MANILA Philippines — MB: There have been supply agreements (specifically those with SPC Power for Panay-Bohol and ICS Renewables for Amlan facilities) which have not gone through ERC approvals, how will you treat or book cost recoveries for the amounts paid for the electricity purchased from these privatized assets and also the fuel supplied for Panay-Bohol?

I am fully aware that PSALM gained ground on denying my article on this on technicality (since these contracts already expired in 2010), but I also know that the existence of these contracts cannot just be simply swept under the rug as they may still be included in the liabilities to be passed on to consumers. (Note: If you don’t have copies of these contracts, I have and I can provide you).

Mr. Ledesma: PSALM has recorded the relevant amounts in accordance with existing government accounting rules and regulations.

MB: Do you or will you support moves of folding or aligning your liability management group with the DoF?

Mr. Ledesma: Yes, I will fully support, if and when the DoF decides to consolidate the liability management program of the national government. For the record, PSALM regularly consults and works very closely with the DoF on its liability management program and transactions.

MB: How is the “cleaning” of the books of NPC and TransCo coming along? I was informed that part of the reason the UC application is “muddled” is that there are collectibles which may be better off written and that there are debts which are “unclear” whether they are part of the stranded debts or not?

Mr. Ledesma: The debts applied by PSALM in its UC-SD filing are only those obligations transferred from NPC with valid documentation; hence, these debts no longer require further reconciliation with NPC. The accounts which require further reconciliation among PSALM, NPC and Transco were left in NPC’s books of accounts; hence, these are not being considered as part of stranded debt.

MB: Are there assets apart from the GenCos and IPP contracts which you intend to privatize in the near future (i.e. the real estate assets which may be harder to dispose of)? What if they are not disposed of in the five-year period that the DoF has projected privatization to be completed?

Mr. Ledesma: My understanding is that the EPIRA requires PSALM to “manage the orderly sale, disposition, and privatization of NPC generation assets, real estate and other disposable assets, and IPP contracts.” Assuming that the DOF has set a five-year period to complete privatization, and assuming that privatization is not completed within that period, it stands to reason that DoF will provide guidance on how to proceed.

MB: I noticed that PSALM still handles the supply contracts of some customers despite not having plants anymore. This is obviously contributing to the losses of NPC/PSALM. When do you intend to unload all these contracts?

Mr. Ledesma: PSALM still has generation plants that supply our existing electricity supply contracts with customers. These contracts, however, may be transferred or may expire depending on when the generating plants are privatized.

MB: PSALM has been under scrutiny for perceived governance issues. Are these issues unfounded? Why or why not? What are you doing about them?

Mr. Ledesma: Since I assumed office, I have not seen any evidence of irregular activities, whether in previous or in present transactions. Nonetheless, PSALM is open to any scrutiny that proper authorities may wish to conduct. My main objective as President and CEO of PSALM is to serve and contribute the best way possible and in the most transparent way.

MB: There have been suggestions to terminate PSALM as corporate structure (despite extending its corporate life only for UC recovery purposes), what is your view onLEDESMAthis?

Mr. Ledesma: PSALM will continue to perform its mandate under the EPIRA until the end of its corporate life, unless a law is passed shortening its existence or abolishing it. With regard to extending its corporate life for UC (Universal Charge) recovery purposes, I am all for it since it will clearly lessen the UC-SD and UC-SCC to be collected from consumers. Stretching PSALM’s life from 15 to 25 years will mitigate the UC (by roughly 5-6 centavos per kWh) to be collected from consumers.

MB: Are there any provisions in the EPIRA which you feel should be amended?

Mr. Ledesma: Yes, there are some very important provisions. We have submitted to the Department of Energy our proposed amendments to the EPIRA for its consideration. The proposed amendments include the following:

• Exemption of the proceeds from the privatization of the generation assets, IPP contracts, real estate and other disposable assets from national and local taxes, fees, and other charges;

• Exemption of the proceeds from the privatization of TRANSCO, the PSALM generation assets, IPP contracts, real estate and other disposable assets, as well as the accounts receivables and bank deposits of PSALM, from garnishment, attachment, forfeiture, seizure and other modes of enforcement of judgment;

• Exemption of PSALM from the payment of dividends to the National Government as required under Republic Act No. 7656; and

• Exercise by PSALM of the power of eminent domain subject to the requirements of the Constitution and existing laws, in order to address contentious issues affecting land underlying.