SEC Form 17Q – 3Q 2012

SEC Number 66381 File Number _____

ENERGY DEVELOPMENT CORPORATION (Company’s full Name)

One Corporate Centre Julia Vargas cor. Meralco Ave., Ortigas Center, Pasig City (Company’s Address)

(632) 755-2332 (Telephone Number)

September 30, 2012 (Quarter Ending)

SEC FORM 17-Q (Form Type)

6 6 3 8 1

SEC Registration Number

E N E R G Y D E V E L O P M E N T C O R P O R A T I O N

( A S u b s i d i a r y o f R e d V u l c a n H o l d i

n g s C o r p o r a t i o n ) A N D S U B S I D I A R I E S

(Company’s Full Name)

J u l i a V a r g a s C o r n e r M e r a l c o A v e n u

e , O r t i g a s C e n t e r , P a s i g C i t y

(Business Address: No. Street City/Town/Province)

Maribel A. Manlapaz 755-2332 (Contact Person) (Company Telephone Number)

0 9 3 0 A A C F S 0 5 0 9 Month Day (Form Type) Month Day

(Fiscal Year) (Annual Meeting)

(Secondary License Type, If Applicable)

Article I Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

700 P=30,105,082,674 P=19,577,815,395

Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

S T A M P S Remarks: Please use BLACK ink for scanning purposes.

COVER SHEET

SEC Form 17Q – 3Q 2012 2

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 September 30, 2012 2. Commission identification number: 66381 3. BIR Tax Identification No. 000-169-125-000 4. Exact name of issuer as specified in its charter: ENERGY DEVELOPMENT CORPORATION 5. PHILIPPINES 6. (SEC Use Only)

Province, country or other jurisdiction of Industry Classification Code Incorporation or organization

7. One Corporate Centre Julia Vargas cor. Meralco Ave., Ortigas Center, Pasig City 1605 Address of issuer's principal office Postal Code 8. (632) 755-2332 Issuer's telephone number, including area code:

9. Merritt Road, Fort Bonifacio, Taguig City Former name, former address and former fiscal year, if changed since last report: 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 September 30, 2012

Common Stock, P1.00 par value 18,750,000,000 Preferred Stock, P0.01 par value 9,375,000,000 11. Are any or all of the securities listed on a Stock Exchange? Yes [ √ ] No [ ]

If yes, state the name of such Stock Exchange and the 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 – 3Q 2012

PART 1 FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Our unaudited consolidated financial statements for the quarter ended September 30, 2012 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 consolidated financial performance for the quarter ended September 30, 2012. 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 power 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 consolidated 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 Corporation and its subsidiaries. Additional information about the Company can be found on our corporate website www.energy.com.ph.

SEC Form 17Q – 3Q 2012 5

OVERVIEW OF OUR BUSINESS

Principal Products or Services As of September 30, 2012, the Company operates twelve geothermal power plants 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 and sale of electricity through Company-owned geothermal power plants to NPC, privately-owned distribution utilities (DUs), large industrials, and electric cooperatives, pursuant to Power Purchase Agreements (PPAs) and Electricity Sales Agreements (ESAs), respectively.

Starting September 3, 2010, on account of the extended waiver, the Company ceased billing to NPC after Bacman Geothermal Inc’s (BGI) successful acquisition of the plants from NPC. Through its 60% equity interest in First Gen Hydro Power Corporation (FG Hydro), the Company indirectly operates the 120 MW Pantabangan and 12 MW Masiway Hydroelectric Power Plants, located in Pantabangan, Nueva Ecija Province, Central Luzon. The power plants supply electricity into the Luzon grid to service the consumption of its customers which include the Wholesale Electricity Spot Market (WESM), distribution utilities covered by bilateral contract quantities (BCQ) and the National Grid Corporation of the Philippines (NGCP) for ancillary services. For the Company’s third business segment, Energy Development Corporation (EDC) provides drilling services to the Lihir Gold Limited in Papua New Guinea. The Company has 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, engineering design and construction, environmental management and energy research and development. With FG Hydro, the Company has not only acquired expertise in hydropower operation and maintenance, but also the capability to sell power on a merchant basis.

Percentage of sales or revenues contributed by foreign sales The Company generated P506.9 million from the contract it entered into with Lihir Gold Limited (LGL) in Papua, New Guinea. This represents 2.3% of the Company’s P21,949.5 million gross revenues for the first three quarters of 2012. As of October 31, 2012, the contract with LGL was pre-terminated.

SEC Form 17Q – 3Q 2012 6

Distribution methods of products or services The Company’s 5,296.1 GWh total sales volume comprised of 4,941.2 GWh coming from electricity production in Leyte, Mindanao, Tongonan I, and Palinpinon geothermal power plants and 354.9 GWh from FG Hydro’s Pantabangan-Masiway hydro power plants. About 63.3% or 3,354.3 GWh generated by Leyte and Mindanao was sold to NPC. The 1,586.9 GWh generated by Tongonan I, Palinpinon I and II was sold to electric cooperatives and industrial customers in the Visayas region and the Wholesale Electricity Spot Market (WESM). Electricity production of about 354.9 GWh, by FG Hydro’s power plants, was sold to the distribution utility clients comprised of electric cooperatives in the province of Nueva Ecija, BGI and the WESM. The electricity generated by the Company’s geothermal power plants is transmitted to customers i.e., distribution utilities, electric cooperatives or bulk power customers by the NGCP through its high voltage backbone system. FG Hydro generated 354.9 GWh of electricity as of first three quarters of 2012, of which 76.1% or 270.1 GWh was delivered to its contracted customers and 23.9% or 84.8 GWh was sold to the WESM.

Competition The Company competes with other energy sources used for the production of power, particularly coal, gas and oil, substantially all of which are imported. Under the Company’s Geothermal Renewable Energy Service Contracts (GRESCs), it has long-term exclusive rights to explore, develop, and utilize geothermal steam resources in specific areas. Substantially all of the Company’s power capacity is sold through various offtake agreements, such as PPAs for the supply of electricity to NPC and ESAs with Dus, large industrials, and electric cooperatives. Since most of these agreements provide for take-or-pay quantities, the Company is not subject to direct competition. Furthermore, the supply of steam is location-specific, such that each power plant can only source its fuel from a dedicated nearby steam field. On May 5, 2010, BGI, the Company’s wholly-owned subsidiary through EDC Geothermal Corporation, submitted the winning bid of US$28.25 million for PSALM’s auction of the 150 MW Bac-Man Geothermal Power Plants located in the towns of Bacon, Sorsogon Province and Manito, Albay Province. The power plants were turned over to BGI in September 2010, and are currently under rehabilitation to restore capacity and reliability. The only other Philippine company engaged in the production of steam is Chevron Geothermal Philippines Holdings. Aboitiz Power Corporation, a power distribution and generation company, operate for the 747 MW Tiwi-Makban geothermal power plant. Multinationals that currently operate in the Philippines include Korea Electric Power Corporation, Marubeni, CalEnergy, Tokyo Electric Power Company, AES, and Sumitomo.

SEC Form 17Q – 3Q 2012 7

Dependence on one or a few major customers and identity of any such major customers Close to 45.2% of the Company’s total revenues are derived from existing long-term PPAs with NPC.

Concessions and government share payments The five geothermal service contract areas where the EDC’s geothermal production steam fields are located are: • Tongonan Geothermal Project (expiring in 2031) • Southern Negros Geothermal Project (expiring in 2031) • Bacon-Manito Geothermal Project (expiring in 2031) • Mt. Apo Geothermal Project (expiring in 2042) Northern Negros Geothermal Project (expiring in 2044) The Company, through its subsidiaries Green Core Geothermal Inc. and Bac-Man Geothermal Inc. secured three (3) Geothermal Operating Contracts covering power plant operations: Tongonan Geothermal Power Plant (with a 25-year contract period expiring in 2037,

renewable for another 25 years) Palinpinon Geothermal Power Plant (with a 25-year contract period expiring in 2037,

renewable for another 25 years) Bacon-Manito Geothermal Power Plant (with a 25-year contract period expiring in 2037,

renewable for another 25 years) The Company also holds service contracts for the following prospect areas: Geothermal Resource

1. Mt Cabalian Geothermal Project (expiring by 2034) 2. Mt. Labo Geothermal Project (with a five-year pre-development period expiring in 2015,

25-year contract period expiring in 2035) 3. Mainit Geothermal Project (with a five-year pre-development period expiring in 2015,

25-year contract period expiring in 2035) 4. Ampiro Geothermal Project (with a five-year pre-development period expiring in 2017,

25-year contract period expiring in 2037) 5. Mandalagan Geothermal Project (with a five-year pre-development period expiring in

2017, 25-year contract period expiring in 2037) 6. Mt. Zion Geothermal Project (with a five-year pre-development period expiring in 2017,

25-year contract period expiring in 2037) 7. Lakewood Geothermal Project (with a five-year pre-development period expiring in

2017, 25-year contract period expiring in 2037) 8. Balingasag Geothermal Project (with a five-year pre-development period expiring in

2017, 25-year contract period expiring in 2037)

SEC Form 17Q – 3Q 2012 8

Wind Resource

1. Burgos Wind Project (WESC assigned by EDC to EDC Burgos Wind Power Corporation; pre-development stage expiring in 2012, 25-year contract period expiring in 2034)

2. Pagudpud Wind Project (pre-development stage expiring in 2013, 25-year contract period expiring in 2035)

3. Camiguin Wind Project (pre-development stage expiring in 2013, 25-year contract period expiring in 2035)

SEC Form 17Q – 3Q 2012 9

KEY PERFORMANCE INDICATORS The top eight (8) key performance indicators are set forth below:

Ratio

Sept – 12

Sept – 11

Current Ratio 2.11:1 2.65:1 Debt-to-Equity Ratio 1.45:1 1.81:1 Net Debt-to-Equity Ratio 1.12:1 1.37:1 Return on Assets (%) 10.59 (4.30) Return on Equity (%) 30.85 (11.49) Solvency Ratio 0.23 0.15 Interest Rate Coverage Ratio 3.87 2.27 Asset-to-Equity Ratio 2.76 3.09 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 (annual basis) 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 (annual basis) 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. Solvency Ratio – Net income excluding depreciation and non-cash provisions divided by total debt obligations. This ratio gauges a company’s ability to meet its long-term obligations.

SEC Form 17Q – 3Q 2012 10

Interest Rate Coverage Ratio – Earnings before interest and taxes of one period divided by interest expense of the same period. This ratio determines how easily a company can pay interest on outstanding debt. Asset-to-Equity Ratio – Total assets divided by total stockholders’ equity. This ratio shows a company’s leverage, the amount of debt used to finance the firm.

SEC Form 17Q – 3Q 2012 11

OPERATING REVENUES AND EXPENSES

FINANCIAL HIGHLIGHTS During the first three quarters of 2012, the Company posted a net income of P8,566.1 million, a 1,856.4% or P9,053.8 million improvement from the net loss of P487.7 million in the nine-month period ending September 30, 2011. The following factors contributed to the increase: P4,998.6 million impairment loss on property, plant and equipment of Northern

Negros Geothermal Project that was recognized in June 2011; P1,811.8 million GCGI’s higher revenues from Tongonan I and Palinpinon power

plants as per agreed contracts that became effective in mid-2011 and the additional power supply agreements that were signed in December 2011; and

P1,481.5 million FG Hydro’s revenues from sale of electricity as ancillary services. These were partially offset by the P175.5 million increase in net loss by BGI.

Net income (loss) is equivalent to 39.0% of total revenues in 2012 as compared to the (2.7%) from the same period in 2011. Net income attributable to equity holders of the parent at P7,105.8 million for the first three quarters of 2012, was a turnaround from the P670.2 million net loss attributable to equity holders of the parent during the same period in 2011. The recurring net income generated in the first three quarters of 2012 increased by 95.9% or P3,804.4 million to P7,771.6 million from the P3,967.2 million posted during the same period in 2011. This was mainly attributable to the P3,366.2 million increase in sale of electricity by FG Hydro and GCGI, offset by the P315.0 million increase in cost of sales of electricity and steam. Recurring net income attributable to equity holders of the parent was posted at P6,311.2 million, up by 66.8%, as compared to the P3,784.2 million for the first three quarters of 2011.

Cash and cash equivalents decreased by 9.0%, or P1,122.1 million, to P11,371.3 million as of September 30, 2012 from the P12,493.4 million December 31, 2011 balance. The decrease was mainly due to the following:

P6,761.2 million increase in property, plant and equipment acquisition and other investments

P3,508.8 million debt servicing; and P3,225.0 million payment of cash dividend.

These were offset by the P12,385.6 million cash generated from operations.

SEC Form 17Q – 3Q 2012 12

RESULTS OF OPERATIONS The following table details the results of operations for EDC for the first three quarters of 2012 and 2011. STATEMENT OF INCOMEHorizontal Analysis of Material Changes

Favorable (Unfavorable) Variance(Amounts in PHP millions) September 2012 September 2011 Amount % 2012 2011REVENUES Sale of electricity 21,442.6 17,699.4 3,743.2 21.1% 97.7% 97.1%

Revenue from drilling services 506.9 522.3 (15.4) -2.9% 2.3% 2.9%21,949.5 18,221.7 3,727.8 20.5% 100.0% 100.0%

COST OF SALES AND SERVICES*Cost of sales of electricity and steam (7,502.5) (7,440.5) (62.0) -0.8% -34.2% -40.8%Cost of drilling services (299.2) (464.4) 165.2 35.6% -1.4% -2.5%

(7,801.7) (7,904.9) 103.2 1.3% -35.6% -43.3%GENERAL AND ADMINISTRATIVE EXPENSES* (3,128.5) (3,066.7) (61.8) -2.0% -14.3% -16.8%FINANCIAL INCOME (EXPENSE) Interest income 274.5 281.2 (6.7) -2.4% 1.3% 1.5% Interest expense (2,869.6) (3,260.2) 390.6 12.0% -13.1% -17.9%

(2,595.1) (2,979.0) 383.9 12.9% -11.8% -16.4%OTHER INCOME (CHARGES)

Loss on impairment of property, plant and equipment* - (4,998.6) 4,998.6 100.0% 0.0% -27.4% Foreign exchange gains, net 813.6 (48.7) 862.3 1770.6% 3.7% -0.3% Derivatives gains, net 1.9 107.5 (105.6) -98.2% 0.0% 0.6% Miscellaneous, net* (85.7) 18.8 (104.5) -555.9% -0.4% 0.1%

729.8 (4,921.0) 5,650.8 114.8% 3.3% -27.0%INCOME BEFORE INCOME TAX 9,154.0 (649.9) 9,803.9 1508.5% 41.7% -3.6%BENEFIT FROM (PROVISION FOR) INCOME TAX

Current (371.3) (402.8) 31.5 7.8% -1.7% -2.2%Deferred (216.6) 565.0 (781.6) -138.3% -1.0% 3.1%

(587.9) 162.2 (750.1) -462.5% -2.7% 0.9%NET INCOME (LOSS) 8,566.1 (487.7) 9,053.8 1856.4% 39.0% -2.7%Net income (loss) attributable to:

Equity holders of the Parent Company 7,105.8 (670.2) 7,776.0 1160.3% 32.4% -3.7%Non-controlling interest 1,460.3 182.5 1,277.8 700.2% 6.7% 1.0%

EBITDA 13,685.9 10,280.2 3,405.7 33.1% 62.4% 56.4%RECURRING NET INCOME 7,771.6 3,967.2 3,804.4 95.9% 35.4% 21.8%Recurring net income attributable to:

Equity holders of the Parent Company 6,311.2 3,784.2 2,527.0 66.8% 28.8% 20.8%Non-controlling interest 1,460.4 183.0 1,277.4 698.0% 6.7% 1.0%

HORIZONTAL ANALYSIS VERTICAL ANALYSIS

*New presentation based on SRC Rule 68 issued by Philippine SEC last October 20, 2011 – As amended effective for audited financial statements covering periods ending December 31, 2011 and onwards, and for interim financial statements starting the first quarter of 2012, and thereafter.

SEC Form 17Q – 3Q 2012 13

YTD September 30, 2012 vs. YTD September 30, 2011 Revenues

Total revenues for the nine-month period ended September 30, 2012 increased by 20.5% or P3,727.8 million to P21,949.5 million from P18,221.7 million in the first nine months of 2011.

Sale of electricity

Revenues from sale of electricity increased by 21.1% or P3,743.2 million to P21,442.6 million in the first three quarters of 2012 from P17,699.4 million during the same period in 2011. The increase in revenue was primarily due to the following:

P1,811.8 million GCGI’s higher revenues from Tongonan I and Palinpinon power plants as per agreed contracts that became effective in mid-2011 and the additional power supply agreements that were signed in December 2011; and

P1,481.5 million FG Hydro’s revenues from sale of electricity as ancillary services.

Cost of Sales and Services Cost of sales and services decreased by 1.3% or P103.2 million to P7,801.7 million in the first three quarters of 2012 from P7,904.9 million during the same period in 2011.

Cost of drilling services

Cost of drilling services decreased by 35.6% or P165.2 million to P299.2 million in the first three quarters of 2012 from P464.4 million during the same period in 2011 mainly due to the major repair of Rig 11 undertaken in 2011.

Financial Income (Expenses) Financial expenses-net decreased by 12.9% or P383.9 million to P2,595.1 million in the first three quarters of 2012 from P2,979.0 million during the same period in 2011 due to the lower interest charges on refinanced loans.

Interest expense Interest expense decreased by 12.0% or P390.6 million to P2,869.6 million in the first three quarters of 2012 from P3,260.2 million during the same period in 2011. The favorable variance is due to lower interest charges on refinanced loans.

Other Income (Charges) Other income for the first three quarters amounted to P729.8 million, or a 114.8% improvement from the other charges of P4,921.0 million in the same period in 2011, primarily due to the absence of any provision for impairment in 2012.

SEC Form 17Q – 3Q 2012 14

Loss on impairment of property, plant and equipment Impairment loss on property, plant and equipment of NNGP amounting to P4,998.6 million was recognized in June 2011 based on the result of the technical assessment of the Northern Negros steam resource.

Foreign exchange gains (losses) - net The P813.6 million foreign exchange gains as of the first three quarters ending September 30, 2012 is P862.3 million turnaround from the foreign exchange losses of P48.7 million in the same period in 2011. The favorable variance was brought about by appreciation of the peso against the US dollar.

The comparative foreign exchange rates against the USD were as follows:

PHP:US$ December 31, 2010 43.840 September 30, 2011 43.720 December 31, 2011 43.840 September 30, 2012 41.700

Derivatives gain - net Derivative gain - net decreased by 98.2%, or P105.6 million, to P1.9 million for the first nine months ending September 30, 2012 from P107.5 million during the same period in 2011 since there are cross-currency swaps that are designated as accounting hedges this year as compared to the foreign currency forwards last year that are not designated as accounting hedges.

Miscellaneous – net The Company recognized miscellaneous charges – net of P85.7 million for the first nine months ending September 30, 2012 compared to miscellaneous income – net of P18.8 million during the same period in 2011 mainly due to the P114.7 million loss on debt extinguishment from the fixed rate corporate notes 1, 2 and 3 in April 2012 and May 2012.

Provision for Income Tax The Company’s current tax expense decreased by 7.8% or P31.5 million to P371.3 million in the nine-month period ending September 30, 2012 from P402.8 million in the nine-month period ending September 30, 2011. The favorable variance was due to the Parent Company’s lower taxable income on steam and electricity operations mainly contributed by the drop in revenues caused by the decrease in average steam price of Palinpinon and Tongonan 1 and the absence of NNGP's revenues in 2012 (P181.5 million). These were offset by:

GCGI’s current tax expense due to its taxable income (P92.7 million);

SEC Form 17Q – 3Q 2012 15

BGI’s current income tax caused by the incidental income from testing of power plant (P26.4 million); and

Absence in 2012 of the additional deductible realized forex loss on full settlement of various JBIC (OECF) loans in April 2011 and June 2011 (P24.9 million).

Deferred tax expense of P216.6 million in September 2012, or a 138.3% turnaround from the P565.0 million deferred tax income in the nine-month period ending September 2011 was primarily contributed by the following:

Absence in 2012 of the deferred tax asset on provision for full impairment of NNGP's property, plant and equipment recognized in June 2011 (P499.9 million);

Parent Company’s deferred taxable income in the nine-month period ending September 2012 versus deferred taxable loss in the nine-month period ending September 2011 mainly attributed to higher unrealized foreign exchange gains on the realignment of foreign loans (P150.6 million); and

GCGI’s deferred tax liability on the application of Net Operating Loss Carryover (NOLCO) in the nine-month period ending September 2012 versus last period's deferred tax benefit (P178.4 million).

Net Income

As a result of the foregoing, the Company’s net income of P8,566.1 million for the first three quarters of 2012 was an improvement over the P487.7 million net loss for the first three quarters of 2011. Net income (loss) is equivalent to 39.0% of total revenues in 2012 as compared to the (2.7%) in 2011. Net income attributable to equity holders of the parent at P7,105.8 million for the first three quarters of 2012 was an improvement of the net loss attributable to equity holders of the parent at P670.2 million during the same period in 2011.

SEC Form 17Q – 3Q 2012 16

CAPITAL AND LIQUIDITY RESOURCES

As of the quarter ended (in millions of pesos)

Q3 2012

Q3 2011 YoY change

Balance Sheet Data Total Assets …………………………… 94,293.0 88,298.2 6.8% Total Liabilities………………………... 60,136.7 59,763.0 0.6% Total Stockholder’s Equity …………… 34,156.3 28,535.2 19.7%

The Company’s assets as of September 30, 2012 amounted to P94,293.0 million, 6.8% higher as compared to the P88,298.2 million level as of September 30, 2011.

