Concessionagreementocr PDF

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II Copy for the National Transmission Corporation

PSALM-TR04-201A-002
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IT CONCESSTON ACREEI,'EI'TT
for the constnrction, inetallation finan in& management, imPtovement' expansiorl

operatiorl maintenanc€, rehabilidtion tepai' ana rerutUiehm€nt of
I! the nationwide uansmission and Subtsa$rniseion
s.vstems in Ote Republic of the Philippines
II amonS
It POWER SECTON ASS TS AND LTAUUTIES MANAGEMENT CORPORATION
I NATIONAI TMI.IST.G$ON CORFORA'ION
I and
I NATIONAL GRID CORPORATION OF THE PHIUPPINES
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Februarv 2008
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I IESTIFITD TFUE COPY
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TTCILIO
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B. AELLADA
COPPORATE LE6^L COUNSEL
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FCsEpuLEs ro rrIE coNcEssroN AGREETvIENI:
I I
I Dcfinitions and lnterpretalion
I I 2 Proiects under corutruction
3 Initial Workin8 Capital
I I 4 RacoveryPayment
I I : 7
:;ffi1"1L."*..,*
Performance Security
I! I
8. Net operating Cash flow
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I I Notices
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tr THts CoNcEsstoN AGREWET\T (as arnended from time to time, this " Ayvcnl4ntl
dated as of the 286 day of February, 2008
.s
ll BETWEE.{
t,owtR SEcToR ASsErs AND Lt^8ILmEs MANACF.VEI\rI CORIDRATION, a
tl government olr'ned and controlled corporation ocisting r]nder and by virtue

of Republic Art No. 9136, witl its principal office at 70r Floor, Banlsrner
Euilding, Ayala Avenue, Makati City, Philippines ("PSi{LM");
ll NATIoNAL Tl(,{.^{s$$ssloN CoRIDRAT!oN, I government or+.rred ard

conEoll€d corporation duly created Lry Republic.Act No,9136, with its
principat office at Power Center, Quezon Avenue comer BIR Road, Diliman,
Quezon City, Philippines ("7MNSC0"); and
1l NATIONAL GRJD CORPORATION OF THE PTIILIPPPINES,

corporation duly organizrd and cxisting under the laws of the Republic of the
A
gI Ph.ilippineu, with its principal o(Ii(e at Suite 3304 West Tower, Philippine
Stock Exchange C€nter, ExchangE Road, Otigas Center, Pasig City, Metro
Manila, Philippines {"N'GCP" or the "Contcssi<trwirc"),
1l collectively referred to as the "Parlirs" and euch individually reft'rred lo as a"Pa
WHEREAS,
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1l by virhre of Section 21 of Republic Act No. 9136, otherwise kno*n as the

"Electric Porver Indusqv Reform Act of 2001- (the "EPIM"), and its
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lmplementing Rules and Regulations (the "IPJG"), I€ALM has selected the
consortium of MONTE OnO GRID RESOURCES CORPORATION,
CALACA IIIGH IOWIR CORt'OltATtON and STATE CRID
CORPORATION Of CHTNA (collectively, the "/rrrustoru"), through opcn
lr cornpetitjvo bidding for the arvord of a concpssion to construct, in5lall,

finance, manag+ improve. expand, operate, maintain, rehabilitale, repair and
refurbish the Transmission Assets, and
the Investore have cstirblished the Concessionake in accordoncc wilh the

TT B.
Direct Agreemcnt dated 12 December 2007 arul 17 January 2m8 between
PSALM and the Investors.
Now, THEx-EronE, in coruideration of tlre lortgoing recita]s and thr respectivc

coven nls and a5peements containcd hereirl, the Parties set torth the terms and
condidons of the concessioft
1, OEHNITTONSANDINIERPIIIIIATION
1.01 Definitionr. Unlcss the con[ext otherwise requires, capitalized

tcrrns and expreSsions used herern rhull have the meanings set forth in
Schedule 1 lDefnitions and llVrprchho ).
l,,,|.fi,on A,?.rrraxt
u'th N.noitl Cr*l Cn pa',nar al ttu Philippr ct
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II LAz In!SIpE!i!-an. Thc Partics will interpre t this A8reemcttt in

acrordance lr'ith lhe rules of consFuction sct lorth irr SclreclLrle 7 (Defiitions
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GRANT oI Con-cEssroN
Il 2,01 Concr.s-sion. Subie(l to th€ terms and conclitions of this Agreement

I'SALM grants the Concessionalre, on an exclusive basrs, (A) the right$ and
responsibilities during the Concession Period (1) to construct, irutall, finance,
Il manage improve, expand, operEte, maintain, Iehabilitate. repair, refurbish and

replace ihe Transmission Assets, save that with regards lhe Sub-lransmission As$ets,
this obtigation shall onll' be to operate anrl maintain the Sut"trarsmission Assets
n'hich have not becn disposed by TRANSCO, (2) to PrePare the 'fransmission
ll Dcvelopment Plan and kJ implement such prgects in the TDP as may be authorized
by thc ERC, (3) to provide Transmission Service and enter into connection
a8reement3 w.iti Trarsmission Customers, (4) to procure such Artcillary Serviceg as
Il are necessary to support the safe and reliable opcration of tie Transrnission Assets,
(5) to bill and coLlect from Trarsmission Customers for its own account such chargeg
as lhe Regulatcd Entity may lawfully demand, and (6) to collect the Universa.l
Charge payablc by end users and self-gcncrating cntities not corulected to a
Il distribution utilitv and rcmit th€ same io [5AL\1. aLl in accordarce with Applicable
Law, including the EPIRA; and (B) the right to carry on anr Related Business in
accordance with Applicable bw.
Il The Concessionaire, as the Regulated Entity, rs to bc regulated b1' the ERC. Neither
IS.arLM nor TRAI\ISCO has any regulatory righu, for any act or inaction of lhe
Concessronarre that are within the regulatory authoriN of the ERC, to (i) make its
tr own determination, or (ii) impose anv penalties on tlre Concessionairc.
?.AZ Commencenent of Concession. The Concession, togethcr with all the
Ir rights, privileBcs, inte.ests in ond oblrSalions psttairdtrg thcreto, shall take cflect on
t}le Commenccment Date, 'l his ASreemsnt shali terminat€ auromatically iI the Direct
Agre€ment is terminated bcfore the Commencemcnt Date.
Ir 2.03 Concession Period, The Concerssion Pcriod shall commence on tlle

Commencement Date and, unless carlier terminated, shall expi-re on the Full Term
Expilation Date. PSALN1 and the Conccssionnire shall meet within [irty (30) days
from the twentieth (20s) anniversary of the Commencernent Datc (and therealter as
often as tlev may agree) to reviery the Corrcessionaire's petformance ol this
Agreement and, h light of that review, to considcr whether and on what tcrms the
Concession Period should be extended, with (onsideratiom given to all such re.levant
matters indudlng bul not liruted tl) the further conce$ion tcrm, the further
conccasion obligatioru and righb, arld ure Iurther concession fee payable, pro!"id€d
that the Concqsrion Perjod shall not be extendcd be1'ond the fiitieth (50th)
anniveBary of the Commcncement Date o, for longer than the remaining term of the
Concessionaire's congressional tranchise,
Z0{ Qb[gations Re8ardinq the Franchise. The Concesslonaire undertake!

to apply fr:r and diligenuy pursu{ an application for a congressional frafthis€ to
nrrn Mn'un.i Gnd Coryolrtoi d ,,E ftul'pr{ll1t
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ll carry on the Conccssion. The Concessionaire rvarrants that it is eligible under the
Constitution to hold a congrcssional franchise to oPerate a public utility and shall
prompUy notify PSALM and TRANSCO in writing if it becomes aware of any event
or circumstance that render or could rcnder it ineli8ible to obtain o, continue io
TI hold such congressional franchise. PSALlvt and TRANSCO shall a$ist the
Concessionaire's application for a congressional franchise in accordance with the
Direct Agreement (Frunchist Afplicttionl.
TT 2.05 PerformanceSccurity*.
Il (a) As secudty for the prompt and (omPlete Perfornrance of its obligations under
thiJ Agreement, the Concessionaire shall deliver
Csrnmencement Date a Performance Security in
to
PSALM on
the form oI ftledule 7
It lPerJanunce Securiry) or zuch other form as IfALM finds acceptable.
Thrcughout the Concession Penod, the issuing bank must be a QualiJied

Bank. 'the Pcrformance Security shall be available lor drawing on a Qualified
Il Banft at its principal olfice within Metro N{ani.la. Each Performance Sc'curity
shall be (or a lerm ol not less than rw€lvc monihs,
!l O) The Concessionaire:
(i) waives all rights to seck or enforce any te&porary or p€rmanent

restraining order or iljunction related to the Performarce S€curitv;
(ii) shall maintain the Performancc Secunty in effeci throughout the

TT peri(xl up to and including thirty (30) days after th€ Tcrmination Datej
tr (rli) shall renew the then-efjective Performance Securit, on a dat€ (the

'Rtplaemcnl Deadlinc"l that is not less than five (5) Dusiness Days
prior to th€ stated expiration date of the then-Mfective Performance
lr Securicy (" Pctfurr!4 kcc Secunly E ptry Detc'") by deliverin5 to PSALM

on or before the Replaceme'nt Dead.line (a) n replncement Per(ormance
Security ald (b) a certilication from a Resporsible
Concessiona.iJe that the bank at which drarvi'lgs under the
Officer of t}le
ll (iv)
Performance Security may be made is a Qualified Banl; and
shal1 replace the Perlomranc€ Security within five (5) Business Days
after (a) any draw thercon made by PS,\I-,V upon the occuntnce of a
Performance Security Dralyin8 Event or (b) the bank at which
dnwings under the Performance Sccurity may tte made ceases to be a
Qualified Bar*, and shall provide PSALM with a certification from a
Responsiblc Of{iccr of the Concessionaire, (c*ifylng that the bank at
which drawing$ under the rcplacement Performance Securiry may be
made is a Qualified llarrk,
O Within two (2) Business Days alter the delivery of a replacement Performancc
5€ rity pusuant to Subsechon ft) above, PSALM shalt deliver the original
Performance S€curity to the Conccssionaire for cancellation.
Notwithtandhg that during this period of two (2) Business Days I5ALM
u,!$ ,V,rrl!,trd Gdl C.!'FEB hd^ ol thr Ptalinia.t
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shall havc in hand hvo (2) Pr'rformanct' Securities, iI a P*rformanct Security
TI Drawing Event occurs, ISALlvl shall be enti cd to drah' on ody one such
I'erf ormance Securi ty.
IT (,1) If the Concesrionate does not deliver a rePlacefieart Performance Security by

the Replacement Deadline (a "Rcplacrau Foilute Drrut Er.e.nl"), thc foUowing
shall appty -
TI (i) PSALIII shall serve a'Iermlnahon Nohce Pursuant to Section 14.01

and immediately draw on tht Performancc Scrurity for the full
amount.
TT {ii) RePlac€n'.ent Deadline and uF to and iJ1cluding

lf at any time 8ftet thc
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the Performance Security Expiry Date, IISALM receives an accePtable
rcplacement Performance Security, I'S.ALM shall. within five (5)
Business Days of thc recciPt of tuch accePtable replacemmt
Per{ormance Security, refund to the Conc€ssionaire in ftrll put
Il without ilterest) thc amount dra\ /n and received by f,SALrvl Fursuant

!o Subsection 205(dxi).
(ili) lf at any time aJter tlre Pcrformance S€curity ExPiry Dale and uP l'o
It and iscJuding the tr+'entieth (20th) Business Day following the

Performance Security Expiry pat( PbALhl receives an acceptable
rePlacement Per(ormanrce S€ftrity, ITSALM shall refund to &e
Il Concessiorraire, without any interest, after deducting a penslty

amounl The penalw arrount shall be 5% of the amount drann and
received by IISALII pursuant to Subsection 2.05(d)(i) (or eacn
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Business Day b€twcen thc Performance Securil-v Et(Ptry Date and the
date ISALM conJirms it
has rt'Leived an acceptable rePlacement
Performance Security rn accordance with the Provisiont irl Subsection
2.05(d)(v) below.
lr (iv) lf an acceptable rtsPldcement Performance Sccurity is received by

PSALM in accordancc with cither Subsections 2.05(dXii) or (ii:i),
ITSALM shall withdtow the Termination Notice lssued in accordance
Il with Subsc<tion 2.05(dXD. lf an acceptable replacement Performance

Security is not received by PSALN( in accordance wit-h either
Subsections 2.05(dxii) or (iii), dris Agreement shall notwithstanding
Substction 13.01(e), immediately terminate on the twcntieth (?oth)
Business Day following the Performarxe Security ExPiry Date.
(") The Concessionaire shall not rcceive any compensation, tsmurerdtion

or damages fmm I€ALM anrj ]I{iNSCO in the cvent thal thir
Agrsem€nt is termlnai€d due to the failure to deliyer an ac(ePtable
ft?lacement Perlormance Securitv, .A.ny replacement Perlormance
Security must be accrptable to PSALM. r':SALM shall havc t1,ro (2)
Business Days from rNcipl o( the replaccmcnt Performance S€curity
to verify and confirm itr acceptance, proaidtrl, lhat i, the replac€ment
Performance Sccurity is identical to the Performance s(turity being
ft.r, Nllrnrd Car' Cr"'r"rti@ of tlt Pur'ptnts
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lt replaced and Ls lssucd hy a Quaiilit'd Ban], PSAW must accsPt such

replacemenl Performancc Securitv.
ll (e) Subiect to the provisions of Subsection (d) above in relation to B RePlacemcnt

Failure Draw Event, rSALM and TMNSCO shall be entitled to draw on and
forfeit the cntire amount oI the l'erformance Security upon tie <xcurrence of
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a Performance Sc.-urity Drawing Ev€nt and amounts so drawn shall be
applied by PSALM towerds satisfying any loss, darnage or costs arising from
the Performance Security Dawing Event, Providd that PSALM may initiete
proceedings Pursuant to Section 16 (DisrtJld Resohtdonl to rccover fur$er
tI omounts ihould the amount of the Pcrformance Se(urity be insulficient to

firJly compensate PSALM for such loss, damage or costs.
tl NATUnE oF CorricassroN
3.01
Rtcltrs
Riqhts and Obliqations" From ihe Conrnencement Datc and subicci Io
ll the terms of this ASreement the Conce.e'sionlire shaU take over and oPeralE the
whole of TITANSCO's regulated transmission busi.ness as a gohg concern and ahall,
as betwee$ TRANSCO and itsell, be the sole rePr$entative of the Regulated f:ntity
before the ERC. The Concessionairc may, but shall not be obliged to, caIry on any
!l R€lrted Business, prouided that the Concessionaire urust assurne and perform
conkacts for Related Business entered into by TRANSCO prior to Commencement
Date beiag those set out in the Disclosure Letters as defined in the Dir€ct A8t€ement.
Il 3.02 Govemmen(s Power to Regulate. The ERC shall regulam the

Concessionairc in carryrng on the Concession ir accorddnce with Applicable [,rw,
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including the EPIRA or any successor legblatiorl Nothing in this Agreement or the
other Transaction DocumenLs shall (a) preiudice the powers of otier Covemmental
Authorities including the Congress of thc Philippines, lo regulate the Concessionaire
in accordance *'tth Applicable Larv nor (b) be deerned to Providc PSALM or
lr TRANSCO *,ith any such rcgulatorv powers.
3.03 Nature of Concession Rishts,
tl (a) Nothing in tht A8reement shal.l be construed ag givins to thc Concessionaire

(i) the o$nership of, any lca.:ehold interest in, or other rights in refi ho Bny
ar$ets comprising the Tran-smixion Grid or any other real ProPerty belonBixl8
b TRANSCq nor (ii) the ownership of or any prcprietary interest in any of
thc Tralsmission Assets, Documcnted ProPerry Ri8hts, tntelle(tual FroPedy
RighLs.
(b) (r) PSALM and TRANSCO covenant and agree with thc Concessionairt
that duritrg the Concession Period, except as otherwise provided in this
Agreement (including the exercise by a Govemmental Authority of the riSht
granted to it und€r Artide Xl[, S€ction 17 or 18 of the Co$titution), the
Concessionaire, its employecs, contractoF and agenE shall be entitled to have
exclusive use of aII of the Tran-rmission Ass€ts, Document d Prope*y Rights,
lntellectual Pror!€rty Rights (subiect to Section i1.05 (I ellcctual horyrf1
Rigfirs)) fot the purposc oi carrying out the Concession in accordsnce with
rrd Ncrsrn.l Crid C,rr,rnnnn ol t Plalipttr.t

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ll this Agrccmcnt, except the (i) I'ower Trahing Center and &e adiacent
warehouse iocated within dre Powcr Center, Quezon Avenue corner BIR
Road. Diliman, Quezon City, and (ii) the Bantayog Dormitory located at
Quezon Avenue, Diliman. Quezon City, (both "Excluded Asstls't, The
IT ownership and usc of the Exduded Assets shall be retained by TRANSC-O'
tl (ii) The Concessionaire shall defend, indemnify and hold PS'ALM and
inelqfO harmless agair$i any and all liabilities, claims, looses, costs ard
€xpetrses (including ittomeys' fees) that they may incur during
Concession Penod by reason of the Concessionaite's us€ of the Transmiriion
the
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Asseis, Do$mented Property Rights. flnd tntellectual ProPerty Ri8ht5'
Notwithstandin8 and without limitin8 Sub$ection 3.03(a) ahove, the

Concessionaire ,ttalt .turirlg the Concession Period assume all of tht
ll responsibilities as i-[ it is an owner of the Trall.srnlssion As$ets (other than tle

Exiluded AsseLr), Docurncnted Property RiShts and lntellectual ProPerty
Ri8hts includin8 the obtigatir:n kr pay license lees, Taxes, renewal fees afld
ll othtr charges payable that fall due for paymcnt during ihc Conccssion
Period, ani shill'delend and indemnify PSALM and Ix.'u"',NSCO and hold
them harmless agairut Bny and all liabilities, claims, losses, costs and
expenses (incfudGg anorneys' fecs) that they may in r during thc
Il Concession Period ulless they are incurred as a rel'ult of PSALM's or

TIIANSCOs breach of any of the 1'ransaclion Documents.
tI (d) Neither IISALM nor TMNSCO makes any rePresentation and warranty of
any kind in relation b TRA.I\ISCO's properties and each of them expressly
dirlaims all warranties of merchantability or fitness for a particular purposc
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that may be irnplied by Applicablc Law.
(e) So lonB as no Concersionate Default is continuing, TRANKO shall male

avai-lable to t]e Concessionaire t]re amounts of budgeted external funding
lr urder the FundinS ABrcemelrls which have not been drawn as of

Commencement Date as sperdier.l in Schcdule 2 (Proi:cts Utd Cons,t/uctto,tl
towards the co,st of completing the ProFcts Under Construction in accordancc
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v.ith the Construction Ivtanagumenl Agreement.
(0 So tong as the CorLcessionairc is not in delault u:rder thi$ Agteem€nt bul

witJhout preludice to the exercise by a Covernmental Authority of the right
granted to it under Arlicle xII. fuction$ 17 and 18 of the Constitution or
Applicable Law, PSALM and TRANSCO shall safeguard and Prote{t the
rights Braflted to the Concessionaire under this Agx€tment and shall defend
and hold the Concessionaire harmless against the actidns o{ all persons
claiming title or righls to the Transmission Assets, Documented PrdPerty
Rights and Intellectual Propcrty Itights that interfere with or dishrrb the
exercise of the Concessionaire's ri8hts, prwidttl thal the cause of action
resulting to such inaerrerence ot drsturbance accrucd prior to Commeffement
Date and lvas not due to the Concessionaire's act or omission Should the
cause o[ action of such interferertce or disturbanc€ accrue ftom
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Commencement Date, the same shall be for the account of the Concessionaire,
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il G) The Conccssionaire agrees and con(imu that it rr'ill carry out the Concession
as an inclependent colrtractor for its or^'n account ExcePt as may be exPressly
provided to the contrar)' in the other Transaction Document'' the
It tonccssionaire is not authorized to act as PSAL\{'s or TRANSCO's agmt and

does not partner or have any Fower to entet into any binding commitments
on their behalf. Nothhg
constihrte a partnership
in the Transa€tion Documents is deemed to
-between
I€ALM and/or TRANSCO and the
TI Conccssionaire, No employer"cmployee relationshiP shall be creattxl between
PSALM anrt/or TRANSCO and the
Concessionalre's employees,
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repreSentatives and aSents.
(h) The Concessionaire agre€s tJrat it shatl ensulc that all contracts to be entered
into by t}re Concessionaire relating to the oPeration of the ConcBeion during
the term of this Agreement and which (a) are for a term of nvelve (12) montfu
ll or more and (b) involving the Payment of money t'o or the receipt of money
by the Concessionaire in cxcess of USS1,000,000, shall only be entered inm by
the Concessionaire if it inctudca an exPress provision oI assignability, at
ll TRANSCO's option, to TRANSCO or its nominee upon thc exPiration of the

Concession Period or €arlier (crmuration of this Agreement.
II TRANSFEN OFTRANSCO'S tsUSINES$
4.01 Translerred Contracts. From the Commencenent Datc and subi€ct to
It
Subs(tion 4.01(e). the Concessionairc shall be entitled to cxercisc all of TRANSCO's
rightr and shall discharge all of TRANSCO's liabilitics (other than the Excluded
Uibilities) and perform all of its obligations u'|der all existhg contracts telating to
the operation of its regulated tratsmission l:usiness, including contracB [or Related
I Businesscs and any rights under any security dePosits, letters o{ cIedit and othtr
forms of credit support provided by TRANSCO's counterParties to such corltracb,
(the - Trarsltnc d Cor ttac ls \.
I (a) lnsofar as the benefits and obligations under any Translerred Contracts may
be elfectively asuigned by TRANSCO [o the Concessionaire without the
II consenl oI a third party;
It (i) TRANSCO agrees to aasisn and trarufer all tlxL'beneIlt of them to the
Concessionaire tt'ith elfe<t from the Commencement Datc; and
I (n) the Concessionaire shall perform all of TRANSCOs obligations under

th€m except for any such obligations that were required to have been
I performed priot to the Commencement DatP and any obliSations that

TRANSCO was in breach of on the CommenccmsJrl Dat€.
T (b) lnsofar as the benefits or obligatioru under any Trarsferred Contracts or any
T other contract may not bc cffertivdy assigned by TRANSCO to tlre
I Concegsionaire without the conscnt of a third party then:
I Lad$sn Atruitnl
(0 TRANSCO and lhe Concessionaire shall each usc theit reasonable
cndeavors to procure an effective assignment of those conb-6ct8 (a3 the
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Concessionairt rrr.,y rcquirr), ;rrovided tiat neither Party shall be
TT obliged to rna.ke any Palment, give any securit) or provide any
guaiance as thr'basis for, or in connection with, any such asslgnment,
ll (i0
except for contracts rclating to lntelleclual Pruperty Rights which shall
be 8overned by Section'1.05 (Inl.llrctr al Proryrly Rrghtsl;
unless and until any such contracts shall be assigned witi consmt,
TRANSCO shall, insofar as may be permissible and lawful, give the
TT benclit under such contracts to the Concessionaire as iJ they had
already been assigned to the Concessionaile and thc Concessionaire
lI (iii)
shall perlorm all of l'l{ANSCo's obllgations excePt for: any obligations
that TRA\ECO was in breach of on the Commencement Date;
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contracts relating to the Prolects Under Corlstruction shall be keated
in accordance with the Constructior ManaBement Agreefienl and
(iv) on and aJter the Com.mcncemcnt Date, TRA\ECO shall noi do

anything as a Partl' to the Trarsferred Conhacts lYithout the written
IT consent of the Concessionaire (n'hich shall not be unreasonably
withhEtd) and shall kt'r:p the Concessionaire Iully urlormed of all
communicalion it ma)' havc rvith othff PJrtics to thc Transfeced
Il Contacts and any irther material information regarding

conEacts it m,]y obtain.
such
It (c) This Agreement shall not corlitjtutt an assi8nmcnt or attemPt to asJi8n any
contract if the as5ignment or attemPt would constih'ttc a breach o{ that
contract or violate Applicable L,rw.
lr (l) TRANSCO shatt indemru.,h'the Concessionain agairlst aU actual loss€s,

liabdities. costs, clainrs, proceedings, damages and exPetrses that Erise a5 a
result o[ any breach by TRANSCO of its obligations under t]ri-s Section 4 01
lr (includin8 obligations undcr the fratrsferrtd Contracts that TRANSCO wae in

breach of on tlre Commenreme[t Date) except irsofar as they are attributabL'
io the Concessionair€'s act or omlssion, m which casc, dre Conce$ionaire
shal b€ solely liable tor such losses. liabilitics, costs, cl.tims, pro&ed.ings,
Ir (e)
damages and expenses.
On or before thc Commercenenl Date, TR,\\SCO shall notifv

