Our Value Chain Our 2015 Highlights

Sustainability is at the core of EDC

Our business processes and activities allow us to deliver clean, abundant and renewable energy on a national scale. Each step, from resource management to power generation, is fueled by the commitment to take care of the environment and create a positive impact on the society. The EDC value chain shows a continuum of efforts and investments to harmonize our every action with nature and our communities. Through this, we generate sustainable energy with little impact on the environment while uplifting the lives of our customers, communities and countrymen.

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G4-DMA Electric Utilities Specific

Availability, Reliability, and System Efficiency. EDC has set its target reliability factor at 99% and target availability factors of 94-96% across all power plants. Likewise, we have a set a target of 99% reliability for the transmission lines, and shall continue to construct transmission lines in remote areas and provide power sources at the end of weak grids to comply and support the system reliability requirements of the national grid.

We undertake equipment retrofit on major components to increase efficiency of the units, improve reliability with the use of advanced technologies, provide shorter maintenance duration, improve its potential to operate at a higher capacity, and utilize the replaced equipment as spares. In terms of turbine retrofit, we increase efficiency by optimizing steam consumption. We also aim to address reliability issues of our assets with the use of the latest technologies in steam turbine design. Beyond 2014, we have already lined up projects for turbine and generator retrofit and prioritized assets that require the retrofitting approach.

We regularly conduct maintenance practices but make sure observe two years of planning and preparation prior to the execution of any Major or Minor Planned Maintenance Shutdown. Major planned maintenance shutdown (PMS) takes place every four years while minor planned maintenance shutdown every two years. We usually target an outage duration of 18 days for the major PMS, and 10 days for the minor PMS unless there are emergent or corrective works that require immediate action. We also have long-term General Framework Agreements on major and specialized work such turbine and generator repair, condition assessment and inspection, and the maintenance servicing of plant air compressors, overhead crane, and main generator and compressors.

Research and Development. At the core of our operational excellence is the strength of our research and development. The company seeks to constantly undertake R&D in such innovative areas as improving energy conversion efficiency of power plants, recovering waste heat energy for productive use, and mitigating other energy losses to improve efficiency, reliability, and availability of power and steamfield facilities and equipment.

EDC’s deep commitment to environmental stewardship is beyond compliance. We aim to not only to safeguard the environment but also to actually enhance forests and biodiversity in areas where we operate. By protecting and enhancing the forest cover in our work sites, we ensure the delivery of optimum forest goods and services that not only help in the recharge of the geothermal and hydropower reservoirs but also serve the various publics and industries that are dependent on the watershed.

Materials and Energy. EDC selects products and equipment that do not contain hazardous substances or components in excess of prescribed regulatory limits. We prefers those that can be recycled or reused; use energy efficiently and do not emit pollutants such as excessive smoke, noise, dust, heat, or radiation; and are equipped with anti-pollution devices. EDC also continuously encourages its employees to subscribe to a “paperless” program for internal communications. The initiative is to avoid the use of trees in paper production.

Water. Improved water management is a constant priority and we make sure that we comply with all regulations and standards concerning water use, withdrawals, and discharges in our areas of operation. We address water management at a larger scale, i.e., at the watershed level, with our geographic information system–assisted Watershed Management Plan. Our Water Budget Study, which simulates the water balance contribution at the catchment scale at each geothermal area and assesses our annual discharges, has allowed us to look into a more in-depth hydrological or groundwater study to predict aquifer response to future climatic or land use changes, and better influence our strategic business units (SBUs) in formulating more responsive and strategic watershed management approaches. We also collaborate actively with the external stakeholders for forest protection, forest rehabilitation, and restoration and upland community development. We are in the process of improving program interface and feedback mechanisms for more efficient water monitoring and watershed management.

Biodiversity. A geothermal reservoir can be sustained by a healthy forest environment. Our programs seek to enhance the biodiversity of the project and the concession areas; ensure the positive outcome from the mitigating measures and existing biodiversity conservation efforts against identified biodiversity impacts from the different phases of project development; and improve the company’s reputation as environmental steward. We favor the use of indigenous, premium, species in our reforestation efforts, support a “no hunting policy” within our reservation areas, and protect and create wildlife sanctuaries. We encourage integrated pest management in EDC plant nurseries and plantations, and if absolutely necessary, use them only through applicable operational control procedures.