SEC Form 17Q – 3Q 2012 17

FINANCIAL POSITION

Horizontal and Vertical Analysis of Material Changes as of September 30, 2012 and December 31, 2011. STATEMENT OF FINANCIAL POSITIONAnalysis of Material Changes as of September 30, 2012 and December 31, 2011

(Amounts in PHP millions) September 2012 December 2011 Amount % 2012 2011ASSETSCurrent Assets

Cash and cash equivalents 11,371.3 12,493.4 (1,122.1) -9.0% 12.1% 13.9%Trade and other receivables 5,047.8 3,411.3 1,636.5 48.0% 5.4% 3.8%Available-for-sale (AFS) investments 137.1 673.9 (536.8) -79.7% 0.1% 0.7%Parts and supplies inventories 3,346.4 3,355.8 (9.4) -0.3% 3.5% 3.7%Other current assets 937.3 741.9 195.4 26.3% 1.0% 0.8%

Total Current Assets 20,839.9 20,676.3 163.6 0.8% 22.1% 23.0%Noncurrent Assets

Property, p lant and equipment 59,894.4 57,676.9 2,217.5 3.8% 63.5% 64.1%Intangible assets 4,755.3 4,705.2 50.1 1.1% 5.0% 5.2%Deferred tax assets 1,204.1 1,420.7 (216.6) -15.2% 1.3% 1.6%Exploration and evaluation assets 1,477.6 1,087.1 390.5 35.9% 1.6% 1.2%Other noncurrent assets 6,121.7 4,451.6 1,670.1 37.5% 6.5% 4.9%

Total Noncurrent Assets 73,453.1 69,341.5 4,111.6 5.9% 77.9% 77.0%TOTAL ASSETS 94,293.0 90,017.8 4,275.2 4.7% 100.0% 100.0%LIABILITIES AND EQUITYLIABILITIESCurrent Liabilities

Trade and other payables 7,930.2 6,704.1 1,226.1 18.3% 8.4% 7.4%Income tax payable 163.7 18.7 145.0 775.4% 0.2% 0.0%Due to related parties 42.9 60.1 (17.2) -28.6% 0.0% 0.1%Derivative liabilities 65.7 - 65.7 100.0% 0.1% 0.0%Current portion of:

Long-term debts 1,610.7 2,249.5 (638.8) -28.4% 1.7% 2.5%Royalty fee payable 65.1 287.6 (222.5) -77.4% 0.1% 0.3%

Total Current Liabilities 9,878.3 9,320.0 558.3 6.0% 10.5% 10.4%Noncurrent Liabilities

Long-term debts - net of current portion 48,072.2 49,240.1 (1,167.9) -2.4% 51.0% 54.7%Net retirement and other post-employment benefits 1,324.8 1,054.2 270.6 25.7% 1.4% 1.2%Provisions and other long-term liabilities 798.0 756.8 41.2 5.4% 0.8% 0.9%Derivative liabilities 63.4 - 63.4 100.0% 0.1% 0.1%Total Noncurrent Liabilities 50,258.4 51,051.1 (792.7) -1.6% 53.3% 56.7%

EQUITYEquity Attributable to Equity Holders of the Parent

Preferred stock 93.8 93.8 - 0.0% 0.1% 0.1%Common stock 18,750.0 18,750.0 - 0.0% 19.9% 20.8%Common stock in employee trust account (372.3) (372.3) - 0.0% -0.3% -0.4%Additional paid-in capital 6,267.0 6,267.0 - 0.0% 6.6% 7.0%Equity reserve (3,706.4) (3,706.4) - 0.0% -3.8% -4.1%Net accumulated unrealized gain on AFS investments 102.4 91.8 10.6 11.5% 0.1% 0.1%Retained earnings 10,777.3 6,304.7 4,472.6 70.9% 11.4% 7.0%Cumulative translation adjustment (92.1) 0.6 (92.7) -15450.0% -0.1% 0.0%

31,819.7 27,429.2 4,390.5 16.0% 33.7% 30.5%Non-controlling interest 2,336.6 2,217.5 119.1 5.4% 2.5% 2.5%Total Equity 34,156.3 29,646.7 4,509.6 15.2% 36.2% 32.9%

TOTAL LIABILITIES AND EQUITY 94,293.0 90,017.8 4,275.2 4.7% 100.0% 100.0%

HORIZONTAL VERTICAL Increase (Decrease)

SEC Form 17Q – 3Q 2012 18

Assets

Cash and cash equivalents The 9.0% or P1,122.1 million decrease to P11,371.3 million as of September 30, 2012 from the P12,493.4 million December 31, 2011 balance was mainly due to the following:

P6,761.2 million increase in property, plant and equipment acquisition and other investments

P3,508.8 million debt servicing; P3,225.0 million payment of cash dividend; and

These were offset by the P12,385.6 million cash generated from operations. Trade and other receivables Trade and other receivables increased by 48.0% or P1,636.5 million to P5,047.8 million as of September 30, 2012 from the P3,411.3 million balance as of December 31, 2011 mainly due to the Parent Company’s P1,154.7 million slide in collection of August 2012 billings to NPC for Unified Leyte and Mindanao I & II projects. This was also caused by the increase in revenues of the subsidiaries.

Available-for-sale (AFS) investments

AFS investments decreased by 79.7% or P536.8 million to P137.1 million as of September 30, 2012 from the P673.9 million balance in December 2011 due to the reclassification to other non-current assets of ROP bonds maturing beyond 2013. Other current assets

This account increased by 26.3% or P195.4 million to P937.3 million as of September 30, 2012 from the P741.9 million balance in December 2011 primarily due to the Parent Company’s higher prepaid withhoding taxes of P320.6 million, GCGI’s higher withholding tax certificates of P102.5 million and prepaid insurance of P34.6 million. These were offset by the P202.0 million reclassification to non-current assets of the Parent Company’s TCC and the P60.4 million decrease in the Parent Company’s prepaid expenses.

Deferred tax assets This account decreased by 15.2% or P216.6 million to P1,204.1 million as of September 30, 2012 from the P1,420.7 million balance as of December 31, 2011 mainly due to the Parent Company’s P127.6 million lower recognition of deferred tax assets (DTA) on unrealized forex gains on translation of long-term foreign loans and GCGI’s P126.9 million application of DTA on NOLCO to its taxable income for the period. These were offset by BGI’s P52.0 million recognized deferred tax on incidental income from testing of power plant that is reflected in the property, plant and equipment account.

SEC Form 17Q – 3Q 2012 19

Exploration and evaluation assets This account increased by 35.9% or P390.5 million to P1,477.6 million as of September 30, 2012 from the balance of P1,087.1 million as of December 31, 2011 mainly due to the expenditures for the exploration activities in Rangas, Kayabon and Tanawon areas of Bacman. Other noncurrent assets This account increased by 37.5% or P1,670.1 million to P6,121.7 million as of September 30, 2012 from the P4,451.6 million balance as of December 31, 2011 mainly due to the following:

P870.1 million increase in Input VAT; P488.3 million reclassification from current AFS investment account of ROP bonds

maturing beyond 2013; P202.0 million reclassification from current portion of tax credit certificates; and P108.3 million investment in shares.

Liabilities

Trade and other payables

This account increased by 18.3% or P1,226.1 million to P7,930.2 million as of September 30, 2012 from the P6,704.1 million balance as of December 31, 2011 mainly due to the P750.0 million accrual of cash dividends to common stockholders and P533.8 million increase in BGI’s accounts payable arising from purchases of electricity for replacement power. Income tax payable

This account increased by 775.4% or P145.0 million, to P163.7 million as of September 30, 2012 from the P18.7 million balance as of December 31, 2011 arising from the Parent Company and GCGI’s taxable income for the period. Due to related parties

This account decreased by 28.6%, or P17.2 million, to P42.9 million as of September 30, 2012 from the P60.1 million balance as of December 31, 2011 mainly due to the Parent Company’s partial settlement of its liabilities.

Derivative liabilities – current

The account balance of P65.7 million as of September 30, 2012 is the fair value of the current portion of the cross-currency swaps designated as accounting hedges.

SEC Form 17Q – 3Q 2012 20

Long-term debts - current portion

Long-term debts - current portion decreased by 28.4% or P638.8 million, to P1,610.7 million as of September 30, 2012 from the P2,249.5 million balance at year-end 2011 primarily due to P1,534.9 million prepayment of the FCRN loans series 1, 2 & 3 and P20.3 million settlement of outstanding balance of OECF 8th yen loan. These were offset by the P707.3 million, P117.9 million and P64.9 million of this year’s current portion of U$175 syndicated loan, IFC B loan and FXCN loan tranche 1 & 2, respectively. Royalty fee payable - current portion

Royalty fee payable decreased by 77.4% or P222.5 million, to P65.1 million as of September 30, 2012 from the P287.6 million balance at year-end 2011 due to the payment for the period.

Net retirement and other post-employment benefits

This account increased by 25.7% or P270.6 million to P1,324.8 million as of September 30, 2012 from the P1,054.2 million balance as of December 31, 2011 due to the accrual of retirement benefits for the period. Provisions and other long-term liabilities This account increased by 5.4% or P41.2 million to P798.0 million as of September 30, 2011 from P756.8 million balance as of December 31, 2011 due to the P82.9 million additional asset retirement obligation offset by the Parent Company’s P40.4 million decrease in accrual of sick and vacation leave.

Derivative liabilities – non current

The account balance of P63.4 million as of September 30, 2012 is the fair value of the non-current portion of the cross-currency swaps designated as accounting hedges.

Net accumulated unrealized gain on AFS investments

This account increased by 11.5% or P10.6 million to P102.4 million as of September 30, 2012 from P91.8 million as of December 31, 2011 mainly due to the increase in fair value of the investments for the period.

Retained earnings Retained earnings increased by 70.9% or P4,472.6 million, to P10,777.3 million as of September 30, 2012 from P6,304.7 million as of December 31, 2011 mainly due to the P7,105.8 million net income for the first three quarters of 2012 offset by the P1,882.5 million regular cash dividend paid on April 23, 2012 and P750.00 million special cash dividend accrued and payable on October 16, 2012.

SEC Form 17Q – 3Q 2012 21

Non-controlling interest Non-controlling interest increased by 5.4% or P119.1 million to P2,336.6 million as of September 30, 2012 from P2,217.5 million balance as of December 31, 2011 mainly due to the P1,460.3 million net income for the first three quarters of 2012 offset by the P1,342.5 million payment of cash dividend.

SEC Form 17Q – 3Q 2012 22

Horizontal and Vertical Analysis of Material Changes as of September 30, 2012 and 2011. STATEMENT OF FINANCIAL POSITIONAnalysis of Material Changes as of September 30, 2012 and 2011

(Amounts in PHP millions) September 2012 S eptember 2011 Amount % 2012 2011ASSETSCurrent Assets

Cash and cash equivalents 11,371.3 12,699.2 (1,327.9) -10.5% 12.1% 14.4%Trade and other receivables 5,047.8 2,949.1 2,098.7 71.2% 5.4% 3.3%Available-for-sale (AFS) investments 137.1 675.3 (538.2) -79.7% 0.1% 0.8%Parts and supplies inventories 3,346.4 3,462.8 (116.4) -3.4% 3.5% 3.9%Due from related parties - 0.6 (0.6) -100.0% 0.0% 0.0%Derivative assets - 158.4 (158.4) -100.0% 0.0% 0.2%Other current assets 937.3 1,267.3 (330.0) -26.0% 1.0% 1.4%

Total Current Assets 20,839.9 21,212.7 (372.8) -1.8% 22.1% 24.0%Noncurrent Assets

Property , plant and equipment 59,894.4 55,968.8 3,925.6 7.0% 63.5% 63.4%Intangible assets 4,755.3 4,704.0 51.3 1.1% 5.0% 5.3%Deferred tax assets 1,204.1 1,440.5 (236.4) -16.4% 1.3% 1.6%Exploration and evaluation assets 1,477.6 1,070.0 407.6 38.1% 1.6% 1.2%Other noncurrent assets 6,121.7 3,902.2 2,219.5 56.9% 6.5% 4.4%

Total Noncurrent Assets 73,453.1 67,085.5 6,367.6 9.5% 77.9% 76.0%TOTAL ASSETS 94,293.0 88,298.2 5,994.8 6.8% 100.0% 100.0%LIABILITIES AND EQUITYLIABILITIESCurrent Liabilities

Trade and other payables 7,930.2 5,355.0 2,575.2 48.1% 8.4% 6.1%Income tax payable 163.7 155.8 7.9 5.1% 0.2% 0.2%Due to related parties 42.9 46.4 (3.5) -7.5% 0.0% 0.1%Derivative liabilities 65.7 74.5 (8.8) -11.8% 0.1% 0.1%Current portion of:

Long-term debts 1,610.7 2,055.2 (444.5) -21.6% 1.7% 2.3%Royalty fee payable 65.1 315.5 (250.4) -79.4% 0.1% 0.4%

Total Current Liabilities 9,878.3 8,002.4 1,875.9 23.4% 10.5% 9.1%Noncurrent Liabilities

Long-term debts - net of current portion 48,072.2 49,695.8 (1,623.6) -3.3% 51.0% 56.3%Royalty fee payable - net of current portion - 48.3 (48.3) -100.0% 0.0% 0.1%Net retirement and other post-employment benefits 1,324.8 1,440.8 (116.0) -8.1% 1.4% 1.6%Provisions and other long-term liabilities 798.0 575.7 222.3 38.6% 0.8% 0.8%Derivative liabilities 63.4 - 63.4 100.0% 0.1% 0.1%Total Noncurrent Liabilities 50,258.4 51,760.6 (1,502.2) -2.9% 53.3% 58.6%

EQUITYEquity Attributable to Equity Holders of the Parent

Preferred stock 93.8 93.8 - 0.0% 0.1% 0.1%Common stock 18,750.0 18,750.0 - 0.0% 19.9% 21.2%Common stock in employee trust account (372.3) (377.5) 5.2 -1.4% -0.3% -0.4%Additional paid-in capital 6,267.0 6,265.6 1.4 0.0% 6.6% 7.1%Equity reserve (3,706.4) (3,706.4) - 0.0% -3.8% -4.2%Net accumulated unrealized gain on AFS investments 102.4 90.9 11.5 12.7% 0.1% 0.1%Retained earnings 10,777.3 5,801.6 4,975.7 85.8% 11.4% 6.6%Cumulative translation adjustment (92.1) (0.8) (91.3) 11412.5% -0.1% 0.0%

31,819.7 26,917.2 4,902.5 18.2% 0.0% 30.5%Non-controlling Interest 2,336.6 1,618.0 718.6 44.4% 2.5% 1.8%Total Equity 34,156.3 28,535.2 5,621.1 19.7% 36.2% 32.3%

TOTAL LIABILITIES AND EQUITY 94,293.0 88,298.2 5,994.8 6.8% 100.0% 100.0%

HORIZONTAL VERTICAL Increase (Decrease)

SEC Form 17Q – 3Q 2012 23

Assets

Cash and cash equivalents The 10.5% or P1,327.9 million decrease to P11,371.3 million as of September 30, 2012 from the P12,699.2 million September 30, 2011 balance was mainly due to the following:

P9,924.3 million property, plant and equipment acquisition and other investments P5,098.0 million debt servicing; and P3,225.0 million payment of cash dividend.

These were offset by the P17,055.0 million cash generated from operations Trade and other receivables This account increased by 71.2% or P2,098.7 million to P5,047.8 million as of September 30, 2012 from the P2,949.1 million balance as of September 30, 2011. The increase was mainly due to the Parent Company’s P1,154.7 million slide in collection of August 2012 billings to NPC for Unified Leyte and Mindanao I & II projects. This was also caused by the increase in revenues of the subsidiaries. Available-for-sale (AFS) investments AFS Investments decreased by 79.7% or P538.2 million to P137.1 million as of September 30, 2012 from the P675.3 million balance as of September 30, 2011 due to the reclassification to other non-current assets of ROP bonds maturing beyond 2013. Derivative assets The derivative assets P158.4 million balance as of September 30, 2011 pertains to the fair value of the outstanding foreign currency forward and foreign exchange swap contracts. Other Current Assets

Other current assets decreased by 26.0% or P330.0 million to P937.3 million as of September 30, 2012 from the P1,267.3 million posted for the same period in 2011 mainly due to the P502.0 million reclassification to non-current assets of the Parent Company’s TCC. This was offset by the Parent Company’s higher prepaid withholding taxes of P131.7 million. Property, plant and equipment This account increased by 7.0% or P3,925.6 million to P59,894.4 million as of September 30, 2012 from the balance of P55,968.8 million as of September 30, 2011 primarily due to the P7,710.0 million net additions partially offset by the P3,325.9 million depreciation for the period.

SEC Form 17Q – 3Q 2012 24

Deferred tax assets This account decreased by 16.4% or P236.4 million to P1,204.1 million as of September 30, 2012 from the balance of P1,440.5 million as of September 30, 2011 mainly due to the Parent Company’s P148.0 million lower recognition of DTA on unrealized forex gains on translation of long-term foreign loans and GCGI’s P126.9 million application of DTA on NOLCO to its taxable income for the period. These were offset by BGI’s P52.0 million recognized deferred tax on incidental income from testing of power plant that is reflected in the property, plant and equipment account. Exploration and evaluation assets This account increased by 38.1% or P407.6 million to P1,477.6 million as of September 30, 2012 from the balance of P1,070.0 million as of September 30, 2011 primarily due to the expenditures for the exploration activities in Mindanao III, Rangas, Kayabon and Tanawon areas.

Other noncurrent assets This account increased by 56.9% or P2,219.5 million, to P6,121.7 million as of September 30, 2012 from the P3,902.2 million as of September 30, 2011 mainly due to the following:

P1,289.7 million increase in input VAT; P488.3 million reclassification from current available for sale investment account of

ROP bonds maturing beyond 2013; and P502.0 million increase in tax credit certificates.

Liabilities

Trade and other payables

This account increased by 48.1%, or P2,575.2 million, to P7,930.2 million as of September 30, 2012 from the balance of P5,355.0 million in the same period of 2011 mainly due to the P2,328.5 million increase in accounts payable to third parties.

Income tax payable

Income tax payable increased by 5.1% or P7.9 million to P163.7 million as of September 30, 2012 from the P155.8 million for the same period in 2011 arising from the GCGI’s taxable income for the period offset by the Parent Company’s lower taxable income.

Due to related parties

This account decreased by 7.5% or P3.5 million to P42.9 million as of September 30, 2012 from the balance of P46.4 million as of September 30, 2011 primarily due to the settlement of advances from First Gen.

SEC Form 17Q – 3Q 2012 25

Derivative liabilities - current The account balance of P65.7 million as of September 30, 2012 is the fair value of the current portion of the cross-currency swaps designated as accounting hedges in 2012. On the other hand, the account balance of P74.5 million as of September 30, 2011 is the fair value of the outstanding foreign currency forward in 2011. Long-term debts (current portion)

This account decreased by 21.6% or P444.5 million to P1,610.7 million as of September 30, 2012 from the balance of P2,055.2 million as of September 30, 2011 primarily due to the P1,554.2 million prepayment of the FCRN series 1, 2 & 3 and regular amortization of loans. This was offset by the P1,057.4 million reclassification from non-current of the US$175 million syndicated loan, IFC A & B loans and FXCN loan tranche 1 & 2.

Royalty fee payable (current portion )

This account decreased by 79.4 % or P250.4 million to P65.1 million as of September 30, 2012 from the balance of P315.5 million as of September 30, 2011 mainly due to the Parent Company’s P279.8 million payment to DOE and LGUs offset by P15.4 million accretion on Day 1 gain recognized from October 1, 2011 to September 30, 2012. Royalty fee payable (net of current portion )

This account decreased by 100.0% or P48.3 million as of September 30, 2012 primarily due to the reclassification to current portion of outstanding royalty fee payable in 2012.

Net retirement and other post-retirement benefits

This account decreased by 8.1% or P116.0 million to P1,324.8 million as of September 30, 2012 from P1,440.8 million balance as of September 30, 2011 mainly due to contribution to the fund in 2011 offset by the accrual of retirement benefits for the period.

Provisions and other long-term liabilities

This account increased by 38.6% or P222.3 million to P798.0 million as of September 30, 2012 from P575.7 million balance as of September 30, 2011 mainly due to the Parent Company’s P131.1 million additional asset retirement obligation and P88.6 million accrual of sick leave and vacation leave benefits.

Derivative liabilities – non current

The account balance of P63.4 million as of September 30, 2012 is the fair value of the non-current portion of the cross-currency swaps designated as accounting hedges.

SEC Form 17Q – 3Q 2012 26

Net accumulated unrealized gain on AFS investments This account increased by 12.7% or P11.5 million to P102.4 million as of September 30, 2012 from P90.9 million as of September 30, 2011 mainly due to the increase in fair value of the investments for the period.

Retained earnings Retained earnings increased by 85.8% or P4,975.7 million to P10,777.3 million as of September 30, 2012 from P5,801.6 million balance as of September 30, 2011 mainly due to the P7,105.8 million net income for the first three quarters of 2012 and the P503.0 million net income posted from October 1, 2011 to December 31, 2011. This was offset by the P1,882.5 million regular cash dividend paid on April 23, 2012 and P750.00 million special cash dividend payable on or before October 16, 2012. Non-controlling interest Non-controlling interest increased by 44.4% or P718.6 million to P2,336.6 million as of September 30, 2012 from P1,618.0 million balance as of September 30, 2011 mainly due to the P1,460.3 million net income for the first three quarters of 2012 and the P599.5 million net income posted from October 1, 2011 to December 31, 2011. This was offset by the P1,342.5 million payment of cash dividend.

SEC Form 17Q – 3Q 2012 27

CASH FLOW YTD September 30, 2012 vs. YTD September 30, 2011 Net cash flows from operating activities increased by 32.7% or P2,251.7 million to P9,127.5 million in the first three quarters of 2012 from P6,875.8 million during the same period in 2011 mainly due to the P2,697.4 million improved cash generation from operations due to increased revenues. This was offset by the P475.7 million increase in payment of income tax. Net cash flows used in investing activities decreased by 19.6% or P1,458.6 million to P5,990.0 million in the nine-month period ending September 2012 as compared to the P7,448.5 million during the same period in 2011. The decrease was primarily due to lower acquisition of property, plant and equipment by P1,745.5 million offset by the higher increase in exploration and evaluation assets by P378.3 million. The movement of P11,357.5 million, to P4,240.4 million on net cash flows used in financing activities in the nine-month period ending September 2012 from the P7,117.0 million net cash flows from financing activities during the same period in 2011 was mainly due to lower proceeds from the P7,000 million FXCN loan this year as compared to the P20,980.0 million proceeds from the US$300 million notes issuance and $175 million loan last year. This was offset by the lower payment of long-term debts by P5,624.9 million this year.

SEC Form 17Q – 3Q 2012 28

DISCUSSION ON THE SUBSIDIARIES

FG Hydro

(Amounts in PHP millions)

As of and for the periods ended Sept 30

2012 2011 Operating revenues 3,769.5 1,306.0 Operating expenses 681.8 537.0 Other expenses – net 313.2 318.3 Income before tax 2,774.5 450.7 Provision for (benefit from) income tax 0.4 0.7 Net income 2,774.1 450.0 Total current assets 2,780.3 1,698.8 Total noncurrent assets 7,004.1 7,322.4 Total current liabilities 794.2 565.7 Total noncurrent liabilities 4,028.6 4,410.4 Total equity 4,961.6 4,045.1

FG Hydro generated revenues of P3,769.5 million for the period ended September 30, 2012, 188.6% higher than the revenues of P1,306.0 million for the same period in 2011. The favorable variance was mainly on account of revenues earned from sale of electricity, as ancillary services to National Grid Corporation of the Philippines (“NGCP”), amounting to P1,862.1 million, the temporary assumption of BGI’s Power Supply Agreements (PSAs) with Batangas Electric Cooperative II (“BATELEC II”) 48MW and Linde Philippines 6MW amounting to P377.1 million, and higher sales to WESM coupled with higher spot prices. Ancillary service revenues in 2011 was only for a month’s billing period while the PSA with BGI only commenced in December 26, 2011. The unfavorable variance in operating expenses is mainly on account of higher depreciation, operations and maintenance expenses and taxes and licenses in 2012. The unfavorable variances, however, were partly offset by higher interest income from short-term deposits of P40.9 million in 2012 versus P28.1 million in 2011. Overall, FG Hydro posted a record net income of P2,774.1 million for the period ended September 30, 2012, P2,324.1 million higher than the P450.0 million reported income for the same period in 2011. Total assets as of September 30, 2012 stood at P9,784.4 million, P763.2 million or 8.5% higher than the 2011 level of P9,021.2 million. The favorable variance was mainly due to higher cash and accounts receivable trade balances in 2012. As of September 30, 2012, total liabilities stood at P4,822.8 million, P153.3 million or 3.1% lower than the 2011 level of P4,976.1 million. The decrease in liabilities was mainly due to the continuous pay-out of the scheduled semi-annual loan repayments. Total equity as of September 30, 2012 of P4,961.6 million is P916.5 million or 22.7% higher compared to the September 30, 2011 level of P4,045.1 million.

