A presentation on the development of geothermal energy use in the Philippines. Presented as part of the Ring of Fire programme jointly implemented by EDC and WWF Philippines

1. The EDC Experience: Sustainability as a Business Model
THE GEOTHERMAL STORY OF THE PHILIPPINES
Agnes C. de Jesus
Senior Vice President, Energy Development Corporation (Philippines)
Presented in Jakarta, Indonesia

2. OUTLINE
 Geothermal in the Philippines
 Origin and history
 Enabling laws and mechanisms
 The role of geothermal in renewable energy development
 Sustainability as Business Strategy
 EDC’s business value chain
 Initiatives, Measures and Processes
 Climate change initiatives
 Performance measures

3.  Geothermal in the Philippines
Origin and history | Enabling laws and mechanisms | Role in renewable energy development

4. THE PHILIPPINES HARNESSED ITS FIRST GEOTHERMAL POWER AFTER
DR. ALCARAZ OF THEN COMMISSION ON VOLCANOLOGY, LIT UP AN
ELECTRIC BULB AT THE FOOT STEP OF MT. MAYON IN 1967
DR. ARTURO P. ALCARAZ,
Father of Philippine Geothermal
The government recognized the Tiwi experiment as the
beginning of the geothermal power era in the country.4
THE COMVOL TEAM

5. BORN OUT OF A PROMETHEAN VISION, THE PHILIPPINE GEOTHERMAL
INDUSTRY HAS GROWN FROM ADDRESSING THE 1970s OIL CRISIS TO
PAVING THE WAY FOR RENEWABLE ENERGY IN THE COUNTRY
Philippine
Commission on RA 6957 or RA 9136 or RA 9513 or
Volcanology the Build, the Electric Renewable
(COMVOL)
Becomes Operate Power Energy Act
investigates the Government EDC is created under the world’s Transfer Industry Is enacted
PNOC to explore, 2nd largest (BOT) Law Reform Act
country’s enacts RA geothermal
capability to 5092 known delineate and develop is enacted Is enacted
producer
produce as the indigenous resources
geothermal Geothermal in the country
energy Law
1962 1967 1969 1973 1976 1984 1990 2001 2008
The 2.5-KW Oil Crisis: First Wave: Second Wave: Third Wave?
noncondensing Philippine National 426MW MakBan 588MW Leyte A Additional
pilot power plant is Oil Company 330MW Tiwi 150MW Bacman 5,000MW from
commissioned in (PNOC) Is created 112.5MW Tongonan 1 106MW Mindanao RE projects
Tiwi, near Mount to support 112.5MW Palinpinon 1 80MW Palinpinon II
Mayon commercialization
of alternative
energy
5

6. OVER THE PAST FOUR DECADES, GEOTHERMAL ENERGY HAS BEEN
CHAMPIONED CREATING A DEVELOPMENT PATH THAT FOSTERED
GOVERNMENT-PRIVATE SECTOR COOPERATION
1971 1990s 1996 1997 2005 2006 2007
Government enters BOT Law EDC commissions EDC commissions Chevron EDC launches EDC is
into a service contract spurred power its first power 104MW MIndanao acquires the Tiwi its Initial privatized.
with Union Oil generation plant, the 125MW and MakBan Public First Gen
Company of California investments Upper Mahiao in steamfields Offering – the Corp. of the
(UNOCAL) through Leyte, biggest in the Lopez Group
subsidiary Philippine country that acquires a
Geothermal Inc. o year 40%
develop the Tiwi economic and
steamfields. In 1973, 60% voting
PGI acquires SC for stake
MakBan steamfields
6

7. THE EFFECTIVE ROLES PLAYED OUT BY KEY PLAYERS SUSTAIN THE
PHILIPPINES’ STATUS AS THE WORLD’S 2ND LARGEST GEOTHERMAL
PRODUCER AND USER OF CLEAN ENERGY IN DOMESTIC ENERGY MIX
7

