ALSONS CONSOLIDATED RESOURCES, INC.

Php 2,500,000,000 Commercial Paper Program

Second Tranche: Php 1,000,000,000

Commercial Paper
91, 182, 364 days Tenor

Issue Price: Discount to face value

Alsons Consolidated Resources, Inc. (“ACR”, the “Company” or the “Issuer”) is authorized by the
Securities and Exchange Commission to issue up to Php 2,500,000,000 worth of commercial paper under
a shelf registration pursuant to SEC-MSRD Order No. 25, Series of 2018 (the “CP Program”). The CP
Program was to be issued in one or more tranches with an initial issuance of Php 1,500,000,000 in 2018.
The remaining Php 1,000,000,000 Commercial Paper will now be issued for the Second Tranche of the
CP Program. The Second Tranche will have the following tenors: 91 days, 182 days, and 364 days for
Series L, M and N, respectively. Series L, M and N of the Second Tranche will carry Discount Rates of
3.250%, 4.000% and 4.750% respectively, calculated on a true-discount basis. (See “Terms and
Description of the CPs – Discount Rate”).

The CPs shall be offered to the public (the “Offer”) at discount to face value and in one lump sum or in
tranches through the Underwriter and the Selling Agents as may be named below subject to certain
conditions in the Issue Management and Underwriting Agreement executed between the Issuer and
the Issue Manager/Underwriter. The CPs are intended to be listed at the Philippine Dealing &
Exchange Corp. (PDEx) for secondary trading of the CPs and upon such listing, all secondary trading
may be coursed through eligible PDEx Trading Participants. The Issuer has been assigned a credit rating
of A plus by the Philippine Ratings Services Corporation (“PhilRatings” or “PRS”) on April 30, 2020. A
credit rating is not a recommendation to buy, sell, or hold the securities and may be subject to
revision, suspension, or withdrawal at any time by PhilRatings.

Sole Issue Manager, Lead Arranger and Underwriter

Multinational Investment Bancorporation

August 11, 2020

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE AND SHOULD BE REPORTED IMMEDIATELY TO THE
SECURITIES AND EXCHANGE COMMISSION.
ALSONS CONSOLIDATED RESOURCES, INC.
ALSONS BUILDING, 2286 DON CHINO ROCES AVENUE
MAKATI CITY 1231, PHILIPPINES
+632 8982 3000

ACR is offering the Second Tranche of the CP Program, with an aggregate face value of up to Php
1,000,000,000.00 (the “CPs” or the “Offer”). The CPs, which may be issued in lump sum or in tranches, shall
have an interest rate fixed prior to issuance.

The CPs will be unsecured obligations of the Company and will rank pari passu without any preference
amongst themselves and at least pari passu with other unsecured and unsubordinated obligations of the
Company, present and future, other than obligations preferred by law. The CPs will be effectively
subordinated in right of payment to all secured debt of the Company to the extent of the value of the
assets securing such debt and all debt that is evidenced by a public instrument under Article 2244(14) of
the Civil Code of the Philippines.

The Company expects the net Offer proceeds of the Second Tranche to amount to approximately
P940,263,494.54. Such proceeds will be used by the Company to fund its maturing short-term obligations
in the 3rd and 4th quarter of 2020 and to partially fund its hydro project development. See “Use of
Proceeds” on page 37. The Sole Issue Manager, Arranger and Underwriter will receive 0.50% per annum of
the aggregate face value of the CPs issued. Such amount shall be inclusive of the underwriting and selling
agency fees, if applicable, and shall be deductible from the gross proceeds of the Offering.

The Company was incorporated on December 24, 1974 as Victoria Gold Mining Corporation to engage in
the business of exploration of oil, petroleum and other mineral products. The corporate name was changed
to Terra Grande Resources, Inc. in March 1995 and to Alsons Consolidated Resources, Inc. in June 1995 to
mark the entry of the Alcantara Group. ACR’s primary purpose was consequently changed to that of an
investment holding company and oil exploration was relegated as a secondary purpose. The Company’s
ultimate parent company is Alsons Corporation, a company incorporated in the Philippines.

ACR's core businesses, conducted through its various subsidiaries and associates, are grouped into main
categories consisting of Energy and Power, Property Development, and Other Investments.

ACR's investment in the Energy and Power business is through four holding firms, namely, Conal Holdings
Corporation, Alsing Power Holdings, Inc., Alsons Renewable Energy Corporation, and Alsons Thermal
Energy Corporation.

The Company is also engaged in property development through its subsidiaries, Alsons Land Corporation
and Kamanga Agro-Industrial Economic Development Corporation.

Declaration of dividends is subject to approval by the Board of Directors. Management continuously

endeavors to increase ACR’s share value through new projects and expansion programs while at the same
time provide yearly dividends to its shareholders. On June 8, 2011, the Board of Directors adopted a
dividend policy of annually declaring dividends from 20% of the previous year’s un-appropriated retained
earnings. See “Dividends” on page 81.

Unless otherwise stated, all information contained in this Prospectus has been supplied by the Company.
The Company, through its Board, having made all reasonable inquiries, accepts full responsibility for the

Page 3
information contained in this Prospectus and confirms that this Prospectus contains all material
information with regard to the Company, its business and operations and the CPs, which as of the date of
this Prospectus is material in the context of the Offer; that, to the best of its knowledge and belief as of the
date hereof, the information contained in this Prospectus are true and correct and is not misleading in any
material respect; that the opinions and intentions expressed herein are honestly held; and, that there are
no other facts, the omission of which makes this Prospectus, as a whole or in part, misleading in any
material respect. The delivery of this Prospectus shall not, under any circumstances, create any implication
that the information contained herein is correct as of any time subsequent to the date hereof.

Multinational Investment Bancorporation, the Sole Issue Manager, Arranger and Underwriter, warrants
that it has, to the best of its ability, exercised the level of due diligence required under existing regulations
in ascertaining that all material information contained in this Prospectus are true and correct, and that to
the best of its knowledge, no material information was omitted, which was necessary in order to make the
statements contained in this Prospectus not misleading.

Market data and certain industry information used throughout this Prospectus were obtained from internal
surveys, market research, publicly available information and industry publications. Industry publications
generally state that the information contained therein has been obtained from sources believed to be
reliable, but that the accuracy and completeness of such information is not guaranteed. Similarly, internal
surveys, industry forecasts and market research, while believed to be reliable, have not been
independently verified and neither the Company nor the Sole Issue Manager, Arranger and Underwriter
makes any representation as to the accuracy and completeness of such information.

In making an investment decision, applicants are advised to carefully consider all the information contained
in this Prospectus, including the following key points characterizing potential risks in an investment in the
CPs:

Risks relating to the Company and its business

 Risk on Foreign Exchange Rate Fluctuations

 Interest Rate Risks
 Liquidity Risks
 Credit Risks
 Risks relating to project cost and completion
 Risk on malfunctions and failures to operate
 Risk of insufficient fund to finance the project
 Risk on failure in operations of the Power plants
 Risk on assurance of successful implementation of business plans and strategies
 Reputational Risk of Directors and Officers of the Company
 Risk on foreign ownership limitations
 Regulatory Risks
 Competitive Risk

General Risks

 Slowdown in the Philippine economy

 Political or social instability

Page 4
  Natural catastrophe and calamity
 Corona Virus Disease 2019 (COVID-19) Pandemic

Risks Relating to the Commercial Papers

 Liquidity Risk – the Philippine securities markets are substantially smaller, less liquid and more
concentrated than the major securities markets
 Price Risk – the CPs’ market value moves (either up or down) depending on the change in interest
rates
 Retention of Ratings Risk – there is no assurance that the rating of the CPs will be retained
throughout the life of the CPs

For a more detailed discussion on the risks in investing, see section on “Risk Factors” beginning on page 23
of this Prospectus, which, while not intended to be an exhaustive enumeration of all risks, must be
considered in connection with a purchase of the CPs.

This Prospectus includes forward-looking statements. The Company has based these forward-looking
statements largely on its current expectation and projections about future events and financial trends
affecting its business and operations. Words including, but not limited to “believe”, “may”, “will”,
“estimates”, “continues”, “anticipates”, “intends”, “expects” and similar words are intended to identify
forward-looking statements. In light of the risks and uncertainties associated with forward-looking
statements, investors should be aware that the forward-looking events and circumstances in this
Prospectus may or may not occur. The Company’s actual results could differ significantly from those
anticipated in the Company’s forward-looking statements.

The contents of this Prospectus are not to be considered as legal, business or tax advice. Each prospective
purchaser of the CPs receiving a copy of this Prospectus acknowledges that he has not relied on the Sole
Issue Manager, Arranger and Underwriter or Selling Agents in his investigation of the accuracy of such
information or his investment decision. Prospective purchasers should consult their own counsel,
accountants or other advisors as to legal, tax, business, financial and related aspects of a purchase of the
CPs.

The CPs are offered solely on the basis of the information contained and the representations made in this
Prospectus. No dealer, salesman or other person has been authorized by the Company or by the Sole Issue
Manager, Arranger and Underwriter to issue any advertisement or to give any information or make any
representation in connection with the Offer other than those contained in this Prospectus and, if issued,
given or made, such advertisement, information or representation must not be relied upon as having been
authorized by the Company or by the Sole Issue Manager, Arranger and Underwriter.

The laws of certain jurisdictions may restrict the distribution of this Prospectus and the offer and sale of the
CPs. Persons into whose possession this Prospectus or any of the CPs come must inform themselves about,
and observe any such restrictions. Neither the Company, the Issue Manager/Underwriter and the Selling
Agents, nor any of its or their respective representatives are making any representation to any prospective
purchaser of the CPs of the legality of any investment in the CPs by such prospective purchaser under
applicable legal investment or similar laws or regulations.

Page 5
TABLE OF CONTENTS
DEFINITION OF TERMS ................................................................................................................. 9
EXECUTIVE SUMMARY ............................................................................................................... 13
SUMMARY FINANCIAL INFORMATION ...................................................................................... 16
THE OFFER ................................................................................................................................... 17
RISK FACTORS ............................................................................................................................ 23
USE OF PROCEEDS ..................................................................................................................... 37
DETERMINATION OF THE OFFER PRICE .................................................................................. 40
PLAN OF DISTRIBUTION ............................................................................................................. 40
DESCRIPTION OF THE SECURITIES TO BE REGISTERED ..................................................... 43
INTEREST OF NAMED EXPERTS AND COUNSEL .................................................................... 50
INDUSTRY OVERVIEW ................................................................................................................ 51
THE COMPANY ............................................................................................................................. 56
Company Overview ........................................................................................................................................... 56
History ................................................................................................................................................................... 56
Corporate Structure .......................................................................................................................................... 57
Business Segments ............................................................................................................................................ 58
Business Segments Contribution to Revenues ........................................................................................ 60
Power Plants ........................................................................................................................................................ 61
The Company has no existing patents, trademarks, copyrights, licenses, franchises,
concessions and royalty agreements.......................................................................................................... 62
Life of Power Plant ............................................................................................................................................ 62
Process Flow ........................................................................................................................................................ 62
Sources and Availability of Raw Materials and Supplies ..................................................................... 66
Related Party Transaction .............................................................................................................................. 66
Customers ............................................................................................................................................................. 67
Marketing Process ............................................................................................................................................. 70
Location of the Power Plants ......................................................................................................................... 70
Properties ............................................................................................................................................................. 70
Investment Acquisition ................................................................................................................................... 72
Research and Development ........................................................................................................................... 72
Employees ............................................................................................................................................................ 72
Future Plans ......................................................................................................................................................... 72
Competition ......................................................................................................................................................... 72
Competitive Strengths...................................................................................................................................... 74
Business Strategy ............................................................................................................................................... 80
Plans and Programs .......................................................................................................................................... 80
Dividends .............................................................................................................................................................. 80
Government Approvals and Permits .......................................................................................................... 80
Legal Proceedings .............................................................................................................................................. 82
Bankruptcy Proceedings ................................................................................................................................. 82
Market Information .......................................................................................................................................... 82
Stockholders ........................................................................................................................................................ 84
Directors and Senior Management .............................................................................................................. 85

Page 7
 Certain Relationships and Related Transactions ................................................................................... 92
Security Ownership of Certain Record and Beneficial Owners ......................................................... 93
Sales of Unregistered Securities within the last three (3) years ...................................................... 94
Corporate Governance ..................................................................................................................................... 95
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION .................................................................................................................................. 97
MATERIAL CONTRACTS & AGREEMENTS ............................................................................. 116
REGULATORY & ENVIRONMENTAL MATTERS ..................................................................... 122
GENERAL CORPORATE INFORMATION ................................................................................. 123
PHILIPPINE TAXATION .............................................................................................................. 125

Page 8
DEFINITION OF TERMS
ACES……………………….. Aces Technical Services Corporation

ACR or Company…….. Alsons Consolidated Resources, Inc.

Alsing……………………… Alsing Power Holdings, Inc. one of the four holding firms of Alsons
under its Energy and Power business

ADIC Alsons Development and Investment Corporation

or ALDEVINCO………….
Alsons……………………… Alsons Consolidated Resources, Inc.

AREC………………………. Alsons Renewable Energy Corporation, one of the four holding firms of
Alsons under its Energy and Power business

ATEC………………………. Alsons Thermal Energy Corporation, one of the four holding firms of
Alsons under its Energy and Power business

Banking Day……………. A day (except Saturdays, Sundays and holidays) on which banks in the
Philippines are open for business

BIR………………..………… Bureau of Internal Revenue

BOO……………..…………. “Build-Operate-Own” agreement

BSP………………..……….. Bangko Sentral ng Pilipinas, the central bank of the Philippines

BVAL Bloomberg Valuation benchmark reference rates as reported in the

Bloomberg system

Conal or CHC …………… Conal Holdings Corporation, one of the four holding firms of Alsons
under its Energy and Power business

Corporation Batas Pambansa Blg. 68, otherwise known as “The Corporation Code
Code………………………... of the Philippines” as amended by Republic Act No. 11232, otherwise
known as the “Revised Corporation Code of the Philippines”.

CPs…………………………… The Commercial Papers which are evidence of indebtedness registered

with the SEC with maturity of three hundred and sixty five (365) days
or less

CP Holder………………… A purchaser of the CPs

CP Program ……………. The Php 2,500,000,000 shelf registration which will be issued in one or
more tranches

Page 9
CSP………………………….. Competitive Selection Process

DENR………………..……… Philippine Department of Environment and Natural Resources

Directors…………………… The members of the Board of Directors of the Company

Eagle Ridge ……………… The Eagle Ridge Golf & Residential Estate

ECA…………………………… Energy Conversion Agreement

EPC…………………………… Engineering, Procurement and Construction is a form of arrangement

where the EPC Contractor is responsible for all the activities from
design, procurement, construction to handover to the Owner

ERC…………………………… Energy Regulatory Commission

First Tranche……………… The first issuance of the Commercial Paper

Government……………… The Government of the Republic of the Philippines

GRT…………………………… Gross receipts tax

Issue Date………………….. A date at which the CPs or a portion thereof shall be issued by the
Issuer, which date shall be set by the Issuer in consultation with the
Sole Issue Manager, Arranger and Underwriter. For the avoidance of
doubt, an Issue Date shall at any time be a date which is within the
validity of the SEC Permit to Sell.

Issuer ………………………. Alsons Consolidated Resources, Inc.

Kalaong…………………….. Kalaong Hydro Power Corporation

Listing Date……………….. The date at which the CP shall be listed with PDEx

MPC…………………………… Mapalad Power Corporation

NPC……………………………. National Power Corporation

O & M…………………………. Operation and Maintenance

Offer………………………….. Up to Php1,000,000,000 worth of Commercial Paper

Offer Price……………………. Discount to face value

Offtake Agreement / A contract between two parties, one which generates electricity (the
Power Supply Agreement/ seller) and one which is looking to purchase electricity (the buyer)
Power Sales Agreement

Page 10
/ PSA…………………………….

Php or P…………………. Philippine Pesos, the lawful currency of the Republic of the Philippines

PDEx……………………........... Philippine Dealing & Exchange Corp.

PDTC…………………………….. The Philippine Depository and Trust Corporation

PEZA……………………………… Philippine Economic Zone Authority

PFRS……………………………… Philippine Financial Reporting Standards

Philratings…………………….. Philippine Ratings Services Corporation

Prospectus…………………….. This Prospectus together with all its annexes, appendices and
amendments, if any

Sarangani Sarangani Energy Corporation

Energy………………………

SEC………………………………… The Philippine Securities and Exchange Commission

SEC Permit to Sell………….. The Certificate of Permit to Offer Securities for Sale issued by the SEC
authorizing the Company to offer for sale and sell the CPs to the public

Siguil…………………………….. Siguil Hydro Power Corporation

Subsequent Issuance…….. Issuances subsequent to the Initial Issuance

Sole Issue Manager Multinational Investment Bancorporation

and Arranger……………….

SPPC…………………………… Southern Philippines Power Corporation

SRC……………………………… Republic Act No. 8799, otherwise known as “The Securities Regulation
Code”

SRPI……………………………. San Ramon Power, Inc.

TDF …………………………….. Term Deposit Facility. The TDF is a key liquidity absorption facility,
commonly used by Central Banks for liquidity management. Due to the
BSP’s inability to issue its own debt instruments, the TDF will be tasked
to withdraw a large part of the structural liquidity from the financial
system to bring market rates closer to the BSP policy rate.

TTC…………………………….. Toyota Tsusho Corporation

Page 11
Underwriter and Multinational Investment Bancorporation
Issue Manager ………………

Underwriting The agreement entered into by and between the Company and the
Agreement…………………… Underwriter, indicating the terms and conditions of the Offer and
providing that the Offer shall be fully underwritten by the Underwriter

VAT……………………………… Value Added Tax

WMPC………………………….. Western Mindanao Power Corporation

Page 12
EXECUTIVE SUMMARY
The following summary does not purport to be complete and is taken from and qualified in its entirety by
the more detailed information including the Company’s financial statements and notes relating thereto,
appearing elsewhere in this Prospectus. For a discussion of certain matters that should be considered in
evaluating any investment in the CPs, see the section entitled “Risk Factors” beginning on page 23 of this
Prospectus.

OVERVIEW OF THE COMPANY

The Company was incorporated on December 24, 1974 as Victoria Gold Mining Corporation to engage in
the business of exploration of oil, petroleum and other mineral products. The corporate name was changed
to Terra Grande Resources, Inc. in March 1995 and to Alsons Consolidated Resources, Inc. in June 1995 to
mark the entry of the Alcantara Group. ACR’s primary purpose was consequently changed to that of an
investment holding company and oil exploration was relegated as a secondary purpose. The Alcantara
Group owns 79.97% of the outstanding common shares of ACR through Alsons Corporation (41.21%),
Alsons Power Holdings Corporation (19.87%) and Alsons Development and Investment Corporation
(18.89%).

ACR's core businesses, conducted through its various subsidiaries and associates, are grouped into main
categories consisting of Energy and Power, Property Development, and Other Investments.

ACR's investment in the Energy and Power business is through four holding firms, namely, Conal Holdings
Corporation, Alsing Power Holdings, Inc., Alsons Renewable Energy Corporation, and Alsons Thermal
Energy Corporation.

The Company has four operating power generation subsidiaries, namely, Western Mindanao Power
Corporation (“WMPC”), Southern Philippines Power Corporation (“SPPC”), Mapalad Power Corporation
(“MPC”), and Sarangani Energy Corporation (“Sarangani”), all of which are located in Mindanao. ACR,
through its subsidiaries, is also conducting feasibility studies on renewable energy projects. Sarangani
Energy’s 210MW coal-fired power plants are located in Maasim, Sarangani Province. Its first section of
105MW began commercial operations in April 2016, while its second section of another 105MW or Phase 2
started commercial operations on October 10, 2019.

ACR has also started construction of its first renewable energy project under Siguil Hydro Power
Corporation, which will operate a 14.5MW run-of-river electricity generating facility located at the Siguil
River basin in Maasim, Sarangani. ACR expects commercial operations to begin in 2022. The Company
likewise began site development and clearing works for SRPI’s 105MW coal-fired power plant project,
which could supply power to Zamboanga City and other parts of the Zamboanga Peninsula, with
commercial operations expected to begin in 2023.

The Company is also engaged in property development through its subsidiaries, Alsons Land Corporation
and Kamanga Agro-Industrial Economic Development Corporation.

Page 13
COMPETITIVE STRENGTHS

The Company believes that its strengths lie in the following:

 In-depth knowledge of the Mindanao region

 Experienced management team
 Proven track record in developing and operating greenfield power projects
 Enhanced competitiveness and sustainable growth
 Focused strategies

Additional information on the Company’s Competitive Strengths may be found in the “The Company”
beginning on page 56.

BUSINESS STRATEGY

ACR’s expansion strategy is driven by the needs of the Mindanao grid and is supported by long-term
offtake agreements. The Company will position its diesel plants to perform roles that are not effectively
and efficiently served by coal fired power plants. In addition, ACR will develop its pipeline of hydro power
projects to round up its generation mix with renewable sources.

ACR’s expansion will:

• Allow it to provide a complete power solution to the Mindanao grid

• Mitigate fuel-type specific risks such as volatilities in fuel costs and regulatory concerns linked to
certain fuel types
• Enhance competiveness of ACR in the Mindanao Electricity Market
• Diversify revenue and cash flow source.

RISKS OF INVESTING

Before making an investment decision, investors should carefully consider the risks associated with an
investment in the CPs. These risks include:

Risks relating to the Company and its business

 Risk on Foreign Exchange Rate Fluctuations

 Interest Rate Risks
 Liquidity Risks
 Credit Risks
 Risks relating to project cost and completion
 Risk on malfunctions and failures to operate
 Risk of insufficient fund to finance the project
 Risk on failure in operations of the Power plants
 Risk on assurance of successful implementation of business plans and strategies
 Reputational Risk of Directors and Officers of the Company
 Risk on foreign ownership limitations
 Regulatory Risks

Page 14
  Competitive Risk

General Risks

 Slowdown in the Philippine economy

 Political or social instability Natural catastrophe and calamity
 Corona Virus Disease 2019 (COVID-19) Pandemic

Risks Relating to the Commercial Papers

 Liquidity Risk – the Philippine securities markets are substantially smaller, less liquid and more
concentrated than major securities markets
 Price Risk – the CPs market value moves (either up or down) depending on the change in interest
rates
 Retention of Ratings Risk – there is no assurance that the rating of the CPs will be retained
throughout the life of the CPs

For a more detailed discussion on the risks in investing, see section on “Risk Factors” beginning on page 23
of this Prospectus, which, while not intended to be an exhaustive enumeration of all risks, must be
considered in connection with a purchase of the CPs.

CORPORATE INFORMATION

The Company’s principal office is located at Alsons Building, 2286 Chino Roces Avenue, Makati City 1231,
Philippines with telephone number +632 8982 3000.

Page 15
SUMMARY FINANCIAL INFORMATION
The selected financial information set forth in the following table has been derived from the Company’s
consolidated, unaudited, interim financial statements as of March 31, 2020 and the Company’s audited
consolidated financial statements for fiscal years ended December 31, 2019. These should be read in
conjunction with the financial statements and notes thereto contained in this Prospectus and the section
entitled “Management’s Discussion and Analysis of Financial Condition” and other financial information
included herein.

The Company’s financial statements were prepared by SyCip Gorres Velayo & Co. (SGV) a member practice
of Ernst & Young Global, in accordance with PFRS. The summary financial information set out below does
not purport to project the results of operations or financial condition of the Company for any future period
or date.

Income Statement

CONSOLIDATED INCOME STATEMENT DATA (in Php millions)

Three Months Ended
March 31
2020 2019
Revenues 2,212 1,226
Cost and Expenses 1,873 1,115
Income Before Income Tax 339 112
Provision for (Benefit From) Income Tax 28 8

Net Income 310 104

CONSOLIDATED FINANCIAL POSITION DATA (in Php millions)

Mar. 31, 2020 Dec. 31, 2019
Unaudited Audited
ASSETS
Current Assets 8,697 8,840
Noncurrent Assets 36,400 36,770
Total Assets 45,097 45,609

LIABILITIES AND EQUITY

Current Liabilities 11,163 12,051

Noncurrent Liabilities 18,769 18,704
Total Liabilities 29,932 30,755

Total Equity 15,165 14,855

Total Liabilities and Equity 45,097 45,609

Page 16
THE OFFER
The following do not purport to be a complete listing of all the rights, obligations and privileges of the CPs.
Some rights, obligations or privileges may be further limited or restricted by other documents and subject
to final documentation. Prospective note holders are enjoined to perform their own independent
investigation and analysis of the Issuer and the Commercial Papers. Each prospective note holder must rely
on its own appraisal of the Issuer and the proposed financing and its own independent verification of the
information contained herein and any other investigation it may deem appropriate for the purpose of
determining whether to participate in the proposed financing and must not rely solely on any statement or
the significance, adequacy or accuracy of any information contained herein. The information and data
contained herein are not a substitute for the prospective note holder’s independent evaluation and
analysis.

The following overview should be read as an introduction to, and is qualified in its entirety by reference to,
the more detailed information appearing elsewhere in this Prospectus. This overview may not contain all of
the information that prospective investors should consider before deciding to invest in the CP. Accordingly,
any decision by a prospective investor to invest in the CPs should be based on a consideration of this
Prospectus as a whole, which provides the material rights, obligations and privileges of a CP Holder. Should
there be any inconsistency between the summary below and the final documentation, the final
documentation shall prevail.

The following are the terms and conditions of the First Tranche:
Issuer : Alsons Consolidated Resources Inc.

Sole Issue Manager, and : Multinational Investment Bancorporation

Arranger, and Underwriter

Instrument : Registered Commercial Paper

Issue Size : P1,000,000,000.00 to be issued in one lump sum or multiple

issuances; the Commercial Papers may be issued and reissued,
in each case, in whole or in part and in one or more series,
within three (3) years from the date of the SEC order rendering
the Registration Statement effective and a corresponding
permit to offer securities for sale covering the Commercial
Paper program

Method of Issue : The Issuer may, in consultation with the Sole Arranger and Lead
Underwriter, issue or reissue, in whole or in part, the
Commercial Papers covered by the Registration Statement, in
one or more series under Rule 12.1.2.5 of the Implementing
Rules and Regulation of the Securities Regulation Code provided
that a) the outstanding amount of the Commercial Papers at
any time shall not exceed One Billion Pesos (PhP
1,000,000,000.00), b) the Commercial Papers are issued within
three (3) years following the Registration Statement Effectivity
Date.

Page 17
Use of Proceeds : To fund its maturing short-term obligations in the 3rd and 4th
quarter of 2020 and to partially fund its hydro project
development.

Tenor / Initial Issuance : The tenor of the initial issuance shall be as follows:
Series L: Ninety One (91) days from Issue Date
Series M: One Hundred Eighty Two (182) days from Issue Date
Series N: Three Hundred Sixty Four (364) days from Issue Date

Denomination : For Series L and M:

Minimum of Pesos: Five Million (Php5,000,000.00) face value
and increments of Pesos: One Hundred Thousand
(Php100,000.00)

For Series N:
Minimum of Pesos: Five Hundred Thousand (Php500,000.00)
face value and increments of Pesos: One Hundred Thousand
(Php100,000.00)

Issue Price : Discount to Face Value

Issue Date : In one or more dates to be set by the Issuer in consultation with
the Sole Issue Manager, and Arranger and Underwriter on a
“when and as needed” basis. The target issue date for the Initial
Issuance of the Second Tranche is 3rd quarter 2020. For the
avoidance of doubt, an Issue Date shall at any time be any date
which is within the validity of the SEC Permit to Sell.

Discount Rate for Initial Issuance : Benchmark Rate + Spread

Reissuance Procedure : Issuer reserves the right during the validity of the Registration
Statement for the Commercial Papers to a) issue additional
Commercial Papers; or b) reissue Commercial Papers that have
matured and are repaid on the relevant Maturity Date;
provided that, at any time during the three (3)-year validity of
the Registration Statement, there will be no more than
Php1,000,000,000.00 in aggregate principal amount of
Commercial Paper outstanding and none of the Commercial
Papers will have a maturity date of 365 days or more; provided
further, that at the maturity date of any outstanding
Commercial Papers for another term of not more than 365
days; provided further, that any and all relevant taxes,
including, but not limited to documentary stamp tax on the
indebtedness, shall be paid by the issuer for each issuance and

Page 18
 reissuance of the Commercial Papers.

Discount Rate for Subsequent : The discount rate for the subsequent issuance/s shall be set by
Issuance/s the issuer in consultation with the arranger which may be
determined based on the corresponding Benchmark Rate plus
Spread

Minimum Denomination for : Minimum of Pesos: One Hundred Thousand (Php 100,000) face
Secondary Trading value and increments of Pesos: Ten Thousand (Php 10,000)

Benchmark Rate : The higher of the three-day average PHP BVAL benchmark rate
of the corresponding tenor or the closest tenor of the Term
Deposit Facility of the Bangko Sentral ng Pilipinas
The corresponding benchmark rates are as follows:
Series L: PHP BVAL 3M, or its successor benchmark rate
Series M: PHP BVAL 6M, or its successor benchmark rate
Series N: PHP BVAL 12M, or its successor benchmark rate

Tenor of Subsequent Issuance/s The tenor of succeeding issues may range from thirty (30) days
up to the maximum tenor allowed by the Securities and
Exchange Commission (SEC) under the relevant provisions of
the Securities Regulation Code (SRC)

Interest Computation : The Interest/Discount Rate and Rollover/Discount Rate will be

calculated on a true-discount basis

Principal Repayment : The principal amount of the CPs will be repaid in full at their
respective Maturity Dates, unless the investor provides written
instruction to rollover the entire amount or a portion thereof.
If such principal repayment is due on a day that is not a business
day, the principal repayment date shall be made on the
immediately succeeding business day. No additional interest will
be paid in such case.

