Republic of the Philippines ENERGY REGULATORY COMMISSION San Miguel Avenue, Pasig City IN THE MATTER OF THE APPLICATION FOR APPROVAL OF INDIVIDUAL CAPEX PROJECT IN ACCORDANCE WITH THE RULES FOR THE APPROVAL OF REGULATED ENTITIES’ CAPITAL EXPENDITURE PROJECTS AND AUTHORITY TO SECURE LOAN FROM NEA, WITH PRAYER FOR ISSUANCE OF PROVISIONAL AUTHORITY ERC CASE NO. 2021- 045___ RC June 16, 2021 FIRST LAGUNA ELECTRIC COOPERATIVE, INC. (FLECO), Applicant. x - - - - - - - - - - - - - - - - - - - - - - - - - - x APPLICATION Applicant First Laguna Electric Cooperative, Inc. (FLECO), by and through the undersigned counsel, and unto this Honorable Commission most respectfully states that: 1. FLECO is an electric cooperative duly organized and existing under and by virtue of the laws of the Philippines, with the principal office at Barangay Lewin, Lumban, Laguna 4014, where it may be served with summons and other legal processes, represented in this instance by its Board President, ALLAN S. GUALBERTO, of legal age, Filipino, and with office address also at FLECO main office; 2. Herein applicant is the exclusive franchise holder issued by the National Electrification Administration (NEA) to operate an electric light and power services in the municipalities of the province of Laguna, namely: Pagsanjan, Cavinti, Lumban, Kalayaan, Paete, Pakil, Pangil, Siniloan, Famy, Mabitac and Sta. Maria; 1 3. Applicant hereby submits its proposed Individual Capital Expenditure (CAPEX) project, in accordance with the specific provisions of Republic Act No. 9136 and the implementing guidelines adopted by the Energy Regulatory Commission (ERC) under Resolution No. 26, Series of 2009, more specifically the Amended Rules for the Approval of Regulated Entities’ Capital Expenditure Projects (CAPEX); 4. Applicant in support of this application for the approval of the capital project has attached the following required documents labeled together and marked collectively as Annex “A”, contained in the said guidelines: a. Project Title b. Project Type c. Project Category d. Project Description e. Gantt Chart Schedule f. Project Justification g. Project Cost Estimate h. Technical Analysis i. Economic Analysis j. Project Financing Plan k. Rate Impact 5. The proposed capital project is the removal of the existing 10 MVA and installation of a new 20 MVA power transformer at Famy Substation located in Brgy. Batuhan, Famy, Laguna; 6. The 10 MVA Power Transformer at Famy Substation serve as the source of power in the municipalities of Siniloan, Famy, Sta. Maria, and Mabitac, all in the province of Laguna. In 2020, it has an actual peak demand of 8.57 or 76% of its ONAF Capacity; 7. This project is intended to relieve the loading of the 10 MVA Power Transformer and address unexpected significant new load that will be connected to the Distribution System. The foreseen load growth in the area for this year 2021, however, requires the minimum capacity of 13.15MW. The major load growth will come the on-going construction of the Manila Water Co. facility in Pakil, and the newly built iMall in Famy with load requirement of 1MW and 3.2MW, respectively; 8. As such, there is an urgency to remove the existing 10 MVA and install a new 20 MVA power transformer capacity. Hence, this substation project proposal; 2 9. The deficiencies of the existing 10 MVA Famy Substation are as follows, to wit: a) In 2020, the 10 MVA Famy substation has an actual demand of 8.57MV or 76.2% of its maximum rated capacity. At present, it exceeds the 70% of its maximum rated capacity. Based on the Distribution Criteria and Goals, additional capacity will be triggered on the year the substation will be loaded 70% of the maximum rated capacity; b) An incoming commercial and industrial load application, iMall Famy and Manila Water Co., respectively, will require an additional 4.2MW supply in 2021. This will cause capacity problem to the power transformer because a total of 13.15MW will be loaded to it. The loading forecast of the power transformer will be critically loaded for the next 10 years if no capacity project will be implemented. Therefore, possible alternatives are formulated to address the deficiencies at Famy Substation: Alternative A: Removal of the existing 10 MVA and installation of new 15 MVA Power Transformer at Famy Substation. Alternative B: Removal of the existing 10 MVA and installation of new 20 MVA Power Transformer at Famy Substation. Alternative C: Removal of the existing 10 MVA and installation of new 30 MVA Power Transformer at Famy Substation; c) The existing 10 MVA Power Transformer installed at Famy was commissioned and energized in 2010. This 10 year old power transformer will be pulled-out once the implementation of the project started and will be transferred to replace the 5 MVA power transformer installed at Pakil Substation. The existing 5 MVA Power Transformer