8. TODAY, GEOTHERMAL DEVELOPMENT IS GOVERNED BY AN ESTABLISHED
FRAMEWORK ENABLING ROBUST PRIVATE SECTOR PARTICIPATION
8

9. THROUGH THE RE LAW, INCENTIVES HAVE SUCCESSFULLY ATTRACTED MORE
PLAYERS AND ARE ENABLING DEVELOPERS TO PRODUCE POWER AT
COMPETITIVE RATES
9

10. WITH A FRESH AVENUE TO PURSUE GREENFIELD PROJECTS, GEOTHERMAL
CAPACITY IS EXPECTED TO DOUBLE OVER THE NEXT 20 YEARS
10

11.  Sustainability as Business Strategy
Adherence to International Conventions | EDC’s business value chain |Initiatives, measures and
processes | Climate change action | Performance measures

12. TODAY, EDC IS VERTICALLY INTEGRATED RENEWABLE ENERGY COMPANY
WITH OPERATIONS LOCATED ACROSS THE COUNTRY
INTEGRATED STEAMFIELD LUZON STEAMFIELD (EDC) AND
AND POWER PLANT POWER PLANT (EDC
SUBSIDIARY)
Leyte Manila
Bacman
125MW Upper Mahiao
232.5MW Malitbog 110MW Bacman I
180MW Mahanagdong 20MW Bacman II
50MW Optimization
Leyte
Northern Negros
VISAYAS 112.5MW Tongonan I
49MW Northern Negros
(Impaired in July 2011)
Southern Negros
Mindanao
112.5MW Palinpinon I
52MW Mindanao I 80MW Palinpinon II
54MW Mindanao II
MINDANAO
12

13. BEING SITE SPECIFIC, GEOTHERMAL PROJECTS ARE LOCATED IN VERY
REMOTE, OPEN, AND PRISTINE AREAS – 5 SITES ARE LOCATED IN 8 KEY
BIODIVERSITY AREAS OF THE COUNTRY
EDC manages 266,326 hectares of public lands or 1% of the Philippines’ land area
13

14. EDC OPERATES IN MOUNTAINOUS AND IMPOVERISHED AREAS
 Poverty in EDC sites pose a high risk for social restiveness
 Wanting of government support, residents expected EDC to
provide the basic services
14

15. EDC EXPANDED GEOTHERMAL IN THE PERIOD OF
ENVIRONMENTALISM & REVIVAL OF DEMOCRACY IN LATE 80’S
 Public understanding on
geothermal was limited
resulting in:
 Legal issues:
- National parks
 Cultural issues:
- Ancestral domain/
indigenous peoples’ rights
 Environmental issues:
- Tree cutting
- Threats to biodiversity 15

16. NATIONAL POLICIES WERE WANTING, EDC NEEDED TO BLAZE
THE PATH
 EDC developed internal policies and protocols to balance energy
development, community interests and environmental protection
 Social acceptability (1990)  IP Welfare Trust Fund adopted in
 Zero disposal (1993) Department of Energy Regulation for all
 Third Party Multi-sectoral IPPs (1994)
Monitoring Teams (1993)  Community-based EIA (1995) 16

17. IN ALIGINING PRACTICE WITH PRINCIPLE, EDC ASCRIBES TO 20
INTERNATIONAL CONVENTIONS ACROSS 6 SECTORS
Sector International Treaty
General 1. Rio Declaration (Earth Summit)
2. World Summit on Sustainable Development (Rio Summit + 10)
Atmosphere 3. Climate Change Convention
4. Kyoto Protocol to the UN Framework on Climate Change
5. Vienna Convention for the Protection of the Ozone Layer
Biodiversity 6. Convention on International Trade of Endangered Species
7. Bonn Convention on Migratory Species of Wild Animals
8. Convention on Biological Diversity
9. Cartagena Protocol on Biosafety
10. Forests Convention
11. Mountain Summit
Chemicals 12. Montreal Protocol on Substances that Deplete the Ozone Layer
13. Basel Convention on Transboundary Movements of Hazardous Wastes
14. Rotterdam Convention on the Prior Informed Consent Procedure
for Certain Hazardous Chemicals and Pesticides in International Trade
15. Stockholm Convention on Persistent Organic Pollutants
16. UN Convention to Combat Desertification
Land
17. Ramsar Convention on Wetlands
Culture 18. Convention Concerning the Protection of the World Cultural and Natural Heritage
19. Convention on Prior Informed Consent
20. UN Declaration of Rights of Indigenous Peoples
17

