out feasibility studies (including
hydrological and geological studies), hydroelectric power installation and maintenance, and also developed
hydroelectric projects in and around Davao City. On June 26, 1990, the Aboitiz Group also incorporated Northern
Mini-Hydro Corporation (now Cleanergy, Inc.), which focused on the development of mini-hydroelectric projects
in Benguet province in northern Luzon. By 1990, HEDC and Cleanergy had commissioned and were operating 14
plants with a combined installed capacity of 36 MW. In 1996, the Aboitiz Group led the consortium that entered
into a Build-Operate-Transfer (BOT) agreement with the National Power Corporation (NPC) to develop and
operate the 70-MW Bakun AC hydroelectric plant (the "Bakun AC Hydro Plant") in Ilocos Sur.

The table below sets out milestones in AboitizPower’s development since 1998:

Year Milestones
1998 Incorporated as a holding company for the Aboitiz Group’s investments in power generation and
distribution.
2005 Consolidated its investments in mini-hydroelectric plants in a single company by transferring all of HEDC’s
and Cleanergy’s mini hydroelectric assets to Hedcor, Inc. (Hedcor).
2007 Entered into a share swap agreement with AEV in exchange for AEV’s ownership interest in the following
distribution utilities:
(i) An effective 55% equity interest in Visayan Electric;
(ii) A 100% equity interest in each of Davao Light and Cotabato Light;
(iii) An effective 64% ownership interest in Subic Enerzone; and
(i) An effective 44% ownership interest in SFELAPCO.
As part of the reorganization of the power-related assets of the Aboitiz Group, the Company:
(i) Acquired 100% interest in Mactan Enerzone and 60% interest in Balamban Enerzone from
AboitizLand; and
(ii) Consolidated its ownership interests in Subic Enerzone by acquiring the combined 25% interest in
Subic Enerzone held by AEV, SFELAPCO, Okeelanta Corporation, and Pampanga Sugar Development
Corporation.

2 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Year Milestones
These acquisitions were made through a Share Swap Agreement, which involved the issuance of the
Company’s 170,940,307 common shares issued at the IPO price of ₱5.80 per share in exchange for the
foregoing equity interests in Mactan Enerzone, Balamban Enerzone, and Subic Enerzone.
Together with its partner, Statkraft Norfund Power Invest AS of Norway, through SN Aboitiz Power-Magat,
acquired possession and control of the Magat Plant following its successful bid in an auction by the Power
Sector Assets and Liabilities Management Corporation (PSALM).
Formed Abovant Holdings, Inc. (Abovant) with the Vivant Group as the investment vehicle for the
construction and operation of a coal-fired power plant in Toledo City, Cebu (“Cebu Coal Project”). Abovant
entered into a Memorandum of Agreement (MOA) with Global Business Power Corporation (Global Power)
of the Metrobank group for the acquisition of a 44% equity interest in Cebu Energy Development Corporation
(Cebu Energy).
Therma Power, Inc. (TPI) entered into a MOA with Taiwan Cogeneration International Corporation (TCIC) for
the Subic Coal Project, an independent coal-fired power plant in the Subic Bay Freeport Zone. Redondo
Peninsula Energy, Inc. (RP Energy) was incorporated as the project company.
Acquired 50% of East Asia Utilities Corporation (EAUC) from El Paso Philippines Energy Company, Inc. and
60% of Cebu Private Power Corporation (CPPC).
Purchased 34% equity ownership in STEAG State Power, Inc. (STEAG Power) from Evonik Steag GmbH in
August 2007.
Purchased Team Philippines Industrial Power II Corporation Industrial Power II Corp.’s 20% equity in Subic
Enerzone.
2008 SN Aboitiz Power–Benguet submitted the highest bid for the Ambuklao-Binga Hydroelectric Power Complex.
Acquired Tsuneishi Holdings (Cebu), Inc. (THC)’s 40% equity ownership in Balamban Enerzone, bringing
AboitizPower’s total equity in Balamban Enerzone to 100%.
2009 AP Renewables, Inc. (APRI) acquired the 234-MW Tiwi geothermal power facility in Albay and the 449.8 MW
Makiling-Banahaw geothermal power facility in Laguna (collectively referred to as the “Tiwi-MakBan
Geothermal Facilities”).
Therma Luzon, Inc. (TLI) became the Independent Power Producer Administrator (IPPA) for the 700-MW
contracted capacity of the Pagbilao Coal-Fired Power Plant (the “Pagbilao Plant”), becoming the first IPPA
of the country.
2010 Therma Marine, Inc. (TMI), acquired ownership over Mobile 1 (“Power Barge 118”) and Mobile 2 (“Power
Barge 117”) from PSALM.
2011 Meralco PowerGen Corporation (MPGC), TCIC, and TPI entered into a Shareholders’ Agreement to formalize
their participation in RP Energy. MPGC took the controlling interest in RP Energy, while TCIC and TPI
maintained the remaining stake equally.
Therma Mobile, Inc. (TMO) acquired four barge-mounted floating power plants and their operating facilities
from Duracom Mobile Power Corporation and EAUC. In the same year, the barges underwent rehabilitation
and started commercial operations in 2013.
2013 Aboitiz Energy Solutions, Inc. (AESI) won 40 strips of energy corresponding to 40 MW capacity of Unified
Leyte Geothermal Power Plant (ULGPP). The contract between AESI with PSALM with respect to the ULGPP
capacity was terminated on October 26, 2019.
2014 TPI entered into a joint venture agreement with TPEC Holdings Corporation to form Pagbilao Energy
Corporation (PEC) to develop, construct, and operate the 400 MW coal-fired Pagbilao Unit 3.
Therma Power-Visayas, Inc. (TPVI) was declared the highest bidder for the privatization of the Naga Power
Plant Complex (NPPC). SPC Power Corporation (SPC), the other bidder, exercised its right-to-top under the
Naga Power Plant Land-Based Gas Turbine Land Lease Agreement, and PSALM declared SPC as the winning
bidder. After protracted legal proceedings, TPVI accepted the turn-over for the NPPC plant on July 16, 2018.
Acquired 100% of Lima Enerzone Corporation (Lima Enerzone) from Lima Land, Inc. (Lima Land), a wholly-
owned Subsidiary of Aboitiz InfraCapital.
TPI entered into a Shareholders’ Agreement with Vivant Group, for the latter’s acquisition of 20% issued and
outstanding shares in Therma Visayas, Inc. (TVI).
2015 ARI formed a Joint Venture, San Carlos Sun Power, Inc. (SacaSun), with SunEdison Philippines to explore solar
energy projects. In 2017, AboitizPower International completed the acquisition of SacaSun from SunEdison
Philippines, and ownership of SacaSun was consolidated in AboitizPower.
TSI commenced full commercial operations of its Unit 1.
2016 TSI commenced full commercial operations of its Unit 2.
TPI acquired an 82.8% beneficial ownership interest in GNPower Mariveles Coal Plant Ltd. Co. (now:
GNPower Mariveles Energy Center Ltd. Co. or GMEC) and a 50% beneficial ownership interest in GNPower
Dinginin Ltd. Co. (GNPower Dinginin or GNPD).
Through TPI, acquired the remaining 50% interest in EAUC from El Paso Philippines.
2017 AboitizPower International completes its acquisition of SunEdison Philippines, and consolidates ownership
of SacaSun.
2018 Aseagas permanently ceased operations of its 8.8-MW biomass plant in Lian, Batangas.

3 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Year Milestones
TPVI accepted the turnover of the Naga Power Plant Complex from PSALM.
Pag 3 began commercial operations.
TVI commenced commercial operations of its Unit 1.
2019 TMO signed a Power Supply Agreement (PSA) with Meralco, after the facility went into preservation mode
on February 5, 2019. TMO re-registered again with Independent Electricity Market Operator of the
Philippines (IEMOP) on April 26, 2019.
AboitizPower acquired 49% voting stake and a 60% economic stake in AA Thermal.
TVI commenced commercial operations of its Unit 2.
2020 TPVI started commercial operations.
2021 A special-purpose vehicle wholly owned by ARI was awarded the Engineering, Procurement, and
Construction (EPC) contract for the 94-megawatt peak (MWp) solar project in Pangasinan province. The
Company entered into an agreement with JGC Philippines, Inc., the country’s biggest EPC services company
to build its second solar power venture.

AboitizPower is currently involved in the distributed generation business through APX1 and APX2, and is
expanding its renewable energy portfolio under its Cleanergy brand. AboitizPower's Cleanergy portfolio includes
its geothermal, run-of-river hydro, and large hydropower facilities.

AboitizPower is developing various solar, wind, hydro, and storage projects. In November 2020, AboitizPower
announced its two battery projects – the TMI Hybrid Battery Energy Storage System (“TMI BESS”) and SN
AboitizPower-Magat Battery Energy Storage System (“Magat BESS”). TMI BESS is located in Maco, Compostela
Valley, has a storage capacity of 49 MWh, is intended to be used for ancillary services, and is currently under
construction. SN AboitizPower BESS is located in Ramon, Isabela, has a storage capacity of 20 MWh, and will be
used to provide ancillary services. In December 2021, the Company also began the construction of a 167MWp
Laoag solar project in Aguilar, Pangasinan.

As of February 28, 2022, AboitizPower had 928 MW of attributable net sellable capacity, through its partners,
under its Cleanergy brand. The Company is pushing for a balanced mix strategy – maximizing Cleanergy while
taking advantage of the reliability and cost efficiency of thermal power plants.

Neither AboitizPower nor any of its Subsidiaries has been the subject of any material reclassification, merger,
consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business.

(2) Business of Registrant

With investments in power generation, retail electricity supply, and power distribution throughout the
Philippines, AboitizPower is considered one of the leading Filipino-owned companies in the power industry.
Based on SEC’s parameters of what constitutes a significant Subsidiary under Item XX of Annex B (SRC Rule 12),
the following are AboitizPower’s significant Subsidiaries at present: ARI and its Subsidiaries, and Therma Power
and its Subsidiaries. (Please see Annex “A” hereof for AboitizPower’s corporate structure.)

(a) Description of Registrant

(i) Principal Products

GENERATION OF ELECTRICITY

AboitizPower’s power generation portfolio includes interests in both renewable and non-renewable generation
plants. As of December 31, 2021, the power generation business accounted for 105% of earning contributions from
AboitizPower’s business segments. AboitizPower conducts its power generation activities through the Subsidiaries
and Affiliates listed in the table below.

The table below summarizes the Generation Companies’ operating results as of December 31, 2021, compared to
the same period in 2020 and 2019:

4 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Energy Sold Revenue
Generation Companies 2021 2020 2019 2021 2020 2019
(in GWh) (in mn Pesos)
APRI 2,787 3,055 2,968 11,405 11,253 12,545
SacaSun 61 44 49 311 250 269
Hedcor 149 161 226 758 697 881
LHC 238 266 262 687 761 787
Hedcor Sibulan 251 201 191 1,858 1,399 1,282
Hedcor Tudaya 40 33 29 234 261 172
Hedcor Sabangan 55 49 51 325 395 300
Hedcor Bukidnon 271 261 284 1,827 1,418 1,605
SN Aboitiz Power-Magat 2,195 1,891 2,054 7,352 5,352 6,608
SN AboitizPower-Benguet 2,120 1,936 1,975 7,412 5,668 6,065
TLI 7,979 6,686 6,812 33,447 20,505 25,410
TSI 1,891 1,531 1,393 11,173 8,276 9,099
TVI 2,434 2,232 1,710 10,686 8,490 6,254
Cebu Energy 2,028 2,025 1,900 8,984 7,719 8,578
STEAG Power 1,845 1,845 1,840 3,918 4,022 4,791
GMEC 2,703 5,003 3,909 19,676 17,821 19,373
WMPC 802 819 638 1,596 1,390 1,158
SPPC 0 0 0 0 0 0
CPPC 381 540 550 1,275 998 1,685
EAUC 363 226 383 963 571 1,013
TMI 1,253 743 1,200 1,276 990 1,865
TMO 1,367 381 938 1,293 668 1,970
TPVI* 29 3 - 367 30 -
Davao Light** Revenue Revenue Revenue
0 0 0
(decommissioned) Neutral Neutral Neutral
Revenue Revenue Revenue
Cotabato Light** 0 0 0
Neutral Neutral Neutral
*The TPVI plant started commercial operations on August 7, 2020 and was first dispatched based on an offer into the WESM on August 26, 2020.
**Plants are operated as stand-by plants and are revenue neutral, with costs for operating each plant recovered by Davao Light and Cotabato Light, as the case may
be, as approved by ERC. The Davao Light plant has been decommissioned since November 2018.

Renewables

Aboitiz Renewables, Inc. (ARI)

As of February 28, 2022, AboitizPower’s renewable energy portfolio in operation consisted of net sellable
capacity of approximately 1,249.17 MW, divided into 46.80 MW of solar, 912.37 MW of hydro, and 290 MW of
geothermal.

AboitizPower’s investments and interests in various renewable energy projects, including geothermal, large
hydro, run-of-river hydro, and solar projects, are held primarily through its wholly-owned Subsidiary, ARI and its
Subsidiary Generation Companies. ARI was incorporated on January 19, 1995.

In line with AboitizPower's ten-year strategy of growing its renewable energy capacity as well as striking a 50:50
balance between its Cleanergy and thermal portfolios by 2030, ARI is actively developing solar, wind, hydro, and
storage projects. The 94MWp Cayanga solar project in Bugallon, Pangasinan is currently under construction and
expected to be completed by the fourth quarter of 2022. Tendering on the 160MWp Laoag solar project in
Aguilar, Pangasinan is ongoing, and the project is expected to start construction in the second quarter of 2022,
and be completed by the second quarter of 2023. SN AboitizPower-Magat expects to commence construction
on the Magat BESS in the first half of 2022 with projected commercial operations date in the first half of 2024.

AboitizPower, through and/or with ARI, owns equity interests in the following Generation Companies, among
others:

5 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Attributable
Percentage Net Sellable
Generation Net Sellable
of Plant Name (Location) Type of Plant Capacity Offtakers
Company Capacity
Ownership (MW)
(MW)
WESM/
APRI 100% Tiwi – Makban (Luzon) Geothermal 290 290
Bilaterals
Benguet 1-11 (Luzon) La
Trinidad, Bineng 3, Ampohaw, Run-of-river FIT/
52.7 52.7
FLS, Labay, Lon-oy, Irisan 1 and hydro Bilaterals
Hedcor 100%
3, and Sal-angan
Davao 1-5 (Mindanao) Talomo 1, Run-of-river Distribution
4.5 4.5
2, 2A, 2B, and 3 hydro utility
Run-of-river
Hedcor Bukidnon 100% Manolo Fortich (Mindanao) 68.8 68.8 FIT
hydro
Run-of-river
Hedcor Sabangan 100% Sabangan (Luzon) 14 14 FIT
hydro
Sibulan (A, B and Tudaya A) Run-of-river Distribution
Hedcor Sibulan 100% 49.10 49.10
(Mindanao) hydro utility
Run-of-river
Hedcor Tudaya 100% Tudaya (B) (Mindanao) 7 7 FIT
hydro
Run-of-river
LHC 100% Bakun (Ilocos Sur, Luzon) 74.8 74.8 NPC (2026)
hydro
SacaSun 100% SacaSun (Visayas) Solar 46.8 46.8 Bilaterals
Large
Ambuklao (Benguet, Luzon) 105 52.50 WESM
Hydroelectric
SN Aboitiz Power- WESM/ASPA
60%**
Benguet Large /Electric
Binga (Luzon) 140 70
Hydroelectric Cooperatives
/DU/RES
WESM/
ASPA/
SN Aboitiz Power- Large
Magat (Luzon) 388 194 Electric
Magat Hydroelectric
60%** Cooperatives
/ DU/RES
Run-of-river
Maris Main Canal 1 (Luzon) 8.5 4.25 FIT
hydro
Total 1,248.2* 928.4*
Notes:
* Sum figures will differ due to rounding effect.
**The 60% equity is owned by MORE.

Run-of-River Hydros

In 2021, Hedcor Group had a total generated gross of 994 GWh of Cleanergy across the Philippines. This is higher
than the generated gross of renewable energy in 2020 of 956 GWh, or an increase of 3.95% during 2021 compared
to -0.79% in 2020. The Hedcor Group achieved this level of generation as a result of minimized outages and the
La Niña in the first half of 2021.

On November 18, 2020, Hedcor inaugurated its first-ever Regional Control Center. With this, all nine plants in
Southern Mindanao, composed of the five hydro facilities in Davao City and four hydro facilities in Davao del Sur
owned by Hedcor, Hedcor Sibulan, and Hedcor Tudaya, respectively, can be operated remotely in a single control
room. This is a significant milestone as part of the organization’s multi-year digitization and integration projects
which aims to connect all of Hedcor’s hydro facilities to a single National Operations Control Center by 2024.

On June 22, 2021, the National Commission on Indigenous Peoples (NCIP) - Cordillera Administrative Region
served on Hedcor a cease-and-desist order (“CDO”) involving its three run-of-river hydropower plants in Bakun,
Benguet. Bakun Indigenous Tribes Organization (BITO) requested the issuance of such CDO following BITO’s
passage of a ‘Resolution of Non Consent’ in relation to a Memorandum of Agreement it previously executed with
Hedcor. Hedcor assailed the issuance of the CDO through court action; and resumed operations and synchronized
to the Luzon grid on July 28, 2021. After the successful conduct of negotiations participated in by Hedcor and

6 ∙ SEC FORM 17-A (ANNUAL REPORT)

 BITO, NCIP formally lifted the CDO in an Order dated February 21, 2022. Given this, Hedcor filed a motion to
withdraw the court action with the Court of Appeals on March 24, 2022.

Luzon Hydro Corporation (LHC)

LHC, a wholly-owned Subsidiary of ARI, owns, operates, and manages the run-of-river Bakun AC
hydropower plant with a total installed capacity of 74.8 MW located in Amilongan, Alilem, Ilocos Sur (the
“Bakun AC Hydro Plant”). LHC was incorporated on September 14, 1994.

LHC was previously ARI’s Joint Venture with Pacific Hydro of Australia, a privately-owned Australian
company that specialized in developing and operating power projects utilizing renewable energy sources.
On March 31, 2011, ARI, LHC, and Pacific Hydro signed a MOA granting ARI full ownership over LHC. ARI
assumed 100% ownership and control of LHC on May 10, 2011.

The Bakun AC Hydro Plant was constructed and operated under the government’s BOT scheme. Energy
produced by the Bakun AC Hydro Plant, approximately 254 GWh annually, is delivered and taken up by NPC
pursuant to a Power Purchase Agreement ("PPA") and dispatched to the Luzon Grid through the 230-kV
Bauang-Bakun transmission line of NGCP. Under the terms of its PPA, all of the electricity generated by the
Bakun AC Hydro Plant will be purchased by NPC for a period of 25 years from February 2001. The PPA also
requires LHC to transfer the Bakun AC Hydro Plant to NPC in February 2026, free from liens and without
the payment of any compensation by NPC.

In 2018, the Bakun AC Hydro Plant gained its ISO 22301:2012 Business Continuity Management System
Certification, aligning with international standards in improving its business resilience. In 2020, it was
recommended by BSi Group for Quality, Environmental, Asset Management, and Information Security
management systems ISO recertification while successfully transitioning to ISO 45001:2018 Occupational
Safety and Health management system.

Hedcor, Inc. (Hedcor)

Hedcor was incorporated on October 10, 1986 by ACO as Baguio-Benguet Power Development
Corporation. ARI acquired ACO’s 100% ownership interest in Hedcor in 1998.

In 2005, ARI consolidated all its mini-hydroelectric generation assets, including those developed by HEDC
and Cleanergy, into Hedcor. Cleanergy is Hedcor’s brand for clean and renewable energy. Hedcor owns,
operates, and manages run-of-river hydroelectric power plants in Northern Luzon and Davao City, with an
increased combined net sellable capacity of 57.25 MW, attributed to the addition of the La Trinidad Hydro
which started operations in July 2019.

The electricity generated from Hedcor’s hydropower plants are taken up by Advent Energy, AESI, and Davao
Light pursuant to PPAs with the said off-takers. Irisan 1 Hydro and La Trinidad Hydro sell energy under the
Feed-in-Tariff (“FIT”) mechanism through a renewable energy payment agreement (“REPA”) with the
National Transmission Corporation (“Transco”).

In 2021, Hedcor Group had a total generated gross of 994 GWh of Cleanergy across the Philippines. This is
higher than the generated gross renewable energy in 2020 of 956 GWh. This 3.95% increase is a great
improvement compared to the 0.79% decrease in 2020. Hedcor achieved maximized generation as a result
of La Niña in the first half of 2021 and minimized outages.

Hedcor Sibulan, Inc. (Hedcor Sibulan)

Hedcor Sibulan, a wholly-owned Subsidiary of ARI, owns, operates, and manages the hydropower plants
composed of three cascading plants with a total installed capacity of 49.24 MW, located in Santa Cruz,
Davao del Sur. Hedcor Sibulan consists of Sibulan A Hydro, Tudaya 1 Hydro, and Sibulan B Hydro. The
energy produced by the Sibulan grid is sold to Davao Light through a PSA signed in 2007. The company was
incorporated on December 2, 2005.

In 2018, Hedcor Sibulan gained its ISO 22301:2014 Business Continuity Management Certification.

7 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Likewise, it has passed all recertification and surveillance audits in 2020, maintaining its certifications for
Quality, Environmental, Operational Health and Safety, Asset Management, Information Security, and
Business Continuity. Also, the organization was successful in its transition to ISO 45001:2018 Occupational
Safety and Health management system in September 2020.

The Hedcor Sibulan plant is part of the Hedcor Group’s Regional Control Center.

Hedcor Tudaya, Inc. (Hedcor Tudaya)

Hedcor Tudaya, a wholly-owned Subsidiary of ARI, owns, operates, and manages the Tudaya 2 Hydro run-
of-river hydropower plant with an installed capacity of 8.1 MW, located in Santa Cruz, Davao del Sur. The
company was incorporated on January 17, 2011.

The Tudaya 2 Hydro plant has been commercially operating since March 2014. At present, Tudaya 2 Hydro
sells energy under the FIT mechanism through a Renewable Energy Supply Agreement (RESA) with Davao
del Sur Electric Cooperative, and through a REPA with Transco.

Together with Hedcor Sibulan, Hedcor Tudaya also gained its ISO 22301:2014 Business Continuity
Management Certification in 2018. Likewise, the company passed all recertification and surveillance audits
in 2020, maintaining its certifications for Quality, Environmental, Operational Health and Safety, Asset
Management, Information Security, and Business Continuity. Hedcor Tudaya also successfully transitioned
to ISO 45001:2018 Occupational Safety and Health management system.

The Tudaya 2 Hydro plant is part of the Hedcor Group’s Regional Control Center.

Hedcor Sabangan, Inc. (Hedcor Sabangan)

Hedcor Sabangan, a wholly-owned Subsidiary of ARI, owns, operates, and manages the Sabangan run-of-
river hydroelectric power plant (HEPP) with a net sellable capacity of 14.96 MW. The company was
incorporated on January 17, 2011.

The Sabangan plant has been commercially operating since June 2015, and is selling under the FIT
mechanism through a REPA with Transco. The plant is a pioneer hydropower plant in the Mountain
Province region, harnessing the power of the Chico River.

Hedcor Bukidnon, Inc. (Hedcor Bukidnon)

Hedcor Bukidnon, a wholly-owned Subsidiary of ARI, owns, operates, and manages the mini hydropower
plants with a combined net sellable capacity of 72.8 MW located in Manolo Fortich, Bukidnon (the “Manolo
Fortich Plant”). The company was incorporated on January 17, 2011.

The Manolo Fortich Plant is composed of the 45.9-MW Manolo Fortich 1 Hydro and the 27.39-MW Manolo
Fortich 2 Hydro. Both plants harness the power of the Tanaon, Amusig, and Guihean rivers.

Persistent rains in the locality that occurred during the second half of 2020 caused soil saturation, erosion,
and mudslides resulting in pipe dislocations, pipe bursts, and damage to the high head penstock line of
Manolo Fortich 1. Hedcor Bukidnon Manolo Fortich 1 Hydro is now fully operational after the 45% supply
generation reduction. Its two pelton units were restored when it re-synchronized to the Mindanao grid in
August 2021.

The Manolo Fortich Plant is selling under the FIT mechanism through RESAs with various Mindanao
cooperatives and private distribution utilities and through a REPA with TRANSCO.

8 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Large Hydros

SN Aboitiz Power-Magat, Inc. (SN Aboitiz Power-Magat)

Incorporated on November 29, 2005, SN Aboitiz Power-Magat owns and operates the HEPP with a
nameplate capacity of 360 MW located at the border of Ramon, Province of Isabela and Alfonso Lista,
Ifugao Province (the “Magat Plant”), and the 8.5-MW run-of-river Maris Main Canal 1 HEPP located in Brgy.
Ambatali in Ramon, Isabela (the “Maris Plant”). The Maris Plant, which is composed of two generator units
with a nameplate capacity of 4.25 MW each, was completed in November 2017. The plant was granted
entitlement to the FIT system in its operations pursuant to the COC issued by ERC in November 2017.

SN Aboitiz Power-Magat is ARI’s Joint Venture with SN Power Philippines Inc. (SN Power Philippines), a
leading Norwegian hydropower company with projects and operations in Asia, Africa, and Latin America.
In October 2020, Norway-based Scatec ASA (Scatec) signed a binding agreement to acquire 100% of the
shares in SN Power from Norfund for a total equity value of US$ 1,166 mn. On January 29, 2021, Scatec
announced it has received all necessary approvals and that conditions are fulfilled to close the acquisition
pursuant to the agreement with Norfund. As of February 28, 2022, SN Aboitiz Power-Magat is 60% owned
by MORE, while SN Power Philippines owns the remaining 40% equity interest.

The Magat Plant was completed in 1983 and was turned over to SN Aboitiz Power-Magat in April 2007 after
it won the bidding process conducted by PSALM. As a hydroelectric facility that can be started up in a short
period of time, the Magat Plant is suited to act as a peaking plant with the capability to capture the
significant upside potential that can arise during periods of high demand. This flexibility allows for the
generation and sale of electricity at the peak demand hours of the day. This hydroelectric asset has minimal
marginal costs, which Aboitiz Power believes gives it a competitive advantage in terms of economic
dispatch order versus other fossil fuel-fired power plants that have significant marginal costs.

On April 25, 2019, ERC certified the Magat Plant’s new Maximum Stable Load (Pmax) at 388 MW. The Magat
Plant’s Units 1-4 were uprated by 2 MW each, or from 95 MW to 97 MW per unit. This means that the
Magat Plant is capable of producing, under normal to best conditions, up to 388 MW as compared to its
nameplate capacity of 360 MW. The new Pmax of the four units was based on the capability test conducted
by the NGCP sometime in 2018.

SN Aboitiz Power-Magat is an accredited provider of ancillary services to the Luzon grid. It sells a significant
portion of its available capacity to NGCP, the system operator of the Luzon grid. SN Aboitiz Power-Magat’s
remaining capacity is sold as electric energy to the spot market through WESM and to load customers
through bilateral contracts.

Driven by improved inflows in the first quarter of 2021, the Magat Plant’s total sold quantities from spot
energy generation and ancillary services (AS) during 2021 was at 1.9 TWh, an improvement from 2020’s
sold capacity of 1.8 TWh. This is equivalent to a sold capacity factor of 60%, compared to 55% in 2020. Spot
and AS revenue for the year 2021 was ₱6.59 bn, 51% higher than 2020’s ₱4.36 bn. SN Aboitiz Power-
Magat’s Bilateral Contract Quantity (BCQ) margin for 2021 was a ₱679 mn loss, significantly lower than
2020’s ₱727 mn. This was mainly driven by the higher spot market prices during 2021 compared to 2020.

In June 2019, SN Aboitiz Power-Magat switched on its first 200kW floating photovoltaic project over the
Magat reservoir in Isabela. This was the first non-hydro renewable energy project of the SN Aboitiz Power
Group, which was looking at other renewables and complementary technologies to expand its portfolio.
On October 21, 2020, the company obtained approval for the project to proceed to engineering design for
a total of 67 MW. The project is currently in the detailed feasibility study stage, which is expected to run
for ten to twelve months. Initial efforts have been focused on securing all pertinent permits and
endorsements, conduct of applicable stakeholder consultations, completion of environmental and social
baseline studies, refinement of commercial assumptions, and completion of technical site investigations
necessary for a feasibility level design. Based on the results of the pre-feasibility studies, phase one of the
project will be for 67 MW with a plan to install up to 150 MW, depending on the final technical solution
and layout. SN Aboitiz Power-Magat is also working on the renewable energy service contract (RESC)
application with the Department of Energy (DOE). The company secured an extension of the memorandum
of understanding with the National Irrigation Administration (NIA), the government agency in charge of

9 ∙ SEC FORM 17-A (ANNUAL REPORT)

 dams and reservoirs, on the conduct of the feasibility study, with ongoing discussions regarding the
agreement for use of the reservoir.

The Magat BESS project is located in Ramon, Isabela. It is an energy storage system with a 20-MW capacity
and 20-MWh energy storage to be used primarily for ancillary services. Site survey works have been
completed as part of the pre-construction. Early works activities have been completed, including site
surveys and basic engineering design. Coordination is ongoing with the NGCP on transmission, particularly
the Magat-Santiago 230 kV transmission line reconductoring and upgrading. The benefit of this upgrade is
to ensure full dispatch of the Magat power plant’s capacity, battery energy storage system, and proposed
expansion in the floating solar space. The addition of BESS complements the rise of variable renewable
energy in the country, increasing frequency variability to the grid which requires a more balanced power
supply in the system.

On October 22, 2020, the DOE issued a Green Energy Option Program (GEOP) Operating Permit to SN
Aboitiz Power-Magat, which authorizes the company to enter into electricity supply contracts with
qualified end-users according to the GEOP or RA No. 9513 or the Renewable Energy Act of 2008 (the “RE
Law”). This permit is valid for five years. SN Aboitiz Power-Magat also has a RES license valid until December
17, 2025.

SN Aboitiz Power-Magat retained its Integrated Management System certifications for ISO 14001 for
Environmental Management System, ISO 9001 for Quality Management System, ISO 45001 for
Occupational Health and Safety Management Systems, and ISO 55001 Asset Management System, as
verified and audited by DQS Philippines in 2021. The company recorded 2 mn manhours without lost time
incident in 2021.

SN Aboitiz Power-Benguet, Inc. (SN Aboitiz Power-Benguet)

SN Aboitiz Power-Benguet is the owner and operator of the Ambuklao-Binga Hydroelectric Power Complex,
which consists of the 105-MW Ambuklao HEPP ("Ambuklao Plant") and the 140-MW Binga HEPP ("Binga
Plant"), located in Brgy. Tinongdan, Itogon, Benguet Province. The company was incorporated on March
12, 2007. As of February 28, 2022, MORE owns 60% equity interest, while SN Power owns the remaining
40%.

The Ambuklao-Binga hydroelectric power complex was turned over to SN Aboitiz Power-Benguet in July
2008 and was rehabilitated to increase its capacity from 75 MW to 105 MW when the plant re-commenced
operations in 2011. The Binga Plant also underwent refurbishment from 2010 to 2013, which increased
capacity to 125 MW. In March 2017, SN Aboitiz Power-Benguet received its amended COC from ERC for all
four units of the Binga Plant. The COC reflects Binga's latest uprating, raising its capacity to 140 MW. The
Ambuklao and Binga Plants sell capacity from spot energy generation and ancillary services to the national
transmission system and related facilities that convey power.

With higher inflows in the Ambuklao reservoir in 2021 compared to 2020, there was an overall higher AS
Capacity Approval and spot sales for SN Aboitiz Power-Benguet. The Ambuklao Plant’s total sold capacity
from spot energy generation and ancillary services in 2021 was 703 GWh, which was 96% of the 732 GWh
capacity sold in 2020. This was equivalent to a sold capacity factor of 76% during 2021, as compared to the
80% during 2020. The Binga Plant’s total sold capacity from spot energy generation and AS in 2021 was
1.12 TWh, or 112% of the 1.00 TWh sold capacity in 2020. This is equivalent to a sold capacity factor of 92%
for 2021, compared to 82% in 2020.

The resulting combined spot and AS revenue of the Ambuklao and Binga Plants for 2021 was ₱6.180 bn,
compared to ₱4.20 bn in 2020. SN Aboitiz Power-Benguet’s BCQ margin for 2021 was ₱236 mn loss, which
was significantly lower than 2020’s BCQ margin of ₱973 mn. This was mainly driven by the higher spot
market prices during 2021 compared to 2020.

Both the Ambuklao and Binga Plants have retained their Integrated Management System certifications (ISO
14001 Environmental Management System, ISO 9001 Quality Management System, and ISO 55001 for
Asset Management). The company also successfully migrated and was certified as ISO 45001 Occupational
Health & Safety Management System from OHSAS 18001. The Ambuklao and Binga Plants jointly have just

10 ∙ SEC FORM 17-A (ANNUAL REPORT)

 over 5.2 mn man hours of no lost time incident in 2021.

Geothermal

AP Renewables, Inc. (APRI)

APRI, a wholly-owned Subsidiary of ARI, is one of the leading renewable power companies in the country.
It owns the 234 MW Tiwi geothermal power facility in Albay and the 449.8 MW Makiling-Banahaw
geothermal power facility in Laguna (the “Tiwi-MakBan Geothermal Facilities”) located in Albay, Laguna,
and Batangas. These geothermal facilities were acquired by APRI from PSALM in July 2008 and were
formally turned over to APRI on May 25, 2009.

The Tiwi-MakBan Geothermal Facilities produce clean energy that is reasonable in cost, efficient in
operation, and environment-friendly. As a demonstration of APRI’s commitment to providing world-class
services, adhering to environmental management principles to reduce pollution, complying with
regulations, and ensuring a safe and healthy workplace, the company has been issued Integrated
Management System (IMS) certifications by TÜV Rheinland Philippines that include the International
Organization for Standardization (ISO) 9001:2015 (Quality), ISO 14001:2015 (Environment), and OSHAS
(Occupational Health and Safety Series) 18001:2007 (Health and Safety).

On August 24, 2018, APRI and Philippine Geothermal Production Company, Inc. (PGPC) signed a
Geothermal Resources Supply and Services Agreement (GRSSA) for the supply of steam and drilling of new
production wells for the Tiwi-MakBan Geothermal Facilities until the expiration of APRI’s initial DOE
operating contract term on October 22, 2034. This ensures the long-term operations of the facilities. Under
the GRSSA, PGPC has committed to drill at least 12 new production wells, with a minimum of 50 MW
aggregated individual well capacity, by 2023 in order to increase steam availability. The GRSSA also provides
for more equitable and competitive fuel pricing for APRI.

The first Steam Production Enhancement Campaign (SPEC) make-up well for MakBan, Bulalo 114, was
completed and started flowing into the system on April 10, 2021. This provided additional steam equivalent
to 5.41 MW to Makban Plant B. For Tiwi, Kapipihan 36, the first well drilled under the SPEC program, was
completed in December 2019 and was tested at 12.11 MW capacity in January 2020. Two additional wells
in MakBan were completed, with Bulalo 115 contributing 4.86 MW and Bulalo 116 adding 3.31 MW based
on the tests conducted on June 2 and July 29, 2021 respectively. In total, two additional new make-up wells
will be contributing to the generation of APRI’s 234 MW geothermal power facility in Tiwi, Albay and the
six remaining new make-up wells will be contributing to the 394.8 MW Makiling-Banahaw geothermal
power facility in Laguna (the “Tiwi-MakBan Geothermal Facilities") for a total of 12 new make-up wells
under the SPEC program within 2021 -2023.

APRI was granted a RES license on February 18, 2020 which is valid until February 17, 2025.

Solar

Maaraw San Carlos Holdings, Inc. (Maaraw San Carlos) and San Carlos Sun Power Inc. (SacaSun)

SacaSun owns and operates the 59-megawatt peak (MWp) solar photovoltaic (PV) power generation plant
located in the San Carlos Ecozone, Barangay Punao, San Carlos City, Negros Occidental (the "SacaSun
Plant"). The project was inaugurated on April 19, 2016.

SacaSun was incorporated on July 25, 2014, initially as a Joint Venture between ARI and SunEdison
Philippines. On December 4, 2017, AboitizPower acquired 100% effective equity ownership in SacaSun.

As of February 28, 2022, the energy generated from the SacaSun Plant benefited more than 33,891 homes
within the Visayas Grid and displaced the energy equivalent to 20,994,583 gallons of gasoline or
approximately 206,222,535 pounds of coal burned.

Maaraw San Carlos is the holding company of SacaSun. It was incorporated on April 24, 2015, and is
effectively owned by AboitizPower, through its wholly-owned Subsidiaries, ARI and AboitizPower

11 ∙ SEC FORM 17-A (ANNUAL REPORT)

 International.

PV Sinag Power, Inc. (PV Sinag)

PV Sinag is the project company for the construction of the 94 MWp Cayanga solar project located in
Cayanga, Bugallon, Pangasinan. PV Sinag issued a notice to proceed (“NTP”) on September 15, 2021 for the
construct of an access road. A NTP to the EPC contractor for the power plant and transmission was issued
on December 16, 2021 and pre-works are ongoing. Issuance of NTP signifies that the EPC contractor can
start with its scope of work, which usually begins with the EPC contractor’s issuance of a standby letter of
credit, PV Sinag’s payment of the advance payment, and other activities needed to start construction, such
as the mobilization of personnel and equipment to site. The total project cost is estimated at ₱4.5 bn and
will be funded through project finance and equity contributions. The project is expected to commence
commercial operations by December 2022, in line with PV Sinag’s PSA with a retail customer.

PV Sinag was incorporated on October 1, 2013, and is wholly-owned by ARI.

Sinag Naraw Power Inc. (Sinag Naraw)

Sinag Naraw was incorporated on June 19, 2020 as a joint venture between ARI and Okeelanta Corporation.
Sinag Naraw is the project company for an 11MWp solar project in Pampanga currently under
development.

`As of February 28, 2022, ARI owned 44% of Sinag Naraw.

Aboitiz Power Distributed Energy, Inc. (APX1) and Aboitiz Power Distributed Renewables Inc. (APX2)

APX1 and APX2 (collectively, “APX”) are the project companies engaged in the business of operating
rooftop PV solar systems in the distributed energy space. APX1 and APX2 are wholly-owned Subsidiaries
of AboitizPower through ARI. APX1 and APX2 were incorporated in November 2016 and May 2002,
respectively.

APX1 is a registered Philippine Economic Zone Authority (PEZA) company intended to serve customers
operating within PEZA zones.

As of February 28, 2022, APX has approximately 4.3 MWp of rooftop solar projects, operating under a
Power Purchase Agreement, a turnkey solution for customers, or about to start construction/installation.
The on-going rooftop solar PV developments are expected to go online within the first half of 2022.

Renewables Pipeline

SN Aboitiz Power-Generation, Inc. (SN Aboitiz Power-Gen)

SN Aboitiz Power-Gen implements the SN Aboitiz Power Group’s Business Development Program, which
aims to grow SN Aboitiz Power Group’s renewable energy portfolio by looking at potential power projects
in the Philippines, primarily within its current host communities in Northern Luzon.

In 2021, SN Aboitiz Power-Gen continued to explore and develop various renewable energy projects in
order to contribute to SN Aboitiz Power Group’s growing renewable energy portfolio.

On the hydropower front, SN Aboitiz Power-Gen continued to develop and execute pertinent activities for
the proposed 390-MW Alimit hydropower complex in Ifugao, which consists of the 120-MW Alimit HEPP,
the 250-MW Alimit Pumped Storage Facility, and the 20-MW Olilicon HEPP. With the easing of pandemic
restrictions in the country and as the Philippine ancillary services market evolves, SN Aboitiz Power-Gen
will continue to evaluate its development strategy for these projects.

SN Aboitiz Power-Gen is likewise venturing into the commercial floating solar front through the Magat
Floating Solar Project, proposed to be located in Ramon, Isabela. This 67-MW project is currently in the
Feasibility Phase. The project has received the Solar Energy Operating Contract from the DOE and will

12 ∙ SEC FORM 17-A (ANNUAL REPORT)

 continue to engage other regulatory bodies such as the NIA, the National Grid Corporation of the
Philippines (NGCP), the Department of Environment and Natural Resources (DENR), and local government
units (LGUs).

SN Aboitiz Power-Gen continues to explore and assess other greenfield and brownfield opportunities, not
only in the field of hydropower and floating solar, but also in the field of energy storage, ground-mounted
solar, and wind power as well.

SN Aboitiz Power-Gen was incorporated on March 10, 2011. As of February 28, 2022, 60% equity interest
in the company is owned by MORE, with the remaining 40% owned by SN Power Philippines.

Non-Renewables

Therma Power, Inc. (TPI)

AboitizPower’s investments and interests in various non-renewable energy projects are held primarily through its
wholly-owned Subsidiary, TPI and its Subsidiary power generation companies. TPI was incorporated on October
26, 2007. As of February 28, 2022, AboitizPower, by itself, through and/or with TPI, owned equity interests in the
following thermal plants:

Net Attributable
Percentage Plant Name Sellable Net Sellable
Generation Company Project Type Off-takers
Ownership (Location) Capacity Capacity
(MW) (MW)
Coal Group

TLI 100% Pagbilao (Luzon) Coal-fired 700 700 Bilaterals/WESM

PEC 50% Pagbilao 3 (Luzon) Coal-fired 388.4 194.2 Bilaterals

TSI 100% TSI Plant (Mindanao) Coal-fired 260 260 Bilaterals

TVI 80% TVI Plant (Visayas) CFB 300 240 Bilaterals/WESM

Cebu Energy
Cebu Energy 26.4% CFB 216 57 Bilaterals/WESM
(Visayas)
Mariveles Project
GMEC 78.32% Coal-fired 632 495 Bilaterals/WESM
(Luzon)
STEAG Power Plant
STEAG Power** 34% Coal-fired 210 71.4 NPC (2031)
(Mindanao)
Oil Group

CPPC** 60% CPPC Plant (Visayas) Bunker-C fired 64 38.4 WESM

EAUC 100% EAUC Plant (Visayas) Bunker-C fired 43.5 43.5 Bilaterals

SPPC Plant
SPPC** 20% Bunker-C fired 55 11 N/A
(Mindanao)
Power Barge Mobile
Barge-mounted 96 96 Bilaterals/ASPA
TMI 1 (Mindanao)
100%
Power Barge Mobile
Barge-mounted 96 96 Bilaterals/ASPA
2 (Mindanao)

Power Barges
TMO 100% Barge-mounted 200 200 WESM/ASPA
Mobile 3-6 (Luzon)
TPVI Plant
TPVI 100% Bunker-C fired 39.3 39.3 WESM
(Visayas)
WMPC Plant
WMPC** 20% Bunker-C fired 100 20 Bilaterals
(Mindanao)

13 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Net Attributable
Percentage Plant Name Sellable Net Sellable
Generation Company Project Type Off-takers
Ownership (Location) Capacity Capacity
(MW) (MW)
Bunker Cotabato
Cotabato Light** 99.94% Bunker-C fired 4.45 4.45 N/A
(Mindanao)
Total 3,404.6 2,566.2*
Notes:
* Sum figures will differ due to rounding effect
** Directly owned by AboitizPower

Oil Group

Therma Marine, Inc. (TMI)

TMI, a wholly-owned Subsidiary of TPI, owns and operates Power Barges Mobile 1 (previously known as PB
118) and Power Barges Mobile 2 (previously known as PB 117), which have a total generating capacity of
200 MW. Power Barges Mobile 1 is currently moored at Barangay San Roque, Maco, Davao De Oro, while
Power Barges Mobile 2 is moored at Barangay Sta. Ana, Nasipit, Agusan del Norte. The company was
incorporated on November 12, 2008.

The 192 MW dependable capacities of TMI are currently contracted with the NGCP in an ASPA. TMI is now
registered as a WESM Trading Participant beginning January 8, 2020, in anticipation of WESM in Mindanao.

TMI Hybrid BESS is one of two battery energy storage system projects of AboitizPower. Located in Maco,
Davao de Oro, TMI Hybrid BESS has a storage capacity of 49 MW and is intended to be used for ancillary
services. Development activities are ongoing to integrate the battery energy storage system with TMI’s
Power Barge Mobile 1. The TMI Hybrid BESS project is expected to commence commercial operations
sometime in 2022.

Therma Mobile, Inc. (TMO)

TMO, a wholly-owned Subsidiary of TPI, operates four barge-mounted power plants located at the Navotas
Fish Port, Manila, which it acquired on May 27, 2011. The barge-mounted power plants have an installed
generating capacity of 231 MW. TMO operates with a net available capacity of 165 MW. The company was
incorporated on October 20, 2008.

On January 7, 2019, TMO notified Meralco that it will physically disconnect from Meralco's system and will
deregister as a Trading Participant in the WESM effective February 5, 2019. After evaluating the
circumstances and the options available, TMO decided to preserve its bunker C-fired diesel power plants.
Notices were also sent to PEMC, DOE, ERC, and IEMOP, following applicable legal notice requirements.
Afterwards, TMO signed a one-year PSA with Meralco that expired on April 25, 2020.

Thereafter on July 14, 2020, TMO and NGCP entered into ASPAs for Reactive Power Support and
Dispatchable Reserve. Both ASPAs have been provisionally approved by the ERC.

East Asia Utilities Corporation (EAUC)

EAUC, a wholly-owned Subsidiary of TPI, is the owner and operator of a 44-MW Bunker C-fired power plant
within MEPZ I, Lapu-Lapu City, Cebu. The company supplies the power requirements of the MEPZ I locators,
and began supplying power through the WESM on December 26, 2010. EAUC was incorporated on February
18, 1993.

EAUC has received awards by the Department of Environment and Natural Resources – Environmental
Management Bureau (DENR-EMB) for its commendable role in the Metro Cebu Airshed Governing Board,
and by IEMOP for its exemplary compliance in the spot market.

14 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Therma Power Visayas, Inc. (TPVI)

TPVI, a wholly-owned Subsidiary of TPI, is the company that was awarded the winning bid for the
privatization of the 25.3-hectare Naga Power Plant Complex (NPPC) located at Naga City, Cebu. The
company was incorporated on October 8, 2007.

Following protracted legal proceedings, on May 23, 2018, PSALM issued a Certificate of Effectivity of the
Notice of Award originally issued on April 30, 2014 in favor of TPVI. Thereafter, PSALM and TPVI executed
the Asset Purchase Agreement and Land Lease Agreement of the NPPC.

On July 16, 2018, the NPPC was physically turned over and accepted by TPVI from PSALM. TPVI embarked
on the rehabilitation of the 44-MW diesel plant right after, which DOE has endorsed as a committed power
project. On August 7, 2020, TPVI commenced commercial operations and was first dispatched based on an
offer into the WESM on August 26, 2020.

Cebu Private Power Corporation (CPPC)

CPPC owns and operates a 70-MW Bunker C-fired power plant located in Cebu City, one of the largest
diesel-powered plants on the island of Cebu. The company was incorporated on July 13, 1994.
Commissioned in 1998, the CPPC plant was constructed to supply 62 MW of power to Visayan Electric.
CPPC is currently trading in the WESM.

CPPC is a Joint Venture between AboitizPower and the Vivant Group. As of February 28, 2022, AboitizPower
beneficially owned 60% of CPPC.

Southern Philippines Power Corporation (SPPC)

SPPC owns a Bunker C-fired power plant with installed capacity of 61.72MW and net capacity of 55MW
located in Alabel, Sarangani, a municipality outside General Santos City in Southern Mindanao. SPPC’s 18-
year “Build-Operate-Own” (BOO) arrangement with NPC expired on April 28, 2016. The company was
incorporated on March 15, 1996.

As of February 28, 2022, AboitizPower has a 20% equity interest in SPPC, a Joint Venture among
AboitizPower, Alsing Power Holdings, Inc., and Tomen Power (Singapore) Pte. Ltd.

SPPC has been on asset preservation status since the expiration of its PSAs with Davao Light and Cotabato
Light on April 28, 2018. The plant’s last operation was in July 2018.

Western Mindanao Power Corporation (WMPC)

WMPC owns and operates a Bunker C-fired power station with installed capacity of 112-MW and net
capacity of 100MW located in Zamboanga City, Zamboanga Peninsula in Western Mindanao. It was
operated as a merchant plant after WMPC’s 18-year BOO arrangement with the NPC expired in December
2015. The company was incorporated on March 15, 1996.

WMPC has an ASPA with NGCP which took effect on April 26, 2019 for 50-MW non-firm Dispatchable
Reserve and Reactive Power Support and Blackstart Support Services. It has been issued an Ancillary
Services (AS) Certificate by NGCP effective September 20, 2021 to September 19, 2023. WMPC is also
supplying electricity to Zamboanga City Electric Cooperative Inc., and has been registered with the WESM
effective April 23, 2020.

As of February 28, 2022, AboitizPower has a 20% equity interest in WMPC, a Joint Venture among
AboitizPower, Alsing Power Holdings, Inc., and Tomen Power (Singapore) Pte. Ltd.

15 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Coal Group

Therma Luzon, Inc. (TLI)

TLI, a wholly-owned Subsidiary of TPI, was the first IPPA in the country, and assumed the role of the
registered trader of the contracted capacity of the 700-MW net (2x350 MW net) coal-fired power plant
located in Pagbilao, Quezon (the "Pagbilao Plant"). TLI was incorporated on October 20, 2008.

As the IPPA, TLI is responsible for procuring the fuel requirements of, and selling the electricity generated
by, the Pagbilao Plant. The Pagbilao Plant is currently owned and operated by TeaM Energy Corporation
(TeaM Energy). Under the IPPA agreement, TLI has the right to receive the transfer of Pagbilao Unit 1 and
Unit 2 at the end of the Energy Conversion Agreement. Over the years, TLI’s capacity was contracted to
various cooperatives, private distribution utilities, directly connected customers, and to affiliate RES. TLI
was granted a RES license on August 12, 2020, which is valid until August 11, 2025.

Pagbilao Energy Corporation (PEC)

PEC owns and operates the 400-MW Unit 3 coal-fired power plant (Pagbilao Unit 3) within the Pagbilao
Power Station, located in Pagbilao, Quezon. PEC is a Joint Venture between AboitizPower and TeaM
Energy, through their respective Subsidiaries, TPI and TPEC Holdings Corporation. Pagbilao Unit 3 is not
covered by either TLI’s IPPAA with PSALM or TeaM Energy’s BOT contract with NPC, and commenced
operations in March 2018.

Through TPI, AboitizPower has 50% equity interest in PEC, while TPEC Holdings Corporation owned the
remaining 50% as of February 28, 2022.

The output of Pagbilao Unit 3 is sold to TLI and TPEC.

Therma South, Inc. (TSI)

TSI, a wholly-owned Subsidiary of TPI, owns and operates the 300-MW net (2x150MW net) circulating
fluidized bed (CFB) coal-fired power plant located in Davao City and Sta. Cruz, Davao del Sur. TSI was
incorporated on November 18, 2008. Commercial operations for Unit 1 and Unit 2 began in September
2015 and February 2016, respectively.

TSI contributes to the continuing growing power requirements of Mindanao by providing stable and cost-
effective base load power. TSI supplies power to various private distribution utilities and energy
cooperatives. TSI seeks to sustain the positive impact it has brought to its host communities through various
educational, livelihood, and enterprise development programs, benefitting children, students, small and
medium enterprise owners, and its employees.

Therma Visayas, Inc. (TVI)

TVI owns and operates the 300-MW net (2x150 MW net) CFB coal-fired power plant located in Toledo City,
Cebu. Commercial operations for Unit 1 and Unit 2 began in April and August 2019, respectively.

AboitizPower, through TPI, effectively owned an 80% equity interest in TVI as of February 28, 2022. The
remaining 20% is held by the Vivant Group.

TVI supplies power to Visayan Electric and its RES Affiliates – AESI, AdventEnergy, and Prism Energy, Inc.
(Prism Energy).

Abovant Holdings, Inc. (Abovant) and Cebu Energy Development Corporation (Cebu Energy)

Abovant is a Joint Venture between AboitizPower and the Vivant Group as the holding company for shares
in Cebu Energy. The company was incorporated on November 28, 2007.

Cebu Energy was incorporated on December 5, 2008 by Abovant and Global Formosa Power Holdings, Inc.

16 ∙ SEC FORM 17-A (ANNUAL REPORT)

 (Global Formosa), a Joint Venture between Global Business Power Corporation and Flat World Limited. The
company owns the 3x82-MW CFB coal-fired power plant situated within the Toledo Power Complex in
Barangay Daanlungsod, Toledo City, Cebu. The first unit was commissioned in February 2010, while the
second and third units were commissioned in the second and fourth quarters of 2010, respectively. Cebu
Energy declared commercial operations on February 26, 2011, and is the first commercial clean-coal facility
in the country.

Cebu Energy consistently ensures delivery of the highest level of service, and actively undertakes
accreditations on Quality Management System (ISO 9001:2015), Environmental Management System (ISO
14001:2015), and Occupational Health and Safety Management System (OHSAS 18001:2007). The
company provides power to the province of Cebu and its neighboring province, Bohol. Likewise, Cebu
Energy has an existing ASPA with NGCP to help maintain a reliable electric Grid system.

As of February 28, 2022, Abovant has a 44% equity interest in Cebu Energy, while Global Formosa owned
the remaining 56%. Consequently, AboitizPower, through TPI, holds a 26.4% effective ownership interest
in Cebu Energy.

Redondo Peninsula Energy, Inc. (RP Energy)

RP Energy was incorporated on May 30, 2007 to construct, own, and operate the 2x300-MW (net) coal-
fired power plant located in the Redondo Peninsula of Subic Bay within the Subic Bay Freeport Zone (SBFZ),
Subic, Zambales.

RP Energy was originally a Joint Venture between AboitizPower and TCIC. MPGC acquired a majority
interest in RP Energy by virtue of a share purchase agreement with TPI on July 22, 2011. As of February 28,
2022, AboitizPower, through TPI, and TCIC each retained a 25% stake in RP Energy.

STEAG State Power Inc. (STEAG Power)

Incorporated in December 19, 1995, STEAG Power is the owner and operator of a 210 MW (net) coal-fired
power plant located in PHIVIDEC Industrial Estate in Misamis Oriental, Northern Mindanao. The STEAG
Power Plant consisting of two units was built under a BOT arrangement and started commercial operations
on November 15, 2006. It has a 25-year PPA with NPC backed by a Performance Undertaking issued by the
Philippine government.

As of February 28, 2022, AboitizPower has 34% equity interest in STEAG Power following the purchase of
said equity from Evonik Steag GmbH (now STEAG). STEAG and La Filipina Uy Gongco Corporation (LFUGC)
currently hold the remaining 51% and 15% equity, respectively, in STEAG Power.

On January 29, 2021, STEAG Power applied for the renewal of its ERC COC which expired last August 29,
2021. ERC issued a Provisional Authority to Operate valid until August 29, 2022.

From December 2020 to May 13, 2021, one of its two power plant units was required to be in
economic shutdown by NPC/PSALM in accordance with the PPA after consideration of the following
factors: (i) grid demand, and (ii) high water level of hydrowater plants aggravated by the pandemic
quarantine effects. Both power plant units have since resumed normal operations, save only during the
long plant maintenance schedule which ran from June 30 to August 9, 2021. The same request for economic
shutdown of one unit was raised by PSALM for the period October 31, 2021 to January 31, 2022. In a letter
dated January 21, 2022, PSALM shortened the unit’s economic shutdown to January 24, 2022. The two
power plant units have resumed normal operations since January 24, 2022.

STEAG Power entered into two coal supply agreements in December 2019 that secured the plant’s fuel
requirements for the next three years on a fixed base and option tonnage. Last December 15, 2021, SPI
amended one of its existing coal supply agreements for the inclusion of clauses allowing shortfalls in
shipments to be added at the end of the contract and extension of the contract for such purpose. The
Company entered into a Charter Party Agreement, as amended, for the transportation of coal in bulk from
January 1, 2020 to December 31, 2025.

17 ∙ SEC FORM 17-A (ANNUAL REPORT)

 AA Thermal, Inc.

On May 2, 2019, AboitizPower completed its acquisition of 49% voting stake and 60% economic stake in
AA Thermal, AC Energy Inc.’s (AC Energy) thermal platform in the Philippines.

The AA Thermal platform initially consists of AC Energy’s limited partnership interests in GMEC and GNPD,
where AboitizPower, through TPI, already holds direct partnership interests.

GNPower Mariveles Energy Center Ltd. Co. (GNPower Mariveles or GMEC)

GMEC, formerly known as GNPower Mariveles Coal Plant Ltd. Co., is a private limited partnership organized
on May 13, 2007 and established to undertake the development, construction, operation, and ownership
of an approximately 2x345 MW (gross) pulverized coal-fired power plant located in Mariveles, Bataan,
Philippines (the “Mariveles Project”). GMEC registered its Amended Articles of Partnership to reflect
GMEC’s change in partnership name, which was approved by the SEC on October 14, 2020.

The Mariveles Project is located within an industrial zone on a 60-hectare coastal site near the port of
Mariveles, Bataan. The project site lies near the northern entrance to Manila Bay, providing easy and safe
shipping access from the West Philippine Sea. The Mariveles Project commenced on January 29, 2010 and
was declared commercially available in 2014.

The electricity produced by the Mariveles Project is exported through a 230kV high voltage transmission
line from Mariveles to Hermosa substation. The transmission line is owned, operated, and maintained by
NGCP. Substantially all of the capacity of the Mariveles Project is contracted under long term PPAs with
highly-rated distribution utilities and Contestable Customers, through its designated RES, GNPower Ltd. Co.

In October 2016, TPI acquired the partnership interests held by the affiliated investment funds of The
Blackstone Group L.P. in World Power Holdings, L.P. (currently registered as Therma Mariveles Holdings
L.P.) and Sithe Global Power, L.P. (currently registered as Therma Dinginin L.P.). Following its receipt of the
necessary approvals from the Board of Investments (BOI) and PCC, TPI completed the acquisition of GMEC
and GNPD interests on December 27, 2016. On March 7, 2018, AboitizPower completed the restructuring
of its share ownership structure in GMEC by transferring its direct ownership of GMEC from the offshore
subsidiaries of TPI to TPI itself, and the eventual dissolution and liquidation of the offshore intermediary
subsidiaries that used to own the GMEC shares.

In 2021, GMEC informed AboitizPower of an unscheduled outage of the Mariveles Project’s Unit 1 (“GMEC
Unit 1”) attributable to damage found in a portion of GMEC Unit 1’s boiler. Actual repairs to the boiler
were completed on August 12, 2021 while, parallel to these repair works, GMEC Unit 1 went on general
maintenance outage. With the extended outage activities, GMEC returned to service from these incidents
on October 18, 2021. In view of the resulting business interruption, GMEC has initiated an insurance claim
for the outage. The Mariveles Project represents approximately 8.96% of the total gross capacity under
AboitizPower’s market control of 3,850 MW. GMEC Unit 1 delivers a net sellable capacity of 316 MW,
which represents approximately 9.06% of AboitizPower’s net sellable capacity of 3,494 MW.

Effectively, the partnership interests in GMEC are owned by:

(i) TPI;
(ii) ACE Mariveles Power Ltd. Co., a joint venture between (a) AA Thermal, Inc., a wholly-owned
subsidiary of AC Energy and Infrastructure Corporation and AboitizPower, and (b) Power Partners
Ltd. Co. (“Power Partners”); and,
(iii) Power Partners.

As of February 28, 2022, AboitizPower has a 78.3% effective partnership interest in GMEC.

GNPower Dinginin Ltd. Co. (GNPower Dinginin or GNPD)

GNPD is a limited partnership organized and established on May 21, 2014 with the primary purpose of
developing, constructing, operating, and owning a 2x724.965 MW (gross) supercritical coal-fired power
plant to be located in Mariveles, Bataan.

18 ∙ SEC FORM 17-A (ANNUAL REPORT)

 GNPD started the construction of Unit 1 in September 2016. With GNPD finally receiving Unit 1's Certificate
of Compliance from the ERC, Unit 1 began servicing its PSAs from the unit's own generation beginning
December 26, 2021. The partnership also proceeded with the expansion of the power plant and achieved
its financial closing for Unit 2 in December 2017, with the target date for Unit 2's initial synchronization
scheduled in the second quarter of 2022, from which GNPD Unit 2 may start earning revenues.

GNPD’s construction is conducted in two phases: (i) the first phase is for Unit 1 and its associated ancillary
facilities, as well as, the balance of plant, and (ii) the second phase is for Unit 2, an additional identical
668MW (net) unit, and its associated ancillary facilities. The electricity that will be produced by Unit 1 of
GNPD will be initially exported through the existing 230kV high voltage transmission line owned and
operated by NGCP. Once NGCP’s 500kV high voltage transmission line is completed, energy from both
GNPD’s Unit 1 and Unit 2 will be exported through the same.

On December 27, 2016, TPI completed the acquisition of the partnership interests held by the affiliated
investment funds of The Blackstone Group, L.P in World Power Holdings, L.P. (currently registered as
Therma Mariveles Holdings L.P.) and Sithe Global Power, L.P. (currently registered as Therma Dinginin L.P.).
AboitizPower’s sharing percentage on GNPD’s (i) profits and losses and (ii) distributions therein, through
its general and limited partners, was eventually reduced to 40%.

In 2018, AboitizPower, through TPI, restructured its share ownership structure in GNPD and transferred
direct ownership of GNPD from the offshore subsidiaries of TPI to TPI itself, resulting in TPI directly owning
a 45% partnership interest in GNPD by December 31, 2018.

In February 2019, GNPD secured the Certificate of Energy Project of National Significance from the DOE.

As an Authority of the Freeport Area of Bataan (AFAB) Registered Enterprise, GNPD is entitled to the
incentives granted under Republic Act No. 9728, the organic law creating the AFAB. To date, GNPD has
signed numerous Power Purchase and Sale Agreements with highly-rated distribution utilities and RES.

GNPD is co-developed by Power Partners, AC Energy, and TPI. As of February 28, 2022, AboitizPower
owned a 70% effective partnership interest in GNPD.

Other Generation Assets

As of February 28, 2022, Cotabato Light maintains a stand-by maximum capacity of 4.45-MW Bunker C-fired power
plant capable of supplying approximately 13.26% of its requirements.

Future Projects

AboitizPower assesses the feasibility of any new power generation project. Factors taken into consideration include
the proposed project’s land use requirements, access to a power grid, energy yield analysis, fuel supply
arrangements, availability of water, local requirements for permits and licenses, acceptability of the project to the
communities and people it will affect, ability of the project to generate electricity at a competitive cost, and the
existence of potential purchasers of the electricity generated. For the development of a new power project, the
Company, its partners, and its suppliers are required to obtain all national and local permits and approvals before
the commencement of construction and commercial operations, including those related to the project site,
construction, environment, land use planning/zoning, operations licenses, and similar approvals.

DISTRIBUTION OF ELECTRICITY

The Aboitiz Group has more than 85 years of experience in the Philippine power distribution sector.

With ownership interests in nine Distribution Utilities, the Company believes that it is currently one of the largest
electricity distributors in the Philippines. AboitizPower’s Distribution Utilities collectively supply electricity to
franchise areas covering a total of 18 cities and municipalities and five economic zones across Luzon, Visayas, and
Mindanao.

19 ∙ SEC FORM 17-A (ANNUAL REPORT)

 In 2020, the wholly-owned Distribution Utilities and Visayan Electric completed a rebranding initiative to modernize
the look and feel of the brands and visually show their relation to AboitizPower.

The Distribution Utilities’ earnings contribution to AboitizPower’s business segments in 2020 was equivalentto
28.03%. The Distribution Utilities had a total customer base of 1,068,820 as of year-end 2020, compared to
1,030,726 as of end-2019, and 995,828 as of the end of 2018.

The table below summarizes the key operating statistics of the Distribution Utilities for each of the past three years:

Electricity Sold (MWh) Peak Demand (MW) No. of Customers

Company
2021 2020 2019 2021 2020 2019 2021 2020 2019
Davao Light 2,597,592 2,476,991 2,633,920 459 452 454 458,498 440,304 420,666
Cotabato Light 178,535 170,363 173,114 34 31 31 47,098 45,044 43,449
Visayan Electric 3,144,768 3,119,850 3,500,781 554 583 601 477,732 462,699 450,088
SFELAPCO 716,888 686,694 714,948 147 134 140 118,806 116,293 112,091
Subic Enerzone 267,047 262,393 329,633 50 56 62 3,581 3,477 3,473
Mactan Enerzone 107,541 99,927 117,433 21 21 22 87 87 87
Balamban
85,813 92,771 101,885 25 28 27 28 29 34
Enerzone
Lima Enerzone 296,780 242,455 249,394 56 49 44 940 882 834
Malvar Enerzone 1,458 158 51 1.28 0.12 0.06 13 5 4
Total 7,396,423 7,151,601 7,821,159 1,347 1,355 1,382 1,106,783 1,068,820 1,030,726

Visayan Electric Company, Inc. (Visayan Electric)

Visayan Electric is the second largest privately-owned distribution utility in the Philippines in terms of customer
size and annual MWh sales. The company supplies electricity to a region covering 674 square kilometers (sq. km.)
on the island of Cebu with a population of approximately 1.7 mn. Visayan Electric has 19 power substations and
one mobile substation that serve the electrical power needs of various cities, municipalities, and barangays in the
island and province of Cebu.

Visayan Electric is the Aboitiz Group’s first involvement in the power industry, with the acquisition by some family
members of 20% ownership interest in the early 1900s. Directly and through its predecessors-in-interest, the
company has been in the business of distributing electricity in Cebu since 1905. In 1928, Visayan Electric
Company, S.A. was granted a 50-year distribution franchise by the Philippine Legislature. The franchise was
renewed in September 2005 for a period of 25 years or until September 2030.

Visayan Electric has energized 100% of all the barangays, and electrified 99.77% of all the households within its
franchise area. A goal of 100% total electrification is set for December 31, 2022, in line with the national goal set
by the DOE.

Visayan Electric is true to its vision of becoming a world-class electric utility by implementing innovations such as
the implementation of a full digital substation using IEC 61850 station and process bus for its Paknaan substation.
The newest application for distribution automation, fault location, isolation, and service restoration (FLISR), is an
ongoing project to be applied to four feeders within the franchise.

Visayan Electric’s Underground Distribution System (UDS) project, which began in 2013, aims to convert overhead
conductors to underground cables along Cebu City’s Sinulog Route with a total length of approximately five
kilometers (km). As of February 28, 2022, approximately 3.6 kms have been completed.

Visayan Electric has reinforced and improved the existing capacity and reliability of its 23kV West Cluster with the
addition of another 33 MVA Power Transformer in the Calamba Substation. This will enhance electricity service
for the increasing demand of both commercial and densely residential customers within its franchise area.

20 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Visayan Electric’s total systems loss was 7.55% as of February 28, 2022. This included a feeder loss of 4.61%, which
is below the government-mandated feeder loss cap for 2022 of 5.50%.

As of February 28, 2022, AboitizPower directly held a 55.26% equity interest in Visayan Electric. 34.81% is owned
by the Vivant Group.

Davao Light & Power Company, Inc. (Davao Light)

Davao Light is the third largest privately-owned electric distribution utility in the country in terms of customer size
and annual kWh sales. Its franchise area covers two cities and three municipalities in the Davao region, with a
population of approximately 1.8 mn and a total area of 3,561 sq. kms.

Davao Light was incorporated on October 11, 1929, and was acquired by the Aboitiz Group in 1946. The company’s
original 50-year franchise, covering Davao City, was granted in November 1930 by the Philippine Legislature.
Pursuant to RA No. 11515 which lapsed into law on December 26, 2020, Davao Light’s franchise was extended for
an additional 25 years from 2025, or until 2050.

The company’s renewable energy power supply is sourced from hydropower plants of NPC-PSALM hydro, Hedcor
Sibulan, Hedcor’s Talomo plant, and Hedcor Bukidnon’s Manolo Fortich Plant.

The distribution network infrastructure of Davao Light is continuously upgraded to increase its capacity and
adopts digital technology in its substations to enhance the reliability and flexibility in the sub-transmission and
distribution network. Its P. Reyes substation has been upgraded to a fully digital substation, the first in the
Philippines outside of Manila, with an additional 50MVA capacity. Its Buhangin substation was upgraded with an
additional 33 MVA capacity to cater to the rapid load growth in the northern part of Davao City. Its underground
cabling project along C.M Recto St. has improved the reliability of power and safety of the community and the
aesthetics of the main downtown road.

As the challenges of the Covid-19 pandemic remain, Davao Light continues to serve its customers through its
diverse digital channels and online facilities to provide ease of doing business such as payments, requests, and
inquiries. The company maintains payment facilities to make bills payment more accessible to its customers. Its
mobile application, MobileAP, allows customers to access their billing and accounts anytime and anywhere This
was introduced in 2020 and has been upgraded with additional features and more access options to its users.

Davao Light retained its certification for the ISO 9001:2015, or the Quality Management System (QMS), and
passed the surveillance audit for ISO 45001:2018 - Occupational Health and Safety (OH&S) Management System
and ISO 14001:2015 – Environmental Management (EM) System.

As of February 28, 2022, Davao Light’s total systems loss is at 8.32%. This included a feeder loss of 5.20%, which
is below the government-mandated feeder loss cap for 2022 of 5.50%.

Cotabato Light and Power Company (Cotabato Light)

Cotabato Light supplies electricity to Cotabato City and portions of the municipalities of Sultan Kudarat, and Datu
Odin Sinsuat, Maguindanao, with its franchise covering a land area of 191.20 sq. kms. Incorporated in April 1938,
Cotabato Light’s original 25-year franchise was granted by the Philippine Legislature through RA No. 3341 in June
1939. The most recent renewal of the franchise was in June 2014 for a period of 25 years, or until 2039.

Cotabato Light also maintains a standby 4.45-MW Bunker C-fired plant capable of supplying approximately 13.26%
of its franchise area requirements. The standby power plant, capable of supplying electricity in cases of supply
problems with its power suppliers or NGCP and for the stability of voltage whenever necessary, is another benefit
available to Cotabato Light’s customers.

Cotabato Light’s total systems loss as of February 28, 2022 is at 7.78%. This included a feeder loss of 6.04%. which
is above the government-mandated feeder loss cap in 2022 of 5.50%. Cotabato Light is continuously innovating
its strategies and processes to reduce its system losses.

21 ∙ SEC FORM 17-A (ANNUAL REPORT)

 As of February 28, 2022 AboitizPower directly owned a 99.94% equity interest in Cotabato Light.

San Fernando Electric Light & Power Co., Inc. (SFELAPCO)

SFELAPCO was incorporated on May 17, 1927 and was granted a municipal franchise in 1927. The most recent
renewal of its franchise was in March 2010 for a period of 25 years.

SFELAPCO’s franchise in the City of San Fernando, Pampanga covers an area of 78.514 sq. kms. and the
municipality of Floridablanca and Brgys. Talang and Ligaya, Municipality of Guagua, Pampanga with an estimated
area of 175.5 sq. kms. For 2021, SFELAPCO has a total of 276.2 MVA of substation capacity with a peak load of
146.5 MW including its 69kv customers.

SFELAPCO’s total systems loss as of February 28, 2022 was 5.27%. This included a feeder loss of 3.58% which is
below the government-mandated feeder loss cap in 2022 of 5.50%.

As of February 28, 2022, AboitizPower had an effective equity interest of 43.727% in SFELAPCO.

Subic Enerzone Corporation (Subic Enerzone)

On June 3, 2003, Subic Enerzone was incorporated as a Joint Venture owned by a consortium including Davao
Light, AEV, and SFELAPCO, among others, to undertake management and operation of the SBFZ power distribution
utility.

Subic Enerzone serves a total of 3,552 customers, consisting of 80 industrial locators, 1,293 commercial locators,
2,056 residential customers, 101 streetlights and 22 industrial locators under RES.

Subic Enerzone’s total systems loss as of February 28, 2022 was 3.87%. This included a feeder loss of 2.19%, which
is below the government-mandated feeder loss cap in 2022 of 5.50%.

As of February 28, 2022, AboitizPower owned, directly and indirectly through Davao Light, a 99.98% equity
interest in Subic Enerzone.

Mactan Enerzone Corporation (Mactan Enerzone)

Mactan Enerzone was incorporated in February 2007 when AboitizLand spun off the power distribution system
of its Mactan Export Processing Zone II (MEPZ II) project. The MEPZ II project, which was launched in 1995, was
operated by AboitizLand under a BOT agreement with the Mactan-Cebu International Airport Authority (MCIAA).

Mactan Enerzone sources its power from Green Core Geothermal Incorporated and Power Sector Asset and
Liabilities Management Corporation pursuant to the respective CSEE.

Mactan Enerzone serves a total of 47 captive industrial locators, 28 captive commercial locators, and 12 industrial
locators under RES.

Mactan Enerzone’s total system loss as of February 28, 2022 was 1.07%. This included a feeder loss of 0.48%,
which is below the government-mandated feeder loss cap for 2022 of 5.50%.

As of February 28, 2022, AboitizPower owned a 100% equity interest in Mactan Enerzone.

Balamban Enerzone Corporation (Balamban Enerzone)

Balamban Enerzone was incorporated in February 2007 when CIPDI, a Joint Venture between AboitizLand and
THC, spun off the power distribution system of the West Cebu Industrial Park – Special Economic Zone (WCIP-
SEZ). WCIP-SEZ is a special economic zone for light and heavy industries located in Balamban, Cebu.

Balamban Enerzone serves a total of ten captive industrial customers, 12 captive commercial customers, and six
contestable industrial customers.

22 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Balamban Enerzone’s total systems loss as of February 28, 2022 was 0.43%. This included a feeder loss of 0.17%,
which is below the government-mandated feeder loss cap for 2022 of 5.50%.

As of February 28, 2022, AboitizPower directly owned a 100% equity interest in Balamban Enerzone.

Lima Enerzone Corporation (Lima Enerzone)

Lima Enerzone was incorporated as Lima Utilities Corporation on June 5, 1997 to serve and provide locators
within the Lima Technology Center (LTC) with a reliable and stable power supply.

Lima Enerzone serves a total of 96 captive industrial locators, 18 captive commercial locators, 792 captive
residential customers, eight street lamps, and 25 industrial locators under RES.

As of February 28, 2022, Lima Enerzone’s total systems loss was 4.11%. This included a feeder loss of 0.70%,
which is below the government-mandated feeder loss cap for 2022 of 5.50%.

As of February 28, 2022, AboitizPower directly owned a 100% equity interest in Lima Enerzone.

Malvar Enerzone Corporation (Malvar Enerzone)

Malvar Enerzone was incorporated on June 9, 2017 to serve and provide locators within the Light Industry &
Science Park IV (LISP IV) in Malvar, Batangas. Malvar Enerzone will manage the operation and maintenance of
the power distribution of LISP IV for 25 years. LISP IV has two 50MVA transformers to provide reliable and
quality power to locators, which are mostly from manufacturers and exporters. Malvar Enerzone served a total
of five captive industrial locators, six captive commercial locators and two streetlights.

As of February 28, 2022, AboitizPower directly owned a 100% equity interest in Malvar Enerzone.

RETAIL ELECTRICITY AND OTHER RELATED SERVICES

One of the objectives of electricity reform in the Philippines is to ensure the competitive supply of electricity at the
retail level. With the start of commercial operations of Open Access, large-scale customers are allowed to obtain
electricity from RES licensed by ERC. Advent Energy, AESI, and Prism Energy are registered under the Renewable
Energy Market and were granted operating permits by the DOE, valid for five years, allowing them to participate in
the GEOP.

Aboitiz Energy Solutions, Inc. (AESI)

AESI is engaged in the business of a retail energy supplier and energy consolidator. It was granted a license to act
as a RES valid until October 28, 2022. The company was incorporated on August 11, 1998.

AESI served 42 customers at the start of commercial operations of Open Access on June 26, 2013. In 2021, AESI
supplied retail electricity to a total of 205 customers, with total energy consumption of 2,058.94 mn kWh. As of
February 28, 2022, AboitizPower owned a 100% equity interest in AESI.

Adventenergy, Inc. (AdventEnergy)

AdventEnergy was specifically formed to serve Contestable Customers who are located in economic zones. It was
granted a license to act as a RES valid until June 17, 2022. The company was incorporated on August 14, 2008.

AdventEnergy differentiates itself from competition by sourcing most of its electricity requirements from a
renewable source. As a result, an increasing number of companies are opting to source a part, if not the majority,
of their electricity supply from AdventEnergy as an environmental initiative.

In 2021, AdventEnergy supplied retail electricity to 109 customers with a total consumption of 1,562.86 mn kWh.

As of February 28, 2022, AboitizPower owned a 100% equity interest in AdventEnergy.

23 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Prism Energy, Inc. (Prism Energy)

Prism Energy was incorporated in March 2009 as a Joint Venture between AboitizPower and Vivant Corporation.
It was granted a license to act as a RES valid until May 22, 2022.

Prism Energy is envisioned to serve Contestable Customers in the Visayas region. As a RES, Prism Energy provides
its customers with contract options for electricity supply that is based on their operating requirements. In 2021,
Prism Energy supplied retail electricity to 53 customers with a total energy consumption of 182.10 mn kWh.

As of February 28, 2022, AboitizPower directly owned a 60% equity interest in Prism Energy.

SN Aboitiz Power – Res, Inc. (SN Aboitiz Power - RES)

SN Aboitiz Power-RES caters and offers energy supply and solutions tailored to the needs and preferences of
customers under the Retail Competition and Open Access (RCOA) market. Starting February 2021, the RCOA
market has lowered its threshold to Phase III, allowing electricity end-users with an average peak demand of at
least 500kW to source their electricity requirements from their RES of choice.

SN Aboitiz Power-RES is the retail arm of the SN Aboitiz Power Group. It caters to Contestable Customers and
electricity consumers using an average of at least 1 MW in the last twelve months across all industries under Open
Access. It offers energy supply packages tailored to its customers’ needs and preferences.

As of February 28, 2022, MORE owns a 60% equity interest in SN Aboitiz Power-RES, with the remaining 40%
owned by SN Power Philippines.

Mazzaraty Energy Corporation (Mazzaraty)

Mazzaraty was incorporated on June 19, 2014 as a joint venture among Aboitiz Power, Pasudeco Corporation,
L&R Development, Inc., and Alfecon Realty, Inc. It was granted a license to act as a RES until June 18, 2022.
Mazzaraty supplies retail electricity customers with a total consumption of 2,903,311 kWh in 2021.

As of February 28, 2022, AboitizPower owned 44.87% of Mazzaraty.

(ii) Sales

The operations of AboitizPower and its Subsidiaries and Affiliates are based only in the Philippines.

Comparative amounts of revenue, profitability and identifiable assets are as follows:

2021 2020 2019

Gross Income ₱134,359 ₱110,377 ₱125,635
Operating Income 28,210 26,880 28,856
Total Assets ₱427,416 ₱397,925 ₱410,469
Note: Values are in Million Pesos. Operating income is operating revenue net of operating expenses.

Comparative amounts of revenue contribution and corresponding percentages to total revenue by business
group are as follows:

2021 2020 2019

Power Generation ₱97,337 59% ₱74,647 55% ₱84,379 53%
Power Distribution 45,628 28% 42,991 32% 47,448 30%
Retail Electricity Supply 19,875 12% 16,477 12% 24,566 15%
Services 1,033 1% 1,308 1% 1,965 1%
Total Revenue 163,874 100% 135,423 100% 158,358 100%
Less: Eliminations -29,514 -25,046 -32,723
Net Revenue ₱134,359 ₱110,377 ₱125,635
Note: Values are in Million Pesos.

24 ∙ SEC FORM 17-A (ANNUAL REPORT)

 (iii) Distribution Methods of the Products or Services

Power Generation Business

The AboitizPower’s Generation Companies sell their capacities and energy through bilateral PSAs with private
distribution utilities, electric cooperatives, RES, other large end-users, and through the WESM. The Company
has Subsidiaries and Affiliates that sell ancillary services through ASPAs with NGCP. The majority of
AboitizPower’s Generation Companies have transmission service agreements with NGCP for transmission of
electricity to the Grid.

Distribution Utilities Business

Ancillary Services are necessary to help ensure a reliable and stable grid, which co-exist with the energy market
or WESM. NGCP signs ASPAs with AS-certified generators to fulfill specific ancillary service requirements per
grid. Currently, SN Aboitiz Power-Magat, SN Aboitiz Power-Benguet, TMI, TMO, TLI, APRI, Cebu Energy, and
WMPC have ASPAs with NGCP. In the Luzon grid, the SN Aboitiz Power Group delivers regulating, contingency,
and dispatchable reserves, blackstart service, and reactive power support through its Ambuklao, Binga, and
Magat Plants. TMO, on the other hand, is located at the load center in Metro Manila and serves the necessary
voltage support and dispatchable reserve. In addition, TLI’s Pagbilao and APRI’s Makban plants deliver
contingency reserves and Reactive Power Support AS, respectively. In the Visayas, AboitizPower delivers
Contingency Ancillary Service through Cebu Energy. TMI provides both contingency and dispatchable reserves
requirements in Mindanao. As a recent development to the Ancillary Service Contracting Process, it was
mandated by the DOE that AS will now undergo Competitive Selection Process (CSP), similar to Energy CSP. DOE
Department Circular No. DC 2021-10-0031 entitled “Prescribing the Policy for the Transparent and Efficient
Procurement of Ancillary Services by the System Operator”, details the provisions of the CSP which became
effective on October 29, 2021. This is a welcome development for a more transparent and efficient process and
AboitizPower intends to actively participate to fulfill the most-needed AS requirements across the nation.

In addition, the Hedcor Tudaya Hydro 2, Hedcor Irisan Hydro 1, Hedcor Sabangan, Hedcor Manolo Fortich 1 &
2, and Hedcor La Trinidad Hydro plants, all in commercial operations, have been approved for inclusion in the
FIT system. Hedcor, Hedcor Tudaya, Hedcor Sabangan, and Hedcor Bukidnon, the companies that own and
operate the foregoing plants, have entered into Renewable Energy Payment Agreement (REPA) with Transco,
in its capacity as FIT-Allowance (“FIT-All”) Administrator, for the collection and payment of the FIT.

In the absence of WESM in Mindanao, Tudaya Hydro 2, and Manolo Fortich Hydro 1 and 2 have entered into
Renewable Energy Supply Agreements (RESAs) with their host distribution utilities or electric cooperatives.

AboitizPower’s Distribution Utilities have exclusive distribution franchises in the areas where they operate. Each
Distribution Utility has a distribution network consisting of a widespread network of predominantly overhead
lines and substations. Customers are classified according to voltage levels based on their electricity
consumption and demand. Large industrial and commercial consumers receive electricity at distribution
voltages of 13.8 kV, 23 kV, 34.5 kV, and 69 kV, while smaller industrial, commercial, and residential customers
receive electricity at 240 V or 480 V.

With the exception of Malvar Enerzone, all of AboitizPower’s Distribution Utilities have entered into
transmission service contracts with NGCP for the use of NGCP’s transmission facilities to receive power from
PSALM to their respective independent power producers to their respective customers. All customers that
connect to the Distribution Utilities’ distribution lines are required to pay a tariff approved by ERC.

Retail Electricity Supply Business

AboitizPower’s wholly-owned RES companies, AdventEnergy and AESI, have existing electricity supply contracts
to ensure continuous supply of power to their customers. AdventEnergy and AESI maintain a portfolio of
energy-based supply contracts from renewable and non-renewable sources to secure reliable and affordable
electricity for its customers. These electricity supply contracts involve a mix of fixed rate and margin-based
electricity fees that are updated year on year to ensure that supply is maintained at competitive rates. Prism
Energy primarily serves contestable customers under the Visayan Electric franchise.

25 ∙ SEC FORM 17-A (ANNUAL REPORT)

 In addition, APRI and TLI were granted RES licenses in 2020 and became registered members of the Renewable
Energy Market last July 6, 2021.

(iv) New Products/Services

Other than the ongoing Greenfield and/or rehabilitation projects undertaken by AboitizPower’s Generation
Companies, AboitizPower and its Subsidiaries do not have any publicly announced new products or services as
of February 28, 2022.

(v) Competition

Power Generation Business

AboitizPower continues to face competition in both the development of new power generation facilities and
the acquisition of existing power plants. Competition for financing these activities, as well as the demand for
use of renewable energy sources, remains to be a challenge to AboitizPower’s growth and portfolio of assets.
The drastic increase in coal prices also puts coal fired power assets at a significant disadvantage in terms of
prices among competitors especially in the renewable space where prices are now more competitive and cost
is not affected by commodities.

As of February 28, 2022, consumption of power has returned to the pre-pandemic levels and in certain areas
has surpassed it. This, combined with the challenges in power supply across the country, means AboitizPower
is positioned to benefit from higher spot prices in the market by managing and maintaining the availability of
its power plants. AboitizPower also believes that the Philippines’ energy requirements will continue to grow as
the country develops, attracting many competitors, including multinational development groups and
equipment suppliers, to explore opportunities in power generation projects in the Philippines. Accordingly,
competition for and from new power projects may increase in line with the expected long-term economic
growth trajectory of the Philippines. With this opportunity, AboitizPower believes it is well-positioned to be
play a significant role in this growth expansion, and to capitalize on the growing renewable energy space with
its strategy to have 50% of its generating assets classified as renewable by the end of this decade, together with
the ability to meet long term baseload requirements.

Based on ERC Resolution No. 05, Series of 2021, there are over 30 players representing a total installed capacity
of 23,422 MW for the Philippine Grid. The largest is SMC Global Power (5,432 MW of installed capacity), a
Subsidiary of San Miguel Corporation. AboitizPower is the second largest generation company by attributable
installed capacity (3,882 MW). The third largest is First Gen Corporation (3,485 MW of installed capacity).

In particular, AboitizPower is expected to face competition from leading multinationals such as AES Corporation,
TeaM Energy, Electricity Generating Public Company Limited (EGCO) and Korea Electric Power Corporation, as
well as power generation facilities owned or controlled by Filipino-owned companies such as Global Business
Power Corporation, AC Energy, First Gen Corporation, DMCI Holdings, Inc., Meralco PowerGen Corporation, and
SMC Global Power.

With the commencement of retail competition, Open Access, and lowering of thresholds for contestability,
these foreign and local generation companies, and other independent RES players, have already set up their
own RES business, which include Direct Power RES, and Ecozone Power Management Inc. RES. Of these, the
largest player in terms of number of registered Contestable Customers is MPower RES. 5 The main strength of
this largest player is its association with the country’s largest distribution utility, Meralco, and the goodwill that
comes from its size and dominance.

Retail Electricity Supply Business

Based on ERC’s Competitive Retail Electricity Market Monthly Statistical Data as of December 2021, there are
44 RES companies and 28 Local RES companies participating in the Open Access markets in Luzon and Visayas.
The Meralco group has the largest market share at 37.43%, with a contracted capacity of 1,663.72 MW. Its main
strength is its affiliation as a subsidiary of the country’s largest distribution utility, Meralco, which has the

5 Based on ERC’s Competitive Retail Electricity Market Report released in December 2021.

26 ∙ SEC FORM 17-A (ANNUAL REPORT)

 financial and market strength, as well as goodwill, that comes from its size, long history, and dominance.
AboitizPower, through its RES companies, has the second-largest market share at 18.91%, 6 with contracted
capacity of 840.18 MW 7 as of December 2021. The San Miguel Group has the third largest market share at
15.83%, with a contracted capacity of 703.66 MW.

The increase in the number of power plants, the number of RES companies, and volatile oil and coal prices have
also increased the level of competition in the Open Access market. RES companies have resorted to both
aggressive pricing and contractual concessions.

AboitizPower believes that its portfolio, consisting of different types of energy sources with a mix of renewables
and non-renewables, allows it to be flexible in both pricing and reliability of supply, thus enhancing its
competitiveness.

Distribution Utilities Business

Each of AboitizPower’s Distribution Utilities currently have franchises to distribute electricity in the areas
covered by its franchises.

(vi) Sources of Raw Materials and Supplies

Power Generation Business

The Generation Companies produce energy using the following fuel types based on attributable net selling
capacity: 17% hydropower, 8% geothermal, 1% solar, 58% coal, and 16% oil. In 2021, renewable fuel sources
comprised 27% of attributable net selling capacity, while thermal accounted for 73%.

AboitizPower’s run-of-river hydropower facilities harness the energy from the flow of water from neighboring
rivers to generate electricity. The hydroelectric companies on their own, or through NPC as in the case of LHC,
possess water permits issued by National Water Resources Board (NWRB), which allow them to utilize the
energy from a certain volume of water from the applicable source of the water flow.

APRI’s steam requirement for its geothermal power generation continues to be supplied by PGPC. The terms of
the steam supply are governed by a Geothermal Resources Supply and Services Agreement. Under the
agreement, the price of steam is based on 50% of the Marketing Clearing Prices starting September 26, 2021.
Prior to this date, the price of steam was ultimately indexed to the Newcastle Coal Index and the Japanese
Public Utilities coal price. APRI and PGPC signed a new agreement on August 24, 2018 under which PGPC will
drill 12 new production wells with a minimum of 50 MW aggregated individual well capacity by 2023.

Oil-fired plants use heavy fuel oil and automotive diesel oil to generate electricity. SPPC and WMPC source fuel
from Pilipinas Shell Petroleum Corporation and Phoenix Petroleum, respectively. Each of EAUC, CPPC, TMI,
TMO, and TPVI secure its fuel oil requirements from Pilipinas Shell, Phoenix Petroleum, and/or PTT Philippines
Corporation. The fuel prices under these agreements are pegged to the Mean of Platts Singapore index.

TLI has long-term coal supply contracts for both the performance and blending coal requirements of Pagbilao
Units 1 and 2. Likewise, Pagbilao Unit 3 has a long-term contract until 2025 for the majority of its annual
requirement.

TVI entered into a long-term coal supply agreement with one of its established coal sources after its successful
test firing while a contract with a second source has been entered into at the end of 2021 for supply during
2022.

TSI has extended its contract with its main supplier up to 2023. It applies the same sourcing strategy as that of
TLI and TVI where evaluation of other potential coal sources is being conducted in order to establish the most
competitive and optimum fuel supply mix.

6 Excluding SFELAPCO which is 20.284% owned by AboitizPower.

7 Excluding SFELAPCO which is 20.284% owned by AboitizPower.

27 ∙ SEC FORM 17-A (ANNUAL REPORT)

 GNPD, GMEC, STEAG Power, and Cebu Energy also have long-term coal supply agreements.

Power Distribution Business

The rates at which the Distribution Utilities purchase electricity from affiliated Generation Companies are
established pursuant to bilateral agreements. These agreements are executed after the relevant Generation
Company has successfully bid for the right to enter into a PSA with a Distribution Utility. These agreements are
entered into on an arms’-length basis, on commercially reasonable terms, and must be approved by the ERC.
ERC’s regulations currently restrict AboitizPower’s Distribution Utilities from purchasing more than 50% of their
electricity requirements from affiliated Generation Companies.

To address long-term power supply requirements, Davao Light and Cotabato Light entered into 25-year Power
Supply Contracts (PSCs) with TSI for 100 MW and 5 MW, respectively, and started drawing their contracted
capacity in September 2015. In June 2016, Davao Light and TSI filed a Joint Manifestation with ERC stating that
they agreed to supplement and modify their supply contract to 108 MW.

In anticipation of higher demand and lower allocation from PSALM, Davao Light entered into a 10-year PSC with
San Miguel Consolidated Power Corporation (SMCPC) for a supply of 60MW in 2016. SMCPC began supplying
the 60-MW contracted capacity in February 2018. Davao Light also renewed its CSEE with PSALM for a period
of two years from 2021 to 2022 for 163 MW. To cover its peak demand requirement for 2018 to 2021, Davao
Light conducted a CSP for the Supply of 50MW which TMI won. Davao Light also addressed the projected
increase in load for 2020 by entering into an Emergency PSC with SMCPC for 50MW with a term of one year
while waiting for the commercial operations of the wholesale spot market in Mindanao.

To address long-term power supply requirements, Visayan Electric entered into a 25-year Electric Power
Purchase Agreement (EPPA) with Cebu Energy in October 2009 for the supply of 105 MW. In December 2010,
Visayan Electric signed a five-year PSA with GCGI for the supply of 60 MW at 100% load factor which was
extended for another ten years in October 2014. Visayan Electric also has 15-year PSA with TVI for the supply
of 150 MW beginning 2018.

Subic Enerzone conducted a CSP to reduce its WESM exposure. Masinloc Power Partners Co. Ltd. (MPPCL) won
the 10MW PSA starting December 26, 2021.

Similarly, Lima Enerzone conducted its own CSP as replacement to its expiring contract.TLI won the contract at
7MW for five years starting in May 2021.

Malvar Enerzone sources its power supply from WESM to meet the ecozone’s power requirements until its
electricity demand is stable.

The provisions of the Distribution Utilities’ PPAs are governed by ERC regulations. The main provisions of each
contract relate to the amount of electricity purchased, the price, including adjustments for various factors such
as inflation indexes, and the duration of the contract. Distribution Utilities also enter into PSAs with various
generation companies.

Transmission Charges

AboitizPower’s Distribution Utilities have existing Transmission Service Agreements (TSAs) with the NGCP for
the use of the latter’s transmission facilities in the distribution of electric power from the Grid to its
customers, which are valid until the dates specified below:

Distribution Utility Valid until

Lima Enerzone July 25, 2022
Cotabato Light August 25, 2023
SFELAPCO December 25, 2023
Davao Light January 25, 2024
Visayan Electric January 25, 2024

28 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Distribution Utility Valid until
Mactan Enerzone January 25, 2025
Balamban Enerzone January 25, 2025
Malvar Enerzone December 25, 2025

The Distribution Utilities have negotiated agreements with the NGCP in connection with the security deposit to
secure their obligations to the NGCP under the TSAs. Mactan Enerzone has already applied and submitted the
requirements for connection to the Grid.

(vii) Major Customers

Power Generation Business

As of February 28, 2022, out of the total electricity sold by AboitizPower’s Generation Companies,
approximately 91% is covered by bilateral contracts with, among others, private distribution utilities, electric
cooperatives, and industrial and commercial companies. The remaining, approximately 9%, is sold by the
Generation Companies through the WESM.

Retail Electricity Supply Business

As of February 28, 2022, AboitizPower’s RES business has approximately 308 Contestable Customers with active
contracts, from a wide number of industries, including property development, meat processing,
semiconductors, steel, and cement. AboitizPower thus believes that this diversity will insulate its RES business
from downturns in any one industry.

Power Distribution Utilities

AboitizPower’s Distribution Utilities have wide and diverse customer bases. As such, AboitizPower believes that
loss of any one customer is not expected to have a material adverse impact on the Company. The Distribution
Utilities’ customers are categorized into four principal categories:

(a) Industrial customers. Industrial customers generally consist of large-scale consumers of electricity
within a franchise area, such as factories, plantations, and shopping malls;
(b) Residential customers. Residential customers are those who are supplied electricity for use in a
structure utilized for residential purposes;
(c) Commercial customers. Commercial customers include service-oriented businesses, universities, and
hospitals; and
(d) Other customers. Customers not falling under any of the above categories.

Government accounts for various government offices and facilities are categorized as either commercial or
industrial depending on their load. Each Distribution Utility monitors government accounts separately and
further classifies them to local government accounts, national government accounts, or special government
accounts like military camps. Streetlights have a different rate category and are thus monitored independently.

(viii) Transactions with and/or Dependence on Related Parties

AboitizPower and its Subsidiaries (the “Group”), in their regular conduct of business, have entered into
transactions with Associates and other related parties principally consisting of professional and technical
services, power sales and purchases, advances, various guarantees, construction contracts, aviation services,
and rental fees. These are made on an arm’s-length basis as of the time of the transactions.

Details of the significant account balances of the foregoing related party transactions of the Group can be found
in the accompanying consolidated financial statements of the Company.

29 ∙ SEC FORM 17-A (ANNUAL REPORT)

 (ix) Patents, Copyrights, Franchises

AboitizPower and its Subsidiaries have secured all material permits required to operate its businesses. These
are further discussed below.

Generation Business

Power generation is not considered a public utility operation under RA No. 9136 or the Electric Power Industry
Act of 2001 (EPIRA). Thus, a franchise is not needed to engage in the business of power generation.
Nonetheless, no person or entity may engage in the generation of electricity unless such person or entity has
secured a COC from ERC to operate a generation facility and has complied with the standards, requirements,
and other terms and conditions set forth in the said COC.

In its operations, a generation company is required to comply with technical, financial and environmental
standards. It shall ensure that facilities connected to the Grid meet the technical design and operation criteria
of the Philippine Grid Code, Philippine Distribution Code, and Philippine Electrical Code. It shall also conform
with financial standards and comply with applicable environmental laws, rules and regulations.

Cotabato Light has its own generation facilities and is required under the EPIRA to obtain a COC. Davao Light’s
generation facility was decommissioned last November 26, 2018. For IPPAs such as TLI, the COCs issued to the
IPPs of the relevant generation facilities are deemed issued in favor of the IPPAs. As such, the IPPAs are also
bound to comply with the provisions of the Philippine Grid Code, Philippine Distribution Code, WESM rules, and
applicable rules and regulations of ERC.

AboitizPower’s HEPPs are required to obtain a water permit from NWRB for the water flow used to run their
respective hydroelectric facilities. The permit specifies the source of the water, the allowable water volume,
and the terms and conditions of its use. The water permit has no expiration date.

AboitizPower, its Subsidiaries, and Affiliates are in various stages of development of several projects. Some of
these projects have been awarded renewable energy service contracts by DOE.

The Generation Companies and Cotabato Light, a Distribution Utility, possess COCs for their power generation
plants, details of which are enumerated in the attached Annex “B”.

Distribution Business

Under EPIRA, the business of electricity distribution is a regulated public utility business that requires a franchise
that can be granted only by Congress. In addition to the legislative franchise, a CPCN from ERC is also required
to operate as a public utility. However, distribution utilities operating within economic zones are not required
to obtain a franchise from Congress, but must be duly registered with PEZA in order to operate within the
economic zone.

All distribution utilities are required to submit to ERC a statement of their compliance with the technical
specifications prescribed in the Philippine Distribution Code, which provides the rules and regulations for the
operation and maintenance of distribution systems, and the performance standards set out in the implementing
rules of the EPIRA.

Shown below are the respective expiration periods of the Distribution Utilities’ legislative franchises:

Distribution
Franchise Term Expiry
Utility
25 years from effectivity of RA
RA No. 9339 No. 9339. RA No. 9339 was
approved on Sept. 1, 2005.
Visayan Valid until
Electric ERC Certificate No. CPCN-09-01 September 24, 2030
25 years, or from September 24,
(ERC Decision dated January 26,
2005 to September 24, 2030
2009, ERC Case No. 2008-095 MC).

30 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Distribution
Franchise Term Expiry
Utility
25 years from effectivity of RA
RA No. 8960 No. 8960, or from September 7,
2000
September 7, 2025
ERC CPCN Decision dated February 25 years, or from September 7,
26, 2002, ERC Case No. 2001-792 2000 to September 7, 2025
Davao Light
25 years from expiration of the
term granted under RA No. 8960,
Valid until
RA No. 11515 or from September 7, 2025 to
September 7, 2050
September 7, 2050 (Lapsed into
law on December 26, 2020)
25 years from the effectivity of
RA No. 10637, as amended. RA
RA No. 10637
No. 10637 was approved on June
Valid until June 16,
Cotabato Light 16, 2014.
2039
ERC Certificate No. CPCN-14-001
25 years, or from June 17, 2014
(ERC Decision dated December 9,
or until June 16, 2039
2019, ERC Case No. 2013-063 MC)
25 years from effectivity of RA
RA No. 9967 No. 9967 (Lapsed into law on
Feb. 6, 2010) Valid until March 23,
SFELAPCO
ERC Certificate No. CPCN-10-01 2035
25 years, or from March 24, 2010
(ERC Decision dated August 31,
to March 23, 2035
2010, ERC Case No. 2010-029 MC)
Distribution Management Service
Notarized on May 15,
Subic Agreement (DMSA) between Subic Valid until May 15,
2003. Term of the DMSA is 25
Enerzone Enerzone and Joint Venture of 2028.
years.
AEV- Davao Light

Mactan Enerzone, Balamban Enerzone, Lima Enerzone, and Malvar Enerzone which operate the power
distribution utilities in MEPZ II, WCIP, LTC, and LISP IV respectively, are duly registered with PEZA as Ecozone
Utilities Enterprises.

Retail Electricity Supply Business

Like power generation, the business of supplying electricity is not considered a public utility operation under
EPIRA, but is considered a business affected with public interest. As such, EPIRA requires all suppliers of
electricity to end-users in the contestable market, other than distribution utilities within their franchise areas,
to obtain a license from ERC. With the implementation of Open Access in 2013, AboitizPower’s RES Subsidiaries
and Generation Companies with RES licenses, AESI, AdventEnergy, APRI, SN Aboitiz Power – Magat, SN Aboitiz
Power – RES, Prism Energy, and TLI, have all obtained separate licenses to act as RES and Wholesale Aggregator.

Trademarks

AboitizPower and its Subsidiaries own, or have pending applications for the registration of, intellectual property
rights for various trademarks associated with their corporate names and logos. The following table sets out
information regarding the trademark applications the Company and its Subsidiaries have filed with the
Philippine Intellectual Property Office (Philippine IPO), and their pending trademark applications abroad.

Philippine IPO

Registration No./
Trademarks/ Description Owner Status
Date Issued
4-2010-004383/ November 11, 2010
“A Better Future” word mark Aboitiz Power
Registered
(Class Nos. 39, 40 and 42) Corporation Trademark was renewed on November
11, 2020.

31 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Registration No./
Trademarks/ Description Owner Status
Date Issued
4-2010-004384/ November 11, 2010
“Better Solutions” word mark Aboitiz Power
Registered
(Class Nos. 39, 40 and 42) Corporation Trademark was renewed on November
11, 2020.
4-2010-004385/ November 11, 2010
“AboitizPower” word mark Aboitiz Power
Registered
(Class Nos. 39, 40 and 42) Corporation Trademark was renewed on November
11, 2020.
4-2010-004380/ February 10, 2011
“AboitizPower Spiral and Device” device
Aboitiz Power
mark with color claim Registered
Corporation Trademark was renewed on February 10,
(Class Nos. 39, 40 and 42)
2021.
4-2001-007900/ January 13, 2006
Aboitiz Power
“Cleanergy” word mark (Class No. 40) Registered
Corporation Trademark was renewed on January 13,
2016.
“Cleanergy” word mark for the
Aboitiz Power
additional goods and services (Class 4-2019-000850/ June 9, 2019 Registered
Corporation
Nos. 39 and 42)
4-2010-004381/ November 11, 2010
“Cleanergy Get It and Device” device
Aboitiz Power
mark with color claim Registered
Corporation Trademark was renewed on November
(Class Nos. 39, 40 and 42)
11, 2020.
4-2010-004382/ November 11, 2010
“Cleanergy Got It and Device” device Aboitiz Power
Registered
mark (Class Nos. 39, 40 and 42) Corporation Trademark was renewed on November
11, 2020.
4-2010-004379/ February 10, 2011
“AboitizPower and Device” device mark
Aboitiz Power
with color claim (Class Nos. 39, 40 and Registered
Corporation Trademark was renewed on February 10,
42)
2021.
4-2006-007306/ August 20, 2007
Subic EnerZone Corporation and Logo Subic EnerZone
Registered
trademark (Class No. 39) Corporation Trademark was renewed on August 20,
2017.
4-2006-007305/ August 20, 2007
Subic EnerZone Corporation and Logo Subic EnerZone
Registered
Word mark and device (Class No. 39) Corporation Trademark was renewed on August 20,
2017.
4-2006-007304/ June 4, 2007
“Subic EnerZone Corporation” word Subic EnerZone
Registered
mark (Class No. 39) Corporation Trademark was renewed on June 4,
2017.
Cotabato Light
“Cotabato Light” Logo (Class No. 39) and Power 4-2019-502915/ October 20, 2019 Registered
Corporation
Davao Light and
“Davao Light” Logo (Class No. 39) Power 4-2019-502917/ October 20, 2019 Registered
Corporation
Balamban
“Balamban Enerzone” Logo (Class No.
Enerzone 4-2019-502910/ February 10, 2020 Registered
39)
Corporation
Mactan
“Mactan Enerzone” Logo (Class No. 39) Enerzone 4-2019-502911/ February 20, 2020 Registered
Corporation
Lima Enerzone
“Lima Enerzone” Logo (Class No. 39) 4-2019-502912/ February 10, 2020 Registered
Corporation
Malvar
“Malvar Enerzone” Logo (Class No. 39) Enerzone 4-2019-502913/ February 10, 2020 Registered
Corporation

32 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Registration No./
Trademarks/ Description Owner Status
Date Issued
Subic Enerzone
“Subic Enerzone” Logo (Class No. 39) 4-2019-502914/ October 20, 2019 Registered
Corporation
Visayan Electric
“Visayan Electric” Logo (Class No. 39) 4-2019-015288/ December 29, 2019 Registered
Company, Inc.
Manila-Oslo
“MORE” Logo (Class 35) Renewable 4-2018-00018077/February 21, 2019 Registered
Enterprise, Inc.
Manila-Oslo
Renewable
Enterprise, Inc.,
“SN ABOITIZ POWER” Logo GROUP SN Aboitiz
4-2018-00018076/ February 5, 2019 Registered
(Class 35 & 40) Power-Magat,
Inc., and SN
Aboitiz Power-
Benguet, Inc.
SN Aboitiz
“SN ABOITIZ POWER-BENGUET, INC.”
Power-Benguet, 4-2014-00005209/ December 29, 2016 Registered
Logo
Inc.
SN Aboitiz
“SNAP ABOITIZ POWER-MAGAT, INC.”
Power-Magat, 4-2014-00005208/ March 9, 2017 Registered
Logo
Inc.
SN Aboitiz
Power-Magat, 4-2017-00018969/ June 7, 2018 Registered
Logo Inc.

International Trademarks (Non-Madrid Protocol)

AboitizPower has the following registered international trademarks:

Trademarks Country of Application

Cleanergy Indonesia
AboitizPower Myanmar
Aboitiz Power and Device Myanmar
Cleanergy Myanmar
Cleanergy Get It Myanmar
Cleanergy Got It Myanmar

The abovementioned trademarks are also in the process of being registered in Malaysia.

International Trademarks Application (Madrid Protocol)

AboitizPower has the following registered international trademarks from applications under the Madrid
Protocol:

Trademarks Country of Application

AboitizPower Word Mark (Class Nos. 39, 40, 42) World Intellectual Property Office (WIPO)
AboitizPower A Better Future (Class Nos. 39, 40, 42) Vietnam
Cleanergy Word Mark (Class Nos. 39, 40, 42) WIPO
Cleanergy Get It Device (Class Nos. 39, 40, 42) WIPO
Cleanergy Get It Device (Class Nos. 39, 40, 42) Vietnam
Cleanergy Got It Device (Class Nos. 39, 40, 42) WIPO

AboitizPower also has the following pending international trademark applications under the Madrid
Protocol:

33 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Trademarks Country of Application
AboitizPower Word Mark (Class Nos. 39, 40, 42) Vietnam
AboitizPower Word Mark (Class Nos. 39, 40, 42) Indonesia
AboitizPower A Better Future (Class Nos. 39, 40, 42) WIPO
AboitizPower A Better Future (Class Nos. 39, 40, 42) Indonesia
Cleanergy Word Mark (Class Nos. 39, 40, 42) Vietnam
Cleanergy Get It Device (Class Nos. 39, 40, 42) Indonesia
Cleanergy Got It Device (Class Nos. 39, 40, 42) Vietnam
Cleanergy Got It Device (Class Nos. 39, 40, 42) Indonesia

(x) Government Approvals

The discussion on the need for any government approval for any principal products or services of the Company
and its Subsidiaries, including COCs obtained by the Generation Companies and franchises obtained by the
Distribution Utilities, is included in item (ix) Patents, Copyrights and Franchises.

(xi) Effect of Existing or Probable Government Regulations on the Business

AboitizPower and its Subsidiaries are subject to the laws generally applicable to all Philippine corporations, such
as corporation law, securities law, tax laws, and the Local Government Code. All Philippine corporations are
also subject to labor laws and social legislation, including RA No. 11199 or the Social Security Act of 2018, RA
No. 10606 or the National Health Insurance Act of 2013, RA No. 11223 or the Universal Health Care Act, RA No.
9679 or the Home Development Mutual Fund Law of 2009, The Philippine Labor Code and its implementing
rules, and other labor-related laws, regulations, and Department of Labor and Employment (DOLE) mandated
work-related programs.

The Aboitiz Group closely monitors its compliance with the laws and government regulations affecting its
businesses.

1. The Tax Reform for Acceleration and Inclusion (TRAIN Law)

RA No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (“TRAIN Law”) was signed
into law by President Duterte on December 19, 2017, and took effect on January 1, 2018. Its declared policies
are to: (a) enhance the progressivity of the tax system through the rationalization of the Philippine internal
revenue tax system, thereby promoting sustainable and inclusive economic growth; (b) provide, as much as
possible, an equitable relief to a greater number of taxpayers and their families in order to improve levels of
disposable income and increase economic activity; and (c) ensure that the government is able to provide better
infrastructure, health, education, jobs, and social protection for the people.

One of the major provisions of the TRAIN Law is the staggered increase in oil and coal excise taxes. Under the
TRAIN Law, rates will be adjusted gradually between 2018 and 2020. For coal, the rates will increase from ₱10
per metric ton to ₱50, ₱100, and ₱150 per metric ton, respectively, in 2018, 2019, and 2020, covering both
domestic and imported coal.

Furthermore, the TRAIN Law repeals Section 9 of RA No. 9511 or the National Grid Corporation of the Philippines
Act, which removes VAT exemptions on transmission charges and sale of electricity by cooperatives duly
registered under the Cooperative Development Authority.

Another major change introduced by the TRAIN Law is the refund mechanism of zero-rated sales and services
under the enhanced Value Added Tax (VAT) refund system. Upon the successful establishment and
implementation of an enhanced VAT refund system, refunds of creditable input tax shall be granted by the BIR
within 90 days from filing of the VAT refund application with BIR, provided that all pending VAT refund claims
of the taxpayer as of December 31, 2017 shall be fully paid in cash by December 31, 2019.

Finally, the TRAIN Law doubled the documentary stamp tax (DST) on almost all covered instruments, except
debt instruments where the increase is 50%. Only the DST on instruments pertaining to property insurance,
fidelity bonds, other insurance, indemnity bonds, and deeds of sale and conveyance remain unchanged.

34 ∙ SEC FORM 17-A (ANNUAL REPORT)

 The TRAIN law is the first package of the Comprehensive Tax Reform Program of the Duterte administration.

2. Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Act)

RA No. 11534, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises (“CREATE”) Act,
was signed into law by President Duterte on March 26, 2021 and took effect on April 1, 2021. The law seeks to
reform the country’s fiscal incentives to make it performance-based, targeted, time-bound, and transparent.
This means that incentives will be granted based on the number and quality of jobs that will be created, the
investments made on research and development and skills training, the capital invested for countrywide
infrastructure development, among other criteria.

The salient features of the CREATE Act are as follows:

(a) Effective July 1, 2020, lowering the income tax rate to 25% for domestic corporations and foreign
corporations, and to 20% for domestic corporations with net taxable income not exceeding P5 mn and with
total assets (excluding land) of not more than P100 mn;
(b) Lowering the Minimum Corporate Income Tax rate to 1% effective July 1, 2020 to June 30, 2023;
(c) Tax exemption on foreign-sourced dividends subject to certain conditions;
(d) Repeal of the Improperly Accumulated Earnings Tax;
(e) Repeal of the 5% Gross Income Tax (“GIT”) incentive and providing for a ten-year transitory period for all
firms that are currently availing of the 5% GIT;
(f) Providing fiscal incentives for activities included in the Strategic Investment Priority Plan, provided that the
category of incentives shall be based on the location and industry of the registered project or activity; and
(g) Granting the President the power to modify the mix, period, or manner of availment of incentives or craft
a financial support package for a highly desirable project or a specific industrial activity.

The CREATE Act is the second package of the Comprehensive Tax Reform Program of the Duterte
Administration. On June 21, 2021, the Department of Finance (DOF) and the Department of Trade and Industry
(DTI) signed the implementing rules and regulations (IRR) of the CREATE Act.

The lower income tax provided by the CREATE Act will generate substantial amounts of tax savings to the
Company and its subsidiaries which were under the 30% tax regime prior to the effectiveness of the said law.
While some of the subsidiaries have been availing of incentives under special laws which have been repealed
by the CREATE Act, the law provides for sunset provisions by (i) allowing the entities granted with income tax
holiday to enjoy it until it expires and (ii) granting subsidiaries who enjoyed income tax holiday and are entitled
to the 5% gross income earned (“GIE”) incentive after their income tax holiday the benefit to continuously avail
of the 5% GIE rate for the next ten years

3. Revised Corporation Code

The Revised Corporation Code was signed into law on February 20, 2019 and took effect on February 23, 2019.
Among the salient features of the Revised Corporation Code are:

(a) Corporations are granted perpetual existence, unless the articles of incorporation provide otherwise.
Perpetual existence shall also benefit corporations whose certificates of incorporation were issued before
the effectivity of the Revised Corporation Code, unless a corporation, upon a vote of majority of the
stockholders of the outstanding capital stock notifies SEC that it elects to retain its specific corporate term
under its current articles of incorporation.

(b) A corporation vested with public interest must submit to its shareholders and to SEC an annual report of
the total compensation of each of its directors or trustees, and a director or trustee appraisal or
performance report and the standards or criteria used to assess each director, or trustee.

Banks, quasi-banks, pawnshops, non-stock savings and loan associations, and corporations engaged in
money service business, preneed trust and insurance companies, and other financial intermediaries, must
have at least 20% independent directors in the Board, in accordance with the Securities and Regulation
Code. This requirement also applies to other corporations engaged in businesses imbued with public

35 ∙ SEC FORM 17-A (ANNUAL REPORT)

 interest, as may be determined by the SEC. To date, SEC has not issued a definition of what businesses are
considered ‘imbued with public interest’.

(c) Material contracts between a corporation and its own directors, trustees, officers, or their spouses and
relatives within the fourth civil degree of consanguinity or affinity must be approved by at least two-thirds
(2/3) of the entire membership of the Board, with at least a majority of the independent directors voting
to approve the same.

SEC Circular No. 10-2019 provides for the rules for material related party transactions (RPT) of publicly-
listed corporations. These rules regulate RPTs amounting to 10% or higher of a company’s total assets.
Compliance with these rules is mandatory for all publicly-listed companies.

(d) Allowing the creation of a “One Person Corporation” (OPC) except for banks and quasi-banks, preneed,
trust, insurance, public and publicly-listed companies, among others. This restriction also applies with
respect to close corporations.

(e) The right of stockholders to vote in the election of directors or trustees, or in shareholders meetings, may
now be done through remote communication or in absentia if authorized by the corporate by-laws. This
manner of voting is deemed available for stockholders of corporations vested with public interest, even if
not expressly stated in the corporate bylaws. The shareholders who participate through remote
communication or in absentia are deemed present for purposes of quorum. When attendance,
participation and voting are allowed by remote communication or in absentia, the notice of meetings to
the stockholders must state the requirements and procedures to be followed when a stockholder or
member elects either option.

SEC has issued several circulars implementing this provision, as follows:

(i) Memorandum Circular No. 3-2020 on Notice of the Regular Meeting of Stockholders - A written notice
of regular meetings of stockholders shall be sent at least 21 days before the meeting and must contain
all information and deadlines relevant to a shareholders’ participation in the meeting and exercise of
the right to vote remotely;
(ii) SEC Memorandum No. 6-2020 on the Guidelines on the Attendance and Participation of Directors,
Trustees, Stockholders, Members, and Other Persons of Corporations in Regular and Special Meetings
through Teleconferencing, Video Conferencing, and Other Remote or Electronic Means of
Communication - Stockholders may now participate in their respective meetings and vote, whether
by remote communication or in absentia. The corporation shall also issue its own internal procedures
and mechanics for voting via remote communication or in absentia;
(iii) SEC Memorandum Circular No. 14-2020. - Allows stockholders who, alone or together, own at least
5% of outstanding capital stock of a publicly-listed company to include items in the agenda prior to a
regular or special stockholders’ meeting;
(iv) SEC Memorandum Circular No. 7-2021. - Provides that stockholders holding at least 10% of the
outstanding capital stock of a publicly-listed corporation has the right to call for a special stockholders’
meeting. The purpose must affect the legitimate interest of stockholders but should not include the
removal of any director.

(f) A favorable recommendation by the appropriate government agency is required for banks or banking
institutions, building and loan associations, trust companies, insurance companies, public utilities, and
other corporations governed by special laws, before the SEC approves any merger or consolidation; or any
voluntary dissolution involving these entities.

(g) In case of transfer of shares of listed companies, the SEC may require that these corporations whose
securities are traded in trading markets and which can reasonably demonstrate their capability to do so, to
issue their securities or shares of stock in uncertificated or scripless form in accordance with the Rules of
the SEC.

The Revised Corporation Code refers to the Philippine Competition Act in case of covered transactions under
said law involving the sale, lease, exchange, mortgage, pledge, or disposition of properties or assets; increase

36 ∙ SEC FORM 17-A (ANNUAL REPORT)

 or decrease in the capital stock; incurring creating or increasing bonded indebtedness; or mergers or
consolidations covered by the Philippine Competition Act thresholds.

4. The Philippines Competition Act

Pursuant to Bayanihan 2 Act, which was signed into law on September 11, 2020, all mergers and acquisitions
with transaction values below ₱50 bn shall be exempt from compulsory notification under the Philippine
Competition Act if entered into within a period of two years from the effectivity of Bayanihan 2 Act. As of
September 14, 2021, mergers and acquisitions entered into during the effectivity of the Bayanihan 2 Act are
already subject to the PCC motu proprio review power.

Any voluntary notification shall constitute a waiver to the exemption from review. With the Bayanihan 2 Act,
the thresholds are as follows:

New Threshold
Test (effective September 15, 2020
until September 22, 2022)
Size of Party Test ₱50 bn
Size of Transaction Test ₱50 bn

This means that the value of the assets or revenues of the UPE of at least one of the parties must exceed ₱50
bn instead of ₱6 bn. The UPE is the entity that, directly or indirectly, controls a party to the transaction, and is
not controlled by any other entity. In addition, the value of the assets or revenues of the acquired, target or
merged entity must exceed ₱50 bn instead of ₱2.4 bn. Both thresholds must be breached in order for the
compulsory notification requirement to apply.

5. Amended Foreign Investments Act of 1991 (Amended FIA)

On March 2, 2022, President Duterte signed into law RA No 11647, “An Act Promoting Foreign Investments,
Thereby Amending Republic Act 7042 Otherwise Known as the Foreign Investments Act of 1991, as Amended
and For Other Purposes.” (the “Amended FIA”). The law aims to attract foreign investments in activities which
contribute to sustainable economic growth, global competitiveness, employment creation, technical
advancement, and countrywide development.

Under this law, foreign nationals are now allowed to engage in a domestic market enterprise with a minimum
capital requirement of US$100,000.00 provided that the enterprise: (a) utilizes advanced technology as
determined by the Department of Science and Technology; (b) endorsed as a start-up or start-up enabler under
RA No. 11337 or the Innovating Startup Act; or (3) composed of a majority of Filipino employees, which shall
not be less than 15. Other salient features of the Amended FIA include: (a) a required understudy or skills
development program by registered foreign enterprises to ensure skills and technology transfer to Filipinos; (b)
allowing 100% foreign investment in a domestic enterprise unless participation of foreigners is limited to a
smaller percentage; and (c) allowing 100% foreign investment in an export enterprise provided that the
products or services do not fall under the Foreign Investments Negative List.