Status : The CPs will constitute direct, unconditional, unsubordinated,

general and unsecured obligations of the Issuer ranking at least
pari passu in all respects and without preference or priority
(except for any statutory preference or priority applicable in the
winding-up of the Issuer) with all other outstanding unsecured
and unsubordinated obligations (contingent or otherwise,
present and future of the Issuer.

Form : The CPs shall be issued scripless and will be maintained in

electronic form with the Registrar to be appointed for the
purpose

Page 19
Taxation : Interest paid on the CPs shall be subject to a 20% final
withholding tax.
A CP Holder who is exempt from or is not subject to the
aforesaid withholding tax shall be required to submit a tax
exemption certificate and other applicable documents.

Registrar : Philippine Depository & Trust Corp.

Paying Agent : Philippine Depository & Trust Corp.

Facility Agent : AB Capital and Investment Corporation – Trust Department

The Facility Agent has no direct relations with the Issuer.

Secondary Trading : The CPs are intended to be listed at the Philippine Dealing &
Exchange Corp. (PDEx) for secondary trading of the CPs and
upon such listing, all secondary trading may be coursed through
eligible PDEx Trading Participants.

Market Maker : Multinational Investment Bancorporation

Manner of Purchase : The CPs will be available for sale from the Sole Underwriter and
Selling Agents, if any, subject to minimum purchase amount and
denomination.

Acceptance / Rejection of the : The Issuer and the Sole Issue Manager, Arranger and
Application Underwriter reserve the right to accept or reject any application
for CPs. In case of over-subscription, the Issuer and the Sole
Issue Manager, Arranger and Underwriter reserve the right to
allocate the CPs available to the investors in a manner they
deem appropriate.

Delivery of CP : Delivery of the CPs will be made upon full payment of the Offer
Price to the Sole Underwriter and/or Selling Agents

Liabilities : The Company as the CP issuer is liable and responsible for any
and all obligations arising from the sale of the CP as provided
under pertinent sections of the Negotiable Instruments Law, the
SRC and applicable laws of the Philippines as well as in the
Underwriting Agreement and related agreements. In addition,
the Issuer is responsible for complying with all reportorial
requirements of the SEC in connection with the issuance of the
CP.

Credit Rating : The Issuer has a rating of PRS A plus as assigned by Philratings
effective April 30, 2020.
Philratings assigned an issuer credit rating of PRS A plus (corp.)

Page 20
 for Alsons Consolidated Resources, Inc. based on the following
considerations:
(i) the development projects in Mindanao that are supportive of
the growth of the region’s power industry;
(ii) the Company’s ability to establish joint ventures with strong
partners for particular projects;
(iii) its planned expansion projects which will further diversify its
generation mix;
(iv) its improving profitability, albeit with the need to improve on
its liquidity position;
(v) the challenges it encountered in securing bilateral contracts
for its diesel power plants; and
(vi) the increasing economic and market uncertainty caused by
the COVID-19 pandemic.

Security : Negative pledge on the Company’s existing and future assets,

except (i) to secure statutory obligations, (ii) to enable the
Company to continue to enter into its usual transactions in the
ordinary course of business, (iii) those imposed by law or arising
out of pledges or deposits under workmen’s compensation laws
or other social security or retirement benefits or similar
legislation, and (iv) those created for the purpose of paying
current taxes, assessments or other governmental charges which
are not delinquent or remain payable without any penalty, or
the validity of which is contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof.

Cross Default : The Company shall be considered to be in default in case the

Company fails to pay or defaults in the payment of any
installment of the principal or interest relative to, or fails to
comply with or to perform, any other material obligation, or
commits a breach or violation of any of the material terms,
conditions or stipulations, of any agreement, contract or
document with any persons to which the Company is a party or
privy, whether executed prior to or after the date hereof, or
under which the Company has agreed to act as guarantor, surety
or accommodation party, which, under the terms of such
agreement, contract, document, guaranty or suretyship,
including any agreement similar or analogous thereto, shall
constitute a material default thereunder after allowing for all
applicable grace periods. No default will occur under this clause
if the aggregate amount the Company fails to pay is less than
Php 35 million (or its equivalent in any other currency or
currencies)”.

Page 21
Other Terms and Conditions : 1. The CPs will not be convertible to any other security or
equity of the Issuer.
2. The Issuer will not set up any sinking fund for the
redemption of the CPs.
3. Substitution of the CP with another type of security will not
be permitted.
Other terms and conditions as may be agreed upon among the
Issuer, the Sole Issue Manager, Arranger and Underwriter.

Page 22
RISK FACTORS
GENERAL RISK WARNING

The price of securities can and does fluctuate, and any individual security may experience upward or
downward movements, and may even become valueless. There is an inherent risk that losses may be
incurred rather than profit made as a result of buying and selling securities. Past performance is not a guide
to future performance.

There is an extra risk of losing money when securities are issued by smaller companies. There may be a big
difference between the buying price and the selling price of these securities.

Investors deal in a range of investments each of which may carry a different level of risk.

PRUDENCE REQUIRED

The risk disclosure does not purport to disclose all the risks and other significant aspects of investing in
these securities. Investors should undertake independent research and study on the trading of these
securities before commencing any trading activity. Investors may request publicly-available information on
the CPs and the Company from the SEC and PDEx.

PROFESSIONAL ADVICE

An investor should seek professional advice if he or she is uncertain of, or has not understood, any aspect of
the securities to invest in or the nature of risks involved in trading of securities, especially high risk
securities.

RISK FACTORS

An investment in the CPs described in this Prospectus involves a certain degree of risk. A prospective
purchaser of the CPs should carefully consider the following factors, in addition to the other information
contained in this Prospectus, in deciding whether to invest in the CPs. This Prospectus contains forward-
looking statements that involve risks and uncertainties. ACR adopts what it considers conservative financial
and operational controls and policies to manage its business risks. The Company’s actual results may differ
significantly from the results discussed in this Prospectus. Factors that might cause such differences, thereby
making the offering speculative or risky, may be summarized into those that pertain to the business and
operations of ACR in particular, and those that pertain to the over-all political, economic, and business
environment, in general. These risk factors and the manner by which these risks shall be managed are
presented below. The risk factors discussed in this section are of equal importance and are only separated
into categories for easy reference.

Investors should carefully consider all the information contained in this Prospectus including the risk factors
described below, before deciding to invest in the CPs. The Company’s business, financial condition and
results of operations could be materially adversely affected by any of these risk factors.

Page 23
RISKS RELATING TO THE COMPANY AND ITS BUSINESS

The following discussion is not intended to be a comprehensive description of all applicable risk
considerations, and is not in any way meant to disclose all risk considerations or other significant aspects of
participation in the CPs. Prospective participants are encouraged to make their own independent legal,
financial, and business examination of the Company.

Through prudent management and cautious invesment decisions, ACR constantly strive to minimize risks
that can weaken its financial position. However, certain risks are inherent to specific industries and are not
within the direct control of the Company.
Some of the risks that the Company and its subsidiaries may be exposed to are the following:
1. Risk on Foreign Exchange Rate Fluctuations
The Company’s exposure is primarily associated with fluctuations in the value of the Peso against
the U.S Dollar and other foreign currency. The spare parts and insurance of SPPC and WMPC are
denominated in U.S. Dollars.
Risk Mitigation:
The Company keeps a portion of its short-term investments in foreign currency to serve as a hedge
in foreign exchange fluctuations.

2. Interest Rate Risks

The Company’s interest rate risks management policy centers on reducing overall interest expense
and minimizing other costs of borrowing. Changes in market interest rates would have material
impact on the Company’s interest-bearing obligations, specifically on those with floating interest
rates.
Risk Mitigation:
ACR and its subsidiaries manage their interest rate risks by averaging its debt portfolio and by
optimizing the mix of fixed and variable interest rates. Other measures are employed to avert risk
include pre-payment of debts and re-financing of loans as the opportunities arise. Moreover,
utilization of existing credit facilities has been kept to a minimum.

3. Liquidity Risks
Liquidity risk arises from the possibility that the Company encounter difficulties in raising funds to
meet or settle its obligations at a reasonable price. In addition, the Company may be unable to
refinance its outstanding debt, and any future financing arrangements entered into by the
Company may be less favorable than the current ones.
Risk Mitigation:
The Company and its subsidiaries carefully manage their liquidity position to be able to finance
their working capital, debt service, and capital expenditure requirements. Sufficient levels of cash
and short-term money market placements are maintained to meet maturing obligations.
Management regularly monitors and forecasts its cash commitments, matches debt payments with

Page 24
 cash generated from the assets being financed, and negotiates with creditors on possible re-
financing of existing loans to avail of better terms and conditions.

4. Credit Risks
Credit risk is the risk that a counterparty will not meet its obligation under a financial instrument or
a customer contract, leading to non-collection of earned revenues and financial losses.
Risk Mitigation:
ACR and subsidiaries transact only with companies and institutions that are in a sound financial
position and have demonstrated good credit standing. The power companies’ receivables are from
various electric cooperatives and the collection of which has been current and up to-date except
for SPPC’s long-outstanding receivable from NPC consisting of US$7,336,536.91 and
P96,255,433.46 plus interest from April 25, 2005 to April 25, 2010, which arose from a decision by
the Energy Regulatory Commission (ERC) that NPC has appealed to the Supreme Court. On
November 23, 2016, the Supreme Court Second Division issued a resolution that denied NPC’s
motion for reconsideration with finality. On the other hand, Receivables of the property companies
come from installment sales of industrial/residential lots and housing units. Receivable balances
are monitored regularly and allowance provisions are reviewed to ensure limited exposure to bad
debts.

5. Risks relating to project cost and completion

Possibility of cost overrun may happen due to change orders. In addition, the Company may
encounter slippage in the project schedule. If any of these happen, the Company may not be able
to achieve its financial targets, which are linked to the successful completion of its future and
ongoing projects.

Risk Mitigation:
The Company is confident that project schedule slippage would be minimized during the
construction since the agreed subcontractors are reputable local companies with good track
record.

Since possibility of cost overrun may happen due to change in orders, the project team ensures
adherence to provisions and scope of work specified in the EPC Contract. Thorough review of terms
of reference will be undertaken by the project team to minimize change orders. If there is a change
in order, there will be disruptions in the construction. However, since EPC contractors have
conducted 3D model and walk through during the pre-construction phase, the team can easily
detect and resolve construction issues, thus minimizing delays.

6. Risk on malfunctions and failures to operate

The Company’s financial performance is highly dependent on the successful operation of its power
plants, which are subject to several operational risks such as plant safety, fire, explosion,
mechanical failure, electrical failure and instrumentation and control Failure.

Effects and Risk Mitigation:

Page 25
 Fire and Explosion :

ACR’s power plant areas are exposed to the risk of fire especially its conveying system,
transformers and steam turbines. Since fire would disrupt the normal operations of the
Company and damage the Company’s properties, ACR may encounter financial losses resulting
from incidents of fire.

To mitigate this risk, the Company ensures that power plant areas have adequate fire detection
and sprinkler system installed. Also, vacuum trucks are used to prevent accumulation of inputs
in the conveyor areas. Sufficient spare parts are also maintained to make sure that faulty parts
are replaced on time and prevent risk of malfunction, which could result in incidents of fire.

Another risk that the machines and equipment of the power plants are exposed to, particularly
the boiler and switchgear, is the risk of explosion. Boiler explosion could happen if too much
fuel is fed to the boiler, which then gassifies and causes an explosion. To mitigate this, the
Company has a boiler protection system which will trip the plant before such condition forms.
Switchgear explosion could happen if there is short circuit in the switchgear. One of the
functions of switchgear is protection, which is interruption of short-circuit and overload fault
currents while maintaining service to unaffected circuits. Switchgear also provides isolation of
circuits from power supplies and a regular thermographic survey is done to all switchgears.
Also, all of ACR’s power plants are adequately insured to cover the risk of fire.

 Plant safety:

Power plants are much safer than they once were however this does not imply that the plant
employees will not encounter hazards. With the Company’s proper operation and maintenance
procedures this reduces accidents and mitigates their effects. Furthermore, the power plants
are strategically located in order to avoid any disturbances and ensure efficient work flow. For
example, during Sarangani Phase 2 construction, the construction may pose as a disturbance to
the existing operations, ACR manages this risk by proper segregation of components for
Sarangani Phase 2. Also, permitting system on common facilities was jointly developed by
Project Team and O&M.

 Mechanical Failure:

One of the main causes of disruption in daily operations in a power plant is mechanical failure
of plant and equipment. Some of the causes of mechanical failure are the boiler, turbine, major
pump or valve, fans, coal conveying system, and raw water supply system and these and the
potential consequences of these failures can be crucial. However, with the expert engineering
assistance, solution and design system, monitoring system for early indication of possible
failure, and daily inspections of the equipment and ensures that there are adequate spare
parts.

The boiler and cooling water (CW) chemical dosing systems have redundant dosing pumps thus
contracts of chemical supply are in place to always have adequate inventory at site. Moreover,
the water/steam system has online analysers for monitoring the quality 24/7 and a water
laboratory with a 365 day coverage. For example, when the lower part of Sarangani Phase 1

Page 26
 boiler was experiencing tube erosion causing two boiler tube leaks/forced outages, the
proposed long term solution/design change was installed allowing the boiler normal operation
from annual scheduled outage to the next scheduled outage.

As for turbine failures, these are considered a very rare occurrence on steam turbines. The
turbine/generator has an online vibration monitoring system and they have its own protection
system. During scheduled outages, inspection of steam turbine (ST) blades will be done.

For the Boiler Feed, Condensate and Cooling Water pumps, an example of this would be
Sarangani Phase 1 where it has 2 x 100% capacity. This means that if one pump has mechanical
failure, the plant can still operate on 100% capacity. Pumps will have adequate spares
(bearings, mechanical seals etc.), and possible repair shops have been identified.

Delays in the operations could also happen when there are mechanical failures and there are
no adequate spare parts. To mitigate this, the Company ensures that its supplies and spares
are adequate at all times by setting a certain period when the inventory is restocked. The
inventory is always monitored and buffers are set in order to give allowance to unexpected
requirements.

 Electrical Failure:

The objective of electric systems is to guarantee uninterrupted operation of a facility’s

lighting, process, and environmental systems. Electrical failures may interrupt the Company’s
processes, and thus could hinder its ability to efficiently run its operations. In the case of
ACR’s power plants, the areas which are highly exposed to risk of electrical failure include fan
motors, feed water, condensate and cooling water pumps, Electrostatic Precipitator (ESP) and
switchgear. To mitigate these types of risk the Company has maintenance and conditioning
monitoring program for early detection of any electrical fault. If problem arises on ESP
transformers / electrical systems, the Company has ESP vendor to inspect the site and rectify
the problems.

A sample of a mitigant on electric failure risk would be Sarangani’s 6kV, 480V and 220V
switchgear. The company makes sure that they are mostly situated at the Main Control Room
(MCR) switchgear rooms which are well ventilated, dust free and protected by FM200 system.
Furthermore, Sarangani is also conducting regular thermographic inspections of all switchgear
systems for early detection of any hot spots and lost connections. During the scheduled
annual outages, maintenance will be done, as per Original Equipment Manufacturer (OEM)
recommendations and at the same time Sarangani is planning to purchase spare switchgear
equipment over the next 3 years.

 Instrumentation and Control Failure:

The plant areas which are highly exposed to risk of instrumentation and control failure include
the Distributed Control System (DCS) and Programmable Logic Controller (PLC) system. This
failure could also disrupt the normal operations of the Company, and thus, ACR mitigates this
risk by ensuring that adequate spares for any part of the DCS are available and that there’s a
dedicated DCS engineer to monitor the system’s performance on a daily basis.

Page 27
 Instrument failures and malfunction is the most common cause of plant disturbance where a
single instrument failure can cause equipment, system or plant trip. To prevent this, the
company has planned maintenance & calibration program for all the instruments and control
valves.

Presented below are the insurance providers of the power plants:

Diesel Power Plants

Type WMPC SPPC MPC

Industrial UCPB General UCPB General 1. Charter Ping An
All Risk Insurance Insurance Insurance
2. Asia Insurance
3. UCPB General
Insurance

Public Liability Pioneer Insurance & Pioneer Insurance & 1. QBE Seaboard
Surety Corp. Surety Corp. Insurance Phils., Inc.

Fuel Stocks UCPB General Charter Ping An 1. Charter Ping An

Insurance Insurance –not Insurance
renewed up to 2018 2. New India
only Assurance Co., Ltd
Sabotage and UCPB General UCPB General 1. Charter Ping An
Terrorism Insurance Insurance – Paid by Insurance
WMPC/MPC only

Page 28
 Coal Power Plants

Type Provider
a.) Sarangani Phase 1
i. Political Violence and BI Charter Ping-An Insurance Corporation
ii. Comprehensive General Liability Charter Ping-An Insurance Corporation
Malayan Insurance Co. Inc., UCPB
iii. Industrial All Risk General Insurance Co., Inc. and Charter
Ping-An Insurance Corporation
iv.Terminal Operators Liability Charter Ping-An Insurance Corporation
v. Marine Open Policy Charter Ping-An Insurance Corporation
vi. Fire Charter Ping-An Insurance Corporation

b.) Sarangani Phase 2

Malayan Insurance Co. Inc., UCPB
i. Construction/Erection All Risk with Delayed
General Insurance Co., Inc. and Charter
Start-up (DSU)
Ping-An Insurance Corporation
ii. Marine Cargo Insurance with DSU UCPB Gen
iii. Sabotage and Terrorism (Political Violence)
Charter Ping An
with DSU
iv. Construction Comprehensive General
Charter Ping An
Liability

7. Risk of insufficient funds to finance the project

Loss or Low Revenue and Net Income and inability to collect revenues in a timely manner may
affect the Company’s ability to finance its ongoing projects.
Risk Mitigation:
Low revenues and inability to collect in a timely manner may affect the Company’s ability to
finance its ongoing projects. This is mitigated by the Company’s efforts to generate and collect
revenues more efficiently. The Company also ensures that their operational risks are minimized to
keep their production steady.

In addition, ACR’s shareholders have enough funds and bank lines to fund possible shortages to
finance the projects.

8. Risk on failure in operations of the Power plants

Failures in the operation of the power plants may impact the Company’s financial performance as
it may disrupt operations and may therefore entail loss in revenues.

Risk Mitigation:
To mitigate such risk, the Company ensures adherence to its business plans and strategies, which
are further discussed in the succeeding risk item. Also, if there’s any disruption in any of the power

Page 29
 plants, the other power plants can support its operations. This prevents failure in operations, and
therefore, minimizes exposure to such risk.

9. Risk on assurance of successful implementation of business plans and strategies

The Company may be exposed to various operational and financial risks that could hinder the
implementation of its business plans and strategies. The inability to achieve its business plans and
stategies may result in a delay in the operations of the Company.
Risk Mitigation:
Focused Strategy

ACR’s expansion plans and growth aspirations are founded on a set of focused strategies that will
enable it to manage the risks and challenges associated with the power generation business.

As in the past, the Company’s expansion strategy is firmly anchored on the needs of the Mindanao
Grid and is supported by offtake agreements to ensure the long-term sustainability of its business.
Furthermore, ACR’s power plants are strategically positioned to serve the key load centers of
Sarangani, Zamboanga and Iligan.

ACR anticipates a surplus of baseload capacity and has managed this risk by virtually fully
contracting its capacity. Any uncontracted capacity will be sold to the Mindanao WESM once it
starts operating. By being adequately contracted, ACR will be less affected by the impending
oversupply in the Mindanao grid.

ACR’s diesel plants will also be positioned to perform roles that are not effectively and efficiently
served by coal fired power plants such as service intermediate and peaking capacities, as well as
provide ancillary services.

To round up its strategy, ACR has also embarked on a renewable energy expansion program that
would involve the construction of several hydropower projects.

Development of greenfield power projects

ACR’s growth story hinges on the successful construction and operation of greenfield power
projects. The development of greenfield power projects involves substantial risks that could result
in delays, cost overruns, or construction not being up to original plans or specifications. Such risks
include the inability to secure adequate financing, inability to negotiate acceptable offtake
agreements, as well as unforeseen engineering and environmental problems, among others.

Any such delays, cost overruns, or construction deviations from original plans could have a material
adverse effect on the business, financial condition, results of operation and future growth
prospects of ACR.

Aside from its own developed expertise and proven success in developing greenfield power
projects, project risks are mitigated by the presence of committed project sponsors and partners,
project contracts that have been crafted in accordance with international project finance

Page 30
 standards, strong project management support from owner’s engineer, power supply agreements
and experienced O&M service providers.

10. Reputational Risk of Directors and Officers of the Company

Any reputational damage involving ACR’s Directors and Officers may affect the Company’s
performance. Reputational issues may result in loss of customers’ and creditors’ confidence, and
since the Company’s ability to continue operating efficiently depends on its relationship with its
customers and creditors, such issues could result in financial losses.

Risk Mitigation:
Any reputational damage involving ACR’s Directors and Officers may affect the Company’s
performance. This is mitigated by the fact that the founders have been in the business for several
years with unblemished record, and that the independent directors and officers are selected
through a stringent vetting process.

11. Risk on foreign ownership limitations

The Company may be exposed to risk on foreign ownership limitations, which is set at 40% as the
Company owns land directly and uses natural resources indirectly via its subsidiaries. This means
that foreigners cannot own more than 40% of the Company. Should the Company hit the limit, it
could no longer accept additional foreign investments. ACR’s current foreign ownership is at 1.19%,
a relatively small percentage compared to the 40% limit.

Risk Mitigation:
ACR’s foreign ownership is currently at 1.19%. The Company is constantly monitoring the
ownership of ACR shares, and it has no prospects of increasing foreign ownership.

12. Regulatory Risks

The Company’s business and financial condition may be adversely affected by amendments in the
Electric Power Industry Reform Act, and its Implementing Rules and Regulations. Continued
compliance with, and any amendments in, regulatory, safety, health and environmental laws and
regulations may have an adverse impact on the Company’s operating costs.

In addition, Licenses, permits, and operating agreements necessary for the Company’s operations
may not be acquired, sustained, renewed or extended.

ACR’s operating subsidiaries are required to comply with environmental regulations. The failure of
these subsidiaries to comply with the relevant environmental regulations could result in
administrative, civil and criminal proceedings initiated by the Government, as well as civil
proceedings by environmental groups and other individuals, which could result in substantial fines
and penalties against the Company, as well as orders that could limit or halt its operations.

There can be no assurance that the Company will not become involved in litigation or other
proceedings, or be held responsible in any such future litigation or proceedings relating to safety,
health and environmental matters in the future, and the costs of which could be material and

Page 31
 could materially and adversely affect the Company’s cash flow, results of operations and financial
condition.

Risk Mitigation:
To mitigate regulatory risks, ACR exerts proactive effort to make sure all existing and upcoming
changes in regulations are met. The Company ensures their continued compliance with, and any
amendments in, regulatory, safety, health and environmental laws and regulations, regardless of
the operating costs entailed by it.

Environmental, health and safety policies are an integral part of ACR’s power generation plants.
The existing diesel power plants conduct regular monitoring of waste water, source emission,
ambient air, noise, aquatic biota, ground and surface water, community health, hazardous waste,
resource usage and conservation, solid waste generation and disposal and legal requirements
compliance. Notable is that WMPC is a recipient of recognitions and awards for being one of the
safest workplaces in the region. The power plant is monitored and verified by the Multi-Partite
Monitoring Team which is composed of the stakeholders including DENR, DOST, relevant local
government units, NGOs and members of academia.

For the Sarangani Energy Corporation coal plants, technology mitigates most pollutants, except
carbon emission. To mitigate the effects of carbon emission, ACR instituted a carbon sink
program, where ACR has committed to plant 1.8 million seedlings over 3,750 hectares of land. To
date, ACR has planted 1.17 million seedlings covering 2,600 hectares of land. ACR is the only
power generation company that has an extensive forest-based carbon mitigation program

13. Competitive Risk

The Company is confronted by increased competition in the power industry, including those
resulting from legislative, regulatory, and industry restructuring efforts.
The Government has sought to implement measures designed to enhance the competitive
landscape of the power market, particularly for the unregulated sectors of the industry. These
measures include the privatization of NPC-owned and controlled power generation assets, the
establishment of the WESM and the Retail Competition and Open Access (RCOA). With increased
competition, ACR could also come under pressure to review or renegotiate the terms of offtake
agreements with customers, which may adversely affect ACR’s financial performance and results
of operations. To the extent that distribution utilities or industrial off-takers decide to purchase
power from other generation companies instead of purchasing from ACR, the ability of ACR to
generate the required revenues would be adversely affected.
Risk Mitigation:
The Company is confronted by increased competition in the power industry, which this could
result in an uncertain revenue stream and a possible reduction in market share. To combat such
risk, ACR focused on strong marketing and finding a niche in the market.
ACR ensured that its power capacities are contracted under long-term power supply agreements
with various customers in the Mindanao Grid. This insulates ACR from the effects of a potential
oversupply situation. Furthermore, ACR’s strategy of locating its plants within the service areas of
their major electric distribution company customers also improves their competitiveness as this
could result in lower transmission costs for the distribution utilities.

Page 32
 The Company believes that its experience in developing, building, financing, and operating
generating plants, its familiarity with the region, and the location of its current and future
generation facilities are strong competitive advantages that mitigate threats from increased
competition.

RISKS RELATING TO THE PHILIPPINES

A slowdown in the Philippine economy could adversely affect the Company.

Results of operations of the Company have generally been influenced, and will continue to be influenced by
the performance of the Philippine economy. Consequently, the Company’s income and results of
operations depend, to a significant extent, on the performance of the Philippine economy.

In the past, the Philippines has experienced periods of slow or negative growth, high inflation, significant
devaluation of the Philippine Peso and debt restructuring, and has been significantly affected by economic
volatilities in the Asia-Pacific region. The Company cannot assure prospective investors that one or more of
these factors will not negatively impact Philippine consumers’ purchasing power, which could materially
and adversely affect the Company’s financial condition and results of operations.

In addition, global financial, credit and currency markets have, since the second half of 2007, experienced,
and may continue to experience, significant dislocations and liquidity disruptions. There is significant
uncertainty as to the potential for a continued downturn in the U.S. and the global economy, which would
be likely to cause economic conditions in the Philippines to deteriorate.

A slowdown in the Philippine economy may adversely affect consumer sentiment and lead to a reduction in
demand for the Company’s products. There is also no assurance that current or future Government
administrations will adopt economic policies conducive to sustaining economic growth.

Political or social instability could adversely affect the financial results of the Company.

The Philippines has experienced political and military instability. In the past decade, political instability has
been observed headlined by impeachment proceedings against former presidents Joseph Estrada and
Gloria Macapagal-Arroyo, and public and military protests arising from alleged misconduct by previous
administrations. There is no assurance that acts of election-related violence will not occur in the future
and such events have the potential to negatively impact the Philippine economy. An unstable political
environment, whether due to the imposition of emergency executive rule, martial law or widespread
popular demonstrations or rioting, could negatively affect the general economic conditions and operating
environment in the Philippines, which could have a material adverse effect on the Company’s business,
financial condition and results of operations.

The occurrence of natural catastrophes may materially disrupt the Company’s operations.

The Philippines has experienced a number of major natural catastrophes over the years, including
droughts, typhoons, volcanic eruptions and earthquakes, which may materially disrupt and adversely affect
the business operations of the Company. While The Company maintains a comprehensive business
insurance against natural catastrophes, there can be no assurance that it will be adequately compensated
for all damages and economic losses resulting from natural catastrophes.

Page 33
Corona Virus Disease 2019 (COVID-19) Pandemic:

On March 8, 2020, President Rodrigo R. Duterte, recognizing that COVID-19 constitutes a threat to national
security and prompting a whole-of-government approach in addressing the outbreak, declared a state of
public health emergency throughout the entire Philippines through Proclamation 922.

On March 16, 2020, to prevent the sharp rise of COVID-19 cases in the country, the President placed the
entire Luzon under Enhanced Community Quarantine (ECQ) until April 14, 2020. On April 7, 2020, upon the
recommendation of the Inter-Agency Task Force on Emerging Infectious Diseases (IATF EID), the President
extended the ECQ until April 30, 2020.

The economic narrative on the COVID-19 outbreak revolves around two causal mechanisms: the impact of
the fear factor on behavior, reflected in a decline in demand for travel-related services, discretionary
consumption, and the production and regional supply chains. Our power plants continue to deliver the
required uninterrupted energy supply. As such, the impact on the business will be minimal.

The ECQ that has been declared as a result of the pandemic resulted in a drop in peak demand for power in
Mindanao of between 20% and 25% as commercial customers, mainly made of shopping malls and similar
establishments stopped operating. Industrial demand however is less affected and we expect this to
continue driving demand for our output. Most of the Company’s customers have industrial loads that are
producing basic commodities that are essential and are in fact counter-cyclical in nature. These include
canneries of fish and fruit products and other producers of food products. Since most of the DU customers
in their respective franchise areas have already shifted from ECQ to GCQ with most essential
manufacturing services on full operations, demand is forecasted to be stable for the rest of 2020.

