IMPORTANT NOTICE

NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE UNITED STATES.

Important: You must read the following before continuing. The following applies to the offering circular following this page
(“Offering Circular”), and you are therefore advised to read this carefully before reading, accessing or making any other use of this
Offering Circular. In accessing the Offering Circular, you agree to be bound by the following terms and conditions, including any
modifications to them any time you receive any information from us as a result of such access.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF NOTES FOR SALE IN THE UNITED
STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE NOTES HAVE NOT BEEN, AND
WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE NOTES
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE OR LOCAL SECURITIES LAWS.

THIS OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT
BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S.
ADDRESS. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS
UNAUTHORIZED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE
SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. IF YOU HAVE GAINED ACCESS TO THIS
TRANSMISSION CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, YOU ARE NOT AUTHORIZED AND WILL
NOT BE ABLE TO PURCHASE ANY OF THE NOTES DESCRIBED THEREIN.

Confirmation of the Representation: In order to be eligible to view this Offering Circular or make an investment decision with
respect to the notes, investors must not be located in the United States. This Offering Circular is being sent at your request and by
accepting the electronic mail and accessing this Offering Circular, you shall be deemed to have represented to us that the electronic
mail address that you gave us and to which this electronic mail has been delivered is not located in the United States and that you
consent to delivery of such Offering Circular by electronic transmission.

You are reminded that this Offering Circular has been delivered to you on the basis that you are a person into whose possession this
Offering Circular may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may
not, nor are you authorized to, deliver this Offering Circular to any other person.

MIFID II PRODUCT GOVERNANCE / TARGET MARKET: The Pricing Supplement (as defined in the Offering Circular) in
respect of any Notes may include a legend entitled “MiFID II Product Governance” which will outline the target market assessment
in respect of the Notes and which channels for distribution of the Notes are appropriate. Any person subsequently offering, selling or
recommending the Notes (a “distributor”) should take into consideration the target market assessment; however, a distributor subject
to Directive 2014/65/EU (as amended, “MiFID II”) is responsible for undertaking its own target market assessment in respect of the
Notes (by either adopting or refining the target market assessment) and determining appropriate distribution channels.

A determination will be made in relation to each issue about whether, for the purpose of the MiFID Product Governance rules under
EU Delegated Directive 2017/593 (the “MiFID Product Governance Rules”), any Dealer subscribing for any Notes is a
manufacturer in respect of such Notes, but otherwise neither the Arrangers (as defined below) nor the Dealers (as defined in the
Offering Circular) nor any of their respective affiliates will be a manufacturer for the purpose of the MIFID Product Governance
Rules.

PRIIPS / IMPORTANT–EEA RETAIL INVESTORS: If the Pricing Supplement in respect of any Notes includes a legend
entitled “Prohibition of Sales to EEA Retail Investors”, the Notes are not intended to be offered, sold or otherwise made available to
and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these
purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID
II or (ii) a customer within the meaning of Directive 2002/92/EC (as amended, the “Insurance Mediation Directive”), where that
customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified
investor as defined in Directive 2003/71/EC (as amended, the “Prospectus Directive”). Consequently no key information document
required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the Notes or otherwise
making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise
making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

The materials relating to the offering of Notes to which the Offering Circular relates do not constitute, and may not be used in
connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires
that the offering be made by a licensed broker or dealer and any of CLSA Limited, The Hongkong and Shanghai Banking
Corporation Limited, Singapore Branch and Merrill Lynch (Singapore) Pte. Ltd. (collectively, the “Dealers”) or any affiliate of the
Dealers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by such Dealer or such affiliate on
behalf of the Issuer (as defined in the Offering Circular) in such jurisdiction.

The Offering Circular has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may
be altered or changed during the process of electronic transmission and consequently, none of the Dealers, any person who controls
any Dealer, or any director, officer, employee or agent of any Dealer, or affiliate of any such person accepts any liability or
responsibility whatsoever in respect of any difference between the Offering Circular distributed to you in electronic format and the
hard copy version available to you on request from the any Dealer.
You are responsible for protecting against viruses and other destructive items. Your use of this document in electronic form is at your
own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature.
OFFERING CIRCULAR
AC Energy Finance International Limited
(incorporated with limited liability in the Cayman Islands)

U.S.$1,000,000,000 Medium Term Note Programme

unconditionally and irrevocably guaranteed by

AC Energy, Inc.
(incorporated with limited liability in the Republic of the Philippines)

Under the Medium Term Note Programme described in this Offering Circular (the “Programme”), AC Energy Finance International
Limited (the “Issuer”), subject to compliance with all relevant laws, regulations and directives, may from time to time issue medium
term notes (the “Notes”) unconditionally and irrevocably guaranteed (the “Guarantee”) by AC Energy Inc. (the “Company” or the
“Guarantor”). The Issuer is a special purpose company which is a wholly-owned subsidiary of the Company.

The aggregate nominal amount of Notes outstanding will not at any time exceed U.S.$1,000,000,000 (or its equivalent in other
currencies), subject to increase as described herein. The Notes of each Series issued in bearer form (“Bearer Notes”) will be
represented on issue by a temporary global note in bearer form (each a “Temporary Bearer Global Note”) or a permanent global
note in bearer form (each a “Permanent Bearer Global Note”) as indicated in the applicable Pricing Supplement. Notes in registered
form (“Registered Notes”) will be represented by a global note in registered form (each a “Registered Global Note” and together
with any Temporary Bearer Global Notes and Permanent Bearer Global Notes, the “Global Notes”), one Registered Global Note
being issued in respect of each Noteholder’s entire holding of Notes in registered form of one Series. Global Notes may be deposited
on the relevant issue date with a common depositary on behalf of Euroclear Bank SA/NV (“Euroclear”) and/or Clearstream Banking
S.A. (“Clearstream, Luxembourg”). The provisions governing the exchange of interests in Global Notes for other Global Notes and
definitive Notes are described in “Form of the Notes.” The applicable Pricing Supplement will specify that definitive Notes will be
made available in certain limited circumstances.

The Notes may be issued on a continuing basis to one or more of the Dealers specified under “Summary of the Programme” and any
additional Dealer appointed under the Programme from time to time by the Issuer (each a “Dealer” and together the “Dealers”),
which appointment may be for a specific issue or on an ongoing basis. References in this Offering Circular to the “relevant Dealer”
shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to
subscribe to such Notes.

Investing in the Notes involves certain risks. See “Risk Factors” beginning on page 63 for a discussion of certain factors to be
considered in connection with an investment in the Notes.

Approval-in-principle has been obtained from the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing and
quotation of any Notes to be issued pursuant to the Programme and which are agreed at or prior to the time of issue thereof to be so
listed on the SGX-ST. Such permission will be granted when such Notes have been admitted on the Official List of the SGX-ST. The
SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions or reports contained in this Offering
Circular. Admission of the Notes to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Notes, the
Issuer or the Company or its subsidiaries. Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of
Notes, the issue price of Notes and certain other information which is applicable to each Tranche (as defined under “Terms and
Conditions of the Notes”) of Notes will be set out in a pricing supplement (the “Pricing Supplement”) which, with respect to Notes
to be listed on the SGX-ST, will be delivered to the SGX-ST on or before the date of issue of the Notes of such Tranche. Investors
are advised to read and understand the contents of this Offering Circular before investing. If in doubt, investors should consult their
advisers. The Programme provides that Notes may be listed on such other or further stock exchange(s) as may be agreed between the
Issuer and the relevant Dealers. The Issuer may also issue unlisted Notes. Notes to be listed on the SGX-ST will be accepted for
clearance through Euroclear and Clearstream, Luxembourg.

The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”)
or with any securities regulatory authority of any state or other jurisdiction of the United States, and the Notes may include Bearer
Notes (as defined herein) that are subject to U.S. tax law requirements. Subject to certain exceptions, the Notes may not be offered,
sold, or delivered within the United States except pursuant to an exemption from, or a transaction not subject to, the registration
requirements of the Securities Act and in accordance with all applicable securities laws of any state of the United States and any other
jurisdiction. Registered Notes are subject to certain restrictions on transfer, see “Subscription and Sale.”

The Issuer may agree with any Dealer and The Hongkong and Shanghai Banking Corporation Limited (the “Trustee”) that Notes
may be issued in a form not contemplated by the terms and conditions of the Notes herein, in which event a supplementary Offering
Circular, if appropriate, will be made available which will describe the effect of the agreement reached in relation to such Notes.

This Offering Circular is not a prospectus for the purpose of EU Directive 2003/71/EC.

Joint Arrangers and Dealers

(in alphabetical order)
BofA Merrill Lynch CLSA HSBC

Offering Circular dated 16 January 2019

In this Offering Circular, references to the “Company”, “AC Energy”, or the “Guarantor” are references to AC
Energy, Inc. and its consolidated subsidiaries and associates and joint ventures, as the context requires.
References to the “Issuer” are references to AC Energy Finance International Limited.

Each of the Issuer and the Guarantor accepts responsibility for the information contained in this Offering
Circular. To the best of the knowledge and belief of the Issuer and the Guarantor (having taken all reasonable
care to ensure that such is the case) the information contained in this Offering Circular is in accordance with the
facts and does not omit anything likely to affect the import of such information.

This Offering Circular has been prepared by the Issuer and the Guarantor for use in connection with the offer and
sale of Notes outside the United States. The Issuer, the Guarantor and the Dealers reserve the right to reject any
offer to purchase Notes, in whole or in part, for any reason. This Offering Circular does not constitute an offer to
any person in the United States.

No person has been or is authorized to give any information or to make any representation concerning the Issuer,
the Company, the Notes or the Guarantee other than as contained herein or any other information supplied in
connection with the Programme or the Notes and, if given or made by any other person, such information or
representation should not be relied upon as having been authorized by the Issuer, the Guarantor, CLSA Limited
(“CLSA”), The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch (“HSBC”) and Merrill
Lynch (Singapore) Pte. Ltd. (“BAML”) (collectively, the “Arrangers” and the “Dealers”), The Hongkong and
Shanghai Banking Corporation Limited in its capacity as trustee (the “Trustee”) or the Agents (as defined in the
Terms and Conditions of the Notes). Neither the delivery of this Offering Circular nor any offering, sale or
delivery made in connection with the issue of the Notes shall, under any circumstances, constitute a
representation that there has been no change or development reasonably likely to involve a change in the affairs
of the Issuer or the Company or any of them since the date hereof or create any implication that the information
contained herein is correct as of any date subsequent to the date hereof. This Offering Circular does not
constitute an offer of, or an invitation by or on behalf of, the Issuer, the Guarantor, the Dealers, the Trustee or the
Agents or their respective affiliates or legal advisers to subscribe for or purchase any of the Notes and may not be
used for the purpose of an offer to, or a solicitation by, anyone in any jurisdiction or in any circumstances in
which such offer or solicitation is not authorized or is unlawful.

None of the Arrangers, the Dealers, the Trustee or the Agents has separately verified the information contained
herein. In this Offering Circular, no representation, warranty or undertaking, express or implied, is made or given
by the Dealers, the Trustee or the Agents or their respective affiliates or legal advisers as to the accuracy,
completeness or sufficiency of the information contained in this Offering Circular, and nothing contained in this
Offering Circular is, or shall be relied upon as, a promise, representation or warranty by the Dealers, the Trustee
or the Agents or their respective affiliates or legal advisers, and no responsibility or liability is accepted by the
Dealers, the Trustee or the Agents or their respective affiliates or legal advisers as to the accuracy or
completeness of the information contained or incorporated in this Offering Circular or any other information in
connection with the Programme, the Notes, their distribution or the offering of the Notes. Neither this Offering
Circular nor any other information supplied in connection with the Programme or any Notes is intended to
provide the basis of any credit or other evaluation or should be considered as a recommendation by either the
Issuer, the Company, the Dealers, the Trustee or the Agents or their respective affiliates or legal advisers that any
recipient of this Offering Circular or any other information supplied in connection with the Programme or any
Notes should purchase the Notes. Each potential purchaser of the Notes should determine for itself the relevance
of the information contained in this Offering Circular and its purchase of the Notes should be based upon such
investigations with its own tax, legal and business advisers as it deems necessary. Neither this Offering Circular
nor any other information supplied in connection with the Programme or the issue of any Notes constitutes an
offer or an invitation by or on behalf of the Issuer, the Guarantor, the Dealers, the Trustee or the Agents to any
person to subscribe for or to purchase any Notes. Investors may not reproduce or distribute this Offering Circular
in whole or in part, and investors may not disclose any of the contents of this Offering Circular or use any
information herein for any purpose other than considering an investment in the Notes. Investors agree to the
foregoing by accepting delivery of this Offering Circular.

Neither the delivery of this Offering Circular nor the offering, sale or delivery of any Notes shall in any
circumstances imply that the information contained herein concerning the Issuer and the Guarantor is correct at
any time subsequent to the date hereof or that any other information supplied in connection with the Programme
is correct as of any time subsequent to the date indicated in the document containing the same. The Arrangers,
the Dealers, the Trustee, and the Agents expressly do not undertake to review the financial condition or affairs of
the Issuer and the Guarantor during the life of the Programme or to advise any investor in the Notes of any

i
information coming to their attention. Neither the delivery of this Offering Circular or any Pricing Supplement
nor any offering, sale or delivery made in connection with the issue of the Notes shall, under any circumstances,
constitute a representation that there has been no change or development reasonably likely to involve a change in
the affairs of the Issuer or the Guarantor since the date hereof or thereof or the date upon which this Offering
Circular has been most recently amended or supplemented or create any implication that the information
contained herein or therein is correct as of any date subsequent to the date hereof or thereof or the date upon
which this Offering Circular has been most recently amended or supplemented. Investors should review, inter
alia, the most recently published documents incorporated by reference into this Offering Circular when deciding
whether or not to purchase any Notes.

To the fullest extent permitted by law, none of the Dealers, the Trustee or the Agents or any of their respective
affiliates, directors or advisors accepts any responsibility for the contents of this Offering Circular. Each of the
Dealers, the Trustee and the Agents or any of their respective affiliates, directors or advisors accordingly
disclaims all and any liability, whether arising in tort or contract or otherwise, which it might otherwise have in
respect of this Offering Circular or any such statement. None of the Dealers, the Trustee or the Agents or any of
their respective affiliates, directors or advisors undertakes to review the financial condition or affairs of the Issuer
or the Company during the life of the arrangements contemplated by this Offering Circular nor to advise any
investor or potential investor in the Notes of any information coming to the attention of the Dealers, the Trustee
or the Agents.

In making an investment decision, investors must rely on their own examination of the Issuer, the Company and
the terms of the offering, including the merits and risks involved. See “Risk Factors” for a discussion of certain
factors to be considered in connection with an investment in the Notes.

Each person receiving this Offering Circular acknowledges that such person has not relied on the Dealers, the
Trustee, or the Agents or any person affiliated with the Dealers, the Trustee, or the Agents in connection with its
investigation of the accuracy of such information or its investment decision.

This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy any Notes in
the United States or in any jurisdiction to any person to whom it is unlawful to make the offer or
solicitation in such jurisdiction. The distribution of this Offering Circular and the offer or sale of Notes
may be restricted by law in certain jurisdictions. None of the Issuer, the Guarantor, the Arrangers, the
Dealers, the Trustee, or the Agents represents that this Offering Circular may be lawfully distributed, or
that any Notes may be lawfully offered, in compliance with any applicable registration or other
requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any
responsibility for facilitating any such distribution or offering. The Notes have not been and will not be
registered under the Securities Act or with any securities regulatory authority of any state or other
jurisdiction of the United States. Subject to certain exceptions, the Notes may not be offered or sold within
the United States. In particular, no action has been taken by the Issuer, the Guarantor, any of the
Arrangers, the Dealers, the Trustee, or the Agents which would permit a public offering of any Notes or
distribution of this Offering Circular in any jurisdiction where action for that purpose is required.
Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Circular nor
any advertisement or other offering material may be distributed or published in any jurisdiction, except
under circumstances that will result in compliance with any applicable laws and regulations.

Persons into whose possession this Offering Circular or any Notes may come must inform themselves
about, and observe, any such restrictions on the distribution of this Offering Circular and the offering and
sale of Notes. In particular, there are restrictions on the distribution of this Offering Circular and the offer
or sale of Notes in the United States, the European Economic Area, the United Kingdom, Japan, Hong
Kong, Singapore, the People’s Republic of China, the Cayman Islands, and the Philippines, see
“Subscription and Sale”. If a jurisdiction requires that the offering be made by a licensed broker or dealer
and any of the Dealers or any affiliate of the Dealers is a licensed broker or dealer in that jurisdiction, the
offering shall be deemed to be made by such Dealer or such affiliate on behalf of the Issuer in such
jurisdiction.

None of the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee, and the Agents makes any
representation to any investor in the Notes regarding the legality of its investment under any applicable
laws. Any investor in the Notes should be able to bear the economic risk of an investment in the Notes for
an indefinite period of time.

Each Dealer has acknowledged, and each further Dealer appointed under the Programme will be required to
acknowledge, that this Offering Circular has not been registered as a prospectus with the Monetary Authority of

ii
Singapore. Accordingly, each Dealer has represented, warranted and agreed, and each further Dealer appointed
under the Programme will be required to represent, warrant and agree, that it has not offered or sold any Notes or
caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any
Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not
circulated or distributed, nor will it circulate or distribute, this Offering Circular or any other document or
material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether
directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in
Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to
time (the “SFA”)) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of
the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in
accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in
accordance with the conditions of, any other applicable provision of the SFA.

Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business
of which is to hold investments and the entire share capital of which is owned by one or more individuals,
each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited investor,

securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that
corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred
within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under
Section 275 of the SFA except:

(1) to an institutional investor or to a relevant person, or to any person arising from an offer referred to in
Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(2) where no consideration is or will be given for the transfer;

(3) where the transfer is by operation of law;

(4) as specified in Section 276(7) of the SFA; or

(5) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and
Securities-based Derivatives Contracts) Regulations 2018 of Singapore.

NOTIFICATION UNDER SECTION 309B(1)(C) OF THE SFA: Unless otherwise stated in the Pricing
Supplement in respect of any Notes, all Notes issued or to be issued under the Programme shall be prescribed
capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018)
and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment
Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

There are restrictions on the offer and sale of the Notes in the United Kingdom. All applicable provisions of the
Financial Services and Market Act 2000, as amended (including by the Financial Services Act 2012 (“FSA”))
(“FSMA”) with respect to anything done by any person in relation to the Notes in, from or otherwise involving
the United Kingdom must be complied with. See “Subscription and Sale”.

MIFID II PRODUCT GOVERNANCE/TARGET MARKET: The Pricing Supplement (as defined in the
Offering Circular) in respect of any Notes may include a legend entitled “MiFID II Product Governance” which
will outline the target market assessment in respect of the Notes and which channels for distribution of the Notes
are appropriate. Any person subsequently offering, selling or recommending the Notes (a “distributor”) should
take into consideration the target market assessment; however, a distributor subject to Directive 2014/65/EU (as
amended, “MiFID II”) is responsible for undertaking its own target market assessment in respect of the Notes
(by either adopting or refining the target market assessment) and determining appropriate distribution channels.

A determination will be made in relation to each issue about whether, for the purpose of the MiFID Product
Governance rules under EU Delegated Directive 2017/593 (the “MiFID Product Governance Rules”), any
Dealer subscribing for any Notes is a manufacturer in respect of such Notes, but otherwise neither the Arrangers
(as defined below) nor the Dealers nor any of their respective affiliates will be a manufacturer for the purpose of
the MIFID Product Governance Rules.

iii
PRIIPS / IMPORTANT–EEA RETAIL INVESTORS: If the Pricing Supplement in respect of any Notes
includes a legend entitled “Prohibition of Sales to EEA Retail Investors”, the Notes are not intended to be
offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any
retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person
who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II or (ii) a customer
within the meaning of Directive 2002/92/EC (as amended, the “Insurance Mediation Directive”), where that
customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or
(iii) not a qualified investor as defined in Directive 2003/71/EC (as amended, the “Prospectus Directive”).
Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the
“PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in
the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any
retail investor in the EEA may be unlawful under the PRIIPs Regulation.

In connection with the offering of any Series of Notes, each Dealer is acting or will act for the Issuer in
connection with the offering and no one else and will not be responsible to anyone other than the Issuer for
providing the protections afforded to clients of that Dealer nor for providing advice in relation to any such
offering.

For a description of other restrictions, see “Subscription and Sale” and the applicable Pricing Supplement.

CERTAIN DEFINITIONS

In this Offering Circular, References to the “Philippines” are to the Republic of the Philippines and to the
“United States” or “U.S.” are to the United States of America, its territories and possessions, any State of the
United States and the District of Columbia. References to “Philippine Pesos” or to “Q” are to the lawful
currency of the Republic of the Philippines and references to “U.S.$” and “U.S. dollars” are to the lawful
currency of the United States of America. References to the “BSP” are to the Bangko Sentral ng Pilipinas, the
central bank of the Philippines. The Company publishes its financial statements in Philippine Pesos. Certain
terms used herein are defined in the “Glossary” contained elsewhere in this Offering Circular.

This Offering Circular contains translations of certain amounts into U.S. Dollars at specified rates solely for the
convenience of the reader. These translations should not be construed as representations that the Philippine Peso
amounts represent such U.S. dollar amounts or could be, or could have been, converted into U.S. dollars at the
rates indicated or at all. Unless otherwise indicated, all translations from Philippine Pesos to U.S. dollars have
been made at a rate of P54.251 = U.S.$1.00, being the closing rate on 28 September 2018 (the last date in
September 2018 that such rate was published) for the purchase of U.S. dollars with Philippine Pesos published in
the Reference Exchange Rate Bulletin by the BSP. On 15 January 2019, the closing rate quoted on the Reference
Exchange Rate Bulletin was P52.197=U.S.$1.00.

PRESENTATION OF FINANCIAL INFORMATION

The Company’s audited consolidated financial statements as of 31 December 2017, 2016 and 2015 and for each
of the three years in the period ended 31 December 2017, and the unaudited, interim condensed consolidated
financial statements as of 30 September 2018 and for the nine months ended 30 September 2018 and 2017
included in this Offering Circular have been prepared in accordance with the Philippine Financial Reporting
Standard (“PFRS”).

The financial information included in this Offering Circular has been derived from the consolidated financial
statements of AC Energy. Unless otherwise indicated, the description of the business activities of the Company
in this Offering Circular is presented on a consolidated basis.

Figures in this Offering Circular have been subject to rounding adjustments. Accordingly, figures shown in the
same item of information may vary, and figures which are totals may not be an arithmetic aggregate of their
components.

NON-PFRS FINANCIAL MEASURES

This Offering Circular contains references to Adjusted EBITDA. Adjusted EBITDA is a supplemental measure
of the performance and liquidity of the Company that is not required by, or presented in accordance with, PFRS.
Further, Adjusted EBITDA is not a measurement of the financial performance or liquidity of the Company under

iv
PFRS and should not be considered as an alternative to net income, gross revenues or any other performance
measure derived in accordance with PFRS or as an alternative to cash flow from operations or as a measure of
the liquidity of the Company. Adjusted EBITDA represents EBITDA as adjusted to exclude noncash expenses/
losses (i.e., impairment provisions and mark-to-market losses) and other income items (i.e., interest income,
mark-to-market gains, net foreign exchange gains, gain on reversal of contingent liabilities, and revaluation gain
on investment, which includes gain on bargain purchase. Because there are various calculation methods, the
Company’s presentation of Adjusted EBITDA may not be comparable to similarly titled measures used by other
companies.

INDUSTRY AND MARKET DATA

Market data and certain industry forecasts and other data used in this Offering Circular were obtained or derived
from internal surveys, market research, governmental data, publicly available information and/or industry
publications. Industry publications generally state that the information contained therein has been obtained from
sources believed to be reliable, but the accuracy and completeness of such information are not guaranteed and
have not been independently verified by the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee or the
Agents. Similarly, internal surveys, industry forecasts and market research, while believed to be reliable, have
not been independently verified, and none of the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee or
the Agents make any representation or warranty, express or implied, as to the accuracy or completeness of such
information. In addition, such information may not be consistent with other information compiled within or
outside the Philippines.

v
 ENFORCEABILITY OF FOREIGN JUDGMENTS

AC Energy is organized under the laws of the Philippines and a substantial portion of its assets are located in the
Philippines. Substantially all of its directors and senior management reside in the Philippines. The Company has
consented to service of process in England. It may be difficult for investors to effect service of process outside of
the Philippines upon the Company. Moreover, it may be difficult for investors to enforce judgments against the
Company outside the Philippines in any actions pertaining to the Notes. In addition, all of the directors and the
officers of the Company are residents of the Philippines, and all or a substantial portion of the assets of such
persons are or may be located in the Philippines. As a result, it may be difficult for investors to effect service of
process upon such persons, or to enforce against them judgments obtained in courts or arbitral tribunals outside
the Philippines predicated upon the laws of jurisdictions other than the Philippines.

The Philippines is not a party to any international treaty in relation to the recognition or enforcement of foreign
judgments but is a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards. Moreover, the Philippines enacted Republic Act No. 9285, otherwise known as the Alternative
Dispute Resolution Act of 2004, to facilitate the enforcement of arbitral awards in the Philippines. Judgments
obtained against the Company in any foreign court may be recognized and enforced by the courts of the
Philippines in an independent action brought in accordance with the relevant procedures set forth in the Rules of
Court of the Philippines to enforce such judgment. Section 48 of Rule 39 of the Rules of Court provides that a
judgment or final order of a tribunal of a foreign country having jurisdiction to give the judgment or final order:
(a) in case of a judgment or final order upon specific property, is conclusive upon the title to that property; and
(b) in case of a judgment or final order against a person, is presumptive evidence of a right between the parties
and their successors in interest by a subsequent title. In either case, the judgment or final order may be repelled if
there is a defect relating to jurisdiction or notice to the other party, collusion, fraud or clear mistake of law or
fact. In addition, Article 17 of the Civil Code of the Philippines provides that the judgment must not be contrary
to laws that have for their object public order, public policy and good customs in the Philippines. Furthermore,
Philippine courts have held that a foreign judgment is presumed to be valid and binding in the country from
which it issues, until the contrary is shown, and the party contesting the foreign judgment has the burden of
overcoming the presumption of its validity.

The Issuer is an exempted company incorporated under the laws of the Cayman Islands with limited liability. The
Issuer has consented to service of process in England. It may be difficult for investors to effect service of process
outside of the Cayman Islands upon the Issuer. Moreover, it may be difficult for investors to enforce judgments
against the Issuer outside the Cayman Islands in any actions pertaining to the Notes. In addition, substantially all
of the directors and the officers of the Issuer are residents of the Philippines, and all or a substantial portion of the
assets of such persons are or may be located in the Philippines. As a result, it may be difficult for investors to
effect service of process upon such persons, or to enforce against them judgments obtained in courts or arbitral
tribunals outside the Cayman Islands predicated upon the laws of jurisdictions other than the Cayman Islands.

Although there is no statutory enforcement in the Cayman Islands of judgments obtained in England or the
Philippines, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign
court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent
foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given
provided certain conditions are met. For such a foreign judgment to be enforced in the Cayman Islands, such
judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or
penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds
of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or
the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary
to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are
being brought elsewhere.

vi
 FORWARD-LOOKING STATEMENTS

This Offering Circular contains forward-looking statements and other information that involves risks,
uncertainties and assumptions. Forward-looking statements are statements that concern plans, objectives, goals,
strategies, future events or performance and underlying assumptions and other statements that are other than
statements of historical fact, including, but not limited to, those that are identified by the use of words such as
“anticipates”, “believes”, “can”, “could”, “estimates”, “forecasts”, “expects”, “intends”, “may”, “likely”, “plans”,
“aims”, “predicts”, “projects”, “seeks”, “should”, “target”, “would”, “will”, and similar expressions or variations
of such expressions. Such forward-looking statements include, without limitation, statements relating to
expansion plans, changes in tariffs, capacity levels, the competitive environment in which the Company operates,
general economic and business conditions, political, economic and social developments in the jurisdictions in
which the Company operates, changes in governmental regulations relating to the businesses which the Company
engages in, liability for remedial action under environmental regulations, the cost and availability of adequate
insurance coverage and financing, changes in interest rates and other factors beyond the Company’s control.
Risks and uncertainties that could affect the Company include, without limitation:

‰ risks associated with the strategic expansion into new geographic markets, or expansion into new
businesses where the Company may have little or no prior experience in;
‰ instability in the social, political and economic conditions in the countries in which the Company operates;
‰ changes in global or regional economic conditions that could affect the businesses that the Company
engages in and the demand for the products and services that the Company provides;
‰ the need for unexpected capital expenditures and difficulties in raising additional financing to fund future
capital expenditures, acquisitions and other general corporate activities;
‰ changes in regulations and increases in regulatory burdens in the jurisdictions in which the Company
operates, including those pertaining to operational, health, safety and environmental standards and those
pertaining to import or export controls, duties, levies or taxes, either in international markets or in the
Philippines;
‰ changes in foreign currency conversion rates;
‰ hazards customary to the power production industry and power generation operations, such as unusual
weather conditions, catastrophic weather-related or other damage to facilities, unscheduled generation
outages, maintenance or repairs, interconnection problems or other developments, environmental incidents,
or electric transmission constraints and the possibility that insurance would be inadequate to cover losses as
a result of such hazards;
‰ competition in the power industry;
‰ other risks related to the businesses, the industries or the regions in which the Company operates;
‰ risks relating to Notes issued under the Programme and the Guarantee;
‰ risks relating to the structure of a particular issue of Notes; and
‰ risks relating to the Notes issued as Green Bonds.

Should one or more of such risks and uncertainties materialize, or should any underlying assumptions prove
incorrect, actual outcomes may vary materially from those indicated in the applicable forward-looking
statements. Any forward-looking statement or information contained in this Offering Circular speaks only as of
the date the statement was made.

All of the Company’s forward-looking statements made herein and elsewhere are qualified in their entirety by the
risk factors discussed in “Risk Factors”. These risk factors and statements describe circumstances that could
cause actual results to differ materially from those contained in any forward-looking statement in this Offering
Circular.

The Issuer, the Company, the Arrangers, the Dealers, the Trustee and the Agents assume no obligation to update
any of the forward-looking statements after the date of this Offering Circular to conform those statements to
actual results, subject to compliance with all applicable laws. The Issuer, the Company, the Arrangers, the
Dealers, the Trustee and the Agents assume no obligation to update any information contained in this Offering
Circular or to publicly release any revisions to any forward-looking statements to reflect events or circumstances,
or to reflect that the Company became aware of any such events or circumstances, that occur after the date of this
Offering Circular.

vii
 DOCUMENTS INCORPORATED BY REFERENCE

This Offering Circular should be read and construed in conjunction with:

(i) all amendments and supplements to this Offering Circular; and

(ii) the most recently published audited consolidated annual financial statements and unaudited interim
condensed consolidated financial statements of the Company, in each case together with any audit or review
reports prepared in connection therewith (where relevant) that are appended to this Offering Circular;

which shall be deemed to be incorporated in, and to form part of, this Offering Circular and which shall be
deemed to modify or supersede the contents of this Offering Circular to the extent that a statement contained in
any such document is inconsistent with such contents.

Any published unaudited interim financial statements of the Company which are, from time to time, deemed to
be incorporated by reference in this Offering Circular will not have been audited by the auditors of the Company.
Accordingly, there can be no assurance that, had an audit been conducted in respect of the such financial
statements, the information presented therein would not have been materially different, and investors should not
place undue reliance upon them.

The Company will provide, without charge, to each person to whom a copy of this Offering Circular has been
delivered, upon the request of such person, a copy of any or all of the documents deemed to be incorporated
herein by reference unless such documents have been modified or superseded as specified above. Requests for
such documents should be directed to the Company at its office set out at the end of this Offering Circular.

SUPPLEMENTAL OFFERING CIRCULAR

Each of the Issuer and the Company has given an undertaking to the Arrangers and the Dealers that in the event
of a change in the condition of the Issuer or the Company which is material in the context of the Programme or
the issue of any Notes or if the Offering Circular shall otherwise come to contain an untrue statement of a
material fact or omit to state a material fact necessary to make the statements contained therein not misleading or
if it is necessary at any time to amend the Offering Circular to comply with, or reflect changes in, the laws or
regulations of the Cayman Islands or the Philippines, the Issuer and the Company shall update or amend the
Offering Circular (following consultation with the Arrangers who will consult with the Dealers) by the
publication of a supplement to it or a new Offering Circular, in each case in a form approved by the Dealers.

viii
 GENERAL DESCRIPTION OF THE PROGRAMME

Under the Programme, the Issuer, subject to compliance with all relevant laws, regulations, and directives, may
from time to time issue Notes denominated in any currency, as set out herein. A summary of the terms and
conditions (the “Conditions”) of the Programme and the Notes appears below. The applicable terms of any
Notes will be agreed between the Issuer, the Guarantor and the relevant Dealer prior to the issue of the Notes and
will be set out in the Conditions endorsed on, attached to, or incorporated by reference into, the Notes, as
modified and supplemented by the applicable Pricing Supplement attached to, or endorsed on, such Notes, as
more fully described under “Form of the Notes.”

This Offering Circular and any supplement will only be valid for listing Notes on the SGX-ST in an aggregate
nominal amount which, when added to the aggregate nominal amount then outstanding of all Notes previously or
simultaneously issued under the Programme, does not exceed U.S.$1,000,000,000 or its equivalent in other
currencies. For the purpose of calculating the U.S. dollar equivalent of the aggregate nominal amount of Notes
issued under the Programme from time to time:

(a) the U.S. dollar equivalent of Notes denominated in another Specified Currency (as specified in the
applicable Pricing Supplement in relation to the relevant Notes, described under “Form of the Notes”) shall
be determined by the Issuer (or an agent appointed by it), as of the date on which agreement is reached for
the issue of Notes on the basis of the spot rate for the sale of the U.S. dollar against the purchase of that
Specified Currency in the London foreign exchange market quoted by a leading international bank selected
by the Issuer (or an agent appointed by it) on the relevant day of calculation;

(b) the U.S. dollar equivalent of Dual Currency Notes, Index Linked Notes and Partly Paid Notes (each as
specified in the applicable Pricing Supplement in relation to the relevant Notes, described under “Form of
the Notes”) shall be calculated in the manner specified above by reference to the original nominal amount
on issue of such Notes (in the case of Partly Paid Notes regardless of the amount of the subscription price
paid); and

(c) the U.S. dollar equivalent of Zero Coupon Notes (as specified in the applicable Pricing Supplement in
relation to the relevant Notes, described under “Form of the Notes”) and other Notes issued at a discount or
a premium shall be calculated in the manner specified above by reference to the nominal amount of those
Notes.

ix
 TABLE OF CONTENTS
Page
ENFORCEABILITY OF FOREIGN JUDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
DOCUMENTS INCORPORATED BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii
GENERAL DESCRIPTION OF THE PROGRAMME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
SUMMARY OF THE PROGRAMME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
TERMS AND CONDITIONS OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FORM OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
FORM OF PRICING SUPPLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
GREEN BOND FRAMEWORK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
CAPITALIZATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SELECTED CONSOLIDATED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 86
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
THE ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
REGULATION AND ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . 166
DESCRIPTION OF MATERIAL INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
FOREIGN EXCHANGE AND FOREIGN INVESTMENT REGULATIONS . . . . . . . . . . . . . . 169
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
CLEARANCE AND SETTLEMENT OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
SUBSCRIPTION AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
GLOSSARY OF SELECTED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

In connection with the issue of any Tranche of Notes under the Programme, the Dealer(s) (if any) named
as the stabilizing manager(s) or persons acting on behalf of any Stabilizing Manager(s)) (the “Stabilizing
Manager(s)”) in the applicable Pricing Supplement may over-allot the Notes or effect transactions with a
view to supporting the price of the Notes at a level higher than that which might otherwise prevail for a
limited period after the issue date of the Notes. However, there is no obligation on such Stabilizing
Manager(s) to do this. Such stabilizing, if commenced, may be discontinued at any time, and must be
brought to an end after a limited period. Such stabilizing shall be in compliance with all applicable laws,
regulations and rules.
 SUMMARY OF THE PROGRAMME

The following is a general summary of the terms of the Notes issued under the Programme. The following
summary is qualified in its entirety by the remainder of this Offering Circular and, in relation to the terms and
conditions of any particular Tranche of Notes, the applicable Pricing Supplement. This summary must be read as
an introduction to this Offering Circular and any decision to invest in the Notes should be based on a
consideration of the Offering Circular as a whole, including any information incorporated by reference. Phrases
used in this summary and not otherwise defined shall have the meanings given to them in “Terms and Conditions
of the Notes” and “Form of the Notes.”

Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . AC Energy Finance International Limited

Guarantor . . . . . . . . . . . . . . . . . . . . . . AC Energy, Inc.

Description . . . . . . . . . . . . . . . . . . . . . Medium Term Note Programme

Lead Arranger . . . . . . . . . . . . . . . . . . . The Hongkong and Shanghai Banking Corporation Limited,

Singapore Branch

Arrangers . . . . . . . . . . . . . . . . . . . . . . CLSA Limited, The Hongkong and Shanghai Banking Corporation

Limited, Singapore Branch and Merrill Lynch (Singapore) Pte. Ltd.

Dealers . . . . . . . . . . . . . . . . . . . . . . . . CLSA Limited, The Hongkong and Shanghai Banking Corporation

Limited, Singapore Branch and Merrill Lynch (Singapore) Pte. Ltd.
and any other Dealers appointed in accordance with the Programme
Agreement (as defined under “Subscription and Sale”).

Certain Restrictions . . . . . . . . . . . . . . . Each issue of Notes in respect of which particular laws, guidelines,
regulations, restrictions or reporting requirements apply will only be
issued in circumstances which comply with such laws, guidelines,
regulations, restrictions or reporting requirements from time to time
(see “Subscription and Sale”) including the following restrictions
applicable at the date of this Offering Circular.

Notes having a maturity of less than one year

Notes having a maturity of less than one year will, if the proceeds of
the issue are accepted in the United Kingdom, constitute deposits for
the purposes of the prohibition on accepting deposits contained in
section 19 of the Financial Services and Markets Act 2000 unless
they are issued to a limited class of professional investors and have a
denomination of at least £100,000 or its equivalent, see
“Subscription and Sale”.

Trustee . . . . . . . . . . . . . . . . . . . . . . . . The Hongkong and Shanghai Banking Corporation Limited

Principal Paying Agent . . . . . . . . . . . . The Hongkong and Shanghai Banking Corporation Limited

Registrar and Transfer Agent . . . . . . . The Hongkong and Shanghai Banking Corporation Limited

Programme Size . . . . . . . . . . . . . . . . . U.S.$1,000,000,000 (or its equivalent in other currencies calculated

as described under “General Description of the Programme”) in
aggregate nominal amount of Notes outstanding at any time. The
Issuer and the Company may increase the amount of the Programme
in accordance with the terms of the Programme Agreement.

Distribution . . . . . . . . . . . . . . . . . . . . . Notes may be distributed by way of private or public placement and

in each case on a syndicated or non-syndicated basis.

2
 The Notes will be issued in Series having one or more issue dates
and on terms otherwise identical (or identical other than in respect of
the first payment of interest), the Notes of each Series being intended
to be interchangeable with all other Notes of the Series. Each Series
may be issued in tranches (each a “Tranche”) on the same or
different issue date. The specific terms of each Tranche (which will
be completed, where necessary, with the relevant terms and
conditions and, save in respect of the issue date, issue price, first
payment of interest and nominal amount of the Tranche, will be
identical to the terms of other Tranches of the same Series) will be
specified in the Pricing Supplement.

Currencies . . . . . . . . . . . . . . . . . . . . . . Subject to any applicable legal or regulatory restrictions, any

currency agreed between the Issuer, the Company and the relevant
Dealer.

Maturities . . . . . . . . . . . . . . . . . . . . . . Such maturities as may be agreed between the Issuer, the Company
and the relevant Dealer and indicated in the applicable Pricing
Supplement, subject to such minimum or maximum maturities as
may be allowed or required from time to time by the relevant central
bank (or equivalent body) or any laws or regulations applicable to
the Issuer, the Company or the relevant Specified Currency.

Issue Price . . . . . . . . . . . . . . . . . . . . . . Notes may be issued on a fully-paid or a partly-paid basis and at an

issue price which is at par or at a discount to, or premium over, par.

Form of Notes . . . . . . . . . . . . . . . . . . . The Notes will be issued in bearer or registered form as described in
“Form of the Notes”. Registered Notes will not be exchangeable for
Bearer Notes or vice versa.

Fixed Rate Notes . . . . . . . . . . . . . . . . . Fixed interest will be payable on such date or dates as may be agreed
between the Issuer, the Company and the relevant Dealer and on
redemption and will be calculated on the basis of such Day Count
Fraction as may be agreed between the Issuer, the Company and the
relevant Dealer.

Floating Rate Notes . . . . . . . . . . . . . . Floating Rate Notes will bear interest at a rate determined:

(a) on the same basis as the floating rate under a notional interest
rate swap transaction in the relevant Specified Currency
governed by an agreement incorporating the 2006 ISDA
Definitions (as published by the International Swaps and
Derivatives Association, Inc., and as amended and updated as
of the Issue Date of the first Tranche of the Notes of the
relevant Series); or

(b) on the basis of a reference rate appearing on the agreed screen

page of a commercial quotation service; or

(c) on such other basis as may be agreed between the Issuer, the
Company and the relevant Dealer.

The margin (if any) relating to such floating rate will be agreed
between the Issuer, the Company and the relevant Dealer for each
Series of Floating Rate Notes.

Index Linked Notes . . . . . . . . . . . . . . . Payments of principal in respect of Index Linked Redemption Notes
or of interest in respect of Index Linked Interest Notes will be
calculated by reference to such index and/or formula or to changes in
the prices of securities or commodities or to such other factors as the
Issuer, the Company and the relevant Dealer may agree.

3
Other provisions in Floating Rate
Notes and Index Linked Interest
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . Floating Rate Notes and Index Linked Interest Notes may also have a
relation to maximum interest rate, a minimum interest rate or both.

Interest on Floating Rate Notes and Index Linked Interest Notes in

respect of each Interest Period, as agreed prior to issue by the Issuer,
the Company and the relevant Dealer, will be payable on such
Interest Payment Dates, and will be calculated on the basis of such
Day Count Fraction, as may be agreed between the Issuer, the
Company and the relevant Dealer.

Dual Currency Notes . . . . . . . . . . . . . Payments (whether in respect of principal or interest and whether at
maturity or otherwise) in respect of Dual Currency Notes will be
made in such currencies, and based on such rates of exchange, as the
Issuer, the Company and the relevant Dealer may agree.

Zero Coupon Notes . . . . . . . . . . . . . . . Zero Coupon Notes will be offered and sold at a discount to their
nominal amount and will not bear interest.

Other Notes . . . . . . . . . . . . . . . . . . . . . The Issuer and the Company may agree with any Dealer and the
Trustee that Notes may be issued in a form not contemplated by the
Conditions, in which event the relevant provisions will be included
in the applicable Pricing Supplement.

Redemption . . . . . . . . . . . . . . . . . . . . . The applicable Pricing Supplement will indicate either that the
relevant Notes cannot be redeemed prior to their stated maturity
(other than (i) in specified instalments, if applicable; (ii) for taxation
and regulatory reasons; (iii) upon the occurrence of a Change of
Control (as defined in Condition 7.5) or (iv) following an Event of
Default (as defined in Condition 10.1) or that such Notes will be
redeemable at the option of the Issuer and/or the Noteholders upon
giving notice to the Noteholders or the Issuer, as the case may be, on
a date or dates specified prior to such stated maturity and at a price or
prices and on such other terms as may be agreed between the Issuer
and the relevant Dealer.

The applicable Pricing Supplement may provide that Notes may be

redeemable in two or more instalments of such amounts and on such
dates as are indicated in the applicable Pricing Supplement.

Notes having a maturity of less than one year may be subject to

restrictions on their denomination and distribution, see “Certain
Restrictions — Notes having a maturity of less than one year” above.

Denomination of Notes . . . . . . . . . . . . Notes will be issued in such denominations as may be agreed

between the Issuer, the Company and the relevant Dealer save that
the minimum denomination of each Note will be such as may be
allowed or required from time to time by the central bank (or
equivalent body) or any laws or regulations applicable to the relevant
Specified Currency, see “Certain Restrictions — Notes having a
maturity of less than one year” above.

Taxation . . . . . . . . . . . . . . . . . . . . . . . All payments in respect of the Notes will be made without deduction
for or on account of withholding taxes imposed by any Tax
Jurisdiction (as defined in Condition 8.2), subject as provided in
Condition 8. In the event that any such deduction is made, the Issuer
or the Guarantor will, save for certain limited circumstances
provided in Condition 8, be required to pay additional amounts to
cover the amounts so deducted.

4
Certain Covenants . . . . . . . . . . . . . . . . The terms of the Notes will contain covenants that will, among other
things, restrict the ability of the Issuer, the Company and, in some
cases, certain of the Company’s subsidiaries to:

‰ incur or guarantee additional indebtedness;

‰ create or incur certain liens;

‰ create or permit to exist any restrictions on the payment of

dividends to the Company by certain of the Company’s
subsidiaries;

‰ enter into unrelated businesses or engage in certain activities; and

‰ consolidate or merge with other entities.

Status of the Notes . . . . . . . . . . . . . . . The Notes will constitute direct, unconditional, unsubordinated and,
subject to the provisions of Condition 4.2, unsecured obligations of
the Issuer and will rank pari passu among themselves, with all other
outstanding unsecured and unsubordinated obligations of the Issuer,
present and future, but, in the event of insolvency, only to the extent
permitted by applicable laws relating to creditors’ rights.

Status of the Guarantee . . . . . . . . . . . . The Guarantee will constitute the direct, unconditional,
unsubordinated and (subject to Condition 4.2) unsecured obligation
of the Guarantor and will at all times rank pari passu in right of
payment with all other outstanding unsecured and unsubordinated
obligations of the Guarantor, present and future, but, in the event of
insolvency, only to the extent permitted by applicable laws relating
to creditors’ rights.

Listing . . . . . . . . . . . . . . . . . . . . . . . . . Approval in-principle has been obtained from the SGX-ST for
permission to deal in, and quotation of, any Notes to be issued
pursuant to the Programme and which are agreed at or prior to the
time of issue thereof to be so listed on the SGX-ST. Such permission
will be granted when such Notes have been admitted to the Official
List. The Notes may also be listed on such other or further stock
exchange(s) as may be agreed between the Issuer, the Company and
the relevant Dealer in relation to each Series.

The Securities will be traded on the SGX-ST in a minimum board lot

size of U.S.$200,000 for so long as the Securities are listed on the
SGX-ST and the rules of the SGX-ST so require.

So long as the Securities are listed on the SGX-ST and the rules of
the SGX-ST so require, the Issuer shall appoint and maintain a
paying agent in Singapore, where the Securities may be presented or
surrendered for payment or redemption. In the event that the Global
Certificate representing the Securities is exchanged for definitive
certificates, an announcement of such exchange shall be made by or
on behalf of the Issuer through the SGX-ST and such announcement
will include all material information with respect to the delivery of
the definitive certificates, including details of the paying agent in
Singapore.

Unlisted Notes may also be issued.

The applicable Pricing Supplement will state whether or not the

relevant Notes are to be listed and, if so, on which stock exchange(s).

5
Notes Issued as Green Bonds . . . . . . . The Issuer and the Guarantor may agree at the relevant issue date of
any Notes designated as Green Bonds (as described in “Use of
Proceeds”) to allocate the net proceeds towards the financing and/or
refinancing of Eligible Green Projects (as defined in “Use of
Proceeds”) in accordance with certain prescribed eligibility criteria
described under AC Energy’s Green Bond Framework. See “Use of
Proceeds—Green Bond Framework”. It would not be a default under
the Green Bonds if (i) the Issuer were to fail to allocate the proceeds
in the manner specified in the applicable Pricing Supplement or
otherwise not comply with AC Energy’s Green Bond Framework
and/or (ii) any third-party statements issued in connection with such
Green Bonds were to be withdrawn, modified or downgraded. Any
failure to allocate as specified or otherwise comply with AC
Energy’s Green Bond Framework or any withdrawal, modification,
or downgrade of third-party statements issued in connection with
Notes designated as Green Bonds and/or any failure to meet, or to
continue to meet, the investment requirements of certain investors
with respect to such Green Bonds may affect the value and/or trading
price of the Green Bonds and/or may have consequences for certain
investors with portfolio mandates to invest in assets with
environmentally-beneficial attributes. See “Risk Factors—Risks
Relating to the Notes issued as Green Bonds.”

Governing Law . . . . . . . . . . . . . . . . . . The Notes and any non-contractual obligations arising out of or in
connection with the Notes will be governed by, and shall be
construed in accordance with, English law.

Clearing System . . . . . . . . . . . . . . . . . Euroclear, Clearstream, Luxembourg, and/or any other clearing

system, as specified in the applicable Pricing Supplement (see “Form
of Notes”).

Selling Restrictions . . . . . . . . . . . . . . . There are restrictions on the offer, sale and transfer of the Notes in
the United States, the European Economic Area, the United
Kingdom, Japan, Hong Kong, Singapore, the People’s Republic of
China, the Cayman Islands, and the Philippines and such other
restrictions as may be required in connection with the offering and
sale of a particular Tranche of Notes (see “Subscription and Sale”).

United States Selling Restrictions . . . . Regulation S Category, as specified in the applicable Pricing
Supplement. TEFRA C/ TEFRA D may be applicable for Notes
issued in bearer form that has original maturity exceeding one year,
as specified in the applicable Pricing Supplement.

Risk Factors . . . . . . . . . . . . . . . . . . . . There are certain factors that may affect the Issuer ability to fulfil its
obligations under the Notes issued under the Programme. These are
set out under “Risk Factors” below. In addition, there are certain
factors which are material for the purpose of assessing the market
risks associated with Notes issued under the Programme. These are
set out under “Risk Factors” and include certain risks relating to the
structure of particular Series of Notes and certain market risks.

6
 TERMS AND CONDITIONS OF THE NOTES

The following are the Terms and Conditions of the Notes (the “Conditions”) which will be incorporated by
reference into each Global Note (as defined below) and each definitive Note, in the latter case only if permitted
by the relevant stock exchange or other relevant authority (if any) and agreed by the Issuer, the Guarantor and
the relevant Dealer at the time of issue but, if not so permitted and not so agreed, such definitive Note will have
endorsed thereon or attached thereto such Conditions. The applicable Pricing Supplement in relation to any
Tranche of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent
inconsistent with the following Conditions, replace or modify the following Conditions for the purpose of such
Notes. The applicable Pricing Supplement (or the relevant provisions thereof) will be endorsed upon, or attached
to, each Global Note and definitive Note. Reference should be made to “Form of the Notes” for a description of
the content of Pricing Supplements which will specify which of such terms are to apply in relation to the relevant
Notes.

This Note is one of a Series (as defined below) of Notes issued by AC Energy Finance International Limited (the
Issuer), and constituted by a trust deed dated 16 January 2019 (such trust deed as modified and/or supplemented
and/or restated from time to time, the Trust Deed) made between the Issuer, AC Energy, Inc. as guarantor (the
Guarantor) and The Hongkong and Shanghai Banking Corporation Limited (the Trustee, which expression
shall include any successor as Trustee).

References herein to the Notes shall be references to the Notes of this Series and shall mean:

(i) in relation to any Notes represented by a global Note (a Global Note), units of each Specified
Denomination in the currency specified therein or, if none is specified, the currency in which the Notes
are denominated (the Specified Currency);

(ii) any Global Note in bearer form (a Bearer Global Note);

(iii) any Global Note in registered form (a Registered Global Note);

(iv) definitive Notes in bearer form (Definitive Bearer Notes, and together with Bearer Global Notes, the
Bearer Notes) issued in exchange for a Bearer Global Note; and

(v) definitive Notes in registered form (Definitive Registered Notes, and together with the Registered
Global Notes, the Registered Notes), whether or not issued in exchange for a Registered Global Note.

The Notes, the Receipts (as defined below) and the Coupons (as defined below) have the benefit of an agency
agreement dated 16 January 2019 (such agency agreement as amended and/or supplemented and/or restated from
time to time, the Agency Agreement) and made between the Issuer, the Guarantor, the Trustee, The Hongkong
and Shanghai Banking Corporation Limited as principal paying agent (the Principal Paying Agent, which
expression shall include any successor principal paying agent) and any additional paying agents appointed in
accordance with the Agency Agreement (together with the Principal Paying Agent, the Paying Agents, which
expression shall include any additional or successor paying agents) and as transfer agent (the Transfer Agent,
which expression shall include any additional or successor transfer agents appointed in accordance with the
Agency Agreement) and The Hongkong and Shanghai Banking Corporation Limited as registrar (the Registrar,
which expression shall include any successor registrar and, together with the Paying Agents and Transfer Agents,
the Agents).

Interest bearing Definitive Bearer Notes (unless otherwise indicated in the applicable Pricing Supplement) have
interest coupons (Coupons) and, if indicated in the applicable Pricing Supplement, talons for further Coupons
(Talons) attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise
requires, be deemed to include a reference to Talons or talons. Definitive Bearer Notes repayable in instalments
have receipts (Receipts) for the payment of the instalments of principal (other than the final instalment) attached
on issue. Registered Notes and Global Notes do not have Receipts, Coupons or Talons attached on issue.

The Pricing Supplement for this Note (or the relevant provisions thereof) is attached to or endorsed on this Note
and supplements these terms and conditions (Conditions) and may specify other terms and conditions which
shall, to the extent so specified or to the extent inconsistent with these Conditions, replace or modify these
Conditions for the purposes of this Note. References to the applicable Pricing Supplement are to the Pricing
Supplement (or the relevant provisions thereof) attached to or endorsed on this Note.

7
Any reference to Noteholders or holders in relation to any Notes shall mean the holders of the Notes and shall,
in relation to any Notes represented by a Global Note, be construed as provided below. Any reference herein to
Receiptholders shall mean the holders of the Receipts and any reference herein to Couponholders shall mean
the holders of the Coupons and shall, unless the context otherwise requires, include the holders of the Talons.
The Trustee acts for the benefit of the Noteholders, the Receiptholders and the Couponholders, in accordance
with the provisions of the Trust Deed.

As used herein, Tranche means Notes which are identical in all respects (including as to listing) and Series
means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (i) expressed to be
consolidated and form a single series with such Tranche of Notes and (ii) identical in all respects (including as to
listing) except for their respective Issue Dates, (unless this is a Zero Coupon Note) Interest Commencement
Dates and/or Issue Prices.

Copies of the Trust Deed and the Agency Agreement are available for inspection during normal business hours,
with prior written notice, at the registered office for the time being of the Trustee (being Level 30, HSBC Main
Building, 1 Queen’s Road Central, Hong Kong) and at the specified office of each of the Principal Paying Agent
and the other Paying Agents. Copies of the applicable Pricing Supplement are obtainable during normal business
hours at the specified office of each of the Paying Agents save that, if this Note is an unlisted Note of any Series,
the applicable Pricing Supplement will only be obtainable by a Noteholder holding one or more unlisted Notes of
that Series and such Noteholder must produce evidence satisfactory to the Issuer and the relevant Agent as to its
holding of such Notes and identity. The Noteholders, the Receiptholders and the Couponholders are deemed to
have notice of, and are entitled to the benefit of, and are bound by, all the provisions of the Trust Deed, the
Agency Agreement and the applicable Pricing Supplement which are applicable to them. The statements in these
Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed and the Agency
Agreement.

Words and expressions defined in the Trust Deed and the Agency Agreement or used in the applicable Pricing
Supplement shall have the same meanings where used in these Conditions unless the context otherwise requires
or unless otherwise stated and provided that, in the event of inconsistency between the Trust Deed and the
Agency Agreement, the Trust Deed will prevail and, in the event of inconsistency between the Trust Deed or the
Agency Agreement and the applicable Pricing Supplement, the applicable Pricing Supplement will prevail.

1. FORM, DENOMINATION AND TITLE

The Notes may be in bearer form and/or in registered form and, in the case of definitive Notes, will be
serially numbered, in the currency (the Specified Currency) and the denominations (the Specified
Denomination(s)) specified in the applicable Pricing Supplement. Save as provided in Condition 2,
Notes of one Specified Denomination may not be exchanged for Notes of another Specified
Denomination and Bearer Notes may not be exchanged for Registered Notes and vice versa.

Prior to the issuance of any Bearer Notes hereunder, the Issuer and the Guarantor will confirm with their
counsel that all documents used in connection with the issuance of such Bearer Notes have been
reviewed, revised and updated to the extent necessary to ensure that such documents properly allow for
the issuance of Bearer Notes in accordance with U.S. federal income tax law.

This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked
Interest Note, a Dual Currency Interest Note or a combination of any of the foregoing, depending upon
the Interest Basis shown in the applicable Pricing Supplement.

This Note may be an Index Linked Redemption Note, an Instalment Note, a Dual Currency Redemption
Note, a Partly Paid Note or a combination of any of the foregoing, depending upon the Redemption/
Payment Basis shown in the applicable Pricing Supplement.

Definitive Bearer Notes are issued with Coupons and (if applicable) Receipts and Talons attached,
unless they are Zero Coupon Notes in which case references to Coupons and Couponholders in these
Conditions are not applicable.

Subject as set out below, title to the Bearer Notes, Receipts and Coupons will pass by delivery. Title to
Registered Notes will pass upon registration of transfers in the books of the Registrar in accordance with
the provisions of the Agency Agreement. The Issuer, the Guarantor, the Trustee, the Principal Paying

8
 Agent, any Paying Agent, the Registrar and the Transfer Agent will (except as otherwise ordered by a
court of competent jurisdiction or required by law) deem and treat the bearer of any Bearer Note,
Receipt or Coupon and any person in whose name a Registered Note is registered as the absolute owner
thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or
notice of any previous loss or theft thereof) for all purposes but, in the case of any Global Note, without
prejudice to the provisions set out in the next succeeding paragraph.

For so long as any of the Notes is represented by a Global Note held by a common depositary on behalf
of Euroclear Bank SA/NV (Euroclear) and/or Clearstream Banking S.A. (Clearstream, Luxembourg),
each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the
records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of
such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream,
Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be
conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer,
the Guarantor, the Trustee, the Principal Paying Agent, any Paying Agent, the Registrar and the Transfer
Agent as the holder of such nominal amount of such Notes for all purposes other than with respect to the
payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer or
registered holder of the relevant Global Note shall be treated by the Issuer, the Guarantor, the Trustee,
the Principal Paying Agent, any Paying Agent, the Registrar and any Transfer Agent as the holder of
such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global
Note and the expressions Noteholder and holder of Notes and related expressions shall be construed
accordingly. In determining whether a particular person is entitled to a particular nominal amount of
Notes, as aforesaid, the Trustee may rely on such evidence and/or information and/or certification as it
shall, in its absolute discretion, think fit and, if it does so rely, such evidence and/or information and/or
certification shall, in the absence of manifest error, be conclusive and binding on all concerned.

For so long as any Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer
shall appoint and maintain a paying agent in Singapore, where such Notes may be presented or
surrendered for payment or redemption, in the event that any of the Global Notes representing such
Notes is exchanged for definitive Notes. In addition, in the event that any of the Global Notes is
exchanged for definitive Notes, an announcement of such exchange will be made by or on behalf of the
Issuer through the SGX-ST and such announcement will include all material information with respect to
the delivery of the definitive Notes, including details of the paying agent in Singapore.

Notes which are represented by a Global Note will be transferable only in accordance with the rules and
procedures for the time being of Euroclear and Clearstream, Luxembourg, as the case may be.
References to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be
deemed to include a reference to any additional or alternative clearing system specified in the applicable
Pricing Supplement or as may otherwise be approved by the Issuer, the Guarantor, the Trustee and the
Principal Paying Agent.

2. TRANSFERS OF REGISTERED NOTES

2.1 Transfers of Interests in Registered Global Notes

Transfers of beneficial interests in Registered Global Notes will be effected by Euroclear or

Clearstream, Luxembourg, as the case may be, and, in turn, by other participants and, if appropriate,
indirect participants in such clearing systems acting on behalf of beneficial transferors and transferees of
such interests. A beneficial interest in a Registered Global Note will, subject to compliance with all
applicable legal and regulatory restrictions, be exchangeable for Registered Notes in definitive form
only in the authorised denominations set out in the applicable Pricing Supplement and only in
accordance with the rules and operating procedures for the time being of Euroclear or Clearstream,
Luxembourg, as the case may be, and in accordance with the terms and conditions specified in the Trust
Deed and the Agency Agreement. Transfers of a Registered Global Note registered in the name of a
nominee for Euroclear or Clearstream, Luxembourg shall be limited to transfers of such Registered
Global Note, in whole but not in part, to another nominee of Euroclear or Clearstream, Luxembourg or
to a successor of Euroclear or Clearstream, Luxembourg or such successor’s nominee.

2.2 Transfers of Registered Notes Generally

Registered Notes may not be exchanged for Bearer Notes and vice versa.

9
 Upon the terms and subject to the conditions set forth in the Trust Deed and the Agency Agreement, a
Definitive Registered Note may be transferred in whole or in part (in the authorised denominations set
out in the applicable Pricing Supplement). In order to effect any such transfer: (i) the holder or holders
must (a) surrender the Definitive Registered Note for registration of the transfer of the Definitive
Registered Note (or the relevant part of the Definitive Registered Note) at the specified office of the
Registrar or any Transfer Agent, with the form of transfer thereon duly executed by the holder or
holders thereof or his or their attorney or attorneys duly authorised in writing and (b) complete and
deposit such other certifications as may be required by the relevant Transfer Agent and (ii) the Registrar
or, as the case may be, the relevant Transfer Agent must, after due and careful enquiry, being satisfied
with the documents of title and the identity of the person making the request and subject to such
reasonable regulations as the Issuer, the Guarantor, the Trustee, the Registrar, or as the case may be, the
relevant Transfer Agent may prescribe (such initial regulations being set out in Schedule 4 to the
Agency Agreement), which may be changed by the Issuer and the Guarantor with the prior written
approval of the Registrar and the Trustee. Subject as provided above, the Registrar or, as the case may
be, the relevant Transfer Agent will, within three business days (being for this purpose a day on which
banks are open for business in the city where the specified office of the Registrar or, as the case may be,
the relevant Transfer Agent is located) of the request (or such longer period as may be required to
comply with any applicable fiscal or other laws or regulations) authenticate and deliver, or procure the
authentication and delivery of, at its specified office to the transferee or (at the risk of the transferee)
send by mail to such address as the transferee may request, a new Definitive Registered Note of a like
aggregate nominal amount to the Definitive Registered Note (or the relevant part of the Definitive
Registered Note) transferred. In the case of the transfer of part only of a Definitive Registered Note, a
new Definitive Registered Note in respect of the balance of the Definitive Registered Note not
transferred will be so authenticated and delivered or (at the risk of the transferor) sent to the transferor.

2.3 Registration of Transfer upon Partial Redemption

In the event of a partial redemption of Notes under Condition 7.3, the Issuer shall not be required to
register the transfer of any Registered Note, or part of a Registered Note, that is called for partial
redemption.

2.4 Costs of Registration

Registration of transfers will be effected without charge by or on behalf of the Issuer, the Guarantor, the
Registrar or the relevant Transfer Agent, but upon payment (or the giving of such indemnity,
pre-funding or security as the Registrar or the relevant Transfer Agent may reasonably require) in
respect of any tax or other governmental charges which may be imposed in relation to it.

2.5 Closed Periods

No Noteholder may require the transfer of a Definitive Registered Note to be registered during the
period of 15 days ending on the due date for any payment of principal, premium or interest on that Note.

The Issuer shall not be required in the event of a partial redemption of Notes under Condition 7:

(a) to register the transfer of Definitive Registered Notes (or parts of such Notes) during the period
beginning on the 65th day before the date of the partial redemption and ending on the day on
which notice is given specifying the serial numbers of Notes called (in whole or in part) for
redemption (both inclusive); or

(b) to register the transfer of any Definitive Registered Note, or part of a Definitive Registered
Note, called for redemption.

3. STATUS OF THE NOTES AND THE NOTES GUARANTEE

3.1 Status of the Notes

The Notes (the Notes), and any relative Receipts and Coupons, are direct, unconditional, unsubordinated
and (subject to the provisions of Condition 4.2) unsecured obligations of the Issuer and rank pari passu,
without any preference among themselves, with all other outstanding unsecured and unsubordinated

10
 obligations of the Issuer, present and future, but, in the event of insolvency, only to the extent permitted
by applicable laws relating to creditors’ rights.

3.2 Status of the Notes Guarantee

Under the Trust Deed, the Guarantor unconditionally and irrevocably guarantees the due and punctual
payment of all sums from time to time payable by the Issuer in respect of its obligations under the Notes
and the Trust Deed (the Notes Guarantee). The Notes Guarantee is the direct, unconditional,
unsubordinated and (subject to the provisions of Condition 4.2) unsecured obligation of the Guarantor
and ranks pari passu with all other outstanding unsecured and unsubordinated obligations of the
Guarantor, present and future, but, in the event of insolvency, only to the extent permitted by applicable
laws relating to creditors’ rights.

The Guarantor, in the Trust Deed, (a) agrees that its obligations under the Notes Guarantee will be
enforceable irrespective of any invalidity, irregularity or unenforceability of the Notes or the Trust Deed
and (b) waives its right to require the Trustee to pursue or exhaust its legal or equitable remedies against
the Issuer prior to exercising its rights under the Notes Guarantee. Moreover, if at any time any amount
paid under a Note, the Trust Deed or the Agency Agreement is rescinded or must otherwise be restored,
the rights of the Noteholders under the Notes Guarantee will be reinstated with respect to such payments
as though such payment had not been made. All payments under the Notes Guarantee will be made in
U.S. dollars.

4. COVENANTS

4.1 Limitation on Guarantees Provided by Material Subsidiaries

The Guarantor will not permit any Material Subsidiary, directly or indirectly, to Guarantee any Relevant
Indebtedness of the Issuer or the Guarantor (Guaranteed Indebtedness), unless:

(a) such Material Subsidiary simultaneously executes and delivers a supplemental trust deed to the
Trust Deed providing for a Subsidiary Guarantee of payments in respect of the Notes by such
Material Subsidiary on an equal and ratable basis with such Guarantee and up to the maximum
amount of such Guarantee for so long as such Guarantee remains effective; and

(b) such Material Subsidiary waives and will not in any manner whatsoever claim, or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights against the Issuer or the Guarantor as a result of any payment by such Material
Subsidiary under such Guarantee until the Notes have been paid in full.

Notwithstanding the foregoing, in connection with any Guarantee of Relevant Indebtedness of the Issuer
or Guarantor made by a Subsidiary prior to becoming a Material Subsidiary, such Subsidiary shall
comply with the requirements of these Conditions 4.1(a) and 4.1(b) as soon as practicable after
becoming a Material Subsidiary.

If the Guaranteed Indebtedness (A) ranks pari passu in right of payment with the Notes or the Notes
Guarantee, then the Guarantee of such Guaranteed Indebtedness shall rank pari passu in right of
payment with, or subordinated to, the Notes or the Notes Guarantee, as the case may be, or (B) is
subordinated in right of payment to the Notes or the Notes Guarantee, then the Guarantee of such
Guaranteed Indebtedness shall be subordinated in right of payment to the Notes or the Notes Guarantee
at least to the extent that the Guaranteed Indebtedness is subordinated to the Notes or the Notes
Guarantee.

A Subsidiary Guarantee given by a Material Subsidiary may be released in certain circumstances,

including:

(a) upon repayment in full of the Notes;

(b) upon the release of any Guarantee of any Relevant Indebtedness of the Issuer or Guarantor
which results in such Material Subsidiary no longer guaranteeing any other Relevant
Indebtedness of the Issuer or Guarantor; or

11
 (c) upon (i) the sale of such Material Subsidiary in compliance with the terms of the Trust Deed
and the Notes resulting in such Material Subsidiary no longer being a Material Subsidiary, or
(ii) the Material Subsidiary ceasing to be such pursuant to the definition of “Material
Subsidiary”.

No release of a Material Subsidiary from its Subsidiary Guarantee shall be effective against the Trustee
or the Noteholders until the Issuer and the Guarantor have delivered to the Trustee an Officer Certificate
stating that all requirements relating to such release have been complied with and that such release is
authorised and permitted by the Trust Deed.

4.2 Negative Pledge

Except for Permitted Liens, so long as any Note remains outstanding (as defined in the Trust Deed),
neither the Issuer nor the Guarantor will create or permit to subsist any Lien upon the whole or any part
of the property, assets or revenues, present or future, of the Issuer or the Guarantor, respectively, to
secure any Relevant Indebtedness (as defined below) or to secure any guarantee of or indemnity in
respect of any Relevant Indebtedness unless, at the same time or prior thereto, the Issuer’s obligations
under the Notes and the Trust Deed (a) are secured equally and rateably therewith, or (b) have the
benefit of such other security, guarantee, indemnity or other arrangement as shall be approved by an
Extraordinary Resolution of the Noteholders.

4.3 Limitation on Indebtedness

(a) The Issuer and the Guarantor will not, and the Guarantor will procure that no Material
Subsidiary will, Incur any Indebtedness (including Acquired Indebtedness) if, after giving
effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom on a pro forma basis, the ratio of Net Debt to Total Equity of the Guarantor would
exceed 2.5 to 1.0.

(b) Notwithstanding the foregoing, the Issuer, the Guarantor and any Material Subsidiary may
Incur each and all of the following:

(i) Indebtedness under the Notes and the Notes Guarantee;

(ii) Indebtedness outstanding on the Issue Date of the first Tranche of Notes;

(iii) Indebtedness (Permitted Refinancing Indebtedness) issued in exchange for, or the

net proceeds of which are used to refinance, refund, renew, redeem, replace, defease
or discharge, then outstanding Indebtedness Incurred under Conditions 4.3(a) or
4.3(b)(i), (ii) or (iii) hereunder, and any refinancings thereof; in each case in an
amount not to exceed the amount so exchanged, refinanced, refunded, renewed,
redeemed, replaced, defeased or discharged (plus premiums, accrued interest, fees and
expenses); provided that Indebtedness the proceeds of which are used to refinance or
refund the Notes or Indebtedness that is pari passu with, or subordinated in right of
payment to, the Notes shall only be Permitted Refinancing Indebtedness if (x) in case
the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with
the Notes, such new Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or remains outstanding,
is expressly made pari passu with, or subordinate in right of payment to, the
remaining Notes, or (y) in case the Indebtedness to be refinanced is subordinated in
right of payment to the Notes, such new Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such new Indebtedness is issued or
remains outstanding, is expressly made subordinate in right of payment to the Notes at
least to the extent that the Indebtedness to be refinanced is subordinated to the Notes;

(iv) Indebtedness pursuant to Hedging Obligations entered into in the ordinary course of
business and not for speculative purposes and designed to protect the Issuer, the
Guarantor or any Material Subsidiary from fluctuations in interest rates, currencies or
the price of commodities and not for speculation;

12
(v) Indebtedness represented by Capitalised Lease Obligations, mortgage financings or
purchase money obligations, or for the purpose of financing all or a portion of the
purchase price of, or in connection with the acquisition (whether through the direct
purchase of property, plant or equipment or the Capital Stock of any Person owning
such property, plant or equipment), construction, improvement or development of, real
or personal, movable or immovable, property, assets, concessions or licences, to be
used in a Permitted Business provided that the aggregate amount of Indebtedness at
any time outstanding under this Condition 4.3(b)(v) shall not exceed 15 per cent. of
Total Assets;

(vi) Subordinated Indebtedness of the Issuer, the Guarantor or any Material Subsidiary
owed to any of its Affiliates (excluding Subsidiaries), provided that such
Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to
which such new Indebtedness is issued or remains outstanding: (x) does not provide
for cash payments of interest thereon at any time during the period beginning on the
Issue Date and ending on the Stated Maturity of the Notes; or (y) provides for cash
payments of interest thereon only to the extent that, as of the date of the first such
proposed cash interest payment, the outstanding principal amount of such
Indebtedness, including any accrued pay-in-kind, discount or similar interest thereon,
could be Incurred under Condition 4.3(a);

(vii) Indebtedness with a maturity of one year or less used by the Issuer, the Guarantor or
any Material Subsidiary for working capital; provided that the aggregate principal
amount of Indebtedness permitted by this Condition 4.3(b)(vii) at any time
outstanding does not exceed U.S.$25.0 million (or the Dollar Equivalent thereof) in
the aggregate;

(viii) Guarantees of Indebtedness of the Issuer, the Guarantor or any Subsidiary to the
extent that the Guaranteed Indebtedness was permitted to be incurred by another
provision of this Condition 4.3;

(ix) Indebtedness in respect of workers’ compensation claims, self-insurance obligations,

performance, surety and similar bonds, bankers acceptances, completion guarantees
and similar obligations, and reimbursement obligations with respect thereto, in the
ordinary course of business;

(x) Indebtedness constituting reimbursement obligations with respect to letters of credit,

trade guarantees, bank guarantees or similar obligations issued in the ordinary course
of business to the extent that such letters of credit or guarantees are not drawn upon
or, if drawn upon, to the extent such drawing is reimbursed no later than the thirtieth
Business Day following receipt by the Issuer, the Guarantor or any Material
Subsidiary of a demand for reimbursement;

(xi) Indebtedness arising from agreements of the Issuer, the Guarantor or any Material
Subsidiary providing for customary indemnification, adjustment of purchase price or
similar obligations, in each case, Incurred in connection with the disposition of any
business, or assets, or Capital Stock of a Subsidiary; provided that the maximum
aggregate liability in respect of all such Indebtedness shall at no time exceed the gross
proceeds actually received by the Issuer, the Guarantor or any Material Subsidiary in
connection with such disposition;

(xii) Indebtedness arising from the honouring by a bank or other financial institution of a
cheque, draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of business;
provided, however, that such Indebtedness is repaid in full or otherwise extinguished
within five Business Days of Incurrence;

(xiii) Indebtedness of any Person outstanding on the date on which such Person becomes a
Material Subsidiary of the Guarantor or is merged, consolidated, amalgamated or
otherwise combined with (including pursuant to any acquisition of assets and
assumption of related liabilities) the Issuer, the Guarantor or any Material Subsidiary

13
 (other than Indebtedness Incurred to provide all or any portion of the funds used to
consummate the transaction or series of related transactions pursuant to which such
Person became a Material Subsidiary of the Guarantor or was otherwise acquired by
the Issuer or the Guarantor or any Material Subsidiary); provided, however, with
respect to this Condition 4.3(b)(xiii), that at the time of the acquisition or other
transaction pursuant to which such Indebtedness was deemed to be Incurred, the Issuer
or the Guarantor, as the case may be, would have been able to Incur at least U.S.$1.00
of additional Indebtedness in compliance with Condition 4.3(a) after giving pro forma
effect to the incurrence of such Indebtedness pursuant to this Condition 4.3(b)(xiii) or
(ii) Net Debt to Total Equity of the Guarantor would not be more than it was
immediately prior to giving pro forma effect to the Incurrence of such Indebtedness
pursuant to this Condition 4.3(b)(xiii);

(xiv) Indebtedness of the Issuer, Guarantor, or any Material Subsidiary owed to the Issuer,
Guarantor or any Subsidiary; provided that (A) (i) any event or circumstance which
results in any Subsidiary owed any Indebtedness pursuant to this Condition 4.3(b)(xiv)
ceasing to be a Subsidiary or (ii) any subsequent transfer of such Indebtedness to a
Person other than the Issuer, the Guarantor or any Subsidiary shall be deemed, in each
case, to constitute an Incurrence of such Indebtedness not permitted by this Condition
4.1(b)(xiv) and (B) if the Issuer or the Guarantor is the obligor of such Indebtedness,
such Indebtedness must be unsecured and expressly be subordinated in right of
payment to the Notes, in the case of the Issuer, or the Notes Guarantee, in the case of
the Guarantor;

(xv) Limited Recourse Project Financing;

(xvi) Indebtedness not otherwise permitted by Condition 4.3 in an aggregate principal

amount outstanding at any time (together with refinancings thereof) not to exceed
U.S.$25 million (or the Dollar Equivalent thereof).

(c) For the purposes of determining any particular amount of Indebtedness under this Condition
4.3, Guarantees of Indebtedness or obligations with respect to letters of credit supporting
Indebtedness otherwise included in the determination of such particular amount shall not be
included.

(d) The Issuer or the Guarantor will not Incur any Indebtedness if such Indebtedness is
contractually subordinated in right of payment to any other Indebtedness of the Issuer or the
Guarantor, unless such Indebtedness is contractually subordinated in right of payment to the
Notes, on substantially identical terms; provided, however, that no Indebtedness will be
deemed to be contractually subordinated in right of payment to any other Indebtedness of the
Issuer or the Guarantor solely by virtue of being unsecured or by virtue of being secured on a
junior priority basis.

(e) Notwithstanding any other provision of this Condition 4.3, the maximum amount of
Indebtedness that may be Incurred pursuant to this Condition 4.3 will not be deemed to be
exceeded with respect to any outstanding Indebtedness due solely to the result of fluctuations in
the exchange rate of currencies. With respect to any U.S. dollar-denominated restriction on the
incurrence of Indebtedness, the U.S. dollar equivalent principal amount (or accreted value, as
applicable) of Indebtedness denominated in a foreign currency shall be calculated based on the
relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the
case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness;
provided that if such Indebtedness is incurred to renew, refund, refinance, replace, defease or
discharge other Indebtedness denominated in a foreign currency, and such renewal, refunding,
refinancing, replacement, defeasance or discharge would cause the applicable U.S. dollar-
denominated restriction to be exceeded if calculated at the relevant currency exchange rate in
effect on the date thereof, such U.S. dollar-denominated restriction shall be deemed not to have
been exceeded so long as the principal amount (or accreted value, as applicable) of such
Indebtedness does not exceed the principal amount (or accreted value, as applicable) of such
Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged.

14
 (f) For purposes of determining compliance with this Condition 4.3, in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness described above,
including under Condition 4.3(a) hereunder, the Issuer, in its sole discretion, will classify, and
from time to time may reclassify, such item of Indebtedness.

(g) The accrual of interest, the accretion or amortisation of original issue discount, the payment of
interest on any Indebtedness in the form of additional Indebtedness with the same terms, the
reclassification of Preferred Stock as Indebtedness due to a change in accounting principles,
and the payment of dividends on Disqualified Stock in the form of additional shares of the
same class of Disqualified Stock, will not be deemed to be an Incurrence of Indebtedness.

4.4 Limitation on Dividend and Other Restrictions Affecting Material Subsidiaries

Subject to laws of general application in relation to the payment of dividends, the Issuer and the
Guarantor will not, and will not permit any Material Subsidiaries to create or otherwise cause or permit
to exist any restrictions on dividend payments by Material Subsidiaries to the Guarantor.

The foregoing does not apply to restrictions on dividend payments:

(a) existing in agreements as in effect on the Issue Date of the first Tranche of Notes (including the
Trust Deed and these Conditions) and in any amendments, restatements, modifications,
supplements, extensions, refinancings, refundings, renewals or replacements of any of the
foregoing agreements; provided that such restrictions in any such amendment, restatement,
modification, supplement, extension, refinancing, refunding, renewal or replacement, taken as a
whole, are not materially more restrictive, with respect to such dividend restriction, than those
restrictions that are then in effect and that are being amended, restated, modified,
supplemented, extended, refinanced, refunded, renewed or replaced;

(b) existing under or by virtue of Permitted Refinancing Indebtedness; provided that the
restrictions contained in the agreements governing such Permitted Refinancing Indebtedness
are not materially more restrictive, taken as a whole, than those contained in the agreements
governing the Indebtedness being refinanced;

(c) existing under or by virtue of the Notes or the Notes Guarantee;

(d) existing under or by virtue of Non-Recourse Debt or Limited Recourse Project Financing;

(e) existing under or by reason of applicable law, rule, regulation, or order;

(f) existing under any instrument with respect to any Person (including any Subsidiary) or the
property or assets of such Person at the time such Person becomes or is merged with or into a
Material Subsidiary or at the time any property or assets of any Person are acquired by any
Material Subsidiary, existing at the time of such acquisition and in each case not incurred in
contemplation thereof, and any extensions, refinancings, renewals or replacements thereof;
provided that such restrictions in any such extension, refinancing, renewal or replacement,
taken as a whole, are no less favourable in any material respect to the Noteholders than those
restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;

(g) arising from, or agreed to, in the ordinary course of business or existing by virtue of any Lien
with respect to any property or assets of the Issuer, the Guarantor or any Material Subsidiary;

(h) existing with respect to a Material Subsidiary, and imposed pursuant to an agreement that has
been entered into for the sale or other disposition of such Material Subsidiary or the sale or
disposition of all or substantially all of property and assets of such Material Subsidiary;

(i) contained in credit agreements, financing agreements, trust deeds, indentures or other
agreements or instruments relating to Indebtedness incurred by Material Subsidiaries
subsequent to the Issue Date and not in violation of Condition 4.3 above, and any amendments,
restatements, modifications, renewals, supplements, refundings, replacements or refinancings
of those agreements, if the restrictions are customary for a financing of that type or are not

15
 materially more restrictive, taken as a whole, than those contained in the Notes and the Note
Guarantees;

(j) existing in customary provisions in joint venture agreements, shareholder agreements and other
similar agreements not prohibited by these Conditions, to the extent such restrictions relate to
the activities or assets of a Material Subsidiary that is party to such joint venture, shareholder
or similar agreement and if the restrictions are customary for an agreement of that type; and

(k) existing under or by virtue of restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.

4.5 Limitation on Consolidation, Merger and Sales of Assets

So long as any Note remains outstanding, neither the Issuer nor the Guarantor will consolidate with, or
merge with or into, another Person, permit any Person to merge with it, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its and its Subsidiaries’ properties and assets (calculated
in their entirety) unless:

(a) the Issuer or the Guarantor shall be the continuing Person, or the continuing Person shall
expressly assume all obligations of the Issuer or the Guarantor, as the case may be, under the
Notes, the Notes Guarantee and the Trust Deed, as applicable; and

(b) immediately after giving effect to such Merger on a pro forma basis, no Event of Default shall
have occurred and be continuing or would result therefrom.

4.6 Limitation on the Guarantor’s Business Activities

The Guarantor will not, directly or indirectly, engage in any business other than a Permitted Business.
The engagement by a Subsidiary of the Guarantor in a business that is not a Permitted Business shall not
be deemed to be an indirect engagement in such business by the Guarantor.

4.7 Provision of Financial Statements and Reports

(a) The Guarantor will furnish to the Trustee and, upon request, any Noteholder:

(i) as soon as they are available, but in any event within 120 calendar days after the end
of the Financial Year of the Guarantor, copies of its financial statements (on a
consolidated basis) in respect of such financial year (including at least a statement of
income, statement of financial position and statement of cash flows) audited by a
member firm of an internationally recognised firm of independent accountants; and

(ii) as soon as they are available, but in any event within 60 calendar days after the end of
each quarterly period (other than the final period of a Financial Year) of the
Guarantor, copies of its unaudited financial statements (on a consolidated basis) in
respect of such quarterly period or (in the case of the second quarter of each financial
year) the relevant semi-annual period (including at least a statement of income,
statement of financial position and statement of cash flows).

(b) In addition, the Guarantor will provide to the Trustee (1) within 120 days after the end of each
fiscal year, an Officer Certificate (X) stating the ratio of Net Debt to Total Equity of the
Guarantor (as of the end of such fiscal year) and showing in reasonable detail the calculation of
such ratio, and (Y) setting out a list of Material Subsidiaries as of the end of such fiscal year,
including in details of any acquisition and/or disposals thereof, as well as details of any
Subsidiary which became or ceased to be a Material Subsidiary during such fiscal year; and
(2) as soon as possible and in any event within 30 days after the Guarantor becomes aware or
should reasonably become aware of the occurrence of a Potential Event of Default, an Officer
Certificate setting forth the details of the Potential Event of Default, and the action which the
Guarantor proposes to take with respect thereto.

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4.8 Suspension Of Certain Covenants

If on any date following the Issue Date of any Notes issued pursuant to these Conditions, any such
Notes have a rating of Investment Grade from at least two Rating Agencies and no Potential Event of
Default or Event of Default has occurred and is continuing (a Suspension Event), then, beginning on
that day and continuing until such time, if any, at which such Notes cease to have a rating of Investment
Grade from at least two of the Rating Agencies, the following Conditions will be suspended and will no
longer apply:

(a) Condition 4.1 (Limitation on Guarantees Provided by Material Subsidiaries);

(b) Condition 4.3 (Limitation on Indebtedness); and

(c) Condition 4.4 (Limitation on Dividend and Other Payment Restrictions Affecting Material
Subsidiaries),

Such covenants will be reinstated and apply according to their terms as of and from the first day on
which a Suspension Event ceases to be in effect. Such covenants will not, however, be of any effect with
regard to actions of the Issuer or the Guarantor properly taken in compliance with the Conditions during
the continuance of the Suspension Event.

4.9 Definitions

In these conditions:

Acquired Indebtedness means Indebtedness of a Person existing at the time such Person becomes a
Material Subsidiary or Indebtedness of a Material Subsidiary assumed in connection with the acquisition
of assets from such Person by such Material Subsidiary and not Incurred in connection with, or in
contemplation of, the Person merging with or into or becoming a Material Subsidiary or such
acquisition.

Affiliate means, with respect to any Person, any other Person (a) directly or indirectly controlling,
controlled by, or under direct or indirect common control with, such Person, or (b) who is a director or
officer of such Person or any Subsidiary of such Person or of any Person referred to in clause (a) of this
definition. For purposes of this definition, control (including, with correlative meanings, the terms
controlling, controlled by and under common control with), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

Business Day means a day (other than a Saturday or Sunday) on which commercial banks are open for
business in Hong Kong, Singapore, New York and Makati.

Capital Stock means, with respect to any Person, any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents (however designated, whether voting or
non-voting) in equity of such Person, whether outstanding on the Issue Date of the first tranche of Notes
or issued thereafter, including, without limitation, all Common Stock and Preferred Stock, but excluding
(i) any debt security convertible or exchangeable into such equity and (ii) any perpetual capital
securities, subordinated capital securities or other similar instruments (or portions thereof) that are
classified as equity under PFRS.

Capitalised Lease means, with respect to any Person, any lease of any property (whether real, personal
or mixed) which, in conformity with PFRS, is required to be capitalised on the balance sheet of such
Person.

Capitalised Lease Obligations means the capitalised amount of any rental obligations under a
Capitalised Lease in accordance with PFRS, and the Stated Maturity thereof will be the date of the last
payment of rent or any other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of penalty.

17
Commodities Agreement means any forward, option or futures contract or other similar agreement or
arrangement designed to protect against fluctuations in the price of fuel, electricity or other commodities
or raw materials.

Common Stock means, with respect to any Person, any and all shares, interests, rights to purchase,
warrants, options or other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person’s common stock or ordinary shares, whether or not outstanding on
the Issue Date of the first Tranche of Notes, and include, without limitation, all series and classes of
such common stock or ordinary shares.

Currency Agreement means any foreign exchange forward contract, currency swap agreement,
currency option or other similar agreement or arrangement designed to protect against fluctuations in
foreign exchange rates.

Disqualified Stock means any class or series of Capital Stock of any Person that by its terms (or by the
terms of any security into which it is convertible or for which it is exchangeable) or otherwise is
(a) required to be redeemed prior to the Stated Maturity of the Notes, (b) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated Maturity of the Notes or
(c) convertible into or exchangeable for Capital Stock referred to in clause (a) or (b) above or
Indebtedness having a scheduled maturity prior to the Stated Maturity of the Notes; provided that (i) any
Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders
thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence
of a “change of control” occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the “change of control” provisions applicable to such Capital Stock are no more
favourable to the holders of such Capital Stock than the provisions contained in Condition 7.5 and such
Capital Stock specifically provides that such Person will not repurchase or redeem any such stock
pursuant to such provision prior to the repurchase of the Notes as are required to be repurchased
pursuant to Condition 7.5; and (ii) any class or series of debt securities or Preferred Stock convertible or
exchangeable into Common Stock, the terms of which allow for a cash payment in lieu of Common
Stock upon conversion or exchange in the event that the issue or distribution of Common Stock to the
holder thereof will cause such Person to violate foreign ownership regulations applicable in the Cayman
Islands or the Philippines from time to time shall not constitute Disqualified Stock provided that any
such cash payments are made with the proceeds of the sale of Equity Interests of such Person to an
unaffiliated Person.

Dollar Equivalent means, with respect to any monetary amount in a currency other than U.S. dollars, at
any time for the determination thereof, the amount of U.S. dollars obtained by converting such foreign
currency involved in such computation into U.S. dollars at the reference exchange rate for the purchase
of U.S. dollars with the applicable foreign currency as quoted by Bangko Sentral ng Pilipinas on the
date of determination.

Equity Interests means Capital Stock and all warrants, options or other rights to acquire Capital Stock
(but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

Extraordinary Resolution has the meaning given to it in the Trust Deed.

Financial Year means a financial year of the Issuer and the Guarantor, for the time being ending on
December 31.

Fitch means Fitch Ratings Ltd. or any successor to the rating agency business thereof.

Guarantee means any obligation, contingent or otherwise, of any Person directly or indirectly
guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person
(a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation of such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (b) entered into for purposes of assuring in any other
manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not

18
include endorsements for collection or deposit in the ordinary course of business. The term Guarantee
used as a verb has a corresponding meaning.

Hedging Obligation means of any Person means the obligations of such Person pursuant to any
Currency Agreement, Interest Rate Agreement or Commodities Agreement.

Incur means, with respect to any Indebtedness or Capital Stock, to incur, create, issue, assume,
guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of,
contingently or otherwise, such Indebtedness or Capital Stock; provided that the accretion of original
issue discount shall not be considered an Incurrence of Indebtedness. The terms Incurrence, Incurred
and Incurring have meanings correlative with the foregoing. Notwithstanding the foregoing, existing
Indebtedness of a Subsidiary which becomes a Material Subsidiary in accordance with these Conditions
solely by reason of exceeding the thresholds for gross revenue or total assets set out in the first
paragraph of the definition of Material Subsidiary shall not be deemed Incurred or an Incurrence.

Indebtedness of a Person means any indebtedness for or in respect of:

(a) moneys borrowed;

(b) any amount raised by acceptance under any acceptance credit facility or dematerialised
equivalent;

(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes,
debentures, loan stock or any similar instrument;

(d) the amount of any liability in respect of any lease or hire purchase contract which would, in
accordance with PFRS, be treated as a Capitalised Lease Obligation (other than any
concession-related leases);

(e) the issue of Disqualified Stock valued at the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued dividends, if any;

(f) any Hedging Obligation;

(g) any counter-indemnity obligation in respect of a Guarantee, indemnity, bond, standby or

documentary letter of credit or any other instrument issued by a bank or financial institution;
and

(h) the amount of any liability of a Person in respect of any Guarantee or indemnity for any of the
items referred to in paragraphs (a) to (g) above, of other Persons,

if and to the extent any of the preceding items would appear as a liability on the balance sheet of the
specified Person prepared in accordance with PFRS or the equivalent relevant local accounting standard,
and so that where the amount of Indebtedness is required to be calculated, no amount shall be taken into
account more than once in the same calculation and, where the amount is to be calculated on a
consolidated basis in respect of a corporate group, monies borrowed or raised, or other indebtedness, as
between members of such group shall be excluded.

Notwithstanding the foregoing, Indebtedness shall not include any capital commitments, purchase
commitments or similar obligations Incurred in connection with the acquisition, development,
construction or improvement of real or personal property (including land use rights) to be used in a
Permitted Business; provided that such obligation is not reflected on the statement of financial position
of the Issuer or the Guarantor (contingent obligations referred to in a footnote to financial statements
and not otherwise reflected on the statement of financial position will not be deemed to be reflected on
such statement of financial position).

For the purposes of determining the amount of Indebtedness, (i) the amount outstanding at any time of
any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the
remaining unamortised portion of the original issue discount of such Indebtedness at such time as
determined in conformity with PFRS; (ii) money borrowed and set aside at the time of the Incurrence of

19
any Indebtedness in order to pre-fund the payment of the interest on such Indebtedness shall be deemed
not to be Indebtedness so long as such money is held to secure the payment of such interest; and
(iii) any lease (including any Capitalised Lease Obligation) relating to the purchase of power as an IPP
administrator (or similar role) shall be deemed not to be Indebtedness.

Interest Rate Agreement means any interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate
collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or
arrangement designed to protect against fluctuations in interest rates.

Investment Grade means a rating of “AAA”, “AA”, “A” or “BBB”, as modified by a “+” or “-”
indication, or an equivalent rating representing one of the four highest rating categories, by S&P or any
of its successors or assigns, or a rating of “Aaa”, or “Aa”, “A” or “Baa”, as modified by a “1”, “2” or
“3” indication, or an equivalent rating representing one of the four highest rating categories, by Moody’s
or any of its successors or assigns, or a rating of “AAA”, “AA”, “A” or “BBB”, as modified by a “+” or
“-” indication, or an equivalent rating representing one of the four highest rating categories of Fitch or
any of its successors or assigns; and the equivalent ratings of any internationally recognised rating
agency or agencies, as the case may be, which shall have been designated by the Guarantor as having
been substituted for any of S&P, Moody’s or Fitch, as the case may be.

Issue Date means the date on which the relevant Tranche of Notes are originally issued under the Trust
Deed.

Joint Venture means any entity over which the Guarantor has joint control or has contractually agreed
sharing of control over an economic activity.

Lien means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest,
encumbrance or other preferential arrangement of any kind in respect of such property or asset,
including, without limitation, any preference or priority under Article 2244(14) of the Civil Code of the
Philippines, as the same may be amended from time to time, and the right of a vendor, lessor, or similar
party under any conditional sales agreement, capital lease or other title retention agreement relating to
such property or asset, and any other right of or arrangement with any creditor to have its claims
satisfied out of any property or assets, or the proceeds therefrom, prior to any general creditor of the
owner thereof.

Limited Recourse Project Financing means any indebtedness (i) which is incurred by any Project
Company; (ii) which is secured by the asset or assets of such Project Company; and (iii) in respect of,
and in connection with which, the providers of such indebtedness have no recourse whatsoever to any
asset of the Guarantor or any Material Subsidiary or, in the case of a Project Company that is a Material
Subsidiary, to any asset of the Guarantor or any other Material Subsidiary (including for the repayment
of, or payment of any sum relating to, such indebtedness) other than (a) guarantees or other support in
respect of completion or construction risk in respect of the relevant project or (b) any recourse over the
shares or other ownership interests in the Project Company following the enforcement of any Lien over
such assets given by the Guarantor or the relevant Material Subsidiary, as the case may be.

Material Subsidiary means:

(i) any Subsidiary of the Guarantor whose gross revenues (consolidated in the case of a Subsidiary
which has Subsidiaries) or whose total assets (consolidated in the case of a Subsidiary which
itself has Subsidiaries) represent, in each case, at least 10 per cent. of the consolidated gross
revenues or, as the case may be, consolidated total assets, of the Guarantor and its Subsidiaries
taken as a whole, all as calculated, respectively, by reference to the then latest available
consolidated audited balance sheet and profit and loss accounts of the Guarantor and its
consolidated Subsidiaries, provided that:

(a) in the case of a corporation or other business entity becoming a Subsidiary after the
end of the financial period to which the latest consolidated audited accounts of the
Guarantor relate, the reference to the then latest consolidated audited accounts of the
Guarantor for the purposes of the calculation above shall, until consolidated audited
accounts of the Guarantor for the financial period in which the relevant corporation or

20
 other business entity becomes a Subsidiary are available, be deemed to be a reference
to the then latest consolidated audited accounts of the Guarantor adjusted to
consolidate the latest audited accounts (consolidated in the case of a Subsidiary which
itself has Subsidiaries) of such Subsidiary;

(b) if at any relevant time in relation to the Guarantor or any Subsidiary which itself has
Subsidiaries no consolidated accounts are prepared and audited, gross revenues or
gross assets of the Guarantor and any such Subsidiary shall be determined on the basis
of pro forma consolidated accounts prepared for this purpose by the Guarantor for the
purposes of preparing a certificate thereon to the Trustee;

(c) if at any relevant time in relation to any Subsidiary, no accounts are audited, its gross
revenues or gross assets (consolidated, if appropriate) shall be determined on the basis
of pro forma accounts (consolidated, if appropriate) of the relevant Subsidiary
prepared for this purpose by the Guarantor for the purposes of preparing a certificate
thereon to the Trustee; and

(d) if the accounts of any Subsidiary (not being a Subsidiary referred to in proviso
(a) above) are not consolidated with those of the Guarantor, then the determination of
whether or not such Subsidiary is a Material Subsidiary shall be based on a pro forma
consolidation of such Subsidiary’s accounts (consolidated, in each case, if
appropriate) with the consolidated accounts (determined on the basis of the foregoing)
of the Guarantor; or

(ii) any Subsidiary to which is transferred the whole or substantially the whole of the assets and
undertaking of a Subsidiary which immediately prior to such transfer was a Material
Subsidiary, whereupon (I) in the case of a transfer by a Material Subsidiary, the transferor
Material Subsidiary shall immediately cease to be a Material Subsidiary and (II) the transferee
Subsidiary shall immediately become a Material Subsidiary, provided that on or after the date
on which the relevant financial statements for the financial period current at the date of such
transfer are published, whether such transferor Subsidiary or such transferee Subsidiary is or is
not a Material Subsidiary shall be determined pursuant to the provisions of the sub-paragraphs
above.

For the avoidance of doubt, (i) a Person will cease to be a Material Subsidiary in the event that and at
such time such Person ceases to be a Subsidiary, and (ii) in the event of a Material Subsidiary ceasing to
be a Subsidiary, determination of the remaining Material Subsidiaries shall be made upon the
availability of the annual consolidated audited balance sheet and profit and loss accounts of the
Guarantor and its consolidated Subsidiaries after such Material Subsidiary ceases to become a
Subsidiary.

Moody’s means Moody’s Investors Service and its affiliates.

Net Debt means the aggregate (without duplication) of all Indebtedness (other than Non-Recourse Debt
and Limited Recourse Project Financing) less cash and cash equivalents of the Guarantor and its
Subsidiaries (excluding cash and cash equivalents of all Subsidiaries with Non-Recourse Debt or
Limited Recourse Project Financing), which appears on a consolidated balance sheet of the Guarantor
and its Subsidiaries as of the end of the most recent fiscal quarter for which internal financial statements
are available, prepared in accordance with PFRS.

Non-Recourse Debt means any Indebtedness of a Subsidiary in respect of which the Issuer or the
Guarantor has not provided a Guarantee and for which the Issuer or the Guarantor is not otherwise
liable. For the avoidance of doubt, to the extent the Issuer or the Guarantor has provided a Guarantee or
is liable for Indebtedness of a Subsidiary up to a certain specified limit, any Indebtedness in excess of
such limit shall be Non-Recourse Debt.

Officer Certificate means a certificate signed by the president, chief operating officer, chief finance
officer or any director of the Issuer or the Guarantor, as applicable.

Permitted Business means any business conducted or proposed to be conducted (as described in the
Offering Circular) by the Issuer or the Guarantor on the Issue Date, reasonable extensions thereof and
other businesses related, complementary or ancillary thereto;

21
Permitted Liens means:

(a) Liens over the shares of, or ownership interests in, any Project Company or over the rights of
the Guarantor or a Material Subsidiary in relation to any debt provided by the Guarantor or
such Material Subsidiary, respectively, to any Project Company, in each case in order to secure
any Limited Recourse Project Financing; and

(b) Liens created on the property or assets of a Project Company securing Limited Recourse
Project Financing of the Project Company.

Person means any individual, corporation, partnership, limited liability company, joint venture, trust,
unincorporated organisation or government or any agency or political subdivision thereof.

PFRS means Philippine Accounting Standards and Philippine Financial Reporting Standards. All ratios
and computations contained or referred to in the Trust Deed shall be computed in conformity with PFRS
either as in effect on the date hereof or from time to time as determined by the Guarantor applied on a
consistent basis.

Potential Event of Default means any event that is, or after notice or passage of time or both would be,
an Event of Default.

Preferred Stock as applied to the Capital Stock of any Person means Capital Stock of any class or
classes that by its term is preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person, or as to redemption, over
any other class of Capital Stock of such Person.

Project Company means any company, partnership or other entity in which the Guarantor or a Material
Subsidiary has an ownership interest.

Rating Agencies means each of (i) S&P, (ii) Moody’s and (iii) Fitch; provided that if S&P, Moody’s or
Fitch shall not make a rating of the relevant Notes publicly available, one or more internationally
recognised statistical rating organisations, as the case may be, as the Guarantor may select, which will
be substituted for any of S&P, Moody’s or Fitch, as the case may be.

Relevant Indebtedness means any present or future indebtedness in the form of, or represented by,
debentures, loan stock, bonds, notes or other similar securities (i) which are, or are issued with the
intention that they should be, and are capable of being, quoted, listed, ordinarily dealt in or traded on
any stock exchange or over the counter or any other securities market (whether or not initially
distributed by way of private placement) and (ii) denominated in a currency other than the Philippine
peso.

S&P means Standard & Poor’s Rating Services, a division of McGraw-Hill Financial.

Stated Maturity means, (a) with respect to any Indebtedness, the date specified in such Indebtedness as
the fixed date on which the final instalment of principal of such Indebtedness is due and payable as set
forth in the documentation governing such Indebtedness and (b) with respect to any scheduled
instalment of principal of or interest on any Indebtedness, the date specified as the fixed date on which
such instalment is due and payable as set forth in the documentation governing such Indebtedness.

Subordinated Indebtedness means any Indebtedness of the Issuer or the Guarantor which is
contractually subordinated or junior in right of payment to the Notes or the Notes Guarantee, pursuant to
a written agreement to such effect.

Subsidiary means, with respect to any Person, any corporation, association or other business entity
(i) of which more than 50.0 per cent. of the voting power of the outstanding Voting Stock is owned or
controlled, directly or indirectly, by such Person and one or more other Subsidiaries of such Person or
(ii) of which 50.0 per cent. or less of the voting power of the outstanding Voting Stock is owned,
directly or indirectly, by such Person and one or more other Subsidiaries of such Person and in each case
which is “controlled” and consolidated by such Person in accordance with PFRS.

22
 Subsidiary Guarantee means any guarantee of the obligations of the Issuer under the Trust Deed and
the Notes by any Material Subsidiary.

Total Assets means, at any date, the aggregate (without duplication) total current assets and total
non-current assets of a Guarantor and its Subsidiaries, which appears on a consolidated balance sheet of
the Guarantor and its Subsidiaries as of the end of the most recent fiscal quarter for which internal
financial statements are available, prepared in accordance with PFRS.

Total Equity means the aggregate (without duplication) stockholder’s equity of the Guarantor and its
Subsidiaries, which appears on a consolidated balance sheet of the Guarantor and its Subsidiaries as of
the end of the most recent fiscal quarter for which internal financial statements are available, prepared in
accordance with PFRS.

Voting Stock means, with respect to any Person, Capital Stock of any class or kind ordinarily having
the power to vote for the election of directors, managers or other voting members of the governing body
of such Person.

Winding-Up means, with respect to the Issuer or the Guarantor, a final and effective order or resolution
for the bankruptcy, winding up, liquidation, receivership, insolvency or similar proceedings in respect of
the Issuer or the Guarantor, as the case may be.

5. INTEREST

5.1 Interest on Fixed Rate Notes

Each Fixed Rate Note bears interest from (and including) the Interest Commencement Date at the rate(s)
per annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment
Date(s) in each year up to (and including) the Maturity Date.

If the Notes are in definitive form, except as provided in the applicable Pricing Supplement, the amount
of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but
excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest
Payment Date will, if so specified in the applicable Pricing Supplement, amount to the broken amount
so specified therein.

As used in these Conditions, Fixed Interest Period means the period from (and including) an Interest
Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest
Payment Date.

Except in the case of Notes in definitive form where an applicable Fixed Coupon Amount or Broken
Amount is specified in the applicable Pricing Supplement, interest shall be calculated in respect of any
period by applying the Rate of Interest to:

(A) in the case of Fixed Rate Notes which are represented by a Global Note, the aggregate
outstanding nominal amount of the Fixed Rate Notes represented by such Global Note (or, if
they are Partly Paid Notes, the aggregate amount paid up); or

(B) in the case of Fixed Rate Notes in definitive form, the Calculation Amount;

and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the
resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit
being rounded upwards or otherwise in accordance with applicable market convention. Where the
Specified Denomination of a Fixed Rate Note in definitive form is a multiple of the Calculation
Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the product of the
amount (determined in the manner provided above) for the Calculation Amount and the amount by
which the Calculation Amount is multiplied to reach the Specified Denomination, without any further
rounding.

23
 Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with
this Condition 5.1:

(a) if Actual/Actual (ICMA) is specified in the applicable Pricing Supplement:

(i) in the case of Notes where the number of days in the relevant period from (and
including) the most recent Interest Payment Date (or, if none, the Interest
Commencement Date) to (but excluding) the relevant payment date (the Accrual
Period) is equal to or shorter than the Determination Period during which the Accrual
Period ends, the number of days in such Accrual Period divided by the product of
(I) the number of days in such Determination Period and (II) the number of
Determination Dates (as specified in the applicable Pricing Supplement) that would
occur in one calendar year; or

(ii) in the case of Notes where the Accrual Period is longer than the Determination Period
during which the Accrual Period ends, the sum of:

(A) the number of days in such Accrual Period falling in the Determination
Period in which the Accrual Period begins divided by the product of (x) the
number of days in such Determination Period and (y) the number of
Determination Dates that would occur in one calendar year; and

(B) the number of days in such Accrual Period falling in the next Determination
Period divided by the product of (x) the number of days in such
Determination Period and (y) the number of Determination Dates that would
occur in one calendar year;

(b) if 30/360 is specified in the applicable Pricing Supplement, the number of days in the period
from (and including) the most recent Interest Payment Date (or, if none, the Interest
Commencement Date) to (but excluding) the relevant payment date (such number of days
being calculated on the basis of a year of 360 days with 12 30-day months) divided by 360; or

(c) if Actual/365 (Fixed) is specified in the applicable Pricing Supplement, the actual number of
days in the Accrual Period divided by 365.

In these Conditions:

Determination Period means each period from (and including) a Determination Date to (but excluding)
the next Determination Date (including, where either the Interest Commencement Date or the final
Interest Payment Date is not a Determination Date, the period commencing on the first Determination
Date prior to, and ending on the first Determination Date falling after, such date); and

sub-unit means, with respect to any currency other than euro, the lowest amount of such currency that
is available as legal tender in the country of such currency and, with respect to euro, one cent.

5.2 Interest on Floating Rate Notes and Index Linked Interest Notes

(a) Interest Payment Dates

Each Floating Rate Note and Index Linked Interest Note bears interest from (and including) the Interest
Commencement Date and such interest will be payable in arrear on either:

(i) the Specified Interest Payment Date(s) in each year specified in the applicable Pricing
Supplement; or

(ii) if no Specified Interest Payment Date(s) is/are specified in the applicable Pricing Supplement,
each date (each such date, together with each Specified Interest Payment Date, an Interest
Payment Date) which falls the number of months or other period specified as the Specified
Period in the applicable Pricing Supplement after the preceding Interest Payment Date or, in
the case of the first Interest Payment Date, after the Interest Commencement Date.

24
 Such interest will be payable in respect of each Interest Period (which expression shall, in these
Conditions, mean the period from (and including) an Interest Payment Date (or the Interest
Commencement Date) to (but excluding) the next (or first) Interest Payment Date).

(b) Rate of Interest

The Rate of Interest payable from time to time in respect of Floating Rate Notes and Index Linked
Interest Notes will be determined in the manner specified in the applicable Pricing Supplement.

(i) ISDA Determination for Floating Rate Notes

Where ISDA Determination is specified in the applicable Pricing Supplement as the manner in which
the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant
ISDA Rate plus or minus (as indicated in the applicable Pricing Supplement) the Margin (if any). For
the purposes of this sub-paragraph (i), ISDA Rate for an Interest Period means a rate equal to the
Floating Rate that would be determined by the Principal Paying Agent under an interest rate swap
transaction if the Principal Paying Agent were acting as Calculation Agent for that swap transaction
under the terms of an agreement incorporating the 2006 ISDA Definitions, as published by the
International Swaps and Derivatives Association, Inc. and as amended and updated as of the Issue Date
of the first Tranche of the Notes (the ISDA Definitions) and under which:

(A) the Floating Rate Option is as specified in the applicable Pricing Supplement;

(B) the Designated Maturity is a period specified in the applicable Pricing Supplement; and

(C) the relevant Reset Date is the day specified in the applicable Pricing Supplement.

For the purposes of this sub-paragraph (i), Floating Rate, Calculation Agent, Floating Rate Option,
Designated Maturity and Reset Date have the meanings given to those terms in the ISDA Definitions.

(ii) Screen Rate Determination for Floating Rate Notes

Where Screen Rate Determination is specified in the applicable Pricing Supplement as the manner in
which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject
as provided below, be either:

(A) the offered quotation; or

(B) the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being
rounded upwards) of the offered quotations, (expressed as a percentage rate per annum) for the
Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as of
11.00 a.m. (Relevant Financial Centre time) on the Interest Determination Date in question plus
or minus (as indicated in the applicable Pricing Supplement) the Margin (if any), all as
determined by the Principal Paying Agent. If five or more of such offered quotations are
available on the Relevant Screen Page, the highest (or, if there is more than one such highest
quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest
quotation, one only of such quotations) shall be disregarded by the Principal Paying Agent for
the purpose of determining the arithmetic mean (rounded as provided above) of such offered
quotations.

The Agency Agreement contains provisions for determining the Rate of Interest in the event that the
Relevant Screen Page is not available or if, in the case of (A) above, no such offered quotation appears
or, in the case of (B) above, fewer than three such offered quotations appear, in each case as at the time
specified in the preceding paragraph.

(c) Minimum and/or Maximum Rate of Interest

If the applicable Pricing Supplement specifies a Minimum Rate of Interest for any Interest Period, then,
in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the
provisions of paragraph (b) above is less than such Minimum Rate of Interest, the Rate of Interest for
such Interest Period shall be such Minimum Rate of Interest.

25
 If the applicable Pricing Supplement specifies a Maximum Rate of Interest for any Interest Period, then,
in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the
provisions of paragraph (b) above is greater than such Maximum Rate of Interest, the Rate of Interest
for such Interest Period shall be such Maximum Rate of Interest.

Unless otherwise stated in the applicable Pricing Supplement the Minimum Rate of Interest shall be
deemed to be zero.

(d) Determination of Rate of Interest and Calculation of Interest Amounts

The Principal Paying Agent, in the case of Floating Rate Notes, and the Calculation Agent, in the case
of Index Linked Interest Notes, will at or as soon as practicable after each time at which the Rate of
Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. In the case of
Index Linked Interest Notes, the Calculation Agent will notify the Principal Paying Agent of the Rate of
Interest for the relevant Interest Period as soon as practicable after calculating the same.

The Principal Paying Agent will calculate the amount of interest (the Interest Amount) payable on the
Floating Rate Notes or Index Linked Interest Notes for the relevant Interest Period by applying the Rate
of Interest to:

(A) in the case of Floating Rate Notes or Index Linked Interest Notes which are represented by a
Global Note, the aggregate outstanding nominal amount of the Notes represented by such
Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or

(B) in the case of Floating Rate Notes or Index Linked Interest Notes in definitive form, the
Calculation Amount;

and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the
resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit
being rounded upwards or otherwise in accordance with applicable market convention. Where the
Specified Denomination of a Floating Rate Note or an Index Linked Interest Note in definitive form is a
multiple of the Calculation Amount, the Interest Amount payable in respect of such Note shall be the
product of the amount (determined in the manner provided above) for the Calculation Amount and the
amount by which the Calculation Amount is multiplied to reach the Specified Denomination, without
any further rounding.

Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with
this Condition 5.2:

(i) if Actual/Actual (ISDA) or Actual/Actual is specified in the applicable Pricing Supplement,

the actual number of days in the Interest Period divided by 365 (or, if any portion of that
Interest Period falls in a leap year, the sum of (I) the actual number of days in that portion of
the Interest Period falling in a leap year divided by 366 and (II) the actual number of days in
that portion of the Interest Period falling in a non-leap year divided by 365);

(ii) if Actual/365 (Fixed) is specified in the applicable Pricing Supplement, the actual number of
days in the Interest Period divided by 365;

(iii) if Actual/365 (Sterling) is specified in the applicable Pricing Supplement, the actual number
of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling
in a leap year, 366;

(iv) if Actual/360 is specified in the applicable Pricing Supplement, the actual number of days in
the Interest Period divided by 360;

(v) if 30/360, 360/360 or Bond Basis is specified in the applicable Pricing Supplement, the number
of days in the Interest Period divided by 360, calculated on a formula basis as follows:

[360 x (Y2 –Y1)] + [30 x (M2 –M1)] + (D2 – D1)

Day Count Fraction =
360

26
 where:

Y1 is the year, expressed as a number, in which the first day of the Interest Period falls;

Y2 is the year, expressed as a number, in which the day immediately following the last day
of the Interest Period falls;

M1 is the calendar month, expressed as a number, in which the first day of the Interest
Period falls;

M2 is the calendar month, expressed as a number, in which the day immediately following
the last day of the Interest Period falls;

D1 is the first calendar day, expressed as a number, of the Interest Period, unless such
number is 31, in which case D1 will be 30; and

D2 is the calendar day, expressed as a number, immediately following the last day included
in the Interest Period, unless such number would be 31 and D1 is greater than 29, in
which case D2 will be 30;

(vi) if 30E/360 or Eurobond Basis is specified in the applicable Pricing Supplement, the number
of days in the Interest Period divided by 360, calculated on a formula basis as follows:

[360 x (Y2 – Y1)] + [30 x (M2 – M1)] + (D2 – D1)

Day Count Fraction =
360

where:

Y1 is the year, expressed as a number, in which the first day of the Interest Period falls;

Y2 is the year, expressed as a number, in which the day immediately following the last day
of the Interest Period falls;

M1 is the calendar month, expressed as a number, in which the first day of the Interest
Period falls;

M2 is the calendar month, expressed as a number, in which the day immediately following
the last day of the Interest Period falls;

D1 is the first calendar day, expressed as a number, of the Interest Period, unless such
number would be 31, in which case D1 will be 30; and

D2 is the calendar day, expressed as a number, immediately following the last day included
in the Interest Period, unless such number would be 31, in which case D2 will be 30;
and

(vii) if 30E/360 (ISDA) is specified in the applicable Pricing Supplement, the number of days in the
Interest Period divided by 360, calculated on a formula basis as follows:

[360 x (Y2 – Y1)] + [30 x (M2 – M1)] + (D2 – D1)

Day Count Fraction =
360

where:

Y1 is the year, expressed as a number, in which the first day of the Interest Period falls;

Y2 is the year, expressed as a number, in which the day immediately following the last day
of the Interest Period falls;

M1 is the calendar month, expressed as a number, in which the first day of the Interest
Period falls;

27
 M2 is the calendar month, expressed as a number, in which the day immediately following
the last day of the Interest Period falls;

D1 is the first calendar day, expressed as a number, of the Interest Period, unless (i) that
day is the last day of February or (ii) such number would be 31, in which case D1 will
be 30; and

D2 is the calendar day, expressed as a number, immediately following the last day included
in the Interest Period, unless (i) that day is the last day of February but not the Maturity
Date or (ii) such number would be 31, in which case D2 will be 30.

(e) Notification of Rate of Interest and Interest Amounts

The Principal Paying Agent will cause the Rate of Interest and each Interest Amount for each Interest
Period and the relevant Interest Payment Date to be notified to the Issuer, the Trustee and any stock
exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time
being listed and notice thereof to be published in accordance with Condition 14 as soon as possible after
their determination but in no event later than the fourth London Business Day thereafter. Each Interest
Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative
arrangements made by way of adjustment) without prior notice in the event of an extension or
shortening of the Interest Period. Any such amendment will be promptly notified to each stock exchange
on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed
and to the Noteholders in accordance with Condition 14. For the purposes of this paragraph, the
expression London Business Day means a day (other than a Saturday or a Sunday) on which banks and
foreign exchange markets are open for business in London.

(f) Determination or Calculation by Trustee

If for any reason at any relevant time the Principal Paying Agent or, as the case may be, the Calculation
Agent defaults in its obligation to determine the Rate of Interest or the Principal Paying Agent defaults
in its obligation to calculate any Interest Amount in accordance with sub-paragraph (b)(i) or
subparagraph (b)(ii) above or as otherwise specified in the applicable Pricing Supplement, as the case
may be, and in each case in accordance with paragraph (d) above, the Trustee shall (or shall, at the
expense of the Issuer, appoint an agent to) determine the Rate of Interest at such rate as, in its absolute
discretion (having such regard as it shall think fit to the foregoing provisions of this Condition, but
subject always to any Minimum Rate of Interest or Maximum Rate of Interest specified in the applicable
Pricing Supplement), it shall deem fair and reasonable in all the circumstances or, as the case may be,
the Trustee shall calculate the Interest Amount(s) in such manner as it shall deem fair and reasonable in
all the circumstances and each such determination or calculation shall be deemed to have been made by
the Principal Paying Agent or the Calculation Agent, as applicable.

(g) Certificates to be Final

All certificates, communications, opinions, determinations, calculations, quotations and decisions given,
expressed, made or obtained for the purposes of the provisions of this Condition 5, whether by the
Principal Paying Agent or, if applicable, the Calculation Agent or the Trustee (or its agent), shall (in the
absence of wilful default, fraud or manifest error) be binding on the Issuer, the Guarantor, the Trustee,
the Principal Paying Agent, the Registrar, the Calculation Agent (if applicable), the other Paying
Agents, the Transfer Agents and all Noteholders, Receiptholders and Couponholders and (in the absence
as aforesaid) no liability to the Issuer, the Guarantor, the Noteholders, the Receiptholders or the
Couponholders shall attach to the Principal Paying Agent or, if applicable, the Calculation Agent, the
Registrar, the other Paying Agents, the Transfer Agents or the Trustee in connection with the exercise or
non-exercise by any of them of their powers, duties and discretions pursuant to such provisions.