18. … AND THE ENVIRONMENTAL AND SOCIAL PERFORMANCE
STANDARDS OF OUR INSTITUTIONAL INVESTOR
IFC PERFORMANCE Coverage
STANDARD
1 Social and environmental assessment and management system
2 Labor and working conditions
3 Pollution prevention and abatement
4 Community health, safety and security
5 Land acquisition and involuntary resettlement
6 Biodiversity conservation and sustainable natural resource
management
7 Indigenous peoples
8 Cultural heritage
18

19. EDC DEVELOPED A BUSINESS MODEL THAT CONTRIBUTES TO ECONOMIC
WELL-BEING, PROMOTES SOUND ENVIRONMENTAL MANAGEMENT AND
HELPS COMMUNITIES BECOME SELF-SUFFICIENT
Then and now, EDC’s thrust remains the same – to seek, develop and operate clean
sources of energy for present and future generations. 19

20. OPERATIONAL SUSTAINABILITY IS EMBEDDED IN THE BUSINESS MODEL -
FOLLOWING NATURE’S CYCLES AND WORKING WITH PEOPLE TO CREATE
GEOTHERMAL’S MULTIPLIER EFFECT
Comprehensive environmental management Renewable energy technology
Watershed, biodiversity, climate change action Wet steam utilization, zero discharge system,
fluid collection & recycling system, efficient power plants
Stakeholder Engagement
Employee development, CSR for 18,000 households
20

21. EDC HAS VERTICALLY INTEGRATED ITS FIELD AND PLANT ASSETS TO
NAVIGATE THROUGH THE COMPLEX GEOTHERMAL DEVELOPMENT
CYCLE
Site Identification
Geothermal Exploration 3 - 5 Years
Steam Field Development
Power Plant Construction
2 Years
Start-up & Testing
Operation & Maintenance
Most of the risk is at the early stage of geothermal projects
21

22. OPERATING BOTH THE STEAMFIELD AND POWER PLANT OFFERS
LITTLE RISK ONCE INTEGRATED AND UP AND RUNNING
Continuous and sustainable energy
Proven technology in steam field and
power generation facilities
Competitive with new fossil-based
plants
22

23. EFFORTS TO PRESERVE THE ENVIRONMENT ARE REFLECTED IN THE
DESIGN AND OPERATIONS OF THE PROJECT
Directional drilling Wastes are fully Water and air EDC has pioneered
is adopted to contained during samples are FCRS to ensure the
reduce affected drilling collected to profile renewability of the
areas potential wastes resource
23

24. EMISSIONS FROM GEOTHERMAL IS BENIGN COMPARED TO OTHER
POWER OPTIONS
24

25. BY HARNESSING GEOTHERMAL , EDC EMITS SIGNIFICANTLY LESS
CARBON IN AREAS IN WHICH IT OPERATES
0.21
0.03
CO₂ ton/MWh*
in Visayas < CO₂ ton/MWh**
In Visayas
EDC’s carbon emissions
0.02
CO₂ ton/MWh*
in Mindanao
< 0.28
CO₂ ton/MWh**
in Mindanao
are between 85-92%
less than the average in
regions where the
company operates
*Primary , Stationary, Scope 1 Emissions on an Operational Basis (2009)
Calculated using the World Resource Institute (2008). GHG Protocol Tool for Stationary
Combustion. Version 4.0.
**Based on the Latest DOE Generation Figures (2008) 25

