In compliance with the disclosure requirements of the Philippine Stock Exchange, we submit the attached SEC Form 17-Q for the 1 st Quarter of 2009

Transcription

1 May 13, 2009 JANET A. ENCARNACION HEAD, Disclosures Department Philippine Stock Exchange Tektite Building, Ortigas Center Pasig City Dear Ms. Encarnacion: In compliance with the disclosure requirements of the Philippine Stock Exchange, we submit the attached SEC Form 17-Q for the 1 st Quarter of 2009

2 SEC Number File Number ENERGY DEVELOPMENT (EDC) CORPORATION (Formerly PNOC Energy Development Corporation) (Company s full Name) PNPC Complex, Merritt Road, Ft. Bonifacio, Taguig City (Company s Address) (632) (Telephone Number) March 31, 2009 (Quarter Ending) SEC FORM 17-Q (Form Type) SEC Form 17Q 1Q 2009

3 SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-Q QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER 1. For the quarterly period ended March 31, Commission identification number: BIR Tax Identification No Exact name of issuer as specified in its charter: ENERGY DEVELOPMENT (EDC) CORPORATION 5. Province, country or other jurisdiction of incorporation or organization: PHILIPPINES 6. Industry Classification Code: (SEC Use Only) 7. Address of issuer's principal office Postal Code PNPC Complex, Merritt Road, Ft. Bonifacio, Taguig City Issuer's telephone number, including area code: (632) Former name, former address and former fiscal year, if changed since last report: Not Applicable 10.Securities registered pursuant to Sections 8 and 12 of the Code, or Sections 4 and 8 of the RSA Title of each Class Number of shares outstanding as of March 31, 2009 Common Stock, P1.00 par value 14,907,000,000 Preferred Stock, P0.01 par value 7,500,000, Are any or all of the securities listed on a Stock Exchange? Yes, the common stock. If yes, state the name of such Stock Exchange and the class/es of securities listed therein: Philippine Stock Exchange Common Stock 12. Indicate by check mark whether the registrant: (a) has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17 thereunder or Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the Corporation Code of the Philippines, during the preceding twelve (12) months (or for such shorter period the registrant was required to file such reports) Yes [ ] No [ ] (b) has been subject to such filing requirements for the past ninety (90) days. Yes [ ] No [ ] SEC Form 17Q 1Q

4 PART 1 FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Our unaudited financial statements for the quarter ended March 31, 2009 have been prepared in accordance with Philippine Financial Reporting Standards (PFRS) and are filed as Annex I of this report. ITEM 2. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ( MD & A ) The following is a discussion and analysis of the Company s financial performance for the quarter ended March 31, The prime objective of this MD&A is to help the readers understand the dynamics of our Company s business and the key factors underlying our financial results. Hence, our MD&A is comprised of a discussion of our core business, and an analysis of the results of operations. This section also focuses on key statistics from the unaudited financial statements and pertains to risks and uncertainties relating to the geothermal industry in the Philippines where we operate up to the stated reporting period. However, our MD&A should not be considered all inclusive, as it excludes unknown risks, uncertainties and changes that may occur in the general economic, political and environment condition after the stated reporting date. Our MD&A should be read in conjunction with our unaudited financial statements and the accompanying notes. All financial information is reported in Philippine Pesos (PhP) unless otherwise stated. Any references in this MD&A to we, us, our, Company means the Energy Development (EDC) Corporation. Additional information about the Company can be found on our corporate website SEC Form 17Q 1Q 2009

5 The following is a summary of the key sections of this MD&A: OVERVIEW OF OUR BUSINESS... 5 KEY PERFORMANCE INDICATORS... 8 OPERATING REVENUES AND EXPENSES... 9 FINANCIAL HIGHLIGHTS... 9 RESULTS OF OPERATIONS CAPITAL AND LIQUIDITY RESOURCES FOREIGN EXCHANGE AND INTEREST RATE EXPOSURE OTHER MATTERS CASH DIVIDEND MAJOR STOCKHOLDERS BOARD OF DIRECTORS KEY OFFICERS SIGNATURES SEC Form 17Q 1Q

6 OVERVIEW OF OUR BUSINESS Principal Products or Services As of March 31, 2009, the Company operates twelve geothermal steamfields in the five geothermal service contract areas where it is principally involved in: i. the production of geothermal steam for sale to National Power Corporation (NPC) pursuant to Steam Sales Agreements (SSAs) and ii. the generation of electricity for sale to NPC pursuant to Power Purchase Agreements (PPAs), and for No. Negros to electric cooperative and distribution utilities pursuant to an Electricity Sales Agreement (ESA),. For the Company s third business segment, EDC provides drilling equipment and rig personnel to the Lihir Gold Limited. With its acquisition of a 60% equity stake in First Gen Hydro Power Corporation (FG Hydro) last November 17, 2008, EDC now finds itself already involved in the operation of hydro power plants. FG Hydro s 100 MW Pantabangan and 12 MW Masiway Hydroelectric Power Plants (PMHEPP), located in Pantabangan, Nueva Ecija Province, Central Luzon, inject electricity into the Luzon grid to service the consumption of its customers which include the Wholesale Electricity Spot Market (WESM) and Transition Supply Contract (TSC) clients. With this development, the Company has now evolved into being the country s premier pure renewable energy play, possessing interests in geothermal energy and hydro power. For geothermal energy, its expertise spans the entire geothermal value chain, i.e., from geothermal energy exploration and development, reservoir engineering and management, drilling, engineering design and construction, environmental management and energy research and development. Percentage of sales or revenues contributed by foreign sales The Company generated P177.6 million revenues from the contract it entered into with Lihir Gold Limited in Papua, New Guinea. This represents 3.2% of the Company s gross revenues for the first quarter of year Distribution method of products and services Almost all of 2,148.4 GWh generated by the Company from its steam and electricity business was sold to NPC. Only the electricity production of about GWh, i.e., pertaining to electricity generated by the power plant of FG Hydro, was sold to various electric cooperatives in the province of Nueva Ecija. The Company s total generation comprised of 1,249.8 GWh coming from electricity production in Leyte and Mindanao areas; GWh pertaining to steam operations in Leyte, Southern Negros and Sorsogon areas; and GWh generated from hydro power plant operations in Pantabangan, Nueva Ecija. SEC Form 17Q 1Q

7 It is the National Grid Corporation of the Philippines (NGCP) responsibility to transmit the electricity generated, by either NPC s or the Company s geothermal power plant(s), through its high voltage backbone system to NPC s customers, i.e., distribution utilities, electric cooperatives or bulk power customers. In the case of NNGP, it is EDC s responsibility to deliver its electricity production to NGCP Bacolod sub-station for the eventual transmission to ILECO, EDC s customer. FG Hydro s electricity production of about GWh was sold to the WESM and TSC clients. This power was delivered to the distribution systems of these customers through the Pantabangan and Cabanatuan substations which are owned, operated and maintained by NGCP. Competition The Company s geothermal steam competes against other major energy sources used for the production of electricity, particularly coal, natural gas and oil. Of these, coal and oil are imported. For the supply of geothermal steam, the only other company operating in the Philippines is Chevron Philippines Geothermal Holdings, Inc. (further to Chevron Texaco Corporation s acquisition of Union Oil Company of California (UNOCAL) on August 10, 2005). With its acquisition of a 60% equity stake in First Gen Hydro Power Corporation (FG Hydro) last November 17, 2008, EDC now finds itself also involved in the operation of hydro power plants. FG Hydro s PMHEPP injects electricity into the Luzon grid to service the consumption of its customers which include the Wholesale Electricity Spot Market (WESM) and Transition Supply Contract (TSC) clients. In turn, its participation in the WESM exposes the Company to a more diversified base of Independent Power Producers (IPP) utilizing energy sources other than geothermal energy. Also, the Company has included into its strategic plans the Company s participation in PSALM s auction of the NPC-owned geothermal power generation facilities, namely Palinpinon I and II, Bacman I and II, Tongonan I. The Company participated in PSALM s auction of the Tiwi and Makban geothermal power plants on July 30, 2008 which was won by Aboitiz Power Corp. Their respective bids were USD446.9 million and USD368.4 million. Additionally, non-philippine companies that are providing geothermal consultancy services in the Asia-Pacific region are West Japan Engineering Consultancy, GeothermEx and Sinclair Knight Merz Engineering Consultancy. For drilling services in the Philippines, the Company s lone competitor is DESCO, Inc. SEC Form 17Q 1Q

8 Dependence on one major customer Significantly, almost all of the Company s revenues from its steam and electricity business are derived from existing long-term Steam Sales Agreements (SSAs) and Power Purchase Agreements (PPAs) with NPC, respectively. Concessions and royalty payments The five geothermal service contract areas where the Company s geothermal steam fields are located are: 1. Leyte Geothermal Production Field (expiring in 2031) 2. Southern Negros Geothermal Production Field (expiring in 2031) 3. Bacman Geothermal Production Field in Luzon (expiring in 2031) 4. Mindanao Geothermal Production Field (expiring in 2022) 5. No. Negros Geothermal Production Field (expiring in 2024) SEC Form 17Q 1Q

9 KEY PERFORMANCE INDICATORS The top five (5) key performance indicators are set forth below: Ratio March 31, 2009 March 31, 2008 Current Ratio 1.26:1 1.22:1 Debt-to-Equity Ratio 1.18:1 0.90:1 Net Debt-to-Equity Ratio 0.94:1 0.81:1 Return on Assets (%) Return on Equity (%) Current Ratio Total current assets divided by total current liabilities. This ratio is a rough indication of a company s ability to pay its short-term obligations. Generally, a current ratio above 1.00 is indicative of a company s greater capability to settle its current obligations. Debt-to-Equity Ratio Total interest-bearing debts divided by stockholders equity. This ratio expresses the relationship between capital contributed by the creditors and the owners. The higher the ratio, the greater the risk being assumed by the creditors. A lower ratio generally indicates greater long-term financial safety. Net-Debt-to-Equity Ratio Total interest-bearing debts less cash & cash equivalents divided by stockholders equity This ratio measures the company s financial leverage and stability. A negative net debt-to-equity ratio means that the total of cash and cash equivalents exceeds interest-bearing liabilities. Return on Assets Net income divided by total assets (average) This ratio indicates how profitable a company is relative to its total assets. This also gives an idea as to how efficient management is at using its assets to generate earnings. Return on Equity Net income divided by total stockholders equity (average) This ratio reveals how much profit a company earned in comparison to the total amount of shareholder equity found on the balance sheet. A business that has a high return on equity is more likely to be one that is capable of internally generating cash. For the most part, the company s return on equity is compared with an industry average. The company is considered superior if its return on equity is greater than the industry average. SEC Form 17Q 1Q

10 OPERATING REVENUES AND EXPENSES FINANCIAL HIGHLIGHTS Net income increased by P783.2 million, or 52.8%, to P2,267.7 million as compared to the P1,484.5 million during the same period in 2008 primarily due to the recognition of P1,278.0 million foreign exchange gain from the translation to peso of the yen and dollar denominated loans using March 31, 2009 closing rates, in contrast with the P3,274.8 million foreign exchange loss for the same period in Total revenues for 2009 increased by P750.1 million -- P514.5 million from an increase in average electricity and steam prices (by P0.2825/KWh and P0.1053/KWh, respectively), P168.9 million from the combined recognition of intangible assets for the buffer zone in No. Negros and Tanawon project in Albay and the P66.7 million increase in revenues from drilling services rendered in Lihir, Papua, New Guinea. Offsetting these positive variances were the following: o one-time transactions reported in March 2008, i.e. arbitration award (partial) amounting to P2,278.1 million presented as miscellaneous income and P616.9 million presented as a reduction adjustment in general and administrative expenses (allowance for doubtful accounts); o P717.8 million combined increase in expenditures for operations and maintenance (P396.4) and for purchased services and utilities (P321.4) given the power plants and FCRS maintenance activities, particularly in Leyte; o recognition of P298.9 million unrealized derivative loss from hedging contracts for Miyazawa I loan while none in the comparative period in 2008; o P101.1 million net increase in finance charges mainly attributed to the new IFC loan; and o P217.7 million tax effect of the foregoing net favorable variances. Cash and cash equivalents as of March 31, 2009 was at P7,579.5 million, or 691.9% higher than the December 31, 2008 balance of P957.1 million. The P4,100.0 million proceeds from the IFC loan and the P1,000.0 million collection from NPC for the 3 rd tranche of the 2008 arbitration award contributed the increase. The recurring net income generated in the first quarter of 2009 amounted to P1,570.1 million, P138.7 million, or 8.1% lower than the P1,708.8 million posted during the same period in This was mainly due to the P999.7 million increase in recurring operating expenses for the maintenance of field facilities and work-over of geothermal wells and P124.4 million net increase in finance charges arising from the availment of the IFC loan in January The foregoing increases were partly offset by P750.1 million increase in total revenues, P33.3 million net realized foreign exchanges gains and the P202.0 million net income tax effect of the foregoing variances. SEC Form 17Q 1Q