5.3 Interest on Dual Currency Interest Notes

The rate or amount of interest payable in respect of Dual Currency Interest Notes shall be determined in
the manner specified in the applicable Pricing Supplement.

28
5.4 Interest on Partly Paid Notes

In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest
will accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as specified in the
applicable Pricing Supplement.

5.5 Accrual of Interest

Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will
cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof,
payment of principal is improperly withheld or refused. In such event, interest will continue to accrue
until whichever is the earlier of:

(a) the date on which all amounts due in respect of such Note have been paid; and

(b) as provided in the Trust Deed.

5.6 Definitions

In these Conditions, if a Business Day Convention is specified in the applicable Pricing Supplement and
(x) if there is no numerically corresponding day on the calendar month in which an Interest Payment
Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a
Business Day, then, if the Business Day Convention specified is:

(A) in any case where Specified Periods are specified in accordance with Condition 5.2(a)(ii)
above, the Floating Rate Convention, such Interest Payment Date (a) in the case of (x) above,
shall be the last day that is a Business Day in the relevant month and the provisions of
(ii) below shall apply mutatis mutandis or (b) in the case of (y) above, shall be postponed to the
next day which is a Business Day unless it would thereby fall into the next calendar month, in
which event (i) such Interest Payment Date shall be brought forward to the immediately
preceding Business Day and (ii) each subsequent Interest Payment Date shall be the last
Business Day in the month which falls the Specified Period after the preceding applicable
Interest Payment Date occurred; or

(B) the Following Business Day Convention, such Interest Payment Date shall be postponed to the
next day which is a Business Day; or

(C) the Modified Following Business Day Convention, such Interest Payment Date shall be
postponed to the next day which is a Business Day unless it would thereby fall into the next
calendar month, in which event such Interest Payment Date shall be brought forward to the
immediately preceding Business Day; or

(D) the Preceding Business Day Convention, such Interest Payment Date shall be brought forward
to the immediately preceding Business Day.

In these Conditions, Business Day means a day which is both:

(a) a day on which commercial banks and foreign exchange markets settle payments and are open
for general business (including dealing in foreign exchange and foreign currency deposits) in
Hong Kong, New York, Singapore and Makati and in each Additional Financial Centre
specified in the applicable Pricing Supplement; and

(b) either (i) in relation to any sum payable in a Specified Currency other than euro, a day on
which commercial banks and foreign exchange markets settle payments and are open for
general business (including dealing in foreign exchange and foreign currency deposits) in the
principal financial centre of the country of the relevant Specified Currency (which, if the
Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and
Auckland, respectively); or (ii) in relation to any sum payable in euro, a day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2)
System or any successor system (the TARGET2 System) is open.

29
6. PAYMENTS

6.1 Method of Payment

Subject as provided below:

(a) payments in a Specified Currency other than euro will be made by credit or transfer to an
account in the relevant Specified Currency maintained by the payee with, or, at the option of
the payee, by a cheque in such Specified Currency drawn on, a bank in the principal financial
centre of the country of such Specified Currency (which, if the Specified Currency is
Australian dollars or New Zealand dollars, shall be Sydney and Auckland, respectively); and

(b) payments in euro will be made by credit or transfer to a euro account (or any other account to
which euro may be credited or transferred) specified by the payee or, at the option of the payee,
by a euro cheque.

Payments will be subject in all cases to (i) any fiscal or other laws and regulations applicable thereto in
the place of payment, but without prejudice to the provisions of Condition 8, and (ii) any withholding or
deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue
Code of 1986 (the Code) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code,
any regulations or agreements thereunder, any official interpretations thereof, or (without prejudice to
the provisions of Condition 8) and law implementing an intergovernmental approach thereto.

6.2 Presentation of Definitive Bearer Notes, Receipts and Coupons

Payments of principal in respect of Definitive Bearer Notes will (subject as provided below) be made in
the manner provided in Condition 6.1 above only against presentation and surrender (or, in the case of
part payment of any sum due, endorsement) of Definitive Bearer Notes, and payments of interest in
respect of Definitive Bearer Notes will (subject as provided below) be made as aforesaid only against
presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Coupons, in
each case at the specified office of any Paying Agent outside the United States (which expression, as
used herein, means the United States of America (including the States and the District of Columbia and
its possessions)).

Payments of instalments of principals (if any) in respect of Definitive Bearer Notes, other than the final
instalment, will (subject as provided below) be made in the manner provided in Condition 6.1 above
against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the
relevant Receipt in accordance with the preceding paragraph. Payment of the final instalment will be
made in the manner provided in Condition 6.1 above only against presentation and surrender (or, in the
case of part payment of any sum due, endorsement) of the relevant Definitive Bearer Note in accordance
with the preceding paragraph. Each Receipt must be presented for payment of the relevant instalment
together with the Definitive Bearer Note to which it appertains. Receipts presented without the
Definitive Bearer Note to which they appertain do not constitute valid obligations of the Issuer. Upon
the date on which any Definitive Bearer Note becomes due and repayable, unmatured Receipts (if any)
relating thereto (whether or not attached) shall become void and no payment shall be made in respect
thereof.

Fixed Rate Notes in definitive bearer form (other than Dual Currency Notes, Index Linked Notes or
Long Maturity Notes (as defined below)) should be presented for payment together with all unmatured
Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be
issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon
(or, in the case of payment not being made in full, the same proportion of the amount of such missing
unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for
payment. Each amount of principal so deducted will be paid in the manner mentioned above against
surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant
Date (as defined in Condition 8) in respect of such principal (whether or not such Coupon would
otherwise have become void under Condition 9) or, if later, five years from the date on which such
Coupon would otherwise have become due, but in no event thereafter.

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 Upon any Fixed Rate Note in definitive bearer form becoming due and repayable prior to its Maturity
Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will
be issued in respect thereof.

Upon the date on which any Floating Rate Note, Dual Currency Note, Index Linked Note or Long
Maturity Note in definitive bearer form becomes due and repayable, unmatured Coupons and Talons (if
any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be,
exchange for further Coupons shall be made in respect thereof. A Long Maturity Note is a Fixed Rate
Note (other than a Fixed Rate Note which on issue had a Talon attached) whose nominal amount on
issue is less than the aggregate interest payable thereon provided that such Note shall cease to be a Long
Maturity Note on the Interest Payment Date on which the aggregate amount of interest remaining to be
paid after that date is less than the nominal amount of such Note.

If the due date for redemption of any Definitive Bearer Note is not an Interest Payment Date, interest (if
any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the
case may be, the Interest Commencement Date shall be payable only against surrender of the relevant
Definitive Bearer Note.

6.3 Payments in respect of Bearer Global Notes

Payments of principal and interest (if any) in respect of Bearer Notes represented by any Bearer Global
Note will (subject as provided below) be made in the manner specified above in relation to Definitive
Bearer Notes or otherwise in the manner specified in the relevant Bearer Global Note against
presentation or surrender of such Bearer Global Note at the specified office of any Paying Agent outside
the United States. A record of each payment made against presentation or surrender of any Bearer
Global Note, distinguishing between any payment of principal and any payment of interest, will be
made on such Bearer Global Note by the Paying Agent to which it was presented and such record shall
be prima facie evidence that the payment in question has been made.

6.4 Payments in respect of Registered Notes

Payments of principal (other than instalments of principal prior to the final instalment) in respect of each
Registered Note (whether or not in global form) will be made against presentation and surrender (or, in
the case of part payment of any sum due, endorsement) of the Registered Note at the specified office of
the Registrar or any of the Paying Agents. Such payments will be made by transfer to the Designated
Account (as defined below) of the holder (or the first named of joint holders) of the Registered Note
appearing in the register of holders of the Registered Notes maintained by the Registrar (the Register) at
the close of the business day (being for this purpose a day on which Euroclear and Clearstream,
Luxembourg are open for business) before the relevant due date. Notwithstanding the previous sentence,
if (i) a holder does not have a Designated Account or (ii) the principal amount of the Notes held by a
holder is less than U.S.$250,000 (or its approximate equivalent in any other Specified Currency),
payment will instead be made by a cheque in the Specified Currency drawn on a Designated Bank (as
defined below). For these purposes, Designated Account means the account (which, in the case of a
payment in Japanese yen to a non-resident of Japan, shall be a non-resident account) maintained by a
holder with a Designated Bank and identified as such in the Register and Designated Bank means (in
the case of payment in a Specified Currency other than euro) a bank in the principal financial centre of
the country of such Specified Currency (which, if the Specified Currency is Australian dollars or New
Zealand dollars, shall be Sydney and Auckland, respectively), (in the case of a payment in euro) any
bank which processes payments in euro.

Payments of interest and payments of instalments of principal (other than the final instalment) in respect
of each Registered Note (whether or not in global form) will be made by a cheque in the Specified
Currency drawn on a Designated Bank and mailed by uninsured mail on the business day in the city
where the specified office of the Registrar is located immediately preceding the relevant due date to the
holder (or the first named of joint holders) of the Registered Note appearing in the Register, at the close
of the business day (being for this purpose a day on which Euroclear and Clearstream, Luxembourg are
open for business) before the relevant due date. Upon application of the holder to the specified office of
the Registrar not less than three business days in the city where the specified office of the Registrar is
located before the due date for any payment of interest in respect of a Registered Note, the payment may
be made by transfer on the due date in the manner provided in the preceding paragraph. Any such

31
 application for transfer shall be deemed to relate to all future payments of interest (other than interest
due on redemption) and instalments of principal (other than the final instalment) in respect of the
Registered Notes which become payable to the holder who has made the initial application until such
time as the Registrar is notified in writing to the contrary by such holder. Payment of the interest due in
respect of each Registered Note on redemption and the final instalment of principal will be made in the
same manner as payment of the principal amount of such Registered Note.

Holders of Registered Notes will not be entitled to any interest or other payment for any delay in
receiving any amount due in respect of any Registered Note as a result of a cheque posted in accordance
with this Condition arriving after the due date for payment or being lost in the post. No commissions or
expenses shall be charged to such holders by the Registrar in respect of any payments of principal or
interest in respect of the Registered Notes.

None of the Issuer, the Guarantor, the Trustee, the Registrar, any Transfer Agent or any Paying Agent
will have any responsibility or liability for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in the Registered Global Notes or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.

6.5 General Provisions Applicable to Payments

The holder of a Global Note (or as provided in the Trust Deed, the Trustee) shall be the only person
entitled to receive payments in respect of Notes represented by such Global Note and the Issuer, or, as
the case may be, the Guarantor, will be discharged by payment to, or to the order of, the holder of such
Global Note (or the Trustee, as the case may be) in respect of each amount so paid. Each of the persons
shown in the records of Euroclear or Clearstream, Luxembourg as the beneficial holder of a particular
nominal amount of Notes represented by such Global Note must look solely to Euroclear or
Clearstream, Luxembourg, as the case may be, for his share of each payment so made by the Issuer, or,
as the case may be, the Guarantor, in respect of such Global Note to, or to the order of, the holder of
such Global Note.

Notwithstanding the foregoing provisions of this Condition, if any amount of principal and/or interest in
respect of the Bearer Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or
interest in respect of such Notes may be made at the specified office of a Paying Agent in the United
States only if:

(a) the Issuer has appointed Paying Agents with specified offices outside the United States with the
reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars
at such specified offices outside the United States of the full amount of principal and interest
on the Bearer Notes in the manner provided above when due;

(b) payment of the full amount of such principal and interest at all such specified offices outside
the United States is illegal or effectively precluded by exchange controls or other similar
restrictions on the full payment or receipt of principal and interest in U.S. dollars; and

(c) such payment is then permitted under United States law without involving, in the opinion of the
Issuer and the Guarantor, adverse tax consequences to the Issuer or the Guarantor.

6.6 Payment Day

If the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment Day,
the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant
place and shall not be entitled to further interest or other payment in respect of such delay. For these
purposes, Payment Day means any day which (subject to Condition 10) is:

(a) a day on which commercial banks and foreign exchange markets settle payments and are open
for general business (including dealing in foreign exchange and foreign currency deposits) in:

(i) in the case of Notes in definitive form only, the relevant place of presentation; and

(ii) each Additional Financial Centre specified in the applicable Pricing Supplement; and

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 (b) either (A) in relation to any sum payable in a Specified Currency other than euro, a day on
which commercial banks and foreign exchange markets settle payments and are open for
general business (including dealing in foreign exchange and foreign currency deposits) in the
principal financial centre of the country of the relevant Specified Currency which, if the
Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and
Auckland, respectively; or (B) in relation to any sum payable in euro, a day on which the
TARGET2 System is open.

6.7 Interpretation of Principal and Interest

Any reference in these Conditions to principal in respect of the Notes shall be deemed to include, as
applicable:

(a) any additional amounts which may be payable with respect to principal under Condition 8 or
under any undertaking or covenant given in addition thereto, or in substitution therefor,
pursuant to the Trust Deed;

(b) the Final Redemption Amount of the Notes;

(c) the Early Redemption Amount of the Notes;

(d) the Optional Redemption Amount(s) (if any) of the Notes;

(e) in relation to Notes redeemable in instalments, the Instalment Amounts;

(f) in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 7.6);
and

(g) any premium and any other amounts (other than interest) which may be payable by the Issuer
under or in respect of the Notes.

Any reference in these Conditions to interest in respect of the Notes shall be deemed to include, as
applicable, any additional amounts which may be payable with respect to interest under Condition 8 or
under any undertaking or covenant given in addition thereto, or in substitution therefor, pursuant to the
Trust Deed.

7. REDEMPTION AND PURCHASE

7.1 Redemption at Maturity

Unless previously (a) redeemed or (b) purchased and, in either case, at the option of the Issuer,
cancelled as specified below, each Note (including each Index Linked Redemption Note and Dual
Currency Redemption Note) will be redeemed by the Issuer at its Final Redemption Amount specified
in, or determined in the manner specified in, the applicable Pricing Supplement in the relevant Specified
Currency on the Maturity Date.

7.2 Redemption for Tax Reasons

Subject to Condition 7.6, the Notes may be redeemed at the option of the Issuer in whole, but not in
part, at any time (if this Note is neither a Floating Rate Note nor an Index Linked Interest Note) or on
any Interest Payment Date (if this Note is either a Floating Rate Note or an Index Linked Interest Note),
on giving not less than the minimum period and not more than the maximum period of notice specified
in the applicable Pricing Supplement to the Trustee, the Registrar (if applicable) and the Principal
Paying Agent and, in accordance with Condition 14, the Noteholders (which notice shall be
irrevocable), if the Issuer satisfies the Trustee immediately before the giving of such notice that:

(a) on the occasion of the next payment due under the Notes, the Issuer or the Guarantor has or
will become obliged to pay Additional Amounts as provided or referred to in Condition 8 as a

33
 result of any change in, or amendment to, the laws or regulations of a Tax Jurisdiction (as
defined in Condition 8) or any change in the application or official interpretation of such laws
or regulations, which change or amendment becomes effective on or after the date on which
agreement is reached to issue the first Tranche of the Notes for such Series; and

(b) such obligation cannot be avoided by the Issuer or the Guarantor, as the case may be, taking
reasonable measures available to it, provided that no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Issuer or the Guarantor would be
obliged to pay such Additional Amounts were a payment in respect of the Notes then due.

Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver to
the Trustee to make available at its specified office to the Noteholders (1) an Officer Certificate of the
Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts
showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and (2) an
opinion of independent legal advisers or written advice of a qualified tax expert, such independent legal
advisers or tax expert being from an internationally recognised law or accountancy firm reasonably
acceptable to the Trustee that the Issuer or the Guarantor, as the case may be, has or will become
obliged to pay such additional amounts as a result of such change or amendment; and the Trustee shall
be entitled without further action or enquiry to accept the certificate and the opinion as sufficient
evidence of the satisfaction of the conditions precedent set out above, in which event the certificate shall
be conclusive and binding on the Noteholders, the Receiptholders and the Couponholders.

Notes redeemed pursuant to this Condition 7.2 will be redeemed at their Early Redemption Amount
referred to in Condition 7.6 below together (if any) with interest accrued to (but excluding) the date of
redemption.

7.3 Redemption at the Option of the Issuer (Issuer Call)

If an Issuer Call is specified as being applicable in the applicable Pricing Supplement, the Issuer may,
having given not less than the minimum period nor more than the maximum period of notice specified
in the applicable Pricing Supplement to the Noteholders in accordance with Condition 14 (which notice
shall specify the date fixed for redemption), redeem all or some only of the Notes then outstanding on
any Optional Redemption Date(s) and at the Optional Redemption Amount(s) specified in, or
determined in the manner specified in, the applicable Pricing Supplement together, if appropriate, with
interest accrued to (but excluding) the relevant Optional Redemption Date.

Any optional redemption of Notes and notice of redemption provided in connection with this Condition
7.3 may, at the Issuer’s discretion, be subject to the satisfaction (or waiver by the Issuer in its sole
discretion) of one or more conditions precedent. If any such redemption or notice is subject to
satisfaction of one or more conditions precedent, such notice may state that, in the Issuer’s sole
discretion, the Optional Redemption Date(s) may be delayed until such time as any or all such
conditions shall be satisfied, or such redemption may not occur and such notice may be rescinded if any
or all such conditions shall not have been satisfied by the Optional Redemption Date(s), or by the
Optional Redemption Date(s) so delayed.

Any such redemption of Notes must be of a nominal amount not less than the Minimum Redemption
Amount and/or not more than the Maximum Redemption Amount, in each case as may be specified in
the applicable Pricing Supplement. In the case of a partial redemption of Notes (or, as the case may be,
parts of Registered Notes), the Notes to be redeemed (Redeemed Notes) will be selected by the Trustee
in such manner as it deems fit (and if the Notes are listed on any securities exchange, in compliance
with the requirements of the principal securities exchange on which the Notes are then traded), in the
case of Redeemed Notes represented by definitive Notes, and in accordance with the rules of Euroclear
and/or Clearstream, Luxembourg (as appropriate), in the case of Redeemed Notes represented by a
Global Note, not more than 30 days prior to the date fixed for redemption (such date of selection being
hereinafter called the Selection Date). In the case of Redeemed Notes represented by definitive Notes,
the Issuer will ensure that a list of the serial numbers of such Redeemed Notes will be published in
accordance with Condition 14 not less than 15 days prior to the date fixed for redemption. The
aggregate nominal amount of Redeemed Notes represented by definitive Notes or represented by a
Global Note shall in each case bear the same proportion to the aggregate nominal amount of all
Redeemed Notes as the aggregate nominal amount of definitive Notes outstanding and Notes

34
 outstanding represented by such Global Note, respectively, bears to the aggregate nominal amount of
the Notes outstanding, in each case on the Selection Date, provided that, if necessary, appropriate
adjustments shall be made to such nominal amounts to ensure that each represents an integral multiple
of the Specified Denomination. No exchange of the relevant Global Note will be permitted during the
period from (and including) the Selection Date to (and including) the date fixed for redemption pursuant
to this Condition 7.3 and notice to that effect shall be given by the Issuer to the Noteholders in
accordance with Condition 14 at least five days prior to the Selection Date.

Neither the Trustee nor any of the Agents shall be responsible for calculating or verifying the
calculations of any amount verifying the calculations of any amount payable under any notice of
redemption and shall not be liable to the Noteholders or any other person for not doing so.

7.4 Redemption of the Notes at the Option of the Noteholders (Investor Put)

(a) If an Investor Put is specified as being applicable in the applicable Pricing Supplement

If an Investor Put is specified as being applicable in the applicable Pricing Supplement with respect to
Notes only, upon the holder of any Notes giving notice to the Issuer in accordance with Condition 14
not less than the minimum period of notice (which period must not be at least five Business Days) nor
more than the maximum period of notice specified in the applicable Pricing Supplement (which notice
shall be irrevocable) the Issuer will, upon the expiry of such notice, redeem, subject to, and in
accordance with, the terms specified in the applicable Pricing Supplement, such Note on the Optional
Redemption Date(s) and at the Optional Redemption Amount(s) together, if appropriate, with interest
accrued to (but excluding) the relevant Optional Redemption Date.

(b) Put Option Exercise Procedures

To exercise the right to require redemption of a Note the holder of the Note must:

(i) if the Note is in definitive form, deliver a duly signed and completed notice of exercise in the
form (for the time being current) obtainable from any specified office of any Paying Agent,
Transfer Agent or the Registrar (a Put Notice) accompanied by the definitive Note, to the
specified office of any Paying Agent in the case of Bearer Notes, or of any Transfer Agent or
the Registrar in the case of Registered Notes; or

(ii) if the Note is represented by a Global Note held on behalf of Euroclear or Clearstream,
Luxembourg, give a Put Notice in accordance with the standard procedures of Euroclear or
Clearstream, Luxembourg (which may include notice being given on his instruction by
electronic means) accompanied by the relevant Global Note for notation accordingly to the
specified office of any Paying Agent,

at any time within the notice period during normal business hours of such Paying Agent, Transfer Agent
or the Registrar. In the Put Notice the holder must specify a bank account (or, if payment is required to
be made by cheque, an address) to which payment is to be made under this Condition, and in the case of
Registered Notes, the nominal amount thereof to be redeemed and, if less than the full nominal amount
of the Registered Notes so surrendered is to be redeemed, an address to which a new Registered Note in
respect of the balance of such Registered Notes is to be sent subject to and in accordance with the
provisions of Condition 2. If the Note is in definitive bearer form, the Put Notice must be accompanied
by the Note or evidence satisfactory to the Paying Agent concerned that this Note will, following
delivery of the Put Notice, be held to its order or under its control.

7.5 Redemption upon Change of Control

Upon the occurrence of a Change of Control (as defined below), each Noteholder shall have the right, at
its option, to require the Issuer to repurchase all (but not some only) of its Notes, at a redemption price
equal to 101.0 per cent. of the principal amount thereof plus accrued interest (the Change of Control
Redemption Price) on the Change of Control Put Date (as defined below). Within 14 days following a
Change of Control, the Guarantor shall notify the Trustee and cause the Principal Paying Agent to notify
each Noteholder in accordance with Condition 14, which notice shall state (i) that a Change of Control
has occurred and that such Noteholder has the right to require the Issuer to redeem its Notes at the

35
 Change of Control Redemption Price; (ii) the date set by the Issuer for such repurchase (which shall be
no earlier than 30 days and no later than 60 days from the date such notice is given) (the Change of
Control Put Date); and (iii) the procedures determined by the Issuer, consistent with the Trust Deed,
that a Noteholder must follow in order to have its Notes redeemed. The Trustee shall not be required to
take any steps to ascertain whether a Change of Control or any event which could lead to the occurrence
of a Change of Control has occurred nor be liable to any person for any failure to do so.

Change of Control means any person other than (i) Ayala Corporation, (ii) any person at least a
majority the voting stock of which is beneficially owned, directly or indirectly, by Ayala Corporation; or
(iii) any Affiliate of any of the foregoing becoming the beneficial owner(s), directly or indirectly, of
more than 50 per cent. of the total voting power of the outstanding voting stock of the Guarantor.

7.6 Early Redemption Amounts

For the purpose of Conditions 7.2, 7.3, 7.4 and 7.5 above and Condition 10, each Note will be redeemed
at its Early Redemption Amount calculated as follows:

(a) in the case of a Note with a Final Redemption Amount equal to the Issue Price, at the Final
Redemption Amount thereof;

(b) in the case of a Note (other than a Zero Coupon Note but including an Instalment Note and a
Partly Paid Note) with a Final Redemption Amount which is or may be less or greater than the
Issue Price or which is payable in a Specified Currency other than that in which the Note is
denominated, at the amount specified in, or determined in the manner specified in, the
applicable Pricing Supplement or, if no such amount or manner is so specified in the applicable
Pricing Supplement, at its nominal amount; or

(c) in the case of a Zero Coupon Note, at an amount (the Amortised Face Amount) calculated in
accordance with the following formula:

Early Redemption Amount = RP x (1 + AY)y

where:

RP means the Reference Price;

AY means the Accrual Yield expressed as a decimal; and

y is the Day Count Fraction specified in the applicable Pricing Supplement which will be either
(i) 30/360 (in which case the numerator will be equal to the number of days (calculated on the
basis of a 360-day year consisting of 12 months of 30 days each) from (and including) the Issue
Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the
case may be) the date upon which such Note becomes due and repayable and the denominator
will be 360) or (ii) Actual/360 (in which case the numerator will be equal to the actual number
of days from (and including) the Issue Date of the first Tranche of the Notes to (but excluding)
the date fixed for redemption or (as the case may be) the date upon which such Note becomes
due and repayable and the denominator will be 360) or (iii) Actual/365 (in which case the
numerator will be equal to the actual number of days from (and including) the Issue Date of the
first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may
be) the date upon which such Note becomes due and repayable and the denominator will
be 365).

7.7 Instalments

Instalment Notes will be redeemed in the Instalment Amounts and on the Instalment Dates. In the case
of early redemption, the Early Redemption Amount will be determined pursuant to Condition 7.6 above.

7.8 Partly Paid Notes

Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance
with the provisions of this Condition and the applicable Pricing Supplement.

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7.9 Purchases

Subject to applicable laws, the Issuer, the Guarantor or any Subsidiary of the Guarantor may at any time
purchase Notes (provided that, in the case of definitive Bearer Notes, all unmatured Receipts, Coupons
and Talons appertaining thereto are purchased therewith) at any price in the open market or otherwise.

7.10 Cancellation

All Notes which are (a) redeemed or (b) purchased in accordance with Condition 7.9 above may be held,
reissued, resold or, at the option of the Issuer, surrendered to any Paying Agent and/or the Registrar for
cancellation (together with all unmatured Receipts, Coupons and Talons attached thereto or surrendered
therewith at the time of redemption). All Notes (together with all unmatured Receipts, Coupons and
Talons cancelled therewith) which are surrendered for cancellation shall be forwarded to the Principal
Paying Agent (which shall notify the Registrar of such cancelled Notes in the case of Registered Notes).

7.11 Late Payment on Zero Coupon Notes

If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note
pursuant to Conditions 7.1, 7.2, 7.3, 7.4, or 7.5 above or upon its becoming due and repayable as
provided in Condition 10 is improperly withheld or refused, the amount due and repayable in respect of
such Zero Coupon Note shall be the amount calculated as provided in Condition 7.6(c) above as though
the references therein to the date fixed for the redemption or the date upon which such Zero Coupon
Note becomes due and payable were replaced by references to the date which is the earlier of:

(i) the date on which all amounts due in respect of such Zero Coupon Note have been paid; and

(ii) five days after the date on which the full amount of the moneys payable in respect of such Zero
Coupon Note has been received by the Trustee or the Principal Paying Agent and notice to that
effect has been given to the Noteholders in accordance with Condition 14.

8. TAXATION

8.1 Payment without Withholding

All payments of principal, premium and interest by or on behalf of the Issuer or the Guarantor in respect
of the Notes, Receipts and Coupons shall be made free and clear of, and without withholding or
deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges
of whatever nature imposed, levied, collected, withheld or assessed by or within any Tax Jurisdiction,
unless such withholding or deduction is required by the law of any Tax Jurisdiction. In the event that the
Issuer or the Guarantor makes a deduction or withholding required by the law of any Tax Jurisdiction
the Issuer or the Guarantor shall pay such additional amounts (the Additional Amounts) as will result
in receipt by the holders of the Notes, Receipts or Coupons of such amounts as would have been
received by them had no such withholding or deduction been required, except that no such Additional
Amounts shall be payable in respect of any Note, Receipt or Coupon:

(a) presented for payment in the Cayman Islands or the Philippines;

(b) Other connection: to or on behalf of a holder who is liable to such taxes, duties, assessments
or governmental charges in respect of such Note, Receipt or Coupon by reason of his having
some connection with a Tax Jurisdiction other than the mere holding of such Note, Receipt or
Coupon;

(c) Surrender more than 30 days after the Relevant Date: presented for payment more
than 30 days after the Relevant Date (as defined below) except to the extent that the holder of it
would have been entitled to such additional amounts on surrendering the relevant Note, Receipt
or Coupon for payment on the last day of such period of 30 days assuming that day to have
been a Payment Day (as defined in Condition 6.6); or

(d) for or on account of any tax, deduction, or withholding imposed under Section 1471(b) of the
Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any

37
 regulations or agreements thereunder, any official interpretations thereof, or (without prejudice
to the provisions of Condition 8) any law implementing an intergovernmental approach thereto.

8.2 Interpretation

As used herein:

(i) Tax Jurisdiction means, in respect of payments by the Issuer, the Cayman Islands or any
political subdivision or any authority thereof or therein having power to tax or, in respect of
payments by the Guarantor, the Republic of the Philippines or any political subdivision or any
authority thereof or therein having power to tax; and

(ii) Relevant Date in respect of any Note, Receipt or Coupon means the date on which payment in
respect of it first becomes due or (if any amount of the money payable is improperly withheld
or refused) the date on which payment in full of the amount outstanding is made or (if earlier)
the date seven days after that on which notice is duly given to the Noteholders in accordance
with Condition 14 that, upon further surrender of the relevant Note, Receipt or Coupon being
made in accordance with the Conditions, such payment will be made, provided that payment is
in fact made upon such surrender.

8.3 Neither the Trustee nor any Agent shall be responsible for paying any tax, duty, charges, withholding or
other payment referred to in this Condition 8 or for determining whether such amounts are payable or
the amount thereof, and none of them shall be responsible or liable for any failure by the Issuer, the
Guarantor, any Noteholder or any third party to pay such tax, duty, charges, withholding or other
payment in any jurisdiction or to provide any notice or information to the Trustee or any Agent that
would permit, enable or facilitate the payment of any principal, premium (if any), interest or other
amount under or in respect of the Notes without deduction or withholding for or on account of any tax,
duty, charge, withholding or other payment imposed by or in any jurisdiction.

9. PRESCRIPTION

The Notes (whether in bearer or registered form), Receipts and Coupons will become void unless
presented for payment within a period of 10 years (in the case of principal) and five years (in the case of
interest) after the Relevant Date (as defined in Condition 8.2) therefor.

There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim
for payment in respect of which would be void pursuant to this Condition or Condition 6.2 or any Talon
which would be void pursuant to Condition 6.2.

10. EVENTS OF DEFAULT AND ENFORCEMENT

10.1 Events of Default

If any of the following events (each an Event of Default) occurs and is continuing, the Trustee at its
sole discretion may, and if so requested in writing by the holders of not less than 25 per cent. in
principal of the Notes then outstanding or if so directed by an Extraordinary Resolution of the
Noteholders shall (subject in each case to being indemnified, secured and/or pre-funded by the holders
to its satisfaction), give notice in writing to the Issuer that the Notes are, and they shall accordingly
thereby become, immediately due and repayable at its Early Redemption Amount together with accrued
and unpaid interest as provided in the Trust Deed:

(a) Non-Payment: (i) failure by the Issuer to pay any principal when due in respect of the Notes;
or (ii) failure by the Issuer to pay premium (if any) or interest due in respect of the Notes, and,
in the case of (ii) only, such default continues for a period of 15 days; or

(b) Breach of Other Obligations: the Issuer or the Guarantor defaults in the performance or
observance of, or compliance with, any one or more of its other obligations under the
Conditions or the Trust Deed, which default is incapable of remedy or, if in the opinion of the
Trustee capable of remedy, is not in the opinion of the Trustee remedied within 30 days after
notice of such default shall have been given to the Issuer or the Guarantor by the Trustee; or

38
(c) Cross-Acceleration: there occurs with respect to any Indebtedness for borrowed money (other
than Non-Recourse Debt or Limited Recourse Project Financing) of the Issuer, the Guarantor
or any Material Subsidiary having an outstanding principal amount of U.S.$25.0 million (or the
Dollar Equivalent thereof) or more in the aggregate for all such Indebtedness of all such
Persons, (A) an event of default that has caused the holder thereof to declare such Indebtedness
to be due and payable prior to its Stated Maturity, or (B) the failure to make a payment of
principal on such Indebtedness when the same becomes due (subject to the applicable grace
period in the relevant documents); or

(d) Judgement, Decree or Order: a final judgement, decree or order has been entered against the
Issuer, the Guarantor or any of the Material Subsidiaries by a court of competent jurisdiction
from which no appeal may be made or is taken for the payment of money in excess of
U.S.$25.0 million or its Dollar Equivalent and any relevant period specified for payment of
such judgement, decree or order shall have expired without it being satisfied, discharged or
stayed; or

(e) Enforcement Proceedings: a distress, attachment, execution, seizure before judgement or

other legal process is levied, enforced or sued out on or against the whole or any material part
of the property, assets or revenues of the Issuer, the Guarantor or any of the Material
Subsidiaries and is not discharged or stayed within 60 days; or

(f) Security Enforced: an encumbrancer takes possession or an administrative or other receiver or

an administrator or other similar officer is appointed of the whole or a material part of the
property, assets or revenues of the Issuer, the Guarantor or any of the Material Subsidiaries (as
the case may be) and is not discharged or stayed within 60 days; or

(g) Involuntary Proceedings: (i) proceedings are initiated against the Issuer, the Guarantor or any
Material Subsidiary under any applicable liquidation, insolvency, composition, reorganisation,
rehabilitation or other similar laws or an application is made for the appointment of an
administrative or other receiver, manager, administrator or other similar official, or an
administrative or other receiver, manager, administrator or other similar official is appointed, in
relation to the Issuer, the Guarantor or any Material Subsidiary or, as the case may be, in
relation to the whole or a substantial part of the undertaking or assets of any of them or an
encumbrancer takes possession of the whole or a substantial part of the undertaking or assets of
any of them, and (ii) such case (other than the appointment of an administrator) is not stayed or
discharged within 60 days; or

(h) Winding-Up: any order is made by any competent court or resolution passed for the winding
up or dissolution of the Issuer, the Guarantor or any Material Subsidiary; or the Issuer, the
Guarantor or any Material Subsidiary ceases or threatens to cease to carry on the whole or
substantially all of its business, save for the purposes of reorganisation or terms approved by an
Extraordinary Resolution of Noteholders, or the Issuer, the Guarantor or any Material
Subsidiary stops or threatens to stop payment of, or is unable to, or admits inability to, pay all
or a substantial part of its debts (or any class of its debt) as they fall due or is deemed unable to
pay its debts pursuant to or for the purposes of any applicable law, or is adjudicated or found
bankrupt or insolvent; or

(i) Voluntary Proceedings: the Issuer, the Guarantor or any Material Subsidiary initiates or
consents to judicial proceedings relating to itself under any applicable liquidation, insolvency,
composition, reorganisation or other similar laws or makes a conveyance or assignment for the
benefit of, or enters into any composition or other arrangement with, its creditors generally (or
any class of its creditors) or any meeting is convened to consider a proposal for an arrangement
or composition with its creditors generally (or any class of its creditors); or

(j) Repudiation: the Issuer or the Guarantor shall contest in writing the validity or enforceability
of the Trust Deed or the Notes or shall deny generally in writing the liability of the Issuer or the
Guarantor under any of the Trust Deed or the Notes;

(k) Ownership: the Issuer ceases to be wholly-owned and controlled by the Guarantor; or

39
 (l) Analogous Events: any event occurs, which, under the laws of any relevant jurisdiction has an
analogous effect to any of the events referred to in paragraphs (g), (h), and (i) of this Condition
10.1.

Each of the Issuer and the Guarantor has undertaken in the Trust Deed that, so long as any Note remains
outstanding, annually and also within 14 days after any request by the Trustee, it will send to the Trustee
a certificate signed by a Director to the effect that as at a date not more than five days prior to the date of
the certificate no Event of Default or event or circumstance that could with the giving of notice, lapse of
time and/or issue of a certificate become an Event of Default has occurred.

10.2 Enforcement

The Trustee may at any time, at its discretion and without notice, take such proceedings against the
Issuer and/or the Guarantor as it may think fit to enforce the provisions of the Trust Deed, the Notes, the
Receipts and the Coupons, but it shall not be bound to take any such proceedings or any other action in
relation to the Trust Deed, the Notes, the Receipts or the Coupons unless (i) it shall have been so
directed by an Extraordinary Resolution of the Noteholders or so requested in writing by the holders of
at least one-fourth in nominal amount of the Notes then outstanding and (ii) it shall have been
indemnified, secured and/or pre-funded to its satisfaction against all actions, proceedings, claims and
demands to which it may be or become liable and all costs, charges, damages, expenses (including but
not limited to legal fees) and liabilities which may be incurred.

Neither the Trustee nor any Agent shall be required to take any steps to ascertain whether any Event of
Default or Potential Event of Default (as defined in the Trust Deed) has occurred and none of them shall
be responsible or liable to the Noteholders, the Issuer or any other person for any loss arising from any
failure to do so.

No Noteholder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer or
the Guarantor unless the Trustee, having become bound so to proceed, fails so to do within a reasonable
period and the failure shall be continuing.

11. REPLACEMENT OF NOTES, RECEIPTS, COUPONS AND TALONS

Should any Note, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be
replaced subject to applicable laws, regulations and relevant stock exchange regulations at the specified
office of the Principal Paying Agent (in the case of Bearer Notes, Receipts or Coupons) or of the
Registrar (in the case of Registered Notes) upon payment by the claimant of such costs and expenses as
may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer
and the Principal Paying Agent may reasonably require. Mutilated or defaced Notes, Receipts, Coupons
or Talons must be surrendered before replacements will be issued.

12. PAYING AGENTS, REGISTRAR AND TRANSFER AGENTS

The Issuer and the Guarantor is entitled, with the prior written approval of the Trustee (such approval
not to be unreasonably withheld or delayed), to vary or terminate the appointment of the Principal
Paying Agent, Paying Agent, Registrar or Transfer Agents and/or appoint additional or other Paying
Agents, Registrars or Transfer Agents and/or approve any change in the specified office through which
any Agent acts, provided that:

(a) there will at all times be a Principal Paying Agent and a Registrar;

(b) so long as the Notes are listed on any stock exchange, there will at all times be a Paying Agent,
which may be the Principal Paying Agent, and Transfer Agent with a specified office in the
place required by the rules and regulations of the relevant stock exchange or any other relevant
authority; and

(c) so long as any Notes are listed on the SGX-ST and the rules of the SGX-ST require, if the
Notes are issued in definitive form, there will at all times be a Paying Agent in Singapore
unless the Issuer obtains an exemption from the SGX-ST.

In addition, the Issuer shall with the prior written approval of the Trustee (such approval not to be
unreasonably withheld or delayed) forthwith appoint a Paying Agent having a specified office in New

40
 York City in the circumstances described in the second paragraph of Condition 6.5. Any variation,
termination, appointment or change referred to in the preceding paragraph and/or any appointment
referred to in this paragraph shall only take effect (other than in the case of insolvency, when it shall be
of immediate effect) after not less than 30 nor more than 45 days’ prior notice thereof shall have been
given to the Noteholders in accordance with Condition 14.

In acting under the Agency Agreement, the Paying Agents, the Registrar and the Transfer Agents act
solely as agents of the Issuer and the Guarantor and, in certain circumstances specified therein, of the
Trustee and do not assume any obligation to, or relationship of agency or trust with, any Noteholders,
Receiptholders or Couponholders. The Agency Agreement contains provisions permitting any entity
into which any Agent is merged or converted or with which it is consolidated or to which it transfers all
or substantially all of its assets to become the successor agent.

13. EXCHANGE OF TALONS

On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet
matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office
of the Principal Paying Agent or any other Paying Agent in exchange for a further Coupon sheet
including (if such further Coupon sheet does not include Coupons to (and including) the final date for
the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the
provisions of Condition 9.

14. NOTICES

Notices to holders of Registered Notes will be deemed to be validly given if sent by first class mail or (if
posted to an overseas address) by air mail to them at their respective addresses as recorded in the
Register and will be deemed to have been validly given on the fourth day after the date of such mailing
and, in addition, for so long as any Registered Notes are listed on a stock exchange or are admitted to
trading by another relevant authority and the rules of that stock exchange or relevant authority so
require, such notice will be published in a daily newspaper of general circulation in the place or places
required by those rules.

All notices regarding the Bearer Notes will be deemed to be validly given if published in a leading daily
newspaper of general circulation in Asia or such other English language daily newspaper with general
circulation in Asia. It is expected that such publication will be made in the Asian Wall Street Journal.
The Issuer shall also ensure that notices are duly published in a manner which complies with the rules
and regulations of any stock exchange (or any other relevant authority) on which the Notes are for the
time being listed. Any such notice will be deemed to have been given on the date of the first publication
or, where required to be published in more than one newspaper, on the date of the first publication in all
required newspapers. If publication as provided above is not practicable, a notice will be given in such
other manner, and will be deemed to have been given on such date, as the Trustee shall approve.

Until such time as any definitive Notes are issued, there may, so long as any Global Notes representing
the Notes are held in their entirety on behalf of Euroclear and/or Clearstream, Luxembourg, be
substituted for such mailing and such publication in such newspaper(s) the delivery of the relevant
notice to Euroclear and/or Clearstream, Luxembourg for communication by them to the holders of the
Notes and, in addition, for so long as any Notes are listed on a stock exchange and the rules of that stock
exchange (or any other relevant authority) so require, such notice will be published in a daily newspaper
of general circulation in the place or places required by the rules of that stock exchange (or any other
relevant authority). Any such notice shall be deemed to have been given to the holders of the Notes on
such day as specified in the applicable Pricing Supplement after the day on which the said notice was
given to Euroclear and/or Clearstream, Luxembourg.

Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in
the case of any Note in definitive form) with the relative Note or Notes, with the Principal Paying Agent
(in the case of Bearer Notes) or the Registrar (in the case of Registered Notes). Whilst any of the Notes
are represented by a Global Note, such notice may be given by any holder of a Note to the Principal
Paying Agent or the Registrar through Euroclear and/or Clearstream, Luxembourg, as the case may be,
in such manner as the Principal Paying Agent, the Registrar and Euroclear and/or Clearstream,
Luxembourg, as the case may be, may approve for this purpose.

41
 Receiptholders and Couponholders will be deemed for all purposes to have notice of the contents of any
notice given to Noteholders in accordance with this Condition 14.

15. MEETINGS OF NOTEHOLDERS, MODIFICATION, WAIVER AND SUBSTITUTION

15.1 Meeting of Noteholders

The Trust Deed contains provisions for convening meetings of the Noteholders to consider any matter
affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the
Notes, the Receipts, the Coupons or any of the provisions of the Trust Deed. Such a meeting may be
convened by the Issuer or the Trustee and shall be convened by the Issuer if required in writing by
Noteholders holding not less than ten per cent. in nominal amount of the Notes for the time being
remaining outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is two
or more persons holding or representing in the aggregate not less than 50 per cent. in nominal amount of
the Notes for the time being outstanding, or at any adjourned meeting two or more persons being or
representing Noteholders whatever the nominal amount of the Notes so held or represented, except that
at any meeting the business of which includes the modification of certain provisions of the Notes, the
Receipts, the Coupons or the Trust Deed (including, inter alia, modifying the date of maturity of the
Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or the
rate of interest payable in respect of the Notes or altering the currency of payment of the Notes, the
Receipts or the Coupons), the quorum shall be two or more persons holding or representing in the
aggregate not less than 75 per cent. in nominal amount of the Notes for the time being outstanding, or at
any adjourned such meeting two or more persons holding or representing in the aggregate not less
than 25 per cent. in nominal amount of the Notes for the time being outstanding. An Extraordinary
Resolution passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or
not they are present at the meeting, and on all Receiptholders and Couponholders.

The Trust Deed provides that a resolution in writing signed by or on behalf of the holders of not less
than 90 per cent. in principal amount of the Notes outstanding shall for all purposes be as valid and
effective as an Extraordinary Resolution passed at a meeting of Noteholders duly convened and held.
Such a resolution in writing may be contained in one document or several documents in the same form,
each signed by or on behalf of one or more Noteholders.

15.2 Modifications and Waivers

The Trustee may agree, without the consent or sanction of the Noteholders, Receiptholders or
Couponholders, to any modification (except such modifications in respect of which an increased
quorum is required as mentioned above) of, or to the waiver or authorisation of any breach or proposed
breach of, any of the provisions of the Notes or the Trust Deed, where, in any such case, it is not, in the
opinion of the Trustee, materially prejudicial to the interests of the Noteholders so to do or may agree,
without any such consent as aforesaid, to any modification which is of a formal, minor or technical
nature or to correct a manifest error. Any such modification shall be binding on the Noteholders, the
Receiptholders and the Couponholders and, unless the Trustee agrees otherwise, any such modification
shall be notified by the Issuer to the Noteholders in accordance with Condition 14 as soon as practicable
thereafter.

In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including,
without limitation, any modification, waiver, authorisation, determination or substitution), the Trustee
shall have regard to the general interests of the Noteholders as a class but shall not have regard to any
interests arising from circumstances particular to individual Noteholders, Receiptholders or
Couponholders (whatever their number) and, in particular but without limitation, shall not have regard
to the consequences of any such exercise for individual Noteholders, Receiptholders or Couponholders
(whatever their number) resulting from their being for any purpose domiciled or resident in, or
otherwise connected with, or subject to the jurisdiction of, any particular territory or any political
sub-division thereof and any Noteholder, Receiptholder or Couponholder shall not be entitled to claim,
from the Issuer, the Guarantor, the Trustee or any other person any indemnification or payment in
respect of any tax consequences of any such exercise upon individual Noteholders, Receiptholders or
Couponholders except to the extent already provided for in Condition 8 and/or any undertaking or
covenant given in addition to, or in substitution for, Condition 8 pursuant to the Trust Deed.

42
15.3 Substitution

The Trustee may, without the consent of the Noteholders, the Receiptholders or the Couponholders at
any time, (a) agree with the Issuer and the Guarantor to the substitution in place of the Issuer (or of the
previous substitute under this Condition) as the principal debtor under the Notes, the Receipts, the
Coupons and the Trust Deed of any entity owned or controlled by the Guarantor, or (b) agree with the
Issuer and the Guarantor to the substitution in place of the Guarantor (or of the previous substitute under
this Condition) as the guarantor under the Notes, the Receipts, the Coupons and the Trust Deed,
provided that, in each case, certain conditions specified in the Trust Deed are fulfilled, including (i) in
the case of a substitution of the Issuer by a company other than the Guarantor, a requirement that the
Guarantee of the Notes be fully effective in relation to the obligations of the new principal debtor under
the Notes, the Receipts, the Coupons and the Trust Deed and that such obligations are guaranteed by the
Guarantor in the same terms (with consequential amendments as necessary) as the Guarantee to the
Trustee’s satisfaction, (ii) in the case of a substitution of the Guarantor as guarantor under the Trust
Deed, a requirement that the Trustee is satisfied that the interests of the Noteholders will not be
materially prejudiced thereby and a requirement that the Guarantee of the Notes by the new guarantor is
fully effective in relation to the obligations of the new guarantor under the Notes, the Receipts, the
Coupons and the Trust Deed and (iii) certain other conditions set out in the Trust Deed being complied
with.

No Noteholder shall, in connection with any substitution, be entitled to claim any indemnification or
payment in respect of any tax consequence thereof for such Noteholder except to the extent provided for
in Condition 8 (or any undertaking given in addition to or substitution for it pursuant to the provisions of
the Trust Deed).

15.4 General

Any such modification, waiver, authorisation, determination or substitution shall be binding on the
Noteholders, the Receiptholders and the Couponholders and, unless the Trustee otherwise agrees, any
such modification or substitution shall be promptly notified to Noteholders by the Issuer in accordance
with Condition 14.

16. INDEMNIFICATION OF THE TRUSTEE AND TRUSTEE CONTRACTING WITH THE

ISSUER AND/OR THE GUARANTOR

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from
responsibility, including provisions relieving it from taking action unless indemnified and/or provided
with security and/or pre-funded to its satisfaction, as well as the priority in payment or satisfaction of all
costs, charges, expenses (including legal expenses) and liabilities due to or incurred and payments made
by the Trustee.

The Trust Deed also contains provisions pursuant to which the Trustee is entitled, inter alia, (a) to enter
into transactions or arrangements with the Issuer and the Guarantor and to act as trustee for the holders
of any other securities issued or guaranteed by, or relating to, the Issuer, (b) to exercise and enforce its
rights, comply with its obligations and perform its duties under or in relation to any such transactions an
arrangements or, as the case may be, any such trusteeship without regard to the interests of, or
consequences for, the Noteholders, Receiptholders or Couponholders and (c) to retain and not be in any
way liable to account for any profit made or any other amount or benefit received thereby or in
connection therewith.

Each Noteholder shall be solely responsible for making and continuing to make its own independent
appraisal and investigation into the financial condition, credit worthiness, condition, affairs and nature
of the Issuer. The Trustee shall not at any time have any responsibility for the same and each Noteholder
shall not rely on the Trustee in respect thereof.

The Trustee may rely, without liability to Noteholders, on a report, confirmation, opinion or certificate
or any advice of any lawyers, accountants, financial advisers, financial institution or any other expert,
whether or not addressed to it and whether their liability in relation thereto is limited (by its terms or by
any engagement letter relating thereto or in any other manner) by reference to a monetary cap,
methodology or otherwise. The Trustee may accept and shall be entitled to rely (without further

43
 investigation or enquiry) on any such report, confirmation, opinion or certificate or advice and such
report, confirmation or certificate or advice shall be binding on the Issuer, the Guarantor, the Trustee
and the Noteholders.

17. FURTHER ISSUES

The Issuer shall be at liberty from time to time without the consent of the Noteholders, the
Receiptholders or the Couponholders to create and issue further notes having terms and conditions the
same as the Notes or the same in all respects save for the amount and date of the first payment of
interest thereon and so that the same shall be consolidated and form a single Series with the outstanding
Notes.

18. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce
any term of this Note, but this does not affect any right or remedy of any person which exists or is
available apart from that Act.

19. GOVERNING LAW AND SUBMISSION TO JURISDICTION

19.1 Governing Law

The Trust Deed, the Agency Agreement, the Notes, the Receipts and the Coupons and any
non-contractual obligations arising out of or in connection with the Trust Deed, the Agency Agreement,
the Notes, the Receipts and the Coupons are governed by, and shall be construed in accordance with,
English law.

19.2 Submission to Jurisdiction

Each of the Issuer and the Guarantor has in the Trust Deed agreed, for the exclusive benefit of the
Trustee, the Noteholders, the Receiptholders and the Couponholders, that the courts of England are to
have exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Trust
Deed, the Notes, the Receipts and/or the Coupons (including a dispute relating to any non-contractual
obligations arising out of or in connection with the Trust Deed, the Notes, the Receipts and/or the
Coupons) and that accordingly any suit, action or proceedings (together referred to as Proceedings)
arising out of or in connection with the Trust Deed, the Notes, the Receipts and/or the Coupons
(including a dispute relating to any non-contractual obligations arising out of or in connection with the
Trust Deed, the Notes, the Receipts and/or the Coupons) may be brought in the English courts.

Each of the Issuer and the Guarantor has in the Trust Deed irrevocably and unconditionally waived and
agreed not to raise any objection which it may have now or hereafter to the laying of the venue of any
Proceedings (including any Proceedings relating to any non-contractual obligations arising out of or in
connection with the Trust Deed, the Notes, the Receipts and the Coupons) arising out of or in
connection with the Trust Deed, the Notes, the Receipts and the Coupons in the courts of England and
any claim that any such Proceedings have been brought in an inconvenient forum and has further
irrevocably and unconditionally agreed in the Trust Deed that a judgement in any such Proceedings
brought in the English courts shall be conclusive and binding upon it and may be enforced in the courts
of any other jurisdiction.

19.3 Appointment of Process Agent

Each of the Issuer and the Guarantor has, in the Trust Deed, irrevocably and unconditionally appointed
Cogency Global (UK) Limited at its specified office for the time being at 6 Lloyds Avenue, Unit 4CL,
London EC3N 3AX as its agent for service of process in England in respect of any Proceedings and has
undertaken that in the event of such agent ceasing so to act it will appoint such other person as the
Trustee may approve as its agent for that purpose.

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19.4 Waiver of Immunity

Each of the Issuer and the Guarantor irrevocably and unconditionally waives with respect to the Trust
Deed, the Notes, the Receipts and the Coupons any right to claim sovereign or other immunity from
jurisdiction or execution and any similar defence and irrevocably and unconditionally consents to the
giving of any relief or the issue of any process, including without limitation, the making, enforcement or
execution against any property whatsoever (irrespective of its use or intended use) of any order or
judgement made or given in connection with any Proceedings.

45
 FORM OF THE NOTES

The Notes of each Series will either be in bearer form, with or without interest coupons (“Coupons”) attached
(“Bearer Notes”), or registered form, without interest coupons attached (“Registered Notes”). The Notes will be
issued outside the United States in reliance on Regulation S.

Notes to be listed on the SGX-ST will be accepted for clearance through Euroclear and Clearstream,
Luxembourg.

Bearer Notes

Prior to the issuance of any Bearer Notes hereunder, the Issuer and the Guarantor will confirm with their counsel
that all documents used in connection with the issuance of such Bearer Notes have been reviewed, revised, and
updated to the extent necessary to ensure that such documents properly allow for the issuance of Bearer Notes in
accordance with U.S. federal income tax law.

Each Tranche of Bearer Notes will initially be represented by either a Temporary Bearer Global Note or a
Permanent Bearer Global Note as indicated in the applicable Pricing Supplement, which, in either case, will be
delivered on or prior to the original issue date of the Tranche to the Common Depositary for Euroclear and
Clearstream, Luxembourg.

While any Bearer Note is represented by a Temporary Bearer Global Note, payments of principal, interest (if
any) and any other amount payable in respect of the Notes due prior to the Exchange Date (as defined below)
will be made against presentation of the Temporary Bearer Global Note only to the extent that certification (in a
form to be provided) to the effect that the beneficial owners of interests in such Bearer Note are not U.S. persons
or persons who have purchased for resale to any U.S. person, as required by U.S. Treasury regulations, has been
received by Euroclear and/or Clearstream, Luxembourg and (in the case of a Temporary Bearer Global Note
delivered to a Common Depositary for Euroclear and Clearstream, Luxembourg) Euroclear and/or Clearstream,
Luxembourg, as applicable, has given a like certification (based on the certifications it has received) to the
Principal Paying Agent (as defined in “Terms and Conditions of the Notes”).

On and after the date (the “Exchange Date”) which, for each Tranche in respect of which a Temporary Bearer
Global Note is issued, is 40 days after the Temporary Bearer Global Note is issued, interests in such Temporary
Bearer Global Note will be exchangeable (free of charge) upon a request as described therein either for
(i) interests in a Permanent Bearer Global Note of the same Series or (ii) Definitive Bearer Notes (“Definitive
Bearer Notes”) of the same Series with, where applicable, receipts, interest coupons and talons attached (as
indicated in the applicable Pricing Supplement and subject, in the case of Definitive Bearer Notes, to such notice
period as is specified in the applicable Pricing Supplement), in each case against certification of beneficial
ownership as described above, unless such certification has already been given. The holder of a Temporary
Bearer Global Note will not be entitled to collect any payment of interest, principal or other amount due on or
after the Exchange Date unless, upon due certification, exchange of the Temporary Bearer Global Note for an
interest in a Permanent Bearer Global Note or for Definitive Bearer Notes is improperly withheld or refused.

Payments of principal, interest (if any) or any other amounts on a Permanent Bearer Global Note will be made
through Euroclear and/or Clearstream, Luxembourg against presentation or surrender (as the case may be) of the
Permanent Bearer Global Note without any requirement for certification.

The applicable Pricing Supplement will specify that a Permanent Bearer Global Note will be exchangeable (free
of charge), in whole but not in part, for Definitive Bearer Notes with, where applicable, receipts, interest coupons
and talons attached upon either (i) not less than 60 days’ written notice in the case of Notes held by a Common
Depositary for Euroclear and/or Clearstream, Luxembourg, from Euroclear and/or Clearstream, Luxembourg
(acting on the instructions of any holder of an interest in such Permanent Bearer Global Note) to the Principal
Paying Agent as described therein, or (ii) upon the occurrence of an Exchange Event. For these purposes, an
“Exchange Event” means that (i) an Event of Default (as defined in Condition 10.1) has occurred and is
continuing or (ii) the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed
for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have
announced an intention permanently to cease business or have in fact done so and, in any case, no successor or
alternative clearing system satisfactory to the Trustee is available or (iii) the Issuer has or will become subject to
adverse tax consequences which would not be suffered were the Notes in definitive form and a certificate to such
effect from two authorized officers of the Issuer has been given to the Trustee. The Issuer will promptly give
notice to the Noteholders and the Trustee in accordance with Condition 14 if an Exchange Event occurs. In the

46
event of the occurrence of an Exchange Event, in the case of Notes held by a Common Depositary for Euroclear
and/or Clearstream, Luxembourg, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any
holder of an interest in such Permanent Bearer Global Note) or the Trustee may give notice to the Principal
Paying Agent requesting exchange and in the event of the occurrence of an Exchange Event as described in
(iii) above, the Issuer may also give notice to the Principal Paying Agent requesting exchange. Any such
exchange following an Exchange Event shall occur not later than 45 days after the date of receipt of the first
relevant notice by the Principal Paying Agent.

The following legend will appear on all Bearer Notes which have an original maturity of more than one year and
on all receipts and interest coupons relating to such Notes:

“ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED
STATES) WHO HOLDS THIS OBLIGATION MAY BE SUBJECT TO LIMITATIONS UNDER THE
UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS
165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.”

The sections referred to provide that United States holders, with certain exceptions, will not be entitled to deduct
any loss on Bearer Notes, receipts or interest coupons and will not be entitled to capital gains treatment in respect
of any gain on any sale, disposition, redemption or payment of principal in respect of such Notes, receipts or
interest coupons.

Notes which are represented by a Bearer Global Note will only be transferable in accordance with the rules and
procedures for the time being of Euroclear or Clearstream, Luxembourg.

Registered Notes

The Registered Notes of each Tranche offered and sold in reliance on Regulation S, which will be sold to
non-U.S. persons outside the United States, will initially be represented by a Registered Global Note.

Prior to expiry of the distribution compliance period (as defined in Regulation S), if any, applicable to each
Tranche of Notes, beneficial interests in a Registered Global Note may not be offered or sold to, or for the
account or benefit of, a U.S. person save as otherwise provided in Condition 2 and may not be held otherwise
than through Euroclear or Clearstream, Luxembourg and such Registered Global Note will bear a legend
regarding such restrictions on transfer.

Registered Global Notes will be deposited with, and registered in the name of a nominee of, a Common
Depositary for Euroclear and Clearstream, Luxembourg, as specified in the applicable Pricing Supplement.
Persons holding beneficial interests in Registered Global Notes will be entitled or required, as the case may be,
under the circumstances described below, to receive physical delivery of definitive Notes in fully registered form
(“Definitive Registered Notes”).

Payments of principal, interest and any other amount in respect of the Registered Global Notes will, in the
absence of provision to the contrary, be made to the person shown on the Register (as defined in Condition 6.4)
as the registered holder of the Registered Global Notes. None of the Issuer, the Guarantor, any Paying Agent or
the Registrar (each as defined under “Terms and Conditions of the Notes”) will have any responsibility or
liability for any aspect of the records relating to or payments or deliveries made on account of beneficial
ownership interests in the Registered Global Notes or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.

Payments of principal, interest or any other amount in respect of the Definitive Registered Notes will, in the
absence of provision to the contrary, be made to the persons shown on the Register on the relevant Record Date
(as defined in Condition 6.4) immediately preceding the due date for payment in the manner provided in that
Condition.

Interests in a Registered Global Note will be exchangeable (free of charge), in whole but not in part, for
Definitive Registered Notes without receipts, interest coupons or talons attached only upon the occurrence of an
Exchange Event.

The Issuer will promptly give notice to the Noteholders and the Trustee in accordance with Condition 14 if an
Exchange Event occurs. In the event of the occurrence of an Exchange Event, (a) in the case of Notes held by a
Common Depositary for Euroclear and/or Clearstream, Luxembourg, Euroclear and/or Clearstream, Luxembourg
(acting on the instructions of any holder of an interest in such Permanent Bearer Global Note), or the Trustee

47
may give notice to the Principal Paying Agent requesting exchange and in the event of the occurrence of an
Exchange Event as described above, the Issuer may also give notice to the Principal Paying Agent requesting
exchange. Any such exchange following an Exchange Event shall occur not later than 10 days after the date of
receipt of the first relevant notice by the Principal Paying Agent.

Transfer of Interests

Interests in a Registered Global Note may, subject to compliance with all applicable restrictions, be transferred to
a person who wishes to hold such interest in another Registered Global Note. No beneficial owner of an interest
in a Registered Global Note will be able to transfer such interest, except in accordance with the applicable
procedures of Euroclear and Clearstream, Luxembourg.

General

All Notes will be issued pursuant to the Trust Deed and the Agency Agreement (each as defined under “Terms
and Conditions of the Notes”).

Pursuant to the Agency Agreement, the Principal Paying Agent shall arrange that, where a further Tranche of
Notes is issued which is intended to form a single Series with an existing Tranche of Notes, the Notes of such
further Tranche shall be assigned a common code and ISIN number which are different from the common code
and ISIN number assigned to Notes of any other Tranche of the same Series until at least the expiry of the
distribution compliance period (as defined in Regulation S under the Securities Act) applicable to the Notes of
such Tranche.

For so long as any of the Notes is represented by a Bearer Global Note or a Registered Global Note (each a
Global Note) held on behalf of Euroclear and/or Clearstream, Luxembourg, each person (other than Euroclear
and/or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream,
Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other
document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to
the account of any person shall be conclusive and binding for all purposes save in the case of manifest error)
shall be treated by the Issuer, the Guarantor, its agents and the Trustee as the holder of such nominal amount of
such Notes for all purposes other than with respect to the payment of principal or interest on such nominal
amount of such Notes, for which purpose the bearer of the relevant Bearer Global Note or the registered holder of
the relevant Registered Global Note shall be treated by the Trustee, the Issuer and their agents as the holder of
such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and
the Trust Deed and the expressions Noteholder and holder of Notes and related expressions shall be construed
accordingly.

Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be
deemed to include a reference to any additional or alternative clearing system specified in the applicable Pricing
Supplement or otherwise approved by the Issuer, the Guarantor, the Trustee and the Principal Paying Agent.

So long as any Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer shall appoint
and maintain a paying agent in Singapore, where such Notes may be presented or surrendered for payment or
redemption. In the event that any of the Global Notes representing such Notes is exchanged for definitive Notes,
an announcement of such exchange will be made by or on behalf of the Issuer through the SGX-ST and such
announcement will include all material information with respect to the delivery of the definitive Notes, including
details of the paying agent in Singapore.

No Noteholder, Receiptholder or Couponholder (each as defined in “Terms and Conditions of the Notes”) shall
be entitled to proceed directly against the Issuer or the Guarantor unless the Trustee, having become bound so to
proceed, fails so to do within a reasonable period and the failure shall be continuing.

The Issuer and the Guarantor may agree with any Dealer and the Trustee that Notes may be issued in a form not
contemplated by the Conditions, in which event, a supplement to this Offering Circular or a new Offering
Circular will be made available which will describe the effect of the agreement reached in relation to such Notes.

48
 FORM OF PRICING SUPPLEMENT

Set out below is the form of Pricing Supplement which will be completed for each Tranche of Notes issued under
the Programme.

[MIFID II product governance / Professional investors and ECPs only target market—Solely for the
purposes of [the/each] manufacturer’s product approval process, the target market assessment in respect of the
Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and
professional clients only, each as defined in [Directive 2014/65/EU (as amended, “MiFID II”)][MiFID II]; and
(ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate.
Any person subsequently offering, selling or recommending the Notes (a “distributor”) should take into
consideration the manufacturer[’s/s’] target market assessment; however, a distributor subject to MiFID II is
responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or
refining the manufacturer[’s/s’] target market assessment) and determining appropriate distribution channels.]

[PROHIBITION OF SALES TO EEA RETAIL INVESTORS—The Notes are not intended to be offered, sold
or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor
in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or
more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended,
“MiFID II”); (ii) a customer within the meaning of Directive 2002/92/EC (as amended, the “Insurance
Mediation Directive”), where that customer would not qualify as a professional client as defined in point (10) of
Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Directive 2003/71/EC (as amended, the
“Prospectus Directive”). Consequently no key information document required by Regulation (EU) No 1286/2014
(as amended, the “PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to
retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making
them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.]

SFA Notification - [the following legend to be included if Notes are Excluded Investment Products, otherwise
appropriate legend to be included;]

Section 309B(1)(c) Notification —[The Notes shall be prescribed capital markets products (as defined in the
Securities and Futures (Capital Markets Products) Regulations 2018) and Excluded Investment Products (as
defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16:
Notice on Recommendations on Investment Products).] [Note: Relevant Dealer(s) to consider whether it/they
have received the necessary product classification from the Issuer prior to the launch of the offer, pursuant to
Section 309B of the SFA.]

Pricing Supplement Dated [Š]

AC Energy Finance International Limited

Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes]

Guaranteed by AC Energy, Inc.
under the U.S.$1,000,000,000
Medium Term Note Programme

This document constitutes the Pricing Supplement relating to the issue of Notes described herein.

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the “Conditions”)
set forth in the Offering Circular dated 16 January 2019 and any documents therein incorporated by reference
(collectively, the “Offering Circular”). This Pricing Supplement comprises the final terms of the Notes and
must be read in conjunction with such Offering Circular. Full information on the Issuer and the offer of the Notes
is only available on the basis of the combination of this Pricing Supplement and the Offering Circular.

[The following alternative language applies if the first tranche of an issue which is being increased was issued
under an Offering Circular with an earlier date.

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the “Conditions”)
set forth in the Offering Circular dated [original date] which are incorporated by reference in the Offering
Circular dated [current date] and are attached hereto. This Pricing Supplement contains the final terms of the
Notes and must be read in conjunction with the Offering Circular dated [current date].]

49
[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that the numbering should
remain as set out below, even if “Not Applicable” is indicated for individual paragraphs or subparagraphs.
Italics denote directions for completing the Pricing Supplement]

[If the Notes have a maturity of less than one year from the date of their issue, the minimum denomination may
need to be £100,000 or its equivalent in any other currency.]

1. (a) Issuer: AC Energy Finance International Limited

(LEI: 549300Z8J2RSBCDEY136)

(b) Guarantor: AC Energy, Inc.

(LEI: 549300ZYHD5YBZVSYZ84)

2. (a) Series Number: [ ]

(b) Tranche Number: [ ]

(If fungible with an existing Series, details of that Series,

including the date on which the Notes become fungible)

(c) Date on which the Notes will be The Notes will be consolidated and form a single Series with
consolidated and form a single Series: [identify earlier Tranches] on [the Issue Date/ exchange of
the Temporary Global Note for interests in the Permanent
Global Note, as referred to in paragraph 34 below, which is
expected to occur on or about [date]][Not Applicable]

3. Specified Currency or Currencies: [ ]

4. Aggregate Nominal Amount:

(a) Series: [ ]

(b) Tranche: [ ]

5. (a) Issue Price: [ ]% of the Aggregate Nominal Amount [plus accrued

interest from [insert date] (in the case of fungible issues only,
if applicable)]

(b) Net Proceeds: (only for listed notes) [ ]

6. (a) Specified Denominations: [ ]

(N.B. Notes must have a minimum denomination of €100,000

(or equivalent) in order to benefit from Transparency
Directive exemptions in respect of whole sale securities and
in order to benefit from the wholesale exemption set out in
Article 3.2(d) of the Prospectus Directive in that Member
State.)

(Note—where Bearer Notes with multiple denominations

above [€100,000] or equivalent are being used with respect
to Bearer Notes, the following sample wording should be
followed:

“[€100,000] and integral multiples of [€1,000] in excess

thereof up to and including [€199,000]. No Notes in definitive
form will be issued with a denomination above [€199,000].”)

(N.B. If an issue of Notes is (i) NOT admitted to trading on a

European Economic Area exchange; and (ii) only offered in
the European Economic Area in circumstances where a

50
 prospectus is not required to be published under the
Prospectus Directive the €100,000 minimum denomination is
not required.)

(In the case of Registered Notes, this means the minimum

integral amount in which transfers can be made.)

(b) Calculation Amount: [ ]

(If only one Specified Denomination, insert the Specified

Denomination. If more than one Specified Denomination,
insert the highest common factor. Note: There must be a
common factor in the case of two or more Specified
Denominations.)

7. (a) Issue Date: [ ]

(b) Interest Commencement Date: [Specify/Issue Date/Not Applicable]

(N.B. An Interest Commencement Date will not be relevant of

certain Notes, for example Zero Coupon Notes.)

8. Maturity Date: [Fixed rate—specify date/Floating rate—Interest Payment

Date falling in or nearest to [specify month and year]]

9. Interest Basis: [[ ]% Fixed Rate]

[[specify Reference Rate] +/– [ ]% Floating Rate] [Zero
Coupon]
[Index Linked Interest]
[Dual Currency Interest]
[specify other]
(further particulars specified below)

10. Redemption/Payment Basis: [Redemption at par]

[Index Linked Redemption]
[Dual Currency Redemption] [Partly Paid]
[Instalment]
[specify other]

11. Change of Interest Basis or Redemption/ [Applicable/Not Applicable]

Payment Basis:
(If applicable, specify details of any provision for change of
Notes into another Interest Basis or Redemption/ Payment
Basis)

12. Put/Call Options: [Investor Put]

[Issuer Call]
[(further particulars specified below)]

13. Status of the Notes: Senior

14. (a) Date Board approval for issuance of [ ] [and [ ], respectively]]/[None required]
Notes obtained:
(N.B. Only relevant where Board (or similar) authorisation is
required for the particular Tranche of Notes.)

(b) Date regulatory approval/consent for [ ]/[None required]

issuance of Notes obtained:

15. Listing: [SGX-ST/specify other/None]

(N.B. Consider disclosure requirements under the EU
Prospectus Directive applicable to securities admitted to an
EU regulated market)

51
16. Method of distribution: [Syndicated/Non-syndicated]

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE

17. Fixed Rate Note Provisions: [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs of this
paragraph)

(a) Rate(s) of Interest: [ ]% per annum [payable in arrear] on each Interest

Payment Date

(b) Interest Payment Date(s): [ ] in each year up to and including the Maturity Date]
(Amend appropriately in the case of irregular coupons)

(c) Fixed Coupon Amount(s): [ ] per Calculation Amount

(Applicable to Notes in definitive
form.)

(d) Broken Amount(s): [ ] per Calculation Amount, payable on the Interest

(Applicable to Notes in definitive Payment Date falling [in/on]
form.) [ ]

(e) Day Count Fraction: [Actual/Actual (ICMA) 30/360 Actual/365 (Fixed) Other]

(f) Determination Date(s): [[ ] in each year] [Not Applicable]

[Insert regular interest payment dates, ignoring issue date or
maturity date in the case of a long or short first or last
coupon]
(N.B. This will need to be amended in the case of regular
interest payment dates which are not of equal duration)
(N.B. Only relevant where Day Count Fraction is Actual/
Actual (ICMA))

(g) Party responsible for calculating the [ ]

amount of interest payable per
Calculation Amount (if not the
Principal Paying Agent):

(h) Other terms relating to the method of [None/give details]

calculating interest for Fixed Rate
Notes:

18. Floating Rate Note Provisions: [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs of this
paragraph)

(a) Interest Period(s): [ ]

(b) Specified Interest Payment Dates: [ ]

(c) Business Day Convention: [Floating Rate Convention/Following Business Day

Convention/Modified Following Business Day Convention/
Preceding Business Day Convention/ [specify other]]

(d) Additional Business Centre(s): [Not Applicable/give details]

(e) Manner in which the Rate of Interest [Screen Rate Determination/ISDA Determination/specify
and Interest Amount is to be other]
determined:

(f) Party responsible for calculating the [[Name] shall be the Calculation Agent (no need to specify if
Rate of Interest and Interest Amount the Principal Paying Agent is to perform this function)]
(if not the Principal Paying Agent):

52
 (g) Screen Rate Determination: [ ]

• Reference Rate and Relevant Reference Rate: [ ] month [LIBOR/EURIBOR/ specify

Financial Centre: other Reference Rate]. Relevant Financial Centre: [London/
Brussels/specify other Relevant Financial Centre]

• Interest Determination Date(s): [ ] [TARGET] business days in [specific city] for

[specific currency] prior to [the first day in each Interest
Period / each Interest Payment Date]

• Relevant Screen Page: [ ] (In the case of EURIBOR, if not Reuters

EURIBOR01 ensure it is a page which shows a composite
rate or amend the fallback provisions appropriately)

• Relevant Time: [ ]
(For example, 11:00 a.m. London time)

(h) ISDA Determination:

• Floating Rate Option: [ ]

• Designated Maturity: [ ]

• Reset Date: [ ]
(In the case of a LIBOR or EURIBOR based option, the first
day of the Interest Period)

• ISDA Definitions: [ ]
(If different from those set out in the Conditions)

(i) Margin(s): [+/-][ ]% per annum

(j) Minimum Rate of Interest: [ ]% per annum

(k) Maximum Rate of Interest: [ ]% per annum

(l) Day Count Fraction: [Actual/Actual (ISDA)][Actual/Actual]

[Actual/365 (Fixed)]
[Actual/365 (Sterling)]
[Actual/360]
[30/360] [360/360][Bond Basis] [30E/360][Eurobond Basis]
[30E/360 (ISDA)]
(See Condition 5 for alternatives)

(m) Fallback provisions, rounding [ ]

provisions and any other terms relating
to the method of calculating interest on
Floating Rate Notes, if different from
those set out in the Conditions:

19. Zero Coupon Note Provisions: [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs of this
paragraph)

(a) Accrual Yield: [ ]% per annum

(b) Reference Price: [ ]

(c) Any other formula/basis of [ ]

determining amount payable:

53
 (d) Day Count Fraction in relation to [30/360]
Early Redemption Amounts: [Actual/360]
[Actual/365]

20. Index Linked Interest Note Provisions: [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs of this
paragraph)

(a) Index/Formula: [Give or annex details]

(b) Party responsible for calculating the [ ]

Rate of Interest (if not the Calculation
Agent) and Interest Amount (if not the
Principal Paying Agent):

(c) Provisions for determining Coupon [Need to include a description of market disruption or
where calculation by reference to settlement disruption events and adjustment provisions]
Index and/or Formula is impossible or
impracticable:

(d) Interest Period(s): [ ]

(e) Specified Interest Payment Dates: [ ]

(f) Business Day Convention: [Floating Rate Convention/Following Business Day

Convention/Modified Following Business Day Convention/
Preceding Business Day Convention/specify other]

(g) Additional Business Centre(s): [Not Applicable/give details]

(h) Minimum Rate of Interest: [ ]% per annum

(i) Maximum Rate of Interest: [ ]% per annum

(j) Day Count Fraction: [ ]

21. DualCurrency Interest Note Provisions: [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs of this
paragraph)

(a) Rate of Exchange/method of [give details]

calculating Rate of Exchange:

(b) Party responsible for calculating the [ ]

Rate of Interest (if not the Calculation
Agent) and Interest Amount (if not the
Principal Paying Agent):

(c) Provisions for determining Coupon [Need to include a description of market disruption or
where calculation by reference to settlement disruption events and adjustment provisions]
Index and/or Formula is impossible or
impracticable:

(d) Person at whose option Specified [ ]

Currency(ies) is/are payable:

PROVISIONS RELATING TO REDEMPTION

22. Notice periods for Condition 7.2: Minimum period: [ ] days

Maximum period: [ ] days

54
23. Issuer Call: [Applicable/Not Applicable]
(If not applicable, delete the remaining subparagraphs of this
paragraph)

(a) Optional Redemption Date(s): [ ]

(b) Optional Redemption Amount of each [[ ] per Calculation Amount/specify other]

Note and method, if any, of calculation
of such amount(s):

(c) If redeemable in part:

(i) Minimum Redemption Amount: [ ] per Calculation Amount

(ii) Maximum Redemption Amount: [ ] per Calculation Amount

(d) Notice periods: Minimum period: [ ] days

Maximum period: [ ] days
(N.B. When setting notice periods, the Issuer is advised to
consider the practicalities of distribution of information
through intermediaries, for example, clearing systems and
custodians, as well as any other notice requirements which
may apply, for example, as between the Issuer and the
Principal Paying Agent or the Trustee)

24. Investor Put: [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs of this
paragraph)

(a) Optional Redemption Date(s): [ ]

(b) Optional Redemption Amount of each [[ ] per Calculation Amount/specify other]

Note and method, if any, of calculation
of such amount(s):

(c) Notice periods: Minimum period: [ ] days

Maximum period: [ ] days
(N.B. When setting notice periods, the Issuer is advised to
consider the practicalities of distribution of information
through intermediaries, for example, clearing systems and
custodians, as well as any other notice requirements which
may apply, for example, as between the Issuer and the
Principal Paying Agent or the Trustee)

25. Final Redemption Amount of each Note: [[ ] per Calculation Amount/specify other/see
Appendix]

26. Early Redemption Amount of each Note [[ ] per Calculation Amount/specify other/see
payable on redemption for taxation Appendix]
reasons, upon change of control or on
event of default and/or the method of
calculating the same (if required or if
different from that set out in
Condition 7.6):

27. Applicable Spread: [[ ]% per annum]/Not Applicable]

GENERAL PROVISIONS APPLICABLE TO THE NOTES

28. Form of Notes: [Bearer Notes:

[Temporary Bearer Global Note exchangeable for a
Permanent Bearer Global Note which is exchangeable for

55
 Definitive Bearer Notes [on [ ] days’ notice given at any
time/only upon an Exchange Event]]
[Temporary Bearer Global Note exchangeable for Definitive
Bearer Notes on and after the Exchange Date]

[Permanent Bearer Global Note exchangeable for Definitive

Bearer Notes [on [ ] days’ notice given at any time/only
upon an Exchange Event]]

(Ensure that this is consistent with the wording in the “Form

of the Notes” section in the Offering Circular and the Notes
themselves. The exchange upon notice option should not be
expressed to be applicable if the Specified Denomination of
the Notes in paragraph 6 includes language substantially to
the following effect:

“[€100,000] and integral multiples of [€1,000] in excess

thereof up to and including [€199,000]. No Notes in definitive
form will be issued with a denomination above [€199,000]”.
Furthermore, such Specified Denomination construction is
not permitted in relation to any issue of Notes which is to be
represented on issue by a Temporary Bearer Global Note
exchangeable for Definitive Bearer Notes.)

Registered Notes:
[Registered Global Note ([ ] nominal amount)
registered in the name of a nominee for a common depositary
for Euroclear and Clearstream, Luxembourg (specify nominal
amounts)]

29. Additional Financial Centre(s) or other [Not Applicable/give details]

special provisions relating to Payment (Note that this item relates to the place of payment and not
Dates: Interest Period end dates to which items 18(d) and 20(g)
relate)

30. Talons for future Coupons or Receipts to [Yes/No. If yes, give details]
be attached to Definitive Notes in bearer
form (and dates on which such Talons
mature):

31. Details relating to Partly Paid Notes: [Not Applicable/give details. N.B. a new form of Temporary
amount of each payment comprising the Bearer Global Note and/or Permanent Bearer Global Note
Issue Price and date on which each may be required for Partly Paid issues]
payment is to be made [and consequences
(if any) of failure to pay, including any
right of the Issuer to forfeit the Notes and
interest due on late payment]:

32. Details relating to Instalment Notes:

(a) [Instalment Amount(s): [Not Applicable/give details]]

(b) [Instalment Date(s): [Not Applicable/give details]]

33. Redenomination, renominalisation and [Not Applicable/The provisions annexed to this Pricing
reconventioning provisions: Supplement apply]

34. Consolidation provisions: [Not Applicable/ [The provisions in Condition [17] (Further
Issues)] / [annexed to this Pricing Supplement] apply]

35. Any applicable currency disruption/ [Not Applicable/give details]

fallback provisions:

56
36. Other terms or special conditions: [Not Applicable/give details] [N.B. If full terms and
conditions are to be used: The full text of the Conditions
which apply to the Notes [and which will be endorsed on the
Notes in definitive form] are set out in [the Annex hereto],
which Conditions replace in their entirety those appearing in
the Offering Circular for the purposes of these Notes and
such Conditions will prevail over any other provisions to the
contrary. The full Conditions should be attached to and form
part of the Pricing Supplement]

DISTRIBUTION

37. (a) If syndicated, names of Managers: [Not Applicable/give names]

(b) Stabilising Manager(s) (if any): [Not Applicable/give name(s)]

(c) Date of Subscription Agreement: [ ]

38. If non-syndicated, name of relevant Dealer: [ ]

39. U.S. Selling Restriction: Reg. S Category [1/2]; [TEFRA D/TEFRA C/TEFRA D and
TEFRA C are not applicable]

40. Additional selling restrictions: [Not Applicable/give details]

41. Additional U.S. federal income tax [Not Applicable/give details]

considerations: [To consider whether any considerations relating to the
U.S. Foreign Account Tax Compliance Act need to be
included]

OPERATIONAL INFORMATION

42. Any clearing system(s) other than [Not Applicable/give name(s) and number(s)]
Euroclear and Clearstream, Luxembourg
and the relevant identification number(s):

43. Delivery: Delivery [against/free of] payment

44. Additional Paying Agent(s) (if any): [ ]

45. ISIN: [ ]

46. Common Code: [ ]

[USE OF PROCEEDS

Give details if different from the “Use of Proceeds” section in the Offering Circular.]

[STABILISATION

In connection with this issue, [insert name of Stabilising Manager(s)] (the Stabilising Manager(s)) (or persons
acting on behalf of any Stabilising Manager(s)) may over-allot Notes or effect transactions with a view to
supporting the market price of the Notes at a level higher than that which might otherwise prevail. However,
there is no assurance that the Stabilising Manager(s) (or persons acting on behalf of a Stabilising Manager) will
undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public
disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may be ended at any
time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes
and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-
allotment must be conducted by the relevant Stabilising Manager(s) (or persons acting on behalf of any
Stabilising Manager(s)) in accordance with all applicable laws and rules.]

57
[LISTING

This Pricing Supplement comprises the final terms required to list the issue of Notes described herein pursuant to
the U.S.$1,000,000,000 Medium Term Note Programme of AC Energy Finance International Limited.]

RESPONSIBILITY

The Issuer and the Guarantor accept responsibility for the information contained in this Pricing Supplement.

Signed on behalf of:

AC Energy Finance International Limited:

By:
Duly authorised

AC Energy, Inc.:

By:
Duly authorised

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 USE OF PROCEEDS

The proceeds from each issue of Notes under the Programme will be used for general corporate purposes,
including, but not limited to, working capital, funding investment activities, development of projects and
on-lending to entities within the AC Energy group. If, in respect of any particular issue, there is a particular
identified use of proceeds, including any Eligible Green Projects (see “Green Bond Framework”), this will be
stated in the applicable Pricing Supplement. “Eligible Green Projects” include qualifying assets and projects
related to the development, construction and production of the components, acquisitions and operation of
(a) solar energy projects, (b) onshore and offshore wind energy projects, and (c) geothermal energy projects with
direct emissions of less than 100gCO2/kWh.

Only Tranches of Notes issued to finance or refinance, in part or in full, new or existing Eligible Green Projects
and will be designated as “Green Bonds.” See “Green Bond Framework”.

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 GREEN BOND FRAMEWORK

Introduction

AC Energy recognizes the importance of creating value not only for its businesses, but also for its stakeholders,
the environment, and the communities in which it operates. The Company strives to integrate sustainability in the
core of its corporate strategies and to balance its growth with environmental and social responsibility.

AC Energy supports the 10 Principles of the UN Global Compact and its parent company, Ayala Corporation, is
a founding member of the UN Global Compact Network Philippines. AC Energy has developed a Green Bond
Framework under which Notes issued under the Programme may be designated as Green Bonds (if so designated,
each such issuance, a “Green Bonds issuance”) to fund selected Eligible Green Projects.

The Green Bond Framework is intended to govern Green Bond issuances across all AC Energy entities, including
(but not limited to) AC Energy Finance International Limited.

Eligible Green Project Categories

An amount equal to the aggregate net proceeds from a Green Bonds issuance will be used to finance or refinance,
in whole or in part, new or existing “Eligible Green Projects”; that is, qualifying assets and projects which meet
the criteria (the “Eligibility Criteria”) outlined below:

Development, construction and production of the components, acquisitions and operation of:

‰ Solar Energy Projects

‰ Wind Energy Projects (onshore and offshore)

‰ Geothermal Energy Projects (direct emissions < 100gCO2/kWh)

Eligible Green Projects may be found throughout the AC Energy group of companies and AC Energy reserves
the right to choose the most efficient way of transferring cash between entities to fund Eligible Green Projects.

Eligible Green Projects may include AC Energy investments made during the two years prior to the issuance date
of the relevant Green Bonds and during the life of such Green Bonds.

Process for Project Evaluation and Selection

The Eligible Green Projects are identified and selected according to the Eligibility Criteria outlined above and via
a process that involves participants from various functional areas including AC Energy’s Business Development,
Finance and Sustainability teams. Prior to investing in a project in a given region, AC Energy ensures local
regulations regarding environmental and social constraints are adhered to.

A short list of projects are reviewed for approval by the Company’s senior management on an at least an annual
basis, until all proceeds are accounted for and thereafter in the event of material developments. AC Energy’s
board of directors and senior management are responsible for the approval of assets and projects in accordance
with the Green Bond Framework.

Management of Proceeds

An amount equal to the net proceeds from the Green Bonds issuance will be allocated to finance designated
eligible green assets/projects across the AC Energy group of companies, selected in accordance with the
Eligibility Criteria, and using the evaluation and selection process mentioned above.

Payment of principal and interest on the Green Bonds will be made from AC Energy’s general funds and will not
be directly linked to the performance of any one specific Eligible Green Project.

AC Energy intends to allocate an amount equal to the majority of the net proceeds from the sales of the Green
Bonds within two years of the date of issuance.

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Tracking of Proceeds

AC Energy will monitor the allocation of an amount equal to the proceeds via its internal information systems. A
register will be created to facilitate the monitoring and reporting of the Green Bonds issuance and the
deployment of an amount equal to the net proceeds.

The register will include, among others:

1. Green Bond details: including ISIN, issue date, maturity date, principal amount and coupon;

2. Eligible Green Project list;

3. Renewable/green asset category;

4. The regions in which the projects are located;

5. The amount of net proceeds allocated to the projects;

6. The date of allocation and foreign exchange rates;

7. Environmental certification of the project (if applicable).

Use of Unallocated Proceeds

Pending any allocation or reallocation, an amount equal to the net proceeds from the Green Bonds issuance may
be invested in cash or cash equivalents, or used to repay existing borrowings under general credit facilities of AC
Energy.

These funds will managed according to AC Energy’s own internal liquidity management policies and may be
transferred to other entities within the AC Energy group.

Substitution of Assets

AC Energy will allocate an amount equal to the net proceeds to assets or projects that comply with the Eligibility
Criteria as soon as reasonably practicable, reallocating to replacement assets or projects in the event that a
previously allocated asset or project is sold or no longer available.

Reporting

Allocation Reporting

At least annually, until an amount equal to the net proceeds has been allocated, and thereafter, in the event of
material changes, AC Energy will provide information on the allocation of an amount equal to the net proceeds
of the Green Bonds issuance on its website and/or in the Ayala Corporation group of companies’ sustainability
reports. The information will contain at least the following details:

1. A list of approved Eligible Green Projects, including amounts allocated; and

2. Remaining balance of unallocated proceeds

Where possible, AC Energy will also provide additional information, case studies or examples of selected
projects, subject to considerations such as confidentiality agreements.

The annual reporting will be reviewed and approved by AC Energy’s senior management.

For each Green Bonds issuance, AC Energy intends to engage an external auditor to provide independent
verification on its reporting and management of proceeds in accordance with this Green Bond Framework.

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Impact Reporting

Where relevant and possible, AC Energy will also report on selected impact metrics (per project or in aggregate
for all projects financed by the proceeds of a Green Bonds issuance), as outlined below:

‰ Energy generated from renewable sources (kWh)

‰ Greenhouse Gas (GHG) emissions reduced/avoided (tCO2e)

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 RISK FACTORS

The Company believes that the following factors may affect its ability to fulfill its obligations under the Notes.
Most of these factors are contingencies which may or may not occur and the Company is not in a position to
express a view on the likelihood of any such contingency occurring.

In addition, factors which are material for the purpose of assessing the market risks associated with the Notes
are described below.

The Company believes that the factors described below represent the principal risks inherent in investing in the
Notes, but the inability of the Company to pay interest, principal or other amounts on or in connection with the
Notes may occur for other reasons which may not be considered significant risks by the Company based on
information currently available to it or which it may not currently be able to anticipate. Prospective investors
should also read the detailed information set out elsewhere in this Offering Circular and reach their own views
prior to making any investment decision.

RISKS RELATING TO THE COMPANY AND ITS BUSINESSES

Increased competition in the power industry, including competition resulting from legislative, regulatory and
industry restructuring efforts could have a material adverse effect on the Company’s operations and financial
performance.

The Company’s success depends on its ability to identify, invest in and develop new power projects, and the
Company faces competition to acquire future rights to develop power projects and to generate and sell power. No
assurance can be given that the Company will be able to acquire or invest in new power projects successfully.

The Philippine government has sought to implement measures designed to establish a competitive power market.
These measures include the ongoing privatization of at least 70% of the NPC-owned-and-controlled power
generation facilities and the grant of a concession to operate transmission facilities, as well as the implementation
of retail competition and open access. The move towards a more competitive environment could result in the
emergence of new and numerous competitors. These competitors may have greater financial resources, and have
more extensive experience than the Company, giving them the ability to respond to operational, technological,
financial and other challenges more quickly than AC Energy. These competitors may therefore be more
successful than the Company in acquiring existing power generation facilities or in obtaining financing for and
the construction of new power generation facilities. The type of fuel that competitors use for their generation
facilities may also allow them to produce electricity at a lower cost and to sell electricity at a lower price. The
Company may therefore be unable to meet the competitive challenges it will face.

The impact of the restructuring of the Philippine power industry changes the competitive landscape of the
industry and such changes affect the Company’s financial position, results of operations and cash flows in
various ways.

In addition, any decision to develop and construct power projects in various jurisdictions, including the
Philippines, Indonesia and Vietnam, is made after careful consideration of regulatory requirements, availability
of fiscal incentives, market conditions (including the demand and supply conditions), land availability, and other
considerations. For those jurisdictions that require participation through a competitive bidding process or through
the submission of a formal proposal, in which the Company will need to compete for projects based on pricing,
technical and engineering qualifications, the financial condition of the Company, availability of land, access to
financings, track record and other specifications of the proposed project, the bidding or proposal submission
process and selection process may be affected by a number of factors, including factors which may be beyond the
Company’s control, such as market conditions or government incentive programs. In such cases, the Company
may not acquire the rights to develop new power projects in the event that the Company misjudges its
competitiveness when submitting its bids or proposals or, where bidding includes price competition, if the
Company’s competitors have more competitive pricing. The ability of the Company’s competitors to access
resources that it does not have access to, including labor and capital, may prevent the Company from acquiring
additional power projects in strategic locations or from increasing its generating capacity, and the Company may
not be able to expand its business as a result.

AC Energy may not successfully implement its growth strategy and the impact of acquisitions, investments and
value realization initiatives could be less favorable than anticipated.

As part of its business strategy, AC Energy seeks to actively manage its portfolio of power projects to maximize
its capital base and has conducted and continues to carry out acquisitions and investments of varying sizes as

63
well as value realization through certain dispositions, some of which are significant, as well as develop additional
power projects in both the Philippines and in international markets. This strategy may require entering into
strategic alliances and partnerships and will involve substantial investments. The Company’s success in
implementing this strategy will depend on, among other things, its ability to identify and assess potential
partners, investments and acquisitions, opportunities for value realization and redeployment of capital, and to
successfully finance, close and integrate such investments and acquisitions, control costs and maintain sufficient
operational and financial controls.

This growth strategy could place significant demands on AC Energy’s management and other resources. AC
Energy’s future growth may be adversely affected if it is unable to make these investments, value realization and
capital recycling initiatives or form these partnerships, or if these investments, value realization and capital
recycling initiatives and partnerships prove unsuccessful. Further, acquisitions and investments involve
numerous risks, including, without limitation, the following: (i) the assumptions used in the underlying business
plans may not prove to be accurate, in particular with respect to synergies and expected demand; (ii) the
Company may not be able to integrate acquired businesses, technologies, products, personnel, and operations
effectively; (iii) the Company may fail to retain key employees, customers and suppliers of the companies
acquired; (iv) the Company may be required or wish to terminate pre-existing contractual relationships, which
could be costly and/or on unfavorable terms; and (v) the Company may increase its indebtedness to finance these
acquisitions. As a result, it is possible that the expected benefits of completed or future acquisitions, investments
and value realization and capital recycling initiatives may not materialize within the time periods or to the extent
anticipated or affect the Company’s financial condition.

Further, the Company may not be able to identify suitable acquisition and investment opportunities or make
acquisitions and investment, on beneficial terms, or obtain financing necessary to complete and support such
acquisitions. Regulation of merger and acquisition activity by relevant authorities or other national regulators
may also limit the Company’s ability to make future acquisitions, mergers or dispositions. In January 2019, the
Company entered into an agreement for the acquisition of certain interests in PHINMA Energy Corporation and
in September 2018, the Company, through its affiliate, entered into an agreement with Aboitiz Power for the
disposition of certain of its interests in its thermal energy portfolio. See “Business—Recent Developments.” The
completion of these transactions are subject to certain conditions, including the approval of the Philippine
Competition Commission. The impact on the Company of any future acquisitions or investments and dispositions
cannot be fully predicted and any of the risks outlined above, should they materialize, could have a material
adverse effect on the Company’s business, financial condition, results of operations and prospects.

In addition, the Company’s growth to date, in particular driven by acquisitions and investments, has placed, and
the anticipated further expansion of the Company’s operations will continue to place, a significant strain on the
Company’s management, systems and resources. In addition to training, managing and integrating the
Company’s workforce, the Company will need to continue to develop the Company’s financial and management
controls. The Company can provide no assurance that the Company will be able to efficiently or effectively
manage the growth and integration of the Company’s operations and internationally dispersed businesses and any
failure to do so may materially and adversely affect the Company’s business, financial condition, results of
operations and prospects. In addition, if general economic and regulatory conditions or market and competitive
conditions change, or if operations do not generate sufficient funds or other unexpected events occur, AC Energy
may decide to delay, modify or forego some aspects of its growth strategies, and its future growth prospects
could be adversely affected.

The operations of the Company’s power projects are subject to significant government regulation, including
regulated tariffs such as FIT, and AC Energy’s margins and results of operations could be adversely affected
by changes in the law or regulatory schemes.

The inability of the Company and the applicable power projects to predict, influence or respond appropriately to
changes in law or regulatory schemes, 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 our results of operations and cash flow.
Furthermore, changes in laws or regulations or changes in the application or interpretation of laws or regulations
in jurisdictions where power projects are located, (particularly utilities where electricity tariffs are subject to
regulatory review or approval) could adversely affect the Company’s business, including, but not limited to:

‰ adverse changes in tax law;

64
‰ changes in the timing of tariff increases or in the calculation of tariff incentives;

‰ change in existing subsidies and other changes in the regulatory determinations under the relevant
concessions;

‰ other changes related to licensing or permitting which increase capital or operating costs or otherwise
affect the ability to conduct business; or

‰ 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 the
Company’s results of operations.

For renewable assets, pricing is either fixed by regulatory arrangements which operate instead of, or in addition
to, contractual arrangements or is based on market prices. To the extent that costs rise above the level approved
in the tariff, the power projects 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 Company’s
business, financial condition, results of operations and prospects.

Failure to obtain financing on reasonable terms or at all could adversely impact the execution of the
Company’s expansion and growth plans.

The Company’s expansion and growth plans are expected to require significant fund raising. As part of the
Company’s current strategy to exceed 5,000MW of renewable energy capacity by 2025, the Company estimates
that it will require around U.S.$2.0 billion of equity financing. The Company’s continued access to debt and
equity financing as a source of funding for new projects, acquisitions and investments, and for refinancing
maturing debt is subject to many factors, including: (i) Philippine regulations limiting bank exposure (including
single borrower limits) to a single borrower or related group of borrowers; (ii) the Company’s compliance with
existing debt covenants; (iii) the ability of the Company to service new debt; (iv) the macroeconomic
fundamentals driving credit ratings of the Philippines; and (v) perceptions in the capital markets regarding the
Company and the industries and regions in which it operates and other factors, some of which may be outside of
its control, including general conditions in the debt and equity capital markets, political instability, an economic
downturn, social unrest, changes in the regulatory environments where any power projects are located or the
bankruptcy of an unrelated company operating in one or more of the same industries as the Company, any of
which could increase borrowing costs or restrict the Company’s ability to obtain debt or equity financing. There
is no assurance that the Company will be able to arrange financing on acceptable terms, if at all. Any inability of
the Company to obtain financing from banks and other financial institutions or from capital markets would
adversely affect the Company’s ability to execute its expansion and growth strategies.

The Company’s international businesses and results of operations are subject to the macroeconomic, social
and political developments and conditions of the countries where the Company’s portfolio of projects are
located.

In addition to the Philippines, the Company’s portfolio of power projects in operation and under construction are
currently located in Indonesia and Vietnam, with plans for further international expansion in other jurisdictions.
International operations and plans for further international expansion may be affected by the respective domestic
economic and market conditions as well as social and political developments in these countries, government
interference in the economy in certain countries and changes in regulatory conditions, and there is no guarantee
that the Company’s existing operations as well as expansion plans will be successful in those countries. The
Company’s financial condition, prospects and results of operations could be adversely affected if it is not
successful internationally or if these international markets are affected by changes in political, economic and
other factors, over which the Company has no control.

Changes in tax policies, affecting tax exemptions and tax incentives could adversely affect the Company’s
results of operations.

Certain subsidiaries, affiliates and joint ventures of AC Energy, including Montesol, NorthWind, North Luzon
Renewables, GNPK and GMCP, are registered with the Board of Investments (the “BOI”) and the Philippine

65
Economic Zone Authority (“PEZA”) and benefit from certain incentives including, among others, income tax
holidays (“ITH”) for a certain period and lower corporate income tax upon expiry of the applicable ITH, and
duty-free importation of capital equipment, spare parts and accessories.

The second package of the Comprehensive Tax Reform Program (“CTRP”) of the Duterte administration was
submitted to Congress on 16 January 2018. The second package of the CTRP reportedly aims to lower corporate
income taxes while reducing fiscal incentives for corporations, such as income tax holidays, special rates, and
custom duty exemptions.

If the second package of the CTRP is passed into law, or if these tax exemptions or tax incentives expire, are
revoked, or are repealed or other new laws are enacted, the income from these sources will be subject to the
corporate income tax rate, which is 30.0% of net taxable income as of 30 September 2018 or the new tax rates as
per any new laws enacted. As a result, the Company’s tax expense would increase and its profitability would
decrease. The expiration, non-renewal, revocation or repeal of these tax exemptions and tax incentives, the
enactment of any new laws, and any associated impact on the Company, could have a material adverse effect on
the Company’s business, financial condition and results of operations.

The Company’s long term success is dependent upon its ability to attract and retain key personnel and in
sufficient numbers.

The Company depends on its senior executives and key management members to implement the Company’s
projects and business strategies. If any of these individuals resigns or discontinues his or her service, it is possible
that a suitable replacement may not be found in a timely manner or at all. If this were to happen, there could be a
material adverse effect on the Company’s ability to successfully operate its power projects and implement its
business strategies.

Power generation involves the use of highly complex machinery and processes and the Company’s success
depends on the effective operation and maintenance of equipment for its power generation assets. Technical
partners and third-party operators are responsible for the operation and maintenance of certain power projects.
Any failure on the part of such technical partners and third-party operators to properly operate and/or adequately
maintain these power projects could have a material adverse effect on the Company’s business, financial
condition and results of operations.

The Company’s business depends on commitments to the promotion of renewable energy.

The countries in which the Company has investments have demonstrated a commitment to renewable energy. As
a result, these countries have created favorable regulatory and tax regimes and financial incentives, as well as
renewable portfolio standards that require distributors to source a certain percentage of their power requirements
from renewable energy sources. For example, Vietnam’s FIT programme provides for a FIT rate of $9.35 cents/
kWh for 20 years for solar plants completed by June 2019 (with the exception of solar power projects in located
in Ninh Thuan province, which has extended this period to December 2019) and $8.50 cents/kWh for wind
projects completed by November 2021. These commitments are, however, generally matters of domestic public
policy and are subject to the execution of the relevant power purchase agreement (“PPA”). Should these
commitments to renewable energy be reduced for any reason, it could affect the Company’s ability to operate or
renew the Company’s permits and licenses and reduce the financial incentives available to the Company, which
could, in turn, have a material adverse effect on the Company’s business, financial condition, results of
operations and prospects.

AC Energy may not be able to adequately influence the operations of its associates and joint ventures and the
failure of one or more of its strategic partnerships may negatively impacts its business, financial condition,
results of operations and prospects.

AC Energy derives a substantial portion of its income from investments in associates and joint ventures, in which
it does not have majority voting control. These relationships involve certain risks including the possibility that
these partners:

‰ may have economic interests or business goals that are different from the Company;

‰ be unable or unwilling to fulfill their obligations under relevant agreements, including shareholder
agreements under which the Company has certain voting rights in respect of key strategic, operating and
financial matters;

66
‰ take actions or omit to take any actions contrary to, or inconsistent with, the Company’s policies or
objectives or prevailing laws;

‰ have disputes with the Company as to the scope of their responsibilities and obligations; and/or

‰ have difficulties in respect of seeking funds for the development or construction of projects.

The success of these partnerships depends significantly on the satisfactory performance by the partners and the
fulfillment of their obligations. If the Company or a strategic partner fails to perform its obligations satisfactorily,
or at all, the partnership may be unable to perform adequately. As a result, cooperation among its partners or
consensus with other shareholders in these entities is crucial to these businesses’ sound operation and financial
success. The Company’s business, financial condition, results of operations and prospects may be materially
adversely affected if disagreements develop with its strategic partners and are not resolved in a timely manner.

In addition, if any of the Company’s strategic partners discontinues its arrangement with the Company, is unable
to provide expected resources or assistance, or competes with the Company on business opportunities, the
Company may not be able to find a substitute for such strategic partner. Failure of one or more of the Company’s
strategic partners to perform their obligations may have a material adverse effect on the Company’s business,
financial condition, results of operations and prospects.

Risks and delays relating to the development of greenfield power projects could have a material adverse effect
on the Company’s operations and financial performance.

The development of greenfield power projects involves substantial risks that could give rise to delays, cost
overruns, unsatisfactory construction or development in the projects. Such risks include the inability to secure
adequate financing, inability to negotiate acceptable offtake agreements, and unforeseen engineering and
environmental problems, among others. Any such delays, cost overruns, unsatisfactory construction or
development could have a material adverse effect on the business, financial condition, results of operation and
future growth prospects of the Company.

For the Company’s projects under development, the estimated time frame and budget for the completion of
critical tasks may be materially different from the actual completion date and costs, which may delay the date of
commercial operations of the projects or result in cost overruns.

The Company is expanding its power generation operations and there are a number of projects in its energy
portfolio under construction. See “Business—Energy Portfolio.” These projects involve environmental,
engineering, construction and commission risks, which may result in cost overruns, delays or performance that is
below expected levels of output or efficiency. In addition, projects under construction may be affected by the
timing of the issuance of permits and licenses by government agencies, any litigation or disputes, inclement
weather, natural disasters, accidents or unforeseen circumstances, manufacturing and delivery schedules for key
equipment, defect in design or construction, and supply and cost of equipment and materials. Further, project
delays or cancelations or adjustments to the scope of work may occur from time to time due to incidents of force
majeure or legal impediments.

Depending on the severity and duration of the relevant events or circumstances, these risks may significantly
delay the commencement of new projects, reduce the economic benefit from such projects, including higher
capital expenditure requirements and loss of revenues, which in turn could have a material adverse effect on the
Company’s business, financial condition, results of operations and cash flows.

Any restriction or prohibition on the Company’s subsidiaries’, associates’ or joint ventures’ ability to
distribute dividends would have a negative effect on its financial condition and results of operations and its
ability to fulfill its guarantee obligations under the Notes.

The Company, as a holding company, conducts its operations through its subsidiaries, associates and joint
ventures. As a holding company, the Company’s income is derived primarily from dividends paid to the
Company by its subsidiaries, associates and joint ventures. For the years ended 31 December 2015, 2016 and
2017, and for the nine months ended 30 September 2018, the Company received P18.8 million, nil,
P11.6 million (U.S.$0.2 million) and P20.8 million (U.S.$0.4 million ), respectively, in dividend income.

The Company is reliant on these sources of funds with respect to its obligations and in order to finance its
subsidiaries. The ability of the Company’s direct and indirect subsidiaries, associates and joint ventures to pay

67
dividends to the Company (and their shareholders in general) is subject to applicable law and may be subject to
restrictions contained in loans and/or debt instruments of such subsidiaries and may also be subject to the
deduction of taxes. Currently, the payment of dividends by a Philippine corporation to another Philippine
corporation is not subject to tax.

In addition, certain subsidiaries are subject to debt covenants for their respective existing debt. For example,
under the terms of the project financing loans in respect of the GNPK Project, the power project may be unable to
pay dividends unless certain covenants are met, including compliance with a specified debt service coverage ratio
and debt service reserves. Failure to comply with these covenants may result in an event of default, which if not
waived, could result in debt becoming immediately due and payable. This could affect the relevant company’s
liquidity and ability to generally fund its day-to-day operations. In the event this occurs, it may be difficult to
repay or refinance such debt on acceptable terms or at all. Furthermore, such restrictions could likewise impact
the Company’s ability to fulfill its guarantee obligations under the Notes.

Any restriction or prohibition on the ability of some or all of the Company’s subsidiaries, associates and/or joint
ventures to distribute dividends or make other distributions to the Company, either due to regulatory restrictions,
debt covenants, operating or financial difficulties or other limitations, could have a negative effect on the
Company’s cash flow and therefore, its financial condition.

The administration and operation of power generation projects by project companies involve significant risks.

The administration and/or operation of power generation projects by project companies involve significant risks,
including:

‰ breakdown or failure of power generation equipment, transmission lines, pipelines or other equipment or
processes, leading to unplanned outages and operational issues;

‰ flaws in the equipment design or in power plant construction;

‰ issues with the quality or interruptions in the supply of key inputs, including fuel or water;

‰ material changes in legal, regulatory or licensing requirements;

‰ human errors in the operation of equipment;

‰ performance below expected levels of output or efficiency;

‰ actions affecting power generation assets owned or managed by the Company, its joint ventures,
affiliates or its contractual counterparties;

‰ pollution or environmental contamination affecting the operation of power generation assets;

‰ force majeure and catastrophic events including fires, explosions, earthquakes, volcanic eruptions,
floods and terrorist acts that could cause forced outages, suspension of operations, loss of life, severe
damage and plant destruction;

‰ planned and unplanned power outages due to maintenance, expansion and refurbishment;

‰ inability to obtain or the cancelation of required regulatory, permits and approvals; and

‰ opposition from local communities and special interest groups.

For example, Unit 2 of the SLTEC Project has been on forced outage since June 2018 due to a complication with
the turbine rotor problem. It is currently under repair and is expected to resume operations in February 2019. On
10 December 2018, SLTEC agreed to receive an advance partial payment from insurers of U.S.$5.0 million as
part of its material damage and business interruption insurance claims in connection with the outage of Unit 2 of
the SLTEC Project.

There is no assurance that any event similar or dissimilar to those listed above will not occur or will not
significantly increase costs or decrease or eliminate revenues derived by the Company, its joint ventures and
affiliates from their power projects.

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Climate change policies may adversely affect the Company’s business and prospects.

The Company is currently invested in certain coal-fired power plants in the Philippines. Policy and regulatory
changes, technological developments and market and economic responses relating to climate change may affect
the Company’s business and the markets in which it operates. The enactment of an international agreement on
climate change or other comprehensive legislation focusing on greenhouse gas emissions could have the effect of
restricting the use of coal. Other efforts to reduce greenhouse gas emissions and initiatives in various countries to
use cleaner alternatives to coal such as natural gas may also affect the use of coal as an energy source.

In addition, technological developments may increase the competitiveness of alternative energy sources, such as
renewable energy, which may decrease demand for coal generated power. Other efforts to reduce emissions of
greenhouse gases and initiatives in various countries to encourage the use of natural gas or renewable energy may
also discourage the use of coal as an energy source. The physical effects of climate change, such as changes in
rainfall, water shortages, rising sea levels, increased storm intensities and higher temperatures, may also disrupt
the Company’s operations. As a result of the above, the Company’s business, financial condition, results of
operations and prospects may be materially and adversely affected.

Environmental regulations may cause the relevant project companies to incur significant costs and liabilities.

The operations of the Company’s project companies are subject to environmental laws and regulations by central
and local authorities in the countries in which the projects operate. These include laws and regulations pertaining
to pollution, the protection of human health and the environment, air emissions, wastewater discharges,
occupational safety and health, and the generation, handling, treatment, remediation, use, storage, release and
exposure to hazardous substances and wastes. These requirements are complex, subject to frequent change and
have tended to become more stringent over time. The project companies have incurred, and will continue to
incur, costs and capital expenditures in complying with these laws and regulations and in obtaining and
maintaining all necessary permits. While the project companies have procedures in place to allow it to comply
with environmental laws and regulations, there can be no assurance that these will at all times be in compliance
with all of their respective obligations in the future or that they will be able to obtain or renew all licenses,
consents or other permits necessary to continue operations. Any failure to comply with such laws and regulations
could subject the relevant project company to significant fines, penalties and other liabilities, which could have a
material adverse effect on the Company’s business, financial condition, results of operations and prospects.

In addition, environmental laws and regulations, and their interpretations, are constantly evolving and it is
impossible to predict accurately the effect that changes in these laws and regulations, or their interpretation, may
have upon the Company’s business, financial condition, results of operations or prospects. If environmental laws
and regulations, or their interpretation, become more stringent, the costs of compliance could increase. If the
Company cannot pass along future costs to customers, any increases could have a material adverse effect on the
Company’s business, financial condition, results of operations and prospects.

The Company’s power project development operations and the operations of the power projects are subject to
inherent operational risks and occupational hazards, which could cause an unexpected suspension of
operations and/or incur substantial costs.

Due to the nature of the business power project development and operations, the Company and its project
companies engage or may engage in certain inherently hazardous activities, including operations at height, use of
heavy machinery and working with flammable and explosive materials. These operations involve many risks and
hazards, including the breakdown, failure or substandard performance of equipment, the improper installation or
operation of equipment, labor disturbances, natural disasters, environmental hazards and industrial accidents.
These hazards can cause personal injury and loss of life, damage to or destruction of property and equipment, and
environmental damage and pollution, any of which could result in suspension of the development or operations
of any of the power projects or even imposition of civil or criminal penalties, which could in turn cause the
Company or any of the project companies to incur substantial costs and damage its reputation and may have a
material adverse effect on the Company’s business, financial condition and results of operations.

Grid curtailments may limit the generation capacity of power projects.

From time-to-time, national grid operators curtail the energy generation for a number of reasons, including line
congestions and during the instances that dispatch schedules of power plants are not implementable (i.e. if the
grid operators foresee that the dispatch schedules may place the grid system at risk). In such circumstances, a
power project’s access to the grid and thus its generation dispatch can be reduced. Such reductions result in a

69
corresponding reduction in revenue, which, if prolonged or numerous could have a material adverse effect on the
Company’s business, financial condition, results of operations and prospects.

The Company enters into transactions with related parties.

In the ordinary course of business, the Company transacts with its related parties, such as its subsidiaries and
certain of its associates and joint ventures, and affiliates enter into transactions with each other. These
transactions have principally consisted of advances, loans, bank deposits, reimbursement of expenses, purchase
and sale of real estate and other properties and services, sale of electricity, management, marketing and
administrative service agreements.

The Company has instituted internal policies with respect to related party transactions and the related party
transaction committee of Ayala Corporation oversees such matters. These related party transactions may involve
conflicts of interest, which, although not contrary to law, may be detrimental to the Company.

For further information on the Company’s related party transactions, see “Related Party Transactions”.

The Company is exposed to credit and collection risks.

As in other businesses, the power business, including the Company’s RES business in the Philippines, is exposed
to credit and collection risks related to its customers. These include the National Transmission Corporation
(“TransCo”), contestable customers as well as electric cooperatives that have varying credit ratings and private
distribution utilities. In addition, the power projects in Indonesia and in Vietnam are exposed to collection risks
from the Perusahaan Listrik Negara (“PLN”) as the sole electricity business authority in Indonesia and Vietnam
Electricity (“EVN”), which has total control of the national power transmission and distribution market in
Vietnam, respectively. There can, however, be no assurance that all customers will pay the Company in a timely
manner or at all. In such circumstances, the Company’s working capital needs would increase, which could, in
turn, divert resources away from the Company’s other projects. If a large amount of its customers were unable or
unwilling to pay AC Energy, its financial condition could be negatively affected.

Exchange rate and/or interest rate fluctuations may have a significant adverse impact on the Company’s
business, financial condition, results of operations and prospects.

As a result of the international nature of the Company’s business, changes in foreign currency rates could have an
adverse impact on the Company’s business, financial condition, results of operations and prospects. Currency
fluctuations affect the Company because of mismatches between the currencies in which operating costs are
incurred and those in which revenues are received. The Company’s functional currency is the Philippine Peso,
and the Company has and may have assets, income streams and liabilities denominated in a number of
currencies, including the U.S. Dollar, Indonesian Rupiah, Vietnamese Dong and Australian dollars.

The insurance coverage of the power projects may not be adequate.

The power projects maintain levels of insurance, which the Company believes are typical with the respective
business structures and in amounts that it believes to be commercially appropriate. However, a power project
may become subject to liabilities against which it has not insured adequately or at all, or are unable to insure. In
addition, insurance policies contain certain exclusions and limitations on coverage, which may result in claims
not being honored to the extent of losses or damages suffered. Further, such insurance policies may not continue
to be available at economically acceptable premiums, or at all. The occurrence of a significant adverse event, the
risks of which are not fully covered or honored by such insurers, could have a material adverse effect on a power
project’s business, financial condition, results of operations and prospects. In addition, under some of the power
project’s debt agreements, the power project is required to name the lenders under such debt agreements as a
beneficiary or a loss payee under some of its insurance policies, or assign the benefit of various insurance
policies to the lenders. Therefore, even if insurance proceeds were to be payable under such policies, any such
insurance proceeds will be paid directly to the relevant lenders instead of to the power project. If an insurable
loss has a material effect on a power project’s operations, the power project’s lenders may not be required to pay
any insurance proceeds or to compensate the power project for loss of profits or for liabilities resulting from
business interruption, and this could have a material adverse effect on the Company’s business, financial
condition, results of operations and prospects.

70
Certain financial information contained in this Offering Circular has not been audited.

The Company’s unaudited interim condensed consolidated financial statements as of 30 September 2018 and for
the nine months ended 30 September 2018 and 2017 included in this offering circular have not been audited in
accordance with Philippine Standards on Auditing.

The Offering Circular contains certain statistical and industry information.

Certain statistical or industry information in this Offering Circular relating to the Philippines, other Southeast
Asian economies, the industries and markets in which the Company operates, and other data used in this Offering
Circular was obtained or derived from internal surveys, market research, governmental data, publicly available
information and/or industry publications. Industry publications generally state that the information they contain
has been obtained from sources believed to be reliable. However, there is no assurance that such information is
accurate or complete. Similarly, internal surveys, industry forecasts and market research have not been
independently verified by the Company and may not be accurate, complete, up-to-date, balanced or consistent
with other information compiled within or outside the Philippines.

RISKS RELATING TO THE PHILIPPINES

Political instability in the Philippines may have a negative effect on the general economic conditions in the
Philippines which could have a material adverse impact on the results of operations and financial condition of
the Company.

The Philippines has from time to time experienced political and military instability. In recent history, there has
been political instability in the Philippines, including impeachment proceedings against two former presidents
and the chief justice of the Supreme Court of the Philippines, hearings on graft and corruption issues against
various government officials, and public and military protests arising from alleged misconduct by previous and
current administrations. The Supreme Court also recently ruled against Maria Lourdes P. Sereno in the quo
warranto proceedings initiated by the Office of the Solicitor General, removing her from the post of Chief Justice
of the Supreme Court. There can be no assurance that acts of election-related or other political violence will not
occur in the future, and any such events could negatively impact the Philippine economy.

The Philippine Presidential elections were held in May 2016, and on 30 June 2016 President Rodrigo Duterte
assumed the presidency with a mandate to advance his “Ten-Point Socio-Economic Agenda” focusing on policy
continuity, tax reform, infrastructure spending and countryside development, among others. The Duterte
administration has initiated efforts to build peace with communist rebels and other separatists through continuing
talks with these groups.

President Duterte’s unconventional methods may also raise risks of social and political unrest. An unstable
political environment, whether due to the impeachment of government officials, imposition of emergency
executive rule, martial law or widespread popular demonstrations or rioting, could negatively affect the general
economic conditions and operating environment in the Philippines, which could have a material adverse effect on
the Company’s business, financial condition and results of operations.

In addition, the Company may be affected by political and social developments in the Philippines and changes in
the political leadership and/or government policies in the Philippines. Such political or regulatory changes may
include (but are not limited to) the introduction of new laws and regulations that could impact the Company’s
business.

No assurance can be given that any changes in such regulations or policies imposed by the Government from
time to time or the future political environment in the Philippines will be stable or that current or future
administrations will adopt economic policies conducive to sustaining economic growth. Political instability in the
future could reduce consumer demand for retail and consumer goods to the Company’s disadvantage, or result in
inconsistent or sudden changes in regulations and policies that affect the Company’s business operations, which
could have a material adverse impact on the results of operations and financial condition of the Company.

A substantial portion of the Company’s business activities and assets are based in the Philippines, which
exposes the Company to risks associated with the country, including the performance of the Philippine
economy.