To help soften the impact of the ECQ, the government also ordered distribution utilities, power generation
companies, fuel suppliers, and other entities involved in the power supply chain to give a 30-day payment
extension of all bills falling due within the ECQ. This deferred amount will be repaid in four (4) equal
monthly installments or as negotiated with DU. As for suppliers, the company has not encountered any
problems with them.

The Company defines its own policies and guidelines to adequately prepare, manage, and respond to the
needs of both the company and its employees as the COVID-19 pandemic develops.

Limited workforce
• Work from Home Scheme for head office and mix of WFH and On Site on a 14 day rotation for
plant personnel
• Manpower support through advance salary and 13th month pay, food and transportation
allowance

The following illustrates how the company is dealing with the current situation.

O&M Personnel
How to Sustain and Maintain COVID free O&M personnel
1. Continue close monitoring of personnel health/condition

Page 34
 2. Maintain provision of PPEs and preventive medical supplies to all personnel
3. Strict adherence to guidelines and protocols for COVID-19 prevention.
4. Continue provision of meals and accommodation for personnel working straight 15-days-
duty and 15-days-off.

Possible/In case of infection of some O&M personnel.

1. Identify potential replacements and start immediately training/cross-training or
developmental assignment.
2. Simulate/draft a type of shifting schedule of operation at reduced number of personnel
and or groups.

Inventory of operating supplies and consumables

1. Fuel inventory – good for 3 months
2. Chemicals, Lube Oil, other supplies – good for 1.5 months

MITIGATION OF RISKS RELATED TO THE COUNTRY

In general, the Company believes that the risk factors discussed herein are mitigated by its competitive
strengths and business strategies, as well as its strong corporate governance structure and its seasoned
management team. The Company continuously monitors and studies its existing and probable exposure to
various risk in order to be able to mitigate these risks more proactively.

RISKS RELATING TO THE COMMERCIAL PAPERS

Liquidity Risk
The Philippine securities markets are substantially smaller, less liquid and more concentrated than the
major securities markets. The Company cannot guarantee that the market for the CPs will always be active
or liquid. Even if the CPs are listed in the PDEx, trading in securities such as the CPs may be subject to
extreme volatility at times, in response to fluctuating interest rates, developments in local and
international capital markets and the overall market for debt securities among other factors. There is no
assurance that the CPs may be easily disposed of at prices and volumes and at instances best deemed
appropriate by their holders.

Price Risk

The CP’s market value may move (either up or down) depending on the change in interest rates in the
market. The CPs when sold in the secondary market may be worth more if interest rates drop. Conversely,
if the prevailing interest rates rise, the CPs may be worth less when sold in the secondary market. In such
instance, an investor faces possible loss if he decides to sell.

Retention of Ratings Risk

There is no assurance that the rating of the Issuer will be retained throughout the life of the CPs. The
rating is not a recommendation to buy, sell, or hold securities and may be subject to revision,
suspension, or withdrawal at any time by the assigning rating organization.

MITIGATION OF RISKS RELATING TO THE COMMERCIAL PAPERS

Page 35
In general, the Company believes that the risk factors discussed herein are mitigated by its competitive
strengths and business strategies.

Page 36
USE OF PROCEEDS
The Company’s net proceeds from the Offer is expected to be approximately Php940,263,494.54 after
deducting the applicable fees and expenses.

Expenses related to the Offer, all of which will be for the account of the Company, are broken down as
follows:

Estimated Net Proceeds from the CP Issuance

Sample Computation

Face Value of the Offer P 1,000,000,000.00

Discount (indicative based on 4.75% and 360 days (45,826,817.57)
assuming true discount computation)
Gross Proceeds 954,173,182.43
Less:
SEC Filing and Legal Research Fees (252,530.00)
Documentary Stamp Tax (maximum assuming (7,500,000.00)
P500 million issued for one year)
Underwriting and Selling Fees (maximum) (5,263,157.89)
Philratings credit rating report fees (649,000.00)
PDTC Registry fees* (170,000.00)
PDEx listing maintenance fees* (25,000.00)
Estimated Costs of Printing and Publication (50,000.00)
Total expenses (13,909,687.89)
Net Proceeds 940,263,494.54
* PDTC and PDEx fees are estimates

In the event that the actual expenses relating to the Offer differ from the above estimates, the actual net
proceeds to the Company from the Offer may be higher or lower than the expected net proceeds set forth
above. Any increase or decrease in the net proceeds to the Company shall be addressed by making a
corresponding increase or decrease, as the case may be, to the Company’s provision for working capital
requirements.

Depending on the net proceeds raised from the Offer, the Company intends to use the proceeds from the
Offer to settle its maturing short-term obligations in the 3rd and 4th quarter of 2020 and to partially fund its
hydro project development.

The short-term loans were incurred to partially fund the redemption of the Company’s commercial papers
which matured on July 10 and August 11, 2020. The combined value of the CP maturities amounted to
Php1,010,000,000.00.

Page 37
 i. Payout of Short-Term Obligations of ACR

Presented below is a list of the Company’s short-term loans maturing in the third and fourth quarter of
2020.

PRINCIPAL MATURITY VALUE

FUNDER MATURITY DATE RATE
VALUE
Various Funders Sep. 7, 2020 5% 35,247,917 35,505,912
St. Augustine’s School Sep. 15, 2020 4.75% 3,000,000 3,023,750
Sterling Bank Trust Group Sep. 17, 2020 5.00% 28,200,000 28,482,000
Franciscan Missionaries of Mary Sep. 24, 2020 5% 5,000,000 5,053,125
St. Theresa’s College Sep. 30, 2020 5% 15,000,000 15,187,500
Various Funders Oct. 05, 2020 4.25%-5% 71,738,241 72,211,726
Shoecat, Inc. Oct. 06, 2020 4,00% 40,000,000 40,240,833
Various Funders Oct. 09, 2020 4%-4.25% 60,700,178 61,049,846
Sterling Bank Trust Group Oct. 12, 2020 4.25% 85,000,000 85,497,722
Stella Maris College Oct. 13, 2020 4.50% 5,661,248 5,701,348
Various Funders Oct. 14, 2020 4.25%-5% 188,071,875 189,411,940
St. Theresa’s College Oct. 15, 2020 5.00% 8,000,000 8,100,000
Various Funders Oct. 16, 2020 4.50% 30,883,853 31,073,264
SBJ Marikina Shoe Exchange
Corp. Oct. 19, 2020 4.50% 25,000,000 25,155,538
TOTAL 601,503,312 605,694,504

Various funders refer to institutions who lent to the Company via promissory notes.

ii. Partial funding of hydro power project development.

The Company plans to use the remaining balance of the CP proceeds to partially fund Sindangan Zambo-
River Power Corporation.

Power Plant Installed Estimated Stages of Location CP Allocation Disbursemen

Capacity Project development t period
(in MW) Cost (in
billions)
Singdangan 22 2.85 Advance Zamboanga del 334,568,990.54 In a span of 1
Norte year from
issue date

The CP allocation above represents the Company’s best estimate of the use of proceeds as this time. While
the CP proceeds have not been deployed, the Company intends to invest the funds from the Issuance in
short-term marketable securities until the disbursement schedule is finalized.

Since the hydro project will be owned by ACR through Alsons Renewable Energy Corp., funds would have to
flow from ACR to AREC. The cash flows will be booked as cash advances from related party. In additions,
the funds would go through from AREC to the corresponding project company and will be booked as cash
advances.

Page 38
The company will arrange Project Financing to complete the funding requirement of Sindangan identified
for implementation.

ACR’s primary sources of income are dividends declared by its operating subsidiaries. ACR and its
subsidiaries follow a dividend policy of annually declaring dividends from 20% of the previous year’s
unappropriated retained earnings. For a more detailed discussion on the Dividends, please see page 81.

The Company’s issuance of CP is also opportunistic. Access in the CP will depend on the interest
environment during the time of issuance.

No portion of the proceeds will be used to acquire major assets or finance the acquisition of other business
nor will the proceeds be used to reimburse any officer, director, employee or shareholder for service
rendered, assets previously transferred, and money loaned or advanced or otherwise.

The Sole Issue Manager, Arranger and Underwriter shall not receive any amount from the proceeds other
than the underwriting, issue management and selling fees.

The foregoing discussion represents a best estimate of the use of proceeds of the Offer based on the
Company’s current plans and anticipated expenditures. In the event that there is any change in the
Company’s disbursement plan, including force majeure, the Company will carefully evaluate the situation
and may reallocate the proceeds and/or hold such funds on short term deposit whichever is better for the
Company’s and its shareholders’ interest taken as whole. In such event, the Company will issue an
announcement if there is any material change in the above proposed use of proceeds.

In the event of any significant deviation, material adjustment or reallocation in the planned use of
proceeds, the Company will secure the approval of its Board of Directors for such deviation, adjustment or
reallocation and promptly make the appropriate disclosures to the SEC and the PDEx.

Page 39
DETERMINATION OF THE OFFER PRICE

The CPs shall be issued at a discount to face value.

Below is an illustration of the computation of the Offer Price for an Issuance:

Offer Price Computation

Series L Series M Series N

Tenor (in Days) 91 182 364
Discount Rate 3.250% 4.000% 4.750%
Cost Breakdown
Face Value 5,000,000.00 5,000,000.00 500,000.00
Discount (40,741.68) (99,106.95) (22,913.41)
Tax on Discount 8,148.34 19,821.39 4,582.68
Cost 4,967,406.65 4,920,714.44 481,669.27
Offer Price 99.35% 98.41% 96.33%

The rates were computed based on the discount rate formula, which sets the base rate as a) the three-day
average BVAL Reference Rate of the corresponding tenor; or b) the weighted average accepted yield of the
closest tenor of the Term Deposit Facility of the BSP whichever is higher as of the pricing date.

Page 40
PLAN OF DISTRIBUTION
The Company plans to issue the CPs in one lump sum or several tranches, through the designated issue
manager, underwriter and selling agents. The CPs shall be issued in the 3rd quarter of 2020.

ISSUE MANAGER/UNDERWRITER AND UNDERWRITING OBLIGATION

The Company has engaged Multinational Investment Bancorporation as its Underwriter pursuant to an
Underwriting Agreement (the “Underwriting Agreement”). The Underwriter has agreed to act as the
Underwriter for the Offer and as such, distribute and sell the CPs at the Offer Price, and has committed to
underwrite the CPs worth up to Php1,000,000,000 on a best-effort basis, in either case subject to the
satisfaction of certain conditions and in consideration for certain fees and expenses. There is no breakdown
of Commercial Papers for particular series for distribution. Any unsold portion would be sold at a future
date, since the issuance is under a three-year shelf-registration.

The Underwriter is duly licensed by the SEC to engage in distribution of securities to the public. The
Underwriter may, from time to time, engage in transactions with and perform services in the ordinary
course of business with the Company and its related companies. There is no appointed syndicate of sub-
underwriters.

Multinational Investment Bancorporation is the oldest existing independent investment house in the
Philippines. It provides a full range of investment banking services that include debt and equity
underwriting, loan syndication and financial advisory services for mergers and acquisitions, corporate
reorganization and financial restructuring.

The Underwriter has no direct relations with the Company in terms of ownership. The Underwriter has no
right to designate or nominate any member of the Board of the Company.

SALE AND DISTRIBUTION

The distribution and sale of the CPs shall be undertaken by the Underwriter and Selling Agents, as
applicable, who shall sell and distribute the CPs to third party buyers/investors. Nothing herein shall limit
the rights of the Underwriter and each Selling Agent as applicable, from purchasing the CPs for its own
account. There are no persons to whom the CPs are allocated or designated. The CPs shall be offered to the
public at large and without preference. The allocation to the investors will depend on their orders which
will be subject to scaling done in case of oversubscription.

Unless otherwise terminated, the engagement of the Sole Issue Manager, Arranger and Underwriter and
Selling Agents shall subsist so long as the SEC Permit to Sell remains valid.

FEES AND COMMISSIONS

The Company will pay the Underwriter a fee of 0.50% per annum on the aggregate face value of the CPs
issued, which is inclusive of the underwriting and the selling agency fees, as applicable. The fees shall be
deductible from the gross proceeds of the Offer on Issue Date.

Page 41
The Company paid the Issue Manager a flat fee of Pesos: Two Million Five Hundred Thousand (Php
2,500,000.00). As the Issue Manager for the Offer, MIB has agreed to perform services which include
conducting due diligence on the Company, evaluating the marketability of the Offering, assisting in the
preparation of the prospectus and other required documents, coordinating the activities of all third parties
appointed for the Offer, arranging and managing necessary marketing activities and such other services as
may be mutually agreed between ACR and MIB.

OFFER PERIOD

The Offer Period shall commence upon or immediately after issuance by the SEC of the Permit to Sell, and
will end 15 working days after the start of the offer period or earlier as deemed appropriate by the Issuer.

Page 42
DESCRIPTION OF THE SECURITIES TO BE REGISTERED

Instrument : Registered Commercial Paper

Issue Size : Php 1,000,000,000.00 face value to be issued in one lump sum
or multiple tranches; the Commercial Papers may be issued
and reissued, in each case, in whole or in part and in one or
more series, within three (3) years from the date of the SEC
order rendering the Registration Statement effective and a
corresponding Permit to Sell covering the Commercial Paper
Program.

Method of Issue : The Issuer may, in consultation with the Sole Arranger and
Lead Underwriter, issue or reissue, in whole or in part, the
Commercial Papers covered by the Registration Statement, in
one or more series under Rule 12.1.2.5 of the Implementing
Riles and Regulations of the Securities Regulation Code
provided that a) the outstanding amount of the Commercial
Papers at any time shall not exceed One Billion Pesos (PhP
1,000,000,000.00).; b) the Commercial Papers are issued within
three (3) years following the Registration Statement Effectivity
Date.

Issue or Offer Price : Discount to face value of the CPs

Use of Proceeds : To settle its maturing short-term obligations in the 3rd and 4th
quarter of 2020 and to partially fund its hydro project
development.

Discount Rate for Initial : The sum of the Base Rate and the Credit Spread determined
Issuance prior to each Issue Date (the “Rate Setting Date”)
The following are the discount rates for the Initial Issuance:
Series L: 3.250%
Series M: 4.000%
Series N: 4.750%

Discount Rate for Subsequent : The interest/discount rate for the subsequent issuance/s shall
Issuance/s be set by the Issuer in consultation with the Sole Arranger
which may be determined based on the corresponding
Benchmark Rate plus Spread

Base Rate : The Base Rate is the higher of a) the three-day average BVAL
Reference Rate of the corresponding tenor, or b) the rate of the
closest tenor of the Term Deposit Facility of the Bangko Sentral
ng Pilipinas

Page 43
 The BVAL Reference Rate for each series is as follows:
Series L: BVAL 3Mos
Series M: BVAL 6Mos
Series N: BVAL 12 Mos
In the event that the BVAL Reference Rates are replaced by a
different calculation methodology, the applicable replacement
reference rates shall apply.

Tenor of the Initial Issuance : Up to three hundred sixty (364) days; provided portions of the
issuance of the CPs may, as determined by the Issuer in
consultation with the Sole Issue Manager, Arranger and
Underwriter, have the following tenor/term. The day count
convention is Actual/360.
Series L: 91 days
Series M: 182 days
Series N: 364 days
Tenor for Subsequent : The tenor of succeeding issues may range from thirty (30) days
Issuance/s up to the maximum tenor allowed by the Securities and
Exchange Commission (SEC) under the relevant provisions of
the Securities Regulation Code (SRC)

Denomination : For Series L and M:

Minimum of Pesos: Five Million (Php5,000,000.00) face value
and increments of Pesos: One Hundred Thousand
(Php100,000.00)

For Series N:
Minimum of Pesos: Five Hundred Thousand (Php500,000.00)
face value and increments of Pesos: One Hundred Thousand
(Php100,000.00)

Issue Date : The CPs may be issued in either lump sum or tranches on a
when and as needed basis in consultation with the Issuer upon
approval by the SEC and issuance of the Permit to Sell any time
within three (3) years following the RS Effectivity Date.

Reissuance Procedure : Issuer reserves the right during the validity of the Registration
Statement for the Commercial Papers to a) issue additional
Commercial Papers; or b) reissue Commercial Papers that have
matured and are repaid on the relevant Maturity Date;
provided that, at any time during the three (3)-year validity of
the Registration Statement, there will be no more than

Page 44
 Php1,000,000,000.00 in aggregate principal amount of
Commercial Paper outstanding and none of the Commercial
Papers will have a maturity date of 365 days or more; provided
further, that at the maturity date of any outstanding
Commercial Papers for another term of not more than 365
days; provided further, that any and all relevant taxes,
including, but not limited to documentary stamp tax on the
indebtedness, shall be paid by the issuer for each issuance and
reissuance of the Commercial Papers.

Interest Computation : The Interest/Discount Rate and Rollover Interest / Discount

Rate will be calculated on a true-discount basis.

Principal Repayment : The principal amount of the CPs will be repaid in full at their
respective Maturity Dates, unless the investor provides written
instruction to rollover the entire amount or a portion thereof.
If such principal repayments is due on a day that is not a
business day, the principal repayment date shall be made on
the immediately succeeding business day. No additional
interest will be paid in such case.

Status : The CPs will constitute direct, unconditional, unsubordinated,

general and unsecured obligations of the Issuer ranking at least
pari passu in all respects and without preference or priority
(except for any statutory preference or priority applicable in
the winding-up of the Issuer) with all other outstanding
unsecured and unsubordinated obligations (contingent or
otherwise, present and future) of the Issuer.

Form : The CPs shall be issued scripless and will be maintained in

electronic form with the Registrar to be appointed for this
purpose.

Taxation on the Discount : Interest paid on the CPs shall be subject to a 20% final
withholding tax.

A CP holder who is exempt from or is not subject to the

aforesaid withholding tax shall be required to submit a tax
exemption certificate and other applicable documents.

Registrar : Philippine Depository & Trust Corporation

Paying Agent : Philippine Depository & Trust Corporation

Facility Agent : AB Capital and Investment Corporation

Page 45
 The Facility Agent is required under the Facility Agency
Agreement to act on behalf of the CP Holders in calling for
and/or attending meetings of the CP Holders.
A meeting of CP Holders may be called at any time and from
time to time pursuant to the provisions of the Schedule 2 of the
Faclity Agency Agreement for the purpose of taking any action
authorized to be taken by or on behalf of the CP Holders of any
specified aggregate principal amount of CPs under any other
provisions of this Agreement or under any other applicable law.
The Facility Agent may at any time call a meeting of the CP
Holders on its own accord or upon the request by the Issuer or
CP Holders holding at least twenty percent (20%) of the
aggregate outstanding principal amount of the CPs to take any
action specified in Clause 1 of this Schedule 2, to be held at
such time and at such place as the Facility Agent shall
determine. Notice of every meeting of CP Holders, setting forth
the time and the place of such meeting in Metro Manila and
the purpose of such meeting in reasonable detail, shall be sent
to the Issuer and to each of the CP Holders and published in
two (2) newspapers of general circulation in Metro Manila,
Philippines not earlier than forty-five (45) days nor later than
fifteen (15) days prior to the date of the meeting; Provided,
that all reasonable costs and expenses incurred by the Facility
Agent for the proper dissemination of required information on
the requested meeting shall be paid or reimbursed, as
applicable, by the Issuer within five (5) Business Days from
receipt of the duly supported billing statement.
The above discussion is qualified by the more detailed
information as contained in the Facility Agency Agreement. The
said Agreement is available for inspection at the Facility Agent’s
office by the CP Holders upon their request.

Other Material Provisions Giving : In a CP Holders Meeting, the presence of the Majority CP
or Limiting the Rights of CP Holders personally or by proxy shall be necessary to constitute
Holders a quorum to do business at any meeting of the CP Holders.
The Facility Agent shall, by an instrument in writing, appoint a
temporary chairman and secretary of the meeting from among
the CP Holders then present or represented during the
meeting, unless the meeting shall have been called by the
Issuer or by the CP Holders as provided in Clause 3 of this
Schedule, in which case the Issuer or the CP Holders calling the
meeting, as the case may be, shall in like manner appoint a
temporary chairman and secretary of the meeting from among
the CP Holders then present or represented during the
meeting. Any meeting of the CP Holders duly called pursuant to
the provisions of this Section may be adjourned from time to

Page 46
time for a period or periods not to exceed in the aggregate one
(1) year from the date for which the meeting shall originally
have been called, and the meeting so adjourned may be held
on another date without further notice. Any such adjournment
may be ordered by persons representing a majority of the
aggregate principal amount of the CPs represented at the
meeting and entitled to vote, whether or not a quorum shall be
present at the meeting.
To be entitled to vote at any meeting of the CP Holders, a
person must be a registered holder of the CPs or a person
appointed by an instrument in writing as proxy by any such CP
Holder as of the date of such meeting. The only persons who
shall be entitled to be present or to speak at any meeting of the
CP Holders shall be the persons entitled to vote at such
meeting and any representative of the Issuer and its counsel.
All matters presented for resolution by the CP Holders in a
meeting duly called for the purpose shall be decided or
approved by the affirmative vote of the majority of the CP
Holders present or represented in a meeting at which there is a
quorum, except as otherwise provided in this Agreement. Any
resolution of the CP Holders which has been duly approved
with the required number of votes of the CP Holders as herein
provided shall be binding upon all the CP Holders and the
Facility Agent as if the votes were unanimous.
Notwithstanding any other provisions of this Agreement, the
Facility Agent may make such reasonable regulations as it may
deem advisable for any meeting of the CP Holders, in regard to
proof of ownership of CPs, the appointment of proxies by
registered holders of CPs, the appointment and duties of
inspectors of votes, the submission and examination of proxies,
certificates and other evidences of the right to vote, and such
other matters concerning the conduct of the meeting as it shall
deem fit.
Wherever in this Agreement it is provided that the holders of a
specified percentage of the aggregate outstanding principal
amount of CPs may take any action (including the making of
any demand or request, the giving of any notice or consent, or
the taking of any other action), the fact that at the time of
taking any such action the holders of such specified percentage
have joined therein may be evidenced by:
(a) any instrument executed by the CP Holders in person or by
the agent or proxy appointed in writing;
(b) the duly authenticated record of voting in favor thereof at
the meeting of the CP Holders duly called and held in
accordance with this clause; or

Page 47
 (c) a combination of such instruments and any such record of
meeting of the CP Holders.

Secondary Trading : The CPs are intended to be listed at the PDEx for secondary
trading of the CPs and upon such listing, all secondary trading
may be coursed through eligible PDEx Trading Participants.
However, there can be no assurance that listing the CPs will
materially affect their liquidity on the secondary market.

Minimum Denomination for : Minimum of Pesos: One Hundred Thousand (Php100,000.00)

Secondary Trading face value and increments of Pesos: Ten Thousand
(Php10,000.00).
Secondary market trading and settlement are governed by the
relevant rules of PDEx and are subject to the applicable fees of
PDEx and the Registry, all of which shall be for the account of
the investors.

Market Maker : Multinational Investment Bancorporation

Manner of Purchase : The CPs will be available for sale from the Underwriter /
Arranger and Selling Agents, if any, subject to minimum
purchase amount and denomination.

Acceptance/Rejection of the : The Issuer and the Issue Manager and Underwriter/Arranger
Application reserves the right to accept or reject any application for CPs. In
case of over-subscription, the Issuer and the Issue Manager and
Underwriter/Arranger reserve the right to allocate the CPs
available to the investors in a manner they deem appropriate.

Delivery of CP : Delivery of the CPs will be made upon full payment of the Offer
Price to the Underwriter/Arranger and/or Selling Agents

Liabilities : The Company as the CP issuer is liable and responsible for any
and all obligations arising from the sale of the CP as provided
under pertinent sections of the Negotiable Instruments Law,
the SRC and applicable laws of the Philippines as well as the
Underwriting Agreement and related agreements. In addition,
the Issuer is responsible for complying with all reportorial
requirements of the SEC in connection with the issuance of the
CP.

Credit Rating : The Issuer has a rating of PRS A plus as assigned by Philratings
effective April 30, 2020.
Philratings assigned an issuer credit rating of PRS A plus (corp.)
for Alsons Consolidated Resources, Inc. based on the following
considerations:
(i) the development projects in Mindanao that are supportive

Page 48
 of the growth of the region’s power industry;
(ii) the Company’s ability to establish joint ventures with strong
partners for particular projects;
(iii) its planned expansion projects which will further diversify
its generation mix;
(iv) its improving profitability, albeit with the need to improve
on its liquidity position;
(v) the challenges it encountered in securing bilateral contracts
for its diesel power plants; and
(vi) the increasing economic and market uncertainty caused by
the COVID-19 pandemic.

Security : Negative pledge on the Company’s existing and future assets,

except (i) to secure statutory obligations, (ii) to enable the
Company to continue to enter into its usual transactions in the
ordinary course of business, (iii) those imposed by law or
arising out of pledges or deposits under workmen’s
compensation laws or other social security or retirement
benefits or similar legislation, and (iv) those created for the
purpose of paying current taxes, assessments or other
governmental charges which are not delinquent or remain
payable without any penalty, or the validity of which is
contested in good faith by appropriate proceedings upon stay
of execution of the enforcement thereof.

Cross Default : The Company shall be considered to be in default in case the

Company fails to pay or defaults in the payment of any
installment of the principal or interest relative to, or fails to
comply with or to perform, any other material obligation, or
commits a breach or violation of any of the material terms,
conditions or stipulations, of any agreement, contract or
document with any persons to which the Company is a party or
privy, whether executed prior to or after the date hereof, or
under which the Company has agreed to act as guarantor,
surety or accommodation party, which, under the terms of
such agreement, contract, document, guaranty or suretyship,
including any agreement similar or analogous thereto, shall
constitute a material default thereunder after allowing for all
applicable grace periods. No default will occur under this clause
if the aggregate amount the Company fails to pay is less than
Php 35 million (or its equivalent in any other currency or
currencies)”.

Other Terms and Conditions : The CPs will not be convertible to any other security or equity
of the Issuer.

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 The Issuer will not set up any sinking fund for the redemption
of the CPs.
Substitution of the CP with another type of security will not be
permitted.
Other terms and conditions as may be agreed upon among the
Issuer, the Issue Manager and Underwriter/Arranger.

Loan Covenants : On November 25, 2015, ACR entered into a fixed rate corporate
notes facility with various noteholders with aggregate principal
amount of P7,500 million divided into two (2) tranches: (a)
Tranche A with principal amount of P5,600 million, subject to
fixed interest rate of 7.24% and payable within five (5) years
from the drawdown date and (b) Tranche B with principal
amount of P1,900 million, subject to fixed interest rate of
7.92% and payable in annual installment of P19 million for the
first six (6) years with balloon payment of P1,786 million on the
7th year from the drawdown date. Proceeds of the loan shall
be used to prepay ACR’s existing long-term debts and finance
the investments in power-related assets. In December 2015,
ACR had drawn the entire loan facility amounting to P7,500
million. In 2018, the Company made a partial payment of Php
1.4 billion and total outstanding amount is at Php 6.04 billion.
ACR shall maintain certain financial ratios such as debt-to-
equity ratio of not more than 2.9 and 2.61, and interest
coverage ratio of not less than 1.58 and 1.95 as at December
31, 2019 and 2018, respectively. As at December 31, 2019 and
2018, ACR is in compliance with the debt covenants.
Throughout the term of the loan, the interest reserve account
is required to have a balance of not less than the aggregate
amount of interest falling due within the next interest period
which is equivalent to one-year interest period as defined in
the loan agreement. As at December 31, 2019 and 2018, the
remaining balance of interest reserve account amounted to
P230 million and P239 million, respectively. Interest income
earned from interest reserve account amounted to P15 million,
P8 million and P6 million in 2019, 2018 and 2017, respectively.

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INTEREST OF NAMED EXPERTS AND COUNSEL
The validity of the CPs and tax matters pertaining thereto were passed upon by Martinez Vergara
Gonzalez & Serrano Law (MVGS), the third party transaction counsel. MVGS has no shareholdings or any
interest, direct or indirect, in the Company, or any right, whether legally enforceable or not to nominate
persons or to subscribe to the securities of the Company in accordance with the standards on
independence required in the Code of Professional Responsibility and as prescribed by the Supreme
Court of the Philippines.

The Philippine Depository & Trust Corporation, the Registrar and Paying Agent, has no direct and
indirect interest in the Company.

The financial statements of the Company for the periods ended December 31, 2019, 2018 and 2017
appearing in this Prospectus have been audited by SyCip Gorres Velayo & Co., independent auditor, as
set forth in their report thereon appearing elsewhere herein. The partner-in-charge for the periods
ended December 31, 2019, 2018 and 2017 is Mr. Martin C. Guantes, CPA.

Castillo Laman Tan Pantaleon & San Jose (CLTPSJ) Law Firm is the legal counsel for the Company. CLTPSJ
has no shareholdings or any interest, direct or indirect, in the Company, or any right, whether legally
enforceable or not to nominate persons or to subscribe to the securities of the Company.

Subido Pagente Certeza Mendoza & Binay (SPCMB) Law Firm is the legal counsel for the Underwriter.
SPCMB has no shareholdings or any interest, direct or indirect, in the Company.

There is no arrangement that experts shall receive a direct or indirect interest in the Company or was a
promoter, underwriter, voting trustee, director, officer, or employee of Company.

