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16 APR 26 P4 :40 REPUBLIC OF THE

ENERGY REGULATORY COMMISSJtJNDnv: —. — SAN MIGUEL AVENUE, PASIG CITY

IN THE MAflER OF THE APPLICATION FOR THE APPROVAL OF THE RENEWABLE ENERGY SUPPLY AGREEMENT BETWEEN I ELECTRIC COOPERATIVE, INC. (ZAMSURECO I) AND ASTRONERGY DEVELOPMENT , INC. (ASTRONERGY), WITH PRAYER FOR THE ISSUANCE OF PROVISIONAL AUTHORITY,

ERC Case No. 2016- 0-c'2RC

ZAMBOANGA DEL SUR I ELECTRIC COOPERATIVE, INC. (ZAMSURECO I) AND ASTRONERGY DEVELOPMENT PAGADIAN INC. (ASTRONERGY), Applicants.

APPLICATION WITH MOTION FOR CONFIDENTIAL TREATMENT OF INFORMATION AND PRAYER FOR ISSUANCE OF PROVISIONAL AUTHORITY

Joint Applicants, ZAMBOANGA DEL SUR I ELECTRIC COOPERATIVE, INC. (ZAMSURECO I) and ASTRONERGY DEVELOPMENT PAGADIAN INC. (ASTRONERGY) through counsel, unto this Honorable Commission1 respectfully allege, that:

ljPage THE APPLICANTS

1. ZAMSURECO I is a non-stock, non-profit electric cooperative, organized and existing by virtue of Presidential Decree No. 269, as amended, with principal office at Gov. Vicente M. Cerilles St., Pagadian City, Zamboanga del Sur. It is engaged in the distribution of electric light and power within its service area which covers the City of Pagadian and certain municipalities of the province of Zamboanga Del Sin, namely: Aurora, , Dinas, , ,,1Labangan, , , , , Molave, R. Magsaysay, San Miguel, San Pablo, ,, Tigbao, 2Tukuran, (formerly Don Mariano Marcos), 3Pitogo, Josefina and Vincenzo Sagun, and the municipality of Don Victoriano in the province of Misamis Occidental4 . Copies of ZAMSURECO I's Articles of Incorporation and By-Laws, Certificate of Franchise, NEA Certificate of Registration and latest Audited Financial Statements are attached hereto and made integral parts hereof as Annexes "A", "B", "C", "D" and "E", respectively.

2. ASTRONERGY is a renewable energy generation company duly organized and existing under the laws of the Republic of the Philippines with principal address at Unit 201 Midway Court Building, Brgy. WackWack, Greenhills 241 EDSA, Mandaluyong City. Copies of Astronergy's Certificate of Incorporation, Articles of Incorporation, latest General Information Sheet and latest unaudited Financial Statements are attached hereto and made integral parts hereof as Annexes "F", "G", "H", and "I", respectively.

Copies of the pertinent Board Resolutions authorizing the filing of the Application are attached hereto and made integral parts hereof as Annexes "J" and "K".

1 Under Republic Act 7159, Barangays Guipos, Katipunan, BagongOroquieta, and Dalapang, all in the Municipality of San Miguel; Barangays Datagan, Dagohoy, Balongating, Baguitan, Magting, Sikatuna, Dacsol, Guling, and Canunan, all in the Municipality of Dumalinao; Barangays Lintum, Singclot and Litan, all in the Municipality of Dinas; and Regla in the Municipality of San Pablo, were separated from their respective municipalities and constituted into a distinct and independent Municipality of Guipos. 2 Under Republic Act 7162, Barangays Tigbao, New Tuboran, Nangan- Nangan, Lacarayan, Upper Nib, Nib, Lacupayan, Diana Countryside, Busol, Maragang, Umas, Guinlin, Libayoy, Timolan, Mate, Begong, Caluma, and Longmot, all in the Municipality of Dumalinao, Province of Zamboanga del Sur were separated from the said municipality and constituted into a district and independent Munidpay of ligbao. Repub1ic Act 6684. 4 Republic Act 6845.

-- 2 IPage 3. ZAMSURECO I and ASTRONERGY may be served orders and other processes through the undersigned counsel/representatives.

