Power Business. Scaling up generation capacity to provide reliable supply to large industries.

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2 Power Business Scaling up generation capacity to provide reliable supply to large industries. B TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT C

3 Wind Energy Harnessing indigenous resources and renewable energy in pursuit of cleaner and more sustainable power sources for the country. D TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT E

4 Energy Resource Development Opening the doors for growth through responsible exploration, development and production of the country s oil and natural gas resources. F TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 1

5 Table Of Contents Vision, Mission and Corporate Values 03 Where We Operate 05 Why Invest in Trans-Asia 06 Message to Shareholders 10 Business Reviews Power Business 18 Wind Energy 22 Energy Resource Development 26 Corporate Social Responsibility 30 Corporate Governance 36 Board of Directors 40 Management Commitee 44 Corporate Information 46 Who We Are We should always pursue our business with honor and never waver in our commitment to the principles of professionalism, integrity, and patriotism. - Amb. Ramon V. del Rosario, Sr., Founder VISION To be the investment and electricity supply partner of choice Leveraging our reputation on a culture of excellence. MISSION Providing reliable, competitive and customer-focused electricity services; Utilizing indigenous energy resources and clean energy technologies; Helping build the nation through innovative, well-managed enterprises; Anchored on the ideals of integrity, professionalism and patriotism. CORPORATE VALUES INTEGRITY We conduct ourselves in an honest, ethical, and transparent manner. We always seek to do what is right, even in the face of adversity and uncertainty. We do not tolerate fraud in all its forms, including corruption, bribery, and abuse. We do what we say we will do and we accept full responsibility for our decisions and actions. PROFESSIONALISM We deliver the results expected of us by understanding and giving importance to the requirements of our customers and stakeholders. We foster a positive work environment by treating everyone with utmost respect and welcoming different view points that allow us to create better ideas, products, and services. PATRIOTISM We proudly express our love for the Philippines through active participation in Nation-building, respect for and adherence to its laws and regulations, commitment to protect the environment, and an unflinching belief in the skill, spirit, and resiliency of Filipinos as a people and as world-class professionals. 2 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 3

6 What We Do New Paradigm for Managing the Energy Business: 3 Business Groups POWER BUSINESS WIND ENERGY ENERGY RESOURCE DEVELOPMENT Trans Asia as an end-to-end energy company engaged in resource development and exploration, wind energy development, and power generation and electricity supply. The main revenues of the Company come from the power and electricity supply business. Trans-Asia operates its own power plants as well as purchases the capacities of other power generation facilities and sells electricity to its customers through bilateral contracts and through the Wholesale Electricity Spot Market (WESM). Trans-Asia also holds investments in various exploration service contracts granted by the Philippine Government to private parties to give them exclusive rights to undertake energy resource exploration, development and production activities over certain areas. In the event of commercial production, the private parties receive a share of proceeds to recover their investments and generate profit The Company maintains 4 oil & gas service contracts (SC 55, 69, 51, 6) and interests in SC 50 & SC 52. Trans-Asia also maintain 8 wind energy service contracts, 3 hydropower service contracts, and 1 geothermal energy service contract, with applications for one other geothermal service contract and one solar energy service contract. Trans Asia is a pioneer in electricity supply, buying and selling power through the WESM as well as producing electricity from its own portfolio of power generation assets, to meet the demand of large and medium scale power consumers. DEFINITION OF BUSINESS COMPANIES UNDER EACH BUSINESS PERFORMANCE INDICATORS UNDER EACH BUSINESS OPERATIONAL HIGHLIGHTS Engaged primarily in power generation and supply through ownership and operation of various generation facilities; Pioneer in electricity supply TRANS-ASIA POWER GENERATION CORPORATION (52MW); CIP II POWER CORPORATION (21MW); TA OIL GUIMARAS POWER PLANT (3.4MW); ONE SUBIC POWER GENERATION CORPORATION (116MW) Joint Ventures: SOUTH LUZON THERMAL ENERGY CORPORATION (2 x 135MW), MAIBARARA GEOTHERMAL, INC. (20MW) TOTAL ENERGY SALES UP 6% (1,695 GWH) TOTAL SUPPLY CAPACITY UP 8% (280 MW) Commissioning of SLTEC s first unit & 88% completion of second unit by year-end 2014, 2 x 135 MW CFB, joint venture with AC Energy by year-end Acquisition of One Subic Power Generation Corporation (116MW) in May 2014 by Trans-Asia Power Secured bilateral contracts with 11 Electric Cooperatives of Region 8, Holcim Mabini Plant and URC. Administration of 40MW strip of power from Unified Leyte, Signed additional supply contracts with 1590 Energy Corp, signed MOA for Power Barges 101, 102 & 103. With primary purpose of developing and utilizing wind energy in the country, in line with the pursuit of clean and sustainable projects TRANS-ASIA RENEWABLE ENERGY CORPORATION (54MW); TRANS-ASIA WIND POWER CORPORATION 8 Wind Energy Service Contracts with an aggregate potential capacity of over 400MW Completed San Lorezno wind farm and attained maximum generation capacity at 96% of the total installed capacity or 52 MW out of 54 MW on December 27, Delivered power to the grid on October 7, 2014, through the commissioning of the first three (3) units of wind turbines. Completion of a world-class 2.8-kilometer 138-kilovolt (kv) submarine cable connecting the wind farm in Guimaras to Panay Island on February 25, Engaged in resource exploration and development, with particular interest in oil and gas, as well as geothermal energy. TRANS-ASIA PETROLEUM CORPORATION; PALAWAN55 EXPLORATION & PRODUCTION CORPORATION; Joint Venture MAIBARARA GEOTHERMAL, INC. (expansion for 10MW) 4 Oil & Gas Service Contracts plus interests in 2 SC s 1 Geothermal Energy Service Contract plus 1 application with DOE 3 Hydropower Service Contracts 1 Solar Energy Service Contract under application with DOE Trans-Asia Petroleum was listed in the Philippine Stock Exchange by way of introduction on August 28, Maibarara Geothermal Inc. (20MW) commenced commercial operations on Feb. 8, 2014 and approved expansion plans for additional 10MW Secured three (3) Hydropower Service Contracts covering areas in Pililia, Rizal; Ilagan, Isabela and Buguias, Benguet on July 10, TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 5

