REPUBLIC OF THE PHILIPPINES ENERGY REGULATORY COMMISSION

Pacific Centre Building San Miguel Avenue, Pasig City

I IN THE MATTER OF THE APPLICATION FOR THE APPROVAL OF THE POWER SUPPLY AGREEMENT (PSA) BETWEEN BUKIDNON SECOND ELECTRIC COOPERATIVE, INC. (BUSECO), AND NORTH BUKIDNON POWER CORPORATION (NBPC), WITH PRAYER FOR THE ISSUANCE OF A PROVISIONAL AUTHORITY,

n BUKIDNON SECOND ELECTRIC COOPERATIVE, INC. (BUSECO), AND NORTH BUKIDNON POWER CORPORATION (NBPC),

Applicants,

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ENERGY REGULATORY COkiMSSl0N

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Loll U BQ ERC Case No. RC

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0 JOINT APPLICATION

Applicants, BLJKIDNON SECOND ELECTRIC COOPERATIVE, INC. (hereafter • referred to as BUSECO) and NORTH BUKIDNON POWER CORPORATION (hereafter

referred to as NBPC), to this Honourable Commission, most respectfully allege:

1. That Applicant BUSECO is an electric cooperative duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office at Manolo Fortich, Bukidnon where it may be served with notices and other legal processes, represented in this Application by its Board President EDWIN B. GALICIA and General Manager, DEITER HOFF P. ARELLANO, authorized by virtue of Resolution No. 17-01-05 dated January 12, 2017, copy of which is attached hereto as Annex "A" and made an integral part hereof. That furthermore, Resolution No. 17-01-06 dated January 12, 2017, is hereby attached as Annex "A-I" authorizing BUSECO legal counsel Ally. Eleuterio F. Diao IV to represent BUSECO in the filing of the application, expository presentation, jurisdictional and evidentiary hearing, public consultations and other

• proceedings relative with this application. However, due to the change in the juridical name of the power supplier, BUSECO passed a Resolution No. 17-01-12 confirming the assignment of PSA with Bukidnon Power Corporation (BPC) to North Bukidnon Power Corporation (NBPC) with the same composition of its Board of Directors and Officers, the Board Resolution is attached as Annex "A-?'. Applicant has the exclusive right and

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authority to operate an electric light and power services in the City of Malaybalay and the Municipalities of Malitbog, Baungon, Talakag, Cabanglasan, lmpasug-ong, Libona, Manolo Fortich, Sumilao, Lantapan and Barangay Lilingayon, part of Valencia City, all in the Province of Bukidnon by virtue of a franchise issued by the National Electrification

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Administration (NEA) pursuant to Presidential Decree No. 269 as amended by Presidential Decree No. 1645.

Copies of BUSECO's Certificate of Franchise and Certificate of Registration, Articles of Incorporation and By-Laws and Updated List of Board of Directors are hereto attached as Annexes "B" to "8-3".

2. That joint applicant NORTH BUKIDNON POWER CORPORATION (NBPC) is a domestic corporation organized and existing under the laws of the Republic of the Philippines with postal address at 2nd Floor, Z-Gas Building, Purok 6 A, South Poblacion, Maramag, Bukidnon and represented in this Application by its Vice President for Operations, ZACARIAS FELIPE C. AQUINO VII and its legal counsel, ATTY. ELEUTERIO F. DIAO IV, whose authority to represent NBPC through Board Resolution No. 004-2017, Series of 2016 is hereto attached as Annex "C".

Likewise, copies of NBPC's Certificate of Incorporation, Articles of Incorporation, General Information Sheet and latest Audited Financial Statements are hereto attached as Annexes "D" to "D-3'

3. That pursuant to Rule 20 (B) of the Commission's Rules of Practice and Procedure, and other pertinent rules and regulations, the instant Application is filed for its due consideration and approval.

