COVER SHEET

4 1 3 7 6
S.E.C. Registration Number

S Y N E R G Y G R I D & D E V E L O P M E N T

P H I L S . , I N C . ( f o r m e r l y : U E M

D E V E L O P M E N T P H I L S . , I N C . )

(Company’s Full Name)

1 6 0 7 1 6 T H F L O O R T Y C O O N C E N T E R

B L D G. C O N D O M I N I U M P E A R L D R I V E ,

P A S I G C I T Y , M E T R O M A N I L A

(Business Address: No. Street/City/Town/Province)

Pia Isabel Co 8633-9757/8584-3930

Contact Person Company Telephone Number

1 2 3 1 SEC FORM 17-A 1 0 2 7

Month Day FORM TYPE Month Day

Fiscal Year Annual Meeting

N/A
Secondary License Type, if Applicable

Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

Total No. of Stockholders Domestic Foreign

________________________________________________________________________________________
To be accomplished by SEC Personnel concerned

______________________________
File Number LCU

______________________________
Document I.D. Cashier

STAMPS

Remarks = pls. use black ink for scanning purposes

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 SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17

OF THE SECURITIES REGULATION CODE AND SECTION 141
OF CORPORATION CODE OF THE PHILIPPINES

1. For the fiscal year ended: 31 December 2022

2. SEC Identification Number: 41376 3. BIR Tax Identification No.: 000-593-240

4. Exact name of issuer as specified in its charter: SYNERGY GRID & DEVELOPMENT PHILS., INC.
(formerly UEM Development Phils., Inc.)

5. Pasig City, Philippines 6. (SEC Use Only)

Province, Country or other jurisdiction of Industry Classification Code:
incorporation or organization

7. 16th Floor, Tycoon Center Bldg.

Condominium Pearl Drive, Pasig City, Metro Manila 1605
Address of principal office Postal Code

8. (632) 85843930
Issuer’s telephone number, including area code

9. Former name, former address, and former fiscal year. If changed since last report. N/A

10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA (as of 31
December 2004)

Title of Each Class Number of Shares of Common Stock Outstanding

and Amount of Debt Outstanding

Common 5,265,866,000

11. Are any or all of these securities listed on a Stock Exchange.

Yes [ X ] No [ ]

12. Check whether the issuer:

(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunder of Section
11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The Corporation Code of
the Philippines during the preceding (12) months (or for such shorter period that the Company was
required to file such reports);

Yes [X ] No [ ]

(b) has been subject to such filing requirements for the past 90 days.

Yes [X ] No [ ]

Aggregate market value of the voting stock held by non-affiliates of the Company. P58,451,112,6001 (Based
on closing market price of P11.10 on December 29, 2022,2 the last trading day for 2022).

1
Based on Public Ownership report as of December 31, 2022
2
Based on the historical data in the website of the Philippine Stock Exchange.
2
 APPLICABLE ONLY TO REGISTRANTS INVOLVED
IN INSOLVENCY/SUSPENSION OF PAYMENTS PROCEEDINGS DURING
THE PRECEDING FIVE (5) YEARS

13. Check whether the registrant has filed all documents and reports required to be filed by Section 17 of the
Code subsequent to the distribution of securities under a plan confirmed by a court or the Commission.

Yes [ ] No [ X ] This item is not applicable to SGP.

DOCUMENTS INCORPORATED BY REFERENCE:

SGP likewise attaches to this form and incorporates by reference as a component of Part II hereof its Statement
of Management’s Responsibility for Financial Statements and Audited Financial Statements as of 31 December
2022.

THE CORPORATION UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON, ON THE

WRITTEN REQUEST OF ANY PERSON, COPY OF SGP’S ANNUAL REPORT ON SEC FORM 17-A.

Written request for a copy of the Annual Report on SEC Form 17-A should be addressed to:

ATTY. CHERYL SALDANA - DE LEON

Corporate Secretary
Synergy Grid &Development Phils., Inc.
GSE Law Firm, 25 ADB Ave., San Antonio, Pasig

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 PART I – BUSINESS AND GENERAL INFORMATION

Item 1. Business

Synergy Grid & Development Phils., Inc. (SGDPI or the “Parent Company”) was originally a mining corporation
and registered with the Philippine Securities and Exchange Commission (SEC) on June 1, 1970 under the name
Mankayan Minerals Development Company, Inc.

The consolidated interim financial statements comprise the financial statements of the Parent Company and its
subsidiaries, namely OneTaipan Holdings, Inc. (“OTHI”), Pacifica21 Holdings, Inc. (“P21”), Monte Oro Grid
Resources Corporation (“MOGRC”), Calaca High Power Corporation (“CHPC”) and National Grid Corporation
of the Philippines (“NGCP”), (collectively referred to as the “Group”). The Parent Company’s shares of stock are
listed on the Philippine Stock Exchange (PSE) under the stock symbol “SGP.”

On February 22, 1994, the SEC approved the Parent Company’s change of corporate name to UEM
Development Phils., Inc. and the change in its primary purpose from engaging in mining activities to general
construction and other allied businesses. The amendment of its primary purpose was due to the potential
opportunity in the construction industry brought about by the entry of a new foreign investor.

On October 10, 1997, the SEC approved the Amendment to the Seventh Article of the Parent Company’s
Articles of Incorporation increasing the par value of its authorized capital stock from P0.01 to P1.00, decreasing
the Parent Company’s shares of stock from 500.00 million shares to 50.00 million shares, and stating that the
stockholders shall have no pre-emptive rights.

On December 14, 2010, the Board of Directors (BOD) considered and approved the Amendment of the Articles
of Incorporation and By-Laws of the Parent Company for the purpose of, among others, changing the Parent
Company’s corporate name to Synergy Grid & Development Phils., Inc., changing its primary purpose to enable
it to engage in the business of investing in, purchasing or acquiring, and selling or disposing of the shares of
stock, bonds, evidences of indebtedness and other securities issued or created by corporations and other
entities engaged in power, energy, utilities, infrastructure and other allied businesses; and for the above
purposes, to acquire, lease, hold, occupy, use, mortgage real and personal properties, to obtain financing from
local and international funding sources or otherwise raise capital and funds by issuing or creating equity and
debt securities, and to do or engage in any and all other businesses and activities incidental to or connected
with, or in furtherance and/or the implementation of any and all of the foregoing. The amendments to the Articles
of Incorporation and By-Laws of the Parent Company were approved by the stockholders on December 21,
2010.

On November 14, 2019, the BOD of the Parent Company, and on December 20, 2019, the Stockholders of the
Parent Company, approved the amendment of the Articles of Incorporation of the Corporation pursuant to an
increase in authorized capital stock from P50.00 million divided into 50.00 million common shares at par value
of P1.00 per share to P5.05 billion divided into 5.05 billion common shares at par value of P1.00 per share.

This amendment and increase in capital stock were pursued in connection with the issuance of 4.10 billion
shares of the Parent Company in exchange for shares of stock in OTHI and P21 (the “Share Swap Transaction”).

On December 20, 2019, the Parent Company and the stockholders of OTHI and P21 entered into a Share
Purchase Agreement, pursuant to which, the two major shareholder of the Parent Company will acquire
additional 4.10 billion shares of the Parent Company at a price of P20 per share for a total purchase price of
P82.00 billion. As consideration for its acquisition, the two major shareholders will exchange their respective
ownership in OTHI and P21. Accordingly, the 2.10 billion shares with a
P1.00 par value of the Parent Company to be swapped with 86.40 million shares of OTHI with a par value of
P100 per share while the 2.00 billion shares of Parent Company to be swapped with 871.00 million common
shares of P21 with a par value of P1.00 per share.

As a result of the Share Swap Transaction, the Parent Company will legally and/or beneficially owns 67% of
the outstanding shares of each of OTHI and P21.

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OTHI owns controlling shares in MOGRC, which holds 30% plus one share in National Grid Corporation of the
Philippines (“NGCP”). P21 owns controlling shares in CHPC, which in turn owns 30% minus one share in NGCP.
The Share Swap Transaction was undertaken to formally consolidate the two major shareholder’s ownership
and control of NGCP through a common corporate structure. Accordingly, the effective ownership of the Parent
Company in NGCP will be 40.20%, with control of 60% voting rights through its subsidiaries MOGRC and CHPC.

On March 26, 2020, the proposed share-swap transaction was approved by the Philippine Competition
Commission on the grounds that it will not likely result in substantial lessening of competition in the Philippine
market.

On May 28, 2021, the SEC approved the increase in the Parent Company’s authorized capital stock from P50.00
million to P5.05 billion. Consequently, the 4.10 billion common shares for the share swap transaction were
issued at a price of P20 per share on the same date. The incremental costs directly attributable to the issuance
of common shares amounting to P206.66 million is recognized as a deduction from additional paid-in capital.

On June 30, 2021 and on August 10, 2021, the Parent Company’s BOD resolved and stockholders respectively
approved the increase in authorized capital stock from P5.05 billion to P5.30 billion, with the increase of 250.00
million to be divided into 250.00 million common shares at a par value of P1.00 per share.

This increase is for the Company to conduct a follow-on offering of its shares to achieve the target public float
of twenty percent (20%) of the outstanding capital stock of the Company and for other business purposes.

The above increase was approved by the SEC on August 25, 2021. Consequently, of the 250.00 million
increase in shares of the Company, 25% of which was subscribed and paid by the Company’s major
shareholders amounting to P62.50 million.

On August 10, 2021, the Company’s BOD approved and authorized the offer and issuance of 1,053,500,000
common shares at an offer price of up to P29 per share, and also grants over-allotment option pursuant to which
a stabilizing agent or its affiliate has the right to purchase up to 101 million common shares of the Company’s
owned by its major shareholders.

On August 12 and September 10, 2021, the Company’s shareholders have also secured the Certificate
Authorizing Registration with the Bureau of Internal Revenue (BIR) in order to transfer in the name of the
Company the following shares:

(i) 86,430,000 common shares in OTHI representing 67% of its total capital stock; and (ii) 871,000,000 common
shares in P21 representing 67% of its total capital stock.

The details in the equity interest of the Parent Company in its subsidiaries after the Share Swap are as follows:

Percentage of
Ownership Country of
Incorporatio
Direct Indirect n
OneTaipan Holdings, Inc. (“OTHI”) 67.0% - Philippines
Pacifica21 Holdings, Inc. (“P21”) 67.0% - Philippines
Monte Oro Grid Resources Corporation Philippines
(“MOGRC”)* - 67.0%
Calaca High Power Corporation (“CHPC”)** - 67.0% Philippines
National Grid Corporation of the Philippines Philippines
(“NGCP”)*** - 40.2%
* Indirectly owned through OTHI
** Indirectly owned through P21
*** Indirectly owned through MOGRC and CHPC

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OTHI is 67% directly owned subsidiary of the Parent Company and was incorporated and registered with
Philippine SEC on February 23, 2010. OTHI’s primary purpose is to acquire by purchase, exchange, assignment
or otherwise, and to sell, assign, transfer, exchange, lease, let, develop, mortgage, pledge, deal in and with and
otherwise operate, enjoy and dispose of, all properties of every kind and description and whatever situated and
to the extent permitted by law.

MOGRC is a wholly-owned subsidiary of OTHI and was incorporated and registered with Philippine SEC on
August 29, 2006. MOGRC’s primary purpose is to invest or hold interests in the shares of stocks of companies
engaged in or proposing to engage in infrastructure projects, whether as proponent, equity investor or financial
or technical advisor and to do all acts and things necessary to carry out the foregoing purpose.

P21 is 67% directly owned by the Parent Company and was incorporated and registered with Philippine SEC
on May 12, 2008. P21’s purpose is to invest or acquire interest, purchase, own or hold directly or indirectly
shares of stock, debentures or securities in other companies including related services and business activities.

CHPC is a wholly-owned subsidiary of P21 and was incorporated and registered with Philippine SEC on
December 15, 2006. CHPC’s primary purpose is to engage in the general business of operating, managing,
maintaining, and rehabilitating energy systems and services from gas, steam and electricity including related
services and business activities.

NGCP is 30%-owned each by MOGRC and CHPC and was incorporated in the Philippines and registered with
Philippine SEC on February 21, 2008 primarily to operate and maintain a nationwide transmission grid
throughout the Philippines; to provide open and non-discriminatory access to the transmission system to all
authorized electricity distributors and electricity users; and to carry on all business incidental to the same.

On October 14, 2021, the listing of the Offer Shares was approved by the Philippine Stock Exchange. The
Philippine SEC approved the listing of SGP on October 20, 2021.

On November 10, 2021 SGDI, under the symbol “SGP”, the Company publicly listed its 1,053,500,000 shares
from its Follow-On Offering (FOO) on the Philippines Stock Exchange with overallotment option of up to
101,000,000 secondary shares at PHP 12.00 per common share.

The Parent Company will use the proceeds of the FOO to directly subscribe to non-voting preferred shares that
will be issued by NGCP. Proceeds from the issuance of the non-voting preferred shares will be used by NGCP
to finance its capital expenditure requirements and related costs and expenses.

On April 4, 2022, the Parent Company used the proceeds of the FOO to subscribe to 203,630,000 non-voting
preferred shares of National Grid Corporation of the Philippines (NGCP) with a par value of P1.00 per share at
a subscription price of P60.10/share or a total subscription price of P12,238,163,000.

The subscription will give the Parent Company a direct shareholding in NGCP of 9.240% of the latter’s
outstanding capital stock. The Parent Company will be entitled to dividends as a direct shareholder of NGCP,
and this is in addition to the dividends that the Parent Company already indirectly receives from NGCP through
the holding entities.

On 12 April 2022, the Parent Company paid P3,059,540,750, representing twenty-five percent (25%) of the total
subscription price. On June 9, 2022, the Parent Company paid the balance of the total subscription price in the
amount of P9,178,622,250.

On 07 June 2022, the SEC approved the Amendment of Articles of Incorporation and Increase in Authorized
Capital Stock of NGCP for the issuance of 203,630,000 Non-Voting Preferred Shares with a par value of P1.00
per share. The Company subscribed to the 203,630,000 Non-Voting Preferred Shares of NGCP, using the
proceeds from the FOO. Proceeds from the issuance of the non-voting preferred shares will be used by NGCP
to finance its capital expenditure requirements and related costs and expenses.

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On February 28, 2008, the Group, through NGCP entered into a Concession Agreement with Power Sector
Assets and Liabilities Management Corporation (PSALM) and the National Transmission Corporation
(TRANSCO) granting the Group as Concessionaire the right to take over and operate the whole of TRANSCO’s
regulated transmission business was a going concern and be the sole representative of Regulated Entity before
the Philippine Energy Regulatory Commission (ERC). The commencement date of the Concession Agreement
is on January 15, 2009 and shall expire on the 25th anniversary of the commencement date. The Concession
can be extended but not to exceed beyond the 50th anniversary of the commencement date or for longer than
the remaining term of the Group’s franchise (see Note 4).

In accordance with the requirements of the SEC for the purpose of the FOO, the Group issued consolidated
financial statement as at and for the years ended December 31, 2020, 2019 and 2018, considering the effect of
the Share Swap Transaction as disclosed in Note 2 to the consolidated financial statements.

SGP indirectly controls 60% is the outstanding capital stock of NGCP, SGP’s sole operating asset with an
effective equity interest of 40.2%.

There are no transactions between the Company and any of its directors, executive officers, or stockholders
owning more than five (5%) of its outstanding capital stock and any member of their immediate family.

The Company has no subsisting construction, consultancy, sub-contracting, supply, sales or other major
agreements with any party. It has no material commitment for any capital expenditure.

In connection with the Company’s FOO last November 10, 2021 the Company has hired several employees
effective September 1, 2021.

There are no major risks that the Company is involved in other than the credit and liquidity risks discussed in
Note 24 of the Notes to Financial Statements.

Item 2. Properties

SGP does not own any property such as real estate, plant, equipment, mines, patents and the like. SGP does
not intend to acquire any real property in the next twelve (12) months. In the absence of any property, the
information required on any mortgage, lien or encumbrance and the limitations on ownership or usage over any
property is inapplicable to SGP.

Item 3. Legal Proceedings

As of December 31, 2022 and as of this date, there are no pending legal proceedings which involve SGP,
MOGRC, CHPC, OTHI, P21 or any of its properties.

NGCP is party to several legal proceedings and claims that have arisen in the ordinary course of business,
including those set out below. NGCP is involved in legal proceedings from time to time.

Civil Cases and Arbitration Proceedings as of December 31, 2021, there are 11 cases for damages, recovery
of possession, collection, declaratory relief, and injunction filed by NGCP and two cases filed against NGCP
which are pending with the different trial courts nationwide. The total estimated amount of claims by NGCP for
these civil cases is approximately ₱480 million. There are three cases filed against NGCP involving recovery of
possession of properties that are allegedly being occupied by NGCP without right, with total claims of
approximately ₱12.6 million.

NGCP was involved in two arbitration proceedings before the Construction Industry Arbitration Commission
(“CIAC”). In the first CIAC arbitration proceeding commenced against NGCP by Kalpataru Power Transmission
Limited (“KPTL”), the CIAC tribunal’s February 20, 2017 Final Award stated that KPTL is entitled to actual
damages and the return of retention money. On appeal, the Court of Appeals deleted all actual damages
previously awarded in favor of KPTL amounting to approximately ₱84 million but ordered NGCP to release the
retention money to KPTL amounting to approximately ₱159 million. Both NGCP and KPTL filed Petitions for
Review before the Supreme Court, which petitions have subsequently been consolidated. The consolidated
petitions are pending resolution by the Supreme Court.

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As regards the second CIAC arbitration commenced by Hyundai Engineering Co., Ltd. (“HEC”) against both
NGCP and TRANSCO in respect of its approximately ₱77.9 million claim, the case was dismissed by the CIAC
tribunal as against NGCP on August 8, 2014 following a May 27, 2014 Court of Appeals ruling that there was
no arbitration agreement between HEC and NGCP. HEC’s appeal before the Court of Appeals was dismissed.
HEC filed a further appeal before the Supreme Court, which is pending resolution.

On February 28, 2008, NGCP, PSALM and TRANSCO entered into a Concession Agreement, which granted
NGCP the Concession to operate the country’s power transmission network. In consideration for the grant of
the Concession, NGCP agreed to pay PSALM US$3.950 billion as Concession Fee, 25% (or at NGCP’s option,
a higher percentage) of which was payable at the Commencement Date, with the balance payable to PSALM
in semi-annual installments (“Deferred Payments”) in accordance with Schedule 5 of the Concession
Agreement. Moreover, Section 6.07 of the Concession Agreement granted NGCP the option to prepay any
Deferred Payment or any portion thereof, as well as the right to determine which Deferred Payment or portion
thereof it opted to prepay, so long that there is no amount due to PSALM or TRANSCO under the Concession
Agreement (including the Deferred Payments) and other Transaction Documents “that are in arrears”. On July
15, 2013, NGCP formally exercised its option to prepay under Section 6.07 of the Concession Agreement,
paying the amount of ₱57,883,053,062.96, representing the Deferred Payments for the period covering January
15, 2014 to January 15, 2024 (the 10th to 30th Deferred Payments). PSALM accepted the prepayment. In a
letter dated August 15, 2013, PSALM acknowledged NGCP’s compliance with the provision of Sections 6.07
(Prepayment) and 8.05 (Indebtedness). On October 3, 2013, PSALM forwarded to NGCP an official receipt
acknowledging its receipt of the prepayment without any qualification or reservation.

In May 2017, or almost four years after accepting NGCP’s prepayment, TRANSCO and PSALM demanded that
NGCP settle its alleged outstanding obligations to TRANSCO in the amount of around ₱3.9 billion. These
alleged outstanding obligations to TRANSCO supposedly invalidated NGCP’s exercise of its option to prepay.
NGCP disputed this claim stating that none of the obligations to TRANSCO was due or in arrears at the time of
the prepayment. On January 15, 2018, pending settlement negotiations between the parties, PSALM unilaterally
set aside the prepayment, declared the prepayment invalid and informed NGCP that PSALM had applied the
prepayment of ₱57.88 billion to “the maturities under the [Concession Agreement] from January 2014 to January
2018” in accordance with “the Deferred Payment Amortization Schedule prior to the 15 July 2013 remittance.”
On February 14, 2018, NGCP commenced an arbitration administered by the Singapore International Arbitration
Centre (“SIAC”) against PSALM and TRANSCO relative to the implementation and interpretation of the parties’
February 28, 2008 Concession Agreement. In the arbitration, NGCP seeks a declaration that the prepayment
that it had made on July 15, 2013 amounting to ₱57.88 billion is valid, and seeks the payment of other monetary
claims of approximately ₱4 billion relating to the proper Concession Fee adjustment amount for “Projects Under
Construction”, sale of “Sub-Transmission Assets” and settlement of “Excluded Liabilities” and/or “Retained
Obligations” which should have been borne by TRANSCO under the Concession Agreement, but were
advanced by NGCP. NGCP also seeks a declaration that (i) it, and not TRANSCO, has the exclusive mandate
to prepare the Transmission Development Plan (TDP), which is the principal document that lays out the
planning, management, and operations (including capital expenditure plans) of the country’s national
transmission system; and that (ii) TRANSCO may not, for the duration of the Concession, use or otherwise
commit the “Transmission Assets” (as defined in the Concession Agreement) in a manner that would restrict
NGCP’s right to use those assets. On the other hand, PSALM and TRANSCO seek a declaration from the
arbitral tribunal that NGCP is in Concessionaire Default for having allegedly violated the nationality restrictions
applicable to public utilities under Philippine law (including the Philippine Constitution and the Philippine Anti-
Dummy Law). Specifically, PSALM and TRANSCO allege that certain former foreign nationals employed by
NGCP occupied prohibited managerial, operational, or control positions in violation of the Philippine Anti-
Dummy Law. Apart from a declaration of Concessionaire Default, PSALM and TRANSCO seek a declaration
that all of NGCP’s claims are inadmissible due to these alleged breaches, i.e., that NGCP be declared
disqualified from enjoying the rights and benefits under the Concession Agreement, including the right to bring
any claim in arbitration arising from and/or in connection with the Concession Agreement and/or Philippine laws.
PSALM and TRANSCO thus seek the dismissal of all of NGCP’s claims and reliefs and a declaration that
NGCP’s prepayment was void and without legal basis. They seek payment of the interest amounts that should
have been paid after July 15, 2013 on the basis that the prepayment was invalid, the amounts due and in arrears
to TRANSCO when the prepayment was made, as well as interest on those amounts. They also seek payment
of the installments for the Concession Fee that were not validly prepaid. 212 PSALM and TRANSCO further
dispute NGCP’s monetary claims and seek counterclaims of ₱2.7 billion as part of TRANSCO’s Excluded
Receivables, plus interest. They disagree with NGCP’s proposition on how to calculate the Concession Fee
adjustment for the sale of Sub-Transmission Assets and ask for an adjustment of the Concession Agreement in
their favor in the amount of USD26,973,945.73 for Projects Under Construction. They seek reimbursement of

8
their costs and expenses in the arbitration. In addition, PSALM and TRANSCO dispute NGCP’s claims with
respect to the TDP and the use of the Transmission Assets, and seek a declaration that NGCP breached its
obligations under the Concession Agreement regarding: (i) its IPO obligations, (ii) Permitted Indebtedness, (iii)
its insurance obligations; (iv) its obligation to consult TRANSCO in preparing the TDP consistent with DOE
Order No. DO2017-04-0004 (“DOE Order”), which gives TRANSCO broad powers to obtain documents and
requires NGCP to consult and actively involve TRANSCO in the preparation of the TDP, as well as obtain a
formal certification from TRANSCO that it was so consulted; (v) the maintenance of separate accounts for
Related Businesses; and (vi) compliance with applicable law on eminent domain (considering that NGCP had
filed expropriation complaints against Government Owned and Controlled Corporations).

Hence, the arbitration involves issues relating to the validity of NGCP’s prepayment on July 15, 2013, some
adjustments to the Concession Fees, as well as the parties’ respective monetary claims. It also involves the
parties’ respective claims of breach by the other party of certain provisions of the Concession Agreement,
including NGCP’s alleged violation of nationality restrictions and its right, in light thereof, to bring claims in the
arbitration. The arbitration is ongoing and NGCP expects it to be concluded by the end of 2022 or by early 2023.
In a related suit, shortly after PSALM unilaterally set aside the prepayment and prior to initiating the SIAC
arbitration, NGCP filed a petition for interim relief before the Regional Trial Court of Quezon City. Before the
constitution of the tribunal in the SIAC arbitration, a Temporary Order of Protection and, subsequently, a Writ of
Preliminary Injunction were issued by the Regional Trial Court of Quezon City to enjoin PSALM and TRANSCO
from, among other things, declaring NGCP in default of the Concession Agreement, in an effort to preserve the
status quo. The Writ of Preliminary Injunction remains effective to date, which means that PSALM and
TRANSCO cannot declare NGCP in default of the Concession Agreement unless and until the Writ of
Preliminary Injunction is modified or revoked by the tribunal in the SIAC arbitration.

PSALM and TRANSCO appealed the issuance of the Writ to the Court of Appeals, which dismissed the appeal
in a Decision dated September 25, 2019 for lack of jurisdiction given that the arbitral tribunal had already been
constituted on April 12, 2018. The Court of Appeals’ Decision has since attained finality as PSALM and
TRANSCO no longer appealed to the Supreme Court. NGCP believes that its claims in the arbitration are well-
founded. NGCP did not violate the Concession Agreement, nor the Philippine Anti-Dummy and nationality laws.
It is 60% owned by Filipinos, consistent with the Constitution. NGCP’s engagement of foreign nationals for
technical positions was lawful and was specifically contemplated by Republic Act No. 9136, the EPIRA. These
foreign nationals did not intervene in NGCP’s management, operation, administration or control.

The liabilities which PSALM and TRANSCO allege to be outstanding form part of their counterclaims in the
arbitration. NGCP believes these were neither due, let alone in arrears, in July 2013 when the prepayment was
made, nor are these due to TRANSCO under the Concession Agreement and other transaction documents.
They continue to be not due and are contingent in the sense that they are subject of pending cases before the
ERC or would arise only should the arbitral tribunal rule that these amounts are part of the “Excluded
Receivables.” NGCP’s monetary and non-monetary claims are based on the provisions of the Concession
Agreement. For instance, NGCP is entitled to an adjustment of the Concession Fees for the sale of the Sub-
Transmission Assets and a further adjustment relating to the “Projects Under Construction.” NGCP is likewise
asking for the 2013 reimbursement of amounts it advanced for “Excluded Liabilities” and/or “Retained
Obligations” which should have been borne by TRANSCO under the Concession Agreement.

NGCP believes it did not breach the Concession Agreement on the other grounds alleged by PSALM and
TRANSCO. First, Section 8 of Republic Act No. 9511 (the Franchise) allows NGCP to apply with the ERC for a
reasonable extension of the 10-year period, and therefore NGCP did not fail to comply with its IPO obligations.
Moreover, NGCP may comply with Section 8 either through listing and making a public offering of the shares
representing at least 20% of its outstanding capital stock or a higher percentage that may hereafter be provided
by law, or through listing in the PSE of any company which directly or indirectly owns or controls at least 30%
of the outstanding shares of stock of NGCP. Second, NGCP did not violate its obligations regarding Permitted
Indebtedness. On July 8, 2013, NGCP provided PSALM information regarding the financing that NGCP intended
to obtain for the funding of the prepayment, specifically, information on the creditor, amount of the financing,
maturity date and interest, as well as the other conditions under Section 8.05. PSALM and TRANSCO did not
object to NGCP’s use of financing to make the prepayment until the arbitration. Third, as regards insurance,
insurance policies have been issued by the Government itself and cover the period from 2019 to present.
Moreover, the consequences for violation of the Concession Agreement’s provisions on insurance are
particularized under Section 9.06 of the Concession Agreement. Fourth, NGCP is exclusively mandated under
Philippine law and the Concession Agreement to prepare the TDP. Therefore, TRANSCO’s invocation of the
DOE Order, which effectively gives TRANSCO veto rights with respect to the preparation of the TDP, violates

9
its exclusive mandate. Fifth, the accounting system TRANSCO complains of was its own, and NGCP had to
migrate to a new system to maintain separate audited accounts for Related Businesses. Finally, land owned by
a Government-Controlled and/or Government-Owned entity that is used for private and/or proprietary purposes
may be lawfully expropriated for projects with a public purpose. However, there is no assurance that the arbitral
tribunal will accept NGCP’s position and rule favorably on its claims and against the counterclaims of PSALM
and TRANSCO. Moreover, a party prevailing on its monetary claims may not necessarily prevail on its non-
monetary claims.

Item 4. Submission of Matters to a Vote of Security Holders

a) On October 20, 2022, SGP conducted its annual stockholders’ meeting and submitted the following matters
to a vote of security holders:

I. Approval of the Minutes of the Previous Annual Stockholders’ Meeting held on September 27, 2021

II. Ratification of the Corporate Acts of the Board of Directors and Management since the last Annual
Stockholders’ Meeting on September 27, 2021

III. Election of Directors for 2022-2023:

Director Mr. Henry T. Sy, Jr.

Director Mr. Robert G. Coyiuto, Jr.
Director Atty. Paul P. Sagayo Jr.
Director Atty. Vicente D. Gerochi IV
Independent Director Atty. Jose Perpetuo M. Lotilla
Independent Director Atty. Francis Saturnino C. Juan
Independent Director Atty. Luis Jose P. Ferrer

IV. Management Report and Presentation of the Audited Financial Statements of the Corporation for
the Year Ended 31 December 2021

V. Appointment of R.G. Manabat & Co. (an affiliate of KPMG) as External Auditor for 2022

VI. Other Matters

VII. Adjournment

10
 PART II – OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters

(1) Market Information

Stock Prices

High Low
2020
1st Quarter P150.00 P131.00
2nd Quarter P150.00 P145.00
3rd Quarter P155.00 P155.00
4th Quarter P242.00 P237.00

2021
1st Quarter P345.00 P333.00
2nd Quarter P395.80 P395.80
3rd Quarter P - P -
4th Quarter P13.30 P13.08

2022
1st Quarter P12.28 P12.16
2nd Quarter P12.26 P12.16
3rd Quarter P11.78 P11.38
4th Quarter P11.28 P11.10

(2) Holders

SGP has one hundred fifty-eight (158) shareholders. The top 20 shareholders of SGP as of December 31, 2022
are as follows:

TOP 20 STOCKHOLDERS AS OF DECEMBER 31, 2022

NO. OF SHARES SHAREHOLDERS
2,050,200,010 COYIUTO JR., ROBERT
2,050,200,000 SY JR., HENRY
798,426,211 PCD NOMINEE CORP – FIL
360,410,479 PCD NOMINEE CORP – NON-FIL
1,483,980 TAN, SAMANTHA LOUISE A.
1,472,477 UNITED ENGINEERS (MALAYSIA) BERHAD
1,077,520 MALAYCO, INC.
1,016,020 TAN, DAVID IAN A.
350,000 RICHARD D. UYAN OR ROBERT D. UYAN
OR RODNEY D. UYAN
185,600 SYSMART CORPORATION
100,000 SPAKOWSKI, LUCIA
RODNEY D. UYAN OR JOVIE S. UYAN OR
80,000 DANIELLE AUDREY UYAN OR DENZELL
CARY S. UYAN
58,200 LUHMANN, BERKLEY M.
42,900 SCHOLEY, GEORGE T.
40,400 A. R. GARCIA & CO., INC
31,000 VICENTE GOQUILAY & CO., INC.
30,000 SPAKOWSKI, JOHN W.
27,000 EQUITABLE SECURITIES (PHILS.), INC.
26,200 ANSELMO TRINIDAD & CO., INC.
21,000 PHILIPPINE REMNANTS CO., INC.

11
The foreign stockholders of SGP and their corresponding shareholdings as of December 31, 2022 are as
follows:

SHAREHOLDERS NATIONAL NO. OF SHARES

AWAD, KENNETH RICHARD American 4,000
BIRMINGHAM, T.J. American 4,000
FOSTER, FRANK American 3,000
KLINGER, JOHN American 2,000
LUHMANN, BERKLEY M. American 58,200
MEARS, MABEL E. American 10,000
METROPOLITAN INVESTMENT CORPORATION American 10,000
MITCHELL, PETER American 2,000
MITCHELL, WILLIAM E. &/OR MARGARET A. MITCHELL American 5,000
SCIPLE, JAMES O. American 1,000
SCHOLEY, GEORGE T. American 42,900
SCHOLEY, GUY E. American 5,000
F.C. HAGEDORN & CO, INC. American 1,000
LILAY, JOSEPH Chinese 4,000
OH CHU KIONG Chinese 15,000
H.E. BENNETT SECURITIES, INC. A/C NO. 2588 Chinese 1,000
MANDRIAK, ROGER Canadian 8,600
PCD NOMINEE CORP. Non-Filipino 360,410,479
NASSR JUAN D. Malaysian 10,000
UNITED ENGINEERS (MALAYSIA) BERHAD Malaysian 1,472,477
YAM SENG LAM Malaysian 1
DUMMERMUTH, WALTER (DECEASED) Swiss 3,000
Total Foreign Shareholdings 362,072,657
Total Outstanding Capital Stock 5,265,866,000
Percentage of Total Foreign Ownership 6.88%

(3) Dividends

On August 10, 2021, the BOD of the Parent Company approved the adoption of the policy to declare
dividends equivalent to 100% of the prior year’s net income after tax based on the Parent Company’s
audited financial statements as of such year, upon declaration of the BOD and subject to the availability
of unrestricted retained earnings and settlement of operational expenses and other relevant taxes ,
cost and expense required to pay the ordinary course of business and subject to any financing
covenants, if applicable.

On March 23, 2022, the Board of Directors of the Parent Company approved the declaration of P0.22
dividend /share for the first quarter of 2022 totaling to P1.16 billion. These cash dividends were paid to
shareholders of record as of April 6, 2022 on April 22, 2022.

On June 22, 2022, the Board of Directors of the Parent Company approved the declaration of P0.26
dividend /share for the second quarter of 2022 totaling to P1.37 billion. These cash dividends were paid
to shareholders of record as of July 6, 2022 on July 22, 2022.

On September 21, 2022, the Board of Directors of the Parent Company approved the declaration of
P0.26 dividend /share for the third quarter of 2022 totaling to P1.37 billion. These cash dividends were
paid to shareholders of record as of October 5, 2022 on October 19, 2022.

On December 7, 2022, the Board of Directors of the Parent Company approved the declaration of P0.26
cash dividend /share for the fourth quarter of 2022 totaling to P1.37 billion. These cash dividends were
paid to shareholders of record as of December 22, 2022 on January 13, 2023.

On September 27, 2021, the Board of Directors of the Parent Company approved the declaration of P.
2375 dividend /share for each of the second and third quarter of 2021 totaling to P.475 dividend /share
amounting to P2.0 billion. These cash dividends were paid to shareholders of record as of October 11,
2021 on October 18, 2021.
12
 On November 19, 2021, the BOD of the Parent Company approved the declaration of P0.20 cash
dividends /share for the fourth quarter of 2021 totaling to P1.05 billion. These cash dividends were paid
to shareholders of record as of December 14, 2021 on January 10, 2022.

Subsequent Event
On March 8, 2023, the BOD of the Parent Company approved the declaration of P0.1737 cash dividends
per share for the 1st quarter of 2023 totaling to P914.68 million. These cash dividends will be paid to
shareholders of record as of March 23, 2023 on April 13, 2023.

(4) Recent Sales of Unregistered Securities

On October 14, 2021 SGDI approved the issuance of 62,500,000 common shares, equally divided
between Mr. Sy and Mr. Coyiuto, pursuant to a private placement transaction.

Item 6. Management's Discussion and Analysis or Plan of Operation

On January 1, 2019, the Company entered into a Shared Services Agreement with MOGRC and CHPC. The
Company shall render monthly management consulting and financial advisory services to MOGRC and CHPC
for a period of three (3) years commencing January 1, 2019, unless otherwise cancelled or extended by mutual
agreement of both parties. In consideration of the services rendered, the Company shall receive a monthly fee
of P500,000 from each entity.

On January 22, 2020, the Shared Services Agreement was amended to include the one-time share of MOGRC
and CHPC in the professional fees incurred by the Company in relation to the ongoing processing of share swap
transactions amounting to a total of P16,506,190.

On March 15, 2022, the Shared Services Agreement was replaced with a new Shared Services Agreement with
MOGRC, CHPC, OTHI and P21, wherein the Company shall render monthly management, consulting and
financial advisory services for a period of five (5) years commencing January 1, 2022, unless otherwise
cancelled or extended by mutual agreement of the Company and any of the parties. In consideration of the
services rendered, the Company shall receive a monthly fee of P1,000,000 from each entity.

In addition to the information disclosed above, the Company further discloses that:

a. The Company does not anticipate any cash flow or liquidity problem within the next 12 months.
The Company is not in default in any note, loan, lease or other indebtedness or financing
arrangement requiring it to make payments.

b. The Company does not have or is not aware of any trends, demands commitments, events or
uncertainties that will have a material impact on its liquidity.

c. At present, the Company has no material commitments for any capital expenditure.

The Company will use the proceeds of the FOO to directly subscribe to non-voting preferred
shares that will be issued by NGCP. Proceeds from the issuance of the non-voting preferred
shares will be sued by NGCP to finance its capital expenditure requirements and related costs
and expenses.

d. There are no significant elements of income or loss that did not arise from its operations. For
the past several years, the Company has continuously sustained losses due to lack of income
stream attributable to its non-operation.

On November 10, 2021 SGDI, under the symbol “SGP”, the Company publicly listed its
1,053,500,000 shares from its Follow-On Offering (FOO) on the Philippines Stock Exchange
with overallotment option of up to 101,000,000 secondary shares at P12.00 per common share.

e. All expenses of the Company are current and the Company does not expect any direct or
contingent financial obligation that is substantial or material.
13
 f. The following is an explanation of material changes in certain items of the Company’s financial
statements:

2022 vs. 2021

Intangible Assets-net
Intangible assets as of December 31, 2022 amounted to P331.43 billion, 10.68% higher than P299.46 billion as
of December 31, 2021. The increase is primarily due to the additional expenditures incurred on NGCP priority
and other major projects, such as Cebu-Bohol Interconnection Project, Mindanao-Visayas Interconnection
Project, Hermosa-San Jose 500KV TLP, CNP230KV Bb Proj-Stage3 (Negros-Cebu), Kauswagan-Lala 230KV
TLP, Visayas SS Upgrading Project 2, Mindanao Substation Upgrading Project 2, Mindanao Substation
Expansion 4 Project, South Luzon Substation Upgrading Project 2 and Taguig EHV Substation Project.

Receivables
Receivables as of December 31, 2022 consist of:

Receivables – net of current portion P 13.81 billion

Receivables – current portion 16.63 billion
Total P 30.44 billion

Receivables as of December 31, 2022 amounted to P30.44 billion, 80.55% higher than P16.86 billion as of
December 31, 2021. This is primarily due to the accrual of incremental iMAR 2020 for CY 2020 and 2021.

Other noncurrent assets

Other non-current assets as of December 31, 2022 amounted to P3.62 billion, 18.28% lower than P4.43 billion
as of December 31, 2021. This is primarily due to amortization of deferred Input VAT and reclass of non-current
to current project prepayments.

Cash and cash equivalent

Cash and cash equivalents as of December 31, 2022 amounted to P4.85 billion, 76.42% lower than P20.57
billion as of December 31, 2021. This is mainly due to settlement of liabilities or obligations.

Prepaid expenses and other current assets

Prepaid expenses and other current assets as of December 31, 2022 amounted to P31.62 billion, 22.08% higher
than P25.90 billion as of December 31, 2021. This is primarily due to recording/recognition of Other Deposits -
Court and Project Prepayments.

Loans Payable
Loans Payable as of December 31, 2022 consist of:

Loans Payable – net of current portion P144.47 billion

Current portion of loans payable _22.62 billion_
Total P167.09 billion

Loans Payable as of December 31, 2022 amounted to P167.09 billion, 10.48% higher than P151.24 billion as
of December 31, 2021. This is mainly due to new loan drawn downs to fund additional CAPEX.

Retirement benefits liability

Retirement benefits liability as of December 31. 2022 amounted to P2.09 billion, 0.95% lower than P2.11 billion
as of December 31, 2021. This is due to lesser retirement expense for the period based on the actuarial
valuation for CY2022.

14
Other current and other non-current liabilities
Other Current and noncurrent liabilities as of December 31, 2022 consist of:

Other noncurrent liabilities P1.75 billion

Other current liabilities 16.00 billion
Total P17.75 billion

Other current and other noncurrent liabilities as of December 31, 2022 amounted to P17.75 billion, 11.08%
higher than P15.98 billion as of December 31, 2021. The increase in other current liability is mainly due to
additional retention payable on on-going projects offset by the decrease in other noncurrent liabilities mainly
due to adjustment on the deed of sale of asset acquisitions.

Trade and other current payables

Trade and other current payables as of December 31, 2022 amounted to P39.41 billion, 11.24% lower than
P44.40 billion as of December 31, 2021. This is due to settlement of payables.

Income
Operation services revenues as of December 31, 2022 totaled to P61.82 billion, 27.20% higher than P48.60
billion as of December 31, 2021.

Interest income as of December 31, 2022 totaled to P139.66 million, 117.07% higher than P64.34 million as of
December 31, 2021. This is due to higher short-term investments during the year.

Operating expenses
For the year ended December 31, 2022, Operating Expenses totaled to P20.68 billion, 5.94% higher than
P19.52 billion as of December 31, 2021 primarily because of higher Public Relation and Corporate social
Responsibility, Outside services, Fuel and oil, Communication, light, and water and Insurance offset by lower
Repairs and maintenance.

Public relations and corporate social responsibility for the year ended December 31, 2022 totaled to P681.73
million, 128.18% higher than P298.77 million as of December 31, 2021. This is due to higher expenses and
more programs relating to public relations in 2022.

Outside services for the year ended December 31, 2022 totaled to P408.96 million, 132.64% higher than
P175.79 million as of December 31, 2021. This is due to higher cost of services related to arbitration cases.

Fuel and Oil for the year ended December 31, 2022 totaled to P253.74 million, 69.99% higher than P149.27
million as of December 31, 2021 mainly due to higher gasoline and diesoline prices.

Communication, light and water for the year ended December 31, 2022 totaled to P581.56 million 29.89% higher
than P447.73 million as of December 31, 2021 mainly due to higher station use offset by lower telephone and
internet subscription.

Insurance expense for the year ended December 31, 2022 totaled to P693.85 million, 30.02% higher than
P533.63 million as of December 31, 2021. This is due to higher principal for aviation insurance and higher
medical benefits expenses.

Repairs and maintenance for the year ended December 31, 2022 totaled to P1.47 billion, 18.33% lower than
P1.80 billion as of December 31, 2021 mainly due to lower Maintenance of Transmission Lines and Substation
Equipment.

Interest Expense
Interest Expense for the year ended December 31, 2022 totaled to P5.65 billion, 6.77% lower than P6.06 billion
as of December 31, 2021 mainly due to diminishing balance of loans payable.

15
2021 vs. 2020

Intangible Assets-net
Intangible assets as of December 31, 2021 amounted to P299.46 billion, 11.84% higher than P267.75 billion as
of December 31, 2020. The increase is primarily due to the additional expenditures incurred on NGCP priority
and other major projects, i.e., Mindanao Visayas Interconnection Project (MVIP), Hermosa – San Jose 500 KV
T/L Project, Mariveles – Hermosa 500 KV T/L Project, Cebu – Bohol Interconnection Project (CBIP), Cebu-
Negros-Panay (CNP) Backbone Project Stage 3, Pagbilao EHV Substation & Associated T/L Project, etc.

Receivables
Receivables as of December 31, 2021 consist of:

Receivables – net of current portion P 5.43 billion

Receivables – current portion 11.43 billion
Total P 16.86 billion

Receivables as of December 31, 2021 amounted to P16.86 billion, 23.25% higher than P13.68 billion as of
December 31, 2020. This is primarily due to the accrual of incremental iMAR for 2021.

Other noncurrent assets

Other non-current assets as of December 31, 2021 amounted to P4.43 billion, 2853% higher than P0.15 billion
as of December 31, 2020. This is primarily due to the reclassification of non-current portion of Project
Prepayment.

Cash and cash equivalent

Cash and cash equivalents as of December 31, 2021 amounted to P 20.57 billion, 46.09% higher than P14.08
billion as of December 31, 2020. This is mainly due to FOO proceeds.

Prepaid expenses and other current assets

Prepaid expenses and other current assets as of December 31, 2021 amounted to P25.90 billion, 24.93% lower
than P34.50 billion as of December 31, 2020. This is primarily due to the reclassification of portion of Project
Prepayment to other non-current assets and reclassification of Materials in Transit to Asset Under Construction.

Loans Payable
Loans Payable as of December 31, 2021 consist of:

Loans Payable – net of current portion P 135.86 billion

Current portion of loans payable _15.38 billion_
Total P 151.24 billion

Loans Payable as of December 31, 2021 amounted to P151.24 billion, 11.47% higher than P135.68 billion as
of December 31, 2020. This is mainly due to new loan drawn downs to fund additional CAPEX.

Retirement benefits liability

Retirement benefits liability as of December 31. 2021 amounted to P2.11 billion, 3.94% higher than P2.03 billion
as of December 31, 2020. This is due to additional retirement expense for the period based on the actuarial
valuation for CY2021.

Other current and other non-current liabilities

Other Current and noncurrent liabilities as of December 31, 2021 consist of:

Other noncurrent liabilities P2.69 billion

Other current liabilities 13.29 billion
Total P15.98 billion

16
Other current and other noncurrent liabilities as of December 31, 2021 amounted to P15.98 billion, 37.76%
higher than P11.60 billion as of December 31, 2020. This is due to increase in Retention Payable, Bidder’s Bond
Deposit and Advances for Construction.

Trade and other current payables

Trade and other current payables as of December 31, 2021 amounted to P44.40 billion, 12.82% lower than
P50.93 billion as of December 31, 2020. This is due to settlement of payables.

Income
Operation services revenues as of December 31, 2021 totaled to P48.60 billion, more or less the same with
P48.60 billion as of December 31, 2020.

Interest income as of December 31, 2021 totaled to P64.34 million, 76.20% lower than P270.38 million as of
December 31, 2020. This is due to higher short-term investments during the year.

Operating expenses
For the year ended December 31, 2021, Operating Expenses totaled to P19.52 billion, 2.52% higher than
P19.04 billion as of December 31, 2020 primarily because of higher Amortization of intangible asset, Salaries,
wages, and employees’ benefits, Repairs and maintenance, Communication, light, and water and Insurance
offset by lower Outside services, Representation and entertainment and Donation for COVID19 Preventive
Drive.

Repairs and maintenance for the year ended December 31, 2021 totaled to P1.80 billion, 36.36% higher than
P1.32 billion as of December 31, 2020 mainly due to higher Maintenance of Transmission lines, Computers as
well as Facilities Management expenses.

Communication, light and water for the year ended December 31, 2021 totaled to P447.73 million 31.40% higher
than P340.73 million as of December 31, 2020 due to higher Station use and Internet subscription.

Supplies and tools for the year ended December 31, 2021 totaled to P255.69 million 37.78% higher than
P185.58 million as of December 31, 2020 mainly due to the purchase of Covid19 Vaccines in 2021 and personal
protective equipment.

Fuel and Oil for the year ended December 31, 2021 totaled to P149.27 million, 47.11% higher than P101.47
million as of December 31, 2020 due to higher consumption.

Charitable Contributions for the year ended December 31, 2021 totaled to P5.65 million, 266.88% higher than
P1.54 million as of December 31, 2020 due to higher financial aid.

Donation for Covid 19 for the year ended December 21, 2021 totaled to nil million 100% lower than P942.85
million as of December 31, 2020. No Covid donation was made in 2021.

Interest Expense
Interest Expense for the year ended December 31, 2021 totaled to P6.06 billion, 7.62% lower than P6.56 billion
as of December 31, 2020 due to lower interest rate on PSALM deferred payment.

17
2020 vs. 2019

Assets
Total assets as of December 31, 2020 stood at PhP 344,612.2 million, an increase of 12.11%, or PhP
37,212.5 million, as compared to PhP 307,399.7 million as of December 31, 2019. This increase was due to
the following:

• Intangible asset - net increased by 14.0%, or ₱32,927.0 million, to ₱267,754.7 million as of December
31, 2020 from ₱234,827.7 million as of December 31, 2019 due to an increase in the cost of
completed projects from ₱71,490.9 million as of December 31, 2019 to ₱75,811.4 million as of
December 31, 2020 and an increase in the computer software from ₱383.2 million as of December 31,
2019 to ₱480.1 million as of December 31, 2020, partially offset by an increase in the accumulated
amortization from ₱80,249.2 million as of December 31, 2019 to ₱88,655.9 million as of December
31, 2020.

• Receivables - net increased by 47.8%, or ₱4,391.2 million, to ₱13,577.6 million as of December 31,
2020 from ₱9,186.4 million as of December 31, 2019 mainly due to an increase in the power
receivables from ₱3,894.3 million as of December 31, 2019 to ₱3,980.4 million as of December 31,
2020, an increase in the accrued transmission revenue from ₱1,635.2 million as of December 31,
2019 to ₱4,596.9 million as of December 31, 2020 and an increase in due from customers from
₱2,132.6 million as of December 31, 2019 to ₱2,937.8 million as of December 31, 2020.

• Prepaid expenses and other current assets increased by 6.5%, or ₱2,109.6 million, to ₱34,503.0
million as of December 31, 2020 from ₱32,393.4 million as of December 31, 2019 due to additional
Project prepayments for on-going projects and Other Court Deposits.

The increase was partially offset by the following:

• Property and equipment - net decreased by 4.8%, or ₱201.0 million, to ₱3,974.9 million as of
December 31, 2020 from ₱4,175.9 million as of December 31, 2019 due to the Depreciation for the
period is higher than the additions to Other Utility Plant.

• Receivables - net of current portion decreased by 39.4%, or ₱66.8 million, to ₱102.6 million as of
December 31, 2020 from ₱169.4 million as of December 31, 2019, mainly due to a decrease in
restructured power receivables from ₱1,446.9 million as of December 31, 2019 to ₱1,428.5 million as
of December 31, 2020 and a decrease in power receivables from ₱148.0 million as of December 31,
2019 to ₱118.0 as of December 31, 2020.

• Other noncurrent assets decreased by 8.3%, or ₱13.3 million, to ₱146.5 million as of December 31,
2020 from ₱159.8 million as of December 31, 2019, mainly due to Amortizations for the period.

• Cash and cash equivalents decreased by 12.1%, or ₱1,934.2 million, to ₱14,081.2 million as of
December 31, 2020 from ₱16,015.4 million as of December 31, 2019 due to higher usage on investing
activities and lower cash provided by financing activities.

Liabilities
Total liabilities as of December 31, 2020 stood at ₱254,962.4 million, an increase of 11.3%, or ₱25,901.6 million,
as compared to ₱229,060.8 million as of December 31, 2019. This increase was due to the following:

• Loans payable - net of current portion increased by 5.0%, or ₱5,880.0 million, to ₱122,503.9 million
as of December 31, 2020 from ₱116,623.9 million as of December 31, 2019 mainly due to an
increase in the peso denominated term loan from ₱70,286.2 million as of December 31, 2019 to
₱85,521.3 million as of December 31, 2020.

• Retirement benefits liability increased by 25.4%, or ₱411.2 million, to ₱2,027.1 million as of

December 31, 2020 from ₱1,615.9 million as of December 31, 2019 due to the current service cost,
interest expense and actuarial loss for the period.

18
 • Customers’ and other deposits increased by 16.0%, or ₱55.3 million, to ₱400.9 million as of
December 31, 2020 from ₱345.6 million as of December 31, 2019 mainly due to additional deposits
from customers resulting from higher average billings.

• Trade and other current payables increased by 47.4%, or ₱16,367.5 million, to ₱50,931.4 million as
of December 31, 2020 from ₱34,563.9 million as of December 31, 2019 including accounts payable
₱3.280 million and accruals ₱5,662 million set up for various projects, GRIR balances awaiting
invoices from suppliers ₱5,720 million and payable to Ancillary Service providers/PSALM including
VAT ₱1,000 million.

• Current Portion of loans payable increased by 14.2%, or ₱1,636.6 million, to ₱13,181.5 million as of
December 31, 2020 from ₱11,544.9 million as of December 31, 2019 due to reclassification of Non-
current loans payable account including debt issue cost of ₱13,366 million offset by ₱11,730 million
principal repayments and availment of new loans.

• Other current liabilities, net increased by 19.8%, or ₱1,625.6 million, to ₱9,830.9 million as of
December 31, 2020 from ₱8,205.3 million as of December 31, 2019 due to increase in Retention on
Contract Payments-Current of ₱1,415 billon offset by decrease in Advances for Construction-Current
of ₱22 million and Bidders/Performance/Bond of ₱18 million.

The increase was partially offset by the following:

• Other non-current liabilities decreased 4.0%, or ₱74.6 million, to ₱1,767.7 million as of December
31, 2020 from ₱1,842.3 million as of December 31, 2019 due to reclassification from Non-current to
Current Finance Lease Liability account of ₱59 million and 2nd tranche payment of ₱15 million to
South Luzon Thermal Energy Corporation for the acquisition of Salong Switchyard and 230kV Salong-
Calaca Line.

Revenue - Net
Revenues - Net increased by 7.1% to ₱48,606.6 million in 2020 from ₱45,396.5 million in 2019 primarily driven
by the incremental iMAR for 2020.

The increase in transmission services operating income was primarily due to the incremental iMAR in 2020. Gain
on transmission service decrease due to cessation of contract granting a special rate to Sunpower last
December 2019.

Expenses
Cost and expenses increased by 4 .7 % to ₱19,042.6 in 2020 from ₱18,179.1 million in 2019 primarily due to the
donation to the Government the amount of ₱942.8 million to assist in its efforts to address the COVID-19
pandemic, of which approximately ₱500 million is in the form of food items and relief goods and the rest in
medical supplies and equipment. In addition, there was increased spending on public relations and corporate
social responsibility initiatives, representation and entertainment expenses and outside services in 2020
compared to 2019 because of financial assistance given to employees, meals expenses in relation to COVID-
19 pandemic contingency measures and payment for consultancy services in relation to arbitration.

The increase in cost and expenses primarily due to Donation for COVID-19 Preventive Drive. NGCP donated
₱942.8 million worth of goods and medical equipment in support of the Government’s effort to combat the
outbreak of COVID-19 and to aid medical frontliners.

Other Charges - Net

Other charges - net decreased by 14.9% to ₱6,127.4 million in 2020 from ₱7,196.1 million in 2019, primarily
due to a decrease in interest expense and increase in net foreign exchange gain offset by decrease in interest
income and Miscellaneous income

Interest expense decreased 9.7% to ₱6,556.3 million in 2020 from ₱7,261.8 million in 2019 primarily due to
diminishing outstanding balance of deferred payment on refinancing loan and lower interest on other borrowings
due to delayed completion of projects, resulting in continuous capitalization of interest.

19
Interest income decreased by 22.6% to ₱270.4 million in 2020 from ₱349.4 million in 2019, primarily due to
lower interest rates based on BSP rate cuts.

The Group recorded foreign exchange gain - net of ₱311.9 million in 2020 compared to foreign exchange loss -
net of ₱194.6 million in 2019, primarily due to net effect of decreasing FX rates on settlement of payables related
to various CAPEX projects.

Bank and finance charges increased by 20.1% to ₱224.0 million in 2020 from ₱186.5 million in 2019, primarily
due to new loans availed in 2020.

Loss on disposal of property and equipment decreased to ₱1.3 million in 2020 from ₱7.8 million in 2019, primarily
due to donation of wood poles from the NGCP warehouse.

Miscellaneous income decreased by 31.7% to ₱71.9 million in 2020 from ₱105.2 million in 2019, primarily due
to lower liquidated damages.

Construction Revenue and Costs

Construction revenue and construction costs increased by 27.7%amounting to ₱41,236.9 million in 2020
compared to ₱32,297.8 million in 2019 primarily due to increase in on-going project cost.

Income Tax Expense

Income tax expense decreased to ₱0.8 million in 2020 from ₱1.1 million in 2019, primarily due to lower amount
of income subject to income tax.

Net Income
As a result of the foregoing, net income increased by 17.1% to ₱23,435.8 million in 2020 from ₱20,020.2
million in 2019.

Net Income Attributable to Equity Holders of SGP

Net income attributable to equity holders of SGP increased to P9,394.8 million in 2020 compared to P8,042.1
million in 2019 due to increase in the Group’s net income.

20
Key Performance Indicators

Performance
Formula Year 2022 Year 2021 Year 2020
Indicators

Current Assets /Current 0.68 : 1 0.79 : 1 0.84 : 1

Current Ratio
Liabilities 53,101,150,742 / 57,899,231,311 / 62,161,805,181 /
78,034,429,197 73,063,896,924 73,943,757,666

Total Liabilities / Stockholders 2.06 : 1 2.37 : 1 2.84 : 1

Debt to Equity Ratio
Equity
281,091,862,151 / 268,431,011,636 / 254,962,429,370 /
136,399,949,107 113,400,144,312 89,649,741,335

Asset to Equity Total Asset / Stockholders 3.06 : 1 3.37 : 1 3.84 : 1

Ratio Equity
417,491,811,258 / 381,831,155,948 / 344,612,170,705 /
136,399,949,107 113,400,144,312 89,649,741,335

Equity to Debt Ratio Stockholders Equity / Total 0.49 : 1 0.42 : 1 0.35 : 1

Liabilities
136,399,949,107 / 113,400,144,312 / 89,649,741,335 /
281,091,862,151 268,431,011,636 254,962,429,370

Book Value per Stockholders Equity / Total 17.53 : 1 15.66 : 1 15.48 : 1

share number of shares 92,330,405,404 / 82,480,407,730 / 64,231,198,287 /
5,265,866,000 5,265,866,000 4,149,866,000

2.85 : 1 2.10 : 1 2.26 : 1

Income (Loss) per Net Income (Loss) / Total
share number of shares 15,021,096,101 / 9,124,966,265 / 9,394,804,867 /
5,265,866,000 4,351,491,000 4,149,866,000

Interest Rate 7.14 : 1 4.79 : 1 4.57 : 1

EBIT / Interest Expense
Coverage Ratio
40,351,815,540 / 29,001,741,861 / 29,992,919,376 /
5,648,991,642 6,056,733,815 6,556,328,207

Expenses

The Group incurred recurring normal expenses such as stock listing fees, stock transfer agent fee, lawyer’s
retainer fees, audit fees, business permits, filing fees and other miscellaneous expenses. Operating expenses
for the year ended 2022 amounting to P20.68 billion is higher than the P19.52 billion recorded for the year ended
2021, the increase were mainly due to Taxes and licenses comprises of final taxes on interest earned on
placement of funds and increase in Insurance, Public relation and corporate responsibility, Outside services,
Transportation and travel, Fuel and oil, Salaries and wages, and employee benefits. Operating expenses
amounted to P19.04 billion for the year ended 2020.

Interest and Other Income

The Group earns interest income from its cash deposits with the bank and short-term money placements. The
Group earned P139.66 million, P 64.34 million, and P270.38 million, for the years ended 2022, 2021, and 2020,
respectively.

Assets

Total assets as of December 31, 2022 amounted to P417.49 billion where 87% is noncurrent and 13% is current.
Total assets amounted to P381.83 billion and P344.61 billion, in 2021 and 2020, respectively.

21
Liquidity and Capital Resources

The Company’s principal requirements for the liquidity are mainly for the payment of operating expenses. As of
December 31, 2022, the Company’s current liabilities exceeded the current assets by P24.93 billion. The current
ratio decreased as compared with previous year because of the payment of normal operating expenses of the
Company. At present, the Company is using these funds for its operations.

