4 . a LY'fl&t -.?3 Qcczr r Republic of the Philippines ENERGY REGULATORY COMMISSIOF* ENE 27 P3:45 San Miguel Avenue, Pasig City RECEtVCOR IN THE MATTER OF THE JOINT APPLICATION FOR APPROVAL OF THE POWER SUPPLY CONTRACT (PSC) ENTERED INTO BY AND BETWEEN FIRST LAGUNA ELECTRIC COOPERATIVE, INC. (FLECO) AND LIMAY PREMIERE POWER CORPORATION (LPPC), WITH PRAYER FOR CONFIDENTIAL TREATMENT OF INFORMATION 1O/7 -0o7 ERC CASE NO. gon- RC FIRST LAGUNA ELECTRIC COOPERATIVE, INC. (FLECO) AND LIMAY PREMIERE POWER . CORPORATION (LPPC), Applicants. x----------------------x JOINT APPLICATION WITH PRAYER FOR CONFIDENTIAL TREATMENT OF INFORMATION The Joint Applicants First Laguna Electric Cooperative, Incorporated (FLECO) and Limay Premiere Power Corporation (LPPC), through their respective undersigned counsels and unto the Honorable Commission, most respectfully state, that: Joint Application (FLECO and LPPC) Paqe2of23 The Joint Applicants FLECO is an electric cooperative duly registered and existing under and by virtue of the laws of the Republic of the Philippines, with principal office address at Barangay Lewin, Lumban, Laguna. It holds a franchise to operate light and power services in the Municipalities of Cavinti, Famy, Kalayaan, Lumban, Mabitac, Paete, Pagsanjan, Pakil, Pangil, Siniloan, and Sta: Maria, all in the Province of Laguna (Franchise Area). It shall also be herein referred to as the "Buyer"; 2. LPPC is a corporation duly created and existing by and under the laws of the Republic of the Philippines, with business address at the No. 40 San Miguel Avenue, Mandaluyong City. It shall also be herein referred to as the "Seller"; 3. The Joint Applicants may be served with the orders, notices and other processes of the Honorable Commission through their respective undersigned counsels at the addresses indicated herein; Nature of the Application 4. The Joint Application for approval of the Power Supply Contract (PSC) entered into by and between FLECO and LPPC, is being submitted to the Honorable Commission for its review and approval pursuant to Sections 25 and 45(b) of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 or the EPIRA, Rules 5, Section 4(e) and 11, Section 5 of its Implementing Rules and Regulations (IRR), Rule 20(B) of its Rules of Practice and Procedure, and other pertinent rules and regulations; Statement of Facts 5. Competitive Selection Process (CSP). On 20 June 2014 and 29 August 2014, FLECO's Bids and Awards Committee (BAC) conducted two (2) separate biddings for the supply of its electricity requirements, however, both had failed considering that only one (1) qualified bidder, Joint Application (FLECO and LPPC) Pane 3 of 23 SMC Consolidated Power Corporation (SCPC), submitted an offer on both occasions; 5.1 On 4 September 2014, FLECO, through Ms. Belinda A. Lugmao, its Officer-In-Charge (OIC), informed the Honorable Commission on the results of the aforementioned bidding; 5.2 On even date, SCPC made a presentation of its proposal and draft PSC before FLECO's Board of Directors, Management, BAC and members of the Technical Working Group (TWG); 5.3 Upon finding said proposal to be generally amenable to its power requirements, FLECO's Board issued Resolution No. 108, Series of 2014 approving the award on the supply of its energy and additional capacity requirements to SCPC; and 5.4 On 15 November 2014, FLECO issued a "Notice of Award" in favor of SCPC; 6. Assignment of the PSC to LPPC. Article 17.2 (Assignability) of said PSC expressly states, that: "Thjs Contract shall be binding between the Parties, their successors-in-interest and assigns. A Party may not assign this Contract or its rights and obligations therein to a third party without the other Party's written consent However, the BUYER acknowledges that the SELLER has, without the need to secure the BUYER'S consent, the right to a) assign or transfer this Contract any affiliate of the SELLER and b) to pledge, transfer, sell, encumber or. assign this Contract or the accounts, revenues or proceeds hereof in connection with any project financing or financial arrangements; provided that the assignee under (a) and (b) hereof shall agree in writing to assume and be bound by the terms and conditions of this Contract, and upon such assumption, the assignor shall be relived from any further liability under this Contract "; 6.1 On 23 December 2015, SCPC and LPPC executed a Deed of Assignment whereby the Assignor SCPC assigned and transferred all its rights, interests, and obligations under the PSC it executed with FLECO Joint Application (FLECO and LPPC) Paae 4 of 23 in favor of the Assignee LPPC. LPPC, likewise, agreed to acquire all of said rights and interests and assumed all of said obligations under the same PSC for the supply of