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July 22, 2011

The President,

El Rio Montana Resources, Inc.

Baguio City

ATTENTION: Mr. J. Alzona

President

Subject: Proposal for the conduct of Pre-Feasibility Study and Comprehensive Feasibility

Study of a Renewable Mini-hydro Power Project.

Sir:

AT DINUM a local consultancy firm is please to submit this letter-proposal in accordance to your Terms

of Reference(TOR) for the conduct of engineering consultancy services (preparation of pre-feasibility

study and Comprehensive feasibility study) of a proposed Mini-hydro power. It is emphasized, that all

services covered in the proposal (Comprehensive Feasibility Study) are necessary in order to determine

the technical, financial and socio-economic viability of the proposed project and possible construction

financing from your organization and other appropriate financing institution. The details are described

as follows.

1.0 FIRST PHASE (PRE-FEASIBILITY STUDY)

Pre-feasibility study is a preliminary engineering activity to assess the following:

1. General Site Potential - Site actual conditions of water sources and availability- Topographic characteristics- Initial geological assessment- Location and accessibility from load center- Socio and economic environment

2. Preliminary Scheme of Development- Preliminary concept of civil works component- Suitable electro-mechanical equipment and auxiliaries

3. Power market analysis- Identification of possible consumers and power taker

4. Preliminary Project costing and estimate- Civil works structures and electro mechanical equipment

5. Strategy of Implementation and ManagementThis report is necessary in the application for Renewable Energy Service Contract from the

Department of Energy (DOE).

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1.1.1 DURATION OF STUDY - One (1) month

1.1.2 COST OF STUDY - One Million and Five Hundred Thousand Pesos ( 1,500,000.00 Php).

1.1.3 TERMS OF PAYMENT

-40% of the study cost as down payment upon signing of contract.

-25 % of the study cost as progress payment at the end of second week from the start of work

respectively . Second progress payment, 25% of contract cost, will be made upon submission of the

completed pre-feasibility study.

-10% retention will be payable for Fifteen (15) days after the final acceptance and upon presentation of

satisfactory evidence that all cost of labor, materials, equipment and others connected to this contract

have been paid in full.

2.0 SECOND PHASE (COMPREHENSIVE FEASIBILITY STUDY)

Conduct of Comprehensive Feasibility Study is necessary in sourcing out financing requirement needed

for the construction from local and foreign financing institution or other similar institutions. It also

determines the project cost, the generation forecast and the Rate of internal return. Following are

activities needed in this phase.

Work scope work title Brief description

2.1.1 Topographic survey conduct comprehensive engineering survey to establish

Ground control of the whole project system, including

access road and transmission line route. Establish the

exact location of the project components like the weir

and the power plant.

2.1.2 Geologic Investigation conduct site geologic and geotechnical investigation to

establish soil and rock characteristics, earthquake mag-

nitude and frequency and structural stability needed for

structures foundation design.

2.1.3 Hydrologic Investigation a group of engineers headed by an experienced hydrol-

ogist will do this task. Investigate the watershed areas,

the maximum and minimum flow of the river, establish

gauging areas and assign people to do gauging weekly.Correlate fresh data with old data, from government

agencies like PAGASA and NIA.

2.1.4 Hydraulic Study conduct water level analysis at normal and flood condi-

tions, using non uniform flow computation.

2.1.5 Power Market Study conduct power market study on potential power taker,

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Cost of power, demand and projected demand of

Power within the franchise area where the power

From the mini-hydro plant will be sold.

2.1.6 Outline Design of plant based on the inputs from the above studies and existing

Facilities with feasibility details facilities evaluation, prepare the scheme of deve

Level lopment of the power system including preliminary and

Concept design of the various facilityies such as weir,

Headrace, desander, surgetank, penstock, power house

Substation and transmission lines including the sourcing

Of equipment from various manufacturer and suppliers.

2.1.7 Cost Estimate Conduct unit pricing analysis and prepare initial cost

estimates of the entire mini-hydro development.

2.1.8 Financial and economic Conduct economic and financial viability studies such asViability Study generation, production cost analysis, benefit cost

analysis, financial and economic internal rate of return

analysis and the like.

2.1.9 Work Program Prepare a clear and concise workplan for a

Renewable Mini-hydro Power Project.

2.2 ALLIED SERVICES

The allied services shall consist of activities to secure other technical and administrative

permitting requirements in accordance with government policies and procedures. These are as

follows:

2.2.1 Water Rights from the National Water Resources Board(NWRB)

Assist in securing the water rights permit from the National Water Resources Board(NWRB)

2.2.2 Preparation of All Documents Necessary for Project Development as Required by the

Department of Energy (DOE) and other Assistance to DOE. Assistance to follow-up will be

rendered.

2.2.3 Meetings and Project Presentations to all sectors affected by the development of the projects.

Note: The duration of the works for the allied services starts from the project conception up to the

completion of the project (full operational stage)

3.0 DURATION OF SERVICES

The duration for the conduct of comprehensive Feasibility Study will be Four (4) months.

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4.0 DETAILED SCOPE OF WORK AND DURATION

a. For the Detailed Topographic Survey - the survey teams together with the instrumentneeded in the conduct of optimum survey results shall be provided by the consultant. The

estimated duration to complete the survey is 45 days .

b. For the Geologic and Geotechnical survey - Geologist and instrument needed in theconduct of the study shall be provided by the consultant. The duration of the geo-technical

study is estimated to take 30 days.

c. Project Hydrological Study - Hydrologist, engineers and necessary instrument for theconduct of the optimum study shall be provided by the consultant. The duration of the

study will take Three (3) months to finish.

d. For the Site Meetings for Public Hearings for Indigenous People , Peoples Consultation, etc.- The cost for the meetings and gathering of the indigenous people, community residents,

etc. shall be borne by the proponent. All cost incurred for the whole process of securing

NCIP certification shall be borne by the proponent.

e. For All Activities Related to DOE, LGU and other Private sectors affected by the developmentof the project: Meetings for Public Hearings and Project Presentations and Peoples

Consultation, and Documentations etc. - All cost incurred also for the whole process of

securing all the necessary permits and documents for the development of the project shall

be borne by the proponent.

5.0 FINANCIAL PROPOSAL FOR THE CONDUCT OF COMPREHENSIVE FEASIBILITY STUDY AND

ALLIED SERVICES:

5.1 COST OF SERVICES

The total cost for the conduct of comprehensive feasibility study and allied services is Four

Million Philippine peso(Php 4,000,000.00) exclusive of vat.

5.2 TERMS OF Payment

y 30% of the feasibility study cost in the amount of Php1,2000,000 as mobilization /downpayment. Work will commence within five (5) days after mobilization payment.

y 15% in the amount of Php 600,000.00 progress payment at the end of each every month untilFour (4) months , the completion and submission of the financially viable and bankable

feasibility study.

y 10% retention in the amount of Php 400,000.00 payable 30 days after final acceptance and uponpresentation of valid proof that all costs incurred during the study have been fully paid.

Thank you for the opportunity to be of service to you.

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