NATURE OF THE APPLICATION

4. The Application is filed pursuant to Rule 20(B) of the Energy Regulatory Coniniission's Rules of Practice and Procedure ("ERC Rules"), and other pertinent rules and regulations, for the Honorable Conmsion's approval of the Renewable Energy Supply Agreement (RESA), executed by and between ZAMSURECO I and ASTRONERGY. Copy of the RESA is attached hereto and made integral part hereof as Annex "L". I COMPLIANCE WITH PRE-FILING REQUIREMENTS

5. ZAMSURECO I and ASTRONERGY furnished the concerned legislative bodies of the local government units where they principally operate with copy of the Application together with all the annexes and accompanying documents. Copies of the proof of service to the Sanggtmiang Panlungsod of the Cities of Pagadian and Mandaluyong and the Sangguniang Panlalawigan of the Province of Zamboanga del Sur are hereto attached and made integral parts hereof as Annexes "M", "N" and "0, respectively.

6. ZAMSURECO I caused the publication of the instant Application in its entirety with the exception of Annexes, in a newspaper of general circulation within its franchise area. Copies of the corresponding Affidavit of Publication and the newspaper are attached as Annexes "P" and "P-i", respectively.

STATEMENT OF THE FACTS

7. At present, ZAMSURECO I sources the majority of its power requirements from the Power Sector Assets and Liabilities Management Corporation (PSALM) under a contract for the Supply of Electric Energy (CSEE) which will expire on December 2016. The remainder of its power requirements is sourced from Therma South Inc., Therma Marine Inc. and Mapalad Power Corp.

3j P a g e 8. It is uncertain whether PSALM still has the capacity to supply power requirements beyond December 2016 as PSALM is in the process of privatizing its generation assets in Mindanao. In fact the contracted capacity under the current CSEE of ZAMSURECO I and PSALM is already a reduced capacity in view of the existence of a region-wide power supply deficiency problem in Mindanao.

9. The reduced capacity has already resulted in daily rotating brown-outs in the franchise area of ZAMSURECO I at an average of three (3) hours per day.

10. Further, the energy requirements of ZAMSURECO I customers is projected to increase in the next few years as demonstrated by ZAMSURECO I Distribution Development Plan, Supply-Demand Outlook and Forecasted Demand, copies of which are attached hereto and made integral parts hereof as Annexes "Q"R" and "S", respectively.

11. In order to ensure sufficient power supply to the ZAMSURECO I service area, the power requirements of the cooperative should be adequately covered by supply contracts.

12. Sometime in the year 2014, ASTRONERGY, offered to supply power to ZAMSURECO I, to partly address the latter's power supply deficiency.

. 13. ZAMSURECO I decided to contract with ASTRONERGY because of its commitment to deliver power within a short time from approval by the Energy Regulatory Conmiission. The short construction period of less than a year will provide immediate relief to the power deficiency problems of ZAMSURECO I. In addition, the energy price for power delivered under the RESA is fixed at an agreed rate for the entire contract period which will help insulate ZAMSURECO I from any external factors that may cause price hikes in the future.

14. Furthermore, the power offered by ASTRONERGY is appropriate to ZAMSURECO Is daytime power requirement based on the ZAMSURECO I average daily load profile for the past twelve months prior to the filing of this application and ASTRONERGY's generation curve. Copies of ZAMSURECO I historical and projected Average Daily Load Curve and ASTRONERGY's Solar Plant Load Curve are attached hereto and made integral parts hereof as Annexes "T" and 'lull, respectively.

41 P a g e 15. More importantly, ASTRONERGY agreed to be an embedded generator. The delivery of power from its plant provides benefits in terms of support for ZAMSURECO I distribution system and savings in purchased power since there are no transmission charges and systems losses.

16. Finally, ZAMSURECO Is utilization of a renewable energy source like ASTRONERGY's solar power is in support of government policy promoting the use of renewable energy so as to reduce the emission of pollutants.

17. ZAMSURECO I and ASTRONERGY executed a RESA on 28 July 2015. Details on the procurement process undertaken by ZAMSURECO I which led to the selection of ASTRONERGY (as stated in the Affidavit of the ZAMSURECO I General Manager) is attached hereto as Annex "V". Likewise, the ZAMSURECO I Board Resolution authorizing the execution of the RESA with ASTRONERGY is attached hereto and made an integral part hereof as Annex "W".

