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Social & Relationship Capital

Helping Uplift Communities amid Challenging Times

Our social and relationship capital represents the stock of resources created by the synergy of EDC’s relationships with its different stakeholders. These include our long-standing ties with host and neighboring communities, relevant government units and agencies, and customers and supply chain partners. We also recognize our dependence on the public sector to strengthen our social license to operate and ensure the continuity of our operations.

We at EDC strongly value sustainable development and inclusive growth. As such, we constantly strive to ensure that our business operations work in harmony with the environment and the communities wherein we operate. With support from our different stakeholders, we remain committed to the promotion of social prosperity and environmental stewardship through the implementation and management of a comprehensive, responsive, and sustained program on social responsibility.

 

HELPING UPLIFT COMMUNITIES AMID CHALLENGING TIMES

At EDC, our social capital encompasses the forged collaborations and relationships within the company, as well as between the organization and all its stakeholders, including its host communities, partner organizations, national and local governments, and even its suppliers and customers.

Our revitalized mission prioritizes the welfare of present and future generations and redefines social capital as lasting partnerships that amplify our core values and positive impact within and between our communities, amongst our groups of stakeholders and other networks, as well as our ability to share information and resources to enhance their individual and collective well-being. The lasting partnerships we build also provide a platform to amplify our core values and enable others to join us in transitioning to a decarbonized energy future.

In 2020, the relationships that we have nurtured were indeed put to the test by numerous challenges, the most disruptive of which was the COVID-19 pandemic. Our collective response to the public health crisis redounds to not just the strength, but also the reach and resilience of our social capital.

It is reflected in our pampamilyang malasakit—the genuine familial concern, common values, and shared norms we uphold in our key stakeholder relationships. We constantly engage and strive to build trust with our customers, suppliers, business partners, host communities, and other external stakeholders to further strengthen our social license to operate.

Our key stakeholders’ confidence in EDC helps garner support for our activities and future plans, thereby ensuring business continuity. Additionally, this social license also helps garner public acceptance, supply chain collaboration, government support, and customer loyalty, all of which ultimately contribute to EDC’s uninterrupted business operations.

We strive to not only maintain harmonious relationships with our host communities and other stakeholders but more so to elevate their lives by ensuring that, as the business progresses, our host communities and other stakeholders also progress with us. We endeavor to uphold their rights consistent with our visions to improve lives by enabling social and national development.

Our actions towards our different partners in progress are anchored on our regenerative path, our value of social justice, and the social safeguards in our corporate policies, specifically our policies on corporate social responsibility (CSR), human rights, and culture and indigenous peoples (IP). We regularly assess possible risks related to our social capital and then develop appropriate measures to address these identified risks, with proper guidance and oversight from the Management and the Board of Directors.

As a leading renewable energy provider, EDC takes its mission to go beyond sustainability by investing in programs that enhance the environment and empower its partner communities. Our new mission of fostering regenerative development entails forging collaborative pathways with our various stakeholders.

For more than 40 years, EDC has maintained close partnerships with its 18 host cities and municipalities across its project sites in Albay, Sorsogon, Leyte, Negros Occidental, Negros Oriental, Cotabato, and Ilocos Norte. These include 49 host barangays and primary partner barangays, 28 secondary partner barangays, and 44 tertiary partner barangays. We have also maintained close collaboration with national government partners and forged strategic partnerships with non-governmental organizations (NGOs), academic institutions, and other private-sector partners in implementing our various CSR initiatives.

In 2020, EDC invested a total of PHP274.3 for its banner CSR programs in education and the environment, as well as for its other local need initiatives on resiliency building, indigenous peoples’ (IP) upliftment, solid waste management, and youth engagement. This amount also includes assistance to the national government, partner local government units (LGUs), host communities, and other stakeholders for COVID-19 response.

 

EDC supports scholars, partners for distance learning

 

Education cannot wait, says Education Secretary Leonor Briones. Cognizant of the challenges brought about by the COVID-19 pandemic, EDC aimed to help its scholars continue their education in the new normal.

As schools shifted to online and other digital modes of learning, we prioritized providing our scholars under the SIKAT Program with the necessary technologies to equip them for distance learning in the new normal. EDC partnered with ASUS, a Taiwan-based multinational electronics company, to provide our SIKAT scholars with free laptops. We also provided pocket Wi-Fi, and we realigned their stipends to now include a monthly internet allowance.