Concessionaire in writing of any rt'ceivables unds the Transfcred Contracb
the
(the "Ercludrd Rzccioables') that are to be retained by TRANSCO for iB own

account and of anv liabilities under the Transferred Cnntracts (t}le't:ch&d
Lirriliries) that TRANSCO rvishes to retnin resPonsibility for dirharghg.
The Excluded R*eivables and the Excluded Liabilities shall not be taken into
account tn calcdating the lnitial Working Capital for purposes of Schedule 6
(Adiu$frcris lo Ccr.'drsio,r Fr) and TRANSCO shall be entitled to collecr and
retain the Exc.ludcd Rc"ceivables for its own account and shall discharge the
Excluded Liabilities at its own expense.
It
Thr Conccssionaire shall be liable Ior all docunentary siamP taxes imPo6ed
of anv Transferrcd Contract to the Concessionaire.
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II (g) Immediately after Commencement Date, the Concessionaire, with the

assistatrce of fnqNSCO, shall promptly obtain the release of any lett€rs of
credit, cash deposits, and other forms of credit support provided by
TI TRANSCO to secure its obti8atiorae under tle Translerred Contracts,
inctuding the provision oI any replacemeni s€curiry, puying TBANSCO kom
its orsrr funds alr a$ount equivalsnt to the securiq/ provided by TR{NSCO
(in which ca$e it shall acquire all of I'x.l"r-5C(Is right in rsP€ct o{ that
TI s€curitv), and shall indernnify TRAI\'SCO against all los*s incured by
TRANSCO arising Irom the Concessionaire's failure to obtain such releases'
ll 4.02 Proiects Under Construction.
tl (a) From Commcaccmcnt Datc, thl- Concessionaire shall manage the

construrtion and completion of all Projecs Under Cotstruction tllat have not
been commissioned and placed in service on behail of 'I'RANSCO in
accfrrdance, with the Construction Managemt5lt A8reemenl
ll (b) Before the Commenement Datc, TRANSCO shall be fully responsible lor
carrying out all Prolects Under Consttuction and shall use all reasmrble
efforts h) keep its invesEncnls in such proiects in linc with the capital
!l investment budget set oul in l'art B of Schedulo ? (PrcJeds Unda

Corirructiol!).
Il (c) From the eftectivity of this Agreemelrt (as Provided in Sertion 17.20
(F-fiettioity)l until Commcnccment Date, TRANSCO shall (i) keep the
Concessionaire informcd of its progress m carryin6 out the Projects Undcr
Il
Constructioru (ii) consult u'ith the Concessionaire regarding the terms of any
signdicant contracts relating lo Projects Under Construction (indudirg
proposed Funding Agreements) and shall give the Concessicnaire a
reasonable opportunity to review and comment on them belore enlering into
Ir ticm; aJrd (iii) uPon prior nodce, 6rant thc Concessiqnairs reasonable acccss
and inspection to inlormation relating to ProjecLs Undcr Construction,
provided drat such access or irupection $'ill not imPede, interruPt, or cause a
susp€nsion in ]RAIr'SCO's op€raliorls- Subicct ro the Conce*gionairds
ll enErirg into appropriatc agretrments to (i) keep their terms confidential unlil
the Commencement Dat€, and (il) undertaking to ProDlFliy retutn all such
contrects in thc event lhis Agreemmt is terminated prior to CommencEtnent
Date, TRANSCO shall givc tlte Concessionaire a copy o[ all sigrificant
conbacts relating to Projecls Undcr Construction promptly after they are
executed.
(d) Within forty five (.15) days from tle Conrmencemcnt Date, 'll1A.t',iSCO shal!
de[ver to the Concessionaire a certilicate setting out (D l RANfOs actual
capial expenditu.re on all Pro,ecLs Under Construction compared !o bud8eted
expenditure which is provided in Part B of Schedule 2 (Paqects Undet
Codrtru.tror), (ii) the amount of such actual capital expenditure that was
funded by the dralr ingp under Fundirg Agreements, (iii) the progress of each
Projscl Under Construction expressed as a percentage of completion
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accompani€d by a €ertificate from the consultant engineer, iJ any is in hct
TT arailuble to'fRANscO, scttinS out the detaib oI the wotk comPlet€d aad the
work in progress, (iv) the a&ount of furd.ing on thc Commear(ement Date
remaining uuailubl. to be drawn by the Concessionaire under eaclr Funding
TI Agreemcnt, antl (v) estimated cosl (of caPital expenditure) to comPlete each
Pr-oiect Under Constructir:n and iJ such cost exceeds the amoufit of funding
availablc under the Funding Agreements, a written explanation from dre
consu.ltant engine€r thereof, if any is in fact available to TRANSCO'
IT (e) The Concession Fee shall be sub.ie(t to adiu5tsnent in accordance with
tl paragraPh 1(a) oI S<hedule 6 (z{diaslraflrls lo Concession Fcr) in light oI the

i*rts the audit to be conducted Pursuant to Subsection 4'02(0 (Ptoi'cts
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Under Construclion).
ll (f) AIter rlelivery by TRANSCO of the certiJicate required in Subsection 4.02(d)

(Prcjecls Llndtr Cansttuc[on), the Parties shall cause an audit to be tonducEd
ior i determination of the status of the Prsiects Undet Construction and
estimated cost (of caPital exP€nditure) to complete each Projed Und€r
Construction to determine cost overruns/savin8s, iJ anv. The audit shall be
TT conducted by an independent apPra$er accePtable to the Parties' Within
Il
forty five (a5) days from Commenceo€nt Date, the Parties n'ill agree on &e
xope of the audit and contmct with the Lndependent lPpraiser. Ite audit
rnuit be completed by the independent aPPraiser within sixty (60) days from
the rKeipt ol the said certiJicate rcferred lo irl Subsection 4.02(d) (P/oiec's
l)nder Conslructiotr). The decision of the indcpendent aPpraiser shall be final
T and binding on Ote Parties save in the case of manifest error, The indePendent
T apptaiscr to be engaged by the Parties should not bt'per(orming or have
peiformed scrvices (including the Past ouee (3) vears) for TRANSCO,
IT f5ALt"l, th.' Concessionaire, the lnvestors or any of their respecuve Alfili,ates,

unlesr the Parties agee otherwisc. The cosE of the audit shall be shared
I I equatly hon*,een TRANSCO and the Concessionaire
4.03 Transfer of T.ansferable Assels. On the CommtEtcement Dattr,

'I'RANSCO shall lramfer title to the Trarsfetable Assets to the Concessionalre by
I
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executing a Deed of Tmrufer (in the form attached a! Exhibit C (Form ol Dted ol
TrcnsJe) ot the Dire(t Agreement) in rcspect of them. TRANSCO and the
I Concessionairu shall exrute additional deeds of transfer in respect ol any
subsequently clirovered TRANSCGowned tangible movable ProPertY, the title of
T whi(h has nol bcen tranrferred to the ConcessionaiJe, under the Deed of Transfer.
T Provided that excluded in Ltre l ransferable Assets are such portion of the
Trrnsferable Assets that TRANSCO would need to perform ils functionc after
T Commencement Datc, the aggregatebook value oI which, as of Bid Date, shall not
I exceed Fifty Million Pesos (PhP 50,000,000.00) in total. TRANSCO must
I communicale such list of Traasferable Ass€ts, the owncrship of which TRANrO

r.rill retain, within sixly (60) days prior to Commenccment Dale. The Corression Fee
I will not be adiustcd by reason of TRANSCO retaining titlc to and use of such
Transferable Assets.
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PSALM-TR04-2010-002
{.Ol lntenm Assifirment of WorB Eorce. Wilh cffcct from the
TT Commencement Date, TRANSCO shail assign ils work for(e to work Ior a maxir:rum
period of onc hundrcd and sixty-live (165) days on the tf,rn'rs sei out rn lhe Int€rim
ll Assign-ment Agreemcnt.
4.05 Intellectual Pmperty Rights. TRANSCO shall take all necessary

measures (at the Concessionaire's expcnse) to authorize the Concessionaire to make
use during the Concession Period all of TRANSCO's intellectual property rigltts,
IT including intellechal property rtghts associated with New Proiects. which shdl be
transferrrd to TRANSCO pursuart to Section 5.04 (Nau Projccls), (all of which are
lI refcrred to Es the "t,l kllzclulrl Proprrty Rrg[ts"). The use of any lntulle$ual ProPerU
Rights not owned by TRANSCO shaU be sub,ject ts tIe resrictions imposed by the
owners of such Intellectual ftoperty Ri8hts, including the lranslerability, tran5f€r
ll
restrictions, term of the license. license Iees and renewal fees. The Concegsionairc
shatl be liahle for all documentary stamp taxes idrposed on any assiSiment oI
Intellectual Prop€rtv Rights, provided that TRANSCO will only assign such rights as
the Parties agree should be assigncd.
4.06 InitiallVorkin&Capital.
TT
(a) On the Comrnencem€nt Date, and except for Excluded Recelvables, the
ll Concessionaire shall acquire all of TMNSCO's cash, receivablee aad the

benefit of all plspayments nrade by TRANSCO and shall assumc th('liability
to pay and disrharge all of TRANSCO's current liabilities exccpt for Excluded
!l I-iabilities. TRArr-SCO's estinrated working capit l Position as at the

Commencement Date is set out in S(hedule 3 and the Concession Fee sha.ll be
adiusted in accordarce with Schedule 6 (Adjustments to Conccssion Fee) to
account for any diffcrence ttetween TRANSCO'S actual working clPita.l
Ir (b)
Position on the Commencement Date and such estimate-
The Parties shall appoint an indep€ndent audit firm io audit th€ working
lr crpital Fl()sition as at the Commencement Datp, such audit firm b to t'e 6

Philippine registered audit firm acceptable lo tht Partics.'lhe Partier shdi
agree the appoinElent of such audit firm within seven (7) days of
Commenc€nnent Date and the audit must b€ completed by the audit Erm
tl within sixg (60) days from the receipt of the schedule of a€tual Initial
Working Capital as of Commencement Date. The audit firm should not be
perforrning or have performed services (includirg the past three (3) years) for
tl G)
TRANSCO, I5ALM, the Concessionaire, the lnvestors or any of their
respective Afliliates unless the Parties otherwise agree.
TRANKO shall be responsible for collecting, and shall be entided to the

proceeds of all receivables fonning part oI the Excludecl Liabillties but the
II Conces..rionaire shall provide such rcasonable aisi.stfice as TRANSCO may

require to collect them.
tt 4.07 Pavmeris to TRANSCO work Forc€. TRANSCo shall remain li8ble

for the salaries, wages, benefits a.rld privileges oI its rvork force Out are tempoarily
assi8ned to the Concessionaire subiect to thc Interfun Assigrunent Agreement.
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TRANSCO shall be liable for and shall delend and hold the Concessionake harmless
N.t,{.r.l Crfl A.ptnt,6i

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!I Irom all rcdundancy paympnb, pensions and othar amounts or.i'ed by TRANSCO to
it$ employeei, who form part o( the 'rvork lorce, by reason ol their emploFrrent with
TRANSCO, including separation brnefits, iJ applicable, accruing to TRANSCO
It employees, who form part of the work forcc, who are subseguently employed by the
Concessionaire, upon the tenrrination of tlcir employmej1t with TRANSCO.
4.08 Arrointrnent to Boatds and Committees. On the Conmencemcnt

Date, to the extent permitted by Applicable Law, TRANSCO shall cause all of is
TI nominees to all boards and committees involved in the operation or man^0gement ol
thc electsicity market in the Philippines to resign and shdt a$ist the Concessionairc
tl in having the Concessionaire's representatives to be nominated a3 replacement for

TRANSCO's resignins nominees. The boards and cogrmittees ,eferred to in this
Scction 4.08 include the PEM Board rnd its cosrmittees, the Grid lvtanagement
Committee, the Distribution Management Committee ard &eir respective
ll subcommittees but exclude the TRA-\SCO board of directors or an;r other kxrd or
committe€ whqse memb€rship is by reason of their being or testricted to Philippine
Govemment offi(ials or governm€nt owned and controlled corporations.
Il subiect
4.09 Con*ssionaire Indemnity, fronn the Commsnceorert Datc rnd
to the other provlsir:rs of this Agreement and the other Transaction
Documenls, all risks, bt:refits, revenucs, losses, liabilitie, obligations and expenses
tI arising out oI or relatcd to the Conccssion belong to and are {or the account of the
Concegsionaire. The Concessionnire shall indemnify PSALlil and TRANSCO (and all
its dire(to$ and officers, pas! prcsent and/or future, that may be impleaded in any
Il action) against all lo6ses, liabilities, cogts, claims, proceedinBs, damages and expenres
fiom thc Com-mencement Date in relation tr: the Concession except insofar as they
are attributable to TRANSCO'S (a) grors negtigence (b) willful mtuconduct or (c) are
prof,€rly attributable to the period prror to the Commencement Date.
tr il^10 Turn-Ov€r o{ Information. To the extenl permitted by Applicable Law

and contracts to which FSALlvl is a party, ISALM shall deliver to the Concessionairt
tr all relcvant intormation artd documentatron (in its pGgession) ,equested by tie
Concessionairc Ior the Concessionaire to b€ in compliance with it$ obligations undcr
the Transaction f)ocumentr.
tl TRANSMISSTON ASSETS
5.01 I&!9. Notwi0rstanding an;rthing in lhis Agreement, TRANSCO shall

retain title to (i) all of the Trarsmission Assets, lntellectual Property Rights (ii) all
assets comprising Projects Under Construction or New Projects, and (iji) all
easemenls/ rights of wa1,or other real estate interesls, including Docutnented
Prcperty Rights ac'quired bv the Conccssionaire in accordance rtith Scction 5.06
(Documcn ted Pr operfy Rrgtts).
5.02 Risk of [-oss. Notwit]EtandinB Section 5.01 (Itrlc), the Parti€f

acknowledge and agree that as betv',cen TR{NrO and the Concessionaire, risk of
loss oi or damag€ to, all Trarumission Asscb, asseB mmprising Proiects Under
Construction and New Proie$s, and &ll easemenB, rights of way or other real egtate
tl urrl, l*.tandl GrU Crlrryrh,a al

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Ir Copy for the National Transmission Corpoia!21
PSALM-TR04-2010-002
Ir interests, including Docunrented PropPrty llighls shall be borne bv the

Concessionairc from the Conurrencement Date.
ll 5.m NeSative Pledge. TRANSCP shall noL without the CoMessionaire's

prior written conserrt, sell, dispoce of or create any lien or encumbranc€ ovel th€
asses referred to ln Section 5.01 (7ilie) cxcept lhat TRANSCO shall be mtitled to
dispose of Sub-,transmission Assets in accordance rfith ge<tion I of the EPIRA and
rctain the proceeds therer:I. The Concession Fee shall be reduced in accotdance with
TI paragraph 1(c) of Schedule 6 (Aiijuslrrtfllr lo Co&"ssiott Flc) to refla:t any disPosals of
Sutrt arsmission assets alter the Bid Date, subicct to S{rtion 6.04 (AdlustnaLr to
tl Conccssron Frn) regarding th{, Commencement Fee.
5.04New Proiecs. From the Commencement Date, th€ Conc€ssionaite
tl agrecs to design, develop, finance, constmct and comPlete aJl New Proic'cts that ate
necessary for the fulfilLmerrt oI the Concessionaire's responsibiliries as the Crid
Owner and Systen Operator at iB own cost and expense after takirig a('count of the
Transmission Development Plan. lVi rout limiting the Eenelality of dre foregoing
tI Concessionairc agrecs to:
(a) submit and ditigently pursue appropdatP applications for the p'ermits and
applova.ls required to implcment suth New Projects (including ERC
ll (b)
approvnl);
enter into oll agressrents end arrangements relati]lg to New ProjecLc ln

on'n name and lor its own accounu
ib
TT (c) ensure thut such agreemenls and arrangements provitle for the conEacto! tro
transfcr lil.le to each New Proiect (including ary associated krtellectual
IT (d)
property rights necessar,v for thcir optration) directly to TRANSCO;
meet the entirc cost of each New Prr)ject withoul any obligation on $e Part
lr of r€ALM. TRAi]5CO or ony other Covern.rnental Authority to estumc or

guarantee any obligation or liability inrurred by the Concessionaire in
connection with their implemcntation; and
!l (e) acguire all Documerted Property Rights required to carry out New Proiects
kr accordance rvith Section 5.06 (Docl.rme nled Prcpcrty Rights).
5"05 Disoosals of Bedundant Assets. As ownership rn anrX tida ro thc

Transrnission Asscts shall at no tirne rluring the tcrm of this Agrcement Poss lo the
Concessionaire, PSAL\{ and TRANSCO aul.hr:rize t}re Concessionaire, as tfu
Regulated Entity, to sell or otherwlse disposc of Transmisslon Ass€ts thal become
obsolets or redundant for the purposes ol the Concession and otherwise so deal with
such obsolete or redundant assetr coffibtent with ilr rights under the Transmission
lVheeling Rate Cuidelines as the Regulated Entity. Such disposals shall be carried
out ln compliance with Applicable Law, including those goveming the disposal of
property or,r.ned by a goyemment owrred and controlled corpor.rtion.
5.06 Docrtmented Properry RishB, During t}le Conce*sion Period, the

Concessionaire at its sole cost and cxpense, shall (i) commence and pur$ue eminent
Cnl C!',o|!r,on al tt Ptrh,ryr'k3

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ll donrain prrreedings Ior lht purpose of arquiring Documented Property Ri8,hts &ai
are ret1ui.rcd to carry out i8 rcsPonsibilities under this Agreement in its own name i{
it is grinred eminent domnin Powers under its flanchise or othenvisc in TRANSCO's
l! name as TRANSCOS agent, (ii) apply for and obtain all approvals and permit
required by Applicable law Ior the rescttlement of all Persons who would be
displaced as a iesu.lt of the obtaining of Docurnented Properw Rights, (iii) cgqPly
witii any conditions to the grantilS of Dfiumented ProPerty RiShts, includin8
conditions relating to the retettlem€nt of displaced Persons imposed on PSALM or
IT TRANSCO ln aciordance with the lrlan Covenants Agr('em.rnt or the relevant
Funding Agreements, (iv) litigate, ncgotiale, stttle. and othert'ise resolve all Adverse
tl Claitrs in accordance with Scrction 5.07 (Adoerv Oums), and (v) take all othcr action
reasonably necessary to acquire and mainrain Documented Property Rights. ln all
instances where Documented Proprty Rights art' held in TIA-Ni'rcO/s name,
ir
ll TRA:{SCO shall allow their us{ bv the Concessionaire accordance with *ris
A greement throu ghout the Cor,.:es.sion.
5.W Adversc Claims. ln the eYent *rat any Person $hall aJs€rt any right
ll title or intcrest (induding the assertion of a:r!, right to condeml or cxPropriate) in or

to any part oI the Transmission Asses at any time during the Cqnccssion Period that
(i) is adverse to any Documenaed Property Rights, or (ii) otherwise imPaits the
Il
Concessionuire's abilitv to exercise and Perform its rights and obligations under this
-fran.saclion
Agreement or any other Docuftent (irl cither case, an " Advetx Cldim"),
the Concessionalre shall. at its own cost and exPelLqe, assert and othenvise defend
thc Doqumented ttoPerty RiShB as PromPUy as practicrrble through negotiations in
tl the first instance and, failing such negotiations, through any arhon or ptor'eeding
required to resolve the Adverse Claim in favor of TMNSCO and the Concessionaire.
Subject to Section 5.08 (TR4NSC&ltctaiac d Obhgations), the Concessionaire shall, at
lI its own (ost and expense, ass€rt and othetwi-se prosE€ute or defend (as the case may
be) any claim or action relatirg to this Section 5.07 and hold FEALN{ and TRA|{SCO
free and hannles flom the same,
Ir following:
(a)
5.O8 TRANSCG[tetainqd Ob[Bationr- TRANSCO shal] be liable for the
except those assumed by tlre Concessionaire under the [aan CovenanB
Ir (b)
Agreement, obligations ln relation to loars existing Prior to Commcnc(ment
Date contracted by NPC relating to the TransfirEsior$ Asects;
ctaims rehting to €xirting rights of way whose causc of action accru8d Prior
to Commencement Date, provid€ti that shou.ld lhe Concessionaire tfuough
any act or omission cause any liability or claim to arise or be aSSravated, it
shall be liable lor the incremental liabiJity resulting from such act or omissio(
(c) obligations to TRANSCO employees under employment agrc'ements (excePt

for costs and experu;es that are to be reimbursed by the Concessionaire under
the Intcrim Assigrurent ABreement, including Cost of Servlce and
Miscellaneous Expenses poth as dcfined in the lnterirn Assignmenl
Agreement);
Errlr N.rto"rl Gad CirlnEhon ol t E Pl"liryi,e.
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Ir (d) liabilities ard costs fr:r all oldcrs, ludgrnents, owards, intercsts, ctl*le of $rit
and reasonable exPeru€s (including attomey's {ees) rendcred in connection
with any claim, contsoversy, action, arbiEation, litigation or other similar
proceetling (including tax disputes) involving TRANrO, or any of is
assets, conracts, bushess or operations (cotlectively, the
TT p.opurty
"r lited and pending as of Commencement Date, Provided
;Liigations"l
It how&er, that the Conc€ssionaire, to the €xlent permitted by Applicable Law,

shall be entitled to exsrcise all o, TRAN5CO'S rights, orders, fudgmfnE and
awards in favor or for the benefit of TMNSCO under all Litigations that may
affect th€ operation oI its regulated transmission business. TRANSCO and tho
It Concessionaire shall agiee on the consideration payable by the