7 Where We Operate 1. TRANS-ASIA POWER GENERATION CORPORATION (TAPGC) - Norzagaray, Bulacan (wholly owned subsidiary) 2. CIP II POWER CORPORATION (CIPP) - Quirino, La Union (wholly owned subsidiary) 3. TRANS-ASIA Guimaras Power Plant - Guimaras Island, Panay (power plant owned by Trans-Asia Oil & Energy Development Corporation) 4. SOUTH LUZON THERMAL ENERGY CORPORATION (SLTEC) - Calaca, Batangas (Joint venture with AC Energy Holdings) 5. MAIBARARA GEOTHERMAL, INC. (MGI) - Sto. Tomas, Batangas (Joint venture with PetroGreen Energy Corporation & PNOC) 6. One Subic Power Generation Corporation - Subic, Olongapo (wholly-owned subsidiary) 1. WESC Sibunag, Guimaras 2. WESC Nueva Valencia, Guimaras 3. WESC Abulog-Ballesteros-Aparri, Cagayan 4. WESC Aparri-Camalaniugan-Buguey, Cagayan 5. WESC Paracale-Visons, Camarines Norte 6. WESC Infanta, Quezon 7. WESC Calauag, Quezon 8. WESC Dumangas, Iloilo 1. SC 6, Block B 2. SC 6, Block A 3. SC SC SC Interest in SC 50 & 52 6 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 7

8 Why Invest in Us We are UNFOLDING GROWTH. WE ARE MOVING INTO OUR SECOND PHASE OF GROWTH. We have purposefully deployed our resources to solidify the foundation of our power business over the past five years. The year 2014 brought us to the realization of our vision with the additional capacity coming from our joint venture investment in the 20 MW Maibarara Geothermal power plant. The acquisition of One Subic Power Generation Corporation added another 116MW to our supply capacity, while the completion of our 54MW San Lorenzo wind farm marked a milestone maiden entry into wind energy. By year end, we completed the first 135 MW unit of South Luzon Thermal Energy Corporation (SLTEC) coal-fired power plant using CFB technology, significantly complementing our power supply portfolio. In addition, we assumed the 40MW power strip from the Unified Leyte Geothermal Power Plant as awarded via competitive bid conducted in November We look forward to the completion of the second unit of SLTEC for another 135MW as well as the Phase II expansion of MGI for an additional 10MW. We continue to explore opportunities in wind energy and resource development. We remain optimistic as we look toward our accelerated trajectory in energy volume, leading to strong revenue expectations, translating to positive bottom line growth for our shareholders. WE DELIVER ON OUR PROMISES. We ensure the security and reliability of our facilities to guarantee full delivery of supply capacity to our customers and to the WESM. We completed the construction of our 54-MW Wind Farm in San Lorenzo, Guimaras which can consistently transmit 100% of its generation capacity to the Visayas grid. We commissioned SLTEC s first unit of the 2x135-MW Clean Coal-Fired Power Plant while pursuing completion of the second unit. We successfully completed the listing of our energy resource and exploration arm, Trans Asia Petroleum Corporation. WE ARE A TRUSTED PARTNER. Top management is comprised of thought leaders in the energy industry. We are a preferred partner by foreign investors and industry leaders. We have enjoyed long-term relationships with our customers. We engage our host communities whom we involve at every stage of our growth. WE OPERATE WITH INTEGRITY. We launched our Integrity Assurance Program for our management, employees, directors, and vendors as a testament to our commitment to lead by example. Inculcating our PHINMA heritage with our resolve to Make Life Better. Our community is our family. Our country is our home. 8 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 9

