Company Presentation January 2017
DISCLAIMER This presentation contains certain “forward looking statements. ” These forward looking statements include words or phrases such as EDC or its management “believes”, “expects”, “anticipates”, “intends”, “plans”, “foresees”, or other words or phrases of similar import. Similarly, statements that describe EDC’s objectives, plans or goals also are forward-looking statements. All such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Such forward looking statements are made based on management’s current expectations or beliefs as well as assumptions made by, and information currently available to, management. EDC does not make expressed or implied representations or warranties as to the accuracy and completeness of the information contained herein and shall not accept any responsibility or liability (including any third party liability) for any loss or damage, whether or not arising from any error or omission in compiling such information or as a result of any party’s reliance or use of such information. The information and opinions in this presentation are subject to change without notice. This presentation does not constitute a prospectus or other offering memorandum in whole or in part. Information contained in this presentation is a summary only and is prepared for discussion purposes and is not a complete record of the discussions. This presentation shall not constitute an offer to sell or the solicitation of an offer to buy any security. There shall be no sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to qualification under securities laws of such state or jurisdiction. By receiving this presentation, each investor is deemed to represent that it is a sophisticated investor and possesses sufficient investment expertise to understand the risks involved. Prospective investors should undertake their own assessment with regard to their investment and they should obtain independent advice on any such investment’s suitability, inherent risks and merits and any tax, legal and accounting implications which it may have for them.
7 Com ompany Intr Introductio ion 8 Business Model, 9 Contract Tenor, 10 Portfolio Expansion, 11 Risk Factors & Initiatives Hig ighlights of of th the Pre resentation 13 19 Preserving the Pre the Rev Revenue Base ase Equi Equipment Reli Reliabilit ity & Res Resil iliency Execution of clear action plans are underway. Full retrofitting In the context of a challenging competitive environment, we works for Tongonan unit 1 has begun. By middle of next year, have focused on investing to improve reliability, increase the rehab of all units will be completed. generation output, thereby lowering unit costs. 14 Profile of Geothermal Plants, 15 Update on FY2015 Outages, 20 Weak Commodity Prices, 21 GCGI Contract Re-pricing , 16 Tongonan Rehab, 17 Typhoon Proofing Initiatives 22 Bacman Capacity 23 29 US$ $ Debt ebt Mana anagement & FX FX Ex Expo posure Bre reaking into nto New ew Mar arkets Initiatives to manage financial risks enable EDC to comfortably Breaking into the contestable markets is key to lowering sales operate within covenanted financial ratios. into the WESM. 24 US$ Exposure, 25 Managing Financial Risks, 26 Financial Ratios, 30 Retail Competition Open Access (RCOA), 31 Contestable 27 Cash Dividends Customers, 32 Timeline for Mandatory Contestability, 33 DOE’s 9 Strategic Directions 35 Key Takeaways
COMPANY INTRODUCTION
EDC’S BUSINESS MODEL POSSESSES STABLE AND PREDICTABLE CASH FLOWS % of Consolidated USD Customers Revenues (1 ) Linkage Cashflow 37% Electricity 73% National Power Geothermal Electricity Corporation Power Purchase Agreements Sovereign off-take Power Purchase Agreements (PPAs) Cashflow or Cashflow Bac-Man Dividends Steam Geothermal Electricity Steam Sales Agreements (SSA) Cashflow or Electric Cooperatives/ 57% Electricity 0% Cashflow Green Core Dividends Third party customers/ Geothermal Steam Electricity NGCP/ WESM Commercial off-take Geothermal Resources Sales Contracts (GRSC) Cashflow FG Hydro Dividends Electricity & Ancillary Svcs. Power Supply Agreements Power Supply Agreements (PSAs) Ancillary Services Provider Agreement (ASPA) Cashflow 6% Electricity 60% Burgos Wind Dividends Electricity Feed-in-Tariff Transco Cashflow Solar Electricity Subsidiaries Cashflow Energy Flow (1) As of Sept. 30, 2016 of EDC 8 Company Introduction