26. AS A RESULT OF EDC’S GEOTHERMAL OPERATION, THE
PHILIPPINES HAS REDUCED ITS DEPENDENCY ON FOSSIL FUELS
AND LOWERED ITS CARBON INTENSITY
Using comparative data from CARMA, without EDC
the Philippines would jump from #49 to as high as
#21 on the list of Carbon Intensity
26

27. TO ADDRESS CLIMATE CHANGE IMPACT, A PROGRAM HAS
BEEN DEVELOPED WITH A DECISION SUPPORT SYSTEM AS ITS
CENTERPIECE TOOL
II. Environmental III. GHG Accounting IV. Business
I. Watershed
Monitoring and and Carbon Footprint Development and
Management
Reporting Management Green Innovations
1: Reduce Risks/Avoid Costs
2: Increase Revenue
3: Regulatory Compliance and
Reputation
Streamline climate change considerations into everyday business decision-
making to protect property and assets prone to extreme weather events 27

28. THE HAZARD DECISION SUPPORT SYSTEM (HDSS) PROCESSES VARIOUS
COMPANY ECOSYSTEM DATA TO PREDICT RISK SCENARIOS THAT WE NEED
TO RESPOND TO AND MITIGATE
IF WE DO NOTHING TODAY, OUR BUSINESS WILL GET AN ESTIMATED HIT OF P329 M/YR
DUE TO FORGONE REVENUES & COST OF REPAIR 28

29. BECAUSE OF OUR REMOTE LOCATION, WE NEED TO BE
STEWARDS OF OUR ENVIRONMENT…
 Planted 9,713 hectares
and 7.7 M trees storing
5.2 M tons Carbon/yr
 Planting for
recharge, carbon sink
and biodiversity
 BINHI program planted
1.5M trees planted
since 2009
 Rescued 40
premium, rare
indigenous species as
of August 2011
ENVIRONMENT: WE PLANT THE SEEDS FOR SUSTAINABILITY - “ BINHI “ LET
THE FUTURE TAKE ROOT. 29

30. A COMPREHENSIVE SOCIAL ENGAGEMENT PROCESS MADE
POSSIBLE OUR GROUNDBREAKING INTIATIVES
Regular and
Sustained
Engagement
Public
Hearings
Consultation and
Focus Group
Discussions
Information
Drive
Community
EDC modeled the Environment Impact
Assessment Statement system for its projects 30

31. FOR INSTANCE, THE MULTISECTORAL MONITORING TEAM PROVIDES AN
AVENUE FOR BUILDING OF TRUST AND DEVELOPMENT OF COMMON
ENVIRONMENTAL OBJECTIVES BY BOTH EDC AND ITS STAKEHOLDERS
Multisectoral agreement paved the way for the permission to operate the
Mindanao geothermal power projects
31

32. WE LISTEN TO THE VOICE OF THE PEOPLE IN OUR COMMUNITIES --
WE CONDUCT SOCIAL SURVEYS
2010 SA: Appreciation for & Willingness to Support
EDC and CSR Project
100%
90%
80% = Acceptable Performance
80%
70%
60%
0-54% LOW
50%
55-89% MEDIUM
56-100% HIGH
40%
30%
20%
10%
0%
BGPF LGPF MGPF NNGPF SNGPF
% Appreciation for & Willingness to support EDC % Appreciation for CSR Project
32

33. KNOWING WHAT THE COMMUNITIES’ CONCERNS MAKE US MORE
RESPONSIVE TO THEIR NEEDS
100%
91%
82%
90% 72%
80% 66% 65%
70%
61% 58%
60%
50%
40%
30%
20%
10%
0%
EDUCATION (91%) & HEALTH (82%) ARE THE MOST APPRECIATED CSR PROJECTS.
33