electric energy to FLECO from its 2 x 150 MW Circulating Fluidized Bed Coal- Fired Thermal Power Plant located in Barangay Lamao, Limay, Bataan; and 6.2 FLECO is fully aware of the import of the aforementioned assignability clause under Article 17.2 of the PSC it executed with SCPC. As such, it interposed no objection to the implementation of its PSC with LPPC as its new power supplier inasmuch as LPPC agreed to acquire all of the rights and interests and assumed all of the obligations of SCPC under said PSC for the supply of electric energy to FLECO; 7. Salient Features of the PSC. 6.1 Contract Capacity. The Contracted Capacity for the duration of the PSC shall be 10,000 kW. The Buyer shalt maintain a minimum hourly nomination of at least forty percent (40%) of the Contract Capacity for the duration of the said PSC. The Contract Capacity shall be subject to a separate Nomination Protocol; 6.2 Generation Source. LPPC is constructing a 2 x 150 MW Circulating Fluidized Bed Coal-Fired Thermal Power Plant (the Plant) located in Barangay Lamao, Limay, Bataan, which is expected to be commercially operational by the 3" quarter of calendar year 2016; 6.3 Contract Term. The PSC shall take effect between the Parties on the date of signing (Execution Date) and shall remain effective for a period of ten (10) years from Commercial Operations Date (COD). The supply of electric power by the Seller shall commence on COD and shall continue until the end of the Contract Term; Joint Application (FLECO and LPPC) Paae 5 of 23 6.4 Contract Charges. Under the PSC, the Buyer shall pay the following Contract Charges for the duration of the Contract, subject to the applicable value- added tax (VAT), and computed as follows: Particulars Unit Amount Capacity Fee Capital Recovery Fee PhP/kW-month 1,371.2920 Fixed Operation and Maintenance Fee PhP/kW-month 383.8079 Total Capacity Fee 1,755.0999 Energy Fee Variable Operation and Maintenance Fee PhP/kWh 0.2831 Fuel Fee (pass through) PhP/kWh 1.6566 Total Energy Fee 1.9397 6.5 Other Charges. The Buyer shall bear all other costs and charges incurred after the Delivery Point including but not limited to transmission line losses, any interconnection charges and site specific loss adjustments, among others; 6.6 Adjustment Formula. The Contract Charges are adjusted on a monthly basis in accordance with the following Adjustment Formula (Annex Il-B of the PSC): MONTHLY CONTRACT CHARGES = Capacity Charges 0n + Energy ChargeSmonth Where: Capacity Charges = Capital Recovery Fee (CRF) + Fixed Operation and Maintenance Fee (FOM) Energy Charges = Variable Operation and Maintenance Fee (VOM) + Fuel Fee + Start-up Charge Joint Application (FLECO and LPPC) Pacie6of23 I. CAPITAL RECOVERY FEE (CRFmonth) CRFmonth = CRFadjusted x CC Where: CRFadjusted = (CRF(base) X 0.30) + (CRF(base) xO.70x!i) FX0 CRFbase = Capital Recovery Fee in PhP/kW- month contained in Annex Il-A of the PSC FXm = The simple average of the daily exchange rate of the Philippine Peso to the US Dollar, as posted by the Ban gko Sentral ng Pilipinas (BSP) for the calendar month within which the start of the current Billing Period occurs FX0 = Exchange rate of the Philippine Peso to the US Dollar, Base PhP44.O0 CC = Contract Capacity in kW II. FIXED OPERATION AND MAINTENANCE FEE (FOMmonth) PHCPIm FOMmonth = FOM x PHCPIQ Where: FOM = Fixed Operation and Maintenance Fee in PhP/kW-month contained in Annex il-A of the PSC Joint Application (FLECO and LPPC) Paqe7of23 PHCPI m = Philippine Consumer Price Index (CPI) for All Income Households in the Philippines - All Items (2006=100), as posted by the Philippine National Statistics Office (NSO) for the calendar month within which the start of the current Billing Period occurs PHCP10 = Philippine CPI for All Income Households in the Philippines - All Items (2006=100), as posted by the Philippine NSO for the calendar month of the COD CC = Contract Capacity in kW Ill. VARIABLE OPERATION AND MAINTENANCE FEE (VOMmonth) USCP!m VOMmontn fto. 85 x VOM x x + (o. 15 x VOM x PHCPIm'•\l x AE USCP!0 FX0 J PHCPIØ LI Where: VOM = Variable Operation and Maintenance Fee in PhP/kWh contained in Annex Il-A of the PSC USCPI m = United States (US) CPI for All Urban Consumers - All Items (1982-84=100), as posted by the Unites States Bureau of Labor Statistics (USBLS) for the calendar month within which the start of the current Billing Period occurs USCPI0 = US CPI for All Urban Consumers - All Items (1982-84=100) for the calendar month of the COD Joint Application (FLECO and LPPC) Paae 8 of 23 FXm = The average daily exchange rate of the Philippine Peso to the US Dollar, as posted by the BSP for the calendar month within which the start of the current Billing Period occurs FX0 = Exchange rate of the Philippine