6. Amended Public Service Act (Amended PSA)

On March 10, 2020, the House of Representatives passed House Bill No. 78 (HB No. 78) that made a distinction
between the definition of “public service” from “public utility” as defined under Commonwealth Act No. 146 or
the Public Service Act, in effect allowing foreigners to fully own public services in the Philippines since, under
the 1987 Philippine Constitution, only firms that are at least 60% owned by Filipinos are given the authorization,
certificate, and franchise to operate as a public utility.

HB No. 78 has limited the definition of a public utility to any person or entity that operates, manages, or controls
for public use the (i) distribution of electricity, (ii) transmission of electricity, (iii) water pipeline distribution, and
(iv) sewerage pipeline.

37 ∙ SEC FORM 17-A (ANNUAL REPORT)

 On December 16, 2021, the Philippine Senate passed the equivalent Senate Bill No. 2094 (SB No. 2094) that
limited the definition of a public utility as any person or entity that operates, manages, or controls for public
use the (i) distribution of electricity, (ii) transmission of electricity, (iii) petroleum and petroleum products
pipeline transmission, (iv) water and wastewater pipeline distribution systems, (v) airports, (vi) seaports, (vii)
public utility vehicles, and (viii) expressways and tollways.

On February 2, 2022, the Bicameral Committee ratified the reconciled version of House Bill No. 78 and Senate
Bill No. 2094, which excluded the following from the definition of a public utility, effectively removing the 40%
foreign ownership cap under the 1987 Philippine Constitution of: (i) telecommunications, (ii) domestic shipping,
(iii) railways and subways, (iv) airlines, (v) expressways and tollways, and (vi) airports. The reconciled version
was signed into law by President Rodrigo R. Duterte as RA 11659 on March 21, 2022.

7. Data Privacy Act of 2012

The Data Privacy Act of 2012 is a comprehensive and strict privacy legislation aimed to protect the fundamental
human right of privacy by: (i) protecting the privacy of individuals while ensuring free flow of information; (ii)
regulating the collection, recording, organization, storage, updating or modification, retrieval, consultation, use,
consolidation, blocking, erasure, or destruction of personal data; and (iii) ensuring that the country complies
with international standards set for data protection through the National Privacy Commission.

Intended to protect the privacy of individuals, it mandates companies to inform individuals about their basic
rights to privacy and how their personal information is collected and processed. It also ensures that all personal
information must be: (i) collected and processed with lawful basis, which includes consent, and only for reasons
that are specified, legitimate, and reasonable; (ii) handled properly, ensuring its accuracy and retention only for
as long as reasonably needed; and (iii) discarded properly to avoid access by unauthorized third parties.

Its implementing rules and regulations (the “Data Privacy Act IRR”) took effect on September 9, 2016, mandating
all Philippine companies to comply with the following: (i) appointment of a Data Protection Officer; (ii) conduct
of a privacy impact assessment; (iii) adoption of a privacy management program and privacy policy; (iv)
implement privacy and data protection measures; and (v) establish a breach reporting procedure. In addition,
companies with at least 250 employees or access to sensitive personal information of at least 1,000 individuals
are required to register their data processing systems with the National Privacy Commission. The Data Privacy
Act IRR furthermore provides the only instances when data sharing is allowed, to wit: (a) data sharing is
authorized by law, provided that there are adequate safeguards for data privacy and security, and processing
adheres to principles of transparency, legitimate purpose and proportionality; (b) in the private sector, data
sharing for commercial purposes is allowed upon: (i) consent of data subject, and (ii) when covered by a data
sharing agreement; (c) data collected from parties other than the data subject for purpose of research shall be
allowed when the personal data is publicly available; and (d) data sharing among government agencies for
purposes of public function or provision of a public service shall be covered by a data sharing agreement.

In 2017, AboitizPower launched its data privacy compliance program which is aligned to the implementation of
the Information Security Management System (ISMS) for the entire Aboitiz Group. This includes the
development and implementation of Data Privacy policies, manuals, supporting guidelines, and procedures.
Since then, AboitizPower and its Business Units have been able to establish a fundamental awareness of data
privacy principles and the related ISMS philosophies, through various learning channels. The Company
maximized the use of e-learning modules, online training platforms, and webinars during the COVID-19
pandemic to minimize the need for physical meetings.

In 2020, AboitizPower rolled out an integrated 1AP Incident Management process, which provides uniform
governance across its Business Units on: (a) incident notification, (b) assessment, (c) resolution, (d) verification
and stand-down, (e) evidence handling, (f) post-event investigation, (g) business recovery, and (h) incident
wrap-up. It includes, among other incident types, information security and data privacy breaches. AboitizPower
builds and continues to improve business continuity resilience, especially with regard to Information Security
and Data Breach Management.

AboitizPower’s Data Privacy Statement has been updated in 2021 and shared in its official website. This this
statement, the Company declares its commitment toward fair and legal processing of personal data.

38 ∙ SEC FORM 17-A (ANNUAL REPORT)

 8. Registration under Board of Investments (BOI)

Under Executive Order (EO) No. 226, otherwise known as the Omnibus Investments Code, as amended, a BOI-
registered enterprise enjoy certain incentives, both financial and non-financial, provided such enterprise invests
in preferred areas of investment enumerated in the Investment Priorities Plan annually prepared by the
Government. However, prior to registration with BOI, the enterprise must first satisfy the minimum equity
required to finance the project applied equivalent to 25% of the estimated project cost, or as may be prescribed
by BOI. Such incentives include: (i) income tax holiday; (ii) exemption from taxes and duties on imported spare
parts; (iii) exemption from wharfage dues and export tax, duty, impost and fees; (iv) reduction of the rates of
duty on capital equipment, spare parts and accessories; (v) tax exemption on breeding stocks and genetic
materials; (vi) tax credits; (vii) additional deductions from taxable income; (viii) employment of foreign
nationals; (ix) simplification of customs procedure; and (x) unrestricted use of consigned equipment.

9. Labor Laws

The Philippine Labor Code and other statutory enactments provide the minimum benefits that employers must
grant to their employees, which include certain social security benefits, such as benefits mandated by the Social
Security Act of 1997 (RA No. 8282), the National Health Insurance Act of 1995 (RA No. 7875), as amended, and
the Home Development Fund Law of 2009 (RA No. 9679). On the other hand, the Occupational Safety and Health
Law (RA No. 11058) reinforces the existing Occupational Safety and Health Standards, which sets out, among
others, the guidelines applicable to different establishments intended for the protection of every working man
against the dangers of injury, sickness or death through safe and healthful working conditions.

DOLE is the Philippine government agency mandated to implement policies, programs and services, and serves
as the policy-coordinating arm of the executive branch in the field of labor and employment. The DOLE has
exclusive authority in the administration and enforcement of labor and employment laws, such as the Labor
Code of the Philippines and the Occupational Safety and Health Law and Standards, and such other laws as
specifically assigned to it or to the Secretary of the DOLE.

(a) Social Security System, PhilHealth and the Pag-IBIG Fund

An employer or any person who uses the services of another person in business, trade, industry or any
undertaking is required under the Social Security Act of 2018 (RA No. 11199) to ensure coverage of
employees following procedures set out by the law and the Social Security System (“SSS”). Under the said
law, an employer must deduct from its employees their monthly contributions in an amount corresponding
to his salary, wage, compensation or earnings during the month in accordance with the monthly salary
credits, the schedule and the rate of contributions as may be determined and fixed by the Social Security
Commission, pay its share of contribution and remit these to the SSS within a period set by law and/or SSS
regulations. This enables the employees or their dependents to claim their pension, death benefits,
permanent disability benefits, funeral benefits, sickness benefits and maternity-leave benefits.

Employers are likewise required to ensure enrolment of its employees in a National Health Insurance
Program administered by the Philippine Health Insurance Corporation, a government corporation attached
to the Department of Health tasked with ensuring sustainable, affordable and progressive social health
insurance pursuant to the provisions of RA No. 10606, the National Health Insurance Act of 2013.

On February 20, 2019, the Universal Health Care Act (RA No. 11223), was enacted, which amended certain
provisions of the National Health Insurance Act of 2013. Under the said law, all Filipino citizens are now
automatically enrolled into the National Health Program. However, membership is classified into two types,
direct contributors and indirect contributors. Direct contributors refer to those who have the capacity to
pay premiums, are gainfully employed and are bound by an employer-employee relationship, or are self-
earning, professional practitioners, migrant workers, including their qualified dependents, and lifetime
members. On the other hand, indirect contributors refer to all others not included as direct contributors,
as well as their qualified dependents, whose premium shall be subsidized by the national government
including those who are subsidized as a result of special laws. Every member is also granted immediate
eligibility for health benefit package under the program.

39 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Under the Home Development Mutual Fund Law of 2009 (RA No. 9679), all employees who are covered by
SSS must also be registered with and covered by the Home Development Mutual Fund (HDMF, more
commonly referred to as the “Pag-IBIG Fund”). It is a national savings program as well as a fund to provide
for affordable shelter financing to Filipino workers. Except for foreign expatriates, coverage under the
HDMF is compulsory for all SSS members and their employers. Under the law, an employer must deduct
and withhold 2% of the employee’s monthly compensation, up to a maximum of ₱5,000.00, and likewise
make a counterpart contribution of 2% of the employee’s monthly compensation, and remit the
contributions to the HDMF.

(b) The Labor Code

The Philippine Labor Code provides that, in the absence of a retirement plan provided by their employers,
private-sector employees who have reached 60 years of age or more, but not beyond 65 years of age, the
compulsory retirement age for private-sector employees without a retirement plan, and who have
rendered at least five years of service in an establishment, may retire and receive a minimum retirement
pay equivalent to one-half month’s salary for every year of service, with a fraction of at least six months
being considered as one whole year. For the purpose of computing the retirement pay, “one-half month’s
salary” shall include all of the following: fifteen days’ salary based on the latest salary rate; in addition, one-
twelfth of the thirteenth month pay and the cash equivalent of five days of service incentive leave pay.
Other benefits may be included in the computation of the retirement pay upon agreement of the employer
and the employee or if provided in a collective bargaining agreement.

(c) Occupational Safety and Health Law

The Occupational Safety and Health Law (RA No. 11058) was signed into law on August 17, 2018. It applies
to all private establishments alike, requiring them, among others, to furnish workers with a place of
employment free from hazardous conditions causing or are likely to cause death, illness, or physical harm,
and to comply with the Occupational Safety and Health standards, including training, medical examination
and the necessary protective and safety devices, such as personal protective equipment.

Other Labor-Related Laws and Regulations

(d) Contracting and Subcontracting

The Labor Code recognizes subcontracting arrangements, whereby a principal puts out or farms out with
a contractor the performance or completion of a specific job, work or service within a definite or
predetermined period, regardless of whether such job, work or service is to be performed or completed
within or outside the premises of the principal. Such arrangements involve a “trilateral relationship”
among: (i) the principal who decides to farm out a job, work or service to a contractor; (ii) the contractor
who has the capacity to independently undertake the performance of the job, work, or service; and (iii)
the contractual workers engaged by the contractor to accomplish the job, work, or service.

The DOLE, through its Department Order No. 174, Series of 2017, regulates subcontracting arrangements
by requiring, among others, the registration of contractors with the Regional Office of the DOLE where it
principally operates.

(e) DOLE Mandated Work-Related Programs

Under the Comprehensive Dangerous Drugs Act (RA No. 9165), a national drug abuse prevention program
implemented by the DOLE must be adopted by private companies with ten or more employees. For this
purpose, employers must adopt and establish company policies and programs against drug use in the
workplace in close consultation and coordination with the DOLE, labor and employer organizations, human
resource development managers and other such private sector organizations. DOLE Department Order
No. 53-03 sets out the guidelines for the implementation of Drug-Free Workplace policies and programs
for the private sector.

40 ∙ SEC FORM 17-A (ANNUAL REPORT)

 The employer or the head of the work-related, educational or training environment or institution, also has
the duty to prevent or deter the commission of acts of sexual harassment and to provide the procedures
for the resolution, settlement or prosecution of such cases in accordance with the Safe Spaces Act (RA No.
9165), which was signed into law on April 17, 2019.

Moreover, DOLE Department Order No. 102-10 requires all private workplaces to have a policy on HIV and
AIDS and to implement a workplace program in accordance with the Philippines AIDS Prevention and
Control Act. The workplace policies aim to manage sensitive issues, such as confidentiality of medical
information and continuation of employment for HIV-positive staff, and to avoid the discrimination of any
employee due to HIV/AIDS. Any HIV/AIDS-related information of workers should be kept strictly
confidential and kept only on medical files, whereby access to it is strictly limited to medical personnel.

All private workplaces are also required to establish policies and programs on solo parenting, Hepatitis B,
and tuberculosis prevention and control. In line with the Mental Health Act (RA No. 11036), employers are
further required to develop policies and programs on mental health in the workplace designed to: raise
awareness on mental health issues, correct the stigma and discrimination associated with mental health
conditions, identify and provide support for individuals at risk, and facilitate access to treatment and
psychosocial support.

Policies and Regulations Relating to the Power Industry

1. WESM in Mindanao

On May 4, 2017, the DOE issued Department Circular No. DC 2017-05-0009 entitled “Declaring the Launch of
WESM in Mindanao and Providing Transition Guidelines”. This DOE Circular took effect on June 7, 2017, with
the following pertinent provisions:

(a) Establishment of Mindanao WESM Transition Committee, which will be one of the committees under the
PEMC Board;
(b) Launch of WESM in Mindanao on June 26, 2017, with the commencement of full commercial operations
dependent on various conditions precedent, including installation of metering facilities, approval of the
Price Determination Methodology by ERC, and trial operations of the WESM, among others;
(c) Conduct of the Trial Operation Program for the WESM;
(d) Automatic termination of IMEM; and
(e) Implementation of an Interim Protocol to govern the dispatch and scheduling of power generation plants,
while the WESM is still not operational.

WESM in Mindanao was originally targeted to start in October 2018, but was deferred because some conditions
precedent for full commercial operations were not yet complied. Trial operations were conducted starting 2018
to ensure the readiness of eventual WESM participants in Mindanao. DOE has released a draft Department
Circular initially announcing December 26, 2021 as the target commercial operation date with transition
provisions and conditions. As of February 28, 2022, WESM Mindanao is still not commercially operating.

2. Independent Electricity Market Operator (IEMOP)

On February 4, 2018, DOE issued Department Circular No. DC2018-01-0002, setting the policy governing the
establishment of an independent market operator (IMO) of the WESM. The policy on IMO outlines the
mandates of DOE and ERC over the IMO, its guiding principles, composition, including a board composed of at
least five members, its functions, WESM’s new governing and governance structure, and the conditions for
transition.

The IMO transition plan called for the formation of a new company called the IEMOP as an independent market
operator, with PEMC remaining as WESM’s governing body. Previously, the PEMC oversaw both the operations
and governance functions of WESM. The transition also entails the reconstitution of the PEMC Board, with the
DOE Secretary relinquishing his chairmanship, paving the way for a PEMC independent of government.

41 ∙ SEC FORM 17-A (ANNUAL REPORT)

 On September 26, 2018, IEMOP formally took over operations of the WESM from PEMC. IEMOP facilitates the
registration and participation of generating companies, distribution utilities, directly connected customers or
bulk users, suppliers and contestable customers in the WESM. It also determines the hourly schedules of
generating units that will supply electricity to the Grid, as well as the corresponding spot-market prices of
electricity via its Market Management System.

Currently, the IEMOP is under legislative review by the House Committee on Energy specifically on its roles and
functions as well as the legal basis for its establishment. This is in response to several House Resolutions calling
for the review of the IEMOP in aid of legislation.

On October 22, 2020, the DOE promulgated Department Circular No. DC2020-10-0021, which adopted
amendments to the WESM Rules for the implementation of an Independent Market Operator.

3. Proposed Amendments to the EPIRA

Since the enactment of the EPIRA in 2001, members of Congress have proposed various amendments to the law
and its IRR. A summary of the significant proposed amendments are as follows:

(a) Classification of power projects as one of national significance and imbued with public interest;
(b) Exemption from VAT on the sale of electricity by generation companies;
(c) Modification of the definition of the term "Aggregator," which is proposed to refer to a person or entity
engaged in consolidating electric power demands of end-users of electricity in the contestable market, for
the purpose of purchasing, reselling, managing for optimum utilization of the aggregated demand, or
simply pooling the tendering process in looking for a supply of electricity on a group basis;
(d) Requirement for distribution utilities to conduct public and competitive selection processes or Swiss
challenges for the supply of electricity and to fully or adequately contract their future and current energy
and demand requirements;
(e) Grant of access to electric cooperatives over the missionary electrification fund collected through universal
charges;
(f) Exclusion of the following items from the rate base charged by Transco and distribution utilities to the
public: corporate income tax, value of the franchise, value of real or personal property held for possible
future growth, costs of over-adequate assets and facilities, and amount of all deposits as a condition for
rendition and continuation of service;
(g) Regulation of generation, transmission, distribution, and supply rates to allow Return-on-Rate-Base (RORB)
up to 12%;
(h) Classification of power generation and supply sectors as public utilities, which would be required to secure
legislative franchises;
(i) Prohibition of cross-ownership between generation companies and distribution utilities or any of their
subsidiaries, affiliates, stockholders, officials or directors, or the officials, directors, or other stockholders
of such subsidiaries or affiliates, including the relatives of such stockholders, officials or directors within
the fourth civil degree of consanguinity;
(j) Prohibition against or restriction on distribution utilities from sourcing electric power supply requirements,
under bilateral electric power supply contracts, from a single generation company or from a group of
generating companies wholly-owned or controlled by the same interests;
(k) Lowering of the allowable extent of ownership, operation and control of a company or related groups as
determined from the installed generating capacity of the Grid and/or nationally installed generating
capacity;
(l) Exemption or deferral of the privatization of some assets of NPC, such as the Unified Leyte (Tongonan)
Geothermal Complexes, Agus, and Polangui Complexes, and Angat Dam;
(m) Expansion of the definition of host communities to include all barangays, municipalities, cities and
provinces or regions where hydro generation facilities are located and where waterways or water systems
that supply water to the dam or hydroelectric power generating facility are located;
(n) Prohibition on distribution utilities, except rural electric cooperatives to recover systems losses and placing
a 5% cap on recoverable system loss;
(o) Imposition of a uniform franchise tax for distribution utilities equivalent to 3% of gross income in lieu of all
taxes;
(p) Grant of authority for NPC to generate and sell electricity from remaining assets;

42 ∙ SEC FORM 17-A (ANNUAL REPORT)

 (q) Removal of the requirement of a joint congressional resolution before the President may establish
additional power generating capacity in case of imminent shortage of supply of electricity
(r) Creation of a consumer advocacy office under the organizational structure of ERC; and
(s) Extension of lifeline rates.

As of February 28, 2022, the proposed amendments are still pending in Congress.

4. Implementation of the Performance-based Rating-setting Regulation (PBR)

On December 13, 2006, ERC issued the Rules for Setting Distribution Wheeling Rates (RDWR) for privately-
owned distribution utilities entering Performance-based Regulation (PBR) for the second and later entry points,
setting out the manner in which this new PBR rate-setting mechanism for distribution-related charges will be
implemented. PBR replaces the RORB mechanism, which has historically determined the distribution charges
paid by customers. Under PBR, the distribution-related charges that distribution utilities can collect from
customers over a four-year regulatory period is set by reference to projected revenues which are reviewed and
approved by ERC and used by ERC to determine the distribution utility’s efficiency factor. For each year during
the regulatory period, the distribution utility’s distribution-related charges are adjusted upwards or downwards
taking into consideration the utility’s efficiency factor as against changes in overall consumer prices in the
Philippines.

ERC has also implemented a Performance Incentive Scheme (PIS) whereby annual rate adjustments under PBR
will take into consideration the ability of a distribution utility to meet or exceed service performance targets set
by ERC, such as the: (a) average duration of power outages; (b) average time of restoration to customers; and
(c) average time to respond to customer calls, with utilities being rewarded or penalized depending on their
ability to meet these performance targets.

The second regulatory period of Cotabato Light ended on March 31, 2013, while that of Visayan Electric and
Davao Light ended on June 30, 2014. In addition, the second regulatory period of Subic Enerzone and SFELAPCO
ended on September 30, 2015. The reset process for the subsequent regulatory period, however, has been
delayed due to the issuance by ERC in 2013 of an Issues Paper on the Implementation of PBR for distribution
utilities under RDWR. Said paper aims to revisit various matters relating to the reset process. ERC has solicited
comments from industry participants and has been holding public consultations on the Issues Paper.

On December 22, 2015, Matuwid na Singil sa Kuryente Consumer Alliance, Inc. (MSK) filed a petition for
rulemaking entitled In the Matter of Petition for Rules Change in Rate Setting Methodology for Distribution
Wheeling Rate - Repeal of the Performance- Based Rate Making (PBR) Regulation and Return to Previous Return-
on-Rate-Base (RORB) with Modification, docketed as ERC Case No. 2015-008RM. Public consultations were held
on various dates in Metro Manila, Cebu, and Davao. ERC also conducted Power 101 and PBR briefing sessions
to various other consumer groups who said that they cannot intelligently comment on the PBR rules without
understanding the concepts.

Through ERC Resolution No. 25 Series of 2016 dated July 12, 2016, ERC adopted the Resolution Modifying the
RDWR for Privately Owned Distribution Utilities Entering PBR. Based on said Resolution, the Fourth Regulatory
Period shall be as follows:

(a) Cotabato Light: April 1, 2017 to March 31, 2021

(b) Davao Light and Visayan Electric: July 1, 2018 to June 30, 2022
(c) SEZ and SFELAPCO: October 1, 2019 to September 30, 2023

On November 21, 2016, ERC posted for comments the draft Regulatory Asset Base (RAB) Roll Forward Handbook
for Privately Owned Electricity Distribution Utilities. Public consultations were conducted on said document.

The reset process for the fourth regulatory period has not yet started for all private distribution utilities as the
abovementioned ERC rules have not been published yet for its effectivity.

In June 2019, ERC posted for comments its draft Rules for Setting Distribution Wheeling Rates and Issues Paper
for the Regulatory Reset of the First Entry Group (Meralco, Cagayan de Oro Electric and Dagupan
Electric). Various public consultations were held in the month of July 2019. However, during the July 29, 2019

43 ∙ SEC FORM 17-A (ANNUAL REPORT)

 PBR public consultation, MSK called the attention of ERC to act first on its 2015 petition on rate methodology
before proceeding with the reset process. ERC issued its Decision dated September 24, 2020 on MSK’s petition
denying its petition to revert to RORB, without prejudice to its right to submit its comments in the revision of
the rules during the next rate reset process of the distribution utilities.

Due to the rules change on PBR, all AboitizPower Distribution Utilities have not undergone regulatory reset
starting from the third regulatory period. In January 2020, ERC requested private distribution utilities to submit
actual or historical expenditure covering the lapsed period. Due to the lockdown and quarantine restrictions, as
well as unresolved clarifications as to what has to be provided to the ERC raised by the distribution utilities to
the ERC through clarificatory meetings, private distribution utilities were not able to provide the data within the
timeframe given by ERC.

In relation to this, the ERC issued show cause orders, all dated October 29, 2020, against Cotabato Light
(docketed as ERC Case No. 2020-097 SC), Visayan Electric (docketed as ERC Case No. 2020-098 SC), Davao Light
(docketed as ERC Case No. 2020-104 SC), and Subic Enerzone (docketed as ERC Case No. 2020-107 SC),
requesting the foregoing distribution utilities to explain why they should not be penalized for the incomplete
submission of the data requested by the ERC for its actual expenditure review. On January 7, 2021, the foregoing
distribution utilities submitted their respective explanations, including a manifestation that all required data
has been submitted as of December 29, 2020. ERC has yet to resolve these cases. If found liable, penalty for
violation is P50,000.00 per distribution utilities, pursuant to ERC Resolution No. 03, series of 2009.

On December 2, 2021, the ERC issued Resolution No. 10, series of 2021, modifying the Rules for Setting the
Distribution Wheeling Rates (RDWR) for private distribution utilities, and Resolution No. 11, series of 2021,
adopting a Regulatory Asset Base (RAB) Roll Forward Handbook. The RDWR and the RAB Handbook as
adopted in these resolutions shall be applied in the next regulatory reset of AboitizPower Distribution
Utilities.

5. ERC Regulation on Systems Loss Cap Reduction

In April 2018, ERC issued Resolution No. 10, Series of 2018 entitled “A Resolution Clarifying the System Loss
Calculation Cap and Providing the Effectivity of the Rules for Setting the Distribution Loss Cap”. This set of rules
provide for the new Distribution System Loss (DSL) cap that can be recovered and charged by distribution
utilities to its customers, beginning in the May 2018 billing period.

Under the ERC resolution, the DSL cap for private utilities was set at 6.5% for 2018, 6.25% for 2019, 6.00% for
2020, and 5.50% for 2021. The aforementioned caps are exclusive of sub-transmission and substation
losses. The aforementioned rules also provide for a performance incentive scheme (PIS), which is a price-linked
reward for distribution utilities, with the goal of reducing the DSL passed on to customers and to promote
efficiency in distribution systems in the long term.

The rules allow distribution utilities to use an alternative method in determining an individualized DSL cap that
it shall apply subject to the approval of ERC. The individualized cap has two components: one for technical loss
(determined using load flow simulations on the distribution utilities’ reference distribution system) and another
for non-technical loss (which represents the level of non-technical loss that minimizes the costs to consumers).
In determining the reasonable level of the individualized DSL cap, costs and benefits must be analyzed from the
viewpoint of the customer.

In 2018, Cotabato Light filed an Application for the Individualized Distribution System Loss Cap, requesting,
among others, that it be exempted from the 6.5% cap pending the filing and approval of its application for
Individualized DSL cap of 7.48% in Technical Loss and 1.77% in Non-Technical Loss and sought approval to use
the previous 8.5% DSL cap instead. The case is still pending with ERC as of February 28, 2022.

In December 16, 2021, ERC issued Resolution No. 12, Series of 2021 entitled “A Resolution Clarifying the
Applicable Distribution Feeder Loss Cap for Private Distribution Utilities by 2022 Onwards”. The said Resolution
amended the Distribution Feeder Loss Cap stated in ERC Resolution No. 10, series of 2018, maintaining the
2021 Distribution Feeder Loss Cap of 5.50% for the year 2022 onwards until such time that a new feeder loss
cap is promulgated by the ERC.

44 ∙ SEC FORM 17-A (ANNUAL REPORT)

 6. Competitive Selection Process

Department Circular No. DC2015-06-0008 (the “2015 DOE Circular”), which took effect upon its publication on
June 30, 2015, mandates all distribution utilities to undergo CSPs in securing PSAs after the effectivity of the
said circular. The 2015 DOE Circular also authorized ERC to adopt a set of guidelines for the implementation of
the CSP.

On October 20, 2015, ERC issued Resolution No. 13, Series of 2015, entitled, “A Resolution Directing All
Distribution Utilities (DUs) to Conduct a Competitive Selection Process (CSP) in the Procurement of their Supply
to the Captive Market” (the “ERC CSP Rules”). This resolution provides that a PSA shall be awarded to a winning
Generation Company following a competitive selection process or by direct negotiation, after at least two failed
CSPs. For PSAs which were already executed but were not yet filed with the ERC and those that were still in the
process of negotiation during the time of the effectivity of the ERC CSP Rules, the relevant distribution utility
already had to comply with the CSP requirement before its PSA application would be accepted by the ERC. The
ERC CSP Rules took immediate effect following its publication on November 7, 2015.

ERC Resolution 13, Series of 2015, was restated in ERC Resolution No. 1, Series of 2016, entitled, “A Resolution
Clarifying the Effectivity of ERC Resolution No. 13, Series of 2015.” ERC Resolution No. 1, Series of 2016,
extended the date of the effectivity of the CSP requirement from November 7, 2015 to April 30, 2016. It further
stated that all PSAs executed on or after the said date would be required, without exception, to comply with
the provisions of the ERC CSP Rules.

On February 1, 2018, DOE promulgated DC No. DC2018-02-0003 (the “2018 DOE Circular”) entitled “Adopting
and Prescribing the Policy for the Competitive Selection Process in the Procurement by the Distribution Utilities
of Power Supply Agreements for the Captive Market.” Through this Circular, DOE issued its own set of guidelines
(the “DOE CSP Rules”) for the procurement by distribution utilities of PSAs for the Captive Market.

Under the DOE CSP Rules, all PSAs shall be procured through CSP, except for the following instances: (1)
generation project owned by the distribution utility funded by grants or donations; (2) negotiated procurement
of emergency power supply; (3) provision of power supply by any mandated Government-Owned and
Controlled Corporation for off-grid areas prior to, and until the entry of New Power Providers (NPP); and (4)
provision of power supply by the PSALM through bilateral contracts. A PSA may also be entered into by direct
negotiation if the CSP fails twice. The DOE CSP Rules took effect upon its publication on February 9, 2018.

The validity of ERC CSP Rules and ERC Resolution No. 1, Series of 2016, was challenged before the SC on the
ground that ERC, in issuing the said resolutions, amended the 2015 DOE Circular and effectively postponed the
date of effectivity of the CSP requirement. Consequently, on May 3, 2019, the SC in the case of Alyansa Para sa
Bagong Pilipinas, Inc. v. ERC (G.R. No. 227670), declared the first paragraph of Section 4 of the ERC CSP Rules
and ERC Resolution No. 1, Series of 2016, as void ab initio. The SC further ruled that all PSAs submitted to ERC
on or after June 30, 2015 shall comply with the CSP and that upon compliance with the CSP, the power purchase
cost resulting from such compliance shall retroact to the date of the effectivity of the complying PSA, but in no
case earlier than June 30, 2015, for purposes of passing on the power purchase cost to the consumers.

On September 24, 2021, the DOE promulgated Department Circular No. DC-2021-09-0030, amending the 2018
DOE Circular on the Competitive Selection Process in the Procurement by the Distribution Utilities of Power
Supply Agreement for the Captive Market. The new circular included a new exemption from the CSP process
and introduced a mechanism of subjecting unsolicited proposals to competitive bidding. The Circular was
published on October 14, 2021 and was effective on October 29, 2021.

7. Adopting a General Framework Governing the Provision and Utilization of Ancillary Services in the Grid

On December 4, 2019, DOE issued Department Circular No. DC2019-12-0018 entitled “Adopting a General
Framework governing the utilization of Ancillary Services (AS) in the Grid” (“AS Circular”). The policy seeks to
ensure the reliability, quality and security of the supply of electricity by adhering to principles that will provide
the safe and reliable operation of the grid by taking into account the entry of emerging technologies and the
intermittency of variable renewable energy generating resources.

Included in the policy is the creation of an Ancillary Services Technical Working Group (AS-TWG) that will render

45 ∙ SEC FORM 17-A (ANNUAL REPORT)

 technical assistance and advice to DOE in developing further policies on AS. One of the main functions of the
AS-TWG is to review the Philippine Grid Code (PGC) (2016 edition) to address issues on the implementation of
new AS categories and Primary Response requirement. Section 5 of the circular required the System Operator
to ensure optimal procurement of the required Ancillary Services.

Pending the harmonization of AS-related issuances and review of the relevant provisions of PGC 2016, the
classification and required levels of AS shall be in accordance with the AS categories prior to PGC 2016.

According to the AS Circular, prior to the commercial operation of the Reserve Market, the SO shall ensure
compliance with its obligation to procure the required level and specifications of AS in line with the following:

(a) Regulating, Contingency, and Dispatchable Reserves shall be procured through firm contracts only;
(b) Reactive Power Support AS and Black Start AS shall be procured through firm contracts only; and
(c) The protocol for the central scheduling of energy and contracted reserves in the WESM shall still apply, in
accordance with the WESM Rules and relevant Market Manuals.

Upon the commercial operation of the Reserve Market, the following rule shall govern the procurement of AS:

(a) SO shall procure Regulating, Contingency, and Dispatchable Reserves through firm contracts and the
Reserve Market provided that the contracted levels per reserve region shall be as follows:
(i) Regulating Reserve - Equivalent to 50% of the Regulating Reserve requirement;
(ii) Contingency Reserve - Equivalent to 50% of the dependable capacity of the largest generating unit;
(iii) Dispatchable Reserve - Equivalent to 50% of the dependable capacity of the second largest
generating unit.

On June 21, 2021, the DOE issued an “Advisory on the Implementation of Department of Energy (DOE) Circular
No. DC2019-12-0018”. The advisory directed the NGCP to expedite the procurement of the required AS in
accordance with Department Circular No. DC2019-12-0018, and to convert NGCP’s non-firm ASPAs into firm
ASPAs.

On May 13, 2021, the DOE promulgated Department Circular No. DC2021-03-0009 entitled “Adopting a General
Framework Governing the Operationalization of the Reserve Market in the Wholesale Electricity Spot Market
and Providing Further Policies to Supplement DC2019-12-00178”. The policy mandates the SO to ensure
adequate and least cost procurement of AS through combination of AS contract and the reserve market.

On October 4, 2021 the DOE issued Department Circular No. DC2021-10-0031 for the Transparent and Efficient
Procurement of Ancillary Services (AS CSP) by the System Operator (SO) that pushed a process similar to the
CSP for Distribution Utilities, but this time for AS to be procured, for all non-firm ASPA be converted to ASPA,
and that the Market Operator (MO) can step in to help SO to avoid delays.

8. Ancillary Services Pricing and Cost Recovery Mechanism

Reserves are forms of ancillary services that are essential to the management of power system security. The
provision of reserves facilitates orderly trading and ensures the quality of electricity.

On December 2, 2014, DOE issued Circular No. 2014-12-0022, otherwise known as the Central Scheduling and
Dispatch of Energy and Contracted Reserves. The circular aims to prepare the market participants in the
integration of ancillary reserves into the WESM. The ancillary service providers will be paid based on their
respective ASPAs with NGCP, while the scheduling of capacity and energy will be based on market results.

On September 14, 2018, NGCP filed a Petition seeking the Commission’s approval of its proposed amendments
to the Ancillary Services – Cost Recovery Mechanism, docketed as ERC Case No. 2018-005 RM. Currently, the
existing cost-recovery mechanism for Ancillary Services shall continue to be implemented until a new
mechanism is recommended by the AS-TWG and adopted by ERC.

On February 8, 2022, the ERC posted its call for comments on the Draft Ancillary Services Rules (AS Rules) under
ERC Case Nos. 2017-005 RM and 2018-005 RM with submission deadline of February 22, 2022. It has forwarded
again the transition to its new types and definitions of Ancillary Services, with its own specifications and

46 ∙ SEC FORM 17-A (ANNUAL REPORT)

 technical requirements, a percentage of procurement of AS, for testing be done only by the SO, and a cost
recovery mechanism.

9. Energy Efficiency and Conservation Act

RA No. 11285 or the Energy Efficiency and Conservation Act (“EEC”) was signed into law on April 12, 2019. Apart
from prescribing efficient use of energy standards and labeling requirements for energy-consuming products,
EEC establishes certain obligations on the part of energy consumers who reach a certain annual energy
consumption threshold (“designated establishments”). These obligations include, among others, reporting to
the DOE of annual energy consumption, and energy consumption record keeping.

Under the law, all government agencies, including government-owned corporations, are directed to ensure the
efficient use of energy in their respective offices, facilities, transportation units, and in the discharge of their
functions. DOE will also be authorized to develop a Minimum Energy Performance standard for the commercial,
industrial, and transport sectors, and energy-consuming products including appliances, lighting, electrical
equipment, and machinery, among others. DOE is also tasked to prescribe labeling rules for all energy-
consuming products, devices, and equipment.

DOE will develop and enforce a mandatory energy efficiency rating and labeling system for energy-consuming
products, such as air conditioners, refrigeration units, and television sets, to promote energy-efficient
appliances and raise public awareness on energy saving. The law also calls for fuel economy performance
labeling requirements for vehicle manufacturers, importers, and dealers. LGUs are tasked to implement the
Guidelines on Energy Conserving Design on Buildings for the construction of new buildings.

Under the Energy Efficiency and Conservation Act’s IRR dated November 22, 2019, DOE can visit designated
establishments to inspect energy-consuming facilities, evaluate energy-management systems and procedures,
identify areas for efficiency improvement, and verify energy monitoring records and reports and other
documents related to the compliance requirements within office hours and with an authorized representative
of the establishment present. The IRR also calls for the commissioning of a certified conservation officer and
energy manager to ensure compliance and be responsible for managing energy consumption, administering
programs, and other responsibilities under the law.

Other Department Circulars promulgated by the DOE in relation to the Energy Efficiency and Conservation Act
are as follows:

(a) Department Circular No. DC2020-06-0015 “Prescribing the Guidelines of the Philippine Energy Labeling
Program (PELP) for Compliance of Importers, Manufacturers, Distributors and Dealers of Electrical
Appliances and other Energy-Consuming Products (ECP)”, which aims to empower consumers in choosing
energy efficient products at the point of sale, help realize energy savings and reduction of energy
consumption/bills through the use of energy efficient products; and reduce greenhouse gas emissions.
(b) Department Circular No. DC2020-06-0016 “Prescribing the Minimum Energy Performance for Products
(MEPP) covered by the Philippine Energy Labeling Program (PELP) for Compliance of Importers,
Manufacturers, Distributors, Dealers and Retailers of Energy-Consuming Products)”, which aims to
eliminate the entry and sale of inefficient and substandard products in the local market; and reduce
greenhouse gas emissions;
(c) Department Order No. 2020-01-0001 “Organizing the Inter-Agency Energy Efficiency and Conservation
Committee (IAEECC)”;
(d) Department Circular No. DC2020-12-0026 “Adoption of the Guidelines for Energy Conserving Design of
Buildings”, aims to encourage and promote the energy conserving design of buildings and their services to
reduce the use of energy with due regard to the cost effectiveness, building function, and comfort, health,
safety, and productivity of the occupants; and
(e) Department Circular No. DC2021-05-0011 “Guidelines for the Endorsement of Energy Efficient Projects
to the Board of Investments for Fiscal Incentives”, establishes the rules and procedures in the
endorsement of energy efficiency projects to avail fiscal incentives from the BOI.

47 ∙ SEC FORM 17-A (ANNUAL REPORT)

 10. Energy Virtual One-Stop Act

RA No. 11234 or the Energy Virtual One-Stop Shop Act (“EVOSS Act”) was signed into law by President Duterte
on March 8, 2019 and became effective on March 29, 2019. DOE issued the IRR on June 24, 2019. Under the
EVOSS Act, prospective power generation, transmission, or distribution companies can apply, monitor, and
receive all the necessary permits, and even pay for charges and fees, through the online platform called Energy
Virtual One-Stop Shop (EVOSS) once it takes effect, cutting down the lengthy permitting process for the
development of power projects. The DOE already began the implementation of the EVOSS Online Platform.

The EVOSS Online Platform applies to all new generation, transmission, and distribution projects throughout
the country as well as government agencies and other relevant entities involved in the permitting process. The
system provides a secure and accessible online processing system; recognizes the legal effect, validity, and
enforceability of submitted electronic documents; and develops an online payment system for all fees for
securing permits or certifications. The system enables government agencies involved in pending power projects
to operate under a streamlined permitting process utilizing a uniform application template and in compliance
with mandated processing timelines as identified in the law. The entire system utilizes electronic documents
and monitors permit status via an online system.

On June 5, 2020, DILG-DOE Joint Memorandum Circular 2020-01 or the Guidelines for LGUs to Facilitate the
Implementation of Energy Projects was published. The Guidelines direct the streamlining by LGUs of their
processes in issuing the necessary permits for energy-related projects, in accordance with the energy
regulatory reforms provided in the EVOSS Law.

On July 2, 2021, President Rodrigo Duterte created the Energy Virtual One-Stop Shop Task Group through
Executive Order No. 143, to ensure the increasing operationalization of the EVOSS.

11. Net Metering

The DOE promulgated Department Circular No. DC 2020-10-0022 or the Net Metering Program for Renewable
Energy System, which aims to encourage and further promote electricity End-Users’ participation in the Net
Metering Program by enhancing the current policies and commercial arrangements while ensuring the
economic and technical viability of the distribution utility.

Pertinent provisions include:

(a) Banking of Net-Metering Credits - All Net Metering Credits shall be banked for a maximum of one calendar
year. Any excess of balance Net-Metering credits at the end of each calendar year shall be forfeited.
(b) Application to Off-Grids or Isolated Grid Systems - The Net Metering Program for End-User shall be allowed
even in areas not connected to the country’s three major national electrical transmission grids.
(c) Publication of Hosting Capacities for Net-Metering - The Distribution Utilities shall publish in their website
the respective Net-Metering programs, processes, and procedures, including hosting capacities on a per
feeder or sector basis.
(d) Responsibility of the LGUs - All LGUs are enjoined to strictly comply with the provisions of EVOSS Law, RA
No. 11032 (Ease of Doing Business and Efficient Government Service Delivery Act of 2018) in processing
permits and licenses related to applications for Net-Metering arrangements.
(e) Responsibility of the National Electrification Administration (NEA) - The NEA shall provide the necessary
assistance in promoting the Net-Metering Program to all electric cooperatives nationwide.
(f) Development of Net Metering Guidebook - A guidebook on procedures and standards shall be developed
by the DOE to be used by all stakeholders. The Renewable Energy Management Bureau shall prepare the
Net Metering Guidebook, within six months from the effectiveness of this circular.

The foregoing Net Metering Program became effective on December 18, 2020. A draft of Net Metering
Guidebook was already sent out for comments on April 2021 and AboitizPower is monitoring its publishing.

48 ∙ SEC FORM 17-A (ANNUAL REPORT)

 12. Reliability Performance Indices

On December 16, 2020, the ERC published on its website Resolution No. 10, Series of 2020, entitled "A
Resolution Adopting the Interim Reliability Performance Indices and Equivalent Outage Days Per Year of
Generating Units".

This resolution aims to monitor the reliability performance of all Generating Units at operations and
maintenance level; regularly determine and specify the reliability performance of the Grid; aid the power
industry in evaluating reliability and availability of Generating Plants; and promote accountability of
Generation Companies in order to achieve greater operation and economic efficiency. It applies to all
Generation Companies with Conventional and Non-Variable Renewable Energy Generating Plants connected
to the Grid, including Embedded Generating Plants, which have an aggregated capacity of 5MW and above.
It includes the requirement for the System Operator and Transmission Network Provider to utilize the
allowable planned outage days in Table 1 of the Resolution as a guide in preparing the Grid Operating and
Maintenance Program. If the System Operator and Transmission Network Provider shall utilize unplanned
outages beyond what is allowed in Table 1, the same shall provide a report as to the reason for such
consideration as well as arrange the replacement.

ERC Resolution No. 10, Series of 2020 became effective on January 3, 2021.

In relation to this, the ERC issued a consolidated show cause order dated June 14, 2021, against Hedcor
Bukidnon, requesting the latter to explain why it should not be held liable for violation of Article V of ERC
Resolution No. 10, Series of 2020 for the alleged excess unplanned outages for Hedcor Bukidnon’s Manolo
Fortich 1 Units 2, 3, and 4 (ERC Case Nos. 2021-075 SC, 2021-076 SC, and 2021-077 SC).

On July 8, 2021, Hedcor Bukidnon submitted its verified explanation, with attached documents to prove that
the cause of the outage is a force majeure event or a planned outage, both of which should not be included
in counting unplanned outage days. On August 25, 2021, the company manifested developments and
submissions relating to the resumption of Manolo Fortich 1’s operations. The case has yet to be resolved by
the ERC.

13. Prescribing Revised Guidelines for Qualified Third Party

On November 22, 2019, DOE promulgated Department Circular No. DC 2019-11-0015 also known as the
“Revised Guidelines for Qualified Third Party”. The Qualified Third Party (QTP) Guideline Policy is an initiative
that was prescribed in the EPIRA, which shall assist the distribution utilities in ensuring and accelerating the
total electrification of the country.

The policy provides revisions to the existing guidelines covering the qualifications and participation of QTPs in
the provision of electric services to “Unviable Areas” within the respective franchise areas of distribution
utilities and electric cooperatives. As part of the Scope of the Revised QTP Guidelines, the policy shall apply to
the provision of electricity services in locations defined as Unviable Areas, which include unserved and
underserved electricity customers, within the franchise areas of distribution utilities.

In view of the QTP Guideline Policy, as of February 28, 2022, the ERC is working on its amendments to the 2006
Rules on the Regulation of Qualified Third Parties Performing Missionary Electrification in Areas Declared
Unviable by the DOE.

On January 21, 2022, the President approved RA No. 11646, or the Microgrid Systems Act, which converts all
QTPs as microgrid system providers. The law also provides a new framework for the use of microgrid systems
or a group of interconnected loads and a generation facility or decentralized power generation that acts as an
integrated power generation and distribution system, to electrify both “underserved” and “unserved” areas in
the country.

14. Providing a Framework for Energy Storage System in the Electric Power Industry

On September 18, 2019, DOE promulgated Department Circular No. DC2019-08-0012 also known as “Providing
a Framework for Energy Storage System in the Electric Power Industry”, which governs the regulation and

49 ∙ SEC FORM 17-A (ANNUAL REPORT)

 operation of energy storage systems (ESS). The increasing penetration of Variable Renewable Energy (VRE) in
the country has prompted the need for the recognition of ESS as one of the technologies to manage intermittent
operations of the VRE-generating plants' output thereby ensuring system stability. The issuance of the circular
further hastens the entry of ESS as part of the modernization of the Philippine power sector. It finally answers
questions relating to who should own and operate energy storage systems in the Philippines. The circular
addresses policy gaps by providing a framework for the implementation and roll out of ESS in the country.

The circular applies to power industry participants, including power generation companies owning and/or
operating ESS. The covered technologies include battery energy storage system; compressed air energy storage;
flywheel energy storage; pumped-storage hydropower; and other emerging technologies that may be
identified, qualified, and approved by DOE as ESS. The rules are also applicable to customers and end-users
owning and/or operating ESS, which include distribution utilities; and directly connected customers. The circular
also applies to qualified third parties, transmission network providers, system operators, market operators, and
PEMC.

15. Guidelines Governing the Issuance of Operating Permits to Renewable Energy Suppliers Under the Green
Energy Option Program

On July 18, 2018, DOE issued Department Circular No. DC2018-07-0019 also known as the “Rules Governing the
Establishment of the Green Energy Option Program (GEOP) in the Philippines.” This sets the guidelines for
consumers or end-users, renewable energy suppliers, and network service providers, among other
stakeholders, in facilitating and implementing such energy sources under the EPIRA.

GEOP is a renewable energy policy mechanism issued pursuant to RA No. 9513 or the RE Law that provides end-
users the option to choose renewable resources as their sources of energy.

Under this issuance, all end-users with a monthly average peak demand of 100kW and above for the past 12
months may opt to voluntarily participate in the GEOP. Those with an average peak demand below 100 kW may
also participate in the GEOP, but only after DOE, in consultation with NREB and industry stakeholders, is able to
determine that the technical requirements and standards are met by the end-user. End-users with new
connections can also opt to participate in the Program and choose renewable energy resources for their
energy/electricity needs, provided their average peak demand meets the threshold provided in the GEOP Rules.

The participation of the end-users in the GEOP will be governed by a supply contract between the end-user and
the renewable energy supplier, and conform with ERC rules on distributed energy resources and generation
facilities.

GEOP is presently available to end-users in Luzon and Visayas only, until such time that DOE, in consultation
with the NREB and industry stakeholders, determines the readiness of the Mindanao market.

Other provisions of the GEOP include the establishment of the GEOP Oversight committee, as well as the ERC
issuing regulatory framework particularly in setting the technical and interconnection standards and wheeling
fees, to affect and achieve the objectives of GEOP. With regard to the billing mechanism, the GEOP Rules provide
that a “dual billing system” may be adopted by the end-user availing of the program.

On April 22, 2020, the DOE issued the Guidelines governing the issuance of Operating Permits to RE Suppliers
under the GEOP (DC No. 2020-04-0009), which sets rules and procedures in the issuance, administration, and
revocation of GEOP Operating permits to RE suppliers

On August 16, 2021, the ERC promulgated Resolution No. 08. Series of 2021, entitled “A Resolution Adopting
the Rules for the Green Energy Option Program (GEOP)” approving and adopting the GEOP rules issuing the
framework to operationalize GEOP and is now effective.

In November 2021, the Central Registration Body announced that the registration for Green Energy Option
(GEOP) customers will start on December 3, 2021. IEMOP will release an advisory soon regarding the timelines
for WESM switching from captive distribution utilities to GEOP.

50 ∙ SEC FORM 17-A (ANNUAL REPORT)

 16. Promulgating the Renewable Energy Market Rules

On December 4, 2019, DOE issued Department Circular No. DC2019-12-0016, entitled “Promulgating
the Renewable Energy Market (REM) Rules”, thereby officially starting the Renewable Portfolio Standards (RPS)
compliance process.

The REM Rules establishes the basic rules, requirements and procedures that govern the operation of
the Renewable Energy Market, which seeks to:

(a) Facilitate the efficient operation of the REM;

(b) Specify the terms and conditions entities may be authorized to participate in the REM;
(c) Specify the authority and governance framework for the REM;
(d) Provide for adequate sanctions in cases of breaches of the REM Rules; and
(e) Provide timely and cost-effective framework for resolution of disputes among REM Members and
the Renewable Energy Registrar (“Registrar”).

The REM is a market for the trading of Renewable Energy Certificates (RECs) in the Philippines, intended as a
venue for Mandated Participants obligated by RPS to comply with their RPS requirements. REM's objective is to
accelerate the development of the country’s renewable energy resources.

The RPS Transition Period defines Year 0 as 2018 and the RPS Compliance Year 1 shall be the year 2020, and the
intervening period shall be the Transition Period.

The REM Rules will be administered and operated by the Renewable Energy Registrar. Moving forward,
operational issues may still arise on who will be the RE Registrar.

As of February 28, 2022, the DOE is asking for public participation in the drafting of the REM Registration
Manual, REM Manual (Allocation of RE Certificates for FIT-Eligible RE Generation), REM Enforcement and
Compliance Manual (REM Investigation Procedures and Penalty Manual), and the REM Manual Dispute
Resolution.

The REM’s target implementation is within 2021, but AboitizPower continues to monitor for the actual start.

17. Feed-in-Tariff System

Pursuant to the RE Law, the FIT system is an energy supply policy aimed to accelerate the development of
emerging renewable energy sources by providing incentives, such as a fixed tariff to be paid for electricity
produced from each type of renewable energy resource over a fixed period not less than 12 years.

The ERC issued Resolution No. 16, Series of 2010, otherwise known as “Resolution Adopting the Feed-In Tariff
Rules” (the “FIT Rules”) which establishes the FIT system and regulates the method of establishing and
approving the FITs and the FIT-All.

The FIT Rules are specific for each emerging renewable energy technology and to be applied only to generation
facilities which enter into commercial operation after effectivity of the FIT Rules or to such parts of such existing
facilities which have been substantially modified or expanded as provided under the FIT Rules.

Under the FIT Rules, the FITs are specific for each eligible renewable energy plants, which are those power
facilities with COCs issued to them that utilize emerging renewable energy resources or to such parts of such
existing facilities that have been substantially modified or expanded, which enter into commercial operation
after effectivity of the FIT Rules. These include facilities intended for their owners’ use, which are connected to
the transmission or distribution networks and are able to deliver to such networks their generation or parts
thereof but FIT shall only be paid for such amount of electricity actually exported to the distribution or
transmission network and not utilized for their own use.

In Resolution No. 10, Series of 2012, ERC adopted the following FIT and degression rates for electricity
generated from biomass, run-of-river hydropower, solar, and wind resources:

51 ∙ SEC FORM 17-A (ANNUAL REPORT)

 FIT Rate Degression Rate
Wind 8.53 0.5% after year 2 from effectivity of FIT
Biomass 6.63 0.5% after year 2 from effectivity of FIT
Solar 9.68 6% after year 1 from effectivity of FIT
Hydro 5.90 0.5% after year 2 from effectivity of FIT

In line with the increase in installation target for solar energy from 50 MW to 500 MW and wind energy from
200 MW to 400 MW, ERC issued Resolution No. 6 Series of 2015 approving the Solar FIT2 rate of ₱8.69/kWh for
the second set of installation target. On October 6, 2015, ERC issued Resolution No. 14, Series of 2015 adopting
the Wind FIT2 rate of ₱7.40/kWh. In Resolution No. 1, Series of 2017, ERC set the degressed FIT rates for hydro
and biomass plants at ₱5.8705/kWh and ₱6.5969/kWh, respectively. Through a letter dated February 23, 2018,
DOE informed ERC of its resolution extending the FIT for Biomass and ROR Hydro until December 31, 2019.

As the fund administrator of the FIT-All, Transco filed an application before the ERC asking for provisional
authority to implement a FIT-All rate of ₱0.2278/kWh for Calendar Year (“CY”) 2020. On January 28, 2020, ERC
released a decision authorizing Transco to collect a FIT-All rate of ₱0.0495/kWh, lower than the applied
₱0.2471/kWh rate for CY2019. Prior to this decision, the last approved FIT-All rate is ₱0.2226/kWh for CY2018.

On May 26, 2020, the ERC promulgated its Resolution No. 6, series of 2020, wherein the ERC resolved to approve
and adopt FIT adjustments for the years 2016, 2017, 2018, 2019, and 2020, using 2014 as the base year for the
CPI and forex, to be recovered for a period of five years.

On August 4, 2020, TransCo filed its Application for the FIT-All rate of CY2021 of ₱0.1881/kwh, effective the
January 2021 billing period. In the alternative, it asked for a FIT-All rate of ₱0.2008/kWh based on a lower
Forecast National Sales to account for the impact of COVID-19 to electricity consumption. Similarly on July 29,
2021, TransCo filed its Application for the FIT-All rate for CY2022 of ₱0.3320/kwh, effective the January 2022
billing period, or in the alternative, ₱0.3165/kwh based on an increase in kWh sales in 2021 due to the
anticipated economic recovery from the COVID-19 pandemic. Both cases remain pending before the ERC.

18. Proposed Revisions to the Guidelines for the Financial Standards of Generation Companies

On February 16, 2021, the ERC issued Resolution No. 03, Series of 2021, entitled "A Resolution Adopting the
Revised Guidelines for the Financial Capability Standards of Generation Companies".

The Revised Financial Guidelines aim to set out the minimum financial standards of 1.25x Debt Service
Capability Ratio (“DSCR”) to ensure that generation companies meet these standards to protect the public
interest as required under Section 43, b(ii) of the EPIRA and provided by Appendix 1, FS.A 1.3 of the Philippine
Grid Code. A generation company failing to comply with the set financial standards shall submit to ERC a
program to comply within 60 days of receipt of an ERC directive.

19. Green Energy Auction Policy

On July 14, 2020, the DOE issued guidelines on the Green Energy Auction Policy (Department Circular No. DC
2020-07-0017) which set the framework for which the DOE shall facilitate the procurement of supply from RE
projects by the mandated participants under the RPS on-grid rules through a competitive process for
compliance with the RPS program and as applicable for their long-term power supply requirements. The process
involves a regular auction process (notice every 15th of June) to be implemented by the Green Energy Auction
Committee (GEAC). The Contracting Customers and the Winning Bidders will execute a Green Energy
Implementation Agreement (GEIA), which involves the Market Operator (MO) as the entity to allocate energy
and calculate corresponding payments. The ERC will approve the GEIA template and the Green Energy Auction
Reserve (GEAR) Price. Each Winning Bidder will have its own Green Energy Tariff (pay-as-bid), which shall not
be higher than the GEAR Price. On the other hand, the Contracted Customers will pay the average price, subject
to the allocation/calculation of MO, per trading interval.

On November 3, 2021, the DOE issued DC2021-11-0036 (the “GEAP DC”) providing the Revised GEAP Guidelines
listing out the Green Energy Auction steps for the competitive selection process, adopting the FIT framework
as the mechanism for RE compensation and introducing an Opt-In mechanism for the Mandated Participants.

52 ∙ SEC FORM 17-A (ANNUAL REPORT)

 The Opt-In Guidelines shall still be promulgated by DOE. Its issuance shall not delay the first GEAP Auction
round.

The GEAP also includes the determination of GEAR Price. The GEAR Price (max price offer) is used as ceiling
price for each auction round. The ERC shall issue the GEAR Price within 60 days after the Notice of Auction has
been published in a newspaper of general circulation. The Notice of Auction has been posted on the DOE
website and published on February 9, 2022 in the Daily Tribune.

With the revised GEAP DC, the first auction is expected in the middle of 2022.

20. Retail Competition and Open Access

Through a Decision dated March 2, 2021, the Supreme Court of the Philippines (the “Supreme Court”) acted on
several petitions regarding the implementation of Retail Competition and Open Access. These petitions were
brought by Philippine Chamber of Commerce and Industry, Siliman University, and Batangas II Electric
Cooperative (docketed as G.R. No. 228588, 229143, and 229453), among other petitioners and intervenors,
against the DOE and the ERC. The Supreme Court struck down Department of Energy Circular No. DC2015-06-
0010, series of 2015, and ERC Resolutions No. 5, 10, 11, and 28, all series of 2016, primarily for mandating
contestability and prohibiting distribution utilities from participating in the contestable market. It likewise
directed the ERC to promulgate guidelines on the DOE’s Department Circular Nos. DC2017-12-0013 and
DC2017-12-0014 for being more aligned with the objective of the EPIRA to promote robust competition among
retail electricity suppliers.

21. The Open Access Transmission Service (OATS) Rules

The Open Access Transmission Service (OATS) Rules describe the requirements and services provided by the
Transmission Network Provider (TNP) that operates the high voltage backbone transmission system. The OATS
Rules outline the responsibilities of the TNP and the functions of the System Operator (SO) as specified in the
Philippine Grid Code (PGC) and the Wholesale Electricity Spot Market (WESM) Rules. It also sets out the
responsibilities accepted by transmission customers as a condition of receiving the services. The OATS Rules
aims to ensure the development of an appropriate, equitable and transparent electricity market, along with the
safe, reliable, and efficient operation of the power system.

The ERC has posted the draft Amendments to the OATS Rules on February 9, 2022 and the deadline for
submission of comments was on February 22, 2022. AboitizPower continues to monitor for any developments
on the OATS Rules.

22. Amendments to the Public Service Acts

Commonwealth Act No. 146, otherwise known as the Public Service Act, is a law governing the regulation of
public services, which originally included “electric light, heat and power”. On February 2, 2022, the Philippine
Senate and the House of Representatives consolidated HB No. 78 and Senate Bill No. 2094, which involved
amendments to the Public Service Act. The amendments introduced the classification of certain public service
as public utilities, which included both the distribution and transmission of electricity. The amendments also
provided for revisions in the regulatory authorities of administrative agencies, but also provided that nothing in
the Public Service Act shall be construed as amending or repealing laws and administrative regulations
deregulating or delisting services, industries and/or rates. The bicameral committee version was signed by
President Duterte into law on March 21, 2022.

(xii) Amount Spent on Research and Development Activities

AboitizPower and its Subsidiaries do not allot specific amounts or fixed percentages for research and
development. All research and development activities are done by AboitizPower’s Subsidiaries and Affiliates
on a per project basis. The allocation for such activities may vary depending on the nature of the project.

53 ∙ SEC FORM 17-A (ANNUAL REPORT)

 (xiii) Costs and Effects of Compliance with Environmental Laws

AboitizPower’s generation and distribution operations are subject to extensive, evolving, and increasingly
stringent safety, health, and environmental laws and regulations. These laws and regulations address concerns
relating to, among other things, air emissions; wastewater discharges; the generation, handling, storage,
transportation, treatment and disposal of toxic or hazardous chemicals, materials, and wastes; workplace
conditions; and employee’s exposure to hazardous substances. Standard laws and regulations that govern
business operations include the Clean Air Act (RA No. 8749), Ecological Solid Waste Management Act (RA No.
9003), Clean Water Act (RA No. 9275), Toxic Substances and Hazardous and Nuclear Wastes Control Act (RA No.
6969), Philippine Environmental Impact Statement System (PD No. 1586), and Occupational Safety and Health
Standards (RA No. 11058). The RE Law also added new and evolving measures that must be complied with.
These laws usher in new opportunities for the Company and set competitive challenges for the businesses
covered. Additional regulations such as DOE’s Energy Regulation No. 1-94 require companies to allocate funds
for the benefit of host communities for the protection of the natural environment and for the benefit of the
people living within the area. Further, funds are set for the management of carbon sinks and watershed areas
through a nationwide reforestation program.

The Safety, Health, Environment and Security (SHES) group of AboitizPower oversees the SHES programs and
activities within its operational control from the corporate center, business units, to facility teams. This includes
the accounting of all environmental impacts. For the Generation Group, the facilities include: (1) APRI’s Tiwi-
MakBan plants, (2) SacaSun’s San Carlos plant, (3) the Benguet, Bakun, Sabangan, Sibulan A, B, and Tudaya A,
Tudaya B, Manolo Fortich, and Talomo HEPPs of the Hedcor Group, (4) SN AboitizPower Group’s Ambuklao,
Magat, and Maris plants, (5) the Oil Group’s Cebu, Mactan, Mobile 1, Mobile 2, Mobile 3-6, and Naga plants,
(6) Coal Group’s Davao and Toledo plants. For the Distribution Utilities, the facilities include: Cotabato Light,
Davao Light, Visayan Electric, Balamban Enerzone, Mactan Enerzone, Lima Enerzone, Malvar Enerzone, and
Subic EnerZone.

AboitizPower and its Subsidiaries have allocated budgets for environmental expenditures covering costs for
waste disposal, remediation, pollution control, environmental initiatives and programs. All facilities are in
compliance with regulatory requirements, thus noting zero spending for remediation costs.

AboitizPower and its Subsidiaries remain committed to align with international best practices in all power plants
and distribution utilities. This is exemplified with the attainment of ISO certification for the management
systems of Quality, Environment, Occupational Health and Safety. However due to the impact of the COVID-19
pandemic in 2021, a few of the AboitizPower subsidiaries in Power Generation, which were ready for their
recertification or surveillance audit, have decided to defer it to 2022. Meanwhile, the Power Distribution
maintained its certifications on ISO 9001:2015 Quality Management System, ISO 45001:2018 and ISO
14001:2015 Environmental Management System.

In 2021, continuous improvement in managing environmental impacts is evident, as seen in the increased total
environmental management expenses at ₱154.5 mn, which is a 115% increase compared with previous year
(₱71.8 mn). This consists of ₱28.5 mn for APRI, ₱14.6mn for Hedcor, ₱61.7 mn for the Coal Group, ₱13 mn for
the SN AboitizPower Group; ₱34 mn for the Oil Group, and a total of ₱2.4 mn for the Distribution Utilities.

Of the ₱154.5 mn total environmental management expenses, ₱24.8 mn was allocated for capital expenditure
(CAPEX) aimed at improving pollution prevention and control. The following projects were implemented: (1)
APRI Makban’s purchase of new unit of Continuous Ambient Monitoring Station (CAMS) upwind and downwind;
(2) APRI Tiwi’s installation of data acquisition system and updating of existing CAMS and meteorological sensors;
(3) the Oil Group’s installation of air quality monitoring station in Mobile 2; (4) the Coal group’s improvement
of Domestic Wastewater Treatment Facility and Project BRICK at its Davao plant and improvement of sewage
treatment facility through installation of wetland and hypochlorination system and installation of online
Continuous Emission Monitoring System at its Toledo plant.

Operational expenditure (OPEX) projects were also implemented to improve environmental management
practices on site, such as: (1) APRI Makban’s rehabilitation of its hazardous waste storage area, improvement
of the composting facility and installation of greenhouse farm/agriculture at storage facility, asbestos
management and assessment; (2) the SN AboitizPower Group’s modification of its sewage treatment facility;
(3) the Coal Group’s installation of Continuous Ambient Air Quality Monitoring System in Toledo City, Cebu and

54 ∙ SEC FORM 17-A (ANNUAL REPORT)

 bamboo tree planting for carbon dioxide sequestration and noise suppression in Barangay Bocalor, Toledo City;
(4) the Oil Group’s improvement of sewage treatment facility and oil water separators at Mobile 3-6, (5) the
Distribution Utilities’ gradual replacement program of Compact Fluorescent Lights to less hazardous LED lights.

AboitizPower also supports environmental initiatives that go beyond its compliance requirements. The
Company takes part in AEV’s A-Park program, various coastal and river clean-up activities, and biodiversity
initiatives. In the year 2021, the Company has planted a total of 288,112 trees at an expanse of 1,152 hectares
with the help of almost 859 volunteers. AboitizPower organized and conducted 25 coastal and river clean-up
activities, wherein over 15,000 kilograms of wastes were collected. Furthermore, AboitizPower supports a
number of biodiversity initiatives, such as (1) the Adopt Tigas River, Adopt Visitang Naga River and Mt. Malinao
biodiversity assessment supported by APRI, (2) Hedcor’s Dino Dolig Coffee agroforestry project in Sabangan,
Mt. Province and watershed management program in Bakun, Benguet; (3) SN AboitizPower-Magat HEPP’s
partnership in Uplifting Upland Natural Resources Livelihood and Assets (PUNLA) for the Upper Magat
Watershed Management Program in Ifugao Province; (4) SN AboitizPower-Benguet partnership with NPC for
2.5km radius Technical Cooperation Agreement on forest fire protection in Ambuklao and Binga reservoir, (5)
the Coal group’s Adopt-an-Estero water body program at Inawayan River, Brgy. Inawayan, Sta. Cruz, Davao del
Sur and Coastal Resource Management Program in Toledo City, Cebu; (6) Davao Light’s Adopt-an-Estero for San
Isidro creek and the Cleanergy park located in Punta Dumalag, Davao City; and (7) Visayan Electric’s mangrove
plantation project in Panadtaran, San Fernando, Cebu.

AboitizPower and its Subsidiaries received a total of 74 awards, certifications and citations in 2021 in relation
to SHES. To highlight a few: (1) APRI Makban Plant’s Bronze Corporate Safety and Health Excellence Award from
the Safety & Health Association of the Philippine Energy Sector, Inc. (SHAPES); (2) APRI Tiwi Plant’s Platinum
Corporate Safety and Health Excellence Award; (3) SN AboitizPower-Magat’s Outstanding Safety and Health
Professionals Award, Corporate Safety and Health Excellence award - Gold. In addition, the Coal Group received
a special citation from DENR-EMB Region VII for highly esteemed contributions over the years in Implementing
sustainable air quality management.

In 2021, AboitizPower and its Subsidiaries did not incur any major sanctions for violation of environmental
standards and laws. AboitizPower continues to be cognizant of new opportunities to comply with regulatory
requirements and improvement of systems to promote safety and prevent adverse impacts to the environment
or affected ecosystems.

(xiv) Employees

At the parent company level, AboitizPower has a total of 457 employees as of February 28, 2022. These include
executives, managers, supervisory, and rank-and-file staff employees. There is no existing Collective Bargaining
Agreement (CBA) covering AboitizPower employees.

The following table provides a breakdown of total employee headcount on a per business group basis, according
to employees’ function, as of February 28, 2022:

Number of Employees
Unionized
Business Group Expiry of CBA
Rank & Employees
Total Executives Managers Supervisors
File
Aboitiz Power 457 96 75 87 199 0 N/A
Generation Companies
Run-of-River Hydros 393 12 17 46 318 104 September 19, 2022 (Hedcor)
Large Hydros 189 20 40 69 60 0 N/A
Geothermal 249 12 16 46 175 11 February 28, 2022 (APRI)
Solar 0 0 0 0 0 0 N/A
Oil 406 12 36 208 150 0 N/A
Coal 1,398 22 72 295 1,009 0 N/A
RES 4 0 0 1 3 0 N/A

55 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Number of Employees
Unionized
Business Group Expiry of CBA
Rank & Employees
Total Executives Managers Supervisors
File
December 31, 2016 8
(Visayan Electric)
June 30, 2024
(Cotabato Light)
Distribution Utilities* 774 15 66 138 555 316
June 16, 2026
(Davao Light)
May 9, 2024
(SFELAPCO)
Total No. of Employees 3,870 189 322 890 2,469 431
*Data for SFELAPCO is as of October 31, 2021.

The Company does not anticipate any significant increase in manpower within the next twelve months unless
new development projects and acquisitions would materially require an increase.

(xv) Major Risk/s Involved in the Business

An integral part of AboitizPower’s Enterprise Risk Management (ERM) efforts is to anticipate, understand, and
address the risks that the Company may encounter in its businesses.

Risk management is integrated in the Company’s strategic and operational planning and decision-making
processes. Management and operating teams identify and assess the risk areas that may impact the Company’s
strategic objectives and day-to-day business operations. In addition, the Company develops key risk treatment
plans to address the drivers of the Company’s top risks, as well as emerging risks that may also significantly
impact its business and stakeholders. The risk management processes, which include ESG focus areas, business
continuity management, and risk transfer strategies, are also embedded in the organizational planning and risk
management processes. Business continuity management (BCM) and risk finance are the other pillars of the
ERM approach that are actively being implemented and continuously developed by AboitizPower.

Risk management planning in Aboitiz Power is an iterative process that is conducted at least semi-annually for
strategic risks. Most of the top or strategic risks that are captured at the corporate or AboitizPower level
originated from risks reported by the corporate support and business units. The Company’s business units
review operational risks and implement mitigation measures as part of day-to-day operations.

Following the completion of the 2021 year-end strategic risk consolidation at AboitizPower, the following top
or strategic risks have been identified and reported to the senior management executives:

1. Project Delays

AboitizPower has identified delay in project completion as a top risk as it continues to grow its power generation
portfolio, in particular, with the construction and commissioning of the GNPD project. The risk is currently driven
by issues related to the management of COVID-19 onsite, issues with the EPC contractor, unresolved technical
issues related to the boiler and steam turbine, and regulatory issues.

COVID-19-related travel restrictions, mandatory quarantine protocols, and on-site infections have delayed
the achievement of the project milestones in 2021 and early 2022. Short term suspension of works by the EPC
contractor became unavoidable as a preventive measure to arrest widespread transmission inside the facility.
Implementation of stricter workplace protocols and improvement in business continuity plans and
administration of vaccines to the workers were done to mitigate the COVID-19 threat.

8 The Secretary of Labor and Employment (SOLE), in its resolution dated January 11, 2022 denied with finality, Visayan Electric’s Motion for

Reconsideration. The parties are directed to submit their compliance within 15 days from receipt, a copy of their signed CBA incorporating the
salary increase awarded retroactive to the expiration of the CBA or January 1, 2017. Visayan Electric filed its Joint Motion for Extension with VECEU
last January 31, 2022 requesting to be given until March 11, 2022 to submit the signed CBA implementing the retroactivity of the salary increase.

56 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Unresolved issues with the EPC contractor have started to emerge as a major risk driver as GNPD Unit 1
completes performance testing and rectification of defects. These issues, which are typical of negotiations
between owners and contractors during the turnover phase, are managed through active stakeholder
engagement not just by the joint venture operator, but also directly by AboitizPower’s own project
development team and third-party experts as part of the Company’s key risk treatment plan. The contractor
currently remains committed to working closely with the plant operator and AboitizPower.

Boiler combustion and turbine vibration issues remain to be a threat to the continuous generation of Unit 1. As
of February 28, 2022, Unit 1 has been running on full load with occasional deration due to boiler slagging. The
contractor continues to supervise the operation of the unit to monitor parameters. There have been
improvements in the performance of the boiler due to the support of specialist contractors who were engaged
to resolve technical issues as part of the mitigation plans. The same approach of consulting third party experts
in close coordination with the contractor will be pursued until the technical issues are resolved.

Regulatory issues are related to the delivery of the transmission assets owned by NGCP in order to dispatch full
capacity from GNPD. The delivery of the transmission assets is no longer at the critical path. Nevertheless,
AboitizPower continues to work with NGCP to ensure the transmission assets are ready when Units 1 and 2
begin commercial operations. Operational readiness reviews are performed to ensure that new generating units
are ready for full commercial operations. Project post-mortem reviews are also conducted to determine key
learnings that can be applied to ongoing and future projects.

As an overall risk mitigation plan, project risk management plans are thoroughly defined and regularly reviewed
for each project in order to track issues related to quality, safety, compliance, schedule, and resources. This
ensures that identified risk control measures and recovery actions are implemented. Appropriate project
insurance coverage, as well as periodic performance reviews of selected partners, reputable contractors, and
third-party suppliers, are also in place.

2. Sustainability

Investments are at risk if these are not able to sustain a viable economic return due to a combination of
technology, regulatory, and/or market changes. Among these changes, ESG strategies continue to be the trend
in the global community where investors are seeking to mitigate exposure to fossil-based fuel and diversifying
portfolio to prioritize renewable energy. In the event that future laws or contracts are enacted imposing
restrictions on operations and refinancing, particularly in relation to power plants utilizing fossil fuels, certain
capital expenditures or operating expenses or financing costs may not be fully recoverable.

The growing multi-sectoral negative action against coal has led many financial institutions to restrict
investments in coal projects. The following are important considerations of the Company's existing portfolio
and strategic project pipeline, where coal concentration will significantly be reduced by the year 2030:

(a) Difficulty in insurance procurement or renewal, where insurers’ policy on coal underwriting and investing
are also aligned with the same global trends on sustainability and ESG issues. While insurers are still willing
to cover coal plants, the resulting impact is significantly higher premium rates for coal insurance year on
year. Inability to fill up 100% capacity due to the reluctance or withdrawal of some insurance markets to
insure coal plants has prompted the Company to resort to self-insurance. Other noteworthy risk drivers are
the hardening of the insurance market aggravated by the global economic impact of the COVID-19
pandemic, and any significant losses on damage to critical assets and related business interruptions;
(b) Financing and refinancing risks in terms of the Company's inability to borrow money to fund future projects
due to current investments in coal. While banks are still willing to lend, the cost of project financing tends
to be more expensive;
(c) Withdrawal of technical support by critical contractors and suppliers from construction and/or
maintenance thermal power plants in line with global trends on sustainability; and
(d) Sourcing of fuel (coal and oil) due to global price volatility because of supply and demand fundamental
affected by pressure on the continued operation of mines and transhipment of fuel due to the International
Maritime Organization (IMO) 2020 regulations which will have the effect of increasing freight costs for coal
and oil.

57 ∙ SEC FORM 17-A (ANNUAL REPORT)

 The Philippines is a party to the 2015 Paris Agreement signed by almost 200 nations. The Paris Agreement aims
to keep the increase in global average temperature to well below 2°C above pre-industrial levels and to limit
the increase to 1.5°C, since this would substantially reduce the risks and effects of climate change. As a party
to the agreement, the Philippines may impose more stringent regulations, particularly on coal-fired power plant
emissions, requiring expensive pollution controls on coal-fired power plants, among other measures. These
measures may significantly increase costs of coal-fired power plants and, at the same time, increase the cost
competitiveness of renewable energy.

Recently promulgated implementing rules and regulations by the DOE on “Renewable Portfolio Standards” also
mandate electric power industry participants (such as generation companies, distribution utilities and electric
cooperatives) to source or produce a portion of their electricity requirements from eligible renewable energy
resources and undertake CSPs in sourcing renewable energy. A significant portion of the captive market may
shift away from coal and other hydrocarbon fuels, which may expose the coal-fired power plants of the
Company to stranded-asset risk (i.e., hazard of an asset suffering from an unanticipated write-down,
devaluation, or conversion to liability).

AboitizPower is cognizant of the regulatory and market drivers in the shift towards green and sustainable
business transformations. AboitizPower and its Subsidiaries are guided by its sustainability framework that
looks into environmental, social and governance risks including climate-related risks of its value chains. Its
strategy has long considered environmental sustainability as one of its key pillars and, to date, together with its
partners, the Company is the largest private renewable energy operator in the country with 1,365 MW in
installed capacity as of January 1, 2022.

AboitizPower’s growth strategy remains aligned with the energy trilemma – balancing the three pillars of energy
security, energy equity, and environmental sustainability. Over the last decade, the growth in energy demand
has necessitated a focus on energy security and energy equity - the provision of reliable, and affordable energy
for a growing economy. Having addressed energy security and energy equity via the presence of sufficient
baseload capacity, AboitizPower has begun to shift focus back to environmental sustainability, and rebalancing
its energy portfolio. This transition is included in the Company’s sustainability agenda, with the Company
targeting a mix of 50% thermal and 50% renewable energy capacity by 2030 from its current mix of 74% thermal
(which are conventional or combustion power plants such as coal or fuel fired plants), and 26% renewable
(which do not rely on fossil fuels).

Further, to properly assess the potential and extent of the above-mentioned risks, AEV and AboitizPower signed
up to become the first Philippine supporters of the international Task Force on Climate-Related Financial
Disclosures (“TCFD”) in early 2020. This is a voluntary commitment to adopt a defined governance structure on
identifying and addressing physical and transition risks associated with climate change, as well uncovering
opportunities, and improving disclosures to provide clear and reliable information to stakeholders. Under SEC
Memorandum Circular No. 4, series of 2019 on the Sustainability Reporting Guidelines for Publicly-Listed
Companies (“PLCs”), there is a three-year period under which PLCs can comply, which includes the adoption of
the TCFD reporting template.

3. Regulatory Risks

The electric power industry is characterized by a constantly evolving regulatory environment. Any shortcoming
in regulatory compliance poses negative consequences in both the net income and reputation of each Business
Unit and the Group. Further, the Company’s results of operations and cash flow could be adversely affected by
the inability to predict, influence, or respond appropriately to changes in law or regulations, including any
inability or delay in obtaining expected or contracted increases in electricity tariff rates or tariff adjustments for
increased expenses, or any inability or delay in obtaining or renewing permits for any facilities, could adversely
impact results of operations and cash flow. The Company’s business could also be adversely affected by any
changes in laws or regulations, or changes in the application or interpretation of laws or regulations in
jurisdictions where power projects are located, could adversely affect the Company’s business, including, but
not limited to:

(a) adverse changes in tax laws including misinterpretation of statutory incentives granted to developers;
(b) changes in the timing of tariff increases or in the calculation of tariff incentives;

58 ∙ SEC FORM 17-A (ANNUAL REPORT)

 (c) change in existing subsidies and other changes in the regulatory determinations under the relevant
concessions or grants;
(d) other changes related to licensing or permitting which increase capital or operating costs or otherwise
affect the ability to conduct business affecting both the generation and distribution utility business; or
(e) other changes that have retroactive effect and/or take account of revenues previously received and expose
power projects to additional compliance costs or interfere with our existing financial and business planning.

Any of the above events may result in lower margins for the affected businesses, which could adversely affect
AboitizPower’s results of operations.

For renewable assets, pricing is fixed by regulatory arrangements which operate instead of, or in addition to,
contractual arrangements. To the extent that operating costs rise above the level approved in the tariff, the
Business Units that are subject to regulated tariffs would bear the risk. During the life of a project, the relevant
government authority may unilaterally impose additional restrictions on the project’s tariff rates, subject to the
regulatory frameworks applicable in each jurisdiction. Future tariffs may not permit the project to maintain
current operating margins, which could have a material adverse effect on the Business Unit or the Group,
financial condition, results of operations and prospects. Withholding of adjustment in feed-in-tariff rates for
qualified plants under the portfolio of AboitizPower are risks that are being monitored and addressed through
active stakeholder engagement with similarly situated developers and the ERC.

To anticipate and proactively respond to changes in regulations, the Regulatory Affairs and External Relations
teams of AboitizPower constantly collaborates with the DOE and the ERC to work towards a sound and
sustainable regulatory and policy environment. Similarly, the AboitizPower SHES Team keeps abreast with
environmental laws and coordinates with DENR on matters pertaining to environmental compliance.

These teams, among others, actively participate in consultative processes and public consultations to provide
feedback and positions on proposed laws and regulations. The Company’s participation likewise ensures that
its interpretation of such laws and regulations is aligned with the regulators. This is done in cooperation with
organized power industry groups such as the Philippine Independent Power Producers Association (PIPPA) and
Philippine Electric Plant Owners Association (PEPOA). Regular dialogues are conducted with host communities,
media, non-government organizations, and the academe, to educate and update various groups about the
power industry.

AboitizPower has likewise transitioned its Legal Team to strategically focus on compliance and to continually
align with the Aboitiz Group’s overall compliance processes. The Company is institutionalizing a compliance
framework across the different business and corporate support units, and is formalizing compliance reporting
requirements among the Group’s compliance officers.

4. Financial

In the course of its operations, AboitizPower and its Subsidiaries are exposed to the following financial risks:

(a) Interest rate risks resulting from the increasing cost to borrow money as a result of inflation; and;
(b) Forex risks in terms of forex fluctuations that may significantly affect its foreign currency-denominated
placements, transactions, and borrowings. This risk is currently driven by the global COVID-19 crisis, given
the impact it has on general currency markets; and the amount of natural hedge flows which may decline.

These risks constrain any expansion and growth projects. Furthermore, defaulting on existing loans and other
financial obligations will consequently put the Company’s reputation at risk.

To address these risks, the Company carries out regular monitoring of the Company's cash position and at the
same time maintaining good relationships with the banks. AboitizPower is implementing the Group’s Financial
Risk Management Framework, which is a collaboration of the Group Risk and Treasury teams and designed to
ensure a consistent approach in identifying, assessing, quantifying, and mitigating financial risks across the
Group.

59 ∙ SEC FORM 17-A (ANNUAL REPORT)

 5. Reputation

AboitizPower recognizes that its reputation is its single most valuable asset, a competitive advantage that allows
the Company to earn, maintain, and strengthen the trust of its stakeholders. The Company knows that its
reputation today took generations to build and sustain; hence, the need to protect and enhance it progressively
is imperative.

Today’s operating environment is characterized by increasing corporate governance standards, heightened

public consciousness due to social media, and greater scrutiny from key stakeholders. Reputation risks result
from the occurrence of, or failure to, mitigate other risks.

AboitizPower continues to strengthen stakeholder engagement activities with all its stakeholders, including its
customers, employees, shareholders, lenders and insurers, regulators, host communities, and LGUs. One of the
key engagement channels is ER 1-94 which allows host communities to reap financial benefits for their
contribution to power plants situated in their localities. AboitizPower’s assumption of the fund’s administration
functions has hastened fund remittance and utilization for local electrification, development and livelihood, and
environment enhancement projects of host communities. Due to the COVID-19 pandemic, DOE Department
Circular 2020-04-0008 dated April6, 2020 rationalized the utilization by host LGUs of ER 1-94 funds for COVID-
19 response instead. As year-end 2021, the total available ER 1-94 funds have been released by DOE and
AboitizPower amounted to ₱714 mn, which was made available to the Company’s host beneficiaries to build
isolation facilities and purchase relief goods, medical supplies or equipment, and COVID-19 testing kits and
vaccines.

In 2021, AboitizPower continues to be recognized as a constituent company in the FTSE4Good Index Series for
the fourth consecutive year. The Company has managed to get a higher overall rating in the latest assessment
with a score of 3.1 in 2021 from 2.5 the previous year, a 24 percent increase brought by the improvements in
its health and safety initiatives as well as its campaign on diversity, equity, and inclusion, among others. The
FTSE4Good Index Series, created by global index provider FTSE Russell, measures the performance of
companies demonstrating strong ESG practices.

The Company’s recent Corporate Sustainability Assessment by the highly regarded S&P Global has also shown
marked improvements in its ESG performance. The Company’s score further increased from 40 in 2020 to 44
in the 2021 assessment, which also improved its percentile ranking in the global peer group from 54th to 67th
percentile.

AboitizPower also earned a Sustainalytics ESG Risk Rating of 33.9, a 3.5 decrease of risk exposure from last
year. Meanwhile, the Company retained its BB rating from the MSCI ESG Rating and D- in CDP Climate Change
Report.

Moving forward, AboitizPower will continue to focus on addressing gaps in various risk areas of
ESG. Furthermore, the Company’s growth strategy remains aligned with the energy trilemma of energy security,
energy equity, and environmental sustainability, but will be characterized by a strategic shift from ensuring low-
cost energy to also providing energy from more sustainable sources in the next decade.

6. Operations

The loss of, and/or damage to, facilities caused by natural calamities such as earthquakes, typhoons, and floods
may result in significant business interruptions within AboitizPower. Interruptions may also be caused by other
factors such as critical equipment breakdown, Information Technology (IT) and OT security breaches, fires and
explosions, hazardous waste spills, workplace injuries and fatalities, terrorism, and other serious risks.

Planned maintenance and overall outage management of AboitizPower’s generation facilities and its critical
equipment and OT infrastructure and systems are governed by asset management standards based on global
best practice. All of AboitizPower’s generation facilities have achieved asset management certifications based
on ISO 55001:2014 standard. Recently commissioned plants will also be lined up for certification.

On the other hand, distribution network availability and reliability targets have consistently been aligned with
the performance bond standards set by the ERC as part of the Rules for Distribution Wheeling Rates (RDWR).

60 ∙ SEC FORM 17-A (ANNUAL REPORT)

 All Business Units have also achieved OSHAS 18001 certification, a British standard which is focused on
controlling occupational health and safety hazards. AboitizPower companies are also transitioning to the ISO
45001 standard to drive a risk-based culture with more proactive approaches toward mitigating risks before
they happen. To further reinforce industrial fire safety, annual in-house training program on Fixed Fire Fighting
Systems of the U.S. National Fire Protection Association is conducted for operations, maintenance, and safety
personnel.

Group insurance programs that leverage on the Company’s portfolio of generation and distribution assets,
supported by risk modelling and quantification, are also in place and regularly reviewed. AboitizPower ensures
that its Business Units have the right insurance solutions to achieve the optimal balance between retaining or
transferring risks versus lowering the Total Cost of Insurable Risk. As such, business interruption insurance is
procured to cover any potential loss in gross profits that may result from a major damage to critical assets.
AboitizPower is embarking on a major initiative to look for alternative risk transfer strategies to optimize loss
indemnity and risk retention.

Business Units periodically review, test, develop, update, and improve their business continuity plan (BCP) to
ensure that they remain relevant with current business conditions, and address the uncertainties and issues
faced by the Company.

Some of these enhancements include: (a) typhoon preparedness; (b) regular emergency drills and simulation
exercises on various scenarios related to other natural and man-made calamities; and (c) post-event evaluations
to ensure that employees are able to respond effectively and safely as planned. AboitizPower is looking to
expand business continuity strategies on a geographic regional scale for better coordination among several
plants.

To further improve its existing BCM framework and practices, AboitizPower has rolled out a three-year roadmap
of Business Continuity initiatives, which conforms to ISO 22301:2012 standards and requirements.

7. Cyber and Information Security

AboitizPower recognizes the vulnerabilities of global information security breaches and the increasingly
complex challenges of digital transformations. Management acknowledges that information security threats
should be addressed to prevent targeted and non-targeted attacks which can adversely disrupt operations and
customer services, and result in serious impacts to the Company’s bottom line and reputation.

In 2021, AboitizPower further strengthened its protection protocols against security threats with the
implementation of the ISMS following the ISO 27001:2015 standard. For 2021, the Company’s Generation and
Distribution Business Groups have rolled out and currently completing a uniform, Company-wide Operational
Technology (OT) Security Minimum Standard.

AboitizPower aligns with the Aboitiz Group-wide Cyber Security Program, specific governance, standards,
training and culture-building, and Operational Technology Security projects. OT Security projects in generation
and distribution facilities are also ongoing through phased implementation until 2022. The ISMS discipline will
continue to be embedded in all three pillars of Information and Operational Systems Security, namely, People,
Process, and Technology.

The cybersecurity program execution which started in 2020 is progressing very well. Its anchor program, the
Continuous Threat Detection (CTD) roll-out, has faced challenges from the global logistics delays which run from
45 to more than 120 days. The delivery of this project is expected to catch up as logistics normalizes and issues
are resolved. Together with the CTD roll-out, the network segmentation will be implemented. End-point
detection solutions for legacy operating systems (OS) will be addressed in 2022 with a new industrial control
systems (ICS) end-point protection system offering the latest malware detection and protection.

In order to achieve the desired Level 4 in Cyber Security Maturity and build an information security risk-aware
culture within the Company, BCPs on loss of technology scenarios are in place, annually tested, reviewed, and
continually improved. AboitizPower keeps pace with current information security threat landscape, solutions,
and best practices to further strengthen prevention, detection, and comprehensive response to information

61 ∙ SEC FORM 17-A (ANNUAL REPORT)

 security threats. Information risks, including cyber security risks, will remain on top of the agenda of the Board
Risk Committee for the coming years.

8. Competition Risk

Increasingly competitive market conditions create downward pressure on contract rates and increasing levels
of commercial risk, to wit: (a) generation companies being required to participate in a transparent and
competitive bidding of power supply requirements of distribution utilities and electric cooperatives through the
CSP; and (b) spot prices are expected to continue to be volatile. As such, fixed pricing may potentially increase
exposure to fuel and forex risk, while the inability to contract at favorable rates and commercial terms may
result in further exposure to higher levels of spot market volatility. This risk could result in inefficiencies in
margins due to aggressive or competitive pricing and forecasting inaccuracy.

As AboitizPower endeavors to market and contract project capacities from investments ahead of time, as well
as renew expiring contracts from existing capacities, it also maximizes energy trading opportunities in the spot
market. Striking this balance requires a combination of portfolio pricing and contracting strategies, and hedging
of coal and forex exposure on fixed contracts. This is to ensure that plant operations are optimized, and that
revenue and cash flow streams are managed.

8. Talent Risk

AboitizPower gears for further growth by shifting towards renewable energy sources and increasing its
presence in the international market, while ensuring the availability and reliability of existing power plants.
Both growth and operational excellence thrusts demand for organic subject matter experts of critical assets.

The risk on availability, readiness, and retention of talents for critical posts is inevitably increasing. Thus, talent
attraction, optimization, and retention strategies are of utmost importance. In 2021, AboitizPower heightened
efforts in ensuring talent supply meets talent demand by utilizing strategic workforce planning process, in
particular:

(a) Optimize talent attraction channels / approaches such as establishing a compelling employer brand,
building targeted talent communities and employee referral programs;
(b) Build talent capability building to ensure a thriving workforce;
(c) Promote a culture-centric engagement and benchmarked employee experience to retain critical talents;
(d) Create as robust labor relations and business continuity plans, labor regulatory compliance checks &
manager education; and
(e) Improve HR internal capability building and transformation thru leveraging analytics and digital
tools/system, re-skilling and resourcing, structure redesign and process simplification/standardization.

AboitizPower integrated the Strategic and Operational Workforce Planning into the Organizational Planning
processes to enable the identification of current and future talent needs. This helped shape the people strategy
of AboitizPower to be able to increase workers engagement and remain competitive in the job market reshaped
by the COVID-19 pandemic.

9. Litigation

The most effective way to avoid litigation and its adverse consequences is to prevent it. Litigation diverts
valuable management resources, adversely affects reputation and standing, and exposes the Company
including its employees and officers to liability.

In 2021, AboitizPower strengthened the capability of its Legal team to ensure legal and contractual obligations
are complied with and in order to be able act quickly and effectively on a potential dispute prior to its escalation.
Legal and internal and external subject matter experts identify and proactively address litigation risks to reduce
threats associated with regulatory action, legal claims, and disputes. Legal strategies are supported by active
stakeholders engagement with the intent to exhaust all available legal remedies outside of litigation.

62 ∙ SEC FORM 17-A (ANNUAL REPORT)

 10. Pandemic

For the AboitizPower Group, the primary impact of the COVID-19 pandemic during its early stages was the
decrease in demand for electricity as business activities were hampered by the government-enforced
community quarantines. These quarantines also resulted in reduced mobility to and from the Power Group’s
existing facilities, and new facilities being constructed. The curtailed economic activity brought about by the
shutdown and/or scaled down operations of energy-intensive industries have resulted in significant drops in
electricity demand and consumption, which in turn has affected the revenue targets of AboitizPower’s
generation, distribution, and retail electricity supply businesses. The Company collaborates with its customers
and key stakeholders to minimize the impact of the pandemic to its PSAs for all concerned parties. Distribution
Utilities have also maximized the use of social media and digital platforms to deliver customer services.

The AboitizPower Group continued to provide the country with the much-needed power supply for hospitals,
government institutions, and critical businesses, while ensuring the safety of its teams, partners, and
communities. To address the challenges posed by the pandemic, the AboitizPower Group developed a program
that combines the best of work-from-home, two-week workshifts, and remote plant operations. This will ensure
that the AboitizPower Group keeps the lights on for the country. It also assessed the current and future modes
of operations. This led to the necessity of doing an organizational restructuring, allowing for resiliency and
enabling the Power Group to remain efficient, competitive, and sustainable. It is in the planning stages of a
return to the workplace program, but will advance with caution. The COVID-19 pandemic also impacted the
construction of the GNPower Dinginin project. Construction has slowed down because of the preventive
measures taken to ensure the safety of workers on-site. GNPD Unit 1 started commercial operations in January
2022 after it was granted by the ERC with a Certificate of Compliance and following the completion of the
functional tests required under the EPC. The partnership also proceeded with the expansion of the power plant
and achieved its financial closing for Unit 2 in December 2017 with expected target delivery thereof around the
third quarter of 2022. Both units are in the final stages of construction but continue to face challenges due to
the COVID-19 pandemic and travel restrictions. Due to said circumstances, the AboitizPower Group is constantly
evaluating the timing of the project’s commercial operations date.

The Company ensures that the supply chains for its power plants and Distribution Utilities remain stable. It also
ensures that supply of coal, critical spare parts, and services from outside the country continues through a
number of options, including alternative local suppliers and service providers. Close coordination with LGUs and
key government agencies by AboitizPower External Relations and its Business Unit’s Legal and Compliance
teams facilitate the unimpeded delivery of energy-related goods and services.

To date, all AboitizPower power generation facilities and power distribution utilities have normalized
operations despite the appearance of new COVID-19 variants including Delta and Omicron. BCPs have been
successfully implemented to ensure the adequate and reliable supply and distribution of electricity and to adapt
to the nature of the virus with the least disruption in operations but ensuring team members are not put at risk
which is the primary objective of the Company’s COVID-19 response. These BCPs are continually and promptly
updated to adhere to the health and other community quarantine protocols and guidelines issued by the DOE,
ERC, DOH, DOLE, Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF), and the
LGUs. COVID-19 vaccination of employees and contractors is at a high rate due to company-initiated vaccination
programs. The Company is also facilitating a program for the administration of boosters to its employees to
maximize protection afforded by the vaccines. As long as the Company continues to improve and remain
steadfast on its COVID-19 protocols despite continued and impending lockdowns, disruption to the Company’s
business is seen to be not as consequential as what was seen during the onset of the pandemic.

The Company will continue to comply with the government’s minimum health standards and directives being a
provider of essential services during this time of the pandemic.

11. Emerging Risks

Embedded in the risk management process is the continuous identification and monitoring of emerging risks.
These are newly developing risks that cannot yet be fully assessed (due to high uncertainty) but could have a
major impact on the organization in the future. These potential risks could be triggered by the fast-changing
landscapes in the political, economic, social, technological, environmental, and legal facets surrounding the
Company’s operations.

63 ∙ SEC FORM 17-A (ANNUAL REPORT)

 For AboitizPower, one such major risk is that of climate change. While the Company has recognized that the
availability of insurance and long-term financing for coal plants has become more and more challenging, these
are being addressed by an overall sustainability strategy that is manifested by its portfolio mix changing towards
sustainable energy sources over the long term. Active engagements with stakeholders to clarify AboitizPower’s
ESG strategy are undertaken to clarify the Company’s positions and plans to achieve its sustainability goals in
the context of the Philippine energy and growth plans. The market for fuel, particularly coal, is also being
actively monitored as currently there are a lot of risk drivers that are starting to emerge that are coming from
sustainability policies and dynamic domestic and international trade policies. The most recent fuel-related risk
is the month-long export ban on coal announced by the Indonesian government which put at risk the continued
normal and full operation of the Company’s coal power plants. While the ban was temporary, the Company has
been developing a more robust risk mitigation plan against potential loss or unavailability of coal suppliers.

Disruptive and new technology are likewise emerging risks the Company continues to monitor. Among others,
the battery storage and the digitization or internet of things are potential transformers of the power business.
Energy storage could play a wider role in the global energy markets moving from limited uses to displacing
power generation due to its potential for reliability, quality, and its capability for renewables integration. The
internet of things has the potential to significantly transform the power sector by optimizing operations,
managing asset performance. Other technologies are expected to impact power generation and transmission
segments. The Company sees these technologies both as threats and opportunities.

Such risks are captured and validated in the semi-annual risk assessment process and during the environmental
scans of the strategic planning and annual organizational planning process of AboitizPower, and are subjected
to further study by subject matter experts. These emerging risks are reported and discussed as part of the Group
Risk Management Council and Board Risk and Reputation Management Committee regular agenda.

(b) Requirements as to Certain Issues or Issuers

(i) Debt Issues

(a) Shelf Registration of Thirty Billion Peso Fixed-Rate Bonds issued in 2017 and 2018

On June 19, 2017, SEC issued an Order of Registration and a Certificate of Permit to Offer Securities for
AboitizPower’s fixed-rate corporate retail bonds in the aggregate amount of up to ₱30 bn (“2017
Bonds”). The 2017 Bonds were registered under the shelf registration program of the SEC and are to be
issued in tranches.

Series “A” Three Billion Peso Fixed Rate Bonds issued in July 2017

Series “A” bonds were issued on July 3, 2017 with an aggregate amount of ₱3 bn, a tenor of ten years,
and fixed interest rate of 5.3367% per annum. Interest is payable quarterly in arrears on January 3, April
3, July 3, and October 3 of each year, or the subsequent banking day without adjustment if such interest
payment date is not a banking day. AboitizPower engaged BPI Capital Corporation (BPI Capital) as Issue
Manager and Underwriter, BPI Asset Management and Trust Group (BPI-AMTG) as Trustee, and the
Philippine Depository & Trust Corporation (PDTC) as the Registrar and Paying Agent. The Series “A”
bonds received a credit rating of "PRS Aaa" with Stable Outlook from the Philippine Rating Services
Corporation (Philratings), and is listed with the Philippine Dealing & Exchange Corporation (PDEx).

AboitizPower received the aggregate amount of ₱2.97 bn as proceeds from the offer and sale of the
Series “A” bonds. AboitizPower has been paying interest to its bond holders since October 2017.

Use of Proceeds

As of December 31, 2017, the proceeds of the Series “A” bonds were fully utilized for the following
projects:

64 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Projected Usage
Name of Project Actual Usage
(Per Prospectus)
Equity infusions into GNPD in 2017 ₱2,206,373 ₱1,255,745
Equity infusions into GNPD in 2018 764,395 1,711,317
Bond issuance costs 29,232 32,938
TOTAL ₱3,000,000 ₱3,000,000
Note: Amounts are in thousands

Series “B” and Series “C” Ten Billion Peso Fixed Rate Bonds issued in October 2018

Series “B” and Series “C” bonds, with an aggregate amount of ₱10 bn and an oversubscription option
of ₱5 bn, were issued on October 12, 2018. The Series “B” bonds have an interest rate of 7.5095% per
annum, and will mature in 2024, while the Series “C” bonds have an interest rate of 8.5091% per annum,
and will mature in 2028. Interest is payable quarterly in arrears on January 25, April 25, July 25, and
October 25 of each year, or the subsequent banking day without adjustment if such interest payment
date is not a banking day.

AboitizPower appointed BDO Capital & Investment Corporation (BDO Capital) as Issue Manager, BDO
Capital, BPI Capital, and United Coconut Planters Bank as Joint Lead Underwriters, BDO Unibank, Inc.
Trust & Investments Group (BDO Trust) as Trustee, and PDTC as the Registry and Paying Agent for the
transaction. The Series “B” and Series “C” bonds received the highest possible rating of PRS “Aaa” from
PhilRatings and are listed with PDEx.

AboitizPower received the aggregate amount of ₱7.5 bn as proceeds from the offer and sale of the Series
“B” bonds and ₱2.5 bn for the Series “C” bonds. AboitizPower has been paying interest to its bond
holders since January 2019 for the Series “B” and Series “C” bonds.
Use of Proceeds

As of September 30, 2019, the proceeds of the Series “B” and Series “C” bonds were fully utilized for
the following projects:

Projected Usage
Name of Project Actual Usage
(Per Prospectus)
Refinancing of the Medium-Term
₱8,700,000 ₱8,700,000
Loan of Therma Power, Inc.
Bond issuance costs 118,868 121,924
General corporate purposes 1,381,132 1,378,076
TOTAL ₱10,200,000 ₱10,200,000
Note: Amounts are in thousands

Series “D” 7.25 Billion Peso Fixed Rate Retail Bonds issued in October 2019

Series “D” bonds, with an aggregate amount of ₱7 bn and an oversubscription of ₱5 bn, were issued on
October 14, 2019. The Series “D” bonds have an interest rate of 5.2757% per annum, and will mature
in 2026. Interest is payable quarterly in arrears on January 14, April 14, July 14, and October 14 of each
year, or the subsequent banking day without adjustment if such interest payment day is not a banking
day.

AboitizPower appointed BDO Capital and First Metro Investment Corporation (FMIC) as Joint Issue
Managers, Joint Bookrunners and Joint Lead Underwriters, and BDO Trust as Trustee, and PDTC as the
Registry and Paying Agent of the transaction. The Series “D” bonds received the highest possible rating
of PRS “Aaa” from PhilRatings and is listed with PDEx.

The Company received the aggregate amount of ₱7.25 bn as proceeds from the offer and sale of the
Series “D” bonds. AboitizPower has been paying interest to its bond holders since January 2020 for the
Series “D” bonds.

65 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Use of Proceeds

As of December 31, 2019, the proceeds of the Series “D” bonds were fully utilized for the following
projects:

Projected Usage
Name of Project Actual Usage
(Per Prospectus)
Repayment of short-term loan ₱7,161,972 ₱7,250,000
Bonds issuance cost 88,028 -
TOTAL ₱7,250,000 ₱7,250,000
Note: Amounts are in thousands

Series “E” and “F” 9.55 Billion Peso Fixed Rate Retail Bonds issued in July 2020

Series “E” and Series “F” bonds, with an aggregate amount of ₱6 bn and an oversubscription option of
₱3.55 bn, were issued on July 6, 2020. The Series “E” bonds have an interest rate of 3.125% per annum,
and will mature in 2022, while the Series “F” bonds have an interest rate of 3.935% per annum, and will
mature in 2025. Interest is payable quarterly in arrears on January 6, April 6, July 6, and October 6 of
each year, or the subsequent banking day without adjustment if such interest payment date is not a
banking day.

AboitizPower appointed BDO Capital, China Bank Capital Corporation (China Bank Capital), and FMIC as
the Joint Issue Managers and Joint Lead Underwriters, BDO Trust as Trustee, and PDTC as the Registry
and Paying Agent for the transaction. The Series “E” and Series “F” bonds have been rated PRS “Aaa”
with a stable outlook from PhilRatings on April 8, 2020, and are listed with PDEx.

AboitizPower received the aggregate amount of ₱9,550,000,000.00 bn as proceeds from the offer and
sale of the Series “E” and Series “F” bonds. AboitizPower has been paying interest to its bond holders
since October 2020 for the Series “E” and Series “F” bonds.

Use of Proceeds

As of December 31, 2021, the proceeds of the Series “E” and Series “F” bonds were utilized for the
following projects:

Projected Usage
Name of Project Actual Usage
(Per Prospectus)
Reimburse Previous Equity ₱6,736,749 ₱6,736,749
Contributions to GNPD through AA
Thermal and TPI
Fund Succeeding Equity Infusions in 2,082,873 2,522,627
AA Thermal and TPI
General corporate purposes 614,889 177,077
Bond issuance costs 115,489 113,547
TOTAL ₱9,550,000 ₱9,550,000
Note: Amounts are in thousands

Per Final Prospectus Actual Usage

Gross Proceeds ₱9,550,000 ₱9,550,000
Net Proceeds 9,434,511 9,436,453
Note: Amounts are in thousands

(b) Shelf Registration of Thirty Billion Peso Fixed-Rate Bonds issued in 2021

On December 18, 2020, AboitizPower filed a Registration Statement with the SEC for the registration of
its proposed fixed rate retail bonds in the aggregate principal amount of ₱30 bn, to be registered under
the shelf registration program of the SEC (the “2021 Bonds”).

66 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Series “A” Eight Billion Peso Fixed Rate Bonds issued in March 2021

The first tranche of the 2021 Bonds, with a base issue size of up to ₱4 bn and an oversubscription of up
to ₱4 bn (the “Series “A” Bonds”) was issued on March 16, 2021. The Series “A” Bonds have an interest
rate of 3.8224% per annum, and will mature in 2026. Interest is payable in arrears on March 16, June
16, September 16, and December 16 of each year, or the subsequent banking day without adjustment
if such interest payment date is not a banking day.

AboitizPower appointed BDO Capital, BPI Capital, China Bank Capital, and FMIC as Joint Lead
Underwriters. BDO Trust was appointed as Trustee. The Series “A” Bonds received the credit rating of
“PRS Aaa” with Stable Outlook. AboitizPower listed the First Tranche Bonds with PDEx on March 15,
2021.

AboitizPower received the aggregate amount of P8 bn as proceeds from the offer and sale of the First
Tranche Bonds.

Use of Proceeds

As of December 31, 2021, the proceeds of the Series “A” Bonds were utilized for the following projects:

Projected Usage
Name of Project Actual Usage
(Per Prospectus)
Redemption of the 2014 Series A
₱6,600,000 ₱6,600,000
Bonds Maturing in 2021
Partial Funding for the Early
Redemption of the 2014 Series B 1,295,303 1,303,093
Bonds Originally Maturing in 2026
Bond issuance costs 104,697 96,907
TOTAL ₱8,000,000 ₱8,000,000

Per Final Prospectus Actual

Gross proceeds ₱8,000,000 ₱8,000,000
Net proceeds 7,895,303 7,903,093
Note: Amounts are in thousands

Series “B” and “C” Twelve Billion Peso Fixed Rate Bonds issued in November 2021

Series “B” and Series “C” bonds (collectively, the “Second Tranche Bonds”), with an aggregate amount
of ₱6 bn and an oversubscription option of ₱6 bn, were issued on November 15, 2021. The Series “B”
bonds have an interest rate of 3.9992% per annum, and will mature in 2025, while the Series “C” bonds
have an interest rate of 5.0283% per annum, and will mature in 2028. Interest is payable quarterly in
arrears on March 2, June 2, September 2, and December 2 of each year, or the subsequent banking day
without adjustment if such interest payment date is not a banking day.

AboitizPower appointed BDO Capital and ChinaBank Capital as Joint Issue Managers; and BDO Capital
and ChinaBank Capital as Joint Lead Underwriters and Joint Bookrunners. BDOTrust was appointed as
Trustee. The Second Tranche Bonds received the credit rating of “PRS Aaa” with Stable Outlook.
AboitizPower listed the Second Tranche Bonds with PDEX on December 2, 2021.

AboitizPower received the aggregate amount of ₱12 bn as proceeds from the offer and sale of the
Second Tranche Bonds.

67 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Use of Proceeds

As of December 31, 2021, the proceeds of the Second Tranche Bonds were utilized for the following
projects:

Projected Usage
Name of Project Actual Usage
(Per Prospectus)
Partially fund the equity
contributions for the construction
₱1,000,000 ₱677,000
of the 74 MW Solar power plant in
Pangasinan province
Refinancing of the 2020 Series E
9,000,000 -
Bonds Maturing in 2022
Fund future renewable projects 1,839,849 -
Bond issuance costs 160,151 150,195
TOTAL ₱12,000,000 ₱827,195
Note: Amounts are in thousands

Per Final Prospectus Actual

Gross proceeds ₱12,000,000 ₱12,000,000
Net proceeds 11,839,849 11,849,805
Note: Amounts are in thousands

Balance of the proceeds as of December 31, 2021: ₱11,172,805,000

Series “D” and “E” Ten Billion Peso Fixed Rate Bonds issued in March 2022

Series “D” and Series “E” bonds (collectively, the “Third Tranche Bonds”), with an aggregate amount of
up to ₱7 bn and an oversubscription option of up to ₱3 bn was issued on March 17, 2022. Series “D” of
the Third Tranche Bonds have a fixed interest rate of 5.3066% per annum maturing in 2027, and the
Series “E” bonds have a fixed interest rate of 5.7388% per annum maturing in 2029. Interest is payable
in arrears on March 17, June 17, September 17, and December 17 of each year, or the subsequent
banking day without adjustment if such interest payment date is not a banking day.

AboitizPower appointed BDO Capital, China Bank Capital, and FMIC as Joint Issue Managers; and BDO
Capital, China Bank Capital, FMIC, and SB Capital Investment Corporation as Joint Lead Underwriters
and Joint Bookrunners. The Third Tranche Bonds received a credit rating of “PRS Aaa” with Stable
Outlook from PhilRatings. AboitizPower listed the Third Tranche Bonds with PDEx on March 17, 2021.

AboitizPower received the aggregate amount of ₱10 bn as proceeds from the offer and sale of the Third
Tranche Bonds.

Item 2. Properties

The Company’s head office is located at 32nd Street, Bonifacio Global City, Taguig City, Metro Manila,
Philippines. The office space occupied by the Company is leased from a third party. As a holding company,
the Company does not utilize a significant amount of office space.

As of February 29, 2022, there are no definite plans of acquiring properties in the next twelve months.
Nonetheless, the Company plans to continually participate in future projects that become available to it and
will disclose the same in accordance with the applicable disclosure rules under the SRC.

On a consolidated basis, AboitizPower’s Property, Plant and Equipment were valued at around ₱203.24 bn as
of end-2021, as compared to ₱203.45 bn as of end-2020. The breakdown of the Company’s Property, Plant
and Equipment as of December 31, 2021 and December 31, 2020 is as follows:

68 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Property, Plant and Equipment
2021 2020
as of December 31
Land 1,807,495 ₱ 1,751,190
Buildings, Warehouses and Improvements 51,935,601 38,731,336
Powerplant, Equipment, and Streamfield Assets 126,267,975 138,325,267
Transmission, Distribution and Substation Equipment 25,319,519 23,002,108
Transportation Equipment 1,634,855 5,311,547
Office Furniture, Fixtures and Equipment 1,038,896 1,345,146
Leasehold Improvements 3,029,884 2,950,245
Electrical Equipment 10,661,921 8,176,921
Meter and Laboratory Equipment 2,899,385 2,383,018
Tools and Others 4,863,477 4,687,252
Construction in Progress 8,661,336 5,464,652
Right-of-use Assets 38,392,228 38,012,187
Less: Accumulated Depreciation and Amortization 69,684,027 63,441,503
Less: Accumulated Impairment 3,588,720 3,248,123
TOTAL 203,239,825 ₱203,451,243
Note: Values for the above table are in thousand Philippine Pesos.

Locations of Principal Properties and Equipment of the Company’s Subsidiaries are as follows:

Subsidiary Description Location/Address Condition

Tiwi, Albay, Caluan, Laguna; and In use for operations, used to
APRI Geothermal power plants
Sto. Tomas, Batangas secure long-term debt
Aseagas Raw land and improvements Lian, Batangas Ceased operations

Kivas, Banengneng, Benguet;

Beckel, La Trinidad, Benguet,
Hedcor Hydropower plants Bineng, La Trinidad, Benguet; In use for operations
Sal-angan, Ampucao, Itogon,
Benguet; and Bakun, Benguet
Santa Cruz, Sibulan, Davao del
Hedcor Sibulan Hydropower plant In use for operations
Sur
Santa Cruz, Sibulan, Davao del
Hedcor Tudaya Hydropower plant In use for operations
Sur
Namatec, Sabangan, Mountain
Hedcor Sabangan Hydropower plant In use for operations
Province
Bunker-C thermal power
CPPC Cebu City, Cebu In use for operations
plant
Bunker-C thermal power
EAUC Lapu-Lapu City, Cebu In use for operations
plant
Nasipit, Agusan del Norte and
Barge-mounted diesel power
TMI Barangay San Roque, Maco, In use for operations
plants
Compostela Valley
Barge-mounted diesel power
TMO Navotas Fishport, Manila In use for operations
plants
Coal-fired thermal power In use for operations, used to
TSI Davao City and Davao del Sur
plants secure long-term debt
Buildings/plants, equipment,
TPVI Naga City, Cebu In use for operations
and machinery
Coal-fired thermal power In use for operations, used to
TVI Bato, Toledo, Cebu
plants secure long-term debt
Coal-fired thermal power
GMEC Mariveles, Bataan In use for operations
plants

69 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Subsidiary Description Location/Address Condition
Industrial land, buildings/
Cotabato Light plants, equipment, and Sinsuat Avenue, Cotabato City In use for operations
machinery
Industrial land, buildings/
P. Reyes Street, Davao City and
Davao Light plants, equipment, and In use for operations
Bajada, Davao City
machinery
Industrial land, buildings/
Jakosalem Street, Cebu City and
Visayan Electric plants, equipment, and In use for operations
J. Panis Street, Cebu City
machinery
Industrial land,
Lima Enerzone buildings/plants, equipment, Lipa City and Malvar, Batangas In use for operations
and machinery
Industrial land,
Balamban Enerzone buildings/plants, equipment, Balamban, Cebu In use for operations
and machinery

Item 3. Legal Proceedings

Material Pending Legal Proceedings

AboitizPower and its Subsidiaries are involved in various legal proceedings in the ordinary conduct of their
businesses. The Company believes that none of these legal proceedings will have a material effect on the
Company’s financial position and results of operations.

Visayan Electric, for example, received several assessments of real property taxes on its electric posts,
transformers, wires, machineries, air-conditioning units, and water pumps. Visayan Electric consistently
maintains that the electric posts, transformers, wires, machineries, air-conditioning units, water pumps and
their appurtenances are not considered real properties under the Civil Code of the Philippines, and therefore
are not lawful objects of real property tax. Further, Section 270 of the Local Government Code of 1991
provides that the collection of real property tax is mandatory within five years from the date they become
due, and that failure to collect the real property tax within the said period will bar collection thereof.

Visayan Electric has availed of Cebu City’s tax amnesty ordinance in settlement of its real property tax
assessment case amounting to ₱183mn covering the period from 1989 to 2019 pending before the Cebu City
Assessor’s Office. Visayan Electric was issued a tax certificate on January 5, 2021, clearing the company of
any and all real property tax liabilities for all its electric poles and their attachments located in Cebu City.

The other material pending legal proceedings involving the Company and its Subsidiaries are as follows:

Luzon Hydro Corporation vs. The Provincial Government of Benguet, represented by Governor Melchor D.
Diclas; Orlando T. Oidi, in his official capacity as the Provincial Assessor of Benguet Province; Imelda I.
Macanes, in her official capacity as the Provincial Treasurer of Benguet Province; Bado K. Pasule, in his
official capacity as the Municipal Assessor of Bakun, Benguet; and Merlita Tolito, in her official capacity as
the OIC-Municipal Treasurer of Bakun, Benguet
Civil Case No. 20I-CV-3558

In view of the finality of the SC's Decision in the case entitled: “National Power Corporation vs. Luzon Hydro
Corporation (LHC), Banggay T. Alwis, Municipal Assessor, Manuel C. Bagayao, Municipal Treasurer of Bakun,
Benguet, Erlinda Estepa, Provincial Assessor and Mauricio B. Ambanloc, Provincial Treasurer of the Province
of Benguet” docketed as GR No. 244450 and GR No. 244659, the Municipal Treasurer of Bakun issued real
property tax Bills for the period covering 2002 to 2019 amounting to ₱284,448,073.24 on January 16, 2020.

On February 3, 2020, LHC wrote to the Provincial Governor requesting for the amendment of the real
property tax Bills to align with the MOA dated December 20, 2012 by and between LHC and the Province of
Benguet. In the same letter, LHC also cited Executive Order (EO) No. 88, Series of 2019, which reduced the
liability for real property tax of IPPs such as LHC with BOT Agreements with Government Owned and

70 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Controlled Corporations to an amount equivalent to the tax due if computed at 15% assessment level and
condoned all interest and penalties for all years up to 2018.

On September 14, 2020, LHC filed a Petition with the Regional Trial Court (“RTC”) of La Trinidad, Benguet,
praying for the issuance of a writ of mandamus to compel the Province of Benguet to comply with the
provisions of the EO and recompute the real property tax liabilities of LHC. The Province of Benguet filed its
Comment with Motion to Dismiss, which was denied by the RTC. The RTC also directed the parties to
immediately manifest their conformity to the statement of undisputed facts, admitted documentary exhibits,
and the statement of legal issues. LHC filed its Comment on January 21, 2021 while the Province filed its
Compliance with Manifestation on February 5, 2021.

On March 23, 2021, a hearing was held through videoconference to discuss the factual issues raised by the
Province. The judge advised that an Amended Order will be issued containing the summary of admitted facts,
list of admitted facts, list of admitted documents, and statement of legal issues based on the respective
Comments or Manifestations filed by the parties. LHC filed its Memorandum on April 28, 2021.

On December 17, 2021, LHC received the RTC’s Decision dated November 18, 2021 denying the Petition. On
December 28, 2021, LHC filed with the Supreme Court a motion for extension of time, requesting a 30-day
extension from January 1, 2022, or until January 31, 2022, within which to file its Petition for Review on
Certiorari.

On February 2, 2022 9, LHC filed its Petition for Review on Certiorari with the Supreme Court. As of February
28, 2022, the Petition is pending before the Supreme Court.

G.R. No. 210245 entitled “Bayan Muna Representative Neri Javier Colmenares, et al. vs. Energy
Regulatory Commission, et al.”, Supreme Court; December 19, 2013

G.R. No. 210255 entitled “National Association of Electricity Consumers for Reforms, et al. vs. Manila
Electric Company, et al.”, Supreme Court; December 20, 2013

G.R. No. 210502 entitled “Manila Electric Company, et al. v Philippine Electricity Market Corporation, et
al.”, Supreme Court; January 8, 2014

On December 19, 2013, Bayan Muna representatives filed a Petition for Certiorari against ERC and Meralco
with the SC, questioning the alleged substantial increase in Meralco’s power rates for the billing period of
November 2013. These cases raised, among others, the: (i) legality of Sections 6, 29 and 45 of the EPIRA, (ii)
failure of ERC to protect consumers from high prices of electricity, and (iii) alleged market collusion by the
generation companies. These cases were consolidated by the SC, which issued a TRO preventing Meralco
from collecting the increase in power rates for the billing period of November 2013. The TRO was
subsequently extended by the SC for another 60 days, or until April 22, 2014. On April 22, 2014, the SC
extended the TRO indefinitely.

Meralco filed a counter-petition impleading all generation companies supplying power to the WESM to
prevent the generation companies from collecting payments on power purchased by Meralco from the WESM
during the contested billing period. The SC ordered other power industry participants (DOE, ERC, PEMC,
PSALM, and the generation companies) to respond to Meralco’s counter-petition.

The SC set the consolidated cases for oral arguments on January 21, 2014, February 4 and 11, 2014. After oral
arguments, all parties were ordered to file their comments and/or memoranda. Meralco has been prevented
from collecting the differential increase of the price hike. Because of Meralco’s counter-petition against the
generation companies, PEMC withheld settlement of the power purchases during the covered period.

9 On January 12, 2022, the Supreme Court issued Memorandum Order No. 10-2022 which, among others, extended until February 1, 2022 the filing

periods of any and all pleadings and other court submissions that will fall due in the month of January 2022 in view of the rising cases of COVID-19
due to the Omicron variant. Further, through Proclamation No. 1236 dated October 29, 2021, February 1, 2022 has been declared a Special (Non-
Working) Day in view of the celebration of Chinese New Year. Hence, all pleadings that will fall due on said date may be filed on the next business
day.

71 ∙ SEC FORM 17-A (ANNUAL REPORT)

 On February 7, 2019, petitioners in G.R. No. 210245 filed their Motion for Directions, Status Updates and
Immediate Resolution. As of February 28, 2022, these cases before the SC are still pending resolution, and
the SC has not lifted the TRO.