34. IN MT APO, WE RESPECTED TRIBAL RIGHTS BY PUTTING UP
A TRIBAL WELFARE FUND
INDIGENOUS PEOPLES: Mt. Apo Foundation, Inc.
Mt.Apo - Striking a balance between
development and culture
 Payment of tribal welfare fund of
1 centavo/kWh from the Mt. Apo
Project to develop and protect
ancestral domain
 Mt. Apo Foundation Inc. (MAFI)
was established to manage the
funds
 Helps tribes within Mt. Apo Park
radiating from the project
(education, livelihood,
environment and culture) 34

35. WE CONVERTED “POACHERS” TO “GOAL-KEEPERS”
LIVELIHOOD: Communities prosper in pace with EDC’s growth
Social Forestry (1989)
 Upland communities mostly subsisted
on slash-and-burn farming (kaingin)
 EDC introduced demo farms with crops
suited to forest environments
• Converted kaingeros into forest
protectors and entrepreneurs
• Predates the “Payment for
Environmental Services “Scheme
35

36. WE BELIEVE OUR ECONOMIC PROGRESS MUST COME WITH THE
IMPROVEMENT IN THE LIVES OF THE COMMUNITIES IN WHICH WE
OPERATE
Environmental Social
Trees Planted by EDC: 9,713 hectares Comprehensive Community Partnership Program
7.7 M trees
8,000,000
7,000,000
NO. of TREES HEALTH
6,000,000
5,000,000
EDUCATION
4,000,000
3,000,000
LIVELIHOOD
2,000,000
1,000,000
ENVIRONMENT
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Covers 6 provinces, 10 municipalities, 43
Carbon Footprint: barangays and 17,680 households
CO2 tons/MWh • Socio-cultural
0.5
0.47 0.48 • Info education
0.31
0.4
0.3 0.23 EDC • Emergency preparedness and response
0.2 Grid
0.1 nm 0.03 0.01 Philippines
• Volunteers program
0.0
• Benefits fund management
Luzon Visayas Midanao Philippines
OVER THE PAST 10 YEARS, EDC HAS DISPLACED 114 MILLION BBL OF OIL IMPORTS FOR $5.8 BILLION FOREX
SAVINGS, AVOIDED 4.1 MILLION TONS OF CARBON/YR, PROVIDED $4 MILLION/YR COMMUNITY SERVICES & SINCE
1984, EDC HAS PAID THE GOVERNMENT A TOTAL OF P34.5 BILLION IN TAXES & OTHER FEES. 36

37. TO HELP US LEVEL UP, WE INSTITUTED WHAT CAN BE
MEASURED
• EDC’s initiatives to align its sustainability performance with global standards
and practices:
– Enterprise Risk Assessment
– Balanced Scorecard
• Quote from an employee “I’ve been in the company for 27 years, and this is the first time that I’ve been involved in planning for 1-
5 years work program. Before, we just do as instructed by the management.”
– Corporate Governance Scorecard for Board
• ICD Award for Corp Governance Scorecard:
– 2007: 15 top Ranked Listed Corp; 2008 – Silver Awardee; 2009 & 2010 - Gold Awardee; 2011 - Platinum Awardee
• Board Self-Assessment: since 2008
– Integrated Annual and Sustainability Report (GRI-checked)
• 2009: 30 KPIs; 2010: 70 KPIs (3rd party checked); 2011 82 KPIs GRI G3.1 EUSS
37
– Stakeholder Surveys

38. AFTER DEVELOPING GEOTHERMAL PROJECTS IN THE PHILIPPINES FOR
MORE THAN 3 DECADES, EDC IS GOING INTERNATIONAL TO MAINTAIN
ITS LEADERSHIP POSITION
38

39. EDC UNFURLED THE PHILIPPINE FLAG AT CHILE FLY CAMP FOR
ITS FIRST INTERNATIONAL GEOTHERMAL EXPLORATION (MARCH 2012)
39

40. The EDC Experience: Sustainability as a Business Model
THE GEOTHERMAL STORY OF THE PHILIPPINES