9 To our dear shareholders, Our company is grateful to you, our shareholders, for your support over the past forty-five years, which has been instrumental to our success and longevity. Trans-Asia, together with our parent company, PHINMA, has purposefully laid the foundation of its business, with the vision of becoming the investment and supply partner of choice, remaining true to its commitment towards self-reliance in energy. In doing so, we are geared towards unfolding our growth. ENERGY INDUSTRY Positive macroeconomic fundamentals continued to fuel the base for strong energy consumption in the Philippines with demand for power forecasted to grow at an average rate of 3.96%. With its cue from the world market, oil prices significantly declined due to an increase in inventory and lower demand projections, and this was beneficial to the Philippines as a net importer of oil and fuel products. PHILIPPINE ECONOMY AT A GLANCE The Philippine economy continued its positive trajectory in 2014, posting GDP growth of 6.1% for the year. Net foreign direct investments reached $4.3B by the third quarter and continued to play a dominant role in national development. The Philippine Stock Exchange breached a new high, with its index closing above the 7,000 level, demonstrating growth momentum for a period of six consecutive years. The country secured two credit rating upgrades in 2014, as Moody s raised the country s credit rating to Baa2, while S&P further upgraded its previous credit rating by a notch above minimum investment grade. International recognition and praise for the Philippines was largely attributable to efforts of the Aquino administration to institutionalize reforms to ensure the sustainability of its good governance agenda, as supported by the country s declining debt burden and favorable growth prospects amid a climate of rising investment. In 2014, the energy industry was also faced with significant challenges. The tight supply scenario carried over from previous years and brought forward an increase in regulatory intervention and review. Future supply concerns likewise escalated urgency in boosting our country s power capacity. In support of this, your company took significant strides to boost our own self generation ability. We support the initiatives towards greater collaboration between government and regulatory agencies, and those of our national and local government. During the past year, a secondary price cap mechanism was maintained in the WESM, as implemented by the Energy Regulatory Commission (ERC) in order to prevent spikes in the market. The Philippine Electricity Market Corporation (PEMC) conducted investigations on power generation companies, and we are pleased to report that your company and its subsidiaries have clearly been dutiful in their responsibilities. Factoring the tight reserves during the summer months and scheduled maintenance shutdown of the Malampaya platform, we warrant that proper facility operation and observance of efficient maintenance practices are imperative to effectively manage power supply concerns in the country. 10 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 11

10 POWER BUSINESS In 2014, demand for energy increased in line with growth in the economy. Energy sales volume increased 6% to 1,695 GWh over the year, while supply grew by 8% to 280 MW, as a result of strong relationships with our customers and suppliers. Your company was however challenged in 2014 by lower margins arising from higher average prices for power purchases on the WESM. Net income decreased from P572.8 million in 2013 to P180 million in 2014, as of December 31, Construction of SLTEC s second unit of its 2x135 MW CFB Coal-Fired Plant is underway with target completion by year-end Our Power Business has focused on unfolding our growth by expanding our supply portfolio. In February, Maibarara Geothermal Incorporated (MGI) commenced commercial operations, with your company enjoying a 25% ownership stake and 100% supply offtake agreement. MGI has likewise embarked on Phase II expansion for another 10MW of geothermal energy. In May 2014, we acquired One Subic Power Generation Corporation (OSPGC) through our wholly owned subsidiary, Trans-Asia Power Generation Corporation (TAPGC), allowing us to manage and operate the leased capacity of 116MW, for another five years. In December, we completed the first unit of our 2 x 135 MW South Luzon Thermal Energy Corporation (SLTEC) joint venture with AC Energy Holdings of the Ayala group. This is the first significant power generation facility to be declared commercial in 2015, supplying an additional 135MW to the grid in time for peak summer months. On December 26, 2014, your Company assumed the 40MW strip of power from the Unified Leyte Geothermal Power Plants, secured through competitive bidding conducted in November We are pleased to report that your Company secured in electricity supply, this platform allows for a transparent and competitive bidding process to encourage efficiency through competition for increased energy reliability. Maintaining the balance between increasing our own capacity while expanding our customer-base will furthermore be the cornerstone of our power business. WIND ENERGY In 2014, your company, through its subsidiary Trans- Asia Renewable Energy Corporation (TAREC), achieved significant milestones by completing and operating its 54-megawatt (MW) windfarm in San Lorenzo, Guimaras. Seen as a considerable contributor to the Renewable Energy portfolio in the Visayas Grid, the San Lorenzo Windfarm is the first wind energy project under the Renewable Energy Act of 2008 to have the ability to consistently deliver its full generation capacity to the grid. Upon commencement of its commercial operations in December 2014, the windfarm was able to attain a maximum capacity of 52MW representing 96% of total installed capacity. The wind farm was able to export 52GWh and generate over Php 53 Million in December Engaging the community for inclusive development and sustainable livelihood opportunities is at the core of our presence in Guimaras. Supporting the government s effort to increase sustainable energy through development of Renewable Energy sources, your company is expected to contribute up to Gwh of electricity per annum, which can sustain almost 48,000 households yearly electricity needs. The project is also expected to contribute to the global effort of reducing greenhouse gas emission in the atmosphere estimated at 65,000 tons of CO2 per year. To date, your company maintains eight (8) service contracts with an aggregate potential capacity of up to 400MW of wind energy. Your company is one with the Department of Energy in its pursuit of energy sustainability through the development of renewable energy. We remain confident that our government will make concrete its support for climate change reforms by expanding the Feed in Tariff structure as an immediate answer to current supply concerns as well as to incentivize capital investments from both local and international investors. We look forward to strong government policies that will cement investor appetite and long-term demand in the Philippine energy industry which would not only play a vital role in achieving energy self-reliance but also secure a cleaner future for younger generations. a supply contract with 11 Electric Cooperatives from Region 8, plus additional agreements with Holcim Cement and Universal Robina Corporation (URC), bringing total energy sales to GWh. Your Company is finalizing negotiations with the Power Sector Assets and Liabilities Management Corporation (PSALM) for the acquisition of Power Barges 101, 102, and 103, with combined registered capacity of up to 96MW. Participation in the WESM remains to be a source of revenue for the power business. As pioneers 12 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 13

