COMPANY PRESENTATION Credit it Su Suisse 19 19 th th Ann Annual - - PowerPoint PPT Presentation

COMPANY PRESENTATION

Credit it Su Suisse 19 19th

th Ann

Annual l As Asian Investment Conf nference

07 April il 2016, Conrad ad Hotel, el, Hong Kong

This presentation contains certain “forward looking statements.” These forward looking statements include words or phrases such as EDC or its management “believes”, “expects”, “anticipates”, “intends”, “plans”, “foresees”, or other words or phrases of similar import. Similarly, statements that describe EDC’s objectives, plans or goals also are forward-looking statements. All such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Such forward looking statements are made based on management’s current expectations or beliefs as well as assumptions made by, and information currently available to, management. EDC does not make expressed or implied representations or warranties as to the accuracy and completeness of the information contained herein and shall not accept any responsibility or liability (including any third party liability) for any loss or damage, whether or not arising from any error or omission in compiling such information or as a result of any party’s reliance or use of such information. The information and opinions in this presentation are subject to change without notice. This presentation does not constitute a prospectus or other offering memorandum in whole or in part. Information contained in this presentation is a summary only and is prepared for discussion purposes and is not a complete record of the discussions. This presentation shall not constitute an offer to sell or the solicitation of an offer to buy any security. There shall be no sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to qualification under securities laws of such state or jurisdiction. By receiving this presentation, each investor is deemed to represent that it is a sophisticated investor and possesses sufficient investment expertise to understand the risks involved. Prospective investors should undertake their own assessment with regard to their investment and they should obtain independent advice on any such investment’s suitability, inherent risks and merits and any tax, legal and accounting implications which it may have for them.

DISCLAIMER

CONTENTS

Snapshot of the last 12 Months

9

Company Introduction

7 15

Executive Summary Key Takeaways

33

Equipment Reliability & Resiliency

17

Preserving the Revenue Base

25

US$ Debt Management & FX Exposure

29

10 Strategic Focus, 11 Business Model, 12 Contract Tenor, 13 Volatile Earnings, 14 Risk Factors & Initiatives 26 Weak Commodity Prices, 27 GCGI Contract Re-pricing 18 Profile of Geothermal Plants, 19 Total CAPEX, 20 FY2015 Outages, 21 Tongonan Rehab, 22 Bacman Plants’ Gross Generation, 23 Typhoon Proofing Initiatives 30 Financial Ratios, 31 Managing Financial Risks, 32 US$ Exposure

EXECUTIVE SUMMARY

8 Executive Summary

HIGHLIGHTS OF THE PRESENTATION

 Volatile earnings reported even as business model possesses stable and predictable cash flows  Formulated initiatives being implemented to reduce/eliminate volatility

Company Introduction

 Nasulo Project operates for its first full year; greater than 90% capacity utilization reported for the Bacman Plants; FiT allowance now being collected for the Burgos Wind and Solar Projects  Revenue loss reported with plants going on forced outage, sales agreements being re-priced and higher OPEX expenditures for typhoon proofing, O&M of new projects and reported FX losses with the PHP depreciating

Snapshot of the last 12 Months

 Significant CAPEX required to uprate reliability of aging power plants and resiliency of company infrastructures’ to harsh weather conditions  Typhoon proofing of critical power plant components in Leyte and Bacman substantially completed together with the implementation of a proactive landslide mitigation strategy

Equipment Reliability & Resiliency

 Weak commodity prices expose company's uncontracted capacity to lower margins prompting EDC to secure the "Base Case" thru re-negotiation of expiring supply contracts and to selectively postpone growth initiatives until targeted project returns are achieved

Preserving the Revenue Base

 Deliberately managed financial risks by minimizing FX exposures and converting bullet maturity loans into amortizing loans  EDC comfortably maintains covenanted financial ratios

US$ Debt Management & FX Exposure

Focus Area 1: Focus Area 2: Focus Area 3:

COMPANY INTRODUCTION

10 Company Introduction

TODAY EDC IS A DIVERSIFIED RENEWABLE ENERGY COMPANY – 100% OF ITS INVESTMENTS ARE IN THE PHILIPPINES

150.0 MW Burgos 4.16 MW Burgos 2.66 MW Burgos 120.0 MW Pantabangan 12.0 MW Masiway 120.0 MW Bacman I 20.0 MW Bacman II 112.5 MW Tongonan 112.5 MW Palinpinon I 60.0 MW Palinpinon II* 125.0 MW Upper Mahiao 232.5 MW Malitbog 180.0 MW Mahanagdong 50.9 MW Optimization 49.4 MW Nasulo 52.0 MW Mindanao I 54.0 MW Mindanao II

Note: *20 MW Nasuji Power Plant placed on preservation

1 1 1 2 3 1 3 2

Wind Hydro Solar Geothermal (EDC Subsidiary) Geothermal (Integrated)

1

1 1 1 2 3 3 2 1 1

STRATEGIC FOCUS BEFORE 2007 TODAY

TECHNOLOGY 1,149 MW Geothermal*

1,169 MW 132 MW 150 MW 6.82 MW Geothermal** Hydro Wind Solar

CUSTOMERS NPC

NPC Electric Cooperatives Distribution Utilities Large Industrial Clients NGCP TRANSCO

BUSINESS MODEL

Power Purchase Agreements Power Purchase Agreements Wholesale Electricity Spot Market Ancillary Services Provider Feed-in Tariff

DOMICILE

Philippines Philippines Indonesia Chile Peru

* Steam field only ** Steam field & Power Plant NPC – National Power Corporation NGCP – National Grid Corporation of the Philippines

EDC IS THE LARGEST VERTICALLY INTEGRATED GEOTHERMAL COMPANY GLOBALLY

11 Company Introduction

EDC’S BUSINESS MODEL POSSESSES STABLE AND PREDICTABLE CASH FLOWS

Transco Electric Cooperatives/ Third party customers

Subsidiaries

• f EDC

National Power Corporation

Power Supply Agreements (PSAs) Power Purchase Agreements

Steam Sales Agreements (SSA)

Bac-Man Geothermal

Geothermal Resources Sales Contracts (GRSC)

Green Core Geothermal FG Hydro

Electricity Cashflow Electricity Cashflow

Electricity & Ancillary Svcs.

Cashflow Steam

Cashflow or Dividends

Steam

Cashflow or Dividends

Dividends

Burgos Wind

Electricity Cashflow Dividends

Power Supply Agreements Power Purchase Agreements (PPAs)

Electricity Cashflow

Solar

Electricity Cashflow

Geothermal

% of Consolidated Revenues (1) USD Linkage

Electricity 37% 73%

Sovereign off-take

Electricity 56% 0%

Commercial off-take

Electricity 7% 60%

Feed-in-Tariff

(1) As of Dec 31, 2015

Customers

Cashflow Energy Flow

12 Company Introduction

EDC’S EXPOSURE TO THE SPOT MARKET PRICES IS ONLY 10%

WESM, 3,529 NGCP, 605 DU, 6,472 NPC, 12,634 DU, 4,527 Transco, 2,404 DU, 4,189 SPOT 10% 1-2 YRS 15% 3-5 YRS 6% 6-10 YRS 46% 11-20 YRS 11% >21 YRS 12%

34,360

(1) Consolidated revenues as of December 31, 2015

TERM STRUCTURE OF CONTRACTS(1) In PHP Millions

SPOT 1-2 YRS 3-5 YRS 6-10 YRS 11-20 YRS >21 YRS WESM

10%

• NGCP
• 2%
• DU
• 13%

6% 9% 4% 12%

NPC

• 37%
• TRANSCO
• 7%
• 90%

revenue from long-term contracts

69%

revenue from contract tenors

• f >6 yrs

44%

expanded revenue base from commercial clients

13 Company Introduction

HOWEVER, REPORTED EARNINGS HAVE BEEN VOLATILE

20,527 20,678 24,153 24,540 28,369 25,656 30,867 34,360 11,859 10,712 13,748 13,238 17,330 15,641 17,922 18,680 1,345 3,357 4,395 615 10,376 5,628 11,818 7,859