Concessionaire to TRANSCO {or the grant of the right t'o exerci:e all of
TRANSCO's rightt, ordcts, iudgmens and awards referred to in this
tl Subsection (d) for each and every LitiSation.
To the extent p€rmitted b}' Applicable Law and as long as this AgrEement i5
in lorce, TRANSCO aPPoints ond authorizes the Concessionaire ar its
attomcy-in-fact v"ith right of substitutiorL so thnt either lhe Conc$sionaire or
TT any Pirson empowered by the Corxessionaire, provided that the
Concesslonaire shall be responsible and liable for the acts of the Persons it
lI empowered, shall be authorizcd without need of further act from TRANSCo,

o enlorcc such ri8hts, oiders, iudgments and awards rendered under the
Utigations that afted the opreration ol its regulated transmission busines*
TRAT ECO hereUy conlirms and ratifies all lawful actions performed or done
by the Concessionaile or any Person ernpowered by tlre Concessionaire in
TT (e)
accordance with this Subsoctiot (d);
exisdng or future claims agairst TRANSCO or the Concessionaire mede after
lr tho Comme-ncenent Date arisin8 hom TRAJ\SCO| s acLs or omissions b€fote

the Commencement Date; and
lr Uability for unpaid Taxes that are payabte in rlrspect of tax periodl €nding
before tie Commencement Date,
lr lf any of the above Subsections (a) io (f) was caused or aggravated by the
Concessionaire's act or omi$ion, the Corre&eionake shall be liable for the same. Upon
request from TRANSCO, the Corrcessionaire shatl indude such er?enses incurrcd by
TMNSCO for all the above Subsections (a) to (0 in th€ aPPropriate r€gllalory tiling ln &e
event that the ERC allows the recovery r:f such TRANSCGincurred expences. lhe
Con essiona&e shall givc the same (o 1BANSCO within fifteen (f5) days from the
Concessionaire's receipt of the same. The Concessionaire shall not be held liable in the event
that the ERC doer not approve ruch TRANfGircurred cxPerrs€s.
CoNcEssroN FBE
6.01 General. In corsideration for the Srant of the Concession the

Conccssionaire shall pay PSALM THREE BILUON MNE HU:{DRED FIFTY
u,{rt N.nond 6', C'r,orctx q tb PkL?Ftns a{.1l -1 15,i ri:::.,-.
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TT
MILUON US Dollars (US$3,950,000,000.00) in accordance with this Article 6, (the
TI " Concexion Fee") In the event that the Con(ession Fec is subject to VAT, thc same
shall be Ior the account of PSALM and TRANSCO.
The Concessionahe shall: (i) Fay, or c&use the Palrnent oi the Commencemcnt Fee
TT and each of the Deferred Paymcnc by wire Sansfe, of immediately available funds
to a bank account dcsi8nated in tr'ritixg by rEALM, or b,Y iuch other re.asonable
tI means of payment required by PSALM with reasonable advance notice; and (ii) bear
alt Ta.xe8 (exctutting VAT), Iees, charges, c'osts and expenscs,elated to the
Commetrccnent Fee and each of the Deferred Payments. including all bank and wire
lI transfet fees.
CommencemeJri Fee. The Concessionaire shall pay twenty-fivc

6.0?
percent (25*) (or at the Concessionaire's option, a higher percentage) of the
T I tonce$ion Fee (the "Comnrn xntilr't fdl to IISALN'I in United States Do[.ts on the
Commencement Date in a(tordanct rvith Section 6 05 (Ml nnn al Prymtnt)'
6.03 Dcfcned Payments. The balance of the Concession Fee shall be

II converted to PhiliPPine Pescrs at a fixed exchanBe rate equal to Fotty Trvo Pcs{,s alld
Seventy Five centav'os (PhP 42.75) for every Onc United States Dollar (US$ 1.@) and
paid to PSALtvt with interest rn seml-annual installments ltJl.e "Deletrcd Pswnk"l,
II on each Semi-Annual Payment Date in accordance with Schedule 5 (Deftned

Puymcntsl,
T
I Except as provided for in this ABreement, no Dejerred Pa1'qt"n, shall be subject to
set-off under Sectron 17.18 (Setoff) without PSALltl's writt€n collrcnt
!
6.04
Adirrstmcnls to thc Concession Fee. The Concession Fee is subitct to
I adirlitmcnt ln accordance with Schedule 6 (Adjustncnts ao Canc.tiion Fcr). The
Iotlowing shall apply to address any adjustments to the Conccssion Fee following
adiustments in accordance with Schedule 6 -
I I If CFo > CF,t the Commencement Fee shall be retluted

Dcfsrred Payment shall be reduced by (CFu - CIr) x N
by (CFu - CFl)x M and the
T If CFE < CI^ the Commencernent Fee shall be increased by (CFe - CFo )x M and the
Deferred Payment shall be inseased by (CFr - CFa)x N,
T
I l4herer
I CFs = the Concession Fee prior to adiustment in accordancc with Schedule 6;
I CFe - the Concession Fee after adjustntcnt in accordance wlth Schedule 5;
T M - ratio of Commencement Fee to Concession Fee expressed as a percentage; and
I N-100X-M.
T 6.05 Manner of Payment- The Concessionairc shall pay the amountc due
I from it pursuant to this Article 6 for value as ol the Due DatE withoul the need for
I t qilt
PaSr t6
t{rrtonrl &id
4 37
Cqr.r,s ol r Ph,limr.s
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Copy for the National Transmisslon Corpglali91
TT PSALM-TR04-2010-002
ll any demand to such bank accourl as ISALlvl shall de.sign{rte for PaYments in the
relevant currency in a notice to the Conccssionaire in writing from time to timr in
accordance with Scction 17.ffi (hbrrcts). PSALM shall pay the amouns required t>
be refunded by it Pursuant to this Artidc 5 for value as of the Due DEIE without lhe
IT need for any demind to such bank ac(ount as the Concessionaire shall designate in a
notice to the Concessionaire in writing from time to time in accordance with Section
ll
17.08 (Nol,crs).
5.06 Default lnterest. If a Party does nol receive any payrnent due to it
under this Article 6 by the Due Date, that Party shall be er:titled to intetest on &€
ll overdue amount at the Dtfault Raic frclrn the Due Date until the overdue ahount
together rvith accrued irterBst is paid,
6.07 Prepavment 5o long that there i5 no amount due to f|s'{L!vl or

ll TRANSCO under this Agreement (including ihe Deferred Paymenls) and o&er
Transaction Documents that ate in arrears, the Concessionaire shall have the oprion
to prepay a.ny Deferred Paymenl o, any portion thcreol incJuding the right to
Il aetlnnine which Deferred Payment or portion thereof is being prupaid. Should any
Deferred Pal/ment not be paid when due, any prcPayments cannot be aPPlied to any
such Delerred Payment that $'as not Paid. Hence, despite the existenft of any
prepayment, upon any Deferred Payment not bcing paid when due, ISALM rnay
Il 7.
avail iself of the rem€di€ under Atticles 14 {Rcnledies).
CoNcEssroNAlRE s PosmvE Co\rfl ttutNc CovENANTS
T 7-01 Transmission DeveloPment Plan rTDP). Aftcr thc Commencement

Date, thc Concessionaire shall be rcsponsible for preparirg ihc TDP for the
T
I Department o( Energ-v, and shall updotc the TDP from time to time as required tx
Applicable l.lw, The Concessircnatue shall consult TRANSCO in preparing the TDP.
The Concessionaire ehall not be obti8td to it Plement ProiEct$ contaired in the TDP
T
t urrless they have bsen ruthotizcd by the F.RC,
7.O? Universal Chargc. From lhe Conrmencement DatE, thc

Concessionaire shall be responsible for discharging all of TRANSCCfS obligations in
I relation to the Universal Charge.
T 7.0i Access and Inspection Throughout the Concession Periol, the
Concessionaire shall (i) provide representatives of I'SALM and TTIANSCO with
T access to the Transmission Asset$ upon rcasonable advance notice for the purpose of
T irupecting the Concessionaire's books and rccords and interviewinB its managers
I anrl staff, and (ii) permit such reprcaentatives to insPect the Transmis.sion AroeE and
witness anv aspecl of the pcrformance oI this Agreement, Ptovided that rhe
Concessionaire shall be enti{ed to impose reasonable rwttictions on such rights of
T access and inspection in the interests oI salety or to Prevent undue disruption hr its
T operationn.
I 7.U Permits. Licenses and Covcnunental Approvab The Concessionaire

I shall be responsible for obtaining and maintaining in frrll forcc and erfccl aU Permits,
licenses, and other govemmental approva.ls requied for the Concessionaire to
T
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Nrtmi.l C.U Cort{rd}ifrt ol tr, Ptal;Fpiwt
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lr Copy for the National Transmission Corporation
PSALM-TR04-2010-002
perform its obligations under this ASredment. ISALV and TRANSCO shall use
IT ieasonable efforts to assist the Concessionaire in obtainin8 such pcrmits, licens€s,
ond other Bovernment t approvals, if and when reasonably requested by the
Concessionaire. To the extent that the existing and valid Permits and lic€nses of
TT TRAN$O ar€ tsansferable to the Concessionaire under Applicable l-aw, and upon
requ$t of lhe Concessionaire, TRANKO shall execute the proper instsuineli
ll necessary for the trans{er of such translelable Permits and licerues, provided that ihe
Concessionaire shall be resporuible for causing such transfer including the Paymenl
of all costs thereof and seflrring the necessary approval or consent from the Pettin€nl
Covemmental Authority in orde! 1o mak€ the transfe, oPerative.
ll 7.05 \!!!.
registered for VAT
Throughoul tle Concession Pcriod, 0te Concessiolratre shall be
purposes and shall promptly provide IISALIT'! and TRANSCO
ll.
with a ccrtiJied copy of each VAT registration certilicatc issued to it
Loan Covenant! Aqreemsnt , The Conccssionairc shall comply with

7.06
the Loan Covenants Agreement arrd any similar covenans imposed on TIGNSCO,
PSALM or bottr under the terms of any of the Funding ASreements.
1I V.O? Proper Legal Form. 'fhe Conces.sionaire shall take all actioru within
its control that are required or, iI the reasonable opinion of IISALM, advisable to
1l ensure that each Transaction Document lo which the Concessionaire i3 s pa*y

remai.ns at all tjmes in proper legal form urder APPlicable Lar+' for the enJorcement
thereof.
7.08Apolicable Law. The Concesstonaire shall at all times fulty comply

TT with AppLitzble Law except that the Conccssionairp shail not be liable for any
breaches of Applicable l,aw by TRANSCO existin8 Prior to CoErmencement Datc.
TT CoNcEsStoNAIna.s NE(iATtV[ CoN]'l-*UING COVENANTg
lr witiout
8.01 Mcrgers afld DlsPosal of Ass€t"s. The Concessionaire shal not,
PSALM'S prior writtcn con$ent, tukc any stePs to liquldate, wirrd up,
dissolve or otherwise trartsfcr or dispose of all or strbstantially all of its PtoP€rti',
assets, or businoss other than irr the purpose of carrying out a law(ul reorganlzatiott
or retructu rin8.
8.02 Securiw lnterests. The Concessionaire shall not. without PSALM's

prior written consent" leas€, mort8aSc, grant, or persrit anv Security lnteresbs (othet
than Permitted Sccurity lnterests or tho.€ permitted by Section 17.06 (Assign,lrrl and
S(bconlrqclinS)) to exirt on, or otherwise encumber (a) the Transmission Assets,
Documeartcd Property Ri6hO lntellectual Propert, Ri8hts. and other properties
made available by TRANSCO (or use ol lhe Corxessionaire, or (b) any riglrts of the
Concessionalre un,.ler thp Trarrssction Documcnts.
8.(}3 Other Bmi.nesses. The Concessionaire shall noL without PSALNfs

prior written consenc (i) enter into anv business other thai the activities reguired
and permiitcd under this Agree$ent or undeflalen in connection witl any Related
Ir ,!it//
Business; or (ii) establish or acquire any ownership interest in any Pcrson,
N.ti."d Gin Coq,rnt,lln

Prt ltol3|
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PSALM-TR04-2010-002
ll E.Ol Financial Assistancc, Thc Concessionaire shall not grant loaru ot

other financial facilities to, or Sive any SuarantE€ or indemnity for the debts or
obligations of, any Person other than in the ordirury course ol business, ot in any
It circumstarces iI the beneficiary of such financinl assistance is a Belatcd Party
8.05 Inrlebtedn*ss. Until all the Deferred Pal'mcnts arc fully paid and
provided no Concessionaire Default has octurcd or is continuing, the
Concessionaire shall not create, incrr, assume or suffe, to exist any Indebted.ness
TI unless:
tI (a) such Indcbiedness is incurrcd in rcsPect of borrowings fmm fina*ial

irstitutioru reasonably acceptable to ISALM lor the purpose of financilg
New Prciscts, refinancing the Deferred Pa)'mens, or for any othet PurPGc
tl O)
related to caJryin8 out t}le Cpnr:esion;
c'uth lndebtedncss shall always rank no higher thln pari passu with the
Concqasionaire's obligation.! !o Pay the Defered Paymenis and other
amounis payable to I€ALIYI or TRANSCO pursuant to t}lis Agrttment (boti
in terms of priority of palment and sccurity); and
TT
(c) the Concessionaire's Debt-Equily Ratio will not exceed {:1 as a tesult of
Il incurring such lndebtednese.
The Concessionaire shall inlorm I5,{L\{ of any Indebiedne"r-s by providing
Il information on the creditor, amount, matur,t1, date. int€resl and relevont terms and
conditions thereof.
8.06 Dividends. Etc. 'Ihe Concessionaire shal noL $'ithout ISALM's Prior
lr writteR consent, declare or pay any dividend or make any remittance or payment on
account of any subordinated shareholdet loans or advalces:
Ir
(u) upon thc o{cuEence 6nd during the continuation of a Conq'essionsire Delqult
or an ev€nt that might become a Concessionaire D€fault with the lapse oi
time or the giving of notice or both; or
(b) for so long as any Deferred Palrurents remain unpaid, unlcss thc Financial
Te3t3 are met as at the date any dividend Ls declared or paid and as at the
TT date any dividend or remitiance on accuunt oI shareholder loans or advm(es
is m;rde.
8.07
Agr€emgnts Lvith Related Pnrties. Until all tho Deferred Payments are
fully paid the Concessionairc shall nol enter into or become a Party io any
agreeflent, conEact, or.ommitment wlth any R€lated Party without PSALIU'9 pttor
written cons€nt, other than Ion-
(a) such contracts involving payment to Relat€d Partics provided such conEacts
have been eiteted into on an arm's length basis, in the aggregate amounts not
excecdtnS One Mlllion U,S. Dollars (51.mo,m0.00) ;rr annum an such
arnount may be increased each year by the changt' in US CPI from the
Cosrmencement Date bo each amiversary thereofj
C.id Crrl'ot t,E| ol tu Phli47,ws
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P.g.|edl37
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II
PSALM-TR04-2010-002
II O) contraclg for (ces, costs nnd eilrrnser owed {or the Provision of ieclur.icitl
servlces to the Qualifyirg lnveslc,r ot ils a,ffiliate (as defined in the Bidding
Procedures) that provides lc.chnical services (i,c. the entity that comPlied with
the Technical Pre.qualification Criteria and Financial Pre-qualifkation
II Criieria of the Bidding ftocedwes and as slated in Schcdule I (Details of the
Bid) of th€ Dir.rt Agreemenl) in the ag8le8ate amount not exce€din8 Ten
tvliltion U.S. Dollars ($ 10,000.000.00) Pcr annum as surh amounl may be
IT increased each year by t}te cha:ngc in US CPI frorn lhc Courmencem€nt Date
to e6ch anniversary thereof"
tI INSUf,ANcE
9^01 General Requfement. lhroughout the Concession Penod, the

Concessionaire shall at its o$'n experrse take out and maintain such insurance agairlgt
IT {i) thid party clairns, and (ii} lo* of or damage to any Transmis$ion Ass€ts that it
shall be required by Applicablc Law to oraintain or (subjert to its beinS notilied by
IISALM or TRANSCO in wlitirg of the relevant requiremenLs) such insurance th.t
IT PSAL\4 nvPC, or TRANSCO have procured or been procuring Pun uant to the loan
agreements of NIjC that were entered into in whole or irl Part with regard.t to asscts
and properties which Section 8 of thc EPIRA mandated to be transferred from NPC
II to TRANSCO. In in^*uring the Transmrsgion A$ets the Comessionaire must comPly

r+,ith Applicable [,arv regarding lhe insurarce of assets owned by a tgvernmcnt
owned ard controlled corporation.
I 9.A2 Policies. Each poliry of irsuranre that tle Concessionaire is

rcquted to maintain under Sectjon 9.01 (Gtnenl Rrquirtmert) and every othcr poticy
covering urird party claims (or lors or damage to anv Transmission Assets that thc
T Conce$ionaire maintaiILs shall:
I (a) be underwritten by insurers and re-insurers reasonably acceptable to I'SALM
and in acrordancq vr'ith Appticable taw;
T
T O) expressly identily ISALM and TTlA.ljSCO as co-bcncliciaries to the extent ot
I their irrsurable interesE
I (c) contain a provision under which the iruurers agree that tlley shall waive all
rights of subrogation howsoever ariging which they may hav€ against the cc
I beneficiary thereundcr, and all rights to enlorcc any righB oI the ct>
t beneficiary or loss payee against the Concessionairc in ctcurnstances where

the Concrssionaire owes the c*beneficiary or loss payee any anount h
respect of the insured liabilities; and
T
I (d) state t}rat neither ITSALM nor TRANSCO's rights undcr the poticy shall be
t
cancelcd or changed without prior written notlce to PSALM and TRANSCO.
9.03 Certificates and Poliqr Endorsements. The Concessionaire shall:

I (E)
I within frirty (30) calendar days of t].le establi:hmerrt or rcnewa! of each policy
refcrred to in S€ction 9.02 (Polkres) (i) provide PSALV and TRANSCO with a
I I t th |llIha,jl Gnn Co.l.s.ttsn 4

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O.l8nal d6rt[Enr Bru.d ty.
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IT PSALM-TR04-2010-002
ll certiricate insuranc': evide.ncin8 each such insurance Policy thal (A)

of
expressly states that the insurcr shaU not cancel or chalge the Policy ta'ithout
PSALM's and TRANKO'9 Prior written consent; (B) exPressly states that the
lru;urer lras waived all righis of cuhrogation that Sutrsection 9-02(c) (Policus)
requires it to waive; and (Q names FSALIT{ and 'fRAi\iff]o a5 co'
IT bcncficiaries to the extent ol their interest in fie insured assets and (ii)
provide PSALII and TRANSCO with copies oI all such policics (including tie
It (b)
endorscmcnts thereto); and
notify r{ALM and TRANSCO within five (5) Business Days of ib ret€iPt of a
It proposal from any such insurer lo car..:el or change any Policy relercd to il
Scction 9.02 (Poliaes).
9.fi Comlliaace. The Conccssionaire shall comply wilh the insurance

Il policies and the rsquirements o{ the rnsurcrs and otherwise take all actions necessary
to errsure that the insurance poticies established under Section 9.02 (Policres) rcrnain
in full force and effect at all times
9.05 oI Proceeds, The Concessionaire shall promptly apply

TI Use
insurance proceeds collected under the policies established under Section 9.02
(Polirus) for physica.l loss or damage to reconstruct, repair or replace that portion ol
a1.l
Il thc Transmi-s,sion Assets that sugtained such loss or damage,
9,06 Cancejlation or Laose of Insurance, U the Concessionai-re fai.ls tu
ll
extend the benefit of any fursurance it maintains or is rcquired to maintrin to I?SAlJlt
and TRANSCO or if the extension of that coverage t,o r'9ALM and TR.AN{O shall
cease to be in full force and effect or iI the relevant policres of the procured or
required insurance coverag€ do not meel lhc requirements o( S+<tion 9.01 (Caural
tr ReEtircmcnl), then PSAL\I ard TRANSCO shall each have the right to procure such
insurance at the expense of the Conccssionaire and require the Concerrionaire to takc
all such steps !o minimize any hazard or potential hazard as ISALlvl or TRANSCO
lr may reaaonobly coneider nc.cessary or expedient- In lhe evsnt that I€ALM or

ffiANSCO procures arry $uch insurance, thc Concessionaire shall reimbur$e that
Perrcn for all expenses it inclrred in connection with the prmurement of such
insurance wilhin ten (10) calmdar days of its receipt of an invoicc thcrelor lrom the
relevant Person by wte transfer of immediately available funds to ar actount
designated in writinS by that Person.
9.O7 hrsurance Carrier, Standards. ExcePt for ilsurance policies that the
Corrcessiornire is required to estabhsh and maintain with the Covcmment Service
Inzurance Systcm in accordarce with Applicabte Law, including Administntive
Order No. 141 issucd in August 1994. the Concessiona e shall establish and maintain
insurance with carriers rated 'A-" or better, rvith a minirnum siz€ rating of "VIll" by
Begt's lnsurance Guide and Key Ratings (or an equivalent raling by mother
intemationally recognizetl insurance rating agency of similar standlng) or with other
insurance companies of rccognized financial responsrbility satistactory to I'SALM.
lr trri *'dil'i.l Grid Criro?rtr0i d/.Ip Pndurd.t
TI
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II
II '
PSALM-TR04-2U0-402
10. RECORDS ANT, PERIODIC REPOR.I.INC
TT 10.01 Eeco15lg. The Concessionaire shall maintain comPlete and accutate books and
ll recortls ir which it shall make full, Eue and corr€ct enlties of all its transactions in
accordance *'ith Philippine GAAP, including records of the oPerating and financial history
and mndition of the Transmission A6$ets. The Concessionaire shall maintain a complele
and lrp.tated copy of such books and rerords both at iLr officc in the Fleho lt'lanila area anrl
ll at another apprtpriately secure iocatiorL and shall provlde rePresentatives of [$ALM and
TRANKO, t^'i$. u."ot to such booLs and records during normal busincs.s hours after
reasonable advance writlen request for fSALM's nloniloring and audit of the
lI Concessionai.re's compliance and per{ormarce with its obl.iSations under this Agreement
and other Transacdon Docum€n[s.
It
10.02 Reporting ObliEztion-s- The Concessionaire shall deliver to [€ALIvl;
(a) within five (5) Business Days after the Conccssionaire bctomes arvare of any
ev€nt, circnmstance or condition which, with the givrng oI notice, the lapse o{
tl (b)
time, or both, would become a Concessionairc Default, a notice dcrribing
such evenL cirturslance or condition in reasonable detail;
within five (5) Businers Days after ihe Concessionaire becomes aware o[ any
It evcnt, circunstance or condition rvhich has or could have a material adverse

effecl on the ConcessionairtJs business or financial Positio& a notice
describing such even! circumstance or condition in reasonablc dctai.l;
Il (c) on each Semi-Annual Palment Date, a certiJicate, signed urrder oath by a

Responsible Officer of the Concessionaire, certifying that (i) .such ResPonsible
Officcr has madc or caused to be made a review r:f the firuncial condition of
ll the Conccssionaire during the rqlevant fiscal periul and that such review has
not, to the best of such RcsPonsible Officer's knowledge, disdosed the
exjstence of ary ev€nt or condition e/hich corBtitutefi a ConcessionairE
lr DefaulL or iI any such event or condition existed or exlsls. t}le nature thereo{
and the corrt'ctive actioru that the Concessionaire has taken or ProPos€s to
ta](e h'ith re?ect thereto. and (ii) the Concessioniire curently complics in all
lr
material resPects with ita obligations under thls Agreenrent or, if such is not
the c{sc, stating lhe nahrre o( such non-compliance antl the corrective actions
which the Concesrionaire has laken or proPo€es to tale h'it} respect tiereto;
and
(d) wlth reasonable promptness after the occurrence of any Concessionaire

Default or other event, circusBtance or condition which could result in a
maierial adverse e{fect affecting thc Concessionaire, such fu-rther injormation
regarding the linancial condition, opcratiotls or business of the
Concessionaire that IISAI.M may reasonably request in ordcr to monitor the
performance oI the Concesionaire urder this Agreement.
10.03 Financial Inlormation. Throughout the Concession Period, the