11 RESULTS OF OPERATIONS The following table details the results of operations for EDC for the first quarter of 2009 and HORIZONTAL ANALYSIS VERTICAL ANALYSIS Increase(Decrease) (Amounts in PHP millions) Mar Mar Amount % Revenue from sale of electricity 3, , % 64.6% 65.3% Revenue from sale of steam 1, , % 20.0% 21.4% Interest income on service concession (19.0) -3.6% 9.2% 11.0% Revenue from drilling services % 3.2% 2.3% Construction revenue % 3.0% 0.0% TOTAL REVENUES 5, , % 100.0% 100.0% Operations and maintenance (1,428.3) (1,031.9) (396.4) 38.4% -25.8% -21.5% General and administrative (661.2) 94.3 (755.5) % -11.9% 2.0% Purchased services and utilities (602.4) (281.0) (321.4) 114.4% -10.9% -5.9% Depreciation and amortization (153.4) (154.5) % -2.8% -3.2% Construction costs (145.6) - (145.6) 100.0% -2.6% 0.0% Total Operating Expenses (2,990.9) (1,373.1) (1,617.8) 117.8% -54.0% -28.6% Interest income - net of final tax % 2.0% 1.4% Interest expense (550.4) (406.5) (143.9) 35.4% -9.9% -8.5% Total Financial Income (Expenses) (439.7) (338.6) (101.1) 29.9% -7.9% -7.1% Foreign exchange gains (losses) - net 1,278.0 (3,274.8) 4, % 23.0% -68.3% Derivatives gain (loss) - net (298.9) - (298.9) % -5.4% 0.0% Miscellaneous - net ,301.5 (2,284.2) -99.2% 0.4% 48.1% Total Other Income (Expenses) (973.3) 1, % 18.0% -20.2% INCOME BEFORE INCOME TAX 3, , , % 56.1% 44.1% Provision for (benefit from) Income Tax Current (512.2) (757.1) % -9.2% -15.8% Deferred (330.8) (462.6) % -6.0% 2.7% (843.0) (625.3) (217.7) 34.8% -15.2% -13.1% NET INCOME 2, , % 40.9% 31.0% Attributable to: Equity holders of the Parent Company 2, , % 39.2% 28.6% Minority Interests (17.2) -15.3% 1.7% 2.3% EBITDA 2, ,587.5 (873.7) -24.4% 48.9% 74.8% RECURRING NET INCOME 1, ,708.8 (138.7) -8.1% 28.3% 35.6% YTD March 31, 2009 vs. YTD March 31, 2008 Revenues Revenues for the period ended March 31, 2009 increased by P750.1 million, or 15.6%, to P5,544.9 million from P4,794.8 million during the same period in 2008 due to higher electricity and steam selling prices. SEC Form 17Q 1Q

12 Revenue from Sale of Electricity Revenue from sale of electricity increased by P454.3 million, or 14.5%, to P3,584.1 million in the first quarter of 2009 from P3,129.8 million during the same period in 2008 on account of the following: P0.2825/KWh increase in electricity prices, due to the higher inflation factor indices with the Peso depreciation against the US dollar in the first quarter of 2009 (P399.8 million); and, 28.4 GWh increase in FG Hydro s billed electricity volumes (P81.1 million). These were partly offset by the absence of electricity generation from the No. Negros Geothermal Power Plant as it remains to be on temporary shutdown, since May 28, 2008, due to insufficient steam production. The decline in production was assessed to be due to the clogging of the wells by calcite minerals found in the current geothermal field. No. Negros generated 9.3 GWh during the first quarter in 2008 (P26.6 million). Revenue from Sale of Steam Revenue from sale of steam increased by P79.2 million, or 7.7%, to P1,106.3 million in the first quarter of 2009 from P1,027.1 million during the same period in The increase was attributed to the following: P0.1053/KWh increase in steam prices, due to higher inflation factor (P77.2 million); and, Lower amortization of concession receivables with the full amortization of Palinpinon I and Tongonan I s concession receivable in December 2008 and January 2009, respectively (P33.2 million). These were reduced by the following: lower billed volume (11.3 GWh) largely on account of an additional revenue day during the first quarter in 2008 (being a leap year) and Palinpinon II's lower sales volume arising from the lower Okoy 5 module s lower tested dependable capacity, i.e., from MW to MW effective May 25, 2008 (P18.7 million). Lower final inflation adjustments on prior year's revenues recognized, i.e., P1.0 and P13.5 million in 2009 and 2008, respectively, based on NSO's published indices (P12.5 million). Interest Income on Service Concession Interest income on concession receivable decreased by P19 million, or 3.6%, to P508 million in the first quarter of 2009 from P527 million during the same period in The drop resulted from the decreasing balance of concession receivable. SEC Form 17Q 1Q

13 Revenue from Drilling Services Revenue from drilling services increased by P66.7 million, or 60.1%, to P177.6 million in the first quarter of 2009 from P110.9 million during the same period in The favorable variance was traced to increased contract day rates for drilling and other services rendered to Lihir Gold Limited in Papua, New Guinea. The US$3.7 million revenues in the first quarter 2009 was higher than the US$2.7 million billed during the same period in In peso terms, the 2009 reported revenues were higher given an average peso-dollar exchange rate of P48.206:US$1.00 versus the P41.044:US$1.00 during the same period in Construction Revenue The recognition of construction revenue is in accordance with the adoption of Philippine Interpretation IFRIC 12. On-going developmental activities in No. Negros Project s buffer zone and in the Tanawon Project resulted to construction revenues amounting to P157.3 and P11.6 million, respectively. Operating Expenses Operating expenses increased by P1,617.8 million, or 117.8%, to P2,990.9 million in the first quarter of 2009 from P1,373.1 million for the same period in The increase resulted from a one-time transaction reported in March 2008 i.e., P616.9 million reduction adjustment in general and administrative expenses (allowance for doubtful accounts), and the P717.8 million combined increase in expenditures for operations and maintenance (P396.4) and for purchased services and utilities (P321.4) given the power plants and FCRS maintenance activities, particularly in Leyte. Operations and Maintenance Operations and maintenance expenses increased by P396.4 million, or 38.4%, to P1,428.3 million in the first quarter of 2009 from P1,031.9 million during the same period in 2008 mainly due to the following: Higher maintenance costs (P181.5 million) primarily contributed by the turbine rotor re-blading program for the Mahanagdong power plants in Leyte; and Higher material consumption in 2009 mainly for the civil works activities and for the work-over of geothermal wells, particularly in Leyte (P189.3million). General and Administrative The P661.2 million general and administrative expenses incurred in the first quarter of SEC Form 17Q 1Q

14 2009 was a reversal of the P94.3 other income during the same period in 2008, mainly because of the following: A one-time transaction reported in March 2008 i.e., P616.9 million reduction adjustment in allowance for doubtful accounts as a result of the arbitral award; Provision for doubtful account on overdue TAR recognized in the first quarter of 2009 (P98.2 million). No provision was made for the same period in 2008; Higher consultancy services and employee costs incurred in the first quarter of 2009, offset by the lower administrative expenses of FG Hydro (P31.3 million); and Higher expensed assets in 2009 particularly in Leyte (P30.1 million). The foregoing unfavorable variances were partly offset by lower insurance expenses in the first quarter of 2009 compared with the same period in 2008 (P32.1 million). Purchased Services and Utilities Purchased services and utilities increased by P321.4 million, or 114.4%, to P602.4 million in the first quarter of 2009 from P281 million during the same period in 2008, largely on account of higher expenses on technical and consultancy services, particularly for EDC s own geothermal drilling operations and wells work-over - by P232.2 million, and third-party drilling operations in Lihir, Papua, New Guinea - by P60.5 million, (P292.7 million) coupled with higher hauling services for the shipment of drilling materials and supplies to field geothermal projects (P31.8 million). Depreciation and Amortization The P1.1 million, or 0.7%, decrease to P153.4 million in the first quarter of 2009 from P154.5 million during the same period in 2008 was mainly attributed to the full depreciation of some geoscientific instruments in SEC Form 17Q 1Q

15 Construction Costs The recognition of construction costs is in accordance with the adoption of Philippine Interpretation IFRIC 12. On-going developmental activities in No. Negros Project s buffer zone and in the Tanawon Project resulted to construction costs amounting to P135.6 and P10.0 million, respectively. Financial Income (Expenses) Financial expenses-net increased by P101.1 million, or 29.9%, to P439.7 million in the first quarter of 2009 from P338.6 million during the same period in 2008 due to higher debt servicing costs largely on account of the new loan availment, i.e., IFC loan availed in January 2009, partly offset by higher interest income on funds placements. Interest Income net Interest income-net of final tax increased by P42.8 million, or 63.0%, to P110.7 million in the first quarter of 2009 from P67.9 million during the same period in The favorable variance was mainly caused by the recognition of interest income accretion on NPC receivables (Tranche 4 of arbitral award) in the first quarter of 2009 with none during the same period in 2008 (P23.4 million) and higher interest income on funds placements coming from the proceeds of the newly availed IFC loan received in January 2009 (P19.4 million). Interest Expense Interest expense increased by P143.9 million, or 35.4%, to P550.4 million in the first quarter of 2009 from P406.5 million during the same period in The unfavorable variance was mainly on account of the following: Interest expense and amortization of the transaction costs on the IFC loan for the first quarter of 2009 for the newly availed IFC loan (P144.3 million); and Impact of the depreciation of the Philippine Peso and appreciation of the Japanese Yen against the US dollar on interest payments (P55.9 million). The foregoing unfavorable variances were reduced by the interest expense accretion on royalty payable due DOE recognized in the first quarter of 2008 (P56.3 million). This was fully accreted in December SEC Form 17Q 1Q

16 Other Income (Charges) The reported other income net amounting to P996.4 million in the first quarter of 2009 was a turnaround from the P973.3 million other charges net during the same period in The favorable variance was primarily contributed by the current period's foreign exchange gain in contrast to the prior period s foreign exchange loss, partly offset by the miscellaneous incomenet recognized in 2008 arising from the arbitral award rendered on March 25, 2008 and the recognition of unrealized derivative loss in the first quarter of Foreign Exchange Loss - net Foreign exchange gain - net of P1,278 million was a reversal of the P3,274.8 million loss during the same period in 2008, primarily due to the depreciation of the Yen against the US dollar offset by the depreciation of the peso against the US dollar. The comparative foreign exchange rates against the USD were as follows: JPY:US$ PHP:US$ December 31, March 31, December 31, March 31, Derivatives Gain (Loss) Derivative loss (net) pertained to the mark to market valuation of the range-bonus forward contracts covering Miyazawa 1 (P232.1 million), accrual of premium costs accumulated in the first quarter of (P72.5 million) and FG Hydro s recognition of unrealized derivative loss on embedded currency options in its PRUP Contract with VA TECH HYDRO, Gmbh Contractor (P19 million). This was partly offset by the unrealized gain on forward currency contracts with various banks for US dollar (P24.7 million). SEC Form 17Q 1Q

17 Miscellaneous net Miscellaneous income-net significantly decreased by P2,284.2 million, or 99.2%, to P17.3 million in the first quarter of 2009 from P2,301.5 million during the same period in 2008 on account of a one-time transaction reported in March 2008, i.e. arbitration award amounting to P2,278.1 million. Provision for (Benefit from) Income Tax Current tax expense decreased by P244.9 million, or 32.3%, to P512.2 million in the first quarter of 2009 from P757.1 million during the same period in 2008 largely due to higher operating expenses in the first quarter of Deferred tax expense of P330.8 million in the first quarter of 2009 was a turnaround from the P131.8 million deferred tax income during the same period in 2008 mainly because of the unrealized foreign exchange gain in 2009 as against the unrealized foreign exchange loss in Net Income Net income in the first quarter of 2009 increased by P783.2 million, or 52.8%, to P2,267.7 million from P1,484.5 million during the same period in The higher returns resulted largely from the current period s foreign exchange gain in contrast to the prior period s foreign exchange loss and the increase in revenues. These were reduced by the one-time transaction reported in 2008, i.e., arbitral award to EDC, coupled with the current period s increase in operating expenses. Net income represented 40.9% of total revenues in the first quarter of 2009 compared to the 31% during the same period in CAPITAL AND LIQUIDITY RESOURCES As of the quarter ended Q Q YoY change (in millions of pesos) Balance Sheet Data Total Assets 74, , % Total Debt.. 43, , % Total Stockholders Equity 31, , % The Company s assets as of March 31, 2009 amounted to P74,580.4 million, 2.1% higher as compared to the P73,030.3 million level as of March 31, SEC Form 17Q 1Q

18 Highlights of selected balance sheet accounts are as follows: In Million Pesos % Change vs. Dec. 31, 2008 Restated Mar. 31, 2008 % Change vs. Mar. 31, 2008 Mar. 31, 2009 December 31, 2008 Cash and cash equivalents 7, % 2, % Trade and other receivables net 5, , % 5, % Concession receivable inclusive of current portion 34, , % 36, % Available-for-sale (AFS) investments % 1, % Other current assets % % Noncurrent assets held for sale 1, , % 1, % Property, plant and equipment net 5, , % 4, % Exploration and evaluation assets 1, % 1, % Goodwill and intangible assets net 11, , % 11, % Deferred tax assets net 3, , % 3, % Other non-current assets net , % 3, % Income tax payable % 1, % Royalty fee payable inclusive of current portion 1, , % 1, % Obligations to a power plant contractor inclusive of current portion % % Long-term debt inclusive of current portion 34, , % 28, % Capital stock 21, , % 21, % Cost of treasury stock held % % Retained earnings 12, , % 10, % Minority interest 1, , % 3, % Cash and cash equivalents This account consists of cash on-hand, in-banks and money market placements with maturities of less than three months. SEC Form 17Q 1Q

19 The P6,622.4 million, or 691.9% increase from the December 31, 2008 balance was mainly due to the proceeds from the IFC loan of P4,100.0 million and P3,673.1 million internal cash generation for the first quarter of 2009, inclusive of the P1,000 million collection from NPC for Tranche 3 of the arbitral award. Cash and cash equivalents was higher by P4,911.6 million, or 184.1%, from the P2,667.9 million balance as of March 31, 2008 primarily due to P4,100.0 million proceeds from IFC loans and the P1,000.0 million collection of Tranche 3 of the favorable arbitral award to EDC. Trade and other receivables - net This account, consisting mainly of receivables from NPC, contractors and employees, decreased by P139.6 million as of March 31, 2009 to P5,272.5 from the P5,412.1 balance as of December 31, Quarter on quarter, this account decreased by P208.5 million from the P5,481.0 balance as of March 31, The decrease was primarily due to the P1,000.0 million collection of Tranche 3 of the arbitral award and the P293.1 million reclassification of input VAT receivable from the BIR to the noncurrent assets account, offset by P894.9 million reclassification of Tranche 4 of the arbitral award receivable from NPC. Available-for-sale (AFS) investments Available-for-sale investments include placements that can be readily converted to cash, primarily dollar-denominated ROP bonds. This account increased by P72.0 million to P746.5 million in the first three months of 2009 from the P674.5 million balance as of December 31, 2008 primarily due to the unrealized foreign exchange gain as of end-march This account was lower by P303.5 million, or 28.9%, from the P1,050.0 million balance as of March 31, 2008 primarily due to the sale of ROP bonds amounting to US$6.8 million. Other current assets Other current assets consist mainly of BIR s tax credit certificates, prepaid expenses and advances to contractors. The P72.3 million decrease in the first quarter of 2009 from the balance as of December 31, 2008 was attributed mainly to the P198.0 million advance payment for the purchase of a new drilling rig reclassified to property, plant and equipment and the transfer of P122.0 million deferred royalty fee to the trade and other receivable account representing payment of royalty fees SEC Form 17Q 1Q