2008 2009 2010 2011 2012 2013 2014 2015 2008-2015 (CAGR)

Revenues 7.6% EBITDA 6.7% NI 28.7%

1 Recorded foreign exchange losses (Php9.4B) and higher interest expense (Php552.4M) on foreign loans brought about by the peso depreciation and yen appreciation

against the US dollars

2 Recorded a non-cash impairment of Php5.0B on NNGP and Php1.2B of foregone steam revenues resulting from EDC’s acquisition of the Bacman power plants 3 Lower revenues (Php2.7B) mainly from ancillary services and impairment of PPE due to typhoon Yolanda (Php0.6B)

Bacman failure

(2012-2013)

Typhoon damage3

(2013-2014)

Tongonan/ Upper Mahiao Outages

(2015)

NNGP impairment2

(2009-2011)

JPY overhang1

(2007-2011)

REVENUES EBITDA NI

14 Company Introduction

WE HAVE CLEAR ACTION PLANS TO REDUCE/ELIMINATE VOLATILITY

Power plants: “Midlife” stage brings about reliability issues Geography: Project sites are situated along the “typhoon” belt Market: Margin squeeze due to low commodity prices Geothermal Resource: Natural decline of reservoir pressure Geothermal Growth CAPEX: Significant amounts required upfront FCRS: Mountainous location exposes infrastructure to potential landslide risk Retrofit aging plants to enhance

• verall reliability

Typhoon proof critical power plant components Re-negotiate expiring contracts to preserve revenue base Advanced technologies drive company’s replacement well drilling strategy Expand to FiT-supported technologies and access multi-lateral financing to mitigate exploration risk Institute a proactive landslide mitigation strategy

RISK FACTORS INITIATIVES

 Power plant rehab CAPEX  Typhoon proofing CAPEX/OPEX  Mitigate margin squeeze  Maintenance CAPEX  Domestic growth  Typhoon proofing CAPEX/OPEX

IMPACT

SNAPSHOT OF THE LAST 12 MONTHS

16 Snapshot of the last 12 Months

EDC’S EARNINGS VARIABILITY CAME INTO FOCUS IN 2015. 2016 WILL BE THE YEAR TO ADDRESS THEM

 150 MW Burgos Wind Project started collecting FiT allowance May 2015  49.4 MW Nasulo Project achieved its first full year of operations in 2015  4.16 MW Burgos Solar Project commissioned last March 2015  Bacman Plants attained greater than 90% capacity utilization with the completion of its retrofit program  Typhoon resistant cooling tower components installed at Leyte [Mahanagdong, Malitbog] and Bacman [Units 1 & 2]  Php8.5Bn EDC retail bond refinanced through GCGI (3.3% lower interest rate)  Foregone revenues from curtailment of 150MW Burgos until September due to third-party transmission line congestion  Competitive pressures that led to Php0.8B margin squeeze after GCGI contract re-pricing  Asset reliability issues that caused ~Php0.8Bn revenue reduction attributable to unplanned outages (Tongonan Unit 2 and Bacman

Unit 3)

 Lower tariff forecasts in Chile that led to postponement of Mariposa drilling schedule  Higher ex-growth OPEX mainly for the O&M of existing projects (Php1.0Bn)  FX losses reported with the PHP depreciating vis-a-vis the US$

Successes Challenges

150 MW BURGOS 49.4 MW NASULO 4.16 MW BURGOS TYPHOON PROOFING COOLING TOWER

EQUIPMENT RELIABILITY & RESILIENCY

18 Equipment Reliability & Resiliency

PLANT AGE, in years

END OF DESIGN LIFE (HIGH) END OF DESIGN LIFE (LOW) END OF DESIGN LIFE (BASELINE)