Concessionaire sh.ll deliver to PSALM the financjal stat€menl.i lhat APPlicable lrw
requfues lt to prepar€ as well as the fiaancial Etatements required by the apgropriate
Govemmental Authority including the Congress of the Republk of the Philippines. ERC.
oi Net;oid Cnd @r/o tilJt ol tk Phnry,.li.t
tI
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PSALM-TR04-2010-002
uf lnternal Revenue and securities and Exchange c<lmmlssion to be subrrritlrr.l. irr
TI Bu_reau
the event that tSALlvt or'I'RANSCO wants any further clariJication or thele are other
information tlat are not contained in such financial statements that will enable PSALM and
TRANSCO to determin€ the Concessionaire's compliance with the terms and conditioru of
TT thir Agreement and other Transaction DocumenB. inclBdins th€ DSCB, the Coocessionaire
shall piovide such information as may be reasonably requbed b1' IISALM or TRANSCO and
allow- PSALM and/or TRANSCQ to insPe(t its books boih wlthln a reasonable time from
It rcccipt of PSALM or TRANSCO's writtcn request.
10.04 RelBted Business€s- The Concessionajre shall maintain seParate audited
Il accounts for each Related Business, kept as iI the Concessionaire carri€d on such Related
Business a5 a s€parale companv, so that such accourts s€Parately idertify the tevenuer,
expenses, ass€ts, liabiJities afid resewes reasonably attn:butable to onch RelaH Busincss in
lI thc brroke of the Conce-ssionaire.
10.05 Regulatory Filines. ltithout the necessity o, a request from PSALM and
TMNSCO, the Concessionaire shall promptly provide PSALM and TRANSCO with a coPy
ll of all notices it receives lrom tic ERC and shatl also fumish ther:r with a copy of aU written
applications. pleadings, tcPorts and othet documenr that the Corcessionaire liles from time
to time with the ERC at the same time as they are liled.
lI CoMrR^groRs
Il 1:..01 Generat. The Concessionaire maY engagc contracirars to rePah,

maintai& inprove and/or expand the Transmission Assets and otherwlse perform
any of its obligations alising out of tlis Agreenrent in a manner comistent udtl
It
Applicable [,a*', subicct to the following terms:
(a) The Concessionaire shall engage all (ontractors in its oh'n name and shall bc
liable under this Agreement for theit octs and omlssions as though they were
Ir (b)
the Concersionai-re': own employecs.
The Concessionaire shall eruure that ea(h conFact wNch (i) will tale longer
than one (t) year to perform, and (ii) provides for t}re performance of serviceg,
or the supply o{ equipment, sPare Parts or other goods with ar a88re8at€
value in excess of U5.$1,000,m0 (One Million United States Dollats)
multiplied by a fiaction the numerato! of which equals thc US CPI publlshed
most recently prior to the datc of such conEact, and the denominator of
which equals the US CPI pubtished most reccntly Prior to the
Commcnccment Date, indudes exprei! provisions:
(i) allowing the Concessionaire at ite election to asaiSn and trarsfer all o[
its right, title and interest in and to, and ils obligations under, zuch
contract, agteement or other legal inslrument to TRA"\sCO or iI5
nominee without th€ prior consent oI such contractor by delivering a
written notice of such assignment and transfer to Such contracior al
least thirty (30) calendar days prir-rr to thc cffcctiveness of such
as$ignment and transfer; and
ll uifi N.rinn C.;n c,qo'!tnrn ol tll, P,,,lfi,rn,
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Copy for the National Transmissior Co-rporation
(ii) Prohibiting the contractor from telminadng such ccntrlct
in the evcnt
IT ' of a Goremmcni Default ot Concessionaire Default or the exerclrc o'
any r€medy arising as a rezull thereof without first Siving PSALIT{ and
TRAUSCO slxty leO; r"olender days Priot writtsn notice of the
proposecl termi-nation o( ruch contract
TT
i1,02 Qgg@@4f!e$. The Concessionaire sha.ll pay whcn due all claims
ll and demands of contlactors al any tier, laborers, mechanics, materialmen and others
for any work per{ormed on, or maierials delivered for incorPcration irto any part of'
the Tiarumission Grid, anrl shall promptly rtirhargc all labor, me(hanic$',
tt materialmen's and other construclion liens; provided, hot'evet, that the

Concqssionalre shall have the riSht to contest in good faith any such claim or
definnd, so long at it does so di[8entl]" by appnrpriate prrxeedings and lrT thout
tI
preiudice to PSiLM's or TMNSCO's rights under this Agreement or TR{NSCO s
guch
rights under the Corstru,cdon ManaBement Agreetrrent and provided that no
cJntest shatl subiect the Transmission Ass€b or any comPQntnt th€reof or interB$t
thercin to any risk of sale, loss or lorfeiture,
I! INDEMNIFTcATIoN
tI 1?.01 Conditions to Riaht cJf Indemnification. It sh.rll be a condition to a

Part/s rith, to Un i"aem"ifieJ ulder this Agreemenl that it shall comply in all
material respects with the provisions of this Article 12.
Il 12.02 Ceneral Obtiqation. lf PSALT\'I, TRANSCO or tle

becomes aware of any circutrustances or atlegations that may o! will result in
aSainsl which it is eniitlcd to bc indemnified under this A8reement, il shall:
Concessionate
a clai-sl
IT (a) promptly notify the indcmnifyirg Part!, in writinS or thesc circumst r'rct5 or
allegations;
tr (b) male available to dre indecrnifying Party all inlormation and docunents in
its possession or in the pocsession oI any of its Afliliates havLrg a bearlng on
thc claim that is or might be brought aSainst i[
It (c)
(d)
tale all reasonablc steps to mitiSate the ciairn or [oss; and
refrain from making any admissions preiudicia.l to tht intercst of the

indemnifyin8 Party scttlin8 or cornprising the claim w'ithout the
indemnifying Parq/s Prior ur tten coruenl
12,03 Coooeration. Farties rvho lre beirg indcmnified lgainst a ddm

under this Agreement slall coopcrale fully with the indemnifying Pafi,v in all aspecb
ll
of the investigation, defense, discovery and other pretrial activities, trial, arbitratio[
me<Iiation. compromise, settlement and dlscharge of the claist including by gling
the indemnifylng Party raasqnable acce$ to irs books and records alld by making
avoilsble relevant directors, officers anrl employees (or interview.
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12.0{ ConEol of Claims. A Party who is entiued to an ind€nrnity under lhis
IT Agreement shall be mtitled, but not obl.i8ated, to assurt€ control of the defense of
th-ut aoim and select legal counsel to tlefdd the claim Thc indcmni.fying Party shall
not be Iiable (or any legal expenses incurred by tJre othcr Panics in respect of the
IT claim alter tlre inrlemnifying Party has assumed control of its deferue excePt to the
extent it was reasonable for the other Partles !o continue to tetain thcir own couns€l
tl to guard a8ainst a conflict of interest bctween re Parties.
12,05 Limitation. A Par!/ may not daim from any other Party for anycause
of action. which it had knowlcdge or would have known in the exercise of ordinary
Il diligence except for a Par$'s (agiirrst whom ar ind€mniry is claimed) concealing any
mntter pertainir8 to the alorementioned in bad raith, with resPect to any mstter
p"rtai"ii g to thii Agreement, the other Transaction D(uments and any ancillary
lI matter n essary to accomplish the objt'ctives of this Agreement nnd the other
Transaction DocumenB". Further, su$cct to f'SALM's ri8it lo draw and for'eit the
Performance Secudty, in no event witl any Parrji be Liable for incldental,
consequential, or punitive damages.
tI DETAUTT
Il 13.01 Concessionaire Default. The folltnving shau constitute events of

dehult by the Concesslonaire under this Agreement (each, a "Conrelsioruire
DefouU" t:
Il (a) the Concessionaire's congressional hanchise or other authority to oP€,ate the

Concession is revoked for cause before the end of the Concession Period;
lr (b) without the congressionat franchise being reroked, the Comessionate ceases
to be eligible to hold a congressional framhise or othe, authority to oPe-rate s
public utitity in the Philipprnes beforc the end of the Concession Period
o sing out of or relaled to nny act or omLsslon of the Con.ffsionaite;
TT (c) either (i) a Change in Control occurs without I5ALM's writtefl conicnt ard
this situation perrists for o Pcriod of sixty (60) calendar days after the
Conces.sionaire-became ot ought to have been aware of it or (ii)-a breach of
Subsection 5.01(a)(b) of thc Direct Agreemenl (E4!,ly Relezlior) occurs;
(d) the Concessionaire d€Jaults ifl naling timely payment of any f,rnounl
payable under Article 6 (Corrcz-rsion flt) and such default shall continue
uncurcd for a period of thirty (30) calendar dnys afler the date when the same
was duc;
(e) the Concessionaire materially deJaulls in the obscrvance or performance of

any other covenant contained in this Agreemenl or any of the Transaction
DocumenB and such defsult shatl continue uffured, unless another period is
specilied h this Agreement, for a period of Eixty (60) calendar days after
receipt by the Concessionaire of notice thereof ftom I'ISALM (or ruch longer
period not exceed.ing one hundred and h,"enty (120) calcndat days as may be
TT ufi N.rlon l6nd C,,?onno $,k Pl$ltttpt'u.
Il
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PSALM-TR04-2010-002
necessary to curt t}c dsfault as long as the Concessionair.' diligcntly pursttes
TT such cure);
ll (0 th€ Concessionaire is declared by any Party or panies to any materlal

Indobtednms to bc in default pursuant !o its terms, or such 'naterial
lndebtedness is declared by such party or Parties to be in defaull;
ll (g) the Concessionaire suffers an Event of Bankrupqv;

(i.) any rePreentation or watranty made bv the Conces'sionaire in this
ll AStecment, or in any certilicate, documsrt or financial or other Statement

fumished by it to ISALM or TMNISCO in accordance t'ith the Transaction
Docu.menB was incorred in irs material Points or otherwise materially
misleat{ing on the date madc and such defaull shall continue urtcured fur a
ll (0
period o[ ii*ty (OO) days a-fter receipt by the Conceisionaire of written notice
thereof hom either [5ALM or TIIANSCO; or
an Abandonment (xcurs.
TT 13.02 Governmelt Default. Thc following shall constitutc events of default

by ISALM snd TRANSCO und€r this Agrcement (each, a "Goucrntnent Defaul{'\:
Il (a) l{iALM or TRANSCO mltt'rially defaults in the observancc or pedormance

oI any covenant contained in this Agreement or anv ol the Transaction
Il Documenb. and $uch default 3hall continuc uncured for a period of sixtl (60)
ca.lendar rJays after receiPt by tEALNf and TRANSCO o[ notice thertol from
the Corrcessionaire (or in the case of a default not involving the payment of
moneY, such longer period not exceerling one hundred twenty (120) calendu
tr (b)
days as may be necessary to cure lhe default so lonS as PSALM and
TRANSCO diligcrdy pursue such cure);
the Conccssioruire's congresrional ftarKhise or other operating auihority i3

n'voked belorq the end of thc Concession Period otlrcr th{n fot csule
TT detcrmined, in case of dispute, by arhitration Pursuant to S€ctlon 16-02
tt
(Afuitrationl; or
(c) an Expropriation Event occurs, Provided it is nol covered by Section 13.03 (No
Fauk).
13.q3 No Faull 'fhe following shall corutitute evenG that shall entitle any
Parly to terminate this Agreement (elch a "No Fault Event"):
(a) Mutual agrccment of ihc Parties; and
(b)i4/here the Concessionaire at anY Point in time prior to th€ end of thc
ll Concession Period ceases to bc eligible by operatlon oJ law or an act of Congress to hold a

congressional franchise or other authority required to oP€rate a pubtic utilit-v in the
Phillppines, and where such ineligibitity is not due to or arising out of or related to any act
or omission of the Concessionaire.
TT vith N.r,.arl (nd Cnr?'at'on ol rh. Ph;lfiFirut
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PSALM-TR04-2010-002
It 1{ REMEDIES
l4,Sl !!\II(S
b€ continuin& [5ALM may:
SsmCdiSE. For so long as any Concestionai'e Detault shall
IT (a) terminate this Agreernent by delivering Termination Notice to the

a
Conce.sionaire anJ acquire the Concessisnaire's business in at'cordance with
tI (b)
Article l5 (Rerrrsion); and,i or
draw on the fulI amount of &c Pcrformance Seorrity.
tl 14.02 Acceleration Upon the occurence of a Concegsionaire Default

specilied in Subsection 13.01G) aE(x"nt o/ 8ankr.rytry:l, the Dejered Paymeflts, and all
other amounts owing to PSALM and TMNSCO rurder the Traruaction DocumElts,
tl shall automatically, necd of demand therefor, becomc immediately due and

iithout
payable. In thc cvent of any ot}er Concessionaift Default PSALlvl shatl have the
right to .uuse the Deferred Payrnents, and all other amounts owing to PSALM and
Il ffr,eNSCO under the Transaition Documenls to become immediately due and

payable by delivering writt€n notice thereof to the Concessionaire at any time while
that Conc$sionaire Default is continuing,
14.03 Concesoiqnaire's Remedie.r' For so long as any Covemment Dcfault

1I shall be contrnuing, the Concessiomire may terminate this Agreement by delivering
a Termination Nolice to PSALM and TRANSCO and requte PSALIV'! or ils nominee
Il lo i!:quire the Concessionaire's business ix accordarce with Article 15 (Rcarrston).
14.04 Remedies Exclusive. Thc Parties waive all other rights or remedics
available urrder Appticable Larv uPon the lermination of this Agreement irrcluding
any right to damages.
TT
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REVExS,oN
15.01 Reversion Evens. The Concession Period shall terminatc on the

Termination Date and the Concessionaire-s business shall thereupon bc taken over
by PSALL! or its nominee as a going conccrn in accordance with this Alticle 15'
PSALMs right to so tale over the Cotlcessionairc's busine*s shall not bc subiect to
any condition, and tht Concessionaire erpressly acknowledges that ln accordanct'
t oiih Scrtion l5.Cr6 (ficr'unry Pulnnenl) the provisir:ns of Schedule 4 provide for the
determination and payment of any Rocovery Pavment onlv.'Uter.l5IEALM hrs taken
over the Concessionaire's businesg in accordance wilh this Articlc
15.02 Transfer of Businesses. On the Termitration Datel

(.) all Trarsaction Documertr shall automatically terminalc (without Preiudice
to the Parties'accrued rights and any obliEations that survive termination);
(b)
TT PSALM or its nominee shaU be cntitled to cicrt the Concessionaire fnrm any
or all of the Transmission Asgets and tale poss€ssion thereof and all New
tI Proiccts then under construction; and
qirrr N.rr'ffi{, Cn,J C{,'Jrorrnoi

P"st 27 ot 1,
o/l]s ,rr r'ppnl',
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PSALM-TR04-2010-002
il (c) I5Al,V crr its nominee (i) all lecords and files
Concessionaire shall deliver to
(including derigns and drawinSs) mainlained by the Concessionairc, and (ii)
all operation or maintenance manuals (including anv developed by the
Concessionaire), rvherever they may be located.
IT 15.m ESlligutngQlgeliggg.
Il (") With effect lrom the Termination Date, tlSALtvl or its nominee shall take over
t}le Conces.sionaire's business (including all Related Businesscs) for PSALM
or its nominLt's own account subicct to Sut's€ction (c) below and Strtion
ll (b)
15.05 (Rc/alrd Eusiras-<cs).
Not later than thirty (30) days beforc the Transfer Closin8 Drte, t}SALM shall
inform th' Concessiona'ire ol (i) an)' Related Business€s that it does not wish
lI to acquire and (ii) any lndebtedness of the Concessionaire it wi5h6 to as8unne

as ftom the Termination Date. 'lhe Parties shall use all reasonabl€ endeavors
to transfs to ISALM or its nominee any Indebtedness PSALM wishes to
asgume and the benefit and the burden ol all existing contracts (other than
contracts ent€red into for the purposc of a Related Busin€ss that PSALM does
TT not wish to acquire or that the Concessionair€ has entered into in breach of
Applicable Law or the terms of any of the Transaction Documents or lhose
enumerated in Subsection (g) br:low1. The Concessionaire shall remain
TT pcrsonally liable 1or all lndebtcdncss and existing contracls that PSALIU is
not required or elects not to assume, or whose transfer to ISALM or itg
tl nominee is prohibited or subject to terms or conditjons that PSALM

reasonably regards as onerous and the Concessionaire shall satisfy iE UBbility
in rr'spcrt of such lndebtednear or contsacts out oI the Recovery Payment.
tI (c) PSALM or its nominee shall be entitled to the interim arsignment of all of the
Concessionaire's employees as t}le Concessionaire until the Transfcr Closing
Date subject to Appli{able Law. The Concessionaire shall remain personauy
tr liable to its ernployees lor rll arnounts owing to them urrder Applicubte l-aw
by reamn of th€ tem nation of their emplolmcnt h'ith t}le Concessionaire
(for redundancy or otherwr-se) antl shau s€ttle such liability out o[ the
It
Recovery Payment. [5ALM or its nomine€ shall be entitled to offer
employment to the Concs&sionairds employees (or anv of them) on such
terms as it sees fit such employment to taks elfect on the Transfer Closing
Date. The Concecsionaire shal indemniJy, defcnd and hold PSALM and
TRANSCO harmlces horn any claim or action brought by the
Concc.asiolraire's enployees by reason of their empk:yment with the
Concessionairc or tie termination oI such empkryment,
(d) Neither PSALM nor TRANSCO shall bc liable to thc Concessionaire for any
claims, liabi.lities or locses tlat lhe Concessionaire sray rncqr as a result ot
anythilg done or not done in the exercise or purportcd exercise of its rights
or poryers except for gros5 negligence or willful mis(onduct by PSALM or
TRANSCO.
(e) The Concessionaire $hall takc all nr-'cessary meaturs$ (at its expensc) to
authorDe TRANSCO to make use o{ Concessionaire's int€llectual
uik Naiod Cnd C,tpnhoa il th Ptullf'j,1€6
It
P.N 18 ol37
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rights orr'ned or used by Coni.'sriotraire and reasonably required by PSALV,
TI TRANSCO, or its nominee for the purpose of opcrating tlre Transmission
Assets (all of which are rcferred to as the 'Conressionairc II'Rs-), provided that
ll for any Concessio ate IPR9 not owned by Concessionairc, it shall be subiact
to the restrictions imposed by the owners of such intellc{tual ProPerty righB,
including the trarLsf€rdbllity, transler restrictions, term o[ the lic'ense, license
ll
fees and renewal fees.
(0 On the Tetmination Date, the Concessionaire shall causc all of its nomlnees to
all boards and commiitees involvtd in &e operation or management of the
lI electricity market in the PhilipPinEs to resign and shall assist TRANSCO or its
nominee in rcplacing them rvith TRANSCO or its nominee's own nomkrees'
The boards and committecs relerred to in ihis Subsecuon (f) i-rrclude the PEM
Board and its committ€es, the Crid Managemeflt Committee, the Distibution
It lvtaragEirent Committee and their lesPective subcommitte€s and any

successor lhereto.
Il (S) I5At-\t, TRANSCO or its nominee

contract with anY Related ParW .
wiII not bc required to as$une
l5.O{ Dutv to Ensure Unint{:rrupted OP€rarions, During the period

anv
Il behveen the deJivery of a Termination Notice and completion of the tansfer of the
Conce.srionalre's buslness, the Parties shnll use their be$! cjforts to ensure the
continuous and unintemrptcd oPerotion ol fte Trafu$mission AsseB in accordance
Il wih Applicable Law.

15.05 Related Businesses. rSALM ar its nominee shall be entided (but not
obliged) to purchase any or all of the Related Businesses of the Concessionaire in
tr accordance with Schcdule 4 (fucoxry Payzcnt). V/here the Related Businesses a.re not
acquired by PSALM, I'SALM and TRANSCO shall grant to thc Corrtsslonaire,
subFct to the payment of a fee { the Concessionaire and subiect to .euch other i{rmt
arid conditions as rEALM may require, rensonable riShB of accefc to thc
Ir Translission Assets to eruble the Concessionai.re to oFerBte or dlspose, s'r the ca$€
may be, of such Relnted Businesses. Witlout limiring the forcgoing, any such right
of access shall only be providcd to tlte Concessionaire should PSALNI in its sole
ll rli-scretion believe it wou.ld not interlere with the oPcration of the Transmission
Assets by [5ALM, TRANSCO, their succesxrr, or their nominee.
15.06 Recovery l'alsrenl. PSI\LM shall pay the Recovery Payment

(together with intere3t at the rutc rpecilied in SrheduJ e S (Recornry Paymarl) hom the
Tersrination Date) to the Concessionaire in accordance with g:hedule 4 (Rc.vtxry
Per,lantl.
16. Drsrun: REsoLunoN
16.01 Amicable Settlement. In t}e event of any dispute, controversy, ot

claim oI any kind whaLsoescr arising out of or ir connection with this AFeemenl
including any question regarding iLs edstcncc, validity, irrterpletation, petformance
ll or iermination (a "Disputt"l. lh€ Partics shall in the first instance atte$pt dlltgsnttry
ErE Ndiond 6ad CrrFElidt ol t . Pkiliryn'rs

dEuunl i..u4d by:
I!
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PSALM-TR04-2A10-002
ll and in good faith, for a Jret iud of 'sixty (6{l) ralendar davs after the receiPt b)' a Part}'
of a wrltten notice from the otler Party of a DirPule, to settle the DisPute by sutual
discussion benveerr authorized reprisentatives of the Parties. The period for
II setgemeni of a Particutar Disputr: may be extended upon the mutual written

agreement oI the Partics, The Partie.s agrcc that receipt ofa written noticc of DisPute
tolls thc ruming of any applicable statute of limilations on anl,clairn for the initial
tl .sixty (tO) caleniar day negotiation period and for any mutuslly agreed upon
extension of that period.
f6.02 Arbiuariolr. Thc Parties consent to, and agree lllat any Dispute not
Il settled
by
within
arbitration
Ge time allowed by gxtion 16.01 (,4rnrcalle *ltlzncnll shall be settled
ln Singapore h accordance with the UNCITRAL Arbihation Rules as
ai present in force. The atbitrahon shall be administersd by the Singlpore
lI lnt€-mational Arbltration Cenhe ("SIAC') in accordance with its practice rules and
regulations. The Parties further agree
(a)
as fotlows:
The arbitral lribunal shall corlslst of three (3) arbitrators/ one (l) of whom
tl shall be appointtd b.v PSALM and TRANSCo and one (1) of whom shall be
appointeJ by the Concessionaire. The two (2) aditrators so aPpointed shall
appoint the third atbit ator, who shall serve as the chairman of the arbitrsl
It
uibunal. II any of the Pa:tie.r fails to aPPoint its arbitrator within ten (10)
days aftcr receivin8 notice of the arbitration, or if tlre two (2) appoinhd
arbitrators cannot agrec on the third arbitrator within ten (10) days after the
apPointrnent of the second arbitrator, then such arbiEator shall be aPpointed
tl p)
by the Chairman or Deputy Chairman of the SIAC
The atbit ation shall be conducted in thc English language and- any
documents PrcsenEd in any other language at such arbitration shall bt
IT accompanied by an English translation thereof.
16.03 loinder. To the extent that eithe! the Parties aglee. or t}te arbirators
lr rule. tiat:
(") arry Dispute arising under this Agreement Ls related to one or morc disputes
that arc pcnding wlth resPe(t lo any l rarusaction D(xument or arrRnS€ment
ll (b)
involvirrg one or mor! common Parti6;
such other disputcs ate b€ing arbitratcd; and
(() judicial economy could be achteved and/or the possibility ot conflicting

out,Comes avoir.led if the arbitrations regarding the various disPu[e5 wete to
be jolned and the i.s$uer Presented whotly or Partially in a single proceeding,
then the Partics and the arblhators rhall lake all actiolls nec$saly or adYisable to
accomplish such joinder.
16.04 Continuation o[ Performancc. Unless t]re Parties mutually agree otherwise ir

rvriting, they shall continue to perform all of their tesPective obligations under this
Agreernent without interuFtion during thc resolution of any Dispute under this Artjcle 16.
alrr Nr.hor.J Cnr' C4tdrnr,& ol tk PlrlinnE