Historically, the Company has derived a substantial portion of its operating income and operating profits from
the Philippines and, as such, it is highly dependent on the state of the Philippine economy. Demand for the

71
Company’s services and products are directly related to the strength of the Philippine economy (including its
overall growth and income levels), the overall levels of business activity in the Philippines as well as the amount
of remittances received from overseas Filipinos. Factors that may adversely affect the Philippine economy
include:

‰ decreases in business, industrial, manufacturing or financial activities in the Philippines, the Southeast
Asian region or globally;

‰ scarcity of credit or other financing, resulting in lower demand for products and services provided by
companies in the Philippines, the Southeast Asian region or globally;

‰ foreign exchange rate fluctuations;

‰ foreign exchange controls;

‰ inflation or increase in interest rates;

‰ levels of employment, consumer confidence and income;

‰ changes in the Philippine government’s fiscal and regulatory policies;

‰ Philippine government budget deficits;

‰ a re-emergence of SARS, bird flu, or H1N1, or the emergence of other similar diseases in the
Philippines or in other countries in Southeast Asia;

‰ natural disasters, including but not limited to tsunamis, typhoons, earthquakes, fires, floods and similar
events;

‰ geopolitical tensions between the Philippines and other claimant countries concerning disputed
territories in the South China Sea;

‰ political instability, terrorism or military conflict in the Philippines, other countries in the region or
globally; and

‰ other regulatory, social, political or economic developments in or affecting the Philippines.

Any future deterioration in economic conditions in the Philippines due to these or other factors could materially
and adversely affect the Company’s borrowers and contractual counterparties. This, in turn, could materially and
adversely affect the Company’s financial position and results of operations, including the Company’s ability to
grow its asset portfolio, the quality of the Company’s assets and its ability to implement the Company’s business
strategy. Therefore, changes in the conditions of the Philippine economy could materially and adversely affect
the Company’s business, financial condition or results of operations.

Natural or other catastrophes, including severe weather conditions, may materially disrupt the Company’s
operations and result in losses not covered by its insurance.

The Philippines has experienced a number of major natural catastrophes over the years, including typhoons,
droughts, floods, volcanic eruptions and earthquakes. There can be no assurance that the occurrence of such
natural catastrophes will not materially disrupt the Company’s operations. These factors, which are not within the
Company’s control, could potentially have significant effects on the Company’s operations. While the Company
carries insurance for certain catastrophic events, in amounts and with deductibles that the Company believes are
in line with general industry practices in the Philippines, there are losses for which the Company cannot obtain
insurance at a reasonable cost or at all. However, should an uninsured loss or a loss in excess of insured limits
occur, the Company could lose all or a portion of the capital invested in such business, as well as the anticipated
future turnover, while remaining liable for any costs or other financial obligations related to the business. Any
material uninsured loss could materially and adversely affect the Company’s business, financial position and
results of operations.

For example, the Central Philippines experienced a severe typhoon, Typhoon Haiyan (Yolanda) in November
2013, which caused extensive damage and claimed thousands of lives and damaged several branches of the

72
Company located in the region and had a significant effect on the economy of the region affected by the typhoon,
which, among other things, led to an increase in inflation, a decrease in the pace of economic growth and/or a
reduction in consumer spending, all of which would have had an adverse effect on the Company’s results of
operations.

Acts of terrorism could destabilize the country and could have a material adverse effect on the Company’s
business, financial position and results of operations.

The Philippines has been subject to a number of terrorist attacks in the past several years. The Philippine army
has been in conflict with the Abu Sayyaf organization which has been identified as being responsible for
kidnapping and terrorist activities in the Philippines, and is also alleged to have ties to the Al-Qaeda terrorist
network and, along with certain other organizations, has been identified as being responsible for certain
kidnapping incidents and other terrorist activities particularly in the southern part of the Philippines.

Furthermore, the Government and the Armed Forces of the Philippines (“AFP”) have clashed with members of
several separatist groups seeking greater autonomy, including the Moro Islamic Liberation Front (“MILF”), the
MNLF and the New People’s Army (“NPA”). In October 2011, 19 AFP troops were killed in a firefight with
MILF members in the southern Philippines. In December 2011, five AFP soldiers were killed in a clash with
NPA members. Beginning in September 2013, Government troops have been involved in violent and deadly
clashes with a faction of the MNLF that has been accused of kidnappings and bombings in parts of Mindanao.
There have been numerous bombing incidents in Mindanao and elsewhere in the Philippines, which have resulted
in death and injury to the civilian population as well as military and security personnel.

In May 2017, after a joint operation of the AFP and the Philippine National Police (“PNP”) was launched in
Marawi City to capture an alleged terrorist leader, prolonged fighting ensued between the AFP and PNP and a
radical Islamist group called the Maute Group. The Maute Group is a group inspired by the bigger extremist
militant group known as the Islamic State in Iraq and Syria (“ISIS”). President Rodrigo Duterte declared martial
law in Mindanao. Hostilities have led to several casualties and substantial property damage. In October 2017, the
Government announced that the leaders of the Maute Group have been killed.

These continued conflicts between the Government and separatist groups could lead to further injuries or deaths
by civilians and members of the AFP, which could destabilize parts of the Philippines and adversely affect the
Philippine economy. There can be no assurance that the Philippines will not be subject to further acts of terrorism
or violent crimes in the future, which could have a material adverse effect on the Company’s business, financial
condition, and results of operations.

Territorial disputes with China and a number of Southeast Asian countries may disrupt the Philippine
economy and business environment.

The Philippines, China and several Southeast Asian nations have been engaged in a series of longstanding
territorial disputes over certain islands in the West Philippine Sea, also known as the South China Sea. The
Philippines maintains that its claim over the disputed territories is supported by recognized principles of
international law consistent with the United Nations Convention on the Law of the Sea (“UNCLOS”). Despite
efforts to reach a compromise, a dispute arose between the Philippines and China over a group of small islands
and reefs known as the Scarborough Shoal. Actions taken by both sides have threatened to disrupt trade and other
ties between the two countries, including a temporary ban by China on Philippine banana imports, a temporary
suspension of tours to the Philippines by Chinese travel agencies and the rejection by China of the Philippines’
request for arbitral proceedings administered in accordance with the UNCLOS to resolve the disputes.

In 2016, the Permanent Court of Arbitration ruled in favor of the Philippines against China over territorial
disputes in the West Philippine Sea. The arbitral tribunal unanimously ruled, among others, that (a) China has
“no historical rights” to the resources within the sea areas falling within the “nine-dash line;” (b) Chinese
reclamation activity in the West Philippine Sea has caused irreparable damage to the environment, obligating the
Chinese government to stop further activities in the West Philippine Sea; and (c) China has violated the
Philippines’ sovereign rights in its exclusive economic zone by interfering with Philippine fishing and petroleum
exploration, constructing artificial islands, and failing to prevent Chinese fishermen from fishing in the zone.
However, China has said it will not recognize the ruling. With no formal enforcement mechanism in place, the
territorial dispute in the West Philippine Sea remains contentious and unresolved.

There had been other occurrences of territorial disputes with Malaysia and Taiwan. In March 2013, several
hundred armed Filipino-Muslims illegally entered Malaysia in a bid to enforce an alleged historical claim on the

73
territory. Clashes between the Filipino-Muslim individuals and the Malaysian armed forces resulted in casualties
on both sides. Taiwan imposed economic sanctions on the Philippines as a result of an incident in May 2013,
whereby a Taiwanese fisherman was unintentionally killed by a Philippine coast guard ship that opened fire on
his vessel in a disputed exclusive economic zone between Taiwan and the Philippines. The sanctions were
eventually lifted after a formal apology was issued by the Philippine government. On 18 May 2018, China’s
People’s Liberation Army Air Force announced that it has sent an H-6K bomber in the Paracel Islands in the
South China Sea.

Should territorial disputes between the Philippines and other countries in the region continue or escalate further,
the Philippines and its economy may be disrupted and the Company’s operations could be adversely affected as a
result.

Corporate governance and disclosure standards in the Philippines may differ from those in more developed
countries.

Although a principal objective of Philippine securities laws is to promote full and fair disclosure of material
corporate information, there may be less publicly available information about Philippine public companies, such
as the Company, than is regularly made available by public companies in the U.S. and other countries. As a
result, public shareholders of the Company may not have access to the same amount of information or have
access to information in as timely of a manner as may be the case for companies listed in the U.S. and many
other jurisdictions. Furthermore, although the Company complies with the requirements of the Philippine SEC
with respect to corporate governance standards, these standards may differ from those applicable in other
jurisdictions. For example, the Securities Regulation Code of the Philippines requires the Company to have at
least two independent Directors or such number of independent Directors as is equal to 20.0% of the Board,
whichever is the lower number. The Company currently has seven independent Directors. Many other
jurisdictions may require more independent directors.

Furthermore, corporate governance standards may be different for public companies listed on the Philippine
securities markets than for securities markets in developed countries. Rules and policies against self-dealing and
regarding the preservation of interests of public shareholders of the Company may be less well-defined and
enforced in the Philippines than elsewhere, putting public shareholders at a potential disadvantage. Because of
this, the directors of Philippine companies may be more likely to have interests that conflict with the interests of
shareholders generally, which may result in them taking actions that are contrary to the interests of public
shareholders of the Company.

Volatility in the value of the Peso against the U.S. dollar and other currencies as well as in the global
financial and capital markets could adversely affect the Company’s businesses.

The Philippine economy has experienced volatility in the value of the Peso and also limitations to the availability
of foreign exchange. The value of the Peso underwent significant fluctuations between July 1997 and December
2004 and the Peso declined from approximately P29.00 to U.S.$1.00 in July 1997 to P56.18 to U.S.$1.00 by
December 2004, recovering to P43.89 at the end of December 2010.

The value of the Peso has greatly depreciated since 2010, and its valuation may be adversely affected by certain
events and circumstances such as the strengthening of the U.S. economy, the rise of the interest rates in the U.S.
and other events affecting the global markets or the Philippines, causing investors to move their investment
portfolios from the riskier emerging markets such as the Philippines. Consequently, an outflow of funds and
capital from the Philippines may occur and may result in increasing volatility in the value of the Peso against the
U.S. Dollar and other currencies. As at 31 December 2017, according to BSP data, the Peso has remained steady
at P49.92 per U.S.$1.00 from P49.81 per U.S.$1.00 at the end of 2016. As of 28 September 2018, the Peso was
at P54.25 against the U.S. dollar.

The sovereign credit ratings of the Philippines may adversely affect the Guarantor’s business.

The sovereign credit ratings of the Philippines directly affect companies resident and domiciled in the Philippines
as international credit rating agencies issue credit ratings by reference to that of the sovereign. In 2013, the
Philippines earned investment grade status from all three major credit ratings agencies – Fitch (BBB-), Standard
and Poor’s (BBB) and Moody’s (Baa3). In 2014, S&P and Moody’s upgraded their ratings to “BBB” and “Baa2”
in May and December, respectively, with both agencies affirming these ratings in 2017. Fitch also upgraded the
Philippines’ long-term foreign currency issuer default rating from “BBB-” to “BBB” in December 2017. All

74
ratings are above investment grade and the highest that the country has received so far from any credit ratings
agency.

International credit rating agencies issue credit ratings for companies with reference to the country in which they
are resident. As a result, the sovereign credit ratings of the Philippines directly affect companies that are resident
in the Philippines, such as the Guarantor. There is no assurance that Fitch, Moody’s, S&P or other international
credit rating agencies will not downgrade the credit rating of the Philippines in the future. Any such downgrade
could have a material adverse effect on liquidity in the Philippine financial markets and the ability of the
Philippine Government and Philippine companies, including the Guarantor, to raise additional financing, and will
increase borrowing and other costs.

Investors may face difficulties enforcing judgments against the Company.

The Company is organized under the laws of the Republic of the Philippines. A substantial portion of the
Company’s assets are located in the Philippines. It may be difficult for investors to effect service of process
outside of the Philippines upon the Company. Moreover, it may be difficult for investors to enforce judgments
against the Company outside of the Philippines in any actions pertaining to the Notes. In addition, substantially
all of the directors and officers of the Company are residents of the Philippines, and all or a substantial portion of
the assets of such persons are or may be located in the Philippines. As a result, it may be difficult for investors to
effect service of process upon such persons or enforce against such persons judgments obtained in courts or
arbitral tribunals outside of the Philippines predicated upon the laws of jurisdictions other than in the Philippines.

The Philippines is not a party to any international treaty in relation to the recognition or enforcement of foreign
judgments but is a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards. Judgments obtained against the Company in any foreign court may be recognized and enforced
by the courts of the Philippines in an independent action brought in accordance with the relevant procedures set
forth in the Rules of Court of the Philippines to enforce such judgment. However, such foreign judgment or final
order may be rejected in the following instances: (i) such judgment was obtained by collusion or fraud, (ii) the
foreign court rendering such judgment did not have jurisdiction, (iii) such order or judgment is contrary to good
customs, public order, or public policy of the Philippines, (iv) the Company did not have notice of the
proceedings before the foreign court, or (v) such judgment was based upon a clear mistake of law or fact.

Uncertainties and instability in global market conditions could adversely affect the Company’s business,
financial condition, and results of operations.

Global markets have experienced, and may continue to experience, significant dislocation and turbulence due to
economic and political instability in several areas of the world. These ongoing global economic conditions have
led to significant volatility in capital markets around the world, including Asia, and further volatility could
significantly impact investor risk appetite and capital flows into emerging markets including the Philippines.

Further, economic conditions in some Eurozone sovereign states could possibly lead to these member states
re-negotiating or restructuring their existing debt obligations, which may lead to a material change in the current
political and/or economic framework of the European Monetary Union. One potential change that may result
from the crisis is an end to the single-currency system that prevails across much of Europe, with some or all
European member states reverting to currency forms used prior to adoption of the euro. The crisis could also lead
to the restructuring or breakup of other political and monetary institutions within the European Union. The risk
may have been exacerbated by the referendum on membership of the European Union, held in the UK on 23 June
2016, where the UK public voted by a majority in favor of the British government taking the necessary action for
the UK to leave the European Union. On 29 March 2017 the UK delivered to the European Council notice of its
intention to withdraw from the EU, pursuant to Article 50 of the Treaty on the European Union. The delivery of
such notice started a two-year period during which the UK is negotiating with the EU the terms of its withdrawal
and of its future relationship with the EU. If the parties fail to reach an agreement within this time frame, all EU
treaties cease to apply to the UK, unless the European Council, in agreement with the UK, unanimously decides
to extend this period. Absent such extension and subject to the terms of any withdrawal agreement, the United
Kingdom will withdraw from the European Union no later than 29 March 2019. There are a number of
uncertainties in connection with such negotiations, including their timing, and the future of the UK’s relationship
with the EU. In addition, the UK’s decision to withdraw from the EU has also given rise to calls for the
governments of other European Union member states to consider withdrawal. These developments, or the
perception that any of them could occur, have had and may continue to have a material adverse effect on global
economic conditions and the stability of global financial markets, and may significantly reduce global market

75
liquidity and restrict the ability of key market participants to operate in certain financial markets, which could in
turn depress economic activity and have a ripple effect across sovereign states and the private sector in Europe
and the rest of the world and possibly lead to a global economic crisis. Any changes to the euro currency could
also cause substantial currency readjustments across Europe and other parts of the world. Until the terms and
timing of the UK’s exit from the EU are clearer, it is not possible to determine the impact that the UK’s departure
from the EU and/or any related matters may have on the stability of the Eurozone or the European Union. These
events and uncertainties could adversely impact the Company’s business, financial condition and results of
operations.

Developments outside the Philippines, including U.S. policies related to global trade and tariffs could
adversely affect the Company’s business, financial condition and results of operations.

The current international political environment, including existing and potential changes to U.S. policies related
to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy. In
September 2018, the U.S. imposed tariffs of 10% on many products from China. In response, the European
Union, China and other jurisdictions have introduced tariffs on U.S. goods. An escalating trade war may have
material adverse effects on the power industry and the Company’s business may be impacted by these tariffs.
Any further expansion in the types or levels of tariffs implemented has the potential to negatively impact the
Company’s business, financial condition and results of operations. Additionally, there is a risk that the U.S.
tariffs on imports are met with tariffs on U.S. produced exports and that a broader trade conflict could ensue,
which has the potential to significantly impact global trade and economic conditions. Potential costs and any
attendant impact on pricing arising from these tariffs and any further expansion in the types or levels of tariffs
implemented could adversely affect the Company’s business, financial condition and results of operations.

Economic disruption in other countries, even in countries in which the Company does not currently conduct
business or have operations, could also adversely affect the Company’s businesses and results. Adverse market
and economic conditions continue to create a challenging operating environment for financial services
companies. In particular, the impact of interest and currency exchange rates, the risk of geopolitical events,
fluctuations in commodity prices and concerns about European stagnation as well as diverging monetary policies
among the major economies have affected financial markets and the economy.

In addition to the macroeconomic factors discussed above, other events beyond the Company’s control, including
terrorist attacks, cyber attacks, military conflicts, economic or political sanctions, disease pandemics, political
unrest or natural disasters could have a material adverse effect on economic and market conditions, market
volatility and financial activity, with a potential related effect on the Company’s businesses and results

There can be no assurance that the uncertainties affecting global markets will not negatively impact credit
markets in Asia, including in the Philippines. These developments may adversely affect trade volumes with
potentially negative effects on the Philippines.

RISKS RELATING TO NOTES ISSUED UNDER THE PROGRAMME AND THE GUARANTEE

The Issuer is a special purpose company with limited assets incorporated in the Cayman Islands.

It may be difficult for investors to effect service of process outside of the Cayman Islands upon the Issuer.
Moreover, it may be difficult for investors to enforce judgments against the Issuer outside the Cayman Islands in
any actions pertaining to the Notes. In addition, substantially all of the directors and the officers of the Issuer are
residents of the Philippines, and all or a substantial portion of the assets of such persons are or may be located in
the Philippines. As a result, it may be difficult for investors to effect service of process upon such persons, or to
enforce against them judgments obtained in courts or arbitral tribunals outside the Cayman Islands predicated
upon the laws of jurisdictions other than the Cayman Islands.

The Issuer is a finance company that will depend on payments from the Company or the Company’s other
subsidiaries to provide it with funds to meet its obligations under the Notes.

The Issuer was formed for the purpose of issuing the Notes; as such, the Issuer has no business operations or
subsidiaries and, upon completion of this offering of Notes, its only assets will be the net proceeds from the
issuance of the Notes, to the extent retained. Accordingly, the Issuer will be wholly dependent upon payments
from the Company or the Company’s other subsidiaries to make payments due on the Notes.

76
Substantial leverage and debt service obligations could adversely affect the Company’s businesses and prevent
the Issuer and the Company from fulfilling their obligations under the Notes and the Guarantee.

Subject to limitations under the Trust Deed, the Company will be permitted to incur additional indebtedness in
the future. For a summary of the Company’s existing indebtedness as of 30 September 2018, see “Description of
Material Indebtedness”. The degree to which the Company will be leveraged in the future, on a consolidated
basis, could have important consequences for the Noteholders, including, but not limited to:

‰ making it more difficult for the Issuer and the Company to satisfy their respective obligations with
respect to the Notes and the Guarantee;

‰ increasing vulnerability to, and reducing the Company’s flexibility to respond to, general adverse
economic and industry conditions;

‰ requiring the dedication of a substantial portion of cash flow from operations to the payment of principal
of, and interest on, the Company’s consolidated indebtedness, thereby reducing the availability of such
cash flow to fund working capital, capital expenditures, acquisitions, joint ventures or other general
corporate purposes;

‰ limiting flexibility in planning for, or reacting to, changes in the Company’s businesses, the competitive
environment and the industry in which the Company operates;

‰ placing Noteholders at a competitive disadvantage compared to the Company’s competitors that are not
as highly leveraged; and

‰ limiting the Company’s ability to borrow additional funds and increasing the cost of any such
borrowing.

Any of these or other consequences or events could materially and adversely affect the Company’s ability to
satisfy debt obligations, including the Notes and the Guarantee.

The Company is subject to certain covenants pursuant to the Trust Deed and other of its financing agreements
that may limit the Company’s ability to finance the Company’s future operations and capital needs and to
pursue business opportunities and activities.

The Trust Deed will, among other things, restrict the ability of the Issuer, the Company and, in some cases,
certain of the Company’s subsidiaries to:

‰ incur or guarantee additional indebtedness;

‰ create or incur certain liens;

‰ create or permit to exist any restrictions on the payment of dividends to the Company by certain of the
Company’s subsidiaries;

‰ enter into unrelated businesses or engage in certain activities; and

‰ consolidate or merge with other entities.

In addition, certain of the Company’s other financing agreements provide for restrictions and limitations on the
Company’s ability to pay dividends or make other distributions on the occurrence of certain events. All of these
limitations are subject to significant exceptions and qualifications. See “Terms and Conditions of the Notes—
Covenants and Definitions”. These covenants and other restrictions and limitations may limit the Company’s
ability to finance its future operations and capital needs and its ability to pursue business opportunities and
activities that may be in the Company’s interest.

The Company will require a significant amount of cash to meet its obligations under its indebtedness and to
sustain its operations, which the Company may not be able to generate or raise.

The ability of the Issuer and the Company to make scheduled principal or interest payments on the Notes and the
Company’s ability to make payments on the Company’s indebtedness and the Company’s contractual obligations

77
(see “Description of Material Indebtedness”), and to fund the Company’s ongoing operations, will depend on the
Company’s future performance and the Company’s ability to generate cash, which to a certain extent is subject to
general economic, financial, competitive, legislative, legal, regulatory and other factors, as well as other factors
discussed in this “Risk Factors” section, many of which are beyond the Company’s control. If the Company’s
future cash flows from operations and other capital resources are insufficient to pay the Company’s debt
obligations, the Company’s contractual obligations, or to fund the Company’s other liquidity needs, the Company
may be forced to sell assets or attempt to restructure or refinance the Company’s existing indebtedness. No
assurance can be given that the Company would be able to accomplish any of these measures on a timely basis or
on satisfactory terms or at all.

Payments under the Notes and the Guarantee will be structurally subordinated to liabilities and obligations of
certain of the Company’s subsidiaries, and the Notes are not secured.

The Issuer is a special purpose finance vehicle with no operations. The operations of the Company are conducted
through its subsidiaries and, therefore, the Company depends on the cash flow of its subsidiaries to meet its
obligations, including its obligations under the Guarantee. Further, none of the Company’s subsidiaries will
guarantee the Notes on the issue date. Accordingly, the Notes and the Guarantee will be structurally subordinated
in right of payment to all indebtedness and other liabilities and commitments (including trade payables and lease
obligations) of the Company’s subsidiaries, unless such subsidiaries guarantee the Notes in the future in the
circumstances specified in the Conditions. For a summary of the Company’s existing indebtedness as of
30 September 2018, see “Description of Material Indebtedness.”

Any right of the Company to receive assets of any of its subsidiaries upon the subsidiary’s liquidation or
reorganization (and the consequent right of the Noteholders to participate in those assets) will be effectively
subordinated to the claims of that subsidiary’s creditors, except to the extent that the Company is itself
recognized as a creditor of the subsidiary, in which case the claims of the Company would still be subordinate in
right of payment to any security in the assets of the subsidiary and any indebtedness of the subsidiary which is
senior to that held by the Company. In addition, the Noteholders will not have the benefit of any security interest
over the shares of any of the Company’s other subsidiaries or any security interest over the assets of any of the
Company’s other subsidiaries.

Under the Conditions, in certain circumstances, subsidiaries of the Company would be permitted to incur non-
recourse debt and certain types of project financing, which would be structurally senior to the Notes and the
Guarantee.

The covenant relating to the incurrence of indebtedness contained in Condition 4.3 restricts the Issuer, the
Company and certain of the Company’s subsidiaries from incurring indebtedness if, after giving effect to the
incurrence of such indebtedness and the application of the proceeds therefrom, the Company’s Net Debt to Total
Equity ratio would not exceed 2.5 to 1.0. Due to the exclusion of non-recourse debt from the definition of “Net
Debt”, so long as the Company’s Net Debt to Total Equity ratio does not exceed 2.5 to 1.0 at a given time, the
Company and its subsidiaries are permitted to incur an unlimited amount of non-recourse debt since such
indebtedness would not be included as “Net Debt” in the ratio calculation. In addition, certain subsidiaries of the
Company are permitted to incur an unlimited amount of certain types of project financing at any time. Any such
non-recourse debt and certain types of project financing debt would be structurally senior to the Notes and the
Guarantee.

Debt notarized under Philippine law has effective priority over a guarantee.
Under Philippine law, in the event of liquidation of a company, unsecured debt of the company (including
guarantees of debt) which is evidenced by a public instrument as provided in Article 2244(14) of the Civil Code
of the Philippines will rank ahead of unsecured debt of the company which is not so evidenced. Under Philippine
law, a debt becomes evidenced by a public instrument when it has been acknowledged before a notary or any
person authorized to administer oaths in the Philippines. Although the position is not clear under Philippine law,
it is possible that a jurat (which is a statement of the circumstances in which an affidavit is made) may be
sufficient to constitute a debt evidenced by a public instrument.

The Issuer may not have the ability to raise the funds necessary to finance an offer to repurchase Notes upon
the occurrence of certain events constituting a change of control as required by the Trust Deed.

Upon the occurrence of certain events constituting a change of control, the Issuer is required to offer to
repurchase all outstanding Notes at a purchase price in cash equal to 101.0% of the principal amount of the
Notes. If a change of control were to occur, no assurance can be given that the Issuer and the Company would

78
have sufficient funds available at such time to pay the purchase price of the outstanding Notes. A change of
control may result in an event of default under, or acceleration of, other indebtedness.

There has been no prior market for the Notes, an active trading market for the Notes may not develop, and the
trading price of the Notes could be materially and adversely affected.

Notes issued as a new series will be an issue of securities for which there is currently no trading market. The
Company has been advised that the Dealers intend to make a market in the Notes, but are not obligated to do so
and may discontinue such market making activity at any time without notice. The Company cannot predict
whether an active trading market for the Notes will develop or be sustained. If an active trading market were to
develop, the Notes could trade at prices that may be lower than the initial offering price. The price at which the
Notes trade depends on many factors, including but not limited to:

‰ prevailing interest rates and the markets for similar securities;

‰ general economic conditions; and

‰ the Company’s financial condition, historical financial performance and future prospects.

If an active market for the Notes fails to develop or be sustained, the trading price of the Notes could be
materially and adversely affected. Approval in-principle has been received for the listing and quotation of the
Notes on the SGX-ST. However, there can be no assurance that the Company will obtain or be able to maintain
such a listing or that, if listed, a trading market will develop for the Notes on the SGX-ST. The Company does
not intend to apply for listing of the Notes on any securities exchange other than the SGX-ST. Lack of a liquid,
active trading market for the Notes may adversely affect the price of the Notes or may otherwise impede a
holder’s ability to dispose of the Notes.

The transfer of Notes is restricted which may adversely affect their liquidity and the price at which they may
be sold.

The Notes and the Guarantee have not been registered under, and Issuer and the Company are not obligated to
register the Notes or the Guarantee under, the Securities Act or the securities laws of any other jurisdiction and,
unless so registered, may not be offered or sold except pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act and any other applicable laws. See “Subscription
and Sale”. The Issuer and the Company have not agreed to or otherwise undertaken to register the Notes
(including by way of an exchange offer), and the Issuer and the Company have no intention of doing so.

The Company will follow the applicable corporate disclosure standards for debt securities listed on the
SGX-ST, and such standards may be different from those applicable to debt securities listed in certain other
countries.

The Company will be subject to reporting obligations in respect of the Notes to be listed on the SGX-ST. The
disclosure standards imposed by the SGX-ST may be different than those imposed by securities exchanges in
other countries or regions. As a result, the level of information that is available may not correspond to what
investors in the Notes may be accustomed to.

The Notes and the Guarantee will not be registered with the BSP and without BSP registration, the Issuer and
the Guarantor cannot access the Philippine banking system to purchase U.S. dollars to fulfill their obligations
under the Guarantee.

The Issuer and the Guarantor have not registered, and do not intend to register the issuance of the Notes, the
Guarantee or the issuance of other U.S. dollar-denominated debt obligations with the BSP. The Issuer and the
Guarantor will not be able to purchase U.S. dollars from the Philippine banking system for the purpose of
funding payments under the Notes and the Guarantee.

If a holder holds Notes which are not denominated in such holder’s home currency, such Noteholder will be
exposed to movements in exchange rates adversely affecting the value of the Notes held. In addition, the
imposition of exchange controls in relation to any Notes could result in a holder not receiving payments on
those Notes.

The Issuer will pay principal and interest on the Notes in the Specified Currency. This presents certain risks
relating to currency conversions if a holder’s financial activities are denominated principally in a currency or

79
currency unit (the “Investor’s Currency”) other than the Specified Currency. These include the risk that
exchange rates may significantly change (including changes due to devaluation of the Specified Currency or
revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency
may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the
Specified Currency would decrease (1) the Investor’s Currency-equivalent yield on the Notes; (2) the Investor’s
Currency equivalent value of the principal payable on the Notes; and (3) the Investor’s Currency equivalent
market value of the Notes.

The Government has, in the past, instituted restrictions on the conversion of Pesos into foreign currency and the
use of foreign exchange received by Philippine residents to pay foreign currency denominated obligations. The
Monetary Board of the BSP, with the approval of the President of the Philippines, has statutory authority, during
a foreign exchange crisis or in times of national emergency, to suspend temporarily or restrict sales of foreign
exchange, require licensing of foreign exchange transactions or require delivery of foreign exchange to the BSP
or its designee. None of the Issuer nor the Company is aware of any pending proposals by the Government
regarding such restrictions. Although the Government has from time to time made public pronouncements of a
policy not to impose restrictions on foreign exchange, there can be no assurance that the Government will
maintain such policy or will not impose economic or regulatory controls that may restrict free access to foreign
currency. Any such restriction imposed in the future could adversely affect the ability of holders to repatriate
foreign currency upon sale of the Notes or receipt of any dividends.

Holders may not receive definitive Notes for Notes with denominations involving integral multiples.

In relation to any issue of Notes which have denominations consisting of a minimum Specified Denomination (as
specified in the applicable Pricing Supplement) plus one or more higher integral multiples of another smaller
amount, it is possible that such Notes may be traded in amounts that are not integral multiples of such minimum
Specified Denomination. In such a case a holder who, as a result of trading such amounts, holds an amount which
is less than the minimum Specified Denomination in his account with the relevant clearing system at the relevant
time may not receive a definitive Note in respect of such holding (should definitive Notes be printed) and would
need to purchase a principal amount of Notes such that its holding amounts to a Specified Denomination.

Noteholders are required to rely on the procedures of the relevant clearing system and its participants while
the Notes are held in global form through the relevant clearing system.

Notes issued under the Programme will be represented on issue by one or more Global Notes that may be
deposited with a common depositary for Euroclear and Clearstream, Luxembourg. Except in the circumstances
described in each Global Note, investors will not be entitled to receive Notes in definitive form. Each of
Euroclear and Clearstream, Luxembourg and their respective direct and indirect participants will maintain
records of the beneficial interests in each Global Note held through it. While the Notes are represented by a
Global Note, investors will be able to trade their beneficial interests only through the relevant clearing systems
and their respective participants.

While the Notes are represented by Global Notes, the Issuer will discharge its payment obligation under the
Notes by making payments through the relevant clearing systems. A holder of a beneficial interest in a Global
Note must rely on the procedures of the relevant clearing system and its participants to receive payments under
the Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of,
beneficial interests in any Global Note.

Holders of beneficial interests in a Global Note will not have a direct right to vote in respect of the Notes so
represented. Instead, such holders will be permitted to act only to the extent that they are enabled by the relevant
clearing system and its participants to appoint appropriate proxies.

If definitive Notes are issued, holders should be aware that definitive Notes that have a denomination that is not
an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.

The conditions of the Notes contain provisions which may permit their modification without the consent of all
investors and confer significant discretions on the Trustee which may be exercised without the consent of the
Noteholders and without regard to the individual interests of particular Noteholders.

The conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting
their interests generally. These provisions permit defined majorities to bind all Noteholders including

80
Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary
to the majority.

The conditions of the Notes also provide that the Trustee may, without the consent of Noteholders and without
regard to the interests of particular Noteholders, agree to (i) any modification of, or to the waiver or authorization
of any breach or proposed breach of, any of the provisions of the Notes or (ii) determine without the consent of
the Noteholders that any Event of Default or potential Event of Default shall not be treated as such or (iii) the
substitution of another company as principal debtor under any Notes in place of the Issuer, in the circumstances
described in Condition 15.

The Notes may be subject to withholding taxes in circumstances where the Issuer is not obliged to make gross
up payments and this would result in holders receiving less interest than expected and could significantly
adversely affect their return on the Notes.

The U.S. Foreign Account Tax Compliance Act (or “FATCA”) imposes a reporting regime and, potentially, a
30% withholding tax. While the Notes are in global form and held within the clearing systems, in all but the most
remote circumstances, it is not expected that FATCA will affect the amount of any payment received by the
clearing systems. However, FATCA may affect payments made to custodians or intermediaries in the subsequent
payment chain leading to the ultimate investor if any such custodian or intermediary generally is unable to
receive payments free of FATCA withholding. It also may affect payment to any ultimate investor that is a
financial institution that is not entitled to receive payments free of withholding under FATCA, or an ultimate
investor that fails to provide its broker (or other custodian or intermediary from which it receives payment) with
any information, forms, other documentation or consents that may be necessary for the payments to be made free
of FATCA withholding. Investors should choose the custodians or intermediaries with care (to ensure each is
compliant with FATCA or other laws or agreements related to FATCA) and provide each custodian or
intermediary with any information, forms, other documentation or consents that may be necessary for such
custodian or intermediary to make a payment free of FATCA withholding. In the event any withholding under
FATCA were imposed on payments under the Notes, the Issuer has no obligation to gross up for any such
withholding. Furthermore, the Issuer’s obligations under the Notes are discharged once it has paid the common
depositary for the clearing systems and the Issuer has therefore no responsibility for any amount thereafter
transmitted through the clearing systems and custodians or intermediaries.

RISKS RELATING TO THE STRUCTURE OF A PARTICULAR ISSUE OF NOTES

A wide range of Notes may be issued under the Programme. A number of these Notes may have features which
contain particular risks for investors. Set out below is a description of certain such features and associated risks.

Notes subject to optional redemption by the Issuer.

An optional redemption feature of Notes is likely to limit their market value. During any period when the Issuer
may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at
which they can be redeemed. This also may be true prior to any redemption period.

The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the
Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective
interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a
significantly lower rate. Potential investors should consider reinvestment risk in light of other investments
available at that time.

Index Linked Notes and Dual Currency Notes.

The Issuer may issue Notes with principal or interest determined by reference to an index or formula, to changes
in the prices of securities or commodities, to movements in currency exchange rates or other factors (each, a
“Relevant Factor”). In addition, the Issuer may issue Notes with principal or interest payable in one or more
currencies which may be different from the currency in which the Notes are denominated. Potential investors
should be aware that:

‰ the market price of such Notes may be volatile;

‰ they may receive no interest;

81
‰ payment of principal or interest may occur at a different time or in a different currency than expected;

‰ they may lose all or a substantial portion of their principal;

‰ a Relevant Factor may be subject to significant fluctuations that may not correlate with changes in
interest rates, currencies or other indices;

‰ if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or contains
some other leverage factor, the effect of changes in the Relevant Factor on principal or interest payable
likely will be magnified; and

‰ the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the average
level is consistent with their expectations. In general, the earlier the change in the Relevant Factor, the
greater the effect on yield.

The historical experience of an index or other Relevant Factor should not be viewed as an indication of the future
performance of such Relevant Factor during the term of any Notes. Accordingly, each potential investor should
consult its own financial and legal advisers about the risk entailed by an investment in any Notes linked to such a
Relevant Factor and the suitability of such Notes in light of its particular circumstances.

Partly-paid Notes.

The Issuer may issue Notes where the issue price is payable in more than one instalment. Any failure by an
investor to pay any subsequent instalment of the issue price in respect of the Notes could result in an investor
losing all of his investment.

Variable rate Notes with a multiplier or other leverage factor.

Notes with variable interest rates can be volatile investments. If they are structured to include multipliers or other
leverage factors, or caps or floors, or any combination of those features or other similar related features, their
market values may be even more volatile than those for securities that do not include those features.

Inverse Floating Rate Notes.

Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a reference rate
such as LIBOR. The market values of those Notes typically are more volatile than market values of other
conventional floating rate debt securities based on the same reference rate (and with otherwise comparable
terms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not only decreases
the interest rate of the Notes, but may also reflect an increase in prevailing interest rates, which further adversely
affects the market value of these Notes.

Fixed/Floating Rate Notes.

Fixed/Floating Rate Notes are Notes which may bear interest at a rate that converts from a fixed rate to a floating
rate, or from a floating rate to a fixed rate. Where the Issuer has the right to effect such a conversion, this will
affect the secondary market and the market value of the Notes since the Issuer may be expected to convert the
rate when it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate to a
floating rate in such circumstances, the spread on the Fixed/Floating Rate Notes may be less favorable than then
prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new
floating rate at any time may be lower than the rates on other Notes. If the Issuer converts from a floating rate to
a fixed rate in such circumstances, the fixed rate may be lower than then prevailing rates on its Notes.

Notes issued at a substantial discount or premium.

The market values of securities issued at a substantial discount (such as Zero Coupon Notes) or premium to their
principal amount tend to fluctuate more in relation to general changes in interest rates than do prices for
conventional interest-bearing securities. Generally, the longer the remaining term of the securities, the greater the
price volatility as compared to more conventional interest-bearing securities with comparable maturities.

The regulation and reform of “benchmark” rates of interest and indices may adversely affect the value of
Notes linked to or referencing such “benchmarks”.

Interest rates and indices which are deemed to be or used as “benchmarks” are the subject of recent international
regulatory guidance and proposals for reform, particularly in the United Kingdom. Some of these reforms are

82
already effective whilst others are still to be implemented. These reforms may cause such benchmarks to perform
differently than in the past or to disappear entirely, or have other consequences which cannot be predicted. Any
such consequence could have a material adverse effect on any Notes linked to or referencing such a benchmark.
Regulation (EU) 2016/1011 (the “Benchmarks Regulation”) was published in the Official Journal of the EU on
29 June 2016 and will apply from 1 January 2018 (with the exception of provisions specified in Article 59
(mainly on critical benchmarks) that apply from 30 June 2016 and 3 July 2016). The Benchmarks Regulation
applies to the provision of benchmarks, the contribution of input data to a benchmark and the use of a benchmark
within the EU. It will, among other things, (i) require benchmark administrators to be authorized or registered
(or, if non-EU-based, to be subject to an equivalent regime or otherwise recognized or endorsed) and (ii) prevent
certain uses by EU supervised entities (such as the Issuer) of benchmarks of administrators that are not
authorized or registered (or, if non-EU based, not deemed equivalent or recognized or endorsed).

The Benchmarks Regulation could have a material impact on any Notes linked to or referencing a benchmark, in
particular, if the methodology or other terms of the benchmark are changed in order to comply with the
requirements of the Benchmarks Regulation. Such changes could, among other things, have the effect of
reducing, increasing or otherwise affecting the volatility of the published rate or level of the benchmark.

More broadly, any of the international reforms, particularly in the United Kingdom or the general increased
regulatory scrutiny of benchmarks, could increase the costs and risks of administering or otherwise participating
in the setting of a benchmark and complying with any such regulations or requirements. For example, the
sustainability of the London interbank offered rate (“LIBOR”) has been questioned as a result of the absence of
relevant active underlying markets and possible disincentives (including as a result of regulatory reforms) for
market participants to continue contributing to such benchmarks. On 27 July 2017, the United Kingdom
Financial Conduct Authority announced that it will no longer persuade or compel banks to submit rates for the
calculation of the LIBOR benchmark after 2021 (the “FCA Announcement”). The FCA Announcement
indicated that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. The
potential elimination of the LIBOR benchmark or any other benchmark, or changes in the manner of
administration of any benchmark, could require an adjustment to the terms and conditions, or result in other
consequences, in respect of any Notes linked to such benchmark (including but not limited to floating rate Notes
whose interest rates are linked to LIBOR). Such factors may have the following effects on certain benchmarks:
(i) discourage market participants from continuing to administer or contribute to the benchmark; (ii) trigger
changes in the rules or methodologies used in the benchmark or (iii) lead to the disappearance of the
“benchmark”. Any of the above changes or any other consequential changes as a result of international reforms,
particularly in the United Kingdom or other initiatives or investigations, could have a material adverse effect on
the value of and return on any Notes linked to or referencing a benchmark.

Investors should consult their own independent advisers and make their own assessment about the potential risks
imposed by the Benchmarks Regulation or any other international reforms, particularly in the United Kingdom,
in making any investment decision with respect to any Notes linked to or referencing a benchmark.

RISKS RELATING TO THE NOTES ISSUED AS GREEN BONDS

Notes issued as “Green Bonds” may not be a suitable investment for all investors seeking exposure to green
assets.

Prospective investors should have regard to the information set out in the “Green Bond Framework” and in the
applicable Pricing Supplement regarding use of proceeds and must determine for themselves the relevance of
such information for the purpose of any investment if Notes issued under the Programme are issued as “Green
Bonds” together with any other investigation such investor deems necessary.

In particular, the Issuer may choose to apply the proceeds from the issue of Notes under the Programme for
Eligible Green Projects which are defined in accordance with the broad categorization of eligibility for green
projects set out by the Green Bond Principles 2018, as administered by the International Capital Market
Association. No assurance is given by the Issuer, the Company or the Dealers that the use of such proceeds for
any Eligible Green Projects will satisfy, whether in whole or in part, any present or future investor expectations
or requirements as regards any investment criteria or guidelines with which such investor or its investments are
required to comply whether by any present or future applicable law or regulations or by its own by-laws or other
governing rules or investment portfolio mandates, in particular with regard to any direct or indirect
environmental sustainability or social impact of any projects or uses the subject of or related to, any Eligible
Green Projects.

83
There can be no assurance that the relevant project(s) or use(s) (including those the subject of, or related to, any
Eligible Green Projects) will be capable of being implemented in or substantially in the manner described in the
Green Bond Framework and/or the applicable Pricing Supplement and/or accordance with any timing schedule
and that accordingly such proceeds will be totally or partially disbursed for such project(s) or use(s). Nor can
there be any assurance that any such projects will be completed within any specified period or at all or with the
results or outcome (whether or not related to the environment) as originally expected or anticipated by the Issuer.
Any such event or failure by the Issuer will not constitute an Event of Default under the Notes.

Furthermore, it should be noted that there is currently no clearly defined definition (legal, regulatory or
otherwise) of, nor market consensus as to what constitutes, a green or sustainable or an equivalently labeled
project or as to what precise attributes are required for a particular project to be defined as green or sustainable or
such other equivalent label, nor can any assurance be given that such a clear definition or consensus will develop
over time. Accordingly, no assurance is or can be given to investors that any project(s) or use(s) the subject of or
related to any Eligible Green Projects will meet any or all investor expectations regarding such green or other
equivalently-labeled performance objectives or that any adverse environmental, social and/or other impacts will
not occur during the implementation of any project(s) or use(s) the subject of, or related to, any Eligible Green
Projects.

No assurance or representation is given as to the suitability or reliability for any purpose whatsoever of any
opinion or certification of any third party (whether or not solicited by the Issuer or the Company) which may be
made available in connection with the issue of the Notes and in particular with any Eligible Green Projects to
fulfill any environmental and/or other criteria. For the avoidance of doubt, any such opinion or certification (i) is
not, nor shall be deemed to be, incorporated in and/or form part of the applicable Pricing Supplement or this
Offering Circular, (ii) is not, nor should be deemed to be, a recommendation by the Issuer, the Company or the
Dealers or any other person to buy, sell or hold any the Notes and (iii) would only be current as of the date that it
was initially issued. Prospective investors must determine for themselves the relevance of any such opinion or
certification and/or the information contained therein and/or the provider of such opinion or certification for the
purpose of any investment in the Notes. Currently, the providers of such opinions and certifications are not
subject to any specific regulatory or other regime or oversight.

In the event that the Notes will be listed or admitted to trading on any dedicated green, environmental,
sustainable or other equivalently-labeled segment of any stock exchange or securities market (whether or not
regulated), no representation or assurance is given by the Issuer, the Company or the Dealers or any other person
that such listing or admission satisfies, whether in whole or in part, any present or future investor expectations or
requirements as regards any investment criteria or guidelines with which such investor or its investments are
required to comply, for example with regard to any direct or indirect environmental, sustainability or social
impact of any projects or uses, the subject of or related to, any Eligible Green Projects. Additionally, it should be
noted that the criteria for any such listings or admission to trading may vary from one stock exchange or
securities market to another. Nor is any representation or assurance given or made by the Issuer, the Company,
the Dealers or any other person that any such listing or admission to trading will be obtained in respect of the
Notes or, if obtained, that any such listing or admission to trading will be maintained during the life of the Notes.

Any such event or failure to apply the proceeds of the Notes for any project(s) or use(s), including any Eligible
Green Projects, and/or the withdrawal modification or downgrade of any opinion or certification as described
above or any such opinion or certification attesting that the Issuer is not complying in whole or in part with any
matters for which such opinion or certification is opining or certifying on, and/or the Notes no longer being listed
or admitted to trading on any stock exchange or securities market as aforesaid may have a material adverse effect
on the value of the Notes and also potentially the value of any other Notes which are intended by the Issuer to
finance Eligible Green Projects and/or result in adverse consequences for certain investors with portfolio
mandates to invest in securities to be used for a particular purpose.

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 CAPITALIZATION AND INDEBTEDNESS

The following table sets forth the Company’s capitalization as of 30 September 2018. This table should be read
in conjunction with the Company’s unaudited interim condensed consolidated financial statements and the notes
thereto, included elsewhere in this Offering Circular.

As of 30 September 2018
(P millions) (U.S.$ millions)
(unaudited)
Debt
Loans payable(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,907.8 827.8
Other liabilities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242.2 4.5
Total Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,150.0 832.3
Equity
Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,687.2 418.2
Cumulative translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347.1 6.4
Equity reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34.3) (0.6)
Remeasurement gain on defined benefit obligation – net of tax . . . . . . . . . . . . . . . . . 3.8 0.1
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,163.6 205.8
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,700.4 363.1
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,867.8 993.0
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,017.8 1,825.3

Notes:
(1) Loans payable includes “Loans payable – current portion” and “Loans payable – net of current portion”.
(2) Other liabilities includes “Other current liabilities” and “Other noncurrent liabilities”.

Other than as described above, there has been no material change in the capitalization of AC Energy since
30 September 2018.

85
 SELECTED CONSOLIDATED FINANCIAL INFORMATION

The selected historical consolidated statement of financial position data as of 31 December 2015, 2016 and 2017
and selected historical consolidated statement of comprehensive income and cash flow data for the years ended
31 December 2015, 2016 and 2017 set forth below have been derived from, and should be read in conjunction
with, the audited consolidated financial statements and, including the notes thereto, included elsewhere in this
Offering Circular. SGV & Co., a member firm of Ernst & Young Global Limited, has audited the consolidated
financial statements in accordance with Philippine Standards on Auditing. The summary historical consolidated
statement of financial position data as of 30 September 2018 and summary historical consolidated statement of
income and cash flow data for the nine months ended 30 September 2017 and 2018 have been derived from, and
should be read in conjunction with, the unaudited interim condensed consolidated financial statements, which
SGV & Co. has reviewed in accordance with Philippine Standard on Review Engagements 2410, “Review of
Interim Financial Information Performed by the Independent Auditor of the Entity”.

Translations from Philippine Pesos to U.S. dollars for the convenience of the reader have been made at the BSP
Rate on 28 September 2018 (the last day in September on which such rate was available) of p54.251 to
U.S.$1.00.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the years ended For the nine months ended
31 December 30 September
2015 2016 2017 2017 2018
(Audited) (Unaudited)
(in millions)
U.S.$
Q Q Q (unaudited) Q Q U.S.$

REVENUE
Energy sales . . . . . . . . . . . . . . . . . . . . . . . . . - 203.3 2,334.5 43.0 1,433.8 3,062.6 56.5
Equity in net income . . . . . . . . . . . . . . . . . . . 1,026.3 1,762.2 2,156.4 39.7 1,216.1 2,284.9 42.1
Dividend income . . . . . . . . . . . . . . . . . . . . . . 18.8 - 11.6 0.2 - - -
Management fees . . . . . . . . . . . . . . . . . . . . . 10.3 16.8 128.6 2.4 75.2 100.5 1.9
Rental income . . . . . . . . . . . . . . . . . . . . . . . . - - 82.8 1.5 55.0 196.6 3.6
1,055.4 1,982.3 4,713.9 86.9 2,780.1 5,644.6 104.0

OTHER INCOME
Dividend income . . . . . . . . . . . . . . . . . . . . . . - - - - 7.0 20.8 0.4
Mark-to-market gain . . . . . . . . . . . . . . . . . . . - - 99.9 1.8 138.6 - -
Interest income . . . . . . . . . . . . . . . . . . . . . . . 15.2 55.8 81.5 1.5 39.9 570.4 10.5
Foreign exchange gain – net . . . . . . . . . . . . . 41.5 73.3 34.2 0.6 70.7 34.6 0.6
Gain on sales of shares . . . . . . . . . . . . . . . . . 1,720.0 1,327.4 - - - - -
Gain on reversal of contingent liability . . . . . - 219.3 - - - - -
Gain on bargain purchase . . . . . . . . . . . . . . . - 149.8 - - - - -
Revaluation gain on investments . . . . . . . . . - 134.3 - - - - -
Other income . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 33.0 1,787.1 32.9 886.4 2,659.3 49.0
1,779.7 1,992.9 2,002.7 36.8 1,142.6 3,285.1 60.6

COST AND EXPENSES

Cost of power operations . . . . . . . . . . . . . . . - 95.6 1,563.4 28.8 995.5 2,647.2 48.8
Salaries, wages and employee benefits . . . . . 71.4 105.3 403.8 7.4 216.9 287.6 5.3
Interest expense . . . . . . . . . . . . . . . . . . . . . . . 12.6 31.3 288.9 5.3 290.8 271.0 5.0
Professional fees . . . . . . . . . . . . . . . . . . . . . . 74.0 309.1 286.4 5.3 163.5 198.1 3.7
Management fee . . . . . . . . . . . . . . . . . . . . . . 96.8 147.9 165.1 3.0 91.7 79.7 1.5
Loss on derivatives . . . . . . . . . . . . . . . . . . . . - - - - - - -
Taxes and licenses . . . . . . . . . . . . . . . . . . . . . 313.5 184.9 107.1 2.0 65.3 139.6 2.6
Depreciation and amortization . . . . . . . . . . . 10.2 32.7 112.6 2.1 25.9 53.3 1.0
Provision for impairment losses . . . . . . . . . . 271.1 350.6 66.2 1.2 10.6 11.1 0.2
Transportation and travel . . . . . . . . . . . . . . . 18.9 28.8 51.0 0.9 33.9 37.0 0.7
Occupancy cost . . . . . . . . . . . . . . . . . . . . . . . 6.8 9.0 36.5 0.7 - - -
Bank charges . . . . . . . . . . . . . . . . . . . . . . . . . 0.7 7.0 15.9 0.3 - - -
Postal and communication . . . . . . . . . . . . . . 4.6 10.4 12.2 0.2 8.7 12.7 0.2
Repairs and maintenance . . . . . . . . . . . . . . . 3.6 4.5 10.5 0.2 10.2 16.8 0.3
Retirement expense . . . . . . . . . . . . . . . . . . . . 7.9 2.5 7.5 0.1 1.8 7.0 0.1
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 5.8 7.8 0.1 6.9 9.0 0.2
Entertainment, amusement and recreation . . 2.6 2.7 5.6 0.1 3.5 4.0 0.1
Mark-to-market losses . . . . . . . . . . . . . . . . . . 4.1 137.0 - - - 95.4 1.8
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 5.6 9.5 41.9 0.8 49.6 105.7 1.9
906.7 1,474.6 3,182.4 58.7 1,974.8 3,975.2 73.3

86
 For the years ended For the nine months ended
31 December 30 September
2015 2016 2017 2017 2018
(Audited) (Unaudited)
(in millions)
U.S.$
Q Q Q (unaudited) Q Q U.S.$

INCOME BEFORE INCOME TAX . . . . . . 1,928.4 2,500.6 3,534.2 65.1 1,947.9 4,954.5 91.3
PROVISION FOR (BENEFIT FROM)
INCOME TAX . . . . . . . . . . . . . . . . . . . . . (48.4) 144.5 (55.6) (1.0) (87.7) 1,071.5 19.7

NET INCOME . . . . . . . . . . . . . . . . . . . . . . . 1,976.8 2,356.1 3,589.8 66.1 2,035.6 3,883.0 71.6

OTHER COMPREHENSIVE INCOME

Other comprehensive income to be
reclassified to profit or loss in
subsequent periods:
Cumulative translation adjustment . . . . . . 604.5 684.6 (79.1) (1.5) 435.4 (863) (15.9)
Other comprehensive income not to be
reclassified to profit or loss in
subsequent periods:
Remeasurement gain (loss) on defined
benefit obligation . . . . . . . . . . . . . . . . . . . . 0.2 (2.1) 5.0 0.1 - 0.8 0.0

TOTAL COMPREHENSIVE INCOME . . 2,581.5 3,038.6 3,515.7 64.8 2,471.0 3,020.8 55.7

NET INCOME (LOSS) ATTRIBUTABLE

TO:
Equity holders of the Parent Company . . . . . 2,127.4 2,666.9 3,508.7 64.7 2,017.4 3,676.5 67.8
Non-controlling interests . . . . . . . . . . . . . . . . (150.6) (310.8) 81.1 1.5 18.2 206.5 3.8
1,976.8 2,356.1 3,589.8 66.2 2,035.6 3,883.0 71.6
TOTAL COMPREHENSIVE INCOME
(LOSS) ATTRIBUTABLE TO:
Equity holders of the Parent Company . . . . . 2,732.1 3,349.4 3,434.6 63.3 2,452.8 2,814.4 51.9
Non-controlling interests . . . . . . . . . . . . . . . . (150.6) (310.8) 81.1 1.5 18.2 206.5 3.8
2,581.5 3,038.6 3,515.7 64.8 2471.0 3,020.8 55.7

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As of 31 December As of 30 September
2015 2016 2017 2018
(Audited) (Unaudited)
(in millions of)
U.S.$
P P P (unaudited) P U.S.$

ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . 2,580.3 11,386.5 5,950.0 109.7 13,144.0 242.3
Current portion of receivables . . . . . . . . . . . . . . 272.1 550.4 1,115.6 20.6 4,619.4 85.1
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . 177.6 - - - - -
Input value-added taxes . . . . . . . . . . . . . . . . . . 302.0 184.7 183.1 3.4 216.7 4.0
Derivative asset . . . . . . . . . . . . . . . . . . . . . . . . . 30.3 106.6 83.8 1.5 0.8 0.0
Prepayments and other current assets . . . . . . . . 81.8 741.3 596.7 11.0 491.6 9.1
Noncurrent asset held for sale . . . . . . . . . . . . . . - - - - 5,635.3 103.9
Total Current Assets . . . . . . . . . . . . . . 3,444.1 12,969.5 7,929.2 146.2 24,107.8 444.4

NONCURRENT ASSETS
Advances to contractors . . . . . . . . . . . . . . . . . . 321.5 - 10.6 0.2 4.5 0.1
Available-for-sale financial assets . . . . . . . . . . 0.2 597.7 11.0 597.6 11.0
Property and equipment . . . . . . . . . . . . . . . . . . 5,936.0 26,152.0 40,798.4 752.0 47,564.6 876.8
Investment Property . . . . . . . . . . . . . . . . . . . . . - - 220.3 4.1 220.3 4.1
Project development costs . . . . . . . . . . . . . . . . . 0.1 0.1 2.2 0 1.8 0
Investments in associate and joint ventures . . . 13,551.7 13,776.6 23,364.4 430.7 22,850.1 421.2
Investments in redeemable preferred shares . . . - - 1,629.4 30.0 1,667.1 30.7
Receivables – net of current portion . . . . . . . . . 88.9 122.1 160.7 3.0 105.7 1.9
Input value-added tax – net of current
portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.9 799.9 2,560.1 47.2 3,869.8 71.3
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.7 2,772.7 76.5 1.4 291.3 5.4
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410.2 - 786.3 14.5 786.3 14.5
Intangible asset . . . . . . . . . . . . . . . . . . . . . . . . . - - 127.5 2.4 127.5 2.4
Leaseholder rights . . . . . . . . . . . . . . . . . . . . . . . - - 470.7 8.7 470.7 8.7
Intangible asset-right of way . . . . . . . . . . . . . . . 227.0 238.9 296.5 5.5 296.5 5.5
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . 61.7 - - - - -
Total Noncurrent Assets . . . . . . . . . . . 20,652.7 43,862.5 71,101.3 1,310.6 78,853.8 1,453.5
24,096.8 56,832.0 79,030.5 1,456.8 102,961.6 1,897.9

87
 As of 31 December As of 30 September
2015 2016 2017 2018
(Audited) (Unaudited)
(in millions of)
U.S.$
P P P (unaudited) P U.S.$

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Accounts and other payables . . . . . . . . . . . . . . 1,431.7 1,990.9 3,587.1 66.1 2,941.8 54.2
Advances from a related party . . . . . . . . . . . . . - 6,563.0 - - - -
Short term loans . . . . . . . . . . . . . . . . . . . . . . . . - 150.0 - - - -
Loans payable – current portion . . . . . . . . . . . . - 423.6 287.1 5.3 274.0 5.1
Other current liabilities . . . . . . . . . . . . . . . . . . . 16.3 63.9 120.6 2.2 66.5 1.2
Total Current Liabilities . . . . . . . . . . . 1,448.0 9,191.4 3,994.8 73.6 3,282.3 60.5

NONCURRENT LIABILITIES
Deferred tax liability – net . . . . . . . . . . . . . . . . - 202.5 157.8 2.9 965.1 17.8
Pension liability . . . . . . . . . . . . . . . . . . . . . . . . 2.4 2.8 0.1 0.0 3.5 0.1
Loans payable – net of current portion . . . . . . . 2,834.6 18,682.4 31,869.6 587.4 44,633.8 822.7
Derivative liability . . . . . . . . . . . . . . . . . . . . . . - - - - 33.4 0.6
Other noncurrent liabilities . . . . . . . . . . . . . . . . - 49.6 18.4 0.3 175.7 3.2
Total Noncurrent Liabilities . . . . . . . . . . 2,837.0 18,937.3 32,045.9 590.7 45,811.5 844.4
Total Liabilities . . . . . . . . . . . . . . . . 4,285.0 28,128.7 36,040.7 664.3 49,093.8 904.9

EQUITY
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 17,506.0 19,797.0 22,687.2 418.2 22,687.2 418.2
Cumulative translation adjustments . . . . . . . . . 604.5 1,289.1 1,210.0 22.3 347.1 6.4
Equity reserves . . . . . . . . . . . . . . . . . . . . . . . . . 32.6 29.1 29.3 0.5 (34.3) (0.6)
Remeasurement gain on defined benefit
obligation – net of tax . . . . . . . . . . . . . . . . . . . 0.2 (2.0) 3.0 0.1 3.8 0.1
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . 1,486.5 4,151.8 7,637.3 140.8 11,163.6 205.8
19,629.8 25,265.0 31,566.8 581.9 34,167.4 629.8
Non-controlling interests . . . . . . . . . . . . . . . . . . 182.0 3,438.3 11,423.0 210.6 19,700.4 363.1
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,811.8 28,703.3 42,989.8 792.4 53,867.8 992.9
24,096.8 56,832 79,030.5 1,456.8 102,961.6 1,897.8

CONSOLIDATED STATEMENT OF CASH FLOWS DATA

For the years ended For the nine months ended
31 December 30 September
2015 2016 2017 2017 2018
(Audited) (Unaudited)
(in millions)
U.S.$
P P P (unaudited) P P U.S.$
Net cash flows provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177.7 (363.4) 3,897.5 71.8 3,242.6 (1,686.2) (31.1)
Net cash used in investing activities . . . . . . . . . (2,461.8) (19,672.5) (24,944.8) (459.8) (19,471.2) (8,354.8) (154.0)
Net cash provided by financing activities . . . . . 4,337.6 28,809.4 15,607.4 287.7 12,323.3 17,235.0 317.7
Effects of changes in foreign currency
exchange rate on cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 32.6 3.4 0.1 - - -
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 2,053.5 8,773.5 (5,439.9) (100.3) (3,905.3) 7,194.0 132.6
Cash and cash equivalents at beginning of
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523.9 2,580.3 11,386.5 209.9 11,386.5 5,950.0 109.7
Cash and cash equivalents at end of year . . . . . 2,580.3 11,386.5 5,950.0 109.7 7,481.1 13,144.0 242.3

88
OTHER FINANCIAL INFORMATION

The table below provides summary additional financial information for the periods indicated:
For the years ended For the nine months ended
31 December 30 September
2015 2016 2017 2017 2018
(in millions unless indicated otherwise)
Q Q Q U.S.$ Q Q U.S.$
Total Revenues(1) . . . . . . . . . . . . . . . . . . . . . . . . . 1,055.3 1,982.3 4,713.9 86.9 2,787.1 5,665.5 104.4
Adjusted EBITDA(2) . . . . . . . . . . . . . . . . . . . . . . 2,169.6 2,473.3 4,008.8 73.9 2,192.5 4,948.9 91.2

(1) Calculated as the sum of energy sales, dividend income, management fees and rental income, excluding equity in net income.
(2) Adjusted EBITDA represents EBITDA as adjusted to exclude noncash expenses/losses (i.e., impairment provisions and mark-to-market
losses) and other income items (i.e., interest income, mark-to-market gains, net foreign exchange gains, gain on reversal of contingent
liabilities, and revaluation gain on investment, which includes gain on bargain purchase. See “Calculation of Adjusted EBITDA” below
for further information. Adjusted EBITDA should not be viewed in isolation or as an alternative to financial measures calculated in
accordance with PFRS. See “Presentation of Financial Information” and “Non-PFRS Financial Measures.”

CALCULATION OF ADJUSTED EBITDA

The following table presents a reconciliation of Adjusted EBITDA from Income Before Income Tax for each of
the periods indicated.

For the years ended For the six months ended

31 December 30 September
2015 2016 2017 2017 2018
(Audited) (Unaudited)
(in millions)
Q Q Q U.S.$ Q Q U.S.$
Income before Income Tax . . . . . . . . . . . . . . . . . 1,928.4 2,500.7 3,534.4 65.1 1,947.9 4,529.3 83.5
Add:
Interest Expense . . . . . . . . . . . . . . . . . . . . . . 12.6 31.3 288.9 5.3 290.8 271.0 5.0
Depreciation and amortization . . . . . . . . . . . 10.2 86.2 334.9 6.2 192.5 221.9 4.1
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,951.1 2,618.3 4,158.2 76.6 2,431.1 5,447.4 100.4
Add:
Impairment provisions . . . . . . . . . . . . . . . . . 271.1 350.6 66.2 1.2 10.6 11.1 0.2
Mark-to-market Losses . . . . . . . . . . . . . . . . 4.1 137.0 - - - 95.4 1.8
Less:
Other income(1) . . . . . . . . . . . . . . . . . . . . . . . (56.7) (632.6) (215.6) (4.0) (249.2) (605.0) (11.2)
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . 2,169.6 2,473.3 4,008.8 73.9 2,192.5 4,948.9 91.2

(1) Represents interest income, mark-to-market gains, net foreign exchange gains, gain on reversal of contingent liabilities, and revaluation
gain on investment, which includes gain on bargain purchase.

89
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following is a discussion and analysis of the Company’s financial condition and results of operations and
certain trends, risks and uncertainties that may affect its business. The following discussion should be read in
conjunction with the section entitled “Selected Financial Information and Other Data” and the Company’s
audited consolidated financial statements as of and for the years ended 31 December 2015, 2016 and 2017 and
its unaudited interim condensed consolidated financial statements, as of and for the period ended 30 September
2018 (with comparative figures as of 31 December 2017 and for the period ended 30 September 2017), including
the notes thereto, included elsewhere in this Offering Circular. This discussion contains forward-looking
statements and reflects the current views of the Company with respect to future events and financial
performance. Actual results may differ materially from those anticipated in these forward-looking statements as
a result of certain factors such as those set forth in the section entitled “Risk Factors” and elsewhere in this
Offering Circular.

Translations from Philippine Pesos to U.S. dollars for the convenience of the reader have been made at the BSP
Rate on 28 September 2018 (the last day in September on which such rate was available) of p54.251 to
U.S.$1.00.

DESCRIPTION OF SELECTED INCOME STATEMENT ITEMS

Revenue

The Company’s revenue consists of revenue derived from energy sales, dividend income, management fees,
rental income and other income. Revenue is recognized to the extent that it is probable that economic benefits
will flow to the Company and the revenue can be measured reliably.

Energy Sales

The Company’s revenues from energy sales are derived from (i) the actual delivery of electricity from the
Company’s subsidiaries and (ii) the sale of electricity through the Company’s RES contracts. Revenue from sale
of electricity through RES contracts is composed of generation and distribution wheeling services charges from
monthly energy supply with various contestable customers and is recognized monthly based on the actual energy
delivered.

Dividend Income

The Company’s dividend income represents dividend earned from equity instruments at fair value through other
comprehensive income. Dividend income is recognized when the Company’s right to receive the payment is
established.

Management Fees

The Company, through its subsidiaries, provides technical services for the construction, operation and
maintenance of renewable energy projects as well as administrative and commercial services for these projects.
Management fees represent income from these technical, administrative and commercial services.

Technical services include (a) identifying, obtaining and maintaining any and all consent, licenses, permits and
registrations or authorizations, (b) managing, implementing administering and monitoring compliance with and
actual performance under all material contracts, (c) coordinating and interfacing with any of the projects’
counterparties to the contracts, or the relevant regulatory authorities or stakeholders under any of the consents,
licenses, permits, registrations or authorizations obtained or maintained for the projects, (d) preparation,
implementation and monitoring of standards for employment of personnel and engagement of service providers
for the development, operation and maintenance of the projects, (e) managing local community relationships
including the performance of any obligations of the projects pursuant to any corporate social responsibility
requirements imposed under any of the project’s consents, licenses, permits, registrations or authorizations and
(f) such other technical services as may be mutually agreed upon.

The administrative and commercial services include (a) preparation of the projects’ annual budget and other
financial statements, including the development of appropriate and effective auditing structures,

90
(b) administration of the projects’ payment, credit and collection activities, (c) general accounting services
related to fund placements, loans, advances, other investments and the management of accounts receivables,
accounts payables and fixed assets, (d) the establishment, maintenance and monitoring of the projects’ bank
accounts, bank relationships, and the supervision of bank services including coordination, supervision and liaison
with existing and/or future lenders, (e) all procurement and sales activities of the projects, (f) the development
and implementation of insurance coverage for optimum risk management and (g) such other administrative
services as may be customary for companies engaged in the same or similar business.

The Company receives management fees on a monthly basis for the provision of management services.
Management fees for services rendered are recognized when earned.

Rental Income

The Company’s rental income is derived from rental payments from leasehold rights over certain properties used
for renewable projects. Rental income under non-cancellable leases are recognized on a straight-line basis over
the term of the lease.

Equity in Net Income

Equity in net income represents income derived from investments in associates and joint ventures accounted for
using the equity method. An associate is an entity in which the Company has a 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 decisions of the investee, but has no 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.

Other Income

The Company’s other income is derived principally from mark-to-market gain, interest income, foreign exchange
gain (net) and other income, including from investments in associates and joint ventures and fee arrangements.

Fee arrangements for the periods presented pertain to service fees from Blackstone Capital Partners (Cayman) VI
L.P. (“Blackstone Capital”) derived from the financial close of a new power plant.

Costs and Expenses

The Company’s costs and expenses consist primarily of costs of power operations, salaries, wages and employee
benefits, interest expense, professional fees, management fees, taxes and licenses and depreciation and
amortization.

Cost of power operations consists primarily of (i) cost of sales under RES contracts and in relation to the
Company’s subsidiaries, (ii) depreciation and amortization; (iii) repairs and maintenance; (iv) taxes and licenses;
(v) professional and management fees; (vi) occupancy costs; (vii) insurance; (viii) compensation and benefits;
and (ix) transportation and travel.

RESULTS OF OPERATIONS

Nine Months Ended 30 September 2018 Compared to Nine Months Ended 30 September 2017

Revenue

Revenue increased by P2,864.6 million, from P2,780.1 million in the nine months ended 30 September 2017 to
P5,644.7 million (U.S.$104.0 million) in the nine months ended 30 September 2018. The increase was primarily
attributable to higher energy sales.

In particular, energy sales increased by P1,628.8 million, from P1,433.8 million in the nine months ended
30 September 2017 to P3,062.6 million (U.S.$56.5 million) in the nine months ended 30 September 2018. The
increase was primarily attributable to higher energy sales of the RES business given the steady increase in its
customer base. The increase was also attributable to the FIT adjustment and better wind regime, from the
Northwind and the project.

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Rental income increased by P141.6 million, from P55.0 million in the nine months ended 30 September 2017 to
P196.6 million (U.S.$3.6 million) in the nine months ended 30 September 2018. The increase was primarily
attributable to rental income from Solienda, Inc. which was acquired in December 2017. Solienda, Inc. is the
lessor of three power plants located in Negros Occidental.

Management fees increased by P25.3 million, from P75.2 million in the nine months ended 30 September 2017
to P100.5 million (U.S.$1.9 million) in the nine months ended 30 September 2018. The increase was primarily
attributable to the one time development premium earned by AC Energy Development, Inc. (“AC Energy
DevCo”) from North Negros Biopower Inc. in 2018.

Equity in net income increased by P1,068.8 million, from P1,216.1 million in the nine months ended
30 September 2017 to P2,284.9 million (U.S.$42.1 million) in the nine months ended 30 September 2018. The
increase was primarily attributable to normalized earnings from GNPower Mariveles Coal Plant Ltd. Co.
(“GMCP”, which operates the GNPower Mariveles Project), which excluded refinancing costs incurred in 2017,
the full nine-months impact of the Salak-Darajat Geothermal Projects acquired in April 2017, and the
commencement of the Sidrap Project’s commercial operations in 2018, partly offset by pre-development costs in
respect of the GNPower Dinginin Project and the Company’s international projects. These also offset the lower
income from the SLTEC Project in view of a forced outage of Unit 2 since June 2018. Unit 2 is currently under
repair and is expected to resume operations in February 2019.

Other Income

Other income increased by P2,142.5 million, from P1,142.6 million in the nine months ended 30 September
2017 to P3,285.1 million (U.S.$60.6 million) in the nine months ended 30 September 2018. The increase was
primarily attributable to higher equity in net income and other income.

The Company’s mark-to-market gain decreased from P138.6 million in the nine months ended 30 September
2017 to nil in the nine months ended 30 September 2018. The mark-to-market gain in the nine months ended
30 September 2017 pertained to the fair value changes of the derivative asset related to the embedded
prepayment option of GNPower Kauswagan Ltd Co. (“GNPK”) in its onshore and offshore loan agreements. In
2018, the fair value changes resulted in a derivative loss which was (included in costs and expenses).

The Company’s dividend income decreased by P13.8 million, from P7.0 million in the nine months ended
30 September 2017 to P20.8 million (U.S.$0.4 million) in the nine months ended 30 September 2018. The
decrease was primarily attributable to a timing difference in the receipt of dividends from Philippine Wind
Holdings Corporation in relation to the Company’s redeemable preferred shares.

Interest income increased by P530.5 million, from P39.9 million in the nine months ended 30 September 2017
to P570.4 million (U.S.$10.5 million) in the nine months ended 30 September 2018. The increase was primarily
attributable to accrued interest income from an investment in redeemable preferred shares in UPC Renewables
Asia III Ltd. The redeemable preferred shares are redeemable only by cash at the holder’s option in accordance
with the redemption period and redemption mechanics and are entitled to fixed dividend rates per annum. Since
these shares include a contractual obligation for UPC Renewables Asia III Ltd. to redeem the shares at a
determined amount by cash at some future date, they are classified as long-term receivables and the earned
dividend is recorded as accrued interest income. Interest income from cash in banks and cash equivalents of AC
Energy and AC Energy International Holdings Pte. Ltd. also contributed to the increase.

Net foreign exchange gain decreased by P36.1 million in the nine months ended 30 September 2017, from
P70.7 million to P34.6 million (U.S.$0.6 million) in the nine months ended 30 September 2018. The decrease
was primarily attributable to translation adjustments of dollar cash and cash equivalents.

Finally, other income increased by P1,772.9 million, from P886.4 million in the nine months ended
30 September 2017 to P2,659.3 million (U.S.$49.0 million) in the nine months ended 30 September 2018. The
increase was primarily attributable to GNPK’s income from liquidated damages arising from construction delays,
partly offset by lower service fees of U.S.$10.8 million (P579.0 million) in relation to the financial close of a
new power plant.

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Cost and Expenses

Cost and expenses increased by P2,000.5 million, from P1,974.8 million in the nine months ended 30 September
2017 to P3,975.3 million (U.S.$73.3 million) in the nine months ended 30 September 2018. The increase was
primarily attributable to higher cost of power operations and interest expense.

In particular, cost of power operations increased by P1,651.7 million, from P995.5 million in the nine months
ended 30 September 2017 to P2,647.2 million (U.S.$48.8 million) in the nine months ended 30 September 2018.
The increase was primarily attributable to higher cost of power operations for the RES business because of higher
sales in 2018.

Salaries, wages and employee benefits increased by P70.7 million, from P216.9 million in the nine months
ended 30 September 2017 to P287.6 million (U.S.$5.3 million) in the nine months ended 30 September 2018.
The increase was primarily attributable to the full year effect of hires in 2017 and additional hires in 2018.

Mark-to-market losses of P95.4 million (U.S.$1.8 million) relate to GNPK’s accounting treatment of specific
loans that require valuation of pre-payment options and from the exposure adjustment arising from a contract
between the AC Energy and South Luzon Power Generation Corporation in relation to the Company’s RES
business. For both derivatives, a loss or gain results from the change in the valuation computed periodically.

Other cost and expenses pertain primarily to professional fees in relation to business development activities,
management fees paid to Ayala Corporation for seconded personnel and depreciation and amortization in relation
to the Northwind Project and Montesol Project as well as taxes and licenses incurred in the ordinary course of
business.

Income Before Income Tax

Income before income tax increased by P3,006.6 million, from P1,947.9 million in the nine months ended
30 September 2017 to P4,954.5 million (U.S.$91.3 million) in the nine months ended 30 September 2018. The
increase was primarily attributable to the strong performance of most projects as well as GNPK income from
liquidated damages arising from construction delays.

Net Income

As a result of the foregoing, net income increased by P1,847.4 million, from P2,035.6 million in the nine
months ended 30 September 2017 to P3,883.0 million (U.S.$71.6 million) in the nine months ended
30 September 2018.

Year Ended 31 December 2017 Compared to Year Ended 31 December 2016

Revenue

Revenue increased by P2,731.6 million, from P1,982.3 million in the year ended 31 December 2016 to
P4,713.9 million (U.S.$86.9 million) in the year ended 31 December 2017. The increase was primarily
attributable to increases in energy sales, divided income, management fees and recognition of rental income.

Energy sales increased by P2,131.2 million, from P203.3 million in the year ended 31 December 2016 to
P2,334.5 million (U.S.$43.0 million) in the year ended 31 December 2017. The increase was primarily
attributable to the energy sales of the RES business, which entered into its first contract on 26 December 2016,
the full year effect of the full line consolidation of NorthWind Power Development Corporation (“NorthWind”)
given the acquisition of an additional 17.79% stake in November 2016 and improved energy production of the
Northwind Project as a result of better wind regime in 2017, and in respect of the Montesol Project, recognition
in 2017 of 2016 FIT differentials coupled with the full year effect of its operations, which started in March 2016.

Equity in net income increased by P394.2 million, from P1,762.2 million in the year ended 31 December 2016
to P2,156.4 million (U.S.$39.7 million) in the year ended 31 December 2017. The increase was primarily
attributable to income from the Company’s interest effective March 2017 in the Salak-Darajat Geothermal
Projects, in the increase in the Company’s limited partnership interest in GMCP from 17.0246% to 20.3372%
starting October 2017 and the strong performance of GMCP and wind projects. The increase in equity in net
income was partly offset by a one-off loan breakage cost incurred by GMCP due to the pre-termination of its loan
in relation to its refinancing and pre-development costs of the Sidrap Wind Project and the GNPower Dinginin
Project, as well as the reclassification of NorthWind, which is now accounted for under full line consolidation

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In particular, dividend income increased by P11.6 million, from nil in the year ended 31 December 2016 to
P11.6 million (U.S.$0.2 million) in the year ended 31 December 2017. The increase was primarily attributable to
higher dividends received from Philippine Wind Holdings Corporation in relation to the Company’s redeemable
preferred shares as a result of improved cash earnings of the North Luzon Renewables Project.

Management fees increased by P111.8 million, from P16.8 million in the year ended 31 December 2016 to
P128.6 million (U.S.$2.4 million) in the year ended 31 December 2017. The increase was primarily attributable
to management fee income of AC Energy DevCo from the Islasol, Sacasol and Biopower Projects.

In addition, the Company earned rental income of P82.8 million (U.S.$1.5 million) in the year ended
31 December 2017 pertaining to lease income of Manapla Sun Power Dev’t Corp.

Other Income

Other income increased by P9.8 million, from P1,992.9 million in the year ended 31 December 2016 to
P2,002.7 million (U.S.$36.9 million) in the year ended 31 December 2017. The increase was primarily
attributable to an increase in equity in net income and the recognition of mark-to-market gain as well as an
increase in other income from investments in associates and joint ventures.

Interest income increased by P25.7 million, from P55.8 million in the year ended 31 December 2016 to
P81.5 million (U.S.$1.5 million) in the year ended 31 December 2017. The increase was primarily attributable to
interest income from cash in banks and cash equivalents.

Net foreign exchange gain decreased by P39.1 million, from P73.3 million in the year ended 31 December 2016
to P34.2 million (U.S.$0.6 million) in the year ended 31 December 2017. The decrease was primarily
attributable to the translation adjustment of U.S. dollar cash and cash equivalents.

Finally, other income increased by P1,754.1 million, from P33.0 million in the year ended 31 December 2016 to
P1,787.1 million (U.S.$32.9 million) in the year ended 31 December 2017. Other income includes service fees of
U.S.$30.1 million or P1.52 billion derived from the financial close of a new power plant. In addition, GNPK
booked other income from liquidated damages due to construction delays.

Cost and Expenses

Cost and expenses increased by P1,707.7 million, from P1,474.5 million in the year ended 31 December 2016 to
P3,182.2 million (U.S.$58.7 million) in the year ended 31 December 2017. The increase was primarily
attributable to higher cost of power operations.

Cost of power operations increased by P1,467.8 million, from P95.6 million in the year ended 31 December
2016 to P1,563.4 million (U.S.$28.8 million) in the year ended 31 December 2017. The increase was primarily
driven by cost of sales of the RES business, the full year effect of NorthWind’s full line consolidation and
Montesol Project operations

Salaries, wages and employee benefits increased by P298.5 million, from P105.3 million in the year ended
31 December 2016 to P403.8 million (U.S.$7.4 million) in the year ended 31 December 2017. The increase was
primarily attributable to additional hires and alignment of compensation and benefits provided to employees of
AC Energy DevCo, the full year effect of NorthWind’s full line consolidation and Montesol Project operations.

Interest expense increased by P257.6 million, from P31.3 million in the year ended 31 December 2016 to
P288.9 million (U.S.$5.3 million) in the year ended 31 December 2017. The increase was primarily attributable
to interest expense on AC Energy’s loan drawdowns and advances from AC International Finance Ltd. and the
full year effect of the NorthWind consolidation.

Other cost and expenses incurred during the year ended 31 December 2017 pertain primarily to professional fees
in relation to business development activities, management fees paid to Ayala Corporation for seconded
personnel and depreciation and amortization in relation to the Northwind Project and Montesol Project as well as
taxes and licenses incurred in the ordinary course of business. The provision for impairment losses of
P66.2 million in 2017 relate to the normal provision for doubtful accounts of the RES business and NorthWind.

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Income Before Income Tax

Income before income tax increased by P1,033.7 million, from P2,500.7 million in the year ended 31 December
2016 to P3,534.4 million (U.S.$65.1 million) in the year ended 31 December 2017. The increase was primarily
attributable to fresh contributions from geothermal assets, the full year effect of the step-up in NorthWind equity
and strong performance of wind platforms. Services income derived from financial close of a new power plant
also boosted net earnings.

Net Income

As a result of the foregoing, net income increased by P1,233.7 million, from P2,356.3 million in the year ended
31 December 2016 to P3,590.0 million (U.S.$66.2 million) in the year ended 31 December 2017.

Year Ended 31 December 2016 Compared to Year Ended 31 December 2015

Revenue

Revenue increased by P927.0 million, from P1,055.3 million in the year ended 31 December 2015 to
P1,982.3 million (U.S.$36.5 million) in the year ended 31 December 2016. The increase was primarily
attributable to the recognition of revenue from energy sales and an increase in dividend income.

In particular, the Company recognized energy sales of P203.3 million (U.S.$3.7 million) in the year ended
31 December 2016 from the commencement of commercial operations of the Montesol Project and full line
consolidation of NorthWind given the step up in ownership from 50% to 67.8% starting December 2016.

Equity in net income increased by or P735.9 million, from P1,026.3 million in the year ended 31 December
2015 to P1,762.2 million (U.S.$34.5 million) in the year ended 31 December 2016. The increase was primarily
attributable to the start of commercial operations of Unit 2 of the SLTEC Project and increased net income of
GMCP, partly offset by NorthWind being accounted for under full line consolidation.

Dividend income decreased by P18.8 million, from P18.8 million in the year ended 31 December 2015 to nil in
the year ended 31 December 2016. The increase was primarily attributable to dividends received from Philippine
Wind Holdings Corporation (“PhilWind”) in relation to the Company’s redeemable preferred shares. PhilWind
made its first dividend declaration in 2016.

Other Income

Other income increased by P213.2 million, from P1,779.7 million in the year ended 31 December 2015 to
P1,992.9 million (U.S.$36.7 million) in the year ended 31 December 2016. The increase was primarily
attributable to higher equity in net income and gains in relation to the acquisition of additional 17.79% equity
interest in NorthWind.

In relation to the acquisition of an additional 17.79% equity interest in NorthWind, the Company recognized
negative goodwill of P149.8 million, a remeasurement gain of P134.3 million from its previously held interest
of P965.7 million resulting to a fair value of its previously held interest of P1.1 billion and a gain amounting to
P219.3 million from the reversal of a liability for the failure to satisfy the FIT contingent consideration after
receiving a confirmation agreement that it is not obliged to settle the contingent liability on the FIT adjustment.

In addition, the Company received income from gain on sales of shares of P1,327.4 million (U.S.$24.5 million)
in the year ended 31 December 2016 from the disposition of a portion of the Company’s interest in the SLTEC
Project, thereby reducing the Company’s equity interest from 50% to 35%.

In September 2015, the Company sold, transferred and conveyed 172,419 common shares to Luzon Wind Energy
Holdings, B.V., which resulted in a gain on the sale of common shares of P1,497.0 million.

Cost and Expenses

Cost and expenses increased by P567.9 million, from P906.6 million in the year ended 31 December 2015 to
P1,474.5 million (U.S.$27.2 million) in the year ended 31 December 2016. The increase was primarily
attributable to an increase in professional fees, mark-to-market losses and cost of power operations.

95
The Company had cost of power operations amounting to P95.6 million (U.S.$ 1.8 million) in the year ended
31 December 2016 because of the commencement of commercial operations of the Montesol Project and full line
consolidation of NorthWind given the increase in ownership interest from 50% to 67.8%.

The Company incurred professional fees of P309.1 million primarily in relation to the Salak-Darajat Geothermal
Projects acquisition in Indonesia and the Philippines.

Mark-to-market losses of P137.0 million during the year ended 31 December 2016 pertain to the fair value
changes of the derivative asset related to the embedded prepayment option of GNPK onshore and offshore loan
agreements.

In addition, the Company sold all of its 70.00% ownership interest in QuadRiver Energy Corporation, Philnew
Hydro Power Corporation and PhilnewRiver Corporation, collectively referred to as “Hydro Project Companies”
to Sta. Clara Group Inc. on 29 December 2016 for a total consideration of P350.00 million, payable on or before
29 December 2020. The Company recognized P82.53 million gain from the disposal of its ownership interest.
AC Energy also recognized a “Day 1” loss of P60.79 million as the note is non-interest-bearing. Subsequently,
AC Energy recognized a provision for impairment losses on the note amounting to P289.21 million in 2016.

Income Before Income Tax

Income before income tax increased by P572.3 million, from P1,928.4 million in the year ended 31 December
2015 to P2,500.7 million (U.S.$ 46.1 million) in the year ended 31 December 2016. The increase was primarily
attributable to strong performance of thermal and wind projects and the start of commercial operations of the
Montesol Project and Unit 2 of the SLTEC Project.

Net Income

As a result of the foregoing, net income increased by P379.5 million, from P1,976.8 million in the year ended
31 December 2015 to P2,356.3 million (U.S.$43.4 million) in the year ended 31 December 2016.

SIGNIFICANT ACCOUNTING POLICIES

For a discussion of the significant accounting policies and significant accounting judgments, estimates and
assumptions of AC Energy please see Notes 2 and 3 of the audited consolidated financial statements and Note 2
of the unaudited interim condensed consolidated financial statements included in this Offering Circular.

96
 INDUSTRY OVERVIEW

Certain information, market data, industry forecasts and other data used in this Offering Circular were obtained
or derived from internal surveys, market research, governmental data, publicly available information and/or
industry publications. Industry publications generally state that the information contained therein has been
obtained from sources believed to be reliable, but the accuracy and completeness of such information are not
guaranteed and have not been independently verified by the Issuer, the Guarantor, the Arrangers, the Dealers,
the Trustee or the Agents. Similarly, internal surveys, industry forecasts and market research, while believed to
be reliable, have not been independently verified, and none of the Issuer, the Guarantor, the Arrangers, the
Dealers, the Trustee or the Agents make any representation or warranty, express or implied, as to the accuracy
or completeness of such information. In addition, such information may not be consistent with other information
compiled within or outside the Philippines.

THE PHILIPPINES ENERGY MARKET

According to the World Bank, the Philippines’ nominal gross domestic product (“GDP”) reached
U.S.$314 billion in 2017. The services sector continues to be the main growth driver and the economy was also
supported by robust manufacturing, trade and agricultural activities.

Based on information from the Philippine Statistics Authority, there was a net inflow of foreign direct investment
(“FDI”) of U.S.$8.7 billion in 2017, the majority of FDI entered the manufacturing sector, such as the production
of information and communication technology (“ICT”) equipment, ICT spare parts and accessories. According
to the World Bank, Philippines’ population increased by 1.9% year-on-year to reach 105 million and life
expectancy at birth improved to 69 years. Unemployment rate stood at 5.7%, representing a 0.1% improvement
year-on-year.
Annual Nominal GDP (2007–2017) Population (2007–2017)

U.S.$ Billion Millions

350 110
1.6%
7.7% 7 CAGR:
R: 100 2007–201
300
7 CAG
–201
250 2007 90

80
200
70
150
60
100
50
50 40
0 30
2007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017

Source: World Bank

Regulatory Framework

There are two main energy bodies in the Philippines: (1) The Energy Regulatory Commission (“ERC”), which is
an independent quasi-judicial regulatory body, and; (2) the Department of Energy (“DOE”), which is in charge
of supervising the restructuring of the electricity industry. Both are governed by the Electric Power Industry
Reform Act of 2001 (“EPIRA”) to implement provisions of the Act.

Under EPIRA, cross ownership between transmission, generation and distribution are prohibited. The EPIRA
sets out and defines the responsibilities of various Government agencies, including but not limited to DOE, ERC
and the National Transmission Corporation (“TRANSCO”), it is a framework for restructuring the electricity
power industry in 2001.

The ERC is an independent quasi-judicial regulatory body mandated to carry out (but not limited to) the
following:

‰ Promote competition and encourage market development;

‰ Determine the pricing in the energy market;

97
‰ Review and approve any plan for expansion or improvement of transmission facilities submitted by
TRANSCO, and;
‰ Perform other regulatory functions as appropriate and necessary to ensure successful restructuring and
modernization of the electric power industry.

The DOE plans and implements power programmes to address the issues and challenges of energy security and
greater electrification in the country, with the ultimate goal of improving economic productivity and rural
development. The DOE determined a reliable long-term power generation mix model for the economy, as
captured in the Philippine energy Plan 2012–2030, which serves as a guideline for the economy with targets that
the Government and related energy stakeholders should realize. The DOE supervises the operation of the
Wholesale Electricity Spot Market of the Philippine Electricity Market Corporation. The Philippines fosters a
liberal competitive environment for market players under each segment within the power structure.

Market Structure

GENERATION SYSTEM TRANSMISSION DISTRIBUTION RETAIL END-USERS

OPERATION
National Power Three regional
Corporation (NPC) only distribution companies
accounts for 7% of total in urban areas and 120
power generation electric cooperatives in
rural electrocution

NPC Meralco
System
operator:
VECO RESIDENTIAL
NGCP

NGCP Davao Light

Wholesale
Private Sector
market: COMMERCIAL
Direct Power
Services
WESM Electric Cooperatives

AES
INDUSTRIAL

Regulator: Energy Regulatory Commission

Majority state-owned Majority private Mixed ownership Power seller Power buyer

The 1991 Foreign Investment Act (“FIA”) regulates foreign investment into the Philippines. Within FIA are two
negative lists known as the Foreign Investment Negative List which defines the percentage of foreign ownership
depending on the nature of the underlying asset or business. Under the energy sector, up to 40% foreign
ownership is permitted for the exploration, development and utilization of natural resources (exclusively
renewables).

98
Electricity Supply and Demand

According to DOE, power generation in the Philippines increased by 3.9% to 94,370 GWh in 2017, 4.7% CAGR
during 2007–2017. The Philippines produced 50% of its energy supply from domestic sources and imported 50%
of its energy supply sources i.e. coal, biofuel and oil from abroad in 2017. Under domestically produced energy
in 2017, the top 3 sources were from geothermal (15.2%), biomass (13.2%) and coal (10.9%) whereas wind and
solar energy made up 0.3% of total energy supply. The Philippines Government awarded 232 solar projects and
66 wind projects in 2017, or 6,887 MW and 2,462 MW of potential capacity respectively.

Power Generation (2017) Power Consumption (2017)

Solar, 1%
Biomass, 1% Wind, 1%
Others, 3%
Hydro, 10%
Geothermal, 11% Residential,
34%
Industrial, 33%
94,370 GWh Coal, 50%
77,793 GWh

Natural
Gas, 22%
Oil-Based,
4% Commercial, 29%

Source: DOE

According to the DOE, power consumption increased by 3.9% year-on-year to 77,793 GWh, 5.0% CAGR during
2007–2017. Power consumption in 2017 increased by 4.9% to 77,793 GWh, which was largely driven by the
following sectors in order of power consumption volume:

1. Transport, the most energy intensive sector, had power consumption increase by 3.3% year-on-year
primarily due to higher private and commercial vehicle sales. Road transport accounted for nearly 90% of
transport power consumption;
2. Residential, the second most energy intensive sector, had power consumption increase by 1.7% year-on-year
due to improving electrification levels that reached 88.3% as of 31 Dec 2017 and higher living standards,
and;
3. Industrial, the third most energy intensive sector, had power consumption increase by 6.6% year-on-year due
to higher demand from mining and construction industries.

Capacity and Peak Demand (2007–2017) Power Generation and Consumption (2007–2017)

MW GWh

%
GR: 3.6
% 100,000 R: 4.7
25,000
017 CA GR: 4.4% 7 – 2 0 1 7 CAG : 4.9%
7 – 2 200 G R
2 0 0
017 CA
90,000 017 CA
2007–2 2007–2
20,000 80,000
70,000
15,000 60,000
50,000
10,000 40,000
30,000
5,000 20,000
10,000
0 0
2007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017

Capacity Peak Demand Power Generation Power Consumption

Source: DOE

99
 Capacity by Region (2007–2017) Share of Capacity by Region (2017)

MW R: 2.6%
17 CAG Mindanao,
2007–20 CAGR: 6.5%
17 16%
2007–20 CAGR: 6.3%
18,000 0 0 7 – 2 0 17
2
16,000
14,000
Visayas,
12,000 15% 22,727 MW
10,000
8,000
6,000
Luzon,
4,000 69%
2,000
0
2007 2009 2011 2013 2015 2017

Luzon Visayas Mindanao

Source: DOE

Power Prices

Spot power prices throughout 2008–2016 have fluctuated between P2,000–8,000/MWh and the average
throughout the period was P5,297/MWh. There were four events that caused relatively larger price movements:
(1) 2010–2011 had forced power plant maintenance outages and high-voltage direct-current power link
maintenances in Luzon; (2) 2012–2013 had gas curtailments in Malampaya and caused power plant outages that
relied on its supply; (3) 2013–2014 had planned gas outages and power plant outages in Visayas and Mindanao;
(4) 2014 onwards had ERC–regulated price reductions.

Spot Electricity Prices (2011–2016)

/MWh

9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: DOE

Outlook

The Government of the Philippines recognizes natural gas and renewables as sources for power generation of the
future, however, coal power plants remain to be the most economical and immediately available in the short-term
to meet the expected increasing demand for electricity.

According to the DOE, the Philippines will be facing a shortage of natural gas supply in the near future due to the
depletion of the Malampaya Gas Supply (“Malampaya”) by 2024. The country expects to replace the depletion
in Malampaya with new domestic LNG sites, but this cannot be implemented over the short-term; meanwhile,
decreasing exports from gas producers in Indonesia and Malaysia will affect the Philippines’ imported supply. In
addition, continued geopolitical tension between the Philippines and China over sovereignty of the Recto Bank in
the West Philippine Sea is halting the Philippines’ LNG exploration to secure further supply.

According to the DOE, renewable energy, in particular geothermal, biomass and hydro, is expected to account
for over 30% of the Philippines’ power supply by 2030. According to TRANSCO, a total of 1,400 MW of
renewable power capacity is targeted to be installed in the long-term. The development of renewable power
sources will be facilitated by favorable Government policies, which includes their renewable target of 15 GW of
installed renewable capacity by 2030 set by the National Renewable Energy Board (“NREB”) with the DOE, and
also the Feed-in-Tariff (“FIT”) scheme.

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The Philippines adopted the FIT in 2010 for eligible renewable power projects, including wind, solar, hydro,
biomass and hybrid energy sources. Eligible renewable power plants are granted a 20-year entitlement. FIT is
designed to accelerate the development of renewable energy by offering guaranteed payments on a fixed rate per
KWh basis. However, subsidies will gradually decrease with the expected grid parity of solar and wind to be
achieved by 2020 and 2025 for new projects respectively. In December 2017, the DOE released the Renewable
Portfolio Standard (“RPS”) system that requires a defined list of power market participants to source a minimum
share of electricity from eligible renewable energy sources, and this will be reviewed and adjusted annually by
the DOE. According to the DOE, the RPS is targeting 35% power supply from renewable energy by 2030.

Capacity and Peak Demand (2017–2040)

MW

120,000

100,000

80,000

60,000

40,000

20,000

-
2017 2020 2023 2026 2029 2032 2035 2038

Coal Natural Gas Oil Hydro Geothermal Other RE Peak Demand

Source: Bloomberg NEF (“BNEF”), DOE

AUSTRALIA ENERGY MARKET

According to the World Bank, Australia’s nominal GDP reached U.S.$1,323 billion in 2017 with strong
underlying economic fundamentals, such as low unemployment rate and continued investment in the
infrastructure sector. According to the Australian Trade and Investment Commission, Australia’s services sector
outpaced growth in non-services sector over the past 3 decades, the service sector is expected to be dominated by
financial services and technology going forward. Australia’s population increased by 1.6% year-on-year to
25 million, representing an increase across every state. Australia’s unemployment rate lowered by 0.2%
year-on-year to 5.5% in 2017.
Annual Nominal GDP (2007–2017) Population (2007–2017)

U.S.$ Billion Millions

1,800 25 7%
CAGR: 4.5% CAGR: 1.
2007−2017 23 2007−2017
1,600
1,400 21
19
1,200
17
1,000
15
800
13
600
11
400 9
200 7
0 5
2007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017

Source: World Bank

Regulatory Framework
From a regulatory perspective, Australia’s power sector is governed and organized in three tiers: (1) Federal; (2)
State; (3) Territory and Local – the Federal Government and State municipals own national energy resources.

101
The Australian Energy Regulator (“AER”) regulates wholesale and retail energy markets and energy networks
functional in eastern and southern Australia:

‰ Wholesale energy market, AER monitors participants’ bidding and rebidding, market dispatch and prices,
network constraints and outages, demand forecasts and forecasts of production and capacity;
‰ Retail energy market, AER monitors and enforces compliance with obligations to Retail Law, Rules and
Regulations, report on market performances and energy businesses and approve policies energy retailers
must comply with among others, and;
‰ Energy networks, AER regulates electricity networks by setting a ceiling on how much revenue they can
earn.

The Australian Energy Market Operator (“AEMO”) represents the amalgamation of 6 electricity and gas market
bodies: the National Electricity Market Management Company, Victorian Energy Networks Corporation,
Electricity Supply Industry Planning Council, Retail Energy Market Company, Gas Market Company and Gas
Retail Market Operator. AEMO’s responsibilities include but are not limited to the operation of the NEM in
Eastern and Southern Australia, system security of the NEM grid, country-wide transmission planning. AEMO
also oversees Australia’s energy market governance with the Australia Energy Market Commission and AER.

The Department of the Environment and Energy (“DEE”) oversees matters related to energy, including:

‰ Energy security;
‰ International engagement;
‰ Energy efficiency programmes, and;
‰ Energy markets.

The Department of Industry, Innovation and Science oversees matters related to power resources and each state
and territory has their own respective departments. The National Electricity Market (“NEM”) enables flow of
electricity between the Australian Capital Territory, New South Wales, Queensland, South Australia and
Victoria. Western Australia and the Northern Territory are not connected to the NEM. The NEM is comprised of
a wholesale and retail sector with all electricity traded via a centralized pool.

NEM Grid Map

N
QL

W
S
NS

Existing interconnectors
Not yet part of the NEM TA

Source: AEMO

102
Market Structure

GENERATION SYSTEM TRANSMISSION DISTRIBUTION RETAIL END-USER

OPERATION
Majority privately One major market on Different for each state Different for each state No retail electricity
owned with common the east, several smaller market
government ownership markets in the west and
in some states remote locations

CS Energy Wholesale Power Link Energex Origin Energy

RESIDENTIAL
1 Origin Energy AEMO TransGrid Ausgrid AGL Energy
AGL Energy SP Ausnet Powercor EnergyAustralia

Capacity
COMMERCIAL
2 Synergy
AEMO
Western Power Synergy

INDUSTRIAL

Regulator: (1) Australian Energy Regulator; (2) Economic Regulation Authority

Majority state-owned Majority private Mixed ownership Power seller Power buyer

Electricity Supply and Demand

According to AER, power generation capacity increased by 4.4% year-on-year to 44,769 MW in 2017,
amounting to a CAGR of 0.8% between 2007 and 2017. Peak demand has fallen by 6.8% year-on-year to 32,469
MW, amounting to a (0.3)% CAGR between 2007 and 2017, due to a slowdown in energy use in the
manufacturing sector, namely chemical and rubber. Despite the countrywide trend of a decrease in peak demand,
peak demand has been rising to new highs in New South Wales and Queensland. Australia’s power consumption
decreased by 0.6% year-on-year to 196,500 GWh, amounting to a (0.6)% CAGR between 2007 and 2017, also as
a result of decreased manufacturing activity, particularly in chemicals and rubber.

According to DEE, power generation increased by 1.1% year-on-year to 260,155 GWh with relatively large
increases from solar and hydro sources at 18.0% and 7.9% year-on-year.

Capacity and Peak Demand (2007–2017) Power Generation and Consumption (2007–2017)

MW GWh
%
2007–2017 CAGR: 0.8
3% 2007–2017 CAGR: -0.6%
50,000 2007–2017 CAGR: -0. 300,000
45,000 2007–2017 CAGR: 0.7%
250,000
40,000
35,000
200,000
30,000
25,000 150,000
20,000
15,000 100,000
10,000
50,000
5,000
0 0
2007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017

Capacity Peak Demand Power Generation Power Consumption

Source: AER, DEE

Power Prices

Spot power prices throughout 2007–2017 across the certain states of Australia increased at an average rate of
5.2%. There were four events that caused relatively larger price movements: (1) 2008–2009 had relatively higher

103
network costs; (2) 2011–2013 saw the introduction of the carbon tax as part of the Clean Energy Act introduced
and implemented; (3) 2014–2015 had planned power plant outages and a series of heat waves; (4) 2016 onwards
had rollout of improved technologies such as low-carbon power generation and cheaper renewables.

Annual Volume Weighted Average Spot Prices (2007–2017)

A$/MWh

140
120
100
80
60
40
20
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Queensland New South Wales Victoria South Australia Tasmania

Source: AER

Outlook

Australia has a long history of using coal as its main energy source due to its abundant reserves. However since
2012, the country has begun to phase out some of its coal-fired capacity as the Australian Government is
committed to decarbonize the economy and to shift the energy mix towards cleaner sources. From 2012–2016,
there were nine coal-fired power plant closures across Queensland, New South Wales, Victoria and South
Australia with capacity totaling 3,559 MW. In 2016, the country entered into the Paris Agreement, under which
the country pledged to reduce carbon emissions to 26–28% below 2005 levels by 2030. In order to align with its
obligation, the Australian Government expects all brown coal power stations and over two thirds of black coal
power stations to be closed by then. According to AEMO’s National Transmission Network Development Plan,
up to 63% of existing coal plants may be decommissioned in the next 20 years.

The Government of Australia has set a Renewable Energy Target (“RET”) that aims to achieve a minimum of
20% of energy generated from renewable sources by 2020. The RET is made up of two schemes: (1) The Large-
scale Renewable Energy Target and (2) The Small-scale Renewable Energy Scheme. The first scheme provides
the creation and expansion of renewable energy power stations while the second scheme creates financial
incentives for individuals and small businesses to install eligible small-scale renewable energy sources. The
Clean Energy Finance Corporation (“CEFC”) was established by the Australian Government under the Clean
Energy Finance Corporation Act 2012, CEFC co-finances and invests, directly and indirectly in renewable
energy and energy efficiency projects.

According to BNEF, Australia is expected to produce over 50% of the country’s energy mix from renewable
energy sources and to add 90,000 MW of new renewables capacity by 2040. Total capacity is expected to grow
by 2.8 times from 2017–2040 to reach 175,240 MW. Solar is expected to take up the largest share among
renewable energy mix with 52%, followed by hydro with 10% and then geothermal with 9%.

The country has a mature renewable market like other major economies. Even without any subsidy from the
Government, the levelized cost of energy (“LCOE”) of onshore wind and utility photovoltaic (“PV”) is
considered competitive with coal-fired and combined-cycle gas turbine (“CCGT”). According to BNEF, in
Australia, the LCOE of both onshore and offshore wind and utility PV will decrease to U.S.$ 25-40/MWh by
2050, or 25%-40% and 9%-15% LCOE of coal and CCGT respectively.

AEMO has confirmed that the NEM is capable of operating with 100% renewable energy while meeting the
current NEM reliability requirement. While this is a process that will take over a decade to perform, the
Australian Government is preparing the national grid for the renewable transformation. The South Australian
Government has committed to provide further grid stability by building Australia’s largest battery storage
capacity of 129 MWh via their A$150 million renewable technology fund by end of 2018; the Victorian
Government and Australian Renewable Energy Agency announced A$50 million to be invested in energy storage
projects to provide 80 MWh of energy storage.

104
 Capacity and Peak Demand (2017–2040)

MW
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039

Coal Natural Gas Oil Hydro Biomass

Wind Solar Battery Others Peak Demand

Source: BNEF

INDONESIA ENERGY MARKET

According to the World Bank, Indonesia’s nominal GDP reached U.S.$1,016 billion in 2017, driven largely by
strong FDI and exports growth from commodities and manufacturing sectors. Private consumption growth began
to recover with higher growth recorded in durable expenditure such as on passenger cars and motorcycles.
Indonesia’s population grew by 1.1% year-on-year to reach 264 million in 2017. Unemployment rate decreased
by 0.1% year-on-year to 5.4% which has been the lowest over the past 5 years.
Annual Nominal GDP (2007–2017) Population (2007-2017)

U.S.$ Billion Millions

1,200 300
AGR: 1.3%
8.9 % 2007−2017 C
CA GR:
1,000
− 2017 250
2007
800 200

600 150

400 100

200 50

0 0
2007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017

Source: World Bank

Regulatory Framework

Indonesia’s Kebijakan Energi Nasional (“KEN”; National Energy Policy) is governed by the Ministry of Energy
and Mineral Resources (“MEMR”), which is responsible for approval of tariffs and development of retail tariffs.
The KEN is defined by the Energy Law which contains principles encompassing utilization of energy resources,
final energy use, security of supply, energy pricing, international partnerships and outlines the roles and
responsibilities of the central and regional Governments:

‰ Policy planning;
‰ Regulatory frameworks;
‰ Energy development priorities;
‰ Energy research and development;
‰ Business roles.

The Government appointed the state-owned electricity company PLN as the sole electricity business authority, or
Pemegang Kuasa Usaha Ketenagalistrikan (“PKUK”), which is responsible for providing electricity to the whole

105
of Indonesia. The industry consists of electricity business entities which are title holders of electricity supply
business licenses, or Izin Usaha Penyediaan Tenaga Listrik (“IUPTL”). The IUPTL vertically integrates
electricity supply, power generation, transmission, distribution and sale of electricity.

Each power generation source and respective activities are guided by a specific set of laws:

‰ Oil and Gas Law

‰ Geothermal Energy Law;
‰ Mineral and Coal Mining Law, and;
‰ Electricity Law.

Indonesia currently has FDI limitations across different subsectors within the energy and natural resources space,
including but not limited to:

‰ 95% for power generation beyond 10 MW in general; for private-public partnerships, 100% for power
generation beyond 10 MW during concession period
‰ 90% for geothermal operating and maintenance services

Market Structure

GENERATION SYSTEM TRANSMISSION DISTRIBUTION RETAIL END-USER

OPERATION
No retail electricity
market

PLN

RESIDENTIAL

PLN

Private Sector COMMERCIAL

INDUSTRIAL

Regulator: Ministry of Energy Mineral Resources

Majority state-owned Majority private Mixed ownership Power seller Power buyer

Electricity Supply and Demand

According to PLN, Indonesia’s power capacity increased by 1.9% year-on-year to reach 61,000 MW in 2017,
7.0% CAGR during 2007–2017, which is the second fastest amongst Southeast Asian countries. Peak demand
increased by 8.8% year-on-year to 35,000 MW, 5.1% CAGR during 2007–2017. This was supported by
Government initiatives to increase investment on large scale infrastructure projects.

106
According to PLN, power generation increased at a rate of 2.7% year-on-year to 254,620 GWh in 2017, 6.0%
CAGR during 2007–2017. This was a result of the Government’s efforts to expand the power grid’s access to
more households and push to replace fossil fuel sources with renewables. Power consumption increased by 3.3%
year-on-year to 223,134 GWh, 6.3% CAGR during 2007–2017.

Power Consumption Mix (2017) Power Generation Mix (2017)

Transport,
0.1% Renewables and others, 5%
Geothermal, 5%
Hydro, 7%
Commercial, 25%

Household, 42% Diesel, 8%

223,134 GWh 254,620 GWh

Combined Gas- Coal, 58%

Industrial, Steam, 17%
32%

Source: MEMR

Capacity and Peak Demand (2007–2017) Power Generation and Consumption (2007–2017)

MW GWh

70,000 300,000
7.0% .3%
R: % R: 6
60,000
C AG R: 5.1 250,000 C AG : 6.0%
0 1 7 AG 7
01 CAG R
7−2 7 C 7−2
50,000 200 7−201 200 −2017
0 7
200 200,000 20

40,000
150,000
30,000
100,000
20,000

10,000 50,000

0 0
2007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017

Capacity Peak Demand Power Generation Power Consumption

Source: PLN

107
Power Prices

Spot power prices throughout 2010–2016 in Indonesia varied across different sectors. Power prices have largely
been kept low because much of the power value chain is controlled by PLN and the Government has been
providing subsidies. However, since 2013, the Government began reforming the subsidy bill and has steadily
been budgeting less for power subsidies, which helps explain the subsequent increase of power prices.

Spot Electricity Prices (2010–2016)

U.S.$/MWh

140
120
100
80
60
40
20
0
2010 2011 2012 2013 2014 2015 2016

Commercial Industrial Residential Retail

Source: BNEF

Outlook

According to MEMR, Indonesia’s GDP is projected to grow at 5.8% per year until 2050. Energy consumption is
expected to grow at 6.4% per year until 2050 in line with the overall GDP growth. Such robust consumption
growth is driven by infrastructure investment and development, population expansion, urbanization and
Government’s priority to boost electrification across country’s numerous islands. From supply side, power
capacity is expected to grow at 8.1% p.a. until 2050, dominated by coal-fired power. Abundant resources and
lower cost of feedstock continue to position coal as the main source of power generation.

In the long run, renewables are expected to be one of the main drivers behind Indonesia’s power generation
capacity growth. By 2025, the Government targets to have 23% of power coming from new and renewable power
sources and 31% by 2050 with focus on the development of decentralized solar PV, such as mini solar power
energy systems. New and renewable power sources are:

‰ Liquefied coal;
‰ Coal bed methane;
‰ Gasified coal;
‰ Nuclear energy, and;
‰ Renewable sources.

In order to incentivize investment in the solar sector, in 2016, the Government introduced the FIT scheme to
solar developers; the wind power FIT is currently under review. Other government strategies to support the
renewable energy market include income tax incentives and exemptions from Import Duty and Import VAT.

Nevertheless, renewable energy expansion in Indonesia will depend on several factors, including the
development of transmission and distribution grids to support renewable energy generation; it will also depend
on the stability of regulatory frameworks, for example, the Government introduced an auction system for the
solar market in 2013 and subsequently canceled the system in 2014.

According to BNEF, Indonesia is expected to produce over 33% of the country’s energy mix from renewable
energy sources and to add 60,017 MW of new renewables capacity by 2040. Total capacity is expected to grow
by 1.8 times from 2017–2040 to reach 179,680 MW. Solar is expected to take up the largest share of the
country’s renewable energy mix with 29%, followed by coal with 24%.

108
 Capacity and Peak Demand (2017–2040)

MW
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
-
2017 2020 2023 2026 2029 2032 2035 2038

Coal Natural Gas Oil Hydro Geothermal Other RE Peak demand

Source: BNEF

VIETNAM ENERGY MARKET

According to the World Bank, Vietnam’s GDP reached U.S.$224 billion in 2017 with near double-digit growth
across various sectors, including but not limited to: agriculture, fishery (+5.2% year-on-year), industry (+9.4%
year-on-year) and services (+10.9% year-on-year). Overall exports increased by 21.1% with a trade surplus of
U.S.$2.7 billion in 2017, supported by strong growth in the smartphone components exports. Total FDI increased
by 45.1% year-on-year to reach U.S.$6.2 billion for foreign manufacturing facilities and the real estate sector.
Vietnam’s population reached 96 million in 2017 and unemployment rate of 2.2%, a 0.1% decrease year-on-year
and supported the overall growth of the power sector.
Annual Nominal GDP (2007–2017) Population (2007–2017)
U.S.$ Billion Millions

250 120

.2% : 1.1%
200 : 11
100 2007−2017 CAGR
R
AG
7C
7− 201 80
150 200
60
100
40

50
20

0 0
2007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017

Source: World Bank

Regulatory Framework
The Ministry of Industry and Trade (“MOIT”) monitors and regulates Vietnam’s energy industry. There are two
key advisory and executive units managing the energy sector, namely, the General Directorate of Energy
(“GDE”) and the Electricity Regulatory Authority of Vietnam (“ERAV”). The GDE focuses on constructing the
law, policy, planning and management of every energy sector; while ERAV regulates activities in the electricity
sector to ensure a safe and high quality electricity supply for the economy. However, the GDE was disbanded
and replaced by:

‰ The Authority of Electricity and Renewable Energy;

‰ Department of Energy Efficiency and Sustainable Development, and;
‰ Department of Oil, Gas and Coal.

109
The Institute of Energy is responsible for preparing energy policy, national and regional power source
development plans, it also conducts research on power facilities and equipment.

There are two main state-owned enterprises in Vietnam’s power sector, namely:

‰ Vietnam Electricity (“EVN”), which has total control of the national power transmission and distribution
market in Vietnam, and;
‰ The Vietnam National Coal-Mineral Industries Group (“Vinacomin”), which is mainly involved in the
exploration, export, import and sale of coal as well as the operation of coal power plants.

The Government of Vietnam has plans to liberalize and increase the competition in the sector in three phases:-

‰ Phase I (up to 2014) - Competitive Generation Power Market;

‰ Phase II (2015–2021) - Competitive Wholesale Power Market, and;
‰ Phase III (2021 onwards) - Competitive Retail Power Market.

Market Structure

GENERATION SYSTEM TRANSMISSION DISTRIBUTION RETAIL END-USER

OPERATION
Independent power No retail electricity
producers accounted for market
14% of total installed
capacity in 2015

EVN

Vinacomin
Petro Vietnam, JVs RESIDENTIAL
with EVN

EVN

International IPPs COMMERCIAL

Local IPPs
INDUSTRIAL

Regulator: Electricity Regulatory Authority of Vietnam

Majority state-owned Majority private Mixed ownership Power seller Power buyer

110
Electricity Supply and Demand
According to MOIT, Vietnam’s power capacity increased by 4.9% year-on-year to 45,000 MW, 12.6% CAGR
during 2007–2017. Power generation increased by 2.8% year-on-year to 186,378 GWh, 10.7% CAGR. During
2007–2017, Vietnam was the highest growth country in Southeast Asia. The Government has implemented many
important policies to attract investments into the power sector and is in the process of designing and building the
appropriate legal and regulatory framework to ensure competitive and attractive market standards.
Capacity (2007–2017) Power Generation (2007–2017)

MW GWh

50,000 180,000
.7%
45,000 160,000 : 10
% GR
40,000 2.6 140,000 CA
R:1 017
AG −2
35,000 C 07
17 120,000 20
0
30,000 −2
07
20 100,000
25,000
80,000
20,000
60,000
15,000
10,000 40,000

5,000 20,000

0 0
2007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017

Source: MOIT

Power Prices
Spot power prices throughout 2010–2016 in Vietnam varied across different sectors. There were two major
events that occurred throughout the period: (1) 2011 saw the Government increase electricity prices by 15%; (2)
2015–2016 saw the Government increase electricity prices by 7.5%.
Electricity Prices (2010–2016)

U.S.$/MWh

120

100

80

60

40

20

0
2010 2011 2012 2013 2014 2015 2016

Commercial Industrial Residential Retail

Source: BNEF

Outlook
According to MOIT, Vietnam will see rapid expansion of the power market over the next 10 years driven by its
fast growing manufacturing sector from increasing investment.

According to EVN’s estimates, a total of U.S.$124 billion is expected to be invested in the power sector over the
next 20 years, which could help strengthen the country’s power project pipeline. However, Vietnam might still
face electricity shortages during the period from 2020 to 2030, due to the underdeveloped transmission system in
the country.

111
Historically, the country’s power mix has been dominated by hydropower. However, in the future, hydropower is
expected to play a less important role because of the volatility of hydrology. Instead, coal-fired power is expected
to see an increase over medium- to long-term as this power offers stability, evidenced by more coal-fired projects
coming into pipeline. The Government is currently targeting to build 90 coal power projects with a capacity of
106 GW by 2025. Natural gas will also steadily increase and remain one of the main power sources of the
country.

For the country’s renewable market, the Government announced a Power Development Plan 7, which set a
renewable target of 6 GW wind and 12 GW solar capacity to be installed by 2030. In line with this target, the
Government also introduced a series of initiatives, such as reduced corporate income tax of 10% applied to
renewable energy producers for first 15 years (instead of 30%), import duty exemptions for renewables
manufactures, and FIT system and Direct Corporate Power Purchase Agreement, which is to be introduced in
2019.

In Jun 2011, wind FIT was introduced to the market. However, the industry has criticized its low subsidy and it
has failed to attract the interest of private investors. In Sep 2018, the Government announced a new level of wind
FIT (onshore: U.S.$0.09 per kWh; offshore: U.S.$0.1 per kWh), a 9% increase in onshore FIT and a 26%
increase in offshore FIT to provide new incentives to investors. In May 2017, FIT was announced for solar
power, with the utility-scale solar projects entitled to a 20-year FIT of U.S.$0.0935 per kWh.

According to BNEF, c.1,200 MW of solar power and 662 MW of wind power is expected to be added from 2018
to 2021. There is an expected slowdown of solar capacity installation after 2019 amid uncertainty surrounding
the future of solar FIT, due to the fact that the current solar FIT will expire in 2019.

Annual Renewables Capacity Addition Forecast (2010–2021)

MW Actual Forecast

1,000

800

600

400

200

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Geothermal Wind Small hydro Biomass Solar

Source: BNEF

TRENDS: COST OF RENEWABLES ENERGY CONTINUES TO FALL

According to BNEF the capital expenditure required for solar energy is expected to fall by 22% from
U.S.$3,300,000 per MW in 2010 to U.S.$890,000 per MW in 2018. The prices of onshore wind turbines are
estimated to fall by 21% from U.S.$1,740,000 per MW in 2008 to U.S.$840,000 per MW in 2018. Operation and
maintenance costs are also expected to fall due to technological advances in turbine efficiency and management.

Decrease of CAPEX and other expenses translates to a lower cost of power generation. Currently, solar and
onshore wind are the cheapest sources of new bulk electricity across most countries with LCOEs falling in the
range of U.S.$30-70/MWh. In India, solar and onshore wind’s LCOE of U.S.$27-28/MWh is half the cost of a
newly built coal plant at U.S.$52-78/MWh.