THE RENEWABLE ENERGY SUPPLY AGREEMENT AND THE MEMORANDUM OF AGREEMENT MATERIAL PROVISIONS AND OTHER RELEVANT INFORMATION

. 18. Project Description. In order to supply power to ZAMSURECO I under the RESA, ASTRONERGY shall construct, own, operate, manage and maintain ASTRONERGY's Pagadian Solar Project (PSP) located at Barangay Banale, Pagadian City. Copies of the Department of Energy Solar Service Contract Application and Department of Environment and Natural Resources Environmental Compliance Certificate (ECC) and the filed application for Board of Investment Certificate of Registration, covering the PSP are attached hereto and made integral parts hereof as Annexes "X", "1" and "Z", respectively.

19. The PSP will be designed and constructed using polycrystalline photovoltaic modules connected to a 1MW inverter. All inverters on each site will be combined through a single on-site substation, before interconnecting to the ZAMSURECO I grid. Copies of the PSP Plant Description and Astronergy Limited Warranty for Crystalline PV Module are attached hereto and made integral parts hereof as Annexes "AA" and "BB", respectively.

5j P a g e

20. The commercial operation date of PSP is estimated to be within six (6) months from the date of receipt of the approval of the Application for Provisional Authority by the Energy Regulatory Commission.

21. Salient Features of the RESA.

21.1. Product. The capacity to be delivered and sold by ASTRONERGY and received and purchased by ZAMSURECO I under the RESA is "As-Available Energy", produced by the PSP (net of station service). 5 The capacity provided under the RESA shall be supplied from PSP only. 6

21.2. Delivery Term. The RESA shall remain in force and effect for a period of twenty-five (25) years counted from the Is Commercial Operation Date. 7

21.3. Contract Capacity and Energy. The contract capacity is ten megawatts (10MW) for the subject solar plant. Contract energy8 is the quantity of energy in megawatt-hours which ASTRONERGY expects to deliver to ZAMSURECO I to wit: 21.3.1. Contract Year 1 to 2 The maximum Contract Energy to be delivered by ASTRONERGY to the ZAMSURECO i is equivalent to 13,250 Megawatt-hours, and the Minimum Energy is equivalent to 10,950 Megawatt-hours. 9

21.3.2. Contract Year 3 to 25,

The maximum Contract Energy to be delivered by ASTRONERGY to ZAMSURECO I is equivalent to 18,250 Megawatt-hours, and the Minimum Energy is equivalent to 8,212.50 Megawatt-hours.'°

21.4. Delivery Point. The Delivery Point shall be at the ZAMSURECO I Substations.'1

Articfe 3.1 (a) RESA 6 Article 3.1 (g) RESA 1 Article 3.1 (c) RESA. The numbers as stated in the RESA were inverted due to a typographical error. Article 3.1 (e) (1) RESA. '° Article 3.1(e) (2) RESA. ' Article 3.1(d) RESA.

6j P a g e

21.5. Energy Payment. The price for each MWh of delivered energy throughout the twenty (25) contract years shall be Php 8,690/MWE.12 For each month, ZAMSURECO I shall pay ASTRONERGY an amount equal to the sum of each and every megawatt-hour (MWh) of product delivered to buyer during such month, multiplied by the Energy Price per MWh. 13

21.6. Transmission. ASTRONERGY shall be responsible for the cost of developing and constructing the project substation and interconnecting the PSP to the nearest distribution line of ZAMSURECO J•14 Ownership and operation of the generation tie line belongs to ASTRONERGY.15

RATE IMPACT I 22. In order to determine the impact of the implementation of the RESA on ZAMSURECO Is blended generation costs, an analysis using its bffling data was conducted taking into consideration its forecasted power requirements and the expected supply from its contracted suppliers.

23. First, ZAMSURECO simply considered two scenarios: one without supply from ASTRONERGY and another with ASTRONERGY supply. A copy of the Rate Impact Analysis is hereto attached and made integral part hereof as Annex "CC".

24. The results of the simple analysis are summarized as follows:

Blended Generation Cost Increase in Blended Generation Cost Without Astronergy Plant Php 0.7785 With Astronergy Plant Php 0.9993

12 Article 4.1 (a) RESA. 13 Article 4.1(b) RESA. 14 Article 3.2 (a) RESA.

15 Ibid. 71 P a g e ALLEGATIONS IN SUPPORT OF THE PRAYER FOR PROVISIONAL AUTHORITY

Joint Applicants ASTRONERGY and ZAMSURECO I replead the foregoing allegations and further state that:

25. ZAMSUIRECO I has an urgent and pressing need for an additional generating capacity as its franchise area has been experiencing rotating brownouts at an average of three (3) hours per day.