11 Students from Trans-Asia s partner schools benefit from the HELP Earth program through educational supplements that enhance energy literacy. RESOURCE DEVELOPMENT Your Company maintains various exploration service contracts (SC s) for the exploration and development of petroleum, hydropower, geothermal, and solar projects in different locations across the country. For petroleum exploration, your Company is anticipating the commencement of drilling activities by the second and third quarter of 2015 for SC 50 and SC 55, respectively. On July 10, 2014, your Company was awarded three (3) Hydropower Service Contracts covering areas in Pililia Rizal, Ilagan Isabela and Buguias Benguet. Still in the preliminary stage, your Company may potentially develop hydro energy projects with an aggregate potential capacity of 320 MW. On November 7, 2014, your Company filed an application for a solar energy service contract in Guimaras, which complements our wind farm on the island. On August 28, 2014, your Company decided to list its resource exploration and development arm, Trans- Asia Petroleum Corporation by way of introduction in the Philippine Stock Exchange. The listing proved to be a strategic move for the company to bring focus to its upstream petroleum activities, realize market value for its assets, and gain access to the capital market and raise needed funds for future exploration and development projects. CORPORATE SOCIAL RESPONSIBILITY We remain steadfast in our advocacies for three main CSR pillars: Education, Environment, and Livelihood. Looking into our own family, we have taken a special interest in promoting Employee Wellness as a priority area to inculcate overall work-life balance, employeedriven volunteer initiatives, and to develop strong leadership potential. Since 2009, your Company s flagship CSR program, Harnessing Energy Literacy for Planet Earth (HELP Earth), has been strategically partnering with schools, teachers and students to promote awareness and consciousness with regard to energy issues in order to make knowledge-based energy choices. In 2014, we added seven (7) new partner schools to our program bringing our total to 29 partner schools across the country. Your Company s CSR efforts have allowed us to actively engage with more than 350 Looking into our own family, we have taken a special interest in promoting Employee Wellness as a priority area to inculcate overall work-life balance, employeedriven volunteer initiatives, and to develop strong leadership potential. faculty members and 9,000 students, supporting our belief in education as a necessary tool to instill a foundation of knowledge and values in our youth. 14 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 15

12 Communities surrounding our facilities have become part of our operations through continuous engagement with our CSR projects. Your Company continues to support environmental conservation and preservation through the efforts of our Parent Company and subsidiaries. In 2014, Trans- Asia employees participated in various tree planting activities, promoting indigenous and native seedlings for biodiversity preservation. We maintain our own plant nurseries and actively propagate a 5 hectare reforestation program in cooperation with the Subic Bay Metropolitan Authority (SBMA) in Olongapo. This year we recorded 1,538 seedlings and look forward to further improving our green handprint. Your Company s livelihood program in La Union marked its second year in The Quirino s Best program is aligned with our vision of providing a sustainable source of income for the Nanays of Quirino with our joint goal for them to become financially independent. Your Company has embarked on a long-term project in Guimaras through the presence of our wind farm in San Lorenzo. From its early stages, we have promoted community engagement and development as a keystone. Our roadmap for strengthening tourism and development takes a multi stakeholder approach, and is focused on building community resiliency, capacity building for tourism and livelihood opportunities, with a proactive mindset for environmentally sound and sustainable practices to maintain the pristine CORPORATE INITIATIVES Your Company, led by our parent PHINMA, has embarked on an enterprise-wide risk management approach to comprehensively and effectively review and mitigate inherent business risks as well as external threats. We recognize the need to proactively identify and regularly manage these risks, with the guidance and leadership of our Board and management, subject to regular review for compliance and good governance. Your Company has developed a strong Business Resiliency program, and launched a group-wide Integrity Assurance program to promote a culture fervently inculcating our core values of Integrity, Professionalism, and Patriotism. Our Human Capital has always and will continue to remain as our number one asset. Our development roadmap is geared towards career and leadership growth, through enhanced performance management systems, aligned with your Company s strategies and objectives. We express our sincere gratitude to the professionals behind our success and achievements. Their perseverance and loyalty are the key driving force of our Company s progress. To our shareholders, whose trust and commitment to TRANS-ASIA propel the Company towards the direction of growth, THANK YOU. The management, officers and staff of TRANS-ASIA will strive to accomplish what we need to deliver, for us to unfold our growth in the future. Your company has developed a strong Business Resiliency program, and launched a group-wide Integrity Assurance program to promote a culture fervently inculcating our core values of Integrity, Professionalism, and Patriotism. Oscar J. Hilado Chairman island while attracting new visitors and markets. May the Lord Almighty continue to guide us and Corporate social responsibility is the heart of our business. Your Company takes pride in making life better for our fellow countrymen and our stakeholders. provide us with the strength to carry on the legacy of our founders and make life better for our shareholders, communities, employees, and the Filipino people. Francisco L. Viray, Ph.D. President and Chief Executive Officer 16 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 17