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INDUSTRY OVERVIEW
The information and data contained in this section have been taken from sources in the public domain.
The Company does not have any knowledge that the information herein is inaccurate in any material
respect. Neither the Company nor the Sole Issue Manager, Arranger and Underwriter nor any of their
respective affiliates or advisors has independently verified the information included in this section.

OPERATING ENVIRONMENT 1OPE RATING ENVIRON MEN T1

Mindanao is the second biggest island of the country.

Mindanao has a high potential for agro-industrial development. It is endowed with eight major river
basins, namely: Agusan, Tagoloan, Cagayan de Oro, Tagum, Libuganon, Davao, Buayan-Malungon,
Agus and the Mindanao River – all of which could supply water for irrigation and other related needs.
One-third of the Mindanao land area is devoted to agriculture. Mindanao supplies over 40 percent of
the country’s food requirements and contributes more than 30 percent to national food trade. It is
also the country’s major producer of rubber, pineapple, banana and coffee.
Mindanao can also be developed into a top tourist destination given the cultural diversity of its
people and its resource-rich environment. Its tourism industry represents about 17 percent of the
national tourist traffic.
Mindanao is endowed with rich mineral resources. The CARAGA and Davao regions contribute the
most to the national output with more than eight percent each. Eastern Mindanao, North Central
Mindanao, Zamboanga Peninsula, and Southeastern Mindanao are considered high-interest mining
areas, with rich deposits of gold, copper, iron, chromium, nickel, cobalt and manganese.
Mindanao also has vast potential for renewable energy sources. Substantial volumes of agricultural
residues are a potential source of biomass energy; Siargao Island and Davao Oriental are ideal sites for
ocean energy generation; while Surigao is a potential site for wind power.

Power Situation
Energy security is crucial to the continued growth of industries in Mindanao.
The experiences of the region in the early part of the decade is a testament to that. Then, it had high
dependency on hydropower which at the time contributed over half of the power generated which in
turn made climate change a real threat to Mindanao’s energy security. In particular, increasing
incidence of El Niño have reduced water levels and hampered power supply. The situation has been
aggravated by the degradation of Mindanao’s watersheds like Lake Lanao, which is the primary
source for the Agus Hydro- Electric Power Plants. However, the relative importance of hydro to the
supply mix had decreased in recent years due to the operation of new power plants that utilize other
sources of energy.

1
Source: National Economic Development Authority’s Mindanao Strategic Development Framework 2010 -
2020

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 Mindanao has gone a long way from then and it has promptly caught up in terms of supply, now with
the highest reserve margin percentage among the three grids. On the demand side, sales and
consumption recorded a sustained accelerated growth of 8.2% in 2018 on a per-grid basis, higher
compared with 4% a year ago as all sectors grew on the back of an adequate and more stable supply
of power.

As shown in the table below, in 2019, the capacities in Mindanao rose significantly compared to
previous years after the entry of new power plants coming from base-load coal (118.5 MW SEC U2 and
a total of 450 MW from GNPOWER Kauswagan U1, U2, and U3), solar (25 MW ground mounted solar
PVs ADG), and hydro (8 MW Run-of-Rivertype HEPP ASIGA).

2019 vs. 2018 Installed and Dependable Capacity, Mindanao (in MW)

Mindanao
Fuel Type Installed Capacity Dependable Capacity
2019 2018 Diff. 2019 2018 Diff.
Coal 2,089 1,521 568 1,874 1,355 519
Oil Based 936 942 (6) 771 778 (7)
Natural Gas 0 0 - 0 0 -
Geothermal 108 108 0 103 100 3
Hydro 1,147 1,134 13 991 978 13
Biomass 73 51 22 25 14 11
Solar 84 59 25 67 44 23
Wind 0 0 - 0 0 -
TOTAL 4,436 3,815 621 3,832 3,269 563

Source: DOE List of Existing Power Plants, December 2019 & 2018

POWER GENERATION

As mentioned earlier, Mindanao, was susceptible to weather phenomenon particularly El Niño during
the early part of the decade. With it persisting through 2018, its effect can still be observed as evidenced
by the drop in the total power generated by hydro sources as shown on the table below. However, this
decline was offset by the increase in generation output from new sources, primarily large coal fired
power plants.

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2018 and 2017 Comparative Gross Generation, Mindanao

MINDANAO GRID
2018 2017 Difference
Plant Type % Growth
GWh % Share GWh % Share GWh
Rate
Coal 7,785 61% 6,271 53.1% 1,514 24.14%
Oil-based 633 5% 867 7.3% (234) (26.99%)
Geothermal 826 6.5% 797 6.8% 29 3.64%
Hydro 3,366 26.4% 3,791 32.1% (425) (11.21%)
Biomass 72 0.6% 0 0.0% 72 -
Solar 88 0.7% 78 0.7% 10 12.82%
Total Generation 12,770 100% 11,804 100% 966 8.18%
Source: DOE Power Statistics 2018 and 2017

Page 54
Significant Events 2

Mindanao also has improved in terms of having lesser Red and Yellow alert notices since 2018,
compared to the previous years due to the development of additional stable capacity from large coal-
fired power plants in the grid. There were only two recorded major incidents in the Mindanao grid that
cause a partial blackout namely the transmission line tripping on 8 November 2018 that affected areas
in Zamboanga peninsula as well as the provinces of Lanao and Misamis Oriental and the 6.3 magnitude
earthquake that hit North Cotabato in October 16, 2019 which caused interruptions in at least six
electric cooperatives.

2
https://www.doe.gov.ph/sites/default/files/pdf/electric_power/2018_power_situation_report.pdf
https://www.pna.gov.ph/articles/1083460

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THE COMPANY
Company Overview
ACR is a Philippines-based investment holding company. The Company is engaged in the business of
exploration of oil, petroleum and other mineral products. The Company's business, conducted through
its subsidiaries and associates, is grouped into various categories, such as Energy and Power, Property
Development and Other Investments. ACR’s investment in Energy and Power business is through four
holding firms namely, Conal Holdings Corporation, Alsing Power Holdings, Inc., Alsons Renewable Energy
Corporation and Alsons Thermal Energy Corporation. ACR is engaged in the Property Development
business through its subsidiary, Alsons Land Corporation (ALC). ALC is engaged in an approximately 72-
hole golf course development with a residential component called the Eagle Ridge Golf and Residential
Estate. ACR, through ACR Mining Corporation (ACR Mining), is engaged in the acquisition of interest in
Manat Mining Claims3.

History
ACR was incorporated on December 24, 1974 as Victoria Gold Mining Corporation to engage in the
business of exploration of oil, petroleum and other mineral products. The corporate name was changed
to Terra Grande Resources, Inc. (Tegre) in March 1995.

In 1994, the Alcantara Group, through Alsons Power Holdings Corporation (APHC), acquired a 55.80%
interest in Tegre through a swap of APHC’s 50.78% stake in Northern Mindanao Power Corporation
(NPMC). The Securities and Exchange Commission formally approved the stock swap on March 4, 1995
together with the increase in the Company’s authorized capital stock from P1 billion to P3 billion.

The corporate name was changed to Alsons Consolidated Resources, Inc. in June 1995 to mark the entry
of the Alcantara Group. The Company’s primary purpose was subsequently changed to that of an
investment holding company, and oil exploration was relegated to a secondary purpose.

On October 10, 1996, the Company completed its reorganization through a series of stock swaps. As a
result of this reorganization, some of the Alcantara Group’s established businesses became majority or
minority owned subsidiaries of ACR and the Company’s authorized capital was further increased from P3
billion to P12 billion.

ACR’s core businesses, conducted through its various subsidiaries and associates, can be grouped into
the following main categories: a) Energy and Power, b) Property Development, and c) Other
Investments. A description of the general nature and scope of these businesses is presented below:

3
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Corporate Structure

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Business Segments
Energy and Power

ACR’s investment in the Energy and Power business is through four holding firms namely, Conal Holdings
Corporation (Conal or CHC) and Alsing Power Holdings, Inc. (Alsing), Alsons Renewable Energy
Corporation (AREC) and Alsons Thermal Energy Corporation (ATEC).

The four holding firms:

1. Conal owns all of ACR’s diesel plants operating power generation businesses, namely: (1)
Alsing Power Holdings, Inc. at 80%, (2) Alto Power Management Corporation at 60%, and (3)
Mapalad Power Corporation at 100%.

2. Alsing, in turn, owns 55% of: (a) Western Mindanao Power Corporation; and (b) Southern
Philippines Power Corporation. Further, ACR directly owns 20% of Alsing.

3. AREC, which was organized on October 2, 2014 is currently in the process of developing Siguil
Hydro Power Corporation (“Siguil”) and Kalaong Hydro Power Corporation (“Kalaong”), Bago
Hydro Resources Corporation and Sindangan Zambo-River Power Corporation, all in the business
of renewable energy, and holds 100% of these entities.

4. ATEC was organized on December 3, 2015, and ACR transferred its ownership in Sarangani
Energy Corporation (Sarangani Energy) to ATEC on October 13, 2016.

ACR also formed Aces Technical Services Corporation (ACES), a wholly-owned subsidiary, on July 7, 2011,
and it serves as the operations and maintenance provider of Sarangani Energy and San Ramon Power,
Inc. (SRPI). ACR transferred its ownership in ACES and SRPI to ATEC on October 12, 2016, and May 24,
2017, respectively.

On June 3, 2017, the Company signed an agreement with Global Business Power Corporation (GBP) for
GBP to acquire a 50% less one share stake in ATEC. The Philippine Competition Commission approved
the transaction on September 25, 2017, and the Deed of Absolute Sale was signed on November 27,
2017. The partnership combines ACR’s distinct knowledge of the Mindanao power market, development
thru long years of experience as the island’s first independent power producer and with GBP’s track
record as the leading power producer in the Visayas. The Company believes that this endeavor will
greatly benefit power consumers particularly in light of the planned interconnection of the Mindanao
and Visayas grids. The partnership will also give ACR the opportunity to pursue with greater strength its
energy-based projects, particularly its renewable power generating plants in Mindanao and Western
Visayas. This will also allow ACR to accelerate its foray and entry in other energy-related enterprises in
Southern Philippines, including the smaller islands with promising growth in power demands.

ACR also has a majority-owned subsidiary, Alto Power International Limited (APIL), which develops
power plant projects outside the country.

The four (4) operating power generation subsidiaries, WMPC, SPPC, MPC, and Sarangani Energy are all
located in Mindanao.

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The four operating power plants:

1. WMPC operates a 100-megawatt (MW) diesel-fired electricity generating facility in

Zamboanga City as a merchant plant after its 18-year “Build-Operate-Own” (BOO) arrangement
with the National Power Corporation (NPC) expired in December 2015.

2. SPPC owns a 55 MW diesel-fired electricity generating facility located in Alabel, Sarangani

Province, 13 kilometers east of General Santos City. SPPC’s 18-year BOO arrangement with NPC
expired on April 28, 2016.

3. MPC rehabilitated the 103MW bunker-fired Iligan Diesel Power Plants (IDPPs) I and II, which
Conal acquired from the Iligan City Government and started operating these plants on February
27, 2013. MPC currently functions as a merchant plant and serves various electric cooperatives
in Mindanao.

4. Sarangani Energy’s 210MW coal-fired power plants are located in Maasim, Sarangani
Province. Its first section of 105MW began commercial operations in April 2016, while its second
section of another 105MW or Phase 2 started commercial operations on October 10, 2019.

ACR has also started construction of its first renewable energy project under Siguil Hydro Power
Corporation, which will operate a 14.5MW run-of-river electricity generating facility located at the Siguil
River basin in Maasim, Sarangani. ACR expects commercial operations to begin in 2022. The Company
likewise began site development and clearing works for SRPI’s 105MW coal-fired power plant project,
which could supply power to Zamboanga City and other parts of the Zamboanga Peninsula, with
commercial operations expected to begin in 2023.

AREC organized and incorporated Bago and Sindangan on February 26, 2018 and August 21, 2018,
respectively, as wholly owned subsidiaries. Bago and Sindangan were incorporated primarily to develop
and invest in energy projects including but not limited to the exploration, development and utilization of
renewable energy resources. Bago’s 42 MW Hydro Power Plant Project is in Negros Occidental while
Sindangan’s 22MW Hydro Power Project is in Siayan and Duminag, Zamboanga Del Norte. These
projects are expected to augment power supply in the provinces of Negros Occidental and Zamboanga
Del Norte, respectively, once they are completed. As at March 31, 2020, Bago and Sindangan have not
yet started commercial operation.

Property Development

ACR is also engaged in the Real Estate Development and Project Management through its subsidiary,
Alsons Land Corporation or ALC. ALC continues to enhance its real estate portfolio thru investments in
projects with immediate development potential. These include residential, commercial, mixed-use, and
township and estate projects that have trading income activities (sale), high value recurring income
businesses (rentals), Joint Venture arrangements and Asset Management opportunities.

Launched in November 25, 1994, ALC was involved in the development of Eagle Ridge Residential
Estates, and the Eagle Ridge Golf and Country Club, in Cavite. The latter Club boasts of 72 holes in 4 golf
courses, each designed by a world-class golf legend. ACR also entered into a Joint Venture Agreement
with Ayala Land Incorporated ( ALI ) to develop a 26-hectare world-class estate in Lanang, Davao City,

Page 59
Mindanao. The estate is set to be transformed into a master-planned, mixed-use community that will
include residential low to mid-rise towers, commercial lots, offices, an events venue and a waterside
cove with some retail components. A world-class medical facility will soon rise within the estate. The
sustainable estate is set to be Davao’s prime waterside community, encapsulating a life of fluidity and
ease within a vibrant locality and a buoyant economy south of the country; a paramount destination for
the best in home, business and lifestyle in Mindanao.

ALC continues to grow its residential business when it embarked on the expansion of its Campo Verde
subdivision in Batangas, a joint venture project with Sunfields Realty Development, Inc. The initial
project, which is an 11-hectare property located inside the Lima Technology Center, is close to selling
out. This project is an hour away from Makati via the South Luzon Expressway and the Southern Tagalog
Arterial Road Tollway. Campo Verde offers three (3) distinct Spanish-themed homes that are ideal for
young to growing families. The model house choices range from: Condesa, with a lot area of 90 square
meters and floor area of 36 square meters; Duquesa, with a lot size of 100 square meters and a floor
area of 50 square meters; and Reina, with 120 square meter-lot and a floor area of 80 square meters.

Through ALC, ACR is also developing the Kamanga Agro-Industrial Economic Zone in the Municipality of
Maasim, Province of Sarangani, where the power plant of Sarangani Energy is located. This “Ecozone” is
accredited with the Philippine Economic Zone Authority (PEZA) as an agricultural and light-industry
zone. Enterprises will be encouraged to set up their businesses in, or relocate to, this Ecozone to enjoy
incentives prescribed by law through the PEZA. Kamanga Agro-Industrial Ecozone Development
Corporation (KAIEDC) has successfully closed an agreement in December 2019 for the sale of 28-hectare
property to a locator.

Other Investments

In 2007, ACR infused capital in ACR Mining amounting to P195 million to support the latter’s acquisition
of the 75% interest of Alsons Development and Investment Corporation (ADIC or ALDEVINCO) to explore
and develop the Manat Mining Claims situated in the provinces of Davao del Norte and Compostela
Valley.

ACR Mining was formerly known as ACR Management Corporation. Its initial activity involved the
acquisition of ADIC’s interest in a mining claim, referred to as the Manat Mining Claims. Covered by
Mineral Production Sharing Agreement (MPSA) Serial no. 094-97-XL for 25 years up to year 2022, the
mining claim has a total area of 1,547.32 hectares. It is located in the Municipality of Nabunturan,
province of Compostela Valley and in the Municipality of Maco, Province of Davao del Norte. Previous
exploration work at the project area Magas. Detailed work on the Magas Vien Zone (MVZ) so far
revealed an estimate inferred resource of 2.7 million tons containing: 2.8 g/t gold, 26 g/t silver, 0.09%
copper, 0.85% lead, and 1.58% zinc. On May 24, 2015, the Board of Directors approved and declared
ACR Mining as property dividend of record date of June 5, 2015. The SEC approved the Certificate of
Filing the Notice of property Dividend on August 11, 2015. The Bureau of Internal Revenue issued its
Certificate Authorizing Registration on February 22, 2016.

The Declaration of Mining Project Feasibility was submitted to the Mines and Geosciences Bureau on
October 2012. As of today, the Manat MPSA is in exploration phase development.

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Business Segments Contribution to Revenues
As presented in the table below, the recurring income of ACR comes from power plant operations. Its
investments in property development contributes only less than 1% of its total Revenues and is
considered only a portfolio investment.

Business Segment (Amounts in Thousand PhP) % to Total

(Three-Month Period Ended March 31)
2020 2019 2020 2019
Energy and Power P 2,219,009 P 1,223,079 100% 100%
Property Development 2,678 1,274 0% 0%
Total P 2,227,454 P 1,226 100% 100%

The Company had no income from foreign sources for the past 3 years.

Material Partly- Owned Subsidaries

The tables below show details of materially partly owned subsidaries of ACR either directly or indirectly.

Proportion Ownership Interest and Voting

Business Segment Rights Held by Non-controlling interest
Principal Activity 2019 2018 2017
SPPC Power Generation 45.0% 45.0% 45.0%
WMPC Power Generation 45.0% 45.0% 45.0%
ATEC Holding Company 50.0% 50.0% 100.0%
Sarangani Energy Power Generation 62.5% 62.5% 25.0%

The summarized financial information in respect of the subsidiaries that have material
non-controlling interests is set out below. The summarized financial information below represents
amounts before intra-group eliminations.

Summarized statements of comprehensive income for Three-Month period ended March 31 2020 and
2019 is shown below.

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 Power Plants
Overview of the Power Plants

The four (4) operating power generation subsidiaries, WMPC, SPPC, MPC, and Sarangani Energy are all
located in Mindanao.

Presented below is a table summarizing relevant information about the Power Plants.

Start of
Power Parent Expecte Date of Capacity
Status Commercial Location
Plant Company d Life Construction (MW)
Operation
WMPC Alsing Power Malasugat,
Holding Sangali
Operational 18 years 1996-1997 December 1997 Zamboanga City 100
MPC Conal Holding July 1993 (MPC Sitio Mapalad,
Corp 1) December Dalipuga, Iligan
Operational 30 years 1992-1993 1993 (MPC 2) City 103
SEC Phase ATEC Barangay
04 June 2012
1 Kamanga,
(LNTP)
Operating 25 years April 29, 2016 Maasim, 105
28 December
Sarangani
2012 (NTP)
Province
SEC Phase ATEC Barangay
14 July 2016
2 Kamanga,
(LNTP) October 10,
Operational 25 years Maasim, 105
14 October 2019
Sarangani
2016 (NTP)
Province

Status of publicly-announced new projects

1. The second phase of 105MW of the 210 MW Sarangani Energy power plant has started
commercial operations on October 10, 2019. The President of the Philippines personally
inaugurated the plant and also attended the launching of the Siguil Hydro Power Corporation’s
14.5 MW project. This hydro project is the beginning of ACR’s venture into renewable energy
projects.

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 2. The 105MW SRPI power plant in Zamboanga City received its environmental compliance
certificate from the Department of Environment and Natural Resources in March 2012. The
Company has begun site preparation and clearing works. The total project cost is estimated at
P16 billion. SRPI is still negotiating with various banks to finance the project. Once in operation,
the SRPI coal-fired power plant would be able to service Zamboanga City and other nearby
areas.

The Company has no existing patents, trademarks, copyrights, licenses, franchises, concessions and
royalty agreements.

Life of Power Plant

Start of Commercial Operations:

 SARANGANI Phase 1 started commercial operation on April 29, 2016.

 SARANGANI Phase 2 started commercial operations on October 10, 2019.
 MPC started commercial operation on 2013.
 WMPC started commercial operation on 1997.
 SPPC started commercial operation on 1998.

Expected Life:

 SARANGANI -The design life of both units, as per the respective EPC contracts, is 35 years.
 WMPC - the expected life is 40 years from start of commercial operations
 MPC – the expected life is 20 years from 2013, based on running hours
 SPPC: The expected life is 20 years from 2017, based on running hours.

After the expected life of the power plants, the Company conducts a plant study in order to extend the
life of the power plants, especially if the plants are still required to be operational. This study takes into
account the condition of equipment and facilities, the running and operating conditions over the
previous designed life of the plant, licensing conditions, among other considerations. The purpose of the
study is to produce a recommendation on whether it is viable to refurbish equipment and continue the
plants’ operations. The company sticks to their set scheduled maintenance regime and refurbish and
replace equipment, as determined by inspections, condition monitoring and obsoleteness. These
enhancements will then extend the useful life of a power plant.

Process Flow
From the four (4) operating power plant, only Sarangani is a coal-fired power plant. WMPC, MPC and
SPPC are all diesel power plants.

Operating Power Plants Type of Power Plant

SARANGANI Coal-Fired Power Plant
WMPC Diesel Power Plant
SPPC Diesel Power Plant
MPC Diesel Power Plant

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Coal Fired Thermal Power Plant4:

Coal is burnt in the boiler furnace to produce heat. Carbon in the coal and Oxygen in the air combine to
produce Carbon Dioxide and heat. The heat from combustion of the coal boils water in the boiler to
produce steam. The steam is then piped to a turbine. The high pressure steam impinges and expands
across a number of sets of blades in the turbine. The impulse and the thrust created rotates the turbine.
The steam is then condensed and pumped back into the boiler to repeat the cycle. After, rotation of the
turbine rotates the generator rotor to produce electricity based of Faraday’s Principle of
electromagnetic induction.

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Diesel-Fired Power Plant5

A diesel engine is a type of internal combustion engine. An internal combustion engine transforms the
chemical energy in fuel to mechanical rotational energy. To release the chemical energy in diesel
effectively, an atomized form of the fuel is made to contact with high temperature and high pressure air.
In diesel engines, this energy is effectively transferred as mechanical rotational energy. The operation of
a diesel engine is all about producing high temperature and high pressure air continuously.

Piston, connecting rod, crank and cylinder form a mechanism called slider-crank mechanism. Here the
linear motion of the piston is transformed to a rotary motion at the crank.

During the motion of the piston, the top most point it can reach is called Top dead centre (TDC) and the
bottom most position the piston can reach is called as Bottom dead centre (BDC). In an IC engine, this
mechanism is properly supported in an engine block. Cylinder head, valves and fuel injector are fitted
above the engine block.

When the piston moves downwards, inlet valves open and fresh air from outside is sucked in, or, in
other words, the engine breathes. This stroke is called as suction stroke.

During the return stroke, inlet and exhaust valves are closed and the air inside the cylinder gets
compressed. During the compression stroke, the piston does work on the air. So the temperature and
pressure of the air will rise to a level which is higher than the self ignition value of the diesel.

An atomized form of diesel is injected into this compressed air. The fuel gets evaporated and undergoes
an uncontrolled spontaneous explosion. As a result, the pressure and temperature rise to high level
values.

The high energy fluid pushes the piston downwards. The hot air does work on the piston and energy in
the fluid is converted to the mechanical energy of the piston. This is the only stroke where the piston
absorbs power from the fluid.

Due to inertia of the system, the piston moves upwards again. This time the exhaust valves open and the
exhaust are rejected. Again the suction stroke happens.

This cycle, which has a total 4 strokes, is repeated over and over for continuous power production.

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Distribution of Power to Customers (Distribution Utilities)

Power is generated in the power plants, following the process flow explained above. After which, power
is transmitted through the grid to the Distribution Utilities. It is then the distribution utilities who will
transmit the power to the end users.

Sources and Availability of Raw Materials and Supplies

SPPC has not renewed Fuel Supply Agreement with Pilipinas Shell Petroleum that expired last
September 1, 2019. MPC and WMPC each signed a Fuel Supply Agreement with Phoenix Petroleum
Corporation for the supply of approximately 4 to 8 million liters of fuel per month for each plant. MPC’s
and WMPC’s agreement is valid until March 2021.

WMPC and MPC has an agreement with Pilipinas Shell Petroleum Corporation for the supply of its
lubricating oil, while SPPC’s contract was terminated in 2018.

Wärtsilä Corporation of Finland supplies the engine parts and major maintenance services needed by
the diesel plants.

Sarangani Energy Corporation has a fuel supply and transport agreement with Toyota Tsusho
Corporation for low sulfur coal, or sub-bituminous coal, which is sourced from Kalimantan, Indonesia
with net calorific value of 3,630 to 5,450 KCal per kilogram and its price based on GlobalCoal New Castle
Index. The agreement is valid for 10 years from April 29, 2016 until 2026. The company is also procuring
low sulfur coal via spot market or short term contracts with flexible pricing options with prices based on
Global Coal New Castle Index, Indonesian Coal Index and or Fixed Price arrangements.

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ACR is not expected to be dependent upon any one or limited number of suppliers for essential raw
materials, energy or other items.

Related Party Transactions

Parties are considered to be related if one party has the ability to control the other party or exercise
significant influence over the other party in making financial and operating decisions. Related parties
include (a) enterprises that directly, or indirectly through one or more intermediaries, control or are
controlled by, or are under common control with, the Group; (b) associates; and (c) individuals owning,
directly or indirectly, an interest in the voting power of the Group that gives them significant influence
over the Group and close members of the family of any such individual. In considering each possible
related party relationship, attention is directed to the substance of the relationships, and not merely to
the legal form.

All related party transactions shall be disclosed to the Group’s Audit Committee (“the Committee”) of
the BOD and all transactions will be reviewed and approved by the Committee to ensure that a conflict
of interest does not exist, a proper assessment of such transaction is made, and all necessary
information is properly documented. Material related party transaction shall mean any individual
related party transaction, or series of related party transactions over twelve (12) months, and with the
same related party, amounting to, or exceeding, individually, or in the aggregate, the materiality
threshold. Materiality threshold shall mean ten percent (10%) of the total assets of any of the parties to
a transaction, based on that party’s latest audited financial statements, and if the transaction is a
material related party transaction, and one of the related parties is a parent of the other, the total
assets shall pertain to the parent’s total consolidated assets.

Transactions with related parties pertain mainly to cash advances and reimbursements of expenses.

Outstanding related party balances are generally settled in cash.

The table below shows the details of the Group’s transactions with related parties.

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 Other receivables primarily include advances to employees, receivables from contractors, receivables
from insurance claims and receivables from ventures.

The Parent Company has various advances to third parties that were nonmoving since prior years. These
advances have been specifically identified to be potentially uncollecetible and thus, provided with
allowance amounting to Php5 million as of March 31, 2020 and December 31, 2019.

The Related Party Transactions can be found in Note 5 of the Company’s Consolidated Financial
Statements for the interim period ended March 31, 2020.

Customers
WMPC and MPC have secured, or are securing PSAs with various distribution utilities, and are currently
moderately contracted. SPPC has no current PSA, but is exploring opportunities for relocating its engines
to other locations. Sarangani Energy, on the other hand, has secured 25-year PSAs.

Presented below is a summary of the PSAs of the power plants.

Power Contracted No. of
Off-taker Location Start Date End Date
Plant/Asset Capacity Years
Cagayan Electric Power
and Light Company Cagayan De
MPC
(CEPALCO) Oro June 24, June 23,
30 10 years 2016 2026
Zamboanga City Electric
Cooperative Inc.
(ZAMCELCO) December December
Zamboanga 50 10 years 13, 2015 12, 2025
Cagayan Electric Power
and Light Company December December
WMPC
(CEPALCO)* Cagayan 1 10 years 13, 2015 12, 2025
National Grid Corporation
of the Philippines (NGCP) –
Ancillary Services
Procurement Agreement April 26, April 25,
(ASPA) GRID 50 5 years 2019 2024
SEC 1 South Cotabato Electric General 70 25 April 29, April 28,

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 Cooperative II (SOCOTECO 2) Santos 2016 2041

Agusan del Norte Electric

Cooperative Agusan del April 29, April 28,
10 25
(ANECO) Norte 2016 2041

Agusan del Sur Electric

Cooperative Agusan del April 29, April 28,
10 25
(ASELCO) Sur 2016 2041

Davao Del Norte Electric

Cooperative, Inc. Davao del October 10, October 9,
15 25
(DANECO) Norte 2019 2044

Cagayan Electric Power

and Light Company, Inc. Cagayan De October 10, October 9,
20 25
(CEPALCO) Oro 2019 2044

Cotabato Electric
Cooperative Inc Cotabato October 10, October 9,
10 25
(COTELCO) City 2019 2044

Davao del Sur Electric

Cooperative Davao del October 10, October 9,
15 25
(DASURECO) Sur 2019 2044

Iligan Light and Power Inc.

April 29, April 28,
SEC 2 (ILPI) Iligan City 15 25
2016 2041
South Cotabato I Electric
Cooperative South October 10, October 9,
10 25
(SOCOTECO I) Cotabato 2019 2044

Zamboanga del Sur I

Electric Cooperative Inc Zamboanga October 10, October 9,
5 25
(ZAMSURECO I) del Sur 2019 2044

Zamboanga del Norte

Electric Cooperative Inc. Zamboanga October 10, October 9,
5 25
(ZANECO) del Norte 2019 2044

Zamboanga City Electric

Cooperative Inc. Zamboanga
SRPI 85 25 n/a n/a
(ZAMCELCO) City

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Alto Power Management Corp. (APMC), a subsidiary of ACR, provides the plant and operation
management services to SPPC, WMPC and MPC. Also, APMC International Ltd., a wholly owned
subsidiary of APMC, provided operations and maintenance management services to PT Makassar Power
Indonesia until April 2016.