SC GR No. 224341 entitled "Philippine Electricity Market Corporation vs. Therma Mobile, Inc.", Supreme
Court
[CA G.R. SP No. 140177 entitled "PEMC v. Therma Mobile Inc.", Court of Appeals, Manila
SP Proc. No. 12790 entitled "Therma Mobile Inc. vs. PEMC", Regional Trial Court Branch 157-Pasig City
PEMC ECO-2014-0009 entitled "Therma Mobile, Inc. (TMO Power Plants Units 1-4) Possible Non-
Compliance with Must-Offer-Rule, Investigation Summary Report, dated August 4, 2014"]

The Enforcement and Compliance Office of the Philippines Electricity Market Corporation (PEMC-ECO)
conducted an investigation on TMO for possible non-compliance with the Must-Offer-Rule for the period
October 26, 2013 to December 25, 2013. PEMC-ECO concluded that TMO was non-compliant with the Must-
Offer-Rule for 3,578 intervals and recommended a penalty of ₱234.9 mn.

TMO filed its letter request for reconsideration on September 5, 2014, contending that it did not violate the
Must-Offer Rule because its maximum available capacity was limited to 100 MW due to: (a) the thermal
limitations of the old TMO 115-kV transmission line, and (b) the technical and mechanical constraints of the
old generating units and the component engines of the TMO power plants which were under various stages
of rehabilitation after having been non-operational for five years. Although TMO's rated capacity is 234 MW
(net), it could only safely and reliably deliver 100 MW during the November and December 2013 supply period
because of limitations of its engines and the 115-kV transmission line. This temporary limitation of TMO's
plant was confirmed during a dependable capacity testing conducted on November 21, 2013.

In its letter dated January 30, 2015, the PEMC Board of Directors denied TMO's request for reconsideration
and confirmed its earlier findings. On February 13, 2015, TMO filed a Notice of Dispute with PEMC to refer
the matter to dispute resolution under the WESM Rules, WESM Dispute Resolution Market Manual and the
ERC-PEMC Protocol.

On February 16, 2015, TMO filed a petition for TRO before the Pasig City RTC. In its Order dated February 24,
2015, the RTC granted TMO a 20-day temporary order of protection and directed PEMC to: (i) refrain from
demanding or collecting the amount of ₱234.9 mn as financial penalty; (ii) refrain from charging interest on
the financial penalty and having the same accrue; and (iii) refrain from transmitting PEMC-ECO's investigation
report to the ERC. TMO posted a bond in the amount of ₱234.9 mn to answer for any damage that PEMC may
suffer as a result of the Order. On April 1, 2015, the RTC rendered a Decision in favor of TMO. PEMC appealed
the RTC decision before the Court of Appeals (CA) and sought to reverse and set aside the decision of the
RTC.

On December 14, 2015, the CA rendered a Decision denying PEMC’s Petition for Review and affirming the
April 1, 2015 Decision of RTC in favor of TMO. On June 6, 2016, PEMC filed a Petition for Review on Certiorari
with the SC to assail the December 14, 2015 CA Decision. TMO filed its Comment to PEMC's Petition for
Review and PEMC filed a Reply. In its March 29, 2017 Resolution, the SC noted TMO's Comment and PEMC's
Reply.

As of February 28, 2022, PEMC’s Petition is still pending before the SC.

SC G.R. Nos. 244449 and 244455-56 entitled “Energy Regulatory Commission vs. Therma Mobile, Inc.,
Manila Electric Company and AP Renewables, Inc.”, Supreme Court;

[CA G.R. SP. No. 152588 entitled “Therma Mobile, Inc. vs. Energy Regulatory Commission, Atty. Alfredo P.
Vergara, Jr. and Engr. Nelson D. Canlas, in their capacity as Investigating Officers (IOs) of the Investigatory
Unit constituted by the Honorable Commission pursuant to its Office Order No. 38, Series of 2013 dated
December 26, 2013, as amended by Office Order No. 82, Series of 2017", Court of Appeals, Manila;

ERC Case No. 2015-025 MC entitled “Atty. Isabelo Joseph P. Tomas II, in his capacity as the Investigating
Officer of the Investigatory Unit constituted by the Honorable Commission pursuant to its Office Order No.
38, Series of 2013 dated December 26, 2013 vs Meralco and Therma Mobile, Inc. [For Violation of Section

72 ∙ SEC FORM 17-A (ANNUAL REPORT)

 45 of RA 9136, otherwise known as EPIRA, Rule 11, Section 1 of IRR of the EPIRA (Commission of an Anti-
Competitive Behavior, particularly Economic Withholding)]”, ERC Pasig City, June 4, 2015;

ERC Case No. 2015-027 MC entitled “Atty. Isabelo Joseph P. Tomas II, in his capacity as the Investigating
Officer of the Investigatory Unit constituted by the Honorable Commission pursuant to its Office Order No.
38, Series of 2013 dated December 26, 2013 vs Therma Mobile, Inc. [For Violation of Section 45 of RA 9136,
otherwise known as EPIRA, Rule 11, Section 1 and 8(e) of IRR of the EPIRA (Commission of an Anti-
Competitive Behavior, particularly Physical Withholding)]”, ERC, Pasig City, June 4, 2015;

Pursuant to the allegations in the Bayan Muna SC case, the Investigation Unit of ERC (“ERC-IU”) conducted
investigations on the alleged anti-competitive behavior and market abuse committed by some participants
of the WESM, including TMO.

On January 24, 2014, ERC issued a Subpoena Ad Testificandum and Duces Tecum directing TMO’s
representative to give clarification on matters pertaining to offers per trading interval involving the November
to December 2013 supply months and provisions on the PSA between Meralco and TMO. The representative
was likewise directed to bring relevant documents.

On January 29, 2014, TMO filed its Compliance and Submission to the Subpoena Duces Tecum. Further, on
March 11, 2014, TMO filed its Memorandum, arguing that it did not commit any act constituting anti-
competitive behavior and/ or misuse of market power. TMO then requested ERC-IU to terminate and close
the investigation.

On May 20, 2015, ERC-IU issued its report and found that in bidding the way they did for the November and
December 2013 supply months, TMO and Meralco allegedly committed Economic Withholding, and TMO
committed Physical Withholding, and thus recommended the filing of cases for Anti-Competitive Behavior
against TMO and Meralco.

On June 23, 2015, ERC ordered Meralco and TMO to file their respective Answers to the Complaint. On August
24, 2015, TMO filed its Answers praying for the dismissal of the Complaints.

In its Manifestation dated October 7, 2016, ERC-IU manifested the resignation of Atty. Isabelo Tomas as
Investigating Officer (IO) and the appointment of Director Alfredo Vergara, Jr. and Engr. Nelson Canlas as new
IOs. In a separate pleading, the new IOs filed their Reply to various motions filed by TMO.

On July 27, 2016, Meralco filed in ERC Case No. 2015-025MC an Urgent Motion to Dismiss with Motion to
Suspend Proceedings on the ground that ERC has no jurisdiction over anti-competitive behavior cases, and
that jurisdiction is with PCC. On July 28, 2016, TMO filed in the same case a Manifestation and Motion
adopting Meralco’s Urgent Motion to Dismiss. On August 1, 2016, TMO also filed its Manifestation and
Motion, which sought the dismissal of ERC Case No. 2015-027MC for lack of jurisdiction.

In an Order dated February 2, 2017, ERC denied Meralco’s and TMO’s motions to dismiss for lack of
jurisdiction. TMO filed its Motion for Reconsideration, which the ERC subsequently denied in its Order dated
June 20, 2017.

On September 18, 2017, TMO filed a Petition for Certiorari with the CA, praying that the CA: (i) issue a TRO
commanding the ERC to desist from conducting further proceedings in ERC Case No. 2015-025MC and ERC
Case No. 2015-027MC; (ii) after proceedings, issue a Writ of Preliminary Injunction; and (iii) annul and set
aside the February 2, 2017 and June 20, 2017 ERC Orders.

In a Resolution dated October 2, 2017, the CA directed the respondents to file their comment on TMO’s
Petition for Certiorari and denied TMO’s prayer for a TRO. TMO filed a Motion for Partial Reconsideration of
the CA’s October 2, 2017 Resolution, which the CA denied. Thereafter, the CA issued its Notice of Judgment
and Decision dated May 23, 2018, which denied TMO’s Petition. On June 20, 2018, TMO filed its Motion for
Reconsideration of CA's Decision dated May 23, 2018. In a Resolution dated January 28, 2019, the CA denied
the motions for reconsideration filed by TMO, Meralco and APRI and the motion for partial reconsideration
filed by the ERC.

73 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Subsequently, ERC filed a Petition dated February 21, 2019 with the SC via Rule 45 of the Rules of Court. In
the Petition, ERC challenged the CA Decision and Resolution insofar as the CA ruled that the PCA repealed
the parts of the EPIRA that granted jurisdiction to ERC over anti-competition matters in the energy sector,
and that PCC has original and exclusive jurisdiction over anti-competition matters, including those affecting
the energy sector after the effectivity of the PCA.

In a Resolution dated July 30, 2019, the SC directed the respondents to file their Comments on ERC’s Petition.
On November 25, 2019, TMO filed its Manifestation with the SC. As of February 28, 2022, ERC’s Petition is
still pending with the SC.

Meanwhile, on March 26, 2021, virtual hearings were held with respect to ERC Case No. 2015-025 MC and
ERC Case No. 2015-027. On August 27, 2021, the parties had their pre-trial conferences in these cases.
Thereafter, the parties have filed motions in relation to matters arising from the pre-trial conferences. As of
February 28, 2022, the motions are still pending with the ERC.

SC G.R. Nos. 244449 and 244455-56 entitled “Energy Regulatory Commission vs. Therma Mobile, Inc.,
Manila Electric Company and AP Renewables, Inc.”, Supreme Court;

CA G.R. SP. No. 152613 entitled, “AP Renewables, Inc. vs. Energy Regulatory Commission and Directors
Alfredo P. Vergara, Jr. and Engr. Nelson Canlas, in their capacity as the Investigating Officers of the
Investigatory Unit of the Energy Regulations Commission”, Court of Appeals, Manila

ERC Case No. 2015-038 MC entitled “Energy Regulatory Commission vs. AP Renewables, Inc. ([Violation of
Section 45 of EPIRA, Rule 11, Sec. 1 and 8 (E) of the Implementing Rules and Regulations (Commission of an
Anti-Competitive Behavior, particularly, Physical Withholding)]”, ERC, Pasig City, June 9, 2015

ERC-IU conducted investigations on the alleged anti-competitive behavior and market abuse committed by
some participants of the WESM, including APRI. On May 20, 2015, ERC-IU released its report holding that
APRI’s non-compliance with the Must-Offer Rule for four intervals is tantamount to Physical Withholding
which, it alleged, is a form of anti-competitive behavior.

On June 9, 2015, complainant Atty. Isabelo Joseph Tomas III, Investigating Officer of the IU, filed the complaint
for Anti-Competitive Behavior against APRI. On June 23, 2015, ERC issued an Order directing APRI to file its
answer within 15 days from notice.

On July 1, 2015, APRI received the summons and complaint. Subsequently, on July 7, 2015, APRI filed a Motion
praying that: (a) the Complainant serve upon APRI the complete copy of the complaint and its annexes; (b)
the Complainant clarify and put on record the answer to the following issues: (i) which of Makban Plants’
generating units is the subject of the complaint; and (ii) the dates and times of the four intervals mentioned
in the complaint during which APRI allegedly offered “less than its total registered capacity.” Meanwhile, on
July 29, 2015, APRI filed its Answer ad cautelam.

In its Manifestation dated October 7, 2016, ERC-IU manifested the resignation of Atty. Isabelo Tomas as IO
and the appointment of new IOs. The new IOs filed their Reply to various motions filed by APRI.

Subsequently, APRI filed a Motion to Dismiss dated July 29, 2016, arguing that jurisdiction over the case is
vested in the PCC. APRI also filed its Ad Cautelam Pre-Trial Brief and Judicial Affidavits. ERC denied APRI’s
Motion to Dismiss, and APRI’s subsequent Motion for Reconsideration.

On September 19, 2017, APRI filed a Petition for Certiorari (with application for TRO and Writ of Preliminary
Injunction) with the CA (CA G.R. SP. No. 152613), praying for the CA to: (i) issue a TRO commanding ERC to
desist from conducting further proceedings in ERC Case. No. 2015-038MC; (ii) after proceedings, issue a Writ
of Preliminary Injunction; and (iii) annul and set aside the February 2, 2017 and June 20, 2017 ERC Orders,
and dismiss the complaint and ERC proceedings with prejudice.

On November 6, 2017, the IOs filed a Motion for Consolidation seeking to consolidate CA G.R. SP. No. 152613
with TMO’s Petition in CA GR. No. 152588. Therafter, the CA issued its Notice of Judgment and Decision dated

74 ∙ SEC FORM 17-A (ANNUAL REPORT)

 May 23, 2018, which denied APRI’s Petition. On June 18, 2018, APRI filed its Motion for Reconsideration of
the CA's Decision dated May 23, 2018.

In a Resolution dated January 28, 2019, the CA denied the motions for reconsideration filed by APRI, Meralco,
and TMO and the motion for partial reconsideration filed by ERC.

Subsequently, ERC filed a Petition dated February 21, 2019 with the SC via Rule 45 of the Rules of Court. In
the Petition, ERC challenged the CA Decision and Resolution insofar as the CA ruled that the PCA repealed
the parts of the EPIRA that granted to ERC jurisdiction over anti-competition matters in the energy sector,
and that the PCC has original and exclusive jurisdiction over anti-competition matters including those
affecting the energy sector after the effectivity of the PCA.

In a Resolution dated July 30, 2019, the SC directed the respondents to file their Comments on ERC’s Petition.
On November 4, 2019, APRI filed its Comment with the SC. As of February 28, 2022, ERC’s Petition is still
pending with the SC.

Meanwhile, on March 26, 2021, a hearing was held in ERC Case No. 2015-038 MC. As of February 28, 2022,
this case is still pending with the ERC.

Consolidated Regulated Price Case (ERC vs. Various Generation Companies and PEMC) G.R. Nos. 246621-
30, and G.R. Nos. 247352-61, Petitions for Review on Certiorari, Supreme Court;

[Consolidated Regulated Price Case against the Energy Regulatory Commission, Petition for Review on
Certiorari, Court of Appeals, Manila;

ERC Case No. 2014-021 MC entitled “In the Matter of the Prices in the WESM for the Supply Months of
November and December 2013 and the Exercise by the Commission of its Regulatory Powers to Intervene
and Direct the Imposition of Regulated Prices therein without Prejudice to the On-going Investigation on
the Allegation of Anti- Competitive Behavior and Possible Abuse of Market Power Committed by Some
WESM Participants”, March 28, 2014]

ERC conducted an investigation on the alleged collusion by the generation companies to raise the WESM
prices. Subsequently, ERC issued an Order in ERC Case No. 2014-021 MC dated March 3, 2014 (the “ERC
Order”), declaring as void the Luzon WESM prices during the November and December 2013 supply months.
ERC also declared the imposition of regulated prices for such billing periods and directed PEMC to calculate
the regulated prices and implement the same in the revised November and December 2013 WESM bills of
the concerned distribution utilities in Luzon, except for Meralco whose November 2013 WESM bill was
maintained in compliance with the TRO issued by the SC.

Pursuant to the ERC Order, on March 18, 2014, PEMC issued adjusted billing statements for all generators
trading in the WESM, including Cebu-based EAUC and CPPC, recalculating the WESM prices.

The Company’s Affiliates and Subsidiaries, APRI, TLI, TMO, AESI, AdventEnergy, SN Aboitiz Power-Magat, SN
Aboitiz Power-Benguet, CPPC, and EAUC filed their respective Motions for Reconsideration, questioning the
validity of the ERC Order on the ground of lack of due process, among others.

ERC, in its Order dated October 15, 2014, denied said Motions for Reconsideration. SN Aboitiz Power-
Benguet, SN Aboitiz Power-Magat, APRI, TLI, and TMO filed their Petitions for Review (the “Petitions”) before
the CA on November 19, 24, December 1, and 4, 2014, respectively. The CA ordered the consolidation of the
Petitions on October 9, 2015.

On November 7, 2017, the CA granted the Petitions. ERC’s March 3, 2014 Order, among other orders, were
declared null and void, and the Luzon WESM market prices in November and December 2013 were declared
valid and therefore reinstated.

Thereafter, ERC and Meralco filed their respective motions for reconsideration. Several entities also filed
motions to intervene in the case. APRI, TLI, and TMO filed their oppositions to the motions for reconsideration
and motions to intervene. The CA denied the motions to intervene filed by several entities, which thereafter

75 ∙ SEC FORM 17-A (ANNUAL REPORT)

 filed their motions for reconsideration. In an Omnibus Resolution dated March 29, 2019, the CA denied the
motions for reconsideration by ERC and Meralco, as well as the motions for reconsideration filed by several
entities that wanted to intervene in the case.

In June 2019, ERC, Meralco, and several entities filed their Petitions for Review on Certiorari with the SC,
asking the latter to reverse and set aside the CA Decision dated November 7, 2017 and the CA Omnibus
Resolution dated March 29, 2019. They also prayed that the SC reinstate the ERC Orders.

In September to October 2019, the SC issued Resolutions denying the Petitions for Review on Certiorari filed
by several entities, including Calco Industries Inc., Paperland, Alyansa ng mga Grupong Haligi at Teknolohiya
Para sa Mamamayan (AGHAM), Ateneo de Manila University, Citizenwatch, Riverbanks Dev’t. Corp., Steel
Angles Shapes & Sections Manufacturers, for failure to show any reversible error on the part of the CA in
promulgating the Decision dated November 7, 2017 and Omnibus Resolution dated March 29, 2019.

In a Resolution dated September 11, 2019, the SC required respondents to file their Comments to ERC’s
Petition for Review on Certiorari. On January 28, 2020, TMO and TLI filed their Consolidated Comment (to
the Petition for Review on Certiorari dated June 13, 2019); whereas APRI filed its Comment (on the Petition
for Review on Certiorari dated June 13, 2019) on February 11, 2020.

In a Resolution dated February 10, 2020, the SC required respondents to file their Comments on Meralco’s
Petition for Review on Certiorari dated June 13, 2019. On July 9, 2020, APRI filed its Comment, and TLI and
TMO filed their Consolidated Comment to Meralco’s Petition for Review on Certiorari.

Subsequently, the SC issued a Resolution dated March 11, 2020 requiring the respondents to comment on
San Beda University’s Motion for Leave to Intervene and to Admit Petition-In-Intervention. On October 2,
2020, APRI filed its Opposition to San Beda University’s Motion; while TLI and TMO filed their Opposition on
October 21, 2020.

In a Resolution dated November 4, 2020, the SC resolved to consolidate and transfer the case with G.R. Nos.
247352-61 to the case with G.R. Nos. 246621-30. In a Resolution dated June 23, 2021, the SC required Meralco
to file its Consolidated Reply to respondents’ Comments, which Meralco filed on October 19, 2021.

As of February 28, 2022, ERC’s and Meralco’s petitions are pending resolution by the SC.

ERC Case No. 2013-077 MC entitled “In Re: Petition for Dispute Resolution: Manila Electric Company
(Meralco) vs. South Premier Power Corporation (SPPC), Masinloc Power Partners Company, Ltd. (MPPCL),
AP Renewables, Inc. (APRI), Therma Luzon, Inc. (TLI), San Miguel Energy Corporation (SMEC) and SEM-
Calaca Power Corporation (SCPC)", August 29, 2013

On August 29, 2013, Meralco filed a petition before ERC against TLI and APRI, among other Successor
Generating Companies (SGCs), docketed as ERC Case No. 2013-077 MC, where Meralco prayed that it be
refunded by the respondent-SGCs of the transmission line losses. The petition arose from a claim of refund
on account of the alleged over-recoveries of transmission line losses.

The petition was filed by Meralco pursuant to ERC Order dated March 4, 2013 and July 1, 2013 in ERC Case
No. 2008- 083 MC where the SGCs were not parties to.

On September 20, 2013, APRI and TLI, together with the other SGCs, filed a Joint Motion to Dismiss arguing
that Meralco’s petition should be dismissed for failure to state a cause of action and ERC’s lack of jurisdiction
over the subject matter of the case. The motion argued that: (i) Meralco cannot base its cause of action
against the SGCs on a decision issued by ERC in another case where none of the SGCs were made parties to
the case; and (ii) Meralco's claim is in a nature of a claim for sum of money which is properly within the
jurisdiction of regular courts. The Joint Motion to Dismiss has since then been submitted for resolution with
ERC.

As of February 28, 2022, ERC has yet to render its decision on the Joint Motion to Dismiss.

76 ∙ SEC FORM 17-A (ANNUAL REPORT)

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year
covered by this report.

77 ∙ SEC FORM 17-A (ANNUAL REPORT)

 PART II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters

(1) Market Information

AboitizPower’s common shares are traded on the PSE.

The high and low stock prices of AboitizPower’s common shares for each quarter of the past two years were
as follows:

2021 2020 2019

High Low High Low High Low
First Quarter ₱27.35 ₱23.05 ₱35.00 ₱23.45 ₱39.20 ₱33.70
Second Quarter 24.90 20.50 30.00 25.50 ₱38.00 ₱34.15
Third Quarter 34.20 23.00 28.25 24.30 ₱40.35 ₱34.10
Fourth Quarter 34.00 29.30 28.55 25.60 ₱40.40 ₱33.00

The closing price of AboitizPower common shares as of March 23, 2022 is ₱35.40 per share.

(2) Holders

As of March 23, 2022, AboitizPower has 592 stockholders of record, including PCD Nominee Corporation
(Filipino) and PCD Nominee Corporation (Foreign). Common shares outstanding as of same date were
7,358,604,307 shares.

The top 20 stockholders of AboitizPower as of March 23, 2022 are as follows:

Name Number of Shares Percentage

1) Aboitiz Equity Ventures Inc. 3,825,794,642 51.99%
2) JERA Asia Private Limited 1,986,823,063 27.00%
3) PCD Nominee Corporation (Filipino) 1,097,446,124 14.91%
4) PCD Nominee Corporation (Foreign) 157,411,177 2.14%
5) Bauhinia Management, Inc. 20,948,380 0.28%
6) Dominus Capital Inc. 14,009,949 0.19%
6) FMK Capital Partners, Inc. 14,009,949 0.19%
7) Portola Investors, Inc. 13,713,337 0.19%
8) Hawk View Capital, Inc. 13,711,967 0.19%
9) Ixidor Holdings, Inc. 8,203,632 0.11%
10) San Fernando Electric Light & Power Co., Inc. 7,931,034 0.11%
11) Parraz Development Corporation 7,827,522 0.11%
12) Arrayanes Corporation 6,936,943 0.09%
13) Sabin M. Aboitiz 5,667,406 0.08%
14) Iker M. Aboitiz 5,465,100 0.07%
15) Danel C. Aboitiz 4,528,696 0.06%
16) Ramon Aboitiz Foundation, Inc. 3,900,000 0.05%
17) Tris Management Corporation 3,130,359 0.04%
18) Tinkerbell Management Corporation 3,042,454 0.04%
19) CAL Management Corporation 3,036,798 0.04%
20) Gitana Management & Dev’t. Corporation 2,817,091 0.04%
SUBTOTAL 7,206,355,623 97.93%
Other Stockholders 152,248,684 2.07%
TOTAL SHARES 7,358,604,307 100.00%

78 ∙ SEC FORM 17-A (ANNUAL REPORT)

 (3) Dividends

Since 2013, the Company’s dividend policy has been to declare an annual cash dividend payment ratio of 50%
of its consolidated net income from the previous fiscal year based on the audited financial statements of the
Company, in all cases subject to the approval of the Company’s Board of Directors. The policy changed the
previous cash dividend payment ratio of 33% of previous year’s net profits.

The cash dividends declared by AboitizPower to common stockholders from 2020 to the first quarter of 2022
are shown in the table below:

Cash Dividend Declaration

Year Total Declared Record Date Payment Date
Per Share Date
2022 (regular) ₱1.45 ₱10.67 bn 3/4/2022 3/18/2022 3/30/2022
2021 (regular) ₱0₱0.85 ₱6.25₱6.25 bn 3/5/2021 3/19/2021 3/31/2021
2020 (regular) ₱1.18 ₱8.68 bn 3/6/2020 3/20/2020 4/3/2020

There are no restrictions that limit the payment of dividends on common shares to stockholders of record as
of March 23, 2022.

(4) Recent Sales of Unregistered or Exempt Securities including Recent Issuance of Securities Constituting an
Exempt Transaction

AboitizPower does not have any recent sales of unregistered or exempt securities including recent issuances
of securities constituting an exempt transaction.

Item 6. Management’s Discussion and Analysis or Plan of Action

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of AboitizPower Corporation’s (“AboitizPower”, “Parent”, or the “Company”)
consolidated financial condition and results of operations should be read in conjunction with the consolidated financial
statements and accompanying schedules and disclosures set forth elsewhere in this report.

Top Five Key Performance Indicators

Management uses the following indicators to evaluate the performance of the Company and its Subsidiaries (the
Company and its Subsidiaries are hereinafter collectively referred to as the “Group”):

1. Share in Net Earnings of Associates and Joint Ventures. This represents the Group’s share in the undistributed
earnings or losses of its investees for each reporting period subsequent to the acquisition of said investment, net
of goodwill impairment cost, if any. It also indicates the profitability of the investment and investees' contribution
to the Group's net income.

Goodwill is the difference between the purchase price of an investment and the investor’s share in the value of the
net identifiable assets of the investee at the date of acquisition.

Manner of Computation:
Investee’s Net Income (Loss) x Investor’s % ownership - Goodwill Impairment Cost

2. Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA). The Company computes EBITDA as
earnings before extraordinary items, net finance expense, income tax provision, depreciation, and amortization. It
provides management and investors with a tool for determining the ability of the Group to generate cash from
operations to cover financial charges and income taxes. It is also a measure to evaluate the Group’s ability to service
its debts.

3. Cash Flow Generated. Using the Consolidated Statement of Cash Flows, management determines the sources and
usage of funds for the period and analyzes how the Group manages its profit and uses its internal and external

79 ∙ SEC FORM 17-A (ANNUAL REPORT)

 sources of capital. This aids management in identifying the impact on cash flow when the Group’s activities are in
a state of growth or decline, and in evaluating management’s efforts to control the impact.

4. Current Ratio. Current Ratio is a measurement of liquidity, calculated by dividing total current assets by total
current liabilities. It is an indicator of the Group’s short-term debt-paying ability. The higher the ratio, the more
liquid the Group.

5. Debt–to–Equity Ratio. Debt-to-Equity Ratio indicates how leveraged the Group is. It compares assets provided by
creditors to assets provided by shareholders. It is determined by dividing total liabilities by stockholders’ equity.

Year Ended December 31, 2021 versus Year Ended December 31, 2020

The table below shows the comparative figures of the key performance indicators for 2021 and 2020:

Key Performance Indicators 2021 2020

Amounts in thousands of ₱s, except for financial ratios

SHARE IN NET EARNINGS OF ASSOCIATES AND JOINT VENTURES 9,479,696 2,675,136
EBITDA 50,661,619 44,687,315
CASH FLOW GENERATED:
Net cash flows from operating activities 36,327,036 31,781,669
Net cash flows used in investing activities 1,018,171 (4,526,973)
Net cash flows used in financing activities (19,103,660) (25,914,010)
Net (Decrease)/Increase in Cash & Cash Equivalents 18,241,547 1,340,686
Cash & Cash Equivalents, Beginning 38,699,545 37,433,929
Cash & Cash Equivalents, End 57,130,243 38,699,545
CURRENT RATIO 1.53 1.38
DEBT-TO-EQUITY RATIO 1.75 1.96

• Share in net earnings in associates and joint ventures for the year 2021 increased by 254% compared to 2020.
The increase was mainly due to higher water inflows of SN Aboitiz Power-Magat and SN Aboitiz Power-Benguet
and the claim of liquidated damages for the delay in the construction of the GNPD plant.

• EBITDA for the year 2021 increased by 13% Year-on-Year (YoY). This was primarily due to the commissioning
revenue from GNPD Unit 1, higher water inflow, higher availability of the TLI, TSI, and TVI facilities, and higher
WESM dispatch in compliance with the must-offer rule.

• For the year ended 2021, cash and cash equivalents increased by ₱18.43 billion (bn) compared to 2020. This was
mainly due to the Parent’s retail bond issuance, partly offset by loans and lease payments during the year 2021.

• Current Ratio as of December 31, 2021 was at 1.53x as compared to 1.38x as of December 31, 2020. The increase
was primarily due to Parent’s retail bond issuance in 2021.

• Debt-to-Equity Ratio as of December 31, 2021 was at 1.75x, lower than the 1.96x recorded as of December 31,
2020.

Results of Operations

Net income for 2021 was ₱20.84 bn, which was 66% higher than the ₱12.58 bn reported in 2020. This translated to
earnings per share of ₱2.83 for 2021. The Company recognized non-recurring losses of ₱228 mn during 2021 (as
compared to the non-recurring gains of ₱45 mn in 2020), primarily due to the impairment losses of TPVI and RPEnergy,
which were partially offset by net foreign exchange gains on the revaluation of dollar-denominated liabilities. Without
these one-off gains, the Company’s core net income for 2021 was ₱21.1 bn, 68% higher than the ₱12.5 bn recorded
in 2020. This was primarily due to commissioning revenue from GNPD Unit 1, higher water inflow for AboitizPower’s

80 ∙ SEC FORM 17-A (ANNUAL REPORT)

hydro plants, higher availability of the TLI, TSI, and TVI facilities, and higher WESM dispatch in compliance with the
must-offer rule. During 2021, AboitizPower was also able to claim liquidated damages for the delay in the construction
of GNPD Units 1 and 2, and also received the final payment for business interruption claims resulting from the GMEC
and APRI outages in previous years.

Power Generation and Retail Electricity Supply (RES)

AboitizPower’s generation and retail supply business recorded EBITDA of ₱43.4 bn during 2021, 15% higher than the
₱37.7 bn recorded in 2020. This was due to the commissioning revenue from GNPD Unit 1, higher availability of the
Company’s TLI, TSI, and TVI facilities, higher water inflows for the hydro plants, and higher WESM dispatch in compliance
with the must-offer rule. These gains were partially offset by the lower margins resulting from the GMEC outage.
Capacity sold in 2021 increased by 10% to 3,753 megawatts (MW), compared to 3,417 MW in 2020. Energy sold
increased by 14% to 26,031 gigawatt-hours (GWh) for 2021, compared to 22,754 GWh during 2020.

Power Distribution

During 2021, AboitizPower’s distribution business recorded EBITDA of ₱7.5 bn, 5% higher than the ₱7.2 bn recorded
in 2020. Energy sales increased by 4% to 5,584 GWh for 2021, compared to 5,368 GWh for 2020. This was driven by
higher energy consumption resulting from recoveries in demand. Energy sales from the Residential, Commercial and
Industrial customer segments increased due to less stringent community quarantine during 2021 and the resumption
of operations of commercial and industrial customers.

Material Changes in Line Items of Registrant’s Statements of Income and Comprehensive Income

Consolidated Statements of Income

Net income attributable to equity holders of the Parent Company increased by ₱8.26 bn, or 66% YoY. The various
movements in line items are shown below to account for the increase:

(Amounts in thousands of ₱s)

Net Income Attributable to Equity Holders of the Parent (January - December 2020) ₱12,577,676

Increase in operating revenues 23,982,572

Increase in operating expenses (22,652,663)
Decrease in interest income (309,843)
Decrease in interest expense 663,163
Increase in share in net earnings of associates and joint ventures 6,804,560
Decrease in other income (4,714,998)
Decrease in provision for taxes 3,951,202
Decrease in income attributable to non-controlling interests 535,513
Total 8,259,506
Net Income Attributable to Equity Holders of the Parent (January - December 2021) ₱20,837,182

Operating Revenues
(22% increase from ₱110.38 bn to ₱134.36 bn)

The increase in operating revenues during 2021 as compared to 2020 was primarily due to higher availability of TLI,
TSI, and TVI facilities and higher WESM dispatch in compliance with the must-offer rule.

81 ∙ SEC FORM 17-A (ANNUAL REPORT)

Operating Expenses
(27% increase from ₱83.50 bn to ₱106.15 bn)

The increase in operating expenses during 2021 as compared to 2020 was mainly due to the higher cost of purchased
power and generated power.

Interest Income
(47% decrease from ₱653.00 mn to ₱343.00 mn)

The decrease in interest income during 2021 as compared to 2020 was primarily due to lower interest rates on money
market placements.

Interest Expense and other financing costs

(5% decrease from ₱14.25 bn to ₱13.59 bn)

Interest expense decreased in 2021 compared to 2020, due to lower interest accretion on lease liabilities as timely
payments were made on TLI’s obligation to PSALM. The refinancing of Hedcor Bukidnon project loan in September
2020, and the prepayment of Parent’s US dollar loan also contributed to lower interest expense in 2021. These were
partly offset by additional interest expenses recognized in 2021 on AboitizPower’s ₱9.55 bn and ₱8.00 bn retail bonds
issued in July 2020 and March 2021, respectively.

Share in Net Earnings of Associates and Joint Ventures

(254% increase from ₱2.68 bn to ₱9.48 bn)
Share in net earnings in associates and joint ventures for the year 2021 increased by 254% YoY. The increase was
mainly due to higher water inflows of SN Aboitiz Power-Magat and SN Aboitiz Power-Benguet, and the claim of
liquidated damages for the delay in the construction of the GNPD plant.

Other Income (Expenses) – net

(96% decrease from ₱4.93 bn to ₱214.00 mn other income)

The decrease in other income in 2021 as compared to 2020 was mainly due to the losses on the revaluation of foreign-
currency denominated liabilities.

Provision for Taxes

(65% decrease from ₱6.06 bn to ₱2.11 bn)

The decrease in provision for taxes was due to the application of the provisions of the CREATE Act reducing the regular
corporate income tax (RCIT) rate from 30% to 25%. The AboitizPower Group also recognized a reversal of deferred tax
on Net Operating Loss Carry-Over (NOLCO) during the year 2020 that resulted in higher provision for taxes during 2020
as compared to 2021.

Changes in Registrant’s Resources, Liabilities and Shareholders’ Equity

Assets

Total assets (as of December 31, 2021 compared to December 31, 2020) increased by ₱29.49 bn, or 7%. The major
movements of the accounts leading to the increase were as follows:

a) Cash and cash equivalents increased by ₱18.43 bn, or 48% (from ₱38.70 bn to ₱57.13 bn). This was due to
Parent's retail bond issuance, offset by loans and lease payments during the year 2021.

b) Trade and other receivables increased by ₱4.80 bn, or 22% (from ₱22.02 bn to ₱26.82 bn), primarily due to
higher revenues.

c) Inventories increased by ₱3.27 bn or 52% (from ₱6.31 bn to ₱9.57 bn). This was mainly driven by the increase
in spare parts, supplies and fuel inventory.

82 ∙ SEC FORM 17-A (ANNUAL REPORT)

 d) Other current assets decreased by ₱969.00 mn, or 9% (from ₱10.48 bn to ₱9.51 bn). This was mainly driven by
TVI’s utilization of restricted cash in accordance with its loan agreement.

e) Investments and advances increased by ₱3.12 bn, or 5% (from ₱61.83 bn to ₱64.95 bn). This was mainly driven
by GNPD’s capital contributions and share in earnings during the year 2021.

f) Intangible assets increased by ₱1.74 bn, or 4% (from ₱44.28 bn to ₱46.02 bn). This was primarily due to the
foreign exchange revaluation of GMEC’s goodwill, partly offset by amortization of existing assets.

g) Net pension assets increased by ₱37.00 mn, or 73% (from ₱50.00 mn to ₱87.00 mn). This was mainly due to
actuarial gains.

h) Deferred income tax assets decreased by ₱97.00 mn, or 6% (from ₱1.54 bn to ₱1.44 bn). This was mainly due
to the application of the provisions of the CREATE Act.

i) Other noncurrent assets decreased by ₱2.09 bn, or 23% (from ₱9.27 bn to ₱7.18 bn). This was mainly due to
the regular reduction in PSALM deferred adjustment of the Power Distribution group.

Liabilities

Compared to December 31, 2020, total liabilities as of December 31, 2021 increased by ₱8.49 bn, or 3%. The major
movements of accounts leading to the increase were as follows:

a) Short-term loans increased by ₱5.44 bn, or 41% (from ₱13.18 bn to ₱18.63 bn). This was mainly due to loan
availments by the AboitizPower Group during the year 2021 which were used for working capital purposes.

b) Trade and other payables increased by ₱4.37 bn, or 24% (from ₱18.37 bn to ₱22.74 bn). This was primarily due
to the increase in trade and fuel purchases.

c) Income tax payable decreased by ₱458.00 mn, or 63% (from ₱723.00 mn to ₱265.00 mn). This was mainly due
to the application of the provisions of the CREATE Act.

d) Customers’ deposits increased by ₱401.00 mn, or 6% (from ₱6.80 bn to ₱7.20 bn). This was mainly due to the
receipt of bill deposits from new customers.

e) Decommissioning liability increased by ₱678.00 mn, or 14% (from ₱5.01 bn to ₱5.69 bn). This was mainly due
to the recognition of additional decommissioning provisions on power plant assets of APRI.

f) Long-term debt (current and non-current portions) increased by ₱6.16 bn (from ₱175.88 bn to ₱182.04 bn).
This was mainly due to Parent’s retail bond issuance in 2021.

g) Lease liabilities (current and noncurrent portions) decreased by ₱5.49 bn (from ₱39.26 bn to ₱33.77 bn), as TLI
made timely payments during 2021 of its obligations to PSALM.

h) Long-term obligation on power distribution system (current and noncurrent portions) decreased by ₱18.00 mn,
or 10% (from ₱183.00 mn to ₱166.00 mn), due to regular payments.

i) Net derivative asset and liability increased by ₱2.85 bn (from ₱1.79 bn liability to ₱1.07 bn asset) during the
year 2021 due to hedging gains.

j) Deferred income tax liabilities decreased by ₱160.00 mn, or 21% (from ₱745.00 mn to ₱585.00 mn), mainly due
to the application of the provisions of the CREATE Act.

k) Other noncurrent liabilities decreased by ₱1.04 bn, or 95% (from ₱1.10 bn to ₱55.00 mn), mainly due to the
regular payments of the PSALM deferred adjustments.

83 ∙ SEC FORM 17-A (ANNUAL REPORT)

84 ∙ SEC FORM 17-A (ANNUAL REPORT)
Equity

Equity attributable to equity shareholders of the Parent increased by 16% (from ₱127.16 bn as of December 31, 2020
to ₱147.95 bn as of December 31, 2021) after the declaration of dividends in March 2021, net of comprehensive
income recognized during the year 2021. Cumulative translation adjustments increased by ₱5.28 bn, due to the
upward net adjustment in the fair value of the Group’s foreign currency forward and commodity swap contracts
designated as cash flow hedges, as well as the net assets translation effect of GMEC and LHC during the period.

Material Changes in Liquidity and Cash Reserves of Registrant

As of December 31, 2021, the Group’s cash and cash equivalents increased by 48% to ₱57.13 bn, from ₱38.70 bn as of
December 31, 2020.

Higher water inflows, higher availability of the Company’s thermal facilities, and higher spot sales resulted in higher
cash generated from operations during the year 2021 by ₱4.55 bn, which was a 14% increase YoY.

Net cash flows from (used in) investing activities reversed from -₱4.53 bn in 2020 to ₱1.02 bn in 2021 mainly due to
the increase in dividends received from associates.

The net cash flows used in financing activities decreased from ₱25.91 bn in the year 2020 to ₱19.10 bn in the year
2021 mainly due to lower payments of cash dividends and higher net availment of short-term loans.

Financial Ratios

As of December 31, 2021, current assets increased by 35% and current liabilities increased by 22% YoY. The current
ratio as of December 31, 2021 was at 1.53x compared to 1.38x as of December 31, 2020.

Consolidated debt to equity ratio as of December 31, 2021 was at 1.75x, lower than the 1.96x recorded at the end of
2020. This was due to a 3% increase in total liabilities and 16% increase in equity during the year 2021.

Outlook for the Upcoming Year/ Known Trends, Events, and Uncertainties which may have Material Impact on the
Registrant

AboitizPower remains focused on addressing the needs of its markets, namely: (1) providing reliable supply, at a (2)
reasonable cost, and with (3) minimal impact on the environment and communities. The Company believes that there
is no single technology that completely addresses the country’s energy requirements and that to address the
deficiency, a mix of power generation technologies is necessary. Thus, AboitizPower continues to pursue both
renewable projects and thermal technologies where and when it makes sense.

Despite increased competition in the power generation market, the Company believes that it has built the foundation
to sustain its long-term growth, as seen in its pipeline of new power generation projects.

The Company has over 1,000 MW of projects under construction which are expected to commercially operate in 2022:
the GNPower Dinginin Project (“Dinginin Project”); the PV Sinag Power Cayanga Project (“Cayanga Solar Project”); the
TMI Maco Hybrid Battery Energy Storage System Project (“Maco BESS Project”).

GNPD Unit 1 officially went on COD last January 26, 2022. Unit 2 has started commissioning. The target for Unit 2's
initial synchronization remains to be the second quarter of 2022, from which GNPD Unit 2 may start earning revenues.

The PV Sinag Power Cayanga Project is for the construction of a 94 megawatts peak (MWp) solar power plant located
in barangay Cayanga, municipality of Bugallon, Pangasinan. The EPC contract was awarded to JGC Philippines last
December 2021. Its groundbreaking ceremony was held last February 2022. The project is expected to commercially
operate by Q4 2022.

The Maco BESS Project is located in Maco, Compostela Valley. It has a storage capacity of 49 MW and is intended to
be used for ancillary services. Development activities are ongoing to integrate the battery energy storage system with
TMI’s Maco oil barge. The project nears completion at around 90% with the BESS barge moored in the TMI facility

85 ∙ SEC FORM 17-A (ANNUAL REPORT)

right next to the power barge. The mobilized technical team continues to work on the testing and commissioning
activities to get the plant running in May 2022. It will serve as a model for future battery investments as well as hybrid
renewable energy projects.

On top of the projects under construction, the Company has a 160 MWp of RE project expected to be issued a notice
to proceed in 2022: the PV Sinag Power Laoag project (“Laoag Solar Project”). The Laoag Solar Project is expected to
commercially operate by Q3 2023.

The Company also has an additional capacity of 721 MW of RE projects under priority development which are expected
to commercially operate by 2024 to 2025: the 10 MW SN AboitizPower Magat BESS Project; the 84 MWp PV Sinag
Power San Manuel Solar Project; the 44 MWp AP Renewable Energy Corporation Tarlac Solar Project; the 40 MW
Hedcor Bukidnon Kibungan Hydro Project; the 212 MWp PV Sinag Power Olongapo Solar Project; the 56 MWp PV Sinag
Power Ramon Solar Project; the 50 MWp PV Sinag Power Gamu Solar Project ; the 75 MWp SN AboitizPower-Magat
Floating Solar Project; and the 150 MWp Aboitiz Solar Power Inc Calatrava Solar Project.

In relation to AboitizPower’s existing capacity, the steam field operator for AP Renewables Inc. (APRI) has commenced
the drilling of 12 new wells, which are expected to result in a minimum 50 MW of aggregated individual well capacity
by 2023. Four wells were completed as of 2021,. Four more will be added by 2022, and another four by 2023. In Tiwi,
the initiative to convert waste heat from the geothermal brine to power a 15 MW Binary power plant is reaching the
final stages of tender. The project is expected to commercially operate by the Q3 of 2023.

The Company targets to double its capacity to 9,200 MW by 2030. It intends to achieve a 50:50 balance between its
renewable (“Cleanergy”) and thermal capacities, without new coal builds. This is expected to come from a portfolio of
renewables and selective baseload builds.

The Company aims to maximize opportunities from the implementation of the Renewable Portfolio Standards (“RPS”)
by the DOE. In line with DOE’s aspirational goal of a 35% share in renewable energy utilization by 2030, RPS is a market-
based policy that mandates power distribution utilities, electric cooperatives, and retail electricity suppliers to source
an agreed portion of their energy supplies from renewable energy facilities. The Company will continue to pursue
international opportunities, with a continued focus on renewable energy projects in wind, hydro, and solar in high
growth geographic markets with acceptable regulatory environments.
The Company targets to significantly grow Cleanergy by 3,700 MW, both domestically and internationally, and bring
its renewable portfolio to 4,600 MW by 2030.

The Company is optimizing its existing baseload facilities to meet critical market needs. Baseload demand will continue
to increase. There is a need to address this in the absence of new coal plants. AboitizPower is currently conducting
studies for viable alternatives to coal. In the event of a critical shortage, AboitizPower’s third unit options located in
existing baseload facilities may respond if called upon. The Company is also shifting its focus to gas for baseload
growth. It has early feasibility studies, and within the next ten years, expects to construct one gas plant with a capacity
of 1,000 MW, unless a cleaner technology proves to be the more economical option.

AboitizPower fully supports the DOE’s coal moratorium efforts to make the Philippine energy system more flexible,
resilient, and sustainable. AboitizPower is also closely and proactively monitoring the risks associated with climate-
related regulations and initiatives, including recent discussions on the early retirement of coal assets in the Philippines
and Indonesia. AboitizPower, through its parent company, AEV, is the first Philippine company to sign up and commit
to the Task Force on Climate-Related Financial Disclosure framework. The Company has taken steps to proactively
quantify the potential impacts of various climate regulations on its assets. The Company is monitoring this risk as part
of its risk management framework and is developing strategies to manage risks that are above certain risk thresholds.

Given the current state of power needs in the Philippines and the expected build progression of new plants over the
next ten years, AboitizPower believes its existing coal assets will need to continue to play a significant role for at least
another 15 to 20 years. AboitizPower is always looking at improvements to make sure it continues to operate its assets
responsibly and in compliance with all regulations.

The Company believes that it is well-positioned to take advantage of opportunities arising from developments in the
power industry. It expects its financial condition to give it the agility to create or acquire additional generating capacity
over the next few years.

86 ∙ SEC FORM 17-A (ANNUAL REPORT)

AboitizPower, together with its partners, has allotted ₱28 bn for capital expenditures in 2022, for the development
and construction of various solar power, hydro power, and battery energy-storage systems, and the continuous
improvement of the reliability of baseload plants. These include remaining investment for GNPD’s construction, a
general overhaul of GMEC, and development and construction of solar and hydro plants, as well as BESS projects. The
balance is allocated for maintenance of business, primarily to ensure the availability of sufficient baseload during the
2022 election period.

Last December 2021, JERA completed the acquisition of a 27% ownership stake in AboitizPower, which includes two
board seats. The partnership enables AboitizPower’s ten-year renewable energy expansion journey.

AboitizPower and JERA have agreed to explore immediate collaboration in the following areas: 1) development of
power projects, including (Liquified Natural Gas) LNG-to-Power projects; 2) management and sourcing of LNG fuel
supply; and 3) potential participation in aspects of plant operation and maintenance (O&M).

Other known trends, events, uncertainties which may have a material impact on AboitizPower have been discussed
extensively in sections of the Company’s Annual Report (e.g. for an extensive discussion on regulatory issues, see Effect
of Existing or Probable Government Regulations on the Business on page 39 of the Company’s 2021 Annual Report).

Year Ended December 31, 2020 versus Year Ended December 31, 2019

The table below shows the comparative figures of the key performance indicators for 2020 and 2019:

Key Performance Indicators 2020 2019

Amounts in thousands of ₱s, except for financial ratios

SHARE IN NET EARNINGS OF ASSOCIATES AND JOINT VENTURES 2,675,136 3,813,962
EBITDA 44,687,315 45,005,022
CASH FLOW GENERATED:
Net cash flows from operating activities 31,781,669 39,356,962
Net cash flows used in investing activities (4,526,973) (34,060,585)
Net cash flows used in financing activities (25,914,010) (14,376,055)
Net (Decrease)/Increase in Cash & Cash Equivalents 1,340,686 (9,079,677)
Cash & Cash Equivalents, Beginning 37,433,929 46,343,041
Cash & Cash Equivalents, End 38,699,545 37,433,929
CURRENT RATIO 1.38 1.50
DEBT-TO-EQUITY RATIO 1.96 2.07

• Share in net earnings in associates and joint ventures for the year 2020 decreased by 30% compared to 2019. The
decrease was mainly due to lower income contributions from SN Aboitiz Power-Magat resulting from a reduction
in volume sold caused by reduced water levels and GNPD net losses due to foreign-currency denominated loan
revaluations.

• EBITDA for the year of 2020 decreased by 1% YoY. This was due to lower demand resulting from the imposition
of COVID-19 related quarantine measures. EBITDA was also affected by plant outages offset by lower purchased
power cost during the year, as well as new capacities.

• For the year ended 2020, cash and cash equivalents increased by ₱1.27 bn. This was mainly due to Company’s
retail bond issuance in July 2020 which was partly offset by principal payments made on existing loans.

• Current Ratio as of December 31, 2020 was at 1.38x as compared to 1.50x as of December 31, 2019. The decline
was primarily due to maturing bonds of the Company that were reclassified from noncurrent to current during
2020.

87 ∙ SEC FORM 17-A (ANNUAL REPORT)

• Debt-to-Equity Ratio as of December 31, 2020 was at 1.96x, lower than the 2.07x recorded at the end of 2019.

Results of Operations

AboitizPower’s net income for 2020 was ₱12.58 bn, 27% lower than the ₱17.32 bn reported in 2019. This translated
to earnings per share of ₱1.71 for 2020. The Company recognized non-recurring net gains of ₱45 mn during 2020,
compared to non-recurring net gains of ₱702 mn during 2019, due to net foreign exchange gains on the revaluation
of dollar denominated liabilities. Without these one-off gains, the Company’s core net income for 2020 was ₱12.53
bn, 25% lower than the ₱16.62 bn recorded in 2019. This was primarily due to additional tax expenses following the
expiration of the income tax holiday (ITH) incentives of TSI and GMEC. The Company also de-recognized deferred tax
assets on Net Operating Loss Carry Over (NOLCO) from 2018 and 2019. There were also additional interest expenses
from the Company’s bonds and loans that were availed of during late 2019 and the second half of 2020.

Power Generation and Retail Electricity Supply (RES)

AboitizPower’s generation and retail supply business recorded EBITDA of ₱37.70 bn in 2020, 4% higher than the ₱36.20
bn recorded in 2019. The variance was primarily due to better availability of the Group’s coal facilities and the
recognition of BI claims, which offset the lower demand caused by the COVID-related community quarantines and lower
water inflows to the Group’s hydro facilities.

Capacity sold during 2020 increased by 7% to 3,417 MW from 3,184 MW in 2019. This resulted from increased
contracting levels driven by the new capacity of TVI and additional portfolio contracts. The increase in contracting
levels, however, was offset by the lower demand brought about by the pandemic and lower water inflows to the
Group’s hydro facilities. This resulted in a YoY reduction in energy sold, which declined by 1% to 22,754 GWh for 2020
from 22,942 GWh during 2019.

Power Distribution

For 2020, AboitizPower’s distribution business recorded EBITDA of ₱7.2 bn, 12% lower than the ₱8.2 bn recorded
during 2019. Energy sales decreased by 8% to 5,368 GWh in 2020 from 5,851 GWh in 2019. This was due to lower
consumption resulting from the enforcement of COVID-related community quarantines.

Material Changes in Line Items of Registrant’s Statements of Income and Comprehensive Income

Consolidated Statements of Income

Net income attributable to equity holders of the Parent Company decreased by ₱4.75 bn, or 27%, YoY. The various
movements in line items are shown below to account for the decrease:

Net Income Attributable to Equity Holders of the Parent (January - December 2019) ₱17,322,677

Decrease in operating revenues (15,258,508)

Increase in operating expenses 13,282,521
Increase in interest income (638,627)
Increase in interest expense (205,882)
Decrease in share in net earnings of associates and joint ventures (1,138,826)
Decrease in other income - net 1,445,176
Higher provision for taxes (2,846,414)
Decrease in income attributable to non-controlling interests 615,559
Total (4,745,001)
Consolidated Net Income Attributable to Equity Holders of the Parent for 2018 ₱12,577,676

88 ∙ SEC FORM 17-A (ANNUAL REPORT)

Operating Revenues
(12% decrease from ₱125.64 bn to ₱110.38 bn)

The decrease in operating revenues during 2020 was primarily due to lower demand brought about by the COVID-19
pandemic and resulting community quarantines, lower spot prices and indices, lower contract rates, and lower water
inflow.

These were offset by new capacities which went online in 2020.

Operating Expenses
(14% decrease from ₱96.78 bn to ₱83.50 bn)

The decrease in operating expenses was mainly due to the lower cost of purchased power and of generated power
brought about by COVID-19.

Interest Income
(49% decrease from ₱1.29 bn to ₱653.00 mn)

The decrease in interest income during 2020 compared to 2019 was primarily due to lower interest rates on
placements.

Interest Expense and other financing costs

(1% increase from ₱14.05 bn to ₱14.25 bn)

Interest expense increased during 2020 compared to 2019 was due to the interest and financing costs on
AboitizPower’s ₱7.25 bn and ₱9.55 bn retail bonds issued in October 2019 and July 2020, respectively.

Share in Net Earnings of Associates and Joint Ventures

(30% decrease from ₱3.81 bn to ₱2.68 bn)

Share in net earnings in associates and joint ventures for 2020 decreased by 30% compared to 2019. The decrease
was mainly due to lower income contributions from SN Aboitiz Power-Magat, as reduced water levels during 2020
caused a reduction in volume sold, and to a higher share of GNPD’s net losses resulting from foreign-currency
denominated loan revaluations.

Other Income (Expenses) – net

(41% increase from ₱3.48 bn to ₱4.93 bn other income)

The increase in other income during 2020 compared to 2019 was mainly due to business interruption insurance claims
of TSI due to plant outages.

Provision for Taxes

(89% increase from ₱3.22 bn to ₱6.06 bn)

The increase in provision for taxes during 2020 was due to the additional taxes resulting from the expiration of the ITH
incentives of TSI and GMEC and the derecognition of deferred tax assets on NOLCO from 2018 and 2019.

Changes in Registrant’s Resources, Liabilities and Shareholders’ Equity

Assets

Total assets (as of December 31, 2020 compared to December 31, 2019) decreased by ₱12.54 bn, or 3%. The major
movements of the accounts leading to the decrease were as follows:

a) Cash and cash equivalents increased by ₱1.27 bn, or 3% (from ₱37.43 bn to ₱38.70 bn). This was primarily due
to the availment of the last tranche of retail bond drawn in July 2020.

89 ∙ SEC FORM 17-A (ANNUAL REPORT)

 b) Inventories decreased by ₱324.00 mn, or 5% (from ₱6.63 bn to ₱6.31 bn). This was mainly driven by a decrease
in coal inventory during 2020.

c) Other current assets decreased by ₱604.00 mn, or 5% (from ₱11.08 bn to ₱10.48 bn). This was mainly driven by
the reclassification during 2020 of a portion of TVI’s Advances to NGCP to Other noncurrent assets.

d) Investments and advances increased by ₱950.00 mn, or 2% (from ₱60.88 bn to ₱61.83 bn). This was mainly
driven by the new capital contributions to GNPD during 2020.

e) Property, plant and equipment decreased by ₱6.07 bn, or 3% (from ₱209.52 bn to ₱203.45 bn). This was
primarily due to the depreciation of existing assets.

f) Intangible assets decreased by ₱2.43 bn, or 5% (from ₱46.71 bn to ₱44.28 bn). This was primarily due to the
amortization of existing assets.

g) Net pension assets decreased by ₱18.00 mn, or 26% (from ₱68.00 mn to ₱50.00 mn). This was mainly due the
accrual of retirement costs.

h) Deferred income tax assets decreased by ₱1.25 bn, or 45% (from ₱2.79 bn to ₱1.54 bn). This was mainly due to
the reduction of the deferred tax benefits recognized by TLI on its net operating loss.

i) Other noncurrent assets decreased by ₱4.25 bn, or 31% (from ₱13.52 bn to ₱9.27 bn). This was mainly due to
the decrease in Input VAT, regular reduction in PSALM deferred adjustment, and the reclassification of TVI’s
restricted cash to Cash and cash equivalents.

Liabilities

Compared to December 31, 2019, total liabilities as of December 31, 2020 decreased by ₱13.49 bn, or 5%. The major
movements of accounts leading to the decrease were as follows:

a) Short-term loans increased by ₱1.41 bn, or 14% (from ₱10.34 bn to ₱11.74 bn). This was mainly due to new
loans availed of by the Group during 2020 for working capital purposes.

b) Trade and other payables decreased by ₱4.00 bn, or 18% (from ₱22.38 bn to ₱18.37 bn). This was primarily due
to the reduction of trade payables.

c) Income tax payable increased by ₱213.00 mn, or 42% (from ₱510.00 mn to ₱723.00 mn). This was mainly due
to the expiration of the ITH incentives of TSI and GMEC.

d) Decommissioning liability increased by ₱1.44 bn, or 40% (from ₱3.57 bn to ₱5.01 bn). This was mainly due to
the recognition of additional decommissioning provisions on power plant assets of APRI and GMEC.

e) Long-term debt (current and non-current portions) decreased by ₱650.00 mn (from ₱177.97 bn to ₱177.32 bn).
This was mainly due to principal payments made on existing loans and the revaluation of dollar denominated
loans, which were partly offset by the Parent’s retail bond issuance during 2020.

f) Lease liabilities (current and noncurrent portions) decreased by ₱5.53 bn (from ₱44.79 bn to ₱39.26 bn), as TLI
made timely payments during 2020 of its obligations to PSALM.

g) Long-term obligation on power distribution system (current and noncurrent portions) decreased by ₱16.00 mn,
or 8% (from ₱199.00 mn to ₱183.00 mn), as payments were made in 2020.

h) Net derivative liabilities decreased by ₱597 mn (from ₱2.39 bn to ₱1.79 bn) during 2020 due to hedging gains.

i) Deferred income tax liabilities decreased by ₱103 mn, or 12% (from ₱848.00 mn to ₱745.00 mn), mainly due to
the amortization of Franchise Assets and increase in the Allowances for Impairment and Probable Losses.

90 ∙ SEC FORM 17-A (ANNUAL REPORT)

 j) Net pension liabilities decreased by ₱132 mn, or 31% (from ₱426.00 mn to ₱294.00 mn), mainly due to the
contributions to the retirement fund during 2020 which were higher than the effect of retirement costs and net
actuarial losses.

k) Other noncurrent liabilities decreased by ₱5.71 bn, or 84% (from ₱6.81 bn to ₱1.10 bn), mainly due to the
regular payments of the PSALM deferred adjustments and the settlement of TVI’s Other noncurrent liabilities.

Equity

Equity attributable to equity shareholders of the Parent Company increased by 1% (from ₱125.54 bn as of December
31, 2019 to ₱127.16 bn as of December 31, 2020) after the declaration of dividends in March 2020, net of
comprehensive income recognized during the year of 2020. Cumulative translation adjustments decreased by ₱1.45
bn, due to the downward net adjustment in the fair value of the Group’s foreign currency forward and commodity
swap contracts designated as cash flow hedges, as well as the net assets translation effect of GMEC and LHC during
2020.

Material Changes in Liquidity and Cash Reserves of Registrant

As of December 31, 2020, the Group’s cash and cash equivalents increased by 3% to ₱38.70 bn, from ₱37.43 bn as of
December 31, 2019.

The reduction in power demand brought about by COVID-19 related community quarantines contributed to lower
cash generated from operations during 2020 by ₱7.58 bn, which was a 19% decrease compared to 2019.

Net cash flows used in investing activities decreased to ₱4.53 bn in 2020, from ₱34.06 bn i2019, which was mainly due
to the ₱24.95 bn AA Thermal acquisition taken up during 2019.

The net cash flows used in financing activities as of December 31, 2020 increased by ₱11.54 bn compared to 2019,
primarily due to payments by the Group of principal amortizations on various loans.

Financial Ratios

As of December 31, 2020, current assets increased by 1% and current liabilities increased by 9% compared to the end
of 2019. The current ratio as of December 31, 2020 was at 1.38x compared to 1.50x as of December 31, 2019.

Consolidated debt to equity ratio as of December 31, 2020 was at 1.96x, higher than the 2.07x recorded at the end of
2019. This was due to a 5% decrease in total liabilities during 2020, coupled with a 1% increase in equity during the
same period.

Year Ended December 31, 2019 versus Year Ended December 31, 2018

The table below shows the comparative figures of the top five key performance indicators for 2019 and 2018.

Key Performance Indicators 2019 2018

Amounts in thousands of ₱s, except for financial ratios

SHARE IN NET EARNINGS OF ASSOCIATES AND JOINT VENTURES 3,813,962 4,356,825
EBITDA 45,005,022 51,490,894
CASH FLOW GENERATED:
Net cash flows from operating activities 39,356,962 37,287,900
Net cash flows used in investing activities (34,060,584) (7,243,119)
Net cash flows used in financing activities (14,376,055) (19,155,753)
Net (Decrease)/Increase in Cash & Cash Equivalents (9,079,677) 10,889,028
Cash & Cash Equivalents, Beginning 46,343,041 35,699,631

91 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Key Performance Indicators 2019 2018

Cash & Cash Equivalents, End 37,433,929 46,343,041

CURRENT RATIO 1.50 1.89
DEBT-TO-EQUITY RATIO 2.07 1.85

Share in net earnings in associates and joint ventures declined by 12% in 2019 compared to 2018 due to lower income
contributions from SN Aboitiz Power-Magat, Inc. (SN Aboitiz Power-Magat) and GNPower Dinginin Ltd. Co. (GNPD).
The lower share in net earnings of GNPD was mainly due to a foreign exchange (forex) gain recorded in 2018 as against
a forex loss reported in 2019. SN Aboitiz Power-Magat’s lower income contribution was primarily driven by a reduction
in volume sold due to reduced water levels in 2019.

Consolidated EBITDA decreased by 13% in 2019, mainly due to an increase in cost of purchased power, lower spot
market revenues, and lower plant availability across the Power Generation Group.

During 2019, cash and cash equivalents decreased by ₱8.91 bn, due to cash flows used for the acquisition of AA
Thermal and investment in GNPD for the ongoing construction of its 1x668 MW supercritical coal-fired power plant in
Bataan.

Current ratio at the end of 2019 was at 1.50x, down from previous year’s 1.89x. This is due to the reduction in cash
and cash equivalents and the increase in currently maturing debt.

Debt-to-equity ratio as of December 31, 2019 was at 2.07, higher than the 1.85 recorded at the end of 2018 due to
the availment of new debts during 2019.

Results of Operations

Net income for 2019 decreased 20% Year-on-Year (YoY), from ₱21.71 bn in 2018 to ₱17.32 bn in 2019, which translated
to earnings per share of 2.35. In 2019, there was higher cost of purchased power, lower spot market revenues, and
lower plant availability of the Power Generation Group. The Company also recognized non-recurring gains of ₱702
mn, mainly due to net foreign exchange gains from the revaluation of dollar-denominated debts and derivatives,
Aseagas, Inc.’s VAT recoveries, and gain on land appraisal. Without these one-off gains, the Company’s core net
income for 2019 was ₱16.62 bn, 30% lower than the ₱23.8 bn recorded during 2018.

Power Generation and Retail Electricity Supply (RES)

The Power Generation Group and RES’ income contribution for 2019 was ₱15.28 bn, down 23% YoY. The decline was
largely driven by the higher volume and cost of purchased power, lower spot market revenues, and lower plant
availability. Spot market prices were high in the first half of 2019. During this period, the Group purchased
replacement power due to outages, and contracted ahead in preparation for Therma Visayas, Inc.’s (TVI) incoming
capacity. Plant availability was also lower versus the same period last year due to outages from the Group’s local
facilities.

As of year-end 2019, AboitizPower’s net sellable capacity stood at 3,455 MW.

Power Distribution

The power distribution group’s earnings contribution increased slightly by 1% YoY, from ₱4.05 bn in 2018 to ₱4.10 bn
in 2019.

92 ∙ SEC FORM 17-A (ANNUAL REPORT)

Material Changes in Line Items of Registrant’s Statements of Income and Comprehensive Income

Consolidated Statements of Income

Consolidated net income attributable to equity holders of the parent decreased by 20% from ₱21.71 bn in 2018 to
₱17.32 bn in 2019. The various movements in line items are shown below to account for the increase:

Consolidated Net Income Attributable to Equity Holders of the Parent for 2018 ₱21,707,603

Decrease in operating revenues (5,936,927)

Increase in operating expenses (1,703,881)
Increase in interest income 411,618
Increase in interest expense (1,965,488)
Decrease in share in net earnings of associates and joint ventures (542,863)
Decrease in other income - net 4,775,698
Higher provision for taxes (289,875)
Decrease in income attributable to non-controlling interests 866,792
Total 4,384,926
Consolidated Net Income Attributable to Equity Holders of the Parent for 2019 ₱17,322,677

Operating Revenues
(5% decrease from ₱131.57 bn to ₱125.64 bn)

The 5% decrease in operating revenues was driven by: (i) lower plant availability, (ii) expiration of contracts with
customers of Therma Marine, Inc. (TMI) and Thermal Mobile, Inc. (TMO), and (iii) lower average selling price on the
Power Generation Group and RES power supply contracts. This was partly offset by higher electricity sales from the
Company’s Distribution Utilities.

The lower plant availability due to outages resulted to a reduction in the volume (capacity and energy) sold to
customers. Likewise, this limited the Group’s capacity available to sell to the spot market.

Operating Expenses
(2% increase from ₱96.78 bn to ₱97.36 bn)

Operating expenses increased by 2% during 2019, driven by the increase in depreciation and amortization cost (14%)
due to the start of operations of TVI and the full year of operations for both Hedcor Bukidnon, Inc. (Hedcor Bukidnon)
and Pagbilao Energy Corporation (PEC). The cost or purchased power and operations and maintenance expenses also
increased during the year.

Interest Income
(47% increase from ₱ 880 mn to ₱ 1,292 mn)
The increase in interest income during 2019 was primarily due to the Company’s higher cash investments and higher
interest income from Therma South, Inc. (TSI), TVI, Hedcor Bukidnon and AP Renewables, Inc. (APRI).

Interest Expense and Other Financing Costs

(16% increase from ₱12.08 bn to ₱14.05 bn)
Interest expense increased in 2019 due to the full-year impact of the ₱10.20 bn in retail bonds issued by the Company
in October 2018 and the interest on the Company’s ₱7.25 bn retail bonds issued in October 2019. The proceeds from
the bonds were used to pay for short-term borrowings and general corporate purpose.

Share in Net Earnings of Associates and Joint Ventures

(12% decrease from ₱4.36 bn to ₱3.81 bn)
Share in net earnings of associates and joint ventures declined by 12% in 2019, mainly due to lower income
contributions from SN Aboitiz Power-Magat and GNPD. SN Aboitiz Power-Magat’s lower income contribution was

93 ∙ SEC FORM 17-A (ANNUAL REPORT)

primarily driven by a reduction in volume sold due to reduced water levels in 2019. The lower share in net earnings
of GNPD was mainly due to a forex gain recorded in 2018 as against a forex loss reported in 2019.

Other Income (Expenses) – net

(Increase from ₱1.29 bn other expense to ₱3.48 bn other income)

The change from an expense position in 2018 to an income position in 2019 was mainly due to lower net forex losses
YoY. This movement was due to favorable movements of the Philippine Peso against U.S. Dollar in 2019 versus 2018.

Provision for Taxes

(10% increase from ₱2.93 bn to ₱3.2 bn)

The increase was due to lower net deferred tax benefit arising from deferred taxes on unrealized forex gain.

Net Income Attributable to Non-controlling Interests

(23% decrease from ₱3.73 bn to ₱ 2.86 bn)

The decrease was due to a decline in the operating results of GMCP combined with a reduction in the Company’s non-
controlling ownership in GMCP after the acquisition of non-controlling interests in May 2019.

Changes in Registrant’s Resources, Liabilities and Shareholders’ Equity

Assets

Total assets (as of December 31, 2019 compared to December 31, 2018) increased by ₱20.81 bn, or 5% YoY. The major
movements of the accounts leading to the increase were as follows:

a) Cash and cash equivalents decreased by 19% during 2019. This was due to cash flows used for: (i) acquisition of
AA Thermal, (ii) investment in GNPD for its on-going power plant construction, (iii) funding of the Group’s capital
expenditures, and (iv) debt service. The decrease in cash and cash equivalents was partially offset by operating
cash flows and proceeds from the Company’s retail bonds issuance in 2019.

b) Property held for sale of ₱676 mn as of December 31, 2018 pertains to transmission assets was sold to NGCP in
February 2019.

c) Other current assets were lower by 16% (from ₱13.21 bn in 2018 to ₱11.04 bn in 2019) mainly driven by the
decrease of TSI’s restricted cash. The maintenance of a cash reserve forms part of TSI’s compliance with the
covenants on its project debt.

d) Investments and advances increased by ₱26.54 mainly as a result of capital infusions for the AA Thermal
acquisition and GNPD plant construction.

e) Property, plant and equipment (PPE) slightly increased by 1% (from ₱207.11 bn in 2018 to ₱209 bn in 2019)
mainly due to the recognition of right-of-use assets on the Group’s leases resulting from the adoption of
Philippine Financial Reporting Standards (PFRS) 16, Leases.

f) Derivatives assets were down by ₱211 mn in 2019, primarily due to fair value changes on GMCP’s interest rate
swaps.

g) Financial assets at fair value through profit or loss went down to ₱4 mn in 2019 from ₱101 mn. This was mainly
due to the sale of Parent’ Company’s financial assets at Fair Value through Profit and Loss (FVPL).

h) Deferred income tax assets increased by 25% (from ₱2.23 bn in 2018 to ₱2.80 bn in 2019), driven by deferred
tax benefits recognized by TMO on its net operating loss and Therma Luzon, Inc. (TLI) on its unrealized forex
loss.

94 ∙ SEC FORM 17-A (ANNUAL REPORT)

 i) Other noncurrent assets increased by ₱2.86 bn or 27% YoY. The increase was due to restricted cash of a
Subsidiary that arose from its receipt of proceeds from a damage claim against its contractors, which claim is
currently under dispute. This was partly offset by decrease in input VAT and reversal of prepaid rent against
lease liabilities upon adoption of PFRS 6, Leases.

Liabilities

Consolidated liabilities increased by 9% YoY, from ₱253.09 bn as of end-2018 to ₱276.83 bn as of end-2019. The major
movements of the accounts leading to the increase were as follows:

a) Derivatives liabilities (current and non-current portions) increased by ₱2.31 bn in 2019, due to fair value changes
on the Group’s foreign currency forward contracts and commodity swap contracts.

b) Income tax payable increased by 15% YoY (from ₱439 mn in 2018 to ₱506 mn in 2019), mainly due to expiration
of the income tax holidays enjoyed by certain Subsidiaries and a corresponding higher current income tax
provision.

c) Long-term debt (current and non-current portions) increased by 13% YoY (from ₱158.06 bn in 2018 to ₱177.97
bn in 2019), primarily due to the ₱7.25 bn bonds issuance in October 2019.

d) Lease liabilities (current and noncurrent portions) decreased by ₱2.10 bn, since TLI made timely payments on
its obligation with PSALM.

e) Long-term obligation on power distribution system (PDS) decreased by 8% as regular annual payments were
made.

f) Customers’ deposits increased by ₱513 mn or 9% primarily, driven by growth in customer base of the
Distribution Utilities.

g) Other noncurrent liabilities went up from ₱3.18 bn in 2018 to ₱6.81 bn in 2019, mainly due to receipt of
proceeds from a damage claim against contractors, which claim is now under dispute.

Equity

Equity attributable to equity shareholders of the Parent Company decreased by 2% YoY (from ₱127.71 bn at year-end
2018 to ₱125.54 bn at year-end 2019), after the declaration of dividends in 2019, net of comprehensive income
recognized.

a) Cumulative translation adjustments decreased by ₱1.52 bn due to downward effect of changes in the fair value
of foreign currency forward and commodity swap contracts designed as cash flow hedges; and translation effect
of GMCP and Luzon Hydro Corporation (LHC) for the current period.

b) Share in cumulative translation adjustments of associates and join ventures decreased by ₱475 mn, mainly due
to translation effect of GNPD.

c) Acquisition of non-controlling interests for the period pertains to the difference between the purchase price
and fair value of net assets acquired in the acquisition of additional partnership interest in GMCP.

Material Changes in Liquidity and Cash Reserves of Registrant

Cash generated from operations of ₱39.36 bn continued to provide a source of liquidity during 2019, growing by ₱2.07
bn as compared to 2018.
Net cash flows used in investing activities increased to ₱34 bn in 2019 from ₱7 bn in 2018, mainly due to funding for
the AA Thermal acquisition.

Despite the cash used to fund acquisition of additional partnership interest in GMCP, the net cash outflows from
financing activities amounting to ₱14.38 in 2019 is still lower than 2018. This is due to higher debt availed in 2019.

95 ∙ SEC FORM 17-A (ANNUAL REPORT)

As of December 31, 2019, the Group’s cash and cash equivalents decreased to ₱37.43 bn, compared to ₱46.34 bn as
of year-end 2018.

Financial Ratios

Current assets decreased by 13% while current liabilities increased by 10%. The current ratio at year-end 2019 was at
1.50x, versus 1.89x at year-end 2018.

Consolidated debt to equity ratio at year-end of 2019 was at 2.07 versus 1.85 as of year-end 2018, as the Company’s
liabilities have been higher during the year.

Item 7. Financial Statements

The consolidated financial statements of AboitizPower are incorporated herein by reference. The schedules
listed in the accompanying Index to Supplementary schedules are filed as part of this SEC Form 17-A.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

The Company has engaged the services of SyCip Gorres Velayo & Co. (SGV) during the two most recent fiscal
years. There were no disagreements with SGV on accounting and financial disclosure.

Information on Independent Public Accountant

As a matter of policy, the Board Audit Committee (the "Audit Committee") selects, monitors, and reviews the
independence, performance and effectiveness, scope of work, fees, and remuneration of external auditors,
in consultation with the Chief Executive Officer, the Chief Financial Officer, and the Group Internal Audit Head.
Where appropriate, the Committee may recommend to the Board of Directors the re-appointment or
replacement of the current external auditor.

During the March 4, 2022 Board Meeting, the Chairman of the Audit Committee, Mr. Carlos C. Ejercito,
reported to the Board that the Audit Committee evaluated and assessed the previous year’s performance of
the Company's external auditor, SyCip Gorres Velayo & Co. (SGV). Based on the results of its evaluation, the
Audit Committee advised the Board of Directors that it is satisfied with SGV's performance for the previous
year and recommended SGV's re-appointment as the Company’s external auditor for 2022.

The Board of Directors discussed the Audit Committee’s recommendation, and after discussion, approved
the re-appointment of SGV. The Board of Directors will endorse to the shareholders the re-appointment of
SGV as the Company’s external auditor for 2022.

The accounting firm of SGV has been AboitizPower’s Independent Public Accountant for more than 23 years.
Ms. Maria Veronica Andresa R. Pore, who has been AboitizPower’s audit partner since audit year 2017, will
be replaced by Ms. Jhoanna Feliza C. Go as audit partner starting audit year 2022. AboitizPower complies with
the requirements of Section 3(b)(ix) of SRC Rule 68 on the rotation of external auditors or signing partners
and the two-year cooling-off period. There was no event in the past 23 years wherein AboitizPower and SGV
(or its handling partner) had any disagreement with regard to any matter relating to accounting principles or
practices, financial statement disclosure or auditing scope or procedure.

Representatives of SGV will be present during the 2022 ASM and will be given the opportunity to make a
statement if they so desire. They are also expected to respond to appropriate questions, if needed.

The Chairman of the Audit Committee is Mr. Carlos C. Ejercito, an Independent Director. The other members
are Messrs. Raphael P.M. Lotilla and Eric Ramon O. Recto, both Independent Directors, and Messrs. Danel C.
Aboitiz and Luis Miguel O. Aboitiz, both directors of AboitizPower.

96 ∙ SEC FORM 17-A (ANNUAL REPORT)

 External Audit Fees and Services

The following table sets out the aggregate fees billed to the Company for each of the last two years for
professional services rendered by SGV.

Year ended Year ended

Fee Type December 31, December
2021 31, 2020
Audit Fees
Audit Fees ₱575,000 ₱502,000.00
Audit Related Fees – Bond 18,000,000.00 8,200,000.00
Total 18,575,000.00 8,702,000.00
Non-Audit Fees
Financial and Tax Due Diligence 1,149,500.00 –
Total 1,149,500.00 –
Total Audit and Non-Audit Fees ₱19,724,500.00 ₱8,702,000.00

AboitizPower engaged SGV to audit its 2021 and 2020 annual financial statements. SGV was also engaged to
conduct post reviews and other procedures for the purpose of issuing comfort letters in connection with the
issuance of the ₱8 bn and ₱12 bn bonds in 2021 and ₱9.6 bn bonds in 2020. In 2021, the Company also
engaged SGV to provide financial and tax due diligence in relation to the Company's preparation of BIR form
1709, comparability analysis and benchmarking update, and transfer pricing documentation.

As a policy, the Board Audit Committee makes recommendations to the Board of Directors concerning the
choice of external auditor and pre-approves audit plans, scope, and frequency before the audit is conducted.

Audit services of SGV for 2021 and 2020 were pre-approved by the Board Audit Committee. The Board Audit
Committee also reviewed the extent and nature of these services to ensure that the independence of the
external auditors was preserved. SGV does not have any direct or indirect interest in the Company.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

The Company has engaged the services of SGV during the two most recent fiscal years. There are no
disagreements with SGV on accounting and financial disclosure.

97 ∙ SEC FORM 17-A (ANNUAL REPORT)

 PART III – CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers

(a) Directors and Officers for 2021-2022

(1) Directors for 2021-2022

The Company’s Board is composed of nine directors, three of whom are Independent Directors, four are Non-
Executive Directors, and two are Executive Directors. Below are the profiles of each director for 2021-2022
with their corresponding positions, offices, and business experience held for the past five years. Except for
Mr. Toshiro Kudama who assumed his directorship on December 22, 2021, the directors were elected during
AboitizPower’s 2021 ASM to serve for a term of one year, and until their successors are duly elected and
qualified.

SABIN M. ABOITIZ
Chairman of the Board
Non-Executive Director

Age: 57 years old

Citizenship: Filipino
Date of First Appointment: April 26, 2021
Tenure: 10 months

Committee Memberships:

Chairman Board Risk and Reputation Management Committee

(since April 26, 2021)
Member Board Environmental, Social and Corporate Governance
Committee (since April 26, 2021)
Board Executive Committee (since April 26, 2021)
Board Cybersecurity Committee (since April 26, 2021)

Present Positions:

Chairman of the Board Aboitiz Power Corporation*

Aboitiz Foundation, Inc.
Aboitiz Infracapital, Inc.
Aboitiz Land, Inc.
Aboitiz Renewables, Inc.
CRH Aboitiz Holdings, Inc.
Filagri Holdings, Inc.
Manila-Oslo Renewable Enterprise, Inc.
Republic Cement Services, Inc.
SN Aboitiz Power – Benguet, Inc.
Director/President and Chief Aboitiz Equity Ventures Inc.*
Executive Officer Aboitiz & Company, Inc.
Director/Chairman/ President
Aboitiz Renewables, Inc.
and Chief Executive Officer
Director/President AEV CRH Holdings, Inc.
Director Aboitiz Construction International, Inc.
Aboitiz Construction, Inc.
AboitizPower International Pte. Ltd.
AEV International Pte Ltd.
Apo Agua Infrastructura, Inc.
Lima Land, Inc.
Pilmico Animal Nutrition Corporation
Pilmico Foods Corporation
Pilmico International Pte. Ltd.

98 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Republic Cement & Building Materials, Inc.
Therma Luzon, Inc.
Therma South, Inc.
Unity Digital Infrastructure Inc.
Union Bank of the Philippines, Inc *
UnionDigital Bank, Inc.
* A publicly listed company

Previous Positions:

First Vice President Aboitiz Equity Ventures Inc.

Senior Vice President
Executive Vice President and
Chief Operating Officer

Educational Background:

College Business Administration, Major in Finance

Gonzaga University, Spokane, U.S.A

He is not connected with any Philippine government agency or instrumentality.

LUIS MIGUEL O. ABOITIZ

Vice Chairman of the Board
Non-Executive Director

Age: 57 years old

Citizenship: Filipino
Date of First Appointment: April 26, 2021
Tenure: 10 months

Committee Memberships:

Member Board Audit Committee (since April 26, 2021)

Board Environmental, Social and Corporate Governance
Committee (since April 26, 2021)
Board Executive Committee (since April 26, 2021)
Board Cybersecurity Committee (since April 26, 2021)

Present Positions:

Vice Chairman of the Board Aboitiz Power Corporation*

Chairman of the Board Aboitiz Impact Ventures, Inc.
Director Aboitiz & Company, Inc.
Director and President DDLS Aboitiz, Inc.
Director AB Capital Securities, Inc.
Trustee Pacific Basin Economic Council
* A publicly listed company

Previous Positions:

Executive Vice President – Chief Aboitiz Power Corporation

Strategy Officer
Executive Vice President and
Chief Operating Officer –
Corporate Business Group
Senior Vice President-Power
Marketing and Trading

99 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Educational Background:

College Bachelor of Science in Computer Science and Engineering

Santa Clara University, California, U.S.A.
Graduate Studies Masters in Business Administration
University of California, Berkeley, U.S.A.

He is not connected with any Philippine government agency or instrumentality. He is not a director of any other
publicly-listed company in the Philippines.

EMMANUEL V. RUBIO
Executive Director/President and Chief Executive Officer

Age: 57 years old

Citizenship: Filipino
Date of First Appointment: January 1, 2020
Tenure: 2 years

Committee Memberships:

Chairman Board Executive Committee (since January 1, 2020)

Member Board Risk and Reputation Management Committee
(since April 26, 2021)
Ex-Officio Member Board Cybersecurity Committee (since July 29, 2021)

Present Positions:

Director/President and Chief Aboitiz Power Corporation

Executive Officer
Chairman of the Board SN Aboitiz Power Group
Therma South, Inc.
AA Thermal, Inc.
Director Aboitiz Power Distributed Energy, Inc.
Aboitiz Power Distributed Renewables, Inc.
Aboitiz Renewables, Inc.
AboitizPower International B.V.
AboitizPower International Pte. Ltd.
Abovant Holdings, Inc.
Cebu Energy Development Corporation
Cebu Private Power Corporation
Cotabato Light & Power Company
Davao Light & Power Co., Inc.
Hedcor Group
Maaraw Holdings San Carlos, Inc.
Redondo Peninsula Energy, Inc.
San Carlos Sun Power Inc.
STEAG State Power, Inc.
Directorship and Management GNPower Mariveles Energy Center Ltd. Co.
Position
Trustee Aboitiz Foundation, Inc.

Previous Positions:

Executive Vice President and Aboitiz Power Corporation

Chief Operating Officer – Power
Generation Group

100 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Executive Vice President - Chief
Operating Officer

Educational Background:

College Bachelor of Science in Industrial Management

Engineering with a minor in Mechanical Engineering
De La Salle University, Manila
Graduate Studies Masters in Business Administration
Certificate of Completion
De La Salle University, Manila
Certificates and Courses The LEAD Program
Columbia University

Advanced Management Program

Columbia University

Strategic Management Course

Nanyang Technological University, Singapore

Executive Certificate in Directorship

Singapore Management University – Singapore Institute
of Directors (SMU-SID)

He is not connected with any Philippine government agency or instrumentality. He is not a director of any other
publicly-listed company in the Philippines.

TOSHIRO KUDAMA
Non-Executive Director

Age: 64 years old

Citizenship: Japanese
Date of First Appointment: December 22, 2021
Tenure: 2 months

Committee Memberships:

Member Board Executive Committee (since December 22,

2021)
Board Risk and Reputation Management Committee
(since December 22, 2021)

Present Positions:

Director Aboitiz Power Corporation

Senior Managing Executive Officer JERA Co., Inc.
Chief Executive Officer JERA Asia Private Limited

Previous Positions:

Managing Executive Officer JERA Co., Inc.

Chief Power Development Officer
and Senior Executive Vice President
Director and Chief Executive Officer JERA Americas Inc.
Managing Director, Head of TEPCO Fuel & Power, Incorporated
Overseas and Domestic Operations

Educational Background:

101 ∙ SEC FORM 17-A (ANNUAL REPORT)

 College Bachelor’s Degree in Mechanical Engineering
Tokyo Institute of Technology
Graduate Studies Master’s Degree in Mechanical Engineering
Graduate School of Tokyo Institute of Technology

He is not connected with any Philippine government agency or instrumentality. He is not a director of any other
publicly-listed company in the Philippines.

EDWIN R. BAUTISTA
Non-Executive Director

Age: 61 years old

Citizenship: Filipino
Date of First Appointment: April 26, 2021
Tenure: 10 months

Committee Memberships:

N/A N/A

Present Positions:

Director Aboitiz Power Corporation*

Chairman of the Board of City Savings Bank
Directors
Director/ President and Chief Union Bank of the Philippines*
Executive Officer
Director Union Investments Corp.
First Union Plans, Inc.
First Union Direct Corp.
UBX Philippines Corporation
Petnet, Inc.
UnionDigital Bank, Inc.
* A publicly listed company

Previous Positions:

Chief Operating Officer Union Bank of the Philippines

Senior Executive Vice President
Executive Vice President

Educational Background:

College Bachelor of Science in Mechanical Engineering

De La Salle University, Manila
Graduate Studies Advance Management Program
Harvard Business School in Massachusetts, U.S.A

He is not connected with any Philippine government agency or instrumentality.

DANEL C. ABOITIZ
Executive Director

Age: 40 years old

Citizenship: Filipino
Date of First Appointment: December 11, 2018
Tenure: 3 years

102 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Committee Memberships:

Member Board Audit Committee (since January 28, 2020)

Board Executive Committee (since April 26, 2021)

Present Positions:

Director and Chief Commercial Aboitiz Power Corporation

and Stakeholder Engagement
Officer
Vice Chairman of the Board Republic Cement & Building Materials, Inc.
Director and President Manila-Oslo Renewable Enterprise, Inc.
Director AA Thermal, Inc.
AEV CRH Holdings, Inc.
CRH Aboitiz Holdings, Inc.
AboitizPower Coal Business Units
AboitizPower Oil Business Units
Pagbilao Energy Corporation
SN AboitizPower Group
STEAG State Power, Inc.
Therma Power, Inc.
Directorship and Management
Positions GNPower Dinginin Ltd. Co.
Board of Advisors Aboitiz & Company, Inc.

Previous Positions:

SVP for Regulatory Affairs and Aboitiz Power Corporation

External Relations
President and COO AboitizPower Coal Business Units
President and COO AboitizPower Oil Business Units

Educational Background:

College MA, Philosophy & Politics (with Second Honors)

University of Edinburgh
Gap Year Beijing Language and Culture University
Chinese Language

Affiliations:

Director Philippine Electricity Market Corporation

Member, Board of Trustees Philippine Independent Power Producers Association

He is not connected with any Philippine government agency or instrumentality. He is not a director of any other
publicly-listed company in the Philippines.

103 ∙ SEC FORM 17-A (ANNUAL REPORT)

 RAPHAEL P.M. LOTILLA
Lead Independent Director

Age: 63 years old

Citizenship: Filipino
Date of First Appointment: April 26, 2021
Tenure: 10 months

Committee Memberships:

Chairman Board Environmental, Social and Corporate Governance

Committee (since April 26, 2021)
Member Board Audit Committee (since April 26, 2021)
Board Risk and Reputation Management Committee
(since April 26, 2021)
Board Related Party Transaction Committee (since April
26, 2021)

Present Positions:

Lead Independent Director Aboitiz Power Corporation*

Chairman of the Board of The Asia-Pacific Pathways to Progress Foundation, Inc.
Trustees
Independent Director Petron Foundation, Inc.
ACE Enexor, Inc.*
First Metro Investment Corporation
Trustee Philippine Institute for Development Studies**
Member of the Advisory Ateneo University Professional Schools
Committee
Adjunct Faculty Asian Institute of Management
* A publicly listed company

** A government agency or instrumentality.

Previous Positions:

Independent Director Aboitiz Equity Ventures Inc.

President and Chief Executive Power Sector Assets and Liabilities Management
Officer (PSALM) Corporation
Deputy Director – General National Economic and Development Authority
Coordinator Philippine Council for Sustainable Development
Chairman Philippine National Oil Company
Vice-Chairman National Power Corporation
Vice-Chairman National Transmission Corporation
Secretary of Energy Department of Energy
Regional Programme Director Global Environment Facility, UN Development
Programme

Educational Background:

College Bachelor of Science in Psychology/ Bachelor of Arts in

History
University of the Philippines – Diliman
Graduate Studies Bachelor of Laws
University of the Philippines – Diliman
Master of Laws
University of Michigan Law School, U.S.A.

104 ∙ SEC FORM 17-A (ANNUAL REPORT)

 CARLOS C. EJERCITO
Independent Director

Age: 76 years old

Citizenship: Filipino
Date of First Appointment: May 19, 2014
Tenure: 7 years

Committee Memberships:

Chairman Board Audit Committee (since May 19, 2014)

Member Board Risk and Reputation Management Committee
(since May 19, 2014)
Board Environmental, Social and Corporate Governance
Committee (since May 19, 2014)
Board Related Party Transactions Committee (since May
15, 2017)

Present Positions:

Independent Director Aboitiz Power Corporation*

Independent Director and Bloomberry Resorts Corporation*
Chairman of the Board Audit
Committee
Independent Director and Century Properties Group, Inc.*
Member of the Audit
Committee
Chairman Northern Access Mining, Inc.
President and Chief Executive Mount Grace Hospitals, Inc.
Officer
Board Member Medical Center Manila
VR Potenciano Medical Center
Tagaytay Medical Center
Pinehurst Medical Services Inc.
Grace General Hospital
Healthserv Medical Center
Lorma Medical Center
Mary Mediatrix Medical Center
Silvermed Corporation
Capitol Medical Center
Divine Grace Medical Center
Good Samaritan Medical Center
* A publicly listed company

Previous Positions:

Chairman of the Board United Coconut Planters Bank

Director National Grid Corporation of the Philippines
President and Chief Executive Greenfield Development Corporation
Officer
Vice President and Senior Citibank, NA.
Country Operations Officer

Educational Background:

College Bachelor of Science in Business Administration (cum

laude), University of the East
Graduate Studies Management Development Program Harvard Business
School, Massachusetts, U.S.A.

He is not connected with any Philippine government agency or instrumentality.

105 ∙ SEC FORM 17-A (ANNUAL REPORT)

 ERIC RAMON O. RECTO
Independent Director

Age: 58 years old

Citizenship: Filipino
Date of First Appointment: May 21, 2018
Tenure: 3 years

Present Positions:

Independent Director Aboitiz Power Corporation*

Chairman of the Board Philippine Bank of Communications*
Chairman of the Board and Bedfordbury Development Corporation
President
Vice Chairman Alphaland Corporation
President and Vice Chairman Atok-Big Wedge Co., Inc.*
President/Director Q-Tech Alliance Holdings, Inc.
Director DITO CME Holdings Corp.*
Independent Director PH Resorts Group Holdings, Inc.*
Independent Director Manila Water Company, Inc. *
Independent Director Waterfront Cebu City Casino Hotel Inc.
Independent Director Davao Insular Hotel Company Inc.
* A publicly listed company

Previous Positions:

Vice Chairman Alphaland Corporation

President Top Frontier Investment Holdings, Inc.
Director San Miguel Corporation
Manila Electric Company (Meralco)
Undersecretary Department of Finance

Educational Background:

College Bachelor of Science Degree in Industrial Engineering

University of the Philippines – Diliman
Graduate Studies Masters in Business Administration, with concentration
in Finance and Operation Management
Johnson Graduate School of Management at the Cornell
University in Ithaca, New York, U.S.A

He is not connected with any Philippine government agency or instrumentality.

Performance Assessment and Attendance Reports of the Board

In accordance with AboitizPower’s Revised Manual on Corporate Governance (as amended on February 23,
2022) (the “Revised Manual”), the members of the Board and Board Committees conduct an annual self-
assessment of their collective and individual performance. In addition, the directors assess the performance
of the Company’s corporate officers such as the Chairman of the Board, the Chief Executive Officer, the Chief
Risk Officer, and Compliance Officer, and the Group Internal Audit Head.

The assessment forms are prepared and regularly reviewed by the Compliance Officer to elicit relevant and
valuable insights on the following assessment criteria: (1) compliance with best governance practices and
principles; (2) participation and contribution to the Board and committee meetings; and (3) performance of
their duties and responsibilities as provided in the Company’s Revised Manuals, Charters, Amended Articles
of Incorporation, and Amended By-Laws.

106 ∙ SEC FORM 17-A (ANNUAL REPORT)

 In addition, AboitizPower directors are evaluated by its key officers based on the following criteria: (1)
business acumen, (2) independent judgment, (3) familiarity with the business, (4) active participation and
effective challenge, (5) professional expertise and network, (6) value contribution, (7) embodiment of Aboitiz
core values, and (8) reputation. Assessment results are presented to the Board ESCG Committee as part of
the nomination and selection process of incumbent Board members.

The Corporate Governance Code and the Revised Manual requires that at least once in every three years, the
conduct of the Board performance assessment must be supported by an independent third-party facilitator.
In 2020, AboitizPower engaged Good Governance Advocates and Practitioners of the Philippines (GGAPP), an
independent association of corporate governance practitioners, to support the Board performance
assessment exercise. The results of the assessment, as well as the recommendations from GGAPP, were
presented and discussed at the Board ESCG Committee meeting on February 16, 2021.

For more discussion on the Board’s (i) performance assessment, and (ii) attendance record at Board, Board
Committee, and stockholders’ meetings for the year 2021, please refer to the Board Matters portion of Part
III – Corporate Governance on page 126 of the Company’s 2021 Annual Report.

Nominations for Independent Directors and Procedure for Nomination

The procedure for the nomination and election of the Independent Directors is in accordance with Rule 38 of
the Securities Regulation Code ("SRC Rule 38"), AboitizPower’s Amended By-Laws, and AboitizPower’s
Amended Guidelines for the Nomination and Election of Independent Directors, approved by the Board of
Directors on March 23, 2017 (the "Amended Guidelines").

Nominations for Independent Directors were opened beginning January 1, 2022 and the table for
nominations was closed on February 15, 2022, in accordance with Section C(1) of the Guidelines. The period
may be extended by unanimous vote of the Board ESCG Committee for meritorious reasons.

SRC Rule 38 further requires the Board ESCG Committee (in its capacity as the Board Nominations and
Compensation Committee) to meet and pre-screen all nominees and submit a Final List of Nominees to the
Corporate Secretary, so that such list will be included in the Company’s Preliminary and Definitive Information
Statements. Only nominees whose names appear on the Final List shall be eligible for election as Independent
Directors. No other nominations shall be entertained after the Final List of nominees has been prepared. The
name of the person or group of persons who nominates an Independent Director shall be identified in such
report including any relationship with the nominee.

On February 18, 2022, the Chairman of the Board of the ESCG Committee submitted the Final List of Nominees
to the Corporate Secretary. In approving the nominations for Independent Directors, the Board ESCG
Committee considered the guidelines on the nominations of Independent Directors prescribed in SRC Rule
38, the Amended Guidelines, and AboitizPower’s Revised Manual. In 2021, Mr. Raphael P.M. Lotilla, Lead
Independent Director, was the Chairman of the Board ESCG Committee. The other voting members are
Messrs. Sabin M. Aboitiz, Luis Miguel O. Aboitiz, Carlos C. Ejercito, and Eric Ramon O. Recto, while the ex-
officio non-voting members are Ms. Ma. Consolacion C. Mercado, Ms. Susan V. Valdez, and Mr. David Jude L.
Sta. Ana.

No nominations for Independent Director shall be accepted at the floor during the ASM at which such
nominee is to be elected. Independent Directors shall be elected in the ASM during which other members of
the Board are to be elected.

Messrs. Raphael P. M. Lotilla and Eric Ramon O. Recto are the nominees for Independent Directors of
AboitizPower for the 2022 ASM. They are neither officers nor employees of AboitizPower or any of its
Affiliates, and do not have any relationship with AboitizPower which would interfere with the exercise of
independent judgment in carrying out the responsibilities of an Independent Director.

AboitizPower stockholders, Mesdames Catherine Alvarez and Maricar Suico Le, have respectively nominated
Messrs. Lotilla and Recto as AboitizPower’s Independent Directors. None of the nominating stockholders
have any relation to the respective independent director they are nominating.

107 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Other Nominees for Election as Members of the Board of Directors

As the Board ESCG Committee conveyed to the Corporate Secretary on February 18, 2022, the following were
also nominated and qualified as candidates to the AboitizPower Board of Directors for the ensuing year 2022-
2023:

Sabin M. Aboitiz
Luis Miguel O. Aboitiz
Emmanuel V. Rubio
Toshiro Kudama
Satoshi Yajima
Edwin R. Bautista
Danel C. Aboitiz

Pursuant to Section 7, Article I of the Amended By-Laws of AboitizPower, nominations for members of the
Board, other than Independent Directors, for the ensuing year must be submitted in writing to the Corporate
Secretary at least 15 working days prior to the ASM on April 25, 2022 or not later than March 31, 2022.

All other information regarding the positions and offices held by nominees are integrated in Item 5(a)(1)
above. Mr. Satoshi Yajima is being nominated to the AboitizPower Board for the first time.

Below is the profile of Mr. Yajima including the positions and offices he held for the past five years:

SATOSHI YAJIMA
Nomination: Non-Executive Director

Age: 55 years old

Citizenship: Japanese

Present Positions:

Managing Executive Officer/ Senior JERA Co., Inc.

Operating Officer – Business Development
Department

Previous Positions:

Senior Vice President of Energy JERA Co., Inc.

Infrastructure Group
Executive Officer and Senior Operating
Officer – Business Development Department

Educational Background:

College Bachelor’s Degree in Electrical Engineering

Waseda University, Japan

He is not connected with any Philippine government agency or instrumentality. He is not a director of any publicly-
listed company in the Philippines.

108 ∙ SEC FORM 17-A (ANNUAL REPORT)

 (2) Officers for 2021-2022

Below is the list of AboitizPower’s officers for 2021-2022 with their corresponding positions and offices held
for the past five years. Unless otherwise indicated, the officers assumed their positions during AboitizPower’s
organizational meeting in 2021 for a term of one year.

SABIN M. ABOITIZ
Chairman – Board of Directors

Refer to Item 5 (a)(1) for the profile of Mr. Sabin M. Aboitiz

LUIS MIGUEL O. ABOITIZ

Vice Chairman – Board of Directors

Refer to Item 5 (a)(1) for the profile of Mr. Luis Miguel O. Aboitiz.

EMMANUEL V. RUBIO
Director/President and Chief Executive Officer

Refer to Item 5 (a)(1) for the profile of Mr. Emmanuel V. Rubio.

LIZA LUV T. MONTELIBANO

Senior Vice President – Chief Financial Officer/Corporate Information Officer

Age: 46
Citizenship: Filipino

Committee Memberships:

Ex-Officio Member Board Risk and Reputation Management Committee

Board Executive Committee

Present Positions:

Senior Vice President – Chief Aboitiz Power Corporation

Financial Officer/Corporate
Information Officer
Director/Treasurer/Chief AA Thermal, Inc.
Finance Officer
Director/SVP – Finance Aboitiz Renewables, Inc.
Director AboitizPower International Pte Ltd
AP Renewable Energy Corporation
Aseagas Corporation
Archipelago Insurance Pte Ltd
Cotabato Light & Power Company
Davao Light & Power Co., Inc.
Hedcor Group
Luzon Hydro Corporation
Subic Enerzone Corporation
Therma Power, Inc.
Visayan Electric Co., Inc.
Directorship and Management GNPower Mariveles Energy Center Ltd. Co.
Position

Previous Positions:

Country Controller NXP Semiconductors

109 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Chief Financial Officer SteelAsia Manufacturing Corporation
General Manager for Finance L’Oreal Philippines, Inc.
and Administration

Educational Background:

College Bachelor of Science in Management, Minor in Finance

(cum laude)
Ateneo de Manila University, Manila

She is also a Certified Internal Auditor under the Institute of Internal Auditors. She is not connected with any
Philippine government agency or instrumentality. She is not a director of a publicly-listed company in the Philippines.

MA. CONSOLACION C. MERCADO*

Compliance Officer

Age: 43
Citizenship: Filipino

Committee Memberships:

Ex-Officio Member Board Environmental, Social, and Corporate Governance

Committee

Present Positions:

Compliance Officer/ Vice Aboitiz Power Corporation

President for Legal – Energy
Affairs

Previous Positions:

Vice President for Regulatory Aboitiz Power Corporation

Affairs, Distribution Utility
Group
Assistant Vice-President for
Legal – Energy Affairs

Educational Background:

College Bachelor of Science in Business Administration and

Accountancy
University of the Philippines – Diliman
Graduate Studies Bachelor of Laws
University of the Philippines – Diliman

She is a Certified Public Accountant and a member in good standing of the Integrated Bar of the Philippines. She is
not connected with any Philippine government agency or instrumentality. She is not a director of any publicly-listed
company in the Philippines.

*Effective April 1, 2022, Ms. Monalisa C. Dimalanta will assume the role of Compliance Officer in AboitizPower.

110 ∙ SEC FORM 17-A (ANNUAL REPORT)

 MARIA VERONICA C. SO
Group Treasurer

Age: 50
Citizenship: Filipino

Committee Memberships:

None N/A

Present Positions:

Group Treasurer Aboitiz Power Corporation

Senior Vice President – Group Aboitiz Equity Ventures Inc.
Treasurer

Previous Positions:

First Vice President – Deputy Aboitiz Equity Ventures Inc.

Group Treasurer
Vice President – Treasury
Services
Various treasury and finance Globe Telecom
positions

Educational Background:

College Bachelor of Science in Business Management

Ateneo de Manila University, Manila
Graduate Studies Masters in Business Management
Asian Institute of Management

She is not connected with any Philippine government agency or instrumentality. She is not a director of any publicly-
listed company in the Philippines.

MANUEL ALBERTO R. COLAYCO

Corporate Secretary

Age: 52
Citizenship: Filipino

Committee Memberships:

None N/A

Present Positions:

Corporate Secretary Aboitiz Power Corporation

Senior Vice President – Chief Aboitiz Equity Ventures Inc.
Legal and Compliance
Officer/Corporate Secretary

Previous Positions:

First Vice President and Chief Aboitiz Equity Ventures Inc.

Legal Officer
General Counsel AGP International Holdings Ltd.
Atlantic, Gulf & Pacific Company of Manila, Inc.
Executive Director and Assistant J.P. Morgan Chase Bank N.A.
General Counsel

111 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Vice President and Legal DKR Oasis (Hong Kong) LLC
Counsel
Associate Skadden, Arps, Slate, Meagher & Flom, LLP
Romulo Mabanta Buenaventura Sayoc & de los Angeles

Educational Background:

College Bachelor of Arts in Economics

Ateneo de Manila University, Manila
Graduate Studies Juris Doctor
Ateneo de Manila University, Manila
Master of Laws
New York University School of Law, New York, U.S.A.

He is a member in good standing of the Integrated Bar of the Philippines and of the New York State Bar. He is not
connected with any Philippine government agency or instrumentality. He is not a director of any publicly-listed
company in the Philippines.

MAILENE M. DE LA TORRE
Assistant Corporate Secretary

Age: 40
Citizenship: Filipino

Committee Memberships:

None N/A

Present Positions:

Assistant Corporate Secretary Aboitiz Power Corporation

Assistant Vice President – Aboitiz Equity Ventures Inc.
Governance and Compliance
and Assistant Corporate
Secretary
Corporate Secretary Aboitiz Renewables Inc.
Therma Power, Inc.
Therma South, Inc.
Therma Visayas, Inc.
Manila Oslo Renewable Enterprise Inc.
Pilmico Foods Corporation
AEV CRH Holdings, Inc.
SN AboitizPower Group
Enerzones Group
Pagbilao Energy Corporation
Assistant Corporate Secretary Cotabato Light & Power Company
Visayan Electric Co., Inc.

Previous Positions:

Senior Associate General Aboitiz Equity Ventures Inc.

Counsel for Governance and
Compliance

Educational Background:

College Bachelor of Arts Degree in Political Science (Cum Laude)

University of the Philippines – Diliman
Graduate Studies Bachelor of Laws Degree
University of the Philippines – Diliman

112 ∙ SEC FORM 17-A (ANNUAL REPORT)

 She is also a graduate member of the Institute of Corporate Directors and completed the Professional Director’s
Program. She is a member in good standing of the Integrated Bar of the Philippines. She is not connected with any
Philippine government agency or instrumentality. She is not a director of a publicly-listed company in the Philippines.

SAMMY DAVE A. SANTOS

Assistant Corporate Secretary

Age: 37
Citizenship: Filipino

Committee Memberships:

None N/A

Present Positions:

Assistant Corporate Secretary Aboitiz Power Corporation

Senior Associate General Aboitiz Equity Ventures Inc.
Counsel for Governance and
Compliance
Corporate Secretary Various Subsidiaries of the Aboitiz Group
Assistant Corporate Secretary Various Subsidiaries of the Aboitiz Group
Good Governance Advocates and Practitioners of the
Philippines

Previous Positions:

Associate General Counsel for Aboitiz Equity Ventures Inc.

Governance and Compliance

Educational Background:

College Master of Science in Industrial Economics

University of Asia and the Pacific, Pasig
Graduate Studies Juris Doctor
Ateneo de Manila University, Manila

He is a member in good standing of the Integrated Bar of the Philippines. He is not connected with any Philippine
government agency or instrumentality. He is not a director of any publicly-listed company in the Philippines.

MARK LOUIE L. GOMEZ

Vice President for Risk and Organizational Performance Management and Data Protection Officer

Age: 40
Citizenship: Filipino

Committee Memberships:

Ex-Officio Member Board Risk and Reputation Management Committee

Present Positions:

Vice President for Risk and Aboitiz Power Corporation

Organizational Performance
Management and Data
Protection Officer

113 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Previous Positions:

Assistant Vice President – Therma Luzon, Inc.

Enterprise Risk Management
and Data Protection Officer
Compliance Manager AP Renewables Inc.

Educational Background:

College Bachelor of Arts in Political Science

University of the Philippines – Diliman
Graduate Studies Bachelor of Laws
San Beda College of Law, Manila

He is a member in good standing of the Integrated Bar of the Philippines. He is not connected with any Philippine
government agency or instrumentality. He is not a director of any publicly-listed company in the Philippines.

SATURNINO E. NICANOR, JR.

Internal Audit Head

Age: 59
Citizenship: Filipino

Committee Memberships:

None N/A

Present Positions:

Internal Audit Head/ Vice Aboitiz Power Corporation

President for Internal Audit

Previous Positions:

Internal Audit Head/ Assistant Aboitiz Power Corporation

Vice President for Internal Audit

Educational Background:

College Bachelor of Science in Commerce, Major in Accounting

(Magna Cum Laude)
University of San Jose Recoletos, Cebu City

Mr. Nicanor is an Accredited Training Facilitator of the Institute of Internal Auditors Philippines. He is not connected
with any Philippine government agency or instrumentality. He is not a director of any publicly-listed company in the
Philippines.

Period in which the Directors and Executive Officers Should Serve

The directors shall serve for a period of one year.

Term of Office of a Director

Pursuant to the Company’s Amended By-Laws, the directors are elected at each ASM by stockholders entitled
to vote. Each director holds office until the next annual election, or for a term of one year and until his
successor is duly elected, unless he resigns, dies, or is removed prior to such election.

Any vacancy in the Board, other than by removal or expiration of term, may be filled by a majority vote of the
remaining members thereof at a meeting called for that purpose, if they still constitute a quorum. The

114 ∙ SEC FORM 17-A (ANNUAL REPORT)

 director so chosen shall serve for the unexpired term of his/her predecessor in office.

When the vacancy arises as a result of removal by the stockholders or members, the election may be held on
the same day of the meeting authorizing the removal and this fact must be so stated in the agenda and notice
of said meeting. In all other cases, the election must be held no later than 45 days from the time the vacancy
arose. The director so chosen to fill a vacancy shall serve for the unexpired term of his/her predecessor in
office.

When the vacancy prevents the remaining directors from constituting a quorum and emergency action is
required to prevent grave, substantial, and irreparable loss or damage to the corporation, the vacancy may
be temporarily filled from among the officers of the corporation by unanimous vote of the remaining
directors. The action by the designated director shall be limited to the emergency action necessary, and the
term shall cease within a reasonable time from the termination of the emergency or upon the election of the
replacement director, whichever comes earlier.

(3) Significant Employees

AboitizPower considers the contribution of every employee important to the fulfillment of its goals.

(4) Family Relationships

Mr. Sabin M. Aboitiz is an uncle of Mr. Danel C. Aboitiz.

Other than this, no other officers or directors are related within the fourth degree of consanguinity.

(5) Involvement in Certain Legal Proceedings as of March 23, 2022

To the knowledge and/or information of AboitizPower, none of its nominees for election as directors, its
present members of the Board, or its executive officers, is presently involved in any legal proceeding or
bankruptcy petition, or has been convicted by final judgment, or being subject to any order, judgment or
decree, or has violated the securities or commodities law in any court or government agency in the Philippines
or elsewhere, for the past five years until March 23, 2022, which would put to question his/her ability and
integrity to serve AboitizPower and its stockholders.

(6) Parent Company

AboitizPower's parent company is AEV. As of March 23, 2022, AEV owns 51.99% of the voting shares of
AboitizPower. In turn, ACO owns, as of March 23, 2022, 48.59% of the voting shares of AEV.

(b) Resignation or Refusal to Stand for Re-election by Members of the Board of Directors

No director has resigned or declined to stand for re-election to the Board since the date of AboitizPower’s last
ASM because of a disagreement with AboitizPower on matters relating to its operations, policies, and practices.

Item 10. Compensation of Directors and Executive Officers

(a) Summary of Compensation of Executive Officers

Information as to the aggregate compensation paid or accrued to AboitizPower’s Chief Executive Officer and four
most highly compensated executive officers, as well as other directors and officers during the last two completed
fiscal years and the ensuing fiscal year, are as follows:

115 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Other
Name of Officer and Principal Position* Year Salary Bonus Compensation

Chief Executive Officer and the Four

Most Highly Compensated Officers:

1. EMMANUEL V. RUBIO
- President and Chief Executive Officer
2. LUIS MIGUEL O. ABOITIZ
- Vice Chairman
3. LIZA LUV T. MONTELIBANO
- Senior Vice President - Chief Financial
Officer/Corporate Information Officer
4. JAIME JOSE Y. ABOITIZ*
- Executive Vice President & Chief
Operating Officer
5. DANEL C. ABOITIZ
- Chief Commercial and Stakeholder
Engagement Officer
Actual 2021 ₱95,120,000.00 ₱5,220,000.00 ₱34,340,000.00
All above named officers as a group Actual 2020 ₱100,840,000.00 ₱4,960,000.00 ₱43,340,000.00
Projected 2022 ₱100,800,000.00 ₱5,500,000.00 ₱36,400,000.00
Actual 2021 ₱11,640,000.00 ₱810,000.00 ₱13,790,000.00
All other officers and directors as a
Actual 2020 ₱25,010,000.00 ₱1,660,000.00 ₱43,650,000.00
group
Projected 2022 ₱12,300,000.00 ₱900,000.00 ₱14,600,000.00
* Mr. Jaime Jose Y. Aboitiz retired from the Company effective January 1, 2022.

The 2020 Amended By-Laws of the Company, as approved by the SEC on October 1, 2020, defined corporate
officers as follows: the Chairman of the Board; the Vice Chairman; the Chief Executive Officer; the Chief Operating
Officer; the Treasurer; the Corporate Secretary; the Assistant Corporate Secretary; and such other officers as
may be appointed by the Board of Directors. For the year 2021, the Company's Summary of Compensation of
Executive Officers covers the compensation of officers as reported under Item 5 (a) of the Annual Report.

Except for the regular company retirement plan, which by its very nature will be received by the officers
concerned only upon retirement from the Company, the above-mentioned officers do not receive any other
compensation in the form of warrants, options, and/or profit-sharing.

There is no compensatory plan or arrangement between the Company and any executive in case of resignation
or any other termination of employment or from a change-in-control of the Company.

(b) Compensation of Directors

(1) Standard Arrangements

AboitizPower directors receive a monthly allowance of ₱150,000.00, while the Chairman of the Board
receives a monthly allowance of ₱200,000.00. In addition, each director/member and the Chairmen of the
Board and the Board Committees receive a per diem for every Board or Board Committee meeting attended
as follows:

Type of Meeting Directors Chairman of the Board

Board Meeting ₱150,000.00 ₱200,000.00

Type of Meeting Members Chairman of the Committee

Board Committee Meeting
₱100,000.00 ₱150,000.00
(except Audit Committee)
Audit Committee ₱100,000.00 ₱200,000.00

116 ∙ SEC FORM 17-A (ANNUAL REPORT)

 In compliance with Section 29 of the Revised Corporation Code, the total compensation of each of the
Company’s directors as of December 31, 2021 is as follows:
Total Compensation
Name of Director
Received as a Director 10
SABIN M. ABOITIZ 11***
₱4,850,000.00
Chairman of the Board of Directors
LUIS MIGUEL O. ABOITIZ*
₱3,800,000.00
Vice Chairman of the Board of Directors
TUSHIRO KUDAMA 12
₱300,000.00
Director
EMMANUEL V. RUBIO***
₱4,500,000.00
Director/President and Chief Executive Officer
EDWIN R. BAUTISTA*
₱2,400,000.00
Director
DANEL C. ABOITIZ ***
Director/Chief Commercial and Stakeholder Engagement Officer ₱4,250,000.00

RAPHAEL P.M. LOTILLA*

Lead Independent Director ₱3,300,000.00

CARLOS C. EJERCITO
₱4,830,000.00
Independent Director
ERIC RAMON O. RECTO
Independent Director ₱5,000,000.00

ENRIQUE M. ABOITIZ**
Director ₱1,480,000.00

ERRAMON I. ABOITIZ**
₱2,290,000.00
Director
JAIME JOSE Y. ABOITIZ 13***
Director & Executive Vice President and Chief Operating Officer ₱1,300,000.00

MIKEL A. ABOITIZ
Director (Resigned effective December 22, 2021) ₱4,250,000.00

* Elected during the April 26, 2021 Annual Stockholders’ Meeting

** Replaced during the April 26, 2021 Annual Stockholders’ Meeting
***A portion of the director’s compensation was paid to their nominating company.

(2) Other Arrangements

Other than payment of the directors’ per diem and monthly allowance as stated, there are no standard
arrangements pursuant to which directors of the Company are compensated, or are to be compensated,
directly or indirectly, for any services provided as a director.

(c) Employment Contracts and Termination of Employment and Change-in-Control Arrangements

There is no compensatory plan or arrangement between AboitizPower and any executive officer in case of
resignation or any other termination of employment or from a change in the management or control of
AboitizPower.

10 Consisting of the monthly allowance and per diem. Per diem is based on the directors’ attendance in the Board and Board Committee meetings,
and their Committee memberships for the period January 1 to December 31, 2021.
11 Mr. Sabin M. Aboitiz replaced Mr. Erramon I. Aboitiz on April 26, 2021.
12 Mr. Toshiro Kudama replaced Mr. Mikel Aboitiz on December 22, 2021.
13 Mr. Jaime Jose Y. Aboitiz retired from the Company effective January 1, 2022.

117 ∙ SEC FORM 17-A (ANNUAL REPORT)

 (d) Warrants and Options Outstanding

To date, AboitizPower has not granted any stock option to its directors or officers.

Item 11. Security Ownership of Certain Record and Beneficial Owners and Management

(1) Security Ownership of Certain Record and Beneficial Owners (more than 5%) as of March 23, 2022

Name of
No. of Shares Held and
Title of Name and Address of Record Beneficial Owner Percentage
Nature of Ownership
Class of Owner, and Relationship with and Relationship Citizenship of
(Record and/or
Shares Issuer with Record Ownership
Beneficial)
Owner
Common 1. Aboitiz Equity Ventures Inc. Aboitiz Equity Filipino 3,825,794,642 51.99%
(AEV) 14 Ventures Inc. 15 (Record and Beneficial)
32nd Street, Bonifacio Global
City, Taguig City
(Stockholder)
Common 2. JERA Asia Private Limited JERA Asia Private Japanese 1,986,823,063 27.00%
(JERA Asia) 16 Limited (Beneficial)
1 Raffles Places, #49-00 One
Raffles 603-279-596
Place, Singapore 48616
(Stockholder)
Common 3. PCD Nominee Corporation 17 PCD participants Filipino 1,097,446,124 14.91%
37th Floor, Tower 1, The acting for (Record)
Enterprise Center, 6766 Ayala themselves or for
Avenue corner Paseo de Roxas, their customers 18
Makati City, 1226 Metro
Manila
(Stockholder)

On December 16, 2021, JERA Asia acquired a 27% stake in AboitizPower, which consisted of a 25.01% stake
from AEV and a 1.99% stake from the Aboitiz family privately held company, Aboitiz & Company, Inc.
(ACO). JERA Asia is an affiliate of JERA Co., Inc. (JERA), a joint venture company organized under the laws
of Japan and established in 2015 by two major Japanese electric companies (TEPCO Fuel & Power
Incorporated and Chubu Electric Power Company Incorporated). JERA is Japan’s largest power generation
company and has a global footprint through its subsidiaries operating in various countries around the
world.

AEV is the public holding and management company of the Aboitiz Group, one of the largest
conglomerates in the Philippines. As of March 23, 2022, the following entities own at least five per centum
(5%) or more of AEV:

Name of
No. of Shares and
Title of Name and Address of Beneficial Owner Percentage
Nature of Ownership
Class of Stockholder and Relationship and Relationship Citizenship of
(Record and/ or
Shares with Issuer with Record Ownership
Beneficial)
Owner
Common 1. Aboitiz & Company, Inc. Aboitiz & Company, Filipino 2,735,600,915 48.59%
Aboitiz Corporate Center, Inc. (Record and Beneficial)
Gov. Manuel A. Cuenco
Avenue, Kasambagan, Cebu
City (Stockholder)

14 AEV is the parent company of AboitizPower.

15 Mr. Sabin M. Aboitiz, President and Chief Executive Officer of AEV, will vote the shares of AEV in AboitizPower in accordance with the directive
of the AEV Board of Directors.
16
Messrs. Low Kian Min, Takao Onuki, and Katsuya Harada, Authorized Representatives of JERA Asia, will vote for the shares of JERA Asia in
AboitizPower in accordance with the directive of JERA Asia’s Board of Directors.
17 PCD Nominee Corporation is not related to the Company. The beneficial owners of the shares held through a PCD participant are the beneficial

owners thereof to the extent of the number of shares registered under the respective accounts with the PCD participant.
18 Each beneficial owner of shares, through a PCD participant, is the beneficial owner of such number of shares he owns in his account with the PCD

participant. AboitizPower has no record relating to the power to decide how the shares held by PCD are to be voted. None of the beneficial owners
under a PCD participant own more than 5% of the Company’s common shares, as of February 28, 2022.