All company operations are covered by the required forestry permits in compliance with relevant forestry and wildlife laws. We follow an Integrated Management Plan (IMP) and Comprehensive Development and Management Plan (CDMP) for forested areas, and strictly enforce forestry laws within the geothermal reservations as mandated by Executive Order 223 and as part of EDC’s deputized role in managing the watersheds. For monitoring biodiversity parameters, we have permanent forest plots. We use the biodiversity data to enhance our biodiversity management plans and undertake environmental impact assessments. Partnerships with the academe (University of the Philippines – Institute of Biology) ensure greater accuracy and transparency in our monitoring.

Emissions, Effluents, and Waste. Complying with applicable pollution control laws, regulations and standards—such as the Philippine Clean Air Act of 1999, the Ecological Waste Management Act of 2000, the Philippine Clean Water Act of 2004, and the recently institutionalized Executive Order 174 (“Philippine Greenhouse Gas Inventory Management and Reporting System”)—is paramount to EDC. We have groundbreaking mechanisms for a zero-discharge system, continuous air quality monitoring, third-party multi-sector monitoring, and regular training of community members as first responders during emergencies and disasters. We continuously improve our waste management protocols and engage the services only of DENR-accredited third party contractors for the treatment and disposal of solid and hazardous wastes. We equip our personnel and sub-contractors with the appropriate protective equipment and training.

Products and Services. Our goal in the next five years is to have a total capacity of 1,500MW of geothermal power and 200MW generated from wind projects. To support this, we aim to expand from our existing fields in the Philippines, develop green fields locally and secure additional geothermal concessions. We continuously sustain high-quality steam volume to maintain the reliability of our products. We choose suppliers and service providers whose track record and permits are in conformity with EDC’s strict Environmental Management System requirements.

Compliance. Our goal is to maintain zero violations in all our projects, as well as zero environmental fines and penalties. Beyond compliance, we seek new opportunities to reduce risks in the workplace by implementing safe operating procedures, employing clean technologies and waste-minimization strategies, promoting scientific investigations and sound management programs, and guaranteeing emergency preparedness at all times. In this way, we safeguard the health and safety of our employees and the communities where we operate.

Environmental Expenditures. We proactively invest where we make the most difference: environmental performance. EDC annually allocates a budget in support of environmental programs and measures on the upstream side of the business process. Funds are allocated for environmental baseline profiling, impact assessment, licensing, waste prevention and minimization, and monitoring. This commitment finds concrete expression in EDC’s Corporate Environmental Policy and Code of Conduct and Business Ethics.

Supplier Environmental Assessment. Our contract with suppliers mandates the compliance with all existing rules and regulations, including, but not limited to rules on environmental compliance, security, access, safety, health, and hazardous material management. It also requires that contractors take all reasonable precautions to ensure safe working procedures and conditions for performance on company premises. We conduct due diligence on the compliance of potential suppliers with contracts relating to hazardous waste management. The environmental criteria used are: valid environmental permits, licenses and clearances; provisions for proper handling and storage; proper treatment and disposal process; adequate emergency response; provision of trained personnel to manage hazardous wastes; accuracy and completeness of reportorial and certification requirements; compliance with Environmental Monitoring Plan or environmental monitoring schedule and regulatory standards; and overall environmental compliance history.

Environmental Grievance Mechanism. We have a grievance mechanism in the form of internal and external procedures. Specific departments are responsible for handling environmental and socio-economic related complaints received from the stakeholders following the established grievance mechanism. If the complaint has corresponding environmental claims, EDC has mechanics for handling these claims, which are also outlined in the Multipartite Monitoring Team's (MMT) Manual of Operation. To ensure objectivity and transparency, this is handled by the Environmental Guarantee Fund Committee, which consists of MMT members (i.e., representatives from the local community, city and provincial offices, Department of Environment and Natural Resources, Environmental Management Bureau, Department of Energy, a non- government organization, and a People's Organization, as applicable).

The provision of clean renewable power is a critical factor of national development. Thus, our standard for leadership and excellence goes beyond the bottom line. We believe we do good business by doing good.

Throughout our value chain, we deal with various publics and commit to uplifting the lives of our internal and external stakeholders. These partners in social development include our employees, contractors, suppliers, host communities, energy industry alliances, media, the academe, non-government organizations, people’s organizations, local government units, government regulatory agencies, and our customers.

Our employment practices and workplace culture seek to bring out the best in people, and our corporate social responsibility programs conform to international best practices and respond to global investor expectations concerning sustainability. We seek to protect the human rights and enhance development opportunities as we deal with them.

To us, this is what it means for a company to be Powered by Good.