2022 2021

Current Assets P53,101,150,742 P57,899,231,311

Current Liabilities 78,034,429,199 73,063,896,924
Difference (24,933,278,457) (15,164,665,613)
Current Ratio 0.68:1.00 0.79:1.00

Item 7. Financial Statements

The financial statements and schedules listed in the accompanying Index to Financial Statements and
Supplementary Schedules are filed as part of this Form 17-A.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

During the Annual Stockholders’ meeting held on October 20, 2022, the Corporation appointed R.G. Manabat
& Co. (an affiliate firm of KPMG) as its External Auditor with Mr. Vernilo G. Yu as the partner-in-charge of the
company. There are no changes in and disagreements with accountants on accounting and financial disclosure
during the two most recent fiscal years.

Information on Independent Accountant

(a) Audit and Audit-related fees

For the calendar year 2022, the total amount to be billed by external auditors for professional fees and
other audit related fees are estimated at P1,230,000.00 (VAT Exclusive) plus out-of-pocket expenses.

(b) Tax Fees – none

(c) All other fees – none

22
 PART III - CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Company

(1) Directors and Executive Officers – Position/Other Directorships

The directors listed below have been recently nominated and elected during the Company’s annual
stockholders’ meeting held on October 20, 2022.

The directors serve for a term of one (1) year until the election and acceptance of their qualified successors.

The list below includes the directorships/officerships held by the Company’s directors for 2021 in other
corporations. Most of these directorships/officerships have been held by the directors for the past five (5) years
to the present.

Director (Age)-Citizenship Position in Company/

Position/Other Directorship

Henry Sy, Jr. Chairman, SM Prime Holdings, Inc.

Director, Chairman Vice Chairman, SM Investments Corporation
of the Board Director, Chairman, President, Monte Oro Grid Resources Corporation
Filipino Director, Chairman, President, Onetaipan Holdings, Inc.
Chairman, Chief Executive Officer, SM Development Corporation
Vice Chairman, National Grid Corporation of the Philippines
Chairman, Bigboss Cement Inc.
Chairman, President, Bigboss Holdings, Inc.
Chairman, President, Cutad, Inc.
Chairman, President, HSBB, Inc.
Chairman, President, PJ Realty Development Corp.
Director, Sybase Equity Investment Corp.
Director, Multi-Realty Development Corp.

Robert G. Coyiuto, Jr. Director, Chairman, President, Calaca High Power Corporation
Director, Vice-Chairman of Director, Chairman, President, Pacifica21 Holdings, Inc.
the Board Director, Chairman, Prudential Guarantee & Assurance, Inc.
Filipino Director, Chairman, PGA Automobile, Inc.
Director, Chairman, PGA Cars, Inc.
Director, Vice Chairman, National Grid Corporation of the Philippines, Chairman of
Accreditation, Bids Evaluation and Award Committee of NGCP (ABEAC)
Director, Vice Chairman, First Life Financial Co., Inc.
Director, President, Chief Operating Officer, Oriental Petroleum & Minerals
Corporation
Director, Chairman, PGA Sompo Insurance Corporation
Director, Canon (Philippines), Inc.
Director, Petrogen Insurance Corporation
Member of Philippine Stock Exchange

Vicente D. Gerochi IV Senior Partner, SyCip Salazar Hernandez & Gatmaitan

Director Director and Corporate Secretary, Becton Dickinson Phils., Inc.
Filipino Director, Land Registration Systems, Inc.
Corporate Secretary, OMD Philippines, Inc.
Corporate Secretary, Omnicom Media Group Philippines, Inc.

Paul Sagayo, Jr. Partner, Sagayo, Evangelista and Rebuelta Law Offices
Director, President & Director, National Grid Corporation of the Philippines
Chief Executive Officer Director, Calaca High Power Corporation
Filipino Director, Pacifica21 Holdings, Inc.
Director, Beneficial Life Insurance, Inc.
Director, ETC Realty Corporation
Director, FMF Development Corporation
BOT Secretary, Trinity University of Asia
Corporate Secretary, JCF Investment Holdings, Inc.
Corporate Secretary, Bernano Hodlings, Inc.

23
 Jose Perpetuo M. Lotilla Director, Carabineros Development Inc.
Independent Director Director, Security Bank
Filipino Director, Philippine Commercial Capital, Inc.

Francis Saturnino C. Juan Energy Consultant and Lawyer, Juan Law Office
Independent Director Director and Treasurer, Annaben Development Corporation
Filipino President, Chief Executive Officer, Power Marketplace and Exchange Corporation

Luis Jose P. Ferrer Member, Board of Trustees of The Philippine Foundation of the Brotherhood of
Independent Director Christian Businessmen and Professionals, Inc. (BCBP)
Filipino Member, Tax Committee of the Philippine Chamber of Commerce and Industry
Faculty Member, University of the Philippines - Diliman, College of Law
Lecturer, Philippine Judicial Academy
Senior Counsel, Carag Zaballero Llamado & Abiera Law Offices
Tax Partner and Head of Tax Services, SGV & Co.
Chairman, Legislation and Taxation Committee of the Philippines Institute of Certified
Public Accountants

Note: The directors of the Company are elected at the annual stockholders’ meeting to hold office until the next
annual meeting and until their respective successors have been elected and qualified.

(2) Significant Employees

The Company has a President/Chief Operating Officer, Treasurer/Chief Finance Officer, Comptroller, and Audit
and Risk Officer.

(3) Family Relationships

The directors, executive officers, or persons nominated or chosen by the Company to become directors or
executive officers are not related up to the fourth civil degree either by consanguinity or affinity.

(4) Involvement in Certain Legal Proceedings

There has been no occurrence of any of the following events during the past five (5) years that are material to
an evaluation of the ability or integrity of any director, person nominated to become a director, executive officer
or control person of the Company:

a) Any bankruptcy petition filed by or against any business of which such person was a general partner or
executive officer either at the time of the bankruptcy or within two years prior to that time;

b) Any conviction by final judgment, in a criminal proceeding, domestic or foreign, or being subject to a
pending criminal proceeding, domestic or foreign, excluding traffic violations and other minor offenses;

c) Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of
any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business, securities, commodities or
banking activities and;

d) Being found by a domestic or foreign court of competent jurisdiction (in a civil action), the Commission
or comparable foreign body, or a domestic or foreign Exchange or other organized trading market or
self-regulatory organization, to have violated a securities or commodities law or regulation, and the
judgment has not been reversed, suspended, or vacated.

24
Item 10. Executive Compensation

For the calendar years ended 2022, 2021, and 2020, the total salaries, allowances, and bonuses paid to the
directors and executive officers of the Issuer are as follows: to the Company’s Chief Executive Officer and four
most highly compensated executive officers.

SUMMARY COMPENSATION TABLE

Year 2020-2022 Annual Compensation
Other Annual
Year Salary (P) Bonus (P) Compensatio
n
President and CEO and top four 2020 0.00 0.00 0.00
most highly compensated 2021 11,159,312.00 11,000,000.00 23,084,088.00
executive officers (total 2022 58,376,728.92 13,123,989.50 36,716,904.76
compensation)

The directors and executive officers of SGP did not receive any compensation prior to August 2021. Prior to
implementation of this Offer, the Comptroller was not classified as an Executive Officer as she was the only
employee of the Company. At the Special Meeting of the Board of Directors held on August 10, 2021, the Board
approved a schedule of per diem compensation for its members as discussed below. At the Organizational
Meeting of the Board of Directors held on September 27, 2021, the Board, upon recommendation of the
Corporate Governance Committee, approved the executive compensation of the Chairman, Vice Chairman,
President and CEO, and Treasurer, CFO, and IRO. The compensation of P108,217,623.18 pertains to total
annual compensation of the Chairman, Vice Chairman, President and CEO, and Treasurer, CFO, IRO, and
Comptroller.

Other than a per diem of Php 50,000.00 per Board meeting, a per diem of Php 40,000.00 per Committee meeting
for the relevant Committee Chairman and a per diem of PhP 30,000.00 Committtee meeting for the relevant
Committee members, effective August 10, 2021, there is no arrangement pursuant to which directors of the
Company are compensated, directly or indirectly, for any services provided as a director, including any additional
amounts payable for committee participation or special assignments, for the last completed fiscal year and the
ensuing year.

Item 11. Security Ownership of Certain Beneficial Owners and Management

(1) Security Ownership of Certain Record and Beneficial (“R&B”) Owners

(As of December 31, 2022) *

Title of Name and address No. of Shares and Nature of Citizenship Percentage to
class Ownership Equity
Common Henry Sy, Jr. 2,050,464,288 (R&B) Filipino 38.94%
One Esplanade,
Seaside cor. JW
Diokno Blvd. SM Mall
of Asia Complex Pasay
City Philippines
Common Robert Coyiuto, Jr.. 2,050,464,450 (R&B) Filipino 38.94%
1385 Palm Avenue,
Dasmarinas Village,
Makati City, Philippines

*See Note in Item 5(2)

Except as stated above, the Board and Management of SGP have no knowledge of any person who is directly
or indirectly the beneficial owner of more than 5% of SGP’s outstanding shares of common stock or who has
voting power or investment power with respect to shares comprising more than 5% of SGP’s outstanding
common stock.

25
(2) Security Ownership of Management (Other than Nominees)
(as of December 31, 2022)*

Title of Name of beneficial owner Amount and nature of Citizenship Percent

class ownership of class
Common Henry Sy, Jr. 2,050,200,000 shares (R&B) Filipino 38.94%
Common Robert G. Coyiuto, Jr. 2,050,200,010 shares (R&B) Filipino 38.94%
Common Paul P. Sagayo, Jr. 1 shares (R&B) Filipino
Common Vicente D. Gerochi IV 1 shares (R&B) Filipino
Common Jose Perpetuo M. Lotilla 2 shares (R&B) Filipino
Common Luis Jose P. Ferrer 1 shares (R&B) Filipino
Common Francis Saturnino C. Juan 1 shares (R&B)
Common Cheryl S. Saldaña-De Leon 7 shares (R&B) Filipino
Total 4,100,400,023 shares 77.88%

*See Note in Item 5(2)

(3) Voting Trust Holders of 5% or More

There are no persons holding more than 5% of a class under a voting trust or similar agreement.

(4) Changes in Control

There are no arrangements, which may result in changes in control of Company.

Item 12. Certain Relationships and Related Transactions

On October 20, 2020, the Company received advances from its two (2) major shareholders amounting to a total
of Php250,051,483 to be used by the Company as its source of fund in relation to the ongoing processes of
share swap transactions. These advances are paid on September 23, 2021.

The Group, through NGCP, has related party transactions with Prudential Guaranty Assurance, Inc. (PGAI)
amounting to P476.12 million, P319.75 million and P282.06 million on 2022, 2021 and 2020, respectively,
representing insurance premiums. The outstanding insurance payable to PGAI amounting to P1.99 million and
P4.15 million as of December 31, 2022 and 2021, respectively, are recorded under the “Trade and other current
payables” account in the consolidated statements of financial position. This pertains to motor vehicle insurance,
aviation, commercial general liability insurance, PGA protect, motor comprehensive, industrial all risk,
engineering electronic equipment insurance and warehouse insurance in nature.

The Group, through NGCP, also has existing lease agreement for parking space with SM Development
Corporation (SMDC) amounting to P6.74 million, P6.74 million and P3.37 million in 2022, 2021 and 2020,
respectively. The outstanding balance payable to SMDC amounting to null and P1.71 million as of December
31, 2022 and 2021, respectively, are recorded under the “Trade and other current payables” account in the
consolidated statements of financial position.

26
 PART IV – CORPORATE GOVERNANCE

Item 13. Corporate Governance

On June 21, 2010, SGP submitted its Manual of Corporate Governance (the Manual) to the SEC and PSE in
compliance with SEC Memorandum Circular No. 6 Series of 2009.

The Company has in place a performance evaluation system for corporate governance. The Compliance Officer
regularly monitors and evaluates the Board of Directors’ compliance with the Manual.

There are no major deviations from the Manual as of the date of this report.

The Board of Directors regularly reviews the Manual to ensure that the same remains relevant, is responsive to
the needs of the organization, and is compliant with regulatory requirements.

On September 28, 2012, the Audit Committee of the Company approved the Audit Committee Charter. The
members of the Audit Committee shall conduct an annual self-assessment required under SEC Memorandum
Circular No. 4 Series of 2012 and the Audit Committee Charter.

On 24 March 2021, the Company filed its Material Related Transaction Policy dated 25 September 2020 with
the SEC.

On 27 September 2021, the Company approved its revised Audit and Risk Committee Charter.

For the year 2022, the Company timely filed its i-ACGR on 30 May 2022.

PART V - EXHIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17-C

(1) Exhibits

See accompanying Index to Exhibits

(2) Reports on SEC Form 17-C

On the following date, SGP filed SEC Form 17-C:

(1) 31 January 2022 - Annual Progress Report on Application of FOO Proceeds

(2) 24 March 2022 - Declaration of 1st Quarter Dividends
(3) 04 April 2022 - Approval of separate and consolidated Audited Financial Statements for the
year ended 31 December 2021 and approval of subscription to 203,630,000 non-voting
preferred shares to be issued by the National Grid Corporation of the Philippines (NGCP) with
a par value of PhP1.00 per share
(4) 12 April 2022 - Quarterly Progress Report on Application of FOO Proceeds
(5) 11 May 2022 - Approval of quarterly financial reports as of 31 March 2022
(6) 08 June 2022 - Approval of SEC of amendment of Articles of Incorporation and Increase in
Authorized Capital Stock of NGCP and Payment of Corporation of Three Billion Fifty-Nine
Million Five Hundred Forty Thousand Seven Hundred Fifty Pesos (PhP3,059,540,750.00) in
cash, representing twenty-five percent (25%) of the total subscription price in the approved
amendment of AOI and increase in ACS
(7) 10 June 2022 - Terms and conditions of the subscription to non-voting preferred shares of
NGCP
(8) 22 June 2022 - Declaration of 2nd Quarter Dividends

27
(9) 24 June 2022 - Order dated May 26, 2022 (received on 24 June 2022), promulgated on June
21, 2022, the Energy Regulatory Commission (ERC) declared that the acquisition by Synergy
Grid & Development Phils., Inc. (SGP or Company) of 40.20% of the outstanding capital stock
of the National Grid Corporation of the Philippines (NGCP) satisfies the dispersal of
ownership requirement under Section 8 of Republic Act No. 9511
(10) 14 July 2022 - Quarterly Progress Report on Application of FOO Proceeds
(11) 11 August 2022 - Approval of quarterly financial reports as of 30 June 2022 and Notice of
Annual Stockholders’ Meeting
(12) 21 September 2022 – Declaration of 3rd Quarter Dividends
(13) 20 October 2022 - Annual Meeting of the Stockholders and Organizational Meeting of the Board
of Directors
(14) 09 November 2022 - Approval of quarterly financial reports as of 30 September 2022 and
imposition of penalty on NGCP by ERC
(15) 07 December 2022 - Declaration of 4th Quarter Dividends

28
 SIGNATURES

Pursuant to the requirements of Section 17 of the Code and Section 141 of the Corporation Code, this report is
signed on behalf of the issuer by the undersigned, thereunto duly authorized, in the Cig of Pasig on

f,^^l S13p\ t
PAUL P. SAGAYOIJR. LADY P. SORIANO
President OfficerlTreasurer

MA.
w/tuh-/4
CHERYL SALDANA.DE LEON
Corporate Secretary

SUBSCRIBED AND SWORN to before me thl{AR

t 9 o#$ zoz3, arfiant(s) exhibitins to me
the following:

Name Competent Evidence of ldentity

PAUL P, SAGAYO, JR. Philippine Passport No. P7432752A issued on 04 June
2018lManila
TrN 200-383-080
JUSTICE LADY P. SORIANO Philippine Passport No. P03816018 issued on 24 January
20191Manila
TtN 147-694-879
CHERYL SALDAIIA-DE LEON Philippine Passport f{o. P96880078 issued on 20 April
2022INCR East
TtN 202-946€57
MA. THERESITA YULO Philippine Passport No. P14902108 issued on 17 Aprit
2019/Antipolo
TIN 150-025-099

,,i'l-=i--V
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Paoe No. -W-,
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Series ot 2A23. IEF Nc}" *1i17' illii..Ian. {ii, 2(}?i}
MOLE Cornr,. Iric. Y{i-{}ilt}{}til,jrttti$l?l12ti'il 4 4l t$l 20W
Adm. Ldatter Nr}. trl}tii,:i){{gi-}9?,-H{.)23}
2S Kamagong St, $apanmrui Vili. &;rst Fhlview &e,
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 SYNERGY GRID & DEVELOPMENT PHILS., INC.
Index to Financial Statements and Supplementary Schedules
Form 17-A, Item 7

Financial Statements Page No.

Statement of Management’s Responsibility for Financial Statements

Report of Independent Public Accountants

Balance Sheets as of December 31, 2022 and December 31, 2021

Statements of Operations for the Year Ended December 31, 2022, the
Year Ended December 31, 2021 and the Year Ended December 31,
2020
Statements of Changes in Equity

Statement of Cash Flows

Notes to Financial Statements

30
 C O V E R S H E E T
for
AUDITED FINANCIAL STATEMENTS
SEC Registration Number

C S 1 9 7 0 4 1 3 7 6

COMPANY NAME

S Y N E R G Y G R I D & D E V E L O P M E N T

P H I L S . , I N C A N D S U B S I D I A R I E S

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province)

U n i t 1 6 0 2 , 1 6 t h F l o o r , T y c o o n

C e n t e r B l d g . C o n d o m i n i u m

P e a r l D r i v e , P a s i g C i t y

M e t r o M a n i l a
Form Type Department requiring the report Secondary License Type, If Applicable

A A F S

COMPANY INFORMATION
Company's email Address Company's Telephone Number/s Mobile Number

[email protected] 8584-39-30

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

December 31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation

Name of Contact Person Email Address Telephone Number/s Mobile Number

Ma. Theresita Yulo [email protected] 8584-3930

CONTACT PERSON's ADDRESS

Note 1: In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the
Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person
designated.
2: All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation's records with
the Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from
liability for its deficiencies.
SYNERGY GRID &
DEVELOPVIENT PHILS., INC AND
SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31,2022,2021 and 2020

With lndependent Auditors' Report

 R.G. Manabat & Co
The KPMG Center, 6/F
6787 Ayala Avenue, Makati City
Philippines 1209
Telephone +63 (2) 8885 7000
Fax +63 (2) 8894 1985
lnternet www.home.kpmg/ph
Email [email protected]

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders

Synergy Grid & Development Phils., lnc.
Unit 1602,16th floor
Tycoon Center Bldg. Condominium
Pearl Drive Pasig City, Metro Manila

Opinion

We have audited the financial statements of Synergy Grid & Development Phils., lnc.
and Subsidiaries (the "Group"), which comprise the consolidated statements of financial
position as at December 31 ,2022 and 2021, and the consolidated statements of
income, consolidated statements of comprehensive income, consolidated statements of
changes in equity and consolidated statements of cash flows for each of the three years
in the period ended December 31,2022, and notes, comprising significant accounting
policies and other explanatory information.

ln our opinion, the accompanying consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Group as at December 31,
2022 and 2021, and its consolidated financial performance and its consolidated cash
flows for each of the three years in the period ended December 31,2022, in accordance
with Philippine Financial Reporting Standards (PFRSS).

Basr's for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSA).

Our responsibilities under those standards are further described in the Auditors'
Responsibilities for the Audit of the Consolidated Financial Sfafemenfs section of our
report. We are independent of the Group in accordance with the Code of Ethics for
Professional Accountants in the Philippines (Code of Ethics) together with the ethical
requirements that are relevant to our audit of the consolidated financial statements in the
Philippines, and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the Code of Ethics. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.

Firm Regulatory Registralion & Accreditalion:

PRC-BOA Registration No 0003. valid until November 21 . 2023
SEC Accreditation N0 0003-5EC, Grou0 A, valid for five (5) years covering the audit of 2020 to 2024
financial statements (20'19 financial statements are covered by SEC Accreditation No. 0004-FR-5)
lC Accreditation N0. 0003-lC, Group A, valid for five (5) years covering the audit of 2020 to 2024
flnancial statements (2019 financial statements are cover€d by lC Circular Letter (CL) No. 2019-3S, Transition clause)
BSP Accreditation I'io. 0003-BSP, Group A, valid lor five (5) years covering lhe audit 0f 2020 t0 2024
financial statements (2019 financial statements are covered by BSP f\,{onetary Board Resolution No. 2161, Transition clause)

R.O Manabat&Co..aPhitippinepadnershlpandameffberfrmolheKPMGglobalorganizationorindependentmemberlirms
atfilialed with KPMG lnternational Limlted, a pnvate English company llmlted by guarantee
wilE
Key Audit Matters

Key audit matters are those matters that, in our professionaljudgment, were of most
significance in our audit of the consolidated financial statements of the current period.
These matters were addressed in the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.

Accounting for lntangible Assef

Refer to Note 8, lntangible Asset - net, to the consolidated financial statements

The Risk
The Group has lntangible asset amounting to P331.43 billion as at December 31,
2022 which mainly consists of assets related to the transmission projects pursuant to
the Concession Agreement entered into by the Group with PSALM and TRANSCO.
The accounting for intangible asset involves significant management judgement
particularly in the determination of the completeness and appropriateness of the
costs recognized related to approved capital expenditures, assessment of work
completion and allocation of related costs that need to be capitalized in accordance
with IFRIC 12, Service Concession Arrangements.

[/loreover, due to the materiality of intangible asset in the consolidated financial

statements, it is deemed as one of our key audit matters.

Our response
Our audit procedures included

I We assessed the operating effectiveness of key controls in respect to the

appropriateness of completeness of the costs recognized related to approved
capital expenditures;
We assessed whether the Group's capitalization of intangible asset is in
accordance with IFRIC 12by obtaining and reviewing sampleconstruction
contracts;
T We performed cut-off testing to check whether transactions were recorded in
the appropriate accounting period by checking the transactions subsequent
to year end within the relevant period and verifying contracts, work statusand
other relevant documentation on a sample basis.
We have also evaluated the appropriateness and adequacy of the
presentation and the relevant disclosures in the consolidated financial
statements.

Valuation of Goodwill
Refer to Note 9, Goodwill, to the consolidated financial statements

The Group has goodwill amounting to P10.47 billion arising from several business
acquisitions. The annual impairment testing in accordance with Philippine
Accounting Standard 36, lmpairmenf of Assefs, is complex by nature and involves
significant management judgment and assumptions on future market and/or
economic conditions. The assumptions include cash flow projections, growth rates
and discount rates.
WME

Our response
Our procedures included:

We tested the integrity of the Group's discounted cash flow model. This
involved using our valuation specialists assessing and challenging the
methodology and key assumptions used by the Group in preparing the
discounted cash flows;

We compared the Group's assumptions to historical results and externally

derived data such as projected economic growth, competition, cost inflation
and discount rates, as well as performing break-even analysis on the
assumptions;

We also evaluated the adequacy of the disclosures in respect to the

sensitivity of the outcome of the impairment assessment to changes in key
assumptions used in the valuation of goodwill.

Other lnformation

Management is responsible for the other information. The other information comprises
the information included in the SEC Form 20-lS (Definitive lnformation Statement), SEC
Form 17-A and Annual Report for the year ended December 31 , 2022, but does not
include the consolidated financial statements and our auditors' report thereon. The SEC
Form 20-lS (Definitive lnformation Statement), SEC Form 17-A and Annual Report for
the year ended December 31,2022 are expected to be made available to us after the
date of this auditors' report.

Our opinion on the consolidated financial statements does not cover the other
information and we will not express any form of assurance conclusion thereon.

ln connection with our audits of the consolidated financial statementsr our responsibility
is to read the other information identified above when it becomes available and, in doing
so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audits or othennrise
appears to be materially misstated.

When we read the other information mentioned above, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to those
charged with governance.

Responsrbilities of Management and Those Charged with Governance for the

Con sol id ated F i n an ci al Statem e nts

Management is responsible for the preparation and fair presentation of the consolidated
financial statements in accordance with PFRSs, and for such internal control as
management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or
error.

ln preparing the consolidated financial statements, management is responsible for

assessing the Group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
WME

Those charged with governance are responsible for overseeing the Group's financial
reporting process.

Auditors'Responsibilities for the Audit of the Consolidated FinancialSfafemenfs

Our objectives are to obtain reasonable assurance about whether the consolidated
financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditors' report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with PSAs will always detect a material misstatement when itexists.
Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with PSAs, we exercise professionaljudgment and

maintain professional skepticism throughout the audit. We also:

ldentify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.

Obtain an understanding of internal control relevant to the audit in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group's internalcontrol.

I Evaluate the appropriateness of accounting policies used and the reasonablenessof

accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management's use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubton
the Group's ability to continue as a going concern. lf we conclude that a material
uncertainty exists, we are required to draw attention in our auditors' report to the
related disclosures in the consolidated financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditors' report. However, future events or
conditions may cause the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial
statements represent the underlying transactions and events in a manner that
achieves fair presentation.

I Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit
opinion.
WME
We communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied
with relevant ethical requirements regarding independence, and communicate with them
all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related actions taken to eliminate threats or
safeguards applied.

From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit matters. We describe
these matters in our auditors' report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that matter
should not be communicated in our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public interest benefits of such
communication.

The engagement partner on the audit resulting in this independent auditors' report is
Mr. Vernilo G. Yu.

R.G. MANABAT & CO

LO G. YU
Partner
CPA License No. 108798
SEC Accreditation No. 1815-A, Group A, valid untilAugust20,2023
Tax Identification No, 225-454-652
Bl R Accreditation No. 08-001 987 -035-2021
lssued June 29, 2021; vaiid until June 28, 2024
PTR No. N/KT 95,63856
lssued January 3,2023 at Makati City

April 14,2023
Makati City, Metro Manila
 Synergy Grid & Development Phils.,lnc.
1 60 1 -1602 Tycoon Centre

Pearl Drive Ortigas Center

SYNERGY
Grid & Developm€nt Phll3., lnc. San Antonio, Pasig City, Philippines

STATEMENT OF MANAGEMENT'S RESPONSIBILITY

FOR FINANCIAL STATEMENTS

The Management of Synersv Grid & Development Phils." Inc & Subsidiaries (the "Group") is
responsible for the preparation and fair presentation of the financial statements including the schedules
attached therein, as at and for the years ended December 31, 2022 and 2021, in accordance with the
prescribed financial reporting framework indicated therein, and for such internal control as management
determines is necessary to enable the preparation of financial statements that are fiee form material
misstatemertt, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to
continue as a going concem, disclosing, as applicable matters related to going concem and using the
going concern basis of accounting unless management either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.

T'he Board of Directors is responsible for overseeing the Company's financial reporting process.

The Board of Directors reviews and approves the financial statements the financial statements including
the schedules attached therein. and subrnits the same to the Stockholders.

R. G. Manabat & Co., the independent auditor appointed by the Stockholders, has audited the financial
statements of the Clompany in accordance with Philippine Standards on Auditing, and in its report to the
has expressed its opinion on the fairness of presentation upon completion of such audit.

flo.r$, +-"N.=P)
PATIL SAGAYO,YR.
President & CEO

LADY SORIANO
& CFO
'i:,'i.):iir MAR eg ffB;
Signed this 29'h day of Marclt 2023 - , :'

Doc. No.
Page No. tlU
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 SYNERGY GRID & DEVELOPMENT PHILS., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31

Nofe 2022 2021

ASSETS
Noncurrent Assets
lntangible asset - net 5, 8, 26 P331,425,647,245 P299,463,741,409
Goodwill 9 10,471,611,069 10,471,611,069
net
Property and equipment - 10 5,064,830,164 4,130,585,421
portion
Receivables - net of current 12, 24 13,812,574,882 5,434,560,775
Other noncurrentassets 73 3,615,997,156 4,431 ,425,963
Total Noncurrent AsseG 364,390,660,516 323,931 ,924,637

Current Assets
Cash and cash equivalents 11, 24 4,849,929,077 20,573,760,424
Receivables - net 12,24 16,631,314,252 11,427,365,264
Prepqld slpgllgq and other current assets 13 311,619,907,413 25,898,105,623
Total Current Assets 53,101,150,742 57,899,231,311
P417,491,811,258 P381,831,1 55,948

LIABILITIES AND EQUITY

Noncurrent Liabilities
Loans payable - net of current portion 14, 24 P144,472,062,385 P135,857,153,722
Retirement beneflts liability 23 2,094,835,424 2,114,687,362
Customers' and other deposits 24 422,698,651 389,336,529
Concession fee payable 5,24 54,319,128,352 54,319,128,352
Other noncurrent liabilities 16,24 1,749,708,142 2,686,808,747
Total Noncurrent Liabilities 203,057,432,954 195,367,1 14,712

Gurrent Liabilities
Trade and other current payables 1 5, 22, 24, 25 39,409,782,757 44,397,585,685
Current portion of loans payable 14,24 22,619,438,229 15,379,916,893
Other current liabilities 16,24 I
16,005,208,21 13,287,394,346
Total Current Liabilities 78,034,429,197 73,063,896,924
Total Liabilities 281,09'1,862,151 268,431 ,01 1 ,636
Equity
Capital stock 17 5,265,866,000 5,265,866,000
Additional paid-in capital 17 88,928,018,694 88,928,018,694
Remeasurements on defined beneflt liability 23 (15,331,402) (1 10,096,975)
Equity adjustments from common control
transactions 6 (73,359,171,000) (73,359,171 ,000)
Retained earnings 17 71,511,023,112 61,755,793,011
Equity Attributable to Equity Holders of the
Parent Company 92,330,405,404 82,480,407,730
Non-cq4trolling I nteres'ls 6, 7 44,069,543,703 30,919,736,582
Total Equity 136,399,949,107 113,400,144,312
P417,49ra,811,258 P381,831,1 55,948

See Notes to the Consolidated Financial Slatements.

 SYNERGY GRID & DEVELOPMENT PHILS. , INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INGOME

Years Ended December 31

llofe 2022 2021 2020

REVENUES 20 P61 1,367,993 P48,604,206,642 P48,606,604,103
EXPENSES
Amortization of intangible asset 8 8,967,36',1,234 8,787,319,948 9,406,714,719
Salaries, wages and employee
benefits 23 4,865,776,722 4,691,447,813 4,433,624,640
Repairs and maintenance 1,473,362,816 1,799,320,650 1,320,929,151
Donation for COVID-19 preventive
drive 27 942,846,200
Depreciation 3, 10 705,731,012 612,419,001 670,689,097
Supervision and regulatory fees 468,433,750 468,433,750 468,433,750
lnsurance 693,849,145 533,634,921 455,288,210
Security and janitorial 451,460,678 480,569,408 434,804,117
Communication, light and water 581,555,973 447,733,565 340,727,501
Public relation and corporate
social responsibility 681,725,902 298,774,240 321,477,089
Outside services 408,959,180 175,787,327 236,634,990
Transportation and travel 331,600,860 235,646,261 187,711,570
Supplies and tools 209,577,433 255,686,888 185,577,'196
Representation and entertainment 103,818,942 107,822,495 168,342,240
Fuel and oil 253,744,891 149,272j20 101,473,574
Rent 3, 22 100,859,453 94,305,241 98,900,798
Provision for impairment losses on
receivables 12 64,670,000 64,670,000 64,670,000
Taxes and licenses {25,587,393 56,923,750 66,569,533
Professional fees 49,466,652 63,364,222 69,326,446
Meetings and conferences 28,190,411 23,662,311 20,012,441
Advertising 18,179,927 16,712,065 18,637,731
Director's fee 35,520,000 20,820,000 '15,000,000
Charitable contributions 6,711,957 5,649,624 1,542,853
Filing fees 2,024,568 125,404,165 1,283,162
Miscellaneous 50,468,728 1,242,449 11,464,088
20,678,636,527 19,516,622,214 19,042,581,096
INCOME FROM OPERATIONS 41,142,731,466 29,087,584,428 29,564,023,007
OTHER CHARGES - Net
lnterest income 11 139,664,024 64,337,554 270,383,237
lnterest expense 3, 5, 14 (5,648,991,642) (6,056,733,815) (6,556,328,207)
Foreign exchange gain (loss) - net 24 (905,638,788) (244,628,027) 311,911,697
Bank and finance charges 14 1226,191,4231 (224,999,243) (223,957,247\
Loss on disposal of property and
equipment (1 ,316,231)
Miscellaneous income 201,250,261 319,447,149 71,874,913
(6,439,907,568) (6,142,576,382) (6,127,431,838)
GONSTRUCTION REVENUE
AND COSTS
Construction revenue 40,921,410,818 40,496,333,357 41,236,872,447
Construction costs O,81 8) (40,496,333,357) (4 1,236, 872,447)
t!q921,4',t

Foruvard
 Years Ended December 31

Nofe 2022 2021 2020

NET INCOME BEFORE TAX P34,7 02,823,89E P22,945, 008, 046 P23,436, 59 1, 1 69
INCOME TAX EXPENSE 17,523,836 2,434,757 799,448
NET INCOME P34,685, 300,062 P22,942,57 3,289 P23,435,7 I 1,7 21

Attributable to:
Equity holders of the Parent Company P15,021,096,101 P9,124,966,265 P9,394,804,867
Non-controllinq interests {9 203.96,1 13.817.607.024 14.040,986,854
p34,685,300,062 P22,942,57 3,289 P23,435,7 91,7 21

BASIC AND DILUTED

EARNINGS PER SHARE 18 P2.85 P2.10 P2.26

See Notes to the Consolidated Financial Statemenfs.

 SYNERGY GRID & DEVELOPMENT PHI LS., !NC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

IVofe 2022 2021 2020

NET INCOME P34,685,300,062 P 22,9 42,57 3,289 P 23,435,7 I 1,7 21
OTHER COMPREHENSIVE
rNcoME (LOSS)
Item thatwill never be
reclassified to profit orloss
Remeasurement gain (losses) on
defined benefit liability 23 239,273,933 1O4,158,044 (184,936,363)
TOTAL COMPREHENSIVE
INCOME P34,924,573,995 P23,046,731,333 P23,250,855,358

Aftributable to:
Equity holders of the Parent Company P15,1 15,863,674 P9,166,837,799 P9,320,460,449
Non-controlli nq interests 1 OE .710.321 13.E79,893,534 13.930.394,909
P34,924,573,995 P23,046,731,333 P23,250,855,358

See Notes to the Consolidated Financial Sfatemenfs,

 SYNERGY GRID & DEVELOPMENT PHILS., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Years Ended December 31

Equity Remeasurement
AdJustments From Gains (Losses)
Capital Stock Addilional Common Control on Deflned Retained Non-controlllng
/Vofe 1Ns!e 17) E4id:!! Clpttll Transactions Benefit Llablllty Earnlngs Total lnteresG Total Equity

As at January 1, 2022 P5,265,866,000 P88,928,018,694 .r7r.0001 tp110.098.975t P61.755.793.0't't P82.480.407.730 P30.919.736.582 P11?.400.144.312

Total Comprehensive lncome

Net incorne for the year 15,021,096,101 15,021,096,101 19,664,203,951 34,685,300,062
Olher comprehensive income:
23
Total Comprehensive lncome for the Year 94,767,573 15,021,096,101 15,115,863,674 19,808,710,321 34,924,s73,995

Transactions with Owners oflhe Group

Dividends 17 (5.265,866.000) (5.265.866.000) (6.658.903.200) (1 1.924.769.200)
Balance at December 31, 2022 P5,265,865,000 P88,928,0't 8,694 (P73,359,171,000) (P1 5,331,402) P7 1,s11,023,112 P92,330,405,404 P44,069,543,703 Pl 35,399,949,1 07

See lvoles fo the Consolidated Financial Statements.

 SYNERGY GRID & DEVELOPMENT PHILS., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Years Ended December 31

Equity Remeasuremenl
Adjustmenls From Gains (Losses)
CapitalStock Additional Common Control on Derined Relained Non-controlling
Note (Note 17) Paid-in Capital Transactions Benefit Liabilitv Earninqs Total lnterests Total Equity

A..tJ-6nr,2rDr P4.149.36.@0 Pruolim.mo rP73,!5€.171,O001 1P151.970.50o) P553aatB,79B P64,2r1,1962r7 P25,416643.94 ru9,649,21i,355

Id.lcornh4lBrllm
N.r hmtuth.yd e,i2t,8,265 s,124,$6265 13,317€07.@,1 22,e12Ftl2'9
Olh4c4r!.*.nrk tme
R e.ErE bronddEdbqr.ftlldnh 23 - - 41,3?1,59 - ,11.371534 62246.510 104154,04{
toEtcmFdrdtiEtlr:mrt.tEYq - 11,an,591 s,1a,Br65 t,166.33lL7e 13,37!,s93,531
"3,1xc,73t,!33
Transa6tions with Owners of the Group
lssuance of shares 17 1,116,000,000 1 1,588,500,000 12,704,500,000 '12,704,500,000
Share issuance Costs 17 (568,08'1,306) (568,081,306) (568,081,306)
Dividends 17 (3 054 047 050) r3.o54 047 050) (8.378.700.O00) 111.432747 050\

Balance al Decembet 31,2021 p5,265,866,000 p88,928,018,694 (P73,359,171 ,000) (P1 10,098,975) P61,755,793,011 P82,48O,4O7 ,73O P30,919,736,582 P113,404,144,312

See Nofes ro lhe Consolidated Financial Statements.

 SYNERGY GRID & DEVELOPMENT PHILS., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Years Ended Decernber 31

Equity Remeasurement
Adjuslments From Gains (Losses)
Capital Stock Additional Common Control on Defined Retained Non-controlling
Nofe (Note 17) Paid-in Capital Transactions Beneflt Liability Earnings Total lnterests Total Equity

As at January '1, 2020, As Restated p4.149,866,000 P77,907,600,O00 (P73,359,'171,000) (P77,626,091) P46,29O,068,929 ,737.838 P23.428.14A.139 P78.338.885.977

Total Cornprehensive lncome

Net incorne for the year 9,394,804,867 9,394,804,867 14,040,986,854 23,435,791,721
Other comprehensive income:
Remeasuremenl loss on defined benefit liability 23 (74.344.418\ fin 344 418\ /1105C1 C45t Il 84 936 363)
Total Cornprehensive lncome for the Year (74,344,418', 9,394,804,867 9,32o,46o,44s 1s,930,394,9o9 23,250,855,3s8

Iransaclaons with Owners of the Group

Dividends 17 940 000 000) n 940 000 000)

Balance at December 3'l, 2020 p4,149,866,000 p77,907,600,000 (p73,359,171,00O) (P151,970,509) P55,684,873,796 P64,231,198,287 P25,418,543,O48 P89,649,741,335

See /vofes to f/,e Consolidated Financial Statements-

 SYNERGY GRID & DEVELOPMENT PHILS., INC. AND SUBSIDIARIES
GONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December3l

Note 2022 2021 2020
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income before tax P34,7 02,823,999 p22,945, 009, 046 p23,436, 5 g 1, 1 6 g
Adjustments for:
Amortization of intangible asset I 8,967,361,234 8,787,319,948 8,406,714,719
lnterest expense 5, 14 5,648,991,642 6,056,733,815 6,556,328,207
Depreciation 10 705,731,012 612,419,001 670,689,097
Retirement benefits cost 23 279,124,642 261,224,272 243,511,284
Provision for impairment losses
on receivables 12 64,670,000 64,670,000 64,670,000
lnterest income 11 (139,664,024) (64,337,554) (270,383,237)
Unrealized foreign exchange loss 24 (15,578,197) (179,869,031) 16,455,712
Gain on pre-termination of
contract (811)
Net loss on disposal of property
and equipment 1,316,231
I mpairment (reversal) of

creditable withholding tax (8,064,990) 3,565,461

Operating income before working
capitalchanges 50,213,459,396 38,475,103,517 39,129,458,643
lncrease in:
Receivables (13,185,271,884) (3,043,142,E51) (4,7E9,805,083)
Prepaid expenses and other
current assets (2,182,414,1771 (949,357,703) (2,177,997,718)
lncrease (decrease) in:
Trade and other current payables (5,564,549,106) (6,036,840,612) 16,325,618,358
Other current liabilities 2,429,564,693 2,759,411,204 1,375,579,362
Customers' and other deposits 33,362,121 (11,529,966) 55,233,051
Other noncurrent liabilities (1,177,446,1741 941,022,945 (15,568,146)
Net cash generated from operations 30,566,704,869 32,134,667,634 49,902,518,465
lnterest paid 5, 14 (5,254,262,1961 (6,531,287,443) (6,079,921,535)
lnterest received 139,834,094 73,664,020 303,418,888
Contribution to retirement fund (105,141,5421 (112,002,237) (56,85s,867)
lncome tax paid (17,494,7261 (2,345,237) (90,253)
Net cash provided by operating
activities 25,329,640,499 25,562,696,737 44,069,069,699
CASH FLOWS FROM INVESTING
ACTIVITIES
lnvestment in capital
expenditures 6, 13, 27 (43,653,5E4,543) (35,219,3O1,477) (41 ,140,039,352)
Additions to property and
equipment 10 (1,640,225,3341 (767,501 ,915) (470,481,297)
Proceeds from sale of property and
equipment (5,617)
lncrease in other noncurrent assets 500,383 198,330 1,620
Net cash used in investing activities (45,293,309,494) (35,986,605,062) (41,610,524,646)
Forward
 Years Ended December 31

Note 2022 2021 2020

CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds of loans payable 74 P31,500,000,000 P29,500,000,000 P19,200,000,000
Payment of cash dividends 111,518,777,150) (10,462,230,633) (1 1,940,000,000)
Payment of loans payable 14 (15,644,570,001) (14,161,472,521) (11,683,444,328)
Settlement of obligation under
lease liabilities 22 (110,553,982) (93,888,442) (1 17,079,519)
17 -
Proceeds from follow - on offering
lssuance of shares
Advances from shareholders
17 |
12,642,000,000

,rZZ:33?:?33r 250,051,;83
Transaction costs relating to
issuance of shares (568.081,306)
Net cash provided by (used in)
financing activities 4,226,098,867 16,668,775,615 (4,290,472,364)
NET TNCREASE (DECREASE)
IN CASH AND CASH EQUIVALEN] 115,737,570,1281 6,244,867,290 (1,831,927,312)
EFFECTS OF EXCHANGE RATE
CHANGES ON CASH AND CASH
EQUIVALENTS 13,738,781 247,708,676 (102,300,740)
GASH AND GASH EQUIVALENTS
AT BEGINNING OF YEAR 11 20 760.424 14,08'l,184,458 16,015,412,510
GASH AND CASH EQUIVALENTS
AT END OF YEAR 11 P4,849,929,077 P20,573,760,424 P14,081,184,458

See Notes to the Consolidated Financial Statements.

 SYNERGY GRID & DEVELOPMENT PHILS. INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

'1. Reporting Entity

Synergy Grid & Development Phils., lnc. (SGDPI or the "Parent Company") was
originally a mining corporation and registered with the Philippine Securities and
Exchange Commission (SEC) on June 1, 1970 underthe name Mankayan Minerals
Development Company, lnc.

The consolidated financial statements comprise the financial statements of the

Parent Company and its subsidiaries, namely OneTaipan Holdings, lnc. ("OTH|"),
Pacifica21 Holdings, lnc. ('P21"), Monte Oro Grid Resources Corporation
('MOGRC'), Calaca High Power Corporation ('CHPC') and National Grid
Corporation of the Philippines ("NGCP"), (collectively referred to as the "Group"). The
Parent Company's shares of stock are listed on the Philippine Stock Exchange
(PSE) under the stock symbol "SGP.'

On February 22, 1994, the SEC approved the Parent Company's change of
corporate name to UEM Development Phils., lnc. and the change in its primary
purpose from engaging in mining activities to general construction and other allied
businesses. The amendment of its primary purpose was due to the potential
opportunity in the construction industry brought about by the entry of a new foreign
investor.

On October 10, 1997, the SEC approved the Amendment to the Seventh Article of
the Parent Company's Articles of lncorporation increasing the par value of its
authorized capital stock from P0.01 to P1.00, decreasing the Parent Company's
shares of stock from 500.00 million shares to 50.00 million shares, and stating that
the stockholders shall have no pre-emptive rights.

On Decembet 14,2010, the Board of Directors (BOD) considered and approved the
Amendment of the Articles of lncorporation and By-Laws of the Parent Company for
the purpose of, among others, changing the Parent Company's corporate name to
Synergy Grid & Development Phils., lnc., changing its primary purpose to enable it to
engage in the business of investing in, purchasing or acquiring, and selling or
disposing of the shares of stock, bonds, evidences of indebtedness and other
securities issued or created by corporations and other entities engaged in power,
energy, utilities, infrastructure and other allied businesses; and for the above
purposes, to acquire, lease, hold, occupy, use, mortgage real and personal
properties, to obtain financing from local and international funding sources or
othenvise raise capital and funds by issuing or creating equity and debt securities,
and to do or engage in any and all other businesses and activities incidental to or
connected with, or in furtherance and/or the implementation of any and all of the
foregoing. The amendments to the Articles of lncorporation and By-Laws of the
Parent Company were approved by the stockholders on December 21,2010.

On November 14, 2019, the BOD of the Parent Company, and on December 20,
2019, the Stockholders of the Parent Company, approved the amendment of the
Articles of lncorporation of the Gorporation pursuant to an increase in authorized
capital stock from P50.00 million divided into 50.00 million common shares at par
value of P1.00 per share to P5.05 billion divided into 5.05 billion common shares at
par value of P1.00 per share.
This amendment and increase in capital stock were pursued in connection with the
issuance of 4.10 billion shares of the Parent Company in exchange for shares of
stock in OTHI and P21 (the "Share Swap Transaction").

On December 20,2019, the Parent Company and the stockholders of OTHI and P21
entered into a Share Purchase Agreement, pursuant to which, the two major
shareholder of the Parent Company acquired additional 4.10 billion shares of the
Parent Company at a price of P20 per share for a total purchase price of
P82.00 billion. As consideration for its acquisition, the two major shareholders
exchanged their respective ownership in OTHI and P21. Accordingly, the 2.10 billion
shares with a P1.00 par value of the Parent Company were swapped with 86.40
million shares of OTHI with a par value of P100 per share, while the 2.00 billion
shares of Parent Company were swapped with 871.00 million common shares of
P21 with a par value of P1.00 per share.

As a result of the Share Swap Transaction, the Parent Company will legally and/or
beneficially owns 67% of the outstanding shares of each of OTHI and P21.
OTHI owns controlling shares in MOGRC, which holds 30% plus one share in
National Grid Corporation of the Philippines ("NGCP'). P21 owns controlling shares
in CHPC, which in turn owns 30o/o minus one share in NGCP. The Share Swap
Transaction was undertaken to formally consolidate the two major shareholder's
ownership and control of NGCP through a common corporate structure. Accordingly,
the effective ownership of the Parent Company in NGCP would be 40.20%, with
control of 60% voting rights through its subsidiaries MOGRC and CHPC.

On March 26, 2020, the proposed share-swap transaction was approved by the
Philippine Competition Commission on the grounds that it will not likely result in
substantial lessening of competition in the Philippine market.

On May 28, 2021, the SEC approved the increase in the Parent Company's
authorized capital stock from P50.00 million to P5.05 billion. Consequently, the
4.10 billion common shares for the share swap transaction were issued at a price of
P20 per share on the same date. The incremental costs directly attributable to the
issuance of common shares amounting to P206.66 million is recognized as a
deduction from additional paid-in capital.

On June 30,2021 and on August 10,2021, the Parent Company's BOD resolved
and stockholders respectively approved the increase in authorized capital stock from
P5.05 billion to P5,30 billion, with the increase of 250.00 million to be divided into
250.00 million common shares at a par value of P1.00 per share.

This increase is for the Parent Company to conduct a follow-on offering of its shares
to achieve the target public float of twenty percent (20%) of the outstanding capital
stock of the Parent Company and for other business purposes.

The above increase was approved by the SEC on August 25,202L Consequently, of
the 250.00 million increase in shares of the Parent Company, 25o/o of which was
subscribed and paid by the Parent Company's major shareholders amounting to
P62.50 million.

On August 10,2021, the Parent Company's BOD approved and authorized the offer
and issuance of 1,053,500,000 common shares at an offer price of up to P29 per
share, and also grants over-allotment option pursuant to which a stabilizing agent or
its affiliate has the right to purchase up to 101 million common shares of the Parent
Company's shares owned by its major shareholders,

-z-
On August 12 and September 10, 2021, the Parent Company's shareholders have
also secured the Certiflcate Authorizing Registration with the Bureau of lnternal
Revenue (BlR) in order to transfer in the name of the Parent Company the following
shares:

(i) 86,430,000 common shares in OTHI representing 670/o of its total capital stock;
and
(ii) 871,000,000 common shares in P21 representing 67% of its total capital stock.

The details the equity interest of the Parent Company in its subsidiaries after the
Share Swap are as follows:

Percentage of
Ownership Country of
Direct lndirect I ncorporation
OneTaipan Holdings, lnc. ("OTHl") 67.0o/o Philippines
Pacifica21 Holdings, lnc. ("P21") 67.0% Philippines
Monte Oro Grid Resources Corporation ("MOGRC")" 67.0% Philippines
Calaca High Power Corporation ("CHPC')** 67.00/o Philippines
National Grid Corporati on ofthe Philippines fN GCP";*** 40.2% Philippines
*
lndirectly owned through OTHI
*" lndirectly
owned through P21
"** lndirectly owned through MOGRC and CHPC

OTHI is 67% directly owned subsidiary of the Parent Company and was incorporated
and registered with Philippine SEC on February 23,2010. OTHI's primary purpose is
to acquire by purchase, exchange, assignment or otherwise, and to sell, assign,
transfer, exchange, lease, let, develop, mortgage, pledge, deal in and with and
otherwise operate, enjoy and dispose of, all properties of every kind and description
and whatever situated and to the extent permitted by law.

TUOGRC is a wholly-owned subsidiary of OTHI and was incorporated and registered

with Philippine SEC on August 29,2006. MOGRC's primary purpose is to invest or
hold interests in the shares of stocks of companies engaged in or proposing to
engage in infrastructure projects, whether as proponent, equity investor or financial
or technical advisor and to do all acts and things necessary to carry out the foregoing
purpose.

P21 is 67% directly owned by the Parent Company and was incorporated and
registered with Philippine SEC on May 12, ?008. P21's purpose is to invest or
acquire interest, purchase, own or hold directly or indirectly shares of stock,
debentures or securities in other companies including related services and business
activities.

CHPC is a wholly-owned subsidiary of P21and was incorporated and registered with

Philippine SEC on December 15, 2006. CHPC's primary purpose is to engage in the
general business of operating, managing, maintaining, and rehabilitating energy
systems and services from gas, steam and electricity including related services and
business activities.

NGCP's common shares is 3O%-owned each by MOGRC and CHPC and was
incorporated in the Philippines and registered with Philippine SEC on February 21,
2008 primarily to operate and maintain a nationwide transmission grid throughout the
Philippines; to provide open and non-discriminatory access to the transmission
system to all authorized electricity distributors and electricity users; and to carry on
all business incidentalto the same.

_?-
On October 14,2021, the listing of the Offer Shares was approved by the Philippine
Stock Exchange. The Philippine SEC approved the listing of SGP on October 20,
2021.

On November 10, 2021 SGDPI, under the symbol "SGP', publicly listed its
1,053,500,000 shares from its Follow-On Offering (FOO) on the Philippines Stock
Exchange with overallotment option of up to 101,000,000 secondary shares at
P12.00 per common share.

The Parent Company will use the proceeds of the FOO to directly subscribe to
non-voting preferred shares that will be issued by NGCP. Proceeds from the
issuance of the non-voting preferred shares will be used by NGCP to finance its
capital expenditure requirements and related costs and expenses.

On April 4,2022, the Parent Company used the proceeds of the FOO to subscribe to
203,630,000 non-voting preferred shares of National Grid Corporation of the
Philippines (NGCP) with a par value of One Peso (P1.00) per share at a subscription
price of P60.10/share or a total subscription price of P12,238,163,000.

The subscription will give the Parent Company a direct shareholding in NGCP of
9.240% of the latter's outstanding capital stock. The Parent Company will be entitled
to dividends as a direct shareholder of NGCP, and this is in addition to the dividends
that the Parent Company already indirectly receives from NGCP through the holding
entities.

On 12 April 2022, the Parent Company paid P3,059,540,750 in cash, representing

twenty-five percent (25o/") of the total subscription price.

On June 9, 2022, the Parent Company paid the balance of the total subscription
price in the amount P9,178,622,250.

On February 28, 2008, the Group, through NGCP entered into a Concession
Agreement with Power Sector Assets and Liabilities Management Corporation
(PSALM) and the National Transmission Corporation (TRANSCO) granting the
Group as Concessionaire the right to take over and operate the whole of
TRANSCO's regulated transmission business was a going concern and be the sole
representative of Regulated Entity before the Philippine Energy Regulatory
Commission (ERC). The commencement date of the Concession Agreement is on
January 15, 2009 and shall expire on the 25th anniversary of the commencement
date. The Concession can be extended but not to exceed beyond the 50th
anniversary of the commencement date or for longer than the remalning term of the
Group's franchise (see Note 4).

SGP indirectly controls 60% of the outstanding common shares of NGCP, SGP's
sole operating asset with an effective equity interest of 45.726%.

Sionifi cant Contracts and Aqreements

Co n stru ction M a n age me nt Ag ree m e nt (C M A)
From the commencement date, TRANSCO appointed the Concessionaire to act as
its Construction Manager (CM) to implement, manage and administer the
construction and completion of each Project Under Construction (PUC) as an
independent contractor for and on its behalf, in accordance with the requirements of
the Concession Agreement and as further set forth below:

a) The CM shall have principal day{o-day on-site management, oversight and

administrative responsibilities over all projects under construction and all
contractors' construction activities in relation thereto,

4
b) The CM shall be the primary point of contact for communications with all
Contractors' Construction of such fact.

c) The CM shall perform its responsibilities in accordance with the standards

required under the CMA.

Nothing in the CMA shall release the CM from complying with its functions and
obligations including the completion of all the PUCs at its own cost and expense,
provided however, that if the sole and exclusive reason for the non-completion of a
PUC is due to TRANSCO's failure to make available the committed funding under
the Funding Agreements, then the CM shall be released from completing such PUC.
Any such release shall be limited to the obligation that the CM would have had, had
TRANSCO not failed to make such funding available and shall be subjected to the
Concessionaire being in full compliance with the Transaction Documents.

Exte rn al Co n su ltant Ag ree m e nts

ln 2022 and 2021, the Group executed various external consultancy agreements in
relation to the conduct of its business and in compliance with regulatory
requirements, several of which are as follows:

'. Tax consultancy services;

Legal services;
. Advisory and consulting services for regulatory filings;
. lmplementation consultancy services; and
, Others consultancy services as needed.

Expenses incurred pertaining to these agreements are included in "Outside services"

and "Professionalfees" accounts in profit or loss.

Construction Contracts
The Group, through NGCP, agreed to manage the construction and completion of all
PUC that have not been commissioned and placed in service on behalf of
TRANSCO in accordance with the CMA. Upon the acceptance by the Group of the
completion of PUC in accordance with the provisions of the applicable PUC
contracts, each PUC completed and accepted by the Group shall immediately form
part of the Transmission Grid.

New Con struction Contracts.

As of December 31, 2022, the Company entered into new significant construction
contracts amounting to P42.19 billion, among the major contracts are as follows:

. Erection and Construction for the Permanent Restoration of C.P. Garcia - Ubay
138kV Transmission Line Special Towers Affected by Typhoon Odette
, Construction and Erection of NGCP Transmission Lines Affected by DOTR-North
South Commuter Railway Extension
. Restoration of Toppled Towers Affected by Typhoon Odette - Erection and
Construction (Permanent)
. Zamboanga Peninsula Voltage lmprovement Project, Schedule I
. Mexico 69kV Substation Expansion Project Under San Simon 230kV Substation
Project & North Luzon Substation Upgrading Project Stage 2 Rebidding
. North Luzon Substation Upgrading Project 2, Schedule Vl - (Laoag, Bauang, San
Esteban & Bacnotan Substation Portion) & Pinili Substation Project - (Currimao
Substation Portion)
. Visayas Substation Upgrading Project 2 Schedule X - Design, Supply,
lnstallation, Testing and Commissioning of High Voltage Equipment including
Secondary Devices at Barotac Viejo, San Jose & Sta. Barbara Substations
(Rebidding)

E
. Expansion of Visayas RegionalControl Center Building (Cebu)
. Laguindingan23OkV bus-in to Balo-l - Villanueva and Nasipitl3SkV bus- in to
Jasaan-Butuan Transmission Line Project
. Western Luzon 500kV Backbone Project (Stage 2) - Schedule I (Castillejos to
cB-220)
. Kibawe - Davao 138 kV TL OPGW Retrofltting Project
. North Luzon Substation Upgrading Project 2, Schedule Vll - (Balingueo,
Tuguegarao, Bayombong, Pantabangan, Hermosa Substation Portion), Grid
Replacement Program & South Luzon Substation Upgrading Project 2 - Taytay
Substation Portion
. Cebu-Negros-Panay 230kv Backbone Project, Stage 3, Phase 1 (Sched ll) -
Secondary Devices
. South Luzon Substation Upgrading Project 1, Schedule 1 (Remaining Works) -
Design, Supply, lnstallation, Testing and Commissioning of 1x300mva Power
Transformer and Associated Equipment at Las Pifras Substation
. Design, Supply of Labor, Tools, and Materials for the Fit-Out of Office Space
Located at Bonaventure Plaza, Connecticut Corner Ortigas Avenue, San Juan
City, Manila
. Mindanao Substation Expansion 4 Project, Schedule lV - Design, Supply,
lnstallation, Testing and Commissioning of High Voltage Equipment lncluding
Secondary Devices (Nasipit, Maco, Culaman and Sultan Kudarat Substations);
and Nasipit Substation Bus-ln Project (Nasipit Substation); and 69kv Bislig
Substation Restoration Works (Package ll - Associated High Voltage
Equipment); and Mindanao Substation Upgrading 2 Project, Schedule Vl -
Design, Supply, lnstallation, Testing and Commissioning of High Voltage
Equipment lncluding Secondary Devices at Kidapawan & Gensan Substations
. Visayas Voltage lmprovement Project 2, Schedule 1 - (Baybay Les, Sipalay Les,
San Jose 69kv S/S, Naga-Vis and Calbayog Substation)
. Amlan-Dumaguete Transmission Line Project (Transmission Line Portion)
' Permanent Restoration of Ormoc-Maasin 1381$/ T/L Towers Affected By
Landslide Due To Typhoon Agaton (Erection And Construction)
. Nagsaag - San Jose 500kv Line Extension to Marilao and Duhat - Marilao 230kv
Transmission Line Project Under Marilao EHV Substation Project
. Relocation of Hermosa-Duhat 230kv Transmission Line Project Along Jasa Road
(Remaining Works)
' Visayas Voltage lmprovement Project, Stage 2 (Himayangan, Laoang
(Bobolosan) And Tolosa 69 Kv Load End Substations)
. Grid Protection Relay Replacement Project (Phase 3) - Sched I (San Jose,
Botolan, And Tayabas Substations)
. Grid Protection Relay Replacement Project (Phase 3) - Schedule lv (Nabunturan
And General Santos Substations)
. Western Luzon 500kv Backbone Project (Stage 2) - Schedule li (Tower No. Cb-
221To Bolo S/S)
" Replacement For Borrowed Line Materials Under Restoration Of Towers
Affected By Typhoon Odette And Various Transmission Line Projects
. Grid Protection Relay Replacement Project (Phase 3) Sched li (Mandaue, Lapu-
Lapu, Quiot, And Pitogo Substations)
. Western Luzon 500kv Backbone Project, Stage 2, Schedule li (Bolo 500kv
Substation Expansion Portion) And Grid Protection Relay Replacement Project,
Phase 3 (Bolo 500/230kv Substation Portion)
. Grid Protection Relay Replacement Project (Phase 3) Sched lii (Amlan, Bacolod,
Babatngon, Cebu, Colon And Ormoc Substations) And Backup Visayas Regional
Control Center (Bacolod Substation)
. llijan 500kv Substation Upgrading Project
. Cebu-Lapulapu Transmission Line Project (Overhead Transmission Line)
(Re-Bidding)

-6-
 Completion Works For The Hermosa - San Jose 500kv Transmission Line
Project (32 Workable Tower Sites)
Remaining Works For Hermosa - San Jose 500kv Transmission Line Project
(20 Tower Sites)
Remaining Works For Hermosa-San Jose Transmission Line Project (10 Tower
Sites)

For 2022, the Capital Expenditures approved by NGCP's Board on March 25,2021
amounted to P37.60 billion and supplemental budget amounting to P3.02 billion was
approved on November 29,2022.