SEC Form 17Q – 3Q 2012 29

Green Core Geothermal Inc. September 2012 vs. September 2011 Results

(Amounts in PHP millions)

As of and for the periods ended September 30

2012 2011 Revenues 7,759.3 6,148.4 Operating expenses* (5,431.6) (6,214.5) Other income (charges) - net 59.6 (391.2) Income (loss) before income tax 2,387.3 (457.3) Benefit from (provision for) income tax (225.2) 45.8 Net income (loss) 2,162.1 (411.5) Total Current Assets 2,671.8 1,624.8 Total Non-Current Assets 9,762.3 9,784.0 Total Liabilities 1,460.0 8,108.3 Total Equity 10,974.1 3,300.5

*Includes Cost of Sale of Electricity and General and Administrative Expenses GCGI’s revenues increased by 26.2% or P1,610.9 million, to P7,759.3 million as of the nine-month period ending September 30, 2012 from P6,148.4 million for the same period in 2011 due to higher revenues from the sale of electricity as per agreed contracts that became effective in mid-2011 and the additional power supply agreements that were signed in December 2011. Operating expenses decreased by 12.6% or P782.9 million, to P5,431.6 million in 2012 from P6,214.5 million in 2011 due to lower cost of steam by an average cost of P0.58/kWh – net of the increase in volume by 144.3 GWh (P511.7 million). The decrease is also due to lower operations & maintenance of P178.5 million and purchased services & utilities of P169.2 million offset by higher general & administrative expenses of P76.5 million. This period’s other income of P59.6 million consisted mainly of foreign exchange gains and the absence in 2012 of interest expense.

Provision for income tax - current and deferred of P225.2 million in 2012 was a reversal of P45.8 million benefit from income tax – deferred in 2011. Total current assets increased by 64.4% or P1,047.0 million, to P2,671.8 million in 2012 from P1,624.8 million in 2011 largely due to higher cash & cash equivalents of P578.3 million, trade & other receivables of P293.5 million and other current assets of P176.0 million. Total noncurrent assets decreased by 0.2% or P21.7 million, to P9,762.3 million in 2012 from P9,784.0 million in 2011 due to lower deferred tax asset of P138.8 million offset by higher other noncurrent assets of P111.4 million and property, plant & equipment of P5.7 million. Total liabilities decreased by 82.0% or P6,648.3 million, to P1,460.0 million in 2012 from P8,108.3 million in 2011 while total equity increased by 232.5% or P7,673.6 million, to P10,974.1 million in 2012 from P3,300.5 million in 2011 due to the conversion of the P5,452.5 million advances from EDC to equity coupled with the net income for the period October 1, 2011 to September 30, 2012 amounting to P2,221.1 million.

SEC Form 17Q – 3Q 2012 30

Bac-Man Geothermal Inc.

(Amounts in PHP millions) As of and for the periods ended

September 2012 September 2011 Expenses* (229.2) (23.1) Other income 3.9 0.8 Operating income (loss) (225.3) (22.3) Benefit from (provision for) income tax 29.8 2.2 Net loss (195.5) (20.1)

Total Current Assets 558.1 155.3 Total Non-Current Assets 3,874.2 2,824.6 Total Current Liabilities 1,501.5 3,032.1 Total Equity 2,930.8 (52.2)

As of September 30, 2012, BGI has yet to start commercial operations. The increase in expenses pertains primarily to net purchases of electricity amounting to P=103.3 million, composed of P=2,302.3 million revenues and P=2,405.6 million replacement power costs; rental and insurance costs of P=60.3 million; and depreciation expense of P=6.2 million. The increase in current assets by 259.4% or P=402.8 million is due mainly to the increase in trade and other receivables amounting to P=401.8 million resulting from the sale of electricity. Non-current assets increased by 37.2% or P=1,049.7 million resulting mainly from the capitalized costs for the rehabilitation of the power plants amounting to P=1,283.8 million. Income from testing of power plant for the period amounting to P=520.4 million was netted off this account as required by PAS 16. The increase in input VAT by P=231.2 million as a result of the increase in expenses also contributed to the overall increase in non-current assets. The decrease in liabilities and corresponding increase in equity results from the conversion of due to related parties into equity as capital infusion in December 2011.

SEC Form 17Q – 3Q 2012 31

Commitments that will have an impact on the issuer’s liquidity As of September 30, 2012, the Company has unserved purchase orders and awarded contracts for the purchase of various capital goods in the total amount of P67.9 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.

FOREIGN EXCHANGE AND INTEREST RATE EXPOSURE The Company has P=19,577.8 million in long-term US dollar denominated loans as of September 30, 2012 which is 43.2% of the total Company’s long-term loans.

OTHER MATTERS

CASH DIVIDEND

On March 13, 2012, the BOD of the Parent Company approved the following cash dividends in favor of all stockholders of record as of March 28, 2012 and payable on or before April 24, 2012:

cash dividend of P=0.0008 per share on the preferred shares; and regular cash dividend of P=0.10 per share on the common shares.

On September 5, 2012, the BOD of the Parent Company approved the payment of special cash dividends of P=0.04 per share on the common shares in favor of common stockholders of record as of September 20, 2012, payable on or before October 16, 2012. In March and May 2012, FG Hydro declared and paid cash dividends amounting to P=88.5 million and P=1,254.0 million, respectively.

SEC Form 17Q – 3Q 2012 32

MAJOR STOCKHOLDERS

As of September 30, 2012, the total number of stockholders was 700 and price was P6.08 per share. The public float level was at 50.60% (or 9,488,077,589 common shares).

List of Top 20 Stockholders as of September 30, 2012

Rank Name Nationality

Number of Shares

% Preferred Common Total

1 Red Vulcan Holdings Corporation

Filipino 9,375,000,000 7,500,000,000 16,875,000,000 60.00

2 PCD Nominee Corporation Foreign - 6,740,652,872 6,740,652,872 23.97

3 PCD Nominee Corporation Filipino - 2,737,451,371 2,737,451,371 9.73

4 First Gen Corporation Filipino - 1,007,891,500 1,007,890,500 3.58

5 Northern Terracotta Power Corporation

Filipino - 726,450,200 726,450,200 2.58

6 Peter D. Garrucho, Jr. Filipino - 5,670,000 5,670,000 0.02

7 Benjamin K. Liboro Filipino - 3,525,500 3,525,500 0.01

8 Arthur A. De Guia Filipino - 2,200,000 2,200,000 0.01

9 CROSLO Holdings Corporation Filipino - 1,700,000 1,700,000 0.01

10 Hi-Light Corporation Filipino - 1,577,500 1,577,500 0.01

11 Mapazon Corporation Filipino - 1,470,000 1,470,000 0.01

12 ALG Holdings Corporation Filipino - 875,000 875,000 0.00

13 Raul I. Macatangay Filipino - 725,000 725,000 0.00

14 Rosalind Camara Filipino - 663,750 663,750 0.00

15 Rodolfo R. Waga, Jr. Filipino - 658,750 658,750 0.00

16 Emelita D. Sabella Filipino - 521,000 521,000 0.00

17 Rodolfo R. Waga, Jr. &/or Grace B. Waga

Filipino - 501,200 501,200 0.00

19 Hiro Budhrani &/or Astrid J. Budhrani

Filipino - 500,000 500,000 0.00

18 Ma. Consuelo R. Lopez Filipino - 500,000 500,000 0.00

20 Peter Mar & /or Annabelle C. Mar

Filipino - 500,000 500,000 0.00

SEC Form 17Q – 3Q 2012 33

BOARD OF DIRECTORS

As of September 30, 2012, the members of Board of Directors of EDC are as follows: Oscar M. Lopez Chairman Emeritus Federico R. Lopez Chairman and Chief Executive Officer Peter D. Garrucho, Jr. Director Elpidio L. Ibañez Director Ernesto B. Pantangco Director and Executive Vice President Francis Giles B. Puno Director Richard B. Tantoco Director, President and Chief Operating Officer Jonathan C. Russell Director Edgar O. Chua Independent Director Francis Ed. Lim Independent Director Arturo T. Valdez Independent Director

OFFICERS As of September 30, 2012, the officers of EDC are as follows:

Name Position Federico R. Lopez Chief Executive Officer Richard B. Tantoco President and Chief Operating Officer Ernesto B. Pantangco Executive Vice President Agnes C. de Jesus Senior Vice President for Environment and

External Relations, and Compliance Officer Nestor H. Vasay Senior Vice President, Chief Financial

Officer and Treasurer Marcelino M. Tongco Senior Vice President for Strategic

Contracting Manuel S. Ogena Senior Vice President for Technical Services Dominic M. Camu Senior Vice President for Power Generation Danilo C. Catigtig Senior Vice President for Strategic Initiatives

Office Vincent Martin C. Villegas Vice President for Business Development Erwin O. Avante Vice President for Corporate Finance Rico G. Bersamin Vice President for Steam Field Operations Ferdinand B. Poblete Vice President, Chief Information Officer Ariel Arman V. Lapus Vice President for Business Development

International Ernesto G. Espinosa Vice President Ellsworth R. Lucero Vice President – Power Dwight A. Maxino Vice President - So. Negros Geothermal

Project

SEC Form 17Q – 3Q 2012 34

Name Position Manuel C. Paete Vice President - Leyte Geothermal Project Liberato S. Virata Vice President - Bacon-Manito Geothermal

Project Wilfredo A. Malonzo Vice President for Supply Chain

Management Maribel A. Manlapaz Comptroller Teodorico Jose R. Delfin Corporate Secretary Ana Maria A. Katigbak Assistant Corporate Secretary Glenn L. Tee Senior Manager, Internal Audit Erudito S. Recio Senior Manager, Investor Relations

EDC Geothermal Corporation (EGC)

First Gen Hydro PowerCorporation (FGHPC)

EDC Wind EnergyHoldings Inc.

(EWEHI)

EDC Holdings International Limited

(EHIL)

EDC Drillco Corporation(EDC Drillco)

• Green Core Geothermal Inc. (GCGI)

• Bac-Man Geothermal Inc. (BGI)

• Unified Leyte Geothermal Energy Inc. (ULGEI)

• Southern Negros Geothermal, Inc. (SNGI)

• EDC Mindanao Geothermal Inc. (EMGI)

• Bac-Man Energy Development Corporation

(BEDC)• Kayabon Geothermal, Inc.

(KGI)

Energy Development (EDC) Corporation Chile Limitada

EDC Pagudpod Wind PowerCorporation (EPWPC)

Energy Development Corporation Hong Kong

Limited(EDC HKL)

Prime TerracottaHoldings Corporation

Red Vulcan Holdings Corporation

D: 100%

D: 100% D: 100%D: 100%D: 100%D: 60%

ID: 100%D: 99.99%ID: 0.01%

Legend:D – Direct OwnershipID – Indirect OwnershipE – Economic InterestV – Voting Interest

E: 40%V: 60%

E: 100%V: 100%

PT EDC IndonesiaEDC Peru

Holdings S.A.C.EDC Chile

Holdings SPAPT EDC Panas Bumi

Indonesia

EDC Geotermica ChileEDC Geotermica

Peru S.A.C.

EDC Quellaapacheta

ID: 100% ID: 100%

ID: 70%

ID: 95% ID: 95% ID: 100%ID: 100%

EDC Burgos Wind PowerCorporation (EBWPC)

ID: 100%D: 33.33%ID: 66.67%

Energy Development Corporation

September 30,2012

Standards and interpretations under the PFRSPAS 1 Presentation of Financial Statements Adopted

PAS 10 Events After the Reporting Period Adopted

PAS 11 Construction Contracts Adopted

PAS 12 Income Taxes Adopted

PAS 16 Property, Plant and Equipment Adopted

PAS 17 Leases Adopted

PAS 18 Revenue Adopted

PAS 19 Employee Benefits Adopted

PAS 2 Inventories Adopted

PAS 20 Accounting for Government Grants and Disclosure of Government

Assistance Not Applicable

PAS 21 The Effects of Changes in Foreign Exchange Rates Adopted

PAS 23 Borrowing Costs Adopted

PAS 24 Related Party Disclosures Adopted

PAS 26 Accounting and Reporting by Retirement Benefit Plans Adopted

PAS 27 Consolidated and Separate Financial Statements Adopted

PAS 28 Investments in Associates Not Applicable

PAS 29 Financial Reporting in Hyperinflationary Economies Not Applicable

PAS 31 Interests In Joint Ventures Not Applicable

PAS 32 Financial Instruments: Presentation Adopted

PAS 33 Earnings Per Share Adopted

PAS 34 Interim Financial Reporting Adopted

PAS 36 Impairment of Assets Adopted

PAS 37 Provisions, Contingent Liabilities and Contingent Assets Adopted

PAS 38 Intangible Assets Adopted

PAS 39 Financial Instruments: Recognition and Measurement Adopted

PAS 40 Investment Property Not Applicable

PAS 41 Agriculture Not Applicable

PAS 7 Statement of Cash Flows Adopted

PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors Adopted

IFRS 1 First-time Adoption of International Financial Reporting Standards Not Applicable

IFRS 2 Share-based Payment Adopted

IFRS 3 Business Combinations Adopted

IFRS 4 Insurance Contracts Not Applicable

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations Not Applicable

IFRS 6 Exploration for and Evaluation of Mineral Assets Adopted

IFRS 7 Financial Instruments: Disclosures Adopted

IFRS 8 Operating Segments Adopted

IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities Adopted

IFRIC 10 Interim Financial Reporting and Impairment Adopted

IFRIC 12 Service Concession Arrangements Not Applicable

IFRIC 13 Customer Loyalty Programmes Not applicable

IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding

Requirements and their Interaction Not applicable

IFRIC 15 Agreements for the Construction of Real Estate Not applicable

IFRIC 16 Hedges of a Net Investment in a Foreign Operation Not applicable

IFRIC 17 Distributions of Non-cash Assets to Owners Not applicable

IFRIC 18 Transfers of Assets from Customers Not applicable

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments Not applicable

IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments Not applicable

IFRIC 4 Determining Whether an Arrangement Contains a Lease Not applicable

IFRIC 5 Rights to Interests Arising from Decommissioning, Restoration and

Environmental Rehabilitation Funds Not applicable

IFRIC 6 Liabilities Arising from Participating in a Specific Market - Waste Electrical

and Electronic Equipment Not applicable

IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in

Hyperinflationary Economies Not applicable

IFRIC 9 Reassessment of Embedded Derivatives Adopted

SIC 10 Government Assistance Not applicable

SIC 12 Consolidation – Special Purpose Entities Not applicable

SIC 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers Not applicable

SIC 15 Operating Leases – Incentives Not applicable

SIC 21 Income Taxes – Recovery of Revalued Non-Depreciable Assets Not applicable

SIC 25 Income Taxes – Changes in the Tax Status of an Entity or its Shareholders Adopted

SIC 27 Evaluating the Substance of Transactions in the Legal Form of a Lease Not Applicable

SIC 29 Disclosure – Service Concession Arrangements Not Applicable

SIC 31 Revenue – Barter Transactions Involving Advertising Services Not applicable

SIC 32 Intangible Assets – Web Site Costs Not applicable

SIC 7 Introduction of the Euro Not applicable

Annex I

Energy Development Corporation (A Subsidiary of Red Vulcan Holdings Corporation) and Subsidiaries

Unaudited Interim Condensed Consolidated Financial Statements September 30, 2012 and 2011 (With Comparative Figures as of December 31, 2011 )

ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)

AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF

FINANCIAL POSITION

September 30,

2012

(Unaudited)

December 31,

2011

(Audited)

September 30,

2011

(Unaudited,

Restated,

Note 26)

ASSETS

Current Assets

Cash and cash equivalents (Notes 5 and 24) P=11,371,320,502 P=12,493,406,963 P=12,699,182,531

Trade and other receivables (Notes 6 and 24) 5,047,767,532 3,411,309,528 2,949,128,079

Available-for-sale (AFS) investments (Note 24) 137,109,600 673,853,680 675,255,400

Parts and supplies inventories (Note 7) 3,346,447,094 3,355,767,653 3,462,812,943

Derivative assets (Note 24) – – 158,419,378

Due from related parties (Notes 23 and 24) – 7,812 603,648

Other current assets 937,227,820 741,911,257 1,267,314,656

Total Current Assets 20,839,872,548 20,676,256,893 21,212,716,635

Noncurrent Assets

Property, plant and equipment (Note 8) 59,894,445,724 57,676,929,006 55,968,768,332

Intangible assets (Note 9) 4,755,318,325 4,705,245,708 4,704,038,221

Deferred tax assets - net 1,204,064,463 1,420,656,657 1,440,514,804

Exploration and evaluation assets 1,477,615,101 1,087,079,413 1,070,018,217

Other noncurrent assets (Note 10) 6,121,616,647 4,451,649,107 3,902,172,313

Total Noncurrent Assets 73,453,060,260 69,341,559,891 67,085,511,887

TOTAL ASSETS P=94,292,932,808 P=90,017,816,784 P=88,298,228,522

LIABILITIES AND EQUITY

Current Liabilities

Trade and other payables (Notes 11 and 24) P=7,930,235,369 P=6,704,075,261 5,355,024,648

Income tax payable 163,734,778 18,736,456 155,757,439

Due to related parties (Notes 23 and 24) 42,890,638 60,090,825 46,388,222

Current portion of:

Long-term debts (Notes 12 and 24) 1,610,673,813 2,249,517,382 2,055,224,478

Derivative liabilities (Note 24) 65,720,038 – 74,503,957

Royalty fee payable (Notes 13 and 24) 65,078,884 287,626,313 315,514,708

Total Current Liabilities 9,878,333,520 9,320,046,237 8,002,413,452

(Forward)

- 2 -

September 30,

2012

(Unaudited)

December 31,

2011

(Audited)

September 30,

2011

(Unaudited,

Restated,

Note 26)

Noncurrent Liabilities

Long-term debts - net of current portion

(Notes 12 and 24) P=48,072,224,256 P=49,240,054,073 P=49,695,800,701

Derivative liabilities - net of current portion

(Note 24) 63,371,038 – –

Royalty fee payable - net of current portion

(Notes 13 and 24) – – 48,318,448

Net retirement and other post-employment

benefits 1,324,796,774 1,054,237,256 1,440,777,462

Provisions and other long-term liabilities

(Note 8) 797,981,250 756,877,725 575,697,239

Total Noncurrent Liabilities 50,258,373,318 51,051,169,054 51,760,593,850

Total Liabilities 60,136,706,838 60,371,215,291 59,763,007,302

Equity

Attributable to equity holders of the Parent

Company:

Preferred stock (Note 14) 93,750,000 93,750,000 93,750,000

Common stock (Note 14) 18,750,000,000 18,750,000,000 18,750,000,000

Common shares in employee trust account (372,272,723) (372,272,723) (377,483,019)

Additional paid-in capital 6,266,966,828 6,266,966,828 6,265,571,968

Equity reserve (3,706,430,769) (3,706,430,769) (3,706,430,769)

Net accumulated unrealized gain on AFS

investments 102,352,984 91,758,915 90,902,139

Cumulative translation adjustments

(Note 24) (92,070,591) 592,534 (818,886)

Retained earnings 10,777,353,058 6,304,695,114 5,801,666,171

31,819,648,787 27,429,059,899 26,917,157,604

Non-controlling interest 2,336,577,183 2,217,541,594 1,618,063,616

Total Equity 34,156,225,970 29,646,601,493 28,535,221,220

TOTAL LIABILITIES AND EQUITY P=94,292,932,808 P=90,017,816,784 P=88,298,228,522

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)

AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF INCOME

Three-month Periods Ended

September 30

Nine-month Periods Ended

September 30

2012 2011 2012 2011

REVENUES (Note 4)

Sale of electricity P=6,419,210,425 P=6,290,586,632 P=21,442,620,932 P=17,699,362,656

Revenue from drilling services 161,670,238 195,609,796 506,891,671 522,321,325

6,580,880,663 6,486,196,428 21,949,512,603 18,221,683,981

COST OF SALES AND SERVICES

Cost of sales of electricity (Note 15) (1,775,772,761) (2,430,243,914) (7,502,538,423) (7,440,512,360)

Cost of drilling services (Note 16) (87,729,096) (185,465,297) (299,210,907) (464,389,788)

(1,863,501,857) (2,615,709,211) (7,801,749,330) (7,904,902,148)

GENERAL AND ADMINISTRATIVE

EXPENSES (Note 17)

(932,160,799)

(872,055,525)

(3,128,487,704)

(3,066,702,114)

FINANCIAL INCOME (EXPENSES)

Interest expense (Notes 4 and 18) (949,342,213) (945,312,694) (2,869,586,587) (3,260,238,922)

Interest income - net of final tax

(Notes 4 and 19)

93,771,405

63,343,894

274,546,848

281,217,028

(855,570,808) (881,968,800) (2,595,039,739) (2,979,021,894)

OTHER INCOME (CHARGES)

Foreign exchange gains (losses)

(Notes 4 and 20) 119,275,094 (285,517,229) 813,610,472 (48,683,289)

Derivative gains - net (Notes 4 and 24) 1,893,130 116,481,020 1,893,130 107,507,535

Impairment loss on property, plant and

equipment (Notes 4 and 8) –

– – (4,998,608,008)

Miscellaneous - net (Notes 4 and 21) (18,351,140) 6,343,758 (85,737,279) 18,802,772

102,817,084 (162,692,451) 729,766,323 (4,920,980,990)

INCOME (LOSS) BEFORE INCOME

TAX 3,032,464,283 1,953,770,441 9,154,002,153 (649,923,165)

BENEFIT FROM (PROVISION FOR)

INCOME TAX

Current (170,313,706) (155,757,439) (371,309,848) (402,833,122)

Deferred (26,980,218) 11,148,584 (216,592,195) 565,035,180

(197,293,924) (144,608,855) (587,902,043) 162,202,058

NET INCOME (LOSS) P=2,835,170,359 P=1,809,161,586 P=8,566,100,110 (P=487,721,107)

Net income (loss) attributable to:

Equity holders of the Parent Company P=2,487,462,502 P=1,660,871,742 P=7,105,782,444 (P=670,221,100)

Non-controlling interest 347,707,857 148,289,844 1,460,317,666 182,499,993

P=2,835,170,359 P=1,809,161,586 P=8,566,100,110 (P=487,721,107)

Basic/Diluted Earnings (Loss) Per Share

for Net Income (Loss) Attributable to

Equity Holders of the Parent

Company (Note 22) P=0.132 P=0.088 P=0.379 (P=0.036)

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)

AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

Three-month Periods Ended

September 30

Nine-month Periods Ended

September 30 2012 2011 2012 2011

Net income (loss) P=2,835,170,359 P=1,809,161,586 P=8,566,100,110 (P=487,721,107)

Other comprehensive income (loss)

Changes in fair value of AFS

investments recognized in

equity 12,755,659 (15,876,699) 10,594,069 (28,816,658)

Cumulative translation adjustments (64,421,018) (2,188,886) (92,663,125) (2,188,886)

Total comprehensive income (loss) P=2,783,505,000 P=1,791,096,001 P=8,484,031,054 (P=518,726,651)

Total comprehensive income (loss)

attributable to:

Equity holders of the Parent

Company P=2,435,797,143 P=1,642,806,157 P=7,023,713,388 (P=701,226,644)

Non-controlling interest 347,707,857 148,289,844 1,460,317,666 182,499,993

P=2,783,505,000 P=1,791,096,001 P=8,484,031,054 (P=518,726,651)

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)

AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2012 AND 2011

Equity Attributable to Equity Holders of the Parent Company

Preferred

Stock

(Note 14)

Common

Stock

(Note 14)

Common

Shares in

Employee

Trust Account

Additional

Paid-in

Capital

Equity

Reserve

Net

Accumulated

Unrealized

Gain on AFS

Investments

Retained Earnings Subtotal

Non-controlling

Interest Total Equity

Cumulative

Translation

Adjustments

Balances, January 1, 2011, as previously

reported P=93,750,000 P=18,750,000,000 (P=379,219,785) P=6,266,099,283 (P=3,706,430,769) P=119,718,797