13 BUSINESS REVIEW Power Business The Power Business, composed of the company s generation facilities and electricity supply and trading arms, has grown significantly in the past year and continues to remain a relevant player in the Wholesale Electricity Spot Market (WESM) and the power industry at large. Your Company s Power Business still remains its main revenue driver for The Power Business, composed of the company s generation facilities that it leases and operates, as well as its electricity supply and trading arm, has grown significantly in the past year and continues to remain a relevant player in the Wholesale Electricity Spot Market (WESM) and the power industry at large. In 2014, demand for energy increased in line with growth in the economy. Energy sales volume increased 6% to 1,695 GWh from 1,597 in 2013, while supply grew by 8% to 280MW from 260 MW in Your Company was however challenged in 2014 by lower margins arising from higher average prices for power purchases on the WESM. Net income decreased from P572.8 million in 2013 to P180.4 million in Moving into 2015, your Company looks forward to increasing its self-generation supply capabilities with our new capacities coming onstream, thereby decreasing our reliance on the WESM for requirements in supply. TRANS-ASIA POWER GENERATION CORPORATION (TAPGC) In May 2014, we acquired One Subic Power Generation Corporation (OSPGC) through our wholly owned subsidiary, Trans-Asia Power Generation Corporation (TAPGC), allowing us to manage and operate the leased capacity of 116MW, for another five years. The One Subic Power Generation Corporation (OSPGC), formerly owned by Udenna Energy Management Corporation, tripled TAPGC s generation portfolio, which is a welcome addition to the 52-MW Bunker C-Fired power plant in Bulacan serving Holcim s Cement Plant and the WESM. CIP II POWER CORPORATION (CIPP) CIPP operates the 21-MW Bunker C-Fired Power Plant in Bacnotan, La Union, beside Holcim s Cement Plant. Since the facility was physically transferred to La Union and commissioned in 2013, it has successfully served the power requirements of WESM and Holcim, and will continue to do so by taking advantage of its strategic location. 6% ENERGY SALES VOLUME 8% ENERGY SUPPLY GUIMARAS POWER PLANT Your Company s 3.4 MW Bunker C-Fired Power Plant in the island of Guimaras continues to be a solid contributor to the power supply of Guimaras Electric Cooperative (GUIMELCO), which is the sole electricity distribution utility (DU) on the island. Since its establishment in 2006, your Company s Guimaras facility has supplied the island of Guimaras on island mode during six distinct instances of grid disconnection, allowing 26,000 households to enjoy access to electricity despite unfavorable conditions. Aside from our Electricity Supply Agreement (ESA) with GUIMELCO, the facility also sells its excess capacity to the Visayas WESM, thereby creating additional revenue for the business. SOUTH LUZON THERMAL ENERGY CORPORATION (SLTEC) In December, we completed the first unit of our 2 x 135 MW South Luzon Thermal Energy Corporation (SLTEC) joint venture with AC Energy Holdings of the Ayala group. This is the first significant power generation facility to be declared commercial in 2015, supplying an additional 135MW to the grid in time for peak summer months. By the end of 2014, the second unit was already at 88% completion and is expected to commence commercial operations by early TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 19

14 ELECTRICITY SUPPLY (ES) Participation in the Wholesale Electricity Spot Market To improve our market trading capabilities, we (WESM) remains to be a source of revenue for the acquired an advanced trading platform software and power business. As pioneers in electricity supply, this developed systems for Electricity Price Forecasting, MAIBARARA GEOTHERMAL INC. (MGI) platform allows for a transparent and competitive Plant Outage Monitoring, and a Reserve Market MGI was the first project under the Renewable bidding process to encourage efficiency through Database. These initiatives are all geared towards Energy Act of 2008 to be declared commercial by the competition for increased energy reliability and price mitigating the effects of volatility in the spot market, government. A joint venture with PetroGreen Energy stability. Maintaining the balance between increasing thereby reducing the risk of unpredictable spot prices Resources (65%) and PNOC Renewable Corporation (10%), Trans-Asia owns a twenty-five percent (25%) share in the project. In 2014, your Company was the sole off-taker of the 20-MW capacity of the One Subic Power Generation Corp., which is leasing the 116-MW Diesel Power Plant from SBMA was acquired by TAPGC in May our own capacity while expanding our customer-base is at the cornerstone of our power business. We increased our customer-base by servicing on our business model. Your Company remains optimistic about its investment in the energy sector as its new supply geothermal power plant. MGI was able to produce additional cement plants of Lafarge Republic capacities will put the Company on the path to 127,348 MWh of power last year, generating and Holcim Philippines. We cater to the power earnings recovery by significantly reducing its reliance significant revenue for Trans-Asia and supporting our requirements of Cavite Economic Zone, Quezon II on WESM power. The new 2015 capacity will result in pursuit for cleaner and more sustainable energy. On Electric Cooperative and DirectPower, retail electricity a 57% increase in Trans-Asia s generation portfolio to July 30, 2014, MGI embarked on Phase II expansion supplier unit of AC Energy Holdings. 440 MW by year end. Beyond 2015, the second 135- for an additional 10MW of geothermal energy. MW clean coal-fired power plant of SLTEC will result To address the needs of our customers, your in a net generation portfolio increase to over 500 Company maintains supply agreements with SEM MW by In the coming years, we will develop CIP II is a 21-MW Bunker-C Fired Power Plant located in Bacnotan, La Union. Calaca Power Corporation, Vivant Sta. Clara Northern Renewables Corporation and KEPCO SPC Power our supply portfolio in order to serve a larger base of customers, answering the need for more reliable Corporation. Your company signed a MOA with power sources towards industry and economic PSALM to negotiate for and operate Power Barges development of the country. 101, 102 and 103, which would further increase our capability to supply more customers in the future. On December 26, 2014, Trans-Asia assumed the 40MW strip of power from the Unified Leyte Geothermal Power Plants, as awarded through a competitive bid won by the Company in November Taking advantage of the government s direction to fully implement Retail Competition and Open Access (RCOA), your Company secured bilateral contracts with eleven (11) Region 8 Electric Cooperatives, Universal Robina Corporation-Continental Milling Corporation (URC-CMC) and Holcim s Mabini plant in Batangas, totaling around 390 GWh in energy sales. Our continuing demand and supply agreements with customers and suppliers are testaments of your Company s unwavering commitment to deliver its services with utmost quality and reliability, coupled with customer-focus and integrity that your Company is TAPGC s 52-MW plant in Norzagaray, Bulacan serves the power requirements of WESM and the adjacent Holcim Cement Plant. known for. 20 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 21