As of December 31,2021, the Group entered into new construction contracts

amounting to P47.72 billion, among the major contracts are as follows:

. Erection and Construction for CNP 230kv Backbone Project - Stage 3, Negros
Side Transmission Line (Calatrava - Gadiz - E.B. Magalona Substations)
' Luzon Voltage lmprovement Project 3, Stage 2 - Schedule V (Botolan SiS and
Itogon S/S) and North Luzon Substation Upgrading Project, Stage 1 - Schedule
Vlll (Quezon S/S)
' Mindanao Substation Expansion 4 Project Schedule I - Design, Supply,
lnstallation, Testing and Commissioning of Power Transformers (Naga-Min,
Polanco, Agus 6 and Maramag SS) - Offshore Portion
' Mindanao Substation Upgrading 2 Project Schedule I - Design, Supply,
lnstallation and Commissioning of Power Transformers (Balo-|, Jasaan, Kibawe
and Butuan SS) - Offshore Portion
. Package C: tMindanao - Visayas lnterconnection Project (Dapitan - Lala and
Dumanjug - Santander 350kV HVDC Transmission Lines)
. Service Agreement for Engineering Geological and Geotechnical lnvestigation
Services of Transmission Line and Substation Projects
. Design, Manufacture, Delivery, lnstallation, Assembly, Testing and
Commissioning of Spare Power Transformer Schedule lll - 2x100mva,
230/69/13.EKV; 1x100MVA, 138/69/13.8KV; 1x100MVA, 115/34.5KV Power
Transformers
' Mindanao Substation Upgrading 2 Project Schedule lll - Design, Supply,
lnstallation and Commissioning of Power Transformers (Kidapawan and General
Santos SS) - Offshore Portion
. Design, Manufacture, Delivery, lnstallation, Assembly, Testing and
Commissioning of Spare Power Transformers, Schedule ll - 2x150MVA,
230 I 1 381 13. 8 kV Power Transfo rmer
. Supply and Delivery of Thirty-Five (35) Units Line Trucks
, Supply and Delivery of IED Meters
. Supply and Delivery of Current Transformer, Combined lnstrument Transformer
and Voltage Transformer (Batch 2)
. Supply of Labor, Tools, l\ilaterials, Supplies and Equipment for the Installation of
Deluge Water Spray System for the Power Transformer at Various Substation of
OandM
. Replacement of Surge Arrester at Cabacungan Cts (Cabacungan Cable
Terminal Station, Brgy Cabacungan Allen Northern Samar) To Facilitate the
Local Delivery of Foreign Supplied Materials, lnstallation, Assembly, Testing and
Commissioning and Training
. Cebu-Lapulapu Transmission Project (Submarine Cable Portion) Re-Bidding
. North Luzon Substation Upgrading Project 2, Schedule lll - Design, Supply,
lnstallation, Testing and Commissioning at
San Manuel and Nagsaag
Substations
. North Luzon Substation Upgrading Project 2, Schedule lV - Design, Supply,
lnstallation, Testing, and Commissioning of HV Equipment at San Jose
Substation

-7-
'. Remaining Works for Hermosasan Jose 500KV Transmission Line Project
Visayas Substation Upgrading Project 2, Schedule lV - Design, Supply,
lnstallation, Testing and Commissioning of High Voltage Equipment lncluding
Secondary Devices at Dingle Substation
. Visayas Substation Upgrading Project 2, Schedule Vlll at Corella and Ubay
Substation
. Visayas Substation Upgrading Project 2, Schedule Vll - at Daanbantayan,
Compostela, Calong-Calong, Toledo and Samboan Substations
. Mindanao Substation Upgrading 2 Project, Schedule lV - Design, Supply,
lnstallation, Testing & Commissioning of High Voltage Equipment lncluding
Secondary Devices at Balo-|, Jasaan, Kibawe & Butuan S/S
. South Luzon Substation Upgrading Project 2, Schedule lV - Design, Supply,
lnstallation, Testing and Commissioning of High Voltage Equipment lncluding
Secondary Devices at Calaca and Tuy Substations
. Supply and Delivery of Steel Towers for the Hermosa - San Jose 500kv TL
Project (Remaining Works)
. Visayas Substation Upgrading Project 2, Schedule lX at Kabankalan and
Mabinay Substations
. Visayas Substation Upgrading Project 2, Schedule V - Design, Supply,
lnstallation, Testing and Commissioning of High Voltage Equipment lncluding
Secondary Devices at Calbayog and Paranas Substations
. Visayas Substation Upgrading Project 2, Schedule Vi - Design, Supply,
lnstallation, Testing and Commissioning of High Voltage Equipment lncluding
Secondary Devices at Tabango, lsabel and Maasin Ss
. Bataan Grid 230kv Reinforcement Project (Erection/Construction of lntermediate
Steel Poles for The Raising of Conductor Sags of Mexico - Hermosa 230kv
Transmission Line Project
. San Francisco - Tago 138kv Transmission Line Project (Substation Porlion)
. South Luzon Substation Upgrading Project 2, Schdule lll at Lumban, GLrmaca,
Labo, Naga and Daraga Substations.
. Abuyog 230kv Substation Project (Transmission Line Portion)
. Erection and Construction of Tuy (Calaca) Dasmarinas 500 KV Transmission
Line Project (TL Portion)
. Mindanao Substation Expansion 4 Project, Schedule lii; Zamboanga Peninsula
Voltage Improvement Project, Schedule li; And Mindanao Substation Expansion
3 Project
. [Vlindanao Substation Upgrading 2 Project, Schedule V - Design, Supply,
lnstallation, Testing and Commissioning of High Voltage Equipment lncluding
Secondary Devices at Davao, Toril & Bunawan SS
. Negros - Panay 230kv lnterconnection Line 2 Project (Substation Portion) -
Barotac Viejo and E.B lt/agalona Substations Expansion Project
. North Luzon Substation Upgrading Project 2, Schedule V, Concepcion
Substation - Design, Supply, lnstallation, Testing and Commissioning of High
Voltage Equipment lncluding Secondary Devices
. Pinamucan 500kv Substation Projects
. Porac 230kv Substation Project
. South Luzon Substation Upgrading Project 2, Schedule V - Design, Supply,
lnstallation, Testing & Commissioning of Hv Equipment lncluding Secondary
Devices at Biffan, Dasmarifias & Muntinlupa S/S
. Western Luzon 500kv Backbone Project (Stage 2) Schedule I - Castillejos 500kv
And Balsik 500kv Substation Portion and Castillejos 230kv Substation Portion

For 2021, the Capital Expenditures approved by the Board on lVlarch 19, 2020
amounted to P50.51 billion.

Projects under Construction (PUC). PUC refer to the 42 transmission projects listed
in Schedule 2 and defined under Section 4.02 of the Concession Agreement.

-B-
From its commencement, the Group has various existing Construction Project
Agreements with different contractors for the construction, rehabilitation, upgrade,
and infrastructure of transmission assets to provide transmission services with an
average term of more than one year. ln accordance with the agreements, the
Contractor agreed to furnish all labor, materials, equipment, and other incidentals
necessary to complete the procurement, manufacturing, supply, construction,
erection, testing, and commissioning of the transmission assets. [n consideration of
such services, the Group agreed to pay the contractors a fee under mutually agreed
upon terms and conditions specifled in the agreement.

The remaining PUC project which is the San Jose S/S under Luzon PCB
Replacement Project, was completed on January 31,2021.

ln compliance with the mandate under the Concession Agreement, the Group
engages the services of third-party contractors for its construction and upgrade
services. Construction costs comprise of all expenses related to the construction
contracts which are equal to construction revenues because it is already the fair
value of the intangible asset recognized.

The Group recognizes construction costs and revenues in compliance with

Accounting Standards specifically, Philippine Interpretation lnternational Financial
Reporting lnterpretations Committee (lFRIC) 12, Seruice Concession Anangements,
but do not receive any cash inflow nor does the Group receive any revenue from
these activities. The annual revenue the Group receives from Transmission
Wheeling Rates for the provision of Transmission Services is determined in
accordance with the Rules in Setting Transmission Wheeling Rates (RTWR) as
approved by the Regulator.

Republic Act No. 9511

Republic Act No. 9511 (RA 9511), which took effect on December 20, 2008, granted
the Group a fifty (50) year franchise from effectivity date to operate, manage and
malntain, and in connection therewith, to engage in the business of conveying or
transmitting electricity through high voltage back-bone system of interconnected
transmission lines, substations and related facilities, system operations, and other
activities that are necessary to support the safe and reliable operation of a
transmission system and to construct, install, finance, manage, improve, expand,
operate, maintain, rehabilitate, repair and refurbish the present nationwide
transmission system of the Republic of the Philippines.

Pursuant to Section 9 of RA 9511, in consideration of the franchise and rights

granted, the Group pays a franchise tax equivalent to three percent (3%) of all gross
receipts derived from its operation under the franchise, in lieu of income tax and any
and all taxes, duties, fees and charges of any kind, nature or description levied,
established or collected on its franchise, rights, privileges, receipts, revenues and
profits, and on properties used in connection with its franchise except for real
property tax on real estate, buildings and personal property, exclusive of the
franchise (see Note 26).

-9-
 Pursuant to Section 8 of RA 9511, NGCP is required to list, subject to the
requirements of the SEC and the PSE, and make a public offering of the shares
representing at least twenty per centum (20%) of its outstanding capital stock or a
higher percentage that may hereafter be provided by law within ten (10) years from
the commencement of its operations. Provided, That the listing in the PSE of any
company which directly or indirectly owns or controls at least thirty per centum (30%)
of the outstanding shares of stock of NGCP shall be considered full compliance of
this listing requirement. ln case compliance with this requirement is not reached, the
ERC may, upon application of NGCP, and after notice and hearing, allow such
reasonable extension of the period within which NGCPshould list its shares of stock,
if the market condition is not suitable for such listing. NGCP has complied with this
requirement on November 12, 2021 as confirmed by ERC in its order dated lVay 26,
2022 under ERC Case No. 2018 - 014lVC. The Parent Company who is listed in the
PSE, indirectly owns NGCP after the completion of the Share Swap transaction and
the Follow On Offering in 2021.

The Parent Company's registered office address is Unit 1602, 16th Floor, Tycoon
Center Bldg. Condominium, Pearl Drive, Pasig City, Metro Manila.

2. Basis of Preparation

Statement of Compliance
These consolidated financial statements have been prepared in compliance with
Philippine Financial Reporting Standards (PFRS). PFRS are based on lnternational
Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB). PFRS consist of PFRS, Philippine Accounting Standards
(PAS), and Philippine Interpretations issued by the Financial and Sustainability
Reporting Standards Council (FSRSC).

The accompanying consolidated financial statements were authorized for issue by

the Board of Directors (BOD) on March 29,2023.

Basis of [Vleasurement
The consolidated flnancial statements have been prepared on the historical cost
basis of accounting except for derivative financial instruments, which have been
measured at fair value, and retirement benefits liability, which has been measured at
fair value of plan assets less the present value of the defined benefit obligation.

Fu nctional and Presentation Currencv

These consolidated financial statements are presented in Philippine peso, which is
the Group's functional currency. All financial information has been rounded off to the
nearest peso, except when othenrrise indicated.

Basis of Consolidation
The consolidated financial statements include the financial statements of Parent
Company and its subsidiaries.

A subsidiary is an entity controlled by the Group. Control exists when an investor is

exposed or has rights to variable returns from its involvement with the investee and
has the ability to affect those returns through its power over the investee. The Group
reassesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control.

-10-
When the Group has less than majority of the voting or similar rights of an investee,
the Group considers all relevant facts and circumstances in assessing whether it has
power over an investee, including the contractual arrangement with other vote
holders of the investee, rights arising from other contractual arrangements and the
Group's voting rights and potential voting rights.

The financial statements of the subsidiaries are included in the consolidated financial
statements from the date that control commences until the date such control ceases.

The financial statements of the subsidiaries are prepared for the same reporting
period as the Parent Company, using uniform accounting policies for like
transactions and other events under similar circumstances. lntergroup balances and
transactions, including intergroup realized profits and losses, are eliminated in
preparing both the consolidated financial statements.

Non-controlling interests represent the portion of profit or loss and net assets not
attributable to the Parent Company and are presented in the consolidated
statements of income and within equity in the consolidated statements of financial
position, separately from the equity attributable to equity holders of the Parent
Company.

Non-controlling interests include the interests not held by the Parent Company in its
subsidiary as follows: OTHI, P21 and NGCP.

A change in the ownership interest of a subsidiary, without a loss of control, is

accounted for as an equity transaction. lf the Group losses control over a Subsidiary,
the Group: (i) derecognizes the assets (including goodwill) and liabilities of the
Subsidiary, the carrying amount of any non-controlling interests and the cumulative
transaction differences recorded in equity; (ii) recognizes the fair value of the
consideration received, the fair value of any investment retained and any surplus or
deficit in the consolidated statements of comprehensive income; and (iii) reclassify
the Parent Company's share of components previously recognized in other
comprehensive income to profit or loss or retained earnings, as appropriate, as
would be required if the Group had directly disposed of the related assets or
liabilities.

Use of Judqments and Estimates

The preparation of the consolidated financial statements in conformity with PFRS
requires management to make judgments, estimate and assumptions that affect the
application of accounting policies and reported amounts of assets, liabilities, income
and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgments about
carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.

Judgments are made by management on the development, selection and disclosure

of the Group's critical accounting policies and estimates and the application of these
policies and estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.

Revisions to accounting estimates are recognized on the period on whioh the
estimate is revised if the revision affects only that period or in the period of the
revision and future periods if the revision affects both currentand future periods.

-11 -
 ln particular, information about significant areas of estimation, uncertainty and critical
judgments in applying accounting policies that have the most significant effect on the
amount recognized in the consolidated financial statements is as follows:

Determination of Functional Cu nency

Based on the economic substance of the underlying circumstances relevant to the
Group, the functional currency of the Group has been determined to be the
Philippine peso. lt is the currency of the primary economic environment in which the
Group operates and the currency that mainly influences its revenue and expenses.

Cl a ssifyi ng Fi n anci al In stru ments

The Group exercises judgments in classifoing a financial instrument, or its
component parts, on initial recognition as a financial asset, a financial liability or an
equity instrument in accordance with the substance of the contractual arrangement
and the definitions of a financial asset or liability. The substance of a financial
instrument, rather than its legal form, governs its classification in the consolidated
statements of financial position.

On initial recognition, the Group classifies its financial assets in the following
categories: amortized cost; fair value through other comprehensive income
(FVOCI) - debt investment, FVOCI - equity investment or fair value through profit or
loss (FWPL). The classification of financial assets under PFRS g, Financial
lnstruments is generally based on the business model which a financial asset is
managed and its contractual cash flow characteristics. Derivatives embedded in
contracts where the host is a financial asset are never separated, lnstead, the hybrid
financial instruments as a whole are assessed for classification (see Note 3).

Determining the Fair Value of Financial lnstruments

The Group's financial assets and financial liabilities measured at fair value, require
the use of accounting estimates and judgment. The significant components of fair
value measurement were determined using verifiable objective evidence (i.e., foreign
exchange rates, interest rates). Any changes in fair value of these financial assets
and liabilities would affect the consolidated statements of income and consolidated
statements of changes in equi$.

The fair values of the Group's flnancial instruments are presented in Note 24 to the
consolidated fi nancial statements.

Seryice Concession Arrangemenfs as Operator

Based on management's judgment, the provisions of Philippine lnterpretation
IFRIC 12, Seruice Concession Arrangemenfs apply to the Group. The consideration
receivable under the concession agreement is accounted for as a financial asset or
an intangible asset according to its substance, considering the terms of the
arrangement as a whole. A financial asset is recognized to the extent that the Group
receives an unconditional right to receive cash irrespective of the use of the
infrastructure. An intangible asset is recognized to the extent that the Group receives
a right (license) to charge users of the transmission system.

-12-
Concession Rights
The Group's service concession agreement was accounted for under the intangible
asset model where it recognized an intangible asset arising from its agreement to
pay the Concession Fee and as consideration for construction services it provides.
The intangible asset represents the right (license) the Group received to charge
users of the transmission system in accordance with the rates approved by the ERC,
the Regulator, pursuantto RepublicAct No.9136. The Group does not receive an
unconditional right to receive cash from or at the direction of the grantor where the
grantor contractually guarantees to pay the Group specified or determinable amounts
or any shortfall between amounts received from users of the transmission system
and specified or determinable amounts (see Notes 4, 5 and 8).

Detennining the Transaction Price - Regulated Iransmrssrbn Seryices

A complex regulatory rate-setting process is in place intended for the recovery of
costs and reasonable margin, where amounts are subject to review and adjustment
or correction for various factors, being done annually and at the end of each S-year
regulatory period where revenue can be adjusted for over- or under-recoveries. The
Group assessed that in the absence of other ERC issuance or directive that states
otherwise (i.e. that revenue has been modified), similar to the practice adopted by
the industry, the amounts chargeable to customers based on the currently effective
Maximum Allowed Revenue (MAR) remains to best represent the transaction price
for its transmission services in a reporting period, considering the substantive nature
of the ERC's approvals under the present rules and regulations as well as the degree
of uncertainty in terms of timing and amounts (see Notes 4,20 and 27).

ln determining the transaction price, an entity is required to adjust the promised

amount of consideration for the effects of the time value of money if that contract
contains a significant flnancing component. The Company has assessed that the
revenue accrued for itt/lAR and under-recovery to be collected in succeeding years
do not have a significant financing component because the timing difference arises
for non-finance reasons and a substantial portion of the consideration is variable,
and the amount or timing of the consideration is outside the customer's or entity's
control. The timing of payments is not specified in revenue contracts to intend any
significant benefit of financing from both the Company and its customers, and the
determination of |MAR and recovery scheme of incremental revenue is decided
purely by the ERC and is beyond the control of the Company or its customers.

Estimati ng Accrued Transmrssio n Reven ue

Revenue is billed covering the period which starts from the 26th day of the current
month to the 25th day of the following month while recognition is based on calendar
month. The recognition of unbilled revenues as at month-end cut-off date requires the
use of estimates based on the number of days of the customers' unbilled consumption.

The carrying amount of the Group's accrued power receivables as at December 31,
2022 and 2021 amounted to P6.43 billion and P2.46 billion, respectively
(See Note 12).

Estimating Allowance for lmpairmenf Losses on Receivables

The Group has elected to measure loss allowances for receivables at an amount
equalto lifetime expected credit loss (ECL).

When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECL, the Group considers
reasonable and supportable information that is relevant and available without undue
cost or effort. This includes both quantitative and qualitative information and analysis,
based on the Group's historical experience and informed credit assessment and
including fonrrrard-looking information.

-'13-
As at December 31, 2022 and December 31 , 2021, the analysis of allowance for
impairment losses on receivables is presented in Note 12,

Estimating Useful Lives of Property and Equipment

The Group estimates the useful lives of property and equipment based on the period
over which the assets are expected to be available for use. The estimated useful
lives of property and equipment are reviewed periodically and are updated if
expectations differ from previous estimates due to physical wear and tear, technical
or commercial obsolescence and legal or other limits on the use of the assets.

ln addition, estimation of the useful lives of property and equipment is based on the
collective assessment of industry practice, internal technical evaluation and
experience with similar assets. lt is possible, however, that future results of
operations could be materially affected by changes in these estimates brought about
by changes in the factors mentioned above. The amounts and timing of recorded
expenses for any period would be affected by the changes in these factors and
circumstances.

A reduction in the estimated useful lives of property and equipment would increase
the recorded depreciation and amortization expenses and decrease noncurrent
assets.

The carrying amount of the Company's property and equipment as at

December 31, 2022 and 2021 amounted to P5.06 billion and P4,13 billion,
respectively (see Note 10).

Estimating Net Realizable Value of Materials, Spare Parts and Supp/ies

The Group carries spare parts and supplies at net realizable value when such value
is lower than cost due to damage, physical deterioration and obsolescence. The
estimated net realizable value is reviewed regularly.

No write-down was recognized in profit or loss in 2022 and 2021. As at

December 31 , 2022 and 2021, accumulated amount of write-down of spare parts and
supplies amounted to P346.27 million (see Note 13).

Estimating Useful Life of lntangrble Assef

The Group estimates the useful life of intangible asset arising from service
concession based on the period over which the asset is expected to be available for
use during the concession period. The Group has not included any renewal period
on the basis of uncertainty, as at reporting date, of the probability of securing
renewal contract at the end of the original contract term.

The Group also estimates the useful life of its computer soffuvare and license based
on the period over which assets are expected to be available for use. The estimated
useful life of computer software and license is updated if expectations differ from
previous estimates due to technical or commercial obsolescence and legal or other
limits on the use of the assets. ln addition, the estimation of the useful life of
computer software and license is based on collective assessment of internal
technical evaluation and experience with similar assets. lt is possible, however, that
future results of operations could be materially affected by changes in estimates
brought about by changes in factors mentioned above. The amounts and timing of
recorded expenses for any period would be affected by changes in these factors and
circumstances.

The carrying amount of the Group's intangible asset as at December 31, 2022 and
2021 amounted to P331.43 billion and P299,46 billion, respectively (see Note E).

-14-
Estimating the Residual Value of lntangible Assefs
The estimated residual value of the intangible assets at the end of concession
contraci was determined based on the quotient of the actual costs of transmission
assets commissioned by the Group during the concession period and the ERC
approved estimated asset lives multiplied by the differenoe of the asset life and the
remaining life of concession. Under this scenario, the residual value of intangible
assets refers to the portion of investment in the additional completed transmission
assets that could not be recovered thru regulatory reset filing as at the end of the
concession period and shall be excluded from the value of intangible assets to be
amortized over the remaining concession period and will be charged against the
Recovery Payment at the end of the period.

As at December 31 ,2022 and 2021, the estimated residual value of intangible assets
from completed projects at the end of the concession period amounted to
P45.11 billion and P39.83 billion, respectively (see Note 8).

lmpairment of Goodwill
The Group determines whether goodwill is impaired at least annually. This requires
the estimation of value in use of the cash-generating units to which the goodwill is
allocated. Estimating value in use requires management to make an estimate of the
expected future cash flows and to choose a suitable discount rate to calculate the
present value of those cash flows.

No impairment loss was recognized on goodwill for December 31, 2022 and2021.
The carrying amount of goodwill amounted to P10.47 billion as at December 31,
2022 and December 31,2021 (see Note 9).

Reliable Measure of the Recovery Payment

The calculation of the Recovery Payment is complex and will involve the use of
variables that will only be determined in the future, including among others the use of
an input based on the value of the Group's RAB at termination date which is partly
dependent on future capital expenditures and recoveries. Based on management's
judgment, considering further that the Recovery Payment will only be determinable at
termination date by a mutually appointed independent appraiser, estimation of the
residual value in the current period involves a significantly high level of estimation
uncertainty such that the amount is not yet reliably measurable at this point.

E sti m ati n g Reti re m e nt Be n efits

The determination of the Group's obligation and cost for retirement benefits is
dependent on the selection of certain assumptions used in calculating such amounts
including discount rates and salary increase rates.

Remeasurements of retirement benefits liability are recognized in other

comprehensive income and comprise of actuarial gains and losses on the retirement
benefit obligation excluding amounts included in the net interest of the retirement
benefits liability.

Retirement benefits cost recognized in profit or loss in 2022 and 2021 amounted to
P279.12 million and P261.22 million, respectively. Retirement benefits liability as at
December 31, 2022 and 2021 amounted to P2.09 billion and P2.11 billion,
respectively (see Note 23).

-15-
 lmpairment of Nonfinancral Assefs
ln accordance with the Group's policy on impairment of nonfinancial assets, the
Group performs an impairment test when certain impairment indicators are present.
ln determining the present value of future cash flows expected to be generated from
the continued use of the assets, the Group is required to make estimates and
assumptions that can materially affect the consolidated financial statements.

lt/anagement believes that there is no indication of impairment loss in the carrying

value of the Group's property and equipment and intangible asset as at
December 31,2022 and December3l ,2021.

Contingencies
The Group is currently involved in various legal proceedings. The estimate of the
probable costs for the resolution of these claims shall be developed in consultation
with the legal counsels handling these matters and based on analysis of potential
results. lt is possible, however, that future financial position and performance could
be affected by changes in the estimates or in the effectiveness of the strategies
relating to these proceedings (see Note 25).

3. Summary of Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods
presented in these consolidated flnancial statements, except for the changes in
accounting policies as explained below.

Adootion of Amendments to Standards and lnteroretations

The Financial and Sustainability Reporting Standards Council (FSRSC) approved the
adoption of amendments to standards and interpretations as part of PFRS. The
following standards are relevant to the Group and have been adopted starting
January 1,2022. The adoption of the amendments did not have a material effect to the
financial statements.

I COVID-l9-Related Rent Concessions beyond 30 June 2021 (Amendment to

PFRS ?6 Leases). The amendment extends the practical expedient introduced in
the 2020 amendment which simplified how a lessee accounts for rent
concessions that are a direct consequence of COVID-19, permitting lessees to
apply the practical expedient to rent concessions for which any reduction in lease
payments affects only payments originally due on or before June 30, 2022.

The amendment is effective for annual reporting periods beginning on or after

April 1 ,2021. Earlier application is permitted. A lessee applies the amendments
retrospectively, recognizing the cumulative effect of the amendments as an
adjustment to the opening balance of retained earnings or other component of
equity, as appropriate. The adoption is mandatory for lessees that chose to apply
the practical expedient introduced by the 2020 amendments and may result in
reversal of lease modifications that was ineligible for the practical expedient
under the 2020 amendments, but becomes eligible as a result of the extension.

Property, Plant and Equipment - Proceeds before lntended Use (Amendments to

PAS 16 Property, Plant and Equipment). The amendments prohibit an entity from
deducting from the cost of an item of property, plant and equipment the proceeds
from selling items produced before that asset is available for use. The proceeds
before intended use should be recognized in profit or loss, together with the
costs of producing those items which are identified and measured in accordance
with PAS 2lnventories.

-16-
 The amendments also clarify that testing whether an item of property, plant and
equipment is functioning properly means assessing its technical and physical
performance rather than assessing its financial performance.

For the sale of items that are not part of a company's ordinary activities, the
amendments require the company to disclose separately the sales proceeds and
related production cost recognized in profit or loss and specify the line items in
which such proceeds and costs are included in the statement of comprehensive
income, This disclosure is not required if such proceeds and cost are presented
separately in the statement of comprehensive income.

The amendments apply retrospectively, but only to items of property, plant and
equipment made available for use on or after the beginning of the earliest period
presented in the financial statements in which the company first applies the
amendments,

! Onerous Gontracts - Cost of Fulfilling a Contract (Amendments to PAS 37,

Provisions, Contingent Liabilities and Contingenf Assefs). The amendments
clarify that the cost of fulfilling a contract when assessing whether a contract is
onerous includes all costs that relate directly to a contract - i.e. it comprises both
incremental costs and an allocation of other direct costs.

The amendments are effective for annual reporting periods beginning on or after
January 1, 2022 to contracts existing at the date when the amendments are first
applied. At the date of initial application, the cumulative effect of applying the
amendments is recognized as an opening balance adjustment to retained
earnings or other component of equity, as appropriate. The comparatives are not
restated.

I
Annual lmprovemenfs fo PFRS 2018-2020 Cycle. This cycle of improvements
contains amendments to four standards, of which, only the following are
applicable to the Company:

O Fees in the "10 percent" Test for Derecognition of Financial Liabilities

(Amendmenf fo PFRS 9, Financial lnstrumenfs). This amendment clarifies
that - for the purpose of performing the "10 percent" for derecognition of
flnancial liabilities - in determining those fees paid net of fees received, a
borrower includes only fees paid or received between the borrower and the
lender, including fees paid or received by either the borrower or lender on the
other's behalf.

a Lease lncentives (Amendment to lllustrative Examples accompanying

PFRS 16, Leases). The amendment removes the illustration of payments
from the lessor relating to leasehold improvements. As currently drafted, this
example is not clear as to why such payments are not a lease incentive.

-17-
Amended Standards Not Yet Adopted
A number of amendments to standards are effective for annual periods beginning
after January 1,2022 and have not been applied in preparing these consolidated
financial statements. Unless othenruise stated, none of these are expected to have a
significant impact on the Group's consolidated financial statements.

Effective January 1, 2023

Disclosure of Accounting Policies (Amendments fo PAS 1 Presentation of

Financial Sfafemenfs and PFRS Practice Statement 2, Making Mabnafig
Judgements). The amendments are intended to help companies provide useful
accounting policy disclosures. The key amendments to PAS 1 include:

a requiring companies to disclose their material accounting policies rather than

their significant accounting policies;

a clarifying that accounting policies related to immaterial transactions, other

events or conditions are themselves immaterial and as such need not be
disclosed; and

a clarifying that not all accounting policies that relate to material transactions,
other events or conditions are themselves material to a company's financial
statements.

The amendments to PFRS Practice Statement 2 includes guidance and

additional examples on the application of materiality to accounting policy
disclosures.

The amendments are effective from January 1, 2023. Earlier application is

permitted.

I Definition of Accounting Esfimafes (Amendmenfs fo PAS 8, Accounting Policies,

Changes in Accounting Estimates and Errors). To clarify the distinction between
changes in accounting policies and changes in accounting estimates, the
amendments introduce a new definition for accounting estimates, clarifying that
they are monetary amounts in the financial statements that are subject to
measurement uncertainty.

The amendments also clarifiT the relationship between accounting policies and
accounting estimates by specifying that an accounting estimate is developed to
achieve the objective set out by an accounting policy.

Developing an accounting estimate includes both selecting a measurement

technique and choosing the inputs to be used when applying the chosen
measurement technique. The effects of changes in such inputs or measurement
techniques are changes in accounting estimates.

The definition of accounting policies remains unchanged. The amendments also

provide examples on the application of the new definition.

The amendments are effective for annual reporting periods beginning on or after
January 1,2023, with earlier application permitted, and will apply prospectively to
changes in accounting estimates and changes in accounting policies occurring
on or after the beginning of the first annual reporting period in which the
amendments are applied.

- 18 -
Effective January 1, 2024

Classification of Liabilities as Current or Noncurrent - 2020 amendments and

Non-Current Liabilities with Covenants - 2022 amendments (Amendments to
PAS 1, Presentation of Financial Stafemenfs). To promote consistency in
application and clarifiT the requirements on determining whether a liability is
current or noncurrent, the amendments:

a removed the requirement for a right to defer settlement of a liability for at

least twelve months after the reporting period to be unconditional and instead
requires that the right must have substance and exist at the end of the
reporting period;

a clarified that only covenants with which a company must comply on or before
the reporting date affect the classification of a liability as current or non-
current and covenants with which the entity must comply after the reporting
date do not affect a liability's classification at that date;

a provided additional disclosure requirements for non-current liabilities subject

to conditions within twelve months after the reporting period to enable the
assessment of the risk that the liability could become repayable within twelve
months; and

a clarified that settlement of a liability includes transferring an entity's own

equity instruments to the counterparty, but conversion options that are
classified as equity do not affect classification of the liability as current or
noncurrent.

The amendments will apply retrospectively for annual reporting periods

beginning on or after January 1,2024, with earlier application permitted. Entities
that have early applied the 2020 amendments may retain application until the
2022 amendments are applied. Entities that will early apply the 2020
amendments after issue of the 2022 amendments must apply both amendments
at the same time.

Service Concession Arranqements

Publicto-private service concession arrangements where: (a) the grantor controls or
regulates what services the Group must provide with the infrastructure, to whom it
must provide them, and at what price; and (b) the grantor controls through
ownership, beneficial entitlement or othenruise any significant residual interest in the
infrastructure at the end of the term of the arrangement are accounted for under the
provisions of Philippine lnterpretation IFRIC 12. lnfrastructures used in a publicto-
private service concession arrangement for its entire useful life (whole-of-life assets)
are within the scope of Philippine lnterpretation IFRIC 12 if the conditions in (a) are
met.

Philippine lnterpretation IFRIC 12 applies to both: (a) infrastructure that the Group
constructs or acquires from a third party for the purpose of the service arrangement;
and (b) existing infrastructure to which the grantor gives the Group access for the
purpose of the service arrangement.

lnfrastructures within the scope of Philippine lnterpretation IFRIC 12 are not

recognized as property and equipment of the Group. Under the terms of contractual
arrangements within the scope of Philippine lnterpretation IFRIC 12, the Group acts
as a service provider. The Group constructs and upgrades infrastructure
(construction or upgrade services) used to provide a public service and operates and
maintains that infrastructure (operation services) for a specified period of time.

- 19 -
The Group recognizes a financial asset to the extent that it has an unconditional
contractual right to receive cash or another financial asset from or at the direction of
the grantor for the construction services. The Group recognizes an intangible asset
to the extent that it receives a right (a license) to charge users of the public service.

When the Group has contractual obligations it must fulfill as a condition of its license:
(a) to maintain the infrastructure to a specified level of serviceability or (b) to restore
the infrastructure to a specified condition before it is handed over to the grantor at
the end of the service arrangement, it recognizes and measures these contractual
obligations in accordance with PAS 37, Provisions, Contingent Liabilities and
Contingent Assefs, i.e., at the best estimate of the expenditure that would be
required to settle the present obligation at the reporting date. Repairs and
maintenance and other expenses that are routinary in nature are expensed and
recognized in the profit or loss as incurred.

ln accordance with PAS 23, Borrowing Cosfs, borrowing costs attributable to the
arrangement are recognized as an expense in the period in which they are incurred
unless the Group has a contractual right to receive an intangible asset (a right to
charge users of the public service). ln this case, borrowing costs attributable to the
arrangement are capitalized during the construction phase of the arrangement.

lntanqible Asset
Seryice Concession Anangement
The Group recognizes an intangible asset arising from the service concession
arrangement through Concession Right when it acquired the right to charge for
usage of the concession infrastructure. An intangible asset received as consideration
for providing construction or upgrade services in a service concession arrangement
is measured at fair value upon initial recognition. Subsequent to initial recognition,
the intangible asset is measured at cost, which includes capitalized borrowing costs,
less accumulated amortization and accumulated impairment losses, if any.

Concession Rights. Concession rights are purchased and recognized at cost at the
date of acquisition and consists of:

a. Concession fees pursuant to Article 6 of the Concession Agreement, broken

down into commencement fee and deferred payments, add/deduct adjustments
pertaining to lWC, PUC and RSTA; and

b. The intangible asset resulting from the cost of infrastructures constructed and
under construction, including related borrowing costs. These are not recognized
as property and equipment of the Group but as intangible asset.

Subsequent performance of construction and upgrade services, where costs related

to infrastructure and equipment arising from the Group's commitments to the
Concession Agreement, results to the increase in future revenue received by the
Group from the enhancement of the intangible asset results to increase the
rights/license to charge users of the public service as Concessionaire of
Transmission Assets. Subsequent expenditure is capitalized only when it increases
the future economic benefits embodied in the specific asset to which it relates.

-20-
lntangible asset is assessed for impairment whenever there is an indication that the
intangible asset may be impaired. Amortization is calculated over the cost of the
intangible asset less any determined residual value. Amortization is recognized in
profit or loss based on the expected pattern of consumption of future economic
benefits embodied in the asset over the life of the concession period. The estimated
useful life of the intangible asset is determined to be the period over which the Group
can charge for usage of the concession infrastructure but not more than the
concession period which is twenty-flve (25) years. The amortization method, useful
life and residual value are reviewed at each reporting date and adjusted, if
appropriate. Changes in the expected useful life or the expected pattern of
consumption of future economic benefits embodied in the asset are accounted for by
changing the amortization period or method, as appropriate, and are treated as
changes in accounting estimates. The amortization expense is recognized in profit or
loss in the expense category consistent with the function of the intangible asset.

Computer Software and License

Computer software and license include costs incurred in the development and
acquisition of computer soffuvare and license used in operations. Computer sofhr\rare
and license is amortized when it is available for use on a straight-line method over its
estimated useful life of five (5) years.

Gains or losses arising from derecognition of the intangible asset are measured as
the difference between the net disposal proceeds and the carrying amount of the
asset and are recognized in profit or loss when the asset is derecognized.

Business Combinations under Common Control

The Group accounts for business combinations involving entities that are ultimately
controlled by the same ultimate parent before and after the business combination
and the control is not transitory, using pooling of interests method.

The assets and liabilities of the combining entities are reflected in the consolidated
statements of financial position at their carrying amounts. No adjustments are made
to reflect fair values, or recognize any new assets or liabilities, at the date of the
combination. The only adjustments are those to align accounting policies between
combining entities.

No new goodwill is recognized as a result of the business combination. The only

goodwill that is recognized is any existing goodwill relating to either of the combining
entities. Any difference between the consideration paid or transferred and the equity
acquired is recognized in equity.

The consolidated statements of income reflect the results of the combining entities
for the full year, irrespective of when the combination took place.

Comparatives are presented as if the entities had been combined for the period that
the entities were under common control (see Note 6).

Non-controllino lnterests
The acquisitions of non-controlling interests are accounted for as transactions with
owners in their capacity as owners and therefore no goodwill is recognized as a
result of such transactions. Any difference between the purchase price and the net
assets of the acquired entity is recognized in equity. The adjustments to
non-controlling interests are based on a proportionate amount of the identifiable net
assets of the subsidiary (see Note 7).

-21 -
Financial Instruments
Recognition and lnitial Measurement
A financial instrument is recognized if the Group becomes a party to the contractual
provisions of the instrument. Regular way purchases or sales of financial assets are
accounted for at settlement date, i.e., the date that an asset is delivered to or by the
Group.

Financial instruments are classified as liabilities or equity in accordance with the

substance of the contractual arrangement. lnterest, dividends, gains and losses
relating to a financial instrument classifled as a liability are reported as expense or
income. Distributions to holders of financial instruments classified as equity are
charged directly to equity.

A flnancial asset (unless it is a trade receivable without a significant component that

is initially measured at the transaction price) or financial liability is initially measured
at fair value plus, for an item not at FVTPL, transaction costs that are directly
attributable to its acquisition.

Classification and Measurement of Financral Assefs

On initial recognition, a financial asset is classified and measured at: amortized cost;
FVOCI - debt investment; FVOCI - equity investment; or FVTPL. The classiflcation of
financial assets is generally based on the business model in which a financial asset
is managed and its contractual cash flow characteristics. Derivatives embedded in
contracts where the host is a financial asset in the scope of the standard are never
separated. lnstead, the hybrid financial instrument as a whole is assessed for
classification.

A financial asset is measured at amortized cost if it meets both of the following

conditions and is not designated as at FWPL:

I it is held within a business model whose objective is to hold assets to collect

contraotual oash flows; and

its contractual terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.

The Group's cash and cash equivalents and receivables are included in this
category.

A debt investment is measured at FVOCI if it meets both of the following conditions

and is not designated as at FVTPL:

a it is held within a business modelwhose objective is achieved by both collecting

contractual cash flows and selling financial assets; and

I its contractual terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity instrument that is not held for trading, the Group
may irrevocably elect to present subsequent changes in the investment's fair value in
OCl. This election is made on an investment-by-investment basis.

-22 -
All financial assets not classified as measured at amortized cost or FVOCI as
described above are measured at FWPL. This includes all derivative financial
assets. On initial recognition, the Group may irrevocably designate a financial asset
that otherwise meets the requirements to be measure at amortized cost or at FVOCI
as at FWPL if doing so eliminates or significantly reduces an accounting mismatch
that would othenrrrise arise.

Busrness ModelAssessmenf. The Group makes an assessment of the objective of

the business model in which a financial asset is held at a porlfolio level because this
best reflects the way the business is managed and information is provided to the
management. The information considered includes:

the stated policies and objectives for the portfolio and the operation of those
policies in practice. These include whether management's strategy focuses on
earning contractual interest income, maintaining a particular interest rate proflle,
matching the duration of the financial assets to the duration of any related
liabilities or expected cash outflows or realizing cash flows through the sale of
the assets;

I
how the performance of the portfolio is evaluated and reported to the Group's
management;

the risks that affect the performance of the business model (and the financial
assets held within that business model) and how those risks are managed;

I how managers of the business are compensated - e.g. whether compensation is

based on the fair value of the assets managed or the contractual cash flows
collected; and

' the frequency, volume and timing of sales of financial assets in prior periods, the
reasons for such sales and expectations about future salary activity.

Transfers of financial assets to third parties in transactions that do not qualify for
derecognition are not considered sales for this purpose, consistent with the Group's
continuing recognition of the assets.

Financial assets that are held for trading or are managed and whose performance is
evaluated on a fair value basis are measured at FVTPL.

Assessment Whether Contractual Cash Flows are Solely Payments of Principal and
lnterest. For the purposes of this assessment, "principal" is defined as the fair value
of the financial asset on initial recognition. "lnterest" is defined as consideration for
the time value of money and for the credit risk associated with the principal amount
outstanding during a particular period of time and for other basis lending risks and
costs (e.9. liquidity risk and administrative costs), as well as profit margin.

ln assessing whether the contractual cash flows are solely payments of principal and
interest, the Group considers contractual terms of the instrument. This includes
assessing whether the financial asset contains a contractual term that could change
the timing or amount of the contractual cash flows such that it would not meet these
conditions, ln making this assessment, the Group considers:
, contingent events that would change the amount or timing of cash flows;
. terms that may adjust the contractual coupon rate, including variable
rate features;
r prepayment and extension features; and

-23-
 terms that limit the Group's claim to cash flows from specified assets (e.g. non-
recourse features).

A prepayment feature is consistent with the solely payments of principal and interest
criterion if the prepayment amount substantially represents unpaid amounts of
principal and interest on the principal amount outstanding, which may include
reasonable additional compensation for early termination of the contract.
Additionally, for a financial asset acquired at a discount or premium to its contractual
par amount, a feature that permits or requires prepayment at an amount that
substantially represents the contractual par amounts plus accrued (but unpaid)
contractual interest (which may also include reasonable additional compensation for
early termination) is treated as consistent with this criterion if the fair value of the
prepayment feature is insignificant at initial recognition.

The Group determines that the business model for financial assets at amortized cost
is held to collect contractual cash flows and meets the solely principal and interest
criterion as at December 31 , 2022 and December 31 ,2021. Other financial assets
are classified as financial assets at FWPL or FVOCI based on the characteristics of
the contractual cash flows of the instruments.

Subseguent Measurement and Galns and Losses

FinancialAssefs at FVTPL. These assets are subsequently measured at fair value.
Net gains and losses, including any interest or dividend income, are recognized in
profit or loss.

Financial ,Assefs at Amortized Cosf. These assets are subsequently measured at

amortized cost using the effective interest method. The amortized cost is reduced by
impairment losses. lnterest income, foreign exchange gains and losses and
impairment are recognised in profit or loss. Any gain or loss on derecognition is
recognized in profit or loss.

Debt lnvestments at FVOCI. These assets are subsequently measured at fair value.
lnterest income calculated using the effective interest method, foreign exchange
gains and losses and impairment are recognised in profit or loss. Other net gains and
losses are recognised in OCl. On derecognition, gains and losses accumulated in
OCI are reclassifled to profit or loss.

Equity lnvestments at FVOCI. These assets are subsequently measured at fair

value. Dividends are recognised as income in profit or loss unless the dividend
clearly represents a recovery of part of the cost of the investment. Other net gains
and losses are recognized in OCI and are never reclassified to profit or loss.

The equity securities represent investments that the Group intends to hold for the
long term for strategic purposes.

Classification and Subseguent Measurement of Financial Liabilities

Financial liabilities are classified as measured at amortized cost or FWPL. A
financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a
derivative or it is designated as such on initial recognition. Financial liabilities at
FWPL are measured at fair value and net gains and losses, including any interest
expense, are recognized in profit or loss. Other financial liabilities are subsequently
measured at amortized cost using the effective interest method. lnterest expense
and foreign exchange gains and losses are recognized in profit or loss. Any gain or
loss on derecognition is also recognized in profit or loss.

-24-
Derecoqnition of Financial Assets and Liabilities
FinancialAssefs. A financial asset (or, where applicable, a part of a financial asset
or part of a group of similar financial assets) is derecognized when:

the rights to receive cash flows from the asset have expired;
the Group retains the right to receive cash flows from the asset, but has
assumed an obligation to pay them in full without material delay to a third party
under a "pass-through" arrangement; or
the Group has transferred its rights to receive cash flows from the asset and
either: (a) has transferred substantially all the risks and rewards of the asset, or
(b) has neither transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control ofthe asset.

When the Group has transferred its rights to receive cash flows from an asset and
has neither transferred nor retained substantially all the risks and rewards of the
asset nor transferred control of the asset, the asset is recognized to the extent of the
Group's continuing involvement in the asset. Continuing involvement that takes the
form of a guarantee over the transferred asset is measured at the lower of the
original carrying amount of the asset or the maximum amount of consideration that
the Group could be required to pay.

Financial Liabilities. A financial liability is derecognized when the obligation under the
liability is discharged or cancelled or has expired. When an existing financial liability
is replaced by another from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of
a new liability, and the difference in the respective carrying amounts is recognized in
profit or loss.

Offsettin g Financial I nstruments

Financial assets and financial liabilities are offset and the net amount is reported in
the consolidated statements of financial position if, and only if, there is a currently
enforceable legal right to offset the recognized amounts and there is an intention to
settle on a net basis, or to realize the asset and settle the liability simultaneously.
This is not generally the case with master netting agreements, and the related assets
and liabilities are presented gross in the consolidated statements of financial
position.

Debt lssuance Costs

Debt issuance costs are directly attributable transaction costs considered as discount
of the related debts upon initial measurement and are subsequently amortized over
the expected life of the instrument under the effective interest method.

Determination of Fair Value

The Group measures financial instruments at fair value at each reporting date

Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date. The fair value is based on the presumption that the transaction to sell the asset
or transfer the liability takes place either in the principal market for the asset or
liability or in the most advantageous market for the asset or liability. The principal or
most advantageous market must be accessible to the Group.

The fair value of an asset or liability is measured using the assumptions that market
partioipants would use when prioing the asset or liability, assuming that market
participants act in their economic best interest.

-25 -
The Group uses valuation techniques that are appropriate in the circumstances and
for which sufficient data are available to measure fair value, maximizing the use of
relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the
consolidated flnancial statements are categorized within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:

Level 1: quoted prices (unadjusted) in active markets for identical assets or

liabilities;

T
Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly; and

I Level 3: inputs for the asset or liability that are not based on observable market
data.

For assets and liabilities that are recognized in the consolidated financial statements
on a recurring basis, the Group determines whether transfers have occurred
between Levels in the hierarchy by re-assessing the categorization at the end of
each reporting period,

'Day 1' Profit. Where the transaction price in a non-active market is different from the
fair value from other observable current market transactions in the same instrument
or based on a valuation technique whose variables include only data from
observable market, the Group recognizes the difference between the transaction
price and the fair value (a'Day 1'profit) in proflt or loss unless it qualifles for
recognition as some other type of asset. ln cases where data used is not
observable, the difference between the transaction price and model value is only
recognized in proflt or loss when the inputs become observable or when the
instrument is derecognized. For each transaction, the Group determines the
appropriate method of recognizing the 'Day 1' profit amount.

Borrowinq Costs
Borrowing costs directly attributable to the acquisition, construction or production of a
qualifying asset are capitalized as part of the respective asset. A qualifying asset is
an item of asset that necessarily takes a substantial period of time to get ready for its
intended use. Capitalization of borrowing costs commences when the activities to
prepare the asset are in progress and expenditures and borrowing costs are being
incurred, and ceases when the assets are substantially ready for their intended use.

Property and Eouipment

Property and equipment are carried at cost less accumulated depreciation and
impairment losses, if any.

lnitially, an item of property and equipment is measured at cost, which comprises its
purchase price and any directly attributable costs of bringing the asset to the location
and condition for its intended use. Subsequent costs that can be measured reliably
are added to the carrying amount of the asset when it is probable that future
economic benefits associated with the asset will flow to the Group. The costs of day-
to-day servicing of an asset are recognized as an expense in the period in which it is
incurred.

Depreciation is computed on a straight-line basis over the estimated useful lives.

zo-
The estimated useful lives of these assets are as follows:

Number of Years
Structures and improvements 30
Transportation equipment 10
Machinery and equipment 10
Office furniture and fixtures 5 - 10

The useful lives and depreciation and amortization method are reviewed at each
reporting date to ensure that they are consistent with the expected pattern of
economic benefits from those assets.

When an asset is disposed of, or is permanently withdrawn from use and no future
economic benefits are expected from its disposal, the cost and the accumulated
depreciation, amoftization and impairment losses, if any, are removed from the
accounts and any resulting gain or loss arising from the retirement or disposal is
recognized in profit or loss.

Goodwill
Goodwill that arises in a business combination is initially measured at cost being the
excess of the cost of the business combination over the Group's interest in the net
fair value of the identifiable assets, liabilities, and contingent liabilities of the
acquiree. Transaction costs, other than those associated with the issue of debt or
equity securities, that the Group incurred in connection with business combinations
were capitalized as part of the cost of acquisition. Following initial recognition,
goodwill is stated at cost less any accumulated impairment losses. Goodwill is
reviewed for impairment, annually or more frequently if events or changes in
circumstances indicate that the carrying amount may be impaired.

lmpairment is determined by assessing the recoverable amount of the

cash-generating unit or group of cash-generating units, to which the goodwill relates.
Where the recoverable amount of the cash-generating unit or group of
cash-generating units is less than the carrying amount, an impairment loss is
recognized. Where goodwill forms part of a cash-generating unit or group of cash-
generating units and part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the
operation when determining the gain or loss on disposal of the operation. Goodwill
disposed of in this circumstance is measured based on the relative values of the
operation disposed of and the portion of the cash-generating unit retained. An
impairment loss with respect to goodwill is not reversed.

Prepaid Expenses and Other Current Assets

Advance Payment to Suppliers and Contracfors. Advance payment to suppliers and
contractors is reclassified to proper asset account and deducted from the
contractor's billings as specified in the provisions of the contract.

Spare parts and supplies inventories are valued at the lower of cost or net realizable
value. Net realizable value is the current replacement cost.

Cost is determined by using the moving weighted average method. lf the cost of
inventories exceeds its net realizable value, provisions are made currently for the
difference between the cost and the net realizable value.

Prepaid Expenses. Prepaid expenses are expenses paid in advance and recorded
as asset before they are utilized,

-27 -
lmpairment of Assets
Financial lnstruments and Contracf Assefs
The Group recognizes loss allowances for ECLs on financial assets measured at
amortized cost and contract assets.

The Group measures loss allowances at an amount equal to lifetime ECLs, except
for the following, which are measured as 12-month ECLs:

r debt securities that are determined to have low credit risk at the reporting date;
and
other debt securities and bank balances for which credit risk (i.e., the risk of
default occurring over the expected life of the flnancial instrument) has not
increased si gnifi cantly since initial recog nition.

The Group has elected to measure loss allowances for power, other receivables and
contract assets at an amount equal to lifetime ECLs.

When determining whether the credit risk of a flnancial asset has increased
significantly since initial recognition and when estimating ECLs, the Group considers
reasonable and supportable information that is relevant and available without undue
cost or effort. This includes both quantitative and qualitative information and analysis,
based on the Group's historical experience and informed credit assessment and
including forward-looking information.

The Group assumes that the credit risk on a financial asset has increased
significantly if it is more than 30 days past due.

The Group considers a financial asset to be in default when:

. the borrower is unlikely to pay its credit obligations to the Group in full, without
recourse by the Group to actions such as realizing security (if any is held); or
. the financial asset is also more than 90 days past due.

The Group considers a debt security to have low credit risk when its credit risk rating
is equivalent to the globally understood definition of investment grade'.

The maximum period considered when estimating ECLs is the maximum contractual
period over which the Group is exposed to credit risk.

Measurement of ECLs. ECLs are a probability-weighted estimate of credit losses.

Credit losses are measured as the present value of all cash shortfalls (i.e. the
difference between the cash flows due to the entity in accordance with the contract
and the cash flows that the Group expects to receive).

ECLs are discounted at the effective interest rate of the flnancial asset. EGLs reflect
reasonable and supportable information that is available without undue cost or effort
about past events, current conditions and forecasts of future economic conditions.

Credit-impaired Financral Assefs. At each reporting date, the Group assesses

whether financial assets carried at amortised cost and debt securities at FVOCI are
credit-impaired. A financial asset is 'credit-impaired' when one or more events that
have a detrimental impact on the estimated future cash inflows of the financial asset
have occurred.

-28-
Evidence that a financial asset is credit-impaired include observable data about the
following events:

. significant financial difficulty of the issuer or the borrower;

. a breach of contract, such as a default or past due event;
. the lender(s) of the borrower, for economic or contractual reasons relating to the
borrowe/s financial difficulty, having granted to the borrower a concession(s) that
the lende(s) would not otherwise consider;
. it is becoming probable that the borrower will enter bankruptcy or other financial
reorganization;
. the disappearance of an active market for that financial asset because of
financial difficulties; or
. the purchase or origination of a financial asset at a deep discount that reflects
the incurred credit losses.

Presentation of impairment loss allowances for financial assets measured at

amortised cost are deducted from the gross carrying amount of the assets.

lmpairment losses related to power, other receivables and contract assets are
presented separately in the consolidated statements of income.

Nonfinancial Assefs
The carrying amounts of nonfinancial assets such as intangible assets, property and
equipment and other noncurrent assets are reviewed at each reporting date to
determine whether there is any indication of impairment. lf any such indication exists,
then the asset's recoverable amount is estimated. The recoverable amount of an
asset is the greater of its value in use and its fair value less costs to sell. The fair
value less costs to sell is the amount obtainable from the sale of an asset in an arm's
length transaction less the cost of disposal while value in use is the present value of
estimated future cash flows expected to arise from the continuing use of an asset
and from its disposal at the end of its useful life. ln assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset. For the purpose of impairment testing, assets are
grouped together into the smallest group of assets that generate cash inflows from
continuing use that are largely independent of the cash inflows of other assets or
groups of assets (the cash-generating unit),

Reversal of provision for impairment losses previously recognized is recorded when

the decrease can be objectively related to an event occurring after the write-down.
Such reversal is recorded as income. However, the increased carrying amount is
only recognized to the extent that it does not exceed what carrying value would have
been had the impairment not been recognized.

All impairment losses are recognized in profit or loss.

Eouitv
CapitalSfock. Capital stock represents the nominal value of shares that have been
issued, lncremental cost directly attributable to the issue of stock, if any, are
recognized as a deduction from equity, net of any tax effects,

Additional Paid-in Capital. Additional paid-in capital represents the excess of

consideration received over the par value of capital stock.

Remeasurements of Defined Benefits Liability. Remeasurements of defined benefits

liability comprise actuarial gains and losses which are recognized immediately in
other comprehensive income.

-29 -
Equity Adjustments from Common Control Transactions. Equity adjustments from
common control transactions represents the difference between the purchase price
and the net assets of the acquired entity.

Retained Earnings. Retained earnings represent the cumulative balance of net

income or loss, dividend distributions, effect of changes in accounting policy and
other capital adjustments.

Revenue and Expense Recoqnition

Revenue from Transmission Serubes Operating lncome
Transmission services operating income pertains to service charges for the use of
the transmission facilities under the Concession Agreement where power delivery,
system operation and metering services are provided by the Group.

The Group's performance obligations in transmission services include the supply of

power delivery service, system operation and metering service, These three services
are considered as a bundle and are accounted for as one performance obligation.

Revenue from transmission services is recognized when control has been

transferred to the customer and the Group has an enforceable right to payment. This
is recognized over time as the customer simultaneously receives and consumes the
benefits provided by the Group's performance as the Group performs. Revenue from
transmission services is recognized upon supply of power to the customers'
connection points.

Revenue is measured as the transaction price referred from the approved Maximum
Allowed Revenue (MAR) by ERC. During the reset process, the ERC makes a
determination of the annual revenue requirements of the transmission business as
well as the price control arrangements that will apply during the regulatory period.

Revenue from Connection and Residual Sub-transmlsslon Charges

Connection charges are charges to recover the reasonable costs associated with
connecting the transmission customers' facilities to the transmission providers'
facilities. These are payable by generation customers on new connection assets and
payable by load customers on existing and new connection assets. Residual
sub-transmission charges are charges to recover the reasonable costs associated
with sub-transmission assets that are not otherwise recovered through the
connection charge. These charges are payable by load customers or generation
customers.

The connection charges and residual sub-transmission charges are considered each
as different performance obligations of the Group which are both satisfied over time,
the same with transmission services.

Revenue from connection and residual sub-transmission charges are recognized

when control has been transferred to the customer and the Group has an
enforceable right to payment. Revenue from connection and residual sub-
transmission charges are recognized upon supply of power to the customers'
connection points.

The revenue is measured as the transaction price referred from the approved rates
by ERC in its decision dated July 6, 2011 under ERC case no. 2008-066RC and
2009-153 RC.

-30-
The Billing period starts from the 26th day of the current month to the 25th day of the
following month. Within five (5) days after the Billing Period, the Group shall issue
billing invoice/billing statement or "Power Bill" to each customer, detailing all charges
and credits for that previous Billing Period.

Basic charges are direct revenues of the Group. The components of the "Billing
Statement" to the customer are as follows;

1. Power delivery service charge

2. Connection charge
3. Residual sub-transmission charge
4. Metering service charge
5. System operator charge
6. Adjustments such as lnterruption Billing Adjustment, Curtailment Billing
Adjustment and Temporary Transmission Service Discount, if applicable,

The Group has assessed its revenue arrangement against specific criteria in order to
determine if it is acting as principal or agent and concluded that it is not a principal
with respect to the Ancillary Service Charges (ASC), Universal Charges (UC) and
Feed-intariff (F lT-ALL) Charges.

The Group was authorized to engage in ancillary service business through Section 1
of RA 9511 and through Ancillary Service Procurement Plan (ASPP). These are
services that are essential to the management of power system security, that
facilitate orderly trading in electricity and ensure that electricity supplies are of an
acceptable quality. With reference to Section 43 of Republic Act No. 9136 (RA 9'136),
NGCP is allowed to charge user fees for ancillary services to all electric power
industry participants or self- generating entities connected to the grid. Further, as per
Ancillary Services - Cost Recovery Mechanism (AS-CRM), charges should be
completely passed-on from the user or beneficiary of the service to the service
provider.

FIT-ALL and UC are charges that is to be imposed on all On-Grid electricity

consumers who are supplied with electricity through the transmission network. The
FIT-All is essential to the implementation of the FIT System as established under
Section 7 of Republic Act No. 9513, otherwise known as the Renewable Energy Act
of 2008 (RE Law). UC is imposed on electricity consumers for purposes such as
missionary electrification, payment of stranded debts and also for environmental
charges mandated under Section 34 of the RA 9136. lssued guidelines of both
FIT-ALL and UC specifically states that the collection shall not form part of the
revenues of NGGP as the collecting agent. Any resulting loss due to failure to collect
shall not be borne by the collecting agent.

Any billing/revenue adjustments which are caused by the following:

change in government policies, rules and regulations;

incorrect computation, incorrect metering of data, and the like shall be made
through issuance of a debiUcredit memo in accordance with the Open Access
Transmission Services Rules. A debiV credit memo shall be booked in the period
in which the related adjustment is noted.