Additionally, we also supported educational institutions in their back-to-school efforts despite the pandemic. In Leyte, EDC teamed up with the Department of Education (DepEd) and the Delsan Office Systems Corporation to provide high-quality printers and toners for 16 schools, as well as school supplies for 23 partner schools in the province. In Burgos, Ilocos Norte, on the other hand, EDC donated reams of bond paper to the DepEd to support their Modular Distance Learning Program.

In 2020, the Mount Apo Foundation, Inc. (MAFI), one of the educational foundations EDC supports, also continued its scholarship assistance and online monitoring support for its 17 college scholars. MAFI provided tablets and monthly internet allowances to equip its scholars for distance learning. Cognizant of the negative effects of the pandemic on mental health, MAFI also offered its scholars access to professional counseling services through MyGolana.

Mapping the impact of EDC’s collective COVID-19 response

 

In March 2020, President Rodrigo Duterte issued Proclamation No. 929 which placed Luzon under an enhanced community quarantine (ECQ), while a six-month state of calamity was enforced for the rest of the country. Various provinces were also placed under community quarantine following the rise of COVID-19 cases in their localities.

Throughout this period, EDC remained at the forefront of spearheading COVID-19 response efforts, especially within its host and neighboring communities. Our speedy and strategic response to the crisis redounds to our strong capabilities to mobilize our leaders and employees towards a common cause. Together, we were able to support frontliners and aid the most vulnerable sectors of society hardest hit by the effects of the pandemic.

From March to December 2020, we extended a total of PHP165 million worth of support for COVID-19 response, which benefited more than 5,400 individuals and 25,000 households. In addition, EDC employees, through their own initiatives, also donated a total of PHP2.6 million to provide food assistance and personal protective equipment(PPEs)for healthcare and service frontliners.

We also provided relief assistance to host communities during the community quarantine and border lockdowns that led to the shutdown of several businesses and affected the public’s immediate access to food supply. Across the project sites, we deployed container vans that served as temporary accommodations for medical frontliners or hospital extensions for COVID-19 patients. Recognizing the importance of early detection, isolation, and treatment in the fight against COVID-19, EDC supported eight projects to develop new or expand existing molecular testing centers in its project sites.

As of this writing, EDC remains one with the nation in its continuing fight against the COVID-19 pandemic. We will continue to support our frontliners and aid our countrymen in need during this trying time in our nation’s history.

EDC provides temporary power to Bicol during Typhoon Rolly

 

As part of our disaster preparedness and response initiatives, EDC aids communities affected by natural disasters and calamities. This includes the provision of relief goods, equipment for clearing operations, financial assistance, livelihood initiatives, and other forms of support needed by the community.

In the wake of Super Typhoon Rolly in November 2020, most of the Bicol region found itself without electricity. As a Category 5-equivalent typhoon, Super Typhoon Rolly is considered the strongest typhoon that hit the country since Super Typhoon Yolanda, which made landfall in 2013.

While EDC quickly mobilized and provided support to its host communities in the Bacon- Manito Geothermal Project (BMGP), it also made efforts to serve the immediate power needs of Albay and Sorsogon—despite the lack of power supply agreements (PSA) with the local electric cooperatives. This move redounds to EDC’s capacity to look beyond business and look towards what benefits the community as a whole.

As such, with full support from the National Grid Corporation of the Philippines (NGCP), EDC worked with Sorsogon I Electric Cooperative, Inc. (SORECO 1), Sorsogon II Electric Cooperative, Inc. (SORECO 2), Albay Electric Cooperative, Inc. (ALECO), and other major commercial establishments in Albay and Sorsogon to temporarily serve their power needs in the wake of Super Typhoon Rolly. This move, in turn, also enabled EDC to provide electricity to two host communities, home to 400,000 households.

In addition, EDC also provided relief goods to households affected by the typhoon. In partnership with the Lopez Group Foundation, Inc. (LGFI), we distributed relief packs and bread to three severely affected host barangays in Guinobatan, Albay. Looking beyond our host communities in Albay and Sorsogon, we also distributed 2,650 sacks of rice in the provinces of Catanduanes and Camarines Sur. To aid in various post-typhoon clearing activities and monitoring works, we also loaned two pick-up trucks to the local government of Sorsogon.