15 BUSINESS REVIEW Wind Energy The San Lorenzo Wind farm is the first wind energy project under the Renewable Energy Act of 2008 to have the capacity to deliver its full generation capacity to the grid. In 2014, your company, through its subsidiary Trans- Asia Renewable Energy Corporation (TAREC), achieved significant milestones by completing the 54-megawatt (MW) windfarm in San Lorenzo, Guimaras. Seen as a considerable contributor to the Renewable Energy portfolio in the Visayas Grid, the San Lorenzo Windfarm is the first wind energy project under the Renewable Energy Act of 2008 to have the capacity to consistently deliver its full generation capacity to the grid. Since its officially recognized start of commercial operations in December 27, 2014, the windfarm was able to attain its maximum capacity of 52MW representing 96% of the total installed capacity of 54MW. One of the first project milestones was the completion of the 2.8-kilometer 138-kilovolt (kv) submarine cable connecting the wind farm to Panay Island on February 25, The construction of the submarine cable was essential for your Company to be able to deliver maximum generation capacity to the Visayas grid. As soon as the first batch of wind turbines were delivered to the site, TAREC commenced the turbine erection work and was able to install the first wind turbine on July 31, TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 23

16 48,000 HOUSEHOLDS YEARLY ELECTRICITY NEEDS On October 7, 2014, the wind farm started to deliver power to the grid through the commissioning of the first three (3) units of wind turbine generators. It was also on this day that the National Grid Corporation of the Philippines (NGCP) issued a Provisional Authority to TAREC to connect the facility to the grid. On October 15, 2015, the Energy Regulatory Commission (ERC) approved TAREC s Point-to-Point Connection to the grid for the wind farm, allowing your Company full access to the Visayas Grid, thereby augmenting the power supply much needed by the region. By the end of October 2014, the project was able to sell its generated power to the WESM, following its registration with the Philippine Electricity Market Corporation (PEMC), the market administrator. Full electromechanical completion of the Windfarm was attained on November 30, In 2014, the San Lorenzo Windfarm sold 11,450,990 kwh to the WESM, yielding over PhP 53 million in revenues for two billing periods. The maximum capacity generation attained in 2014 was recorded on December 27 at 52-MW or 96% of the total installed capacity of 54MW. Supporting the government s effort to increase sustainable energy through development of Renewable Energy sources, your Company is expected to contribute GWh of electricity per annum, which can sustain almost 48,000 households yearly electricity needs. The project is also expected to contribute to the global effort of reducing greenhouse gas emission in the atmosphere estimated at 65,000 tons of CO2 per year. We are one with the Department of Energy in its pursuit towards self-reliance in energy promoting renewable and clean energy sources. As such, your company continues to maintain eight (8) service contracts with a potential aggregate capacity of 400MW in wind energy. We expect to play a significant role in the development of renewable energy projects, and we look forward to favorable government policies and regulations which will put us at par with global direction towards proactive climate change mitigation in the development of sustainable energy for our country. 65,000 tons OF CO2 REDUCED PER ANNUM TAREC s substation is located in Brgy. Suclaran and is connected to the grid via a 69-kilovolt transmission line. 24 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 25

17 OIL AND GAS SITUATIONER 2014 BUSINESS REVIEW Energy Resource Development Your company continues to take a deliberate approach with high prospectivity and sustained optimism, banking on its years of expertise, in the energy resource development of our country. The year 2014 witnessed a substantial drop in the price of crude oil in the world market. The price has fallen by more than 50% since the first half of Analysts credited the occurrence of the trend to many factors, but mainly to the increased oil production of the United States and the slowdown of demand in China, India and Europe. The country has benefitted from this since it imports around 90% of its oil needs, mostly from the Middle East. The local oil exploration industry, on the other hand, was given a boost by the Department of Energy when it launched a tender for exploration rights in 11 oil and gas blocks in May 2014 under the 5th Philippine Energy Contracting Round. Of the 11 blocks, ten are offshore acreage located mostly in the West Philippine Sea. With a positive outlook for the oil and gas industry, your Company decided to list its resource exploration and development arm, Trans-Asia Petroleum, by way of introduction in the Philippine Stock Exchange on August 28, The listing proved to be a strategic move for the Company to bring focus to its upstream petroleum activities, realize market value for its assets, and gain access to the capital market in order to raise needed funds for future exploration and development projects. TAPET ACTIVITIES SC 55 (Offshore West Palawan) Palawan55 Exploration & Production Corporation, 69% owned subsidiary of TAPET, holds 6.82% participating interest in SC 55 that is carried free in the cost of drilling of two wells in the block. Following the withdrawal of BHP Billiton Petroleum (Philippines) Corporation (BHPB) from SC 55, Otto Energy Investments, Ltd. (OEL) re-assumed operatorship. The Department of Energy (DOE) approved the consortium s request for extension of exploration Sub-Phase 4 from August 5, 2011 to December 23, 2015, as well as a revised work program consisting of the drilling of the Hawkeye prospect. Preparations are underway for the drilling of the Hawkeye prospect in the third quarter of TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 27