The cost of developing and operating renewable energy has become more competitive which has resulted in
many Governments across the region canceling the subsidy programmes as the industry has become self-
sustainable. In Jun 2018, the National Energy Administration of China announced a new policy to terminate
subsidy approvals for any utility-scale PV power stations in 2018. This movement is in line with China’s
pre-determined goal to achieve the grid parity by 2020 and to make renewable energy more affordable to end
users.

112
Below charts of LCOE demonstrate that the renewable energy sources have become more cost competitive, and
are expected to continue to decline in the foreseeable future.

The Philippines Current LCOE

U.S.$/MWh

180
160
140
120
100
80
60
40
20
0
Onshore wind Non-tracking PV Small Hydro Geothermal flash Coal CCGT Biomass

Australia Current LCOE

U.S.$/MWh

300

250

200

150

100

50

0
PV

PV

al

ge

ge

ro

ne

ry
in

CG
Co

yd

tte
ra

ra

gi
w

CC
ng

ng

sto

sto

En
H

Ba
O
re
ki

ki
ho

r+
ac

ac

d
ns
Tr

-tr

la
in
O

So
on

W
N

Indonesia Current LCOE

U.S.$/MWh

180
160
140
120
100
80
60
40
20
0
Non-tracking PV Onshore wind Small Hydro Geothermal flash Coal CCGT Biomass

113
 Vietnam Current LCOE

U.S.$/MWh

180
160
140
120
100
80
60
40
20
0
Non-tracking PV Onshore wind Small Hydro Geothermal flash Coal CCGT Biomass

Source: BNEF

114
 THE ISSUER
GENERAL

The Issuer was incorporated as an exempted company with limited liability under the Companies Law (2018
Revision) of the Cayman Islands on 4 December 2018. The registered address of the Issuer is at the offices of
Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
The Issuer is a wholly-owned subsidiary of the Guarantor. The Issuer has no subsidiaries.

BUSINESS ACTIVITY

The Issuer was established for the purpose of, among other things, raising financing for the Guarantor through
bilateral and syndicated bank loans, and capital market transactions such as notes, all of which are guaranteed by
the Guarantor. The Issuer has not engaged, since its inception, in any other material activities other than those
relating to the proposed issue of the Notes and the authorization of documents and agreements referred to in
connection therewith to which it is or will be a party.

MANAGEMENT

The board of the directors of the Issuer consists of John Eric T. Francia, Patrice Rene Clausse and Maria Corazon
G. Dizon.

Nesly Joy S. Javier is the Company Secretary. There are no other officers of the Issuer.

CAPITALIZATION

The authorized share capital of the Issuer is U.S.$20,000 and is divided into 20,000 ordinary shares of U.S.$1.00
nominal value each. Twenty thousand ordinary shares have been issued and paid up and are held by AC Energy.

The Issuer has no other borrowings or indebtedness in the nature of borrowings (including loan capital issued, or
created but unused), term loans, liabilities under acceptances or acceptance credits, mortgages, charges or
guarantees or other contingent liabilities.

115
 BUSINESS

OVERVIEW

AC Energy, Inc. (“AC Energy”) is a Philippine corporation that manages a diversified portfolio of renewable
and conventional power generation projects and engages primarily in power project development operations and
in other businesses located in the Philippines, Indonesia, Vietnam and Australia. AC Energy was designated in
2011 as Ayala Corporation’s vehicle for investments in the power sector to pursue greenfield, as well as currently
operating, power-related projects for both renewable and conventional technologies in various parts of the
Philippines. In 2016, the Company expanded its business purpose to include the purchase, retail, supply and
delivery of electricity and in 2017, the business purposes were expanded further to include the development,
operation and maintenance of power projects.

Philippines

From 2011 to 2014, the Company made its initial investments in the power sector in the Philippines, with
strategic investments in 50.0% of a wind farm located in Ilocos Norte province with a net capacity of 52MW (the
“Northwind Project”) (which interest has since increased to 67.79%), 50.0% in a 2 x 122MW CFB thermal
power plant located in Batangas province (the “SLTEC Project”) (which interest has since been reduced to
35.0%), 64.0% of a second wind farm located in Ilocos Norte province with a net capacity of 81MW (the “North
Luzon Renewables Project”) (which interest has since been reduced to 28.51%), 17.02% limited partnership
interest in a 2 x 316MW coal-fired plant located in Bataan province (the “GNPower Mariveles Project”) and
85.72% limited partnership interest in a 4 x 138MW coal-fired power plant under construction located in Lanao
del Norte province (the “GNPower Kauswagan Project”). AC Energy has continued to make strategic
investments in the energy sector since that time. In 2015, AC Energy invested in the development, construction
and operation of a solar power farm located in Bais City, Negros Oriental (the “Montesol Project”).

AC Energy is in the process of transitioning from a Philippine-focused energy investment holding company into
a regional player with investment, development and operation capabilities, and is actively scaling up its
renewable energy platform with expected investments in various projects in the pipeline in the Philippines and in
markets where it is a new participant, such as Indonesia, Vietnam and Australia.

Indonesia

In 2017, the Company established its first footprint overseas with investments in renewable energy projects in
Indonesia as part of a consortium with Star Energy Group Holdings Pte. Ltd, Star Energy Geothermal Pte. Ltd. of
Indonesia (collectively “Star Energy”) and The Electricity Generating Company (“EGCO”) of Thailand, and
acquired the Salak and Darajat geothermal projects (the “Salak-Darajat Geothermal Projects”) in West Java,
Indonesia with a combined capacity of 637MW of steam and power. AC Energy has an effective economic stake
of 19.80% in the Salak-Darajat Geothermal Projects. The Sidrap wind project (the “Sidrap Wind Project”), AC
Energy’s first greenfield offshore investment, is the first utility-scale wind farm project in Indonesia with a net
capacity of 75MW, which commenced commercial operations in March 2018.

Vietnam

On 19 December 2017, AC Energy Vietnam Investments Pte Ltd. (“ACEV”), a wholly-owned subsidiary of AC
Energy International Holdings Pte. Ltd. (“AC Energy International”), entered into a 50:50 joint venture with
AMI Renewables Energy Joint Stock Company (“AMI Renewables”), a joint stock company incorporated in
Vietnam to invest in New Energy Investments Corporation (“New Energy Investments”), a joint stock company
with 100% ownership over the shares of the following entities situated in Vietnam: (i) AMI Energy Khanh Hoa
Joint Stock Company (“AMI Khanh Hoa”), which has commenced construction of a 50MW solar farm in
Khanh Hoa province (the “Khanh Hoa Solar Plant”), (ii) BMT Renewable Energy Joint Stock Company
(“BMT Dak Lak”), which has commenced construction of a 30MW solar farm located in Dak Lak province (the
“Dak Lak Solar Plant”), and (iii) B&T Windfarm Joint Stock Company (“B&T Quang Binh”), which has
entered into an agreement with the government of Quang Binh province for the development of an up to 200MW
wind farm located in Quang Binh province. The Khanh Hoa and Dak Lak Solar Plants are expected to commence
operations in June 2019 with an expected net capacity of 80MW.

In addition, as of June 2018, the Company entered into a partnership with the BIM Group of Vietnam for the
development of an aggregate of 330MW of solar power plants located in the province of Ninh Thuan, Vietnam
(the “Ninh Thuan Solar Plants”), which are expected to commence operations by June 2019.

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In April 2018, AC Energy International and Jetfly Asia Pte. Ltd. entered into an agreement for the acquisition of
25.0% interest in The Blue Circle Pte. Ltd. (“The Blue Circle”) as well as co-investment rights in The Blue
Circle’s projects in Southeast Asia. The Blue Circle is an international renewable energy developer which has a
pipeline of projects in Southeast Asia, over which the Company has certain investment rights.

Australia

In May 2018, the Company entered the Australian renewable energy market through a joint venture with
international renewable energy developer, UPC Renewable Asia Pacific Holdings Limited (“UPC
Renewables”). AC Energy through its subsidiary, AC Energy International, invested U.S.$30 million for 50.0%
ownership in UPC-AC Energy Renewables Australia (HK) Limited (“UPC-AC Energy Renewables
Australia”). AC Energy also extended a U.S.$200 million revolver facility to partially fund the Australia
projects. UPC-AC Energy Renewables Australia has certain projects in the pipeline, including the New England
Solar Farm (“NE Solar Farm”) currently under development located near Uralla in New South Wales with an
expected net capacity of up to 700MW. The NE Solar Farm is being targeted for financial close by the first half
of 2019 with commercial operations targeted by 2021. UPC-AC Energy Renewables Australia is also developing
wind farms on Robbins Island and Jim’s Plain in North West Tasmania with a targeted net capacity of up to
1,000MW. In addition to the revolver facility, AC Energy has investment rights to invest equity directly into the
projects. UPC-AC Energy Renewables Australia continues to assess potential investments into additional
renewable energy projects across Australia.

As of 30 September 2018, the Company had a total attributable capacity of 481MW in operation across the
region, which includes strategic investments in renewable and conventional power generation projects. As of
30 September 2018, the Company also had attributable capacity of 1,347MW under construction, as follows:

Attributable Capacity In Operation Attributable Capacity Under

(MW)(1) Construction (MW)(2)
Renewable Energy
Solar 21 205
Wind 121 -
Geothermal 127 -
Biomass - 5
270 210
Conventional Energy 212 1,137
Total 481 1,347
Total Attributable Capacity In
Operation and Under Construction
1,828

Notes:
(1) Attributable capacity refers to the product of the Company’s effective economic interest in the relevant power project multiplied by the net capacity of
the relevant power project. See “—Energy Portfolio.”
(2) Attributable capacity in respect of projects which are under the construction phase of development. Projects under development and for which
construction has not commenced are excluded.

In addition to its renewable and conventional energy businesses, AC Energy is also engaged in retail electricity
supply (“RES”). AC Energy obtained an RES license allowing it to sell electricity to end-users in the contestable
market in September 2016. As of 30 September 2018, the Company has entered into agreements with various
customers and end-users for the supply of over 100MW.

On 26 September 2018, the Company, through Arlington Mariveles Netherlands Holding BV, entered into a
share purchase agreement with Aboitiz Power for the sale of a 49% voting stake and 60% economic stake in AA
Thermal, Inc. (“AA Thermal”), a wholly-owned subsidiary (the “AA Thermal Disposition”). AA Thermal
holds the Company’s interests in the GNPower Mariveles Project and in a 2 x 668MW supercritical coal-fired
plant in Bataan (the “GNPower Dinginin Project”), which is currently under construction. See “—AA Thermal
Disposition”. The AA Thermal Disposition is expected to be completed on or about the first quarter of 2019.

AC Energy is a subsidiary of Ayala Corporation, one of the largest and most diversified conglomerates in the
Philippines, with interests in real estate, banking, telecoms, water, power, infrastructure, industrial technologies,
healthcare and education. Ayala Corporation was founded in 1834 and has developed a unique portfolio of

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businesses providing various engines for growth and diversification amid the Philippines’ economic growth.
Ayala Corporation is a publicly held company listed on The Philippine Stock Exchange (the “PSE”). As of
28 December 2018, Ayala Corporation had a market capitalization of P568,147.8 million (U.S.$10,472.6
million).

For the years ended 31 December 2015, 2016 and 2017, the Company had total consolidated revenue and other
income of P2,835.0 million, P3,975.3 million and P6,716.6 million (U.S.$128.5 million), respectively, and
consolidated net income of P1,976.8 million, P2,356.3 million and P3,590.0 million (U.S.$66.2 million),
respectively. For the nine months ended 30 September 2018, the total consolidated revenue and net income of the
Company was P8,929.8 million (U.S.$170.90 million) and P3,882.9 million (U.S.$74.31 million), respectively.
As of 31 December 2017 and 30 September 2018, AC Energy had total consolidated assets of P79,030.7 million
(U.S.$1,456.8 million) and P102,961.6 million (U.S.$1,897.9 million), respectively.

COMPETITIVE STRENGTHS

The Company believes that it has the following strengths:

Well-positioned to benefit from a rapidly growing region increasingly embracing renewable energy sources to
address its long-term energy needs

AC Energy believes that it has selected highly attractive markets in the Asia Pacific in which to pursue growth,
particularly in the renewable energy space.

The narrative of the Philippine power sector is underpinned by its robust economic fundamentals and attractive
demographic qualities. The Philippines’ nominal GDP has been growing at 7.7% CAGR from 2007 to 2017
(U.S.$314 billion in 2017) according to the World Bank. Over the same period, power consumption grew by
5.0% CAGR, according to the DOE. In order to meet increasing demand, growth in installed capacity is essential
and has compelled the Philippine government to encourage the expansion in renewable energy capacity. The
National Renewable Energy Board (“NREB”) has set a target of reaching 15GW of installed renewable capacity
by 2030. In addition, renewable initiatives are currently in place, including income tax holiday, lower corporate
income tax rate and tax-free importation. The NREB has also launched the Renewable Portfolio Standards
(“RPS”), which mandates distribution utilities to source a portion of their power supply from renewable energy
and requires 35% of power demand to come from renewable energy by 2030.

Similar to the Philippines, Indonesia’s GDP growth has been driving activity in the country, with nominal GDP
growing at 8.9% CAGR from 2007 to 2017 (U.S.$1,016 billion in 2017), according to the World Bank. Over the
same period, power generation grew by 6.0% based on information from the Perusahaan Listrik Negara (“PLN”,
Indonesia’s sole electricity business authority), underpinned by strong economic growth and the government’s
electrification efforts. Renewable power is expected to play a significant role in further supply expansion as the
government targets new and renewable energy sources to account for 23% of total energy generation by 2025 and
31% by 2050. To support this growth, several renewable initiatives have been introduced or are under review,
such as favorable tariff for solar and wind, income tax and importation incentives.

Vietnam offers one of the most attractive renewable energy markets in the region due to its large population and
rapid nominal GDP growth of 11.2% CAGR from 2007 to 2017 (U.S.$224 billion in 2017), according to the
World Bank. Over the same period, electricity consumption grew by 10.7% driven by strong economic growth
and the country’s rapidly expanding manufacturing sector, based on information from the Ministry of Industry
and Trade of Vietnam. According to Business Monitor International (“BMI”), the Vietnam government is
targeting power generation of over 330TWh by 2020 and over 695TWh by 2030, which are significantly higher
than the aggregate electricity generated in 2017 of 160TWh. Renewable power is expected to play a key role in
supporting the expansion in supply with the revised Power Development Plan 7 (“PDP 7”) targeting 12GW and
6GW, respectively, in solar and wind by 2030. In addition, renewable initiatives are currently in-place to support
this renewable target: for example, a 20-year FIT for solar and wind import tax exemptions and corporate income
tax reductions.

Being a mature and developed market, Australia offers stability with growth driven by the national directive to
shift towards renewable energy sources and the increasing cost competitiveness of renewable technology.
Australia has an established renewable market underpinned by the Renewable Energy Act 2000. With the support
of positive regulatory framework and the country’s strong renewable projects pipeline, Australia’s
non-hydroelectric renewable market capacity is expected to grow 7.2% annually during 2018 to 2027 according
to BMI data, especially with the decommissioning of coal-fired power plants that begun in 2012.

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Proven track record of delivering growth, rapid execution, performance and realizing value

In 2011, Ayala Corporation designated AC Energy (formerly AC Energy Holdings, Inc.), as the group’s platform
for its investments in the power sector. In view of the Company’s desire to be responsive to the rapidly growing
power supply needs of the Philippines and to its commitment to sustainability, it assembled a portfolio and
pipeline of projects from both conventional and renewable energy sources.

To deliver on its objectives, on the same year, AC Energy made its initial foray into the renewables space with its
acquisition of a 50.0% stake in Northwind Power Development Corporation (“NorthWind”), which operates a
wind farm operating in Ilocos Norte, for a 16MW attributable capacity. At the time of the investment, it was the
only wind farm in the country and considered the largest in Southeast Asia. AC Energy also signed a 50:50 JV
agreement with the PHINMA Group, a leading diversified business group in the Philippines, to develop the
South Luzon Thermal Energy Corporation (“SLTEC”) coal project, the Company’s first investment in
conventional energy. The project was subsequently expanded to include a second unit.

Having established its foothold in the Philippine power sector, AC Energy embarked on a series of strategic
power sector investments over the succeeding years.

In 2012, AC Energy announced that it was entering into a joint venture with Power Partners, Ltd. Co. (“Power
Partners”), a private partnership with a long history of power plant development in the Philippines and founded
in 2001, and Sithe Global Power, a company affiliated with the Blackstone Group, as sponsors of GMCP which
was undergoing commissioning at the time.

In 2013, it announced that it entered into an Investment Framework Agreement with UPC Renewables Partners,
and the Philippine Investment Alliance for Infrastructure (“PINAI”), a fund financed by the Government Service
Insurance System, Dutch pension fund asset manager APG Asset Management, the Macquarie Group and the
Asian Development Bank. The agreement saw the launch of the North Luzon Renewables Project, an 81MW
wind farm in Ilocos Norte, the PINAI consortium’s first-ever investment in the country. In the same year, AC
Energy and Power Partners also established a JV to develop a thermal power plant in Lanao del Norte which
would later become the GNPower Kauswagan Project.

The period from 2014 to 2016 saw AC Energy further growing its attributable capacity and network of
partnerships, in the course of which the Company achieved several key milestones. In addition to the acquisition
of a 50% stake in GNPD, and the start of SLTEC Unit 1 and 2’s commercial operations, in 2016 the Company
announced its first geothermal investment and first international investment in partnership with Star Energy and
EGCO of Thailand to acquire a stake in the Salak-Darajat Geothermal Projects, Chevron’s geothermal operations
in Indonesia.

In 2016, AC Energy was granted a RES license by the Energy Regulatory Commission, enabling it to supply
electricity to end-users in contestable markets, after successfully demonstrating its technical, financial and
managerial capability to procure electricity and establish a system and the infrastructure needed to ensure the
supply of electricity to contestable customers. The Company also began commercial operations of the Montesol
Project, its first solar farm project, expanding AC Energy’s portfolio and renewables technology capabilities to
include solar, in addition to thermal, wind and geothermal.

Starting 2015, AC Energy began to realize value from its earlier investments. Mitsubishi Corporation
(“Mitsubishi”) and Marubeni Corporation (“Marubeni”), among Japan’s largest trading houses and among the
most active Japanese business groups in the country, partnered with AC Energy by acquiring equity interest in
the North Luzon Renewables Project (in 2015) and in SLTEC (in 2016), respectively.

With fresh capital from the sale of its strategic stakes in its portfolio, a larger balance sheet, and the improved
cost efficiency of emerging solar and wind technologies, AC Energy further embarked on the expansion of its
renewable energy and international capabilities.

In 2017, AC Energy acquired 100.0% of San Carlos Clean Energy (now AC Energy Development, Inc.), a
Philippines-based renewable energy developer, further expanding AC Energy’s in-house renewable energy
developmental and operational capability.

Over the next two years, AC Energy broadened its footprint in Indonesia, with the inauguration of the Sidrap
Project in 2018, AC Energy’s first offshore utility-scale wind farm and Indonesia’s first commercial-scale wind
farm. Through its partnership with the BIM Group and the AMI Group, the acquisition of The Blue Circle, and

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establishment of a joint venture with UPC Renewables in Australia, the Company has expanded its international
presence and on-the-ground expertise to include the rapidly developing renewable energy markets of Vietnam
and Australia.

In late 2018, AC Energy agreed to the sale of a 60% economic stake in its thermal platform, AA Thermal, to
Aboitiz Power for U.S.$579.2 million, providing the Company with significant realized value and allowing it to
focus on its renewable energy objectives. See “—AA Thermal Disposition”.

Having grown its revenues and equity in net income to P4.7 billion as of end of 2017 and attributable capacity,
including projects under construction, to about 1,800MW as of the first nine months of 2018, AC Energy
believes that it has demonstrated its ability to identify and deliver attractive projects, attract world-class partners
that complement its capabilities and create growth, particularly in the renewable energy space.

Further to its achievements, to date, the Company has also achieved several awards among which are:

‰ Fastest Growing Energy Platform in IFM Awards 2017 – Philippines by London-based International
Finance Magazine
‰ Smart Project Award by Project Finance International during the Asia Best Practice Citations 2017
‰ Recognized by several regional and international organizations including The Asset, Alpha Southeast
Asia, Project Finance International, International Financing Review Asia and IJGlobal for the
acquisition of the geothermal and power business of Chevron Global Energy in Indonesia in 2017

Portfolio of projects across geographies, technologies and regulatory regimes provides stable cashflows,
diversification and a strong platform for growth

AC Energy believes that it benefits from a portfolio approach to its investments, providing the Company with a
blend of seasoned and new operating projects that provide stable cashflows underpinned by attractive, long-term
contractual arrangements which are mostly dollar-linked and a diverse business model (a combination of bilateral
contracts, spot sales and FIT contracts), fuel types, geographies and regulatory regimes that the Company is able
to leverage as a platform for renewable capacity expansion and international growth.

The Northwind Project, Southeast Asia’s first commercial wind farm, is a 52MW wind farm in Ilocos Norte
province. Phases 1 and 2, with combined capacity of 33MW, began commercial operations in 2005 and 2008
respectively, benefit from a FIT rate of P5.76/KWh for 20 years beginning from June 2014. Phase 3 has a FIT
rate of P8.53/KWh and is valid for 20 years. The FIT received by the projects provide a stable selling price that
has recently been higher than the WESM’s average Customer Effective Spot Settlement Price of P3.34/KWh and
P4.11/KWh in 2017 and in the first six months of 2018. Phases 1 and 2, and Phase 3 have demonstrated strong
availability factors at 92% and 96% respectively in the first nine months of 2018, owing to the attractive wind
energy potential of the northern Philippines.

The North Luzon Renewables Project, an 81MW wind farm also in Ilocos Norte province, was awarded a FIT
rate of P8.53/KWh from November 2014 and until 20 years thereafter. In the first nine months of 2018, it
registered an availability factor of 94%.

AC Energy’s initial foray into solar energy, the Montesol Project, is an 18MW solar farm in the province of
Negros Oriental in the Visayas region of the Philippines. It is entitled to a FIT rate of P8.69/KWh valid for 20
years from March 2016. AC Energy believes in the potential for the project to be further expanded to 50MW.

In Indonesia, the Salak-Darajat Geothermal Projects and Sidrap Wind Project, similarly enjoy attractive
commercial arrangements. The Salak- Darajat Geothermal Projects has PLN, the national electricity distributor
and the Indonesia market’s primary power purchaser, as its offtaker having granted the project with a take-or-pay
contract. The Sidrap Wind Project has a 30-year PPA with the PLN at a US dollar-linked, levelized tariff of
U.S.$0.1141/KWh, providing AC Energy with a hedge against any potential volatility in the Indonesia Rupiah.

GMCP, AC Energy’s largest operating power asset in its portfolio to-date, in partnership with Power Partners
and Aboitiz Power, provides the Company with access to a highly attractive 2 x 316MW clean pulverized coal-
fired power generation facility. Located in the Luzon island, the country’s population and industrial base, over
95% of GMCP’s offtake is contracted by electric cooperatives, with PPSAs ranging from 10 to 15 years. Most of
the electric cooperatives that are off-takers of GMCP are rated AAA by the National Electrification
Administration as of end-2017. GMCP began commercial operations in February 2014.

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SLTEC similarly benefits from its proximity to the Mega Manila area, the region covering Metro Manila, Central
Luzon, and the CALABARZON area and the country’s economic center. SLTEC’s capacity is fully contracted
under a 15-year PPA. Unit 1 and 2 of SLTEC began commercial operations in April 2015 and February 2016
respectively.

Pipeline of projects in partnership with recognized and accomplished power industry developers, operators
and investors provides a visible path to growth

AC Energy believes that its partners in its domestic and international operations are some of the most established
developers and operators of conventional and renewable assets. In addition to pursuing attractive investment
opportunities together with the sector’s most established names, AC Energy believes that it commitment to its
objectives, visible track record of success in achieving growth and the ability to forge partnerships in various
market segments has made it a partner of choice.

Key among AC Energy’s partners in the conventional energy business in the Philippines are Power Partners,
Marubeni and PHINMA Energy Corporation (“PHINMA Energy”). Power Partners is a private limited
partnership organized and established in the Philippines in 2001 and formed by principals having extensive
backgrounds in power development both in the Philippines and around the world. Marubeni has significant
power presence in the country such as through the Ilijan natural gas-fired plant, Sual and Pagbilao coal-fired
plants and the San Roque hydro plant. PHINMA Energy is an integrated power solutions company engaged in
power generation and electricity supply, renewable energy, and resource exploration and development.

Aboitiz Power Corporation, one of the country’s largest power generation companies by gross installed capacity,
has been a partner of the Company in the GNPower Mariveles and the GNPower Dinginin Projects, and a
shareholder in both projects prior to AC Energy’s selldown of its stake in AA Thermal. Aboitiz Power
Corporation is led by the Spanish-Filipino Aboitiz family, whose involvement in the Philippine power sector
began in 1905. To-date, Aboitiz Power and its affiliated companies collectively is one of the country’s largest
business conglomerates, with a long history of operating conventional power assets.

PINAI, an infrastructure-focused fund whose investors include the Macquarie Group, and the Asian
Development Fund, has also been a repeat partner of the group. Initially a partner for the North Luzon
Renewables Project, PINAI subsequently co-invested in the GNPower Kauswagan Project, joining AC Energy
and Power Partners as an additional limited partner.

The GNPower Kauswagan and GNPower Dinginin projects, are scheduled to commence commercial operations
from 2019 to 2020 and are expected to add 552MW of subcritical and 1,336 MW of supercritical net capacity
into the system, respectively, of which an aggregate of 1,137MW is attributable to AC Energy.

In the international space, the Company has partnered with UPC Renewables, a U.S.-based renewable energy
developer with over 20 years of global experience in the construction and operations of wind and solar energy
projects. UPC Renewables has developed over 3,500MW of wind and solar projects, has a presence across
12 countries and has built 70 projects with approximately U.S.$5.0 billion of project debt and equity deployed.

AC Energy began its partnership with UPC Renewables in the North Luzon Renewables Project. Subsequent to
this, AC Energy and UPC Renewables expanded their partnership by developing and constructing the Sidrap
Wind Project. Inaugurated by Indonesia’s President Joko Widodo, the Sidrap Wind Project is AC Energy’s first
offshore and Indonesia’s first utility-scale wind farm.

In 2018, UPC Renewables and AC Energy established a joint venture, UPC-AC Energy Renewables Australia,
which saw AC Energy invest U.S.$30 million for a 50% equity stake and provide a U.S.$200 million facility to
fund the partnership’s equity needs. UPC-AC Energy Renewables Australia is developing the Robbins Island and
Jim’s Plain wind projects and the NE Solar Farm located in Australia, which in total potentially combine for up
to 1,700MW of renewable energy capacity.

In Southeast Asia, AC Energy has forged ties with The Blue Circle, the BIM Group, the AMI Group and Star
Energy for various wind, solar and geothermal projects. Through The Blue Circle, AC Energy is participating in
the development of The Blue Circle’s pipeline of projects across Southeast Asia. Through the BIM Group, AC
Energy is participating in the development of 330MW of solar power projects in the Ninh Thuan province of
Vietnam. Through the AMI group, AC Energy is part of the development of 80MW solar projects in Khan Hoa
and Dak Lak provinces in Vietnam. These projects in Vietnam are expected to benefit from a FIT rate incentive.

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AC Energy believes that its various partnerships provide it with the ability to source high quality projects
efficiently and with local market expertise. Collectively, the Company’s current partnerships provide visibility to
over 4GW of expected gross capacity across wind, solar and geothermal projects in the Philippines, Indonesia,
Vietnam and Australia, helping drive the Company towards its goal of achieving 5GW of attributable capacity
from renewable energy sources by 2025.

Supported by a strong shareholder fully committed to delivering AC Energy’s vision

AC Energy believes that it benefits from having a shareholder in Ayala Corporation which is fully committed to
seeing AC Energy’s vision of providing low-cost energy to Filipinos and becoming a leading renewable energy
player in the Asia Pacific.

Ayala Corporation, founded in 1834, is among Southeast Asia’s most respected business groups (the “Ayala
Group”). Led by the Zobel de Ayala Family, Ayala Corporation has a market capitalization of
U.S.$10,787 million with total assets of U.S.$20,963 million as of 28 September 2018. Under the Ayala Group is
a portfolio of market leading businesses in the country with their respective market capitalization as of the same
date as follows:

‰ Ayala Land, Inc. (Market capitalization of U.S.$10,878 million): Leading and most diversified property
developer in the country with the largest landbank; holds several of the country’s most premium
commercial and residential properties
‰ Bank of the Philippine Islands (“BPI”, market capitalization of U.S.$6,913 million): Founded in 1851, it
is the oldest bank in Southeast Asia and the third largest bank in the country by assets
‰ Globe Telecom, Inc. (“Globe”, market capitalization of U.S.$5,396 million): Largest
telecommunications provider in the country by subscriber base
‰ Manila Water Company, Inc. (“Manila Water”, Market capitalization of U.S.$932 million): Second
largest water and wastewater services provider in the country by number of customers, serving over
6 million residents across 23 cities and municipalities

In addition, the Ayala Group has set for itself nation-building as a core commitment, and has a portfolio of
rapidly growing verticals devoted to each of infrastructure, healthcare, education, industrials and strategic
ventures.

Ayala Corporation’s most recent recognitions, particularly in the area of sustainability and governance, are a
testament to the alignment between the Ayala Group and AC Energy with regard to leadership, sustainability and
advocacy for the environment:

‰ Ranked 1st (2016) and 2nd (2017) “Best Managed Companies” by Finance Asia
‰ Ranked 3rd, “Best CEO” (2017) by Finance Asia
‰ Ranked 1st (2016) and 2nd (2017) “Most Committed to Corporate Governance” by Finance Asia
‰ “United Nations SDG Pioneer” (2017) recognition for Chairman and CEO Jaime Augusto Zobel de
Ayala
‰ Ranked 18th, “Global 2000: World’s Best Employers” (2017) by Forbes Magazine
‰ “Best at Corporate Social Responsibility” (2016) by Finance Asia
‰ Among Top 3 CSR Advocates in Asia, by Asia Corporate Excellence and Sustainability Awards (2016)

Like AC Energy, the Ayala Group has had a long history of forging partnerships to drive its business strategy. An
example is BPI, which has a joint venture with AIA Group Ltd. through its local affiliate, the Philippine
American Life and General Insurance Company. In Globe, Singapore Telecommunications Ltd. has been a
longstanding strategic shareholder since 1993. In infrastructure, the Ayala Group has on multiple occasions,
teamed up with both foreign and domestic partners to pursue projects in the country. At Ayala Corporation,
Mitsubishi has been a strategic shareholder since 1974, a partnership further deepened by Mitsubishi’s
investment in Manila Water, and most recently, in the North Luzon Renewables Project.

Since AC Energy’s founding, it has enjoyed the full support of the Ayala Group and has had access to the Ayala
Group’s experience in governance, network, management and financial resources. Among AC Energy’s board
members are the Ayala Corporation’s Chairman, CEO and CFO with several of AC Energy’s key management
having been officers at Ayala Corporation. From 2011, Ayala Corporation has invested in AC Energy over
P37 billion (over U.S.$680 million) to support its expansion. Going forward, Ayala Corporation remains
committed to furthering its support for the Company and its objectives to expand beyond the Philippines and
become a recognized leader in the regional renewable energy space.

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Led by a reputable and experienced board and management team

AC Energy believes that it has assembled a strong management team with the right combination of management
experience, project management expertise, international exposure and entrepreneurship.

The Company is led by John Eric T. Francia, President and CEO who joined the company in 2011 from the
Ayala Corporation with a four-man team. Previously a management consultant at the Monitor Group based in
Cambridge, Massachusetts in the U.S. he joined the Ayala Group in 2009 as Head of Corporate Strategy before
eventually leading the infrastructure and power businesses concurrently. Eric’s vision for the business has driven
the very rapid growth that AC Energy has achieved in the last seven years. Today, he leads over 100 employees
and applies his international experience derived from management consulting, strategy and building
infrastructure and utilities businesses in emerging markets.

Supporting Mr. Francia is a highly experienced management team: Maria Corazon G. Dizon, seasoned finance
and business development professional from the Ayala Group, and Jose Maria P. Zabaleta, founder and CEO of
BCE, who has developed hundreds of megawatts of renewable energy capacity, respectively the Chief Finance
Officer and Chief Development Officer of AC Energy. The management team is supported by a highly-engaged
employee force developed and accumulated by the Company since its founding. AC Energy enjoys an employee
engagement score of 96% with attrition rates at less than 3%.

Ayala Corporation is involved in the governance of AC Energy, with several of the Ayala Group’s most senior
leaders participating in its board of directors. Fernando Zobel de Ayala is the Chairman of the board of directors
of the Company. He has been the President and Chief Operating Officer of Ayala Corporation since April 2006.
He holds various positions in the following publicly-listed companies: Chairman of Ayala Land, Inc. and Manila
Water Company, Inc.; Director of Bank of the Philippine Islands, Globe Telecom, Inc., and Integrated Micro-
Electronics, Inc.; and Independent Director of Pilipinas Shell Petroleum Corporation. He graduated with a B.A.
in Liberal Arts at Harvard College in 1982 and holds a CIM from INSEAD, France.

One of the Directors is Jaime Augusto Zobel de Ayala, the Chairman and CEO of the Ayala Corporation since
2006. He is one of the Philippines’ most pre-eminent leaders, and has received multiple recognition for his
leadership, such as the Harvard Business School’s Alumni Achievement Award, the Presidential Medal of Merit,
and recognition into the Philippines’ Legion of Honor. He is also a member of the JP Morgan International
Council and the Mitsubishi Corporation International Advisory Committee.

Good corporate governance is a key component of the Company’s culture

As part of Ayala Group, the Company aligns its Corporate Governance with that of the Ayala Corporation.

Ayala Corporation believes that good corporate governance is essential for the achievement of its strategic goals.
Ayala Corporation pursues measures that bring up the level of awareness and practices in the organization to help
drive value creation and long-term growth. To this end, Ayala has set in place a comprehensive set of oversight
controls to put management decisions in check and ensure that it conforms to regulatory requirements and global
best practices.

AC Energy’s management reports to the board of directors among which are Ayala Corporations’ Chairman,
CEO and CFO. The board convenes at least quarterly and where necessary special meetings are convened to
ensure that strategic directions are properly aligned and that appropriate approvals are secured prior to
implementing initiatives.

Internally, AC Energy has established committees to assist the management in exercising its authority and
monitoring the performance of the Company. Among such Committees are the Strategic Management
Committee, Investment Committee, Organizational Development Committee, Compensation and Promotion
Committee and the Finance Committee.

The Strategic Management Committee is headed by the CEO with the key officers of the Company as members.
Such committee regularly meets to determine the strategic plans, key results areas and business plans of the
Company. The Investment Committee reviews, provides direction, sets the investment policies, approves
investments, prioritizes projects and allocates appropriate resources and endorses projects for board approval.
The Compensation and Promotion Committee is tasked to establish, review and as needed make changes to the
Company’s compensation policies and package. The Finance Committee reviews financial performance,
approves financial initiatives, sets financing policies, prioritizes financing initiatives and endorse financing
initiatives board approval.

123
A strong independent internal audit team directly reporting to the Audit and Risk Committee is in place and
conducts regular review of key identified areas including relevant policies, internal controls, corporate
governance, operations and security of the various subsidiaries and affiliates under the AC Energy group. Results
of the audits including tracking of the completion of remedial measures are reported quarterly to the Audit and
Risk Committee.

The Company regularly reports its results of operations initially to the Audit and Risk Committee, which
endorses the results to the board. The Company also participates in various other initiatives driven by Ayala
Corporation among which are Enterprise Risk Management and Sustainability, Corporate Social Responsibility
and group-wide insurance optimization.

Strong balance sheet and good credit history

AC Energy believes that it has prudent standards with regards to financing and risk management, in which
to-date, AC Energy has retained a strong balance sheet with low leverage. As of 30 September 2018, the
Company has U.S.$585.4 million net debt and U.S.$1,075.6 million equity.

The Company’s financial prudence starts with the assessment of any proposed investment or project. The
Company sets certain criteria that needs to be met among which are the fundamental soundness of the proposed
investment or project and its business case, the sound reputation and capability of the partners, and the long-term
sustainability of the investment or project. When debt is required to fund new investments, the Company ensures
that cash inflows are adequate to cover loan repayment requirements as well as meet relevant loan covenants. To
date, the Company has not breached any covenants on its existing loans.

AC Energy believes that its good credit history and strong relationship with its bank partners and its parent
provides it with the capability to mobilize and deploy financial resources as needed in both the domestic and
international space.

Highly motivated organization with capabilities to anticipate and react to developing market thematics and
trends rapidly

While the Company started as an investment holding company with a portfolio of conventional and renewable
energy assets through partnerships and acquisitions, the Company has been able to develop and acquire
investment, development and operational competencies, which the Company believes has transformed it into one
of the fastest growing energy companies in the region with close to U.S.$1 billion of invested and committed
equity in renewable and thermal energy in the Philippines and around the region.

The Company strengthens its capabilities by developing home-grown resources through training and project
assignments, attracting high potential talents in the market, actively participating in employee engagement
activities, linking rewards to performance and practicing sound compensation policies which is at par with the
market. Strategically, the Company’s acquisition of BCE’s development platform in 2016 enabled it to add
organic project development capability in its competency index. Such acquisition enables the Company to
develop projects end-to-end, from permits and feasibility studies all the way to construction and operations.

In the last Willis Towers Watson Employee Engagement Survey, the organization scored 96% in the sustainable
employee engagement category surpassing its previous survey score by 6% and the 2017 global highly
performing companies score by 11%. This survey is conducted every two years with employee participation rate
achieving 100% in the last two surveys conducted. The company’s annual attrition rate is at 3% which is lower
compared to the average employee turnover rate of companies in the Energy industry as reported by Mercer
Philippines, Inc.

The Company believes that the foregoing allows it to retain and continuously augment its pool of talents and
competencies, enabling it to easily tap and deploy resources to address growth opportunities and market changes,
as well as achieve excellent project execution even in new markets and partnerships.

Active involvement in the management of the portfolio

AC Energy believes that it has assembled a dynamic team of professionals that can move quickly to take
advantage of market trends and opportunities. This allows the Company to be actively involved from inception,
development, execution and operations of its portfolio.

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Through its active involvement in its projects, the Company applies stringent selection processes for projects,
partners and contractors. Together with partners, AC Energy takes a leading role in structuring, designing,
engineering and financing of projects. Once a project reaches financial close, it is also actively involved in
overseeing and managing the various contractors and project parties. When the project reaches commercial
operations, the Company continues to take an active role in management and operations not only through board
representation and extensive reserve matters but also in the day-to-day management by nominating key officers
such as the CEO, CFO and/or COO.

BUSINESS STRATEGIES

The Company’s strategy is to become one of the leading renewable energy players in the region and aims to
increase its attributable renewable energy capacity to 5,000MW or 5GW by 2025. The Company aims to have at
least half of its electricity output derived from renewable energy projects and plans to implement the following
strategies:

Focus on large scale renewable energy projects in high growth markets

To achieve its aim of 5GW attributable capacity, the Company focuses on large scale renewable energy projects
in the Philippines to take advantage of the country’s sound macroeconomic fundamentals and robust power
sector growth, as well as in other high growth markets in the Asia Pacific.

A key imperative for AC Energy is to identify and focus on high growth markets that can support 1GW of
renewable energy capacity within the Asia Pacific region. To this end, the Company has identified Vietnam,
Indonesia and Australia as its next growth markets, and has partnered with international developers UPC
Renewables and The Blue Circle, and reputable Vietnam partners the BIM Group and the AMI Group.

Indonesia shares numerous favorable investment thematics with the Philippines. Like the Philippines, Indonesia
is a rapidly growing economy (8.9% nominal GDP CAGR from 2007 to 2017, according to the World Bank)
with a large population (264 million in 2017). Over the same period, peak demand for electricity grew at 5.1%
CAGR to 35GW, based on information from the PLN. Renewable energy is expected to play a much more
important role in the country’s overall fuel mix, with the government targeting new and renewable energy
sources to account for 23% of total energy generation by 2025. The Company seeks to utilize renewable energy
initiatives that are being introduced to support the government’s renewable energy target, such as FIT for solar
and wind and tax incentives.

Vietnam, similarly, is a rapidly growing, underpenetrated market with a large population. From 2007 to 2017,
Vietnam’s nominal GDP grew by 11.2% CAGR with a population of 96 million as at 2017, based on information
from the World Bank. The government has a significant growth target for the sector – 330TWh of generation by
2020 compared to 160TWh as of 2017. Renewable energy is seen as a key driver to supplying this need, with the
revised PDP 7 targeting up to 12GW of solar and 6GW of wind projects by 2030. Renewable energy incentives
are already in place and continues to evolve, such as feed-in-tariffs, land incentives, import tax exemptions and
corporate income tax deductions.

The Australia power market offers a different investment proposition over developing markets such as the
Philippines, Indonesia and Vietnam. While GDP growth and is lower than those in AC Energy’s other markets at
4.5% from 2007 to 2017 (based on information from the World Bank), the market offers a mature and ecosystem
with a large industrial base and established renewable energy policies underpinned by the Renewable Energy Act
of 2000. The country is pushing to advance its renewable energy agenda with non-hydro renewable market
capacity expected to grow 7.2% per annum from 2018 to 2027 as the country continues to retire older,
conventional power assets.

In view of the continuously improving renewable energy tailwinds available globally and regionally, outside of
the Philippines, Indonesia, Vietnam and Australia, the Company continues to opportunistically seek out other
attractive markets with viable long-term renewable energy potential.

Combine in-house expertise and further strategic partnerships with best-in-class developers

The Company continues to improve on its in-house expertise by developing home-grown resources through
training and project assignments, and attracting high potential talents in the market. Strategically, the Company’s
acquisition of BCE’s development platform in 2016 enabled it to add organic project development to its
competencies. Together with this in-house expertise, the Company pursues strategic partnerships with developers
who are familiar with regional markets, have technical expertise, and have complementary skills and strengths

125
with AC Energy. These partnerships allow the Company to access markets and projects that would not have been
available to AC Energy had it pursued project development on its own.

Value realization and active capital recycling to fuel growth

While AC Energy is committed to grow its portfolio of operating assets, development projects, and its project
pipeline, it also continues to look for opportunities for value realization and redeploy funds for further expansion.
Growth to date has largely been funded by parent equity, but AC Energy in the long term intends to fund further
expansion by utilizing recurring income and gains from value realization.

This has been the strategy behind the partial sell-downs of NLR and SLTEC in 2015 and 2016, respectively.
Using the proceeds from these sell-downs, AC Energy was able to fund its equity commitments for its other
projects.

The Company received P2.06 billion from a partial sale of its ownership interest in NLR to Luzon Wind Energy
Holdings, B.V. in September 2015. Through this, the Company was able to get back its original investment of
P340.56 million while remaining to be the single largest shareholder with over 25% equity interest.

The Company also received P2.53 billion from a partial sale of its ownership stake in SLTEC to Axia Power
Holdings Philippines Corp., a subsidiary of Marubeni Corporation, while remaining to be a 35% shareholder
therein. This resulted to a net gain of P1.18 billion (net of capital gains tax and documentary stamp tax
amounting to P145.04 million and P2.02 million, respectively).

For both partial sales, the Company was able to book gains, while continuing to receive recurring dividends from
these assets.

HISTORY AND CORPORATE MILESTONES

AC Energy was designated in 2011 as Ayala Corporation’s vehicle for investments in the power sector to pursue
greenfield, as well as currently operating, power related projects for both renewable and conventional
technologies in various parts of the Philippines. From 2011 to 2017, the Company invested approximately
P38,000 million in the power sector to build and acquire over 1,800MW of attributable generating capacity
(including projects under construction) as of 30 September 2018.

The following table sets forth the Company’s corporate milestones:

Year Milestones
2005 ‰ Ayala Corporation incorporates Michigan Power, Inc.

2011 ‰ Michigan Power, Inc. changes its name to AC Energy Holdings, Inc. (“ACEHI”) and becomes the
Ayala Group’s power arm

‰ ACEHI made first investment in renewables by acquiring 50.00% stake in Northwind Power
Development Corp.

‰ ACEHI signs a joint venture agreement with Phinma Corp.’s Trans Asia Oil and Energy
Development Corporation (now PHINMA Energy Corporation or “PHEN”) to form the 50:50 joint
venture company, SLTEC.

2013 ‰ ACEHI enters into an “Investment Framework Agreement” with UPC Philippines Wind Holdco I BV
and the PINAI for the development of wind power projects in Ilocos Norte — the North Luzon
Renewables Project

‰ AC Energy signs a partnership agreement with Power Partners to build and operate the GNPower
Kauswagan Project in Kauswagan, Lanao del Norte through GN Power Kauswagan Ltd. Co
(“GNPK”)

2014 ‰ The Company acquires 50.00% interest in GNPower Dinginin Ltd. Co. (“GNPD”) for the
development of the GNPower Dinginin Project

‰ The Company, thru its wholly-owned subsidiary, ACE Mariveles Power Ltd. Co. (“AMPLC”)
becomes the beneficial owner of 17.02% limited partnership interest in GMCP, which operates the
GNPower Mariveles Project

‰ Northwind Project’s expansion phase (18.9MW) begins commercial operations

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Year Milestones
2015 ‰ Unit 1 of the SLTEC Project achieves COD

‰ Partnership with BCE to develop a solar power plant, the Montesol Project, in Negros Occidental

‰ Sale of shares held in Philippine Wind Holdings Corp in respect of the North Luzon Renewables
Project to Luzon Wind Energy Holdings BV

2016 ‰ Unit 2 of the SLTEC Project achieves COD

‰ Montesol Project begins commercial operations

‰ ACEHI obtains RES license for the sale of electricity to end-users in contestable markets

‰ The Company enters into share sale and purchase agreement, as part of an Indonesian consortium for
the purchase of Chevron’s geothermal operations and/or assets in Indonesia

‰ The Company sells a portion of its stake in SLTEC to Axia Power Holdings Philippines Corp. (“Axia
Power”), a subsidiary of Marubeni Corporation, which decreased the Company’s equity interest to
35.0%

‰ The Company increases its effective interest in Northwind Power Development Corp from 50% to
67.8%

2017 ‰ Registered name of ACEHI changed to “AC Energy, Inc.”

‰ AC Energy acquires the renewable energy development platform San Carlos Clean Energy, now
known as AC Energy Development Inc. (“AC Energy DevCo”), BCE, now known as Visayas
Renewables Corp., Bulk Water Companies SCC Bulk, LCC Bulk and MCV Bulk and San Julio Land
Development

‰ AC Energy acquires a 66.22% ownership interest in Manapla Sun Power Dev’t Corp.

‰ AC Energy enters into investment agreements with UPC Renewables Indonesia, Ltd. for the
development, construction and operation of a wind farm project in Sidrap, South Sulawesi, Indonesia
— the Sidrap Wind Project

‰ The Company’s economic interest in GMCP stepped up from 17.02% to 20.34%

‰ The Company, through a wholly-owned subsidiary, Presage Corporation (“Presage”), acquires a

100% interest in SCC Bulk Water Supply, Inc. and in Solienda, Inc.

2018 ‰ AMPLC becomes the legal and registered owner of the limited partnership interest in GMCP.

‰ Inauguration of the Sidrap Wind Project, Indonesia’s first utility-scale wind power project in
Sindereng Rappang Regency, South Sulawesi, AC Energy’s first offshore utility-scale wind farm

‰ Presage, acquires a 42.97% voting interest in the Negros Island Biomass Holdings, Inc. (“Isla Bio),
which holds interests in the three biomass plants in Negros island — San Carlos BioPower, South
Negros BioPower and North Negros BioPower

‰ AC Energy incorporates Ingrid Power Holdings, Inc.

‰ AC Energy signs a share purchase agreement with Aboitiz Power for the sale of a 60% economic
stake in AA Thermal

‰ AC Energy enters into a joint venture with UPC Renewables investing U.S.$30 million for 50.0%
ownership in UPC-AC Energy Renewables Australia and extending a U.S.$200 million revolver
facility to fund project equity

‰ The Company enters into a partnership with the BIM Group of Vietnam and executed EPC and
financing documents for the development of an aggregate of 330MW of solar power plants located in
the province of Ninh Thuan, Vietnam

‰ The Company enters into a partnership with Vietnam’s AMI Renewables and executed the EPC and
financing documents for the development of an aggregate of 80MW of solar power plants located in
the provinces of Kanh Hoa and Dak Lak, Vietnam

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RECENT DEVELOPMENTS

On 12 November 2018, the Company, through its subsidiary AC Energy International and Jetfly Asia Pte. Ltd.
entered into an agreement for the acquisition of a 25.0% interest in The Blue Circle. The Blue Circle has a
pipeline of wind projects in Southeast Asia, over which the Company has certain investment rights. In particular
and as part of their agreement, AC Energy and The Blue Circle will jointly develop, construct, own and operate
The Blue Circle’s pipeline of renewable energy projects across Southeast Asia (Vietnam, Indonesia, Thailand
and Cambodia among others), including approximately 200 MW of wind projects in Vietnam aimed for
commencement of construction by 2019 with additional projects planned in the pipeline. AC Energy is expecting
to deploy approximately U.S.$100 million of equity for these projects. The Blue Circle is focused on developing
and investing in utility-scale wind projects in Southeast Asia and developed and constructed one of the first wind
farms in Vietnam. The Blue Circle was founded in 2013 and has a management team with 79 years of combined
renewable energy experience.

On 27 November 2018, the Company through its subsidiary, Presage entered into an investment framework
agreement and shareholders’ agreement for the development and construction of a proposed Balaoi-Caunayan
wind farm project in Ilocos Norte (the “Balaoi-Caunayan Project”). As part of the transaction, Presage agreed
to acquire full ownership of Pagudpud Wind Power Corp., the majority shareholder of Bayog Wind Power Corp.
(“BWPC”), the project company for the Balaoi-Caunayan Project. Further, on 4 December 2018, Presage, acting
as the lender, entered into a loan agreement (the “Presage Loan Agreement”) with BWPC, acting as the
borrower, whereby Presage agreed to make available to BWPC a credit facility in an aggregate principal amount
of P265.0 million for funding the development of the Balaoi-Caunayan Project.

On 7 December 2018, Presage entered into a share purchase agreement with Jose Maria Eduardo P. Zabaleta and
Juan Xavier P. Zabaleta for the purchase of 100% of the outstanding capital stock of HDP Bulk Water Supply
Inc. (“HDP Bulk Water Supply”). The transaction was also closed on the same day.

HDP Bulk Water Supply is a domestic company that supplies water to San Carlos Bioenergy, Inc. (“SCBI”)
under a water supply contract executed on 31 October 2006 (originally between SCBI and San Julio Realty Inc.
(“SJRI”), which was later assigned by SJRI to San Carlos Land, Inc. (“SCLand”) on 22 December 2008, and
then by SCLand to HDP Bulk Water Supply on 11 December 2017).

On 8 January 2019, AC Energy, PHINMA Inc. and PHINMA Corporation, signed a mutually strategic agreement
in relation to AC Energy’s investment in PHINMA Energy, a publicly held company listed on the PSE under the
stock code “PHEN”. AC Energy will acquire PHINMA Inc.’s and PHINMA Corporation’s combined 51.48%
stake in PHINMA Energy via a secondary share sale for approximately P3.42 billion. This is based on the
valuation date of 31 December 2018 and is subject to adjustments. AC Energy will also subscribe to
approximately P2.632 billion of PHINMA Energy primary shares at par value of P1.00, subject to approval by
PHINMA Energy. Upon completion of the transaction, AC Energy will own at least 68% of PHINMA Energy.
Closing of the transaction is subject to satisfaction of certain conditions, such as approval of the Philippine
Competition Commission and compliance with applicable tender offer requirements under Philippine securities
laws and is expected to be completed before the third quarter of 2019. The transaction will be funded by a
combination of internally generated funds and credit facilities.

AC Energy and PHINMA Energy started a partnership in 2011 for the development, construction and operations
of the SLTEC Project.

As of November 2018, PHINMA Energy has an attributable generation capacity of 472MW and is the third
largest retail electricity supplier in the Philippines, serving 378 MW of customer demand, according to the
preliminary settlement data from the Independent Electricity Market Operator of the Philippines.

128
 CORPORATE STRUCTURE

The chart on the following page summarizes the Company’s portfolio of investments in subsidiaries, associates and joint ventures and its effective economic ownership interests in
such subsidiaries, associates and joint ventures as of 31 December 2018:
AC ENERGY, INC.

96.11% 100%
100% PRESAGE
MONTE SOLAR ENERGY, VIAGE CORPORATION
INC. CORPORATION 51%
40% 100%
42.74% 100% 49%
3.89% AC ENERGY INTERNATIONAL
UPC-AC ENERGY AUSTRALIA 50% 100% ARLINGTON MARIVELES 60% AA THERMAL, INC. AC ENERGY GP
100% PHILIPPINE WIND MOORLAND PHILIPPINES, HOLDINGS PTE LTD.
(HK) LTD NETHERLANDS COOPERATIVE U.A. CORPORATION
VISAYAS RENEWABLES HOLDINGS CORP. INC.
CORP. (Hong Kong) (Netherlands)

2%/ 100% 0.002% ~83.22%

100% 24.7%
4% 34.59% 100%
SAN CARLOS SOLAR ILOCOS WIND ENERGY 8.5% ARLINGTON MARIVELES KAUSWAGAN POWER
ENERGY, INC. NORTHWIND POWER NETHERLANDS HOLDING B.V.
HOLDING CO., INC. DEVELOPMENT CORP. ACE MARIVELES GP HOLDINGS LTD. CO.
100% (Netherlands)
CORP.
2% ACEHI N B.V. 100%
NEGROS ISLAND SOLAR 100%
POWER, INC.
28.7% (Netherlands) ~99.02%** 0.0006%
PAGUDPUD WIND POWER 100% KAUSWAGAN POWER GP
NORTH LUZON CORP
38% 19.8% AC ENERGY HK LTD 100% 100% ACE MARIVELES CORP.
100% RENEWABLE ENERGY
(Hong Kong) POWER LTD. CO..
BATAAN SOLAR ENERGY, CORPORATION AC ENERGY VIETNAM ASIAN WIND POWER
INC.* 60% STAR ENERGY GEOTHERMAL INVESTMENT PTE LTD. 1 HK LTD 0.08% 85.6%
(SA:AK DARAJAT) B.V. 100%
BAYOG WIND POWER CORP (Vietnam) (Hong Kong)
(Netherlands) 100% ARLINGTON GNPOWER KAUSWAGAN
100% MARIVELES POWER
SANTA CRUZ SOLAR AC ENERGY CAYMAN LTD. CO.
ENERGY, INC.* GP CORP.
(Cayman Islands) ~25%
STAR ENERGY GEOTHERMAL 100% 0.08% 20.2272%
SCC BULK WATER SUPPLY 100% 50% THE BLUE CIRCLE 30% BIM ENERGY
SALAK LTD. (Singapore) (Vietnam)
INC. GNPOWER MARIVELES 100%*
100% (Indonesia) ACE Thermal, Inc.
NEW ENERGY IINVESTMENTS COAL PLANT LTD. CO.
AC ENERGY (Philippines)
100% (Vietnam) 100%
DEVELOPMENT INC.

129
SOLIENDA INC.
(formerly AC Energy STAR ENERGY GEOTHERMAL 100% BIM RENEWABLE 100%
100% TBC Indochina 6.67% 100% AC Energy Finance
DevCo, Inc.) DARAJT I LTD. (Vietnam) ACE DINGININ GP
~71%/ KHAN HOAH (Singapore) Internaonal Limited
SOUTH NEGROS BIOPOWER (Indonesia) CORP.
~7%
100% (Vietnam) (Cayman)
INC. GIGASOL 2, INC. 100%
SAN JULIO LAND 100% and SUBS* 0.02%
DEVELOPMENT CORP. 100% DAI PHONG, HONG 97.66%** DINGININ POWER INGRID POWER 100%
~71%/ ~43%/ DAK LAK PHONG, BA THAP HOLDINGS, INC.
NEGROS ISLAND BIOMASS HOLDING LTD. CO.
SAN CARLOS BIOPOWER INC. ~70% 51% 11% (Vietnam)
~7% (Vietnam)
LCC BULK WATER SUPPLY, 100% HOLDINGS INC. 83%
100%
INC.
UPC RENEWABLES ASIA UPC SIDRAP (HK) LTD. DINGININ POWER GP SOUTH LUZON 35%
~99%/ III LTD. (Hong Kong) CORP. THERMAL ENERGY CORP
NORTH NEGROS BIOPWER ~7% (Hongkong)
MCV BULK WATER 100% INC. 100%
0.001% 49.999%
SUPPLY INC. 50%
72% 21% GNPOWER DINGININ ACTA POWER CORP
HDP BULK WATER SUPPLY
INC. 75% 22% LTD. CO.
MANAPLA SUN 36.37% UPC SIDRAP
29.63%
DEVELOPMENT CORP. BAYU ENERGI
(Indonesia)

NOTE:
1) Figures in red font represent economic interests only
2) Gigasol 2 subsidiaries includes AC Subic Solar Inc., AC La Mesa Solar Inc., AC Laguna Solar Inc., Gigasol 1 Inc., Gigasol 3 Inc. Solar Ace 1 Inc. and Solar Ace 2 Inc.
3) Australia companies include UPC Australia HK Ltd., UPC Renewables Pty Ltd., UPC Renewables Transmission Pty Ltd., UPC Robins Island Pty Ltd., UPC New England Solar Farm Pty Ltd., UPC Axedale Solar Farm Pty Ltd. and UPC North East
Tasmania Pty. Ltd.
* Pre-development companies
** The tax clearance/certificate authorizing registration for the transfer of partnership interests to AA Thermal, Inc. are currently being processed
AA Thermal Disposition

On 26 September 2018, Arlington Mariveles Netherlands Holding B.V., an affiliate of AC Energy, entered into a
share purchase agreement and a shareholders’ agreement with Aboitiz Power, for the proposed acquisition of a
49% voting stake and 60% economic stake in AA Thermal.

The AA Thermal portfolio consists of AC Energy’s (i) limited partnership interests in ACE Mariveles Power Ltd.
Co., the development company for the GNPower Mariveles Project, and (ii) limited partnership interests in
Dinginin Power Holdings Ltd. Co., the development company for the GNPower Dinginin Project, which is
currently under construction.

Closing of the transaction is subject to the satisfaction of certain conditions precedent, including the approval by
the Philippine Competition Commission. The transaction was valued at U.S.$579.2 million. As a result of the AA
Thermal Disposition, the equity in net income from GMCP and GNPD will be reduced by 60%.

ENERGY PORTFOLIO

AC Energy holds investments in and operates its portfolio of power projects through its subsidiaries, associates
and joint ventures. The following tables set forth selected data on the Company’s power generation portfolio in
operation and under construction as of 31 December 2018.

‰ Power projects in operation through the Company’s subsidiaries:

Effective
Net Economic Attributable
Project Capacity Interest Capacity
Plant/ Project Name Location Type (MW) (%)(1) (MW)(2) COD

Renewable Energy
Montesol Project Negros Solar 18 100 18 March 2016
Oriental,
Philippines
Northwind Project Ilocos Wind 52 68 35 Phase 1:
Norte, June 2005
Philippines Phase 2:
Aug 2008
Phase 3:
Sept 2014
Notes:
(1) Effective economic interest refers to the Company’s economic interest directly and/or indirectly held in the project.
(2) Attributable capacity refers to the product of the Company’s effective economic interest in the relevant power project multiplied by net capacity of the
relevant power project.

‰ Power projects in operation through the Company’s associates and joint ventures:

Effective
Net Economic Attributable
Project Capacity Interest Capacity
Plant/ Project Name Location Type (MW) (%)(1) (MW)(2) COD

Renewable Energy
Sidrap Wind Project South Wind 75 75 56 April 2018
Sulawesi,
Indonesia
Salak-Darajat Geothermal West Java, Geothermal 637(3) 20 127 March
Projects Indonesia 2017(4)
North Luzon Renewables Ilocos Wind 81 36 29 November
Project Norte, 2014
Philippines
Islasol Project Negros Solar 80 2 2 March 2016
Occidental,
Philippines
Sacasol Project Negros Solar 45 4 2 Phase AB:
Occidental, May 2014
Philippines Phase CD:
September
2015

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 Effective
Net Economic Attributable
Project Capacity Interest Capacity
Plant/ Project Name Location Type (MW) (%)(1) (MW)(2) COD
Thermal Energy
GNPower Mariveles Bataan, Coal-fired 632 20 126 February
Project(5) Philippines 2014
SLTEC Project Batangas, CFB 244 35 85 Unit 1:
Philippines Thermal April 2015
Unit 2(6):
February
2016
Notes:
(1) Effective economic interest refers to the Company’s economic interest directly and/or indirectly held in the project.
(2) Attributable capacity refers to the product of the Company’s effective economic interest in the relevant power project multiplied by net capacity of the
relevant power project.
(3) Combined capacity of the Salak Geothermal Plant (337MW integrated steam and power plant) and Darajat Geothermal Plant (217MW integrated steam
and power plant).
(4) The Company, as part of a consortium with Star Energy and EGCO, acquired its interest in March 2017.
(5) On 26 September 2018, the Company, through Arlington Mariveles Netherlands Holding BV, entered into a share purchase agreement with Aboitiz Power
for the sale of a 49% voting stake and 60% economic stake in AA Thermal, the Company’s thermal platform in the Philippines. Following the completion
of the AA Thermal Disposition, the Company’s effective economic interest and attributable capacity in the GNPower Mariveles Project will be 8% and
51MW, respectively. See “Business—Corporate Structure—AA Thermal Disposition.”
(6) Unit 2 of the SLTEC Project has been on forced outage since June 2018 due to a turbine rotor problem. It is currently under repair and is expected to
resume operations in February 2019. On 10 December 2018, SLTEC agreed to receive an advance partial payment from insurers of U.S.$5.0 million as
part of its material damage and business interruption insurance claims.

‰ Power projects under construction through the Company’s subsidiaries:

Expected Effective Expected
Net Economic Attributable
Project Capacity Interest Capacity Expected
Plant/ Project Name Location Type (MW) (%)(1) (MW)(2) COD

Thermal Energy
GNPower Kauswagan Lanao del Coal-fired 552 85 469 May to
Project Norte, November
Philippines 2019
Notes:
(1) Effective economic interest refers to the Company’s economic interest directly and/or indirectly held in the project.
(2) Attributable capacity refers to the product of the Company’s effective economic interest in the relevant power project multiplied by expected net capacity
of the relevant power project.

‰ Power projects under construction through the Company’s associates and joint ventures:
Expected Effective Expected
Net Economic Attributable
Project Capacity Interest Capacity Expected
Plant/ Project Name Location Type (MW) (%)(1) (MW)(2) COD

Renewable Energy
San Carlos Biopower San Carlos, Negros Biomass 20 7 1 First
Project Philippines Quarter,
2019
South Negros La Carlota, Negros Biomass 25 7 2 Fourth
Biopower Project Philippines Quarter,
2019
North Negros Manapla, Negros Biomass 25 7 2 Fourth
Biopower Project Philippines Quarter,
2019
Dak Lak & Khanh Hoa Dak Lak, Vietnam Solar 80 50 40 June 2019
Solar Plants and Khanh Hoa,
Vietnam
Ninh Thuan Solar Ninh Thuan, Solar 330 50 165 June 2019
Plants Vietnam
Thermal Energy
GNPower Dinginin Bataan, Philippines Coal-fired 1,336 50 668 Unit 1:
Project(3) June 2019
Unit 2:
July 2020

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Notes:
(1) Effective economic interest refers to the Company’s economic interest directly and/or indirectly held in the project.
(2) Attributable capacity refers to the product of the Company’s effective economic interest in the relevant power project multiplied by expected net capacity
of the relevant power project.
(3) On 26 September 2018, the Company, through Arlington Mariveles Netherlands Holding BV, entered into a share purchase agreement with Aboitiz Power
for the sale of a 49% voting stake and 60% economic stake in AA Thermal, the Company’s thermal platform in the Philippines. Following the completion
of the AA Thermal Disposition, the Company’s effective economic interest and attributable capacity in the GNPower Dinginin Project will be 20% and
267MW, respectively. See “Business—Corporate Structure—AA Thermal Disposition.”

To date, the Company has projects in operation and under construction in the following locations:

Renewable Energy Portfolio

As of 31 December 2018, the Company’s portfolio of projects under its renewable energy platform had a total
attributable capacity of approximately 270MW renewable energy in operation divided into 21MW of solar
energy, 121MW of wind power and 127MW of geothermal power. In addition to the Company’s interests in
power projects, the Company has established renewable energy development platforms as part of its renewable
energy strategy.

Renewable Energy Projects in Operation

Renewable Energy Projects in Operation under AC Energy’s Subsidiaries

Montesol Project

Background. In 2015, AC Energy entered into a subscription and shareholders’ agreement with BCE for the
development, construction and operation of the Montesol Project, a solar power farm located in Bais City,
Negros Oriental. This project is owned and operated by Monte Solar Energy Inc., a special purpose company.
The first phase of the project was for an 18MW solar power plant with a total project cost of P1.3 billion which
was completed in February 2016, and is currently dispatching its full capacity to partially meet the energy
requirements of Dumaguete City and Cebu City. The Company believes that there is further potential for the
expansion of the initial 18MW solar power plant to up to 50MW.

Power Offtaker / Energy Sales. Pursuant to Section 7 of the Renewable Energy Act of the Philippines and
Section 5 of its implementing rules and regulations (the “Renewable Act IRR”), the Energy Regulatory

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Commission (“ERC”) adopted and promulgated feed-in tariff (“FIT”) rules. Eligible plants are entitled to the
appropriate FIT administered and paid by the TransCo.

On 15 October 2015, the Montesol Project secured the certificates of registration with the Department of Energy
(“DOE”) and BOI as a renewable energy developer of solar energy resources. On 13 June 2016, the DOE
certified the Montesol Project as an eligible project under the FIT system. On 28 December 2016 following a
provisional authority to operate from ERC on 14 July 2016, the Montesol Project received provisional authority
to operate as a renewable energy generation company and entitling it to a FIT rate of P8.69/kWh for a period of
20 years from 13 March 2016. On 6 February 2017, the Company received its certificate of compliance (“COC”)
from the ERC and recognized revenues from energy sales using the FIT rate.

Operations Review. The Montesol Project started commercial operations in March 2016 initially at Wholesale
Electricity Spot Market (“WESM”) prices until the receipt of the COC allowing the company to recognize
revenue from generation starting from March 2016 at FIT rate.

The table below summarizes the capacity factor of the Montesol Project.

For the year ended For the nine months ended

2016 (10 month) 31 December 2017 30 September 2018
Capacity Factor (%) 16.50 15.43 16.08

Operations and Maintenance. The Montesol Project utilizes photovoltaic (“PV”) technology to convert sunlight
to electricity using 17,938 modules and inverters. On 20 April 2016, Montesol signed a technical consultancy and
services agreement with Conergy Asia & ME PTE Ltd, an Operations and Maintenance Agreement with Physics
Research Sales and Services Corp., O&M Coordination Agreement and a Wrap Agreement and Waiver of
Defenses under the Offshore Contract and O&M Contract for the operation and maintenance of the plant for five
years from the issuance of the certificate for the Performance Acceptance test for Montesol as defined in the
Offshore Supply contract it signed with Conergy Asia & ME PTE Ltd. Conergy was also the EPC contractor for
the Montesol Project.

Northwind Project

Background. In March 2011, AC Energy acquired a 50.00% effective stake in NorthWind, which owns and
operates the Northwind Project, which was then a 33MW wind farm located in Bangui Bay, Ilocos Norte. The
wind farm has total of 26 wind turbines and is the first commercial wind farm ever established in Southeast Asia.
Commercial operations started in June 2005 with 15 wind turbines (Phase 1) followed by an additional five
turbines in August 2008 (Phase 2) and another six turbines in September 2014 (Phase 3), increasing the project’s
generation capacity to 52MW.

AC Energy acquired an additional 17.79% stake in NorthWind in 2016. This increased AC Energy’s effective
ownership interest from 50.00% to 67.79%.

Power Offtaker / Energy Sales. The Northwind Project delivers all its generation to the national grid via its own
57 kilometer 69kV transmission line from its plant site in Bangui, Ilocos Norte to the substation of the National
Grid Corporation of the Philippines (“NGCP”) in Laoag City, Ilocos Norte.

The tariff on the generation of Phases 1 and 2 was a FIT rate of P5.76/kWh specific to the company, approved
by the ERC in its decision dated 30 June 2014. The FIT rate is valid for 20 years less the actual years of
operation as provided for under the FIT rules.

The tariff on the Phase 3 turbines is the national FIT rate of P8.53/kWh and is valid for a period of 20 years.
Annual adjustment to the FIT rate is provided for under the FIT rules.

Operations Review. Phases 1 and 2 use Vestas turbines and have a total 33MW of capacity and while Phase 3
uses Siemens turbines and have a total 10MW of capacity.

The table below is a summary of selected operating data of the Northwind Project.

For the year ended For the year ended For the nine months ended
31 December 2016 31 December 2017 30 September 2018
Phase 1 & 2 Availability Factor (%) 85 91 92
Capacity Factor (%) 21 26 26
Phase 3 Availability Factor (%) 97 95 96
Capacity Factor (%) 29 32 32

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Operations and Maintenance. After the expiration of the O&M warranty on NorthWind’s Phase I and II turbines
in 2010 and 2013 respectively, the turbines had been maintained and operated by NorthWind personnel.
However, major repairs and software upgrades are outsourced to Vestas.

In 2013, NorthWind signed a five year Service and Availability Agreement (“SAA”) with Siemens, covering the
same period as the O&M warranty. Under the SAA, for the duration of the availability warranty period, the
measured average availability (“MAA”) if the project shall not be less than the warranted average availability
(“WAA”) of around 95%, The SAA also provides for an incentive if the MAA exceeds the incentive threshold of
97%. Siemens continually exceeds the WAA but has yet to exceed the incentive threshold.

Renewable Projects in Operation under AC Energy’s Associates and Joint Ventures

Sidrap Wind Project

Background. In January 2017, AC Energy invested in the development of a 75MW wind farm in Sidrap, South
Sulawesi, Indonesia. The project uses 30 x 2.5MW Gamesa turbines for total effective capacity of 75MW. Sidrap
commenced commercial operations in April 2018. The project is the first utility-scale wind farm project in
Indonesia and is also the first greenfield offshore investment of AC Energy, through its affiliate, AC Energy
International Holdings Pte Ltd., a Singapore private limited company. AC Energy’s effective economic stake in
the Sidrap Wind Project is 75%.

Power Offtaker / Energy Sales. Sidrap delivers its power through a 7.5km 150kV transmission line to a PLN
substation. The ownership and maintenance of the transmission asset is with PLN but the project is compensated
through a tariff supplement.

The project has 30-year PPA with PLN. The contract is priced in the Indonesian Rupiah (“IDR”) equivalent of
the U.S. Dollar tariff, effectively making payments U.S. Dollar-denominated under the PPA.

Operations. Since commencing commercial operations in April 2018, the Sidrap Wind Project average capacity
factor is 35%. Sidrap Wind Project has a five-year maintenance and availability agreement with Gamesa with
standard availability guarantees.

Salak-Darajat Geothermal Projects

Background. In April 2017, AC Energy, as part of an Indonesian consortium, completed the purchase and
acquisition of Chevron’s geothermal assets and operations in Indonesia. The consortium consists of AC Energy
(with a 19.8% economic stake), the Star Energy Group and EGCO. The acquisition was made through a joint
venture company, Star Energy Geothermal (Salak-Darajat) B.V. The assets include the Salak and Darajat
geothermal fields in West Java, Indonesia with a combined capacity of 637MW of steam and power. The project
has a combination of long term steam and power supply agreements with PLN.

In July 2017, AC Energy and Star Energy entered into definitive agreements for the transfer of 99% of their
consortium interests in ACEHI-STAR Holdings, Inc. to AllFirst Equity Holdings, Inc. ACEHI-STAR Holdings,
Inc. is the special purpose company that signed a share sale and purchase agreement with Chevron in December
2016 to acquire Chevron’s Philippine geothermal assets. After the transfer of ACEHI-Star to Allfirst, Allfirst and
Chevron applied and obtained the Philippine Competition Commission’s approval for the asset acquisition.

North Luzon Renewables Project

Background. In July 2013, AC Energy signed an Investment Framework Agreement and shareholders’ agreement
with UPC Philippines Wind Holdco I B.V., a wholly-owned company of UPC Renewables and the PINAI fund,
comprised of the Government Service Insurance System, Langoer Investments Holding B.V. and Macquarie
Infrastructure Holdings (Philippines) Pte. Limited. Under the agreements, the parties agreed to develop wind
farm projects in Ilocos Norte through Northern Luzon UPC Asia Corp. as their joint venture company (now
named North Luzon Renewable Energy Corp. or “NLR”).

Under the Investment Framework Agreement, an initial equity investment was agreed upon for the first 81MW
Caparispisan wind farm project, which had a total project cost of U.S.$220 million. AC Energy funded 64% of
the project’s equity, with PINAI funding 32% and UPC Renewables funding 4%.

The Caparispisan wind farm started commercial operations on 11 November 2014. On 11 December 2014 the
DOE through the issuance of a certificate of endorsement certified the project as an eligible project under the FIT
system.

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In September 2015, AC Energy sold a portion of its ownership stake in NLR to Luzon Wind Energy Holdings
BV. Subsequent to such sale, AC Energy remains the single largest shareholder in NLR with a 28.51% voting
interest.

Power Offtaker / Energy Sales. The power generated by the Caparispisan wind farm is supplied to the NGCP via
its 62 kilometers, 115 kV transmission line from the project site to the NGCP substation in Laoag City, Ilocos
Norte.

In April 2015, NLR received the FIT COC from the ERC entitling the wind farm to a FIT rate of P8.53/kWh for
a period of twenty years. The FIT rate covers the period from 11 November 2014 to 10 November 2034.

Operations Review. The wind farm is comprised of 27 wind turbines with individual capacity of 3MW each. The
table below is a summary of selected operating data of the North Luzon Renewables Project.

For the nine months

For the year ended For the year ended ended
31 December 2016 31 December 2017 30 September 2018
Availability Factor (%) 97 97 94
Capacity Factor (%) 29 37 33

Operations and Maintenance. On 11 July 2013, the company signed a service maintenance and availability
agreement with Siemens, its supplier of wind turbine generators (“WTGs”), to provide and carry out certain
service and maintenance activities for the WTGs to support the company’s day-to-day operations of the WTGs
and retain Siemens to provide an availability warranty. The term of the agreement is from the commencement
date to the fifth annual anniversary of the WTG commissioning completion date.

Under the service agreement, Siemens performs its services in accordance with the annual maintenance service
plan reviewed and accepted by NLR. The annual maintenance plans are prepared no later than 60 days prior to
the commencement date and updated 60 days prior to the expiration of the previous plan year or as necessary to
reflect on-going maintenance issues. Each annual maintenance service plan include breakouts of Siemens’ plan
for providing the services. Services include maintenance and inspection, waste management during the
performance of services and remote monitoring of the WTGs on a 24- hour a day, seven days a week basis.

The agreement was amended on 26 June 2015, changing the term of the agreement and the daily fee paid to
Siemens, from the commencement date to the fifth annual anniversary of the WTG Commissioning Completion
date to 15 January 2015 to 15 January 2020 and from P4,990 to P5,448.

A further amendment was executed on 20 April 2018 amending the Availability Test Procedure.

Renewable Energy Projects Under Construction and Under Development

Renewable Energy Projects under Construction under AC Energy’s Associates and Joint Ventures

Negros Occidental Renewable Projects

On 20 March 2018, Presage and Zabaleta & Co. entered into a share purchase agreement for acquisition of
21,484 common shares in Isla Bio, which represents a 42.97% voting interest. Isla Bio is the entity that holds
interests in three biomass plants in Negros Occidental province that are currently under construction, namely the:
(1) 20 MW San Carlos BioPower Project, (2) 25MW South Negros BioPower Project and (3) 25MW Negros
BioPower Project.

The biomass plants are conceptualized to be highly efficient power plants capable of combusting a range of
locally available biomass to generate power by a steam turbine-driven generator utilizing tried and proven
technologies while ensuring environmental compliance. Biomass, including but not limited to, agricultural
residue such as sugarcane trash and coconut husks/shells, as well as wood and grasses, will be the main fuel
utilized in such plants.

Vietnam Renewable Projects

AC Energy’s projects under construction in Vietnam are in partnership with AMI Renewables, a joint stock
company incorporated in Vietnam, and the BIM Group of Vietnam.

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AMI Renewables Projects. In January 2018, ACEV entered into a 50:50 joint venture with AMI Renewables to
invest in New Energy Investments, a joint stock company with 100% ownership over the shares of the following
entities with projects situated in Vietnam: (i) AMI Energy Khanh Hoa, which has commenced construction of the
Khanh Hoa Solar Plant, (ii) BMT Dak Lak, which has commenced construction of the Dak Lak Solar Plant, and
(iii) B&T Quang Binh for the development of an up to 200MW wind farm in Quang Binh province.

In June 2018, B&T Quang Binh and Quang Bihn province of Vietnam signed a memorandum of understanding to
develop up to 352MW of wind projects with a project cost of up to $493.00 million. Sizing of the wind farm is
still subject to further review and the projects are still in pre-development stage.

On 12 October 2018, the Company in partnership with AMI Renewables, signed EPC and financing documents
for the development of the Khan Hoa and Dak Lak Solar Plants. The Khan Hoa and Dak Lak Solar Plants are
expected to commence operations in June 2019 with an expected combined net capacity of 80MW.

BIM Group Projects. As of June 2018, the Company entered into a partnership with the BIM Group for the
development of an aggregate of 330MW of solar plants — the Ninh Thuan Solar Plants. As of August 2018, the
Company and the BIM Group signed the relevant EPC contracts as well as project financing documents for the
development of the Ninh Thuan Solar Plants, which are expected to commence operations by June 2019.

In September 2017, a model PPA for solar projects was released in Vietnam. It reconfirmed FIT at
U.S.$9.35cents/KWh for 20 years for projects which are completed by June 2019. In order to be eligible for the
FIT, a project needs to be completed and certified by the EVN.

The government of Vietnam also increased the wind FIT to U.S.$8.50 cents/KWh from U.S.$7.80 cents/KWh
last September 2018 for the same 20 year period. Projects seeking this FIT must be completed no later than
30 November 2021.

Renewable Energy Development Platforms

In March 2017, AC Energy acquired 100% of the ownership interests in BCE (now Visayas Renewables Corp.)
and SCCE (now AC Energy Development Inc.). The acquisition provides AC Energy with a renewable energy
development, management and operations platform. The platform currently provides operations and management
support to renewable energy companies that include San Carlos Solar Energy Inc., Negros Island Solar Energy
Inc., Montesolar Energy Inc., San Carlos BioPower Inc., South Negros BioPower Inc. and North Negros
BioPower Inc.

In July 2017, AC Energy, acting through its subsidiary AC Energy International, entered into a shareholders’
agreement with UPC Renewables Asia Pacific Holdings Limited and UPC Renewables Asia I Limited to provide
development funding to certain island renewable power projects in Indonesia.

AC Energy is scaling up its renewable energy platform with a strong pipeline of projects in the region and targets
to reach financial close for various renewable projects with an expected gross capacity of over 4,000MW in the
next five years, as follows:

Expected
Gross
Capacity
Location Fuel Type (MW)
Australia Solar 700*
Australia Wind 1,000*
Vietnam Solar 400**
Vietnam Wind 800
Philippines Solar 600
Philippines Wind 200
Indonesia Wind 200
Indonesia Geothermal 200
* This includes the projects under development but not yet
under construction by UPC-AC Energy Renewables Australia.
**A portion is now currently under construction.

The Company’s attributable capacity from these projects to be undertaken together with various partners and
through various subsidiaries, associates and joints have not yet been determined. The Company’s target pipeline

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reflects its current strategy and may change as proposed projects are reviewed or contracts are entered into, and
subject to various factors, including market conditions, the general state of the economy and investment
environment where the projects will be located and the ability to obtain financing, among others. See “Risk
Factors—Risks Relating to the Company and its Businesses— AC Energy may not successfully implement its
growth strategy and the impact of acquisitions, investments and value realization initiatives could be less
favorable than anticipated; —Risks and delays relating to the development of greenfield power projects could
have a material adverse effect on the Company’s operations and financial performance.”

Conventional Energy Portfolio

As of 31 December 2018, the Company had a total attributable capacity of over 200 MW conventional energy in
operation, over 1,100 MW conventional energy under construction.

Conventional Energy Projects in Operation

Conventional Energy Projects in Operation under AC Energy’s Associates and Joint Ventures

GNPower Mariveles Project

In December 2012, Ayala Corporation entered into a sale and purchase agreement to acquire the interests held by
an affiliate of a fund advised by Denham Capital in GMCP, the owner and operator of the 2 x 316MW coal-fired
generating plant in Mariveles, Bataan province. In January 2014, Ayala Corporation, through its wholly-owned
subsidiary, Ayala International Holdings Ltd., closed the acquisition of 17.0246% interest in GMCP. The
acquisition includes a step-up in the sharing percentage (economic) attributable to the limited partnership interest
acquired from 17.0246% to 20.3372% (following a pre-agreed formula) upon the recoupment by Sithe Global
Investors (the lead partner for the project) of their total equity contribution to the project.

On 30 May 2014, Arlington Mariveles Netherlands Holding B.V. (“AMNHB”) and AMPLC, a wholly owned
subsidiary of AC Energy, entered into an agreement for the sale and purchase of 17.02% outstanding limited
partnership interest of AMNHB in GMCP. In the second half of 2017, the step up of AC Energy’s sharing
percentage to 20.3372% became effective. In 29 January 2018, AMPLC became the legal and registered owner
of the limited partnership interest in GMCP.

GMCP is engaged in all aspects of developing, financing, obtaining permits and licenses for constructing,
owning and operating a 2x316MW clean pulverized coal-fired electric power generation facility, including any
future expansion, and other assets including transmission and sub-transmission lines and jetties, in each case to
be located in Bataan, Philippines. More than 90% of capacity is contracted under long-term dollar-denominated
power supply agreements with pass-through provisions.

On 26 September 2018, AC Energy entered into an agreement with Aboitiz Power for the sale of a 49% voting
stake and 60% economic stake in AA Thermal, AC Energy’s thermal platform in the Philippines which also
holds the 17.02% partnership interest in GMCP. See “—Corporate Structure—AA Thermal Disposition.”

SLTEC Project

In June 2011, AC Energy signed a joint venture agreement with PHINMA Energy to form the 50:50 joint venture
company, SLTEC. The joint venture is for the construction and operation of a 2 x 122MW CFB thermal power
plant in Calaca, Batangas. SLTEC achieved commercial operations for the first unit of the Calaca project in 2015
and for the second unit in 2016. DM Consunji, Inc was the EPC contractor for both units. Also in 2016, AC
Energy and PHINMA Energy sold of a portion of their ownership stake in SLTEC to Marubeni Corporation’s
subsidiary, Axia Power. The sale brought PHINMA Energy’s ownership in SLTEC to 45%, and AC Energy’s
ownership to 35%.

Conventional Energy Projects under Construction

Conventional Energy Projects Under Construction under AC Energy’s Subsidiaries

GNPower Kauswagan Project

In July 2013, AC Energy signed a partnership agreement with Power Partners, a private limited partnership
engaged in developing and owning power facilities in the Philippines since 2001, to build and operate a 3 x
138MW coal-fired power plant in Kauswagan, Lanao del Norte through GNPK. The project was subsequently
expanded to include a fourth unit, and PINAI participated as an additional limited partner in GNPK.

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In July 2016, GNPK, achieved financial close for additional funding to enable the construction of Unit 4 of the
GNPower Kauswagan Project. Unit 1 of the GNPower Kauswagan Project is expected to start commercial
operations by the first half of 2019 and units 2, 3 and 4 are expected to commence commercial operations in the
second half of 2019.

Conventional Energy Projects under Construction under AC Energy’s Associates and Joint Ventures

GNPower Dinginin Project

In December 2013, AC Energy signed an investment agreement with Sithe Global GNPD BV and Power Partners
for the development of a proposed 2 x 668MW coal-fired power plant project in Bataan. In January 2017, GNPD,
the joint venture company of the partners, commenced construction of the plant, with Unit 1 expecting
completion by 2019. On 26 September 2018, AC Energy entered into an agreement with Aboitiz Power for the
sale of a 49% voting stake and 60% economic stake in AA Thermal, which holds 25% partnership interest in
GNPD. See “—Corporate Structure—AA Thermal Disposition.”

OTHER BUSINESSES

Retail Electricity Supply Business

On 8 September 2016, AC Energy obtained an RES license allowing it to sell electricity to the end-users in the
contestable market. As of 30 September 2018, the RES business has contracted capacity of over 100MW from
several contestable customers across a mix of industries including manufacturing, office and mall operators.

Power Project Management

The Company provides management services to the Islasol Project and Sacasol Project, and previously to the
biomass projects located in Negros Occidental through its subsidiary AC Energy DevCo. Management of the
biomass projects were transferred to Isla Bio effective 1 September 2018.

As the management company, AC Energy DevCo provides both technical services for construction, operation
and maintenance of the solar plants as well as administrative and commercial services for these plants. See
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Description of
Selected Income Statement Items—Management Fees.”

The Company receives management fees on a monthly basis for the provision of management services.

In addition, the Company also earns management fees from NLR, NorthWind, GNPD and GNPK in relation to
certain key management personnel seconded to these project companies.

COMPETITION

The Company believes that it will face competition in both the development of new power generation facilities,
the acquisition of existing power plants, competition for financing for these activities, as well as if the retail
electricity supply business. The performance of the Philippine economy and the potential for a shortfall in the
Philippines’ energy supply have attracted many potential competitors, including multinational development
groups and equipment suppliers, to explore opportunities in the development of various electric power generation
projects within the Philippines. Accordingly, competition for and from new power projects, and in retail
electricity supply may increase in line with the long-term economic growth in the Philippines. Key competitors
for market share in the Philippines include Aboitiz Power, Energy Development Corporation, First Gen, SMC
Global Power MGen and their affiliated retail electricity suppliers.

In Vietnam, EVN controls the generation, transmission and distribution of energy but it also encourages
independent power producers (“IPP”) to supplement its own generation capacity. In the renewable energy space,
local and international developers are actively competing to secure allocation for the FIT. While the Company’s
solar projects are well positioned to secure their FIT allocations before June 2019, given the attractive FIT policy
of the country, the market is expected to continue to bring in more market players.

In Indonesia, similar to Vietnam, the generation, transmission and distribution is controlled by PLN, but the
Indonesian government also encourages IPP. Indonesia is a highly competitive market with major domestic and
international developers. Given the continuing growth of the Indonesian economy, the Company sees
competition to continue to intensify moving forward.

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Australia has a fully open energy market that is dominated by a few big generator-retailers (“gentailers”)
including Origin, AGL, Energy Australia and ERM Power. Several international and smaller domestic players
are also very active in the market.

INTELLECTUAL PROPERTY

AC Energy owns exclusive rights to its corporate name. Management believes that the business of AC Energy as
a whole is not materially dependent on any trademark or on any other intellectual property.

INSURANCE

The Company maintains insurance at levels that it believes are customary in the power generation industry to
protect against various losses and liabilities that may arise from the risks and hazards in the operations of its
power generation businesses, including all-risk insurance, business interruption insurance, commercial general
liability insurance, marine cargo insurance and terrorism and political violence insurance. In addition, the
Company obtains insurance that includes construction all-risks, commercial general liability insurance, marine
cargo insurance and terrorism, sabotage and political violence insurance covering facilities, equipment and
infrastructure under construction.

The Company further maintains Directors and Officers liability insurance to cover its Directors and Officers and
employees serving as Director or Officer on any of its subsidiaries.

To determine the appropriate insurance policies and levels of insurance coverage, the Company conducts regular
risk analyzes. It also participates in the Ayala Group-wide insurance optimization program.

EMPLOYEES AND LABOR RELATIONS

As of 30 September 2018, the Company had 131 employees located in the Philippines, Vietnam and Indonesia,
comprised of 36 executives, 75 managerial, professional and technical employees, and 20 rank and file
employees. From time to time, the Company seconds its employees to certain project companies to provide
finance, development and management services and functions.

The Company’s employees and the employees of its joint ventures are not members of any unions, and for the
years ended 31 December 2015, 2016, and 2017, and the nine months ended 30 September 2018, the Company
has not been involved in any labor disputes which would have a material adverse effect on its results of
operations and financial condition.

With respect to GMCP, where the Company has an ownership interest of 20.3372%, the rank and file employees
of GMCP are members of the Mariveles Power Station Employees Union.

Management believes that Group’s current relationship with their respective employees is generally good and
neither the Company nor any of its subsidiaries have experienced a work stoppage as a result of labor
disagreements.

ENVIRONMENT, SAFETY AND HEALTH

The Company is subject to environmental laws and regulations in the jurisdictions in which it develops, owns,
manages and/or operates power projects. These laws and regulations generally require that governmental permits
and approvals be obtained both before construction and during operation of power plants. While the Company
incurs costs in the ordinary course of business to comply with these laws, regulations and permit requirements, it
does not expect that the costs of compliance will have a material impact on its business, financial condition or
results of operations. These laws and regulations frequently change and often become more stringent, or subject
to more stringent interpretation or enforcement, and therefore future changes could require us to incur materially
higher costs.

CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY

The Company’s commitment to sustainability and social responsibility goes beyond environmental management
or development of social projects. The Company, together with its parent, Ayala Corporation, integrates its
sustainability principles into all aspects of its businesses and provide guidance for day-to-day operations and our
sustainable business strategy.

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As AC Energy builds a balanced portfolio of renewable and conventional power generation assets, it recognizes
the importance of working with communities to create development programs that benefit its stakeholders. Its
programs are classified under the key result areas of environment, livelihood, health and sanitation, and
education.

AC Energy’s flagship program is a conservation estate in Pagudpud, Ilocos Norte, which aims to preserve and
enhance the ecological character of the area through initiatives that include reforestation and agro-forestry.

The Company also contributes to community development programs at the project level. The GNPower
Mariveles Project has implemented several programs, one of which is the “Cement Credits-Total Ash
Management” program. This allows cement producer Lafarge to collect GMCP’s coal ash and translates these
into credits for cement products from Lafarge. GMCP then makes the cement products available to the province
of Bataan for public works projects such hospitals and community facilities.

In Mindanao, GNPK has built storage facilities benefiting over 59 fisherfolk from local barangays. It has also
implemented a cadetship program where qualified engineering graduates from Mindanao State University attend
a year-long training program. Cadets who graduate from the program automatically qualify as regular operations
staff of GNPK.

Environment

The North Luzon Renewables Project undertook a reforestation initiative in 2014. As of 2017, it has exceeded the
replanting requirement set by the Department of Environment and Natural Resources (the “DENR”), with
209,874 seedlings planted within the vicinity of its 81MW wind farm and a survival rate of 94%. NLR’s wind
farm stretches across the 625-hectare forest area which the company develops and protects under the Forest
Land-use Agreement (“FLAg”) with the DENR.

As part of AC Energy’s conservation estate project, North Luzon Renewables performed a biodiversity
assessment study from 2017 to 2018 to generate baselines for tree, bird, and mammal species. Results suggest
that the wind farm becoming is slowly becoming a refuge for a variety of flora and fauna; the data on the bird
community strongly suggest that the forests within the wind farm is an important habitat for endemic and
threatened birds in Northern Luzon. The Company plans to develop a monitoring system for certain focal species
to determine whether forest rehabilitation and management are resulting in clear biodiversity outcomes.

In its Bangui wind farm operated by NorthWind Power, the Company plans work closely with the community to
develop a turtle sanctuary in the area. Through an ecological study, AC Energy and NorthWind are looking to
develop sustainable ways to protect turtle hatchlings so that more turtles return to Bangui’s shores in the years to
come.

AC Energy has also entered into partnerships with host communities on a solid waste management program
which includes a materials recovery facility in the NorthWind Project and the Montesol Project.

Livelihood

AC Energy and NLR launched a five-year agro-forestry program in 2018 with a series of lectures and workshops
with farmers that reside within the boundaries of the wind farm, led by consultants from UP Los Baños. A
4.5-hectare piece of land serves as a model farm where a variety of sustainable farming techniques are being
implemented. Professional agro-foresters helped equip an initial batch of 20 to 30 individuals with the skills in
growing fruit-bearing trees.

Since pre-construction, NLR has provided 1,900 employment opportunities for many locals who work as plant
nursery staff, forest guards, maintenance and stockyard workers, and civil works personnel.

In respect of the Montesol Project, AC Energy is undertaking a cattle-raising program with its host community,
slated to begin in 2019.

Education

In respect of NLR and NorthWind, the Company is planning to establish a learning lab for local students where
they can learn about wind technology and renewable energy through modules and educational videos to be
provided by AC Energy.

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Health and Sanitation

Through NLR and GMCP, AC Energy extends assistance to host communities via regular medical missions.
NLR has implemented a sanitation system in its host barangay which includes the construction of deep wells, a
filtration system, and storage tank to improve water supply. SLTEC undertook the construction of the first
hospital in Calaca, Batangas, which was turned over to the local government for operation and maintenance.

Electrification

In 2017, AC Energy partnered with Kennedy Renewable + Technology Corporation to provide Mindanao State
University in Tawi-Tawi with solar panels. Seven campus buildings were outfitted with solar panels, hybrid
inverters, and batteries for energy storage, helping to address the power shortages in the university and reducing
the impact of electrical disruptions and lowering the school’s cost of electricity.

Disaster Risk Reduction

NLR and NorthWind Power have been training local communities on disaster preparedness and response through
the “Resilient Communities Campaign”, which has empowered community members across 32 barangays to take
a proactive approach to disaster management. AC Energy has also contributed to international relief efforts in
Indonesia with its partner UPC Renewables Indonesia, following the 7.5-magnitude earthquake and tsunami that
struck Central Sulawesi in 2018.

International Partnerships

AC Energy, through partnerships with international developers across Southeast Asia, is committed to
minimizing the environmental and social impact of its projects.

Singapore-based development platform The Blue Circle conducts social due diligence in its project areas to
ensure that community development opportunities are identified and implemented. It undertakes detailed
environmental impact assessments in coordination with experts to reduce the environmental impact of its
projects.

UPC Renewables, AC Energy’s partner in the Sidrap Wind Project, works with local communities in project
areas to provide programs that improve the living standards in its communities. It has implemented programs
such as housing renovation, provision of clean water systems, cleft-lip surgery, and an English language program
for local schoolchildren.

Star Energy, AC Energy’s partner in the Salak-Darajat Geothermal Projects in Indonesia, has implemented
education, medical assistance, and social development programs in its local communities. It has also contributed
to the provision of clean water supply, as well as the construction of public roads, sports facilities, schools, and
religious infrastructure in its areas of operation.

DESCRIPTION OF PROPERTY

The Company’s property and equipment related primarily to its projects in operation and under construction. The
Company owns parcels of land located in Kauswagan, Lanao del Norte totaling 684,640 square meters, which is
used as the project site for the construction and operations of the GNPower Kauswagan Project. As part of the
acquisition of the BCE portfolio, the company purchased 66.22% interest in Manapla Sun Power Development
Corp., which owns 638,193 square meters of land located in Barangay Sta. Teresa, Municipality of Manapla,
Negros Occidental that is leased to Islasol for a period of 25 years.

LEGAL PROCEEDINGS

The Company and its subsidiaries, from time to time, are subject to various legal actions arising in the ordinary
course of business. The Company believes that none of the lawsuits or legal actions to which it is currently
subject will materially affect the daily operations of its business nor will they have a material adverse effect on
the Company’s consolidated financial position and results of operations.

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 REGULATION AND ENVIRONMENTAL MATTERS

OVERVIEW OF THE PHILIPPINE ENERGY INDUSTRY

Organization and Operation of the Power Industry

Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act (“EPIRA”) established a
framework for the organization and operation of the electric power industry in connection with its restructuring,
with the industry divided into four sectors: generation, transmission, distribution and supply. The structural
reforms resulted among others in the creation of two government-owned and controlled corporations
(“GOCCs”), the Power Sector Assets and Liabilities Management Corporation (“PSALM”) and the TransCo.

The following diagram shows the current structure of the electric power industry under the EPIRA:

JCPC

ERC PSALM DOE NEA

NPC

Industry Participants

WESM SPUG

Suppliers/ DUs
GENCOs Transco
Aggregators PUs ECs

Oversight Regulation
Supervision Policy making
Coordination Competitive
Ownership Control Regulated

Note:
DUs: Distribution Utilities
ECs: Electric Cooperatives
GENCOs: Any entity authorized by the ERC to operate electricity generation facilities
JCPC: Joint Congressional Power Commission
PUs: Production Utilities

Since the enactment of the EPIRA in 2001, the Philippine power industry has undergone and continues to
undergo significant restructuring. Through the EPIRA, the Philippine government began to institute major
reforms with the goal of fully privatizing all aspects of the power industry. The major aspects of the reforms
include the (1) restructuring of the entire power industry to introduce competition in the generation sector,
(2) change from government to private ownership, and (3) introduction of a stable regulatory framework for the
electricity sector.

With a view to implementing the EPIRA’s objectives, the DOE, in consultation with the relevant government
agencies, electric power industry participants, non-government organizations and electricity consumers,
promulgated the Implementing Rules and Regulations of the EPIRA (the “EPIRA IRR”) on 27 February 2002.

The EPIRA IRR governs the relations between, and respective responsibilities of, the different electric power
industry participants as well as the particular governmental authorities involved in implementing the structural
reforms in the industry, namely the DOE, NPC, National Electrification Administration (“NEA”), ERC and
PSALM.

Primary Regulatory Agencies

Energy Regulatory Commission

The ERC is the independent, quasi-judicial regulatory body created under the EPIRA that replaced the Energy
Regulatory Board. The ERC plays a significant role in the restructured industry environment, consisting of,
among others, promoting competition, encouraging market development, ensuring consumer choice and
penalizing abuse of market power by industry participants.

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Department of Energy

In accordance with its mandate to supervise the restructuring of the electric power industry, the DOE exercises,
among others, the following functions:

(i) preparation and annual updating of the Philippine Energy Plan and the Philippine Power Development
Program, and thereafter integrate the latter into the former;
(ii) ensuring the reliability, quality and security of the supply of electric power;
(iii) exercise of supervision and control over all government activities pertaining to energy projects;
(iv) encouragement of private investment in the power industry sector and promotion of the development of
indigenous and renewable energy sources for power generation;
(v) facilitation of reforms in the structure and operation of distribution utilities for greater efficiency and
lower costs;
(vi) promotion of incentives to encourage industry participants, including new generating companies and
end-users, to provide adequate and reliable electric supply;
(vii) education of the public (in coordination with NPC, ERC, NEA and the Philippine Information Agency)
on the restructuring of the industry and the privatization of NPC assets; and
(viii) establishment of the WESM in cooperation with electric power industry participants, and formulating
rules governing its operations.

Joint Congressional Power Commission

The Joint Congressional Power Commission created pursuant to the EPIRA consists of 14 members with the
Chairmen of the Committee on Energy of the Philippine Senate and House of Representatives and six
(6) additional members from each House to be designated by the Senate President and the Speaker of the House
of Representatives, respectively.

The initial term of the JCPC was 10 years from the effectivity of the EPIRA, or only until 26 June 2011.
However, since key structural changes introduced in the EPIRA have yet to be carried out as well as the need to
oversee the implementation of the Renewable Energy Act, the Philippine Congress issued Joint Resolution No. 1
on 26 July 2010 (which was passed by the Senate and the House of Representatives on 6 June 2011 and approved
by the President of the Philippines on 21 June 2011) extending the term of the JCPC for another period of 10
years from 26 June 2011.

Reorganization of the Electric Power Industry

Of the many changes initiated by the EPIRA, of primary importance is the reorganization of the electric power
industry by segregating the industry into four sectors: (1) the generation sector; (2) the transmission sector;
(3) the distribution sector; and (4) the supply sector. The goal is for the generation and supply sectors to be fully
competitive and open, while the transmission and distribution sectors will remain regulated. Prior to the EPIRA,
the industry was regulated as a whole, with no clear distinctions between and among the various sectors and/or
services.

The Generation Sector

The generation sector converts fuel and other forms of energy into electricity. This sector, by utility, consists of
the following: (i) NPC-owned and -operated generation facilities; (ii) NPC-owned plants, which consist of plants
operated by IPPs, as well as IPP-owned and -operated plants, all of which supply electricity to NPC; and
(iii) IPP-owned and -operated plants that supply electricity to customers other than NPC. Successes in the
privatization process of NPC continue to build up momentum for the power industry reforms.

Historically, the generation sector has been dominated by NPC. To introduce and foster competition in the sector,
and, more importantly, to lessen the debt of NPC, the EPIRA mandates the total privatization of the generation
assets and IPP agreements of NPC, which exclude the assets devoted to missionary electrification through the
NPC Small Power Utilities Group (“SPUG”). NPC is directed to transfer ownership of all the assets for
privatization to a separate entity, PSALM, which is specially tasked to manage the privatization. Beginning early
2004, PSALM has been conducting public bidding for the generation facilities owned by NPC.

The goal of the EPIRA is for the generation sector to be open and competitive, while the private sector is
expected to take the lead in introducing additional generation capacity. Generation companies will compete
either for contracts with various suppliers and private distribution utilities, or through spot sale transactions in the
WESM. Competition will be based largely on pricing, subject to availability of transmission lines to wheel

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electricity to the grid and/or buyers. Recovery by distribution utilities (“DUs”) of their purchased power cost is
subject to review by the ERC to determine reasonableness of the cost and to ensure that the distribution utilities
do not earn any revenue therefrom. With the implementation of RCOA, generation rates, except those intended
for the “Captive Market” (i.e., a market of electricity end-users who may not choose their supplier of electricity),
ceased to be regulated to a certain extent.

Under the EPIRA, generation companies are allowed to sell electricity to distribution utilities or to retail
electricity suppliers through either bilateral contracts or the WESM as described below. With the implementation
of RCOA on 26 December 2013, generation companies may likewise sell electricity to eligible end-users with an
average monthly peak demand of 750KW and certified by the ERC to be such (“Contestable Customers”). No
generation company is allowed to own more than 30.0% of the installed generating capacity of the Luzon,
Visayas or Mindanao grids and/or 25.0% of the national installed generating capacity. Also, no generation
company associated with a distribution utility may supply more than 50.0% of the distribution utility’s total
demand under bilateral contracts, without prejudice to the bilateral contracts entered into prior to the enactment
of the EPIRA.

The EPIRA provides that power generation is not a public utility operation and thus, not required to secure
national franchises and there are no restrictions on the ability of non-Filipinos to own and operate generation
facilities. However, in order to operate, generation companies must obtain a COC from the ERC, as well as
health, safety and environmental clearances from appropriate government agencies under existing laws. Upon
implementation of retail competition and open access (“RCOA”), the prices charged by a generation company
for the supply of electricity shall not be subject to regulation by the ERC except as otherwise provided under the
EPIRA.

The ERC may impose fines and penalties for violations by generation companies of the EPIRA and the EPIRA
IRR policies as well as the ERC’s rule and regulations on market power abuse, cross-ownership and anti-
competitive behavior.

Requirement of Public Offering for Generation Companies

Under Section 43(t) of the EPIRA, the ERC was mandated to issue rules and guidelines under which, among
others, generation companies which are not publicly listed shall offer and sell to the public a portion of not less
than 15.0% of their common shares of stock.

ERC Resolution No. 9, Series of 2011, the latest ruling of the ERC with regard to public offerings of generation
companies and distribution utilities, adopted the rules to implement Section 43(t) of the EPIRA. Under the
resolution, generation companies, among others, which are not publicly listed are required to sell to the public a
portion of not less than 15.0% of their common shares of stock. If the authorized capital stock of a generation
company is fully subscribed, such company must increase its authorized capital stock by 15.0% or sell or cause
the sale of 15.0% of its existing subscribed capital stock in order to comply with the public offering requirement
under the EPIRA.

According to Resolution No. 9, which took effect on 29 June 2011, any offer of common shares of stock for sale
to the public through any of the following modes may be deemed as a public offering for purposes of compliance
with the public offering requirement under the EPIRA: (1) listing on the PSE; and (2) listing of the shares of
stock in any accredited stock exchange or direct offer of the required portion of a company’s capital stock to the
public. For generation companies registered with the BOI under the Omnibus Investments Code, the public
offering requirement may be complied with by a direct offer of the required portion of the registered enterprise’s
shares of stock to the public or through its employees through an employee stock option plan (or any plan
analogous thereto), provided such offer is deemed feasible and desirable by the BOI.

However, the offer of common shares through an employee stock option plan is not considered a public offering
since the offer is limited only to the employees of the generation companies or the DUs and not to the general
public. The offer to employees may be considered public offering only when the generation company or
distribution utility is a registered enterprise under the Omnibus Investment Code. Further, the public offering
requirement does not apply to: (i) self-generation facilities, (ii) generation companies and distribution utilities
already listed on the PSE, (iii) generation companies and distribution utilities whose holding companies are
already listed on the PSE, (iv) generation companies and distribution utilities which are organized as
partnerships, and (v) electric cooperatives which have no common shares of stock.

The public offering by existing companies shall be made within five years from the effectivity of ERC
Resolution No. 9, Series of 2011, or until 29 June 2016. The five-year period was extended up to 29 June 2017

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pursuant to ERC Resolution No. 18, Series of 2016. For new companies, however, the five-year period is counted
from the issuance by the ERC of their respective COCs. The period for compliance has further been extended
pursuant to ERC Resolution No. 10, Series of 2017 for another year, or until the resolution of the petition filed by
the Private Electric Power Operators Association regarding the clarification on whether the registration of
common shares at the SEC may be considered as a mode of public offering is resolved, whichever comes earlier.
On 21 June 2018, the ERC issued Resolution No. 14, Series of 2018 which further extended the period for
compliance until 29 December 2018. As of the date of this Offering Circular, the ERC has not publicly issued
any other resolution relating to the same.

The Transmission Sector

Pursuant to the EPIRA, NPC has transferred its transmission and sub-transmission assets to TransCo, which was
created pursuant to the EPIRA to assume, among other functions, the operation of the electrical transmission
systems throughout the Philippines. The principal function of TransCo is to ensure and maintain the reliability,
adequacy, security, stability and integrity of the nationwide electrical grid in accordance with the Philippine Grid
Code (“Grid Code”). TransCo is also mandated to provide Open Access to all industry participants. The EPIRA
granted TransCo a monopoly over the high-voltage network and subjected it to performance-based regulations.

The transmission of electricity through the transmission grid is subject to transmission wheeling charges. Since
the transmission of electric power is a regulated common carrier business, the transmission wheeling charges of
TransCo are subject to regulation and approval by the ERC.

The EPIRA also requires the privatization of TransCo through an outright sale of, or the grant of a concession
over, the transmission assets while the subtransmission assets of TransCo are to be offered for sale to qualified
distribution utilities. In December 2007, NGCP, comprising a consortium of Monte Oro Grid Resources, Calaca
High Power Corporation and State Grid Corporation of China, won the concession contract to operate, maintain
and expand the TransCo assets with a bid of U.S.$3.95 billion. NGCP was officially granted the authority to
manage and operate the country’s sole transmission system on 15 January 2009. Ownership of all transmission
assets, however, remained with TransCo.

The Grid Code establishes the basic rules, requirements, procedures and standards that govern the operation,
maintenance and development of the Philippine grid, or the high-voltage backbone transmission system and its
related facilities. The Grid Code identifies and provides for the responsibilities and obligations of three key
independent functional groups, namely: (a) the grid owner, or TransCo; (b) the system operator, or NGCP as the
current concessionaire of TransCo; and (c) the market operator, or PEMC. These functional groups, as well as all
users of the grid, including generation companies and distribution utilities, must comply with the provisions of
the Grid Code as promulgated and enforced by the ERC.

The Distribution Sector

The distribution of electric power to end-users may be undertaken by private distribution utilities, cooperatives,
local government units presently undertaking this function, and other duly authorized entities, subject to
regulation by the ERC. The distribution business is a regulated public utility business requiring a franchise from
Congress, although franchises relating to electric cooperatives remained under the jurisdiction of the NEA until
the end of 2006. All distribution utilities are also required to obtain a Certificate of Public Convenience and
Necessity (“CPCN”) from the ERC to operate as public utilities.

All distribution utilities are also required to submit to the ERC a statement of their compliance with the technical
specifications prescribed in the Philippine Distribution Code (“Distribution Code”), the Distribution Services
and Open Access Rules (“DSOAR”) and the performance standards set out in the EPIRA IRR.

The distribution sector is and will continue to be regulated by the ERC, with distribution and wheeling charges,
as well as connection fees from its consumers, subject to ERC approval. Likewise, the retail rate imposed by
distribution utilities for the supply of electricity to its captive consumers is subject to ERC approval. In addition,
as a result of the Philippine government’s policy of promoting free competition and open access, distribution
utilities are required to provide universal and non-discriminatory access to their systems within their respective
franchise areas following commencement of RCOA.

The Distribution Code establishes the basic rules and procedures that govern the operation, maintenance,
development, connection and use of the electric distribution systems in the Philippines.

The Distribution Code defines the technical aspects of the working relationship between the distributors and all
the users of the distribution system, including distribution utilities, embedded generators and large customers. All

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such electric power industry participants in distribution system operations are required to comply with the
provisions of the Distribution Code as promulgated and enforced by the ERC.

The Supply Sector

The supply of electricity refers to the sale of electricity directly to end-users. The supply function is currently
being undertaken solely by franchised distribution utilities. However, with the implementation of RCOA, the
supply function has become competitive. The business is not considered a public utility operation and suppliers
are not required to obtain franchises. However, the supply of electricity to the “Contestable Market” (i.e., a
market of electricity end-users who have a choice on their supplier of electricity) is considered a business with a
public interest dimension. As such, the EPIRA requires all suppliers of electricity to the Contestable Market to
obtain a license from the ERC and they are subject to the rules and regulations of the ERC on the abuse of market
power and other anti-competitive or discriminatory behavior.

Under the RCOA rules, a retail electricity supplier may only sell up to 50% of its total capacity to all of its
end-user affiliates. With the implementation of the RCOA, a RES license allows a generation company to enter
into retail electricity supply agreements with Contestable Customers. This set-up encourages competition at the
retail level. It has been planned that retail competition will gradually increase over time, provided that supply
companies are sufficiently creditworthy to be suitable offtakers for generation companies.

Competitive Market Devices

Wholesale Electricity Spot Market

The EPIRA mandates the establishment of the WESM, which is a pre-condition for the implementation of
RCOA, within one year from its effectivity. The WESM provides a venue whereby generators may sell power,
and at the same time suppliers and wholesale consumers can purchase electricity where no bilateral contract
exists between the two. The establishment of the WESM facilitates a transparent and competitive electricity
market for the country.

All generation companies, distribution utilities, suppliers, bulk consumers/end-users and other similar entities
authorized by the ERC are eligible to become WESM members subject to compliance with membership
requirements.

On 28 June 2002, the DOE, in cooperation with electric power industry participants, promulgated detailed rules
for the WESM. These rules set the guidelines and standards for participation in the market, reflecting accepted
economic principles and providing a level playing field for all electric power industry participants, and
procedures for establishing the merit order dispatch for each time (hourly trading period). These rules also
provide for a mechanism for setting electricity prices that are not covered by bilateral contracts between
electricity buyers and sellers.

On 18 November 2003, upon the initiative of the DOE, the PEMC was incorporated as a non-stock, non-profit
corporation with membership comprising an equitable representation of electricity industry participants and
chaired by the DOE. The PEMC acts as the autonomous market group operator and the governing arm of the
WESM. The PEMC was tasked to undertake the preparatory work for the establishment of the WESM, pursuant
to Section 30 of the EPIRA and in accordance with the WESM Rules. Its primary purpose is to establish,
maintain, operate and govern an efficient, competitive, transparent and reliable market for the wholesale
purchase of electricity and ancillary services in the Philippines in accordance with relevant laws, rules and
regulations.

Retail Competition and Open Access

The EPIRA likewise provides for a system of RCOA on transmission and distribution wires, whereby TransCo/
NGCP and distribution utilities may not refuse the use of their wires by qualified persons, subject to the payment
of distribution and wheeling charges. Conditions for the commencement of the open access system are as
follows:

(i) establishment of the WESM;

(ii) approval of unbundled transmission and distribution wheeling charges;
(iii) initial implementation of the cross-subsidy removal scheme;
(iv) privatization of at least 70.0% of the total capacity of generating assets of NPC in Luzon and Visayas;
and

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 (v) transfer of the management and control of at least 70.0% of the total energy output of power plants
under contract with NPC to the IPPAs.

Prior to the implementation of the RCOA, the distribution utility exclusively procures energy on behalf of its
customers, and delivers the energy through its distribution wires. With RCOA, competing RES will do the
buying and selling of electricity, and have the distribution utility deliver the energy for them through the
distribution utility’s existing distribution wires. The Contestable Customers will have more choices in pricing
and power supply contracting, thereby getting the best deal in terms of price and value for money.

The implementation of retail competition and open access is mandated by the EPIRA, subject to the fulfillment
of certain conditions including, but not limited to, the establishment of the WESM, the unbundling of
transmission and distribution wheeling charges, and privatization of at least 70% of the total capacity of
generating assets of NPC in Luzon and Visayas. 26 December 2011 was the commencement of the full
operations of the competitive retail electricity in Luzon and Visayas. Initially, all electricity end-users with an
average monthly peak demand of one (1) MW for 12 months preceding 26 December 2011, as certified by the
ERC to be contestable customers, shall have the right to choose their own electricity suppliers and are, thus,
enjoined to exercise such right to their full benefit.

On 17 December 2012, the ERC promulgated the transitory rules for the implementation of RCOA.

Beginning 26 December 2016, an end-user with an average monthly peak demand of at least one MW is
mandated to enter into a RES Contract with a RES. By 26 June 2017, the threshold for mandatory migration to
contestability status is lowered to at least 750kW and by 26 June 2018, the threshold shall be lowered down to at
least 500kW.

On 21 February 2017, the Supreme Court issued a temporary restraining order (“TRO”) against the enforcement
of several orders and regulations promulgated by the ERC and the DOE in relation to RCOA, particularly those
compelling big consumers to enter into a power-supply deal with any of the RES accredited by the DOE and the
ERC by 26 February 2017.

Unbundling of Rates and Removal of Cross Subsidies

The EPIRA mandates that transmission and distribution wheeling charges be unbundled from retail rates and that
rates reflect the respective costs of providing each service. The EPIRA also states that cross-subsidies shall be
phased out within a period not exceeding three years from the establishment by the ERC of a universal charge,
which shall be collected from all electricity end-users. However, the ERC may extend the period for the removal
of the cross-subsidies for a maximum of one year if it determines that there will be a material adverse effect upon
the public interest or an immediate, irreparable and adverse financial effect on a distribution utility. The initial
implementation of the cross-subsidy removal scheme was accomplished in 2001.

These arrangements are now in place, in satisfaction of the conditions for RCOA.

The EPIRA likewise provides for a socialized pricing mechanism such as the lifeline rate subsidy to be set by the
ERC for marginalized or low-income captive electricity consumers who cannot afford to pay the full cost of
electricity. These end-users are exempt from the cross-subsidy removal for a period of ten years, unless extended
by law. Its application was extended for another ten years by Republic Act No. 10150, which was approved in
June 2011.

Implementation of the PBR

On 22 June 2009, the ERC issued the Rules for Setting Distribution Wheeling Rates that apply to privately
owned distribution utilities entering Performance Based Regulation (“PBR”) for the fourth entry points, which
set out the manner in which the new PBR rate-setting mechanism for distribution-related charges will be
implemented. PBR is intended to replace the return-on-rate-base regulation (“RORB”) that has historically
determined the distribution charges paid by the distribution companies’ customers. Under the PBR, the
distribution-related charges that distribution utilities can collect from customers over a four-year regulatory
period will be set by reference to projected revenues which are reviewed and approved by the ERC and used by
the ERC to determine a distribution utility’s efficiency factor. For each year during the regulatory period, a
distribution utility’s distribution charge is adjusted upwards or downwards taking into consideration the utility’s
efficiency factor set against changes in overall consumer prices in the Philippines. The ERC has also
implemented a performance incentive scheme whereby annual rate adjustments under PBR will also take into
consideration the ability of a distribution utility to meet or exceed service performance targets set by the ERC,

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such as the average duration of power outages, the average time to provide connections to customers and the
average time to respond to customer calls, with utilities being rewarded or penalized depending on their ability to
meet these performance targets.

Reduction of Taxes and Royalties on Indigenous Energy Resources

To equalize prices between imported and indigenous fuels, the EPIRA mandates the President of the Philippines
to reduce the royalties, returns and taxes collected for the exploitation of all indigenous sources of energy,
including but not limited to, natural gas and geothermal steam, so as to effect parity of tax treatment with the
existing rates for imported coal, crude oil, bunker fuel and other imported fuels. Following the promulgation of
the EPIRA IRR, President Arroyo enacted Executive Order No. 100 on 3 May 2002, to equalize the taxes among
fuels used for power generation. This mechanism, however, is yet to be implemented.

Government Approval Process

As set forth in the EPIRA, power generation is not considered a public utility operation. Thus, an entity engaged
or intending to engage in the generation of electricity is not required to secure a franchise. However, no person or
entity may engage in the generation of electricity unless such person or entity has complied with the standards,
requirements and other terms and conditions set by the ERC and has received a COC from the ERC to operate
facilities used in the generation of electricity. A COC is valid for a period of five years from the date of issuance.