The Property Development and other businesses of ACR are not dependent on a single or few customers
and the loss of one or a few customers will have no material adverse effect on the Company and its
subsidiaries.

Marketing Process
ACR follows the marketing process for its prospective customers

1. ACR gathers customer data which include demand, supply, load profile, forecasts, suppliers, rates.
2. ACR simulates the technical and commercial/rate impacts of the coming in of its supply. If deemed
acceptable, ACR proceeds to the next step.
3. ACR offers supply with the proposed tariff to management and Board of Directors
4. Series of negotiations and meetings with customer/s is conducted
5. ACR undergoes a Competitive Selection Process (CSP)
6. Contract is awarded to the winning bidder.

Location of the Power Plants

ACR’s power plants are strategically located to cater to the power requirements of its key areas in
Mindanao.

The first three power plants of ACR, namely WMPC, SPPC and MPC, are strategically located to serve key
load centers in Mindanao and provide adequate generation where it is needed most. The long-term
Energy Conversion Agreements of these plants assured ACR of a steady revenue stream. Today, ACR
continues to operate power plants through bilateral contracts with various distribution utilities.

Mindful of the need to strategically position the baseload plants in key load centers and also recognizing
the inherent advantage of expanding in areas where we are already present, the Company decided to
establish the Sarangani 210MW Coal-Fired Power Plant of Sarangani Energy Corporation in Maasim,
Sarangani and the Zamboanga 105MW Coal-Fired Power Plant of San Ramon Power Incorporated in
Zamboanga City. These coal-fired power plants are equipped with the latest state of the art thermal
power generation technology.

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Beyond the baseload expansion of ACR, the Company is looking towards the future and investing in
renewable energy projects. ACR has identified hydropower resources in Mindanao and Negros
Occidental that can be implemented under the Renewable Energy Act.

Properties
The Company’s energy and power operations are located in four different sites. WMPC’s own power
plant is on a 9-hectare property in Sitio Malasugat, Sangali, Zamboanga City. SPPC’s operations are
conducted on a 16-hectare property located in Alabel, Sarangani Province, and 13 kilometers east of the
city proper of General Santos. CHC’s Plants 1 and 2, which are operated by MPC, are in an 8-hectare
property in the Municipality of Lugait, Misamis Oriental, and in the City of Iligan. WMPC and SPPC fully
own their respective properties. The power plants in Lugait, Misamis Oriental and City of Iligan were
acquired by virtue of a Deed of Sale between the City of Iligan and CHC dated February 27, 2013. The
lots on which the power plants of CHC are located were acquired by MPC from Alsons Development and
Investment Corporation by virtue of the deed of sales dated November 21, 2013. Sarangani Energy
Corporation is located in the Municipality of Maasim, Sarangani Province. The real estate assets of
KAIEDC are located in Maasim Sarangani Province.
The power assets were used as collateral in various loans, specifically: (1) CHC power plant and the real
estate owned by MPC, were used as collateral for loans for the rehabilitation of the MPC power plants;
and (2) Sarangani Energy’s real estate and coal-fired power plants are mortgaged to its various lender
banks.
ALC, the Company’s property development company, has properties in the Province of Batangas, in the
Municipality of Cabuyao in the Province of Laguna, and along Chino Roces Avenue (formerly Pasong
Tamo Extension), Makati City. Its Batangas property currently has residential developments.
The Company maintains its corporate headquarters at the Alsons Building, Makati City, which is owned
by ALC.
All of these properties are in good condition.

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Property, Plant and Equipment (Consolidated)

(Amounts in Thousand Pesos) March 31, 2020 December 31,

2019
Main Engine of Power Plant P 30,678,044 P 30,678,044
Plant Mechanical, Switchyard and
7,239,101 7,239,101
Desulfurization Equipment
Land, Buildings and Leasehold Improvements 574,049 574,049
Machinery and Other equipment 1,398,804 1,398,804
Construction in Progress 810,204 810,204
Right of Use 35,274 35,274
Total 40,735,476 40,735,476
Less: Accumulated Depreciation and
12,007,904 11,638,510
Amortization
Net Book Value 28,862,156 29,096,966

Lease Committments

On December 1, 2011, the Group entered into a 5 year lease agreement with Alphaland Development
Inc. commencing on February 1, 2012 up to January 31, 2017 for office space. Upon expiration, the
lease was renewed for another five years.

Set out below, are the amounts recognized in the Company’s consolidated statements of income:

Total cash outflow for leases amounted to P15 million in 2019. Recoverable deposits related to the lease
agreement amounted to P4.16 million and P3.95 million as of December 31, 2019 and 2018,
respectively.

Future Plans to Acquire Properties

KAIEDC is finalizing the purchase of 36.7 hectares of raw land in Maasim, Sarangani Province. The total
purchase price, around PHP 200M, shall be financed from internally generated funds.

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ALC intends to purchase a commercial lot inside Azuela Cove. The acquisition cost around PHP151M,
shall be funded through a combination of proceeds from pre-selling and bank loan.

Investment Acquisition

On October 9, 2015, the Board of Directors approved the subscription to Non-Voting Preferred Shares in
ALDEVINCO amounting to P2.2 billion. The preferred shares are entitled to receive out of the
unrestricted retained earnings of the ALDEVINCO, cumulative dividends at the rate of 4% per annum of
the par value of the Preferred Shares, before any dividends shall be paid to holders of the Common
Shares. In 2018, ALDEVINCO declared dividends amounting to P264 million covering the years 2016 to
2018.
On August 27, 2019, the Board of Indophil Resources Phils, Inc. (IRPI) approved the equity call to all
existing shareholders amounting to P52.50 per share. On September 30, 2019, ACR participated and
paid IRPI P2,977,452 for the additional 56,715 common shares.

Research and Development

ACR and its subsidiaries do not allocate specific amounts or a fixed percentage for research and
development. All research, if any, are done by its subsidiaries and affiliates on a per project basis. The
allocation for such activities may vary depending on the nature of the project.

Employees
As of December 31, 2019, ACR and its 50% or more directly or indirectly-owned subsidiaries had a
manpower complement of 481 employees, broken down as follows: 15 executives, 20 managers, 120
supervisors and 326 associates. As of March 31, 2020, a total manpower is recorded at 486 employees
with 15 executives, 19 managers, 124 supervisors and 327 associates The Company believes that
changes in manpower complement will be minimal for the next twelve months. The employees of the
Company and its subsidiaries are not unionized. None of the employees are on strike, or have been in
the past three (3) years, or are threatening to strike.

Future Plans
The second phase of 105MW of the 210 MW Sarangani Energy power plant has started commercial
operations on October 10, 2019. The President of the Philippines personally inaugurated the plant and
also attended the launching of the Siguil Hydro Power Corporation’s 14.5 MW project. This hydro
project is the beginning of ACR’s venture into renewable energy projects.

On top of the hydroelectric power plant, the Company is considering putting up a solar farm as well. This
solar plant would have a maximum capacity of 50 MW, and is estimated to cost around $1.2M per MW.

The Company is also looking to expand operations in Indonesia, particulary in Sulawesi province,
because of its proximity to Mindanao, but the plans are still in very early stages.

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Competition
A shift in the market forces has prompted a slowdown in sales for the Eagle Ridge Estates. Economic and
affordable housing developments of Filinvest, Camella Homes, and Amaia have gained a foothold in the
region.

While several power generation companies have either commenced construction of coal-fired power
stations or announced plans to build them, Sarangani Energy has secured its position in the market by
entering into Power Sales Agreements (PSAs) with various distribution utilities. Having secured the
approval of the Energy Regulatory Commission of these PSAs, Sarangani Energy is assured of the market
for its capacity.

The diesel power plants of WMPC and MPC are moderately contracted. These plants offer distribution
utilities ideal peaking and insurance capacities due to their competitive pricing and proven performance
over years of reliable operations. SPPC, on the other hand, has no current PSA, but the Company is
exploring opportunities for relocating its engines to other locations. MPC is likewise considering
relocating its available unutilized engines to other locations.

List of other Merchant plants

Merchant plants Capacity (MW) Owner
Installed Dependable
Therma South, Inc. 1 150 130.0 Aboitiz Power
Corporation
Therma South. Inc. II 150 130.0 Aboitiz Power
Corporation
Therma Marine, Inc. I 100.3 96.0 Aboitiz Power
Corporation
Therma Marine, Inc. II 100.3 96.0 Aboitiz Power
Corporation
FDC Misamis Power 270 240 FDC Utilities
Corporation (unit 1 & 2)

Company Description
Aboitiz Power Corporation - Provides hydroelectric power generation
- Market cap: 211.928 billion
- Therma South, Inc. (TSI), a wholly-owned subsidiary of
AboitizPower, is the project company of the 300-MW
Circulating Fluidized Bed (CFB) coal-fired plant in Toril,
Davao City and Sta. Cruz, Davao del Sur. It supplies
reliable baseload power to more than 20 electric
cooperatives and distribution utilities all over Mindanao
FDC Utilities - A subsidiary of the Filinvest Development Corporation
(FDC)
- Offers utility services and focuses on power generation
and potential water distribution projects.
- Developed the FDC Misamis 3 x 135 MW Circulating

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 Fluidized Bed (CFB) Coal Thermal Plant located in
PHIVIDEC Industrial Estate, Villanueva, Misamis Oriental.
The power plant has a combined capacity of 405 MW
SMC Global Power Holdings - A power generation company and provides a diversified
Corp. portfolio utilizing a mix of coal, natural gas, and
hydroelectric power plants
- Total capacity is 2,903 MW representing 22% of the
Luzon grid and 17% of the National grid.

Competitive Strengths
The key strengths of ACR as compared to competitors are the following:

1. In-depth knowledge of the Mindanao Region

2. Experienced Management Team
3. Expertise in power plant development and operation
4. Enhanced competitiveness and sustainable growth
5. Focused Strategies

1. In-depth knowledge of the Mindanao region

The Alcantara group has been operating in Mindanao for over 60 years engaging in forestry and wood
processing, property development, power generation, cement, product distribution, agriculture,
aquaculture, insurance, utilities. ACR benefits from this extensive business network by being able to
build established relationships and acquire in-depth local knowledge of its operating environment and
principal shareholders.

2. Experienced Management Team

One of the strengths of the Company is its seasoned management team. The management team has
relevant and extensive experience in the operation and management of power assets both here and
abroad. They have deep understanding of the power industry and an extensive experience in the
development and operation of greenfield power projects. Through their extensive experience, they have
demonstrated successes in raising and negotiating financing for the power projects, and negotiating
construction, supply and the offtake agreements. They have also established strong relationships with
various stakeholders.

Key Executives

Key Executives Profiles

Tomas I. Alcantara * Holds various managing and operating position in the Alcantara
Chairman and President group
* Former Undersecretary of Department of Trade and Industry
* Former Managing Head of the Board of Investments
* Former President of the Manila Economic & Cultural Office

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 * MBA from Columbia University
* Attended Advanced Management Program at Harvard Business
School

Editha I. Alcantara * Holds various positions or directorships in Alcantara Group,

Director and Treasurer Philippine Business for the Environment, Miriam College, and
Philippine Wood Producers Association
* MBA from Boston College

Tirso Santillan, Jr. * Over 20 years of experience in the power industry and has been
Executive Vice President with ACR since 1995
* Overall head for the power division and overseas existing
projects and new investments
* Previously worked with the First Pacific Group and with Clark
Development Corp.
* Bachelor of Arts degree in Engineering and Masters in Business
Management from Ateneo de Manila University

Key Executives in Power Division

Key Executives in power Profiles

division
Joseph C. Nocos * Over 24 years of experience in the power industry and has been
Vice President with ACR since 1992
Project Development Head * Head of development for all of ACR’s power plants in Mindanao
Power Sales and Marketing and abroad, and markets power to offtakers and evaluates new
Head investments.
* Bachelor of Arts degree in Economics from Ateneo de Manila
University.

Edgardo D. Sevilles * Over 37 years of experience in the power industry and has been
Vice President for Diesel with ACR since 1993
Operations * Head of ACR’s diesel power projects and manages operations of
existing plants
* Part of the team for project development and due diligence of
diesel power plants
* Also served as Head of Power Barge Fleet in NPC for 19 years
* Masters in Management from Asian Institute of Management
and Registered Electrical Engineer

3. Expertise in power plant development and operation

ACR has been in the power generation business for more than 23 years, and has demonstrated success
in developing, financing and operating power projects both here and abroad. ACR has also established
knowledge of the market and strong longstanding relationships with power customers.

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Power Plant Development & Operation

*From 1992 to 2006, developed and operated the 103MW diesel power
plant (then named NMPC) in Iligan City under a BOT arrangement with
NPC
* Since 2013, reacquired from the Iligan City government and has
successfully rehabilitated and restored the diesel power plant to full
operation

* Since 1997, has been operating the 100MW diesel-fired plant in

Zamboanga City under a BOO arrangement with NPC
* Has historically exceeded the required level of availability as set under
the ECA contract of 85%

* Since 1998, has been operating the 55MW diesel-fired plant in

Sarangani Province under a BOO arrangement with NPC
* Has historically exceeded the required level of availability as set under
the ECA contract of 85%

*APMC has also provided management or consultancy services to power

plants in Vietnam, Pakistan and Indonesia

Sarangani Energy Corporation

 Project Overview
o The Sarangani Project is a two-phased coal power project with total rated net capacity
of 211.5MW
o The project is located at the 58-hectare Kamanga Agro-Industrial Economic Zone in
Maasim, Sarangani
o Notice to Proceed (NTP) for Sarangani Phase 1 was issued in January 2013 and COD was
achieved in April 29, 2016
o Limited Notice To Proceed (LNTP) for Sarangani Phase 2 was issued in July 2016 and
construction is expected to be completed by 2019
o Sarangani is 75% owned by ATEC and 25% owned by TTC

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  Technical Overview

PARAMETERS DETAILS
Sarangani Phase 1: 118.5MW
Gross Capacity
Sarangani Phase 2: 118.5MW
Sarangani Phase 1: 106.8MW
Net Capacity
Sarangani Phase 2: 106.5MW
Sarangani Phase 1: 10,663.5 kJ/kwh
Net plant heat rate
Sarangani Phase 2: 10,435.0 kJ/kwh
Average Availability 88.1%

Coal Storage Capacity 60 days (covered / open)

ACR’s new power projects are grounded on:

 Committed project sponsors and partners – similar to its existing power plants, ACR and TTC will
expand their partnership to the new coal-fired plants
 Project contracts (EPC contract, the Fuel Supply and Transportation Agreement, and the
Operation & Maintenance Agreement) that have been crafted in accordance with international
project finance standards
 Strong project management support from ÅF Consult, a Finnish engineering company with vast
experience in thermal power construction and operation
 Power Supply Agreements mitigating offtake risks
o Sarangani Phase 1 has PSAs covering 100% of capacity for a tenor of 25 years
o Sarangani Phase 2 has PSAs covering 76% of capacity for a tenor of 25 years
o SRPI has signed a 25-year PSA with Zamboanga City Electric Cooperative, Inc. (ZAMCELCO)
for 80% of its capacity
 Experienced Operation & Maintenance (O&M) Firm
o The Sarangani and SRPI plants’ O&M will be supervised by PIC Marubeni

4. Enhanced competitiveness and sustainable growth

ACR’s expansion to a balanced generation mix will allow it to:

 Provide a complete power solution to Mindanao grid

 Mitigate fuel-type specific risks such as volatilities in fuel costs and regulatory concerns linked to
certain fuel types
 Enhance competitiveness of ACR in the Mindanao Electricity Market
 Diversify revenue and cash flow source

Page 78
 Alsons Consolidated Resources

Diesel Coal Hydro

Sarangani Siguil
WMPC (Phase 1)

Sarangani
SPPC (Phase 2) Bago

MPC SRPI Sindangan

5. Focused Strategies

ACR’s expansion strategy is driven by the needs of the Mindanao Grid and is supported by long-term
offtake agreements.

 1990s: Intermediate, peaking, and back up

 2000s: Baseload
 Future: Renewables

ACR will position the diesel plants to perform roles that are not effectively and efficiently served by coal
fired power plants.

 Intermediate and peaking capacity

 Back up capacity
 Ancillary service

ACR to develop its pipeline of hydro power projects to round up its generation mix with renewable
sources

ACR’s expansion will:

 Allow it to provide a complete power solution to the Mindanao grid

Page 79
 Mitigate fuel-type specific risks such as volatilities in fuel costs and regulatory concerns linked to
certain fuel types
 Enhance competiveness of ACR in the Mindanao Electricity Market
 Diversify revenue and cash flow source.

Business Strategy

 ACR aims to maximize returns from its existing portfolio of oil-fired assets and to capitalize on
underserved and growing baseload demand through the development of advanced coal-fired
power stations. Management views that growth will be driven according to the needs in relation to
the Mindanao grid.

 ACR’s existing plants play an important role in the Mindanao grid due to their strategic location,
wherein there is great demand for electricity. ACR likewise has the operating versatility in meeting
baseload and peak demand requirements in Mindanao.

 ACR highlights that its Bunker C – fired diesel plants will be essential in carrying out ACR’s business
strategies. It will perform/cover tasks that will not be served by its coal-fired plants. These diesel
capacities will be sold to cover intermediate and peaking supply, as well as provision of back-up
power and ancillary services.

Plans and Programs

ACR has four (4) operating power plants in Mindanao. Majority of its power plants are Bunker C –fired
diesel and coal fuel types, with a total power capacity of about 468 MW in operation. Around 105 MW
are still under construction and development. ACR expects its power capacities to further expand once
all of its projects are completed,

While other power generation companies have recently entered Mindanao, ACR believes that its reliable
and efficient service would be its primary strength to secure long-term PSAs. Sarangani Phase I which
commenced commercial operation only last April 29, 2016, has already contracted its full capacity under
long-term PSAs. A coal-fired power plant, Sarangani Phase I, already has PSAs for a tenor of 25 years
with South Cotabato II Electric Cooperative, Inc. to supply its 70 MW requirement, Agusan del Norte
Electric Cooperative, Inc. for 10 MW, Agusan del Sur Electric Cooperative, Inc. with 10 MW and Davao
del Norte Electric Cooperative, Inc. with 15 MW.

For Sarangani Phase II, it already has established PSAs for 76% of its capacity for a tenor of 25 years with
the following: Iligan Light and Power Inc., Cagayan Electric Power and Light Company, Inc., Davao Del Sur
Electric Cooperative Inc, South Cotabato I Electric Cooperative, Zamboanga del Sur I Electric
Cooperative, Inc., and Zamboanga del Norte Electric Cooperative, Inc.

San Ramon Power Inc., ACR’s third coal fired power plant will be located on a leased site in Zambo
Ecozone. This plant is intended to serve the Zamboanga region. SRPI is expected to be in operation by
2019 but has already contracted and signed a 25-year PSA with ZAMCELCO for 80% of its capacity.

Page 80
ACR has plans of investing in renewable energy. The Group has identified hydropower resources in
Mindanao and Visayas that may be implemented under the Renewable Energy Act. Apart from hydro-
powered projects, the group is also looking into solar-power projects in Mindanao and is also planning
to participate in the retail electricity supply business.

ACR’s plan is to reach a level of balanced generation mix where it can serve the complete power
requirements of its customers (i.e. baseload, intermediate, peaking, back-up as well as ancillary). Apart
from enhancing its market position, this strategy, will in turn diversify its revenue mix, as well as
minimize potential risks that may arise.

Dividends
Declaration of dividends is subject to approval by the Board of Directors.

Dividends on preferred shares amounting to P4 million in 2019, 2018 and 2017 were applied against the
Company’s subscriptions receivable from Alsons Corporation.

Management continuously endeavors to increase ACR’s share value through new projects and
expansion programs while at the same time provide yearly dividends to its shareholders. On June 8,
2011, the Board of Directors adopted a dividend policy of annually declaring dividends from 20% of the
previous year’s un-appropriated retained earnings..

Historical Dividend Declarations

Year Date of Declaration Per Share Amount Date of Payment

2019 May 30, 2019 0.02 125,830,000 July 25, 2019
2018 May 24, 2018 0.036 230,894,000 July 25, 2018
2017 May 25, 2016 0.016 100,664,000 July 25, 2017

Dividend Policy:

Management continously endeavors to increase ACR’s share value through new projects and expansion
programs while at the same time provide yearly dividends to its shareholders. On June 8, 2011, the
Board of Directors adopted a dividend policy of annually declaring dividends from 20% of the previous
year’s unappropriated retained earnings.

Lack of unappropriated retained earnings, due to certain situations such as, but not limited to, allocation
of funds for capital expenditures or expansion plans, would limit the ability of the company to pay
dividends in the future.

Government Approvals and Permits

Effects of Existing or Probable Government Regulations on the Company’s Business

Republic Act No. 9136, the EPIRA of 2001, and the covering Implementing Rules and Regulations provide
for the significant changes in the power sector which include among others:

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i. The unbundling of the generation, transmission, distribution and supply and other disposable
assets, including its contracts with IPP and electricity rates;
ii. Creation of a Wholesale Electricity Spot Market within one year; and
iii. Open and non-discriminatory access to transmission and distribution systems.

The law also requires public listing of not less than 15% of common shares of generation and
distribution companies within 5 years from the effectivity of the EPIRA. It provides cross ownership
restrictions between transmission and generation companies and between transmission and distribution
companies, and a cap of 50% of its demand that a distribution utility is allowed to source from an
associated company engaged in generation except for contracts entered into prior to the effectivity of
EPIRA.

There are also certain sections of the EPIRA, specifically relating to generation companies, which provide
for a cap on the concentration of ownership to only 30% of the installed capacity of the grid and/or 25%
of the national installed generating capacity. Based on the assessment of management, the operating
subsidiaries have complied, with the applicable provisions of the EPIRA and its IRR.

The second package of the tax reform program or the Corporate Income Tax and Incentives
Rationalization Act (CITIRA), which is still subject to approvals, aims to rationalize the incentives system,
with the hope that foreign investments will match or even surpass the incentives given, allowing net
positive benefits to our country. Thus, additional requirements are proposed before a registered entity
can avail certain tax incentives. such as the value-added tax (VAT) incentives on importation and
domestic purchases.

The CITIRA proposes to grant VAT exemption on importation and VAT zero-rating on domestic purchases
of capital equipment and raw materials used in the manufacturing and processing of products and
importation of source documents of registered enterprises whose export sales meet the required
threshold and are located within the ecozone, freeport, or utilizing customs bonded manufacturing
warehouse.

If a registered enterprise’s export sales are below the required threshold but is located within an
ecozone, freeport, or is utilizing customs bonded manufacturing warehouse, the CITIRA likewise grants
VAT exemption on importation and VAT zero-rating on domestic purchases of capital equipment and
raw materials used in the manufacturing and processing of products to issue and transmit electronic
receipts or sales or commercial invoices through designated electronic channels with a public
certification system accredited by the Bureau of Internal Revenue. CITIRA will also reduce corporate
income tax rate to 20 percent by 2029, from 30 percent at present. Based on management assessment,
the reduction of income tax rates will provide positive impact to existing businesses and attract foreign
investors to Kamanga Agro-Industrial Ecozone.

Cost and Effect of Compliance with Environmental Laws

ACR engages only in projects and activities that comply with environmental laws. Its power subsidiaries
follow the regulations embodied in the EPIRA. All its plants meet the exhaust emission standards set by
Department of Environment and Natural Resources (DENR). Compliance with existing environmental
laws has corresponding costs, which include expenditures for the following:

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 a. renewal fees for the DENR permit/license to operate;
b. exhaust emission tests and monitoring (costs covered by the environmental guarantee fund);
c. environmental monitoring fund (SPPC P500,000 and WMPC P598,000); and,
d. environmental guaranty fund (SPPC P500,000 and WMPC P508,000).

The Company meets all governmental, environmental, health and safety requirements. The Company’s
operating units are regularly inspected and have not experienced significant governmental, environment,
health or safety problems. For the past three years, the total amounts spent in complying with
environmental laws by the subsidiaries are as follows (1) P2,022,841 in 2019; (2) P2,593,707 in 2018;
and, (3) P2,940,145 in 2017

Legal Proceedings
Southern Philippines Power Corporation (“SPPC”), a subsidiary of the Company, and owner of a diesel-
fired power plant, has a receivable from the National Power Corporation (“NPC”), which NPC disputed.
The parties brought their dispute to the Energy Regulatory Commission (“ERC”) for arbitration. On June
3, 2013, the ERC decided in favor of SPPC, and NPC appealed the ERC decision to the Court of Appeals
(“CA”), which affirmed the ERC decision. On August 17, 2015, the CA denied NPC’s motion for
reconsideration. On September 18, 2015, NPC petitioned the Supreme Court (“SC”) to review the ERC
and CA decisions. On July 16, 2016, the SC rendered a decision holding NPC liable to pay SPPC for the
capacity and other fees arising from the additional 5 MW nominated by SPPC from 2005 to 2010. On
November 23, 2016, the SC denied NPC’s motion for reconsideration, rendering the ERC decision final.
SPPC is now preparing to petition the Commission on Audit (“COA”) to approve its money claim. Some
of the subsidiaries or affiliates of the Company are also from time to time involved in routine litigation
as well as various legal actions incidental to their respective operations. However, in the opinion of the
Company’s management, none of these legal matters, in which its subsidiaries or affiliates are involved,
will be material to the Company’s financial condition and results of operations.

Some of the subsidiaries or affiliates of the Company are also from time to time involved in routine
litigation as well as various legal actions incidental to their respective operations. However, in the
opinion of the Company’s management, none of these legal matters, in which its subsidiaries or
affiliates are involved, will be material to the Company’s financial condition and results of operations.

Bankruptcy Proceedings
The Company has not contemplated ay plan for bankruptcy, receivership, or similar proceedings.
Neither is there any material reclassification, merger, consolidation, nor sale of any significant amount
of assets in the ordinary course of business.

Market Information
All the common shares of the company are listed in the Philippine Stock Exchange.
The following are the high and low market prices of the Company’s shares for the past three years:

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Market Price of ACR Shares

Year First Second Third Fourth

Quarter Quarter Quarter Quarter
2020 High 1.37 1.37
Low 1.16 0.80
2019 High P1.58 P1.48 P1.42 P1.34
Low 1.28 1.36 1.29 1.21
2018 High 1.38 1.35 1.30 1.31
Low 1.23 1.18 1.14 1.22
2017 High 1.59 1.94 1.48 1.43
Low 1.23 1.35 1.35 1.34

The price of the Corporation’s common shares as of June 08, 2020 trading date was PhP0.93 per share.

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Stockholders
As of June 30, 2020 ACR has 6,291,500,000 shares outstanding. The top twenty (20) stockholders of the
Company, as recorded by Prime Stock Transfer Services,Inc., the Company’s stock transfer agent, are as
follows:

Top Twenty (20) Stockholders

No. of Shares % to
Name Held Total*
ALSONS CORPORATION 2,592,524,072 41.21%
ALSONS POWER HOLDINGS CORP 1,249,999,599 19.87%
ALSONS DEVELOPMENT AND INVESTMENT CORRPORATION 1,188,524,026 18.89%
PCD NOMINEE CORPORATION (FILIPINO) 1,159,295,050 18.43%
PCD NOMINEE CORPORATION (NON-FILIPINO) 70,354,001 1.12%
SEC ACCOUNT NO. 2 FAO: VARIOUS CUSTOMERS OF GUOCO 2,090,000 0.03%
ALL ASIA CAPITAL TRUST & INVESTMENT DIVISION A/C#95-001 1,830,000 0.03%
EBC SECURITIES CORPORATION 1,030,000 0.02%
CRISOSTOMO, EMILY A. 1,000,000 0.02%
CRUZ JR., FELIPE A 1,000,000 0.02%
GO, NORA T. 1,000,000 0.02%
FIRST INTEGRATED CAPITAL SECURITIES, INC. (555300) 900,000 0.01%
FIRST INTEGRATED CAPITAL SECURITIES, INC. (555200) 795,000 0.01%
ANSALDO, GODINEZ & CO., INC. 755,000 0.01%
GO, GEORGE 750,010 0.01%
AACTC FAO TRINITY INVESTMENT 680,000 0.01%
YAU, ESTEBAN 600,000 0.01%
TIA, ROY C 513,000 0.01%
S.J. ROXAS & COMPANY, INC. 507,000 0.01%
CO, ANTONIO 500,000 0.01%
MENDOZA, MARITES &/OR ALBERTO MENDOZA 500,000 0.01%
ROQUEZA, RICARDO S. 500,000 0.01%
SAN JOSE, ROBERTO 500,000 0.01%
VEGA, LUIS V. &/OR ELISEO C. OCAMPO JR. 500,000 0.01%
MENDOZA, ALBERT G. &/OR JEANNIE C. MENDOZA 450,000 0.01%
Total shares of top 20 6,277,096,758 99.80%
*percentages were rounded off.

Submission of Matters to a Vote of Security Holders

During the calendar year covered by this report, no business matter was submitted to a vote of security
holders through solicitation of proxies or otherwise other than an election of the Directors.

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Directors and Senior Management
The Board of Directors

The Company’s Board of Directors is responsible for the overall management and direction of the
Company. The Board meets regularly or as often as required, to review and monitor the Company’s
financial position and operations. Each Board member serves for a term of one year or until his
successor is duly elected and qualified.

The following are the Directors and Officers of the Company and their business experience for the last
five years.