Employment. We encourage sustainable value creation for our employees through an established performance management system and individual development plans and the design of our compensation and benefits package. We highlight the need for regular discussion between the managers and employees on career and individual development. Our compensation programs is guided by principles that enable us to achieve our primary reward objectives, which are: to keep rewards competitive in the relevant markets; to align rewards with the individual, team performance and company’s performance; to send the right message; and to deliver the appropriate total value. At the same time, EDC strives to identify the optimal rewards and recognition mix i.e., monetary and non-monetary, to attract, retain, engage and motivate effectively all employees.

Labor-Management Relations. We seek to maintain good management-employee relations to promote industrial harmony in the workplace, which is characterized by continuous communication and dialogue, good faith and transparency, fairness and cooperation. A labor-relations policy is found in our Policy Manual, and there are provisions for the creation of labor-management councils in all our collective bargaining agreements.

Occupational Health and Safety. We seek to promote positive safety culture across the organization. Our new Corporate Health and Safety Policy provides for a safe and healthy working environment for all employees, contractors, and various stakeholders. Our Health and Safety Center of Excellence translates the policy into health and safety strategies, programs, and standards for uniform and consistent information and application across all units of EDC. We also comply with international guidelines and standards on labor and occupational health and safety (OHS).

We have fleet-wide safety training with experts for employees and contractors to ensure safety management throughout operations. We have a Contractor Health and Safety Management Program requiring them to attend and pass the Safety Passport Training before entry and work in EDC workplaces. Our third-party agreements also require compliance with the Independent Contractor Health, Safety, and Environment Requirement.

We collect, maintain, and monitor all necessary health and safety performance data through incident reporting and record management to measure the performance and effectiveness of the Health and Safety Management System and facilitate its continual improvement. Regular assessments and internal and external audits seek to ensure the effectiveness of the management system in managing OHS risk. Our targets are zero fatality, zero lost-time incident, and a total recordable incident rate of 0.1.

Training and Education. EDC trains its employees to be the best in their chosen fields of expertise. We believe that a highly trained and motivated employee can fortify the company’s geothermal leadership position and its reputation for global excellence. To maintain this alignment, it is our policy to support the employee’s training and education both in the Philippines and abroad and finance relevant post-graduate courses and training in specialized non-degree courses. A leadership development program supports succession planning and management, and we make it a point to monitor the career development of each staff. We ensure the provision of skills management and lifelong learning programs for the employees’ continued employability or their transition to retirement.

Diversity and Equal Opportunity. We believe in upholding equal opportunity in the workplace. Our Wage and Salary Administration Policy states that employees who demonstrate their abilities through satisfactory job performance are given preference for promotions and upgrading opportunities. It is also our policy to accord courteous reception to everyone seeking employment with the company. Employees are appraised and compensated based on their performance and not their gender.

Supplier Assessment for Labor Practices and Impacts on Human Rights. EDC’s commitment to protect labor and promote employee rights extends to its suppliers. We only deal with legal contractors that comply with labor laws and have no labor or human rights cases filed against them. Our contract terms and conditions stipulate that the independent contractor must strictly abide with all applicable laws pertaining to labor, employment, and contracting. The supplier must fulfill all its legal obligations to its personnel, such as compensation, wages and or fees and all mandatory benefits related to labor, social security, health and taxes. Part of the vendor’s documentary requirements for payment is the submission of an affidavit of compliance with minimum wage, and other mandatory statutory benefits of the government, such as SSS and Philhealth.

Labor Practices and Human Rights Grievance Mechanisms. ur Whistleblower policy allows employees, customers, shareholders, as well as other stakeholders to raise and report serious concerns involving labor practices and human rights violations, including illegal and questionable activities or omissions, unethical behavior, fraud and other malpractices prior to seeking resolution outside the company without fear of harassment, retaliation, or adverse employment consequence. Our Whistleblower Policy laid down the procedures for whistleblowing, as well as the rights and responsibilities of the involved parties.

Investment. We believe in upholding fairness in all our transactions. While our Code of Conduct and Business Ethics protects the interests of the company, we also accord similar protection to our supplies and contractors. We are working towards an accreditation system that will promote and encourage our suppliers, vendors and contractors to conform to a procurement policy that includes human rights–specific requirements for commercial contracts.

Non-discrimination and Abolition of Child Labor. We employ people based on their qualifications without regard to sex, race, color, creed, religion, or political affiliation. Our Policy Manual ensures against discrimination and hiring applicants below the allowed hiring age of 18 years old. We work closely with partner Local Government Units (LGUs) in terms of employing local residents and members of cultural minorities who are able to comply with the requirements and procedures of recruitment and hiring.