In addition to the COC requirement, a generation company must comply with technical, financial and
environmental standards. A generation company must ensure that all its facilities connected to the grid meet the
technical design and operational criteria of the Grid Code and Distribution Code promulgated by the ERC. In this
connection, the ERC has issued “Guidelines for the Financial Standards of Generation Companies,” which sets
the minimum financial capability standards for generation companies. Under the guidelines, a generation
company is required to meet a minimum annual interest cover ratio or debt service coverage ratio of 1.5x
throughout the period covered by its COC. For COC applications and renewals, the guidelines require the
submission to the ERC of, among other things, comparative audited financial statements for the two most recent
12-months periods, if available, a schedule of liabilities, and a five-year financial plan. For the duration of the
COC, the guidelines also require a generation company to submit audited financial statements and forecast
financial statements to the ERC for the next two financial years, as well as other documents. The failure by a
generation company to submit the requirements prescribed by the guidelines may be a ground for the imposition
of fines and penalties.

The ERC also governs the approval process for Power Supply Agreement (“PSAs”) between distribution utilities
and power suppliers. Under ERC Resolution No. 38, Series of 2006, Rule 20 (B), the ERC specified that the
procedures established by the Guidelines for the Setting and Approval of Electricity Generation Rates and
Subsidies for Missionary Electrification Rates (ERC Res. No. 11, s. 2005), shall also be applicable for PSAs of
the distribution utilities. Aside from the regulatory certificates from the SEC, BOI, DOE, and the like, the ERC
also requires additional documentary support for PSA approval. For instance, they require financial data such as
debt-to-equity ratios, project costs, annual interests, weighted average cost of capital, bank loans, to name a few.
The ERC also requires a specification of the cash flow on the initial costs, operating & maintenance expenses,
Minimum Energy Offtake (“MEOT”), fuel costs, and the like. In addition, technical and economic
characteristics of the generating plant such as the kWh generation (basis of maintenance allowance), installed
capacity, mode of operation, and dependable capacity, also need to be presented for ERC approval.

Both resolutions specify that ERC must render a decision within 90 days from the date of filing of the
application. If no decision is rendered within the 90-day period, the PSA shall be deemed approved, unless the
extension of the period is due to extraordinary circumstances

Upon the introduction of RCOA, the rates charged by a generation company will no longer be regulated by the
ERC, except rates for Captive Markets (which are determined by the ERC). In addition, since the establishment
of the WESM, generation companies are now required to comply with the membership criteria and appropriate
dispatch scheduling as prescribed under the WESM Rules.

In the course of developing a power plant, other permits, approvals and consents must also be obtained from
relevant national, provincial and local government authorities, relating to, among others, site acquisition,
construction and operation, including environmental licenses and permits.

Retail rates charged by RES to Contestable Customers will not require ERC approval. Only the retail rates
charged by Distribution Utilities to their Captive Customers will be subject to the approval of the ERC.

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The Renewable Energy Act of 2008

Republic Act No. 9513, otherwise known as the Renewable Energy Act of 2008 (the “RE Law”) provides for the
acceleration and development of renewable resources. It was signed into law on 16 December 2008 and became
effective in January 2009.

Renewable energy developers of renewable energy facilities, including hybrid systems, in proportion to and to
the extent of the renewable energy component, for both power and non-power applications as certified by the
DOE are entitled to the following general incentives:

(i) income tax holiday (“ITH”) for the first 7 years of its commercial operations. Additional investments in
the project are entitled to additional income tax exemption on the income attributable to the investment.
For this purpose, the discovery and development of new renewable energy resource is treated as a new
investment and is therefore entitled to a fresh package of incentives. The entitlement period for
additional investments shall not be more than 3 times the period of the initial availment of the income
tax holiday.
(ii) Duty-free importation of renewable energy machinery, equipment and materials which are directly and
actually needed and used exclusively in the RE facilities for transformation into energy and delivery of
energy to the point of use and covered by shipping documents in the name of the duly registered
operator to whom the shipment will be directly delivered by customs authorities, within the first 10
years upon the issuance of a certification of an RE developer. DOE endorsement must be obtained
before the importation and before any sale, transfer or disposition of the imported capital equipment,
machinery or spare parts is made. There are additional conditions for sale, transfer, disposition made
within the 10-year period from date of importation.
(iii) Special realty tax rates on equipment and machinery;
(iv) The net operating loss carry-over of the RE developer during the first 3 years from the start of
commercial operation which had not been previously offset as deduction from gross income shall be
carried over as a deduction for the next 7 consecutive taxable years following the year of such loss.
(v) RE developers shall enjoy a 7% corporate income tax rate after the expiration of its ITH.
(vi) Accelerated depreciation if the RE project fails to receive an ITH before full operation;
(vii) Zero-percent value added tax rate for sale of fuel or power generated from renewable sources. Further,
all RE developers are entitled to zero-rated value added tax on its purchases of local supply of goods,
properties and services needed for the development, construction and installation of its plant facilities.
(viii) Cash incentive for RE developers for missionary electrification.
(ix) Tax exemption of carbon credits.
(x) Tax credit on domestic capital equipment and services.

The RE Law likewise provides incentives for manufacturers, fabricators and suppliers of locally-produced RE
equipment and components duly recognized and accredited by the DOE and upon registration with the BOI.

Further, the RE Law provides a policy on FIT. The FIT scheme mandates electric power industry participants to
source RE-derived electricity at a guaranteed fixed price (the “FIT Rate”). This scheme was primarily viewed as
a way to entice the private sector players to hasten investment into the renewable power generation sector due to
the urgent need of the Philippines to deploy additional capacity.

RE projects are governed by an RE Contract, a service agreement between the Philippine Government and an RE
developer over an appropriate period of time as determined by the DOE in which the RE developer will have the
exclusive right to explore, develop or utilize a particular RE area.

Feed-In Tariff

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

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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.

The renewable energy plants which have started commercial operations after the effectivity of the RE Law and
are not bound under any contract to supply the energy they generate to any distribution utility or consumer, may
avail of the FITs from time to time they are certified by the ERC as eligible through an amendment of the COC
issued to them and for a period of 20 years less the number of years they have been in operation.

FITs shall be established for each generation plant using: (i) wind energy resources; (ii) solar energy resources;
(iii) ocean energy resources; (iv) run-of-river hydroelectric power resources; (v) biomass energy resources; and
(vi) renewable energy components of technologies listed above of hybrid systems under the RE Law.

The FIT System applicable to renewable energy plants in on-grid areas are: (i) Technology-specific FITs;
(ii) Fixed FITs; and (iii) Time-of-Use FITs.

Eligible RE Plants shall be entitled to the applicable FITs to them for a period of 20 years. After this period,
should these plants continue to operate, their tariffs will be based on prevailing market prices or whatever prices
they should agree with an off-taker.

Electricity consumers who are supplied with electricity through the distribution of transmission network shall
share in the cost of the FITs in part through a uniform charge (in P/kWh) referred to as the FIT-All and applied
to all billed kWh. NGCP ensures that the FIT-All fund is sufficient to pay all renewable energy producers
regularly.

ENVIRONMENTAL MATTERS

Philippine Clean Water Act

In 2004, Republic Act No. 9275, or the “Philippine Clean Water Act of 2004,” was enacted to streamline
processes and procedures in the prevention, control, and abatement of pollution in the country’s water resources
and provide for a comprehensive water pollution management program focused on pollution prevention. The law
primarily applies to the abatement and control of water pollution from land-based sources. The EMB, in
partnership with other Philippine government agencies and the respective local government units, is tasked by the
Implementing Rules of the Clean Water Act to identify existing sources of water pollutants and strictly monitor
pollution sources which are not in compliance with the effluent standards provided in the law. The Philippine
Clean Water Act also authorizes the DENR to formulate water quality criteria and standards for oil and gas
exploration which encounter re-injection constraints.

The Clean Water Act requires owners or operators of facilities that discharge regulated effluents (such as
wastewater from manufacturing plants or other commercial facilities) to secure a discharge permit from the
DENR which authorizes the owners and operators to discharge waste and/or pollutants of specified concentration
and volumes from their facilities into a body of water or land resource for a specified period of time.

Philippine Clean Air Act

Republic Act No. 8749, otherwise known as the “Philippine Clean Air Act of 1999,” requires enterprises that
operate or utilize air pollution sources to obtain an Authority to Construct or a Permit to Operate from the DENR
with respect to the construction or use of air pollutants. The issuance of said permits seek to ensure that
regulations of the DENR with respect to air quality standards and the prevention of air pollution are achieved and
complied with by such enterprises.

Environmental Compliance

The Company’s operations are subject to evolving and increasingly stringent safety, health and environmental
laws and regulations. These laws and regulations address, among other things, air emissions, wastewater
discharges, generation, handling, storage, transportation, treatment and disposal of oil products, workplace
conditions and employee exposure to hazardous substances.

Development projects that are classified by law as environmentally critical or projects within statutorily defined
environmentally critical areas are required to obtain an Environmental Compliance Certificate (“ECC”) prior to
commencement. As a prerequisite for the issuance of an ECC, an environmentally critical project is required to

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submit an Environment Impact Statement (“EIS”) while project in an environmentally critical area is generally
required to submit an Initial Environmental Examination (“IEE”) to the DENR, through its regional offices or
through the Environmental Management Bureau (the “EMB”).

The EIS refers to both the document and the study of a project’s environmental impact, including a discussion of
the scoping agreement identifying critical issues and concerns as validated by the EMB, environmental risk
assessment if determined necessary by the EMB during the scoping, environmental management program, direct
and indirect consequences to human welfare and the ecological as well as environmental integrity. The IEE refers
to the document and the study describing the environmental impact, including mitigation and enhancement
measures, for projects in environmentally critical areas.

While the terms and conditions of an EIS or an IEE may vary from project to project, as a minimum it contains
all relevant information regarding the project’s environmental effects. The entire process of organization,
administration and assessment of the effects of any project on the quality of the physical, biological and socio-
economic environment as well as the design of appropriate preventive, mitigating and enhancement measures is
known as the EIS System. The EIS System successfully culminates in the issuance of an ECC. The issuance of an
ECC is a Philippine government certification that the proposed project or undertaking will not cause a significant
negative environmental impact; that the proponent has complied with all the requirements of the EIS System; and
that the proponent is committed to implementing its approved Environmental Management Plan in the EIS or, if
an IEE was required, that it shall comply with the mitigation measures provided therein before or during the
operations of the project and in some cases, during the project’s abandonment phase.

Project proponents that prepare an EIS are required to establish an Environmental Guarantee Fund when the ECC
is issued for projects determined by the DENR to pose a significant public risk to life, health, property and the
environment or where the project requires rehabilitation or restoration. The Environmental Guarantee Fund is
intended to meet any damage caused by such a project as well as any rehabilitation and restoration measures.
Project proponents that prepare an EIS are required to include a commitment to establish an Environmental
Monitoring Fund when an ECC is eventually issued. In any case, the establishment of an Environmental
Monitoring Fund must not occur later than the initial construction phase of the project. The Environmental
Monitoring Fund must be used to support the activities of a multi-partite monitoring team, which will be
organized to monitor compliance with the ECC and applicable laws, rules and regulations.

In order to address air pollution from mobile and stationary sources, equipment that emit or may emit air
pollutants may only be operated upon obtaining a Permit to Operate from the DENR. An application for a Permit
to Operate must be filed for each source emitting regulated air pollutants, but facilities having more than one
source may group the sources under a single permit application.

Other Regulations on Water Pollution

Philippine maritime laws and regulations are enforced by two Philippine government agencies: the MARINA and
the Philippine Coast Guard. Both are agencies under the Philippine Department of Transportation.

The MARINA is responsible for integrating the development, promotion, and regulation of the maritime industry
in the Philippines. It exercises jurisdiction over the development, promotion, and regulation of all enterprises
engaged in the business of designing, constructing, manufacturing, acquiring, operating, supplying, repairing,
and/or maintaining vessels, or component parts thereof, of managing and/or operating shipping lines, shipyards,
dry docks, marine railways, marine repair ships, shipping and freight forwarding agencies, and similar
enterprises.

To address issues on marine pollution and oil spillage, the MARINA issued: (i) Circular No. 2007-01 which
mandated the use of double-hull vessels including those below 500 tons deadweight tonnage by the end of 2008
for transporting Black Products; and (ii) Circular No. 2010-01 for transporting White Products in certain
circumstances by 2011.

The Philippine Coast Guard, in a 2005 Memorandum Circular, provided implementing guidelines based on the
International Convention for the Prevention of Pollution from Ships, MARPOL 73/78. The guidelines provide
that oil companies in major ports or terminals/depots are required to inform the Philippine Coast Guard through
its nearest station of all transfer operations of oil cargoes in their respective areas. Furthermore, oil companies
and tanker owners are required to conduct regular team trainings on managing oil spill operations including the
handling and operations of MARPOL combating equipment. A dedicated oil spill response team is required to be
organized to react to land and ship-originated oil spills. Oil companies, oil explorers, natural gas explorers, power
plants/barges and tanker owners are also required to develop shipboard oil pollution emergency plans to be
approved by the Philippine Coast Guard.

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Moreover, both the Clean Water Act and the Philippine Coast Guard Guidelines provide that the spiller or the
person who causes the pollution have the primary responsibility of conducting clean-up operations at its own
expense.

The Toxic Substances and Hazardous and Nuclear Waste Control Act

The Toxic Substances and Hazardous and Nuclear Waste Control Act of 1990 (Republic Act No. 6969) regulates,
restricts or prohibits the (i) importation, manufacture, processing, handling, storage, transportation, sale,
distribution, use and disposal of chemical substance and mixtures that present unreasonable risk or injury to
health or the environment, and (ii) entry into the Philippines or the keeping in storage of hazardous wastes which
include byproducts, process residue, contaminated plant or equipment or other substances from manufacturing
operations. The said law is implemented by the DENR.

Hazardous wastes are substances brought into the country without any safe commercial, industrial, agricultural or
economic usage. On the other hand, toxic wastes are substances that are poisonous and have carcinogenic,
mutagenic, or teratogenic effects on human or other life forms.

Ecological Solid Waste Management Act

The Ecological Solid Waste Management Act of 2000 (Republic Act No. 9003) provides for the proper
management of solid waste which includes discarded commercial waste and non-hazardous institutional and
industrial waste. The said law prohibits, among others, the transporting and dumping of collected solid wastes in
areas other than prescribed centers and facilities. The same law mandates all, especially, the local government
units, to adopt a systematic, comprehensive and ecological solid waste management program which shall ensure
protection of public health and environment, utilize environmentally sound methods, set targets and guidelines
for solid waste avoidance and reduction, and ensure proper segregation, collection, transport and storage of solid
waste.

The National Solid Waste Management Commission, together with other government agencies and the different
local government units, are responsible for the implementation and enforcement of the said law.

OTHER APPLICABLE REGULATIONS

Foreign Investment Act

The FIA liberalized the entry of foreign investment into the Philippines. Under the FIA, in domestic market
enterprises, foreigners can own as much as 100% equity except in areas specified in the Eleventh Regular
Foreign Investment Negative List (the “Negative List”) signed on 29 October 2018. This Negative List
enumerates industries and activities which have foreign ownership limitations under the FIA and other existing
laws. Nationalized activities include, among others, land ownership, telecommunications, mining and the
operation of public utilities.

In connection with the ownership of private land, the Philippine Constitution states that no private land shall be
transferred or conveyed except to citizens of the Philippines or to corporations or associations organized under
the laws of the Philippines at least 60% of whose capital is owned by such citizens. Likewise, under the
Philippine Constitution, only citizens of the Philippines or corporations or associations organized under the laws
of the Philippines at least 60% of whose capital is owned by such citizens may engage in activities relating to the
exploration, development and utilization of natural resources, which covers the utilization of natural resources for
the operation of renewable energy power plants.

The Philippine Competition Act

Republic Act No. 10667, otherwise known as the “Philippine Competition Act” (“PCA”) authorizes the
Philippine Competition Commission (“PCC”) to review mergers and acquisitions to ensure compliance with the
PCA. The PCA, its Implementing Rules and Regulations, as amended, and the Rules on Merger Procedure
(collectively “Merger Rules”) provides for mandatory notification to the PCC of any merger or acquisition
within thirty (30) days of signing any definitive agreement relating to the transaction, where the value of such
transaction exceeds Two Billion Pesos (P2,000,000,000.00), and where the size of the ultimate parent entity of
either party exceeds Five Billion Pesos (P5,000,000,000.00). The parties may not consummate the transaction
prior to receiving PCC approval or the lapse of the period stated in the Merger Rules. A merger or acquisition
that meets the thresholds under the Merger Rules but was not notified to the PCC, or notified but consummated,
in whole or in part, prior to the expiration of the waiting period, is considered void and will subject the parties,

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and will subject the parties to a fine between 1% to 5% of the value of the transaction. Given the usual volume of
the Issuer’s transactions, mergers or acquisitions undertaken by the Issuer would likely meet the notification
threshold under the PCA and the Merger Rules.

Local Government Code

The Local Government Code (“LGC”) establishes the system and powers of provincial, city, municipal, and
barangay governments in the country. The LGC general welfare clause states that every local government unit
(“LGU”) shall exercise the powers expressly granted, those necessarily implied, as well as powers necessary,
appropriate, or incidental for its efficient and effective governance, and those which are essential to the
promotion of the general welfare.

LGUs exercise police power through their respective legislative bodies. Specifically, the LGU, through its
legislative body, has the authority to enact such ordinances as it may deem necessary and proper for sanitation
and safety, the furtherance of the prosperity, and the promotion of the morality, peace, good order, comfort,
convenience, and general welfare of the locality and its inhabitants. Ordinances can reclassify land, order the
closure of business establishments, and require permits and licenses from businesses operating within the
territorial jurisdiction of the LGU.

OVERVIEW OF REGULATORY FRAMEWORK FOR WIND FARM POWER PLANT PROJECTS IN

INDONESIA

Regulation Background

The relevant laws and regulations for a wind farm power plant project (“WFPP”) in Indonesia include the
following (each, as amended):

(i) Law No. 30 of 2009 on Electricity (“Law on Electricity”);

(ii) Law No. 32 of 2009 on Environmental Protection and Management (“Law on Environment”);
(iii) Law No. 25 of 2007 on Investment (“Law on Investment”);
(iv) Law No. 40 of 2007 on Limited Liability Company (“Law on Company”);
(v) Law No. 41 of 1999 on the Forestry, as amended by Law No. 19 of 2004 (“Law on Forestry”);
(vi) Law No. 2 of 2017 on Construction Services;
(vii) Minister of Energy and Mineral Resources (“MEMR”) Regulation No. 39 of 2018 regarding
Electronically Integrated Business Licensing Services in the Field of Electricity (“MEMR Regulation
39-2018”);
(viii) Government Regulation No. 14 of 2012 on Power Supply Business Activities, as amended by
Government Regulation No. 23 of 2014 (“Government Regulation 14”);
(ix) MEMR Regulation No. 50 of 2017 regarding the Utilization of Renewable Energy Sources for
Electricity Supply (“MEMR Regulation 50-2017”);
(x) MEMR Regulation No. 001 of 2006 on the Procedure of Purchase of Electricity and/or Lease of
Network in Procurement of Electricity for Public Interest as amended by MEMR regulation No. 004 of
2007 and partly revoked by MEMR Regulation No. 03 of 2015 and MEMR Regulation 50-2017;
(xi) MEMR Regulation No. 27 of 2018 on Compensation for Land, Buildings and/or Plants Located under
Electrical Transmission Network Free Spaces;
(xii) Presidential Regulation No. 44 of 2016 on the List of the Lines of Business that are Closed to
Investment and the Lines of Business that are Conditionally Open for Investment (“Negative List”);
(xiii) Head of National Land Agency (Badan Pertanahan Nasional—“BPN”) Regulation No. 14 of 2018
regarding Location Permits (“Head of BPN Regulation 14-2018”);
(xiv) State Minister of Environmental Affairs (currently known as Minister of Environment and Forestry
(“MOEF”) Regulation No. 5 of 2012 on Types of Planned Businesses and/or Activities Subject to
Mandatory Environmental Impact Assessment (“Regulation 5-2012”); and
(xv) MOEF Regulation No. P.26/MENLHK/SETJEN/KUM.1/7/2018 regarding the Guidelines on the
Preparation and Assessment as well as Evaluation of Environmental Documents in the Implementation
of Electronically Integrated Business Licensing Services (“MOEF Regulation 26-2018”).

Please note that this memorandum sets out the overall regulatory framework and the main business licenses
applicable to WFPPs in Indonesia. This memorandum is not intended to set out a comprehensive review of all of
the different regulations, regulatory requirements or licenses/permits applicable to Indonesian WFPPs.
Additional regulatory requirements (as well as the obligation to obtain additional technical and/or operational
licenses) may apply based on the specific activities, operating procedures and utilized equipment of the relevant

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project company. For example, specific construction activities, manpower arrangements, use or development of
ancillary facilities (such as roads and ports) and hazardous waste arrangements are subject to separate regulatory
requirements outside the scope of this memorandum.

General Corporate Documents and Licenses

Based on the Law on Company, among the general corporate documents applicable for a newly established
company involved in a WFPP is the Deed of Establishment and any amendments thereto (“DOE”), together with
the relevant approval and notification receipts from the Minister of Law and Human Rights.

With regard to general business licenses, the relevant mandatory licenses include the company’s Certificate of
Domicile (Surat Keterangan Domisili Perusahaan) and tax related licenses.

Company Registration

Foreign investment companies (Penanaman Modal Asing or the “PMA company/ies”) are allowed to engage in
the business of electricity supply for the public interest and electricity power generation under the Law on
Electricity but subject to the foreign ownership restrictions imposed under the Negative List.

A Business Registration Number (Nomor Induk Berusaha—“NIB”) is an identity number for Indonesian business
entities issued by the Online Single Submission (“OSS”) system following the registration of such business
entity in the OSS system. An NIB also serves as a company’s Company Registration Certificate (Tanda Daftar
Perusahaan), Importer Identification Number (Angka Pengenal Importir) and customs access right (nomor induk
kepabeanan). Business entities with an NIB are also automatically registered with the national healthcare and
employment social security schemes (Badan Penyelenggara Jaminan Sosial). The requirement to obtain an NIB
through the OSS system also applies to business entities which were established prior to the establishment of the
OSS system in 2018. The registration of an Indonesian PMA company is generally evidenced by its NIB.

Under the Law on Investment, a PMA company engaged in a WFPP must have an NIB with a classification of
“electricity generation”. The “electricity generation” business classification for WEPPs, in turn, are separated
into 3 (three) different categories under the Negative List, as follows:

‰ electricity generation of less than 1 MW (which is closed to foreign ownership);

‰ electricity generation of 1 MW to 10 MW (which allows foreign ownership of up to 49%); and
‰ electricity generation of more than 10 MW (which generally allows for foreign ownership up to 95%).

Operational Licenses

Under the Law on Electricity, a company engaged in the development of a WFPP must secure an Electricity
Supply Business License (Izin Usaha Penyedia Tenaga Listrik or the “IUPTL”), which is its main business
license.

IUPTL

As a requirement for the supply of electricity to PLN, a project company is required to secure an IUPTL issued
by MEMR (or by its delegated authority). The IUPTL is granted for up to 30 (thirty) years and can be extended.

Pursuant to MEMR Regulation 39-2018, MEMR, in the framework of electronically integrated business licensing
services, has delegated to the OSS system its authority to grant several licenses, including IUPTLs. Therefore, an
application to obtain an IUPTL must be submitted through the OSS system and the IUPTL will be issued by the
OSS system for and on behalf of MEMR.

In order for an IUPTL issued through the OSS system to become effective, certain administrative and technical
requirements are required to be complied with by the project company. These include, among others, MEMR
approval of the selling price of electricity, a copy of the relevant PPA and evidence of the financial capabilities of
the project company.

Operational Feasibility Certificate

After the commissioning test of a WFPP, MEMR Regulation 39-2018 requires the power plant to undergo
inspection and testing for the purpose of obtaining an Operational Feasibility Certificate (Sertifikat Laik Operasi)

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issued through the OSS system, which will certify the fitness of the electricity installation and formally recognize
that the power plant is ready to commence operations.

Environmental and Forestry Licenses

Approval of AMDAL documents

Certain environmental approvals and permits are required to be secured with respect to the construction of a
WFPP. In case of a WFPP with capacity of more than 10MW in one location, Regulation 5-2012 categorizes the
construction thereof as an activity that requires an Environmental Impact Assessment (Analisis Mengenai
Dampak Lingkungan Hidup or the “AMDAL”). The AMDAL is a document which consists of an Environmental
Impact Assessment Report (Analisa Dampak Lingkungan Hidup or the “ANDAL”), an ANDAL Terms of
Reference (Kerangka Acuan Analisa Dampak Lingkungan Hidup or the “KA-ANDAL”), an Environmental
Management Plan (Rencana Pemantauan Lingkungan or the “RPL”) and an Environmental Monitoring Plan
(Rencana Pengelolaan Lingkungan or the “RKL”).

The approval process of the AMDAL includes the project company’s preparation and submission of a
KA-ANDAL to the AMDAL Valuation Committee for approval. The AMDAL documents must then be prepared
and eventually submitted to the MOEF or Head of Regional Government (Governor or Regent/Mayor), as
applicable. The AMDAL approval will state that the business activities are feasible for the environment, the
obligations of the project company and the validity of the approval, among others.

Environment License/Permit

Under the Law on Environment, every person required to secure an AMDAL approval is also obliged to secure
an environmental license. Based on MOEF Regulation 26-2018, the OSS system will issue an Environmental
Permit (with a specific commitment to complete an AMDAL) in accordance with the application made by the
relevant project company through the OSS system. Once the Environmental Permit is issued by the OSS system
and in order for the Environmental Permit to become effective, then the relevant project company must complete
the AMDAL process.

Borrow and Use Permit of Forest Area, if applicable

Under the Law on Forestry, a Borrow and Use Permit is mandatorily required to be obtained if a project
company is to carry out electricity business in an area which has been categorized as “production forest” or
“protection forest” (together, the “Forest Zones”). A Borrow and Use Permit can be issued to a company
conducting activity in a Forest Zone for the period equal to the period in the IUPTL and may be extended upon
compliance with the relevant requirements under the Law on Forestry. The conditions attaching to a Borrow and
Use Permit can be extensive (including the obligation to comply with financial and land compensation
requirements). In accordance with MOEF Regulation 27-2018, an application to obtain a Borrow and Use Permit
must be submitted by the management of the relevant project company (which has obtained an NIB) to the
MOEF through the OSS system.

Land Arrangements

Location Permit

Under Head of BPN Regulation 14-2018, a Location Permit is required to be secured by the project company in
order to be allowed to acquire a certain land area and apply for the relevant land title in respect of such land in
accordance with Regional Spatial Layout Plan. A Location Permit will typically be based on a commitment from
its holder to obtain additional approvals. If the land acquisition process cannot be completed within the initial
period provided in the Location Permit (of up to 3 years), the Location Permit can be extended for a one (1) year
period, provided the holder of the Location Permit has acquired at least 50% of the total land area specified in the
Location Permit at the time of extension.

A PMA company can only acquire land within the area indicated in the Location Permit issued in its favor. Based
on Head of BPN Regulation 14-2018, Location Permits are applied for and issued through the OSS system. For
purposes of a WFPP, it is necessary that the Location Permit specifically allows for electricity business activities,
among others, to be carried out on that land. The Location Permit is different from and separate to the actual
underlying land title.

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Land Utilization License

In addition to the Location Permit, regional governments may also require a company carrying on business
within their jurisdiction to obtain a Land Utilization License (Izin Peruntukkan dan Penggunaan Lahan or the
“IPPL”). The IPPL is granted to make sure that the business being carried out on the relevant land is in line with
the relevant Regional Spatial Layout Plan.

Land rights applicable to a WFPP

While there are different kinds of registered land titles in Indonesia, the most relevant for an IUPTL holder is a
‘right to build’ (hak guna bangunan or the “HGB”). The HGB gives the holder the right to own and use land and
to erect and/or possess buildings and installations on the land. HGB certificates are issued to evidence the
ownership of this type of title. Usually, an HGB is for a period of up to 30 years and extendable for maximum
periods of 20 years per extension.

Electricity Tariffs and Power Purchase Agreements with PLN

Pursuant to MEMR Regulation 50-2017, for Indonesian WFPPs, the relevant electricity sale pricing shall be
determined as follows:

‰ up to 85% of the local grid average national PLN electricity supply cost (biaya pokok penyediaan
pembangkitan—“BPP”), if the local grid BPP is higher than the national BPP; or

‰ based on mutual agreement between PLN and the independent power producer, if the local grid BPP is less
than or equal to the national BPP.

The electricity price based on the above pricing mechanism must obtain an electricity price approval from
MEMR. However, MEMR Regulation 50-2017 is silent on the mechanism and timeline for an independent
power producer to apply for and obtain such electricity price approval from MEMR. In practice, we expect that
this process will be managed through the co-operation of PLN during the negotiation of the terms of the power
purchase agreement.

OVERVIEW OF REGULATORY FRAMEWORK FOR RENEWABLE SOLAR POWER PLANT

PROJECTS IN VIETNAM
Relevant laws and regulations
General (applicable to all power projects)
(i) Investment Law No. 67/2014/QH13 dated 26 November 2014 passed by the National Assembly (as
amended by Laws No. 90/2015/QH13 and No. 03/2016/QH14) (“Investment Law”)
(ii) Decree 118/2015/ND-CP dated 12 November 2015 as the implementing regulations of the Investment
Law (“Decree 118”)
(iii) Electricity Law No. 28/2004/QH11 dated 3 December 2004 passed by the National Assembly (as
amended by Law No. 24/2012/QH13 dated 20 November 2012) (“Electricity Law”)
(iv) Decree 137/2013/ND-CP dated 21 October 2013 implementing Electricity Law
(v) National Power Master Plan VII (amended) for the period 2011 – 2020 approved by the Prime Minister
under Decision 428/QD-TTg dated 18 March 2016 (“Power Master Plan VII”). Power Master Plan VII
aims to increase solar power capacity from the current almost zero to 850 MW by 2020 and 12,000 MW
by 2030.
(vi) Construction Law No. 50/2014/QH13 dated 18 June 2014 passed by the National Assembly (as
amended by Law No. 03/2016/QH14 dated 22 November 2016 passed by the National Assembly)
(“Construction Law”)
(vii) Decree 44/2015/ND-CP dated 6 May 2015 on detailed regulations on construction planning
(viii) Decree 59/2015/ND-CP dated 18 June 2015 (as amended by Decree 42/2017/ND-CP) on management
of construction investment projects (“Decree 59”)
(ix) Circular 03/2016/TT-BXD dated 10 March 2016 issued by the Ministry of Construction (“MOC”)
(“Circular 3”)

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Grid-connected solar power projects:
(i) Decision 11/2017/QD-TTg dated 11 April 2017 issued by the Prime Minister which provides the
incentive for solar power projects in Vietnam (“Decision 11”)
(ii) Circular 16/2017/TT-BCT dated 12 September 2017 issued by of the Ministry of Industry and Trade
(“MOIT”) on project development and model power purchase agreements for solar power projects
(“Circular 16”)
(iii) Circular 43/2013/TT-BCT dated 31 December 2013 issued by the MOIT on preparation of the power
master plans (“Circular 43”)
Environment; Firefighting and Fire Prevention:
(i) Law on Environmental Protection No. 55/2014/QH13 dated 23 June 2014 passed by the National
Assembly (“Law on Environmental Protection”)
(ii) Decree 18/2015/ND-CP dated 14 February 2015 on environmental protection planning, strategic
environmental assessment, environmental impact assessment and environmental protection plans
(iii) Law on Firefighting and Fire Prevention No. 27/2001/QH10 dated 29 June 2001 passed by the National
Assembly (as amended by Law No. 40/2013/QH13 dated 22 November 2013)
(iv) Decree 79/2014/ND-CP dated 31 July 2014 as implementing regulations of the Law on Firefighting and
Fire Prevention (“Decree 79”)
Enterprise Registration Certificate
The ERC is a license issued by the provincial Planning and Investment Department certifying the incorporation
of a project company. The ERC generally contains the following information:
‰ name and enterprise number of the project company

‰ address of the project company’s head office

‰ information of the legal representative of the project company

‰ information of the owner/members of the project company (applicable to a limited liability company only)

‰ charter capital of the project company

Inclusion in power master plan
A proposed solar power project must be included in the provincial (general) power development master plan or
the national (general) power development master plan, or the provincial solar power development master plan or
the national solar power development master plan. To have a project included in such master plans, the project
proponent must first conduct a preliminary feasibility study for the project, which should include, among others,
the description of the project: proposed location, construction scale and area, construction items, relevant
contents of industry master plan and local construction master plan, need for the project and its advantages and
disadvantages, total investment capital, source of funds, capacity of project proponent to mobilize funds, project
implementation schedule, analysis of economic, financial and social efficiency, plan for land using, land
clearance and compensation, environmental impact assessment, fire fight and fire prevention plan and other
requirements in respect of national defense and public security (if any) and plan for supports in construction of
technical infrastructure (“Pre-FS”).

The Pre-FS should then be submitted to and reviewed by the Energy General Department (for inclusion in the
national solar power development master plan) or submitted to relevant provincial Department of Planning and
Investment and then forwarded to the Energy General Department for review (for inclusion in the provincial
solar power development master plan). Once approved, the proposed project will be submitted to the MOIT.
Pursuant to Circular 16, for a solar power project with capacity of up to 50 MW, the MOIT will approve
inclusion thereof in the provincial solar power development master plan. For a solar power project with capacity
of more than 50 MW, the MOIT will endorse to the Prime Minister for approval of the proposed project’s
inclusion in the national solar power development master plan.

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In-principle approval for investment
Upon inclusion in the relevant power master plan, the project proponent, in accordance with the Investment Law,
must apply for in-principle approval for investment with:
‰ the National Assembly – in the case of (i) a project which seriously affects or may seriously affect the
environment; (ii) a project involving the conversion of land use purpose for wet rice dual harvest cultivation
in an area of 500 hectares or more; (iii) a project involving the relocation and resettlement of 20,000 people
or more in mountainous areas or 50,000 people or more in other areas; or (iv) a project requiring the
application of a special mechanism or policy which should be decided by the National Assembly;
‰ the Prime Minister – in case of (i) a project involving the relocation and resettlement of 10,000 people or
more in mountainous areas or 20,000 people or more in other areas; or (ii) a project having a scale of
investment capital of VND5,000 billion or more; or
‰ the People’s Committee – in case of (i) a project to which the State allocates or leases land without auction,
tendering or transfer; (ii) a project requiring the conversion of land use purpose; or (iii) a project using
technology in the list of technologies subject to restriction on transfer in accordance with the law on
technology transfer.
The in-principle approval for investment is necessary for and will enable the project proponent to apply for an
investment registration certificate
Investment Registration Certificate
Within five working days from the issuance date of the in-principle approval for investment, the provincial
Department of Planning and Investment (“DPI”) will issue an investment registration certificate (“IRC”) to the
project company in accordance with the Investment Law. The IRC is the official document recording the right of
the project proponent to invest in and implement the solar power project.
Under the Investment Law, generally, the term of an investment project is 50 years. The term of an investment
project to be implemented in areas with specially difficult socio-economic conditions or an investment project
with large investment capital but slow capital recovery may be longer but shall not exceed 70 years.
Land Clearance and Compensation Process; Land Lease
The project proponent may proceed with the land clearance and compensation process with respect to the project
land upon receipt of the in-principle approval for investment.
Upon completion of the land clearance process, the project company may then proceed with the application for a
land lease decision to be issued by the People’s Committee and for the People’s Committee to sign a land lease
agreement.
1/500 Master Plan
The project proponent submits a proposed detailed (1/500) construction master plan of the solar power plant for
appraisal by the provincial People’s Committee. The approved 1/500 construction master plan is a basis for the
project company to prepare the dossier and to obtain a construction permit.
Construction permit
After a land lease decision, land lease agreement and 1/500 construction master plan are secured, the project
company may then apply for a construction permit from the provincial Department of Construction in accordance
with the Construction Law. Upon issuance of the construction permit, the project company must then commence
construction work within 12 months thereafter. The 12-month construction deadline can be extended twice for a
period of additional 12 months each in accordance with the Construction Law.
Land use right certificate
The land use right certificate (“LURC”) is the prima facie evidence of title to land use rights. The LURC will be
issued in favor of the project company by the provincial People’s Committee or its authorized land division after
the land lease agreement is executed and rent obligations to the government are fulfilled. It has the same term as
the land lease agreement.
Feasibility Study and Technical design approval
In terms of construction and pursuant to the Construction Law (including Decree 59 and Circular 3), another part
of the process is the submission of a feasibility study (“FS”) for appraisal by: (i) the Department of Construction
or the specialized construction management Department for a project with a capacity of up to 30MW; or (ii) the

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specialized construction management agency of the MOC or the specialized construction management Ministry
for a project with a capacity of more than 30MW.
The FS should contain the basic design, among others. Upon approval of the basic design and the FS, the project
company must then prepare a more detailed technical design, which will be evaluated and approved by: (i) the
Department of Construction or the specialized construction management Department for a project with a capacity
of up to 30MW; or (ii) the specialized construction management agency of the MOC or the specialized
construction management Ministry for a project with a capacity of more than 30MW.
Electricity contracts and licenses
The following agreements/licenses must be secured by the project company for a solar power project with
various divisions of EVN:
‰ the PPA;
‰ the Grid Connection Agreement;
‰ the SCADA/EMS (DMS) Agreement;
‰ the Load Dispatch Information System Agreement;
‰ the Protective Relay System Agreement;
‰ the Metering Agreement; and
‰ the Electricity Operation License.
The agreements are typically negotiated with the EVN or its relevant divisions during the FS process.
Environment impact assessment
The project company which uses land with a total area of 100 hectares or more must also prepare the
Environmental Impact Assessment Report (“EIAR”) during the preparation of the basic design for the FS. The
EIAR will then be submitted to and evaluated and approved by either the Ministry of Natural Resources and
Environment (“MONRE”) or the provincial People’s Committee depending on the scale and sector of the project
pursuant to the Law on Environmental Protection. The EIAR approval has a validity of 24 months.
Fire Prevention and Firefighting design approval and implementation
Pursuant to Decree 79 and as part of the requirements for issuance of the construction permit, the project
company must also submit its Fire Prevention and Firefighting (“FPFF”) design to the Police Department of Fire
Prevention and Firefighting (“Fire Department”) for appraisal and approval.

As required by Decree 79, after completion of construction works, but before operations, the project company
must also have the Fire Department certify that the construction works are built in accordance with the FPFF
design approval.
OVERVIEW OF ELECTRICITY REGULATORY FRAMEWORK FOR WIND FARM PROJECT IN
TASMANIA, AUSTRALIA

Electricity generation and connection approvals

A project company who wishes to supply electricity from a wind farm project in Tasmania is required to secure a
license from the Tasmanian Electricity Regulator (“TER”) and register as a Market Participant with the
Australian Energy Market Operator (“AEMO”). In addition, a generator must liaise with the relevant
transmission or distribution network supplier to connect to the electricity transmission network under a process
set out in the National Electricity Rules (“NER”), which is overseen by AEMO.

Registration as a Participant with AEMO

Under the National Electricity Law, a person who will engage in the activity of owning, controlling or operating
a generating system connected to the interconnected transmission or distribution system in the National
Electricity Market (NEM) is required to be a registered participant with AEMO, unless an exemption applies.
The transmission and distribution system in Tasmania is part of the NEM.

To be a registered participant, such a person must register within a particular category with AEMO. In case of
generation, such a person is required to register with AEMO in the “Generator” category before commencing
operation of any generation facilities.

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The process for registration and requirements for applicants are outlined in the NER. The applicant must, among
other matters, satisfy AEMO that it is (and will continue to be) able to fulfill the financial obligations relating to
market participants and has demonstrated an ability to comply with the NER.

License for generation of electricity in Tasmania

A person wishing to carry on operations in the electricity supply industry in Tasmania, including generating
electricity from a wind farm project, is required to secure, a license in Tasmania as a generator under the
Electricity Supply Industry Act 1995 (Tasmania). This license is in addition to registration as a Market Participant
with AEMO.

The project company should file a license application with the TER, specifying the information required by TER
in the applicable form. In addition, the application must, among other matters, identify the officers and major
shareholders, if applicable, of the project company, contain the details of the proposed generating plant and
details relating to the generator’s connection to the relevant the transmission system or distribution network, and
such any other relevant information requested by TER.

Connection to transmission network

The NER provides for the procedure for connection to a transmission network or a distribution network and
access to the national grid. This procedure is overseen by AEMO.

To be able to connect, the project company is required to submit an application to connect and enter into a
connection agreement with a network service provider prior to being connected to the network.

On receipt of a connection inquiry, a network service provider must, in accordance with the system strength
impact assessment guidelines, undertake a system strength impact assessment of each proposed new connection
of a generating system. The network service provider must then proceed to prepare an offer to connect and accept
with a specific period, which should also contain the relevant terms and conditions for connection.

If the network service provider determines that an application will have an adverse system strength impact as part
of its assessment, it can require as a condition of connection that the applicant participate in a system strength
remediation scheme. This may include installation of plant or undertaking other works to augment the capacity of
the transmission network.

Once it has received an offer to connect, the project company then has the opportunity negotiate and enter into a
connection agreement with the relevant network service provider. The timing of the connection process is heavily
dependent on the specific nature of the connection and features of the relevant parts of the transmission or
distribution network. AEMO guidelines suggest that the entire process could a number of years, but could also be
much shorter (for example, 10 months) in the case of less complicated connections.

Electricity generation and connection approvals

A project company engaged in a wind farm project in Tasmania is required to secure a license as a generator in
Tasmania and with the AEMO. Apart from this, the National Electricity Rules, as promulgated by the AEMO,
requires that it secure connection to the electricity transmission network.
Registration as a Participant with AEMO
Under the National Electricity Law, a person who will engage in the activity of owning, controlling or operating
a generating system connected to the interconnected transmission or distribution system is required to be a
registered participant with the AEMO, unless an exemption applies.

To be a registered participant, such person must register within a category with the AEMO. In case of generation,
such person is required to register with AEMO in the Generator category before commencing operation of any
generation facilities, as required under the National Electricity Rules.
License for generation of electricity in Tasmania
As mentioned, a project company that will engage in a wind farm project in Tasmania is required to secure, in
addition to an AEMO license, a license in Tasmania as a generator before it can be permitted to carry out
operations in the Tasmanian electricity supply industry under the Electricity Supply Industry Act 1995
(Tasmania). This license should specifically authorize the relevant operations of the project company.

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The project company should file a license application with the Tasmanian Economic Regulator (“TER”),
specifying the information required by TER in the applicable form. In addition, the application must, among
others, identify the officers and major shareholders, if applicable, of the project company, contain the details of
the proposed generating plant and the transmission system or distribution network to which the generating plant
is to be connected and such any other relevant information requested by the TER.
Connection to transmission network
The National Electricity Rules provides for the procedure for connection to a transmission network or a
distribution network and access to the national grid. To be able to connect, the project company is required to
submit an application to connect and enter into a connection agreement with a network service provider prior to
being connected to the network. In turn, a network service provider must, in accordance with the system strength
impact assessment guidelines, undertake a system strength impact assessment of each proposed new connection
of a generating system. The network service provider must then proceed to prepare an offer to connect and accept
with a specific period, which should also contain the relevant terms and conditions for connection.

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 MANAGEMENT

The overall management and supervision of AC Energy is undertaken by the Board. The executive officers and
management team cooperate with the Board by preparing appropriate information and documents concerning the
Company’s business operations, financial condition and results of operations for its review.

BOARD OF DIRECTORS AND SENIOR MANAGEMENT

Currently, the Board consists of seven members. The table below sets forth certain information regarding the
members of the Board as of the date of this Offering Circular.

Name Position Citizenship

Jaime Augusto Zobel de Ayala . . . . . . . . . . . . . . . Director Filipino
Fernando Zobel de Ayala . . . . . . . . . . . . . . . . . . . Director Filipino
Jose Teodoro K. Limcaoco . . . . . . . . . . . . . . . . . . Director Filipino
Eric T. Francia . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director Filipino
Gerardo C. Ablaza, Jr. . . . . . . . . . . . . . . . . . . . . . . Director Filipino
Solomon M. Hermosura . . . . . . . . . . . . . . . . . . . . Director Filipino
Jose Rene D. Almendras . . . . . . . . . . . . . . . . . . . . Director Filipino

Jaime Augusto Zobel de Ayala, Filipino, Director of Ayala Corporation since May 1987. He has been the
Chairman and CEO of Ayala Corporation since April 2006. He holds the following positions in publicly-listed
companies: Chairman of Globe Telecom, Inc., Integrated Micro-Electronics, Inc. and Bank of the Philippine
Islands; and Vice Chairman of Ayala Land, Inc. and Manila Water Company, Inc. He is also the Chairman of AC
Education, Inc., Ayala Retirement Fund Holdings, Inc., AC Industrial Technology Holdings, Inc., AC Ventures
Holding Corp., AC Infrastructure Holdings Corporation, and Asiacom Philippines, Inc.; Co-Chairman of Ayala
Foundation, Inc. and Ayala Group Club, Inc.; Director of Alabang Commercial Corporation, Ayala International
Pte. Ltd., AC Energy, Inc., Ayala Healthcare Holdings, Inc., Light Rail Manila Holdings, Inc., and AG Holdings
Limited; Chairman of Harvard Business School Asia-Pacific Advisory Board and Endeavor Philippines; and
member of the Harvard Global Advisory Council, Mitsubishi Corporation International Advisory Committee, JP
Morgan International Council, Global Board of Advisors of the Council on Foreign Relations, Asia Society
International Council, University of Tokyo Global Advisory Board, Singapore Management University Board of
Trustees, and Eisenhower Fellowships Board of Trustees. He was the Philippine Representative to the Asia
Pacific Economic Cooperation Business Advisory Council from 2010 to December 2015. In 2007, he received
the Harvard Business School Alumni Achievement Award, the school’s highest recognition. He was a recipient
of the Presidential Medal of Merit in 2009 for enhancing the prestige and honor of the Philippines both at home
and abroad. In 2010, he was bestowed the Philippine Legion of Honor, with rank of Grand Commander, by the
President of the Philippines in recognition of his outstanding public service. In 2015, he received the Order of
Mabini, with rank of Commander, for his vital contributions during the Philippines’ hosting of the APEC
Summit. In 2017, he was recognized as a United Nations SDG Pioneer for his work in sustainable business
strategy and operations. He graduated with a B.A. in Economics (Cum Laude) at Harvard College in 1981 and
obtained an MBA at the Harvard Graduate School of Business Administration in 1987.

Fernando Zobel de Ayala, Filipino, Director of Ayala Corporation since May 1994. He has been the President
and Chief Operating Officer of Ayala Corporation since April 2006. He holds the following positions in publicly-
listed companies: Chairman of Ayala Land, Inc. and Manila Water Company, Inc.; Director of Bank of the
Philippine Islands, Globe Telecom, Inc., and Integrated Micro-Electronics, Inc.; and Independent Director of
Pilipinas Shell Petroleum Corporation. He is the Chairman of AC International Finance Ltd., Liontide Holdings,
Inc., AC Energy, Inc., Ayala Healthcare Holdings, Inc., Automobile Central Enterprise, Inc., Alabang
Commercial Corporation, Accendo Commercial Corp., and Hero Foundation, Inc.; Co-Chairman of Ayala
Foundation, Inc. and Ayala Group Club, Inc.; Vice-Chairman of ALI Eton Property Development Corporation,
Aurora Properties Incorporated, Vesta Property Holdings, Inc., Ceci Realty Inc., Fort Bonifacio Development
Corporation, Bonifacio Land Corporation, Emerging City Holdings, Inc., Columbus Holdings, Inc., Berkshires
Holdings, Inc., and Bonifacio Art Foundation, Inc.; Director of LiveIt Investments, Ltd., AG Holdings Ltd., AC
Infrastructure Holdings Corporation, Asiacom Philippines, Inc., Ayala Retirement Fund Holdings, Inc., AC
Education, Inc., AC Ventures Holding Corp., Honda Cars Philippines, Inc., Isuzu Philippines Corporation, and
Manila Peninsula; Member of the Philippine-Singapore Business Council, INSEAD East Asia Council, World
Presidents’ Organization, and Chief Executives Organization; Chairman of Habitat for Humanity’s Asia-Pacific
Capital Campaign Steering Committee; and Member of the Board of Trustees of Caritas Manila, Pilipinas Shell
Foundation, and the National Museum. He graduated with a B.A. in Liberal Arts at Harvard College in 1982 and
holds a CIM from INSEAD, France.

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Jose Teodoro K. Limcaoco, Filipino, was appointed Chief Finance Officer and Finance Group Head of Ayala
Corporation effective 10 April 2015. He is the former President of BPI Family Savings Bank. He is a member of
the Board of Directors of AC Energy, Inc. His prior assignments within the Ayala group include President of BPI
Capital Corporation from 2007 to 2010. He was Officer-in-Charge for Ayala Life Assurance, Inc. and Ayala
Plans, Inc.; Trustee and Treasurer of Ayala Foundation, Inc.; President of myAyala.com; and CFO of Azalea
Technology Investments, Inc. He graduated with a degree in BS Mathematical Sciences at Stanford University in
1984 and earned his Master’s Degree in Finance from the Wharton School of the University of Pennsylvania in
1988.

Eric T. Francia, Filipino, Managing Director and member of the Management Committee of Ayala Corporation
since 2009. He is President and Chief Executive Officer of AC Energy, Inc. In his previous role as Head of
Ayala’s Corporate Strategy and Development group, Mr. Francia led Ayala’s entry into the energy and transport
infrastructure sectors in 2011. Under his leadership, Ayala invested in over 1,000MW of attributable capacity in
the energy sector, and secured over $1bn worth of PPP projects in the transport infrastructure space. Mr. Francia
is a Director of Manila Water Company, Inc., publicly listed company. He is also a member of the Board of
Directors of the following companies within the Ayala Group: Purefoods International Limited, AC Education,
Inc., AC College of Enterprise and Technology, Inc., AC Ventures Holding Corp., Ayala Aviation Corporation,
Zapfam, Inc., Northwind Power Development Corporation, North Luzon Renewable Energy Corporation, Light
Rail Manila Corporation, AC Infrastructure Holdings Corporation, MCX Tollway, Inc., and other various
companies. Prior to joining Ayala, Mr. Francia was a senior consultant and member of the management team of
Monitor Group, a strategy consulting firm based in Cambridge, Massachusetts, USA. Prior to consulting, he
spent a few years in the field of academe and media. Mr. Francia received his undergraduate degree in
Humanities and Political Economy from the University of Asia & the Pacific, graduating magna cum laude. He
then completed his Masters Degree in Management Studies at the University of Cambridge in the United
Kingdom, graduating with First Class Honors.

Gerardo C. Ablaza, Jr., Filipino, served as President and CEO of Manila Water Company, Inc. from June 2010
to April 2017. Gerry was responsible for overseeing the financial and operational growth within Manila Water’s
service areas in the Metro Manila East Zone and in its expansion areas. Gerry holds key positions in the
Philippines’ longest running conglomerate, Ayala Corporation, and its various subsidiaries. He is currently a
Senior Managing Director at the Ayala Corporation and a member of the Ayala Group Management Committee
since 1998. From 1998 to April 2009, Gerry was President and CEO of Globe Telecom, Inc. During this period,
he took the company from being the fourth-ranked mobile services provider to the second-largest full-service
telecom operator with a subscriber base of 25 million in 2008. In 2004 he was recognized by CNBC as the Asia
Business Leader of the Year, making him the first Filipino CEO to win the award. He was also awarded by
Telecom Asia as the Best Asian Telecom CEO. In 2013, he was recognized for his consistent leadership and
innovation across the banking, investment, telecommunications and utility service industries through the Citi
Distinguished Alumni Award for Leadership and Ingenuity. Gerry is the first and only Filipino to be awarded
with such an honor. In June 2015, Gerry became a member of the International Advisory Panel of the Institute for
Water Policy under the Lee Kuan Yew School of Public Policy in Singapore.

Solomon M. Hermosura, Filipino, has served as Managing Director of Ayala Corporation since 1999 and a
member of the Ayala Corporation Management Committee since 2009 and the Ayala Group Management
Committee since 2010. He is also the Group Head of Corporate Governance, General Counsel, Compliance
Officer, and Corporate Secretary of Ayala Corporation. He is the CEO of Ayala Group Legal. He serves as
General Counsel and Corporate Secretary of Ayala Land, Inc., and Corporate Secretary of Globe Telecom, Inc.,
Manila Water Company, Inc., Integrated Micro-Electronics, Inc. and Ayala Foundation, Inc.; and a member of
the Board of Directors of a number of companies in the Ayala group. He graduated valedictorian with Bachelor
of Laws degree from San Beda College in 1986 and placed third in the 1986 Bar Examination.

Jose Rene D. Almendras, Filipino, has experience in both private and public sectors. He currently serves as
President & CEO of AC Infrastructure Holdings Corporation (AC Infra). Concurrently, he is Managing Director
and Head of Public Affairs and a member of the Ayala Corporation (AC) Management Committee. He also
serves as a member of the Board of Directors of the following companies within the Ayala Group: Light Rail
Manila Holdings, Inc., MCX Tollway Inc. and AF Payments Inc. As a public servant in the Philippine
government, Rene served in various positions, namely, Secretary of Energy, Cabinet Secretary and Secretary of
Foreign Affairs. The first 13 years of his professional life started with the Citibank group, where he started as a
management trainee. Landing his first CEO position as the President of City Savings Bank of the Aboitiz Group
at the age of 37, he has come to be known for his success in driving the value of the companies he has led, and
his craft in honing these companies to garner national and international recognitions and awards. In 2011, he was

163
recognized by the World Economic Forum as the new Sustainability Champion for his efforts as President of
Manila Water Company, Inc. He introduced customer service quality improvements resulting to a very high
satisfactory rating from the company’s customers. He was instrumental for the expansion and growth of the
company beyond the East Zone. During his term, the company was awarded as one of the Best Managed
Companies in Asia, the Best in Corporate Governance, one of the Greenest Companies in the Philippines and
hailed as the world’s Most Efficient Water Company. In June 2016, a Presidential Award, Order of Lakandula,
Rank of Gold Cross Bayani, the highest honor given to a civilian by the Republic of the Philippines, was awarded
to him by President Benigno S. Aquino III, for his remarkable performance during the Aquino administration.
Rene believes in servant leadership and aims to lead to serve others. He is a passionate advocate of
transformation through people development and personally champions the development programs of the people
in his organization.

MANAGEMENT/EXECUTIVE OFFICERS

The following table sets forth the members of the Company’s management committee and senior leadership team
as of the date of this Offering Circular:
Name Position Citizenship
Eric T. Francia . . . . . . . . . . . . . . . . . . . . . . . . . . . President and Chief Executive Officer Filipino
Maria Corazon G. Dizon . . . . . . . . . . . . . . . . . . . Chief Finance Officer and Head of AC Energy Filipino
Retail
Jose Maria P. Zabaleta . . . . . . . . . . . . . . . . . . . . . Chief Development Officer Filipino
Dodjie D. Lagazo . . . . . . . . . . . . . . . . . . . . . . . . . Head of Legal and Regulatory Filipino
Roman Miguel G. de Jesus . . . . . . . . . . . . . . . . . Head of Product Development Filipino

Eric T. Francia — see above.

Maria Corazon G. Dizon, Filipino, joined Ayala’s Energy and Infrastructure Group in 2016 after spending 28
years with Ayala Land, Inc., the publicly listed real estate vehicle of Ayala Corporation, where she previously
held the positions of Head of ALI Capital Corp., Head of Business Development and Strategic Planning of the
Commercial Business Group, Head of Asset Management Group of Shopping Centers, Head of Control and
Analysis, Head of Investor Relations, as well as Chief Financial Officer of Residential Buildings, Office
Buildings and Shopping Centers groups. Prior to joining Ayala Land, Ms. Dizon was connected with SGV & Co
for three years as a senior auditor. She is a CPA and graduated with a degree in Accountancy from the University
of Santo Tomas, graduating cum laude. She completed the academic units for a Masters degree in Business
Administration from De la Salle University Graduate School of Business, and attended an Executive
Management Program at the Wharton School of the University of Pennsylvania.

Jose Maria P. Zabaleta, Filipino, serves as President of AC Energy Development Inc. (formerly San Carlos
Clean Energy) and Visayas Renewables Corporation (formerly Bronzeoak Clean Energy), a pioneering
renewable energy development company in the Philippines, which he founded in 2003. In 2008, San Carlos
Bioenergy, an integrated sugar, ethanol and power cogeneration facility developed by Bronzeoak Philippines of
which Mr. Zabaleta served as Project Director, was the first greenfield biomass plant to have been completed in
the Philippines. In 2013, he led the successful development of a 22MW solar farm under San Carlos Solar
Energy, which was inaugurated by President Benigno Aquino on 15 May 2014. In the same year, under his
leadership, a 20MW biomass power plant under San Carlos Biopower started construction and is expected to be
operational in 2019. Both the solar plant and the biomass power plant are each the first of its kind in the country.
Today, with over ten years of renewable energy experience behind him, Mr. Zabaleta is leading the development
of additional renewable energy projects of AC Energy. Prior to leading Bronzeoak, he trained with Citibank in
Manila and Jardine Pacific in Hong Kong, and spent several years as a business strategy and development
consultant in the UK. He has a BS Management Honors degree from the Ateneo de Manila University and a
Masters in Business Administration from Duke University in the U.S..

Dodjie D. Lagazo, Filipino, was a Director and member of AG Counselors Corporation’s Management
Committee from January 2014 to July 2017. He is also the Assistant Corporate Secretary of publicly listed
company Ayala Corporation, the Assistant Corporate Secretary of AC Energy, Inc. and the Corporate Secretary
of various AC Energy subsidiaries and affiliates. Prior to joining Ayala, he was an associate at SyCip Salazar
Hernandez & Gatmaitan. He received his undergraduate degree in Political Science from the University of the
Philippines, Diliman, graduating magna cum laude. He then completed his Bachelor of Laws Degree in the
College of Law of the University of the Philippines, Diliman, ranked sixth in the graduating class of 2003. He is
a member in good standing of the Integrated Bar of the Philippines. He attended an Executive Leadership
Program in Harvard Law School, Harvard University.

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Roman Miguel G. de Jesus, Filipino, was the former President and CEO of North Luzon Renewable Energy
Corporation and former Head of the Retail Electricity Supply group of AC Energy, Inc. Prior to joining AC
Energy, Inc., Mr. de Jesus held the positions of Chief Legal and Compliance Officer and then Chief Operating
Officer of North Luzon Renewable Energy Corporation. Before this, he practiced law in the law firms of Romulo
Mabanta Buenaventura Sayoc & de los Angeles where he specialized in corporate banking and finance and Puyat
Jacinto & Santos where he specialized in energy law and special projects. He has Bachelor of Arts and Master of
Arts degrees in Philosophy from the Ateneo de Manila University, where he was an instructor for ten years. He
also has a Bachelor of Laws degree from the University of the Philippines where he graduated cum laude,
receiving awards, among others, for being Chair of the Philippine Law Journal and Most Outstanding Law Intern.

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 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Company transacts with its related parties, such as its subsidiaries, certain
of its affiliates, associates and joint ventures. These transactions principally consist of advances, loans,
reimbursement of expenses, and management, marketing and administrative service agreements.

Receivables from related parties totaled P206.2 million as of 31 December 2015, P28.0 million as of
31 December 2016, P73.8 million as of 31 December 2017 and P26.3 million as of 30 September 2018.

See Note 23 to the Company’s audited consolidated financial statements as of and for the year ended
31 December 2017 and Note 22 to the Company’s unaudited interim condensed consolidated financial statements
included in this Offering Circular for further information.

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 DESCRIPTION OF MATERIAL INDEBTEDNESS

As of 30 September 2018, AC Energy’s loans outstanding (comprised of long-term borrowings) was equivalent
to P44,907.8 million, 83.1% of the Company’s total loans as of 30 September 2018 were denominated in U.S.
dollars and 94% of the Company’s total loans represent long-term borrowings as of 30 September 2018. Out of
the Company’s total loans, 69% are non-recourse and limited recourse debts. The Company also has
arrangements with various banks and financial institutions to meet short-term working capital requirements. As
of 30 September 2018, 6% of the Company’s borrowings represent short-term borrowings.

The following table describes the Company’s indebtedness as of 30 September 2018.

Outstanding
Original Amount as of
Principal 30 September 2018
Amount (in Q Amount (in Q
Description of unless otherwise unless otherwise
Indebtedness Borrower Lender indicated) Maturity indicated)

Long-Term Borrowings
Bank Loan AC Energy Inc. The Philippine 1,000,000,000 23-Feb-27 1,000,000,000
America Life &
Insurance
Company
Bank Loan AC Energy Inc. Philippine 2,245,650,000 03-May-24 2,245,650,000
National Bank
Bank Loan AC Energy Inc. Security Bank 100,000,000 28-Jun-24 100,000,000
Corporation
Bank Loan NorthWind Power Bank of the 1,000,000,000 31-Oct-24 585,000,000
Development Corp. Philippine
Islands
Bank Loan NorthWind Power Bank of the 1,500,000,000 30-Apr-25 990,660,535
Development Corp Philippine
Islands
Bank Loan NorthWind Power Bank of the 1,000,000,000 27-Apr-28 1,000,000,000
Development Corp Philippine
Islands
Project Finance GN Power Rizal 1,200,000,000 01-Sep-27 1,200,000,000
Kauswagan Ltd. Commercial
Co. Banking Corp.
Project Finance GN Power Sun Life of 500,000,000 01-Sep-27 500,000,000
Kauswagan Ltd. Canada
Co. (Philippines),
Inc.
Project Finance GN Power Bank of the U.S.$110,000,000 01-Sept-27 5,184,394,529
Kauswagan Ltd. Philippine
Co. Islands
Project Finance GN Power Bank of the U.S.$40,000,000 01-Mar-31 1,885,234,364
Kauswagan Ltd. Philippine
Co. Islands
Project Finance GN Power Rizal U.S.$75,000,000 01-Sep-27 3,534,814,420
Kauswagan Ltd. Commercial
Co. Banking Corp.
Project Finance GN Power Rizal U.S.$40,000,000 01-Sep-27 1,765,322,659
Kauswagan Ltd. Commercial
Co. Banking Corp.
Project Finance GN Power Security Bank 100,000,000 01-Sep-27 4,713,085,965
Kauswagan Ltd. Corporation
Co.

167
 Outstanding
Original Amount as of
Principal 30 September 2018
Amount (in Q Amount (in Q
Description of unless otherwise unless otherwise
Indebtedness Borrower Lender indicated) Maturity indicated)
Project Finance GN Power United Coconut U.S.$70,000,000 01-Sep-27 3,299,160,165
Kauswagan Ltd. Planters Bank
Co.
Project Finance GN Power Land Bank of U.S.$20,000,000 01-Sep-27 942,617,182
Kauswagan Ltd. the Philippines
Co.
Project Finance GN Power Prudential U.S.$37,500,000 01-Sep-27 1,586,642,596
Kauswagan Ltd. Assurance
Co. Company
Singapore
(PTE)
Project Finance GN Power Prudential U.S.$37,500,000 01-Sep-27 1,586,642,596
Kauswagan Ltd. Hong Kong
Co. Limited
Project Finance GN Power Rizal U.S.$70,000,000 01-Mar-31 3,299,160,165
Kauswagan Ltd. Commercial
Co. Banking Corp.
Project Finance GN Power Cathay United U.S.$30,000,000 01-Mar-31 1,413,925,800
Kauswagan Ltd. Bank Co. Ltd.
Co. (Taiwan
Branch)
Project Finance GN Power Cathay United U.S.$10,000,000 01-Mar-31 471,308,618
Kauswagan Ltd. Bank Co. Ltd.
Co. (Manila
Branch)
Project Finance GN Power Development U.S.$20,000,000 01-Mar-28 942,617,182
Kauswagan Ltd. Bank of the
Co. Philippines
Project Finance GN Power Bank of China U.S.$20,000,000 01-Mar-28 942,617,182
Kauswagan Ltd. (Manila
Co. Branch)
Project Finance GN Power Bank of China U.S.$55,000,000 30-Jun-28 2,592,197,238
Kauswagan Ltd. (Grand Cayman
Co. Branch)
Project Finance GN Power Philippine U.S.$20,000,000 01-Sep-27 1,062,528,888
Kauswagan Ltd. Bank of
Co. Communication

Short-Term Borrowings
Revolver AC Energy Rizal U.S.$20,000,000 13 Nov 18/ 810,300,000
International Commercial 23 Nov 18
Holdings Pte Ltd. Banking Corp.
Subtotal 43,653,880,084
Less: Issue costs* (636,743,432)

TOTAL P43,817,136,152

*Issues costs are incidental costs incurred in obtaining the relevant loan which includes documentary stamp tax, transfer tax, chattel
mortgage, real estate mortgage, professional fees and other out of the pocket expenses, if applicable.

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 FOREIGN EXCHANGE AND FOREIGN INVESTMENT REGULATIONS

Foreign Exchange Regulations

Philippine foreign exchange rules and regulations of the BSP have been liberalized since 1992. Under present
regulations, as a general rule, foreign exchange may be freely sold and purchased outside the Philippine banking
system. If foreign currency obligations of Philippine borrowers (or guarantors) are to be serviced with foreign
exchange purchased from the Philippine banking system, the loan must have been registered with the BSP within
six months from the utilization of proceeds. Further, if there is a call on the guarantee, the borrower/guarantor
must submit a written notification to the BSP at least 10 banking days before target date of settlement of such call
on the guarantee. Generally, the proceeds of such loans intended to fund local costs should be inwardly remitted
and sold converted into Philippine Pesos within the Philippine banking system. However, loan proceeds intended
to finance foreign exchange currency obligations of the borrower may be paid directly to the supplier/beneficiary
concerned. BSP’s rules generally limit access to the purchase of foreign currency to fund payment obligations
offshore to only those private sector foreign currency loans that had been previously approved by, registered
with, or notified to the BSP, as required under the Manual on Foreign Exchange Transactions.

Outside of Philippine banks, there are other sources of foreign currency. These include entities that are licensed
to engage in the business of buying and selling foreign currency. These other sources of foreign currency outside
the Philippine banking system may be subject to greater exchange rate volatility and liquidity constraints.
Foreign currency received as revenue or held by any person (that is not a bank) in the Philippines can be freely
traded within and freely remitted outside the Philippines, without being subject to these foreign exchange
restrictions imposed by the BSP.

Registration of Foreign Loans and Foreign Investments

Registration with the BSP for the issuance and guarantee of offshore borrowings is not required for the legal
validity and enforceability of such obligations. The registration process takes time and involves costs for the
applicant. The benefit of registration with the BSP is that it would, assuming the BSP determines the applicant to
be eligible for such registration under certain criteria, allow a borrower or guarantor to access the Philippine
banking system to obtain foreign currency, such as U.S. dollars to service such debt or guarantee obligations.
Otherwise, the payment currency must be obtained from other sources as described above. The Guarantor has not
registered with the BSP as it considers it will have sufficient U.S. dollars for funding payments under the
Guarantee without having to access the Philippine banking system. See “Risk Factors — Risks Relating to Notes
issued under the Programme and the Guarantee — The Notes and the Guarantee will not be registered with the
BSP and without BSP registration, the Issuer and the Guarantor cannot access the Philippine banking system to
purchase U.S. dollars to fulfill their obligations under the Guarantee.”

169
 TAXATION

The statements herein regarding taxation are based on the laws in force as of the date of this Offering Circular
and are subject to any changes in law occurring after such date, which changes could be made on a retroactive
basis. The following summary does not purport to be a comprehensive description of all of the tax considerations
that may be relevant to a decision to purchase, own or dispose of the Notes and does not purport to deal with the
tax consequences applicable to all categories of investors, some of which (such as dealers in notes or
commodities) may be subject to special rules. Prospective purchasers of Notes are advised to consult their own
tax advisers concerning the overall tax consequences of their ownership of Notes.

The following is a general description of certain Philippine tax aspects of the Notes. It is based on the present
provisions of the National Internal Revenue Code of 1997, as amended by Republic Act No. 10963 (the
“Philippine Tax Code”), the regulations promulgated thereunder and judicial and ruling authorities in force as of
the date of this Offering Circular, all of which are subject to changes occurring after such date, which changes
could be made on a retroactive basis.

As used in this section, the term “resident alien” refers to an individual whose residence is within the Philippines
and who is not a citizen of the Philippines while the term “non-resident alien” means an individual whose
residence is not within the Philippines and who is not a citizen of the Philippines. A non-resident alien who stays
in the Philippines for an aggregate period of more than 180 days during any calendar year is considered a
“non-resident alien doing business in the Philippines”; otherwise, such non-resident alien is considered a
“non-resident alien not engaged in trade or business within the Philippines”. A “resident foreign corporation” is a
foreign corporation engaged in trade or business in the Philippines and a “non-resident foreign corporation” is a
foreign corporation that is not engaged in trade or business within the Philippines. The term “non-Philippine
holders” refers to beneficial owners of the Notes who are (1) non-resident aliens not engaged in trade or business
within the Philippines or (2) non-resident foreign corporations.

Documentary Stamp Tax

Under the Philippine Tax Code, a documentary stamp tax is imposed upon every original issue of debt
instruments, such as bonds and notes, at the rate of P1.50 on each P200, or fractional part thereof, of the issue
price of such debt instruments; provided, that for debt instruments with terms of less than one year, the
documentary stamp tax to be collected shall be proportionate to the ratio of the debt instrument’s term in number
of days to 365 days. The documentary stamp tax is collectible wherever the document is made, signed, issued,
accepted or transferred when the obligation or right arises from Philippine sources, the property is situated in the
Philippines, or where the object of the contract is located or used in the Philippines.

No documentary stamp tax is imposed upon the issuance of the Notes, as the Issuer is a non-resident foreign
corporation and the issuance of the Notes takes place outside the Philippines. No documentary stamp tax is
imposed upon the issuance of the Guarantee to secure payment of the Notes.

No documentary stamp tax is imposed on the subsequent sale or disposition of the Notes, trading of the Notes in
a secondary market or through an exchange as long as such subsequent sale, disposition or trading is not made in
the Philippines or there is no change in the maturity date or the material terms and conditions of the Notes.

Repayment of the Principal on the Notes

The Issuer’s payment of the principal on the Notes to a non-Philippine holder will not subject such
non-Philippine holder to taxation in the Philippines by reason solely of the holding of the Notes or the receipt of
principal.

Under the current laws and regulations of the Philippines, all payments of principal on the Notes may be paid by
the Guarantor pursuant to the terms of the Agreements to the Noteholders who are non-residents of the
Philippines without being subject to Philippine income, withholding or other taxes and are otherwise free and
clear of any other tax, duty, withholding or deduction in the Philippines. Gains realized from the sale, exchange
or retirement of the Notes shall be exempt from Philippine income tax, if the Notes are considered Long Term
Notes, if sold by non-residents outside the Philippines, or if the holder is qualified for such exemption under an
applicable tax treaty. Notes held by persons at the time of death will not be subject to estate tax in the Republic
of the Philippines if the deceased at the time of death was a citizen and resident of a foreign country which did
not impose a transfer or estate tax of any character in respect of intangible personal property of citizens of the
Republic of the Philippines not residing in that foreign country, or if the laws of the foreign country of which the

170
deceased was a citizen and resident at the time of his or her death allow a similar exemption from transfer or
estate taxes of every character and description in respect of intangible personal property owned by citizens of the
Republic of the Philippines not residing in that foreign country.

Interest on the Notes

Under the Philippine Tax Code, alien individuals and foreign corporations are subject to Philippine income tax
on Philippine-sourced income only. It further provides that interest income derived from bonds, notes or other
interest-bearing obligations of Philippine residents is Philippine-source income subject to Philippine income tax.
As the Notes will be issued by the Issuer which is a non-resident foreign corporation, interest on the Notes
received by non-resident holders from the Issuer should not be subject to Philippine income tax on interest.
However, resident Philippine citizen and domestic corporations are subject to tax on their global income. As
such, interest income on the Notes paid by the Issuer will form part of a resident Philippine citizen or a domestic
corporation’s gross income, which, after being reduced by the applicable deductions, will be subject to the
applicable Philippine income tax rates. The net taxable income of resident Philippine citizens is subject to
graduated tax rates ranging from 0-35% while the net taxable income of domestic corporations is subject to a flat
30% tax rate.

Any payment made by the Guarantor to a Noteholder under the Guarantee which is attributable to interest on the
Notes could be considered as Philippine-source income and accordingly subject to final withholding taxes in the
Philippines at the following rates:

Philippine citizens and resident alien individuals 20%

Non-Resident aliens doing business in the Philippines 20%
Non-resident aliens not doing business in the Philippines 25%

Domestic corporations 20%

Resident foreign corporations 20%
Non-resident foreign corporation 30%

If the payment made by the Guarantor to a non-resident foreign corporation is in foreign currency and qualifies
as interest on foreign loans, the applicable final withholding tax rate is 20%.

The aforementioned final withholding tax rates may be reduced by applicable provisions of tax treaties in force
between the Philippines and the tax residence country of the non-resident Noteholder. Most tax treaties to which
the Philippines is a party provide for a preferential reduced tax rate of 15% where Philippine-source interest
income is paid to a resident of the other contracting state. However, tax treaties would also normally qualify that
the preferential reduced tax rates will not apply if the recipient of the interest income, even if considered a
resident of the other contracting state, carries on business in the Philippines through a permanent establishment
and the holding of the relevant interest-bearing instrument is effectively connected to such permanent
establishment.

Under Condition 8.1, all payments of principal, premium and interest by or on behalf of the Issuer or the
Guarantor in respect of the Notes, Receipts and Coupons shall be made free and clear of, and without
withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed, levied, collected, withheld or assessed by or within any Tax Jurisdiction,
unless such withholding or deduction is required by the law of any Tax Jurisdiction. Where such withholding or
deduction is made by the Issuer or the Guarantor, as the case may be, the Issuer or the Guarantor will increase the
amounts paid by it to the extent required, so that the net amount received by the holders of the Notes, Receipts or
Coupons equals the amounts which would otherwise have been receivable by them had no such withholding or
deduction been required. In the event that the Issuer or the Guarantor makes a deduction or withholding required
by the law of any Tax Jurisdiction the Issuer or the Guarantor shall pay such Additional Amounts as will result in
receipt by the holders of the Notes, Receipts or Coupons of such amounts as would have been received by them
had no such withholding or deduction been required, except that no such Additional Amounts shall be payable in
respect of any Note, Receipt or Coupon:

(i) presented for payment in the Cayman Islands or the Philippines;

(ii) to or on behalf of a holder who is liable to such taxes, duties, assessments or governmental charges in
respect of such Note, Receipt or Coupon by reason of his having some connection with a Tax Jurisdiction
other than the mere holding of such Note, Receipt or Coupon; or

171
(iii) presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent
that the holder of it would have been entitled to such additional amounts on surrendering the relevant Note,
Receipt or Coupon for payment on the last day of such period of 30 days assuming that day to have been a
Payment Day (as defined in Condition 6.6) (see “Terms and Conditions of the Notes”).

Tax Exempt Status

Noteholders who are exempt from, are not subject to final withholding tax, or are subject to a lower rate of final
withholding tax on interest income paid by the Guarantor may avail of such exemption or preferential
withholding tax rate by submitting the necessary documents. The BIR has prescribed certain procedures for
availment of such exemption or preferential withholding tax rate. Assuming the payments to be made by the
Guarantor are subject to withholding tax, subject to the filing of the Guarantor’s application and its approval by
the BIR, the Guarantor will not withhold or will withhold at a reduced rate provided that such holder furnishes
the Guarantor with the following documents, in form and substance prescribed by the Guarantor: (a) For (1)
tax-exempt corporations under Section 30 of the Tax Code (except non-stock, non-profit educational institutions
under Section 30(H) of the Tax Code); (2) cooperatives duly registered with the Cooperative Development
Authority; and (3) BIR-approved pension fund and retirement plan – certified true copy of valid, current and
subsisting tax exemption certificate, ruling or opinion issued by the BIR. For this purpose, a tax exemption
certificate or ruling shall be deemed “valid, current and subsisting” if it has not been more than 3 years since the
date of issuance thereof; (b) For Tax-Exempt Personal Equity Retirement Account established pursuant to PERA
Act of 2008 – certified true copy of the Noteholder’s current, valid and subsisting Certificate of Accreditation as
PERA Administrator; (c) For all other tax-exempt entities (including, but not limited to, (1) non-stock, non-profit
educational institutions; (2) government-owned or -controlled corporations; and (3) foreign governments,
financing institutions owned, controlled or enjoying refinancing from foreign governments, and international or
regional financial institutions established by foreign governments) – certified true copy of tax exemption
certificate, ruling or opinion issued by the BIR expressly stating that their income is exempt from income tax
and, consequently, withholding tax; (d) With respect to tax treaty relief, (1) certificate of tax residence issued for
the current year (whether using the form prescribed in their country of residence, or using Part I (D) of the
Certificate of Tax Residence for Tax Treaty Relief (“CORTT”) Form prescribed under Revenue Memorandum
Order No. 8-2017), and (2) duly accomplished CORTT Form (particularly Part I (A), (B) and (C), and Part II
(A), (B), (C) and (D)); and (e) Any other document that the Guarantor may require from time to time; (ii) a duly
notarized declaration and undertaking in the prescribed form, executed by (ii.a) the Corporate Secretary or any
authorized representative, who has personal knowledge of the exemption based on his official functions, if the
Noteholder purchases Notes for its account, or (ii.b) the Trust Officer, if the Noteholder is a universal bank
authorized under Philippine law to perform trust and fiduciary functions and purchase the Notes pursuant to its
management of tax-exempt entities (i.e., Employee Retirement Fund, etc.), declaring and warranting that the
same Noteholder named in the tax exemption certificate described in (i) above, is specifically exempt from the
relevant tax or is subject to a preferential tax rate for the relevant tax, undertaking to immediately notify the
Guarantor of any suspension or revocation of the tax exemption certificates or preferential rate entitlement, and
agreeing to indemnify and hold the Guarantor free and harmless against any claims, actions, suits, and liabilities,
or any tax or charge resulting from the non-withholding of the required tax; and (iii) if applicable, such other
documentary requirements as may be reasonably required by the Guarantor, or as may be required under
applicable regulations of the relevant taxing or other authorities; provided further that, all sums payable by the
Guarantor to tax-exempt entities shall be paid in full without deductions for Taxes, duties, assessments, or
government charges, subject to the submission by the Noteholder claiming the benefit of any exemption of
reasonable evidence of such exemption to the Guarantor.

If the regular rate mentioned above is withheld by the Guarantor, instead of the reduced rate, the Noteholder may
file a claim for a refund from the BIR. However, because the refund process in the Philippines could be
cumbersome, requiring the filing of an administrative claim and the possible filing of a judicial appeal, it may be
impractical to pursue such a refund.

Value -Added Tax

Gross receipts derived by dealers in securities from the sale of the Notes in the Philippines, equivalent to the
gross selling price less the acquisition cost of the Notes sold, shall be subject to value-added tax of 12%.

“Dealer in securities” means a merchant of stock or securities, whether an individual partnership or corporation,
with an established place of business, regularly engaged in the purchase of securities and their resale to
customers, that is, one who as a merchant buys securities and sells them to customers with a view to the gains
and profits that may be derived therefrom.

172
Gross Receipts Tax
Bank and non-bank financial intermediaries performing quasi-banking functions are subject to gross receipts tax
on gross receipts derived from sources within the Philippines in accordance with the following schedule:
On interest, commissions and discounts from lending activities as well as income from financial leasing, on the
basis of remaining maturities of instruments from which such receipts are derived:

Maturity period is five years or less 5%

Maturity period is more than five years 1%
Non-bank financial intermediaries not performing quasi-banking functions doing business in the Philippines are
likewise subject to gross receipts tax. Gross receipts of such entities derived from sources within the Philippines
from interests, commissions and discounts from lending activities are taxed in accordance with the following
schedule based on the remaining maturities of the instruments from which such receipts are derived:

Maturity period is five years or less 5%

Maturity period is more than five years 1%
If the net trading gains realized within the taxable year on the sale or disposition of the Notes by banks and
nonbank financial intermediaries performing quasi-banking functions are considered as gross receipts derived
from sources within the Philippines, such gains shall be subject to gross receipts tax at the rate of 7%.
Sale or Other Disposition of the Notes
Under Section 32(B)(7)(g) of the Tax Code, gains realized from the sale, exchange or retirement of bonds,
debentures and other certificates of indebtedness with a maturity date of more than five years (as measured from
the date of issuance of such bonds, debentures or other certificates of indebtedness) (“Long Term Notes”) are
exempt from income tax. The BIR, however, has not had occasion to confirm whether bonds issued by foreign
entities, such as the Notes, may constitute Long Term Notes for purposes of such exemption. In any case, any
gain from the sale or exchange of the Notes is not subject to Philippine income tax if the sale or exchange of the
Notes by a non-resident holder takes place outside the Philippines.
If the Notes are considered ordinary assets, gains from the sale or disposition of such Notes within the
Philippines that are subject to Philippine income tax will be included in the computation of taxable income,
which, after being reduced by the applicable deductions, is subject to the following graduated tax rates for
Philippine citizens (whether residents or non-residents), or resident foreign individuals or non-resident aliens
engaged in trade or business in the Philippines effective 1 January 2018 until 31 December 2022:

Not over P250,000 0%

Over P250,000 but not over P400,000 20% of the excess over P250,000
Over P400,000 but not over P800,000 P30,000 + 25% of the excess over
P400,000
Over P800,000 but not over P2,000,000 P130,000 + 30% of the excess over
P800,000
Over P2,000,000 but not over P8,000,000 P490,000 + 32% of the excess over
P2,000,000
Over P8,000,000 P2,410,000 + 35% of the excess over
P8,000,000

and effective 2 January 2023 and onwards:

Not over P250,000 0%

Over P250,000 but not over P400,000 15% of the excess over P250,000
Over P400,000 but not over P800,000 P22,500 + 20% of the excess over P400,000
Over P800,000 but not over P2,000,000 P102,500 + 25% of the excess over
P800,000
Over P2,000,000 but not over P8,000,000 P402,500 + 30% of the excess over
P2,000,000
Over P8,000,000 P2,202,500 + 35% of the excess over
P8,000,000

173
For non-resident aliens not engaged in trade or business, the gain from the sale of Notes within the Philippines
shall be subject to the 25% final withholding tax.

If the Notes are considered as capital assets of individual Noteholders, gains from the sale or disposition of such
Notes shall be subject to the same income tax rates as if the Notes were held as ordinary assets, except that if the
gain is realized by an individual who held the Notes for a period of more than twelve (12) months prior to the
sale, only 50% of the gain will be recognized and included in the computation of taxable income, subject to the
applicable deductions. On the other hand, if the Notes were held by an individual for a period of twelve
(12) months or less, 100% of the gain will be included in the computation of the taxable income.

Gains derived by domestic or resident foreign corporations on the sale or other disposition of the Notes within
the Philippines are included in the computation of taxable income. which, after being reduced by the applicable
deductions, is subject to a 30% regular corporate income tax. Furthermore, gains derived by a domestic
corporation from a sale or disposition of Notes outside the Philippines, will likewise form part of its taxable
income. Gains derived by non-resident foreign corporations on the sale or other disposition of the Notes shall
form part of their gross income which is subject to a 30% final withholding tax unless such foreign corporation is
entitled to preferential tax treatment pursuant to a tax treaty subject to such other documentary requirements as
may be reasonably required under the applicable regulations of the relevant taxing or other authorities for
purposes of claiming tax treaty relief.

Estate and Donor’s Tax

As the Notes are issued by a corporation organized outside the Philippines, they generally do not have a
Philippine situs. Having no Philippine situs, the transfer of the Notes (1) to the estate or heirs of a deceased
non-resident alien holder should not be subject to Philippine estate taxes and (2) by way of donation should not
be subject to Philippine donor’s taxes.

However, the following obligations of a foreign corporation are deemed to have a Philippine situs and are subject
to Philippine estate or donor’s gift taxes upon their transfer: (1) obligations of a foreign corporation, 85% of the
business of which is located in the Philippines, and (2) obligations issued by a foreign corporation, if such
obligation has acquired a business situs in the Philippines. The Notes may acquire a Philippine situs if the
foregoing circumstances become applicable to the Issuer or the Notes.

The transfer of the Notes by a deceased Noteholder to his heirs shall be subject to an Philippine estate tax at a
fixed rate of 6% of the net estate.

A Noteholder who transfers the Notes by way of gift or donation shall be subject to Philippine donor’s tax at the
fixed rate of 6% based on the total gifts or donations in excess of P250,000 exempt gifts made during the
calendar year, whether the donor is a stranger or not.

The estate or donor’s taxes payable in the Philippines may be credited with the amount of any estate or donor’s
taxes imposed by the authority of a foreign country, subject to limitations on the amount to be credited, and the
tax status of the donor. The estate tax and the donor’s tax, in respect of the Notes, shall not be collected in respect
of intangible property, such as the Notes, (1) if the deceased, at the time of death, or the donor, at the time of the
donation, was a citizen and resident of a foreign country which, at the time of his death or donation, did not
impose a transfer tax of any character in respect of intangible personal property of citizens of the Philippines not
residing in that foreign country; or (2) if the laws of the foreign country of which the deceased or donor was a
citizen and resident, at the time of his death or donation, allows a similar exemption from transfer or death taxes
of every character or description in respect of intangible personal property owned by citizens of the Philippines
not residing in the foreign country.

Subject to the qualifications discussed above, in case the Notes are transferred for less than adequate and full
consideration in money or money’s worth, the amount by which the fair market value of the Notes exceeded the
value of the consideration may be deemed a gift and donor’s taxes may be imposed on the transferor of the
Notes. Transfer of the Notes made in the ordinary course of business (a transaction which is bona fide, at arm’s
length, and free from any donative intent) is considered as made for an adequate and full consideration in money
or money’s worth.

Cayman Islands Taxation

The following is a discussion on certain Cayman Islands income tax consequences of an investment in the Notes.
The discussion is a general summary of present law, which is subject to prospective and retroactive change. It is

174
not intended as tax advice, does not consider any investor’s particular circumstances, and does not consider tax
consequences other than those arising under Cayman Islands law.

Under Existing Cayman Islands Laws:

Payments of interest and principal on the Notes and dividends and capital in respect of the shares will not be
subject to taxation in the Cayman Islands and no withholding will be required on the payment of interest and
principal or a dividend or capital to any holder of the Notes or shares, as the case may be, nor will gains derived
from the disposal of the Notes or shares be subject to Cayman Islands income or corporation tax. The Cayman
Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax.

Where issued in bearer form, no stamp duty is payable in respect of the issue of the Notes and the Notes
themselves will be stampable if they are executed in or brought into the Cayman Islands.

Where issued in registered form, no stamp duty is payable in respect of the issue of the Notes and the
Certificates. An instrument of transfer in respect of a Note or a Certificate is stampable if executed in or brought
into the Cayman Islands.

The Company has been incorporated under the laws of the Cayman Islands as an exempted company with limited
liability and, as such, has obtained an undertaking from the Financial Secretary of the Cayman Islands in the
following form:

The Tax Concessions Law Undertaking as to Tax Concessions

In accordance with the Tax Concessions Law, the following undertaking is hereby given to AC Energy Finance
International Limited (the “Cayman Company” below):

1 That no law which is hereafter enacted in the Islands imposing any tax to be levied on profits, income, gains
or appreciations shall apply to the Cayman Company or its operations; and

2 In addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of
estate duty or inheritance tax shall be payable:

On or in respect of the shares, debentures or other obligations of the Cayman Company; or

2.1 by way of the withholding in whole or part, of any relevant payment as defined in the Tax Concessions Law.

These concessions shall be for a period of twenty years from the 11th day of December 2018.

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 CLEARANCE AND SETTLEMENT OF THE NOTES

The information set out below is subject to any change in or reinterpretation of the rules, regulations and
procedures of Euroclear and Clearstream, Luxembourg (together, the “Clearing Systems”) currently in effect.
The information in this section concerning the Clearing Systems has been obtained from sources that the Issuer
believes to be reliable, but neither the Issuer, the Guarantor, nor any Dealer takes any responsibility for the
accuracy of this section. Investors wishing to use the facilities of any of the Clearing Systems are advised to
confirm the continued applicability of the rules, regulations and procedures of the relevant Clearing System.
None of the Issuer, the Guarantor or any other party to the Agency Agreement will have any responsibility or
liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests
in the Notes held through the facilities of any Clearing System or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. Custodial and depositary links have been established
with Euroclear and Clearstream, Luxembourg to facilitate the initial issue of the Notes and transfers of the Notes
associated with secondary market trading.

THE CLEARING SYSTEMS

Euroclear and Clearstream, Luxembourg

Euroclear and Clearstream, Luxembourg each hold securities for participating organizations and facilitates the
clearance and settlement of securities transactions between their respective participants through electronic book-
entry of changes in the accounts of their participants. Euroclear and Clearstream, Luxembourg provide their
respective participants with, among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream,
Luxembourg participants are financial institutions throughout the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Indirect access
to Euroclear or Clearstream, Luxembourg is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Euroclear or Clearstream, Luxembourg
participant, either directly or indirectly.

Distributions of principal with respect to book-entry interests in the Notes held through Euroclear or Clearstream,
Luxembourg will be credited, to the extent received by the Principal Paying Agent, to the cash accounts of
Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system’s rules and
procedures.

Registration and Form

Book-entry interests in the Notes held through Euroclear and Clearstream, Luxembourg will be evidenced by the
Global Certificate, registered in the name of nominee of the common depositary of Euroclear and Clearstream,
Luxembourg. The Global Certificate will be held by a common depositary for Euroclear and Clearstream,
Luxembourg. Beneficial ownership in Notes will be held through financial institutions as direct and indirect
participants in Euroclear and Clearstream, Luxembourg.

The aggregate holdings of book-entry interests in the Notes in Euroclear and Clearstream, Luxembourg will be
reflected in the book-entry accounts of each such institution. Euroclear and Clearstream, Luxembourg, as the
case may be, and every other intermediate holders in the chain to the beneficial owner of book-entry interests in
the Notes, will be responsible for establishing and maintaining accounts for their participants and customers
having interests in the book-entry interest in the Notes. The Registrar will be responsible for maintaining a record
of the aggregate holdings of Notes registered in the name of a common nominee for Euroclear and Clearstream,
Luxembourg and/or if individual Certificates are issued in the limited circumstances described under “The
Global Certificate — Registration of Title”, holders of Notes represented by those individual Certificates. The
Principal Paying Agent will be responsible for ensuring that payments received by it from the Issuer for holders
of interests in the Notes holding through Euroclear and Clearstream, Luxembourg are credited to Euroclear or
Clearstream, Luxembourg, as the case may be.

The Issuer will not impose any fees in respect to the Notes; however, holders of book-entry interest in the Notes
may incur fees normally payable in respect of the maintenance and operation of accounts in Euroclear and
Clearstream, Luxembourg.

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CLEARANCE AND SETTLEMENT PROCEDURES

Initial Settlement

Upon their original issue, the Notes will be in global form represented by the Global Certificate. Interests in the
Notes will be in uncertificated book-entry form. Purchasers electing to hold book-entry interests in the Notes
through Euroclear and Clearstream, Luxembourg accounts will follow the settlement procedures applicable to
conventional eurobonds. Book-entry interests in the Notes will be credited to Euroclear and Clearstream,
Luxembourg participants’ securities clearance accounts on the business day following the Closing Date against
payment (for value the Closing Date).

Secondary Market Trading

Secondary market sales of book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg
to purchasers of book-entry interests in the Notes through Euroclear or Clearstream, Luxembourg will be
conducted in accordance with the normal rules and operating procedures of Euroclear and Clearstream,
Luxembourg and will be settled using the procedures applicable to conventional participants.

GENERAL

Although the foregoing sets out the procedures of Euroclear and Clearstream, Luxembourg in order to facilitate
the transfers of interests in the Notes among participants of Euroclear and Clearstream, Luxembourg, none of
Euroclear and Clearstream, Luxembourg is under any obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.

Neither of the Issuer, the Guarantor nor any of their agents will have any responsibility for the performance by
Euroclear or Clearstream, Luxembourg or their respective participants of their respective obligations under the
rules and procedures governing their operations.

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 SUBSCRIPTION AND SALE

The Dealers have, in a Programme Agreement (such Programme Agreement as modified and/or supplemented
and/or restated from time to time, the “Programme Agreement”) dated 16 January 2019, agreed with the Issuer
and the Guarantor a basis upon which they or any of them may from time to time agree to purchase Notes. Any
such agreement will extend to those matters stated under “Form of the Notes” and “Terms and Conditions of the
Notes”. The Issuer (failing which, the Guarantor) will pay each relevant Dealer a commission as may be agreed
between them in respect of Notes subscribed by it. The Issuer (failing which, the Guarantor) has agreed, unless
otherwise agreed in respect of an issue of Notes, to pay all expenses incidental to the performance of their
respective obligations under the Programme Agreement. The commissions in respect of an issue of Notes on a
syndicated basis may be stated in the applicable Pricing Supplement. The Notes may also be sold by the Issuer
through the Dealers, acting as the Issuer’s agents. The Dealers may also offer and sell Notes through certain of
their affiliates. In the Programme Agreement, the Issuer (failing which, the Guarantor) has agreed to reimburse
the Dealers for certain of their expenses in connection with the establishment of the Programme and the issue of
Notes under the Programme and to indemnify the Dealers against certain liabilities incurred by them in
connection therewith. The Programme Agreement entitles the Dealers to terminate any agreement that they make
to subscribe Notes in certain circumstances prior to payment for such Notes being made to the Issuer.

Where the Issuer agrees to sell to the Dealer(s), who agree to subscribe and pay for, or to procure subscribers to
subscribe and pay for, Notes at an issue price set forth in the applicable Pricing Supplement (less commissions, if
any, in connection with such issue of Notes), the Notes may be reoffered and resold by the relevant Dealer(s) at a
price different from their Issue Price, including (without limitation) at prevailing market prices, or at prices
related thereto, at the time of such reoffer and resale, in each case as may be determined by the relevant
Dealer(s).

In order to facilitate the offering of any Tranche of the Notes, the Dealer or Dealers (if any) named as Stabilizing
Managers for persons acting on behalf of any Stabilizing Manager(s) in the applicable Pricing Supplement and
participating in the offering of the Tranche may engage in transactions that stabilize, maintain or otherwise
affect, which support the market price of the relevant Notes during and after the offering of the Tranche.
Specifically such persons may over-allot Notes or effect transactions with a view to supporting the market price
of the Notes at a level higher than that which might otherwise prevail or create a short position in the Notes for
their own account by selling more Notes than have been sold to them by the Issuer. Such persons may also elect
to cover any such short position by purchasing Notes in the open market. In addition, such persons may stabilize
or maintain the price of the Notes by bidding for or purchasing Notes in the open market and may impose penalty
bids, under which selling concessions allowed to syndicate members or other broker-dealers participating in the
offering of the Notes are reclaimed if Notes previously distributed in the offering are repurchased in connection
with stabilization transactions or otherwise. The effect of these transactions may be to stabilize or maintain the
market price of the Notes at a level higher than that which might otherwise prevail in the open market. The
imposition of a penalty bid may also affect the price of the Notes to the extent that it discourages resales thereof.
There is no assurance that the Stabilizing Manager(s) or persons acting on behalf of a Stabilizing Manager will
undertake stabilization action. No representation is made as to the magnitude or effect of any such stabilizing or
other transactions. Such transactions, if commenced, may be discontinued at any time, and must be brought to an
end after a limited period. Under the laws and regulations of the United Kingdom any stabilization action may
begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of
Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after
the issue date of the relevant tranche of Notes and 60 days after the date of the allotment of the relevant tranche
of Notes. Any stabilization action or over-allotment must be conducted by the relevant Stabilizing Manager(s) (or
person acting on behalf of any Stabilization Manager(s)) in accordance with all applicable laws and rules.

The Dealers and their affiliates are full service financial institutions engaged in various activities which may
include securities trading, commercial and investment banking, financial advice, investment management,
principal investment, hedging, financing and brokerage activities. Each of the Dealers may have engaged in, and
may in the future engage in, investment banking and other commercial dealings in the ordinary course of
business with the Issuer, the Company or their respective subsidiaries, jointly controlled entities or associated
companies from time to time. In the ordinary course of their various business activities, the Dealers and their
affiliates may make or hold (on their own account, on behalf of clients or in their capacity of investment
advisers) a broad array of investments and actively trade debt and equity securities (or related derivative
securities) and financial instruments (including bank loans) for their own account and for the accounts of their
customers and may at any time hold long and short positions in such securities and instruments and enter into
other transactions, including credit derivatives (such as asset swaps, repackaging and credit default swaps) in

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relation thereto. Such transactions, investments and securities activities may involve securities and instruments of
the Issuer, the Company or their respective subsidiaries, jointly controlled entities or associated companies,
including any Tranche of Notes issued under the Programme, may be entered into at the same time or proximate
to offers and sales of Notes or at other times in the secondary market and be carried out with counterparties that
are also purchasers, holders or sellers of Notes. Each Tranche of Notes issued under the Programme may be
purchased by or be allocated to any Dealer or an affiliate for asset management and/or proprietary purposes but
not with a view to distribution.

In connection with each Tranche of Notes issued under the Programme, the Dealers or their respective affiliates
may purchase Notes for its or their own account and enter into transactions, including credit derivatives, such as
asset swaps, repackaging and credit default swaps relating to such Notes and/or other securities of the Issuer, the
Guarantor or their respective subsidiaries or associates at the same time as the offer and sale of each Tranche of
Notes or in secondary market transactions. Such transactions would be carried out as bilateral trades with
selected counterparties and separately from any existing sale or resale of the Tranche of Notes to which a
particular Pricing Supplement relates (notwithstanding that such selected counterparties may also be purchasers
of such Tranche of Notes).

United States

1.1 In respect of Notes offered or sold in reliance on Category 1 as specified in the applicable Pricing
Supplement, the Notes and the Guarantee have not been and will not be registered under the Securities Act
or the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold
within the United States except in certain transactions exempt from or not subject to, the registration
requirements of the Securities Act. Each Dealer represents and agrees that it has not offered or sold, and
will not offer or sell, any Notes constituting part of its allotment in the United States except in accordance
with Rule 903 of Regulation S under the Securities Act or pursuant to another exemption from the
registration requirements of the Securities Act.

Terms used in this paragraph 1.1 have the meanings given to them by Regulation S.

1.2 In respect of Notes offered or sold in reliance on Category 2 as specified in the applicable Pricing
Supplement, the Notes and the Guarantee have not been and will not be registered under the Securities Act
or the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions
exempt from or not subject to the registration requirements of the Securities Act. Each Dealer represents
and agrees that it has not offered, sold and delivered any Notes, and will not offer, sell and deliver any
Notes (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the
distribution of all Notes of the Tranche of which such Notes are a part, as determined and certified as
provided below, within the United States or to, or for the account or benefit of, U.S. persons except in
accordance with Regulation S of the Securities Act. Each Dealer who has purchased Notes of a Tranche
hereunder (or in the case of a sale of a Tranche of Notes issued to or through more than one Dealer, each of
such Dealers as to the Notes of such Tranche purchased by or through it or, in the case of a syndicated
issue, the relevant Lead Manager) shall determine and certify to the Principal Paying Agent the completion
of the distribution of the Notes of such Tranche. On the basis of such notification or notifications, the
Principal Paying Agent has agreed to notify such Dealer/Lead Manager of the end of the distribution
compliance period with respect to such Tranche. Each Dealer has also agreed that, at or prior to
confirmation of sale of Notes, it will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases Notes from it during the distribution compliance
period a confirmation or notice to substantially the following effect:

“The Securities covered hereby have not been registered under the U.S. Securities
Act of 1933, as amended (the Securities Act), or the securities laws of any state or
other jurisdiction of the United States, and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons (i) as part of their
distribution at any time or (ii) otherwise until 40 days after the completion of the
distribution of the Securities as determined and certified by the relevant Dealer, in
the case of a non-syndicated issue, or the Lead Manager, in the case of a
syndicated issue, and except in either case in accordance with Regulation S under
the Securities Act. Terms used above have the meanings given to them by
Regulation S”.
Terms used in this paragraph 1.2 have the meanings given to them by Regulation S.

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1.3 Each Dealer further represents and agrees that it, its affiliates or any persons acting on its or their behalf
have not engaged and will not engage in any “directed selling efforts” (as defined in Rule 902(c) under the
Securities Act) with respect to any Note, and, in respect of Notes offered or sold in reliance on Category 2
as specified in the applicable Pricing Supplement, it and they have complied and will comply with the
offering restrictions requirement of Regulation S.

1.4 Prior to the issuance of any Bearer Notes under the Programme, the Issuer and the Guarantor will confirm
with their counsel that all Programme Documents have been reviewed, revised and updated to the extent
necessary to ensure that such documents properly allow for the issuance of Bearer Notes in accordance
with U.S. federal income tax law.

1.5 The applicable Pricing Supplement will specify whether U.S. Treas. Reg. Section 1.163-5(c)(2)(i)(D), as in
effect prior to the repeal of Section 163(f)(2)(B) of the U.S. Internal Revenue Code of 1986, as amended
(the “Code”), or any successor rules that are substantially in the same form (“TEFRA D”), in each case,
are applicable (or relevant under IRS Notice 2012-20) for purposes of Section 4701 of the Code. In respect
of Bearer Notes where TEFRA D is specified in the applicable Pricing Supplement:

(i) except to the extent permitted under TEFRA D, each Dealer (i) has represented and agreed, and each
Dealer appointed under the Programme will be required to represent and agree, that it has not offered
or sold, and has agreed that during a 40-day restricted period it will not offer or sell, Notes in bearer
form to a person who is within the United States or its possessions or to a United States person, and
(ii) has represented that it has not delivered and agreed that it will not deliver within the United
States or its possessions definitive Notes in bearer form that are sold during the restricted period;

(ii) each Dealer has represented and agreed, and each Dealer appointed under the Programme will be
required to represent and agree, that it has and agreed that throughout the restricted period it will
have in effect procedures reasonably designed to ensure that its employees or agents who are directly
engaged in selling Notes in bearer form are aware that such Notes may not be offered or sold during
the restricted period to a person who is within the United States or its possessions or to a United
States person, except as permitted by TEFRA D;

(iii) if it is a United States person, each Dealer has represented and agreed, and each Dealer appointed
under the Programme will be required to represent and agree, that it is acquiring Notes in bearer
form for purposes of resale in connection with their original issuance and if it retains Notes in bearer
form for its own account, it will only do so in accordance with TEFRA D (including the
requirements of U.S. Treas. Reg. Section l.163-5(c)(2)(i)(D)(6));

(iv) it will provide the Issuer with the documentation specified (at the time specified) in U.S. Treas. Reg.
Section 1.163-5(c)(2)(i)(D)(3);

(v) with respect to each affiliate of such Dealer that acquires Notes in bearer form from such Dealer for
the purpose of offering or selling such Notes during the restricted period, such Dealer has repeated
and confirmed the representations and agreements contained in subparagraphs (i), (ii), (iii) and
(iv) on such affiliate’s behalf.

Terms used in this paragraph 1.5 have the meanings given to them by the Code and Treasury regulations
promulgated thereunder, including TEFRA D.
1.6 The applicable Pricing Supplement will specify whether U.S. Treas. Reg. Section 1.163-5(c)(2)(i)(C), as in
effect prior to the repeal of Section 163(f)(2)(B) of the Code, or any successor rules that are substantially
in the same form (“TEFRA C”), in each case, are applicable (or relevant under IRS Notice 2012-20) for
purposes of Section 4701 of the Code. In respect of Bearer Notes where TEFRA C is specified in the
applicable Pricing Supplement, such Bearer Notes must be issued and delivered outside the United States
and its possessions in connection with their original issuance. Each Dealer has represented and agreed, and
each Dealer appointed under the Programme will be required to represent and agree, that it has not offered,
sold or delivered, and will not offer, sell or deliver, directly or indirectly, such Bearer Notes within the
United States or its possessions in connection with their original issuance. Further, each Dealer has
represented and agreed, and each Dealer appointed under the Programme will be required to represent and
agree, in connection with the original issuance of such Bearer Notes that it has not communicated, and will

180
 not communicate, directly or indirectly, with a prospective purchaser if such purchaser is within the United
States or its possessions and will not otherwise involve its U.S. office in the offer or sale of such Bearer
Notes. Further, the Issuer will comply with the documentary requirements described in U.S. Treas. Reg.
Section 1.163-5(c)(2)(i)(C)(4).

Terms used in this paragraph 1.6 have the meanings given to them by the Code and Treasury regulations
promulgated thereunder.
1.7 Each issue of Index Linked Notes or Dual Currency Notes shall be subject to such additional U.S. selling
restrictions as the Issuer and the relevant Dealer may agree as a term of the issue and purchase of such
Notes, which additional selling restrictions shall be set out in the applicable Pricing Supplement. The
relevant Dealer has agreed that it shall offer, sell and deliver such Notes only in compliance with such
additional U.S. selling restrictions.

European Economic Area

Unless the Pricing Supplement specifies “Prohibition of Sales to EEA Retail Investors” as “Not Applicable”,
each Dealer represents and agrees that it has not offered, sold or otherwise made available and will not offer, sell
or otherwise make available any Notes which are the subject of the offering contemplated by the Offering
Circular as completed by the pricing supplement in relation thereto to any retail investor in the European
Economic Area. For the purposes of this provision:

(a) the expression “retail investor” means a person who is one (or more) of the following:

(i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or

(ii) a customer within the meaning of Directive 2002/92/EC (as amended, the “Insurance Mediation
Directive”), where that customer would not qualify as a professional client as defined in point (10) of
Article 4(1) of MiFID II; or

(iii) not a qualified investor as defined in Directive 2003/71/EC (as amended, the “Prospectus Directive”);
and

(b) the expression an “offer” includes the communication in any form and by any means of sufficient
information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to
purchase or subscribe the Notes.

If the Pricing Supplement specifies “Prohibition of Sales to EEA Retail Investors” as “Not Applicable”, in
relation to each Member State of the European Economic Area which has implemented the Prospectus Directive
(each, a “Relevant Member State”), each Dealer represents and agrees that with effect from and including the
date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant
Implementation Date”) it has not made and will not make an offer of Notes which are the subject of the offering
contemplated by the Offering Circular as completed by the pricing supplement in relation thereto to the public in
that Relevant Member State except that it may, with effect from and including the Relevant Implementation
Date, make an offer of such Notes to the public in that Relevant Member State:

(a) if the pricing supplement in relation to the Notes specify that an offer of those Notes may be made other
than pursuant to Article 3(2) of the Prospectus Directive in that Relevant Member State (a “Non-exempt
Offer”), following the date of publication of a prospectus in relation to such Notes which has been approved
by the competent authority in that Relevant Member State or, where appropriate, approved in another
Relevant Member State and notified to the competent authority in that Relevant Member State, provided
that any such prospectus has subsequently been completed by final terms contemplating such Non-exempt
Offer, in accordance with the Prospectus Directive, in the period beginning and ending on the dates
specified in such prospectus or pricing supplement, as applicable, and the Issuer has consented in writing to
its use for the purpose of that Non-exempt Offer;

(b) at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive;

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(c) at any time to fewer than 150 natural or legal persons (other than qualified investors as defined in the
Prospectus Directive) subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by
the Issuer for any such offer; or

(d) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of Notes referred to in (b) to (d) above shall require the Issuer, the Company or any
Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus
pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of Notes to the public” in relation to any Notes in
any Relevant Member State means the communication in any form and by any means of sufficient information
on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe
the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus
Directive in that Member State; the expression “Prospectus Directive” means Directive 2003/71/EC (as
amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in the Relevant
Member State.

United Kingdom

Each Dealer represents and agrees, and each further Dealer appointed under the Programme will be required to
represent and agree, that:

(a) in relation to any Notes which have a maturity of less than one year, (i) it is a person whose ordinary
activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for
the purposes of its business and (ii) it has not offered or sold and will not offer or sell any Notes other than
to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect
will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their
businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the
Financial Services and Markets Act 2000 (FSMA) by the Issuer;

(b) it has only communicated or caused to be communicated and will only communicate or cause to be
communicated an invitation or inducement to engage in investment activity (within the meaning of
Section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in
which Section 21(1) of the FSMA does not apply to the Issuer or the Company; and

(c) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done
by it in relation to any Notes in, from or otherwise involving the United Kingdom.

Singapore

Each Dealer has acknowledged, and each further Dealer appointed under the Programme will be required to
acknowledge, that this Offering Circular has not been registered as a prospectus with the Monetary Authority of
Singapore. Accordingly, each Dealer has represented, warranted and agreed, and each further Dealer appointed
under the Programme will be required to represent, warrant and agree, that it has not offered or sold any Notes or
caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any
Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not
circulated or distributed, nor will it circulate or distribute, this Offering Circular or any other document or
material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether
directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section
4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time (the
“SFA”)) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA)
pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance
with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the SFA.

Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business
of which is to hold investments and the entire share capital of which is owned by one or more individuals,
each of whom is an accredited investor; or

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(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited investor,

securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that
corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred
within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under
Section 275 of the SFA except:

(1) to an institutional investor or to a relevant person, or to any person arising from an offer referred to in
Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(2) where no consideration is or will be given for the transfer;

(3) where the transfer is by operation of law;

(4) as specified in Section 276(7) of the SFA; or

(5) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and
Securities-based Derivatives Contracts) Regulations 2018 of Singapore.

Japan

The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan
(Act No. 25 of 1948, as amended; the “FIEA”) and each Dealer represents and agrees that it will not offer or sell
any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined under
Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Act (Act No. 228 of 1949, as
amended)), or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, any
resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in
compliance with, the FIEA and any other applicable laws, regulations and ministerial guidelines of Japan.

People’s Republic of China

Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be
required to represent and agree, that the Notes are not being offered or sold and may not be offered or sold,
directly or indirectly, in the People’s Republic of China (for such purpose, not including Hong Kong, the Macau
Special Administrative Region or Taiwan), except as permitted by the securities laws of the People’s Republic of
China.

Hong Kong

In relation to each Tranche of Notes to be issued by the Issuer under the Programme, each Dealer has represented
and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that:

(a) it has not offered or sold, and will not offer or sell, in Hong Kong Special Administrative Region of the
People’s Republic of China (“Hong Kong”), by means of any document, any Notes (except for Notes which
are a “structured product” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the
“Securities and Futures Ordinance”) other than (i) to “professional investors” as defined in the Securities
and Futures Ordinance and any rules made under that Ordinance, or (ii) in other circumstances which do not
result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the
meaning of that Ordinance; and

(b) it has not issued, or had in its possession for the purposes of issue, and will not issue or have in its
possession for the purposes of issue, any advertisement, invitation or document relating to the Notes,
whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed
or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong)
other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong
Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance and
any rules made under that Ordinance.

Philippines

THE NOTES BEING OFFERED OR SOLD HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH
THE PHILIPPINE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES

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REGULATION CODE OF THE PHILIPPINES (THE “SRC”). ANY FUTURE OFFER OR SALE OF THE
NOTES WITHIN THE PHILIPPINES IS SUBJECT TO THE REGISTRATION REQUIREMENTS UNDER
THE SRC UNLESS SUCH OFFER OR SALE IS MADE UNDER CIRCUMSTANCES IN WHICH THE
NOTES QUALIFY AS EXEMPT SECURITIES OR THE OFFER OR SALE QUALIFIES AS AN EXEMPT
TRANSACTION UNDER THE SRC.

Any offer or sale of the Notes within the Philippines is subject to registration unless such offer or sale is made
under circumstances in which the Notes qualify as exempt securities or pursuant to an exempt transaction under
the SRC. The offer or sale of the Notes in the Philippines to (a) “primary institutional lenders” pursuant to Rule
10.1.4 of the implementing rules of the SRC or (b) persons who are “qualified buyers” pursuant to Section 10.1(l)
of the SRC is exempt from registration. The Issuer has not obtained confirmation from the SEC that the offer and
sale of the Notes within the Philippines qualifies as an exempt transaction. The Guarantor has not obtained and
will not obtain confirmation from the SEC that the offer and sale of the Notes within the Philippines qualify as an
exempt transaction. It is not required that the SEC confirm the exemption of such offers or sales from the
registration requirements of the SRC. Each of the Dealers has represented, warranted and agreed that it has not
and will not sell or offer for sale or distribution any Notes in the Philippines except to “primary institutional
lenders” pursuant to Rule 10.1.4 of the implementing rules of the SRC or to “qualified buyers” pursuant to
Section 10.1(l) of the SRC. Prospective investors should take note of the transfer restrictions set out in the
implementing rules of the SRC.

Cayman Islands

No invitation whether directly or indirectly may be made to the public in the Cayman Islands to subscribe for the
Notes unless the Issuer is listed on the Cayman Islands Stock Exchange.

General

Each Dealer has agreed, and each further Dealer appointed under the Programme will be required to agree that it
will (to the best of its knowledge and belief) comply with all applicable securities laws and regulations in force in
any jurisdiction in which it purchases, offers, sells or delivers Notes or possesses or distributes this Offering
Circular and any applicable pricing supplement and will obtain any consent, approval or permission required by
it for the purchase, offer, sale or delivery by it of Notes under the laws and regulations in force in any jurisdiction
to which it is subject or in which it makes such purchases, offers, sales or deliveries and none of the Issuer, the
Guarantor, the Trustee or any of the other Dealers shall have any responsibility therefor.

None of the Issuer, the Guarantor, the Trustee or any of the Dealers represents that Notes may at any time
lawfully be sold in compliance with any applicable registration or other requirements in any jurisdiction, or
pursuant to any exemption available thereunder, or assumes any responsibility for facilitating such sale.

With regard to each Tranche, the relevant Dealer will be required to comply with any additional restrictions
agreed between the Issuer and the relevant Dealer and set out in the applicable pricing supplement.

184
 LEGAL MATTERS

Certain matters as to the laws of the Cayman Islands will be passed upon for the Issuer by Maples and Calder
(Hong Kong) LLP. Certain legal matters as to English law will be passed upon for the Issuer and the Company
by Latham & Watkins LLP and for the Arrangers by Milbank, Tweed, Hadley & McCloy LLP. Certain legal
matters as to Philippine law will be passed upon for the Arrangers by Romulo Mabanta Buenaventura Sayoc &
de los Angeles.

185
 INDEPENDENT AUDITORS

SGV & Co., a member firm of Ernst & Young Global Limited, independent auditors, audited the Company’s
consolidated financial statements as of 31 December 2017, 2016 and 2015 and for each of the years then ended,
and reviewed the Company’s unaudited interim condensed consolidated financial statements as of 30 September
2018 and for the nine months ended 30 September 2018 and 2017. A review is substantially less in scope than an
audit conducted in accordance with Philippine Standards on Auditing. Consequently, it does not enable them to
obtain assurance that they would become aware of all significant matters that might be identified in an audit.
Accordingly, they do not express an audit opinion on the unaudited interim condensed consolidated financial
statements. The financial information included in this Offering Circular has been prepared under PFRS. SGV &
Co. has agreed to the inclusion of its report in this Offering Circular.

186
 GLOSSARY OF SELECTED TERMS

In this Offering Circular, unless the context otherwise requires, the following terms shall have the meanings set
out below.

AC Energy . . . . . . . . . . . . . . . . . . . . . AC Energy, Inc.