20 (initially advanced by EDC for reimbursement by NPC). The foregoing variances were offset by P175.0 million prepaid insurance and P64.0 million accrual of royalty fee chargeable to NPC. Other current assets decreased by P28.5 million from P613.6 million as of March 31, 2008 mainly due to the application of P387.0 million tax credit certificate for its 2008 income tax payments offset by the P245.7 million increase in advances to contractors and P122.0 million recognition of royalty fees chargeable to NPC. Noncurrent assets held for sale The P1,797.6 million noncurrent assets held for sale represent the parcel of land, buildings and improvements owned by the Company in its Fort Bonifacio head office, which the Company agreed to sell to PNOC prior to its privatization. The company expects the sale to be completed in This account increased by P125.1 million from the P1,672.5 million balance as of March 31, 2008 primarily due to the reclassification of the carrying value of Fort Bonifacio buildings, improvements and equipment from the property and equipment account. Property, plant and equipment - net Property and equipment-net increased by P288.3 million as of March 31, 2009 from the P5,280.1 million balance as of December 31, 2008 mainly due to the reclassification from the other current assets account the advance payment to the drilling rig supplier and the P92.4 million capital expenditures for the current period. This account increased by P629.5 million from the P4,938.9 million balance as of March 31, 2008 primarily due to capital expenditures from Q2 of 2008 to Q1 of 2009 of P791.6 million and the P198.0 million advance payment for the purchase of a new drilling rig from the current assets account, offset by P125.1 million reclassification of the carrying value of Fort Bonifacio buildings and improvements to the noncurrent-assets-held for sale account and depreciation charges. Exploration and evaluation assets Exploration and evaluation assets account increased by P55.2 million as of March 31, 2009 from P999.7 million as of December 31, 2008 primarily due to exploration costs of Mindanao, Dauin and North Luzon Wind Project. SEC Form 17Q 1Q

21 This account reduced by P145.8 million from the P1,200.8 million balance as of March 31, 2008 primarily due to the reclassification of P902.9 million exploration expenses of Tanawon and No. Negros Project s buffer zone to the intangible assets account, offset by the P757.1 million current period s expenditures for the other projects. Goodwill and intangible assets-net Intangible asset increased by P74.3 million as of March 31, 2009 from the P11,882.9 million balance as of December 31, This account increased by P722.9 million from the P11,234.3 million balance as of March 31, Both increases were primarily due to the reclassification of No. Negros buffer zone and Tanawon exploration and evaluation expenses amounting to P1,101.1 million as the projects are already in the development stage reduced by P448.6 million amortization expenses. Deferred tax assets - net Net deferred tax assets decreased by P334.5 million in the first quarter of 2009 mainly due to the deferred tax liability on the unrealized foreign exchange gain on translation to Peso of the foreign-currency denominated loans. This account decreased by P108.7 million from P3,184.6 million balance as of March 31, 2008 due to the unrealized foreign exchange gain in translating to Peso of the foreign-currency denominated loans to the March 31, 2009 peso-dollar exchange rate. Other non-current assets, net This account decreased by P419.5 million, or 130.7%, to P946.5 million as of March 31, 2009 from P1,366.0 million as of December 31, 2008 attributed primarily by P894.9 million transfer of Tranche 4 of the arbitral award receivable from NPC to the trade and other receivable account, offset by P293.1 million reclassification of input VAT receivable from BIR to the trade and other receivable account. Quarter on quarter, this account dropped by P2,578.7 million, or 73.2%, from P3,525.2 million as of March 31, 2008 primarily due to P894.9 million transfer of Tranche 4 of the arbitral award receivable from NPC to the trade and other receivable account, P764.3 million final application of the 10% retention on advances to Kanematsu Corporation for the construction of the No. Negros geothermal power plant and P464.0 million decrease in royalty fees chargeable to NPC. SEC Form 17Q 1Q

22 Income tax payable This account increased by P512.2 million, or 604.1% in the first quarter of 2009 mainly due to the accrual of income tax liability for the current year. This account decreased by P596.2 million, or 50.4%, from P1,193.2 million balance as of March 31,2008 mainly due to the payment of income tax due in Royalty fee payable This account decreased by P139.9 million to P1,548.4 million as of March 31, 2009 from P1,688.3 million as of December 31, This account decreased by P217.4 million from P1,765.8 million as of March 31, 2008 Both decreases were mainly due to the accelerated payment of 2006 to 2007 royalty fees due DOE for Palinpinon I, and the accelerated payment deadline for royalty fee due local government units (LGUs) from one year to 60 days with the privatization of EDC in Obligations to a power plant contractor (inclusive of current portion) Obligations to Marubeni as BOT contractor for the Mindanao power plants decreased by P57.9 million to P54.3 million as of March 31, 2009 from P112.2 million as of December 31, 2008, and by P216.6 million from P270.9 million as of March 31, 2008 due to the payments of regular capital cost recovery fees. Long-term debt (inclusive of current portion) Long-term debt, consisting of JPY and US$ loans, increased by P2,495.3 million to P34,724.8 million as of March 31, 2009 from P32,229.5 million as of December 31, 2008 primarily due to the newly availed IFC loan amounting to P4,100.0 million offset by P1,293.7 foreign exchange gains on translation of foreign-currency-denominated outstanding loans to the March 31, 2009 exchange rates and P421.8 million principal amortization payments. This account increased by P6,200.6 million, or 21.7%, from the P28,524.2 million balance as of March 31, 2008 due to the IFC loan in January 2009 plus the foreign exchange loss sustained in translating the foreign-currency denominated loans from April 1 to December 31, Cost of treasury stock held SEC Form 17Q 1Q

23 This account pertains to the 93,000,000 common shares which were bought back for the Company s programmed stock-based benefits plans. Retained earnings Retained earnings increased by P2,172.8 million or 21.8% as of March 31, 2009 from the December 31, 2008 balance accounted by net income for the period. Retained earnings increased by P1,658.9 million or 15.8 % from the same period in 2008 accounted by the P2,172.8 million net income for the first quarter of 2009 offset by of P449.4 million adjustment on deferred tax liability and P64.4 million net loss for the period April to December SEC Form 17Q 1Q

24 CASH FLOW March 31, 2009 vs. March 31, 2008 Net cash provided from operating activities decreased by P1,300.5 million, or 28.2%, to P3,307.8 million in the first quarter of 2009 from P4,608.3 million during the same period in 2008 mainly due to the decrease in trade and other receivable resulting from the P1,000.0 million collection for Tranche 3 of the arbitral award and the drop of P307.2 million cash disbursement to settle trade and other payables. Net cash flows used in investing activities decreased by P523.6 million, or 60.1%, to P346.8 million in 2009 as compared to P870.4 million in This was primarily accounted by the P894.9 million transfer of Tranche 4 of the arbitral award receivable from NPC from the noncurrent assets account to trade and other receivable account offset by P million drop in maturity and sale of the available-for-sale investments and P168.9 million disbursements for intangible assets during the first quarter of Net cash flow from financing activities amounted to P3,657.4 million in 2009, a turnaround from net cash flows used in financing activities of P4,373.0 million in 2008, primarily due to the P4,100.0 million IFC loan. DISCUSSION ON THE SUBSIDIARY FG Hydro March 2009 vs. March 2008 Results As of and for the periods ended March 31 (Amounts in PHP millions) Revenues Expenses Operating income Provision for (benefit from) income tax (3.7) - Net income Total Current Assets Total Non-Current Assets 6, ,402.5 Total Current Liabilities Total Noncurrent Liabilities 2, ,598.7 Total Equity 3, ,147.3 SEC Form 17Q 1Q

25 FG Hydro generated revenues of P543.1 million in 1Q 2009, 3.8% lower than revenues of P564.8 million for the same period in The unfavorable variance was mainly on account of lower dispatch due to lower irrigation requirements during the period. Higher foreign exchange losses of P50.4 million for 1Q 2009, compared with the P20.8 million foreign exchange loss for the same period in 2008 contributed further to the unfavorable variance. Consequently, net income for the first quarter of 2009 dropped to P237.3 million from the P280.1 million reported income in Total current assets decreased by P181.6 million, or 19.8%, to P734.4 million in 2009 from P916.0 million in 2008 primarily due to the P1,250.0 million payment of cash dividend, P648.0 million return of deposit for future stock subscription to First Gen, P463.9 million increment in capital expenditures and P389.6 payment of long-term debt. These variances were partly offset by the P1,648.0 million EDC s subscription of FG Hydro s additional issuance of primary common shares coupled with the P895.7 million cash flows from operations. Total non-current assets as of March 31, 2009 stood at P6,594.5 million, around 3.0% higher than last year s level of P6,402.5 mainly due to an increase in capital expenditures for the ongoing Pantabangan refurbishment and upgrade project, partly offset by depreciation and amortization charges. Total liabilities increased by P210.1 million, or 6.6%, to P3,381.3 million in 2009 from P3,171.2 million in 2008 attributed mainly to the P215.1 million increment in advances from affiliates, the P46.7 million pay down of the liability to PSALM offset by the unfavorable effect of higher PhP/$ exchange rate in Commitments that will have an impact on the issuer s liquidity As of March 31, 2009, the company has unserved purchase orders and awarded contracts for the purchase of various capital goods in the total amount of P57.6 million. Other than these, we are not aware of any other material commitments that should impact the Company s liquidity. Legal proceedings There are no other material changes in the contingent liabilities since the last annual balance sheet date. SEC Form 17Q 1Q

26 FOREIGN EXCHANGE AND INTEREST RATE EXPOSURE The Company has P30,636.2 million in long-term US dollar and Yen denominated loans as of March 31, 2009, of which 78.8% is yen-denominated. To partially mitigate foreign exchange risk, the Company hedged its JPY12.0 billion Miyazawa I loan. The loan is due for bullet payment on June 1, It is equivalent to 24.7% of the P24,133.7 million total yen-denominated loans and 19.5% of the total long-term foreign loans. OTHER MATTERS CASH DIVIDEND On March 30, 2009, the BOD of the Parent Company approved the following cash dividends in favor of all stockholders of record as of April 16, 2009 and payable on May 11, 2009: cash dividend of P= per share on the preferred shares regular cash dividend of P=0.125 per share on the common shares. MAJOR STOCKHOLDERS As of March 31, 2009, the total number of stockholders was 654 and the stock price was P3.90. List of Top 20 Stockholders as of March 31, 2009 Number of Shares Rank Name Nationality Preferred Common Total % 1 Red Vulcan Holdings Corporation Filipino 7,500,000,000 6,000,000,000 13,500,000, PCD Nominee Corporation Foreign - 8,121,524,418 8,121,524, PCD Nominee Corporation Filipino - 692,223, ,223, Spathodea Campanulata, Inc. Filipino - 65,000,000 65,000, The Insular Life Assurance Co., Ltd. Filipino - 6,739,000 6,739, SEC Form 17Q 1Q

27 Number of Shares Rank Name Nationality Preferred Common Total % 6 Peter D. Garrucho, Jr. Filipino - 5,080,000 5,080, Emmanuel Antonio P. Singson Filipino - 1,500,000 1,500, ALG Holdings Corporation Filipino - 700, , Rosalind Camara Filipino - 531, , Engracio A. Sanchez Filipino - 426, , Peter Mar &/or Annabelle C. Mar Filipino - 400, , Guillermo N. Tantuco or Clarita C. Tantuco Filipino - 352, , Quality Investments & Securities Corporation Filipino - 350, , Nelia G. Gabarda Filipino - 300, , Hans T. Sy Filipino - 300, , Francis Giles B. Puno &/or Ma. Patricia Puno Filipino - 294, , Rodolfo R. Waga, Jr. Filipino - 250, , Hi-Light Corporation Filipino - 221, , Manuel G. Bausa, Jr. Filipino - 200, , Patrick Brian V. Gan Filipino - 200, , SEC Form 17Q 1Q

28 BOARD OF DIRECTORS As of March 31, 2009, the members of Board of Directors of EDC are as follows: Oscar M. Lopez Paul A. Aquino Peter D. Garrucho, Jr. Federico R. Lopez Richard B. Tantoco Francis Giles B. Puno Ernesto B. Pantangco Jonathan C. Russell Vicente S. Perez, Jr. Eric O. Recto Francis G. Estrada Chairman Director, President and Chief Executive Officer Director Director Director, Deputy President and Chief Operating Officer, Feb. 24, 2009 Director Director and Executive Vice President Director Independent Director Independent Director Independent Director KEY OFFICERS As of March 31, 2009, the key officers of EDC are as follows: Name Paul A. Aquino Richard B. Tantoco Ernesto B. Pantangco Agnes C. de Jesus Marcelino M. Tongco Manuel S. Ogena Danilo C. Catigtig Michael A. Medado Mario L. Taguines Glenn I. Funk Fenina O.T. Rodriguez Roberto V. San Jose Ana Maria A. Katigbak-Lim Position President and Chief Executive Officer Deputy President and Chief Operating Officer Executive Vice President Senior Vice President and Vice President for Environmental and External Affairs Vice President for Operations Vice President for Technical Services Vice President for Power Generation Vice President for Administrative Services Vice President for Drilling Services Vice President for Supply Chain Management Chief Financial Officer/Treasurer Corporate Secretary Assistant Corporate Secretary SEC Form 17Q 1Q

29 SIGNATURES Pursuant to the requirements of the Securities Regulation Code, the issuer has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Registrant ENERGY DEVELOPMENT (EDC) CORPORATION FENINA O. T. RODRIGUEZ Chief Financial Officer 12 l\4av 2009 Date Sisned zr*' c' /' /.-'* AGNES C. DE JESUS Senior Vice President 12 l\[ay 2009 Date Sisned SEC Form 17Q - lq