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PSALM-TR04-2010-002
17, MrscEr.tANr,ous
IT 17.01 Covernin8 Law
This Agrcemenl sha.ll be governed by, and
ll intcrprcted in accordance with, the laws of the'Republic of thc Philippincs
17.02 Proper Business Prachces. Each Parlv (i) shall Perform its obligations
under this Atreement in accordance with all Applicable Laws in relation to the
ll ptopet condu€t of its respective business aciivities and obligations, and (ii) agrees to
take all actions to ensure that all Persons acting on iB behalf in the future (including
all subcontractoB) do not give. authcrizl or offer any cour-nission, bribe, payoff,
ll kiclback money o, anything of value directly or indirectly to any Present or fuhrre

dlrector, officet employee or ag€,nt of any Governmenlal Authority which violates
any Applicable l.aw.
tl 17.G Furthpr Asuurances, lf elther Party determines thdt any furthe,

furstrum€flts or any other acti or thlrgs are neces.lary or desirable to c.rrry out lhe
terms of this Agreeolenl, the othtr Parr1, shall exetute and deliver all such
ll irxitrume ts End assurances and tlo all such things as the requesting Party reasonably
deems necessary or desirabte to caJry oul the lerms oI thls Agreement; Prouided,
that this Stction 17.03 shall not require either Party to: (i) incur any expmsa
hou.retxr,
othet than a de minimis expensc unless the requesting Partl' oflers to reimburse the
lI ,equested Party's expenses on terms reasonablv satisfactory to the ParV thlt will
incur the expenre; or (ii) execute any contra(t, agrtsment, or other legal instrument
that could. in the reasonable opinion of the Party askr'd to executc such legal
Ir
instlument, result in msterially g,reater liabilities for such Party unless the requesting
Party agrees to indemnily the requested Party a8ainst such liabilities on termr
reasonably satisfactory to the Parv requested to execute such legal insrrument.
tI 17.04 No Firuncial Undertakiags. Nohvithstanding any other prwision in

thb A8ree$ent undcr no circumstances shall [5AL.V or TRtu\SCO be reguired to
undertale any guarantees, expendinres, o, other financial obligations in order to
lr ,acilitate t}re Concessionaire's pcrformonce of its obligotions under this .Agreement
17.05 No Conseouential Damaqes. Except as otherwise expressly provided

in this Agreement, in no event, whetler as a result of breach of contract, waranty,
ll irldemnity, quasl-delict, strict liabilit!,, or otharwise, shall e.ither Party have any
liabiliry m the other Partv for any indirei:l, consequcntial, incidr:ntal, special, punitive
or exemplary damage (including loss of prolil loss o( anticipatad revenur's, locs u{
use, loss of production, loss o, contracts, lo*s or postponement o, financifl& 8ny
financial or eronornic loss. costs of capital, cqsts of substitute equipmm! facilities, or
s€rvice3, downtime costs or contra(tual p€n[lties to third parties] thEt the oth€r Party
may incur Ior any reason whatsocvcr, othcr than in connection with the fiaud, gross
negligence or u.illful misconduc! oI a Palty or iB employees, s8enls or contracbrs at
ony level.
17.06 Assigrim€nt and SubconEocting. This Agreement and all provisions

hereof will be birding upon, and inure to the benelit of, the Partie! and their
respeqtive successors and permitted assigns. The Conr€ssionaire or its successor or
assi.gnee shall not (without the written consent of r5rlLV)r (i) assign thir A8rcement,
lt intcrest, or
EirA ['ctian.l Grd Co?orunon ol UE
Prf,, Jl o/3,
Plutli,in t
hereunder; (ii) subcontract lhe whole or
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TI Copy for the National Transmission Co,rpola!91
PSALM-TR04-2010-002
ll essentially the wholc of its resgonsibilities under this Agrccmenu ctt (iii) allow any
other Person to be subrogated to arty riSht or obligation undcr this ASrctglent;
prooidcd, hounur,0ral from Commerr-ernent Date, the Concessionaire slrall havc the
right to designate a Concessionaire bank account (which accorut must always bc in
the name oI the Concessionabc) (&c "Rdco.rery Payaznt Bank Account"\ to be the
TT ,Rclpient of the Recovery Payment.
tI The Concessionaire shall have the right to a$sign the right to rxeive the proceeds ol
the Recovery Payment Bank Account, as secu ty in favor of (i) financial irutitutions
providing Indebtedness in accordance with Section 8.05 (ltrdcbte&].ss\ or (ii) any
lI financial institutioru providing Indebtedness to any lnvestor or Holdco for the

purpo66 of (x) financing such Investor or Holdco's cquiry ParticiPation in the
Coffessionaire or (y) enabling such Investor or Holdco to Provide shareholder loans
Il
to the Concessionaire-
There shall never be any privity of contro(t between PSALtvl and 'IRANSCO with the
assignee,/s of urc procectls of the Recovery Pat'rnent Eank Account, provided further
Il thai PSALM and TRANSCO shal.l not be required to enter into any a8reemcnt with
anv of the assignee/s of the procceds of the Recovery Payment Bank Actount
regarding such assignment and any matter r€18ted thereto.
tl 17,07 Entirc AEreemenL this Agreement and the other Transactj,on

Docu$ents emborly the entire sgre€ment bctr*'een the Parties relating to the subiect
matter hereof. 'Iha Parties sha.ll not be bound by or liable for any documents
tI proposed or submifted prior to the Commencement Date and nol incorPorated into
this Agreement (by refeterce or otherrvise), or for any statemcnl reprcsenlation,
prouri:e, inducement or understanding of any kind or nature relating to the subiect
mattcr of this Agreement not set Iorth or proYided for in lhe 'l'rarlsaction Documents.
Il 17,08 Notices. Each notice, demand, ,eport or otler communication to be

given or made or oiher dot'uments to b€ delivered under this Agree.ment shtrll be in
lr writinE and in ttte EnBlLsh langu!8e ond dcllvercd or s€nt to the relevant Party at itr
address, email address or fax number set out ifl Schedule 9 (i\iorices) (or such other
address, email address or fax number as the addressee has sPecified to the other
lr
Parties), with a copy to all parues indicated on Schedulc 9 (Notires) at the addresn
email address or fax nunber indicated in Schedule 9 (Noticrs) (or such other addresg
email address or fax number as the addressce has spccilied to the other Parties). AJty
nolice, demand, report or other communication shall be deemed to have been
delivered (i) il given or made by lett€r, when actually delivertd lo t}le rel€vant
addrees, (ii) if given by email, whm receipt of the email is acknowl*lged by the
rF(ipieni and (in) iI given or made by fax, whe'n dispatrhed r{iti a lkrultaneous
confirsration of transmi$ioru prauidttl, houexet, iI such day b not a business dEy in
the place to which it is scnt, such noticc, demend, report or oth€r coEmunication
shall be deemed delivered on the next follolving business daY at such place. Either
Party may change the ad&ess, email address and fax nurnbcr to ra'hich noticcs are m
be addressed by giving the other Party notice in the manner hercin set forth.
17.09 Amendment: Waiver. The Parties acknowledge and agree that (i) the
Parties msy anrend this Agreenrunt only in writing signcd by each of them; (ii) no
lt P.1t t2 D!
breach of
37
covcnant,
Crid Crtpontia'' o[ tha l,kiLp)n.s
made herein shall be
Il
It
tl
TT
tt deemed u'aived unless expressly waived in v"riting by the Party who might assttt
strch breach; (iii) the waivir by a Party of a brcach of any term or Prousion of this
Agrcement shall not censtitute a waiver ol any subseguent breach; and (iv) neither
ll tlie review or comment by one Party o[ ot on the olher Partv's documens, tro, th€
witnessing by onc Party of tlre othcr Party's perforrrance, nor the rendering of any
certificatelshall be tieemed lor any purpose hereunder to constitute a waiver of any
ll
repr€f,entation. lr'arranty or ri8ht.
17.10 Eroenses. Each Party shall be solely liable for its own fees and
expenses (inctuding the {ees oI any lawyers, accountants, invesknent bankert'
lI advisors. agents or 6ther reprtsentatives engaged by any Party) Ior entering into this
Agreemcnt and the other Transaction Docum€nts
17.11 Counterpdrts. This Agreement may not be executed ln countetpo'tr'
It 17.12 Severabilitv. lI any one or morc of the Provkiorls of this Agreement a

held to be invalid, illegal or unenforceable, the vatidity, legaliw or enJorceability of
Il the remaining provisi6ns of this Agreement rvill not be alfecred thercby, and the
Parties will use tt
"it
reasonable efforB to substitute one or more valid, tegal and
enlorceablc provisions whit-h, ingo(ar as practicable, implement the purposes and
intent hereof. To the extent permitted by Applicabte Law, each Party waives any
ll provbion of law, which renders any provision of this Agreement invalid, illegal or
un*nforceable in any respect.
lr 17.13 Waiver o[ Immunitv. Ea(h of the Partles hereto irrevocabl;l waives

any immunity to which it or its proPcrty mav ot any time be or become entitled,
whether claracterized as sovereitn immunity or otherwise, from any legal action in
ary iurisdiction. includhg irnmunitl from service of prtxcss, immunitv ftom
Ir ;urisdiction oI any court or tribunal. and ary immunity of any of is property from
attachment prior to iud8ment or frorr. exxuilon of a iudgment, prourdrd that such
waiver of immunity by lSALtvl and TRANSCO shatl bc limited to l.h€ extent that it is
ri
I permitted by Applicable l-av,/.
17.14 Ng-IEC-Egrtv BenQ&llrieE. This Agreement ts not intended to, and

shall noi, confer upon any other Perrcn any rights or temedies hereurder, prouidzd
ll that each Party may assert the righs of its resp,ective shareholders, Affiliates, ofEcers,
directors, ernployces, agents and rePresentatives on their behall Pursuant to Article
7? (lndcnnifcation).
17.15 ]gdsrngn(ugenfX. Unless otherwise expres{y Prorided, all

payments remitted under this Agre€nnent, including contingent Paymefits, shall be
denominated in Philippine Peso Each Parb"s obli8alions hereunder to make
pdyments in Philippine Peso shall nol be discharged or satisfied by any tender or
recovery pursuatlt to any iud8menl expressed in or converted into any currency
other than Philippine Peso, except to the cxtent that such tendel or recovery results
in the e(fectivc reccipt by a Party of the full amount of Philippine Peso expressed to
be payable to such Party under this Agreement. tf for thc purpose of obtaining or
en-{orci:rg iudgment against a Party (thc " Paurng Party") in any court or in any
furisdlction, it be(omes n€cessary to convert into or from any currency other iha,t
tt Crrcarson .{8tffrrr,
ltso (such othr:r
.rrrlt,rror.r 6rid Co/ponriat ol t t Ptilipyttut
hereinafter referred to as tle "
It
!r rxlti:ffir;':; [:: i
It
TI
II Currency") an amouJlt due in Philipninc Peso, the conversion sha.ll be madc at the
rate of ixchange determined at ol the rley on which the iudgment is given (such day
being hereinafter referred to as the " Judgmtnl Cunenry Conotnicn Dcle"). tf thete is a
tl change in the rate of exchange prevaillng between the Judgment Currency

Convcrsion Date and the date of actual payment of the amount due, the Pafing Party
shalt pay, or cause to b€ paid, such additional aqrounts, iI any (but in any event not a
Iesseiamount), as may be necessary lo ensure that the amount paid in the ludgment
It Curency, when converted at the rate of exchsnge prelaillng on the date of payment,
will produce the amount of Philippine Peso that could have been purclrased with the
amount of Judgment Currency iupulated in the iudgment or judicial award at the
ll rate of erchalge prerailing on thc ,udgment Cunency Convcrsion Date. For

purposes of determining the rate oI exchange under this Section 17.15, such amounts
ihol include all premium and costs payable in conne{tion with the Purchas€ o{
Il Philippine Peso.
1?.16 Use of Nameg; Publicih,. Exccpl as may b€ requlred by Applir'able low

or disclosure rules of t-he Philippine Stock Exchange, iI appticable, the Concesrionaire
Il shall not use or publish publicly the name of TRANSCO or IISALM (or any of their
advisors), whcther lor advertising purposes or otlerwise, in connection wlth the
performance of uris Agreement, without the Prior rqitten conscnt of TRANflIO or
pSaUM as the casc may be, aftrr notice from the Concessionuire informing
ll TRANSCO or PSALM, as the case may be, in reasonable cletail of the purpose for
rvhich the Concessionaifl: wishes to use TRANSC0s or ISALM's (or any of their
advisors') name.
Ir !7.17 Laneua8e. This Agrt'cment is being execrrted and delivered in the

Engiish language snd a.l] modificatioru, amendments and waivers of any prolision
of this ASreement and all other written documents bctween the Parties in connection
tr with this Agreemcnt (including any atbittation) shall, exccpt as othenvise agrecd by
the Parties, be in the Engllsh language. No hanslation of this AgretBent into ony
other language shall be of any force or erlBct irt the i.n(erprctution oI Uiis AEreement.
tr 17.1s fugQff. ln addition tu any rights and remedics of a Party (the "Firsl
Pa*y'') provided herer:nder, or by law or otherwise and uPon an)'amount becoming
due and payable to the First Party under any of the Transaction Documents by the
Ir other Party (whether at the staM maturity, by acceleration or otherwise), the First
Party sh6u have the right, not$,ithstanding any notic€ of assignment ii may have
reccive4 to set-oIf and appropriate and apply against zuch amount any and all
paymenis, olher credits, indebtedn€sg or claims, in any curency, &en orving by the
First Porty to other Partv under any of tht Trarsaction Docurn€nts (u'ith any arnount
owing in a currency other than US Dollars being convertt'd to US Dollats at the
prevailing rate of cxchange quoted by the Borgko S€ntra.l at t}le date of set off).
17.19 PSALM and TRANSCO. ISALM and I'I{ANSCO shatl be ioindy and
severally liable for each other's obligations under this Agreement. IISALM is
irrevocably authorized to exercise aU ol TRANSCOs rights under this Agreement
and any drxumenl exscutcd for thc purposes of this ASteemL'nt by PSALM for and
on behall of TRANSCO rhall be dccmed ul have been duly authorieed by TRANSCO
lr t th Ndsn
and shall conclusively presufted to br binding on TRANSO.
l Cr'l Cor,!l,,!,oli ol th. Phibpzla.
It
I'qc 3a al3t O.rl(|rul d(lrrncrrl ir.lrd by
ll P
lr
ll
PSALM-TR04-2010-002
ll 17.20 EffertivitX. This Agreement shall take uffe<t ind bc hnding

PSALM and TRANSCO only upon PSALM and TRA!.lSCCtrs execution and ddivery
of thts Agreement to tfie Conc.ssionaire. PSALM and TMNSCO's execution and
delivery of lhis Agreemmt to the Concessionaire thtfl b€ precondidoned upon
on
H PSALM and TRANSCC||s securing the nsc€ssary Soverrurenbal approvalr pumuant

to Applicable Law.
tI Tr{E RSMAINDER or rHls PAGE INTENTIoNALLY LE}T BLANK
SIGNATURES APPEAR ON THE FOLLOWING PAGE
TT
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TI c o py fo r th e N a t io n a t
1o;o!-:j6 ?6:3 3 !
IT L\ wrrN8ss WHEREoF, the Parties hcreto have caused this -Agreement to be dulv executed as
of the day and year first w:itten above.
TI
ANT' LIAIIIUTIBS
TT
Il Joee C.
ll
Il
Il NATIONAL GRID CORT)ORA'I]ON OT THE PHTUPPINES
TT
8v: C* O-
tr Director
lr u,, Du
4-'L+.$+11
Zligangl )
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Dtector
TT Ei!' Nrlorrd Gd, OrF r! tro,t ol tb Phllq^,e'
TT
Il
Ir
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PSALM-TR04-2010-002
il ACKI{OWLEDCMENT
It Ciry
ef
Philippinr:
Repubtic of the
of rb&'-li
BEFORE ME,
sdo..1
)
) S,S.
a Notary Public in and for City of Oo[aJ r - Philippines, this

2008, personally appcared:
TT Namc ldentilicotion Document Datc and Place of lssue
Prcsented
TT Powe! S€ctor Assets and

Liabillties Mana gement
ll
Corpo!ation
Represented bv:
Jose C. Ibazeta NWtrtl tll lo ltkrNr * '/&t* lq
National Transmission 'Zg',l
Il Corporation
Represented by;
Arthur N. Aeuilar D Ntr- cf - bvfT // y'tqxq ]e'/ q..<un
1
It National Grid Corporation
of the Philippines
Represented byr
Walter W. Bror.r.n RP Passport No. 22229195 14 lune 2007; DFA-Manila
Ir Du Zhigang
Elmer G. Pedregosa
PROC Passport
Pfi217722
RP Passport No. LL901310
rr-o. 15 Augu-st 2007;
2,1 September 2003; DFA-
tl (all) known to me and to me krorvn to be the surte persons who executed the forcgoing
Manila
lr
Conccsgion Agr€eme-nt and (they) hc acknowledgect to me that the.iame is hi.s (their) free
and voluntary act nnd deed as well as thal of the Corporation he (they) represents.
Thi,s Concession Agreem€nt consisls of thirly-seven (37) pages including this pege on
tt which the Acknor,/ledgm€nt i$ wrilten, exclusive cf Annexes, signed by thc parties and their
instrumental wirresscs on the siSnaturc page, and ,sealed witi my nolarial seal.
lN TESTIMOI.ry WHEREOF, I have hereunto set my hand and alfixed mv notlria-l

seal on the date and at the place first above written.
mn
NOTARY PUBUC
!- r
_,ld*ffiaHfic.ffircro"
,_"r\ .rw. a^gor-ttEl ll& u 6^.
D*'No 42a Nc&ry tuDIc tbr iihtrd Cttv
PaseNo. 01 ' r
IE-- reh
Urdf DEamDar 3l. 2ooa '
& ,l7.l Flotr, u6ortv corrtor
B;k No.:-r-, l(N H.V. dCE Colto RrEor
Series of 2008. Sdocdo Vt,taoo, li.f€ City
Il
Xoli Otr, umoyu t,rr. l..:-t5j
^_
PFRooz$snrarff ili,.;.,'_', :;.r.-"
ril* N.tbn.l Cnn Co.W.ton dl ttlf Fhrlilltiv.
Il
It r;-,rii:f#{t.ti:.
)d.
ll
ll
PSALM-TR04-2010-A02
ll SCHEDULE 1
TI l. Definitions.
DErtNn'loNs AND II'(TEnPRETATIoN
TI "Abandonment" means a willful refusal by the ConcessionaiJe to meet any of iB

fesporsibilties under this Agreement in the knowledge that such rcfusal is likelY to reult in
tI a serious denial of trarsmission services to a siSnilicant numbcr of Transmission Customets

entided to receive lhem,
"Adve$€ Oatm" shaU have the meaning defined in ftrtion 5.$/ (Adocne Claimsl'
ll ,Affilile"
or
means any Person which, directly or indirectly, is in control of, is controlied by,
undcr coEunon control with, anothci Person" For the purposcs of this definition,
i.s
" contm!" o( a Person means thc Power, direcdy or indirectly, either to (i) vote ten Percent
ll (1096) or more of the shares having ordinary voting power for the election of directors ol
such-Perso& or (ii) direct o. cur". th" direction of the marugement and policies of such
Person whether by conEact or othenvbe.
ll "Agreenent" shall havo the meaning tlefined in the preamble.
"Ancillary Services" shall have the meaning dcfincd in the OATS Rules.
I I "Applicable Law" means (i) the Constitution, (ii) all laws. statutes, beaties, n:les, codes,
ordirur,ces, re8dations, certificatet decisions, orders. memoranda, circulars dccrccrs,
I I
resolutions, di;ecuves, rulinSs, interPtetations, approvals, licenses, and Pcrmits of any
Governmental Authority, ona 1ili1 i"ag."nts. decrees, iniunctions, wrils, orders or like
actions of any court, arbitrator or other idministrative, iudicial or quasljudicial tribunal or
I I aBency that arc binding on s Ptr..ty as they may be amended. supplemented, rePlice4
r&nterpreted by a duly aurhorieed Covemmentat Authority or otherwise modified {ronr
tlme to time, and incl.udes the EFIRA, the lRRs, the Grid Code, the Dlstribution Code, the
WESM Ru]es, the Competition Rules, the OATS Rules, the Transmission lt/heeling Rate
I Guideiines, and any legistative franchise Sranled to Lhe Concessionaire.
I 'Drngko S€ntrrl" means &engko Scntral ng Pilipinls.
T "Bid Date" shall have the meaning dcfined in thc Dircct Agreement.
I Bidding Procedurer" shall have the meaninB defined in the Direct Agr€ement
I
" .
"Busineas Day" means any day (other than a Sahrrdav or Surday) on which banks are
I authorized to be open for business in lvtalati Citv. Metro lvlanila, Philippines,
I 'Change in Contnrl" means the change in the riSht to (i) vote or control the voting of the
I maiorif of the Concessionaire's voting shares ot (ii) appoint elect or remove a maiority of
the dircctors of the Conccssionaire.
T
I
t
I I
I t s
|L:T|i#;r'lii r',!:''|
I T
ll
- PSALM-TR04-2010-002
'Commencement Date" shall have the meaning defined in Scctiott 3.92 ot the Direct
IT Agreement (Crnnu \cen,dnl Date),
ll "Commcncem€nl lee" shall havc the meaning defined in S€ction 6.02 (Coflimcnulnenl
"Competilion Rules" shall have the meaning defined in the IRRs, as amended from time !o
time, and at the Commenc€ment Date incatu the rules ptomulgated by the ERC to Promote
Fcer'
ll and ensure competition in the €lectdc Powcr induslry Fursuant to the IjPIRA and th€ II{R3-
"Con<sssion" shall refer to the ri8hg antl resporsibilities Srafltcd to tle Conccssionai'e on
tl *re Commencement Dtte in Scction 2'01 (Corressiott).
"Concessionalre" shall have the meaning deiined in the prcamblc
ll .,coacessionrire Default" shall have ure meaning defined in section 13.01 (Cozcessionair:
Delaultj.
ll "Comession Fe€" shall havc the meaning defined in Section 6.01 (Gtaenl).
'Concersion Period" shall have the meanrng defined in Section ?.03 (Cortctssinn Priody
ll 'Constitution" meats lhe Cotrstitution of the Republic of the Philippincs,

tlme to time.
"Constructlon Mana8ement Agreemenf' mcaru the agreement of that nasrc relerred

as amended from
b in
Il the Dire€t Agreement.
'Dett Scrvice Coverage Ratlo" or "DSCR" mears Ure ratio of Net Operatin8 Cash Row to
It the Debt Senrice Cosi Thc "Net Op'rahrg Orl Florr"' is determined in accordance with
Schedule 8 calculated over the six (6) calendar months immediately preceding t}te relevant
date. The Debt Servite Cost shall be equal to thc Finance Coct.
!r 'Debt-Equity Ratio- means at any tisre thc ratio of tie Concession.rire's Indcbtedne$ to its
Net Worth.
Ir 'De€d of TransfEr" means the agree[rent of that namc referred to in U1e Direct A8re€ment
as amended from time to dlrle.
"D€fault R.t€" mealLe (a) {or obligations to be paid in Philippine Pcsos (i) where an irterest
rat€ is provided for under this Agreement, that rat€ Plus thrce perccnt (3%) or (iJ) t{here a
rate b not provided for undcr the Agreement, Gmonths PDST-F plus tluee percent (3%); or
(b) for obligations to b€ paid in a (u ency other than PhiliPpine Pesoi it is LIBOR plus two
and one half percent (LIBOR + 2.5,o(,)
"Defered Pay$ent" means in respect of any SemlAnnual Pavmqnt Date, th€ amounl
determined by the formula sel out in Schedule 5 (De.ftrre d Prymentsl in resPect ol thet date.
"Deprrtnenl of Ererg/' or "DOE" means the DeParhrent of Encrgy of the Repullic of the
li
Philippines, a government agenq'(reated pursualrt to Republic Act No. 7638 (otherwise
knowr as t}te "Department of Energy Act of 1992").
kfufuI
tl ku.d
tl
Ptf. 2 ol doftrmcnl lD':
lr rr,nil%;l: [ii'i fl
tr
tl
il Copy for the National Transmission Corporation
PSALM-TR04-2010-002
ll "Dirert Agr€emert- means the Drect Agreement dated