Fostering self-reliant communities through social enterprises

 

In line with our goal of improving the economic well-being of our host communities, and fostering their self-reliance in the process, we support four social enterprises across our project sites in Albay, Leyte, Negros Oriental, and Cotabato. In all, these social enterprises generate sustainable livelihood for at least 600 households, all of whom are also members of five community organizations.

 

Manito Mangrove Ecotourism Project

Manito, Albay

EDC supports the Alliance of BacMan Farmers Association, Inc. (ALBAFAI) in their community-managed ecotourism enterprise within the 190-hectare mangrove forest in Barangays Cawit, It-ba, Buyo, and Manumbalay in Manito, Albay. The Manito mangrove was once degraded, but has since been restored into a closed mangrove forest through the BINHI program. As such, the project incentivizes the community as they continue to protect the forest and promote mangrove conservation. The enterprise will generate sustainable income for 318 households through tourism receipts, as well as provide employment through tour guiding, food services, and ecotourism operations.

 

Mt. Apo Sukkudanan Coffee Project

Magpet and Kidapawan City

The four-phased project, which is being implemented with the Coffee for Peace, Inc., also known as the PeaceBuilders Community, aims to capacitate the local coffee farmers from the Obo-Manovu tribe. This will also enrich the 40 hectares of coffee plantations in the ancestral domain of the Manobo Apao Descendant of Ancestral Domains of Mount Apo (MADADMA), which is located in Barangay Ilomavis and Magpet, Kidapawan City. The word sukkudanan is an Obo-Manovu term that translates to “united as one”, as the project also aims to promote solidarity and peace among the Obo-Manovu tribes through the coffee enterprise.

 

Handicraft Scaling-Up Project

Valencia, Negros Oriental

EDC supports the Balili-Cambucad- Tubigon-Malabo Farmers Association (BALCAMTUMA), which has been engaged for BINHI plantation maintenance in Barangay Malabo, Valencia, Negros Oriental. The association currently has more than 100 members, 28 of whom are weavers of unique bamboo-based handicrafts such as lanterns, food covers, and other household items. As such, the project aims to support the association in scaling up their handicraft production, expanding their product line, and tapping into other markets through partnerships.

 

TGP Coffee and Cacao Project

Ormoc City and Kananga, Leyte

Through the BINHI program, EDC established coffee plantations in Barangay Tongonan, Ormoc City and Barangay Lim-ao, Kananga, both of which are in Leyte. However, these plantations are not being used to their full potential. The coffee beans, while harvested, are not processed and commercially sold. Also, its current farm size is not enough to sustain a viable coffee enterprise. As such, EDC tapped two community organizations to help develop and expand these coffee plantations, namely, the Tongonan Farmers Association (TOFA) and the Lim-ao Farmers Association (LIFA). Through support from various partners, EDC will support these organizations in expanding the farms into a 45-hectare coffee plantation. With the emergence of high-quality chocolate production in the area, cacao will also be intercropped with coffee as a way to provide diverse sources of income for the farmers.

On top of these social enterprises, which are long-term initiatives, we also launched 17 short- term livelihood projects to provide income for households affected by the COVID-19 pandemic. From July to December 2020, EDC provided raw materials, start-up capital, and technical assistance to support various livelihood projects such as backyard vegetable gardening, tilapia farming, piggery and other livestock farming, coffee seedlings collection, and face mask production, among others. To date, these short-term livelihood projects have benefited a total of 1,568 households.

Our Approach to Social Responsibility

We remain cognizant of the direct and indirect impacts of our business operations to our host and neighboring communities within all our project sites.

Guided by our Corporate Social Responsibility (CSR) Policy, we strive to enhance the positive impacts we bring to our host communities and address development issues such as poverty and lack of access to basic services. We firmly believe that our presence helps catalyze our host communities towards positive and productive action.

Ultimately, our strategic CSR programs aim to empower our different stakeholders and partner communities towards becoming proactive agents of their own development to break the cycle of poverty and dependence.

We monitor and measure our impacts based on project objectives, quantitative targets, and simple cost-benefit analysis. We also monitor and evaluate each project through our bi-annual Social Acceptability Monitoring, Sustainability Assessment Tool, and Social Impact Assessment, all of which have been developed based on widely accepted local and international literature and methods. Our social development initiatives are guided by both local CSR regulations and international standards and best practices in community engagement.