30 Annex I ENERGY DEVELOPMENT (EDC) CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation) Consolidated Condensed Financial Statements March 31, 2009 and 2008 (Unaudited)

31 ENERGY DEVELOPMENT (EDC) CORPORATION AND SUBSIDIARIES (Formerly PNOC Energy Development Corporation) A Subsidiary of Red Vulcan Holdings Corporation CONSOLIDATED INTERIM CONDENSED STATEMENT OF FINANCIAL POSITION March 31, 2009 (Unaudited) December 31, 2008 (Audited) March 31, 2008 (Unaudited) ASSETS Current Assets Cash and cash equivalents 7,579,451, ,088,260 2,667,879,417 Trade and other receivables - net 5,272,458,114 5,412,135,610 5,481,002,785 Current portion of concession receivable 2,025,906,924 2,048,110,310 2,162,017,322 Available-for-sale (AFS) investments 746,515, ,494,128 1,050,009,599 Parts and supplies inventories - at cost 1,420,758,198 1,563,284,383 1,115,968,497 Derivative assets 399,446, ,081,623 - Other current assets 585,140, ,407, ,620,506 18,029,677,469 11,926,602,215 13,090,498,126 Noncurrent assets held for sale 1,797,587,000 1,797,587,000 1,672,516,100 Total Current Assets 19,827,264,469 13,724,189,215 14,763,014,226 Noncurrent Assets Concession receivable - net of current portion 32,133,725,267 32,647,323,888 34,183,406,621 Property, plant and equipment - net 5,568,416,085 5,280,149,541 4,938,938,086 Goodwill and intangible assets - net 11,957,248,903 11,882,881,883 11,234,250,506 Deferred tax assets - net 3,075,897,469 3,410,392,338 3,184,636,823 Exploration and evaluation assets 1,055,031, ,757,259 1,200,843,026 Derivative assets 16,356,811 34,907,195 - Other noncurrent assets - net 946,510,462 1,365,986,414 3,525,206,529 Total Noncurrent Assets 54,753,186,343 55,621,398,518 58,267,281,591 TOTAL ASSETS 74,580,450,812 69,345,587,733 73,030,295,817 LIABILITIES AND EQUITY Current Liabilities Trade and other payables 3,104,072,069 2,979,859,848 3,790,192,353 Loan payable 2,000,000,000 2,000,000,000 - Income tax payable 597,031,121 84,807,510 1,193,197,970 Due to related party 96,980, ,920,747 4,123,896,404 Derivative liabilities 47,050,740 54,250,018 - Current portion of: - Long-term debt 8,347,850,984 8,672,427,694 2,416,932,114 Obligations to power plant contractors 54,261, ,187, ,496,721 Royalty fee payable 1,548,362,528 1,688,282, ,904,486 Total Current Liabilities 15,795,609,474 15,702,735,730 12,115,620,048 Noncurrent Liabilities Long-term debt - net of current portion 26,376,998,270 23,557,027,591 26,107,305,893 Royalty fee payable - net of current portion - - 1,399,866,560 Obligations to a power plant contractor - net of current portion ,393,293 Deferred tax liability 7,584,542 11,294,373 39,273,824 Retirement and other post-retirement benefit plans 1,060,593,619 1,026,394, ,819,135 Other long-term liabilities 272,030, ,816, ,298,849 27,717,206,737 24,907,533,304 28,833,957,554 Minority Interest 1,579,062,119 1,484,133,299 3,456,957,584 Equity Attributable to Equity Holders of the Parent Common stock 15,000,000,000 15,000,000,000 15,000,000,000 Preferred stock 75,000,000 75,000,000 75,000,000 Additional paid-in capital 6,278,075,648 6,278,075,648 6,278,075,648 Equity reserves (3,706,430,769) (3,706,430,769) (3,706,430,769) Cost of treasury stock held (404,219,068) (404,219,068) - Accumulated unrealized gain on AFS investments 95,446,560 30,826, ,345,488 Retained earnings 12,150,700,111 9,977,933,235 10,491,770,264 29,488,572,482 27,251,185,400 28,623,760,631 Total Equity 31,067,634,601 28,735,318,699 32,080,718,215 TOTAL LIABILITIES AND EQUITY 74,580,450,812 69,345,587,733 73,030,295,817

32 ENERGY DEVELOPMENT (EDC) CORPORATION AND SUBSIDIARIES (Formerly PNOC Energy Development Corporation) A Subsidiary of Red Vulcan Holdings Corporation UNAUDITED CONSOLIDATED INTERIM CONDENSED STATEMENTS OF INCOME March 31, 2009 March 31, 2008 REVENUES Revenue from sale of electricity 3,584,072,215 3,129,777,555 Revenue from sale of steam 1,106,272,301 1,027,070,984 Interest income on service concession 508,002, ,960,306 Revenue from drilling services 177,628, ,923,622 Construction revenue 168,889,299-5,544,864,625 4,794,732,467 OPERATING EXPENSES Operations and maintenance (1,428,293,033) (1,031,916,430) General and administrative (661,180,931) 94,287,594 Purchased services and utilities (602,381,103) (280,994,792) Construction costs (145,594,223) - Depreciation and amortization (153,386,596) (154,499,035) (2,990,835,886) (1,373,122,663) FINANCIAL INCOME (EXPENSES) Interest income - net of final tax 110,734,975 67,897,328 Interest expense (550,441,364) (406,535,461) (439,706,389) (338,638,133) OTHER INCOME (CHARGES) Foreign exchange gain (loss) - net 1,278,039,549 (3,274,768,006) Derivatives gain (loss) - net (298,928,076) - Miscellaneous - net 17,270,524 2,301,514, ,381,997 (973,253,560) INCOME BEFORE INCOME TAX 3,110,704,347 2,109,718,111 PROVISION FOR INCOME TAX (843,008,651) (625,243,022) NET INCOME 2,267,695,696 1,484,475,089 Attributable to: Equity Holders of the Parent 2,172,766,876 1,372,424,987 Minority interests 94,928, ,050,102 2,267,695,696 1,484,475,089 Basic/Diluted Earnings Per Share - Attributable to Equity Holders of the Parent

33 ENERGY DEVELOPMENT (EDC) CORPORATION AND SUBSIDIARIES (Formerly PNOC Energy Development Corporation) A Subsidiary of Red Vulcan Holdings Corporation UNAUDITED CONSOLIDATED INTERIM CONDENSED STATEMENTS OF COMPREHENSIVE INCOME March 31, 2009 March 31, 2008 Profit for the period 2,267,695,696 1,484,475,089 Other comprehensive income Unrealized gain on AFS investments 64,620, ,796,235 Total comprehensive income 2,332,315,902 1,601,271,324 Attributable to: Equity Holders of the Parent 2,237,387,082 1,489,221,222 Minority interests 94,928, ,050,102 2,332,315,902 1,601,271,324

34 ENERGY DEVELOPMENT (EDC) CORPORATION AND SUBSIDIARIES (Formerly PNOC Energy Development Corporation) A Subsidiary of Red Vulcan Holdings Corporation UNAUDITED CONSOLIDATED INTERIM CONDENSED STATEMENTS OF CASH FLOWS March 31, 2009 March 31, 2008 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax 3,110,704,347 2,109,718,111 Adjustments for: Interest expense 552,049, ,535,461 Depreciation and amortization 159,730, ,863,026 Unrealized foreign exchange losses (gains) (1,261,617,089) 3,255,947,531 Interest income on service concession (508,002,717) (526,960,306) Interest income (112,342,767) (67,897,328) Derivatives loss (gain) - net 298,928,076 - Reduction in allowance for doubtful accounts (407,121) (616,878,879) Provision for doubtful accounts 98,196,184 - Provision for retirement and other benefits 34,199,137 33,442,139 Impairment loss on noncurrent AFS 3,328,633 - Operating income before working capital changes 2,374,766,031 4,759,769,755 Decrease (increase) in: Trade and other receivables 689,897,855 (462,893,952) Parts and supplies inventories 86,289,395 24,816,871 Service concession receivable 1,043,804,724 1,076,956,887 Other current assets (191,333,732) (51,194,224) Increase (decrease) in: Trade and other payables (48,114,053) (355,278,112) Due to related parties (37,469,065) 110,288 Other long-term liabilities (40,786,551) (33,562,559) Royalty fee payable (203,994,159) (111,355,238) Net cash generated from operations 3,673,060,445 4,847,369,716 Income taxes paid - - Interest and financing charges paid (365,225,151) (239,071,557) Net cash flows from operating activities 3,307,835,294 4,608,298,159 CASH FLOWS FROM INVESTING ACTIVITIES Interest received 88,742,112 67,897,328 Payment of amounts due to First Gen for acquisition of subsidiary - - Acquisition of property, plant and equipment (108,180,378) (306,942,763) Addition to intangible assets (168,889,299) - Decrease(increase) in: Property, plant and equipment - 144,550 Exploration and evaluation assets (32,886,378) (20,008,319) Other noncurrent assets (84,347,091) (860,296,076) AFS investments - 248,757,503 Due from related parties (41,270,492) - Net cash flows from (used in) investing activities (346,831,526) (870,447,777) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from: Proceeds from loan availments 4,100,000, ,000,000 Increase in due to related parties 66,805,142 - Payments of: Cash dividends - (4,052,999,997) Long-term debts (450,562,512) (496,074,054) Return of deposit for future stock subscription to minority interest - - Obligations to power plant contractor (58,835,332) (73,984,344) Net cash flows (used in) financing activities 3,657,407,298 (4,373,058,395) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,618,411,066 (635,208,013) Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalent 3,952,541 6,510,480 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 957,088,260 3,296,576,950 CASH AND CASH EQUIVALENTS AT END OF PERIOD 7,579,451,867 2,667,879,417

35 ENERGY DEVELOPMENT (EDC) CORPORATION AND SUBSIDIARIES (Formerly PNOC Energy Development Corporation) A Subsidiary of Red Vulcan Holdings Corporation UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Equity Attributable to Equity Holders of the Parent Capital Stock Additional Equity Accum. Unrealized Gain Retained earnings Treasury Stock Common Preferred Paid-in Capital Reserves on AFS Investments Appropriated Unappropriated Common Total Minority Interest Total Equity Balance, January 1, ,000,000,000 75,000,000 6,278,075,648 (3,706,430,769) 368,549,253 1,653,315,043 11,519,030,231-31,187,539,406 3,344,907,482 34,532,446,888 Total comprehensive income ,796,235-1,372,424,987-1,489,221, ,050,102 1,601,271,324 Gain (Loss) on AFS investments recognized in equity Total recognized income for the period ,796,235-1,372,424,987-1,489,221, ,050,102 1,601,271,324 Redemption of common shares Cash dividend - EDC (4,052,999,997) (4,052,999,997) (4,052,999,997) Balance, March 31, ,000,000,000 75,000,000 6,278,075,648 (3,706,430,769) 485,345,488 1,653,315,043 8,838,455,221-28,623,760,631 3,456,957,584 32,080,718,215 Balance, January 1, ,000,000,000 75,000,000 6,278,075,648 (3,706,430,769) 30,826,354-9,977,933,235 (404,219,068) 27,251,185,400 1,484,133,299 28,735,318,699 Total comprehensive income ,620,206-2,172,766,876-2,237,387,082 94,928,820 2,332,315,902 Gain (Loss) on AFS investments recognized in equity Total recognized income for the period ,620,206-2,172,766,876-2,237,387,082 94,928,820 2,332,315,902 Balance, March 31, ,000,000,000 75,000,000 6,278,075,648 (3,706,430,769) 95,446,560-12,150,700,111 (404,219,068) 29,488,572,482 1,579,062,119 31,067,634,601

36 ENERGY DEVELOPMENT (EDC) CORPORATION AND SUBSIDIARIES (Formerly PNOC Energy Development Corporation) A Subsidiary of Red Vulcan Holdings Corporation SELECTED NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2009 AND Corporate Information Energy Development (EDC) Corporation (the Parent Company or EDC ), formerly PNOC Energy Development Corporation, and the following subsidiaries (collectively hereinafter referred to as the Company ), are separately incorporated and registered with the Philippine Securities and Exchange Commission (SEC): Percentage of Ownership First Luzon Geothermal Energy Corporation (FL Geothermal) 100% 100% First Gen Hydro Power Corporation (FG Hydro) 60% 60% Beginning December 13, 2006, the common shares of EDC are listed and traded on the Philippine Stock Exchange (PSE). Up to November 2007, EDC was owned and controlled by the Philippine National Oil Company (PNOC), a government-owned and controlled corporation and the PNOC EDC Retirement Fund. On November 29, 2007, PNOC and PNOC EDC Retirement Fund sold their combined interests in EDC to First Gen Corporation (First Gen), a domestic corporation owned and controlled by First Philippine Holdings Corporation (First Holdings), also a Filipino corporation. First Gen s interest in EDC, through its wholly owned subsidiary Red Vulcan Holdings Corporation (Red Vulcan), consists of 6 billion common shares and 7.5 billion preferred shares. Control is established through First Gen s 60% voting interest in EDC. First Holdings owns directly 66.2% of the common shares of First Gen. The ultimate parent of the Company is First Holdings, a publiclylisted entity. The Parent Company operates twelve geothermal projects in five geothermal service contract areas namely Leyte Geothermal Production Field, Southern Negros Geothermal Production Field, BacMan Geothermal Production Field, Mindanao Geothermal Production Field and Northern Negros Geothermal Production Field under the Geothermal Service Contracts (GSCs) entered into with the Department of Energy (DOE) pursuant to the provisions of Presidential Decree (P.D.) Geothermal steam produced is sold to the National Power Corporation (NPC) or are fed to the Parent Company and Built-Operate-Transfer (BOT) contractors power plants to produce electricity. EDC sells steam and power to NPC under the Steam Sales Agreements (SSAs) and Power Purchase Agreements (PPAs), respectively. EDC also sells electricity to Iloilo Electric Cooperative I under the Electricity Sales Agreement. Separately, it also has drilling activities in Papua New Guinea. On October 20 and November 17, 2008, in line with its objective of focusing on renewable energy, the Parent Company acquired a total of 60% interest in FG Hydro from First Gen (see Note 5). FG Hydro operates the 112 Megawatt (MW) Pantabangan and Masiway Hydro-Electric Power Plants (PAHEP/MAHEP) located in Nueva Ecija, Philippines. FG Hydro sells electricity to