EDC’S EXPOSURE TO THE SPOT MARKET PRICES IS ONLY 12% TERM STRUCTURE OF CONTRACTS (1) In PHP Millions 88% SPOT >21 YRS revenue from 12% 14% long-term contracts WESM, 2,930 DU, 3,564 1-2 YRS 72% 11-20 YRS NGCP, 701 15% revenue from 10% Transco, 1,535 contract tenors DU, 3,360 of >6 yrs 25,384 3-5 YRS DU, 3,904 1% 41% expanded revenue base from contracted commercial clients NPC, 9,391 6-10 YRS SPOT 1-2 YRS 3-5 YRS 6-10 YRS 11-20 YRS >21 YRS 48% 12% - - - - - WESM NGCP - 3% - - - - - 12% 1% 11% 3% 14% DU NPC - - - 37% - - (1) Consolidated revenues as of September 30, 2016 TRANSCO - - - - 7% - 9 Company Introduction
HOWEVER, REPORTED EARNINGS HAVE BEEN VOLATILE 638 770 1,181 1,331 1,262 1,262 1,262 1,446 1,455 513 132 411 150 (69) 0 0 184 9 - 49.4 MW + 49.4 MW + 132.0 MW + 106.0MW + 150 MW + 49.4 MW Nasulo + 5.0 MW Bacman • Acquired geothermal concessions - 20.0 MW Nasuji N.Negros Pantabangan- Mindanao BacMan I & II N. Negros overseas Unit 2 - 20.0 MW + 463.4 MW + 150.0 MW + 4.16 MW Masiway I & II + 305.0 MW Mahanagdong, Botong Burgos Burgos Solar + 5.0 MW Bacman Malitbog & Palinpinon & Optimization Tongonan Unit 1 EDC TODAY Cumulative MW Current MW (AS AS OF OF 3Q Q 2016) 6) 2007-2015 ( CAGR ) RE REVENUES Customer Base 34,360 MW cum 9.6% Revenues 6.8% 30,867 10.8 Bn DUs EBITDA 6.8% 9.4 Bn NPC 28,369 RNIA 3.9% 2.9 Bn WESM 25,656 24,540 24,153 1.5 Bn TransCo EBITDA EB 0.7 Bn NGCP 20,678 20,527 19,007 18,680 17,922 17,330 Technology 15,641 13,748 13,238 1,169 MW Geothermal 11,859 10,712 10,324 150 MW Wind RN RNIA 132 MW Hydro 6.82 MW Solar 9,197 8,798 8,522 Geography 7,276 6,638 6,568 6,243 5,690 4,459 Philippines Chile Indonesia Peru 2007 2008 2009 2010 2011 2012 2013 2014 2015 10 Company Introduction
WE HAVE CLEAR ACTION PLANS TO REDUCE/ELIMINATE VOLATILITY RISK FACTORS INITIATIVES IMPACT Power plants: “Midlife” stage Re Retro trofit agi ging g pl plants ts to o enha nhance ove overall Power plant lant br brings abou bout t reliability iss ssue ues reliability ty reh rehab CAP CAPEX Geography: Project Ge t si sites are Typ yphoon n pr proo oof f cr critical powe power pl plant t Ty Typhoon proo roofin ing situ si tuated a long the “typhoon” belt com components CAPEX/OPEX CA Re Re-negoti tiate exp xpiring ng cont contracts to o Market: Ma t: Ma Margin sq sque ueeze due due to o low ow Mit itig igate mar argin in commodity com ty pr prices pr preserve revenu nue ba base sq squeeze Ge Geoth thermal Re Reso sour urce: Na Natu tural Advanced techn Ad hnologies drive company’s Main intenance replacement well dr drilling st strategy decline of dec of reser servoir pr pressure CAPEX CA Ex Expand to o FiT-suppor orted tech chnolog ogies Geoth Ge thermal Gr Grow owth th CAPEX: : Do Domestic ic gro growth Significant amou Si mounts ts requ quired and nd acc ccess mul multi ti-late teral fina nancing to o miti mi tigate te exp xploration on risk sk upfr upfron ont FCRS: : Moun Mounta taino nous locat ocation on Insti In stitute te a proa oactive land ndslide mi miti tigation Ty Typhoon proo roofin ing expos oses inf nfrastructu ture to o pote potenti tial strategy st CAPEX/OPEX CA landslide risk sk 11 Company Introduction
EQUIPMENT RELIABILITY & RESILIENCY
OUR POWER PLANTS ARE AT MIDLIFE STAGE AND REQUIRE SUBSTANTIAL CAPEX FOR IMPROVED RELIABILITY UNPLANNED OUTAGE FACTOR (UOF) ≥ 5% UOF 30.0% Leyte Optimization 27.66% 25.0% Tongonan I 14.66% 20.0% Upper Mahiao Bacman II 17.19% 12.77% 15.0% 10.0% Mindanao I 8.17% 3.0% 5.0% UNPLANNED OUTAGE FACTOR (UOF) Palinpinon I < < 5% 5% UOF 2.21% 2.5% Mahanagdong Mindanao II 1.74% Nasulo 2.22% 2.0% 1.49% Malitbog 1.16% Palinpinon II 1.5% 1.18% Bacman I 1.16% 1.0% 0.5% 0 5 10 15 20 25 30 35 END OF DESIGN LIFE (HIGH) PLANT AGE, in years Leyte Bacman END OF DESIGN LIFE (BASELINE) Southern Negros Mindanao END OF DESIGN LIFE (LOW) *As of December 31, 2015 14 Equipment Reliability & Resiliency
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