Guided by a strategic framework, our approach to social responsibility supports not only the growth and profitability of our business, but also the continued protection and sustainability of the environment and its natural resources and the long-term improvement of the quality of life of all our host communities.

Our commitment to social responsibility is evident in how it is managed—it is an issue that is tackled at the highest level of our organization. Our board of directors has a CSR Committee, composed of at least three members of the board. As such, they provide leadership and oversight over the management of our strategic CSR programs, which, in turn, enable the company to deliver effective CSR initiatives that contribute greatly to our triple bottom line.

Our Corporate Social Responsibility Head Office Team (CSR-HO), on the other hand, oversees the systems and structures related to our strategic CSR portfolio and provides direction on policy implementation. As such, it provides technical assistance to our on-site CSR and Watershed Management Section (WMS), both of which form teams on the ground and at the national level which activate partnerships to help us achieve our strategic CSR goals.

Accordingly, EDC establishes a Community Partnerships Department (CPD) in each of its project sites across the country. At the community level, the CPD teams develop and operationalize our CSR agenda and serve as the company’s front-liners to implement its strategic CSR programs and activities.

Our 2020 Integrated Report

 

Our Integrated Report tells the story of our efforts to achieve our business objectives, hand-in-hand with our sustainability aspirations.

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One of the most powerful cartoons I’ve come across in a while is one by To New Yorker
Magazine which shows a man in a tattered business suit and around a campfire amidst a
future wasteland telling three children, “Yes they destroyed but for a beautiful moment in
time we created a lot of value for. Funny, but tragically so true of how the world works today.

We urgently need to overhaul how we relate with the Earth
if we want to keep it habitable for humans in the decades
to come. We don't have a choice.

The way we measure progress and success in our world is severely broken. Countries are
judged by how fast gross domestic product (GDP) grows, and corporate stocks are deemed
good investments also by how fast they can advance their net incomes regardless of how
it’s achieved. Most successful business models are racing to spur consumption of their
products beyond what consumers really need. As a result, carbon emission trajectories are
leading us toward a catastrophic world that’s 3-6 degrees warmer. Human activity is warming
the Earth 5,000 times faster than the most rapid natural warming occurrence in our planet’s
past, and species are going extinct faster than at any period in geologic history. Microplastics
are already being found in dwelling in the deepest reaches of the Marianas trench as well as
the pristine Pyrenees mountains of France and Spain. These are but a few examples of the
widescale destruction humans are wreaking on our only home. The international no
organization (NGO) Global Footprint Network estimates that we already use up 1.5 Earths
each year just feeding our current level of wants and needs; that’s 50% more than our planet’s
ability to replenish 3the resources used up!

Dear Stakeholders,

Message from the EDC
Chairman and CEO

With every passing year, it becomes increasingly tougher to deny that our climate
is changing faster than previously imagined due to human activity. A large and growing
number of the world’s largest corporations participating in the Carbon Disclosure Project,
more than 75% as opposed to only 10% in 2010, now incorporate climate change into
their business strategies. I believe that today, we are living through one of history's great
paradigm shifts. An age wherein we’re only just beginning to realize the immense impact
we’ve had on the planet and that we urgently need to overhaul how we relate with the
Earth if we want to keep it habitable for humans in the decades to come. We don't have
a choice. There is no Plan B or planet B, as some would say.

Real and lasting shareholder value can only be had when we place the
interests of all our stakeholders, our customers, the planet, and humanity
at the center of everything we do.

Of course paradigm shifts are never easy. They never have been throughout history. But
as the environmentalist and author Bill McKibben rightly puts it: “the math is hard to
argue with; business as usual and growth as usual spell an end to the world as usual.
This is the one overwhelming fact of our lifetimes.” PricewaterhouseCoopers or PWC
quantifies what the world needs to do to keep global temperature rise to less than 2
degrees Celsius. They emphasize that we must reduce the carbon intensity of the
economy—the amount of carbon emitted per dollar of GDP—by 6% each year until 2100.
Although this number looks modest, it is nine times the current rate of important
being experienced in the world today; this only underscores the magnitude of the
transformation needed. At Energy Development Corporation and parent company,
First Gen Corportion, we believe our platform of businesses and our way-to-play are all
geared toward this goal.