37 - 2 - Wholesale Electricity Spot Market (WESM) and to various electric companies under the Transition Power Supply Contracts (TPSCs). FL Geothermal is a special purpose company incorporated on April 9, 2008 to participate in the bid for another local power plant. The bid was won by and awarded to another local entity. Thereafter, there has been no business activity yet as far as FL Geothermal is concerned. On July 22, 2008, the SEC approved the change in the Parent Company s corporate name. Such resolution was previously approved by the Parent Company s Board of Directors (BOD) on June 10, The registered office address of the Parent Company is Merritt Road, Fort Bonifacio, Taguig City. The consolidated financial statements were reviewed and, recommended for approval by the Audit and Governance Committee on April 28, The same consolidated financial statements were also approved and authorized for issuance by the BOD on April 28, Basis of Preparation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with Philippine Accounting Standard (PAS) 34, Interim Financial Reporting. Accordingly, the unaudited interim condensed financial statements do not include all of the information and footnotes required in the annual financial statements, and should be read in conjunction with the Company s annual financial statements as at December 31, The unaudited interim condensed consolidated financial statements have been prepared in compliance with Philippine Financial Reporting Standards (PFRS). PFRS includes statements named PFRS and PAS, including interpretations, issued by the Financial Reporting Standards Council. The accompanying condensed interim consolidated financial statements, which have been prepared under the historical cost convention method except for fair market valuation of financial instruments (financial assets, financial liabilities and equity instruments), are presented in Philippine peso because this is the currency of the primary economic environment in which the Company operates 3. Significant Accounting Policies The accounting policies and method of computation adopted in the preparation of the unaudited interim condensed financial statements are consistent with those followed in the preparation of the Company s annual consolidated financial statements as of and for the year ended December 31, 2008, except for the adoption of the following Philippine Interpretations and Improvements to PFRS, which became effective beginning January 1, Adoption of these changes in PFRS did not have any significant effect on the Company s consolidated financial statements. PFRS 1, First-time Adoption of Philippine Financial Reporting Standards - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

38 - 3 - The amended PFRS 1 allows an entity, in its separate financial statements, to determine the cost of investments in subsidiaries, jointly controlled entities or associates (in its opening PFRS financial statements) as one of the following amounts: (a) cost determined in accordance with PAS 27; (b) at the fair value of the investment at the date of transition to PFRS, determined in accordance with PAS 39; or (c) previous carrying amount (as determined under generally accepted accounting principles) of the investment at the date of transition to PFRS. PFRS 2, Share-based Payment - Vesting Condition and Cancellations PFRS 2 has been revised to clarify the definition of a vesting condition and prescribes the treatment for an award that is effectively cancelled. It defines a vesting condition as a condition that includes an explicit or implicit requirement to provide services. It further requires non-vesting conditions to be treated in a similar fashion to market conditions. Failure to satisfy a non-vesting condition that is within the control of either the entity or the counterparty is accounted for as cancellation. However, failure to satisfy a non-vesting condition that is beyond the control of either party does not give rise to a cancellation. PFRS 8, Operating Segments PFRS 8 will replace PAS 14, Segment Reporting, and adopts a full management approach to identifying, measuring and disclosing the results of an entity s operating segments. The information reported would be that which management uses internally for evaluating the performance of operating segments and allocating resources to those segments. Such information may be different from that reported in the consolidated balance sheet and consolidated statement of income and the Company will provide explanations and reconciliations of the differences. This standard is only applicable to an entity that has debt or equity instruments that are traded in a public market or that files (or is in the process of filing) its financial statements with a securities commission or similar party. Amendments to PAS 1, Presentation of Financial Statements These amendments introduce a new statement of comprehensive income that combines all items of income and expenses recognized in the profit or loss together with other comprehensive income. Entities may choose to present all items in one statement, or to present two linked statements, a separate statement of income and a statement of comprehensive income. These amendments also prescribe additional requirements in the presentation of the balance sheet and owner s equity as well as additional disclosures to be included in the financial statements. PAS 23, Borrowing Costs PAS 23 has been revised to require capitalization of borrowing costs when such costs relate to a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

39 - 4 - Amendments to PAS 27, Consolidated and Separate Financial Statements - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate These amendments prescribe changes in respect of the holding companies separate financial statements including (a) the deletion of cost method, making the distinction between preand post-acquisition profits no longer required; and (b) in cases of reorganizations where a new parent is inserted above an existing parent of the group (subject to meeting specific requirements), the cost of the subsidiary is the previous carrying amount of its share of equity items in the subsidiary rather than its fair value. All dividends will be recognized in profit or loss. However, the payment of such dividends requires the entity to consider whether there is an indicator of impairment. Amendment to PAS 32, Financial Instruments: Presentation and PAS 1, Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation These amendments specify, among others, that puttable financial instruments will be classified as equity if they have all of the following specified features: (a) the instrument entitles the holder to require the entity to repurchase or redeem the instrument (either on an ongoing basis or on liquidation) for a pro rata share of the entity s net assets; (b) the instrument is in the most subordinate class of instruments, with no priority over other claims to the assets of the entity on liquidation; (c) all instruments in the subordinate class have identical features; (d) the instrument does not include any contractual obligation to pay cash or financial assets other than the holder s right to a pro rata share of the entity s net assets; and (e) the total expected cash flows attributable to the instrument over its life are based substantially on the profit or loss, a change in recognized net assets, or a change in the fair value of the recognized and unrecognized net assets of the entity over the life of the instrument. Philippine Interpretation IFRIC 13, Customer Loyalty Programmes, effective for annual periods beginning on or after July 1, 2008 IFRIC 13 requires customer loyalty award credits to be accounted for as a separate component of the sales transaction in which they are granted and therefore part of the fair value of the consideration received is allocated to the award credits and deferred over the period that the award credits are fulfilled. Philippine Interpretation IFRIC 16, Hedges of a Net Investment in a Foreign Operation IFRIC 16 provides guidance on identifying foreign currency risks that qualify for hedge accounting in the hedge of net investment; where within the group the hedging instrument can be held in the hedge of a net investment; and how an entity should determine the amount of foreign currency gains or losses, relating to both the net investment and the hedging instrument, to be recycled on disposal of the net investment. Improvements to PFRSs. In May 2008, the International Accounting Standards Board issued its first omnibus of amendments to certain standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. PAS 1, Presentation of Financial Statements

40 - 5 - Assets and liabilities classified as held for trading are not automatically classified as current in the balance sheet. PAS 16, Property, Plant and Equipment The amendment replaces the term net selling price with fair value less costs to sell, to be consistent with PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations and PAS 36, Impairment of Asset. Items of property, plant and equipment held for rental that are routinely sold in the ordinary course of business after rental, are transferred to inventory when rental ceases and they are held for sale. Proceeds of such sales are subsequently shown as revenue. Cash payments on initial recognition of such items, the cash receipts from rents and subsequent sales are all shown as cash flows from operating activities. PAS 19, Employee Benefits Revises the definition of past service costs to include reductions in benefits related to past services ( negative past service costs ) and to exclude reductions in benefits related to future services that arise from plan amendments. Amendments to plans that result in a reduction in benefits related to future services are accounted for as a curtailment. Revises the definition of return on plan assets to exclude plan administration costs if they have already been included in the actuarial assumptions used to measure the defined benefit obligation. Revises the definition of short-term and other long-term employee benefits to focus on the point in time at which the liability is due to be settled. Deletes the reference to the recognition of contingent liabilities to ensure consistency with PAS 37, Provisions, Contingent Liabilities and Contingent Assets. PAS 20, Accounting for Government Grants and Disclosures of Government Assistance Loans granted with no or low interest rates will not be exempt from the requirement to impute interest. The difference between the amount received and the discounted amount is accounted for as a government grant. PAS 23, Borrowing Costs Revises the definition of borrowing costs to consolidate the types of items that are considered components of borrowing costs, i.e., components of the interest expense calculated using the effective interest rate method. PAS 28, Investment in Associates If an associate is accounted for at fair value in accordance with PAS 39, only the requirement of PAS 28 to disclose the nature and extent of any significant restrictions on the ability of the associate to transfer funds to the entity in the form of cash or repayment of loans will apply.

41 - 6 - An investment in an associate is a single asset for the purpose of conducting the impairment test. Therefore, any impairment test is not separately allocated to the goodwill included in the investment balance. PAS 29, Financial Reporting in Hyperinflationary Economies The improvement to PAS 29 revises the reference to the exception that assets and liabilities should be measured at historical cost, such that it notes property, plant and equipment as being an example, rather than implying that it is a definitive list. PAS 31, Interest in Joint Ventures If a joint venture is accounted for at fair value, in accordance with PAS 39, only the requirements of PAS 31 to disclose the commitments of the venturer and the joint venture, as well as summary financial information about the assets, liabilities, income and expense will apply. PAS 36, Impairment of Assets When discounted cash flows are used to estimate fair value less cost to sell, additional disclosure is required about the discount rate, consistent with disclosures required when the discounted cash flows are used to estimate value in use. PAS 38, Intangible Assets Expenditure on advertising and promotional activities is recognized as an expense when the Company either has the right to access the goods or has received the services. Advertising and promotional activities now specifically include mail order catalogues. It also deletes references to there being rarely, if ever, persuasive evidence to support an amortization method for finite life intangible assets that results in a lower amount of accumulated amortization than under the straight-line method, thereby effectively allowing the use of the unit-of-production method. PAS 39, Financial Instruments: Recognition and Measurement Changes in circumstances relating to derivatives - specifically derivatives designated or dedesignated as hedging instruments after initial recognition - are not reclassifications. When financial assets are reclassified as a result of an insurance company changing its accounting policy in accordance with paragraph 45 of PFRS 4, Insurance Contracts, this is a change in circumstance, not a reclassification. It further removes the reference to a segment when determining whether an instrument qualifies as a hedge. It also requires the use of revised effective interest rate (rather than the original effective interest rate) when re-measuring a debt instrument on the cessation of fair value hedge accounting.

42 - 7 - PAS 40, Investment Properties Improvement on PAS 40 revises the scope (and the scope of PAS 16) to include property that is being constructed or developed for future use as an investment property. Where an entity is unable to determine the fair value of an investment property under construction, but expects to be able to determine its fair value on completion, the investment under construction will be measured at cost until such time as fair value can be determined or construction is complete. PAS 41, Agriculture The improvements to PAS 41 remove: a. the reference to the use of a pre-tax discount rate to determine fair value, thereby allowing use of either a pre-tax or post-tax discount rate depending on the valuation methodology used; and b. the prohibition to take into account cash flows resulting from any additional transformations when estimating fair value. Instead, cash flows that are expected to be generated in the most relevant market are taken into account. 4. Cash and Cash Equivalents This account consists of the following: March 31, 2009 (Unaudited) December 31, 2008 (Audited)) March 31, 2008 (Unaudited) Cash on hand and in banks P=347,088,624 P=27,875,003 P=60,435,922 Cash equivalents 7,232,363, ,213,257 2,607,443,495 P=7,579,451,867 P=957,088,260 P=2,667,879, Trade and Other Receivables This account consists of the following: March 31, 2009 (Unaudited) December 31, 2008 (Audited)) March 31, 2008 (Unaudited) Trade P=5,122,525,886 P=4,774,822,706 P=5,726,260,560 Others 258,723, ,092, ,988,242 Total 5,381,249,856 5,423,915,673 6,006,248,802 Allowance for doubtful accounts 108,791,742 11,780, ,246,017 P=5,272,458,114 P=5,412,135,610 P=5,481,002,785

43 Long-term Debt March 31, 2009 (Unaudited) December 31, 2008 (Audited)) March 31, 2008 (Unaudited) Total Dollar-denominated debt P=6,502,488,755 P=6,636,009,076 P=7,170,736,451 Total Japanese Yen-denominated debt 24,133,732,215 25,593,446,209 21,101,228,829 Total Peso-denominated debt 4,088,628, ,272,727 34,724,849,254 32,229,455,285 28,524,238,007 Current portion (8,347,850,984) (8,674,427,694) (2,416,932,114) Long-term portion P=26,376,998,270 P=23,557,027,591 P=26,107,305,893 The Company s foreign-currency denominated long-term debts were translated into Philippine pesos based on the prevailing foreign exchange rates at balance sheet date (USD1=JPY97.172: USD1=PHP on March 31, 2009, USD1=JPY90.942: USD1=PHP on December 31, 2008 and USD1=JPY99.236: USD1=PHP on March 31, 2008). 7. Equity The Company is subject to the nationality requirement that at least sixty percent (60%) of its capital stock must be owned by Filipino citizens since it is engaged in the exploration and exploitation of the country s energy resources and other mineral resources. Details are as follows: March 31, 2009 (Unaudited) December 31, 2008 (Audited) March 31, 2008 (Unaudited) Capital Stock Common stock authorized and issued 15,000,000,000 P=1 par value P=15,000,000,000 P=15,000,000,000 P=15,000,000,000 Preferred stock authorized and issued 7,500,000,000 P=0.01 par value 75,000,000 75,000,000 75,000,000 Additional paid-in capital 6,278,075,648 6,278,075,648 6,278,075,648 Cost of treasury stock held - 93,000,000 shares (Note 17) (404,219,068) (404,219,068) As of March 31, 2009, there are 654 stockholders of EDC.