26. Such predicament will be partly addressed by the power supplied under the RESA between ZAMSURECO I and ASTRONERGY.

27. To expedite the implementation of the RESA, a provisional authority is respectfully prayed for, considering that it is necessary for financial closing. Once financial closing is completed, it is estimated that ASTRONERGY will be able to supply power to ZAMSURECO I after eight (8) months.

28. Affidavits of Merit in support of the prayer for the provisional authority are attached hereto and made integral parts hereof as Annexes "DD" and "DD-l".

29. Public interest as well as the declared government policy encouraging the development and utilization of renewable energy resources therefore compels the immediate issuance of a provisional authority subject to the final authority that may be subsequently issued by the Honorable Commission.

ALLEGATIONS IN SUPPORT OF MOTION FOR CONFIDENTIAL TREATMENT OF INFORMATION

30. Under Rule 4 of the ERC Rules, the Honorable Commission may, upon request of a party and determination of the existence of conditions which would warrant such remedy, treat certain information submitted to it as confidential.

31. In further support of the instant Application, ASTRONERGY and ZAMSURECO I are submitting the following documents pursuant to the aforementioned rule:

1 P a g e Description of Document Annex Grid Connected System: Simulation Parameters EE for PSP 1OMWp

Astronergy's Financial Model and Notes FF

Astronergy's Unlevered Cash Flow Model GG

Astronergy's Levered Cash Flow Model HH

Astronergy's Itemized Development and II Construction Cost Schedule

Astronergy's Mnual Operations & JJ I Maintenance Cost Schedule 32. These documents contain certain non-public information, data and projections involving business operations and financial trade secrets reflecting ASTRONERGY's investment and business calculations.

33. Under Article 13.1(a) of the RESA, as parties to the contract, ZAMSURECO I and ASTRONERGY undertook to ensure that non-public terms or conditions of the RESA or any transaction under the RESA, shall not be disclosed to a third party, except under C the circumstances mentioned under the said provision. 16

34. ZAMSURECO I and ASTRONERGY respectfully move that Annexes "LE", "FE", "GG", "liii", "II" and "J}" not be disclosed and be treated as confidential documents in accordance with Rule 4 of the ERC Rules.

16 Article 13.1 (Confidentiality) (a) General. Neither party shall disclose the non-public terms or conditions of this Agreement or any transaction hereunder to a third party, other than (i) the Party's affiliates and its and their officers, directors, employees, lenders, counsel, accountants or advisors who have a need to know such information and have agreed to keep such terms confidential, (ii) for disclosure to the Buyer's Procurement Review Group, subject to a confidentiality agreement, (iii) to the ERC under seal for purposes of review, (iv) disclosure of terms specified in and pursuant to Section 13.1(b) of this Agreement, (v) in order to comply with any applicable law, regulation or exchange, control area rule, or order issued by a court or entity with competent jurisdiction over the disclosing party ("Disclosing Party"). In connection with requests made pursuant to clause (v) of this section 13.1 (a) ("Disclosure Order") each party shall, to the extent practicable, use reasonable efforts to prevent or limit such disclosure. After using such reasonable efforts, the Disclosing party shall not be: (i) prohibited from complying with a disclosure order or (ii) liable to the other party for monetary or other damages incurred in connection with the disclosure of the confidential information. Except as provided in the preceding sentence, the Parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with, this confidentiality obligation.

9j P a g e 35. ZAMSURECO I and ASTRONERGY hereby submit one (1) copy of Annexes "EE", "FF", "GG", "HH", "II" and "JJ" in a sealed envelope, with the envelope and each page of the document stamped with the word "Confidential."

ADDITIONAL SUBMISSION 36. In further support of the instant application, applicants are submitting herewith an Alternative Demand Side Management (DSM) program to be implemented by ZAMSURECO I if accepted by the Honorable Commission, attached hereto and made integral part as Annex "KK".

PRAYER

WHEREFORE, in view of all the foregoing, it is most • respectfully prayed of this Honorable Commission that:

(1.) Upon filing of the instant Application and pending hearing thereon, an Order be issued:

(a) Granting PROVISIONAL AUTHORITY for the immediate implementation of the provisions of the Renewable Energy Supply Agreement executed on 28 July 2015. a (b) Treating Annexes "EE", "FF", "GG", "HH", "II" and W "JJ" and the information contained therein as CONFIDENTIAL, directing their non-disclosure pursuant to Rule 4 of the ERC Rules, and prescribing the guidelines for the protection thereof.