OUR POWER PLANTS ARE AT MIDLIFE STAGE AND REQUIRE SUBSTANTIAL CAPEX FOR IMPROVED RELIABILITY

OUTAGE RATE

*As of December 31, 2015

Leyte Southern Negros Bacman Mindanao

19 Equipment Reliability & Resiliency

INVESTMENTS SHIFTED TOWARDS PROTECTING THE CORE BUSINESS

in PHP millions

2016 2017 2018 2019 2020 2021 Growth 226 1,761 3,539 14,074 23,934

• Local Geo Growth1
• 1,308

3,050 906

• Wind Growth2
• 7,544

20,342

• Solar Growth2

33

• International4

223 453 489 5,624 3,592

• Existing

13,744 6,114 4,721 6,262 3,525 4,588

Steam field 7,1685 5,498 4,224 5,205 2,962 3,993 Power Plant 6,5766 616 497 1,057 563 595

Total Capex 13,9707 7,875 8,260 20,336 27,459 4,588

1 31MW Bacman 3 2 Implementing of additional Wind and Solar growth projects depend on the new government’s policy for Feed-in-tariff (FiT) 3 2.6MW Burgos Solar commissioned last January 17, 2016 4 International Projects are on hold pending improvements in project economics 5 Drilling of 9 wells in Leyte 6 Tongonan 1 Rehab 7 Excludes Php1,181Mn budget provision for Bacman 3 & 4

20 Equipment Reliability & Resiliency

UNPLANNED OUTAGES ARE THE BIGGEST CONTRIBUTORS OF OPPORTUNITY LOSS FOR 2015 Facility

OUTAGE Duration Nature Action Plan

Tongonan Unit 2 Mar 7 - Jul 7 Turbine Rotor Problem Retrofit kits on order and for installation 2016 - 2017 Malitbog OEC7 Jan 1 – Mar 24 Jul 18 – Sept 28 PMS Generator Problem For rotor replacement Bacman Unit 3 Mar 5 – Apr 8 Lube Oil Leak Re-design of lubrication system completed Mindanao I Jul 12 – Aug 11 Aug 17 Generator Stator Problem Replacement generator stator on order and for installation mid-2016

808.4MW <5% Outage 360.4MW >5% Outage

288.4MW Leyte 20MW Bacman 52MW Mindanao

MW vs. Outage Rate Facility Net Capacity Revenues for 1% Δ in outage rate p.a.

Tongonan 107.1 MW  Php46.7Mn Upper Mahiao 120.3 MW  Php33.8Mn Bacman 2 18.5 MW  Php8.4Mn Mindanao I 49.7 MW  Php13.4Mn

A CONDITION BASED MONITORING REVIEW PROGRAM HAS BEEN INSTITUTED TO ANITICIPATE EQUIPMENT END OF DESIGN LIFE (OBSOLESCENCE) AND END OF SERVICE LIFE (RELIABILITY) ISSUES

21 Equipment Reliability & Resiliency

Costs Benefits TONGONAN REHAB PHASE II: Php4.3Bn

ATTAINING GENERATION TARGETS REQUIRE SUCCESSFUL IMPLEMENTATION OF BOTH EQUIPMENT RELIABILITY UPRATING AND TYPHOON RESILIENCY INITIATIVES RETROFIT

Php968Mn

UPRATE

Php789Mn

RELIABILITY

Php2,581Mn

Mitsubishi for Turbine Retrofit* Transformer, Busbar, Cooling Tower (Php196Mn) Mitsubishi for Generator Rehabilitation* (Php593Mn) Control System Integration – Tongonan* (Php258Mn) Balance-of-Plant Reliability Enhancements (Php2,323M) *Projects with Notice to Proceed

CAPACITY (MW) FORCED OUTAGE RATES REVENUES (EST.) BASE CASE 1% Δ

3 x 37.5 24.2% Php 46.8 Mn Php 1,085.8 Mn 3 x 3.5*

• 433.0 Mn

*incremental capacity from improved engineering design

2.8 Years

Payback Period (est.)