P=1,370,000 P=9,524,603,810 P=30,669,891,336 P=1,569,089,721 P=32,238,981,057

Effect of voluntary change in accounting

policy (Note 26) – – – – – – – 155,072,607 155,072,607 – 155,072,607

Balances, January 1, 2011, as restated

(Audited) 93,750,000 18,750,000,000 (379,219,785) 6,266,099,283 (3,706,430,769) 119,718,797 1,370,000 9,679,676,417 30,824,963,943 1,569,089,721 32,394,053,664

Total comprehensive income (loss):

Net income (loss) – – – – – – – (670,221,100) (670,221,100) 182,499,993 (487,721,107)

Changes in fair value of AFS

investments recognized in equity

–

–

–

–

– (28,816,658)

–

– (28,816,658)

– (28,816,658)

Cumulative translation adjustment – – – – – – (2,188,886) – (2,188,886) – (2,188,886)

– – – – – (28,816,658) (2,188,886) (670,221,100) (701,226,644) 182,499,993 (518,726,651)

Cash dividends (Note 14) – – – – – – – (3,007,500,000) (3,007,500,000) – (3,007,500,000)

Effect of subsidiary’s issuance of and declaration of dividends on preferred

shares to non-controlling interest (NCI)

(Note14) – – – – – – – (200,289,146) (200,289,146) 200,289,146 –

Cash dividend - FG Hydro’s preferred

shares – – – – – – – – – (333,815,244) (333,815,244)

Share-based payment – – 1,736,766 464,953 – – – – 2,201,719 – 2,201,719

Deferred income tax effect of share-based

payment – – – (992,268) – – – – (992,268) – (992,268)

Balances, September 30, 2011, as

restated (Unaudited, Note 26)

P=93,750,000

P=18,750,000,000

(P=377,483,019)

P=6,265,571,968

(P=3,706,430,769)

P=90,902,139

(P=818,886)

P=5,801,666,171

P=26,917,157,604

P=1,618,063,616

P=28,535,221,220

- 2 -

Equity Attributable to Equity Holders of the Parent Company

Preferred

Stock

(Note 14)

Common

Stock

(Note 14)

Common

Shares in

Employee

Trust Account

Additional

Paid-in

Capital

Equity

Reserve

Net

Accumulated

Unrealized

Gain on AFS

Investments

Cumulative

Translation

Adjustments Retained Earnings Subtotal

Non-controlling

Interest Total Equity

Balances, December 31, 2011 (Audited) P=93,750,000 P=18,750,000,000 (P=372,272,723) P=6,266,966,828 (P=3,706,430,769) P=91,758,915 P=592,534 P=6,304,695,114 P=27,429,059,899 P=2,217,541,594 P=29,646,601,493

Total comprehensive income (loss):

Net income – – – – – – – 7,105,782,444 7,105,782,444 1,460,317,666 8,566,100,110

Changes in fair value of AFS investments recognized in equity

– – – – – 10,594,069

– – 10,594,069

– 10,594,069

Cumulative translation adjustments – – – – – – (92,663,125) – (92,663,125) – (92,663,125)

– – – – – 10,594,069 (92,663,125) 7,105,782,444 7,023,713,388 1,460,317,666 8,484,031,054

Cash dividends (Note 14) – – – – – – – (2,632,500,000) (2,632,500,000) – (2,632,500,000) Cash dividends to NCI – – – – – – – – – (1,342,533,077) (1,342,533,077)

Documentary stamp tax on common

shares subscription

Non-controlling interest in PT EDC

Indonesia and PT EDC Panas Bumi

Indonesia

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(624,500)

–

(624,500)

–

–

1,251,000

(624,500)

1,251,000

Balances, September 30, 2012

(Unaudited)

P=93,750,000

P=18,750,000,000

(P=372,272,723)

P=6,266,966,828

(P=3,706,430,769)

P=102,352,984

(P=92,070,591)

P=10,777,353,058

P=31,819,648,787

P=2,336,577,183

P=34,156,225,970

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)

AND SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2012 AND 2011

2012 2011

CASH FLOWS FROM OPERATING ACTIVITIES

Income (loss) before income tax P=9,154,002,153 (P=649,923,165)

Adjustments for:

Interest expense (Notes 4 and 18) 2,869,586,587 3,260,238,922

Depreciation and amortization (Notes 4, 8 and 9) 2,613,048,943 2,632,779,385

Unrealized foreign exchange gains - net (950,575,758) (177,643,991)

Interest income (Notes 4 and 19) (274,546,848) (281,217,028)

Provision for: – –

Retirement and post-employment benefits 270,967,853 212,830,273

Doubtful accounts - unrecoverable input VAT 148,912,692 –

Share-based benefits cost – 2,201,719

Loss on debt extinguishment (Notes 12 and 21) 114,683,892 –

Recovery of impairment loss on property, plant and

equipment (Notes 8 and 21) (63,614,885) –

Loss (gain) on retirement of property, plant

and equipment (752,932) 6,775,880

Impairment loss on property, plant and equipment of

Northern Negros Geothermal Project (NNGP)

(Notes 4 and 8) – 4,998,608,008

Derivative gains - net (Note 24) – (83,915,421)

“Day 1” loss on security deposits (Note 21) – 6,078,723

Operating income before working capital changes 13,881,711,697 9,926,813,305

Decrease (increase) in:

Trade and other receivables (1,625,391,361) 914,353,720

Due from related parties 7,812 (603,648)

Parts and supplies inventories 45,116,094 (702,171,632)

Other current assets 19,778,196 79,286,473

Increase (decrease) in:

Trade and other payables 390,361,459 (167,441,186)

Due to related parties (93,264,999) (145,695,637)

Royalty fee payable (232,737,504) (216,312,202)

Cash generated from operations 12,385,581,394 9,688,229,193

Interest and financing charges (2,781,246,427) (2,731,686,727)

Income taxes paid including creditable withholding taxes (476,475,056) (747,506)

Retirement and other post-employment benefits paid (408,336) (80,000,000)

Net cash from operating activities 9,127,451,575 6,875,794,960

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property, plant and equipment (Note 8) (4,949,643,012) (6,695,153,475)

Proceeds from incidental income from testing of property,

plant and equipment 520,417,469 –

Interest received 247,612,163 294,482,856

Increase in:

Exploration and evaluation assets (390,535,688) (12,225,900)

Intangible assets (Note 9) (122,215,985) –

Other noncurrent assets (1,298,815,757) (1,035,643,756)

Proceeds from sale of property, plant and equipment 3,223,548 –

Net cash used in investing activities (5,989,957,262) (7,448,540,275)

(Forward)

- 2 -

September 30, 2012

(Unaudited)

September 30, 2011

(Unaudited)

CASH FLOWS FROM FINANCING ACTIVITIES

Payments of:

Long-term debts (P=7,909,964,859) (P=13,534,852,507)

Cash dividends (Note 14) (3,225,033,077) (3,341,315,244)

Short-term loans – (175,000,000)

Documentary stamp (624,500) –

Proceeds from long-term debts (Note 12) 6,934,833,050 24,242,500,000

Decrease in provisions and other long-term liabilities (39,649,426) (74,283,283)

Net cash flows from (used in) financing activities (4,240,438,812) 7,117,048,966

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS (1,102,944,499) 6,544,303,651

EFFECT OF FOREIGN EXCHANGE RATE CHANGES

ON CASH AND CASH EQUIVALENTS (19,141,962) (3,046,252)

CASH AND CASH EQUIVALENTS AT BEGINNING

OF PERIOD 12,493,406,963 6,157,925,132

CASH AND CASH EQUIVALENTS AT END OF

PERIOD (Notes 5 and 24) P=11,371,320,502 P=12,699,182,531

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements

.

ENERGY DEVELOPMENT CORPORATION (A Subsidiary of Red Vulcan Holdings Corporation)

AND SUBSIDIARIES

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

1. Corporate Information

Corporate Structure

Energy Development Corporation (the “Parent Company” or “EDC”) is a subsidiary of Red

Vulcan Holdings Corporation (Red Vulcan). The Parent Company and its subsidiaries

(collectively hereinafter referred to as the “Company”), were separately incorporated and

registered with the Philippine Securities and Exchange Commission (SEC) except for its foreign

subsidiaries. Below are the Parent Company’s ownership interests in its subsidiaries:

Percentage of Ownership

September 30, 2012 December 31, 2011

Direct Indirect Direct Indirect

EDC Drillco Corporation (EDC Drillco) 100.00% – 100.00% –

EDC Geothermal Corp. (EGC) 100.00% – 100.00% –

Green Core Geothermal Inc. (GCGI) – 100.00% – 100.00%

Bac-Man Geothermal Inc. (BGI) – 100.00% – 100.00%

Unified Leyte Geothermal Energy Inc.

(ULGEI) – 100.00% – 100.00%

Southern Negros Geothermal, Inc. (SNGI)**

– 100.00% – 100.00%

EDC Mindanao Geothermal Inc. (EMGI)**

– 100.00% – 100.00%

Bac-Man Energy Development Corporation

(BEDC)**

–

100.00%

–

100.00%

Kayabon Geothermal, Inc. (KGI)**

– 100.00% – 100.00%

Energy Development (EDC) Corporation Chile

Limitada [EDC Chile Limitada] 99.99%

0.01% 99.99%

0.01%

EDC Holdings International Limited (EHIL)**

100.00% – 100.00% –

Energy Development Corporation Hong Kong

Limited (EDC HKL)**

PT EDC Indonesia* –

100.00%

95.00%

–

–

100.00%

–

PT EDC Panas Bumi Indonesia* – 95.00% – –

EDC Chile Holdings SPA* – 100.00% – –

EDC Geotermica Chile* – 100.00% – –

EDC Peru Holdings S.A.C. * – 100.00% – –

EDC Geotermica Peru S.A.C. * – 100.00% – –

EDC Quellaapacheta* – 70.00% – –

EDC Wind Energy Holdings, Inc. (EWEHI) 100.00% – 100.00% –

EDC Burgos Wind Power Corporation (EBWPC) 33.33% 66.67% 33.33% 66.67%

EDC Pagudpud Wind Power Corporation

(EPWPC)* –

100.00% –

–

First Gen Hydro Power Corporation (FG Hydro) 60.00% – 60.00% – * Incorporated in 2012 and has not yet started commercial operations.

**Incorporated in 2011 and has not yet started commercial operations.

- 2 -

History of Ownership

Beginning December 13, 2006, the common shares of EDC were listed and traded on the

Philippine Stock Exchange (PSE). Up to November 2007, EDC was 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 Red Vulcan (a Philippine corporation). Red Vulcan was then a wholly owned

subsidiary of First Gen Corporation (First Gen, a publicly listed Philippine corporation) through

Prime Terracota Holdings Corporation (Prime Terracota). First Gen’s indirect interest in EDC

consists of 6.0 billion common shares and 7.5 billion preferred shares. Control was then

established through First Gen’s 60% indirect voting interest in EDC. Meanwhile, First Philippine

Holdings Corporation (First Holdings) directly owns 66.2% of the common shares of First Gen.

Accordingly, First Holdings became then the ultimate parent of the Company.

On May 12, 2009, First Gen’s indirect voting interest in Red Vulcan was reduced to 45% with the

balance taken up by Lopez Inc. Retirement Fund (40%) and Quialex Realty Corporation (15%)

through the issuance of preferred shares by Prime Terracota. As a result of this transaction, Prime

Terracota replaced First Holdings as the ultimate parent of EDC effective May 12, 2009.

Nature of Operations

The Parent Company operates 12 geothermal energy projects in five Geothermal Service Contract

(GSC) areas, namely:

1. Bacon-Manito Geothermal Project (BMGP);

2. Mt. Apo Geothermal Project (MGP);

3. Northern Negros Geothermal Project (NNGP);

4. Southern Negros Geothermal Project (SNGP); and,

5. Tongonan Geothermal Project (TGP).

These GSCs are entered into with the Department of Energy (DOE) pursuant to the provisions of

Presidential Decree 1442. These GSCs were replaced by Geothermal Renewable Energy Service

Contracts (GRESCs) on October 23, 2009.

Geothermal steam produced is delivered to the National Power Corporation (NPC) and fed to the

Parent Company and subsidiary’s power plants to produce electricity. EDC sells power to NPC

under the Steam Sales Agreements (SSAs) and Power Purchase Agreements (PPAs), respectively.

EDC also has drilling activities in Papua New Guinea. In August 2011, the Parent Company

assigned its electricity sales agreement with Iloilo I Electric Cooperative, Inc. (ILECO I) to GCGI.

On July 25, 2012, the ESA expired.

Subsidiaries

EDC Drillco

EDC Drillco is a company incorporated on September 28, 2009 to act as an independent service

contractor, consultant, specialized technical adviser for well construction and drilling, and other

allied activities. As of September 30, 2012, EDC Drillco remained non-operating.

EGC

EGC, originally named as First Luzon Geothermal Energy Corporation, 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, EGC became an investment

- 3 -

holding company of its wholly owned subsidiaries, namely GCGI, BGI, ULGEI, SNGI, EMGI,

BEDC and KGI. EGC also has a 0.01% stake in EDC Chile Limitada.

On March 8, 2011, the Philippine SEC approved the change of its corporate name to EGC.

Further details on EGC’s wholly-owned subsidiaries follow:

GCGI was incorporated on June 22, 2009 with primary activities on power generation,

transmission, distribution, and other energy related businesses. GCGI is currently operating

the 192.5 Megawatt (MW) Palinpinon and 112.5 MW Tongonan 1 geothermal power plants in

Negros Oriental and Leyte, respectively, following its successful acquisition from the Power

Sector Assets and Liabilities Management Corporation (PSALM) in 2009.

BGI was incorporated on April 7, 2010 primarily to carry on the general business of

generating, transmitting, and/or distributing energy. BGI has successfully acquired the

150 MW Bac-Man Geothermal Power Plants (BMGPP) from PSALM in 2010. BMGPP is

currently under rehabilitation to restore its capacity and reliability.

ULGEI is a company incorporated on June 23, 2010 to carry on the general business of

generating, transmitting, and/or distributing energy.

On February 4, 2011, the Philippine SEC approved the incorporation of SNGI and EMGI,

wholly owned subsidiaries of EGC, to carry on the general business of generating,

transmitting, and/or distributing energy derived from any and all forms, types and kinds of

energy sources for lighting and power purposes and whole-selling the electric power to power

corporations, public electric utilities and electric cooperatives.

On September 22 and 28, 2011, the Philippine SEC approved the incorporation of BEDC and

KGI, wholly owned subsidiaries of EGC, to carry on the general business of generating,

transmitting, and/or distributing energy derived from any and all forms, types and kinds of

energy sources for lighting and power purposes and whole-selling the electric power to power

corporations, public electric utilities and electric cooperatives.

As of September 30, 2012, ULGEI, SNGI, EMGI, BEDC and KGI remained non-operating.

EHIL and EDC HKL

EHIL was incorporated on August 17, 2011 in British Virgin Islands and will serve as an

investment holding company of EDC’s international subsidiaries. EHIL is the holding company

of EDC HKL which was incorporated on November 22, 2011 in Hong Kong. The following

entities are the subsidiaries under EHKL:

EDC Peru Holdings S.A.C., a foreign subsidiary incorporated on January 19, 2012 in Lima,

Peru is a 99.9% owned by EDC HKL. EDC Peru Holdings S.A.C. holds 99.9% stake in EDC

Geotermica Peru S.A.C., a foreign subsidiary incorporated on January 19, 2012 in Lima, Peru.

EHIL owns the remaining 0.1% stake in EDC Peru Holdings S.A.C. and EDC Geotermica

Peru S.A.C.

On July 17, 2012, EDC Quellaapacheta was incorporated in Lima,Peru as a 70% owned

subsidiary of EDC Geotermica Peru S.A.C.

On July 9, 2012, PT EDC Indonesia and PT EDC Panas Bumi Indonesia were incorporated in

Jakarta Pusat, Indonesia as 95% owned subsidiaries of EDC HKL.

- 4 -

EDC Chile Holdings SPA, which was incorporated on January 13, 2012 in Santiago,

Chile, is a wholly owned subsidiary of EDC HKL and is the holding company of EDC

Geotermica Chile, a foreign subsidiary that was also incorporated on January 13, 2012 in

Santiago, Chile.

EWEHI

EWEHI is a holding company incorporated on April 15, 2010. The following entities are the

subsidiaries under EWEHI:

EBWPC is a company incorporated on April 13, 2010 to carry on the general business of

generating, transmitting, and/or distributing energy. EBPWC is currently developing the

86 MW wind energy concession in Burgos, Ilocos Norte.

EPWPC is a company incorporated on February 29, 2012 to carry on the general business of

generating, transmitting, and/or distributing energy.

FG Hydro

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. FG

Hydro operates the 132 MW Pantabangan and Masiway Hydro-Electric Power Plants

(PAHEP/MAHEP) located in Nueva Ecija, Philippines. FG Hydro buys from and sells electricity

to the Wholesale Electricity Spot Market (WESM) and to various privately-owned distribution

utilities (DUs) under the Transition Power Supply Contracts (TPSCs).

EDC Chile Limitada

EDC Chile Limitada is a limited liability company incorporated on February 11, 2010 in Santiago,

Chile with the purpose of exploring, evaluating and extracting any mineral or substance to

generate geothermal energy. On January 10, 2012, the Chilean Ministry of Energy awarded to

EDC the geothermal exploration concession of Newen, while San Rafael and Batea geothermal

exploration concessions were awarded on January 19, 2012.

Corporate Address

In November 2011, the Parent Company changed its corporate address to One Corporate Centre,

Julia Vargas Avenue corner Meralco Avenue, Ortigas Center, Pasig City from Merritt Road, Fort

Bonifacio, Taguig City.

Authorization for Issuance of the Unaudited Interim Condensed Consolidated

Financial Statements

The consolidated financial statements were reviewed and approved by the Audit and Governance

Committee on November 5, 2012.

2. Basis of Preparation

The 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 consolidated financial statements do not include all

of the information and footnotes required in the annual consolidated financial statements, and

should be read in conjunction with the Company’s audited annual consolidated financial

statements as of and for the year ended December 31, 2011.

- 5 -

The unaudited interim condensed consolidated financial statements have been prepared on a

historical cost basis, except for derivative instruments and AFS investments measured at fair

value. The unaudited interim condensed consolidated financial statements are presented in

Philippine peso (Peso), the Parent Company’s functional currency. All values are rounded to the

nearest Peso, except when otherwise indicated.

As of September 30, 2012, the Company did not conduct an evaluation of the impact of the

Philippine Financial Reporting Standards (PFRS) 9, Financial Instruments: Classification and

Measurement, in its financial statements. The Company does not also intend to adopt PFRS 9 in

its December 31, 2012 annual consolidated financial statements. The Company will assess the

impact of PFRS 9 in its financial statements upon completion of all the phases of PFRS 9.

3. Significant Accounting Policies

The accounting policies adopted in the preparation of the unaudited interim condensed

consolidated 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, 2011, except for the following:

Cash flow hedges

Cash flow hedges are hedges of the exposure to variability in cash flows that are attributable to a

particular risk associated with a recognized asset, liability or highly probable forecast transaction

and could affect the consolidated statement of income. The effective portion of the gain or loss on

the hedging instrument is recognized as other comprehensive income (loss) in the “Cumulative

translation adjustments” account in the consolidated statement of financial position while the

ineffective portion is recognized as “Mark-to-market gain (loss) on derivatives” in the

consolidated statement of income.

Amounts taken to other comprehensive income (loss) are transferred to the consolidated statement

of income when the hedge transaction affects profit or loss, such as when hedged financial income

or expense is recognized or when a forecast sale or purchase occurs. Where the hedged item is the

cost of a non-financial asset or liability, the amounts taken to other comprehensive income (loss)

are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction is no longer expected to occur, amounts previously recognized in other

comprehensive income (loss) are transferred to the consolidated statement of income. If the

hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or

if its designation as hedge is revoked, amounts previously recognized in other comprehensive

income (loss) remain in equity until the forecast transaction occurs. If the related transaction is

not expected to occur, the amount is recognized in the consolidated statement of income.

The Company uses cross currency swaps to partially hedge its exposure to foreign currency and

interest rate risks on its floating rate Club Loan that is benchmarked against US LIBOR.

Amended accounting standards effective beginning January 1, 2012

PAS 12, Income Taxes - Recovery of Underlying Assets

The amendment clarified the determination of deferred tax on investment property measured

at fair value. The amendment introduces a rebuttable presumption that deferred tax on

investment property measured using the fair value model in PAS 40, Investment Property,

should be determined on the basis that its carrying amount will be recovered through sale.

- 6 -

Furthermore, it introduces the requirement that deferred tax on non-depreciable assets that are

measured using the revaluation model in PAS 16, Property, Plant and Equipment, always be

measured on a sale basis of the asset. The amendment becomes effective for annual periods

beginning on or after January 1, 2012. The amendment has no impact on the Company’s

financial position or performance.

PFRS 7, Financial Instruments: Disclosures - Enhanced Derecognition Disclosure

Requirements

The amendment requires additional disclosure about financial assets that have been transferred

but not derecognized to enable the user of the Company’s financial statements to understand

the relationship with those assets that have not been derecognized and their associated

liabilities. In addition, the amendment requires disclosures about continuing involvement in

derecognized assets to enable the user to evaluate the nature of, and risks associated with, the

entity’s continuing involvement in those derecognized assets. The amendment becomes

effective for annual periods beginning on or after July 1, 2011. The amendment affects

disclosures only and has no impact on the Company’s financial position or performance.

4. Operating Segment Information

The Company’s operating businesses are organized and managed separately according to the

nature of the products and services provided, with each segment representing a strategic business

unit that offers different products and serves different markets.

The Company’s identified operating segments below are consistent with the segments reported to

the Board of Directors (BOD), which is the Chief Operating Decision Maker (CODM) of the

Company.

a. Electricity segment - This segment pertains to: (1) EDC’s power plants covered mainly by

long-term PPAs with NPC; (2) FG Hydro’s spot sales to the WESM and with various DUs

covered by TPSCs; and (3) GCGI’s sales to WESM and to various NPC-assigned and new

customers covered by Power Supply Contracts and Power Supply Agreements, respectively.

b. Steam segment - This segment relates to EDC’s sale of steam to GCGI and NPC covered by

SSAs.

c. All other segments - This segment relate to segment performing drilling services for Lihir

Gold Ltd. in Papua New Guinea.

The Company has one geographical segment since it derives principally all its revenues from

domestic operations. Revenue from drilling services outside the Philippines is not material.

Management monitors the operating results of the business segments separately for the purpose of

making decisions about resources to be allocated and of assessing performance. Finance costs,

finance income, income taxes and other charges and income are managed on a group basis.

All of the Company’s operations are in the Philippines and revenues generated are from domestic

operations except for revenue included in “All Others” category, which is from drilling services

rendered to Lihir Gold Ltd.

- 7 -

Segment performance is evaluated based on net income (loss) for the period and earnings before

interest, taxes, and depreciation and amortization (EBITDA). Net income (loss) for the period is

measured consistent with consolidated net income (loss) in the unaudited interim condensed

consolidated financial statements. EBITDA is calculated as total revenues minus total operating

expenses except non-cash items such as depreciation and amortization, impairment loss on

property, plant and equipment, and loss on disposal of property, plant and equipment among

others.

NPC is the main customer for the electricity segment which comprised 46% and 57% of the total

electricity revenue for the nine-month periods ended September 30, 2012 and 2011, respectively.