118 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Name of
No. of Shares and
Title of Name and Address of Beneficial Owner Percentage
Nature of Ownership
Class of Stockholder and Relationship and Relationship Citizenship of
(Record and/ or
Shares with Issuer with Record Ownership
Beneficial)
Owner
Common 2. PCD Nominee Corporation PCD participants Filipino 997,122,163 17.71%
(Filipino) acting for (Record)
37th Floor, Tower 1, The themselves or for
Enterprise Center, 6766 Ayala their customers
Avenue corner Paseo de Roxas,
Makati City, 1226 Metro
Manila (Stockholder)
Common 3. Ramon Aboitiz Foundation, Ramon Aboitiz Filipino 426,804,093 7.58%
Inc. Foundation, Inc. (Record and Beneficial)
35 Lopez Jaena St., Cebu City
(Stockholder)
Common 4. PCD Nominee Corporation PCD participants Non- 337,091,841 5.99%
37th Floor, Tower 1, The acting for Filipino (Record)
Enterprise Center, 6766 Ayala themselves or for
Avenue corner Paseo de Roxas, their customers
Makati City, 1226 Metro
Manila (Stockholder)

(2) Security Ownership of Management as of March 23, 2022 (Record and Beneficial)

Title of No. of Shares and Nature

Percentage of
Class of Name of Owner and Position of Ownership Citizenship
Ownership
Shares (Direct and/or Indirect)
Sabin M. Aboitiz 5,667,406 Direct 0.08%
Common Filipino
Chairman of the Board 15,280,079 Indirect 0.21%

Luis Miguel O. Aboitiz 11,167,081 Direct 0.15%

Common Filipino
Vice Chairman of the Board 21,238,323 Indirect 0.29%

Toshiro Kudama 0 Direct 0.00%

Common Japanese
Director 100 Indirect 0.00%
Emmanuel V. Rubio 89,130 Direct 0.00%
Common Director/President and Chief Executive Filipino
Officer 428,000 Indirect 0.01%
Danel C. Aboitiz 4,081,636 Direct 0.06%
Common Director/Chief Commercial and Stakeholder Filipino
Engagement Officer 3,369,504 Indirect 0.05%

Edwin R. Bautista 1,000 Direct Filipino 0.00%

Common
Director 0 Indirect 0.00%

Raphael P.M. Lotilla 1,000 Direct 0.00%

Common Filipino
Lead Independent Director 0 Indirect 0.00%

Carlos C. Ejercito 1,000 Direct 0.00%

Common Filipino
Independent Director 0 Indirect 0.00%

Eric Ramon O. Recto 1,000 Direct 0.00%

Common Filipino
Independent Director 0 Indirect 0.00%

Veronica C. So 0 Direct 0.00%

Common Filipino
Group Treasurer 0 Indirect 0.00%
Liza Luv T. Montelibano 19,600 Direct 0.00%
Common Senior Vice President/Chief Financial Filipino
Officer/Corporate Information Officer 0 Indirect 0.00%

Ma. Consolacion C. Mercado 0 Direct 0.00%

Common Filipino
Compliance Officer 0 Indirect 0.00%
Manuel Alberto R. Colayco 0 Direct 0.00%
Common Filipino
Corporate Secretary 0 Indirect 0.00%

119 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Title of No. of Shares and Nature
Percentage of
Class of Name of Owner and Position of Ownership Citizenship
Ownership
Shares (Direct and/or Indirect)
Mailene M. de la Torre 0 Direct 0.00%
Common Filipino
Assistant Corporate Secretary 5,000 Indirect 0.00%
Sammy Dave A. Santos 0 Direct 0.00%
Common Filipino
Assistant Corporate Secretary 0 Indirect 0.00%
Mark Louie L. Gomez 0 Direct 0.00%
Common Data Privacy Officer and Vice President for Risk Filipino
and Organizational Performance Management 0 Indirect 0.00%

Saturnino E. Nicanor, Jr. 26,896 Direct 0.00%

Common Filipino
Internal Audit Head 0 Indirect 0.00%
TOTAL 61,376,755 0.83%

(3) Voting Trust Holders of Five Per Centum (5%) or More of Common Equity

No person holds under a voting trust or similar agreement more than five per centum (5%) of AboitizPower’s
common equity.

(4) Changes in Control

There are no arrangements that may result in a change in control of AboitizPower during the period covered
by this report.

Item 12. Certain Relationships and Related Transactions

AboitizPower and its Subsidiaries (the "Group"), in their regular conduct of business, have entered into related
party transactions consisting of professional fees, advances, various guarantees, construction contracts, and
rental fees. These are made on an arm’s length basis as of the time of the transactions.

AboitizPower ("Parent") has provided support services to its Business Units, such as marketing, trading, billing
and other technical services, necessary for the effective and efficient management and operations among
and between the Subsidiaries and Associates.

The Group has existing Service Level Agreements (SLAs) with its parent company, AEV, for corporate center
services such as human resources, internal audit, legal, information technology, treasury and corporate
finance, among others. These services are obtained from AEV to enable the Group to realize cost synergies
and optimize expertise at the corporate center. AEV maintains a pool of highly qualified professionals with
business expertise specific to the businesses of the Group. Transaction costs are always benchmarked on third
party rates to ensure competitive pricing and consistency with prevailing industry standards. SLAs are in place
to ensure quality of service.

Material and significant related party transactions are reviewed and approved by the Board Related Party
Transactions Committee, composed of all independent directors.

No other transactions, without proper disclosure, were undertaken by the Company in which any director or
executive officer, any nominee for election as director, any beneficial owner (direct or indirect) or any
member of his immediate family was involved or had a direct or indirect material interest. Other than what
has been discussed in this Annual Report and the Company’s 2021 Annual Financial Statements, there are no
other related party transactions entered into by the Company with related parties, including transactions with
directors or self-dealings by the Company’s directors.

AboitizPower employees are required to promptly disclose any business and family-related transactions with
the Company to ensure that potential conflicts of interest are brought to the attention of the management.

120 ∙ SEC FORM 17-A (ANNUAL REPORT)

 In 2021, AboitizPower updated the Related Parties Certification for Directors and Officers in compliance with
the Bureau of Internal Revenue (BIR) Regulation No. 19-2020 on the reporting guidelines for the transactions
of individuals and juridical entities with related parties. The RPT Committee continued to ensure that related
party transactions are taken on an arm’s-length basis, within market rates, and with sufficient
documentation. Lastly, the RPT Committee ensured that RPTs falling below the SEC-defined materiality
threshold are coursed through the appropriate levels of review, reporting, and/or approval process.

For detailed discussion on related party transactions, please refer to the Consolidated Financial Statements.

121 ∙ SEC FORM 17-A (ANNUAL REPORT)

 PART IV – CORPORATE GOVERNANCE

Item 13. Corporate Governance

In 2021, the Aboitiz Group began the next chapter in its history, by continuing to drive change for a better world by
advancing business and communities for the next 100 years. The Group has taken deliberate steps in transforming the
organization into an enterprise that not only endures but thrives in the new and dynamic business landscape. This
story of transformation builds on a strong foundation of growth and expansion that was nurtured by more than five
generations of leaders with unwavering commitment to the highest standards of corporate governance.

Leading this transformation is AboitizPower’s Board of Directors, all of whom firmly believe that a sound framework
of corporate governance creates a path towards the realization of the Group’s strategic goals and growth aspirations.

Notable accomplishments of the AboitizPower Board for 2021 are as follows:

● Reviewed and affirmed the appropriateness of the Group’s purpose and brand promise in support of the
country’s gradual economic recovery.
● Reviewed and aligned the Group’s short-term and long-term business strategies to sustain and expand the
business under the new normal.
● Reviewed and ensured the sufficiency of the internal controls system and enterprise risk management
framework of AboitizPower.
● Assessed and approved the sale of 25.01% of the Company’s equity ownership in AboitizPower.
● Authorized and held AboitizPower’s Virtual Annual Stockholders’ Meeting for the second year.
● Reviewed and approved amendments to the Board and Committee Charters.
● Established the Board Information Security and Cybersecurity Committee to formalize a group-wide
integrated approach in managing cybersecurity-related risks.
● Approved amendments to the Company’s Code of Ethics and Business Conduct, Whistleblowing Policy, and
the Related Party Transactions Policy.
● Reviewed and implemented changes to the Board’s governance mechanism in alignment with global best
practices and the demands of the current business environment.
● In addition to the Annual Corporate Governance Seminar, conducted regular virtual learning sessions to
strengthen the continuous learning program for the Company’s directors and officers.

Shareholders Rights and Equitable Treatment

The protection of the rights of its shareholders is of paramount importance to the Company. The goal is to ensure the
free exercise of shareholder rights, regardless of the number of shares they own. Among the rights of the Company’s
shareholders are:(i) to receive notices of and to attend shareholders’ meetings; (ii) to participate and vote on the basis
of the one-share, one-vote policy; (iii) nominate,elect, remove, and replace Board members (including via cumulative
voting); (iv) call for a special board meeting and propose a meeting agenda, (v) inspect corporate books and records;
(vi) vote in person, in absentia, or through proxy; (vii) receive dividends; and (viii) ratify corporate actions.

Right to Actively Participate at Shareholders’ Meetings

The Company strives to maintain a transparent and fair conduct of its Annual and Special Shareholders’ Meetings and
ensures that accurate and timely information are available to the shareholders to enable them to make a sound
judgment on all matters brought to their attention for consideration or approval. The Definitive Information Statement
and the Annual Report, distributed prior to the ASM and made available in the Company’s website, include the
highlights and summary of the financial condition of the Company. Stockholders are provided with individual profiles
of new and returning directors, as well as a summary of the Board meeting attendance and performance record of its
Directors.

In the conduct of its shareholders’ meetings, all shareholders receive notices not less than 28 days from the date of
the meeting, and all agenda items to be discussed and decided upon during the said meeting are set out in the notices
and no new agenda items are taken up during the conduct of the meeting. The rationale of agenda items which are
submitted to the shareholders for their approval are included in the notices to shareholders’ meetings.

122 ∙ SEC FORM 17-A (ANNUAL REPORT)

In 2021, AboitizPower conducted a fully digital stockholders’ meeting for the second consecutive year. Driven by its
commitment to practice sound corporate governance and guided by its core value of innovation, AboitizPower was
able to provide an accessible and convenient venue for its shareholders to exercise their basic and inviolable right to
elect their representatives to the Boards of Directors while remaining in the comfort and safety of their homes.
Beginning 2020, the Company allowed voting through remote communication or in absentia. Stockholders may access
AboitizPower’s online voting portal in order to register and vote on the matters submitted for shareholders approval
at any stockholder meetings.

All shareholders are encouraged and given the right to participate in the meetings. The opportunity to ask questions
or raise issues, the questions, answers, issues and motions raised, the agreements and resolutions arrived at, the
corporate acts approved or disapproved, and the voting results are reported in the minutes. The Company also
discloses to PSE, PDEx and the SEC all the items approved at the shareholders’ meeting no later than the next business
day. The voting results including quorum and summary of resolutions approved are made publicly available by the
next working day through the Company’s website under Investor Relations’ page. There are no barriers or
impediments preventing shareholders from consulting or communicating with one another, with the Directors and
with the Corporate Secretary.

The Company continues to exert efforts to extend the communication channels between the Company and the
institutional and individual stockholders through its Investor Relations Office and Shareholder Relations Office,
respectively.

Right to Receive Dividends

The right to receive dividends is a basic shareholder right. The Company promotes this basic shareholder right by
adopting a clear and transparent dividend policy.

Every year, the Company pays dividends in an equitable and timely manner. All shareholders are treated equally,
receiving an amount of dividends per share that is proportionate to their shareholdings. The period for payment of
dividends is based on trading requirements or constraints of the SEC and PSE.

In the last three (3) years, the Company has paid the following dividends:

Declaration Dividends per Total Dividends

Record Date Payment Date
Date Share Declared
₱0.85
2021 March 5, 2021 March 19, 2021 March 31, 2021 ₱6.25bn
(regular)
₱1.18
AboitizPower 2020 March 6, 2020 March 20, 2020 April 3, 2020 ₱8.68bn
(regular)
₱1.47
2019 March 7, 2019 March 21, 2019 April 5, 2019 ₱10.82bn
(regular)

For a more detailed discussion on the rights of the shareholders of the Company, please refer to the 2021 Consolidated
Annual and Sustainability Report, the 2021 Integrated Annual Corporate Governance Report (IACGR), and the
Governance page of the AboitizPower website, which will be available at www.aboitizpower.com.

BOARD MATTERS

Board of Directors

The Board leads the Group’s corporate governance framework. Independent from management, its members are
committed to serve and promote long-term success, and to secure the Group’s sustained growth, competitiveness
and sustainability. The Directors perform the crucial role of articulating and assessing the Group’s purpose, vision and
mission, and strategies to carry out its objectives. They ensure that the strategic business direction of the Group’s
businesses are soundly established and are in line with the overall Group’s goals and strategy. In line with best
practices, the members of the Board are responsible in establishing and monitoring the Group’s commitment to the
principles embodied in ESG. In performing these functions, the members of the AboitizPower Board, individually and
collectively, are expected to act consistently with the Aboitiz core values.

123 ∙ SEC FORM 17-A (ANNUAL REPORT)

The AboitizPower Board is composed of nine members, all of whom come from diverse professional backgrounds.
They are composed of legal and finance professionals, engineers, former or current Chief Executive Officers/Chief
Operating Officers, auditors, and accountants. Many of them have management experience in the private and
Government sectors, as well as in multilateral agencies. In 2021, the AboitizPower Board had three Independent
Directors, five Non-Executive Directors, and one Executive Director. The Chairman of the AboitizPower Board, Mr.
Enrique M. Aboitiz, is a highly experienced Non-Executive Director. As a Non-Executive Director, he is not involved in
the Company’s day-to-day operations, which enables him to focus on ensuring that the AboitizPower Board properly
discharges its duties and responsibilities. Following the 2021 ASM, the AboitizPower Board appointed Mr. Romeo L.
Bernardo as Lead Independent Director, a highly qualified professional who is familiar with the operations of
AboitizPower, and the industries it does business in. Mr. Bernardo is the Chairman of the ESCG Committee
(alsofunctions as the Nomination and Selection Committee) to ensure an independent and transparent nomination,
selection, election, and performance assessment process of the Board.

The members of the AboitizPower Board are the following:

ABOITIZ POWER CORPORATION’S BOARD OF DIRECTORS

Board and
Number Directorships in Other
Committee
Director Designation/ Year First of Years Listed Companies
Memberships and %
(Age, Nationality) Directorship Elected Served as Outside the Aboitiz
of Attendance for
Director Group
2021

SABIN M. ABOITIZ Chairman of the April 26, 2021 0 (C) BOD (100%) None
57 years old Board (NED) (C) Risk (100%)
Filipino (M) ESCG (100%)
(M) ExCom (100%)
(M) Cyber (100%)

LUIS MIGUEL O. Vice-Chairman September 1, 1 (VC) BOD (100%) None

ABOITIZ (NED) 2018 (M) AudCom (75%)
57 years old (M) Risk (100%)
Filipino (M) ExCom (100%)
(M) Cyber (100%)
(M) ESCG (N.A.)***

MIKEL A. ABOITIZ** Director (NED) February 13, 23 (M) BOD (100%) None
67 years old 1998 (M) ExCom (100%)
Filipino (M) ESCG (100%)

EMMANUEL V. President and CEO January 1, 2020 1 (M) BOD (100%) None
RUBIO (ED) (C) ExCom (100%)
57 years old (M) Risk (100%)
Filipino (Ex Officio) Cyber
(100%)

EDWIN R. BAUTISTA Director (NED) April 26, 2021 0 (M) BOD (100%) None
61 years old
Filipino

DANEL C. ABOITIZ Chief Dec 11, 2018 2 (M) BOD (89%) None
40 years old Commercial and (M) AudCom (100%)
Filipino Stakeholder (M) ExCom (100%)
Engagement
Officer
(ED)

124 ∙ SEC FORM 17-A (ANNUAL REPORT)

 RAPHAEL P.M. Lead April 26, 2021 0 (M) BOD (100%) ● ACE Enexor, Inc. (ID)
LOTILLA Independent (C) ESCG (100%) ● First Metro Investment
63 years old Director (M) Risk (100%) Corp. (ID)
Filipino (M) AudCom (100%)
(M) RPT (100%)

CARLOS C. EJERCITO Independent May 19, 2014 6 (M) BOD (100%) ● Bloomberry Resorts
76 years old Director (M) ESCG (100%) Corporation (ID);
Filipino (M) Risk (100%) ● Century Properties
(C) AudCom (100%) Group, Inc. (ID)
(M) RPT (100%)

ERIC RAMON O. Independent May 21, 2018 2 (M) BOD (78%) ● Philippine Bank of
RECTO Director (M) ESCG (100%) Communications (C)
58 years old (M) Risk (100%) ● Atok-Big Wedge Co.,
Filipino (M) AudCom (100%) Inc (Ex)
(C) RPT (100%) ● DITO CME Holdings
(C) Cyber (100%) Corp. (D)
● PH Resorts Group
Holdings, Inc. (ID)

TOSHIRO Non-Executive December 22, 0 (M) BOD (100%) None

KUDAMA** Director 2021 (M) Risk (N.A.)***
63 years old (M) ExCom
Japanese (N.A.)***

* C- Chairman; VC – Vice Chairman; M – Member; ID – Independent Director; NED – Non-Executive Director; ED – Executive Director; ExO – Ex Officio;
BOD - Board of Directors; ESCG - Board Environmental, Social, and Corporate Governance Committee; ExCom - Board Executive Committee; AudCom
- Board Audit Committee; Risk - Board Risk and Reputation Management Committee; RPT - Board Related Party Transactions Committee; Cyber –
Board Information Security and Cybersecurity Committee.
** On December 20, 2021, the members of the Board appointed Mr. Toshiro Kudama to replace Mr. Mikel A. Aboitiz as Director of AboitizPower
effective December 22, 2021.
*** Appointed as committee member on December 22, 2021.

Board Performance

In 2021, the members of the AboitizPower Board conducted the following performance review and assessment:

Type of Assessment Respondents and Scope Criteria

Director Self-Assessment Respondents: Members of the Board (1) compliance with best governance practices and
Completed: October 2021 principles;
Scope: Individual and the collective (2) participation and contribution to the Board and
performance of the members of the committee meetings; and
Board and Board committees. (3) performance of their duties and responsibilities as
provided in the company’s Revised Manuals, Charters,
Key Officers Evaluation Respondents: Members of the Board Amended Articles, and Amended By-Laws.
Completed: October 2021
Scope: Chairman, Chief Executive
Officer, Internal Audit Head, Risk
Officer, Corporate Secretary, and
Compliance Officer
Director Evaluation Respondents: Executive Officers (1) business acumen, (2) independent judgment, (3)
Completed: October 2021 familiarity with the business, (4) active participation
Scope: Members of the Board and and effective challenge, (5) professional expertise and
Board Committees network, (6) value contribution, (7) embodiment of
Aboitiz core values, and (8) goodwill and reputation.

125 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Type of Assessment Respondents and Scope Criteria
Board and Committee Respondents: Board and Committee (1) Membership and composition, (2) duties and
Charter Assessment Members responsibilities, (3) conduct of meetings, (4) support
Completed: December 2021 and resources

In addition, the Corporate Governance Code requires that at least once in every three years, the conduct of the Board
performance assessment must be supported by an independent third-party facilitator. AboitizPower complied with
this requirement in 2020 with the engagement of the Good Governance Advocates and Practitioners of the Philippines
(GGAPP), an independent association of corporate governance practitioners, to support its Board performance
assessment exercise. The results of the assessment, as well as the recommendations from GGAPP were presented and
discussed during the ESCG Committee meeting on February 16, 2021.

Board Committees

The different Board committees - Audit, Corporate Governance (now Environmental, Social, and Corporate
Governance), Risk and Reputation Management, Related Party Transactions, Executive Committee, and the Cyber and
Information Security Committee - report regularly to the Board and are crucial in maintaining Board oversight in key
management areas.

The mandate of each Board committee, including key accomplishments in 2021, are described below:

a. The Board Environmental, Social, and Corporate Governance Committee is responsible for ensuring the
establishment of a governance mechanism that promotes sustainability practices through proper
environmental stewardship, social development, and sound corporate governance. The ESCG Committees
also perform the functions of the Nomination and Remuneration Committees. In carrying out their duties and
responsibilities, the ESCG Committee is supported by the company’s Compliance Officer, Chief External
Relations Officer, as well as the Group Chief Human Resources Officer. These officers regularly attend
committee meetings to act as resource persons. The chairmen of the ESCG Committees are the Lead
Independent Directors.

Key Areas of Focus in 2021

- Discussed the potential impact of the COP26 outcome to the Group.
- Monitored the progress of the ongoing Climate Value at Risk study.
- Monitored the progress of the groupwide ESG Materiality Re-assessment.
- Ensured that each of the company’s ESG programs are implemented. In the same
Environmental and Social
year, the ESCG Committee amended the Code of Ethics and Business Conduct and
the Whistleblowing Policy to further strengthen the company’s commitment to
corporate governance, particularly on sustainability and ethical corporate
citizenship.
- Reviewed and monitored AboitizPower and AboitizPower’s compliance with new
laws and regulations.
Compliance
- Ensured that the nomination, selection, election, remuneration, and assessment of
each company’s directors and officers are aligned with the Manuals.
- Reviewed and endorsed for Board approval the proposed amendments to
the Codes, Whistleblowing Policies, and RPT Policies.
- Reviewed and endorsed the implementation of the Aboitiz High Impact
Corporate Governance Governance.
- Reviewed and monitored the status of whistleblowing reports.
- Endorsed the creation of the Board Information and Cybersecurity Committee and
its Charter.
- Approved the final list of nominees for directors for election after reviewing the all
the qualifications and none of the disqualifications as provided in the By-Laws,
Revised Manuals, and other relevant SEC rules.
Nomination and - Reviewed and endorsed management’s proposal to increase the per diems of the
Compensation Board and Board Committee Chairmen.
- Reviewed the qualifications of all persons nominated to appointed positions by the
Board.
- Reviewed and approved the 2021 groupwide merit increase guidelines.

126 ∙ SEC FORM 17-A (ANNUAL REPORT)

 b. The Board Audit Committee represents the Board in discharging its responsibility related to audit matters
for the Group. Independent Directors comprise the majority of the members of the Board Audit Committee,
including its Chairman. At the end of every Audit Committee meeting, Committee Members meets without
the presence of any executives. In 2021, the President and Chief Executive Officer, Chief Financial Officer, and
Internal Audit Head attested to the sufficient internal control and compliance system of their respective
companies.

Key Areas of Focus in 2021

- Reviewed, discussed, and approved for public disclosure the 2021 quarterly
unaudited consolidated financial statements.
Financial Reports
- Endorsed for approval by the full Board the 2021 annual audited financial
statements of AboitizPower and AboitizPower, its subsidiaries and alliances.
- Reviewed the performance of SGV as AboitizPower and AboitizPower’s external
auditor
- Endorsed to the Board the appointment of SGV as AboitizPower and
External Auditors AboitizPower’s External Auditor for 2021
- Reviewed and approved the overall scope and audit plan of SGV
- Reviewed and approved the audit plan, fees and terms of engagement which
covers non-audit and audit-related services provided by SGV
- Reviewed and approved the annual audit program for 2021 which also covers the
adequacy of resources, qualifications and competency of the staff and
independence of the internal auditor.
- Confirmed that the internal audit function is executed effectively and internal
Internal Auditors
auditors have conducted their responsibilities objectively and in an unbiased
manner.
- Brought to the attention of the board the seriousness of cybersecurity risks to the
group.
- Updated the Board Audit Committee Charters to improve on each of the
Committee Charter company’s control performance by having an adequate and effective control
system.

c. The Board Risk and Reputation Management Committee represents the Board in discharging its
responsibility relating to risk and reputation management related matters for the Group. In 2021, the Board
Risk and Reputation Committees updated its charter to continually identify, monitor, and manage the Group’s
top risks.

d. The Board Related Party Transaction Committee represents the Board in discharging its responsibility to
ensure that related party transactions are taken on an arms’ length basis and within market rates, with
sufficient documentation, and coursed through all appropriate levels of approval necessary.

Key Areas of Focus in 2021

- Reviewed and updated AboitizPower and AboitizPower’s RPT Policies and their
RPT Policy and Committee respective charters to further strengthen the process of reviewing, reporting, and
Charter approval of all RPTs, particularly those falling below the SEC-defined materiality
threshold.
- Updated and monitored the compliance with the submission of the RPT
Certification by the directors and key officers of AboitizPower and AboitizPower in
Completion of RPT compliance with relevant BIR regulations on the reporting guidelines for the
Certification transactions of individuals and juridical entities with related parties.
- Monitored the compliance of AboitizPower and AboitizPower with the reportorial
requirements of the BIR.
- Continued to ensure that RPTs are taken on an arm’s-length basis and within
Fairness of RPTs market rates, with sufficient documentation, and coursed through the appropriate
levels of approval.

e. The Executive Committee assists the Board in overseeing the Company’s day-to-day operations of the
Company. The Committee ensures agility in the management of the Company and in strategic decision-
making, as well as compliance with the Company’s governance policies, during the intervening period
between Board meetings.

127 ∙ SEC FORM 17-A (ANNUAL REPORT)

 f. The Board Information Security and Cybersecurity Committee was established on March 8, 2021. It assists
the Board in providing strategic direction and ensuring the establishment of a system of governance
(processes, policies, controls and management) for the Company and its strategic business units on matters
relating to information security and cybersecurity.

Key Areas of Focus in 2021

- Organized the governance structure of AboitizPower and AboitizPower on matters
Organizational
involving information and cybersecurity.
- Reviewed the Aboitiz Group IT and OT cybersecurity programs and maturity
Cybersecurity Strategy
roadmap, and their respective implementation strategies.
Cybersecurity Risks - Reviewed the cybersecurity risk map and key risk treatment plans.

For more details on the AboitizPower Board and Board Committees matters, please refer to the 2021 Consolidated
Annual and Sustainability Report, the 2021 IACGR, and the Governance page of the AboitizPower website, which will
be available at www.aboitizpower.com.

GOVERNANCE PRACTICES

Compliance with Governance Policies

AboitizPower has a Revised Manual and a Code of Ethics and Business Conduct (“Code of Ethics”) to guide the
attainment of its corporate goals and the implementation of its strategies. The Revised Manual is generally aligned
to the principles and recommendations laid down by the SEC under the Corporate Governance Code for Publicly-
Listed Companies to further strengthen the Company’s corporate governance practices. The Board regularly reviews
the Revised Manual to ensure that the same remains relevant and responsive to the needs of the organization. Any
amendments to the Revised Manual are promptly submitted to the SEC for confirmation and approval.

The Revised Manual is supported by various company policies that are regularly reviewed and issued by the Board
including the Code of Ethics. AboitizPower ensures that its Code of Ethics is cascaded to new team members as part
of their onboarding processes. Team members are also required to review the Code of Ethics and to sign an
affirmation that they have read and understood the same. In order to support this annual exercise, an e-learning
module on the Group’s Code of Ethics was developed and is rolled out every year. As part of the Group’s commitments
in the Code of Ethics, all team members are expected to act professionally, fairly, and with integrity in all of their
business dealings, and to comply with all applicable laws and regulations, including those against bribery and
corruption.

The Chief Compliance Officer, together with the Human Resources Department, regularly monitors and evaluates
compliance by the Board, management, and employees with the Revised Manual, the Code of Ethics, other company
policies, and existing laws and regulations. The Chief Compliance Officer also ensures the implementation of
AboitizPower's policy against conflicts of interests and the misuse of confidential and proprietary information
throughout the organization.

The Chief Compliance Officer regularly reports the Company's compliance status with existing laws and regulations,
as well as the Board's, management's and employees' compliance with internal governance policies to the Board
ESCG Committee.

In addition, the Company has a Whistleblowing Policy to support the implementation of the Revised Manual and the
Code of Ethics. Through this policy, allegations of violations of the Revised Manual, the Code of Ethics, or of other
illegal conduct can be reported through an independent whistleblowing portal. Matters reported through the
whistleblowing platform are discussed by the Board ESCG Committee and, if necessary, escalated to the entire Board.

In 2021, AboitizPower updated its Code to align with international best practices and promote the Company’s
Environmental, Social and Governance efforts. The following policies and guidelines were approved by the Board of
Directors:

● Amended Code of Ethics and Business Conduct to (i) strengthen the Company’s commitment to sustainability
principles, and (ii) further elaborate on the Company’s commitment to its stakeholders, particularly on anti-
bribery and anti-corruption, trade compliance, and anti-money laundering. Related guidelines on (i) anti-

128 ∙ SEC FORM 17-A (ANNUAL REPORT)

 corruption, (ii) gift, meals, and entertainment, and (iii) business partner due diligence were also approved
by senior management to operationalize the amendments to the Code

● Amended the Company’s Whistleblowing Policy. The Company is evaluating the adoption of a new
whistleblowing portal to encourage team members, team leaders and third parties to report suspected or
actual violation of the Code and Company policies. Procedures were also developed to assist and guide in
the handling, investigation, and resolution of reports or complaints received, whether via the whistleblowing
platform or through any other channel.

There are no major deviations from the Revised Manual as of the date of this report. There were also no corruption-
related incidents reported in 2021.

For a full discussion on the Company’s corporate governance initiatives, please refer to the 2021 Consolidated Annual
and Sustainability Report, the 2021 IACGR, and the Governance page of the AboitizPower website which will be
available at www.aboitizpower.com.

Disclosure and Transparency

Pursuant to its commitment to transparency and accountability, AboitizPower’s website, www.aboitizpower.com has
its own dedicated corporate governance webpage which serves as a resource center and library for its stakeholders.

SUSTAINABILITY AND ENVIRONMENT, SOCIAL, AND GOVERNANCE PRACTICES

Sustainable business practices have enabled the Aboitiz Group to operate commercially for 100 years. A key
component of AboitizPower’s ESG strategy is to create a balance between business growth and sustainability
initiatives. It adopts the triple bottom line framework to measure the impact of its activities not only on profit but also
on people and the planet. In line with this, the Company continues to strengthen its commitment to ESG standards
and practices.

Indices and Ratings

AboitizPower continues to be recognized as a constituent company in the FTSE4Good Index Series for the fourth
consecutive year since 2018. The Company has managed to get a higher overall rating in the latest assessment with a
score of 3.1 in 2021 from 2.5 in 2020, a 24% increase because of the improvements in its health and safety initiatives
as well as its campaign on diversity, equity, and inclusion, among others. The FTSE4Good Index Series, created by
global index provider FTSE Russell, measures the performance of companies demonstrating strong ESG practices.

The Company’s recent Corporate Sustainability Assessment by the highly regarded S&P Global has also shown marked
improvements in its ESG performance. The Company’s score further increased from 40 in 2020 to 44 in the 2021
assessment, which also improved its percentile ranking in the global peer group from 54th to 67th percentile.

AboitizPower also earned a Sustainalytics ESG Risk Rating of 33.9, a 3.5 decrease of risk exposure from the previous
year. Meanwhile, the Company retained its BB rating from the MSCI ESG Rating and D- in the CDP Climate Change
Report.

Focus Areas

AboitizPower is driven by its Sustainability Vision to contribute to the OneAboitiz Sustainability goals through the 1AP
Sustainability Culture. The Company manages its economic, environmental, and social impact through strong
governance to deliver value to its stakeholders. AboitizPower will continue to focus on addressing gaps in various
areas of ESG, including governance improvements, addressing climate-related risks, and a long-term plan to transition
to more renewable energy in its generation portfolio.

AboitizPower’s growth strategy for the next ten years is to significantly grow its renewables portfolio, Cleanergy. The
Company ensures its balance strategy is well-aligned with the government’s efforts to address the energy trilemma
of energy security, energy equity, and environmental sustainability. It remains committed to its goal of a more
balanced energy mix, or a 50:50 Cleanergy and thermal capacities, by 2030.

129 ∙ SEC FORM 17-A (ANNUAL REPORT)

The Company’s focus areas on its ESG reports are team member engagement, talent development, Occupational
Health and Safety (OHS), diversity and inclusion, corporate governance, Corporate Social Responsibility (CSR),
customer focus, disaster resilience, carbon emissions reduction, resource efficiency, renewable energy, waste
management, biodiversity and conservation, financial growth, financial returns, risk management, and ISO
certification.

The Company conducts a report in compliance with the sustainability reporting initiatives of its parent company, AEV.
Currently, AboitizPower is compliant with AEV’s sustainability reporting initiatives. Its report has been prepared
following the GRI Standards: Core Option and its key performance indicators are aligned with the United Nations
Sustainable Development Goals (SDGs).

United Nations Sustainable Development Goals

The Aboitiz Group is one of the first Philippine businesses to support the United Nations’ 17 SDGs and in 2020, became
a member of the United Nations Global Compact, and is currently a member of the Board of Trustees of UNGC’s
Global Compact Network Philippines (GCNP). AboitizPower, has, or expects to have, direct, significant, and profitable
contributions to UN SDG 7 or Affordable and Clean Energy, through its Cleanergy, AboitizPower's brand for clean and
renewable energy. As of end-2021, the Company has a total net sellable capacity of 1,249 MW of renewable energy.

AboitizPower is submitting its Sustainability Report through the consolidated report that its parent company, AEV,
publishes annually. AEV began publishing its Sustainability Report in 2009, being one of the few Philippine publicly-
listed companies to publish and submit a report on its sustainability impacts and performances to SEC.

Sustainable Finance

In February 2016, Asian Development Bank (“ADB”) provided a credit enhancement to AboitizPower’s Subsidiary,
APRI, for its Tiwi-MakBan geothermal energy facilities. The issuance by APRI of the U.S.$225 mn (₱10.7 bn in local
currency) bond was in addition to a direct loan from ADB of ₱1.8 bn (U.S.$37.7 mn). ADB’s credit enhancement was
in the form of a guarantee of 75% of the principal and interest on the bond. The Climate Bond, which was certified by
the Climate Bonds Initiative, was the first issuance of its kind in Asia.

Corporate Social Responsibility

AboitizPower and its Business Units contribute to social development programs in education, enterprise development,
and environment implemented by the Aboitiz Group through its social development arm, Aboitiz Foundation, Inc.
(Aboitiz Foundation). These CSR program projects are also aligned with the Aboitiz Group’s core competencies and
are made scalable nationwide to deliver long-term benefits to targeted communities and beneficiaries. The Aboitiz
Group, through Aboitiz Foundation, invested a total of ₱326 mn in CSR projects and initiatives to support its
communities in 2021, of which ₱130 mn was committed for its environmental programs, ₱26 mn for enterprise or
livelihood programs, ₱122 mn was committed for educational programs, and ₱47 mn for other initiatives. All these
are consistent with the Aboitiz Group’s commitment to protecting and enhancing the planet and uplifting the well-
being of its communities. Through responsible operations and the implementation of various sustainability and CSR
projects, the Company is constantly advancing business and communities by exploring opportunities to create shared
value whenever possible.

The Company provides funds for the communities through its compliance with Energy Regulations No. 1-94 (ER 1-94).
The ER 1-94 program is a policy under the Department of Energy Act of 1992 and EPIRA, which stipulates that host
communities will get a share of one centavo for every kilowatt-hour (₱0.01/kWh) generated by power plants operating
in its area. The funds generated can be used by host beneficiaries for the electrification of areas or households that
have no access to power, development, and livelihood programs, as well as reforestation, watershed management,
health, and environmental enhancement initiatives. With the recent amendment to the ER 1-94 guidelines, power
generation companies can now directly download the ER 1-94 fund to their host communities. Streamlining the
release of funding will ease the process of implementing projects that benefit the host communities. Towards the end
of 2019, the Company led its power generation Business Units to sign memoranda of agreement with their respective
beneficiaries for the amended set-up of the ER 1-94. On April 6, 2020, due to the COVID-19 pandemic, DOE released
a new department circular DC2020-04-0008 which repurposed ER 1-94 funds for projects that would help alleviate

130 ∙ SEC FORM 17-A (ANNUAL REPORT)

the COVID-19 situation in the country. The Company has successfully downloaded about ₱160 mn-worth of ER 1-94
funds as of the end of 2021 to about 150 host beneficiaries. About ₱554 mn-worth of outstanding ER 1-94 funds was
also remitted by the DOE to the Company’s beneficiaries. The remitted funds were used by the beneficiaries to build
isolation facilities and purchase relief goods, medical supplies or equipment, and COVID-19 testing kits and vaccines.
The Company continues to extend assistance to its communities to ensure the full utilization of the available ER 1-94
funds.

Beyond Compliance

The Aboitiz Group’s brand promise of advancing business and communities extends beyond compliance with
government laws and regulations. The Aboitiz Group is committed to stakeholder-focused environmental
management projects, such as the A-Park nationwide reforestation program, the Aboitiz Cleanergy Park in Davao City,
the Cleanergy Center in Laguna, and the Energy Education Center (EEC) in TSI.

(a) A-Park Program

The A-Park Program is the Aboitiz Group’s partnership with DENR’s Expanded National Greening Program.
AboitizPower supports the A-Park Program through the watershed management and carbon sink programs
of its Subsidiaries.

(b) Aboitiz Cleanergy Park

The Company also features the Aboitiz Cleanergy Park as one of its environmental programs. Located in
Davao City, the eight-hectare park showcases a mangrove reforestation site, nursery, and botanical garden
for the propagation of 29 native tree species and is home to more than 100 species of birds. Aside from
helping reduce carbon emissions, the Park is also actively promoting habitat conservation and biodiversity
management in an urban setting. Most importantly, the Park serves as a sanctuary and safe nesting ground
for the critically endangered hawksbill sea turtles. Since 2014, the park has already released more than 6,400
hawksbill hatchlings to the sea, planted 13,992 mangroves, and rescued 16 pawikans.

(c) Cleanergy Center and Energy Education Resource Center

In 2013, the Company launched its Cleanergy Center at the Makiling-Banahaw Geothermal Complex of APRI
to firm up its long-standing commitment to responsible energy development and education. The Cleanergy
Center–taken from the words “clean energy” and named after AboitizPower’s brand for renewables–is the
country’s first renewable energy learning facility. Since it opened, the Cleanergy Center has welcomed close
to 56,000 visitors from all over the country and even abroad.

The Company also opened the Energy Education Center (EEC) in 2016 located at Therma South’s Davao
baseload power plant. The center features interactive and informative displays on the Philippine energy
sector and various power-generating technologies. Since it opened, the center has already accommodated a
total of 3,500 visitors.

131 ∙ SEC FORM 17-A (ANNUAL REPORT)

 PART V – EXHIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17-C

(a) Exhibits. None

(b) Reports on SEC Form 17-C

Reports filed by AboitizPower on SEC Form 17-C from April 2021 to March 2022 are as follows:

Date Reported Disclosure Details

April 26, 2021 Results of the 2021 Annual Stockholders’ Meeting
April 26, 2021 Results of the 2021 Organizational Meeting
April 26, 2021 First Quarter 2021 Financial and Operating Results
June 22, 2021 Press Release: Bakun hydro plants receive cease and desist order from NCIP-
CAR
June 29, 2021 Matters Approved by the Board during its June 29, 2021 Board Meeting
June 29, 2021 Press Release: Hedcor advised to continue operating Bakun hydros
July 1, 2021 Press Release: Bakun LGU resists DOE order, forcibly closes 3 hydros
July 28, 2021 Second Quarter 2021 Financial and Operating Results
August 2, 2021 Press Release: AboitizPower eyes ₱190-B spend for RE growth
August 4, 2021 Press Release: Hedcor, IPs come together to resume Bakun RE plants operation
August 18, 2021 Press Release: Hedcor’s hydro in Bukidnon generates Cleanergy at full capacity
August 26, 2021 Resignation of Data Privacy Officer and Appointment of Replacement
September 14, 2021 Full Payment of Early Redemption of 2014 Bonds
September 17, 2021 Matters Approved by the Board during its September 17, 2021 Board Meeting
October 29, 2021 Third Quarter 2021 Financial and Operating Results
December 2, 2021 Listing with PDEx of the Second Tranche of the ₱30 bn Bonds, equivalent to ₱12
bn, including oversubscription
December 15, 2021 Press Release: AboitizPower awards JGC Philippines EPC contract for 94-MW
solar power plant
December 20, 2021 Changes in the Members of the Board of Directors
December 27, 2021 Retirement of Officer
January 10, 2022 Filing of Preliminary Registration Statement for Third Tranche Bonds
January 17, 2022 PhilRatings' Credit Rating of Third Tranche Bonds
February 18, 2022 Nominees to the Board of Directors for 2022-2023
February 22, 2022 Matters Approved by the Board during its February 22, 2022 Board Meeting
March 2, 2022 Receipt of the Certificate of Permit to Offer Securities for Sale from SEC in
relation to the Company’s Application for the Issuance of the Third Tranche of
the ₱30 bn Bonds
March 4, 2022 Resignation of Compliance Officer and Appointment of Replacement
March 4, 2022 Declaration of Regular Cash Dividends
March 4, 2022 Full Year 2021 Financial and Operating Results
March 4, 2022 Matters Approved by the Board during its March 4, 2022 Board Meeting
March 4, 2022 Notice and Agenda of AboitizPower’s Annual Stockholders’ Meeting on April 25,
2022
March 17, 2022 Listing with PDEx of the Third Tranche of the ₱30 bn Bonds, equivalent to ₱10
bn, including oversubscription

(c) Sustainability Report

The 2021 Aboitiz Group Annual Report and Sustainability Report (the “2021 Consolidated Annual Report”) is
submitted together with the Company’s SEC Form 17-A (2021 Annual Report) and is also available for download at
the Company’s website at latest Annual Report page in the Investor Relations tab in: https://aboitizcom-
uploads.s3.ap-southeast-1.amazonaws.com/public/2021+Annual+and+Sustainability+Report.pdf.

132 ∙ SEC FORM 17-A (ANNUAL REPORT)

 SIGNATURES

Pursuant to the requirements of Section 17 of the Code and Section 177 of the Revised Corporation Code,
AboitizPower has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Taguig on April 11, 2022.

By:

EMMANUEL V. RUBIO LIZA LUV T. MONTELIBANO

Principal Executive Officer Principal Financial Officer

MANUEL ALBERTO R. COLAYCO MYLA M. ESPINEDA

Corporate Secretary Controller/Principal Accounting Officer

133 ∙ SEC FORM 17-A (ANNUAL REPORT)

Before me, a notary public in and for the city named above, personally appeared:

DATE / PLACE OF DATE / PLACE OF

NAME GOVT ISSUED ID CTC NO.
ISSUE ISSUE
EMMANUEL V. Passport No. September 13, 2019 January 15, 2022
09551084
RUBIO P3162364B DFA Manila Manila
LIZA LUV T. Passport No. May 7, 2018 January 13, 2022
08785188
MONTELIBANO P7070135A DFA Manila Makati
MANUEL ALBERTO Passport No. July 9, 2021 January 11, 2022
21176127
R. COLAYCO P7171651B DFA Pampanga Taguig City
MYLA M. Drivers’ License February 14, 2022
- 04401404
ESPINEDA No. D16-08-000403 Rizal

who were identified by me through competent evidence of identity to be the same persons who presented
the foregoing instrument and signed the instrument in my presence, and who took an oath/affirmation
before me as to such instrument.

Witness my hand and seal this April 11, 2022.

Doc. No. 202;

Page No. 42;
Book No. XIX;
Series of 2022.

134 ∙ SEC FORM 17-A (ANNUAL REPORT)

ANNEX “A” – Conglomerate Map
As of February 28, 2022

ABOITIZ POWER CORPORATION

POWER DISTRIBUTION POWER GENERATION RETAIL ELECTRICITY SUPPLY

DAVAO LIGHT & POWER ABOITIZ RENEWABLES, INC. ABOITIZ ENERGY

CEBU PRIVATE POWER
COMPANY, INC. 100% (D) SOLUTIONS, INC.
CORPORATION
99.93% (D) 100% (D)
60% (B)

STEAG STATE POWER INC.

VISAYAN ELECTRIC AP RENEWABLES, INC. ADVENTENERGY, INC.
34% (D)
COMPANY, INC. 100% (B) 100% (D)
55.26% (D)
LUZON HYDRO SOUTHERN PHILIPPINES
CORPORATION POWER CORPORATION
100% (B) 20% (D) PRISM ENERGY, INC.
COTABATO LIGHT & POWER
60% (D)
COMPANY HEDCOR, INC.
99.94% (D) 100% (B) WESTERN MINDANAO
POWER CORPORATION
20% (D) MAZZARATY ENERGY
HEDCOR SIBULAN, INC. CORPORATION
COTABATO ICE PLANT, INC. 1 100% (B) 44.87% (D)
100% (B) THERMA POWER, INC.
100% (D)
HEDCOR TUDAYA, INC.
100% (B)

SAN FERNANDO ELECTRIC OTHERS

LIGHT & POWER CO., INC. HEDCOR SABANGAN, INC.
20.29% (D) 100% (B)
THERMA LUZON, INC.
100% (B)
43.78% (B) ABOITIZPOWER
INTERNATIONAL PTE. LTD.
HEDCOR BUKIDNON, INC. THERMA SOUTH, INC.
100% (D)
100% (B) 100% (B)
SUBIC ENERZONE
CORPORATION
THERMA MARINE, INC.
99.98% (B) ASEAGAS CORPORATION 100% (B)
100% (B) ABOITIZPOWER
THERMA MOBILE, INC. INTERNATIONAL B.V
100% (B) 100% (B)
MACTAN ENERZONE MAARAW HOLDINGS SAN
CORPORATION CARLOS, INC.2 100% (B)
EAST ASIA UTILITIES
100% (D) CORPORATION
100% (B)
SAN CARLOS SUN POWER,
INC.3 100% (B) THERMA POWER-VISAYAS, INC.
100% (B)
BALAMBAN ENERZONE
CORPORATION ABOITIZ POWER DISTRIBUTED
THERMA VISAYAS, INC.
100% (D) ENERGY, INC, 100% (B) 80% (B)

AA THERMAL, INC.
ABOITIZ POWER DISTRIBUTED
49% (voting)
LIMA ENERZONE RENEWABLES, INC. 60% (economic)
CORPORATION 100% (B)

100% (D)
GNPOWER MARIVELES ENERGY
MANILA-OSLO RENEWABLE CENTER LTD. CO.
78.33% (B)
ENTERPRISE, INC.
MALVAR ENERZONE 83.33% (B)
GNPOWER DINGININ LTD. CO.
CORPORATION
70% (B)
100% (D)

SN ABOITIZ POWER – PAGBILAO ENERGY CORPORATION5

50% (B)
MAGAT, INC. 60% (B)

SN ABOITIZ POWER – REDONDO PENINSULA

ENERGY, INC. 25% (B)
BENGUET, INC. 60% (B)

ABOVANT HOLDINGS, INC.

SN ABOITIZ POWER –
60% (B)
GENERATION, INC. 60% (B)

CEBU ENERGY DEVT. CORP.

SN ABOITIZ POWER – RES,
44% (B)
INC. 4 60% (B)

ELECTRICIDAD, INC.
100% (B)

Legend:
B – Beneficial Ownership
D – Direct Ownership
______________________________________________________________________________________________________________________________________________
1 Other services
2 ARI has a 60% direct ownership in Maaraw San Carlos, with AboitizPower International B.V. directly owning the remaininga 40%.
3 ARI has a 75% direct ownership in SacaSun; while AboitizPower International and Maaraw San Carlos directly owning 15% and 10%, respectively.

4 Engages in Retail Electricity Supply Business

5Joint operations

135 ∙ SEC FORM 17-A (ANNUAL REPORT)

 ANNEX “B” – Certificates of Compliance

Power Plant
Title of Issued under Economic Date of
Document the Name of Name Type Location Capacity Fuel Life/Term Issuance
of COC
November
COC No. Hydroelectric Tadiangan, 5, 2018 - December
Hedcor, Inc. Irisan 3 1.20 MW Hydro
18-12-M-0030L Power Plant Tuba, Benguet November 11, 2018
4, 2023
November
Bineng, La
COC No.18-12- Hydroelectric 5.625 5, 2018 - December
Hedcor, Inc. Bineng 3 Trinidad, Hydro
M-00334L Power Plant MW November 11, 2018
Benguet
4, 2023
November
COC No. Banengbeng,
Hydroelectric 5, 2018 - December
18-12-M- Hedcor, Inc. Ampohaw Sablan, 8.00 MW Hydro
Power Plant November 11, 2018
00329L Benguet
4, 2023
October 5,
Provisional
Hydroelectric La Trinidad, 2021 - November
Authority to Hedcor, Inc. La Trinidad 20.4 MW Hydro
Power Plant Benguet October 5, 3, 2021
Operate
2022
November
COC No. Ampucao,
Hydroelectric 5, 2018 - December
18-12-M- Hedcor, Inc. Sal-angan Itogon, 2.40 MW Hydro
Power Plant November 11, 2018
00336L Benguet
4, 2023
April 30,
COC No. Brgy.
Hydroelectric 2017 – April 19,
17-04-M- Hedcor, Inc. Irisan 1 Tadiangan, 3.89 MW Hydro
Power Plant April 29, 2017
00032L Tuba, Benguet
2022
February
COC No. 16, 2020
Talomo 1 Hydroelectric Brgy. Malagos, August 12,
20-08-M- Hedcor, Inc. 1 MW Hydro -
Power Plant Davao City 2020
00061M February
15, 2025
February
COC No.
Hydroelectric Brgy. Mintal, 16, 2020 - August 12,
20-08-M- Hedcor, Inc. Talomo 2 0.6 MW Hydro
Power Plant Davao City February 2020
00062M
15, 2025
February
COC No.
Hydroelectric Upper Mintal, 16, 2020 - August 12,
20-08-M- Hedcor, Inc. Talomo 2A 0.65 MW Hydro
Power Plant Davao City February 2020
00063M
15, 2025
February
COC No. 16, 2020
Hydroelectric Upper Mintal, August 12,
20-08-M- Hedcor, Inc. Talomo 2B 0.3 MW Hydro -
Power Plant Davao City 2020
00064M February
15, 2025
February
COC No. Catalunan, 16, 2020
Hydroelectric August 12,
20-08-M- Hedcor, Inc. Talomo 3 Pequeño, 1.92 MW Hydro -
Power Plant 2020
00065M Davao City February
15, 2025
November
COC No. Ferdinand L. Poblacion,
Hydroelectric 5, 2018 - December
18-12-M- Hedcor, Inc. Singit Plant Bakun, 6.40 MW Hydro
Power Plant November 11, 2018
00327L (FSL) Benguet
4, 2023
November
COC No. Ampusongan,
Hydroelectric 5, 2018 - December
18-12-M- Hedcor, Inc. Lower Labay Bakun, 2.40 MW Hydro
Power Plant November 11, 2018
00335L Benguet
4, 2023

136 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Power Plant
Title of Issued under Economic Date of
Document the Name of Name Type Location Capacity Fuel Life/Term Issuance
of COC
November
COC No. Poblacion,
Hydroelectric 5, 2018 - December
18-12-M- Hedcor, Inc. Lon-oy Bakun, 3.60 MW Hydro
Power Plant November 11, 2018
00328L Benguet
4, 2023
Sibulan A – 8.164 February
Provisional Unit 1 Brgy. Sibulan, MW 9, 2021 -
Hedcor Sibulan, Hydroelectric November
Authority to Sta. Cruz, Hydro February
Inc. Sibulan A – Power Plant 8.164 4, 2020
Operate Davao del Sur 8, 2022*
Unit 2 MW
Sibulan B – 13.128 November
Provisional Unit 1 Brgy. Sibulan, MW 23, 2020 -
Hedcor Sibulan, Hydroelectric November
Authority to Sta. Cruz, Hydro November
Inc. Sibulan B – Power Plant 13.128 4, 2020
Operate Davao del Sur 22, 2021*
Unit 2 MW
March 10,
COC No.
Hedcor Sibulan, Hydroelectric Sta. Cruz, 2019- March 5,
19-03-M- Tudaya 1 6.65 MW Hydro
Inc. Power Plant Davao del Sur March 9, 2019
00346M
2024
COC No. Amilongan, July 30,
Luzon Hydro Hydroelectric 74.80 June 20,
18-06-M- Bakun AC Alilem, Ilocos Hydro 2018 – July
Corporation Power Plant MW 2018
00017L Sur 29, 2023

Tudaya 2 – 5.362
Hydro
COC No. Unit 1 MW April 11,
Hedcor Tudaya, Hydroelectric Sta. Cruz, March 5,
19-03-M- 2019-April
Inc. Power Plant Davao del Sur 2019
00013M 10, 2024
Tudaya 2 – 2.775
Hydro
Unit 2 MW
Brgy.
September September
Provisional Namatec,
Hedcor Sabangan Hydroelectric 14.139 29, 2021 - 29, 2021
Authority to Sabangan, Hydro
Sabangan, Inc. Hydro Power Plant MW September
Operate Mountain
28, 2022
Province
Brgy. Santiago,
June 18,
COC No. 19-06- Hedcor Manolo Hydroelectric Manolo 45.936 June 18,
Hydro 2019-June
M-00174M Bukidnon, Inc. Fortich 1 Power Plant Fortich, MW 2019
17, 2024
Bukidnon
Brgy. Dalirig,
June 18,
COC No. 19-06- Hedcor Manolo Hydroelectric Manolo 27.387 June 18,
Hydro 2019-June
M-00175M Bukidnon, Inc. Fortich 2 Power Plant Fortich, MW 2019
17, 2024
Bukidnon
Bunker CLPC Diesel /
9.927
C-Fired Diesel Compound, Bunker January
Cotabato Light MW
COC No. 17-04- Engine Sinsuat Ave., C 10, 2017 - April 19,
and Power N/A
M-15911M Rosary Heights January 9, 2017
Company, Inc.
Blackstart I, Cotabato 10 kW Diesel 2022*
City
Bunker June 11,
COC No. East Asia Barrio Ibo, Bunker
C/Diesel Fired 49.60 2018 – March 27,
18-03-M- Utilities N/A MEPZ 1, Lapu- C/
Power MW June 10, 2018
00002V Corporation Lapu City, Cebu Diesel
Plant 2023
Old Veco
June 4,
COC No. Cebu Private Bunker Compound, Bunker
70.59 2018 – March 27,
18-03-M- Power N/A C/Diesel Fired Brgy. Ermita, C/
MW June 3, 2018
00001V Corporation Power Plant Carbon, Cebu Diesel
2023
City
COC No. Western Bunker C- Malasugat, August 27,
Bunker December
18-12-M- Mindanao N/A Fired Power Sangali, 112 MW 2018 –
C/Diesel 4, 2018
00020M Power Plant Zamboanga City August 26,

137 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Power Plant
Title of Issued under Economic Date of
Document the Name of Name Type Location Capacity Fuel Life/Term Issuance
of COC
Corporation 2023
N/A Blackstart 160 kW Diesel

Bunker C- Bunker
Southern Brgy. Baluntay, 61.72 August 27,
COC No. Fired Diesel C/
Philippines Alabel, MW 2018 – December
18-12-M- N/A Power Plant Diesel
Power Sarangani August 26, 4, 2018
00021M
Corporation Province 2023
Blackstart 160 kW Diesel
Magat
Hydroelectric
90 MW
Power Plant –
Unit 1
Magat
Hydroelectric
90 MW
Power Plant – November
SN Aboitiz Unit 2 Hydroelectric 29, 2021 -
Hydro
Provisional Power – Magat, Magat Power Plant Ramon, Isabela November
Hydroelectric 28, 2022 November
Authority to Inc. (Magat and A. Lista, 90 MW
Power Plant – 18, 2020
Operate Hydroelectric Ifugao
Power Plant) Unit 3
Magat
Hydroelectric
90 MW
Power Plant –
Unit 4
Blackstart
Diesel Blackstart 344 kW Diesel 25 years
Generator Set
Maris Main April 4,
COC No. SN Aboitiz
Canal I Hydroelectric Brgy. Ambatali, 2018 – April 4,
18-04-M- Power – Magat, 8.50 MW Hydro
Hydroelectric Power Plant Ramon, Isabela April 3, 2018
00150L Inc.
Power Plant 2023
Binga
Hydroelectric Hydroelectric 35.02
Power Plant – Power Plant MW
Unit 1
Binga
Hydroelectric Hydroelectric 35.02
Power Plant – Power Plant MW
Unit 2
Hydro
Binga
Hydroelectric Hydroelectric 35.02
Provisional SN Aboitiz Power Plant – Power Plant Brgy. MW March 12, March 2,
Authority to Power – Unit 3 Tinongdan, 2022 - 2022
Operate Benguet, Inc. Itogon, Benguet March 11,
Binga
2023
Hydroelectric Hydroelectric 35.02
Power Plant – Power Plant MW
Unit 4
Binga
Blackstart
Hydroelectric 320 KW Diesel
Generator Set
Power Plant
Binga Diesel
330.40
Hydroelectric Auxiliary Diesel
KW
Power Plant Generator Set
Ambuklao
Hydroelectric 34.85
Brgy. August 31,
Provisional SN Aboitiz Power Plant – MW
Hydroelectric Ambuklao, 2021 - September
Authority to Power – Unit 1 Hydro
Power Plant Bokod, August 30, 1, 2021
Operate Benguet, Inc. Ambuklao
Benguet 34.85 2022
Hydroelectric
MW
Power Plant –

138 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Power Plant
Title of Issued under Economic Date of
Document the Name of Name Type Location Capacity Fuel Life/Term Issuance
of COC
Unit 2

Ambuklao
Hydroelectric 34.85
Power Plant – MW
Unit 3
Ambuklao
Auxiliary
Hydroelectric 320 KW Diesel
Generator Set
Power Plant
Ambuklao
Blackstart
Hydroelectric 314 KW Diesel
Generator Set
Power Plant
Coal Fired Phividec
232 MW Coal
Power Plant Industrial Estate, September
COC No.
STEAG State Balacanas, 5, 2019 – June 13,
16-06-M- N/A Emergency
Power, Inc. Villanueva, September 2016
00016M Generating 1.25 MW Diesel
Misamis 4, 2024
Set
Oriental
Phividec
Industrial
September September
COC No. Estate,
STEAG State 5, 2019 - 5, 2019
15-03-S- N/A Diesel Engine Balacanas, 400 kW Diesel
Power, Inc. September
00013M Villanueva,
4, 2024
Misamis
Oriental

Makban – Bay,
63.2 MW
Plant A, Unit 1
December January
Provisional AP Makban – Bay, Geo-
Geothermal Brgy. Bitin, 63.2 MW 1, 2021 to 11, 2022
Authority to Renewables, Plant A, Unit 2 thermal
Power Plant Bay, Laguna November
Operate Inc. Steam
Makban – Bay, 30, 2022
20.0 MW
Plant D, Unit 7
Makban – Bay,
20.0 MW
Plant D, Unit 8
Makban –
Calauan, Plant 63.2 MW
B, Unit 3
Makban –
Calauan, Plant 63.2 MW December January
Provisional AP Brgy. Limao, Geo-
B, Unit 4 Geothermal 1, 2021 to 11, 2022
Authority to Renewables, Calauan, thermal
Makban – Power Plant November
Operate Inc. Laguna Steam
Calauan, Plant 55.0 MW 30, 2022
C, Unit 5
Makban –
Calauan, Plant 55.0 MW
C, Unit 6

Makban – Sto.
Tomas, Plant Brgy. Sta. 20.0 MW Geo- December
Provisional AP
E, Unit 9 Geothermal Elena, Sto. thermal 1, 2021 to January
Authority to Renewables,
Power Plant Tomas, Steam November 11, 2022
Operate Inc. Makban – Sto. Batangas 30, 2022
Tomas, Plant 20.0 MW
E, Unit 10

139 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Power Plant
Title of Issued under Economic Date of
Document the Name of Name Type Location Capacity Fuel Life/Term Issuance
of COC

December July 28,

Provisional Plant A, Unit 1 60 MW Geo-
AP Geothermal Brgy. Naga, 12, 2020 - 2021
Authority to thermal
Renewables, Power Plant Tiwi, Albay December
Operate Steam
Inc. 11, 2021*
March 17,
Plant A, Unit 2 60 MW
2021

Plant C, Unit 5 57 MW December

Provisional AP Geo-
Geothermal Brgy. Cale, 12, 2020 - March 17,
Authority to Renewables, thermal
Power Plant Tiwi, Albay December 2021
Operate Inc. Steam
Plant C, Unit 6 57 MW 11, 2021*

Brgy. Sta. November

Provisional AP
MakBan Geothermal Elena, Sto. 7, 2021 - November
Authority to Renewables, 7.0 MW Brine
Binary 1 Power Plant Tomas, November 12, 2021
Operate Inc.
Batangas 6, 2022

Brgy. Punao,
Provisional July 14,
San Carlos Sun San Carlos Sun Solar Power San Carlos 58.98 July 7,
Authority to Solar 2021 - July
Power Inc. Power Inc. Plant City, Negros MWp DC 2021
Operate 13, 2022
Occidental
Diesel Power 100.33
COC No. Brgy. San Diesel 25 years
Therma Marine, Plant MW March 30,
16-03-M- Mobile 1 Roque, Maco,
Inc. 2016
00286ggM Blackstart Davao de Oro 1.68 MW Diesel 5 years

Diesel Power Brgy. Sta. Ana, 100.33

COC No. Diesel 25 years
Therma Marine, Plant Nasipit, MW March 30,
16-03-M- Mobile 2
Inc. Agusan del 2016
00286bbM Blackstart 1.68 MW Diesel 5 years
Norte

Navotas Fish
Bunker Bunker July 9,
COC No. 17-07- Therma Mobile, Barge 1/ Port Complex, June 22,
C-Fired Diesel 66 MW C/ 2017 - July
M-00305L Inc. Mobile 3 Navotas, 2017
Power Plant Diesel 8, 2022
Metro Manila

Navotas Fish
Bunker Bunker July 9,
COC No. 17-07- Therma Mobile, Barge 2/ Port Complex, June 22,
C-Fired Diesel 56 MW C/ 2017 - July
M-00306L Inc. Mobile 4 Navotas, 2017
Power Plant Diesel 8, 2022
Metro Manila
Navotas Fish
Bunker Bunker July 9,
COC No. 17-07- Therma Mobile, Barge 3/ Port Complex, June 22,
C-Fired Diesel 57 MW C/ 2017 - July
M-00307L Inc. Mobile 5 Navotas, 2017
Power Plant Diesel 8, 2022
Metro Manila
Navotas Fish
Bunker Bunker July 9,
COC No. 17-07- Therma Mobile, Barge 4/ Port Complex, June 22,
C-Fired Diesel 52 MW C/ 2017 - July
M-00308L Inc. Mobile 6 Navotas, 2017
Power Plant Diesel 8, 2022
Metro Manila

Naga Oil-Fired
Oil-Fired 44.58 Bunker
Power Plant
Power Plant MW C January 6,
Provisional (NOPP) Brgy. Colon,
Therma Power- 2021 – December
Authority to Naga City,
Visayas, Inc. Blackstart January 5, 16, 2020
Operate Cebu
Diesel Engine 2022
Blackstart 440 kW Diesel
Generating
Unit

140 ∙ SEC FORM 17-A (ANNUAL REPORT)

 Power Plant
Title of Issued under Economic Date of
Document the Name of Name Type Location Capacity Fuel Life/Term Issuance
of COC
150.025 September
Provisional Unit 1 Brgy. Binugao, Coal
Therma South, Coal Fired MW 1, 2021 - September
Authority to Toril District,
Inc. Power Plant 150.025 August 31, 16, 2021
Operate Unit 2 Davao City Coal
MW 2022
September
Brgy. Bato,
COC No. 19-09- Therma Visayas, Diesel 1.275 20, 2019 - September
N/A Toledo City, Diesel
S-03902V Inc. Power Plant MW September 20, 2019
Cebu
19, 2024
Therma Visayas
Circulating Sitio Looc, April 15,
Circulating
COC No. 19-06- Therma Visayas, Fluidized Bed Brgy. Bato, 353.94 2019 - June 26,
Fluidized Bed Coal
M-00176V Inc. Coal-Fired Toledo City, MW April 14, 2019
Coal-Fired
Power Plant Cebu 2024
Power Plant
Coal Fired
751.4
Thermal Isla Grande, Coal
Pagbilao Coal MW July 20,
COC No. 19-07- TeaM Energy Power Plant Ibabang Polo, July 9,
Fired Power 2019 - July
M-00040L Corporation Pagbilao, 2019
Plant 19, 2024
Black Start Quezon 800 kW Diesel

Coal Fired
Pagbilao Unit Thermal Isla Grande, 420 MW Coal February
COC No. Power Plant
Pagbilao Energy 3 Coal Fired Ibabang Polo, 20, 2018 – February
18-02-M-
Corporation Thermal Pagbilao, February 20, 2018
00145L
Power Plant Blackstart Quezon 1.04 MW Diesel 19, 2023

325.8
Unit 1
Coal Fired MW December
COC No. GNPower Brgy. Alas-asin, Coal
Power Plant 325.8 3, 2017 – November
17-11-M- Mariveles Coal Unit 2 Mariveles,
MW December 21, 2017
00282L Plant Ltd. Co. Bataan
2, 2022
N/A Blackstart 1.68 MW Diesel
Coastal Area,
Sitio Dinginin, December
Supercritical
COC No. 21-12- Brgy. Alas- 724.965 2, 2021 - December
Unit 1 Coal-Fired Coal
M-00203L asin, MW December 2, 2021
Power Plant
Mariveles, 1, 2026
GNPower
Bataan
Dinginin Ltd. Co.
Sitio Dinginin,
Apri 30,
Brgy. Alas-
COC No. 21-04- 2.400 2021 to April 30,
N/A Diesel asin, Diesel
S-04285L MW April 29, 2021
Mariveles,
2026
Bataan

141 ∙ SEC FORM 17-A (ANNUAL REPORT)

Annex C. Reporting Template
(For additional guidance on how to answer the Topics, organizations may refer to Annex B: Topic Guide)

We are pleased to present, in our 13th year of sustainability reporting, the Aboitiz Power Corporation
(AboitizPower) Annual and Sustainability Report (the “2021 Annual and Sustainability Report”). The theme
for the 2021 report is “Transitioning Pathways towards Sustainability” as the Aboitiz Group continues to
transform itself through innovation in the midst of adversity, and in constantly finding better ways of
driving change for a better world by advancing business and communities.

The 2021 Annual and Sustainability Report provides information on AboitizPower’s financial, operational,
governance, social, and environmental performance that are material to its businesses and various
stakeholders. This report also provides our progress through various programs guided by the UN
Sustainable Development Goals. This report has been prepared in accordance with the GRI Standards: Core
Option. GRI Materiality Disclosures Services reviewed that the GRI content index is clearly presented and
the references for Disclosures 102-40 to 102-49 align with appropriate sections in the body of the report.
The GRI content index is found starting on page 298 of the 2021 Annual and Sustainability Report.

This report is in compliance with the Securities and Exchange Commission Memorandum Circular No. 4
Series of 2020: “Sustainability Reporting Guidelines for Publicly Listed Companies.”

Kindly refer to the 2021 Annual and Sustainability Report available for downloading at https://aboitizcom-
uploads.s3.ap-southeast-1.amazonaws.com/public/2021+Annual+and+Sustainability+Report.pdf

Please take note that the page number indicated in the references of each disclosure item are PDF pages.

Contextual Information
Company Details

Name of Organization Aboitiz Power Corporation

Location of Headquarters NAC Tower, 32nd Street, Bonifacio Global City, Taguig City, 1643
Philippines

Location of Operations The locations where the operations of the Aboitiz Group’s
businesses are found on page 125 (page 248 in print) of the 2021
Annual and Sustainability Report.

Report Boundary: Legal entities The reporting scope is found on page 130 (pages 258-259 in print)
(e.g. subsidiaries) included in this of the 2021 Annual and Sustainability Report.
report*

1
 Business Model, including Kindly refer to pages 6 to 7 (pages 10 - 13 in print) of the 2021
Primary Activities, Brands, Annual and Sustainability Report.
Products, and Services

Reporting Period January 1, 2021 to December 31, 2021

Highest Ranking Person Emmanuel V. Rubio

responsible for this report President and Chief Executive Officer

*If you are a holding company, you could have an option whether to report on the holding company only
or include the subsidiaries. However, please consider the principle of materiality when defining your report
boundary.

Materiality Process
Explain how you applied the materiality principle (or the materiality process) in identifying your
material topics. 1

The discussion on the materiality assessment process can be found on page 5 (page 8 in print) of the
2021 Annual and Sustainability Report (About the Report).

Materiality, as defined by the GRI reporting framework, includes topics and disclosures that reflect the
Group’s significant economic, environmental, and social impacts, or those that would substantially
influence the assessments and decisions of our stakeholders. Our process involved an internal analysis
of the importance of a broad list of sustainability issues related to our core businesses of power, banking
and financial services, food, infrastructure, land, and our corporate foundations. At the parent company
level, we integrated the common material issues that are within the medium-term horizon of our
reporting parameters.

We used our stakeholder dialogues and company-wide feedback channels to inform the selection of
these material issues, which were discussed and approved by the Aboitiz Group Management
Committee as part of the focus areas of our Aboitiz Sustainability Framework.

Supporting references are found on page 78 (page 155 in print) for Key Dialogue Channel for
Stakeholders and 150 (page 298 in print) for Summary of Material Concerns of the 2021 Annual and
Sustainability Report.

1
See GRI 102-46 (2016) for more guidance.

2
 ECONOMIC
Economic Performance
Direct Economic Value Generated and Distributed

AboitizPower’s financial performance is summarized on page 9 (pages 16-17 in print, Financial

Highlights), and discussed on pages 17 to 20 (pages 32-39 in print, CFO Message) of the 2021 Annual
and Sustainability Report. Economic and Governance practices of AboitizPower are also available in the
company website at https://aboitizpower.com/sustainability/governance/.

Disclosure Amount Units

Direct economic value generated (revenue) PhP

Direct economic value distributed:

a. Operating costs PhP

b. Employee wages and benefits PhP

c. Payments to suppliers, other operating costs Php

d. Dividends given to stockholders and interest payments PhP

to loan providers

e. Taxes given to government PhP

f. Investments to community (e.g. donations, CSR) PhP

A discussion on management’s approach in addressing material economic indicators are found on

pages 68 to 87 (pages 134-154 in print) of the 2021 Annual and Sustainability Report (Management
Approach).

What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?
organization’s involvement in
the impact?

3
 Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

Climate-related risks and opportunities2

A discussion on the Aboitiz Group’s Climate-related actions is found on pages 72 to 75 (pages 143-149
in print), and Climate-related risk management on page 88 (page 144 in print) of the 2021 Annual and
Sustainability Report.

Governance Strategy Risk Management Metrics and Targets

Disclose the Disclose the actual and Disclose how the Disclose the metrics
organization’s potential impacts 3 of organization identifies, and targets used to
governance around climate-related risks assesses, and manages assess and manage
climate-related risks and opportunities on climate-related risks relevant climate-
and opportunities the organization’s related risks and
businesses, strategy, opportunities where
and financial planning such information is
where such material
information is material

Recommended Disclosures

2
Adopted from the Recommendations of the Task Force on Climate-Related Financial Disclosures. The TCFD Recommendations apply to non-
financial companies and financial-sector organizations, including banks, insurance companies, asset managers and asset owners.
3
For this disclosure, impact refers to the impact of climate-related issues on the company.

4
a) Describe the a) Describe the a) Describe the a) Disclose the metrics
board’s oversight of climate-related organization’s used by the
climate-related risks and processes for organization to
risks and opportunities the identifying and assess climate-
opportunities organization has assessing climate- related risks and
identified over the related risks opportunities in
short, medium and line with its
long term strategy and risk
management
process

b) Describe b) Describe the impact b) Describe the b) Describe the

management’s role of climate-related organization’s targets used by the
in assessing and risks and processes for organization to
managing climate- opportunities on managing climate- manage climate-
related risks and the organization’s related risks related risks and
opportunities businesses, strategy opportunities and
and financial performance
planning. against targets

c) Describe the c) Describe how

resilience of the processes for
organization’s identifying,
strategy, taking into assessing, and
consideration managing climate-
different climate- related risks are
related scenarios integrated into the
including a 2°C or organization’s
lower scenario overall risk
management

Procurement Practices
Proportion of spending on local suppliers
Disclosure Quantity Units

Percentage of procurement budget used for significant locations %

of operations that is spent on local suppliers

Refer to page 79 (pages 156 - 157 in print, Management Approach) of the 2021 Annual and
Sustainability Report.

5
 What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?
organization’s involvement in
the impact?

Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

Anti-corruption

Refer to pages 107 to 109 (pages 213-217 in print, Corporate Governance) of the 2021 Annual and
Sustainability Report.

Training on Anti-corruption Policies and Procedures

Disclosure Quantity Units

Percentage of employees to whom the organization’s anti- %

corruption policies and procedures have been communicated to

Percentage of business partners to whom the organization’s %

anti-corruption policies and procedures have been
communicated to

Percentage of directors and management that have received %

anti-corruption training

6
 Percentage of employees that have received anti-corruption %
training

What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?
organization’s involvement in
the impact?

Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

Incidents of Corruption

Corruption-related reports or incidents are discussed on pages 108 (pages 215 in print, Key Company
Policies) of the 2021 Annual and Sustainability Report.

Disclosure Quantity Units

Number of incidents in which directors were removed or #

disciplined for corruption

Number of incidents in which employees were dismissed or #

disciplined for corruption

Number of incidents when contracts with business partners #

were terminated due to incidents of corruption

7
What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?
organization’s involvement in
the impact?

Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

8
 ENVIRONMENT

Information on environmental indicators material to the Aboitiz Group are found on pages 153 (page
304 in print, Appendix Table) of the 2021 Annual and Sustainability Report. Environmental metrics and
indicators of AboitizPower are also available in the company website at
https://aboitizpower.com/sustainability/environment/.

A discussion on the Aboitiz Group’s management approach on environmental stewardship is found on

pages 71 - 73 (pages 145-149 in print, Management Approach) of the 2021 Annual and Sustainability
Report.

Resource Management
Energy consumption within the organization:
Disclosure Quantity Units

Energy consumption (renewable sources) GJ

Energy consumption (gasoline) GJ

Energy consumption (LPG) GJ

Energy consumption (diesel) GJ

Energy consumption (electricity) kWh

Reduction of energy consumption

Disclosure Quantity Units

Energy reduction (gasoline) GJ

Energy reduction (LPG) GJ

Energy reduction (diesel) GJ

Energy reduction (electricity) kWh

Energy reduction (gasoline) GJ

Refer to pages 71 - 73 (pages 145-149 in print, Management Approach) and environmental indicators
material to the Aboitiz Group are found on pages 153 (page 304 in print, Appendix Table) of the 2021
Annual and Sustainability Report.

9
What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?
organization’s involvement in
the impact?

Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

Water consumption within the organization

Disclosure Quantity Units

Water withdrawal Cubic

meters

Water consumption Cubic

meters

Water recycled and reused Cubic

meters

Refer to pages 71 - 73 (pages 145-149 in print, Management Approach) and environmental indicators
material to the Aboitiz Group are found on pages 153 (page 304 in print, Appendix Table) of the 2021
Annual and Sustainability Report.

10
 What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?
organization’s involvement in
the impact?

Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

Materials used by the organization

Disclosure Quantity Units

Materials used by weight or volume

● renewable kg/liters

● non-renewable kg/liters

Percentage of recycled input materials used to manufacture the %

organization’s primary products and services

Refer to pages 71 - 73 (pages 145-149 in print, Management Approach) and environmental indicators
material to the Aboitiz Group are found on pages 153 (page 304 in print, Appendix Table) of the 2021
Annual and Sustainability Report.

What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?

11
 organization’s involvement in
the impact?

Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

Ecosystems and biodiversity (whether in upland/watershed or coastal/marine)

Disclosure Quantity Units

Operational sites owned, leased, managed in, or adjacent to, (identify all sites)
protected areas and areas of high biodiversity value outside
protected areas

Habitats protected or restored ha

IUCN 4 Red List species and national conservation list species with (list)
habitats in areas affected by operations

Refer to pages 71 - 73 (pages 145-149 in print, Management Approach) and environmental indicators
material to the Aboitiz Group are found on pages 153 (page 304 in print, Appendix Table) of the 2021
Annual and Sustainability Report.

What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?

4
International Union for Conservation of Nature

12
 organization’s involvement in
the impact?

Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

Environmental impact management

Air Emissions
GHG
Disclosure Quantity Units

Direct (Scope 1) GHG Emissions Tonnes CO2e

Energy indirect (Scope 2) GHG Emissions Tonnes CO2e

Emissions of ozone-depleting substances (ODS) Tonnes

Refer to pages 71 - 73 (pages 145-149 in print, Management Approach) and environmental indicators
material to the Aboitiz Group are found on pages 153 (page 304 in print, Appendix Table) of the 2021
Annual and Sustainability Report.

What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?
organization’s involvement in
the impact?

13
 Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

Air pollutants
Disclosure Quantity Units

NOx kg

SOx kg

Persistent organic pollutants (POPs) kg

Volatile organic compounds (VOCs) kg

Hazardous air pollutants (HAPs) kg

Particulate matter (PM) kg

Refer to pages 71 - 73 (pages 145-149 in print, Management Approach) and environmental indicators
material to the Aboitiz Group are found on pages 153 (page 304 in print, Appendix Table) of the 2021
Annual and Sustainability Report.

What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?
organization’s involvement in
the impact?

14
 Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

Solid and Hazardous Wastes

Solid Waste
Disclosure Quantity Units

Total solid waste generated kg

Reusable kg

Recyclable kg

Composted kg

Incinerated kg

Residuals/Landfilled kg

Refer to pages 68 to 87 (pages 134-178 in print, Management Approach) of the 2021 Annual and
Sustainability Report.

What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?
organization’s involvement in
the impact?

15
Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

Hazardous Waste

Disclosure Quantity Units

Total weight of hazardous waste generated kg

Total weight of hazardous waste transported kg

Refer to pages 68 to 87 (pages 134-178 in print, Management Approach) of the 2021 Annual and
Sustainability Report.

What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?
organization’s involvement in
the impact?

Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

16
 What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

Effluents
Disclosure Quantity Units

Total volume of water discharges Cubic

meters

Percent of wastewater recycled %

Refer to pages 68 to 87 (pages 134-178 in print, Management Approach) of the 2021 Annual and
Sustainability Report.

What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?
organization’s involvement in
the impact?

Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

17
 What are the Opportunity/ies Which stakeholders are Management Approach
Identified? affected?

Identify the opportunity/ies

related to material topic of the
organization

Environmental compliance
Non-compliance with Environmental Laws and Regulations

Disclosure Quantity Units

Total amount of monetary fines for non-compliance with PhP

environmental laws and/or regulations

No. of non-monetary sanctions for non-compliance with #

environmental laws and/or regulations

No. of cases resolved through dispute resolution mechanism #

Refer to pages 68 to 87 (pages 134-178 in print, Management Approach) of the 2021 Annual and
Sustainability Report.

What is the impact and where Which stakeholders are Management Approach
does it occur? What is the affected?
organization’s involvement in
the impact?

Identify the impact and where it (e.g. employees, What policies, commitments, goals and
occurs (i.e., primary business community, suppliers, targets, responsibilities, resources,
operations and/or supply chain) government, vulnerable grievance mechanisms, and/or projects,
Indicate involvement in the groups) programs, and initiatives do you have
impact (i.e., caused by the to manage the material topic?
organization or linked to impacts
through its business relationship)

What are the Risk/s Identified? Which stakeholders are Management Approach
affected?

Identify risk/s related to material

topic of the organization

What are the Opportunity/ies Which stakeholders are Management Approach

Identified? affected?

18
Identify the opportunity/ies
related to material topic of the
organization

19
 SOCIAL

Information on social indicators material to the Aboitiz Group are found on pages 153 (page 304 in print,
Appendix Table) of the 2021 Annual and Sustainability Report. Social metrics and indicators of
AboitizPower are also available in the company website at
https://aboitizpower.com/sustainability/social/.

A discussion on the Aboitiz Group’s management approach and focus areas focused on people is found
beginning on page 93 (pages 185-195 in print, Management Approach), and pages 55 to 62 (pages 108-
123 in print, Corporate Social Responsibility) of the 2021 Annual and Sustainability Report.

Employee Management
Employee Hiring and Benefits
Employee data
Disclosure Quantity Units

Total number of employees 5

a. Number of female employees #

b. Number of male employees #

Attrition rate 6 rate

Ratio of lowest paid employee against minimum wage ratio

Employee benefits
List of Benefits Y/N % of female employees % of male employees
who availed for the who availed for the
year year

SSS

PhilHealth

Pag-ibig

5
Employees are individuals who are in an employment relationship with the organization, according to national law or its application (GRI
Standards 2016 Glossary)
6
Attrition are = (no. of new hires – no. of turnover)/(average of total no. of employees of previous year and total no. of employees of current
year)

20
Parental leaves

Vacation leaves

Sick leaves

Medical benefits (aside from

PhilHealth))

Housing assistance (aside from Pag-

ibig)

Retirement fund (aside from SSS)

Further education support

Company stock options

Telecommuting

Flexible-working Hours

(Others)

Refer to pages beginning on page 93 (pages 185-195 in print, Talent Management), page 153 (page
304 in print, Appendix Table) of the 2021 Annual and Sustainability Report.

What is the impact and where does it occur? Management Approach

What is the organization’s involvement in the
impact?

Identify the impact and where it occurs (i.e., primary What policies, commitments, goals and targets,
business operations and/or supply chain) responsibilities, resources, grievance
Indicate involvement in the impact (i.e., caused by mechanisms, and/or projects, programs, and
the organization or linked to impacts through its initiatives do you have to manage the material
business relationship) topic?

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

21
Employee Training and Development
Disclosure Quantity Units

Total training hours provided to employees

a. Female employees hours

b. Male employees hours

Average training hours provided to employees

a. Female employees hours/employee

b. Male employees hours/employee

Refer to pages beginning on page 93 (pages 185-195 in print, Talent Management), page 153 (page
304 in print, Appendix Table) of the 2021 Annual and Sustainability Report.

What is the impact and where does it occur? Management Approach

What is the organization’s involvement in the
impact?

Identify the impact and where it occurs (i.e., primary What policies, commitments, goals and targets,
business operations and/or supply chain) responsibilities, resources, grievance
Indicate involvement in the impact (i.e., caused by mechanisms, and/or projects, programs, and
the organization or linked to impacts through its initiatives do you have to manage the material
business relationship) topic?

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

Labor-Management Relations
Disclosure Quantity Units

22
 % of employees covered with Collective Bargaining %
Agreements

Number of consultations conducted with employees #

concerning employee-related policies

Refer to pages beginning on page 93 (pages 185-195 in print, Talent Management), page 153 (page
304 in print, Appendix Table) of the 2021 Annual and Sustainability Report.

What is the impact and where does it occur? Management Approach

What is the organization’s involvement in the
impact?

Identify the impact and where it occurs (i.e., primary What policies, commitments, goals and targets,
business operations and/or supply chain) responsibilities, resources, grievance
Indicate involvement in the impact (i.e., caused by mechanisms, and/or projects, programs, and
the organization or linked to impacts through its initiatives do you have to manage the material
business relationship) topic?

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

Diversity and Equal Opportunity

Disclosure Quantity Units

% of female workers in the workforce %

% of male workers in the workforce %

Number of employees from indigenous communities and/or #

vulnerable sector*
*Vulnerable sector includes, elderly, persons with disabilities, vulnerable women, refugees, migrants,
internally displaced persons, people living with HIV and other diseases, solo parents, and the poor or the
base of the pyramid (BOP; Class D and E).

23
 Refer to pages beginning on page 93 (pages 185-195 in print, Talent Management), page 153 (page
304 in print, Appendix Table) of the 2021 Annual and Sustainability Report.

What is the impact and where does it occur? Management Approach

What is the organization’s involvement in the
impact?

Identify the impact and where it occurs (i.e., primary What policies, commitments, goals and targets,
business operations and/or supply chain) responsibilities, resources, grievance
Indicate involvement in the impact (i.e., caused by mechanisms, and/or projects, programs, and
the organization or linked to impacts through its initiatives do you have to manage the material
business relationship) topic?

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

Workplace Conditions, Labor Standards, and Human Rights

Occupational Health and Safety
Disclosure Quantity Units

Safe Man-Hours Man-hours

No. of work-related injuries #

No. of work-related fatalities #

No. of work related ill-health #

No. of safety drills #

Refer to pages beginning on page 93 (pages 185-195 in print, Talent Management); and page 152
(page 262 in print, GRI Content Index, Occupational Health and Safety 2018) of the 2021 Annual and
Sustainability Report.

24
 What is the impact and where does it occur? Management Approach
What is the organization’s involvement in the
impact?

Identify the impact and where it occurs (i.e., primary What policies, commitments, goals and targets,
business operations and/or supply chain) responsibilities, resources, grievance
Indicate involvement in the impact (i.e., caused by mechanisms, and/or projects, programs, and
the organization or linked to impacts through its initiatives do you have to manage the material
business relationship) topic?

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

Labor Laws and Human Rights

Disclosure Quantity Units

No. of legal actions or employee grievances involving forced #

or child labor

Do you have policies that explicitly disallows violations of labor laws and human rights (e.g. harassment,
bullying) in the workplace?

Topic Y/N If Yes, cite reference in the company policy

Forced labor Y We have a human rights commitment on our

website. See section on Respecting Human Rights at
Child labor Y https://aboitizpower.com/sustainability/social/.

Human Rights Y

Refer to pages beginning on page 93 (pages 185-195 in print, Talent Management), page 153 (page
304 in print, Appendix Table) of the 2021 Annual and Sustainability Report.

25
 What is the impact and where does it occur? Management Approach
What is the organization’s involvement in the
impact?

Identify the impact and where it occurs (i.e., primary What policies, commitments, goals and targets,
business operations and/or supply chain) responsibilities, resources, grievance
Indicate involvement in the impact (i.e., caused by mechanisms, and/or projects, programs, and
the organization or linked to impacts through its initiatives do you have to manage the material
business relationship) topic?

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

Supply Chain Management

Do you have a supplier accreditation policy? If yes, please attach the policy or link to the policy:

Yes, AboitizPower has a policy [1AP-SSM-002 Policy - Accredit to Evaluate] and guidelines on Vendor
Accreditation and Vendor Performance Evaluation [1AP-SSM-002-G001 Guideline - Accredit to Evaluate].

All prospective vendors shall submit all appropriate accreditation requirements. Where site and/or
office inspections shall be required for critical vendors or as deemed necessary, the Ocular Inspection
Team shall conduct the inspection, comprising the following: supply chain management representative,
health, safety, environment (HSE) representative, risk representative and authorized technical
representative/s. Moreover, Supply Chain Management team will monitor all vendor's performance. For
all active critical vendors shall be assessed at least once a year. Vendor’s performance shall be
monitored and evaluated based on quality, timeliness of service delivery, customer service or after
sales, compliance and cost effectiveness or price competitiveness.

Do you consider the following sustainability topics when accrediting suppliers?

Topic Y/N If Yes, cite reference in the supplier policy

Environmental performance Y The company conducts accreditation through an

Ocular Inspection Team can be comprised of the
Forced labor Y following
1. Supply Chain Management representative
2. Health, Safety, Environment (HSE)
Child labor Y representative

26
 Human rights Y 3. Risk representative
4. Authorized technical representative/s
Bribery and corruption Y

Refer to pages 68 to 87 (pages beginning 134 in print, Management Approach) of the 2021 Annual and
Sustainability Report.

What is the impact and where does it occur? Management Approach

What is the organization’s involvement in the
impact?

Identify the impact and where it occurs (i.e., primary What policies, commitments, goals and targets,
business operations and/or supply chain) responsibilities, resources, grievance
Indicate involvement in the impact (i.e., caused by mechanisms, and/or projects, programs, and
the organization or linked to impacts through its initiatives do you have to manage the material
business relationship) topic?

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

Relationship with Community

Significant Impacts on Local Communities

Refer to pages 55 to 62 (pages 108-123 in print, Corporate Social Responsibility) of the 2021 Annual
and Sustainability Report.

Operations Location Vulnerable Does the Collective or Mitigating

with significant groups (if particular individual measures (if
(positive or applicable)* operation rights that negative) or
negative) have have been enhancement

27
 impacts on impacts on identified that measures (if
local indigenous or particular positive)
communities people concern for the
(exclude CSR (Y/N)? community
projects; this
has to be
business
operations)

*Vulnerable sector includes children and youth, elderly, persons with disabilities, vulnerable women,
refugees, migrants, internally displaced persons, people living with HIV and other diseases, solo parents,
and the poor or the base of the pyramid (BOP; Class D and E)

For operations that are affecting IPs, indicate the total number of Free and Prior Informed Consent (FPIC)
undergoing consultations and Certification Preconditions (CPs) secured and still operational and provide
a copy or link to the certificates if available: _____________

Certificates Quantity Units

FPIC process is still undergoing #

CP secured #

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

28
Customer Management
Customer Satisfaction

Disclosure Score Did a third party conduct the customer satisfaction study
(Y/N)?

Customer satisfaction 92% Y - The company engaged with a Third Party to conduct a
satisfaction survey among its retail customers only in mid-
2020. Using the index of 4.6, the company's CSAT is at 92%
(4.6/5), using a sample size of n=101 out of 200 customers.
No target was set in 2019 because this is the first year that
AboitizPower formalized its customer satisfaction survey for
its retail business. AboitizPower customers appear to be very
satisfied with the company’s service.

Refer to pages 68 to 87 (pages beginning 134 in print, Management Approach) of the 2021 Annual and
Sustainability Report.

What is the impact and where does it occur? Management Approach

What is the organization’s involvement in the
impact?

Identify the impact and where it occurs (i.e., primary What policies, commitments, goals and targets,
business operations and/or supply chain) responsibilities, resources, grievance
Indicate involvement in the impact (i.e., caused by mechanisms, and/or projects, programs, and
the organization or linked to impacts through its initiatives do you have to manage the material
business relationship) topic?

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

Health and Safety

Disclosure Quantity Units

No. of substantiated complaints on product or service #

health and safety*

29
 No. of complaints addressed #
*Substantiated complaints include complaints from customers that went through the organization’s
formal communication channels and grievance mechanisms as well as complaints that were lodged to
and acted upon by government agencies.

What is the impact and where does it occur? Management Approach

What is the organization’s involvement in the
impact?

Identify the impact and where it occurs (i.e., primary What policies, commitments, goals and targets,
business operations and/or supply chain) responsibilities, resources, grievance
Indicate involvement in the impact (i.e., caused by mechanisms, and/or projects, programs, and
the organization or linked to impacts through its initiatives do you have to manage the material
business relationship) topic?

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

Marketing and labelling

Disclosure Quantity Units

No. of substantiated complaints on marketing and #

labelling*

No. of complaints addressed #

*Substantiated complaints include complaints from customers that went through the organization’s
formal communication channels and grievance mechanisms as well as complaints that were lodged to
and acted upon by government agencies.

What is the impact and where does it occur? Management Approach

What is the organization’s involvement in the
impact?

Identify the impact and where it occurs (i.e., primary What policies, commitments, goals and targets,
business operations and/or supply chain) responsibilities, resources, grievance
mechanisms, and/or projects, programs, and

30
 Indicate involvement in the impact (i.e., caused by initiatives do you have to manage the material
the organization or linked to impacts through its topic?
business relationship)

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

Customer privacy

Disclosure Quantity Units

No. of substantiated complaints on customer privacy* #

No. of complaints addressed #

No. of customers, users and account holders whose #

information is used for secondary purposes
*Substantiated complaints include complaints from customers that went through the organization’s
formal communication channels and grievance mechanisms as well as complaints that were lodged to
and acted upon by government agencies.

What is the impact and where does it occur? Management Approach

What is the organization’s involvement in the
impact?

Identify the impact and where it occurs (i.e., primary What policies, commitments, goals and targets,
business operations and/or supply chain) responsibilities, resources, grievance
Indicate involvement in the impact (i.e., caused by mechanisms, and/or projects, programs, and
the organization or linked to impacts through its initiatives do you have to manage the material
business relationship) topic?

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

31
Data Security

Disclosure Quantity Units

No. of data breaches, including leaks, thefts and losses #

of data

What is the impact and where does it occur? Management Approach

What is the organization’s involvement in the
impact?

Identify the impact and where it occurs (i.e., primary What policies, commitments, goals and targets,
business operations and/or supply chain) responsibilities, resources, grievance
Indicate involvement in the impact (i.e., caused by mechanisms, and/or projects, programs, and
the organization or linked to impacts through its initiatives do you have to manage the material
business relationship) topic?

What are the Risk/s Identified? Management Approach

Identify risk/s related to material topic of the

organization

What are the Opportunity/ies Identified? Management Approach

Identify the opportunity/ies related to material

topic of the organization

UN SUSTAINABLE DEVELOPMENT GOALS

Product or Service Contribution to UN SDGs
Key products and services and its contribution to sustainable development.

The Value Creation Business model of the Aboitiz Group provides societal value and contribution to the
UN SDGs.

Guided by UN SDGs we provide management approaches to minimize our potential negative impacts
to various programs we implement across the group. Kindly refer to pages 71 to 72 (pages 141-142 in
print, Aboitiz Sustainability Programs) of the 2021 Annual and Sustainability Report.

32
 Our Businesses Key Products Societal Value / Potential Negative Management
and Services Contribution to UN Impact of Approach to
SDGs Contribution Negative Impact

Power Power • Ample and reliable Potential negative • Managing Carbon

Generation & power supply impacts of Carbon footprint of our
Distribution • Reasonable and footprint to SDG 13 operations through
Service competitive price 14 and 15 compliance to
• Availability of a regulatory
right mix of energy standards and
supply minimizing by
promoting Carbon
SDG 7 sequestration and
biodiversity
programs
* None/Not Applicable is not an acceptable answer. For holding companies, the services and products of
its subsidiaries may be disclosed.

33
The following document has been received:

Receiving: AARON PAGKATIPUNAN

Receipt Date and Time: April 06, 2022 09:45:07 AM

Company Information
____________________________________________________________________________

SEC Registration No.: C199800134

Company Name: ABOITIZ POWER CORP.
Industry Classification: E40100
Company Type: Stock Corporation

Document Information
____________________________________________________________________________
____________________________________________________________________________

Document ID: OST1040620228285285

Document Type: Financial Statement
Document Code: FS
Period Covered: December 31, 2021
Submission Type: Parent
Remarks: None
 COVER SHEET
for
AUDITED FINANCIAL STATEMENTS

SEC Registration Number

C 1 9 9 8 0 0 1 3 4

COMPANY NAME

A B O I T I Z P O W E R C O R P O R A T I O N

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

3 2 n d S t r e e t , B o n i f a c i o G l o b a l

C i t y , T a g u i g C i t y , M e t r o M a n i l

a , P h i l i p p i n e s

Form Type Department requiring the report Secondary License Type, If Applicable

A P F S C R M D N / A

COMPANY INFORMATION
Company’s Email Address Company’s Telephone Number Mobile Number

ap_investor@aboitiz.com (632) 889-10307 Not Available

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)
th
594 4 Monday of April 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

Liza Luv T. Montelibano liza.montelibano@aboitiz.c (02) 8886-2800 Not Available

om

CONTACT PERSON’s ADDRESS

32nd Street, Bonifacio Global City, Taguig City, Metro Manila, 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.

*SGVFS162523*
 SyCip Gorres Velayo & Co. Tel: (632) 8891 0307
6760 Ayala Avenue Fax: (632) 8819 0872
1226 Makati City ey.com/ph
Philippines

INDEPENDENT AUDITOR’S REPORT

The Board of Directors and Stockholders

Aboitiz Power Corporation
32nd Street, Bonifacio Global City
Taguig City, Metro Manila
Philippines 1634

Report on the Audit of the Parent Company Financial Statements

Opinion

We have audited the parent company financial statements of Aboitiz Power Corporation (the Company),
which comprise the parent company balance sheets as at December 31, 2021 and 2020, and the parent
company statements of income, parent company statements of comprehensive income, parent
company statements of changes in equity and parent company statements of cash flows for each of the
three years in the period ended December 31, 2021, and notes to the parent company financial
statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2021 and 2020, and its financial
performance and its cash flows for each of the three years in the period ended December 31, 2021 in
accordance with Philippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Parent Company Financial Statements section of our report. We are independent of the
Company in accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of
Ethics) together with the ethical requirements that are relevant to our audit of the parent company
financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the Code of Ethics. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Parent Company
Financial Statements

Management is responsible for the preparation and fair presentation of the parent company financial
statements in accordance with PFRSs, and for such internal control as management determines is
necessary to enable the preparation of parent company financial statements that are free from material
misstatement, whether due to fraud or error.

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A member firm of Ernst & Young Global Limited
 -2-

In preparing the parent company financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting
process.

Auditor’s Responsibilities for the Audit of the Parent Company Financial Statements

Our objectives are to obtain reasonable assurance about whether the parent company financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with PSAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these parent company financial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:

 Identify and assess the risks of material misstatement of the parent company financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.

 Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.

 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

 Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the parent company financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause
the Company to cease to continue as a going concern.

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A member firm of Ernst & Young Global Limited
 -3-

 Evaluate the overall presentation, structure and content of the parent company financial
statements, including the disclosures, and whether the parent company financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.

Report on the Supplementary Information Required Under Revenue Regulations 15-2010

Our audits were conducted for the purpose of forming an opinion on the parent company financial
statements taken as a whole. The supplementary information required under Revenue Regulations
15-2010 in Note 22 to the parent company financial statements is presented for purposes of filing with
the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such
information is the responsibility of the management of the Company. The information has been
subjected to the auditing procedures applied in our audit of the parent company financial statements. In
our opinion, the information is fairly stated, in all material respects, in relation to the basic financial
statements taken as a whole.

The engagement partner on the audit resulting in this independent auditor’s report is
Maria Veronica Andresa R. Pore

SYCIP GORRES VELAYO & CO.

Maria Veronica Andresa R. Pore

Partner
CPA Certificate No. 90349
Tax Identification No. 164-533-282
BOA/PRC Reg. No. 0001, August 25, 2021, valid until April 15, 2024
SEC Partner Accreditation No. 0662-AR-4 (Group A)
November 21, 2019, valid until November 20, 2022
SEC Firm Accreditation No. 0001-SEC (Group A)
Valid to cover audit of 2021 to 2025 financial statements of SEC covered institutions
BIR Accreditation No. 08-001998-071-2020, December 3, 2020, valid until December 2, 2023
PTR No. 8854348, January 3, 2022, Makati City

March 4, 2022

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A member firm of Ernst & Young Global Limited
ABOITIZ POWER CORPORATION
PARENT COMPANY BALANCE SHEETS

December 31
2021 2020
ASSETS
Current Assets
Cash and cash equivalents (Note 4) =18,371,422,227
P =8,320,836,713
P
Trade and other receivables (Note 5) 832,166,838 1,277,383,079
Input VAT 7,825,893 7,011,255
Total Current Assets 19,211,414,958 9,605,231,047
Noncurrent Assets
Investments and advances (Note 6) 118,262,794,631 120,096,381,604
Project development costs (Note 9) 448,995,430 702,671,150
Property and equipment (Note 7) 85,599,005 103,044,819
Derivative asset (Note 18) 75,717,785 –
Other noncurrent assets (Note 8) 1,024,599,205 1,061,321,422
Total Noncurrent Assets 119,897,706,056 121,963,418,995
TOTAL ASSETS =139,109,121,014 P
P =131,568,650,042

LIABILITIES AND EQUITY

Current Liabilities
Current portion of long-term debts - net of deferred financing cost
(Note 11) =9,012,855,045
P =6,637,206,289
P
Trade and other payables (Note 10) 734,898,603 638,678,090
Current portion of lease liabilities (Note 19) 24,701,232 22,084,295
Total Current Liabilities 9,772,454,880 7,297,968,674
Noncurrent Liabilities
Long-term debts - net of deferred financing cost (Note 11) 54,176,302,410 52,172,875,914
Derivative liability (Note 18) – 429,498,461
Pension liability (Note 14) 18,829,708 33,139,892
Lease liabilities - net of current portion (Note 19) 4,657,472 29,296,845
Total Noncurrent Liabilities 54,199,789,590 52,664,811,112
Total Liabilities 63,972,244,470 59,962,779,786
Equity
Capital stock (Note 12a) 7,358,604,307 7,358,604,307
Additional paid-in capital (Note 12a) 12,588,894,332 12,588,894,332
Cash flow hedge reserve (Note 18) 75,717,785 (429,498,461)
Actuarial losses on defined benefit plan (Note 14) (537,866,915) (605,394,508)
Retained earnings (Note 12b)
Appropriated 20,060,000,000 33,660,000,000
Unappropriated 35,591,527,035 19,033,264,586
Total Equity 75,136,876,544 71,605,870,256
TOTAL LIABILITIES AND EQUITY =139,109,121,014 P
P =131,568,650,042

See accompanying Notes to Parent Company Financial Statements.

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ABOITIZ POWER CORPORATION
PARENT COMPANY STATEMENTS OF INCOME

Years Ended December 31

2021 2020 2019
REVENUE
Dividends (Note 16) =13,584,933,218
P =P6,682,236,151 =13,985,410,862
P
Technical, management and other service fees (Note 16) 1,033,204,426 1,308,299,061 1,964,330,515
Interest income (Notes 4 and 16e) 98,196,432 106,589,029 163,380,755
14,716,334,076 8,097,124,241 16,113,122,132
GENERAL AND ADMINISTRATIVE EXPENSES
Interest and other financing charges (Notes 11, 17 and 19) 3,471,372,528 2,946,898,811 2,547,531,855
Personnel (Note 13) 1,066,641,892 1,000,114,150 841,147,414
Service fees (Note 16) 250,318,230 151,085,981 114,024,341
Professional fees (Note 16) 136,516,864 133,527,727 84,589,126
Transportation and travel (Note 16) 68,267,910 54,115,983 98,277,343
Depreciation and amortization (Notes 7 and 8) 48,112,514 44,543,930 55,316,885
Taxes and licenses 23,961,998 67,867,303 35,961,127
Advertising and sponsorships 18,762,673 6,957,340 19,972,985
Communication 18,106,175 5,100,713 15,218,626
Training 16,765,191 10,301,594 11,935,333
Entertainment, amusement and recreation 7,762,576 9,170,026 3,756,593
Repairs and maintenance 7,743,500 7,323,199 7,583,781
Office supplies 5,157,938 4,534,695 6,106,790
Rent (Notes 16 and 19) 1,379,362 3,426,142 7,027,319
Light and water 711,721 1,009,786 1,202,157
Others 12,251,929 7,893,043 9,621,206
5,153,833,001 4,453,870,423 3,859,272,881
OTHER INCOME (CHARGES) - net
Foreign exchange gains (loss) (Note 17) (383,484,630) 571,207,124 104,238,709
Write-off of project development costs (Note 9) (298,031,413) (7,086,632) –
Others (Note 21c) 349,170,980 4,446,921 5,656,727
(332,345,063) 568,567413 109,895,436

INCOME BEFORE INCOME TAX 9,230,156,012 4,211,821,231 12,363,744,687

PROVISION FOR INCOME TAX (Note 15) 17,079,902 18,388,719 59,382,106

NET INCOME 9,213,076,110 4,193,432,512 12,304,362,581

EARNINGS PER COMMON SHARE (Note 12c)

Basic and diluted, for net income for the year =1.25
P =0.57
P =1.67
P

See accompanying Notes to Parent Company Financial Statements.

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ABOITIZ POWER CORPORATION
PARENT COMPANY STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

2021 2020 2019

NET INCOME =9,213,076,110

P =4,193,432,512 P
P =12,304,362,581

OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) not to be reclassified to
profit or loss in subsequent periods:
Actuarial gains (loss) on defined benefit plans
(Note 14) 67,527,593 (48,597,682) (258,909,416)
Income tax effect – – (89,366,223)
Net other comprehensive income (loss) not to be
reclassified to profit or loss in subsequent periods 67,527,593 (48,597,682) (348,275,639)

Other comprehensive income (loss) that may be

reclassified to profit or loss in subsequent periods:
Changes in fair value of cash flow hedge
(Note 18) 505,216,246 (509,632,732) 80,134,271
Total other comprehensive income (loss) for the year,
net of tax 572,743,839 (558,230,414) (268,141,368)

TOTAL COMPREHENSIVE INCOME =9,785,819,949

P =3,635,202,098 P
P =12,036,221,213

See accompanying Notes to Parent Company Financial Statements.

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ABOITIZ POWER CORPORATION
PARENT COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

Additional Cash Flow Hedge Actuarial

Capital Stock Paid-In Capital Reserve Losses on Defined Retained Earnings (Note 12b)
(Note 12a) (Note 12a) (Note 18) Benefit Plan Appropriated Unappropriated Total

Balances at January 1, 2021 =7,358,604,307 P

P =12,588,894,332 (P
=429,498,461) (P
=605,394,508) P
=33,660,000,000 =P19,033,264,586 =P71,605,870,256
Net income for the year – – – – – 9,213,076,110 9,213,076,110
Other comprehensive income – – 505,216,246 67,527,593 – – 572,743,839
Total comprehensive income – – 505,216,246 67,527,593 – 9,213,076,110 9,785,819,949
Cash dividends (Note 12b) – – – – – (6,254,813,661) (6,254,813,661)
Reversal of appropriation (Note 12b) – – – – (13,600,000,000) 13,600,000,000 –

Balances at December 31, 2021 =7,358,604,307 P

P =12,588,894,332 =75,717,785
P (P
=537,866,915) P
=20,060,000,000 P
=35,591,527,035 P
=75,136,876,544

Additional Cash Flow Hedge Actuarial

Capital Stock Paid-In Capital Reserve Losses on Defined Retained Earnings (Note 12b)
(Note 12a) (Note 12a) (Note 18) Benefit Plan Appropriated Unappropriated Total

Balances at January 1, 2020 =7,358,604,307 P

P =12,588,894,332 =80,134,271
P (P
=556,796,826) P=33,660,000,000 P
=23,522,985,155 P
=76,653,821,239
Net income for the year – – – – – 4,193,432,512 4,193,432,512
Other comprehensive loss – – (509,632,732) (48,597,682) – – (558,230,414)
Total comprehensive income (loss) – – (509,632,732) (48,597,682) – 4,193,432,512 3,635,202,098
Cash dividends (Note 12b) – – – – – (8,683,153,081) (8,683,153,081)

Balances at December 31, 2020 =7,358,604,307 P

P =12,588,894,332 (P
=429,498,461) (P
=605,394,508) P
=33,660,000,000 P
=19,033,264,586 P
=71,605,870,256

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 -2-

Additional Cash Flow Hedge Actuarial

Capital Stock Paid-In Capital Reserve Losses on Defined Retained Earnings (Note 12b)
(Note 12a) (Note 12a) (Note 18) Benefit Plan Appropriated Unappropriated Total
Balances at January 1, 2019 =7,358,604,307 P
P =12,588,894,332 =–
P (P
=208,521,187) P=34,060,000,000 P=21,635,770,905 P
=75,434,748,357
Net income for the year – – – – – 12,304,362,581 12,304,362,581
Other comprehensive income (loss) – – 80,134,271 (348,275,639) – – (268,141,368)
Total comprehensive income (loss) – – 80,134,271 (348,275,639) – 12,304,362,581 12,036,221,213
Cash dividends (Note 12b) – – – – – (10,817,148,331) (10,817,148,331)
Appropriation during the year (Note 12b) – – – – 11,900,000,000 (11,900,000,000) –
Reversal of appropriation (Note 12b) – – – – (12,300,000,000) 12,300,000,000 –

Balances at December 31, 2019 =7,358,604,307 P

P =12,588,894,332 =80,134,271
P (P
=556,796,826) P
=33,660,000,000 P
=23,522,985,155 P
=76,653,821,239

See accompanying Notes to Parent Company Financial Statements.

*SGVFS162523*
ABOITIZ POWER CORPORATION
PARENT COMPANY STATEMENTS OF CASH FLOWS

Years Ended December 31

2021 2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax =9,230,156,012
P =4,211,821,231 P
P =12,363,744,687
Adjustments for:
Interest and other financing charges (Notes 11, 17 and 19) 3,471,372,528 2,946,898,811 2,547,531,855
Unrealized foreign exchange losses (gain) (Note 17) 958,305,749 (609,508,010) (605,762,999)
Write-off of project development costs (Note 9) 298,031,413 7,086,632 —
Interest income (Notes 4 and 16e) (98,196,432) (106,589,029) (163,380,755)
Depreciation and amortization (Notes 7 and 8) 48,112,514 44,543,930 35,961,127
Losses (gain) on disposal of property and equipment
(Note 7) 878,330 (3,983,013) (1,329,856)
Gain on disposal of financial assets at FVTPL — — (1,250,542)
Unrealized fair valuation gain on financial assets at FVTPL — — (2,464,564)
Operating income before working capital changes 13,908,660,114 6,490,270,552 14,173,048,953
Decrease (increase) in:
Trade and other receivables 461,523,013 (203,280,545) (123,992,097)
Input VAT (814,638) 4,614,590 168,232,322
Increase (decrease) in:
Trade and other payables 635,204 (3,922,163) 103,142,506
Pension liability 53,217,409 (235,202,259) (39,164,947)
Net cash generated from operations 14,423,221,102 6,052,480,175 14,319,328,241
Income taxes refunded (paid) - net 16,133,106 (165,176,422) (168,612,213)
Net cash flows from operating activities 14,439,354,208 5,887,303,753 14,150,716,028

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 81,889,660 105,980,970 195,342,135
Decrease (increase) in recoverable deposits 212,277 (66,906) 75,420,311
Proceeds from:
Advances from subsidiaries and associates 2,000,560,857 1,412,353,654 —
Redemption on preferred shares (Note 6) 14,413,000 6,939,000 5,340,000
Disposal of property and equipment (Note 7) 5,124,967 4,034,952 4,344,811
Disposal of financial asset at FVTPL — — 101,250,542
Additions to:
Investments and advances (181,386,884) (881,465,617) (31,707,725,376)
Project development costs (Note 9) (44,355,693) (86,418,415) (234,871,366)
Property and equipment (Note 7) (30,796,911) (20,759,356) (29,851,823)
Computer software license (Note 8) (2,576,154) (22,597,540) (4,535,865)
Net cash flows from (used in) investing activities 1,843,085,119 518,000,742 (31,595,286,631)

(Forward)

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Years Ended December 31

2021 2020 2019

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long-term debts (Note 11) =26,000,000,000
P =9,550,000,000 P
P =27,881,500,000
Payments of:
Long-term debt (22,815,725,000) (50,000,000) —
Cash dividends (Note 12b) (6,254,587,553) (8,682,746,344) (10,817,148,331)
Interest and other financing charges (3,049,008,525) (2,797,326,277) (2,301,301,047)
Transaction costs from availment of long-term debt (292,662,959) (116,717,375) (431,396,357)
Lease liability, including interest accretion (Note 19) (25,334,028) (23,650,208) (17,825,560)
Bank loans — (8,600,000,000) (4,700,000,000)
Availment of bank loans — 8,600,000,000 —
Net cash flows from (used in) financing activities (6,437,318,065) (2,120,440,204) 9,613,828,705

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,845,121,262 4,284,864,291 (7,830,741,898)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND

CASH EQUIVALENTS 205,464,252 (174,091,990) 165,617,999

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,320,836,713 4,210,064,412 11,875,188,311

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 4) =18,371,422,227

P =8,320,836,713
P P
=4,210,064,412

See accompanying Notes to Parent Company Financial Statements.

*SGVFS162523*
ABOITIZ POWER CORPORATION
NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

1. Corporate Information

Aboitiz Power Corporation (the Company) was incorporated in the Philippines and registered with
the Securities and Exchange Commission on February 13, 1998. The Company is a publicly-listed
holding company of the entities engaged in power generation and power distribution in the Aboitiz
Group.

On December 16, 2021, JERA Asia Private Limited completed the acquisition of the Company's share
from Aboitiz Equity Ventures, Inc. (AEV) and Aboitiz & Company, Inc. (ACO) totaling to 27%. As of
December 31, 2021, AEV (also incorporated in the Philippines) owns 52.00% of the Company. The
ultimate parent of the Company is ACO.

The Company’s registered office address is 32nd Street, Bonifacio Global City, Taguig City, Metro
Manila.

The parent company financial statements were approved and authorized for issue in accordance
with a resolution by the Board of Directors (BOD) of the Company on March 4, 2022.

2. Basis of Preparation, Statement of Compliance and Summary of Significant Accounting

Basis of Financial Statement Preparation

The accompanying parent company financial statements have been prepared on a historical cost
basis, except for derivative financial instruments and financial assets at FVTPL which are measured
at fair value. The parent company financial statements are presented in Philippine peso which is the
Company’s functional currency.

Statement of Compliance
The parent company financial statements are prepared in compliance with Philippine Financial
Reporting Standards (PFRSs).

Changes in Accounting Policies and Disclosures

The accounting policies adopted are consistent with those of the previous financial year, except for
the amendments to existing standards which were applied starting January 1, 2021. The Company
has not early adopted any other standard, interpretation or amendment that has been issued but is
not yet effective.

 Amendment to PFRS 16, COVID-19-related Rent Concessions beyond 30 June 2021

The amendment provides relief to lessees from applying the PFRS 16 requirement on lease
modifications to rent concessions arising as a direct consequence of the COVID-19 pandemic. A
lessee may elect not to assess whether a rent concession from a lessor is a lease modification if
it meets all of the following criteria:
• The rent concession is a direct consequence of COVID-19;
• The change in lease payments results in a revised lease consideration that is substantially
the same as, or less than, the lease consideration immediately preceding the change;

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 -2-

• Any reduction in lease payments affects only payments originally due on or before
June 30, 2022; and
• There is no substantive change to other terms and conditions of the lease.

A lessee that applies this practical expedient will account for any change in lease payments
resulting from the COVID-19 related rent concession in the same way it would account for a
change that is not a lease modification, i.e., as a variable lease payment.

• Amendments to PFRS 9, PFRS 7, PFRS 4 and PFRS 16, Interest Rate Benchmark Reform – Phase 2

The amendments provide temporary reliefs which address the financial reporting effects when
an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate
(RFR):
• Practical expedient for changes in the basis for determining the contractual cash flows as a
result of IBOR reform
• Relief from discontinuing hedging relationships
• Relief from the separately identifiable requirement when an RFR instrument is designated as
a hedge of a risk component

The Company shall also disclose information about:

• The about the nature and extent of risks to which the entity is exposed arising from financial
instruments subject to IBOR reform, and how the entity manages those risks; and
• Their progress in completing the transition to alternative benchmark rates, and how the
entity is managing that transition

The Company’s treasury function is managing the Company’s LIBOR transition plan. The
greatest change will be amendments to the contractual terms of the LIBOR-referenced floating-
rate debt and the associated swap and the corresponding update of the hedge designation.
However, the change reference rate may also affect other systems, processes, risk and valuation
models, as well as having tax and accounting implications.

The adoption of these amendments did not have a significant impact on the parent company
financial statements.

New Standards and Interpretation Issued and Effective after December 31, 2021
The Company will adopt the standards enumerated below when these become effective. The
Company does not expect the adoption of these new and amended PFRSs to have significant impact
on its parent company financial statements.

Effective beginning on or after January 1, 2022

• Amendments to PFRS 3, Reference to the Conceptual Framework

The amendments are intended to replace a reference to the Framework for the Preparation and
Presentation of Financial Statements, issued in 1989, with a reference to the Conceptual
Framework for Financial Reporting issued in March 2018 without significantly changing its
requirements. The amendments added an exception to the recognition principle of PFRS 3,
Business Combinations to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities

*SGVFS162523*
 -3-

and contingent liabilities that would be within the scope of PAS 37, Provisions, Contingent
Liabilities and Contingent Assets or Philippine-IFRIC 21, Levies, if incurred separately. At the
same time, the amendments add a new paragraph to PFRS 3 to clarify that contingent assets do
not qualify for recognition at the acquisition date.

The amendments are applied prospectively.

• Amendments to PAS 16, Property, Plant and Equipment: Proceeds before Intended Use

The amendments prohibit entities deducting from the cost of an item of property, plant and
equipment, any proceeds from selling items produced while bringing that asset to the location
and condition necessary for it to be capable of operating in the manner intended by
management. Instead, an entity recognizes the proceeds from selling such items, and the costs
of producing those items, in profit or loss.

The amendment must be applied retrospectively to items of property, plant and equipment
made available for use on or after the beginning of the earliest period presented when the
entity first applies the amendment.

• Amendments to PAS 37, Onerous Contracts – Costs of Fulfilling a Contract

The amendment specifies which costs an entity needs to include when assessing whether a
contract is onerous or loss-making. The amendments apply a “directly related cost approach”.
The costs that relate directly to a contract to provide goods or services include both incremental
costs and an allocation of costs directly related to contract activities. General and
administrative costs do not relate directly to a contract and are excluded unless they are
explicitly chargeable to the counterparty under the contract.

The Company will apply these amendments to contracts for which it has not yet fulfilled all its
obligations at the beginning of the annual reporting period in which it first applies the
amendments.

• Annual Improvements to PFRSs 2018-2020 Cycle

◦ Amendments to PFRS 1, First-time Adoption of PFRS – Subsidiary as a first-time adopter

The amendment permits a subsidiary that elects to apply paragraph D16(a) of PFRS 1 to
measure cumulative translation differences using the amounts reported by the parent,
based on the parent’s date of transition to PFRS. This amendment is also applied to an
associate or joint venture that elects to apply paragraph D16(a) of PFRS 1.

The amendment is effective for annual reporting periods beginning on or after

January 1, 2022 with earlier adoption permitted.

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◦ Amendments to PFRS 9, Financial Instruments – Fees in the ’10 per cent’ test for
derecognition of financial liabilities

The amendment clarifies the fees that an entity includes when assessing whether the terms
of a new or modified financial liability are substantially different from the terms of the
original financial liability. These fees include only those paid or received between the
borrower and the lender, including fees paid or received by either the borrower or lender
on the other’s behalf. An entity applies the amendment to financial liabilities that are
modified or exchanged on or after the beginning of the annual reporting period in which the
entity first applies the amendment.

The amendment is effective for annual reporting periods beginning on or after

January 1, 2022 with earlier adoption permitted. The Company will apply the amendments
to financial liabilities that are modified or exchanged on or after the beginning of the annual
reporting period in which the entity first applies the amendment.

◦ PAS 41, Agriculture – Taxation in fair value measurements

The amendment removes the requirement in paragraph 22 of PAS 41 that entities exclude
cash flows for taxation when measuring the fair value of assets within the scope of PAS 41.

An entity applies the amendment prospectively to fair value measurements on or after the
beginning of the first annual reporting period beginning on or after January 1, 2022 with
earlier adoption permitted.

Effective beginning on or after January 1, 2023

• Amendments to PAS 12, Deferred Tax related to Assets and Liabilities arising from a Single
Transaction

The amendments narrow the scope of the initial recognition exception under PAS 12, so that it
no longer applies to transactions that give rise to equal taxable and deductible temporary
differences.

The amendments also clarify that where payments that settle a liability are deductible for tax
purposes, it is a matter of judgement (having considered the applicable tax law) whether such
deductions are attributable for tax purposes to the liability recognized in the financial
statements (and interest expense) or to the related asset component (and interest expense).

An entity applies the amendments to transactions that occur on or after the beginning of the
earliest comparative period presented for annual reporting periods on or after January 1, 2023.

The Company is currently in the process of quantifying the impact of this amendment in respect
of those temporary differences arising from the transactions contemplated by this amendment.

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• Amendments to PAS 8, Definition of Accounting Estimates

The amendments introduce a new definition of accounting estimates and clarify the distinction
between changes in accounting estimates and changes in accounting policies and the correction
of errors. Also, the amendments clarify that the effects on an accounting estimate of a change
in an input or a change in a measurement technique are changes in accounting estimates if they
do not result from the correction of prior period errors.

An entity applies the amendments to changes in accounting policies and changes in accounting
estimates that occur on or after January 1, 2023 with earlier adoption permitted.