at Pakil Substation has been in service for 29 years. It has shown signs of deterioration considering its age, frequent transformer trouble and technical obsolescence; d) The FLECO Management has proposed to replace its existing 5 MVA Power Transformer at Pakil Substation with the 10 MVA Power Transformer from Famy to meet the following reasons: 3 i. To meet the present and future load requirement in the area; ii. To ensure safety in the operation of the facilities; iii. To enhance the reliability of delivery of power to customers being supplied by the substation; iv. To have an accessible capacity that could accommodate emergency requirements on transferring of loads from other substation or feeders; and v. To have a continuously available distribution services and a substation that will provide reserve capacity margins for future interruption contingency to meet the reliability performance standards; 10. FLECO conducted a Technical Analysis wherein the present loading of the 10 MVA Power Transformer of Famy Substation is compared against the future loading if the proposed project will be implemented. The interpretation of the analysis shows that without the project being implemented, this will cause overloading to the 10 MVA Power Transformer and with the project, all of the alternatives will be technically feasible. However, the capacity of Alternative A will be overloaded before it reaches its economic life of 30 years and so it has the need to add additional capacity project in the near future. A copy of more detailed comparative loading analysis of Famy Substation is hereto attached and duly marked as Annex “B”; 11. The substation uprating project at Famy is classified under capacity projects, therefore, it is deemed mandatory for FLECO to have an expansion plan for the system. Based on the simulation, a 20 MVA capacity expansion is ideal. The expansion plan study assumes economic life of the power transformer and other electric equipment of the substation to be 30 years. A copy for more detailed economic evaluation for each alternative is hereto attached and duly marked as Annex “C”; 12. The project shall start by March 1, 2021 and end by December 3, 2021. From the beginning of the bidding and procurement procedure up to the commissioning and energization of the substation, this project shall last for ten (10) months based from the load projection of the significant new loads. iMall is set to be energized at the first quarter while the Manila Water Co. will ramp-up its operation not later than the last quarter of the year. Thus, feeder load transferring with adjacent substation is the 4 remedial action undertaken by FLECO to address its immediate capacity concern; 13. The expected cost of the Proposed Individual CAPEX Project totals to TWENTY TWO MILLION TWENTY FIVE THOUSAND SIX HUNDRED (Php22,025,600.60); 14. The capital projects of FLECO will be financed by acquiring loans from the National Electrification Administration. Based on the Cooperative’s Cash Flow analysis, the Reinvestment Fund for Sustainable CAPEX (RFSC) would result to negative revenues as shown below: Capex Plan Annual Cash Flow For the Years 2021 – 2023 Particulars 2021 2022 2023 Total Actual/Forecasted Energy sales, kWh 122,527,953 128,813,637 134,983,810 386,325,399.19 RFSC balance beginning per AFS, PhP 1,651,362.77 7,229,827.84 (4,202,738.97) 1,651,362.77 CASH INFLOWS Actual/Forecasted 1 collection from RFSC 65,172,618.03 68,515,973.34 71,797,888.46 205,486,479.83 Charge, PhP Loan proceeds from financial institutions, PhP 22,025,600.00 22,025,600.00 Loan proceeds from financial institutions, PhP 10,720,598.00 78,284,091.80 14,773,130.20 103,777,820.00 (Other CAPEX projects) From general fund, if any, - PhP Subsidy (if any), PhP - Interest earned from - deposits, PhP Total Cash Inflows, PhP 97,918,816.03 146,800,065.14 86,571,018.66 331,289,899.83 Available cash for disbursement 99,570,178.80 154,029,892.97 82,368,279.69 332,941,262.60 CASH OUTFLOWS Payment for CAPEX project 22,025,600.00 22,025,600.00 Payment for other CAPEX projects 33,752,526.54 100,153,724.39 47,187,423.53 181,093,674.46 5 Payment of amortization/s for new - 2,945,008.00 2,945,008.00 5,890,016.00 loan, if any (PhP) Payment of amortization/s for new loan, for other CAPEX 2,497,716.48 20,736,574.61 24,178,461.97 47,412,753.07 Projects Payment of amortization/s for 33,646,172.00 33,646,172.00 33,646,172.00 100,938,516.00 previous loan (PhP) Replenishment of General Fund account - (PhP) Permit Fee (PhP) 418,335.95 751,152.93 353,905.68 1,523,394.56 Total Cash Outflows, PhP 92,340,350.96 158,232,631.94 108,310,971.18 358,883,954.08 Cash balance ending, PhP, excess/(shortfall) 7,229,827.84 (4,202,738.97) (25,942,691.48) (25,942,691.48) Total / Average YEAR 2021 2022 2023 Rate Projected kWH Sales 122,527,953 128,813,637 134,983,810 386,325,399 Additional Rev.