AC Energy DevCo. . . . . . . . . . . . . . . AC Energy Development Inc., formerly SCCE.
AC Energy International . . . . . . . . . . AC Energy International Holdings Pte Ltd.
ACEHI . . . . . . . . . . . . . . . . . . . . . . . . AC Energy Holdings, Inc., now registered as AC Energy, Inc.
ACEV . . . . . . . . . . . . . . . . . . . . . . . . AC Energy Vietnam Investments Pte Ltd.
AMI Khanh Hoa . . . . . . . . . . . . . . . . AMI Energy Khanh Hoa Joint Stock Company
AMI Renewables . . . . . . . . . . . . . . . . AMI Renewables Energy Joint Stock Company
AMNHB . . . . . . . . . . . . . . . . . . . . . . Arlington Mariveles Netherlands Holding B.V.
AMPLC . . . . . . . . . . . . . . . . . . . . . . . ACE Mariveles Power Ltd. Co.
ASEAN . . . . . . . . . . . . . . . . . . . . . . . The Association of Southeast Asian Nations, including Brunei,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines,
Singapore, Thailand and Vietnam
attributable capacity . . . . . . . . . . . . . The product of the Company’s effective economic interest in the relevant
power project multiplied by net capacity of the relevant power project
availability factor . . . . . . . . . . . . . . . . The availability factor of a power plant is the percentage of the time that
it is available to provide energy to the grid
Australia . . . . . . . . . . . . . . . . . . . . . . The Commonwealth of Australia
Axia Power . . . . . . . . . . . . . . . . . . . . Axia Power Holdings Philippines Corporation, a subsidiary of Marubeni
Corporation
Balaoi-Caunayan Project . . . . . . . . . . A proposed wind farm project in Ilocos Norte, Philippines
BCE . . . . . . . . . . . . . . . . . . . . . . . . . . Bronzeoak Clean Energy, now known as Visayas Renewables
Corporation
BIM Group . . . . . . . . . . . . . . . . . . . . The BIM Energy Holding Corporation, BIM Salt Manufacturing and
Processing Joint Stock Company, Ca Na Ninh Thuan Salt Joint Stock
Company, Mr. Doan Quoc Viet and Mr. Doan Quoc Huy
Blackstone Capital . . . . . . . . . . . . . . . Blackstone Capital Partners (Cayman) VI L.P.
BMT Dak Lak . . . . . . . . . . . . . . . . . . BMT Renewable Energy Joint Stock Company
BOI . . . . . . . . . . . . . . . . . . . . . . . . . . Board of Investments of the Philippines
BSP . . . . . . . . . . . . . . . . . . . . . . . . . . Bangko Sentral ng Pilipinas, the Central Bank of the Philippines
BWPC . . . . . . . . . . . . . . . . . . . . . . . . Bayog Wind Power Corporation, the project company for the Balaoi-
Caunayan Project
B&T Quang Binh . . . . . . . . . . . . . . . B&T Windfarm Joint Stock Company
CAGR . . . . . . . . . . . . . . . . . . . . . . . . Compound annual growth rate
capacity factor . . . . . . . . . . . . . . . . . . The ratio of a power plant’s actual output over a period of time, to its
potential output if it were possible for it to operate at full capacity
Captive Market . . . . . . . . . . . . . . . . . A market of end-users who do not have a choice of their supplier of
electricity
CDMP . . . . . . . . . . . . . . . . . . . . . . . . Comprehensive Development and Management Plan
CFB . . . . . . . . . . . . . . . . . . . . . . . . . . Circulating fluidized bed
China . . . . . . . . . . . . . . . . . . . . . . . . . The People’s Republic of China
Clean Air Act . . . . . . . . . . . . . . . . . . . The Philippine Clean Air Act of 1999

187
Clean Water Act . . . . . . . . . . . . . . . . The Philippine Clean Water Act of 2004
Clearing System Business Day . . . . . A day on which Euroclear and Clearstream, Luxembourg are both open
for business
Clearing Systems . . . . . . . . . . . . . . . . Euroclear and Clearstream, Luxembourg
Clearstream, Luxembourg . . . . . . . . . Clearstream Banking, SA.
COC . . . . . . . . . . . . . . . . . . . . . . . . . . Certificate of compliance
COD . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial operations date
contestable customer . . . . . . . . . . . . . Electricity end-users with monthly average peak demand of at least
1MW for the preceding 12 months to the initial implementation of Open
Access, which shall be reduced to 750 KW two years thereafter
contestable market . . . . . . . . . . . . . . . A market of end-users who have a choice on their supplier of electricity.
CSR . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate social responsibility
DENR . . . . . . . . . . . . . . . . . . . . . . . . Department of Environment and Natural Resources of the Philippines
DOE . . . . . . . . . . . . . . . . . . . . . . . . . . Department of Energy of the Philippines
ECA . . . . . . . . . . . . . . . . . . . . . . . . . . Energy Conversion Agreement
ECC . . . . . . . . . . . . . . . . . . . . . . . . . . Environmental Compliance Certificate
effective economic interest . . . . . . . . The Company’s economic interest directly and/or indirectly held in a
power project
EGCO . . . . . . . . . . . . . . . . . . . . . . . . The Electricity Generating Company of Thailand
EIS . . . . . . . . . . . . . . . . . . . . . . . . . . . Environmental Impact Statement
EPC . . . . . . . . . . . . . . . . . . . . . . . . . . Engineering, procurement and construction
EPIRA . . . . . . . . . . . . . . . . . . . . . . . . Philippine Republic Act No. 9136, otherwise known as the Electric
Power Industry Reform Act of 2001
ERC . . . . . . . . . . . . . . . . . . . . . . . . . . Energy Regulatory Commission of the Philippines
Euroclear . . . . . . . . . . . . . . . . . . . . . . Euroclear Bank SA/NV
EVN . . . . . . . . . . . . . . . . . . . . . . . . . . Vietnam Electricity
FIA . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign Investment Act of 1991 of the Philippines
FIT . . . . . . . . . . . . . . . . . . . . . . . . . . . Feed-in tariff
FLAg . . . . . . . . . . . . . . . . . . . . . . . . . Forest land use agreement.
GDP . . . . . . . . . . . . . . . . . . . . . . . . . . Gross domestic product
GMCP . . . . . . . . . . . . . . . . . . . . . . . . GNPower Mariveles Coal Plant Ltd. Co.
GNPD . . . . . . . . . . . . . . . . . . . . . . . . GNPower Dinginin Ltd. Co.
GNPK . . . . . . . . . . . . . . . . . . . . . . . . GNPower Kauswagan Ltd Co.
GNPower Dinginin Project . . . . . . . . A 2 x 668MW supercritical coal-fired plant under construction located in
Dinginin, Bataan, Philippines
GNPower Mariveles Project . . . . . . . A 2 x 316MW coal-fired plant located in Mariveles, Bataan, Philippines
GNPower Kauswagan Project . . . . . . A 4 x 138MW coal-fired power plant under construction located in
Kauswagan, Lanao del Norte, Philippines
Government . . . . . . . . . . . . . . . . . . . . The Government of the Philippines
GRI . . . . . . . . . . . . . . . . . . . . . . . . . . Global Reporting Initiative
GW . . . . . . . . . . . . . . . . . . . . . . . . . . Gigawatt, a unit of electrical power equivalent to 1,000MW
GWh . . . . . . . . . . . . . . . . . . . . . . . . . Gigawatt hours, a unit of electrical energy equivalent to 1,000MWh

188
HDP Bulk Water Supply . . . . . . . . . . HDP Bulk Water Supply Inc
Hong Kong . . . . . . . . . . . . . . . . . . . . The Hong Kong Special Administrative Region of the People’s Republic
of China
IDR . . . . . . . . . . . . . . . . . . . . . . . . . . Indonesian rupiah, the lawful currency of Indonesia
Indonesia . . . . . . . . . . . . . . . . . . . . . . The Republic of Indonesia
IPP . . . . . . . . . . . . . . . . . . . . . . . . . . . Independent Power Producer
IPPA . . . . . . . . . . . . . . . . . . . . . . . . . Independent Power Producer Administrator
Isla Bio . . . . . . . . . . . . . . . . . . . . . . . Negros Island Biomass Holdings, Inc
Islasol Project . . . . . . . . . . . . . . . . . . A 80MW solar farm located in Negros Occidental, Philippines
ISO . . . . . . . . . . . . . . . . . . . . . . . . . . . International Organization for Standardization
Issuer . . . . . . . . . . . . . . . . . . . . . . . . . AC Energy Finance International Limited
kV . . . . . . . . . . . . . . . . . . . . . . . . . . . Kilovolt, a unit of energy equivalent to 1,000 volts
kW . . . . . . . . . . . . . . . . . . . . . . . . . . . Kilowatt, a unit of electrical power equivalent to 1,000 watt
kWh . . . . . . . . . . . . . . . . . . . . . . . . . . Kilowatt hours, a unit of electrical energy equivalent to 1,000 watt hours
Montesol Project . . . . . . . . . . . . . . . . A solar power farm located in Bais City, Negros Oriental, Philippines
with a net capacity of 18MW
MW . . . . . . . . . . . . . . . . . . . . . . . . . . Megawatt, a unit of electrical power equivalent to 1,000 kilowatt
MWh . . . . . . . . . . . . . . . . . . . . . . . . . Megawatt hours, a unit of electrical energy equivalent to 1,000 kilowatt
hour
NEA . . . . . . . . . . . . . . . . . . . . . . . . . . National Electrification Administration of the Philippines
NE Solar Farm . . . . . . . . . . . . . . . . . . New England Solar Farm located near Uralla in New South Wales,
Australia with an expected net capacity of up to 700MW
NEI . . . . . . . . . . . . . . . . . . . . . . . . . . New Energy Investments Corporation, a joint stock company
net capacity . . . . . . . . . . . . . . . . . . . . The difference between the maximum rated output and the power
consumed onsite
NGCP . . . . . . . . . . . . . . . . . . . . . . . . National Grid Corporation of the Philippines
NLR . . . . . . . . . . . . . . . . . . . . . . . . . . North Luzon Renewable Energy Corporation
North Luzon Renewables Project . . . A wind farm located in Ilocos Norte, Philippines with a net capacity of
81MW
North Negros Biopower Project . . . . A biomass power plant under construction located in Manapla, Negros,
Philippines with an expected net capacity of 25MW
Northwind Project . . . . . . . . . . . . . . . A wind farm located in Ilocos Norte, Philippines with a net capacity of
52MW
NPC . . . . . . . . . . . . . . . . . . . . . . . . . . National Power Corporation of the Philippines
Open Access . . . . . . . . . . . . . . . . . . . System of allowing qualified persons to use the transmission and/or
distribution systems and associated facilities of distribution utilities
subject to the payment of transmission and/or distribution wheeling rates
approved by the ERC
PhilWind . . . . . . . . . . . . . . . . . . . . . . Philippine Wind Holdings Corporation
PHINMA Energy Corporation, a publicly held company listed on the
PHINMA Energy . . . . . . . . . . . . . . . . PSE under the stock code “PHEN”
PINAI . . . . . . . . . . . . . . . . . . . . . . . . Philippine Investment Alliance for Infrastructure Fund
PLN . . . . . . . . . . . . . . . . . . . . . . . . . . Perusahaan Listrik Negara, the government appointed the state-owned
electricity company in Indonesia
PPA . . . . . . . . . . . . . . . . . . . . . . . . . . Power purchase agreement

189
Presage . . . . . . . . . . . . . . . . . . . . . . . . Presage Corporation
PSE . . . . . . . . . . . . . . . . . . . . . . . . . . The Philippine Stock Exchange
PV . . . . . . . . . . . . . . . . . . . . . . . . . . . Photovoltaic
RCOA . . . . . . . . . . . . . . . . . . . . . . . . Retail Competition and Open Access
RES . . . . . . . . . . . . . . . . . . . . . . . . . . Retail electricity supply
RSCs . . . . . . . . . . . . . . . . . . . . . . . . . Retail supply contracts
Sacasol Project . . . . . . . . . . . . . . . . . A 45MW solar farm located in Negros Occidental, Philippines
Salak-Darajat Geothermal The Salak and Darajat geothermal fields in West Java, Indonesia with a
Projects . . . . . . . . . . . . . . . . . . . . . combined capacity of 637MW of steam and power
San Carlos Biopower Project . . . . . . A 20MW biomass power plant located in San Carlos, Negros,
Philippines
SCCE . . . . . . . . . . . . . . . . . . . . . . . . . San Carlos Clean Energy, now AC Energy Development Inc.
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . The Philippine Securities and Exchange Commission
Securities Act . . . . . . . . . . . . . . . . . . The United States Securities Act of 1933, as amended
Securities and Futures Act . . . . . . . . . The Securities and Futures Act, Chapter 289 of Singapore
SGX-ST . . . . . . . . . . . . . . . . . . . . . . . Singapore Exchange Securities Trading Limited
Sidrap Wind Project . . . . . . . . . . . . . A wind farm in located in Sidrap, South Sulawesi, Indonesia with a net
capacity of 75MW
SLTEC . . . . . . . . . . . . . . . . . . . . . . . . South Luzon Thermal Energy Corporation
SLTEC Project . . . . . . . . . . . . . . . . . A 2 x 122MW CFB thermal power plant located in Batangas province
SLUP . . . . . . . . . . . . . . . . . . . . . . . . . Special Land Use Permit
South Negros Biopower Project . . . . A 25MW biomass power plant in La Carlota, Negros, Philippines.
SRC . . . . . . . . . . . . . . . . . . . . . . . . . . Securities Regulation Code of the Philippines (Republic Act No. 8799)
and its implementing rules, as amended
Tax Code . . . . . . . . . . . . . . . . . . . . . . The Philippine National Internal Revenue Code of 1997, as amended
The Blue Circle . . . . . . . . . . . . . . . . . The Blue Circle Pte. Ltd.
Thailand . . . . . . . . . . . . . . . . . . . . . . . The Kingdom of Thailand
TransCo . . . . . . . . . . . . . . . . . . . . . . . National Transmission Corporation
TWh . . . . . . . . . . . . . . . . . . . . . . . . . . Terrawatt hours
United States or U.S. . . . . . . . . . . . . . The United States of America
UPC-AC Energy Renewables
Australia . . . . . . . . . . . . . . . . . . . . UPC-AC Energy Renewables Australia (HK) Limited
UPC Renewables . . . . . . . . . . . . . . . . UPC Renewables Asia Pacific Holdings Limited
UPC Renewables Group . . . . . . . . . . UPC Renewables Partners and affiliated companies
Vietnam . . . . . . . . . . . . . . . . . . . . . . . The Socialist Republic of Vietnam
WESM . . . . . . . . . . . . . . . . . . . . . . . . Wholesale electricity spot market
WTG . . . . . . . . . . . . . . . . . . . . . . . . . Wind turbine generators

190
 GENERAL INFORMATION

1. Listing of Notes: Approval in-principle has been obtained from the SGX-ST for permission to deal in and
for quotation of any Notes which are agreed at or prior to the time of issue thereof to be so listed on the
SGX-ST. The approval in-principle from, and the admission of any Notes to the Official List of the
SGX-ST and quotation of any Notes on the SGX-ST is not to be taken as an indication of the merits of the
Issuer, Guarantor, the Programme, the Notes or the Guarantee. The SGX-ST assumes no responsibility for
the correctness of any of the statements made or opinions or reports contained herein. There is no assurance
that the application to the Official List of the SGX-ST for the listing of the Notes of any Series will be
approved.

So long as the Securities are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer shall
appoint and maintain a paying agent in Singapore, where the Securities may be presented or surrendered for
payment or redemption. In the event that the Global Certificate representing the Securities is exchanged for
definitive certificates, an announcement of such exchange shall be made by or on behalf of the Issuer
through the SGX-ST and such announcement will include all material information with respect to the
delivery of the definitive certificates, including details of the paying agent in Singapore.

2. Authorizations: The establishment of the Programme was authorized by resolutions of the board of
directors of the Issuer dated 20 December 2018 and 10 January 2019. The Issuer has obtained all necessary
consents, approvals and authorizations in connection with the establishment of the Programme and has
agreed to obtain from time to time, as may be necessary, the required consents, approvals and
authorizations for the update of the Programme and the issue of Notes under the Programme. The Guarantor
has obtained all necessary consents, approvals and authorizations in connection with the giving and
performance of the Guarantee. The giving of the Guarantee was authorized by resolutions of the board of
directors of the Guarantor on 23 November 2018, 17 December 2018 and 10 January 2019.

3. No Material Adverse Change: Except as disclosed in this Offering Circular, there has been no material
adverse change in the financial position or prospects of the Company since 30 September 2018.

4. Litigation: The Company is not involved in any legal or arbitration proceedings (including any such
proceedings which are pending or threatened of which the Company is aware) in the 12 months preceding
the date of this document which may have or have in such period had a significant effect on the financial
position of the Company.

5. Bearer Notes, Receipts, Coupons and Talons: Each Bearer Note having a maturity of more than one year,
Receipt, Coupon and Talon will bear the following legend on its face: “ANY UNITED STATES PERSON
(AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS
OBLIGATION MAY BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX
LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(J) AND 1287(A) OF THE
INTERNAL REVENUE CODE.”

6. Delisting of Notes: The Trust Deed provides that if the applicable Pricing Supplement indicates that the
Notes are listed, the Issuer will use its reasonable endeavors to maintain the listing on the relevant Stock
Exchange of those Notes which are listed on the relevant Stock Exchange or, if it is unable to do so having
used its reasonable endeavors or if the Trustee considers that the maintenance of such listings is unduly
onerous and the Trustee is of the opinion that to do so would not be materially prejudicial to the interests of
the Noteholders, use its reasonable endeavors promptly to obtain and maintain a quotation or listing of such
Notes on such other stock exchange or exchanges or securities market or markets on which it is then
accepted in the sphere of international issues of debt securities to list securities such as the Notes as it may
(with the approval of the Trustee (which approval of the Trustee may only be given if the Trustee has
received confirmation from the relevant Dealer(s) in respect of such Notes that such other stock exchange
or exchanges or securities market or markets is so accepted)) decide and shall also upon obtaining a
quotation or listing of such Notes issued by it on such other stock exchange or exchanges or securities
market or markets enter into a trust deed supplemental to the Trust Deed to effect such consequential
amendments to these presents as the Trustee may require or as shall be requisite to comply with the
requirements of any such stock exchange or securities market.

7. Clearing of the Notes: The Notes to be issued under the Programme may be accepted for clearance through
Euroclear and Clearstream, Luxembourg. The appropriate ISIN and Common Code in relation to the Notes

191
 of each Tranche will be specified in the relevant Pricing Supplement. If the Notes are to be cleared through
any additional or alternative Clearing System, the appropriate information will be specified in the
applicable Pricing Supplement.

8. Available Documents: For so long as Notes may be issued pursuant to this Offering Circular, the following
documents will be available, during normal business hours upon prior written notice on any weekday
(Saturdays, Sundays and public holidays excepted), for inspection at the Company’s registered office and
from the specified office of the Trustee and the Principal Paying Agent (upon prior written notice and
satisfactory proof of holdings):

(i) the Trust Deed (which includes the form of the Global Notes, the Notes in definitive form, the
Coupons, the Receipts and the Talons);

(ii) the Agency Agreement;

(iv) the Memorandum and Articles of Association of the Issuer;

(v) the Company’s most recent audited consolidated financial statements;

(vi) each Pricing Supplement (save that a Pricing Supplement related to an unlisted Series of Notes will
only be available for inspection by a holder of any such Notes and such holder must produce evidence
satisfactory to the Issuer, the Guarantor or the Trustee as to its holding of Notes and identity); and

(vii) a copy of this Offering Circular together with any supplement to this Offering Circular and any other
documents incorporated herein or therein referenced.

9. Independent Auditors: SGV & Co., independent auditors, have audited and rendered an unqualified audit
report on the Company’s consolidated financial statements as of 31 December 2017, 2016 and 2015 and for
the years then ended, and have reviewed the unaudited interim condensed consolidated financial statements
as of 30 September 2018 and for the nine months ended 30 September 2018 and 2017.

192
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Unaudited Interim Condensed Consolidated Financial Statements of the Company as of

30 September 2018 and for the nine months ended 30 September 2018 and 2017
Report on Review of Interim Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-2
Interim Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Interim Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Interim Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
Interim Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
Notes to Unaudited Interim Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . F-12

Audited Consolidated Financial Statements of the Company as of 31 December 2017, 2016 and
2015 and for the years ended 31 December 2017, 2016 and 2015
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-60
Consolidated Statements of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-63
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-65
Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-67
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-69
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-71

F-1
 SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 819 0872 October 4, 2018, valid until August 24, 2021
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-5 (Group A),
Philippines November 6, 2018, valid until November 5, 2021

REPORT ON REVIEW OF INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

The Stockholders and the Board of Directors

AC Energy, Inc. and Subsidiaries

Introduction

We have reviewed the accompanying interim consolidated statement of financial position of AC Energy,
Inc. and Subsidiaries as at September 30, 2018 and the related interim consolidated statements of
comprehensive income, statements of changes in equity and statements of cash flows for the nine-month
periods ended September 30, 2018 and 2017, and a summary of significant accounting policies and other
explanatory notes. Management is responsible for the preparation and fair presentation off these interim
condensed consolidated financial statements in accordance with Philippine Accounting Standards (PAS)
34, Interim Financial Reporting. Our responsibility is to express a conclusion on these interim condensed
consolidated financial statements based on our review.

Scope of review

We conducted our review in accordance with Philippine Standard on Review Engagements 2410, Review
of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of
interim financial information consists of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with Philippine Standards on Auditing and
consequently does not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying
interim condensed consolidated financial statements are not prepared, in all material respects, in
accordance with PAS 34.

SYCIP GORRES VELAYO & CO.

John T. Villa
Partner
CPA Certificate No. 94065
SEC Accreditation No. 1729-A (Group A),
December 18, 2018, valid until December 17, 2021
Tax Identification No. 901-617-005
BIR Accreditation No. 08-001998-76-2018,
February 26, 2018, valid until February 25, 2021
PTR No. 7332628, January 3, 2019, Makati City

January 10, 2019

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AC ENERGY, INC. (FORMERLY AC ENERGY HOLDINGS, INC.)
AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

September 30, 2018 December 31, 2017

Unaudited Audited
ASSETS
Current Assets
Cash and cash equivalents (Note 4) P
=13,144,035,301 P5,950,008,583
=
Current portion of receivables (Note 5) 4,619,448,037 1,115,605,482
Input value-added taxes (Note 7) 216,665,812 183,101,239
Derivative asset (Note 18) 767,425 83,785,051
Prepayments and other current assets (Note 8) 491,583,148 596,687,068
18,472,499,723 7,929,187,423
Noncurrent asset held for sale (Notes 3 and 11) 5,635,296,425 −
Total Current Assets 24,107,796,148 7,929,187,423
Noncurrent Assets
Equity instruments at fair value through other
comprehensive income (Note 10) 597,654,473 −
Available-for-sale financial assets (Note 10) − 597,654,473
Property, plant and equipment (Note 14) 47,564,609,655 40,798,406,706
Investment property (Note 14) 220,345,447 220,345,447
Project development costs (Note 9) 1,771,208 2,228,729
Advances to contractors (Note 6) 4,489,085 10,581,617
Investments in associates and joint ventures (Note 11) 22,850,159,043 23,364,444,227
Investments in redeemable preferred shares
(Note 11) 1,667,057,200 1,629,422,558
Receivables - net of current portion (Note 5) 105,665,038 160,726,520
Input value-added tax - net of current portion
(Note 7) 3,869,810,354 2,560,132,306
Deposits (Note 12) 291,274,091 76,518,220
Goodwill (Notes 13 and 15) 786,263,071 786,263,071
Intangible assets - easement right of way (Note 9) 296,540,000 296,540,000
Intangible assets - water supply contract (Note 15) 127,476,358 127,476,358
Leasehold rights (Note 15) 470,726,907 470,726,907
Total Noncurrent Assets 78,853,841,930 71,101,467,139
P
=102,961,638,078 =79,030,654,562
P

LIABILITIES AND EQUITY

Current Liabilities
Accounts and other payables (Note 16) P
=2,941,775,574 =3,587,146,988
P
Current portion of loans payable (Note 17) 274,021,646 288,434,107
Other current liabilities 66,452,907 120,624,982
Total Current Liabilities 3,282,250,127 3,996,206,077

(Forward)

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September 30, 2018 December 31, 2017

Unaudited Audited
Noncurrent Liabilities
Deferred tax liability - net (Note 21) P
=965,106,055 =157,787,822
P
Pension liability 3,530,161 70,030
Loans payable - net of current portion (Note 17) 44,633,815,006 31,868,281,729
Derivative liability (Note 18) 33,357,444 −
Other noncurrent liabilities 175,746,858 18,446,480
Total Noncurrent Liabilities 45,811,555,524 32,044,586,061
Total Liabilities 49,093,805,651 36,040,792,138

Equity
Paid-in capital (Note 19) 22,687,220,900 22,687,220,900
Cumulative translation adjustments (Note 25) 347,087,308 1,210,057,771
Equity reserves (34,252,158) 29,288,207
Remeasurement gain on defined benefit obligation - net
of tax 3,813,687 2,992,745
Retained earnings 11,163,558,266 7,637,337,372
34,167,428,003 31,566,896,995
Non-controlling interests 19,700,404,424 11,422,965,429
Total Equity 53,867,832,427 42,989,862,424
P
=102,961,638,078 =79,030,654,562
P

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

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AC ENERGY, INC. (FORMERLY AC ENERGY HOLDINGS, INC.)
AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Nine Months Ended

September 30
2018 2017
REVENUE
Rendering of services (Note 2) P3,359,747,360
= P1,564,018,404
=
Equity in net income of associates and joint ventures (Note 11) 2,284,910,360 1,216,099,370
5,644,657,720 2,780,117,774
OTHER INCOME
Interest income (Notes 4 and 5) 570,405,400 39,914,747
Foreign exchange gain - net 34,591,107 70,726,626
Dividend income (Note 10) 20,824,320 7,000,136
Mark-to-market gain (Note 18) − 138,562,429
Other income (Notes 10, 14 and 26) 2,659,300,580 886,375,834
3,285,121,407 1,142,579,772
8,929,779,127 3,922,697,546
COST AND EXPENSES
Cost of power operations (Note 24) 2,647,155,506 995,535,594
Salaries, wages and employee benefits 287,593,224 216,878,264
Interest expense (Note 17) 270,951,046 290,754,895
Professional fees 198,146,014 163,468,101
Taxes and licenses 139,573,678 65,297,715
Mark-to-market losses (Note 18) 95,443,748 −
Management fee 79,726,694 91,733,672
Depreciation and amortization (Note 14) 53,272,612 25,877,162
Transportation and travel 36,967,984 33,935,358
Repairs and maintenance 16,779,778 10,178,167
Postal and communication 12,736,273 8,702,602
Provision for impairment losses (Note 5) 11,105,077 10,588,223
Supplies 9,024,596 6,925,630
Retirement expense 7,043,359 1,810,167
Entertainment, amusement and recreation 4,049,854 3,492,347
Miscellaneous 105,687,145 49,640,366
3,975,256,588 1,974,818,263
INCOME BEFORE INCOME TAX 4,954,522,539 1,947,879,283
PROVISION FOR (BENEFIT FROM) INCOME TAX
(Note 21) 1,071,549,600 (87,685,670)
NET INCOME 3,882,972,939 2,035,564,953
OTHER COMPREHENSIVE INCOME
Other comprehensive income to be reclassified to profit or loss in
subsequent periods:
Cumulative translation adjustment (862,970,463) 435,375,967
Other comprehensive income not to be reclassified to profit or loss in
subsequent periods:
Remeasurement gain on defined benefit obligation 820,942 −
TOTAL COMPREHENSIVE INCOME =3,020,823,418
P =2,470,940,920
P

(Forward)

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For the Nine Months Ended

September 30
2018 2017
NET INCOME ATTRIBUTABLE TO:
Equity holders of the Parent Company =3,676,521,829
P =2,017,334,139
P
Non-controlling interests 206,451,110 18,230,814
=3,882,972,939
P =2,035,564,953
P

TOTAL COMPREHENSIVE INCOME

ATTRIBUTABLE TO:
Equity holders of the Parent Company =2,814,372,308
P =2,452,710,106
P
Non-controlling interests 206,451,110 18,230,814
=3,020,823,418
P =2,470,940,920
P

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

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AC ENERGY, INC. (FORMERLY AC ENERGY HOLDINGS, INC.)
AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Nine Months Ended

September 30
2018 2017

PAID-IN CAPITAL
Common Stock - P =100 par value (Note 19)
Authorized - 227,400,000 shares
Issued and subscribed – 159,865,993 shares in 2018 and
154,240,995 shares in 2017
Balance as at January 1 =15,986,599,300
P =13,137,140,100
P
Issuance of shares − 2,286,959,400
15,986,599,300 15,424,099,500

Subscription Receivable
Balance as at January 1 (1,687,500,000) (701,164,000)
Subscription of shares (Note 19) − (986,336,000)
(1,687,500,000) (1,687,500,000)
14,299,099,300 13,736,599,500

Redeemable Common Stock - P =100 par value (Note 19)

Authorized - 100,000,000 shares in 2018 and 2017
Issued and subscribed - 83,881,216 shares in 2018 and 2017
Balance as at January 1 8,388,121,600 7,361,021,600
Issuance of shares − 1,027,100,000
8,388,121,600 8,388,121,600
Total Paid-in Capital 22,687,220,900 22,124,721,100

EQUITY RESERVES
Balance as at January 1 29,288,207 29,054,783
Net change (63,540,365) (42,953,875)
(34,252,158) (13,899,092)

REMEASUREMENT GAIN (LOSS) ON DEFINED BENEFIT

OBLIGATION - NET
Balance as at January 1 2,992,745 (1,968,127)
Net change 820,942 −
3,813,687 (1,968,127)

CUMULATIVE TRANSLATION ADJUSTMENTS

(Note 2)
Balance as at January 1 1,210,057,771 1,289,143,466
Net change (862,970,463) 435,375,967
347,087,308 1,724,519,433
(Forward)

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For the Nine Months Ended

September 30
2018 2017

RETAINED EARNINGS
Balance as at January 1 - as previously reported =7,637,337,372
P =4,151,761,777
P
Effect of adoption of new standard (Note 2) (150,300,935) −
Balance as at January 1 - as restated 7,487,036,437 4,151,761,777
Transaction costs (Note 19) − (23,358,488)
Net income 3,676,521,829 2,038,880,519
Balance at end of period 11,163,558,266 6,167,283,808

NON-CONTROLLING INTERESTS
Balance as at January 1 11,422,965,429 3,438,310,378
Net income 206,451,110 18,230,815
Additional infusions (Note 2) 8,070,987,885 7,478,539,476
Balance at end of period 19,700,404,424 10,935,080,669
=53,867,832,427
P =40,935,737,791
P

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

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AC ENERGY, INC. (FORMERLY AC ENERGY HOLDINGS, INC.)
AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30
2018 2017

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax =4,954,522,539
P =1,947,879,283
P
Adjustment for:
Interest expense (Note 17) 270,951,046 290,754,895
Depreciation and amortization (Note 14) 221,903,846 192,511,206
Mark-to-market losses (Note 18) 95,443,748 −
Provision for impairment losses (Note 5) 11,105,077 −
Retirement expense 7,043,359 1,810,167
Mark-to-market gain (Note 18) − (138,562,429)
Dividend income (Notes 10 and 11) (341,514,321) (385,410,137)
Interest income (Notes 4 and 5) (570,405,400) (39,914,747)
Equity in net income (Note 11) (1,964,220,360) (837,689,370)
Operating income before working capital changes 2,684,829,534 1,031,378,868
Decrease (increase) in:
Receivables (2,958,709,979) (332,463,655)
Advances to contractors 6,092,532 (7,920,610)
Input value-added taxes (1,343,242,621) (1,288,201,798)
Prepayments and other current assets 105,103,920 141,931,633
Increase (decrease) in:
Accounts and other payables (88,361,549) 3,823,311,295
Other liabilities 410,232 (144,762,466)
Net cash provided by (used in) operating activities (1,593,877,931) 3,223,273,267
Interest received 69,229,229 39,914,747
Income tax paid (161,513,295) (20,557,961)
Net cash flows provided by (used in) operating activities (1,686,161,997) 3,242,630,053

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition through business combination - net of cash acquired (Note 13) − (1,616,261,474)
Deductions (additions) to:
Investments in associates and joint ventures (Note 11) (3,370,632,181) (10,188,665,208)
Investments in available-for-sale investment (Note 10) − (611,743)
Deposits (Note 12) (214,755,871) 2,772,673,615
Project development costs (Note 9) 457,521 238,911,801
Property and equipment (Note 14) (4,769,902,230) (9,662,473,724)
Other noncurrent assets − (1,014,768,710)
Net cash used in investing activities (8,354,832,761) (19,471,195,443)

(Forward)

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For the Nine Months Ended

September 30
2018 2017

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from:
Availment of loans (Note 17) =10,814,323,802
P =13,190,110,203
P
Issuance of shares of stocks (Note 19) − 2,327,723,451
Capital infusion of non-controlling interests in a subsidiary (Note 22) 8,070,987,885 915,499,476
Dividends received (Note 11) 341,514,320 385,410,136
Payments of:
Loans (Note 17) (655,279,663) (3,106,977,308)
Interest including capitalized borrowing cost (1,336,524,868) (1,388,527,209)
Net cash provided by financing activities 17,235,021,476 12,323,238,749

NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS 7,194,026,718 (3,905,326,641)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,950,008,583 11,386,450,622

CASH AND CASH EQUIVALENTS AT END OF PERIOD (Note 4) =13,144,035,301

P =7,481,123,981
P

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

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AC ENERGY, INC. (FORMERLY AC ENERGY HOLDINGS, INC.)
AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. Corporation Information and Basis of Financial Statement Preparation

AC Energy, Inc. (formerly AC Energy Holdings, Inc., the Parent Company) was incorporated on
December 13, 2005 and domiciled in the Philippines. The Parent Company and its subsidiaries
(collectively, the Group) were organized primarily to engage in the business of generating electricity,
distribution of electricity, and supply of electricity, including the provision of related services. The
Parent Company is organized as well to purchase, exchange, hold, own, use investments, capital stock
or other securities and exercise all the rights, powers, and privileges of ownership to the extent
permitted by law.

The Parent Company is a wholly owned subsidiary of Ayala Corporation (AC), a publicly-listed
company which is 47.04% owned by Mermac, Inc. (ultimate parent), and the rest by the public.
AC is a listed entity incorporated in the Philippines.

The Parent Company’s registered office address is 4th Floor 6750 Ayala Avenue Office Tower,
Makati City. Formerly, its registered office address was 32nd Floor, Tower One and Exchange Plaza,
Ayala Triangle, Ayala Avenue, Makati City. The change in office address was approved by the
Board of Directors (BOD) on June 15, 2017.

On July 27, 2016, the Articles of Incorporation (AOI) of the Parent company was amended to include
in its secondary purpose of business the purchase, retail, supply and delivery of electricity.

On September 8, 2016, the Parent Company was granted a Retail Electricity Supply license allowing
it to sell electricity to the end-users in the contestable market. This business unit is known as
AC Energy Retail Electricity Supply (ACERES).

On March 7, 2017, the BOD approved the amendment of the Parent Company AOI to include in the
primary purpose of business the development, operation and maintenance of power projects
and the change of registered name of AC Energy Holdings, Inc. to AC Energy, Inc. (ACEI).
The amendments were approved by the Securities and Exchange Commission (SEC) on
December 29, 2017.

The interim consolidated financial statements of the Group as at September 30, 2018 and
December 31, 2017 and for the nine-month periods ended September 30, 2018 and 2017 were
authorized for issue by the BOD on January 10, 2019.

2. Summary of Significant Accounting Policies

Basis of Preparation
The accompanying interim condensed consolidated financial statements of the Group have been
prepared on a historical cost basis except for equity instruments at fair value through other
comprehensive income (FVOCI), derivative asset, and derivative liability that are measured at fair
value.

The interim condensed consolidated financial statements are presented in Philippine Peso (P
=) which is
the functional and presentation currency of the Parent Company, and all amounts are rounded to the
nearest Philippine Peso, unless otherwise indicated.

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Statement of Compliance
The interim condensed consolidated financial statements have been prepared in accordance with
Philippine Accounting Standard (PAS) 34, Interim Financial Reporting. Accordingly, the interim
condensed consolidated financial statements do not include all the information and disclosures
required in the annual audited consolidated financial statements, and should be read in conjunction
with the Group’s annual consolidated financial statements as at and for the year ended
December 31, 2017 which have been prepared in accordance with Philippine Financial Reporting
Standards (PFRS). The interim condensed consolidated financial statements of the Group have been
prepared for inclusion in the Offering Circular in relation to a planned capital-raising activity.

Changes in Accounting Policies and Disclosures

The accounting policies adopted in the preparation of the interim condensed consolidated financial
statements are consistent with those followed in the preparation of the Group’s annual consolidated
financial statements for the year ended December 31, 2017, except for the adoption of new standards
effective as of January 1, 2018. The Group has not early adopted any other standard, interpretation or
amendment that have been issued but is not yet effective.

The Group applies, for the first time, PFRS 15, Revenue from Contracts with Customers and PFRS 9,
Financial Instruments that require restatement of previous financial statements. As required by
PAS 34, the nature and effect of these changes are disclosed below.

∂ Amendments to PAS 28, PFRS 15, Revenue from Contracts with Customers

PFRS 15 supersedes PAS 18, Revenue and related Interpretations and it applies to all revenue
arising from contracts with customers, unless those contracts are in the scope of other standards.
The new standard establishes a five-step model to account for revenue arising from contracts with
customers. Under PFRS 15, revenue is recognized at an amount that reflects the consideration to
which an entity expects to be entitled in exchange for transferring goods or services to a
customer.

PFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts
and circumstances when applying each step of the model to contracts with their customers. The
standard also specifies the accounting for the incremental costs of obtaining a contract and the
costs directly related to fulfilling a contract.

The Group’s revenue from rendering of services consists of:

For the Nine Months Ended

September 30
2018 2017
Energy sales P
=3,062,631,876 P=1,433,764,692
Rental income 196,598,155 55,012,211
Management fees 100,517,329 75,241,501
P
=3,359,747,360 P=1,564,018,404

The Group adopted PFRS 15 using the modified retrospective method of adoption. The Group
elected to apply the modified retrospective method only to contracts that were not completed at
the date of initial application which is January 1, 2018.

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The adoption of PFRS 15 affected the Group’s associate, Star Energy Salak-Darajat B.V. (Salak-
Darajat), which is accounted for under the equity method (see Note 11). In compliance with
PFRS 15, revenue of Salak-Darajat is recognized at a point in time as its performance obligation
is satisfied upon the delivery of electricity and steam/geothermal energy. The adoption of
PFRS 15 decreased the Group’s investments in associates and joint ventures by P150.30 million
as of January 1, 2018.

Except for above, the Group assessed that its contracts have single performance obligation each,
mainly relating to sale of power. Under PFRS 15, the Group concluded that revenue from sale of
services including sale of power, will continue to be recognized at a point in time. Moreover,
under PFRS 15, any earned consideration that is conditional is recognized as a contract asset
rather than a receivable.

Presentation and disclosure requirements

As required for the unaudited interim condensed consolidated financial statements, the Group
disaggregated revenue recognized from contracts with customers into categories that depict how
the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic
factors. The Group also disclosed information about the relationship between the disclosure of
disaggregated revenue and revenue information disclosed for each reportable segment.

∂ PFRS 9, Financial Instruments

PFRS 9, Financial Instruments replaces PAS 39, Financial Instruments: Recognition and
Measurement for annual periods beginning on or after January1, 2018, bringing together all three
aspects of the accounting for financial instruments: classification and measurement; impairment;
and hedge accounting. With the exception of hedge accounting, which the Group applied
prospectively, the Group has applied PFRS 9 retrospectively, with the initial application date
of January1, 2018 and adjusting the comparative information for the period beginning
January 1, 2017.

Classification and measurement

Except for certain Receivables, under PFRS 9, the Group initially measures a financial asset at its
fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction
costs.

Under PFRS 9, debt financial instruments are subsequently measured at fair value through profit
or loss (FVPL), amortized cost, or fair value through other comprehensive income (FVOCI). The
classification is based on two criteria: the Group’s business model for managing the assets; and
whether the instruments’ contractual cash flows represent ‘solely payments of principal and
interest’ on the principal amount outstanding (the ‘SPPI criterion’).

There is no change in the classification and measurement of the Group’s debt financial assets
comprised of Receivables.

Other financial assets are classified and subsequently measured, as follows:

∂ Equity instruments at FVOCI, with no recycling of gains or losses to profit or loss on
derecognition. This category only includes equity instruments, which the Group intends to
hold for the foreseeable future and which the Group has irrevocably elected to so classify
upon initial recognition or transition. The Group classified its investments in unquoted equity
instruments as equity instruments at FVOCI. Equity instruments at FVOCI are not subject to
an impairment assessment under PFRS 9. Under PAS 39, the Group’s unquoted equity
instruments were classified as AFS financial assets.

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∂ Financial assets at FVPL comprise derivative instruments and quoted equity instruments
which the Group had not irrevocably elected, at initial recognition or transition, to classify at
FVOCI. This category would also include debt instruments whose cash flow characteristics
fail the SPPI criterion or are not held within a business model whose objective is either to
collect contractual cash flows, or to both collect contractual cash flows and sell. Under
PAS 39, the Group’s quoted equity securities were classified as AFS financial assets. Upon
transition the AFS reserve relating to quoted equity securities, which had been previously
recognized under accumulated OCI, was reclassified to Retained earnings.

The assessment of the Group’s business models was made as of the date of initial application,
January 1, 2018, and then applied retrospectively to those financial assets that were not
derecognized before January1, 2018. The assessment of whether contractual cash flows on debt
instruments are solely comprised of principal and interest was made based on the facts and
circumstances as at the initial recognition of the assets.

The adoption of PFRS 9 resulted in the reclassification in 2018 of certain available-for-sale

financial assets to equity instruments at fair value through other comprehensive income.

Impairment of Financial Instruments

The adoption of PFRS 9 has fundamentally changed the Group’s accounting for impairment
losses for financial assets by replacing PAS 39’s incurred loss approach with a forward-looking
expected credit loss (ECL) approach. PFRS 9 requires the Group to record an allowance for
ECLs for all loans and other debt financial assets not held at FVPL.

ECLs are based on the difference between the contractual cash flows due in accordance with the
contract and all the cash flows that the Group expects to receive. The shortfall is then discounted
at an approximation to the asset’s original effective interest rate.

For Trade and other receivables, the Group has applied the standard’s simplified approach and
has calculated ECLs based on lifetime expected credit losses. The Group has established a
provision matrix that is based on the Group’s historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and the economic environment.

For other debt financial assets (i.e., loans and debt securities at FVOCI), the ECL is based on the
12-month ECL. The 12-month ECL is the portion of lifetime ECLs that results from default
events on a financial instrument that are possible within 12 months after the reporting date.
However, when there has been a significant increase in credit risk since origination, the allowance
will be based on the lifetime ECL.

The Group’s debt instruments at FVOCI comprised solely of quoted bonds that are graded in the
top investment category (Very Good and Good) by the Good Credit Rating Agency and,
therefore, are considered to be low credit risk investments. It is the Group’s policy to measure
such instruments on a 12-month ECL basis. In all cases, the Group considers that there has been a
significant increase in credit risk when contractual payments are more than 30 days past due.

The Group considers a financial asset in default when contractual payment are 90 days past due.
However, in certain cases, the Group may also consider a financial asset to be in default when
internal or external information indicates that the Group is unlikely to receive the outstanding
contractual amounts in full before taking into account any credit enhancements held by the
Group.

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The adoption of the ECL requirements of PFRS 9 did not result in an adjustment to the Group’s
impairment allowances of the Group’s debt financial assets.

∂ Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part of Annual
Improvements to PFRSs 2014 - 2016 Cycle)
The amendments clarify that an entity that is a venture capital organization, or other qualifying
entity, may elect, at initial recognition on an investment-by-investment basis, to measure its
investments in associates and joint ventures at fair value through profit or loss. They also clarify
that if an entity that is not itself an investment entity has an interest in an associate or joint
venture that is an investment entity, the entity may, when applying the equity method, elect to
retain the fair value measurement applied by that investment entity associate or joint venture to
the investment entity associate’s or joint venture’s interests in subsidiaries. This election is made
separately for each investment entity associate or joint venture, at the later of the date on which
(a) the investment entity associate or joint venture is initially recognized; (b) the associate or joint
venture becomes an investment entity; and (c) the investment entity associate or joint venture first
becomes a parent. The amendments should be applied retrospectively, with earlier application
permitted.

The amendment has no impact to the Group’s consolidated financial statements since entities
within the Group are not venture capital organizations or alike.

∂ Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-based

Payment Transactions
The amendments to PFRS 2 address three main areas: the effects of vesting conditions on the
measurement of a cash-settled share-based payment transaction; the classification of a share-
based payment transaction with net settlement features for withholding tax obligations; and the
accounting where a modification to the terms and conditions of a share-based payment transaction
changes its classification from cash settled to equity settled.

On adoption, entities are required to apply the amendments without restating prior periods, but
retrospective application is permitted if elected for all three amendments and if other criteria are
met. Early application of the amendments is permitted.

This amendment has no impact to the Group because it does not have share-based payment
transactions.

∂ Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments, with

PFRS 4
The amendments address concerns arising from implementing PFRS 9, the new financial
instruments standard before implementing the new insurance contracts standard. The amendments
introduce two options for entities issuing insurance contracts: a temporary exemption from
applying PFRS 9 and an overlay approach. The temporary exemption is first applied for reporting
periods beginning on or after January 1, 2018. An entity may elect the overlay approach when it
first applies PFRS 9 and apply that approach retrospectively to financial assets designated on
transition to PFRS 9. The entity restates comparative information reflecting the overlay approach
if, and only if, the entity restates comparative information when applying PFRS 9.

The amendment has no impact to the Group since none of the entities within the Group are
engaged in the insurance business.

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• Amendments to PAS 40, Investment Property, Transfers of Investment Property

The amendments clarify when an entity should transfer property, including property under
construction or development into, or out of investment property. The amendments state that a
change in use occurs when the property meets, or ceases to meet, the definition of investment
property and there is evidence of the change in use. A mere change in management’s intentions
for the use of a property does not provide evidence of a change in use. The amendments should be
applied prospectively to changes in use that occur on or after the beginning of the annual
reporting period in which the entity first applies the amendments. Retrospective application is
only permitted if this is possible without the use of hindsight.

This amendment may apply to the Group’s land held for lease and is carried at the lower of cost
or NRV. There were no transfers into and out of investment property in 2018.

∂ Philippine Interpretation IFRIC-22, Foreign Currency Transactions and Advance Consideration

The interpretation clarifies that, in determining the spot exchange rate to use on initial recognition
of the related asset, expense or income (or part of it) on the derecognition of a nonmonetary asset
or non-monetary liability relating to advance consideration, the date of the transaction is the date
on which an entity initially recognizes the nonmonetary asset or nonmonetary liability arising
from the advance consideration. If there are multiple payments or receipts in advance, then the
entity must determine a date of the transactions for each payment or receipt of advance
consideration. Entities may apply the amendments on a fully retrospective basis. Alternatively,
an entity may apply the interpretation prospectively to all assets, expenses and income in its
scope that are initially recognized on or after the beginning of the reporting period in which the
entity first applies the interpretation or the beginning of a prior reporting period presented as
comparative information in the financial statements of the reporting period in which the entity
first applies the interpretation.

The interpretation does not have a significant effect on the Group’s interim condensed
consolidated financial statements

Asset held for sale

The Group classifies an asset as held for sale under PFRS 5, Noncurrent Assets Held for Sale and
Discontinued Operations when the asset’s carrying amount will be recovered principally through a
sale transaction rather than through continuing use and the following criteria are met as of the
financial reporting date:

(a) The asset is available for immediate sale in its present condition subject only to terms that are usual and
customary for sales of such assets; and
(b) The sale must be highly probable.

In the case of an investment in associate (or portion thereof) that qualifies as an asset held for sale, the
Group ceases to account for such investment (or portion thereof) under the equity method from the
time it is reclassified as held for sale and thereby accounts for it in accordance with PFRS 5.

Disposal of partial interest in a subsidiary that is a single-asset entity

When the Group disposes of a partial interest in a subsidiary that results in the loss of control of that
subsidiary, but that subsidiary is a single-asset entity or a special purpose holding company, the
Group treats the transaction as a partial sale of the underlying asset, and a gain or loss is recognized
only to the extent of the portion of the asset sold.

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Pronouncements issued but not yet effective are listed below. Unless otherwise indicated, the Group
does not expect that the future adoption of the said pronouncements will have a significant impact on
its consolidated financial statements. The Group intends to adopt the following pronouncements when
they become effective.

Effective beginning on or after January 1, 2019

∂ Amendments to PFRS 9, Prepayment Features with Negative Compensation

The amendments to PFRS 9 allow debt instruments with negative compensation prepayment
features to be measured at amortized cost or fair value through other comprehensive income.
An entity shall apply these amendments for annual reporting periods beginning on or after
January 1, 2019. Earlier application is permitted.

The Group will apply this amendment if there are transactions of this nature in the future. None
of its current transactions will fall under this feature.

∂ PFRS 16, Leases

PFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of
leases and requires lessees to account for all leases under a single on-balance sheet model similar
to the accounting for finance leases under PAS 17, Leases. The standard includes two recognition
exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term
leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease,
a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset
representing the right to use the underlying asset during the lease term (i.e., the right-of-use
asset). Lessees will be required to separately recognize the interest expense on the lease liability
and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events
(e.g., a change in the lease term, a change in future lease payments resulting from a change in an
index or rate used to determine those payments). The lessee will generally recognize the amount
of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting under
PAS 17. Lessors will continue to classify all leases using the same classification principle as in
PAS 17 and distinguish between two types of leases: operating and finance leases.

PFRS 16 also requires lessees and lessors to make more extensive disclosures than under
PAS 17.

Early application is permitted, but not before an entity applies PFRS 15. A lessee can choose to
apply the standard using either a full retrospective or a modified retrospective approach. The
standard’s transition provisions permit certain reliefs.

The adoption of the standard is expected to have no significant impact to the Group.

∂ Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures

The amendments to PAS 28 clarify that entities should account for long-term interests in an
associate or joint venture to which the equity method is not applied using PFRS 9. An entity shall

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apply these amendments for annual reporting periods beginning on or after January 1, 2019.
Earlier application is permitted.

The Group is currently assessing the impact of adopting this interpretation.

∂ Philippine Interpretation IFRIC-23, Uncertainty Over Income Tax Treatments

The interpretation addresses the accounting for income taxes when tax treatments involve
uncertainty that affects the application of PAS 12 and does not apply to taxes or levies outside the
scope of PAS 12, nor does it specifically include requirements relating to interest and penalties
associated with uncertain tax treatments.
The interpretation specifically addresses the following:
o Whether an entity considers uncertain tax treatments separately
o The assumptions an entity makes about the examination of tax treatments by taxation
authorities
o How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax
credits and tax rates
o How an entity considers changes in facts and circumstances

An entity must determine whether to consider each uncertain tax treatment separately or together
with one or more other uncertain tax treatments. The approach that better predicts the resolution
of the uncertainty should be followed.

The Group is currently assessing the impact of adopting this interpretation.

Deferred effectivity

∂ Amendments to PFRS 10 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, Business Combinations. 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 postponed the original effective
date of January 1, 2016 of the said amendments until the International Accounting Standards
Board has completed 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.

Significant Accounting Judgments, Estimates and Assumptions

The preparation of the interim condensed consolidated financial statements requires management to
make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses,
assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However,
uncertainty about these estimates and assumptions could result in outcomes that could require a
material adjustment to the carrying amount of the affected asset or liability in the future. Except as
otherwise stated, the significant accounting judgments, estimates and assumptions used in the
preparation of the interim condensed consolidated financial statements are consistent with those used
in the annual consolidated financial statements as at and for the year ended December 31, 2017.

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Assessment of significant influence over an associate

As discussed in Note 3, the Group signed a share purchase agreement to sell to Aboitiz Power Corp.
an effective 12.20% interest in GMCP and 30% GNPD, with the Group retaining an effective interest
in GMCP and GNPD of 8.13% and 20%, respectively. The retained interests in both companies are
judged and accounted for by management as investments in associates for the reason that the
significant influence of the Group over the two entities before and after the execution of the
agreement did not change. The Group only disposed of its limited partnership rights over the two
entities, and retained its general partnership involvement and accordingly, the general partnership
rights. The Group’s significant influence relating to the retained interests is manifested in the
Group’s representation in the board of both companies and the veto rights over certain key
management activities.

Purchase price allocation and goodwill

The Group made several acquisitions in 2017 (see Note 13). The Group determined the fair value of
the net assets of the investee companies for the finalization of the purchase price allocation.
Estimation of the fair value used assumptions such as discount rate, land value and future cash flows
among others (see Note 13).

3. Principles of Consolidation

Basis of Consolidation
The interim condensed consolidated financial statements comprise the financial statements of the
Parent Company and its subsidiaries as of September 30, 2018 and for the nine months ended
September 30, 2018 and 2017.

A subsidiary is an entity which the Group controls. Control is achieved when the Group is exposed,
or has rights, to variable returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee. Specifically, the Group controls an investee if and
only if the Group has:
∂ 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 its 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:
∂ The contractual arrangement with the other vote holders of the investee
∂ Rights arising from other contractual arrangements
∂ The Group’s voting rights and potential voting rights.
A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an
equity transaction. Any difference between the amount by which the non-controlling interests are
adjusted at fair value of the consideration paid or received is recognized directly in equity as “Equity
reserves” and attributed to the owners of the Parent Company. If the Group loses control over a
subsidiary, it:
∂ Derecognizes the assets (including goodwill) and liabilities of the subsidiary, the carrying amount
of any non-controlling interest and the cumulative translation differences recorded in equity;
∂ Recognizes the fair value of the consideration received, the fair value of any investment retained;
∂ Recognizes any surplus or deficit in profit or loss; and

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∂ Reclassifies the parent’s share of components previously recognized in other comprehensive

income to profit or loss or retained earnings, as appropriate.

The interim condensed consolidated financial statements include the consolidation of the financial
statements of the Parent Company and the following subsidiaries:
Percentages of Ownership
September 2018 December 2017
(Unaudited) (Audited)
Moorland Philippines Holdings, Inc. (Moorland) 100 100
Viage Corporation (Viage) 100 100
Presage Corporation (Presage) 100 100
AC Energy International Holdings PTE Ltd.
100 100
(ACEHI SG)
AC Energy HK Limited 100 100
AC Energy Cayman 100 100
Gigasol2, Inc. 100 100
AC Laguna Solar, Inc. 100 100
AC La Mesa Solar, Inc. 100 100
AC Subic Solar, Inc. 100 100
Gigasol1, Inc. 100 100
Gigasol3, Inc. 100 100
SolarAce1 100 100
SolarAce2 100 100
SCC Bulk Water Supply, Inc. 100 100
Solienda, Inc. 100 100
Visayas Renewables Corporation 100 100
Bataan Solar Energy, Inc. 100 100
Sta. Cruz Solar Energy, Inc. 100 100
ACEHI Netherlands B.V. 100 100
AC Energy Vietnam Investments Pte. Ltd. 100 100
Arlington Mariveles Netherlands Holdings B.V. 100 −
Arlington Mariveles Netherlands Cooperative 100 −
AC Energy DevCo Inc. 100 100
MCV Bulk Water 100 100
LCC Bulk Water 100 100
San Julio Land Development 100 100
Manapla Sun Power Dev't Corp. 66.22 66.22
AC Energy GP Corporation (AEGC) 100 100
Kauswagan Power Holdings Ltd. Co. (KPHLC) 85.72 85.72
ACE Dinginin GP Corporation (ADGC) 100 100
ACE Mariveles GP Corporation (AMGC) 100 100
NorthWind Power Development Corporation (NPDC) 67.79 67.79
Monte Solar Energy, Inc. (MSEI) 100 100
AA Thermal, Inc. 100 −
ACE Mariveles Power Ltd. Co. (AMPLC) 100 100
Dinginin Power Holdings Ltd. Co. (DPHLC) 100 100
ACE Thermal, Inc. 100 −
Ingrid Power Holdings, Inc. (IPHI) 100 −

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The following were the changes in the Group structure as of September 30, 2018:

On June 7, 2018, Ingrid Power Holdings, Inc., a wholly owned subsidiary of ACEI was incorporated.

On July 12, 2018, the Group restructured Gigasol2, Inc. to transfer 100% ownership from AC Laguna
Solar Inc., AC La Mesa Solar Inc., AC Subic Solar Inc., Gigasol1 Inc., Gigasol3 Inc. SolarAce1 Inc.
and SolarAce2. These companies including Gigasol2 were 100%-owned by Presage Corporation.

On September 7, 2018, ACE Thermal, Inc., a wholly owned subsidiary of ACEI was incorporated.

On September 20, 2018, AA Thermal, Inc., a wholly owned affiliate of ACEI was incorporated.

On September 24, 2018, ACEI, Inc. transferred 100% of its limited partnership interest in each of
ACE Mariveles Power Ltd. Co. and Dinginin Power Holdings Ltd. Co. to AA Thermal, Inc. The
transfer is part of the Group’s restructuring plan for its thermal assets.

On September 25, 2018, ACEI and Arlingon Mariveles Netherlands Holdings B.V. (a subsidiary of
ACEI) signed a subscription agreement for the purchase of shares of stock of AA Thermal, Inc.

On September 26, 2018, Aboitiz Power Corp. entered into a share purchase agreement with the Group
for the acquisition of 12.20% effective interest in GMCP and 30% effective interest in GNPD. The
closing of the sale transaction is subject to conditions precedent (including the approval by the
Philippine Competition Commission) which are still to occur as of the audit report date. After the
sale, the Group’s effective ownership in GMCP and GNPD will be reduced to 8.13% and 20%,
respectively.

Consequently, as a result of the share purchase agreement, the Group’s interest in GMCP and GNPD,
in so far as it relates to the portion to be sold to Aboitiz Power Corp., is reclassified to noncurrent
asset held for sale as of September 30, 2018. The Group also determined that the asset held for sale
shall be carried at reclassification date at the carrying value of the two investments = P5,635.30 million
since this is lower than the fair value less cost to sell of US$579.20 million.

Closing of the transaction is subject to satisfaction of certain conditions precedent, including the
approval by the Philippine Competition Commission. The transaction was valued at
US$579.20 million.

The following were the changes in the Group structure during 2017:

On February 3, 2017, ACEHI Netherlands B.V. was established as a wholly owned subsidiary of
AC Energy SG. ACEHI Netherlands, as part of an Indonesian consortium, holds 19.80% interest
in Star Energy Salak-Darajat, BV (see Note 11).

On March 16, 2017, ACEI signed definitive documents to acquire 100% ownership of Bronzeoak
Clean Energy (BCE) and San Carlos Clean Energy (SCCE) as well as an additional 36.79% of
shares of Manapla Sun Power Dev’t. Corp. (see Note 13). The acquisition provides the Group with
renewable energy development, management and operations platform. Manapla Sun, on the other
hand, engages in leasing, operating, managing and developing public or private lands since 2015.
With these acquisitions, SCCE and BCE have been renamed as AC Energy DevCo Inc. and
Visayas Renewables Corp., respectively. Further, with the acquisition of BCE that owns the
remaining 4.00% of MSEI, MSEI became a wholly owned subsidiary of the Group.

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On March 30, 2017, Gigasol1, Gigasol2, Gigasol3, SolarAce1 and SolarAce2 were incorporated as
wholly owned subsidiaries of Presage Corporation. These shall carry on the business of exploring,
developing, and utilizing renewable energy projects in the Philippines.

On September 11, 2017, AC Energy Vietnam Investments Pte. Ltd. was established as a
wholly owned subsidiary of AC Energy SG. AC Energy Vietnam is intended to be the holding
entity for the Group’s future renewable energy investments in Vietnam.

On December 18, 2017, Presage Corporation acquired 100% interest in SCC Bulk Water Supply,
Inc. SCC Bulk Water is engaged in the collection, purification and distribution of water in Negros
Occidental. The entity has not started commercial operations as of December 31, 2017
(see Note 13).

On December 28, 2017, ACEI acquired 100% interest in Solienda, Inc. Principal activities of
Solienda includes dealing and engaging in land lease and real estate business (see Note 13).

4. Cash and Cash Equivalents

This account consists of:

September 30, December 31,

2018 2017
(Unaudited) (Audited)
Cash on hand P
=856,430 =23,000,737
P
Cash in bank 3,133,910,662 3,656,621,203
Cash equivalents 10,009,268,209 2,270,386,643
P
=13,144,035,301 =5,950,008,583
P

Cash on hand pertains to petty cash fund used under imprest fund system.

Cash in banks earn interest at the prevailing bank deposit rates.

Cash equivalents are short-term, highly liquid investments that are made for varying periods of up to
three months depending on the immediate cash requirements of the Group, and earn interest at the
prevailing short-term rates.

Interest income from cash in banks and cash equivalents for the nine-month periods ended
September 30, 2018 and 2017 amounted to = P45.67 million and = P22.68 million in 2018 and 2017,
respectively.

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5. Receivables

This account consists of:

September 30, December 31,

2018 2017
(Unaudited) (Audited)
Trade receivables =1,107,624,142
P =884,793,667
P
Receivable from:
The Blue Circle 378,140,000 −
Sta. Clara Group, Inc. (Sta. Clara) 314,435,457 303,330,380
Acetrans Ventures Corporation (Acetrans) 153,724,512 153,724,512
Jetfly Asia Pte Ltd 58,842,505 58,842,505
Shanghai Electric Power Construction (SEPC) − 73,830,697
Accrued liquidated damages (Note 14) 2,326,140,123 95,962,963
Accrued interest receivable - UPC Renewables Asia III
(Note 11) 410,709,309 −
Accrued interest receivable - UPC Renewables Asia I
(Note 11) 71,331,922 −
Accrued interest receivable 15,031,871 7,002,008
Advances to employees 13,040,256 5,133,693
Other receivables 245,626,548 52,140,070
5,094,646,645 1,634,760,495
Less allowance for impairment of receivables 369,533,570 358,428,493
4,725,113,075 1,276,332,002
Less noncurrent portion 105,665,038 160,726,520
=4,619,448,037
P =1,115,605,482
P

Trade receivables
Trade receivables include (a) MSEI’s receivables from National Transmission Corporation
(TransCo), the Administrator of the FIT system, and Philippine Electric Market Corporation (PEMC)
for sale of electricity, (b) ACERES receivables from its various RES customers and (c) NPDC’s
receivables from Ilocos Norte Electric Cooperative, Inc. (INEC), Wholesale Electricity Spot Market
(WESM) and TransCo. This includes amounts withheld by INEC amounting to P =79.01 million as of
September 30, 2018 and December 31, 2017 due to dispute in billings made by NPDC to the INEC.
As of September 30, 2018, the ERC has yet to order a final and executory decision on the motion
filed by the NPDC. NPDC management believes that it has a solid claim on those receivables and
those are fully recoverable.

Trade receivable from PEMC are collectible within 90 days. Trade receivable from TransCo are
generally on a thirty (30) to forty (40) day credit term. Under ERC Resolution No. 24 series of 2013,
section 2.2.8, the failure to properly and fully pay the actual FIT Revenue to the Group for any billing
period shall authorize the Group to charge TransCo interest, upon the lapse of one billing period after
the due date of the unpaid amounts based on a 91-day treasury bill plus 300 basis points until fully
paid.

The Group earned interest income on trade receivables for the nine-month periods ended
September 30, 2018 and 2017 amounting to = P42.69 million and = P17.23 million, respectively.

In 2017, ACERES recognized allowance for trade receivable from electricity sale amounting to
=
P5.49 million for accounts outstanding beyond the credit term (nil for the nine-month period ended
September 30, 2018).

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Receivable from Sta. Clara Group, Inc. (Sta. Clara)

On December 29, 2016, the Parent Company sold all of its 70.00% ownership interest in QuadRiver
Energy Corporation (QEC), Philnew Hydro Power Corporation (PHPC) and PhilnewRiver
Corporation (PRPC), collectively referred to as “Hydro Project Companies” to Sta. Clara for a total
consideration of =
P350.00 million, payable on or before December 29, 2020. The Parent Company
recognized =P82.53 million gain from the disposal of its ownership interest. The Parent Company
also recognized a ‘Day 1’ loss of P
=60.79 million as the note is noninterest-bearing. As of
September 30, 2018 and December 31, 2017, the Parent Company recorded an accretion of its
receivable from Sta. Clara amounting to =
P11.11 million and = P10.59 million, respectively.

Subsequently, the Parent Company recognized a provision for impairment losses on the note
amounting to =
P11.11 million and =
P10.59 million for the nine-month periods ended
September 30, 2018 and 2017, respectively.

On September 8, 2017, ACEI secured the Certificate Authorizing Registration (CAR) arising from
the sale of shares in its Hydro Project Companies.

The following is the rollforward analysis of impaired trade receivables and receivable from Sta.
Clara:

Receivable from
Trade Receivables Sta. Clara Total
Balance at January 1, 2017 =3,013,996
P =289,212,749
P =292,226,745
P
Provision for the year 52,084,117 14,117,631 66,201,748
Balance at January 1, 2018 55,098,113 303,330,380 358,428,493
Provision for the period − 11,105,077 11,105,077
Balance at September 30, 2018 =55,098,113
P =314,435,457
P =369,533,570
P

Receivable from Acetrans

On November 17, 2015, the Parent Company and Acetrans entered into a two-year loan agreement
for a total amount of =
P146.62 million. Acetrans has the option to draw down the amount within one
year from the date of agreement, provided that a promissory note be delivered to the Parent Company
before the drawdown is released.

On April 12, 2016, the Parent Company and Acetrans entered into another two-year loan agreement
for a total amount of =
P10.00 million, with the same terms as the previous loan agreement.

In November 2017, the Parent Company entered into an agreement with Acetrans to extend the note
receivable for another two (2) years effective November 16, 2017. The outstanding note receivable
was then reclassified under noncurrent portion of notes receivable.

As of September 30, 2018 and December 31, 2017, total drawdown amounted to = P153.72 million
with 3.00% interest per annum. Interest, accrued daily and compounded annually, is payable together
with the principal amount on repayment date.

As of September 30, 2018 and December 31, 2017, noncurrent portion of notes receivable amount to
P
=105.67 million and P
=7.11 million, respectively.

Receivable from Shanghai Electric Power Construction (SEPC)

Receivables from SEPC pertains to advances made by GNPK for the construction of an acceptable
critical path method (CPM), the costs of the training manuals, operating instructions and operation
and maintenance manuals, as well as to conduct a pre-commercial operational and maintenance

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training program for the operations and maintenance team. These costs are part of the contractor’s
obligations under the Engineering, Procurement and Construction (EPC) agreement and was paid by
the contractor in August 2018.
Receivable from Jetfly Asia Pte Ltd
On December 26, 2017, ACEHI SG (the “Lender”) and Jetfly Asia Pte Ltd (the “Borrower”) and a
third party (the “Guarantor”), entered into a loan agreement for a facility to be made available to
Jetfly Asia in the principal amount of US$1.18 million (or =
P58.84 million). On the same date, the
guarantor and the lender entered into a security agreement (i.e., mortgage over shares) to secure the
loan. The loan is noninterest-bearing and is due and demandable.

The Blue Circle

On April 26, 2018, The Blue Circle (TBC) and AC Energy International Pte. Ltd. entered into a
Development Loan Agreement pursuant to which, ACEI agreed to grant TBC an aggregate principal
amount up to US$10.00 million in several tranches within the availability period. Interest is charged
at 10% per annum repayable on June 30, 2020. Total drawdown as of September 30, 2018 amounts
to US$7.00 million (P
=378.14 million).

Accrued interest receivable

Accrued interest receivable pertains to interest earned from notes receivable from Acetrans Ventures
Corporation (Acetrans) and interest income from investments in redeemable preferred shares (see
Note 11). For the nine-month periods ended September 30, 2018 and 2017, the Group earned interest
income from notes receivable amounting to = P3.96 million and =P4.36 million, respectively. Accrued
interest income from redeemable preferred shares amounted to US$7.27 million (P =392.65 million) as
of September 30, 2018.

6. Advances to Contractors

As of September 30, 2018 and December 31, 2017, the advances to contractors amounted to
=4.49 million and =
P P10.58 million, respectively. These are downpayments made to contractors for the
construction of the power plant and shall be recouped against progress billings within the next three
months after period-end.

7. Input Value-Added Taxes (VAT)

September 30, December 31,

2018 2017
(Unaudited) (Audited)
Input VAT P
=4,086,476,166 =2,743,233,545
P
Less noncurrent portion 3,869,810,354 2,560,132,306
P
=216,665,812 =183,101,239
P

The noncurrent portion arises from acquisition of capital assets with aggregate acquisition price
exceeding =P1.00 million and with estimated useful life of more than one year. This is amortized over
five (5) years or the life of the property, plant and equipment, whichever is shorter, in accordance
with the Bureau of Internal Revenue (BIR) regulation.

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8. Prepayments and Other Current Assets

This account consists of:

September 30, December 31,

2018 2017
(Unaudited) (Audited)
Prepaid expenses P
=314,879,085 =456,698,880
P
Creditable withholding tax 117,492,414 55,474,737
Spare parts inventory 59,211,649 84,513,451
P
=491,583,148 =596,687,068
P

Prepaid expenses pertain to real property taxes, financing costs and insurance of the construction
facility paid for by the Group. These are expected to be utilized in one year.

9. Project Development Costs and Right of Way

The rollforward analysis of this account follows:

September 30, December 31,

2018 2017
(Unaudited) (Audited)
At January 1 P
=47,965,326 =45,798,398
P
Additions − 2,166,928
Disposals (457,521) −
At December 31 47,507,805 47,965,326
Less allowance for impairment 45,736,597 45,736,597
P
=1,771,208 =2,228,729
P

Wind Power Development Cost

Wind power development cost amounting to = P45.74 million pertains to costs incurred of the wind
power project in Bais, Negros Oriental. This include among others, data study, roadworks and
installation costs. In 2016, the Group recognized impairment of P
=45.74 million.

Solar Power Development Cost

Solar power development costs pertain to costs incurred for the development of power plant projects
in various sites. These include, among others, applications for permits and licenses in compliance
with the requirements of the regulatory bodies and fees paid to third party consultants. As of
September 30, 2018 and December 31, 2017, development costs amounted to P =12.97 million.

Right of Way (ROW)

Project development costs include cost pertaining to easement ROW which the privilege is granted to
one person to pass across another’s land. During the construction of Kauswagan Transmission Line
(TL) Project and Mariveles Project, several ROW were acquired from local residents for the right to
erect the transmission lines which will be used to connect to the National Grid Corporation of the
Philippines. Easement right acquired from local residents is for an indefinite period of time.

As of September 30, 2018 and December 31, 2017, project development costs pertaining to easement
ROW amounted to P =296.54 million.

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10. Equity Instruments at Fair Value through Other Comprehensive Income and Available-for-Sale
Financial Assets

September 30, December 31,

2018 2017
(Unaudited) (Audited)
Negros Island Solar Power, Inc. (ISLASOL) P
=336,544,360 =336,544,360
P
San Carlos Solar Energy, Inc. (SACASOL) 260,898,363 260,898,363
Ilocos Mango Growers, Inc. (IMGI) 209,250 209,250
Katimak Holdings, Inc. 2,500 2,500
P
=597,654,473 =597,654,473
P

Investment in ISLASOL, SACASOL, and IMGI are investment equity securities in domestic
corporations whose shares are not listed in the Philippine Stock Exchange. The investments are
carried at fair value following the finalization of the purchase price allocation of a business
combination in 2018 (see Note 13). The movement in fair value from acquisition date through
September 30, 2018 is not material.

Dividends declared and received from SACASOL amounted to P20.82 million and P7.00 million for
the nine-month periods ended September 30, 2018 and 2017, respectively.

On January 19, 2017, Katimak Holdings, Inc., a subsidiary of Presage Corporation was incorporated
with paid up capital of =
P250,000 for a local bidding geothermal project. Subsequently on
July 21, 2017, Presage Corporation assigned 247,500 shares or 99.00% ownership interest of Katimak
Holdings, Inc. to AllFirst Equity Holdings, Inc. at par value. The accrued bidding cost for the local
geothermal project amounting to P =122.74 million was subsequent reversed and reported as part of
other income for the nine-month period ended September 30, 2017.

As of December 31, 2017, the investments are accounted for as available-for-sale financial assets in
the audited consolidated financial position. As of September 30, 2018, the investments are classified
as equity instruments at fair value through other comprehensive income in line with the adoption of
PFRS 9.

11. Investments in Associates and Joint Ventures

This account consists of:

September 30, December 31,

2018 2017
(Unaudited) (Audited)
Acquisition costs P
=16,730,740,814 P
=19,209,246,358
Accumulated equity in net income:
Balance at beginning of period 4,155,197,869 2,370,598,506
Share in the net income during the period 2,284,910,360 2,156,401,634
Dividends received from preferred shares (320,690,000) (378,410,000)
Equity reserves − 6,607,729
Balance at end of period 6,119,418,229 4,155,197,869
P
=22,850,159,043 P=23,364,444,227

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The Group’s investments in associates and joint ventures and the corresponding direct percentages of
ownership are shown below.
Direct Percentage
of Ownership Carrying Amounts
September 30, December 31, September 30, December 31,
2018 2017 2018 2017
(Unaudited) (Audited) (Unaudited) (Audited)
Joint Ventures
South Luzon Thermal Energy Corporation (SLTEC) (1) 35 35 P
= 3,034,396,270 P
=2,703,920,281
UPC Renewables Australia (11) 50 − 1,585,794,068 −
GNPower Dinginin (GNPD) (5) 50* 50 1,407,465,224 2,265,534,506
UPC Sidrap HK Ltd (6) 11 11 484,453,179 320,653,306
New Energy Investment Corp (10) 50 − 431,810,482 −
The Blue Circle Pte. Ltd. (TBC) (12) 25 − 103,506,079 −
UPC Renewables Asia III Ltd (6) 51 51 54,932,098 7,379
ACTA Power Corporation (APC) (3) 50 50 31,631,628 31,463,772
PhilNewEnergy, Inc. (PNE) (2) 50 50 4,023,271 7,051,373
Associates
Star Energy Salak-Darajat B.V. (9) 20 20 9,769,466,931 9,044,892,782
GNPower Mariveles Coal Plant Ltd. Co. (GMCPLC) (8) 20* 20 2,703,046,473 7,987,926,794
BIM EnergyJoint Stock Co. (13) 30 − 1,990,574,583 −
Philippine Wind Holdings Corporation (PWHC) (4) 43 43 960,509,916 1,005,986,136
BIM Renewable/Energy Joint Stock Co. (14) 30 − 196,669,822 −
Negros Island Biomass Holdings (Isla Bio) (7) 43 − 94,871,121 −
22,853,151,145 23,367,436,329
Less allowance for impairment 2,992,102 2,992,102
P
= 22,850,159,043 P
=23,364,444,227
* In accordance with the share purchase agreement as disclosed in Note 3, the Group reclassified portions of its effective holdings in GMCP and GNPD
as asset held for sale as of September 30, 2018. The closing of the agreement, however, is subject to certain conditions precedent that have not yet
materialized as of date. Accordingly, the effective ownership of the Group remains unchanged as of September 30, 2018.

(1)
Investment in SLTEC
On June 29, 2011, the Parent Company entered into a 50-50 joint venture with PHINMA Energy
Corporation (PHINMA; formerly Trans-Asia Oil and Energy Development Corporation) to
incorporate SLTEC which will undertake the construction and operation of a 135-megawatt
power plant in Calaca, Batangas. The power plant will employ the environment-friendly
Circulating Fluidized Bed boiler technology.

The Parent Company invested a total of =

P3.64 billion in SLTEC owning 50.00% of the shares of
SLTEC. The percentage ownership of the Parent Company is equivalent to its economic interest
in SLTEC.

On April 24, 2015, Unit 1 of the 2x135MW coal fired power plant achieved commercial
operations date (COD). Unit 2, on the other hand, achieved COD on February 21, 2016.

On December 20, 2016, the Parent Company sold 5,374,537 common shares and 5,374,537
preferred shares in SLTEC with a carrying value of = P1.20 billion to Axia Power Holdings
Philippines Corp. (Axia Power), a subsidiary of Marubeni Corporation, for a selling price of
=
P2.53 billion. This resulted to a net gain of =
P1.18 billion (net of capital gains tax and
documentary stamp tax amounting to = P145.04 million and =
P2.02 million, respectively). After the
sale, the equity interest of the Parent Company decreased to 35.00% but the investment in SLTEC
remains to be a joint venture since at least one director from the Parent Company and PHINMA
are required to make decisions on the relevant activities of SLTEC.

Dividends from common shares of SLTEC amounted to P =173.06 million and =

P821.91 million for
the nine-month periods ended September 30, 2018 and 2017, respectively.

F-29
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(2)
Investment in PNE
On October 15, 2010, the Parent Company’s BOD authorized the Parent Company to enter into a
joint venture agreement with Diamond Generating Asia Limited (DGA), and to incorporate a
joint venture company for the exploration and development of solar power projects in the
Philippines.

The Parent Company and DGA entered into a Memorandum of Understanding on

October 19, 2010 to confirm their intent to work together on an exclusive basis to agree on,
develop and implement the solar power projects. On November 12, 2010, the Parent Company
and DGA entered into a Shareholders’ Agreement to document the terms by which PNE will be
owned, managed and controlled.

On November 21, 2011, DGA transferred its ownership interest in the PNE to DGA PNE B.V.
(DGA PNE), a company incorporated in the Netherlands. The voting interest of the Parent
Company in PNE is in proportion to its ownership interest.

PNE recognized impairment loss on its project development costs amounting to = P31.28 million in
2013 due to the non-viability of the its solar power project. Accordingly, the Parent Company
recognized impairment loss on its investment in PNE amounting to P =28.99 million due to the
current economic situation of PNE.

On November 26, 2015, PNE’s BOD approved the shortening of its corporate term to
March 31, 2017, subject to the required regulatory filings and approval.

On December 2015, the Parent Company received return of capital from PNE amounting to
=
P22.00 million. As such, the recognized allowance for impairment loss were decreased by
=26.00 million as of December 31, 2015.
P

As of September 30, 2018, PNE is in the process of completing the liquidation procedures with
BIR and SEC.
(3)
Investment in APC
On February 9, 2012, the Parent Company entered into a 50-50 joint venture with PEC to
incorporate APC that will be engaged in the business of owning, developing or constructing
power generation facilities. The voting interest of the Parent Company in APC is in proportion to
its ownership interest.

For the nine-month period ended September 30, 2018 and year-ended December 31, 2017, APC
made capital calls for which the Parent Company infused a total of =
P0.10 million and
P
=18.01 million, respectively.
(4)
Investment in PWHC
On July 12, 2013, the Parent Company signed an Investment Framework Agreement and
Shareholders’ Agreement with UPC Philippines Wind Holdco I B.V., a wholly owned company
of UPC Renewable Partners (UPC) and the Philippine Investment Alliance for Infrastructure fund
(PINAI), comprised of the Government Service Insurance System, Langoer Investments Holding
B.V. and Macquarie Infrastructure Holdings (Philippines) Pte. Limited, to develop wind power
projects in Ilocos Norte through Northern Luzon UPC Asia Corporation (currently known as
North Luzon Renewable Energy Corp. or NLREC) as their joint venture company. An initial
equity investment has been agreed for the first 81 MW project with an investment value of
approximately US$220.00 million with the Parent Company funding 64% of equity, PINAI at
32% and UPC at 4%.

F-30
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The 81 MW wind power project received a declaration of commerciality on June 17, 2013 from
the Department of Energy. Accordingly, NLREC has signed the Turbine Supply, Installation and
Service Availability Agreements with Siemens Wind Power A/S and Siemens Inc. and has issued
the Notice to Proceed. The change was approved by the SEC on January 14, 2014.

As of September 30, 2018, the investment in Philippine Wind Holdings Corporation is comprised
of 230,256 common shares, 15,088 Preferred Shares A-1 and 2,631 Preferred Shares A-2
amounting to P =23.03 million, P
=239.39 million and =P601.74 million, respectively. The preferred
shares are entitled to cumulative, non-participating dividend which are redeemable at the option
of the issuer.

Dividends received by the Parent Company from preferred shares in PWHC amounted to
=320.69 million and =
P P378.41 million for the nine-month periods ended September 30, 2018 and
2017, respectively.

The voting interest of the Parent Company in PWHC is in proportion to its ownership interest.
(5)
Investment in GNPD
On May 21, 2014, the Group acquired 50.00% interest in GNPD. GNPD was registered with the
Philippine SEC on May 21, 2014 primarily to develop, construct, operate and own an
approximately 2x600 MW (net) supercritical coal-fired power plant to be located at Mariveles,
Province of Bataan.

On September 2, 2016, GNPD achieved financial close for the first 2x600 MW plant and on
December 12, 2017, GNPD achieved financial close for the project financing of the second unit
of its 2 x 668 MW super-critical coal fired power plant in Dinginin, Bataan.

On October 30, 2017, the Parent Company, through Dinginin Power Holdings, infused additional
capital to GNPD amounting to US$3.35 million (equivalent to =P172.86 million) and on
December 11, 2017 amounting to US$20.41 million (equivalent to = P1,027.64 million), these
funds will be used for the construction of the second 2x600 MW plant.

As of September 30, 2018 and December 31, 2017, ACEI’s remaining total capital commitment
on its investment in GNPD amounted to US$82.20 million and US$122.18 million, respectively.
(6)
Investments in UPC Renewables Asia III Ltd., UPC Sidrap HK Ltd and UPC Renewables Asia I Ltd.
On January 11, 2017, the Parent Company signed investment agreements with UPC Renewables
Indonesia Ltd for the development, construction, and operation of a wind farm project in Sidrap,
South Sulawesi, Indonesia (the “Sidrap Project”). The project will be developed through PT UPC
Sidrap Bayu Energi, a special purpose company based in Indonesia and 72%-owned by UPC
Renewables Asia III Ltd. The Sidrap Project, with generating capacity of 75MW, started
commercial operations in April 2018 and is the first utility-scale wind farm project in Indonesia.
In 2017, ACEHI SG infused of US$21.86 million (or P =1,091.69 million) to UPC renewables Asia
III Ltd representing 51% voting interest. The investment in UPC Renewables Asia III Ltd. is
comprised of 10,710 common shares for US$1.83 million and 21,864 Redeemable Class A shares
for US$21.86 million (or P=1,180.05 million). The Redeemable Class A Shares are redeemed only
by cash at the holder’s option in accordance with the redemption period and redemption
mechanics and are entitled to dividends of 13.50% per annum. The investment in UPC Sidrap
HK Ltd. is comprised of 1,130 Redeemable Class B shares amounting to US$6.39 million
(or P
=330.92 million). Since these shares include a contractual obligation for UPC Asia III to
redeem the shares at a determined amount by cash at some future date, they are classified as long-
term receivables and are presented as “Investment in redeemable preferred shares” in the interim

F-31
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consolidated financial position of the Group. Total accrued interest as of September 30, 2018
amounts to US$7.60 million (or P =410.71 million) (nil for the year ended December 31, 2017).

On July 25, 2017, ACEHI SG entered into an arrangement with UPC Renewables Asia I Ltd to
subscribed to 10,710 Redeemable Class B shares for US$9.00 million (or P =449.37 million) and
has a mandatory redemption period. As such, the shares are classified as long-term receivables
and presented as “investment in redeemable preferred shares” in the consolidated financial
position of the Group. The shares are entitled to dividends of 12% per annum. Total accrued
interest as of September 30, 2018 amounts to US$1.32 million (or P=71.33 million) (nil in
December 31, 2017).
(7)
Investment in Negros Island Biomass Holdings (Isla Bio)
On March 20, 2018, Presage Corporation, a wholly owned subsidiary of ACEI and Zabaleta &
Co. entered into a share purchase agreement for acquisition of 21,484 common shares in Negros
Island Biomass Holdings (Isla Bio) which represents 42.97% interest. Isla Bio is the entity that
holds interest in the three biomass plants in Negros - (1) San Carlos BioPower, (2) South Negros
BioPower and (3) Negros BioPower.
(8)
Investment in GMCPLC
On May 30, 2014, Arlington Mariveles Netherlands Holding B.V. (AMNHB, the Seller) and
AMPLC (the Buyer), entered into a Sale and Purchase Agreement for the 17.02% outstanding
limited partnership interest of AMNHB in GMCP. The Parties agreed that until the issuance of
the BIR of tax clearance certificate authorizing the transfer of registration of the ownership
interests from the seller to the buyer, AMNHB remains to be the legal and registered owner of the
Limited Partnership (LP) Interest. AMPLC, on the other hand, is the beneficial owner of the LP
interest. Effective on January 29, 2018, ACE Mariveles became the legal and registered owner of
the limited partnership interest.

GMCP is engaged in all aspects of developing, financing, obtaining permits and licenses for
constructing, owning and operating a 600MW clean pulverized coal-fired electric power
generation facility, including any future expansion, and other assets including transmission and
sub-transmission lines and jetties, in each case to be located in Bataan, Philippines (the Clean
Coal Project).

AMPLC’s Management Committee approved the return of capital to the Parent Company
amounting to US$14.09 million (or =P761.27 million) and US$30.58 million
(or =
P1,569.63 million) as of September 30, 2018 and December 31, 2017, respectively.

Following the return of capital to the project sponsors and owners last October 12, 2017, the
sharing percentage of the Parent Company (through its limited partnership interest) increased
from 17.0246% to 20.4172%, pursuant to the terms of the Second Amended and Restated Limited
Partnership Agreement for GMCP. The return of capital in 2018 did not impact the percentage of
limited partnership interest of the Group in GMCP.
(9)
Investment in Star Energy Salak-Darajat B.V.
On December 22, 2016, the Parent Company, as part of an Indonesian and Philippine consortium,
signed Share Sale and Purchase Agreements with Chevron Global Energy, Inc., Union Oil
Company of California, and their relevant affiliates for the purchase of Chevron’s geothermal
operations and/or assets in Indonesia and the Philippines.

The Indonesian consortium consists of the ACEI (with significant influence as a result of its
19.80% equity interest), Star Energy Group Holdings Pte. Ltd. Star, Star Energy Geothermal Pte.

F-32
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Ltd., DGA SEG BV and Electricity Generating Public Co. Ltd. The acquisition was made
through the consortium’s joint venture company, namely Star Energy Geothermal (Salak-Darajat)
B.V., subject to the satisfaction of certain agreed conditions.

On March 31, 2017, ACEI, as part of an Indonesian consortium, completed the purchase and
acquisition of Chevron’s geothermal assets and operations in Indonesia. The Indonesia assets and
operations include the Darajat and Salak geothermal fields in West Java, Indonesia, with a
combined capacity of 637MW of steam and power.

As of December 31, 2017, the investment in Salak-Darajat amounted to US$168.49 million (or
=
P8,412.71 million). The identifiable assets and liabilities acquired and goodwill arising from the
transaction follows: Salak-Darajat’s assets and liabilities amounting to US$2,677.20 million and
US$1,826.70 million, respectively. Assets include developed and undeveloped geothermal
intangible assets amounting to US$44.30 million and US$1,196.20 million, respectively, which
will not be amortized but will be subjected to impairment assessment. ACEI’s corresponding
notional goodwill on this investment amounted to US$0.09 million is included as part of the
carrying value of the investment as of December 31, 2017.

The valuation of Salak-Darajat was based on the existing enterprise value and value of future
development.
(10)
Investment in AC Energy Vietnam Investments PTE. LTD. (ACEV)
January 22, 2018, AC Energy Vietnam Investments PTE. LTD. (ACEV), a wholly owned
subsidiary of AC Energy International Pte Ltd. (ACE SG), entered into a 50-50 joint venture with
AMI Renewables Energy Joint Stock Company (AMI RE JSC), a joint stock company
incorporated in Vietnam, to invest in New Energy Investments Corporation (NEI), a joint stock
company with a 100% ownership shares in AMI Energy Khanh Hoa Joint Stock Company (AMI
KH JSC), a 50MWp Solar Farm in Khanh Hoa, in AMI Energy Binh Thuan Joint Stock Company
(AMI BT JSC), a 50MWp Solar Farm in Bihn Thuan and in B&T Windfarm Joint Stock
Company (B&T QB JSC), a 200MW Wind Farm in Quang Binh, all of which are situated in
Vietnam.
(11)
Investment in UPC Renewables Australia
On May 23, 2018, ACEI participated in the Australian renewables market through a joint venture
with international renewable energy developer, UPC Renewables Australia. ACEI has invested
US$30.00 million (or P1,620.60 million) for 50% ownership in UPC’s Australian business and is
also providing US$200 million facility to fund project equity.
(12)
Investment in The Blue Circle Pte. Ltd. (TBC)
On April 26, 2018, ACE SG, a wholly owned subsidiary of ACEI, and Jetfly Asia Pte. Ltd.
executed a Share Sale Purchase Agreement for the acquisition of 25% interest in The Blue Circle
Pte. Ltd. (TBC). ACEI investment in TBC is US$1,902,000 representing ownership of 489,227
ordinary shares (SGD1 par value per share). TBC has a platform of wind projects in the
Southeast Asia.
(13)
BIM Energy Joint Stock Co.
On April 12, 2018, AC Energy Vietnam Investments Pte Ltd. (ACEV), a wholly-owned
subsidiary of AC Energy International Holdings Pte Ltd (ACEI SG), entered into a 30-70 joint
venture with BIM Group to develop a 30MW of solar power projects in Ninh Thuan province,
Vietnam. As of September 30, 2018. ACEI investment in BIM E is VND6,428.57 million (or
P14,811.43 million), representing 5,123,891 issued common shares issued and additional paid-in
capital of VND44.81 billion (or P.103 million).

F-33
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(14)
BIM Renewable Energy Joint Stock Co.
On June 1 2018, AC Energy Vietnam Investments Pte Ltd. (ACEV), a wholly-owned subsidiary
of AC Energy International Pte Ltd (ACEI SG), entered into a 30-70 joint venture with BIM
Group to develop 300MW of solar power projects in Ninh Thuan province, Vietnam. As of
September 30, 2018, ACEI investment in BIM RE is US$37.80 million (or P1,990.57 million)
representing contribution for Common shares, deposits for subscription and additional paid in
capital:

Common Shares 1,071,429

Additional paid in capital VND 772.38 billion
Deposits for subscription VND 89.28 billion

The purchase price allocation for acquisitions made for the nine-month period ended September 30,
2018 have been prepared on a preliminary basis due to unavailability of information to facilitate fair
value computation. These include, among others, information based on discounted future cash flows
and information necessary for the valuation of identifiable intangible assets. Reasonable changes are
expected as additional information becomes available. The provisional purchase price allocation will
be finalized within one year from the dates of closer of the above transactions.

12. Deposits

This account consists of:

September 30, December 31,
2018 2017
(Unaudited) (Audited)
Bill deposit P
=285,792,721 =71,036,850
P
Refundable deposit 5,481,370 5,481,370
P
=291,274,091 =76,518,220
P

Bill deposit
Bill deposit pertains to the deposit with Meralco that is equivalent to the RES customer’s average
billing in the immediately preceding twelve (12) months or in case of a newly connected RES’s
customer, based on projected demand and/or energy of such customer. The bill deposit may be
applied by Meralco to any outstanding bill, billing adjustment or differential billing upon termination
of the contract.

Refundable deposit
Refundable deposits pertain to refundable deposits for leased office spaces.

13. Business Combinations

2017 Acquisitions

AC Energy DevCo Inc., Visayas Renewables Corp. and Manapla Sun Power Dev’t Corp.
On March 16, 2017, ACEI signed definitive documents to acquire 100% ownership of Bronzeoak
Clean Energy (Bronzeoak) and SCCE. With the acquisition, SCCE and Bronzeoak have been
renamed as AC Energy DevCo Inc. and Visayas Renewables Corp. (VRC), respectively. In March
2017, ACEI Group also acquired 66.22% ownership interest in Manapla Sun Power Dev’t. Corp.

F-34
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(MSPDC). MSPDC is the landowner of and lessor for Islasol’s solar farm in Manapla, Negros
Occidential.

The fair values of the identifiable assets and assumed acquired liabilities and goodwill arising as at
the date of acquisition follows:

AC Energy DevCo Inc. (AEDCI) Group

Assets
Cash and cash equivalents =9,380,978
P
Receivables 5,224,504
Prepayments and other current assets 19,526,901
Property, plant and equipment 2,447,245
36,579,628
Liabilities
Accounts payable and accrued expenses 10,315,424
Net Assets 26,264,204
Cost of acquisition 812,527,275
Goodwill (Note 15) =786,263,071
P

Cash consideration =812,527,275

P
Less: Cash acquired from the subsidiary 9,380,978
Net cash flow =803,146,297
P

As of September 30, 2018, the Group finalized its purchase price allocation and there were no
changes to the fair values of the assets acquired and liabilities assumed.

The goodwill arising from the acquisition of AC Energy DevCo Inc. is from the established
capabilities of its assembled workforce which includes:

a. Pre-development and development - which involves site acquisition, permitting and studies to get
the project to a shovel ready state
b. Construction - including sourcing of investors as well as managing the construction of the power
plants
c. Operations - covering management of the power plants in lieu of the investors for a fee

Further, the above acquisition included projects in its pipeline with a view of developing projects
(new and from the pipeline) for the Group. Through this acquisition, the Group is able to have the
capability to develop projects end-to-end from permits and feasibility studies all the way to
construction and operations.

Currently, the assembled workforce oversees the pre-development and development of several
potential sites for its solar projects within the Philippines, as well as the construction of offshore
renewable power plants where the Group co-invested with local partners.

From March 16 to December 31, 2017, ACEI’s share in AEDCI’s revenue and net income amounted
to =
P119.9 million and =
P12.4 million, respectively. If the combination had taken place at the
beginning of 2017, ACEI’s share in AEDCI’s revenue and net income would have been
P
=180.2 million and P
=31.8 million, respectively.

F-35
*SGVFS032388*
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Visayas Renewables Corp. (VRC)

Assets
Cash and cash equivalents =6,225,961
P
Prepayments and other current assets 20,592
Equity instruments at fair value through other comprehensive income 579,885,670
586,132,223
Liabilities
Accounts payable and accrued expenses 106,819
Net Assets 586,025,404
Cost of acquisition 586,025,404
Goodwill =−
P

Cash consideration =586,025,404

P
Less: Cash acquired from the subsidiary 6,225,961
Net cash flow =579,799,443
P

As of September 30, 2018, the Group finalized its purchase price allocation. The fair value of
prepayments and other current assets and accounts payable and accrued expenses approximate their
carrying amounts since these are short-term in nature. The valuation technique adopted for equity
instruments at fair value through other comprehensive income dated March 16, 2017 is the discounted
cash flow method. The fair value measurement using unobservable data is based on Level 3 of the fair
value hierarchy.

From March 16 to December 31, 2017, ACEI’s share in VRC’s revenue and net income amounted to
=11.6 million and =
P P11.3 million, respectively. If the combination had taken place at the beginning of
2017, ACEI’s share in VRC’s revenue and net income would have been = P16.0 million and
=
P15.6 million, respectively.

Manapla Sun Power Dev’t. Corp.

The fair values of the identifiable assets and assumed acquired liabilities and goodwill arising as at
the date of acquisition follows:

Assets
Cash and cash equivalents P2,684,264
=
Receivables 28,816,896
Prepayments and other current assets 8,254,713
Investment property 253,670,048
293,425,921
Liabilities
Accounts payable and accrued expenses 49,440,258
Net Assets 243,985,663
Cost of acquisition 235,999,998
Non-controlling Interest 7,985,665
Goodwill =−
P

Cash consideration =235,999,998

P
Less: Cash acquired from the subsidiary 2,684,264
Net cash flow =233,315,734
P

F-36
*SGVFS032388*
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As of September 30, 2018, the Group finalized its purchase price allocation. The fair value of
receivables and accounts payable and accrued expenses approximate their carrying amounts since
these are short-term in nature. The valuation technique adopted for the measurement of investment
property (i.e., land) fair value dated July 3, 2018 is the market approach. The market price per square
meter of land amounts to P680.00. The fair value measurement using unobservable data is based on
Level 3 of the fair value hierarchy.

From March 16 to December 31, 2017, ACEI’s share in MSPDC’s revenue and net income amounted
to =
P46.0 million and =
P37.5 million, respectively. If the combination had taken place at the beginning
of 2017, ACEI’s share in MSPDC’s revenue and net income would have been = P40.3 million and
=
P36.6 million, respectively.

SCC Bulk Water Supply, Inc. (SCC)

On December 18, 2017, Presage Corporation acquired 100% interest in SCC Bulk Water Supply, Inc.

The fair values of the identifiable assets and assumed acquired liabilities and goodwill arising as at
the date of acquisition follows:

Assets
Cash and cash equivalents =152,462
P
Prepayments and other current assets 77,052
Property, plant and equipment 18,281,486
Water supply contract (Note 15) 127,476,358
Other assets 243,200
146,230,558
Liabilities
Accounts payable and accrued expenses P19,157,789
=
Net Assets 127,072,769
Cost of acquisition 127,072,769
Goodwill =−
P

Cash consideration =127,072,769

P
Less: Cash acquired from the subsidiary 152,462
Net cash flow =126,920,307
P

As of September 30, 2018, the Group finalized its purchase price allocation. The fair value of
prepayments and other current assets, other assets and accounts payable and accrued expenses
approximate their carrying amounts since these are short-term in nature. The valuation technique
adopted for the measurement of property, plant and equipment and water supply contract is the
discounted cash flow method. The fair value measurement using unobservable data is based on
Level 3 of the fair value hierarchy.

From December 18 to 31, 2017, ACEI’s share in SSC’s revenue and net loss amounted to nil. If the
combination had taken place at the beginning of 2017, ACEI’s share in SSC’s revenue and net loss
would have been nil and =
P0.50 million, respectively.

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Solienda, Inc. (Solienda)

On December 28, 2017, Presage acquired 100% interest in Solienda.
The fair values of the identifiable assets and assumed acquired liabilities and goodwill arising as at
the date of acquisition follows:
Assets
Cash and cash equivalents =13,664,716
P
Receivables 6,111,959
Prepayments and other current assets 3,300
Deferred tax assets 6,143,051
Leasehold rights 470,726,907
496,649,933
Liabilities
Accounts payable and accrued expenses 148,964,773
Net Assets 347,685,160
Cost of acquisition 347,685,160
Goodwill =−
P

Cash consideration =347,685,160

P
Less: Cash acquired from the subsidiary 13,664,716
Net cash flow =334,020,444
P

As of September 30, 2018, the Group finalized its purchase price allocation. The fair value of
receivables, prepayments and other current assets, deferred tax assets, and accounts payable and
accrued expenses approximate their carrying amounts since these are short-term in nature. The
valuation technique adopted for the measurement of leasehold rights is the discounted cash flow
method. The fair value measurement using unobservable data is based on Level 3 of the fair value
hierarchy.
From December 28 to 31, 2017, ACEI’s share in Solienda’s revenue and net income amounted to nil.
If the combination had taken place at the beginning of 2017, ACEI’s share in Solienda’s revenue and
net income would have been = P68.4 million and P=44.7 million, respectively.

14. Property, Plant and Equipment and Investment Property

As of September 30, 2018 and December 31, 2017, property, plant and equipment and investment
property amounted to =P47,564.61 million and =P220.35 million, and =P40,798.41 million and
P
=220.35 million, respectively. The increase in property, plant and equipment for the nine-month
period ended September 30, 2018 pertains to increase in construction in progress of GNPower
Kauswagan project.
Land and Improvements
On various dates in 2016, the Parent Company purchased certain parcels of land in Kauswagan,
Lanao Del Norte. These parcels of land are used as project site for the construction and operations of
the Kauswagan Power Plant Project. Portion of the land will also be donated to the local government
of Kauswagan to be used for the relocation of informal settlers. The total land area acquired
measures 719,600 square meters amounting to = P391.30 million. Related acquisition costs (e.g., legal
and registration fees) amounting to =
P3.25 million in 2017 were capitalized as part of the cost of land
acquired.

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Machinery and Equipment - Solar

MSEI’s 18-megawatt (MW) solar power plant project, with expansion of up to 40MW, located in the
City of Bais, Province of Negros Oriental. The project utilizes photovoltaic (PV) technology to
convert sunlight to electricity using 18,938 modules and eight (8) inverters. On March 11, 2016,
MSEI began full commercial operations.
Machinery and Equipment - Wind
NPDC developed the country’s first commercial wind farm, owns and operates the 52MW Bangui
wind project in Bangui, Ilocos Norte. Commercial operations started in June 2005 with fifteen (15)
wind turbines. Five (5) additional turbines were commissioned in August 2008. In September 2014,
NPDC commissioned six (6) new turbines under its Phase III expansion project, with a generation
capacity of 18.9 MW. Commercial operations started in October 2014. NPDC’s 20 wind turbines
have a maximum generation capacity of 33 megawatts (MW).
Construction in Progress
Construction in progress account in 2018 and 2017 pertains to the construction and development of
GNPower Kauswagan (GNPK) - 4x135 MW (net) coal-fired power generating facility and private
port facility located in the Barangays of Tacub and Libertad in the Municipality of Kauswagan,
Province of Lanao del Norte.
On May 15, 2014, GNPK, Shanghai Electric Power Construction Co., Ltd. (SEPC; Supplier and
Contractor) and Power Construction Corporation of China (Parent Guarantor) executed the
Coordination Agreement, Construction and Supply Agreement (Onshore EPC) and Engineering,
Design and Procurement (Offshore EPC) Agreement (collectively, the EPC Agreement).
In accordance with the amended Onshore EPC, SEPC shall construct, procure and supply, pack and
transport, commission, start-up, test, deliver, guarantee, performance and warrant GNPK’s power
facility for a total construction cost of US$227.54 million (or P
=11,361.20 million). Further, in
accordance with the Offshore EPC, SEPC shall design, engineer, procure and supply, and warrant the
GNPK’s power facility for a total supply cost of US$472.90 million (or = P23,612.04 million).
GNPK has the right to claim Delay Liquidated Damages for any delays on the completion of each
unit using the rate of US$20,550 per day on the Onshore EPC and US$42,710 per day on the
Offshore EPC or a total of US$63,260 per day rate. Unit 1’s completion date was expected and
contracted to be on December 1, 2017 which resulted in thirty (30) days of delay. Total
liquidated damages for the nine-month periods ended September 30, 2018 and 2017 amounted to
US$36.53 million (or P2,077.00 million) and nil, respectively. As of September 30, 2018, the Group
has cost recoveries from liquidated damages amounts to US$4.61 million (or P 249.14 million) (nil in
2017).
Investment Property
The investment property consists solely of land that is held by Manapla Sun Power Dev’t Corp. to
earn rental income located in Barangay Sta. Teresa, Manapla, Negros Occidental. As at
September 30, 2018 and December 31, 2017, the fair value of investment property amounted to
=220.35 million (see Note 13).
P
On September 1, 2015, Manapla Sun Power Dev’t Corp. entered into a lease agreement with Negros
Island Solar Power Inc. (the Lessee) for the lease of approximately 638,193 sqm. of land. The term
of the lease shall be for a period of twenty-five (25) years upon written notice served upon by the
Manapla Sun Power Dev’t Corp. not earlier than one (1) year but not later than three (3) months
before the expiration of the original period of lease. Lease extension shall be in writing executed by
both parties three (3) months before the expiration of the original period of lease. The Lessee has the
sole option to extend the term of the lease.

F-39
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Agreed rental payment under the lease contract is =

P9.00 per square meter per month or a total annual
rental of =
P68.92 million. Contract amount shall be subject to annual adjustment based on actual
inflation rate covering subject period. Manner of payment shall be in an annual lump-sum amount to
be paid one (1) year in advance.

15. Intangible Assets and Leasehold Rights

Goodwill
Goodwill acquired through business combinations of the Group for impairment testing is attributable
to the purchase of interest in AC Energy DevCo, Inc. amounting to =
P786.26 million both as of
September 30, 2018 and December 31, 2017 (see Note 13).
Leasehold rights
On December 5, 2016, San Julio Realty, Inc. assigned to Solienda Inc. (Solienda) the absolute and
irrevocable title, rights and interests in the contract of lease, and the subsequent amendment
agreements, with San Carlos Sun Power, Inc. Also in December 2016, San Julio Realty, Inc. assigned
its rights to its contracts of lease with San Carlos Solar Energy, Inc. and San Carlos Biopower Inc.,
beginning 2017.
The Assignment Agreements were amended on December 26, 2016 to clarify that San Julio Realty,
Inc. irrevocably assigns, transfers and conveys absolutely unto Solienda all its rights, ownership
and/or interest in 50% of the total rental payments due under the Contracts of Lease. The parties
undertake to provide continuing support for the full implementation of the Agreements and shall
perform in good faith any and all facts necessary to implement the Agreements and its amendments.
The leasehold rights amounted to =
P470.72 million as of September 30, 2018. The leasehold right is
amortized over the remaining lease term of the agreements.
Water Supply Contract
SCC Bulk Water Supply, Inc. has obtained the contract for the supply and distribution of water to San
Carlos Biopower, Inc. Water Supply Contract obtained amounted to P =127.48 million as of
September 30, 2018 and December 31, 2017. This is presented as intangible assets in the
consolidated statements of financial position.

16. Accounts and Other Payables

This account consists of:
September 30, December 31,
2018 2017
(Unaudited) (Audited)
Payable to contractors P
=1,434,217,270 =1,882,224,378
P
Trade payables 1,044,430,314 540,430,917
Accrued expenses 371,322,799 342,137,620
Interest payable (Note 17) 77,314,007 616,154,836
Retention payable 14,483,035 153,374,139
Other payables 8,149 52,825,098
P
=2,941,775,574 =3,587,146,988
P

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Payable to contractors pertains to amounts owed to the Contractors of GNPK and MSEI. As of
September 30, 2018 and December 31, 2017, GNPK is under the construction phase of its coal power
plant. These are noninterest-bearing and are normally settled on a 30- to 60-day term.

Trade payables include billings of goods and services from various suppliers and are normally settled
within 30 days.

Accrued expenses consist mainly of professional and consultancy fees, personnel costs, postal and
communication, contracted services, transportation and travel, and representation expenses incurred.
These are noninterest-bearing and are normally settled within 12 months.

Retention payable pertains to the balance of the purchase price for the acquired parcels of land
situated in Barangays Tacub and Libertad, Municipality of Kauswagan, Lanao Del Norte. These
parcels of land will be used as project site for the construction and operations of the Kauswagan
Power Plant Project.

Other payables are noninterest-bearing and are normally settled within a year.

17. Loans Payable

This account consists of dollar and peso-denominated loans from the following:
September 30, December 31,
2018 2017
(Unaudited) (Audited)
Dollar-denominated loans P
=7,303,078,277 =P28,753,543,667
Peso-denominated loans 37,604,758,375 3,403,172,169
44,907,836,652 32,156,715,836
Less current portion 274,021,646 288,434,107
Noncurrent portion P
=44,633,815,006 P=31,868,281,729

GNPK

As of September 30, 2018 and December 31, 2017, the GNPK property and equipment with net book
value of =P43,483.42 million and P=40,776.54, respectively, are pledged as collateral under a project
finance structure. Interest amounting to =P2.63 million and =
P0.27 million were charged to the interim
condensed consolidated statement of comprehensive income in 2018 and 2017, respectively, as these
relate to various administrative expenses. As of September 30, 2018 and December 31, 2017, interest
capitalized as part of “Construction in progress” amounted to P=1,656.37 million and
=
P1,211.83 million respectively.

Interest payable from the loans amounting to P

=0.85 million and P
=574.85 million as of
September 30, 2018 and December 31, 2017, respectively (see Note 16).

As of September 30, 2018 and December 31, 2017, GNPK is compliant with the covenants under the
loan agreement.

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NPDC

Short-term debt:
On April 27, 2017, the company fully paid the outstanding balance of P150.00 million loan from
BDO.

Long-term debt:
September 30, 2018 (Unaudited)
Current Noncurrent Total
Principal balances at the end of period =273,189,934
P =2,302,470,601
P =
P2,575,660,535
Less unamortized debt issuance cost 3,170,994 12,265,720 15,436,714
=270,018,940
P =2,290,204,881
P =
P2,560,223,821

December 31, 2017 (Audited)

Current Noncurrent Total
Principal balances at the end of year =287,078,489
P =1,779,343,513
P =2,066,422,002
P
Less unamortized debt issuance cost 2,994,382 10,255,451 13,249,833
=284,084,107
P =1,769,088,062
P =2,053,172,169
P

Bank of the Philippines Islands (BPI)

On May 31, 2012, BPI granted a P =1.00 billion loan to NPDC. The proceeds from the loan were used
to fully prepay the senior loans of NPDC.

On September 27, 2013, BPI granted a P=1.50 billion long-term loan facility to NPDC to partly fund
the Phase III expansion project of NPDC. Total drawings from the loan facility amounted to
=1.28 billion.
P

On October 26, 2016, NPDC and BPI signed an amendment to the loan agreements dated
September 27, 2013 and May 31, 2012. Under the amendment, the loan principal due on
October 2016 and April 2017 were reduced by = P44.88 million and =
P134.69 million, respectively, to
offset the short-term impact of the following:

(a) low wind due to the El Nino phenomenon,

(b) constraint in the delivery of electricity brought about by the delay in the completion of the
230 kV San Sebastian-Laoag transmission line; and
(c) delay in collection of revenues due under the FIT.
The reduction in loan principal payment in those periods were spread over the remaining term of the
loan. The remaining terms and conditions of the original loan agreements were not amended.

The interest rate on both loans from BPI is based on a floating rate equivalent to prevailing Bangko
Sentral ng Pilipinas Overnight Reverse Repurchase Rate (BSP RRP), plus 1.00% spread. The interest
is payable semi-annually, computed based on the outstanding balance with payments commencing on
the issue date and ending on the maturity date. Starting on the 5th or 7th year, the NPDC has the
option of choosing between a floating rate and a fixed rate.

On June 27, 2018, BPI granted a P =1.00 billion loan to the company. The proceeds from the loan were
used to fully prepay the outstanding balance of the loan from Union Bank of the Philippines (UBP)
and to finance the company’s general funding requirements.

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Union Bank of the Philippines (UBP)

On May 6, 2014, NPDC signed a P =500.00 million long-term loan facility with UBP to partly fund the
Phase III expansion project of NPDC and refinance a loan from Metrobank.

The loans from BPI and UBP are secured by a participation in a Mortgage Trust Indenture dated
June 13, 2007, covering certain assets, properties, machinery and equipment located in Bangui, Ilocos
Norte issued by Chinatrust Commercial Bank Corporation with net book values of P =2.56 billion and
=2.68 billion as of September 30, 2018 and December 31, 2017, respectively.
P

The 6.25% interest rate on the loan from UBP is fixed for the entire 10-year repayment period.

Debt issuance costs are incidental cost incurred in obtaining the loan, which include documentary
stamp tax (DST), transfer tax, chattel mortgage, real estate mortgage, professional fees and other out
of the pocket expenses. As of September 30, 2018 and December 31, 2017, P =15.44 million and
=
P13.25 million, respectively, are presented as deduction to the loans payable account and will be
amortized over the life of the loan using EIR method. Amortizations of deferred cost are capitalized
until all activities necessary to prepare the power plant for its intended use are substantially complete.

The loan covenants with both BPI and UBP require NPDC to maintain a debt-to-equity (DE) ratio of
70:30 for September 30, 2018. NPDC complied with these covenants as of September 30, 2018.

On June 27, 2018, NPDC fully paid its outstanding loan with UBP amounting to P333.33 million.

Parent Company
The Parent Company entered into several Term Loan Agreements to finance its investments in
energy-related projects and for general corporate needs.

On February 20, 2017, the Parent Company entered into an unsecured loan agreement with The
Philippine American Life and General Insurance Company (PHILAM) amounting to P =1.00 billion,
payable in 10 years from the date of drawdown with 6% fixed interest per annum. The loan shall be
paid in one lump-sum at the maturity date. As of December 31, 2017, the loan has been fully drawn.

On April 27, 2017, the Parent Company entered into an unsecured loan agreement with Philippine
National Bank (PNB) amounting to = P7.00 billion. The loan is payable seven (7) years from initial the
drawdown date. The Parent Company shall pay interest on the outstanding principal amount of the
loan at the fixed rate of 5.75% per annum, with duration of three (3) months commencing on the
drawdown date. All drawdown beyond May 5, 2017, the relevant PDST-R2 benchmark rate will
apply +1% per annum spread, with a floor of 5.25% per annum. Repayment of the principal amount
shall be 20% of the loan from 5th to 27th interest period and the remaining 80% shall be paid lump-
sum at the end of 28th interest period. Draw down of = P250.00 million was made by the Parent
Company on May 3, 2017. On May 6, 2018, the Parent Company received additional drawdown of
=2.00 billion. As of September 30, 2018 and December 31, 2017, the Parent Company has undrawn
P
loan amounting to P =4.76 billion and =
P6.75 billion, respectively.

On June 22, 2017, the Parent Company entered into unsecured loan agreement with Security Bank
Corporation (SBC) amounting to = P5.00 billion. The tenor of the loan agreement is seven (7) years
from the initial drawdown date, with grace period on principal payments of up to three (3) years,
reckoned from the initial drawdown. Repayment of the principal amount shall be 16% of the loan
from the 12th to 27th interest period and the remaining 84% of the loan will be paid lump-sum on the
28th interest period. The Parent Company shall pay interest on the outstanding principal amount of
the loan at the fixed rate of 5.75% per annum for all drawdowns from June 2017 to June 2018. For
all drawdowns beyond June 2018, the interest rate shall be based on the relevant Peso Benchmark

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Rate PDST-R2 rate, plus credit spread, the fixed interest rate shall have a floor rate of 5.00%. Interest
period shall have a duration of three (3) months.

For the nine-month ended September 30, 2018, total drawdowns from the loan facilities are as
follows:

PNB =2,240,650,000
P
PHILAM 1,000,000,000
SBC 100,000,000
=3,340,650,000
P

The related debt issue cost amounted to P

=18.96 million and P
=5.00 million for the nine-month
periods ended September 30, 2018 and 2017, respectively. Interest expense recognized for the
nine-month period ended September 30, 2018 and 2017 amounted to P =109.78 million and
=
P64.90 million, respectively, of which =
P31.32 million and =
P24.08 million remained outstanding as of
September 30, 2018 and December 31, 2017, respectively.

AC Energy International Holdings Pte. Ltd.

On April 20, 2018 and July 30, 2018, respectively, AC Energy International Holdings Pte. Ltd. signed
a short-term loan line and revolving credit facility with Rizal Commercial Banking Corporation and
Mizuho Bank Ltd. Singapore amounting to US$65.00 million (or P =3,511.30 million) and
US$50.00 million (or P =2,701.00 million), respectively. Proceeds of the loan are to be used to finance
investments in power and power related projects and for other general corporate purpose expenses.

As of September 30, 2018, outstanding drawdowns from the short-term loan line and revolving credit
facility amounted to US$35.00 million (P
=1,890.70 million) and US$15.00 million (P
=810.30 million),
respectively.

18. Derivatives

The onshore and offshore loan agreements have embedded prepayment options subject to a 3%
prepayment penalty. The embedded derivative for the onshore dollar loan is assessed to be not
closely related to the host contract, and thus, bifurcated and accounted for separately.

As of September 30, 2018 and December 31, 2017, the value of the derivative asset related to the
embedded prepayment option amounted to P =0.77 million and P
=83.79 million, respectively. The fair
value changes of the derivative asset recognized as “Mark-to-market losses” for the nine-month
period ended September 30, 2018 amounted to = P62.09 million and the “Mark-to-market gain” for the
nine-month period ended September 30, 2017 amounted to P =138.56 million.

The balance of the derivative asset as of September 30, 2018 and December 31, 2017 follows:

September 30, December 31,

2018 2017
(Unaudited) (Audited)
Balance upon bifurcation P
=62,853,729 (P
=16,098,381)
Net fair value changes during the period (62,086,304) 99,883,432
Balance at end of year P
=767,425 =83,785,051
P

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On January 31, 2017, the Parent Company executed a five (5) year contract with South Luzon Power
Generation Corporation (“SLPGC”), which owns and operates 2 x 150 MW coal-fired power
generating plant in Calaca, Batangas. The contract is effective from February 26, 2017 up to
December 25, 2021 and covers contracted capacity of 50MW which enables ACEI to meet the
electricity requirements of its retail customers. Under the contract, the Parent Company has the
obligation to pay SLPGC the Exposure Adjustment and the Parent Company or SLPGC, as the case
may be has the obligation to pay the Exposure Adjustment in accordance with the fee computation
formula agreed to by both parties.

On June 26, 2017, ACEI entered into a three (3) year contract with DirectPower Services Inc.
(“DPSI”) (an affiliate) effective from June 26, 2017 up to June 25, 2020. The contract enables DPSI
to meet the electricity requirements of its customers. Under the contract, the Parent Company or
DPSI, as the case may be has the obligation to pay the Exposure Fee in accordance with the fee
computation formula agreed to by both parties.

The contracts with SLPGC and DPSI resulted to a “Mark-to-market losses” for the nine-month period
ended September 30, 2018 amounting to P33.34 million. The fair value of derivative liability as of
September 30, 2018 amounted to P33.36 million.

19. Equity

As of September 30, 2018 and December 31, 2017, the capital stock is composed of common shares of
=
P14,299.10 million and redeemable preferred shares of P
=8,388.12 million.

Redeemable preferred shares have the following features:

∂ Voting;
∂ Participating;
∂ Redeemable no earlier than five years from issuance, and in all cases at the option to the Parent
Company; and,
∂ With dividend rate as may be determined by the BOD from time to time.

On August 31, 2017, the Parent Company’s BOD approved to increase the authorized capital stock of
ACEI from P =23.74 billion divided into 137,400,000 common shares and 100,000,000 redeemable
preferred shares, both with a par value of =
P100 per share, into =P32.74 billion divided into
227,400,000 common shares and 100,000,000 redeemable preferred shares, both with a par value of
=100 per share. On various dates in 2017, AC invested =
P P2.85 billion comprised of 28.49 million
common shares, of which = P1.69 billion remains unpaid as of December 31, 2017. Also on various
dates in 2017, AC invested = P1.03 billion comprised of 10.27 million redeemable common shares.
Transaction costs related to the increase in authorized capital stock amounted to P=23.36 million in
2017. On December 29, 2017, ACEI received from the SEC its certificate of approval for the
increase in capital stock.

Capital management
The primary objective of the Parent Company’s capital management policy is to ensure that it
maintains sufficient funds and equity capital in order to support its business and maximize
shareholder value.

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The Parent Company manages its capital structure and makes adjustments to it, in light of changes in
economic conditions. No changes were made in the objectives, policies or processes for the periods
ended September 30, 2018 and December 31, 2017. The Parent Company considers total equity as
capital.

The Parent Company is not subject to externally imposed capital requirements.

20. Segment Information

Business segment information is reported on the basis that is used internally for evaluating segment
performance and deciding how to allocate resources among operating segments. Accordingly, the
primary segment reporting format is by business segment.

For management purposes, the Group is organized into the following business units:

∂ Parent Company - represents operations of the Parent Company including its Retail Electricity
Supply (RES) Unit.
∂ Renewables - generation, transmission, distribution and supply of electricity using renewable
sources such as solar, wind and geothermal resources.
∂ Thermal - generation, transmission, distribution and supply of electricity using conventional way
of energy generation. The Group holds joint venture partnerships with various power generators.

Management monitors the operating results of its business units separately for the purpose of making
decisions about resource allocation and performance assessment. Segment performance is evaluated
based on operating profit or loss and is measured consistently with operating profit or loss in the
consolidated financial statements.

For the nine-month periods ended September 30, 2018 and September 30, 2017, there were no
revenue transactions with a single external customer which accounted for 10% or more of the
consolidated revenue from external customers.

Intersegment transfers or transactions are entered into under the normal commercial terms and
conditions that would also be available to unrelated third parties. Segment revenue, segment expense
and segment results include transfers between operating segments. Those transfers are eliminated in
consolidation.