4. That in Compliance with Rule 6 of the said Rules, Applicant BUSECO served copies of the Application together with all of its Annexes to the legislative bodies of the province of Bukidnon, the City of Malaybalay and the Municipalities of Malitbog, Baungon, Talakag, Cabanglasan, lmpasug-ong, Libona, Manolo Forfich, Sumilao, Lantapan and Barangay Lilingayon, part of Valencia City, all in the Province of Bukidnon where it principally operates. These are attached herein as Annexes "E" to "E-12."

5. That it likewise caused the publication of the entire Application in Goldstar Daily, a newspaper of general circulation within Applicants' franchise area. The Affidavit of Publication and the newspaper where and when said Application was published is attached herein as Annexes "F" and "F-I."

STATEMENT OF FACTS

6. Shortage of peaking power supply of BUSECO. BUSECO has a Power

<S Supply Contracting Team (PSCT) which it utilizes as a technical working group tasked to study, evaluate and recommend power supply strategies for its baseload and peaking load. The PSCT has found that BUSECO's existing and future peaking load requirement is increasing and that the current supply is inadequate. BUSECO, through its PSCT, is

therefore looking for an additional power supplier which can satisfy its peaking toad deficiency.

7. Power Suppliers of BUSECO. The franchise area of BUSECO had a total peak power requirement of 29.70 MW in the year 2016. Currently, BUSECO sources its electric power requirements from the following suppliers:

a. 5 MW from the Power Sector Asset and Liabilities Management Corp. (PSALM)! National Power Corporation (NPC) under a Contract for the Supply of Electric Energy (CSEE) as amended by a Letter of Agreement (LOA) until December 25, 2017, attached herein as Annexes "G"and "C-I".

b. 5 MW from the Therma Marine Inc., (TMI) under an Energy Supply Agreement (ESA) until May 18, 2018.

• C.

2 MW from the Therma South Inc. (TSI) under an Energy Supply Agreement (ESA) until September 18, 2040.

d. 10 MW from the FOC Misamis Power Corporation (FOC MISA MIS) from the output of geothermal of Mt. Apo I and II which is currently managed by the later until 26 December 2017.

e. 8 MW from Coal-Fired Power Plant of FDC MI SA MIS under an Electric Power Purchase Agreement (EPPA) until October 14, 2031.

f. 220 KW from the Gerphil Renewable Energy, Inc. (GREI) under a Power Supply Agreement (PSA) until June 25, 2021.

In addition, BUSECO contracted 10 MW from Peakpower Bukidnon, Inc. for peaking load requirement and 18.18 MW from ON Power LTD, Co. for its baseload • requirement which expected to be operational by the year 2017 and 2019, respectively.

8. PSALM Certification. PSALM has certified that it has insufficient capacity to supply BUSECO's additional power requirements beyond the contracted energy and equivalent demand in their current power supply contract. A copy of the relevant certification is hereto attached as Annex "H'

9. Power Demand. The Capacity and Energy Demand of BUSECO for 2017 to 2040 is projected as follows (all in Megawatts hours-MWH), attached hereto as Annex "I":

fl 2017

DEMAND(KW)jj 32747

l :4tt'tth rA'I a I

200,969 2018 33,853 209,499 2019 35,358 218,093 2020 36,864 226,755

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2021 38,369 235,492 2022 39,875 244,307 2023 41,381 253,206 2024 42,886 262,195 2025 44,392 271,279 2026 45,897 280,464 2027 47,403 289,756 2028 48,908 299,162 2029 50,414 308,687 2030 51,920 318,213 2031 53,425 327,738 2032 54,931 337,264 2033 56,436 346,789 2034 57,942 356,315 2035 59,447 365,840 2036 60,953 375,366 2037 62,459 384,892 2038 63,964 394,417 2039 65,470 403,943 2040 1 66,975 413,468

Additionally, BUSECO's Distribution Development Plan (DDP), covering the years 2012 to 2026, Annex "J" is attached to this Joint Application.