Message from the EDC
Chairman and CEO

Our Geothermal plants are today the only large scale 24/7 sources of renewable energy
The relatively fixed pricing we are able to offer our electricity customers is a massive
advantage and gives them certainty at a time when our coal-based competitors cannot. In
addition, the massive transformation taking place in the company is exciting and promises
to transform us into a leaner but more robust and resilient player and competitor.
Our Natural Gas plants at First Gen are key to bringing down the carbon intensity
of the economy as they emit less than half of the carbon and only a fraction of the other
pollutants per kilowatt-hour relative to an equivalent-sized coal plant. This is key to
keeping the economy humming and our lights on, even as we transition to a decarbonized
world. Today, these plants run on the country’s only indigenous gas field
Camago-Malampaya, but we are currently preparing for the day these fields no longer
have indigenous gas through the development of what could be the country's first
Liquefied Natural Gas (LNG) import terminal. In December 2018, First Gen signed a joint
Development Agreement (JDA) with Tokyo Gas Co., Ltd. to push this forward. It's an
exciting time to be doing this as LNG suppliers worldwide are only just beginning to
innovate and show flexibility on gas contracts never before seen in the world of LNG
contracting. Just this April 2019, Shell and Tokyo Gas signed the world’s first coal-indexed
LNG contract. This signals that gas producers are now willing to fight head against
coal plants in competitive power markets, if they aren’t cheaper already. Our decision
several years ago to slam the door on developing any coal-fired power for ourselves
was prescient. Even as more coal- fired capacity comes on line globally, their utilization
and capacity factors are falling. International Energy Agency (IEA) figures for 2017 show
the average capacity factor of coal plants globally has fallen even more to 52.8%, down
from 59.3% in 2013. This is alarming for a technology whose economics only makes sense
when run at baseload rates of 70-80%. The implication is that many coal plants today are
being run sub-optimally and expensively. The fact that they are required to ramp up and
down frequently causes thermal fatigue of components, of materials, and corrosion that
negatively impact efficiency and emissions even more. Aside from the fact that coal-fired
power no longer has a place in a world that needs to decarbonize rapidly, its economics
are being rendered uncompetitive in grids increasingly being penetrated by more
intermittent renewable energy sources. Its days are numbered.

Message from the EDC
Chairman and CEO

Our world today teems with change and disruption. At EDC, we’re all incessantly
and purposefully “sensing the wind” and “reading the tea leaves”. And in such a
world marked by so much complexity, we must also keep our organizations alert,
as well as agile. But let me just say that real and lasting shareholder value can only
be had when we place the interests of all our stakeholders, our customers, the
planet, and humanity at the center of everything we do. The world’s paradigms are
shifting yet again and, as a company, we intend to help that shift in the best way
we can. It is amongst these great challenges where we intend to build the many
great opportunities that will foster true shareholder value.

Thank you for your continued trust and unwavering support.

Federico R. Lopez
Chairman and CEO

Message from the EDC
Chairman and CEO

Due to climate change, only hell is hotter than summer.

We now live in a world that has increased its temperature by 1.5°C from pre-industrial times
and at these levels 14% of the world’s population will experience intense heat waves at least
once in five years. Should things deteriorate further by half a degree, at a 2°C increase from
pre-industrial times, the effect will be 2.7 times worse: 37% of the world’s population will
experience severe heat waves at least once in five years. In 2018, Australia revised their
temperature charts and increased the upper limit to 55 degrees Celsius, or over 135 degrees
Fahrenheit, given what was experienced for a sustained period in the south-central part of
the country in 2018.

Hotter temperatures mean hotter oceans, because water absorbs an estimated 90% of the
heat in the atmosphere and radiant heat from the sun. The “hydrogen bond" between water
molecules is what allows water to absorb a significant amount of energy in the form of heat
before turning to vapor. However, once in vapor form, water rises into the atmosphere, and
the very same life-sustaining water becomes fuel for deadly typhoons and hurricanes that
bring with them torrential rains.