• Amendments to PAS 1 and PFRS Practice Statement 2, Disclosure of Accounting Policies

The amendments provide guidance and examples to help entities apply materiality judgements
to accounting policy disclosures. The amendments aim to help entities provide accounting policy
disclosures that are more useful by:
• Replacing the requirement for entities to disclose their ‘significant’ accounting policies with
a requirement to disclose their ‘material’ accounting policies, and
• Adding guidance on how entities apply the concept of materiality in making decisions about
accounting policy disclosures

The amendments to the Practice Statement provide non-mandatory guidance. Meanwhile, the
amendments to PAS 1 are effective for annual periods beginning on or after January 1, 2023.
Early application is permitted as long as this fact is disclosed.

Effective beginning on or after January 1, 2024

• Amendments to PAS 1, Classification of Liabilities as Current or Non-current

The amendments clarify paragraphs 69 to 76 of PAS 1, Presentation of Financial Statements, to

specify the requirements for classifying liabilities as current or non-current. The amendments
clarify:
• What is meant by a right to defer settlement
• That a right to defer must exist at the end of the reporting period
• That classification is unaffected by the likelihood that an entity will exercise its deferral right
• That only if an embedded derivative in a convertible liability is itself an equity instrument
would the terms of a liability not impact its classification

The amendments are effective for annual reporting periods beginning on or after
January 1, 2023 and must be applied retrospectively. However, in November 2021, the
International Accounting Standards Board (IASB) tentatively decided to defer the effective date
to no earlier than January 1, 2024. The Company is currently assessing the impact the
amendments will have on current practice.

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Effective beginning on or after January 1, 2025

• PFRS 17, Insurance Contracts

PFRS 17 is a comprehensive new accounting standard for insurance contracts covering

recognition and measurement, presentation and disclosure. Once effective, PFRS 17 will replace
PFRS 4, Insurance Contracts. This new standard on insurance contracts applies to all types of
insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type
of entities that issue them, as well as to certain guarantees and financial instruments with
discretionary participation features. A few scope exceptions will apply.

The overall objective of PFRS 17 is to provide an accounting model for insurance contracts that
is more useful and consistent for insurers. In contrast to the requirements in PFRS 4, which are
largely based on grandfathering previous local accounting policies, PFRS 17 provides a
comprehensive model for insurance contracts, covering all relevant accounting aspects. The
core of PFRS 17 is the general model, supplemented by:
◦ A specific adaptation for contracts with direct participation features (the variable fee
approach)
◦ A simplified approach (the premium allocation approach) mainly for short-duration
contracts

On December 15, 2021, the FRSC amended the mandatory effective date of PFRS 17 from
January 1, 2023 to January 1, 2025. This is consistent with Circular Letter No. 2020-62 issued by
the Insurance Commission which deferred the implementation of PFRS 17 by two (2) years after
its effective date as decided by the IASB.

PFRS 17 is effective for reporting periods beginning on or after January 1, 2025, with
comparative figures required. Early application is permitted.

Deferred effectivity

• Amendments to PFRS 10, Consolidated Financial Statements, and PAS 28, Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture

The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of
control of a subsidiary that is sold or contributed to an associate or joint venture. The
amendments clarify that a full gain or loss is recognized when a transfer to an associate or joint
venture involves a business as defined in PFRS 3. Any gain or loss resulting from the sale or
contribution of assets that does not constitute a business, however, is recognized only to the
extent of unrelated investors’ interests in the associate or joint venture.

On January 13, 2016, the Financial Reporting Standards Council deferred the original effective
date of January 1, 2016 of the said amendments until the International Accounting Standards
Board (IASB) completes its broader review of the research project on equity accounting that
may result in the simplification of accounting for such transactions and of other aspects of
accounting for associates and joint ventures.

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Summary of Significant Accounting Policies

Current versus Noncurrent Classification

The Company presents assets and liabilities in the parent company balance sheet based on
current/noncurrent classification. An asset as current when it is:
• Expected to be realized or intended to be sold or consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realized within twelve months after the reporting period or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for a
least twelve months after reporting period

All other assets are classified as noncurrent.

A liability is current when:

• It is expected to be settled in normal operating cycle
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months after the reporting period or
• There is no unconditional right to defer settlement of the liability for at least twelve months
after the reporting period

All other liabilities are classified as noncurrent.

Deferred income tax assets and liabilities are classified as noncurrent assets and liabilities.

Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their
economic best interest.

A fair value measurement of a non-financial asset takes into account a market participants ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable inputs
and minimizing the use of unobservable inputs.

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All assets and liabilities for which fair value is measured or disclosed in the parent company financial
statements are categorized within the fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a whole:
• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable
• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair
value measurement is unobservable

For assets and liabilities that are recognized in the parent company financial statements on a
recurring basis, the Company determines whether transfers have occurred between Levels in the
hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair
value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Company has determined classes of assets and
liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of
the fair value hierarchy as explained above.

Foreign Currency Translation

The Company’s financial statements are presented in Philippine Peso, which is the Company’s
functional currency. Transactions in foreign currencies are recorded using the exchange rate at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
restated using the rate of exchange at balance sheet date. Exchange gains and losses arising from
foreign currency transactions and translations of foreign currency denominated monetary assets
and liabilities are credited to or charged against current operations. Non-monetary items that are
measured in terms of historical cost in a foreign currency are translated using the exchange rates as
at the dates of the initial transactions.

Cash and Cash Equivalents

Cash and cash equivalents in the parent company balance sheet consist of cash on hand and with
banks, and short-term, highly liquid investments that are readily convertible to known amounts of
cash and subject to insignificant risk of changes in value. They are held for the purpose of meeting
short-term cash commitments rather than for investment or other purposes.

For the purpose of the parent company statement of cash flows, cash and cash equivalents consist
of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

Financial Instruments - Classification and Measurement

Classification of financial assets
Financial assets are classified in their entirety based on the contractual cash flows characteristics of
the financial assets and the Company’s business model for managing the financial assets. The
Company classifies its financial assets into the following measurement categories:
• financial assets measured at amortized cost
• financial assets measured at fair value through profit or loss (FVTPL)
• financial assets measured at fair value through other comprehensive income (FVOCI), where
cumulative gains or losses previously recognized are reclassified to profit or loss
• financial assets measured at FVOCI, where cumulative gains or losses previously recognized are
not reclassified to profit or loss

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Contractual cash flows characteristics

If the financial asset is held within a business model whose objective is to hold assets to collect
contractual cash flows or within a business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets, the Company assesses whether the cash flows
from the financial asset represent solely payments of principal and interest (SPPI) on the principal
amount outstanding

In making this assessment, the Company determines whether the contractual cash flows are
consistent with a basic lending arrangement, i.e, interest includes consideration only for the time
value of money, credit risk and other basic lending risks and costs associated with holding the
financial asset for a particular period of time. In addition, interest can include a profit margin that is
consistent with a basic lending arrangement. The assessment as to whether the cash flows meet
the test is made in the currency in which the financial asset is denominated. Any other contractual
terms that introduce exposure to risks or volatility in the contractual cash flows that is unrelated to
a basic arrangement, such as exposure to changes in equity prices or commodity prices, do not give
rise to a contractual cash flows that are solely payments of principal and interest on the principal
amount outstanding.

Business model
The Company's business model is determined at a level that reflects how groups of financial assets
are managed together to achieve a particular business objective. The Company's business model
does not depend on management's intentions for an individual instrument.

The Company's business model refers to how it manages its financial assets in order to generate
cash flows. The Company's business model determines whether cash flows will result from collecting
contractual cash flows, selling financial assets or both. Relevant factors considered by the Company
in determining the business model for a group of financial assets include how the performance of
the business model and the financial assets held within that business model are evaluated and
reported to the Company's key management personnel, the risks that affect the performance of the
business model (and the financial assets held within that business model) and how these risks are
managed and how managers of the business are compensated.

Financial assets at amortized cost

A financial asset is measured at amortized cost if (i) it is held within a business model whose
objective is to hold financial assets in order to collect contractual cash flows and (ii) the contractual
terms of the financial asset give rise on specified dates to cash flows that are SPPI on the principal
amount outstanding. These financial assets are initially recognized at fair value plus directly
attributable transaction costs and subsequently measured at amortized cost using the effective
interest method, less any impairment in value. Amortized cost is calculated by taking into account
any discount or premium on acquisition and fees and costs that are an integral part of the effective
interest method. The amortization is included in ‘Interest income’ in the parent company statement
of income and is calculated by applying the effective interest method to the gross carrying amount
of the financial asset, except for (i) purchased or originated credit-impaired financial assets and (ii)
financial assets that have subsequently become credit-impaired, where, in both cases, the effective
interest method is applied to the amortized cost of the financial asset. Losses arising from
impairment are recognized in ‘Provision for credit and impairment losses’ in the parent company
statement of income.

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The Company’s financial assets at amortized cost as of December 31, 2021 and 2020 consist of cash
in banks, cash equivalents and trade and other receivables (see Note 17). The Company assessed
that the contractual cash flows of these financial assets are SPPI and are expected to be held to
collect all contractual cash flows until their maturity. As a result, the Company concluded these
financial assets are to be measured at amortized cost.

Financial assets at FVOCI

A financial asset is measured at FVOCI if (i) it is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling financial assets and (ii) its contractual
terms give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.
These financial assets are initially recognized at fair value plus directly attributable transaction costs
and subsequently measured at fair value. Gains and losses arising from changes in fair value are
included in other comprehensive income within a separate component of equity. Impairment losses
or reversals, interest income and foreign exchange gains and losses are recognized in the parent
company statement of income until the financial asset is derecognized. Upon derecognition, the
cumulative gain or loss previously recognized in other comprehensive income is reclassified from
equity to profit or loss. This reflects the gain or loss that would have been recognized in profit or
loss upon derecognition if the financial asset had been measured at amortized cost. Impairment is
measured based on the expected credit loss (ECL) model.

The Company may also make an irrevocable election to measure at FVOCI on initial recognition
investments in equity instruments that are neither held for trading nor contingent consideration
recognized in a business combination in accordance with PFRS 3. Amounts recognized in OCI are not
subsequently transferred to profit or loss. However, the Company may transfer the cumulative gain
or loss within equity. Dividends on such investments are recognized in profit or loss, unless the
dividend clearly represents a recovery of part of the cost of the investment.

Dividends are recognized in profit or loss only when:

• the Company’s right to receive payment of the dividend is established
• it is probable that the economic benefits associated with the dividend will flow to the Company;
and
• the amount of the dividend can be measured reliably.

The Company does not have any financial asset at FVOCI as of December 31, 2021 and 2020.

Financial assets at FVTPL

Financial assets at FVTPL are measured as at unless these are measured at amortized cost or at
FVOCI. Included in this classification are equity investments held for trading and debt instruments
with contractual terms that do not represent SPPI. Financial assets held at FVTPL are initially
recognized at fair value, with transaction costs recognized in the parent company statement of
income as incurred.

Additionally, even if the asset meets the amortized cost or the FVOCI criteria, the Company may
choose at initial recognition to designate the financial asset at FVTPL if doing so eliminates or
significantly reduces a measurement or recognition inconsistency (an accounting mismatch) that
would otherwise arise from measuring financial assets on a different basis.

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Trading gains or losses are calculated based on the results arising from trading activities of the
Company, including all gains and losses from changes in fair value for financial assets and financial
liabilities at FVTPL, and the gains or losses from disposal of financial investments.

The Company’s does not have any financial assets at FVTPL as of December 31, 2021 and 2020.

Classification of financial liabilities

Financial liabilities are measured at amortized cost, except for the following:
• financial liabilities measured at FVTPL;
• financial liabilities that arise when a transfer of a financial asset does not qualify for
derecognition or when the Company retains continuing involvement;
• financial guarantee contracts;
• commitments to provide a loan at a below-market interest rate; and
• contingent consideration recognized by an acquirer in accordance with PFRS 3.

A financial liability may be designated at fair value through profit or loss if it eliminates or
significantly reduces a measurement or recognition inconsistency (an accounting mismatch) or:
• if a host contract contains one or more embedded derivatives; or
• if a Company of financial liabilities or financial assets and liabilities is managed and its
performance evaluated on a fair value basis in accordance with a documented risk management
or investment strategy.

Where a financial liability is designated at fair value through profit or loss, the movement in fair
value attributable to changes in the Company’s own credit quality is calculated by determining the
changes in credit spreads above observable market interest rates and is presented separately in
other comprehensive income.

The Company’s financial liabilities measured at amortized cost as of December 31, 2021 and 2020
which comprise of trade and other payables, long-term debts and lease liabilities (see Note 17).

Reclassifications of financial instruments

The Company reclassifies its financial assets when, and only when, there is a change in the business
model for managing the financial assets. Reclassifications shall be applied prospectively by the
Company and any previously recognized gains, losses or interest shall not be restated. The
Company does not reclassify its financial liabilities.

The Company does not reclassify its financial assets when:

• A financial asset that was previously a designated and effective hedging instrument in a cash
flow hedge or net investment hedge no longer qualifies as such;
• A financial asset becomes a designated and effective hedging instrument in a cash flow hedge or
net investment hedge; and
• There is a change in measurement on credit exposures measured at fair value through profit or
loss.

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Derivative financial instruments

Initial recognition and subsequent measurement
Derivative financial instruments, including embedded derivatives, are initially recognized at fair
value on the date in which a derivative transaction is entered into or bifurcated, and are
subsequently remeasured at FVTPL, unless designated as effective hedge. Changes in fair value of
derivative instruments not accounted as hedges are recognized immediately in the parent company
statement of income. Derivatives are carried as assets when the fair value is positive and as
liabilities when the fair value is negative.

An embedded derivative within a financial asset host is not accounted for separately. The financial
asset host together with the embedded derivative is required to be classified in its entirety as either
at amortized cost or at fair value depending on whether the cash flows of the hybrid contract are
solely payments of principal and interest and the assessment of the business model within which
the financial asset is held. On the other hand, an embedded derivative with a financial liability or a
non-financial host is separated from the host and accounted for as a separate derivative if: its
economic characteristics and risks are not closely related to the host; a separate instrument with the
same terms as the embedded derivative would meet the definition of a derivative; and the hybrid
contract is not measured at fair value through profit or loss.

Separated embedded derivatives are measured at fair value with changes in fair value recognized in
profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that
significantly modified the cash flows that would otherwise be required or a reclassification of a
financial asset out of the fair value through profit or loss category.

The Company uses derivative financial instruments, such as foreign currency forward and interest
rate swaps (IRS) to hedge its foreign currency risks and interest rate risk, respectively.

For the purpose of hedge accounting, the Company’s hedge are classified as cash flow hedges.
Hedges are classified as cash flow hedge when hedging the exposure to variability in cash flows that
is either attributable to a particular risk associated with a recognized asset or liability or a highly
probable forecast transaction or the foreign currency risk in an unrecognized firm commitment.

At the inception of a hedge relationship, the Company formally designates and documents the
hedge relationship to which it wishes to apply hedge accounting and the risk management objective
and strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item, the nature
of the risk being hedged and how the Company will assess whether the hedging relationship meets
the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and
how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it
meets all of the following effectiveness requirements:
• There is ‘an economic relationship’ between the hedged item and the hedging instrument.
• The effect of credit risk does not ‘dominate the value changes’ that result from that economic
relationship.
• The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that the Company actually hedges and the quantity of the hedging instrument that
the Company actually uses to hedge that quantity of hedged item.

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The Company’s hedges that meet all the qualifying criteria for hedge accounting are accounted for,
as described below:

Cash flow hedge

The effective portion of the gain or loss on the hedging instrument is recognized in the cash flow
hedge reserve, while any ineffective portion is recognized immediately in the parent company
statement of income. The cash flow hedge reserve is adjusted to the lower of the cumulative gain
or loss on the hedging instrument and the cumulative change in fair value of the hedged item.

The Company uses foreign currency forward contracts as hedges of its exposure to foreign currency
risk in forecast transactions and IRS contracts to manage its floating interest rate exposure on its
loans. The ineffective portion relating to these contracts are recognized in other operating income
or expenses as realized gain or loss on derivative instruments.

The Company designated all of the foreign currency forward and IRS as hedging instrument. The
amounts accumulated in other comprehensive income are accounted for, depending on the nature
of the underlying hedged transaction. If the hedged transaction subsequently results in the
recognition of a non-financial item, the amount accumulated in equity is removed from the separate
component of equity and included in the initial cost or other carrying amount of the hedged asset or
liability. This is not a reclassification adjustment and will not be recognized in other comprehensive
income for the period. This also applies where the hedged forecast transaction of a non-financial
asset or non-financial liability subsequently becomes a firm commitment for which fair value hedge
accounting is applied.

For any other cash flow hedges, the amount accumulated in other comprehensive income is
reclassified to profit or loss as a reclassification adjustment in the same period or periods during
which the hedged cash flows affect profit or loss.

If cash flow hedge accounting is discontinued, the amount that has been accumulated in other
comprehensive must remain in accumulated other comprehensive income if the hedged future cash
flows are still expected to occur. Otherwise, the amount will be immediately reclassified to profit or
loss as a reclassification adjustment. After discontinuation, once the hedged cash flow occurs, any
amount remaining in accumulated other comprehensive must be accounted for depending on the
nature of the underlying transaction as described above.

Derecognition of Financial Assets and Liabilities

Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a Company of similar
financial assets) is derecognized when, and only when:
• the rights to receive cash flows from the asset expires;
• the Company retains the right to receive cash flows from the asset, but has assumed an
obligation to pay them in full without material delay to a third party under a ‘pass-through’
arrangement; or
• the Company has transferred its rights to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the
asset.

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When the Company retains the contractual rights to receive the cash flows of a financial asset but
assumes a contractual obligation to pay those cash flows to one or more entities, the Company
treats the transaction as a transfer of a financial asset if the Company:
• has no obligation to pay amounts to the eventual recipients unless it collects equivalent
amounts from the original asset;
• is prohibited by the terms of the transfer contract from selling or pledging the original asset
other than as security to the eventual recipients for the obligation to pay them cash flows; and
• has an obligation to remit any cash flows it collects on behalf of the eventual recipients without
material delay.

In transactions where the Company neither transfers nor retains substantially all the risks and
rewards of ownership of the financial asset and it retains control over the financial asset, the
financial asset is recognized to the extent of the Company’s continuing involvement in the financial
asset. The extent of the Company’s continuing involvement in the transferred asset is the extent to
which it is exposed to changes in the value of the transferred asset. When the Company’s
continuing involvement takes the form of guaranteeing the transferred asset, the extent of the
Company’s continuing involvement is the lower of (i) the amount of the asset and (ii) the maximum
amount of the consideration received that the Company could be required to repay (‘the guarantee
amount’). When the Company’s continuing involvement takes the form of a written or purchased
option (or both) on the transferred asset, the extent of the Company’s continuing involvement is the
amount of the transferred asset that the Company may repurchase. However, in the case of a
written put option on an asset that is measured at fair value, the extent of the Company’s
continuing involvement is limited to the lower of the fair value of the transferred asset and the
option exercise price. When the Company’s continuing involvement takes the form of a cash-settled
option or similar provision on the transferred asset, the extent of the Company’s continuing
involvement is measured in the same way as that which results from non-cash settled options.

Modification of contractual cash flows

When the contractual cash flows of a financial asset are renegotiated or otherwise modified and the
renegotiation or modification does not result in the derecognition of that financial asset, the
Company recalculates the gross carrying amount of the financial asset as the present value of the
renegotiated or modified contractual cash flows discounted at the original effective interest method
(or credit-adjusted effective interest method for purchased or originated credit-impaired financial
assets) and recognizes a modification gain or loss in the parent company statement of income.

When the modification of a financial asset results in the derecognition of the existing financial asset
and the subsequent recognition of the modified financial asset, the modified asset is considered a
‘new’ financial asset. Accordingly, the date of the modification shall be treated as the date of initial
recognition of that financial asset when applying the impairment requirements to the modified
financial asset.

Financial liabilities
A financial liability (or a part of a financial liability) is derecognized when the obligation under the
liability is discharged, cancelled or has expired. Where an existing financial liability is replaced by
another from the same lender on substantially different terms, or the terms of an existing liability or
a part of it are substantially modified, such an exchange or modification is treated as a
derecognition of the original financial liability and the recognition of a new financial liability, and the
difference in the respective carrying amounts is recognized in the parent company statement of
income.

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Impairment of Financial Assets

The Company recognizes ECL for the following financial assets that are not measured at FVTPL:
• debt instruments that are measured at amortized cost and FVOCI;
• loan commitments; and
• financial guarantee contracts.

ECLs are measured in a way that reflects the following:

• an unbiased and probability-weighted amount that is determined by evaluating a range of
possible outcomes;
• the time value of money; and
• reasonable and supportable information that is available without undue cost or effort at the
balance sheet date about past events, current conditions and forecasts of future economic
conditions.

Financial assets migrate through the following three stages based on the change in credit quality
since initial recognition:

Stage 1: 12-month ECL

For credit exposures where there have not been significant increases in credit risk since initial
recognition and that are not credit-impaired upon origination, the portion of lifetime ECLs that
represent the ECLs that result from default events that are possible within the 12-months after the
balance sheet date are recognized.

Stage 2: Lifetime ECL - not credit-impaired

For credit exposures where there have been significant increases in credit risk since initial
recognition on an individual or collective basis but are not credit-impaired, lifetime ECLs
representing the ECLs that result from all possible default events over the expected life of the
financial asset are recognized.

Stage 3: Lifetime ECL - credit-impaired

Financial assets are credit-impaired when one or more events that have a detrimental impact on the
estimated future cash flows of those financial assets have occurred. For these credit exposures,
lifetime ECLs are recognized and interest revenue is calculated by applying the credit-adjusted
effective interest rate to the amortized cost of the financial asset.

A financial asset is considered to have low credit risk if:

• the financial instrument has a low risk of default
• the borrower has a strong capacity to meet its contractual cash flow obligations in the near term
• adverse changes in economic and business conditions in the longer term may, but will not
necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

The Company considers a debt investment security to have low credit risk when its credit risk rating
is equivalent to the globally understood definition of ‘investment grade’, or when the exposure is
less than 30 days past due.

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Determining the stage for impairment

At each balance sheet date, the Company assesses whether there has been a significant increase in
credit risk for financial assets since initial recognition by comparing the risk of default occurring over
the expected life between the balance sheet date and the date of initial recognition. The Company
considers reasonable and supportable information that is relevant and available without undue cost
or effort for this purpose. This includes quantitative and qualitative information and forward-
looking analysis.

The simplified approach, where changes in credit risk are not tracked and loss allowances are
measured at amounts equal to lifetime ECL, is applied to ‘Trade receivables’. The Company has
established a provision matrix for customer segments that is based on historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the economic
environment.

Offsetting Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the parent
company balance sheet if, and only if, there is a currently enforceable legal right to offset the
recognized amounts and there is an intention to settle on a net basis, or to realize the asset and
settle the liability simultaneously. This is not generally the case with master netting agreements
whereby the related assets and liabilities are presented gross in the parent company balance sheet.

Classification of Financial Instruments between Liability and Equity

A financial instrument is classified as liability if it provides for a contractual obligation to:
• deliver cash or another financial asset to another entity; or
• exchange financial assets or financial liabilities with another entity under conditions that are
potentially unfavorable to the Company; or
• satisfy the obligation other than by the exchange of a fixed amount of cash or another
financial asset for a fixed number of own equity shares.

If the Company does not have an unconditional right to avoid delivering cash or another financial
asset to settle its contractual obligation, the obligation meets the definition of a financial liability.

Financial instruments are classified as liabilities or equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or a
component that is a financial liability, are reported as income or expense. Distributions to holders
of financial instruments classified as equity are charged directly to equity net of any related income
tax benefits.

The components of issued financial instruments that contain both liability and equity elements are
accounted for separately, with the equity component being assigned the residual amount after
deducting from the instrument as a whole the amount separately determined as the fair value of the
liability component on the date of issue.

Investments in Subsidiaries, Associates and a Joint Venture

A subsidiary is an entity over which the Company has the power to govern the financial and
operating policies generally accompanying a shareholding of more than half of the voting rights.
The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Company controls another entity.

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An associate is an entity in which the Company has significant influence and which is neither a
subsidiary nor a joint venture. Significant influence is the power to participate in the financial and
operating policy decision of the investee, but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint venture. Joint control is the contractually
agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control are similar to those
necessary to determine control over subsidiaries.

Investments in subsidiaries, associates and a joint venture are carried at cost, less impairment in
value, in the parent company financial statements.

The Company recognizes income from the investments only to the extent that the Company
receives distributions or establishes a right to receive distributions from accumulated profits of the
subsidiaries and associates arising after the date of acquisition. Distributions received in excess of
such profits are regarded as a recovery of investment and are recognized as a reduction of the cost
of the investment.

Property and Equipment

Property and equipment are stated at cost, excluding the costs of day-to-day servicing, less
accumulated depreciation and accumulated impairment in value, if any. The initial cost of property
and equipment compromises its purchase price, including import duties, if any, nonrefundable taxes
and any directly attributable costs of bringing the asset to its working condition and location for its
intended use. Such cost includes the cost of replacing parts of such property and equipment when
that costs is incurred if the recognition criteria are met. Repairs and maintenance costs are
recognized in the parent company statement of income as incurred.

Depreciation is computed using the straight-line method over the useful lives of the assets as
follows:

Category Number of years

Transportation equipment 5
Office equipment 3
Communication equipment 3
Leasehold improvements 10

Leasehold improvements are amortized over the shorter of the lease terms and the lives of the
improvements.

An item of property and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the
asset) is included in the parent company statement of income in the year the asset is derecognized.

The carrying values of property and equipment are reviewed for impairment when events or
changes in circumstances indicate that the carrying values may not be recoverable.

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The assets’ residual values, useful lives and depreciation method are reviewed, and adjusted if
appropriate, at each financial year-end to ensure that the periods, residual values and method of
depreciation are consistent with the expected patter of economic benefit from the items of
property and equipment.

When each major inspection is performed, its cost is recognized in the carrying amount of the
property and equipment as a replacement if the recognition criteria are satisfied.

Fully depreciated assets are retained in the accounts until these are no longer in use. When assets
are retired or otherwise disposed of, both the cost and related accumulated depreciation and
amortization and any allowance for impairment losses, if any, are removed from the accounts, and
any resulting gain or loss is credited or charged to current operations.

Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired in a business combination is fair value as at the date of the acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated amortization
and any accumulated impairment losses. Internally generated intangible assets, excluding
capitalized development costs, are not capitalized and expenditure is reflected in the parent
company statement of income in the year in which the expenditure is incurred.

Computer software license

Computer software license is initially recognized at cost. Following initial recognition, the computer
software license cost is carried at cost less accumulated amortization and any accumulated
impairment in value, if any.

The computer software license is amortized on a straight-line basis over its estimated useful
economic life of three to five years and assessed for impairment whenever there is an indication
that the intangible asset may be impaired. The amortization commences when the computer
software license is available for use. The amortization period and the amortization method for the
license are reviewed at each financial year end. Changes in the estimated useful life is accounted for
by changing the amortization period or method, as appropriate, and treating them as changes in
accounting estimates. The amortization expense is recognized in the parent company statement of
income in the expense category consistent with the function of the computer software license.

Project development costs

Project development costs include power plant projects in the development phase which meet the
“identifiability” requirement under PAS 38, Intangible Assets, as they are separable and susceptible
to individual sale and are carried at acquisition cost. These assets are transferred to “Property and
equipment” when construction of an asset commences. During the period of development, the
asset is tested for impairment annually.

Research and Development Expenditure

The Company’s policy is to record research expenses in the parent company statement of income in
the period when they are incurred.

Development costs are recognized as an intangible asset on the parent company balance sheet if the
Company can identify them separately and show the technical viability of the asset, its intention and
capacity to use or sell it, and how it will generate probable future economic benefits.

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Following initial recognition of the development expenditure as an asset, the cost model is applied
requiring the asset to be carried at cost less any accumulated amortization and accumulated
impairment losses. Amortization of the asset begins when development is complete and the asset is
available for use. It is amortized over the period of expected future benefit. During the period of
development, the asset is tested for impairment annually.

Impairment of Nonfinancial Assets

Input VAT, project development costs, property and equipment and other noncurrent assets
Except for the project development costs, which are tested for impairment annually, the Company
assesses at each balance sheet date whether there is an indication that an asset may be impaired. If
any such indication exists, or when annual impairment testing for an asset is required, the Company
makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher
of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is
determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. Where the carrying amount of an asset
exceeds its recoverable amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. Impairment losses of continuing operations
are recognized in the parent company statement of income in those expense categories consistent
with the function of the impaired asset.

An assessment is made at each balance sheet date as to whether there is any indication that
previously recognized impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously recognized impairment loss is
reversed only if there has been a change in the estimates used to determine the asset’s recoverable
amount since the last impairment loss was recognized. If that is the case, the carrying amount of
the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying
amount that would have been determined, net of depreciation, had no impairment loss been
recognized for the asset in prior years. Such reversal is recognized in the parent company statement
of income unless the asset is carried at revalued amount, in which case the reversal is treated as a
revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its
remaining useful life.

Investments and advances

The Company performs impairment review on its investments and advances whenever an
impairment indicator exists. This requires an estimation of the value in use of the investees.
Estimating the value in use requires the Company to make an estimate of the future cash flows of
the investees and to use a suitable discount rate to calculate the present value of those future cash
flows. Impairment losses, if any, are recognized in the parent company statement of income.

Capital Stock and Additional Paid-in Capital

Capital stock is measured at par value for all shares issued. When the Company issues more than
one class of stock, a separate account is maintained for each class of stock and the number of shares
issued. Capital stock includes common stock and preferred stock.

When the shares are sold at premium, the difference between the proceeds and the par value is
credited to the “Additional paid-in capital” account. When shares are issued for a consideration

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other than cash, the proceeds are measured by the fair value of the consideration received. In case
the shares are issued to extinguish or settle the liability of the Company, the shares shall be
measured either at the fair value of the shares issued or fair value of the liability settled, whichever
is more reliably determinable.

Direct costs incurred related to equity issuance, such as underwriting, accounting and legal fees,
printing costs and taxes are debited to the “Additional paid-in capital” account. If additional paid-in
capital is not sufficient, the excess is charged against an equity reserve account.

Retained Earnings
The amount included in retained earnings includes accumulated earnings of the Company and
reduced by dividends on capital stock. Dividends on capital stock are recognized as a liability and
deducted from equity when they are approved by the BOD. Dividends for the year that are
approved after the financial balance sheet date are dealt with as an event after the financial balance
sheet date. Retained earnings may also include effect of changes in accounting policy as may be
required by the transition provisions of new and amended standards.

Revenue Recognition
Revenue from contracts with customers is recognized when control of the goods or services are
transferred to the customer at an amount that reflects the consideration to which the Company
expects to be entitled in exchange for those goods or services. The Company assesses its revenue
arrangements against specific criteria in order to determine if it is acting as a principal or an agent.

The following specific recognition criteria must also be met before revenue is recognized:

Dividend income
Dividend income is recognized when the Company’s right to receive payment is established.

Technical, management and service fees

Technical, management and service fees are recognized when the related services are rendered.

Interest income
Interest is recognized as it accrues taking into account the effective interest method.

Expenses
Expenses are decreases in economic benefits during the accounting period in the form of outflows
or decrease of assets or incurrence of liabilities that result in decreases in equity, other than those
relating to distributions to equity participants. Expenses are recognized when incurred.

Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if
the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.

Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for
short-term leases. The Company recognizes lease liabilities to make lease payments and right-of-
use assets representing the right to use the underlying assets.

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Right-of-use assets
It is the Company’s policy to classify right-of-use assets as part of property and equipment. The
Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial
direct costs incurred, and lease payments made at or before the commencement date less any lease
incentives received. Right-of-use assets only pertain to office spaces and are depreciated on a
straight-line basis over the shorter of the lease term of 5 to 10 years and the estimated useful lives
of the assets.

If ownership of the leased asset transfers to the Company at the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life
of the asset. The right-of-use assets are also subject to impairment.

Lease liabilities
At the commencement date of the lease, the Company recognizes lease liabilities measured at the
present value of lease payments to be made over the lease term. The lease payments include fixed
payments (including in substance fixed payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to be paid under residual value
guarantees. The lease payments also include the exercise price of a purchase option reasonably
certain to be exercised by the Company and payments of penalties for terminating the lease, if the
lease term reflects the Company exercising the option to terminate. Variable lease payments that
do not depend on an index or a rate are recognized as expenses (unless they are incurred to
produce inventories) in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Company uses its incremental borrowing rate
at the lease commencement date because the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease liabilities is increased to reflect
the accretion of interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a
change in the lease payments (e.g., changes to future payments resulting from a change in an index
or rate used to determine such lease payments) or a change in the assessment of an option to
purchase the underlying asset.

Short-term leases
The Company applies the short-term lease recognition exemption to its short-term leases of
conference rooms (i.e., those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). Lease payments on short-term leases
and leases of low value assets are recognized as expense on a straight-line basis over the lease term.

Pension benefits
The Company has defined benefit pension plans which require contributions to be made to
separately administered funds. The net defined benefit liability or asset is the aggregate of the
present value of the defined benefit obligation at the end of the reporting period reduced by the fair
value of plan assets (if any), adjusted for any effect of limiting a net defined benefit asset to the
asset ceiling. The asset ceiling is the present value of any economic benefits available in the form of
refunds from the plan or reductions in future contributions to the plan.

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The cost of providing benefits under the defined benefit plans is actuarially determined using the
projected unit credit method.

Defined benefit costs comprise the following:

• Service cost
• Net interest on the net defined benefit liability or asset
• Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on
non-routine settlements are recognized as expense in profit or loss. Past service costs are
recognized when plan amendment or curtailment occurs. These amounts are calculated periodically
by independent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the net
defined benefit liability or asset that arises from the passage of time which is determined by
applying the discount rate based on government bonds to the net defined benefit liability or asset.
Net interest on the net defined benefit liability or asset is recognized as expense or income in the
parent company statement of income.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the
effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized
immediately in other comprehensive income in the period in which they arise. Remeasurements are
not reclassified to parent company statement of income in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are not
available to the creditors of the Company, nor can they be paid directly to the Company. Fair value
of plan assets is based on market price information. When no market price is available, the fair
value of plan assets is estimated by discounting expected future cash flows using a discount rate
that reflects both the risk associated with the plan assets and the maturity or expected disposal date
of those assets (or, if they have no maturity, the expected period until the settlement of the related
obligations). If the fair value of the plan assets is higher than the present value of the defined
benefit obligation, the measurement of the resulting defined benefit asset is limited to the present
value of economic benefits available in the form of refunds from the plan or reductions in future
contributions to the plan.

The Company’s right to be reimbursed of some or all of the expenditure required to settle a defined
benefit obligation is recognized as a separate asset at fair value when and only when
reimbursement is virtually certain.

Borrowing Costs
Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or
production of a qualifying asset. To the extent that funds are borrowed specifically for the purpose
of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization on that asset
shall be determined as the actual borrowing costs incurred on that borrowing during the period less
any investment income on the temporary investment of those borrowings. To the extent that funds
are borrowed generally, the amount of borrowing costs eligible for capitalization shall be
determined by applying a capitalization rate to the expenditures on that asset. The capitalization
rate shall be the weighted average of the borrowing costs applicable to the borrowings of the
Company that are outstanding during the period, other than borrowings made specifically for the

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purpose of obtaining a qualifying asset. The amount of borrowing costs capitalized during a period
shall not exceed the amount of borrowing costs incurred during that period.

Taxes
Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted as of the
balance sheet date.

Current income tax relating to items recognized directly in equity is recognized in the parent
company statement of comprehensive income and not in the parent company statement of income.

Management periodically evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretation and establishes provisions where
appropriate.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the balance
sheet date between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences.

Deferred income tax assets are recognized for all deductible temporary differences, carryforward
benefits of unused net operating loss carryover (NOLCO) and excess minimum corporate income tax
(MCIT), to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences, and the carryforward benefits of unused NOLCO and excess MCIT
can be utilized in the future.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be available to
allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax
assets are reassessed at each balance sheet date and are recognized to the extent that it has
become probable that future taxable profit will allow the deferred income tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to
the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted as of the balance sheet date.

Income tax relating to items recognized directly in other comprehensive income is also recognized in
other comprehensive income and not in the parent company statement of income.

Value-added Tax (VAT)

Revenues, expenses, and assets are recognized net of the amount of VAT, if applicable.

When VAT from sales of goods and/or services (output VAT) exceeds VAT passed on from purchases
of goods or services (input VAT), the excess is recognized as payable in the parent company balance

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sheet. When VAT passed on from purchases of goods or services (input VAT) exceeds VAT from
sales of goods and/or services (output VAT), the excess is recognized as an asset in the parent
company balance sheet to the extent of the recoverable amount.

Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. Where the Company expects some or all of a provision to be reimbursed, for example
under an insurance contract, the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any provision is presented in the parent
company statement of income net of any reimbursement. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the
risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognized as a borrowing cost.

Contingencies
Contingent liabilities are not recognized in the parent company financial statements but are
disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.
Contingent assets are not recognized but are disclosed in the parent company financial statements
when an inflow of economic benefits is probable.

Events After the Reporting Period

Post year-end events that provide additional information about the Company’s financial position at
balance sheet date (adjusting events) are reflected in the parent company financial statements.
Post year-end events that are not adjusting events are disclosed when material.

Earnings Per Common Share

Basic earnings per common share are computed by dividing net income for the year by the weighted
average number of common shares issued and outstanding during the year, after retroactive
adjustments for any stock dividends declared and stock rights exercised during the year.

Diluted earnings per share amounts are calculated by dividing the net income for the year by the
weighted average number of common shares outstanding during the year plus the weighted
average number of common shares that would be issued for outstanding common stock
equivalents. The Company does not have dilutive common stock equivalents.

3. Significant Accounting Judgment, Estimates and Assumptions

The preparation of the Company’s parent company financial statements requires management to
make judgments, estimates and assumptions that affect the amounts reported in the parent
company financial statements and related notes. The judgment, estimates and assumptions used in
the parent company financial statements are based upon management’s evaluation of relevant facts
and circumstances as of the date of the Company’s parent company financial statements. Actual
results could differ from such estimates. Judgments, estimates and assumptions are continually
evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.

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The following items are those matters which the Company assess to have significant risk arising from
judgement and estimation uncertainty:

Judgments
In the process of applying the Company’s accounting policies, management has made judgments,
apart from those involving estimations which have the most significant effect on the amounts
recognized in the parent company financial statements.

Classification of financial instruments

The Company exercises judgment in classifying a financial instrument, or its component parts, on
initial recognition as either a financial asset, a financial liability or an equity instrument in
accordance with the substance of the contractual arrangement and the definition of a financial
asset, a financial liability or an equity instrument. The substance of a financial instrument, rather
than its legal form, governs its classification in the parent company balance sheet.

Contractual cash flows assessment

For each financial asset, the Company assesses the contractual terms to identify whether the
instrument is consistent with the concept of SPPI.

‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial
recognition and may change over the life of the financial asset (for example, if there are repayments
of principal or amortization of the premium/discount).

The most significant elements of interest within a lending arrangement are typically the
consideration for the time value of money and credit risk. To make the SPPI assessment, the
Company applies judgment and considers relevant factors such as the currency in which the
financial asset is denominated, and the period for which the interest rate is set.

In contrast, contractual terms that introduce a more than de minimis exposure to risks or volatility
in the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to
contractual cash flows that are solely payments of principal and interest on the amount outstanding.
In such cases, the financial asset is required to be measured at FVTPL.

Evaluation of business model in managing financial instruments

The Company determines its business model at the level that best reflects how it manages groups of
financial assets to achieve its business objective. The Company’s business model is not assessed on
an instrument-by-instrument basis, but at a higher level of aggregated portfolios and is based on
observable factors such as:
• How the performance of the business model and the financial assets held within that business
model are evaluated and reported to the entity's key management personnel;
• The risks that affect the performance of the business model (and the financial assets held within
that business model) and, in particular, the way those risks are managed; and
• The expected frequency, value and timing of sales are also important aspects of the Company’s
assessment.

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The business model assessment is based on reasonably expected scenarios without taking 'worst
case' or 'stress case’ scenarios into account. If cash flows after initial recognition are realized in a
way that is different from the Company’s original expectations, the Company does not change the
classification of the remaining financial assets held in that business model, but incorporates such
information when assessing newly originated or newly purchased financial assets going forward.

Identifying performance obligations

The Company identifies performance obligations by considering whether the promised goods or
services in the contract are distinct goods or services. A good or service is distinct when the
customer can benefit from the good or service on its own or together with other resources that are
readily available to the customer and the Company’s promise to transfer the good or service to the
customer is separately identifiable from the other promises in the contract.

The Company assesses performance obligations as a series of distinct goods and services that are
substantially the same and have the same pattern of transfer if i) each distinct good or services in
the series are transferred over time and ii) the same method of progress will be used (i.e., units of
delivery) to measure the entity’s progress towards complete satisfaction of the performance
obligation.

Revenue recognition
The Company recognizes revenue when it satisfies an identified performance obligation by
transferring a promised good or service to a customer. A good or service is considered to be
transferred when the customer obtains control. The Company determines, at contract inception,
whether it will transfer control of a promised good or service over time. If the Company does not
satisfy a performance obligation over time, the performance obligation is satisfied at a point in time.

The Company will continue to recognize revenue from rendering of services over time, since
customers simultaneously receives and consumes the benefits as the Company provides the
services.

Identifying methods for measuring progress of revenue recognized over time

The Company determines the appropriate method of measuring progress which is either through
the use of input or output methods. Input method recognizes revenue on the basis of the entity’s
efforts or inputs to the satisfaction of a performance obligation while output method recognizes
revenue on the basis of direct measurements of the value to the customer of the goods or services
transferred to date.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year, are described below.

Measurement of expected credit losses

ECLs are derived from unbiased and probability-weighted estimates of expected loss. Financial
assets that are not credit-impaired at the balance sheet date are measured as the present value of
all cash shortfalls over the expected life of the financial asset discounted by the effective interest
rate. The cash shortfall is the difference between the cash flows due to the Company in accordance
with the contract and the cash flows that the Company expects to receive.

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The Company leverages existing risk management indicators (e.g., internal credit risk classification
and restructuring triggers), credit risk rating changes and reasonable and supportable information
which allows the Company to identify whether the credit risk of financial assets has significantly
increased.

No allowance for expected credit losses was recognized in 2021 and 2020. Trade and other
receivables amounted to P =0.8 billion and P=1.3 billion as of December 31, 2021 and 2020,
respectively (see Note 5).

Inputs, assumptions and estimation techniques

The ECL is measured on either a 12-month or lifetime basis depending on whether a significant
increase in credit risk has occurred since initial recognition or whether an asset is considered to be
credit-impaired. Expected credit losses are the discounted product of the Probability of Default
(PD), Loss Given Default (LGD), and Exposure at Default (EAD), defined as follows:

• PD

The PD represents the likelihood of a borrower defaulting on its financial obligation, either over
the next 12 months, or over the remaining life of the obligation. PD estimates are estimates at a
certain date, which are calculated based on statistical rating models, and assessed using rating
tools tailored to the various categories of counterparties and exposures. If a counterparty or
exposure migrates between rating classes, then this will lead to a change in the estimate of the
associated PD. PDs are estimated considering the contractual maturities of exposures. The 12-
months and lifetime PD represent the expected point-in-time probability of a default over the
next 12 months and remaining lifetime of the financial instrument, respectively, based on
conditions existing at the balance sheet date and future economic conditions that affect credit
risk.

• LGD

Loss Given Default represents the Company’s expectation of the extent of loss on a defaulted
exposure, taking into account the mitigating effect of collateral, its expected value when
realized and the time value of money. LGD varies by type of counterparty, type of seniority of
claim and availability of collateral or other credit support. LGD is expressed as a percentage loss
per unit of EAD.

• EAD

EAD is based on the amounts the Company expects to be owed at the time of default, over the
next 12 months or over the remaining lifetime.

The ECL is determined by projecting the PD, LGD, and EAD for each future month and for each
individual exposure or collective segment. These three components are multiplied together and
adjusted for the likelihood of survival (i.e., the exposure has not prepaid or defaulted in an earlier
month). This effectively calculates an ECL for each future month, which is then discounted back to
the balance sheet date and summed. The discount rate used in the ECL calculation is the original
effective interest rate or an approximation thereof.

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The lifetime PD is developed by applying a maturity profile to the current 12-month PD. The
maturity profile looks at how defaults develop on a portfolio from the point of initial recognition
throughout the lifetime of the loans. The maturity profile is based on historical observed data and is
assumed to be the same across all assets within a portfolio and credit grade band. This is supported
by historical analysis. The 12-month and lifetime EADs are determined based on the expected
payment profile, which varies by counterparty.

The 12-month and lifetime LGDs are determined based on the factors which impact the recoveries
made post default. LGDs are typically set at product level due to the limited differentiation in
recoveries achieved across different borrowers. These LGD’s are influenced by collection strategies.

The assumptions underlying the ECL calculation such as how the maturity profile of the PDs change
are monitored and reviewed on a quarterly basis.

Simplified approach for trade receivables

The Company uses a provision matrix to calculate ECLs for trade receivables. The provision rates are
based on days past due for various customer segments that have similar loss patterns.

The provision matrix is initially based on the Company’s historical observed default rates. The
Company will calibrate the matrix to adjust the historical credit loss experience with forward-looking
information. For instance, if forecast economic conditions (i.e., gross domestic product) are
expected to deteriorate over the next year which can lead to an increased number of defaults in the
industrial segment, the historical default rates are adjusted. At every balance sheet date, the
historical observed default rates are updated and changes in the forward-looking estimates are
analyzed.

The assessment of the correlation between historical observed default rates, forecast economic
conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in
circumstances and of forecast economic conditions. The Company’s historical credit loss experience
and forecast of economic conditions may also not be representative of customer’s actual default in
the future.

There have been no significant changes in estimation techniques or significant assumptions made
during the reporting period.

Incorporation of forward-looking information

The Company incorporates forward-looking information into both its assessment of whether the
credit risk of an instrument has increased significantly since its initial recognition and its
measurement of ECL.

The Company has identified and documented key drivers of credit risk and credit losses of each
portfolio of financial instruments and, using an analysis of historical data, has estimated
relationships between macro-economic variables and credit risk and credit losses.

Predicted relationship between the key indicators and default and loss rates on various portfolios of
financial assets have been developed based on analyzing historical data over the past 5 years. The
methodologies and assumptions including any forecasts of future economic conditions are reviewed
regularly.

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The Company has not identified any uncertain event that it has assessed to be relevant to the risk of
default occurring but where it is not able to estimate the impact on ECL due to lack of reasonable
and supportable information.

Estimating allowance for impairment of losses on investment in and advances to subsidiaries,

associates and a joint venture
Investments in and advances to subsidiaries, associates and a joint venture are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable or impairment recovery for any significant change in the expected historical or
projected future operating results of the investees. No impairment loss recognized in 2021 and
2020. The aggregate carrying amount of the investments in and advances to subsidiaries, associates
and a joint venture amounted to P=118.3 billion and P=120.1 billion as of December 31, 2021 and
2020, respectively (see Note 6).

Estimating impairment of project development costs

Impairment is determined for development costs by assessing the recoverable amount of each
projects. Where the recoverable amount of the project is less than the carrying amount, an
impairment loss is recognized. When calculating recoverable amount, the future cash flow is
discounted by a discount factor that takes into consideration risk free interest and the risk
associated with the specific project.

The Company has written-off project development costs amounting to P =298.0 million and
=7.1 million in 2021 and 2020, respectively. The carrying amount of the Company’s project
P
development costs amounted to P =449.0 million and P
=702.7 million as of December 31, 2021 and
2020, respectively (see Note 9).

Estimating useful lives of property and equipment

The Company estimates the useful lives of property and equipment based on the period over which
assets are expected to be available for use. The estimated useful lives of property and equipment
are reviewed periodically and are updated if expectations differ from previous estimates due to
physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of
the assets. In addition, the estimation of the useful lives of property and equipment is based on
collective assessment of internal technical evaluation and experience with similar assets. It is
possible, however, that future results of operations could be materially affected by changes in
estimates brought about by changes in the factors and circumstances mentioned above. As of
December 31, 2021 and 2020, the net book values of property and equipment amounted to
=85.6 million and P
P =103.0 million, respectively (see Note 7).

Estimating residual value of property and equipment

The residual value of the Company’s property and equipment is estimated based on the amount
that would be obtained from disposal of the asset, after deducting estimated costs of disposal, if the
asset is already of the age and in the condition expected at the end of its useful life. Such estimation
is based on the prevailing price of property and equipment of similar age and condition. The
estimated residual value of each asset is reviewed periodically and updated if expectations differ
from previous estimates due to changes in the prevailing price of a property and equipment of
similar age and condition. As of December 31, 2021 and 2020, the aggregate net book values of
property and equipment amounted to P =85.6 million and P
=103.0 million, respectively (see Note 7).

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Assessing impairment of nonfinancial assets

The Company assesses whether there are any indicators of impairment for nonfinancial assets at
each balance sheet date. These nonfinancial assets (property and equipment, input VAT and
noncurrent assets) are tested for impairment when there are indicators that the carrying amounts
may not be recoverable.

Determining the recoverable amount of the assets, which require the determination of future cash
flows expected to be generated from the continued use and ultimate disposition of such assets,
requires the Company to make estimates and assumptions that can materially affect its financial
statements. Future events could cause the Company to conclude that these assets are impaired.
Any resulting impairment loss could have a material adverse impact on the financial condition and
results of operations.

As of December 31, 2021, the carrying values of property and equipment, input VAT and other
noncurrent assets amounted to P =85.6 million, P
=7.8 million, and P=1.0 billion, respectively. As of
December 31, 2020, the carrying values of property and equipment, input VAT and other noncurrent
assets amounted to P=103.0 million, P
=7.0 million, and P
=1.1 billion, respectively (see Notes 7 and 8).

Estimating the incremental borrowing rate

The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its
incremental borrowing rate (IBR) to measure its lease liability. The IBR is the rate of interest that
the Company would have to pay to borrow over a similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic
environment. The IBR therefore reflects what the Company ‘would have to pay’, which requires
estimation when no observable rates are available or when they need to be adjusted to reflect the
terms and conditions of the lease. The Company estimates the IBR using observable inputs (such as
market interest rates) when available and is required to make certain entity-specific estimates. As
of December 31, 2021 and 2020, lease liability amounted to P =29.4 million and P=51.4 million,
respectively (see Note 19).

Pension benefits
The cost of defined benefit pension plans, as well as the present value of the pension obligation, are
determined using actuarial valuations. The actuarial valuation involves making various assumptions.
These include the determination of the discount rates, future salary increases, mortality rates and
future pension increases. Due to the complexity of the valuation, the underlying assumptions and
its long-term nature, defined benefit obligations are highly sensitive to changes in these
assumptions. All assumptions are reviewed at each balance sheet date.

In determining the appropriate discount rate, management considers the interest rates of
government bonds that are denominated in the currency in which the benefits will be paid, with
extrapolated maturities corresponding to the expected duration of the defined benefit obligation.

The mortality rate is based on publicly available mortality tables for the specific country and is
modified accordingly with estimates of mortality improvements. Future salary increases and
pension increases are based on expected future inflation rates for the specific country.

Further details about the assumptions used are provided in Note 14.

*SGVFS162523*
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Net benefit expense amounted to P =53.2 million in 2021, P

=54.5 million in 2020 and P=29.8 million in
2019. Net pension liability amounted to P=18.8 million and P
=33.1 million as of December 31, 2021
and 2020, respectively (see Note 14).

Recognition of deferred income tax assets

The Company reviews the carrying amounts of deferred income tax assets at each balance sheet
date and reduces deferred income tax assets to the extent that it is no longer probable that
sufficient income will be available to allow all or part of the deferred income tax assets to be
utilized. Deferred income tax asset amounted to P =21.4 million and P=313.2 million as of
December 31, 2021 and 2020, respectively (see Note 15).

No deferred income tax assets were recognized for deductible temporary difference and
carryforward benefit from unused NOLCO and excess MCIT as disclosed in Note 15.

Legal contingencies
The estimate of probable costs for the resolution of possible claims has been developed in
consultation with outside counsels handling the Company’s defense in these matters and is based
upon an analysis of potential results. No provision for probable losses arising from legal
contingencies was recognized in the parent company financial statements for the years ended
December 31, 2021 and 2020.

4. Cash and Cash Equivalents

2021 2020
Cash on hand and in banks =P303,532,539 =P569,409,822
Short-term deposits 18,067,889,688 7,751,426,891
=18,371,422,227
P =8,320,836,713
P

Cash in banks earn interest at floating rates based on daily bank deposit rates. Short-term deposits
are made for varying periods depending on the immediate cash requirements of the Company and
earn interest at the respective short-term deposits rates.

Interest income earned from cash in banks and short-term deposits amounted to P
=98.2 million,
=106.6 million and P=163.4 million in 2021, 2020 and 2019, respectively.
P

5. Trade and Other Receivables

2021 2020
Trade receivables
Related parties (Note 16) =P9,940,769 =586,147,450
P
Others 88,395,183 26,864,936
Dividends (Note 16) 698,732,939 645,719,866
Interest 28,731,132 12,424,360
Others 6,366,815 6,226,467
=832,166,838
P =1,277,383,079
P

Trade receivables are noninterest-bearing and are generally on 30 days’ term.

*SGVFS162523*
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For terms and conditions relating to related party receivables, refer to Note 16.

6. Investments and Advances

The details of the Company’s investments and advances follow:

2021 2020
Investments in Subsidiaries
Therma Power, Inc. (TPI) =P30,116,058,873 =30,116,058,873
P
Aboitiz Renewables, Inc. (ARI) 25,172,988,814 25,172,988,814
Therma Visayas, Inc. (TVI) 7,118,681,570 7,118,681,570
Hedcor Bukidnon, Inc. (Hedcor Bukidnon) 2,997,000,000 2,997,000,000
Hedcor Sabangan, Inc. (Hedcor Sabangan) 1,732,643,142 1,732,643,142
Lima Enerzone Corporation (LEZ) 1,329,696,667 1,329,696,667
Hedcor, Inc. (HI) 1,237,204,309 1,237,204,309
Therma South, Inc. (Therma South) 877,892,679 877,892,679
Therma Mobile, Inc. (Therma Mobile) 742,400,000 742,400,000
Davao Light & Power Co., Inc. (DLPC) 738,472,506 738,472,506
Visayan Electric Co., Inc. (VECO) 665,438,202 665,438,202
Hedcor Tudaya, Inc. (HTI) 656,250,000 656,250,000
Mactan Enerzone Corporation (MEZC) 609,532,287 609,532,287
Balamban Enerzone Corporation (BEZC) 444,869,161 444,869,161
Subic Enerzone Corporation (SEZC) 227,000,000 227,000,000
Cotabato Light & Power Co. (CLPC) 214,047,443 214,047,443
AboitizPower International Pte. Ltd. (AP Int) 171,404,666 171,404,666
Retensol, Inc. (RI) 135,116,116 135,116,116
Malvar Enerzone Corporation (Malvez) 110,500,000 110,500,000
East Asia Utilities Corporation (EAUC) 100,914,275 100,914,275
AP Renewable Energy Corporation (APREC) 27,382,759 27,382,759
Aboitiz Energy Solutions, Inc. (AESI) 21,000,000 21,000,000
Cebu Private Power Corporation (CPPC) 17,806,608 17,806,608
Prism Energy, Inc. (PEI) 12,648,600 12,648,600
AdventEnergy, Inc. (AI) 812,500 812,500
75,477,761,177 75,477,761,177
Investments in Associates and a Joint Venture
AA Thermal, Inc. (ATI) 31,822,827,705 31,643,684,239
STEAG State Power, Inc. (STEAG ) 4,400,611,465 4,400,611,465
Hijos de F. Escaño, Inc. (Hijos) 873,491,034 873,491,034
Pampanga Energy Ventures, Inc. (PEVI) 209,465,106 209,465,106
San Fernando Electric Light & Power Co., Inc.
(SFELAPCO) 180,863,801 180,863,801

(Forward)

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2021 2020
AEV Aviation, Inc. (AAI) =142,583,000
P =156,996,000
P
Western Mindanao Power Corporation (WMPC) 79,099,377 79,099,377
Southern Philippines Power Corporation (SPPC) 45,776,067 45,776,067
Mazzaraty Energy Corporation (MEC) 2,243,418 —
37,756,960,973 37,589,987,089
Less allowance for impairment loss 1,071,358,480 1,071,358,480
112,163,363,670 111,996,389,786
Advances 6,099,430,961 8,099,991,818
=118,262,794,631 =P120,096,381,604
P

Investment in ATI
The Company subscribed additional RPS amounting to USD 3.7 million (P
=179.1 million) and
USD 11.2 million (P
=560.7 million) in 2021 and 2020, respectively.

Investment in AAI
AAI redeemed shares attributable to the Company at 14,413 RPS and for P =14.4 million and 6,939
RPS and for P
=6.9 million at P
=1,000 per share in 2021 and 2020, respectively.

Investment in MEC
In 2021, the Company made capital contributions to MEC amounting to P=2.2 million.

Investment in Malvez
In 2020, the Company subscribed additional 40.1 million Redeemable Preferred Shares (RPS) for
=40.1 million.
P

Investment in HI
In 2020, the Company subscribed additional 262.3 million RPS for P
=262.3 million.

Investment in RI
In 2020, the Company subscribed additional 116.1 thousand RPS for P
=116.1 thousand.

Investment in APREC
In 2020, the Company subscribed additional 2.4 million RPS for P=2.4 million.

Investment in AP Int
In 2020, the Company converted the advances to AP Int to equity in the form RPS amounting to
=50.7 million.
P

Investment in Hijos
In 2020, the Company converted the advances to Hijos to equity in the form of common and
redeemable preferred shares amounting to P
=15.4 million.

*SGVFS162523*
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Advances
These advances include advances to subsidiaries that will be applied against future subscriptions of
the Company to the shares of stock of the subsidiaries.

In 2021, the Company received partial settlement from TPI and other advances amounting to
=2.0 billion and P
P =0.6 million, respectively. In 2020, the Company received partial settlement from
TPI and TSI’s advances amounting to P =1.2 billion and P
=212.4 million, respectively.

The Company’s subsidiaries, all incorporated in the Philippines except for AP Int which was
incorporated in Singapore and the corresponding percentage equity ownership are as follows:

2021 2020
Name of Company Nature of Business Direct Indirect Direct Indirect
TPI Holding company 100 % — 100 % —
ARI Holding company 100 % — 100 % —
TVI Power generation — 80 % — 80 %
Hedcor Bukidnon Power generation — 100 % — 100 %
Hedcor Sabangan Power generation — 100 % — 100 %
LEZ Power distribution 100 % — 100 % —
HI Power generation — 100 % — 100 %
Therma South Power generation — 100 % — 100 %
Therma Mobile Power generation — 100 % — 100 %
DLPC Power distribution 100 % — 100 % —
VECO Power distribution 55 % — 55 % —
HTI Power generation — 100 % — 100 %
MEZC Power distribution 100 % — 100 % —
BEZC Power distribution 100 % — 100 % —
SEZC Power distribution 65 % 35 % 65 % 35 %
CLPC Power distribution 100 % — 100 % —
RI* Power generation —% 100 % — 100 %
EAUC Power generation 50 % 50 % 50 % 50 %
Malvez* Power distribution 100 % — 100 % —
AP Int Holding company 100 % — 100 % —
APREC* Power generation —% 100 % — 100 %
AESI Retail electricity supplier 100 % — 100 % —
CPPC Power generation 60 % — 60 % —
PEI Retail electricity supplier 60 % — 60 % —
AI Retail electricity supplier 100 % — 100 % —

* No commercial operations as of December 31, 2021 and 2020

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The percentage of the Company’s ownership in associates and a joint venture is as follows:

Percentage of Ownership
Name of Company Nature of Business 2021 2020
AAI Service 49 % 49 %
ATI (Joint venture) Holding company 49 % 49 %
Hijos Holding company 47 % 47 %
MEC Retail electricity supplier 45 % —%
PEVI* Holding company 43 % 43 %
STEAG Power generation 34 % 34 %
SFELAPCO* Power distribution 20 % 20 %
SPPC Power generation 20 % 20 %
WMPC Power generation 20 % 20 %
*PEVI has direct ownership in SFELAPCO of 54.83% while the Company’s direct ownership in SFELAPCO is 20.29%
resulting to the Company’s effective ownership in SFELAPCO of 43.78%.

7. Property and Equipment

December 31, 2021

Right-of-use
Transportation Office Communication Leasehold asset -
Equipment Equipment Equipment Improvements Office Space Total

Cost:

Balances at beginning of year = 91,003,933

P = 57,379,403
P = 816,915
P = 40,811,095
P = 65,824,334
P = 255,835,680
P

Additions 23,861,802 6,935,109 — — — 30,796,911

Disposals (14,242,232) (1,809,416) — — — (16,051,648)

Balances at end of year 100,623,503 62,505,096 816,915 40,811,095 65,824,334 270,580,943

Accumulated Depreciation and Amortization:

Balances at beginning of year 54,913,109 44,446,127 762,827 24,608,778 28,060,020 152,790,861

Depreciation and
amortization 14,100,692 7,563,210 21,635 3,984,556 16,569,335 42,239,428

Disposals (8,790,089) (1,258,262) — — — (10,048,351)

Balances at end of year 60,223,712 50,751,075 784,462 28,593,334 44,629,355 184,981,938

Net Book Values = 40,399,791

P = 11,754,021
P = 32,453
P = 12,217,761
P = 21,194,979
P = 85,599,005
P

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December 31, 2020

Right-of-use
Transportation Office Communication Leasehold asset -
Equipment Equipment Equipment Improvements Office Space Total

Cost:

Balances at beginning of year =82,586,235

P =47,474,243
P =752,009
P =39,601,265
P =46,702,778
P =217,116,530
P

Additions 9,521,245 9,963,375 64,906 1,209,830 19,121,556 39,880,912

Disposals (1,103,547) (58,215) — — — (1,161,762)

Balances at end of year 91,003,933 57,379,403 816,915 40,811,095 65,824,334 255,835,680

Accumulated Depreciation and Amortization:

Balances at beginning of year 41,417,997 37,818,494 752,009 20,612,633 11,490,685 112,091,818

Depreciation and
amortization 14,546,720 6,685,848 10,818 3,996,145 16,569,335 41,808,866

Disposals (1,051,608) (58,215) — — — (1,109,823)

Balances at end of year 54,913,109 44,446,127 762,827 24,608,778 28,060,020 152,790,861

Net Book Values =36,090,824

P =12,933,276
P =54,088
P =16,202,317
P =37,764,314
P =103,044,819
P

The Company recognized loss on disposal of property and equipment amounting to P =0.9 million in
2021 and recognized gain on disposal amounting to P=4.0 million in 2020. There are no restrictions
on the title and no property and equipment are pledged as security for liabilities.

Fully depreciated property and equipment with cost amounting to P =75.7 million and =P71.5 million as
of December 31, 2021 and 2020, respectively, are still carried in the books of the Company and still
in use.

8. Other Noncurrent Assets

2021 2020
Prepaid tax =991,803,238
P =1,025,016,246
P
Computer software licenses 27,155,473 30,452,405
Recoverable deposits 5,640,494 5,852,771
=1,024,599,205
P =1,061,321,422
P

In 2021, the Company received a tax refund amounting to ₱129.8 million.

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The rollforward analysis of computer software licenses is presented below:

2021 2020
Cost:
Balances at beginning of year =43,825,070
P =21,227,530
P
Additions 2,576,154 22,597,540
Balances at end of year 46,401,224 43,825,070
Accumulated amortization:
Balances at beginning of year 13,372,665 10,637,601
Amortization for the year 5,873,086 2,735,064
Balances at end of year 19,245,751 13,372,665
Net book values =27,155,473
P =30,452,405
P

9. Project Development Costs

2021 2020
Balances at beginning of year =702,671,150
P =623,339,367
P
Additions 44,355,693 86,418,415
Write-offs (298,031,413) (7,086,632)
Balances at end of year =448,995,430
P =702,671,150
P

Project development costs consist of rights, titles and interests for various power plant development
projects.

10. Trade and other payables

2021 2020
Trade payables =P87,492,752 =P13,196,121
Accrued interest (see Note 11) 490,480,539 395,121,338
Output VAT 84,875,522 111,204,790
Accrued taxes and fees 55,638,164 92,119,057
Nontrade payables 14,634,281 25,499,920
Others (see Note 16) 1,777,345 1,536,864
=734,898,603
P =638,678,090
P

Trade payables are noninterest-bearing and generally on 30-day term. Accrued taxes and fees
represent taxes withheld on compensation, benefits, interests and other fees.

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11. Long-term Debts

Long-Term Debts

Interest Rate 2021 2020

Financial and non-financial
institutions - unsecured
2014 7-year retail bonds 5.21% =–
P =6,600,000,000
P
2014 12-year retail bonds 6.10% – 3,400,000,000
2017 10-year retail bonds 5.34% 3,000,000,000 3,000,000,000
2018 5.25-year retail bonds 7.51% 7,700,000,000 7,700,000,000
2018 10-year retail bonds 8.51% 2,500,000,000 2,500,000,000
2019 5-year long-term loan LIBOR + 1.20% 2,804,945,000 14,406,900,000
2019 7-year retail bonds 5.28% 7,250,000,000 7,250,000,000
2019 7-year long-term loan 4.33% - 5.28% 4,900,000,000 4,950,000,000
2020 2-year retail bonds 3.13% 9,000,000,000 9,000,000,000
2020 5-year retail bonds 3.94% 550,000,000 550,000,000
2021 7-year retail notes 4.00% 6,000,000,000 –
2021 5-year retail bonds 3.82% 8,000,000,000 –
2021 4-year retail bonds 4.00% 4,800,000,000 –
2021 7-year retail bonds 5.03% 7,200,000,000 –
63,704,945,000 59,356,900,000
Less deferred financing costs 515,787,545 546,817,797
63,189,157,455 58,810,082,203
Less current portion - net of
deferred financing costs 9,012,855,045 6,637,206,289
=54,176,302,410
P =52,172,875,914
P
* London Interbank Offered Rate (LIBOR)

Retail Bonds - =P12.0 billion

In December 2021, the Company issued a total of =P12.0 billion bonds, broken down into a
=4.8 billion 4-year bond due 2025 at a fixed rate equivalent to 4% p.a. and a P
P =7.2 billion 7-year bond
due 2028 at a fixed rate equivalent to 5.03% p.a. The bonds have been rated PRS Aaa by
PhilRatings.

Long-term Loan - P =6.0 billion

In July 2021, the Company availed P
=6.00 billion 5-year fixed-rate notes from the BDO Unibank, Inc.
due 2026 at an annual fixed rate equivalent to 4%.

Retail Bonds - =P8.0 billion

In March 2021, the Company issued another P =8.00 billion 5-year bond due 2026 at an annual fixed
rate equivalent to 3.82% as part of the first tranche of its P
=30.00 billion debt securities program.
The bonds have been rated PRS Aaa by PhilRatings.

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Retail Bonds - =P9.6 billion

In July 2020, the Company issued the fourth and last tranche of its 30 billion debt securities
program, equivalent to P =9.6 billion in July (the “Series E and F Bonds”). The Fixed Rate “Series E and
F Bonds” has an interest rate of 3.125% and 3.935% per annum (p.a.) maturing in 2022 and 2025,
respectively. The bonds have been rated PRS Aaa by PhilRatings.

Under the bond trust agreements, the Company shall not permit its debt-to-equity ratio to exceed
3:1 calculated based on the year-end debt and consolidated equity. The Company is in compliance
with the debt covenants as of December 31, 2021.

Long-term Loan - P=5.0 billion

In November 2019, the Company obtained a P =5.0 billion 7-year long term loan from the BDO
Unibank, Inc. at a fixed rate of 5.28% p.a.

In 2020, the Company amend the "Mode of Payment" for the Principal from bullet payment to
partial payments equal to 1 percent (%) of total principal amount payable annually starting
November 2020 and the remaining 94 percent (%) upon maturity.

On July 13, 2021, the Company reached a rate reduction agreement to amend the interest rates of
the loan from fixed rate loan of 5.28% to the sum of a benchmark rate and a spread of 0.90%,
divided by an applicable factor and 4.125% per annum, whichever is higher.

Under the facility agreement, the Company shall not incur any obligation with a maturity of more
than 1 year, if on the date of such borrowing, the net debt to consolidated equity ratio will exceed
3:1. The Company is in compliance with the debt covenants as of December 31, 2021.

Retail Bonds - =P7.3 billion

In October 2019, the Company issued =P7.3 billion 7-year bond due 2026 at a fixed rate of 5.28% p.a.
The bonds have been rated PRS Aaa by PhilRatings.

Dollar Loan - $300 million

On April 2019, the Company executed and availed a US$300,000,000 syndicated bridge loan facility
loan agreement with DBS Bank Ltd., Mizuho Bank, Ltd., MUFG Bank, Ltd. and Standard Chartered
Bank as lead arrangers and bookrunners to finance the AA Thermal, Inc. acquisition. The loan bears
a floating interest based on credit spread over applicable LIBOR plus 1.2% margin. The loan will
mature on the 5th anniversary of the first utilization date.

In April and July 2021, the Company prepaid a total of $245.0 million of the $300.0 million
syndicated bridge loan facility availed in 2019 to finance the AA Thermal, Inc. acquisition. This loan
is due in 2024.

The Company recognized a loss on extinguishment of the pre-terminated loans amounted to

=447.5 million included as part of the “Interest expense and other financing costs” in the parent
P
company statement of income for the year ended December 31, 2021.

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Under the facility agreement, the Company shall ensure that the net consolidated debt to net
consolidated equity ratio is not more than 3:1 at all times and the leverage ratio is not more than
5:50:1 at all times. The Company is in compliance with the debt covenants as of December 31,
2021.

Retail Bonds - =P10.2 billion

In October 2018, the Company issued a total of P =10.2 billion bonds, broken down into a
=7.7 billion 5.25-year bond due 2024 at a fixed rate equivalent to 7.51% p.a. and a P
P =2.5 billion 10-
year bond due 2028 at a fixed rate equivalent to 8.51% p.a. The bonds have been rated PRS Aaa by
PhilRatings.

Retail Bonds - =P3.0 billion

In July 2017, the Company issued P
=3.0 billion 10-year bond due 2027 at an annual fixed rate of
5.34% p.a. The bonds have been rated PRS Aaa by PhilRatings.

Retail Bonds - =P10.0 billion

In September 2014, the Company issued a total of P =10.0 billion bonds, broken down into a
=6.6 billion 7-year bond due 2021 at a fixed rate equivalent to 5.21% p.a. and a P
P =3.4 billion 12-year
bond due 2026 at a fixed rate equivalent to 6.10% p.a. The bonds have been rated PRS Aaa by
PhilRatings.

The principal amount of these bonds shall be payable on a lump sum basis on the respective
maturity date at its face value. These bonds may be redeemed in advance by the Company based
on stipulated early redemption option dates and on agreed early redemption price.

In September 2021, the Company settled its 2014 Series 'B' Bonds by prepaying =P3.4 billion twelve-
year bond maturing in 2026 and paying as scheduled its P=6.6 billion seven-year bond.

Under the bond trust agreements, the Company shall not permit its debt-to-equity ratio to exceed
3:1 calculated based on the year-end debt and consolidated equity. The Company is in compliance
with the debt covenants as of December 31, 2021.

Unamortized deferred financing cost reduced the carrying amount of long-term debt by
=515.8 million and P
P =546.8 million as of December 31, 2021 and 2020, respectively.

Total interest expense recognized on long-term debts amounted to P=2.8 billion, P=2.7 billion and
=2.4 billion in 2021, 2020 and 2019, respectively.
P

Bank Loans
In 2020, the Company obtained unsecured bank loans from financial institutions with a total
principal amount of P=8.6 billion at an annual interest rate ranging from 3.25% to 5.20% for working
capital purposes. These loans are covered by the respective borrower's existing credit lines with the
banks and are not subject to any significant covenants and warranties. As of December 31, 2020,
the loans have been fully paid.

In 2020, interest expense on bank loans amounted to P

=124.7 million.

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12. Equity and Earnings per Common Share

a. Paid-in Capital

2021 2020
Capital Stock:
Authorized - =P1 par value:
Common shares - 16,000,000,000 shares
Preferred shares - 1,000,000,000 shares
Issued:
Common shares - 7,358,604,307 shares =P7,358,604,307 P=7,358,604,307
Additional Paid-in Capital 12,588,894,332 12,588,894,332
=19,947,498,639 =P19,947,498,639
P

On May 25, 2007, the Company listed with the Philippine Stocks Exchange its 7,187,664,000
common shares with a par value of P =1.00 to cover the initial public offering (IPO) of
1,787,664,000 common shares at an issue price of P=5.80 per share. On March 17, 2008, the
Company listed an additional 170,940,307 common shares, which it issued pursuant to a share
swap agreement at the IPO price of P =5.80 per share. The total proceeds from the issuance of
new shares amounted to P =10.37 billion. The Company incurred transaction costs incidental to
the initial public offering amounting to P=412.4 million, which is charged against “Additional paid-
in capital” in the parent company balance sheet.

As of December 31, 2021, 2020 and 2019, the Company has 594, 598 and 631 shareholders,
respectively.

Preferred shares are non-voting, non-participating, non-convertible, redeemable, cumulative,

and may be issued from time to time by the BOD in one or more series. The BOD is authorized
to issue from time to time before issuance thereof, the number of shares in each series, and all
the designations, relative rights, preferences, privileges and limitations of the shares of each
series. Preferred shares redeemed by the Company may be reissued. Holders thereof are
entitled to receive dividends payable out of the unrestricted retained earnings of the Company
at a rate based on the offer price that is either fixed or floating from the date of the issuance to
final redemption. In either case, the rate of dividend, whether fixed or floating, shall be
referenced, or be a discount or premium, to market-determined benchmark as the BOD may
determine at the time of issuance with due notice to the SEC.

In the event of any liquidation or dissolution or winding up of the Company, the holders of the
preferred stock shall be entitled to be paid in full the offer price of their shares before any
payment in liquidation is made upon the common stock.

There are no preferred shares issued and outstanding as of December 31, 2021 and 2020.

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b. Retained Earnings

As of December 31, 2020, the Company has appropriated retained earnings amounting to
P=33.7 billion. This appropriation pertains to the project development and construction of power
plants that was approved on March 7, 2019, November 24, 2016 and November 27, 2014,
amounting P =11.9 billion, P
=13.2 billion and ₱8.6 billion, respectively.

On March 5, 2021, the BOD approved the reversal of a total of ₱13.6 billion retained earnings
appropriation for the following:
• set up in 2014 for the P =2.6 billion equity requirements of the 68 MW Manolo Fortich
Hydropower and for the P =6.0 billion of the 400 MW Pagbilao Coal Power Plant; and
• set up in 2016 for the P =5.0 billion equity requirements of RP Energy.

As of December 31, 2021, total appropriated retained earnings amounted to P

=20.1 billion.

On March 7, 2019, the BOD approved the declaration of regular cash dividends of P=1.47 per
share (P
=10.8 billion) to all stockholders of record as of March 21, 2019. These dividends were
paid on April 5, 2019.

On March 6, 2020, the BOD approved the declaration of regular cash dividends of P=1.18 per
share (P
=8.7 billion) to all stockholders of record as of March 20, 2020. These dividends were
paid on April 3, 2020.

On March 5, 2021, the BOD approved the declaration of regular cash dividends of P=0.85 per
share (P
=6.3 billion) were paid to all stockholders of record as of March 19, 2021. The cash
dividends are payable on March 31, 2021.

To comply with the requirements of Section 43 of the Corporation Code, on March 4, 2022, the
BOD approved the declaration of regular cash dividends of P=1.45 per share (P
=10.7 billion) to all
stockholders of record as of March 18, 2022. The cash dividends are payable on March 30,
2022.

c. Earnings per Common Share

Basic and diluted earnings per common share amounts were computed as follows:

2021 2020 2019

a. Net income =9,213,076,110
P =4,193,432,512 P
P =12,304,362,581
b. Weighted average number
of common shares issued and
outstanding
7,358,604,307 7,358,604,307 7,358,604,307
Basic and diluted earnings per
common share (a/b) =1.25
P =0.57
P =1.67
P

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13. Personnel Costs

2021 2020 2019

Salaries and wages =716,663,207
P =670,398,476
P =572,060,660
P
Employee benefits 296,761,276 275,233,905 239,240,032
Retirement benefit costs
(see Note 14) 53,217,409 54,481,769 29,846,722
=1,066,641,892
P =1,000,114,150
P =841,147,414
P

14. Retirement Costs

The Company has a funded, non-contributory, defined benefit pension plan (the “Plan”) covering all
regular and full-time employees and requiring contributions to be made to separately administered
fund. This retirement benefit fund (the “Fund”) is in the form of a trust being maintained and
managed by AEV, under the supervision of the Board of Trustees (BOT) of the Plan. The BOT, whose
members are also officers of AEV, is responsible for the investment of the Fund assets. Taking into
account the Plan’s objectives, benefit obligations and risk capacity, the BOT periodically defines the
investment strategy in the form of a long-term target structure.

The following tables summarize the components of net benefit expense recognized in the parent
company statements of income and the funded status and amounts recognized in the parent
company balance sheets for the plan.

Net benefit expense (recognized as part of personnel costs):

2021 2020 2019

Retirement expense to be
recognized in the parent company
statements of income:
Current service cost =51,991,233
P =43,670,341
P =32,960,153
P
Net interest cost (income) 1,226,176 10,811,428 (3,113,431)
=53,217,409
P =54,481,769
P =29,846,722
P

Remeasurement effect to be recognized in other comprehensive income:

2021 2020 2019

Actuarial gains (loss) due to:
Experience adjustments (P
=40,983,766) (P
=11,775,982) (P
=197,172,700)
Changes in financial
assumptions 52,489,103 (37,371,952) (61,716,402)
Actual return excluding amount
included in net interest cost 56,022,256 (91,442,619) (20,314)
Changes in demographic
assumptions – 91,992,871 –
=67,527,593
P (P
=48,597,682) (P
=258,909,416)

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Pension liability

2021 2020
Present value of obligation =P484,385,778 =P510,957,588
Fair value of plan assets (465,556,070) (477,817,696)
=18,829,708
P =33,139,892
P
Changes in the present value of the defined benefit obligation are as follows:

2021 2020
At January 1 =510,957,588
P =533,382,355
P
Net benefit expense:
Current service cost 51,991,233 43,670,341
Interest cost 18,905,431 26,242,412
70,896,664 69,912,753
Benefits paid (106,833,425) (63,575,517)
Employee transfers 20,870,288 14,082,934
Remeasurements in other comprehensive
income:
Actuarial gain (loss) due to:
Changes in financial assumptions (52,489,103) 37,371,952
Experience adjustments 40,983,766 11,775,982
Changes in demographic assumptions – (91,992,871)
(11,505,337) (42,844,937)
At December 31 =484,385,778
P =510,957,588
P

Changes in the fair value of plan assets are as follows:

2021 2020
At January 1 =477,817,696
P =313,637,886
P
Actual contributions – 289,684,028
Interest income included in net interest cost 17,679,255 15,430,984
Actual return excluding amount included in
net interest cost 56,022,256 (91,442,619)
Benefits paid (106,833,425) (63,575,517)
Transfers 20,870,288 14,082,934
At December 31 =465,556,070
P =477,817,696
P

Changes in pension liability recognized in the parent company balance sheets are as follows:

2021 2020
At January 1 =33,139,892
P =219,744,469
P
Actual contributions – (289,684,028)
Actuarial loss (gain) recognized for the year (67,527,593) 48,597,682
Retirement expense for the year 53,217,409 54,481,769
At December 31 =18,829,708
P =33,139,892
P

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The fair value of plan assets by each class at the end of the reporting period are as follows:

2021 2020
Assets:
Financial assets at FVOCI =307,542,035
P =570,586,556
P
Equity instruments - financial institution:
Financial assets at amortized cost 65,581,602 60,321,478
Holding 4,305 4,805
Power 41,364,400 37,892,745
Financial institution 16,284,186 10,026,135
Others 164,302,206 130,129,078
595,078,734 808,960,797
Liability:
Financial liability (129,522,664) (331,143,101)
Fair value of plan assets =465,556,070
P =477,817,696
P

All equity instruments held have quoted prices in active market. The remaining plan assets do not
have quoted market prices in active market.

The plan assets have diverse investments and do not have any concentration risk.

The Company’s retirement benefit fund for its employees has investments in the equity of the
Company. The carrying value of these investments as of December 31, 2021 and the losses of Fund
arising from such investments for the year then ended amounted to P=112.4 million and
=26.5 million, respectively.
P

The principal assumptions used in determining net pension liability for the Company’s Plan is shown
below:

2021 2020
Discount rate 5.03% 3.70 %
Salary increase rate 6.00% 6.00 %

The sensitivity analysis below has been determined based on reasonable possible changes of each
significant assumption assuming all other assumptions were held constant:

Increase
Effect on defined benefit obligation
(decrease) in
basis points 2021 2020
Discount rates 100 (P
=33,260,909) (P
=31,137,705)
(100) 38,452,804 35,974,948
Future salary increases 100 =39,815,019
P =37,058,928
P
(100) (35,090,757) (32,766,595)

The Company’s defined benefit pension plan is funded by the Company.

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The Company expected to contribute P=38.8 million to the defined benefit plans in 2022. The
average duration years of the defined benefit obligation is 13 years as of December 31, 2021 and
2020.

The BOT reviews the performance of the plans on a regular basis. It assesses whether the
retirement plans will achieve investment returns which, together with contributions, will be
sufficient to pay retirement benefits as they fall due. The Company also reviews the solvency
position of the different member companies on an annual basis and estimates, through the actuary,
the expected contribution to the Plan in the subsequent year.

15. Income Tax

Details of provision for income tax are as follows:

2021 2020 2019

Current:
Corporate income tax =P7,532,077 =P4,166,070 =21,180,971
P
Final 9,547,825 14,222,649 26,101,093
17,079,902 18,388,719 47,282,064
Deferred – – 12,100,042
=17,079,902
P =18,388,719
P =59,382,106
P

The provision for corporate income tax represents MCIT in 2021, 2020 and 2019.

Reconciliation between the statutory income tax rate and the Company’s effective income tax rates
follows:

2021 2020 2019

At statutory rate of 25% in 2021
and 30% in 2020 and 2019 =P2,307,539,003 =P1,263,546,369 =P3,709,123,406
Additions to (reductions in)
income tax resulting from:
Dividend income (3,396,233,305) (2,004,670,845) (4,195,623,259)
Movement in unrecognized
deferred income tax asset on:
NOLCO 1,023,007,205 754,815,801 568,058,043
Unamortized past service
cost (13,800,478) (26,308,544) 49,398,725
Pension liability 13,304,352 5,149,103 (101,115,717)
MCIT 8,573,595 4,166,070 21,180,971
Others 495,782 20,768,673 14,986,699
Nondeductible expenses:
Project and bidding expenses 74,507,853 2,172,111 –
Interest expense 2,465,483 7,620,867 15,570,740
Interest income already subjected
to final tax at a lower rate (2,779,588) (8,870,886) (21,082,970)
Others – – (1,114,532)
=17,079,902
P =18,388,719
P =59,382,106
P

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The components of the Company’s net deferred income tax assets (liability) are as follows:

2021 2020
Deferred income taxes on NOLCO =21,391,101
P =313,161,044
P
Deferred income tax liability on unrealized foreign
exchange gains (21,391,101) (313,161,044)
=–
P =–
P

As of December 31, 2021, the Company has MCIT that can be claimed as deduction from regular
income tax liability as follows:

Period of Recognition Availment Period Amount Applied Expired Balance

2018 2019-2021 =15,959,089
P =–
P =15,959,089
P =—
P
2019 2020-2022 21,180,971 – – 21,180,971
2020 2021-2023 3,124,553 – – 3,124,553
2021 2022-2024 8,573,595 – – 8,573,595
=48,838,208
P =–
P =15,959,089
P =32,879,119
P

Bayanihan to Recover as One Act (Bayanihan 2)

On September 30, 2020, the BIR issued Revenue Regulations No. 25-2020 implementing Section 4 of
Bayanihan 2 which states that the NOLCO incurred for taxable years 2020 and 2021 can be carried
over as a deduction from gross income for the next five (5) consecutive taxable years immediately
following the year of such loss.

As of December 31, 2021, the Company has NOLCO before taxable year 2020 which are valid as
deduction against the regular taxable income for the next three (3) consecutive taxable years, as
follows:

Period of Recognition Availment Period Amount Applied Expired Balance

2018 2019-2021 =606,218,323
P =–
P (P
=606,218,323) =–
P
2019 2020-2022 2,327,888,945 – – 2,327,888,945
=2,934,107,268
P =–
P (P
=606,218,323) =2,327,888,945
P

As of December 31, 2021, the Company has NOLCO incurred in taxable years 2021 and 2020 which
can be claimed as deduction against the regular taxable income for the next five (5) consecutive
taxable years pursuant to the Bayanihan 2, as follows:

Period of Recognition Availment Period Amount Applied Expired Balance

2020 2021-2025 =3,130,564,280
P =–
P =–
P =3,130,564,280
P
2021 2022-2026 3,139,176,172 – – 3,139,176,172
=6,269,740,452
P =–
P =–
P =6,269,740,452
P

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No deferred income tax assets have been recognized on the following temporary differences as it is
probable that no sufficient taxable income will be available to allow the benefit of the net deferred
income tax assets to be utilized:

2021 2020
NOLCO =8,512,064,993
P =5,015,797,802
P
Unamortized past service cost 274,131,297 329,333,209
MCIT 32,879,119 41,306,130
Pension liability 18,829,708 33,139,892

No deferred income tax has been recognized on the impairment of investment in subsidiaries
amounting to P=1.1 billion as of December 31, 2021 and 2020 as management’s intention of
recovering this amount is through future dividend which is exempt from income tax.

The Company has unrecognized deductible and taxable temporary differences that arises from the
initial recognition of the lease liability and the right-of-use asset upon adoption of PFRS 16 which
affects neither the accounting profit nor taxable profit or loss amounting to P=29.4 million and
=21.2 million, respectively, as of December 31, 2021 and =P51.4 million and P
P =37.8 million,
respectively, as of December 31, 2020.

16. Related Party Disclosures

Parties are considered to be related if one party has the ability to control, directly or indirectly, the
other party or exercise significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related if they are subject to common control or
common significant influence. Related parties may be individuals or corporate entities.

The sales to and purchases from related parties are made on terms equivalent to those that prevail
in arm’s length transactions.

The Company, in its normal course of business, has transactions with its related parties, which
principally consist of the following:
a. The Company has management agreements with each of the following subsidiaries: CLPC, DLPC,
and CPPC for which it is entitled to management fees.

b. The Company renders various services to related parties such as technical and legal assistance
for various projects, trainings and other services, for which it bills technical and service fees.

c. The Company obtained standby letters of credit (SBLC) and is acting as surety for the benefit of
certain subsidiaries, associates and joint ventures in connection with certain loans and credit
accommodations. As of December 31, 2021 and 2020, the Company provided SBLCs for AP
Renewables, Inc. (APRI), Cebu Energy Development Corporation (CEDC), Luzon Hydro
Corporation (LHC), SN Aboitiz Power-Benguet, Inc. (SNAP B), Therma South (TSI), Pagbilao
Energy Corporation (PEC), Hedcor Inc., STEAG, and TVI amounting to P =3.6 billion and P=5.7 billion,
respectively.

d. Interest-bearing advances from the Company availed by DLPC and CLPC. The annual interest
rates are determined on arm’s length basis.

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e. AEV provides human resources, internal audit, legal, treasury and corporate finance services,
among others, to the Company and shares with the member companies the business expertise
of its highly qualified professionals. Transactions are priced based on agreed rates, and billed
costs are always benchmarked to third party rates to ensure competitive pricing. Service Level
Agreements are in place to ensure quality of service. This arrangement enables the Company to
maximize efficiencies and realize cost synergies.

f. Cash deposits and money market placements with Union Bank of the Philippines (UBP), an
associate of AEV. At prevailing rates, these fixed-rate investments earned interest income
amounting to P=11.5 million and P=38.6 million in 2021 and 2020, respectively. Outstanding
balances amounted P=1.4 billion and P=5.8 billion as of December 31, 2021, and 2020,
respectively.

g. Rentals paid at current market rates to AEV and Cebu Praedia Development Corporation (CPDC)
for the use of meeting rooms and properties by the Company’s officers and employees.

h. Aviation service fees paid at arm’s length basis to AAI for the use of aircraft during travel of the
Company’s officers and employees.

i. HI renders technical services to the Company for the technical expertise of its highly qualified
professionals on the Company's project management.

j. Consultancy service fees paid at arm's length basis to Aboitiz Data Innovation PTE. Ltd (ADI) for
services relating to data innovation initiatives.

k. TMI incurred shared services relating to corporate support for the Company.

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The Company’s balance sheets and statements of income include the following accounts resulting from the above transactions with related parties:

Technical, Management and other Service Fees

Revenue Receivable
2021 2020 2019 2021 2020 Terms Conditions
Subsidiaries:
DLPC =470,453,414
P =P437,377,855 =P367,741,901 =P– =P– 30-day, noninterest-bearing Unsecured; no impairment
VECO 71,364,024 260,857,566 391,849,526 – – 30-day, noninterest-bearing Unsecured; no impairment
TVI 67,385,513 3,752,756 625,236,619 – 573,848,932 30-day, noninterest-bearing Unsecured; no impairment
CLPC 44,514,947 51,782,341 46,897,878 – – 30-day, noninterest-bearing Unsecured; no impairment
AESI 44,066,628 66,551,036 57,630,764 – – 30-day, noninterest-bearing Unsecured; no impairment
GMEC 42,508,219 42,390,557 43,374,465 – 3,325,878 30-day, noninterest-bearing Unsecured; no impairment
Therma Luzon, Inc. (TLI) 38,939,644 32,668,804 41,166,971 234,428 – 30-day, noninterest-bearing Unsecured; no impairment
AI 25,928,663 34,276,983 26,315,382 – – 30-day, noninterest-bearing Unsecured; no impairment
Hedcor Bukidnon 23,801,631 5,033,883 — – – 30-day, noninterest-bearing Unsecured; no impairment
APRI 22,458,468 19,663,735 10,253,796 – – 30-day, noninterest-bearing Unsecured; no impairment
ARI 16,794,750 — — – – 30-day, noninterest-bearing Unsecured; no impairment
TSI 12,405,436 13,431,519 12,674,586 – – 30-day, noninterest-bearing Unsecured; no impairment
Therma Marine, Inc. (TMI) 11,417,673 2,036,277 5,979,579 – – 30-day, noninterest-bearing Unsecured; no impairment
PEI 8,039,203 10,516,295 2,627,543 121,000 – 30-day, noninterest-bearing Unsecured; no impairment
SEZC 7,136,902 9,585,362 10,905,487 – – 30-day, noninterest-bearing Unsecured; no impairment
LEZC 5,351,677 5,677,043 4,390,866 – – 30-day, noninterest-bearing Unsecured; no impairment
HI 3,789,097 390,019 5,169,208 48,840 – 30-day, noninterest-bearing Unsecured; no impairment
TMO 2,918,377 595,162 40,682 – – 30-day, noninterest-bearing Unsecured; no impairment
MEZC 2,676,338 6,901,875 5,429,535 – – 30-day, noninterest-bearing Unsecured; no impairment
BEZC 2,676,338 6,824,396 4,848,405 – – 30-day, noninterest-bearing Unsecured; no impairment
EAUC 1,832,018 1,635,682 3,191,420 – – 30-day, noninterest-bearing Unsecured; no impairment

(Forward)

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Revenue Receivable
2021 2020 2019 2021 2020 Terms Conditions
CPPC =1,741,872
P =P1,003,228 =20,900,607
P =1,916,059
P =P– 30-day, noninterest-bearing Unsecured; no impairment
San Carlos Sun Power, Inc. 1,178,232 9,160,805 118,706 – – 30-day, noninterest-bearing Unsecured; no impairment
Aboitiz Power Distributed
Renewables, Inc. 362,574 548,220 15,856 45,067 – 30-day, noninterest-bearing Unsecured; no impairment
TPVI 348,385 7,838,252 — – – 30-day, noninterest-bearing Unsecured; no impairment
Luzon Hydro Corporation 291,880 — — – – 30-day, noninterest-bearing Unsecured; no impairment
Hedcor Sabangan 291,880 — — – – 30-day, noninterest-bearing Unsecured; no impairment
Hedcor Sibulan, Inc. 291,880 — — – – 30-day, noninterest-bearing Unsecured; no impairment
Hedcor Tudaya, Inc. 291,880 — — – – 30-day, noninterest-bearing Unsecured; no impairment
Aboitiz Power Distributed – –
Energy, Inc. 262,726 596,647 15,856 30-day, noninterest-bearing Unsecured; no impairment
CIPI – 191,920 597,083 – – 30-day, noninterest-bearing Unsecured; no impairment
Malvez – — 41,235 – – 30-day, noninterest-bearing Unsecured; no impairment
Associates:
SFELAPCO 19,000,000 108,837,850 106,760,000 – – 30-day, noninterest-bearing Unsecured; no impairment
CEDC 39,502,302 39,883,596 41,768,304 7,575,375 3,111,900 30-day, noninterest-bearing Unsecured; no impairment
GNPD – 88,445,000 74,074,000 – 5,860,740 30-day, noninterest-bearing Unsecured; no impairment
Joint Venture:
SN Aboitiz Power - Magat, Inc. 6,696,429 6,696,429 – – – 30-day, noninterest-bearing Unsecured; no impairment
SN Aboitiz Power - Benguet, 6,696,429 6,696,429 – – – 30-day, noninterest-bearing Unsecured; no impairment
SN Aboitiz Power - Generation 238,501 – – – – 30-day, noninterest-bearing Unsecured; no impairment
Affiliates:
Apo Agua Infrastructura, Inc. 14,948,497 4,253,406 7,482,550 – – 30-day, noninterest-bearing Unsecured; no impairment
Aboitiz Infracapital, Inc. – – 907,589 – – 30-day, noninterest-bearing Unsecured; no impairment
=1,018,602,427
P =1,286,100,928
P =1,918,406,399
P =9,940,769
P =586,147,450
P

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Advances to Related Parties

Advances Outstanding Receivable
2021 2020 2021 2020 Terms Conditions
Subsidiaries:
CLPC =179,000,000
P =–
P =–
P =–
P 30-day, noninterest-bearing Unsecured; no impairment
bearing
DLPC 2,035,000,000 – – – 30-day, noninterest-bearing Unsecured; no impairment
TPI – – 6,099,063,840 8,099,063,840 30-day, noninterest-bearing Unsecured; no impairment
Affiliates:
Hijos – – 367,121 367,121 On-demand; noninterest-bearing Unsecured; no impairment
Others – – – 560,857 On-demand; noninterest-bearing Unsecured; no impairment
=2,214,000,000
P =–
P =6,099,430,961
P =8,099,991,818
P

Dividends
Revenue Receivable
2021 2020 2019 2021 2020 Terms Conditions
Subsidiaries:
ARI =7,900,000,000
P =–
P =3,358,000,000
P =–
P =–
P 30-day, noninterest-bearing Unsecured; no impairment
DLPC 1,690,784,646 1,780,720,001 1,545,389,160 – 389,719,866 30-day, noninterest-bearing Unsecured; no impairment
VECO 1,158,584,493 1,176,607,600 686,176,541 – – 30-day, noninterest-bearing Unsecured; no impairment
LEZC 285,120,000 369,680,000 65,600,000 – – 30-day, noninterest-bearing Unsecured; no impairment
AESI 272,454,554 926,533,750 437,000,000 272,454,554 – 30-day, noninterest-bearing Unsecured; no impairment

(Forward)

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Revenue Receivable
TSI =230,000,000
P =247,800,000
P =482,500,000
P =–
P =–
P 30-day, noninterest-bearing Unsecured; no impairment
H.Sabangan 196,915,636 108,612,660 110,378,720 – – 30-day, noninterest-bearing Unsecured; no impairment
AI 196,278,385 555,736 217,000,000 196,278,385 – 30-day, noninterest-bearing Unsecured; no impairment
CPPC 180,000,000 477,000,000 80,400,000 180,000,000 186,000,000 1-year, noninterest-bearing Unsecured; no impairment
SEZC 130,130,000 140,205,000 86,385,000 – – 30-day, noninterest-bearing Unsecured; no impairment
CLPC 70,843,998 76,722,542 78,953,374 – – 30-day, noninterest-bearing Unsecured; no impairment
H.Tudaya 53,731,491 37,662,260 50,216,346 – – 30-day, noninterest-bearing Unsecured; no impairment
EAUC 50,000,000 115,000,000 97,500,000 50,000,000 70,000,000 90-day, noninterest-bearing Unsecured; no impairment
MEZC 39,307,449 20,310,308 39,745,171 – – 30-day, noninterest-bearing Unsecured; no impairment
PEI 25,800,000 69,000,000 – – – 30-day, noninterest-bearing Unsecured; no impairment
BEZC 25,738,900 20,935,262 36,278,227 – – 30-day, noninterest-bearing Unsecured; no impairment
H.Bukidnon 17,728,483 531,854,481 – – – 30-day, noninterest-bearing Unsecured; no impairment
TMO – (2,890,362) – – – 30-day, noninterest-bearing Unsecured; no impairment
TPI – – 6,070,000,000 – – 30-day, noninterest-bearing Unsecured; no impairment
Affiliates:
STEAG 862,776,180 392,524,220 402,784,740 – – 30-day, noninterest-bearing Unsecured; no impairment
SFELAPCO 71,008,973 68,995,283 88,398,806 – – 30-day, noninterest-bearing Unsecured; no impairment
PEVI 67,730,030 79,339,670 51,236,633 – – 30-day, noninterest-bearing Unsecured; no impairment
WMPC 60,000,000 44,000,000 – – – 30-day, noninterest-bearing Unsecured; no impairment
AEV Aviation – 1,067,740 1,468,144 – – 30-day, noninterest-bearing Unsecured; no impairment
=13,584,933,218
P =6,682,236,151 P
P =13,985,410,862 =698,732,939
P =645,719,866
P

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Interest
Revenue Receivable
2021 2020 2019 2021 2020 Terms Condition
Subsidiaries:
DLPC =P1,931,302 =P– =P– =P– =P– 30-day, noninterest-bearing Unsecured
CLPC 21,280,662 – – – – 30-day, noninterest-bearing Unsecured
=23,211,964
P =–
P =–
P =–
P =–
P

Transportation and Travel

Expense Payable
2021 2020 2019 2021 2020 Terms Condition
Parent:
AEV =–
P =–
P =704
P =–
P =–
P 30-day, noninterest-bearing Unsecured
Affiliate:
AAI 22,268,283 16,939,847 17,138,321 – – 30-day, noninterest-bearing Unsecured
=P22,268,283 =P16,939,847 =P17,139,025 =P– =P–

Rent
Expense Payable
2021 2020 2019 2021 2020 Terms Condition
Parent
AEV =–
P =411,400
P =2,212,900
P =–
P =–
P 30-day, noninterest-bearing Unsecured
Affiliate
CPDC 1,028,941 1,141,394 1,095,894 – – 30-day, noninterest-bearing Unsecured
=P1,028,941 =P1,552,794 =P3,308,794 =P– =P–

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Professional, Legal and Service Fees

Expense Payable
2021 2020 2019 2021 2020 Terms Condition
Parents
AEV =105,091,860
P =81,335,683
P =80,916,869
P =P– =P– 30-day, noninterest-bearing Unsecured
ACO 4,500,000 – – – – 30-day, noninterest bearing Unsecured
Subsidiary
HI 30,630,903 18,803,326 – – – 30-day, noninterest-bearing Unsecured
=140,222,763
P =100,139,009
P =80,916,869
P =–
P =–
P

Contracted Services
Expense Payable
2021 2020 2019 2021 2020 Terms Condition
Subsidiary
TMI =872,437
P =697,175
P =–
P =695,193
P =–
P 30-day, noninterest-bearing Unsecured
Affiliate
ADI 5,772,399 – – – – 30-day, noninterest-bearing Unsecured
=6,644,836
P =697,175
P =P– =695,193
P =P–

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The above transactions are expected to be settled in cash.

The Company’s Fund is in the form of a trust being maintained and managed by AEV under the
supervision of the BOT of the plan. In 2021 and 2020, other than contributions to the Fund, no
transactions occurred between the Company or any of its subsidiaries and the Fund.

Total compensation and benefits of key management personnel of the Company are as follows:

2021 2020 2019

Short-term benefits =154,754,328
P =209,576,892
P =182,349,079
P
Post-employment benefits
(see Note 14) 6,166,450 9,879,034 10,403,791
=160,920,778
P =219,455,926
P =192,752,870
P

17. Financial Risk Management Objectives and Policies

The Company’s principal financial instruments comprise of cash and cash equivalents and
long-term debts. The main purpose of these financial instruments is to raise financing for the
Company’s operations. The Company has various other financial instruments such as trade and other
receivables and trade and other payables which arise directly from its operations.

The Company also enters into derivative transactions, particularly foreign currency forwards, to
economically hedge its foreign currency risk from foreign currency denominated liabilities
(see Note 19).

Risk Management Structure

The BOD is mainly responsible for the overall risk management approach and for the approval of risk
strategies and principles of the Company.

Financial risk committee

The Financial Risk Committee has the overall responsibility for the development of risk strategies,
principles, frameworks, policies and limits. It establishes a forum of discussion of the Company’s
approach to risk issues in order to make relevant decisions.

Treasury service group

The Treasury Service Group is responsible for the comprehensive monitoring, evaluating and
analyzing of the Company’s risks in line with the policies and limits.

The main risks arising from the Company’s financial instruments are credit risk involving possible
exposure to counter party default on its cash and cash equivalents, and trade and other receivables;
liquidity risk in terms of the proper matching of the type of financing required for specific
investments; foreign exchange risk in terms of foreign exchange fluctuations that may significantly
affect its foreign currency denominated placements changes; and interest rate risk primarily to its
long-term debt with a floating interest rate and to its derivative asset.

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Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flow of financial instrument will
fluctuate because of the changes in market interest rates. The Company’s exposure to the risk of
changes in market interest rates relates primarily to its long-term debt with a floating interest rate
and to its derivative asset.

The Company’s policy is to manage its interest cost using effective hedging derivatives subject to
BOD approval.

The following tables set out the carrying amounts, by maturity, of the Company's financial
instruments that are exposed to cash flow interest rate risk (amounts in thousands):

As of December 31, 2021

<1 year 1-5 years >5 years Total
Floating rate - long term debt =–
P =2,777,437
P =–
P =2,777,437
P

As of December 31, 2020

<1 year 1-5 years >5 years Total
Floating rate - long term debt =–
P =14,196,824
P =– P
P =14,196,824

The following tables demonstrate the sensitivity to a reasonably possible change in rates, with all
other variables held constant, of the Company’s income before tax (through the impact on floating
rate borrowings). The effect on equity pertains to the impact of the Company’s derivative
designated under cash flow hedge accounting:

Increase
(decrease) in Effect on income
basis points before tax
2021 200 =55,549,000
P
(100) (27,774,000)
2020 200 =283,936,000
P
(100) (141,968,000)
There is no other impact on the Company's equity other those already affecting the parent company
statements of income.

The interest expense and other financing costs recognized according to sources are as follows:

2021 2020 2019

Short term and long-term debts =2,793,782,731
P =2,789,726,329
P =2,445,928,120
P
Loss on loan extinguishment 447,501,753 – –
Lease liabilities 3,311,592 4,307,644 5,080,616
Other long-term obligations 226,776,452 152,864,838 96,523,119
=3,471,372,528
P =2,946,898,811
P =2,547,531,855
P

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Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in
financial loss to the Company.

The Company’s credit risk on cash in banks and cash equivalents and trade and other receivables
pertains to possible default by the counterparty, with a maximum exposure equal to the carrying
amount of these assets. With respect to cash in banks and cash equivalents, the risk is mitigated by
the short-term and/or liquid nature of its short-term deposits mainly in bank deposits and
placements, which are placed with financial institutions of high credit standing. With respect to
trade and other receivables, credit risk is controlled by the application of credit approval, limit and
monitoring procedures. It is the Company’s policy that all debtors who wish to trade on credit terms
are subject to credit procedures. In addition, receivable balances are monitored on an ongoing basis
with the result that the Company’s exposure to bad debts is not significant.

The Company has no significant concentration risk to a counterparty or group of counterparties.

The credit quality per class of financial assets as of December 31 is as follows (amounts in
thousands):

2021

Past due
Neither past nor impaired
but not
High Grade Standard Sub-standard impaired Total
Cash and cash equivalents* =18,370,292
P =–
P =–
P =–
P =18,370,292
P
Trade and other
receivables 808,118 – – 24,049 832,167
Derivative asset 75,718 – – – 75,718
Total =19,254,128
P =–
P =–
P =24,049
P =19,278,177
P
*Excluding cash on hand

2020
Past due
Neither past due nor impaired but not
High Grade Standard Sub-standard impaired Total
Cash and cash equivalents* =8,319,638
P =–
P =–
P =–
P =8,319,638
P
Trade and other receivables 668,483 – – 608,900 1,277,383
Total =8,988,121
P =–
P =–
P =608,900
P =9,597,021
P
*Excluding cash on hand

High grade pertains to receivables from customers with good favorable credit standing and have no
history of default.

Standard grade pertains to those customers with history of sliding beyond the credit terms but pay a
week after being past due.

Sub-standard grade pertains to those customers with payment habits that normally extend beyond
the approved credit terms, and has high probability of being impaired.

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The aging analyses of financial assets as of December 31 are as follows (amounts in thousands):

2021
Past Due
Total Current 30 days 31 to 60 days Over 60 days
Cash and cash equivalents* =18,370,292
P =18,370,292
P =–
P =–
P =–
P
Trade and other 832,167 808,118 7,928 – 16,121
receivables
Derivative asset 75,718 75,718 – – –
Total =19,278,177
P =19,254,128
P =7,928
P =–
P =16,121
P
*Excluding cash on hand

2020
Past Due
Total Current 30 days 31 to 60 days Over 60 days
Cash and cash equivalents* =8,319,638
P =8,319,638
P =–
P =–
P =–
P
Trade and other receivables 1,277,383 668,483 17,189 3,341 588,370
Total =9,597,021
P =8,988,121
P =17,189
P =3,341
P =588,370
P
*Excluding cash on hand

Liquidity risk
Liquidity risk is the potential of not meeting obligations as they come due because of an inability to
liquidate assets or obtain adequate funding. The Company maintains sufficient cash and cash
equivalents to finance its operations. Any excess cash is invested in short-term money market
placements. These placements are maintained to meet maturing obligations and pay dividend
declarations.

In managing its short-term fund requirements, the Company’s policy is to ensure that there are
sufficient working capital inflows to match repayments of short-term borrowings. With regard to its
long-term financing requirements, the Company’s policy is that not more than 25% of long-term
borrowings should mature in any 12-month period.

The following tables summarize the maturity profile of the Company’s financial liabilities based on
contractual undiscounted payments as of December 31 (amounts in thousands):

2021
Contractual undiscounted payments
Total Less than 1 More than 5
Carrying Total On Demand year 1 to 5 years years
Financial liabilities:
Trade and other payables* =593,240
P =593,240
P =–
P =593,240
P =–
P =–
P
Long-term debts 63,189,157 77,143,096 – 11,972,891 44,718,696 20,451,509
Lease liabilities 29,359 30,914 – 27,754 3,160 –
Total =63,811,753 P
P =77,767,250 =–
P =12,593,885
P =44,721,856
P =20,451,509
P
*Excluding output VAT, withholding tax and other statutory liabilities

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2020
Contractual undiscounted payments
Total On Less than 1 More than 5
Carrying Total Demand year 1 to 5 years years
Financial liabilities:
Trade and other payables* =434,224
P =434,224
P =–
P =434,224
P =–
P =–
P
Long-term debts 58,810,082 72,011,720 – 9,242,052 56,684,406 6,085,262
Lease liabilities 51,381 56,259 – 25,345 30,914 –
Derivative liability 429,498 429,498 – – 429,498 –
Total =59,725,185 P
P =72,931,701 =—
P =9,701,621
P =57,144,818
P =6,085,262
P
*Excluding output VAT, withholding tax and other statutory liabilities

Market Risk
The risk of loss, immediate or over time, due to adverse fluctuations in the price or market value of
instruments, products, and transactions in the Company’s overall portfolio (whether on or
off-balance sheet) is market risk. These are influenced by foreign and domestic interest rates,
foreign exchange rates and gross domestic product growth.

Foreign exchange risk

The foreign exchange risk of the Company pertains significantly to its foreign currency denominated
obligations. To manage its foreign exchange risk, stabilize cash flows and improve investment and
cash flow planning, the Company enters into foreign currency forward contracts aimed at reducing
and/or managing the adverse impact of changes in foreign exchange rates on financial performance
and cash flows.

Presented below are the Company’s foreign currency denominated financial assets and liabilities
translated to Philippine Peso:

2021 2020
US Dollar Peso Equivalent US Dollar Peso Equivalent
Financial asset:
Cash and cash equivalents $22,654,190 =1,155,341,036
P $113,585,317 =5,454,707,694
P
Financial liability:
Long-term debt (55,000,000) (2,804,945,000) (300,000,000) (14,406,900,000)
Net foreign currency
denominated liability ($32,345,810) (P=1,649,603,964) ($186,414,683) (P
=8,952,192,306)

The exchange rate for December 31, 2021 and 2020 is P=50.999:US$1 and P =48.023:US$1,
respectively. As a result of the translation of these net foreign-currency denominated liability, the
Company reported net unrealized foreign exchange loss of P=958.3 million in 2021, and foreign
exchange gain of P=609.5 million in 2020.

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The following tables demonstrate the sensitivity to a reasonable possible change in the US dollar
exchange rates, with all other variables held constant, of the Company’s income before income tax
(amounts in thousands).

Increase (decrease) Effect on income

2021
US dollar-denominated accounts 5% (P
=82,480)
US dollar-denominated accounts -5% 82,480
2020
US dollar-denominated accounts 5% (P
=447,610)
US dollar-denominated accounts -5% 447,610

There is no other impact on the Company’s equity other than those already affecting the parent
company statements of income.

Capital management
The primary objective of the Company’s capital management is to ensure that it maintains a strong
credit rating and healthy capital ratios in order to support its business and maximize shareholder
value. The Company considers equity as its capital.

The Company manages its capital structure and makes adjustments to it, in light of changes in
economic conditions. To maintain or adjust the capital structure, the Company may adjust the
dividend payment to shareholders, return capital to shareholders or issue new shares. The
Company monitors capital using a gearing ratio, which is net debt divided by equity plus net debt.
Its policy is to keep the gearing ratio at 70% or below. The Company determines net debt as the
sum of interest-bearing short-term and long-term loans less cash and short-term deposits.

2020 2019
Long-term debts (Note 11) =P63,189,157,455 =P58,810,082,203
Cash and cash equivalents (Note 4) (18,371,422,227) (8,320,836,713)
Net debt (a) 44,817,735,228 50,489,245,490
Equity 75,136,876,544 71,605,870,256
Equity and net debt (b) =119,954,611,772 P
P =122,095,115,746
Gearing ratio (a/b) 37.36% 41.35%

Part of the Company’s capital management is to ensure that it meets financial covenants attached
to long-term borrowings. Breaches in meeting the financial covenants would permit the banks to
immediately call loans and borrowings. The Company is in compliance with the financial covenants
attached to its long-term debts as of December 31, 2021 and 2020 (see Note 11).

No changes were made in the objectives, policies or processes during the years ended
December 31, 2021 and 2020.

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18. Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the amount at which the financial instrument could be sold in a current
transaction between knowledgeable willing parties in an arm’s length transaction, other than in a
forced liquidation or sale. Fair values are obtained from quoted market prices, discounted cash flow
models and option pricing models, as appropriate.

A financial instrument is regarded as quoted in an active market if quoted prices are readily
available from an exchange, dealer, broker, pricing services or regulatory agency and those prices
represent actual and regularly occurring market transactions on an arm’s length basis. For a
financial instrument with an active market, the quoted market price is used as its fair value. On the
other hand, if transactions are no longer regularly occurring even if prices might be available and the
only observed transactions are forced transactions or distressed sales, then the market is considered
inactive. For a financial instrument with no active market, its fair value is determined using a
valuation technique (e.g. discounted cash flow approach) that incorporates all factors that market
participants would consider in setting a price.

Set out below is a comparison by category of carrying amounts and fair values of the Company’s
financial instruments whose fair values are different from their carrying amounts (amounts in
thousands).

2021 2020
Carrying Fair Carrying Fair
Amount Value Amount Value

Financial liabilities:
Long-term debts =63,189,157
P =62,209,990
P =58,810,082
P =62,456,152
P
Lease liabilities 29,359 28,653 51,381 49,324
=63,218,516
P =62,238,643
P =58,861,463
P =62,505,476
P

The following method and assumption are used to estimate the fair value of each class of financial
instruments:

Cash and cash equivalents, trade and other receivables and trade and other payables
The carrying amounts of cash and cash equivalents, trade and other receivables and trade and other
payables approximate fair values due to the relatively short-term maturity of these financial
instruments.

Long-term debts
The fair value of long-term debt is based on the discounted value of future cash flows using the
applicable rates for similar types of loans. Discount rates used range from 2.78% to 6.09% in 2021
and 3.03% to 4.34% in 2020.

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Lease liabilities
The fair values are computed using Level 3 of the fair value hierarchy and are based on the
discounted value of expected future cash flows using the applicable credit-adjusted risk-free rates of
2.86% to 3.58% and 3.29% to 3.44% in 2021 and 2020, respectively.

Derivative Financial Instruments

The fair value of forward contracts is calculated by reference to prevailing interest rate differential
and spot exchange rate as of valuation date (Level 2), taking into account its remaining term to
maturity. The fair value of the IRS and interest rate cap are determined by generally accepted
valuation techniques with reference to observable market data such as interest rates.

The Company entered into an IRS agreement to fully hedge its floating rate exposure on its foreign
currency-denominated loan and par forward contracts to hedge the floating rate exposure on
foreign-currency denominated payments.

Interest rate swap (IRS)

On September 6, 2019, the Company entered into an IRS agreement effective September 30, 2019
to hedge $150 million of its floating rate exposure on its loan (see Note 11). Under the IRS
agreement, the Company, on a quarterly basis, pays a fixed rate of 1.449% per annum and received
variable interest at 3-month LIBOR, subject to a floor of 0%. On February 5, 2020, the Company
entered additional IRS agreement effective April 29, 2020 to hedge $50 million of its floating rate
exposure on its loan (see Note 12). Under the IRS agreement, the Company, on a quarterly basis,
pays a fixed rate of 1.434% per annum and received variable interest at 3-month LIBOR, subject to a
floor of 0%. The interest payments and receipts are based on the outstanding USD notional amount
simultaneous with the interest payments on the hedged loan. Similar with the hedged loan, the IRS
has amortizing notional amounts which cover a period of up to April 30, 2024. The Company
designated the swap as a cash flow hedge.

As of December 31, 2021, the outstanding notional amount and fair value of the swap amounted to
=2.8 billion and P
P =34.0 million, respectively. As of December 31, 2020 the outstanding notional
amount and fair value of the swap amounted to P =9.6 billion and P
=389.4 million, respectively.

Foreign currency forward contracts

In 2020, the Company entered into foreign currency forward contracts, namely Principal-only Swap
(POS) and Call Spread (CS), with counterparty banks to manage foreign currency risks associated
with foreign currency-denominated liabilities and purchases. As of December 31, 2021, the notional
amount of the forward contract is $25.0 million (P
=1.2 billion) and $10.0 million (P
=480.8 million) for
POS and CS, respectively. In 2021, the Company entered into additional POS contract with a
notional amount of $10.0 million (P=485.8 million). The Company designated these forward
contracts as a cash flow hedge.

Hedge Effectiveness Results

Since the critical terms of the hedged loan and the IRS match, the hedge was assessed to be highly
effective. The effective portion of the changes in the fair value of the swap amounting to
=75.7 million gain and P=429.5 million loss in 2021 and 2020, respectively, was deferred in equity
P
under the “Cash flow hedge reserve” account.

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The following is the maturity analysis of the notional amount and the corresponding average fixed
interest rate (amounts in thousands):

As of December 31, 2021

Maturity
Less than 3 3 to 6 6 to 12 1 to 2 More than 2
months months months years years Total
IRS - Derivative liability
Notional amount =–
P =–
P =–
P =–
P = 2,804,945
P = 2,804,945
P
Average fixed interest rate (%) – – – – 1.45%-1.43%
POS - Derivative asset
Notional amount – – – – 1,700,575 1,700,575
CS - Derivative asset
Notional amount – – – – 480,800 480,800

As of December 31, 2020

Maturity
Less than 3 3 to 6 6 to 12 1 to 2 More than 2
months months months years years Total
IRS - Derivative liability
Notional amount =–
P =–
P =–
P =–
P =9,604,600
P =9,604,600
P
Average fixed interest rate (%) – – – – 1.45%-1.51%
POS - Derivative liability
Notional amount – – – – 1,214,775 1,214,775
CS - Derivative liability
Notional amount – – – – 480,360 480,360

The impact of the hedged item and hedging instrument in the parent company balance sheets and
in the parent company statements of income and parent company statements of comprehensive
income is as follows:

As of December 31, 2021

Total hedging
Change in fair loss recognized Ineffectivenes
value used for in other s recognized in
Carrying measuring comprehensive other income
amount ineffectiveness income (charges)
IRS - Derivative liability (P
=33,958,165) (P
=33,958,165) (P
=33,958,165) =–
P
POS - Derivative asset 64,789,385 64,789,385 64,789,385 –
CS - Derivative asset 44,886,566 44,886,566 44,886,566 –
=75,717,785
P =75,717,785
P =75,717,785
P =–
P

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As of December 31, 2020

Change in fair Total hedging Ineffectiveness
value used for gain recognized recognized in
measuring in other other income
Carrying amount ineffectiveness comprehensive (charges)
IRS - Derivative liability (P=389,376,797) (P=469,511,068) (P=469,511,068) =–
P
POS - Derivative liability (39,350,319) (39,350,319) (39,350,319) –
CS - Derivative liability (771,345) (771,345) (771,345) –
(P=429,498,461) (P=509,632,732) (P=509,632,732) =–
P

The movements in fair value changes of derivative instruments are as follows:

2021 2020
At beginning of year =429,498,461
P (P=80,134,271)
Net changes in fair value of derivatives designated as
accounting hedges (505,216,246) 509,632,732
At end of year (P
=75,717,785) =429,498,461
P

The changes in the fair value of derivatives designated as cash flow hedges were deferred in equity
under “Cash flow hedge reserve”.

For the years ended December 31, 2021 and 2020, there were no transfers between Level 1 and
Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements
were made.

19. Lease Agreements

a. Operating Lease Agreement with Manta Equities, Inc. (MEI)

The Company entered into an operating lease agreement with MEI for its use of administrative
office space and parking space for a period of ten (10) years from April 1, 2013 to May 31, 2023
and nine (9) years and three (3) months from and March 1, 2014 to May 31, 2023, respectively.
Both lease contracts have an escalation rate of 5.0%.

The Company entered additional operating lease agreement with MEI in 2020 for use of
administrative office space and parking space for a period of three (3) years and five (5) months
from January 1, 2020 to May 31, 2023. The lease contract has an escalation rate of 5.0%

b. Operating Lease Agreement with SM Prime Holdings, Inc. (SMPH)

The Company entered into an operating lease agreement with SMPH for its use of
administrative and sales office space for a period of three (3) years from August 1, 2019 to
July 31, 2022. The lease contract has a an escalation of 5.0%

The Company also has certain leases of conference rooms with lease terms of 12 months or less.
The Company applies the ‘short-term lease’ recognition exemptions of these leases.