(2.) After hearing on the merits, a Decision be rendered issuing a PERMANENT APPROVAL of the Renewable Energy Supply Agreement executed on 28 July 2015.

Other reliefs just and equitable are likewise prayed for.

Pasig City, 5th April 2016.

10 1 P a g e DECHAVEZ & EVANGELISTA LAW OFFICES Counsel for Zamboanga del Sur I Electric Cooperative, Inc. (ZAMSURECO I) Units 1609-1610, Tycoon Centre Pearl Drive, Ortigas Center, Pasig City 1605 Tel. Nos. 9101587; 6619357 E-mail: poweriawfirm@gniail .com

JOSEPH ;E' ?tt?D M. DECHAVEZ Roll of Attorneys No. 38015 FIR No. 1423111 January 20, 2016 Pasig IBP Lifetime Member No. 049680 RSM MCLE Compliance V Cert. No. 0005240, valid until April 14, 2019

111 P a g e DENNIS R.V. EALA President - Astronergy Development Pagadian, Inc. Unit 902-903 One World Place, 32nd St., Bonifacio Global City, Taguig Tel. No. 834-2036 E-mail: [email protected]

[1

1 P a g e VERIFICATION & CERTIFICATION OF NON-FORUM SHOPPING

I, JOSE RAUL A. SANIEL, of legal age, Filipino and with office address at ZAMSURECO I Central Office, Coy. Vicente M. Cerilles St., Pagadiai-i City, after being sworn to according to law, depose and state that:

1. I am the General Manager/Chief Executive Officer of Zamboanga del Sur I Electric Cooperative, Inc. (ZAMSUIRECO I) and I have been duly authorized to represent ZAMSURECO I in the instant application.

2. As the duly authorized officer of ZAMSURECO I, I caused the preparation and filing of the foregoing Application; I have read the allegations contained therein, and certify that the same are true and correct based on my personal knowledge and on authentic records in the possession of ZAMSURECO I.

3. ZAMSURECO I. has not heretofore commenced any other action or proceedings involving the same issues and parties before any court, tribunal or quasi-judicial agency; to the best of my knowledge no such action or proceeding is pending, and if I should learn that the same or similar action or proceeding has been filed or is pending, I undertake to report such fact to this Honorable Commission, within five (5) days therefrom.

.: IN WITNESS WHEREOF, I have hereunto set my hand in Pagadian City, this --L day of April 2016.

A. SANIEL

SUBSCRIBED AND SWORN to be'kre md in Pagadian City, this B day of April 2016, by the affiant who exhibited to me his Tax Identification Number (TIN) 124-301-148. /

Doc No. 2R. 1/3 ; lii 7 Page No. 15 9 15 No. VI/4/166 Book No. 1 Roll of Att l'agadian City el Star Series of 2016. McLE Compi. N 7/27/15

VERIFICATION & CERTIFICATION OF NON-FORUM SHOPPING

L DENNIS R.V. EALA, of legal age, Filipino and with office address at Unit 201 2/F Midway Court Building, 241 EDSA, Mandaluyong City, after being sworn to according to law, depose and state that:

1.1 am the President of Astronergy Development Pagadian Inc. and I have been duly authorized to represent by the company in the instant application.

2. As the duly authorized officer of Astronergy Development Pagadian Inc., I caused the preparation and filing of the foregoing Application; I have read the allegations contained therein, and certify that the same are true and correct based on my personal knowledge and on authentic records in the possession of Astronergy Development Pagadian S Inc.

3. Astronergy Development Pagadian Inc. has not heretofore commenced any other action or proceedings involving the same issues and parties before any court, tribunal or quasi-judicial agency; to the best of my knowledge no such action or proceeding is pending, and if I should learn that the same or similar action or proceeding has been filed or is pending, I undertake to report such fact to this Honorable Commission, within five (5) days therefrom.

IN WiTNESS WHEREOF, I have hereunto set my hand in City, this - da$ April 2016.

DENNIS R.V. EALA

SUBSCRIBED AND SWORN to before me in ______this _dtof April 2016, by the affiant who exhibited to me his __ . lag/IA Am. vrncJtPM.'BATM DocNo. 24t NOTARY PUILIt*QR MAKA11 CITY Page No.____ 32.. 2016 Book No. 429 Series of 2016. iapo. 166jC62, tPTR No.