If the earth did not have water and was dry like Mars, our average temperature would be
negative 16°C. Because of the presence of water, the year-round average temparature of
the Earth is now 14°C. Averages have a way of lulling us into complacency until we are shaken
or impacted by terrible horrors, like Typhoon Yolanda in the Philippines, Hurricane Sandy in
New York, Hurricane Maria in Puerto Rico, Harvey in Houston (the costliest hurricane on
earth at USD125B in damage). The common thread among these events? They are all the
worst in either the history of those areas or the worst in centuries. And they all occurred in the
last 6 years.

The diametric opposite of typhoons, drought, is the other side of the same coin. From
California to Cape Town in South Africa, to Greece and Australia, drought has affected millions
of people. Closer to home, Manila is experiencing drought in this summer of 2019.

Dear Stakeholders,

Message from the EDC
President and COO

Our 2018 cover follows the expressive and visceral nature of the images we have chosen in
the past two years. It shows a striking image of what the future holds for us, if we do not
heed the call of the planet to pivot. The harsh reality of climate change is already felt, and
sadly, it is the most vulnerable members of society who bear the brunt of it.

We know the pivot will not be easy, especially in the face of significant vested interests.

The Intergovernmental Panel on Climate Change’s findings say that we may only have
until 2030 to avert “catastrophic climate change.” Despite the warnings however, action
has been slow. And in 2018, carbon emissions increased by another 2% from the previous
year. Scientists remain optimistic and cite the growth of renewable energy as a reason to
believe that the world can achieve the necessary reductions.

This continues to motivate us to do things better, to make a difference toward turning the
tide. Over the past five years, the Energy Development Corporation (EDC) and the rest of
the Lopez group of companies have decided to be the leaders in the business sector of
the Philippines in sounding the warning about the worsening effects of climate change
and the need for decisive action and enlightened choices. We know the pivot will not be
easy, especially in the face of significant vested interests.

Our Performance Report tells the story of EDC’s work-in-progress this year: our efforts to
achieve our business objectives, hand-in-hand with our sustainability aspirations. As
always, we keep track of the metrics that matter most to our stakeholders in alignment
with the framework of the Global Reporting Initiative (GRI) Standards.

Message from the EDC
President and COO

Bouncing back from a tough year

We tempered our expectations for 2018, given that we began the year with damage to
our facilities as a result of Typhoon Urduja, in December of 2017. Despite this setback, the
concerted efforts of our operational units, and inspired action from our employees,
helped us return our assets to service ahead of schedule. As a result of this, we ended
the year with a recurring income attributable (RNIA) of PhP9 billion, slightly ahead of our
2017 numbers.

We continued to execute our strategy with excellent results. We ended the year above our
target for generation. Our Nasulo and Palinpinon II power plants were also re-certified
for the 40 megawatt (MW) (+10MW) Ancillary Services Procurement Agreement (ASPA),
while our BacMan geothermal facility was fully contracted.

We adopted new ways of working and better practices in our operations with promising
results. For instance, majority of our planned maintenance activities were completed in
60% of the time, versus the previous 5-year averages. Fundamental changes have taken
place, such as the safety and medical clearances of contractors prepared a full month
ahead of the start of the activities, versus the old practice of doing this just prior to day
zero. We have also enhanced our reinjection management strategies to support our
efforts to reduce wasted heat and to ensure the recharge of our geothermal reservoirs.

Message from the EDC
President and COO

Taking the long view on sustainability and profitability

We are aware that challenges to the business will arise from time to time, such as natural
calamities or extreme weather. In response to these threats, we made smart investments
in resilience projects. Rather than implement risk reduction and resilience in potentially
hazardous areas, such as the steepest slopes most prone to landslides, we looked instead
at this through the necessary lens of high hazard against the potential value at risk from
the infrastructure in the area. From there, we have now prioritized those works which
mitigate the value at risk (VAR) of our assets relative to the hazard present. This way, we
are sure that we are investing in the right places where we can have the greatest risk
reduction. Using this VAR strategy, we completed 31 landslide mitigation projects in
BacMan, Negros, and Leyte in 2018. This crucial investment in resiliency is being
accelerated in 2019.

We are also investing in the growth and development of our people. People seek
opportunities to work for us because they appreciate EDC’s strategy. We have found that
EDC’s renewable energy focus has made us an employer of choice. Improvements in our
ways of working have given our employees greater flexibility to participate in and
contribute to over 100 simultaneous special projects, resulting in disperse decision-making
and improved accountability.