Board of Directors
Office Name Nationality
Director, President, Chairman of the Board Tomas I. Alcantara Filipino
Director and Treasurer Editha I. Alcantara Filipino
Director, Executive Vice President and Chief
Tirso G. Santillan, Jr. Filipino
Operating Officer
Director Alejandro I. Alcantara Filipino
Director Ramon T. Diokno Filipino
Director Conrado C. Alcantara Filipino
Independent Director Jacinto C. Gavino, Jr. Filipino
Independent Director Jose Ben R. Laraya Filipino
Director Honorio A. Poblador III Filipino
Director Arturo B. Diago, Jr. Filipino
Independent Director Thomas G. Aquino Filipino

Tomas I. Alcantara, 73, Filipino, became the Chairman of the Board of Directors and the President of the
Company in August 2001. He holds a Bachelor of Science degree in Economics from the Ateneo de
Manila University and a Masters in Business Administration (MBA) from Columbia University, and he
attended the Advanced Management Program of the Harvard Business School. He is presently the
Chairman of the Board of Directors and President of Alsons Development and Investment Corporation
and Sarangani Agricultural Company, Inc., and other companies in the Alcantara Group (since August
2001).

Mr. Alcantara is also the Chairman of the Alsons Adtx Information Systems, Inc. (since August 2001). He
is a Trustee of the European IT Service Center Foundation (since August 2002) and of the Foundation for
Revenue Enhancement (August 2004). He has been a Director of Holcim Philippines, Inc. since July 2003,
Philweb Corporation (May 2002) and DBP-Daiwa Capital Markets Phils., Inc. (July 1995).

Mr. Alcantara served as Undersecretary for the Industry and Investment Group of the Department of
Trade and Industry, the Vice Chairman and Managing Head of the Board of Investments from July 1986
to March 1995, and the Special Envoy of the Philippine President to Asia Pacific Economic Cooperation
forum in 1996. He was also the Chairman of the Board of Directors and the President of Holcim
Manufacturing Corporation (formerly Alsons Cement Corporation) from May 1997 to July 2003 and has
served as a Director of that company since 1997. He was a Member of the Advisory Board of Rizal

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Commercial Banking Corporation (RCBC) from April 1997 to June 2007. Mr. Alcantara served as a
Director of Philippine Reclamation Authority (formerly Public Estate Authority) from 2003 to April 2006
and Chairman of the Manila Economic and Cultural Office from March 2001 to August 2010.

Editha I. Alcantara, 71, Filipino, has served as a Director of the Company since March 8, 1995. She holds
a Business Administration degree from Maryknoll College and an MBA from Boston College. Ms.
Alcantara became the President of C. Alcantara and Sons, Inc. in 1992 after serving as the Treasurer of
that company. Presently, she is a Director (since 1980) and the Treasurer (since October 2000) of other
companies in the Alcantara Group.

She is also a Director of the Philippine Wood Producers Association (since May 16, 1980), and has served
as a Trustee for the Philippine Business for the Environment, Inc. since July 1995 and as a Trustee of
Miriam College since December 1998.

Tirso G. Santillan Jr., 76, Filipino, became a Director of the Company in June 11, 1996. He has also been
the Executive Vice-President since April 27, 1995. He holds a Bachelor of Arts degree in Engineering and
a Masters in Business Management degree from the Ateneo de Manila University.

Presently, he heads the Power Business Unit of the Alcantara Group. He has been the Executive Vice-
President of Alto Power Management Corporation since January 1996, Conal Holdings Corporation since
June 1997, Southern Philippines Power Corporation and Western Mindanao Power Corporation since
March 1996. He is also a Director of Sarangani Agricultural Co., Inc. since May 2002.

Additionally, he has been the Managing Partner of Private Capital of Asia Ltd. Since June 1991. Mr.
Santillan worked with the First Pacific Group from February 1987 to May 1991.

Alejandro I. Alcantara, 65, Filipino, has served as a Director of the Company since July 2003. He
graduated from the Ateneo de Davao with a degree in Economics. Mr. Alcantara has been a Director and
the President of Aquasur Resources Corporation since 1993 and has served in the same capacity with
Finfish Hatcheries, Inc. since 1995. He has also served as the Executive Vice President and General
Manager of Sarangani Agricultural Company, Inc. since 1986 and of Alsons Aquaculture Corporation
since 1998. He also became a Director and the Treasurer of the Federation of Cattle Raisers Association
of the Philippines from 1997 to December 2009.

Ramon T. Diokno, 72, Filipino, rejoined the Company as a Director in March 18, 2009. Previously, he
served the Company as a Director from June 19, 2002 to June 29, 2006 and as its Chief Financial Officer
from January 16, 2001 to June 30, 2006. He holds an Economics and Accountancy degree from the De La
Salle University and a Masters of Science in Management degree from the Massachusetts Institute of
Technology.

Mr. Diokno is also the Chief Financial Officer of Lepanto Consolidated Mining Co and its wholly-owned
subsidiaries. He is currently also a Director of Alsons Insurance Brokers Corporation.

Conrado C. Alcantara, 47, Filipino, has served as Director of the Company since November 2010. He
graduated from the Boston University with a degree in Political Science and attended a Post
Baccalaureate Program in Management at Harvard University. He presently serves as a Director and
President of Infinicor, Inc. He also became a Director of C. Alcantara and Sons, Inc. in July 2006 and of
Alsons Land Corporation in July 2009.

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Jacinto C. Gavino, Jr., 67, Filipino, has served as Independent Director of the Company since May 2005.
He has been a full-time Faculty of the Asian Institute of Management (AIM) since 1990 and he presently
holds the Fr. James F. Donelan, SJ, Professional Chair Business Ethics. He is on the core faculty of the
Washington SyCip Graduate School of Business (WSGSB). He was also the Associate Dean of the Master
in Management Program from 1993 to 1995, and Associate Dean for Research from 1995 to 1999.

He is currently a Director of Productronica Holdings, Inc. (2003), Aurotech Corporation (2000), Green
Chemicals Corporation (2006), RNuable Energy Corporation (2011) and Sarangani Agricultural Co., Inc.
(2005). He also serves as a Trustee of Fundacion Santiago (2002) and the Center for Family Ministries at
the Loyola School of Theology (2006). He also does consultancy work for various businesses and non-
profit organizations.

Professor Gavino holds a Bachelor of Science degree in Electrical Engineering from the University of the
Philippines (1971), a Master in Business Administration degree from the Ateneo de Manila University
(1984), and a Doctorate in Public Administration from the University of the Philippines (1993). He also
taught in the Ateneo de Manila University, Maryknoll College, and the University of the Philippines.

Jose Ben R. Laraya, 80, Filipino, has served as Independent Director of the Company since March 1995.
He holds a Commerce degree from De La Salle College and an MBA from the University of the
Philippines. He also attended the Advanced Management Program at Harvard Business School.
Currently, he serves as Chairman of the Board of Directors of Ultrex Management and Investments
Corporation (1992) and Laraya Holdings, Inc. (2007). He also serves as President of Trully Natural Food
Corporation (2004), and a Director of La Frutera, Inc. (1997).

Previously, he served as Vice-Chairman of the Philcom Corporation from October 1996 to February
1999, President of National Steel Corporation from September 1980 to February 1989, Dole Asia from
February 1989 to June 1992, and APC Group, Inc. from September 1995 to February 1999.

Honorio A. Poblador III, 74, Filipino, has served as a Director of the Company since March 8, 1995. He
holds a Political Science degree from the Ateneo de Manila University. Currently, he serves as Chairman
of the Board of Directors of Asuncion Realty Corporation (since 1995), Chairman of the Board of
Directors and President of Asmaco, Inc. and President of Asian Aesthetic Excellence, Inc. and Mayriad
Human Resources and Services, Inc.

He is also a Director of Philippine Communications Satellite Corporation, Philippine Overseas

Telecommunications Corporation, and Elnor Investment Corp. (since 1983), Philcomsat Holdings
Corporation (1998), the Philodrill Corporation (1997), F&C Realty Corporation and POB Corporation
(2003).

Arturo B. Diago, Jr. 68, Filipino, became a director of the Company in August 2017 after the resignation
of Mr. Nicasio I. Alcantara in July 2017. Mr. Diago has been the Treasurer of Cyan Management
Corporation since 1988, Teleperformance, Inc. since 1996, Lacturan Holdings, Inc. since 1997, Mantrade
Development Corporation since 2003 and Canlubang Golf Corporation since 2007. Mr. Diago has been
the Vice-President-Comptroller of MG Exeo Network, Inc. since 1991. He has been an Executive Vice
President and Treasurer of Directories Philippines Corporation since 1989. He served as the Chief Officer
for Administrative and Corporate Service of Pilipino Telephone Corporation until December 31, 2000.
Mr. Diago served as the President of Lodestar Investment Holdings Corp. since May 2006. He held

Page 88
various positions in the Alcantara Group of Companies involved in manufacturing, marketing and
shipping operations. He has been the Vice Chairman of Asian Media Development Group, Inc. since
2003. Mr. Diago serves as a Director of Directories Philippines Corporation and MG Exeo Network Inc.,
among other corporations. He has been a Director of Alsons Consolidated Resources, Inc. since August
24, 2017. He serves as a Director of Cebuana Lhuillier Bank, Cybersoft Information Technology, Inc., 911
Alarm, Inc. and Vinnell Belvoir Corp. He served as a Director of Lodestar Investment Holdings Corp. from
March 10, 2006 to December 2007 and its Globalport 900, Inc. (a/k/a MIC Holdings Corp.). Mr. Diago
served as a Director of PLDT Communications and Energy Ventures, Inc. (Former Name: Pilipino
Telephone Corporation) from April 24, 1991 to May 9, 2011. He obtained his Master's Degree in
Business Management from the Asian Institute of Management and his Bachelor of Science Degree in
Commerce from the De La Salle University. He also attended the Strategic Business Economics Program
of the Center for Research and Communication (now University of Asia and the Pacific).

Dr. Thomas G. Aquino, 71, Filipino, became an Independent Director of the Company in May 20, 2011.
He is a Senior Fellow at the Center for Research and Communication of the University of Asia and the
Pacific (UA&P). He was formerly the Senior Undersecretary of Philippine Department of Trade and
Industry. He supervised the country’s foreign trade promotions, trade negotiations under World Trade
Organization and the ASEAN Free Trade Agreements as well as bilateral trade talks with the country’s
major economic trading nations. He served as overall lead negotiator for the country’s first free trade
agreement, namely the Philippine-Japan Economic Partnership Agreement and was country
representative to the High Level Task Force on ASEAN Economic Integration. For public service, Dr.
Aquino was conferred the Presidential Service Award (or Lingkod Bayan) for extraordinary contribution
of national impact on public interest, security and patrimony and was recipient of the Gawad Mabini
Award with the rank of Grand Cross (or Dakilang Kamanong) for distinguished service to the country
both at home and abroad by the President of the Republic of the Philippines.

Before entering public service, Dr. Aquino held important roles in the fields of economics and business in
the private sector as Vice President for Business Economics and Director of the Strategic Business
Economics Program of UA&P. He returned to private practice as strategy consultant to companies and
economic policy adviser to government entities. He is the Chairman of NOW Corporation and
Independent Director of A Brown Company, both publicly listed at the Philippine Stock Exchange. He
obtained his Doctorate in Management from IESE Business School, University of Navarre (Spain) in 1980,
an MS in Industrial Economics from presently the University of Asia and the Pacific in 1972 and an AB in
Economics from the School of Economics, University of the Philippines in 1970.

The Executive Officers

The following Company Executive Officers do not own more than 2% of ACR:

Office Name Nationality

Director, President, Chairman of the Board Tomas I. Alcantara Filipino
Director and Treasurer Editha I. Alcantara Filipino
Director, Executive Vice President, Chief
Tirso G. Santillan, Jr. Filipino
Operating Officer
Corporate Secretary Roberto V. San Jose Filipino
Assistant Corporate Secretary Angel M. Esguerra III Filipino

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Roberto V. San Jose, 78, Filipino, has been the Corporate Secretary of the Company since June 1991. He
received his Bachelor of Arts degree from De La Salle University and his law degree from the University
of the Philippines. He is a member of the Philippine Bar and a Consultant of the Castillo Laman Tan
Pantaleon and San Jose Law Offices. In addition to serving as Corporate Secretary for the Company, he
serves as Director, Officer, and/or Corporate Secretary of the Anglo Philippine Holdings Corp., CP
Equities Corporation, Atlas Resources Management Group, MAA Consultants, Inc. and several other
companies. He is also the Corporate Secretary of Premiere Horizon Alliance Corporation, Marc Ventures
Holdings, Inc., Solid Group Inc., United Paragon Mining Corporation, FMF Development Corporation,
Beneficial Life Insurance Co., Inc., The Metropolitan Club, Inc., and other client corporations of the
Castillo Laman Tan Pantaleon and San Jose law firm.

Angel M. Esguerra III, 58, Filipino, was appointed as the Assistant Corporate Secretary of the Company
on August 10, 2010. He is a member of the Philippine bar and obtained his Bachelor of Arts degree in
Economics and his Law degree from the University of the Philippines. Mr. Esguerra practiced with
several firms then joined a trans-national energy company with power plants in the Asia-Pacific Region
as internal counsel, and served as the Corporate Secretary of its Philippine subsidiaries such as Batangas
Power Corp. and Subic Power Corporation. In June of 2010, he joined the Alcantara Group as head of its
Legal Services department and now serves as the Corporate Secretary of the group’s other companies.

Independent Directors

The following are the Company’s Independent Directors. They are neither officers nor substantial
shareholders of ACR:

1. Jacinto C. Gavino, Jr.

2. Jose Ben R. Laraya
3. Thomas G. Aquino

Significant Employee

There are no persons other than the Executive Officers that are expected by the Company to make a
significant contribution to the business.

Family Relationships

Mr. Tomas I. Alcantara, Mr. Alejandro I. Alcantara, and Ms. Editha I. Alcantara are siblings, while Mr.
Conrado C. Alcantara is their nephew. There are no other family relationships known to the Company up
to the 4th civil degree.

Compensation of directors and executive officers

A Director’s compensation consists of a per diem of P30,000 for every meeting of the Board of Directors’
and P15,000 for every meeting of the Executive Committee and Corporate Governance Committee and
the Audit Committee.

The aggregate amounts paid by the Company to its Directors and Executive Officers as a group were
P2,985,000 and P5,256,000 for the years 2019 and 2018, and P3,705,000 in 2017, respectively. For 2020,

Page 90
the Company estimates that it will pay an aggregate amount of P4,257,000 as compensation to its
Directors and Executive Officers.

Summary of Compensation of Directors and Executive Officers

Name and Year (With 2020 Salary (Php) Bonus (Php) Other Annual
Principal Position Estimates) Compensation
Income (php)
Tomas I. Alcantara 2020 - - P 330,000
Chairman and 2019 - - 165,000
President 2018 - - 434,000
2017 - - 330,000
Editha I. Alcantara 2020 - - 405,000
Director and 2019 - - 285,000
Treasurer 2018 - - 509,000
2017 - - 0,000
Tirso G. Santillan, 2020 - - 405,000
Jr. 2019 - - 315,000
Director, EVP and 2018 - - 509,000
COO 2017 - - 330,000
Jose Ben R. Laraya 2020 - - 405,000
Director 2019 - - 330,000
2018 - - 509,000
2017 - - 330,000
Ramon T. Diokno 2020 - - 375,000
Director 2019 - - 255,000
2018 - - 464,000
2017 - - 330,000
All other Officers 2020 - - 2,355,000
and Directors as a 2019 - - 1,635,000
group unnamed 2018 - - 2,831,000
2017 - - 1,500,000

Annual Compensation received from ACR consists of per diems given for every attendance in meeting of
the Board, Executive Committee, or Audit Committee.

The Company and the Executive Officers are not involved in any of the following transactions:
1. Standard arrangement and any material arrangements;
2. Employment contract (between the registrant and named Executive Officers);
3. Compensatory plan or arrangement;
4. Outstanding warrants or options;
5. Adjustments or amendments on the stock warrants or options.

The members of the Compensation Committee of the Company are as follows:

1. Tomas I. Alcantara - Chairman
2. Honorio A. Poblador III - Member
3. Jose Ben R. Laraya - Member (Independent Director)
4. Tirso G. Santillan, Jr. - Member

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Warrants and Options Outstanding

There are no warrants or options granted by the Company to any of its Directors or Executive Officers.

Pending Legal Proceedings

None of the directors and officers were involved in any bankruptcy proceedings as of April 30, 2020 and
during the past five years. Neither have they been convicted by final judgment in any criminal
proceedings or been subject to any order, judgment or decree of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending, or otherwise limiting their involvement in any type of
business, securities, commodities or banking activities, nor found in action by any court of
administrative bodies to have violated a securities or commodities law.

Significant employees

There are no persons other than the executive officers that are expected by the Company to make a
significant contribution to the business.

Voting Trust Holders of 5% or More

No person holds five percent (5%) or more of the issued and outstanding shares of stocks of the
Company under a voting trust or similar agreement.

Change in Control
There are no changes in controlling interest of the Company during the period covered by this report.

Page 92
Certain Relationships and Related Transactions
During the last three (3) years, the Company was not a party to any transaction in which a Director or
Executive Officer of the Company, any nominee for election as a Director, or any security holder owning
more than 5% of any class of the Company’s issued and outstanding shares and/or his/her immediate
family member, had a material interest thereon.

In the normal conduct of business, the following are some of the Company’s transactions with its
affiliates and related parties disclosed in the audited financial statements.

I. On October 9, 2015, the Company subscribed to 22 million redeemable preferred shares of

Aldevinco, a shareholder of the Company, through a conversion of the Company’s advances to
Aldevinco amounting to P2.2 billion. The redeemable preferred shares have a par value of P100
per share with cumulative dividend of 4% per annum and are non-participating. The Company
accounts for its investment in these redeemable preferred shares as part of AFS investment in
the Financial Statements.

II. On March 21, 2013, Aldevinco and ACIL (collectively referred to as AG) and Ayala Land, Inc. (ALI)
entered into a joint venture agreement, wherein ALI would own 60% and AG would own 40% of
the outstanding capital stock of a Joint Venture Corporation (JVC), Aviana Development
Corporation (ADC), which shall develop the Lanang Landholdings in Davao. On September 17,
2013, ADC was incorporated, and ACR subscribed to, and now owns, 34% of ADC’s outstanding
capital stock.

There were no transactions to which the Company was a party during the past two (2) fiscal years where
a Director, Executive Officer, nominee for Director, or stockholder owning more than 10% of the
outstanding shares of the Company had a direct interest.

The Company retains the law firm of Castillo Laman Pantaleon and San Jose for legal services, where
Atty. Roberto V. San Jose is a Consultant. In 2019 and 2018, ACR paid this law firm fees of P360,000.00
and P5,135,548.08, respectively. Included in the amount paid in 2018 is the P4,722,338.88 which pertain
to legal advice and services on the partial divestment of Alsons Thermal Energy Corporation in 2017. The
Company believes that the legal fees are reasonable for the services rendered.

With the Company’s issuance of the voting preferred shares, the Company’s ultimate parent company is
Alsons Corporation or AC, which owns 68.63% of all the common and the preferred shares. The
Company’s outstanding common shares, which are all listed in the Philippine Stock Exchange, are owned
and controlled by the following Companies: Alsons Corporation – 41.21%; Alsons Power Holdings
Corporation – 19.87%; and Alsons Development and Investment Corporation – 18.89%.

Page 93
Security Ownership of Certain Record and Beneficial Owners
As of June 04, 2020, the Company knows of no one who beneficially owns in excess of 5% of its common
stock except as set forth below:

Beneficial Owners of Voting Securities

Name of
Beneficial
Title of Name and address of Relationship Owner and Number of
Citizenship %age
Class Record Owner with Issuer Relationship shares held
with record
owner

Alsons Corporation 6
Alsons Building, 2286
Common Affiliate AC7 Filipino 2,592,524,072 41.21%
Pasong Tamo Ext.,
Makati City

Alsons Power
Holdings Corp. 10
Common Alsons Bldg., 2286 Affiliate APHC11 Filipino 1,249,999,599 19.87%
Pasong Tamo Ext.,
Makati City

Alsons Development
and Investment Corp
10
Common Affiliate ADIC11 Filipino 1,188,524,026 18.89%
Alsons Bldg., 2286
Pasong Tamo Ext.,
Makati City
PCD Nominee
Corporation8 (Fil)
37/F Tower 1
Common None Various9 Filipino 1,146,851,476 18.23%
Enterprise Center
6766 Ayala Avenue,
Makati City

6
The President and CEO of the Corporation, Tomas I. Alcantara, is the Chairman of the Board of Directors of the Company.
7
The respective Board of Directors of each AC, APHC and ALDEVINCO has power to decide how the shares are to be voted..
8
The PCD Nominee Corporation is not related to the Company
9
There are no holders of more than 5% of common stock under PCD. The clients of the various PCD participants have the
power to decide how the Company’s shares are to be voted.

Page 94
Security Ownership of Management

The table below shows the securities beneficially owned by all Directors, nominees, and Executive
Officers of ACR as of June, 4 2020.

Security Ownership of Management

Amount and
Name of Beneficial Nature of Percent of
Title of Class Citizenship
Owner Beneficial Ownership
Ownership
Directors
Common Tomas I. Alcantara 1 (d) Filipino 0.00%
Common Editha I. Alcantara 100,000 (d) Filipino 0.00%
Common Alejandro I. Alcantara 1 (d) Filipino 0.00%
Common Jacinto C. Gavino, Jr. 1 (d) Filipino 0.00%
Common Ramon T. Diokno 1 (d) Filipino 0.00%
Common Jose Ben R. Laraya 100 (d) Filipino 0.00%
Common Conrado C. Alcantara 1 (d) Filipino 0.00%
Common Honorio A. Poblador III 100 (d) Filipino 0.00%
Common Arturo B. Diago, Jr. 1 (d) Filipino 0.00%
Common Thomas G. Aquino 100 (d) Filipino 0.00%
Common Tirso G. Santillan, Jr. 1 (d) Filipino 0.00%
Total 100,406 (d)
Officers:
Common Tomas I. Alcantara 1 Filipino -
Common Editha I. Alcantara 100,000 Filipino -
Common Tirso G. Santillan, Jr. 1 Filipino -
Common Roberto V. San Jose 500,000 Filipino 0.00%
Angel M. Esguerra III - Filipino -
Total 600,002

Sales of Unregistered Securities within the last three (3) years

There are no other securities sold for cash by the Company within the last three (3) years that were not
registered under the Securities Regulation Code.

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Corporate Governance
In compliance with the SEC directive and in view of the ASEAN Corporate Governance Scorecard
Assessment, the Company filed its the latest Integrated Annual Corporate Governance Report for 2018
on May 30, 2019. This is compiled and published in the Company website, in compliance with the SEC
Memoranda No. 1 and 12, Series of 2014, requiring all publicly listed companies to consolidate all the
ACGR updates and changes for the year and label the consolidated changes as “Consolidated Changes in
ACGR for (year)”.

Evaluation System

In compliance with Securities & Exchange Commission (“SEC”) Memorandum Circular No 19, Series of
2016, the Company timely and duly adopted a New Manual on Corporate Governance on 24 August
2017. In this New Manual, the evaluation system established by the Company to measure or determine
the level of compliance by the Board of Directors and top-level management with its New Manual
consisted of: (1) the appointment of a competent compliance officer who monitors, reviews, evaluates
and ensures the compliance by the Company, its officers and Directors with the relevant laws, the Code,
rules and regulations and all governance issuances of regulatory agencies; (2) the appointment of a
competent Chairman of the Board of Directors who makes sure that performance of the Board is
evaluated at least once a year and discussed/ followed up on; (3) the constitution of the Executive
Committee of the Board of Directors as concurrently the Corporate Governance Committee that (i)
oversees the periodic performance evaluation of the Board, its committees, and Management, and
conducts an annual self-evaluation of its performance; (ii) ensures that the results of the Board
evaluation are shared, discussed, and that concrete action plans are developed and implemented to
address the identified areas for improvement; and (iii) evaluates itself in carrying out its evaluation
functions. These evaluations take place usually at the end of the year, just before the annual corporate
governance that all Directors and Officers attend.

Measures Being Undertaken for Compliance

The Company plans to fully comply with the adopted leading practices on good corporate governance by
constantly reviewing such practices as reported in the relevant media, portrayed in the appropriate
websites, and revealed in various conferences and seminars regarding such practices. In addition, the
Company’s external auditor regularly briefs the Board regarding up-to-date corporate governance
practices in other situations, and suggests the adoption of such practices when relevant for the
Company.

Deviations

To date, the Company knows of no material deviation from the Company’s New Manual of Corporate
Governance.

Future Plans for Improvement

To improve the corporate governance of the Company, it plans to fully adopt another New Manual on

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Corporate Governance pursuant to the SEC’s Memorandum Circular No 24, series of 2019, which will
require the Company to (1) appoint a competent compliance officer who will monitor, review, evaluate,
and ensure that the compliance by the Company, its officers and Directors with the relevant laws, the
Code, rules and regulations and all governance issuances of regulatory agencies; (2) appoint a
competent Chairman of the Board of Directors who will make sure that performance of the Board is
evaluated at least once a year and discussed/followed up on; (3) constitute the Executive Committee of
the Board of Directors as concurrently the Corporate Governance Committee that (i) oversees the
periodic performance evaluation of the Board, its committees, and Management, and conducts an
annual self-evaluation of its performance; (ii) ensures that the results of the Board evaluation are
shared, discussed, and that concrete action plans are developed and implemented to address the
identified areas for improvement; and (iii) evaluates itself in carrying out its evaluation functions. These
evaluations will take place at the end of the year, just before the annual corporate governance that all
Directors and Officers attend, and at such other dates at the discretion of the Board of Directors .

Page 97
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The following management’s discussion and analysis of the Company’s financial condition and results of
operations should be read in conjunction with the Company’s unaudited, interim financial statements as
of March 31, 2020and audited consolidated financial statements for the fiscal years ended 2019, 2018
and 2017 including the related notes, contained in this Prospectus. This Prospectus contains forward-
looking statements that are based largely on the Company’s current expectations and projections about
future events and trends affecting its business and operations. The Company cautions investors that its
business and financial performance is subject to substantive risks and uncertainties. The Company’s
actual results may differ materially from those discussed in the forward-looking statements as a result of
various factors, including, without limitation, those set out in “Risk Factors.” In evaluating the Company’s
business, investors should carefully consider all of the information contained in “Risk Factors."

Risks related to the Covid-19 pandemic

The economic narrative on the COVID-19 outbreak revolves around two causal mechanisms: the impact
of the fear factor on behavior, reflected in a decline in demand for travel-related services, discretionary
consumption, and the production and regional supply chains. Our power plants continue to deliver the
uninterrupted energy supply required by the power purchasers under their respective power sales
agreements. As long as the power purchasers distribute the power sold to them ACR’s subsidiaries, and
honor their power sales agreements, the impact on the business will be minimal.

In compliance with ERC, ACR’s subsidiaries have also extended the payment terms to their customers.

Review as of March 31 2020 vs. March 31, 2019 Operations

Results of Operation

The first three months of 2020 showed significant improvements in revenues to Php 2,212 million from
Php 1,266 million in the first quarter 2019. The fully operational SEC plant continues to be a major
revenue driver for the company along with the continuing operations of WMPC and the other diesel
plants.

Cost of goods sold and services has proportionately increased to Php 1,225 million from Php 825 million
from last year due mainly to the fuel costs associated to SEC 2 operations. Gross profit margin improved
to 45% from last year’s 32%, delivering a steady gross profit of Php 987 million in the first three months
of 2020.

General administrative expenses increased to Php 160 million from Php 94 million last year due largely
to the full operations of SEC 2.

Net finance charges for the first quarter of this year was at Php 506 million compared to last year’s Php
217 million. The increase in interest was due to the recognition of expense attributable to SEC 2 loan.
SEC 2 began commercial operations in October 10, 2019.

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Due to the improved performance of SEC and WMPC , the net income significantly increased to Php 310
million from last year’s Php 104 million resulting in a net income attributable to the Parent of Php 55
million from last year’s Php 6 million. Earnings per share were Php 0.009 during this period.

Review of Financial Position

ACR and its Subsidiaries continue to post strong balance sheets with total assets of Php 45,097million a
slight decline from Php 45,609 million at the end of 2019.

Current assets decreased by 1% from Php 8,840 million to Php 8,697 million brought about by the lower
cash and cash equivalents during the period. Portion of the beginning cash balance as of the end 2019
was used to settle maturing obligations during the first quarter of 2020.

Non-current assets likewise decreased 1% from Php 36,770 million to Php 36,400 million. This is due
largely to the recognition of depreciation of property, plant and equipment. SEC 2 is on its first full
operation during the period.

Total liabilities amounted to Php 29,932 million is slightly lower than the Php 30,754 million reported at
the end of 2019. The settlement of maturing obligations during the period caused the slight decrease in
current liabilities.

As of March 31, 2020, ACR’s current ration decreased from 1.37:1 at the end of 2019 to 0.78:1 this
period. Debt to equity ratio increased to 2.68:1 from 2.77:1 last year.

ACR’s consolidated statement of cash flows showed that cash from operating activities is the major
source of funding for payment of maturing obligations during the period.

