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Sycip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati City

Attention: W. U. Villanueva

Principal, Tax Service

Gentlemen/Ladies :

This refers to your letter dated 6 October 2006 which was filed on behalf of MIRANTSWEDEN INTERNATIONAL AB (PUBL) (Mirant-Sweden), requesting confirmation ofyour opinion that the interest payments by Mirant Sual Corporation (MSC) and MirantPagbilao Corporation (MPC) to Mirant-Sweden are subject to the preferential tax rate often percent (10%), pursuant to Article 11 of the Philippines-Sweden tax treaty.

It is represented that Mirant-Sweden is a foreign corporation organized and existing

under the laws of Sweden, with address at Box 7305, 103 90 Stockholm, Sweden asevidenced by a Certificate of Registration issued by the Swedish Companies RegistrationOffice on 20 September 2006; that it is a public limited liability company; that it is notregistered as a corporation or as a partnership in the Philippines per certification issuedby the Securities and Exchange Commission dated 14 September 2006; that MSC andMPC are corporations duly organized and existing under the laws of the Philippines, withprincipal address at Bo. Pangascasan, Sual Pangasinan, Philippines, and Pagbilao GrandeIsland, Pagbilao, Quezon, Philippines, respectively.

It is further represented that on 15 August 2006, MSC and MPC separately executed two(2) Intercompany Notes in favor of Mirant-Sweden with the principal amounts of Four

Hundred Million US Dollars (US$400,000,000) and Three Hundred Million US Dollars(US$300,000,000), respectively; that the unpaid principal amounts from time to timeoutstanding shall bear interest for each day during each "Interest Period" in effect undertheir Credit Agreement at a rate per annum equal to the Eurodollar Rate determined forsuch day plus 2.75%, or at such rate per annum as shall be agreed upon from time to timeby payors, MSC and MPC, and the payee, Mirant-Sweden; that interest shall be due andpayable on the 13th day of each month commencing after the date hereof or at such othertimes as may be agreed upon in writing from time to time by the said payors and payee;that MSC and MPC will pay the first monthly interest payment to Mirant-Sweden on 13September 2006 and every quarter thereafter until the loan is fully paid; and that thetransaction subject of the instant request for ruling is not under investigation, audit,administrative protest, claim for refund or issuance of a tax credit certificate, collectionproceedings, or a judicial appeal of MSC, MPC and Mirant-Sweden.

In reply, please be informed that Section 28 (B) (1) of the National Internal RevenueCode of 1997, as amended by Republic Act No. 9337, provides as follows, viz.:

"SEC. 28. Rates of Income Tax on Foreign Corporations.

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(B) Tax on Nonresident Foreign Corporation.

(1) In General. Except as otherwise provided in this Code, a foreign corporationnot engaged in trade or business in the Philippines shall pay a tax equal to thirty-fivepercent (35%) of the gross income received during each taxable year from all sources

within the Philippines, such as interests . . .: Provided, That effective January 1, 2009, therate of income tax shall be thirty percent (30%).

(5) Tax on Certain Incomes Received by a Nonresident Foreign Corporation.

(a) Interest on Foreign Loans. A final withholding tax at the rate of twenty percent(20%) is hereby imposed on the amount of interest on foreign loans contracted on or afterAugust 1, 1986;

However, Section 32 (B) (5) of the same Code provides as follows, to wit:

"SEC. 32. Gross Income.

(B) Exclusions from Gross Income. The following items shall not be included ingross income and shall be exempt from taxation under this Title: 2

(5) Income Exempt under Treaty. Income of any kind, to the extent required byany treaty obligation binding upon the Government of the Philippines."

In this particular case, you invoke the provisions of the Philippines-Sweden tax treatywhich, in its Article 11, provides as follows, viz.:

"ARTICLE 11

Interest

1. Interest arising in a Contracting State and paid to a resident of the otherContracting State may be taxed in that other State.

2. However, such interest may also be taxed in the Contracting State in which itarises, and according to the laws of that State, but if the beneficial owner of the interest isa resident of the other Contracting State, the tax so charged shall not exceed 10 per centof the gross amount of the interest.

4. The term 'interest' as used in this Article means income from debt-claims of everykind, whether or not secured by mortgage and whether or not carrying a right toparticipate in the debtor's profits and in particular, income from government securitiesand bonds or debentures including premiums and prices attaching to such securities,bonds or debentures. Penalty charges for late payment shall not be regarded as interest forpurposes of this Article.

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Based on the aforequoted provisions, your opinion that the interest payments by MSCand MPC to Mirant-Sweden are subject to 10% preferential tax rate as prescribed underArticle 11 of the Philippines-Sweden tax treaty is hereby confirmed.

Moreover, the subject Intercompany Notes are subject to the documentary stamp tax

imposed under Section 179 of the National Internal Revenue Code of 1997, as amendedby Republic Act No. 9243, 3 at the rate of One Peso (P1.00) on each Two Hundred Pesos(P200) or fractional part thereof of the issue price of the said promissory notes.This ruling is issued on the basis of the foregoing facts as represented. If uponinvestigation it shall be disclosed that the actual facts are different, this ruling shall bewithout force and effect insofar as the herein parties are concerned.

Very truly yours,

(SGD.) LILIAN B. HEFTICommissioner of Internal Revenue

Footnotes1. Formally known as THE CONVENTION BETWEEN THE REPUBLIC OF THE

PHILIPPINES AND THE KINGDOM OF SWEDEN FOR THE AVOIDANCE OFDOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITHRESPECT TO TAXES ON INCOME.

2. TITLE II TAX ON INCOME.

3. Republic Act No. 9243 An Act Rationalizing the Provisions on theDocumentary Stamp Tax of the National Internal Revenue Code of 1997, as amended andfor other purposes. (Effective date is 20 March 2004 per Revenue Regulations No. 13-2004).