Since the Group bills transmission customers from the 26th of the previous month to
25th of the current month, at each reporting date, the Group shall record revenue for
the remaining days of the reporting month. The Group shall accrue revenue in
proportion to what should be recorded as revenue for this period and in accordance
with the estimation procedure determined by management, from time to time.

-31 -
The Group may engage in related business such as Rental of facilities and
equipment and Co-location, antenna attachments, use of building lots and space,
use of access roads, attachment of telephone cables, and tapping to AC/DC power
sources.

lnterest income is recognized when earned

Revenue from Construction and Upgrade Seryices (Construction Revenues

and Costs)
Under Philippine lnterpretation IFRIC 12, revenue related to construction or upgrade
services under a service concession agreement is recognized over time, consistent
with the Group's accounting policy on recognizing revenue on construction contracts.
Operation or service revenue is recognized in the period in which the services are
provided by the Group. lf the service concession arrangement contains more than one
performance obligation, then the consideration received is allocated with reference to
the relative stand-alone selling prices of the services rendered. No margin has been
recognized since the estimated selling price approximates the construction costs.
The estimated selling price is classified as a contract asset under lntangible assets
during the construction or upgrade period in accordance with PFRS 15.

Sig n ificant F i n a nci ng Co mpo nent

ln determining the transaction price, an entity shall adjust the promised amount of
consideration for the effects of the time value of money if the timing of payments
agreed to by the parties to the contract (either explicitly or implicitly) provides the
customer or the entity with a significant benefit of financing the transfer of goods or
services to the customer. In those circumstances, the contract contains a significant
financing component. A significant financing component may exist regardless of
whether the promise of financing is explicitly stated in the contract or implied by the
payment terms agreed to by the parties to the contract.

The objective when adjusting the promised amount of consideration for a significant
flnancing component is for an entity to recognise revenue at an amount that reflects
the price that a customer would have paid for the promised goods or services if the
customer had paid cash for those goods or services when (or as) they transfer to the
customer (ie the cash selling price). An entity shall consider all relevant facts and
circumstances in assessing whether a contract contains a financing component and
whether that financing component is significant to the contract, including both of the
following:

the difference, if any, between the amount of promised consideration and the
cash selling price of the promised goods or services; and the combined effect of
both of the following:

a the expected length of time between when the eqtity transfers the promised
goods or

a services to the customer and when the customer pays for those goods or
services; and the prevailing interest rates in the relevant market.

I Notwithstanding the assessment in PFRS 15 paragraph 61, a contract with a

customer would not have a significant financing component if any of the following
factors exist:

a. the customer paid for the goods or services in advanoe and the timing of the
transfer of those goods or services is at the discretion of the customer.

32-
 b. substantial amount of the consideration promised by the customer is variable
and the amount or timing of that consideration varies on the basis of the
occurrence or non-occurrence of a future event that is not substantially within
the control of the customer or the entity (for example, if the consideration is a
sales-based royalty).

The difference between the promised consideration and the cash selling price of the
good or service (as described in paragraph 61) arises for reasons other than the
provision of finance to either the customer or the entity, and the difference between
those amounts is proportional to the reason for the difference. For example, the
payment terms might provide the entity or the customer with protection from the
other party failing to adequately complete some or all of its obligations under the
contract.

Cost and Expense Recognition

Expenses are recognized when incurred.

Construction costs comprise of all expenses related to the construction contracts.

Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a
lease. A contract is, or contains, a lease if the contract conveys the right to control
the use of an identified asset for a period of time in exchange for consideration. To
assess whether a contract conveys the right to control the use of an identified asset,
the Group assesses whether:

I the contract involves the use of an identified asset - this may be specified
explicitly or implicitly, and should be physically distinct or represent substantially
all of the capacity of a physical distinct asset. lf the supplier has a substantive
substitution right, then the asset is not identified;

I the Group has the right to obtain substantially all of the economic benefits from
use of the asset throughout the period of use; and

the Group has the right to direct the use of the asset. The Group has the right
when it has the decision-making rights that are most relevant to changing how
and for what purpose the asset is used. ln rare cases where the decision about
how and for what purpose the asset is used is predetermined, the Group has the
right to direct the use of the asset if either:

a the Group has the right to operate the asset; or

a the Group designed the asset in a way that predetermines how and for what
purpose it will be used.

The Group recognizes a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct costs incurred and
an estimate of costs to dismantle and remove the underlying asset or the site on
which it is located, less any lease incentives received.

-33-
The right-of-use asset is subsequently depreciated using the straight-line method
from the commencement date to the earlier of the end of the useful life of the
right-of-use asset or the end of the lease term. The estimated useful lives of
right-of-use assets are determined on the same basis as those of property and
equipment. In addition, the rightof-use asset is periodically reduced by impairment
losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments
that are not paid at the commencement date, discounted using the interest rate
implicit in the lease or, if that rate cannot be readily determined, the Group's
incremental borrowing rate. Generally, the Group uses its incremental borrowing rate
as the discount rate.

Lease payments included in the measurement of the lease liability comprise the
following:

. fixed payments, including in-substance fixed payments;

. variable lease payments that depend on an index or a rate, initially measured
using the index or rate as at the commencement date;
. amounts expected to be payable under a residual value guarantee; and
. the exercise price under a purchase option that the Group is reasonably certain
to exercise an extension option, and penalties for early termination of a lease
unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortized costs using the effective interest method.
It is remeasured when there is a change in future lease payments arising from a
change in an index or rate, if there is a change in a Group's estimate of the amount
expected to be payable under a residualvalue guarantee, or if the Group changes its
assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured in this way, a corresponding adjustment is

made to the carrying amount of the right-of-use asset or is recorded in profit or loss if
the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment
property in "Property and equipment - net" and lease liabilities in "Trade and other
current payables" and "Other noncurrent liabilities".

Short-term Leases and Leases and Leases of Low-value Assefs

The Group has elected not to recognize right-of-use assets and lease liabilities for
short-term leases of machinery that have a lease term of 12 months or less and
leases of low-value assets, including lT equipment. The Group recognizes the lease
payments associated with these leases as an expense on a straight-line basis over
the lease term.

Foreiqn Exchanqe Transactions

Transactions in foreign currencies are recorded in Philippine peso based on the
exchange rates prevailing at the transaction dates. Foreign currency denominated
monetary assets and liabilities are retranslated into Philippine peso using the
exchange rate prevailing at the reporting date. Exchange gains and losses arising
from foreign currency denominated items at rates different from those at which they
were previously recorded are recognized in profit or loss.

-34-
Concession Fee Payable
Concession fee payable is recognized at the commencement date as the present
value of the concession fee converted to Philippine peso at a flxed exchange rate
equal to P42.75 forevery US dollar under IFRIC 12. Upon recognition of intangible
assets, transferable asset and initial working capital, the Group also recognized the
corresponding concession fee payable. Payments to concession fee payable are
classified inlo 250/, commencement fee and 75o/o semi-annual deferred payment
subject to interest pursuant to Schedule 5 of concession agreement.

concession fee payable that are expected to be settled for no more than
twelve (12) months after the reporling period are classified as current portion of
concession fee payable. Othenruise, these are classifled as noncurrent liabilities.
Maturities of concession fee payable are shown in Note 24.

Employee Benefits
Short-term Employee Benefits. Shortterm employee benefits are expensed as the
related service is provided. A liability is recognized for the amount expected to be
paid if the Group has a present legal or constructive obligation to pay this amount as
a result of past service provided by the employee and the obligation can be
estimated reliably.

Retirement Benefits Cosf. The Group's net defined benefit obligation in respect of its
retirement plan is calculated by estimating the amount of future benefit that
employees have earned in return for their seruice in the current and prior periods;
that benefit is discounted to determine its present value, and the fair value of any
plan assets is deducted. The discount rate is the yield at the reporting date of long-
term government bonds that have maturity dates approximating the terms of the
Group's plan. The calculation is performed by a qualifled actuary using the projected
unit credit method.

Remeasurements of the net defined benefit obligation, which comprise actuarial

gains and losses, the return on plan assets (excluding interest) and the effect of the
asset ceiling (if any, excluding interest), are recognized immediately in OCl. The
Group determines the net interest expense (income) on the net defined benefit
liability (asset) for the period by applying the discount rate used to measure the
defined benefit obligation at the beginning of the annual period. Net interest expense
and other expenses related to deflned benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting
change in benefit that relates to past service or the gain or loss on curtailment is
recognized immediately in proflt or loss. The Group recognizes gains and losses on
the settlement of a defined benefit plan when the settlement occurs.

Value Added Tax (VAT)

Revenues, expenses and assets are recognized net of the amount of VAT, except:

(a) where the tax incurred on a purchase of assets or services is not recoverable
from the taxation authority, in which case the tax is recognized as part of the cost
of acquisition of the asset or as part of the expense item as applicable; and

(b) receivables and payables that are stated with the amount of tax included.

The amount of tax recoverable from, or payable to, the taxation authority is included
as part of "Prepaid expenses and other current assets" or "Trade and other current
payables" in the consolidated statements of flnancial position.

-35-
Related Partv Transactions
Parties are considered to be related if one party has the ability, directly or indirectly,
to control the other party or exercise signiflcant influence over the other party in
making financial and operating decisions. Parties are also considered to be related if
they are subject to common control or significant influence. Related parties may be
individuals or corporate entities.

Basic and Diluted Earninqs Per Share (EPS)

Basic EPS is computed by dividing the net income for the period attributable to
equity holders of the Group, net of dividends on preferred shares, by the weighted
average number of issued and outstanding common shares during the period, with
retroactive adjustment for any stock dividends declared.

Diluted EPS is computed in the same manner, adjusted for the effect of all potential
dilutive debt or equity instruments.

Operatinq Seqments
The Group has only one operating segment which is the transmission business. The
Group's results of operations are reviewed by the Management to make decisions
and to assess Group performance, and for which discrete financial information is
available.

The Group's performance is evaluated based on net income for the year; earnings
before interest, taxes and depreciation and amortization (EBITDA) and EBITDA
margin. Net income for the year is measured consistent with the net income in the
consolidated statements of income.

Provisions
Provisions are recognized only when the Group has a present legal or constructive
obligation as a result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, and a reliable
estimate can be made on the amount of the obligation. lf the effect of the time value
of money is material, provisions are determined by discounting the expected future
cash flows at pre-tax rate that reflects current market assessments of the time value
of money and where appropriate, the risks specific to the liability. When discounting
is used, the increase in the provision due to the passage of time is recognized as an
interest expense. Where the Group expects a provision to be reimbursed, the
reimbursement is recognized as a separate asset but only when the receipt of the
reimbursement is virtually certain.

Provisions are reviewed at each reporting date and adjusted to reflect the current
best estimate.

Contingencies
Contingent liabilities are not recognized in the consolidated financial statements.
These are disclosed in the notes to the consolidated fina4cial statements unless the
possibility of an outflow of resources embodying economic benefits is remote.
Contingent assets are not recognized in the consolidated financial statements but
are disclosed in the notes to the consolidated financial statements when an inflow of
economic benefits is probable.

Events After the Reoortinq Eate

Events after the reporting date that provide additional information about the Group's
financial position at the reporting date (adjusting events) are reflected in the
consolidated financial statements. Post year-end events that are not adjusting events
are disclosed in the notes to the consolidated financial statements when material.

-36-
4. Concession Agreement

Electric Power lndustrv Reform Act of 2001 (EPIRA)

On June 8,2001, Republic Act No.9136, othenrvise known as the "Electric Power
lndustry Reform Act of 2001" (EPIRA) was passed into law. EPIRA provided for an
orderly and transparent privatization of the assets and liabilities of the National
Power Corporation (NPC) and created TRANSCO to assume the electrical
transmission function of NPC. TRANSCO is wholly-owned by PSALNI, a
government-owned and controlled corporation. EPIRA also provides for the
privatization of TRANSCO by directing PSALM to award in an open competitive
bidding, the transmission facilities, including grid interconnections and ancillary
services to a qualified party either through an outright sale or a concession
agreement.

Concession Aoreement
By virtue of its authority under EPIRA, and its lmplementing Rules and Regulations,
PSALTV had carried out an open competitive bidding process in accordance with the
Bidding Procedures dated August 1, 2007, as amended, to award a Concession for
the Transmission Assets of TRANSCO.

As the bid dated December 12, 2007 (Bid Date) submitted by the consortium of
MOGRC, SGIDL and CHPC (the lnvestors) resulted to being the highest among all
the bids submitted and evaluated according to the Bidding Procedures, PSALTV
agreed to award the Concession to the Group, through NGCP, (Concessionaire),
being the special purpose entity established by the lnvestors.

On February 28, 2008, the Group, through NGCP, entered into a Concession
Agreement with PSALTV and TRANSCO granting the Group, through NGCP, as
Concessionaire the right to take over and operate the whole of TRANSCO's
regulated transmission business as a going concern and be the sole representative
of TRANSCO before the ERC. The Concession Agreement is tor a Z5-year period
starting on January 15,2009 (Commencement Date) and ending on January 15,
2034 (Full Term Expiration Date), which can be extended provided the concession
period shall not be extended beyond the 50th anniversary of the Commencement
Date (the "Term") or for longer than the remaining term of the Group, through
NGCP's franchise.

The Concession Agreement provides for the following, among others:

a) From Commencement Date and subject to the terms of the Agreement, the
Concessionaire shall take over and operate the whole of TRANSCO's regulated
transmission business as a going concern and be the sole representative of the
regulated entity to the ERC.

b) The ERC shall regulate the Concessionaire in carrying on the Concession

Agreement in accordance with applicable law, including EPIRA or any successor
legislation.

c) The Concessionaire, its employees, contractors and agents, shall have exclusive
use of the Transmission Assets, Documented Property Rights and lntellectual
Property Rights for the purpose of carrying out the Concession Agreement.

d) The Concessionaire shall during the concession period assume all of the
responsibilities as if it's an owner of the Transmission Assets, other than
excluded assets, Documented Property Rights and lntellectual Property Rights
including the obligation to license fees, taxes, renewal fees and other charges
payable that fall due for payment during the concession period.

-37 -
e) So long as no Concessionaire default is continuing, TRANSCO shall make
available to the Concessionaire the amounts of budgeted external funding under
the Funding Agreements which have not been drawn as at Commencement Date
as specified in the schedule of Projects Under Construction (PUC) towards the
cost of completing PUC in accordance with the Construction Management
Agreement (CIMA) (see Note B).

f) The Concessionaire will carry out the Concession Agreement as an independent

contractor for its own account.

g) All contracts to be entered into by the Concessionaire relating to the operation of

the Concession Agreement during its term and which: (a) are for a term of
12 months or more; and, (b) involving the payment of money or the receipt of
money by the Concessionaire in excess of US$1.0 milllon shall only be entered
into by the Concessionaire if it includes an expressed provision of assignability,
at TRANSCO's option, to TRANSCO or its nominee upon the expiration of the
Concession Period or earlier termination of the Agreement.

h) As security for prompt and complete performance of its obligations under the
Agreement, the Concessionaire shall deliver to PSALM on Commencement Date
a Performance Security in the form of lrrevocable Standby Letter of Credit. Each
Performance Security, equal to 2o/o of the Concession Fee, shall be for a term of
not less than twelve months. The Concessionaire shall deliver a replacement
Performance Security by the Replacement Deadllne (the date that is not less
than five business days prior to the expiration date of the then effective
Performance Security). Failure to deliver a replacement Performance Security by
Replacement Deadline represents a Replacement Failure Draw Event.

i) Subject to the provisions related to the Replacement Failure Draw Event, PSALM
and TRANSCO shall be entitled to draw on and forfeit the entire amount of the
Performance Security upon the occurrence of a Performance Security Drawing
Event. Performance Security Drawing Event shall mean any one or combination
of: (i) a Concessionaire Default, (ii) a Replacement Failure Draw Event, or
(iii) any violation by the Concessionaire of any of the terms and conditions of the
Agreement (including non-payment of Concession fee or any portion thereof)
or any of the other Transaction Documents.

j) From the Commencement Date, the Concessionalre shall be entitled to exercise

all of TRANSCO's rights and shall discharge all of TRANSCO's liabilities
(except for excluded liabilities) under all existing contracts relating to the
operation of its regulated transmission business, including contracts for related
businesses and any rights under any security deposits, letters of credit and other
forms of credit support provided by TRANSCO's counterparties to such contracts
(the Transferred Contracts).

k) On the Commencement Date, TRANSCO shall transfer title to the Transferable

Assets to the Concessionaire by executing a Deed of Transfer. TRANSCO and
the Concessionaire shall execute additional deeds of transfer in respect of any
subsequently discovered TRANSCO-owned tangible moving property, the title of
which has not been transferred to the Concessionaire, under the Deed of
Transfer.

l) From Commencement Date, the Concessionaire shall manage the construction

and completion of all PUC that have not been commissioned and placed in
service on behalf of TRANSCO in accordance with the CI\/,A (see Note 8).

-38-
m) On the Commencement Date, and except for Excluded Receivables, the
Concessionaire shall acquire all of TRANSCO's cash, receivables and the
beneflt of prepayments made by TRANSCO and shall assume the liability to pay
and discharge all of TRANSCO's current liabilities except for Excluded Liabilities.
TRANSCO's estimated working capital position and the Concession Fee shall be
adjusted to account for any difference between TRANSCO's actual working
capital position on the Commencement Date and such estimate.

n) TRANSCO shall retain title to: (i) all of the Transmission Assets, lntellectual
Property Rights, (ii) all assets comprising PUC or New Projects, and (iii) all
easernents, rights of way or other real estate interests, including Documented
Property Rights acquired by the Concessionaire.

o) From the Commencement Date, the Concessionaire agrees to design, develop,

finance, construct and complete all New Projects that are necessary for the
fulfillment of the Concessionaire's responsibilities as the Grid Owner and System
Operator at its own cost and expense after taking account of the Transmission
Development Plan (see Note 8).

p) TRANSCO shall be liable to obligations in relation to loans existing prior to the

Commencement Date contracted by NPC relating to the Transmission Assets,
except those assumed by the Concessionaire under the Loan Covenants
Agreement.

q) TRANSCO shalltemporarily assign to the Concessionaire its workforce to ensure

a smooth transition in the operation of the Transmission Grid by the
Concessionaire under the "Interim Assignment Agreement."

r) ln consideration for the grant of the Concession Agreement, the Concessionaire

shall pay PSALM US$3.95 billion. The Concessionaire shall pay 25Vo (or at the
Concessionaire's option, a higher percentage) of the Concession Fee to PSALM
in US dollar on the Commencement Date (Commencement Fee). The balance of
the Concession Fee shall be converted to Philippine peso at a fixed exchange
rate equal to P42.75 for every US dollar and paid to PSALM with interest in
accordance with the Schedule of Deferred Payments. The Concession Fee is
subject to adjustments in accordance with Schedule 6 to the Agreement,
Adjustments to Concession Fee (see Notes 5, I and 14).

s) The concession period shall terminate on the termination date and the
Concessionaire's business shall thereupon be taken over by PSALM or its
nominee as a going concern in accordance with the Agreement.

0 ln consideration for the Concessionaire's construction, installation, financing,

management, improvement, operation, etc. of the Transmission Assets in the
Philippines, TRANSCO shall pay the Concessionaire the Recovery Payment as
determined by independent appraisers.

The Recovery Payment shall be paid, together with interest at the applicable rate
from the termination date until transfer closing date. The applicable rate shall be:
(a) ln case of a termination by reason of a government default, a rate reflecting a
fair and reasonable weighted average cost of capital as at the termination date,
(b) ln case of a termination by reason of a concessionaire default, a rate
reflecting a fair and reasonable risk-free rate as at the termination date, (c) ln the
event of termination of the Agreement by reason of a no fault event, a rate
reflecting a fair and reasonable cost of debt as at the termination date
determined, and (d) ln the event of expiration of the Concession Period, a rate
reflecting a fair and reasonable cost of debt as at the expiration date determined.

-39-
 PSALI\X shall remit the Recovery Payment, together with interest from the
termination date until the transfer closing date at the applicable rate, by wire
transfer to an account designated by the Concessionaire unless within that
period PSALIU notifies the Concessionaire in writing that it has elected to pay the
Recovery Payment over seven (7) years.

The Recovery Payment will only be determinable at termination date by a

mutually appointed independent appraiser.

Standby Letter of Credit

ln compliance with the terms and conditions of the Concession Agreement, the
NGCP obtained an lrrevocable Standby Letter of Credlt (SBLC) with The tt/izuho
Bank, Ltd. amounting to US$79.00 million in favor of PSALIM which is effective
October 10,2022 until October 10,2023.

Transferred Contracts
lncluded in the transferred contracts from TRANSCO are existing contracts before
the bidding date and subsequent contracts entered into by TRANSCO after the
bidding date such as, loan agreements amounting to P5.00 million and above,
insurance contracts, software licenses of information technology and intellectual
properties, radio station licenses, projects under construction, sub-transmission
assets sale, procurement contracts, transmission service agreements, undelivered
purchase orders, requirements for award, spatial data infrastructure projects and
other agreements with transmission customers.

5. Concession Fee

As discussed in Note 4 to the financial statements, the Group shall pay PSALM
US$3.95 billion (P172.99 billion) as Concession Fee. Such fee is recognized as part
of "lntangible asset" account in the statements of financial position as at
December 31,2022 and 2021 (see Note B).

The Group paid PSALM the Commencement Fee amounting to

US$987.50 million (P46.34 billion), representing 25% of the Concession Fee, in
January 2009 through funds received by NGCP from its lnvestors.

The balance of the Concession Fee of US$2.962 billion was converted to peso
liability at a fixed exchange rate of P42.75 for every US dollar at initial recognition,
payable in forty (40) semi-annual installments (Deferred Payments), lnterest is
payable on the aggregate outstanding amount of the Deferred Payments in arrears
on each semi-annual payment date (see Note 15).

Subsequently, the Concession Fee shall be adjusted as follows:

a. The Concession Fee shall be adjusted for the difference between the audited
lnitialWorking Capital (lWC) and the estimated IWC as at Commencement Date.
The Concession Fee shall be: (i) increased if the audited IWC at
Commencement Date is greater than the amount of estimated IWC; or
(ii) decreased if the audited IWC at Commencement Date is less than the
amount of estimated IWC (see Note 4).

-40-
b. The Concession Fee shall be reduced by an amount equal to: (i) any reduction in
the regulatory asset value resulting from the disposal of subtransmission assets;
and (ii) any difference between the aggregate regulatory asset value of
transmission connection projects and sub-transmission projects included in the
PUC approved by the ERC on their completion and the aggregate value of such
projects if the aggregate ERC-approved value is lower than their aggregate
estimated value.

c. A recalculation of the amount of funding from sources other than the Funding
Agreements and source of TRANSCO's actual expenditure on PUC before the
Commencement Date and the estimated cost of capital expenditure to complete
each PUC after the Commencement Date. lf the remaining capital expenditure
required to complete all PUC to be funded from sources other than Funding
Agreements is higher than the expenditure to be funded from such sources after
the Commencement Date, the Concession Fee shall be reduced by the
difference between those two amounts. On the other hand, if the remaining
capital expenditure required to complete all PUC to be funded from sources other
than Funding Agreements is lower than the expenditure to be funded from such
sources after the Commencement Date, the Concession Fee shall be increased
by the difference between those two amounts (see Note 4).

Whenever it becomes necessary for the Concession Fee to be adjusted, the

Concessionaire shall furnish PSALIVI with its preliminary calculations of the
necessary adjustments within thirty days, together with a detailed explanation of its
calculation.

Adiustments to Concession Fee

As at December 31 ,2010, the audits of the PUC and IWC have been fully completed
and agreed to by the parties. The estimated reduction in the regulatory asset value
resulting from the disposals of the sub-transmission assets had also been
determined and deemed insignificant as at December 31, 2010 while the difference
between the aggregate regulatory asset value of transmission connection projects
and sub-transmission projects included in the PUC approved by the ERC on their
completion and the aggregate value of such projects set out in Schedule 2 to the
Concession Agreement will be determined upon completion of the projects.
Accordingly, the Group recognized the resulting net determinable adjustment to the
Concession Fee amounting to P8.85 billion as at December 31 ,2010. Subsequently,
the Group determined and adjusted the computed escrow fund utilization amounting
to P3.01 billion as at December 31 ,2011 (see Note 8) as confirmed by TRANSCO in
a letterdated August 15,2011. On June 14,2013, NGCP and PSALM had agreed
the dollar portion of the PUC amount of P240.05 million resulting to additional
adjustments to Concession Fee.

ln accordance with Section 4.02 of the Concession Agreement, the concession fee
shall be subject to adjustment based on Schedule 6 (Adjustments to Concession
Fee) in light of the audit to be conducted pursuant to Subsection 4.02 (t) (Projects
Under Construction). PSALM, TRANSCO and NGCP appointed Sinclair, Knight,
Itlez (SKM) as the independent appraiser to conduct the audit of PUC for purposes
of determining the adjustment to concession fee. SKM made its independent
determination of the estimated cost to complete each PUC and the final report was
submitted on July 15,2009 and was duly accepted and approved by PSALIT/,
TRANSCO and NGCP. NGCP maintains that the proposed adjustment to concession
fee be based on the SKM audit. However, there was differing interpretation proposed
by PSALII/ which is currently being resolved.

-41 -
On July 15,2013, the Concession Fee was adjusted for P1.57 billion representing
overpayment from January 15, 2009 to January 15, 2013 which was netted-out from
its scheduled Concession Fee payment to PSALM. Further, PSALM refunded NGCP
the amounts of US$29.26 million representing overpayment on lhe 25o/o upfront
concession fee payment.

The Concession Fee Adjustment further includes P1.77 billion adjustment to the 75%
semi-annual deferred payment amortization for the 1O-year period January 15,2014
to January 15,2024.

On December 31 , 2016, the Concession Fee was adjusted for P557.34 million
representing interest receivable and accounts receivable - others which were turned-
over by TRANSCO and subsequently determined to be uncollectible.

The Group has reserved its right to further adjustment of the Concession Fee and full
refund of any and all overpayments of Concession Fees following the finalization of
Adjustments to Concession Fee.

The Adjustments to the Concession Fee are computed based on the formula as set
out in Schedule 6 of the Concession Agreement ("Schedule 6, Adjustments to
Concession Fee"). The Commencement Fee is increased or decreased by the
difference between the Concession Fee prior to the adjustments and the Concession
Fee after the adjustments in accordance with Schedule 6, and such difference is
multiplied by the ratio of the Commencement Fee to the Concession Fee expressed
as a percentage ("M"). ln addition, Deferred Payment is increased or decreased by
the difference between the Concession Fee prior to the adjustments and the
Concession Fee after the adjustments in accordance with Schedule 6, and such
difference is multiplied by the percentage difference of 100% - NI.

Concession Fee Pavable

This account consists of the balance of the Concession Fee amounting to
U5$2.962 billion converted to peso liability at a fixed exchange rate of
P42.75 for every US dollar at initial recognition and is payable in 40 semi-annual
installments (Deferred Payments).

lnterest rate applicable to the Deferred Payments has been fixed until the last semi-
annual payment date of the Second Regulatory Period (January 2006 to December
2010) to equalto the Philippine Dealing System (PDS)Treasury Fixing or PDST-F or
PDST-F 10 year benchmark rate as published by the Philippine Dealing and
Exchange (PDEx) Corporation on the lVlarket page of the PDEx System (the 10 Year
PDST-F Rate) at approximately 11:16 am on a date designated by PSALM falling
approximately one month before the Bid Date plus 230 basis points (2.3%). After the
end of the Second Regulatory Period, the interest rate shall be adjusted for the next
Regulatory Period and every Regulatory Period, thereafter, and such adjusted
interest rate shall be applicable for each Deferred Payment falling due during the
relevant Regulatory Period. The adjusted interest rate shall be equal to the 10 Year
PDST-F Rate at approximately'11:16 am two business days before the semi-annual
payment date on which an adjustment is to take effect plus 230 basis points (2.3%).

For the Fourth Regulatory Period, PSALM Board of Directors approved, on June 16,
2015 through PSALI/ Board Resolution No.2015-0616-08 to substitute the interest
benchmark rate under the Concession Agreement (CA) from 1O-Year PDST-F to
1O-Year PDST-R1. This adjusted interest rate was applied for each Deferred
Payment falling due during the relevant Regulatory Period. Thus, for the Fourth
Regulatory Period starting January 1,2016 to December 31, 2020, interest rate
applied was 6.5391%.

-42-
 With the retirement of the PDST reference rates effective October 29,2018, PSALIV
in its letter dated August 14,2019 hereby confirms that the 10-year PHP BVAL
interest benchmark rate for Philippine Government issued debt securities shall be the
interest rate for the next Regulatory Period of the Deferred Payments under the
Concession Agreement (CA). The 1O-year PHP BVAL as at January 13, 2021 was
3.013% plus 2.30% margin, the applicable interest rate for the Fifth Regulatory
Period covering January 1, 2021 to December 31 , 2025 shall be 5.313%.

lnterest expense on deferred payments in 2022 and 2021 recognized in profit or loss
amounted to P2.89 billion (see Note 14).

6. Business Combination under no Common Control

As discussed in Note '1, on lVlay 28, 2021, SGDPI entered into a share swap
transaction in exchange for the shares of stocks of OTHI and P21. The business
combination involving OTHI and P21 including NGCP (collectively referred to as the
"acquired subsidiaries") and SGDPI is considered to be a business combination of
entities under common control as two major shareholders, through contractual
agreement and with majority representation in the Board of Directors, jointly controls
SGDPI and the acquired subsidiaries before and after the acquisition.

The Share Swap Transaction which is considered to be a business combination of

entities under common control was accounted for retrospectively using the pooling of
interests method with the consolidated financial statements being restated as if the
entities had always been combined for the periods that the entities were under
common control.

The Group recognized the assets acquired and liabilities assumed at their carrying
amounts. The difference between the consideration paid or transferred and the net
assets acquired is recognized under "Equity adjustment from common control
transactions" account in the consolidated statements of changes in equity.

-43-
7. Non-controlling lnterests

The details of the Group's material non-controlling interests as a result of the consolidation of OTHI, P21 and NGCP are as follows

Pe,,c€ntao€ of non-conlrollinq inlcr$ts 33% 33% 40% 33% 33% 40%

canfing amounr of non-conrmlling lnte€sls (P12,975,075,925) (P16,660,404,861' P73,714,O21,149 el1.673,763,187) (P15,367,286,114 P57,960,7E5,886
Net income attributable to non-controlling interests (P206,541,138) (P205,347,'|.44!. P2O,076,092,243 (P5,560,921) (p5,265,415) p13,828,433,360

Other comprehensive income attributable to non-

controlling interests P P- P144,506,360 P P (P62,454,826)

Dividends paid to non-controlling interests Pl,095,771,600 P1,095,771,600 P4,467,350,000 P1,789,350,000 P1,789,350,000 P4,800,000,000

The following are the financial information of OTHI, P21 and NGCP:

December 31,2022 December31,2021

NoncurlRnt assets €,865?407,90ut 33,615,583,164 35!,917,048,435 37,7@,437,145 27,449,955,595 313,,156,067,974

Cufrontliabilities 24,U7,2|,7 845,769,472 75,f41,024,615 101,309 843,692,617 71,222,767,322
No|lcrrrBnl liabilities 18.992 26.551 203.057.376.007 9.689 13.544 195,367,086,166
Net assets P43,911,539,1r5a P32,808,ur24835 P126,316!326!709 P37,746'762.279 P26,640,029,997 P9t,127,536,2165

Revenues/lncome P9,452,229,973 P9,451 ,797,582 P61,821,367,993 P6,940,476,034 P6,940,159,045 P48,6A4,206,642

Net income P9,420,147,269 P9,423,765,432 P34,713,351,311 P6,914,489,874 P6,915,385,348 P23J24,470,501

Other comprehensive income (loss) 65,149,506 65,149,505 239,273,933 31 ,247,413 31,247,413 104,158,O44
Total comprehensive incorne P9,485,296,775 P9,488,914,938 P34,952,625,244 P6,945,737,287 P6,946,632,761 P23,228,628,545
Cash flows provided by (used in) operating activlties (P5,745,967) (P28,4s5,663) P25,358,022,285 (P',t12,502,361) (P84,387,357) P29,876,175,O53
Cash flows provided by (used in) investing activities 3,350,713,482 3,350,826,901 (45,292,906,4271 3,600,197,547 3,599,853,783 (41 ,316,909,1 28)
Cash flows provided by (used in) financing activities (3,320,520,000) (3,320,635,000) 15,983,154,017 (3,595,000,000) (3,595,530,28s) 4,586,475,629
Efiect ofexchange rate changes on cash and cash
equivalents 75,969 106,203 13,510,995 38L54 54,191 247,594,496
Net increase (decrease) in cash and cash equivalent: P24,523,484 P1,802,441 (p3,938,219,{30) (P107,266,060) (P80,009,672) (p6,606,663,950)

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8. lntangible Asset - net

This account consists of:

IVote 2022 2021

Cost:
Concession fee 2,5 P160,296,289,265 P160,296,289,265
Cost of completed projects 2 96,611,921,945 84,932,962,401
Computer software 3 487,983,237 480,126,986
257,396,194,447 245,709,378,652
Less accumulated amoftization '|.06,410,554,475 97,443,193,241
150,985,639,972 148,266,185,411
Contract assets 180,440,007,273 151 ,197,555,998
P331,425,q47,245 P299,463,741,409

Concession Fee
This represents the right to operate the entire regulated transmission business of
TRANSCO during the concession period. The Concession Fee is subsequently
adjusted by the Adjustments to Concession Fee disclosed in Note 5 pursuant to
Schedule 6 of the Concession Agreement.

Amortization expense recognized in proflt or loss amounted to P6.38 billion in 2022

and2021.

Costs of Comoleted Projects

This pertains to the intangible asset resulting from completed transmission projects
from Commencement Date to report date which will be transferred to TRANSCO at
the end of the concession period in accordance with the Concession Agreement.

Amortization expense recognized in profit or loss amounted to P2.55 billion and

P2.37 billion in 2022 and 2021, respectively.

Contract Assets
This pertains to the intangible asset related to costs of assets under construction
resulting from the construction of transmission assets as part of the Concession
Agreement and will be transferred to TRANSCO at the end of the concession period.

Computer Software and License

This pertains to the costs incurred for the Enterprise Resource Planning (ERP)
Project, Enterprise Document Management System (EDMS), lntegrated Human
Resource Application (IHRA), lntegrated [Vleter Data Validation System (IMDVS),
Medical lnformation System (MEDYSIS) and Visitor's lVlanagement System (VMS)
amounting to P487.98 million and P480.13 million as at December 31 ,2022 and
2021, respectively.

Amortization expense recognized in profit or loss amounted to P42.99 million and

P38.55 million in 2022 and 2021, respectively.

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The movements and balances of the accounts are as follows:

Per Concession Right

Gompleted Gomputer
GoncessionFee Projects/Others Contract Assets Total Software Total
Cost
January 1,2021 P 1 60,2e6, 28e,265 rr t,,il1,,21?,,21r, Pl19,822,764,157 P355,930,474,307 P480,126,986 P356,410,601,293
Add itions/adiustments 31 37 4. 7 91.841 40.496.333.357 - 40.496.333.357
December 31,2021 16t),296,289,265 U,932,962,41 151,197,555,998 396,426,807,664 480,126,386 396,906,934,650
Additions/adiustmenb - 11,678,959,94 29,242,451,275 40,921,410,819 7.856,25'l i10,929.267,070
Decemb.t 31,2022 160,296,280,265 95,611,921,9,15 14O,M,0O7,273 417,3l|4,218443 87,943,237 1r7,836,m1,72o
Accumulated Amortization
January 1,2021 77,412,523,431 10,885,015,899 88,297,539,330 358,333,963 88,655,873,293
Add itions/adiustments 6,375,674,295 2,373,100,514 8.748.774.809 38.545.139 8.787.319.948
December31,2021 83,7AA,197,726 13,256,116,413 - 97,046,314,13S 396,873,102 97,443,193,241
Addilions/adiustmenb 6,375,674,295, 2, 8,693,748 - 8,924,368,013 42,993.'191 8,967.361.234
Decernbet 31,2022 90,15X,A72,021 15,806,810,16'l - 105,970,6E2,182 139,972393 106,410,554,475
Net Carrying Amount
Decernber 31,2021 p76,508,091,539 p71,674,845,988 P151,197,555,998 P299,380,493,525 P83,247,884 P299,463,741,409

December 31,2022 p70,132,417,24 p90,905,111,794 P18O,440,007,273 P33{,377,536,301 P48,11O,944 P331,425,647,245

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9. Goodwill

Goodwill amounting lo P10.47 billion as at December 31 ,2022 and 2021 arise from
the acquisition of OTHI of 100% equity interest in MOGRC and acquisition of
MOGRC and CHPC of 30o/o interest each in NGCP.

The recoverable amount of goodwill has been determined based on valuation using
cash flow projections (value in use) covering a five-year period based on long range
plans approved by management. The values assigned to the key assumptions
represent management's assessment of future trends in the relevant industries and
were based on historical data from both external and internal sources. Cash flows
beyond the five-year period are extrapolated using a constant growth rate
determined to arrive at its terminal value. The growth rates used 5.7o/o and 8.1% in
2022 and 2021, respectively, are based on Group's expectations of market
developments and past historical performance. The disoount rates applied to after
tax cash flow projections ranged from 9.60% and 10.670/0 in 2022 and 2021. The
discount rate also imputes the risk of the cash-generating units compared to the
respective risk of the overall market and equity risk premium. The recoverable
amount of goodwill has been categorized as Level 3 in the fair value hierarchy based
on the inputs used in the valuation technique (see Note 3).

No impairment loss was recognized for goodwill for the year ended December 31,
2022 and 2021.

Management believes that any reasonably possible change in the key assumptions
on which the recoverable amount is based would not cause their carrying amounts to
exceed their recoverable amounts.

The calculations of value in use is most sensitive to discount rate. The risk-adjusted
weighted average cost of capital is used as the discount rate, which reflects
management's estimate of the risk specific to each unit. This is the benchmark used
by management to assess operating performance and to evaluate future investment
proposals.

10. Property and Equipment - net

The movements of this account are as follows:

Structures Machinery
and Transportation and Otfice Fumiture
lmprovements Equipment Equlpment and Fixtures Total
Cost
January I ,2021 P209,702,620 P2,711,420,022 P4,681,249,509 P3,964,594,243 P11,567,066,394
Additions durino the vear 1 1.584.025 412,834,010 1 38,409,39 1 768,1 08,423
December 31, 2021 221,289,645 2,916,701,019 5,094,083,5't9 4,'t 03,103,634 12,335,174,817
Addltlons durlno the vear 31'1,689.147 622,588.830 474,929;820 230,767,958 1,639,975,755
December 31, 2022 532,975,752 3,539,289,849 s,s69,013,339 4,333,87.r,592 13,975,150,s72

Accumulated Depreciation
January 1,2021 66,994,761 't,946,531,20'1 2,982,867,745 2,595,776,688 7,592,1 70.395
Depreciation during the year 20,268,850 129,8s5,154 :rs8212534 226,037,463 612,419,001
December 31, 2021 87,263,61 1 2,122,426.355 3..173.085.279 2,821,811,151 8,204,589,396
Depreciation during the year 't02,648,510 170,587,O42 21 1 ,681,955 220,81 3,505 705,731,012
oecEmber 31, 2022 189,9',12,121 2,293,013,397 3,384,767,234 3,042,627,656 6,910,320,40E

Net Carrying Amount

Oecember 31, 2021 P134,023,034 P794,274,864 P1,920,998,240 P1,281,285,483 P4,130,585,421
DecEmber 31, 2022 P343,063,671 P1,248,276,452 P2,184,246,105 p,r
,291,243,936 P5,064,830,164

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 Structures Machinery Offlce
and Transportatlon and Furniture
lmprovements Equipmsnt Equipment Fixtures Total
Cost
January 1, 2020 P204,045,756 P2,667,533,959 P4,397,430,780 P3,828,911,994 P11,097,922,489
Additions durinq the vear 5.656,864 283,818,729 135,782,249 469,143,905
December 31, 2020 209,702,620 2,711,420,022 4,68'1,249,509 3,964,694,243 1 1,567,066,394
Additions durino the vear 1 1.584.025 205 412,834,010 138,409,391 768,1 08,423
December 31, 2021 221,286,645 2,916,701,019 5,094,083,519 4,103,103,634 12,335,'174,817

Accumulated Depreciation
January 1,2020 46,867,796 1,7?1,018,156 2,790,857,728 2,363,244,311 6,921,987,991
Depreciation during the year 20,126,965 225,513,045 192,010,017 232,532,377 670,182,404
December 31, 2020 56,934,761 1,945,531,20'1 2,982,867,745 2,595,776,688 7,592,170.395
Deoreciation durino the vear 20.268 850 '175 154 190.217.534 226.037.463 612.419.001
December 31, 202'l 87,263,611 2,122,426,35s 3,'173,085,279 2,821,814,151 8,204,589,396

Net Carrying Amount

December 31, 2020 P142,707,859 P764,888,821 P1,698,381,764 p1,368,917,555 p3,974,895,999

December 31, 2021 P134,023,034 P794,274,664 P,1,920,998,240 P'1,281,289,483 P4,130,585,421

Depreciation expense recognized in statements of oomprehensive income amounted

to P705.73 million andP612.42 million in2022and2021, respectively.

{1. Cash and Cash Equivalents

This account consists of:

Note 2022 2021

Cash on hand P14,985,173 P14,085,144
Cash in banks 24 3,673,009,184 16,897,369,880
Short{erm placements 24 1.161,934,720 3,662,305,400
P4,949,929,077 P20,573,760,424

Cash in banks generally earn interest at rates based on daily bank deposit rates.
Short-term placements have average tenors of three (3) months or less and earn
interests ranging from 0.750o/o - 4.750o/o and 0.325% - 1.6250/o in 2022 and 2021,
respectively. lnterest income earned amounted to P108,45 million and P58.04 million
in 2022 and 2021, respectively.

12. Receivables

This account consists of:

A. Current Receivables

Note 2022 2021

Power receivables 24 P4,547,634,467 P3,709,635,141
Due from customers 24 3,749,632,681 3,121,100,724
Accrued power receivables 24 6,430,656,406 2,461,168,557
Output VAT receivable '1,701,149,641 1,839,959,853
Due from officers and employees
and other receivables 24 148,302,680 183,202,141
Restructured power receivables 24 53,393,239 111,573,641
lnterest receivable 24 555,138 725,207
P1 6,631,31 4,252 P 1 1,427,365,264

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B. Noncurrent Receivables

Note 2022 2021

Restructured power receivables F',1,437,336,225 P1,430,731,170
Accrued power receivables 12,809,832,000 5,380,062,500
Power receivables 120,043,947 1 10,569,362
Due from customers 444,233,622 455,327,402
Other noncurrent account
receivable 1,007,927,847
24 { 5,819,373,541 7,376,699,434
Less allowance for impairment
losses (2,006,798,659) (1,942,128,659)
P13,812,57 4,882 P5,434,560,77 5

Details of movements of allowance for impairment losses are as follows

2022 2021
Balance at beginning of year P1,942,128,659 P1,877,458,659
Provision for impairment losses on
receivables during the year 64,670,000 64,670,000
Balance at end of year P2,006,798,659 P1,942,128,659

Power receivables consist of amounts due from power customers for the
transmission, connection and subtransmission services rendered by the Group.

Noncurrent - receivables consist of amount due from power customers relating to

transmission and sub-transmission services, ancillary services and the claim from
DPWH amounting to P1.01 billion for the damaged Amlan-Samboan submarine
cable which are to be collected beyond I year. These receivables pertain mainly to
the |MAR2020 approved by ERC in an order dated March 23, 2022 amounting to
P51.471 million effective January 1,2020 until a new transmission revenue has been
determined. Starting May 2022 billing period, NGCP already implemented the billing
based on the P51.471 million |MAR. However, NGCP is yet to receive ERC's
resolution on the proposed manner of recovery of the unbilled i[/AR2020 for the
years 2020,2021 and four (4) months of 2022 resulting to the accrual of the unbilled
incremental iMAR2020 for the 2020, 2021 and the four (4) months of 2022 as of
December 31,2022. As of December 31, 2022, total unbilled non-current power
receivables amounted to P12.81 billion, of which P4.24 billion pertains to incremental
|MAR OF 2020, P7.68 billion pertains to |MAR ot 2021 and P883.06 million pertains
to Performance lncentive Scheme (PlS).

Due from customers pertains to receivables for ancillary service charges (ASC),
FIT-ALL and universal charges billed to the customers on behalf of the ancillary
service providers, TRANSCO and PSALM. These charges will ultimately be remitted
to ancillary providers, TRANSCO and PSALM. The noncurrent portion pertains to
customers with dispute resolution cases pending with ERC.

Accrued interest receivable from short-term placements amounted to P0.18 million

and P0.41 million as at December 31 ,2022 and 2021, respectively.

Restructured power receivables represent that portion of restructured power

customers' accounts subject to repayment by pre-determined installments,

-49-
 Output VAT Receivables is the value added tax due from sales of goods and
services both to customers and to other businesses.

Accrued power receivables refers to the estimated amount of revenues earned but
not yet billed to the customers at year-end. This contract asset is generally reversed
upon billing and recognition of power receivables.

13. Prepaid Expenses and Other Assets

Prepaid Exoenses and Other Current Assets

This account consists of:

2022 2021
Advance payment to suppliers and contractors P18,158,867,1 10 14,520,194,602
Court and other deposits 7,658,813,934 6,207,020,662
Materials, supplies and spare parts - net 3,689,264,986 3,674,286,317
lnput VAT 1,239,341,361 590,972,054
Other deposits 486,008,889 460,722,167
Materials, supplies and spare parts in transit 188,294,420 274,366,926
Prepaidexpenses 172,889,557 130,157,330
Other supplies 17,210,727 31,039,653
Guarantydeposit 9,072,835 9,072,835
fund
Calamity loan 143,594 273,O77
P3{,619,907,413 P25,898,1 05,623

Advance payment to suppliers and contractors includes the balance advanced by the
Group to suppliers and contractors in relation with its contracts for the construction of
the project or for services rendered.

Materials, supplies and spare parts before write-down to net realizable value
amounted to P4.03 billion and P4.29 billion as at December 31 , 2022 and 2021,
respectively, which resulted to an accumulated write-down amount of P346.27 million
as at December 3l, 2022 and 2021.

Materials, supplies and spare parts are items that will be used in the operations and
maintenance of utility plants, substation and transmission lines.

Materials, supplies and spare parts in transit pertain to items that were already
purchased by the Group but not yet received.

Court and other deposits include various amounts deposited with the provincial,
municipal or city courts and other entities as guaranty for the fulflllment of obligation
and for other purposes. These are mostly provisional deposits relative to right of way
andior lot acquisition cases.

lnput VAT is the value-added tax added to the price on purchases of goods and
services to suppliers/contractors liable to VAT. lt is deductible to the amount of
Output VAT payable to the Bureau of lnternal Revenue (BlR).

Other deposits consist of amounts advanced by the Group such as refundable and
security deposits.

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 Prepaid expenses refer to advance payments made for rent, insurance,
communication license and all expenditures related to preliminary surveys, studies,
investigations and other related undertakings to determine the feasibility of a project for
development by the Group.

Guaranty deposits include the amount of letters of credit (LC) opened in favor of
suppliers corresponding to the marginal guaranty deposits and other charges
applicable to the LC. These also include other transactions requiring deposit to
guarantee for the fulfillment of an obligation.

Calamity loan fund pertains to the cash advances provided to the employees for the
damages suffered by them due to the typhoon calamities.

ltlaterials, supplies and spare parts and other supplies charged in the statements of
comprehensive income amounted to P344.69 million and P291.26 million in 2022
and 2021, respectively.

Other Noncurrent Assets

This account consists of:

2022 2021
Deferred input VAT P101,098,812 P157,363,389
Projeot prepayment - noncurrent 3,514,E9E,344 4,273,562,190
Others 500,384
P3,6{5,997,156 P4,431,425,963

Deferred lnput VAT

This account refers to the balance of input VAT of acquired capital goods with cost of
P1.00 million and above and amortized for five (5) years.

Proiect Prepavment
This represents cash advances to contractors in connection with the contract for the
construction of project or for services rendered which will not be recouped within one
year from the date of payment. These are expenses to be converted into cash once
contractor did not fulfill obligation,

14. Loans Payable

Outstanding Balance and ltflaturities

Outstanding balance of loans payable is presented below:

Note 2022 2021

Loan Facilifies (Nef of Debt
Issuance Costs)
Fixed-rate peso corporate notes P33,834,167,492 P42,006,783,907
Peso denominated term loan 133,257,333,132 109,229,286,708
24 167,091,500,614 151,236,07 0,615
Less current portion 22,6',19,438,229 15,378,916,993
P144,472,062,385 P1 35,857, 1 53,722

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Movements in debt issuance costs are as follows:

2022 2021
Balance at beginning of year P873,929,395 P819,677,980
Debt issuance costs during the year 233,064,516 266,472,521
Amortization durinq the year (222,494,5151 (212,221,116)
Balance at end of year P884,499,396 Pg73,g2g,3g5

Repayment Schedule
As at December 31 ,2022, the annual maturities of loans payable are as follows

Debt
Year Gross Amount lssuance Costs Net
2023 P22,810,170,000 P203,476,540 P22,606,693,460
2024 22,402,340,000 160,050,764 22,242,299,236
2025 19,680,340,000 129,573,285 19,550,766,715
2026 20,554,340,000 109,820,984 20,444,519,016
2027 17,062,810,000 90,873,343 { 6,97{,936,657
More than 5 years 65,466,000,000 190,704,470 65,275,295,530
P167,976,000,000 P884,499,386 P167,091,500,614

As at December 31 ,2021, the annual maturities of loans payable are as follows:

Debt
Year Gross Amount lssuance Costs Net
2022 P15,575,000,000 P196,083;107 P15,378,916,893
2023 21,945,000,000 154,084,435 21,790,915,565
2024 21,090,000,000 123,876,786 20,966,123,214
2025 18,100,000,000 106,561 ,89617,993,438,104
2026 19,170,000,000 92,905,134 18,077,094,866
More than 5 years 57,230,000,000 200,418,027 57,029,581,973
P152,110,000,000 P873,929,385 P151,236,070,615

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Details, Descriotion and Terms of the Loans
Following are the details, description and terms of the loans

Financing of Capital Expenditures

a. The Group entered into a P5.9 billion from P20.90 billion Peso Bilateral
Unsecured Term Loan drawn on January 10,2022; P5.0 billion Peso Bilateral
Unsecured Term Loan drawn on February 24,2022, P10.0 billion Peso Bilateral
Unsecured Term Loan drawn on April 7, 2022 (P5.0Bn) & July 14, 2022
(P5.0 billion), P3.2 billion Peso Bilateral Unsecured Term Loan drawn on
September 9,2022, P2.7 billion from P6.0 billion Peso Bilateral Unsecured Term
Loan drawn on September 20,2022 (P1.4 billion) & December 12,2022
(P1.3 billion), and P4.7 billion Peso Bilateral Unsecured Term Loan drawn on
November 14,2022, intended for purposes of financing New Projects or for any
other purpose related to carrying out the Concession including but not limited to
flnancing capital expenditures. Terms of these loans include Ten-year Peso
Bilateral Unsecured Term Loan for P5.90 billion from P20.90 billion, for
P5.00 billion, for P10.0 billion, for P3.2 billion, for P2.7 billion from P6.0 billion
and Five-year Peso Bilateral Unsecured Term Loan for P4.7 billion. The
applicable interest rate for the P5.90 billion from P20.90 billion, the applicable
interest rate for the Loan shall be (i) the lnterest Rate for the period beginning on
the relevant Drawdown Date until the flfth anniversary of the initial Drawdown
Date and (ii) the Reset lnterest Rate, for the period beginning on the Reset Date
until the Maturity Date. For the P5.00 billion, the applicable interest rate for the
Loan shall be (i) the lnterest Rate for the period beginning on the Drawdown
Date until the fifth anniversary of the Drawdown Date and (ii) the Reset lnterest
Rate, for the period beginning on the Reset Date until the Maturity Date. For the
P10.0 billion, the applicable interest rate for the Loan shall be (i) the lnterest Rate
for the period beginning on the relevant Drawdown Date until the fifth anniversary
of the initial Drawdown Date and (ii) the Reset lnterest Rate, for the period
beginning on the Reset Date until the tMaturity Date. For the P3.2 billion, the
applicable interest rate for the Loan shall be (i) the lnterest Rate for the period
beginning on the Drawdown Date until the fifth anniversary of the Drawdown
Date and (ii) the Reset lnterest Rate, for the period beginning on the Reset Date
until the Maturity Date. For the P2.7 billion from P6.0 billion, the applicable
interest rate for the Loan shall be (i) the lnterest Rate for the period beginning on
the relevant Drawdown Date until the flfth anniversary of the initial Drawdown
Date and (ii) the Reset lnterest Rate, for the period beginning on the day
immediately following the fifth anniversary of the initial Drawdown Date until the
Maturity Date. For the P4.7 billion, the applicable interest rate for the Loan shall
be the lnterest Rate for the period beginning on the Drawdown Date until the
Maturity Date.

-53-
b. The Group entered into a P4.00 billion; P5.00 billion; P3.OO biilion from
P6.00 billion; P5.00 billion, P6.00 billion and P4.00 billion from P20.90 bittion;
andP2.50 billion Peso Bilateral Unsecured Term Loan which were drawn on
February 24, 2021 , May 21, 2A21, June 21, 2021, July 14, 2021 , September 13,
2021, November 09,2021 and December 16, 2021 respectively, intended for
purposes of financing New Projects or for any other purpose related to carrying
out the Concession including but not limited to financing capital expenditures.
Terms of these loans include Ten-year Peso Bilateral Unsecured Term Loan for
P4.00 billion; Five-year Peso Bilateral Unsecured Term Loan for P5.00 billion,
Ten-year Peso Bilateral Unsecured Term Loan for P3.00 billion from
P6.00 billion; Ten-year Peso Bilateral Unsecured Term Loan for P6.00 billion and
P4.00 billion from P20.90 billion and Five-year Peso Bilateral Unsecured Term
Loan for P2.50 billion drawn as at December 31 ,2021. The applicable interest
rate for the P4.00 billion Term Loan shall be: (i) the lnterest Rate for the period
beginning on the Drawdown Date until the fifth anniversary of the Drawdown
Date and (ii) the Reset Interest Rate, for the period beginning on the Reset Date
until the Maturity Date. For the P5.00 billion, the applicable interest rate shall be
the lnterest Rate for the period beginning on the Drawdown Date until the
Maturity Date. For the P3.00 billion from P6.00 billion, the applicable interest
rate for the Loan shall be (i) the lnterest Rate for the period beginning on the
relevant Drawdown Date until the fifth anniversary of the initial Drawdown Date
and (ii) the Reset lnterest Rate, for the period beginning on the Reset Date until
the Maturity Date. For the P5.00 billion, P6.00 billion and P4.00 billion from
P20.90 billion, the applicable interest rate for the Loan shall be (i) the lnterest
Rate for the period beginning on the relevant Drawdown Date until the fifth
anniversary of the initial Drawdown Date and (ii) the Reset lnterest Rate, for the
period beginning on the Reset Date until the Maturity Date. For the P2.50 billion,
the applicable interest rate for the Loan shall be (i) the Interest Rate for the
period beginning on the Drawdown Date until the second anniversary of the
Drawdown Date and (ii) the Reset lnterest Rate, for the period beginning on the
Reset Date untilthe lt/aturity Date.

-54-
c. The Group, through NGCP, entered into a P4.20 billion from P7.00 billion,
P1.00 billion, P10.00 billion, P3.00 billion from P6.00 billion, and P1.00 billion
Peso Bilateral Unsecured Term Loan which were drawn on March 10, 2020,
April 2, 2020, April 28,2020, and the last two (2) loans both on July 10, 2020,
respectively, intended for purposes of financing New Projects or for any other
purpose related to carrying out the Concession including but not limited to
financing capital expenditures. Terms of these loans include Five-year Peso
Bilateral Unsecured Term Loan for P1.00 billion and Ten-year Peso Bilateral
Unsecured Term Loan for P10.0 billion and the balance of P4.20 billion from
P7.00 billion term loan, Ten-year Peso Bilateral Unsecured Term Loan for
P6.00 billion, and Five-year Peso Bilateral Unsecured Term Loan for
P1,00 billion drawn as at December 31 ,2020. The applicable interest rate for the
P1.00 billion Term Loan shall be: (i) the lnterest Rate for the period beginning on
the Drawdown Date until the second anniversary of the Drawdown Date and
(ii) the lnterest Rate, for the period beginning on the day immediately following
the second anniversary of the Drawdown Date until the Maturity Date whereas
the applicable interest rate for the P10.00 billion Term Loan shall be: (i) the
lnterest Rate for the period beginning on the relevant Drawdown Date until the
fifth anniversary of the initial Drawdown Date and (ii) the Reset lnterest Rate, for
the period beginning on the Reset Date until the Maturity Date. For the
P4.20 billion from P7.00 billion Term Loan, the applicable interest rate shall be
(i) the lnterest Rate for the period beginning on the relevant Drawdown Date until
the fifth anniversary of such Drawdown Date and (ii) the Reset lnterest Rate, for
the period beginning on the Reset Date until the relevant Maturity Date. For the
P6.00 billion, the applicable interest rate shall be (i) the lnterest Rate for the
period beginning on the relevant Drawdown Date until the fifth anniversary of the
initial Drawdown Date and (ii) the Reset lnterest Rate, for the period beginning
on the Reset Date until the Maturity Date. For the P1.00 billion, the applicable
interest rate shall be the lnterest Rate for the period beginning on the Drawdown
Date untilthe Maturity Date.

d. The Group, through NGCP, entered into a P5.00 billion, P5.00 billion,
P2.00 billion, P15.00 billion, P2.80 billion from P7.00 billion Peso Bilateral
Unsecured Term Loan which were drawn on March 29, 2019, June 17, 2019,
September 30, 2019, December 5,2019 and December 10, 2019, respectively,
intended for purposes of financing New Projects or for any other purpose related
to carrying out the Concession including but not limited to financing capital
expenditures. Terms of these loans include Ten-year Peso Bilateral Unsecured
Term Loan for P5.00 billion, P5.00 billion, P2.00 billion, P15.00 billion and
P2.80 billion from P7.00 billion TL drawn as at December 31,2019. The
applicable lnterest rate for the first S-years is based on s-Yr BVal plus spread.
lnterest rate shall be reset on the fifth anniversary from the Drawdown Date and
shall be applicable for the next 5-years.

e. The Group, through NGCP, entered into a P2.50 billion Peso Bilateral Unsecured
Term Loan which was drawn on December 10,2019 intended for purposes of
financing New Projects or for any other purpose related to carrying out the
Concession including but not limited to financing capital expenditures. Terms of
these loans include Five-year Peso Bilateral Unsecured Term Loan for
P2.50 billion drawn as at December 31 , 2019. The applicable interest rate is
based on S-Yr BVal plus spread.