1. Causes of the material changes (5% or more) in balances of relevant accounts as of March 31, 2020
compared to December 31, 2019 are as follows:

a) Short-term cash investment – Increased 106%

The increase is due mainly to the additional placements made during the period

b) Spared parts and supplies – Decreased 30%

The decrease is due mainly to the usage of spare parts by the power companies. SPPC has no
existing contract while SEC became on-line effective October 10, 2019.

c) Advances to contractors – Decreased 89%

The decrease was due to the offsetting of advances against contract payable during the period.

d) Contract Asset – Increased 12%

Contract asset represents asset recognized through the application of PFRS 15. This Accounting
Standards simply recognizes the revenues of SEC relative to its Capital Recovery Fee equally over
the life of its PSA. Thus, applying the average method in calculating the CRF Revenue. The
increment is presented as Contract Asset.

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 e) Other Non-current assets - Increased 18%
The increase was due to the additional cost incurred on deferred project costs.

f) Accounts payable and accrued expenses – Decreased 13%

The decrease was due to the timing of payables during the period.

g) Loans payable – Decreased 14%; Short Term loans payable – Decreased 21%
The increase is due to the partial settlement of loans during the period.

h) Income tax payable- Increased 65%

Timing of payments of income tax payable led to the increase in this account during the period.
ii. Events that will trigger Direct or Contingent Financial Obligation that is material to the Company,
including any default or acceleration of obligation.

Some of the subsidiaries or affiliates of the Company are from time to time involved in routine litigation
and various legal actions incidental to their respective operations. However, in the opinion of the
Company’s management, none of the legal matters in which its subsidiaries or affiliated are involved
have material effect on the Company’s financial condition and results of operation.

iii. There are no Material Off-Balance Sheet Transaction, Arrangements, Obligations (including
contingent obligations), and other relationships of the Company with unconsolidated entities or other
persons created during the reporting period.

Key Performance Indicators (KPI)

The following key performance indicators were identified by the Company and included in the
discussion of the results of operations and financial condition for the three months ended March 31,
2020 and 2019. (Amounts in million pesos, except ratios).

Financial KPI March 31

2020 2019
Profitability
Revenues Php 2,212 Php 1,226
EBITDA 1,214 550
EBITDA Margin 55% 45%
Return on Equity 2% 1%
Net Earnings Attributable to Equity Holders 55 6
Efficiency
Operating Expense Ratio 37% 31%
Liquidity
Net Debt Coverage 5% 2%
Current Ratio 0.78:1 1.37:1
Debt-to-Equity Ratio 2.77:1 2.70:1
Asset-to-equity Ratio 2.97:1 3.03:1
Interest Rate Coverage Ration 2.85:1 1.41:1

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Profitability
Earnings before interest, taxes, depreciation and amortization margin if the Company improved
significantly during the first three months of 2020 to 55% from the same period last year at 45%. The
second section of SEC has been operating since October 10 last year and contributed significant growth
for the Group’s earnings. Return on Equity increased to 2% from 1% in 2019 due to higher revenues.

Efficiency
ACR’s power facilities continued to operate and provide power to our customers in various parts of
Mindanao amidst the nationwide quarantine brought about by the COVID-19 Pandemic. The 220 MW
Sarangani Energy baseload coal-fired power plant in Maasin is in full operation with both sections
delivering electricity to General Santos City, Sarangani Province, Cagayan de Oro, Iligan, Butuan, and
other major population centers in Mindanao. The 100 MW diesel plant of WMPC continues to be a
major power to Zamboanga City. WMPC likewise provides ancillary services to NGCP with dispatchable
generating capacity, reactive power support, and black start capacity to help stabilize the power grid in
Zamboanga Peninsula. Also last year, the Company tendered a proposal for the group’s SPPC diesel
plant in Sarangani to provide ancillary services to NGCP in order to help stabilize the power grid in
Region 12 or South Central Mindanao. The Company is likewise actively exploring prospective markets
for its diesel capacity in areas outside of Mindanao where the demand for power is growing.

With the first year of operations of SEC 2 and the ongoing construction of our first renewable energy
project, the Siguil Hydro Power Plant, the operating expense ratio increased to 37% from 31% in the
previous year. The operating efficiency of the power plant is expected to continue in accordance with
the plans and budgets.

ACR’s cash flow from operations this year increased significantly to Php 1,053 million from last year’s
Php 365 million due mainly to cash flow contribution coming from SEC 2 operations. The recognized
interest expense of SEC 2 has increased the net debt coverage from 2% in 2019 to 5% this year while
current ratio decreased to 0.78:1 from 1.37:1 last year, resulting from the reclassification of the first
tranche of the Parent’s Fixed Corporate Note that is due on December 2020. DBP Investment Bank was
mandated to refinance this Note Facility.

Debt Covenants

As of March 31, 2020, the Company is in compliance with its debt covenants.

Review of Current Year –2019 vs. 2018 Operations

Highlights of the Company’s financial performance are as follows:

Revenues and Profitability

ACR and Subsidiaries posted a slight increase in its consolidated revenues during the year at P6,796
million, a 2% improvement from the P6,666 million reported in the previous year. This improvement
was due mainly to SEC 2’s commercial operations which started on October 10, 2019. It generated
186,609 megawatts of power during the year.

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Cost of services decreased by 9% at P4,237 million from P4,673 million in 2018. The decrease was due
mainly to the lower cost of fuel, lower energy dispatched by the diesel plants and the delay in SEC 2’s
commercial operations.

General and administrative expenses increased by 23% at P598 million from P487 million in 2018. The
increase was due mainly to the expenses recognized by SEC 2 s well as those of Siguil Hydro Power
Corporation which began construction in the 3rd quarter of 2019 and expected commercial operations
by the first half of 2022. Operating profit also improved by 31% at P1,959 million from P1,499 million
reported in the previous year.

Earnings before interest, taxes, depreciation and amortization (EBITDA) improved from P2,698 million to
3,081 million this year. The EBITDA margin is higher at 45% this year versus the 40% earned in 2018. The
improvements were due mainly to the revenue contribution of SEC 2 and the better performance of
WMPC.

Meanwhile, finance charges decreased by 9% from P1,186 million to P1,084 million. The partial pre-
payment by ACR Parent debt in April 2018 amounting to P1billion and amortization of SEC 1 project
loans, caused the decrease in interest expense. The interest incurred for SEC 2 was capitalized as part of
project cost up to the time it declared commercial operations.

The Company realized Other Income of P164 million from P390 million in 2018. The Company
recognized a dividend from its investment in preferred shares amounting to P264 million in 2018 which
is partly offset by higher equity in net earnings from an associate of P71 million in 2019, from P33
million last year. The issuer of the preferred shares did not declare dividend this year. However, the
feature of this preferred shares is cumulative and therefore the Company will recognize the dividend in
arears when declaration is made in the future.

As a result of the foregoing, the consolidated net income posted a better performance of P974 million in
2019, 73% better than the P563 million in 2018. The income attributable to Parent is 58% better from
last year’s P94 million to P148 million this year and posting an earnings per share of P0.023 from P0.014
last year.

Financial Position

As of December 31, 2019, total resources of ACR and Subsidiaries remained strong at P45,609 million,
increased by 5% versus the P43,492 million level reported in 2018.

Current assets posted a 0.7% decrease, from P8,904 million to P8,840 million. The decrease came largely
from the use of cash and cash equivalents for the construction and completion of SEC 2. Siguil Hydro
Power Plant likewise began construction during the year. Noncurrent assets rose by 6%, mostly on the
capital expenditures incurred for the completion of the construction of SEC 2 and Siguil.

Current liabilities increased significantly by 92% from P6,280 million to P12,051 million, largely on
account of higher current portion of long-term debt. The first tranche of Company’s Fixed Rate
Corporate Note (FXCN) which will mature in December 2020 has been recognized as current during the
year. The Company is currently working on refinancing this maturing obligation. Noncurrent liabilities,
on the other hand, decreased by 18% due to the reclassification of above maturing obligation and partly
offset by the recognition of additional decommissioning liability related to SEC 2.

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 ACR posted a current ratio of 0.73:1 for 2019 as compared to 1.42:1 in 2018 mainly due to the
reclassification of its maturing obligation. The Company is already in discussion with the existing lenders
for the refinancing and majority has obtained management clearance to refinance the same.

Net cash inflows from operating activities remain stable and continue to be the source of payment of
maturing obligations and trade payables. Net cash used for investing activities decreased from P5,310
million to P3,083 million this year due mainly to the completion of SEC 2. Net cash inflows from
financing activities amounted to -P33 million in 2019, largely coming from loan availments of P5,324.
These were used mainly for debt servicing and dividend payments. The net cash balance after
accounting for the above changes reached P2,815 million, 19% lower than the P3,474 million in the
previous year.

Key Performance Indicators (KPI)

The following key performance indicators were identified by the Company and included in the
discussion of the results of operations and financial condition. The Company’s operations for the year
ended December 31, 2018 showed stable gross income at P2,559 million compared to last year’s P1,993
million. KPI of the Company are as follows: (Amounts in million pesos, except ratios).

Financial KPI Calendar Year

2019 2018
Profitability
Revenues P6,796 P6,666
EBITDA 3,081 2,698
EBITDA Margin 45% 40%
Return on Equity 7% 4%
Net Earnings Attributable to Equity Holders 148 94
Efficiency
Operating Expense Ratio 29% 32%
Liquidity
Net Debt Coverage 11% 13%
Current Ratio 0.73 : 1 1.42 : 1
Debt-to-Equity Ratio 2.82 : 1 2.62 : 1

Profitability

The earnings before interest, taxes, depreciation and amortization (EBITDA) of the Company increased
from P2,695 million to P3,152 million in 2019 due mainly to the improved performances of SEC and
WMPC. EBITDA Margin was also up from 40% in the previous year to 45% this year as a result of higher
income.

Return on equity (ROE) was also up from last year’s 4% to 8% this year while the net income attributable
to the equity holders of the parent increased significantly to P148 million from last year’s P94 million.

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The second section of SEC started commercial operations on October 10, 2019 contributing P1,046
million in total revenues during the year.

Efficiency

The Company’s operating expense ratio decreased to 29% in 2019 from 32% in 2018. The continued
operating performance of the Company’s operations led to the decrease in operating expense ratio.

Liquidity

As a result of additional project loan drawdown for the completion of Sarangani Energy section 2 during
the year, financial debt increased by 8%. Consequently, net debt coverage ratio decreased to 11% from
last year’s 13%. Current ratio on the other hand decreased to 0.73:1 from last year’s 1.42:1. The first
tranche of Company’s Five-Year Fixed Rate Corporate Note (FXCN) which matures on December 2020
has been recognized as current during the year. The Company is currently working on the refinancing of
this maturing obligation and majority of the noteholders have signified their concurrence.

Material Changes in Consolidated Balance Sheet Accounts by 5% or More

1. Cash and cash equivalents, 19% Decrease and Short-term investments, 31% decrease

The decrease in cash and cash equivalents (2019: P2,815 million vs. 2018: P3,475 million) was due to the
usage of cash for the completion of the SEC 2 power plant as well as the on-going construction of Siguil
Hydro Power Plant. SEC 2 has started commercial operations on October 10 while Siguil is expected to
be completed to commence commercial operations in 2022.

2. Trade and other receivables, 22% Increase

The increase was due to the timing of collection of trade receivables during the year.

3. Spare parts and supplies, 6% decrease

The decline was due mainly to the lower coal consumption of Sarangani Energy Corporation during the
year.

4. Prepaid expenses and other current assets, 12% Increase

The increase was due to the higher interest reserve account of Sarangani Energy Corporation required
for its loan facility used for the construction of SEC 2.

5. Advances to Constructors, 306% Increase

The increase was due to the additional advances made during the year for our first renewable energy
project that began construction in 2019 and target completion in 2022.

6. Property, plant and equipment, 7% Increase

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The increase in is due mainly to expenditures incurred for the completion of SEC 2 power plant.

7. Contract Asset, 5% Increase

The Contract asset represents asset recognized though the application of PFRS 15. This Accounting
Standards simply recognizes the revenues of SEC relative to its Capital Recovery Fee equally over the life
of its PSA. Thus, applying the average method in calculating the CRF Revenue. The increment is
presented as Contract Asset.

8. Deferred Financing Cost, 100% Decrease

The decrease was due to reclassification of SEC 2 financing costs into property plant and equipment
account.

9. Deferred Tax Assets, 75% Increase

The increase is due largely to the deferred tax impact of the additional recognized contract assets.

10. Accounts payable and other current liabilities, 4% Decrease

The decrease was due mainly to the payment of dividend declared by Sarangani Energy in the previous
year.
11. Loans payable and short-term notes payable , 285% Increase

The short-term notes payable represents negotiable commercial paper registered with the Securities
and Exchange Commission of the Company, which security is listed in the Philippine Dealing System
(PDEx). The increase was due mainly to the additional issuance during the year.

12. Income tax payable, 571% Increase

The increase was due to the higher taxable income earned during the year.

13. Current Portion of Long-term Debt, 397% Increase

Long-term debts – net of Current portion, 19% Decrease

The first tranche of Company’s Five-Year Fixed Rate Corporate Note (FXCN) which matures on December
2020 has been recognized as current during the year. The Company is currently working on the
refinancing of this maturing obligation and majority of the noteholders have signified their concurrence.

14. Deferred Tax Liabilities, 16% Decrease

The decline in deferred tax liabilities was due to the increase capitalized interest of the SEC 2 Power
Plant which is under construction during the year.

Page 105
Review of Year 2018 vs. 2017 Operations
Highlights of the Company’s financial performance are as follows:

Revenues and Profitability

ACR and Subsidiaries posted a slight increase in its consolidated revenues during the year at P6,666
million, a 2% improvement from the P6,519 million reported in the previous year. This improvement
was due mainly to Sarangani Energy Section 1 operations.

Cost of services also increased by 2% at P4,673 million from P4,574 million in 2016. The increase was
due mainly to the higher energy dispatched of SEC 1 generating 521,304 megawatts of power from last
years’ 489,029 megawatts due to higher utilization this year.

General and administrative expenses decreased by 13% at P487 million from P562 million in 2017. The
decline was due to one-time expenses recognized by SEC 1 in 2017 for prior year’s administrative
charges. Operating profit also improved 9% at P1,499 million from P1,374 million reported in the
previous year.

Earnings before interest, taxes, depreciation and amortization (EBITDA) improved from P2,363 million to
P2,695 million this year. The EBITDA margin is higher at 40% this year versus the 36% earned in 2017.
Meanwhile, finance charges slightly decreased by 1% from P1,200 million to P1,186 million. The partial
pre-payment by ACR Parent debt in April 2018 amounting to P1billion, caused the slight decrease in
interest expense . The interest incurred for SEC 2 was capitalized as part of project cost.

On the other hand, the Company realized another income of P326 million from P70 million in 2017. The
Company recognized a dividend from its investment in preferred shares amounting to P264 million and
equity in net earnings from an associate of P33 million during the year.

As a result of the foregoing, the consolidated net income jumped 444% from last year’s P103 million to
P563 million. The income attributable to Parent is turnaround from a loss of P21 million in the previous
year to an income of P94 million this year and posting an earnings per share of P0.015 from (P0.004) last
year.

Financial Position

As of December 31, 2018, total resources of ACR and Subsidiaries remained strong at P43,492 million,
increased by 14% versus the P38,237 million level reported in 2017.

Current assets posted a 4% decrease, from P9,257 million to P8,904 million. The decrease came largely
from the use of cash and cash equivalents for the construction of SEC 2 and partial prepayment of the
Company’s Fixed Rate Corporate Note (FXCN). Noncurrent assets rose by 19%, mostly on the capital
expenditures incurred for the completion of the second phase of Sarangani Energy’s power plant and
the contract asset resulting from the application of Philippine Financial Reporting Standards 15 wherein
revenues of Sarangani Energy should be is recognized over time based on contract period (straight-line
basis).

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Current liabilities also increased by 12% from P5,590 million to P6,280 million, largely on account of
higher accounts payable and accrued expenses. Noncurrent liabilities increase by 20%, due to the
additional drawdown of project loan for the second phase of Sarangani Energy’s power plant.

ACR’s balance sheet remained strong with a current ratio at 1.42:1 in 2018 versus the 1.66:1 level in
2017, while its debt-to-equity ratio increased at 2.03:1 from 1.79:1, due to availments of additional
debts for SEC 2 power plant.

Net cash inflows from operating activities remain stable and continue to be the source of payment of
maturing obligations and trade payables. Net cash used for investing activities increased significantly
from P1,050 million to P5,212 million this year due mainly to the construction of SEC 2. Together with
net cash inflows from financing activities amounting to P1,738 million, largely from loan availments,
available funds totaled P11,117 million in 2018, from which P5,534 were used for power plant project
construction during the year. The net cash balance after accounting for the above changes reached
P3,475 million, 21% lower than the P4,384 million in the previous year.

Key Performance Indicators

The Company’s operations for the year ended December 31, 2018 showed stable gross income at P1,498
million compared to last year’s P3,74 million. KPI of the Company are as follows: (Amounts in million
pesos, except ratios).

Financial KPI Calendar Year

2018 2017
Profitability
Revenues P6,666 P6,519
EBITDA 2,695 2,325
EBITDA Margin 40% 36%
Return on Equity 4% 1%
Net Earnings Attributable to Equity Holders 94 -21
Efficiency
Operating Expense Ratio 32% 41%
Liquidity
Net Debt Coverage 13% 15%
Current Ratio 1.42 : 1 1.66 : 1
Debt-to-Equity Ratio 1.94 : 1 1.74 : 1

Profitability

The earnings before interest, taxes, depreciation and amortization (EBITDA) of the Company increased
from P2,325 million to P2,695 million in 2018 due mainly to higher utilization of SEC 1. EBITDA Margin
was also up from 36% in the previous year to 40% this year as a result of higher income.

Return on equity (ROE) was also up from last year’s 1% to 4% this year while the net income attributable
to the equity holders of the parent was a turnaround at P94 million from a loss of P21 million in 2017.
The loss in 2017 was attributable to the higher finance charges availed for the project loan of SEC 1 and

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the lower performance of the diesel plants. The Company is currently exploring opportunities on how its
diesel assets are best utilized.

Efficiency

The Company’s operating expense ratio decreased to 32% in 2018 from 41% in 2017. The last year’s
recognition of a non-recurring administrative cost resulted to a higher general and administrative
expenses in 2017.

Liquidity

As a result of additional project loan for the construction of Sarangani 2 during the year, financial debt
increased by 18%. Consequently, net debt coverage decreased to 13% from last year’s 15%. Current
ratio on the other hand decreased to 1.42:1 from last year’s 1.66:1 due largely to the higher accounts
payable and accrued expenses in 2018.

Material Changes in Consolidated Balance Sheet Accounts by 5% or More

1. Cash and cash equivalents, 21% Decrease

The decrease in cash and cash equivalents (2018: P3,474 million vs. 2017: P4,384 million) was due to the
usage of cash for partial pre-payment of Parent Company’s long-term debt in April 2018.

2. Trade and other receivables, 4% Increase

The increase was due to the timing of collection of trade receivables during the year.

3. Prepaid expenses and other current assets, 59% Increase

The increase was due to the higher interest reserve account of Sarangani Energy Corporation required
for its loan facility used for the construction of SEC 2.

4. Advances to Constructors, 100% Increase

The increase was advances for the upgrade of transmission Line for SEC 2. The advances will be applied
against future payments.

5. Property, plant and equipment, 19% Increase

The increase in is due mainly to expenditures incurred for the construction of SEC 2 power plant.

6. Equity instruments designated through fair value other than comprehensive income, 100%
Increase

The increase is a change in classification from AFS financial assets in 2017 to the above account in
compliance with Accounting Standards.

7. Contract Asset, 100% Increase

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The Contract asset represents asset recognized though the application of PFRS 15. This Accounting
Standards simply recognizes the revenues of SEC relative to its Capital Recovery Fee equally over the life
of its PSA. Thus, applying the average method in calculating the CRF Revenue. The increment is
presented as Contract Asset.

8. Deferred Tax Assets, 22% Increase

The increase is due largely to the deferred tax impact of the recognized contract assets.

9. Other Noncurrent Assets, 18% Increase.

The increase was due to the additional deferred project expenses recognized by SRPI and Siguil projects.

10. Accounts payable and other current liabilities, 25% Increase

The increase was due mainly to the unpaid dividend declared by Sarangani Energy in 2018 payable in
2019.

11. Loans payable, 64% Decrease

The decrease was due the settlements of short-term working capital facility of ACR Parent, SPPC and
WMPC during the year.

12. Short-term Notes Payable , 100% Increase.

The short-term notes payable represents P 100 million negotiable commercial paper registered with the
Securities and Exchange Commission of the Company, which security is listed in the Philippine Dealing
System (PDEx). The fist issuance is part of the first tranche of P 1.5 billion of commercial paper.

13. Income tax payable, 50% Decrease

The decrease was due to the lower taxable income earned during the year.

14. Current Portion of Long-term Debt, 34% Increase

Long-term debt-net of Current Portion, 21% Increase

The increase in long-term debt was due to additional loan drawdown for the construction of SEC 2
Power Plant. While the maturing principal of the project loan availed for SEC 1 caused the 34% increase
in current portion of long-term debt.

15. Deferred Tax Liabilities, 15% Increase

The incline in deferred tax liabilities was due to the increase capitalized interest of the SEC 2 Power Plant
which is under construction during the year.

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Review of Year 2017 vs. 2016 Operations
Revenues and Profitability

ACR and subsidiaries posted a decline in its consolidated revenues during the year at P6,518 million, an
8% down from the P7,107 million reported in the previous year. This decline was due mainly to the one
time recognition of gain on loss and damages charged to the EPC contractor of Sarangani Phase 1 and
the lower energy dispatch of the diesel plants brought about by the lower contracted capacity and
energy sales.

Cost of services registered 2% decline at P4,574 million from P4,679 million in 2016. The decline was due
mainly to the lower energy dispatched of the 3 diesel plants namely; SPPC, WMPC and MPC. The full
operations of Sarangani Phase 1 posted an increase in cost of services from P1,934 million in 2016 to
P2,904 million this year.

Due to the one-time gain recognized by Sarangani in 2016, the gross profit declined by 20% from P2,422
million in 2016 to P1,935 million this year. General and administrative expenses increased by 6% at P562
million in 2017 from P531 million in 2016. The increase is attributable to Sarangani Phase 1 expenses,
which is now in full year commercial operations. Operating profit also declined 27% at P1,373 million
from P1,892 million reported in the previous year.

Earnings before interest, taxes, depreciation and amortization (EBITDA) slightly decreased from P2,698
million to P2,327 million this year. The last year income includes one-time gain due to construction
penalties charged to Sarangani Phase 1 EPC contractor. The EBITDA margin is slightly lower at 35% this
year versus the 38% earned in 2016.

Meanwhile, the finance charges increased by 39% from P865 million to P1,200 million. The interest
expense incurred on the project loan to complete the first phase of Sarangani is now fully recognized as
an expense after the project was completed and commenced operations. Last year, the interest was
capitalized until April 2016 as part of project cost.

On the other hand, the Company realized a net other income of P70 million from a net other charges of
P155 million in 2016. The Company realized a gain when its investment in Duta, Inc. was divested this
year. The net other charges in 2016 was due to the recognized impairment loss of P245 million on
goodwill which was partly negated by the income from insurance claim of SPPC during that year
amounting to P70 million.

As a result of the foregoing, the consolidated net income declined 84% from last year’s P636 million to
P103 million. The income attributable to Parent posted a loss of P21 million this year compared to the
income of P317 million in 2016 posting an earnings per share of (P0.004) from P0.050 last year.

Financial Position

As of December 31, 2017, total resources of ACR and subsidiaries remained strong at P38,237 million,
increased by 24% versus the P30,810 million level reported in 2016.

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Current assets increased 32% from P6,084 million to P9,257 million. The increase came largely from the
cash and cash equivalents representing the proceeds of the partial divestment of investment in ATEC
and a deposit in interest reserve account on the Fixed Rate Corporate Note (FXCN) of the Parent
Company. Noncurrent assets also rose by 17% representing capital expenditures incurred for the
construction of the second phase of Sarangani’s power plant and the additional deferred project cost
incurred for SRPI during the year.

Current liabilities also increased by 103% from P2,910 million to P5,590 million, largely on account of
higher current portion of long-term debt and accounts payable and accrued expenses and half of the
advances of related party advances of ATEC assigned to Global Business Power Corp. Noncurrent
liabilities increased by 8% due to the additional drawdown of project loan for the second phase of
Sarangani power plant.

ACR’s balance sheet remained strong with a current ratio at 1.65: 1 in 2017 versus the 2.09: 1 level in
2016, while its debt-to-equity ratio increased at 2.21: 1 from 2.03: 1, due to availment of additional
debts.

Net cash inflows from operating activities remain stable at P2,348 million, 1.4% down from last year’s
P2,382 million. The additional payment of prepaid expenses resulted to the decline in cash from
operations this year. Net cash used for investing activities was down by 63% from P2,809 million to
P1,050 million this year due mainly to the collection of advances from related parties. Together with net
cash inflows from financing activities amounting to P1,032 million, largely from loan availments,
available funds totaled P1,972 million in 2017, from which P4,023 were used for power plant project
construction during the year. The net cash balance after accounting for the above changes reached
P4,384 million, 114% higher than the P2,051 million in the previous year.

Key Performance Indicators (KPI)

The Company’s operations for the year ended December 31, 2017 showed stable gross income at P1,374
million compared to last year’s P1,191 million excluding the one-time gain on recoveries of foregone
revenue of P701 million. KPI of the Company are as follows: (Amounts in million pesos, except ratios)

Financial KPI Calendar Year

2017 2016
Profitability
Revenues P6,519 P7,107
EBITDA 2,327 2,698
EBITDA Margin 36% 38%
Return on Equity 1% 6%
Net Earnings Attributable to Equity Holders -21 317
Efficiency
Operating Expense Ratio 41% 28%
Liquidity
Net Debt Coverage 10% 15%
Current Ratio 1.65 : 1 2.09 : 1
Debt-to-Equity Ratio 2.21 : 1 2.03 : 1

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Material Changes in Consolidated Balance Sheet Accounts by 5% or More

1. Cash and cash equivalents, 113% Increase

The increase in cash and cash equivalents was principally due to the proceeds of the partial divestment
of investment in ATEC which was sold to Global Business Power Corp. on November 27, 2017 and
remain unused during the year.

2. Short-term cash investments, 347% Increase

Short-term cash investments increased due to the additional placements made during the year.

3. Trade and other receivables, 20% Decrease

The decrease was due to the collection of trade receivables during the year.

4. Spare parts and supplies, 5% Increase

The build-up consisted mainly of the purchase coal and spare parts for Sarangani during the
year.

5. Prepaid expenses and other current assets, 33% Increase

The increase is due to the higher interest reserve account of the Parent as required by the Corporate
Fixed Facility issued during the year as well as the project loan availed by Sarangani Energy Corporation
for the construction of Sarangani Phase 2.

6. Property, plant and equipment, 22% Increase

The growth is due mainly to expenditures incurred for the construction of the second phase of
Sarangani’s power plant.

7. Deferred Tax Assets, 17% Increase

The increase is due largely to the deferred tax impact of the accrued decommissioning liability and
impairment losses.

8. Other Noncurrent Assets, 13% Increase

The increase was due to the additional deferred project expenses for SRPI and Siguil projects.

9. Accounts payable and other current liabilities, 137% Increase

The increase was due mainly to the assignment of the 50% ATEC’s to GBP amounting to P1.8 billion and
accrued interest on loans during the year.

10. Loans payable, 46% Increase

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The increase was due to the availments of short-term working capital facility of SPPC and WMPC during
the year.

11. Income tax payable, 67% Decrease

The decrease was due to the lower taxable income earned during the year.

12. Current Portion of Long-Term Debt, 47% Increase

Long-term debt net of Current Portion, 9% Increase

The increase in long-term debt was due to the additional loan drawn down for the construction of
Sarangani Phase 2 power plant. While the maturing principal of the project loan availed for Sarangani
Phase 1 caused the 47% increase in current portion of long-term debt.

13. Deferred Tax Liabilities, 6% Increase

The incline in deferred tax liabilities was due to the increase in capitalized interest of the Sarangani
Phase 2 power plant which is under construction during the year.

Other Required Disclosures

There are no events that will trigger direct or contingent financial obligation that is material to the
Company, including any default or acceleration of an obligation.

There are no material off-balance sheet transactions, arrangements, obligations (including contingent
obligations), and other relationships of the Company with unsolicited entities or other persons created
during the reporting period.

There are no material commitments for capital expenditures.

There are no known trends, events or uncertainties that have had or that are reasonably expected to
have a material favorable or unfavorable impact on net sales or revenues or income from continuing
operations.

There are no significant elements of income or loss that did not arise from the registrant’s continuing
operations.

There are no seasonal aspects that had a material effect on the financial condition or results of
operations.

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External Audit and Fees

1. SyCip Gorres Velayo & Co. has been the Company’s external auditor for the last three fiscal years.
SGV has not expressed any intention to resign as the Company’s principal public accountant nor has
it indicated any hesitance to accept re-election after the completion of their last audit.

2. In compliance with SEC Memorandum Circular No. 8 Series of 2003 on rotation of External Auditors,
SGV’s previous engagement partner was replaced in 2014.

3. There has been no disagreement with SGV & Co. on accounting principles or practices, financial
statements disclosures, auditing scope or procedures, which disagreements, if not resolved to their
satisfaction, would have caused them to make reference thereto in its respective reports on the
Company’s financial statements for the abovementioned years.