Our business also faces systemic and market-driven challenges. For example, the energy
sector will have to confront regulatory shifts and changes in tax regimes. This is par for
the course. We will also experience market shifts, which can be disruptive, both from
operational and pricing standpoints. An example would be the influx of non-
conventional, non-base load (intermittent) energy, like solor and wind. These energy
sources have significant impact on the grid, but do not have to shoulder the cost of
ancillary services.

EDC is prepared to face these changes by maximazing the cash generation of our assets.
We upgraded the capability of our plants in order to provide services that support grid
stability. These plans have been implemented, with investments in ancillary services
capability completed. Expanding our services offering has generated economic returns:
revenue from the sale of electricity as contingency and dispatchable reserves increased
143.5% from 2017, to P970 million in 2018.

Message from the EDC
President and COO

Making the shift to low carbon energy

While renewable energy is often seen as an alternative, EDC believes it is necessary and
timely to mainstream clean energy. Renewable energy is not only the environmentally-
responsible choice, but a wise business decision as well. EDC’s experience demonstrates
this, and we hope to convince even the doubters that the future of energy is in renewable
This commitment to clean energy is growing. In the United States, the mood on low-
carbon energy is changing. So much so, that one of the major US energy utilities has
pledged to go carbon free by 2050, and 80% carbon-free by 2030. This is only one utility,
in a wave of energy providers that have announced carbon-reduction goals.

A common theme across those committing to renewable energy is that their customers
are demanding low-carbon energy. And the energy providers, even mining companies are
listening. Renewable energy is not only the environmentally-responsible choice, but a
wise business decision as well. EDC’s experience demonstrates this, and we
hope to convince even the doubters that the future of energy is in
renewable.

In the capital markets, many large financial institutions have announced they will no
longer finance coal fired power plants. It is their belief that the assets will neither have the
capability to compete nor “the right to operate” based on the preferences of their
customers and other stakeholders such as local communities. For this reason, providing
financing for such assets are seen to be a poor medium- to long-term risk.

Increasingly, our customers are looking for cleaner energy choices, and we are happy to
oblige. Our role is not only to advocate for, but to convert consumers to, renewable
energy. More customers are signing up with EDC, with some choosing us because they
want to be powered by a pure RE company. Companies that have chosen to make the
switch believe it is a critical advantage: in fact, one customer that makes industrial
building materials told us that they want to be known as the first company in their
industry to be 100% powered by RE. We are encouraged by the small, but growing,
population of enlightened consumers that are demanding that the businesses and brands
they support show greater climate responsibility.

Message from the EDC
President and COO

EDC is proud and happy to partner with businesses that want to make positive
environmental change. Together, we will be part of a virtuous cycle that will contribute to
positive climate action.

Staying committed to our sustainability journey

In the last quarter of 2018, EDC completed the process of its voluntary delisting from the
Philippine Stock Exchange. Our delisting was a considered decision and part of an overall
strategy to support EDC’s long-term growth. The move to delist allows us greater flexibilty
over factors like leverage and dividend policies, without the need to excessively focus on
short-term results.
Our shareholders share this long-term focus with us. There is less attention given to
quarterly earnings, in favor of deliberate growth. This gives us the latitude and support to
explore investments in new Capital Expenditure, to test new technologies that alter our future
prospects, without the expectation of immediate results or instant returns.

While the Philippine Stock Exchange and the SEC have established guidelines for
mandatory sustainability reporting beginning in 2020, EDC voluntarily reported on
sustainability for the past nine years. We will continue this practice because we believe
that this is how we can best create and share value with society, and care for the
environment upon which we depend, and the we all share.

Message from the EDC
President and COO

Our clear path ahead

The strong beam from a beacon serves to shine a light on the way ahead, and while we
made some gains in 2018, our journey is far from over. One the business side, we are
confident in the path we are taking to grow and develop our portfolio, invest in our
facilities and our PEOPLE, and continue to support our host communities.

Strategy is fundamentally a choice that is executed well. EDC is committed to our choice
for renewable enrgy and we intend to deliver on our plans to optimuze our assets,
mitigate our risks and grow the business and our talent pool. It is our hope that we can
serve as a role model for the energy sector, our host communities, the local government,
energy are bright, and by all indications, are getting better with each passing day.

Richard B. Tantoco
President and COO

Message from the EDC
President and COO

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