18 SC 50 (Offshore North Palawan) SC 51 (Cebu Strait and Northwest Leyte) TAPET signed a Farm-in Agreement with Frontier The Duhat - 2 well was plugged and abandoned in 3Q Energy, Ltd. (FEL) and Frontier Oil Corporation (FOC) 2013 when it failed to reach its reservoir objective on October 16, 2014, providing for TAPET s acquisition due to drilling problems. The DOE granted a six- of 10% participating interest in SC 50 from FEL. month extension of Sub-Phase 5 to July 31, 2014 to MAIBARARA GEOTHERMAL INC. enable the Operator, Otto Energy Investments, Ltd. MGI is currently operating a 20-MW power plant The SC 50 contract area hosts the Calauit discovery, a (OEL), to complete its post-well evaluation of the in the Maibarara geothermal field in Santo Tomas, marginal oil field which FEL committed to appraise by results of the Duhat - 2 well. Batangas, which commenced commercial operations drilling two horizontal wells and conducting extended in February Phase 2 expansion of the project well tests. On September 15, 2014, FEL signed a On 28 April 2014, OEL notified the DOE and partners which would add another 10 MW to the facility by contract with UMW of Malaysia for use of a jack up of its withdrawal from SC 51. The remaining Filipino 2017 is already underway. rig for drilling the two programmed wells. partners opted to continue exploration work in the area, but requested the DOE suspension of the term MABINI GEOTHERMAL SERVICE CONTRACT SC 6 Block A (Offshore Northwest Palawan) of Sub-Phase 5 from the date OEL notified the DOE of Your Company completed a gravity geophysical Pitkin Petroleum Plc, the Operator, withdrew from SC its withdrawal from SC 51, until the DOE approves the program over the prospect area in Mabini, Batangas 6 Block A effective December 31, While Pitkin transfer of OEL s interest to the Filipino partners. in the fourth quarter of 2014, in fulfilment of its work has already completed geological and geophysical work obligation under its December 2013 Memorandum programs in fulfillment of its obligations under the first Upon DOE approval of the re-assignment of interests, of Agreement with Basic Energy Corporation. exploration phase, the remaining partners agreed to TAPET s participating interest will be adjusted from Under said Agreement, Trans-Asia committed to pursue the geological evaluation of the block. 6.67% to 33.34%. acquire a minimum of 10% up to a maximum of 40% Upon re-assignment of Pitkin s 70% participating interest, participating interest in the service contract upon TAPET s holdings shall revert from 2.334% to 7.78% SC 69 (Camotes Sea) completion of the gravity program. Before yearend, On October 17, 2014, the DOE approved the Trans-Asia notified Basic of its election to acquire SC 6 Block B (Offshore Northwest Palawan) Geological studies composed of seismic data interpretation and a satellite gravity program, adjustment of TAPET s participating interest from 6% to 50% which resulted from the withdrawal of Otto Energy Philippines, Inc. from SC % participating interest. The relevant Farm-in Agreement will be signed in early MGI 20MW geothermal power plant is located in Sto. Tomas, Batangas. Phase II expansion for additional 10MW is already underway. progressed during the year. TAPET has % participating interest in the block. The DOE extended the term of Sub-Phase 3 to May HYDROPOWER SERVICE CONTRACTS 7, 2015 to enable the remaining parties to conduct a Trans-Asia was awarded on 10 July 2014 three (3) review of the prospectivity of the contract area. Hydropower Service Contracts covering certain areas SOLAR ENERGY SERVICE CONTRACT in Pililia Rizal, Ilagan Isabela and Buguias Benguet. Your Company filed with the DOE on 7 November SC 52 (Cagayan Province) A 300 MW pumped storage power plant is envisioned 2014 an application for a solar energy service contract Your Company has an option to acquire 10% at the Pililia site, a 10MW reservoir - type facility at covering a certain area in Guimaras, within the participating interest in SC 52 from FOC, which may the Ilagan site, and a 10 MW run-of-river plant at the confines of the wind farm of Trans-Asia Renewable be exercised after completion of the committed Buguias site. Energy Corporation. We believe that the area Nassipping - 2 well deepening and testing program. complements our existing wind site, and could allow In the event Trans-Asia exercises its option, the The service contracts uniformly provide for a two- us increased diversification within our renewable intent is to transfer the option interest directly to year Pre-Development Stage. Upon declaration of energy portfolio. TAPET. commerciality, the term of a contract is extended to 25 years from effective date. Your company continues to take a deliberate Due to rig availability constraints, Frontier Oil approach with high prospectivity and sustained On August 28, 2014, TAPET was listed by way of introduction in the PSE. Corporation (FOC), the Operator, requested the DOE a six-month extension of Sub-Phase 5 to July 8, Preliminary map studies and site inspections were conducted over the areas of interest. optimism, banking on its years of expertise, in the energy resource development of our country. 28 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 29