Finally, a copy of the Supply and Demand Scenario, both historical and forecasted 2015 to 2026 is attached herein as Annex "IC"

10. Load Profile. Profile of latest average daily load curve of BUSECO for the last twelve (12) months from May 2016 up to April 2017, are attached hereto as Annex

Last 12 Months from the Time ofAppJication Average Daily Load Curve (May 2016 to AprIl 2017)

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2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Hourly Inteival FOCGEO t== GREI V== TSI FDC Coal PSALM TMI fl DEFiCIENCY -MW DEMAND

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Latest Billing Period Average Daily Load Curve (April 2017)

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2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Hourly Interval

CJFDC CEO C==GREI T5I SFOCCcaI

P5A&M 1111111111111111ITMI 41111111111111111DERCIENCY —MW DEMAND

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2018 Forecasted Average Daily Load Curve

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1 2 3 4 5 6 7 8 9 101112131415161718192021222324

Hourly Interval

L—= FDC Gao GREI SupplIer 1 SMCPC 0 TSI 1111111111111111111FOCCO81 PSALM Sun Asia

Peak Powec NBPC 11111111111111111DERCIENCY 2018 DEMAND REQ.

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11. That due to the sustained and increasing peak load requirement for applicant BUSECO, coupled with the expiration of one of its power supplier for peak load, Therma Marine Inc. (TMI) 5 MW contracted capacity on May 18, 2018, BUSECO was compelled to bid out for its peaking power requirements. BUSECO followed the Commission's competitive selection process in awarding the PSA.

12. Competitive Selection Process. BUSECO invited interested bidders to supply its 5 MW peaking power requirements for the 2nd quarter of the year 2018 pursuant to Energy Regulatory Commission Resolution No. 13, Series of 2015 directing all Distribution Utilities (DUs) to conduct a Competitive Selection Process (CSP) in the procurement of their supply to the captive market and in accordance to BUSECO's duly approved Competitive Selection Process Guidelines through Board Resolution No. 2016- 13. The public bidding was participated by two (2) interested bidders, namely, Bukidnon Power Corporation (BPC) (now assigned to NBPC with consent of BUSECO) and Solar Eagle Renewable Energy Corporation.

13. Based on BUSECO's evaluation, it was concluded that the proposal of NBPC complied with all the specified terms set for an embedded power plant, it has also the lowest responsive bid. Moreover, given that it is adjacent to BUSECO's Substation, it avoids

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transmission costs. More importantly, BUSECO will obtain ownership of the Power Plant after 15 years from commercial operation without any financial outlay.

14. Considering that the NBPC is the lowest responsive bid and passed the technical and financial specifications required by BUSECO, the Bids and Awards Committee

(BAC) recommended the awarding of the 5 MW supply to NBPC. Thereafter, during the regular meeting of BUSECO's Board of Directors, such awarding was then confirmed.

On 19 January 2017, BUSECO and NBPC signed the Power Supply Agreement (PSA). Further details on BPC's procurement process is attached as Annex "hi".

THE PEAKING POWER PLANT

15. Peaking power plant description. The Power Plant has a total installed capacity of 6.2 MW, with 5 MW operating capacity. The entire operating capacity of the plant is to be allocated to BUSECO for its peaking power requirements. There are two (2) units of Pielstick 6PC2-6L engines with an installed capacity of 3,100 kW each. The plant is located in Brgy. Bugcaon, Lantapan, Bukidnon. These engines will run on diesel/bunker LFO/HFO combination.

The power plant will be embedded to BUSECO with an output of 13.2 kV which will be directly injected to the latter's distribution line system.

