CONCESSION AGREEMENT between ALBAY ELEGTRI OOPERATIVE, INC. and SMC GLOBAL POWER HOLDINGS CORP. Relating to the distribution of electric power and other related services to the Franchise Area of Albay Electric Cooperative, Inc. t 29 October 2013CONCESSION AGREEMENT This Concession Agreement (‘Agreement’). is made in this 29" day of October 2013 (the "Execution Date") between: ALBAY ELECTRIC COOPERATIVE, INC., an electric cooperative duly organized and existing under and by virtue of the laws of the Philippines, with principal office located at Legazpi City, Albay, represented herein by the Chairman and Vice Chairman of the Interim Board of Directors BISHOP JOEL Z. BAYLON and ATTY. JOSE VICENTE D. FERNANDEZ (hereinafter referred to as “ALECO” or the “EC’); and SMC GLOBAL POWER HOLDINGS CORP., 2 corporation duly organized and _ existing under the laws of the Philippines with its principal office at 155 EDSA, Bray. Wack-Wack, ‘Mandaluyong City, Metro Manila, and: represented by its Directors FERDINAND K. CONSTANTINO and AURORA T. CALDERON (hereinafter referred to as “SMC Global Power" or the “Concessionaire"), each a "Party" and collectively "Parties". Recitals: ‘A. Under Section 2 of Republic Act No. 9136, otherwise known as the “Electric Power Industry Reform Act of 2001" (‘EPIRA’), it is the declared policy of the Republic of the Philippines to, among other things: () ensure and accelerate the total electrification of the country, (i) ensure the Quality, reliability, security and affordability of the supply of electric power, and (ii) enhance the inflow of private capital and broaden the ownership base of the power generation, transmission and distribution sectors. B. Reforms in the operations of distribution utilities, including eleciric cooperatives, which result in greater efficiency and lower costs, are a necessary part of the implementation of this policy. C. ALECO has a franchise to distribute electricity in the Cities of Legazpi, Ligao and Tabaco, the Municipalities of Deraga, Camalig, Manito, Rapu-rapu, Malinao, Maliliput, Bacacay, Sto. Domingo, Libon, Polangui, Albay, Guinobatan, Oas, Jovellar and Pio Duran, all in the province of Albay, Legaspi (the “Franchise Area’), a map of which is attached hereto as Schedule 1 (Franchise Area) D. ALECO has tHe ‘authority to.enter into a Private Sector Participation with a third party for, among others, the management and operation of its business to improve its efficiency, and fo ensure the Quality, reliability, security, and affordability, of the supply of eleciric power to the Franchise Area; and in cooperation with the National Electrification Administration ("NEA"), determined that 2 Coneession agreement Is the most viable option for ALECO to achieve the foregoing purposes. &, ALECO issued and published an invitation to various Bidders to tender for the concession, ‘Thereafter, the Bidders conducted their due diligence in connection with the concession. F. On August 23, 2013, the SMC Global Power was selected as the winning Bidder and was selected to enter into this Agreement for submitting the bid that is most advantageous to ALECO and its representation that it has, among other things, the financial capacity and the managerial and technical capability to pefform the obligations under this Agreement. G. On Septembert4, 2013, a referendum was heldYor the ALECO general membership to choose between the two options for the rehabilitation of ALECO, namely private sector participation 1through a Concession Agreement with SMC. Global or coop to coop partnership where the former received 5,508 votes and the latter got'3,491 votes, thereby the ALECO members ratified the decision of ALECO to enter into a Concession Agreement with SMC Global Power. H. The ALECO Board of Directors approves the Concession Agreement between ALECO and SMC Global. ‘SMC Global Power and ALECO agree that this Concession Agreement shall be governed by the Policy of complete transparency between the Parties. ‘SMC Global Power shall organize and establish the Albay Power and Energy Corp. (‘APEC’), a fully owned and controled subsidiary which shall assume, as the Concessionaire, all the rights and interests and perform the obligations of SMC Global Power under the Concession Agreement. For and in consideration of the foregoing premises, the Parties agree as follows: 1 Definition of Terms. Unless the context otherwise. ‘Agreement shall have the following meaning: 9" Affiliate ‘means any person which, alone or together with any other person, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common controt with another person, and shall include subsidiaries, the parent company, and subsidiaries, directly or indirectly, of a common parent. implies, capitalized terms used in Agreement means this Concession Agreement. ALECO CBA means the Collective Bargaining Agreement executed between ALECO and the union of its employees. Applicable Law means: 1. the Constitution of the Republic of the Philippines; 2. all laws, statutes, treaties, rules, codes, ordinances, ‘regulations, catficates, decisions, orders, memoranda, cculrs, detrees, resolutions, directives, ruling, interpretations, approvals, icenses, and permits or any Governmental Authority; and 3.judgments, decrees, injunctions, writs, orders or like actions of any court, arbitrator, or other administrative, judicial, or quasi- judicial tribunal or agency that are binding on a Party, as they may be amended, supplemented, replaced, reinterpreted by @ duly authorized Government Authority or otherwise modified from time to time, Approved Accounting ‘means the accounting principles, standards and practices generally Principles accepted from time to time in the Philippines and/or its jurisdiction of incorporation. Asset ‘means all assets and rights belonging to ALECO and necessary to enable the Concessionaire to operate and maintain ALECO, including: (@) any land or buildings; (b) any equipment; (©) any books and records (including operating and maintenance manuals, health and safety manuals and other know-how); 4@) any spare parts, tools and other assets (together with any warranties in respect of assets being transferred); (©) any revenues atid any other contractual rights;