19 Corporate Social Responsibility Your company is of the belief that Corporate Social Responsibility should be promoted as an integral part and strategic function of any responsible corporation. We remain steadfast in our advocacies for three main CSR pillars: Education, Environment and Livelihood, and we have added Community Resiliency as another key focus area. EDUCATION Since 2009, your Company s flagship CSR program, Harnessing Energy Literacy for Planet Earth (HELP Earth), has been strategically partnering with schools, teachers and students to promote awareness and consciousness with regard to energy issues in order to make knowledge-based energy choices. In 2014, we added seven (7) new partner schools to our program, with 1 school from Bulacan and 6 new schools from Guimaras, bringing our total to 29 partner schools across the country. Your Company s CSR efforts have allowed us to actively engage with more than 350 faculty members and 9,000 students, supporting our belief in education as a necessary tool to instill a foundation of knowledge and values in our youth. 30 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 31

20 The program aims to achieve energy literacy through provision of educational materials, training programs for teachers, interactive science exhibits, and establishment of the HELP Earth Savers Clubs. The activities are all designed to create a learning environment that cultivates energy conservation and environmental protection. This year, we launched our PATHS Projects, Positive Action Through Help Earth Savers. Bright young members of our HELP Earth Savers Clubs seized our call to action to create their own projects with the theme of promoting the 3R s: Re-duce, Re-use, Re-cycle. Not only were we impressed by their innovative entries, but the projects were able to spin off to livelihood opportunities for the students, their parents, while significantly cleaning up their surrounding communities. As in previous years, your company participated in the annual Brigada Eskwela, in partnership with the Department of Education. Your company was able to help 18 schools by not only providing construction and repair materials, but more importantly, volunteer engagement by our officers and employees for our partner educational institutions. ENVIRONMENT PROGRAM Your Company continues to support environmental conservation and preservation through the efforts of our Parent Company and subsidiaries. In 2014, Trans- Asia employees participated in various tree planting activities, promoting indigenous and native seedlings for biodiversity preservation. We maintain our own plant nurseries and actively propagate a 5 hectare reforestation program in cooperation with the Subic Bay Metropolitan Authority (SBMA) in Olongapo. This year we recorded 1,538 seedlings and look forward to further improving our green handprint and carbon sequestration efforts. Trans-Asia s Annual Juan Matipid Artwork Competition yields numerous entries from students across the country. Aside from our green initiative, your Company also participated in two coastal clean-up drives, and waste management initiatives in our partner host communities. On collaborative success, even our vendors like PTT and Shell Pilipinas, heeded our invitation to promote cleanliness, and donated used fuel drums to be converted into waste receptacles. Through the Juan Matipid Interactive Science exhibits, Trans-Asia is able to strengthen and concretize their education advocacies. Moving forward, we will continue to engage our stakeholders in order to build on awareness and capabilities in preserving and promoting environmental protection and conservation. 32 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 33

21 LIVELIHOOD AND COMMUNITY WELFARE Your Company takes pride in the sustainability of its livelihood programs that have become a source of empowerment by the beneficiaries and the communities where our facilities are located. Quirino s Best, the livelihood program for the mothers of Bacnotan, La Union, has been successfully running for two years and has modestly made its way to become a recognizeable frozen products brand in their community. Your Company has embarked on a long-term project in Guimaras through the presence of our wind farm in San Lorenzo. From its early stages, we have promoted community engagement and development as a keystone. Our roadmap for strengthening tourism and development takes a multi stakeholder approach, and is focused on building community resiliency, capacity building for tourism and livelihood opportunities, with a proactive mindset for environmentally sound and sustainable practices to maintain the pristine island while attracting new visitors and markets. In 2014, your Company focused on helping to improve the quality of life in Guimaras by offering training programs that will prepare the local residents for the growing tourism industry in their island. Some programs offered were TESDA skills training, financial responsibility training and first aid training which, in total, benefitted more than 200 residents. In February 2015, your company launched its first livelihood program with Guimaras State College (GSC) who is our partner as an Accredited Renewable Energy Center (AREC) as accorded by the Department of Energy. GSC trainors brought photographic Silk Screen Printing to our host beneficiaries, which is foreseen by the locals as a highly feasible business, especially with the influx of tourists in their province. Looking into our own family, we have taken a special interest in promoting Employee Wellness as a priority area to inculcate overall work-life balance, employeedriven volunteer initiatives, as well as to develop strong leadership potential. At home, we launched the SIGLA Program for our employees, fondly known as Special Interest Groups for Life Balance Activities. We will continue to provide support for our communities and host beneficiaries as we grow our business. Your Company s vision is to effect inclusive progress for our stakeholders in alignment with PHINMA s goal of Making Life Better. The first livelihood project of Trans-Asia in Guimaras focused on silk-screen printed t-shirt design and production. TAREC signed a MOA with Guimaras State College, as an Accredited Renewable Energy Center (AREC) partner as endorsed by DOE. 34 TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION 2014 ANNUAL REPORT 35