16. Project Cost. The project cost for a net of 5 MW capacity NBPC Power Plant is Php 349,999,666.88. The major cost components are electro-mechanical, civil works, building and fencing, permits and licenses, and consultancy costs. A detailed breakdown is hereto attached as ANNEX "N";

17. Annual Operating & Maintenance Expenses-Fixed and Variable. These costs consist of the incremental operating and maintenance (O&M) expenses associated with the operation of the power plant. A breakdown of the projected annual operation and maintenance expenses for the NBPC is hereto attached as ANNEX "0";

18. Generation rate and financial ratios. In adopting the generation rate applied for, the following assumptions were made: (1) 6% interest rate; (2) 70-30 debt - equity ratio; (3)10 years amortization with 3 quarter grace period; (4) 2.5% inflation rate; (5) Minimal 0.5% CPI escalation rate only on the local civil works cost.

The computation of the cost of capital for the equity and debt and the weighted cost of capital, the annualized cost of capital, the Present Value factors is summarized under the heading Financial Computations which is attached hereto as ANNEX "P";

The overall generation rate with its major components for Capital Recovery Fee, Fixed and Variable 0 & M, is also attached as ANNEX "Q."

ABSTRACT OF THE POWER SUPPLY AGREEMENT (PSA) AND OTHER RELEVANT INFORMATION

19. Executive Summary. The Power Supply Agreement is hereto attached as • Annex "R". This is a Build Operate Maintain and Transfer (BOMT) scheme whereby the

ownership of the power plant will be transferred to BUSECO at the end of the contract term, which is for a period of fifteen (15) years. The Contract Capacity to be made available by NBPC to BUSECO shall be the total energy generated by its 5 MW bunker-fired power plant for a period of fifteen (15) years The PSA provides that BUSECO and NBPC shall be excused from their respective obligation to deliver and receive energy during the occurrence of scheduled due to maintenance or unscheduled outages/interruptions beyond their control.

The original PSA is with Bukidnon Power Corporation (BPC) but this was assigned to North Bukidnon Power Corporation (NBPC) which is a joint applicant in this case. The Deed of Assignment and the conformity of BUSECO are attached as part and parcel of the PSA.

20. Salient Features of the PSA.

a. Term. The PSA shall have a term or contract period of fifteen (15) years from effective commercial date.

b. Contract Energy. NBPC shall deliver the nominated capacity of its 5 MW diesel/bunker power plant to BIJSECO for its peaking requirements. However, BUSECO shall have the right to market and/or sell to the WESM the excess capacity of the power plant after satisfaction of its peaking needs.

C. Rates Schedule.

• Electricity Fees = Fixed Fees + Variable Fees + Actual Fuel Cost + Actual Lube Costs

Where:

• Fixed Fees = Capacity Fees + Fixed O&M Fees Capacity Fees = Php 720.00 1kW/month x Contract Capacity Fixed O&M Fees =(Php 510.001kW/month x ifFOM) x Contract Capacity

ifFOM = I x ( PhCPIm / PhCPIb)

• Variable Fees = (Php 0.50/kWh x ifVF) x E E = Total electricity delivered for the billing month in kWh ifVF = 1- [(PhFOREXb - PhFOREXm)/PhFOREXb]

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• Actual Fuel Costs = E x Fuel Consumption Rate x Price of Fuel Fuel Consumption Rate = 0.26 liters per kwh or actual consumption,

whichever is lower

• Actual Lube Costs = E x Lubricant Consumption Rate x Price of lubricant Lube Consumption Rate = 0.002 liter per kWh or actual consumption,

whichever is lower

IMPACT ON APPLICANT BUSECO's OVERALL GENERATION RATE

21. The determination of the generation rate impact is based on the blended generation rates of Applicant BUSECO's , Annex "S, "to wit:

2018 BUSECO's Generation Rate with BPC Php 5.7382 /kWh 2018 BUSECO's Generation Rate without BPC 5.4917 /kWh

LRate Increment Php 0.2465 /kWh

OTHER RELATED DOCUMENTS

22. In support of the instant application, Applicants most respectfully submit to the Honorable Commission the following documents.