2008 among PSALM and a1l oI thc lnvestors.
12 Decer:lber 2fi)7 and 17 Jaruary
ll "Dirpute" shall have the meaning defined h Section 16.07 lAtticablc Stlllcnldnll.
"Dlstdbution Codc" rnealu the rules and regulatiors adopted pursuant to ERC Resolution
No. 115, as amended, modified, supplemented, or replaced from time to time.
TT 'Distribution l\tana8emcnl Committee" means ihe distribution marageorent

rstablishsd under the Disribution Code.
comtrrlttee
lI 'Documenled ttopedy RlShls' means: (i) a Torrerls cerdficote of title issut'd in the name o{
TMNSCO or, iI such interest has still to be trarsferred from NPC to TRANSCO, NPC lhat
evidmces, as the case may be, TR{NSCO/s or NPC's ownership interest in a parcel oI land;
1l (ii) a Torrens cerufkate of title issued in tht nane of t}lc orvner of a Parcel of land that is
armotated to reflect TRANSCO's ot as the cix}t may be, I',IPC'3 easement or right-of'way
over such parcel of land or other document evidenchg such easemcnt,; {iii} a Permit from th€
Dryartment of Environment and Naturat Rcxourccs of the Republic of the PhllifrPines, and
1l any other necessary rights and permits {rom the proper Govemmertal Authority, issued in
the name of TI{ANSCO or N?C that suidenccs, as the case may be, TRANSCOs or NPC's
right to occupy and use a seafloor corridor; and (iv) a lease from the Deparunent of
1l Environment and Nahrral Resources of the Republic of the PhiliPPines, and any other
necessary rights and permits from the proper Covernnental Authority, Sranted in favor of
TRANSCO or NPC and evidencin& as the case may be, TRANSCO's ot NPC's riSht to
exerclc€ a foreshore righr. All re{erences to thc NPC proPerties or righs Earsferred to
IT TRAN$O relates to properties transferred by N?C to TRANSCO in accordance with

Sertion 8 of the EPIRA.
tr "Due Date' means the latest dale by which an amount Payable under this Agreemtrrt musl
be paid.
ll
I 'EPIRA" shau have the meaning delined in Rccital A.
"ERC means the Philipprne Energy Regulatory Corrmission, a regulatory agency created
lt
underSection 38 oi the EPIRA.
"Event of Bankruptcy" 61g6n9, with respect to any Persor! the occurrence of any of the
followingt
al a.
I such Person mal<es an assi8nmcnt for thc benefit of crcditors, or Petitions or
applies to any tribura.l for a receivcr or a trustee for itseu or of any substantial
I b.
part of 1B property;
such Pcrson commences any judicial or other legal proceedings by reason of

its financial dilficulties under any reorganizrtion, aranBemenL readjustsnent
!: o{ debt, dissolution, or liquidation law or statute of any iurisdiction, whether

now or hereafter in effect;
Il
tl
Pr*r 3 .111 dqurnrnt irruerl L'y
tl d/r-
tli,, ;;:.il r,l-.:
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ll
TT
ll Copy for the National Transmission Co-rporation
PSALM-TR04-2010-002
c. the commenccment aSainst srtch Person of any such proct'eding a:ryiU-ef ln
IT subsectioru ! and b aLve which shall rcmain unresolv€d for a periud o{ eixty
(50) calendar daYs;
ll d. such Person shall by any act indicate its coftsent to' aPPmeal of !r
acquiescence in, any such proceeding in subsections a' t" or c above for the
tl e.
ugpointo,*t of y recelver of, or trustee for, it or anv substantial Part of its
ProPerty;
"t
such Person shall sulfer any such receivership or trusteeshiP to continuc

undischarged for a Period o, sixty (60) calendar days; or
TT I. zuch Person shall suffer or take lny rction to ef{ect a disgolution or

tiquidation that does not involve a iudicial procceding'
ll ,,Excluded Llabilitler" shall have the meaning delinetl !n subsecdon

Cdfllrflcr$).
4.01,1e]l (Tmwfuned
T
I "Ercluded &eccivablcs" shall have lhe mcanh8 delined in Subscctiun 4'A1@)
Corfrnc&).
(Transpfied
I 'Exproprirtion Even(' me:ns ihe erProPriation or comPulsory acquisition, nationalization'

,.iri.r., t king or.r of the whole or any material part of the Trarumission Aseet$ (including
its right undlr this ASreement) by a douemmen'tal Authority. or any othcr action.taken by
II
a Goiemmental nuthjaty h an arbitrary manner and wilhout lawful and reasonable
cause
that preventt the Concessionaire &om iarrying on its entire -business or oP€rations ot a
suUs;r.tial part thereof; or results in a matsiial advenie eflect on the concl€ssionaire;
provided, ho*e*,er, that an Expropriation Event shall not-in"llde any of the following: (i)
I k" u*"r.iru by PSALM or TR.{NSCO of any remedy ulder this AgreemenL or any other
Transaction Dlcument to which it is a paity; iii) any sanction tmposed by any Gov:mr]enj{
Authority, including Lhc ERC, in aciordirrce wiih Applicable Law; and (iii) thc lawfut
I I exerciee iy a Goverimental Authority of thc riSht granttd to it under Article XlI' Srrtion
or 1E of the Constitution.
17
"Firulce Costs" meam the following obligatioru thnt are incurred or are expected to be
I
l incurred by the Concessionaire during
a.
a lelevant Periud:
intemst (including interest on the Deleffed Payments), fees, comllris$ion'$ and"

I banl chargei oi aly kind payable by the Concessionake in resp$t of
bomowed money;
b. payments of primipal in resr*ct of the Delerred Payments and the rePsyment

I of a.ny other prirrcipal amounts borrowed by thc Concessionai'e';
t c, amounts payable under hedging arangemenls; and

I d. Taxes payable by the Concessionairc in resPe{t of thc Deferred Payments or
t borrowed money.
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"Financlng Lcage" mearu any lease of Prcpcrry, rell or personai. that l'hitippine CAAP
IT requires the lassee to capitali?.e on ils balancc shect.
"llnan ial Testr" means thst as of the date a dividend is declared or as of the dste a
TI dividend or remittffEe on account of shareholder loans

dc[a,,), (i) no installment of the Deferred Paymcnts or olher
(iii ii * Debt Servicc Coverage Ratio as al
or advances is
IndcbtP.dness
datc is not
made
less
shall
than
(the "rlemat
be in arrearr,
one doclmal
lI
the r€levant
"".f
fifteen (1.15).
Datt'
''Futl 1'erm Expiration Dat€'' means the 25th annivtrsary oi the Commencemen!
1l "Fundlng Ag:ecment" mearu, in relation to a Proiect Under Construction, an a8rcemenl

beiween fR.{NSCO and/or I5ALM ard one or ,,.'ore financial instihrtions (including stat€-
owned or multilateral funding agencies) under which such financial irtstihltions aSlee to
tl, provide funding of thnt proie,ci.

.Government Default. shall have thc meaning delhed in sectiorr 13.02 (Gooarnncnt
Delaultl.
1I "Govemmental Authority" means any Sovcrnment agenc.v, authority, bureau, dePn'tnent'

court, tribunal, legislative Uody, puLtir official, statutory, com-nrission, corporation' or
'ERC,
thc DOE a"rd the ]CIt), of the Republic of the
1l instrumentality (in-clurling
philippines oi any of its
the
subdivisions, having jurisdiction over the Concessionaire
folitical
or the subiect matter of this Agreement.
!l "Grld Code" means the rules and regulations adopted in ERC l{esolution No 1l5'
amended, modified, supplemented, or replaced from time to ti$L'
as
Ir .,Grid Managemelt Com-mittee" means the gdd management committee established undel
the Crid Code.
lr "Grid Owner- ghall have the meaning defined in the Grid Code.
lndebtcdness" means, in lespect o( any Petson at any date:
ll (i) all indebtedness of such Person for borrowed money or for the.dcferred purthase price oI
pi"p"tty o, sE vic$ (other than curtent tratle liabilities incurred in the ordinary cource of
business and payable in accorda.ncc with customary practices);
(ii) any other indebtedneJs of such Pe'rson which is evidenced by a rlote, hond. debcnture or
si[lilar instrumenU
(iil) aU obtigations of such Person under Financing Lcases (including any othtr such
oUtig"tlor,r ihich required under Philippine GAAP to be capitalired on such Pergon's
balancr sheet); "t*
(iv) all obligations of such Person in respect ol acceplances issued or o'eated for the account
o{ euch Peron;
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PSALM-TR04-2010-002
(v) all <teferred obligations of such Person 10 reinbutsc any banl or other Person im r€sPect
TI of'amounts paid or advanced under a leller of credit or other ilstrumcnt;
II (vi) aU tndebt€dness (as defined in ctauses (i), (ii), (iii), (iv), (v), (vil) and (viii) hereoQ of
":tt
ers g*-"t .a directly or indirectly by such ferson or a3 to h'hich such
obligatiL which substantially amounts to the e(onomic equivalent ol a suretv
Person hag an
or Suarantee;
Il (vii) all obligations in !8Pect of contracts relating to interest rate swaPs' caPs' ccllarg or
other similar inErest rate or curency hedging mechanisrrs or derivative ProducE
o'
instnrm€nts enteled into by such Person to Plovide Protection a8ainit charrge3 in intercst or
Il {oreign rat$; and
(vin) aI liabilities securcd by any Security lntetest on any ProP€rty owned by such Person'
Il With respect to the Concessionairc, lntlebtednms also includes (a) toans or advances by any
of 11, shiieholders which are not subordinated to atl other forms of Indebtedness. md
aggregate outstandlng arnount of f)eferred Poynrcnis.
(b) tha
I! .tnitlat working c:pitrl", as defined ln thls Agreemen! is the dilference between selected
runent asseb itd setected current liabilities both pertaining to tmderelated accounts
irwolving power cuslomers, suppliers, contractors, creditors-and other Private entities' The
-current
sc.lccted asrets ur. uaaorrntt receivables, other receivables, materials and supplies for
TT operatiol advances and pEpayments while the selected current ljabilities are accounls
fryable and accrued experses, retmtion on contract payments, deFxits
and trust funds'
TI -tntetlertual Property Rights" shall have the meaning defin8d in S€(tion 4.05 (latelbctual
&oprrty RrShts).
lr 'Interlm Assitn-E€nt AEreement'

Direct ASrecment.
means the aSreement oI that name referred to ln the
tr "tnveltor Default" shall have the mcaning dclhcti in t}le Direct Ag,'{]ement'
"Investols" shall have tlre meaning defined in llre Dir€ct A8reerf,ient.
tt "lRR-r' shall have the mcaning defined in Recital A

*ICPC' mearu ihe ,oint Congressional Power Commission of the Republic of
Piilippines, a congressional commtssion constituted under Sectlon 62 of the EPIRA'
the
"LIBOR" mearrs:
a. the London interbanl offeted rate as quoted by Telerate on PaBe 3750

('British Banters Assxiation - Intereit Relerence Rate") for ovemight U'5'
Dollar deposib at 11:00 am, London time two (2) London Business Days
prior to the lelevlnt date of determination;
b. iIsuch information is no longer quoted by Telerale, the respective rntes

shown on the Reutets Monitor Scteen as being thc rate Per annum nt which
It ovemight U.S. Doltar dePsits ate offcrcd at 11100 a.m. tondon tifie fwo (2)
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IT London Busincss Days prior to the rclcvant date of determinationi for this
PutPose 'Rsr/!at3 Moailot S(I,ec'I.'mearu the display designated as page
;'LIBC/' on the Reuters Monitsr system or such other page as may replace
ll page "IJBO" on thal systcm lor the purpose of disPla)'ing offered,ates for
U.S. Dollar deposie; or
tl c. iJ such information is no longer quotcd by Reuters, the respective rates

notified to I'SALM by any Qualified Bank as being the rate Per annum at
rvhich ovemight U.5. Dollar deposib in ,n amount comparable to such $um
are offered to that Qualified BanI for a period equal or comparable to the
ll fteriod in question by prime banks in the I-onclon interbar* matket .t 11:00

a-m, tondon time two (2) l,r:nrlon Business Days Ptior to the relevant daie oI
determination.
lI "Litigatlonr" shall have the meaning dcfined in Subsection 5.08(d) (Ifl,aNSCO'Rctmzd

Obligatiori).
t! "Loan Covenants Agrermenl" has the meanirrg in the Diloct ASreemonL
"Iandon Business Day" mearu any day (o&er than a Sdturday or Sunday) on which banks
are authorized to be open lor business in t ondon. England.
Il -Moody'8" mearu Moody's Investor s€rvice, lnr-, and any successor thereto thlt is an
internationally recognized rating agency, or such other rating agerry as tle Palties may
muhrally select as a substitute for Mood)r's lnvector Service, lnc.
TT "National Power Corpontion" or'NPC

Ropublic Act No. 6395, as amended.
mearLe th€ govemment corPoration created under
ll 'Net Op€reting Cash Flow' is
"N.{ Wqrth"
as set out in Schedule 8.
mearl-s at any time tie aggregate of the amounts paid up or credited as paid up
ll on the issued ordinary or prefencd sharc capital of the Concessionaire, the amount standinS
to the credit oI the reserves of the Conces.gionaire, including any amount credited to tie
share premium accounL any amount of fully subordinaled loans lrom shareholders of the
ConrcssionairE, after deducting (without doubls counting): (i) any debit bal,anc€ on the
profit and losa acrount of the Concessionairc; (ii) any prouision for deferred taxatiou and
(iii) any amount in respect of any dividend or distribution declared. rscommended or made
by the Cotrcessionaire lnd to the erlcnt such distribution i$ not provided for in fie nost
recent doementation delivered to flSAlJr{ pursuant to Section 10.@ (Firunn:al lnfonnalionl,
"New hojecf m€ani any ERC approve.d construction proiect for lhe improvanent or
expansion of the Transmission Assets other than a Proiect Und€r ConsEuction.
"No Fault Event" shall have the meaning defined in Section 13.03 (No Fcull).
lt "oA1'S Rules" means the Rules, Terms and Conditioru for the Provis'ion of Oper: Access
Transmission Service under ERC Case No. 2@2-253 approved by ihe ERC on 16 Sepeanb€r
20O1, as amended, modified, supplemented or replaced from time to time.
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PSALM-TR04-2010-002
ll "Pert}'" and "Panies" shall have the meanings defined in the preamble'
"PEM Board" shall have the mtaning defined in the WESM Rules
Il 'Performence Security" meall:t an irrevocabte standby lelter of credit issued by a Qualified

Bank in an a.mount equal to two percefrt (2%) of tlre concession Fee.
-PerroErrnce s€cudty
Dr.lying Evenl- shrli -uu', on;r o.,e or a combination of the follor'ing: (1) a Concecsionaire
ll of any of
a Replacemmt Failure Draw Event, or (iii) any violation by the Co*essionaire
oefauttlill'the
terms an.l conditions of this r\greement (inctuding norF'Pa)'ment of the
Concission Fee or any portion thereof) or any of the other Tran-saction Docrrmenls'
ll "Permitted St'curlty lnterHt3" means any ol the follorving;
a. for the firsl ninety (90) calendar days after iB creation, any Security Intereit
ll artstng by operatitn of law, provided that the Concessiona'ire shall reasonably

etpeci to dirct
its creation;
"rge
such Ser-uritv lnterest within ninety (90) calendar days of
It b. any S€curity tnt€r€sts atising as a result of a court order or ludgment ttrat is

not yct fhal or is bein8 cont$ted;
ll c. any Sccurity tnterests creatcd in conneqtion with workrnen's comPerlqation,

unemployment kuurance,
obllgati,ons; or
or other social security or old age pension
Il d any Security Intetests which arises in corurection h'ith

gor"^-"rr-tul .h"tge which
contested.
Laxes, assessments or
are not yet due and payable or which are being
ll "Person' means an intliviclual, partrerrhip, corporation, business trust, ioint stock €omPan,
trus! unincorporated arsociation, ioint venture, Governmental Authority, limited liability
cornpany or other lcgal €fltity of whatcver nature.
ll "Phillppine GAAP" means generally accePted accounting principles th€n in efft'ct irr the
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Republic of thc Philippines and applied on a consistent basis.
"Fhilippine Peror", 'Pesos' or 'PhF' means the lawful currency for the tirne being of
Republtc of the Philippines.
the
t
t_ 'Philippine CPI'means the All ltems Consumer Price lndex published by the National
Statistica Cxfice of the t'hilippines or, if such inder ceas€s to be published, s1rch other index
_I as the ERC shall prescribe as the measure of pricc inllation in the Philippines lor the
tr pr.rposes of the Tralsmission l4'hc€ling Rate Cuidelines'
'Proiectr Under Conttru(tion" meals lhe Proiects for the improvement or exPaision of the
lr
Trarumission Assets descriH in Schedule 2 lPrciects Und Conslruction) that TnANfO
exp€cts to cotnmence construction on or artange external firance for before the
Commenc€ment Date.
tI "fSALM" shall have the meaning defined in the preamble o this Agreeutenl
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PSALM-TR04-2010-002
.Qualitied Bank. means a bank licensed to do business and is operating in the Philippines
IT wiose long-term senior ursec-urerl debt obligations denomimted in U S' Dollars' as of tle
date of issiance or renewal of any letter of credit and at aU tint"* thereafter, are rated at or
tt abow the Qualified Bank Mtnimum Rating, providett that it has not been placed by a
relevant rating agency on credit watch with the irnplication. that its lonrt*rm -serrio:
unsc(lrred Us'po'Uar'aeUl obl.iSations may be downgraded below the Qualilled Bank
tI Mi6-; Rating ot ls engaged-in any miterial liugation with TRANSCO, PSALlvl' the
Republic oI the iirilippines-or-any of its potitical subdi'isions, agencies or instrunenlalities.
"Quelifted Bank Mlninrum Ratingl shall mean a rating or ratings of at least- (i) A2 by
ll Moody's or A by S&P for banks a majority of whose shates outstanding and erttitled to vote
ar" oine.l by non-Philippine nationals; or (ii) Bl by Moody's or B by S&P fol b-ldf "
nrajority of irtrose shaiei outstanding and entitlec! to vote -are owned by Philippine
ll *tio*ts, or such lower rating or ratiigs as PSALM rnay notify the Concessionate from
time m time ag being acceptable for the purposes of this Agre€arenL
"Rxovery Peymenf mealu a value of the Concessionajre,s business calculaled in
Il accordance with Schedule 4 (Recorrery Pryr4cnl).
"Rccovcry Paymcnt Brnk Account" shall have the meaning defined in Section 17'()6
tl lAxignnwnl and Suk;on?7a cting).

"Regulated F"ntity" shatl havc the tneaning defincd in the Transmission Wht'elhg Rate
Guidelines.
T
I 'Regulatory Aeset B!se'or "RAB'means the value of the Concessionaira's Bssets for the
p".i"r* oi the Transmission Wheeting Rate Guidelines at a particutar time as determined
Ii
I by thr ERC.
"Regulitory Pedod" shall have the meaning defined in the Trarumission wheeling Rate
Gddeline.
T "Reguletory Year" shall have tlre meaning, dcfinr:d in the Trarsmlssic'n wlleeling Ralc
rl Guidelines.
I "Relrted Budnesges" mears any busincss which maximiz€s thc utilization of the
I Transmission Assets and in the case of Related Businesses prior to comnencement DatE
shall be the businesses idcntificd as such in thc Disclosure tetters (as defined in the Direct
T A$eemglt).
I .Relatrd Psny' any shareholder. offif,er or dire(tor of thc Concegsionaire or o{ any Alliliate
I of the Concessioneilc, or an}, Person within the fourth civil degree ol consanguinity or
affinlty (legitimate or common law) of any such person.
I "Replacemerrt Deedllne- shall have the meaning delhed in Section 205 (Pcrfutnancc
t Seornty).
t " Rcplaccment Feilure Draw Event" shall have the meaning defined in Sedion 2.05
t (Perfunnanu Secuityl,
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PSALM-TR04-2010-002
"Rcsponsible Offlcer" mearu witl. resPect lo anv Person. with resPect lo financial matters'
IT the chief financial officer or treasurer of such Person, or, r,r.ilh resPect to all other matters, the
chief erecutive officer, the ptesid€nt and any senior vice presideat of such Person
IT .s&P' means Stanrlarrl & Poo/s Ratingr Croup, a division of Mccraw-Hill corPo.auofl. and
f,ny succrsaor thffeto that is an internatlonatty recOgnizcd rating agency, or- zuch- otter rating
agency as the Parties may mutually sdect as a substitub for Standard & Poo/s Ratings Group
TT 'S€csdty lnterert" mealrs any mortgage, charge, encumbrance, pledge, lierr.oPtion,

resrriction" ri6ht of fust refusal, right of preemption, third party light of inlerest,
lI encumbrancc hypothec.tion, security interes! or other preferentlal arranS€ment or interest

of any kind, tnciuding any assignment by way of security and including an1' title transfer or
rctention arrangement.
ll "Semi-Annual Paymenl Datc" mearu a date fatrling (a) six calendar months a.fter tlre
Comm€ncernstt Dite, ft) on the fitst anniversaty of the Cosrmencement Date and (c) on
any anniversary of the dates mentioned in (a) or @) up to the wentieth anniversary of the
Il Comrncnccment Date; provided that iJ any such day is not a Business Day, the relwant
Semi-Annual Pa)'rnent Date shall fall on the next Business Day.
"SIAC' shall have the meaning defiaed in Section 16.02 \AtWtrllionl.
Il "Sub-kans lsrion Asselt" shall have the meaning of subtrarumission assets