However, following the acquisition by BGI of the BMGPP in September 2010 and the subsequent

rehabilitation of these assets, the Parent Company ceased to bill NPC. In 2011, PSALM approved

the request of EDC to extend the waiver of billings and collections under Bac-Man steam

contracts until: (a) the execution of the deed of assignment from NPC/PSALM to BGI; or (b) such

time that the BMGPP resumes operations.

Financial information on the operating segments are summarized as follows:

Electricity Steam

All Others

Eliminations Total

For the Nine-Month Period

Ended September 30, 2012

Segment revenue from external

customers P=21,442,620,932 P=– P=506,891,671 P=– P=21,949,512,603

Intersegment revenue – 4,338,772,423 – (4,338,772,423) –

Total segment revenue 21,442,620,932 4,338,772,423 506,891,671 (4,338,772,423) 21,949,512,603

Segment expenses (11,943,513,224) (2,846,581,467) (318,524,982) 4,338,772,423 (10,769,847,250)

Segment results P=9,499,107,708 P=1,492,190,956 P=188,366,689 P=– P=11,179,665,353

Unallocated interest expense (2,869,586,587)

Unallocated other income - net 729,766,323

Unallocated income taxes (587,902,043)

Unallocated interest income 274,546,848

Unallocated segment expenses (160,389,784)

Net income P=8,566,100,110

Segment EBITDA P=11,845,717,216 P=1,799,444,650 P=202,542,496 P=– P=13,847,704,362

Unallocated expenses (160,146,867)

Total EBITDA P=13,687,557,495

Electricity Steam All Others Eliminations Total

For the Nine-Month Period

Ended September 30, 2011

Segment revenue from external

customers P=17,699,362,655 P=– P=522,321,326

P=– P=18,221,683,981 Intersegment revenue 200,907,409 4,850,479,463 – (5,051,386,872) –

Total segment revenue 17,900,270,064 4,850,479,463 522,321,326 (5,051,386,872) 18,221,683,981

Segment expenses (17,590,473,162) (2,905,708,162) (489,738,353) 5,051,386,872 (15,934,532,805)

Segment results P=309,796,902 P=1,944,771,301 P=32,582,973 P=– 2,287,151,176

Unallocated interest expense (3,260,238,922)

Unallocated interest income 281,217,028 Unallocated income taxes 162,202,058

Unallocated other income - net 77,627,018

Unallocated segment expenses (35,679,465)

Net loss (P=487,721,107)

Segment EBITDA P=7,770,902,370 P=2,498,249,327 P= 46,545,455 P=– P=10,315,697,152

Unallocated expenses (35,466,346)

Total EBITDA P=10,280,230,806

- 8 -

Electricity Steam All Others

Eliminations Total

As of and for the Nine-Month

Period Ended

September 30, 2012

Segment assets P=61,211,227,207 P=11,102,712,097 P=6,027,696,802 P=– P=78,341,636,106

Unallocated corporate assets 15,951,296,702

Total assets P=94,292,932,808

Segment liabilities P=36,486,322,256 P=19,659,139,521 P=1,882,125,186 P=– P=58,027,586,963

Unallocated corporate liabilities 2,109,119,875

Total liabilities P=60,136,706,838

Capital expenditure P=2,513,893,300 P=1,422,707,665 P=1,056,804,395 P=– P=4,993,405,360

Unallocated capital expenditure 189,704,505

Total capital expenditure P=5,183,109,865

Depreciation and amortization P=2,250,994,788 P=347,635,431 P=14,175,807 P=– P=2,612,806,026

Unallocated depreciation and

amortization

242,917

Total depreciation and

amortization

P=2,613,048,943

Other non-cash items P=94,005,040 (P=40,381,736) P=– P=– P=53,623,304

Unallocated non-cash items –

Total other non-cash items P=53,623,304

Electricity Steam All Others Eliminations Total

As of and for the Year Ended

December 31, 2011

Segment assets P=59,324,793,038 P=12,376,428,799 P=4,066,696,844 P=– P=75,767,918,681

Unallocated corporate assets 14,249,898,103

Total assets P=90,017,816,784

Segment liabilities P=36,727,310,548 P=20,589,217,647 P=1,774,574,665 P=– P=59,091,102,860

Unallocated corporate liabilities 1,280,112,431

Total liabilities P=60,371,215,291

Capital expenditure P=4,674,950,095 P=4,106,780,031 P=158,656,411 P=– P=8,940,386,537

Unallocated capital expenditure 596,087,898

Total capital expenditure P=9,536,474,434

Depreciation and amortization (P=3,035,691,787) (P=386,991,348) (P=18,973,159) P=– (P=3,441,656,294)

Unallocated depreciation and amortization

(218,203)

Total depreciation and amortization (P=3,441,874,497)

Impairment loss P=4,998,608,008 P=– P=– P=– P=4,998,608,008

Other non-cash items (P=305,215,436) (P=340,416,065) (P=198,180) P=– (P=645,829,681)

Unallocated non-cash items 23,722,640

Total other non-cash items (P=622,107,041)

- 9 -

Electricity Steam All Others Eliminations Total

As of and for the Nine-Month Period Ended

September 30, 2011

Segment assets P=58,231,542,841 P=11,011,815,787 P=3,041,279,046 P=– P=72,284,637,674

Unallocated corporate assets 16,013,590,848

Total assets P=88,298,228,522

Segment liabilities P=34,869,479,237 P=18,806,771,286 P=1,527,009,918 P=– P=55,203,260,441

Unallocated corporate liabilities 4,559,746,861

Total liabilities P=59,763,007,302

Capital expenditure P=3,538,611,487 P=2,634,960,944 P=75,204,389 P=– P=6,248,776,820

Unallocated capital expenditure 456,733,819

Total capital expenditure P=6,705,510,639

Depreciation and amortization (P=2,333,866,535) (P=284,737,249) (P=13,962,482) P=– (P=2,632,566,266)

Unallocated depreciation and amortization

(213,119)

Total depreciation and

amortization

(P=2,632,779,385)

Impairment loss (P=4,998,608,008) P=– P=– P=– (P=4,998,608,008)

Other non-cash items (P=276,935,798) (P=329,476,987) (P=198,180) P=– (P=606,610,965)

Unallocated non-cash items 176,717,559

Total other non-cash items (P=429,893,406)

The following table shows the Company’s reconciliation of EBITDA to the consolidated net

income (loss) for the nine-month periods ended September 30, 2012 and 2011.

2012 2011

EBITDA P=13,687,557,495 P=10,280,230,806

Add (Deduct):

Interest expense (Note 18) (2,869,586,587) (3,260,238,922)

Depreciation and amortization (Note 8) (2,613,048,943) (2,632,779,385)

Foreign exchange gains (losses) - net (Note 20) 813,610,472 (48,683,289)

Benefit from (provision for) income tax (587,902,043) 162,202,058

Interest income (Note 19) 274,546,848 281,217,028

Provision for unrecoverable input VAT (Note 17) (148,912,692) (118,281,178)

Reversal of (provision for) impairment of parts and supplies

inventories (Note 17) 93,033,671 (179,794,591)

Derivatives gains - net (Note 24) 1,893,130 107,507,535

Reversal of (provision for) doubtful accounts (Note 17) 646,038 (99,295,933)

Impairment loss on property, plant and equipment of

NNGP (Note 8) – (4,998,608,008)

Miscellaneous income (charges) - net (Note 21) (85,737,279) 18,802,772

Consolidated net income (loss) P=8,566,100,110 (P=487,721,107)

The Parent Company has intersegment revenue from/to GCGI for the sale of steam/electricity.

Intersegment revenues are all eliminated in consolidation. Segment information is measured in

conformity with the accounting policies adopted for preparing and presenting the consolidated

financial statements. Intersegment revenue are made at normal commercial terms and conditions.

Unallocated expenses pertain to expenses of the corporate, technical and administrative support

groups while unallocated corporate assets and liabilities which include among others certain cash

and cash equivalents, property, plant and equipment, parts and supplies inventories, trade and

other payables and retirement and post-employment benefits, pertain to the Head Office and are

managed on a group basis.

- 10 -

5. Cash and Cash Equivalents

September 30,

2012

(Unaudited)

December 31,

2011

(Audited)

September 30,

2011

(Unaudited)

Cash on hand and in banks P=869,621,824 P=692,764,092 P=867,235,811

Cash equivalents 10,501,698,678 11,800,642,871 11,831,946,720

P=11,371,320,502 P=12,493,406,963 P=12,699,182,531

Cash in banks earn interest at the respective bank deposit rates. Cash equivalents consist of

money market placements, which are made for varying periods of up to three months depending

on the immediate cash requirements of the Company.

6. Trade and Other Receivables

September 30,

2012

(Unaudited)

December 31,

2011

(Audited)

September 30,

2011

(Unaudited)

Trade P=4,901,795,739 P=3,336,433,682 P=2,938,731,313

Others:

Loans and notes receivables 72,127,246 59,331,933 28,826,614

Advances to employees 67,875,434 37,934,595 40,864,256

Non-trade accounts receivable 42,219,155 99,398,810 59,552,998

Employee receivables 7,400,307 8,896,656 10,921,652

Claims receivable 177,171 153,322 133,971

Total other receivables 189,799,313 205,715,316 140,299,491

5,091,595,052 3,542,148,998 3,079,030,804

Less allowance for doubtful accounts 43,827,520 130,839,470 129,902,725

P=5,047,767,532 P=3,411,309,528 P=2,949,128,079

Trade receivables are noninterest-bearing and are generally collectible in 30 to 60 days. Majority

of the Company’s trade receivables came from revenues from sale of electricity to NPC.

Provision for doubtful accounts recognized for the nine-month periods ended September 30, 2012

and 2011 amounted to P=0.65 million and P=99.29 million, respectively (see Note 17). As of

September 30, 2012, the Company provided provision for doubtful accounts amounting to P=0.28

million and there was a recognized recovery amounting to P=0.93 million. The Company written

off receivables amounting to P=86.08 million.

- 11 -

7. Parts and Supplies Inventories

September 30,

2012

(Unaudited)

December 31,

2011

(Audited)

September 30,

2011

(Unaudited,

Restated)

On hand:

Drilling tubular products and

equipment spares P=1,730,735,946 P=1,648,876,310 P=1,780,409,804

Power plant spares 674,849,661 718,777,618 744,128,832

Pump, production/steam gathering

system, steam turbine, valves

and valve spares

401,946,971 305,461,738

303,343,921

Electrical, cable, wire product and

compressor spares

102,744,151 83,543,105

83,190,006

Heavy equipment spares 87,936,477 90,293,956 90,646,650

Chemical products, gases and catalyst 96,367,962 113,397,104 133,520,350

Automotive, mechanical, bearing,

seals, v-belt, gasket, tires and

batteries

55,436,648 39,385,963

40,336,562

Construction and hardware supplies,

stationeries and office supplies,

hoses, communication and other

spares and supplies

61,538,168 20,268,296

16,949,069

Measuring instruments, indicators and

tools, safety equipment and

supplies

39,121,898 28,640,098

34,271,503

3,250,677,882 3,048,644,188 3,226,796,697

In transit 95,769,212 307,123,465 236,016,246

P=3,346,447,094 P=3,355,767,653 3,462,812,943

Inventories in transit include items not yet received but ownership or title to the goods has already

been transferred to the Company.

- 12 -

8. Property, Plant and Equipment

September 30, 2012 (Unaudited)

Land Power Plants

Fluid Collection

and Recycling

System (FCRS)

and Production

Wells

Buildings,

Improvements

and Other

Structures

Exploration,

Machinery and

Equipment

Transportation

Equipment

Furniture,

Fixtures and

Equipment

Laboratory

Equipment

Major Spares

and Others

Construction

in-Progress Total

Cost

Balances at January 1, 2012 P=379,809,254 P=37,204,980,737 P=20,651,972,508 P=2,246,291,592 P=4,074,330,782 P=85,355,600 P=659,065,713 P=580,618,276 P=57,649,072 P=9,517,751,749 P=75,457,825,283

Additions 46,219 79,346 59,476,906 149,854,391 955,405,228 24,407,298 160,014,154 31,851,998 75,366,756 3,726,607,569 5,183,109,865

Disposals/Retirements/Write-off – – – (97,659) (9,360,783) (280,022) (956,262) (218,577) (1,387,073) – (12,300,376)

Reclassifications – (2,251,993) 1,832,102,085 66,103,852 5,884,277 – 95,187 (13,202) (42,170,926) (2,294,809,061) (435,059,781)

Balances at September 30, 2012 379,855,473 37,202,808,090 22,543,551,499 2,462,152,176 5,026,259,504 109,482,876 818,218,792 612,238,495 89,457,829 10,949,550,257 80,193,574,991

Accumulated Depreciation and Impairment

Balances at January 1, 2012 17,255,629 7,867,549,819 6,368,571,711 429,037,601 1,949,150,666 34,764,668 347,350,270 172,673,077 3,678,839 590,863,997 17,780,896,277

Depreciation for the year – 1,576,721,824 578,402,432 68,616,691 128,534,111 9,599,192 135,975,566 42,986,988 – – 2,540,836,804

Reversal of impairment – NNGP (Note 8) – (63,614,885) – – – – – – – – (63,614,885)

Disposals/Retirements/Write-off – – – (97,657) (8,321,622) (256,667) (804,211) (218,560) – – (9,698,717)

Reclassifications – (589,306) – 85,764 69,685,852 (568,462) (17,953,006) 48,946 – – 50,709,788

Balances at September 30, 2012 17,255,629 9,380,067,452 6,946,974,143 497,642,399 2,139,049,007 43,538,731 464,568,619 215,490,451 3,678,839 590,863,997 20,299,129,267

Net Book Value P=362,599,844 P=27,822,740,638 P=15,596,577,356 P=1,964,509,777 P=2,887,210,497 P=65,944,145 P=353,650,173 P=396,748,044 P=85,778,990 P=10,358,686,260 P=59,894,445,724

December 31, 2011 (Audited)

Land Power Plants

FCRS and

Production Wells

Buildings,

Improvements

and Other

Structures

Exploration,

Machinery and

Equipment

Transportation

Equipment

Furniture,

Fixtures and

Equipment

Laboratory

Equipment

Major Spares

and Others

Construction

in-Progress Total

Cost

Balances at January 1, 2011 P=333,924,551 P=36,607,352,559 P=17,392,141,146 P=1,798,591,948 P=3,803,840,502 P=67,240,415 P=495,684,907 P=456,421,470 P=53,030,079 P=5,021,702,358 P=66,029,929,.935

Additions 45,884,703 – 344,150,911 419,864,968 278,703,487 36,618,569 210,525,800 132,783,958 44,533,825 8,023,408,213 9,536,474,434

Disposals/Retirements/Write-off – (35,988,750) – (1,094,655) (1,812,341) (1) (1,899,186) (344,455) (583,522) – (41,722,910)

Reclassifications – 633,616,928 2,915,680,451 28,929,331 (6,400,866) (18,503,383) (45,245,808) (8,242,697) (39,331,310) (3,527,358,822) (66,856,176)

Balances at December 31, 2011 379,809,254 37,204,980,737 20,651,972,508 2,246,291,592 4,074,330,782 85,355,600 659,065,713 580,618,276 57,649,072 9,517,751,749 75,457,825,283

Accumulated Depreciation and Impairment

Balances at January 1, 2011 – 4,054,656,189 3,256,620,699 287,626,674 1,462,628,729 42,658,867 233,098,901 89,502,206 – – 9,426,792,265

Depreciation for the year – 2,158,122,126 692,852,385 84,957,014 258,849,165 4,939,887 85,937,845 60,024,918 – – 3,345,683,340

Impairment - NNGP 17,255,629 1,662,635,857 2,419,098,627 56,658,530 141,579,492 8 74,681,583 32,155,446 3,678,839 590,863,997 4,998,608,008

Disposals/Retirements/Write-off – (7,864,353) – (248,578) (1,805,755) – (1,667,039) (344,417) – – (11,930,142)

Reclassifications – – – 43,961 87,899,035 (12,834,094) (44,701,021) (8,665,076) – – 21,742,805

Balances at December 31, 2011 17,255,629 7,867,549,819 6,368,571,711 429,037,601 1,949,150,666 34,764,668 347,350,269 172,673,077 3,678,839 590,863,997 17,780,896,276

Net Book Value P=362,553,625 P=29,337,430,918 P=14,283,400,797 P=1,817,253,991 P=2,125,180,116 P=50,590,932 P=311,715,444 P=407,945,199 P=53,970,233 P=8,926,887,752 P=57,676,929,006

- 13 -

September 30, 2011 (Unaudited)

Land Power Plants

FCRS and

Production Wells

Buildings,

Improvements

and Other

Structures

Exploration,

Machinery and

Equipment

Transportation

Equipment

Furniture,

Fixtures and

Equipment

Laboratory

Equipment

Major Spares

and Others

Construction

in-Progress Total

Cost

Balance at January 1, 2011 P=333,924,551 P=36,607,352,559 P=17,392,141,146 P=1,798,591,947 P=3,803,840,502 P=67,240,415 P=495,684,907 P=456,421,470 P=53,030,079 P=5,021,702,358 P=66,029,929,934

Additions 45,830,894 – 304,026,186 63,450,924 132,833,294 27,175,690 40,691,336 76,718,133 – 6,318,810,368 7,009,536,825

Retirements/Write-off – – – (1,715,314) (5,374,487) (12,290,078) (43,020,199) (7,356,762) 5,849,270 – (63,907,570)

Reclassifications – 464,280,905 2,259,773,591 (9,712,761) (2,797,306) – (2,246,613) – – (2,722,252,895) (12,955,079)

Balance at September 30, 2011 379,755,445 37,071,633,464 19,955,940,923 1,850,614,796 3,928,502,003 82,126,027 491,109,431 525,782,841 58,879,349 8,618,259,831 72,962,604,110

Accumulated Depreciation and Impairment

Balance at January 1, 2011 – 4,054,656,188 3,256,620,699 287,626,673 1,462,628,729 42,658,867 233,098,900 89,502,206 – – 9,426,792,262

Depreciation for the period – 1,629,459,886 549,267,144 74,084,146 201,702,714 8,241,072 59,023,982 38,857,074 – – 2,560,636,018

Impairment – NNGP 17,255,629 1,662,635,857 2,419,098,627 56,658,530 141,579,492 8 74,681,583 32,155,446 3,678,839 590,863,998 4,998,608,009

Retirements/Write-off – – – (935,986) (5,318,755) (12,290,059) (38,107,689) (6,641,034) (7,154) – (63,300,677)

Reclassifications – – – (846,041) 76,772,009 (8,766) (4,282,164) (534,872) – – 71,100,166

Balance at September 30, 2011 17,255,629 7,346,751,931 6,224,986,470 416,587,322 1,877,364,189 38,601,122 324,414,612 153,338,820 3,671,685 590,863,998 16,993,835,778

Net Book Value P=362,499,816 P=29,724,881,533 P=13,730,954,453 P=1,434,027,474 P=2,051,137,814 P=43,524,905 P=166,694,819 P=372,444,021 P=55,207,664 P=8,027,395,833 P=55,968,768,332

Impairment Assessment of Northern Negros Geothermal Plant (NNGP)

In 2011, after the five-month shutdown of the NNGP since November 22, 2010, the NNGP was operated during April to June to complete the geothermal

resource testing. Based on the subsequent technical assessment, EDC has come to a conclusion that the sustainable operation of NNGP is only at 5-10 MW.

The Company evaluates the assets on a CGU basis for any indication of impairment at each financial reporting date. The Company assessed that there

continues to be an indication of impairment for NNGP and based on its impairment testing, recognized an impairment loss of P=4,998.6 million in June 2011.

In February 2012, EDC transferred vacuum pumps from NNGP to the Palinpinon Power Plant owned by GCGI. Since these transferred assets can still be

utilized and were included in the CGU of the Palinpinon Power Plant, the Company recognized a corresponding reversal of impairment loss amounting to

P=63.6 million, representing the net book value of the assets transferred had no impairment loss been previously recognized (Note 21).

Estimated Rehabilitation and Restoration Costs

FCRS and production wells include the estimated rehabilitation and restoration costs of the Company’s steam fields and power plants’ contract areas at the

end of the contract period. These costs, net of accumulated amortization, amounted to P=356.81 million and P=311.98 million as of September 30, 2012 and

December 31, 2011, respectively. As of September 30, 2012, December 31, 2011, and September 30, 2011, the provision for rehabilitation costs presented

under “Provision and other long-term liabilities” amounted to P=489.69 million, P=406.78 million and P=358.60, respectively.

- 14 -

Details of depreciation and amortization charges recognized in the consolidated statements of income are shown below:

September 30,

2012

(Unaudited)

December 31,

2011

(Audited)

September 30,

2011

(Unaudited)

Property, plant and equipment P=2,540,836,804 P=3,345,683,340 P=2,560,636,018

Water rights and other amortization (Note 9) 72,212,139 96,191,157 72,143,367

P=2,613,048,943 P=3,441,874,497 P=2,632,779,385

Cost of sales of electricity (Note 15) P=2,350,787,368 P=3,173,306,732 P=2,443,518,576

Cost of drilling services (Note 16) 860,429 1,110,041 652,487

General and administrative expenses (Note 17) 261,401,146 267,457,724 188,608,322

P=2,613,048,943 P=3,441,874,497 P=2,632,779,385

- 15 -

9. Intangible Assets

September 30, 2012 (Unaudited)

Goodwill Water Rights

Other

Intangible Asset Total

Cost

Balances at January 1, 2012 P=2,535,051,530 P=2,404,778,918 P=258,394,939 P=5,198,225,387

Additions – – 122,215,985 122,215,985

Balances at September 30, 2012 2,535,051,530 2,404,778,918 380,610,924 5,320,441,372

Accumulated Amortization

Balances at January 1, 2012 – 492,979,679 – 492,979,679

Amortization (Note 8) – 72,143,368 – 72,143,368

Balances at September 30, 2012 – 565,123,047 – 565,123,047

Net Book Value P=2,535,051,530 P=1,839,655,871 P=380,610,924 P=4,755,318,325

December 31, 2011 (Audited)

Goodwill Water Rights

Other

Intangible Asset Total

Cost

Balances at January 1, 2011 P=2,535,051,530 P=2,404,778,918 P=– P=4,939,830,448

Additions – – 258,394,939 258,394,939

Balances at December 31, 2011 2,535,051,530 2,404,778,918 258,394,939 5,198,225,387

Accumulated Amortization

Balances at January 1, 2011 – 396,788,522 – 396,788,522

Amortization (Note 8) – 96,191,157 – 96,191,157

Balances at December 31, 2011 – 492,979,679 – 492,979,679

Net Book Value P=2,535,051,530 P=1,911,799,239 P=258,394,939 P=4,705,245,708

September 30, 2011 (Unaudited)

Goodwill Water Rights

Other

Intangible Asset Total

Cost

Balances at January 1, 2011 P=2,535,051,530 P=2,404,778,918 P=– P=4,939,830,448

Additions – – 233,152,862 233,152,862

Balances at September 30, 2011 P=2,535,051,530 P=2,404,778,918 233,152,862 5,172,983,310

Accumulated Amortization

Balances at January 1, 2011 – 396,788,522 – 396,788,522

Amortization (Note 8) – 72,143,367 – 72,143,367

Balances at September 30, 2011 – 468,931,889 – 468,931,889

Net Book Value P=2,535,051,530 P=1,935,847,029 P=233,152,862 P=4,704,051,421

Water rights are amortized using the straight-line method over 25 years, which is the term of the

Agreement between FG Hydro and National Irrigation Administration. The remaining

amortization period of water rights is 19.1 years as of September 30, 2012.