TONGONAN

32 YEARS OLD

(STATUS QUO)

70.6%

UTILIZED

74.4%

AVAILABLE

75.8%

RELIABLE PALINPINON I TURBINE RETROFIT ALREADY PROGRAMMED FOR 2017 AS UNITS ARE DEEMED AT THE END- OF-DESIGN LIFE EVEN AS ITS REPORTED RELIABILITY IS CURRENTLY HIGH

19.0 %

Internal Rate of Return

22 Equipment Reliability & Resiliency

WITH THE COMPLETION OF THE BACMAN RETROFIT PROGRAM IN 2015, GROSS GENERATION HAS IMPROVED

Gross Generation (GWh) Ave.

gWh

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 22.67 30.63 45.03 13.98 43.08 66.04 39.17 87.38 72.20 99.69 96.47 94.07

9.9 58.1 0.0 27.0 14.3 50.6 48.9 56.9 29.2 14.7 13.8 13.4 20.9 51.4 57.0 46.9 59.6 91.6 40.5 17.0 60.1 94.3 93.2 74.7 55.2 71.3 90.1 96.8 102.8 99.5 99.1 92.3 98.0 100.0 95.4 86.8

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 110.0 120.0 130.0 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

2013 2014 2015 Gross Generation (Installed Capacity), GWh 1138 1143 1226 Gross Generation (Actual), GWh 337 707 1087

23 Equipment Reliability & Resiliency

EDC HAS BEEN “TYPHOON PROOFING” BACMAN AND LEYTE FACILITIES TO A DESIGN FOR UP TO 300 KPH WINDSPEED

REINFORCEMENT OF COOLING TOWERS

BEFORE (200 kph) MODIFIED (233 kph) 100% OF ALL UNITS WITH HISTORICAL TYPHOON DAMAGE AFTER (300 kph)

REINFORCEMENT OF POWERHOUSES

INSTALLATION OF INTERMEDIATE SHORING ON ROLLUP DOORS 86% UNDERGOING REINFORCEMENT INSTALLATION OF ADDITIONAL PURLINS

BUNKERING OF CONTROL ROOMS

3 COMPLETED; 5 OUT OF 8 ONGOING CONVERSION OF CONTROL ROOM TO BUNKER-TYPE DESIGN ENHANCEMENT OF POWER PLANT CONTROL CENTER

PRESERVING THE REVENUE BASE

26 Preserving the Revenue Base

WEAK COMMODITY PRICES EXPOSE OUR UNCONTRACTED CAPACITY TO LOWER MARGINS WHICH PROMPTS EDC TO SELECTIVELY POSTPONE GROWTH UNTIL TARGET RETURNS ARE ACHIEVED

CONTRACTED VS. WESM/EXPIRING CONTRACT[1] EDC WACC

Source: Bloomberg

128.08 71.34 98.97 121.55 96.53 84.38 70.88 59.38 62.44 70.26 64.64 59.81 59.34 59.76 60.55 59.17 57.93 53.65 52.41 52.58 93.56 63.28 78.04 106.19 109.08 105.30 96.24 50.91 45.57 55.44 54.66 58.55 63.56 61.79 56.17 47.69 45.38 45.84 41.69 34.59 20 40 60 80 100 120 140 160 2008 2009 2010 2011 2012 2013 2014 2015 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sept-15 Oct-15 Nov-15 Dec-15

Coal, $/MT Oil, S/bbl

HISTORICAL COAL AND OIL PRICES

(2008-2015, in US$)

(1) Expressed as percentage of capacity

27 Preserving the Revenue Base

GCGI’S CONTRACT REPRICING IS IMPERATIVE GIVEN ADVERSE MARKET CONDITIONS

1 As of November 30, 2014 2 As of January 31, 2015

CONTRACT REPRICING SUCCESSFULLY PRESERVED GCGI REVENUES OVER THE NEXT 5 TO 10 YEARS, INSPITE OF PHP800M IN FOREGONE REVENUES AT THE ONSET

3.6x increase

weighted ave. contract life

4.27 yrs

vs.