ANNEX NATURE OF DOCUMENTS

I Environmental Compliance Certificate (ECC)

U Letter of Request for Certificate of Endorsement V Certification of Net Heat Rate

X Financial Model (in a sealed envelope)

Y Proposal from the Bank (in a sealed envelope)

Z EPC Contract (in a sealed envelope) AA Sworn Statement on the Fuel Procurement Process BB Technical and Economic Characteristics of the Generation Capacity

CC Order Approving the Rules to Govern the Interruptible Load Program

DD Affidavit of Explanation and Undertaking

ALLEGATIONS IN SUPPORT OF THE MOTION FOR ISSUANCE OF A PROVISIONAL AUTHORITY

23. As discussed, the demand for power supply of BUSECO's franchise area is steadily increasing. Furthermore, NPC/PSALM, the supplier of the bulk of BUSECO's requirement has significantly reduced its supply commitments to BUSECO by about thirty

(30%) percent. With supply constraints and considering that the power source will be approaching critical level by the second quarter of 2018, there is an urgent need that the Power Supply Agreement be provisionally approved. This is required for the processing of various permits and licenses as well as for financial closure purposes.

24. In view of the foregoing, Joint Applicants respectfully move for the provisional approval of the instant Application pursuant to Rule 14 of this Honorable Commission's Rules of Practice and Procedure.

Copy of the sworn statement/Affidavit of Merit executed by its OlC General Manager DATER HOFF ARELLANO, supporting the petition for the issuance of the Provisional Authority is attached hereto as Annex "EE'

MOTION FOR CONFIDENTIAL TREATMENT OF INFORMATION

25, Under Article 9 of the PSA, NBPC undertook to ensure that no confidential information is disclosed to third parties and shall employ its utmost effort and diligence to prevent unauthorized disclosure of such Confidential Information.

26. Under Rule 4 of the ERC Rules, the Honorable Commission may, upon request of a party and determination of the existence of conditions which would warrant such remedy, treat certain information submitted to it as confidential. Pursuant to its undertaking, Applicants respectfully move that Annexes "X", "Y" and "Z" not be disclosed and be treated as confidential documents in accordance with Rule 4 of the ERC Rules and, accordingly, not to be disclosed to persons other than the officers and staff of the Honorable Commission, as necessary. These documents contain certain non-public information, data and calculations involving business operations and financial trade secrets reflecting NBPC's investment and business calculations.

27. The Applicants hereby submits one (1) copy of Annexes 'X' "Y"and "Z"in a sealed envelope, with the envelope and each page of the document stamped with the word "ConfidentiaL"

I riNd

WHEREFORE, foregoing premises considered, it is most respectfully prayed of this Honourable Commission, to approve provisionally the Power Supply Agreement (PSA) entered into by Applicant BLJSECO and supplier NBPC upon the filing of this Application.

The prayer for the issuance of a Provisional Authority is necessitated in order that joint applicant NBPC can immediately proceed with the development stage of the project and BUSECO to be assured of this supply.

Issue an Order treating Annexes 'tX", "1" and "Z" and the information contained therein as confidential, directing their non-disclosure to persons other than officers and staff of the Honorable Commission, as necessary, pursuant to Rule 4 of the ERC Rules, and prescribing the guidelines for the protection thereof;

It is finally prayed that after due notice, publication and heahng, the proposed generation rate subject mailer of this Application.