Guidelitres on the Sa.le and Traru{et oI TRANSCO Subtransmlscion Assets and Franchlsing
ln the "ERC
It of Qurlii+ed Consortiums'' dated October 1Z 2003 as amended by ERC Resoludon No. 3

series of 2005 dated March 17, 2005, as may be amended from tim€ to time
"System Operatof shall have the nrezuring defined in the Crid Code
IrI -Iexer'mearu incomc tax, VAT, rcal proPerty tarL local franchise tax, docurnentary stamP
tax and all other taxes. duties and lcvies thot may be imposed on the Partieg or the
transactioru contemptated by the Transaction Documents under Applicable Law,
l, 'Termin.tlon Dete- nreans (i) the date on which thb Agreement is t€rminsted by
Termirution Notice, which shall be the date on which the Termination Notice is given or
a
lI such later &te as may be specified as the Termiration Date in the Termination Notice, or (ii)
the da@ on which the Concession P€riod cxpires.
"Tctminatlon Notice" means a notice given by I€ALlvt under Subsection l{ 01(a) (PS^IJVI's
Renzdizsl or by the Concessionaire under Section lil.03 (Cancrssroncirc's fumcdics) sbting that
thi.s A$eemeni b terminaled either irnmcdiatnly or at some spc'cified future date if the
defaulB gtving rise to the terminalion arc not eorlier remedied.
"Third Regulatory Period- shall hove the meaning defined in the Tran-smission Wheeling
RateGuidelin*.
-Tnnsaction Docum€ntr" means lh,s Agreement, the CoNtruction ManaS€ment
Agreement, the Interim Assignment Agreement, the Loan Covenanls Agree8tent and the
Deed of Traru{er.
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IT "TRANSCO" shall have thc meaning dcfined in the preamble.
'Tnncfereble A$ets- mearu a.U tangible movable property as o, Comfrencem€(t Date

owned by TRANSCO and are listed in TRANSCO's general Plant equiPm€nt registst and its
register if personal property-on thr cornmencement Date including but not limited to all
TT vehicles, helicopters, furnihrlc, fumishings, goods, inventory, spare parts. chattels,
tl machines. and equipment, and all warrantits aad guaranties rclating theteto and more
particularly listed in Schedute A of the Deett of Transfer: prwidtd, hottxwr, that the term
Transferable Agsets shall not include assets mmPrising the Transmission AsseE,
Documented Property Rights, tntrellectual ProPetty fughts or any real property.
lI "Transfer Cloalng Date" mears the thirtieth (300') Bushess Day after thc amounl of the
Recovery Payment has been determined in accordance with Schedule 4 (Recot}cry YaW t)
It or such other date as the Parde* may agree,
"Trenefered Contra(to" shall have the meaning defined in Scction

&nb,(ts).
4 01 lTransltrred
tI -Trusmisslon Acsets" mearrs (a) the Transmission Crid, (b) thc Sub-trarumis:ion AsseE,
(c) all buildings, civil works and establishment, plart" machinery, equiPmenL tools, spart
It parts and other lssels used by the Regulated Entity io carrying on its transmirsion business.
"Trarsmisoion Cuslomerr" shall have the meaning defined in the O.{TS Rules.
Il "Tranemission Developmcnt Plan" or "TDP" shall have the meaning defirled in the EPIM
and tte IRRs.
'Tnnrmlssion Grtd" shall have tlre

of the IRRs.
same meaning as the lersr ddined as "Grid" in Rule 4
TT "Transmlsrioa Service" chall have the meanhg given to thc term "Op€n Access
lr Trangrrigsion S*rvice" by tlre OATS Rules,
'Thnsmlrslon Wheeting Rate Guidellnes" means the Cuiddines on the Methodology for
Setting Transmission Whcelin6 Rates approved by the ERC on 29 May 2003 in Resotution
ll Nurrber 04, Series of 2003, as rhe same may be arnended, suPPlemented, replaced, or
otherwise modified from time to time.
"United States Dollaru," "U.S. Dollars,' " Dollarr" or "U.S.$" shall mean the lawftrl
currency for the tirrre betnS o, the United States of America.
"Universal Chuge" shall have the meaning defmed in tlre EPIRA.
"US CPI, means the Consumer hice Index [or all Urban Corsumers (CPl-tI) comPuted and
is.sued by the Burcau of l-abor Statistics of the U.S. Department of Labor or such other index
of U-S, reail prices as PSALM may reasonably deignate if CPI-U ceases to be published ot
is otherwise unavailable.
"VAT" means PNippino Valuc Added Tax,
It
Il
tt rretr-KrnuE cr:ff
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PSALM-TR04-2010-002
It "WESM Rulec" means the det iled rules that govem the administration and operation o{
the WESM as s€t forth in DC)E Grcular No. 2002{ 03, dated 2E Junc 2002, as amended'
supplemented replaced or otherwlse modified from timc to timc'
tl .whotegale Et€ctriclty spot Markct" or "wESlvl' shall have the meaning defined in the
IRRg, 83 amended from time to time, and at tlle commencement Date means the wholesale
lI €l€ctricity spot mark€t to be created in accordance with the EPIRA.
2 lnterpretatiorl
lI (a) Construction. Unless the context otherwisc requires:
(1) n'ords singular and plural in nu$b€r shall be deemed to indude the
ll (2)
othef;
all references to ApPlicable Law or to a Particular Applicable Law
tI (3)
includ$ a rcference to any measures amendinp supplemerting or
repealing any relevant Applicable Law lrom tine to time;
aU references to this Agreenent, the Di!€ct Agre€ment or any other
tI Tramaction Docum€nt, contract or atreement Etearu this Ag€eoent,

the Dbect A8reement or suci other Trarre.cdon DocumenL conEact ol
agteement and aI schedules, appcaditcs, exhibits and attachmmts
Ir thereto as amended. supplt'mented or otherwige modified and in

effect from time to time, ald shall include a rcference to any
documcnt which amends, supplements or replaces it, or is entered
into, made or given pusuatrt to or in accordance with lts terms;
li I (4) the terms 'include" and "including' shall be constsued as belng at all
tisres followed by the words "without limilati,on" unle$ the context
t specilically hdicates otherwi!*, whether o. not t}le words "without

limitation" are expressly stad in any particulal irBtarce in this
rl Agreenent;
(5) in resFect of the Performance of the obligations under thi6 Agrcement

references to the "Concessionaire" slur.ll be deemed to include tie
Concessionaire and all oI its subcontractorsj
(6) referencesto "PSALM" shall indude any successor appointed by
ll
Applicable Law to carry out ISALM'S resPoruibilities under the
EPIRA or, iJ no such succcssor is appointed, the Republic of the
Philippines;
m rvhenever a Person is required to lorm an opinion, make a
Ir
determination or designation, give a notice of approval o, consenl
incur costs or experues, request any item or action, exercisc a
discretion or perform an act und€r this A8reement, it must be done
reasonably under the circr:mgtances in accordance with the terms of
tlis Agreement or their rcasorably inferred context and based upon
TT
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PSALM-TR04-2010-002
ll reasonable grounds, ottd must not be done or refused caPricioBly or

arbitrarily or undulY delaYed;
II (S) any reference to the Agreement or other document as of q Siven dal€

means the A8reem€nt or other document as arnended, supplernmted
and modified from time to time tluough zuch date;
Il (9) Unless otherwise expressty specilied in writing, all te(ereT ces to timeg
and dates shall refei to Moniiu time and date. Should any of the dater
fall on a holiday, lhe deadline shall be extended lo the same time of
Il (10)
the immediately succeedini Business Day;
In computing a Period, the first day shall bc excluded and the last day
lI lncluded, Uilcis specified, all relerence !o days shall refer to calendar

days and a month sha.ll bc equal to thkty (30) calendar days' A
fraition of a month shall be considercd as one (1) month
tl 0l) Unless otherwise defined in a Particul Sthedule, capitatrized termr

used but nol defined in such Schcdule shalt have the mcaning defined
in Fart 1 {D4 tions} of khedule I lDefinitio* and Inkrprelatiottl '
p) Tecinical Meanlngs. Words not otherwise defined herein that have well
TT kn-wn and gcnera[y accePted t€chnical or t ade meanings are used hereln In
accordance iittr recignized mcanings. Unless otherwise agreed to by
lr "rihof meleurement shatl be stated in the metric urut (SI)

ihe Parties, all uniB
system.
Hearlines: Section Re(erences. Section headings are for convenierre of
lI
(c)
..fu**. ao not form Part oI thb ABreement' and shall not be deemed
"nti,
to limit or otherwise alfect any of the provisioru herpof- References to
Articles, Sections, Subsections. Paragraphs, the preamble, the Recitals,
tr Schedules, ExhibiG and APPendices, unless otherwise indicated, q,e

relerences to Articles, Sections, Subscctions. Paragraphs, thc prcamble, the
Recitals, the fthedules, the ExNbis and Appendices of thb AgreemenL
tl (d) Precedence. In case of express conflicl betw€en provisions of the Sectiont or

the Schedules of this Agreemr:nl the order of precedence ir conslruction and
interpretation of euch provislonr shail be ar followsr
(1) Sections; and
(2) Schedul$.
Su$ect to the foteSoin& iI nny requirements sP€cified in any Soclion c6 lict

with those of any other Section, or if any requirements specified in any
Schedule conflict with any other rlquirfilenB in such fthedule ot in any
other exhibit, thc more dctailed requirements shall prerail Notrvithrtanding
the above, the provisiofls of this Agreement, including all fthedules, shall be
wherever possible construed as complementary rather than conllicthg. All
Il Appendices to Schedules are provided for purpoces of clarilying and
lr Oridml d*rrnar frrurd by:
lr [ii;iii-ii., iiliil [;r./

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PSALM-TRc/'2010-OO2
It supplementing the Schedules, and shall not b€ construed as limiting any of

the Concessionairds obligations under this Agreement'
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PSALM-TR04-2010-002
SCHEDUIT 2
PBOTECTS UNDSN CONST8UCI:ON
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WONXING C^PITAL
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PSALM-TR04-2010-002
IT Schedule 3: Initial Working Capital

IT ( A } SELECTED
A/l
CURRENT ASSTTS
- Power Customers
Powcr Rt'<elvables 3,763 375.527
IT Accrued Utility Revenue

Allow lnr Bad Dcbe .
Reccivables
PcJll'tt
51 0.6{E.796
(88,tr16,515)
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Allow. for Bod lfeb ts-I{es tru ctu.ed

Power
6,785,rn ,088
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Other Receivrbles
lnteregt Receivtrblc ?,.637?,7!2
Rcnt Receivable 228,#
Accountr Receivable - OtheE 53-092{61
lI Alorr.. for llad Debts -

Receivrbler
Outpua Tax Receivdbk
Ot-her
(93,163.t1.11 )
r,695,19L49q
7,8€,."Tts,67
lI M.t€.i ! md Supplicr
Casnlino
Aviodon Fuel
Matlrial, Supplici &
tor Opcrrtior
*11,689
26,IIN
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Equip't
lrventory 2,04,1352,951
Other Oil ltoducls I,2m,901
L0#,@r,648
Advances rnd F.eprymentt
tr N1rberial, Supptics & Equip't fo,.l'ml!".t Conet'n

Cs-sh Advances to ConhactorE
Cuaranly Depasits
6.r,258,153
5n,&?.957
60,0t4
6{1J86,154
tr Totll Cullcnt AsBett $ 10,756J36,557
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(B) SELECIED CURRENT I,IAAILTTIES
A.coutrtt Payable and Accrutd

Expnsco
Gasoline & Other Oil Producb Payable P 5.878,6@
Mat*rLl, Supplies & Equiprnefll
Pryoble u3.17.517
Accountc P.yable - Oth€rs 726,513,191
Chcrk Vouchers Payable TJ,50(J575
Certilied Obli8ation - Supplicn & Corrtractors 516,704,915
InErcst PEyable - Iuel ldvJl
lnterrrt Payoble - Others 17,724
Duc to Other Agency .Ancillary Service Charge 3,17\Me327
Due to Other Agency - Univrrsnl
Chargc 57 372,4s1
Output'l'ax Pay.ble
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6690J35,030
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PSALM-TR04-2010-002
I R€tlntlon on Conhact Paymcnlr
Dcpodto & Trust Fundr
I Customers Deposit Advsnc€r

D€porits & ?rust Furds
13r,23,1,060
31,188179
t Tolrl Curr*ni Urbllltlae s _@IEA$-

{cI rNrTriL woRKrNG c PrrAL(A.B} P 3,st397227
t Nohr! l. Thc lnttlal worltng capitrl lo be r€ceived bI the CorKt$lonairc on Com[relceEllnt D!t!
rhrll be determined u3ing thc clteSori$ o[ accounb set out in thb S&eduk. The hi6d
I Nl
worklng csplt!! in rhis Schcdulc i! boted on the inh:ril,l fllunci.l rbn trtnIrt ar of 30 lunr
cerfiIted by the AVP.Finarrce.

Z ComPris€! of curreii acount hlmces identilied by TRANSCO sr tradE rnd without istuelr
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PSALM-TR04-2010-002
II REcovERt
SCHENULE 4
PAY:VF.NT
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ll In consideration for the Concession.rire's constructio& installation, fhancin&
mana8ement, lmpn:vement, expansion, operEtion, maintenance, rehabililatio&
repair and refurbishment of the l'ransmission Ass€ts in the l{epublit of the
ll Philippines, the Parties have agreed on the payment by TRANSCO to the

Concessionaire oI thc Rccovery Payment detefffned by an independmt aPPraiset in
accordance witl (lause C and applying the following formulae and principlcs:
l In tle event o, a ttrminalion o( the Agreement by reason of a Gov€Tnmenl

1I Hault under S€ction 1.3.02 (CowrnrEnl Defoult), thc Rccovery Payment shall
be an amount denominated in Philippine Pesos and calculated as follows:
1l 2,
m= (NPVqr + NPVuq)+ W+ R+T - DP+ P
In tle event of a termination o[ the A8reemenl by reason of a Concesslonalre

l)efault under S,ection 13.01 (Concr.rsiorurirr Dvlqula), lhe Recovery Payrnent
1l shall be an amount denominatcd in Philippine Pesos and calculated as
followsr
1l 3,
RP. (Nlryc|, + NI'VUq)+ I,V + R - DP.T- P
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In the evelt of a termination of the Agreement by reason of a No Frult Event
undcr Section 13.03 (No forll), thc Recovery Payment shall be an amount
denominated in Philippine Pesoo and calculatcd as follows;
r (NPV6
tr t{P + NPVuc) } W+R - DP
4. tn the event of expiration of the Concerslon Period , the Rc'covery Payment
shall be an amount denominrted in Philppine Pesos and calcu.l&ted as
Iollows:
TI RP-(UC+w+R) -DP
Where:
RP is the Recovery Pa).ment to be paid to the ConcesJionaire;
tl tIt the initial RAB as at $rc Conmencemmt Date. Iess amounts by rvhich
Concession Fee has been reduced following the disposal o1 Sub-transmission
Ass{rs by TRANrO;
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l! (b) the total tdPital expendihre actually expended in

relation to the Conccssion bl the Concessionaire afte! t}le
Commencement Dat€ (excludirg any elfect of revaluation of the RAB
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try the ERC, iI any) and -
(, has been aPProved bY the ERC or
Il (ii) wherc there is caPital expcnditure which has

not be€n approved by the ERC, an estiE\ate of such capital
erPenditure which the lndPpendent APpraiser (to bc aPPointed uncler
Clau.te C) agtees should he allowed on the basls that it would, in the
ll lndependent Appralsr:r's jud6ment, bc allowed by the ERC and
(2) less the surn of -
It (a) the tottl acormulated regulatory depreciation

permittcd by the ERC lor recovery by the Concessionaire Pur$uart t'o
the Annrlal I{evcnue Requircment (as set Qut in the Transnission
It Wheeling Rate Cuidelines) as oI the Termination Date, zrnd
(b) lehere thc Termination Date is belore the Ful[ Term
tt Erpiration Date, ruch furthcr amount of depreciation a-! the

Concessiouaire would have recovered applying principles consisbent
with those in subclause 2(a) at'ove, from the Termination Date until
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the Full Term Erpiration Date, and
(3) prcvided that UC shall in any event not be less tlan zero;
ll NPVcr is ths net presert vajue as at tht Terrnination Date of the cstilllated fuh.ue net
cash flows to th€ Regutat€d Entlty fmm thc Tcrmination Date up to the Full
Term Expiration Date, calculatcd (a) using the regulatory weighled averaS€
coct of capital for the Regulated Entity as al the Termination Date, exccpt the
lnde5nndent Apprais€r (to be appointed putsuant to Claus€ C below) shall
have the dirretion lo utilise a dirferent cost of capita.l where it corrsiders t}le
regulatory cost of capital to be inappropnate, and (b) aszuming no further
capital expenditure as from the Termrnation Date;
NPVus is the nct present value as at thc Termination Date of the UC to the Re8ulattd
Entiry as of the Futl Term Expi-ration Datc, calculated using the re8u.latory
weighted average cost of capital for the Regulated Entity as at the
Termination Date, except the Independent Appraiser shall have the discretion
lo utilise a differenl cost oI capital where it considers the rcgulatory cet ol
ll DP
capital to be inappropriatc,;
is outstanding amount of Dcfcired Payments plus accrued intersst u.rrder

5 (Dcfcrred Payments), togcther with any amounts of the
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G8r".l dqurndrl ilrurd 5yl
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Conces.sionaire's lndebt€dnees rvhich I'5A LV det'idcs to assume as of thc
TI 'ltrmination Date. Thr decisiorr as to whlch of lh(' Concessionaire'3
Indebtedness, if any, shall be assumed by PSALM shall be at the sole
discretion of PSALM;
TI is the nel value oI the Concessionaire's cash, accounts receivablc and other
curent assets less the value oI its accounts payable and ol}er curt€nt
ll Iiabilities on the Terntnation Dalc (W berng a negative amount iJ such

currcnt liabiliti€s exceed its curent ass€ts);
is tht fair market value as of the Termination Datc of any Related EusinEsses
that PSALM purchases pulsuant to Section 15 (Reversion);
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are the reasonable, docurnented ttansaction cosb of thc non-dcfaulting parly
ll in conne'ction with determi.nation crf the Retovery Payment under this

Schedule 4, irrluding its cont ibution to the cost of the IndePend€flt
Appraiser in case of a Govcmment D€fault or Concessionaire Default;
Il ls equal to ttn percent (10%) of (NPVcr + NPVuc)
Thc Recovery Payment shall be paid, together with interesi at the ApPlicabl€ Rate
Il from the Termiration Date until Transfer Cming Dltr. The Applirable Ratr shall be:
1) In case of a terudnation by rea-rcn of a Covemment Default undor Sechon
It 13.A2 (Cowrnmtnt Delnull), a rat€ reflectin8 a fair and reasonable weighted

average cost of tapital for the Rcgulated Entity as of the Termination Datr
determincd in accordrnct with the methodology sel out in section 4.9 of the
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TWRC in effect on the Bid Date,
2) In cas€ of a terminntion by reason of a Concessionaire Delault under Section

Iair and reasonable risk'free
13.01 (Cor.ursrsru ne Defrult), a rate refle<ting a
lr 3)
rate as of the ferminadon DatL" determined in accotdance with the
methodology s€t out ifl section 4.9.5 ol tie TWRC in clfect on the Bid Date;
and
In tle event of expiration of the Concession Pedod or a lcrmlnadon oI the

TI Agreement by reason of a No Fault Event under Section 13.03 (No Farll), a
rate rellecting a fair and ressonable cost ot debt [or ttle Rcgulated Entiry as o(
the Termination Date determined in accordance rvitlt the mcthodology set out
in Section 4-9.10 of the'IWRG in effect on the Bid Date.
The Corrcessionaire and TRANSCO shall rnutually appoint an interrutionallv

recognized consulting firm o! investmcnt banl (the "Indtrytdr t Apyaiw/') to
determine the Recovcry Payment ds IoUows;
l) Within filteen (15) calendar days after the dnie oI the Termination Date, *l€
Concessionaire and TRANSCO shall deliver to each other in writjng, the
names of three (3) candidate lirmr with experience to carry out a valuatioa in
actordalce with the requiJemcnts set out in Clausc A above.
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PSALM-TR04-2010-002
Within fourteen (14) rnlenrlar Javs i:f reccipt of the wliLirgu lelerretl to in the
TI prececling sub-clause (1), thc Conccssionaire ard TRANSCO shall sclext and
ippoint, in writing signctl by botlr of them, an Independcnt .App. raiser from
the candirlate firms pioposc.t by the Concessionaire and IRANSCO under
sub<lause (l) above to conduct an independent aPPrai-ta.l in accordance with
TT sub{lausc (.1) below.
l) tn the event that the Concessionaire and TRANSCO fail to agree on the
TT appointment of an lndePendent AFPraiser within the fourteen (1,l) calendat
diy period set forth in sutr-clause (2) above, then either the Concessionaire or
It fnelVSCO may at any time thereelttr rcquest th€ Chairman of the SIAC (the
" Chainan"\ to seltg thc lndependent Appraiser, Thc Concessionaire and
TRANrO shnll appoint tic lndependcnt Appraiser sele<ted by th€
Chairman within seven (7) Business Days oI such selection. In the event that
either the Concessionairc or TRANSCO declines to ParticiPate ln the
1l appointment of the lndePendent APPlaiser selected by the Chaitman within
s,rih s€ucr, (7) Business Day period, the other Party ma1' go forward with the
appointrnent of the lndepenlent APPrris€r selected try t}le Chairman, and
1I se& recovery oI 50% of any and all cosc incurred by it in connection witl
such appointmr3nt from the non-particiPating Party.
The tnclependmt ApPraiser shall be itutructed to exercise is best efforts to

1I render a preliminary tleterufration of the Recovery Palment within thxee (3)
months and a final detersrination wlihin six (5) montl$ alter its aPPointment'
The lndependent APpraiJei's determination of tre Recovery Pafment shall
1l bc binding upon the Parties abstnt any manifest ent:r. The Independent
Appraiser shall include in its dttermination of the Recovery Payment a
rletaited explarution oI horr' i! was arrtved at. The Parties shall prompdy
tr provide the lndependent ApPraiscr wift alt in ormation requested by, and
otherwise cooperate lully with, thc IndeJ:endent Appraiscr.
lr The Iair market value of such Rclated Busitlesses that f5ALN't purchases
pursuant to Section 15 (Ila,yrsion) shall b€ determined by th€ Lndependent
Appraiser in acrordanc€ with such method as the Parties may a6ree or, iI the
Parties have not agreed on a method within ten (10) days alter the
Independent *ppraiier is apPointed, by dis{ounting to Present v ue thc
TT lndependent Appraiser's forecast of the after tax cash flows of each Related
Businesses (aftcr treating any portion of net incorne or other arnount that thc
ERC requires to be used lo reduce tra[smi]sion whceling charges under
Section 20 of the EPIRA as a cosl of thc business) at such dlscounting rate as
thp tndependent Appraiser decms approPriate for the risk of the relevant
Related Busiress.
Neither TRANSCO nor the Cunccssionaire, no! any Person claiming through
them, shall bc entitled to bring any claim against the lnd€Pendent APPrai$er
arising out of or in connection leith its delermiution otr the Rc'coverv
Payment or the ApPlicable Rate exc€Pt for gro:rs negligence, wlllful
misconduct or fraud. Thc Conccssionaire and TRANSCO shall, if required,
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il inrlude a provision to this afferl satisfactory to th€ lndePendent ApPrai"*r in

the tertns of its apPointrnent.
ll D. ISALM shall remit the Recovery Paymcnt. together with interesi from the
Termiration Date until the Transler Closing rlott'at thc Applicable Rate' by wilc
transfer to ar accoutrt designated by the Concessionaire unless within that period
ISALM notfies the Conceaeionaire in writing that it has elected to Pay the Recovcry
tl Palment ovet s€ven (4 years. U such election is made by [5ALM. the following
shall apply -.
It 1)
' An initial payment shall be Paid by PSALM on the Tran-sfer Closing Datc and
shaI be equal to oneeighth (t /8th) of the Recover.v Payment The balance of
the Recovery Pa,'ment a'RP Balance") shall be equal to Eevcn'ei8h*Li (7/8th3)
of the Recovery i'ayment, and shall be paid in seven (7) armual payments'
It 2)
' The Payment of the RP Balance th.dl b€ calculated with an anlruity Ploflle
wit}"flnat maturity on the mventh (7th) anniversarv of the Transfer Qosing
Date (whe,re annuiry pro{ila mears that the principat repayments shall be
1I calculated such thai tirc sum of the principal nnd inrerest Payments is an
equal anount for €ach of thc arurual pal'rnent dates after the Transler Oosing
DaF).
1I 3) Interest payment shall be payable annually in arrears from the Trarsfer