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Set out below are the carrying amount and movements of the Company’s lease liabilities:

2021 2020
Balance at beginning of year =51,381,140
P =51,602,147
P
Additions – 19,121,556
Interest expense 3,311,592 4,307,645
Payments (25,334,028) (23,650,208)
Balance at end of year =29,358,704
P =51,381,140
P

The Company also has certain leases of conference rooms with lease terms of 12 months or less. The
company applies the 'short-term lease' recognition exemption on these arrangements.

Set out below, are the amounts recognized in the parent company statements of income:

2021 2020 2019

Amortization expense of right-of-use
assets =16,569,335
P =16,569,335
P =11,490,685
P
Interest expense on lease liabilities 3,311,592 4,307,645 5,080,616
Rent expense - short-term leases 1,379,362 3,426,142 7,027,319
=21,260,289
P =24,303,122
P =23,598,620
P

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20. Note to Statements of Cash Flows

The following are the cash flow movements of the Company’s financing liabilities:

Non-cash Changes
Amortized
Net Dividend deferred Foreign exchange December 31,
January 1, 2021 cash flows declaration financing costs movement Interest expense Others 2021
Lease liability =51,381,140
P (P
=25,334,028) =—
P =—
P =—
P =3,311,592
P =—
P =29,358,704
P
Non-current interest-
bearing loans and borrowings 58,810,082,203 2,891,612,041 — 323,693,211 1,163,770,000 — — 63,189,157,455

Interest on loans and borrowings 395,121,338 (3,049,008,525) — — — 2,793,782,731 350,584,995 490,480,539

Dividend payable 406,737 (6,254,587,553) 6,254,813,661 — — — — 632,845

Total liabilities from
financing activities =59,256,991,418
P (P
=6,437,318,065) =6,254,813,661
P =323,693,211
P =1,163,770,000
P =2,797,094,323
P =350,584,995
P =63,709,629,543
P

Non-cash Changes
Amortized
Dividend deferred Foreign Exchange December 31,
January 1, 2020 Net cash flows declaration financing costs Movement Interest expense Others 2020

Lease Liability =70,723,703

P (P
=23,650,208) =—
P =—
P =—
P =4,307,645
P =—
P =51,381,140
P
Non-current interest-bearing loans
and borrowings 50,079,825,067 9,383,282,625 — 130,574,511 (783,600,000) — — 58,810,082,203
Interest on loans and borrowings 380,430,960 (2,797,326,277) — — — 2,789,726,329 22,290,326 395,121,338
Dividend payable — (8,682,746,344) 8,683,153,081 — — — — 406,737
Total liabilities from financing
activities =50,530,979,730
P = (2,120,440,204)
P =8,683,153,081
P =130,574,511
P (P
=783,600,000) =2,794,033,974
P =22,290,326
P =59,256,991,418
P

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21. Others

a. COVID-19

In a move to contain the COVID-19 outbreak, on March 13, 2020, the Office of the President of
the Philippines issued a Memorandum directive to impose stringent social distancing measures
in the National Capital Region effective March 15, 2020. On March 16, 2020, Presidential
Proclamation No. 929 was issued, declaring a State of Calamity throughout the Philippines for a
period of six months and imposed an enhanced community quarantine (ECQ) throughout the
island of Luzon until April 12, 2020, as subsequently extended to April 30, 2020. This was
further extended to May 15, 2020 in selected areas including the National Capital Region. These
measures have caused disruptions to businesses and economic activities, and its impact on
businesses continues to evolve.

The economic slowdown during the ECQ has been caused by reduced consumer spending in
most sectors and therefore, affects the Company’s operations.

The Company has an in-placed and extensive business continuity plan on similar risk, including
the lay out of the necessary steps that will help address or minimize the Company’s business
exposures. However, considering the evolving nature of this outbreak, the Company will
continue to monitor the situation and adjust the steps it is currently implementing in
subsequent periods.

b. Application of the Provisions of Corporate Recovery and Tax Incentives for Enterprises (CREATE)
Act

On March 26, 2021, the Office of the President of the Philippines signed into law the CREATE Act
to attract more investments and maintain fiscal prudence and stability in the Philippines. RA
11534 or the CREATE Act introduces reforms to the corporate income tax and incentives
systems. It takes effect 15 days after its complete publication in the Official Gazette or in a
newspaper of general circulation or April 11, 2021.

The following are the key changes to the Philippine tax law pursuant to the CREATE Act which
have an impact on the parent company financial statements of the Company as of and for the
year ended December 31, 2020 because of their retroactive effect:
• Effective July 1, 2020, regular corporate income tax (RCIT) rate is reduced from 30% to 25%
for domestic and resident foreign corporations. For domestic corporations with net taxable
income not exceeding P =5 million and with total assets not exceeding P
=100 million (excluding
land on which the business entity’s office, plant and equipment are situated) during the
taxable year, the RCIT rate is reduced to 20%.
• Minimum corporate income tax rate reduced from 2% to 1% of gross income effective
July 1, 2020 to June 30, 2023.
• Imposition of improperly accumulated earnings tax is repealed.

As clarified by the Philippine Financial Reporting Standards Council in its Philippine

Interpretations Committee Q&A No. 2020-07, the CREATE Act was not considered substantively
enacted as of December 31, 2020 even though some of the provisions have retroactive effect to
July 1, 2020. The passage of the CREATE Act into law on March 26, 2021 is considered as a non-
adjusting subsequent event in the parent company financial statements of the Company as of

*SGVFS162523*
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and for the year ended December 31, 2020. Accordingly, current and deferred income taxes
continued to be computed and measured using the applicable income tax rates as of
December 31, 2020 (i.e., 30% RCIT / 2% MCIT) for financial reporting purposes.

The Company reflected the changes in the current and deferred income taxes its parent
company financial statements as of and for the year ended December 31, 2021, including the
retroactive effect of the change in tax rates arising from the CREATE Act, reducing provisions for
current and deferred income tax by P =1.0 million.

c. Other Income

In August 2021, the Company received P

=324.9 million from a fund held in escrow as compensation
for warranties and contingencies from its previous investment transaction.

d. Bond Issuance

On January 5, 2022, the Company filed the application with the Securities and Exchange
Commission (SEC) for the issuance of the third tranche of its Php30 billion fixed-rate retail bonds
registered on March 1, 2021 under the shelf registration program of SEC (the “Third Tranche
Bonds”). The Third Tranche Bonds, with an aggregate principal amount of up to ₱10.0 billion,
including oversubscription, is expected to be issued in March 2022. Interest rate setting was
completed on February 28, 2022.

22. Supplementary Information Required Under Revenue Regulations (RR) 15-2010

The Company also reported and/or paid the following types of taxes for the year:

VAT
The Company’s sales are subject to output value added tax (VAT) while its importations and
purchases from other VAT-registered individuals or corporations are subject to input VAT. The VAT
rate is 12.0%.

i. Net receipts and output VAT declared in the Company’s VAT returns in 2021

Net Sales/ Output

Receipts VAT
Taxable Sales:
Sales of services =1,613,132,035
P =192,241,133
P

The Company’s sales that are subject to VAT are reported under the following accounts:
Service Income - Management fees
Service Income - Professional fees
Service Income - Technical fees
Miscellaneous Income - Operating
Miscellaneous Income - Non-operating

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The Company’s sales of services are based on actual collections received, hence, may not be the
same as amounts accrued in the parent company statement of income.

ii. Input VAT for 2021

Balance at January 1 =12,204,075

P
Current year’s domestic purchases/payments for:
Goods other than for resale or manufacture 1,903,843
Capital goods subject to amortization 2,967,633
Capital goods not subject to amortization 155,340
Services lodged under the other accounts 49,461,215
66,692,106
Claims for tax credit/refund and other adjustments (53,942,950)
Balance at December 31 =12,749,156
P

Other taxes and licenses

Taxes and licenses, local and national, include real estate taxes, licenses and permit fees for 2021:

License and permit fees =13,067,238

P
Fringe benefit taxes 5,872,997
Deficiency and amnesty taxes 5,009,053
Documentary stamp taxes (DST) 110
Others 12,600
=23,961,998
P

Withholding taxes

Final withholding taxes =341,257,591

P
Withholding taxes on compensation and benefits 226,534,455
Expanded withholding taxes 33,248,050
Withholding VAT 489,579
=601,529,675
P

Tax assessment and cases

The Company has no pending tax cases outside of the administration of the BIR as of
December 31, 2021.

*SGVFS162523*
The following document has been received:

Receiving: AARON PAGKATIPUNAN

Receipt Date and Time: April 06, 2022 09:45:53 AM

Company Information
____________________________________________________________________________

SEC Registration No.: C199800134

Company Name: ABOITIZ POWER CORP.
Industry Classification: E40100
Company Type: Stock Corporation

Document Information
____________________________________________________________________________
____________________________________________________________________________

Document ID: OST1040620228285289

Document Type: Financial Statement
Document Code: FS
Period Covered: December 31, 2021
Submission Type: Consolidated
Remarks: None
 COVER SHEET
for
AUDITED FINANCIAL STATEMENTS

SEC Registration Number

C 1 9 9 8 0 0 1 3 4

COMPANY NAME

A B O I T I Z P O W E R 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 )

3 2 n d S t r e e t , B o n i f a c i o G l o b a l

C i t y , T a g u i g C i t y , M e t r o M a n i l

a , P h i l i p p i n e s 1 6 3 4

Form Type Department requiring the report Secondary License Type, If Applicable

A A C F S C F D - N A -

COMPANY INFORMATION
Company’s Email Address Company’s Telephone Number Mobile Number

www.aboitizpower.com (02) 8886-2800 None

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

594 April 26 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

Liza Luv T. Montelibano liza.montelibano@aboitiz.com 02) 8886-2813 Not Available

CONTACT PERSON’s ADDRESS

32nd Street, Bonifacio Global City, Taguig City, Metro Manila, Philippines 1634
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.

*SGVFS162530*
 SyCip Gorres Velayo & Co. Tel: (632) 8891 0307
6760 Ayala Avenue Fax: (632) 8819 0872
1226 Makati City ey.com/ph
Philippines

INDEPENDENT AUDITOR’S REPORT

The Board of Directors and Stockholders

Aboitiz Power Corporation
32nd Street, Bonifacio Global City
Taguig City, Metro Manila
Philippines

Opinion

We have audited the consolidated financial statements of Aboitiz Power Corporation and its subsidiaries
(the Group), which comprise the consolidated balance sheets as at December 31, 2021 and 2020, and
the consolidated statements of income, consolidated statements of comprehensive income,
consolidated statements of changes in equity and consolidated statements of cash flows for each of the
three years in the period ended December 31, 2021, and notes to the consolidated financial statements,
including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at December 31, 2021 and 2020, and its
consolidated financial performance and its consolidated cash flows for each of the three years in the
period ended December 31, 2021 in accordance with Philippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements section of our report. We are independent of the Group in
accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics)
together with the ethical requirements that are relevant to our audit of the consolidated financial
statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. For each matter below, our
description of how our audit addressed the matter is provided in that context.

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We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our assessment
of the risks of material misstatement of the consolidated financial statements. The results of our audit
procedures, including the procedures performed to address the matters below, provide the basis for our
audit opinion on the accompanying consolidated financial statements.

Impairment Testing of Goodwill

Under PFRSs, the Group is required to annually test the amount of goodwill for impairment. As of
December 31, 2021, the goodwill attributable to several cash-generating units (CGUs) amounted to
P41.16 billion or 10% of total consolidated assets, which is considered significant to the consolidated
financial statements. In addition, management’s assessment process requires significant judgment and
is based on assumptions which are subject to uncertainty on the estimation process due to the current
economic conditions which have been impacted by the coronavirus pandemic, specifically discount and
growth rates, revenue assumptions, and material price inflation.

The Group’s disclosures about goodwill are included in Note 12 to the consolidated financial statements.

Audit Response
We involved our internal specialist in assessing the methodologies and assumptions used. We compared
the key assumptions used, such as growth rate and revenue assumptions against the historical
performance of the CGUs, industry outlook and other relevant external data, taking into consideration
the impact associated with the coronavirus pandemic. We tested the parameters used in the
determination of the discount rates against market data. We also reviewed the Group’s disclosures
about those assumptions to which the outcome of the impairment test is most sensitive; specifically,
those that have the most significant effect on the determination of the recoverable amount of goodwill.

Revenue Recognition of Distribution Utilities

The distribution utilities’ revenue from the sale of electricity amounting to P44.38 billion for the year
ended December 31, 2021 accounts for 33% of the Group’s consolidated revenues and is material to the
Group. This matter is significant to the audit because the revenue recognized depends on the electric
consumption captured, the rates applied across different customers, and the systems involved in the
billing process. Electric consumption captured is based on the meter readings taken on various dates for
the different types of customers (i.e., industrial, commercial, and residential customers) within the
franchise areas of operations of the distribution utilities.

The Group’s disclosures related to this matter are provided in Notes 3 and 20 to the consolidated financial
statements.

Audit Response
We obtained an understanding and evaluated the design and tested the controls over the billing and
revenue process which includes the capture and accumulation of meter data in the billing system and
calculation of billed amounts, and uploading of billed amounts from the billing system to the financial

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reporting system. We performed a test calculation of the rates using the Energy Regulatory Commission-
approved rates and formulae, then compared them with the rates used in billing statements.

Recoverability of Certain Segments of Property, Plant and Equipment

Based on the assessment of the Group as of December 31, 2021, certain segments of its property, plant
and equipment totaling P8.4 billion, may be impaired due to the existence of impairment indicators. As
such, the Group assessed the recoverable amount of these segments of property, plant and equipment
and this requires significant judgment and involves estimation and assumptions about future electricity
generation levels and costs as well as external inputs such as fuel prices, electricity prices and discount
rates. In addition, because of the coronavirus pandemic, there is heightened level of uncertainty on the
future economic outlook and market forecast. Hence, we consider such assessment as a key audit
matter in our audit.

The disclosures about the recoverability of certain segments of property, plant and equipment are
included in Note 11 to the consolidated financial statements.

Audit Response
We involved our internal specialist in assessing the methodologies and assumptions used. We compared
the key assumptions used against the historical performance of certain segments of property, plant and
equipment, industry outlook and other relevant external data, taking into consideration the impact
associated with the coronavirus pandemic. We tested the parameters used in the determination of the
discount rate against market data. We also reviewed the Group’s disclosures about those assumptions
to which the outcome of the impairment test is most sensitive; specifically those that have the most
significant effect on the determination of the recoverable amounts of certain segments of property,
plant and equipment.

Consolidation Process

Aboitiz Power Corporation owns a significant number of domestic and foreign entities at varying equity
interests. We considered the consolidation process as a key audit matter because it required significant
auditor attention, particularly on the following areas: (a) fair value adjustments arising from business
combinations, (b) numerous intercompany transactions, (c) alignment of accounting policies of the
investees with the Group’s policy on property, plant and equipment and investment properties,
(d) translation of investees’ foreign-currency-denominated financial information to the Group’s
functional currency and (e) other equity adjustments.

The Group’s disclosures on the basis of consolidation are in Note 3 to the consolidated financial
statements.

Audit Response
We obtained an understanding of the Group’s consolidation process and the related controls, the
process for identifying related parties and related party transactions, as well as the reconciliation of
intercompany balances. We also checked the entities included in the consolidation and reviewed the

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eliminating entries recorded, including fair value adjustments. In addition, we reviewed the foreign
currency translation adjustments, as well as the alignment of accounting policies on property, plant and
equipment and investment properties.

Other Information

Management is responsible for the other information. The other information comprises the information
included in the SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report for
the year ended December 31, 2021 but does not include the consolidated financial statements and our
auditor’s report thereon. The SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and
Annual Report for the year ended December 31, 2021 are expected to be made available to us after the
date of this auditor’s report.

Our opinion on the consolidated financial statements does not cover the other information and we will
not express any form of assurance conclusion thereon.

In connection with our audits of the consolidated financial statements, our responsibility is to read the
other information identified above when it becomes available and, in doing so, consider whether the
other information is materially inconsistent with the consolidated financial statements or our knowledge
obtained in the audits, or otherwise appears to be materially misstated.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with PFRSs, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate the Group or
to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with PSAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these consolidated financial statements.

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As part of an audit in accordance with PSAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:

 Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.

 Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.

 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

 Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group to cease
to continue as a going concern.

 Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.

 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the audit. We remain solely
responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.

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From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.

The engagement partner on the audit resulting in this independent auditor’s report is
Maria Veronica Andresa R. Pore.

SYCIP GORRES VELAYO & CO.

Maria Veronica Andresa R. Pore

Partner
CPA Certificate No. 90349
Tax Identification No. 164-533-282
BOA/PRC Reg. No. 0001, August 25, 2021, valid until April 15, 2024
SEC Partner Accreditation No. 0662-AR-4 (Group A)
November 21, 2019, valid until November 20, 2022
SEC Firm Accreditation No. 0001-SEC (Group A)
Valid to cover audit of 2021 to 2025 financial statements of SEC covered institutions
BIR Accreditation No. 08-001998-071-2020, December 3, 2020, valid until December 2, 2023
PTR No. 8854348, January 3, 2022, Makati City

March 4, 2022

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ABOITIZ POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)

December 31
2021 2020
ASSETS
Current Assets
Cash and cash equivalents (Note 5) ₱57,130,243 ₱38,699,545
Trade and other receivables (Note 6) 26,820,071 22,017,309
Inventories (Note 7) 9,574,613 6,308,200
Derivative assets (Note 33) 1,383,903 —
Other current assets (Note 8) 9,511,107 10,479,648
Total Current Assets 104,419,937 77,504,702
Noncurrent Assets
Investments and advances (Note 9) 64,952,728 61,828,801
Property, plant and equipment (Notes 11 and 34) 203,239,825 203,451,243
Intangible assets (Note 12) 46,015,496 44,279,386
Derivative assets - net of current portion (Note 33) 75,718 —
Net pension assets (Note 26) 87,146 50,410
Deferred income tax assets (Note 28) 1,441,768 1,539,020
Other noncurrent assets (Note 13) 7,183,001 9,271,556
Total Noncurrent Assets 322,995,682 320,420,416
TOTAL ASSETS ₱427,415,619 ₱397,925,118

LIABILITIES AND EQUITY

Current Liabilities
Short-term loans (Note 15) ₱18,625,546 ₱13,184,103
Current portions of:
Long-term debts (Note 16) 18,419,227 15,813,523
Lease liabilities (Note 34) 8,106,781 7,104,181
Long-term obligation on power distribution system 40,000 40,000
Derivative liabilities (Note 33) 219,030 787,273
Trade and other payables (Note 14) 22,744,322 18,371,798
Income tax payable 264,647 722,715
Total Current Liabilities ₱68,419,553 ₱56,023,593

(Forward)

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December 31
2021 2020
Noncurrent Liabilities
Noncurrent portions of:
Long-term debts (Note 16) ₱163,618,747 ₱160,067,119
Lease liabilities (Note 34) 25,667,098 32,158,796
Long-term obligation on power distribution system 125,532 143,436
Derivative liabilities - net of current portion (Note 33) 174,664 1,001,529
Customers’ deposits (Note 17) 7,200,341 6,798,845
Decommissioning liability (Note 18) 5,686,224 5,008,033
Deferred income tax liabilities (Note 28) 585,440 745,214
Net pension liabilities (Note 26) 302,812 294,086
Other noncurrent liabilities (Note 39k) 54,505 1,099,394
Total Noncurrent Liabilities 203,415,363 207,316,452
Total Liabilities 271,834,916 263,340,045
Equity Attributable to Equity Holders of the Parent
Paid-in capital (Note 19a) 19,947,498 19,947,498
Share in other comprehensive income (loss) of associates and joint
ventures (Note 9) 185,183 (576,692)
Cumulative translation adjustments (Note 33) 1,917,151 (1,067,593)
Cash flow hedge reserve (Note 33) 917,353 (1,379,180)
Actuarial losses on defined benefit plans (Note 26) (1,072,629) (1,239,612)
Equity reserve (7,175,742) (7,175,742)
Retained earnings (Note 19b)
Appropriated 20,060,000 33,660,000
Unappropriated (Notes 9 and 19c) 113,172,268 84,989,900
147,951,082 127,158,579
Non-controlling Interests 7,629,621 7,426,494
Total Equity (Note 19c) 155,580,703 134,585,073
TOTAL LIABILITIES AND EQUITY ₱427,415,619 ₱397,925,118

See accompanying Notes to Consolidated Financial Statements.

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ABOITIZ POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Earnings Per Share Amounts)

Years Ended December 31

2021 2020 2019
OPERATING REVENUES
Sale of power (Notes 20 and 31):
Generation ₱70,008,135 ₱51,750,660 ₱55,895,587
Distribution 44,375,529 41,872,331 46,120,403
Retail electricity supply 19,874,964 16,476,713 22,805,450
Technical, management and other fees (Note 31) 100,593 276,945 813,717
OPERATING REVENUES 134,359,221 110,376,649 125,635,157

OPERATING EXPENSES
Cost of purchased power (Notes 21 and 31) 41,496,499 31,409,251 35,835,144
Cost of generated power (Note 22) 33,499,708 23,461,858 35,526,706
Depreciation and amortization (Notes 11, 12 and 34) 11,202,273 10,973,364 9,895,695
General and administrative (Note 23) 9,540,775 8,663,373 8,155,366
Operations and maintenance (Note 24) 10,410,170 8,988,916 7,366,372
106,149,425 83,496,762 96,779,283

FINANCIAL INCOME (EXPENSES)

Interest income (Notes 5 and 31) 343,233 653,076 1,291,703
Interest expense and other financing costs (Notes 15, 16,
32 and 34) (13,590,365) (14,253,528) (14,047,646)
(13,247,132) (13,600,452) (12,755,943)

OTHER INCOME (EXPENSES)

Share in net earnings of associates and joint ventures
(Note 9) 9,479,696 2,675,136 3,813,962
Other income (expenses) - net (Note 27) 213,565 4,928,563 3,483,387
9,693,261 7,603,699 7,297,349

INCOME BEFORE INCOME TAX 24,655,925 20,883,134 23,397,280

PROVISION FOR INCOME TAX (Note 28) 2,110,710 6,061,912 3,215,498
NET INCOME ₱22,545,215 ₱14,821,222 ₱20,181,782

ATTRIBUTABLE TO:
Equity holders of the parent ₱20,837,182 ₱12,577,676 ₱17,322,677
Non-controlling interests 1,708,033 2,243,546 2,859,105
₱22,545,215 ₱14,821,222 ₱20,181,782

EARNINGS PER COMMON SHARE (Note 29)

Basic and diluted, income for the period attributable to
ordinary equity holders of the parent ₱2.83 ₱1.71 ₱2.35

See accompanying Notes to Consolidated Financial Statements.

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ABOITIZ POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Thousands)

Years Ended December 31

2021 2020 2019
NET INCOME ATTRIBUTABLE TO:
Equity holders of the parent ₱20,837,182 ₱12,577,676 ₱17,322,677
Non-controlling interests 1,708,033 2,243,546 2,859,105
22,545,215 14,821,222 20,181,782
OTHER COMPREHENSIVE INCOME (LOSS)
Other comprehensive income (loss) that may be
reclassified to profit or loss in subsequent
periods:
Movement in cumulative translation
adjustments 2,990,011 (2,749,926) 751,169
Movement in cash flow hedges 2,355,803 764,459 (2,518,667)
Share in movement in cumulative
translation adjustment of associates and
joint ventures 753,960 (530,557) (474,624)
Share in net unrealized valuation losses on
fair value through other
comprehensive income (FVOCI)
investments of an associate (Note 9) — (3,125) —
Net other comprehensive income (loss) to be
reclassified to profit or loss in subsequent
periods 6,099,774 (2,519,149) (2,242,122)
Other comprehensive income (loss) that will not
be reclassified to profit or loss in
subsequent periods:
Share in actuarial gain (loss) on defined
benefit plans of associates and joint
ventures, net of tax 7,915 23,047 (44,028)
Actuarial gain (loss) on defined benefit
plans, net of tax (Note 26) 168,827 (327,505) (329,029)
Net other comprehensive gain (loss) not to be
reclassified to profit or loss in subsequent
periods 176,742 (304,458) (373,057)
Total other comprehensive income (loss) for the
period, net of tax 6,276,516 (2,823,607) (2,615,179)
TOTAL COMPREHENSIVE INCOME ₱28,821,731 ₱11,997,615 ₱17,566,603

ATTRIBUTABLE TO:
Equity holders of the parent ₱27,047,317 ₱10,298,742 ₱14,947,290
Non-controlling interests 1,774,414 1,698,873 2,619,313
₱28,821,731 ₱11,997,615 ₱17,566,603

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019
(Amounts in Thousands, Except Dividends Per Share Amounts)

Attributable to Equity Holders of the Parent

Share in Other
Comprehensive
Income (Loss) Actuarial
of Associates Losses on
Cash Flow Retained Earnings (Note 19b)
Paid-in and Joint Cumulative Defined Non-
Capital Ventures Translation Hedge Benefit Plans Equity controlling
(Note 19a) (Note 9) Adjustments Reserve (Note 26) Reserve Appropriated Unappropriated Interests Total
Balances at January 1, 2021 ₱19,947,498 (₱576,692) (₱1,067,593) (₱1,379,180) (₱1,239,612) (₱7,175,742) ₱33,660,000 ₱84,989,900 ₱7,426,494 ₱134,585,073
Net income for the year — — — — — — — 20,837,182 1,708,033 22,545,215
Other comprehensive income
Share in other comprehensive income of associates and
joint ventures — 761,875 — — — — — — — 761,875
Movement in cumulative translation adjustments — — 2,984,744 — — — — — 5,267 2,990,011
Movement in cash flow hedges — — — 2,296,533 — — — — 59,270 2,355,803
Actuarial gain on defined benefit plans, net of tax — — — — 166,983 — — — 1,844 168,827
Total comprehensive income for the year — 761,875 2,984,744 2,296,533 166,983 — — 20,837,182 1,774,414 28,821,731
Reversal of appropriation — — — — — — (13,600,000) 13,600,000 — —
Cash dividends - ₱0.85 per share (Note 19b) — — — — — — — (6,254,814) — (6,254,814)
Cash dividends paid to non-controlling interests — — — — — — — — (1,586,998) (1,586,998)
Change in non-controlling interests — — — — — — — — 15,711 15,711
Balances at December 31, 2021 ₱19,947,498 ₱185,183 ₱1,917,151 ₱917,353 (₱1,072,629) (₱7,175,742) ₱20,060,000 ₱113,172,268 ₱7,629,621 ₱155,580,703

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Attributable to Equity Holders of the Parent

Share in Other
Comprehensive Actuarial
Loss of Losses on
Associates and Cumulative Cash Flow Defined Non-
Paid-in Capital Joint Ventures Translation Hedge Benefit Plans Equity Retained Earnings (Note 19b) controlling
(Note 19a) (Note 9) Adjustments Reserve (Note 26) Reserve Appropriated Unappropriated Interests Total
Balances at January 1, 2020 ₱19,947,498 (₱66,057) ₱1,229,557 (₱2,223,810) (₱923,833) (₱7,175,742) ₱33,660,000 ₱81,095,377 ₱8,100,021 ₱133,643,011
Net income for the year — — — — — — — 12,577,676 2,243,546 14,821,222
Other comprehensive income (loss)
Share in other comprehensive loss of associates and joint —
ventures — (510,635) — — — — — — (510,635)
Movement in cumulative translation adjustments — — (2,297,150) — — — — — (452,776) (2,749,926)
Movement in cash flow hedges — — — 844,630 — — — — (80,171) 764,459
Actuarial loss on defined benefit plans, net of tax — — — — (315,779) — — — (11,726) (327,505)
Total comprehensive income (loss) for the year — (510,635) (2,297,150) 844,630 (315,779) — — 12,577,676 1,698,873 11,997,615
Cash dividends - ₱1.18 per share (Note 19b) — — — — — — — (8,683,153) — (8,683,153)
Cash dividends paid to non-controlling interests — — — — — — — — (2,350,216) (2,350,216)
Change in non-controlling interests — — — — — — — — (22,184) (22,184)
Balances at December 31, 2020 ₱19,947,498 (₱576,692) (₱1,067,593) (₱1,379,180) (₱1,239,612) (₱7,175,742) ₱33,660,000 ₱84,989,900 ₱7,426,494 ₱134,585,073

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Attributable to Equity Holders of the Parent

Share in Other
Comprehensive Actuarial
Income (Loss) of Losses on
Associates and Cumulative Cash Flow Defined Non-
Paid-in Capital Joint Ventures Translation Hedge Benefit Plans Retained Earnings (Note 19b) controlling
(Note 19a) (Note 9) Adjustments Reserve (Note 26) Equity Reserve Appropriated Unappropriated Interests Total
Balances at January 1, 2019 ₱19,947,498 ₱452,595 ₱312,802 ₱213,114 (₱587,267) (₱1,113,564) ₱34,060,000 ₱74,189,848 ₱8,823,681 ₱136,298,707
Net income for the year — — — — — — — 17,322,677 2,859,105 20,181,782
Other comprehensive income (loss)
Share in other comprehensive loss of associates and joint —
ventures — (518,652) — — — — — — (518,652)
Movement in cumulative translation adjustments — — 916,755 — — — — — (165,586) 751,169
Movement in cash flow hedges — — — (2,436,924) — — — — (81,743) (2,518,667)
Actuarial loss on defined benefit plans, net of tax — — — — (336,566) — — — 7,537 (329,029)
Total comprehensive income (loss) for the year — (518,652) 916,755 (2,436,924) (336,566) — — 17,322,677 2,619,313 17,566,603
Reversal of appropriation — — — — — — (12,300,000) 12,300,000 — —
Appropriations during the period — — — — — — 11,900,000 (11,900,000) — —
Acquisition of non-controlling interest (Note 9) — — — — — (6,062,178) — — (710,830) (6,773,008)
Cash dividends - ₱1.47 per share (Note 19b) — — — — — — — (10,817,148) — (10,817,148)
Cash dividends paid to non-controlling interests — — — — — — — — (2,580,724) (2,580,724)
Change in non-controlling interests — — — — — — — — (51,419) (51,419)
Balances at December 31, 2019 ₱19,947,498 (₱66,057) ₱1,229,557 (₱2,223,810) (₱923,833) (₱7,175,742) ₱33,660,000 ₱81,095,377 ₱8,100,021 ₱133,643,011

See accompanying Notes to Consolidated Financial Statements.

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ABOITIZ POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)

Years Ended December 31

2021 2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax ₱24,655,925 ₱20,883,134 ₱23,397,280
Adjustments for:
Interest expense and other financing costs (Note 32) 13,590,365 14,253,528 14,047,646
Depreciation and amortization (Notes 11 and 12) 11,202,273 10,973,364 9,895,695
Share in net earnings of associates and joint ventures
(Note 9) (9,479,696) (2,675,136) (3,813,962)
Net unrealized foreign exchange loss (gain) 1,816,579 (2,022,493) (1,950,762)
Interest income (Notes 5 and 31) (343,233) (653,076) (1,291,703)
Impairment loss (recovery) on property, plant and
equipment, goodwill and other assets
(Notes 11, 12, 13 and 27) 340,597 113,683 (245,489)
Write-off of project development costs (Notes 12
and 27) 298,031 7,240 31,431
Losses on disposal of property, plant and equipment
(Note 27) 214,032 88,227 304,631
Unrealized fair valuation loss (gain) on derivatives
and financial assets at FVTPL (Note 33) (18,333) 4,848 1,424
Unrealized fair valuation gains on investment
property (Note 27) — (115,829) (126,842)
Gain on sale of financial assets at FVTPL — — (1,251)
Operating income before working capital changes 42,276,540 40,857,490 40,248,098
Decrease (increase) in:
Trade and other receivables (4,134,879) (8,521,328) (5,765,526)
Inventories (3,266,413) 323,829 58,424
Other current assets 1,102,850 2,857,713 2,780,992
Increase (decrease) in:
Trade and other payables 2,427,336 632,050 5,230,984
Long-term obligation on power distribution system (40,000) (40,000) (40,000)
Customers' deposits 401,496 277,376 513,105
Net cash generated from operations 38,766,930 36,387,130 43,026,077
Income and final taxes paid (2,439,894) (4,605,461) (3,669,115)
Net cash flows from operating activities 36,327,036 31,781,669 39,356,962
CASH FLOWS FROM INVESTING ACTIVITIES
Cash dividends received (Note 9) 8,355,017 3,238,926 3,784,671
Decrease (increase) in other noncurrent assets 1,553,457 (636,579) (2,109,404)
Interest received 314,490 654,133 1,421,536
Proceeds from redemption of shares (Note 9) 14,413 6,939 5,340
Proceeds from sale of property, plant and equipment 10,360 8,851 63,555
Net collection of advances (Note 9) 5,549 2,035 —
Acquisitions through business combinations, net of cash
acquired 1,251 — —
Disposal of assets at FVTPL — — 101,251

(Forward)

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Years Ended December 31

2021 2020 2019
Additions to:
Property, plant and equipment (Note 11) (₱8,254,307) (₱5,428,730) (₱9,675,816)
Intangible assets - service concession rights (Note 12) (27,673) (39,957) (60,625)
Additional investments (Note 9) (954,386) (2,332,591) (27,591,092)
Net cash flows from (used in) investing activities 1,018,171 (4,526,973) (34,060,584)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from long-term debt (Note 16) 39,737,724 20,967,211 33,246,916
Net availments (payments of) short-term loans (Note 15) 5,352,163 1,888,223 (934,625)
Cash dividends paid (Note 19b) (6,254,588) (8,682,746) (10,817,148)
Payments of:
Long-term debt (Note 16) (37,179,837) (19,905,432) (11,819,230)
Lease liabilities (Note 34) (9,401,915) (7,632,923) (7,424,990)
Interest (9,770,209) (10,032,413) (7,273,246)
Payment of dividends to non-controlling interests (1,586,998) (2,515,930) (2,580,724)
Acquisition of non-controlling interest (Note 9) — — (6,773,008)
Net cash flows used in financing activities (19,103,660) (25,914,010) (14,376,055)
NET INCREASE (DECREASE) IN CASH AND CASH
18,241,547 1,340,686 (9,079,677)
EQUIVALENTS
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
189,151 (75,070) 170,565
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 38,699,545 37,433,929 46,343,041
CASH AND CASH EQUIVALENTS AT END OF YEAR
₱57,130,243 ₱38,699,545 ₱37,433,929
(Note 5)

See accompanying Notes to Consolidated Financial Statements.

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ABOITIZ POWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands, Except Earnings per Share and Exchange Rate Data and When Otherwise
Indicated)

1. Corporate Information

Aboitiz Power Corporation (the Company) was incorporated in the Philippines and registered with
the Securities and Exchange Commission on February 13, 1998. The Company is a publicly-listed
holding company of the entities engaged in power generation, retail electricity supply and power
distribution in the Aboitiz Group. On December 16, 2021, JERA Asia Private Limited completed the
acquisition of the Company's share from Aboitiz Equity Ventures, Inc. (AEV) and Aboitiz & Company,
Inc. (ACO) totaling to 27%. As of December 31, 2021, AEV (also incorporated in the Philippines)
owns 52.00% of the Company. The ultimate parent of the Company is ACO.

The Company’s registered office address is 32nd Street, Bonifacio Global City, Taguig City, Metro
Manila.

The consolidated financial statements of the Group were approved and authorized for issue in
accordance with a resolution by the Board of Directors (BOD) of the Company on March 4, 2022.

2. Group Information
The consolidated financial statements comprise the financial statements of the Company,
subsidiaries of the Company and a joint operation that is subject to joint control (collectively
referred to as “the Group”; see Note 10). The following are the subsidiaries as of December 31 of
each year:

Percentage of Ownership
Nature of 2021 2020 2019
Business Direct Indirect Direct Indirect Direct Indirect
Aboitiz Renewables, Inc. (ARI) and Subsidiaries Power generation 100.00 – 100.00 – 100.00 –
AP Renewables, Inc. (APRI) Power generation – 100.00 – 100.00 – 100.00
Aboitiz Power Distributed Energy, Inc. Power generation – 100.00 – 100.00 – 100.00
Aboitiz Power Distributed Renewables, Inc. Power generation – 100.00 – 100.00 – 100.00
Hedcor, Inc. (HI) Power generation – 100.00 – 100.00 – 100.00
Hedcor Sibulan, Inc. (HSI) Power generation – 100.00 – 100.00 – 100.00
Hedcor Tudaya, Inc. (HTI) Power generation – 100.00 – 100.00 – 100.00
Luzon Hydro Corporation (LHC) Power generation – 100.00 – 100.00 – 100.00
Sinag Solar Power Corporation (formerly AP Solar Tiwi,
Inc.)* Power generation – 100.00 – 100.00 – 100.00
Retensol, Inc.* Power generation – 100.00 – 100.00 – 100.00
AP Renewable Energy Corporation* Power generation – 100.00 – 100.00 – 100.00
Aseagas Corporation (Aseagas)* Power generation – 100.00 – 100.00 – 100.00
Bakun Power Line Corporation* Power generation – 100.00 – 100.00 – 100.00
Cleanergy, Inc.* Power generation – 100.00 – 100.00 – 100.00
Cordillera Hydro Corporation* Power generation – 100.00 – 100.00 – 100.00
Hedcor Benguet, Inc.* Power generation – 100.00 – 100.00 – 100.00
Hedcor Bukidnon, Inc. (Hedcor Bukidnon) Power generation – 100.00 – 100.00 – 100.00
Hedcor Kabayan, Inc. * Power generation – 100.00 – 100.00 – 100.00
PV Sinag Power, Inc. (formerly Hedcor Ifugao, Inc.)* Power generation – 100.00 – 100.00 – 100.00
Amihan Power, Inc. (formerly Hedcor Kalinga, Inc.)* Power generation – 100.00 – 100.00 – 100.00
Aboitiz Solar Power, Inc. (formerly Hedcor Itogon Inc.)* Power generation – 100.00 – 100.00 – 100.00
Hedcor Manolo Fortich, Inc.* Power generation – 100.00 – 100.00 – 100.00

(Forward)

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Percentage of Ownership
Nature of 2021 2020 2019
Business Direct Indirect Direct Indirect Direct Indirect
Amihan Frontier Energy, Inc. (formerly Hedcor Mt.
Province, Inc.)* Power generation – 100.00 – 100.00 – 100.00
Hedcor Sabangan, Inc. (Hedcor Sabangan) Power generation – 100.00 – 100.00 – 100.00
Hedcor Tamugan, Inc.* Power generation – 100.00 – 100.00 – 100.00
Mt. Apo Geopower, Inc.* Power generation – 100.00 – 100.00 – 100.00
Negron Cuadrado Geopower, Inc. (NCGI)* Power generation – 100.00 – 100.00 – 100.00
Tagoloan Hydro Corporation* Power generation – 100.00 – 100.00 – 100.00
Luzon Hydro Company Limited* Power generation – 100.00 – 100.00 – 100.00
Electricidad, Inc. (formerly La Filipina Electrika, Inc.)* Power generation – 100.00 – – – –
Wind Renewable Energy Corporation* Power generation – 100.00 – – – –
Maaraw Renewable Energy Corporation* Power generation – 100.00 – – – –
Hydro Electric Development Corporation* Power generation – 99.97 – 99.97 – 99.97
Therma Power, Inc. (TPI) and Subsidiaries Power generation 100.00 – 100.00 – 100.00 –
Mindanao Sustainable Solutions, Inc.* Services – 100.00 – 100.00 – 100.00
Therma Luzon, Inc. (TLI) Power generation – 100.00 – 100.00 – 100.00
Therma Marine, Inc. (Therma Marine) Power generation – 100.00 – 100.00 – 100.00
Therma Mobile, Inc. (Therma Mobile) Power generation – 100.00 – 100.00 – 100.00
Therma South, Inc. (TSI) Power generation – 100.00 – 100.00 – 100.00
Therma Power-Visayas, Inc. (TPVI) Power generation – 100.00 – 100.00 – 100.00
Therma Central Visayas, Inc.* Power generation – 100.00 – 100.00 – 100.00
Therma Subic, Inc.* Power generation – 100.00 – 100.00 – 100.00
Therma Mariveles Holdings, Inc. Holding company – 100.00 – 100.00 – 100.00
GNPower Mariveles Energy Center Ltd. Co. (former
GNPower Mariveles Coal Plant) (GMEC) Power generation – 78.33 – 78.33 – 78.33
Therma Dinginin Holdings, Inc. Holding company – 100.00 – 100.00 – 100.00
Therma Visayas, Inc. (TVI) Power generation – 80.00 – 80.00 – 80.00
Abovant Holdings, Inc. Holding company – 60.00 – 60.00 – 60.00
AboitizPower International Pte. Ltd. (API) Holding company 100.00 – 100.00 – 100.00 –
Aboitiz Energy Solutions, Inc. (AESI) Retail electricity supplier 100.00 – 100.00 – 100.00 –
Adventenergy, Inc. (AI) Retail electricity supplier 100.00 – 100.00 – 100.00 –
Balamban Enerzone Corporation (BEZ) Power distribution 100.00 – 100.00 – 100.00 –
Lima Enerzone Corporation (LEZ) Power distribution 100.00 – 100.00 – 100.00 –
Mactan Enerzone Corporation (MEZ) Power distribution 100.00 – 100.00 – 100.00 –
Malvar Enerzone Corporation (MVEZ) Power distribution 100.00 – 100.00 – 100.00 –
East Asia Utilities Corporation (EAUC) Power generation 50.00 50.00 50.00 50.00 50.00 50.00
Cotabato Light and Power Company (CLP) Power distribution 99.94 – 99.94 – 99.94 –
Cotabato Ice Plant, Inc. Manufacturing – 100.00 – 100.00 – 100.00
Davao Light & Power Company, Inc. (DLP) Power distribution 99.93 – 99.93 – 99.93 –
Maaraw Holdings San Carlos, Inc. (MHSCI, see Note 9) Holding company – 100.00 – 100.00 – 100.00
San Carlos Sun Power, Inc. (Sacasun, see Note 9) Power generation – 100.00 – 100.00 – 100.00
AboitizPower International B.V. (APIBV, see Note 9) Holding company – 100.00 – 100.00 – 100.00
Subic Enerzone Corporation (SEZ) Power distribution 65.00 34.98 65.00 34.98 65.00 34.98
Cebu Private Power Corporation (CPPC) Power generation 60.00 – 60.00 – 60.00 –
Prism Energy, Inc. (PEI) Retail electricity supplier 60.00 – 60.00 – 60.00 –
Visayan Electric Company (VECO) Power distribution 55.26 – 55.26 – 55.26 –
* No commercial operations as of December 31, 2021.

All of the foregoing subsidiaries are incorporated and registered with the Philippine SEC and operate
in the Philippines except for the following:

Country of
Subsidiary incorporation
AboitizPower International Pte. Ltd. Singapore
AboitizPower International B.V. Netherlands

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Material partly-owned subsidiary

Information of subsidiaries that have material non-controlling interests is provided below:

2021 2020 2021 2020 2021 2020

VECO VECO TVI TVI GMEC GMEC
Summarized balance sheet
information
Current assets ₱3,893,467 ₱3,927,347 ₱8,204,475 ₱8,884,283 ₱11,903,465 ₱8,799,937
Noncurrent assets 13,063,250 13,172,421 33,463,331 34,999,698 32,261,831 31,011,841
Current liabilities 7,123,948 6,983,082 4,199,642 5,085,904 10,081,276 5,413,454
Noncurrent liabilities 3,358,708 4,084,624 24,697,667 27,114,919 31,372,483 32,243,565
Non-controlling interests 2,676,895 2,534,720 2,570,405 2,352,937 895,600 902,282
Summarized comprehensive income
information
Profit for the year ₱2,337,966 ₱1,883,558 ₱1,081,523 ₱283,194 ₱83,498 ₱4,133,938
Total comprehensive income 2,303,253 1,848,845 1,087,338 271,949 385,153 3,746,717
Summarized other financial
information
Profit (loss) attributable to non-
controlling interests ₱1,080,695 ₱814,947 ₱216,305 ₱56,639 (₱76,688) ₱1,401,774
Dividends paid to non-controlling
interests 938,149 952,742 — — — 714,687
Summarized cash flow information
Operating ₱2,498,355 ₱1,790,658 ₱4,394,866 ₱57,912 ₱1,962,435 ₱7,042,638
Investing (379,535) (658,185) 555,734 (533,532) (2,176,780) (769,887)
Financing (1,986,331) (1,954,658) (4,299,085) (2,104,388) (210,090) (6,311,812)
Net increase (decrease) in cash
and cash equivalents ₱132,489 (₱822,185) ₱651,515 (₱2,580,008) (₱504,310) (₱39,061)

3. Summary of Significant Accounting Policies

Basis of Preparation
The accompanying consolidated financial statements have been prepared on a historical cost basis,
except for derivative financial instruments, financial assets at FVTPL and investment properties
which are measured at fair value. The consolidated financial statements are presented in Philippine
peso which is the Company’s functional currency and all values are rounded to the nearest thousand
except for earnings per share and exchange rates and as otherwise indicated.

The consolidated financial statements provide comparative information in respect of the previous
periods.

Statement of Compliance
The consolidated financial statements are prepared in compliance with Philippine Financial
Reporting Standards (PFRSs).

Basis of Consolidation
The consolidated financial statements comprise the financial statements of the Company, its
subsidiaries and a joint operation that is subject to joint control, as at December 31 of each year.
The Group controls an investee if and only if the Group has:

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• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant
activities of the investee);
• Exposure, or rights, to variable returns from its involvement with the investee; and
• The ability to use its power over the investee to affect is returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group
considers all relevant facts and circumstances in assessing whether it has power over an investee,
including:

o The contractual arrangement with the other vote holders of the investee;
o Rights arising from other contractual arrangements; and
o The Group’s voting rights and potential voting rights.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements if control. Consolidation of a subsidiary
begins when the Group obtains control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated statement of comprehensive income from the date
the Group gains control until the date the Group ceases to control the subsidiary.

The financial statements of the subsidiaries are prepared for the same reporting year as the
Company.

Profit or loss and each component of other comprehensive income are attributed to the equity
holders of the parent of the Group and to the non-controlling interests, even if this results in the
non-controlling interests having deficit balance. When necessary, adjustments are made to the
financial statements of subsidiaries to bring their accounting policies into line with the Group’s
accounting policies. All intra-group assets, liabilities, equity, income, expenses, cash flows relating to
transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an
equity transaction. If the Group loses control over a subsidiary, it:

• Derecognizes the assets (including goodwill) and liabilities of the subsidiary;

• Derecognizes the carrying amount of any non-controlling interest;
• Derecognizes the cumulative translation differences recorded in equity;
• Recognizes the fair value of the consideration received;
• Recognizes the fair value of any investment retained;
• Recognizes any surplus or deficit in profit or loss; and
• Reclassifies the parent’s share of components previously recognized in other comprehensive
income to profit or loss or retained earnings, as appropriate.

Transactions with Non-controlling Interests

Non-controlling interests represent the portion of profit or loss and net assets in the subsidiaries not
held by the Group and are presented separately in the consolidated statement of income and within
equity in the consolidated balance sheet, separately from the equity attributable to equity holders of
the parent. Transactions with non-controlling interests are accounted for as equity transactions. On
acquisitions of non-controlling interests, the difference between the consideration and the book
value of the share of the net assets acquired is reflected as being a transaction between owners and
recognized directly in equity. Gain or loss on disposals of non-controlling interest is also recognized
directly in equity.

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Changes in Accounting Policies and Disclosures

The accounting policies adopted are consistent with those of the previous financial year, except for
the amendments to existing standards which were applied starting January 1, 2021. The Group has
not early adopted any other standard, interpretation or amendment that has been issued but is not
yet effective.

o Amendment to PFRS 16, COVID-19-related Rent Concessions beyond 30 June 2021

The amendment provides relief to lessees from applying the PFRS 16 requirement on lease
modifications to rent concessions arising as a direct consequence of the COVID-19 pandemic. A
lessee may elect not to assess whether a rent concession from a lessor is a lease modification if
it meets all of the following criteria:

• The rent concession is a direct consequence of COVID-19;

• The change in lease payments results in a revised lease consideration that is substantially
the same as, or less than, the lease consideration immediately preceding the change;
• Any reduction in lease payments affects only payments originally due on or before
June 30, 2022; and
• There is no substantive change to other terms and conditions of the lease.

A lessee that applies this practical expedient will account for any change in lease payments
resulting from the COVID-19 related rent concession in the same way it would account for a
change that is not a lease modification, i.e., as a variable lease payment.

• Amendments to PFRS 9, PFRS 7, PFRS 4 and PFRS 16, Interest Rate Benchmark Reform - Phase 2

The amendments provide temporary reliefs which address the financial reporting effects when
an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate
(RFR):

• Practical expedient for changes in the basis for determining the contractual cash flows as a
result of IBOR reform
• Relief from discontinuing hedging relationships
• Relief from the separately identifiable requirement when an RFR instrument is designated as
a hedge of a risk component

The Group shall also disclose information about:

• The nature and extent of risks to which the entity is exposed arising from financial
instruments subject to IBOR reform, and how the entity manages those risks; and
• Their progress in completing the transition to alternative benchmark rates, and how the
entity is managing that transition

The Group’s treasury function is managing the Group’s LIBOR transition plan. The greatest
change will be amendments to the contractual terms of the LIBOR-referenced floating-rate debt
and the associated swap and the corresponding update of the hedge designation. However, the
changed reference rate may also affect other systems, processes, risk and valuation models, as
well as having tax and accounting implications.

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The adoption of these amendments did not have a significant impact on the consolidated financial
statements.

New Standards and Interpretation Issued and Effective after December 31, 2021
The Group will adopt the standards enumerated below when these become effective. Except as
otherwise indicated, the Group does not expect the adoption of these new and amended PFRSs, PAS
and Philippine Interpretations to have significant impact on its consolidated financial statements.

Effective beginning on or after January 1, 2022

• Amendments to PFRS 3, Reference to the Conceptual Framework

The amendments are intended to replace a reference to the Framework for the Preparation and
Presentation of Financial Statements, issued in 1989, with a reference to the Conceptual
Framework for Financial Reporting issued in March 2018 without significantly changing its
requirements. The amendments added an exception to the recognition principle of PFRS 3,
Business Combinations to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities
and contingent liabilities that would be within the scope of PAS 37, Provisions, Contingent
Liabilities and Contingent Assets or Philippine-IFRIC 21, Levies, if incurred separately. At the same
time, the amendments add a new paragraph to PFRS 3 to clarify that contingent assets do not
qualify for recognition at the acquisition date.

The amendments are applied prospectively.

• Amendments to PAS 16, Property, Plant and Equipment: Proceeds before Intended Use

The amendments prohibit entities deducting from the cost of an item of property, plant and
equipment, any proceeds from selling items produced while bringing that asset to the location
and condition necessary for it to be capable of operating in the manner intended by
management. Instead, an entity recognizes the proceeds from selling such items, and the costs
of producing those items, in profit or loss.

The amendment must be applied retrospectively to items of property, plant and equipment
made available for use on or after the beginning of the earliest period presented when the entity
first applies the amendment.

The Group is currently in the process of quantifying the impact of this amendment.

• Amendments to PAS 37, Onerous Contracts – Costs of Fulfilling a Contract

The amendment specifies which costs an entity needs to include when assessing whether a
contract is onerous or loss-making. The amendments apply a “directly related cost approach”.
The costs that relate directly to a contract to provide goods or services include both incremental
costs and an allocation of costs directly related to contract activities. General and administrative
costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to
the counterparty under the contract.

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The Group will apply these amendments to contracts for which it has not yet fulfilled all its
obligations at the beginning of the annual reporting period in which it first applies the
amendments.

• Annual Improvements to PFRSs 2018-2020 Cycle

• Amendments to PFRS 1, First-time Adoption of PFRS – Subsidiary as a first-time adopter

The amendment permits a subsidiary that elects to apply paragraph D16(a) of PFRS 1 to
measure cumulative translation differences using the amounts reported by the parent,
based on the parent’s date of transition to PFRS. This amendment is also applied to an
associate or joint venture that elects to apply paragraph D16(a) of PFRS 1.

The amendment is effective for annual reporting periods beginning on or after

January 1, 2022 with earlier adoption permitted.

• Amendments to PFRS 9, Financial Instruments – Fees in the ’10 per cent’ test for
derecognition of financial liabilities

The amendment clarifies the fees that an entity includes when assessing whether the terms
of a new or modified financial liability are substantially different from the terms of the
original financial liability. These fees include only those paid or received between the
borrower and the lender, including fees paid or received by either the borrower or lender on
the other’s behalf. An entity applies the amendment to financial liabilities that are modified
or exchanged on or after the beginning of the annual reporting period in which the entity
first applies the amendment.

The amendment is effective for annual reporting periods beginning on or after

January 1, 2022 with earlier adoption permitted. The Group will apply the amendments to
financial liabilities that are modified or exchanged on or after the beginning of the annual
reporting period in which the entity first applies the amendment.

• PAS 41, Agriculture – Taxation in fair value measurements

The amendment removes the requirement in paragraph 22 of PAS 41 that entities exclude
cash flows for taxation when measuring the fair value of assets within the scope of PAS 41.

An entity applies the amendment prospectively to fair value measurements on or after the
beginning of the first annual reporting period beginning on or after January 1, 2022 with
earlier adoption permitted.

Effective beginning on or after January 1, 2023

• Amendments to PAS 12, Deferred Tax related to Assets and Liabilities arising from a Single
Transaction

The amendments narrow the scope of the initial recognition exception under PAS 12, so that it
no longer applies to transactions that give rise to equal taxable and deductible temporary
differences.

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The amendments also clarify that where payments that settle a liability are deductible for tax
purposes, it is a matter of judgement (having considered the applicable tax law) whether
such deductions are attributable for tax purposes to the liability recognized in the financial
statements (and interest expense) or to the related asset component (and interest expense).

An entity applies the amendments to transactions that occur on or after the beginning of the
earliest comparative period presented for annual reporting periods on or after January 1, 2023.

The Group is currently in the process of quantifying the impact of this amendment in respect of
those temporary differences arising from the transactions contemplated by this amendment.

 Amendments to PAS 8, Definition of Accounting Estimates

The amendments introduce a new definition of accounting estimates and clarify the distinction
between changes in accounting estimates and changes in accounting policies and the correction
of errors. Also, the amendments clarify that the effects on an accounting estimate of a change in
an input or a change in a measurement technique are changes in accounting estimates if they do
not result from the correction of prior period errors.

An entity applies the amendments to changes in accounting policies and changes in accounting
estimates that occur on or after January 1, 2023 with earlier adoption permitted.

• Amendments to PAS 1 and PFRS Practice Statement 2, Disclosure of Accounting Policies

The amendments provide guidance and examples to help entities apply materiality judgements
to accounting policy disclosures. The amendments aim to help entities provide accounting policy
disclosures that are more useful by:

• Replacing the requirement for entities to disclose their ‘significant’ accounting policies with
a requirement to disclose their ‘material’ accounting policies, and
 Adding guidance on how entities apply the concept of materiality in making decisions about
accounting policy disclosures

The amendments to the Practice Statement provide non-mandatory guidance. Meanwhile, the
amendments to PAS 1 are effective for annual periods beginning on or after January 1, 2023.
Early application is permitted as long as this fact is disclosed.

Effective beginning on or after January 1, 2024

 Amendments to PAS 1, Classification of Liabilities as Current or Non-current

The amendments clarify paragraphs 69 to 76 of PAS 1, Presentation of Financial Statements, to

specify the requirements for classifying liabilities as current or non-current. The amendments
clarify:

 What is meant by a right to defer settlement

 That a right to defer must exist at the end of the reporting period
 That classification is unaffected by the likelihood that an entity will exercise its deferral right
 That only if an embedded derivative in a convertible liability is itself an equity instrument
would the terms of a liability not impact its classification

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The amendments are effective for annual reporting periods beginning on or after January 1,
2023 and must be applied retrospectively. However, in November 2021, the International
Accounting Standards Board (IASB) tentatively decided to defer the effective date to no earlier
than January 1, 2024. The Group is currently assessing the impact the amendments will have on
current practice.

Effective beginning on or after January 1, 2025

• PFRS 17, Insurance Contracts

PFRS 17 is a comprehensive new accounting standard for insurance contracts covering

recognition and measurement, presentation and disclosure. Once effective, PFRS 17 will replace
PFRS 4, Insurance Contracts. This new standard on insurance contracts applies to all types of
insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type
of entities that issue them, as well as to certain guarantees and financial instruments with
discretionary participation features. A few scope exceptions will apply.

The overall objective of PFRS 17 is to provide an accounting model for insurance contracts that is
more useful and consistent for insurers. In contrast to the requirements in PFRS 4, which are
largely based on grandfathering previous local accounting policies, PFRS 17 provides a
comprehensive model for insurance contracts, covering all relevant accounting aspects.
The core of PFRS 17 is the general model, supplemented by:

• A specific adaptation for contracts with direct participation features (the variable fee
approach)
• A simplified approach (the premium allocation approach) mainly for short-duration contracts

On December 15, 2021, the FRSC amended the mandatory effective date of PFRS 17 from
January 1, 2023 to January 1, 2025. This is consistent with Circular Letter No. 2020-62 issued by
the Insurance Commission which deferred the implementation of PFRS 17 by two (2) years after
its effective date as decided by the IASB.

PFRS 17 is effective for reporting periods beginning on or after January 1, 2025, with
comparative figures required. Early application is permitted.

Deferred effectivity

• Amendments to PFRS 10, Consolidated Financial Statements, and PAS 28, Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture

The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of
control of a subsidiary that is sold or contributed to an associate or joint venture. The
amendments clarify that a full gain or loss is recognized when a transfer to an associate or joint
venture involves a business as defined in PFRS 3. Any gain or loss resulting from the sale or
contribution of assets that does not constitute a business, however, is recognized only to the
extent of unrelated investors’ interests in the associate or joint venture.

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On January 13, 2016, the Financial Reporting Standards Council deferred the original effective
date of January 1, 2016 of the said amendments until the International Accounting Standards
Board (IASB) completes its broader review of the research project on equity accounting that may
result in the simplification of accounting for such transactions and of other aspects of accounting
for associates and joint ventures.

Summary of Significant Accounting Policies

Business Combination and Goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is
measured as the aggregate of the consideration transferred, measured at acquisition date fair value
and the amount of any non-controlling interest in the acquiree. For each business combination, the
acquirer measures the non-controlling interest in the acquiree pertaining to instruments that
represent present ownership interests and entitle the holders to a proportionate share of the net
assets in the event of liquidation either at fair value or at the proportionate share of the acquiree’s
identifiable net assets. All other components of non-controlling interest are measured at fair value
unless another measurement basis is required by PFRS. Acquisition-related costs incurred are
expensed and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s
previously held equity interest in the acquiree is remeasured to fair value at the acquisition date
through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the
acquisition date. Subsequent changes to the fair value of the contingent consideration which is
deemed to be an asset or liability, will be recognized either in profit or loss or as a change to other
comprehensive income. If the contingent consideration is classified as equity, it should not be
remeasured until it is finally settled within equity.

Goodwill is initially measured at cost being the excess of the aggregate of the consideration
transferred and the amount recognized for non-controlling interest over the net identifiable assets
acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of
the subsidiary acquired, the difference is recognized as “bargain purchase gain” in the consolidated
statement of income.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For
the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group’s cash-generating units (CGUs) that are expected to
benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are
assigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is
disposed of, the goodwill associated with the operation disposed of is included in the carrying
amount of the operation when determining the gain or loss on disposal of the operation. Goodwill
disposed of in this circumstance is measured based on the relative values of the operation disposed
of and the portion of the cash-generating unit retained.

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Impairment of goodwill
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is reviewed for impairment, annually or more frequently, if events or changes in
circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating
units, that are expected to benefit from the synergies of the combination, irrespective of whether
other assets or liabilities of the Group are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit or group
of cash-generating units, to which the goodwill relates. Where the recoverable amount of the cash-
generating unit or group of cash-generating units is less than the carrying amount, an impairment
loss is recognized.

Common control business combination

Business combination of entities under common control is accounted for similar to pooling of
interest method, which is scoped out of PFRS 3. Under the pooling of interest method, any excess of
acquisition cost over the net asset value of the acquired entity is recorded in equity.

Current versus Noncurrent Classification

The Group presents assets and liabilities in the consolidated balance sheet based on
current/noncurrent classification. An asset as current when it is:

• Expected to be realized or intended to be sold or consumed in normal operating cycle

• Held primarily for the purpose of trading
• Expected to be realized within twelve months after the reporting period or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for a
least twelve months after reporting period

All other assets are classified as noncurrent.

A liability is current when:

• It is expected to be settled in normal operating cycle

• It is held primarily for the purpose of trading
• It is due to be settled within twelve months after the reporting period or
a. There is no unconditional right to defer settlement of the liability for at least twelve months
after the reporting period

All other liabilities are classified as noncurrent.

Deferred income tax assets and liabilities are classified as non-current assets and liabilities.

Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:

• In the principal market for the asset or liability, or

• In the absence of a principal market, in the most advantageous market for the asset or liability.

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The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their economic
best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable inputs
and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the consolidated financial
statements are categorized within the fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a whole:

• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable.
• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.

For assets and liabilities that are recognized in the consolidated financial statements on a recurring
basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-
assessing categorization (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities
on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair
value hierarchy as explained above.

The Group’s valuation team (the Team) determines the policies and procedures for fair value
measurement of its investment properties. External valuers (the Valuers) are involved in the
periodic valuation of these assets. The respective subsidiary’s Team decides the selection of the
external valuers after discussion with and approval by its Chief Financial Officer (CFO). Selection
criteria include market knowledge, reputation, independence and whether professional standards
are maintained. The Team also determines, after discussions with the chosen Valuers, which
valuation techniques and inputs to use for each case.

At each reporting date, the Team analyses the movements in the values of the investment properties
which are required to be re-measured or re-assessed in accordance with the subsidiaries’ accounting
policies. The team, in coordination with the Valuers, also compares each of the changes in the fair
value of each property with relevant external sources to determine whether the change is
reasonable.

On the re-appraisal year, the Team and Valuers present the valuation results and the major
assumptions used in the valuation to its CFO.

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Investments in Associates and Joint Ventures

An associate is an entity over which the Group has significant influence. Significant influence is the
power to participate in the financial and operating policy decisions of the investee, but is not control
or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint venture. Joint control is the contractually
agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control are similar to those
necessary to determine control over subsidiaries.

The Group’s investments in its associates and joint ventures are accounted for using the equity
method.

Under the equity method, the investment in an associate or a joint venture is initially recognized at
cost. The carrying amount of the investment is adjusted to recognize changes in the Group’s share of
net assets of the associate or joint venture since the acquisition date. Goodwill relating to the
associate or joint venture is included in the carrying amount of the investment and is neither
amortized nor individually tested for impairment.

The consolidated statement of income reflects the Group’s share of the results of operations of the
associate or joint venture. Any change in other comprehensive income of those investees is
presented as part of the Group’s other comprehensive income. In addition, when there has been a
change recognized directly in the equity of the associate or joint venture, the Group recognizes its
share of any changes, when applicable, in the consolidated statement of changes in equity.

Unrealized gains and losses resulting from transactions between the Group and the associate or joint
venture are eliminated to the extent of the interest in the associate or joint venture.

The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on
the face of the consolidated statement of income outside operating profit and represents profit or
loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period
as the Group. When necessary, adjustments are made to bring the accounting policies in line with
those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognize
an impairment loss on its investment in its associate or joint venture. At each reporting date, the
Group determines whether there is objective evidence that the investment in the associate or joint
venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the
difference between the recoverable amount of the associate or joint venture and its carrying value
and recognizes the loss in the consolidated statement of income.

Upon loss of significant influence over the associate or joint control over the joint venture, the
Group measures and recognizes any retained investment at its fair value. Any difference between
the carrying amount of the associate or joint venture upon loss of significant influence or joint
control and the fair value of the retained investment and proceeds from disposal is recognized in
consolidated statement of income.

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Interest in Joint Operations

A joint arrangement is classified as a joint operation if the parties with joint control have rights to
the assets and obligations for the liabilities of the arrangement. For interest in joint operations, the
Group recognizes:

• assets, including its share of any assets held jointly;

• liabilities, including its share of any liabilities incurred jointly;
• revenue from the sale of its share of the output arising from the joint operation;
• share of the revenue from the sale of the output by the joint operation; and
• expenses, including its share of any expenses incurred jointly.

The accounting and measurement for each of these items is in accordance with the applicable PFRSs.

Foreign Currency Translation

Each entity in the Group determines its own functional currency and items included in the financial
statements of each entity are measured using that functional currency. Transactions in foreign
currencies are initially recorded in the functional currency at the rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at
the functional currency rate of exchange ruling at the balance sheet date. All differences are taken
to the consolidated statement of income. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rates as at the dates of the
initial transactions. Non-monetary items measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value was determined.

The functional currency of its subsidiaries; Therma Mariveles Group, Therma Dinginin Group,
AboitizPower International Pte. Ltd., AboitizPower International B.V. and LHC, and its associate;
STEAG State Power, Inc. (STEAG), is the United States (US) Dollar. As at the balance sheet date, the
assets and liabilities of these entities are translated into the presentation currency of the Group (the
Philippine peso) at the rate of exchange ruling at the balance sheet date and their statement of
income and statement of comprehensive income are translated at the weighted average exchange
rates for the year. The exchange differences arising on the translation are taken directly to other
comprehensive income. Upon disposal of the subsidiary and associate, the deferred cumulative
amount recognized in other comprehensive income relating to that particular entity is recognized in
the consolidated statement of income.

Cash and Cash Equivalents

Cash and cash equivalents in the consolidated balance sheet consist of cash on hand and with banks,
and short-term, highly liquid investments that are readily convertible to known amounts of cash and
subject to insignificant risk of changes in value. They are held for the purpose of meeting short-term
cash commitments rather than for investment or other purposes.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of
cash and cash equivalents as defined above, net of outstanding bank overdrafts.

Inventories
Materials and supplies are valued at the lower of cost and net realizable value (NRV). Cost is
determined on weighted average method. NRV is the current replacement cost. An allowance for
inventory obsolescence is provided for slow-moving, defective or damaged goods based on analyses
and physical inspection.

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Financial Instruments - Classification and Measurement

Classification of financial assets

Financial assets are classified in their entirety based on the contractual cash flows characteristics of
the financial assets and the Group’s business model for managing the financial assets. The Group
classifies its financial assets into the following measurement categories:

• financial assets measured at amortized cost

 financial assets measured at fair value through profit or loss
 financial assets measured at fair value through other comprehensive income, where cumulative
gains or losses previously recognized are reclassified to profit or loss
 financial assets measured at fair value through other comprehensive income, where cumulative
gains or losses previously recognized are not reclassified to profit or loss

Contractual cash flows characteristics

If the financial asset is held within a business model whose objective is to hold assets to collect
contractual cash flows or within a business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets, the Group assesses whether the cash flows from
the financial asset represent solely payments of principal and interest (SPPI) on the principal amount
outstanding.

In making this assessment, the Group determines whether the contractual cash flows are consistent
with a basic lending arrangement, i.e., interest includes consideration only for the time value of
money, credit risk and other basic lending risks and costs associated with holding the financial asset
for a particular period of time. In addition, interest can include a profit margin that is consistent
with a basic lending arrangement. The assessment as to whether the cash flows meet the test is
made in the currency in which the financial asset is denominated. Any other contractual terms that
introduce exposure to risks or volatility in the contractual cash flows that is unrelated to a basic
lending arrangement, such as exposure to changes in equity prices or commodity prices, do not give
rise to contractual cash flows that are solely payments of principal and interest on the principal
amount outstanding.

Business model
The Group’s business model is determined at a level that reflects how groups of financial assets are
managed together to achieve a particular business objective. The Group’s business model does not
depend on management’s intentions for an individual instrument.

The Group’s business model refers to how it manages its financial assets in order to generate cash
flows. The Group’s business model determines whether cash flows will result from collecting
contractual cash flows, selling financial assets or both. Relevant factors considered by the Group in
determining the business model for a group of financial assets include how the performance of the
business model and the financial assets held within that business model are evaluated and reported
to the Group’s key management personnel, the risks that affect the performance of the business
model (and the financial assets held within that business model) and how these risks are managed
and how managers of the business are compensated.

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Financial assets at amortized cost

A financial asset is measured at amortized cost if (i) it is held within a business model whose
objective is to hold financial assets in order to collect contractual cash flows and (ii) the contractual
terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding. These financial assets are initially
recognized at fair value plus directly attributable transaction costs and subsequently measured at
amortized cost using the EIR method, less any impairment in value. Amortized cost is calculated by
taking into account any discount or premium on acquisition and fees and costs that are an integral
part of the EIR. The amortization is included in ‘Interest income’ in the consolidated statement of
income and is calculated by applying the EIR to the gross carrying amount of the financial asset,
except for (i) purchased or originated credit-impaired financial assets and (ii) financial assets that
have subsequently become credit-impaired, where, in both cases, the EIR is applied to the amortized
cost of the financial asset. Losses arising from impairment are recognized in ‘Provision for credit and
impairment losses’ in the consolidated statement of income.

The Group’s debt financial assets as of December 31, 2021 and 2020 consist of cash in banks,
including restricted cash, cash equivalents, and trade and other receivables and the Power Sector
Assets and Liabilities Management Corporation (PSALM) deferred adjustment - net of current
portion included in “Other noncurrent assets” in the consolidated balance sheets. The Group
assessed that the contractual cash flows of its debt financial assets are SPPI and are expected to be
held to collect all contractual cash flows until their maturity. As a result, the Group concluded these
debt financial assets to be measured at amortized cost.

Financial assets at FVOCI

A financial asset is measured at FVOCI if (i) it is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling financial assets and (ii) its contractual
terms give rise on specified dates to cash flows that are solely payments of principal and interest on
the principal amount outstanding. These financial assets are initially recognized at fair value plus
directly attributable transaction costs and subsequently measured at fair value. Gains and losses
arising from changes in fair value are included in other comprehensive income within a separate
component of equity. Impairment losses or reversals, interest income and foreign exchange gains
and losses are recognized in profit and loss until the financial asset is derecognized. Upon
derecognition, the cumulative gain or loss previously recognized in other comprehensive income is
reclassified from equity to profit or loss. This reflects the gain or loss that would have been
recognized in profit or loss upon derecognition if the financial asset had been measured at
amortized cost. Impairment is measured based on the expected credit loss (ECL) model.

The Group may also make an irrevocable election to measure at FVOCI on initial recognition
investments in equity instruments that are neither held for trading nor contingent consideration
recognized in a business combination in accordance with PFRS 3. Amounts recognized in OCI are not
subsequently transferred to profit or loss. However, the Group may transfer the cumulative gain or
loss within equity. Dividends on such investments are recognized in profit or loss, unless the
dividend clearly represents a recovery of part of the cost of the investment.

Dividends are recognized in profit or loss only when:

• the Group’s right to receive payment of the dividend is established

• it is probable that the economic benefits associated with the dividend will flow to the Group;
and
• the amount of the dividend can be measured reliably.

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The Group does not have any financial asset at FVOCI as of December 31, 2021 and 2020.

Financial assets at FVTPL

Financial assets at FVTPL are measured at its fair value unless these are measured at amortized cost
or at FVOCI. Included in this classification are equity investments held for trading and debt
instruments with contractual terms that do not represent solely payments of principal and interest.
Financial assets held at FVTPL are initially recognized at fair value, with transaction costs recognized
in the consolidated statement of income as incurred.

Additionally, even if the asset meets the amortized cost or the FVOCI criteria, the Group may choose
at initial recognition to designate the financial asset at FVTPL if doing so eliminates or significantly
reduces a measurement or recognition inconsistency (an accounting mismatch) that would
otherwise arise from measuring financial assets on a different basis.

Trading gains or losses are calculated based on the results arising from trading activities of the
Group, including all gains and losses from changes in fair value for financial assets and financial
liabilities at FVTPL, and the gains or losses from disposal of financial investments.

The Group’s investments in quoted equity securities and in unquoted equity shares are measured at
FVTPL as of December 31, 2021 and 2020.

Classification of financial liabilities

Financial liabilities are measured at amortized cost, except for the following:

 financial liabilities measured at fair value through profit or loss;

• financial liabilities that arise when a transfer of a financial asset does not qualify for
derecognition or when the Group retains continuing involvement;
 financial guarantee contracts;
 commitments to provide a loan at a below-market interest rate; and
 contingent consideration recognized by an acquirer in accordance with PFRS 3.

A financial liability may be designated at fair value through profit or loss if it eliminates or
significantly reduces a measurement or recognition inconsistency (an accounting mismatch) or:

 if a host contract contains one or more embedded derivatives; or

 if a group of financial liabilities or financial assets and liabilities is managed and its performance
evaluated on a fair value basis in accordance with a documented risk management or investment
strategy.

Where a financial liability is designated at fair value through profit or loss, the movement in fair
value attributable to changes in the Group’s own credit quality is calculated by determining the
changes in credit spreads above observable market interest rates and is presented separately in
other comprehensive income.

The Group’s financial liabilities measured at amortized cost as of December 31, 2021 and 2020
include trade and other payables (excluding taxes and fees, output value-added tax (VAT) and
unearned revenue), customers’ deposits, short-term loans, lease liabilities, long-term obligation on

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power distribution system, long-term debts, lease liabilities and other noncurrent liabilities and
(see Note 32).

Reclassifications of financial instruments

The Group reclassifies its financial assets when, and only when, there is a change in the business
model for managing the financial assets. Reclassifications shall be applied prospectively by the
Group and any previously recognized gains, losses or interest shall not be restated. The Group does
not reclassify its financial liabilities.

The Group does not reclassify its financial assets when:

 A financial asset that was previously a designated and effective hedging instrument in a cash
flow hedge or net investment hedge no longer qualifies as such;
 A financial asset becomes a designated and effective hedging instrument in a cash flow hedge or
net investment hedge; and
 There is a change in measurement on credit exposures measured at fair value through profit or
loss.

Derivative financial instruments

Initial recognition and subsequent measurement
Derivative financial instruments, including embedded derivatives, are initially recognized at fair value
on the date in which a derivative transaction is entered into or bifurcated, and are subsequently
remeasured at FVTPL, unless designated as effective hedge. Changes in fair value of derivative
instruments not accounted as hedges are recognized immediately in the consolidated statement of
income. Derivatives are carried as assets when the fair value is positive and as liabilities when the
fair value is negative.

An embedded derivative within a financial asset host is not accounted for separately. The financial
asset host together with the embedded derivative is required to be classified in its entirety as either
at amortized cost or at fair value depending on whether the cash flows of the hybrid contract are
solely payments of principal and interest and the assessment of the business model within which the
financial asset is held. On the other hand, an embedded derivative with a financial liability or a non-
financial host is separated from the host and accounted for as a separate derivative if: its economic
characteristics and risks are not closely related to the host; a separate instrument with the same
terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract
is not measured at fair value through profit or loss.

Separated embedded derivatives are measured at fair value with changes in fair value recognized in
profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that
significantly modified the cash flows that would otherwise be required or a reclassification of a
financial asset out of the fair value through profit or loss category.

The Group uses derivative financial instruments, such as foreign currency forward, interest rate swap
(IRS) and commodity swap contracts to hedge its foreign currency risks, interest rate risks and
commodity price risks, respectively.

For the purpose of hedge accounting, the Group’s hedges are classified as cash flow hedges. Hedges
are classified as cash flow hedge when hedging the exposure to variability in cash flows that is either

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attributable to a particular risk associated with a recognized asset or liability or a highly probable
forecast transaction or the foreign currency risk in an unrecognized firm commitment.

At the inception of a hedge relationship, the Group formally designates and documents the hedge
relationship to which it wishes to apply hedge accounting and the risk management objective and
strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item, the nature
of the risk being hedged and how the Group will assess whether the hedging relationship meets the
hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and
how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets
all of the following effectiveness requirements:

• There is ‘an economic relationship’ between the hedged item and the hedging instrument.
• The effect of credit risk does not ‘dominate the value changes’ that result from that economic
relationship.
 The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that the Company actually hedges and the quantity of the hedging instrument that
the Company actually uses to hedge that quantity of hedged item.

The Group’s hedges that meet all the qualifying criteria for hedge accounting are accounted for, as
described below:

Cash flow hedge

The effective portion of the gain or loss on the hedging instrument is recognized in the cash flow
hedge reserve, while any ineffective portion is recognized immediately in the consolidated statement
of income. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on
the hedging instrument and the cumulative change in fair value of the hedged item.

The Group uses foreign currency forward contracts as hedges of its exposure to foreign currency risk
in forecast transactions, IRS contracts to manage its floating interest rate exposure on its loans and
commodity swap contracts for its exposure to volatility in the commodity prices. The ineffective
portion relating to these contracts are recognized in other operating income or expenses as realized
gain or loss on derivative instruments.

The Group designated all of the foreign currency forward, IRS and commodity swap contracts as
hedging instrument. The amounts accumulated in other comprehensive income are accounted for,
depending on the nature of the underlying hedged transaction. If the hedged transaction
subsequently results in the recognition of a non-financial item, the amount accumulated in equity is
removed from the separate component of equity and included in the initial cost or other carrying
amount of the hedged asset or liability. This is not a reclassification adjustment and will not be
recognized in other comprehensive income for the period. This also applies where the hedged
forecast transaction of a non-financial asset or non-financial liability subsequently becomes a firm
commitment for which fair value hedge accounting is applied.

For any other cash flow hedges, the amount accumulated in other comprehensive income is
reclassified to the consolidated statement of income as a reclassification adjustment in the same
period or periods during which the hedged cash flows affect profit or loss.

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If cash flow hedge accounting is discontinued, the amount that has been accumulated in other
comprehensive must remain in accumulated other comprehensive income if the hedged future cash
flows are still expected to occur. Otherwise, the amount will be immediately reclassified to profit or
loss as a reclassification adjustment. After discontinuation, once the hedged cash flow occurs, any
amount remaining in accumulated other comprehensive must be accounted for depending on the
nature of the underlying transaction as described above.

Derecognition of Financial Assets and Liabilities

Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial
assets) is derecognized when, and only when:

 the rights to receive cash flows from the asset expires;

 the Group retains the right to receive cash flows from the asset, but has assumed an obligation
to pay them in full without material delay to a third party under a ‘pass-through’ arrangement;
or
 the Group has transferred its rights to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the
asset.

When the Group retains the contractual rights to receive the cash flows of a financial asset but
assumes a contractual obligation to pay those cash flows to one or more entities, the Group treats
the transaction as a transfer of a financial asset if the Group:

• has no obligation to pay amounts to the eventual recipients unless it collects equivalent amounts
from the original asset;
• is prohibited by the terms of the transfer contract from selling or pledging the original asset
other than as security to the eventual recipients for the obligation to pay them cash flows; and
• has an obligation to remit any cash flows it collects on behalf of the eventual recipients without
material delay.

In transactions where the Group neither transfers nor retains substantially all the risks and rewards
of ownership of the financial asset and it retains control over the financial asset, the financial asset is
recognized to the extent of the Group’s continuing involvement in the financial asset. The extent of
the Group’s continuing involvement in the transferred asset is the extent to which it is exposed to
changes in the value of the transferred asset. When the Group’s continuing involvement takes the
form of guaranteeing the transferred asset, the extent of the Group’s continuing involvement is the
lower of (i) the amount of the asset and (ii) the maximum amount of the consideration received that
the Group could be required to repay (‘the guarantee amount’). When the Group’s continuing
involvement takes the form of a written or purchased option (or both) on the transferred asset, the
extent of the Group’s continuing involvement is the amount of the transferred asset that the Group
may repurchase. However, in the case of a written put option on an asset that is measured at fair
value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of
the transferred asset and the option exercise price. When the Group’s continuing involvement takes
the form of a cash- settled option or similar provision on the transferred asset, the extent of the
Group’s continuing involvement is measured in the same way as that which results from non-cash
settled options.

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Modification of contractual cash flows

When the contractual cash flows of a financial asset are renegotiated or otherwise modified and the
renegotiation or modification does not result in the derecognition of that financial asset, the Group
recalculates the gross carrying amount of the financial asset as the present value of the renegotiated
or modified contractual cash flows discounted at the original EIR (or credit-adjusted EIR for
purchased or originated credit-impaired financial assets) and recognizes a modification gain or loss in
the consolidated statement of income.

When the modification of a financial asset results in the derecognition of the existing financial asset
and the subsequent recognition of the modified financial asset, the modified asset is considered a
‘new’ financial asset. Accordingly, the date of the modification shall be treated as the date of initial
recognition of that financial asset when applying the impairment requirements to the modified
financial asset.

Financial liabilities
A financial liability (or a part of a financial liability) is derecognized when the obligation under the
liability is discharged, cancelled or has expired. Where an existing financial liability is replaced by
another from the same lender on substantially different terms, or the terms of an existing liability or
a part of it are substantially modified, such an exchange or modification is treated as a derecognition
of the original financial liability and the recognition of a new financial liability, and the difference in
the respective carrying amounts is recognized in the consolidated statement of income.

Impairment of Financial Assets

The Group recognizes ECL for the following financial assets that are not measured at FVTPL:

• debt instruments that are measured at amortized cost and FVOCI;

• loan commitments; and
• financial guarantee contracts.

No ECL is recognized on equity investments.

ECLs are measured in a way that reflects the following:

• an unbiased and probability-weighted amount that is determined by evaluating a range of

possible outcomes;
• the time value of money; and
• reasonable and supportable information that is available without undue cost or effort at the
reporting date about past events, current conditions and forecasts of future economic
conditions.

Financial assets migrate through the following three stages based on the change in credit quality
since initial recognition:

Stage 1: 12-month ECL

For credit exposures where there have not been significant increases in credit risk since initial
recognition and that are not credit-impaired upon origination, the portion of lifetime ECLs that
represent the ECLs that result from default events that are possible within the 12-months after the
reporting date are recognized.

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Stage 2: Lifetime ECL - not credit-impaired

For credit exposures where there have been significant increases in credit risk since initial
recognition on an individual or collective basis but are not credit-impaired, lifetime ECLs
representing the ECLs that result from all possible default events over the expected life of the
financial asset are recognized.

Stage 3: Lifetime ECL - credit-impaired

Financial assets are credit-impaired when one or more events that have a detrimental impact on the
estimated future cash flows of those financial assets have occurred. For these credit exposures,
lifetime ECLs are recognized and interest revenue is calculated by applying the credit-adjusted
effective interest rate to the amortized cost of the financial asset.

Loss allowances are recognized based on 12-month ECL for debt investment securities that are
assessed to have low credit risk at the reporting date. A financial asset is considered to have low
credit risk if:

• the financial instrument has a low risk of default

• the borrower has a strong capacity to meet its contractual cash flow obligations in the near term
• adverse changes in economic and business conditions in the longer term may, but will not
necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

The Group considers a debt investment security to have low credit risk when its credit risk rating is
equivalent to the globally understood definition of ‘investment grade’, or when the exposure is less
than 30 days past due.

Determining the stage for impairment

At each reporting date, the Group assesses whether there has been a significant increase in credit
risk for financial assets since initial recognition by comparing the risk of default occurring over the
expected life between the reporting date and the date of initial recognition. The Company considers
reasonable and supportable information that is relevant and available without undue cost or effort
for this purpose. This includes quantitative and qualitative information and forward-looking analysis.

The simplified approach, where changes in credit risk are not tracked and loss allowances are
measured at amounts equal to lifetime ECL, is applied to ‘Trade and other receivables’. The Group
has established a provision matrix for customer segments that is based on historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the economic
environment.

Financial Guarantee Contracts and Loan Commitments

Financial guarantees are contracts issued by the Group that require it to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due
in accordance with the original or modified terms of a debt instrument.

Financial guarantees are initially recognized in the financial statements at fair value. Subsequently,
these are measured at the higher of:

• the amount of the loss allowance determined in accordance with the ECL model and
• the amount initially recognized less, when appropriate, the cumulative amount of income
recognized in accordance with the principles of PFRS 15.

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Loan commitments provided by the Group are measured as the amount of the loss allowance. The
Group has not provided any commitment to provide loans that can be settled net in cash or by
delivering or issuing another financial instrument or that are issued at below-market interest rates.

For loan commitments and financial guarantee contracts, the loss allowance is recognized as a
provision. However, for financial instruments that include both a loan and an undrawn commitment
(i.e. loan commitment) component where the Group cannot separately identify the expected credit
losses on the loan commitment component from those on the loan component, the expected credit
losses on the loan commitment should be recognized together with the loss allowance for the loan.
To the extent that the combined expected credit losses exceed the gross carrying amount of the
financial asset, the expected credit losses should be recognized as a provision.

Offsetting Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated
balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized
amounts and there is an intention to settle on a net basis, or to realize the asset and settle the
liability simultaneously. This is not generally the case with master netting agreements whereby the
related assets and liabilities are presented gross in the consolidated balance sheet.

Classification of financial instruments between liability and equity

A financial instrument is classified as liability if it provides for a contractual obligation to:

• deliver cash or another financial asset to another entity; or

• exchange financial assets or financial liabilities with another entity under conditions that are
potentially unfavorable to the Group; or
• satisfy the obligation other than by the exchange of a fixed amount of cash or another financial
asset for a fixed number of own equity shares.

If the Group does not have an unconditional right to avoid delivering cash or another financial asset
to settle its contractual obligation, the obligation meets the definition of a financial liability.

Financial instruments are classified as liabilities or equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or a
component that is a financial liability, are reported as income or expense. Distributions to holders of
financial instruments classified as equity are charged directly to equity net of any related income tax
benefits.

The components of issued financial instruments that contain both liability and equity elements are
accounted for separately, with the equity component being assigned the residual amount after
deducting from the instrument as a whole the amount separately determined as the fair value of the
liability component on the date of issue.

Property, Plant and Equipment

Except for land, property, plant and equipment are stated at cost, excluding the costs of day-to-day
servicing, less accumulated depreciation and accumulated impairment in value. The initial cost of
property, plant and equipment comprises its purchase price, including import duties, if any, and
nonrefundable taxes and any directly attributable costs of bringing the asset to its working condition
and location for its intended use. Such cost includes the cost of replacing parts of such property,
plant and equipment when that cost is incurred if the recognition criteria are met. Cost also include

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decommissioning liability relating to the decommissioning of power plant equipment, if any. Repairs
and maintenance costs are recognized in the consolidated statement of income as incurred.

Land is stated at cost less any accumulated impairment in value.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets
as follows:
Estimated Useful
Category Life (in years)
Buildings, warehouses and improvements 10-50
Power plant equipment 2-50
Transmission, distribution and substation equipment:
Power transformers 30
Poles and wires 20-40
Other components 12-30
Transportation equipment 5-10
Office furniture, fixtures and equipment 2-20
Electrical equipment 5-25
Meters and laboratory equipment 25
Steam field assets 20-25
Tools and others 2-20

Leasehold improvements are amortized over the shorter of the lease terms and the lives of the
improvements ranging from 5 to 15 years.

The carrying values of property, plant and equipment are reviewed for impairment when events or
changes in circumstances indicate that the carrying values may not be recoverable.

Fully depreciated assets are retained in the accounts until these are no longer in use. When assets
are retired or otherwise disposed of, both the cost and related accumulated depreciation and
amortization and any allowance for impairment losses are removed from the accounts, and any
resulting gain or loss is credited or charged to current operations. An item of property, plant and
equipment is derecognized upon disposal or when no future economic benefits are expected from
its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the asset) is included in
the consolidated statement of income in the year the asset is derecognized.

The assets’ residual values, useful lives and depreciation method are reviewed, and adjusted if
appropriate, at each financial year-end.

When each major inspection is performed, its cost is recognized in the carrying amount of the
property, plant and equipment as a replacement if the recognition criteria are satisfied.

Construction in progress represents structures under construction and is stated at cost. This
includes cost of construction and other direct costs. Borrowing costs that are directly attributable to
the construction of property, plant and equipment are capitalized during the construction period.

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Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the
contract conveys the right to control the use of an identified asset for a period of time in exchange
for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-
term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease
payments and right-of-use assets representing the right to use the underlying assets.

Right-of-use assets
The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the
underlying asset is available for use) included as part of “Property, plant and equipment” account in
the consolidated balance sheet. Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The
cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs
incurred, and lease payments made at or before the commencement date less any lease incentives
received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease
term and the estimated useful lives of the assets, as follows:

Category Number of years

Land 10-50
Building 2-50
Power plant 20-25
Equipment and others 2-20

If ownership of the leased asset transfers to the Group at the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of
the asset. The right-of-use assets are also subject to impairment.

Lease liabilities
At the commencement date of the lease, the Group recognizes lease liabilities measured at the
present value of lease payments to be made over the lease term. The lease payments include fixed
payments (including in substance fixed payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to be paid under residual value
guarantees. The lease payments also include the exercise price of a purchase option reasonably
certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease
term reflects the Group exercising the option to terminate. Variable lease payments that do not
depend on an index or a rate are recognized as expenses (unless they are incurred to produce
inventories) in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at
the lease commencement date because the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease liabilities is increased to reflect
the accretion of interest and reduced for the lease payments made. In addition, the carrying amount
of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the
lease payments (e.g., changes to future payments resulting from a change in an index or rate used to
determine such lease payments) or a change in the assessment of an option to purchase the
underlying asset.

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Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases of machinery
and equipment (i.e., those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also applies the lease of low-value
assets recognition exemption to leases of office equipment that are considered to be low value.
Lease payments on short-term leases and leases of low-value assets are recognized as expense on a
straight-line basis over the lease term.

Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards incidental to
ownership of an asset are classified as operating leases. Rental income arising is accounted for on a
straight-line basis over the lease terms and is included in revenue in the consolidated statement of
income due to its operating nature. Initial direct costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of the leased asset and recognized over the lease
term on the same basis as rental income. Contingent rents are recognized as revenue in the period
in which they are earned.

Service Concession Arrangements

Public-to-private service concession arrangements where: (a) the grantor controls or regulates what
services the entities in the Group must provide with the infrastructure, to whom it must provide
them, and at what price; and (b) the grantor controls-through ownership, beneficial entitlement or
otherwise-any significant residual interest in the infrastructure at the end of the term of the
arrangement, are accounted for under the provisions of Philippine Interpretation IFRIC 12, Service
Concession Arrangements. Infrastructures used in a public-to-private service concession
arrangement for its entire useful life (whole-of-life assets) are within the scope of this Interpretation
if the conditions in (a) are met.

This interpretation applies to both: (a) infrastructure that the entities in the Group constructs or
acquires from a third party for the purpose of the service arrangement; and (b) existing
infrastructure to which the grantor gives the entity in the Group access for the purpose of the
service arrangement.

Infrastructures within the scope of this Interpretation are not recognized as property, plant and
equipment of the Group. Under the terms of contractual arrangements within the scope of this
Interpretation, an entity acts as a service provider. An entity constructs or upgrades infrastructure
(construction or upgrade services) used to provide a public service and operates and maintains that
infrastructure (operation services) for a specified period of time.

An entity recognizes and measures revenue in accordance with PFRS 15, for the services it performs.
If an entity performs more than one service (i.e. construction or upgrade services and operation
services) under a single contract or arrangement, consideration received or receivable shall be
allocated by reference to the relative fair values of the services delivered, when the amounts are
separately identifiable.

When an entity provides construction or upgrades services, the consideration received or receivable
by the entity is recognized at the stand-alone selling price of the related service. An entity accounts
for revenue and costs relating to construction or upgrade services in accordance with PFRS 15.
Revenue from construction contracts is recognized based on the percentage-of-completion method,
measured by reference to the percentage of costs incurred to date to estimated total costs for each

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contract. The applicable entities account for revenue and costs relating to operation services in
accordance with PFRS 15.

An entity recognizes a financial asset to the extent that it has an unconditional contractual right to
receive cash or another financial asset from or at the direction of the grantor for the construction
services. An entity recognizes an intangible asset to the extent that it receives a right (a license) to
charge users of the public service.

When the applicable entities have contractual obligations it must fulfill as a condition of its license
(a) to maintain the infrastructure to a specified level of serviceability or (b) to restore the
infrastructure to a specified condition before it is handed over to the grantor at the end of the
service arrangement, it recognizes and measures these contractual obligations in accordance with
PAS 37, Provisions, Contingent Liabilities and Contingent Assets, i.e., at the best estimate of the
expenditure that would be required to settle the present obligation at the balance sheet date.

Borrowing cost attributable to the construction of the asset if the consideration received or
receivable is an intangible asset, is capitalized during the construction phase. In all other cases,
borrowing costs are expensed as incurred.

Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired in a business combination is fair value as at the date of the acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated amortization
and any accumulated impairment losses. Internally generated intangible assets, excluding
capitalized development costs, are not capitalized and expenditure is reflected in the consolidated
statement of income in the year in which the expenditure is incurred.

Software and licenses

Software and licenses are initially recognized at cost. Following initial recognition, the software and
licenses are carried at cost less accumulated amortization and any accumulated impairment in value.

The software and licenses is amortized on a straight-line basis over its estimated useful economic life
of three to five years and assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortization commences when the software development
costs is available for use. The amortization period and the amortization method for the software
development costs are reviewed at each financial year-end. Changes in the estimated useful life is
accounted for by changing the amortization period or method, as appropriate, and treating them as
changes in accounting estimates. The amortization expense is recognized in the consolidated
statement of income in the expense category consistent with the function of the software
development costs.

Service concession right

The Group’s intangible asset - service concession right pertains mainly to its right to charge users of
the public service in connection with the service concession and related arrangements. This is
recognized initially at the fair value which consists of the cost of construction services and the fair
value of future fixed fee payments in exchange for the license or right. Following initial recognition,
the intangible asset is carried at cost less accumulated amortization and any accumulated
impairment losses.

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The intangible asset - service concession right is amortized using the straight-line method over the
estimated economic useful life which is the service concession period, and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The estimated economic
useful life is ranging from 18 to 25 years. The amortization period and the amortization method are
reviewed at least at each financial year-end. Changes in the expected useful life or the expected
pattern of consumption of future economic benefits embodied in the asset is accounted for by
changing the amortization period or method, as appropriate, and are treated as changes in
accounting estimates. The amortization expense is recognized in the consolidated statement of
income in the expense category consistent with the function of the intangible asset.

Franchise
The Group’s franchise pertains to VECO’s franchise to distribute electricity within an area granted by
the Philippine Legislature, acquired in the business combination in 2013. The franchise is initially
recognized at its fair value at the date of acquisition. Following initial recognition, the franchise is
carried at cost less accumulated amortization and any accumulated impairment losses. The Group’s
franchise is amortized using the straight-line method over the estimated economic useful life, and
assessed for impairment whenever there is an indication that the franchise may be impaired. The
estimated economic useful life of the franchise is 40 years. The amortization period and
amortization method for franchise are reviewed at least at each financial year-end. Changes in the
expected useful life or the expected pattern of consumption of future economic benefits embodied
in the franchise are accounted for by changing the amortization period or method, as appropriate,
and treated as a change in accounting estimates. The amortization expense on franchise is
recognized in the consolidated statement of income in the expense category consistent with its
function.

Intangible assets - customer contracts

The Group’s intangible assets - customer contracts pertain to contracts entered by subsidiaries
relating to the provision of utility services to locators within an industrial zone.

These are measured on initial recognition at cost. The cost of intangible assets acquired in a
business combination is their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortization and accumulated impairment
losses.

The intangible assets - customer contracts are amortized using the straight-line method over the
remaining life of the contract, and assessed for impairment whenever there is an indication that the
intangible assets may be impaired. The amortization period and method are reviewed at least at
each financial year end.

The amortization expense is recognized in the consolidated statement of income in the expense
category consistent with the function of the intangible asset.

Project development costs

Project development costs include power plant projects in the development phase which meet the
“identifiability” requirement under PAS 38, Intangible Assets, as they are separable and susceptible
to individual sale and are carried at acquisition cost. These assets are transferred to “Property, plant
and equipment” when construction of each power plant commences. During the period of
development, the asset is tested for impairment annually.

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Research and Development Expenditure

The Group’s policy is to record research expenses in the consolidated statement of income in the
period when they are incurred.

Development costs are recognized as an intangible asset on the consolidated balance sheet if the
Group can identify them separately and show the technical viability of the asset, its intention and
capacity to use or sell it, and how it will generate probable future economic benefits.

Following initial recognition of the development expenditure as an asset, the cost model is applied
requiring the asset to be carried at cost less any accumulated amortization and accumulated
impairment losses. Amortization of the asset begins when development is complete and the asset is
available for use. It is amortized over the period of expected future benefit. During the period of
development, the asset is tested for impairment annually.

Investment Properties
Investment properties, which pertain to land and buildings, are measured initially at cost, including
transaction costs. The carrying amount includes the cost of replacing part of an existing investment
property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of
day-to-day servicing of an investment property. Subsequent to initial recognition, investment
properties are carried at fair value, which reflects market conditions at the balance sheet date.
Gains or losses arising from changes in fair values of investment properties are included in the
consolidated statement of income in the year in which they arise.

Investment properties are derecognized when either they have been disposed of or when the
investment property is permanently withdrawn from use and no future economic benefit is expected
from its disposal. Any gains or losses on the retirement or disposal of an investment property are
recognized in the consolidated statement of income in the year of retirement or disposal.

Transfers are made to investment property when, and only when, there is a change in use, evidenced
by ending of owner-occupation, commencement of an operating lease to another party. For a
transfer from investment property to owner-occupied property or inventories, the deemed cost of
property for subsequent accounting is its fair value at the date of change in use. If the property
occupied by the Group as an owner-occupied property becomes an investment property, the Group
accounts for such property in accordance with the policy stated under property, plant and
equipment up to the date of change in use. For a transfer from inventories to investment property,
any difference between the fair value of the property at that date and its previous carrying amount is
recognized in the consolidated statement of income. When the Group completes the construction
or development of a self-constructed investment property, any difference between the fair value of
the property at that date and its previous carrying amount is recognized in the consolidated
statement of income.

Impairment of Non-financial Assets

Property, plant and equipment, intangible assets, investment and advances and other current and
noncurrent assets excluding restricted cash and PSALM deferred adjustment

The Group assesses at each balance sheet date whether there is an indication that an asset may be
impaired. If any such indication exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is
the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is

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determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. Where the carrying amount of an asset
exceeds its recoverable amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. Impairment losses of continuing operations are
recognized in the consolidated statement of income in those expense categories consistent with the
function of the impaired asset.

An assessment is made at each balance sheet date as to whether there is any indication that
previously recognized impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously recognized impairment loss is
reversed only if there has been a change in the estimates used to determine the asset’s recoverable
amount since the last impairment loss was recognized. If that is the case, the carrying amount of the
asset is increased to its recoverable amount. That increased amount cannot exceed the carrying
amount that would have been determined, net of depreciation, had no impairment loss been
recognized for the asset in prior years. Such reversal is recognized in the consolidated statement of
income unless the asset is carried at revalued amount, in which case the reversal is treated as a
revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its
remaining useful life.

Decommissioning Liability
The decommissioning liability arose from the Group’s obligation, under their contracts, to
decommission, abandon and perform surface rehabilitation at the end of the useful lives of the
steam field assets, or the end of the lease term, or upon abandonment of the plant. A
corresponding asset is recognized as part of property, plant and equipment. Decommissioning costs
are provided at the present value of expected costs to settle the obligation using estimated cash
flows. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the
decommissioning liability. The unwinding of the discount is expensed as incurred and recognized in
the consolidated statement of income under “Interest expense” account. The estimated future costs
of decommissioning are reviewed annually and adjusted prospectively.

Changes in the estimated future costs or in the discount rate applied are added or deducted from
the cost of property, plant and equipment. The amount deducted from the cost of property, plant
and equipment, shall not exceed its carrying amount.

If the decrease in the liability exceeds the carrying amount of the property, plant and equipment, the
excess shall be recognized immediately in the consolidated statement of income.

Capital Stock and Additional Paid-in Capital

Capital stock is measured at par value for all shares issued. When the Company issues more than
one class of stock, a separate account is maintained for each class of stock and the number of shares
issued. Capital stock includes common stock and preferred stock.

When the shares are sold at premium, the difference between the proceeds and the par value is
credited to the “Paid-in capital” account. When shares are issued for a consideration other than
cash, the proceeds are measured by the fair value of the consideration received. In case the shares
are issued to extinguish or settle the liability of the Company, the shares shall be measured either at

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the fair value of the shares issued or fair value of the liability settled, whichever is more reliably
determinable.

Direct costs incurred related to equity issuance, such as underwriting, accounting and legal fees,
printing costs and taxes are debited to the “Paid-in capital” account. If additional paid-in capital is
not sufficient, the excess is charged against an equity reserve account.

Retained Earnings
The amount included in retained earnings includes accumulated earnings of the Company and
reduced by dividends on capital stock. Dividends on capital stock are recognized as a liability and
deducted from equity when they are approved by the BOD. Dividends for the year that are
approved after the reporting date are dealt with as an event after the reporting date. Retained
earnings may also include effect of changes in accounting policy as may be required by the transition
provisions of new and amended standards.

Revenue Recognition
Revenue from contracts with customers is recognized when control of the goods or services are
transferred to the customer at an amount that reflects the consideration to which the Group expects
to be entitled in exchange for those goods or services. The Group assesses its revenue arrangements
against specific criteria in order to determine if it is acting as a principal or an agent.

The following specific recognition criteria must also be met before revenue is recognized:

Sale of power
For power generation and ancillary services where capacity and energy dispatched are separately
identified, these two obligations are to be combined as one performance obligation since these are
not distinct within the context of the contract as the buyer cannot benefit from the contracted
capacity alone without the corresponding energy and the buyer cannot obtain energy without
contracting a capacity. The combined performance obligation qualifies as a series of distinct goods
or services that are substantially the same and have the same pattern of transfer.

Revenue from power generation and ancillary services is recognized in the period actual capacity is
delivered. Revenue is recognized over time since the customer simultaneously receives and
consumes the benefits as the seller supplies power.

In contracts with fixed capacity payments which are determined at contract inception, the fixed
capacity payments for the entire contract period is determined at day 1 and is recognized over time.
Specifically, on contracts where capacity payments are fixed but escalates throughout the contract
period without any reference to market indices, the fixed escalation is recognized on a straight-line
basis over the contract period.

Some contracts with customers provide unspecified quantity of energy, includes provisional Energy
Regulatory Commission (ERC) rates, and volume and prompt payment discounts that give rise to
variable consideration. The variable consideration is estimated at contract inception and constrained
until the associated uncertainty is subsequently resolved.

Power distribution and retail supply also qualify as a series of distinct goods or services that are
substantially the same and have the same pattern of transfer accounted for as one performance
obligation. Revenue is recognized over time and based on amounts billed.

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Technical, management and other fees

Technical, management and other fees are recognized when the related services are rendered.

Interest income
Interest is recognized as it accrues taking into account the effective interest method.

Other income
Revenue is recognized when non-utility operating income and surcharges are earned.

Costs and Expenses

Costs and expenses are decreases in economic benefits during the accounting period in the form of
outflows or decrease of assets or incurrence of liabilities that result in decreases in equity, other
than those relating to distributions to equity participants. Expenses are recognized when incurred.

Pension Benefits
The Group has defined benefit pension plans which require contributions to be made to separately
administered funds. The net defined benefit liability or asset is the aggregate of the present value of
the defined benefit obligation at the end of the reporting period reduced by the fair value of plan
assets (if any), adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The
asset ceiling is the present value of any economic benefits available in the form of refunds from the
plan or reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using the
projected unit credit method.

Defined benefit costs comprise the following:

• Service cost
• Net interest on the net defined benefit liability or asset
• Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non-
routine settlements are recognized as expense in profit or loss. Past service costs are recognized
when plan amendment or curtailment occurs. These amounts are calculated periodically by
independent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the net
defined benefit liability or asset that arises from the passage of time which is determined by
applying the discount rate based on government bonds to the net defined benefit liability or asset.
Net interest on the net defined benefit liability or asset is recognized as expense or income in the
consolidated statement of income.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the
effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized
immediately in other comprehensive income in the period in which they arise. Remeasurements are
not reclassified to consolidated statement of income in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are not
available to the creditors of the Group, nor can they be paid directly to the Group. Fair value of plan
assets is based on market price information. When no market price is available, the fair value of plan
assets is estimated by discounting expected future cash flows using a discount rate that reflects both
the risk associated with the plan assets and the maturity or expected disposal date of those assets

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(or, if they have no maturity, the expected period until the settlement of the related obligations). If
the fair value of the plan assets is higher than the present value of the defined benefit obligation,
the measurement of the resulting defined benefit asset is limited to the present value of economic
benefits available in the form of refunds from the plan or reductions in future contributions to the
plan.

The Group’s right to be reimbursed of some or all of the expenditure required to settle a defined
benefit obligation is recognized as a separate asset at fair value when and only when reimbursement
is virtually certain.

Borrowing Costs
Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or
production of a qualifying asset. To the extent that funds are borrowed specifically for the purpose
of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization on that asset
shall be determined as the actual borrowing costs incurred on that borrowing during the period less
any investment income on the temporary investment of those borrowings. To the extent that funds
are borrowed generally, the amount of borrowing costs eligible for capitalization shall be determined
by applying a capitalization rate to the expenditures on that asset. The capitalization rate shall be the
weighted average of the borrowing costs applicable to the borrowings of the Group that are
outstanding during the period, other than borrowings made specifically for the purpose of obtaining
a qualifying asset. The amount of borrowing costs capitalized during a period shall not exceed the
amount of borrowing costs incurred during that period.

Taxes
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted as of the
balance sheet date.

Current income tax relating to items recognized directly in equity is recognized in the consolidated
statement of comprehensive income and not in the consolidated statement of income.

Management periodically evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretation and establishes provisions where
appropriate.

Deferred income tax

Deferred income tax is provided using the balance sheet liability method on temporary differences at
the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences, except:

• where the deferred income tax liability arises from the initial recognition of goodwill or of an
asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; and
• in respect of taxable temporary differences associated with investments in subsidiaries,

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• associates and interests in joint ventures, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse in
the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences, carryforward
benefits of unused tax credits and unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences, and the carryforward
benefits of unused tax credits and unused tax losses can be utilized except:

• where the deferred income tax asset relating to the deductible temporary difference arises from
the initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss; and
• in respect of deductible temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, deferred income tax assets are recognized only to the
extent that it is probable that the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be available to
allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax
assets are reassessed at each balance sheet date and are recognized to the extent that it has
become probable that future taxable profit will allow the deferred income tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to
the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted as of the balance sheet date.

Income tax relating to items recognized directly in other comprehensive income is also recognized in
other comprehensive income and not in the consolidated statement of income.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right
exists to set off current income tax assets against current income tax liabilities and the deferred
income taxes relate to the same taxable entity and the same taxation authority.

VAT
Revenues, expenses, and assets are recognized net of the amount of VAT, if applicable.

For its VAT-registered activities, when VAT from sales of goods and/or services (output VAT) exceeds
VAT passed on from purchases of goods or services (input VAT), the excess is recognized as payable
in the consolidated balance sheet. When VAT passed on from purchases of goods or services (input
VAT) exceeds VAT from sales of goods and/or services (output VAT), the excess is recognized as an
asset in the consolidated balance sheet up to the extent of the recoverable amount.

For its non-VAT registered activities, the amount of VAT passed on from its purchases of goods or
service is recognized as part of the cost of goods/asset acquired or as part of the expense item, as
applicable.

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Input VAT, which is presented as part of “Other current assets” and/or “Other noncurrent assets” in
the consolidated balance sheet, is recognized as an asset and will be used to offset the Group’s
current output VAT liabilities and/or applied for claim for tax credit certificates. Input VAT is stated at
its estimated NRV.

Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. Where the Group expects some or all of a provision to be reimbursed, for example under
an insurance contract, the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any provision is presented in the
consolidated statement of income net of any reimbursement. If the effect of the time value of
money is material, provisions are discounted using a current pre-tax rate that reflects, where
appropriate, the risks specific to the liability. Where discounting is used, the increase in the
provision due to the passage of time is recognized as a borrowing cost.

Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. These are
disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.
Contingent assets are not recognized in the consolidated financial statements but disclosed when an
inflow of economic benefits is probable.

Events After the Reporting Period

Post year-end events that provide additional information about the Group’s financial position at
balance sheet date (adjusting events) are reflected in the consolidated financial statements. Post
year-end events that are not adjusting events are disclosed when material.

Earnings Per Common Share

Basic earnings per common share are computed by dividing consolidated net income for the year
attributable to the equity holders of the Company by the weighted average number of common
shares issued and outstanding during the year, after giving retroactive effect for any stock dividends
declared and stock rights exercised during the year.

Diluted earnings per share amounts are calculated by dividing the consolidated net income for the
year attributable to the equity holders of the parent by the weighted average number of common
shares outstanding during the year plus the weighted average number of common shares that would
be issued for outstanding common stock equivalents. The Group does not have dilutive potential
common shares.

Operating Segments
For management purposes, the Group is organized into two major operating segments (power
generation and power distribution) according to the nature of the services provided, with each
segment representing a significant business segment. The Group’s identified operating segments are
consistent with the segments reported to the BOD which is the Group’s Chief Operating Decision
Maker (CODM). Financial information on the operating segment is presented in Note 30.

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4. Significant Accounting Judgments, Estimates and Assumptions

The Group’s consolidated financial statements prepared in accordance with PFRSs require
management to make judgment, estimates and assumptions that affect amount reported in the
financial statements and related notes. The judgment, estimates and assumptions used in the
financial statements are based upon management’s evaluation of relevant facts and circumstances
as of the date of the Group’s consolidated financial statements. Actual results could differ from such
estimates. Judgments, estimates and assumptions are continually evaluated and are based on
historical experiences and other factors, including expectations of future events that are believed to
be reasonable under circumstances. The following items are those matters which the Group assess
to have significant risk arising from judgements and estimation uncertainties:

Judgments
In the process of applying the Group’s accounting policies, management has made judgments, apart
from those involving estimations, which have the most significant effect on the amounts recognized
in the consolidated financial statements:

Determining functional currency

Based on the economic substance of the underlying circumstances relevant to the companies in the
Group, the functional currency of the companies in the Group has been determined to be the
Philippine Peso except for certain subsidiaries and an associate whose functional currency is the US
Dollar. The Philippine Peso is the currency of the primary economic environment in which
companies in the Group operates and it is the currency that mainly influences the sale of power and
services and the costs of power and of providing the services. The functional currency of the
Group’s subsidiaries and associates is the Philippine Peso except for Therma Mariveles Group,
Therma Dinginin Group, AboitizPower International Pte. Ltd., AboitizPower International B.V. and
LHC (subsidiaries), and STEAG (associate) whose functional currency is the US Dollar.

Service concession arrangements - Companies in the Group as Operators

Based on management’s judgment, the provisions of Philippine Interpretation IFRIC 12 apply to SEZ’s
Distribution Management Service Agreement (DMSA) with Subic Bay Metropolitan Authority
(SBMA); MEZ’s Built-Operate-Transfer agreement with Mactan Cebu International Airport Authority
(MCIAA) and LHC’s Power Purchase Agreement (PPA) with the National Power Corporation (NPC).
SEZ, MEZ and LHC’s service concession agreements were accounted for under the intangible asset
model.

The Company’s associate, STEAG, has also determined that the provisions of Philippine
Interpretation IFRIC 12 apply to its PPA with NPC. STEAG’s service concession agreement was
accounted for under the financial asset model. Refer to the accounting policy on service concession
arrangements for the discussion of intangible asset and financial asset models.

Determining fair value of customers’ deposits

In applying PFRS 9 on transformer and lines and poles deposits, the Group has made a judgment that
the timing and related amounts of future cash flows relating to such deposits cannot be reasonably
and reliably estimated for purposes of establishing their fair values using alternative valuation
techniques since the expected timing of customers’ refund or claim for these deposits cannot be
reasonably estimated. These customers’ deposits, which are therefore stated at cost, amounted to
=7.2 billion and P
P =6.8 billion as of December 31, 2021 and 2020, respectively (see Note 17).

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Determining whether Independent Power Producer (IPP) Administration Agreement Contains a Lease
In accounting for its IPP Administration Agreement with PSALM, the Group’s management has made
a judgment that the IPP Administration Agreement of TLI is an arrangement that contains a lease.
The Group’s management has made a judgment that TLI has substantially acquired all the risks and
rewards incidental to ownership of the power plant principally by virtue of its right to control the
capacity of power plant and its right to receive the transfer of the power plant at the end of the IPP
Administration Agreement for no consideration. Accordingly, the Group accounted for the
agreement as a lease and recognized a right-of-use asset included as part of power plant and lease
liability at the present value of the agreed monthly payments to PSALM (see Note 34).

The power plant is depreciated over its estimated useful life, as there is reasonable certainty that the
Group will obtain ownership by the end of the lease term. As of December 31, 2021 and 2020, the
carrying value of the power plant amounted to ₱31.41 billion and ₱32.5 billion, respectively (see
Notes 11 and 34). The carrying value of the lease liability related to this contract amounted to
=31.38 billion and P
P =37.15 billion as of December 31, 2021 and 2020, respectively (see Note 34).

Nonconsolidation of Manila-Oslo Renewable Enterprise, Inc. (MORE) and its investees, AA Thermal,
Inc. (AA Thermal) and GNPower Dinginin Ltd. Co. (GNPD)

The Group has 83.33% interest in MORE which has a 60% ownership interest in SN Aboitiz Power-
Magat, Inc. (SNAP M), SN Aboitiz Power-Benguet, Inc. (SNAP B), SN Aboitiz Power-RES, Inc. (SNAP
RES), and SN Aboitiz Power-Generation, Inc.

The Group has 70% interest in GNPD.

The Group does not consolidate MORE, AA Thermal and GNPD since it does not have the ability to
direct the relevant activities which most significantly affect the returns of MORE and its investees,
AA Thermal and GNPD. This is a result of partnership and shareholders’ agreements which, among
others, stipulate the management and operation of MORE, AA Thermal and GNPD. Management of
MORE, AA Thermal and GNPD are vested in their respective BOD or “Management Committee” and
the affirmative vote of the other shareholder or partners is required for the approval of certain
company actions which include financial and operating undertakings (see Note 9).

Determining a joint operation

The Group has 50% interest in Pagbilao Energy Corporation (PEC). The Group assessed that the joint
arrangement is a joint operation as the financial and operating activities of the operation are jointly
controlled by the participating shareholders and are primarily designed for the provision of output to
the shareholders.

Classification of financial instruments

The Group exercises judgment in classifying a financial instrument, or its component parts, on initial
recognition as either a financial asset, a financial liability or an equity instrument in accordance with
the substance of the contractual arrangement and the definition of a financial asset, a financial
liability or an equity instrument. The substance of a financial instrument, rather than its legal form,
governs its classification in the consolidated balance sheet.

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Contractual cash flows assessment

For each financial asset, the Group assesses the contractual terms to identify whether the
instrument is consistent with the concept of SPPI.

‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial
recognition and may change over the life of the financial asset (for example, if there are repayments
of principal or amortization of the premium/discount).

The most significant elements of interest within a lending arrangement are typically the
consideration for the time value of money and credit risk. To make the SPPI assessment, the Group
applies judgment and considers relevant factors such as the currency in which the financial asset is
denominated, and the period for which the interest rate is set.

In contrast, contractual terms that introduce a more than de minimis exposure to risks or volatility in
the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to
contractual cash flows that are solely payments of principal and interest on the amount outstanding.
In such cases, the financial asset is required to be measured at FVTPL.

Evaluation of business model in managing financial instruments

The Group determines its business model at the level that best reflects how it manages groups of
financial assets to achieve its business objective. The Group’s business model is not assessed on an
instrument-by-instrument basis, but at a higher level of aggregated portfolios and is based on
observable factors such as:

• How the performance of the business model and the financial assets held within that business
model are evaluated and reported to the entity's key management personnel;
• The risks that affect the performance of the business model (and the financial assets held within
that business model) and, in particular, the way those risks are managed; and
• The expected frequency, value and timing of sales are also important aspects of the Group’s
assessment.

The business model assessment is based on reasonably expected scenarios without taking 'worst
case' or 'stress case’ scenarios into account. If cash flows after initial recognition are realized in a way
that is different from the Group's original expectations, the Group does not change the classification
of the remaining financial assets held in that business model, but incorporates such information
when assessing newly originated or newly purchased financial assets going forward.

Identifying performance obligations

The Group identifies performance obligations by considering whether the promised goods or
services in the contract are distinct goods or services. A good or service is distinct when the
customer can benefit from the good or service on its own or together with other resources that are
readily available to the customer and the Group’s promise to transfer the good or service to the
customer is separately identifiable from the other promises in the contract.

The Group assesses performance obligations as a series of distinct goods and services that are
substantially the same and have the same pattern of transfer if i) each distinct good or services in
the series are transferred over time and ii) the same method of progress will be used (i.e., units of
delivery) to measure the entity’s progress towards complete satisfaction of the performance
obligation.

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For power generation and ancillary services where capacity and energy dispatched are separately
identified, these two obligations are to be combined as one performance obligation since these are
not distinct within the context of the contract as the buyer cannot benefit from the contracted
capacity alone without the corresponding energy and the buyer cannot obtain energy without
contracting a capacity.

The combined performance obligation qualifies as a series of distinct goods or services that are
substantially the same and have the same pattern of transfer since the delivery of energy every
month are distinct services which are all recognized over time and have the same measure of
progress.

Power distribution and retail supply also qualify as a series of distinct goods or services which is
accounted for as one performance obligation since the delivery of energy every month are distinct
services which are recognized over time and have the same measure of progress.

Revenue recognition
The Group recognizes revenue when it satisfies an identified performance obligation by transferring
a promised good or service to a customer. A good or service is considered to be transferred when
the customer obtains control. The Group determines, at contract inception, whether it will transfer
control of a promised good or service over time. If the Group does not satisfy a performance
obligation over time, the performance obligation is satisfied at a point in time.

The Group’s revenue from power generation, power distribution, ancillary services and retail supply
are to be recognized over time, since customers simultaneously receives and consumes the benefits
as the Group supplies power.

Identifying methods for measuring progress of revenue recognized over time

The Group determines the appropriate method of measuring progress which is either through the
use of input or output methods. Input method recognizes revenue on the basis of the entity’s
efforts or inputs to the satisfaction of a performance obligation while output method recognizes
revenue on the basis of direct measurements of the value to the customer of the goods or services
transferred to date.

For power generation and ancillary services, the Group determined that the output method is the
best method in measuring progress since actual electricity is supplied to customers. The Group
recognizes revenue based on:

For power generation and ancillary services:

• For the variable energy payment, actual kilowatt hours consumed which are billed on a monthly
basis.
• For fixed capacity payments, the Group allocates the transaction price on a straight-line basis
over the contract term. The allocated fixed payments are also billed on a monthly basis.

For power distribution and retail supply, the Group uses the actual kilowatt hours consumed, which
are also billed on a monthly basis.

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Determining method to estimate variable consideration and assessing the constraint

The Group includes some or all the amounts of variable consideration estimated but only to the
extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognized will not occur when the uncertainty associated with the variable consideration is
subsequently resolved. The Group considers both the likelihood and magnitude of the revenue
reversal in evaluating the extent of variable consideration the Group will subject to constraint.
Factors such as i) highly susceptibility to factors outside the Group’s influence, ii) timing of resolution
of the uncertainty, and iii) having a large number and broad range of possible considerations amount
are considered.

Some contracts with customers provide unspecified quantity of energy, provisional ERC rates, and
volume and prompt payment discounts that give rise to variable consideration. In estimating the
variable consideration, the Group applies the expected value method in estimating the variable
consideration given the large number of customer contracts that have similar characteristics and the
range of possible outcomes.