-55-
f. ln December 2018, the Group, through NGCP, entered into a P2.00 billion,
P1.35 billion and P2.00 billion Peso Bilateral Unsecured Term Loan intended for
purposes of financing New Projects or for any other purpose related to carrying
out the Concession including but not limited to financing capital expenditures.
Drawdowns of the P2.00 billion and P1,35 billion loan were made on
December 18,2018 and the remaining P2.00 billion was drawn on January 25,
2019. Terms of these loans include Five-year Peso Bilateral Unsecured Term
Loan for P2.00 billion, P1.35 billion and P2.00 billion, of which P3.35 billion has
been drawn as at December 31 ,2018 and the balance of P2.00 billion has been
drawn as at December 31 , 2019. Applicable interest rate shall be the lnterest
Rate for the period beginning on the Drawdown Date until the Maturity Date
whereas the other P2.00 billion applicable interest rate shall be: (i) the lnterest
Rate for the period beginning on the Drawdown Date until the second
anniversary of the Drawdown Date and (ii) the lnterest Rate, for the period
beginning on the day immediately following the second anniversary of the
Drawdown Date untilthe Maturity Date.

g. The Group, through NGCP, entered into a P5.00 billion, P7.00 billion,
P3.80 billion and P5.00 billion Peso Bilateral Unsecured Term Loans which were
drawn on May 30, 2018, July 10, 2018, September 26, 2018 and October 16,
2018, respectively, intended for purposes of financing New Projects or for any
other purpose related to carrying out the Concession including but not limited to
financing capital expenditures. Terms of these loans include Ten-year Peso
Bilateral Unsecured Term Loan for P5.00 billion, P3.80 billion, P7.00 billion and
P5.00 billion drawn as at December 31, 2018. The applicable interest rate shall
be: (i) the lnterest Rate for the period beginning on the Drawdown Date until the
Reset Date and (ii) the Reset lnterest Rate, for the period beginning the day
immediately following the Reset date until Maturity Date where the interest rate
means from the Drawdown Date to the Reset Date of the aggregate of
(a) the Fixed Rate Margin and (b) the applicable Base Rate.

h. ln Septembet2OlT, the Group, through NGCP, entered into a P5.00 billion Peso
Bilateral Unsecured Term Loan intended to repay the P4.95 billion Peso Term
Loan that matured on November 29,2017. Another P10 billion Peso Bilateral
Term Loan was availed on December 11,2A17 for purposes of financing New
Projects or for any other purpose related to carrying out the Concession including
but not limited to financing capital expenditures. Terms of these loans include
Ten-year Peso Bilateral Unsecured Term Loan for P5.00 billion and P10 billion
drawn as at December 31 , 2017. lnterest rate for the first S-years is based on
5-Yr PDST-R2 plus spread. lnterest rate shall be reset on the fifth anniversary
from the Drawdown Date and shall be applicable for the next five years.

i. ln May 2016, the Group, through NGCP, entered into a P17.00 billion Peso
Corporate Note Financing for purposes of financing New Projects or for any other
purpose related to carrying out the Concession including, but not limited to,
financing capital expenditures and paying the fees and expenses on the Facility.
Drawdowns were made in the amount of P4.00 billion, P2.00 billion, and
P3.00 billion on July 11,2016, September 30,2016 and December 15, 2016,
respectively. The balance amounting to P8,00 billion was drawn in March 21,
2017. Terms of these loans include Ten-year, Unsecured Corporate Notes
Facility with a consortium of five (5) local banks for P17.00 billion, of which
P9.00 billion has been drawn as at December 31 , 2016 and the balance of
P8.00 billion has been drawn as at December 31 ,2017.It bears an interest
based on S-Yr PDST-R2 plus spread and the principal payable beginning on the
Qfi month from initial issue date and the remaining for eighteen (18)
semi-annual installments as a percentage of principal amount of borrowing.

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 ln July 2015, the Group, through NGCP, entered into a P15.00 billion Peso
Corporate Note Financing for purposes of financing New Projects or for any other
purpose related to carrying out the Concession including but not limited to
financing capital expenditures and paying the fees and expenses on the Facility.
Drawdowns were made in tranches of P5.00 billion, P3.00 billion and
P5.00 billion, on July 10,2015, September 10,2015 and December 10,2015,
respectively. The balance amounting to P2.00 billion was drawn on March 31,
2016. Terms of these loans include Ten-year, Unsecured Corporate Notes
Facility with a consortium of four (4) local banks for P15.00 billion, of which
P13.00 billion has been drawn as at December 31 ,2015 and the balance of
P2.00 billion has been drawn as at December 31 , 2016. lt bears an interest
based on S-Yr PDST-R2 plus spread and the principal payable beginning on the
12th month from initial issue date and the remaining for eighteen (18) semi-
annual installments as a percentage of principal amount of borrowing.

k. ln April 2014, the Group, through NGCP, entered into a P21.00 billion Peso
Corporate Financing Facility to cover its funding requirements for calendar year
2014 including the financing of maturing obligations and approved capital
expenditures. lnitial drawdown amounting to P6.00 billion was made on April 10,
2014 to pay off the maturing US Dollar Bridge Loan. The succeeding drawdown
of P8.00 billion, P5.00 billion and P2.00 billion were made on July 10, 2014,
December 10,2014 and January 30, 2015, respectively, to cover the funding of
the Group's capital expenditures. Terms of these loans include Ten-year,
Unsecured Corporate Notes Facility with a consortium of nine (9) local banks for
P21.00 billion, of which P19.00 billion has been drawn as at December 31 ,2014
and P2.00 billion has been drawn as at December 31 ,2015. lt bears an interest
based on S-yr PDST-F plus spread and the principal payable beginning on the
12th month from initial issue date and the remaining for eighteen (18) semi-
annual installments as a percentage of principal amount of borrowing.
Amendment was made effective April 10, 2019. lnterest rate from 5-yr PDST-F
to S-yr BVal and noteholders were decreased to four (4).

lnterest from these loans amounting to P5.89 billion and P4.55 billion as at
December 31, 2022 and December 31 ,2021, respectively, were capitalized and
recognized in Contract Assets under "lntangible asset" in the consolidated
statements of financial position (see Note 8). lnterest expense recognized in profit or
loss amounted to P2.06 billion and P2.23 billion for period ended December 31,2022
and 2021, respectively.

Financing of Concession Fee Prepayment

ln June 2013, the Group, through NGCP, signed unsecured loan facilities to partly
prepay the concession fee payable which then had an outstanding balance of
P111.44 billion. These loans were fully drawn on July 15,2013.

The following are the terms of the loan facilities:

a. Fixed.Rate Peso Corporate Notes

Ten-year, Unsecured Corporate Loan Facility with a consortium of six (6) local
banks for P29.50 billion which bears an interest based on PDST-F plus spread
and the principal payable in twenty (20) semi-annual installments.

lnterest expense from these loans recognized in profit or loss amounted to

P0.69 billion and P0.94 billion in2022and2021, respectively.

-57 -
 These loan agreements contain, among others, covenants relating to the Concession
Agreement and maintenance of certain financial ratios, including requirements before
payment of dividends. As at December 31,2022 and December 31 ,2021, the Group
is in compliance with the covenants of its debt agreements.

Changes in Liabilities Arising from Financing Activities

The movements and balances of this account are as follows:

Loans Payable
Balance at January 1. 2022 P15{,236,070,615
Changes from financing cash flows
Proceeds from loans 31,500,000,000
Payment of loans payable and debt issue costs (15,634,000,000)
't5,866,000,000
Others - debt issue costs related transactions fl0,570,00't)
Total liability-related changes 15,855,429,999
Balance at December 31,2022 P167,091 ,500,614

Loans Payable
Balance at January 1,2021 P135,685,322,020
Changes from financing cash flows:
Proceeds from loans 29,500,000,000
Payment of loans payable and debt issue costs (14,161,472,521)
15,338,527,479
Others - debt issue costs related transactions 212,221,116
Total liability-related changes 15,550,748,595
Balance at December 31,2021 P151 ,236,070,615

15. Trade and Other Current Payables

This account consists of:

Nofe 2022 2021

Accrued expenses 24 P6,667,990,256 P12,959,252,151
Accounts payable 24 21,208,798,635 21,248,508,228
Due to government agencies and
others 7,324,270,605 6,518,681 ,616
lnterest payable 5,14,24 3,785,977,026 3,391,249,258
Current portion of lease liability 24 154,187,471 47,395,192
Franchise tax payable to BIR 26 268,558,764 232,500,240
P39,409,782,7 57 P44,397,585,685

Accrued expenses include accruals on capital expenditures, purchases of materials

and supplies, personal services, and other operating services.

Current portion of liability arising from lease is the balance of Financing Lease-
Current amounting to P154.19 million and P47.40 million as of December 31 ,2022
and 2021 i respectively.

Accounts payable include amounts incurred by the Group for trade-related

purchases.

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 lnterest payable pertains to the interest due in relation to the Deferred Payments of
the Concession Fee and interest related to loans payable (see Notes 5, 14 and 24).

Due to government agencies and others include amounts accruing to the ancillary
services providers, TRANSCO and PSALM for the ancillary service charges, FIT-ALL
and universal charges which are being billed and collected from the Group's
customers on behalf of the ancillary service providers, TRANSCO, PSALM and the
amount due to SSS, Philhealth, HDMF, withholding taxes and out VAT payable due
to BlR. (see Notes 12,13,26 and27).

16. Other Liabilities

This account consists of:

A. Other Current Liabilities

Note 2022 2021

Retention on contract payments Pf 0,934,887,012 P8,787,760,509
Bidders/suppl iers deposits 129,257,748 207,994,602
Advances from shareholders 368,544,628 368,544,628
Dividends payable 1,235,526,797 947,278,332
Advances from a subsidiary's
minority interest 474,730,215 474,730,215
Advances for construction 2,862,260,923 2,501,085,840
Others 928 220
24 P16,005,208,21',1 P 13,287,394,346

B. Other Noncurrent Liabilities

Nofe 2022 2021

Advances for construction P1,503,684,634 P2,681,130,807
Noncurrent portion of lease liability 22, 24 244,966,561 5,649,394
Deferred tax liability 56,947 28,546
P1,7 49,708,142 P2,686,808,747

Retention on contract payments pertains to the amounts withheld from payments

to contractors which shall be returned to the latter upon final acceptance of the
project at the end of warranty period or upon posting by the contractor of
warranty security if stillwithin the warranty period.

Bidders'/suppliers' deposits include all amounts received in compliance to

specifications of contract bids or to ensure the fulfillment of contracts.

Advances for construction pertains to advances made by third parties particularly

generators for the construction of transmission facilities under Section 9 of the
EPIRA consistent with the Transmission Development Plan subject to prior
authorization by the ERC or for the cost of assets owned by third parties but
reclassified as transmissions assets by ERC.

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17. Equity

Capital stock consists of:

2022

Caoital Stock
Authorized - P'1
par valus per share 5,300,000,000 P5,300,000,000 5,300,000,000 p5,300,000,000 s,050,000,000 p5,050,000,000
lssued, fully paid and
outstanding balance at
beginning of year* 5,255,866,000 P5,265,866,000 4,149,866,000 P4,149,866,000 4,149,866,000 P4,149,E66,000
lssued mmmon shares to
major shareholders
during theyear 62,500,000 62,500,000
lssued common shares
during FOO . - 1,053,500,000 1,053,500,000 - -
lssued, fully paid and
outstanding balance at
end ofyear 5,255,866,000 P5,265,E66,000 5,265,866,000 P5,265,866,000 4,149,866,000 p4,149,866,000

Additional Paid-in Capital

Additional paid-in €pital
balance at beginning of
yeat P88,926,018,694 P77,907,600,000 P77,907,600,000
Additional paid-in capital

shares during FOO 1 1,588,500,000

Shares issuance ests (568,081,306)

Total paid-up capital P88,928,018,694 P88,928,01 8,694 P77,907,600,000

lncludes retnactive effecl of Share Swa p (Note 6)

As at December 31 ,2022,2021 and 2020, the Parent Company's share offer price is
P1 1 .10, P13.12, and P242, respectively.

ln relation to the Parent Company's Share Purchase Agreement and the

stockholders of OTHI and P21, discussed in Note 1, the BOD of the Parent Company
approved the increase in the authorized capital stock of the Parent Company from
P50.00 million divided into 50.00 million common shares at par value of P1.00 per
share to P5.05 billion divided into 5.05 billion common shares at par value of
P1.00 per share on November 14,2019.

The application for the Amendment of Articles of lncorporation for,the increase in

authorized capital stock was approved by the SEC on May 28, 2021.

On November 10,2021 SGDI, under the symbol "SGP", the Parent Company
publicly listed its 1,053,500,000 shares from its Follow-On Offering (FOO) on the
Philippines Stock Exchange with overallotment option of up to 101,000,000
secondary shares at PHP12.00 per common share.

SGP indirectly controls 60% is the outstanding voting capital stock of NGCP, SGP's
sole operating asset with an effective equity interest of 45.726Yo.

Cash Dividends
On August 10,2021, the BOD of the Parent Company approved the adoption of the
policy to declare dividends equivalent to 100% of the prior year's net income after tax
based on the Parent Company's audited flnancial statements as of such year, upon
declaration of the BOD and subject to the availability of unrestricted retained
earnings and settlement of operational expenses and other relevant taxes , cost and
expense required to pay the ordinary course of business and subject to any financing
covenants, if applicable.

On March 23, 2022, the Board of Directors of the Parent Company approved the
declaration of P0.22 dividend /share for the first quarter o'( 2022 totaling to
P1.16 billion. These cash dividends were paid to shareholders of record as of April 6,
2022 on 4pri122,2022.

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On June 22, 2022, the Board of Directors of the Parent Company approved the
declaration of P0.26 dividend /share for the second quarter of 2022 totaling to
P1.37 billion. These cash dividends were paid to shareholders of record as of July 6,
2022 on July 22,2022.

On September 21,2022, the Board of Directors of the Parent Company approved the
declaration of P0.26 dividend /share for the third quarter of 2022 totaling to
P1.37 billion. These cash dividends were paid to shareholders of record as of
October 5,2022 on October 19,2022.

On December 7, 2022, the Board of Directors of the Parent Company approved the
declaration of P0.26 cash dividend /share for the fourth quarter of 2022 totaling to
P1.37 billion. These cash dividends were paid to shareholders of record as of
December 22,2022 on January 13,2023.

On September 27 ,2021, the Board of Directors of the Parent Company approved the
declaration of P. 2375 dividend /share for each of the second and third quarter of
2021 totaling to P.475 dividend /share amounting to P2.0 billion. These cash
dividends were paid to shareholders of record as of October 1 1 , 2021 on October 18,
2021.

On November 19, 2021,hhe BOD of the Parent Company approved the declaration
of P0.20 cash dividends /share for the fourth quarter of 2021 totaling to P1.05 billion.
These cash dividends were paid to shareholders of record as of December 14,2021
on January 10,2022.

ln 2022, the BOD of OTHI approved the declaration of cash dividends amounting to
P3.32 billion to all shareholders of record as of date of the meeting.

ln 2022, the BOD of P21 approved the declaration of cash dividends amounting to
P3.32 billion to all shareholders of record as of date of the meeting.

For the year ended December 31,2022, the BOD of NGCP approved the declaration
of cash dividends amounting to P12.00 billion to all shareholders of record as of date
of the meeting. Of the total amount declared, P7.2O billion pertains to the share of
the Parent Company which is eliminated during consolidation

ln 2021, the BOD of OTHI approved the declaration of cash dividends amounting to
P3.60 million to all shareholders of record as of date of meeting.

ln 2021, the BOD of P21 approved the declaration of cash dividends amounting to
P3.60 million to all shareholders of record as of date of meeting,

ln 2021, the BOD of NGCP approved the declaration of cqsh dividends amounting to
P12.00 billion to all shareholders of record as of date of the meeting. Of the total
amount declared, P7.2O billion pertains to the share of the Parent Company which is
eliminated during consolidation.

|n2020, the BOD of OTHI approved the declaration of cash dividends amounting to
P3.57 billion to all shareholders of record as of date of the meeting.

ln 2020, the BOD of P21 approved the declaration of cash dividends amounting to
P3.57 billion to all shareholders of record as of date of the meeting.

-01 -
 ln 2020, the BOD of NGCP approved the declaration of cash dividends amounting to
P12.00 billion to all shareholders of record as of date of the meeting. Of the total
amount declared, P7.2O billion pertains to the share of the Parent Company which is
eliminated during consolidation

Subseguent Event
On March 8,2023, in view of the dividends received by the Parent Company from its
non-voting preferred shares in NGCP amounting to P184.8 million and a total of
P729.7 million cash dividends from OTHI and P21, the BOD of the Parent Company
authorized the Parent Company to declare, release, pay and distribute from the
Parent Company's unrestricted retained earnings not later than April 13, 2023,
P914.68 million to the Parent Company's shareholders as of record date of March
23,2023.

Retained Eamings
The retained earnings of the Group include the accumulated earnings in subsidiaries
not available for declaration as dividends until declared by the respective investee.

18. Earnings PerShare

Basic and diluted earnings per share at December 31 are computed as follows:

IVofe 2022 2021 2020

(a) Net income attributable to Equity
holders of the Parent Company p15,021,096,,101 P9,124,966,265 P9,394,804,867

Issued common shares at January '1* P5,265,866,000 P4,149,666,000 P4,149,E66,000

Weighted average number of issued
common shares to major
shareholders during the year 1 26,041,667
Weighted average number of issued
common shares during FOO 1 175,583,333
(b) Weighted average common
shares outstanding P5,265,866,000 P4,351,49'r,000 P4,149,866,000
Basic/Diluted earnings per share (a/b) P2.85 P2.10 P2.26
*includes rctroactive effect of Share Swap (Note 6)

As at December 31 ,2022 and 2021, the Group does not have any potential common
shares or other instruments that may entitle the holder to common shares.
Consequently, diluted earnings per share is the same as basic earnings per share in
December 31,2022 and 2021.

19. Segment Reporting

The Group operates through its transmission services across Luzon, Visayas and
Mindanao. The Group's results of operations are reviewed by Management on a
monthly basis to make decisions and to assess the Group's financial performance
and flnancial position, and for which discrete information is available.

Accordingly, management has assessed that the Group is considered as a single

business and, hence, there are no operating segments required to be disclosed
under PFRS 8, Operating Segments.

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20. Revenues

This account at December 31 consists of:

2022 2021 2020

Transmission services
operating income P60,310,396,241 P47,051,740,556 P47,051,639,600
Connection and residual
sub-transmission income 1,510,376,267 1,552,466,086 1,554,964,503
Power factor adjustment 576,05E
Reconnection fee 19,417
p6{,82{,367,993 P48,604,206,642 P49,606,604,103

Transmission services operating income pertains to service charges for the use of the
transmission facilities under the Concession Agreement where power delivery, system
operation and metering services are provided by the Group.

The transmission services operating income amounting to P60.31 billion based on the
P51.47 billion iMAR and P47.05 billion as of December 31, 2022 and 2021 includes
unbilled incremental |MAR2020 approved by ERC in an order dated March 23,2022
for the year 2020 and 2021 amounting to P8.84 billion and P3.26 billion, respectively.
Consequently, on June 8, 2022, NGCP submitted to ERC its Compliance dated
June 2, 2022 on NGCP proposed manner of recovery of the said unbilled lMARzozo
starting September 20221o June2024 which the ERC is yet to issue its resolution.

Connection charges are charges to recover the reasonable costs associated with
connecting the transmission customers' facilities to the transmission providers'
facilities. Residual sub-transmission charges are charges to recover the reasonable
costs associated with sub-transmission assets that are not otherwise recovered
through the connection charge.

ln the following table, revenue is disaggregated by geographical market and electric

power industry participants.

2022:
Transmission Connection and Power Factor
Senrices Residual Adjustment and
Operating Sub-transmission Reconnection
lncome lncome Fee Total
Luzon P44,820,384,671 P821,'t49,606 P595,485 P45,642,129,762
Distribution utilities P34,629,010,241 P745,041,979 P P35,374,052,220
Generators 344,422,432 6,397,155 350,81 9,587
Directed Connected/Non-D Us 1,430,889,s99 69,710,472 595,485 1,501,195,356
Accruals for |MAR and Under-
recovery 8,41 8,062,599 8,416,062,599
Visayas P7,259,845,048 P248,25313O P P7,518,098,'t 78

Distribution utilities P5,296,992,180 P235,680,194 P P5,532,572,374

Generators 265,260,756 28,923 265,289,679
Directed Connected/Non-DUs 307,000,512 12,544,013 31 9,544,525
Accruals for iMAR and Under-
recovery 1,400,591,600 1,400,591,600
Mindanao P6,637,147,386 P440,973,531 P P7,079,120,917

Distribution utilities P6,468,173,133 P433,458,150 P- P6,90'1,631,283

Generators 78,124,406 78'124,406
Directed Connected/Non-Dus 90,849,847 7,515,38't - 98,365,228
Accruals for |MAR and Under-
recovery P1,583,019,1 36 P P P1,5E3,019,136

December 31,2022Total P60,310,396,24't P1F1O,376P67 P595,485 P61,821,367,993

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2021:
Transmission Connection and
Services Residual
Operating Sub-transmission
lncome lncome Total
Luzon P32,592,288,434 P854,644,924 P33,446,933,358

Distribution utilities P30,972,478,057 P773,362,000 P31,745,840,057

Generators 302,722,396 6,492,771 309,215,167
Directed Connected/
Non-DUs 1,317,087,981 74,790,153 1,391,878,134
Visayas P5,254,686,397 P248,646,787 P5,503,333,184

Distribution utilities P4,836,454,049 P235,658,416 P5,O72,112,465

Generators 132,867,289 28,923 132,996,212
Directed Connected/
Non-DUs 285,365,059 12,959,448 298,324,507
Mindanao P5,942,175,725 P449,174,375 P6,391,350,100

Distribution utilities P5,784,960,557 P441,658,994 P6,226,619,551

Generators 77,819,681 77,819,681
Directed Connected/
Non-DUs 79,395,487 7,515,391 q,,910,66E
Accruals for iMAR and
Under-recovery P3,262,590,000 P P3,262,590,000

December 31,2021
Total P47,051,740,556 P1,552,466,086 P48,604,206,642

2020:
Connection and
Transmission Residual
Services Sub-transmission
Operating lncome lncome Total
Luzon P32,804,'158,710 P857,486,079 P33,661,644,789
Distribution utilities P31,362,402,695 P771,652,694 P32,134,055,389
Generators 191,491,775 5,533,035 197,024,810
Directed Connected/
Non-DUs 1,250,264,240 80,300,350 1,330,564,590
Visayas P5,288,839,834 P248,552,785 P5,537,392,619

Distribution utilities P4,925,124,846 P235,527,917 P5,160,652,763

Generators 1 10,592,697 28,907 110,621,604
Directed Connected/
Non-DUs 2s3j22,291 12,995,961 266,118,252
Mindanao P5,996,051,056 P448,925,639 P6,444,976,695

Distribution utilities P5,849,601,091 P441,414,420 P6,291,015,51 1

Generators 64,865,712 64,865,712
Directed Connected/
Non-DUs 81,584,253 7511,219 89,095,472
Accruals for iMAR and
Under-recovery P2,962,590,000 P P2,962,590,000

December 31,2020
Total P47,051,639,600 P1,554,964,503 P48,606,604,103

Based on the ERC-promulgated Transmission Wheeling Rate Guidelines (TWRG) of

May 2003, amended in 2009 as the Rules for Setting the Transmission Wheeling
Rates (RTWR), the Group is regulated under a performance-based regulation (PBR)
revenue cap methodology.

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During the reset process, the ERC makes a determination of the annual revenue
requirements (ARR) of the transmission business as well as the price control
arrangements that will apply during the regulatory period.

The Fourth Regulatory Period (4th RP) reset process for the transmission business
under the PBR has been delayed. Under the RTWR, the Group would have filed its
revenue application for the 4th RP covering the periods of 2016 lo 2020 in 2015. To
bridge the gap, on October 2,2015, the Group filed an Application for the Approval of
an lnterim lt/aximum Annual Revenue for 2016 (iMARzoro) in the amount of
P45.29 billion.

ln an Order dated January 21,2016, the ERC provisionally approved an iNIARzoro of

P41.65 billion. Subsequently, the Group filed a Motion for Reconsideration dated
February 24,2016 and an Omnibus Motion dated December6,2016.

As resolution of the foregoing, the ERC issued an Order dated December 19, 2016
authorizing the Company to implement an adjusted iMARzoro of P43.79 billion. Further,
the ERC directed that the difference between the provisionally-approved iNIARzore of
P41.65 billion and the approved |MAR of P43.79 billion, in the amount of P2.14 billion,
be collected by NGCP in2017 (see Note 12).

Furthermore, the same Order provides that NGCP is authorized to continuously bill its
transmission customers using an adjusted |MAR of P43.79 billion for the succeeding
regulatory years until the ERC's issuance of the Final Determination for the 4th RP,
thus the billing of an |MAR of P43,79 billion in 2018 and 2019.

On October 29,2019, NGCP filed an Application with the ERC for the Approval of an
lnterim Maximum Annual Revenue for Calendar Year 2020 (iMARzozo) in the amount
of P58,846 million, docketed as ERC Case No. 2019-086RC. Subsequently, the ERC,
in its Order dated February 13, 2020, granted NGCP a provisional authority to
implement an iMARzozo in the amount of P47,051.64 million effective April 2020
billing month. Billing of the incremental revenue, however, has been deferred in
consideration of the situation brought about by the Corona Virus Disease 2019
(COVID-19) pandemic.

Following the easing of quarantine arrangements, NGCP gradually billed portion of

the iMARzozo differential in the total amount of P300 Million for both billing months of
July and August 2020. However, in September 2020, the ERC directed the
suspension of the billing of the iMARzozo providing among others that the demand
forecast used in the determination are no longer valid and would need to be
re-assessed. ln compliance with the Order issued in September 2020, NGCP
discontinued the billing resulting in an unbilled iMARzozo differential in the amount of
P2.96 billion.

ln compliance with the ERC's directive during the September 24,2020 public hearing
and with the ERC's Order dated October 23,2020 which was received by NGCP on
October 29, 2020, NGCP submitted the following information to the ERC in
December 2020 to substantiate the proposed iMARzozo.

a. Reconciliation of the actual CAPEX with NGCP's Financial Statements;

b. Actual and Forecast Billing Determinant for CY 2019-2021;
c. NGCPs Actual and Forecasted CAPEX for 2011 lo 2O2O (Updated);
d. Percentage Completion of ERG-approved CAPEX Projects under/outside of the
3d Regulatory Period Final Determination, as at October 2O2O;
e. lndicative 2020 Transmission Rate; and
f. Possible approach on the collection of unbilled portion of the ERC-approved
iMARzozo in the forthcoming year of 2021.

-65-
ERC issued a subsequent Order dated December 15, 2020 directing NGCP to
submit the following additional information in support of its iMARzozo Application and
which was submitted by NGCP on January 28,2021, as follows:

a. Updated Actual Demand for Year 2020;

b. Detailed Analysis and Basis of the Forecast Demand for Year 2021;
c. Updated Rate Movement on a Per kW and per kWh as at December 202Q;
d. Updated Actual and Forecast CAPEX for Calendar Years 2011 lo 2020;
e. Estimated Demand Data particularly for the Battery Energy Storage System
(BESS) and transmission services to the Kalayaan Pumped Storage Power Plant
(KPSPP) which NGCP included in the said forecast; and
f. Load Billing Determinant with and without BESS and KPSPP.

Relative to the directives of the ERC on the itMARzozo Application, NGCP submitted
Compliances with Motion dated December 3, 2020 and January 28, 2021, which
prayed for, among others, the confirmation from ERC that the approved iMARzozo
level shall be implemented continuously until a new MAR is issued, or until the
issuance of a Final Determination for the succeeding regulatory period, whichever is
earlier. As at report date, the ERC is yet to issue its resolution on said Compliances.

Given the significant recovery of the demand and energy consumption in the country
in 2021, in contrast with the recorded data in 2020, NGCP deemed that the
circumstances surrounding the issuance of the July 28, 2020 Order no longer exist
and that there are justifiable grounds to lift the said Order. Hence, the filing of the
Reiteratory Motion in October 2021 praying for the following:

a. lifting the July 28, 2020 Order;

b. allowing NGCP to recover the deferred 2020 |MAR on top of the current i[/AR
and iMAR tor 2022, to be implemented starting October 2021 to March 2022
billing period;
c. allowing NGCP to recover the unbilled 2021 iMAR on top of the iMAR for 2022,
to be implemented from April 20221o December 2022;
d. confirming that the approved |MAR2020 level of P47,051.64 million shall be
implemented continuously until a new MAR is issued, or until the issuance of the
Final Determination for the succeeding regulatory period, whichever is earlier.

On January 17,2022, NGCP submitted its compliance to the January 5, 2022 ERC
Order to submit documents to facilitate the final evaluation of the application, which
was received by NGCP on January 7,2022, more specifically on the following:

a. Latest actual demand for CY 2021 and forecast demand for 2022 onwards,
including economic indicators demand justification; and
b. Latest actual Capital Expenditure (CAPEX) for CYs 2011 to 2021 (including, but
not limited to, Disbursement and Percent Completion as of December 2021) and
forecast CAPEX for CY 2022)

On April 29,2022, the ERC promulgated an Order dated March 23,2022 resolving
the itt/AR2020 Application and approving an itt/AR2020 of P51.47 billion effective
January 2020 until a new transmission revenue has been determined.

Starting May 2022 Billing Period, NGCP has already impiemented the billing based
on the P51.47 billion iIVIAR pursuant to the 23 lVlarch 2022 Order of the ERC

On June 8, 2022, in compliance with the direction of the Commission, NGCP

submitted to ERC its Compliance dated June 2, 2022 on NGCP's proposed manner
of recovery of the unbilled lMARzozo for the years 2020,2021 and four (4) months of
2022, for the total amounl of P17 ,624.85 million, starting September 2022lo 2024.

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 To date, NGCP is yet to receive ERC's resolution on NGCP's proposed manner of
recovery of the unbilled iMAR2020 for the years 2020,2021, and four (4) months of
2022.

21. Related Party Disclosures

Amountof Outstanding
Relationship with Transaction Balance
Related Pa(ies Year Note (in Millions) (in Millions) Terms and Conditions
Companies with the
Same BOD
. PGAI December 31,2022 a P476.12 P'1.99 On demand; Unsecured
December 31, 2021 a 319.75 4.1s non-interest
December 31, 2020 a 282.06 7.92 bearing
. SMDC December 31, 2022 b 6.74 On demand; Unsecured
December 31, 2021 6.74 1.71 non-interest
December 31, 2020 b 2.56 bearing
Shareholders December 31, 2022 c 368.54 On demand; Unsecured
December 3'1, 2021 c : 368.54 non-interest
December 31, 2020 250.05 618.75 bearing
Key Management
Personnel
. Short-term beneflts December 31, 2022 d 368.44
December 31, 2021 d 307.99
December 31,2020 d 302.1 5
. Post-employment December 31, 2022 d 23.20
benefits December 31, 2021 tl 22.30
December 3.1, 2020 d 22.66
December 31, 2022 P370.53

December 31, 2021 P374.40

December 31, 2020 P629.23

a. The Group, through NGCP, has related party transactions with Prudential
GuarantyAssurance, lnc. (PGAI) amounting toP476.12 million, P319.75 million
and P282.06 million on 2022, 2021 and 2020, respectively, representing
insurance premiums. The outstanding insurance payable to PGAI amounting to
P1.99 million and P4.15 million as of December 31 ,2022 and 2021, respectively,
are recorded under the "Trade and other current payables" (see Note 15)
account in the consolidated statements of financial position. This pertains to
motor vehicle insurance, aviation, commercial general liability insurance, PGA
protect, motor comprehensive, industrial all risk, engineering electronic
equipment insurance and warehouse insurance in nature.

b, The Group, through NGCP, also has existing lease ag;eement for parking space
with Slvl Development Corporation (SMDC) amounting to P6.74 million,
P6.74 million and P3.37 million in 2022, 2021 and 2020, respectively. The
outstanding balance payable to STMDC amounting to null and P1.71 million as of
December 31, 2022 and 2021, respectively, are recorded under the "Trade and
othercurrent payables" (see Note 15) account in the consolidated statements of
financial position.

c. As at and December 31, 2022 and 2021, Group, through P21, has outstanding
payables to its stockholders amounting to P368.54 million, which are included
under "Other current liabilities" account in the consolidated statements of
financial position. These payables were obtained for working capital
requirements and part of these payables were used to pay for CHPC's
professional fees and other various expenses and liabilities. These payables are
non-interest bearing, payable on demand and will be settled in cash (see
Note 16).

-67 -
 On September 23,2021, the Parent Company paid its outstanding advances
from its two major stockholders amounting to P250.05 million which was used by
the Group as its source of fund in relation to the share swap transactions.

d. Total remunerations of key management personnel which represent short-term

benefits in 2022,2021 and 2020 amounted to P368.44 million, P307.99 million
and P302.15 million respectively. Total key management compensation relating
to post-employment beneflts in2022,2021 and 2020 amounted to P23.20 million
P22.30 million and P22.66 million, respectively.

22. Leases

Leases as Lessee
The Group leases vehicles, parking lots and office spaces. The leases typically run
for a period of five (5) years. Some leases include an option to renew the lease for
an additional five years after the end of the non-cancellable lease period. Some
leases provide for additional rent payments that are based on change in local price
indices. Previously, the lease was classified as an operating lease under PAS 17.

The Group leases other vehicles, printers and copiers which are short term and/or
leases of low-value items. The Group has elected not to recognize right-of-use
assets and lease liabilities for these leases.

lnformation about leases forwhich the Group is a lessee is presented below

Rightof-Use Assets

2022 2021
Balance at January 1 P55,124,278 P1 13,018,250
Additions 465,412,081 30,741,237
Disposals (638,7221 (128,239)
Depreciation for the year (147,756,3021 (88,506,970)
Balance at December 31 P372,14'1,335 P55,124,278

The Depreciation relating to Finance Lease were recorded as part of "Depreciation

Expense" in the statements of comprehensive income

The Group classified its lease liability as part of "Trade and other current payables"
and "Other noncurrent liabilities" in the statements of financial position as follows:

2022 2021
Balance at beginning of year P52,751,588 P1 15,780,230
Additions 456,841,427 30,329,511
Lease payments inclusive of interest payments (121,457,4061 (98,330,035)
lnterest expense 11,018,424 4,971,882
Balance at end of year P399,154,033 P52,751,598

Expenses relating to short-term leases amounted to P100.86 million and

P94.31 million 2022 and 2021, respectively, were recorded as part of "Rent" in the
statements of comprehensive income.

The Company had total cash outflows for the above leases amounting to P222.32
and P191 .91 in 2022 and 2021, respectively.

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 The following table sets out a maturity analysis of lease payments, showing
undiscounted and discounted lease payments to be made after the reporting date:

Future Present Value

Minimum of Minimum
Lease Lease
December 31,2022 Payments lnterest Payments
Less than one year P169,419,885 P15,232,414 P154,187,471
Between one to five vears 256 ,832 11,360,270 244.966,562
P425,746,717 P26,592,694 P399,154,033

Future Present Value

Minimum of [i4inimum
Lease Lease
December 31,2021 Pa nts lnterest Pavments
Less than one year P48,366,464 P1,264,270 P47,102,194
Between one to five 5 857 757 208 649
P54,224,221 P1,472,633 P52,751,588

23. Retirement Benefits

As at December 31 ,2022 and 2021, the Group has funded, noncontributory defined
benefit retirement plan covering all its regular employees, The current service cost
and the present value of obligations were derived on the basis of the projected unit
credit method,

The latest actuarial valuation report of the Group is dated February 06, 2023 for the
year ended December 31, 2022.

Salient Provisions of the Retirement Plan

The plan provides retirement benefits under Republic Act No. 7641 (the Act) upon
compulsory retirement at the age of sixty-five (65) or upon optional retirement at age
sixty (60) or more but not more than age sixty-five (65) with at least five (5) years in
service. The benefits as required by the Act are equivalent to 22.5 days for every
year of service, a fraction of at least six (6) months being considered as one (1)
whole year. The 22.5 days shall be defined as follows: One half month (15 days)
plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of 5 days of
service incentive leaves.

-69-
Fundino Arranqements
The Compensation Committee, in a meeting on February 26, 2A14, approved the
establishment of the NGCP Employee Retirement Plan in compliance with Republic
Act No. 7641. On December 22, 2014, the retirement fund has been established by
the Group. Benefit claims under the retirement obligation are paid directly by the
Group when they become due.

The following table shows a reconciliation of the net defined benefit retirement
liability and its components:

Present Value of Net Defined Benefit

Balance at beginning ofyear P342,046,909 P337,626,920 P2,456,734,27't P2,364,725,409 P2,114,687,352 P2,027,098,489

Recognized in Profit or Loss
and Statement of Financial
Position
Service costs 216,714,481 226,719,410 216,714,48'l 226,719,410
lnterest expense 125,293,448 89,859,566 125,293,448 89,859,566
lnterest income 17 .444.392 12 429 423 17.444,3921 (12.829.823\
17,4M,392 12,829,823 342,007,929 316,578,976 324,563,537 303,749,153

Recognized in Other
Comprehensive lncome
Remeasurements:
Actuarial losses (gains)
arising from:
Experience adjustments (45,260,561) 169,454,1 1 5 (45,260,561) 169,454,115
Changes in financial
assumptions |t218,737,7581 (282,021,993) (216,737,7561 (282,021,993)
Return (loss) on plan asset
excluding interest (22,724,3841 (8,409,834) 22,724,384 8,409,834

122,724,3841 (8,409,834) (261,998,317) (1 12,567,878) (239,273,933) (104,158,044)

OtheE
Contributions 105,141,542 112,002,236 1105,141,5421 (112,002,236\
Bensfits paid 1105,141,542\ i'112,002,236) (105,141,5421 (112,002?99)
1105,'141,5421 (112,00?,236) (105,141,542) (112,002,236)

Balance at end of year P336,766,917 P342,048,S09 P2,431,802,341 P2,456,734,271 P2,094,835,424 P2,114,6A7,362

ln 2017, the Group through its Trust Fund Agreement established the Group's
Retirement Trust Fund, offsetting the retirement liability retrospectively.

Plan assets consist of the following:

2022 2021
Deposits in banks 0.00% 0.00%
Debt securities 70.49% 72.48%
Equity Securities 25.80% 25.06%
lnvestment in Unit lnvestment Trust Fund 2.86% 1.69%
Other Assets 0.85% 0,770/o
100.00% 100.00%

The retirement benefits cost under "Salaries, wages and employees' benefits" in the
consolidated statements of income is recognized as follows:

2022 2021
Current service cost P186,374,454 P194,978,693
lnterest cost 107,752,365 77,279,227
lnterest lncome of plan asset ('15,002,1771 (1 1,033,648)
P279,124,642 P261,224,272

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The retirement benefits cost under "lntangible asset - net" in the consolidated
statements of financial position is recognized as follows:

2022 2021
Current service cost P30,340,027 P31,740,717
lnterest cost 17,541,083 12,590,339
lnterest income of plan asset 12,442,2151 (1,796,175)
P45,438,895 P42,524,991

Actuarial Assumptions
The following are the principal actuarial assumptions at the reporting date
(expressed as percentages under weighted averages):

2022 2021
Discount rate 7.20% 5.10%
Future salary growth 5.00% 4.00%

Assumptions regarding future mortality have been based on published statistics and
mortality tables.

The mortality and the disability rate used in the valuation were based on 100% of the
1985 Unisex Annuity Table and 100% of the 1952 Disability Table, respectively. The
discount rate assumed was based on single-weighted present value approach using
bootstrapped-derived zero rates from BVAL index.

The weighted average duration of the defined benefit liability as at December 31,
2022 and 2021 is 1 1 years.

Assumptions and Relevant lnformation

Sensitivity Analysis
The calculation of the defined benefit obligation is sensitive to the assumptions set
out above, The following table summarizes how the impact on the defined benefit
obligation at the end of the reporting period would have increased (decreased) as a
result of a change in the respective assumptions by 1o/o.

December 31 2022
1% lncrease 1"/o Decrease
Discount rate (P159,879,343) P184,894,016
Salary increase rate 173,539,079 11q2,5!4,7Q0)

December 31,2021
1% lncrease 1% Decrease
Discount rate (P181 ,246,082) P211,640,040
Salary increase rate 197,738,082 (172,514,271)

Although the analysis does not take account of the full distribution of cash flows
expected under the plan, it does provide an approximation of the sensitivity of the
assumption shown.

This defined benefit plan exposes the Group to actuarial risks, such as interest rate
risk, longevity and salary risk.

The Group plans to make additional funding in 2023, subject to the approval of the
Management.

-71-
24. Financial lnstruments

The accounting policies for financial instruments classified under loans and
receivables have been applied to the line items below:

Nofe 2022 2021

Current assets:
Cash and cash equivalents 11 P4,834,943,904 P20,559,675,280
Power receivables 12 4,547,634,467 3,709,635,141
Accrued power receivables 12 6,430,656,406 2,461,168,557
Due from customers 12 3,749,632,691 3,121,100,724
Restructured power receivables 12 53,383,239 111,573,641
lnterest receivable 12 555,,X38 725,207
Due from officers and employees
and other receivables 12 148,302,680 183,202,141
Advance payment to suppliers
and contractors 73 18,158,867,{ 10 14,520,194 02
Total current financial assets 37,923,975,625 44,667,275,293
Noncurrent assets:
Restructured power receivables 1,437,336,225 1,430,731,170
Accrued power receivables 12,809,832,000 5,380,062,500
Power receivables 12O,O43,847 110,568,362
Due from customers 444,233,622 45s,327,402
Other noncurrent account
receivable 1,007,927,847
Total noncurrent financial assets 12 15,819,373,541 7,376,689,434
Totalflnancial assets P53,743,349,1 66 P52,043,964,727

Details of movements of allowance for impairment losses are as follows:

2022 2021
Balance at beginning of year P1,942,128,659 P1,877,458,659
Provision for impairment losses on
receivables during the year 64,670,000 64,670,000
Balance at end of year P2,006,798,659 P1,942,128,659

Trade and other current payables, concession fee payable, loans payable,
customers' and other deposits and other current liabilities in the consolidated
statements of financial position as at December 31 ,2022 and 2021 are designated
as other flnancial liabilities. Except for concession fee payable and loans payable,
the balances disclosed are the contractual undiscounted cash flows which equal their
carrying amounts, as the impact of discounting is not significant.

Financial Risk Manaqement

The Group's activities expose it to a variety of financial risks and those activities
involve the analysis, evaluation, acceptance and management of some degree of
risk or combination of risks. Taking risk is core to the financial business, and the
operational risks are an inevitable consequence of being in business. The Group's
aim is therefore to achieve an appropriate balance between risk and return and
minimize potential adverse effects on the Group's financial performance.

-72 -
The Group's BOD has overall responsibility for the establishment and oversight of
the Group's risk management framework. The BOD has delegated to management
the responsibility of developing and monitoring the Group's risk management
policies.

The Group's risk management policies are designed to identify and analyze these
risks, to set appropriate risk limits and controls, and to monitor the risks and
adherence to limits by means of reliable and up-to-date information systems. The
Group regularly reviews its risk management policies and systems to reflect changes
in markets, products and emerging best practices.

The BOD oversees how management monitors compliance with the Group's risk
management policies and procedures and reviews the adequacy of the risk
management framework in relation to the risks faced by the Group.

The Group has exposure to the following risks from its use of financial instruments:

. Credit Risk
. Liquidity Risk
. Market Risk

This note presents information about the Group's exposure to each of the above
risks, the Group's objectives, policies and processes for measuring and managing
risks, and the Group's management of capital.

Credit Risk
Credit risk represents the risk of loss the Group would incur if counterparties fail to
perform their contractual obligations, The Group has established controls and
procedures in its credit policy to determine and to monitor the credit worthiness of
customers and counterparties. The carrying amount of each financial asset
represents the Group's maximum credit exposure.

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The Group's aging per class of financial assets is as follows

Neither Past Due Past Due but not lmpaired Past Due and
Total nor red 1 to 30 31 to 60 than 60 red Total
Decernber 31,2022
Cash and Cash Equivalents
Cash in banks P3,673,009,184 P3,673,009,194 P P P P P3,673,009,184
Short-term placements 1,161,934,720 '1,161,934,720 1,161,934,720
Receivables
Power receivables 4,547,634,467 4,523,494,983 6,250,651 8,699,356 9,189,467 120,O43,847 4,667,678,314
Due frorn customers 3,690,258,163 2,802,051 ,088 210,157,056 150,702,799 527,347,220 503,608,140 4,193,866,303
Due frorn officers and employees
and other receivables 148,302,680 148,302,680 148,302,680
Restructured power receivables 107,884,150 75,139,730 31,744,420 1,382,835,314 1,490,719,464
lnterest receivable 243,780 198,154 45,626 311,358 555,138
Other noncurrent accounts
receivables 1,007,927,847 1,007,927,847 1,0o7,927,847
Prepaid Expenses and Other
Gurrent Assets
Advance payment to suppliers and
contraclors 18,158,867,110 18,158,867,110 18,1 58,867,1 10
P32,496,062,101 P31,551,925,496 P216,453,343 P159,402,155 P568,28f,107 P2,006,798,659 P34,502,860,760

-74-
 Neither Past Due Past Due but not lmpaired Past Due and
Total nor Impaired 1 to30 Davs 31 to 60 Davs lr4ore than 60 Davs lmpaired Total
December 31,2021
Cash and Cash Equivalents
Cash in banks P16,897,369,880 P16,897,369,880 P P P P P16,897,369,880
Short-term placements 3,662,305,400 3,662,305,400 3,662,305,400
Receivables
Power receivables 9,089,701 ,137 9,077,113,693 9,055,820 1,307,650 2,223,974 I 10,564,866 9,200,266,003
Due from customers 3,1 28,01 1 ,005 2,392,878,723 127,016,O87 72,276,608 535,839,587 448,417,121 3,576,428,126
Due from officers and employees and
other receivables 183,202,141 183,202,141 183,202,',|41
Restructu red power receivables 159,469,498 114,563,1 03 6,206,676 38,699,719 1,382,835,313 1,542,304,811
lnterest receivable 413,849 413,849 311,358 725,207
Prepaid Expenses and Other Current
Assets
Advance payment to suppliers and
contractors 14,520,194,602 14,520,194,602 14.520.194.602
p47,640,667,512 p46,848,041,391 P142,278,583 P73,584,258 P576,763,280 P1,942,128,658 P49,582,796,170

-75-
The Group generally applies lifetime ECL to financial assets which substantially
comprise power receivables and other shortterm balances.

Credit Risk Concentration. The Group's exposure to credit risk arises from default of
counterparty. Generally, the maximum credit risk exposure of receivables is its
carrying amount without considering collaterals or credit enhancements, if any. The
Group has no significant concentration of credit risk since the Group deals with a
large number of customers. The Group does not execute any credit guarantee in
favor of any counterparty.

Credit Quality. ln monitoring and controlling credit extended to counterpafi, the

Group adopts a comprehensive credit rating system based on financial and
non-financial assessments of its customers. Financial factors being considered
comprised of the financial standing of the customer while the non-financial aspects
include, but are not limited to, the assessment of the customer's nature of business,
management profile, industry background, payment habit and both present and
potential business dealings with the Group.

a) Cash and Shortterm Placements

Cash in banks and short-term placements are deposited to banks that qualify as
universal and commercial banks as defined by the Philippine Banking System.

b) Receivables Neither Past Due nor lmpaired

These refer to accounts of satisfactory financial capability, credit standing and

collectability.

c) Receivables Past Due but not lmpaired

Past due but not impaired receivables consist mainly of trade receivables which
are currently being negotiated for collection with third party customers.
Management believes that no provision for impairment losses is required for
these receivables as at December 31 ,2022 and December 31 ,2021.

d) Past Due and lmpaired Accounts

Receivables with an aggregate nominal value of P2.00 billion and P1.94 billion
as at December 31 ,2022 and 2021, respectively, were assessed to be impaired
and hence, provided with allowance. There is a high concentration of credit risk
with respect to these customers. These refer to accounts from customers in
default due to financial difficulties without clear indication of recoverability and
disputed charges already decided by ERC in favor of the customers. These
accounts are in default and assessed as delinquent.

Cash and Cash Equivalents

The Group does not expect material ECL on cash in banks and cash equivalents as
these financial assets are deposited with universal and commercial banks with good
credit ratings and are either payable on demand or have very short maturities.

Receivables and Contract Assets

The Group estimates ECL for power receivables, due from customers, and accrued
transmission revenue by applying both collective assessment and assessment of
specific customers, considering what is appropriate under the circumstances.

76-
For the collective assessment, the Group used a provision matrix to separate
customer segments sharing common credit risk characteristics. ECLs are calculated
based on the probability of a receivable progressing through successive stages of
delinquency until finally determined uncollectible. Loss rates are based on the actual
credit loss experience over twelve (12) months. The Group has assessed and
currently does not expect that the effects of any adjustment for forecasts of future
economic conditions could be material considering that power receivables have short
credit terms and ordinarily collected substantially within one month. The collective
assessment excludes specific customer balances with circumstances that are
deemed not representative of the credit risk exposure of a group.

For specific customers that are separately assessed, circumstances speciflc to the
customer are considered in estimating cash flows for ECL measurement, including
historical experience with the customer, its current financial condition, and where
billing disputes are involved, the status of ERC cases and court cases.

The Group assessed that no material ECL is required for current receivables as at
December 31, 2022 and 2021. As at December 31, 2022, the Company recognized
total impairment allowance amounting to P2.00 billion attributable to and covers
substantially all noncurrent receivables. There is no material difference between the
estimated ECL provision required for the year 2A21 and the P64.67 million
recognized by the Group based on the forecast bad debts provided in the Final
Determination approved by ERC.

Liquidity Risk
Liquidity risk is the risk that the Group will have difficulty in meeting its financial
obligations as they fall due.

As part of the Group's prudent liquidity risk management policies and procedures,
management monitors rolling forecasts of the Group's liquidity reserve on the basis
of expected cash flows. Financing requirements for working capital, loan
repayments, and capital expenditures are reviewed on a monthly basis. Results of
management's review are reported to the Board on a regular basis.

The Group's ability to make payments on its indebtedness and to fund its operations
depend on its future performance and financial results, which to a certain extent, are
subject to general economic, financial, competitive and interest rate environment that
are beyond its control. The Group projects monthly cash flows from operating,
investing and financing activities and evaluates actual cash flow information to
ensure that the immediate requirements of the Group are attended to.

The contractual maturities of financial liabilities including estimated payments as at

December 31,2022 and December 31 ,2021 are as follows:

As at December 31, 2022

Carrying Contractual Less than More than
,vore Amount Cash Flow 1 Year , Year
Non-derivatlve financial liabilities:
Trade and olher current payables' 15 P31,8'16,953,388 P31,816,953,388 P31,816,953,388 P.
Concession fee payable 5 54,31 9,1 28,352 54,3't 9,128,352 54,31 9,1 28,352
Loans payable (current and
noncurrent) 14 1 67,091,500,614 1 91,026,440,343 31,607,E46,581 159,420,593,702
Customers' and other deposits 422,698,651 422,698,651 422,698,651
Other current liabilitiest' 16 1 3,142,946,360 1 3,1 42,946,360 '13,142,946,360
Olher noncurrent Iiabilitlest' 16 244,966,5q1 J44, q6-qq1 244,966,56,1
P267,038,1 93,926 P290,975,1 33,655 P76,s57,746,329 P214,407 3A7 326

"excluding payables to govemment.

*texcl udi ng advance s for con struction.

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 Aqat December 31, 2021
Carrying Contraciual Lesslhan More than
Note Amount Cash FloW 1Yeall Year
Non-derivative financial liabilitles:
Trade and other current payables' 15 P37,646,403,829 P37,646,403,829 P37,646,403,829 P.
Concession fee payable 5 54,319,128,352 s4,319,128,352 54,319,128,352
Loans payable (current and
noncurrent) 14 151,236,070,51 5 1 75,009,590,643 23,115,777,640 151 ,893,813,003
Customers' and other deposits 389,336,529 389,336,529 389,336,529
Other current liabilities" 16 10,7E6,308,2E6 10,786,308,2E6 10,786,308,286
Olher noncurrent liabililies" 16 5,649,394 5,649,394 5,649,394
P254,382,897,005 P278,156,41 7,033 P7 1,937,826,284 p206,2'18,590,749
.excluding payables to govemment.
*excluding advances tor construction.

Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates,
interest rates and other market prices, will affect the Group's income or the value of
its holdings of financial instruments. The objective of market risk management is to
manage and control market risk exposures within acceptable parameters while
optimizing the return. The Group is subject to various risks, including foreign
currency and interest rates,

Foreign Cunency Exchange Risk

Foreign currency risk is the risk that the fair value or future cash flows of a flnancial
instrument will fluctuate because of changes in foreign exchange rates.

The Company's foreign currency exchange risk for the years ended
December 31, 2022 and 2021 pertains to its cash in banks, prepaid expenses and
other current assets, trade and other liabilities denominated in US dollar, Euro, NZD,
and JPY,

The Group regularly monitors outstanding financial assets and liabilities in foreign
currencies and maintains them at a level responsive to the current exchange rates so
as to minimize the risks related to these foreign currency denominated assets and
liabilities.

lnformation on the Group's foreign currency denominated assets and liabilities and
their Philippine peso equivalent are as follows:

Assets
Cash and cash equivalents ,1,306,477 73,319,486
Advance payment to suppliers
and contractors 167,879,292 9,417,550,277
1 09,1 85,769 (64,405) 9,490,869,763
Llabilities
Accounts payable and accrued
expenses" (408,s67,721) (2,526,018) (3,261) (2,673,843,€2) (24,47,581,!sil
Net forelgn currency-
denomlnated asset (llabllities) (23s,781,s521 (2,s9O,423) (3,2611 12,673,843,462) (14,727,012,1921

Assets
Cash and cash
equivalents 5,0'10,216 251,858,591
Advance payment to
suppliers and
contractors '176,489,393 216,368 8,884,250,001
'181 ,499,609 216,368 9,1 36,1 08,592

Liabilities
Accounts payable and
accrued expenses* (604,647,179) (8,560,94s) fi75.429\ (3.26'1) (3.842.321.845) (32.570.518.212)
Net foreign currency-
denominated asset
(liabilities) (423,147,570) (8,344,577) (175,425) (s,261) (3,842,321,845) (23,434,409,620)

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With the translation of these foreign currency denominated assets and liabilities, the
Company reported net foreign exchange gain (loss) of (P905.64) million and
(P 244.63) m o n in 2022 and 2021, res pectively.
iI Ii

The following are the closing exchange rates applied as qt December 31, 2021 and
2020:

USD Euro AUD I{ZD JPY

2022 56.120 59.554 37.802 3s.406 0.417
2021 50.269 56.869 36.334 34.238 0.438

Sensitivity Analysis. The following table demonstrates the sensitivity to a reasonably

possible change in the exchange rates, with all other variables held constant, of the
Group's net income and equity:

December 31 2022
Strengthening/
Weakening of the
Philippine Peso Effect on Frofit Effect on Equity
U. S. Dollar +10o/o 1,345,656,3'X3 (1,345,656,313)

-10% (1 11,606,226) 111,606,226

NZD +10o/o 11,546 (1 1 ,546
-1Oo/o {,546)
(,t 4 I ,546
EURO +1loh 15,427,134 (15,427,1341
-10% (15,427,1341 15,427,134

December 31 2421
Strengtheningi
Weakening of the
Philippine Peso Effect on Profit Effect o[ Equity
U. S. Dollar +10o/o 2,127 ,120,516.62 2,127 ,120,516.62
-10o/o (2,127 ,120,516.62) (2,127 ,120,516.62)
JPY +10% 168,216,850.37 (168,216,850.37)
-10% (168,216,910.37) 168,216,850.37
NZD +10%o 11,165.28 (11,165.28)
-10% (11,165.28) 11,165.28
EURO +10o/o 47,455,019.76 (47,455,019.76)
-10% (47,45s,019.76) 47,455,019.76
AUD +10o/o 637,410.02 (637,410.02)
-10% (637,410.02) 637,410.02

lnterest Rafe Risk. lnterest rate risk is the riskthatthe fairvalue orfuture cash flows
of a financial instrument will fluctuate because of changes in market interest rates.
The Group's exposure to the risk of changes in market interest rates relates primarily
to the Group's long-term debt obligations with floating interest rates.

The Group manages its interest cost by using an optimal combination of fixed and
variable rate debt instruments. The management is responsible for monitoring the
prevailing market-based interest rate and ensures that the mark-up rates charged on
its borrowings are optimal and benchmarked against the rates charged by other
creditor banks.

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Capital Management
Management's objectives in managing capital are to safeguard the ability of the
Group to operate as a going concern, ensure that it has sufficient cash flows to
service long-term debt, and to satisfy both maturing short-term debt and upcoming
operational expenses, thereby providing returns to shareholders and other
stakeholders.

Capital is defined as the Group's capital stock, additional paid-in capital and retained
earnings.

Management uses debt-to-equity ratio to monitor and review, on a regular basis, the
Group's capital.

There were no changes in the Group's approach to capital management during the
year.

The NGCP has to meet Debt to Equity Ratio and Debt Service Coverage Ratio
required by the concession agreement. As at December 31, 2422 and 2021, the
NGCP is in compliance with these requirements.

Fair Values
The Group analyzes financial instruments carried at fair value by valuation method
as at December 31 , 2022 and December 31 , 2021. The different levels have been
defined as follows:

I Level 1: quoted prices (unadjusted) in active markets for identical assets or

liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly.
Level 3: inputs for the asset or liability that are not based on observable market
data.

As at December 31 ,2022 and December 31 ,2021, the Group's derivative financial

asset and liability were measured based on Level 2 classification.

As at December 31,2022 and December 31 ,2021, the Group has no financial

instruments valued based on Levels 1 and 3 and has not introduced any movement
among Levels 1,2 and 3 classifications.

The following summarizes the major methods and assumptions used in determining
the fair values of financial instruments:

Cash and Cash Equivalents, Receivables, Trade and Other Current Payables and
Other Current Liabilities. The carrying amounts of these financial assets and financial
liabilities approximate fair values primarily due to the relative short-term
natu re/matu rities of these fi nancial instru ments.

Receivables - Nef of Current Portion and Customers and Other Deposlfs. These
accounts are reported at their carrying amounts which approximates its amortized
cost as the impact of discounting is immaterial, Carrying amounts approximates the
cash amounts that would be settled at reporting date.

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 Concession Fee Payable and Loans Payable. The carrying value of interest-bearing
concession fee payable and loans payable is the present value which approximates
the cash amount that would be fully settled as at reporting date. These are classified
as current liabilities when they become payable within twelve (12) months from the
reporting date.

25. Contingencies

The Group, in the ordinary course of business, is a party to certain cases or claims
under protest pending with administrative bodies or the courts, including but not
limited to those set out below, the outcome of which are not presently determinable,

a. Civil Cases

NGCP is a defendant in an Arbitration case filed by Kalpataru Power

Transmission Limited (KPTL) before the Construction lndustry Arbitration
Commission (CIAC) where the Arbitral Tribunal awarded damages in favor of
KPTL, as follows:

DAMAGES
PROJECT PHP USD INR
Abaoa-Kirahon 28,749,664 93,041 1,s29,869
Kirahon-Maramaq 1 6,658,168 77,369 2,333,347
Ormoc-Babatngon 27,053,362 394,743

Moreover, the Arbitral Tribunal also directed NGCP to release the Retention
Money previously withheld by NGCP from the payments to KPTL, as follows:

RETENTION MONEY
PROJECT PHP USD
Abaga-Kirahon 30,000,000 2.000,000
Kirahon-Maramaq 21,929,714 143,563

NGCP filed a Petition for Review with the Court of Appeals assailing the
erroneous award and also posted a bond before the CIAC in an amount equal to
the award in order to restrain the implementation of the Final Award pending the
resolution of NGCP's Petition. ln its Decision dated June 29, 2018, the Court of
Appeals deleted all the actual damages granted by the Arbitral Tribunal in favor
of Kalpataru but ordered NGCP to release the retention money to Kalpataru. The
June 29, 2018 Decision of the Court of Appeals is now subject of separate
Petitions for review by NGCP and Kalpataru before the Supreme Court which is
pending resolution.