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The following tables regarding operating segments present revenue and income information for the
nine months ended September 30, 2018 and 2017 and assets and liabilities as of
September 30, 2018 and December 31, 2017:

September 30, 2018 (Unaudited)

Intersegment
Parent Company Renewables Thermal Elimination Consolidated

Revenue
Energy sales P
= 2,193,848,706 P
= 868,783,170 P
=− P
=− P
= 3,062,631,876
Equity in net income − 1,109,930,495 1,174,979,865 − 2,284,910,360
Management fees 9,824,848 94,377,556 − (3,685,076) 100,517,328
Rental income 77,472,438 132,802,418 − (13,676,701) 196,598,155
2,281,145,992 2,300,271,195 1,174,979,865 (17,361,777) 5,644,657,719

Cost and expenses

Costs of services 2,237,928,650 409,226,856 − − 2,647,155,506
General and administrative 375,022,356 580,712,755 9,656,253 (3,685,076) 961,706,288
2,612,951,006 989,939,611 9,656,253 (3,685,076) 3,608,861,794

Other income (charges)

Foreign exchange gain 217,401,749 59,927,057 9,255,157 (251,992,856) 34,591,107
Interest income 45,672,259 522,067,458 2,665,683 − 570,405,400
Dividend income 3,052,518,573 144,819,405 − (3,176,513,657) 20,824,321
Mark-to-market loss − (95,443,748) − − (95,443,748)
Interest and other financing
(155,417,892)
charges (115,521,161) (11,993) − (270,951,046)
Other income 1,041,496,266 1,603,100,665 654,480,479 (639,776,830) 2,659,300,580
4,241,567,686 2,079,052,945 666,389,326 (4,068,283,343) 2,918,726,614

Net income before income tax 3,909,762,672 3,295,006,973 1,831,712,938 (4,081,960,044) 4,954,522,539
Provision for (benefit from)
income tax 26,559,749 854,424,213 209,482,705 (18,917,067) 1,071,549,600
Net income P
= 3,883,202,923 P
= 2,440,582,760 P
= 1,622,230,233 (P
= 4,063,042,977) P
= 3,882,972,939

Other information
Segment assets P
= 12,874,508,016 P
= 90,548,059,966 P
= 871,326,405 (P
= 24,182,415,352) P
= 80,111,479,035
Investments in associates and
joint ventures 23,117,880,071 16,190,329,688 7,135,809,167 (23,593,859,883) 22,850,159,043
Total assets P
= 35,992,388,087 P
= 106,738,389,654 P
= 8,007,135,572 (P
= 47,776,275,235) P
= 102,961,638,078

Segment liabilities P
= 4,617,045,959 P
= 44,707,841,955 P
= 717,365,172 (P
= 1,913,553,490) P
= 48,128,699,596
Deferred tax liabilities 75,542,794 680,152,294 209,410,967 − 965,106,055
Total Liabilities P
= 4,692,588,753 P
= 45,387,994,249 P
= 926,776,139 (P
= 1,913,553,490) P
= 49,093,805,651

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September 30, 2017 (Unaudited)

Intersegment
Parent Company Renewables Thermal Elimination Consolidated
Revenue
Energy sales P626,121,806
= P807,642,886
= =−
P =−
P P1,433,764,692
=
Equity in net income 390,382,507 607,716,742 208,485,025 9,515,096 1,216,099,370
Management fees 6,274,011 72,784,001 − (3,816,511) 75,241,501
Rental income 73,202,071 55,012,211 − (73,202,071) 55,012,211
1,625,764,308 1,543,155,840 − (652,669,028) 2,780,117,774
Cost and expenses
Costs of services 614,143,917 381,391,677 − − 995,535,594
General and administrative 269,533,682 137,291,604 289,988,685 (8,286,197) 688,527,774
883,677,599 518,683,281 289,988,685 (8,286,197) 1,684,063,368
Other income (charges)
Dividend income 7,000,136 − − − 7,000,136
Interest income 25,939,856 12,962,402 1,012,489 − 39,914,747
Foreign exchange gain 46,816,021 18,711 23,891,894 − 70,726,626
Interest and other financing
charges (43,696,269) (196,746,405) (50,312,221) − (290,754,895)
Mark-to-market gain − − 138,562,429 − 138,562,429
Other income 127,284,279 758,627,883 463,672 − 886,375,834
163,344,023 574,862,591 113,618,263 − 851,824,877
Net income before income tax 375,646,819 1,599,335,150 32,114,603 (59,217,289) 1,947,879,283
Provision for (benefit from)
income tax 21,061,391 26,851,435 (145,113,592) 9,515,096 (87,685,670)
Net income =1,267,751,712
P =1,234,967,877
P P177,228,195
= (P
=644,382,831) =2,035,564,953
P

December 31, 2017 (Audited)

Intersegment
Parent Company ACE Renewables ACE Thermal Elimination Consolidated
Other information
Segment assets P
=6,191,341,088 P
=7,834,341,531 P
=41,187,648,272 P
=452,879,444 P
=55,666,210,335
Investments in associates and
joint ventures 23,540,923,957 24,465,771,140 8,528,083,289 (33,170,334,159) 23,364,444,227
Deferred tax asset − − − − −
Total assets =29,732,265,045
P =32,300,112,671
P =49,715,731,561
P (P
=32,717,454,715) =79,030,654,562
P

Segment liabilities =2,035,632,555

P =4,556,904,964
P =31,703,534,702
P (P
=2,310,349,833) =35,985,722,388
P
Deferred tax liabilities 56,625,726 (114,505,195) 9,697 112,939,522 55,069,750
Total liabilities P
=2,092,258,281 P
=4,442,399,769 P
=31,703,544,399 (P
=2,197,410,311) P
=36,040,792,138

21. Income Tax

Provision for (benefit from) income tax consists of:

September 30, September 30,

2018 2018
(Unaudited) (Unaudited)
MCIT P
=255,956,173 =25,902,446
P
Final 8,275,194 3,259,462
Deferred 807,318,233 (116,847,578)
P
=1,071,549,600 (P
=87,685,670)

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The components of net deferred tax assets (liabilities) follow:

September 30, December 31,

2018 2017
(Unaudited) (Audited)
2018 2017
Presented in profit or loss
Deferred tax assets
Advance rent P
=6,143,051 =−
P
Accrued expense 828,849 −
NOLCO − 307,484,084
Unrealized loss on foreign exchange − 99,027,491
Minimum corporate income tax − 2,667,911
6,971,900 409,179,486
Deferred tax liabilities
Unrealized gains on foreign exchange − (1,935,610)
Capitalized straight-line adjustment (8,134,255) (57,263,634)
Difference between carrying amount of
nonmonetary asset and their tax base (963,943,700) (507,768,064)
(972,077,955) (566,967,308)
Net deferred tax liability (P
=965,106,055) (P
=157,787,822)

22. Related Party Transactions

Parties are related if one party has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions and the
parties are subject to common control or common significant influence. Related parties may be
individuals or corporate entities. The following are the significant transactions with related parties:

As of September 30, 2018 (Unaudited)

Outstanding
Related Party Relationship Amount/Volume Balance Terms Conditions
Cash and cash equivalents
BPI Under common P
= 10,627,681,030 P
= 10,627,681,030 Earns annual rate at Unsecured, No
control prevailing rates impairment
Trade receivables
Integrated Microelectronics, Under common P
= 49,446,533 P
= 26,281,103 Noninterest-bearing Unsecured, No
Inc. (IMI) control receivable impairment
Manila Water Company, Inc. Under common 35,586,824 − Noninterest-bearing Unsecured, No
(MWCI) control receivable impairment
Globe Telecom Under common 9,426,634 − Noninterest-bearing Unsecured, No
control receivable impairment
Fort Bonifacio Development Under common 23,207,696 − Noninterest-bearing Unsecured, No
Corporation (Fort Bonifacio) control receivable impairment
P
= 117,667,687 P
= 26,281,103
Loans payable
BPI Under common P
= 9,523,042,573 P
= 9,523,042,573 Noninterest-bearing Unsecured
control payable
Interest income
BPI Under common P
= 3,178,587 =
P− Earned from cash Unsecured, No
control and cash equivalents impairment
Others Under common P
= 4,884,037 P
= 89,200 Noninterest-bearing Unsecured,
control No impairment

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December 31, 2017 (Audited)

Outstanding
Related Party Relationship Amount/Volume Balance Terms Conditions
Cash and cash equivalents
BPI Under common P
=2,756,468,555 P
=2,756,468,555 Earns annual rate at Unsecured, No
control prevailing rates impairment
Trade receivables
Integrated Microelectronics, Under common P
=40,649,260 P
=23,712,497 Noninterest-bearing Unsecured, No
Inc. (IMI) control receivable impairment
Manila Water Company, Inc. Under common 18,595,233 − Noninterest-bearing Unsecured, No
(MWCI) control receivable impairment
Globe Telecom Under common 3,255,824 − Noninterest-bearing Unsecured, No
control receivable impairment
Fort Bonifacio Development Under common 11,302,830 − Noninterest-bearing Unsecured, No
Corporation (Fort Bonifacio) control receivable impairment
P
=73,803,147 P
=23,712,497
Loans payable
BPI Under common P
=7,072,007,112 P
=7,072,007,112 Noninterest-bearing Unsecured
control payable
Interest income
BPI Under common P
=903,030 P
=− Earned from cash Unsecured, No
control and cash equivalents impairment
Management fees expense and
salaries, wages and employee
benefits
Ayala Corporation Parent P
=104,000,726 P
=− Noninterest-bearing Unsecured, No
impairment
Others Under common 15,941,829 − Noninterest-bearing Unsecured, No
control impairment

IMI, MWCI, Globe Telecom, Fort Bonifacio Development Corporation (Fort Bonifacio)
The receivable from IMI, MWCI, Globe Telecom and Fort Bonifacio pertains to receivable from sale
of electricity of the Parent Company’s retail electricity sales business unit.

ACIFL
On December 20, 2016, ACEHI SG received US$132.00 million (P =6,559.08 million) from AC
International Finance Limited (ACIFL), an affiliate of the Parent Company as advances for bidding of
Chevron geothermal assets in Indonesia and Philippines. On April 28, 2017, ACIFL and ACEHI SG
approved the conversion of ACIFL’s advances into 1,320,000 cumulative redeemable preferred
shares in ACEHI SG. The non-voting redeemable cumulative preferred shares are redeemable at the
option of the issuer.

On May 16, 2018, ACIFL subscribed to 150,000 non-voting redeemable cumulative preferred shares
of ACEHI SG equivalent to US$15.00 million (P =810.30 million). On September 26, 2018, ACIFL
subscribed to 1,100,000 non-voting redeemable cumulative preferred shares of ACEHI SG equivalent
to US$110.00 million (P=5,942.20 million). The proceeds of the infusion were used for the
restructuring of AA Thermal, Inc. The redeemable cumulative preferred shares are redeemable at the
option of the issuer. As of September 30, 2018, the subscribed 1,250,000 redeemable cumulative
preferred shares were not issued.

On December 19, 2018, the 1,250,000 redeemable cumulative preferred shares were issued.

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Key Management Compensation

Some of the key management personnel of the Group are employees of AC. Hence, the disclosure of
the total compensation of these key management personnel by benefit type is included in the financial
statements of AC. Key management personnel of the Group who are employees of ACEI received the
following short-term employee benefits and post-employment benefits:

September 30, December 31,

2018 2017
(Unaudited) (Audited)
Short-term employee benefits P
=6,310,500 =4,742,815
P
Post-employment benefits 8,409,986 −
P
=14,720,486 =4,742,815
P

Terms and conditions of transactions with related parties

Outstanding balances at year-end are unsecured, interest-free and settlement occurs in cash. There
have been no guarantees provided or received for any related party receivables or payables. The
Group has not recognized any impairment losses on amounts receivable from related parties for the
nine-month period ended September 30, 2018 and the year ended December 31, 2017. This
assessment is undertaken each financial year through a review of the financial position of the related
party and the market in which the related party operates.

23. Note to Statements of Cash Flow

Details of the movement in cash flows from financing activities follow:

September 30, December 31,

2018 2017
(Unaudited) (Audited)
At January 1 P
=32,156,715,836 =
P19,256,034,956
Cash flows 10,159,044,139 12,695,036,180
Non-cash change
Amortization of debt issue cost 51,958,517 128,553,340
Foreign exchange movement 2,540,118,160 77,091,360
P
=44,907,836,652 P
=32,156,715,836

The non-cash investing transactions of the Group for the nine-month period ended
September 30, 2018 pertains to the reclassification of investment in associates and joint ventures to
noncurrent asset held for sale amounting to P
=5,635.30 million (nil for the nine-month period ended
September 30, 2017).

The non-cash financing transactions of the Group for the nine-month period ended
September 30, 2018 and 2017 pertains to capitalized borrowing cost amounting to =P1,656.37 million
and =
P1,025.11 million for the nine-month periods ended September 30,2018 and 2017, respectively.

As of September 30, 2018, non-cash change in property, plant and equipment due to foreign exchange
movement amounts to =P561.83 million.

The foreign exchange movement is reflected under CTA in the interim consolidated statements of
changes in equity.

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24. Cost of Power Operations

This account consists of:

September 30, September 30,

2018 2017
(Unaudited) (Unaudited)
Cost of sales P
=2,256,040,138 =638,658,937
P
Depreciation and amortization (Note 14) 168,631,234 166,634,044
Repairs and maintenance 111,861,205 71,483,463
Taxes and licenses 41,838,150 55,374,511
Professional and management fees 23,986,309 19,959,068
Occupancy costs 16,557,568 17,801,643
Insurance 16,403,241 15,478,946
Compensation and benefits 11,440,532 9,731,224
Transportation and travel 397,129 413,758
P
=2,647,155,506 =995,535,594
P

25. Financial Instruments and Risk Management

Fair Value Information

The table below presents the carrying amounts and fair values of the Group’s financial assets and
financial liabilities as follows:

September 30, 2018 December 31, 2017

Carrying Value Fair Value Carrying Value Fair Value
Loans and receivables
Receivables P
= 4,725,113,075 P
= 4,892,908,111 =1,276,332,002
P =1,276,332,002
P
Derivative asset 767,425 767,425 83,785,051 83,785,051
Available-for-sale financial assets − − 597,654,473 597,654,473
Deposits 291,274,091 300,212,728 76,518,220 76,518,220
P
= 5,017,154,591 P
= 5,193,888,264 P
=2,034,289,746 P
=2,034,289,746
Other financial liabilities
Loans payable P
= 44,907,836,652 P
= 45,202,901,211 P
=32,156,715,836 P
=32,156,715,836
Other noncurrent liabilities 66,452,907 66,890,600 18,446,480 18,446,480
Total financial liabilities P
= 44,974,289,559 P
= 45,269,791,811 P
=32,175,162,316 P
=32,175,162,316

The following methods and assumptions were used to estimate the fair value of each class of financial
instrument for which it is practicable to estimate such value:

Cash and cash equivalents, receivables accounts and other payables: Due to the short-term nature of
the accounts, the fair value approximate the carrying amounts in the unaudited interim consolidated
statements of financial position.

Equity instruments at fair value through other comprehensive income: Estimated fair value is based
on the discounted value of future cash flows using the applicable discount rates relevant to the
industry of investee companies. Interest rates used in discounting cash flows ranged from 10% to
12% in 2018 and 2017. This is a Level 3 valuation technique.

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Equity instruments at fair value through other comprehensive income: Estimated fair value is based
on the discounted value of future cash flows using the applicable discount rates relevant to the
industry of investee companies. Interest rates used in discounting cash flows ranged from 10% to
12% in 2018 and 2017. This is a Level 3 valuation technique.

Loans payable: Estimated fair values are based on the discounted value of future cash flows using the
applicable rates for similar types of loans. Interest rates used in discounting cash flows ranged from
5.74% to 6.85% in 2018 and 2017 for dollar-denominated loans and 5.00% to 6.80% in 2018 and
2017 for peso-denominated loans. This is a Level 3 valuation technique.

In 2018 and 2017, there were no transfers between Levels for fair value measurements.

Significant increase (decrease) in discount rate would result in significant higher (lower) fair value of
equity instruments at fair value through other comprehensive income and loans payable.

Financial Risk Management Objectives and Policies

Financial risk
The Group’s principal financial liabilities comprise of accounts and other payables and loans payable.
The main purpose of the Group’s financial liabilities is to raise financing for the Group’s operations
and investing activities.

The Group has various financial assets such as cash and cash equivalent, receivables, investments in
redeemable preferred shares, equity instruments at fair value through other comprehensive income
which arise directly from its operations and financing activities. The main risk arising from the use of
financial instruments are interest rate risk, liquidity risk, credit risk and foreign currency risk.

The BOD reviews and approves with policies for managing each of these risks. The Group monitors
market price risk arising from all financial instruments and regularly report financial management
activities and the results of these activities to the BOD.

The Group’s risk management policies are summarized below. The exposure to risk and how they
arise, as well as the Group’s objectives, policies and processes for managing the risk and the methods
used to measure the risk did not change from prior periods.

Interest Rate Risk

The Group’s exposure to the risk of changes in market interest rate relates primarily to its loans
payable with floating interest rates.

The Group regularly monitors its interest rate exposure from interest rate movements. Management
believes that cash to be generated from future operations will be sufficient to pay for its obligations
under the debt financing agreements as they fall due.

In 2018 and 2017, the Group’s exposure to the risk for changes in market interest rate relates
primarily to Onshore Dollar Loans of GNPK and term loans of NPDC with floating interest rates.

The Group regularly monitors its interest rate exposure from interest rate movements. Management
believes that cash to be generated from future operations will be sufficient to pay for its obligations
under the debt financing agreement as they fall due.

The interest on financial assets and financial liabilities classified as floating rate is repriced at
intervals of less than one year. Interest on financial assets and financial liabilities classified as fixed

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rate is fixed until the maturity of the instrument. The other financial instruments of GNPK that are
not included in the above table are noninterest-bearing or have no fixed or determinable maturity.

Liquidity risk
The Group monitors its cash flow position and overall liquidity position in assessing its exposure to
liquidity risk. The Group maintains a level of cash deemed sufficient to fund expenditures and to
mitigate the effects of fluctuation in cash flows.

As of September 30, 2018 and December 31, 2017, the Group monitors its cash flow position, debt
maturity profile and overall liquidity position in assessing its exposure to liquidity risk. The Group
maintains a level of cash and cash equivalents deemed sufficient to finance operations and to mitigate
the effects of fluctuation in cash flows. Accordingly, its loan maturity profile is regularly reviewed to
ensure availability of funding through an adequate amount of credit facilities with financial
institutions.

Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and
cause the other party to incur a financial loss. The Group’s holding of cash and cash equivalents and
advances to related parties exposes the Group to credit risk of the counterparty. Credit risk
management involves dealing only with institutions for which credit limits have been established.

The Group’s cash and cash equivalents, investments in redeemable preferred shares, advances to
contractors, equity instruments at fair value through other comprehensive income and refundable
deposit are neither past due nor impaired and are considered as high grade. High grade pertains to
quoted financial assets and those unquoted investments or transactions with related parties. Medium
grade pertains to the Group’s receivables and other unquoted financial assets with nonrelated
corporate counterparties. Low grade pertains to financial assets with the probability to be impaired
based on the nature of the counterparty.

Foreign exchange risk

The Group’s foreign exchange risk results primarily from movement of the Philippine Peso against
the United States Dollar (USD). The Group’s foreign currency-denominated are cash and cash
equivalents.

The assets and liabilities of AC Energy International Pte. Ltd. and its subsidiaries, composed of
investments in associates and joint ventures and loans payable with US$ functional currency, are
translated into the presentation currency of the Group using the closing foreign exchange rate
prevailing at the reporting date., and the respective income and expenses at the weighted average rates
for the period. The exchange differences arising on the translation are recognized in OCI under
“Cumulative Translation Adjustment”.

26. Commitments

Revolving Credit Facility

On April 22, 2016 and May 31, 2016, the Parent Company entered into a Revolving Credit Facility
with Philippine National Bank (PNB) and an Omnibus Line with Security Bank Corporation (SBC),
respectively, amounting to =
P1.00 billion each. The Credit Facilities were entered into to finance the
operating and investing requirements of the Parent Company.

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RES Contract
On December 26, 2017, ACEI entered into a four year contract with Citicore Energy Solutions, Inc.
(“CESI”) effective from December 26, 2017 up to December 25, 2021. The contract guarantees
supply to ACEI by CESI of a firm contract capacity of 20 MW renewable energy for intervals 8 to 17
to be sourced from CESI’s Bataan and Cebu plants.
Fee Agreement with Blackstone Capital Partners (Cayman) VI L.P.
On August 11, 2016, the Parent Company executed a Fee Agreement with Blackstone Capital
Partners (Cayman) VI L.P. (Blackstone) whereby through ACEHI SG, a subsidiary, the Parent
Company agreed to perform certain services and undertake certain obligations in favor of Blackstone
in relation to Blackstone’s investments in the Philippines.

On December 22, 2016, ACEHI SG and AC Energy Cayman executed an Assignment Agreement
whereby the former assigned all its rights, titles and interest under the Fee Agreement to the
latter. Since the assignment was made in relation to the GNPower Dinginin (GNPD) project, where
Blackstone was an investor, ACEHI SG and AC Energy Cayman agreed that the release of the fee
(under the Fee Agreement) to AC Energy Cayman shall be made as follows:

∂ When at least 40% of the loan amount under the financing documents of GNPD has been
successfully drawn down, AC Energy Cayman shall be entitled to the release of 75% of the fee;
and

∂ When at least 70% of the loan amount under the financing documents of GNPD has been
successfully drawn down, AC Energy Cayman shall be entitled to the release of the balance of the
fee.

ACEHI SG and AC Energy Cayman also agreed to cause Blackstone to deposit the fee to a trust
account with a trust bank that would administer the release of the fee.
On December 23, 2016, ACEHI SG entered into a Trust Agreement with the Bank of the Philippine
Islands-Asset Management and Trust Group (BPI). As the trustee, BPI has the sole power and
authority to manage the fund and operate the trust account (i.e., invest, reinvest or lend the
fund). The amount deposited in the trust account amounted to US$41.70 million as of
December 31, 2016.

On September 15, 2017, the AC Energy SG signed an Amended and Restated Trust Agreement with
BPI to revise the mechanics for the release of the fee as follows:

∂ When at least 15% of the loan amount under the financing documents of GNPD has been
successfully drawn down, AC Energy Cayman shall be entitled to the release of up to 35% of the
fee;
∂ When at least 18% of the loan amount under the financing documents of GNPD has been
successfully drawn down, AC Energy Cayman shall be entitled to the release of up to 55% of the
fee;

∂ When at least 30% of the loan amount under the financing documents of GNPD has been
successfully drawn down, AC Energy Cayman shall be entitled to the release of up to 70% of the
fee; and

∂ When at least 50% of the loan amount under the financing documents of GNPD has been
successfully drawn down, AC Energy Cayman shall be entitled to the release of the balance of the
fee.

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On September 18, 2017, BPI Asset Management Trust Corp., as Trustee under the Trust Agreement,
released a total of US$14.10 million (or P
=756.53 million) to AC Energy Cayman in consideration for
the achievement of the GNPD loan drawdown milestone per the Trust Agreement. Consequently, AC
Energy Cayman recognized income of the same amount. This is presented as other income in the
condensed consolidated statement of comprehensive income of the Group.
On June 18, 2018, the Trustee released a total of US$10.83 million (or =
P579.02 million) to AC
Energy Cayman in consideration for the achievement of the GNPD loan drawdown milestone per the
Trust Agreement. Consequently, AC Energy Cayman recognized income of the same amount. This
is presented as other income in the condensed consolidated statement of comprehensive income of the
Group.
In the future, depending on the progress of construction of the GNPD power plant and the level of
loan drawdown for the project, additional fees will be paid and released to AC Energy Cayman.

27. Subsequent Events

Investment in PHINMA Energy Corporation
On January 8, 2019, the Company and PHINMA inked a mutually strategic agreement in relation to
ACEI’s investment in PHINMA Energy Corporation (“PHEN”). ACEI will acquire PHINMA’s
combined 51.48% stake in PHEN via a secondary share sale for approximately P3.42 billion. This is
based on the valuation date of December 31, 2018 and is subject to adjustments. Closing of the
Transaction is subject to satisfaction of certain conditions, such as regulatory approvals, including the
approval of the Philippine Competition Commission, and compliance with applicable tender offer
requirements. ACEI will also subscribe to approximately 2.632 billion PHEN primary shares at par
value.
Income from Fee Agreement with Blackstone Capital Partners (Cayman) VI L.P.
On December 20, 2018, the Trustee released a total of US$4.67 million to AC Energy Cayman in
consideration for the achievement of the GNPD loan drawdown milestone per Fee Agreement.
Consequently, the Group will recognize the income of the same amount under other income in the
2018 interim consolidated statement of comprehensive income.
Acquisition of Pagudpud Wind
On November 27, 2018, Presage Corporation (“Presage”) entered into an Investment Framework
Agreement and Shareholders’ Agreement for the development and construction of a proposed Balaoi-
Caunayan wind farm project in Ilocos Norte (the “Project”). As part of the transaction, Presage
agreed to acquire full ownership of Pagudpud Wind Power Corp., the majority shareholder of Bayog
Wind Power Corp. (“BWPC”), the project company for the Project.
The provisional values of the identifiable assets and liabilities acquired and goodwill arising as at the
date of acquisition follows:
Assets
Cash and cash equivalents =874,913
P
Prepayments and other current assets 529,761
1,404,674
Liabilities
Accounts payable and accrued expenses 1,496,631
Net Assets (91,957)
Cost of acquisition 2,500,000
Goodwill =
P2,591,957

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Cash consideration =
P2,500,000
Less: Cash acquired from the subsidiary 874,913
Net cash flow =
P1,625,087

The purchase price allocation have been prepared on a preliminary basis due to unavailability of
information to facilitate the fair value computation. These include, among others, information based
on appraisal reports for property, plant and equipment and information necessary for the valuation of
identifiable intangible assets (i.e. process, projects development costs, etc.) Reasonable changes are
expected as additional information becomes available. The provisional purchase price allocation will
be finalized within one year from the date of closure of the above acquisition.

Further, on December 4, 2018, Presage, acting as the lender, entered into a loan agreement (the
“Agreement”) with BWPC, acting as the borrower, whereby Presage agreed to make available to
BWPC a credit facility (the “Loan”) in an aggregate principal amount P265.00 million. The loan is
available for multiple drawings within two (2) years from the date of the Agreement, and is repayable
in full within five (5) years from the date of the initial drawdown. The borrower shall use the loan
proceeds solely for funding the Project’s development activities. The loan is interest bearing at
annual rate of eight percent (8%).

Acquisition of HDP Bulk Water Supply

On December 7, 2018, Presage Corporation (“Presage”) entered into a Share Purchase Agreement
with Jose Maria Eduardo P. Zabaleta and Juan Xavier P. Zabaleta for the purchase of one hundred
percent (100%) of outstanding capital stock of HDP Bulk Water Supply Inc. (“HDP”) for a total
consideration of P110.10 million. The transaction was also closed on the same day.
HDP is a domestic company that supplies water to San Carlos Bioenergy, Inc. (“SCBI”) under a
Water Supply Contract executed on October 31, 2006 (originally between SCBI and San Julio Realty
Inc. (“SJRI”), which was later assigned by SJRI to San Carlos Land, Inc. (“SCLand”) on
December 22, 2008, and then by SCLand to the HDP on December 11, 2017).

The provisional values of the identifiable assets and liabilities acquired and goodwill arising as at the
date of acquisition follows:

Assets
Cash and cash equivalents =1,111,066
P
Receivables 3,462,667
Prepayments and other current assets 5,355,225
Intangibles 7,381,115
Property, plant and equipment 350,000
17,660,073
Liabilities
Accounts payable and accrued expenses 12,423,034
Net Assets 5,237,039
Cost of acquisition 110,099,015
Goodwill =104,861,976
P

Cash consideration =110,099,015

P
Less: Cash acquired from the subsidiary 1,111,066
Net cash flow =108,987,949
P

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The purchase price allocation have been prepared on a preliminary basis due to unavailability of
information to facilitate the fair value computation. These include, among others, information based
on appraisal reports for property, plant and equipment and information necessary for the valuation of
identifiable intangible assets (i.e. process, projects development costs, etc.) Reasonable changes are
expected as additional information becomes available. The provisional purchase price allocation will
be finalized within one year from the date of closure of the above acquisition.

Dividend Declarations
On December 18, 2018, PWHC declared dividends payable to ACEI amounting to P96.72 million
and =
P47.17 million on its preferred and common shares, respectively. Dividends are payable on or
before December 21, 2018.

On November 23, 2018, NPDC declared dividends payable to ACEI amounting to P

=207.35 million on
its common shares. Dividends are payable on or before December 3, 2018.

On November 21, 2018, NLREC declared dividends payable to PWHC amounting to = P253.72 million
and =
P43.86 million on its preferred and common shares, respectively. On the same date, NLREC
declared dividends payable to Ilocos Wind amounting to P=65.77 million on its common shares.
Dividends are payable on or before November 23, 2018.

On October 8, 2018, GMCP declared dividends payable to AMPLC and Arlington Mariveles
Philippines GP Corp amounting to US$5.08 million and US$0.02 million on its common shares,
respectively.

Financing Activities of AC Energy International Pte. Ltd. and AC Energy Vietnam Investments Pte.
Ltd.
On various dates, AC Energy International Pte. Ltd. received additional loan drawdowns from
different banks aggregating to US$86.00 million and made repayments amounting to
US$50.00 million.

Also, the Company made additional loan drawdowns to UPC Asia I Development and TBC
Development loans both amounting to US$3.00 million.

On November 27, 2018, AC Energy Vietnam Investments Pte. Ltd. entered into a loan facility
agreement with BIM Renewable Energy Joint Stock Company to fund the construction of the solar
power project in an aggregate principal amount of up to US$35.00 million which shall be drawable in
multiple drawdowns as and when requested by the borrower on the terms and conditions specified by
the agreement. The first loan drawdown amounted to US$5.60 million.

Additional capital infusions were also made by AC Energy Vietnam Investments Pte. Ltd. on various
dates to its joint venture companies - BIM Renewables, BIM Energy and New Energy Investments
amounting to US$1.45 million, US$3.33 million and US$13.63 million, respectively. Conversion of
advances to redeemable preferred shares were also made by AC Energy International Pte. Ltd. and
AC Energy Vietnam Investments Pte. Ltd. amounting to US$159.00 million and US$32.12 million,
respectively.

GNPK Assignment of Loan Facility

In early 2018, EastSpring Investments, indicated its intention to assign its entire US$75.00 million
committed loan facility, to an acceptable lender, due to internal portfolio considerations. During the
same period, China Development Bank (“CDB”), which was originally a target lender at the early
stages of the Project, reiterated its interest to increase its loan portfolio in the Philippines. After

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several rounds of discussions with both parties, the assignment terms were finalized under the same
general loan terms, with the added benefit of CDB, charging a lower effective interest rate, compared
to EastSpring. The transaction was concluded in November 2018.

F-59
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 SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 819 0872 October 4, 2018, valid until August 24, 2021
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-5 (Group A),
Philippines November 6, 2018, valid until November 5, 2021

INDEPENDENT AUDITOR’S REPORT

The Stockholders and the Board of Directors

AC Energy, Inc. and Subsidiaries

Opinion

We have audited the consolidated financial statements of AC Energy, Inc. and Subsidiaries (the Group),
which comprise the consolidated statements of financial position as at December 31, 2017, 2016 and
2015, and the 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, 2017, 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, 2017, 2016 and 2015, and its
consolidated financial performance and its consolidated cash flows for each of the three years in the
period ended December 31, 2017 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.

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.

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 -2-

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 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 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.

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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.

SYCIP GORRES VELAYO & CO.

John T. Villa
Partner
CPA Certificate No. 94065
SEC Accreditation No. 1729-A (Group A),
December 18, 2018, valid until December 17, 2021
Tax Identification No. 901-617-005
BIR Accreditation No. 08-001998-76-2018,
February 26, 2018, valid until February 25, 2021
PTR No. 7332628, January 3, 2019, Makati City

January 10, 2019

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AC ENERGY, INC. (FORMERLY AC ENERGY HOLDINGS, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31
2017 2016 2015
ASSETS
Current Assets
Cash and cash equivalents (Notes 4 and 27) P5,950,008,583
= =11,386,450,622
P =2,580,330,016
P
Current portion of receivables (Notes 5 and 27) 1,115,605,482 550,399,124 272,070,948
Restricted cash (Notes 7 and 27) − − 177,574,213
Input value-added taxes (Note 8) 183,101,239 184,725,396 302,007,668
Derivative asset (Note 19) 83,785,051 106,616,866 30,265,290
Prepayments and other current assets (Note 9) 596,687,068 741,269,694 81,775,697
Total Current Assets 7,929,187,423 12,969,461,702 3,444,023,832
Noncurrent Assets
Available-for-sale financial assets (Notes 11 and 27) 597,654,473 209,250 −
Advances to contractors (Notes 6 and 27) 10,581,617 − 321,559,235
Property and equipment (Note 15) 40,798,406,706 26,151,960,733 5,936,028,117
Investment property (Note 15) 220,345,447 − −
Project development costs (Note 10) 2,228,729 61,801 59,281
Investments in associates and joint ventures (Note 12) 23,364,444,227 13,776,636,176 13,551,719,576
Investments in redeemable preferred shares
(Notes 12 and 27) 1,629,422,558 − −
Receivables - net of current portion (Notes 5 and 27) 160,726,520 122,113,708 88,877,104
Input value-added tax - net of current portion (Note 8) 2,560,132,306 799,874,750 7,880,852
Deposits (Note 13) 76,518,220 2,772,673,615 47,695,943
Goodwill (Notes 14 and 16) 786,263,071 − 410,236,722
Intangible assets (Notes 16) 127,476,358 −
Leasehold rights (Note 16) 470,726,907 − −
Intangible assets - right-of-way (Note 10) 296,540,000 238,850,000 226,970,000
Deferred tax asset (Note 22) − − 61,725,895
Total Noncurrent Assets 71,101,467,139 43,862,380,033 20,652,752,725
=79,030,654,562
P =56,831,841,735
P =24,096,776,557
P

LIABILITIES AND EQUITY

Current Liabilities
Accounts and other payables (Notes 17 and 27) =3,587,146,988
P P1,990,871,556
= =1,431,728,850
P
Advances from a related party (Note 23) − 6,563,040,000 −
Short term loans (Note 18) − 150,000,000 −
Loans payable - current portion (Notes 18 and 27) 287,078,489 423,614,935 −
Other current liabilities 120,624,982 63,892,296 16,222,484
Total Current Liabilities 3,994,850,459 9,191,418,787 1,447,951,334
Noncurrent Liabilities
Deferred tax liability - net (Note 22) 157,787,822 202,486,812 −
Pension liability (Note 25) 70,030 2,750,468 2,380,024
Loans payable - net of current portion
(Notes 18 and 27) 31,869,637,347 18,682,420,021 2,834,642,386
Other noncurrent liabilities 18,446,480 49,465,670 −
Total Noncurrent Liabilities 32,045,941,679 18,937,122,971 2,837,022,410
Total Liabilities 36,040,792,138 28,128,541,758 4,284,973,744
(Forward)

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December 31
2017 2016 2015
Equity
Paid-in capital (Note 20) =22,687,220,900
P =19,796,997,700
P =17,506,035,800
P
Cumulative translation adjustments (Note 2) 1,210,057,771 1,289,143,466 604,515,084
Equity reserves 29,288,207 29,054,783 32,572,491
Remeasurement gain on defined benefit obligation -
net of tax (Note 2) 2,992,745 (1,968,127) 174,964
Retained earnings 7,637,337,372 4,151,761,777 1,486,518,884
31,566,896,995 25,264,989,599 19,629,817,223
Non-controlling interests 11,422,965,429 3,438,310,378 181,985,590
42,989,862,424 28,703,299,977 19,811,802,813
=79,030,654,562
P =56,831,841,735
P =24,096,776,557
P

See accompanying Notes to Consolidated Financial Statements.

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AC ENERGY, INC. (FORMERLY AC ENERGY HOLDINGS, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

2017 2016 2015

REVENUE
Energy sales P2,334,520,762
= =203,306,325
P =−
P
Equity in net income (Note 12) 2,156,401,634 1,762,222,192 1,026,261,338
Dividend income (Notes 11 and 12) 11,598,243 − 18,764,384
Management fees 128,562,669 16,786,425 10,298,135
Rental income 82,848,366 − −
4,713,931,674 1,982,314,942 1,055,323,857

OTHER INCOME
Mark-to-market gain (Note 19) 99,883,432 − −
Interest income (Notes 4 and 5) 81,482,678 55,804,422 15,220,196
Foreign exchange gain - net 34,208,287 73,347,307 41,488,823
Gain on sales of shares (Note12) − 1,327,360,819 1,719,954,405
Gain on reversal of contingent liability (Note 7) − 219,330,000 −
Gain on bargain purchase (Note 14) − 149,849,300 −
Revaluation gain on investments (Notes 12 and 14) − 134,281,189 −
Other income (Note 28) 1,787,120,468 32,973,886 2,997,780
2,002,694,865 1,992,946,923 1,779,661,204

COST AND EXPENSES

Cost of power operations (Note 26) 1,563,398,556 95,595,463 −
Salaries, wages and employee benefits 403,750,367 105,296,662 71,398,798
Interest expense (Note 18) 288,870,604 31,307,668 12,558,300
Professional fees 286,432,462 309,077,795 73,992,738
Management fee 165,052,313 147,878,591 96,849,762
Taxes and licenses 107,083,238 184,927,094 313,486,447
Depreciation and amortization (Note 15) 112,569,358 32,729,728 10,186,241
Provision for impairment losses
(Notes 2, 5, 10 and 16) 66,201,748 350,626,227 271,051,725
Transportation and travel 50,969,585 28,795,971 18,913,933
Occupancy cost 36,468,320 9,001,455 6,779,470
Bank charges 15,884,686 6,997,698 674,284
Postal and communication 12,247,993 10,391,901 4,580,415
Repairs and maintenance 10,464,782 4,473,109 3,585,393
Supplies 7,836,809 5,753,779 2,346,561
Retirement expense (Note 25) 7,455,857 2,494,836 7,907,810
Entertainment, amusement and recreation 5,632,607 2,701,826 2,592,119
Mark-to-market losses (Note 19) − 136,969,756 4,100,648
Miscellaneous 41,884,708 9,505,534 5,578,885
3,182,203,993 1,474,525,093 906,583,529

INCOME BEFORE INCOME TAX 3,534,422,546 2,500,736,772 1,928,401,532

PROVISION FOR (BENEFIT FROM)

INCOME TAX (Note 22) (55,565,761) 144,456,279 (48,354,005)

NET INCOME 3,589,988,307 2,356,280,493 1,976,755,537

(Forward)

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Years Ended December 31

2017 2016 2015

OTHER COMPREHENSIVE INCOME

Other comprehensive income to be reclassified to
profit or loss in subsequent periods
Cumulative translation adjustment (P
=79,085,695) =684,628,382
P =604,515,084
P
Other comprehensive income not to be reclassified to
profit or loss in subsequent periods:
Remeasurement gain (loss) on defined benefit
obligation - net of tax (Note 25) 4,960,872 (2,143,091) 174,964

TOTAL COMPREHENSIVE INCOME =3,515,863,484

P =3,038,765,784
P =2,581,445,585
P

NET INCOME ATTRIBUTABLE TO:

Equity holders of the Parent Company =3,508,934,083
P =2,667,067,948
P =2,127,386,817
P
Non-controlling interests 81,054,224 (310,787,455) (150,631,280)
=3,589,988,307
P =2,356,280,493
P =1,976,755,537
P

TOTAL COMPREHENSIVE INCOME

ATTRIBUTABLE TO:
Equity holders of the Parent Company =3,434,809,260
P =3,349,553,239
P =2,732,076,865
P
Non-controlling interests 81,054,224 (310,787,455) (150,631,280)
=3,515,863,484
P =3,038,765,784
P =2,581,445,585
P

See accompanying Notes to Consolidated Financial Statements.

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AC ENERGY, INC. (FORMERLY AC ENERGY HOLDINGS, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Years Ended December 31

2017 2016 2015
PAID-IN CAPITAL
Common Stock - P =100 par value (Note 20):
Authorized - 227,400,000 shares in 2017,
137,400,000 shares in 2016 and 2015
Issued and subscribed - 159,865,993 shares in
2017; 131,371,401 shares in 2016 and
108,461,782 shares in 2015
Balance at beginning of year =13,137,140,100
P =10,846,178,200
P P9,203,693,200
=
Issuance of shares 2,849,459,200 2,290,961,900 1,642,485,000
Balance at end of year 15,986,599,300 13,137,140,100 10,846,178,200
Subscription Receivable
Balance at beginning of the year (701,164,000) (701,164,000) −
Subscription of share (Note 20) (986,336,000) − (701,164,000)
Balance at end of year (1,687,500,000) (701,164,000) (701,164,000)
14,299,099,300 12,435,976,100 10,145,014,200
Redeemable Common Stock - P =100 par value
(Note 20):
Authorized - 100,000,000 shares in 2017, 2016
and 2015
Issued and subscribed - 83,881,216 shares in 2017
and 73,610,216 shares in 2016 and 2015
Balance at beginning of year 7,361,021,600 7,361,021,600 −
Issuance of shares 1,027,100,000 − 7,361,021,600
Balance at end of year 8,388,121,600 7,361,021,600 7,361,021,600
Total Paid-in Capital 22,687,220,900 19,796,997,700 17,506,035,800
EQUITY RESERVES
Balance at beginning of year 29,054,783 32,572,491 (11,516,732)
Net change 233,424 (3,517,708) 44,089,223
Balance at end of year 29,288,207 29,054,783 32,572,491
REMEASUREMENT GAIN ON DEFINED
BENEFIT OBLIGATION - NET OF TAX
(Note 25)
Balance at beginning of year (1,968,127) 174,964 −
Net change 4,960,872 (2,143,091) 174,964
Balance at end of year 2,992,745 (1,968,127) 174,964
CUMULATIVE TRANSLATION
ADJUSTMENTS (Note 2)
Balance at the beginning of the year 1,289,143,466 604,515,084 −
Net change (79,085,695) 684,628,382 604,515,084
Balance at end of year 1,210,057,771 1,289,143,466 604,515,084
(Forward)

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Years Ended December 31

2017 2016 2015
RETAINED EARNINGS
Balance at beginning of year =4,151,761,777
P =1,486,518,884
P (P
=606,798,829)
Transaction costs (Note 20) (23,358,488) (1,825,055) (34,069,104)
Net income 3,508,934,083 2,667,067,948 2,127,386,817
Balance at end of year 7,637,337,372 4,151,761,777 1,486,518,884
NON-CONTROLLING INTERESTS
Balance at beginning of year 3,438,310,378 181,985,590 12,377,403
Net income (loss) 81,054,224 (310,787,455) (150,631,280)
Additional infusions (Note 2) 7,903,600,827 3,567,112,243 320,239,467
Balance at end of year 11,422,965,429 3,438,310,378 181,985,590
=42,989,862,424
P =28,703,299,977
P =19,811,802,813
P

See accompanying Notes to Consolidated Financial Statements.

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AC ENERGY, INC. (FORMERLY AC ENERGY HOLDINGS, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31

2017 2016 2015

CASH FLOWS FROM OPERATING

ACTIVITIES
Income before income tax =3,534,422,546
P =2,500,736,772
P =1,928,401,532
P
Adjustment for:
Depreciation and amortization (Note 15) 334,864,491 86,230,747 10,186,241
Interest expense (Note 18) 288,870,604 31,307,668 12,558,300
Provision for impairment losses
(Notes 5, 10 and 16) 66,201,748 350,626,227 271,051,725
Retirement expense (Note 25) 7,455,857 2,494,836 7,907,810
Unrealized foreign exchange gain - net (34,208,287) (32,642,574) (2,977,355)
Interest income (Notes 4 and 5) (81,482,678) (55,804,422) (15,220,196)
Mark-to-market (gains) losses (Note 19) (99,883,432) 136,969,756 4,100,648
Dividend income (Notes 11 and 12) (11,598,243) – (18,764,384)
Equity in net income (Note 12) (2,156,401,634) (1,762,222,192) (1,026,261,338)
Revaluation gain on investment in joint venture
(Note 12) − (134,281,189) −
Gain on bargain purchase (Note 14) − (149,849,300) −
Gain on reversal of contingent liability (Note 12) − (219,330,000) −
Gain on sale of shares (Note 12) − (1,327,360,819) (1,719,954,405)
Operating income (loss) before working capital
changes 1,848,240,972 (573,124,490) (548,971,422)
Decrease (increase) in:
Receivables (666,531,041) (600,544,637) (242,671,155)
Advances to contractors (10,581,617) 321,559,235 (47,954,104)
Input value-added taxes 801,498,907 125,163,124 (42,626,567)
Prepaid expenses and other current assets 144,582,626 (659,493,997) (74,141,737)
Increase in:
Accounts and other payables 1,677,028,083 903,140,171 1,124,616,008
Other liabilities 128,431,568 75,266,652 3,430,540
Contribution to pension fund (Note 25) (11,284,149) (2,750,468) (5,277,838)
Net cash provided by (used in) operating activities 3,911,385,349 (410,784,410) 166,403,725
Interest received 77,992,801 52,298,456 15,776,124
Income tax paid (91,851,301) (4,911,037) (4,457,305)
Net cash flows provided by (used in) operating
activities 3,897,526,849 (363,396,991) 177,722,544
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition through business combination - net of
cash acquired (Note 14) (2,245,326,527) (114,848,621) (415,771)
Proceeds from sale of shares (Note 20) − 2,525,311,666 2,060,311,256
Deductions (additions) to:
Investments in associate and joint ventures
(Note 12) (6,988,189,225) 749,560,969 952,385,431
Investments in redeemable preferred shares
(Note 12) (1,629,422,558) − −
Investments in available-for-sale investment
(Note 11) (611,743) − −
(Forward)

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Years Ended December 31

2017 2016 2015
Deposits (Note 13) =570,472,376
P (P
=2,724,977,672) (P
=32,640,880)
Project development cost (Note 10) (59,856,928) (70,282,002) 60,532
Property and equipment (Note 15) (16,162,615,977) (20,612,054,752) (5,444,224,086)
Proceeds from sale of property and equipment 1,124,307 − −
Proceeds from return on capital 1,569,625,334 396,957,950 −
Release of restricted cash (Note 12) − 177,574,213 −
Interest received from restricted cash (Note 12) − 259,078 2,721,093
Net cash used in investing activities (24,944,800,941) (19,672,499,171) (2,461,802,425)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from:
Long-term loans payable (Note 18) 13,190,110,203 16,271,392,570 3,137,228,405
Issuance of shares (Note 23) 2,890,223,200 2,290,962,104 941,321,000
Advances from related party (Note 23) − 6,563,040,000 −
Short-term loans payable (Note 18) − 150,000,000 −
Capital infusion of non-controlling interests in
subsidiary (Note 23) 1,340,560,827 3,567,112,243 320,239,467
Payment of:
Transaction costs on issuance of shares (Note 20) (23,358,488) (1,825,055) (48,670,149)
Short-term loans payable (Note 18) (150,000,000) − −
Interest payable (Note 18) (1,445,057,004) (31,307,668) (12,558,300)
Long-term loans payable (Note 18) (195,074,023) − −
Net cash provided by financing activities 15,607,404,715 28,809,374,194 4,337,560,423
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (5,439,869,377) 8,773,478,032 2,053,480,542
EFFECTS OF CHANGES IN FOREIGN
CURRENCY EXCHANGE RATE ON CASH
AND CASH EQUIVALENTS 3,427,338 32,642,574 2,977,355
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 11,386,450,622 2,580,330,016 523,872,119
CASH AND CASH EQUIVALENTS AT
END OF YEAR (Note 4) =5,950,008,583
P =11,386,450,622
P =2,580,330,016
P

See accompanying Notes to Consolidated Financial Statements.

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AC ENERGY, INC. (FORMERLY AC ENERGY HOLDINGS, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

AC Energy, Inc. (formerly AC Energy Holdings, Inc., the Parent Company) was incorporated on
December 13, 2005 and domiciled in the Philippines. The Parent Company and its subsidiaries
(collectively, the Group) were organized primarily to engage in the business of generating electricity,
distribution of electricity, and supply of electricity, including the provision of related services. The
Parent Company is organized as well to purchase, exchange, hold, own, use investments, capital stock
or other securities and exercise all the rights, powers, and privileges of ownership to the extent
permitted by law.

The Parent Company is a wholly owned subsidiary of Ayala Corporation (AC), a publicly-listed
company which is 47.04% owned by Mermac, Inc. (ultimate parent), and the rest by the public. AC
is a listed entity incorporated in the Philippines.

The Parent Company’s registered office address is 4th Floor 6750 Ayala Avenue Office Tower,
Makati City. Formerly, its registered office address is 32nd Floor, Tower One and Exchange Plaza,
Ayala Triangle, Ayala Avenue, Makati City. The change in office address was approved by Board of
Directors (BOD) on June 15, 2017.

On July 27, 2016, the Articles of Incorporation (AOI) of the Parent company was amended to include
in its secondary purpose of business the purchase, retail, supply and delivery of electricity.

On September 8, 2016, the Parent Company was granted a Retail Electricity Supply license allowing
it to sell electricity to the end-users in the contestable market. This business unit is known as AC
Energy Retail Electricity Supply (ACERES).

On March 7, 2017, the BOD approved the amendment of the Parent Company AOI to include in the
primary purpose of business the development, operation and maintenance of power projects and the
change of registered name of AC Energy Holdings, Inc. to AC Energy, Inc. (ACEI). The
amendments were approved by the Securities and Exchange Commission on December 29, 2017.

The consolidated financial statements of the Group were authorized for issue by the Board of
Directors (BOD) on January 10, 2019.

2. Summary of Significant Accounting Policies

Basis of Preparation
The accompanying consolidated financial statements of the Group have been prepared on a historical
cost basis except for available-for-sale financial assets (AFS) and derivative asset that are measured at
fair value. The consolidated financial statements are presented in Philippine Peso (P =) which is the
functional and presentation currency of the Parent Company, and all amounts are rounded to the
nearest Philippine Peso, unless otherwise indicated.

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Statement of Compliance
The consolidated financial statements of the Group have been prepared in compliance with Philippine
Financial Reporting Standards (PFRS). The consolidated financial statements of the Group have been
prepared for inclusion in the Offering Circular in relation to a planned capital-raising activity.
Basis of Consolidation
The consolidated financial statements comprise the financial statements of the Parent Company and
its subsidiaries as of and for the years ended December 31, 2017, 2016 and 2015.
A subsidiary is an entity which the Group controls. Control is achieved when the Group is exposed,
or has rights, to variable returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee. Specifically, the Group controls an investee if and
only if the Group has:
∂ 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 its 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:
∂ The contractual arrangement with the other vote holders of the investee
∂ Rights arising from other contractual arrangements
∂ The Group’s voting rights and potential voting rights
A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an
equity transaction. Any difference between the amount by which the non-controlling interest are
adjusted at fair value of the consideration paid or received is recognized directly in equity as “Equity
reserve” and attributed to the owners of the Parent Company. If the Group loses control over a
subsidiary, it:
∂ Derecognizes the assets (including goodwill) and liabilities of the subsidiary, the carrying amount
of any non-controlling interest and the cumulative translation differences recorded in equity;
∂ Recognizes the fair value of the consideration received, 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.
The consolidated financial statements represent the consolidation of the financial statements of the
Parent Company and the following subsidiaries:
Percentages of Ownership
December 31
2017 2016 2015
Moorland Philippines Holdings, Inc. (Moorland) 100 100 100
Viage Corporation (Viage) 100 100 100
Presage Corporation (Presage) 100 100 100
AC Energy International Holdings PTE Ltd. −
100 100
(ACE SG)
AC Energy HK Limited 100 100 −
AC Energy Cayman 100 100 −
AC Laguna Solar, Inc. 100 100 −
(Forward)

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Percentages of Ownership
December 31
2017 2016 2015
AC La Mesa Solar, Inc. 100 100 −
AC Subic Solar, Inc. 100 100 −
ACEHI-Star Holdings, Inc. − 100 −
Gigasol1, Inc. 100 − −
Gigasol2, Inc. 100 − −
Gigasol3, Inc. 100 − −
SolarAce1 100 − −
SolarAce2 100 − −
SCC Bulk Water Supply, Inc. 100 − −
Solienda, Inc. 100 − −
Visayas Renewables Corporation 100 − −
Bataan Solar Energy, Inc. 100 − −
Sta. Cruz Solar Energy, Inc. 100 − −
ACEHI Netherlands B.V. 100 − −
AC Energy Vietnam Investments Pte. Ltd. (ACEV) 100 − −
AC Energy DevCo Inc. (ACE DevCo) 100 − −
MCV Bulk Water Supply, Inc. 100 − −
LCC Bulk Water Supply, Inc. 100 − −
San Julio Land Development 100 − −
Manapla Sun Power Dev't Corp. 66.22 − −
AC Energy GP Corporation (AEGC) 100 100 100
Kauswagan Power Holdings Ltd. Co. (KPHLC) 85.72 85.72 99.78
ACE Dinginin GP Corporation (ADGC) 100 100 100
Dinginin Power Holdings Ltd. Co. (DPHLC) 100 100 97.66
ACE Mariveles GP Corporation (AMGC) 100 100 100
ACE Mariveles Power Ltd. Co. (AMPLC) 100 100 99
NorthWind Power Development Corporation (NPDC) 67.79 67.79 50
Monte Solar Energy, Inc. (MSEI) 100 96 96
Quadriver Energy Corporation (QEC) − − 70
Philnew Hydro Power Corporation (PHPC) − − 70
Philnew River Power Corporation (PRPC) − − 68

The following were the changes in the group structure during 2017:

On February 3, 2017, ACEHI Netherlands B.V. was established as a wholly-owned subsidiary of

ACEHI SG. ACEHI Netherlands, as part of an Indonesian consortium, holds 19.80% interest in
Star Energy Salak-Darajat, BV (see Note 12).

On March 16, 2017, ACEI signed definitive documents to acquire 100% ownership of Bronzeoak
Clean Energy (Bronzeoak) and San Carlos Clean Energy (SCCE) as well as an additional 36.79%
of shares of Manapla Sun Power Dev’t. Corp. (see Note 14). The acquisition provides the Group
with renewable energy development, management and operations platform. Manapla Sun, on the
other hand, engages in leasing, operating, managing and developing public or private lands since
2015. With these acquisitions, SCCE and Bronzeoak have been renamed as ACE DevCo and
Visayas Renewables Corp., respectively. Further, with the acquisition of Bronzeoak that owns the
remaining 4.00% of MSEI, MSEI became a wholly owned subsidiary of the Group.

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On March 30, 2017, Gigasol1, Gigasol2, Gigasol3, SolarAce1 and SolarAce2 were incorporated as
wholly owned subsidiaries of Presage Corporation. These shall carry on the business of exploring,
developing, and utilizing renewable energy projects in the Philippines.

On July 24, 2017, ACEI together with Star Energy Geothermal Holdings, Pte. Ltd. entered into
definitive agreements for the transfer of 99.00% of their consortium interests in ACEHI-Star to
AllFirst Equity Holdings, Inc. (AllFirst) (see Note 13).

On September 8, 2017, ACEI secured the Certificate Authorizing Registration (eCAR) arising from
the sale of shares in its former hydro project companies (QuadRiver Energy Corp., Philnew Hydro
Power Corp., and Philnew River Power Corp.) (see Note 5).

On September 11, 2017, ACEV was established as a wholly-owned subsidiary of ACEHI SG.
ACEV is intended to be the holding entity for the Group’s future renewable energy investments in
Vietnam.

On December 18, 2017, Presage Corporation acquired 100% interest in SCC Bulk Water Supply,
Inc. SCC Bulk Water is engaged in the collection, purification and distribution of water in Negros
Occidental. The entity has not started commercial operations as of December 2017 (see Note 14).

On December 28, 2017, ACEI acquired 100% interest in Solienda, Inc. Principal activities of
Solienda includes dealing and engaging in land lease and real estate business (see Note 14).

The following were the changes in the group structure during 2016:

On May 23, 2016, ACEHI SG, a Singapore private limited company and a wholly-owned
subsidiary of the Parent Company was incorporated. ACEHI SG is a private company which will
be the investment vehicle for international projects. On August 5, 2016, the Parent Company
subscribed to and paid for 100,000 common shares of ACEHI SG. Subsequently, on
August 14, 2016, AC International Finance Limited (ACIFL), an affiliate of the Parent Company,
subscribed to 300,000 redeemable cumulative preferred shares of ACEHI SG equivalent to
$30.00 million. On April 28, 2017, ACIFL and ACEHI SG approved the conversion of ACIFL’s
advances amounting to $132.00 million into additional redeemable preferred shares in ACEHI SG.
The proceeds of the infusion were used for the acquisition of Chevron’s geothermal assets in
Indonesia (see Note 12).

On September 20, 2016, AC Subic Solar, Inc., AC Laguna Solar, Inc., and AC La Mesa Solar, Inc.
were established as wholly-owned subsidiaries of Presage Corporation. The purpose of these
companies is to carry on the business of exploring, developing, and utilizing renewable energy
resources.

On November 23, 2016, the Parent Company sold and transferred its 100% common shares in
ACEHI SG to Presage Corporation (Presage), a wholly-owned subsidiary of the Parent Company
as part of internal restructuring.

On November 21, 2016, the Parent Company, through Presage, acquired an additional 17.79%
stake in NorthWind Power Development Corp. (NPDC), increasing the Parent Company’s effective
ownership interest in NPDC from 50% to 67.79%. Accordingly, NPDC financial statements were
consolidated on a line-by-line basis with that of the Group as of December 31, 2016. The purchase
of additional shares resulted in a gain of P
=149.8 million.

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On November 22, 2016, AC Energy HK Limited was established as a wholly-owned subsidiary of

ACEHI SG.

On December 9, 2016, AC Energy Cayman was established as a wholly-owned subsidiary of AC

Energy HK Limited.

On December 15, 2016, ACEHI-Star Holdings, Inc. was incorporated as a wholly-owned

subsidiary of Presage Corporation. ACEHI-STAR is the special purpose company for the intended
acquisition of interest Chevron’s Philippine geothermal assets.

On December 29, 2016, the Parent Company entered into an agreement with Sta. Clara Group, Inc.
to sell all of its ownership stake in Quadriver Energy Corporation (QEC), Philnew Hydro Power
Corporation (PHPC) and Philnew River Power Corporation (PRPC). Prior to this sale, the Parent
Company held 70.00% of the outstanding capital stock of each of the Hydro Companies, with its
joint venture partner Sta. Clara Power Corporation.

The change in the group structure during 2015:

Monte Solar Energy, Inc. is a company engaged in the construction and development of an 18MW
(DC) solar power plant project, with expansion of up to 40MW (DC), located in the City of Bais,
Province of Negros Oriental. MSEI is 96.00% owned by ACEI, and 4.00% owned by Bronzeoak
Philippines, Inc.

Changes in Accounting Policies and Disclosures

The accounting policies adopted in the preparation of the consolidated financial statements are
consistent with those of the previous financial year, except for the new PFRS, amended PFRS and
improvements to PFRS which were adopted beginning January 1, 2017. Adoption of these new
standards and amendments did not have significant impact on the Group’s financial position or
performance.

∂ Amendment to PFRS 12, Clarification of the Scope of the Standard (Part of Annual
Improvements to PFRSs 2014 - 2016 Cycle)
∂ Amendments to PAS 7, Statement of Cash Flows, Disclosure Initiative

The amendments require entities to provide disclosure of changes in their liabilities arising from
financing activities, including both changes arising from cash flows and non-cash changes (such
as foreign exchange gains or losses).

The Group has provided the required information in Note 24 to the consolidated financial
statements. As allowed under the transition provisions of the standard, the Group did not present
comparative information for the year ended December 31, 2016.

∂ Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for Unrealized
Losses

Future Changes in Accounting Policies

The Group will adopt the following new and amended standards and Philippine Interpretations of
International Financial Reporting Interpretations Committee (IFRIC) enumerated below when these
become effective. Except as otherwise indicated, the Group does not expect the adoption of these
new and amended PFRS and Philippine Interpretations to have significant impact on the consolidated
financial statements.

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Effective January 1, 2018

∂ Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part of Annual
Improvements to PFRSs 2014 - 2016 Cycle)

∂ Amendments to PAS 40, Investment Property, Transfers of Investment Property

∂ Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-based

Payment Transactions

∂ PFRS 9, Financial Instruments

PFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, Financial
Instruments: Recognition and Measurement, and all previous versions of PFRS 9. The standard
introduces new requirements for classification and measurement, impairment, and hedge
accounting. Retrospective application is required but providing comparative information is not
compulsory. For hedge accounting, the requirements are generally applied prospectively, with
some limited exceptions.

The assessment of the Group’s business models was made as of the date of initial application,
January 1, 2018, and then applied retrospectively to those financial assets that were not
derecognized before January1, 2018. The assessment of whether contractual cash flows on debt
instruments are solely comprised of principal and interest was made based on the facts and
circumstances as at the initial recognition of the assets.

The adoption of PFRS 9 resulted in the reclassification in 2018 of certain available-for-sale

financial assets to equity instruments at fair value through other comprehensive income.

∂ PFRS 15, Revenue from Contracts with Customers

PFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with
customers. Under PFRS 15, revenue is recognized at an amount that reflects the consideration to
which an entity expects to be entitled in exchange for transferring goods or services to a
customer. The principles in PFRS 15 provide a more structured approach to measuring and
recognizing revenue.

The new revenue standard is applicable to all entities and will supersede all current revenue
recognition requirements under PFRSs. Either a full retrospective application or a modified
retrospective application is required for annual periods beginning on or after January 1, 2018.
Early adoption is permitted. The Group plans to adopt the new standard on the required effective
date using the full retrospective method.

The Group adopted PFRS 15 using the modified retrospective method of adoption. The Group
elected to apply the modified retrospective method only to contracts that were not completed at
the date of initial application which is January 1, 2018.

The adoption of PFRS 15 affected the Group’s associate, Star Energy Salak-Darajat B.V. (Salak-
Darajat), which is accounted for under the equity method (see Note 11). In compliance with
PFRS 15, revenue of Salak-Darajat is recognized at a point in time as its performance obligation
is satisfied upon the delivery of electricity and steam/geothermal energy. The adoption of
PFRS 15 decreased the Group’s investments in associates and joint ventures by P150.30 million
as of January 1, 2018.

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Except for above, the Group assessed that its contracts have single performance obligation each,
mainly relating to sale of power. Under PFRS 15, the Group concluded that revenue from sale of
services including sale of power, will continue to be recognized at a point in time. Moreover,
under PFRS 15, any earned consideration that is conditional is recognized as a contract asset
rather than a receivable.

In addition, the presentation and disclosure requirements in PFRS 15 are more detailed than under
current PFRSs which will result to more disclosures in the financial statements.

∂ Philippine Interpretation IFRIC-22, Foreign Currency Transactions and Advance Consideration

Effective January 1, 2019

∂ PFRS 16, Leases

PFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of
leases and requires lessees to account for all leases under a single on-balance sheet model similar
to the accounting for finance leases under PAS 17, Leases. The standard includes two recognition
exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term
leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease,
a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset
representing the right to use the underlying asset during the lease term (i.e., the right-of-use
asset). Lessees will be required to separately recognize the interest expense on the lease liability
and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events
(e.g., a change in the lease term, a change in future lease payments resulting from a change in an
index or rate used to determine those payments). The lessee will generally recognize the amount
of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting under
PAS 17. Lessors will continue to classify all leases using the same classification principle as in
PAS 17 and distinguish between two types of leases: operating and finance leases.

PFRS 16 also requires lessees and lessors to make more extensive disclosures than under
PAS 17.

Early application is permitted, but not before an entity applies PFRS 15. A lessee can choose to
apply the standard using either a full retrospective or a modified retrospective approach. The
standard’s transition provisions permit certain reliefs.

The new lease standard will impact the Group’s operating lease agreements with its office space
which is currently accounted for as operating leases, which will now require to be recorded as
right of use asset and the related lease liability. There is no significant impact to the Group as a
lessor for its investment portfolio. There will be more disclosures as required by the new
standard.

Standards and Interpretation with Deferred Effectivity

∂ Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture

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Cash and Cash Equivalents

Cash includes cash on hand and cash in bank. Cash in bank earns interest at the prevailing bank
deposit rates. Cash equivalents are short-term, highly liquid investments that are readily convertible
to known amounts of cash with maturities of three months or less from dates of placement and are
subject to an insignificant risk of change in value.

Restricted Cash
Restricted cash in 2015 pertains to escrow accounts held for the payment of a contingent liability.
These will be released from restriction upon receipt of a final resolution from an Arbitration
Committee of which the involved parties agreed to constitute to resolve issues which the parties have
raised.

Financial Instruments
Date of recognition
The Group recognizes a financial asset or a financial liability in the consolidated statement of
financial position when it becomes a party to the contractual provisions of the instrument. Purchases
or sales of financial assets that require delivery of assets within the time frame established by
regulation or convention in the marketplace are recognized on the settlement date.

Initial recognition
All financial assets and financial liabilities are initially recognized at fair value. Except for financial
assets at fair value through profit or loss (FVPL), the initial measurement of financial assets includes
transaction costs. The Group classifies its financial assets in the following categories: financial assets
at FVPL, held-to-maturity investments (HTM), available-for-sale (AFS) financial assets, and loans
and receivables. Financial liabilities, on the other hand, are classified as financial liabilities at FVPL
and other financial liabilities. The classification depends on the purpose for which the investments
were acquired and whether they are quoted in an active market. The Group determines the
classification of its investments at initial recognition and, where allowed and appropriate, re-evaluates
such designation at every reporting date.

Financial instruments are classified as liabilities or equity in accordance with the substance of the
contractual arrangement. Interests, dividends, gains and losses relating to a financial instrument or a
component that is a financial liability, are reported as expense or income. Distributions to holders of
financial instruments classified as equity are charged directly to equity, net of related income tax
benefits.

The substance of a financial instrument, rather than its legal form, governs its classification in the
entity’s statement of financial position. A preference share, for example, that provides for mandatory
redemption by the issuer for a fixed or determinable amount at a fixed or determinable future date, or
gives the holder the right to require the issuer to redeem the instrument at or after a particular date for
a fixed or determinable amount, is a financial liability from the point of view of the investee and a
financial asset from the point of view of the investor.

The Group’s financial instruments are of the nature of loans and receivables, derivative asset,
available-for-sale financial assets, and other financial liabilities.

Determination of fair value

The fair value for financial instruments traded in active markets at the reporting date is based on its
quoted market price or dealer price quotations (bid price for long positions and ask price for short
positions), without any deduction for transaction costs. When current bid and ask prices are not
available, the price of the most recent transaction provides evidence of the current fair value as long

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as there has not been a significant change in economic circumstances since the time of the
transaction.

For all other financial instruments not listed in an active market, the fair value is determined by using
appropriate valuation techniques. Valuation techniques include net present value techniques,
comparison to similar instruments for which market observable prices exist, options pricing models,
and other relevant valuation models.

Day 1 profit
Where the transaction price in a non-active market is different from the fair value of other observable
current market transactions in the same instrument or based on a valuation technique whose variables
include only data from observable market, the Group recognizes the difference between the
transaction price and fair value (a “Day 1” profit) in profit or loss unless it qualifies for recognition as
some type of asset or liability. In cases where no observable data is used, the difference between the
transaction price and model value is only recognized in profit or loss when the inputs become
observable or when the instrument is derecognized. For each transaction, the Group determines the
appropriate method of recognizing the “Day 1” profit amount.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments and fixed maturities
that are not quoted in an active market. They are not entered into with the intention of immediate or
short-term resale and are not designated as AFS or financial assets at FVPL. These are included in
current assets if maturity is within 12 months from the end of the reporting period; otherwise, these
are classified as noncurrent assets. This accounting policy relates to the statement of financial
position captions “Cash and cash equivalents”, “Receivables”, “Investments in redeemable preferred
shares” and “Deposits”.

After initial measurement, loans and receivables are subsequently measured at amortized cost using
the effective interest rate method, less allowance for impairment. Amortized cost is calculated by
taking into account any discount or premium on acquisition and fees that are an integral part of the
effective interest rate (EIR) and transaction costs. The losses arising from impairment of such loans
and receivables are recognized in profit or loss.

AFS financial assets

AFS financial assets are those non-derivative investments which are designated as such or do not
qualify to be classified as designated as financial assets or financial liabilities at FVPL, HTM
investments or loans and receivables. They are purchased and held indefinitely, and may be sold in
response to liquidity requirements or changes in market conditions.

After initial measurement, quoted AFS financial assets are subsequently measured at fair value. The
unrealized gains and losses arising from the fair valuation of AFS financial assets are excluded from
reported earnings and are reported under “Other comprehensive income” (OCI).

When the security is disposed of, the cumulative gain or loss previously recognized in equity is
recognized in profit or loss. Where the Group holds more than one (1) investment in the same
security, these are deemed to be disposed of on a first-in, first-out basis. Dividends earned on holding
AFS financial assets are recognized in profit or loss when the right to receive payment has been
established. The losses arising from impairment of such investments are recognized in profit or loss.

When the fair value of AFS financial assets cannot be measured reliably because of lack of reliable
estimates of future cash flows and discount rates necessary to calculate the fair value of unquoted
equity instruments, these investments are carried at cost, less any allowance for impairment losses.

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This accounting policy applies primarily to the Group’s AFS financial assets which are unquoted
equity securities.

Financial assets and financial liabilities at FVPL

This category includes financial assets and financial liabilities held for trading and financial assets
and financial liabilities designated upon initial recognition as at FVPL. Financial assets and financial
liabilities are classified as held for trading if they are acquired for the purpose of selling in the near
term. Derivatives, including separated embedded derivatives, are also classified as held for trading
unless they are designated as effective hedging instruments or financial guarantee contracts.
Financial assets and financial liabilities may be designated by management on initial recognition as at
FVPL when the following criteria are met:

∂ The designation eliminates or significantly reduces the inconsistent treatment that would
otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them on
a different basis; or
∂ The assets or liabilities are part of a group of financial assets, or are financial assets and financial
liabilities, which are managed and their performance is evaluated on a fair value basis, in
accordance with a documented risk management or investment strategy; or

The financial instrument contains an embedded derivative, unless the embedded derivative does not
significantly modify the cash flows or it is clear, with little or no analysis, that it would not be
separately recorded.

Financial assets and financial liabilities at FVPL are recorded in the statement of financial position at
fair value. Changes in fair value are recorded in the statement of comprehensive income.

Interest earned or incurred is recorded as interest income or expense, respectively, while dividend
income is recorded as other income when the right to receive payment has been established.

Financial asset at FVPL pertains to “Derivative asset”.

Embedded Derivatives
An embedded derivative is separated from the host contract and accounted for as derivative if all the
following conditions are met:

a. the economic characteristics and risks of the embedded derivative are not closely related to the
economic characteristic of the host contract;
b. a separate instrument with the same terms as the embedded derivative would meet the definition
of the derivative; and
c. the hybrid or combined instrument is not recognized at FVPL.

The Group assesses whether embedded derivatives are required to be separated from host contracts
when the Group first becomes party to the contract. Reassessment only occurs if there is a change in
the terms of the contract that significantly modifies the cash flows that would otherwise be required.

Other financial liabilities

Other financial liabilities are financial liabilities not designated at FVPL are classified as other
financial liabilities where the substance of the contractual arrangement results in the Group having an
obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation
other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of
its own equity shares. 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

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amount after deducting from the instrument the amount separately determined as the fair value of the
liability component on the date of issue.

After initial measurement, other financial liabilities are subsequently measured at amortized cost
using the effective interest rate method. Amortized cost is calculated by taking into account any
discount or premium on the issue and fees that are an integral part of the EIR.

This accounting policy applies primarily to “Accounts and other payables”, “Advances from related
party”, “Short term loans”, “Loans payable”, and other obligations that meet the above definition.

Derecognition of Financial Assets and Financial Liabilities

Financial asset
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial
assets) is derecognized when:

∂ the rights to receive cash flows from the asset have expired;
∂ 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.

Where the Group has transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, and has neither transferred nor retained substantially all the risks and
rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the
Group’s continuing involvement in the asset. Continuing involvement that takes the form of
guarantee over the transferred asset is measured at the lower of the original carrying amount of the
asset and the maximum amount of consideration that the Group could be required to repay.

Financial liability
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 are substantially modified, such an
exchange or modification is treated as a derecognition of the original liability and the recognition of a
new liability, and the difference in the respective carrying amounts is recognized in profit or loss.

Impairment of Financial Assets

The Group assesses at each reporting date whether there is objective evidence that a financial asset or
group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be
impaired if, and only if, there is objective evidence of impairment as a result of one or more events
that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event
(or events) has an impact on the estimated future cash flows of the financial asset or the group of
financial assets that can be reliably estimated. Evidence of impairment may include indications that
the borrower or a group of borrowers is experiencing significant financial difficulty, default or
delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganization and where observable data indicate that there is measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.

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Loans and receivables

For loans and receivables carried at amortized cost, Group first assesses whether objective evidence
of impairment exists individually for financial assets that are individually significant, and individually
or collectively for financial assets that are not individually significant. If it is determined that no
objective evidence of impairment exists for an individually assessed financial asset, whether
significant or not, the asset is included in a group of financial assets with similar credit risk
characteristics and that group of financial assets is collectively assessed for impairment. Assets that
are individually assessed for impairment and for which an impairment loss is or continues to be
recognized are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is
measured as the difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future expected credit losses that have not been incurred) discounted at
the financial assets’ original effective interest rate (i.e., the effective interest rate computed at initial
recognition). The carrying amount of the asset is reduced through the use of an allowance account.
The amount of the loss shall be recognized in profit or loss during the period in which it arises.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of
such credit risk characteristics as past-due status and term.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are
estimated on the basis of historical loss experience for assets with credit risk characteristics similar to
those in the group. Historical loss experience is adjusted on the basis of current observable data to
reflect the effects of current conditions that did not affect the period on which the historical loss
experience is based, and to remove the effects of conditions in the historical period that do not exist
currently. The methodology and assumptions used for estimating future cash flows are reviewed
regularly by the Group to reduce any differences between loss estimates and actual loss experience.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized
in profit or loss to the extent that the carrying value of the asset does not exceed its cost or amortized
cost at the reversal date.

Offsetting Financial Instruments

Financial instruments are offset and the net amount reported in the statement of financial position 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.

Property and Equipment

Property and equipment, except land, are carried at cost less accumulated depreciation and
amortization and any impairment in value. Land is carried at cost less any impairment in value. The
initial cost of property and equipment consists of its purchase price and any directly attributable costs
of bringing the asset to its working condition and location for its intended use.

Major repairs are capitalized as part of property and equipment only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost of the items can be
measured reliably. All other repairs and maintenance are charged to profit or loss as incurred.

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Depreciation and amortization of property and equipment commences once the asset are available for
use and computed on a straight-line basis over the estimated useful lives of the property and
equipment as follows:

Years
Wind turbines 25
Solar power plant 25
Transmission lines 20
Substation 20
Building 20
Transportation equipment 5
Anemometer and measuring equipment 5
Furniture, fixtures and equipment 3
Computer software 3
Leasehold improvements shorter of 5 years or lease term

The useful life and depreciation and amortization method are reviewed periodically to ensure that the
amounts, periods and method of depreciation and amortization are consistent with the expected
pattern of economic benefits from items of property and equipment.

When property and equipment are retired or otherwise disposed of, the cost and the related
accumulated depreciation and amortization and accumulated provision for impairment losses, if any,
are removed from the accounts and any resulting gain or loss is credited to or charged to profit or
loss.

Construction in progress, included in property and equipment, is stated at cost. Cost of construction
in progress includes cost of construction, capitalized borrowing cost and other directly attributable
cost of bringing the asset to the location and condition necessary for it to be capable of operating in
the manner intended by management. Construction in progress is not depreciated until such time that
the relevant assets are completed and ready for use.

Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired in a business combination is its fair value as at the date of acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated amortization
and accumulated impairment losses, if any. 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.

Goodwill
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 in profit or loss as bargain purchase gain. The
Group reassesses whether it has correctly identified all of the assets acquired and all of the liabilities
assumed and reviews the procedures used to measure amounts to be recognized at the acquisition
date.

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 that are expected to benefit

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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.

If the initial accounting for a business combination can be determined only provisionally by the end
of the period in which the combination is effected because either the fair values to be assigned to the
acquiree’s identifiable assets, liabilities or contingent liabilities or the cost of the combination can be
determined only provisionally, the acquirer shall account for the combination using those provisional
values. The acquirer shall recognize any adjustments to those provisional values as a result of
completing the initial accounting within twelve months of the acquisition date as follows: (i) the
carrying amount of the identifiable asset, liability or contingent liability that is recognized or adjusted
as a result of completing the initial accounting shall be calculated as if its fair value at the acquisition
date had been recognized from that date; (ii) goodwill or any gain recognized shall be adjusted by an
amount equal to the adjustment to the fair value at the acquisition date of the identifiable asset,
liability or contingent liability being recognized or adjusted; and (iii) comparative information
presented for the period before the initial accounting for the combination is complete shall be
presented as if the initial accounting has been completed from the acquisition date.

Leasehold rights
Leasehold rights with finite lives are amortized using the straight-line method over the remaining
leaser term of the agreements and assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortization period and the amortization method for an
intangible asset with a finite useful life are reviewed at least at the end of each reporting period.
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 on
intangible assets with finite lives is recognized in the consolidated statement of income in the expense
category consistent with the function of the intangible assets. Gains or losses arising from
derecognition of an intangible asset are measured as the difference between the net disposal proceeds
and the carrying amount of the asset and are recognized in the income statement when the asset is
derecognized.

Right-of-way
Easement right of way acquired for an indefinite use is classified as an intangible asset and is carried
at cost. This is subject to an annual impairment test.

Investments in Associate and Joint Ventures

Investments in associates and joint ventures (investee companies) are accounted for under the equity
method of accounting. An associate is an entity in which the Group has significant influence and
which is neither a subsidiary nor a joint venture. A joint arrangement is a contractual arrangement
whereby two or more parties undertake an economic activity that is subject to joint control, and a
joint venture is a joint arrangement that involves the establishment of a separate entity in which each
venturer has an interest.

An investment is accounted for using the equity method from the day it becomes an associate or joint
venture. On acquisition of investment, the excess of the cost of investment over the investor’s share
in the net fair value of the investee’s identifiable assets, liabilities and contingent liabilities is

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accounted for as goodwill and included in the carrying amount of the investment and not amortized.
Any excess of the investor’s share of the net fair value of the investee’s identifiable assets, liabilities
and contingent liabilities over the cost of the investment is excluded from the carrying amount of the
investment, and is instead included as income in the determination of the share in the earnings of the
investees.

Under the equity method, the investments in the investee companies are carried in the consolidated
statement of financial position at cost plus post-acquisition changes in the Group’s share in the net
assets of the investee companies, less any impairment in values. The consolidated statement of
income reflects the share of the results of the operations of the investee companies. The Group’s
share of post-acquisition movements in the investee’s equity reserves is recognized directly in equity.
Profits and losses resulting from transactions between the Group and the investee companies are
eliminated to the extent of the interest in the investee companies and for unrealized losses to the
extent that there is no evidence of impairment of the asset transferred. Dividends received are treated
as a reduction of the carrying value of the investment.

The Group discontinues applying the equity method when their investments in investee companies
are reduced to zero. Accordingly, additional losses are not recognized unless the Group has
guaranteed certain obligations of the investee companies. When the investee companies subsequently
report net income, the Group will resume applying the equity method but only after its share of that
net income equals the share of net losses not recognized during the period the equity method was
suspended.

The reporting dates of the investee companies and the Group are identical and the investee
companies’ accounting policies conform to those used by the Group for like transactions and events
in similar circumstances. Upon loss of significant influence over the associate, the Group measures
and recognizes any retaining investment at its fair value. Any difference between the carrying
amount of the associate upon loss of significant influence and the fair value of the retaining
investment and proceeds from disposal is recognized in the consolidated statement of income.

Project Development Costs

The Group expenses all project development costs until management deems a project is probable of
being technically, commercially and financially viable. The Group capitalizes project development
costs generally once management deems a project probable of being technically, commercially and
financially viable. This generally occurs in tandem with management’s determination that a project
should be classified as advanced project. Project development cost will be reclassified to property
and equipment when construction of the project commences.

Amortization of project development cost begins when the development of the projects are complete
and available for use. It is amortized using the straight-line method over the estimated useful life of
the project.

Business Combinations 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 either at fair value or at the
proportionate share of the acquiree’s identifiable net assets. Acquisition costs are expensed as
incurred.

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

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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 and
included under “Remeasurement gain/loss arising from business combination” in the consolidated
statement of income. 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 in accordance with
PAS 39 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 in profit or loss as bargain purchase gain. The
Group reassess whether it has correctly identified all of the assets acquired and all of the liabilities
assumed and reviews the procedures used to measure amounts to be recognized at the acquisition date
if the reassessment still results in an excess of the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognized in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment loss.
Goodwill is reviewed for impairment, annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired. For purposes 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), or groups of CGUs, 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.
Each unit or group of units to which the goodwill is allocated should:

∂ represent the lowest level within the Group at which the goodwill is monitored for internal
management purposes; and
∂ not be larger than an operating segment determined in accordance with PFRS 8, Operating
Segments.
Impairment is determined by assessing the recoverable amount of the CGU (or group of CGUs), to
which the goodwill relates. Where the recoverable amount of the CGU (or group of CGUs) is less
than the carrying amount, an impairment loss is recognized. Where goodwill forms part of a CGU (or
group of CGUs) 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 these circumstances is measured
based on the relative values of the operation disposed of and the portion of the CGU retained. If the
acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities
exceeds the cost of the business combination, the acquirer shall recognize immediately in the
consolidated statement of income any excess remaining after reassessment.

Impairment of Nonfinancial Assets

The Group assess at the reporting date to determine whether there is any indication that an asset may
be impaired or whether there is any indication that an impairment loss previously recognized for an
asset in prior years may no longer exist or may have decreased. If any such indication exists and

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when the carrying value of an asset exceeds its estimated recoverable amount, the asset or the cash-
generating unit to which the asset belongs is written down to its recoverable amount.

The recoverable amount of an asset is the greater of its net selling price and value in use.
Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-
generating unit to which the asset belongs.

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.

An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable
amount. An impairment loss is charged against operations in the year in which it arises. A
previously recognized impairment loss is reversed only if there has been a change in estimate used to
determine the recoverable amount of an asset, however, not to an amount higher than the carrying
amount that would have been determined (net of any accumulated depreciation and amortization), had
no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is
included in the results of operations in the year when the reversal is recognized.

Goodwill
For assessing impairment of goodwill, a test for impairment is performed annually and when
circumstances indicate that the carrying value may be impaired. Impairment is determined for
goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the
goodwill relates. Where the recoverable amount of the CGU is less than its carrying amount, an
impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future
periods.

Investments in associate and joint ventures

The Group determines at each end of the reporting period whether there is any objective evidence that
the investment in the investee company is impaired. If this is the case, the Group calculates the
amount of impairment as being the difference between the recoverable amount of the investment and
the carrying cost and recognized the amount in profit or loss.

Equity
Capital stock is measured at par value for all shares issued. When the shares are sold at premium, the
difference between the proceeds and the par value is recognized as additional paid-in capital. Direct
costs incurred related to the equity issuance are deducted from equity, net of any related tax benefits.
If additional paid-in capital is not sufficient, the excess is charged against retained earnings.

Subscriptions receivable pertains to the uncollected portion of the subscribed shares and is presented
as reduction from equity.

Retained earnings represent accumulated earnings (losses) of the Group. The retained earnings is
restricted to the extent of the undistributed earnings of the subsidiaries, associates and joint venture.

Other Comprehensive Income (OCI)

OCI are items of income and expense that are not recognized in determining the profit or loss for the
year in accordance with PFRS.

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Remeasurement gain on defined benefit obligation

Remeasurements on actuarial gains or losses are recognized immediately in other comprehensive
income, net of tax, in the period in which they arise. Remeasurements are not reclassified to profit or
loss in subsequent periods.

Revenue and Income Recognition

Revenue is recognized to the extent that it is probable that economic benefits will flow to the Group
and the revenue can be measured reliably. The Group has assessed its revenue arrangements against
specific criteria in order to determine if it is acting as a principal or as an agent. The Group has
concluded that it is acting as a principal in all of its revenue arrangements. The following specific
recognition criteria must also be met before revenue is recognized:

Energy sales
Energy sales is recognized upon actual delivery of converted electricity from the 51.9M NorthWind
Renewable Energy Plant (REP) at Bagui Farm and 18MW DC Solar Power Plant of MSEI at Bais,
Negros Oriental and from the Group’s retail electricity supply unit.

The tariff on the generation of REP’s original twenty (20) turbines (Phases I & II) is a FIT rate
specific to NPDC of =P5.76/kWh, as approved by the ERC in its decision dated June 30, 2014. The
FIT specific to NPDC is lower than the national FIT and is valid for twenty (20) years, less the actual
years of operation as provided for under the FIT Rules.

The tariff on the new six (6) turbines (Phase III) shall be the national FIT of =
P8.53/kWh, subject to
compliance by NPDC of the requirements under the FIT System. Being a new plant and established
under the incentives granted under RA 9513, it shall have FIT period of twenty (20) years.

On December 28, 2016, the MSEI received provisional authority to operate (PAO) by the ERC dated
December 8, 2016 that allows the entity to be entitled to a FIT rate of =
P8.69/kWh for a period of
twenty (20) years from March 11, 2016. On February 6, 2017, MSEI received the Certificate of
Compliance (COC) from Energy Regulation Commission (ERC).

Revenue from sale of electricity through Retail Electricity Supply Contract (RESC) is composed of
generation charge from monthly energy supply with various contestable customers and is recognized
monthly based on the actual energy delivered. The basic energy charges for each billing period are
inclusive of generation charge and retail supply charge.

Dividend income
Dividend income is recognized when the Group’s right to receive the payment is established.

Management fees
Management fees for services rendered are recognized when earned.

Rental income
Rental income under noncancellable leases are recognized on a straight-line basis over the term of the
lease.

Interest income
Interest income is recognized as it accrues using the effective interest method.

Costs of Sales and Expenses

Cost of sales and expenses are generally recognized as they are incurred and measured at the fair
value of the consideration paid or payable.

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Income Taxes
Current tax
Current 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 at the reporting date.

Deferred tax
Deferred tax is provided using the balance sheet liability method on all temporary differences at the
reporting date between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, with certain exceptions,
at the reporting date between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes.

Deferred tax assets are recognized for all deductible temporary differences and carryforward benefit
of unused tax credits from excess of minimum corporate income tax (MCIT) over the regular
corporate income tax and unused net operating loss carryover (NOLCO), to the extent that it is
probable that taxable income will be available against which the deductible temporary differences and
carryforward benefits of MCIT and NOLCO can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting 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 tax asset to be utilized. Unrecognized deferred assets are reassessed at each reporting
date and are recognized to the extent that it has become probable that future taxable profit will allow
the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period
when the asset is realized or the liability is settled based on tax rates and tax laws that have been
enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities relating to items recognized directly in equity are recognized in
equity and not in the statement of comprehensive income.

Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current tax
asset against current tax liabilities and the deferred taxes relate to the same taxable entity and the
same taxable authority.

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 statement of
financial position. 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
statement of financial position to the extent of the recoverable amount.

Foreign Currency Transactions

The functional and presentation currency of the Parent Company and its subsidiaries (except for Ace
Mariveles Power Ltd. Co, Kauswagan Power Holdings Ltd. Co., ACE SG, AC Energy HK Ltd., AC
Energy Cayman, ACEHI Netherlands B.V. and ACEV), is the Philippine Peso (P =). 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

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recorded in the function currency rate ruling at the date of transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the functional currency rate ruling at the
reporting date. All differences are taken to the consolidated statements of income, with exception of
differences on foreign currency borrowings that provide a hedge against a net investment in a foreign
entity. These are recognized in the consolidated statement of comprehensive income until the
disposal of the net investment, at which time they are recognized in the consolidated statement of
comprehensive income. Tax charges and credits attributable to exchange differences on those
borrowings are also dealt with in equity. Nonmonetary items that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate as at the date of initial transaction.
Nonmonetary items measured at fair value in a foreign currency are translated using the exchange rate
at the date when the fair value was determined.

The functional currency of the entities enumerated above is in US Dollar (US$). As of the reporting
date, the assets and liabilities of these subsidiaries are translated into the presentation currency of the
Group at the rate of exchange ruling at the reporting date and their statement of income accounts are
translated at the weighted average exchange rates for the year. The exchange differences arising on
the translation are recognized in the consolidated statement of comprehensive income and reported as
a separate component of equity as “Cumulative Translation Adjustments”. On disposal of a foreign
entity, the deferred cumulative amount relating to that particular foreign operation shall be recognized
in the consolidated statement of comprehensive income.

Exchange differences arising from elimination of intragroup balances and intragroup transactions are
recognized in profit or loss. As an exception, if the exchange differences arise from intragroup
balances that, in substance, forms part of an entity’s net investment in a foreign operation, the
exchange differences are not to be recognized in profit or loss, but are recognized in OCI and
accumulated in a separate component of equity until the disposal of the foreign operation.

On disposal of a foreign entity, the deferred cumulative amount recognized in the consolidated
statement of comprehensive income relating to that particular foreign operation shall be recognized in
profit or loss.

The Group’s share in the translation adjustments of associates and joint ventures are likewise
included under the “Cumulative Translation Adjustments” account in the consolidated statement of
comprehensive income.

Segment Reporting
Management monitors operating results per technology platform for the purpose of making decisions
about resource allocation and performance assessment. It evaluates the segment performance based
on gross revenue, cost of operations and net income before and after tax of its major subsidiaries and
affiliates.

Prior period information is consistent with the current year basis of segmentation.

Contingencies
Contingent liabilities are not recognized in the 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 financial statements but disclosed when an inflow of economic benefits is
probable.

Events after the Financial Reporting Date

Post year-end events up to the date when the financial statements are authorized for issue that provide
additional information about the Group’s position at the reporting date (adjusting events) are reflected

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in the financial statements. Post year-end events that are not adjusting events are disclosed in the
financial statements when material.

3. Significant Judgments, Estimates and Assumptions

The preparation of the accompanying consolidated financial statements in compliance with PFRS
requires management to make estimates and assumptions that affect the amounts reported. The
estimates and assumptions used in the accompanying consolidated financial statements are based on
management’s evaluation of relevant facts and circumstances as of the date of the financial
statements. Actual results could differ from such estimates.

Judgments and estimates 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.

Assessment of joint controls

The Group’s investment in joint ventures are structured in separate incorporated entities. Even
though the Group holds various percentages of ownership interests on these arrangements, their
respective joint arrangement agreements require unanimous consent from all parties to the agreement
for the relevant activities identified. In addition, the Group considers the number of its Board seats in
the incorporated entity. Further, the Group and the parties to the agreement only have rights to the
net assets of the joint venture through the term of the contractual agreements.

Assessment of significant influence over an associate

The Group determined that it exercises significant influence over its associate (see Note 12) by
considering, among others, its ownership interest (holding 20% or more of the voting power of the
investee), Board representation and participation on Board sub-committees, and other contractual
terms.

Separating embedded derivatives from host contract

In 2015, the Group obtained a loan facility agreement with embedded prepayment option. Out of the
three (3) tranches (i.e., PHP Tranche, USD Tranche A and USD Tranche B), the prepayment option
on USD Tranche A was assessed as not closely related to the loan; hence, required to be bifurcated.

Assessment includes considering the following indicators:

i. the economic characteristics and risks of the embedded derivative are not closely related with that
of the host contract since the prepayment option in the loan is exercisable at an amount other than
the amortized cost of the loan;
ii. the prepayment option having the same terms as the loan meets the definition of a derivative; and
iii. the combined instrument is not recognized as at FVPL.

Estimating fair value of derivative asset

As of December 31, 2017 and 2016, GNPK valued the embedded derivative (i.e., prepayment option)
assessed as not closely related to the loan at fair value with any changes in fair value recognized to
profit or loss. Mark-to-market loss is recognized through adjustment to “loss or gain on derivative
asset” in the statement of comprehensive income and to “derivative asset” in the statement of
financial position. GNPK determines mark-to-market prices using the forward price for quotational
periods at every interest payment date as stipulated in the loan agreement. The effects of the fair
value adjustments arising from embedded derivative are fully discussed in Note 19.

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Purchase price allocation and provisional goodwill

In March 2017, ACEI acquired 100% ownership of Bronzeoak Clean Energy and San Carlos Clean
Energy and 66.22% ownership interest in Manapla Sun Power Dev’t. Corp. In December 2017,
Presage Corporation acquired 100% interest in SCC Bulk Water Supply, Inc. and 100% interest in
Solienda, Inc. (see Note 14). The Group is required to determine the fair value of the net assets of the
investee companies for purposes of the purchase price allocation. Estimation of the fair value entails
use of assumptions such as discount rate, land value, and future cash flows among others. In 2018,
the Group finalized the purchase price allocation for these acquisitions (see Note 14).

Allowance for impairment losses

The Group maintains allowance for impairment losses based on the result of the individual and
collective assessment under PAS 39. Under the individual assessment, the Group is required to
obtain the present value of estimated cash flows using the receivable’s original EIR. Impairment loss
is determined as the difference between the receivables’ carrying balance and the computed present
value. The collective assessment would require the Group to group its receivables based on the credit
risk characteristics (customer type, past-due status and term) of the customers. Impairment loss is
then determined based on historical loss experience of the receivables grouped per credit risk profile.

Historical loss experience is adjusted on the basis of current observable data to reflect the effects of
current conditions that did not affect the period on which the historical loss experience is based and to
remove the effects of conditions in the historical period that do not exist currently.

The methodology and assumptions used for the individual and collective assessments are based on
management’s judgment and estimate.

Therefore, the amount and timing of recorded expense for any period would differ depending on the
judgments and estimates made for the year.

As of December 31, 2017, 2016 and 2015, allowance for impairment losses amounted to
=
P358.43 million, =
P292.23 million and nil, respectively. Receivables, net of allowance for impairment
losses, amounted to P
=1,276.33 million, P
=672.51 million and P
=360.95 million as of
December 31, 2017, 2016 and 2015, respectively (see Note 5).

Impairment of AFS financial assets

The Group assesses AFS financial assets for impairment when there are indicators of impairment for
its unquoted investment in equity securities (e.g. deterioration in earnings, and financial condition of
the investee).

No impairment indicators were identified as of December 31, 2017, 2016 and 2015. The carrying
amount of AFS financial assets as of December 31, 2017, 2016 and 2015 amounted to
=597.65 million and =
P P0.21 million (nil in December 31 2015), respectively (see Note 11).

Evaluation of impairment of nonfinancial assets

The Group assesses impairment of nonfinancial assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The Group recognizes an
impairment loss whenever the carrying amount of an asset exceeds its recoverable amount.
Recoverable amount is estimated for individual assets or, if it is not possible, for the cash-generating
unit to which the asset belongs.

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The factors that the Group considers important which could trigger an impairment review include the
following:

a. significant underperformance relative to expected historical or projected future operating results;

b. significant changes in the manner of use of the acquired assets or the strategy for overall business;
and,
c. significant negative industry or economic trends.

The allowance for impairment losses on nonfinancial assets amounted to P

=54.60 million,
=48.73 million and 241.59 as of December 31, 2017, 2016 and 2015, respectively. The carrying
P
amount of the nonfinancial assets as of December 31, 2017, 2016 and 2015 subjected to this
assessment amounts to:

2017 2016 2015

Input value-added tax (Note 8) P
=2,743,233,545 =984,600,146
P =309,888,520
P
Prepayments and other current assets
(Note 9) 596,687,068 741,269,694 81,775,697
Investments in associate and joint
ventures (Note 12) 23,364,444,447 13,776,636,176 13,551,719,576
Property and equipment (Note 15) 40,798,406,706 26,151,960,733 5,936,028,117
Project development cost (Note 10) 2,228,729 61,801 59,281

Estimating useful life of property and equipment

The Group estimated the useful lives of its property and equipment based on the period over which
the assets are expected to be available for use. The estimated useful lives of office equipment are
reviewed at least annually and are updated if expectations differ from previous estimates due to
physical wear and tear and technical or commercial obsolescence on the use of these assets. It is
possible that future results of operations could be materially affected by changes in these estimates
brought about by changes in factors mentioned above. A reduction in the estimated useful lives
would increase depreciation and amortization expense and decrease noncurrent assets.

There was no change on the estimated useful life for three years (see Note 15).

Property and equipment amounted to =

P40,798.41 million, =P26,151.96 million and =
P5,936.03 million
as of December 31, 2017, 2016 and 2015, respectively (see Note 15).

Recognition of project development cost

Development costs are capitalized in accordance with the accounting policy. Initial capitalization of
costs is based on management’s judgment that technological and economic feasibility is confirmed,
usually when a development project has reached a defined milestone according to an established
project management model. In determining the amounts to be capitalized, management makes
assumptions regarding the expected future cash generation of the project, and the expected period of
benefits.

Project development cost amounted to P

=298.77 million, =
P238.91 million and =
P227.03 million as of
December 31, 2017, 2016 and 2015, respectively (see Note 10).

Recognition of deferred tax assets

The Group reviews the carrying amounts of deferred income taxes at each reporting date and reduces
deferred tax assets to the extent that it is no longer probable that sufficient taxable income will be
available to allow all or part of the deferred tax assets to be utilized. However, there is no assurance

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that the Group will generate sufficient taxable income to allow all or part of deferred tax assets to be
utilized (see Note 22).

4. Cash and Cash Equivalents

This account consists of:

2017 2016 2015

Cash on hand P
=23,000,737 =972,803
P =517,544
P
Cash in bank (Note 27) 3,656,621,203 7,537,509,344 621,532,589
Cash equivalents (Note 27) 2,270,386,643 3,847,968,475 1,958,279,883
P
=5,950,008,583 P
=11,386,450,622 =2,580,330,016
P

Cash on hand pertains to petty cash fund used under imprest fund system.
Cash in banks earn interest at the prevailing bank deposit rates.

Cash equivalents are short term, highly liquid investments that are made for varying periods of up to
three months depending on the immediate cash requirements of the Group, and earn interest at the
prevailing short-term rates.

Interest income from cash in banks and cash equivalents amounted to P

=49.36 million, =
P10.94 million
and =
P13.39 million in 2017, 2016 and 2015, respectively.

5. Receivables

This account consists of:

2017 2016 2015

Trade receivables P
=893,993,667 =485,911,193
P =−
P
Receivable from:
Sta. Clara Group, Inc. (Sta. Clara) 303,330,380 289,212,749 −
Acetrans Ventures Corporation
(Acetrans) 153,724,512 153,724,512 82,324,512
Shanghai Electric Power Construction
(SEPC) 73,830,697 − −
Jetfly Asia Pte Ltd 58,842,505 − −
Star Energy Geothermal 13,517,175 − −
GNPower Dinginin Ltd. Co.
(GNPD, Note 22) − − 206,218,426
GNPower Ltd. Co. (GNPLC) − − 36,447,641
PMR Holdings Corp. (PMRHC) − − 21,715,178
GN Power Kauswagan Ltd. Co.
(GNPK, Note 22) − − 4,849,206
(Forward)

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2017 2016 2015

Advances to stockholders (Note 23) P
=47,500,000 =−
P =−
P
Advances to employees 6,151,019 − −
Accrued interest receivable 7,002,008 3,512,131 265,243
Other receivables 76,868,532 32,378,992 9,127,846
1,634,760,495 964,739,577 360,948,052
Less allowance for impairment of
receivables 358,428,493 292,226,745 −
1,276,332,002 672,512,832 360,948,052
Less noncurrent portion 160,726,520 122,113,708 88,877,104
P
=1,115,605,482 =550,399,124
P =272,070,948
P

Trade receivables
Trade receivables include (a) MSEI’s receivables from National Transmission Corporation
(TransCo), the Administrator of the FIT system, and Philippine Electric Market Corporation (PEMC)
for sale of electricity, (b) ACERES receivables from its various RES customers and (c) NPDC’s
receivables from Ilocos Norte Electric Cooperative, Inc. (INEC), Wholesale Electricity Spot Market
(WESM) and TransCo. This includes amounts withheld by INEC amounting to P =79.01 million as of
December 31, 2017 and 2016 due to dispute in billings made by NPDC to the INEC. As of
December 31, 2017, the ERC has yet to order a final and executory decision on the motion filed by
the NPDC. NPDC management believes that it has a solid claim on those receivables and those are
fully recoverable.

Trade receivable from PEMC are collectible within 90 days. Trade receivable from TransCo are
generally on a thirty (30) to forty (40) day credit term. Under ERC Resolution No. 24 series of 2013,
section 2.2.8, the failure to properly and fully pay the actual FIT Revenue to the Group for any billing
period shall authorize the Group to charge TransCo, upon the lapse of one billing period after the due
date of the unpaid amounts based on a 91-day treasury bill plus 300 basis points until fully paid.

In 2017 and 2016, the Group earned interest income on trade receivable amounting to =
P13.64 million
and P
=8.01 million, respectively (nil in 2015).

In 2017 and 2016, ACEI recognized allowance for doubtful accounts amounting to P52.08 million
and P14.59 million, respectively for accounts outstanding beyond the credit term (nil in 2015).

Receivable from Sta. Clara Group, Inc. (Sta. Clara)

On December 29, 2016, the Parent Company sold all of its 70.00% ownership interest in QuadRiver
Energy Corporation (QEC), Philnew Hydro Power Corporation (PHPC) and PhilnewRiver
Corporation (PRPC), collectively referred to as “Hydro Project Companies” to Sta. Clara for a total
consideration of =
P350.00 million, payable on or before December 29, 2020. The Parent Company
recognized =
P82.53 million gain from the disposal of its ownership interest. The Parent Company also
recognized a ‘Day 1’ loss of =
P60.79 million as the note is noninterest-bearing. In December 2017, the
Parent Company recorded an accretion of its receivable from Sta. Clara amounting to P =14.12 million.

Subsequently, the Parent Company recognized a provision for impairment losses on the note
amounting to =
P14.12 million and =
P289.21 million in 2017 and 2016, respectively.

On September 8, 2017, ACEI secured the Certificate Authorizing Registration (CAR) arising from
the sale of shares in its Hydro Project Companies.

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The following is the rollforward analysis of impaired trade receivables and receivable from Sta.
Clara:

Receivable
Trade Receivables from Sta. Clara Total
Balance at January 1, 2016 =−
P =−
P =−
P
Provision for the year 3,013,996 289,212,749 292,226,745
Balance at January 1, 2017 3,013,996 289,212,749 292,226,745
Provision for the period 52,084,117 14,117,631 66,201,748
Balance at end of period =55,098,113
P =303,330,380
P =358,428,493
P

Receivable from Acetrans Ventures Corporation (Acetrans)

On November 17, 2015, the Parent Company and Acetrans entered into a two-year loan agreement
for a total amount of =
P146.62 million. Acetrans has the option to drawdown the amount within one
year from the date of agreement, provided that a promissory note be delivered to the Parent Company
before the drawdown is released.

On April 12, 2016, the Parent Company and Acetrans entered into another two-year loan agreement
for a total amount of =
P10.00 million, with the same terms as the previous loan agreement.

In November 2017, the Parent Company entered into an agreement with Acetrans to extend the note
receivable for another two (2) years effective November 16, 2017. The outstanding note receivable
was then reclassified under noncurrent portion of notes receivable.

Total drawdown amounted to = P153.72 million as of December 31, 2017 and 2016 and P=82.32 million
as of December 31, 2015 with 3.00% interest per annum. Interest, accrued daily and compounded
annually, is payable together with the principal amount on repayment date.

As of December 31, 2016, current portion of notes receivable amount to P

=146.62 million
(nil in 2017 and 2015).

As of December 31, 2017, 2016 and 2015, noncurrent portion of notes receivable amount to
P
=153.72 million, P
=7.11 million and P
=82.32 million, respectively.

Receivable from Shanghai Electric Power Construction (SEPC)

Receivables from SEPC pertains to advances made by GNPK for the construction of an acceptable
critical path method (CPM) schedule, the costs of the training manuals, operating instructions and
operation and maintenance manuals, as well as to conduct a pre-commercial operational and
maintenance training program for the operations and maintenance team. These costs are part of the
contractor’s obligations under the Engineering, Procurement and Construction (EPC) agreement and
is to be paid by the contractor in 2018.
Receivable from Jetfly Asia Pte Ltd
On December 26, 2017, ACEHI SG (the “Lender”) and Jetfly Asia Pte Ltd (the “Borrower”) and a
third party (the “Guarantor”), entered into a loan agreement for a facility to be made available to
Jetfly Asia in the principal amount of $1.18 million (or =
P58.84 million). On the same date, the
guarantor and the lender entered into a security agreement (i.e. mortgage over shares) to secure the
loan. The loan is noninterest-bearing and is due and demandable.
Receivable from Star Energy Geothermal
Receivables from Star Energy Geothermal relate to management and administrative support services
provided by Parent Company to Star Energy. Total invoiced amount of P
=13.51 million as of
December 31, 2017 was subsequently fully collected in 2018.

F-96
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Receivable from GNPower Dinginin Ltd. Co.

Receivables of =P206.22 Million from GNPD pertains to the advances made by DPHLC to GNPD to
fund its monthly anticipated expenditures to be used in developing and constructing the GNPD
Project. All advances and accrued interest were settled upon finance close of the project in 2015.
Interest income amounted to P=25.43 million in 2015.
Receivable from GNPower Ltd. Co. and PMR Holdings Corp.
Receivables from GNPLC and PMRHC pertain to advances made by the Parent Company pursuant to
the GNPD Investment Agreement. These advances were used for the pre-development costs of the
2x600 MW Dinginin coal plant facility. Receivables from GNPLC and PMRHC bear 6.50% interest
per annum and are due upon financial closing date or upon liquidation of the maker or assignee, as
applicable. Interests will be accrued and paid upon financial closing. Total interest income earned in
2016 and 2015 amounted to P15.81 million and nil, respectively (nil in 2017). On September 2, 2016,
the Financial Closing Date, all outstanding principal including interest amounting to P98.19 million
and P15.81 million, respectively were collected.
Advances to stockholders
Advances from stockholders pertain to advances made by Manapla Sun to its stockholders which will
be offset against future dividends. These advances are noninterest-bearing which are to be paid with
one year.

Accrued interest receivable

Accrued interest receivable pertains to interest earned from notes receivable to Acetrans Ventures
Corporation (Acetrans). In 2017, 2016 and 2015, the Group earned interest income from notes
receivable amounting to =
P4.36 million, = P4.06 million, =
P0.27 million, respectively.

6. Advances to Contractors

As of December 31, 2017, 2016 and 2015, the advances to contractors amounted to P =10.58 million,
nil and =
P321.56 million, respectively. These are down payments made to contractors for the
construction of power plants and shall be recouped against progress billings within the next three
months after period-end.

7. Restricted Cash

As part of the share purchase agreements with the previous owners of Moorland, Viage and Presage,
contingent consideration consisting of Feed-in-Tariff (FiT) and Achieved Capacity Factor
Adjustments were agreed to be made to the previous owners provided that certain conditions are
satisfied within one year from the closing of the acquisition.

The aggregate acquisition price amounted to =

P889.40 million, which includes the contingent
consideration recognized as nontrade payables amounting to P
=219.33 million for FiT (see Note 17)
and =
P177.64 million upon reaching the Capacity Factor. On August 17, 2012, the Parent Company
made additional payments to the previous owners of NPDC totaling =P177.60 million in relation to the
Achieved Capacity Factor Adjustment.

On the same date, a potential earn-out amounting to P =167.70 million was deposited in an escrow
account, payment of which is dependent on the final resolution by the Arbitration Committee that the
parties agreed to constitute to resolves the issues that they agreed to raise, and the final FiT rate to be

F-97
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awarded to NPDC by the Energy Regulatory Commission. The escrow account is treated as restricted
cash under current assets in the consolidated statement of financial position.

In 2016, the Parent Company received a confirmation agreement that it is not obliged to settle the
contingent liability on the FiT adjustment. A deed of release, quitclaim and waiver was also
executed. In November 2016, the Group reversed the liability and recognized a gain on reversal of
contingent liability amounting toP=219.33 million due to the failure to satisfy the FiT contingent
consideration.

Interest income earned on the escrow account amounted to =P2.01 million and =P3.40 million in 2016
and 2015, respectively (nil in 2017). As of December 31, 2015, restricted cash amounted to
=177.54 million (nil as of December 31, 2017 and 2016).
P

8. Input Value-Added Taxes (VAT)

2017 2016 2015

Input VAT P
=2,743,233,545 =984,600,146
P =309,888,520
P
Less noncurrent portion 2,560,132,306 799,874,750 7,880,852
P
=183,101,239 =184,725,396
P =302,007,668
P

Input VAT is a tax imposed on purchases of goods, professional and consulting services and
construction costs. These are available for offset against output VAT on future sale of electricity.

The noncurrent portion arises from acquisition of capital assets with aggregate acquisition price
exceeding =P1.00 million and with estimated useful life of more than one year. This is amortized over
five (5) years or the life of the property, plant and equipment, whichever is shorter, in accordance
with the Bureau of Internal Revenue (BIR) regulation.

9. Prepayments and Other Current Assets

This account consists of:

2017 2016 2015

Prepaid expenses P
=456,698,880 =671,736,812
P =75,723,695
P
Spare parts inventory 84,513,451 51,311,023 −
Creditable withholding tax 55,474,737 18,221,859 6,052,002
P
=596,687,068 =741,269,694
P =81,775,697
P

Prepaid expenses pertain to real property taxes, financing costs and insurance of the construction
facility paid for by the Group. Prepaid financing costs are debt issue costs such as upfront fees,
chattel and real estate mortgage fees and commitment fees incurred related to undrawn portion of the
loan facilities which are expected to be drawn in one year.

Spare parts inventory includes supplies and spare parts for the repair and maintenance of wind
turbines, transmission lines and substation.

Creditable withholding taxes are applied against income tax payable.

F-98
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10. Project Development Cost and Right of Way

The rollforward analysis of this account follows:

2017 2016 2015

At January 1 P
=45,798,398 =152,894,339
P =241,977,867
P
Additions 2,166,928 31,749,794 60,532
Disposal − (138,845,735) −
Reclassifications (Note 15) − − (89,144,060)
At December 31 47,965,326 45,798,398 152,894,339
Less allowance for impairment (45,736,597) (45,736,597) (152,835,058)
P
=2,228,729 =61,801
P =59,281
P

Hydro Power Development Cost

Project development costs in 2015 pertain to cost incurred for the development of the hydro power
project in Clarin, Misamis Occidental, Mangima, Bukidnon, Danao, Bohol and Tinoc, Ifugao. These
include among others, costs of setting up of equipment and works preparatory to the full blown
construction of the hydro power project, cost of applications for permits and licenses in compliance
with the requirements of the regulatory bodies and fees paid to third party consultants.

In 2015, management provided an allowance for impairment loss of = P152.84 million for the hydro
power projects due to socio-political reasons. The Group wrote off the provision in 2016 upon sale of
interest in Hydro Project Companies (see Note 5).

Wind Power Development Cost

Wind power development cost pertains to cost incurred of the wind power project in Bais, Negros.
This include among others, data study, roadworks and installation costs. As of December 31, 2016
and 2015, the Group incurred =P45.74 million and =
P0.06 million project development cost,
respectively. In 2016, the Group recognized allowance for provision for impairment losses on the
wind power development cost amounting to P =45.74 million.

Solar Power Development Cost

Solar power development costs pertain to costs incurred for the development of power plant projects
in various sites. These include, among others, applications for permits and licenses in compliance
with the requirements of the regulatory bodies and fees paid to third party consultants. As of
December 31, 2017, developments costs amounted to P =2.23 million (nil as of December 31, 2016 and
2015).

The rollforward analysis of allowance for impairment losses follows:

2017 2016 2015

Balance at beginning of year P
=45,736,597 =152,835,058
P =−
P
Additions − 31,747,274 152,835,058
Writeoff − (138,845,735) −
Balance at end of year P
=45,736,597 =45,736,597
P =152,835,058
P

Right of Way (ROW)

Project development cost includes cost pertaining to easement ROW which the privilege is granted to
one person to pass across another’s land. During the construction of Kauswagan Transmission Line
(TL) Project and Mariveles Project, several ROW were acquired from local residents for the right to

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erect the transmission lines which will be used to connect to the National Grid Corporation of the
Philippines. Easement right acquired from local residents is for an indefinite period of time.
Project development cost pertaining to easement ROW amounted to P =296.54 million,
=
P238.85 million and P
=226.97 million, respectively as of December 31, 2017, 2016 and 2015.

11. Available-for-sale Financial Assets

2017 2016 2015
Negros Island Solar Power, Inc.
(ISLASOL) P
=336,544,360 =−
P =−
P
San Carlos Solar Energy, Inc.
(SACASOL) 260,898,363 − −
Ilocos Mango Growers, Inc. (IMGI) 209,250 209,250 −
Katimak Holdings, Inc. 2,500 − −
P
=597,654,473 =209,250
P =−
P

On January 19, 2017, Katimak Holdings, Inc., a subsidiary of Presage Corporation was incorporated
with paid up capital of =
P250,000. Subsequently on July 21, 2017, Presage Corporation assigned
247,500 shares or 99.00% ownership interest of Katimak Holdings, Inc. to AllFirst Equity Holdings,
Inc. at par value. The remaining = P2,500 or 1.00% ownership interest was reclassified as
available-for-sale financial assets. These available-for-sale financial assets are measured at cost. The
accrued bidding cost for the local geothermal project amounting to P =22.74 million was subsequent
reversed and reported as part of other income for the year ended December 31, 2017.
Investment in ISLASOL, IMGI and SACASOL are investment equity securities in domestic
corporations whose shares are not listed in the Philippine Stock Exchange. The investments are
carried at fair value following the provisional purchase price allocation of a business combination that
was received in 2017 (see Note 14). The movement in fair value from acquisition date through
December 31, 20187 is not material.
Dividends declared and received from SACASOL amounted to P
=11.59 million in 2017.
No allowance for impairment was recognized for the years ended December 31, 2017, 2016 and
2015.

12. Investment in Associate and Joint Ventures

This account consists of:
December 31
2017 2016 2015
Acquisition costs P
=19,209,246,358 P
=11,406,037,670 P
=12,705,812,042
Accumulated equity in net income
(losses):
Balance at beginning of year 2,370,598,506 845,907,534 (243,887,401)
Share in the net income during
the year 2,156,401,634 1,762,222,192 1,026,261,338
Dividends received during year (378,410,000) (219,745,544) −
Equity reserves 6,607,729 (17,785,676) 63,533,597
Balance at end of year 4,155,197,869 2,370,598,506 845,907,534
P
=23,364,444,227 P=13,776,636,176 P=13,551,719,576

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The Group’s investments in associate and joint ventures and the corresponding direct percentages of
ownership are shown below.

Direct Percentage
of Ownership Carrying Amounts
2017 2016 2015 2017 2016 2015
Joint Ventures
South Luzon Thermal Energy Corporation (SLTEC) (1) 35 35 50 P
= 2,703,920,281 P
=2,784,546,365 P
=3,791,776,115
PhilNewEnergy, Inc. (PNE) (2) 50 50 50 7,051,373 7,051,373 4,189,941
ACTA Power Corporation (APC) (3) 50 50 50 31,463,772 13,446,600 7,594,227
GNPower Dinginin (GNPD) (5) 50 50 50 2,265,534,506 1,158,020,855 −
UPC Renewables Asia III Ltd (6) 51 − − 7,379 − −
UPC Sidrap HK Ltd (6) 11 − − 320,653,306 − −
NorthWind Power Development Corp. (NPDC) (7) 68 68 50 − − 495,932,284
Associates
GNPower Mariveles Coal Plant Ltd. Co. (GMCPLC) (8) 20 17 17 7,987,926,794 8,823,291,187 8,236,635,931
Philippine Wind Holdings Corporation (PWHC) (4) 43 43 72 1,005,986,136 993,271,898 1,015,591,078
Star Energy Salak-Darajat B.V. (9) 20 − − 9,044,892,782 − −
23,367,436,329 13,779,628,278 13,551,719,576
Less allowance for impairment 2,992,102 2,992,102 −
P
= 23,364,444,227 P
=13,776,636,176 P
=13,551,719,576

(1)
Investment in SLTEC
On June 29, 2011, the Parent Company entered into a 50-50 joint venture with PHINMA Energy
Corporation (PHINMA; formerly Trans-Asia Oil and Energy Development Corporation) to
incorporate SLTEC which will undertake the construction and operation of a 135-megawatt
power plant in Calaca, Batangas. The power plant will employ the environment-friendly
Circulating Fluidized Bed boiler technology.

The Parent Company invested a total of =

P3.64 billion in SLTEC owning 50.00% of the shares of
SLTEC. The percentage ownership of the Parent Company is equivalent to its economic interest
in SLTEC.

On April 24, 2015, Unit 1 of the 2x135MW coal fired power plant achieved commercial
operations date (COD). Unit 2 on the other hand achieved COD on February 21, 2016.

On October 25, 2016, SLTEC’s BOD approved the declaration of dividends out of the
unrestricted retained earnings of SLTEC, conditioned upon the satisfaction of certain conditions
set out in the Amended Omnibus Loan and Security Agreement, amounting to P =1,289.89 million,
or at a dividend rate of P
=18.00 per share, for both common and preferred shares, to SLTEC’s
stockholders of record as of September 30, 2016. On December 19, 2016, dividends amounting
to =
P644.94 million was received by the Parent Company.

On December 20, 2016, the Parent Company sold 5,374,537 common shares and 5,374,537
preferred shares in SLTEC with a carrying value of = P1.20 billion to Axia Power Holdings
Philippines Corp. (Axia Power), a subsidiary of Marubeni Corporation, for a selling price of
=
P2.53 billion. This resulted to a net gain of =
P1.18 billion (net of capital gains tax and
documentary stamp tax amounting to = P145.04 million and =
P2.02 million, respectively). After the
sale, the equity interest of the Parent Company decreased to 35.00% but the investment in SLTEC
remains to be a joint venture since at least one director from the Parent Company and PHINMA
are required to make decisions on the relevant activities of SLTEC.

Dividends declared and received from SLTEC amounted to P

=821.91 million and =
P644.94 million
in 2017 and 2016, respectively (nil in 2015).

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(2)
Investment in PNE
On October 15, 2010, the Parent Company’s BOD authorized the Parent Company to enter into a
joint venture agreement with Diamond Generating Asia Limited (DGA), and to incorporate a
joint venture company for the exploration and development of solar power projects in the
Philippines.