Before including any amount of variable consideration in the transaction price, the Group considers
whether the amount of variable consideration is constrained. The Group determined that the
estimates of variable consideration are to be fully constrained based on its historical experience (i.e.,
volume and prompt payment discounts), the range of possible outcomes (i.e., unspecified quantity
of energy), and the unpredictability of other factors outside the Group’s influence (i.e., provisional
ERC rates).

Allocation of variable consideration

Variable consideration may be attributable to the entire contract or to a specific part of the contract.
For power generation, power distribution, ancillary services and retail supply revenue streams which
are considered as series of distinct goods or services that are substantially the same and have the
same pattern of transfer, the Group allocates the variable amount that is no longer subject to
constraint to the satisfied portion (i.e., month) which forms part of the single performance
obligation, and forms part of the monthly billing of the Group.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below:

Estimating allowance for impairment losses on investments and advances

Investments and advances are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable or impairment recovery for
any significant change in the expected historical or projected future operating results of the
investees. There were no impairment indicators in 2021 and 2020 based on management’s
assessment. The carrying amounts of the investments and advances amounted to ₱64.95 billion and
₱61.83 billion as of December 31, 2021 and 2020, respectively (see Note 9).

Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an
estimation of the value in use of the cash-generating units to which the goodwill is allocated.
Estimating the value in use requires the Group to make an estimate of the expected future cash
flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate

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the present value of those cash flows. The carrying amount of goodwill as of December 31, 2021
and 2020 amounted to ₱41.16 billion and ₱38.81 billion, respectively (see Note 12). No impairment
of goodwill was recognized in 2021, 2020 and 2019.

Estimating useful lives of property, plant and equipment

The Group estimates the useful lives of property, plant and equipment based on the period over
which assets are expected to be available for use. The estimated useful lives of property, plant and
equipment are reviewed periodically and are updated if expectations differ from previous estimates
due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the
use of the assets. In addition, the estimation of the useful lives of property, plant and equipment is
based on collective assessment of internal technical evaluation and experience with similar assets. It
is possible, however, that future results of operations could be materially affected by changes in
estimates brought about by changes in the factors and circumstances mentioned above. As of
December 31, 2021 and 2020, the net book values of property, plant and equipment, excluding land
and construction in progress, amounted to ₱195.42 billion and ₱198.88 billion, respectively
(see Note 11).

Estimating residual value of property, plant and equipment

The residual value of the Group’s property, plant and equipment is estimated based on the amount
that would be obtained from disposal of the asset, after deducting estimated costs of disposal, if the
asset is already of the age and in the condition expected at the end of its useful life. Such estimation
is based on the prevailing price of property, plant and equipment of similar age and condition. The
estimated residual value of each asset is reviewed periodically and updated if expectations differ
from previous estimates due to changes in the prevailing price of a property, plant and equipment of
similar age and condition. As of December 31, 2021 and 2020, the aggregate net book values of
property, plant and equipment, excluding land and construction in progress, amounted to
₱195.42 billion and ₱198.88 billion, respectively (see Note 11).

Estimating useful lives of intangible asset - franchise

The Group estimates the useful life of VECO distribution franchise based on the period over which
the asset is estimated to be available for use over 40 years. As of December 31, 2021 and 2020, the
carrying value of the franchise amounted to ₱2.42 billion and ₱2.49 billion, respectively
(see Note 12).

Estimating useful lives of intangible asset - service concession rights

The Group estimates the useful lives of intangible asset arising from service concessions based on
the period over which the asset is expected to be available for use which is 18 to 25 years. The
Group has not included any renewal period on the basis of uncertainty, as of balance sheet date, of
the probability of securing renewal contracts at the end of the original contract term. As of
December 31, 2021 and 2020, the aggregate net book values of intangible asset - service concession
rights amounted to ₱1.75 billion and ₱2.01 billion, respectively (see Note 12).

Assessing impairment of nonfinancial assets

The Group assesses whether there are any indicators of impairment for nonfinancial assets at each
balance sheet date. These nonfinancial assets (property, plant and equipment, intangible assets
(excluding goodwill), and other current and noncurrent assets) are tested for impairment when
there are indicators that the carrying amounts may not be recoverable.

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Determining the recoverable amount of non-financial assets, which requires the determination of
future cash flows expected to be generated from the continued use and ultimate disposition of such
assets, requires the Group to make estimates and assumptions that can materially affect its
consolidated financial statements. Future events could cause the Group to conclude that the
property, plant and equipment, intangible assets (excluding goodwill), and other current and
noncurrent assets are impaired. Any resulting impairment loss could have a material adverse impact
on the consolidated balance sheet and consolidated statement of income.

As of December 31, 2021 and 2020, the aggregate net book values of these assets amounted to
₱220.65 billion and ₱222.24 billion, respectively (see Notes 8, 11, 12 and 13). Impairment losses and
write-off recognized on these non-financial assets in 2021, 2020 and 2019 amounted to
₱711.5 million, ₱165.0 million and ₱41.3 million, respectively (see Notes 11, 12 and 13).

Measurement of expected credit losses

ECLs are derived from unbiased and probability-weighted estimates of expected loss, and are
measured as follows:

• Financial assets that are not credit-impaired at the reporting date: as the present value of all
cash shortfalls over the expected life of the financial asset discounted by the effective interest
rate. The cash shortfall is the difference between the cash flows due to the Group in accordance
with the contract and the cash flows that the Group expects to receive.
• Financial assets that are credit-impaired at the reporting date: as the difference between the
gross carrying amount and the present value of estimated future cash flows discounted by the
effective interest rate.
• Financial guarantee contracts: as the expected payments to reimburse the holder less any
amounts that the Group expects to recover.

The Group leverages existing risk management indicators (e.g. internal credit risk classification and
restructuring triggers), credit risk rating changes and reasonable and supportable information which
allows the Group to identify whether the credit risk of financial assets has significantly increased.

Inputs, assumptions and estimation techniques

The ECL is measured on either a 12-month or lifetime basis depending on whether a significant
increase in credit risk has occurred since initial recognition or whether an asset is considered to be
credit-impaired. Expected credit losses are the discounted product of the Probability of Default (PD),
Loss Given Default (LGD), and Exposure at Default (EAD), defined as follows:

• Probability of default
The PD represents the likelihood of a borrower defaulting on its financial obligation, either over
the next 12 months, or over the remaining life of the obligation. PD estimates are estimates at a
certain date, which are calculated based on statistical rating models, and assessed using rating
tools tailored to the various categories of counterparties and exposures. If a counterparty or
exposure migrates between rating classes, then this will lead to a change in the estimate of the
associated PD. PDs are estimated considering the contractual maturities of exposures. The 12-
months and lifetime PD represent the expected point-in-time probability of a default over the
next 12 months and remaining lifetime of the financial instrument, respectively, based on
conditions existing at the balance sheet date and future economic conditions that affect credit
risk.

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• Loss given default

Loss Given Default represents the Group’s expectation of the extent of loss on a defaulted
exposure, taking into account the mitigating effect of collateral, its expected value when realized
and the time value of money. LGD varies by type of counterparty, type of seniority of claim and
availability of collateral or other credit support. LGD is expressed as a percentage loss per unit of
EAD.

• Exposure at default
EAD is based on the amounts the Group expects to be owed at the time of default, over the next
12 months or over the remaining lifetime.

The ECL is determined by projecting the PD, LGD, and EAD for each future month and for each
individual exposure or collective segment. These three components are multiplied together and
adjusted for the likelihood of survival (i.e. the exposure has not prepaid or defaulted in an earlier
month). This effectively calculates an ECL for each future month, which is then discounted back to
the reporting date and summed. The discount rate used in the ECL calculation is the original
effective interest rate or an approximation thereof.

The lifetime PD is developed by applying a maturity profile to the current 12-month PD. The maturity
profile looks at how defaults develop on a portfolio from the point of initial recognition throughout
the lifetime of the loans. The maturity profile is based on historical observed data and is assumed to
be the same across all assets within a portfolio and credit grade band. This is supported by historical
analysis. The 12-month and lifetime EADs are determined based on the expected payment profile,
which varies by customer segment.

The 12-month and lifetime LGDs are determined based on the factors which impact the recoveries
made post default. LGDs are typically set at product level due to the limited differentiation in
recoveries achieved across different borrowers. These LGD’s are influenced by collection strategies
including contracted debt sales and price.

The assumptions underlying the ECL calculation such as how the maturity profile of the PDs change
are monitored and reviewed on a quarterly basis.

Simplified approach for trade receivables

The Group uses a provision matrix to calculate ECLs for trade receivables. The provision rates are
based on days past due for various customer segments that have similar loss patterns (i.e., by
geography, customer segment and coverage by letters of credit).

The provision matrix is initially based on the Group’s historical observed default rates. The Group will
calibrate the matrix to adjust the historical credit loss experience with forward-looking information.
For instance, if forecast economic conditions (i.e., gross domestic product) are expected to
deteriorate over the next year which can lead to an increased number of defaults in the industrial
segment, the historical default rates are adjusted. At every reporting date, the historical observed
default rates are updated and changes in the forward-looking estimates are analyzed.

The assessment of the correlation between historical observed default rates, forecast economic
conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in
circumstances and of forecast economic conditions. The Group’s historical credit loss experience
and forecast of economic conditions may also not be representative of customer’s actual default in
the future.

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There have been no significant changes in estimation techniques or significant assumptions made
during the reporting period.

Incorporation of forward-looking information

The Group incorporates forward-looking information into both its assessment of whether the credit
risk of an instrument has increased significantly since its initial recognition and its measurement of
ECL.
The Group has identified and documented key drivers of credit risk and credit losses of each
portfolio of financial instruments and, using an analysis of historical data, has estimated
relationships between macro-economic variables and credit risk and credit losses.

The macro-economic variables include the following key indicators for the Philippines:
unemployment rates, inflation rates, gross domestic product growth and net personal income
growth.

Predicted relationship between the key indicators and default and loss rates on various portfolios of
financial assets have been developed based on analyzing historical data over the past 5 years. The
methodologies and assumptions including any forecasts of future economic conditions are reviewed
regularly.
The Group has not identified any uncertain event that it has assessed to be relevant to the risk of
default occurring but where it is not able to estimate the impact on ECL due to lack of reasonable
and supportable information.

An increase in the Group’s allowance for expected credit losses of trade and other receivables will
increase the Group’s recorded expenses and decrease current assets. As of December 31, 2021 and
2020, allowance for expected credit losses amounted to ₱3.02 billion and ₱2.28 billion, respectively.
Trade and other receivables, net of allowance for ECL, amounted to ₱26.82 billion and ₱22.02 billion
as of December 31, 2021 and 2020, respectively (see Note 6).
Estimating allowance for inventory obsolescence
The Group estimates the allowance for inventory obsolescence based on the age of inventories. The
amounts and timing of recorded expenses for any period would differ if different judgments or
different estimates are made. An increase in allowance for inventory obsolescence would increase
recorded expenses and decrease current assets. As of December 31, 2021 and 2020, allowance for
inventory obsolescence amounted to ₱27.5 million and ₱102.8 million respectively. The carrying
amount of the inventories amounted to ₱9.57 billion and ₱6.31 billion as of December 31, 2021 and
2020, respectively (see Note 7).

Estimating the incremental borrowing rate (IBR)

The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its IBR to
measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow
over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar
value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what
the Group ‘would have to pay’, which requires estimation when no observable rates are available or
when they need to be adjusted to reflect the terms and conditions of the lease. The Group
estimates the IBR using observable inputs (such as market interest rates) when available and is
required to make certain entity-specific estimates. The carrying amount of the lease liabilities
amounted to ₱33.77 billion and ₱39.26 billion as of December 31, 2021 and 2020, respectively (see
Note 34).

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Estimating decommissioning liability

Under the Geothermal Resource Service Contract (GRSC), the Group has a legal obligation to
decommission, abandon and perform surface rehabilitation on its steam field asset at the end of its
useful life. The Group also has a legal obligation under its land lease agreements to decommission
the power plants at the end of their lease term. The Group recognizes the present value of the
obligation to decommission the plant, abandon and perform surface rehabilitation of the steam field
asset and capitalizes the present value of these costs as part of the balance of the related property,
plant and equipment, which are being depreciated and amortized on a straight-line basis over the
useful life of the related asset.

These costs are accrued based on in-house estimates, which incorporates estimates of the amount
of obligations and interest rates, if appropriate. Assumptions used to compute the provision are
reviewed and updated annually. Each year, the provision is increased to reflect the accretion of
discount and to accrue an estimate for the effects of inflation, with charges being recognized as
accretion expense, included under “Interest expense” in the consolidated statement of income.

Changes in the decommissioning liability that result from a change in the current best estimate of
cash flow required to settle the obligation or a change in the discount rate are added to (or deducted
from) the amount recognized as the related asset and the periodic unwinding of the discount on
the liability is recognized in the consolidated statement of income as it occurs.

While the Group has made its best estimate in establishing the decommissioning provision, because
of potential changes in technology as well as safety and environmental requirements, plus the actual
time scale to complete decommissioning activities, the ultimate provision requirements could either
increase or decrease significantly from the Group’s current estimates.

The amounts and timing of recorded expenses for any period would be affected by changes in these
factors and circumstances.

Decommissioning liability amounted to P

=5.69 billion and P=5.01 billion as of December 31, 2021 and
2020, respectively, (see Note 18).

Recognition of deferred income tax assets

The Group reviews the carrying amounts of deferred income tax assets at each balance sheet date
and reduces deferred income tax assets to the extent that it is no longer probable that sufficient
income will be available to allow all or part of the deferred income tax assets to be utilized. The
Group recognize deferred taxes based on enacted or substantially enacted tax rates for renewable of
10% and for non-renewable of 30%. The Group has deferred income tax assets amounting to
=3.52 billion and P=3.06 billion as of December 31, 2021 and 2020, respectively.
P

Details of the Group’s unused net operating loss carryover (NOLCO) and excess minimum corporate
income tax (MCIT) are disclosed in Note 28.

Pension benefits
The cost of defined benefit pension plans, as well as the present value of the pension obligation, are
determined using actuarial valuations. The actuarial valuation involves making various assumptions.
These include the determination of the discount rates, future salary increases, mortality rates and
future pension increases. Due to the complexity of the valuation, the underlying assumptions and

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its long-term nature, defined benefit obligations are highly sensitive to changes in these
assumptions. All assumptions are reviewed at each reporting date.

In determining the appropriate discount rate, management considers the interest rates of
government bonds that are denominated in the currency in which the benefits will be paid, with
extrapolated maturities corresponding to the expected duration of the defined benefit obligation.

The mortality rate is based on publicly available mortality tables for the specific country and is
modified accordingly with estimates of mortality improvements. Future salary increases and
pension increases are based on expected future inflation rates for the specific country.

Further details about the assumptions used are provided in Note 26.

Net benefit expense amounted to P =277.3 million in 2021, P =231.0 million in 2020, and P
=182.3 million
in 2019. The net pension assets as of December 31, 2021 and 2020 amounted to =P87.1 million and
=50.4 million, respectively. Net pension liabilities as of December 31, 2021 and 2020 amounted to
P
=302.8 million and P
P =294.1 million, respectively.

Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the consolidated balance
sheet cannot be derived from active markets, their fair value is determined using valuation
techniques which include the discounted cash flow model and other generally accepted market
valuation model. The inputs for these models are taken from observable markets where possible,
but where this is not feasible, a degree of judgment is required in establishing fair values. The
judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in
assumptions about these factors could affect the reported fair value of financial instruments. The
fair values of the Group’s financial instruments are presented under Note 33.

Legal contingencies
The estimate of probable costs for the resolution of possible claims has been developed in
consultation with outside counsels handling the Group’s defense in these matters and is based upon
an analysis of potential results. No provision for probable losses arising from legal contingencies was
recognized in the Group’s consolidated financial statements for the years ended December 31, 2021,
2020 and 2019.

5. Cash and Cash Equivalents

2021 2020
Cash on hand and in banks =17,239,024
P =14,790,197
P
Short-term deposits 39,891,219 23,909,348
=57,130,243
P =38,699,545
P

Cash in banks earn interest at floating rates based on daily bank deposit rates. Short-term deposits
are made for varying periods depending on the immediate cash requirements of the Group and earn
interest at the respective short-term deposits rates. Interest income earned from cash and cash
equivalents amounted to =P343.2 million in 2021, P=653.1 million in 2020, and P=1.29 billion in 2019.

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6. Trade and Other Receivables

2021 2020
Trade receivables - net of allowance for expected
credit losses of ₱3.02 billion and ₱2.28 billion
in 2021 and 2020, respectively (see Notes 31
and 32) =19,618,892
P =15,450,006
P
Non-trade receivable 4,726,071 3,766,426
Dividends receivable (see Note 9) 1,192,000 1,498,000
Advances to contractors 191,904 226,123
Interest receivable 48,343 33,893
PSALM deferred adjustment (see Note 39k) 1,042,861 1,042,861
=26,820,071
P =22,017,309
P

Trade and other receivables are noninterest-bearing and are generally on 10 - 30 days’ term.

For terms and conditions relating to related party receivables, refer to Note 31.

Advances to contractors refer to noninterest-bearing advance payments made for acquisition of

inventories and services which are offset against progress billings to be made by the suppliers.

Non-trade receivable relates mostly to claims from insurance against the property damage and
business interruption insurance policies of TSI, and receivable of GMEC from the National Grid
Corporation of the Philippines (NGCP) related to the sale of transmission assets in 2019 and
advances to partners in GMEC.

The rollforward analysis of allowance for expected credit losses as of December 31, 2021 and 2020,
which pertains to trade receivables, is presented below:

2021 2020
January 1 =P2,276,373 =1,973,520
P
Provision (see Note 23) 1,089,566 719,193
Write-off (204,940) (121,618)
Effect of changes in foreign exchange rate (142,018) (294,722)
December 31 =3,018,981
P =2,276,373
P

7. Inventories

2021 2020
Plant spare parts and supplies =4,881,095
P =3,154,218
P
Fuel 3,399,155 1,635,333
Transmission and distribution supplies 1,294,087 1,469,095
Other parts and supplies 276 49,554
=9,574,613
P =6,308,200
P

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Inventories are carried at lower of cost and NRV as of December 31, 2021 and 2020.

The cost of inventories recognized as part of cost of generated power in the consolidated statements
of income amounted to P =27.48 billion in 2021, P
=19.65 billion in 2020, and P=29.39 billion in 2019 (see
Note 22). The cost of inventories recognized as part of operations and maintenance in the
consolidated statements of income amounted to P =272.1 million in 2021, P=305.8 million in 2020, and
=353.7 million in 2019 (see Note 24). Write-down on inventories to arrive at NRV amounted to
P
=27.5 million, P
P =102.8 million and P
=88.2 million in 2021, 2020 and 2019, respectively.

8. Other Current Assets

2021 2020
Restricted cash (Note 16) =4,073,381
P =5,324,213
P
Prepaid tax 2,529,435 1,352,645
Input VAT 1,387,464 1,972,706
Prepaid expenses 818,610 561,739
Advances to NGCP 615,785 1,167,296
Others 86,432 101,049
=9,511,107
P =10,479,648
P

Restricted cash represents proceeds from sale of power under the control of trustees of TVI and TSI’s
lenders as per loan agreement (see Note 16). The asset will be used to pay the current portion of
loans payable, interest payments and operating costs in the following period.

Advances to NGCP pertain to TVI’s cost of construction and installation of substation and
transmission facilities which are subject for reimbursement.

Prepaid expenses mainly include prepayments for insurance.

9. Investments and Advances

2021 2020
Acquisition cost:
Balance at beginning of the year =60,470,649
P =58,144,997
P
Additions during the year 954,386 2,332,591
—
Step acquisition to subsidiary (77)
Redemptions during the year (14,413) (6,939)
Balance at end of year 61,410,545 60,470,649
Accumulated equity in net earnings:
Balance at beginning of the year 2,482,442 3,345,164
Share in net earnings 9,479,696 2,675,136
Step acquisition to subsidiary 1,082 —
Dividends received or receivable (8,049,017) (3,537,858)
Balance at end of year 3,914,203 2,482,442

(Forward)

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2021 2020
Share in net unrealized valuation gain on FVOCI investment
of an associate =98,602
P =98,602
P
Share in actuarial gains on defined benefit plans of
associates and joint ventures 16,663 8,748
2021 2020
Share in cumulative translation adjustments of associates
and joint ventures 69,918 (684,042)
185,183 (576,692)
65,509,931 62,376,399
Less allowance for impairment losses 568,125 568,125
Investments at equity 64,941,806 61,808,274
Advances 10,922 20,527
=64,952,728
P =61,828,801
P

As of December 31, 2021 and 2020, the undistributed earnings of the associates and joint ventures
included in the Group’s retained earnings amounting to P =3.91 billion and P
=2.48 billion, respectively,
are not available for distribution to the stockholders unless declared by the investees (see Note 19).

2021
In 2021, the Group, through TPI and AA Thermal, made capital contributions to GNPD amounting to
=952.1 million.
P

In 2021, the Group made capital contributions to MEC amounting to P

=2.2 million.

In 2021, AEV Aviation, Inc. (AAI) redeemed 14,413 RPS held by the Company for P
=14.4 million.

In 2021, the Group, through ARI acquired 100% of Electricidad, Inc. (formerly La Filipina Electrika,
Inc.) from TPI (40%) and La Filipina Uy Gongco Corporation (60%) at its par value of P
=192,500. As a
result, Electricidad, Inc. (formerly an associate) became a subsidiary.

2020
In 2020, the Group converted the advances to Hijos de F. Escaño, Inc. (Hijos) to equity in the form of
common and redeemable preferred shares amounting to =P15.4 million.

In 2020, AAI redeemed 6,939 RPS held by the Company for P=6.9 million.

In 2020, the Group, through TPI and AA Thermal made capital contributions to GNPD amounting to
US$48.25 million (P=2.32 billion).

The completion of the transaction increases the Company’s economic interests in GMEC, and GNPD
to 78.3%, and 75.0%, respectively.

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The Group’s associates and joint ventures and the corresponding equity ownership are as follows:

Percentage of Ownership
Nature of Business 2021 2020 2019

MORE1 Holding company 83.33 83.33 83.33

GNPD1 Power generation 70.00 70.00 72.50

AA Thermal(1,2) Holding company 60.00 60.00 60.00

Hijos Holding company 46.73 46.73 46.73

Mazzaraty Energy Corporation (MEC) Retail electricity supplier 44.87 44.87 44.87

San Fernando Electric Light & Power Co., Inc. (SFELAPCO) Power distribution 43.78 43.78 43.78
Pampanga Energy Ventures, Inc. (PEVI) Holding company 42.84 42.84 42.84

Electricidad, Inc.. * Power generation — 40.00 40.00

STEAG Power generation 34.00 34.00 34.00

AAI Service 26.69 26.69 26.69

Cebu Energy Development Corporation (CEDC) Power generation 26.40 26.40 26.40
Redondo Peninsula Energy, Inc. (RPEI)* Power generation 25.00 25.00 25.00
Southfern Philippines Power Corporation (SPPC) Power generation 20.00 20.00 20.00
Western Mindanao Power Corporation (WMPC) Power generation 20.00 20.00 20.00
1 Joint ventures.
2 Economic interest.

* No commercial operations as of December 31 ,2021.

The principal place of business and country of incorporation of the Group’s associates and joint
ventures are in the Philippines.

All ownership percentages presented in the table above are direct ownership of the Group except for
GNPD and SFELAPCO. As of December 31, 2021, ATI has an indirect ownership in GNPD of 50% while
the Group’s direct ownership in GNPD is 40% resulting to the Group’s effective ownership in GNPD of
70%. PEVI has direct ownership in SFELAPCO of 54.83% while the Group’s direct ownership in
SFELAPCO is 20.29% resulting to the Group’s effective ownership in SFELAPCO of 43.78%.

The carrying values of investments, which are accounted for under the equity method are as
follows:

2021 2020
AA Thermal ₱26,517,258 ₱24,146,045
GNPD 22,164,022 17,713,271
MORE 8,151,748 10,653,803
STEAG 3,211,116 3,855,162
CEDC 2,928,493 3,409,799
RPEI 361,663 522,347
PEVI 586,219 532,796
SFELAPCO 437,673 395,698
Hijos 212,038 213,524
WMPC 179,639 168,244
SPPC 48,368 53,246
Others 143,569 144,339
₱64,941,806 ₱61,808,274

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Following is the summarized financial information of significant associates and joint ventures:
2021 2020 2019
MORE:
Total current assets = 655,296
P =1,046,825
P =681,925
P
Total noncurrent assets 9,672,667 12,724,102 12,222,826
Total current liabilities (510,947) (961,848) (610,443)
Total noncurrent liabilities (34,918) (24,516) (75,721)
Equity = 9,782,098
P =12,784,563
P =12,218,587
P
Gross revenue =222,460
P =178,636
P =198,636
P
Operating profit 3,800,149 3,194,516 3,750,522
Net income 3,788,908 3,193,335 3,732,874
Other comprehensive income (loss) 16,501 22,889 (152,630)
Group’s share in net income = 3,157,424
P =2,658,476
P =3,110,204
P
Additional information:
Cash and cash equivalents = 55,669
P =36,165
P =P34,480
Current financial liabilities 10,385 9,890 11,745
Noncurrent financial liabilities 8,209 13,785 43,821
Depreciation and amortization 18,628 20,124 18,163
Interest income 188 500 1,175
Interest expense 1,501 2,132 4,272
Income tax expense 10,149 4,836 14,373
WMPC:
Total current assets = 933,419
P =P786,831 =P643,983
Total noncurrent assets 245,101 338,568 348,174
Total current liabilities (210,852) (203,776) (193,157)
Total noncurrent liabilities (67,288) (80,403) (83,804)
Equity = 900,380
P =841,220
P =715,196
P
Gross revenue = 1,596,258
P =1,390,204
P =1,157,772
P
Operating profit 630,603 427,771 280,417
Net income 351,931 348,795 196,693
Other comprehensive loss — — —
Group’s share in net income = 71,395
P =69,667
P =36,053
P
SPPC:
Total current assets = 142,071
P =P149,970 =P148,228
Total noncurrent assets 189,810 222,642 265,422
Total current liabilities (37,565) (51,339) (39,137)
Total noncurrent liabilities (53,015) (55,041) (76,324)
Equity = 241,301
P =266,232
P =298,189
P
Gross revenue =—
P =P12,857 =—
P
Operating loss (9,490) (56,722) (88,013)
Net loss (43,115) (48,136) (77,296)
Other comprehensive income — — —
Group’s share in net loss (P
=4,878) (P
= 8,250) (P
= 20,359)
SFELAPCO*:
Total current assets = 1,071,258
P =P1,112,909 =P1,135,431
Total noncurrent assets 2,918,480 2,825,295 2,691,104
Total current liabilities (699,925) (831,991) (868,787)
Total noncurrent liabilities (772,733) (826,003) (784,368)
Equity = 2,517,080
P =2,280,210
P =2,173,380
P
Gross revenue = 4,674,301
P =4,318,340
P =4,448,624
P
Operating profit 1,336,613 573,989 479,553
Net income 517,748 437,566 342,199
Other comprehensive income (loss) 68,923 8,203 (51,500)
Group’s share in net income = 234,137
P =198,142
P =164,080
P
STEAG:
Total current assets = 3,510,163
P =P5,053,099 =P3,107,046
Total noncurrent assets 9,155,136 9,000,415 9,967,406
Total current liabilities (1,687,950) (1,605,648) (1,379,138)
Total noncurrent liabilities (3,732,167) (4,205,178) (2,840,129)
Equity = 7,245,182
P =8,242,688
P =8,855,185
P
Gross revenue = 3,780,615
P =P3,941,673 =P4,812,414
Operating profit 1,242,155 1,504,642 1,250,028
Net income 1,028,755 1,022,111 1,150,501
Other comprehensive income (loss) 73,301 (42,194) (29,106)
Group’s share in net income = 218,730
P =210,781
P =249,432
P
(Forward)

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2021 2020 2019

CEDC:
Total current assets =P4,546,675 =P4,611,404 =P5,199,140
Total noncurrent assets 11,074,007 11,851,774 12,842,201
Total current liabilities (3,205,091) (7,751,429) (2,496,096)
Total noncurrent liabilities (5,823,525) (1,008,946) (7,672,244)
Equity = 6,592,066
P =7,702,803
P =7,873,001
P
Gross revenue ₱8,984,184 ₱7,718,729 ₱8,578,452
Operating profit 4,111,795 2,726,815 3,017,831
Net income 1,921,029 1,576,645 2,317,071
Other comprehensive income (36,552) (17,256) 29,483
Group’s share in net income ₱839,766 ₱710,307 ₱1,002,882
AA Thermal
Total current assets ₱9,859 ₱491,206 ₱75,243
Total noncurrent assets 16,775,941 15,998,648 14,827,626
Total current liabilities (89) (134) (7,762)
Total noncurrent liabilities (152) — —
Equity ₱16,785,559 ₱16,489,720 ₱14,895,107
Gross revenue ₱— ₱— ₱—
Operating profit — — —
Net income (2,920) — —
Other comprehensive income — — —
Group’s share in net loss ₱— (₱6,937) ₱—
GNPD
Total current assets ₱14,738,599 ₱3,949,591 ₱1,612,549
Total noncurrent assets 81,161,930 71,095,383 67,043,356
Total current liabilities (5,173,546) (2,542,327) (5,623,202)
Total noncurrent liabilities (64,794,734) (56,958,752) (48,514,482)
Equity ₱25,932,249 ₱15,543,895 ₱14,518,221
Gross revenue ₱18,531,437 ₱1,725,867 ₱—
Operating income (loss) 2,067,594 (752,254) (1,161,098)
Net loss 7,495,055 (1,642,379) (1,160,004)
Other comprehensive income — 1,514 —
Group’s share in net income (loss) ₱2,922,760 (₱683,376) (₱726,682)
Additional information:
Cash and cash equivalents ₱6,037,783 ₱272,868 ₱1,093,991
Current financial liabilities 1,295,090 1,213,841 2,033,297
Noncurrent financial liabilities 2,133,426 2,146,158 48,514,482
Depreciation and amortization 113,358 8,051 61,005
Interest income 26,868 3,702 590
Interest expense 87,560 24,494 63,928
Income tax expense ₱1,448,237 ₱807,066 ₱395,945
Others**:
Total current assets ₱407,576 ₱380,749 ₱403,979
Total noncurrent assets 2,585,044 2,759,869 2,831,067
Total current liabilities (27,113) (34,193) (31,272)
Total noncurrent liabilities (143,983) (166,040) (111,875)
Gross revenue ₱131,073 ₱125,908 ₱150,059
Net income (loss) 8,138 (18,021) (8,856)
*Amounts are based on appraised values which are adjusted to historical amounts upon equity take-up of the Group. Using cost
method in accounting for property, plant and equipment, net income amounted to ₱517.7 million, ₱449.2 million and
₱374.8 million in 2021, 2020, and 2019, respectively, for SFELAPCO.
**The financial information of insignificant associates and joint ventures is indicated under “Others”.

10. Joint Operation

Percentage of Ownership
Name of Joint Operation Nature of Business 2021 2020 2019
PEC Power generation 50.00 50.00 50.00
*PEC’s principal place of business and country of incorporation is the Philippines.

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On May 15, 2014, the Group entered into a shareholders’ agreement with TPEC Holdings
Corporation (TPEC) for the development, construction and operation of the 400 MW Pagbilao Unit III
in Pagbilao, Quezon through PEC. TPI and TPEC both agreed to provide their respective capital
contributions and subscribe to common shares such that each stockholder owns 50% of the issued
and outstanding shares of stock of PEC.

The financial and operating activities of the operation are jointly controlled by the participating
shareholders and are primarily designed for the provision of output to the shareholders.

The Group’s share of assets, liabilities, revenue, expenses and cash flows of joint operations are
included in the consolidated financial statements on a line-by-line basis.

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11. Property, Plant and Equipment

December 31, 2021

Power plant Transmission,

Buildings, equipment and distribution and Office furniture Meters and
warehouses and steam field assets substation Transportation fixtures and Leasehold Electrical laboratory Construction in ROU assets
Land improvements (see Note 18) equipment equipment equipment improvements equipment equipment Tools and others progress (see Note 34) Total

Cost:
Balances at beginning of ₱1,751,190 ₱38,731,336 ₱138,325,267 ₱23,002,108 ₱5,311,547 ₱1,345,146 ₱2,950,245 ₱8,176,921 ₱2,383,018 ₱4,687,252 ₱5,464,652 ₱38,012,187 ₱270,140,869
year
Additions (see Notes 14
and 18) 4,482 26,826 528,603 — 72,165 77,234 97,316 71,687 — 41,266 7,334,757 380,040 8,634,376
Disposals — — (335,264) (9,909) (65,497) (57,544) (9) 10,951 107 (2,191) (2,958) — (462,314)
Reclassifications and others 51,823 13,177,439 (11,094,680) 2,327,320 (3,683,360) (325,940) (17,668) 2,402,362 516,260 137,150 (4,135,115) 1 (644,408)
Balances at end of year 1,807,495 51,935,601 127,423,926 25,319,519 1,634,855 1,038,896 3,029,884 10,661,921 2,899,385 4,863,477 8,661,336 38,392,228 277,668,523
Accumulated Depreciation and
Amortization:
Balances at beginning — —
of year 6,358,394 40,637,430 6,411,392 1,055,681 992,516 817,685 3,653,417 281,595 701,844 2,531,549 63,441,503
Depreciation and — —
amortization 1,940,013 5,388,949 723,878 152,391 172,403 130,744 442,545 122,759 300,314 1,326,394 10,700,390
Disposals — — (119,538) (2,092) (59,152) (65,773) (9) 10,774 2 (2,134) — — (237,922)
Reclassifications and others — 3,054,170 (6,376,082) 645 (4,560) (290,457) 29,349 507,676 28 15,238 — — (3,063,993)
Balances at end of year — 11,352,577 39,530,759 7,133,823 1,144,360 808,689 977,769 4,614,412 404,384 1,015,262 — 3,857,943 70,839,978

Accumulated Impairment:
Balances at beginning
of year — — 599,963 — 2,088 792 251 — — — 2,645,029 — 3,248,123
Impairment (see Note 27) — 9,955 187,533 77,541 — — — — 65,568 — — — 340,597
Balances at end of year — 9,955 787,496 77,541 e 2,088 792 251 — 65,568 — 2,645,029 — 3,588,720
Net book values ₱1,807,495 ₱40,573,069 ₱87,105,671 ₱18,108,155 ₱488,407 ₱229,415 ₱2,051,864 ₱6,047,509 ₱2,429,433 ₱3,848,215 ₱6,016,307 ₱34,534,285 ₱203,239,825

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December 31, 2020

Power plant Transmission,

Buildings, equipment and distribution and Office furniture, Meters and
warehouses and steam field assets substation Transportation fixtures and Leasehold Electrical laboratory Construction in ROU assets
Land improvements (Note 18) equipment equipment equipment improvements equipment equipment Tools and others progress (Note 34) Total

Cost:
Balances at beginning of
year ₱1,785,250 ₱37,218,328 ₱141,948,261 ₱21,295,812 ₱1,626,721 ₱1,174,643 ₱2,793,542 ₱7,788,861 ₱2,265,372 ₱1,228,993 ₱6,311,485 ₱37,864,618 ₱263,301,886
Additions (see Notes 14
and 18) 7,623 347,179 416,501 — 73,029 64,357 63,377 141,066 — 30,782 4,284,816 152,491 5,581,221
Disposals — — (98,178) — (99,989) (9,283) (11,966) (15,663) — (10,173) — — (245,252)
Reclassifications and others (41,683) 1,165,829 (3,941,317) 1,706,296 3,711,786 115,429 105,292 262,657 117,646 3,437,650 (5,131,649) (4,922) 1,503,014
Balances at end of year 1,751,190 38,731,336 138,325,267 23,002,108 5,311,547 1,345,146 2,950,245 8,176,921 2,383,018 4,687,252 5,464,652 38,012,187 270,140,869
Accumulated Depreciation and
Amortization:
Balances at beginning
of year — 4,977,159 32,089,849 5,738,598 996,744 870,505 681,804 3,281,314 177,562 620,939 — 1,211,506 50,645,980
Depreciation and
amortization — 1,362,949 5,923,510 672,817 146,320 117,016 127,317 382,866 104,033 342,349 — 1,319,059 10,498,236
Disposals — — (24,237) (23) (88,045) (7,968) (11,966) (13,869) — (2,066) — — (148,174)
Reclassifications and others — 18,286 2,648,308 — 662 12,963 20,530 3,106 — (259,378) — 984 2,445,461
Balances at end of year — 6,358,394 40,637,430 6,411,392 1,055,681 992,516 817,685 3,653,417 281,595 701,844 — 2,531,549 63,441,503
Accumulated Impairment:
Balances at beginning of —
year — 486,280 — 2,088 792 251 — — — 2,645,029 — 3,134,440

Impairment (see Note 27) — — 113,683 — — — — — — — — — 113,683

Balances at end of year — — 599,963 — 2,088 792 251 — — — 2,645,029 — 3,248,123
Net book values ₱1,751,190 ₱32,372,942 ₱97,087,874 ₱16,590,716 ₱4,253,778 ₱351,838 ₱2,132,309 ₱4,523,504 ₱2,101,423 ₱3,985,408 ₱2,819,623 ₱35,480,638 ₱203,451,243

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In 2021 and 2020, the Group determined that an impairment test has to be performed on certain
segments of its property, plant and equipment amounting to ₱8.4 billion and ₱41.6 billion,
respectively. In performing an impairment test calculation, the Group determined the recoverable
amount of the relevant property, plant and equipment through value in use (VIU). VIU is derived
based on financial budgets prepared by senior management covering the project’s entire life. Pre-
tax discount rate of 7.51% to 10.88% in 2021 and 7.12% to 8.79% in 2020 was used.

The calculation of value in use of these property, plant and equipment are most sensitive to the
following assumptions:

• Discount rate - Discount rate reflects the management’s estimate of risks applicable to these
projects. The benchmark used by the management to assess operating performance and to
evaluate future investment proposals. In determining appropriate discount rates, consideration
has been given to various market information, including, but not limited to, government bond
yield, bank lending rates and market risk premium.

• Material price inflation - Estimates are obtained from published indices from which the materials
are sourced, as well as data relating to specific commodities. Forecast figures are used if data is
publicly available, otherwise past actual material price movements are used as an indicator of
future price movement.

• Growth rate - The long-term rate used to extrapolate future cash flows excludes expansions and
potential improvements in the future. Management also recognized the possibility of new
entrants, which may have significant impact on existing growth rate assumptions. Management,
however, believes that new entrants will not have a significant adverse impact on the forecasts
included in the financial budget.

Management have reflected future economic uncertainty in the risk-adjusted cash flows, giving a
more accurate representation of the risks specific to the projects, taking into account the impact of
COVID-19.

In addition, the Group also performed an assessment whether there are specific equipment that
should have been impaired.

These assessments resulted to the recognition of impairment losses in 2021 and 2020 amounting to
₱340.6 million and ₱113.7 million, respectively.

In 2021 and 2020, power plant equipment and steam field assets increased by ₱459.2 million and
₱1.2 billion, respectively, due to the change in accounting estimate and because of an additional
obligation originating in 2020 (see Note 18).

In 2021 and 2020, additions to “Construction in progress” include capitalized borrowing costs, net of
interest income earned from short-term deposits amounted to ₱35.8 million and nil, respectively
(see Note 16). The rate used to determine the amount of borrowing costs eligible for capitalization
ranged from 4.54% to 5.86% which are the effective interest rate of the specific borrowings in 2021.

Property, plant and equipment with carrying amounts of ₱68.08 billion and ₱111 billion as of
December 31, 2021 and 2020, respectively, are used to secure the Group’s long-term debts
(see Note 16).

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Fully depreciated property and equipment with gross carrying amount of ₱2.19 billion and
₱6.57 billion as of December 31, 2021 and 2020, respectively, are still in use.

In 2019, the Group completed the sale of its transmission assets. These assets have been previously
recognized as property held for sale carried at its recoverable amount of ₱675.8 million
(see Note 27).

12. Intangible Assets

2021 2020
Goodwill ₱41,163,608 ₱38,812,852
Franchise 2,417,850 2,494,811
Service concession rights 1,754,392 2,007,375
Project development costs 448,995 702,671
Software and licenses 230,651 261,677
₱46,015,496 ₱44,279,386

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The table below shows the rollforward of intangible assets:

December 31, 2021

Service Project
Customer Software and
Goodwill concession development
Franchise contracts licenses Total
rights costs
Cost:
Balances at beginning of year ₱38,812,852 ₱5,411,326 ₱3,078,431 ₱702,671 ₱60,068 ₱538,776 ₱48,604,124
Additions during the year — 27,673 — 44,355 — 33,021 105,049
Write-off (see Note 27) — — — (298,031) — — (298,031)
Exchange differences 2,350,756 54,583 — — — — 2,405,339
Balances at end of year 41,163,608 5,493,582 3,078,431 448,995 60,068 571,797 50,816,481
Accumulated amortization:
Balances at beginning of year — 3,403,951 583,620 — 60,068 277,099 4,324,738
Amortization — 335,239 76,961 — — 64,047 476,247
Balances at end of year — 3,739,190 660,581 — 60,068 341,146 4,800,985
Net book values ₱41,163,608 ₱1,754,392 ₱2,417,850 ₱448,995 ₱— ₱230,651 ₱46,015,496

December 31, 2020

Service Project
Customer Software and
Goodwill concession development
Franchise contracts licenses Total
rights costs
Cost:
Balances at beginning of year ₱40,876,082 ₱5,456,916 ₱3,078,431 ₱622,491 ₱60,068 ₱468,123 ₱50,562,111
Additions during the year — 39,957 — 87,420 — 70,653 198,030
Write-off (see Note 27) — — — (7,240) — — (7,240)
Exchange differences (2,063,230) (85,547) — — — — (2,148,777)
Balances at end of year 38,812,852 5,411,326 3,078,431 702,671 60,068 538,776 48,604,124
Accumulated amortization:
Balances at beginning of year — 3,050,596 506,659 — 60,068 232,287 3,849,610
Amortization — 353,355 76,961 — — 44,812 475,128
Balances at end of year — 3,403,951 583,620 — 60,068 277,099 4,324,738
Net book values ₱38,812,852 ₱2,007,375 ₱2,494,811 ₱702,671 ₱— ₱261,677 ₱44,279,386

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Impairment Testing of Goodwill

Goodwill acquired through business combinations have been attributed to individual CGUs.

The carrying amount of goodwill follows:

2021 2020
GMEC ₱40,284,323 ₱37,933,567
LEZ 467,586 467,586
HI 220,228 220,228
BEZ 191,471 191,471
₱41,163,608 ₱38,812,852

The recoverable amounts of the investments have been determined based on a value-in-use
calculation using cash flow projections based on financial budgets approved by senior management
covering a five-year period.

Key assumptions used in value-in-use calculation for December 31, 2021 and 2020
The following describes each key assumption on which management has based its cash flow
projections to undertake impairment testing of goodwill.

Discount rates and growth rates

The discount rates applied to cash flow projections are from 7.51% to 10.88% in 2021 and 7.12% to
8.79% in 2020, and cash flows beyond the five-year period are extrapolated using a zero percent
growth rate.

Revenue assumptions
Revenue assumptions are based on the expected electricity to be sold. Revenue growth used for the
next five (5) years are as follows:

2021 2020
LEZ BEZ GMEC HI LEZ BEZ GMEC HI
Year 1 6% 6% 30% -2% 4% 6% 8% 17%
Year 2 9% 1% 5% 3% 10% 2% 0% -2%
Year 3 6% 10% -3% 0% 7% 1% 10% 3%
Year 4 4% 0% 1% 20% 11% 2% 4% 0%
Year 5 9% -3% -2% 0% 10% 3% 0% 20%

Materials price inflation

In 2021, the assumption used to determine the value assigned to the materials price inflation is
2.98% in 2022, 2.51% in 2023 and settles at 2.31% for the next 3 years until 2026. The starting point
of 2022 is consistent with external information sources.

In 2020, the assumption used to determine the value assigned to the materials price inflation is
2.50% in 2021, and settles at 3.00% for the next 4 years until 2025. The starting point of 2021 is
consistent with external information sources.

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Foreign exchange rates

In 2021, the assumption used to determine foreign exchange rate is a weakening Philippine peso
which starts at a rate of ₱50.92 to a dollar in 2022 and depreciates annually at an average of 1.00%
until 2026. In 2020, the assumption used to determine foreign exchange rate is a weakening
Philippine peso which starts at a rate of ₱50.00 to a dollar in 2021 and depreciates annually at an
average of 0.88% until 2025.

Management has reflected future economic uncertainty in the risk-adjusted cash flows, giving a
more accurate representation of the risks specific to the Group taking into consideration the impact
of COVID-19. To reflect ongoing uncertainty, the likelihood that actual performance will differ from
these assumptions has been estimated at a CGU level with reference to external market forecasts
and the CGU’s current performance.

Based on the impairment testing, no impairment of goodwill was recognized in 2021 and 2020.

With regard to the assessment of value-in-use, management believes that no reasonably possible
change in any of the above key assumptions would cause the carrying value of the goodwill to
materially exceed its recoverable amount.

Service Concession Rights

Service concession arrangements entered into by the Group are as follows:

1. On November 24, 1996, LHC entered into a PPA with NPC, its sole customer, for the construction
and operation of a 70-megawatt hydroelectric power generating facility (the Power Station) in
Bakun River in Benguet and Ilocos Sur Provinces on a build-operate-transfer scheme. Under the
PPA, LHC shall deliver to NPC all electricity generated over a cooperation period of 25 years until
February 5, 2026.

On the Transfer Date, as defined in the PPA, LHC shall transfer to NPC, free from any lien or
encumbrance, all its rights, title and interest in and to the Power Station and all such data as
operating manuals, operation summaries/transfer notes, design drawings and other information
as may reasonably be required by NPC to enable it to operate the Power Station.

Since NPC controls the ownership of any significant residual interest of the Power Station at the
end of the PPA, the PPA is accounted for under the intangible asset model as LHC has the right to
charge users for the public service under the service concession arrangement.

The Power Station is treated as intangible asset and is amortized over a period of 25 years, which
is the service concession period, in accordance with Philippine Interpretation IFRIC 12. The
intangible asset with a carrying value of ₱1.09 billion and ₱1.27 billion as of December 31, 2021
and 2020, respectively, was used as collateral to secure LHC’s long-term debt (see Note 16).

2. On May 15, 2003, the SBMA, AEV and DLP entered into a DMSA for the privatization of the
SBMA Power Distribution System (PDS) on a rehabilitate-operate-and-transfer arrangement; and
to develop, construct, lease, lease out, operate and maintain property, structures and
machineries in the Subic Bay Freeport Zone (SBFZ).

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Under the terms of the DMSA, SEZ was created to undertake the rehabilitation, operation and
maintenance of the PDS (the Project), including the provision of electric power service to the
customers within the Subic Bay Freeport Secured Areas of the SBFZ as well as the collection of
the relevant fees from them for its services and the payment by SBMA of the service fees
throughout the service period pursuant to the terms of the DMSA. The DMSA shall be effective
for 25-year period commencing on the turnover date.

For and in consideration of the services and expenditures of SEZ for it to undertake the
rehabilitation, operation, management and maintenance of the Project, it shall be paid by the
SBMA the service fees in such amount equivalent to all the earnings of the Project, provided,
however, that SEZ shall remit the amount of ₱40.0 million to the SBMA at the start of every 12-
month period throughout the service period regardless of the total amount of all earnings of the
Project. The said remittances may be reduced by the outstanding power receivables from
SBMA, including streetlights power consumption and maintenance, for the immediate preceding
year.

Since SBMA controls ownership of the equipment at the end of the agreement, the PDS are
treated as intangible assets and are amortized over a period of 25 years up to year 2028, in
accordance with Philippine Interpretation IFRIC 12.

The carrying value of the intangible asset arising from the service concession arrangement
amounted to ₱594.9 million and ₱655.8 million as of December 31, 2021 and 2020, respectively.

3. The transmission and distribution equipment of MEZ are located within Mactan Export
Processing Zone (MEPZ) II. Since MCIAA controls ownership of the equipment at the end of the
agreement, the equipment are treated as intangible assets and are amortized over a period of
21 years up to year 2028, in accordance with Philippine Interpretation IFRIC 12.

The carrying amount of the intangible asset arising from the service concession arrangement
amounted to ₱71.4 million and ₱77.6 million as of December 31, 2021 and 2020, respectively.

13. Other Noncurrent Assets

2021 2020
Input VAT and tax credit receivable, net of impairment
loss of ₱72.9 million and ₱44.1 million in 2021 and
2020 (see Note 23) ₱2,307,517 ₱2,993,466
Prepaid taxes 2,076,500 2,321,582
Advances to NGCP - net of current portion 1,044,846 920,682
Advances to contractors and projects 619,188 893,827
Refundable deposits 353,064 313,751
Prepaid expenses 311,912 251,576
Investment properties 237,701 248,129
PSALM deferred adjustment - net of current portion
(see Notes 6 and 39k) 54,505 1,097,365
Financial assets at FVTPL 3,906 3,906
Others 173,862 227,272
₱7,183,001 ₱9,271,556

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14. Trade and Other Payables

2021 2020
Trade payables (see Note 32) ₱11,963,685 ₱8,610,228
Output VAT 3,388,646 3,370,163
Accrued expenses:
Interest 2,122,020 2,134,625
Taxes and fees 1,016,249 896,429
Claims conversion costs 68,180 105,627
Materials and supplies cost 66,087 66,087
Insurance 25,713 21,464
Nontrade 1,077,356 986,066
PSALM deferred adjustment (see Note 39k) 1,042,861 1,042,861
Amounts due to contractors and other third parties 949,951 397,707
Dividends payable 252,003 235,538
Customers’ deposit 129,992 23,378
Unearned revenues 36,461 37,337
Others 605,118 444,288
₱22,744,322 ₱18,371,798

Trade payables are noninterest-bearing and generally on 30-day terms.

Accrued taxes and fees represent accrual of real property tax, transfer tax and other fees.

Amounts due to contractors and other third parties include liabilities arising from the power plant
construction (see Note 11).

Others include withholding taxes and other liabilities and are generally payable within 12 months
from the balance sheet date.

15. Short-term Loans

Interest Rate 2021 2020

Peso loans - financial institutions - 1.9% - 4.92% in 2021
unsecured 2% - 4.92% in 2020 ₱14,003,000 ₱11,717,000
Dollar loans - financial institutions - 2.07% - 3.75% in 2021
unsecured (see Note 16) 2.90% in 2020 4,581,237 1,440,690
Temporary advances (see Note 31) Noninterest-bearing 41,309 26,413
₱18,625,546 ₱13,184,103

The Peso loans are unsecured short-term notes payable obtained from local banks. These loans are
covered by the respective borrower’s existing credit lines with the banks and are not subject to any
significant covenants and warranties.

Interest expense on short-term loans amounted to ₱741.8 million in 2021, ₱827.7 million in 2020,
and ₱797.6 million in 2019 (see Note 32).

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16. Long-term Debts

2021 Interest Rate 2020 Interest Rate 2021 2020

Company:
Bonds due 2021 —% 5.21% ₱— ₱6,600,000
Bonds due 2022 3.13% 3.13% 9,000,000 9,000,000
Bonds due 2024 7.51% 7.51% 7,700,000 7,700,000
Bonds due 2025 3.94% 3.94% 550,000 550,000
Bonds due 2025 4.00% —% 4,800,000 —
Bonds due 2026 5.28% 5.28% 7,250,000 7,250,000
Bonds due 2026 —% 6.10% — 3,400,000
Bonds due 2026 3.82% —% 8,000,000 —
Bonds due 2027 5.34% 5.34% 3,000,000 3,000,000
Bonds due 2028 8.51% 8.51% 2,500,000 2,500,000
Bonds due 2028 5.03% —% 7,200,000 —
Financial institutions- unsecured 4.00% - 4.33% 5.28% 10,900,000 4,950,000
Financial institutions- unsecured LIBOR + 1.20% LIBOR + 1.20% 2,804,945 14,406,900
Subsidiaries:
GMEC
Financial institutions - unsecured LIBOR + 1.7% - 4.85% LIBOR + 1.7% - 4.00% 32,260,286 32,271,113
TMI
Financial institutions - secured 4.54% —% 1,790,000 —
HSAB
Financial institutions - secured 4.92% —% 1,145,000 —
TVI
Financial institutions - secured 5.56% to 9.00% 5.56% to 9.00% 26,947,493 29,418,667
AESI
Financial institutions - unsecured 4.87% 4.87% 594,000 600,000
TSI
Financial institutions - secured 4.27% 5.26% 18,314,624 18,729,025
APRI
Financial institutions - secured 4.48% - 5.20% 4.48% - 5.20% 10,600,000 6,873,920
Hedcor Bukidnon
Financial institutions - secured 4.00% - 5.34% 4.00% - 5.34% 8,714,717 9,315,000
TPVI
Financial institutions - secured 3.32%-5.06% 3.32%-5.06% 1,500,000 1,500,000
Hedcor Sibulan
Fixed rate corporate notes -
unsecured 4.63% - 5.42% 4.63% - 5.42% 3,403,401 3,702,401
HI
Financial institution - secured 7.41% 7.41% 423,000 423,000
Financial institution - secured 7.87% 7.87% 1,077,000 1,207,000
VECO
Financial institution - unsecured 4.73% - 4.92% 4.73% - 4.81% 384,000 579,000
HTI
Financial institutions - secured 4.92% —% 752,000 —
LHC
Financial institutions - secured LIBOR + 2.00% LIBOR + 2.00% 7,650 271,330
DLP
Financial institution - unsecured 4.73% to 4.92% 4.73% to 4.92% 288,000 434,250
AI
AEV - unsecured 3.50% 3.50% 300,000 300,000
SEZ
Financial institution - unsecured —% 5.00% — 56,500
CLP
Financial institution - unsecured 4.73% to 4.92% 4.73% to 4.92% 57,600 86,850
Joint operation (see Note 9)
Financial institutions - secured 5.77% - 6.27% 5.50% - 8.31% 11,146,343 12,251,259
183,410,059 177,376,215
Less deferred financing costs 1,372,085 1,495,573
182,037,974 175,880,642
Less current portion - net of deferred
financing costs 18,419,227 15,813,523
₱163,618,747 ₱160,067,119
* London Interbank Offered Rate (LIBOR)

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Interest expense and other financing costs on long-term debt amounted to ₱9.84 billion in 2021,
₱9.98 billion in 2020, and ₱8.65 billion in 2019 (see Note 32).

Company
In September 2014, the Company issued a total of ₱10.00 billion bonds, broken down into a
₱6.60 billion 7-year bond due 2021 at an annual fixed rate equivalent to 5.21% and a ₱3.40 billion
12-year bond due 2026 at an annual fixed rate equivalent to 6.10%. The bonds have been rated PRS
Aaa by PhilRatings.

In July 2017, the Company issued a ₱3.00 billion 10-year bond due 2027 at an annual fixed rate
equivalent to 5.34%. The bonds have been rated PRS Aaa by PhilRatings.

In October 2018, the Company issued a total of ₱10.20 billion bonds, broken down into a
₱7.70 billion 5.25-year bond due 2024 at an annual fixed rate equivalent to 7.51% and a ₱2.50 billion
10-year bond due 2028 at an annual fixed rate equivalent to 8.51%. The bonds have been rated PRS
Aaa by PhilRatings.

In October 2019, the Company issued ₱7.25 billion 7-year bond due 2026 at a fixed rate of 5.28%.
The bonds have been rated PRS Aaa by PhilRatings.

In July 2020, the Company issued the fourth and last tranche of its ₱30.00 billion debt securities
program, equivalent to ₱9.55 billion (the “Series E and F Bonds”). The Fixed Rate “Series E and F
Bonds” has an interest rate of 3.13% and 3.94% per annum maturing in 2022 and 2025 respectively.
The bonds have been rated PRS Aaa by PhilRatings.

In March 2021, the Company issued the first tranche of its ₱30.00 billion debt securities program
equivalent to ₱8.00 billion (the “Series A Bonds”) with an annual fixed rate of 3.82% due in 2026.

In July 2021, the Company availed ₱6.00 billion 5-year fixed-rate notes due 2026 at an annual fixed
rate equivalent to 4%.

In December 2021, the Company issued the second tranche of its ₱30.00 billion debt securities
program equivalent to ₱12.00 billion (the “Series B and Bonds”) with an annual fixed rates of 4.00%
and 5.03% due in 2025 and 2028, respectively.

The principal amount of the bonds shall be payable on a lump sum basis on the respective maturity
date at its face value. These bonds may be redeemed in advance by the Company based on
stipulated early redemption option dates and on agreed early redemption price.

In April 2019, the Company executed and availed a US$300.0 million syndicated bridge loan facility
loan agreement with DBS Bank Ltd., Mizuho Bank, Ltd., MUFG Bank, Ltd., and Standard Chartered
Bank as lead arrangers and bookrunners to finance the AA Thermal, Inc. acquisition. The loan bears
a floating interest based on credit spread over applicable LIBOR plus 1.2% margin. The loan will
mature on the 5th anniversary of the first utilization date.

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In April and July 2021, the Company prepaid a total of $245.0 million of the $300.0 million
syndicated bridge loan facility availed in 2019 to finance the AA Thermal, Inc. acquisition.

In September 2021, the Company settled its 2014 Series ‘B’ bonds by prepaying ₱3.40 billion twelve-
year bond maturing in 2026 and paying as scheduled its ₱6.60 billion ten-year bond.

Loss on extinguishment of the above loans amounted to ₱447.5 million included as part of the
“Interest expense and other financing costs” account in the consolidated statement of income for
the year ended December 31, 2021 (see Note 32).

In November 2019, the Company obtain a ₱5.00 billion 7-year long term loan from the BDO Unibank,
Inc. at a fixed rate of 5.28% p.a.

In 2020, the Company amend the "Mode of Payment" for the Principal from bullet payment to
partial payments equal to 1% of total principal amount payable annually starting November 2020
and the remaining 94% upon maturity.

On July 13, 2021, the Company reached a rate reduction agreement to amend the interest rates of
the loan from fixed rate loan of 5.28% to the sum of a benchmark rate and a spread of 0.90%,
divided by an applicable factor and 4.125% per annum, whichever is higher.

GMEC
On August 29, 2017, GMEC entered into a Notes Facility Agreement (NFA) with local banks with BDO
Capital and Investment Corporation as Lead Arranger, with the maximum principal amount of $800.0
million, the proceeds of which will be used to refinance GMEC’s existing loan obligation and for
other general corporate purposes.

On September 29, 2017, $600.0 million was drawn from the NFA, out of which $462.4 million was
used to prepay the outstanding loans. In February 2018, the remaining principal amount of
$200.0 million was drawn from the NFA.

GMEC also has an existing facility agreement with certain banks to finance the GMEC’s working
capital requirements presented as part of short-term loans in the balance sheets (see Note 15).

Loans payable consist of the following dollar denominated loans:

2021 2020 Interest Rate Per Annum Payment Schedule

NFA
(i) Fixed rates of 2.5514% and
3.4049% plus 1.45% margin for
the first seven-year period and 24 semi-annual
(ii) Fixed Rate Loan Benchmark payments starting from
plus 1.45% margin for the the first Interest
Fixed Rate Loan $396,118 $420,818 subsequent five-year period Payment Date
24 semi-annual
payments starting from
Six-month LIBOR plus 1.70% the first Interest
LIBOR Loan 236,475 251,175 margin Payment Date

(Forward)

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2021 2020 Interest Rate Per Annum Payment Schedule

Working Capital
LIBOR plus 2.75% applicable
BDO 30,000 15,000 margin 30,60, or 90 days
LIBOR plus 2.55% to 2.80% Payable within six
SCB — 15,000 applicable margin months
LIBOR plus 1.95% applicable
ICBC Manila 5,000 — margin Payable within 90 days
LIBOR plus 1.95% applicable
ICBC Dubai 25,000 — margin Payable within 90 days
PBCOM 9,830 — Fixed Rate 3.75% Payable within 360 days
LIBOR plus 2.75% applicable
Chinabank 20,000 — margin Payable within 90 days
89,830 30,000
Total borrowings 722,423 701,993
Less unamortized portion of deferred
financing costs 1,438 4,151
720,985 697,842
Less current portion 135,189 67,984
Loans payable - net of current portion $585,796 $629,858

TMI
On February 23, 2021, TMI entered into a Loan Agreement with China Banking Corporation (CBC) for
an aggregate principal amount of ₱2.60 billion. The loan proceeds will be utilized, among others, to
finance capital expenditures for the development and integration of a Battery Energy Storage
System, working capital requirements, and for other financing and corporate purposes of TMI. Total
amount drawn as of December 31, 2021 is ₱1.79 billion.

Interest is payable semiannually and is fixed at 4.54% for the first five years, with an adjustment for
inflation on the five-year period thereafter. The principal amount is payable in 20 equal semi-annual
installments after the 30 months grace period. The total interest expense capitalized to construction
in progress in 2021 amounted to ₱34.9 million.

HSAB
On December 16, 2021, HSAB entered into an Omnibus Notes Facility and Security Agreement
(Agreement) with Bank of the Philippine Islands (Lender) for a loan facility in the principal amount of
₱1.15 billion for capital expenditures and other general purposes.

Based on the loan agreement, borrowing shall be for a term of ten (10) years reckoned from initial
borrowing date. HSAB shall pay the first principal amount in six months from the initial borrowing
date and shall continue on every six months interval. HSAB may not re-borrow any part of the loan
that has already been paid.

This loan is subject to an annual interest fixed at 4.92% for the first 5 years. For the remaining five
years, interest rate will be repriced. HSAB shall pay interest on the unpaid principal amount of the
loan on each interest payment date. The interest rate shall be set on an interest rate setting date,
and on the interest rate resetting date, as applicable.

TVI
On June 18, 2015, TVI entered into an omnibus agreement with local banks for a project loan facility
with an aggregate principal amount of ₱31.97 billion. As of December 31, 2021 and 2020,
₱31.52 billion has been drawn from the loan facility.

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The loan is available in two tranches, as follows:

• Tranche A, in the amount of ₱25.60 billion, with interest rate fixed for the first eight years and
will be repriced and fixed for another seven years.
• Tranche B, in the amount of ₱5.90 billion, with a fixed interest rate for fifteen years.

70% of the principal amount of the loan is payable in 20 equal semi-annual installments, with the
remaining 30% payable in full on the final maturity date. TVI may prepay the loan in part or in full
beginning on the end of the fourth year from the initial advance or on the project completion date,
whichever is earlier. Any prepayment shall be subject to a certain percentage of prepayment
penalty on the principal to be prepaid.

The loan is secured by a mortgage of all its assets with carrying amount of ₱42.47 billion as of
December 31, 2021, and a pledge of TVI’s shares of stock held by its shareholders.

AESI
On April 16, 2020, AESI entered into a loan agreement with BPI with a principal amount of
₱600.0 million, which was fully drawn in 2020. The term of the loan is 10 years and interest is fixed
at 4.87% for 5 years subject to reset 2 days prior to the 5th anniversary. The loan is payable in equal,
semi-annual amortizations of at least one percent (1.00%) of the loan amount per annum, with
balloon payment at maturity date.

TSI
On October 14, 2013, TSI entered into an omnibus agreement with local banks for a project loan
facility with an aggregate principal amount of ₱24.00 billion, which was fully drawn in 2014.

On October 28, 2015, TSI entered into an additional loan agreement with principal amount of
₱1.68 billion, which was fully drawn in 2016.

The loan is secured by a mortgage of all its assets with carrying amount of ₱28.60 billion as of
December 31, 2021, and a pledge of TSI’s shares of stock held by the shareholders and TPI.

Interest rate ranging from 4.50% - 5.15% is fixed for the first seven years and will be repriced and
fixed for another five years. In 2018, upon release of AP guarantee, interest was increased by 0.5%.

Fifty percent of the principal amount of the loan is payable at semi-annual installments within 12
years with a two-year grace period, with the remaining 50% payable in full on the final maturity
date.

TSI may prepay the loan in part or in full beginning on the end of the third year from the initial
advance or on the project completion date, whichever is earlier. Any prepayment shall be subject to
a prepayment penalty of 2% on the amount prepaid.

In 2021, TSI prepaid a portion of its loan amounting to ₱2.26 billion which resulted to a prepayment
penalty of ₱48.4 million, including gross receipts tax.

In 2021, TSI also entered into amendments of its existing loan agreements with local banks to obtain
additional financing intended to finance the prepayment of its loan, to pay costs, expenses and fees
in relation to the loan prepayment and amendments and to re-leverage and optimize the capital
structure of TSI. Moreover, the parties have agreed to amend certain financial terms of the existing
loan agreements, including but not limited to the interest rate and final maturity date, and shall take
effect after the prepayment.

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The amendments resulted to the following:

• TSI has drawn additional loan principal in the amount of ₱2.5 billion;
• Interest rate for the initial 5-year period from the effective date of amendment until the 5th
anniversary of the effective date will be the 3-day average of the 5-year BVAL rate plus a spread
of 130 basis points (the original spread), divided by the applicable premium factor, subject to a
floor rate of 4.25% per annum. For the subsequent 7-year period commencing on the date
following the 5th anniversary of the effective date, interest rate will be the 3-day average of the
7-year BVAL rate plus a spread equivalent to the original spread, divided by the applicable
premium factor, subject to a floor rate equivalent to the initial 5-year rate divided by the
applicable premium factor; and,
• 58.5% of the outstanding principal amount is payable in 18 equal semi-annual installments,
16.5% of the remaining principal amount is payable in another 5 equal semi-annual installments,
with the remaining 25% payable in the final maturity date of the loan in 2033.

These amendments were considered as extinguishment of the old loan, accordingly, TSI recognized a
loss amounting to ₱90.5 million for the year ended December 31, 2021.

APRI
On February 29, 2016, APRI entered into an omnibus agreement with BPI, Asian Development Bank
(ADB) and Credit Guarantee and Investment Facility (CGIF). This has been certified to have met the
requirements of the Climate Bond Standard. The loan proceeds were used for return of equity to
shareholders and to fund necessary operating and capital expenditures.

The loan is available in two tranches, as follows:

• The Notes Facility Agreement, in the amount of ₱10.70 billion, with interest rate already fixed for
ten years. 41.6% of the principal amount is payable in ten equal semi-annual installments and
the balance payable in another ten semi-annual installments
• The ADB Facility Agreement, in the amount of ₱1.80 billion, with interest rate fixed for five years
and principal repayments made in ten equal semi-annual installments.

On December 23, 2021, APRI entered into a ₱12.00 billion loan facility agreement with Bank of the
Philippine Islands (BPI) to refinance its existing term loan under the Omnibus Agreement; finance
the design, development, construction, and operation of the 16 MW Binary Cycle Geothermal Plant
to be developed in Tiwi, Albay (Project); and other general corporate purposes.

The loan is available in three tranches, as follows:

• A portion of the Facility in the amount equivalent to the total amount outstanding under the
Omnibus Agreement, duly supported by a Statement of Account to be provided by the
Intercreditor Agent, and to be used to finance the its payment of all outstanding obligations
under the Omnibus Agreement.
 A portion of the Facility to be used by APRI for other general corporate purposes, in the amount
equivalent to the resulting difference after deducting Tranche A and Tranche C from the
maximum amount of the Facility.
• A portion of the Facility to be used by APRI to finance the Project up to the total amount of
₱1.40 billion.

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Tranche A and B were already drawn from the initial borrowing date with the interest rate already
fixed for 5 years. Maturity of all tranches shall be up to ten (10) years from initial drawdown date.
40% of the principal amount is payable in ten equal semi-annual installments, 20% is payable in
succeeding four equal semi-annual installments, 30% is payable in succeeding five equal semi-annual
installments, and the 10% balance is payable in the last installment.

The loan is secured by mortgage of its assets with carrying amount of ₱28.99 billion as of
December 31, 2021, and pledge of APRI’s shares of stock held by shareholders and assignment of
Project Agreements and Project Accounts.

This loan refinancing is considered as an extinguishment of the old loan, accordingly, APRI
recognized a loss amounting to ₱62.1 million for the year ended December 31, 2021.

Hedcor Bukidnon
On April 3, 2020, Hedcor Bukidnon entered into a loan agreement with BPI, up to the maximum
principal amount of ₱225.0 million which was fully drawn in 2020, for the construction of the
Transformer Facility and other general corporate purposes.

The term of the loan is 8 years and the loan shall be paid as follows: (i) payment of an aggregate
amount equivalent to 70% of the total principal amount of the loans, by equal semi-annual
amortizations beginning on the seventh interest payment date up to and including the maturity date;
and (ii) payment of the amount equivalent to 30% of the total principal amount of the loans, on the
maturity date.

On September 29, 2020, Hedcor Bukidnon entered into an omnibus agreement for a loan facility in
the principal amount of ₱9.09 billion which was fully drawn in 2020 to refinance the project loan
availed in 2015.

The term of the loan is 10 years and the loan shall be paid as follows: (i) payment of an aggregate
amount equivalent to 70% of the total original amount of the Loan, by equal semi-annual
amortizations beginning on the first interest payment date up to and including the Maturity Date;
and (ii) payment of the amount equivalent to 30% of the total original amount of the loan, on the
maturity date.

TPVI
On December 23, 2019, TPVI entered into a Loan Agreement with the Philippine National Bank (PNB)
for an aggregate amount of ₱1.50 billion available in two drawdowns. The loan proceeds will be
utilized, among others, in funding necessary operating and capital expenditures. Drawdowns were
made on December 26, 2019 and April 27, 2020 for ₱1.30 billion and ₱200.0 million respectively.
The loan is payable for 15 years, with a grace period of 3 years. The mode of repayment is sculpted
with balloon payment of 70%. TPVI will pay PNB an interest of 5.0593% for the first 8 years, with the
rate being expected to go up to 5.25% for the rest of the term due to: (1) continued inflation, and;
(2) liquidity tightness due to funds held and additional borrowings by the Bureau of Treasury. The
interest is payable semi-annually, every 30th of June and 31st of December.

Hedcor Sibulan
On November 17, 2016, Hedcor Sibulan entered into a NFA with various institutions with
Metrobank Trust Banking Group as the Notes Facility Agent, for a loan facility with an aggregate
principal amount of up to ₱4.10 billion to return equity to shareholders, and for other general
corporate purposes.

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The unsecured notes were issued in ten tranches with interest payable semi-annually at annual fixed
rates ranging from 4.05% - 5.42% with principal maturity as follows:

Tranche Maturity Date Principal Amount

1 Fifteen months from issue date ₱96.8 million
2 Two (2) years from issue date ₱96.8 million
3 Three (3) years from issue date ₱84.0 million
4 Four (4) years from issue date ₱84.0 million
5 Five (5) years from issue date ₱284.0 million
6 (Series A&B) Six (6) years from issue date ₱388.4 million
7 (Series A&B) Seven (7) years from issue date ₱445.8 million
8 Eight (8) years from issue date ₱451.4 million
9 Nine (9) years from issue date ₱508.1 million
10 (Series A&B) Ten (10) years from issue date ₱1,660.7 million

Prior to maturity date, Hedcor Sibulan may redeem in whole or in part the relevant outstanding
notes on any interest payment date plus a one percent prepayment penalty.

HI
On August 6, 2013, HI availed of a ten-year ₱900.0 million loan from a local bank. This loan is subject
to a semi-annual principal payment with annual interest fixed at 5.25% for the first 5 years. For the
remaining five years, interest rate will be repriced and fixed on the fifth anniversary from the
drawdown date. The debt is secured by a pledge of HI’s shares of stock held by ARI.

On December 14, 2018, HI entered into a Notes Facility Agreement with a local bank to borrow
₱1.39 billion, which will mature on August 31, 2033, to finance the rehabilitation and/or expansion
of the Bineng hydropower plant, refinance its short-term loans and for other general corporate
purposes. This loan is subject to a semi-annual principal payment with annual interest fixed at
7.87% for the first 5 years. For the next five years, interest rate will be repriced and fixed one
banking day prior to August 31, 2023. For the remaining five years, interest rate will be repriced and
fixed one banking day prior to August 31, 2028. The debt is secured by a continuing suretyship from
ARI.

VECO
On December 20, 2013, VECO availed of a ₱2.00 billion loan from the NFA it signed on
December 17, 2013 with Land Bank of the Philippines (LBP). The unsecured notes were issued in ten
tranches of ₱200.0 million with interest payable semi-annually at annual fixed rates ranging from
3.50% - 4.92% and principal amortized as follows:

Tranche Maturity Date Principal Repayment Amount

A, B December 20, 2014 and 2015 ₱200M balloon payment on maturity date
C December 20, 2016 ₱1M each on first 2 years; 198M on maturity date
D December 20, 2017 ₱1M each on first 3 years; 197M on maturity date
E December 20, 2018 ₱1M each on first 4 years; 196M on maturity date
F December 20, 2019 ₱1M each on first 5 years; 195M on maturity date
G December 20, 2020 ₱1M each on first 6 years; 194M on maturity date
H December 20, 2021 ₱1M each on first 7 years; 193M on maturity date
I December 20, 2022 ₱1M each on first 8 years; 192M on maturity date
J December 20, 2023 ₱1M each on first 9 years; 191M on maturity date

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Prior to maturity date, VECO may redeem in whole or in part the relevant outstanding notes on any
interest payment date without premium or penalty. If it redeems the notes on a date other than an
interest payment date, then a certain percentage of prepayment penalty on the principal amount to
be prepaid shall be imposed.

HTI
On December 16, 2021, HTI entered into an Omnibus Notes Facility and Security Agreement
(Agreement) with Bank of the Philippine Islands (Lender) for a loan facility in the principal amount of
₱752.0 million for capital expenditures and other general purposes.

Based on the loan agreement, borrowing shall be for a term of ten (10) years reckoned from initial
borrowing date. HTI shall pay the first principal amount in six months from the initial borrowing date
and shall continue on every six months interval. HTI may not re-borrow any part of the loan that has
already been paid.

This loan is subject to an annual interest fixed at 4.92% for the first 5 years. For the remaining five
years, interest rate will be repriced. HTI shall pay interest on the unpaid principal amount of the loan
on each interest payment date. The interest rate shall be set on an interest rate setting date, and on
the interest rate resetting date, as applicable.

LHC
On April 24, 2012, LHC entered into an omnibus agreement with Philippine National Bank and Banco
De Oro to borrow US$43.1 million with maturity on April 26, 2022 and payable in 20 semi-annual
installments. Interest is repriced and paid semi-annually. Annual interest rate ranges from 2.25% to
4.81% in 2020 and range from 3.94% to 4.81% in 2019.

Intangible asset arising from service concession arrangement with carrying value of ₱1.09 billion as
of December 31, 2021, was used as collateral to secure LHC’s long-term debt (see Note 12).

DLP
On December 20, 2013, DLP availed of a ₱1.50 billion loan from the NFA it signed on
December 17, 2013 with LBP. The unsecured notes were issued in ten tranches of ₱150.0 million
with interest payable semi-annually at annual fixed rates ranging from 3.50% to 4.92% and principal
amortized as follows:

Tranche Maturity Date Principal Repayment Amount

A, B December 20, 2014 and 2015 ₱150M balloon payment on maturity date
C December 20, 2016 ₱0.75M each on first 2 years; 148.5M on maturity date
D December 20, 2017 ₱0.75M each on first 3 years; 147.8M on maturity date
E December 20, 2018 ₱0.75M each on first 4 years; 147M on maturity date
F December 20, 2019 ₱0.75M each on first 5 years; 146.2M on maturity date
G December 20, 2020 ₱0.75M each on first 6 years; 145.5M on maturity date
H December 20, 2021 ₱0.75M each on first 7 years; 144.8M on maturity date
I December 20, 2022 ₱0.75M each on first 8 years; 144M on maturity date
J December 20, 2023 ₱0.75M each on first 9 years; 143.2M on maturity date

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Prior to maturity date, DLP may redeem in whole or in part the relevant outstanding notes on any
interest payment date without premium or penalty. If it redeems the notes on a date other than an
interest payment date, then a certain percentage of prepayment penalty on the principal amount to
be prepaid shall be imposed.

AI
In April 2017, AI entered into a loan agreement with AEV for the principal sum of ₱300.0 million. The
loan will mature in April 2022 and shall be interest bearing payable on a per annum basis. The
interest rate is at 3.5% per annum.

SEZ
On July 7, 2011, SEZ issued ₱565.0 million worth of fixed rate notes to Metropolitan Bank and Trust
Company. Interest on the notes is subject to quarterly payment at 5.00% annual fixed interest rate.
Principal is payable annually over 10 years at an equal amortization of ₱56.5 million. The loan was
settled in 2021.

CLP
On December 20, 2013, CLP availed of a ₱300.0 million loan from the NFA it signed on December 17,
2013 with LBP. The unsecured notes were issued in ten tranches of ₱30.0 million with interest
payable semi-annually at annual fixed rates ranging from 3.50% - 4.92% and principal amortized as
follows:

Tranche Maturity Date Principal Repayment Amount

A, B December 20, 2014 and 2015 ₱150M balloon payment on maturity date
C December 20, 2016 ₱0.75M each on first 2 years; 148.5M on maturity date
D December 20, 2017 ₱0.75M each on first 3 years; 147.8M on maturity date
E December 20, 2018 ₱0.75M each on first 4 years; 147M on maturity date
F December 20, 2019 ₱0.75M each on first 5 years; 146.2M on maturity date
G December 20, 2020 ₱0.75M each on first 6 years; 145.5M on maturity date
H December 20, 2021 ₱0.75M each on first 7 years; 144.8M on maturity date
I December 20, 2022 ₱0.75M each on first 8 years; 144M on maturity date
J December 20, 2023 ₱0.75M each on first 9 years; 143.2M on maturity date

Prior to maturity date, CLP may redeem in whole or in part the relevant outstanding notes on any
interest payment date without premium or penalty. If it redeems the notes on a date other than an
interest payment date, then a certain percentage of prepayment penalty on the principal amount to
be prepaid shall be imposed.

Long-term debt of Joint Operation (see Note 10)

This pertains to TPI’s share of the outstanding project debt of its joint operation.

In May 2014, PEC entered into an omnibus agreement with various local banks for a loan facility in
the aggregate principal amount of up to ₱33.31 billion with maturity period of 15 years.

The loan facility is subject to a semi-annual interest payment with annual fixed interest ranging from
5.50% - 8.31%. The loans may be voluntarily prepaid in full or in part commencing on and from the
third year of the date of initial drawdown with a prepayment penalty.

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The loans are secured by a mortgage of substantially all its assets with carrying amount of
₱36.68 billion as of December 31, 2021, and a pledge of the shares of stock held by the joint
operators.

Loan covenants
The loan agreements on long-term debt of the Group provide for certain restrictions with respect to,
among others, mergers or consolidations or other material changes in their ownership, corporate
set-up or management, investment and guaranties, incurrence of additional debt, disposition of
mortgage of assets, payment of dividends, and maintenance of financial ratios at certain levels.

These restrictions and requirements were complied with by the Group as of December 31, 2021 and
2020.

17. Customers’ Deposits

2021 2020
Lines and poles ₱1,275,934 ₱1,187,053
Transformers 1,372,632 1,085,294
Bill and load 4,551,775 4,526,498
₱7,200,341 ₱6,798,845

Transformers and lines and poles deposits are obtained from certain customers principally as cash
bond for their proper maintenance and care of the said facilities while under their exclusive use and
responsibility.

Effective April 1, 2010, the Amended Distribution Services and Open Access Rules (Amended
DSOAR), increased the refund rate from 25% to 75% of the gross distribution revenue generated
from the extension lines and facilities until such amounts are fully refunded.

Bill deposit serves to guarantee payment of bills by a customer which is estimated to equal one
month’s consumption or bill of the customer.

Both the Magna Carta and Distribution Services and Open Access Rules (DSOAR) also provide that
residential and non-residential customers, respectively, must pay a bill deposit to guarantee payment
of bills equivalent to their estimated monthly billing. The amount of deposit shall be adjusted after
one year to approximate the actual average monthly bills. A customer who has paid his electric bills
on or before due date for three consecutive years, may apply for the full refund of the bill deposit,
together with the accrued interests, prior to the termination of the service; otherwise, bill deposits
and accrued interests shall be refunded within one month from termination of service, provided all
bills have been paid.

In cases where the customer has previously received the refund of his bill deposit pursuant to \

Article 7 of the Magna Carta, and later defaults in the payment of his monthly bills, the customer
shall be required to post another bill deposit with the distribution utility and lose his right to avail of
the right to refund his bill deposit in the future until termination of service. Failure to pay the
required bill deposit shall be a ground for disconnection of electric service.

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Interest expense on customers’ deposits amounted to ₱4.2 million in 2021, ₱4.0 million in 2020,
₱4.4 million in 2019 (see Note 32).

The Group classified customers’ deposit under noncurrent liabilities due to the expected long-term
nature of these deposits. The portion of customers’ deposit to be refunded amounted to
₱130.0 million and ₱23.4 million as of December 31, 2021 and 2020, respectively, and are presented
as part of “Trade and other payables” (see Note 14).

18. Decommissioning Liability

Decommissioning liability includes the estimated costs to decommission, abandon and perform
surface rehabilitation on the steam field assets at the end of their useful lives, and the best estimate
of the expenditure required to settle the obligation to decommission power plant at the end of its
lease term (see Note 11).

2021 2020
Balances at beginning of year =5,008,033
P =3,567,492
P
Change in accounting estimate (see Note 11) 459,228 1,158,166
Additions — 158,184
Accretion of decommissioning liability
(see Note 32) 218,963 124,191
=5,686,224
P =5,008,033
P

The actual dismantling and removal cost could vary substantially from the above estimate because of
new regulatory requirements, changes in technology, increased cost of labor, materials, and
equipment or actual time required to complete all dismantling and removal activities. Adjustment, if
any, to the estimated amount will be recognized prospectively as they become known and reliably
estimable.

19. Equity

a. Paid-in Capital (number of shares not rounded)

2021 2020
Capital Stock
Authorized - ₱1 par value
Common shares - 16,000,000,000 shares
Preferred shares - 1,000,000,000 shares
Issued
Common shares - 7,358,604,307 shares =P7,358,604 =P7,358,604
Additional Paid-in Capital 12,588,894 12,588,894
=19,947,498
P =19,947,498
P

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On May 25, 2007, the Company listed with the PSE its 7,187,664,000 common shares with a par
value of P=1.00 to cover the initial public offering (IPO) of 1,787,664,000 common shares at an
issue price of =P5.80 per share. On March 17, 2008, the Company listed an additional
170,940,307 common shares, which it issued pursuant to a share swap agreement at the IPO
price of P=5.80 per share. The total proceeds from the issuance of new shares amounted to
=10.37 billion. The Company incurred transaction costs incidental to the initial public offering
P
amounting to P =412.4 million, which is charged against “Additional paid-in capital” in the
consolidated balance sheet.

As of December 31, 2021, 2020 and 2019, the Company has 594, 598 and 631 shareholders,
respectively.

Preferred shares are non-voting, non-participating, non-convertible, redeemable, cumulative,

and may be issued from time to time by the BOD in one or more series. The BOD is authorized
to issue from time to time before issuance thereof, the number of shares in each series, and all
the designations, relative rights, preferences, privileges and limitations of the shares of each
series. Preferred shares redeemed by the Company may be reissued. Holders thereof are
entitled to receive dividends payable out of the unrestricted retained earnings of the Company
at a rate based on the offer price that is either fixed or floating from the date of the issuance to
final redemption. In either case, the rate of dividend, whether fixed or floating, shall be
referenced, or be a discount or premium, to market-determined benchmark as the BOD may
determine at the time of issuance with due notice to the SEC.

In the event of any liquidation or dissolution or winding up of the Company, the holders of the
preferred shares shall be entitled to be paid in full the offer price of their shares before any
payment in liquidation is made upon the common shares.

There are no preferred shares issued and outstanding as of December 31, 2021 and 2020.

b. Retained Earnings

As of December 31, 2020, the Company has appropriated retained earnings amounting to
P=33.66 billion. This appropriation pertains to the project development and construction of
power plants that was approved on March 7, 2019, November 24, 2016 and November 27, 2014,
amounting P =11.90 billion, P
=13.16 billion and ₱8.60 billion, respectively.

On March 5, 2021, the BOD approved the reversal of a total of ₱13.60 billion retained earnings
appropriation for the following:

• set up in 2014 for the P=2.6 billion equity requirements of the 68 MW Manolo Fortich
Hydropower and for the P =6.0 billion of the 400 MW Pagbilao Coal Power Plant; and
 set up in 2016 for the P=5.0 billion equity requirements of RP Energy.

As of December 31, 2021, total appropriated retained earnings amounted to P

=20.06 billion.

On March 7, 2019, the BOD approved the declaration of regular cash dividends of P=1.47 per
share (P
=10.82 billion) to all stockholders of record as of March 21, 2019. These dividends were
paid on April 5, 2019.

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On March 6, 2020, the BOD approved the declaration of regular cash dividends of P =1.18 per
share (P
=8.68 billion) to all stockholders of record as of March 20, 2020. These dividends were
paid on April 3, 2020.

On March 5, 2021, the BOD approved the declaration of regular cash dividends of P =0.85 per
share (P
=6.25 billion) to all stockholders of record as of March 19, 2021. The cash dividends were
paid on March 31, 2021.

To comply with the requirements of Section 43 of the Corporation Code, on March 4, 2022, the
BOD approved the declaration of regular cash dividends of P
=1.45 per share (P
=10.67 billion) to all
stockholders of record as of March 18, 2022. The cash dividends are payable on March 30, 2022.

c. The balance of retained earnings includes the accumulated equity in net earnings of subsidiaries,
associates and joint arrangement amounting to P =77.58 billion and ₱65.96 billion as of
December 31, 2021 and 2020, respectively. Such amounts are not available for distribution until
such time that the Company receives the dividends from the respective subsidiaries, associates
and joint arrangement (see Note 9).

20. Sale of Power

Sale from Distribution of Power

 The Uniform Rate Filing Requirements on the rate unbundling released by the Energy Regulatory
Commission (ERC) on October 30, 2001, specified that the billing for sale and distribution of
power and electricity will have the following components: Generation Charge, Transmission
Charge, System Loss Charge, Distribution Charge, Supply Charge, Metering Charge, the Currency
Exchange Rate Adjustment and Interclass and Lifeline Subsidies. National and local franchise
taxes, the Power Act Reduction (for residential customers) and the Universal Charge are also
separately indicated in the customer’s billing statements.

 Pursuant to Section 43(f) of Republic Act (R.A.) No. 9136, otherwise known as the Electric Power
Industry Reform Act of 2001 (EPIRA), and Rule 15, section 5(a) of its Implementing Rules and
Regulations (IRR), the ERC promulgated the Distribution Wheeling Rates Guidelines on
December 10, 2004. These were subsequently updated and released on July 26, 2006 as the
Rules for Setting Distribution Wheeling Rates (RDWR) for Privately Owned Utilities entering
Performance Based Regulation (PBR).

Details of the PBR regulatory period and the date of implementation of the approved rates are
as follows:

CLP DLP VECO SEZ

Current regulatory period April 1, 2009 to July 1, 2010 to July 1, 2010 to October 1, 2011 to
March 31, 2013 June 30, 2014 June 30, 2014 September 30, 2015
Date of implementation of approved May 1, 2009 August 1, 2010 August 1, 2010 November 26, 2011
distribution supply and metering charges

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The reset process for the Third Regulatory Period to adjust the previously approved distribution
supply and metering charges were deferred due to the changes on PBR rules.

Through ERC Resolution No. 25 Series of 2016 dated July 12, 2016, the ERC adopted the
Resolution Modifying the RDWR. Based on this Resolution, the Fourth Regulatory Period shall be
as follows:

 CLP: April 1, 2017 to March 31, 2021

 DLP and VECO: July 1, 2018 to June 30, 2022
 SEZ: October 1, 2019 to September 30, 2023

The reset process for the Fourth Regulatory Period has not started for all private DUs as the
above-mentioned ERC rules have not been published, which is a condition for their effectivity.

Total sale from distribution of power amounted to ₱44.38 billion, ₱41.87 billion, and
₱46.12 billion in 2021, 2020 and 2019, respectively.

Sale from Generation of Power and Retail Electricity

 Energy Trading through the Philippine Wholesale Electricity Spot Market (WESM)

Certain subsidiaries are trading participants and direct members under the generator sector of
the WESM. These companies are allowed to access the WESM Market Management System
through its Market Participant Interface (MPI). The MPI is the facility that allows the trading
participants to submit and cancel bids and offers, and to view market results and reports. Under
its price determination methodology as approved by the ERC, locational marginal price method
is used in computing prices for energy bought and sold in the market on a per node, per hour
basis. In the case of bilateral power supply contracts, however, the involved trading participants
settle directly with their contracting parties.

Total sale of power to WESM amounted to P

=14.72 billion in 2021, and P
=6.37 billion in 2020 and
2019.

 Power Supply Agreements

 `Administration Agreement

Revenue recognition for customers under the power supply contracts assumed under the
APA and IPP Administration Agreements are billed based on the contract price which is
calculated based on the pricing structure approved by the ERC. Rates are calculated based
on the time-of-use pricing schedule with corresponding adjustments using the GRAM and
the ICERA.

 Power Purchase/Supply Agreement and Energy Supply Agreement (PPA/PSA and ESA)

Certain subsidiaries have negotiated contracts with NPC, Private Distribution Utilities,
Electric Cooperatives and Commercial and Industrial Consumers referred to as PPA/PSA or
ESA. These contracts provide a tariff that allows these companies to charge for capacity
fees, fixed operating fees and energy fees.

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 Feed-in-Tariff (FIT)

Certain subsidiaries were issued a FIT Certificate of Compliance from the ERC which entitles
them to avail the FIT rate. These subsidiaries also signed agreements with the National
Transmission Corporation (NTC), the FIT administrator. These agreements enumerate the
rights and obligations under the FIT rules and FIT-All guidelines, in respect to the full
payment of the actual energy generation of the generator, at a price equivalent to the
applicable FIT rate, for the entire duration of its FIT eligibility period.

Total sale of power under power supply agreements amounted to ₱52.58 billion in 2021,
₱42.64 billion in 2020, and ₱46.78 billion in 2019.

 Ancillary Services Procurement Agreement (ASPA)

Certain subsidiaries have ASPA with the National Grid Corporation of the Philippines. Ancillary
services are support services such as frequency regulating, contingency and dispatchable
reserves, reactive power support, and black start capability which are necessary to support the
transmission capacity and energy that are essential in maintaining power quality and security of
the grid. Total sale of power under ASPA amounted to ₱2.71 billion in 2021, ₱2.74 billion in
2020, and ₱2.75 billion in 2019.

 Retail Electricity Supply Agreements (see Note 39i)

Certain subsidiaries have negotiated contracts with contestable customers. These contracts
provide supply and delivery of electricity where capacity fees, fixed operating fees and energy
fees are at fixed price/kwh or time of use.

Total sale of power under retail electricity supply agreements amounted to =P19.87 billion,
=16.48 billion, and P
P =22.81 billion in 2021, 2020 and 2019, respectively.

21. Purchased Power

Distribution
The Group’s distribution utilities entered into contracts with NPC/PSALM and generation companies
for the purchase of electricity, and into Transmission Service Agreements with NGCP for the
transmission of electricity.

To avail of opportunities in the competitive electricity market, some of the Group’s distribution
utilities registered as direct participants of the WESM.

Total power purchases amounted to ₱19.81 billion, =P19.98 billion, and P=21.81 billion in 2021, 2020,
2019, respectively.

Generation
Purchased power takes place during periods when power generated from power plants are not
sufficient to meet customers’ required power as stated in the power supply contracts. Insufficient
supply of generated energy results from the shutdowns due to scheduled maintenance or an
emergency situation. The Group purchases power from WESM to ensure uninterrupted supply of
power and meet the requirements in the power supply contracts.

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The Group entered into Replacement Power Contracts with certain related parties (see Note 32).
Under these contracts, the Group supplies power to counterparties when additional power is
needed. Correspondingly, when faced with energy shortfalls, the Group purchases power from
counterparties.

Total purchased power amounted to P=16.32 billion, =P7.71 billion, =P7.60 billion in 2021, 2020 and
2019, respectively.

Retail Electricity Supply

AESI pays PSALM monthly generation payments using the formula specified in the IPP Administration
Agreement. In October 2019, a compromise agreement with PSALM was effected, which includes
the termination of supply and ₱125.0 million payment of AESI as termination fee.

The Group also purchases from WESM in order to supply its contestable customers.

Total purchased power amounted to ₱5.37 billion, ₱3.72 billion, ₱6.43 billion in 2021, 2020 and
2019, respectively.

22. Cost of Generated Power

2021 2020 2019

Fuel costs (see Note 7) =27,484,810
P =19,650,746
P =29,394,773
P
Steam supply costs
(see Note 35a) 4,950,813 2,974,611 5,008,607
Energy fees 746,182 565,676 694,696
Ancillary charges 169,467 225,916 360,095
Wheeling expenses 148,436 44,909 68,535
=33,499,708
P =23,461,858
P =35,526,706
P

23. General and Administrative

2021 2020 2019

Personnel costs (see Note 25) =3,014,555
P =3,078,045
P =2,641,365
P
Taxes and licenses 1,576,077 1,270,078 1,680,928
Outside services (see Note 31) 1,247,373 1,110,416 1,031,326
Provision for expected credit
losses of trade receivables
(see Note 6) 1,089,566 719,193 87,086
Professional fees (see Note 31) 730,973 832,866 814,149
Repairs and maintenance 323,320 282,432 306,316
Insurance 296,221 215,833 205,998
Information technology and
communication 233,912 189,720 181,746

(Forward)

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2021 2020 2019

Transportation and travel (see
Note 31) =206,416
P =141,427
P =206,861
P
Corporate social responsibility
(CSR) (see Note 39) 190,305 231,208 299,595
Rent (see Notes 31 and 34) 54,027 72,463 44,916
Entertainment, amusement and
recreation 51,026 34,143 40,916
Advertisements 36,147 42,294 33,798
Training 29,204 36,292 156,027
Guard services 20,293 18,577 25,570
Market service and
administrative fees 8,741 3,397 —
Freight and handling 5,366 3,130 4,264
Gasoline and oil 510 452 1,020
Supervision and regulatory fees — — 584
Others 426,743 381,407 392,901
=9,540,775
P =8,663,373
P =8,155,366
P

“Others” include host community-related expenses, provision for probable losses, claims conversion
costs and utilities expenses.

24. Operations and Maintenance

2021 2020 2019

Repairs and maintenance =2,842,287
P =2,208,522
P =2,076,988
P
Insurance 1,862,403 1,439,804 787,983
Outside services 1,801,650 1,479,641 1,276,255
Personnel costs (see Note 25) 1,788,373 1,633,451 1,586,624
Taxes and licenses 1,700,188 1,818,853 1,167,990
Materials and supplies
(see Note 7) 270,543 287,717 275,814
Transportation and travel 113,716 73,479 104,858
Rent (see Note 34) 29,424 29,338 11,980
Fuel and lube oil (see Note 7) 1,586 18,111 77,880
=10,410,170
P =8,988,916
P =7,366,372
P

25. Personnel Costs

2021 2020 2019

Salaries and wages =4,027,014
P =3,969,607
P =3,105,859
P
Employee benefits (see Note 26) 775,914 741,889 1,122,130
=4,802,928
P =4,711,496
P =4,227,989
P

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26. Pension Benefit Plans

Under the existing regulatory framework, RA 7641, otherwise known as The Retirement Pay Law,
requires a provision for retirement pay to qualified private sector employees in the absence of any
retirement plan in the entity. It further states that the employees' retirement benefits under any
collective bargaining and other agreements shall not be less than those provided under the law. The
law does not require minimum funding of the plan.

The Company and its subsidiaries have funded, non-contributory, defined retirement benefit plans
(“Plan”) covering all regular and full-time employees and requiring contributions to be made to
separately administered funds. The retirement benefit fund (“Fund”) of each subsidiary is in the
form of a trust being maintained and managed by AEV, under the supervision of the Board of
Trustees (BOT) of the Plan. The BOT, whose members are also corporate officers, is responsible for
the investment of the Fund assets. Taking into account the Plan’s objectives, benefit obligations and
risk capacity, the BOT periodically defines the investment strategy in the form of a long-term target
structure.

The following tables summarize the components of net benefit expense recognized in the
consolidated statements of income and the funded status and amounts recognized in the
consolidated balance sheets for the respective plans.

Net benefit expense (recognized as part of personnel costs under operations and maintenance and
general and administrative expenses):

2021 2020 2019

Current service cost =244,801
P =194,202
P =179,269
P
Net interest cost 10,345 18,731 5,012
Past service cost 22,138 18,026 (1,975)
=277,284
P =230,959
P =182,306
P

Remeasurement effects to be recognized in other comprehensive income:

2021 2020 2019

Actuarial gains (losses) due to:
Changes in financial
assumptions =295,714
P (P
=235,343) (P
=145,431)
Changes in demographic
assumptions (40,067) 99,079 31,693
Return on assets excluding
amount included in
net interest cost 98,407 (278,058) (18,050)
Experience adjustments (79,692) (50,244) (82,122)
=274,362
P (P
=464,566) (P
=213,910)

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Net pension assets

2021 2020
Fair value of plan assets =P509,924 =128,558
P
Present value of the defined benefit obligation (422,778) (78,148)
=87,146
P =50,410
P

Net pension liabilities

2021 2020
Present value of the defined benefit obligation =2,124,351
P =2,550,134
P
Fair value of plan assets (1,821,539) (2,256,048)
=302,812
P =294,086
P

Changes in the present value of the defined benefit obligation are as follows:

2021 2020
At January 1 =2,628,282
P =2,412,098
P
Net benefit expense:
Current service cost 244,801 194,202
Net interest cost 98,486 118,744
Past service cost 22,138 18,026
365,425 330,972
Benefits paid from retirement fund (274,708) (204,157)
Benefits paid from operating funds (6,176) (95,233)
Foreign exchange translation differences 3,145 (2,028)
Transfers and others 7,116 122
Remeasurements in other comprehensive income:
Actuarial losses (gains) due to:
Experience adjustments 79,692 50,244
Changes in demographic assumptions 40,067 (99,079)
Changes in financial assumptions (295,714) 235,343
(175,955) 186,508
At December 31 =2,547,129
P =2,628,282
P

Changes in the fair value of plan assets are as follows:

2021 2020
At January 1 =2,384,606
P =2,054,260
P
Contribution by employer 27,903 712,423
Interest income included in net interest cost 88,141 100,013
Fund transfer from affiliates 7,116 122
Foreign exchange translation differences (2) 3
Return on assets excluding amount included in
net interest cost 98,407 (278,058)
Benefits paid (274,708) (204,157)
At December 31 =2,331,463
P =2,384,606
P

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Changes in net pension liability recognized in the consolidated balance sheets are as follows:

2021 2020
At January 1 =P243,676 =357,838
P
Retirement expense during the year 277,284 230,959
Benefits paid from operating funds (6,176) (95,233)
Contribution to retirement fund (27,903) (712,423)
Actuarial loss (gain) recognized during the year (274,362) 464,566
Foreign exchange translation differences 3,147 (2,031)
At December 31 =215,666
P =243,676
P

The fair value of plan assets by each class as at the end of the reporting period are as follows:

2021 2020
Financial assets at FVOCI ₱978,421 ₱1,096,076
Financial assets at amortized cost 931,607 1,116,973
Equity instruments:
Financial Institution 45,912 28,268
Power 105,980 97,085
Holding 125,560 140,144
Others 143,983 (152,282)
Financial assets at FVTPL — 58,342
Fair value of plan assets ₱2,331,463 ₱2,384,606

All equity instruments held have quoted prices in active market. The remaining plan assets do not
have quoted market prices in active market.

The plan assets are diverse and do not have any concentration risk.

The BOT reviews the performance of the plans on a regular basis. It assesses whether the
retirement plans will achieve investment returns which, together with contributions, will be
sufficient to pay retirement benefits as they fall due. The Group also reviews the solvency position
of the different member companies on an annual basis and estimates, through the actuary, the
expected contribution to the Retirement plan in the subsequent year.

The Company’s retirement benefit fund for its employees has investments in the equity of the
Company. The carrying value of these investments as of December 31, 2021 and the losses of Fund
arising from such investments for the year then ended amounted to ₱112.4 million and
₱26.5 million, respectively.

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The principal assumptions used as of December 31, 2021, 2020 and 2019 in determining pension
benefit obligations for the Group’s plans are shown below:
2021 2020 2019
Discount rates 3.51%-6.07% 2.75%-4.87% 4.36%-6.00%
Salary increase rates 6.00% 6.00% 6.00%

The sensitivity analysis below has been determined based on reasonably possible changes of each
significant assumption on the defined benefit obligation, assuming if all other assumptions were
held constant:

2021 2020
Increase
(decrease) in Effect on defined
basis points benefit obligation
Discount rates 100 (₱112,655) (₱124,887)
(100) 130,170 144,856
Future salary increases 100 ₱135,632 ₱148,583
(100) (119,783) (130,835)

The Group’s defined benefit pension plans are funded by the Company and its subsidiaries.
The Group expects to contribute ₱179.6 million to the defined benefit plans in 2022. The average
durations of the defined benefit obligation as of December 31, 2021 and 2020 are 4.90 to 21.67
years and 7.16 to 22.90 years, respectively.

27. Other Income

2021 2020 2019
Net foreign exchange gain (loss) (₱1,062,547) ₱754,108 ₱1,130,743
Surcharges 561,367 447,703 536,856
Recovery (provision for) impairment losses
on property, plant and equipment (340,597) (113,683) 245,489
Write off of project development costs
(see Note 12) (298,031) (7,240) (31,431)
Losses on disposal of property, plant and
equipment (214,032) (88,227) (304,631)
Non-utility operating income 138,922 142,013 170,640
Rental income 131,492 31,586 67,854
Unrealized fair valuation gains on
investment property — 115,829 126,842
Others – net 1,296,991 3,646,474 1,541,025
₱213,565 ₱4,928,563 ₱3,483,387

Included in “Net foreign exchange gain (loss)” are the net gains and losses relating to currency
forward transactions (see Note 33).

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Provision and recovery of impairment losses pertain to the following:

• The net book value of VECO’s damaged assets due to typhoon Odette amounting to
₱143.1 million was recognized as impairment loss in 2021.
• The income from the 2019 recovery of a certain Aseagas asset previously impaired in 2017
amounting to ₱245.5 million.

“Others” include insurance claims from plant outages of TSI amounting to ₱1.8 billion and liquidating
damages from contractor due to the delay in the completion of TVI’s power plant amounting to
₱611.0 million in 2020, reversal of APRI and TLI’s liability to PSALM pertaining to GRAM/ICERA
collection amounting to ₱924.0 million in 2019. “Others” also include non-recurring items like sale
of scrap and sludge oil, other insurance claims and reversal of provisions.

28. Income Tax

The provision for income tax account consists of:

2021 2020 2019

Current:
Corporate income tax ₱2,637,181 ₱4,622,913 ₱3,460,636
Final tax 53,706 101,856 221,149
2,690,887 4,724,769 3,681,785
Deferred (580,177) 1,337,143 (466,287)
₱2,110,710 ₱6,061,912 ₱3,215,498

Reconciliation between the statutory income tax rate and the Group’s effective income tax rates
follows:

2021 2020 2019

Statutory income tax rate 25.00% 30.00% 30.00%
Tax effects of:
Nontaxable share in net earnings of
associates and joint ventures (9.61%) (3.84%) (4.89%)
Deductible lease payments (9.50%) (23.85%) (11.53%)
Income under income tax holiday (ITH) (3.30%) (1.98%) (7.41%)
Unrecognized deferred income tax assets 3.24% 16.03% 3.53%
Nondeductible interest expense 2.88% 11.53% 6.43%
Nondeductible depreciation expense 1.15% 3.12% 1.42%
Interest income subjected to final tax at
lower rates – net (0.28%) (0.73%) (1.57%)
Others (1.02%) (1.25%) (2.24%)
8.56% 29.03% 13.74%

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Deferred income taxes of the companies in the Group that are in deferred income tax assets and
liabilities position consist of the following at December 31:

2021 2020
Net deferred income tax assets:
Allowances for impairment and
probable losses ₱423,176 ₱378,315
Net income from commissioning 1,191,899 1,483,220
Difference between the carrying amount of
nonmonetary assets and related
tax base (1,053,314) (724,052)
Unrealized foreign exchange gains (665,994) (383,227)
Net operating loss carryover (NOLCO) 1,388,619 197,296
Pension asset (liability):
Unamortized contributions for
past service 62,196 70,685
Recognized in other comprehensive
income 16,423 47,182
Recognized in statements of income 41,969 29,319
Unamortized customs duties and
taxes capitalized (31,787) (53,161)
Net provision for rehabilitation and
restoration costs 190,888 624,875
Others (122,307) (131,432)
Net deferred income tax assets ₱1,441,768 ₱1,539,020

2021 2020
Net deferred income tax liabilities:
Unamortized franchise ₱604,463 ₱744,193
Fair value adjustments of property, plant
and equipment 106,304 135,615
Unrealized foreign exchange gains 2,165 24,739
Unamortized customs duties and
taxes capitalized 4,197 5,348
Pension asset (liability):
Recognized in other comprehensive
income (70,944) (98,311)
Recognized in statements of income 47,068 68,400
Unamortized past service cost (24,584) (31,039)
Allowances for impairment and
probable losses (107,628) (71,006)
Others 24,399 (32,725)
Net deferred income tax liabilities ₱585,440 ₱745,214

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In computing for deferred income tax assets and liabilities, the rates used were 25% and 10% as of
December 31, 2021 and 30% and 10% as of December 31, 2020, which are the rates expected to
apply to taxable income in the years in which the deferred income tax assets and liabilities are
expected to be recovered or settled and considering the tax rate for renewable energy (RE)
developers as allowed by the Renewable Energy Act of 2008 (see Note 39j).

No deferred income tax assets were recognized on the Group’s NOLCO and MCIT amounting to
₱10.30 billion and ₱38.0 million, respectively, as of December 31, 2021 and ₱18.50 billion and
₱61.5 million, respectively, as of December 31, 2020, since management expects that it will not
generate sufficient taxable income in the future that will be available to allow all of the deferred
income tax assets to be utilized.

There are no income tax consequences to the Group attaching to the payment of dividends to its
shareholders.

29. Earnings Per Common Share

Basic and diluted earnings per common share amounts were computed as follows:

2021 2020 2019

a. Net income attributable to
equity holders of the parent ₱20,837,182 ₱12,577,676 ₱17,322,677
b. Weighted average number
of common shares issued
and outstanding 7,358,604,307 7,358,604,307 7,358,604,307
Basic and diluted earnings per
common share (a/b) ₱2.83 ₱1.71 ₱2.35

There are no dilutive potential common shares for the years ended December 31, 2021, 2020 and
2019.

30. Operating Segment Information

Operating segments are components of the Group that engage in business activities from which they
may earn revenues and incur expenses, whose operating results are regularly reviewed by the
Group’s CODM to make decisions about how resources are to be allocated to the segment and
assess their performances, and for which discrete financial information is available.

For purposes of management reporting, the Group’s operating businesses are organized and
managed separately according to services provided, with each segment representing a strategic
business segment. The Group’s identified operating segments, which are consistent with the
segments reported to the BOD, which is the Group’s CODM, are as follows:

• “Power Generation” segment, which is engaged in the generation and supply of power to
various customers under power supply contracts, ancillary service procurement agreements and
for trading in WESM;

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• “Power Distribution” segment, which is engaged in the distribution and sale of electricity to the
end-users; and
• “Parent Company and Others”, which includes the operations of the Company, retail electricity
sales to various off takers that are considered to be eligible contestable customers (see Note 39i)
and electricity related services of the Group such as installation of electrical equipment.

The power generation segment's revenue from contracts with customers is mainly from power
supply contracts. Set out below is the disaggregation of the Group’s revenue from contracts with
customers:

2021
Power Power Parent and
Generation Distribution Others Total
Revenue from power supply contracts ₱52,577,596 ₱— ₱— ₱52,577,596
Revenue from distribution services — 44,375,529 — 44,375,529
Revenue from retail electricity sales — — 19,874,964 19,874,964
Revenue from non-power supply contracts 17,430,539 — — 17,430,539
Revenue from technical and
— — 100,593 100,593
management services
₱70,008,135 ₱44,375,529 ₱19,975,557 ₱134,359,221

2020
Power Power Parent and
Generation Distribution Others Total
Revenue from power supply contracts ₱42,639,028 ₱— ₱— ₱42,639,028
Revenue from distribution services — 41,872,331 — 41,872,331
Revenue from retail electricity sales — — 16,476,713 16,476,713
Revenue from non-power supply contracts 9,111,632 — — 9,111,632
Revenue from technical and management services — — 276,945 276,945
₱51,750,660 ₱41,872,331 ₱16,753,658 ₱110,376,649
2019
Power Power Parent and
Generation Distribution Others Total
Revenue from power supply contracts ₱46,783,955 ₱— ₱— ₱46,783,955
Revenue from distribution services — 46,120,403 — 46,120,403
Revenue from retail electricity sales — — 22,805,450 22,805,450
Revenue from non-power supply contracts 9,111,632 — — 9,111,632
Revenue from technical and management services — — 813,717 813,717
₱55,895,587 ₱46,120,403 ₱23,619,167 ₱125,635,157

The revenue from contracts with customers is consistent with the revenue with external customers
presented in Segment information.

The Group has only one geographical segment as all of its assets are located in the Philippines. The
Group operates and derives principally all of its revenue from domestic operations. Thus,
geographical business information is not required.

Management monitors the operating results of its segments separately for the purpose of making
decisions about resource allocation and performance assessment. Segment revenue and segment
expenses are measured in accordance with PFRS. The presentation and classification of segment
revenue and segment expenses are consistent with the consolidated statements of income. Interest

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expense and financing charges, depreciation and amortization expense and income taxes are
managed on a per segment basis.

The Group has inter-segment revenues in the form of management fees as well as inter-segment
sales of electricity which are eliminated in consolidation. The transfers are accounted for at
competitive market prices on an arm’s-length transaction basis.

Capital expenditures consist of additions of property, plant and equipment and intangible asset -
service concession rights. Adjustments as shown below include items not presented as part of
segment assets and liabilities.

Revenue is recognized when control of the goods or services are transferred to the customer at an
amount that reflects the consideration to which the Group expects to be entitled in exchange for
those goods or services. Sale of power to Manila Electric Company (MERALCO) accounted for 8%,
10%, and 22% of the power generation revenues of the Group in 2021, 2020, and 2019, respectively.

Financial information on the operations of the various business segments is summarized as follows:

2021
Parent Eliminations
Power Power Company/ and
Generation Distribution Others adjustments Consolidated
REVENUE
External ₱70,008,135 ₱44,375,529 ₱19,975,557 ₱— ₱134,359,221
Inter-segment 27,329,151 1,252,529 932,611 (29,514,291) —
Total Revenue ₱97,337,286 ₱45,628,058 ₱20,908,168 (₱29,514,291) ₱134,359,221

(Forward)
Segment Results ₱22,949,164 ₱5,057,139 ₱203,492 ₱1 ₱28,209,796
Unallocated corporate income - net (519,603) 1,014,963 (281,795) — 213,565
INCOME FROM OPERATIONS 22,429,561 6,072,102 (78,303) 1 28,423,361
Interest expense and other
financing costs (9,472,367) (591,189) (3,526,809) — (13,590,365)
Interest income 127,868 6,701 208,664 — 343,233
Share in net earnings of associates and
joint ventures 9,236,653 242,882 25,210,136 (25,209,975) 9,479,696
Provision for income tax (806,745) (1,067,836) (236,129) — (2,110,710)
NET INCOME ₱21,514,970 ₱4,662,660 ₱21,577,559 (₱25,209,974) ₱22,545,215
OTHER INFORMATION
Investments ₱63,562,307 ₱1,034,881 ₱188,071,199 (₱187,726,581) ₱64,941,806
Capital Expenditures ₱5,918,316 ₱3,228,363 ₱30,858 ₱— ₱8,281,980
Segment Assets ₱301,389,460 ₱36,094,279 ₱238,366,874 (₱148,434,994) ₱427,415,619
Segment Liabilities ₱177,496,067 ₱28,554,581 ₱78,702,587 (₱12,918,319) ₱271,834,916
Depreciation and Amortization ₱9,879,617 ₱1,128,298 ₱49,340 ₱145,018 ₱11,202,273

2020
Parent Eliminations
Power Power Company/ and
Generation Distribution Others Adjustments Consolidated
REVENUE
External ₱51,750,660 ₱41,872,331 ₱16,753,658 ₱— ₱110,376,649
Inter-segment 22,896,433 1,118,499 1,031,354 (25,046,286) —
Total Revenue ₱74,647,093 ₱42,990,830 ₱17,785,012 (₱25,046,286) ₱110,376,649
(Forward)
Segment Results ₱21,444,970 ₱4,946,100 ₱488,817 ₱— ₱26,879,887

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Parent Eliminations
Power Power Company/ and
Generation Distribution Others Adjustments Consolidated
Unallocated corporate income - net 3,486,054 841,667 600,842 — 4,928,563
INCOME FROM OPERATIONS 24,931,024 5,787,767 1,089,659 — 31,808,450
Interest expense and other
financing costs (10,536,420) (693,525) (3,023,583) — (14,253,528)
Interest income 397,880 48,408 206,788 — 653,076
Share in net earnings of associates and
joint ventures 2,454,530 198,142 15,066,479 (15,044,015) 2,675,136
Provision for income tax (4,413,334) (1,397,825) (250,753) — (6,061,912)
NET INCOME ₱12,833,680 ₱3,942,967 ₱13,088,590 (₱15,044,015) ₱14,821,222
OTHER INFORMATION
Investments ₱60,520,910 ₱928,495 ₱170,100,955 (₱169,742,086) ₱61,808,274
Capital Expenditures ₱2,821,303 ₱2,628,493 ₱20,706 ₱— ₱5,468,687
Segment Assets ₱287,225,921 ₱33,915,449 ₱207,799,057 (₱131,015,309) ₱397,925,118
Segment Liabilities ₱173,334,124 ₱27,599,412 ₱75,498,129 (₱13,091,620) ₱263,340,045
Depreciation and Amortization ₱9,684,189 ₱1,098,103 ₱46,054 ₱145,018 ₱10,973,364

2019
Parent
Power Power Company/ Eliminations and
Generation Distribution Others Adjustments Consolidated
REVENUE
External ₱55,895,587 ₱46,120,403 ₱23,619,167 ₱— ₱125,635,157
Inter-segment 28,483,698 1,327,759 2,911,436 (32,722,893) —
Total Revenue ₱84,379,285 ₱47,448,162 ₱26,530,603 (₱32,722,893) ₱125,635,157
Segment Results ₱21,830,533 ₱5,885,145 ₱1,140,196 ₱— ₱28,855,874
Unallocated corporate income - net 2,406,999 956,784 119,604 — 3,483,387
INCOME FROM OPERATIONS 24,237,532 6,841,929 1,259,800 — 32,339,261
Interest expense and other financing costs (10,957,821) (507,019) (2,582,806) — (14,047,646)
Interest income 943,542 41,972 306,189 — 1,291,703
Share in net earnings of associates and
joint ventures 3,648,999 164,080 19,003,726 (19,002,843) 3,813,962
Provision for income tax (1,230,697) (1,742,500) (242,301) — (3,215,498)
NET INCOME ₱16,641,555 ₱4,798,462 ₱17,744,608 (₱19,002,843) ₱20,181,782
OTHER INFORMATION
Investments ₱59,646,763 ₱881,812 ₱161,528,818 (₱161,201,414) ₱60,855,979
Capital Expenditures ₱6,237,592 ₱3,319,554 ₱31,393 ₱— ₱9,736,441
Segment Assets ₱298,890,572 ₱33,688,098 ₱191,993,277 (₱114,102,590) ₱410,469,357
Segment Liabilities ₱190,276,375 ₱27,267,433 ₱71,179,680 (₱12,433,142) ₱276,290,346
Depreciation and Amortization ₱8,694,303 ₱1,010,396 ₱37,397 ₱153,599 ₱9,895,695

31. Related Party Disclosures

Parties are considered to be related if one party has the ability to control, directly or indirectly, the
other party or exercise significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related if they are subject to common control or
common significant influence. Related parties may be individuals or corporate entities.

The sales to and purchases from related parties are made on terms equivalent to those that prevail
in arm’s length transactions.

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The Group enters into transactions with its parent, associates, joint ventures and other related
parties, principally consisting of the following:

 The Company provides services to certain associates and joint ventures such as technical and
legal assistance for various projects and other services.

 Energy fees are billed by the Group to related parties and the Group also purchased power from
associates and joint ventures, arising from the following:

 PPA/PSA or ESA (Note 20)

 Replacement power contracts (Note 21)

 AEV provides human resources, internal audit, legal, treasury and corporate finance services,
among others, to the Group and shares with the member companies the business expertise of
its highly qualified professionals. Transactions are priced based on agreed rates, and billed costs
are always benchmarked to third party rates. Service level agreements are in place to ensure
quality of service. This arrangement enables the Group to maximize efficiencies and realize cost
synergies. These transactions result to professional and technical fees paid by the Group to AEV
(see Note 23).

 Aviation services are rendered by AAI, an associate, to the Group.

 Lease of commercial office units by the Group from Cebu Praedia Development Corporation
(CPDC) and Aboitizland, Inc. and subsidiaries. CPDC and Aboitizland, Inc. are subsidiaries of AEV.

 Aboitiz Construction, Inc. (ACI), a wholly owned subsidiary of ACO, rendered its services to the
Group for various construction projects.

 LEZ entered into a Concession Agreement with Lima Land, Inc. (LLI) for which it is entitled to the
exclusive right to distribute and supply electricity to LLI’s locators.

 Interest-bearing advances from AEV and subsidiaries availed by the Group. The annual interest
rates are determined on arm’s length basis.

 Cash deposits with Union Bank of the Philippines (UBP) earn interest at prevailing market rates
(see Note 5). UBP is an associate of AEV.

 The Company obtained Standby Letter of Credit (SBLC) and is acting as surety for the benefit of
certain associates and joint ventures in connection with loans and credit accommodations. The
Company provided SBLC for STEAG, CEDC, and SNAP B in the amount of ₱103.5 million in 2021,
₱900 million in 2020 and ₱958.3 million in 2019.

The above transactions are settled in cash.