Other intangible asset pertains to the Company’s wind energy project development costs.

- 16 -

10. Other Noncurrent Assets

September 30,

2012

(Unaudited)

December 31,

2011

(Audited)

September 30,

2011

(Unaudited)

Input value-added tax (VAT) P=4,140,435,487 P=3,270,286,773 P=2,850,768,215

Tax credit certificates 1,540,884,449 1,338,884,447 1,038,884,446

AFS investments 616,724,456 20,443,924 20,816,362

Special deposits and funds 262,850,225 123,278,392 116,238,764

Long-term receivables 79,624,273 81,561,056 59,670,238

Prepaid expenses 12,141,171 12,246,824 15,295,942

Others 39,573,941 27,670,094 33,136,564

6,692,234,002 4,874,371,510 4,134,810,531

Less allowance for doubtful

accounts

570,617,355 422,722,403

232,638,218

P=6,121,616,647 P=4,451,649,107 P=3,902,172,313

Provision for unrecoverable input VAT and long-term receivables amounted to P=147.30 million

and P=118.28 million for the nine-month periods September 30, 2012 and 2011, respectively

(Note 17).

11. Trade and Other Payables

September 30,

2012

(Unaudited)

December 31,

2011

(Audited)

September 30,

2011

(Unaudited)

Accounts payable:

Third parties P=5,752,346,012 P=4,653,828,081 P=3,740,421,507

Related parties (Note 23) 219,458,193 145,143,240 101,772,180

Accrued interest and guarantee fees 1,180,882,817 1,047,605,943 1,274,550,117

Withholding and other taxes payable 310,212,375 328,466,441 106,774,803

SSS and other contributions payable 2,739,510 1,893,569 2,393,612

Deferred credits 19,869,446 22,095,129 11,963,286

Other payables 444,727,016 505,042,858 117,149,143

P=7,930,235,369 P=6,704,075,261 P=5,355,024,648

Accounts payable are noninterest-bearing and are normally settled on a 30 to 60 days payment

term.

Accrued interest represents interest accrual on outstanding long-term debts.

- 17 -

12. Long-term Debts

September 30,

2012

(Unaudited)

December 31,

2011

(Audited)

September 30,

2011

(Unaudited)

US Dollar-denominated debts P=19,577,815,395 P=13,003,311,706 P=20,480,107,578

Peso-denominated debts 30,105,082,674 38,466,007,305 31,250,424,758

Japanese Yen-denominated debts – 20,252,444 20,492,843

49,682,898,069 51,489,571,455 51,751,025,179

Less current portion 1,610,673,813 2,249,517,382 2,055,224,478

Noncurrent portion P=48,072,224,256 P=49,240,054,073 P=49,695,800,701

Issuance of Fixed Rate Note (FXCN) and Prepayment of Fixed Rate Corporate Note (FRCN)

On April 4, 2012, EDC signed a 10-year FXCN facility agreement amounting to P=7,000.0 million.

EDC used the proceeds to pay in full its existing FRCN loan. On April 4, 2012, EDC prepaid

series one and three for P=1,774.3 million and P=1,007.1 million, respectively. Subsequently, on

May 3, 2012, the FRCN series two was also prepaid for P=4,211.1 million. The extinguished

FRCN series one and three loans were originally scheduled to mature in July 2014 while the

extinguished FRCN series two was originally scheduled to mature in July 2016.

EDC recognized loss amounting to P=114.68 million arising from early extinguishment of debt

(Note 21).

Debt issuance costs amounting to P=86.05 million was capitalized as part of the new FXCN.

Overseas Economic Cooperation Fund (OECF)

On April 8, 2011, the Parent Company prepaid the JP¥8.1 billion (P=4,260.6 million) 21st Yen loan

with Japan International Cooperation Agency (JICA), a successor institution of the OECF (Japan).

The 21st Yen loan was originally scheduled to mature in March 2027.

On June 10, 2011, the Parent Company prepaid the OECF 19th Yen loan balance of JP¥218.6

million (P=117.4 million) originally scheduled to mature in December 2024. On June 17, 2011, the

Company fully settled its OECF 9th Yen loan of JP¥207.7 million (P=111.5 million).

On July 20, 2011, the Parent Company prepaid the OECF 18th Yen loan balance of JP¥45.3

million (P=24.3 million) originally scheduled to mature in January 2023.

On January 31, 2012, EDC fully settled its matured JP¥1.5 billion OECF 8th Yen loan amounting

to P=20.25 million.

US$300.0 million Notes

On January 20, 2011, EDC issued a 10-year US$300.0 million Notes (P=13,350.0 million) at 6.50%

interest per annum which will mature in January 2021. The notes are intended to be used by the

Parent Company to support the business expansion plans, finance capital expenditures, service

debt obligations and for general corporate purposes.

International Finance Corporation (IFC)

On May 20, 2011, the Parent Company signed a 15-year US$75.0 million loan facility with the

IFC to fund its medium-term capital expenditures program. The loan was drawn in Peso on

September 30, 2011 amounting to P=3,262.5 million. The loan is payable in 24 equal semi-annual

installments after a three-year grace period at an interest rate of 6.657% per annum.

- 18 -

Syndicated Loan Facility

On June 17, 2011, the Parent Company entered into a credit agreement for US$175.00 million

(P=7,630.00 million) syndicated term loan facility (Club Loan) with Australia New Zealand

Banking Group Limited, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Chinatrust (Philippines)

Commercial Banking Corporation, ING Bank N.V., Manila Branch, Maybank Group, Mizuho

Corporate Bank, Ltd., and Standard Chartered Bank as Mandated Lead Arrangers and

Bookrunners, and Standard Chartered Bank as Facility Agent. The purpose of the Club Loan is to

refinance the old US$175.00 million syndicated term loan which was availed on June 30, 2010

scheduled to mature on June 30, 2013. The Club Loan, which was fully drawn as of agreement

date, bears interest based on the prevailing LIBOR plus spread of 175 basis points. The prevailing

LIBOR shall be based on term of 1-month, 3-month or 6-month depending on what interest reset

frequency EDC selects at the end of each term. The Club Loan will mature on June 17, 2017.

FG Hydro Loan

On May 7, 2010, FG Hydro signed a loan agreement for a 10-year P=5,000.0 million loan with

PNB and Allied Bank, maturing on May 7, 2020. The loan is secured by a Real Estate and Chattel

mortgages on all present and future mortgageable assets of FG Hydro. The loan carries an interest

rate of 9.025% subject to re-pricing after five years. Loan repayment is semi-annual based on

increasing percentages yearly as set forth in Schedule 3 of the loan agreement with the first

payment made on November 8, 2010. The loan proceeds was used to finance the full payment of

the Deferred Payment Facility and the PRUP, and fund general corporate and working capital

requirements of FG Hydro.

13. Royalty Fee Payable

September 30,

2012

(Unaudited)

December 31,

2011

(Audited)

September 30,

2011

(Unaudited)

Due to DOE and Local

Government Units (LGUs) P=65,078,884 P=287,626,313 P=363,833,156

Less current portion 65,078,884 287,626,313 315,514,708

Noncurrent portion P=– P=– P=48,318,448

As discussed in Note 1 under “Nature of Operations”, the Parent Company entered into five GSCs

with the DOE, which granted the Company the right to explore, develop, and utilize the country’s

certain geothermal resources subject to sharing of net proceeds with the Philippine Government.

The Parent Company pays royalty fees to the DOE and LGUs under these agreements.

On May 8, 2012, GCGI entered into two Geothermal Operating Contracts, wherein GCGI will

have the right to operate the geothermal power plants under the Republic Act No. 9136 through a

Renewable Energy Operating Contract.

14. Equity

As required under the Philippine Constitution, the Parent 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. The

Parent Company is compliant with the said nationality requirement.

- 19 -

Beginning December 13, 2006, the 15.0 billion common shares of EDC were listed and traded on

the PSE at an Initial Public Offering (IPO) price of P=3.20 per share. After the initial IPO, there are

no subsequent listings of shares by the Parent Company.

The combined interest of Red Vulcan entitles it to 60% voting interest and 40% economic interest

in EDC.

The ownership of the Parent Company’s preferred shares is limited to Filipino citizens. The

preferred shares have voting rights and subject to 8% cumulative interest. Red Vulcan holds the

entire 9.4 billion preferred shares equivalent to 20% voting interest in EDC. The common shares

are majority held by Filipinos, with Red Vulcan holding 7.5 billion shares or an equivalent of 40%

voting and economic interest.

Issued and outstanding preferred and common shares as of September 30, 2012 and 2011, and

December 31, 2011 are as follows:

Number of Shares

Preferred stock - P=0.01 par value per share

Authorized 15,000,000,000

Issued and outstanding 9,375,000,000

Common stock - P=1 par value per share

Authorized 30,000,000,000

Issued and outstanding 18,750,000,000

The number of stockholders of the Parent Company as of September 30, 2012 and 2011, and

December 31, 2011 are as follows:

September 30,

2012

December 31,

2011

September 30,

2011

Preferred shares 1 1 1

Common shares 700 702 704

Retained Earnings

On September 5, 2012, the BOD of the Parent Company declared a cash dividend of P=0.04 per

share in favor of all common stockholders of record as of September 20, 2012, payable on or

before September 30, 2012 amounting to P=750.0 million.

On March 13, 2012, the BOD of the Parent Company approved the following cash dividends in

favor of all stockholders of record as of March 28, 2012 and payable on or before April 24, 2012:

cash dividend of P=0.0008 per share on the preferred shares totaling P=7.5 million

cash dividend of P=0.10 per share on the common shares totaling P=1,875.0 million

On March 15, 2011, the BOD of the Parent Company approved the following cash dividends in

favor of all stockholders of record as of March 29, 2011 and payable on or before April 22, 2011:

cash dividend of P=0.0008 per share on the preferred shares totaling P=7.5 million

cash dividend of P=0.16 per share on the common shares totaling P=3,000.0 million

- 20 -

NCI

On May 9, 2011, the Philippine SEC approved the amendment of the articles of incorporation of

FG Hydro reclassifying the unissued redeemable preferred shares into redeemable preferred

A & B shares. Included in the features of the preferred shares Series B is that it shall earn

cumulative dividends for each year during the period commencing January 1, 2009 and ending on

December 31, 2013, as may be declared and paid from time to time in amounts and on such dates

as may be declared by FG Hydro’s BOD, subject to the availability of FG Hydro’s retained

earnings. As a result of the issuance of the preferred “A” & “B” shares, P=200.3 million was

reallocated from retained earnings to non-controlling interest pertaining to the net income

allocable to First Gen for the period prior to January 1, 2011.

In June 2011, FG Hydro declared and paid cash dividends to its preferred shares amounting to

P=333.8 million.

In March and May 2012, FG Hydro declared and paid cash dividends to its preferred and common

shares amounting to P=88.5 million and P=1,254.0 million, respectively.

15. Cost of Sales of Electricity

September 30,

2012

(Unaudited)

September 30,

2011

(Unaudited)

Depreciation and amortization (Notes 8 and 23) P=2,350,787,368 P=2,443,518,576

Personnel costs 1,341,373,227 1,109,950,555

Purchased services and utilities 1,297,632,077 1,331,083,734

Repairs and maintenance 928,068,323 1,021,112,424

Rental, insurance and taxes 762,544,021 684,920,386

Parts and supplies issued 696,039,813 649,517,729

Royalty fees 135,336,974 152,686,774

Business and related expenses 76,659,957 47,722,182

Proceeds from insurance claims (85,903,337) –

P=7,502,538,423 P=7,440,512,360

16. Cost of Drilling Services

September 30,

2012

(Unaudited)

September 30,

2011

(Unaudited)

Purchased services and utilities P=201,268,689 P=291,844,580

Rental, insurance and taxes 53,426,227 31,552,795

Parts and supplies issued 29,122,478 50,996,386

Repairs and maintenance 9,833,145 43,595,486

Business and related expenses 4,400,814 28,231,942

Depreciation (Note 8) 860,429 652,487

Personnel costs 299,125 17,516,112

P=299,210,907 P=464,389,788

- 21 -

p

17. General and Administrative Expenses

September 30,

2012

(Unaudited)

September 30,

2011

(Unaudited)

Personnel costs P=940,919,078 P=1,041,792,389

Purchased services and utilities 776,544,260 669,624,444

Rental, insurance and taxes 613,449,773 361,716,170

Business and related expenses 332,632,045 244,700,213

Depreciation and amortization (Note 8) 261,401,146 188,608,322

Provision for unrecoverable input VAT and long-

term receivables (Note 10) 148,912,691 118,281,178

Parts and supplies issued 115,213,414 123,173,516

Provision for (reversal of) impairment of parts and

supplies inventories (Note 7) (93,033,671) 179,794,591

Repairs and maintenance 33,095,006 39,715,358

Provision (reversal) for doubtful accounts (Notes 4

and 6) (646,038) 99,295,933

P=3,128,487,704 P=3,066,702,114

18. Interest Expense

September 30,

2012

(Unaudited)

September 30,

2011

(Unaudited)

Interest on long-term debts including amortization

of transaction costs P=2,831,465,221 P=3,173,685,505

Interest accretion on provision for rehabilitation

and restoration costs 21,276,043 54,192,779

Interest accretion of “Day 1” gain 10,190,075 25,361,786

Interest on liability from litigation 6,655,248 5,858,330

Interest on loans payable – 1,140,522

P=2,869,586,587 P=3,260,238,922

19. Interest Income

September 30,

2012

(Unaudited)

September 30,

2011

(Unaudited)

Interest on cash equivalents P=223,506,839 P=266,121,000

Interest on overdue accounts/others 42,828,178 11,144,541

Interest on savings/current accounts 3,016,569 3,951,487

Interest accretion of “Day 1” loss on security deposit 818,786 – Others 4,376,476 –

P=274,546,848 P=281,217,028

- 22 -

20. Foreign Exchange Gains (Losses) - net

September 30,

2012

(Unaudited)

September 30,

2011

(Unaudited)

Foreign exchange gains on long-term debts P=981,827,599 P=504,188,449

Foreign exchange losses on other accounts (168,217,127) (552,871,738)

P=813,610,472 (P=48,683,289)

This account pertains to foreign exchange adjustments realized on repayment of loans and

restatement of outstanding balances of foreign currency-denominated loans, short-term placements

and cash in banks. The following table shows the exchange rates used to restate outstanding

balances at financial reporting dates:

Equivalent to US$1.00

Currency September 30,

2012

December 31,

2011

September 30,

2011

Japanese Yen 77.61 77.912 76.787

Philippine Peso 41.70 43.840 43.720

21. Miscellaneous Income (Charges)

September 30,

2012

(Unaudited)

September 30,

2011

(Unaudited)

Loss on debt extinguishment (Note 12) (P=114,683,892) P=–

Recovery of impairment loss on property, plant and

equipment (Note 8) 63,614,885 – “Day 1” loss on security deposit – (6,078,723)

Others (34,668,272) 24,881,495

(P=85,737,279) P=18,802,772

22. Earnings (Loss) Per Share (EPS)

September 30,

2012

(Unaudited)

September 30,

2011

(Unaudited)

(a) Net income (loss) attributable to equity holders

of the Parent Company P=7,105,782,444 (P=670,221,100)

Less dividends on preferred shares 7,500,000 7,500,000

(b) Net income attributable to common shareholders

of the Parent Company P=7,098,282,444 (P=677,721,100)

(c) Weighted average number

of common shares outstanding 18,750,000,000 18,750,000,000

Basic/diluted earnings (loss) per share (b/c) P=0.379 (P=0.036)

- 23 -

The Parent Company does not have dilutive common stock equivalents as of September 30, 2012

and 2011, and December 31, 2011.

23. 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 nine-month

periods ended September 30, 2012 and 2011.

a. Thermaprime Well Services, Inc. (Thermaprime)

Thermaprime is a subsidiary of First Balfour, a wholly owned subsidiary of First Holdings.

Thermaprime provides drilling services such as, but not limited to, rig operations, rig

maintenance, well design and engineering.

b. First Balfour, Inc. (First Balfour)

First Balfour is a wholly owned subsidiary of First Holdings. In 2011, the Company awarded

to First Balfour procurement contracts for various works such as Palinpinon 1 zero condensate

disposal system, civil, structural and mechanical/ piping works in Leyte and Bac-Man, and

refurbishment of BGI’s geothermal power plants.

c. First Gen

First Gen provides financial consultancy, business development and other related services to

the Parent Company under a consultancy agreement beginning September 1, 2008. Such

agreement is for a period of three years up to August 31, 2011. Under the terms of the

agreement, billings for consultancy services shall be P=8.70 million per month plus applicable

taxes. This was increased to P=11.80 million per month plus applicable taxes effective

September 2009 to cover the cost of additional officers and staff assigned to the Parent

Company. The consultancy agreement was subsequently extended for another 16 months

from September 1, 2011 to December 31, 2012. Total consultancy services amounted to

P=124.10 million and P=119.52 million for the nine-month periods ended September 30, 2012

and 2011, respectively and were included in the “Cost of sales of electricity” under

“Purchased services and utilities” (see Note 15).

In 2012, EDC purchased shares of common stock of First Gen classified under AFS

investments. As of September 30, 2012, such AFS investments amounted to P=108.3 million.

d. IFC

On May 20, 2011, the Parent Company signed a 15-year US$75.0 million loan facility with

IFC, a shareholder of the Parent Company. IFC has approximately 5% ownership interest in

the Parent Company. The loan was drawn in Peso on September 30, 2011, amounting to

P=3,262.5 million. As of September 30, 2012 and December 31, 2011, the outstanding balance

of the loan amounting to P=3,201.29 million and P=3,196.11 million, respectively, is included

- 24 -

under the “Long-term debts” account in the unaudited interim consolidated statements of

financial position (see Note 12).

On November 27, 2008, the Parent Company entered into a loan agreement with IFC for

US$100.0 million. On January 7, 2009, the Parent Company opted to draw the loan in Peso

and received the proceeds amounting to P=4,048.75 million, net of P=51.25 million front-end

fee. As of September 30, 2012 and December 30, 2011, the outstanding loan amounted to

P=3,706.44 million and P=3,871.27 million, respectively.

e. Other Related Parties

In the ordinary course of business, the Company avails of or grants advances from/to its

related parties for working capital requirements. Such advances are payable/collectible within

12 months and are non-interest bearing.

Following are the other related parties identified by the Company:

i. Bauang Private Power Corporation is a subsidiary of First Private Power Corporation,

an associate of First Gen. First Gas Holdings Corporation and First Gas Power

Corporation are subsidiaries of First Gen. First Holdings, parent company of First

Gen, is an associate of Lopez Holdings Corporation (formerly Benpres Holdings

Corporation).

ii. Bayan Telecommunications Inc. (Bayantel) is 97.3%-owned by Bayantel Holdings on

which Lopez Holdings Corporation has 47.3% ownership.

iii. Sky Cable Corporation (Sky Cable) is 80.72%-owned by ABS-CBN Corp. on which

Lopez Holdings Corporation has 57.3% interest. ABS-CBN Publishing, Inc. is a

wholly owned subsidiary of ABS-CBN Corp.

iv. Rockwell Land Corporation is 51% owned by Meralco, which is 6.6% owned by First

Holdings.

v. First Electro Dynamics Corporation (FEDCOR) is a wholly owned subsidiary of First

Holdings.

vi. Adtel Inc. is a wholly owned Lopez Incorporated entity.

vii. Lopez Group Foundation, Inc. is the coordinative hub for the corporate social

responsibility initiatives of Lopez Holdings Corporation.

viii. First Philec Manufacturing Technologies Corp., Securities Transfer Services, Inc. and

First Philippine Realty Corp. (FPRC), formerly known as INAEC Development Corp,

are wholly owned subsidiaries of First Holdings.

ix. First Philippine Industrial Corp. is 60% owned by First Holdings.

- 25 -

Following are the amounts of related party transactions for the periods ended September 30, 2012

and 2011, and the outstanding balances as of September 30, 2012 and 2011, and

December 31, 2011:

Transactions for the nine-

month periods ended September 30

Net amounts due from/to related parties

Related Party Nature of Transaction 2012

(Unaudited)

2011 (Unaudited)

September 30,

2012

(Unaudited)

December 31,

2011 (Audited)

September 30,

2011 (Unaudited)

Due from related parties

First Balfour, Inc. Interest-free advances P=– P=595,836 P=– P=– P=595,836

First Gen Interest-free advances – 3,437 – 3,437 3,437 First Gen Northern Energy

Corp.

Interest-free advances – 2,511 – 2,511 2,511

First GES Interest-free advances – 1,864 – 1,864 1,864

P=– P=603,648 P=– P=7,812 P=603,648

Due to related parties

First Gen Consultancy fee P=124,102,856 P=119,527,059 P=40,719,463 P=53,863,530 P=38,731,765

Interest-free advances 13,108,329 52,575,456 2,162,575 6,061,620 7,295,007 Eugenio Lopez Foundation Interest-free advances 1,095,000 2,400,000 – – –

First Gas Power Corporation Interest-free advances 117,182 525,690 8,600 165,675 361,450 Bauang Private Power

Corporation

Interest-free advances 57,330 – – – –

Lopez Group Foundation, Inc.

Interest-free advances – 498,400 – – –

First Gas Holdings

Corporation

Interest-free advances – 767,900 – – –

P=138,480,697 P=176,294,505 P=42,890,638 P=60,090,825 P=46,388,222

Trade and other payables

Thermaprime Work fees 889,589,364 694,231,740 110,233,783 P=101,171,006 93,181,809 First Balfour, Inc. Refurbishment of BMGPP

and ancillary facilities 72,812,561 147,798,460 98,525,289 38,989,273 5,862,855

First Philec Manufacturing Technologies Corp.

Purchase of services and utilities 3,750,000 – 3,247,481 – –

Adtel Inc. Purchase of services and

utilities 3,272,208 – 1,452,277 – – First Electro Dynamics

Corporation

Purchase of services and

utilities 2,930,000 – – – –

ABS-CBN Publishing, Inc. Purchase of services and utilities 1,284,110 – – – –

FPRC Purchase of services and

utilities 1,143,464 1,848,760 292,800 458,150

Bayantel

Purchase of services and

utilities 644,547 6,658,196 5,667,193 4,524,811 2,727,516

Securities Transfer Services, Inc.

Purchase of services and utilities 107,520 – 39,370 – –

Rockwell Land Corporation Purchase of services and

utilities 70,000 – – – – ABS-CBN Corp. Purchase of services and

utilities 8,878 – – – –

First Philippine Industrial Corporation

Purchase of services and utilities 1,488 – – – –

Sky Cable Purchase of services and

utilities – 25,182 – – –

P=975,614,140 P=850,562,338 P=219,458,193 P=145,143,240 P=101,772,180

Long-term debt

IFC Interest-bearing loans P=392,033,941 P=– P=6,907,726,314 P=7,067,386,686 7,234,328,541

The purchases from related parties are made at normal commercial terms and conditions. The

amounts outstanding are unsecured and will be settled in cash. Except for the US$80.0 million

- 26 -

letters of credit issued by the Parent Company in favor of EDC Chile Limitada, there were no

guarantees that have been given to and/or received from any related party in 2012 and 2011.

The Company did not recognize any impairment loss on receivables from related parties for the

nine-month periods ended September 30, 2012 and 2011.

24. Financial Risk Management Objectives and Policies

The Company’s financial instruments consist mainly of cash and cash equivalents, AFS

investments and long-term debts. The main purpose of these financial instruments is to finance

the Company’s operations. The Company has other various financial assets and liabilities such as

trade receivables, trade payables and other liabilities, which arise directly from operations.