44 Earnings Per Share (EPS) The EPS amount was computed as follows: March 31, 2009 (Unaudited) December 31, 2008 (Audited) March 31, 2008 (Unaudited) (a) Net income attributable to equity shareholders of the parent P=2,172,766,876 P=1,308,021,833 P=1,372,424,987 Less dividends on preferred shares 6,000,000 6,000,000 6,000,000 (b) Net income attributable to common shareholders of the parent P=2,166,766,876 P=1,302,021,833 P=1,366,424,987 (c) Weighted average numbers of shares for EPS 14,907,000,000 14,965,918,555 15,000,000,000 Basic/diluted EPS (b/c) P=0.145 P=0.087 P=0.091 The Company does not have dilutive common stock equivalents. 9. Related Party Transactions Parties are considered to be 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. Parties are also considered to be related if they are subject to common control or common significant influence. The following are the transactions that the Company had with related parties for the period ended March 31, 2009 and a. First Balfour, Inc. (First Balfour) Following the usual bidding process in 2008, the Parent Company awarded to First Balfour a procurement contract for various civil, structural, mechanical and piping works for the Leyte Geothermal Production Field. The contract amount is P=360.0 million. The Company paid P=54.0 million in 2008 as 15% advance payment for the steam augmentation project in Leyte. Advance payment made was recorded under Other current assets account with an outstanding balance of P=49.1 million as of March 31, First Balfour is a wholly owned subsidiary of First Holdings, which is the ultimate parent company of EDC.

45 b. First Gen First Gen provides financial consultancy, business development and other related services to the Parent Company under a consultancy agreement beginning September 1, Such agreement is for a period of three years up to August 31, Under the terms of the agreement, billings for consultancy services shall be P=8.70 million per month plus applicable taxes. Total consultancy services paid by the Parent Company to First Gen amounted to P=58.46 million. The outstanding balance as of March 31, 2009 included in the Due to related parties account amounted to P=9.74 million. FG Hydro availed of unsecured, interest bearing and US dollar-denominated cash advances from First Gen amounting to $2.00 million (P=95.2 million). Said advances are due and demandable and bear interest of 5.29% in The outstanding balance as of March 31, 2009 included in the Due to related parties account amounted to P=89.67 million. c. Various Affiliates In the ordinary course of business the Company avails of or grants advances from/to its affiliates for working capital requirements. Such advances are payable/collectible within 12 months and are non-interest bearing. Following are the amounts of transactions and outstanding balances as of and for the period ended March31, 2009 and 2008: Transaction Amount Due Related Party Nature of Transaction During the Period to Related Parties First Gen Consultancy Fee 2009 (P=58,464,000) P=9,744,000 Bauang Private Power Corporation Availment (payment) of interest-bearing advances ,195,783 89,668,879 Availment of interest-free advances ,143,593 Directors liability insurance 2009 (1,358,947) Availment of interest-free advances Availment of interest-free First Gas Holdings Corporation advances First Gas Power Corporation FGP Corporation Availment of interest-free advances Availment of interest-free advances 2009 (150,286) , , , , ,866 29, , ,454 8,462 Bauang Private Power Corporation is a subsidiary of First Private Power Corporation, an associate of First Gen. First Gas Holdings Corporation, First Gas Power Corporation and FGP Corporation are wholly owned subsidiaries of First Gen.

46 There were no guarantees provided or received for any related party. The Company has not recognized any impairment loss on receivables from related parties as of March 31, 2009 and Explanatory Comments about the Seasonality or Cyclicality of Interim Operations Seasonality or cyclicality of interim operations is not applicable to the Company s type of business, except for its hydro operations, because of the nature of its contracts with National Power Corporation (NPC) and with the Ilo-ilo I Electric Cooperative, Inc. (ILECO) which includes guaranteed volume under the applicable take-or-pay, minimum energy off-take or contracted energy provisions. 11. The Nature and Amount of Items Affecting Assets, Liabilities, Equity, Net Income, or Cash Flows that are Unusual Because of their Nature, Size or Incidence Except for the loan proceeds of P=4,100.0 million on January 7, 2009 from International Finance Corporation (IFC), and the collection of the third tranche of the arbitration agreement with NPC amounting to P=1, million discussed in Note 16, there are no assets, liabilities, equity, net income or cash flows that are unusual because of their nature, size or incidence. 12. The Nature and Amount of Changes in Estimates of Amounts Reported in Prior Interim Periods of the Current Fiscal Year or Changes in Estimates of Amounts Reported in Prior Financial Years, If Those Changes Have a Material Effect in the Current Interim Period There are no changes in estimates of amounts during the current period as well as in the comparative period in Issuances, Repurchases, and Repayments of Debt and Equity Securities There are no issuances, repurchases and repayments of debt and equity securities during the current period. 14. Dividends Paid On March 30, 2009, the BOD of the Parent Company approved the following cash dividends in favor of all stockholders of record as of April 16, 2009 and payable on May 11, 2009: cash dividend of P= per share on the preferred shares regular cash dividend of P=0.125 per share on the common shares. There are no other declarations thereafter. There are no other declarations thereafter.

47 Segment Revenue and Segment Results for Business Segments or Geographical Segments, Whichever is the Issuer s Primary Basis of Segment Reporting The Company s main reportable segments are as follows: Electricity Generation This represents the production of steam for delivery to the Company-owned Upper Mahiao, Malitbog, Mahanagdong, Optimization and Northern Negros power plants and to the Build- Operate-Transfer (BOT) power plants which convert steam to electricity for sale by the Company to NPC, pursuant to the Power Purchase Agreements (PPAs), and to ILECO, pursuant to the Electricity Sales Agreement (ESA) entered into by the Company. Steam Generation This represents the production of geothermal steam for sale to the National Power Corporation (NPC) pursuant to the Steam Sales Agreements (SSAs) entered into by the two parties. Services These represent the drilling and technical services rendered by the Company to Lihir Gold Limited for its mining project in Papua New Guinea. Financial information on the business segments are summarized as follows: Electricity Steam Services Others Total Period Ended March 31, 2009 Revenue P=4,033,827,336 P=1,164,519,897 P=346,517,392 P= P=5,544,864,625 Segment expenses (1,944,297,789) (670,085,827) (372,537,598) (3,914,672) (2,990,835,886) Segment results 2,089,529, ,434,070 (26,020,206) (3,914,672) 2,554,028,739 Interest income 110,734, ,734,975 Interest expense (550,441,364) (550,441,364) Other charges 996,381, ,381,997 Income taxes (843,008,651) (843,008,651) Net income P=2,089,529,547 P=494,434,070 (P=26,020,206) (P=290,247,715) P=2,267,695,696 As of March 31, 2009 Segment assets P=61,250,484,822 P=1,630,533,104 P=1,495,534,822 P=1,161,288,951 P=65,537,841,699 Unallocated corporate assets 9,042,609,113 9,042,609,113 Total assets P=61,250,484,822 P=1,630,533,104 P=1,495,534,822 P=10,203,898,064 P=74,580,450,812 Segment liabilities (P=25,660,997,512) (P=12,758,169,030) (P=299,724,124) (P=11,548,067) (P=38,730,438,733) Unallocated corporate liabilities (4,782,377,478) (4,782,377,478) Total liabilities (P=25,660,997,512) (P=12,758,169,030) (P=299,724,124) (P=4,793,925,545) (P=43,512,816,211) Period Ended March 31, 2009 Capital expenditure P=15,802,371 P= P=83,031,352 P=9,346,654 P=108,180,378 Depreciation and amortization (147,853,033) (2,477,364) (9,397,960) (1,835) (159,730,192) Other non-cash items (18,418,790) (111,172,171) (2,397,239) 959,360, ,372,180 Period Ended March 31, 2008 Revenue P=3,563,671,477 P=1,120,137,368 P=110,923,622 P= P=4,794,732,467 Segment expenses (1,222,266,962) (39,392,056) (109,362,140) (2,101,505) (1,373,122,663) Segment results 2,341,404,515 1,080,745,312 1,561,482 (2,101,505) 3,421,609,804 Interest income 67,897,328 67,897,328 Interest expense (406,535,461) (406,535,461) Other income (973,253,560) (973,253,560) Income taxes (625,243,022) (625,243,022)

48 Electricity Steam Services Others Total Net income P=2,341,404,515 P=1,080,745,312 P=1,561,482 (P=1,939,236,220) P=1,484,475,089 As of March 31, 2008 Segment assets P=63,952,856,757 P=1,305,319,247 P=807,917,500 P=1,024,070,937 P=67,090,164,441 Unallocated corporate assets 5,940,131,376 5,940,131,376 Total assets P=63,952,856,757 P=1,305,319,247 P=807,917,500 P=6,964,202,313 P=73,030,295,817 Segment liabilities (P=19,433,134,688) (P=9,871,136,413) (P=80,124,423) (P=20,066,716) (P=29,404,462,240) Unallocated corporate liabilities (11,545,115,361) (11,545,115,361) Total liabilities (P=19,433,134,688) (P=9,871,136,413) (P=80,124,423) (P=11,565,182,077) (P=40,949,577,601) Period Ended March 31, 2008 Capital expenditure P=284,169,651 P= P=6,377,284 P=16,395,827 P=306,942,763 Depreciation and amortization (150,962,705) (4,616,216) (10,282,656) (1,449) (165,863,026) Other non-cash items 104,318, ,444,704 (2,326,182) (3,255,947,531) (2,672,510,791) 16. The Effect of Changes in the Composition of the Issuer During the Interim Period, Including Business Combinations, Acquisition or Disposal of Subsidiaries and Long-term Investments, Restructurings, and Discontinuing Operations There are no material changes in the composition of the registrant during the period. 17. Changes in Contingent Liabilities or Contingent Assets Since the Last Annual Balance Sheet Date There are no material changes in the contingent liabilities or contingent assets since the last annual balance sheet date. 18. Existence of Material Contingencies and Any Other Events or Transactions that are Material to an Understanding of the Current Interim Period Arbitration Award On April 24, 2008, the Company and NPC signed a Joint Manifestation and Undertaking (JMU) to abide by the arbitral decision on March 25, The arbitral decision covered the long-standing issue related to the SSAs and PPAs of EDC and NPC. In the execution of the arbitral decision, both the Company and NPC agreed that the amount of P=2, million shall be paid by NPC to the Company, without further interest, in accordance with the following schedule: Tranche Settlement Amount Payment Term Actual Date of Settlement First P= million 30 days from submission of JMU to the Office of the Voluntary Arbitrator Second million 60 days from submission of JMU to the Office of the Voluntary July 15, 2008 July 15, 2008

49 Arbitrator Third 1, million January 2009 February 2, 2009 Fourth million January 2010 Not applicable Full payment of the foregoing amounts shall constitute full and complete settlement of all the claims each party has against the other as detailed in the November 5, 2007 arbitration agreement. As a result of the foregoing transaction in 2008, the Company recognized an income of P=2, million recorded as revenue from arbitration award of P=2, million and a reversal of allowance for doubtful accounts of P= million previously recorded related to the portion collected as part of the settlement. In addition, allowance for doubtful accounts of P= million was reversed following the resolution of some of certain issues covered by the arbitration. The reduction of the allowance for doubtful accounts resulted in the recognition of the credit adjustments on allowance for doubtful accounts totaling P=1, million classified under General and administrative expenses account. 19. Share Buyback Program On March 25, 2008, the Board of Directors approved a share buyback program involving up to P=4.0 billion worth of the Company s common shares, representing approximately four percent (4%) of the Company s market capitalization as of the date of the approval. The buyback program will be carried out within a two-year period commencing on March 26, 2008 and ending on March 25, On January 23, 2009, the BOD approved an amendment to the Company s share buy-back program, to include, not only the previously stated objective of acquiring shares to implement the proposed executive/employee stock ownership plan, but also for the purpose of enhancing shareholder value whenever the stock is trading at a price discount to its true valuation. The share buy-back program will be implemented through grants, options, purchases or other equivalent methods. As of March 31,2009, the Company s treasury shares totaled 93,000,000 common shares for a total value of P=404,219,068 since no additional purchase or grant was made during the first quarter of Financial Risk Management Objectives and Policies The Company s financial instruments consist mainly of cash and cash equivalents, AFS investments, and long-term debt. The main purpose of these financial instruments is to finance the Company s operations and accordingly manage its exposure to financial risks. The Company has various financial assets and liabilities such as trade receivables, concession receivables, trade payables and other liabilities, which arise directly from operations.

50 Risk Management Strategy The Company uses the risk management option model in its Risk Management Strategy formulation. This model involves whether to accept or reject the risk identified based on the risk management process. When the risk is accepted, the Company chooses the following alternatives: retain, reduce, exploit, modify time and wait and see. When the risk is rejected, the Company may opt to avoid or transfer the risk. Financial Risk Management Policy The main risks arising from the Company s financial instruments are credit and credit concentration, interest rate risk, liquidity risk, and foreign currency risk. The Company s policies for managing the aforementioned risks are summarized hereinafter below. Credit Risk and Credit Concentration The Company s geothermal and power generation business trades with only one major customer, NPC, a government-owned-and-controlled corporation. Any failure on the part of NPC to pay its obligations to the Company would significantly affect the Company s business operations. As a practice, the Company monitors closely its collection from NPC and charges interest on delayed payments following the provision of its respective SSAs and PPAs. Receivable balances are monitored on an ongoing basis to ensure that the Company s exposure to bad debts is not significant. The maximum exposure of trade receivable is equal to the carrying amount. With respect to credit risk arising from other financial assets of the Company, which comprise cash and cash equivalents excluding cash on hand, trade and other receivables, AFS financial assets, derivatives assets, concession receivables, cash collateral on PCIR bonds and deferred royalty fee, the Company s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments Loans and receivables: Cash and cash equivalents P=7,575,450,207 P=2,664,291,595 Trade receivables net 5,013,734,144 5,201,014,543 Non-trade receivables 161,071, ,461,293 Loans and notes receivables 62,968,734 56,253,251 Employee receivables 11,978,551 28,166,532 Advances to employees 22,597,061 24,542,068 Long-term receivables net 317,211,950 1,692,895,127 Concession receivable 34,159,632,190 36,345,423,943 Cash collateral on PCIR Bonds 3,519,226 3,066,807 Royalty fee chargeable to NPC 64,054, ,991,244 AFS investments: Debt investments 746,515,813 1,050,009,598 Equity investments 14,113,216 17,063,226 Financial assets at FVPL: Derivative assets 415,803,001 P=48,568,649,397 P=47,720,179,227 The Company trades only with recognized, creditworthy third parties and/or transacts only with institutions and/or banks which have demonstrated financial soundness and which have passed the financial evaluation and accreditation of the Company.