The consolidated balance sheets and consolidated statements of income include the following
significant account balances resulting from the above transactions with related parties:

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a. Revenue - Technical, management and other fees

Revenue Receivable
2021 2020 2019 2021 2020 Terms Conditions
AEV and subsidiaries
APO Agua 30-day; interest- No impairment;
Infrastractura, Inc. ₱14,948 ₱13,587 ₱24,545 ₱— ₱— free unsecured
30-day; interest- No impairment;
Aboitiz InfraCapital, Inc. — 777 1,055 — — free unsecured
Associates and joint
ventures
30-day; interest- No impairment;
GNPD 39,502 39,884 41,768 7,575 3,112 free unsecured
30-day; interest- No impairment;
SFELAPCO 19,000 108,838 106,760 — — free unsecured
30-day; interest- No impairment;
SNAP M 6,696 6,696 — — — free unsecured
30-day; interest- No impairment;
SNAP B 6,696 6,696 — — — free unsecured
30-day; interest- No impairment;
SNAP G 239 — — — — free unsecured
30-day; interest- No impairment;
CEDC — 88,445 74,074 — 5,861 free unsecured
₱87,081 ₱264,923 ₱248,202 ₱7,575 ₱8,973

b. Revenue Sale of power

Revenue Receivable
2021 2020 2019 2021 2020 Terms Conditions
AEV and subsidiaries
Pilmico Foods 30-day; No impairment;
Corporation ₱54,363 ₱140,741 ₱203,398 ₱6,413 ₱10,637 interest-free unsecured
30-day; No impairment;
Lima Land, Inc. 36,755 22,488 9,842 8,982 4,242 interest-free unsecured
30-day; No impairment;
Lima Water Corporation 19,425 18,772 — — 1,664 interest-free unsecured
Aboitizland, Inc. and 30-day; No impairment;
subsidiaries 20,263 14,202 — 10,949 1,335 interest-free unsecured
Cebu Industrial Park 30-day; No impairment;
Developer's, Inc. 1,568 2,640 2,540 — — interest-free unsecured
Associates and joint
ventures
30-day; No impairment;
SFELAPCO 2,710,153 2,351,358 2,655,153 234,517 171,663 interest-free unsecured
30-day; No impairment;
GNPD 9,452,701 1,882,942 37,212 — 150,872 interest-free unsecured
30-day; No impairment;
MEC 13,867 764,862 312,055 36,038 128,612 interest-free unsecured
30-day; No impairment;
SNAP M 2,912 7,355 22,802 2,901 — interest-free unsecured
30-day; No impairment;
SNAP RES — — 28,983 — — interest-free unsecured
Other related parties
Republic Cement &
Building Materials, Inc. 30-day; No impairment;
(an associate of AEV) 2,464,158 1,509,512 1,295,957 180,143 33,028 interest-free unsecured
Tsuneishi Heavy
Industries Cebu, Inc. (a
joint venture of ACO and 30-day; No impairment;
Tsuneishi Group) — 30,662 165,254 — — interest-free unsecured
Aboitiz Construction 30-day; No impairment;
International, Inc. 1,319,651 — — — — interest-free unsecured
₱16,095,816 ₱ 6,745,534 ₱4,733,196 ₱479,943 ₱502,053

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c. Cost of purchased power

Purchases Payable
2021 2020 2019 2021 2020 Terms Condition
Associates and Joint
Ventures
30-day; Unsecured
CEDC ₱4,522,422 ₱3,955,490 ₱3,619,999 ₱341,528 ₱330,478 interest-free
30-day; Unsecured
SNAP M 73,350 94,730 109,142 103,516 7,745 interest-free
30-day; Unsecured
SFELAPCO — 30,002 — — — interest-free
₱4,595,772 ₱4,080,222 ₱3,729,141 ₱445,044 ₱338,223

d. Expenses

Purchases/Expenses Payable
Nature 2021 2020 2019 2021 2020 Terms Condition
Ultimate Parent
Professional 30-day;
ACO fees ₱4,500 ₱1,415 ₱1,663 ₱— ₱723 interest-free Unsecured
AEV and subsidiaries
Professional
and Technical 30-day;
AEV fees 622,983 526,488 591,310 12,972 6,228 interest-free Unsecured
Lima Land, Concession 30-day;
Inc. fees 88,820 77,365 78,516 6,823 815 interest-free Unsecured
Aviation 30-day;
AAI Services 54,814 49,416 55,537 579 — interest-free Unsecured
Generation 30-day;
RCBM fees 38,070 — — 43,384 — interest-free Unsecured
30-day;
CPDC Rental 27,201 35,927 34,862 100 — interest-free Unsecured
30-day;
AEV Rental — 411 2,213 — — interest-free Unsecured
Aboitizland, Inc. 30-day;
and subsidiaries Rental 351 306 280 — — interest-free Unsecured
Professional
and Technical 30-day;
CPDC fees — — 64 — — interest-free Unsecured
₱836,739 ₱691,328 ₱764,445 ₱63,858 ₱7,766

e. Capitalized construction and rehabilitation costs

Purchases Payable
2021 2020 2019 2021 2020 Terms Condition
Other related
parties
30-day;
ACI ₱340,286 ₱271,383 ₱458,564 ₱— 2,137 interest-free Unsecured

f. Temporary advances

Interest Expense Payable

2021 2020 2019 2021 2020 Terms Condition
Parent
Promissory note;
AEVI ₱342 ₱301 ₱17,919 ₱41,309 ₱26,413 interest-bearing Unsecured

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g. Loans payable

Interest Expense Payable

2021 2020 2019 2021 2020 Terms Conditions
Parent
Loan agreement;
AEV ₱7,965 ₱14,775 ₱— ₱300,000 ₱300,000 interest-bearing Unsecured

h. Cash deposits and placements with UBP

Interest Income Outstanding Balance

2021 2020 2019 2021 2020 Terms Conditions
TPI and 90 days or less; No impairment;
subsidiaries ₱10,407 ₱41,833 ₱67,184 ₱4,480,783 ₱3,070,469 interest-bearing unsecured
90 days or less; No impairment;
Company 11,553 38,983 106,743 1,432,328 5,820,099 interest-bearing unsecured
ARI and 90 days or less; No impairment;
subsidiaries 9,985 24,991 40,802 3,197,538 2,168,146 interest-bearing unsecured
90 days or less; No impairment;
VECO 2,535 17,630 10,144 431,492 338,969 interest-bearing unsecured
90 days or less; No impairment;
DLP 2,994 15,401 3,025 438,578 327,256 interest-bearing unsecured
90 days or less; No impairment;
CPPC 1,737 5,365 11,710 392,260 355,354 interest-bearing unsecured
90 days or less; No impairment;
AESI 2,964 4,569 15,026 1,720,564 1,200,315 interest-bearing unsecured
90 days or less; No impairment;
AI 1,473 3,042 15,332 928,057 785,066 interest-bearing unsecured
90 days or less; No impairment;
SEZ 261 1,305 262 140,124 79,167 interest-bearing unsecured
90 days or less; No impairment;
EAUC 961 1,294 5,740 352,824 167,267 interest-bearing unsecured
90 days or less; No impairment;
CLP 158 1,212 402 33,034 35,889 interest-bearing unsecured
90 days or less; No impairment;
LEZ 56 1,049 41 69,536 44,185 interest-bearing unsecured
90 days or less; No impairment;
PEI 90 811 888 85,113 69,666 interest-bearing unsecured
90 days or less; No impairment;
MEZ 134 581 311 24,975 29,020 interest-bearing unsecured
90 days or less; No impairment;
BEZ 82 575 205 29,041 14,514 interest-bearing unsecured
90 days or less; No impairment;
MVEZ 44 416 35 37,982 56,026 interest-bearing unsecured
90 days or less; No impairment;
MHSCI — — — 826 — interest-bearing unsecured
90 days or less; No impairment;
SACASUN 359 1 — 32,229 885 interest-bearing unsecured
₱45,793 ₱159,058 ₱277,850 ₱13,827,284 ₱14,562,293

The Company’s Fund is in the form of a trust being maintained and managed by AEV. In 2021 and
2020, other than contributions to the Fund, no transactions occurred between the Company or any
of its direct subsidiaries and the Fund.

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Compensation of BOD and key management personnel of the Group follows:

2021 2020 2019

Short-term benefits ₱346,730 ₱385,431 ₱456,844
Post-employment benefits 14,608 18,392 30,616
₱361,338 ₱403,823 ₱487,460

32. Financial Risk Management Objectives and Policies

The Group’s principal financial instruments comprise of cash and cash equivalents and long-term
debts. The main purpose of these financial instruments is to raise finances for the Group’s
operations. The Group has various other financial instruments such as trade and other receivables,
investments in equity securities, short-term loans, trade and other payables, lease liabilities, long-
term obligation on power distribution system and customers’ deposits, which generally arise directly
from its operations.

The Group also enters into derivative transactions, particularly foreign currency forwards, to
economically hedge its foreign currency risk from foreign currency denominated liabilities and
purchases (see Note 33).

Risk Management Structure

The BOD is mainly responsible for the overall risk management approach and for the approval of risk
strategies and principles of the Group.

Financial risk committee

The Financial Risk Committee has the overall responsibility for the development of risk strategies,
principles, frameworks, policies and limits. It establishes a forum of discussion of the Group’s
approach to risk issues in order to make relevant decisions.

Treasury service group

The Treasury Service Group is responsible for the comprehensive monitoring, evaluating and
analyzing of the Group’s risks in line with the policies and limits.

The main risks arising from the Group’s financial instruments are interest rate risk, credit risk,
liquidity risk, commodity price risk and foreign exchange risk.

Liquidity risk
Liquidity risk is the risk of not meeting obligations as they become due because of the inability to
liquidate assets or obtain adequate funding. The Group maintains sufficient cash and cash
equivalents to finance its operations. Any excess cash is invested in short-term money market
placements. These placements are maintained to meet maturing obligations and pay any dividend
declarations.

In managing its long-term financial requirements, the Group’s policy is that not more than 25% of
long-term borrowings should mature in any twelve-month period. 13.67% and 10.90% of the
Group’s debt will mature in less than one year as of December 31, 2021 and 2020 respectively. For
its short-term funding, the Group’s policy is to ensure that there are sufficient working capital
inflows to match repayments of short-term debt.

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The financial assets that will be principally used to settle the financial liabilities presented in the
following table are from cash and cash equivalents amounting to ₱57.13 billion and ₱38.70 billion as
of December 31, 2021 and 2020, respectively, and trade and other receivables amounting to
₱26.87 billion and ₱23.11 billion as of December 31, 2021 and 2020, respectively. Cash and cash
equivalents can be withdrawn anytime while trade and other receivables are expected to be
collected/realized within one year.

The following tables summarize the maturity profile of the Group’s financial liabilities as of
December 31, 2021 and 2020 based on contractual undiscounted payments:

December 31, 2021

Total
carrying Contractual undiscounted principal payments
value Total On demand <1 year 1 to 5 years > 5 years
Short-term loans ₱18,625,546 ₱18,658,596 ₱— ₱18,658,596 ₱— ₱—
Trade and other
18,356,838 18,356,839 3,111,065 15,191,269 54,505 —
payables*
Long-term debts 182,037,974 225,360,904 — 23,340,047 105,567,654 96,453,203
Customers’ deposits 7,200,341 7,200,341 — — 457,618 6,742,723
Lease liabilities 33,773,879 44,123,449 — 10,929,330 27,901,130 5,292,989
Long-term obligation on
165,532 240,000 — 40,000 200,000 —
PDS
Derivative liabilities 393,694 393,694 — 219,030 174,664 —
₱260,553,804 ₱314,333,823 ₱3,111,065 ₱68,378,272 ₱134,355,571 ₱108,488,915
*Includes the noncurrent portion of the PSALM deferred adjustment presented under other noncurrent liabilities in the consolidated balance sheet.

December 31, 2020

Total
Carrying Contractual undiscounted payments
Value Total On demand <1 year 1 to 5 years > 5 years
Short-term loans ₱13,184,103 ₱13,220,578 ₱— ₱13,220,578 ₱— ₱—
Trade and other payables* 15,166,856 15,166,856 1,662,192 12,405,270 1,099,394 —
Long-term debts 175,880,642 209,636,083 — 21,822,630 122,135,563 65,677,890
Customers’ deposits 6,798,845 6,798,845 — 171 400,461 6,398,213
Lease liabilities 39,262,977 53,155,319 — 10,548,371 37,462,775 5,144,173
Long-term obligation on PDS 183,436 320,000 — 40,000 200,000 80,000
Derivative liabilities 1,788,802 1,788,802 — 787,273 1,001,529 —
₱252,265,661 ₱300,086,483 ₱1,662,192 ₱58,824,293 ₱162,299,722 ₱77,300,276
*Includes the noncurrent portion of the PSALM deferred adjustment presented under other noncurrent liabilities in the consolidated balance sheet.

Market risk
The risk of loss, immediate or over time, due to adverse fluctuations in the price or market value of
instruments, products, and transactions in the Group’s overall portfolio (whether on or off-balance
sheet) is market risk. These are influenced by foreign and domestic interest rates, foreign exchange
rates and gross domestic product growth.

Interest rate risk

The Group’s exposure to market risk for changes in interest rates relates primarily to its long-term
debt obligations. To manage this risk, the Group determines the mix of its debt portfolio as a
function of the level of current interest rates, the required tenor of the loan, and the general use of
the proceeds of its various fund raising activities. As of December 31, 2021, 10% of the Group’s long-
term debt had annual floating interest rates ranging from 1.32% to 2.27%, and 90% have annual
fixed interest rates ranging from 4.00% to 9.00%. As of December 31, 2020, 16% of the Group’s long-
term debt had annual floating interest rates ranging from 1.45% to 3.60%, and 84% have annual
fixed interest rates ranging from 4.00% to 8.50%.

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The following tables set out the carrying amounts, by maturity, of the Group’s financial instruments
that are exposed to cash flow interest rate risk:

As of December 31, 2021

<1 year 1-5 years >5 years Total

Floating rate - long-term debt ₱810,596 ₱6,504,968 ₱7,573,479 ₱14,889,043

As of December 31, 2020

<1 year 1-5 years >5 years Total

Floating rate - long-term debt ₱2,361,434 ₱17,531,930 ₱8,007,950 ₱27,901,314

Interest on financial instruments classified as floating rate is repriced at intervals of less than one
year. Interest on financial instruments classified as fixed rate is fixed until the maturity of the
instrument. The other financial instruments of the Group that are not included in the above tables
are non-interest bearing and are therefore not subject to interest rate risk. The Group’s derivative
assets and liabilities are subject to fair value interest rate risk (see Note 33).

The following table demonstrates the sensitivity to a reasonable possible change in interest rates,
with all other variables held constant, of the Group’s income before tax (through the impact on
floating rate borrowings):

Increase Effect
(decrease) in on income
basis points before tax
December 2021 200 (₱297,781)
(100) 148,890
December 2020 200 (₱558,026)
(100) 279,013

There is no other impact on the Group’s equity other than those already affecting the consolidated
statements of income.

The interest expense and other finance charges recognized according to source are as follows:

2021 2020 2019

Short-term loans and long-term
debt (see Notes 15 and 16) ₱10,138,558 ₱10,812,088 ₱9,443,882
Lease liabilities (see Note 34) 2,750,328 3,255,809 4,350,043
Loss on loan extinguishment
(see Note 16) 447,502 — —
Customers’ deposits (see Note 17) 4,180 4,027 4,353
Other long-term obligations
(see Notes 12 and 18) 249,797 181,604 249,368
₱13,590,365 ₱14,253,528 ₱14,047,646

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Commodity Price Risk

Commodity price risk of the Group arises from transactions on the world commodity markets to
secure the supply of fuel, particularly coal, which is necessary for the generation of electricity.

The Group’s objective is to minimize the impact of commodity price fluctuations and this exposure is
hedged in accordance with the Group’s commodity price risk management strategy.

Based on a 36-month forecast of the required coal supply, the Group hedges the purchase price of
coal using commodity swap contracts. The commodity swap contracts do not result in physical
delivery of coal, but are designated as cash flow hedges to offset the effect of price changes in coal.

Currently, the management is monitoring the development of the situation in Ukraine which could
indirectly impact the Group because of higher prices of fuel.

Foreign exchange risk

The foreign exchange risk of the Group pertains significantly to its foreign currency denominated
obligations. To manage its foreign exchange risk, stabilize cash flows and improve investment and
cash flow planning, the Group enters into foreign currency forward contracts aimed at reducing
and/or managing the adverse impact of changes in foreign exchange rates on financial performance
and cash flows. Foreign currency denominated borrowings account for 23.89% and 29.32% of total
consolidated borrowings as of December 31, 2021 and 2020, respectively.

Presented below are the Group’s foreign currency denominated financial assets and liabilities
translated to Philippine Peso:

December 31, 2021 December 31, 2020

Philippine
Peso Philippine Peso
US Dollar equivalent1 US Dollar equivalent2
Financial assets:
Cash and cash equivalents $65,645 ₱3,347,829 $156,869 ₱7,533,320
Trade and other receivables 3,414 174,111 4 192
Advances to associates — — 457 21,947
Total financial assets 69,059 3,521,940 157,330 7,555,459
Financial liabilities:
Short-term loans 810 41,309 550 26,413
Trade and other payables 29,589 1,509,010 39,054 1,875,490
Long-term debt 55,000 2,804,945 300,000 14,406,900
Lease liabilities 321,601 16,401,329 394,341 18,937,438
Total financial liabilities 407,000 20,756,593 733,945 35,246,241
Total net financial liabilities ($337,941) (₱17,234,653) ($576,615) (₱27,690,782)
1
US$1 = ₱51.00
2
US$1 = ₱48.02

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The following table demonstrates the sensitivity to a reasonable possible change in the US dollar
exchange rates, with all other variables held constant, of the Group’s income before tax as of
December 31:

Increase (decrease) Effect on income

in US Dollar before tax
2021
US Dollar denominated accounts US Dollar strengthens by 5% (₱861,733)
US Dollar denominated accounts US Dollar weakens by 5% 861,733
2020
US Dollar denominated accounts US Dollar strengthens by 5% (₱1,384,539)
US Dollar denominated accounts US Dollar weakens by 5% 1,384,539

The increase in US Dollar rate represents the depreciation of the Philippine Peso while the decrease
in US Dollar rate represents appreciation of the Philippine Peso.

The following table presents LHC’s and GMEC’s foreign currency denominated assets and liabilities:
2021 2020
Philippine US Dollar Philippine US Dollar
Peso Equivalent1 Peso Equivalent2
Financial assets:
Cash and cash equivalents ₱2,400,523 $47,070 ₱1,160,417 $24,163
Trade and other receivables 4,378,060 85,846 773,437 16,105
6,778,583 132,916 1,933,854 40,268
Financial liabilities:
Trade and other payables 2,797,091 54,846 824,791 17,175
Net foreign currency denominated
assets ₱3,981,492 $78,070 ₱1,109,063 $23,093
1US$1 = ₱51.00
2US$1 = ₱48.02

The following tables demonstrate the sensitivity to a reasonable possible change in the US dollar
exchange rate in relation to Philippine peso, with all variables held constant, of the Group’s income
before tax as of December 31:

Effect on income before tax

2021 2020
US dollar appreciates against Philippine peso by 5.0% ($3,904) ($1,155)
US dollar depreciates against Philippine peso by 5.0% 3,904 1,155

There is no other impact on the Group’s equity other than those already affecting the consolidated
statements of income.

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Credit risk
For its cash investments (including restricted portion), financial assets at FVTPL and receivables, the
Group’s credit risk pertains to possible default by the counterparty, with a maximum exposure equal
to the carrying amount of these investments. With respect to cash investments and financial assets
at FVTPL, the risk is mitigated by the short-term and/or liquid nature of its cash investments mainly
in bank deposits and placements, which are placed with financial institutions and entities of high
credit standing. With respect to receivables, credit risk is controlled by the application of credit
approval, limit and monitoring procedures. It is the Group’s policy to only enter into transactions
with credit-worthy parties to mitigate any significant concentration of credit risk. The Group ensures
that sales are made to customers with appropriate credit history and it has internal mechanisms to
monitor the granting of credit and management of credit exposures.

Concentration risk
Credit risk concentration of the Group’s receivables according to the customer category as of
December 31, 2021 and 2020 is summarized in the following table:

2021 2020
Power distribution:
Industrial =P4,934,502 =4,005,713
P
Residential 2,566,449 1,922,998
Commercial 778,568 1,144,382
City street lighting 109,700 764,702
Power generation:
Power supply contracts 11,930,242 8,066,769
Spot market 2,318,412 1,821,815
=22,637,873
P =17,726,379
P

The above receivables were provided with allowance for ECL amounting to =P3.02 billion and
=2.28 billion as of December 31, 2021 and 2020, respectively (see Note 6).
P

Credit quality
The credit quality per class of financial assets is as follows:
December 31, 2021

Neither past due nor impaired Past due or

individually
High Grade Standard Sub-standard impaired Total
Cash and cash equivalents:
Cash on hand and in banks =17,239,024
P =–
P =–
P =–
P =17,239,024
P
Short-term deposits 39,891,219 – – – 39,891,219
57,130,243 – – – 57,130,243
Trade receivables:
Power supply contracts 9,392,603 – – 2,537,639 11,930,242
Spot market 516,969 – – 1,801,443 2,318,412
(Forward)

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Neither past due nor impaired Past due or

individually
High Grade Standard Sub-standard impaired Total
Industrial =3,138,445
P =–
P =–
P =1,796,057
P =4,934,502
P
Residential 618,806 – – 1,947,643 2,566,449
Commercial 312,444 – – 466,124 778,568
City street lighting 20,991 – – 88,709 109,700
14,000,258 – – 8,637,615 22,637,873
Other receivables* 7,238,330 – – 17,355 7,255,685
Financial assets at FVTPL 3,906 – – – 3,906
Restricted cash 4,073,381 – – – 4,073,381
Derivative assets 1,459,621 – – – 1,459,621
Total =83,905,739
P =–
P =–
P =8,654,970
P =92,560,709
P
*Includes the noncurrent portion of the PSALM deferred adjustment presented under other noncurrent assets in the consolidated balance sheets.

December 31, 2020

Past due or
Neither past due nor impaired
individually
High Grade Standard Sub-standard impaired Total
Cash and cash equivalents:
Cash on hand and in banks =P14,790,197 =P– =P– =P– =P14,790,197
Short-term deposits 23,909,348 – – – 23,909,348
38,699,545 – – – 38,699,545
Trade receivables:
Power supply contracts 5,978,326 – – 2,088,443 8,066,769
Spot market 302,649 – – 1,519,166 1,821,815
Industrial 3,235,760 – – 769,953 4,005,713
Residential 667,936 – – 1,255,062 1,922,998
Commercial 569,713 – – 574,669 1,144,382
City street lighting 365,511 – – 399,191 764,702
11,119,895 – – 6,606,484 17,726,379
Other receivables* 7,644,570 – – 20,098 7,664,668
Financial assets at FVTPL 3,906 – – – 3,906
Restricted cash 5,324,213 – – – 5,324,213
Derivative assets – – – – –
Total =62,792,129
P =–
P =–
P =6,626,582
P =69,418,711
P
*Includes the noncurrent portion of the PSALM deferred adjustment presented under other noncurrent assets in the consolidated balance
sheets.

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2021
Stage 1 Stage 2 Stage 3 Lifetime ECL
12-month ECL Lifetime ECL Lifetime ECL Simplified Approach Total
High grade =69,905,481
P =–
P =–
P ₱14,000,258 =83,905,739
P
Standard grade – – – – –
Substandard grade – – – – –
Default 17,355 – – 8,637,615 8,654,970
Gross carrying amount 69,922,836 – – 22,637,873 92,560,709
Loss allowance – – – 3,018,981 3,018,981
Carrying amount =69,922,836
P =–
P =–
P ₱19,618,892 =89,541,728
P

2020

Stage 1 Stage 2 Stage 3 Lifetime ECL

12-month ECL Lifetime ECL Lifetime ECL Simplified Approach Total
High grade =51,672,233
P – =–
P ₱11,119,896 =P62,792,129
Standard grade – – – — –
Substandard grade – – – — –
Default 20,098 -- – 6,606,484 6,626,582
Gross carrying amount 51,692,311 – – 17,726,380 69,418,711
Loss allowance – – – 2,276,373 2,276,373
Carrying amount =51,692,311
P =–
P =–
P ₱15,450,007 =P67,142,338

High grade - pertain to receivables from customers with good favorable credit standing and have no
history of default.

Standard grade - pertain to those customers with history of sliding beyond the credit terms but pay a
week after being past due.

Sub-standard grade - pertain to those customers with payment habits that normally extend beyond
the approved credit terms, and has high probability of being impaired.

Trade and other receivables that are individually determined to be impaired at the balance sheet
date relate to debtors that are in significant financial difficulties and have defaulted on payments
and accounts under dispute and legal proceedings.

The Group evaluated its cash and cash equivalents and restricted cash as high quality financial assets
since these are placed in financial institutions of high credit standing.

With respect to other receivables, investments in equity securities and derivative assets, the Group
evaluates the counterparty’s external credit rating in establishing credit quality.

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The tables below show the Group’s aging analysis of financial assets:
December 31, 2021
Less than 31 days to 60 Over Individually
Total Current 30 days impaired
days 60 days
Cash and cash equivalents:
Cash on hand and in banks = 17,239,024
P = 17,239,024
P =–
P =–
P =–
P =–
P
Short-term deposits 39,891,219 39,891,219 – – – –
57,130,243 57,130,243 – – – –
Trade receivables:
Power supply contracts 11,930,242 9,392,603 273,594 219,308 1,334,487 710,250
Spot market 2,318,412 516,969 83,213 26,850 95,718 1,595,662
Industrial 4,934,502 3,138,445 246,465 95,342 1,174,176 280,074
Residential 2,566,449 618,806 612,325 142,472 859,455 333,391
Commercial 778,568 312,444 154,468 30,902 195,177 85,577
City street lighting 109,700 20,991 5,733 7,418 61,531 14,027
22,637,873 14,000,258 1,375,798 522,292 3,720,544 3,018,981
Other receivables* 7,255,685 7,238,330 724 464 16,167 –
Financial assets at FVTPL 3,906 3,906 – – – –
Restricted cash 4,073,381 4,073,381 – – – –
Derivative assets 1,459,621 1,459,621 – – – –
Total = 92,560,709
P = 83,905,739
P = 1,376,522
P = 522,756
P = 3,736,711
P = 3,018,981
P
*Includes the noncurrent portion of the PSALM deferred adjustment presented under other noncurrent assets in the consolidated balance sheets.

December 31, 2020

Less than 31 days to 60 Over Individually
Total Current 30 days days 60 days impaired
Cash and cash equivalents:
Cash on hand and in banks =14,790,197
P =14,790,197
P =–
P =–
P =–
P =–
P
Short-term deposits 23,909,348 23,909,348 – – – –
38,699,545 38,699,545 – – – –
Trade receivables:
Power supply contracts 8,066,769 5,978,326 232,668 159,520 1,182,518 513,737
Spot market 1,821,815 302,649 11,604 25,176 199,048 1,283,338
Industrial 4,005,713 3,235,760 339,146 78,585 243,461 108,761
Residential 1,922,998 667,936 551,843 181,743 246,802 274,674
Commercial 1,144,382 569,713 295,445 93,458 111,918 73,848
City street lighting 764,702 365,511 207,039 102,755 =67,382
P 22,015
17,726,379 11,119,895 1,637,745 641,237 2,051,129 2,276,373
Other receivables* 7,664,668 7,644,570 5,306 608 14,184 –
Financial assets at FVTPL 3,906 3,906 – – – –
Restricted cash 5,324,213 5,324,213 – – – –
Total =69,418,711
P =62,792,129
P =1,643,051
P =641,845
P =2,065,313
P =2,276,373
P
*Includes the noncurrent portion of the PSALM deferred adjustment presented under other noncurrent assets in the consolidated balance sheets.

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Capital Management
Capital includes equity attributable to the equity holders of the parent. The primary objective of the
Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital
ratios in order to support its business and maximize shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic
conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment
to shareholders, return capital to shareholders or issue new shares.

The Group monitors capital using a gearing ratio, which is net debt divided by equity plus net debt.
The Group’s policy is to keep the gearing ratio at 70% or below. The Group determines net debt as
the sum of interest-bearing short-term loans, long-term loans, and lease liabilities less cash and
short-term deposits (including restricted cash).

Gearing ratios of the Group as of December 31, 2021 and 2020 are as follows:

2021 2020
Short-term loans =P18,625,546 =P13,184,103
Long-term debt 182,037,974 175,880,642
Lease liabilities 33,773,879 39,262,977
Cash and cash equivalents (57,130,243) (38,699,545)
Restricted cash (4,073,381) (5,324,213)
Net debt (a) 173,233,775 184,303,964
Equity 155,580,703 134,585,072
Equity and net debt (b) 328,814,478 318,889,036
Gearing ratio (a/b) 52.68% 57.80%

Part of the Group’s capital management is to ensure that it meets financial covenants attached to
long-term borrowings. Breaches in meeting the financial covenants would permit the banks to
immediately call loans and borrowings. The Group is in compliance with the financial covenants
attached to its long-term debt as of December 31, 2021 and 2020 (see Note 16).

Certain entities within the Group that are registered with the BOI are required to raise a minimum
amount of capital in order to avail of their registration incentives. As of December 31, 2021 and
2020, these entities have complied with the requirement as applicable (see Note 36).

No changes were made in the objectives, policies or processes during the years ended
December 31, 2021 and 2020.

33. Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the amount at which the financial instrument could be sold in a current
transaction between knowledgeable willing parties in an arm’s length transaction, other than in a
forced liquidation or sale. Fair values are obtained from quoted market prices, discounted cash flow
models and option pricing models, as appropriate.

A financial instrument is regarded as quoted in an active market if quoted prices are readily available
from an exchange, dealer, broker, pricing services or regulatory agency and those prices represent

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actual and regularly occurring market transactions on an arm’s length basis. For a financial
instrument with an active market, the quoted market price is used as its fair value. On the other
hand, if transactions are no longer regularly occurring even if prices might be available and the only
observed transactions are forced transactions or distressed sales, then the market is considered
inactive. For a financial instrument with no active market, its fair value is determined using a
valuation technique (e.g. discounted cash flow approach) that incorporates all factors that market
participants would consider in setting a price.

Set out below is a comparison by category of carrying amounts and fair values of the Group’s
financial instruments whose fair values are different from their carrying amounts.

December 31, 2021 December 31, 2020

Carrying Fair Carrying Fair
Amounts Values Amounts Values
Financial Asset
PSALM deferred adjustment =1,097,366
P =1,032,511
P =2,140,226
P =1,939,398
P
Financial Liabilities
Lease liabilities =33,773,879
P =31,893,831
P =39,262,977
P =37,907,883
P
Long-term debt - fixed rate 167,148,931 171,255,721 149,420,018 164,336,417
PSALM deferred adjustment 1,097,366 1,032,511 2,140,226 1,939,398
Long-term obligation on power
distribution system 165,532 151,878 183,436 162,164
=202,185,708
P =204,333,941
P =191,006,657
P =204,345,862
P

The following methods and assumptions are used to estimate the fair value of each class of financial
instruments:

Cash and cash equivalents, trade and other receivables, short-term loans and trade and other
payables. The carrying amounts of cash and cash equivalents, trade and other receivables, short-
term loans and trade and other payables approximate fair value due to the relatively short-term
maturity of these financial instruments.

Fixed-rate borrowings. The fair value of fixed rate interest-bearing loans is based on the discounted
value of future cash flows using the applicable rates for similar types of loans. Interest-bearing loans
were discounted using credit-adjusted interest rates ranging from 1.00% to 6.44% in 2021 and 3.03%
to 6.22% in 2020.

Floating-rate borrowings. Since repricing of the variable-rate interest bearing loan is done on a
quarterly basis, the carrying value approximates the fair value.

Lease liabilities. The fair value of lease liabilities was calculated by discounting future cash flows
using discount rates of 9.11% for dollar payments and 2.86% to 9.75% for peso payments in 2021
and 1.38% to 2.44% for dollar payments and 1.38% to 3.56% for peso payments in 2020.

Long-term obligation on PDS and PSALM deferred adjustment. The fair value of the long-term
obligations on power distribution system and PSALM deferred adjustment is calculated by

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discounting expected future cash flows at prevailing market rates. Discount rates used in discounting
the obligation ranges from 1.66% to 4.63% in 2021 and 3.15% to 4.45% in 2020.

Customers’ deposits. The fair value of bill deposits approximates the carrying values as these
deposits earn interest at the prevailing market interest rate in accordance with regulatory guidelines.
The timing and related amounts of future cash flows relating to transformer and lines and poles
deposits cannot be reasonably and reliably estimated for purposes of establishing their fair values
using an alternative valuation technique.

Financial assets at FVTPL. These equity securities are carried at fair value.

Derivative financial instruments. The fair value of forward contracts is calculated by reference to
prevailing interest rate differential and spot exchange rate as of valuation date, taking into account
its remaining term to maturity. The fair value of the IRS and interest rate cap are determined by
generally accepted valuation techniques with reference to observable market data such as interest
rates.

The Group entered into an IRS agreement to fully hedge its floating rate exposure on its foreign
currency-denominated loan and par forward contracts to hedge the floating rate exposure on
foreign-currency denominated payments.

The Group also entered into deliverable and non-deliverable short-term forward contracts with
counterparty banks to manage its foreign currency risks associated with foreign currency-
denominated liabilities, purchases and highly probable forecasted purchases.

The Group also entered into commodity swap contracts to hedge the price volatility of its forecasted
coal purchases.

IRS
In August 2012, LHC entered into an IRS agreement effective October 31, 2012 to fully hedge its
floating rate exposure on its US Dollar-denominated loan. Under the IRS agreement, LHC, on a semi-
annual basis, pays a fixed rate of 1.505% per annum and receives variable interest at 6-month LIBOR
plus margin. The interest payments and receipts are based on the outstanding USD notional amount
simultaneous with the interest payments on the hedged loan. Similar with the hedged loan, the IRS
has amortizing notional amounts which cover a period up to final maturity. LHC designated the swap
as a cash flow hedge.

As of December 31, 2021, the outstanding notional amount and derivative liability as a result of the
swap amounted to $0.15 million and P
=0.1 million, respectively. As of December 31, 2020, the
outstanding notional amount and derivative asset as a result of the swap amounted to $5.7 million
and P
=2.8 million, respectively.

On September 29, 2017, GMEC entered into an IRS agreement to hedge the variability in the interest
cash flows on the entire amount of its LIBOR Loan (see Note 16), which bears interest based on six-
month US LIBOR. Under the swap agreement, GMEC pays a fixed rate of 2.18% and receives six-
month US LIBOR, semi-annually from March 29, 2018 until September 27, 2024. The IRS settlement
dates coincide with the semi-annual interest payment dates of the NFA. GMEC designated the swap
as a cash flow hedge.

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As of December 31, 2021, the outstanding notional amount and derivative liability as a result of the
swap amounted to US$236.5 million and P =393.7 million, respectively. As of December 31, 2020, the
outstanding notional amount and derivative asset as a result of the swap amounted to
US$267.5 million and P=252.3 million, respectively.

In September 2019, the Company entered into an interest rate swap agreement effective
September 30, 2019 to hedge $150 million of its floating rate exposure on its loan (see Note 16).
Under the interest rate swap agreement, the Company, on a quarterly basis, pays a fixed rate of
1.4493% per annum and received variable interest at 3-month LIBOR, subject to a floor of 0%. The
interest payments and receipts are based on the outstanding USD notional amount simultaneous
with the interest payments on the hedged loan. Similar with the hedged loan, the interest rate swap
has amortizing notional amounts which cover a period up to April 30, 2024. The Company
designated the swap as a cash flow hedge.

As of December 31, 2021, the outstanding notional amount and fair value of the swap amounted to
=2.8 billion and P=34.0 million, respectively. As of December 31, 2020, the outstanding notional
P
amount and fair value of the swap amounted to =P9.6 billion and P =389.4 million, respectively.

Foreign currency forward contracts

In 2020, the Company entered into foreign currency forward contracts, namely Principal-only Swap
(POS) and Call Spread (CS), with counterparty banks to manage foreign currency risks associated
with foreign currency-denominated liabilities and purchases. The notional amount of the forward
contract is $25.0 million (P
=1.2 billion) and $10.0 million (P
=480.8 million) for POS and CS, respectively.
In 2021, the Company entered into additional POS contract with a notional amount of $10.0 million
(P
=485.8 million). The Company designated these forward contracts as a cash flow hedge.

TLI entered into forward contracts to hedge the foreign currency risk arising from forecasted US
dollar denominated coal purchases. These forecasted transactions are highly probable, and they
comprise about 20% of the TLI’s total expected coal purchases. The forward contracts were
designated as cash flow hedges.

On January 1, 2020, TLI re-designated its foreign currency forwards with notional amount of
$22.5 million and average forward rate of ₱48.00 as cash flow hedges of the monthly fees due to
PSALM under its IPP Administration Agreement, the settlement of which is in USD. The cash flow
hedges of PSALM fees were all matured as of December 31, 2020.

As of December 31, 2021 and 2020, the aggregate notional amount of the forward contracts is
=15.36 billion and P
P =5.25 billion, respectively.

Commodity swap contracts

In 2018, TLI entered into commodity swap contracts to hedge the price volatility of forecasted coal
purchases. The commodity swaps do not result in physical delivery of coal, but are designated as
cash flow hedges to offset the effect of price changes in coal. TLI hedges approximately 30% of its
expected coal purchases considered to be highly probable. There is an economic relationship
between the hedged items and the hedging instruments as the terms of the foreign currency
forward and commodity swap contracts match the terms of the expected highly probable forecasted
transactions.

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There is an economic relationship between the hedged items and the hedging instruments as the
terms of the foreign currency forward, IRS and commodity swap contracts match the terms of the
expected highly probable foreign currency denominated forecasted purchases and floating rate
loans. The Group has established a hedge ration of 1:1 for the hedging relationships as the
underlying risk of the foreign currency forward, IRS and commodity swap contracts are identical to
the hedged risk components. To test the hedge effectiveness, the Group uses the hypothetical
derivative technique and compares the changes in the fair value of the hedging instruments against
the changes in fair value of the hedged items attributable to the hedged risks.

The hedge ineffectiveness can arise from:

 Different reference prices linked to the hedged risk of the hedged items and hedging
instruments
 Differences in the timing of the cash flows of the hedged items and the hedging instruments
 The counterparties’ credit risk differently impacting the fair value movements of the hedging
instruments and hedged items
 Changes to the forecasted amount of cash flows of hedged items and hedging instruments

The Group is holding the following hedging instruments designated as cash flow hedges:

December 31, 2021

Maturity
Less than 3 3 to 6 6 to 12 1 to 2 More than 2
months months months years years Total

IRS - Derivative Assets

Notional amount (in PHP) 428,392 – 481,941 1,820,664 9,328,992 12,059,989
Average fixed interest rate (%) 2.18% – 2.18% 2.18% 2.18%
IRS -Derivative Liability
Notional amount (in PHP) – (7,650) – – (2,805) (10,455)
Average fixed interest rate (%) – 1.51% – – 1.45%-1.51%
Foreign Currency Forward Contracts - Derivative Assets

Notional amount (in PHP) 1,745,437 2,844,785 4,972,328 3,960,874 3,257,050 16,780,474
Average forward rate (in PHP) 50 51 51 52 55
Commodity swaps - Derivative Asset
Notional amount (in metric) 273,000 191,000 304,000 105,000 – 873,000
(Forward)
Notional amount (in PHP) 1,410,758 946,281 1,353,512 476,921 – 4,187,472
Average hedged rate (in PHP per
metric tonnes) 5,168 4,954 4,452 4,542 –
Foreign Currency Forward Contracts - Derivative Liability
Notional amount (in PHP) 283,276 252,063 377,561 – 504,326 1,417,226

Average forward rate (in PHP) 54 55 54 – 56

(Forward)

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Maturity
Less than 3 3 to 6 6 to 12 1 to 2 More than 2
months months months years years Total
Commodity Swaps - Derivative Liability
Notional amount (in metric
tonnes) 76,000 103,000 164,000 59,000 – 402,000
Notional amount (in PHP) 617,606 753,062 1,105,646 390,880 – 2,867,194
Average hedged rate (in PHP per
metric tonne) 8,126 7,311 6,742 6,625 –

December 31, 2020

Maturity
Less than 3 3 to 6 6 to 12 1 to 2 More than 2
months months months years years Total

IRS - Derivative Assets

Notional amount (in PHP) – – – – 9,604,600 9,604,600
Average fixed interest rate (%) – – – – 1.45%-1.51%
IRS -Derivative Liability
Notional amount (in PHP) 517,352 105,561 579,349 1,084,455 10,848,156 13,134,873
Average fixed interest rate (%) – – – – –
Foreign Currency Forward Contracts - Derivative Assets
Notional amount (in PHP) 48,106 54,559 49,247 – – 151,912
Average forward rate (in PHP) 48 48 49 – –
Foreign Currency Forward Contracts - Derivative Liability
Notional amount (in PHP) 1,187,189 1,016,015 1,825,623 1,343,132 34,057 5,406,016
Average forward rate (in PHP) 54 53 53 53 51
Principal Only Swap Currency Forward Contracts - Derivative Liability
Notional amount (in PHP) – – – – 1,214,775 1,214,775
Call Spread Foreign Currency Forward Contracts - Derivative Liability
Notional amount (in PHP) – – – – 480,360 480,360
Commodity swaps - Derivative
Notional amount (in metric) 105,000 72,000 140,000 52,000 – 369,000
Notional amount (in PHP) 363,956 243,215 477,051 177,783 – 1,262,005
Average hedged rate (in PHP per –
metric tonne) 3,466 3,466 3,408 3,419
Commodity swaps - Derivative Liability
Notional amount (in metric tonnes) 177,000 174,000 291,000 260,000 8,000 910,000
Notional amount (in PHP) 748,246 725,808 1,211,904 1,040,778 31,782 3,758,518
Average hedged rate (in PHP per
metric tonne) 4,227 4,171 4,165 4,411 3,973

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The impact of the hedged items and hedging instruments in the consolidated balance sheets as of
December 31, 2021 and 2020, and consolidated statements of income and comprehensive income
for the years ended December 31, 2021 and 2020, is as follows:

As at 31 December 2021
Ineffectiveness
Change in fair value Total hedging gain recognized in other
used for measuring (loss) recognized in comprehensive
Carrying amount ineffectiveness OCI income (charges)
IRS
Derivative asset =–
P =–
P =–
P =–
P
Derivative liability (427,652) (491,479) (494,431) –
Forward exchange currency forwards
Derivative asset 263,254 263,255 263,254 –
Derivative liability (42,124) (42,124) -42124 –

Principal Only Swap foreign currency

forward
Derivative Asset 64,789 64,789 64,789
Derivative Liability – – –

Call Spread currency foreign currency

forward
Derivative Asset 44,887 44,887 44,887 –
Derivative liability – – – –
Commodity swaps
Derivative asset 1,460,544 1,460,315 1,460,315 229
Derivative liability (297,771) (250,930) (250,930) (46,841)

As at 31 December 2020
Ineffectiveness
Change in fair value recognized in other
used for measuring Total hedging gain comprehensive
Carrying amount ineffectiveness (loss) recognized in OCI income (charges)
IRS
Derivative asset =–
P =–
P =–
P =–
P
Derivative liability (1,193,701) (389,377) (956,447) –
Forward exchange currency forwards
Derivative asset 735 735 735 –
Derivative liability (461,531) (461,531) (461,531) –
Principal only swap foreign currency
forwards
Derivative liability (39,350) (39,350) (39,350) –
Call spread currency foreign currency
forwards
Derivative liability (771) (771) (771) –
Commodity swaps
Derivative asset 164,361 161,703 161,703 2,658
Derivative liability (258,545) (251,251) (251,251) (7,294)

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The movements in fair value changes of all derivative instruments for the year ended
December 31, 2021 and 2020 are as follows:

2021 2020
At beginning of year (P
=1,788,802) (P
=2,385,997)
Net changes in fair value of derivatives
designated as cash flow hedges 2,422,452 1,107,316
Net changes in fair value of derivatives not
designated as accounting hedges 18,333 (4,848)
Fair value of settled instruments 413,944 (505,273)
At end of year =1,065,927
P (P
=1,788,802)

The net gains and losses from the net fair value changes of derivatives not designated as accounting
hedges are included under “Net foreign exchange gain (losses)” in Note 27.

The changes in the fair value of derivatives designated as cash flow hedges were deferred in equity
under “Cash flow reserve.”

The net movement of changes to cash flow hedge reserve is as follows:

2021 2020
Balance at beginning of year (net of tax) (P
=1,492,830) (P
=2,257,289)
Changes in fair value recorded in equity 4,882,566 (1,482,795)
3,389,736 (3,740,084)
Changes in fair value transferred to profit or loss (2,872,739) 2,245,088
Balance at end of year before deferred tax effect 516,997 (1,494,996)
Deferred tax effect 345,976 2,166
Balance at end of year (net of tax) =862,973
P (P
=1,492,830)

As of December 31, 2021 and 2020, the Group held the following financial instruments that are
measured and carried or disclosed at fair value:

December 31, 2021

Total Level 1 Level 2 Level 3

Carried at fair value:
Derivative assets =1,459,621
P =–
P =1,459,621
P =–
P
Derivative liabilities 393,694 – 393,694 –
Disclosed at fair value:
Lease liabilities 31,893,831 – – 31,893,831
Long-term debt - fixed rate 171,255,721 – – 171,255,721
Long-term obligation on
PDS 151,878 – – 151,878
PSALM deferred
adjustment 1,032,511 – – 1,032,511

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December 31, 2020

Total Level 1 Level 2 Level 3

Carried at fair value:
Derivative liabilities =1,788,802
P =–
P =1,788,802
P =–
P
Disclosed at fair value:
Lease liabilities 37,907,883 – – 37,907,883
Long-term debt - fixed
rate 164,336,417 – – 164,336,417
Long-term obligation on
PDS 162,164 – – 162,164
PSALM deferred
adjustment 1,939,398 – – 1,939,398

The fair values of the Group’s investment properties were determined as follows:

• In valuing the land, the Group used the Sales Comparison Approach. This is a comparative
approach to value that considers the sales of similar or substitute properties and related market
data and establishes a value estimate by processes involving comparison.

• The appraiser gathers data on actual sales and/or listings, offers, and renewal options, and
identifies the similarities and differences in the data, ranks the data according to their relevance,
adjusts the sales prices of the comparable to account for the dissimilarities with the unit being
appraised, and forms a conclusion as to the most reasonable and probable market value of the
subject property.

The elements of comparison include location, physical characteristics, available utilities, zoning, and
highest and best use. The most variable elements of comparison are the site’s physical
characteristics, which include its size and shape, frontage, topography and location.

Fair value investment properties are estimated under Level 3 inputs.

During the years ended December 31, 2021 and 2020, there were no transfers between level 1 and
level 2 fair value measurements and transfers into and out of level 3 fair value measurement.

34. Lease agreements

TLI
In 2009, TLI was appointed by PSALM as Administrator under the IPP Administration Agreement,
giving TLI the right to receive, manage and control the capacity of the power plant for its own
account and at its own cost and risk; and the right to receive the transfer of the power plant at the
end of the IPP Administration Agreement for no consideration.

In view of the nature of the IPP Administration Agreement, the arrangement has been considered as
a lease. Accordingly, TLI recognized the right-of-use asset and related liability of =P44.79 billion
(equivalent to the present value of the minimum lease payments using TLI’s incremental borrowing
rates of 10% and 12% for dollar and peso payments, respectively) in the consolidated financial
statements as “Power plant” and “Lease liabilities” accounts, respectively.

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APRI
On May 25, 2009, APRI entered into a lease agreement with PSALM for a parcel of land owned by
the latter on which a portion of the assets purchased under the APA is situated. The lease term is for
a period of 25 years commencing from the Closing Date as defined in the APA which falls on
May 25, 2009. The rental fees for the whole term of 25 years amounting to P=492.0 million were paid
in full after the receipt by APRI of the Certificate of Effectivity on the lease (see Notes 8 and 13).

GMEC
In August 2007, a 25-year lease agreement with Authority of the Freeport Area of Bataan for land at
Bataan Economic Zone, used as an access road and right of way for electric power transmission lines.

In January 2010, a 50-year land lease agreement with PMR Group Retirement Plan, Inc. (PGRPI),
used for its power plant facilities. GMEC, upon mutual agreement of PGRPI, has the right and option
to extend the lease for a period of twenty-five years. In August 2016, GMEC entered into another
lease agreement with PGRPI for land to be used for staff house.

On January 16, 2015, GMEC and Worth Properties, Inc. executed a Lease Agreement for the lease of
276.13 square meters office space and two parking lots. The contract of lease is effective for a
period of five years commencing on February 17, 2015 and was terminated effective on
December 31, 2021.

HI, HTI, HBI, HSAB, LHC and HSI

HI, HTI, HBI, HSAB, LHC and HSI entered into contracts with various lot owners for lease of land
where their power plants are located. Terms of contract are for a period of 1 to 50 years renewable
upon mutual agreement by the parties.

Sacasun
Sacasun entered into a contract for lease of land where the power plant is located. The contract
pertains to rent for 25 years renewable upon mutual agreement by the parties.
Therma Mobile
On April 26, 2014, a 10-year lease for portions of the breakwater area of the Navotas Fishport
Complex (NFPC), including the mooring facility, marine and land transmission lines.

EAUC
Lease agreement with PEZA for a piece of land located inside Mactan Economic Zone for its power
plant facilities for a period of 25 years.

TPVI
TPVI entered into a contract for lease of land where the power plant is located. The contract
pertains to rent for 25 years renewable upon mutual agreement by the parties.

Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the
movements during the years:

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December 31, 2021

Right-of-use assets
Equipment Lease
Land Building Power Plant and Others Total Liability
Balances at the
beginning of
the year =2,822,342
P =71,638 P
P =32,504,564 =82,094 P
P =35,480,638 P
=39,262,977
Additions 278,178 9,646 7,486 84,730 380,040 372,554
Amortization
expense (180,709) (28,224) (1,106,996) (10,465) (1,326,394) –
Interest expense – – – – – 2,750,328
Payments – – – – – (9,401,915)
Others 3,618 – – (3,618) – 789,935
Balances at the end
of the year =2,923,429
P =53,060 P
P =31,405,054 =152,741 P
P =34,534,284 P
=33,773,879

December 31, 2020

Right-of-use assets
Equipment Lease
Land Building Power Plant and Others Total Liability
Balances at the
beginning of the
year =P2,730,076 =230,234 P
P =33,575,200 =117,602 P
P =36,653,112 P
=44,789,644
Additions 122,456 19,121 – 10,914 152,491 152,491
Amortization
expense (180,225) (24,950) (1,105,125) (8,759) (1,319,059) –
Interest expense – – – – – 3,255,809
Payments – – – – – (7,504,954)
Others 150,035 (152,767) 34,489 (37,663) (5,906) (1,430,013)
As at December 31 =2,822,342
P =71,638 P
P =32,504,564 =82,094 P
P =35,480,638 P
=39,262,977

The carrying amount of the Group’s right-of-use assets as of December 31, 2021 and 2020 is
presented as part of “Property, plant and equipment”.

The Group also has certain leases of equipment, meeting rooms and event sites with lease terms of
12 months or less. The Group applies the ‘short-term lease’ recognition exemption of these leases.

Set out below, are the amounts recognized in the consolidated statements of income:

2021 2020 2019

Amortization expense of right-of-
use assets =1,326,394
P =1,319,059
P =1,223,073
P
Interest expense on lease
liabilities 2,750,328 3,255,809 4,350,043
Rent expense - short-term leases 83,451 123,329 56,896
=4,160,173
P =4,698,197
P =5,630,012
P

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35. Agreements

Pagbilao IPP Administration Agreement

TLI and PSALM executed the IPP Administration Agreement wherein PSALM appointed TLI to manage
the 700MW contracted capacity (the “Capacity”) of NPC in the coal-fired power plant in Pagbilao,
Quezon.

The IPP Administration Agreement includes the following obligations TLI would have to perform until
the transfer date of the power plant (or the earlier termination of the IPP Administration
Agreement):

k. Supply and deliver all fuel for the power plant in accordance with the specifications of the
original Energy Conservation Agreement (ECA); and
b. Pay to PSALM the monthly payments (based on the bid) and energy fees (equivalent to the
amount paid by NPC to the IPP).

TLI has the following rights, among others, under the IPP Administration Agreement:

a. The right to receive, manage and control the Capacity of the power plant for its own account and
at its own cost and risk;
b. The right to trade, sell or otherwise deal with the Capacity (whether pursuant to the spot
market, bilateral contracts with third parties or otherwise) and contract for or offer related
ancillary services, in all cases for its own account and its own risk and cost. Such rights shall
carry the rights to receive revenues arising from such activities without obligation to account
therefore to PSALM or any third party;
c. The right to receive the transfer of the power plant at the end of the IPP Administration
Agreement (which is technically the end of the ECA) for no consideration; and
d. The right to receive an assignment of NPC’s interest to existing short-term bilateral Power Supply
Contract from the effective date of the IPP Administration Agreement the last of which were
scheduled to end in November 2011.

Agreements with Contractors and Suppliers

a. APRI total steam supply cost reported as part of “Cost of generated power” amounted to
P=4.95 billion in 2021, P
=2.97 billion in 2020, and P=5.01 billion in 2019 (see Note 22).

On May 26, 2013, APRI’s steam supply contract with Chevron Geothermal Philippines Holdings,
Inc. (CGPHI) shifted to a GRSC. The change is due to an existing provision under the
government’s existing contract with CGPHI when the Tiwi-Makban facilities were bidded out
under the former’s privatization program. Under the GRSC, the effective steam price of APRI
payable to PGPC will be a premium to coal.

To ensure that APRI will continue to remain competitive in the market, a two-month interim
agreement supplementing the GRSC was implemented on August 14, 2013 and extended until
August 25, 2018. On August 24, 2018, a new contract was signed by the Company and Philippine
Geothermal Production Company, Inc. which aims to ensure long-term operations of both
parties. The Geothermal Resources Supply and Services Agreement took effect August 26, 2018
and shall continue in effect until October 22, 2034, unless earlier terminated or extended by
mutual agreement of the Parties.

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b. TLI enters into short-term coal supply agreements. Outstanding coal supply agreements as of
December 31, 2021 have aggregate supply amounts of 1,840,000 MT (equivalent dollar value is
estimated to be at $131 million), which are due for delivery from January 2021 to December
2022. Outstanding coal supply agreements as of December 31, 2020 have aggregate supply
amounts of 560,000 MT (equivalent dollar value is estimated to be at $29 million), which are due
for delivery from January 2020 to April 2020. Terms of payment are by letter of credit where
payment is due at sight against presentation of documents, and by telegraphic transfer where
payment is due within 7 days from receipt of original invoice.

c. GMEC entered into Coal Supply Agreements (CSAs) with Avra Commodities Pte. Ltd. (Avra) and
PT Arutmin Indonesia (Arutmin) dated December 20, 2019 and December 23, 2019, respectively,
for coal deliveries commencing on January 1, 2020. Avra shall annually deliver between a
minimum of 500,000 metric tonnes to a maximum of 1,200,000 metric tonnes of coal until the
CSA expires on December 31, 2024, while Arutmin shall annually deliver 1,650,000 metric tonnes
of coal with an additional quantity of 160,000 metric tonnes at GMEC’s option until the CSA
expires on December 31, 2029. In addition, GMEC entered into a CSA with PT. Bayan Resources
TBK (Bayan) on April 8, 2020. Bayan shall annually deliver between a minimum of 500,000 metric
tonnes to a maximum of 1,000,000 until the CSA expires on April 30, 2030.

d. PEC entered into EPC with suppliers relating to the construction of the 400MW coal fired power
plant on April 25, 2014. The Supply Contract with Mitsubishi Hitachi Power Systems, Ltd. and
Daelim Industrial Co. Ltd. prescribes the design and engineering of the Project as well as the
supply of certain material, property and equipment for the project. The Construction Contract
with Desco Incorporated and Daelim Philippines Inc. prescribes the general requirements for the
design, engineering, procurement, permitting, fabrication, construction, installation,
commissioning, start-up, testing and safe and timely completion of the coal-fired power plant.
Total EPC contract price for the complete performance of these contracts amount to
US$398.0 million and P =7.00 billion. As of December 31, 2021 and 2020, the joint operation has a
retention payable amounting to P =286.0 million and P=287.2 million, respectively, which is
presented as part of “Trade and other payables” in the consolidated balance sheets.

e. TMI entered into Heavy Fuel Oil (HFO) Supply Agreement with Pilipinas Shell Petroleum
Corporation (PSPC) On September 1, 2014. The said agreement provides for the supply and
delivery of HFO by PSPC to TMI, subject to terms and conditions of the agreement. The actual
quantities may vary from month to month and are contingent to the actual generation of the
TMI’s power plant. The actual aggregate HFO delivered to the TMI from PSPC as of
December 31, 2021 and 2020 is 572.7 million liters and 564.3 million liters, respectively.
Moreover, on December 1, 2016, TMI entered into a Lube Oil Supply Agreement with PSPC for
the supply and delivery of lube oil products with an agreed aggregate volume of 3.8 million
liters. The actual aggregate of lube oil products delivered to TMI from PSPC as of
December 31, 2021 and 2020 is 1,502,796 liters and 1,462,886 liters, respectively.

f. EAUC entered with Supply Agreement with suppliers. On December 1, 2016, the Lube Oil Supply
Agreement with PSPC undertakes to supply and deliver an agreed aggregate volume of 220,000
liters. On March 20, 2018, Heavy Fuel Oil Supply Agreement with Phoenix Petroleum Philippines
Inc. (PPPI) is to supply and deliver HFO on a consignment basis with an agreed aggregate volume
of 38.2 million liters. The actual quantities may vary from month to month and are contingent
on the actual generation of the EAUC’s power plant. As of December 31, 2021 and 2020, the
actual HFO consumed from the supply agreement is 38.6 million liters and 27.5 million liters,
respectively.

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36. Registration with the Board of Investments (BOI)

Certain power generation subsidiaries in the Group have been registered with the BOI. The
following are the incentives granted by the BOI:

a. ITH for a period of four (4) to seven (7) years, as follows:

Subsidiary/Joint
operation BOI Approval Date Start of ITH Period ITH Period
Start of commercial
APRI July 25, 2016 operations 7 years
GMEC January 29, 2010 July 1, 2013 6 years
1
TSI July 15, 2011 February 1, 2016 4 years
1
TVI August 28, 2012 January 1, 2017 4 years
1
Hedcor Tudaya January 31, 2013 August 1, 2014 7 years
Hedcor, Inc. 3 February 20, 2013 February 1, 2013 7 years
September 1, 2014 1
Hedcor Sibulan2 April 23, 2013 7 years
1
Hedcor Sabangan October 23, 2013 February 1, 2015 7 years

Hedcor Bukidnon4 January 7, 2015 July 2, 2018 7 years

PEC June 26, 2014 March 7, 2018 6 years
Start of commercial
Sacasun October 26, 2015 operations 7 years
1 Or actual start of commercial operations, whichever is earlier.
2 For Tudaya-1 hydroelectric plant.
3 For Irisan-1 hydroelectric plant.
4 For Manolo-1 hydroelectric plant.

The ITH shall be limited only to sales/revenue generated from the sales of electricity of the
power plant and revenues generated from the sales of carbon emission reduction credits.

a. For the first five (5) years from date of registration, the registrant shall be allowed an additional
deduction from taxable income of fifty percent (50) of the wages corresponding to the increment
in the number of direct labor for skilled and unskilled workers in the year of availment as against
the previous year if the project meets the prescribed ratio of capital equipment to the number of
workers set by BOI of US$10,000 to one worker and provided that this incentive shall not be
availed of simultaneously with the ITH.

b. Employment of foreign nationals may be allowed in supervisory, technical or advisory positions

for five (5) years from date of registration.

c. Importation of consigned equipment for a period of ten (10) years from the date of registration,
subject to the posting of re-export bond.

d. Special realty tax rates on equipment and machinery and tax credit on domestic capital
equipment and services

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e. For APRI, it may qualify to import capital requirement, spare parts and accessories at zero (0%)
duty rate from the date of registration to June 16, 2011 pursuant to Executive Order No. 528 and
its Implementing Rules and Regulations.

As a requirement for availment of the incentives, the registrant has to maintain a minimum equity
requirement.

As of December 31, 2021 and 2020, the power generation subsidiaries referred to above, which are
currently availing the incentives, have complied with the requirements.

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37. Notes to Consolidated Statement of Cash Flows

The following are the cash flow movements of the Group’s financing liabilities:

December 31, 2021

Non-cash Changes
Amortized
Net Dividend deferred Foreign exchange Changes in fair December 31,
January 1, 2021 cash flows Declaration financing costs movement values Accreted interest Others 2021
Current interest-bearing loans and borrowings,
excluding obligations under finance leases = 28,997,626
P (P
= 14,953,317) =–
P =–
P =–
P =–
P =–
P = 23,000,464
P = 37,044,773
P
Non-current interest-bearing loans and borrowings,
excluding obligations under finance leases 160,067,119 22,863,367 – 426,046 1,197,092 – – (20,934,877) 163,618,747
Current obligations under lease liabilities 7,104,181 (9,401,915) – – – – – 10,404,515 8,106,781
Non-current obligations under lease liabilities 32,158,796 – – – 1,007,764 – 2,750,328 (10,249,790) 25,667,098
Dividends payable 407 (6,254,588) 6,254,814 – – – – – 633
Interest payable 2,134,624 (9,770,209) 9,757,605 2,122,020
Derivatives 1,788,802 – – – – (1,395,108) – – 393,694
Total liabilities from financing activities = 232,251,555
P (P
= 17,516,662) = 6,254,814
P = 426,046
P = 2,204,856
P (P
= 1,395,108) = 2,750,328
P = 11,977,917
P = 236,953,746
P

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December 31, 2020

Non-cash Changes
Amortized
Net Dividend deferred Foreign exchange Changes in fair December 31,
January 1, 2020 cash flows Declaration financing costs movement values Accreted interest Others 2020
Current interest-bearing loans and borrowings,
excluding obligations under finance leases =20,721,731
P (P
=8,978,318) =–
P =–
P =–
P =–
P =–
P =17,254,213
P =28,997,626
P
Non-current interest-bearing loans and borrowings,
excluding obligations under finance leases 167,585,311 11,928,320 – 321,520 (1,915,843) – – (17,852,189) 160,067,119
Current obligations under lease liabilities 5,486,745 (7,632,923) – – – – – 9,250,359 7,104,181
Non-current obligations under lease liabilities 39,302,899 — – – (1,038,942) – 3,255,808 (9,360,969) 32,158,796
Dividends payable — (8,682,746) 8,683,153 – – – – 407
Interest payable 2,350,811 (10,032,413) 9,816,226 2,134,624
Derivatives 2,468,324 – – – – (679,522) – – 1,788,802
Total liabilities from financing activities =237,915,821
P (P
=23,398,080) =8,683,153
P =321,520
P (P
=2,954,785) (P
=679,522) =3,255,808
P =9,107,640
P =232,251,555
P

Others includes the effect of reclassification of noncurrent portion of interest-bearing loans and borrowings.

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38. Contingencies

The Group is a party to certain proceedings and legal cases with other parties in the normal course
of business. The ultimate outcome of these proceedings and legal cases cannot be presently
determined. Management, in consultation with its legal counsels, believes that it has substantial
legal and factual bases for its positions and is currently of the opinion that the likely outcome of
these proceedings and legal cases will not have a material adverse effect on the Group’s financial
position and operating results. It is possible, however, that the future results of operations could be
materially affected by changes in estimates or in the effectiveness of the strategies relating to these
proceedings and legal cases.

39. Other Matters

a. Temporary Restraining Order (TRO) affecting power generation companies trading in WESM

On December 19, 2013, Bayan Muna representatives filed a Petition for Certiorari against the
ERC and MERALCO with the Supreme Court (SC). On December 20, 2013, National Association
of Electricity Consumers for Reforms filed a Petition for Certiorari and/or Prohibition against
MERALCO, ERC and Department of Energy (DOE). These cases raised and questioned, among
others, the alleged substantial increase in MERALCO’s power rates for the billing period of
November 2013, the failure of the ERC to protect consumers from high energy prices and
perceived market collusion of the generation companies.

These cases were consolidated by the SC which issued a TRO for a period of 60 days from
December 23, 2013 to February 21, 2014, preventing MERALCO from collecting the increase in
power rates for the billing period of November 2013. The TRO was subsequently extended for
another 60 days ending April 22, 2014 by the SC. Thereafter, the TRO was extended indefinitely.

MERALCO, in turn, filed a counter-petition impleading generation companies supplying power to

the WESM. The SC also ordered all the parties in the consolidated cases to file their respective
pleadings in response to MERALCO’s counter-petition. The SC set the consolidated cases for oral
arguments last January 21, 2014, February 4 and 11, 2014. After hearing, all parties were
directed to file their comments and/or memorandum. The case is now submitted for resolution.

As a result of the TRO, MERALCO has not been able to fully bill its consumers for the generation
costs for the supply month of November 2013; and in turn, it has not been able to fully pay its
suppliers of generation costs. As of December 31, 2021, the SC has not lifted the TRO.

b. Imposition of financial penalties on Therma Mobile by PEMC

This case involves an investigation of Therma Mobile in the dispatch of its power barges during
the November and December 2013 supply periods. As a result of the MERALCO price hike case
brought before the SC, the SC ordered the ERC to investigate anti-competitive behavior and
abuse of market power allegedly committed by some WESM participants.

PEMC conducted the investigation under the “Must-Offer” rules of the WESM Rules.
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PEMC initially found that Therma Mobile violated the “Must-Offer Rule” during the period under
investigation. In its letter dated January 30, 2015, the PEM Board imposed financial penalties
amounting to P =234.9 million on Therma Mobile. According to the PEM Board, the penalties will
be collected from Therma Mobile through the WESM settlement process.

Therma Mobile maintains that there is no basis for the PEMC decision. It did not violate the
Must-Offer Rule for the period covered, as it was physically impossible for Therma Mobile to
transmit more than 100MW to MERALCO. Although Therma Mobile’s rated capacity is 234 MW
(Net), it could only safely, reliably and consistently deliver 100MW during the November and
December 2013 supply period because of transmission constraints. Therma Mobile’s engines
and transmission lines were still undergoing major repairs to address issues on post
rehabilitation.

On February 13, 2015, Therma Mobile filed a notice of dispute with the PEMC to refer the
matter to dispute resolution under the WEM Rules and the WESM Dispute Resolution Market
Manual.

Therma Mobile also filed a Petition for the Issuance of Interim Measures of Protection with the
Regional Trial Court (RTC) of Pasig to hold off enforcement of the payment of the penalties
during the pendency of the Therma Mobile and PEMC dispute resolution proceedings. On
February 24, 2015, the RTC issued in favor of Therma Mobile an ex parte 20-day Temporary
Order of Protection directing PEMC to refrain from (a) demanding and collecting from Therma
Mobile the =P234.9 million financial penalty; (b) charging and accruing interest on the financial
penalty; and (c) transmitting the PEMC-ECO investigation report to the ERC.

On April 1, 2015, the RTC granted the prayer for the issuance of Writ of Preliminary Injunction,
which ruling was assailed by the PEMC and elevated to the Court of Appeals (CA) via Petition for
Review. On December 15, 2015, the CA issued a Decision confirming the RTC’s findings. PEMC
filed a Motion for Reconsideration, and in compliance with a Resolution of the CA, has filed a
comment on the said motion.

On June 6, 2016, PEMC filed a petition before the SC questioning the CA’s Decision. TMO also
filed its Comment on the Petition on November 14, 2016. On June 1, 2017, TMO received the SC
Notice dated March 29, 2017. In the Resolution, the SC noted TMO's Comment and PEMC's
Reply. As of December 31, 2021, the petition is still pending resolution with the SC.

c. Therma Marine Cases

In 2013, ERC issued Final Approval of various ESAs of Therma Marine with some modifications
on ERC’s provisionally approved rates which directed both parties to devise a scheme for the
refund of the difference between the final and the provisionally approved rates.

On November 25, 2013, ERC issued its order for Therma Marine to refund the amount of
=180.0 million to its customers for a period of 6 months with equal installments per month.
P

On August 27, 2014, ERC issued an order directing NGCP to refund its customers the amount of
=12.7 million and the corresponding VAT for a period of twelve months. As such, Therma Marine
P
will refund the said amount to NGCP and the latter will refund the same to its customers. In

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2015, ERC issued Provisional Approvals (PA) on ESA contracts extensions with capacity fees lower
than the previously approved rates. Therma Marine filed MRs on these PAs. During the last
quarter of 2015, ERC issued Final Approvals on some of these ESA’s sustaining the decision in the
PA’s, thus Therma Marine filed MRs on the final decisions. As of December 31, 2021, there is no
resolution yet on the MRs on the Final Approvals.

d. ERC Case No. 2013-077 MC

On August 29, 2013, MERALCO filed a petition for dispute resolution against TLI/APRI, among
other Successor Generating Companies (“SGCs”) under ERC Case No. 2013-077 MC. The case
arose from a claim of refund of the alleged over charging of transmission line losses pursuant to
the ERC Order dated March 4, 2013 and July 1, 2013 in ERC Case No. 2008-083 MC.

On September 20, 2013, TLI, together with the other SGCs, filed a Joint Motion to Dismiss
arguing that MERALCO’s petition should be dismissed for failure to state a cause of action and
ERC’s lack of jurisdiction over the subject matter of the case. The SGCs and Meralco have filed
their respective comments, reply, rejoinder and sur-rejoinder after the filing of the Joint Motion
to Dismiss. The Joint Motion to Dismiss has since then been submitted for resolution with the
ERC. As of December 31, 2021, the ERC has yet to render its decision on the Joint Motion to
Dismiss.

e. Sergio Osmena III vs. PSALM, Emmanuel R. Ledesma, Jr., SPC Power Corporation (SPC) & Therma
Power Visayas, Inc. (TPVI)

In 2009, SPC acquired through a negotiated bid the 153.1MW Naga Land-Based Gas Turbine
Power Plant (“Naga Plant”) in Naga, Cebu. In the same year, it entered into a Land Lease
Agreement (LLA) with PSALM, which includes SPC’s right to top (RTT) the price of a winning
bidder for the sale of any property in the vicinity of the leased premises.

PSALM subsequently bid out the Naga Plant located in the leased premises. On April 30, 2014
and after two failed biddings, PSALM issued a Notice of Award to TPVI for submitting the highest
bid for the Naga Plant. SPC wrote PSALM of its intent to exercise its RTT the winning bid, on the
condition that the LLA would be for a term of 25 years from closing date.

Senator Sergio Osmeña III filed with the SC a Petition for Certiorari and Prohibition with prayer
for issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction dated June
16, 2014 (the “Case”) with PSALM, Emmanuel R. Ledesma, SPC and TPVI as respondents to
enjoin PSALM from making the award of the Naga Plant to SPC. In his petition, Sen. Osmeña
argued that the RTT should be held invalid as it defeats the purpose of a fair and transparent
bidding for a government asset and it discourages interested bidders considering the unfair
advantage given to SPC.

On July 25, 2014, PSALM awarded the contract to SPC, despite TPVI’s objection on the ground
that SPC did not validly exercise its right to top because of its qualified offer. Thereafter, an APA
for the Naga Plant was executed between PSALM and SPC.

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On September 28, 2015, the SC declared in the Case that the RTT and the APA executed in favor
of SPC are null and void. The parties thereafter filed various motions for reconsideration which
the SC subsequently denied.

On March 16, 2016, TPVI filed its Manifestation/Motion praying that the Notice of Award dated
April 30, 2014 be reinstated and that respondent PSALM be ordered to execute the Asset
Purchase Agreement (“NPPC-APA”), Land Lease Agreement (“NPPC-LLA”) and other documents
to implement TPVI’s acquisition of the Naga Plant.

On April 6, 2016, the SC issued a Resolution that required PSALM and SPC to comment on TPVI’s
Manifestation/Motion. In the same Resolution, the SC denied the motion for leave to file and
admit SPC’s second motion for reconsideration and referral to the SC en banc.

On July 19, 2016, TPVI filed its Manifestation with Omnibus Motion to clarify the motion dated
March 16, 2016 and for early resolution. TPVI prayed that the SC Decision dated.

September 28, 2015 be clarified, and if necessary, be amended to include in its “fallo” that the
Notice of Award in favor of TPVI be reinstated.

In response to various motions, the SC issued a Notice of Judgment and Resolution dated
October 5, 2016 clarifying that the nullification of SPC’s right to top did not invalidate the entire
bidding process. Thus, the SC ordered the reinstatement of the Notice of Award dated April 30,
2014 in favor of TPVI. Further, the SC annulled and set aside the APA and the LLA executed
between SPC and PSALM and directed PSALM to execute with dispatch the NPPC-APA and the
NPPC-LLA in favor of TPVI.

On October 26, 2016, SPC filed an Urgent Motion for Reconsideration with Alternative Motion to
Refer to the En Banc of the SC. SPC reiterated its prayer for the reversal of the October 5, 2016
Resolution, denial of TPVI’s Manifestation/Motion and for the conduct of a new round of bidding
for the Naga Plant. PSALM also filed its Motion for Reconsideration with Leave and prayed that
the SC’s October 5, 2016 Resolution be re-examined and/or reconsidered.

In its Resolution dated November 28, 2016, the SC denied SPC’s and PSALM’s motions for
reconsideration (of the October 5, 2016 Resolution) with finality. The SC ordered that no further
pleadings, motions, letters, or other communications shall be entertained in the Case, and it
ordered the issuance of Entry of Judgment.

Notwithstanding the above SC Resolution, SPC filed its Motion for Leave to File and Admit
(Motion for Reconsideration dated 9 December 2016) with attached Motion for Reconsideration
dated December 9, 2016. Thereafter, SPC filed its Supplemental Motion/Petition for Referral to
the Banc dated January 16, 2017.

On February 14, 2017, TPVI received a copy of the Entry of Judgment which states that the
October 5, 2016 Resolution of the SC has become final and executory on November 28, 2016.

In May 2018, TPVI received the Certificate of Effectivity (COE) from PSALM initiating the
purchase of the facility. The COE implements the September 28, 2015 decision of the SC, which
upheld the April 30, 2014 award of the facility to TPVI. Pursuant to the NPPC-APA, on July 16,
2018 (“Closing date”), the Joint Certificate of Turn-Over was signed and issued and the facility
was formally turned-over to TPVI.

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In 2018, TPVI paid a total amount 1.03 billion for the NPPC-APA and NPPC-LLA and
=495.97 million for the inventories upon implementation of the acquisition of the Naga Power
P
Plant.

f. DLP Case

On December 7, 1990, certain customers of DLP filed before the then Energy Regulatory Board
(ERB) a letter-petition for recovery claiming that with the SC’s decision reducing the sound
appraisal value of DLP’s properties, DLP exceeded the 12% Return on Rate Base (RORB). The
ERB’s order dated June 4, 1998, limited the computation coverage of the refund from
January 19, 1984 to December 14, 1984. No amount was indicated in the ERB order as this has
yet to be recomputed.

The CA, in Court of Appeals General Register Special Proceeding (CA-GR SP) No. 50771,
promulgated a decision dated February 23, 2001 which reversed the order of the then ERB, and
expanded the computation coverage period from January 19, 1984 to September 18, 1989.

The SC in its decision dated November 30, 2006 per GR150253 reversed the CA’s decision CA-GR
SP No. 50771 by limiting the period covered for the refund from January 19, 1984 to December
14, 1984, approximately 11 months. The respondent/customers filed a Motion for
Reconsideration with the SC, which was denied with finality by the SC in its Order dated July 4,
2007.

The SC, following its decision dated November 30, 2006, ordered the ERC to proceed with the
refund proceedings instituted by the respondents with reasonable dispatch.

On March 17, 2010, the ERC directed DLP to submit its proposed scheme in implementing the
refund to its customers. In compliance with the order, the DLP filed its compliance stating that
DLP cannot propose a scheme for implementing a refund as its computation resulted to no
refund.

A clarificatory meeting was held where DLP was ordered to submit its memoranda.

On October 4, 2010, in compliance with the ERC directive, DLP submitted its memoranda
reiterating that no refund can be made. After which, no resolution has been received by DLP
from the ERC as of December 31, 2021.

g. LHC Franchise Tax Assessment

In 2007, the Provincial Treasurer of Benguet issued a franchise tax assessment against LHC,
requiring LHC to pay franchise tax amounting to approximately ₱40.4 million, inclusive of
surcharges and penalties covering the years 2002 to 2007. In 2008, LHC has filed for a petition
for the annulment of the franchise tax assessment, based primarily on the fact that LHC is not
liable for franchise tax because it does not have a franchise to operate the business. Section 6 of
R.A. No. 9136 provides that power generation shall not be considered a public utility operation.
As such, an entity engaged or which shall engage in power generation and supply of electricity
shall not be required to secure a national franchise. Accordingly, no provision has been made in
the consolidated financial statements. The case remains pending as of December 31, 2021.

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h. EPIRA of 2001

R.A. No. 9136 was signed into law on June 8, 2001 and took effect on June 26, 2001. The law
provides for the privatization of NPC and the restructuring of the electric power industry. The
IRR were approved by the Joint Congressional Power Commission on February 27, 2002.

R.A. No. 9136 and the IRR impact the industry as a whole. The law also empowers the ERC to
enforce rules to encourage competition and penalize anti-competitive behavior.

R.A. No. 9136, the EPIRA, and the covering IRR provides for significant changes in the power
sector, which include among others:

i. The unbundling of the generation, transmission, distribution and supply and other
disposable assets of a company, including its contracts with IPPs and electricity rates;
ii. Creation of a WESM; and
iii. Open and non-discriminatory access to transmission and distribution systems.

The law also requires public listing of not less than 15% of common shares of generation and
distribution companies within 5 years from the effectivity date of the EPIRA. It provides cross
ownership restrictions between transmission and generation companies and a cap of 50% of its
demand that a distribution utility is allowed to source from an associated company engaged in
generation except for contracts entered into prior to the effectivity of the EPIRA.

There are also certain sections of the EPIRA, specifically relating to generation companies, which
provide for a cap on the concentration of ownership to only 30% of the installed capacity of the
grid and/or 25% of the national installed generating capacity.

i. Retail Competition and Open Access

The EPIRA mandates the implementation of Retail Competition and Open Access (RCOA) subject
to the fulfilment of the conditions as provided in the EPIRA. The ERC was tasked under the EPIRA
Implementing Rules and Regulations to declare, after due notice and public hearing, the initial
implementation of RCOA. Through the RCOA, eligible customers will have the option to source
their electricity from eligible suppliers that have secured Retail Electricity Supplier (RES) licenses
from the ERC. End users with a monthly average peak demand of at least 1 Megawatt (MW) for
the preceding 12 months are eligible to be contestable customers. The 1 MW qualification would
gradually be reduced upon evaluation of the ERC.

In June 2011, after due notice and public hearings, the ERC declared December 26, 2011 as the
date to mark the commencement of the full operation of RCOA in Luzon and Visayas. However,
due to deficiencies in the rules and guidelines governing the RCOA at that time, the
December 26, 2011 commencement date was deferred several times until an interim system
commenced on July 26, 2013.

The DOE and ERC have issued and revised several circulars, rules and resolutions on the
implementation of the RCOA and the issuance of RES licences, including a Code of Conduct,
Rules on Contestability, and Rules on RES Licencing.

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On February 21, 2017, the SC issued a TRO enjoining the DOE and ERC from implementing the
following issuances:

1. DOE Circular No. DC-2015-06-0010 or the DOE Circular Providing Policies to Facilitate the
Full Implementation of RCOA in the Philippine Electric Power Industry;
2. ERC Resolution No. 5, Series of 2016 or the Rules Governing the Issuance of Licenses to RES
and Prescribing the Requirements and Conditions Therefor;
3. ERC Resolution No. 10, Series of 2016 or a Resolution adopting the Revised Rules for
Contestability;
4. ERC Resolution No. 11, Series of 2016 or a Resolution Imposing Restrictions on the
Operations of DUs and RES in the Competitive Retail Electricity Market; and
5. ERC Resolution No. 28, Series of 2016 or the Revised Timeframe for Mandatory
Contestability, Amending Resolution No. 10, Series of 2016, entitled Revised Rules of
Contestability.

The TRO effectively enjoined the DOE and the ERC from imposing the mandatory migration of
end-users with average monthly peak demand of at least 1MW and 750 kW on 26 February 2017
and 26 June 2017, respectively, and barring Local RESs and DUs from supplying electricity to the
Contestable Market.

Due to the TRO, no new or renewed RES licenses were issued by the ERC due to the perceived
risk of being declared in contempt by the SC. The renewal of PEI, AEI and AESI’s RES licenses
remain pending before the ERC. The application for RES licenses of TLI and APRI are likewise
pending.

On November 29, 2017, DOE issued Department Circular No. 2017-12-0013, which provides,
among other things, for voluntary participation of Contestable Customers in the Retail Market.
On the same date, DOE issued Department Circular No. 2017-12-0014, which provides, among
other things, the guidelines on the licensing of RES. Both DOE Circulars enjoin the ERC to
promote the supporting guidelines to the DOE Circulars. Once the ERC promulgates these rules,
approval of RES license applications and renewals can be expected.

j. Renewable Energy Act of 2008

On January 30, 2009, R.A. No. 9513, An Act Promoting the Development, Utilization and
Commercialization of Renewable Energy Resources and for Other Purposes, which shall be
known as the “Renewable Energy Act of 2008” (the Act), became effective. The Act aims to (a)
accelerate the exploration and development of renewable energy resources such as, but not
limited to, biomass, solar, wind, hydro, geothermal and ocean energy sources, including hybrid
systems, to achieve energy self-reliance, through the adoption of sustainable energy
development strategies to reduce the country’s dependence on fossil fuels and thereby minimize
the country’s exposure to price fluctuations in the international markets, the effects of which
spiral down to almost all sectors of the economy; (b) increase the utilization of renewable energy
by institutionalizing the development of national and local capabilities in the use of renewable
energy systems, and promoting its efficient and cost-effective commercial application by
providing fiscal and non-fiscal incentives; (c) encourage the development and utilization of
renewable energy resources as tools to effectively prevent or reduce harmful emissions and
thereby balance the goals of economic growth and development with the protection of health
and environment; and (d) establish the necessary infrastructure and mechanism to carry out
mandates specified in the Act and other laws.

*SGVFS162530*
 - 128 -

As provided for in the Act, renewable energy (RE) developers of RE facilities, including hybrid
systems, in proportion to and to the extent of the RE component, for both power and non-power
applications, as duly certified by the DOE, in consultation with the BOI, shall be entitled to
incentives, such as, income tax holiday, duty-free importation of RE machinery, equipment and
materials, zero percent VAT rate on sale of power from RE sources, and tax exemption of carbon
credits, among others.

k. PSALM deferred adjustment

Deferred Accounting Adjustments (DAA)

The ERC issued a Decision dated March 26, 2012 which granted PSALM DAA pertaining to GRAM
and ICERA and in its Order dated June 20, 2017, the ERC authorized PSALM to implement the
methodology for the recovery/refund of the approved DAA.

Upon Private Electric Power Operators Association’s (PEPOA) motion, the ERC, in an Order dated
October 19, 2017, deferred the implementation of the approved DAA pending clarification by
the ERC of the queries raised in the motion for clarification.

In its Order dated December 19, 2017, the ERC clarified that the GRAM and ICERA DAA are
deferred adjustments, which were incurred by PSALM/NPC in supplying energy during the
corresponding period; thus, it should be recovered/refunded by PSALM/NPC to its customers.
Hence, the Distribution Utilities (DUs) are not just mere collectors of the said DAA but these are
charges that they should pay to NPC/PSALM and charged to their customers as part of their
generation charge. In the same Order, the ERC directed the DUs to resume the implementation
of the GRAM and ICERA starting the January 2018 billing period.

Automatic Cost Recovery Mechanism (ACRM)

On June 20, 2017, the ERC issued its Decision, authorizing PSALM to recover/refund the True-up
Adjustments of Fuel and Purchased Power Costs and Foreign Exchange-Related Costs effective its
next billing period.

In an Order dated October 19, 2017, the implementation of the ACRM was deferred to the
January 2018 billing period pending the evaluation of the clarifications raised in PEPOA’s letter
and motion and on 19 December 2017, the Commission issued an Order directing PSALM and
the DUS to abide with the clarifications issued by the Commission.

l. CSR Projects

The Group has several CSR projects in 2021, 2020 and 2019 which are presented as part of
“General and administrative expenses” (see Note 23).

m. COVID 19

In a move to contain the COVID-19 outbreak, on March 13, 2020, the Office of the President of
the Philippines issued a Memorandum directive to impose stringent social distancing measures
in the National Capital Region effective March 15, 2020. On March 16, 2020, Presidential
Proclamation No. 929 was issued, declaring a State of Calamity throughout the Philippines for a
period of six months and imposed an enhanced community quarantine (ECQ) throughout the

*SGVFS162530*
 - 129 -

island of Luzon until April 12, 2020, as subsequently extended to April 30, 2020. This was further
extended to May 15, 2020 in selected areas including the National Capital Region. These
measures have caused disruptions to businesses and economic activities, and its impact on
businesses continues to evolve.

The Group is operating normally but at a lower energy dispatch level because of the decreased
demand during the community quarantines. In addition, because of the decrease in energy
demand, market prices are down.

The Group has an in-placed and extensive business continuity plan on similar risk, including the
lay out of the necessary steps that will help address or minimize the Group’s business exposures.
However, considering the evolving nature of this outbreak, the Group will continue to monitor
the situation and adjust the steps it is currently implementing in subsequent periods.

n. Bond Issuance

On January 5, 2022, the Company filed the application with the Securities and Exchange
Commission (SEC) for the issuance of the third tranche of its Php30 billion fixed-rate retail bonds
registered on March 1, 2021 under the shelf registration program of SEC (the “Third Tranche
Bonds”). The Third Tranche Bonds, with an aggregate principal amount of up to ₱10 billion,
including oversubscription, is expected to be issued in March 2022. Interest rate setting was
completed on February 28, 2022.

o. Application of the Provisions of Corporate Recovery and Tax Incentives for Enterprises (CREATE)
Act

On March 26, 2021, the Office of the President of the Philippines signed into law the CREATE Act
to attract more investments and maintain fiscal prudence and stability in the Philippines. RA
11534 or the CREATE Act introduces reforms to the corporate income tax and incentives systems.
It takes effect 15 days after its complete publication in the Official Gazette or in a newspaper of
general circulation or April 11, 2021.

The following are the key changes to the Philippine tax law pursuant to the CREATE Act which
have an impact on the consolidated financial statements of the Group as of and for the year
ended December 31, 2020 because of their retroactive effect:

• Effective July 1, 2020, regular corporate income tax (RCIT) rate is reduced from 30% to 25%
for domestic and resident foreign corporations. For domestic corporations with net taxable
income not exceeding =P5 million and with total assets not exceeding =P100 million (excluding
land on which the business entity’s office, plant and equipment are situated) during the
taxable year, the RCIT rate is reduced to 20%.

• Minimum corporate income tax rate reduced from 2% to 1% of gross income effective July 1,
2020 to June 30, 2023.

As clarified by the Philippine Financial Reporting Standards Council in its Philippine

Interpretations Committee Q&A No. 2020-07, the CREATE Act was not considered substantively
enacted as of December 31, 2020 even though some of the provisions have retroactive effect to

*SGVFS162530*
 - 130 -

July 1, 2020. The passage of the CREATE Act into law on March 26, 2021 is considered as a non-
adjusting subsequent event in the consolidated financial statements of the Group as of and for
the year ended December 31, 2020. Accordingly, current and deferred income taxes continued
to be computed and measured using the applicable income tax rates as of December 31, 2020
(i.e., 30% RCIT / 2% MCIT) for financial reporting purposes.

The Group reflected the changes in the current and deferred income taxes in its consolidated
financial statements as of and for the year ended December 31, 2021, including the retroactive
effect of the change in tax rates arising from the CREATE Act, reducing provisions for current and
deferred income tax by P =333.0 million.

*SGVFS162530*
 SyCip Gorres Velayo & Co. Tel: (632) 8891 0307
6760 Ayala Avenue Fax: (632) 8819 0872
1226 Makati City ey.com/ph
Philippines

INDEPENDENT AUDITOR’S REPORT

ON SUPPLEMENTARY SCHEDULES

The Board of Directors and Stockholders

Aboitiz Power Corporation
32nd Street, Bonifacio Global City
Taguig City, Metro Manila
Philippines

We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of Aboitiz Power Corporation and Subsidiaries as at December 31, 2021 and 2020, and for
each of the three years in the period ended December 31, 2021. Our audits were made for the purpose
of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the
Index to Financial Statements and Supplementary Schedules are the responsibility of the Company’s
management. These schedules are presented for purposes of complying with the Revised Securities
Regulation Code Rule 68 and are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state, in all material respects, the information required to be set forth therein in relation
to the basic financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Maria Veronica Andresa R. Pore

Partner
CPA Certificate No. 90349
Tax Identification No. 164-533-282
BOA/PRC Reg. No. 0001, August 25, 2021, valid until April 15, 2024
SEC Partner Accreditation No. 0662-AR-4 (Group A)
November 21, 2019, valid until November 20, 2022
SEC Firm Accreditation No. 0001-SEC (Group A)
Valid to cover audit of 2021 to 2025 financial statements of SEC covered institutions
BIR Accreditation No. 08-001998-071-2020, December 3, 2020, valid until December 2, 2023
PTR No. 8854348, January 3, 2022, Makati City

March 4, 2022

*SGVFS162530*
A member firm of Ernst & Young Global Limited
 SyCip Gorres Velayo & Co. Tel: (632) 8891 0307
6760 Ayala Avenue Fax: (632) 8819 0872
1226 Makati City ey.com/ph
Philippines

INDEPENDENT AUDITOR’S REPORT ON

COMPONENTS OF FINANCIAL SOUNDNESS INDICATORS

The Board of Directors and Stockholders

Aboitiz Power Corporation
32nd Street, Bonifacio Global City
Taguig City, Metro Manila
Philippines

We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of Aboitiz Power Corporation and Subsidiaries as at December 31, 2021 and 2020, and for
each of the three years in the period ended December 31, 2021. Our audits were made for the purpose
of forming an opinion on the basic financial statements taken as a whole. The Supplementary Schedule
on Financial Soundness Indicators, including their definitions, formulas, calculation, and their
appropriateness or usefulness to the intended users, are the responsibility of the Company’s
management. These financial soundness indicators are not measures of operating performance defined
by Philippine Financial Reporting Standards (PFRSs) and may not be comparable to similarly titled
measures presented by other companies. This schedule is presented for the purpose of complying with
the Revised Securities Regulation Code Rule 68 issued by the Securities and Exchange Commission, and
is not a required part of the basic financial statements prepared in accordance with PFRSs. The
components of these financial soundness indicators have been traced to the Company’s financial
statements as at December 31, 2021 and 2020 and for each of the three years in the period ended
December 31, 2021 and no material exceptions were noted.

SYCIP GORRES VELAYO & CO.

Maria Veronica Andresa R. Pore

Partner
CPA Certificate No. 90349
Tax Identification No. 164-533-282
BOA/PRC Reg. No. 0001, August 25, 2021, valid until April 15, 2024
SEC Partner Accreditation No. 0662-AR-4 (Group A)
November 21, 2019, valid until November 20, 2022
SEC Firm Accreditation No. 0001-SEC (Group A)
Valid to cover audit of 2021 to 2025 financial statements of SEC covered institutions
BIR Accreditation No. 08-001998-071-2020, December 3, 2020, valid until December 2, 2023
PTR No. 8854348, January 3, 2022, Makati City

March 4, 2022

*SGVFS162530*
A member firm of Ernst & Young Global Limited
 Aboitiz Power Corporation
and Subsidiaries

Supplementary Schedules
to the Financial Statements
Required by the Securities and Exchange Commission
For the Year Ended December 31, 2021

and

Independent Auditors’ Report

Philippine
Pesos
------------------------------
 ABOITIZ POWER CORPORATION AND SUBSIDIARIES

Supplementary Schedules Required

By the Securities and Exchange Commission
As of and for the Year Ended December 31, 2021

Page

A - Financial Assets 1

B - Amounts Receivable from Directors, Officers,

Employees, Related Parties and Principal Stockholders
(Other than Related Parties) NA

C - Amounts Receivable from Related Parties which are

Eliminated during the Consolidation of Financial Statements 2

D - Intangible Assets - Other Assets 3

E - Long-Term Debt 4

F - Indebtedness to Related Parties (Long-Term Loans

from Related Companies) 5

G - Guarantees of Securities of Other Issuers NA

H - Capital Stock 6

I - Trade and Other Receivables from Related Parties which are

Eliminated during the Consolidation of Financial Statements 7

J - Trade and Other Payables from Related Parties which are

Eliminated during the Consolidation of Financial Statements 8

Reconciliation of Retained Earnings Available for Dividend Declaration 9

Conglomerate Mapping 10

Financial Soundness Indicator 16

Use of Proceeds 17

NA: NOT APPLICABLE

 ABOITIZ POWER CORPORATION AND SUBSIDIARIES

SCHEDULE A - FINANCIAL ASSETS

AS OF DECEMBER 31, 2021

(Amounts in Thousands except number of shares)

Name of issuing entity and association of each issue (i) Number of shares or Amount shown in the Income received and
principal amount of balance sheet (ii) accrued
bonds and notes

CASH ON HAND AND IN BANK, INCLUDING RESTRICTED CASH

ANZ P808,405 P-
Banco de Oro 1,822,336 67,318
BDO Network Bank 8,132 -
Bank of Commerce 844 1
Bank of the Philippine Islands 658,773 1,016
Bank of Tokyo - Mitsubishi UFJ 91 -
China Banking Corporation 1,302 6
Citibank 43,757 33
Development Bank of the Philippines 1,093 9
Hongkong Shanghai Banking Corporation 571,629 442
ING Bank N.V. 3,491 -
Industrial and Commercial Bank of China 1,531 1
Land Bank of the Philippines 40,167 34
Metropolitan Bank and Trust Company 1,870,861 743
Philippine National Bank 156,321 39
Rizal Commercial Banking Corporation 15,517 107
Security Bank Corporation 328,520 138
Standard Chartered Bank 31,883 25
Union Bank of the Philippines 10,648,519 35,755
Cash on Hand, Cash in Vault and Revolving Fund 225,852 -

TOTAL P17,239,024 P105,667

SHORT-TERM DEPOSITS
Banco de Oro P1,329,036 P5,466
Bank of the Philippine Islands 6,001,553 6,617
City Savings Bank 21,081,866 206,334
Development Bank of the Philippines 7,300,000 8,307
Philippine National Bank - 22
Rizal Commercial Banking Corporation 1,000,000 778
Union Bank of the Philippines 3,178,764 10,038

TOTAL P39,891,219 P237,562

TRADE AND OTHER RECEIVABLES
Trade Receivables (net of allowance):
Residential P2,233,058 P-
Commercial 4,849,178 -
Industrial 537,630 -
City street lighting 95,673 -
Non-power supply contracts 722,750 -
Power supply contracts 11,180,603 -
Dividends receivable 1,192,000 -
Advances to contractors 191,904 -
Non-trade receivables 4,726,071 -
Interest receivable 48,343 -
PSALM deferred adjustment (including noncurrent portion) 1,042,861

TOTAL P26,820,071 P-
FINANCIAL ASSET AT FVTPL
Apo Golf & Country Club 3 P2 P-
Banco De Oro 8,050 793 -
Philippine Long Distance Telephone Co. 36,463 458 -
PICOP Resources, Inc. 164 8 -
Alta Vista Golf & Country Club 1 2,265 -
Philex Mining Corp 2,168 5 -
Others 375,000 375 -

TOTAL P3,906 P-

-1-
 ABOITIZ POWER CORPORATION AND SUBSIDIARIES

SCHEDULE C - AMOUNTS RECEIVABLE FROM RELATED PARTIES

WHICH ARE ELIMINATED DURING THE CONSOLIDATION OF FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2021

(Amounts in Thousands)

Balance at Deductions
Beginning Amounts Amounts Ending
Name and Designation of Debtor of Period Additions Collected Written-Off Current Non-Current Balance
Parent Company P- P31,911 (P31,911) P- P- P- P-
Davao Light & Power Co., Inc. 503,929 8,578,529 (7,996,882) - 1,085,576 - 1,085,576
Therma Power, Inc. and Subsidiaries 579,762 210,299 (789,481) - 580 - 580
Cotabato Light & Power Company 25,963 337,785 (318,532) - 45,216 - 45,216
Aboitiz Renewables, Inc. and Subsidiaries 75 79,443 (79,344) - 174 - 174
Subic Enerzone Corporation 165,603 317,139 (254,135) - 228,607 - 228,607
Visayan Electric Co., Inc. 453,848 6,243,240 (6,144,483) 552,605 - 552,605
Aboitiz Energy Solutions, Inc. 1,100,011 6,945,546 (7,000,149) - 1,045,408 - 1,045,408
Mactan Enerzone Corporation - 2,896 (2,896) - - - -
Balamban Enerzone Corporation - 2,896 (2,896) - - - -
Cebu Private Power Corporation - 31,476 (26,886) - 4,590 - 4,590
Lima Enerzone Corporation 77,001 322,762 (305,047) - 94,716 - 94,716
East Asia Utilities Corporation - 20,518 (18,933) - 1,585 - 1,585
Prism Energy, Inc. 112,813 999,547 (1,010,800) - 101,560 - 101,560
Adventenergy, Inc. 569,070 5,520,076 (5,204,553) - 884,593 - 884,593
TOTAL P3,588,075 P29,644,063 (P29,186,928) P- P4,045,210 P- P4,045,210

-2-
 ABOITIZ POWER CORPORATION AND SUBSIDIARIES

SCHEDULE D - INTANGIBLE ASSETS - OTHER ASSETS

AS OF DECEMBER 31, 2021

(Amount in Thousands)

DEDUCTIONS Other Changes

Beginning Additions Charged to Costs Charged to Additions Ending
Description Balance At Cost and Expenses Other Accounts (Deductions) Balance
A. Intangibles
Goodwill P38,812,852 P- P- P- P2,350,756 P41,163,608
Service concession rights 2,007,375 27,673 (360,875) - 80,219 1,754,392
Project development costs 702,671 44,355 - (298,031) 448,995
Franchise 2,494,811 - (76,961) - - 2,417,850
Software and licenses 261,677 33,021 (64,047) - - 230,651
Total P44,279,386 P105,049 (P501,883) P- P2,132,944 P46,015,496
B. Other Noncurrent Assets
Restricted cash P- P- P- P- P-
Input VAT and tax credit
receivable 2,993,466 - - (685,949) 2,307,517
PSALM deferred adjustment - net
of current portion 1,097,365 - - - (1,042,860) 54,505
Advances to NGCP - net of
current portion 920,682 - - - 124,164 1,044,846
Advances to contractors and
projects 893,827 - - - (274,639) 619,188
Refundable deposits 313,751 - - - 39,313 353,064
Investment properties 248,129 - - (10,428) 237,701
Prepaid expenses 251,576 60,336 311,912
Prepaid taxes 2,321,582 - - - (245,082) 2,076,500
Others 231,178 (53,410) 177,768
Total P9,271,556 P- P- P- (P2,088,555) P7,183,001

Total P53,550,942 P105,049 (P501,883) P- P44,389 P53,198,497

-3-
 ABOITIZ POWER CORPORATION AND SUBSIDIARIES

SCHEDULE E - LONG-TERM DEBT

AS OF DECEMBER 31, 2021

(Amounts in Thousands)

Amount Amount Amount

Name of Issuer and Authorized Shown as Shown as
Type of Obligation by Indentures Current Long-Term Remarks

Parent:
Aboitiz Power Corporation P63,189,157 P9,012,855 P54,176,302
Subsidiaries:
Hedcor, Inc. 1,491,600 128,959 1,362,641
Luzon Hydro Corporation 7,646 7,646 -
Davao Light & Power Co., Inc. 288,000 144,750 143,250
Cotabato Light & Power Company 57,600 28,650 28,950
Therma South, Inc. 18,104,113 1,165,380 16,938,733
Pagbilao Energy Corp. (Joint Operation) 10,993,112 1,166,231 9,826,881
Visayan Electric Co., Inc. 383,635 192,755 190,880
GNPower Mariveles Coal Plant Ltd. Co. 32,186,946 2,311,945 29,875,001
Therma Visayas, Inc. 26,730,748 2,040,350 24,690,398
Therma Power - Visayas, Inc. 1,489,717 - 1,489,717
Therma Marine, Inc. 1,777,437 - 1,777,437
AP Renewables, Inc. 10,520,765 836,116 9,684,649
Hedcor Sibulan, Inc. 3,384,328 393,764 2,990,564
Hedcor Bukidnon, Inc. 8,656,313 591,650 8,064,663
Aboitiz Energy Solutions, Inc. 594,000 - 594,000
Hedcor Sabangan, Inc. 1,136,464 40,490 1,095,974
Hedcor Tudaya, Inc. 746,393 57,686 688,707

Total P181,737,974 P18,119,227 P163,618,747

-4-
 ABOITIZ POWER CORPORATION AND SUBSIDIARIES

SCHEDULE F - INDEBTEDNESS TO AFFILIATES

(LONG-TERM LOANS FROM AFFILIATED COMPANIES)

AS OF DECEMBER 31, 2021

(Amounts in Thousands)

Beginning Ending
Name of Affiliate Balance Balance
Aboitiz Equity Ventures, Inc. P300,000 P300,000
- -
- -
Total P300,000 P300,000

-5-
 ABOITIZ POWER CORPORATION

SCHEDULE H - CAPITAL STOCK

AS OF DECEMBER 31, 2021

(Amounts in Thousands)

Number of
Number of Shares Reserved Number of Shares Held By
Number of Shares Issued for Options, Warrants, Directors,
Title of Issue Shares and Conversions, and Affiliates Officers and Others
Authorized Outstanding Other Rights Employees

COMMON SHARES 16,000,000 7,358,604 - 3,833,726 71,463 3,453,415 •

PREFERRED SHARES 1,000,000 - - - - -

-6-
 ABOITIZ POWER CORPORATION AND SUBSIDIARIES

SCHEDULE I - TRADE AND OTHER RECEIVABLES FROM RELATED PARTIES

WHICH ARE ELIMINATED DURING CONSOLIDATION OF FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2021

(Amounts in Thousands)

Balances Volume
Related Party Trade Non-trade Total Sales Rental Advances Terms
Parent Company P- P- P- P31,911 P- P- 30 days
Davao Light & Power Co., Inc. P1,085,576 P- P1,085,576 P8,578,529 P- P- 30 days
Therma Power, Inc. and Subsidiaries - 580 580 216,555 - - 30 days
Cotabato Light & Power Company 45,216 - 45,216 337,785 - - 30 days
Aboitiz Renewables, Inc. and Subsidiaries - 174 174 73,187 - - 30 days
Subic Enerzone Corporation 228,607 - 228,607 317,139 - - 30 days
Visayan Electric Co., Inc. 552,605 - 552,605 6,243,240 - - 30 days
Aboitiz Energy Solutions, Inc. 1,045,193 215 1,045,408 6,945,546 - - 30 days
Mactan Enerzone Corporation - - - 2,896 - - 30 days
Balamban Enerzone Corporation - - - 2,896 - - 30 days
Cebu Private Power Corporation 343 4,247 4,590 31,476 - - 30 days
Lima Enerzone Corporation 94,716 - 94,716 322,762 - - 30 days
East Asia Utilities Corporation - 1,585 1,585 20,518 - - 30 days
Prism Energy, Inc. 101,439 121 101,560 999,547 - - 30 days

Adventenergy, Inc. 884,477 116 884,593 5,520,076 - - 30 days

TOTAL P4,038,172 P7,038 P4,045,210 P29,644,063 P- P-

-7-
 ABOITIZ POWER CORPORATION AND SUBSIDIARIES

SCHEDULE J - TRADE AND OTHER PAYABLES FROM RELATED PARTIES

WHICH ARE ELIMINATED DURING CONSOLIDATION OF FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2021

(Amounts in Thousands)

Balances Volume
Related Party Trade Non-trade Total Sales Rental Advances Terms
Parent Company P- P2,911 P2,911 P932,613 P- P- 30 days
Aboitiz Renewables, Inc. and Subsidiaries 827,887 211 828,098 5,681,997 - - 30 days
Cebu Private Power Corporation 24,741 - 24,741 850,818 - - 30 days
Therma Power, Inc. and Subsidiaries 3,046,535 3,916 3,050,451 20,501,934 - - 30 days
East Asia Utilities Corporation 23,775 - 23,775 380,377 - - 30 days
Subic Enerzone Corporation 20,566 - 20,566 229,881 - - 30 days
Mactan Enerzone Corporation 7,677 - 7,677 74,388 - - 30 days
Lima Enerzone Corporation 45,759 - 45,759 544,021 - - 30 days
Davao Light & Power Co., Inc. - - - 9,051 - - 30 days
Adventenergy, Inc. - - - 34,693 - - 30 days
Visayan Electric Co., Inc. 41,232 - 41,232 404,290 - - 30 days
TOTAL P4,038,172 P7,038 P4,045,210 P29,644,063 P- P-

-8-
 Aboitiz Power Corporation
Reconciliation of Retained Earnings Available for Dividend Declaration
For the Year Ended December 31, 2021
(Amount in Philippine Currency)

Unappropriated Retained Earnings, beginning P19,033,264,586

Less:
Reversal of appropriation for the year 2021 13,600,000,000

Net income based on face of audited financial statements P9,213,076,110

Less: Non-actual/unrealized income (net of tax) -
Add: Non-actual loss (net of tax) -
Net income actual/realized for the period 9,213,076,110

Less:
Dividend declaration during the period (6,254,813,661)

UNAPPROPRIATED RETAINED EARNINGS, AS ADJUSTED, ENDING P35,591,527,035

-9-
ABOITIZ EQUITY VENTURES, INC. AND SUBSIDIARIES
CONGLOMERATE MAPPING
As of December 31, 2021

Legend:
Reporting Company
Parent Company
Reporting Company
Co-Subsidiary
Subsidiary
Associate or Joint Venture
Other Related Parties

ABOITIZ & CO., INC.

99.98% 20.0%
ABOITIZ CONSTRUCTION, INC. TSUNEISHI HEAVY
HEAVY INDUSTRIES
100.0% (CEBU), INC.
ABOITIZ CONSTRUCTION 100.0%
INTERNATIONAL, INC. METAPHIL GLOBAL LTD.

48.59%
ABOITIZ EQUITY VENTURES, INC.

POWER FINANCIAL SERVICES FOOD MANUFACTURING OTHERS

REAL ESTATE INFRASTRUCTURE

52.00% 49.66% 100.0% 100.0% 100.0% 73.31% [direct]

ABOITIZ POWER UNIONBANK OF PILMICO FOODS ABOITIZLAND, INC. ABOITIZ INFRACAPITAL, INC. 93.86% [beneficial]
CORPORATION PHILIPPINES CORPORATION & SUBSIDIARIES & SUBSIDIARIES AEV AVIATION, INC.
& SUBSIDIARIES & SUBSIDIARIES & SUBSIDIARIES
60.0% 100.0%
100.0% AEV CRH HOLDINGS, INC. CEBU PRAEDIA
PILMICO INTERNATIONAL & SUBSIDIARIES DEVELOPMENT
PTE. LTD. & SUBSIDIARIES * CORPORATION
45.0%
CRH ABOITIZ HOLDINGS, INC. 100.0%
& SUBSIDIARY ARCHIPELAGO
* 100% owned by AEV International INSURANCE PTE. LTD.

15.0%
SINGAPORE LIFE
(PHILIPPINES), INC.

100.0%
AEV INTERNATIONAL
PTE. LTD.

100.0%
ABOITIZ DATA
INNOVATION PTE. LTD.

- 10 -
ABOITIZ EQUITY VENTURES, INC. - POWER
CONGLOMERATE MAPPING
As of December 31, 2021

Legend:
Reporting Company
Parent Company
Subsidiary
Associate or Joint Venture
Other Related Parties

ABOITIZ EQUITY VENTURES, INC.

POWER

52.00%
ABOITIZ POWER CORPORATION

POWER DISTRIBUTION POWER GENERATION RETAIL ELECTRICITY SUPPLY

99.93% 100.0% 60.00% 100.0%

DAVAO LIGHT & ABOITIZ CEBU PRIVATE ABOITIZ ENERGY
POWER CO., INC. RENEWABLES, INC. POWER CORPORATION SOLUTIONS, INC.

55.26% 50.0% [direct] 100.0%

VISAYAN ELECTRIC 100.0% [beneficial] ADVENTENERGY, INC.
CO., INC. 100.0% EAST ASIA UTILITIES
AP RENEWABLES, INC. CORPORATION 60.00%
99.94% PRISM ENERGY, INC.
COTABATO LIGHT AND 100.0% 34.00%
POWER COMPANY LUZON HYDRO STEAG STATE 44.87%
CORPORATION POWER, INC. MAZZARATY
100.0% ENERGY CORPORATION
COTABATO 100% [beneficial] 20.00%
ICE PLANT, INC. HEDCOR, INC. SOUTHERN PHILIPPINES
POWER CORP.
20.29% [direct] 100.0% OTHERS
43.78% [beneficial] HEDCOR SIBULAN, INC. 20.00%
SAN FERNANDO WESTERN MINDANAO 100.0%
ELECTRIC LIGHT & 100% [beneficial] POWER CORP. ABOITIZPOWER
POWER CO., INC. HEDCOR TUDAYA, INC. INTERNATIONAL PTE. LTD.
100.0%
99.98% [beneficial] 100% [beneficial] THERMA 100.0%
SUBIC ENERZONE HEDCOR SABANGAN, INC. POWER, INC. ABOITIZPOWER
CORPORATION INTERNATIONAL B.V.
100% [beneficial]
100.0% HEDCOR BUKIDNON, INC. 100.0%
MACTAN ENERZONE THERMA LUZON, INC.
CORPORATION 100.0%
ASEAGAS CORP. 100% [beneficial]
100.0% THERMA SOUTH, INC.
BALAMBAN ENERZONE 100% [beneficial]
CORPORATION MAARAW HOLDINGS 100.0%
SAN CARLOS, INC. THERMA MARINE, INC.
100.0%
LIMA ENERZONE 100% [beneficial] 100% [beneficial]
CORPORATION SAN CARLOS THERMA MOBILE, INC.
SUN POWER, INC.
100.0% 100.0%
MALVAR ENERZONE 100% [beneficial] THERMA POWER
CORPORATION ABOITIZ POWER VISAYAS, INC.
DISTRIBUTED ENERGY, INC.
80% [beneficial]
100.0% THERMA VISAYAS, INC.
ABOITIZ POWER
DISTRIBUTED 78.33% [beneficial]
RENEWABLES, INC. GNPOWER MARIVELES
ENERGY CENTER LTD. CO. 1
83.33%
MANILA OSLO 49.0% [voting]
RENEWABLE 60.0% [economic]
ENTERPRISE, INC. AA THERMAL, INC.

70.0% [beneficial]
60.0% GNPOWER
SN ABOITIZ POWER - DINGININ LTD. CO.
MAGAT, INC.
50.0%
60.0% PAGBILAO ENERGY
SN ABOITIZ POWER - CORPORATION **
BENGUET, INC.
25.0%
60.0% REDONDO PENINSULA
SN ABOITIZ POWER - ENERGY, INC.
GENERATION, INC.
60.0%
60.0% ABOVANT
SN ABOITIZ POWER - HOLDINGS, INC.
RES, INC. ***
44.0%
CEBU ENERGY
DEVELOPMENT CORP.

** Joint Operations
*** Engages in retail electricity supply business
1 Formerly, GNPower Mariveles Coal Plant Ltd. Co.

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ABOITIZ EQUITY VENTURES, INC. - FINANCIAL SERVICES
CONGLOMERATE MAPPING
As of December 31, 2021

Legend:
Parent Company
Co-Subsidiary/Subsidiary of Parent Company
Associate or Joint Venture of Parent Company

ABOITIZ EQUITY VENTURES, INC.

FINANCIAL SERVICES

49.66%
UNIONBANK OF
THE PHILIPPINES

100.0% 99.79% 100.0%

UNIONDIGITAL BANK INC. CITY SAVINGS BANK UBP INVESTMENTS CORP.

100.0%
UBX PHILIPPINES 51% [UIC]; 49% [CSB] 100.0%
CORPORATION FIRST AGRO INDUSTRIAL FIRST UNION INSURANCE &
RURAL BANK, INC. (FAIRBANK) FINANCIAL AGENCIES, INC.
100.0%
UBX PRIVATE LIMITED 51% [UIC]; 49% [CSB] 100.0%
PROGRESSIVE BANK, INC. FIRST UNION PLANS, INC.
100.0%
UBX REMIT PTE. LTD. 21% [UIC]; 49% [CSB] 100.0%
BANGKO KABAYAN, INC. FIRST UNION DIRECT CORP.

11% [UIC); 40% [CSB] 51.0%

PETNET, INC. WAYBETTER, INC.

100% 32.0%
CSFP Condominium, Inc. BANANA FINTECH
SERVICES CORPORATION

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ABOITIZ EQUITY VENTURES, INC. - FOOD MANUFACTURING
CONGLOMERATE MAPPING
As of December 31, 2021

Legend:
Parent Company
Co-Subsidiary/Subsidiary of Parent Company
Associate or Joint Venture of Parent Company

ABOITIZ EQUITY VENTURES, INC.

FOOD MANUFACTURING

100.0% 100.0%
PILMICO FOODS PILMICO INTERNATIONAL
CORPORATION PTE. LTD. *

100.0% [beneficial] * 100% owned by AEV International

PILMICO ANIMAL
NUTRITION CORP.

100.0%
FIL-AGRI 100.0% 100.0% 100.0%
HOLDINGS, INC. ABAQA INTERNATIONAL PILMICO VIETNAM GOLD COIN MANAGEMENT
PTE. LTD. COMPANY LIMITED HOLDINGS PTE. LTD.
100% [beneficial]
FIL-AGRI, INC.

100.0% 100.0% 100% [beneficial] 100.0% 100.0%

GC INVESTMENT GOLD COIN SABAH KLEAN GREENTECH GOLD COIN AQUA FEED GOLD COIN MALAYSIA
HOLDINGS LIMITED SDN. BHD. CO. LTD. INCORPORATED GROUP SDN. BHD.

100.0% 100.0% 100.0%

GOLD COIN FEEDMILL GOLD COIN FEEDMILL BINH GOLD COIN AQUA FEED 100.0%
100.0% (DONG NAI) CO. LTD. DUONG COMPANY LIMITED (SINGAPORE) PTE. LTD. GOLD COIN FEEDMILLS
GOLD COIN (MALAYSIA) SDN. BHD.
(ZHANGZHOU) 100.0% 100.0% 100% [beneficial]
COMPANY LIMITED AMERICAN FEEDS GOLD COIN VIETNAM GOLD COIN SPECIALITIES 100.0%
COMPANY LIMITED HOLDINGS PTE. LTD. SDN. BHD. GOLD COIN FEEDMILL
100.0% (SABAH) SDN. BHD.
GOLD COIN (ZHUHAI) 100.0% 100.0% 100% [beneficial]
COMPANY LIMITED GOLD COIN FEEDMILL MYANMAR GOLD GOLD COIN SPECIALITIES 72.8%
HA NAM COMPANY COIN INTERNATIONAL (THAILAND) CO. LTD. GOLD COIN SARAWAK
100.0% LIMITED CO. LTD. SDN. BHD.
GOLD COIN 100% [beneficial]
FEEDMILL (KUNMING) 100% [beneficial] P.T. GOLD COIN 20.0%
COMPANY LIMITED GOLD COIN FEED MILLS TRADING INDONESIA GOLD COIN FEED MILLS
(LANKA) LTD. (BRUNEI) SDN. BHD.
100.0%
GOLD COIN FEEDMILL 100.0% 100.0%
(DONGGUAN) GOLD COIN HOLDINGS GOLDEN LIVESTOCK
CO. LIMITED SDN. BHD. SDN. BHD.

100.0% 100% [beneficial] 30.0%

GOLD COIN P.T. GOLD COIN K&L FARMING INDUSTRIES
AGRICULTURE INDONESIA SDN. BHD.
(GUANGXI) CO. LIMITED

100.0% 100% [beneficial]

GOLD COIN P.T. GOLD COIN
MANAGEMENT SPECIALITIES
(SHENZHEN) CO. LIMITED
60.0%
P.T. AYAM UNGGUL

100.0%
FEZ ANIMAL
NUTRITION PTE. LTD.

40.0%
FEZ ANIMAL NUTRITION
PHILIPPINES, INC.

100% [beneficial]
FEZ ANIMAL
NUTRITION PAKISTAN
(PRIVATE) LIMITED

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ABOITIZ EQUITY VENTURES, INC. - REAL ESTATE
CONGLOMERATE MAPPING
As of December 31, 2021

Legend:
Parent Company
Co-Subsidiary/Subsidiary of Parent Company
Associate or Joint Venture of Parent Company

ABOITIZ EQUITY VENTURES, INC.

REAL ESTATE

100.0%
ABOITIZLAND, INC.

100.0% 50.0% 50.0%

LIMA LAND, INC. CEBU DISTRICT PROPERTY ALLRISE DEVELOPMENT CORP. *
ENTERPRISE, INC.

60.0% 100.0% 100.0%

CEBU INDUSTRIAL PROPRIEDAD TRIPLECROWN
PARK DEVELOPERS INC. DEL NORTE PROPERTIES, INC.

100.0% 60.0% 100.0%

CEBU INDUSTRIAL MISAMIS ORIENTAL 78 POINTBLUE, INC.
PARK SERVICES INC. LAND DEVELOPMENT CORP.
100.0%
FIRMWALL SYSTEMS, INC.

* Formerly, A2 Airport Partners, Inc.

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ABOITIZ EQUITY VENTURES, INC. - INFRASTRUCTURE
CONGLOMERATE MAPPING
As of December 31, 2021

Legend:
Parent Company
Co-Subsidiary/Subsidiary of Parent Company
Associate or Joint Venture of Parent Company

ABOITIZ EQUITY VENTURES, INC.

INFRASTRUCTURE

100.0% 60.0% 45.0%

ABOITIZ INFRACAPITAL, INC. AEV CRH CRH ABOITIZ
HOLDINGS, INC. HOLDINGS, INC.

70.0% [beneficial] 50.00% 99.40% 100.0%

APO AGUA UNITY DIGITAL REPUBLIC CEMENT REPUBLIC CEMENT
INFRASTRUCTURA, INC. * AND BUILDING SERVICES, INC.
INFRASTRUCTURE, INC.
MATERIALS, INC.
100.0%
LIMA WATER CORP. 99.72%
REPUBLIC CEMENT
15.94% MINDANAO, INC.
BALIBAGO WATER
SYSTEMS, INC. 100.0%
REPUBLIC CEMENT
LAND & RESOURCES, INC.

* Formerly, Aboitiz Airports Advisory Services Corporation

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 ABOITIZ POWER CORPORATION AND SUBSIDIARIES
SCHEDULE OF FINANCIAL SOUNDNESS INDICATOR

FORMULA 2021 2020

LIQUIDITY RATIOS
Current ratio Current assets 1.53 1.38
Current liabilities

Cash + Marketable securities

+ Accounts receivable
Acid test ratio + Other liquid assets 1.25 1.08
Current liabilities

SOLVENCY RATIOS
Debt to equity ratio Total liabilities 1.75 1.96
Total equity

Asset to equity ratio Total assets 2.75 2.96

Total equity

Net debt to equity ratio Debt - Cash & cash equivalents 1.11 1.37
Total equity

Gearing ratio Debt - Cash & cash equivalents 52.68% 57.80%

Total equity
+ (Debt - Cash & cash equivalents)

Interest coverage ratio EBIT 2.86 2.54

Interest expense

PROFITABILITY RATIOS
Operating margin Operating profit 21.0% 24.4%
Total revenues

Return on equity Net income after tax 17.01% 10.57%

Total equity adjusted for cash dividends

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 ABOITIZ POWER CORPORATION AND SUBSIDIARIES
USE OF PROCEEDS
For the Year Ended December 31, 2021
(Amounts in Thousands)

Series “B" and "C" of the Thirty Billion Shelf Registration issued in 2021
As of December 31, 2021, the proceeds from the 2021 bonds were utilized for the following:

Projected Usage
Name of Project Actual Usage
(Per Prospectus)
Partially fund the equity contributions for the construction
1,000,000 677,000
of the 74 MW Solar power plant in Pangasinan province
Refinancing of the 2020 Series E Bonds Maturing in 2022 9,000,000 -
Fund future renewable projects 1,839,849 -
Bond issuance costs 160,151 150,195
TOTAL 12,000,000 827,195

Per Final Prospectus Actual

Gross proceeds 12,000,000 12,000,000
Net proceeds 11,839,849 11,849,805

Balance of the proceeds as of December 31, 2021: ₱11,172,805

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