Overview of the Company’s Risk Management

The Company has an Enterprise Risk Management (ERM) System in place covering all areas of

its organization, and it is aligned with ISO 31000:2009 (Risk Management - Principles and

Guidelines).

The risk management process involves a systematic application of management policies,

procedures, and practices to the activities of communicating, consulting, establishing the context,

and identifying, analyzing, evaluating, treating, monitoring, and reviewing risk. It is aligned and

integrated in the Company’s business model through the annual Strategy Execution Process which

integrates strategic planning, balanced scorecard, risk management, budget and performance

management processes.

The implementation of the Company’s ERM System provides the following benefits and

advantages:

a. Proactively identifies and manages the key exposures of the Company to protect corporate

assets and profits by identifying and preventing risks before they occur. Thus, it helps avoid

losses which can impair the operations or financial position of the Company in case of

fortuitous events;

b. Identifies and exploits areas of “risk-based advantage”;

c. Provides management at all levels with the required information to make informed decisions on

issues critical to the success of the business and its projects;

d. Establishes the accountability of risk owners in the management of risks;

e. Provides balance in the management of risks and an objective basis for allocating resources;

f. Ensures that efforts and initiatives are well-coordinated so that the Company does not manage

risks in silo;

g. Monitors the implementation and effectiveness of the risk treatment options;

h. Ensures compliance with the policies and processes that are established to manage risks; and

i. Reduces the reliance on increasingly expensive insurance protection. Insurance may provide

the financial relief in case of loss. However, certain risks are not insurable, while some though

insurable, may be too costly and uneconomical to insure.

Risk Assessment

One major activity in the Company’s ERM System is the risk assessment. It is the overall process

of risk identification, risk analysis, and risk evaluation (ISO 31000:2009). It is performed at the

project level by project teams, at the operational level by the line and middle management, at the

executive level by the Management Committee, and at the strategic level by the BOD through its

Risk Management Committee.

- 27 -

Risk Treatment

Risk management strategies and action plans are formulated once the risks have been evaluated

and the top risks have been identified. Risk treatment is a process to modify risk (ISO

Guide 73:2009) and is synonymous with risk mitigation, risk elimination, risk prevention, and risk

reduction. It can involve:

a. Avoiding the risk by deciding not to start or continue with the activity that gives rise to the

risk;

b. Taking or increasing risk in order to pursue an opportunity;

c. Removing the risk source;

d. Changing the likelihood;

e. Changing the consequences;

f. Sharing the risk with another party or parties (including contracts and risk financing); and

g. Retaining the risk by informed decision.

Financial Risk Management Policy

The main financial risks arising from the Company’s financial instruments are credit risk, foreign

currency risk, interest rate risk, equity price risk and liquidity risk. The Company’s policies for

managing the aforementioned risks are summarized hereinafter below.

Credit Risk

Credit risk is the risk that the Company will incur a loss arising from customers, clients or

counterparties that fail to discharge their contracted obligations.

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 Company does not hold any collateral from its trade receivables hence, its

maximum exposure to credit risk on these trade receivables equals its carrying amount.

With respect to the credit risk arising from other financial assets of the Company, which comprise

of cash and cash equivalents excluding cash on hand, other receivables, amounts due from related

parties and AFS investments in debt securities, 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.

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.

- 28 -

The following tables below show the Company’s aging analysis of past due but not impaired

financial assets as of September 30, 2012 and 2011, and December 31, 2011:

September 30, 2012 (Unaudited)

Past Due but Not Impaired

Neither Past

Due nor

Impaired

Less than

30 Days

31 Days

to 1 Year

Over 1 Year

up to

3 Years

Over

3 Years

Past

Due and

Impaired Total

(In Thousand Pesos)

Loans and receivables:

Cash and cash

equivalents (excluding cash on

hand) P=11,365,569 P=– P=– P=– P=– P=– P=11,365,569

Trade receivables 4,105,201 221,398 481,369 50,000 43,828 4,901,796

Long-term receivables 16,964 – – – – 62,660 79,624

Loans and notes

receivables 52,208 8,044 7,148 4,727 – – 72,127

Advances to employees 58,120 5,430 2,183 2,142 – – 67,875

Non-trade receivables 11,679 19,093 11,447 – – 42,219

Employee receivables* 15,640 – – – – – 15,640

AFS investments:

Debt investments 622,107 – – – – – 622,107

Total P=16,247,488 P=253,965 P=502,147 P=56,869 P=– P=106,488 P=17,166,957

*Includes noncurrent portion of employee receivables under other noncurrent assets.

December 31, 2011 (Audited)

Past Due but Not Impaired

Neither Past Due nor

Impaired

Less than

30 Days

31 Days

to 1 Year

Over 1 Year up to

3 Years

Over

3 Years

Past Due and

Impaired Total

(In Thousand Pesos)

Loans and receivables:

Cash and cash equivalents

(excluding cash on

hand) P=12,486,732 P=– P=– P=– P=– P=– P=12,486,732 Trade receivables 2,942,461 75,181 150,377 37,576 – 130,839 3,336,434

Non-trade receivables 54,130 6,792 38,477 – – – 99,399

Long-term receivables – – – – – 61,062 61,062 Loans and notes

receivables 59,332

– –

– –

– 59,332

Advances to employees 26,025

1,416 7,727 2,767 –

– 37,935

Employee receivables* 19,949 – – – – – 19,949

Due from related parties 8 – – – – – 8

AFS investments:

Debt investments 673,854 – – – – – 673,854

Total P=16,262,491 P=83,389 P=196,581 P=40,343 P=– P=191,901 P=16,774,705

*Includes noncurrent portion of employee receivables under other noncurrent assets.

- 29 -

September 30, 2011 (Unaudited)

Past Due but Not Impaired

Neither Past

Due nor Impaired

Less than 30 Days

31 Days to 1 Year

Over 1 Year

up to 3 Years

Over 3 Years

Past

Due and Impaired Total

(In Thousand Pesos)

Loans and receivables:

Cash and cash

equivalents (excluding cash on hand) P=12,691,784 P=– P=– P=– P=– P=– P=12,691,784

Trade receivables 2,501,827 80,343 217,169 2,397 7,092 129,903 2,938,731 Loans and notes

receivables 52,585 316 2,467 4,185 – – 59,553

Employee receivables* 23,622 – – – – – 23,622

Non-trade receivables 15,669 – 10,904 2,254 – – 28,827

Advances to employees 22,148 5,525 10,067 3,124 – – 40,864

Long-term receivables 1,000 – – – – 58,670 59,670 Due from related parties 604 – – – – – 604

AFS debt investments: 675,255 – – – – – 675,255

Financial assets at FVPL: Derivative assets 158,419 – – – – – 158,419

Total P=16,142,913 P=86,184 P=240,607 P=11,960 P=7,092 P=188,573 P=16,677,329

*Includes noncurrent portion of employee receivables under other noncurrent assets.

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

settling their obligations. These counterparties normally include customers, banks and related

parties who pay on or before due date. Thus, the credit risk exposure is minimal. Financial assets

are classified as a standard grade if the counterparties settle their obligation with the Company

within 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 September 30, 2012 and 2011 and December 31, 2011, all financial assets categorized as

neither past due nor impaired are viewed by management as high grade, considering the

collectibility of the receivables and the credit history of the counterparties.

Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument

will fluctuate because of changes in foreign exchange rates.

The Company’s exposure to foreign currency risk resulted primarily from the financial assets and

liabilities that are denominated in US dollar, Japanese yen and Sweden kroner. These financial

assets and liabilities consist of the Company’s investments in marketable securities and

government debt securities and foreign currency denominated loans.

The Company’s exposure to foreign currency risk to some degree is mitigated by some provisions

in the Company’s GRESCs, SSAs and PPAs. The service contracts allow full cost recovery while

the sales contracts include billing adjustments covering the movements in the Peso and US dollar

exchange 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. The Company also

enters into derivative contracts to mitigate foreign currency risk. In 2012, the Company entered

into non-deliverable cross currency swaps to hedge its foreign currency risk exposure on its US

dollar-denominated Club Loan.

- 30 -

The Company’s foreign currency-denominated financial assets and liabilities (translated into

Philippine peso) as of September 30, 2012 and 2011, and December 31, 2011, are as follows:

September 30, 2012 (Unaudited) September 30, 2011 (Unaudited)

Original Currency

Peso

Equivalent1

Original Currency

Japanese Yen US Dollar

Sweden

Kroner

(SEK) Japanese Yen US Dollar

Sweden Kroner

(SEK)

Peso

Equivalent2

Financial Assets

Loans and receivables:

Cash equivalents − 48,514,639 − 2,023,060,446 − 91,466,061 − 3,998,896,187

Cash on hand and in banks − 2,571,472 − 107,230,374 − 3,769,079 − 164,784,134

Trade and other receivables − 2,730,154 − 113,847,422 − 834,170 − 36,469,912

AFS debt investments:

Government debt securities − 14,918,625 − 622,106,663 − 15,445,000 − 675,255,400

Financial assets at FVPL:

Derivative assets − − − − − 260,415 − 11,385,344

Total financial assets − 68,734,890 − 2,866,244,905 − 111,774,725 − 4,886,790,977

Current Financial Liabilities

Liabilities at amortized cost:

Trade and other payables 24,506,663 12,813,481 397,967 550,043,096 26,205,892 28,981,340 3,858,102 1,307,715,486

Accrued interest and guarantee fees 51,773,878 5,339,004 − 250,454,804 391,254,035 5,336,721 − 456,088,015

Current portion of long-term debts − 16,962,422 − 707,332,997 35,992,417 − − 20,492,843

Financial assets at FVPL:

Derivative liabilities − 3,095,709 − 129,091,065 − 36,428 − 1,592,632

Total current financial liabilities 76,280,541 38,210,616 397,967 1,636,921,962 453,452,344 34,354,489 3,858,102 1,785,888,976

Noncurrent Financial Liability

Liability at amortized cost:

Long-term debts - net of current portion − 452,529,554 − 18,870,482,402 − 468,437,959 − 20,480,107,567

Total financial liabilities 76,280,541 490,740,170 397,967 20,507,404,364 453,452,344 502,792,448 3,858,102 22,265,996,543 1USD1=JPY77.610, USD1= P=41.70 and SEK1=P=6.4161 as of September 30, 2012

2USD1=JPY76.787, USD1= P=43.72 and US$1=SEK6.8067 as of September 30, 2011

December 31, 2011 (Audited)

Original Currency

Yen US Dollar SEK Peso

Equivalent1

Financial Assets

Loans and receivables:

Cash equivalents − 99,562,576 − 4,364,823,332 Cash on hand and in banks 125,208 1,909,007 − 83,761,320 Trade and other receivables − 1,802,580 − 79,025,107 AFS debt investments − 15,370,750 − 673,853,680

Total financial assets 125,208 118,644,913 − 5,201,463,439

Current Financial Liabilities

Liabilities at amortized cost: Trade and other payables 53,561,520 69,067,270 10,776,022 3,126,615,268 Accrued interest and

guarantee fees 52,256,670 10,214,835 − 477,222,468 Current portion of

long-term debts 35,992,417 − − 20,252,433

Total current financial liabilities 141,810,607 79,282,105 10,776,022 3,624,090,169

Noncurrent Financial Liability Liability at amortized cost:

Long-term debts - net of

current portion − 468,600,735 − 20,543,456,222

Total financial liabilities 141,810,607 547,882,840 10,776,022 24,167,546,391 1US$1=JP¥77.912, US$1= P=43.840 and SEK1=P=6.363 as of December 31, 2011

- 31 -

The following tables demonstrate the sensitivity to a reasonably possible change in the US dollar

and Japanese yen and Sweden kroner exchange rates, with all other variables held constant, of the

Company’s income (loss) before income tax and equity for the periods ended September 30, 2012

and 2011 and year ended December 31, 2011 (arising from revaluation of financial assets and

liabilities and derivative instruments).

September 30, 2012 (Unaudited)

Foreign Currency

Appreciates (Depreciates) By

Effect on Income

before Income Tax

USD 10% or P=4.170 (P=1,746,942,040)

(10% or P=4.170) 1,746,942,040

JPY 10% or P=0.05373 4,098,588

(10% or P=0.05373) (4,098,588)

SEK 10% or P=0.64161 255,340

(10% or P=0.64161) (255,340)

December 31, 2011 (Audited)

Foreign Currency

Appreciates (Depreciates) By

Effect on Income

Before Income Tax

USD 10% or P=4.38 (P=1,880,062,120)

(10% or P=4.38) 1,880,062,120

JPY 10% or P=0.06252 (8,858,171)

(10% or P=0.05115) 7,247,208

SSEK 10% or P=0.6363 (6,856,783)

(10% or P=0.6363) 6,856,783

September 30, 2011 (Unaudited)

Foreign Currency

Appreciates (Depreciates) By

Effect on Loss

Before Income Tax

US$ 10% or PHP4.372 (P=1,446,932,085)

(10% or PHP4.372) 1,446,932,085

JPY 10% or PHP0.06326 (28,686,766)

(10% or PHP0.05176) 23,470,991

The effect of changes in foreign exchange rates in equity pertains to the fair valuation of AFS

investments and derivatives designated as cash flow hedges, and is exclusive of the impact of

changes affecting the Company’s interim condensed consolidated statements of income.

Equity Price Risk

Equity price risk is the risk that the fair value of traded equity instruments decreases as the result

of the changes in the levels of equity indices and the value of the individual stocks.

As of September 30, 2012 and 2011 and December 31, 2011, the Company’s exposure to equity

price risk is minimal.

- 32 -

Interest Rate Risk

The Company’s exposure to the risk of changes in market interest rates relates primarily to the

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 and AFS debt investments are

fixed at the inception of the loan agreement.

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 provide for the effective interest rates and interest payments by period of

maturity of the Company’s long-term debts.

Interest

Rates

Within 1

Year

More than 1

Year but less

than 4 Years

More than 4

Years but

less than 5

Years

More than

5 Years Total

September 30, 2012

(Unaudited)

Fixed Rate

In Thousand Pesos

IFC 1 7.40% P=275,563 P=673,285 P=172,943 P=499,147 P=1,620,938

IFC 2 6.66% 285,958 572,086 156,630 647,150 1,661,824

PNB & Allied 9.03% 398,115 950,339 219,721 321,860 1,890,035

FXCN-Tr1 6.62% 198,023 582,157 190,082 920,632 1,890,894

FXCN-Tr2 6.61% 263,771 775,447 253,194 1,226,303 2,518,715

Public Bonds Series 1 8.64% 734,553 1,469,106 – – 2,203,659

Public Bonds Series 2 9.33% 326,645 979,934 163,322 – 1,469,901

USD300M Notes 6.50% 813,150 2,439,450 813,150 2,846,025 6,911,775

Floating Rate

US$ 175M

Syndicated Club

Loan

1.75%+

Libor

143,995

312,232

56,882

–

513,109

Interest

Rates

Within

1 Year

More than 1

Year but less

than 4 Years

More than 4

Years but

less than 5

Years

More than

5 Years

Total

December 31, 2011

(Audited)

In Thousand Pesos

Fixed Rate

OECF

PNB and Allied Bank

IFC 1

IFC 2

3.20%

9.03%

7.40%

6.66%

P=327

416,291

289,163

273,799

P=–

1,014,291

711,135

608,541

P=–

246,520

186,262

165,548

P=–

423,956

582,174

723,131

P=327

2,101,058

1,768,734

1,771,019

FRCN Series 1 8.37% 180,117 207,851 – – 387,968

FRCN Series 2 9.40% 423,750 816,579 92,983 – 1,333,312

FRCN Series 3

US$ 300M Notes

8.43%

6.50%

102,907

854,880

118,752

2,564,640

–

854,880

–

3,846,960

221,659

8,121,360

Public Bonds Series 1 8.64% 734,553 1,836,383 – – 2,570,936

Public Bonds Series 2 9.33% 326,645 979,934 326,645 – 1,633,224

Floating Rate

US$ 175.0M

Refinanced

Syndicated Club

Loan

1.75% +

LIBOR

155,724

372,675

89,541

38,506

656,446

- 33 -

Interest

Rates

Within 1

Year

More than 1

Year but less

than 4 Years

More than 4

Years but less

than 5 Years

More than

5 Years Total

September 30, 2011

(Unaudited)

Fixed Rate

In Thousand Pesos

OECF 3.20% P=331 P=– P=– P=– P=331

IFC 1 7.40% 303,711 749,723 199,124 672,089 1,924,647

IFC 2 6.66% 119,452 683,995 174,049 803,780 1,781,276

PNB & Allied 9.03% 431,232 1,076,563 271,891 541,581 2,321,267

FRCN Series 1 8.37% 180,117 207,851 – – 387,968

FRCN Series 2 9.40% 400,536 747,128 69,769 – 1,217,433

FRCN Series 3 8.43% 90,048 93,104 – – 183,152

Public Bonds Series 1 8.64% 734,553 2,203,659 – – 2,938,212

Public Bonds Series 2 9.33% 326,645 979,934 326,645 163,322 1,796,546

US$ 300M Notes 6.50% 852,540 2,557,620 852,540 3,836,430 8,099,130

Floating Rate

US$ 175M

Refinanced

Syndicated Club

Loan

1.75% +

Libor

155,722

385,169

93,158

59,637

693,686

The following tables demonstrate the sensitivity to a reasonably possible change in interest rates,

with all other variables held constant, of the Company’s income (loss) before income tax and

equity as of September 30, 2012 and 2011 and December 31, 2011. The effect on equity includes

impact of change in interest rates on derivatives designated as cash flow hedges as well as AFS

debt investments.

September 30, 2012 (Unaudited)

Increase/Decrease

in Basis Points

Effect on Income

Before Income Tax Effect on Equity

USD +100 (P=72,975,000) (P=12,795,026)

-100 72,975,000 4,552,221

December 31, 2011 (Audited)

Increase/Decrease

in Basis Points

Effect on Income

Before Tax Effect on Equity

USD +100 (P=76,720,000) (P=8,929,578)

-100 76,720,000 19,217,468

September 30, 2011 (Unaudited)

Increase/Decrease

in Basis Points

Effect on Loss

Before Income Tax

Effect on

Equity

USD +100 (P=75,033,796) (P=8,902,435)

-100 75,034,792 22,333,879

The effect of changes in interest rates in equity pertains to the fair valuation of AFS investments

and derivatives designated as cash flow hedges, and is exclusive of the impact of the changes

affecting the Company’s interim condensed consolidated statement of income.

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

- 34 -

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.

The tables below show the maturity profile of the Company’s financial assets used for liquidity

purposes based on contractual undiscounted cash flows as of September 30, 2012 and 2011 and

December 31, 2011.

September 30, 2012 (Unaudited)

On Demand

Within 30

Days

31 to 60

Days

61 to 180

Days

181 to 360

Days

Over

360 Days Total

(In Thousand Pesos)

AFS debt investments P=137,110 P=– P=– P=– P=– P=– P=137,110

Loans and receivables

Cash equivalents – 10,045,103 431,595 – – 25,000 10,501,698

Total P=137,110 P=10,045,103 P=431,595 P=– P=– P=25,000 P=10,638,808

December 31, 2011 (Audited)

On

Demand

Within 30

Days

31 to 60

Days

61 to 180

Days

181 to 360

Days

Over

360 Days Total

(In Thousand Pesos)

AFS debt investments P=673,854 P=– P=– P=– P=– P=– P=673,854

Loans and receivables

Cash equivalents – 9,574,010 2,226,633 – – – 11,800,643

Total P=673,854 P=9,574,010 P=2,226,633 P=– P=– P=– P=12,474,497

September 30, 2011 (Unaudited)

On Demand Within 30

Days 31 to 60

Days 61 to 180

Days 181 to 360

Days Over

360 Days Total

(In Thousand Pesos)

AFS debt investments P=675,255 P=− P=− P=− P=− P=− P=675,255

Loans and receivables Cash equivalents – 8,917,793 2,914,154 – – – 11,831,947

Total P=675,255 P=8,917,793 P=2,914,154 P=– P=− P=− P=12,507,202

The tables below summarize the maturity analysis of the Company’s financial liabilities as of

September 30, 2012 and 2011 and December 31, 2011 based on contractual undiscounted

payments:

September 30, 2012 (Unaudited)

On

Demand

Less than

3 Months

3 to

6 Months

>6 to

12 Months

>1 to

5 Years

More than

5 Years Total

(In Thousand Pesos)

Liabilities at amortized cost:

Accounts payable P=− P=6,076,125 P=− P=− P=− P=− P=6,076,125

Accrued interest and guarantee fees 86,446 931,806 162,631 − − − 1,180,883

Other payables − 7,257 − − − − 7,257

Due to related parties 42,891 − − − − − 42,891

Royalty fee payable − 20,583 − 49,073 − − 69,656

Long-term debts − 781,990 280,369 2,912,146 34,115,818 31,815,929 69,906,252

- 35 -

September 30, 2012 (Unaudited)

On

Demand

Less than

3 Months

3 to

6 Months

>6 to

12 Months

>1 to

5 Years

More than

5 Years Total

Financial Liabilities at FVPL:

Derivative liabilities

Current − 65,720 − − − − 65,720

Noncurrent − 63,371 − − − − 63,371

Total P=129,337 P=7,946,852 P=443,000 P=2,961,219 P=34,115,818 P=31,815,929 P=77,412,155

December 31, 2011 (Audited)

On

Demand

Less than

3 Months

3 to

6 Months

>6 to

12 Months

>1 to

5 Years

More than

5 Years Total

(In Thousand Pesos)

Liabilities at amortized cost:

Accounts payable P=− P=4,731,730 P=− P=− P=− P=− P=4,731,730 Accrued interest and

guarantee fees 90,769 713,620 243,217 − − − 1,047,606

Other payables − 3,518 − 81,092 − − 84,610 Due to related parties 60,091 − − − − − 60,091

Royalty fee payable − 133,228 87,500 136,573 − − 357,301

Long-term debts − 924,581 1,140,510 3,030,619 37,322,968 29,329,707 71,748,385

Total P=150,860 P=6,506,677 P=1,471,227 P=3,248,284 P=37,322,968 P=29,329,707 P=78,029,723

September 30, 2011 (Unaudited)

On

Demand Less than 3 Months

3 to 6 Months

>6 to 12 Months

>1 to 5 Years

More than 5 Years Total

(In Thousand Pesos)

Liabilities at amortized cost:

Accounts payable P=− P=3,223,751 P=− P=− P=− P=− P=3,223,751

Accrued interest and

guarantee fees 284,125 654,688 335,736 − − − 1,274,549

Other payables − 2,197 − − − − 2,197 Due to related parties 148,160 − − − − − 148,160

Royalty fee payable − 135,763 87,500 175,000 49,073 − 447,336

Long-term debts − 647,297 1,283,298 2,943,498 33,683,074 34,224,446 72,781,613 Financial Liabilities at FVPL:

Derivative liabilities − 74,504 − − − − 74,504

Total P=432,285 P=4,738,200 P=1,706,534 P=3,118,498 P=33,732,147 P=34,224,446 P=77,952,110

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 September 30, 2012 and 2011 and December 31, 2011.