15.36 yrs

MW MW

GCGI CONTRACT REPRICING

US$ DEBT MANAGEMENT & FX EXPOSURE

30 US$ Debt Management & FX Exposure

COMFORTABLY OPERATING WITHIN COVENANTED FINANCIAL RATIOS

FY 2015 FY 2014 Dec-13 Dec-12 Dec-11 Dec-10 7.4 5.4 2.1 3.2 2.1 2.5 FY 2015 FY 2014 Dec-13 Dec-12 Dec-11 Dec-10 3.1 3.1 3.3 3.2 3.0 2.3 FY 2015 FY 2014 Dec-13 Dec-12 Dec-11 Dec-10 1.6 1.6 1.6 1.3 1.5 1.0 FY 2015 FY 2014 Dec-13 Dec-12 Dec-11 Dec-10 1.7 1.4 3.9 2.5 2.4 3.0

CURRENT RATIO DEBT TO EQUITY NET DEBT TO EBITDA(1) DEBT SERVICE COVERAGE RATIO(2)

Notes: Ratios are computed based on Parent Company financial statements (1) EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization (2) Debt Service Coverage Ratio = Net Cash flow from Operating Activities / (Short Term Debt + Long Term Debt + Projected Interest Service for the next 12 months)

3.6 times 1.0 times 2.3 times High liquidity to meet short-term obligations Well within our targeted 3.6 times Allows headroom for additional debt financing Strong ability to produce cash to cover debt payments 1.2 times

31 US$ Debt Management & FX Exposure

DELIBERATELY MANAGING FINANCIAL RISKS

Management of financial risks

PhP 8,500.0 Mn USD 315.0 Mn PhP 5,000.0 Mn

PROACTIVE LIABILITY MANAGEMENT STRATEGIES WILL CONTINUE TO BE EVALUATED IN 2016

Increasing head room for debt at Parent level

• Refinancing debt at the operating company
• Project Finance new RE venture
• Derivative Transactions
• Interest rate reduction initiatives
• Addressing lumpy principal payments

70.0 % HEDGED

2016-17 US$ Debt Service

5.45 % p.a.

Interest Rate (weighted ave.) for 2016

66% of Total Debt

Amortizing Repayment

32 US$ Debt Management & FX Exposure

VARIOUS INITIATIVES HAVE BEEN UNDERTAKEN TO INSULATE EDC FROM SWINGS IN NET INCOME

100 200 300 400 500 600 700 Cover Debt

LOANS BY CURRENCY Eliminated JPY exposure starting 2011 USD EXPOSURE Significant portion of USD obligation remain exposed to currency fluctuations Cash flow exposure is evident in year 2021 CASH FLOW EXPOSURE

143 181 181 181 181 181 181 98 91 129 156 98 88 346 100 200 300 400 2015 2016 2017 2018 2019 2020 2021 USD Capex, Opex, Debt Service USD Linked Revenues 12 66 56 63 62 60 62 59% 11 21 44 37 38 40 38 41% 77 13 0% 20% 40% 60% 80% 100% 2009 2010 2011 2012 2013 2014 2015 2016* PESO USD JPY Dollar Bonds 300 CCS** 63 $ Linked Revenues 181 Uncovered Portion 370

* 2016 Year-End Projected figures as of March 31, 2016 ** cross currency swaps *** call spread

175 Mn Club loan 88 80 Mn Club loan 73 Burgos Project Finance 175 OPEX 14 Debt Service 54 USD Cash 63 Capex Dep’n 1 CS*** 27

KEY TAKEAWAYS

34 Key Takeaways

KEY TAKEAWAYS

 EDC faces challenges in the different facets of our operations and this has resulted to volatile

financial performance

 EDC proactively addresses underlying risk factors that fuel earnings volatility …

• Invest in both typhoon resiliency and equipment reliability uprating initiatives to deter
• perational upsets
• Deliberately manage financial risks by entering into project financing for new investments,

hedging of US Dollar debt, and refinancing bullet maturities to amortizing type loan

 EDC remains comfortably within debt covenant ratios despite the increase in leverage  EDC will defer some CAPEX-intensive growth projects and focus investments on its existing asset

base to boost output and improve reliability and cash generation

 EDC remains committed to grow its geothermal business overseas  EDC will continue to pay cash dividends to its shareholders

OVERSEAS DRILLING TURBINE RETROFIT REINFORCED COOLING TOWER

END OF PRESENTATION

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