-81 -
 ln a case involving customer High Street (SPV-AMC), lnc., (High Street)
concerning the manner of calculating the transmission charge of High Street,
NGCP filed on March 10, 2022 a Motion (to remand the Case) before the
Supreme Court requesting that case be remanded to the Energy Regulatory
Commission (ERC) for proper disposition, particularly, on the implementation and
computation of the billing due from High Street consistent with the Decision and
Resolution of the Court of Appeals, as affirmed by the Supreme Court, declaring
the non-coincident peak demand (NCPD) as the correct billing determinant in the
computation of transmission charges of High Street, lnc. Consequently, on
September 9,2022, NGCP filed with the Supreme Court a Reiteratory Motion
praying that case be remanded to the ERC in order to implement and compute
the billing due from High Street. On November 2, 2022 the 1st lndorsement of
the Supreme Court to the Court of Appeals - the case was remanded to CA on
June 14, 2021. And on December 12,2022 NGCP received the CA letter
transmitting the records of the case to ERC for proper disposition, which is still
pending as of period end.

There are several other cases for ejectment, damages, recovery of possession,
and other cases of civil in nature filed by and against the Company and pending
with the different courts and quasi-judicial bodies nationwide. The total estimated
amount of claim against NGCP for these civil cases is P0.77 billion.

b. Revenue Application

On 22 December 2022, NGCP filed its revenue application for the 4th Regulatory
Period (2016-2020). ln the Application, NGCP proposed its Annual Revenue
Requirement for the years 2016 to 2020 for the ERC's approval. The Application
is pending resolution as of date (see Note 20).

c. Show Cause Orders

There are also ten (10) pending cases arising from show cause orders (SCOs)
issued by the ERC. These SCOs involve allegations of possible violations of the
Philippine Grid Code (PGC), the Ancillary Services Procurement Plan (ASPP),
the 2021 DOE AS-CSP Circular, the Rules for Setting Transmission Wheeling
Rates (RTWR), Commonwealth Act No. 146, and the Republic Act No. 9136, and
NGCP may be imposed with administrative penalties for these violations.

ln one SCO (ERC Case No. 2022-129 to 131 SC), after NGCP has filed its
Explanation, the ERC issued a Decision and ruled that NGCP violated the 2021
DOE AS-CSP Circular and meted out a penalty in the amount of P5.1M. NGCP
timely filed a Motion for Partial Reconsideration of the Decision and paid the
penalty imposed with reservation. Said motion is pending resolution.

NGCP has also timely flled its Explanation on various dates for the other SCOs
which are pending resolution.

-82-
d. Tax Cases

ln the case of National Grid Corporation of the Philippines vs. Ofelia M. Oliva,
G.R. No. 213157, August 10, 2016, and Ofelia M. Oliva vs. National Grid
Corporation of the Philippines, G.R. No. 213558, August 10, 2016 (Oliva case),
the Supreme Court ruled that NGCP is exempt from payment of real property tax
on properties used in connection with its franchise. The cases were remanded to
the Central Board of Assessment Appeals (CBAA), Case No. V-31, and on
April 10, 2019, the CBAA ruled that the maintenance offlce and warehouse
buildings are used in connection with NGCP's franchise. However, the Supreme
Court also ruled in the Oliva cases that NGCP cannot ask for refund from the
Cebu City Government for the taxes it paid from 2001-2008 in the amount of
P2.79 million but shall take its relief from NPCffransCo. NGCP may only ask for
reimbursement from the City of Cebu the amount paid in excess of the correct
tax that should have been collected if the tax is computed applying the 10%
assessed value for the period 2001-2008, and refund of the amount paid for the
year 2009. Likewise, in another similar case, NGCP vs Local Board of
Assessment Appeals (LBAA) and the City Treasurer of Cebu, CBAA Case
No V-35, the CBAA recognized NGCP's exemption from payment of real
property tax pursuant to the Supreme Court decision in the Oliva case and
ordered the refund of taxes paid for the year 2009 on fuuo office buildings used in
the Talamban substation. The refund of the taxes paid in both cases are still
under negotiation with the City of Cebu.

NGCP obtained another favorable Resolution, dated June 23, 2021, from the
Supreme Court in the consolidated cases docketed as G.R. Nos.218289-90
(NGCP vs. CBAA, LBAA of Cabanatuan City and [Vls. Heidi Pangilinan, in her
capacity as City Assessor of Cabanatuan and NGCP vs, CBAA, LBAA of
Cabanatuan City and Ms. Florida Oca, in her capacity as the City Treasurer of
Cabanatuan City). NGCP questioned the assessment issued by the Assessor of
Cabanatuan City in the first case; while in the second case, NGCP paid under
protest the real property tax in the amount of P3.82 million for the period 2009 to
20'10. ln its Resolution, the Supreme Court reiterated its ruling in the case of
NGCP vs. Oliva that NGCP is exempt from payment of real property tax on
properties that are actually and directly used for electric power transmission. As
in the Oliva case, the SC ordered to remand the cases to the CBAA to determine
the actual and direct use of subject machineries, buildings and lands for the
purpose of resolving the merits of NGCP's claim for exemption from paying the
real property taxes. On 24 November 2022, the CBAA conducted the ocular
inspection of the involved properties in the presence of both parties. NGCP
submitted its Compliance with N/otion with the CBAA on 19 December 2022 and
the case is still pending for decision.

ln NGCP vs. the OlC, Provincial Assessor of South Cotabato and the lVlunicipal
Assessor of Tupi, South Cotabato, a case involving properties with assessed
value of P7B.B9 million was dismissed on appeal by the CTA for failure to pay the
tax under protest. This was brought to the Supreme Court by way of Petition for
Review, docketed as G.R. No. 241 105. A Reply to the Comment of Respondents
to NGCP's Petition for Review dated January 3,2019 was filed by NGCP on
16 September 2020 and the case is still pending resolution.

-83-
Likewise, in the case of NGCP vs. Fatima Tenorio, et al, the CTA dismissed the
petition filed by NGCP for failure to pay the tax under protest. However, since a
similar case involving the same properties is also pending before the LBAA of
llocos Sur, NGCP subsequently paid the real property tax under protest in the
amount of P10.17 million. NGCP then filed another petition before the LBAA on
November 5,2018 contesting the collection and payment of the tax. The cases
are still pending before the LBAA.

Also, in the case of NGCP vs. LBAA of Batangas City and Guadalupe Judy
Tumambing, City Assessor of Batangas City, involving properties with assessed
value of P1.40 million, the Supreme Court dismissed the Petition for Review filed
by NGCP in a Resolution dated February 28,2022. NGCP subsequently filed a
Motion for Reconsideration of said Resolution on March 15, 2022 praying,
among others, that the properties involved be classified as exempt from the
payment of RPT in the Assessment Roll. On 13 July 2022, NGCP received a
Resolution denying its Motion for Reconsideration. The subject properties are
now the subject of pending verification by South Luzon O&tM for possible
payment under protest of the assessed real property taxes.

With regards to the pending Petition for lnjunction with TRO (NGCP vs. The
Province of Cebu, et al. (Declaratory Relief with Prayer of Cancellation of TDs,
with Urgent Application for TRO and/or Preliminary lnjunction) against the
collection of RPT in the amount of Pl92million filed with the Regional Trial Court
Regional Trial Court (RTC) of Cebu, the parties already submitted their
respective Memoranda on 19 July 2019, and the case is now submitted for
resolution.

ln the case of NGCP vs. City Government of Kidapawan represented by Ms.

Rosalina Aguirre, Provincial Treasurer of the Province of Cotabato, Civil Case
No. 201146 RTC Branch 17 Kidapawan City, involving the amount of
P7.13 million, on 26 May 2020, the RTC already rendered a decision invalidating
the franchise tax assessment issued by the Provincial Treasurer of Cotabato
against NGCP, which became final and executory.

Under Civil Case No. R-QZN-21-07791, entitled NGCP vs. City Government of
Quezon City, the RTC in its Resolution dated 08 September 2022, which was
received by NGCP on 20 September 2022, dismissed due to lack of merit
NGCP's Petition questioning the assessment issued by the LGU of Quezon City
for the year 2021 and seeking the refund of the amount of P21.98 billion which
NGCP paid under protest. The RTC subsequently denied NGCP's Motion for
Reconsideration (MR). NGCP filed Petition for Review with CTA on 19 October
2022 and was ordered to submit Memorandum for Resolution

-84-
As to the other Real Property Tax (RPT) cases, on October 12, 2020, NGCP
received a copy of the CTA Decision, dated September 23, 2020, in CTA EB
No. 2110 (City Assessor's Office of Valenzuela City vs. NGCP) reversing and
setting aside the Decision dated Augusl22, 2012 of the LBAA and the October B,
2018 Decision and May 31 ,2019 Resolution of the CBAA. The CTA declared
the Notice of Assessment dated October 9, 2012, as final, executory and
unappealable. On October 23,2020, NGCP filed its [t4otion for Reconsideration.
Thereafter, NGCP received on October 23, 2020, the Statement of Account
issued by the City Treasurer on the 37 machineries/transmission towers subject
of the case in the total amount of P421.75 million. On October 30,2020, NGCP
wrote a letter and requested the City Treasurer and City Assessor the following:
(a) refer to TransCo the notice of delinquency for real propefty tax covering years
2002 lo 2008; (b) classify the 37 machineries/transmission towers, as exempt
from payment of real property tax from year 2009 onwards; and (c) issue revised
tax declarations on 37 machineries/transmission towers and indicate thereon that
NGCP is the beneficial user of the same and to re-classify said properties from
taxable to exempt. On June 28,2021, NGCP received the CTA Resolution dated
June 2, 2021 denying NGCP's lVlotion for Reconsideration. NGCP filed Petition
for Review dated July 13, 2021before the Supreme Court.

With the ruling of the Supreme Court in Oliva cases and BLGF [vlemorandum
Circulars and letters confirming NGCP's exemption from RPTs, local franchise
tax and business taxes, NGCP is continuously and actively asserting its
exemption on all properties used in connection with its franchise and is
pro-actively negotiating with various LGUs for the recognition of its exemption,
and for the refund of all real property taxes paid under protest. Constant
communication and coordination meetings and negotiations with the various
LGUs are being conducted all year round for this purpose. Consequently, as of
31 December 2022, NGCP obtained three thousand seven hundred ninety-nine
(3,799) tax exemptions (3,630 as of December 31, 2021) covering lands,
buildings and machineries located in various cities, municipalities, provinces with
assessed value in the total amount of P1 1.4 billion.

As of 31 December 2022, NGCP has a total of ninety-four (94) RPT, franchise

and business tax cases pending before the LBAA, GBAA, RTC, Municipal Trial
Court in Cities (MTCC), the CTA and the Supreme Court, broken down as
follows:

(i) Real Property Tax cases

a. forty-eight (48) cases pertain to Petition filed contesting the Notices of

Assessment issued by the Provincial or City Assessors involving
properties with total assessed value of P13.1 billion; and

b. thirty-six (36) cases with Payment Under Protest contesting the

Statements of Account or Billings issued by the Provincial or City
Treasurers in the total amount of P40.5 million.

(ii) Franchise/ business tax cases:

a. two (2) cases pertain to Petition filed contesting the assessment for
Franchise/Business Taxes and Fees issued by the Provincial or City
MunicipalTreasurers with total amount of P62,6 million; and
b. eight (8) cases with Payment Under Protest contesting the assessment
for Franchise/Business Taxes and Fees issued by the Provincial or City
or ftlunicipal Treasurers in the total amount of P346.2million.

-85-
e. Right of Way (ROW) Expropriation Cases

Pursuant to R.A. No. 9511, the Company is authorized to exercise the right of
domain insofar as it may be reasonably necessary for the construction,
expansion, and efficient maintenance of the transmission system and grid. Thus,
NGCP may acquire private property as is actually necessary for the realization of
the purposes for which its franchise (R. A. 951 1) was granted.

With regard to the expropriation case filed by NGCP against SSS for the
acquisition of the site for the Pasay 230kV Substation Project, on l/larch 12,
2020, NGCP filed an Omnibus lVlotion to Withdraw Complaint and Provisional
Deposit amounting to Php1.46 billion with RTC-Pasay City which is currently for
resolution of Court of Appeals.

One of the relevant expropriation cases filed on lt/lay 06, 2016 by the Company is
NGCP v. Social Security System (SSS), a government-owned and -controlled
corporation, for the acquisition of the site for the Pasay 230kV Substation
Project. An Omnibus Motion to Withdraw Complaint and Provisional Deposit in
the amount of P1.46 billion was filed with the Regional Trial Court of Pasay City
(RTC-Pasay) on fvlarch 12, 2020. However, the resolution was deferred since
the records of the case were forwarded and still with the Supreme Court.
Unfortunately, hearings of the court were suspended due to Covid 19 Pandemic
at the start of March 2020.

On January 22,2021, the Company filed with the Supreme Court a Motion to
Enforce Court's Order to remand the records of the case to RTC-Pasay. On
March 18, 2021, NGCP's Motion to Enforce Court Order was granted by the
Supreme Court. Consequently, the records were transmitted to the RTC-Pasay
on July 13,2021. The Omnibus lt/lotion to Withdraw Complaint and Provisional
Deposit was granted by the RTC-Pasay after the hearing on July 21,2021. The
Company filed a Partial lV]otion for Reconsideration regarding the interest on the
provisional deposit which was denied by the said court in its Order dated
November 5,2021.

The Group filed a Notice of Appeal on December 10,2021. The provisional

deposit's principal amount of P1.46 billion was withdrawn by the Company on
December 22,2021. On November 07, 2022,hhe company received a Notice to
File Bief dated September 17, 2022 from the Court of Appeals, requiring the
Company to file its Appellant's Brief within 45 days from receipt of the said
Notice. On December 22, 2022, the Appellant's Brief praying for the release of
the interest on the P1,46 billion principal amount of provisional deposit was flled.
As to date, the resolution of the issue is pending with the Court of Appeals.

As of December 31 , 2022, the total number of expropriation cases filed/pending

with the Courts, including Projects Under Construction (PUC) cases turned over
to the company by the National Transmission Corporation (TRANSCO) ls 3,070
with the total estimated amount involved of P9.216 billion (based on provisional
deposits).

-86-
f. ReclassificationCases

There are six (6) reclassification cases pending before the ERC.

These cases involve assets which are currently not part of NGCP's Regulatory
Asset Base (RAB) but are performing transmission functions and therefore,
should be transferred to NGCP pursuant to R.A. No. 9136. By law, NGCP is
required to pay the current owners of these assets the corresponding fair market
price of each asset upon its transfer to NGCP to become part of NGCP's RAB.
However, considering that the ERC has not yet issued NGCP's Final
Determination for the Fourth and Fifth Regulatory Periods, there are still no
approved CAPEX for the acquisition of these assets.

g. Permit Fees

There are six (6) cases pending with the Supreme Court (which were
consolidated and will be resolved in one decision) involving ERC's imposition of
Fees in relation to approved various CAPEX projects. The issue involved is
whether or not NGCP is liable to pay all types of fees taking into consideration
the provisions of R.A. No. 9511 which exempts NGCP from paying all other kinds
of fees, taxes, and charges in consideration of its payment of the 3% Franchise
Tax. The resolution of these cases may not have an impact on NGCP's revenue
considering that the ERC considers Permit Fees as part of the capital expense in
NGCP's Final Determination, NGCP has paid these permit fees under protest.

NGCP has already obtained favorable decisions from the Court of Appeals
where the court declared NGCP exempt from payment of permit fees pursuant to
its Franchise. These decisions are now subject of appeals by the ERC with the
Supreme Court. There are also motions for reconsideration still pending with
ERC where NGCP, upon obtaining approval of CAPEX applications, filed
motions relative to the imposition of permit fees.

h. Supervision and Regulation Fees; Metering Authority Fees

Similar to Permit Fees, NGCP is being assessed by the ERC of Supervision and
Regulation Fees in the amount of P468.00 million annually and Metering
Authority Fees in the amount of P15.00 million every three years upon the
renewal of NGCP's authority as the metering service provider, The Supervision
and Regulation Fee is required to be paid on or before September 30th of each
year with a penalty of fifty per centum in case of delinquency; Provided, further,
that if the fees or any balance thereof are not paid within sixty days from the said
date, the penalty shall be increased one per centum for each month of
delinquency thereafter. On the other hand, the metering fee is being assessed by
ERC based on the authority granted to NGCP as the WESM metering seruice
provider.

The assessment is based on ERC Resolution No. 21, Series of 2O07 entitled 'A
Resolution Approving the Revised Schedule of ERC Fees and Charges' which
provides that supervision and regulatory fees are for annual reimbursement of
the expenses incurred by the ERC in the supervision of electric utilities,
transmission companies and/or in the regulation or flxing of their rates. Both the
supervision and regulatory fee and metering authority assessment fee are
computed at one peso for each one hundred pesos or fraction thereof, of the
capital stock subscribed or paid.

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 NGCP is paying both Fees although under protest on the ground that NGCP
should be exempt from payment of these fees pursuant to Section 9 of R.A.
No. 9511, which provides that NGCP's payment of 3o/o franchise tax shall be in
lieu of, and expressly exempted from paying all other kinds of fees, taxes, and
charges. The resolution of its protest may not have an impact on NGCP's
revenue because the ERC considers the Supervision and Regulation Fees as
part of the operating expense.

These legal issues are still pending before the Supreme Court for resolution.

i. Labor Cases

There are twenty-two (22) labor cases pending before the Supreme Court, Court
of Appeals, National Labor Relations Commission, and the Department of Labor
and Employment filed either by (i) former NGCP employees against NGCP in
different areas/regions for illegal dismissal, with prayer for reinstatement, and
payment of baclo,vages and damages or for other money claims; or (ii) by
employees of service providers with service contracts with NGCP wherein NGCP
was impleaded as co-defendant. The contingent liabilities arising from the labor
cases are difficult to estimate considering that in most of the complaints, the
monetary claims are not specified by the complainants.

j. Other Cases

There are twenty-four (24) NGCP CAPEX Applications pending with the ERC for
approval. Due to urgency of the projects, NGCP filed the CAPEX Applications for
approval considering that ERC has not yet issued NGCP's Final Determination
for the 4th and Sth Regulatory Periods.

With regard to the disputes among NGCP, PSALIVI and TRANSCO, the dispute
resolution process has already commenced. NGCP filed with the Singapore
lnternational Arbitration Centre ("SIAC') a Notice of Arbitration, docketed as
SIAC Case No. ARB044|181CHB, against PSALM and TRANSCO pursuant to
the Arbitration Clause in Section 16 of the Concession Agreement among the
parties. The proceedings have already been completed and the case is now for
resolution of the arbitral tribunal.

Prior to the constitution of the arbitral tribunal, a Temporary Order of Protection

and, subsequently, a Writ of lnjunction were issued by the Regional Trial Court of
Quezon City to enjoin PSALM and TRANSCO from, among others, declaring
NGCP in default of the Concession Agreement. The Writ remains effective until
it is modified or revoked by the arbitral tribunal. PSALM and TRANSCO appealed
the issuance of the Writ to the Court of Appeals. ln its Decision dated
September 25, 2019, the Court of Appeals dismissed PSALlvl's and TRANSCO's
appealfor lack of jurisdiction, the arbitral tribunal having already been constituted
on April 12,2018. PSALM and TRANSCO did not elevate this matter to the
Supreme Court. They even filed a Manifestation with the Court of Appeals
confirming that, after its constitution, the arbitral tribunal could rule on the matter
of interim measures.

NGCP has also filed on November 13,2018 a "Petition for the Approval of the
Extension of the Period for the Listing of the Shares of National Grid Corporation
of the Philippines" before the ERC, docketed as ERC Case No.2018-014MC.
The Petition seeks the extension of the period for compliance prescribed by
Section 8 of RA No, 9511.

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 In its Decision dated March 3, 2020, the ERC denied NGCP's Petition and
directed NGCP to commence immediately the process of public listing pursuant
to RA No. 9511 and to fully comply with the same within six (6) months from
receipt of the Decision. NGCP filed a Motion for Reconsideration of the ERC's
March 3, 2020 Decision. ln support of its tVlotion for Reconsideration, NGCP
presented an expert witness to apprise the ERC of the impact of the Covid-19
pandemic on the timeline of its key IPO activities. On [Vlay 14,2021, NGCP
received the ERC Order dated March 10, 2021 denying NGCP's N/otion for
Reconsideration and directing NGCP to complete its compliance with Section B
of RA No. 9511 within six (6) months from receipt of the Order. Finally, in its
Compliance with Verified tVlotion dated 12 November 2021 filed with the ERC,
NGCP informed the ERC that it has already fully complied with the March 10,
2021 Order when the Securities and Exchange Commission (SEC) and the
Philippine Stock Exchange approved the follow on offering (FOO) of Synergy
Grid and Development Philippines, lnc. (SGP), a listed company that indirectly
owns 40.2% of NGCP.

[v1ay 26, 2022 (promulgated in 21 June 2022), the ERC

Finally, in its Order dated
resolved the Compliance with Verified lt/otion dated November 12, 2021 and
Compliance/Submission dated April 25, 2022 filed by NGCP and declared that
NGCP is Compliant with Section 8 of Republic Act. No. 9511.

The Group has other possible claims from or obligations to other parties from
past events and whose existence may only be conflrmed by the occurrence or
non-occurrence of one or more uncertain future events not wholly within the
control of the Group.

26. Franchise Tax

As discussed in Note 1 to the consolidated financial statements, in consideration of

the franchise and rights granted by R.A.9511, the Group is required to pay a
franchise tax equivalent to three percent (3%) of all gross receipts/actual collection
derived from its operations under the franchise, in lieu of income tax and any and all
taxes, duties, fees and charges of any kind, nature or description levied, established
or collected on its franchise, rights, privileges, receipts, revenues and profits, and on
properties used in connection with its franchise except for real property tax on real
estate, buildings and personal propedy, exclusive of the franchise.

ln view thereof, the Group's income from business activities included within the scope of
its authority under Section 1 of R.A. 9511 is exempt from income tax, and
consequently from withholding taxes, minimum corporate income tax (MCIT),
improperly accumulated earnings tax (IAET), Value-Added Tax (VAT) and
documentary stamp tax (DST). Subsequently, effective January 1, 2018, the
implementation of TRAIN Law has changed the classification of NGCP from
non-VAT to VAT entity which made all transactions affected therein to be subject to
VAT (see Note 25).

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 Pursuant to Third Regulatory Period Final Determination under Clause 5.20, ERC
Final Decision on Other Taxes, particularly Section 5.20.1specifically states that "the
3% national franchise tax will not be included in the maximum allowed revenue
(MAR) but will be recovered through a surcharge on the Regulated Entity's
customers' invoices". NGCP started billing its customers the 3% national franchise
tax effective on the billing period December 26, 2010 to January 25, 2011 as
approved by the ERC under Resolution No. 07, series o'f 2011, "A Resolution
Allowing the Distribution Utilities to lnclude Their Monthly Transmission Cost the
NGCP's National Franchise Tax Billing." The Group adopted an accounting
treatment for franchise tax that upon billing to its customers, both franchise tax
receivable and franchise tax payable to BIR are set-up. As such, franchise tax
recovery is not recognized in the profit or loss in view of the pass-through nature of
the 3% national franchise tax (see Note 15).

27. Final Determination and Others

"The Final Determination, Regulatory Reset for the NGCP for 2011 to 2015"
(Final Determination) was approved by the ERG on November 22,2010.

Pursuant to the EPIRA of 2001 and its Implementing Rules and Regulations (lRR),
the ERC promulgated the Guidelines on the Methodology for Setting Transmission
V/heeling Rates (TWRG) on May 29, 2003, which was subsequently updated and
revised on September 16, 2009 as the RTWR for 2003 to around 2027. The RTWR
provides for Performance-Based Regulation (PBR) using a revenue cap
methodology to determine the maximum rates that may be charged by the Regulated
Entity to its customers for the provision of Regulated Transmission Services. The
RTWR amends the TWRG which formed the basis for setting the revenue cap of the
Regulated Entity. The methodology in the TWRG, now the RTWR was applied in
setting the revenue for Second Regulatory period of January 1, 2006 to
December 31,2010 and for the Third Regulatory Period of January 2011 to
December 31,2015, with the issuance of the Final Determination on June 13, 2006
and November 22, 201 0, respectively.

On 28 September 2022,hhe ERC issued ERC Resolution No. 08, Series of 2022, A
Resolution Adopting the Amended Rules for Sefting Transmission Wheeling Rafes
(Amended RTWR). The Amended RTWR provides, among others, the relevant
provisions that would govern the filing of the revenue reset applications of NGCP for
the Fourth and Fifth Regulatory Periods (4th and sth RP).

Relative to this, on 27 October 2022, NGCP filed an Omnibus Motion docketed as

ERC Case No. 2018-004RM, requesting ERC to subject Article lV of the 2022
Amended RTWR to public consultation and public hearings, clarify pertinent
provisions and hold in abeyance the regulatory reset process for the 4th and sth RP.

ln response to NGCP's Petition, in its Order dated 25 November 2022, the ERC
denied NGCP's motion to hold in abeyance the regulatory reset process and directed
it to file the 4th RP Revenue Application within a non-extendable period of
fifteen (15) calendar days from the receipt of the issuance and the sth RP Revenue
Application by 19 January 2023.

Accordingly, NGCP filed its 4th RP Revenue Application on 22 December 2022. ln

addition, in a letter dated 13 January 2023, NGCP requested ERC to allow NGCP to
file the Sth Reset Application on April 28, 2023. As of report date, the approval is yet
to be received from ERC.

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Regulated Entity
At the time the ERC issued its Final Determination for the Second Regulatory Period
(the 2006 Final Determination), Regulated Transmission Services were provided by
the National Transmission Corporation (TRANSCO). Under R.A. 951'1, which was
signed by the President on December 1, 2008 and which became effective on
January 15, 2009, a nationwide franchise to manage the transmission system was
granted to the Company.

As discussed in Note 4 to the financial statements, the Company has signed a

Concession Agreement with PSALITI and TRANSCO, which covers the management
and development of the transmission grid over the term of the franchise. Under the
Concession Agreement, the Company is responsible for the operation, management,
and development of the grid, while TRANSCO continues to hold title over the
transmission assets. Notwithstanding this, TRANSCO continues to be responsible for
the settlement of Right of Way (RO\A/) claims in respect of projects that were ongoing
at the time R.A. 9511 became effective, while the Company is responsible for ROW
claims for projects that were initiated subsequent to the effectivity of the Act.

Hence, while the Company will incur the bulk of the costs of providing the Regulated
Transmission Services over the Third Regulatory Period, some residual costs for the
provision of these services will be incurred by TRANSCO. For the Third Reset, the
ERC is concerned only with the total cost of providing the Regulated Transmission
Services and not with who incurs these costs.

Pertormance Based Regulation (PBR)

PBR is an internationally accepted method of rate setting that meets the
requirements of Section a3(f) of EPIRA. PBR is fonruard looking and sets the MAR
that the Regulated Entity can earn from the provision of Regulated Transmission
Services for each five-year regulatory period. This provides an incentive for cost
reduction over time, this leads to price efficiency since savings made in one
regulatory period are built into the cost structure used to determine the MAR that will
apply over the subsequent regulatory periods.

Maximum Allowed Revenue (MAR)

The ERC makes a determination of the annual revenue requirements (ARR) of the
transmission business as well as the price control arrangements that will apply
during the regulatory period, The RTWR requires the MAR to be smoothed to reduce
the likelihood of price shocks to customers and revenue shocks to the Regulated
Entity.

Following an annual rate verification and validation process, and using a price control
formula, the ERC sets the MAR that the Company can bill its transmission customers
for each year in the regulatory period.

With the issuance of the Order dated January 21,2016, NGCP billed an i[\4ARzoro of
P41,653.82 million consistent with Module F of the 2006 Revised Open Access
Transmission Service (OATS) Rules. As for the iMARzoro differential of P2,135.23
million, following the ERC Order dated December 19, 2016, this was collected by
NGCP in 2017. The approved iMARzoro amounting to P43,789.05 million has been
applied in CYs 2017,2018 and 2019,

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ln its Order dated February 13,2020, the ERC granted NGCP a provisional authority
to implement an iMARzoeo in the amount of P47,051.64 million, an increase of
P3,262.59 million from the iMARzore of P43,789.05 million, effective April 2020 billing
month. However, only P300 Million of the incremental revenue was billed in July and
August 2020 billing months following its deferment in consideration of the COVID-19
pandemic situation and the issuance of the July 28, 2020, directing the suspension of
the billing of the iMARzozo. As a result, there was an unbilled iMARzozo differential in
the amount of P2,962.59 million.

ln October 2021, NGCP filed a Reiteratory Motion for lmplementation of iMARzozo

praying for the lifting of the July 28,2020 Order, recovery of the 2020 |MAR and the
unbilled iMAR for 2021 from October 2021 to December 2022, and confirmation that
the approved iMARzozo level of P47,051.64 million shall be implemented continuously
until a new MAR is issued, or until the issuance of the Final Determination for the
succeeding regulatory period, whichever is earlier.

On January 17, 2022, NGCP submitted its compliance to the January 5, 2022 ERC
Order, which was received by NGCP on January 7,2022.

On April 29,2022, the ERC promulgated an Order dated March 23,2022 resolving
the iMARzozo Application and approving an iltlARzozq of P51,471.13 million.
Moreover, the Commission directed the implementation of the approved i[/lARzozo in
the next billing cycle and required the submission of NGCP's proposed recovery
scheme on the unbilled iMARzozo in CYs 2020,2021 and first four (4) months of 2022
within 60 days from receipt of the Order.

Accordingly, on June 8,2022, NGCP submitted to ERC its Compliance dated June 2,
2022 on NGCP proposed manner of recovery of the unbilled lMARzozo for the years
2020,2021 and four (4) months of 2022, in the total amount of PhP17,624.85 million
starting September 20221o June 2024. Starting May 2022 Billing Period, NGCP has
already implemented the billing based on the PhPsl Bn iMAR pursuant to the
23 March 2022 Order of the ERC.

NGCP is yet to receive ERC's resolution on NGCP's proposed manner of recovery of

the unbilled |MAR2020 for the years 2020,2021, and four (4) months of 2022.

Forecast Capital Expenditures (CAPEX) and Forecast Operating Expenditures

(oPEx)
The ERC building block cost calculations for the approved ARR include allowed
forecast CAPEX and forecast OPEX. This entails responsibility on the part of NGCP
as the regulated entity to implement projects and/or activities allowed by ERC to be
able to perform its mandated function as transmission provider. A significant amount
of NGCP's Revenues is used to fund the CAPEX and OPEX approved by the ERC in
its Decision and Final Determination for the subsequent year/s. The utilization of
these earned profits will allow NGCP to implement projects and meet its performance
targets committed with the ERC and its customers.

ln Section 5.4 of the Final Determination, ERC's approval on the operating and
maintenance expenditures (OPEX) for the Third Regulatory Period considered only,
among others, inclusions of TRANSCO of the supervision and permit fees relating to
its Second Regulatory Period capital expenditures (CAPEX). However, instead of
allowing its recovery as part of the OPEX for the Third Regulatory Period, ERC
deemed it more appropriate to treat it as an adjustment to the Third Regulatory
Period Revenue Requirement of NGCP thru the OPEX Efficiency Adjustment (OEA).

-92-
ln Section 5.26 of Final Determination for the Third Regulatory Period, ERC included
provisions for the recovery of cost of capital on land-related CAPEX for years 2011 to
2015 based on NGCP's approved CAPEX requirements and the historical levels at
which TRANSCO has been able to settle its right-of-way (ROW) claims. Further,
ERC decided that land-related CAPEX is to be reflected as a separate item from the
approved CAPEX levels of NGCP for the Third Regulatory Period and is to be the
subject of an ex-post prudency review during the Fourth Regulatory Period.

Outside the levels of CAPEX and OPEX approved by ERC, NGCP has to finance for
the cost of ROW, operation/maintenance and rehabilitation of sub-transmission
assets not disposed to distribution utilities (DUs), and value-added tax.

For the 4th RP, the Company continues to undertake the implementation of CAPEX
which it deems prudent and necessary and incur OPEX that is essential in its day-to-
day operations to continuously fulfill its mandated function as the Transmission
Provider.

Weighted Average Cost of Capital (WACC)

The rate of return that the Regulated Entity can earn in its investment in transmission
system assets is equal to the WACC as set by the ERC during each Reset based on
a market analysis of the rate of return a business in the Philippines with a similar risk
profile to the Regulated Entity can be expected to earn.

ln the absence of a Final Determination for the 4th RP, which should provide, among
others the WACC approved by the ERC for the years 2016 to 2020, as stated in
Note 20, the ERC approved an interim revenue of P43,789.05 million which was
implemented in years 2016 to 2019, and subsequently provisionally approved a
revenue of P47,051.64 million for the year 2020. On April 29,2022, the ERC
promulgated an Order dated March 23,2022 resolving the iMARzozo Application and
approving an iMARzozo of P51 ,471.13 million effective January 2020 until a new
transmission revenue has been determined.

Other laxes
As stated in the Third Regulatory Period Final Determination Section 5.20 ERC Final
Decision - Other Taxes, the VAT payable on both CAPEX and OPEX inputs will be
accounted separately and will not be included in either the CAPEX or OPEX
forecasts for the third and subsequent regulatory periods. VAT payable on CAPEX
inputs will not be capitalized but will be recovered from customers in full as the
expenditure is incurred. lt follows that asset valuations will continue to be
undertaken on a VAT exclusive basis.

lnput VAT related to CAPEX and OPEX presented under "Prepaid expenses and
other current assets" and "Deferred input VAT" account in the statements of financial
position amounted to P1.16 billion and P129.22 million respectively as at
December 31,2022.

With the implementation of the TRAIN Law under R.A No. 10963 which took effect
on January 1,2018, Section 86 thereof, under Clause (bbb) repealed Section 9, with
respect to VAT, of R.A. 9511 or the National Grid Corporation of the Philippines
Franchise Act, which changes the classiflcation of NGCP from Non-VAT to VAT
entity, all transactions affected therein are made subject to VAT. Hence, effective
January 1,2018, all lnputTaxes related to purchases of goods and services both for
CAPEX and OPEX shall be considered as lnput VAT, deductible from the company's
Output VAT Payable pursuant to the BIR rules and regulations.

-93-
P/S
The PIS provides the Regulated Entity an incentive to improve the quality of service
provided to customers. Under the PlS, key indicators of service performance are
monitored annually. Should the quality-of-service performance be above targets set
during the Reset, the Regulated Entity can earn an incentive of up to 3% of ARR or
the unsmoothed MAR. Conversely, should the quali$ of service fall below the
targets, a penalty of up to 3% of ARR can be applied.

ln the absence of a Final Determination for the 4th RP, which should provide, among
others the key indicators, performance targets and the ARR for years 2016 to 2020,
the PIS has not been considered in the current iMAR collected by the Company.

Rate Arrears - TransfenedAssefs

An issue that has arisen since the Draft Determination is the recovery of rate arrears
in respect of sub-transmission and connection assets that are to be transferred to the
RAB at the beginning of the Third Regulatory Period, The ERC has not enforced
payment of the associated sub-transmission and connection charges from a number
of electric cooperatives (ECs), as to have done so, would have been unduly onerous
on the ECs' customers. The ERC has decided that the Regulated Entity can recover
these arrears through the Final Determination.

ln the Final Determination, the total rate arrears from transferred assets carried
forward at Consumer Price Index (CPl) to 2011 and added to the 2011 unsmoothed
MAR amounted to P1.46 billion.

Force Majeure Events

ln the occurrence of Force Majeure Events (FME), transmission assets operated by
the Company may be damaged or destroyed. ln such cases, increase in costs
incurred by the Company in addition to the maximum amounts that it is otherwise
permitted to charge to its transmission customers through the MAR is allowed to be
recovered through FME Pass Through charges, subject to the approval of ERC in
accordance with Article X of the RTWR.

For capital expenditures (i.e., replacement with new assets), partial recovery through
additional FME charges will be billed on top of the regulated charges from the time of
its approval until the end of the current Regulatory Period. The remaining
unrecovered cost will then form part of the RAB assets to be carried forward to the
subsequent regulatory period and recovered through regulatory depreciation with
reasonable rate of return based on WACC. For operating expenditures
(e.9., repairs), recovery during the current regulatory period as additional OPEX, is
allowable.

The assets destroyed by such FMEs are removed from the RAB in the succeeding
regulatory reset, but recovery is allowable through application for "accelerated
depreciation".

Management does not consider the occurrences of FMEs as impairment indications

with respect to the future economic benefits.

The ERC in its decisions dated December 10, 2012 under ERC Gase Nos. 2010-1 12
RC, 2011-112 RC and 2010-065 RC, authorized the Company to collect the Ftt/
Event Pass-Through Amount Charge from its Luzon and Mindanao Grid customers,
and allowed FME the billing of the rates corresponding to these FME claim
applications until December 31 , 2015, which is the last year under the Third
Regulatory Period.

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For the year 2016 to December 31, 2022, the following FME Claims were submitted
to the Commission:

Year FME Claim Date Filed

Typhoon Amang in Visayas and Sabotage
lncidents in Mindanao (ERC Case No. 2016- January 12,2016
003RC)
Typhoon lneng in Luzon (ERC Case No. 2016-
August 22,2016
163RC)
2016 Typhoon Lando in Luzon and Sabotage
lncidents in Mindanao (ERC Case No. 2016- October 07 ,2016
179RC)
Typhoon Nona in Luzon and Sabotage
lncidents in Mindanao (ERC Case No. 2016- December 12,2016
196RC)
Typhoons Karen and Lawin in Luzon (ERC
October 12,2017
Case No. 2017-090RC)
2017
Typhoon Nina in Luzon (ERC Case No. 2017-
December 22,2017
116RC)
Earthquake in Visayas (ERC Case No. 2018-
July 05,2018
073RC)
Lightning and Sabotage lncidents in Luzon
and Bombing lncident in Mindanao (ERC Case October 02,2018
201 I No.201B-100RC)
Typhoon Urduja, Typhoon Vinta, Typhoon
Basyang and Flash Flood in tilindanao (ERC December 11,2018
Case No. 2018-117RC)
Flood due to Enhanced Southwest Monsoon
Rain caused by Tropical Depression Josie in July 19, 2019
Luzon (ERC Case No.2019-055RC)
2019 Typhoon Ompong in Luzon (ERC Case No.
September 13,2019
2019-071RC)
Typhoon Rosita in Luzon (ERC Case No.
October 29,2019
2019-085RC)
Earthquake lncidents in ftlindanao, Typhoon
2020 Tisoy in Luzon and Visayas, and Typhoon
October 30, 2020
Ursula in Visayas (ERC Case No. 2020-
03eRC)
Typhoon Quinta, Super Typhoon Rolly, and
2021 Tropical Storm Vicky and Landslide in October 20,2021
ltlindanao (ERC Case No. 2021-084RC)
2022 Tvphoon Odette in Visavas and lvlindanao December 21,2022

On September 28,2021, NGCP received a copy of ERC Decision dated June 16,
2021 relative to the FME Claim Application for Typhoon Agaton in Mindanao (ERC
Case No. 2015-005RC) resolving the instant application. On this, NGCP filed its
Motion for Reconsideration on October '13, 2021 and prayed that the Commission
reconsiders its June 16,2021 Decision and issues a new decision on the said case.

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Subsequently, NGCP received a copy of ERC Decision dated April '15,2021 relative
to the FME Claim Application for Typhoons Quiel and Sendong (ERC Case No.
2012-106RC) on November 2, 2021. Accordingly, NGCP filed its lVlotion for
Reconsideration on November 16, 2021 and prayed that the Commission
reconsiders its April 15,2021 Decision and issues a new decision.

On March 18,2022, NGCP received a copy of ERC Decision dated November 24,
2A21 relalive to the FME Claim Application for Sabotage lncidents and also for
Landslide due to Continuous Heavy Rains in Mindanao and Typhoons Santi and
Vinta in Luzon (ERC Case No.2014-127RC). On this, NGCP filed its lvlotion for
Partial Reconsideration dated April 1 ,2022.

On April 5,2022, NGCP received a copy of the ERC Decision dated November 24,
2021 relative to the FME Claim Application for Flooding in Mindanao, Typhoon
Bebeng, Landslide in Mindanao and Typhoon Juaning (ERC Case No.2012-070RC).
On this, NGCP filed its lt/otion for Reconsideration dated April 19,2022.

All other FME cases filed with the ERC in years 2016 to 2022 are still pending
approvalwith the ERC.

Excluded Services or Connection Charge and Residual Sub-transmrssion Charges

(cC/RSTC)
The Company is also engaged in the provision of other services and are earning
revenues for these services over and above the IVAR.

The Company's excluded services, as provided in the RTWR. Currently, this includes
the provision of Transmission Connection Services, and the management of
Residual Sub-transmission Assets. lncome from these excluded services is
recognized under Connection and Residual Sub-transmission lncome under
"Revenues" account presented in profit or loss.

The ERC, in its Decision dated July 6, 2011 (ERC Case Nos. 2008-066RC and
2009-153 RC), approved the CC/RSTC for the years 2008 and 2009 with
modification. Further, it required the filing of its application for the approval of the
2011 and 2012 CCIRSTC within 30 days from receipt of the Decision and within the
same period as the filing of the tt/lAR 2012, respectively.

ln compliance with the ERC's directive in the said Decision, the Company applied for
the approval of CY 2011 and 2012 CCIRSTC in December 2011. Also, the Company
commenced billing customers of the ERC-approved 2009 CC/RSTC starting
December 2011 billing month.

The ERC, in the same issuance, likewise directed the Company to bill the approved
re-computed charges for CY 2009 as its current charges to all customers effective
December 2011 billing month. These re-computed charges considered the asset
reclassification made in the Third Regulatory Period Final Determination which
brought changes in the charges resulting to over or under billings. On this, ERC
directed for the refund/collection of the accounted over or under recovery of the
CC/RSTC. The Company, in December 2011 filed a lVlotion for Reconsideration
(tt/R) which challenged the interest imposition. To date the ERC is yet to be resolved
the tt/lR.

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Moreover, this ERC Decision effectively repealed the Deferment Orders issued in
year 2008 covering the following nine (9) power customers, namely: lfugao Electric
Cooperative, lnc. (IFELCO), Eastern Samar Electric Cooperative, lnc. (ESAMELCO),
Northern Samar Electric Cooperative, lnc. (NORSAMELCO), Leyte lV Electric
Cooperative, lnc. (LEYECO lV), Davao Oriental Electric Cooperative, lnc.
(DORECO), Surigao del Sur ll Electric Cooperative, lnc. (SURSECO ll), Mountain
Province Electric Cooperative, lnc. (MOPRECO), Negros I Electric Cooperative, lnc.
(NORECO l), Busco Sugar lVlilling Co., lnc. (BUSCO).

Consistent with the foregoing, the accounts of the nine (9) power customers were
adjusted to consider the implementation of the approved CYs 2008 and 2009
CC/RSTC and the reclassification of assets.

Subsequent to this, the Company in a letter dated October 16,2013, requested for
the deferment of the filing of the 2014 CCiRSTC Application to prioritize the
re-computation of the CYs 2011,2012 and 2013 CCiRSTC using the 2004 Sinclair
Knight Merz (SKM) Valuation Report as directed by the Commission during the
regulatory hearings on the said cases. ln compliance, the Company submitted the
2011, 2012 and 2013 Re-computed CCiRSTC on September 4, 2014.

On October 8, 2014, the Company also requested the deferment of the filing of its
2015 CC/RSTC Application to allow it considerable time to submit a robust
application given that it has just commenced with the preparations and the validation
process for the determination of the 2014 as well as 2015 CC/RSTC.

On June 8, 2015, the Company received a copy of the ERC Order dated June 2,
2015 directing the Company to submit the refundicollect scheme and over/under
recovery on the CC/RSTC for CYs 2008, 2009 and 2010. ln compliance with the
foregoing, the Company submitted the CC/RSTC Over/Under-recoveries relative to
the implementation of the Refund/Collect Scheme on the 200E and 2009 CC/RSTC,
and the resolution of NGCP's Application for the Approval of the 2010 CC/RSTC on
July 13, 2015.

On October 6, 2017, the Gompany filed with the ERC its 2014 and 2015 CC/RSTC
Application docketed as ERC Case No. 2017-100 RC.

Pending the resolution of the 2010 to 2015 CC/RSTC cases filed with the ERC, the
Company continues to implement the 2009 CC/RSTC level approved by the ERC in
its July 6, 2011 Decision with adjustments due to sale of sub-transmission assets
and reclassification of assets, as applicable.

Su b-tra n s mission Assefs (S fAs)

Pursuant to the EPIRA and Rule 6 of its lRR, the ERC adopted and mandated the
segregation of transmission and sub-transmission functions and assets for
transparency and disposal, and authorized TRANSCO to negotiate and transfer such
sub-transmission assets and facilities to qualified DUs based on technical and
functional criteria established in Article lll of the Guidelines to the Sale and Transfer
of the TRANSCO's Sub-transmission Assets and the Franchising of Qualified
Consortiums (Guidelines).

-97 -
ERC Resolution 15, Series of 2411, A Resolution Adopting the Amended Rulesfor
the Approval of the Sale and Transfer of IRANSCO's Sub-fransmisslon Assefs and
the Acquisition by Qualified Consortiums provides some payment option to ECs on
the settlement of the sub-transmission cost of service provision brought by regulatory
lag of one year (deferred CC/RSTC); capitalization of the CC/RSTC and inclusion of
the same in the acquisition cost of the assets.

Valuation of STAs
Article V Section 2 of the Guidelines states "Asset valuation shall be the agreed
value as negotiated between TRANSCO and the Qualified Distribution Utility or
Qualified Consorlium in a manner consistent with Section 8 of the Act. This
negotiated value shall be deemed to be the Current Sound Value of the Sub-
transmission Assets at the time of the acquisition of the assets."

Article V Section 2 of ERC Resolution No. 1, Series of 2009 states that "if the
contract was entered after June 13, 2006, the sub-transmission assets shall be
valued in reference to the Sinclair Knight tt/lerz (SKII/) vatuation or any subsequent
valuation as approved by the Commission." This was further amended by ERC
Resolution No. 18 Series of 2009.

Neqative Pledqe
Pursuant to Section 5.03 (Negative Pledge) of the Concession Agreement,
TRANSCO shall not without the Concessionaire's prior written consent, sell, dispose
of, or create any lien or encumbrance over Transmission Assets except that
TRANSCO shall be entitled to dispose of Sub-Transmission Assets in accordance
with Section 8 of the EPIRA and retain the proceeds thereof. The Concession Fee
shall be reduced in accordance with paragraph 1 (c) of Schedule 6 (Adjustment to
Concession Fee) to reflect any disposals of STAs after the Bid Date, subject to
Section 6.04 regarding the Commencement Fee.

-98-
Sale of STAs
For the year 2016 to December 31, 2022, lhe following sub-transmissions assets
were divested by TRANSCO to Qualified Distribution Utilities:

Acquiring
Year Distribution Utility Assets Acquired
Putik Lateral 69 kV line
Zamboanga City
Recodo Lateral 69 69 kV line
2016 Electric Cooperative,
Pitogo-Tulungatung 69 kV line
lnc. (ZAIMCELCO)
Pitooo-San Jose Gusu 69 kV line
Currimao - San Nicolas 69kV
llocos Norte Electric San Nicolas - Laoag 69kV
Cooperative, lnc. Laoag - Sarrat 69kV
(rNEC) Sarrat - Marcos 69kV
Sarrat - Piddig 69kV
Central Pangasinan Mangaldan Bari S/S Site Establishment
Electric Cooperative, Transformer, two winding, 5 NIVA 69/13.8 kV
lnc. (CENPELCO) Structures and Improvements
lsabela I Electric Cauayan substation (all eqpt. and facilities incl. 15
Cooperative, lnc. MVA transformer)
2017 (ISELCO I)
Mactan Loadend S/S-GlS 69kV
TIVX/STR #20\\AEPZ loadend S/S 69kV
l/actan Loadend S/S #3 69kV
MECO S/S 31 MECO S/S #3 69KV
Mactan Electric
GIS-IMECO S/S #2 69KV
Company (MECO)
GIS 69KV
Nlactan Loadend S/S-tt/ulle Osmena 69kV
Mactan-PAF 13.BkV
lt/andaue-lt/actan Power Cable 69kV
2018 Cotabato Electric Tacurong-Kidapawan 69kV
Cooperative Kidapawan-lVlto. Apo 69kV
(corELCo) Kidapawan-Matalam 69kV
Agus 6-Swyd-NSC L2 69kV Line
Kiwalan-lCC 69kV Line
lligan Light and
Overton-lLPl'1 3.BkV Line
Power Co. (ILPI)
Kiwalan-PFC 69kV Line
Agus 6-Swyd-NSC L1
2019 La Union Electric Bauang-Poro 69kV line
Company, lnc.
(LUECO)

-99-
 Acquiring
Year Distribution Utility Assets Acquired
2020 tvlanila Electric Batch 2
Company Makban-Los Banos 69kV line
(MERALCO) Makban-Calamba 69kV line Portion
Calamba-CSE 13.8kV line
Los Banos-lRRI/ERDB/PPRDI 1 3.8kV
Calamba S/S Eqpt., 10 tvlvA transformer
Los Banos S/S Eqpt., 2x10MVA transformer
Makban S/S termination Eqpt.

Batch 4
Tayabas 11skv Switchyard incl. 100 MVA
Transformer
Transformer (T1) - two winding 1OOIMVA
1 - 1 1skv Power Circuit Breaker
6 - 1 'lskv Current Transformer
4 - 1 15kV Voltage Transformer
Site Establishment - Type 3-115
1 - Switch Bay 115kV with 1 CB Feeder
1 - Switch Bay 115kV with 1 CB Feeder
Protection
Ternate S/S Equipment, incl. 50MVA Transformer
Transformer (T3) - two winding 50MVA
3 - 1 1skv Power Circuit Breaker
2 - 34.5kV Power Circuit Breaker
3 - 34.skv PotentialTransformer
Ancillaries - 1 1skv
Site Establishment - Type 3-1 15
Site Establishment - Type 2-69
1 - Switchbay 1 15kV 1 & 112 bay with 3 CB
1 - Switchbay 1 15kV 1 & 112 bay with 3 CB
Protection
2 - Switchbay 34.5kV with 1 CB Feeder
2 - Switchbay 34.5kV with 1 CB Feeder
Protection

Revenue from Related Busrness

The Company provides the following services that utilize part of the RAB:

. Rental of facilities and equipment; and

. Co-location, antenna attachments, use of building lots and space, use of access
roads, attachment of telephone cables, and tapping to AC/DC power sources.

The Company also earns revenue from provision of the following services that do not
involve the use of RAB assets like technical assistance, including assisting with the
testing, commissioning, calibration, and maintenance of client's facilities.

Section 1 of RA 9511 provides that NGCP may engage in any related business
which maximizes utilization of assets provided that a portion of the net income
derived from such undertaking utilizing assets which form part of the rate base shall
be used to reduce transmission wheeling rates as determined by the ERC. Such
portion of net income used to reduce the transmission wheeling rates shall not
exceed 50% of the net income derived from such undertaking.

- 100 -
Ancillary Seruice Charges
The Company includes in its monthly billings to customers pass through charges for
provision of Ancillary Services (AS) which are generation-related services.

Relative to this, the Company has undertaken the reconciliation of its billing and
payment of AS and AS VAT for years 2009 to 2018.

The Company has also submitted its compliances with ERC on the Ancillary
Services Procurement Agreements (ASPA) with National Power Corporation (NPC)
and Therma Marine, lnc. (TMl) involving re-computation of AS costs and
collection/refund of AS charges from/to customers pursuant to pertinent ERC
Orders/Decisions,

ERC in its Orderdated June 16,2014in ERC Case Nos.2010-011 RC and 2010-
014 RC entitled, "ln the Matter of the Application for Approval of the Ancillary
Services Procurement Agreement (ASPA) between the National Grid Corporation of
the Philippines (NGCP) and Therma Marine, lnc. (TMl), with Prayer for Provisional
Authority," directed the Company to refund its customers the amount of P12.7 million
and the corresponding VAT, for a period of twelve (12) months or the amount of
P1.06 million plus VAT, per month starting its next billing cycle from receipt of the
Order.

Consistent with the aforesaid Order, the Company implemented the refund effective
September 2014 billing month or August 26 to September 25, 2014lor a period of
twelve (12) months or until August 2015 billing month (July 26 to August 25,2015),
equivalent to a monthly credit adjustment of P1.26 million refund of the AS Cost was
funded by TMI deposited monthly to the Company's accounts. TMI shall also fund
the AS-VAT refund after its conduct of reconciliation with the Company.

On March 15, 2016, ERC issued an Order approving the recovery of the Differential
Charge for the Ancillary Service provided by NPC to NGCP representing the
March 26, 2008 to October 25,2009 billing period under ERC Case No. 2009-029
RC. Pursuant to this, the Company commenced the billing of Ancillary Service
Differential Charge of P31.38/kW-month for the Luzon, Visayas, and Mindanao grids
effective May 2016 billing month or April 26 to May 25, 2016 to customers who
benefitted from the Ancillary Services provision from April 2008 to October 2009
billing months. As at October 2016 billing month, NGCP has fully billed and stopped
the billing of AS Differential Charge in Luzon.

ln a letter from the ERC dated July 22,2021 , NGCP was directed to comply with the
Decision on ERC Case No. 2006-049RC entitled, "ln the Matter of the Application of
Ancillary Seryices - Cosf Recovery Mechanism (AS-CRM) of the Ancillary Servrces
Procurement Plan, with Prayer for Provisional Authoity". Thus, in September 2021
Billing Period, NGCP implemented the full recovery of AS costs from the Load
Customers and the cessation of the AS Charges in the power bills being issued to
Embedded Generators (EGs).

lmpact of Typhoon Odette

With the onslaught of Typhoon Odette, various transmission lines in Visayas and
Mindanao were affected.

On December 22, 2021, ERC directed the NGCP and the DUs in Visayas and
Mindanao that were affected by the Typhoon Odette to prioritize and speed up their
power restoration efforts while giving some consideration to their electricity
consumers by providing some leniency in their electric bill payment.

-101 -
A number of Visayas and Mindanao transmission customers have requested for
payment extension/arrangement on their power bills, namely:

1. Antique Electric Cooperative, lnc (ANTECO)

2. Balamban Enezone (BEZ)
3. Bohol Light Company, lnc.
4. Carmen Copper Corp. (CCC)
5. Cebu I Electric Cooperative, lnc. (CEBECO I)
6. Mactan Enezone (MEZ)
7. Maguindanao Electric Cooperative, lnc. (MAGELCO)
8. MORE Electric and Power Corp. (MORE Power)
9. Negros Oriental I Electric Cooperative, lnc. (NORECO l)
10. Negros Oriental ll Electric Cooperative, lnc. (NORECO ll)
1 1. Northern Negros Electric Cooperative, lnc. (NONECO)
12. Northern Samar Electric Cooperative, lnc. (NORSAMELCO)
13. Surigao del Norte Electric Cooperative, lnc. (SURNECO)
14. Visayan Electric Company (VECO)

-102-
 R.G. Manabat & Co
The KPMG Center, 6/F
6787 Ayala Avenue, Makati City
Philippines 1209
Telephone +63 (2) 8885 7000
Fax +63 (2) 8894 1985
lnternet www.home.kpmg/ph
Email [email protected]

REPORT OF INDEPENDENT AUDITORS

TO ACCOMPANY SUPPLEMENTARY INFORMATION FOR FILING
WITH THE SECURITIES AND EXCHANGE COMMISSION

The Board of Directors and Stockholders

Synergy Grid & Development Phils., lnc.
Unit 1602, 16th floor
Tycoon Center Bldg. Condominium
Pearl Drive Pasig City, Metro Manila

We have audited, in accordance with Philippine Standards on Auditing, the consolidated

financial statements of Synergy Grid & Development Phils., lnc. and Subsidiaries
(the "Group") as at December 31, 2022 and 2021 and each of the three years in the
period ended December 31 ,2022, on which we have rendered report our thereon dated
April 14, 2023.

Our audit was made for the purpose of forming an opinion on the consolidated financial
statements of the Group taken as a whole. The supplementary information included in
the following accompanying additional components is the responsibility of the Group's
management. Such additional components include:

. Reconciliation of Retained Earnings Available for Dividend Declaration

. Supplementary Schedules of Annex 68-J
. Map of conglomerate

Firm Regulatory Registration & Accreditation.

PRC-BOA Registration N0, 0003, valid untii November 21. 2423
SEC Accreditation No. 0003-SEC, Group A. valid for flve (5) years covering the audit 0f 2020 to 2024
financial statements (201 I financial statements are covered by SEC Accreditation No. 0004-FR-5)
f C Accreditation No. 0003-lC, Group A. valid for five (5) years covering the audit of 20201o 2024

financial statemenls (2019 financial statements are covered by lC Circular Letter (CL) N0. 2019-39, Transition clause)
BSP Accreditation No, 0003-BSP, Group A, valid for flve (5) years covering tne audit d 2AZA b 2424
financial statements (2019 financial statements are covered by BSP f\,4onetary Board Resolution No. 210.1, Transition clause)

R.G Mrnabat&Co.,aphiiippinepadnershipandanenberfimoftheKPlrGslobalorsanizaiionofindependentmenberfirms
affiiiated wjth KPIVIG lnternational Limited, a privaie English company limited by guarantee
WME

This supplementary information is presented for purposes of complying with the Revised
Securities Regulation Code Rule 68, and is not a required part of the basic consolidated
financial statements. Such supplementary information has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial statements
and, in our opinion, is fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.

R.G. MANABAT & GO.

G. YU
rtner
CPA License No. 108798
SEC Accreditation No. 1815-A, Group A, valid until August20,2023
Tax ldentification No. 225-454-652
Bl R Accreditation No. 08-001 987 -035-2021
lssued June 29, 2021; valid until June 28,2024
PTR No. MKT 9563856
lssued January 3,2023 at Makati City

Aprrl14,2023
Makati City, Metro Manila
 R.G. Manabat & Co
The KPMG Center, 6/F
6787 Ayala Avenue, Makati City
Philippines 1209
Telephone +63 (2) 8885 7000
Fax +63 (2) 8894 1985
lnternet www.home.kpmg/ph
Email [email protected]

REPORT ON INDEPENDENT AUDITOR'S

COMPONENTS OF FINANCIAL SOUNDNESS INDICATORS

The Board of Directors and Stockholders

Synergy Grid & Development Phils., !nc.
Unit 1602, 16th ftoor
Tycoon Center Bldg. Condominium
Pearl Drive Pasig City, Metro Manila

We have audited in accordance with Philippine Standards on Auditing, the consolidated

financial statements of Synergy Grid & Development Phils., lnc. and Subsidiaries
(the "Group(the "Group") as at December 31,2022 and 2021 and each of the three
years in the period ended December 31,2022, on which we have rendered report our
thereon dated April 14, 2023.

Firm Regulatory Regiskation & Accreditation:

PRC-BOA Registration No. 0003, valid until November 21 ,2023
SEC Accreditation No. 0003-SEC, Group A, valid for five (5) years covering the audit of 2020 to 2024
financial statements (201 I financial statements are covered by SEC Accreditation No. 0004-FR-5)
lC Accreditation N0. 0003-lC. Group A, valid for five (5) years covering the audit of 2020 to 2024
financial statements (201 I financial statements are covered by lC Circular Letter (CL) No 201 s-3s. Transition clause)
BSP Accreditation No. 0003-BSP, Group A, valid for five (5) years covering the audit of 20201o 2024
financial statements (2019financial statements are covered by BSP l\llonetary Board Resolution No. 2161, Transition clause)

R.G. N4anabat & Co., a Philippine partnership and a member iim of the KPtu1G global organization of independenl member iirms
affiliated with KPMG lnternational Llnrited a p.ivale Engllsh company limited by guarantee
WE
Our audits were made for the purpose of forming an opinion on the basic consolidated
financial statements of the Company taken as a whole. The Supplementary Schedule on
Financial Soundness lndicators, including their definitions, formulas, calculation, and
their appropriateness or usefulness to the intended users, are the responsibility of the
Company's management. These financial soundness indicators are not measures of
operating performance defined by Philippine Financial Reporting Standards (PFRS) and
may not be comparable to similarly titled measures presented by other companies. This
schedule is presented for the purpose of complying with the Revised Securities
Regulation Code Rule 68 issued by the Securities and Exchange Commission and is not
a required part of the basic consolidated financial statements prepared in accordance
with PFRS. The components of these financial soundness indicators have been traced
to the Group's consolidated financial statements as at December 31 ,2022 and 2021 and
each of the three years in the period ended December 31,2022, and no material
exceptions were noted.