Closing bite and shal bc Lased on the intcrest rate on tie five (5) year
govrrnrnent Peso bond at thc Transfsr Clo$ing Date.
1t {) PSALlvl shall have the dght to prepay thc RP Balance o! any Part thereof
without P€nnlty and no rurther lrterest paymenLs shatl be pa1'able on such
tr amounS prepairi (and, for the avoidance of doubt, any sur'-h PrePayments
shal.l not tesult in a recalculation of the principal repayment schedule
established on thc Trarsrer Closin8 Date according to Clause D2 above)'
Ir TRANSCO and the Concessionaire shalt equa.lly sharL' rhe lndependent Appraix/s
Il {ees ard expenses of catryin8 out the valuations and the other rnatters rcferled to il
unrler this- Schedule 4. The Indcpendent Apprairer sha[ adiust the Recovery
Palment to leflect the amount of its Ices and experucs that a Party shall hovc bome
in excers of its proper share and that it Ls cntitJed 1() recover hom the othr'r Party'
F. The Concessionaire shall indemnlfl' TRANSCO and hold it harmless agairst all
losses it incurs as a lesult o[ t}te Conccssionaire's default or negligence in carrying
out its duties under Section 15.03 (Rr'utrrstor).
U Recovery Payment is sub,ect to VAT, this sha.ll be payable by ISALM'
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Il, SCTIEDULE 5
DETBRTED PAY:uEN'rs
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Int€re-$t pRyable serni-annually from thc Commencenrent D{te on eaclr Semj-Annual
Il b.
Payment Date.
Principal payable in accordance with Section III (Computation Of Defcrrcd Payment
Il For Each Scmi-Annuol Palment Datc).
Total or partial repayment allowed wittrout premium or penalty on ony Semi'Annual

Paymeni Date provided at least twenty (20) Business Days notice i-'i Siven to PSALV'
ll Untess otherwise agreed by IlSALli'l, an;r adiustments to tic Concession Fce made
pursuant to Sthedul-e 6lAiiust ent lo Caacession Fer) shall be applied so 8s to adiust
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each principal payment proPortionately.
lnte'e6t
a. Inter€st is Payable on Ure aggre8ate outstandinB amount of the Deferred Paymmts in

arrears on each Semi-Annual Payment Date.
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b. The interest rte applicable to the Deferred Payments shall be fixcd until the last
Ir Semi Annual Pa1'rnent Date of thc Sc'cond ReBulatory Penod lo equal to the
I'hilippine Dealing System (PDS) Treasury Fixing or 'PDS'I'-F' l0 year beNhmark
rate as publishett 6y [re Philippine Dealhg and Exchange Corporation on the Market
Il pag. oithu PDEx System (the "10 Yeur PDST'F Ratc") at approximatcly 11 l6am on a
daie designated by PSALM falling approximately one month bcfore Oe Bid Date
plus 230 basis poins (2.3%).
tr c. Alter the end o( the lkcond Resulatory Period, the interest rate shall be adjusttd for
the next Regulatory Pcriod and every Regulatory Pt'riod therealter, and such
adiusted intJrest ra-te shalt be applicable for each Deferred Payment falling due
during tie relevant Regulatory Peiod. The adiusted intcresl rate shall be eq-ual to
TI the l0 Year PDST-F Raie at aPProrimately 11.16 a.m. two (2) Business Days before
the Semi-Annual Payment Date on which an adiustrnent is to take elfect Pll]s 80
basB points (?.3%),
d. If the l0 year PDST-F Rale ceases to be pubtishcd or s not available, PSALM may
substitute guch other benchmark nte as. in its oPinion, rea-rcnablv re8ects the yield
on l0 year Philippines Govemment debt s€.CuritiEs.
m. Computation Of Deferted Pavmenl For Eech Seml-Annual Pelmenl Drle
ll The Delerred Payment for each Serri A:rnual Palmcnt Date shall bc compuled os follows:
Dcferred Payment (in Philippine Pesos) - (Conccruion Fcc x ER x .A x RePrym"nt Eactor)
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PSALM-TR04-2010-002
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'A' mears the percentage of the Corre$ion Fee that is not paid as Commencemeni F€e
TI 'ER" refers to the exchange rate !€t out in Section 6.(8.

-Repayment
ll 'Rcprym.ent Factor' rcfers to the number under the colu$n heading caPtioned
Facto/ in the table captioned 'Repaymmt Protile o{ Deferred Pa}ments" b€low as it
corresponds to the pertinent Doferrecl Payment due on s specific Semi Aruual Paymmt
Date.
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PSALM-TR04-2010-O02
II lltultr.tlv€ Indic.tive RePaytrent hofile of Deferrcd Payments
il mus&ative Example:
Assuuring concession Fee ig LS58,00,000,00.00 and only 25% is paid as conmenc€mrnt
It Fea, inteett rae is 9.39* and exchange raE is {2f5.
The Deftrred Paym€nt due on lhe 4u Semi Annual Payment Date is computed as follows:
Il E,000,0m,000.00 x 4it,75 x
t tence, the
.E x.010' 2565.000.00
Defered Payment due on the 4s S{ml Annual Payment Date i5 PtP 2565,000'00
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0.000
II 2
3
4
0.009
0,010
0.0r0
0.0r0
6 0.0r 1
T T 7 0.012
I 0.0r 2
9 0.013
T t 10
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0.0r 4
0.014
0.015
13 0.0r6
T I
11 0 016
15 0.017
10 0 0r8
T I
17 0.019
'18 0.019
10 0,021
20 0.u2
II
21 0.023
a 0.02{
23 0 025
24 0.02e
II
25 0.4)7
26 0.026
27 0.029
2A 0.031
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29 0.0s3
30 0.034
31 0.036
32 0.037
I I 33
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35
o.039
0.041
0.013
36 0.045
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0.047
0.049
0,051
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(r) Principal payable seoi-annually beginning on thc 2nd SeEri-Annud Paymcnt DaE
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lt iCHEDULE 6
lt A O IUST:II E.\TS TO CONCESSION
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adiusted, without .luplication, as follows:
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1. The Concession Fee shall
(a)
' Followin8 receiPt of the audit Pursuanl to Section 4.02(Q, the Parties shalt
recalculate the amount ol lunding from sources othcr than thc [unding
ll Agreements (to the extent thcy are certilied by TRANSCO to be available !o

th-e Concessionaire) in UBht of the amount and source o[fRANSCO's
expenditure on Proie(B onr.ler Construction before the Commencenent Date
actuB'l
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anrl thc estimated cost (of capital expenditure) to complett each Project Under
Conskuction after the Commencement Date. lf the remaining capital
expenditure required to comPletc all Projects Under Construction lo be
fur,aud fro- sources othet than Funoing Agreements (as recalculatcd by t}e
gl Concessionahe in accordance rvitl the first scntence of this Provision) is

higher than the expenditure to be funded from such sources after the
Commencemenl Date as shown !r the original budget set out in Part B of
Schcdule 2, the Co cession Fee shull be r*duced by the difference between
gl those two amounts. On the other hantl, iJ the rcrnaining capital expenditure
requhed to completo all Prorects Under Construction to be funded from
rcurces other than Funding Agreements (as recalculated by the
Concessionaire in acrordance with the [init sentence o[ this Provision) is lower
1I t}ran the expenditure to be fuldcd from such sources altur the

Commencement Date as shou'n in the original budget sct out in Part B of
Schedule 2, the Concession Fce shall be incrcas€d b1' thc dilfercnce between
gl thosc two amounts.'
(b) The Concession Fee shatl be ndiusted for lhe difference bet*'t'cn thc audited
Ir tnitiol Working CaPit .l as of Cornmcnccment Date ond the lnitial worktng

Caplral as sct out in Schedule 3, The Concession Fee shall be (i) increas€d if
the audited Initial lvotking Capifal at Commencement Date i$ Sreatet thsn
the amount of lnitial Working Capital stated in Schedule 3; or (ii) deceased if
tr tlre audited lnitial Working CaFital at Co[rmencEmeni Date is less than the
amount o( lnitial Working Capital stated in Schedu]t 3.
Ir (c) The Concession Fcc shau be reduced by an amount equal to (i) any reduction
in the regulatorv assct value rcsulting from the disposal of Sub-'transmission
asocls pursuant to kion5.03 (Ncgrirt;c Plcdge) and (ii) any dilference
between the aESregatE re8utatory asset value of transmission connection
prqerts and Sub-transmission projects included in thc Projects Under
Corstruction appmved by the ERC on their completion and the aggregaie
value of auch proiects set out in *hedule 2 if the aggregate ERC-approved
valuc is lower than their l8gregate estimated value,
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PSALM-TR04-2010-002
TI e catculation of AdjusknEnts. whenever it hecomcs necessary for the concession ree_
lt to Uo uijirt"a, th" Co".*"ri"*i* shall furnish ISALI\,I with its preliminary calculations of
the necessary adjurbnents within thirty tlays, togcther B.ith a delailed cxplanation of its
calculations. The Concessionaire shall promptly provide PSALM with all inJormation
requested by, and othenyis€ cooPerate fuly witli, IlSALtv! for PurPoscs of revi€winB the
concessionaire's determination. tr psnulvl disagrees with the Concessionaire's calculated
TI tdiustments to the Concession Fee, such dispute shall be resolver.l in actordance with Article
16 (Di'p(tr R4.roh.liorr) of this Agreement.
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PSALM-TR04-2010-002
SCHEDULE 7
TI Pcrformance Securit)
lr (To be submitted on the letterhead of the Lssuing Bank)
,RREVOCABLE SIANDEY LETTER OF CREDIT

TI Number: [.1
ll Amount:
Stated Expiration
Accounl Partvl
Date
PhP [an amount equat to 2S of the Concession Feel
[.1
[a]
lI Porver Sector Assels and Liabilities Mana6ement Corp,:ration

7dr Floor, Bankmer Burlding
Ayala Avenue
\,takati City
1l Philippines
Subiect; Letter ofCredit No. [al

gl lve rcfer to tie Concession AgrecmenL dated ['l among Pou'er g:dor Assets and
Uabilities Management Corporation (r5ALN1"), National Transmission CorPoration
gI (TR.ANSCO') *"a 1o; 1t-tto "ioncessionaire")

"Concession Agreement").
as amendcd or otherwise suppleurentcd, (thc
we hereby establish this tncvocablc standby Letter of credit No. [ol (this "SBLC")
gI in your favor it u*or'lt of [Pesos (PhP )]' (the " Dmwing Alrlount") Funds under
"n
this SBLC are avaiJable to you at sight upon our receiPt of a certificate in the forn of Annex
A attached hereto notifying us of Ge occurrence of a Performance Secudty Drawing Event
lr as defined in the Concession Agreement (a "Demand Ccrtificare"), aPProPriatcly comPletl\d

and purportedly signed by yirr duly authorized offker, employee or signatory, if such
Demand-Certifiiateis presented as h€reinafter specified on or before the ExPitation Date (as
Ir
hereinalter defined).
Thc SBLC shall be drawable at our oftice rn lv{akati City, Pl'Lilippmes
lr You shall present on€ Deman(l Certilicate datr:d the date of Pr$entation for each
drawing hereunder to [nane and arldress o{ issuurg office]. lf you Prescnt the Dynnf
Certificie by 1000 a.m. local time on any day on rvhiih we are open lor business (each such
day, a "Bueineas Day''), in strict conlormance with th€ terms and conditioru of *ris SBLC,
TI we will honor the same by making Payment in immediately available funds, in accordance
with your payment instructions ati.l'wlthout uny reslrictions, conditions, inquiry or right of
otrjortion whatsoever on our part, wilhoul notice io the Account Party prior to such paymeflt
and notwithstandin8 any conditions, dearands, or obicctioru by the Accou:rl Party or any
other party. without you having to further substo.ndste guch demand, by 4:00 p.m' iocal time
t: On$t!.l
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PSALM-TR04-2010-002
Il, on such Bu$iness Day, orherwise we will honor your Demand CcrtiJicale by
time ihc following Business Day,
10100 a.m. local
lr any demand for paym€nt does not confomr to the terms und conditions of thi8
lf
58LC, we shall give you Prompt notlce of the saare statinS l}le reasons therefor and tlul. we
wil), upon your request, hold any documents presented to us lor five (5) Busirress Days or
return Ure same ta you. Upon being notified that an)' demand for payment dicl not conform
to this SBLC, you may correct any such non<onforming demand; Provided uut such
TI corretted demand shall be made and presented to us on or before the ExPiration Date (as
defined below).
ll This SBLC shall expire at 5:00 P.m. at our office on the earliest of the fol.lowing: (i) the
Sbtcd Expirntion Date; (ii) our honoring of Demand Certificate(s) preserrted hereunder lhat,
Il in the atSiegate, equal the Drawing Aaroun! and (iii) the surrender by you of the origlnal
SBLC for cancellation. The earliest of the foregoing dates is reJerred to herein as the
"Expiration Date." Except as otJrerwke expressly provided in this paragraph, this SBLC
shall not t€rminate prior to the Stated Exptation Date for any reason whalsoever,
gt Nohvitlutanding tlte occurrence o( the Exgiration Date, We will honor and pay for ihe
amount drawn by You as stated in the Dtmand Certificatc; Frorided that the Demand
Certificatc was prcsented to Us beforc thc Expiration Date. NoBsidBtanding the occurrPnce
o, the Stated Expbation Date, Wc will honor and pay for the amount drar{n by You 8s staled
1l in the Demand Certificate; prouidfd, that the Demand Cerhficate B'aJ Presented to Us bdore
the Expiration Date.
You may make mu.ltiple ard partial drawings hereunder. Each drawing hereunder
1l shall reduce the amount available for drawing under this SBLC. We h'ill Pny amounts
drawn hereunder from our general funds.
1l This SBLC sets torth in full our underlaking and references herein to any documenl
instrum€nt or agreemsntr except the Demand CertiJicate, shall not in any way a.rrend,
modify, amplily or limit our undertaking.
tr Al! documeits presented to us in connection with any demard for

hereunder, as well as all notices and other communications to us in resPect of thls SBL-C
Payment
Ir shall be in wrlting and addrossed and pres€nted to us at our office at Iaddr€ss of issuing
bfflkl Altendon: [.1. and shall make reference to thir SBLC by number. You shall
personally deliver such docurnen$, notices and other communications to us or stnd them to
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us by facsimile to [ol, or such other numbcr as we may specifl' from time to tinre in writing
to you.
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PSALM-TR04-2010-002
ll cagc
This SBLC shaU b€ subiect to Intemational Srmdby Practices 1998 ("ISt98) and in
of dispute arising ftosr, or in conncttion with, the intcrPrctation ot imPlemertation
thereof, shall be subiect to Philippine Lrw.
ll Very truly yours,

flssuing Ban]l
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PSALM-TR04-2010-OA2
THIS ANNEX A TS AN INTEGRAL PNRT OF'
T T LETTER OF CltEDlr No. [.]
DA"IED [.1
TI ANTIEX A
DEMAND CERTIFICATT
lDatel
II lAddrcss o( issuhg barkl
T I
Atren6on: [ol
Re: Demand {or Parrnent under l-etter ol Credit
tI Ladies and Gendemen:
lve refer to vour L€tter of Cretlit No, [ol (tht'"SBLC"). Any term delined h the
SBLC shall have the same meaning when uscd herein. A Performance Security Drawmt
T Evenr has occurred and the Benefiiiary hcrcby demancls payment o{ [amountl under t}te
SBLC such payment to be made to [insert account irBtructionsl.
I IN I1TTNESS WHEREOF, tNs Certilicate has been executed and deLivered hy the
Bencficiary on the Io] day of [o].
T POTVER SECTOR ASSETS AND IJABILITIES

\{ANAGEI\,IENT CORPORATTON
I B)i, -.....
Naure:
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lr Schcdulc
Net OPenhnB Ca6h Flow

8
TT CASH Flows FRoNt OpERA'rrNc AcrlvlrlEs (FoR PREVlous6 MoNTlrs)
It Cnoss REyENuxs (FoR PREwous6 MoN-fi$)

TRANsMlssloli CttARGES
INTEnEST lricoME
lI TAX RETUNDS
RET.ATED BUStNESS INCOME
OTHEN INCOME
ll opEffArINc ExpENsEs (FoR Pn[vrous

PAYRoLL
A-NCILLARY SERvrcE Cosrs
5 MoiYftrs)t
ll INSUR IiCE PREMIUMS

ADMrNrsrRATtoN Cosrs
N,I^TNTENANCE & Ol.IIER OIERATING COSTS
Rtrr-ATED BusINEss Cosrri
ll OTHER ExfENsEs
La.f,Es PArD (Fon PR[uous 6 iro,wrrs)
It vvollKIlvG CrPrrAL C]IAr.\'cf,s (FoR PRfvrous 6 MoNTrs)

INcRF.AssGyDecnE^sB(+) rN Accounirs REcEtvAELES
tNcRf,AsEGyDEcRtAsE(+) lN I.\vEr,lroRtEs
Ir INCnEASE(tyDEcREAsE{-) rN AcCoUNnS PAYABLES

INCREASE(+)/DECREASEI) THER PAYAELEs N
NEr INCREASE(-yD0cREAsE(+) tx wonKII\iG CAPITAL
tr NEr OpERATING CA5H FLow (FoR PREvlous 6 l,loNTlls)

lcnoss RrvExuES - (OPElrarrNc Ex?!Ns!6 + TAI!5I',AlDl +/- WORXINC CAPrraL CXA|IGES]
TT t Errlrding ilrnrr rerlridr tN Nrl ol Fiudne Crrlt
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PSALM-TR04-2010-002
II SCHEDULH
NOTrCl]s
,,
IT t. To the Conceesionaire:
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NATIONAL CRID CORPORATION OF THE PHILIPPINES
Suite 33O4 West Tower, Philippine Stocl ExcharBe Center
Exchangc Road, OrtiSas Center, Pasig City, N4etro lvlan a, I'hilippines
Attn: Dr. Walter W. Brown, Director
Telephone: (632)631-9023
IT Facsimile:
Copied:
(632)631-9023
TT Du Zhigang
No. 86. Xichang'an Avenue. Xcheng District Beiiing
Il People's Republic of China

Telephone: 8610{65+8518
Facsimile: 861M659-7.186
ll Elmer G. Pedregosa
20'l EDSA, Mandaluyon6 City, Metro Nlanila
Telephone: (632)777-0381
tl Facsimile:
To PSALM:
1632)7270146
tr PowtR SucroR AssE:rs AND Lt AstlrrEs NlANAGElt,"-vr coRPoR.'\TIoN

7th Floor, Bankmer Building
Ayala Avenue
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lvlakati" Mctro Manila, Philippines
Attn: President
Telephone: 612€4&3956
Il Facai$ile; 6$2{40'5341
POWER SECTOR ASSETS A.\D tIABIUI.IES IUi\N/T6EMTN1. CORIIDRA1ION

7th Floor, Banl<mer Building
Ayala Avenue
Malati" Mebo Manila, Phitippines
Attn: General Counsel
Tclcphonc: 692'84e3956
Facsimile: 632-8.lSai4l
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II

II Copy for the National Transmission Corporation

for the constnrction, inetallation finan in& management, imPtovement' expansiorl

It POWER SECTON ASS TS AND LTAUUTIES MANAGEMENT CORPORATION

I NATIONAI TMI.IST.G$ON CORFORA'ION

I NATIONAL GRID CORPORATION OF THE PHIUPPINES

I I 2 Proiects under corutruction

3 Initial Workin8 Capital

t,owtR SEcToR ASsErs AND Lt^8ILmEs MANACF.VEI\rI CORIDRATION, a

tl government olr'ned and controlled corporation ocisting r]nder and by virtue

ll NATIoNAL Tl(,{.^{s$$ssloN CoRIDRAT!oN, I government or+.rred ard

1l NATIONAL GRJD CORPORATION OF THE PTIILIPPPINES,

1l collectively referred to as the "Parlirs" and euch individually reft'rred lo as a"Pa

1l by virhre of Section 21 of Republic Act No. 9136, otherwise kno*n as the

lr cornpetitjvo bidding for the arvord of a concpssion to construct, in5lall,

the Investore have cstirblished the Concessionake in accordoncc wilh the

Now, THEx-EronE, in coruideration of tlre lortgoing recita]s and thr respectivc

1.01 Definitionr. Unlcss the con[ext otherwise requires, capitalized

II LAz In!SIpE!i!-an. Thc Partics will interpre t this A8reemcttt in

Il 2,01 Concr.s-sion. Subie(l to th€ terms and conclitions of this Agreement

Il manage improve, expand, operEte, maintain, Iehabilitate. repair, refurbish and

tr own determination, or (ii) impose anv penalties on tlre Concessionairc.

?.AZ Commencenent of Concession. The Concession, togethcr with all the

Ir 2.03 Concession Period, The Concerssion Pcriod shall commence on tlle

Z0{ Qb[gations Re8ardinq the Franchise. The Concesslonaire undertake!

It lPerJanunce Securiry) or zuch other form as IfALM finds acceptable.

Thrcughout the Concession Penod, the issuing bank must be a QualiJied

(i) waives all rights to seck or enforce any te&porary or p€rmanent

(ii) shall maintain the Performancc Secunty in effeci throughout the

tr (rli) shall renew the then-efjective Performance Securit, on a dat€ (the

lr Securicy (" Pctfurr!4 kcc Secunly E ptry Detc'") by deliverin5 to PSALM

IT (,1) If the Concesrionate does not deliver a rePlacefieart Performance Security by

TI (i) PSALIII shall serve a'Iermlnahon Nohce Pursuant to Section 14.01

TT {ii) RePlac€n'.ent Deadline and uF to and iJ1cluding

Il without ilterest) thc amount dra\ /n and received by f,SALrvl Fursuant

It and iscJuding the tr+'entieth (20th) Business Day following the

Il Concessiorraire, without any interest, after deducting a penslty

lr (iv) lf an acceptable rtsPldcement Performance Sccurity is received by

Il with Subsc<tion 2.05(dXD. lf an acceptable replacement Performance

(") The Concessionaire shall not rcceive any compensation, tsmurerdtion

ft.r, Nllrnrd Car' Cr"'r"rti@ of tlt Pur'ptnts

lt replaced and Ls lssucd hy a Quaiilit'd Ban], PSAW must accsPt such

ll (e) Subiect to the provisions of Subsection (d) above in relation to B RePlacemcnt

tI omounts ihould the amount of the Pcrformance Se(urity be insulficient to

Riqhts and Obliqations" From ihe Conrnencement Datc and subicci Io

Il 3.02 Govemmen(s Power to Regulate. The ERC shall regulam the

lr TRANSCO *,ith any such rcgulatorv powers.

3.03 Nature of Concession Rishts,

tl (a) Nothing in tht A8reement shal.l be construed ag givins to thc Concessionaire

rrd Ncrsrn.l Crid C,rr,rnnnn ol t Plalipttr.t

Notwithstandin8 and without limitin8 Sub$ection 3.03(a) ahove, the

ll responsibilities as i-[ it is an owner of the Trall.srnlssion As$ets (other than tle

Il Concession Period ulless they are incurred as a rel'ult of PSALM's or

(e) So lonB as no Concersionate Default is continuing, TRANKO shall male

lr urder the FundinS ABrcemelrls which have not been drawn as of

(0 So tong as the CorLcessionairc is not in delault u:rder thi$ Agteem€nt bul

wtlh Nchstd cril Ct?plrhon 4 lk PktlDtrin l

It tonccssionaire is not authorized to act as PSAL\{'s or TRANSCO's agmt and

ll TRANSCO's option, to TRANSCO or its nominee upon thc exPiration of the

II TRANSFEN OFTRANSCO'S tsUSINES$

4.01 Translerred Contracts. From the Commencenent Datc and subi€ct to

I (n) the Concessionaire shall perform all of TRANSCOs obligations under