Freedom of Association and Collective Bargaining. We respect the rights of employees to form organizations in accordance with labor laws, and this is embedded in our Labor Relations Policy Manual. We strive to comply fully with labor laws and our President is directly responsible for this aspect of our business.

Forced and Compulsory Labor. We make sure to accord employees their rights in all aspects of their employment with the company. EDC fosters a results-oriented culture and guarantee the just compensation of all its employees. Company policy prohibits forced and compulsory labor.

Indigenous Rights. We are cognizant of the presence of indigenous peoples (IPs) in some of our project areas and, as such, are sensitive to the protection of their culture and way of life as we conduct our business and interact with them. The welfare of our partner IPs is a top priority, and we are guided by the principles and policies of the National Commission of Indigenous Peoples on the protection of IP rights when engaging them. Our entry to IP areas is always preceded by free and prior informed consent and we make sure to participate in Ancestral Domain Sustainable Management planning and tribal federation meetings.

Local communities. We see our presence as a means to help catalyze communities into positive and productive action so that they can ultimately bring about their own development and break the cycle of poverty. Guided by the Corporate Social Responsibility (CSR) Policy, we enhance the positive impacts we bring to our partner communities and address development issues such as poverty and lack of access to basic services. Through it, we also seek to maintain the high social acceptability for all our power projects.

Systemic and long term, our Community Partnerships programs on health, education, livelihood, and environment (HELEn) are undertaken in 44 partner barangays in our project sites. HELEn programs are set in a five-year roadmap for improved impacts and measured based on quantitative targets. Impacts are also measured based on project objectives or on simple cost-benefit analysis. Each project is also subject to monitoring and evaluation processes such as the Social Acceptability monitoring, Sustainability Assessment Tool, and impact assessments following widely acceptable methods based on local and international literature. In the absence of any local CSR regulation, EDC’s social development initiatives are guided by international standards and best practices in community engagement. We submit CSR accomplishment reports to financial and regulatory agencies annually and publish annual sustainability reports.

Anti-corruption. EDC has anti-corruption programs that extend beyond detection and prevention of fraud and other corrupt practices, and supports a culture where unethical practices are highly discouraged and strictly prohibited.

Public Policy. We cooperate with and support the Philippine government in the furtherance of policies expressed in relevant laws and regulations, including compliance with requirements. We actively participate in government consultations on new and upcoming laws, rules and regulations affecting our business. We do this through the means made available by the concerned government instrumentalities, such as the submission of position papers and participation in hearings and consultative technical proceedings. In the proper fora participated in by government agencies and/or other stakeholders, we conduct briefings on our operations, plans or expert views, as may be relevant.

Compliance and Anti-competitive Behavior. Compliance is one of the cornerstones of EDC's leadership in the renewable energy industry. Our Board, management, and the employees are committed to good and sound corporate governance practices anchored on the principles of fairness, accountability, transparency, and integrity. We remain steadfast in ensuring that our actions and decisions are conducted ethically and professionally, going beyond mere compliance with existing laws, rules, and regulations. We have revised our Corporate Governance Manual to formally incorporate the stakeholder principle in corporate governance and expand the scope of responsibility to all other stakeholders of the company. These stakeholders include our shareholders, our employees, our creditors, our country and our partner (host) and affected communities.

Supplier Assessment for Impacts on Society. EDC deals only with legal entities. Current assessment practices ensure that the vendor has ownership (in terms of titles, rights, and interests) on the goods and services offered to the company. We require every vendor to have legal personality and authority to enter into a contract. Suppliers must be duly registered with all the required agencies, and have no pending legal action against them. Through the contract, the supplier guarantees EDC that its ownership of goods and services offered, do not infringe on the property rights of any other person. Vendors are also required to submit a signed conflict of interest statement, as part of its accreditation requirements to disclose that they are not related to any director, officer, or employee of EDC up to the third degree of affinity or consanguinity. EDC’s procurement also promotes economic inclusion of community-based organizations, to create positive impact on the economies of the communities where EDC operates.

Grievance Mechanisms for Impacts on Society. All stakeholders are encouraged to raise their concerns and complaints, together with detailed evidence, using our hotlines (+63 2 982-2202 or +63 917 863-4260). All reports are acted upon and treated with strict confidentiality in accordance with the provisions of EDC‟s Protected Disclosure Policy.

Customer Health and Safety, and Customer Privacy. While we are not involved in the direct distribution of electricity, we still seek to address relevant issues on privacy, health, and safety that may affect our customers, contractors, distribution facilities and communities. For instance, we have policies that always seek to protect and uphold the rights of electric cooperatives. Our Marketing and Sales Group works in tandem with our Corporate Communications Group in protecting the privacy of our customers.