R.G. MANABAT & CO.

ILO G. YU
Partner
CPA License No. 108798
SEC Accreditation No. 1815-A, Group A, valid until August20,2023
Tax ldentification No. 225-454-652
Bl R Accreditation No. 08-001 987 -035-2021
lssued June 29, 2021; valid until June 28,2024
PTR No. MKT 9563856
lssued January 3,2023 at Makati City

Apnl 14,2023
Makati City, Metro Manila
 RECONCTLATTON OF RETATNED EARNTNGS (DEF|CtT)
AVAILABLE FOR DIVIDEND DECLARATION
AS OF DECEMBER 31 ,2022
SYNER.GY GRID & DEVELOPMENT PHILS., INC.
Unit 1602, 16th FloorTycoon Center Bldg. Condominium, Pearl Drive Pasig
City, Metro Manila

U nappropriated Retained Earn inqs (Defic it), January 1,2021 P376,451,954.

Net income based on the face of AFS 5,3f 2,635,440
Less: Non-actual/unrealized income net of tax
Equity in net income of associate/ joint venture
Unrealized foreign exchange gain - net (except those attributable to
Cash and Cash Equivalents)
Fair value adjustments (tt42M gains)
Fair value adjustment of Investment Property resulting to gain
adjustment due to deviation from PFRS/GAAP-gain
Other unrealized gains or adjustments to the retained earnings as a
result of certain transactions accounted for under the PFRS
Deferred income tax benefitfor the year
Add: Non-actual losses
Depreciation on revaluation increment (after tax)
Adjustment due to deviation from PFRSiGAAP - loss
Loss on fair value adjustment of investment property (after tax)
Net lncome Actual/Realized 5,3'!2,635,440
Add (Less):
Dividend declaration during the year (5,265,866,000)
Appropriation of retained earnings during the year
Reversal of appropriations
Effects of prior period adjustments
Treasury shares
Subtotal (5,265,866,000)
Unappropriated Retained Earnings (Deficit), December 31, 2022 P423,221,394
SYNERGY GRID & DEVELOPMENT PHILS,,lllc, andSUESIDIARIES
SCHEDULE A. FINAI{CIAL.Ii ASSETS

Name of lssuing entity and association of each Number of shares or principal Amount shown in the Valued based on market quotation at
lncome received and accrued
issue (i) amount of bonds and notes balance sheet (ii) balance sheet date (iii)

NOT APPLICABLE
SYNERGYGRID & DEVELOPME{T PHlLS.,lNC. and SUBSIDIARIES
SCHEDULE B. AMOUNTS RECEIVABLE FROiII DIRECTORS, OFFICERS, EMPLOYEES, RETATED PARTIES AND PRINCIPAL STOCI<HOLDERS (OTHER THAN AFFILIATE€).

Balance at beginning of Balance at end of

Account Name Additions Amounts collected (ii) Amounts written off (iii) Current Not Current
period Period

Calamity Loan Fund P273,077 P2,644,162 (P2,773,645) P P143,594 P P143,594

Due From Officers & 15,483,570 49,'147,002 (49,698,608) 14,931 ,964 14,93
1 ,964

Ernployees
Advances to Officers & 73,650,228 698,720,429 (730,082,100) 42,288,557 42,288,557
Ernployees
Total P89,406,875 P750,51 1,593 P (782,554,353) P P57,364,115 P P57,364,115
SYNERGY GRID & DEVELOPMENT PHILS., INC. end SUBSIDIARIES
SCHEDULE C. AMOUNTS REGEIVABLE FRoil RELATED PARIES WHICH ARE EUillilATED DURING THE COiISOLIDATION OF SEPARATE FINANCIAL STATEMEmS

Name and Balance at end of

Balance at beginning
Designation of Additions Amounts collected (i) Amounts written off (ii) Current Not Current
period
of period
debtor

NOT
SYNERGY GRID A DEVELOPiIENT PHILS., ITC. and SUBSIDIARIES
SCHEDULE D. IIITANGIBLE ASSETS - OTHER'ASSETS

Other changes
Charged to cost and Charged to other additions
Description (i) Beginning balance Additions at cost (ii) Ending balance
expenses accounts
(deductions) (iii)

Intanqible Assets P299,463,741,409 P40,929,267,070 (P8.967.361 .234) P P. P331.425,647.245

 SYNERGY GRID & DEVELOPMENT PHlLS., lNC. and
SUBSID!ARIES
SCHEDULE E. LONG TERM DEBT

Amount shown under Amount shown under

Title of lssue and
caption "Current portion caption "Long-Term Number of Periodic
type of obligation Lender Outstanding Balance lnterest Rates
of long{erm debt" in Debt" in related balance lnstallments
(i)
related balance sheet fii) sheet (iii)
Long Term Debt Land Bank of the Philippines, P8,850,000,000.00 P8,850,000,000.00 P Tranche A - 10 years; Semi-annual
Metropolitan Bank and Trust Co., 6-8107o/o
Phllippine National Bank, Security Bank Tranche B -
Corporation s.9333%
Long Terrn Debt Asia United Bank, Maybank Philippines 7,350,000,000.00 1 ,050,000,000.00 6,300,000,000.00 6.44o0o/o 10 years; Semi-annual
lnc. , Philippine National Bank, Security
Bank Corporation
Long Term Debt Land Bank of the Philippines, Maybank 7,500,000,000.00 1 ,500,000,000.00 6,000,000,000.00 5.O282o/o 10 years; Semi-annual
Philippines Inc. , Philippine National Bank
, Union Bankof the Philippines
Long Term Debt BDO Unibank, lnc., Land Bank of the 1 0,200,000,000.00 1 ,700,000,000.00 8,500,000,000.00 5.0657o/o 10 years; Semi-annual
Philippines, Philippine National Bank ,

Security Bank Corporation, Union Bank of

the Philipoines
Lonq Term Debt BANK OF CHINA LIMITED 2,500,000,000.00 2,500,000,000.00 4.8750o/o 5 years ; Semi-Annual
Lonq Term Debt BANK OF CHINA LIMITED 2,500,000,000.00 2,500,000,000.00 4.0000% 5 years . Semi-Annual
Lonq Term Debt BDO UNIBANK, INC. 7,000,000.000.00 '1
,000,000.000.00 6.000.000,000.00 5.6889% 10 vears ; Semi-Annual
Lonq Term Debt BDO UNIBANK,INC. 8.750.000.000.00 750,000,000.00 8.000.000,000.00 5.O152o/o 10 vears : Semi-Annual
Lonq Term Debt BDO UNIBANK,INC. 4.375.000.000.00 375,000,000.00 4.000.000.000.00 5.O152o/o 't0 vears:Semi-Annual
Lonq Term Debt BDO UNIBANK,INC. 3.900.000.000.00 80,000,000.00 3.820.000.000.00 3.1538o/o 10 years ; Semi-Annual
Lonq Term Debt BDO UNIBANK. INC. 5.850.000.000.00 120.000.000.00 5.730.000.000.00 3.1538o/o 10 years ; Semi-Annual
Lonq Term Debt BDO UNIBANK, INC. 4.950.000.000.00 50.000.000.00 4.900.000.000.00 4"O4O4o/o 10 years ; Semi-Annual
Lono Term Debt BDO UNIBANK. INC. 5.940.000.000.00 60,000,000.00 5,880,000,000.00 4.O4O4o/o 10 years : Semi-Annual
Lonq Term Debt BDO UNIBANK, INC. 3,960,000,000.00 40,000,000.00 3,920,000,000.00 4.7815o/o 10 years : Semi-Annual
Lonq Term Debt BDO UNIBANK,INC. 5,841 ,000,000.00 59,000,000.00 5,782,000,000.00 5.O514o/o 10 vears ; Semi-Annual
Lonq Term Debt BANK OF COMMERCE 3,040,000,000.00 380,000,000.00 2,660,000,000.00 5.4242o/o 10 vears:Semi-Annual
Lonq Term Debt BANK OF COMMERCE 3,200,000.000.00 32,000,000.00 3,168,000,000.00 6.8404o/o 10 vears : Semi-Annual
Lonq Term Debt BANK OF THE PHILIPPINE ISLANDS 4,000.000.000.00 500,000,000.00 3.500,000,000.00 6.62420/o 10 vears : Semi-Annual
Lonq Term Debt CHINA BANKING CORPORATION 5,600.000.000.00 700,000.000.00 4.900.000.000.00 4.7980o/o 10 years ; Semi-Annual
Lonq Term Debt CHINA BANKING CORPORATION 4.250.000.000.00 500,000,000.00 3.750,000.000.00 5.67O7o/o 10 years ; Semi-Annual
Lonq Term Debt CHINA BANKING CORPORATION 2,940,000.000.00 30,000.000.00 2.910.000.000.00 4.2929% 10 years ; Semi-Annual
Forward
SYNERGY GRID & DEVELOPMENT PHlLS., INC. and
SUBSIDIARIES
SCHEDULE E. LONG TERM DEBT

Amount shown under Amount shown under

Title of lssue and
caption "Current portion caption "Long-Term Number of Periodic
type of obligation Lender Outstanding Balance lnterest Rates
of longterm debt" in Debt" in related balance lnstallments
0 related balance sheet (ii) sheet (iii)
Lonq Term Debt CHINA BANKING CORPORATION P2,940,000.000.00 P30,000,000.00 P2.9'1 0,000.000.00 4.2929% 10 vears : Semi-Annual
Lonq Term Debt CHINA BANKING CORPORATION 1.400.000.000.00 14,000,000.00 1 .386.000.000.00 6.8281% 10 vears : Semi-Annual
Lonq Term Debt CHINA BANKING CORPORATION 1 .300.000.000.00 13.000.000.00 1 .287.000.000.00 7.2172% 10 vears : Semi-Annual
Lonq Term Debt LAND BANK OF THE PHILIPPINES 3.750.000.000.00 500.000.000.00 3.250.000.000.00 6.2102% '10years ; Semi-Annual
Lonq Term Debt LAND BANK OF THE PHILIPPINES 2.450.000.000.00 210,000.000.00 2.240.000.000.00 5.2273% '10years ; Semi-Annual
Long Term Debt LAND BANK OF THE PHILIPPINES 3.780.000.000.00 210.000.000.00 3.570.000.000.00 4.8424% 10 years ; Semi-Annual
Lonq Term Debt LAND BANK OF THE PHILIPPINES 5,000,000,000.00 75,000,000.00 4,925,000,000.00 6.1294% 10 years : Semi-Annual
Lonq Term Debt IAND BANK OF THE PHILIPPINES 5,000,000,000.00 75,000,000.00 4,925,000,000.00 6.1294% 10 years ; Semi-Annual
Long Term Debt MIZUHO BANK, LTD. - MANILA 270,000,000.00 270,000,000.00 6.8400% 5 years ; Quarterly
BRANCH
Long Term Debt MIZUHO BANK, LTD. - MANILA 1 ,000,000,000.00 1 ,000,000,000.00 4.0530% 5 years ; Semi-Annual
BRANCH
Long Term Debt MIZUHO BANK, LTD. - MANILA 4,700,000,000.00 522,170,000.00 4,177,830,000.00 7.3000% 5 years ; Quarterly
BRANCH
Lonq Terrn Debt MUFG BANK, LTD 400,000,000.00 400,000,000.00 7.0800% 5 vears ; Semi-Annual
Lonq Term Debt MUFG BANK. LTD 1 ,000,000.000.00 1.000,000,000.00 5.3200% 5 vears : Semi-Annual
Lonq Term Debt PHILIPPINE NATIONAL BANK 3,500.000.000.00 500,000,000-00 3.000.000.000.00 5.5253% 10 vears : Semi-Annual
Lonq Term Debt PHILIPPINE NATIONAL BANK 4.250.000.000.00 500.000,000.00 3.750.000.000.00 5.9222% 10 years ; Semi-Annual
Lonq Term Debt PHILIPPINE NATIONAL BANK 3.500.000.000.00 1 .000.000.000.00 2.500.000.000.00 4.86840/0 5 years ; Semi-Annual
Lonq Term Debt SECURITY BANK CORPORATION 1 ,700.000.000.00 200,000,000.00 1 .500.000.000.00 5.9222% 10 years ; Semi-Annual
Lonq Terrn Debt SECURITY BANK CORPORATION 3.940.000.000.00 40.000.000.00 3.900.000.000.00 4.9859% 10 years ; Semi-Annual
Long Term Debt SECURITY BANK CORPORATION 5.000.000.000.00 75.000.000.00 4.925.000.000.00 5.7O4Oo/o 10 years : Semi-Annual
SUMITOMO MITSUI BANKING
Lonq Term Debt CORPORATION - MANILA BRANCH 600,000.000.00 400,000,000.00 200,000,000.00 6.9368% 5 years ; Semi-Annual
TOTALS Pl 67,976,000,000.00 P22,810,170,000.00 P145,165,830,000.00
SYNERGYGRID & DEVELOPMENT PHlLS., lNC. and SUBSIDIARIES
SCHEDULE F, INDEBTEDNESS TO RELATED PARTIES (LONG TERII LOANS FROI RELATED PARTIES)

Name of Related Parties (i) Balance at beginning of period Balance at end of period (ii)

NOT APPLICABLE
SYNERGY GRID & DEVELOPMENT PHILS.,lNC. and SUBSIDIARIES
SCHEDULE G. GUARANTEES OF SECURITIES OF OTHER ISSUERS

Narne of issuing entity of securities guaranteed Title of issue of each class of Total amount guaranteed and Amount owned by person for
Nature of guarantee (ii)
by the cornpany for which this statement is filed I
securities guaranteed outstanding (i) which statement is filed

NOT APPLICABLE
SYNERGY GRID & DEVELOPMENT PHlLS.,lNG. and SUBSIDIARIES
SCHEDULE H. CAPITAL STOCK

Number of shares
Number of shares issued and
Number of Shares reserved for options, Number of shares held Directors, officers
Title of lssue (2) outstanding at shown under Others
authorized warrants, conversion by affiliates (3) and employees
related balance sheet caption
and other rights

Common Shares 5,300,000,000 5,265,866,000 4,100,400,023 1,165,465,977

 C O V E R S H E E T
for
AUDITED FINANCIAL STATEMENTS
SEC Registration Number

C S 1 9 7 0 4 1 3 7 6

COMPANY NAME

S Y N E R G Y G R I D & D E V E L O P M E N T

P H I L S . , I N C .

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province)

U n i t 1 6 0 2 , 1 6 t h F l o o r , T y c o o n

C e n t e r B l d g . C o n d o m i n i u m

P e a r l D r i v e , P a s i g C i t y

M e t r o M a n i l a
Form Type Department requiring the report Secondary License Type, If Applicable

A A F S

COMPANY INFORMATION
Company's email Address Company's Telephone Number/s Mobile Number

[email protected] 8584-39-30

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

December 31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation

Name of Contact Person Email Address Telephone Number/s Mobile Number

Ma. Theresita Yulo [email protected] 8584-3930

CONTACT PERSON's ADDRESS

Note 1: In case of death,resignation or cessation of office ofthe officer designated ascontact person,such incident shall be reported to the Commission
within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated.
2: All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records with the
Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from liability
for its deficiencies.
SYNERGY GRID &
DEVELOPIVENT PHILS., INC.
SEPARATE FINANCIAL STATEMENTS
December 31,2022 and 2021

With lndependent Auditors' Report

 R.G. Manabat & Co
The KPMG Center, 6/F
6787 AyalaAvenue, Makati City
Philippines 1209
Telephone +63 (2) 8885 7000
Fax +63 (2) 8894 1985
Internet unanar.home.kpmg/ph
Email [email protected]

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders

Synergy Grid & Development Phils., lnc.
Unit 1602, 16th Floor
Tycoon Center Bldg. Condominium
Pearl Drive Pasig City, Metro Manila

Report on the Audit of the Financial Statements

Opinion APR t ct ?$?3

We have audited the separate financial statements of n

Phils., lnc. (the "Company"), which comprise the sepa m of financial
position as at December 31 ,2022 and 2021, and the separate statements of income,
separate statements of comprehensive income, separate statements of changes in
equity and separate statements of cash flows for the years then ended, and notes,
comprising significant accounting policies and other explanatory information.

ln our opinion, the accompanying separate financial statements present fairly, in all
material respects, the unconsolidated financial position of the Company as at
December 31 ,2022 and 2021, and its unconsolidated financial performance and its
unconsolidated cash flows for the years then ended in accordance with Philippine
Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs).

Our responsibilities under those standards arre fufther described in the Auditors'
Responsibilities for the Audit of the Financial Sfafemenfs section of our report. We are
independent of the Company in accordance with the Code of Ethics for Professional
Accountants in the Philippines (Code of Ethics) together with the ethical requirements
that are relevant to our audits of the financial statements in the Philippines, and we have
fulfilled our other ethical responsibilities in acoordance with these requirements and the
Code of Ethics. We believe that the audit eviclence we have obtained is sufficient and
appropriate to provide a basis for our opinion

Firm Regulatory Registraticn & Accreditation:

PRC-BOA Registration No. 0003, valid until November 21 ,2023
SfCAccrsdltationNo.0003-SEC,GroupA validforfive(5) yearscoverirgtheaudilof 20?A1(l-2024
financial statements (2C1 I financial statements are covered by SEC Accreciitaljon No. 0004-FR-5)
IC Accreditation No. 0003-lC, Group A, valid for flve (5) years covering the audii at 2020 to 2A24
financial statements (2019 financial statements are covered by lC Circular Letter (CL) No 2C19-39, Transition clause)
BSP Accreditalion No. 0003-85P, Group A. valid for five (5) years coveflng the audl1 ar 2a2o to 2424
financial statements(20l9financial statementsarecoveredbyBSPMonelaryBoardResolutionNo 2lal,Transitionclause)

R G. lJanabat g Co a Phiirppi,ro parineiship aii a member rim of the KPL1G gicbal c.eaiiz.i1.. cf lndofiendoni nember irrms
aifiiiaied vrlih KPLIG lnieilrational Llmrted a prl!eie Enelish cornpani limried by grarentee
WE
Responsrbilities of Management and Those Charged with Governance for the Financial
Statements

I\Ianagement is responsible for the preparation and fair presentation of the financial
statements in accordance with PFRSs, and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.

ln preparing the financial statements, management is responsible for assessing the

Company's ability to continue as a going Goncern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease operations, or has no
realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial
reporting process.

Auditors'Responsibilities for the Audit of the FinancialSfafemenfs

Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud or
error, and to issue an auditors' report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with PSAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with PSAs, we exercise professionaljudgment and

maintain professional skepticism throughout the audit. We also:

ldentify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internalcontrol.

I Obtain an understanding of internal control relevant to the audit in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company's internalcontrol.

Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by management,

Conclude on the appropriateness of management's use of the going concern basis

of accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on
the Company's ability to continue as a going concern. lf we conclude that a material
uncertainty exists, we are required to draw attention in our auditors' report to the
related disclosures in the financial statements or, if such disclosures are inadequate,
to modify our opinion, Our oonolusions are based on the audit evidence obtained up
to the date of our auditors' report. However, future events or conditions may cause
the Company to cease to continue as a going concern.

APR td, ?il?:

TU TU
DAN S, Seoro{r)
rEue
I Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.

Report on the Supplementary lnformation Required Under Revenue Regulations

No. 15-2010 of the Bureau of lnternal Revenue

Our audits were conducted for the purpose of forming an opinion on the basic separate
financial statements taken as a whole. The supplementary information in Note 14 to the
separate financial statements is presented for purposes of filing with the Bureau of
lnternal Revenue and is not a required pad of the basic separate financial statements.
Such information is the responsibility of management. The information has been
subjected to the auditing procedures applied in our audit of the basic separate financial
statements. ln our opinion, the information is fairly stated in all material respects, in
relation to the basic separate financial statements taken as a whole.

The engagement partner on the audit resulting in this independent auditors' report is
Vernilo G. Yu

R.G. MANABAT & CO. APR 1{ ?i}?3

OG.YU
Partner
CPA License No. 108798
SEC Accreditation No. 1815-A, Group A, valid untilAugust20,2023
Tax ldentification No. 225-454-652
BIR Accreditation No. 08-001 987 -035-2021
lssued June 29, 2021; v_alid until June 28,2024
PTR No. MK'f 9563856
lssued January 3,2023 at [Makati City

April14,2023
Makati City, lt/letro l/lanila
 Synergy Grid & Devetopment Phils., lnc.
1601 -1602 Tycoon Centre
Pearl Drive Ortigas Center
SYNERGY San Antonio, Pasig City, Philippines
6rid & D€velopm€ot Philt-, lnc.

STATEMENT OF N/LANAGEMENT,S RESPONSIBILITY

F'OR FINAIICIAL STATEMENTS

The Management of Synergy Grid & Development Phils., Inc. (the "Company") is
responsible for the preparation and fair presentation of the financial statements, as at and for
the years ended December 31,2022 ald2A2l, in accordance with the prescribed financial
reporting framework indicated therein, and for such internal control as management determines
is necessary to enable the preparation of financial statements that are free form material
misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's
ability to continue as a going concern, disclosing, as applicable matters related to going concern
and using the going concem basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is responsible for overseeing the Company's financial reporting process.

The Board of Directors reviews and approves the financial statements, and submits the same to
the Stockholders.

R. G. Manabat & Co., the independent auditor appointed by the Stockholders, has audited the
financial statements of the Company in accordance with Philippine Standards on Auditing, and
in its report to the Stockholders, has expressed its opinion on the faimess of presentation upon
of such audit.

'fq^^lS-frt (

PAUL SAGAYO, JR.

& CEO
President

o
& CFO
ili{R t g
Signed this 29th day of March2023
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 SYNERGY GRID & DEVELOPMENT PHI LS., INC.
SEPARATE STATEMENTS OF FINANCIAL POSITION

December 31
Note 2022 2021
ASSET
Current Asset
Cash and cash equivalents 4, 13 Pl,7 31,1 42,553 P1 3,543,080,695
Other current assets 5 17,489,460 15,010,238
Total Current Assets 1,749,632,013 1 3,558,090,933
Noncurrent Asset
Property and equipment - net 6 1,905,693 1,586,702
lnvestment in subsidiaries 7 91,246,163,q0Q 82,008,000,000
Total Noncurrent Assets 94,248,068,693 82,009,586,702
P95,996,700,706 P95,567,677,635

LIABILITIES AND EQUITY

Current Liabilities
Accrued expenses and other current liabilities 8, 13 P144,056,417 P50,057,346
Dividends payable 10, 13 '1,235,526,797 947,278,332
Total Current Liabilities 1,379,583,214 997,335,676
Noncurrent Liability
Deferpgllqxliability 1re
Total Liabilities 1,379,594,618 997,340,987
Equity
Capitalstock 10 5,265,866,000 5,265,E66,000
Additional paid-in capital 10 98,928,019,694 88,928,018,694
BelarnS{erynUgs 423,221,394 376,45't,954
Total Equity 94,617,106,088 94,570,336,648
P95,996,700,706 P95,567,677,635

See Notes to the Separate Financial Sfatemenfs.

APR 1 4 ll,fi
C-i v
KAPiI YSA
DAN
 SYNERGY GRID & DEVELOPMENT PHILS., INC.
SEPARATE STATEMENTS OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME

Years Ended December 3{

Nofe 2022 2021
INCOME
Dividend income 7,9 P5,281,096,800 P3,61 1,300,000
Management income I 48,000,000 12,000,000
lnterest income 4, 11 85,07'!,488 11,726,047
5,414,168,288 3,635,026,047

OPERATING EXPENSES
Salaries and other employee benefits I 38,058,978 14,928,301
Director's fee 35,520,000 9,570,000
Professional fees 4,739,940 13,052,184
Filing fees 2,024,568 125,404,165
Depreciation 6 584,459 100,479
Transportation 458,542 108,369
Communications, light and water 279,422 18,796
Office supplies 220,055 200,100
Advertising fees 182,446 870,276
Repairs and maintenance 145,819 85,362
Taxes and licenses 120,406 241,057
Bank charges 10,3,! 3 19,187
lnsurance 871 1,926
Itleetings and conferences 470,431
Reversal of impairment of creditable
withholding tax 5 (8,064,980)
Miscellaneous ,1,733,'142 1,420,456
84,077,86,! 158,426J09
INCOME FROM OPERATIONS 5,330,090,427 3,476,599,939
FOREIGN EXGHANGE GAIN - Net 45 614 21 235
INCOME BEFORE INCOME TAX AND
FINAL TAX 5,330,{36,041 3,476,621,173
TAXES 12 't7,500,60'! 2,411,309
NET INCOME/TOTAL COMPREHENSIVE
INCOME P5,312,635,440 P3,474,209,865

See /Vofes to the Separate Financial Sfafen enfs.

APR 14. 20?3

TLJ
Y SA fJAC
DAN S.
 SYNERGY GRID & DEVELOPMENT PHILS. tNc.
SEPARATE STATEMENTS OF CHANGES IN EQUITY

Years Ended December 31

Additional Retained
CapitalStock Paid-in Capital Earnings
/Vofe (Note 10) (Note 10) (Deficit) TotalEquity
Balance at January 1,2022 P5,265,866,000 P88,928,019,694 p376,451,954 P94,570,335,648
Net income/total comprehensive income for the year 5,312,635,440 5,312,635,440
Transactions with Owners of the Company
Cash dividends declared (5,265,866,000) (5,265,866,000)
(5,265,856,000) (5,265,866,000)
Balance at December 31,2O22 P5,265,866,000 P88,928,019,694 p423,221,394 P94,617,106,098
Balance at January 1. 2021 P49.466. 000 P (P43,710,861) P5,755,139
Net income/total comprehensive income for the year 3,474,209,865 3,474,209,865
Transactions with Owners of the Company
Cash dividends declared (3,054,047,050) (3,054,047,050)
Proceeds from follow-on offering 11,588,500,000 11,588,500,000
lssuance of capital stock 10 5,216,400,000 77,907,600,000 83,124,000,000
Share issuance costs 1A (568,081,306) (568,081,306)
5,216,400,000 88,928,018,694 (3,054,047,050) 91,090,371,644
Balance at Decernber 31,2021 P5,265,866,000 P88,928,018,694 p376,451,954 p94,570,336,648

See Noles to the Separate Financial Statements.

 SYNERGY GRID & DEVELOPMENT PHILS., INC.
SEPARATE STATEMENTS OF CASH FLOWS

Years Ended December 31

Note 2022 2021
CASH FLOWS FROM OPERATING
ACTIVITIES
lncome before income tax P5,330,136,041 P3,476,621,173
Adjustments for:
Depreciation 6 584,459 100,479
Dividend income 7,9 (5,281,096,800) (3,611,300,000)
lnterest income 4, 11 (85,071,48E) (11,726,047)
Unrealized foreign exchange gain - net (45,6{4} (21,235)
Reversal of impairment of creditable
withholdino tax (8,064, 980)
Operating loss before working capital
changes (35,493,402) (154,390,610)
lncrease in other current assets (2,479,222l. (7,006,052)
lncrease (decrease) in accrued expenses and
other current liabilities (23,744,514) 26,060,836
Cash absorbed by operations (61,717,138) (135,335,826)
lnterest received 85,071,488 11,726,047
lncome taxes paid (17,494,506) (2,345,205)
Net cash provided (used in) by operating
activities 5,859,844 (125,954,984)

CASH FLOWS FROM INVESTING

ACTIVITIES
Cash dividends received 5,28{,096,800 3,61 1 ,300,000
Purchase of preferred shares 7 112,239,163,000)
Additions to property and equipment (903,450) (1,687,181)
Net cash generated by (used in) investing
activities (6,957,969,650) 3,609,612,819
CASH FLOW FROM FINANCING
ACTIVITIES
Payment of cash dividends (4,435,109,692) (1,799,469,885)
Payment of final tax on dividends paid (424,764,2581 (285,060,748)
Proceeds from follow-on offering 10 12,642,000,000
Proceeds from issuance of capital stock 10 62,500,000
Transaction cost relating to issuance of
shares 10 (568,081,306)
Payment to shareholders {2J9pil-qEol
Net cash provided by (used in) flnancing
activities (4,859,873,950) 9,802,836,578
NET TNCREASE (DECREASE) rN CASH
AND CASH EQUIVALENTS (1 1,811,983,756) 13,286,494,413
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS 45,6',14 21,235
CASH AND GASH EQUIVALENTS
AT BEGINNING OF YEAR ,13,543,080,695 256,565,047
CASH AND CASH EQUIVALENTS
AT END OF YEAR 4 P1,731,142,553 P13,543,080,695

See Notes to the Separate Financial Staternents.

 SYNERGY G RID & DEVELOPMENT PH ILS. tNc.
NOTES TO THE SEPARATE F INANCIAL STATEMENTS

1. Reporting EntitY

Synergy Grid & Development Phils., lnc. (the "Company") was originally a mining
corporation and registered with the Philippine Securities and Exchange Commission
(SEC) on June 1, lglT under the name Mankayan lvlinerals Development Company,
lnc.

On February 22, 1994, the SEC approved the Company's change of corporate name
to UEM Development Phils., lnc. and the change in its primary purpose from
engaging in mining activities to general construction and other allied businesses. The
amendment of its primary purpose was due to the potential opportunity in the
construction industry brought about by the entry of a new foreign investor.

On October 10, 1997, the SEC approved the Amendment to the Seventh Article of
the Company's Articles of lncorporation increasing the par value of its authorized
capital stock from P0.01 to P1.00, decreasing the Company's shares of stock from
500,000,000 shares to 50,000,000 shares, and stating that the stockholders shall
have no pre-emptive rights.

On December 14,2010, the Board of Directors (BOD) considered and approved the
Amendment of the Articles of lncorporation and By-Laws of the Company for the
purpose of, among others, changing the Company's corporate name to Synergy Grid
& Development Phils., lnc,, changing its primary purpose to enable it to engage in
the business of investing in, purchasing or acquiring, and selling or disposing of the
shares of stock, bonds, evidences of indebtedness and other securities issued or
created by corporations and other entities engaged in power, energy, utilities,
infrastructure and other allied businesses; and for the above purposes, to acquire,
lease, hold, occupy, use, mortgage real and personal propedies, to obtain financing
from local and international funding sources or othenrvise raise capital and funds by
issuing or creating equity and debt securities, and to do or engage in any and all
other businesses and activities incidental to or connected with, or in furtherance
and/or the implementation of any and all of the foregoing. The amendments to the
Articles of lncorporation and By-Laws of the company were approved by the
stockholders on December 21 ,2010.

on November 14,2019, the BoD of the company, and on December20,2019, the

stockholders of the Company, approved the amendment of the Articles of
lncorporation of the Corporation pursuant to an increase in authorized capital stock
from P50.00 million divided into 50.00 million common shares at par value of
P1.00 per share to P5.05 billion divided into 5.05 billion common shares at par value
of P1.00 per share.

This amendment and increase in capital stock were pursued in connection with the
issuance of 4.10 billion shares of the Company in exchange for shares of stock in
oneTaipan Holdings, lnc. ("orHl") and paclfica2l Holdings, lnc. ("p21") (the .share
Swap Transaction").
On December 20, 2019, the Company and the stockholders of OTHI and
P21 entered into a Share Purchase Agreement, pursuant to which, the two major
shareholder of the Company will acquire additional 4.10 billion shares of the
Company at a price of P20 per share for a total purchase price of P82.00 billion. As
consideration for its acquisition, the two major shareholders will exchange their
respective ownership in OTHI and P21. Accordingly, the 2.10 billion shares with a
P1.00 par value of the Company to be swapped with 86.40 million shares of OTHI
with a par value of P100 per share while the 2.00 billion shares of Company to be
swapped with 871.00 million common shares of P21 with d par value of P1.00 per
share.

As a result of the Share Swap Transaction, the Company will legally and/or
beneficially owns 67% of the outstanding shares of each of OTHI and P21. OTHI
owns controlling shares in Monte Oro Grid Resources Corporation ("MOGRC'),
which holds 30% plus one share in National Grid Corporation of the Philippines
('NGCP). P21 owns controlling shares in Calaca High Power Corporation (CHPC),
which in turn owns 30% minus one share in NGCP. The Share Swap Transaction
was undertaken to formally consolidate the two major shareholdefs ownership and
control of NGCP through a common corporate structure. Accordingly, the effective
ownership of the Company in NGCP will be 40.20%, with control of 60% voting rights
through its subsidiaries MOGRC and CHPC.

On March 26, 2020, the proposed share-swap transaction was approved by the
Philippine Competition Commission on the grounds that it will not likely result in
substantial lessening of competition in the Philippine market.

On May 28, 2021, the SEC approved the increase in the Company's authorized
capital stock from P50.00 million to P5.05 billion. Consequently, the 4.10 billion
Gommon shares for the share swap transaction were issued at a price of P20 per
share on the same date. The incremental costs directly attributable to the issuance of
common shares amounting to P206.66 million is recognized as a deduction from
additional paid-in capital.

On June 3A,2021 and on August 10,2021, the Company's BOD and stockholders,
respectively, resolved and approved the increase in authorized capital stock from
P5.05 billion to P5.30 billion, with the increase of 250.00 million to be divided into
250.00 million common shares at a par value of P1.00 per share.

This increase is for the Company to conduct a follow-on offering of its shares to
achieve the target public float of twenty percent (20V") of the outstanding capital
stock of the Company and for other business purposes.

The above increase was approved by the SEC on August 25,202L Consequently, of
the 250.00 million increase in shares of the Company, 25% of which was subscribed
and paid by the Company's major shareholders amounting to P62.50 million.

On August 10, 2021, the Company's BOD approved and authorized the offer and
issuance of 1,053,500,000 common shares at an offer price of up to P29 per share,
and also grants over-allotment option pursuant to which a stabilizing agent or its
affiliate has the right to purchase up to 101 million common shares of the Company's
owned by its major shareholders.

-2
On August 12 and September 10, 2021, the Company's shareholders have also
secured the Certificate Authorizing Registration with the Bureau of lnternal Revenue
(BlR) in order to transfer in the name of the Company the following shares:

(i) 86,430,000 common shares in OTHI representing 67% of its total capital stock;
and
(ii) 871,000,000 common shares in P21 representing 670/o of its total capital stock.
The details of the equity interest of the Company in its subsidiaries after the Share
Swap are as follows:

Percentage of
Ownerehip Country of
Direct lndirect lncorporation
OneTaipan Holdings, lnc. ("OTHl") 67.0% Philippines
Pacifica21 Holdings, Inc. ("P21") 67.00/o Philippines
Monte Oro Grid Resources Corporation ("MOGRC")" 67.0% Philippines
Calaca High Power Corporation ('CHPC)* 67.0% Philippines
National Grid Corporation of the Fhilippines ("NGCP1*** 40.2o/o Philippines
" lndirectly owned through OTHI
*" lndirectly owned through P21
***
lndirectly owned through MOGRC and CHPC

OTHI is 67% directly owned subsidiary of the Company and was incorporated and
registered with Philippine SEC on February 23,2010. OTHI's primary purpose is to
acquire by purchase, exchange, assignment or otherwise, and to sell, assign,
transfer, exohange, lease, let, develop, mortgage, pledge, deal in and with and
otherwise operate, enjoy and dispose of, all properties of every kind and description
and whatever situated and to the extent permitted by law.

MOGRC is a wholly-owned subsidiary of OTHI and was incorporatecl and registered

with Philippine SEC on August 29, 2006. MOGRC's primary purpose is to invest or
hold interests in the shares of stocks of companies engaged in or proposing to
engage in infrastructure projects, whether as proponent, equity investor or financial
or technical advisor and to do all acts and things necessary to carry out the foregoing
purpose,

P21 is 67% directly owned by the Company and was incorporated and registered
with Philippine SEC on May 12,2008. P21's purpose is to invest or acquire interest,
purchase, own or hold directly or indirectly shares of stock, debentures or securities
in other companies including related services and business activities.

CHPC is a wholly-owned subsidiary of P21 and was incorporated and registered with
Philippine SEC on December 15,2006. CHPC's primary purpose is to engage in the
general business of operating, managing, maintaining, and rehabilitating energy
systems and services from gas, steam and electricity including related services and
business activities.

NGCP's common shares is 3O%-owned each by MOGRC and CHPC. NGCP was
incorporated in the Philippines and registered with Philippine SEC on February 21,
2008 primarily to operate and maintain a nationwide transmission grid throughout the
Philippines; to provide open and non-discriminatory access to the transmission
system to all authorized electricity distributors and electricity users; and to carry on
all business incidentalto the same.

On October 14,2021, the listing of the Offer Shares was approved by the Philippine
Stock Exchange. The Philippine SEC approved the listing of SGP on October 20,
2021.

-3-
 On November 10, 2021 SGDI, under the symbol "SGP', the Company publicly listed
its 1,053,500,000 shares from its Follow-On Offering (FOO) on the Philippines Stock
Exchange with overallotment option of up to 101,000,000 secondary shares at
PHP 12.00 per common share.

On April 4, 2022, the Company used the proceeds of the FOO to subscribe to
203,630,000 non-voting preferred shares of National Grid Corporation of the
Philippines (NGCP) with a par value of One Peso (PHP 1.00) per share at a
subscription price of PHP 60.1O/share or a total subscription price of
P12,238,163,000.

The subscription will give the Company a direct shareholding in NGCP of 9.240o/o of
the latter's outstanding capital stock. The Company will be entitled to dividends as a
direct shareholder of NGCP, and this is in addition to the dividends that the Company
already indirectly receives from NGCP through the holding entities.

On 12 April 2022, the Company paid P3,059,540,750, representing twenty-five

percent (25%) of the total subscription price. On June 9,2022, the Company paid the
balance of the total subscription price in the amount of P9,178,622,250.

The Company indirectly controls 60% of the outstanding voting capital stock of
NGCP, the Company's sole operating asset with an effective equity interest of
40.2o/o.

The Company's shares of stock are listed on the Philippine Stock Exchange (PSE)
under the stock symbol 'SGP".

The Gompany's registered office address is Unit 1602, 16th Floor, Tycoon Genter
Bldg. Condominium, PearlDrive, Pasig City, Metro Manila.

2. Basis of Preparation

Statement of Compliance
The separate financial statements have been prepared in compliance with Philippine
Financial Reporting Standards (PFRS). PFRS are based on lnternational Financial
Reporting Standards issued by the lnternationalAccounting Standards Board (IASB).
PFRS which are issued by the Philippine Financial Reporting Standards Council,
consist of PFRS, Philippine Accounting Standards (PAS), and Philippine
lnterpretations.

The Company also prepares and issues consolidated financial statements for the
same period as the separate financial statements prepared and presented in
compliance with PFRSS. Said consolidated financial statements may be obtained
from the SEC.

The separate financial statements were authorized for issue by the BOD on
March 29,2023.

Basis of Measurement
The separate financial statements of the Company have been prepared on a
historical cost basis of accounting.

Functional and Presentation Currency

The separate finanoial statements are presented in Philippine peso, which is the
Company's functional currency. All financial information presented in Philippine peso
has been rounded off to the nearest peso, unless otherwise indicated.

4
Use of Judoments and Estimates
The preparation of the financial statements in conformity with PFRS requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, income and expenses. The estimates and assumptions used in the
separate financial statements are based upon management's evaluation of relevant
facts and circumstances as of the date of the separate financial statements. Actual
results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions

to accounting estimates are recognized in the period in which the estimate is revised
and in any future periods affected.

Judgments are made by management on the development, selection and disclosure

of the Company's critical accounting policies and estimates and the application of
these policies and estimates.

ln particular, below is the information about significant areas of estimation

uncertainty in applying accounting policies that have the most significant effect on
the amounts recognized in the separate flnancial statements:

Estimating Realizability of Defened lax Assefs

The Company reviews its deferred tax assets at each reporting date and reduces the
carrying amount to the extent that it is no longer probable that sufficient taxable proflt
will be available to allow all or part of the deferred tax asset to be utilized. The
Gompany's assessment on the recognition of deferred tax assets on deductible
temporary difference and carryforward benefits of [Vlinimum Corporate lncome Tax
(MCIT) and Net Operating Loss Garry Over (NOLCO) is based on the projected
taxable income within the prescription period.

The Company has not recognized the deferred tax assets as at December 31 ,2022
and 2021 since management does not expect to have sufficient taxable profit that will
be available against which the Company can utilize the benefit therefrom (Note 12).

Determining whetherthe Company has Controlover its lnvestee Company

The Company uses judgment in determining control over its investee. The Company
controls the entity when it is exposed, or has rights, to variable returns from its
involvement with the investee; has the ability to affect those returns through its power
over the investee and there is a link between power and returns. The principle of
control sets out the following three elements of control:

r power over the relevant activities of the investee;

. exposure, or rights, to variable returns from involvement with the investee; and
. the ability to use power over the investee to affect the amount of the investor's
returns.

The Company assessed that it controls its investee company, OTHI, P21, and
NGCP. Accordingly, the Company treats OTHI, P21, and NGCP as subsidiaries
(Note 7).

E
3. Summary of Significant Accounting Policies

The accounting policies set out below have been applied consistently to all years
presented in these separate financial statements, except for the changes in
accounting policies as explained below.

Adoption of Amendments to Standards

The Company has adopted the following amendments to standards starting
January 1, 2022 and accordingly, changed its accounting policies. Except as
othenrvise indicated, the adoption did not have any significant impact on the
Company's separate financial statements.

Property, Plant and Equipment - Proceeds before lntended Use (Amendments to

PAS 16, Property, Plant and Equipment). The amendments prohibit an entity
from deducting from the cost of an item of property, plant and equipment the
proceeds from selling items produced before that asset is available for use. The
proceeds before intended use should be recognized in profit or loss, together
with the costs of producing those items which are identified and measured in
accordance with PAS 2,lnventoies.

The amendments also clarify that testing whether an item of property, plant and
equipment is functioning properly means assessing its technical and physical
performance rather than assessing its financial performance.

For the sale of items that are not part of a company's ordinary activities, the
amendments require the company to disclose separately the sales proceeds and
related production cost recognized in profit or loss and specify the line items in
which such proceeds and costs are included in the statement of comprehensive
income. This disclosure is not required if such proceeds and cost are presented
separately in the statement of comprehensive income.

The amendments apply retrospectively, but only to items of property, plant and
equipment made available for use on or after the beginning of the earliest period
presented in the financial statements in which the company first applies the
amendments.

I Onerous Contracts - Cost of Fulfilling a Contract (Amendment to PAS 37,

Provisions, Contingent Liabilities and Contingenf Assefs). The amendments
clarify that the cost of fulfilling a contract when assessing whether a contract is
onerous includes all costs that relate directly to a contract - i.e. it comprise both
incremental costs and an allocation of other direct costs,

The amendments apply to contracts existing at the date when the amendments
are first applied. At the date of initial application, the cumulative effect of applying
the amendments is recognized as an opening balance adjustment to retained
earnings or other component of equity, as appropriate. The comparatives are not
restated.

-0-
 Annual lmprovements to
PFRS Standards 2018-2020. This cycle of
improvements contains amendments to four standards, of which the following is
applicable to the Company:

a Fees in the'10 per cent'Test for Derecognition of Financial Liabilities

(Amendment to PFRS 9 Financial lnstruments). The amendment clarifies that
for the purpose of performing the'10 per cent'test for derecognition of
financial liabilities, the fees paid net of fees received included in the
discounted cash flows include only fees paid or received between the
borrower and the lender, including fees paid or received by either the
borrower or lender on the other's behalf. lt applies to financial liabilities
that are modified or exchanged on or after the beginning of the annual
reporting period in which the entity first applies the amendment.

Standards lssued But Not Yet Adopted

A number of new standards and amendments to standards are effective for annual
periods beginning after January 1,2022, However, the Company has not early
adopted the following new or amended standards in preparing these separate
financial statements. Unless othenrvise stated, none of these are expected to have a
signiflcant impact on the Company's separate financial statements.

Effective January 1, 2023

Definition of Accounting Estimates (Amendments to PAS 8, Accounting Policies,

Changes in Accounting Estimates and Errors). To clarifiT the distinction between
changes in accounting policies and changes in accounting estimates, the
amendments introduce a new deflnition for accounting estimates, clarifying that
they are monetary amounts in the flnancial statements that are subject to
measurement uncertainty. The amendments also clarify the relationship between
accounting policies and accounting estimates by specifying that an accounting
estimate is developed to achieve the objective set out by an accounting policy.
Developing an accounting estimate includes both selecting a measurement
technique and choosing the inputs to be used when applying the chosen
measurement technique. The effects of changes in such inputs or measurement
techniques are changes in accounting estimates. The definition of accounting
policies remain unchanged. The amendments also provide examples on the
application of the new definition.

The amendments are effective for annual reporting periods beginning on or after
January 1,2023, with earlier application permitted, and will apply prospectively to
changes in accounting estimates and changes in accounting policies occurring
on or after the beginning of the first annual reporting period in which the
amendments are applied.

Disclosure of Accounting Policies (Amendments to PAS 1, Presentation of

Financial Sfafemenfs and PFRS Practice Statement 2, Making Mateiality
Judgements). The amendments are intended to help companies provide useful
accounting policy disclosures. The key amendments to PAS 1 include:

a requiring companies to disclose their material accounting policies rather than

their significant accounting policies;

a clarifying that accounting policies related to immaterial transactions, other

events or conditions are themselves immaterial and as such need not be
disclosed; and

7
 a clarifying that not all accounting policies that relate to material transactions,
other events or conditions are themselves material to a company's financial
statements.

The amendments to PFRS Practice Statement 2 includes guidance and

additional examples on the application of materiality to accounting policy
disclosures.

The amendments are effective from January 1, 2023. Earlier application is

permitted,

Effective January 1, 2024

Classification of Liabilities as Current or Noncurrent - 2020 amendments and

Non-Current Liabilities with Covenants - 2022 amendments (Amendments to
PAS 1, Presentation of Financial Sfafemenfs). To promote consistency in
application and clarify the requirements on determining whether a liability is
current or noncurrent, the amendments:

a removed the requirement for a right to defer settlement of a liability for at

least 12 months after the reporting period to be unconditional and instead
requires that the right must have substance and exist at the end of the
reporting period;

a clarified that only covenants with which a company must comply on or before
the reporting date affect the classification of a liability as current or non-
current and covenants with which the enti$ must comply after the reporting
date do not affect a liability's classification at that date;

a provided additional disclosure requirements for non-current liabilities subject

to conditions within twelve months after the reporting period to enable the
assessment of the risk that the liability could become repayable within twelve
months; and

a clarified that settlement of a liability includes transferring an entity's own

equity instruments to the counterparty, but conversion options that are
classified as equity do not affect classification of the liability as current or
noncurrent.

The amendments will apply retrospectively for annual reporting periods

beginning on or after January 1,2024, with earlier application permitted. Entities
that have early applied the 2020 amendments may retain application until the
2022 amendments are applied. Entities that will early apply the 2020
amendments after issue of lhe 2022 amendments must apply both amendments
at the same time.

Financial lnstruments
Non-derivative Financial lnstrumenfs. Non-derivative financial instruments consist of
cash and cash equivalents, accrued expenses and other current liabilities (excluding
government payables), dividends payable and advances from shareholders.

Recognition and lnitial Measuremenf. All other financial assets and financial liabilities
are initially recognized when the Company becomes a party to the contractual
provisions of the instrument,

-8-
A financial asset (unless it is a trade receivable without a signiflcant financing
component) or financial liability is initially measured at fair value plus, for an item not
at Fair Value through Profit or Loss (FVTPL), transaction costs that are directly
attributable to its acquisition or issue. A trade receivable without a significant
financing component is initially measured at the transaction price.

Financial Assets
Classification and Subsequent Measuremenf. On initial recognition, the Company
classifies its financial assets in the following measurement categories: amortized
cost; fair value through other comprehensive income (FVOCI) - debt investment;
FVOCI - equity investment; or FVTPL.

The classification depends on the Company's business model for managing the
financial assets and the contractual terms of the cash flows.

The Company has no financial assets classified as measured at: FVOCI - debt
investment or FVOCI - equity investment.

Financial assets are not reclassified subsequent to their initial recognition unless the
Company changes its business model for managing financial assets, in which case
all affected financial assets are reclassified on the first day of the first reporting
period following the change in the business model.

A financial asset is measured at amortized cost if it meets both of the following

conditions and is not designated as at FWPL:

It is held within a business model whose objective is to hold assets to collect

contractual cash flows; and

Its contractual terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amountoutstanding.

The amortized cost is reduced by impairment losses. lnterest income, foreign

exchange gains and losses and impairment are recognized in profit or loss. Any gain
or loss on derecognition is recognized in profit or loss.

lncluded in this category are the Company's cash and cash equivalents.

Cash includes cash on hand and in banks which are stated at amortized cost. Cash
equivalents are short-term, highly liquid investments that are readily convertible to
known amounts of cash with original maturities of three months or less from dates of
acquisition and are subject to an insignificant risk of changes in value.

On initial recognition, an entity may choose to designate a financial asset that would
otherwise qualify for amortized cost or FVOCI classiflcation as at FVTPL. This
optional designation is permitted only if it eliminates or significantly reduces a
measurement or recognition inconsistency that would othenruise arise from
measuring financial assets or financial liabilities, or recognizing gains or losses on
them, on different bases.

Financial assets held in any other business model are measured at FWPL. This
category includes a portfolio that:

r is managed with the objective of realizing cash flows through sale;

I is managed, and whose performance is evaluated, on a fair value basis;or

-9-
 meets the definition of held for trading

A financial asset is held for trading if it is:

I acquired principally for the purpose of selling it in the nearterm;

I on initial recognition, part of a portfolio of identifled financial instruments that are

managed together and for which there is evidence of a recent actual pattern of
short-term profit taking; or

I a derivative, except for a derivative that is a designated and effective hedging

instrument.

Business ModelAssessmenf. The Company makes an assessment of the objective

of the business model in which a financial asset is held at a portfolio level because
this best reflects the way the business is managed and information is provided to
management. The information considered includes:

a. the stated policies and objectives for the portfolio and the operation of those
policies in practice. These include whether management's strategy focuses on
earning contractual interest income, maintaining a particular interest rate profile,
matching the duration of the financial assets to the duration of any related
liabilities or expected cash outflows or realizing cash flows through the sale of
the assets;

b, how the performance of the portfolio is evaluated and reported to the Company's
management;

c. the risks that affect the performance of the business model (and the financial
assets held within that business model) and how those risks are managed;

d. how managers of the business are compensated - e.9., whether compensation is

based on the fair value of the assets managed or the contractual cash flows
collected; and

e. the frequency, volume and timing of sales of financial assets in prior periods, the
reasons for such sales and expectations about future sales activity.

Solely Payments of Principal and lnteresf Assessrnenf. Principal is defined as the fair
value of the financial asset on initial recognition. 'lnterest' is defined as consideration
for the time value of money and for the credit risk associated with the principal
amount outstanding during a particular period of time and for other basic lending
risks and costs (e.9. liquidity risk and administrative costs), as well as a profit margin.
ln assessing whether the contractual cash flows are solely payments of principal and
interest, the Company considers the contractual terms of the instrument. This
includes assessing whether the financial asset contains a contractual term that could
change the timing or amount of contractual cash flows such that it would not meet
this condition. ln making this assessment, the Company considers:

. contingent events that would change the amount or timing of cash flows;

I terms that may adjust the contractual coupon rate, including variable-rate
features;

I prepayment and extension features; and

- 10 -
 terms that limit the Company's claim to cash flows from specified assets
(e.9. non-recourse features).

lnvestments in Subsidiaries
A subsidiary is an entity controlled by the Company. The Company controls an entig
when it is exposed to, or has right to, variable returns from its involvement with the
entity and has the ability to affect those returns over its power to the entity. The
Company reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three elements
of control.

lnvestment in subsidiaries are stated at cost less impairment in value, if any, in the
separate statements of financial position. Dividends are recognized from a subsidiary
in profit or loss when its right to receive the dividend is established. When the
Company loses control over a subsidiary, any interest retained in the former
subsidiary is measured at fair value.

Financial Liabilities
Classification, Subsequent Measurement and Garns and Losses. Financial liabilities
are classified as measured at amortized cost or FVTPL. A financial liability is
classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is
designated as such on initial recognition. Financial liabilities at FWPL are measured
at fair value and net gains and losses, including any interest expense, are
recognized in profit or loss. Other financial liabilities are subsequently measured at
amortized cost using the effective interest method. lnterest expense and foreign
exchange gains and losses are recognized in proflt or loss. Any gain or loss on
derecognition is also recognized in profit or loss.

lncluded under other financial liabilities are accrued expenses and other current
liabilities (excluding payables to government), dividends payable and advances from
shareholders.

Derecoqnition of Financial Assets and Liabilities

FinancialAssefs. A financial asset (or, where applicable, a part of a financial asset or
part of a group of similar financial assets) is derecognized when:

. the rights to receive cash flows from the asset have expired;

the Company retains the right to receive cash flows from the asset, but has
assumed an obligation to pay them in full without material delay to a third party
under a "pass-through" arrangement; or

the Company has transferred its rights to receive cash flows from the asset and
either: (a) has transferred substantially all the risks ancJ rewards of the asset, or
(b) has neither transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control ofthe asset.

When the Company has transferred its right to receive cash flow from an asset and
has neither transferred nor retained substantially all the risks and rewards of the
asset nor transferred control of the asset, the asset is recognized to the extent of the
Company's continuing involvement in the asset. Continuing involvement that takes
the form of a guarantee over the transferred asset is measured at the lower of the
original carrying amount of the asset or the maximum amount of consideration that
the Company could be required to pay.

Finanoial Liabilities. A finanoial liability is derecognized when the obligation under the
liability is discharged, cancelled or has expired,

-11 -
When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the
original liability and the recognition of a new liability. The difference in the respective
carrying amounts is recognized in profit or loss.

Offsettinq Financial nstrumentsI

Financial assets and financial liabilities are offset and the net amount is reported in
the separate statements of financial position if, and only if, there is a currently
enforceable legal right to offset the recognized amounts and there is an intention to
settle on a net basis, or to realize the asset and settle the liability simultaneously.
This is not generally the case with master netting agreements, where the related
assets and liabilities are presented at gross in the separate statements of financial
position.

I mpairment of Financial Assets

The Company recognizes loss allowances for expected credit losses (ECLs) on
financial asset at amortized cost. Loss allowances are measured on either of the
following bases:

12-month ECLs: these are ECLs that result from possible default events within
the 12 months after the reporting date; and

Lifetime ECLs: these are ECLs that result from all possible default events over
the expected life of a financial instrument.

The Company measures loss allowances at an amount equal to lifetime ECLs.

When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the Company
considers reasonable and supportable information that is relevant available without
undue cost or effort. This includes both quantitative and qualitative information and
analysis, based on the Company's historical experience and informed credit
assessment and including forward-looking information.

Lifetime ECLs are the ECLs that result from all possible default events over the
expected life of a financial instrument. 12-month ECLs are the portion of ECLs that
result from default events that are possible within the 12 months after the reporting
date (or a shorter period if the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual
period over which the Company is exposed to credit risk.

Measurement of ECLs
ECLs are probability-weighted estimate of credit losses. Credit losses are measured
as the present value of all cash shortfalls (i.e. the difference between the cash flows
due to the entity in accordance with the contract and the cash flows that the
Company expects to receive).

C re d it-i m p a i red F i n a no,a/ Assefs

At each reporting date, the Company assesses whether flnancial assets carried at
amortized cost are credit-impaired. A financial asset is 'credit-impaired'when one or
more events that have a detrimental impact on the estimated future cash flows of the
financial asset have occurred.

-12-
Evidence that a financial asset is credit-impaired includes the following observable
data:

I Significant financial difficul$ of the borrower or issuer;

A breach of contract such as a default or being more than g0 days past due;

The restructuring of a loan of advance by the Company on terms that the

Company would not consider otherwise;
It is probable that the borrower will enter bankruptcy or other financial
reorganization; or

The disappearance of an active market for a security because of financial

difficulties.

Presentation of lmpairment
Loss allowances for the financial assets measured at amortized cost are deducted
from the gross carrying amount of the assets,

Wite-off
The Company writes off a flnancial asset when there is information indicating that the
counterparty is in severe financial difficulty and there is no realistic prospect of
recovery, e.g. when the counterparty has been placed under liquidation or has
entered into bankruptcy proceedings. Financial assets written off may still be subject
to enforcement activities under the Company's recovery procedures, taking into
account legal advice where appropriate. Any recoveries made are recognized in
profit or loss,

Determination of Fair Value

Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date. The fair value measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either in the principal market for
the asset or liability, or, in the absence of a principal market, in the most
advantageous market for the asset or liability, The principal or most,advantageous
market must be accessible to the Company.

The fair value of an asset or liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market
participants act in their economic best interest.

The Company uses valuation techniques that are appropriate in the circumstances
and for which sufficient data are available to measure fair value, maximizing the use
of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the separate
financial statements are categorized within the fair value hierarchy, described as
follows, based on the lowest level input that is significant to the fair value
measurement as a whole:

Level 1: quoted prices (unadjusted) in active markets for identical assets or

liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly; and

- 13 -
 Level 3: inputs for the asset or liability that are not based on observable market
data.

For assets and liabilities that are recognized in the separate financial statements on
a recurring basis, the Company determines whether transfers have occurred
between levels in the hierarchy by re-assessing the categorization at the end of each
reporting period.

For purposes of the fair value disclosure, the Company has determined classes of
assets and liabilities on the basis of the nature, characteristics and risks of the asset
or liability and the level of the fair value hierarchy, as explained above,

CapitalStock
Common Shares
Common shares are classified as equity. lncremental costs directly attributable to the
issue of common shares are recognized as a deduction from equity, net of any tax
effects.

Additional Paid-in Capital

The amount of contribution in excess of par value is accounted for as "Additional
paid-in capital." Any transaction costs associated with the issuance of shares are
deducted from additional paid-in capital, net of any related income tax benefit.

Earninos Per Share

Basic Earnings Per Share (EPS) is calculated by dividing income applicable to
common shares by the weighted average number of common shares outstanding
during the year with retroactive adjustments for stock dividends, if any. Diluted EPS
is computed in the same manner as basic EPS, however, net income attributable to
common shares and the weighted average number of shares outstanding are
adjusted for the effects of all dilutive potential common shares, if any,

Operatino Seqment
A segment is a distinguishable component of the Company that is engaged either in
providing related products or services (business segment), or in providing products
or services within a particular economic environment (geographical segment), which
is subject to risks and rewards that are different from those othersegments.

The Company, having no operations, assessed that it has no reportable segment.

Accordingly, the Company does not present segment information.

Revenue Recoqnition
Revenue from Contracts with Customers
The Company recognizes revenue when it transfers control over a service to a
customer. Revenue is measured based on the consideration specified in the contract
which is a flxed amount.

The Company recognizes management income from its related parties. [\4anagement
income, which is derived from management consulting and financial advisory
services, is recognized over time at a monthly fixed rate as the services are provided
and are due on demand.

lnterest lncome
lnterest income from cash in banks is recognized on a time proportion basis, taking
into account the principal outstanding and the effective rate over the period of
maturity. lt is subject to final withholding tax and is presented at gross amount and
the tax paid or withheld is included in income tax expense.

-14-
Other lncome
Other income is recognized when earned

Expense Recoqnition
Expenses are recognized when decrease in future economic benefits related to a
decrease in an asset or an increase of a liability has arisen that can be measured
reliably. Expenses are recognized when they are incurred.

Short-term Employee Benefits

Shortterm employee benefits are expensed as the related service is provided. A
liability is recognized for the amount expected to be paid if the Company has a
present, legal or constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated reliably.