51 The table below shows the Company s aging analysis of past due but not impaired receivables as of March 31, 2009 and 2008: 2009 Past Due but Not Impaired Neither Past Over 1 Year Past Due nor Impaired Less than 30 Days 31 Days to 1 Year up to 3 Years Over 3 Years Due and Impaired Total (In Thousand Pesos) Loans and receivables: Cash and cash equivalents P=7,575,450 P= P= P= P= P= P=7,575,450 Trade receivables 4,978,774 44,558 99,194 5,122,526 Non-trade receivables 151,870 1,129 7, ,071 Loans and notes receivables 54, , ,968 Employee receivables 11, ,979 Advances to employees 10,798 5,550 5, ,597 Long-term receivables 384, ,293 Concession receivable 34,159,632 34,159,632 Cash collateral on PCIR Bonds 3,519 3,519 Royalty fee chargeable to NPC 64,054 64,054 AFS investments: Debt investments 746, ,516 Equity investments 14,113 14,113 Financial assets at FVPL: Derivative assets 415, ,803 Total P=48,186,847 P=6,900 P=65,329 P=1,611 P=347 P=483,487 P=48,744,521 Neither Past Due Nor Impaired Less than 30 Days 2008 Past Due but Not Impaired Over 1 Year 31 Days up to to 1 Year 3 Years (In Thousand Pesos) Over 3 Years Past Due and Impaired Loans and receivables: Cash and cash equivalents P= 2,664,292 P= P= P= P= P= P=2,664,292 Trade receivables 3,539,455 1,656,743 4, ,246 5,726,260 Non-trade receivables 72, ,038 48, ,462 Loans and notes receivables 47, , ,253 Employee receivables 28, ,167 Advances to employees 12,743 5,550 5, ,542 Long-term receivables 894, ,965 1,692,895 Concession receivable 36,345,424 36,345,424 Cash collateral on PCIR Bonds 3,067 3,067 Royalty fee chargeable to NPC 474, ,991 AFS investments: Debt investments 1,050,010 1,050,010 Equity investments 17,063 17,063 Total P=45,150,442 P=1,662,901 P=59,270 P=49,311 P=291 P=1,323,211 P=48,245,426 Total Credit Quality of Neither Past due nor Impaired Financial Assets Financial assets are classified as high grade if the counterparties are not expected to default in

52 settling their obligations. Thus the credit risk exposure is minimal. These counterparties normally include customers, banks and related parties who pay on or before due date. Financial assets are classified as a standard grade if the counterparties settle their obligation with the Company with tolerable delays. Low grade accounts are accounts, which have probability of impairment based on historical trend. These accounts show propensity of default in payment despite regular follow-up actions and extended payment terms. As of March 31, 2009, financial assets categorized as neither past due nor impaired are viewed by management as high grade, considering the collectability of the receivables and the credit history of the counterparties. Foreign Currency Risk The Company s exposure to foreign currency risk resulted from the financial assets and liabilities that are denominated in U.S. dollar and Japanese yen. This primarily arise from future payments of foreign loans, BOT lease obligation and other commercial transactions and the Company s investment in ROP Bonds. The Company s exposure to foreign currency risk to some degree is mitigated by some provisions in the Company s GSCs, SSAs and PPAs. The service contracts allow full cost recovery while the sales contracts include billing adjustments covering the movements in Philippine peso and the U.S. dollar rates, US Price and Consumer Indices, and other inflation factors. To mitigate further the effects of foreign currency risk, the Company will prepay, refinance or hedge its foreign currency denominated loans, whenever deemed feasible. During 2008, the Company entered into derivative contracts with various counterparties to hedge its JPY12 billion Miyazawa I loan. The Company s foreign currency-denominated financial assets and liabilities (translated into Philippine peso) as of March 31, 2009 are as follows: Original Currency Peso Original Currency Peso Yen US Dollar Equivalent 1 Yen US Dollar Equivalent 2 Financial Assets Loans and receivables: Cash equivalents 12,448, ,625, ,802 40,620,305 Cash on hand and in banks 296, ,104 20,741, ,199 28,257 1,412,888 Trade and other receivables 3,968, ,780,528 1,424,392 59,476,899 Cash collateral on PCIR Bonds 74,058 3,579,226 74,058 3,092,366 AFS investments: Government debt securities 13,710, ,515,813 14,600,000 1,050,009,598 Financial assets at FVPL: Derivative assets 8,603, ,803,002 Total financial assets 296,577 39,230,016 1,980,045, ,199 17,099,509 1,154,612,056 Current Financial Liabilities Liabilities at amortized cost: Trade and other payables 626,747,872 7,904, ,261, ,529,891 2,255, ,185,181 Current portion of interestbearing financial liabilities 13,850,430,460 30,282,415 8,347,850,984 1,868,893,372 29,987,044 2,038,523,024 Current portion of obligations to a power plant contractor 1,122,729 54,261,525 6,002, ,658,679 Financial liabilities at FVPL: Derivative liabilities 973,531 47,050,740 Total current financial liabilities 14,477,178,332 40,283,083 9,272,425,138 2,206,423,263 38,245,011 2,525,366,884 Noncurrent Financial Liabilities

53 Original Currency Peso Original Currency Peso Yen US Dollar Equivalent 1 Yen US Dollar Equivalent 2 Liabilities at amortized cost: Interest-bearing financial liabilities - net of current portion 34,672,845, ,261,114 22,288,369,986 48,515,795, ,900,746 23,369,333,362 Obligations to a power plant contractor - net of current portion 1,203,740 50,263,367 Total noncurrent financial liabilities 34,672,845, ,261,114 22,288,369,986 48,515,795, ,104,486 23,419,596,729 Total financial liabilities 49,150,024, ,544,197 31,560,795,124 50,722,218, ,349,497 25,944,963,613 1 USD1=JPY98,37and USD1= P= USD1=JPY and USD1= P= The following table demonstrates the sensitivity to a reasonably possible change in the U.S. dollar and Japanese yen exchange rates, with all other variables held constant, of the Company s profit before tax as at March 31, 2009 and 2008 (arising from revaluation of monetary assets and liabilities and derivative instruments) Foreign Currency Appreciates (Depreciates) By Effect on Profit Before Tax USD 10% or PHP4.833 (P=532,055,600) (10% or PHP4.833) 509,184,040 JPY 10% or PHP (2,683,083,626) (10% or PHP ) 2,195,518,329 EURO (a) 10% against USD 35,038,951 (10% against USD) (12,167,391) 2008 Foreign Currency Appreciates (Depreciates) By Effect on Profit Before Tax USD 5% or PHP2.088 (P=332,482,125) (5% or PHP2.088) 332,482,125 JPY 5% or PHP (1,123,484,896) (5% or PHP ) 1,016,462,181 (a) This pertains to fair valuation of FG Hydro s derivative asset which is a currency option. Equity Price Risk Equity price risk is the risk that the fair value of traded equity instruments decrease as the result of the changes in the levels of equity indices and the value of the individual stocks. As of March 31, 2009 and 2008, the Company s exposure to equity price risk is minimal. Interest Rate Risk The Company s exposure to the risk of changes in market interest rates relates primarily to the

54 Company s long-term debt obligations with floating interest rates, derivative assets, derivative liabilities and AFS investments. The interest rates of some of the Company s long-term borrowings, AFS debt investments and finance leases (to which the Company is a lessee) are fixed at the inception of the loan agreement and/or lease. The Company regularly evaluates its interest rate risk by taking into account the cost of qualified borrowings being charged by its creditors. Prepayment, refinancing or hedging the risks are undertaken when deemed feasible and advantageous to the Company. The following tables demonstrate the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Company s profit before tax and equity as of March 31, The effect also includes impact of change in interest rates on derivatives. Increase/Decrease in Basis Points 2009 Effect on Profit Before Tax Effect on Equity PHP +100 (P=15,000,000) ,000,000 USD +100 (31,320,337) (30,581,887) ,320,337 30,506,465 JPY +100 (16,704,975) ,704,975 EURO +100 (1,870,022) ,946,866 Increase/Decrease in Basis Points 2008 Effect on Profit Before Tax Effect on Equity PHP +100 (P=946,023) ,023 USD +100 (37,718,844) (34,690,850) ,718,844 37,467,437 JPY +100 (28,612,714) ,612,714 Interest Rate Risk Table Set out below is the schedule of interest payments of the Company s long-term debt. Interest Rates Within 1 Year 2 3 Years 4 5 Years 2009 Fixed Rate (In Thousand Pesos) More than 5 Years Total

55 Long-term debt: OECF JEXIM (a) 3747 JBIC (b) 21 st yen Miyazawa I Miyazawa II PSALM Loan Interest Rates Within 1 Year 2 3 Years 4 5 Years 3% 5.7% 3.5% 2.3% & 2.7% 2.63% & 3.78% 2.37% 12.00% P=539, , ,999 5,988, , ,895 P=722, , ,152 10,937,190 1,609,790 P=242, ,025 1,609,789 More than 5 Years Total P=621,731 3,837,816 P=2,126,330 1,053,392 5,615,992 5,988,038 11,193,368 4,024, Floating Rate Long-term debt: IBRD IFC Short-term debt: LBP 7.39% 7.40% 6.75% 1,365, , ,250 2,399, ,228 1,260,917 4,763,145 3,764,380 6,876, , Fixed Rate Long-term debt: OECF JEXIM (a) 3747 JBIC (b) 21 st yen Miyazawa I Miyazawa II PCIR Bonds PSALM Loan Short-term debt: LBP 3% 5.7% 3.5% 2.3% & 2.7% 2.63% & 3.78% 2.37% 6.50% 12.00% 5.26% P=476, , , , ,394 14, , P=850, , ,284 5,128,234 9,586,145 1,390,821 P=335, ,541 1,390,821 P=634,203-3,579, ,411 P=2,297,686 1,110,793 5,131,370 5,286,187 9,805,539 14,597 4,172, Floating Rate Long-term debt: IBRD LBP 6.82% 5.67% 1,367, ,624 3,314,128 4,681, ,624 (a) The Export - Import Bank of Japan (b) Japan Bank for International Cooperation Liquidity Risk The Company s objective is to maintain a balance between continuity of funding and sourcing flexibility through the use of available financial instruments. The Company manages its liquidity profile to meet its working and capital expenditure requirements and service debt obligations. As part of the liquidity risk management program, the Company regularly evaluates and considers the maturity of both its financial investments and financial assets (e.g. trade receivables, other financial assets) and resorts to short-term borrowings whenever its available cash or matured placements is not enough to meet its daily working capital requirements. To ensure immediate availability of short-term borrowings, the Company maintains credit lines with banks on a continuing basis. Liquidity risk arises primarily when the Company has difficulty collecting its receivables from its major customer, NPC. Other instances that contribute to its exposure to liquidity risk are when the company finances long-term projects with internal cash generation and when there is credit crunch especially at times when the company has temporary funding gaps.

56 The table below summarizes the maturity analysis of the Company s financial liabilities at March 31, 2009 based on contractual undiscounted payments: On Demand Less than 3 Months 3 to 6 Months to 12 Months (In Thousands) 1 to 5 Years More than 5 Years Total Liabilities at amortized cost: Accounts payable - trade P= P=1,870,250 P= P= P= P= P=1,870,250 Accrued interest and guarantee fees 522, ,118 Accrued premium on range bonus forwards 247, ,567 Other current liabilities 7,402 7,402 Loan payable 2,000,000 2,000,000 Due to related parties 96,981 96,981 Royalty fee payable 1,548,363 1,548,363 Obligations to a power plant contractor 41,368 17,698 59,066 Long-term debt 7,373, ,146 1,925,505 22,663,627 8,181,748 40,642,084 Financial liability at FVPL: Derivative liabilities 47,051 47,051 Total P= P=11,754,158 P=515,844 P=3,925,505 P=22,663,627 P=8,181,748 P=47,040,882 On Demand Less than 3 Months 3 to 6 Months 6 to 12 Months 1 to 5 Years More than 5 Years Total (In Thousands) Liabilities at amortized cost: Accounts payable - trade P= P=2,229,198 P= P=73,436 P= P= P=2,302,634 Accrued interest and guarantee fees 235, ,865 Other current liabilities 6,629 6,629 Short-term loan payable 250, ,000 Royalty fee payable 1,765,771 1,765,771 Due to related parties 9,299 4,114,598 4,123,897 Obligations to a power plant contractor 55,042 78, ,222 51, ,937 Long-term debt 1,357, ,948 1,666,886 25,219,109 3,819,214 32,758,203 Total P= P=5,658,850 P=1,024,589 P=5,962,142 P=25,270,141 P=3,819,214 P=41,734, Financial Assets and Financial Liabilities Set out below is a comparison of carrying amounts and fair values of the Company s financial instruments as of March 31, 2009 and Carrying Amount Carrying Amount Fair Value Fair Value Financial Assets Loans and receivables: Cash and cash equivalents P=7,579,451,865 P=7,579,451,865 P=2,667,879,417 P=2,667,879,417 Trade receivables 5,013,734,144 5,013,734,144 5,201,014,543 5,201,014,543 Non-trade receivables 161,071, ,071, ,461, ,461,293 Loans and notes receivables 62,968,734 62,968,734 56,253,251 56,253,251 Employee receivables 11,978,551 11,978,551 28,166,532 28,166,532 Advances to employees 22,597,061 22,597,061 24,542,068 24,542,068 Long-term receivables 317,211, ,928,507 1,692,895,127 1,586,003,995