The Parent Company and DGA entered into a Memorandum of Understanding on

October 19, 2010 to confirm their intent to work together on an exclusive basis to agree on,
develop and implement the solar power projects. On November 12, 2010, the Parent Company
and DGA entered into a Shareholders’ Agreement to document the terms by which PNE will be
owned, managed and controlled.

On November 21, 2011, DGA transferred all of its ownership interest in the PNE to DGA PNE
B.V. (DGA PNE), a company incorporated in the Netherlands. The voting interest of the Parent
Company in PNE is in proportion to its ownership interest.

PNE recognized impairment loss on its project development cost amounting to = P31.28 million in
2013 due to the non-viability of the its solar power project. Accordingly, the Parent Company
recognized impairment loss on its investment in PNE amounting to P =28.99 million due to the
current economic situation of PNE.

On November 26, 2015, PNE’s BOD approved the shortening of its corporate term to
March 31, 2017, subject to the required regulatory filings and approval.

On December 2015, the Parent Company received return of capital from PNE amounting to
=
P22.00 million. As such, the recognized allowance for impairment loss were decreased by
=26.00 million as of December 31, 2015.
P

As of December 31, 2017, PNE is in the process of completing the liquidation procedures with
BIR and SEC.
(3)
Investment in APC
On February 9, 2012, the Parent Company entered into a 50-50 joint venture with PEC to
incorporate APC that will be engaged in the business of owning, developing or constructing
power generation facilities. The voting interest of the Parent Company in APC is in proportion to
its ownership interest.

In December 31, 2017, 2016 and 2015, APC made capital calls for which the Parent Company
infused a total of =
P18.01 million, =
P5.64 million and =
P5.85 million for the respective years.
(4)
Investment in PWHC
On July 12, 2013, the Parent Company signed an Investment Framework Agreement and
Shareholders’ Agreement with UPC Philippines Wind Holdco I B.V., a wholly-owned company
of UPC Renewable Partners (UPC) and the Philippine Investment Alliance for Infrastructure fund
(PINAI), comprised of the Government Service Insurance System, Langoer Investments Holding
B.V. and Macquarie Infrastructure Holdings (Philippines) Pte. Limited, to develop wind power
projects in Ilocos Norte through Northern Luzon UPC Asia Corporation (currently known as
North Luzon Renewable Energy Corp. or NLREC) as their joint venture company. An initial
equity investment has been agreed for the first 81MW project with an investment value of
approximately $220.00 million with the Parent Company funding 64% of equity, PINAI 32% and
UPC 4%.

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The 81MW wind power project received a declaration of commerciality on June 17, 2013 from
the Department of Energy. Accordingly, NLREC has signed the Turbine Supply, Installation and
Service Availability Agreements with Siemens Wind Power A/S and Siemens Inc. and has issued
the Notice to Proceed.

During the period May to July 2015, PWHC redeemed from the Parent Company 51,230
Class A-1 Preferred Shares and 2,821Class A-2 Preferred Shares with acquisition cost of
=
P812.84 million and =
P645.20 million, respectively.

In September 2015, the Parent Company sold, transferred and conveyed 172,419 common shares
to Luzon Wind Energy Holdings, B.V. (LWEHBV) which resulted to net gain on the sale of
common shares of = P1,497.00 million. On July 25, 2016, the BIR certificate authorizing the
transfer of registration of the shares was secured.

On August 19, 2016, the BOD of PWHC approved the declaration and distribution of the
following cash dividends:
1. P=4,052.31 per share on outstanding redeemable preferred shares A-1
2. P=58,413.23 per share on outstanding redeemable preferred shares of A-2

Dividends received by the Parent Company from PWHC amounted to P

=378.41 million and
P219.75 million, in 2017 and 2016, respectively (nil in 2015).
=

The voting interest of the Parent Company in PWHC is in proportion to its ownership interest.
(5)
Investment in GNPD
On May 21, 2014, the Group acquired 50.00% interest in GNPD. GNPD was registered with the
Philippine SEC on May 21, 2014 primarily to develop, construct, operate and own an
approximately 2x660 MW (net) supercritical coal-fired power plant to be located at Mariveles,
Province of Bataan.

On September 2, 2016, GNPD achieved financial close for the first 2x600 MW plant and on
December 12, 2017, GNPD achieved financial close for the project financing of the second unit
of its 2 x 660 MW super-critical coal fired power plant, in Dinginin, Bataan.

On October 30, 2017, the Parent Company, through Dinginin Power Holdings, Ltd. (BPHLC)
infused additional capital to GNPD amounting to $3.35 million (equivalent to P
=172.86 million)
and on December 11, 2017 amounting to $20.41 million (equivalent to P=1,027.64 million), these
funds will be used for the construction of the second 2x600 MW plant. In 2016, the Parent
Company infused additional capital to GNPD amounting to $32.85 million (equivalent to
P
=1,532.66 million).

As of December 31, 2017 and 2016, total loan drawdown under GNPD’s financing documents
amounted to =
P14.27 billion and P
=4.6 billion.

As of December 31, 2017, 2016 and 2015, ACEI’s remaining total capital commitment on its
investment in GNPD amounted to $122.18 million and $146.18 million and $167.7 million,
respectively.
(6)
Investments in UPC Renewables Asia III Ltd., UPC Sidrap HK Ltd and UPC Renewables Asia I Ltd.
On January 11, 2017, the Parent Company signed investment agreements with UPC Renewables
Indonesia Ltd for the development, construction, and operation of a wind farm project in Sidrap,
South Sulawesi, Indonesia (the “Sidrap Project”). The project will be developed through PT UPC

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Sidrap Bayu Energi, a special purpose company based in Indonesia and 72%-owned by UPC
Renewables Asia III Ltd. The Sidrap Project, with generating capacity of 75MW, started
commercial operations in April 2018 and is the first utility-scale wind farm project in Indonesia.
In 2017, ACEHI SG infused of US$21.86 million (or P =1,091.69 million) to UPC renewables Asia
III Ltd representing 51% voting interest. The investment in UPC Renewables Asia III Ltd. is
comprised of 10,710 common shares for US$1.83 million and 21,864 Redeemable Class A shares
for US$21.86 million (or P=1,180.05 million). The Redeemable Class A Shares are redeemed only
by cash at the holder’s option in accordance with the redemption period and redemption
mechanics and are entitled to dividends of 13.50% per annum. The investment in UPC Sidrap
HK Ltd. is comprised of 1,130 Redeemable Class B shares amounting to US$6.39 million
(or P
=330.92 million). Since these shares include a contractual obligation for UPC Asia III to
redeem the shares at a determined amount by cash at some future date, they are classified as long-
term receivables and are presented as “Investment in redeemable preferred shares” in the interim
consolidated financial position of the Group. Total accrued interest as of September 30, 2018
amounts to US$7.60 million (or P =410.71 million) (nil for the year ended December 31, 2017).

On July 25, 2017, ACEHI SG entered into an arrangement with UPC Renewables Asia I Ltd to
subscribed to 10,710 Redeemable Class B shares for US$9.00 million (or P =449.37 million) and
has a mandatory redemption period. As such, the shares are classified as long-term receivables
and presented as “investment in redeemable preferred shares” in the consolidated financial
position of the Group. The shares are entitled to dividends of 12% per annum. Total accrued
interest as of September 30, 2018 amounts to US$1.32 million (or P=71.33 million) (nil in
December 31, 2017).
(7)
Investment in NPDC
On March 16, 2011, the Parent Company entered into a share purchase agreement with Moorland
Philippines Investments, Inc., Presage Holdings Limited, Viage Holdings Limited and BDO
Capital and Investment Corporation to acquire 100% ownership of Moorland, Viage and Presage.
The acquisition of Moorland, Viage and Presage gave the Parent Company an indirect 50.00%
effective stake in NPDC. NPDC owns and operates the 33-MW wind farm located in Bangui
Bay, Ilocos Norte. The voting interest of the Parent Company in Moorland, Viage and Presage is
in proportion to its ownership interest.

On November 21, 2016, the Parent Company, through Presage, acquired additional 17.79%
common equity interest in NPDC for a total consideration of P
=355.88 million. As a result of the
additional acquisition, the Parent Company made an assessment to determine if the Parent
Company has control over NPDC. It is concluded that the Parent Company through its indirect
ownership from its wholly owned subsidiaries controls NPDC and is now accounted for as an
investment in subsidiary through business combination achieved in stages (see Note 14). In
2015, ACEI received dividend income from NPDC amounting to P =18.78 million.
(8)
Investment in GMCPLC
On May 30, 2014, Arlington Mariveles Netherlands Holding B.V. (AMNHB, the Seller) and
AMPLC (the Buyer), entered into a Sale and Purchase Agreement for the 17.0246% outstanding
limited partnership interest of AMNHB in GMCP. The Parties agreed that until the issuance of
the BIR of tax clearance certificate authorizing the transfer of registration of the ownership
interests from the seller to the buyer, AMNHB remains to be the legal and registered owner of the
Limited Partnership (LP) Interest. AMPLC, on the other hand, is the beneficial owner of the LP
interest. Effective January 29, 2018, ACE Mariveles became the legal and registered owner of the
limited partnership interest.

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GMCP is engaged in all aspects of developing, financing, obtaining permits and licenses for
constructing, owning and operating a 600MW clean pulverized coal-fired electric power
generation facility, including any future expansion, and other assets including transmission and
sub-transmission lines and jetties, in each case to be located in Bataan, Philippines
(the Clean Coal Project).

AMPLC’s Management Committee approved the return of capital to the Parent Company
amounting to $30.58 million (or P
=1,569.63 million), $7.94 million (or P
=380.51 million) and
$4.09 million (or =
P182.02 million) in 2017, 2016 and 2015, respectively.

Following the return of capital to the project sponsors and owners last October 12, 2017, the
sharing percentage of ACEI (through its limited partnership interest) increased from 17.0246% to
20.3372%, pursuant to the terms of the Second Amended and Restated Limited Partnership
Agreement for GMCP.
(9)
Investment in Star Energy Salak-Darajat B.V.
On December 22, 2016, the Parent Company, as part of an Indonesian and Philippine consortium,
signed Share Sale and Purchase Agreements with Chevron Global Energy, Inc., Union Oil
Company of California, and their relevant affiliates for the purchase of Chevron’s geothermal
operations and/or assets in Indonesia and the Philippines.

The Indonesian consortium consists of ACEI (with significant influence as a result of its 19.80%
equity interest), Star Energy Group Holdings Pte. Ltd. Star, Star Energy Geothermal Pte. Ltd.,
DGA SEG BV and Electricity Generating Public Co. Ltd. The acquisition was made through the
consortium’s joint venture company, namely Star Energy Geothermal (Salak-Darajat) B.V.,
subject to the satisfaction of certain agreed conditions. Bid deposit of ACEI thru ACEHI SG
totaled $40.61 million or =P2.02 billion (see Note 13).

On the other hand, the Philippine consortium consists of ACEI and Star Energy Group Holdings
Pte. Ltd. The acquisition was made through the consortium’s joint venture company, namely
ACEHI-STAR Holdings, Inc., subject to the satisfaction of certain agreed conditions, including
the approval of the Philippine Competition Commission. The related bid deposit of ACEI
amounted to =P648.31 million as of December 31, 2016 (see Note 13).

On March 31, 2017, ACEI, as part of an Indonesian consortium, completed the purchase and
acquisition of Chevron’s geothermal assets and operations in Indonesia. The Indonesia assets and
operations include the Darajat and Salak geothermal fields in West Java, Indonesia, with a
combined capacity of 637MW of steam and power.

On July 21, 2017, ACEI together with Star Energy Geothermal Holdings Pte. Ltd., entered into
definitive agreements for the transfer of 99% of their consortium interests in ACEHI-STAR
Holdings, Inc.to AllFirst Equity Holdings, Inc. (AllFirst). ACEHI-STAR is the special purpose
company that signed a share sale and purchase agreement with Chevron in December 2016, to
acquire Chevron’s Philippine geothermal assets subject to the satisfaction of certain conditions
precedent, including approval of the Philippine Competition Commission. AllFirst is Chevron’s
current partner, and directly holds a 60% ownership interest in Philippine Geothermal Production
Company (see Note 11).

As of December 31, 2017, ACEI’s investment in Salak-Darajat amounted to $168.49 million or

=
P8,412.71 million. The identifiable assets and liabilities acquired and goodwill arising from the
transaction follows: Salak-Darajat’s assets and liabilities amounting to $2,677.20 million and
$1,826.70 million, respectively. Assets include developed and undeveloped geothermal

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intangible assets amounting to $44.3 million and $1,196.2 million, respectively, which will not be
amortized but will be subjected to impairment assessment. ACEI’s corresponding notional
goodwill on this investment amounted to $0.09 million is included as part of the carrying value of
the investment as of December 31, 2017.

The valuation of Salak-Darajat was based on the existing enterprise value and value of future
development.

Summary of financial information of the Parent Company’s significant investments in joint ventures
and associates follow:
2017

Assets Liabilities Revenues Net Income (Loss)

Peso reporting entities
Joint Ventures:
SLTEC P
=22,262,844,984 P
=14,559,677,349 P
=8,248,139,749 P
=2,115,783,282
PNE 9,954,919 326,085 10,279 (470,378)
APC 63,350,414 881,710 1,415,929 (162,298)
Associate:
PWHC 1,878,779,644 6,507,928,924 2,212,488,789 1,138,647,863
Dollar reporting entity
Associates:
GMCPLC $852,896,518 $641,584,561 $44,054,407 $9,323,042
Salak & Darajat 2,692,560,000 1,804,994,000 241,154,000 50,836,000
Joint Ventures:
GNPD 385,515,258 296,038,779 − (7,483,500)
UPC Asia III 7,229 26,094,241 − (3,756,625)
UPC Sidrap HK 16,853 30,808 − 91,241

2016

Assets Liabilities Revenues Net Income (Loss)

Peso reporting entities
Joint Ventures:
SLTEC =23,986,122,555
P =16,048,252,460
P =5,982,706,851
P =1,702,444,352
P
PNE 10,187,694 88,482 48,577 (313,621)
APC 26,911,904 247,121 680,657 426,745
Associate:
PWHC 2,261,481,491 328,085 621,677,415 621,425,314
Dollar reporting entity
Associate:
GMCPLC $896,404,962 $581,316,410 $373,206,814 $95,530,779
Joint Venture:
GNPD 143,356,328 93,906,528 5,503,951 (126,408)

2015

Assets Liabilities Revenues Net Income (Loss)

Peso reporting entities
Joint Ventures:
SLTEC =25,074,154,344
P =17,548,839,601
P =2,396,936,338
P =527,295,258
P
PNE 10,479,709 66,876 313,648 170,881
APC 15,243,482 15,147,193 57,957 (1,153)
NPDC 3,786,877,082 2,658,244,072 685,340,923 121,902,406
GNPD 358,509,603 392,840,033 121,862 (38,569,924)
Associate:
PWHC 2,267,081,603 375,184 467,332 205,251
Dollar reporting entity
Associate:
GMCPLC $898,940,185 $617,331,557 $328,995,013 $57,904,994

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13. Deposits

This account consists of:

2017 2016 2015

Bill deposit P
=71,036,850 =−
P =−
P
Refundable deposit (Note 27) 5,481,370 5,370,736 47,695,943
Bid deposit (Note 12) − 2,767,302,879 −
P
=76,518,220 =2,772,673,615
P =47,695,943
P

Bill deposit
Bill deposit pertains to the deposit with Meralco that is equivalent to the RES customer’s average
billing in the immediately preceding twelve (12) months or in case of a newly connected RES’s
customer, based on projected demand and/or energy of such customer. The bill deposit may be
applied by Meralco to any outstanding bill, billing adjustment or differential billing upon termination
of the contract.

Refundable deposit
On May 13, 2014, DPHLC and Sithe Global GNPD B.V. (collectively “Parties” entered into an
option to lease agreement with PGRPI, for a period of two (2) years from the date of agreement,
covering the 134,000 square meters land owned by Mariveles Resources Development Corporation
(MRDC), located in Barangay Alasasin, Mariveles Bataan, where the GNPD Project will be located.
PGRPI intends to enter an option to purchase agreement with MRDC relative to the land. DPHLC
paid an option fee amounting to $338,500 (equivalent to P15.14 million, revaluated amount as of
December 31, 2014) representing 50% of the total option fee. The other 50% of the option fee was
paid by Sithe Global GNPD B.V.

On May 27, 2015 the Parties and PGRPI executed an amendment to the option to lease agreement
extending the option period until June 30, 2016, effective immediately upon the expiration of the
option period on May 15, 2016. In consideration of the extended option period, the Parties shall pay
an additional option fee in total amount of $1.40 million, which shall be paid upon signing the letter
of amendment and monthly thereafter starting June to December 2015 and April to June 2016.

The deposits are noninterest-bearing and refundable to the Parties until the option to lease is exercised
or upon default of PGRPI to acquire the MRDC land. However, in case of compliance by PGRPI and
the option is not exercised, the amounts paid by the Parties shall be forfeited in favor of PGRPI. Upon
exercise of the option, lease term is for a period of 50 years unless earlier terminated.

On June 17, 2016, PMR Group Retirement Plan, Inc. returned $1.04 million (P48.71 million) to
DPHLC without interest by way of mutual rescission by reason of the Option to Lease Agreement
dated May 13, 2014 and the amended Option to lease Agreement dated May 27, 2015, which
represents the total payments made by DPHLC to PGRP under the OLA and the Amended OLA.

As of December 31, 2016 and 2015, the total option fee paid by DPHLC amounted to nil and
$946,406 (equivalent to nil and =
P44.55 million, revalued amount as of December 31, 2016 and 2015),
respectively.

Refundable deposits amounting to P

=5.48 million, =
P5.37 million and =
P3.15 million as of
December 31, 2017, 2016 and 2015, respectively, pertain to refundable deposits for leased office
spaces.

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Bid deposit
On July 24, 2017, ACEI, together with Star Energy Geothermal Holdings, Pte. Ltd. entered into
definitive agreements for the transfer of 99% of their consortium interests in ACEHI-Star to AllFirst
Equity Holdings, Inc. (AllFirst). The bid deposit of P
=648.31 million made by ACEI in 2016 was
refunded by AllFirst in 2017 (see Note 12).

On December 23, 2016, the Parent Company, Bronzeoak Philippines, Inc. (BPI) and ACE DevCo
(Formerly, San Carlos Clean Energy) entered into a Share Purchase Agreement for the acquisition of
shares of SCCE. Earnest money amounting to = P100.00 million was paid for the said transaction.

In 2017, the bid deposit amounting to =

P2,018.99 million was applied for the acquisition of Star
Energy Geothermal B.V. (see Note 12).

Upon signing of definitive documents to acquire 100% ownership in BPI and SCCE, the deposit was
considered as part of the total purchase price for the shares (see Note 14).

14. Business Combinations

2017 Acquisitions

ACE DevCo, Visayas Renewables Corp. and Manapla Sun Power Dev’t. Corp.
On March 16, 2017, ACEI signed definitive documents to acquire 100% ownership of Bronzeoak
Clean Energy (Bronzeoak) and SCCE. With the acquisition, SCCE and Bronzeoak have been
renamed as ACE DevCo and Visayas Renewables Corp. (VRC), respectively. In March 2017, ACEI
Group also acquired 66.22% ownership interest in Manapla Sun Power Dev’t. Corp. (MSPDC).
MSPDC is the landowner of and lessor for Islasol’s solar farm in Manapla, Negros Occidential.

The values of the identifiable assets and liabilities acquired and goodwill arising as at the date of
acquisition follows:

ACE DevCo Group

Assets
Cash and cash equivalents =9,380,978
P
Receivables 5,224,504
Prepayments and other current assets 19,526,901
Property, plant and equipment 2,447,245
36,579,628
Liabilities
Accounts payable and accrued expenses 10,315,424
Net Assets P26,264,204
=
Cost of acquisition =812,527,275
P
Goodwill (Note 15) =786,263,071
P
Cash consideration =812,527,275
P
Less: Cash acquired from the subsidiary 9,380,978
Net cash flow =803,146,297
P

In 2018, the Group finalized its purchase price allocation and there were no changes to the fair values
of the assets acquired and liabilities assumed.

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The goodwill arising from the acquisition of AC Energy DevCo Inc. is from the established
capabilities of its assembled workforce which includes:

a. Pre-development and development – which involves site acquisition, permitting and studies to get
the project to a shovel ready state
b. Construction – including sourcing of investors as well as managing the construction of the power
plants
c. Operations – covering management of the power plants in lieu of the investors for a fee
Further, the above acquisition included projects in its pipeline with a view of developing projects
(new and from the pipeline) for the Group. Through this acquisition, the Group is able to have the
capability to develop projects end-to-end from permits and feasibility studies all the way to
construction and operations.
Currently, the assembled workforce oversees the pre-development and development of several
potential sites for its solar projects within the Philippines, as well as the construction of offshore
renewable power plants where the Group co-invested with local partners.
From March 16 to December 31, 2017, ACEI’s share in AEDCI’s revenue and net income amounted
to =
P119.9 million and =
P12.4 million, respectively. If the combination had taken place at the
beginning of 2017, ACEI’s share in AEDCI’s revenue and net income would have been
P
=180.2 million and P
=31.8 million, respectively.
Visayas Renewables Corp. (VRC)
Assets
Cash and cash equivalents =6,225,961
P
Prepayments and other current assets 20,592
Equity instruments at fair value through other comprehensive income 579,885,670
586,132,223
Liabilities
Accounts payable and accrued expenses 106,819
Net Assets P586,025,404
=
Cost of acquisition =586,025,404
P
Goodwill =−
P

Cash consideration =586,025,404

P
Less: Cash acquired from the subsidiary 6,225,961
Net cash flow =579,799,443
P

In 2018, the Group finalized its purchase price allocation. The fair value of prepayments and other
current assets and accounts payable and accrued expenses approximate their carrying amounts since
these are short-term in nature. The valuation technique adopted for equity instruments at fair value
through other comprehensive income dated March 16, 2017 is the discounted cash flow method. The
fair value measurement using unobservable data is based on Level 3 of the fair value hierarchy.
The fair value of prepayments and other current assets and accounts payable and accrued expenses
approximate their carrying amounts since these are short-term in nature. The valuation technique
adopted for equity instruments at fair value through other comprehensive income dated March 16,
2017 is the discounted cash flow method. The fair value measurement using unobservable data is
based on Level 3 of the fair value hierarchy.
From March 16 to December 31, 2017, ACEI’s share in VRC’s revenue and net income amounted to
=11.6 million and =
P P11.3 million, respectively. If the combination had taken place at the beginning of

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2017, ACEI’s share in VRC’s revenue and net income would have been =
P16.0 million and
=
P15.6 million, respectively.
Manapla Sun Power Dev’t. Corp.
Assets
Cash and cash equivalents P2,684,264
=
Receivables 28,816,896
Prepayments and other current assets 8,254,713
Property, plant and equipment 253,670,048
293,425,921
Liabilities
Accounts payable and accrued expenses 49,440,258
Net Assets =243,985,663
P
Cost of acquisition =235,999,998
P
Non-controlling Interest 7,985,665
Provisional goodwill (Note 16) =−
P
Cash consideration =235,999,998
P
Less: Cash acquired from the subsidiary 2,684,264
Net cash flow =233,315,734
P

In 2018, the Group finalized its purchase price allocation. The fair value of receivables and accounts
payable and accrued expenses approximate their carrying amounts since these are short-term in
nature. The valuation technique adopted for the measurement of investment property (i.e., land) fair
value dated July 3, 2018 is the market approach. The market price per square meter of land amounts
to P680.00. The fair value measurement using unobservable data is based on Level 3 of the fair value
hierarchy.
The fair value of receivables and accounts payable and accrued expenses approximate their carrying
amounts since these are short-term in nature. The valuation technique adopted for the measurement of
investment property fair value dated July 3, 2018 is the market approach for the land. The market
price per square meter of land amounts to = P680.00. The fair value measurement using unobservable
data is based on Level 3 of the fair value hierarchy.
From March 16 to December 31, 2017, ACEI’s share in MSPDC’s revenue and net income amounted
to =
P46.0 million and =
P37.5 million, respectively. If the combination had taken place at the beginning
of 2017, ACEI’s share in MSPDC’s revenue and net income would have been = P40.3 million and
=
P36.6 million, respectively.
SCC Bulk Water Supply, Inc. (SCC)
On December 18, 2017, Presage Corporation acquired 100% interest in SCC Bulk Water Supply, Inc.
The values of the identifiable assets and liabilities acquired and goodwill arising as at the date of
acquisition follows:
Assets
Cash and cash equivalents =152,462
P
Prepayments and other current assets 77,052
Property, plant and equipment 18,281,486
Water supply contract (Note 15) 127,476,358
Other assets 243,200
146,230,558
(Forward)

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Liabilities
Accounts payable and accrued expenses P19,157,789
=
Net Assets =127,072,769
P
Cost of acquisition =127,072,769
P
Goodwill =−
P
Cash consideration =127,072,769
P
Less: Cash acquired from the subsidiary 152,462
Net cash flow =126,920,307
P

The fair value of prepayments and other current assets, other assets and accounts payable and accrued
expenses approximate their carrying amounts since these are short-term in nature. The valuation
technique adopted for the measurement of property, plant and equipment and water supply contract is
the discounted cash flow method. The fair value measurement using unobservable data is based on
Level 3 of the fair value hierarchy.

From December 18 to 31, 2017, ACEI’s share in SSC’s revenue and net loss amounted to nil. If the
combination had taken place at the beginning of 2017, ACEI’s share in SSC’s revenue and net loss
would have been nil and =
P0.50 million, respectively.

Solienda, Inc. (Solienda)

On December 28, 2017, Presage acquired 100% interest in Solienda.

The values of the identifiable assets and liabilities acquired and goodwill arising as at the date of
acquisition follows:
Assets
Cash and cash equivalents =13,664,716
P
Receivables 6,111,959
Prepayments and other current assets 3,300
Deferred tax assets 6,143,051
Leasehold rights 638,851,209
664,774,235
Liabilities
Accounts payable and accrued expenses 148,964,773
Net Assets =515,809,462
P
Cost of acquisition =515,809,462
P
Goodwill =−
P

Cash consideration =515,809,462

P
Less: Cash acquired from the subsidiary 13,664,716
Net cash flow =502,144,746
P

The fair value of receivables, prepayments and other current assets, deferred tax assets, and accounts
payable and accrued expenses approximate their carrying amounts since these are short-term in
nature. The valuation technique adopted for the measurement of leasehold rights is the discounted
cash flow method. The fair value measurement using unobservable data is based on Level 3 of the fair
value hierarchy.

F-111
*SGVFS032389*
 - 42 -

From December 28 to 31, 2017, ACEI’s share in Solienda’s revenue and net income amounted to nil.
If the combination had taken place at the beginning of 2017, ACEI’s share in Solienda’s revenue and
net income would have been = P68.4 million and P=44.7 million, respectively.

2016 Acquisitions

NPDC

On November 21, 2016, Presage Corporation acquired an additional 17.79% equity interest in NPDC,
increasing the Group’s effective ownership interest in NPDC from 50% to 67.79%. Accordingly, as
of such date, the Parent Company considered NPDC as a subsidiary.

Below is a summary of the fair values of assets acquired and liabilities assumed as of the date of the
acquisition:

Assets
Cash =241,033,171
P
Receivables 348,248,005
Prepayments and other current assets 234,722,776
Investments - Ilocos Mango Growers, Inc. 209,250
Property and equipment 4,136,655,400
4,960,868,602
Liabilities
Accounts payable and accrued expenses 211,956,728
Deferred tax liability 129,675,138
Loans payable 2,237,909,157
2,579,541,023
Net Assets 2,381,327,579
Negative goodwill (149,849,300)
Fair value of previously held interest (1,099,998,410)
Non-controlling interest (775,598,077)
Acquisition cost =355,881,792
P

The cost of the acquisition is determined as follows:

Cash paid =355,881,792

P
Fair value of previously held interest 1,099,998,410
=1,455,880,202
P

The Group recognized remeasurement gain of = P134.28 million from its previously held interest of
=965.72 million resulting to fair value of previously held interest of P
P =1.10 billion.

Cash on acquisition follows:

Cash acquired from NPDC P241,033,171

=
Cash paid (355,881,792)
Net cash flow (P
=114,848,621)

F-112
*SGVFS032389*
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15. Property and Equipment and Investment Property

The rollforward analysis of this account follows:

2017

Machinery and
Land and Buildings and Equipment - Solar Machinery and Furniture and Transportation Construction in
Improvements Improvements and Hydro Equipment – Wind Fixtures Equipment Progress Others Total
Cost
At January 1 P
= 527,120,771 P
= 113,384,613 P
= 1,192,027,200 P
= 5,423,553,741 P
= 29,455,213 P
= 45,299,630 P
= 20,335,312,672 P
= 56,101,054 P
= 27,722,254,894
Additions 37,803,294 75,432,983 7,779,602 − 45,393,455 44,448,333 15,715,733,379 45,893,235 15,972,484,281
Acquisitions through business
combination − − 35,533,763 − 1,188,513 11,703,214 22,765,502 − 71,190,992
Retirement − (542,437) − − − − − − (542,437)
Disposals (4,735,718) − (2,498) − (3,383,027) (4,301,942) − (2,021,623) (14,444,808)
Reclassifications 2,603,600 8,430,316 − − 21,194 − (11,055,110) − −
Others* − (67,243,325) − − (14,973,994) (24,497,128) (948,209,454) (26,889,371) (1,081,813,272)
At December 31 562,791,947 129,462,150 1,235,338,067 5,423,553,741 57,701,354 72,652,107 35,114,546,989 73,083,295 42,669,129,650
Accumulated depreciation and
amortization

F-113
At January 1 4,923,675 5,918,564 38,999,825 1,462,126,553 15,883,055 16,850,731 − 25,591,758 1,570,294,161
Depreciation and amortization 756,467 11,238,133 50,404,144 177,090,519 35,227,632 24,329,358 − 35,818,238 334,864,491
Disposals (4,276,887) − (2,498) − (3,266,497) (3,913,329) − (1,861,290) (13,320,501)
Retirement − (76,773) − − − − − − (76,773)
Others* − (3,399,429) − − (5,325,653) (7,298,366) − (10,881,504) (26,904,952)
At December 31 1,403,255 13,680,495 89,401,471 1,639,217,072 42,518,537 29,968,394 − 48,667,202 1,864,856,426
Allowance for impairment − − 5,866,518 − − − − − 5,866,518
Net Book Value P
= 561,388,692 P
= 115,781,655 P
= 1,140,070,078 P
= 3,784,336,669 P
= 15,182,817 P
= 42,683,713 P
= 35,114,546,989 P
= 24,416,093 P
= 40,798,406,706

*Others pertains to cumulative translation adjustments.

*SGVFS032389*
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2016

Machinery and
Land and Buildings and Equipment - Solar Machinery and Furniture and Transportation Construction in
Improvements Improvements and Hydro Equipment – Wind Fixtures Equipment Progress Others Total
Cost
At January 1 =391,304,784
P =55,766,288
P =4,867,133
P =−
P =12,353,218
P =31,798,163
P P5,523,828,059
= =21,872,103
P P6,041,789,748
=
Additions 5,641,194 12,756,907 516,701,027 1,439,140,808 14,028,707 16,130,066 14,634,074,709 27,478,348 16,665,951,766
Acquisitions through business
combination 132,376,400 19,147,000 − 3,985,132,000 − − − − 4,136,655,400
Retirement − (2,779,464) (7,405,492) − (172,324) (3,793,530) − (1,084,606) (15,235,416)
Disposals − − − − − − (88,753,293) − (88,753,293)
Reclassifications − 21,868,830 677,864,532 − − − (677,864,532) − 21,868,830
Others* (2,201,607) 6,625,052 − (719,067) 3,245,612 1,164,931 944,027,729 7,835,209 959,977,859
At December 31 527,120,771 113,384,613 1,192,027,200 5,423,553,741 29,455,213 45,299,630 20,335,312,672 56,101,054 27,722,254,894
Accumulated depreciation and
amortization
At January 1 − 3,606,538 185,873 − 1,883,089 5,924,644 88,753,293 5,408,194 105,761,631
Depreciation and amortization − 2,763,938 54,116,019 9,225,054 3,811,203 7,447,842 − 8,866,691 86,230,747
Disposals − − − − − − (88,753,293) − (88,753,293)
Retirement − (2,779,464) (1,538,974) − (146,835) (2,893,616) − (1,059,548) (8,418,437)
Others* 4,923,675 2,327,552 (13,763,093) 1,452,901,499 10,335,598 6,371,861 − 12,376,421 1,475,473,513
At December 31 4,923,675 5,918,564 38,999,825 1,462,126,553 15,883,055 16,850,731 − 25,591,758 1,570,294,161

F-114
Net Book Value =522,197,096
P =107,466,049
P =1,153,027,375
P =3,961,427,188
P =13,572,158
P =28,448,899
P =20,335,312,672
P =30,509,296
P =26,151,960,733
P

*Others pertains to cumulative translation adjustments.

2015

Machinery and
Land and Buildings and Equipment - Solar Furniture and Transportation Construction in
Improvements Improvements and Hydro Fixtures Equipment Progress Others Total
Cost
At January 1 =346,719,398
P =17,148,594
P =91,400
P P1,860,835
= =12,785,527
P =62,786,589
P P7,579,434
= =448,971,777
P
Additions 44,585,386 38,617,694 5,668,344 10,637,361 19,012,636 5,011,756,436 14,292,669 5,144,570,526
Retirement − − − (144,978) − − − (144,978)
Reclassifications − − − − − 449,285,034 − 449,285,034
Others − − (892,611) − − − − (892,611)
At December 31 391,304,784 55,766,288 4,867,133 12,353,218 31,798,163 5,523,320,059 21,872,103 6,041,789,748
Accumulated depreciation and
amortization
At January 1 − 2,779,464 76,167 319,388 2,279,664 − 1,402,967 6,857,650
Depreciation and amortization − 827,074 109,706 1,599,255 3,644,980 − 4,005,227 10,186,242
Retirement − − − (35,554) − − − (35,554)
Impairment − − − − − 88,753,293 − 88,753,293
At December 31 − 3,606,538 185,873 1,883,089 5,924,644 88,753,293 5,408,194 105,761,631
Net Book Value =391,304,784
P =52,159,750
P =4,681,260
P =10,470,129
P =25,873,519
P =55,375,074,766
P =16,463,909
P =5,936,028,117
P

*SGVFS032389*
 - 45 -

Land and Improvements

On various dates in 2016 and 2015, the Parent Company purchased certain parcels of land in
Kauswagan, Lanao Del Norte. These parcels of land are used as project site for the construction and
operations of the Kauswagan Power Plant Project. Portion of the land will also be donated to the
local government of Kauswagan to be used for the relocation of informal settlers. The total land area
acquired measures 719,600 square meters amounting to P =391.30 million. Related acquisition costs
(e.g., legal and registration fees) amounting to =
P3.25 million, =
P0.52 million and =
P27.82 million in
2017, 2016 and 2015 were capitalized as part of the cost of land acquired.

Investment Property
The investment property consists solely of land that is held by Manapla Sun Power Dev’t Corp. to
earn rental income located in Barangay Sta. Teresa, Manapla, Negros Occidental. As at
September 30, 2018 and December 31, 2017, the fair value of investment property amounted to
=
P220.35 million.

The valuation technique adopted for the measurement of fair value dated March 21, 2017 are the
market approach. The market price per square meter of land amounts to P680.00. The fair value
measurement using unobservable data is based on Level 3 of the fair value hierarchy.

On September 1, 2015, Manapla Sun Power Dev’t Corp. entered into a lease agreement with Negros
Island Solar Power Inc. (the Lessee) for the lease of approximately 638,193 sqm. Of land. The term
of the lease shall be for a period of twenty-five (25) years upon written notice served upon by the
Manapla Sun Power Dev’t Corp. not earlier than one (1) year but not later than three (3) months
before the expiration of the original period of lease. Lease extension shall be in writing executed by
both parties three (3) months before the expiration of the original period of lease. The Lessee has the
sole option to extend the term of the lease.

Agreed rental payment under the lease contract is P9.00 per square meter per month or a total annual
rental of =
P68.92 million. Contract amount shall be subject to annual adjustment based on actual
inflation rate covering subject period. Manner of payment shall be in an annual lump sum amount to
be paid one (1) year in advance.

Machinery and Equipment - Solar

MSEI’s 18-megawatt (MW) solar power plant project, with expansion of up to 40MW, located in the
City of Bais, Province of Negros Oriental. The project utilizes photovoltaic (PV) technology to
convert sunlight to electricity using 18,938 modules and eight (8) inverters. On March 11, 2016,
MSEI begun full commercial operations.

Machinery and Equipment - Wind

NPDC developed the country’s first commercial wind farm, owns and operates the 52MW Bangui
wind project in Bangui, Ilocos Norte. Commercial operations started in June 2005 with fifteen (15)
wind turbines. Five (5) additional turbines were commissioned in August 2008. In September 2014,
NPDC commissioned six (6) new turbines under its Phase III expansion project, with a generation
capacity of 18.9 MW. Commercial operations started in October 2014. NPDC’s 20 wind turbines
have a maximum generation capacity of 33 megawatts (MW).

Construction in Progress
Construction in progress account in 2017 and 2016 pertains to the construction and development of
GNPower Kauswagan (GNPK) - 4x135 MW (net) coal-fired power generating facility and private
port facility located in the Barangays of Tacub and Libertad in the Municipality of Kauswagan,
Province of Lanao del Norte.

F-115
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On May 15, 2014, GNPK, Shanghai Electric Power Construction Co., Ltd. (SEPC; Supplier and
Contractor) and Power Construction Corporation of China (Parent Guarantor) executed the
Coordination Agreement, Construction and Supply Agreement (Onshore EPC) and Engineering,
Design and Procurement (Offshore EPC) Agreement (collectively the EPC Agreement).

In accordance with the amended Onshore EPC, SEPC shall construct, procure and supply, pack and
transport, commission, start-up, test, deliver, guarantee the performance and warrant GNPK’s power
facility for a total construction cost of $227.54 million (or =
P11,361.20 million). Further, in
accordance with the Offshore EPC, SEPC shall design, engineer, procure and supply, and warrant the
GNPK’s power facility for a total supply cost of $472.90 million (or = P23,612.04 million).

GNPK has the right to claim Delay Liquidated Damages for any delays on the completion of each
unit using the rate of $20,550 per day on the Onshore EPC and $42,710 per day on the Offshore EPC
or a total of $63,260 per day rate. Unit 1’s completion date was expected and contracted to be on
December 1, 2017 which resulted to thirty (30) days of delay. Total liquidated damages as of
December 31, 2017 and 2016 amounted to $1.90 million (or P =94.76 million) and nil, respectively.

16. Intangible Assets

Goodwill
Goodwill acquired through business combinations of the Group for impairment testing is attributable
to the purchase of interest in ACE DevCo and NPDC amounting to P =786.26 million and
=410.24 million, respectively, as of December 31, 2017 and 2015, respectively (nil as of
P
December 31, 2016) (see Note 14).

Leasehold Rights
On December 5, 2016, San Julio Realty, Inc. assigned to Solienda Inc. (Solienda) the absolute and
irrevocable title, rights and interests in the contract of lease, and the subsequent amendment
agreements, with San Carlos Sun Power, Inc. Also in December 2016, San Julio Realty, Inc. assigned
its rights to its contracts of lease with San Carlos Solar Energy, Inc. and San Carlos Biopower Inc.,
beginning 2017.

The Assignment Agreements were amended on December 26, 2016 to clarify that San Julio Realty,
Inc. irrevocably assigns, transfers and conveys absolutely unto Solienda all its rights, ownership
and/or interest in 50% of the total rental payments due under the Contracts of Lease. The parties
undertake to provide continuing support for the full implementation of the Agreements and shall
perform in good faith any and all facts necessary to implement the Agreements and its amendments.

The leasehold rights amounted to =

P470.72 million as of December 31, 2017. The leasehold right will
be amortized over the remaining lease term of the agreements.

Water Supply Contract

SCC Bulk Water Supply, Inc. has obtained the contract for the supply and distribution of water to San
Carlos Biopower, Inc. Water Supply Contract obtained amounted to P =127.48 million. This is
presented as intangible assets in the consolidated statements of financial position.

F-116
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17. Accounts and Other Payables

This account consists of:

2017 2016 2015

Payable to contractors P
=1,882,224,378 =1,138,044,135
P =1,040,195,883
P
Interest payable 616,154,836 330,713,420 60,663,911
Trade payables 540,430,917 184,192,934 60,059,413
Accrued expenses 342,137,620 312,793,097 17,165,216
Retention payable 153,374,139 20,051,344 21,582,462
Nontrade payables (Note 7) − − 219,330,000
Other payables 52,825,098 5,076,626 12,731,965
P
=3,587,146,988 =1,990,871,556
P =1,431,728,850
P

Payable to contractors pertains to amounts owed to the Contractors of GNPK and MSEI. As of
December 31, 2017, 2016 and 2015, GNPK’s coal power plant is under construction. Outstanding
balance of MSEI pertains to the unpaid services performed by the contractors in relation to the
construction of its solar power plant. MSEI construction also occurred from September 2015 to
March 2016. These are noninterest-bearing and are normally settled on a 30- to 60-day term.

Interest payable include the unpaid interest expense on GNPK loan amounting to P =574.85 million,
=310.53 million and =
P P60.66 million as of December 31, 2017, 2016 and 2015, respectively. Interest
payable on ACEI loan amounts to = P24.08 million as of December 31, 2017 (nil as of
December 31, 2016). Interest payable on NPDC loan amounts to = P17.23 million and P =20.18 million
as of December 31, 2017 and 2016, respectively (nil in 2015).

Trade payables include billings of goods and services from various suppliers and are normally settled
within 30 days.

Accrued expenses consist mainly of professional and consultancy fees, personnel costs, postal and
communication, contracted services, transportation and travel, and representation expenses incurred.
These are noninterest-bearing and are normally settled within 12 months.

Retention payable pertains to the balance of the purchase price for the acquired parcels of land
situated in Barangays Tacub and Libertad, Municipality of Kauswagan, Lanao Del Norte. These
parcels of land will be used as project site for the construction and operations of the Kauswagan
Power Plant Project.

Other payables are noninterest-bearing and are normally settled within a year.

18. Loans Payable

This account consists of dollar and peso denominated loans from the following:

2017 2016 2015

Dollar denominated loans P
=27,083,907,198 =
P16,861,180,657 =2,466,326,167
P
Peso denominated loans 5,072,808,638 2,244,854,299 368,316,219
32,156,715,836 19,106,034,956 2,834,642,386
Less current portion 287,078,489 423,614,935 −
P
=31,869,637,347 P
=18,682,420,021 =2,834,642,386
P

F-117
*SGVFS032389*
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GNPK

2017

Amounts
(in original Interest Rate
Senior Lenders currency) Amounts (in P
=) Per Annum Payment Schedule
Onshore Dollar Facility -
Tranche A
Bank of Philippine Islands (BPI) $80,721,492 4,030,424,096 6.875% 18 unequal semi-
Security Bank Corporation annual installments
(SBC) 73,383,174 3,664,021,878 6.875% from Loan
Rizal Commercial Banking Conversion Date
Corporation (RCBC) 55,037,380 2,748,016,383 6.875%
United Coconut Planters Bank
(UCPB) 51,368,222 2,564,815,324 6.875%
Land Bank of the Philippines
(LBP) 14,676,634 732,804,336 6.875%
$275,186,902 13,740,082,017
Onshore Dollar Facility - LIBOR*
Tranche B applicable at
RCBC $24,720,370 1,234,288,074 each Interest 18 unequal semi-
Philippine Bank of Period plus a annual installments
Communications (PBCom) 19,309,534 964,125,033 margin of three from Loan
and one-quarter Conversion Date
of one percent
(3.25%)
$44,029,904 2,198,413,107
Onshore Dollar Facility -
Tranche C
RCBC $51,368,222 2,564,815,324 The greater of 25 unequal semi-
BPI 29,353,270 1,465,608,771 the Tranche C annual installments
Cathay United Bank Co., Ltd. - Floor Rate** and from Loan
Taiwan Branch the Tranche C Conversion Date
(CUBC-Taiwan) 22,014,953 1,099,206,603 Base Rate***
Development Bank of the
Philippines (DBP) 14,676,634 732,804,336
Cathay United Bank Co., Ltd. -
Manila Branch
(CUB-Manila) 7,338,318 366,402,218
$124,751,397 6,228,837,252
Onshore Peso Facility - 18 unequal semi-
RCBC =1,200,000,000
P 1,200,000,000 6.80% annual installments
Sun Life of Canada from Loan
(Philippines), Inc. (SunLife) 500,000,000 500,000,000 6.80% Conversion Date
=1,700,000,000
P 1,700,000,000
Offshore Commercial Facility - 18 unequal semi-
Tranche A annual installments
Prudential Hong Kong Limited from Loan
(PHKL) $27,518,691 1,374,008,242 6.875% Conversion Date
Offshore Commercial Facility -
Tranche B 18 unequal semi-
Prudential Assurance Company annual installments
Singapore (Pte.) Ltd. from Loan
(PACS) $27,518,691 1,374,008,242 6.875% Conversion Date

(Forward)

F-118
*SGVFS032389*
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Amounts
(in original Interest Rate
Senior Lenders currency) Amounts (in P
=) Per Annum Payment Schedule
Additional Senior Term Facility LIBOR*
Bank of China Limited - applicable at
Grand Cayman Branch each Interest
(BOC-Cayman) $40,360,746 2,015,212,048 Period plus a 19 unequal semi-
Bank of China Limited - margin of three annual installments
Manila Branch and one-quarter from Loan
(BOC-Manila) 14,676,634 732,804,336 of one percent Conversion Date
(3.25%)
$55,037,380 2,748,016,384
Total Borrowings 29,363,365,244
Less: Unamortized
deferred financing costs (723,355,257)
Add: Unamortized portion
of derivative asset 113,533,680
Loans payable 28,753,543,667
*London Interbank Offered Exchange Rate
* * “Tranche C Floor Rate” shall mean six and one-quarter of one percent (6.25%) per annum.
***“Tranche C Base Rate” shall mean the straight-line interpolation of the Tranche C 2021 ROP Bond Rate and
the Tranche C 2024 ROP Bond Rate plus the Tranche C Margin (3.50%).

2016

Amounts
(in original Interest Rate
Senior Lenders currency) Amounts (in P
=) Per Annum Payment Schedule
Onshore Dollar Facility -
Tranche A
BPI $47,789,886 2,386,149,008 6.875% 18 unequal semi-
annual installments
SBC 43,445,348 2,169,226,226 6.875% from Loan
Conversion Date
RCBC 32,584,013 1,626,919,769 6.875%

UCPB 30,411,744 1,518,458,378 6.875%

LBP 8,689,065 433,845,015 6.875%

$162,920,056 8,134,598,396
Onshore Dollar Facility -
Tranche B
Philippine Bank of LIBOR* 18 unequal semi-
Communications (PBCom) $18,532,916 925,348,496 applicable at annual installments
RCBC 7,534,295 376,187,349 each Interest from Loan
Period plus a Conversion Date
margin of three
and one-quarter
of one percent
(3.25%)
$26,067,211 1,301,535,845

(Forward)

F-119
*SGVFS032389*
 - 50 -

Amounts
(in original Interest Rate
Senior Lenders currency) Amounts (in P
=) Per Annum Payment Schedule
Onshore Dollar Facility -
Tranche C
RCBC $30,411,746 1,518,458,478 The greater of 25 unequal semi-
BPI 17,378,141 867,690,580 the Tranche C annual installments
Cathay United Bank Co., Ltd. - Floor Rate** and from Loan
Taiwan Branch the Tranche C Conversion Date
(CUBC-Taiwan) 13,033,606 650,767,948 Base Rate***
Development Bank of the
Philippines (DBP) 8,689,070 433,845,265
Cathay United Bank Co., Ltd. -
Manila Branch
(CUB-Manila) 4,344,535 216,922,633
$73,857,098 3,687,684,904
Onshore Peso Facility - 18 unequal semi-
RCBC =418,383,391
P 418,383,391 6.80% annual installments
Sun Life of Canada from Loan
(Philippines), Inc. (SunLife) 365,290,913 365,290,913 6.80% Conversion Date
=783,674,304
P 783,674,304
Offshore Commercial Facility - 18 unequal semi-
Tranche A annual installments
Prudential Hong Kong Limited from Loan
(PHKL) $16,292,015 813,460,309 6.875% Conversion Date
Offshore Commercial Facility -
Tranche B 18 unequal semi-
Prudential Assurance Company annual installments
Singapore (Pte.) Ltd. from Loan
(PACS) $16,292,015 813,460,309 6.875% Conversion Date

Additional Senior Term Facility LIBOR*

Bank of China Limited - applicable at
Grand Cayman Branch each Interest
(BOC-Cayman) $23,894,941 1,193,074,404 Period plus a 19 unequal semi-
Bank of China Limited - margin of three annual installments
Manila Branch and one-quarter from Loan
(BOC-Manila) 8,689,069 433,845,215 of one percent Conversion Date
(3.25%)
$32,584,010 1,626,919,619
Total Borrowings 17,161,333,686
Less: Unamortized deferred
financing costs (548,042,248)
Add: Unamortized portion
of derivative asset 247,889,219
Loans payable 16,861,180,657
*London Interbank Offered Exchange Rate
* * “Tranche C Floor Rate” shall mean six and one-quarter of one percent (6.25%) per annum.
***“Tranche C Base Rate” shall mean the straight-line interpolation of the Tranche C 2021 ROP Bond Rate and
the Tranche C 2024 ROP Bond Rate plus the Tranche C Margin (3.50%).

F-120
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2015
Amounts
(in original Interest Rate
Senior Lenders currency) Amounts (in P
=) Per Annum Payment Schedule
Onshore Dollar Facility -
Tranche A
BPI $14,878,555 700,184,798 6.875% 18 unequal semi-
annual installments
SBC 13,525,956 636,531,489 6.875% from Loan
Conversion Date
RCBC 10,144,469 477,398,711 6.875%

UCPB 9,468,170 445,572,080 6.875%

LBP 2,705,187 127,306,100 6.875%

$50,722,337 2,386,993,178

Onshore Dollar Facility - LIBOR*

Tranche B applicable at
RCBC $8,115,576 381,919,007 each Interest 18 unequal semi-
Period plus a annual installments
margin of three from Loan
and one-quarter Conversion Date
of one percent
(3.25%)
$8,115,576 381,919,007
Onshore Peso Facility - 18 unequal semi-
RCBC =368,316,219
P 368,316,219 6.80% annual installments
from Loan
Conversion Date
=368,316,219
P 368,316,219
Total Borrowings 3,137,288,404
Less: Unamortized
deferred financing costs (336,909,794)
Add: Unamortized portion
of derivative asset 34,323,776
Loans payable 2,834,642,386
*London Interbank Offered Exchange Rate

Deferred financing costs represent the costs incurred to obtain project financing for the drawn loan
facilities.

As of December 31, 2017, 2016 and 2015, the GNPK property and equipment with net book value of
=40,776.54 million, P
P =20,635.93 and =P20,378.48, respectively, are pledged as collateral under a
project finance structure. Interest amounting to =
P0.27 million, P
=21.34 million and P=12.56 million
were charged to statement of comprehensive income in 2017, 2016 and 2015, respectively, as these
relate to various administrative expenses. As of December 31, 2017, 2016 and 2015, interest
capitalized as part of the “Construction in progress” amounted to P=1,211.83 million, =P711.51 million
and P=60.55 million respectively.

Interest from the loans amounting to P

=574.85 million, P
=310.53 and =
P60.66 million remains unpaid as
of December 31, 2017, 2016 and 2015, respectively (see Note 17).

As of December 31, 2017, 2016 and 2015, GNPK is compliant with the loan covenants under the loan
agreement.

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NPDC

Short-term debt:
On April 21, 2016, BDO granted an unsecured = P200.00 million short-term loan facility to the NPDC.
The proceeds from the loan were used for working capital purposes. Total drawings from loan
facility amounted to P
=170.00 million, =
P20.00 million was paid on October 27, 2016 and
=150.00 million on April 27, 2017 plus 3.41% interest.
P

Long-term debt:

2017
Current Noncurrent Total
Principal balances at the end of year =287,078,489
P =1,779,343,513
P =
P2,066,422,002
Less unamortized debt issuance cost 2,994,382 10,255,451 13,249,833
=284,084,107
P =1,769,088,062
P =
P2,053,172,169

2016
Current Noncurrent Total
Principal balances at the end of year =195,074,023
P =2,066,422,002
P =2,261,496,025
P
Less unamortized debt issuance cost 3,486,160 13,155,566 16,641,726
=191,587,863
P =2,053,266,436
P =2,244,854,299
P

Bank of the Philippines Islands (BPI)

On May 31, 2012, BPI granted a P =1.00 billion loan to NPDC. The proceeds from the loan were used
to fully prepay the senior loans of NPDC.

On September 27, 2013, BPI granted a P=1.50 billion long-term loan facility to NPDC to partly fund
the Phase III expansion project of NPDC. Total drawings from the loan facility amounted to
=1.28 billion.
P

On October 26, 2016, NPDC and BPI signed an amendment to the loan agreement dated
September 27, 2013 and May 31, 2012. Under the amendment, the loan principal due on
October 2016 and April 2017 were reduced by = P44.88 million and =
P134.69 million, respectively, to
offset the short-term impact of the following:

(a) low wind due to the El Nino phenomenon,

(b) constraint in the delivery of electricity brought about by the delay in the completion of the
230 kV San Sebastian-Laoag transmission line; and
(c) delay in collection of revenues due under the FIT.

The reduction in loan principal payment in those periods were spread over the remaining term of the
loan. The remaining terms and conditions of the original loan agreements were not amended.

The interest rate on both loans from BPI is based on a floating rate equivalent to prevailing Bangko
Sentral ng Pilipinas Overnight Reverse Repurchase Rate (BSP RRP), plus 1.00% spread. The interest
is payable semi-annually, computed based on the outstanding balance with payments commencing on
the issue date and ending on the maturity date. Starting on the 5th or 7th year, the NPDC has the
option of choosing between a floating rate and a fixed rate.

Union Bank of the Philippines (UBP)

On May 6, 2014, NPDC signed a P =500.00 million long-term loan facility with UBP to partly fund the
Phase III expansion project of NPDC and refinance a loan from Metrobank.

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The loans from BPI and UBP are secured by a participation in a Mortgage Trust Indenture dated
June 13, 2007, covering certain assets, properties, machinery and equipment located in Bangui, Ilocos
Norte issued by Chinatrust Commercial Bank Corporation with net book values of P =2.68 billion and
=2.85 billion as of December 31, 2017 and 2016, respectively.
P

The 6.25% interest rate on the loan from UBP is fixed for the entire 10-year repayment period.

The details of the contractual maturity of the principal and the interest rate of the loans follow:

Principal Balance Interest Terms of Start of End of

Creditor 2017 2016 Rate Payment Repayment Repayment
BPI =1,061,422,002 =
P P1,146,575,469 5.00% Semi-annual 10/31/2015 4/30/2025
BPI 630,000,000 684,365,000 5.00% Semi-annual 10/31/2012 10/31/2024
UBP 375,000,000 430,555,556 6.25% Semi-annual 10/31/2015 4/30/2025
=2,066,422,002 P
P =2,261,496,025
*The principal balance does not include the fair value adjustment amounting to =
P156.65 million as a result of business
combination of NPDC.

Debt issuance costs are incidental cost incurred in obtaining the loan, which include documentary
stamp tax (DST), transfer tax, chattel mortgage, real estate mortgage, professional fees and other out
of the pocket expenses. As of December 31, 2017 and 2016, = P13.25 million and P=16.64 million,
respectively, are presented as deduction to the loans payable account and will be amortized over the
life of the loan using EIR method. Amortizations of deferred cost are capitalized until all activities
necessary to prepare the power plant for its intended use are substantially complete.

Details of unamortized debt issuance costs follow:

2017 2016 2015

Balances at beginning of year P
=16,641,726 =20,391,614
P =16,905,454
P
Less amortization during the year 3,391,893 3,749,888 3,486,160
Balances at end of year P
=13,249,833 =16,641,726
P =20,391,614
P

The loan covenants with both BPI and UBP require NPDC to maintain a debt-to-equity (DE) ratio of
70:30. NPDC complied with these covenants as of December 31, 2017, 2016 and 2015.

ACEI (the Parent Company)

The Parent Company entered into several Term Loan Agreements to finance its investments in
energy-related projects and for general corporate needs.

On February 20, 2017, the Parent Company entered into an unsecured loan agreement with The
Philippine American Life and General Insurance Company (PHILAM) amounting to P =1.00 billion,
payable in 10 years from the date of drawdown with 6% fixed interest per annum. The loan shall be
paid in one lump sum at the maturity date. As of December 31, 2017, the loan has been fully drawn.

On April 27, 2017, the Parent Company entered into an unsecured loan agreement with Philippine
National Bank (PNB) amounting to = P7.00 billion. The loan is payable seven (7) years from initial the
drawdown date. The Parent Company shall pay interest on the outstanding principal amount of the
loan at the fixed rate of 5.75% per annum, with duration of three (3) months commencing on the
drawdown date. All drawdown beyond May 5, 2017, the relevant PDST-R2 benchmark rate will
apply +1% per annum spread, with a floor of 5.25% per annum. Repayment of the principal amount
shall be 20% of the loan from 5th to 27th interest period and the remaining 80% shall be paid lump
sum at the end of 28th interest period. Draw down of = P250.00 million was made by the Parent

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Company on May 3, 2017. As of December 31, 2017, the Parent Company has undrawn loan
amounting to P
=6.75 billion.

On June 22, 2017, the Parent Company entered into unsecured loan agreement with Security Bank
Corporation (SBC) amounting to = P5.00 billion. The tenor of the loan agreement is seven (7) years
from the initial drawdown date, with grace period on principal payments of up to three (3) years,
reckoned from the initial drawdown. Repayment of the principal amount shall be 16% of the loan
from the 12th to 27th interest period and the remaining 84% of the loan will be paid lump sum on the
28th interest period. The Parent Company shall pay interest on the outstanding principal amount of
the loan at the fixed rate of 5.75% per annum for all drawdowns from June 2017 to June 2018. For
all drawdowns beyond June 2018, the interest rate shall be based on the relevant Peso Benchmark
Rate PDST-R2 rate, plus credit spread, the fixed interest rate shall have a floor rate of 5.00%. Interest
period shall have a duration of three (3) months.

As of December 31, 2017 total drawdowns from the loan facilities are as follows:

PHILAM =1,000,000,000
P
PNB 250,000,000
SBC 100,000,000
=1,350,000,000
P

The related debt issue cost amounted to =

P5.00 million in 2017. Interest expense recognized in 2017
amounted to =P64.90 million, of which =
P24.08 million remained outstanding as of December 31, 2017.

The loan covenants with PHILAM, PNB and SBC require the Parent Company to maintain a debt-to-
equity ratio of 2.33:1. The Parent Company complied with these covenants as of December 31, 2017,
2016 and 2015.

19. Derivatives

The onshore and offshore loan agreements have embedded prepayment options subject to a 3%
prepayment penalty. The embedded derivative for Tranche A onshore dollar loan is assessed to be
not closely related to the host contract, and thus, bifurcated and accounted for separately.

As of December 31, 2017, 2016 and 2015, the value of the derivative asset related to the embedded
prepayment option amounted to P =83.79 million, P=106.62 million and =
P30.26 million, respectively.
The fair value changes of the derivative asset recognized as “Mark-to-market gain” for the year ended
December 31, 2017 amounted to P =99.88 million and “Mark-to-market losses” for the years ended
December 31, 2016 and 2015 amounted to P =136.97 million and =P4.10 million, respectively.

The movement in fair value of the derivative asset for 2017, 2016 and 2015 is as follows:

2017 2016 2015

Balance at beginning of year P
=106,616,866 =30,265,290
P =−
P
Increase (decrease) in the derivatives
bifurcated during the year (122,715,247) 213,321,152 34,365,938
Net fair value changes during the year 99,883,432 (136,969,576) (4,100,648)
Balance at end of year P
=83,785,051 =106,616,866
P =30,265,290
P

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On January 31, 2017, the Parent Company executed a five (5) year contract with South Luzon Power
Generation Corporation (“SLPGC”), which owns and operates 2 x 150 MW coal-fired power
generating plant in Calaca, Batangas. The contract is effective from February 26, 2017 up to
December 25, 2021 and covers contracted capacity of 50MW which enables ACEI to meet the
electricity requirements of its retail customers. Under the contract, the Parent Company has the
obligation to pay SLPGC the Exposure Adjustment and the Parent Company or SLPGC, as the case
may be has the obligation to pay the Exposure Adjustment in accordance with the fee computation
formula agreed to by both parties.

On June 26, 2017, ACEI entered into a three (3) year contract with DirectPower Services Inc.
(“DPSI”) (an affiliate) effective from June 26, 2017 up to June 25, 2020. The contract enables DPSI
to meet the electricity requirements of its customers. Under the contract, the Parent Company or
DPSI, as the case may be has the obligation to pay the Exposure Fee in accordance with the fee
computation formula agreed to by both parties.

The mark-to-market gains and losses related to contracts with SLPGC and DPSI are not material for
2017.

20. Equity

On March 24, 2014, the Parent Company’s BOD approved the increase in authorized capital stock
from =
P10.00 billion divided into 100,000,000 common shares with a par value of =
P100 per share to
=20.00 billion divided into 100,000,000 common shares and 100,000,000 redeemable common
P
shares, both with a par value of =
P100 per share.

Redeemable common shares have the following features:

∂ Voting;
∂ Participating;
∂ Redeemable no earlier than five years from issuance, and in all cases at the option of the Parent
Company; and,
∂ With dividend rate as may be determined by the BOD from time to time.

On December 18, 2014, the Parent Company filed with the SEC its application for said increase in
authorized capital stock. The application was subsequently approved by the SEC on
December 28, 2014. On various dates in 2014, AC infused capital totaling =
P2.12 billion for which
the related common stock totaling 21.25 million shares have been issued.

On February 23, 2015, the Parent Company’s BOD approved to increase the authorized capital stock
of the Parent Company from = P20.00 billion divided into 100,000,000 common shares and
100,000,000 redeemable common shares both with a par value of = P100 per share to =
P23.74 billion
divided into 137,400,000 common shares and 100,000,000 redeemable common shares both with a
par value of =
P100 per share.

On May 14, 2015, the Parent Company filed its application for another increase in authorized capital
stock with the SEC. On June 3, 2015, the Parent Company received from SEC its certificate of
approval of increase in capital stock. On various dates in 2017 and 2016, AC infused P =2.85 billion
and =
P2.29 billion, respectively, for which the related common stock totaling 28.49 million shares and
22.91 million shares, respectively, have been issued. Transaction cost related to the stock issuance
amounted to =P26.3 million and = P8.02 million in 2017 and 2016, respectively.

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On August 31, 2017, the Parent Company’s BOD approved to increase the authorized capital stock of
ACEI from P =23.74 billion divided into 137,400,000 common shares and 100,000,000 redeemable
common shares, both with a par value of = P100 per share, into P=32.74 billion divided into 227,400,000
common shares and 100,000,000 redeemable common shares, both with a par value of = P100 per
share. On various dates in 2017, AC invested P =2.85 billion comprised of 28.49 million common
shares, of which = P1.69 billion remains unpaid as of December 31, 2017. Also on various dates in
2017, AC invested = P1.03 billion comprised of 10.27 million redeemable common shares. Transaction
costs related to the increase in authorized capital stock amounted to =
P23.36 million in 2017. On
December 29, 2017, ACEI received from the SEC its certificate of approval for the increase in capital
stock.

Capital management
The primary objective of the Parent Company’s capital management policy is to ensure that it
maintains sufficient funds and equity capital in order to support its business and maximize
shareholder value.

The Parent Company manages its capital structure and makes adjustments to it, in light of changes in
economic conditions. No changes were made in the objectives, policies or processes for the years
ended December 31, 2017, 2016 and 2015. The Parent Company considers total equity as capital.

The Parent Company is not subject to externally imposed capital requirements.

21. Segment Information

Business segment information is reported on the basis that is used internally for evaluating segment
performance and deciding how to allocate resources among operating segments. Accordingly, the
primary segment reporting format is by business segment.

For management purposes, the Group is organized into the following business units:

∂ Parent Company - represents operations of the Parent Company including its Retail Electricity
Supply (RES) Unit.
∂ Renewables - generation, transmission, distribution and supply of electricity using renewable
sources such as solar, wind and geothermal resources.
∂ Thermal - generation, transmission, distribution and supply of electricity using conventional way
of energy generation. The Group holds joint venture partnerships with various power generators.

Management monitors the operating results of its business units separately for the purpose of making
decisions about resource allocation and performance assessment. Segment performance is evaluated
based on operating profit or loss and is measured consistently with operating profit or loss in the
consolidated financial statements.

For the years ended December 31, 2017, 2016 and 2015, there were no revenue transactions with a
single external customer which accounted for 10% or more of the consolidated revenue from external
customers.

Intersegment transfers or transactions are entered into under the normal commercial terms and
conditions that would also be available to unrelated third parties. Segment revenue, segment expense
and segment results include transfers between operating segments. Those transfers are eliminated in
consolidation.

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The following tables regarding operating segments present revenue and income information for the
periods ended December 31, 2017, 2016 and 2015 and assets and liabilities as of December 31, 2017,
2016 and 2015:

2017

Parent Intersegment
Company Renewables Thermal Elimination Consolidated
Revenue
Energy sales P1,128,014,479
= P1,206,506,283
= P−
= =− =
P P2,334,520,762
Dividend income 1,230,708,107 3,163,078,024 − (4,003,777,888) 390,008,243
Management fees 29,785,845 109,028,430 − (10,251,606) 128,562,669
Rental income 99,993,417 80,344,763 − (97,489,814) 82,848,366
2,488,501,848 4,558,957,500 − (4,111,519,308) 2,935,940,040
Cost and expenses
Costs of sales and services 1,092,581,728 470,816,828 − − 1,563,398,556
General and administrative 533,812,914 409,390,346 390,507,039 (3,775,466) 1,329,934,833
1,626,394,642 880,207,174 390,507,039 (3,775,466) 2,893,333,389
Other income (charges)
Equity in net income 46,335,629 512,198,701 1,219,457,304 − 1,777,991,634
Interest income 64,128,886 15,832,546 1,521,246 − 81,482,678
Foreign exchange gain (loss) (2,746,275) 9,238 (785,876) 37,731,200 34,208,287
Interest and other financing
charges (49,878,760) (231,289,034) (7,702,810) − (288,870,604)
Other income 131,299,406 1,554,201,899 201,502,595 − 1,887,003,900
189,138,886 1,850,953,350 1,413,992,459 37,731,200 3,491,815,895
Net income (loss) before
income tax 1,051,246,092 5,529,703,676 1,023,485,420 (4,070,012,642) 3,534,422,546
Provision for (benefit from)
income tax 37,485,690 43,471,775 (136,523,226) − (55,565,761)
Net income (loss) =1,013,760,402
P =5,486,231,901
P =1,160,008,646 (P
P =4,070,012,642) P
=3,589,988,307

Other information
Segment assets =5,379,382,881 P
P =8,646,299,738 =
P41,187,648,272 =452,879,444 P
P =55,666,210,335
Investments in associate and
joint ventures 24,468,241,360 21,511,493,568 8,528,083,289 (31,143,373,990) 23,364,444,227
Deferred tax asset − − − − −
Total assets =29,847,624,241 =
P P30,157,793,306 P
=49,715,731,561 (P
=30,690,494,546) P
=79,030,654,562

Segment liabilities =1,978,318,889

P =4,511,500,558 P
P =31,703,534,702 (P
=2,310,349,833) P
=35,883,004,316
Deferred tax liabilities 54,206,052 103,572,073 9,697 − 157,787,822
Total liabilities =2,032,524,941
P =4,615,072,631 P
P =31,703,544,399 (P
=2,310,349,833) P
=36,040,792,138

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2016

Parent Intersegment
Company Renewables Thermal Elimination Consolidated
Revenue
Energy sales =4,101,506
P =199,204,819
P P−
= =−
P =203,306,325
P
Dividend income 896,391,414 − − (676,645,870) 219,745,544
Management fees 16,786,425 − − − 16,786,425
Rental income − − − − −
917,279,345 199,204,819 − (676,645,870) 439,838,294
Cost and expenses
Costs of sales and services 3,083,477 92,511,986 − − 95,595,463
General and administrative 357,115,111 92,290,212 465,670,352 432,546,287 1,347,621,962
360,198,588 184,802,198 465,670,352 432,546,287 1,443,217,425
Other income (charges)
Equity in net income 780,430,366 23,722,454 738,323,828 − 1,542,476,648
Interest income 28,646,655 889,913 26,267,854 − 55,804,422
Foreign exchange gain 3,435,543 6,518,831 63,392,933 − 73,347,307
Interest and other financing
charges − (10,754,901) (20,552,767) − (31,307,668)
Other income 98,553,157 1,860,032,297 − (94,790,260) 1,863,795,194
911,065,721 1,880,408,594 807,431,848 (94,790,260) 3,504,115,903
Net income (loss) before
income tax 1,468,146,478 1,894,811,215 341,761,496 (1,203,982,417) 2,500,736,772
Provision for (benefit from)
income tax 25,676,541 123,190,558 (4,542,276) 131,456 144,456,279
Net income (loss) =1,442,469,937
P =1,771,620,657
P =346,303,772 (P
P =1,204,113,873) P
=2,356,280,493

Other information
Segment assets =5,241,818,443 P
P =13,766,949,351 =
P23,584,644,344 =461,793,421 P
P =43,055,205,559
Investments in associate and
joint ventures 19,512,231,712 636,890,958 9,941,784,127 (16,314,270,621) 13,776,636,176
Deferred tax asset − − − − −
Total assets =24,754,050,155 P
P =14,403,840,309 P
=33,526,428,471 (P
=15,852,477,200) P
=56,831,841,735

Segment liabilities =347,535,387

P =9,374,967,457 P
P =18,431,016,960 (P
=227,464,858) P
=27,926,054,946
Deferred tax liabilities 39,224,723 188,709 30,488,082 132,585,298 202,486,812
Total Liabilities =386,760,110
P =9,375,156,166 P
P =18,461,505,042 (P
=94,879,560) P
=28,128,541,758

2015
Parent Intersegment
Company Renewables Thermal Elimination Consolidated
Revenue
Energy sales =
P− =
P− =
P− =
P− =
P−
Dividend income 18,764,384 35,486,898 − (35,486,898) 18,764,384
Management fees − 10,298,135 − − 10,298,135
Rental income 96,758,331 3,142,744 − (99,901075) −
115,522,715 48,927,777 − (135,387,973) 29,062,519
Cost and expenses
Costs of sales and services − − − − −
General and administrative 358,964,019 53,213,255 354,030,786 132,323,161 898,531,221
358,964,019 53,213,255 354,030,786 132,323,161 898,531,221
Other income (charges)
Equity in net income 538,305,894 (11,759,761) 441,461,943 58,253,262 1,026,261,338
Interest income 11,849,985 818,843 2,551,368 − 15,220,196
Foreign exchange gain 19,496,400 2,768,591 19,227,930 (4,098) 41,488,823
Interest and other financing
charges (12,558,300) − − − (12,558,300)
Other income 968,366,622 758,627,883 463,672 − 1,727,458,177
1,525,460,601 750,455,556 463,704,913 58,249,164 2,797,870,234
(Forward)

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Parent Intersegment
Company Renewables Thermal Elimination Consolidated
Net income (loss) before
income tax =1,282,019,297
P =746,170,078
P =109,674,127
P (P
=209,461,970) P
=1,928,401,532
Provision for (benefit from)
income tax (26,779,460) (96,735,607) 75,161,062 − (48,354,005)
Net income (loss) =1,308,798,757
P =842,905,685
P P34,513,065
= (P
=209,461,970) P
=1,976,755,537
Other information
Segment assets =2,222,764,511
P =2,085,581,027
P =6,106,798,282
P =68,187,266 P
P =10,483,331,086
Investments in associate and
joint ventures 17,010,034,697 240,605,101 8,145,447,482 (11,844,367,704) 13,551,719,576
Deferred tax asset 61,725,895 − − − 61,725,895
Total assets =19,294,525,103
P =2,326,186,128 P
P =14,252,245,764 (P
=11,776,180,438) =
P24,096,776,557

Segment liabilities =316,994,783

P =441,570,521
P =3,605,228,575
P (P
=78,820,135) P
=4,284,973,744
Deferred tax liabilities − − − − −
Total Liabilities =316,994,783
P =441,570,521
P =3,605,228,575
P (P
=78,820,135) P
=4,284,973,744

22. Income Tax

Provision for (benefit from) income tax consists of:

2017 2016 2015

MCIT P
=46,970,131 =3,341,379
P =2,377,313
P
Final 4,924,117 1,569,658 2,079,992
Deferred (107,460,009) 139,545,242 (52,811,310)
(P
=55,565,761) =144,456,279
P (P
=48,354,005)

The reconciliation of statutory income tax to the provision for income tax follows:

2017 2016 2015

Provision from income tax at statutory
income tax rate P
=1,060,326,764 =750,221,032
P =578,520,520
P
Tax effect of:
Interest income already subject to
final tax (902,888) (1,235,607) (1,818,861)
Changes in unrecognized deferred
tax assets 17,933,244 323,038,744 189,837,329
Non-taxable revenue (1,144,192,326) (928,350,056) (829,494,038)
Capitalization of documentary
stamp tax 11,269,445 782,166 14,601,045
Provision for (benefit from) income tax (P
=55,565,761) =144,456,279
P (P
=48,354,005)

The Group has deductible temporary differences for which deferred tax assets have not been
recognized. These deductible temporary differences follow:

2017 2016 2015

NOLCO P
=1,807,262,281 =1,378,929,630
P =772,224,670
P
Unrealized foreign exchange loss 98,202,350 466,757,520 −

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Deferred tax assets are recognized only to the extent that taxable income will be available against
which the deferred tax assets can be used. The Group will recognize a previously unrecognized
deferred tax asset to the extent that it has become probable that future taxable income will allow the
deferred tax asset to be recovered.

As of December 31, 2017, carryover NOLCO that can be claimed as deduction from future taxable
income follows:

NOLCO

Year Incurred Amount Applied/Expired Balance Expiry

2017 =567,766,226
P =−
P =567,766,226
P 2020
2016 606,704,960 − 606,704,960 2019
2015 632,791,095 − 632,791,095 2018
2014 139,433,575 (139,433,575) − 2017
=1,946,695,856
P (P
=139,433,575) =1,807,262,281
P

The components of net deferred tax assets (liabilities) follow:

December 31
2017 2016 2015
Presented in profit or loss
Deferred tax assets
NOLCO P
=307,484,084 P =224,750,666 = P101,087,540
Unrealized loss on foreign exchange 99,027,491 36,038,116 −
Minimum corporate income tax 2,667,911 − −
Provision for potential loss − 2,020,123 −
Provision for impairment loss − 1,855,828 −
Accrued expense − 618,747 19,624,036
Unamortized portion of prepayment option − 29,680,056 9,061,482
Provision for pension liability − 1,156,865 714,008
Capitalized amortization of prepayment option − 891,132 39,598
409,179,486 297,011,533 130,526,664
Deferred tax liabilities
Capitalized straight line adjustment (57,263,634) (33,336,564) (17,530,761)
Unrealized gains on foreign exchange (1,935,610) (3,732,770) (4,394,803)
Loan prepayment option − (15,815,833) (2,505,784)
Nontaxable income − (4,425,655) (4,385,570)
Capitalized amortization cost − (25,673,715) (19,624,036)
Difference between carrying amount of
nonmonetary asset and their tax base (507,768,064) (416,513,808) (20,359,815)
(566,967,308) (499,498,345) (68,800,769)
Net deferred tax asset (liability) (P
=157,787,822) (P
=202,486,812) P =61,725,895

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23. Related Party Transactions

Parties are related if one party has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions and the
parties are subject to common control or common significant influence. Related parties may be
individuals or corporate entities. The following are the significant transactions with related parties:

2017
Outstanding
Related Party Relationship Amount/Volume Balance Terms Conditions
Cash and cash equivalents
BPI Under common P
=2,756,468,555 P
=2,756,468,555 Earns annual rate at Unsecured, No
control prevailing rates impairment
Trade receivables
Integrated Microelectronics, Inc. Under common P
=40,649,260 P
=40,649,260 Noninterest-bearing Unsecured, No
(IMI) control receivable impairment
Manila Water Company, Inc. Under common 18,595,233 18,595,233 Noninterest-bearing Unsecured, No
(MWCI) control receivable impairment
Globe Telecom Under common 3,255,824 3,255,824 Noninterest-bearing Unsecured, No
control receivable impairment
Fort Bonifacio Development Under common 11,302,830 11,302,830 Noninterest-bearing Unsecured, No
Corporation (Fort Bonifacio) control receivable impairment
P
=73,803,147 P
=73,803,147
Loans payable
BPI Under common P
=7,072,007,112 P
=7,072,007,112 Noninterest-bearing Unsecured
control payable
Advances to stockholders
MSPDC Subsidiary P
=47,500,000 P
=47,500,000 Noninterest-bearing Unsecured
payable
Interest income
BPI Under common P
=903,030 P
=− Earned from cash Unsecured, No
control and cash equivalents impairment
Management fees expense and P
=− Noninterest-bearing Unsecured, No
salaries, wages and employee impairment
benefits
Ayala Corporation Parent P
=104,000,726 P
=− Noninterest-bearing Unsecured, No
impairment
Others Under common 15,941,829 − Noninterest-bearing Unsecured, No
control impairment

2016
Outstanding
Related Party Relationship Amount/Volume Balance Terms Conditions
Cash and cash equivalents
BPI Under common P
=4,055,524,068 P
=4,055,524,068 Earns annual rate at Unsecured, No
control prevailing rates impairment
Trade receivables
IMI Under common P
=28,031,304 P
=28,031,304 Noninterest-bearing Unsecured, No
control receivable impairment
Loans payable
BPI Under common P
=5,035,010,058 P
=5,035,010,058 Noninterest-bearing Unsecured
control payable
Advances from a related party
ACIFL Under common 6,563,040,000 6,563,040,000 Noninterest-bearing Unsecured
control payable
Interest income
BPI Under common P
=7,799,356 P
=− Earned from cash Unsecured, No
control and cash equivalents impairment
Management fees expense Noninterest-bearing Unsecured, No
impairment
Ayala Corporation Parent P
=55,960,390 P
=− Noninterest-bearing Unsecured, No
impairment
NPDC Subsidiary 5,515,982 − Noninterest-bearing Unsecured, No
impairment
SLTEC Joint venture 1,595,000 − Noninterest-bearing Unsecured, No
impairment
P
=63,071,372 P
=−
Others Under common 12,772,385 =
P − Noninterest-bearing Unsecured, No
control impairment

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2015
Outstanding
Related Party Relationship Amount/Volume Balance Terms Conditions
Cash and cash equivalents
BPI Under common P
=2,142,727,578 P
=2,142,727,578 Earns annual rate at Unsecured, No
control prevailing rates impairment
Receivables
GNPD Subsidiary P
=167,222,586 P
=206,218,426 Noninterest-bearing Unsecured, No
receivable impairment
Loans payable
BPI Under common P
=700,184,798 P
=700,184,798 Noninterest-bearing Unsecured
control payable
Interest income
BPI Under common P
=9,170,769 P
=− Earned from cash Unsecured, No
control and cash equivalents impairment
Management fees expense Noninterest-bearing Unsecured, No
impairment
Ayala Corporation Parent P
=96,849,762 P
=− Noninterest-bearing Unsecured, No
impairment
NPDC Subsidiary 5,357,143 − Noninterest-bearing Unsecured, No
impairment
SLTEC Joint venture 435,000 − Noninterest-bearing Unsecured, No
impairment
P
=102,641,905 P
=−
Others Under common 2,739,962 =
P − Noninterest-bearing Unsecured, No
control impairment

IMI, MWCI, Globe Telecom, Fort Bonifacio Development Corporation (Fort Bonifacio)
The receivable from IMI, MWCI, Globe Telecom and Fort Bonifacio pertains to receivable from sale
of electricity of the Parent Company’s retail electricity sales business unit.

ACIFL
On December 20, 2016, ACEHI SG received US$132.00 million (P =6,559.08 million) from AC
International Finance Limited (ACIFL), an affiliate of the Parent Company as advances for bidding of
Chevron geothermal assets in Indonesia and Philippines. On April 28, 2017, ACIFL and ACEHI SG
approved the conversion of ACIFL’s advances into 1,320,000 cumulative redeemable preferred
shares in ACEHI SG. The non-voting redeemable cumulative preferred shares are redeemable at the
option of the issuer.

GNPD
Receivables of =P206.22 million from GNPD pertains to the advances made by DPHLC to GNPD to
fund its monthly anticipated expenditures to be used in developing and constructing the GNPD
Project. All advances and accrued interest were settled upon finance close of the project

On September 2, 2016, GNPD declared its financial closing and settled all of its obligation to DPHLC
including interests.

Key Management Compensation

In 2016 and 2015, all key management personnel of the Group are employees of AC. Hence, the
disclosure of the total compensation of these key management personnel by benefit type is included
in the financial statements of AC. In 2017, some of the key management personnel of the Group
became employees of ACEI. In 2017, short-term employee benefits and post-employment benefits
amounted to = P4.74 million and nil, respectively.

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Terms and conditions of transactions with related parties

Outstanding balances at year-end are unsecured, interest-free and settlement occurs in cash. There
have been no guarantees provided or received for any related party receivables or payables. The
Group has not recognized any impairment losses on amounts receivable from related parties for the
years ended December 31, 2017, 2016 and 2015. This assessment is undertaken each financial year
through a review of the financial position of the related party and the market in which the related
party operates.

24. Note to Statements of Cash Flow

Details of the movement in cash flows from financing activities follow:

2017 2016 2015

At January 1 P
=19,256,034,956 P2,834,642,386
= =−
P
Cash flows 12,695,036,180 16,578,038,261 3,137,228,405
Non-cash change
Amortization of debt issue cost 3,391,893 3,749,888 3,486,160
Foreign exchange movement 202,252,807 (160,395,579) (306,072,179)
= 32,156,715,836 =
P P19,256,034,956 =P2,834,642,386

25. Retirement Plan

The Parent Company has a funded, non-contributory, defined benefit pension plan covering all of its
regular employees. The benefits are based on years of service and compensation on the last year of
employment.

The latest actuarial valuation of the Parent Company was made on December 31, 2017.

The following tables summarize the components of net retirement expense recognized in the
statements of comprehensive income and the funded status and amounts recognized in the statements
of financial position for the existing pension plan.

The components of pension expense are included in cost and expenses in the statements of
comprehensive income as follows:

2017 2016 2015

Current service cost P
=3,729,981 =2,375,835
P =1,963,403
P
Net interest expense 471,589 119,001 266,845
Transition liability recognized 3,254,287 − 5,677,562
P
=7,455,857 =2,494,836
P =7,907,810
P

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The remeasurement effects recognized in other comprehensive income are as follows:

2017 2016 2015

Actuarial gain due to liability assumption
changes P
=5,302,806 (P
=1,299,907) (P
=348,822)
Actuarial (gain) loss due to liability
experience 2,456,510 (843,184) 523,786
Actuarial changes arising from changes in
demographic assumptions (2,798,444) − −
Remeasurement gain on other
comprehensive income P
=4,960,872 (P
=2,143,091) =174,964
P

The amounts recognized under pension liability in the statements of financial position for the pension
plan are as follows:

2017 2016 2015

Defined benefit obligation P
=20,690,228 =8,273,499
P =7,657,862
P
Fair value of plan assets 20,620,198 5,523,031 5,277,838
Net pension liability P
=70,030 =2,750,468
P =2,380,024
P

Changes in the present value of the defined benefit obligation are as follows:

2017 2016 2015

Balance at January 1 P
=8,273,499 =7,657,862
P =5,677,562
P
Current service cost 3,729,981 2,375,835 (348,822)
Interest expense 471,589 382,893 98,874
Remeasurement loss (gain) arising from
changes in experience 5,302,806 (1,299,907) 1,963,403
Remeasurement loss (gain) arising from
changes in financial assumptions 2,456,510 (843,184) 266,845
Actuarial changes arising from changes in
demographic assumptions (2,798,444) − −
17,435,941 8,273,499 7,657,862
Acquired obligation 3,254,287 − −
Balance at year end P
=20,690,228 =8,273,499
P =7,657,862
P

The categories of plan assets as a percentage of fair value of the total plan assets are as follows:

2017
Fixed income 96.16%
Equity 3.84
100.00%

The Parent Company’s fund is in the form of a trust being maintained by a trustee bank, Bank of the
Philippine Islands, an associate of AC. The investing decisions of the plan are made by certain
officers of the Parent Company duly authorized by the Board of Directors.

The overall expected rate of return on assets is determined based on the market prices prevailing on
that date, applicable to the period over which the obligation is settled.

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The sensitivity analysis below has been determined based on reasonably possible changes of each
significant assumption on the defined benefit obligation as of the end of the reporting period,
assuming if all other assumptions were held constant:

December 31,
2017
Discount rate +1.00% (P
=2,310,599)
-1.00% 2,755,408
Rate of salary increase +1.00% 2,876,207
-1.00% (2,450,644)

The cost of defined benefit pension plans and other post-employment medical benefits as well as the
present value of the pension obligation are determined using actuarial valuations. The actuarial
valuation involves making various assumptions. The principal assumptions used in determining
pension and post-employment medical benefit obligations for the defined benefit plans in 2017 are
shown below:

2017
Discount rate 5.70%
Salary increase rate 6.00%

The weighted average duration of the defined benefit obligation at the end of the 2017 reporting
period is 19.75 years.

26. Cost of Power Operations

This account consists of:

2017 2016
Cost of sales P
=1,092,581,728 =3,083,477
P
Depreciation and amortization (Note 15) 222,295,133 53,501,019
Repairs and maintenance 67,780,629 5,761,515
Taxes and licenses 63,201,656 118,922
Professional and management fees 25,643,868 9,326,214
Occupancy costs 24,274,620 16,245,033
Insurance 20,221,533 3,270,800
Compensation and benefits 12,494,324 341,256
Transportation and travel 522,575 401,048
Others 34,382,490 3,546,179
P
=1,563,398,556 =95,595,463
P

In 2015, cost of power operations is nil.

27. Financial Instruments and Risk Management

Fair value of financial instruments

The fair values of cash and cash equivalents, receivables, advances to contractors and accounts and
other payables approximate their carrying values due to the relative short-term maturities of these
financial instruments.

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Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair
value are observable in the market, either directly or indirectly
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that
are not based on observable market data.

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.

The table below presents the carrying amounts and fair values of the Group’s financial assets and
financial liabilities as follows:

December 31, 2017 December 31, 2016 December 31, 2015

Carrying Value Fair Value Carrying Value Fair Value Carrying Value Fair Value
Loans and receivables
Receivables P
= 1,276,332,002 P
= 1,387,461,215 P
=672,512,832 P
=692,437,292 P
=360,948,052 P
=372,821,672
Derivative asset 83,785,051 83,785,051 106,616,866 106,616,866 30,265,290 30,265,290
Available-for-sale
financial assets 597,654,473 624,872,293 209,250 215,721 – –
Deposits 76,518,220 77,621,865 2,772,673,615 2,844,214 47,695,943 48,762,237
P
= 2,034,289,746 P
= 2,173,740,424 =3,552,012,563
P =802,114,093
P =438,909,285
P =451,849,199
P
Other financial liabilities
Loans payable =32,156,715,836
P =32,462,761,256
P =19,106,034,956
P =19,262,672,592
P =2,834,642,386
P =2,853,234,111
P
Other noncurrent liabilities 18,446,480 18,772,868 49,465,670 50,521,902 − −
Total financial liabilities P
= 32,175,162,316 P
= 32,481,534,124 =19,155,500,626
P =19,313,194,494
P =2,834,642,386
P =2,853,234,111
P

The following methods and assumptions were used to estimate the fair value of each class of financial
instrument for which it is practicable to estimate such value:

Cash and cash equivalents, restricted cash, accounts and other payables, advances from a related
party, short-term loans and other current liabilities: Due to the short-term nature of the accounts, the
fair value approximate the carrying amounts in the consolidated statements of financial position.

Receivables: Fair value is based on undiscounted value of future cash flows using the prevailing
interest rates for similar types of receivables as of the reporting date using the remaining terms of
maturity.

Derivative asset: The fair value of the derivative asset is determined using valuation techniques with
inputs and assumptions that are based on market observable data and conditions and reflect
appropriate risk adjustments that market participants would make for risks existing at the end each of
reporting period.

AFS financial assets: For unquoted equity securities where the fair value is not reasonably
determinable due to the unpredictable nature of future cash flows and the lack of suitable method of
arriving at a reliable fair value, these are carried at a reliable fair value, these are carried at cost less
impairment, any.

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Deposits: These are presented at cost since the timing and amounts of future cash flows related to the
deposits cannot be reasonably and reliably estimated for purpose of establishing their fair values
using an alternative valuation technique.

Loans payable and other noncurrent liabilities: Estimated fair values are based on the discounted
value of future cash flows using the applicable rates for similar types of loans and liabilities. Interest
rates used in discounting cash flows ranged from 5.75% to 6.07% in 2017, 5.00% to 6.88% in 2016,
and 5.00% to 6.25% in 2015, respectively. This is a Level 3 valuation technique.

In 2017, 2016 and 2015, there were no transfers between Levels for fair value measurements.

As of December 31, 2017, 2016 and 2015, there were no financial instruments that are carried at fair
value.

In 2017, 2016 and 2015, there were no transfers between Levels for fair value measurements.
As of December 31, 2017, 2016 and 2015, there were no financial instruments that are carried at fair
value.

Financial Risk Management Objectives and Policies

The Group’s financial instruments comprise cash and cash equivalents, receivables, investments in
redeemable preferred shares, advances to contractors, refundable deposits, accounts and other
payables and loans payable which arise directly from its operations. The main purpose of the Group’s
financial instruments is to fund its expenditures.

Exposure to liquidity, foreign currency and credit risks arise in the normal course of the Group’s
business activities. The main objectives of the Group’s financial risk management are as follows:

∂ to identify and monitor such risks on an ongoing basis;

∂ to minimize and mitigate such risks; and
∂ to provide a degree of certainty about costs.

The Group’s risk management policies are described below.

Interest Rate Risk

The Group’s exposure to the risk of changes in market interest rate relates primarily to its loans
payable with floating interest rates.

The Group regularly monitors its interest rate exposure from interest rate movements. Management
believes that cash to be generated from future operations will be sufficient to pay for its obligations
under the debt financing agreement as they fall due.

In 2017, 2016 and 2015, the Group’s exposure to the risk for changes in market interest rate relates
primarily to its Onshore Dollar Loans - Tranch B with floating interest rates.

The Group regularly monitors its interest rate exposure from interest rate movements. Management
believes that cash to be generated from future operations will be sufficient to pay for its obligations
under the debt financing agreement as they fall due.

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2017
6 months More than
Effective interest rate or less 6 to 12 months 1 to 2 years 2 to 5 years 5 years Total
Loans payable

Onshore Dollar LIBO Rate applicable at each Interest Period =–

P =–
P =153,884,260
P =763,929,000
P =1,280,554,710
P =2,198,367,970
P
Tranche B plus a margin of three and one-quarter of one
percent (3.25%)

Onshore Dollar Interest rate is the greater of the Tranche C – – 404,882,370 513,879,560 5,310,105,430 6,228,867,360
Tranche C Floor Rate and the Tranche C Base Rate

Additional LIBO Rate applicable at each Interest Period – – 178,599,610 728,229,050 1,841,168,750 2,747,997,410
Senior Term plus a margin of three and one-quarter of one
percent (3.25%)

2016
6 months or 6 to 12
Effective interest rate less months 1 to 2 years 2 to 5 years More than 5 years Total
Loans payable

Onshore Dollar LIBO Rate applicable at =

P– =
P– =
P– =
P359,674,480 P
=936,426,480 P
=1,296,100,960
Tranche B each Interest Period plus
a margin of three and
one-quarter of one
percent (3.25%)

Onshore Dollar Interest rate is the – – – 449,866,560 3,222,353,200 3,672,219,760

Tranche C greater of the Tranche C
Floor Rate and the
Tranche C Base Rate

Additional Senior LIBO Rate applicable at – – – 368,574,360 1,251,502,120 1,620,076,480

Term each Interest Period plus
a margin of three and
one-quarter of one
percent (3.25%)

2015
6 months or 6 to 12
Effective interest rate less months 1 to 2 years 2 to 5 years More than 5 years Total
Loans payable

Onshore Dollar LIBO Rate applicable at =

P– =
P– =
P– =
P89,743,42 =
P292,148,480 =
P381,891,900
Tranche B each Interest Period plus
a margin of three and
one-quarter of one
percent (3.25%)

The interest on financial assets and financial liabilities classified as floating rate is repriced at intervals
of less than one year. Interest on financial assets and financial liabilities classified as fixed rate is fixed
until the maturity of the instrument. The other financial instruments of GNPK that are not included in
the above table are noninterest-bearing or have no fixed or determinable maturity.

The following table sets forth the estimated change in Group’s income before income tax due to
parallel changes in the interest rate as of December 31, 2017.

Effect on income before

Change in interest rates income tax
(in basis points) (in $’000)
+650 (8,613)
-650 8,613

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Liquidity risk
The Group monitors its cash flow position and overall liquidity position in assessing its exposure to
liquidity risk. The Group maintains a level of cash deemed sufficient to fund expenditures and to
mitigate the effects of fluctuation in cash flows.

As of December 31, 2017, 2016 and 2015, the Group monitors its cash flow position, debt maturity
profile and overall liquidity position in assessing its exposure to liquidity risk. The Group maintains a
level of cash and cash equivalents deemed sufficient to finance operations and to mitigate the effects
of fluctuation in cash flows. Accordingly, its loan maturity profile is regularly reviewed to ensure
availability of funding through an adequate amount of credit facilities with financial institutions.

The following table summarizes the maturity profile of the Group’s financial assets held to manage
liquidity as of December 31, 2017, 2016 and 2015 based on contractual undiscounted payments:

December 31, 2017

On Less than 1 to 5 More than

demand one year years 5 years Total
Financial assets
Cash and cash equivalent P
= 3,679,621,940 P
= 2,270,386,643 P
=− P
=− P
= 5,950,008,583
Receivables − 1,115,605,482 160,726,520 − 1,276,332,002
Investment in redeemable preferred
shares − − 1,629,422,558 − 1,629,422,558
Available-for-sale financial assets − − 820,993 − 820,993
Advances to contractor − 10,581,617 − − 10,581,617
Refundable deposit − − 5,481,370 − 5,481,370
P
= 3,679,621,940 P
= 3,396,573,742 P
= 1,796,451,441 P
=− P
= 8,872,647,123

Financial liability
Accounts payable and accrued
expenses P
= 769,528,975 P
= 2,817,618,013 P
=− P
=− P
= 3,587,146,988
Loans payable 284,084 288,150,023 11,512,042,762 20,356,238,967 32,156,715,836
P
= 769,813,059 P
= 3,105,768,036 P
= 11,512,042,762 =
P20,356,238,967 P
= 35,743,862,824

December 31, 2016

On Less than 1 to 5 More than
demand one year years 5 years Total
Financial assets
Cash and cash equivalent =7,538,482,147
P =3,847,968,475
P =−
P P−
= =11,386,450,622
P
Receivables − 550,399,124 122,113,708 − 672,512,832
Available-for-sale financial assets − − 209,250 − 209,250
Refundable deposit − − 5,370,736 − 5,370,736
=7,538,482,147
P =4,398,367,599
P =127,693,694
P =−
P =12,064,543,440
P

Financial liability
Accounts payable and accrued
expenses P
=350,764,764 P
=1,640,106,792 =
P− P
=− P
=1,990,871,556
Loans payable 284,084 423,330,851 5,002,449,570 13,679,970,451 19,106,034,956.
=351,048,848
P =2,063,437,643
P =5,002,449,570
P =13,679,970,451
P =21,096,906,512
P

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December 31, 2015

On Less than 1 to 5 More than

demand one year years 5 years Total
Financial assets
Cash and cash equivalent =2,580,330,016
P =−
P =−
P P−
= =2,580,330,016
P
Receivables − 272,070,948 − − 272,070,948
Refundable deposit − − 47,695,943 − 47,695,943
=2,580,330,016
P =272,070,948
P =47,695,943
P =−
P =2,900,096,907
P

Financial liability
Accounts payable and accrued
expenses P
=− P
=1,431,728,850 =
P− P
=− P
=1,431,728,850
Loans payable − 150,000,000 423,614,935 18,682,420,021 19,106,034,956.
P
=− P
=1,581,728,850 P
=423,614,935 P
=18,682,420,021 P
=20,537,763,806

Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and
cause the other party to incur a financial loss. The Group’s holding of cash and cash equivalents and
advances to related parties exposes the Group to credit risk of the counterparty. Credit risk
management involves dealing only with institutions for which credit limits have been established.

The following table shows the maximum exposure to credit risk for the components of the statement
of financial position:

2017 2016 2015

Cash and cash equivalents
(excluding cash on hand) P
=5,927,007,846 P
=11,385,477,819 =2,579,812,472
P
Receivables 1,276,332,002 672,512,832 360,948,052
Investments in redeemable
preferred shares 1,629,422,558 − −
Available-for-sale financial assets 597,654,473 209,250 −
Refundable deposit 5,481,370 5,370,736 177,574,213
P
=9,435,898,249 P
=12,063,570,637 =3,118,334,737
P

The Group’s cash and cash equivalents, investments in redeemable preferred shares, advances to
contractors, available-for-sale financial assets and refundable deposit are neither past due nor
impaired and are considered as high grade. High grade pertains to quoted financial assets and those
unquoted investments or transactions with related parties. Medium grade pertains to the Group’s
receivables and other unquoted financial assets with nonrelated corporate counterparties. Low grade
pertains to financial assets with the probability to be impaired based on the nature of the counterparty.

Foreign exchange risk

The Group’s foreign exchange risk primarily results from movement of the Philippine Peso (P
=)
against the United States Dollar (US$). Foreign currency denominated cash in bank amounted to
US$75.74 million in 2017 and US$142.59 million in 2016 with peso equivalent of =P3,781.91 million
and =
P7,089.54 million, respectively. The spot rate used was =
P49.93:US$1.00, =
P49.72:US$1.00 and
=47.06:US$1.00 as of December 31, 2017, 2016 and 2015, respectively.
P

December 31, 2017 December 31, 2016 December 31, 2015

Increase Effect on Increase Effect on Effect on
(decrease) income (decrease) income Increase(decrease) income
in US Dollar rate before tax in US Dollar rate before tax in US Dollar rate before tax
Cash P
= 1.00 P
= 75,744,199 =1.00
P =142,589,216
P =1.00
P =35,984,154
P
(1.00) (75,744,199) (1.00) (142,589,216) (1.00) (P
=35,984,154)

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The assumed movement in basis points for foreign exchange sensitivity analysis is based on the
currently observable market environment, showing no material movements as in prior years.

There are no items affecting equity except for those having impact on profit or loss.

28. Commitments

Revolving Credit Facility

On April 22, 2016 and May 31, 2016, the Parent Company entered into a Revolving Credit Facility
with Philippine National Bank (PNB) and an Omnibus Line with Security Bank Corporation (SBC),
respectively amounting to =
P1.00 Billion each. The Credit Facilities were entered into to finance the
operating and investing requirements of the Parent Company. As of December 31, 2016, no
drawdowns were made on both facilities. As of December 31, 2017, P =250.00 million was drawn
from PNB and = P100.00 million was drawn from SBC.

RES Contracts
On January 31, 2017, the Parent Company executed a five (5) year contract with South Luzon Power
Generation Corporation (“SLPGC”), which owns and operates 2 x 150 MW coal-fired power
generating plant in Calaca, Batangas. The contract is effective from February 26, 2017 up to
December 25, 2021 and covers contracted capacity of 50MW which enables ACEI to meet the
electricity requirements of its retail customers. Under the contract, the Parent Company has the
obligation to pay SLPGC the Exposure Adjustment and the Parent Company or SLPGC, as the case
may be has the obligation to pay the Exposure Adjustment in accordance with the fee computation
formula agreed to by both parties.

On June 26, 2017, ACEI entered into a three (3) year contract with DirectPower Services Inc.
(“DPSI”) (an affiliate) effective from June 26, 2017 up to June 25, 2020. The contract enables DPSI
to meet the electricity requirements of its customers. Under the contract, the Parent Company or
DPSI, as the case may be has the obligation to pay the Exposure Fee in accordance with the fee
computation formula agreed to by both parties.

On December 26, 2017, ACEI entered into a four (4) year contract with Citicore Energy Solutions,
Inc. (“CESI”) effective from December 26, 2017 up to December 25, 2021. The contract guarantees
supply to ACEI by CESI of a firm contract capacity of 20 MW renewable energy for intervals 8 to 17
to be sourced from CESI’s Bataan and Cebu plants.

Investments in associates and joint ventures

The Parent Company made capital commitments in its associates and joint ventures in 2017 and 2016
(see Note 11).

Fee Agreement with Blackstone Capital Partners (Cayman) VI L.P.

On August 11, 2016, the Parent Company executed a Fee Agreement with Blackstone Capital
Partners (Cayman) VI L.P. (Blackstone) whereby through ACEHI SG, a subsidiary, the Parent
Company agreed to perform certain services and undertake certain obligations in favor of Blackstone
in relation to Blackstone’s investments in the Philippines.

On December 22, 2016, ACEHI SG and AC Energy Cayman executed an Assignment Agreement
whereby the former assigned all its rights, titles and interest under the Fee Agreement to the
latter. Since the assignment was made in relation to the GNPower Dinginin (GNPD) project, where

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Blackstone was an investor, ACEHI SG and AC Energy Cayman agreed that the release of the fee
(under the Fee Agreement) to AC Energy Cayman shall be made as follows:

∂ When at least 40% of the loan amount under the financing documents of GNPD has been
successfully drawn down, AC Energy Cayman shall be entitled to the release of 75% of the fee;
and

∂ When at least 70% of the loan amount under the financing documents of GNPD has been
successfully drawn down, AC Energy Cayman shall be entitled to the release of the balance of the
fee.

ACEHI SG and AC Energy Cayman also agreed to cause Blackstone to deposit the fee to a trust
account with a trust bank that would administer the release of the fee.
On December 23, 2016, ACEHI SG entered into a Trust Agreement with the Bank of the Philippine
Islands-Asset Management and Trust Group (BPI). As the trustee, BPI has the sole power and
authority to manage the fund and operate the trust account (i.e., invest, reinvest or lend the
fund). The amount deposited in the trust account amounted to $41.70 million as of
December 31, 2016.

On September 15, 2017, the ACEHI SG signed an Amended and Restated Trust Agreement with BPI
to revise the mechanics for the release of the fee as follows:

∂ When at least 15% of the loan amount under the financing documents of GNPD has been
successfully drawn down, AC Energy Cayman shall be entitled to the release of up to 35% of the
fee;

∂ When at least 18% of the loan amount under the financing documents of GNPD has been
successfully drawn down, AC Energy Cayman shall be entitled to the release of up to 55% of the
fee;

∂ When at least 30% of the loan amount under the financing documents of GNPD has been
successfully drawn down, AC Energy Cayman shall be entitled to the release of up to 70% of the
fee; and

∂ When at least 50% of the loan amount under the financing documents of GNPD has been
successfully drawn down, AC Energy Cayman shall be entitled to the release of the balance of the
fee.
On September 18, 2017 and December 22, 2017, BPI Asset Management Trust Corp., as Trustee
under the Trust Agreement, released a total of $30.10 million to AC Energy Cayman in
consideration for the achievement of the GNPD loan drawdown milestone per the Trust
Agreement. Consequently, AC Energy Cayman recognized income of the same amount
$30.10 million (or =
P1.52 billion) presented as other income in the statements of comprehensive
income.

In the future, depending on the progress of construction of the GNPD power plant and the level of
loan drawdown for the project, additional fees will be paid and released to AC Energy Cayman
(see Note 27)

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29. Subsequent Events

Investments in Vietnam
On January 22, 2018, ACEV, a wholly-owned subsidiary of ACE SG entered into a 50-50 joint
venture with AMI Renewables Energy Joint Stock Company, a joint stock company incorporated in
Vietnam, to invest in New Energy Investments Corporation, a joint stock company with a 100%
ownership shares in AMI Energy Khanh Hoa Joint Stock Company, a 50MWp Solar Farm in Khanh
Hoa, in AMI Energy Binh Thuan Joint Stock Company, a 50MWp Solar Farm in Bihn Thuan and in
B&T Windfarm Joint Stock Company, a 200MW Wind Farm in Quang Binh, all of which are situated
in Vietnam.

On April 12, 2018, ACEV, a wholly-owned subsidiary of ACE SG, entered into a 30-70 joint venture
with BIM Group to develop 30MW of solar power projects in Ninh Thuan province, Vietnam.

On April 26, 2018, ACE SG, a wholly owned subsidiary of ACEI, and Jetfly Asia Pte. Ltd. executed
a Share Sale Purchase Agreement for the acquisition of 25% interest in The Blue Circle Pte. Ltd.
(TBC). ACEI investment in TBC is US$1,902,000 representing ownership of 489,227 ordinary
shares (SGD1 par value per share). TBC has a platform of wind projects in the Southeast Asia.

On April 26, 2018, TBC and ACE SG entered into a Development Loan Agreement pursuant to
which, ACEI agreed to grant TBC an aggregate principal amount up to $10.00 million in several
tranches within the availability period. Interest is charged at 10% per annum repayable on
June 30, 2020.

On June 1 2018, ACEV, a wholly-owned subsidiary of ACE SG, entered into a 30-70 joint venture
with BIM Group to develop 300MW of solar power projects in Ninh Thuan province, Vietnam.

Acquisition of Negros Island Biomass Holdings

On March 20, 2018, Presage Corporation, a wholly-owned subsidiary of ACEI and Zabaleta & Co.
entered into a share purchase agreement for acquisition of 21,484 common shares in Negros Island
Biomass Holdings (Isla Bio) which represents 42.97% interest. Isla Bio is the entity that holds interest
in the three biomass plants in Negros - (1) San Carlos BioPower, (2) South Negros BioPower and (3)
Negros BioPower

Investments in Australia
On May 23, 2018, ACEI participated in the Australian renewables market through a joint venture
with international renewable energy developer, UPC Renewables Australia. ACEI has invested
$30.00 million (or P1,620.60 million) for 50% ownership in UPC’s Australian business and is also
providing $200 million facility to fund project equity.

Investment in PHINMA Energy Corporation

On January 08, 2019, the Company and PHINMA inked a mutually strategic agreement in relation to
ACEI’s investment in PHINMA Energy Corporation (“PHEN”). ACEI will acquire PHINMA’s
combined 51.48% stake in PHEN via a secondary share sale for approximately P3.42bn. This is based
on the valuation date of December 31, 2018 and is subject to adjustments. Closing of the Transaction
is subject to satisfaction of certain conditions, such as regulatory approvals, including the approval of
the Philippine Competition Commission, and compliance with applicable tender offer
requirements. ACEI will also subscribe to approximately 2.632bn PHEN primary shares at par value.

Acquisition of Pagudpud Wind

On November 27, 2018, Presage Corporation (“Presage”) entered into an Investment Framework
Agreement and Shareholders’ Agreement for the development and construction of a proposed Balaoi-

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Caunayan wind farm project in Ilocos Norte (the “Project”). As part of the transaction, Presage
agreed to acquire full ownership of Pagudpud Wind Power Corp., the majority shareholder of Bayog
Wind Power Corp. (“BWPC”), the project company for the Project.

Further, on December 4, 2018, Presage, acting as the lender, entered into a loan agreement (the
“Agreement”) with BWPC, acting as the borrower, whereby Presage agreed to make available to
BWPC a credit facility (the “Loan”) in an aggregate principal amount P265.00 million. The loan is
available for multiple drawings within two (2) years from the date of the Agreement, and is repayable
in full within five (5) years from the date of the initial drawdown. The borrower shall use the loan
proceeds solely for funding the Project’s development activities. The loan is interest bearing at
annual rate of eight percent (8%).

Acquisition of HDP Bulk Water Supply

On December 7, 2018, Presage Corporation (“Presage”) entered into a Share Purchase Agreement
with Jose Maria Eduardo P. Zabaleta and Juan Xavier P. Zabaleta for the purchase of one hundred
percent (100%) of outstanding capital stock of HDP Bulk Water Supply Inc. (“HDP”) for a total
consideration of P110.10 million. The transaction was also closed on the same day.

HDP is a domestic company that supplies water to San Carlos Bioenergy, Inc. (“SCBI”) under a
Water Supply Contract executed on October 31, 2006 (originally between SCBI and San Julio Realty
Inc. (“SJRI”), which was later assigned by SJRI to San Carlos Land, Inc. (“SCLand”) on
December 22, 2008, and then by SCLand to the HDP on December 11, 2017).

Changes to Group Structure

Effective January 29, 2018, AMPLC became the legal and registered owner of the limited partnership
interest in GMCP.

On June 7, 2018, Ingrid Power Holdings, Inc., a wholly-owned subsidiary of ACEI was incorporated.

On July 12, 2018, the Group restructured Gigasol2, Inc. to transfer 100% ownership from AC Laguna
Solar Inc., AC La Mesa Solar Inc., AC Subic Solar Inc., Gigasol1 Inc., Gigasol3 Inc. SolarAce1 Inc.
and SolarAce2. These companies including Gigasol2 were 100% owned by Presage Corporation.

On September 7, 2018, ACE Thermal, Inc., a wholly-owned subsidiary of ACEI was incorporated.

On September 20, 2018, AA Thermal, Inc., a wholly-owned affiliate of ACEI was incorporated.

On September 24, 2018, ACEI, Inc. transferred 100% of its limited partnership interest in each of
ACE Mariveles Power Ltd. Co. and Dinginin Power Holdings Ltd. Co. to AA Thermal, Inc. The
transfer is part of the Group’s restructuring plan for its thermal assets.

On September 25, 2018, ACEI and Arlingon Mariveles Netherlands Holdings B.V. (a wholly-owned
affiliate of ACEI) signed a subscription agreement for the purchase of shares of stock of AA Thermal,
Inc.

On September 26, 2018, Aboitiz Power entered into a share purchase agreement with Arlington
Mariveles Netherlands Holdings B.V., and a shareholder’s agreement with ACEI for the proposed
acquisition of 49% voting interest and 60% economic interest in AA Thermal, Inc.

Consequently, as of September 30, 2018, 60% of the Group’s interest in AA Thermal, Inc. amounting
to =
P5,635.30 million was reclassified as noncurrent asset held for sale. Following the classification,

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the Group determined that the asset shall be carried at its carrying value since it is lower than its fair
value less cost to sell of US$579.20 million.

Closing of the transaction is subject to satisfaction of certain conditions precedent, including the
approval by the Philippine Competition Commission. The transaction was valued at $579.20 million.

On September 26, 2018, AC International Finance Limited (ACIFL), an affiliate of the Parent
Company, subscribed to 110,000 non-voting redeemable cumulative preferred shares of ACEHI SG
equivalent to $110.00 million (P
=5,942.20). The redeemable cumulative preferred shares are
redeemable at the option of the issuer. As of September 30, 2018, the redeemable cumulative
preferred shares were not issued. On December 19, 2018, ACIFL and ACEHI SG approved the
conversion of ACIFL’s advances amounting to $110.00 million into additional redeemable preferred
shares in ACEHI SG. The proceeds of the infusion were used for the restructuring of AA Thermal,
Inc.

NPDC Loans
On June 27, 2018, BPI granted a = P1.00 billion loan to NPDC. The proceeds from the loan were used
to fully prepay the outstanding balance of the loan from UPB and to finance the company’s general
funding requirements.

On June 27, 2018, NPDC fully paid its outstanding loan with UBP amounting to =
P333.33 million.

ACE SG Loans
On April 20, 2018 and July 30, 2018, respectively, ACE SG signed a short-term loan line and
revolving credit facility with Rizal Commercial Banking Corporation and Mizuho Bank Ltd.
Singapore amounting to $65.00 million and $50.00 million, respectively. Proceeds of the loan are to
be used to finance investments in power and power related projects and for other general corporate
purpose expenses.

Income from Fee Agreement with Blackstone Capital Partners (Cayman) VI L.P.
On June 18, 2018 and December 20, 2018, the Trustee released a total of $10.83 million and
$4.67 million, respectively to AC Energy Cayman in consideration for the achievement of the GNPD
loan drawdown milestone per the Trust Agreement. Consequently, AC Energy Cayman recognized
income of the same amount. This is presented as other income in the statements of comprehensive
income of the Group.

Dividend Declarations
Dividends declared and received from SACASOL amounted to P20.82 million in 2018.

Dividends from common shares of SLTEC amounted to P

=173.06 million in 2018.

On March 15, 2018, PWHC declared dividends payable to ACEI amounting to = P159.12 million and
=
P16.57 million on its preferred and common shares, respectively. Dividends are payable on or before
March 22, 2018.

On May 28, 2018, PWHC declared dividends payable to ACEI amounting to P

=28.82 million on its
preferred. Dividends are payable on or before May 28, 2018.

On December 18, 2018, PWHC declared dividends payable to ACEI amounting to = P96.72 million
and =
P47.17 million on its preferred and common shares, respectively. Dividends are payable on or
before December 21, 2018.

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On November 23, 2018, NPDC declared dividends payable to ACEI amounting to = P207.45 million on
its common shares and preferred shares. Dividends are payable on or before December 3, 2018.

On November 21, 2018, NLREC declared dividends payable to PWHC amounting to P =253.72 million
and =
P43.86 million on its preferred and common shares, respectively. On the same date, NLREC
declared dividends payable to Ilocos Wind amounting to P
=65.77 million on its common shares.
Dividends are payable on or before November 23, 2018.

On October 8, 2018, GMCP declared dividends payable to AMPLC and Arlington Mariveles
Philippines GP Corp amounting to $5.08 million and $0.02 million on its common shares,
respectively.

Financing Activities of ACE SG and ACEV

On various dates, ACE SG received additional loan drawdowns from different banks aggregating to
$86.00 million and made repayments amounting to $50.00 million.
Also, the Company made additional loan drawdowns to UPC Asia I Development and TBC
Development loans both amounting to $3.00 million.

On November 27, 2018, ACEV entered into a loan facility agreement with BIM Renewable Energy
Joint Stock Company to fund the construction of the solar power project in an aggregate principal
amount of up to $35.00 million which shall be drawable in multiple drawdowns as and when
requested by the borrower on the terms and conditions specified by the agreement. The first loan
drawdown amounted to $5.60 million.

Additional capital infusions were also made by ACEV on various dates to its joint venture companies
- BIM Renewables, BIM Energy and New Energy Investments amounting to $1.45 million,
$3.33 million and $13.63 million, respectively. Conversion of advances to redeemable preferred
shares were also made by ACE SG and ACEV amounting to $159.00 million and $32.12 million,
respectively.

GNPK Assignment of Loan Facility

In early 2018, EastSpring Investments, indicated its intention to assign it’s entire US$75.00 million
committed loan facility, to an acceptable lender, due to internal portfolio considerations. During the
same period, China Development Bank (“CDB”), which was originally a target lender at the early
stages of the Project, reiterated its interest to increase its loan portfolio in the Philippines. After
several rounds of discussions with both parties, the assignment terms were finalized under the same
general loan terms, with the added benefit of CDB, charging a lower effective interest rate, compared
to EastSpring. The transaction was concluded in November 2018.

GNPK Liquidated Damages

GNPK has the right to claim Delay Liquidated Damages for any delays on the completion of each
unit using the rate of $20,550 per day on the Onshore EPC and $42,710 per day on the Offshore EPC
or a total of $63,260 per day rate. Unit 1’s completion date was expected and contracted to be on
December 1, 2017 which resulted in thirty (30) days of delay. Total liquidated damages to be
recognized in 2018 is estimated at $36.53 million.

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 THE ISSUER THE GUARANTOR

AC Energy Finance International Limited AC Energy, Inc.

Maples Corporate Services Limited 4/F 6750 Ayala Avenue Office Tower
P.O. Box 309, Ugland House Makati City
Grand Cayman, KY1-1104 Philippines
Cayman Islands

JOINT ARRANGERS AND DEALERS

CLSA Limited The Hongkong and Shanghai Merrill Lynch (Singapore) Pte.
18/F, One Pacific Place Banking Corporation Limited, Ltd.
88 Queensway Singapore Branch OUE Bayfront #14-01
Hong Kong 21 Collyer Quay 50 Collyer Quay
#10-01 HSBC Building 049321, Singapore
Singapore 049320

TRUSTEE AND PAYING AGENT REGISTRAR

The Hongkong and Shanghai Banking Corporation The Hongkong and Shanghai Banking Corporation
Limited Limited
Level 30, HSBC Main Building Level 30, HSBC Main Building
1 Queens Road 1 Queens Road
Central, Hong Kong Central, Hong Kong

LEGAL ADVISERS

to the Issuer and the Company as to to the Issuer and the Company as to
Cayman Islands law English law

Maples and Calder (Hong Kong) LLP Latham & Watkins LLP
53/F, The Center 18/F, One Exchange Square
99 Queen’s Road 8 Connaught Place
Central Central, Hong Kong
Hong Kong

to the Dealers as to to the Dealers as to

English law Philippine law

Milbank, Tweed, Hadley & McCloy LLP Romulo Mabanta Buenaventura

30/F, Alexandra House Sayoc & de los Angeles
18 Chater Road 21/F, Philamlife Tower
Central 8767 Paseo de Roxas
Hong Kong Makati City
Philippines

INDEPENDENT AUDITORS LISTING AGENT

SyCip Gorres Velayo & Company Latham & Watkins LLP

6760 Ayala Avenue 9 Raffles Place
Makati City 1226 #42-02 Republic Plaza
Philippines Singapore 048619
652657