4. The Company has maintained SGV as its principal public accountant to audit the financial statement
for the last fiscal year. SGV has not expressed any intention to resign as the Company’s principal
public accountant nor has it indicated any hesitance to accept re-election after the completion of
their last audit.

Members of the Audit Committee

Listed below are the members and officers of the Company’s Audit Committee:

Company’s Audit Committee

Office Name
Chairman Jose Ben R. Laraya
Member Editha I. Alcantara
Member Jacinto C. Gavino, Jr.
Member Tirso G. Santillan, Jr.
Member Ramon T. Diokno

External Audit and Audit-Related Fees

Fees for the years ended December 31, 2019 and 2018 were P550,200 for each year. The above fees are
for the audit of the Company’s annual financial statements or services normally provided in connection
with statutory and regulatory filings or engagements for 2019 and 2018. The fees and services were
approved by the Audit, Risk Oversight, and Related Party Transaction Committee (Audit Committee) in
compliance with the Code of Corporate Governance for Publicly Listed Companies.

The other fees billed by SGV pertain to an engagement of SGV in 2018 to conduct a tax seminar
exclusively for the Group on the Tax Reform for Acceleration and Inclusion (TRAIN). For this separate
engagement, SGV billed the Company P112,000 as professional fee, inclusive of any applicable taxes.

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Brief Summary for the Approval of the Auditor’s fees

The Audit Committee pre-approves all audit plans, scope, and frequency before the conduct of its
external audit. Moreover, pursuant to its mandate, it likewise performs interface functions with both
internal and external auditors.

The External Auditor confers and discusses with the Internal Auditors of the Company the auditing
process adopted and methodologies used in compliance with International Accounting Standards in the
initial draft of the Financial Statements and Notes to the Financial Statements in compliance with its
Internal Management handbook and such other statutory and regulatory requirements.
The External Auditor, likewise, prepares an accountability statement that sufficiently identifies the
officers responsible for the financial report.

The final form of the Annual Financial Statements is then presented to the Company’s Audit Committee
members who can properly review and further examine and perform their oversight financial
management functions in such areas relative to the Company’s credit, market, liquidity, operational,
legal and other risks as indicated in its financial reports. The approval of the External Auditor’s fees is
made by the Audit Committee in view of the complexity of the services rendered and reasonableness of
the fee under the engagement provided in the audit of the Company’s Annual Financial Statements.

Changes in and Disagreements with Accountant on Accounting and Financial Disclosure

1. SGV has been the Company’s external auditor for the last three fiscal years. SGV has not expressed
any intention to resign as the Company’s principal public accountant nor has it indicated any
hesitance to accept re-election after the completion of their last audit.
2. In compliance with SEC Memorandum Circular No. 8 Series of 2003 on rotation of External Auditors,
SGV’s previous engagement partner was replaced in 2014.
3. There have been no disagreement with SGV & Co. on accounting principles or practices, financial
statements disclosures, auditing scope or procedures, which disagreements, if not resolved to their
satisfaction, would have caused them to make reference thereto in its respective reports on the
Company’s financial statements for the abovementioned years.

Page 115
MATERIAL CONTRACTS & AGREEMENTS
The Company’s principal contracts generally consist of Memorandum of Agreements with Government
agencies and different Corporations. The Company also has existing financing agreements. Save for the
contracts mentioned below, the Company is not a party to any contract of material importance and
outside the usual course of business, and the Directors do not know of any such contract involving the
Company.

1. Energy Conversion Agreement (ECA)

SPPC and WMPC, under separate ECAs with NPC, have constructed a 55 MW and a 100 MW bunker C-
fired diesel generator power plants in General Santos City and Zamboanga City, respectively, under a
BOO scheme. NPC supplies all fuel necessary to generate electricity, with all electricity generated
purchased by NPC at a price calculated based on the formula provided in the ECAs. SPPC and WMPC
shall, directly or indirectly, own the power plants and shall operate and manage the power plants and
provide all power generated to NPC for a period of 18 years up to April 28, 2016 and December 12,
2015, respectively. Upon expiration of the 18-year cooperation period, the ECAs may be renewed upon
the sole option of NPC. On April 28, 2016 and December 12, 2015, ECA with SPPC and WMPC have
expired and not renewed by NPC, respectively.

The covering agreements also contain certain provisions with respect to NPC’s payment to SPPC and
WMPC, subject to certain conditions, of the total remaining amounts of the capacity fees until the end
of the cooperation period, in the event of amendment, modification or repeal of any Philippine laws or
any government regulations that will materially reduce, prejudice or otherwise adversely affect the
companies’ interest in the project or the power plant/station, and/or the economic return on their
investments. The ECAs qualify as operating leases as SPPC and WMPC sell all their outputs to NPC. No
energy fees earned on the ECAs in 2019, 2018 and 2017.

2. Operations and Maintenance (O&M) Service Agreements

Under an Advisory Service Agreement, AIL provides PT Makassar Power (PTMP), which is an
independent power producer based in Indonesia, with technical advisory services in connection with the
operation and maintenance of a power plant in Indonesia for specified monthly fee of $44,600 from
August 2011 to April 2012 and $46,600 from May 2012 to April 2015. On April 20, 2015, PTMP extended
the Advisory Service Agreement with AIL for another year starting May 1, 2015. On April 30, 2016, AIL’s
contract with PTMP officially ended. No billings to PTMP in 2019, 2018 and 2017.

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3. Power Supply Agreements (PSA)

Starting December 13, 2015 and April 29, 2016, WMPC, and SPPC, respectively, arranged for PSAs with
the following electric cooperatives and distribution utilities:

WMPC
Contracted Capacity
Contracting Party (in Mega Watts)
Zamboanga City Electric Cooperative, Inc. (ZAMCELCO) 50
Cagayan Electric Power and Light Company, Inc. (CEPALCO) 30
80

In January 2016, WMPC entered into interim PSAs with Davao Light and Power Company, Inc. (DLPC)
and Cotabato Light and Power Company, Inc. (CLPC) for a period of four months with contracted
capacity of 18 MW and 2 MW, respectively.

On September 25, 2017, CEPALCO requested to suspend its PSA starting October 2017 because based on
the current supply-demand condition within its franchise area, CEPALCO will not be requiring the 30
megawatts capacity from WMPC for the meantime. Consequently, on September 26, 2017, WMPC
agreed to the requested suspension. The unexpired term of the PSA between WMPC and CEPALCO shall
be preserved and will resume upon prior written notice from the latter.

On September 8, 2018, WMPC filed an application with the ERC for the approval of ASPA between
WMPC and National Grid Corporation of the Philippines. The approval of ASPA remains pending to date.
Revenue from contracts with customers from PSAs amounted to P1,157.77 million and P1,380.93 million
in 2019 and 2018, respectively, while energy fees from PSAs amounted to P1,375.49 million in 2017.

SPPC

Contracted Capacity
Contracting Party (in Mega Watts)
Davao Light Power Company (DLPC) 50
Cotabato Light and Power Company, Inc. (CLPC) 5
55

The PSAs with CLPC and DLPC expired on April 28, 2018 and April 29, 2018, respectively, which were
neither extended nor renewed. As of February 24, 2020, the SPPC has no operations. Revenue from
contracts with customers from PSAs amounted to P121.24 million in 2018 (nil in 2019) while energy fees
from PSAs amounted to 405.28 million in 2017.

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MPC

The details of MPC’s contracted capacity (in Megawatts) with electric cooperatives based on the
PSAs entered as at December 31 are as follows:

Contracted Capacity
Contracting Party (in Mega Watts)
CEPALCO 30
Surigao Del Sur I Electric Cooperative, Inc. (SURSECO I) 4
34

On January 8 and June 9, 2016, MPC entered into a PSA with CEPALCO and SURSECO I, respectively, to
supply energy for a period of ten (10) years.

The PSAs with ZAMCELCO and ZANECO expired on March 3, 2018 and July 31, 2018, respectively, which
were not extended nor renewed. On April 29, 2019, SURCECO I decided to fully terminate their contract
with MPC effective December 26, 2019.

Revenue from contracts with customers from PSAs amounted to P440.46 million and P446.12 million in
2019 and 2018, respectively, while energy fees from PSAs amounted to P 545.22 million in 2017.

Sarangani Energy

Phase 1 of the Project

Contracted Capacity
Contracting Party (in Mega Watts)
SOCOTECO II 70
Iligan Light and Power Inc. 15
Agusan del Norte Electric Cooperative 10
Agusan del Sur Electric Cooperative 10
105
Phase 2 of the Project

Contracted Capacity
Contracting Party (in Mega Watts)
South Cotabato Electric Cooperative II
Iligan Light and Power Inc.
Cagayan Electric Power and Light Company, Inc. 20
Davao Del Norte Electric Cooperative, Inc. 15
Davao del Sur Electric Cooperative 15
Cotabato Electric Cooperative Inc. 10
South Cotabato I Electric Cooperative 10
Zamboanga del Sur I Electric Cooperative Inc. 5
Zamboanga del Norte Electric Cooperative Inc. 5
80

Revenue from contracts with customers from PSAs amounted to P5,411.39 million and P4,727.51 million
in 2019 and 2018, respectively, while energy fees from PSAs amounted to P4,168.08 million in 2017.

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SRPI

In March 2013, SRPI entered into a PSA with ZAMCELCO for a period of 25 years from start of the SRPI’s
commercial operation. Contracted capacity for the related PSA was 85 MW. On September 15, 2014,
Energy Regulation Commission approved the above PSA. SRPI has not entered into any additional PSA in
2019 and 2018.

4. Loan Agreements

 On December 12 2012, Sarangani obtained a financing facility consisting of as syndicated term loan
in the aggregate principal amount of P9,300 million brokern down as follows: (1) Series 1 Loan in
the principal amount of up to P8,600 million for the construction of the Phase 1 100-MW coal-fired
power plant and its common or shared areas and facilities; and (2) Series 2 Loan in the principal
amount of up to P700 million for the construction of the transmission line. Sarangani should pay
interest semi-annually at the rate equal to the higher of (a) PDST-F benchmark bid yield for five
year-treasury securities plus 3.5% spread per annum, or (b) 7.5% floor rate, for the first five (5)-year
period commencing from the date of initial borrowing; and thereafter, to be adjusted based on the
higher of (a) interpolated PDST-R2 benchmark bid yield for eight and one-half (8 ½)-year treasury
securities plus 2.75% spread per annum, or (b) interest rate applicable on the initial borrowing.

 On July 15, 2013, MPC entered into a fixed interest rate long-term OLSA amounting to P900 million
from a local bank. The loan is payable in 11 semi-annual principal amortizations beginning
immediately at the end of August 16, 2014, the first year from loan draw down, up to August 16,
2019. Interest is computed as the sum of the spread and the applicable benchmark rate, based on
outstanding facility amount, and calculated on the basis of the actual number of days elapsed in a
year of 360 days. The fixed rate shall be subject to a floor rate of 6.25% per annum, excluding gross
receipt tax. The interest is payable every six months reckoned from August 16, 2013.

 On November 25, 2015, ACR entered entered into a fixed rate corporate notes facility with various
noteholders with aggregate principal amount of P7.5 billion divided into two (2) tranches: (a)
Tranche A with principal amount of P5.6 billion, subject to fixed interest rate of 7.24% and payable
within five (5) years from the drawdown date and (b) Tranche B with principal amount of P1.9
billion, subject to fixed interest rate of 7.92% and payable with seven (7) years from the drawdown
date. Proceeds of the loan shall be used to prepay ACR’s existing long-term debt and finance the
investments in power-related assets.

5. Registration with Zamboanga City Special Economic Zone Authority (ZAMBOECOZONE) and Kamanga
Agro-Industrial Economic Zone

On November 20, 2012, SRPI obtained the certificate of registration and tax exemption issued by
ZAMBOECOZONE. As a registered ZAMBOECOZONE enterprise, SRPI shall enjoy incentives and benefits
provided for in Republic Act (R.A.) 7903 Sections 4(e) and 4(f) and Sections 43-44, 57-59 and 62 of R.A.
7903 throughout the Lease Agreement with ZAMBOECOZONE.

On June 7, 2011, PEZA approved Sarangani’s registration as an Ecozone Utilities Enterprise inside
Kamanga Agro-Industrial Economic Zone located at Barangay Kamanga, Maasim, Sarangani Province. As
a power generation registered economic zone enterprises SRPI and Sarangani are entitled to the
following incentives:

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(a) Exemption from national and local taxes and in lieu thereof payment of a special tax rate of 5% on
gross income; and

(b) Tax and duty free importation of capital equipment, machineries and spare parts. VAT-zero rating on
local purchases subject to compliance with BIR and PEZA regulations/requirements.

6. Land Lease Agreement with ZAMBOECOZONE

On January 27, 2013, SRPI entered into a Land Lease Agreement with ZAMBOECOZONE for a period of
31 years from execution of the lease agreement. The leased properties consist of: (a) 300,000 sq.m. for
the Main Power Plant Area; and (b) 37,000 sq.m. for the Port Facility Area. Payment of monthly rental
will commence on October 1, 2013 and subject to fee escalation. On January 27, 2014, SRPI received
billing from ZAMBOECOZONE covering period October 1, 2013 to December 31, 2013. However, SRPI
requested for the deferment of the recognition of its rental obligations to ZAMBOECOZONE for the
three (3) months period ended December 31, 2013 pending resolution of the certain conditions
requisite for the start of rental payments. SRPI requested for revised billing to reflect the three-month
deferment of the full rental rates.

On April 2, 2014, ZAMBOECOZONE issued the revised billing to SRPI amounting to P10 million for the
period starting January 1, 2014 to March 2015. In response to the revised billing, SRPI wrote to
ZAMBOECOZONE on October 24, 2014 communicating that while the plant site was cleared of informal
settlers, the conflicting positions taken by the Department of Agrarian Reform and the Office of the
Government Corporate Counsel on land-use conversion made the use of the land for industrial purposes
uncertain. Despite the issue on land-use conversion, SRPI tendered payment of P10 million to show
good faith and willingness to continue with the contract.

7. Lease Committments

SPPC has a contract for the lease of land owned by Sarangani Agriculture Co., Inc. until May 2026. The
lease contract provides for annual rent of P1 million and shall be paid in three lump-sum payment in
years 2016, 2019 and 2022. The lease contract was accounted for on a straight-line method over the
term of the lease.

8. Marketing Agreements

ALC and SLRDI have a Marketing Agreement with Fil-Estate Group of Companies (FEGC) for the latter to
market and sell the individual lots at Eagle Ridge. FEGC is entitled to a marketing commission of 12% of
the sales contract price.

9. Engineering, Procurement and Construction Contract (EPC)

On March 30, 2011, Sarangani entered into EPC contract with the consortium of Daelim Industrial Co.
Ltd, a company incorporated in Korea, and Daelim Philippines Incorporated, a company incorporated in
the Philippines (“Contractor”). Under the terms of the contract, the Contractor shall perform any and all
services and provide any and all equipment and construction equipment necessary to perform the work
in accordance with the EPC contract on a fixed-price, turnkey basis and shall deliver a fully operational
power plant facility (SM 200). On December 29, 2011 and May 24, 2012, Amendments 1 and 2 to the

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EPC, respectively, were signed, revising certain portions of the EPC. Construction of Phase 1 of the
SM200 commenced in January 2013 and was completed in April 2016.

On July 6, 2016, Sarangani entered into EPC contract with JGC Corporation, a company incorporated in
Japan, and JGC Philippines, Inc., a company incorporated in the Philippines (“JGC”). Under the terms of
the contract, JGC shall install the second 105 MW unit and associated auxiliaries in accordance with
Sarangani’s requirements. On October 14, 2016, the formal Notice to Proceed was issued to JGC. The
construction of Phase 2 (105 MW) commenced in January 2017 and was completed in October 2019

10. Joint Venture Agreements

ALC has a Joint Venture Agreement with SLRDI for the development of ALC’s parcels of land at General
Trias, Cavite into a commercial and residential subdivision with golf courses, known as the Eagle Ridge
Golf and Residential Estates (Eagle Ridge). The entire development shall be undertaken by SLRDI which
shall receive 60% of the total sales proceeds of the lots of the subdivision, both commercial and
residential, and of the golf shares. The remaining balance of 40% shall be for ALC. ALC’s 40% share in the
proceeds and in the cost of the lots sold is shown as part of “Sales of real estate” and “Cost of real estate
sold” accounts, respectively, in the consolidated statements of income. ALC’s share in the unsold lots is
included under “Real estate inventories” account in the consolidated statements of financial position.

In 2006, ALC entered a joint venture agreement with Sunfields Realty Development Inc., the developer,
for the development of ALC’s parcels of land at Lipa and Malvar, Batangas into residential house and lots,
called as the Campo Verde Subdivision. The entire development costs were shouldered by the developer.
In return to their respective contributions to the project, the parties have agreed to assign a number of
units of residential house and lots proportionate to their respective contributions computed as specified
in the Memorandum of Agreement. The developer was assigned as the exclusive marketing agent and
receives 10% of the total contract price, net of value-added tax and discounts, as marketing fee. Sales
and cost of lots sold allocated to ALC are shown as part of “Real estate sales” and “Cost of real estate
sales” accounts, respectively, in the consolidated statements of income.

On March 21, 2013, Aldevinco and ACIL (collectively referred as “AG”) and Ayala Land, Inc. (ALI) entered
into a joint venture agreement, where ALI shall own 60% and AG shall own 40% of the outstanding
capital stock of the Joint Venture Corporation (JVC), Aviana. On September 17, 2013, Aviana was
incorporated as the JVC. ACR has subscribed to 296 preferred shares and 32 common shares for 34%
ownership in Aviana.

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REGULATORY & ENVIRONMENTAL MATTERS
a. Electric Power Industry Reform Act (EPIRA)

Republic Act No. 9136, the EPIRA of 2001, and the covering Implementing Rules and Regulations (IRR)
provide for the significant changes in the power sector which include among others:

i. The unbundling of the generation, transmission, distribution and supply and other
disposable assets, including its contracts with IPP and electricity rates;
ii. Creation of a Wholesale Electricity Spot Market within one year; and
iii. Open and non-discriminatory access to transmission and distribution systems.

The law also requires public listing of not less than 15% of common shares of generatio and distribution
companies within 5 years from the effectivity of the EPIRA. It provides cross ownership restrictions
between transmission and generation companies and between transmission and distribution companies,
and a capof 50% of its demand that a distribution utility is allowed to source from an associated company
engaged in generation except for contracts entered into prior to the effcetivity of EPIRA.

There are also certain sections of the EPIRA, specifically relating to generation companies, which provide
for a cap on the concentration of ownership to only 30% of the installed capacity of the grid and/or 25% of
the national installed generating capacity. Based on the assessment of management, the operating
subsidiarieshave complied, with the applicable provisions of the EPIRA and its IRR.

Based on the assessment of management, the operating subsidiaries have complied with the applicable
provisions of the EPIRA and its IRR.

b. Clean Air Act

The Clean Air Act and the related IRR contain provisions that have an impact on the industry as a whole
and on the Group in particular, that needs to be complied with. Based on the assessment made on the
power plant’s existing facilities, management believes that the operating subsidiaries comply with the
applicable provisions of the Clean Air Act and the related IRR.

c. Securities and Exchange Commission

Under the SRC, the SEC has jurisdiction and supervision over all corporations, partnerships or
associations that are grantees of primary franchises, license to do business or other secondary licenses.
As the government agency regulating the Philippine securities market, the SEC issues regulations on the
registration and regulation of securities exchanges, the securities market, securities trading, the
licensing of securities brokers and dealers and reportorial requirements for publicly listed companies
and the proper application of SRC provisions, as well as the Corporation Code, and certain other
statutes.

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GENERAL CORPORATE INFORMATION
INCORPORATION

The Company is duly organized as a corporation under the laws of the Philippines and was registered
with the SEC on December 24, 1974.

ARTICLES OF INCORPORATION AND BY-LAWS

The Articles of Incorporation of the Company were approved by the SEC on December 24, 1974. The
latest amended Articles were approved by the SEC on August 11, 2014.

The By-Laws of the Company were registered with the SEC on December 24, 1974 and were amended
on July 16, 2004.

PRIMARY PURPOSE

To acquire by purchase, exchange, assignment, gift or otherwise, and to hold, own and use for
investment or otherwise, and to sell, assign, transfer, exchange, lease, let, develop, mortgage, pledge,
traffic, deal in, and with, and otherwise to operate, manage, enjoy and dispose of, any and all properties
of every kind and description and whatever situated, as and to the extent permitted by the law,
including but not limited to, buildings, tenements, warehouses, factories, edifices and structures and
other improvements, and bonds, debentures, promissory notes, shares of capital stock, or other
securities or obligations, created, negotiated or issued by any corporation, association, or other entity,
foreign or domestic and while the owner, holder or possessor thereof, to exercise all the rights, powers
and privileges of ownership or any other interest therein, including the right to receive, collect and
dispose of, any and all rentals, dividends, interests and income, derived therefrom, and the right to vote
on any proprietary or other interest, on any shares of the capital stock, and upon any bonds,
debentures, or other securities having voting power, owned or held; and provided that it shall not
engage in the business of an open-end or close-end investment company as defined in the Investment
Company Act (Republic Act No. 2629)

CORPORATE TERM

The Company has perpetual existence pursuant to the Corporation Code. Section 11 of the Corporation
Code grants corporations perpetual existence unless its articles of incorporation provides otherwise.
Corporations established prior to the effectivity of the Corporation Code shall have perpetual existence
unless the shareholders owning and/or representing at least a majority of the outstanding capital stock
notifies the SEC that it elects to retain its corporate term pursuant to its articles of incorporation. The
Company has not made such election to retain its corporate term indicated in its Articles of
Incorporation.

FISCAL YEAR

The business year of the Company begins on the first day of January and ends on the last day of
December of each year.

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APPROVALS

The issuance and sale of the CPs were duly authorized by the Board of Directors of the Company on
October 13, 2016.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the Articles of Incorporation and By-laws are available for inspection at the principal office of
the Company, during normal business hours on any day on which such office is open for business. Copies
may also be inspected at the office of the SEC.

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PHILIPPINE TAXATION
Following is a general description of certain Philippine tax aspects of investment by prospective CP
Holders. This discussion is based upon Philippine tax laws, in particular the Tax Code, its implementing
regulations and rulings in effect at the date of this Prospectus. Subsequent legislative, judicial or
administrative changes or interpretations may be retroactive and could affect the tax consequences to
the prospective CP Holders.

The tax treatment of a prospective CP Holder may vary depending on such CP Holder’s particular
situation and certain prospective CP Holders may be subject to special rules not discussed below. This
summary does not purport to address all tax aspects that may be important to a prospective CP Holder.

This general description does not purport to be a comprehensive description of the Philippine tax aspects
of investment in the CPs and no information is provided regarding the tax aspects of acquiring, owning,
holding or disposing the CPs under applicable tax laws of other jurisdictions and the specific tax
consequence in light of particular situations of acquiring, owning, holding and disposing the CPs in such
other jurisdictions.

EACH PROSPECTIVE CP HOLDER SHOULD CONSULT WITH HIS OWN TAX ADVISER AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH CP HOLDER OF PURCHASING, OWNING AND DISPOSING
OF THE CPs, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL AND NATIONAL TAX
LAWS.

As used in this section, the term “resident alien” refers to an individual whose residence is within the
Philippines but who is not a citizen of the Philippines; a “non-resident alien” is an individual whose
residence is not within the Philippines and who is not a citizen of the Philippines; a non-resident alien
who is actually within the Philippines for an aggregate period of more than 180 days during any calendar
year is considered a “non-resident alien doing business in the Philippines”; otherwise, such non-resident
alien who is actually within the Philippines for an aggregate period of 180 days or less during any
calendar year is considered a “non-resident alien not doing business in the Philippines.” A “resident
foreign corporation” is a foreign corporation engaged in trade or business within the Philippines; and a
“non-resident foreign corporation” is a foreign corporation not engaged in trade or business within the
Philippines. The term “foreign” when applied to a corporation means a corporation which is not
domestic while the term “domestic” when applied to a corporation means a corporation created or
organized in the Philippines or under its laws.

Taxation of Interest Income/Discount

The CPs will be, under current interpretation of the Tax Code, treated as, a deposit substitute
instrument as such term is defined under the Tax Code. Interest income earned or yield or any other
monetary benefit from the CPs realized by the CP Holders shall be taxed as described in the following
sections.

Interest income/Discount earned by individuals

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As a general rule, interest income earned or yield or any other monetary benefit from the CPs realized
by individual citizens of the Philippines, resident aliens and non-resident aliens engaged in trade or
business in the Philippines is subject to a final withholding tax at the rate of 20%.

Transfers or assignments of the CPs by the CP Holders are subject to a final tax on the interest income
already earned by the transferor CP Holder which shall be borne by the CP Holder.

Interest income received by non-resident aliens not engaged in trade or business in the Philippines shall
generally be subject to a final withholding tax of 25%. However, such tax rate may be reduced under an
applicable tax treaty.

Interest income/Discount earned by corporations

Interest income earned or yield or any other monetary benefit derived by domestic and resident foreign
corporations from the CPs shall be subject to a final withholding tax of 20% of such interest income.

On the other hand, interest income received by a non-resident foreign corporation shall be subject to
30% final withholding tax. This rate may also be reduced under an applicable tax treaty.

Interest income/Discount earned by trusts

A trust is generally taxed in the same way as an individual pursuant to the Tax Code which provides that
the tax imposed upon individuals shall apply to the income of any kind of property held in trust (except
qualifying employee’s trust considered tax-exempt). Accordingly, since trusts are, for tax purposes,
treated as an individual, interest income earned by trusts are likewise subject to the 20% final
withholding tax.

Tax-exempt persons

All sums payable by the Issuer to tax-exempt persons shall be paid in full without deductions for taxes,
duties, assessments, or government charges, subject to the submission to the Registrar by the CP Holder
claiming the exemption of reasonable evidence of such exemption.

DOCUMENTARY STAMP TAXES

The Tax Code imposes a documentary stamp tax on all debentures, certificates of indebtedness, due
bills, bonds, loan agreements, deposit substitute debt instruments at the rate of P1.50 on every P200, or
fractional part thereof, of the face value of such securities; Provided, that for such debt instruments
with terms of less than one (1) year, the documentary stamp tax to be collected shall be of a
proportional amount in accordance with the ratio of its term in number of days to three hundred sixty-
five (365) days. The Company has undertaken to pay the documentary stamp tax on the issuance of the
CPs.

VALUE-ADDED TAX AND GROSS RECEIPTS TAX

At issuance, no VAT shall be imposable upon the CPs. Subsequent transfers shall similarly be free of VAT,
unless the CP Holder is a dealer in securities. In that instance, the CP Holder shall be liable to pay 12%
VAT on the gross income derived from the trading of the CPs.

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Under Republic Act No. 9238, services rendered in the Philippines by, among others, banks, non-bank
financial intermediaries, quasi-banks, finance companies, and other financial intermediaries not
performing quasi-banking functions (excluding insurance companies) are exempted from the coverage
of the VAT. The exemption, which took effect retroactively on 1 January 2004, reverts to the application
of the GRT regime on services rendered by banks, non-bank financial intermediaries, quasi-banks,
finance companies, and other financial intermediaries not performing quasi-banking functions
(excluding insurance companies). Rates of GRT shall be as follows:

(1) Banks and Non-Bank Financial Intermediaries Performing Quasi-Banking Functions:

(a) On interest, commission and discounts from lending activities as well as income from financial
leasing, on the basis of the remaining maturities of instruments from which such receipts are
derived:
Maturity period is five years or less – 5%
Maturity period is more than five years – 1%
(b) On dividends and equity shares in net income of subsidiaries – 0%
(c) On royalties, rentals of real or personal property, profits from exchange and all other items
treated as gross income under the Tax Code – 7%
(d) On net trading gains within the taxable year on foreign currency, debt securities, derivatives
and other similar financial instruments – 7%

(2) Other Non-Bank Financial Intermediaries:

(a) On interest, commission, discounts and all other items treated as gross income under the Tax
Code – 5%
(b) On interest, commission and discounts from lending activities as well as income from financial
leasing, on the basis of the remaining maturities of instruments from which such receipts are
derived:
Maturity period is five years or less – 5%
Maturity period is more than five years – 1%

ESTATE AND DONOR’S TAX

The transfer of the CPs by a decedent to his heirs, whether or not such decedent was residing in the
Philippines, will be subject to an estate tax which is levied on the net estate of the deceased at a rate of
six percent (6%).

CP Holders, whether or not citizens or residents of the Philippines, will be subject to donor’s tax upon
the donation of the CPs to any person at a rate of 6% computed on the basis of the total gifts in excess
of Php 250,000 per year.

The estate tax, as well as the donor’s tax in respect of the CPs, shall not be collected if: (a) the deceased
at the time of his death or donation was a citizen and resident of a foreign country which, at the time of
his death or donation, did not impose a transfer tax of any character in respect of intangible personal
property of citizens of the Philippines not residing in that foreign country; or (b) the laws of the foreign
country of which the deceased or the donor was a citizen and resident at the time of his death or
donation allows a similar exemption from transfer or death taxes of every character or description in

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respect of intangible personal property owned by citizens of the Philippines not residing in that foreign
country.

TAXATION OUTSIDE THE PHILIPPINES

The tax treatment of non-resident CP Holders in jurisdictions outside the Philippines may vary
depending on the tax laws applicable to such holder by reason of domicile or business activities and
such holder’s particular situation. This Prospectus does not discuss the tax considerations on such non-
resident holders under laws other than those of the Philippines.

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