57 Carrying Amount Fair Value Carrying Amount Fair Value Concession receivable 34,159,632,190 33,784,564,612 36,345,423,943 31,278,027,770 Cash collateral on PCIR Bonds 3,519,226 3,519,226 3,066,807 3,066,807 Royalty fee chargeable to NPC 64,054,245 64,054, ,991, ,991,244 AFS investments: Debt investments 746,515, ,515,813 1,050,009,598 1,050,009,598 Equity investments 14,113,216 14,113,216 17,063,226 17,063,226 Financial assets at FVPL: Derivative assets 415,803, ,803,001 P=48,572,651,054 P=48,183,300,033 P=47,723,767,049 P=42,549,479,744 Financial Liabilities Financial liabilities at amortized cost: Accounts payable - trade P=1,870,249,989 P=1,870,249,989 P=2,302,633,155 P=2,302,633,155 Accrued interest and guarantee fees 522,118, ,118, ,865, ,865,351 Accrued premium on range bonus forwards 247,567, ,567,485 6,628,795 6,628,795 Other current liabilities 7,401,566 7,401, ,000, ,000,000 Loan payable 2,000,000,000 2,000,000,000 Due to related parties 96,980,507 96,980,507 4,123,896,404 4,123,896,404 Royalty fee payable 1,548,362,528 1,548,362,528 1,765,771,046 1,687,640,770 Obligations to a power plant contractor 54,261,525 54,261, ,890, ,665,814 Long-term debt 34,724,849,253 32,853,944,430 28,524,238,008 30,010,331,072 Financial liabilities at FVPL: Derivative liabilities 47,050,740 47,050,740 P=41,118,842,026 P=39,247,937,203 P=37,479,922,773 P=38,904,661,361 The methods and assumptions used by the Company in estimating the fair value of financial instruments are: Cash and Cash Equivalents. Carrying amounts approximate fair values due to its short-term nature. Trade and Other Receivables, Cash Collateral on PCIR Bonds, Royalty Fee Chargeable to NPC, Due to Related Parties, Trade and Other Payables and Loan Payable. These are instruments with relatively short maturity ranging 1 to 3 months. Carrying amounts approximate fair values. Long-term Receivables. The fair value of long-term receivables was computed by discounting the expected cash flow using the applicable rate of 4.28% and 6.11% in the first quarter of 2009 and 2008, respectively. Concession Receivable. The fair value of concession receivables is computed by discounting the expected free cash flows using the applicable rates as of balance sheet dates ranging from 4.27% to 10.35% and 6.09% to 10.82% in the first quarter of 2009 and 2008, respectively. AFS Investments. Fair values of debt securities are based on quoted market prices. For equity investments that are not quoted, the investments are carried at cost less allowance for impairment losses due to the unpredictable nature of future cash flows and the lack of suitable methods of arriving at a reliable fair value.

58 Derivative Assets and Liabilities. The fair values of range bonus forwards and currency forwards were determined by reference to market values provided by counterparty banks. The currency options were valued using Garman- Kohlhagen option pricing model that takes into account such factors as the risk-free US Dollar and Euro interest rates and historical volatility. Long-term Debt and Royalty Fee Payable. The fair values for the Parent Company s long-term debt are estimated using the discounted cash flow methodology with the applicable rates ranging from 0.39% to 1.78% and.86% to 2.10% in the first quarter of 2009 and 2008, respectively, while for FG Hydro, the fair value of deferred payment facility with PSALM was computed by discounting the facility s expected future cash flows using the prevailing credit adjusted Philippine Government Zero Coupon Yield interest rates ranging from 4.26% to 4.67% and 6.12% to 6.77% in the first quarter of 2009 and 2008, respectively. Fair value of royalty fee payable approximates the carrying value in the first quarter of 2009 while in 2008 its fair value was determined using discount rates ranging from 6.37% to 6.82%. Obligations to a Power Plant Contractor. Fair value of obligation to power plant contractor approximates the carrying value in the first quarter of 2009 while in the first quarter of 2008, its fair value represents the present value of the corresponding expected future cash flows with applicable rates at the balance sheet dates ranging from 6.37% to 6.82%. The Company classifies its financial instruments in the following categories. Loans and Receivables 2009 Financial Assets at FVPL Liabilities at Amortized Cost Financial Liabilities at FVPL AFS Total (In Thousands) Financial Assets Cash and cash equivalents P=7,579,452 P= P= P= P= P=7,579,452 Trade receivables 5,013,734 5,013,734 Non-trade receivables 161, ,071 Loans and notes receivables 62,969 62,969 Employee receivables 11,979 11,979 Advances to employees 22,597 22,597 Long-term receivables 317, ,212 Concession receivable 34,159,632 34,159,632 Cash collateral on PCIR Bonds 3,519 3,519 Royalty fee chargeable to NPC 64,054 64,054 AFS - debt investments 746, ,516 AFS - equity investments 14,113 14,113 Derivative Assets 415, ,803 Financial Liabilities Accounts payable - trade P=1,870,250 1,870,250 Accrued interest and guarantee fees 522, ,118 Accrued premium on range bonus forwards 247, ,567 Other current liabilities 7,402 7,402 Loan payable 2,000,000 2,000,000 Due to related parties 96,981 96,981 Royalty fee payable 1,548,363 1,548,363 Obligations to a power plant contractor 54,262 54,262 Long-term debt 34,724,849 34,724,849 Derivative liabilities 47,051 47,051 Total P=47,396,219 P=760,629 P=415,803 P=41,071,791 P=47,051 P=7,453,808

59 Loans and Receivables 2008 Financial Assets at FVPL Liabilities at Amortized Cost Financial Liabilities at FVPL AFS Total (In Thousands) Financial Assets Cash and cash equivalents P=2,667,879 P= P= P= P= P=2,667,879 Trade receivables 5,203,444 5,203,444 Non-trade receivables 160, ,032 Loans and notes receivables 56,253 56,253 Employee receivables 28,167 28,167 Advances to employees 24,542 24,542 Long-term receivables 1,692,895 1,692,895 Concession receivable 36,345,424 36,345,424 Cash collateral on PCIR Bonds 3,067 3,067 Royalty fee chargeable to NPC 474, ,991 AFS - debt investments 1,050,010 1,050,010 AFS - equity investments 17,063 17,063 Financial Liabilities Accounts payable - trade P=2,302,633 P=2,302,633 Accrued interest and guarantee fees 235, ,865 Other current liabilities 6,629 6,629 Short-term loan payable 250, ,000 Due to related parties 4,123,896 4,123,896 Royalty fee payable 1,765,771 1,765,771 Obligations to a power plant contractor 270, ,890 Long-term debt 28,524,238 28,524,238 Derivative Liabilities 47,051 47,051 Total P=46,656,694 P=1,067,073 P= P=37,479,922 P=47,051 P=10,196,794 The table below demonstrates the income, expense, gains or losses of the Company s financial instruments for the years ended March 31, 2009 and Effect in Profit or Loss Increase (Decrease) Effect Effect in in Equity Profit or Loss Increase Increase (Decrease) (Decrease) Effect in Equity Increase (Decrease) Loans and receivables: Interest income on cash in bank P=355,088 P= P=72,027 P= Interest income on cash equivalents 86,531,908 67,816,998 Interest income on trade receivables 23,353,754 Interest income on concession receivables 508,002, ,960,306 Debt investments: Gain on sale of AFS investments 64,620, ,796,235 Net gain removed from equity (64,620,206) (116,796,235) Financial assets at FVPL: Realized loss (72,451,292) Unrealized loss on fair value changes (254,572,433) Unrealized gain on fair value changes 28,095,649 Financial liabilities at amortized cost: Interest expense on long-term loans (554,805,406) (462,848,058) Interest expense on short-term loans (2,756,250) (60,218) Interest expense on royalty payable (56,252,379) (P=173,626,059) (P=64,620,206) 192,484,911 (P=116,796,235)

60 Capital Management The primary objective of the Company s capital management is to ensure that it maintains a healthy capital ratio in order to comply with its financial loan covenants and support its business operations. The Company manages and makes adjustment to its capital structure as it deems necessary. To maintain or adjust its capital structure, the Company may increase the levels of capital contributions from its creditors and owners/shareholders through debt and new shares issuance, respectively. The Company monitors capital using the debt ratio, which is long-term liabilities divided by longterm liabilities plus equity. The Company s policy is to keep the debt ratio not more than 70:30. The Company s long-term liabilities include both the current and long-term portions of obligations to power plant contractors and long-term debt. Equity includes capital stock attributable to common and preferred shares, unrealized gains reserve and retained earnings. Table below shows the Company s debt ratio as at March 31, 2009 and Long-term liabilities P=36,119,319,246 P=31,476,386,389 Equity 31,067,634,601 32,080,718,215 Debt ratio 53.8% 49.5% Derivative Financial Instruments The Company s freestanding derivative financial instruments are accounted for as financial instruments at FVPL. The table below shows the fair value of derivative financial instruments, reported as assets or liabilities, together with their notional amounts as of March 31, The notional amount is the basis upon which changes in the value of derivatives are measured. The Company has no outstanding derivatives as of March 31, Derivative Assets Derivative Liabilities Notional Amount Freestanding derivatives: Range bonus forwards P=399,446,190 P= JPY 8 billion Currency forwards 47,050,740 USD 100 million Embedded derivatives - Currency options 16,356,811 Total derivatives P=415,803,001 P=47,050,740 Presented as: Current P=399,446,190 P=47,050,740 Noncurrent 16,356,811 Freestanding Derivatives. The Company enters into derivative transactions to hedge the foreign currency exposure arising from its foreign currency denominated loan contracts, particularly the maturing Miyazawa 1 loan. As of March 31, 2009, the Company has positions in the following

61 types of freestanding derivatives to protect itself against foreign currency risk arising from the changes of the exchange rate of the peso in relation to the foreign currency: Foreign Currency Forward Contract. Foreign currency forward contracts are contractual agreements to buy or sell a foreign currency at an agreed rate on a future date. These are contracts that are customized and transacted with a bank or financial institution. As of the 1 st quarter of the year, the Company has a total of 13 foreign currency forward contracts with various counterparty banks maturing on May 28, 2009, four of these were only instituted during the year. The Company s outstanding deliverable buy Dollar and sell Peso and buy yen and sell dollar forward exchange contracts as of March 31, 2009 have an aggregate notional amount of $103 million and Y4,000 million, respectively. The weighted average forward rates of the outstanding forward exchange rates are P=48.67 and Y 98.6 to US$1. Range Bonus Forward Contract. A Range Bonus forward contract is an agreement that provides protection against unfavorable exchange rate movement by setting an agreed rate at which an entity can exchange one currency for another. At the same time, it provides that for each day during the fixing period that the spot rate is outside the predetermined range, the Company will accrue a premium based on a specified formula, which is payable at maturity. The following table shows the relevant data with the corresponding unrealized gain pertaining to the two range bonus forward contracts entered into by the Company for the Miyazawa 1 loan due on June 1, 2009: Notional Amount JPY 5 Billion JPY 3 Billion Trade date April 30, 2008 May 2, 2008 Expiry date May 26, 2009 May 26, 2009 Delivery date May 28, 2009 May 28, 2009 Agreed rate Premium formula (where n = number of days when the spot rate is outside the predetermined range during the fixing period and N = fixing period) USD47,846,890 x 13.40% x n/n USD28,571, x 13.06% x n/n Predetermined range JPY96-JPY106 JPY97-JPY107 Fixing period (in days) Unrealized mark to market gain P=239,422,634 P=142,555,317 As of March 31, 2009, the total accrued premium payable for the JPY5 billion and JPY3 billion range bonus forward amounted to P= million and P=86.68 million, respectively. The said amounts are included under trade and other payables in the 2008 consolidated balance sheet. Embedded Derivatives. The Company has financial and non-financial contracts with derivatives embedded in them. These embedded derivatives have the effect that some of the cash flows of the financial and non-financial contracts vary in a similar way to a freestanding derivative.

62 Currency Options. As of March 31, 2009, the Company has embedded currency options in its Pantabangan Refurbishment and Upgrade Project Contract with VA TECH HYDRO, Gmbh Contractor. Under the PRUP Contract, the Company has the option to pay the Contractor in European Euro (Euro) or in U.S. Dollar at a strike rate of to $1.00 for the original contract and to $1.00 for the contract options availed during the year. The fair value of the outstanding embedded currency option as of March 31, 2009 amounted to $0.34 million (P=16.4 million). The embedded currency option will mature on various dates until December 2010 or upon full payment and completion of the related host contract. Fair Value Changes of Derivatives The tables below summarize the net movement in fair values of the Company s derivatives as of March 31, Freestanding Derivatives Net Derivative Assets Balance at beginning of year P= P= Net changes in fair value of derivatives 352,395,450 Fair value of settled derivative Balance at end of year P=352,395,450 P= Embedded Derivatives Derivative Assets Balance at beginning of year P=34,907,195 P= Net changes in fair value of derivatives 490,246 Fair value of settled derivatives Foreign exchange difference (19,040,630) Balance at end of year P=16,356,811 P= The net changes in fair value of the Company s derivative during the year were taken into Derivatives gain (loss) account in the consolidated statements of income, net of accrued premium on range bonus forwards 21. Subsequent Events The Company has no significant events after March 31, 2009.

63 Energy Development Corporation As of March 31,2009 (With comparative figures for March 31' 2008) In Million Pesos Annex II Aeins n of Accounts Receivable Trade Receivables Amount Current More than 90 days past due 141I More than 120 days past due 6.6 Subtotal 5,122.6 Other Receivables Total Receivables 5,381.3 Allowance for Doubtful Accounts ( r08.8) Trade and Other Receivables - Net Breakdown of Liabilities A. Current Liabilities Loan Pavable 2,000.0 Accounts Pavable 2_2t9.7 2,633.1 Accrued Interest and Other Payables l,l57.l Income Tax Pavable s97.0 t Derivative Liabilities 47.0 Due to a Related Parties ,123.9 Sub-total B. Lons-term liabilities Rovaltv Fee Pavable Current 1, Non-current r Oblisations to a Power Plant Contractor Current Non-current 45.4 Lons-term debt Current ,416.9 Non-current ,107.3 Retirement Benefit Oblisation and Other Non-current Liabilities ,281.4 Total Liabilities 43, Certified true and Correct FENINA O. T. RODRIG Chief Financial Officer /@ t.a/,--^. AGNES C. DE JESUS Senior Vice-President