National Power Corporation Small Power Utilities Group POWER SUPPLY AGREEMENT

Small Power Utilities Group Power Supply Agreement Test our interest in participative discussion Story about: The KUBA Family The Consultant and the Driver

National Power Corporation 27 January 2009 Small Power Utilities Group Power Supply Agreement Between NPC-SPUGAnd Distribution Utilities

Small Power Utilities Group Power Supply Agreement PSA MEANS: Power Supply Agreement Para Sa Atin

Small Power Utilities Group Power Supply Agreement Why do we need to discuss and to sign PSA? Types of Agreement: Purchase Order Memorandum of Understanding Memorandum of Agreement Contract of Supply and/or Services

Small Power Utilities Group Power Supply Agreement Why do we need to discuss and to sign PSA? Source of Funds: SAGR Revenue – Opex = Loss = UCME 0.00 – Fixed Cost = Loss 0.00 – Variable cost = Loss Capex = Loss = UCME UCME > ERC Approved UCME Secure funds from the GAA, if possible If not, what will happen? PRIORITIZE OPERATIONS

Small Power Utilities Group Power Supply Agreement Why do we need to discuss and to sign PSA? SPUG has the mandate to provide power DUs should pay SPUG for the service Therefore, “No Revenue, No funds for Operation” Both Parties should do each responsibility

Small Power Utilities Group Power Supply Agreement Why do we need to discuss and to sign PSA? Signing the PSA is inevitable Energy forecasting Capacity allocation Funding requirements Legal considerations

Small Power Utilities Group Power Supply Agreement Table of Contents SECTION ONE – SCOPE OF AGREEMENT SECTION TWO- TERM OF AGREEMENT SECTION THREE- SERVICE SPECIFICATIONS SECTION FOUR - CHARGES AND ADJUSTMENTS SECTION FIVE- DEFAULT SECTION SIX- TERMINATION SECTION SEVEN- INDEMNIFICATION SECTION EIGHT -MISCELLANEOUS PROVISIONS LIABILITIES FORCE MAJEURE SETTLEMENT OF DISPUTES: ARBITRATION COURT LITIGATION ATTORNEY’S FEES AND LITIGATION EXPENSES NOTICES VALIDITY AND BINDING EFFECT AMENDMENT ENTIRE AGREEMENT UNDERTAKING EFFECTIVITY Annex A-DEFINITION OF TERMS Annex B-CONTRACTED DEMAND AND ENERGY Annex C-CHARGES AND ADJUSTMENTS

Small Power Utilities Group Power Supply Agreement Signing the PSA is Inevitable

Small Power Utilities Group Power Supply Agreement Conclusion Let us join forces in order to have a better supply of electricity in your franchise areas

Small Power Utilities Group Power Supply Agreement Salamat Po

Small Power Utilities Group Power Supply Agreement The KUBA FamilyUV MHFR BGBGBG ALL are KUBA ? ? ?

Small Power Utilities Group Power Supply Agreement The Consultant and the Driver

Small Power Utilities Group Power Supply Agreement Table of Contents SECTION ONE – SCOPE OF AGREEMENT SUPPLY Supply of electric power and energy between NPC – SPUG and Distribution Utilities

Small Power Utilities Group Power Supply Agreement Table of Contents SECTION TWO - TERM OF AGREEMENT SECTION TWO - TERM OF AGREEMENT Cooperation period is ten (10) years from Effectivity Date and renewable by mutual consent of the parties. DU or NPC has an option to enter into a Power Supply Agreement with new power provider (NPP).

Small Power Utilities Group Power Supply Agreement Table of Contents SECTION THREE - SERVICE SPECIFICATIONS SECTION THREE - SERVICE SPECIFICATIONS CONTRACT DEMAND AND CONTRACT ENERGY Allocation of Contract Demand and Contract Energy as set forth in Annex A. To increase the contracted volumes, notify at least two (2) years in advance to adjust capacity

Small Power Utilities Group Power Supply Agreement Table of Contents SECTION THREE - SERVICE SPECIFICATIONS SERVICE RELIABILITY Supply shall be available continuously except for allowable interruption or reduction The parties shall have a period of three (3) years to improve their respective facilities, including ensuring the compliance of the CUSTOMER with the pertinent technical specifications and performance standards of the Distribution Code.

Small Power Utilities Group Power Supply Agreement Table of Contents SECTION THREE - SERVICE SPECIFICATIONS APPLICATION FOR INCREASE IN DEMAND AND ENERGY Through an amendment in Contract Demand or Contract Energy for any particular year or years subject to the technical constraints of generating plants, transmission, substation, and other facilities and subject to such rates and to other terms and conditions as the parties may agree upon.

Small Power Utilities Group Power Supply Agreement Table of Contents SECTION THREE - SERVICE SPECIFICATIONS ASSIGNABILITY NPC-SPUG shall assign, cede, transfer, allocate wholly or partly its rights and obligations under this agreement unilaterally to an NPP which will be selected by the NPC-SPUG/CUSTOMER to take over the former’s power generation function by reason of private sector participation. CUSTOMER shall not assign any of its rights and/or obligations under this Agreement without the prior written consent of NPC-SPUG, which consent shall not be unreasonable withheld, and subject to the terms and conditions imposed in this Agreement.

Small Power Utilities Group Power Supply Agreement Table of Contents SECTION FOUR - CHARGES AND ADJUSTMENT SECTION FOUR - CHARGES AND ADJUSTMENT Billing and payment for energy delivered by NPC- SPUG Subsidized Approved Generation Rate (SAGR) Other adjustments and procedures as approved by the ERC and provided in Annex B on Charges and Adjustments.

Small Power Utilities Group Power Supply Agreement Table of Contents SECTION FIVE - DEFAULT The occurrence of the following events: Breach or failure in the performance An assignment by either party Repeated breaches of this agreement Cessation by either party

Small Power Utilities Group Power Supply Agreement Table of Contents SECTION SIX - TERMINATION Default Initial Term Extended Term

Small Power Utilities Group Power Supply Agreement Annex B CHARGES AND ADJUSTMENTS TARIFF Basic Rate =P /kW-hr Capex/Fixed Cost =P /kW-hr Variable Cost =P /kW-hr Overdue Accounts = P /kW-hr GRAM = P /kW-hr ICERA = P /kW-hr

Small Power Utilities Group Power Supply Agreement Annex B PENALTIES If the CUSTOMER fails to meet the annual Contracted Energy, CUSTOMER shall still pay for the Full Fixed Cost component of the True Cost Generation Rate (TCGR) of the undelivered Contracted Energy; If the CUSTOMER offtakes is in excess to the Contracted Energy, CUSTOMER shall pay for the Full Variable Cost component of the True Cost Generation Rate (TCGR) of the incremental excess energy;

Small Power Utilities Group Power Supply Agreement Annex B PENALTIES If NPC-SPUG fails to meet the Contracted Energy, and the CUSTOMER secures an alternative supplier to meet the deficiency, NPC- SPUG shall pay for the electricity produced by the CUSTOMER equivalent to the true cost of generation of NPC-SPUG.

Small Power Utilities Group Power Supply Agreement Annex B CHANGES TO CHARGES AND ADJUSTMENTS The charges and adjustments may from time to time be reviewed and amended in accordance with prevailing laws, rules or regulations.