13 June 2017, Cagayan de Oro City.

ATTY.1ELEUTERIO F. DIAO IV Counsel for Applicants BUSECO and NBPC Roll of Attorney No. 41679 Book# XVII, page No. 336, 1997 MCLE Compliance No. V - 0009380 PTR No. 7909369 09-Jan-2017 IBP No. 1059573 09-Jan-2017 Phone No. (088)88038951 Cp 09279760117 Email Address: earldiaogmail.com

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VERIFICATION WITH CERTIFICATION OF NON-FORUM SHOPPING

I, DEITER HOFF P. ARELLANO, of legal age, Filipino with postal address at BUSECO, Manolo Fortich, Bukidnon after being duly sworn in accordance with law hereby depose and say:

1. That I am the General Manager and duly authorized by the Board of Directors under BOD Resolution No. 17-01-05 to jointly file the foregoing Application;

2. That by virtue of said resolution, I have caused the preparation of the foregoing application; that I have read and understood all the contents therein, and hereby state that all allegations therein made are true and correct of my own knowledge and based on authentic records; and

3. That the applicant have not commenced any action or proceedings involving the same issues before the Supreme Court, Court of Appeals, or any other tribunal or agency; that to the best of our knowledge, no such action or proceeding is pending in the Supreme Court, Court of Appeals, or any other tribunal agency; that should hereafter we learn that a similar action or proceedings has been filed or is pending before the Supreme Court, Court of Appeals, or any other Tribunal or agency, we shall undertake to report to the Honorable Commission of said fact within five (5) days from knowledge therefrom.

IN WITNESS WHEREOF, I have hereunto set my hand this th day of _________, 2017 in the

Philippines.

DEITER HOFF P. ARELLANO Affiant

SUBSCRIBED Aza SVVcJRNtq BEFORE ME this day of O17, in 9ATaveAzkrr.r Affiant, for purposes of

identification, exhibit'd to me his SSS.icfentification no. 08-1 547279-7. I

RqAx B1&L1HMN LARV PUBIC

Doc. No. 34V ; UNT% 31, 2017 DEC,

Page No. " ; ROLVOF AnY's NO. 0Z22

Book No. cssi)4 PTQWUICDN$)PTR NO. EGGSIS?. ,JAN. 3 201

P(9UKIDflbN)OR NO. 1040154, OAN. 3 2t'

Series of 2017. / TIN: 278-557-07

MCLE COMPLIMJCF F)C.

Republic of the Philippines ) flAVMLY ) S.S.

VERIFICATION AND CERTIFICATION OF NON-FORUM SHOPPING

I, ZACARIAS FELIPE C. AQUINO VII, Filipino, of legal age, and with office address at 2nd Floor, RICOGEN Building, Aguirre St., Legazpi Village, Makati City, after having been duly sworn to in accordance with law, do hereby depose and state, that:

1. 1 am the Vice President for Operations of the North BukidnonPower Corporation (NBPC), a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office address in Maramag, Bukidnon;

2. 1 have caused the preparation and filing of the instant joint application;

3. I have read the contents thereof and all the allegations contained therein are true and correct to the best of my knowledge; and

4. I further certi& that I have not filed any action involving the same issues in the Supreme Court, Court of Appeals, or any other courts or tribunals. If ever there is a case pending before the said courts or tribunals involving the same issues, I undertake to inform the Honorable Commission of such fact within five (5) days from knowledge thereof.

Affiant further sayeth naught

IN WITNESS WHEREOF, I have hereunto set my hand this j. day of JUU4E .2017 at L.PAL.AYtl'

ZA PEC. AQUINO WI Afflant

SUBSCRIBED AND SWOTtN to before m this J& day of JIJ$E

. A ant exhibited to me his 2017 at gtapvnL7A4 ° withNo PII(I3tA issuedon .20 Qv-. 101

at Pc'A MRPJILA - \-

Doc. No._ ; h- A BISNIAN Page No. ' NOTARY PUBIC

UNTIL DWT4RYIPUBLIC Book N 's01 -9 o. POLL OF ATTY'S NO. 60222

Series of 2017. (QUKIDNON)PTP NO. 5606fl7# .IAN. 0.200 'BUXIDNON)OP NO. 1040154, JAN. 3, 201

TIN: 278-557-677 MCLE COMPLIANCE NO. V-0009214

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