Marketing Communications.Our goal is protect, uphold, and promote EDC’s reputation as a global diversified renewable power company, and to aggressively spread awareness of the importance and benefits of using renewable energy—and to do so in an ethical and professional manner. We disseminate properly vetted information, education, and communication programs, and marketing and advertising materials, making sure that our disclosures and practices are guided by the principles of truth in advertising, promotions, and communications. Our advertisements are produced in accordance with the Ad Standards Council's principles in responsible advertising. We commission third-party agencies to objectively conduct reputation surveys in key areas where we operate. We also conduct an annual stakeholder consultation to find out what our stakeholders want us to disclose and improve on as far as the economic, environmental and social impacts of our operations are concerned.

Provision of Information. We make it a point to utilize local networks and translate our informational materials to local languages, and to maintain open communication lines with both media and non-media networks. We have produced information materials like videos and brochures on the geothermal process in English, Spanish (for our stakeholders in Latin America), Filipino, and in the local dialect Cebuano to enable more people to understand and appreciate our primary business, which is still geothermal energy. We likewise have continuous information campaigns on energy conservation to guide our stakeholders on the proper use and conservation of electricity. We also have bi-annual community satisfaction surveys to assess the effectiveness of our external engagements and community programs. Monitoring and evaluation of our practices make us better informed of what we need to do to make more people aware of the benefits of renewable energy and, in the process, uphold stakeholder support and ensure unhampered business.

Compliance. We go beyond mere compliance with existing laws, rules, and regulations, and make sure our actions and decisions are responsible and ethical. We make sure to continuously challenge ourselves and seek ways to improve our standards while considering innovations to level with international best practices. As we expand our sustainable energy projects from geothermal energy development to include other clean and renewable energy ventures, taking them to international shores, we will continue to sustain and strengthen our corporate governance initiatives to ensure that our businesses will not only be fully compliant with existing laws, rules and regulations but will be carried out in a sound and efficient manner and with the best interests of all our stakeholders in mind.

EDC is a global diversified renewable power company. As the world's largest vertically integrated geothermal company, we maintain our leadership in the Philippine renewable energy industry with our portfolio of geothermal, hydropower, solar, and wind power assets. We anchor our growth agenda in a) the acquisition of key government geothermal privatization projects; b) development of existing geothermal capacity; c) diversification of its renewable energy portfolio; and d) the establishment of viable operations in Asia, Latin America, and Africa.

Economic Performance. We maintain healthy cash flows from long-term contract agreements and a strong financial position to fund our portfolio expansion, improve the profitability of energy projects in the pipeline, and ensure regular strong returns to shareholders. We continuously improve our treasury, financial, accounting and budgeting systems to tighten fiscal control, and promote corporate governance and better risk management. We have an extensive capital expenditure program for the optimum availability and reliability of all power generating assets, including the climate proofing of the cooling towers. EDC fully complies with the corporate governances rules and regulations of the Securities and Exchange Commission and the Philippine Stock Exchange (PSE), particularly with PSE's Trading Rules and Restrictions to protect the interest of all shareholders.

Market Presence. Economic prosperity in areas where we operate is a meaningful indicator of how well we contribute to local economic development. It is our policy to directly award the procurement of goods and services to locally based suppliers, continuously build the capabilities of community organizations and cooperatives for economic inclusion, and prioritize qualified applicants from our host communities.

Indirect Economic Impacts. Our Community Partnerships program empowers stakeholders and partner communities to become agents of their own development. We help uplift the standard of living through focused initiatives on health, education, livelihood, and environment; royalty payments for host communities of power projects; direct investments in community projects; and ecosystem services for the preservation of the watersheds in the project sites. Our bi-annual social acceptability survey and CSR key performance indicators monitor the effectiveness of these initiatives and ensure lasting inclusive growth for our partner communities.

Procurement. The quality of suppliers plays a critical role in our success. Supply Chain Management allows EDC to undertake strategic sourcing for uninterrupted supply of goods and services, optimized inventory levels, vendor accreditation, spend analysis and market studies, and warehousing and logistics, among others. Vendor selection is based on factors such as price, technical capability and expertise, compliance with accreditation requirements, financial capacity, safety practices, and long-term sustainability. Because Shared Economic Value is a sustainability focus area, sourcing strategy guidelines promote economic inclusion by providing for local purchasing and direct award to qualified locally based suppliers and contractors. We regularly communicate with our vendors through assemblies held at each SBU, including the Head Office. Regular monitoring and benchmarking are also conducted through internal and external auditing.