September 30, 2012 (Unaudited) September 30, 2011 (Unaudited)

Carrying

Amount Fair Value

Carrying

Amount Fair Value

Financial Assets

Loans and receivables:

Cash and cash equivalents P=11,371,320,502 P=11,371,320,502 P=12,699,182,531 P=12,699,182,531

Trade receivables 4,857,968,219 4,857,968,219 2,808,828,588 2,808,828,588

Loans and notes receivables 72,127,246 72,127,246 28,826,614 28,826,614

Non-trade receivables 42,219,155 42,219,155 59,552,998 59,552,998

Advances to employees 67,875,434 67,875,434 40,864,256 40,864,256

Employee receivables 15,640,344 15,640,344 23,622,385 23,622,385

Long-term receivables 16,964,228 16,964,228 1,000,000 974,104

Due from related parties − − 603,648 603,648

AFS investments:

Debt investments 622,106,663 622,106,663 675,255,400 675,255,400

Equity investments 131,727,394 131,727,394 20,816,362 20,816,362

Financial assets at FVPL:

Derivative assets − − 158,419,378 158,419,378

P=17,197,949,185 P=17,197,949,185 P=16,516,972,160 P=16,516,946,264

- 36 -

September 30, 2012 (Unaudited) September 30, 2011 (Unaudited)

Carrying

Amount Fair Value

Carrying

Amount Fair Value

Financial Liabilities

Financial liabilities at amortized cost:

Accounts payable P=6,076,124,985 P=6,076,124,985 P=3,223,751,223 P=3,223,751,223

Accrued interest and guarantee fees 1,180,882,817 1,180,882,817 1,274,550,117 1,274,550,117

Other payables 7,256,926 7,256,926 2,196,586 2,196,586

Due to related parties 42,890,638 42,890,638 46,388,222 46,388,222

Royalty fee payable 65,078,884 65,078,884 363,833,156 369,225,129

Long-term debts 49,682,898,069 56,096,314,045 51,751,025,179 53,684,576,142

Financial Liabilities at FVPL:

Derivative Liabilities 129,091,076 129,091,076 74,503,957 74,503,957

P=57,184,223,395 P=63,597,639,371 P=56,736,248,440 P=58,675,191,376

December 31, 2011 (Audited)

Carrying

Amounts Fair Values

Financial Assets

Loans and receivables:

Cash and cash equivalents P=12,493,406,963 P=12,493,406,963

Trade receivables 3,205,594,212 3,205,594,212

Non-trade receivables 99,398,810 99,398,810

Loans and notes receivables 59,331,933 59,331,933

Advances to employees 37,934,595 37,934,595

Employee receivables 19,948,544 19,948,544

Due from related parties 7,812 7,812

Long-term receivables − −

AFS investments:

Debt investments 673,853,680 673,853,680

Equity investments 20,443,924 20,443,924

P=16,609,920,473 P=16,609,920,473

Financial Liabilities

Financial liabilities at amortized cost:

Accounts payable P=4,731,729,893 P=4,731,729,893

Accrued interest and guarantee fees 1,047,605,943 1,047,605,943

Other payables 84,610,045 84,610,045

Due to related parties 60,090,825 60,090,825

Royalty fee payable 287,626,313 290,907,188

Long-term debts 51,489,571,455 59,055,715,275

P=57,701,234,474 P=65,270,659,169

The methods and assumptions used by the Company in estimating the fair value of financial

instruments are as follows:

Cash and Cash Equivalents. Carrying amounts approximate fair values due to its short-term

nature.

Trade and Other Receivables, Due to Related Parties, and Trade and Other Payables. These are

instruments with relatively short maturity ranging from one to three months, and thus, the carrying

amounts approximate fair values.

Long-term Receivables. The fair value of long-term receivables was computed by discounting the

expected cash flow.

AFS Investments. Fair values of quoted debt and equity securities are based on quoted market

prices. For equity investments that are not quoted, the investments are carried at cost less

- 37 -

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.

Derivative Assets and Derivative Liabilities. The fair values of the non-deliverable cross currency

swaps as of September 30, 2012 are based on quote provided by the counterparty bank while the

fair values of non-deliverable forwards outstanding as of September 30, 2011 are calculated by

reference to the prevailing forward rates.

Long-term Debts and Royalty Fee Payable. The fair values for EDC’s long-term debts are

estimated using the discounted cash flow methodology with the applicable rates ranging from

1.75% to 9.33%, 1.91% to 10.88%, and 2.11% to 11.72% on September 30, 2012, December 31,

2011 and September 30, 2011, respectively.

Fair values of royalty fee payable are determined using discount rates ranging from 5.32% to

6.43% and from 5.02% to 5.68%, as of December 31, 2011 and September 30, 2011, respectively.

The following tables show the fair value information of financial assets at FVPL and AFS

investments analyzed by sources of inputs on fair valuation as follows:

Quoted prices in active markets for identical assets or liabilities (Level 1);

Those involving inputs other than quoted prices included in Level 1 that are observable for the

asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and

Those with inputs for the asset or liability that are not based on observable market data

(unobservable inputs) (Level 3).

September 30,

2012

(Unaudited) Level 1 Level 2 Level 3

AFS investments:

Debt investments P=622,106,663 P=622,106,663 P=− P=−

Equity investments 131,652,844 131,652,844

December 31, 2011

(Audited) Level 1 Level 2 Level 3

AFS investments:

Debt investments P=673,853,680 P=673,853,680 P=− P=− Equity investments 20,369,374 20,369,374 − −

September 30,

2011

(Unaudited) Level 1 Level 2 Level 3

Financial assets at FVPL-

Derivative assets P=158,419,378 P=− P=158,419,378 P=−

AFS investments:

Debt investments 675,255,400 675,255,400 − − Equity investments 20,741,812 20,741,812 − −

For the nine-month periods ended September 30, 2012 and 2011, and for the year ended

December 31, 2011, there were no transfers between level 1 and level 2 fair value measurements

and no transfers into and out of Level 3 fair value measurements.

The Company classifies its financial instruments in the following categories.

- 38 -

September 30, 2012 (Unaudited)

Loans and

Receivables

AFS

Investments

Liabilities at

Amortized

Cost

Derivatives

designated as

cash flow

hedges Total

(In Thousand Pesos)

Financial Assets

Cash and cash equivalents P=11,371,321 P=− P=− P=− P=11,371,321

Trade receivables 4,857,968 − − − 4,857,968

Loans and notes receivables 72,127 − − − 72,127

Non-trade receivables 42,219 − − − 42,219

Advances to employees 67,875 − − − 67,875

Employee receivables 15,640 − − − 15,640

Other Long-term Receivables - net 16,960 − − − 16,960

AFS - debt investments − 616,724 − − 616,724

AFS - equity investments − 137,110 − − 137,110

Financial Liabilities

Accounts payable − − 6,076,125 − 6,076,125

Accrued interest and guarantee fees − − 1,180,883 − 1,180,883

Other payables − − 7,257 − 7,257

Due to related parties − − 42,891 − 42,891

Royalty fee payable − − 65,079 − 65,079

Long-term debt − − 49,682,898 − 49,682,898

Derivative liabilities − − − 129,091 129,091

Total P=16,444,110 P=753,834 P=57,055,133 P=129,091 P=74,382,168

December 31, 2011 (Audited)

Loans and

Receivables

AFS

Investments

Liabilities at

Amortized

Cost Total

(In Thousand Pesos)

Financial Assets

Cash and cash equivalents P=12,493,407 P=− P=− P=12,493,407

Trade receivables 3,205,594 − − 3,205,594

Non-trade receivables 99,399 − − 99,399

Loans and notes receivables 59,332 − − 59,332

Advances to employees 37,935 − − 37,935

Employee receivables 19,949 − − 19,949

Due from related parties 8 − − 8

AFS - debt investments − 673,854 − 673,854

AFS - equity investments − 20,444 − 20,444

Financial Liabilities

Accounts payable − − 4,731,730 4,731,730

Accrued interest and guarantee fees − − 1,047,606 1,047,606

Other payables − − 84,610 84,610

Due to related parties − − 60,091 60,091

Royalty fee payable − − 287,626 287,626

Long-term debts − − 51,489,571 51,489,571

Total P=15,915,624 P=694,298 P=57,701,234 P=74,311,156

- 39 -

September 30, 2011 (Unaudited)

Loans and

Receivables

AFS

Investments

Financial

Assets at

FVPL

Liabilities at

Amortized

Cost

Financial

Liabilities at

FVPL Total

(In Thousand Pesos)

Financial Assets

Cash and cash equivalents P=12,699,183 P=– P=– P=– P=– P=12,699,183

Trade receivables 2,808,829 − − − − 2,808,829

Loans and notes receivables 59,553 − − − − 59,553

Non-trade receivables 28,827 − − − − 28,827

Advances to employees 40,864 − − − − 40,864

Employee receivables 23,622 − − − − 23,622

Other long-term receivables 1,000 − − − − 1,000

Due from related parties 604 − − − − 604

AFS - debt investments − 675,255 − − − 675,255

AFS - equity investments − 20,816 − − − 20,816

Derivative assets − − 158,419 − − 158,419

Financial Liabilities

Accounts payable − − − 3,223,751 − 3,223,751

Accrued interest and

guarantee fees − − − 1,274,550 − 1,274,550

Other payables − − − 2,197 − 2,197

Due to related parties − − − 46,388 − 46,388

Royalty fee payable − − − 363,833 − 363,833

Long-term debts − − − 51,751,025 − 51,751,025

Derivative liabilities − − − − 74,504 74,504

Total P=15,662,482 P=696,071 P=158,419 P=56,661,744 P=74,504 P=73,253,220

The table below demonstrates the income, expense, gains or losses of the Company’s financial

instruments for the nine-month periods ended September 30, 2012 and 2011.

September 30, 2012 (Unaudited) September 30, 2011 (Unaudited)

` Increase

(Decrease)

Increase

(Decrease)

Increase

(Decrease)

Increase

(Decrease)

Effect on

Profit or Loss

Effect

on Equity

Effect on

Profit or Loss

Effect

on Equity

Loans and receivables:

Interest income on cash equivalents P=223,506,839 P=– P=266,121,000 P=–

Interest on employees receivable 2,570,625 – 9,530,360 – Interest income on cash in bank 3,016,569 – 3,951,487 – Interest income on trade receivables 1,805,851 – – – Equity investments -

Net gain (loss) recognized in

equity – 7,958,969 – 2,650,008

Debt investments: – – Net gain (loss) recognized in

equity – 2,635,099 – (31,466,667)

Interest income on ROP Bonds 42,828,178 – 822,746 – Financial assets at FVPL:

Fair value changes on derivative

forward contract 1,893,130 – 107,507,535 – Financial liabilities at amortized cost:

Interest expense on long-term loans (2,831,465,221) – (3,173,685,505) – Interest expense on loan payable – – (1,140,522) – Interest expense on royalty payable (10,190,075) – (25,361,786) –

(P=2,566,034,104) P=10,594,068 (P=2,812,254,685) (P=28,816,659)

- 40 -

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 the

sum of long-term liabilities and 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 long-term debts. Equity includes all items presented in the equity section of the consolidated

statement of financial position.

The table below shows the Company’s debt ratio as at September 30, 2012 and 2011 and

December 31, 2011.

September 30, 2012

(Unaudited)

December 31, 2011

(Audited)

September 30, 2011

(Unaudited)

Long-term liabilities P=49,682,898,069 P=51,489,571,455 P=51,751,025,179

Equity 34,156,225,970 29,646,601,493 28,535,221,220

Debt ratio 59.3% 63.5% 64.5%

Derivative Financial Instruments

The Company engages in derivative transactions, particularly foreign currency forwards, foreign

currency swaps and cross-currency swaps, to manage its foreign currency risk and/or interest rate

risk arising from its foreign-currency denominated loans and to take advantage of market

opportunities. These derivatives are accounted for either as derivatives designated as accounting

hedges or derivatives not designated as accounting hedges.

The table below shows the derivative financial instruments of the Company for the nine-month

periods ended September 30, 2012 and 2011.

September 30, 2012

(Unaudited)

September 30, 2011

(Unaudited)

Derivative

Assets

Derivative

Liabilities

Derivative

Assets

Derivative

Liabilities

Derivatives designated as

accounting hedges

Cross-currency swaps P=– P=129,091,076 P=– P=–

Derivatives not designated as

accounting hedges

Foreign currency forwards – – 158,419,378 74,503,957

Total derivatives P=– P=129,091,076 P=158,419,378 P=74,503,957

Presented as:

Current P=– P=65,720,038 P=158,419,378 P=74,503,957

Noncurrent – 63,371,038 – –

Total derivatives P=– P=129,091,076 P=158,419,378 P=74,503,957

Derivatives Not Designated as Accounting Hedges

- 41 -

Foreign Currency Forward Contracts. These are contractual agreements to buy or sell a foreign

currency at an agreed rate on a future date. These are customized contracts transacted with a bank

or financial institution.

As of December 31, 2011 and September 30, 2011, the Company has entered into a total of 38

foreign currency forward contracts. These include 6 deliverable buy JP¥ - sell US$, 16 non-

deliverable buy US$ - sell PHP= and 16 non-deliverable sell US$ - buy PHP= forward contracts.

The aggregate notional amounts and weighted average forward rates of these foreign currency

forward contracts are as follows:

December 31, 2011 September 30, 2011

Position

Aggregate

notional amount

Average

forward rate

Aggregate

notional amount

Average

forward rate

Buy JP¥ - sell US$ JP¥2,441.00 million JP¥83.00 JP¥2,441.00 million JP¥83.00

Buy US$ - sell PHP= US$255.00 million P=43.12 US$255.00 million P=43.12

Sell US$ - buy PHP= US$255.00 million P=43.34 US$255.00 million P=43.34

In relation to the non-deliverable forward contracts, the Company entered into sell US$ - buy PHP=

transactions with onshore banks and simultaneously entered into buy US$ - sell PHP= transactions

with offshore banks as offsetting positions to lock-in gains at inception.

For the year ended December 31, 2011 and for the nine-month period ended September 30, 2011,

the Company recognized P=68.25 million gain and P=107.2 million gain, respectively, from fair

value changes of these currency forwards contracts. Such amounts are recorded under “Derivative

gains - net” in the interim consolidated statements of income.

Foreign Currency Swap Contracts. These are contractual agreements between two parties that

involve selling of one currency to another currency at trade date with a simultaneous agreement to

repurchase the sold currency at a future date against the payment of the currency bought at trade

date.

As of December 31, 2011 and September 30, 2011, the Company has entered into a total of 36

foreign currency swap contracts. The position of these foreign currency swap contracts at trade

date include sell JP¥ - buy PHP=, sell JP¥ - buy US$ and sell US$ - buy PHP=.

The aggregate notional amount and weighted average forward rate of foreign currency swap

contracts are as follows:

December 31, 2011 September 30, 2011

Position

Aggregate

notional amount

Average

forward rate

Aggregate notional

amount

Average

forward rate

Sell JP¥ - buy PHP= JP¥12,450.00 million P=0.53 JP¥12,450.00 million P=0.53

Sell JP¥ - buy US$ JP¥2,075.00 million JP¥81.00 JP¥2,075.0 million JP¥81.00

Sell US$ - buy PHP= US$701.00 million P=43.32 US$701.00 million P=43.32

For the year ended December 31, 2011 and for the nine-month period ended September 30, 2011,

the Company recognized P=40.07 million gain and P=44.3 million gain from the fair value changes

of these currency swap contracts. Such amount is recorded under “Derivative gains (losses) - net”

in the consolidated statements of income.

- 42 -

Derivatives Designated as Accounting Hedges

In 2012, the Company entered into five non-deliverable cross-currency swap (NDCCS)

agreements with an aggregate notional amount of US$55.00 million to partially hedge the foreign

currency and interest rate risks on its floating rate Club Loan that is benchmarked against US

LIBOR and with flexible interest reset feature that allows the Company to select what interest

reset frequency to apply (i.e. monthly, quarterly, or semi-annually). As it is the Company’s

intention to reprice the interest rate on the hedged loan quarterly, the Company utilizes NDCCS

with quarterly interest payments and receipts. Under the four NDCCS, the Company receives

floating US$ interest based on 3-month US LIBOR plus 175 basis points and pays fixed peso

interest. On specified dates, the Company also receives specified US$ amounts in exchange for

specified peso amounts based on the agreed swap rates. These US$ receipts correspond with the

expected interest and fixed principal amounts due on the hedged loan. Effectively, the NDCCS

converted 25.71% of hedged loan into a fixed rate peso Loan. Other details of the NDCCS are as

follows:

Notional amount

(in million)

Trade

Date

Effective

Date

Maturity

Date

Swap

rate

Fixed

rate

Variable rate

US$15.00 03/26/12 03/27/12 06/17/17 P43.05 4.87% 3-month LIBOR + 175 bps US$10.00 04/18/12 06/27/12 06/17/17 P42.60 4.92% 3-month LIBOR + 175 bps US$10.00 05/03/12 06/27/12 06/17/17 P42.10 4.76% 3-month LIBOR + 175 bps US$10.00 06/15/12 06/27/12 06/17/17 P42.10 4.73% 3-month LIBOR + 175 bps US$10.00 07/17/12 09/27/12 06/17/17 P41.25 4.58% 3-month LIBOR + 175 bps

The maturity date of the five NDCCS coincides with the maturity date of the hedged loan.

As of September 30, 2012, the outstanding aggregate notional amount of the Company’s NDCCS

amounted to US$55.00 million. The aggregate fair value changes on these NDCCS amounting to

P=129.09 million loss was recognized by the Company under “Cumulative Translation

Adjustment” account.

Hedge Effectiveness Results

Since the critical terms of the hedged loan and the NDCCS match, except for one to two days

timing difference on the interest reset date, the hedges were assessed to be highly effective. As

such, there was no ineffectiveness recognized immediately in the interim consolidated statement

of income for the nine-month period September 30, 2012.

The rollforward analysis of the “cumulative translation adjustment” account of the Company

pertaining to the cash flow hedges is as follows:

September 30, 2012

(Unaudited)

Beginning balance P=–

Changes in fair value of the cash flow hedges 146,935,178

Transferred to consolidated statement of income (40,450,000)

Settlement (17,884,101)

Ending balance P=88,641,076

Of the amounts transferred to the interim consolidated statement of comprehensive income,

P=40.45 million is included in “Forex exchange gains (losses) - net”.

- 43 -

Fair Value Changes of Derivatives

The tables below summarize the net movement in fair values of the Company’s derivatives as of

December 31, 2011 and September 30, 2011.

Derivatives not designated as accounting hedges

December 31, 2011 September 30, 2011

Derivative

Assets

Derivative

Liabilities Derivative

Assets

Derivative

Liabilities

Balance at beginning of year P=– P=– P=– P=–

Net changes in fair value 381,813,015 (273,493,638) 395,098,781 (287,591,246)

Settlement (381,813,015) 273,493,638 (236,679,403) 213,087,289

Balance at end of period P=– P=– P=158,419,378 (P=74,503,957)

There are no derivatives not designated as accounting hedges as of September 30, 2012. The net

changes in fair value of the Company’s derivatives not designated as accounting hedges for the

year ended December 31, 2011 and for the nine-month period ended September 30, 2011,

amounting to P=108.32 million gain and P=107.5 million gain, respectively, were taken to the

“Derivatives gain (loss)” account in the interim consolidated statements of income.

Derivatives designated as accounting hedges

Derivative Liabilities

September 30,

2012

Balance at beginning of year P=–

Net changes in fair value 146,935,178

Settlement (17,844,101)

Balance at end of year P=129,091,076

The effective portion of the changes in the fair value of the NDCCS designated as accounting

hedges were deferred in equity under “Cumulative Translation Adjustment” account.

25. Event After the Financial Reporting Period

On October 15, 2012, EDC signed an agreement with Canada-based Alterra Power Corp. (Alterra)

for EDC to conduct exploration field works and due diligence at Alterra’s geothermal concession

in Chile as well as at five of Alterra’s geothermal authorizations in Peru.

26. Restatements

Voluntary Change in Accounting Policy

Prior to 2011, the Company accounted for rig consumables as direct expense upon purchase since

these are primarily intended for immediate use. Over the years, the Company has accumulated a

large stock of unused rig consumables. As a result, starting January 1, 2011, the Company

adopted the policy of recognizing rig consumables as inventories.

PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, requires retrospective

application for a change in accounting policy, except when it is impracticable to determine period-

specific effects. If retrospective application is impracticable, the entity shall apply the new

accounting policy at the beginning of the earliest period for which retrospective application is

- 44 -

practicable. Because prior to January 1, 2011, the Company does not monitor the unused portion

of rig consumable, management determined that it is impracticable to establish the balance of rig

consumables in prior years. Accordingly, the effect of the voluntary change in accounting policy

was presented as an adjustment to the opening balance of 2011 retained earnings.

As at January 1, 2011, the voluntary change in accounting policy resulted to an increase in parts

and supplies inventories, retained earnings and deferred tax liability amounting to P=172.3 million,

P=155.1 million and P=17.2 million, respectively.

27. Other Matters

Seasonality or Cyclicality of Interim Operations

Except for FG Hydro’s sale of electricity coming from hydroelectric power/operations, seasonality

or cyclicality of interim operations is not applicable to the Parent Company’s type of business

because of the nature of its contracts with NPC, which includes guaranteed volume under the

applicable take-or-pay, minimum energy off-take or contracted energy provisions. GCGI’s sales

to cooperatives and industries are also not subject to seasonality or cyclicality.

Changes in Estimates of Amounts Reported in Prior Financial Years

The key assumptions concerning the future and other key sources of estimation uncertainty used in

preparation of the unaudited interim condensed consolidated 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, 2011, except for the following estimates that follows:

Impairment of Intangible Asset not yet available for Use

On July 27, 2012, the Energy Regulatory Commission approved the initial Feed-in Tariff (FIT)

rates that shall apply to generation of electricity from renewable energy sources. Particularly, for

wind energy, the approved FIT rate amounted Php8.53 per kwh. Accordingly, the Company used

the new FIT rate in the impairment assessment of the Company’s wind energy project

development costs. Based on the Company’s impairment assessment, the Company’s wind energy

project development remained to be recoverable. As of September 30, 2012, no impairment loss

has been recognized for this asset.

Provision for rehabilitation and restoration costs

Provision for rehabilitation and restoration costs is based on technical estimates of probable costs,

which may be incurred by the Company in the rehabilitation and restoration of the Company’s

steam fields and power plants’ contract areas from 2031 up to 2044. As of December 31, 2011, the

estimated rehabilitation and restoration costs are discounted using the Company’s risk-adjusted

rate. For the nine-month period ending September 30, 2012, the Company computed for the

provision for rehabilitation and restoration costs using the risk-adjusted cash flows and discount

rates equal to the risk-free rate. As of September 30, 2012 and December 31, 2011, the provision

for rehabilitation and restoration costs amounted to P=489.69 million and P=406.78 million,

respectively.

Changes in the Composition of the Company During the Interim Period

On February 2, 2012, EDC entered into JVA with HRL to co-develop four geothermal exploration

projects: the Calerias and Longavi projects in Chile, and the Quellaapacheta and Chocopata

projects in Peru. EDC and HRL successfully concluded negotiations after discussions began with

the signing of the Heads of Terms Agreement last November 28, 2011.

- 45 -

On May 2, 2012, EDC executed SHA with HRL to establish project companies for each of the Calerias and Longavi geothermal concessions in Chile, as well as the Chocopata and

Quellaapacheta geothermal authorizations in Peru, allowing the joint venture to commence

exploration activities at each of the foregoing sites. Pursuant to the terms of the SHA, EDC will

hold 70% of the outstanding capital stock of each of the project companies, with HRL taking the

remaining 30%.

Changes in Contingent Liabilities or Contingent Assets Since the Last Annual Reporting Date

There are no material changes in the contingent liabilities or contingent assets since the last annual

reporting date.

Existence of Material Contingencies and Any Other Events or Transactions that are Material to an

Understanding of the Current Interim Period

There are no material contingencies and any other events or transactions during the period.

Unusual items

There are no assets, liabilities, equity, net income or cash flows that are unusual because of their

nature, size or incidence during the current period.