Taxes
lncome tax on the profit or loss for the year is composed of current and deferred
income tax. lncome tax is recognized in profit or loss except to the extent that it
relates to items recognized directly in equity or in other comprehensive income.

Current Tax
Current tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the tax authority. The tax rates and
tax laws used to compute the amount are those that are enacted or substantively
enacted by the end of the reporting period.

Deferred Tax
Deferred tax assets and liabilities are recognized in respect of temporary differences
between the carrying amounts of assets and liabilities for flnancial reporting
purposes and the amounts used for taxation purposes and the carryfonruard tax
benefits of the NOLCO and the excess of tt/lClT over the Regular Corporate lncome
Tax (RCIT). The amount of deferred tax provided is based on the expected manner
of realization or settlement of the carrying amount of assets and liabilities,
carryfonruard benefits of NOLCO and tt/ClT, using tax rates enacted or substantively
enacted by the end of the reporting period.

Deferred tax is not recognized for:

temporary differences on the initial recognition of assets or liabilities in a

transaction that is not a business combination and that affects neither accounting
nor taxable profit or loss;

temporary differences related to investments in subsidiaries and jointly controlled

entities to the extent that it is probable that they will not reverse in the
foreseeable future; and

taxable temporary differences arising on the initial recognition of goodwill

- 15 -
Deferred tax assets are recognized for carryforurard tax benefits of unused NOLCO,
unused tax credits from excess MCIT and deductible temporary differences to the
extent that it is probable that future taxable proflts will be available against which
they can be used. Future taxable profits are determined based on the reversal of
relevant taxable temporary differences. lf the amount of taxable temporary
differences is insufficient to recognize a deferred tax asset in full, then future taxable
profits, adjusted for reversals of existing temporary differences, are considered,
based on the business plans of the Company. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no longer probable that
the related tax benefit will be realized. Unrecognized deferred tax assets are
reassessed at each reporting date and are recognized to the extent that it has
become probable that future taxable income will allow the deferred tax assets to be
recognized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply to the year when the asset is realized or the liability is settled, based on tax
rates that have been enacted or substantively enacted by the end of the reporting
period.

ln determining the amount of current and deferred tax, the Company takes into
account the impact of uncertain tax positions and whether additional taxes and
interest may be due. The Company believes that its accn:al for tax liabilities are
adequate for all open tax years based on its assessment of many factors, including
interpretations of tax law and prior experience. This assessment relies on estimates
and assumptions and may involve a series of judgments about future events. New
information may become available that causes the Company to change its judgment
regarding the adequacy of existing tax availabilities; such changes to tax Iiabilities
will impact tax expense in the period that such a determination is made.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to
offset current tax liabilities and assets, and they relate to income taxes levied by the
same tax authority on the same taxable entity.

Value Added Tax (VAT). Revenues, expenses and assets are recognized net of the
amount of VAT, except:

. where the tax incurred on a purchase of assets or services is not recoverable

from the taxation authority, in which case the tax is recognized as part of the cost
of acquisition of the asset or as part of the expense item as applicable; and

, receivables and payables that are stated with the amount of tax included.

Related Partv Transactions and Relationship

Related party relationship exists when one party has the ability to control, directly or
indirectly through one or more intermediaries, the other party or exercise significant
influence over the other party in making financial and operating decisions. Such
relationship also exists between and/or among entities which are under common
control with the reporting enterprise, between and/or among entities which are under
control with reporting enterprise and its Key Management Personnel (KMP),
directors, or the entity, or any member of the group of which it is part, that provides
key management personnel services to the reporting entity.

-16-
 Foreiqn Currencv Transactions
Transactions in foreign currencies are converted to Philippine peso at exchange
rates prevailing at the transaction dates. Foreign currency-denominated monetary
assets and liabilities are retranslated into Philippine peso at the exchange rates
prevailing at the reporting date. The resulting foreign exchange gains or losses are
recognized in profit or loss.

Provisions
Provisions are recognized when the Company has: (a) a present obligation (legal or
constructive) as a result of past event; (b) it is probable (i.e., more likely than not)
that an outflow of resources embodying economic benefits will be required to settle
the obligation; and (c) a reliable estimate can be made of the amount of the
obligation. lf the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a pre{ax rate that
reflects current market assessment of the time value of money and those risks
specific to the liability. Where discounting is used, the increase in the provision due
to the passage of time is recognized as interest expense. Where some or all of the
expenditures required to settle a provision are expected to be reimbursed by another
party, the reimbursement shall be recognized when, and only when, it is virtually
certain that reimbursement will be received if the entity settles the obligation. The
reimbursement shall be treated as a separate asset. The amount recognized for the
reimbursement shall not exceed the amount of the provision. Provisions are
reviewed at each reporting date and adjusted to reflect the current bestestimate.

Contingencies
Contingent liabilities are not recognized in the separate financial statements but are
disclosed in the notes to the separate financial statements unless the possibility of an
outflow of resources embodying economic benefits is remote. Contingent assets are
not recognized in the separate financial statements but are disclosed in the notes to
the separate financial statements when an inflow of economic benefits is probable.

Events After the Reportinq Date

Post year-end events that provide additional information about the Company's
position at the reporting date (adjusting events) are reflected in the separate financial
statements. Post year-end events that are not adjusting events are disclosed in the
notes to the separate financial statements when material.

4. Cash

This account at December 31 consists of:

Nofe 2022 2421

Cash on hand F50,000 P10,000
Cash in banks 649,826,953 127,379,121
Short-term place ments 1,081.265.600 13.415.691 .574
13 P1,731,142,553 P13,543,090,695

Cash in banks earn annual interest at the respective bank's deposit rates. Shortterm
placements represent money market placements made for varying periods up to
three (3) months which can be withdrawn at any time depending on the immediate
cash requirements of the Company and earn interest rates at the respective short-
term investment rates.

-17-
 lnterest income from cash in banks and short-term placements amounted to
P54,384,378 and P6,109,557 for the years ended December 31,2022 and 2021,
respectively (Note 1 1).

5, Other Current Assets

This account at December 31 consists of the following

2422 2021
Creditable withholding tax P'!6 ,523,974 P9,804,186
lnput tax 407,820 5,075,119
Prepaid rent 273,881 40,933
Security Deposit 233,785
Advances to employees 20,000 90,000
Others 30,000
P17,489,460 P15,010,238

ln 2O?0, the Company has provided allowance for impairment on its creditable
withholding tax as the Company does not expect to have enough future income tax
liabilities for which the creditable withholding tax can be applied with. ln 2021,
reversal of related allowance was recognized as management believes that with
expected increase in income, the creditable withholding tax can be utilized in the
future. The corresponding reversal of impairment loss on creditable withholding tax
recognized in profit or loss amounted to P8,064,980 for the year ended
December 31,2021.

6. Property and Equipment - net

The movements and balances of this account are as follows

Furniture Office Computer Automoblles Computer Offlce
and Flxtures Equipment Equipment and Vehlcles Software lmprovement Total
Cost
January 1,2021 P37,665 P18,781 P207,518 P1,182.143 P474,956 P- P1,921,063
Additions 281,151 439,127 966.903 '1.687.181

December 31, 2021 318,816 457,908 207,518 1,182,143 474,956 956,903

3,608,244
Additions 141,445 167,231 - s94,774 903,450
Disposals (1,182,143) - - (1,182,143)
December 31, 2022 460,261 625,139 207,518 474,956 1,581,677 3,329,551

Accumulated Depreciatlon
January 1,2021 37,665 18,7E1 207,518 1,182,143 474,956 1,921 ,063
Depreciation 22,898 29,236 48,345 100,479
December 31, 2021 60,563 48,O17 207,518 1,182,143 474,956 48,345 2,021,542
Depreciation 125,149 1 86,526 - 272.684 5E4,459
Disposals (1,182,143) - - (1'182,143)
December 31, 2022 185,7'12 234,643 207,518 474,956 321,029 1,423,858

Net Carrying Amount

December 31, 2021 P258,253 P409,891 P P P918,558 P1 ,s86,702

December 31, 2022 P274,549 P390,496 P P P ?1,240,648 Pl,905,593

ft/anagement believes that there are no indications that property and equipment are
impaired or their carrying value may not be recoverable as at December 31 ,2022.

-18-
7. lnvestment in Subsidiaries

The carrying amount of investment in subsidiaries are as follows:

Percentage of
Ownership Country of
Direct lndirect AmSUlt lncorporalion
OneTaipan Holdings, lnc. 67.00 - P41,004,000,000 Philippines
Pacifica?l Holdings, lnc. 67.00 - 41,004,000,000 Philippines
Monte Oro Grid Resources
Corporation - 67.00 Philippines
Calaca High Power Corporation - 67.00 Philippines
National Grid Corporation of the
Philippines 9.24 40.20 12,238,163,000 Philippines
P94,246,163,000

OTHI was incorporated and registered with the SEC on February 23, 2010. lts
primary purpose is to acquire by purchase, exchange, assignment or otherwise, and
to sell, assign, transfer, exchange, lease, Iet, develop, mortgage, pledge, deal in and
with and otherwise operate, enjoy and dispose of, all properties of every kind and
description and wherever situated and to the extent permitted by law. The registered
office of OTHI is at One Esplanade, Seaside cor. J.W. Diokno Blvd., SIVI lvlall of Asia
Complex, Pasay City.

MOGRC is a wholly-owned subsidiary of OTHI and was incorporated and registered

with Philippine SEC on August 29, 2006. The Company indirectly owned 670/o of
TVORGC through its investment in OTHI.

Following is the financial information of OTHI as at and for the years ended
December 31, 2022 and 2021:

2022 2021
Current assets P52,763,678 P31,106,950
Noncurrent asset 29,464,000,000 28,464,000,000
Current liability 27,316,108
Noncurrent liabilitv 18 992 9,689
Net assets P28,489,428,578 P28,495,O97,261
lncome P3,330,916,599 P3,582,132,661
Expenses 16,{ 31,560 195,949
Foreign exchange gain - net 75,969 38,754
lncome tax 9 691 I 689
Netincome/totalcomprehensiveincome P3,3't4,85{,317 P3,581,965,777

P21 was incorporated and registered with the SEC on May 12,2008. lts purpose is
to invest or acquire interest, purchase, own or hold directly or indirectly shares of
stock, debentures or securities in other companies including related services and
business activities. The registered office of Pacifica 21 is at 201 EDSA, lt/andaluyong
City.

CHPC is a wholly-owned subsidiary of P21 and was incorporated and registered with
Philippine SEC on December 15, 2006. The Company indirectly owned 67% of
CHPC through its investment in P21

- 19 -
Following is the financial information of P21 as at and for the years ended
December 31,2022 and 2021:

2022 2021
Current assets P'!5,011,957 P15,770,469
Noncurrent asset 3,150,750,000 3,150,750,000
Current liability 845,038,466 843,274,843
Nq!'qqrre!!liqbilrlv 25,772 13,150
Net assets P2,320,697,719 P2,323,232,476
lncome P3,330,546,4{2 P3,586,789,740
Expenses {2,651,{09 382,665
Foreign exchange gain - net 103,088 52,598
lncome tax expense 13,148 13,150
Net income/total comprehensive income P3,317,985,243 P3,586,446,523

NGCP's common shares is 3O%-owned each by MOGRC and CHPC, NGCP was
incorporated in the Phitippines and registered with Philippine SEC on February 21,
2008. lts purpose is to operate and maintain a nationwide transmission grid
throughout the Philippines, to provide open and non-discriminatory access to the
transmission system to all authorized electricity distributors and electricity users, and
to carry on all business incidental to the same. The Company indirectly owned
40.2OYo of NGCP through its investments in IVIOGRC and CHPC.

Upon signing of the Subscription Contract on the non-voting preferred shares of

NGCP, the Company paid 250/o of its total subscription ot P12,238,163,000,
amounting to P3,059,540,750 on April 12, 2022, and paid the remaining 75%
balance of the total subscription amounting to P9,178,622,250 on June g, 2022.The
subscription will give the Company a direct shareholding in NGCP of 9.240% of the
latter's outstanding capital stock.

Following is the financial information of NGCP as at and for the years ended
December 31,2022 and 2021:

2022 2021
Current assets P51,239,693,',126 P44,261,323,979
Noncurrent asset 353,91 7,048,435 31 3,456,067,97 4
Current liability 7 5,781,028,845 7 1,222,767,322

l!qlqqtqnt liability 203,057,376,007 1 95,367,086, 1 66

Net assets P1 26,31 8,326,709 P91,127,538,465

lncome P61,821,367,993 P48,604,206,642

Expenses 20,582,298,067 19,319,392,225
Other charges - net 6,525,718,6{5 6,160,343,916
Other comprehensive income 239,273,933 104,158,044
Netincome/total comprehensive income P34,952,625,244 P23,228,628,545

Dividend income received from the Company's subsidiaries amounted to

P5.28 billion and P3.6 billion, in 2022 and 2Q21, respectively (see Note 9).

-20-
8. Accrued Expenses and Other Current Liabilities

This account at December 31 consists of:

Nofe 2022 2021

Accrued expenses 13 P1,230,000 P25,490,725
Government pavables 142,926,417 24,566,621
P144,O56,417 P50,057,346

Accrued expenses consist mainly of professional fees and transaction costs related
to the follow-on offering.

Government payables include withholding taxes and other payroll-related costs

payable to various government agencies.

9. Related Party Transactions

The Company's balances and transactions with related parties as at December 31

are as follows:

Amounts of Outstanding Terms and

Relationship with Related Parties Alote Year Transactlons Balance Conditions
Subsidlarles
. Dividend lncome
OneTaipan Holdings, lnc. 7 2022 P2,221,748,100 P
2021 1,80s,650,000
Pacifica2l Holdings, lnc. 7 2022 2,224,748,100
2021 1,805,650,000
National Grid Corporation of the Phils. 7 2022 831,600,000
2021
. Management Fee
Monte Oro Grid Resources 2022 12,000,000 Payable quarterly
Corporation at the end of each
quarter
2021 6,000,000
Calaca High Power Corporation a 2022 12,000,000 Payable quarterly
at the end of each
quarter
2021 6,000,000
OneTaipan Holdings, lnc. 2022 12,000,000 Payable quarterly
at the end of each
quafter
2021
P acificaz1 Holdings, lnc. a 2022 12,000,000 Payable quarte.ly
at the end of each
quarter
2021
Shareholders
. Dividends 9 2022 5,265,866,000 1,235,t26,797
2021 3,054,047,050 947,278,332
Short-term Employee Benefits c 2022 38,058,978
2021 14,928,30',1
13 2022 P1,235,526,797

13 2021 P947,278,332

a. On January 1, 2019, the Company entered into a Shared Services Agreement

with MOGRC and CHPC. The Company shall render monthly management
consulting and financial advisory services to MOGRC and CHPG for a period of
three (3) years commencing January 1, 2019, unless otheruise cancelled or
extended by mutual agreement of both parties. ln consideration of the services
rendered, the Company shall receive a monthly fee of P500,000 from each
enti$.

-21 -
 On January 22,2020, the Shared Services Agreement was amended to include
the one-time share of MOGRC and CHPC in the professional fees incurred by
the Company in relation to the ongoing processing of share swap transactions
amounting to a total of P16,506,190.

On March 15, 2022, the Shared Services Agreement was replaced with a new
Shared Services Agreement with MOGRC, CHPC, OTHI and P21, wherein the
Company shall render monthly management, consulting and financial advisory
services for a period of five (5) years commencing January 1,2022, unless
othenruise cancelled or extended by mutual agreement of the Company and any
of the parties. ln consideration of the services rendered, the Company shall
receive a monthly fee of P1,000,000 from each entity.

b. Short-term employee benefits are included under "Salaries and other employee
benefits" account in the separate statements of profit or loss and other
comprehensive income.

Related party transactions are normally settled in cash.

10. Equity

Paid-up Capital
Paid-up capital at December 31 consists of:

Years Ended December 3'l

2022 2021
Shares Amount
Authorized - Pl
par value per share 5,300,000,000 P5,300,000,000 5,300,000,000 P5,300,000,000

lssued, fully paid and

outstanding balance at
beginning of year 5,265,866,000 P5,265,866,000 49,466,000 P49,466,000
Effect of Share Swap
Transaction 4,1 00,400,000 4,1 00,400,000
lssued common shares to
major shareholders
during the year 62,500,000 62,500,000
lssued common shares
during FOO 1.0s3.500.000 1,053,s00,000
lssued, fully paid and
outstanding balance at
end of year 5,205,866,000 5,265,E66,000 5,265,866,000 5,265,866,000
Additional Paid-in
Gapital
Additional paid-in capital 88,928,018,694 89,496,100,000
Shares issuance costs (568,081,306)
88,928,018,694 88,928,018,694
Total paid-up capital P94,193,984,694 P94,193,884,694

As at December 31,2022 and 2021, the Company's stock price is P11.10 and
P13.12 respectively.

-22-
Retained Earninqs
Cash Dividends
On August 10, 2021, the BOD of the Company approved the adoption of the policy to
declare dividends equivalent to 100% of the prior year's net income after tax based
on the Company's audited separate financial statements as of such year, upon
declaration of the BOD and subject to the availability of unrestricted retained
earnings and settlement of operational expenses and other relevant taxes, cost and
expense required to pay the ordinary course of business and subject to any financing
covenants, if applicable.

On September 27, 2021, lhe Board of Directors of the Company approved the
declaration of P0.2375 dividend per share for each of the second and third quarter of
2021 totaling to P0.475 dividend per share amounting to P2.00 billion. These cash
dividends were paid to shareholders of record as at October 11, 2021 on October 18,
2021. Out of the cash dividends declared for the 2nd and 3rd quarter P2.49 million is
still outstanding as of December 31,2022.

On November 19, 2021 , the BOD of the Company approved the declaration of P0.20
cash dividends per share for the fourth quarter of 2021 totaling to P1.05 billion.
These cash dividends were paid to shareholders of record as of December 14,2021
on January 10, 2022. Out of the cash dividends declared for the 4th quarter
P1.05 million is still outstanding as of December 31 ,2022.

On March 23, 2022, the BOD of the Company approved the declaration of
P0.22 cash dividends per share for the flrst quarter of 2022 totaling to P1 .16 billion.
These cash dividends were paid to shareholders of record as of April 6, 2022 on
April 26, 2022. Out of the cash dividends declared for the 1st quarter P1 .14 million is
still outstanding as of December 31,2Q22.

On June 22,2022, the BOD of the Company approved the declaration of P0.26 cash
dividends per share for the second quarter of 2022 totaling to P1.37 billion. These
cash dividends were paid to shareholders of record as of July 6,2022 on July 22,
2022. Oul of the cash dividends declared for the 2nd quarter P1.35 million is still
outstanding as of December 31 ,2022.

On September 21, 2022, the BOD of the Company approved the declaration of
P0.26 cash dividends per share for the second quarter of 2022 totaling to
P1.37 billion. These cash dividends were paid to shareholders of record as of
October 5, 2022 on October 19, 2022. Out of the cash dividends declared for the
3rd quarter P1.35 million is still outstanding as of December 31,2022.

On December 7, 2022, the BOD of the Company approved the declaration of P0.26
cash dividends per share for the second quarter of 2022 totaling to P1.37 billion.
These cash dividends were paid to shareholders of record as of December 22,2022
on January 13,2023.

Subseguent Event
On March 8, 2023, in view of the dividends received by the Company from its
non-voting preferred shares in NGCP amounting to P184.8 million and a total of
P729.7 million cash dividends from OTHI and P21, the BOD of the Company
authorized the Company to declare, release, pay and distribute from the
Company's unrestricted retained earnings not later than April 13, 2023,
P914.68 million to the Company's shareholders as of record date of March 23,
2023.

-23-
11. lnterest lncome

lnterest income consists of income from

Note 2022 2021

Cash in banks 4 P104,836 P293,424
Short-term placements 4 54,279,542 5,816,133
UITF investment 30,687,110 5,616.490
P85,071,488 P11,726,047

ln 2022 and 2021, the Company earned interest income from investments in Unit
lnvestment Trust Fund (UITF). UITF represents funds entrusted to a financial
institution for the purpose of maximizing the yield on investible funds. As at
December 31,2022 and 2021, the Company has no outstanding UITF investment.

12. lncome Tax

The components of taxes are as follows

2022 2021
Current tax P480,212 P120,000
Deferred tax 6,095 5,309
Finaltax on interest income 17,014,294 2,345,205
Change in tax rate - (59,206)
P17,500,601 P2,411 ,308

Current income tax expense of the Company for the period ended December 31,
2022 and 2021 represents MCIT amounting to P480,212 and P120,000 which was
computed based on the new tax rate of 1%.

The reconciliation of the taxes computed at the statutory income tax rate to the taxes
as shown in profit or loss follows:

2022 2021
lncome before income tax P5,330,{36,041 P3,476,621,173
Tax on income at statutory tax rate P1,332,534,010 P869,155,293
Tax effects of:
Dividend income (1,320,274,2001 (902,825,000)
lnterest income subjected to finaltax (21,267,8721 (2,931,512)
Final tax on interest income '17,014,294 2,345,205
Movement in unrecognized deferred tax 9,494,217 38,393,500
Nondeductible expense 152 329,964
Nontaxable income (2,O16,245)
Change in tax rate (39,797)
P17,500,601 P2,411,308

-24-
 The Company did not recognize the deferred tax assets in respect of the following
items since management does not expect the Company to have sufficient taxable
profit that will be available against which the Company can utilize the benefit there
from:

2022 2021
NOLCO P188,409,9{0 P153,583,793
MCIT 480,212 120,000
Accrued exoenses {.230.000
P190,120,022 P153,703,793

As at December 31 , 2022 and 2021, the movement in the Company's deferred tax
liability is as follows:

2022 2021
Beginning balance P5,309 P
Deferred tax on unrealized foreign exchange
gain 6,095 5,309
P11,404 P5,309

The Company has NOLCO that can be claimed as deduction from future taxable
income as follows:

Year Balance
lncurred Expiry Amount Expired 2022 2021
2021 2026* P153,583,793 P P153,583,793 P153,583,793
2022 2025 34 017 017
P189,409,910 P F188,409,810 P153,583,793
*Per Section 4 of Revenue Regulations No.
25-2020 of Bureau of lnternal Revenue provides fhaf busrnesses or
enferpnses which incuned net operating /oss for taxable years 2020 and 2021 shall be allowed to carry over
the same as a deduction from gross income for the next five (5) consecutive taxable years, immediately
following the year of such /oss, unless otherwise disqualified.

The Company has carryforward benefit of MCIT which can be claimed as tax credits
against future income tax liabilities. Details of tt/ClT are as follows:

Year Beginning Ending

lncurred Expiry Date Balance Additions Expired Balance
2021 December 31,2024 P120,000 P P P120,000
2022 December 31,2025 480,212 480,212
P120,000 P480,212 P P600,212

13. Financial Risks and Capital Management Objectives and Policies

The Company's financial instruments comprise of cash and cash equivalents,

accrued expenses and other current liabilities (excluding government payables),
advances from shareholders and dividends payable.

The Company has exposure to credit risk and liquidity risk primarily from its use of
financial instruments.

-25-
This note presents information about the Company's exposure to each of the
foregoing risks, the Company's objectives, policies and processes for measuring and
managing these risks, and the Company's management of capital.

The Company's aim is to achieve an appropriate balance between risk and return
and minimize potential adverse effects on the Company's financial performance. The
BOD provides written principles for overall risk management.

The BOD constituted the Company's Audit Committee which has oversight
responsibility over Company's corporate governance process relating to the:
(a) quality and integrity of the Company's separate financial statements and financial
reporting process and the Company's system of internal accounting and financial
controls; (b) annual independent audit of the Company's separate financial
statements; (c) compliance by the Company with legal and regulatory requirements,
including the Company disclosures control and procedures; and (d) evaluation of
management's process to access and manage the Company's enterprise riskissues.

Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to
a financial instrument fails to meet its contractual obligations and arises principally
from cash.

The maximum credit risk exposure of the Company is its cash and cash equivalents
amounting to P1,731,092,553 and P13,543,070,695 as at December 31 ,2022 and
2021, respectively, These excludes a cash on hand amounting to P50,000 and
P10,000 as at December 31 ,2022 and2021(Note 4).

To reduce its credit risk on cash and cash equivalents, the Company concentrates its
main cash activities with a bank that has good financial ratings. Also, the utilization of
credit limits with the bank is regularly monitored.

High grade financial assets are those assessed as having minimal credit risk,
otherwise, they are of standard quality.

As at December 31, 2022 and 2021, the credit quality of the Company's cash and
cash equivalents is high grade given that the credit risk for cash and cash
equivalents is considered negligible since the counterparties are reputable entities
with high quality external credit rating.

lmpairment on cash and cash equivalents has been measured on a 12-month

expected loss basis and reflects the short maturities of the exposures. The Company
considers that cash and cash equivalents have low credit risk based on the external
credit ratings of the counterparties and any ECL is expected to be immaterial.

Liquidity Risk
Liquidity risk is the risk that the Company will be unable to meet its payment
obligations associated with its financial liabilities when they fall due and to replace
funds when they are withdrawn. The consequence may be the failure to meet
obligations to repay creditors and fulflll commitments.

To manage liquidity risk, the Company maintains sufficient liquid assets to meet its
maturing obligations and to meet current operating requirements.

-26-
The table below summarizes the maturity profile of the Company's financial assets
and financial liabilities based on contractual undiscounted payments used for liquidity
management as at December 31,2022 and 2021.

2022
Carrying Contractual More than
Alole Amount Cash Flows Within 1 Year { Year
Financial Asset
Cash and cash equivalents 4 P1,731,142,553 P1,731,142,553 p1,731,'t42,553 p
Financial Liabilities
Accrued expenses and other
current liabilities* I 1,230,000 1,230,000 1,230,000
Dividends payable 1,235,528,797 1,235,526,797 1,235,526,797
*Excluding govemment payables amounting
to P1 42,826,41 7.

2021
Carrying Contractual More than
Nofe Amount Cash Flows 1 Year 1 Year
Financial Asset
Cash and cash equivalents 4 P13,543,080,695 P13,543,080,695 P13,543,080,695 P
Financial Liabilities
Accrued expenses and other
current liabilities* I 25,490,72s 25,490,725 25,490,725
Dividends payable 947,278,332 947,278,332 947,27E,332
*Excluding government payables amounting to P24,566,621

Fair Value of Financial Assets and Liabilities

The carrying amounts of the Company's financial assets and financial liabilities at
reporting dates approximate their fair values considering that these have short-term
maturities.

Capital Manaoement
WscapitalaScapitalstockanddeficitaSShoWnintheSeparate
statements of flnancial position.

Management's objectives in managing capital are to safeguard the Company's ability

to continue as a going concern so that it can continue to provide returns to its
shareholders and to maintain an optimal capital structure to reduce the cost of
capital.

There were no changes in the Company's approach to capital management during

the year.

The Company's current ratio, calculated as total current asset over total current
liabilities, and debtto-equity ratio, calculated as total liabilities over equity, as at
December 31,2022 and 2021 are as follows:

Current Ratio

2022 2021
Current asset 3 P1 3,558,090,933
P',|,7 49,632,01
Current liabilities 1.379.583.214 997,335.678
1.27=1.00 13.59:1 .00

-27 -
 Debt-to-Equity Ratio

2022 2021
Total liabilities P1,379,594,618 P997,340,987
Totalequity 94,617,106,088 94,570,336,648
0.01 :'!.00 0.01:1.00

14. Supplementary lnformation Required Under Revenue Regulations No. 15-2010 of

the Bureau of lnternal Revenue (BlR)

ln addition to the disclosures mandated under PFRS, and such other standards
and/or conventions as may be adopted, companies are required by the BIR to
provide in the notes to the separate financial statements, certain supplementary
information for the taxable year. The amounts relating to such information may not
necessarily be the same with those amounts disclosed in the separate financial
statements which were prepared in accordance with PFRS. The following are the tax
information/disclosures required for the taxable year ended December 31,2022:

A. VAT
1. Output VAT P5,760,000
Account title used:
Basis of the Output VAT:
Vatable sales P48,000,000
Exempt sales
Zero rated sales
P48,000,000
2. lnput VAT
Beginning of the year F5,075,119
Goods other than for resale or manufacture 65,905
Capital goods not subject to amortization 68,443
Services lodged under other accounts 958,353
VAT payment for the year (5,760,000)
Balances at the end of the year P407,820

B. Withholding Taxes

Final withholding taxes P542,507,843

Expanded withholding taxes 3,645,623
Fringe benefit taxes '1,207,23',1
Tax on compensation and benefits 8,899,435
P556,260,{32

C. AII Other Taxes (l-ocal and National)

Other faxes paid during the year recognized under

"Taxes and Licenses" account in Operatino Expenses
Permits and license fees P120,406

28-
D. Tax Cases
As at December 31 ,2022, the company has no pending tax court cases nor has
received tax assessment notices from the BlR.

29-
Synergy Grid & Development Philippines,
Inc.
2022 Sustainability Report

1
Table of Contents

I. About this Report ..................................................................................................... 3

II. Company Background.............................................................................................. 3
III. Materiality Process ................................................................................................... 4
IV. Economic Issues ...................................................................................................... 5
A. Direct Economic Value Generated and Distributed .............................................. 5
B. Anti-Corruption .................................................................................................... 6
i. Training on anti-corruption policies and procedures ............................................ 6
ii. Incidents of corruption ......................................................................................... 7
V. Environmental Issues ............................................................................................... 7
A. Resource Management ....................................................................................... 7
i. Energy consumption within the organization........................................................ 7
ii. Reduction of energy consumption ....................................................................... 8
iii. Water consumption within the organization ......................................................... 8
B. Environmental Compliance .................................................................................. 9
VI. Social Issues .......................................................................................................... 10
A. Employee Management..................................................................................... 10
i. Employee data .................................................................................................. 10
ii. Employee benefits ............................................................................................. 10
B. Employee training and development.................................................................. 10
C. Promotion of worker health ................................................................................ 10
D. Labor-management relations ............................................................................. 11
E. Data security ..................................................................................................... 11
VII. United Nations Sustainable Development Goals .................................................... 13

2
I. About this Report
The 2022 Sustainability Report (Report) details the economic, environmental, and
social (EES) impacts arising from the operations of Synergy Grid & Development
Philippines, Inc. (SGP or the Company) for the year ending 31 December 2022. This
report has been prepared according to the Sustainability Reporting Guidelines for
Publicly-Listed Companies prescribed under Securities and Exchange Commission
(SEC) Memorandum Circular No. 4 Series of 2019.

As a result of this Report, SGP has been able to assess, measure, monitor, and
manage its non-financial performance across the EES aspects towards achieving
sustainability.

II. Company Background

Company Details
Name of Synergy Grid & Development Philippines, Inc. (formerly UEM
Organization Development Philippines, Inc.)
Location of 16th Floor, Tycoon Center Bldg., Condominium Pearl Drive,
Headquarters Pasig City
Location of 16th Floor, Tycoon Center Bldg., Condominium Pearl Drive,
Operations Pasig City
Report Boundary This report shall only cover SGP and does not include any of its
subsidiaries.
Business Model The Company currently has limited business operations. Its
income is derived from:

1. Interest income from cash deposits with the bank and

short-term money placements;
2. Management consulting and financial advisory services
provided to Monte Oro Grid Resources Corporation and
Calaca High Power Corporation; and,
3. Dividend income from the National Grid Corporation of
the Philippines (NGCP), its sole operating asset.

It currently has ten (10) employees:

- President
- Chief Financial Officer
- Comptroller
- Audit and Risk officer
- Accounting Manager
- Treasury Assistant
- 2 Finance Associate
- Administrative Assistant
- Messenger
Reporting Period Year ending 31 December 2022
Highest Ranking Paul P. Sagayo
Person President
Responsible for
this Report

3
III. Materiality Process
For the purpose of SGP’s Sustainability reporting, the concept of “Materiality” refers to
the significant EES impacts of the Company that substantively influence the
assessments and decisions of its stakeholders.

In 2020, SGP conducted a materiality assessment to determine the strategic

sustainability priorities in line with its values and business goals. The results of the
2020 materiality assessment were adopted for 2021 and adjusted, when relevant, in
consideration of the Follow-on Offering conducted on 10 November 2021.

In pursuit of the 2020 materiality assessment, the Company undertook to assess the
opinions of a selection of internal and external stakeholders through questionnaires
and interviews. The term stakeholders include investors, shareholders, directors,
officers, regulators, employee, and legal consultants. The stakeholders who
participated were given a brief explanation of the purpose of the Materiality process
and were asked to choose from a list which EES topics they believe are significant for
the Company to report on. To guide the stakeholders in identifying material topics,
each were requested to take the following factors into account:

• Key corporate values, policies, strategies, operational management systems,

goals, and targets;
• The core competencies of the Company and the manner in which they can
contribute to sustainable development;
• The stakeholders’ interest and expectations in the Company;
• Broader economic, social, and/or environmental interests and topics such as
unemployment, vulnerable groups and civil society;
• Future challenges for the industries SGP has interest in; and
• Laws, regulations, international agreements, or voluntary agreements of strategic
significance to the Company and the stakeholders.

For the reporting period, the resulting material topics and material disclosures were
revisited in light of the changes in work situation, especially those brought about by the
continuing restrictions related to the COVID-19 pandemic.

With the addition of Occupational Health and Safety topic, SGP’s consultation and
evaluation process resulted in ten (10) material topics and thirteen (13) material
disclosures. Figure A is a visual presentation of the material topics assessed against
their (a) significance on EES impacts; and (b) influence on stakeholder assessments
and decisions.

4
 10
High
Relevance to Stakeholders

Economic Value
8
Occupational Health and Safety
6 Data Security Environmental Compliance

Energy Consumption
4
Water Consumption Employee Management Anti-corruption Policies
2 and Incidents
Labor-management Employee Training and
0 Relations Development
0 2 4 6 8 10

y
Low High
Low Significance on EES Impacts

Figure A: Prioritization of topics

IV. Economic Issues

A. Direct Economic Value Generated and Distributed

Disclosure Amount (in PhP)

Direct economic value generated 3,611,300,000.00
(revenue)
Direct economic value distributed:
a. Operating expenses 158,426,109.00
b. Employee wages and benefits 14,928,301.00
c. Payments to suppliers, other 0.00
operating costs
d. Dividends given to stockholders 3,054,047,050.00
and interest payments to loan (dividend declared)
providers
e. Taxes given to government 241,057.00
f. Investments to community (e.g. 0.00
donations, CSR)

At the core of the Company’s business operations is the aim to significantly contribute
to the economic development of the Philippines, with a special view to supporting
economic recovery with the establishment of key energy infrastructure projects. In
shaping its business model and investment strategies, SGP continues its commitment
in undertaking the economic well-being of the society, including, but not limited to,
investors, shareholders, employees, local communities, and the government—not only
at present but over the course of succeeding years.

As a holding company, the Company currently generates and distributes direct

economic value through minimal operations. As early as 2010, SGP has been carefully
planning and preparing to invest in corporations and entities engaged in power, energy,
utilities, infrastructure and other allied businesses. Its follow-on offering and its
procurement of additional preferred shares in the National Grid Corporation of the
Philippines is another step towards actualization of the company’s business potential.

5
To reduce investment risks, existing investments are regularly monitored, and new
investments are undertaken with due diligence considering SGP’s economic position
and long-term financial goals. Further, the Company has an existing investment
criterion that it implements to ensure that risks are mitigated, and its investments are
well-managed. The Company’s Audit and Risk Committee (ARC) regularly evaluates
and implements the enterprise risk management systems and protocols. This includes
providing oversight over management’s risk activities in managing credit, market,
liquidity, operational, legal, and other risk exposures of the Company in relation to its
assets. The ARC also continues to regularly review the Company’s risk appetite levels
and risk tolerance limits based on changes and developments in the business,
applicable regulatory framework, and external economic and business environment,
especially when major events occur that are considered to have major impacts on the
Company such as the global pandemic.

SGP shall continue to add value by developing and improving its portfolio of well-run
and sustainable assets that positively contribute to individual stakeholders, the
community, and the country’s economy. The Company acknowledges that there are
still a lot of opportunities to improve its future profitability. In order to achieve its goals
despite the risks and today’s challenging environment, SGP’s plans include investing
in research and development to generate knowledge and innovations that will improve
its financial position. Further, SGP shall further pursue its acquisition of subsidiaries
and seek strategic partnerships that will create value for its stakeholders by improving
infrastructure, and electricity production and distribution.

B. Anti-Corruption

i. Training on anti-corruption policies and procedures

Disclosure Quantity
Percentage of employees to whom the organization’s anti- 100
corruption policies and procedures have been
communicated to
Percentage of business partners to whom the 100
organization’s anti-corruption policies and procedures
have been communicated to
Percentage of directors and management that have 0
received anti-corruption training
Percentage of employees that have received anti- 0
corruption training

As guided by the Company’s Manual for Corporate Governance, the Company

adopts an anti-corruption policy and program in its Code of Conduct. These
procedures will likewise be embedded in trainings of its current and future
employees. The Company has developed a framework for whistleblowing that
would allow the employees to freely communicate their concerns about illegal
or unethical practices without fear of retaliation, and to have direct access to
an independent member of the Board or a unit created to handle whistleblowing
concerns.

The Company continues to vigorously pursue the implementation of anti-

corruption measures and intends to conduct a continuous risk assessment to
identify significant risks related to corruption.

6
 ii. Incidents of corruption

Disclosure Quantity
Number of incidents in which directors were removed or 0
disciplined for corruption
Number of incidents in which employees were dismissed 0
or disciplined for corruption
Number of incidents when contracts with business 0
partners were terminated due to incidents of corruption

The Company aims to protect the confidence and trust that stakeholders put in
it which is why SGP has zero tolerance for corruption in the organization.
Corruption negatively affects all its stakeholders. It can lead to loss of business
resources, slowdown of business development, damage to the business’s
brand, negative effect on employee morale, and inhibit economic growth.

In its internal dealings and transactions with stakeholders, the Company

continues to adhere to laws on anti-corruption, anti-bribery, and money
laundering, among others. It expects and insists that its business partners,
present and future, consistently observe applicable laws and regulations with
integrity and honesty. The Company’s contracts and transactions are
thoroughly reviewed by its external legal team and higher management to
ensure that standard provisions concerning compliance with applicable laws
against corrupt practices are incorporated.

V. Environmental Issues
The Company recognizes its indispensable role alongside the government and civil
society in contributing solutions to global environmental challenges like air pollution,
water shortage, and climate change.

With the reduced face to face interactions and hybrid work arrangement due to the
community quarantine restrictions in the country, SGP is still able to reduce its energy
and water consumption. Moving forward, SGP anticipates the necessity and benefit of
developing and implementing environmental governance policies, as well as including
environmental compliance in its compliance risk management structure. Further,
considering that its environmental impact is highly dependent on the activities and
businesses of companies where SGP will hold ownership stakes, it shall work with
them to implement environmental policies to mitigate the impact created by their
activities when possible.

A. Resource Management

i. Energy consumption within the organization

Disclosure Quantity Unit

Energy consumption (renewable sources) 0.00 GJ
Energy consumption (gasoline) 0.00 GJ
Energy consumption (LPG) 0.00 GJ
Energy consumption (diesel) 0.00 GJ
Energy consumption (electricity) 0.00 kWh

7
 ii. Reduction of energy consumption

Disclosure Quantity Unit

Energy consumption (renewable sources) 0.00 GJ
Energy consumption (gasoline) 0.00 GJ
Energy consumption (LPG) 0.00 GJ
Energy consumption (diesel) 0.00 GJ
Energy consumption (electricity) 0.00 kWh

Conserving energy reduces emissions which result in cleaner air quality and create a
healthier planet. Energy conservation also positively contributes to decreasing an
entity’s operating expenses, leading to sustainable business operations. On the other
hand, overusing energy can lead to increased expenses for an organization, air
pollution and climate change, all of which negatively affect the business’s operations
and investments.

Prior to the onset of the pandemic and the imposition of community quarantine rules
in the Philippines, the Company’s total energy consumption was derived mainly from
the activities in its office occupied by its single employee in 2020 and the years prior.
Further, the office of the Company was shared with other holding companies with
likewise minimal operations. Thus, energy consumption and the Company’s overall
impact to the environment was very minimal and distributed among the organizations.
This was further reduced when a work-from-home scheme was implemented by the
Company for the majority of the year 2020, and continuing into 2021 and 2022.
Nonetheless, SGP recognizes that it has indirect energy consumption through its
dealings with third parties.

To reduce the risk posed by the negative effects of excessive energy use, the
Company has undertaken several steps to reduce its energy consumption, both in the
office and at the home setting where work was partially done by the Company’s
employees. Its energy-saving efforts include advising employee to reduce and replace
inefficient and excessive lighting in the work area, taking advantage of natural daylight,
establishing preventive maintenance program for its air conditioning, turning off
electrical equipment in the office during non-business hours, and choosing energy
efficient equipment. Further, the Company is also implementing paperless
transactions, when possible. Its workforce is also able to lessen travel emissions by
conducting virtual calls and meetings and opting to work from home when it is not
necessary to be physically present at the office.

Since the Company expanded its operations, it is in the process of drafting and
developing an environmental policy, which shall include the following approaches to
reduce its energy consumption: tracking energy consumptions at all levels (direct and
indirect use), utilizing resource conservation technologies, and investing in clean
energy. The Company plans to integrate its environmental policy into the Company’s
vision and operations, making energy consciousness part of its corporate culture.

iii. Water consumption within the organization

Disclosure Quantity (in cubic meters)

Water withdrawal 0.00
Water consumption 0.00
Water recycled and reused 0.00

8
Despite its low water consumption, SGP aims to help in alleviating the water scarcity
in the Philippines aggravated by climate change. Its water-saving measures currently
include installing water-efficient taps with flow restrictor to use less water, fixing leaking
faucets, use of fans and natural ventilation when possible, and regularly checking
toilets and faucets for leaks.

Despite its efforts, the Company understands that a lot of factors affecting its water
supply is beyond its control.

Reports and experience have shown that businesses and investors in the electric
power or energy sector are exposed to water-related physical, regulatory, and
reputational risks. Climate change will further reduce the availability of reliable and
high-quality water, impacting productivity, costs, revenues, public goodwill, and
reputation for companies in this sector. Because of the Company’s exposure to water-
related risk, it considers this a material issue that merits management attention and
action.

In light with the risks posed to SGP’s business and stakeholders by water shortage
and interruption, it plans to implement key actions below as its operations expand:

a. Continuous measurement of its water footprint;

b. Regular assessment of business risks associated with its water footprint;
c. Engagement with stakeholders (local communities, non-government
organizations, government bodies, contractors, shareholders, and employees) as
part of its water risk assessment, management and long-term planning;
d. Integration of water risk into its overall business planning and governance
structure; and
e. Disclosure to stakeholders of its water performance and associated risks.

By pursuing its strategic water management plan above, SGP hopes to build resiliency
for water and climate change risks and turn these risks into financial and competitive
advantage. Water efficiency measures can demonstrate the Company’s commitment
to water management, boost public image, and help build positive relations with the
communities where the Company may operate.

B. Environmental Compliance

Disclosure Quantity (in PhP)

Total amount of monetary fines for non-compliance with 0.00
environmental laws and/or regulations
No. of non-monetary sanctions for non-compliance with 0.00
environmental laws and/or regulations
No. of cases resolved through dispute resolution 0.00
mechanism

SGP remains committed to conducting its business in accordance with the highest
ethical standards and regard to environmental aspect of its activities. In 2022, SGP
recorded no fines or non-monetary sanctions for non-compliance with environmental
laws and regulations. It will continue striving to go beyond compliance by actively
minimizing the impact of its business activities on the environment and implementing
environmental protection programs. It shall also continue ensuring that the Company
will be consistent in its positive environmental compliance record through integrating
environmental compliance risk in its risk management function.

9
VI. Social Issues
A. Employee Management

i. Employee data

Disclosure Quantity
Total number of employees 10
a. Number of female employees 8
b. Number of male employees 2
Attrition rate 0
Ratio of lowest paid employee against 0
minimum wage

ii. Employee benefits

List of Benefits Availability % employees

availed
SSS ✓ 100%
PhilHealth ✓ 100%
Pag-ibig ✓ 100%
Parental leaves N/A
Vacation leaves ✓ 100%
Medical benefits (aside from Philhealth) ✓ 100%
Housing assistance (aside from Pag-ibig) N/A
Retirement fund (aside from SSS) N/A
Further education support N/A
Company stock options N/A
Telecommuting ✓ 100%
Flexible-working hours ✓ 100%
(Others)

B. Employee training and development

Disclosure Quantity
Total training hours provided to employees 34
Average training hours provided to employees 3.4

C. Promotion of worker health

Disclosure Description
Employee access to non-occupational and Medical benefits in addition
healthcare services to Philhealth is available
Voluntary health promotion services and Regular monitoring of health
programs risk and access to health
information is available

10
D. Labor-management relations

Disclosure Quantity
Percentage of employees covered with Collective Bargaining 0
Agreements
Number of consultations conducted with employees 0
concerning employee-related policies

In 2021, the Company increased its workforce from one to ten (10) employees due to
its follow-on offering conducted in the 4th quarter of the year. Nonetheless, employee
welfare and wellness are still highly regarded at SGP. In addition to the minimum
benefits required by law, SGP provided all its full-time employees with leave benefits
and company-funded medical benefits, to name a few. In view of the continuing risks
posed by COVID-19, employees were allowed to continue work from home
arrangements and that the work standards set by the Department of Health,
Department of Labor and Employment, and the COVID-19 Inter-Agency Task Force
for the Management of Emerging Infectious Diseases were diligently followed at all
times.

Aside from providing access to non-occupational and healthcare services to the

Company’s employees, in addition to Philhealth, the Company also regularly assesses
the health status of its employee and provides access to programs and materials on
health management and improvement. This includes access to online seminars and
articles on stress management, COVID-19 precautions, and maintaining a healthy
lifestyle.

The Company recognizes the risks posed by a small staff. Employee turnover could
result in disruption of business and expense in finding and training new employees.
There is also a risk of fraud or collusion when employees are largely autonomous. As
part of its risk mitigation strategies, the Company continues to implement a selection
procedure that increases the probability of finding the right staff for the business. It also
implements a performance development system for communication of performance
expectations and monitoring performance.

The value that the Company places on employee participation is reflected in the
Company’s Manual of Corporate Governance. It plans to implement the action points
therein as the Company further expands its operations. It also intends to provide proper
training for its employees and to improve labor relations.

E. Data security

Disclosure Quantity
Number of data breaches, including leaks, thefts and losses of data 0

Information technology (IT) enables the Company to maintain its operations with
convenience and speed, especially in 2022 when most transactions continued online.
It, however, also presents potentially high-impact risk to both the Company and its
stakeholders. While there were no data breaches recorded in 2022, cyber security
remains on the top of the Company’s agenda. Significant risks in technology identified
by the Company includes data management risk, cyber security risk, and third-party
risk.

11
Ineffective data management can result from poor data management capabilities,
retention of unnecessary data, and unmanaged creation, processing, and disposal of
data. This can lead to financial fraud, accounting and compliance issues. IT-related
processes within the Company are also vulnerable to cyber-attacks and data privacy
breaches. The Company is also exposed to third-party risk as it does business with
other companies, financial institutions, government offices, and other stakeholders.

To mitigate these risks, the Company continues its implementation of the following
action steps to better enable SGP to oversee and manage IT risks:

a. Integrate IT risks into its risk management structure;

b. Conduct trainings on technology management skills;
c. Conduct regular and independent internal audit;
d. Assess IT capabilities of third parties; and
e. Develop cyber incident response plan.

A secured IT environment will increase stakeholder confidence and will allow the
Company to maximize existing and emerging IT available to it. SGP aims to keep up
with the new technology and capabilities as it continues to strengthen its technological
governance through the action steps mentioned above.

12
VII. United Nations Sustainable Development Goals
In September 2015, the United Nations General Assembly adopted the 2030 Agenda
for Sustainable Development that includes 17 Sustainable Development Goals
(SDGs). The SGDs aim to achieve a better and more sustainable future for all. In a
highly interconnected world, the Company is fully aware that it cannot thrive without
operating within a sustainability framework.

The Company has analyzed the risks and opportunities to our business that may arise
from the 17 UN SGDs, as follows:

Business Societal Potential Negative Management

Contributions Value/Contribution to Impact or Approach to
UN SDGs Contribution Negative Impact
Stimulating the 1 8 9 11 17 As operations Investment in clean
economy expands, so will energy and partnering
resources with stakeholders for
consumption sustainable business
models
Implementing energy 6 7 11 12 13 17 Expenses will be Integrating energy and
and water saving incurred in upgrading water conservation
measures fixtures and into business
equipment, and in planning, considering
transitioning to use of profits in efficiency
alternative energy and innovation
sources or efficient
use of energy and
water
Promoting employee 3 8 16 With the COVID-19 Provide access to
health and welfare pandemic, turnover non-occupational and
caused by medical healthcare services,
emergencies within prioritize health
small staff can cause programs and
disruption of business. implementation of
There is also a risk of sanitation measures;
fraud if low on Improve selection
accountability. procedures,
implement
performance
development system

13
 for communication of
performance
expectations and
monitoring employee
performance; to
improve labor relations
with employees
Promoting data 9 16 Increase in vigilance Set notification and
privacy and security in cybersecurity can approval threshold for
hinder ease of doing IT risk situations
business

In 2022, through the Company’s sole operating asset NGCP and its corporate social
responsibility initiatives, it was also able to indirectly comply with the SDGs in its engagements
to its stakeholders.

Stakeholder Societal Strengths Management

Contributions Value/Contribution to Approach
UN SDGs
Provision of Health 3 This project will NGCP provided health
Center to host facilitate and promote centers equipped with
barangays sustained basic medical
improvements in equipment for primary
community health care level.
health status, with These centers will
special attention given provide first aid, lying-
to the needs of women in maternity services
and children. and child health care,
and other basic health
services.
Provision of 4 This project was aimed NGCP provided
Computer Laboratory to bridge the digital computer laboratory
to host school gap in underserved buildings with air
beneficiaries and remote NGCP conditioning units
host communities by equipped with twenty-
providing students with five laptops, two
access to basic printers, one router,
computer proficiency. and sets of tables and
chairs for twenty-five
laptops.
Provision of Two- 4 This project supports NGCP provided 2-
Classroom Building to the government’s Classroom buildings in
host school initiative in providing partnership with the
beneficiaries basic infrastructure Department of
facilities conducive to Education (DepEd).
learning. The project
also aims to improve
the learning
environment of the
students that can
impact their well-being
and performance to
achieve success in the
future.
Medical assistance to 3 NGCP to provide NGCP conducted face-
host communities health care for to-face Medical and
through Mobile MD barangay beneficiaries Dental Missions in five
project (5) areas under Alert
Level 1, two (2) in

14
 North Luzon, one (1) in
South Luzon, one (1)
in Visayas and one (1)
IP Community in
Mindanao.

For the other 20 target

barangays and IP
Communities which
were under Alert Level
2. an alternative
implementation
scheme was adopted
through the
turnover/distribution of
hygiene kits
Educational 4 The program aims to In partnership with 26
Assistance through provide opportunity to partner state
Tertiary Edification underprivileged but universities and
(EDUCATE) deserving students colleges, NGCP
from NGCP host provided scholarship to
communities 400 college students.
Benefits per semester
include full tuition fee,
monthly stipend of
P5000 for five months
and P5000 book and
clothing allowance.
Gamit ni Bulilit 4 Simultaneous NGCP turned-over
distribution/turnover of school supplies to 200
school supplies to schools in Luzon,
pupils from select Visayas and
public schools Mindanao. School
nationwide supplies consists of
bag, notebooks,
pencils, reusable
facemasks and a bottle
of alcohol
Response to 13 Prepositioned items NGCP distributed relief
calamity-stricken provided the goods to different
communities through opportunity for a faster provinces affected by
Calamity Affected way to deliver relief typhoons and natural
Relief Efforts (CARE) items to affected calamities in 2021. By
communities. procuring the items
prior to any incident
and prepositioning
these in hazard prone
areas, it avoided the
effect of being
inflationary during a
calamity and improved
efficiency in disaster
response.
Community Water 6, 7 Potable water supply NGCP to provide
System Project access to the local support in
community for implementing the
domestic use construction of a Water
system with a Village
Bio-sand Filtering
System powered by

15
 Solar PV. Community
members were
likewise trained on
Sanitation and Hygiene
to minimize waterborne
illnesses in the area.
Disaster Risk 13 Strengthening the NGCP provided
Reduction (DRR) capacity of high-risk support in the updating
Project NGCP partner of provincial risk
provinces in disaster assessment;
preparedness and strengthening and
mitigation to contribute institutionalization of
to the Sendai early warning system
Framework for (EWS),
Disaster Risk establishing/updating
Reduction expected of localized flood and
outcome: “substantial landslide EWS and
reduction of disaster communication
risk and losses in lives, equipment, and
livelihoods and health developing a
and in the economic, dashboard for
physical, social, information
cultural, and management for
environmental assets provincial LGUs
of persons, chosen through hazard
businesses, prone categorization,
communities and vulnerability, and
countries”. exposure based on
available NDRRMC
data and information.
Wildlife and Nature 13, 15 Increase the NGCP invested in
Guardians (WINGS) understanding of the biodiversity
biology and ecology of conservation with the
threatened species, main goal of increasing
restore, conserve, and the population of the
protect their habitat Rufous-headed
and maintain the Hornbill (locally known
integrity of ecosystems as Dulungan), a
to support and sustain critically endangered
human well-being. species found in the
Northwest Panay
Peninsula and the
Norther Negros Natural
Park Key Biodiversity
Areas. This has been
done through capacity
building initiatives
targeting local
governments, the
DENR, and other key
stakeholders, as well
as efforts to enhance
ecological knowledge
with the aim of raising
awareness among
local communities on
the importance of
creating a conducive
environment for the
conservation and

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 protection of the
Dulungan.
Forest Restoration 13, 15 Establish ecological NGCP supports the
Project stability and empower implementation of
key stakeholders capacity-building
through forest activities of local
restoration, capacity communities,
building, and increasing forest cover
sustainable livelihood thru native forest tree
opportunities. The planting, and
initiative likewise helps establishment of
secure present and Community Ecological
future generations’ Sanctuaries thru active
need for forest collaboration with key
services such as stakeholders such as
sustainable water community-based
supply, clean air, organizations, local
reliable energy source, government units and
and protection from the Department of
impacts of weather Environment and
disturbances such as Natural Resources.
landslides and
floodings. The project is being
implemented in three
protected areas where
NGCP likewise
operates and
maintains transmission
lines and facilities.
Provision of 1 The livelihood kits In partnership with the
Livelihood Kits helped alleviate the Department of Trade
through Community negative impact of the and Industry (DTI) and
Upskilling and COVID-19 pandemic the respective local
Enterprise by providing the government units
Development needed capital in the (LGUs), NGCP turned
(CUPED) form of livelihood kits over livelihood kits to
to various micro- 320 micro-enterprises
enterprises comprising from eight (8) host
of 20 convenience municipalities/cities
stores, 10 bakeries, comprising of
and 10 convenience stores
modiste/tailoring (sari-sari), bakeries,
packages in eight (8) and modiste/tailoring.
municipalities/cities.
Training related to
enterprise
development was also
provided to the
beneficiaries through
the project partner,
Department of Trade of
Industry (DTI). The
identification of
individual beneficiaries
was conducted by the
concerned LGUs, and
profiling/verification
was done by DTI.
Grassroots Rice- 2,15 GRAINS aims to NGCP partnered with
based establish a replicable World Wide Fund for

17
Agroenterprises prototype for profitable Nature Philippines and
Integrated small-scale rice-based provided support by
Sustainability farming systems providing the needed
(GRAINS) Project where there is resources and capacity
diversification of development trainings
production and to farmers on rice-
sustainable methods based farming systems
are integrated such as technology demo farm,
integrated nutrient financial literacy and
cycling, to help lower savings mobilization,
production costs and and organizational and
reduce the enterprise
dependency on costly development.
external inputs.

Expected results of the

project are as follows:
1. Establishment of A
1/2 to 1 hectare of
technology
demonstration
farm integrated
with vegetable and
poultry production;
2. Creation of
community-
managed savings
groups to imbibe
the importance of
financial literacy
and provide local
access to finance;
3. Formation of
agroenterprise
associations
trained in
management of
organization and
enterprise
development.

18
Provision of skills 1, 8 Provision of NGCP partnered with
training course construction-related the Technical
through Skills Camp skills training Education and Skills
project particularly the Development
Shielded Metal Arc (TESDA), a national
Welding (SMAW) agency mandated to
training with provide relevant,
corresponding accessible, high quality
National Certification and efficient technical
(NC) II qualification education and skills
assessment. development, to
implement the SMAW
The NC II qualification training course in 4
helps the beneficiaries communities and
become competitive subsequently, conduct
and qualified for an NC II assessment
available job of the trainees to
opportunities in the certify them as
related industry. The qualified and
NC II passers are competent skilled
endorsed to the LGU’s workers.
Public Employment
Service Office (PESO)
for manpower pooling.

The Company’s evaluation reveals that its EES business impacts are aligned with 12
out of 17 UN SGDs. Of these business impacts, our most significant contribution is its
investment in banks and, indirectly, in various industries that increase economic
productivity of our country.

19
Disclosure Index

Disclosure Reference and Omission

Contextual information Pg. 2
Materiality process Pg. 3
ECONOMIC
Direct economic value Pg. 5
generated and Distributed
Climate-related risks and As a holding corporation with limited business
opportunities operation, the Company has no climate-related risks
and opportunities.
Portion of spending on local As a holding corporation with limited business
suppliers operation, the Company has no significant
procurement budget on local suppliers.
Training on anti-corruption Pg. 6
policies and procedures
Incidents of corruption Pg. 7
ENVIRONMENTAL
Energy consumption within the Pg. 8
organization
Reduction of energy Pg. 8
consumption
Water consumption within the Pg. 9
organization
Materials used by the As a holding corporation with limited business
organization operation, the Company did not use or produce any
materials to manufacture products or services.
Ecosystems and biodiversity The Company does not own, lease, manage or operate
in protected areas or areas of high biodiversity value.
There are no species or habitats affected by the
Company’s limited business operation.
GHG As a holding corporation with limited business
operation, the Company does not directly or indirectly
produce GHG emissions or emissions of ozone-
depleting substances (ODS).
Air pollutants As a holding corporation with limited business
operation, the Company does not directly or indirectly
produce significant air pollutants.
Solid Waste As a holding corporation with limited business
operation and number of employees, the Company
does not produce significant solid waste.
Hazardous Waste As a holding corporation, the Company does not
produce or generate hazardous waste.
Effluents As a holding corporation with limited business
operation and number of employees, the Company
does not produce significant effluents.
Non-compliance with Pg. 9
environmental regulations
SOCIAL
Employee data Pg. 10
Employee benefits Pg. 10
Employee training and Pg. 11
development
Labor management relations Pg. 11

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Diversity and equal opportunity Topic is not material as Company only has one (1)
employee.
Occupational health and safety Pg. 11
Labor laws and human rights Topic is not material as Company’s only employee has
not commenced any legal action involving forced or
child labor or violation of human or labor rights.
Supply chain management Topic is not material as Company does not have any
supplier due to the nature of its business and its limited
business operation.
Significant impacts on local Topic is not material as Company does not have
communicates business operations involving local communities.
Customer satisfaction Topic is not material due to the nature of Company’s
business and limited business operations.
Health and safety Topic is not material as Company does not have
products or render services that affect the health and
safety of the customers or the public in general.
Marketing and labelling Topic is not material as Company’s operations do not
involve marketing and labelling
Customer privacy Topic is not material as Company has no significant
customers whose data is processed by the Company.
Data security Pg. 12
UN SUSTAINABLE DEVELOPMENT GOALS
Product or service contribution Pg. 13
to UN SDGs

21
,]

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Commission, the issuer has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.

SYNERGY GRID & DEVELOPMENT PHILS., INC.

By

^Sr*hm*
President

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